Business Context and Reporting Period
Company: Becton, Dickinson and Company (BD)
Filing Type: Form 8-K (Current Report)
Date of Report: November 6, 2018
Reporting Period: Fourth fiscal quarter ending September 30, 2018, and full fiscal year 2018.
This filing announces the issuance of a press release (Exhibit 99.1) detailing financial results for the fourth quarter and full year 2018. The report highlights the integration of the C.R. Bard, Inc. ("Bard") acquisition and the use of non-GAAP measures to assess underlying performance.
Key Financial Metrics
Note: This 8-K filing serves as a notification of results and defines non-GAAP methodologies. Specific numerical values for revenue, profit, cash flow, margins, debt, and liquidity are contained in the referenced press release (Exhibit 99.1) and are not explicitly stated in the text of this filing.
- Revenue Growth Measures: The company reports "Currency-Neutral Revenue Growth" and "Comparable Revenue Growth." The latter adjusts for the Bard acquisition as if it occurred at the start of the prior fiscal year, accounting for product line movements, divestitures, royalty reclassifications, and intercompany revenue eliminations.
- Earnings Per Share (EPS): The company reports "Adjusted EPS," which excludes items such as purchase accounting adjustments, acquisition-related costs, restructuring, financing costs, hurricane recovery costs, debt extinguishment losses, litigation reserve reversals, investment gains/losses, asset impairments, and tax impacts from recent U.S. legislation.
- Debt and Liquidity: The filing mentions the "extinguishment of certain long-term debt" as an adjustment item but does not provide current debt balances or liquidity figures.
Material Changes and Non-GAAP Adjustments
The filing details significant adjustments made to GAAP results to facilitate year-to-year comparability, primarily driven by the Bard acquisition and specific one-time events:
- Acquisition Impact: Adjustments are made to reflect the Bard acquisition on a "comparable" basis, assuming the deal closed at the start of the preceding fiscal year.
- Operational Adjustments: Revenue growth metrics exclude revenues from divestitures and intercompany revenues, and account for the reclassification of royalties previously reported by Bard.
- One-Time Items: Adjusted EPS excludes costs related to hurricanes, restructuring, integration, and the dilutive impact of shares issued to fund the Bard acquisition.
- Tax Legislation: Adjustments include additional tax expense relating to recent U.S. tax legislation.
Guidance, Outlook, and Risks
Guidance and Outlook: The company provides estimated revenue growth and adjusted EPS for fiscal year 2019. These estimates are presented on an adjusted "comparable," currency-neutral basis to allow for better comparison with fiscal year 2018 performance. Management uses these non-GAAP measures for budget planning and to evaluate anticipated underlying earnings performance.
Risks and Contingencies:
- Non-GAAP Limitations: Management cautions that non-GAAP results should not be considered in isolation or as a substitute for GAAP results. Items excluded from non-GAAP measures may have a material impact on net income and cash flows.
- Comparability Warning: Adjusted comparable revenues for 2017 and 2018 are for illustrative purposes only and do not necessarily indicate the results that would have occurred if the Bard acquisition had been consummated on the indicated dates.
- Peer Comparison: Non-GAAP measures used by BD may differ from similar measures used by other companies.
Investor Verification Checklist
- Review Exhibit 99.1 (Press Release) for specific numerical values regarding revenue, net income, EPS, and cash flow, as they are not listed in this 8-K text.
- Verify the reconciliation between GAAP and non-GAAP measures to understand the magnitude of excluded items (e.g., Bard acquisition costs, hurricane recovery, tax impacts).
- Assess the assumptions behind the "Comparable Revenue Growth" metric, specifically the pro-forma treatment of the Bard acquisition.
- Confirm the specific impact of recent U.S. tax legislation on the company's effective tax rate and adjusted EPS.
- Monitor the integration progress of C.R. Bard, Inc. and the realization of anticipated synergies referenced in the guidance.