10-QPeriod: Q3 FY2020

BECTON DICKINSON & CO Quarterly Report for Q3 Ended Jun 30, 2020

Filed August 6, 2020For Securities:BDX

Summary

Becton, Dickinson and Company (BDX) reported revenues of $3.86 billion for the third quarter of fiscal year 2020, a decrease of 11.4% year-over-year. This decline was primarily attributed to the COVID-19 pandemic, which negatively impacted procedural volumes and overall healthcare demand, resulting in an estimated $600 million reduction in revenue. Despite the revenue challenges, the company took proactive steps to manage its financial position, including increasing its revolving credit facility and issuing equity. BD also continued its commitment to shareholder returns through dividend payments. The company's performance varied by segment, with the Life Sciences segment seeing some offset from COVID-19 testing solutions, while Medical and Interventional segments faced headwinds from reduced elective procedures and non-COVID-19 related medical device demand. BD highlighted its efforts in developing and distributing COVID-19 diagnostic tests and its preparedness for a potential future vaccination campaign, demonstrating its role in addressing the pandemic's healthcare needs.

Financial Highlights

53 data points
Beta

Revenue

$3.85B

43.0% Gross Margin

Net Income

$286.00M

7.4% Net Margin

EPS (Diluted)

$0.97

Total Assets

$53.96B

Cash & Equivalents

$2.88B

Free Cash Flow

$660.00M

Financial Statements
Beta
Revenue$3.85B
Cost of Revenue$2.19B
Gross Profit$1.66B
R&D Expenses$262.00M
SG&A Expenses$980.00M
Operating Expenses$3.50B
Operating Income$358.00M
Interest Expense$135.00M
Net Income$286.00M
EPS (Basic)$0.98
EPS (Diluted)$0.97
Shares Outstanding (Basic)282.38M
Shares Outstanding (Diluted)285.15M

Key Highlights

  • 1Third-quarter revenues decreased by 11.4% to $3.86 billion, largely due to an estimated $600 million negative impact from the COVID-19 pandemic.
  • 2The company's cash and equivalents and short-term investments stood at approximately $2.99 billion as of June 30, 2020.
  • 3Net cash provided by operating activities for the first nine months of fiscal year 2020 was $2.06 billion.
  • 4Becton Dickinson (BD) raised $2.92 billion in equity financing during the quarter, including common stock and mandatory convertible preferred stock offerings, to bolster financial flexibility.
  • 5The Medical and Interventional segments experienced revenue declines due to fewer elective procedures and reduced demand for non-COVID-19 related medical devices, while the Life Sciences segment saw some offset from COVID-19 testing solutions.
  • 6BD incurred $74 million in restructuring costs for the nine months ended June 30, 2020, primarily related to the Bard acquisition and portfolio rationalization.
  • 7Accruals for product liability claims amounted to approximately $2.2 billion as of June 30, 2020, reflecting ongoing legal matters.

Frequently Asked Questions

The primary driver of the revenue decline was the COVID-19 pandemic. It led to a significant decrease in demand for many of BD's products due to reduced elective medical procedures, a slowdown in routine diagnostic testing, and decreased research activity. The company estimated that the pandemic negatively impacted its third-quarter revenues by approximately $600 million.

BD strengthened its financial flexibility by increasing its revolving credit facility by $381 million and issuing approximately $3.0 billion in equity securities (common stock and mandatory convertible preferred stock). The company also maintained sufficient operating cash flows to meet its short-term liquidity needs and continued to pay dividends to shareholders.

BD is defending a significant number of product liability claims related to hernia repair devices, pelvic mesh devices, and inferior vena cava filters, with accruals for these claims totaling approximately $2.2 billion as of June 30, 2020. The company is also cooperating with investigations from state attorneys general and the Department of Justice regarding sales and marketing practices. Additionally, BD received a Warning Letter from the FDA in January 2018 regarding quality system regulations at its Preanalytical Systems facility and is operating under an amended consent decree related to its U.S. infusion pump business.

The pandemic had mixed effects. The Medical and Interventional segments experienced revenue declines due to fewer elective procedures and reduced demand for general medical devices. The Life Sciences segment was also negatively impacted by slowed research and routine testing but saw some offset from sales of COVID-19 diagnostic testing solutions. The company is also leveraging its capabilities for a potential COVID-19 vaccination campaign.