Business Context and Reporting Period
Company: Becton, Dickinson and Company (BD)
Filing Type: Form 8-K (Current Report)
Report Date: July 31, 2014
Period Covered: Third fiscal quarter ending June 30, 2014, and the first nine months of fiscal year 2014.
This filing serves to announce the issuance of a press release (Exhibit 99.1) detailing financial results for the specified periods. The document focuses on the methodology for presenting non-GAAP financial measures to facilitate period-over-period comparisons.
Key Financial Metrics and Methodology
The filing does not provide specific GAAP revenue, profit, cash flow, or debt figures. Instead, it outlines the non-GAAP adjustments management uses to evaluate performance:
- Revenue Growth: Presented after eliminating the effect of foreign currency translation for international and total revenue.
- Earnings Per Share (EPS) Adjustments (Q3 2014): Adjusted to exclude a charge within research and development (the "R&D Charge").
- EPS Adjustments (First Nine Months 2014): Adjusted to exclude the R&D Charge, asset write-offs in the BD Biosciences segment, termination costs for a European distributor agreement, and a gain from the sale of an equity investment (collectively "2014 Items").
- Medical Device Excise Tax: EPS for the first nine months of 2014 is further adjusted for the incremental impact of the medical device excise tax effective January 2013.
- Comparative Adjustments (2013): Prior year EPS is adjusted to exclude an antitrust class action settlement charge, a litigation verdict charge against Retractable Technologies, Inc., and non-cash pension settlement charges.
Material Changes and Unusual Items
The filing identifies several specific items excluded from non-GAAP calculations to highlight underlying operational performance:
- 2014 Items: Includes an R&D charge, asset write-offs in BD Biosciences, distributor termination costs in Europe, and a gain on equity investment sale.
- 2013 Items: Includes an antitrust class action settlement, a litigation verdict charge, and non-cash pension settlements.
- Regulatory Impact: The medical device excise tax under the U.S. Patient Protection and Affordable Care Act is noted as a factor affecting comparability between fiscal years 2013 and 2014.
- Currency Impact: Foreign currency translation effects are consistently removed from growth rate calculations to isolate organic performance.
Guidance, Outlook, and Management Commentary
Management utilizes these non-GAAP measures for budget planning, performance evaluation against peers, and to provide investors with a clearer view of underlying business results. The filing states that management presents estimated EPS and EPS growth for fiscal year 2014 after adjusting for the "2014 Items," foreign currency translation, and the anticipated incremental impact of the medical device excise tax. Management asserts that these adjustments allow for a better understanding of guidance relative to fiscal year 2013. The filing explicitly warns that non-GAAP results should not be considered in isolation or as a substitute for GAAP results.
Investor Verification Checklist
- Review the full text of the press release (Exhibit 99.1) for specific GAAP revenue, net income, and cash flow figures, as this 8-K summary does not contain them.
- Verify the reconciliation between the reported GAAP EPS and the adjusted non-GAAP EPS to quantify the impact of the "2014 Items" and currency effects.
- Assess the magnitude of the "R&D Charge" and "asset write-offs" to determine if they represent recurring operational risks or one-time events.
- Confirm the specific dollar impact of the medical device excise tax on the current and prior year periods.
- Examine the details of the litigation with Retractable Technologies, Inc., and the antitrust settlement to understand potential future liabilities.