10-QPeriod: Q1 FY2020

BECTON DICKINSON & CO Quarterly Report for Q1 Ended Dec 31, 2019

Filed February 6, 2020For Securities:BDX

Summary

Becton, Dickinson and Company (BDX) reported a modest revenue increase of 1.6% to $4.225 billion for the three months ended December 31, 2019, compared to the prior year. This growth was primarily driven by volume increases across all three business segments: Medical, Life Sciences, and Interventional. However, net income applicable to common shareholders significantly decreased to $240 million ($0.87 per diluted share) from $562 million ($2.05 per diluted share) in the comparable prior-year period. This decline was heavily influenced by significant "specified items" impacting both periods, including a substantial product recall charge of $59 million in the current quarter and a large gain from a business divestiture in the prior year, along with a higher effective tax rate in the current period. The balance sheet shows total assets of $51.95 billion and total liabilities of $30.75 billion. Notably, short-term debt increased substantially from $1.31 billion to $2.46 billion, while long-term debt decreased. The company generated strong operating cash flow of $713 million, an improvement from the previous year, indicating healthy operational cash generation despite the dip in net income.

Financial Highlights

52 data points
Beta

Revenue

$4.22B

46.8% Gross Margin

Net Income

$278.00M

6.6% Net Margin

EPS (Diluted)

$0.87

Total Assets

$51.95B

Cash & Equivalents

$560.00M

Free Cash Flow

$540.00M

Financial Statements
Beta
Revenue$4.22B
Cost of Revenue$2.25B
Gross Profit$1.98B
R&D Expenses$270.00M
SG&A Expenses$1.12B
Operating Expenses$3.72B
Operating Income$501.00M
Interest Expense$136.00M
Net Income$278.00M
EPS (Basic)$0.88
EPS (Diluted)$0.87
Shares Outstanding (Basic)271.10M
Shares Outstanding (Diluted)274.95M

Key Highlights

  • 1Total revenues increased by 1.6% to $4.225 billion, driven by volume growth across all segments.
  • 2Net income applicable to common shareholders decreased significantly to $240 million ($0.87 EPS) from $562 million ($2.05 EPS) due to a product recall charge and a higher effective tax rate compared to a prior-year gain from divestiture.
  • 3Operating cash flow improved substantially to $713 million from $245 million in the prior year.
  • 4Short-term debt saw a significant increase, rising from $1.31 billion to $2.46 billion, while long-term debt decreased.
  • 5The Medical segment experienced a revenue decline, primarily due to the delay in Alaris infusion pump shipments pending FDA regulatory compliance.
  • 6The Life Sciences segment showed robust revenue growth of 6.4%, led by strong performance in Integrated Diagnostic Solutions and Biosciences.
  • 7The company recorded an estimated $59 million charge for a voluntary recall of certain AlarisTM pump systems.

Frequently Asked Questions

The significant decrease in net income was primarily due to a combination of factors. In the current quarter, BDX recorded a $59 million charge for a product recall. Furthermore, the effective income tax rate increased substantially to 29.6% from 16.1% in the prior year. This contrasts with the prior-year period, which benefited from a significant pre-tax gain of $335 million from the sale of its Advanced Bioprocessing business.

BDX's total debt remained relatively stable, with a decrease in long-term debt offsetting an increase in short-term debt. The increase in short-term debt was primarily driven by the reclassification of certain notes from long-term to short-term. The company maintains a revolving credit facility and is in compliance with its financial covenants. Despite the shift, the overall debt-to-capital ratio remained stable, indicating active debt management.

The Medical segment's revenue was impacted by delays in Alaris pump shipments due to regulatory requirements, though Pharmaceutical Systems showed strong growth. The Life Sciences segment was a strong performer, with revenue up 6.4% driven by Integrated Diagnostic Solutions and Biosciences. The Interventional segment saw broad-based growth across its units, though Peripheral Intervention was partially offset by the impact of an FDA letter regarding certain devices.

The company is involved in several product liability claims, including those related to hernia repair devices, pelvic mesh devices, and vena cava filters, with significant accruals for these matters. There's also ongoing engagement with the FDA regarding a Warning Letter for a Preanalytical Systems facility and a consent order related to sterilization operations. While the company believes these are being managed, the potential exists for material adverse effects on financial results.