Business Context and Reporting Period
Company: Becton, Dickinson and Company (BD)
Filing Type: Form 8-K (Current Report)
Date of Report: February 5, 2019
Reporting Period: First fiscal quarter ended December 31, 2018
This filing announces the issuance of a press release containing financial results for the first fiscal quarter of 2018. The report focuses on the methodology and rationale for presenting specific non-GAAP financial measures to assist investors in evaluating underlying performance following the acquisition of C.R. Bard, Inc. ("Bard").
Key Financial Metrics
The filing text does not provide specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity. Instead, it defines the non-GAAP metrics used to report these figures in the accompanying press release (Exhibit 99.1):
- Currency-Neutral Revenue Growth: Revenue growth rates adjusted to eliminate the fluctuating effects of foreign currency translation.
- Comparable Revenue Growth: Revenue growth on a currency-neutral basis that includes Bard results in the prior year. Adjustments include:
- Movement of product lines between Medical and Interventional segments.
- Elimination of revenues from divestitures.
- Reclassification of certain Bard royalties.
- Elimination of intercompany revenues.
- Adjusted Earnings Per Share (EPS): Diluted EPS excluding items not part of ordinary operations, such as:
- Acquisition-related transaction, integration, and restructuring costs.
- Purchase accounting adjustments and financing costs.
- Hurricane recovery costs and debt extinguishment losses.
- Gains from the sale of a business and certain regulatory costs.
- Dilutive impact of shares issued for the Bard acquisition.
Material Changes and Comparability
The filing highlights significant changes in reporting methodology driven by the Bard acquisition:
- Acquisition Impact: The company now presents "comparable" revenue and EPS figures to allow for year-to-year comparability between the combined entity and the prior year, which included Bard.
- Segment Reclassification: Certain product lines have moved between the Medical and Interventional segments, requiring adjustments for accurate comparison.
- Non-GAAP Adjustments: Management excludes specific one-time or non-operational costs (e.g., hurricane recovery, restructuring) to show underlying performance, noting that these excluded items may materially impact GAAP net income.
Guidance, Outlook, and Management Commentary
Management Commentary:
- Management utilizes these non-GAAP measures for internal budget planning and to evaluate performance against peer companies.
- The company believes these adjustments provide a reasonable measure of underlying performance by removing items outside of ordinary operations.
- Limitations: Management explicitly states that non-GAAP results should not be considered in isolation or as a substitute for GAAP results. They may differ from similar measures used by other companies.
Guidance and Outlook:
- The filing mentions that the press release contains estimated revenue growth and estimated adjusted EPS for the full fiscal year 2019.
- Specific numerical guidance targets are not included in this 8-K text; they are contained in the referenced press release (Exhibit 99.1).
Risks and Contingencies:
- Comparability Risk: Adjusted comparable revenues are for illustrative purposes only and do not necessarily indicate results that would have occurred if the Bard acquisition had been consummated at the beginning of 2018.
- Operational Variance: BD and Bard may have performed differently had they been combined during the periods presented, and such differences may be material.
Investor Verification Checklist
- Review Exhibit 99.1 (Press Release) for the specific numerical values of GAAP and non-GAAP revenue, EPS, and full-year 2019 guidance.
- Verify the reconciliation between GAAP and non-GAAP measures to understand the magnitude of excluded items (e.g., restructuring costs, hurricane recovery).
- Assess the impact of foreign currency translation on reported growth versus currency-neutral growth.
- Confirm the specific adjustments made to the prior year period to include Bard results for "comparable" revenue calculations.