Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 30, 2026, for Becton, Dickinson and Company (BD). The reporting period is significantly impacted by the completion of the spin-off of BD's former Biosciences and Diagnostic Solutions business and its combination with Waters Corporation on February 9, 2026. Consequently, the historical results of the former Life Sciences segment are presented as discontinued operations. Post-separation, BD operates four reportable segments: Medical Essentials, Connected Care, BioPharma Systems, and Interventional.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2026 | Nine Months Ended June 30, 2026 |
|---|---|---|
| Revenues | $4,983 million | $14,183 million |
| Operating Income | $663 million | $1,225 million |
| Net Income (Continuing Ops) | $451 million | $725 million |
| Net Income (Total) | $377 million | $449 million |
| Diluted EPS (Continuing Ops) | $1.64 | $2.58 |
| Diluted EPS (Total) | $1.37 | $1.59 |
| Cash from Operating Activities | N/A | $2,104 million |
| Total Debt | $16,808 million | $16,808 million |
| Cash and Equivalents | $863 million (incl. restricted) | $863 million (incl. restricted) |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 5.4% year-over-year for the quarter and 4.8% for the nine-month period, driven by volume growth and favorable foreign currency impacts, partially offset by market dynamics in China (volume-based procurement) and lower vaccine demand.
- Profitability Pressure: Operating income decreased 10.3% for the quarter and 12.8% for the nine-month period compared to the prior year. This decline was primarily due to a significant increase in "Integration, restructuring and transaction expense" ($729 million for the nine months vs. $277 million prior year), which included $450 million in non-cash asset impairment charges.
- Discontinued Operations: The spin-off resulted in a net loss of $276 million from discontinued operations for the nine months ended June 30, 2026, compared to income of $430 million in the prior year. This loss was largely driven by foreign taxes associated with the transaction.
- Debt Reduction: Total debt decreased from $19.18 billion at September 30, 2025, to $16.81 billion at June 30, 2026. BD utilized $4 billion in cash proceeds from the spin-off to fund debt repayments and share repurchases.
Guidance, Outlook, and Risks
Management Commentary: BD is executing its "Excellence Unleashed" strategy, focusing on operational simplification and cost efficiency. Management noted that while revenue growth remains positive, operating margins are under pressure from tariffs, higher labor costs, and specific regulatory costs.
Regulatory Risks:
- FDA Warning Letters: BD received Warning Letters regarding its El Paso facility (drug-device combination products) and San Diego facility (dispensing quality management). These cite deficiencies in manufacturing practices, quality controls, and sterility assurance. BD has committed to corrective actions, including product recalls, but noted that ultimate resolution and potential liabilities are unknown.
- Consent Decree: The U.S. infusion pump business remains under an amended Consent Decree with the FDA. While recent audits were completed, the FDA's review of corrective actions is ongoing.
Legal Contingencies: BD faces significant product liability litigation, including approximately 7,090 hernia repair device claims and 3,850 implantable port claims. Accruals for these matters totaled approximately $1.6 billion as of June 30, 2026. Additionally, BD is involved in environmental litigation regarding ethylene oxide emissions in Georgia.
Macroeconomic Risks: Management highlighted ongoing risks from tariffs, global supply chain disruptions, and geopolitical instability in the Middle East, which could impact costs and delivery capabilities.
Investor Verification Checklist
- Spin-off Accounting: Verify the treatment of the $4 billion cash distribution from the Waters transaction and the classification of the former Life Sciences segment as discontinued operations.
- Restructuring Charges: Review the $450 million non-cash asset impairment charge included in restructuring expenses to understand the specific assets written off and the impact on future depreciation.
- Regulatory Remediation Costs: Assess the potential financial impact of the FDA Warning Letters (El Paso and San Diego) and the Consent Decree, including the possibility of future recalls or penalties exceeding current accruals.
- Product Liability Accruals: Monitor the $1.6 billion accrual for product liability claims, particularly given the ongoing trials for implantable ports and hernia devices.
- Tariff Exposure: Evaluate the sensitivity of operating margins to continued or increased tariffs on imported components and products.