Business Context and Reporting Period
Company: Becton, Dickinson and Company (BD)
Filing Type: Form 8-K (Current Report)
Date of Report: November 4, 2009
Reporting Period: Fourth fiscal quarter and full fiscal year ended September 30, 2009.
This filing announces the issuance of a press release regarding financial results for the fourth quarter and full year 2009. The report details the company's use of non-GAAP financial measures to adjust for specific one-time items and foreign currency fluctuations.
Key Financial Metrics and Adjustments
The filing text does not provide specific numerical values for revenue, profit, cash flow, or debt. Instead, it outlines the methodology for presenting non-GAAP measures to reflect underlying operational performance:
- Revenues: Presented at constant foreign exchange rates to facilitate comparison with prior periods, as the strengthening U.S. dollar significantly impacted results.
- Gross Profit: Adjusted to eliminate the negative impact of foreign currency translation.
- Selling and Administrative Expense: Adjusted to exclude the "Litigation Charge" related to pending antitrust class action settlements and foreign currency effects.
- Operating Income: Adjusted to exclude the Litigation Charge and foreign currency translation impacts.
- Income Taxes and Effective Tax Rate: Adjusted to exclude the Litigation Charge and a "Tax Benefit" from various tax settlements.
- Earnings Per Share (EPS): Adjusted to exclude the Litigation Charge, Tax Benefit, and foreign currency translation effects.
A reconciliation of these non-GAAP measures to GAAP results is provided in Exhibit 99.2 of the original filing.
Material Changes and Unusual Items
The filing highlights two primary factors causing deviations from standard GAAP reporting for the 2009 fiscal year:
- Foreign Currency Translation: The U.S. dollar strengthened significantly against foreign currencies, primarily the Euro, compared to fiscal year 2008. This resulted in lower reported gross profit, operating income, and EPS than would have occurred at constant rates.
- One-Time Charges and Benefits:
- Litigation Charge: A charge related to the pending settlement of certain antitrust class action suits increased selling and administrative expenses and reduced operating income.
- Tax Benefit: A benefit arising from various tax settlements reduced income taxes and the effective tax rate.
Guidance, Risks, and Contingencies
Legal Contingency: On October 19, 2009, Gen-Probe Incorporated filed a patent infringement action against BD in the U.S. District Court for the Southern District of California. The complaint alleges that certain BD specimen collection products infringe eight U.S. patents. Gen-Probe is seeking monetary damages and injunctive relief. BD states it believes it has meritorious defenses and intends to defend the matter vigorously.
Management Commentary: Management utilizes non-GAAP measures for internal evaluation, budget planning, and to provide investors with insight into underlying performance. However, the filing cautions that these measures 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) for specific GAAP and non-GAAP numerical results for Q4 and full-year 2009.
- Examine Exhibit 99.2 to understand the exact dollar amounts of the Litigation Charge, Tax Benefit, and foreign currency translation adjustments.
- Monitor the status of the Gen-Probe patent infringement lawsuit filed in October 2009 for potential future financial impact.
- Compare the reported "constant currency" growth rates against GAAP growth rates to assess the magnitude of the foreign exchange impact.