10-QPeriod: Q3 FY2019

BECTON DICKINSON & CO Quarterly Report for Q3 Ended Jun 30, 2019

Filed August 6, 2019For Securities:BDX

Summary

Becton Dickinson & Co. (BDX) reported for the fiscal quarter ended June 30, 2019, with revenues of $4.35 billion, a 1.7% increase year-over-year. This growth was primarily driven by volume increases across its Medical, Life Sciences, and Interventional segments, partially offset by unfavorable foreign currency translation and pricing pressures. Net income for the quarter was $451 million, or $1.51 per diluted share, a decrease from $594 million, or $2.03 per diluted share, in the prior year's quarter. This decline is largely attributable to a significant pre-tax charge of $331 million related to product liability matters, as well as higher acquisition and restructuring costs associated with the Bard acquisition. Despite these charges, the company generated strong operating cash flow of $1.96 billion for the first nine months of the fiscal year, underscoring its operational resilience. The company continues to return capital to shareholders through dividends, with $737 million paid out in the first nine months.

Financial Highlights

53 data points
Beta

Revenue

$4.35B

47.7% Gross Margin

Net Income

$451.00M

10.4% Net Margin

EPS (Diluted)

$1.51

Total Assets

$52.23B

Cash & Equivalents

$523.00M

Free Cash Flow

$695.00M

Financial Statements
Beta
Revenue$4.35B
Cost of Revenue$2.28B
Gross Profit$2.07B
R&D Expenses$282.00M
SG&A Expenses$1.08B
Operating Expenses$3.73B
Operating Income$626.00M
Interest Expense$156.00M
Net Income$451.00M
EPS (Basic)$1.53
EPS (Diluted)$1.51
Shares Outstanding (Basic)270.25M
Shares Outstanding (Diluted)274.34M

Key Highlights

  • 1Revenue increased by 1.7% to $4.35 billion in Q3 2019, driven by volume growth across all segments.
  • 2A significant product liability charge of $331 million impacted the 'Other operating expense, net' line item, negatively affecting profitability.
  • 3Net income for the quarter decreased to $451 million ($1.51/share) from $594 million ($2.03/share) in the prior year, largely due to the aforementioned charge and other restructuring costs.
  • 4Operating cash flow remained robust, with $1.96 billion generated in the first nine months of fiscal 2019.
  • 5The company continued to return capital to shareholders, paying $737 million in dividends during the first nine months of fiscal 2019.
  • 6Goodwill remained largely stable at $23.5 billion, with minor decreases due to divestiture and purchase accounting adjustments.
  • 7Long-term debt decreased to $18.0 billion from $18.9 billion, indicating debt reduction efforts.

Frequently Asked Questions

The decrease in net income and diluted EPS for the quarter ended June 30, 2019, compared to the same period in 2018, was primarily due to a significant pre-tax charge of $331 million recorded for product liability matters. Additionally, acquisition and restructuring costs related to the Bard acquisition, along with other operational expenses, also contributed to the decline in profitability.

The company actively manages its debt. For the nine months ended June 30, 2019, it issued Euro-denominated debt totaling $1.75 billion and used proceeds to repay outstanding notes and repurchase other long-term senior notes for $1.169 billion. This resulted in a loss on debt extinguishment of $57 million but reduced overall long-term debt to $18.0 billion from $18.9 billion at the end of fiscal year 2018, while the weighted average cost of debt decreased to 2.9%.

The company faces significant contingent risks primarily related to product liability matters, including ongoing claims for hernia repair devices, pelvic mesh devices, and vena cava filters. These litigations are substantial in number and complexity, and while the company has established accruals, it notes that unfavorable outcomes could have a material adverse effect on its consolidated results of operations and cash flows. Additionally, the company received a Warning Letter from the FDA regarding its Preanalytical Systems facility, which it is actively working to resolve.

The Medical segment saw a 2.9% revenue increase, driven by Medication Management Solutions and Medication Delivery Solutions. The Life Sciences segment's revenue decreased slightly by 2.0%, with growth in Diagnostic Systems and Preanalytical Systems offset by a decline in Biosciences, partly due to the divestiture of its Advanced Bioprocessing business. The Interventional segment reported a 2.9% revenue increase, with strong performance in Urology and Critical Care and Surgery, though Peripheral Intervention was impacted by an FDA letter concerning paclitaxel-coated devices.