Business Context and Reporting Period
Company: Becton, Dickinson and Company (BD)
Filing Type: Form 8-K (Current Report)
Date of Report: August 6, 2015
Reporting Period: Third fiscal quarter ended June 30, 2015, and the first nine months of fiscal 2015.
This filing announces the issuance of a press release (Exhibit 99.1) detailing financial results for the specified periods. The report highlights the impact of the March 2015 acquisition of CareFusion Corporation on financial metrics.
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 non-GAAP measures to facilitate investor understanding of underlying performance.
- Revenues: Presented on a GAAP basis and adjusted for a write-down of deferred revenue related to the CareFusion acquisition. Non-GAAP measures exclude foreign currency translation effects and present "comparable" revenue growth assuming the acquisition occurred at the start of fiscal 2015.
- Earnings Per Share (EPS): Adjusted EPS excludes financing, transaction, integration, and restructuring costs from the CareFusion acquisition, amortization of acquisition-related intangible assets, litigation charges, and the dilutive impact of shares issued for the acquisition.
- Comparability: Prior year EPS is adjusted for amortization charges, R&D charges, and other items to ensure period-to-period comparability.
Material Changes and Non-GAAP Adjustments
The primary material change discussed is the integration of CareFusion Corporation, acquired in March 2015. This acquisition necessitates specific adjustments to financial reporting:
- Revenue Impact: A write-down of deferred revenue associated with the acquisition lowered reported revenues for the third quarter and first nine months of fiscal 2015.
- EPS Impact: Significant one-time costs (financing, transaction, integration, restructuring) and non-cash expenses (amortization) are excluded from adjusted EPS to reflect ordinary operations.
- Currency Impact: Revenue growth rates and EPS growth are presented after eliminating the effect of foreign currency translation to better reflect underlying operational performance.
Guidance, Outlook, and Management Commentary
Management utilizes non-GAAP measures for budget planning, performance evaluation, and peer comparisons. The filing notes that the press release contains estimated revenue growth rates and EPS guidance for the full fiscal year 2015.
- Guidance Scope: Estimated guidance is provided for fiscal 2015 compared to fiscal 2014, covering both the BD business as it existed prior to the acquisition and the combined entity.
- Management Rationale: Adjustments are made to exclude items considered outside of ordinary operations to allow investors to better understand anticipated underlying performance.
- Limitations: Management cautions that non-GAAP results should not be considered in isolation or as a substitute for GAAP results, as excluded items may materially impact net income and cash flows.
Investor Verification Checklist
- Review Exhibit 99.1 (Press Release dated August 6, 2015) for specific numerical values regarding revenue, EPS, and full-year guidance, as they are not included in the 8-K text.
- Verify the reconciliation between GAAP and non-GAAP measures to understand the magnitude of the CareFusion acquisition adjustments (deferred revenue write-down, amortization, and transaction costs).
- Assess the impact of foreign currency translation on reported growth rates versus the adjusted "underlying" growth rates provided by management.
- Confirm the specific components of the "comparable" revenue basis, which assumes the CareFusion acquisition occurred at the start of the fiscal year.