Business Context and Reporting Period
Company: Becton, Dickinson and Company (BD)
Filing Type: Form 8-K (Current Report)
Date of Report: November 3, 2005
Reporting Period: Fourth fiscal quarter and full fiscal year ended September 30, 2005.
Context: This filing announces the issuance of a press release (Exhibit 99.1) detailing financial results for the period. The filing primarily serves to disclose the use of non-GAAP financial measures and to report on pending litigation.
Key Financial Metrics
The filing text does not provide specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity. Instead, it outlines the methodology for presenting adjusted (non-GAAP) financial measures found in the accompanying press release. Key metrics discussed include:
- Revenues: Presented at constant foreign exchange rates to remove currency fluctuation impacts.
- Cost of Products Sold, Gross Profit, and Operating Income: Presented excluding share-based compensation expense and significant charges to improve comparability with prior periods.
- Income from Continuing Operations and Net Income: Adjusted to exclude share-based compensation, tax impacts from the repatriation of foreign earnings under the American Jobs Creation Act, and significant reversals of tax reserves.
- Earnings Per Share (EPS): Presented excluding significant charges and the aforementioned tax and compensation items.
- Expenses: Selling, administrative, and R&D expenses are presented excluding share-based compensation.
Material Changes and Comparability
The filing does not list specific percentage changes or dollar variances versus prior periods. However, it highlights factors that cause fluctuations in reported results, which management adjusts for to show underlying performance:
- Foreign Exchange: Fluctuations in currency rates impact reported revenue growth.
- Share-Based Compensation: The recognition of this expense in the current period differs from prior periods, affecting cost of goods sold, operating income, and expenses.
- Tax Items: Variations in the effective tax rate are attributed to the repatriation of foreign earnings, reversals of tax reserves, and changes in tax laws/regulations.
- Significant Charges: One-time charges impact net income and EPS.
Guidance, Risks, and Contingencies
Management Commentary: Management utilizes non-GAAP measures for internal evaluation and budget planning, believing they better reflect underlying operational performance. However, the filing explicitly states these measures are not a substitute for GAAP results and may differ from measures used by other companies.
Legal Contingencies (Antitrust Litigation): BD is facing multiple purported class action lawsuits alleging violations of federal antitrust laws and charging of higher prices for certain products.
- Plaintiffs: Dik Drug Company (filed Sept 12, 2005), American Sales Company, Inc. (filed Oct 3, 2005), and Park Surgical Co. Inc. (filed Oct 26, 2005).
- Consolidation: Actions by Louisiana Wholesale Drug Company and Dik Drug Company have been consolidated as "In re Hypodermic Products Antitrust Litigation."
- Procedural Status: BD has moved to transfer these cases, along with others, to the Judicial Panel on Multidistrict Litigation for coordinated pre-trial proceedings.
- Claims: Plaintiffs seek undisclosed money damages.
- Company Stance: BD believes it has meritorious defenses and intends to defend the lawsuits vigorously.
Investor Verification Checklist
- Review Exhibit 99.1 (the press release) for specific GAAP and non-GAAP numerical results, as this 8-K text contains only the methodology for adjustments.
- Verify the reconciliation between GAAP and non-GAAP figures, specifically regarding the impact of share-based compensation and tax rate variations due to the American Jobs Creation Act.
- Monitor the status of the antitrust litigation ("In re Hypodermic Products Antitrust Litigation") for updates on consolidation and potential financial exposure.
- Assess the impact of foreign exchange rates on revenue growth by comparing constant currency figures to reported GAAP figures in the full press release.