Business Context and Reporting Period
Company: Becton, Dickinson and Company (BD)
Filing Type: Form 8-K (Current Report)
Report Date: August 2, 2018
Period Covered: Third fiscal quarter ended June 30, 2018
This filing announces the issuance of a press release containing financial results for the third quarter of fiscal year 2018. The report focuses on the methodology and rationale behind specific non-GAAP financial measures used by management to evaluate performance, particularly in the context of the recent acquisition of C.R. Bard, Inc. ("Bard").
Key Financial Metrics
The provided text serves as a disclosure of non-GAAP measures and does not contain specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity. The filing details the following metrics that are presented in the accompanying press release (Exhibit 99.1):
- Currency-Neutral Revenue Growth: Revenue growth rates adjusted to eliminate the effect of foreign currency translation.
- Comparable Revenue Growth: Estimated revenue growth on an adjusted, currency-neutral basis assuming the Bard acquisition occurred at the start of fiscal 2017. Adjustments include product line movements, divestitures, royalty reclassifications, and intercompany revenue eliminations.
- Adjusted Earnings Per Share (EPS): Diluted EPS excluding items not considered part of ordinary operations.
Material Changes and Adjustments
The filing outlines significant adjustments made to financial metrics to ensure comparability with prior periods and to reflect the combined company's performance:
- Acquisition Impact: Adjustments account for the C.R. Bard acquisition, including the dilutive impact of shares issued to fund the deal and integration costs.
- External Events: Adjustments are made for the estimated adverse impact of Hurricane Maria in Puerto Rico during the first fiscal quarter of 2018.
- Business Model Changes: Adjustments reflect the impact of a previously announced change in the business model of the dispensing business.
- One-Time Items: Adjusted EPS excludes purchase accounting adjustments, restructuring costs, financing costs, hurricane recovery costs, debt extinguishment losses, litigation reserve reversals, investment gains/losses, asset impairments, and tax expenses related to recent U.S. tax legislation.
Guidance, Outlook, and Management Commentary
Management Commentary: Management utilizes these non-GAAP measures for internal evaluation, budget planning, and peer comparison. They believe these metrics provide a clearer view of underlying operational performance by removing the effects of foreign currency fluctuations and non-recurring items associated with the Bard acquisition and other extraordinary events.
Guidance and Outlook: The text mentions that BD presents estimated adjusted EPS for the full fiscal year 2018, adjusted for anticipated foreign currency translation impacts. However, the filing explicitly states that adjusted comparable revenues for fiscal 2017 are for illustrative purposes only and are not indicative of actual results that would have occurred if the acquisition had been consummated earlier, nor are they predictive of future results.
Risks and Contingencies: The filing includes a disclaimer that non-GAAP results should not be considered in isolation or as a substitute for GAAP results. It notes that items excluded from non-GAAP measures may have a material impact on net income and cash flows. Additionally, the text warns that BD and Bard may have performed differently had they been combined during the periods presented.
Investor Verification Checklist
- Review Exhibit 99.1 (Press Release) for specific numerical values regarding revenue, EPS, and cash flow, as they are not included in this 8-K text.
- Verify the reconciliation between GAAP and non-GAAP measures to understand the magnitude of excluded items (e.g., acquisition costs, tax impacts).
- Assess the specific impact of Hurricane Maria and the dispensing business model change on the reported "comparable" growth figures.
- Confirm the assumptions used for the "pro forma" Bard acquisition adjustments to ensure they align with investor expectations for the combined entity.