Business Context and Reporting Period
Company: Becton, Dickinson and Company (BD)
Filing Type: Form 8-K (Current Report)
Date of Report: April 28, 2009
Reporting Period: Second fiscal quarter ended March 31, 2009
This filing announces the issuance of a press release regarding financial results for the second quarter of fiscal year 2009 and discloses a significant legal settlement.
Key Financial Metrics and Adjustments
The filing text does not provide specific numerical values for revenue, profit, cash flow, or margins. Instead, it details the methodology for presenting non-GAAP financial measures in the accompanying press release (Exhibit 99.1). Management adjusts the following metrics to exclude the impact of a specific legal charge:
- Revenues: Presented at constant foreign exchange rates to remove currency fluctuation impacts.
- Selling and Administrative Expense: Adjusted to exclude charges related to an antitrust class action settlement.
- Operating Income: Adjusted to exclude the antitrust settlement charge.
- Income Taxes and Effective Tax Rate: Adjusted to exclude the tax impact of the settlement charge.
- Income from Continuing Operations: Adjusted to exclude the settlement charge.
- Earnings Per Share (Diluted): Adjusted to exclude the settlement charge.
Management states these non-GAAP measures are used for internal evaluation and budget planning to better reflect underlying operational performance.
Material Changes and Legal Settlement
Antitrust Settlement: On April 27, 2009, BD entered into a settlement agreement regarding consolidated antitrust class actions titled "In re Hypodermic Products Antitrust Litigation."
- Settlement Amount: $45 million to be paid into a settlement fund.
- Scope: Covers direct purchaser plaintiffs (including distributors) and releases claims related to specific products and acts enumerated in the complaints.
- Conditions: Subject to preliminary and final court approval. Potential class members may opt out.
- Exclusions: No settlement has been reached with indirect purchaser plaintiffs; those cases will continue.
This settlement charge is the primary driver for the non-GAAP adjustments described in the financial section.
Guidance, Outlook, and Risks
Management Commentary: Management believes the adjusted non-GAAP measures provide a reasonable view of underlying performance by removing items considered outside of ordinary operations. However, they caution 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.
Risks and Contingencies:
- The settlement is contingent upon court approval.
- Indirect purchaser litigation remains unresolved and ongoing.
- Foreign exchange rate fluctuations continue to impact reported revenue figures.
Investor Verification Checklist
- Review Exhibit 99.1 (Press Release) for specific GAAP and non-GAAP numerical results for Q2 2009.
- Verify the status of the $45 million settlement approval by the U.S. District Court.
- Monitor ongoing litigation status regarding indirect purchaser plaintiffs.
- Assess the impact of foreign exchange rates on international revenue growth.
- Compare the adjusted operating income and EPS against the GAAP figures to quantify the impact of the legal charge.