Becton, Dickinson and Company (BDX) — FY2023 Form 10-K
Reporting period: Fiscal year ended September 30, 2023. This is an annual report; it does not provide standalone Q4 results. BD is a global medical technology company reporting through BD Medical, BD Life Sciences and BD Interventional.
Financial results and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $19.372 billion | $18.870 billion |
| Operating income | $2.111 billion | $2.282 billion |
| Income from continuing operations | $1.530 billion | $1.635 billion |
| Diluted EPS from continuing operations | $5.10 | $5.38 |
| Gross margin | 42.2% | 44.9% |
| Cash from continuing operating activities | $2.990 billion | $2.471 billion |
| Capital expenditures | $874 million | $973 million |
| Total debt | $15.879 billion | $16.065 billion |
Revenue rose 2.7% reported and 4.5% on a foreign-currency-neutral basis. Reported growth reflected volume/other of 3.0% and pricing of 3.8%, offset by a 2.3% decline in COVID-19-only testing and a 1.8% currency headwind. The effective tax rate on continuing operations was 7.9%, versus 8.3%.
Cash and equivalents, restricted cash and short-term investments totaled $1.489 billion at year-end. The $2.750 billion revolving credit facility had no borrowings outstanding, and BD reported compliance with applicable covenants. FY2023 cash dividends were $1.114 billion. In November 2023, after year-end, BD entered into agreements to repurchase $500 million of shares.
Segment performance and year-over-year changes
| Segment | FY2023 revenue | Revenue change | Operating income | Operating margin |
|---|---|---|---|---|
| Medical | $9.502 billion | +7.5% | $1.967 billion | 20.7% |
| Life Sciences | $5.133 billion | -7.8% | $1.585 billion | 30.9% |
| Interventional | $4.736 billion | +6.1% | $1.217 billion | 25.7% |
Medical growth was led by pharmacy automation and prefillable drug-delivery systems. Life Sciences declined mainly because COVID-19-only testing revenue fell to $73 million from $511 million. Interventional grew across major product units; its results include the Surgical Instrumentation platform only until its August 2023 sale.
Operating income fell 7.5%, continuing-operations net income declined 6.4%, and gross margin contracted 2.7 percentage points. The primary gross-margin pressure was a $653 million charge for estimated future Alaris infusion-pump remediation costs, compared with $72 million in FY2022. Higher raw-material, labor and freight costs also weighed on results. Cash from continuing operations improved, partly reflecting better inventory management; investing outflows fell substantially as FY2022 included the Parata acquisition.
Outlook, risks and unusual items
- Outlook: The filing provides no specific numerical FY2024 revenue or earnings guidance. Management expected inflation to persist into FY2024 at a lower level than FY2023, while skilled-labor availability remained a challenge. BD cautioned that macroeconomic uncertainty could make near-term performance volatile.
- Alaris pumps: FDA clearance for an updated Alaris system was received in July 2023. BD plans to remediate or replace U.S. devices over several years. The FDA’s review of quality-system observations and consent-decree compliance remains ongoing; BD stated it did not consider a loss probable at year-end and had no related accrual.
- Product liability: Product-liability reserves were approximately $1.9 billion, down from $2.1 billion, largely reflecting settlements and legal fees paid. BD was defending approximately 34,845 hernia-device claims; management said the reserve includes estimated unfiled claims but warned that actual charges could exceed current accruals. A hernia-claims trial was scheduled for April 2024.
- Other legal and regulatory matters: The filing describes ongoing investigations and litigation, including DOJ inquiries, an SEC investigation relating in part to Alaris, and claims involving pelvic mesh, IVC filters, implantable ports and ethylene-oxide exposure. Outcomes and potential losses for several matters could not be estimated clearly.
- Divestiture and other items: The Surgical Instrumentation sale generated $540 million in proceeds and a $268 million pretax gain. FY2023 specified items totaled $2.448 billion before tax, including acquisition accounting, restructuring, regulatory initiative costs and product-remediation charges. Diabetes Care was spun off as Embecta in April 2022; FY2023 includes a $46 million discontinued-operations loss related to foreign tax associated with the spin-off.
- Operating risks: Key exposures include supply and sterilization interruptions, proposed ethylene-oxide regulation, inflation and currency movements, China volume-based procurement, reimbursement and pricing pressure, cybersecurity, product quality, and significant debt obligations.
Important facts for investors to verify
- Whether Alaris remediation costs, device replacement timing and FDA actions differ from current estimates.
- How much of revenue and margin performance depends on pricing, acquisition contributions and recovery in Life Sciences as COVID-19 testing normalizes.
- Potential developments in product-liability claims and investigations, including reserve adequacy and insurance recoveries.
- Whether inflation, labor costs, supply constraints, sterilization capacity and China procurement programs materially affect FY2024 results.
- Debt maturities, borrowing costs, cash generation and the effect of the announced $500 million share repurchase.
The financial statements received an unqualified audit opinion, and management and the auditor concluded that internal control over financial reporting was effective as of September 30, 2023.