ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
New Jersey | 22-0760120 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer | ý | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ | (Do not check if a smaller reporting company) | ||||
Smaller reporting company | ¨ | |||||
Emerging growth company | ¨ | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ¨ |
Page Number | ||
Part I. | FINANCIAL INFORMATION | |
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Part II. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
March 31, 2017 | September 30, 2016 | ||||||
(Unaudited) | |||||||
Assets | |||||||
Current Assets: | |||||||
Cash and equivalents | $ | 548 | $ | 1,541 | |||
Short-term investments | 8 | 27 | |||||
Trade receivables, net | 1,569 | 1,618 | |||||
Current portion of net investment in sales-type leases | 355 | 339 | |||||
Inventories: | |||||||
Materials | 305 | 316 | |||||
Work in process | 292 | 274 | |||||
Finished products | 1,150 | 1,129 | |||||
1,747 | 1,719 | ||||||
Assets held for sale | — | 642 | |||||
Prepaid expenses and other | 664 | 480 | |||||
Total Current Assets | 4,891 | 6,367 | |||||
Property, Plant and Equipment | 8,351 | 8,419 | |||||
Less allowances for depreciation and amortization | 4,411 | 4,518 | |||||
Property, Plant and Equipment, Net | 3,941 | 3,901 | |||||
Goodwill | 7,405 | 7,419 | |||||
Customer Relationships, Net | 2,923 | 3,022 | |||||
Developed Technology, Net | 2,539 | 2,655 | |||||
Other Intangibles, Net | 579 | 604 | |||||
Capitalized Software, Net | 77 | 70 | |||||
Net Investment in Sales-Type Leases, Less Current Portion | 817 | 796 | |||||
Other Assets | 948 | 753 | |||||
Total Assets | $ | 24,121 | $ | 25,586 | |||
Liabilities and Shareholders’ Equity | |||||||
Current Liabilities: | |||||||
Short-term debt | $ | 1,224 | $ | 1,001 | |||
Payables and accrued expenses | 2,794 | 3,210 | |||||
Liabilities held for sale | — | 189 | |||||
Total Current Liabilities | 4,018 | 4,400 | |||||
Long-Term Debt | 9,082 | 10,550 | |||||
Long-Term Employee Benefit Obligations | 1,356 | 1,319 | |||||
Deferred Income Taxes and Other | 1,702 | 1,684 | |||||
Commitments and Contingencies (See Note 5) | |||||||
Shareholders’ Equity | |||||||
Common stock | 333 | 333 | |||||
Capital in excess of par value | 4,742 | 4,693 | |||||
Retained earnings | 13,321 | 12,727 | |||||
Deferred compensation | 22 | 22 | |||||
Common stock in treasury - at cost | (8,445 | ) | (8,212 | ) | |||
Accumulated other comprehensive loss | (2,009 | ) | (1,929 | ) | |||
Total Shareholders’ Equity | 7,963 | 7,633 | |||||
Total Liabilities and Shareholders’ Equity | $ | 24,121 | $ | 25,586 |
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues | $ | 2,969 | $ | 3,067 | $ | 5,892 | $ | 6,054 | |||||||
Cost of products sold | 1,537 | 1,584 | 3,007 | 3,162 | |||||||||||
Selling and administrative expense | 724 | 732 | 1,432 | 1,480 | |||||||||||
Research and development expense | 187 | 182 | 368 | 369 | |||||||||||
Acquisitions and other restructurings | 76 | 104 | 163 | 225 | |||||||||||
Other operating income (See Note 5) | — | — | (336 | ) | — | ||||||||||
Total Operating Costs and Expenses | 2,523 | 2,601 | 4,634 | 5,236 | |||||||||||
Operating Income | 446 | 466 | 1,257 | 818 | |||||||||||
Interest expense | (86 | ) | (99 | ) | (181 | ) | (196 | ) | |||||||
Interest income | 7 | 3 | 12 | 9 | |||||||||||
Other (expense) income, net | (5 | ) | 6 | (35 | ) | 11 | |||||||||
Income Before Income Taxes | 362 | 376 | 1,054 | 642 | |||||||||||
Income tax provision | 18 | 38 | 148 | 75 | |||||||||||
Net Income | 344 | 338 | 905 | 567 | |||||||||||
Basic Earnings per Share | $ | 1.61 | $ | 1.59 | $ | 4.24 | $ | 2.67 | |||||||
Diluted Earnings per Share | $ | 1.58 | $ | 1.56 | $ | 4.15 | $ | 2.62 | |||||||
Dividends per Common Share | $ | 0.73 | $ | 0.66 | $ | 1.46 | $ | 1.32 |
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net Income | $ | 344 | $ | 338 | $ | 905 | $ | 567 | |||||||
Other Comprehensive Income (Loss), Net of Tax | |||||||||||||||
Foreign currency translation adjustments | 136 | 179 | (139 | ) | 63 | ||||||||||
Defined benefit pension and postretirement plans | 15 | 12 | 29 | 24 | |||||||||||
Cash flow hedges | 2 | 1 | 30 | 4 | |||||||||||
Other Comprehensive Gain (Loss), Net of Tax | 153 | 193 | (80 | ) | 91 | ||||||||||
Comprehensive Income | $ | 497 | $ | 531 | $ | 826 | $ | 658 |
Six Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Operating Activities | |||||||
Net income | $ | 905 | $ | 567 | |||
Adjustments to net income to derive net cash provided by operating activities: | |||||||
Depreciation and amortization | 523 | 569 | |||||
Share-based compensation | 99 | 119 | |||||
Deferred income taxes | (43 | ) | (112 | ) | |||
Change in operating assets and liabilities | (474 | ) | (194 | ) | |||
Pension obligation | 55 | 40 | |||||
Excess tax benefits from payments under share-based compensation plans | 48 | — | |||||
Other, net | (74 | ) | 30 | ||||
Net Cash Provided by Operating Activities | 1,040 | 1,020 | |||||
Investing Activities | |||||||
Capital expenditures | (272 | ) | (258 | ) | |||
Proceeds from sale of investments, net | 26 | 10 | |||||
Acquisitions of businesses, net of cash acquired | (40 | ) | — | ||||
Proceeds from divestitures, net | 165 | 111 | |||||
Other, net | (34 | ) | (33 | ) | |||
Net Cash Used for Investing Activities | (155 | ) | (170 | ) | |||
Financing Activities | |||||||
Change in short-term debt | (50 | ) | (300 | ) | |||
Proceeds from long-term debt | 1,054 | — | |||||
Payments of debt | (2,189 | ) | (1 | ) | |||
Repurchase of common stock | (220 | ) | — | ||||
Excess tax benefits from payments under share-based compensation plans | — | 51 | |||||
Dividends paid | (312 | ) | (280 | ) | |||
Other, net | (144 | ) | (45 | ) | |||
Net Cash Used for Financing Activities | (1,861 | ) | (576 | ) | |||
Effect of exchange rate changes on cash and equivalents | (17 | ) | (2 | ) | |||
Net (decrease) increase in cash and equivalents | (993 | ) | 272 | ||||
Opening Cash and Equivalents | 1,541 | 1,424 | |||||
Closing Cash and Equivalents | $ | 548 | $ | 1,696 |
(Millions of dollars) | Total | Foreign Currency Translation | Benefit Plans | Cash Flow Hedges | ||||||||||||
Balance at September 30, 2016 | $ | (1,929 | ) | $ | (1,011 | ) | $ | (883 | ) | $ | (35 | ) | ||||
Other comprehensive (loss) income before reclassifications, net of taxes | (114 | ) | (139 | ) | — | 25 | ||||||||||
Amounts reclassified into income, net of taxes | 34 | — | 29 | 5 | ||||||||||||
Balance at March 31, 2017 | $ | (2,009 | ) | $ | (1,151 | ) | $ | (853 | ) | $ | (5 | ) |
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
(Millions of dollars) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Benefit Plans | |||||||||||||||
Reclassification of losses into income | $ | 22 | $ | 19 | $ | 44 | $ | 37 | |||||||
Associated tax benefits | (7 | ) | (6 | ) | (14 | ) | (13 | ) | |||||||
Amounts reclassified into income, net of taxes (A) | $ | 15 | $ | 12 | $ | 29 | $ | 24 | |||||||
Cash Flow Hedges | |||||||||||||||
Reclassification of losses into income | $ | 2 | $ | 5 | $ | 8 | $ | 9 | |||||||
Associated tax benefits | (1 | ) | (2 | ) | (3 | ) | (3 | ) | |||||||
Amounts reclassified into income, net of taxes (B) | $ | 1 | $ | 3 | $ | 5 | $ | 6 |
(A) | These reclassifications were not recorded into income in their entirety and were included in the computation of net periodic benefit plan costs. Additional details regarding the Company's benefit plans are provided in Note 8. |
(B) | These reclassifications were recorded to Interest expense and Cost of products sold. Additional details regarding the Company's cash flow hedges are provided in Note 12. |
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Average common shares outstanding | 213,583 | 212,469 | 213,321 | 212,077 | |||||||
Dilutive share equivalents from share-based plans (A) | 4,283 | 4,069 | 4,665 | 4,618 | |||||||
Average common and common equivalent shares outstanding – assuming dilution | 217,866 | 216,538 | 217,986 | 216,695 |
(A) | The prior-period adjustments to calculate diluted share equivalents from share-based plans included excess tax benefits relating to share-based compensation awards. Upon the Company's adoption, as discussed in Note 2, of new accounting requirements relating to share-based compensation award-related income tax effects, the adjustments in the current-year periods excluded these excess tax benefits. |
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
(Millions of dollars) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Revenues (A) | |||||||||||||||
Medical | $ | 1,987 | $ | 2,131 | $ | 3,951 | $ | 4,185 | |||||||
Life Sciences | 982 | 936 | 1,940 | 1,869 | |||||||||||
Total Revenues | $ | 2,969 | $ | 3,067 | $ | 5,892 | $ | 6,054 | |||||||
Income Before Income Taxes | |||||||||||||||
Medical | $ | 537 | $ | 513 | $ | 1,085 | $ | 978 | |||||||
Life Sciences | 177 | 202 | 376 | 404 | |||||||||||
Total Segment Operating Income | 714 | 715 | 1,461 | 1,381 | |||||||||||
Acquisitions and other restructurings | (76 | ) | (104 | ) | (163 | ) | (225 | ) | |||||||
Net interest expense | (79 | ) | (96 | ) | (169 | ) | (187 | ) | |||||||
Other unallocated items (B) | (197 | ) | (139 | ) | (76 | ) | (328 | ) | |||||||
Income Before Income Taxes | $ | 362 | $ | 376 | $ | 1,054 | $ | 642 |
(A) | Intersegment revenues are not material. |
(B) | Primarily comprised of foreign exchange, corporate expenses, and share-based compensation expense. The amount for the six months ended March 31, 2017 also included a $336 million reversal of certain reserves related to an appellate court decision which, among other things, reversed an unfavorable antitrust judgment in the RTI case. Additional disclosures regarding this legal matter are provided Note 5. |
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
(Millions of dollars) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Revenues | |||||||||||||||
United States | $ | 1,627 | $ | 1,719 | $ | 3,257 | $ | 3,410 | |||||||
International | 1,342 | 1,349 | 2,635 | 2,644 | |||||||||||
Total Revenues | $ | 2,969 | $ | 3,067 | $ | 5,892 | $ | 6,054 |
2017 | 2016 | ||||||
Risk-free interest rate | 2.33 | % | 2.17 | % | |||
Expected volatility | 20.00 | % | 19.00 | % | |||
Expected dividend yield | 1.71 | % | 1.76 | % | |||
Expected life | 7.5 years | 7.6 years | |||||
Fair value derived | $ | 33.81 | $ | 27.69 |
Pension Plans | Other Postretirement Benefits | ||||||||||||||
(Millions of dollars) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Service cost | $ | 27 | $ | 20 | $ | 1 | $ | 1 | |||||||
Interest cost | 18 | 18 | 1 | 1 | |||||||||||
Expected return on plan assets | (33 | ) | (27 | ) | — | — | |||||||||
Amortization of prior service credit | (4 | ) | (4 | ) | (1 | ) | (1 | ) | |||||||
Amortization of loss | 28 | 19 | — | — | |||||||||||
Settlements | — | 1 | — | — | |||||||||||
Net pension and postretirement cost | $ | 35 | $ | 27 | $ | 1 | $ | 1 |
Pension Plans | Other Postretirement Benefits | ||||||||||||||
(Millions of dollars) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Service cost | $ | 51 | $ | 41 | $ | 1 | $ | 1 | |||||||
Interest cost | 35 | 37 | 2 | 3 | |||||||||||
Expected return on plan assets | (63 | ) | (55 | ) | — | — | |||||||||
Amortization of prior service credit | (8 | ) | (7 | ) | (2 | ) | (2 | ) | |||||||
Amortization of loss | 52 | 39 | 1 | 1 | |||||||||||
Settlements | — | 1 | — | — | |||||||||||
Net pension and postretirement cost | $ | 67 | $ | 55 | $ | 2 | $ | 3 |
(Millions of dollars) | Employee Termination | Other | Total | ||||||||
Balance at September 30, 2016 | $ | 67 | $ | 2 | $ | 69 | |||||
Charged to expense | 18 | 29 | 46 | ||||||||
Cash payments | (28 | ) | (17 | ) | (45 | ) | |||||
Non-cash settlements | — | (6 | ) | (6 | ) | ||||||
Other adjustments | — | (7 | ) | (7 | ) | ||||||
Balance at March 31, 2017 | $ | 57 | $ | 1 | $ | 58 |
March 31, 2017 | September 30, 2016 | ||||||||||||||
(Millions of dollars) | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | |||||||||||
Amortized intangible assets | |||||||||||||||
Customer relationships | $ | 3,374 | $ | 451 | $ | 3,360 | $ | 339 | |||||||
Developed technology | 3,417 | 879 | 3,409 | 754 | |||||||||||
Product rights | 122 | 46 | 125 | 43 | |||||||||||
Trademarks | 405 | 56 | 405 | 45 | |||||||||||
Patents and other | 351 | 265 | 349 | 254 | |||||||||||
Amortized intangible assets | $ | 7,670 | $ | 1,696 | $ | 7,648 | $ | 1,435 | |||||||
Unamortized intangible assets | |||||||||||||||
Acquired in-process research and development | $ | 65 | $ | 66 | |||||||||||
Trademarks | 2 | 2 | |||||||||||||
Unamortized intangible assets | $ | 67 | $ | 68 |
(Millions of dollars) | Medical | Life Sciences | Total | ||||||||
Goodwill as of September 30, 2016 | $ | 6,688 | $ | 731 | $ | 7,419 | |||||
Acquisitions | — | 24 | 24 | ||||||||
Divestiture (A) | (25 | ) | — | (25 | ) | ||||||
Currency translation | (10 | ) | (3 | ) | (13 | ) | |||||
Goodwill as of March 31, 2017 | $ | 6,653 | $ | 752 | $ | 7,405 |
(A) | Represents goodwill derecognized upon the Company's sale of a 50.1% controlling financial interest in the Respiratory Solutions business, as further discussed in Note 9. |
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
(Millions of dollars) | 2017 | 2016 | 2017 | 2016 | |||||||||||
(Losses) gains on fair value hedges | $ | (1 | ) | $ | 11 | $ | (16 | ) | $ | 24 |
(Millions of dollars) | March 31, 2017 | September 30, 2016 | |||||
Asset derivatives-designated for hedge accounting | |||||||
Interest rate swaps | $ | 7 | $ | 23 | |||
Asset derivatives-undesignated for hedge accounting | |||||||
Forward exchange contracts | 6 | 3 | |||||
Total asset derivatives (A) | $ | 12 | $ | 25 | |||
Liability derivatives-designated for hedge accounting | |||||||
Interest rate swaps | 4 | 18 | |||||
Liability derivatives-undesignated for hedge accounting | |||||||
Forward exchange contracts | 5 | 13 | |||||
Total liability derivatives (B) | $ | 8 | $ | 31 |
(A) | All asset derivatives are included in Prepaid expenses and other. |
(B) | All liability derivatives are included in Payables and accrued expenses. |
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
(Millions of dollars) | 2017 | 2016 | 2017 | 2016 | |||||||||||
After-tax gains (losses) relating to cash flow hedges recognized in other comprehensive income (loss) | $ | 1 | $ | (2 | ) | $ | 25 | $ | (2 | ) |
Location of (Loss) Gain Recognized in Income on Derivatives | Amount of (Loss) Gain Recognized in Income on Derivatives | Amount of (Loss) Gain Recognized in Income on Derivatives | |||||||||||||||
Derivatives Not Designated as Hedging Instruments | Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
(Millions of dollars) | 2017 | 2016 | 2017 | 2016 | |||||||||||||
Forward exchange contracts (A) | Other income (expense), net | $ | 15 | $ | 15 | $ | (7 | ) | $ | 26 |
(A) | The gains and losses on forward contracts and currency options utilized to hedge the intercompany transactional foreign exchange exposures are largely offset by gains and losses on the underlying hedged items in Other income (expense), net. |
Basis of Fair Value Measurement | |||||||||||||||
(Millions of dollars) | March 31, 2017 Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||
Assets | |||||||||||||||
Institutional money market investments | $ | 20 | $ | 20 | $ | — | $ | — | |||||||
Interest rate swaps | 7 | — | 7 | — | |||||||||||
Forward exchange contracts | 6 | — | 6 | — | |||||||||||
Total Assets | $ | 32 | $ | 20 | $ | 12 | $ | — | |||||||
Liabilities | |||||||||||||||
Forward exchange contracts | $ | 5 | $ | — | $ | 5 | $ | — | |||||||
Interest rate swaps | 4 | — | 4 | — | |||||||||||
Contingent consideration liabilities | 63 | — | — | 63 | |||||||||||
Total Liabilities | $ | 71 | $ | — | $ | 8 | $ | 63 |
Basis of Fair Value Measurement | |||||||||||||||
(Millions of dollars) | September 30, 2016 Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||
Assets | |||||||||||||||
Institutional money market investments | $ | 224 | $ | 224 | $ | — | $ | — | |||||||
Interest rate swaps | 23 | — | 23 | — | |||||||||||
Forward exchange contracts | 3 | — | 3 | — | |||||||||||
Total Assets | $ | 249 | $ | 224 | $ | 25 | $ | — | |||||||
Liabilities | |||||||||||||||
Forward exchange contracts | $ | 13 | $ | — | $ | 13 | $ | — | |||||||
Interest rate swaps | 18 | — | 18 | — | |||||||||||
Contingent consideration liabilities | 54 | — | — | 54 | |||||||||||
Total Liabilities | $ | 86 | $ | — | $ | 31 | $ | 54 |
Interest Rate and Maturity | Aggregate Principal Amount (Millions of dollars) | |||
1.450% Notes due May 15, 2017 | $ | 226 | ||
1.800% Notes due December 15, 2017 | 250 | |||
5.000% Notes due May 15, 2019 | 153 | |||
6.375% Notes due August 1, 2019 | 338 | |||
2.675% Notes due December 15, 2019 | 125 | |||
3.875% Notes due May 15, 2024 | 221 | |||
3.734% Notes due December 15, 2024 | 375 | |||
Total notes purchased | $ | 1,689 |
• | Medical segment volume growth in the second quarter was driven by the Medication and Procedural Solutions and Medication Management Solutions units. Second quarter revenues in the Diabetes Care and Pharmaceutical Systems units were unfavorably impacted by the timing of orders that were expected to occur in the second quarter but were received in the first quarter. |
• | Life Sciences segment volume growth in the second quarter was driven by the Preanalytical Systems and Diagnostic Systems units. Life Sciences segment volume growth in the second quarter was partially offset by the unfavorable timing of instrument orders and the impact of sales fulfillment delays in the Biosciences unit. |
• | Worldwide sales of safety-engineered products reflected growth that was attributable to both segments. Second quarter sales in the United States of safety-engineered devices of $459 million increased 3.7% and second quarter international sales of safety-engineered devices of $315 million grew 8.6% over the prior year’s period, inclusive of an estimated 1.7% unfavorable impact due to foreign currency translation. |
Three months ended March 31, | ||||||||||||||||
(Millions of dollars) | 2017 | 2016 | Total Change (B) | Estimated FX Impact | FXN Change (B) | |||||||||||
Medication and Procedural Solutions | $ | 865 | $ | 831 | 4.1 | % | (0.7 | )% | 4.8 | % | ||||||
Medication Management Solutions (A) | 567 | 533 | 6.3 | % | (0.7 | )% | 7.0 | % | ||||||||
Diabetes Care | 243 | 243 | — | % | (0.5 | )% | 0.5 | % | ||||||||
Pharmaceutical Systems | 312 | 311 | 0.4 | % | (2.2 | )% | 2.6 | % | ||||||||
Respiratory Solutions (A) | — | 213 | NM | — | % | NM | ||||||||||
Total Medical Revenues | $ | 1,987 | $ | 2,131 | (6.8 | )% | (0.9 | )% | (5.9 | )% | ||||||
Medical segment safety-engineered products | $ | 485 | $ | 465 | 4.3 | % | (0.4 | )% | 4.7 | % |
(A) | The presentation of prior-period amounts has been revised to conform with the presentation of current-period amounts, which does not separately present an immaterial adjustment for the amortization of a deferred revenue balance write-down relating to the CareFusion acquisition. |
Six months ended March 31, | ||||||||||||||||
(Millions of dollars) | 2017 | 2016 | Total Change | Estimated FX Impact | FXN Change | |||||||||||
Total Medical Revenues | $ | 3,951 | $ | 4,185 | (5.6 | )% | (0.7 | )% | (4.9 | )% | ||||||
Medical segment safety-engineered products | $ | 968 | $ | 932 | 3.9 | % | (0.3 | )% | 4.2 | % |
Three months ended March 31, | Six months ended March 31, | ||||||||||||||
(Millions of dollars) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Medical segment operating income | $ | 537 | $ | 513 | $ | 1,085 | $ | 978 | |||||||
Segment operating income as % of Medical revenues | 27.0 | % | 24.1 | % | 27.5 | % | 23.4 | % |
Three months ended March 31, | ||||||||||||||||
(Millions of dollars) | 2017 | 2016 | Total Change | Estimated FX Impact | FXN Change | |||||||||||
Preanalytical Systems | $ | 363 | $ | 340 | 6.6 | % | (0.9 | )% | 7.5 | % | ||||||
Diagnostic Systems | 350 | 319 | 9.8 | % | (0.7 | )% | 10.5 | % | ||||||||
Biosciences | 269 | 277 | (2.8 | )% | (1.0 | )% | (1.8 | )% | ||||||||
Total Life Sciences Revenues | $ | 982 | $ | 936 | 4.9 | % | (0.9 | )% | 5.8 | % | ||||||
Life Sciences segment safety-engineered products | $ | 289 | $ | 268 | 8.0 | % | (1.0 | )% | 9.0 | % |
Six months ended March 31, | ||||||||||||||||
(Millions of dollars) | 2017 | 2016 | Total Change | Estimated FX Impact | FXN Change | |||||||||||
Total Life Sciences Revenues | $ | 1,940 | $ | 1,869 | 3.8 | % | (0.7 | )% | 4.5 | % | ||||||
Life Sciences segment safety-engineered products | $ | 569 | $ | 538 | 5.7 | % | (1.0 | )% | 6.7 | % |
Three months ended March 31, | Six months ended March 31, | ||||||||||||||
(Millions of dollars) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Life Sciences segment operating income | $ | 177 | $ | 202 | $ | 376 | $ | 404 | |||||||
Segment operating income as % of Life Sciences revenues | 18.0 | % | 21.6 | % | 19.4 | % | 21.6 | % |
Three months ended March 31, | ||||||||||||||||
(Millions of dollars) | 2017 | 2016 | Total Change | Estimated FX Impact | FXN Change | |||||||||||
United States | $ | 1,627 | $ | 1,719 | (5.4 | )% | — | (5.4 | )% | |||||||
International | 1,342 | 1,349 | (0.5 | )% | (2.0 | )% | 1.5 | % | ||||||||
Total Revenues | $ | 2,969 | $ | 3,067 | (3.2 | )% | (0.8 | )% | (2.4 | )% |
Three months ended March 31, | Six months ended March 31, | ||||||||||||||
(Millions of dollars) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Integration costs (A) | 63 | 40 | 109 | 75 | |||||||||||
Restructuring costs (A) | 11 | 64 | 46 | 149 | |||||||||||
Transaction costs (A) | 8 | — | 14 | — | |||||||||||
Purchase accounting adjustments (B) | 129 | 115 | 255 | 268 | |||||||||||
Litigation-related item (C) | — | — | (336 | ) | — | ||||||||||
Loss on debt extinguishment (D) | — | — | 42 | — | |||||||||||
Total specified items | 211 | 218 | 130 | 492 | |||||||||||
Tax impact of specified items | 54 | 85 | 27 | 164 | |||||||||||
After-tax impact of specified items | $ | 157 | $ | 134 | $ | 103 | $ | 329 |
(A) | Represents integration, restructuring and transaction costs substantially associated with our fiscal year 2015 acquisition of CareFusion and other portfolio rationalization initiatives. The integration and restructuring costs were recorded in Acquisitions and other restructurings. The transactions costs were recorded in Acquisitions and other restructurings and Other (expense) income, net. |
(B) | Primarily represents non-cash amortization expense associated with acquisition-related identifiable intangible assets. BD’s amortization expense is primarily recorded in Costs of products sold. |
(C) | Represents the reversal of certain reserves related to an appellate court decision recorded in Other operating income, as further discussed below. |
(D) | Represents a loss recognized in Other (expense) income, net upon our extinguishment of certain long-term senior notes, as further discussed below. |
Three-month period | Six-month period | ||||
March 31, 2016 gross profit margin % | 48.4 | % | 47.8 | % | |
Operating performance | 0.2 | % | 1.0 | % | |
Impact of divestitures | 0.8 | % | 0.8 | % | |
Foreign currency translation | (1.2 | )% | (0.6 | )% | |
March 31, 2017 gross profit margin % | 48.2 | % | 49.0 | % |
Three months ended March 31, | Increase (decrease) in basis points | Six months ended March 31, | Increase (decrease) in basis points | ||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
(Millions of dollars) | |||||||||||||||||||||
Selling and administrative expense | $ | 724 | $ | 732 | $ | 1,432 | $ | 1,480 | |||||||||||||
% of revenues | 24.4 | % | 23.9 | % | 50 | 24.3 | % | 24.5 | % | (20 | ) | ||||||||||
Research and development expense | $ | 187 | $ | 182 | $ | 368 | $ | 369 | |||||||||||||
% of revenues | 6.3 | % | 5.9 | % | 40 | 6.2 | % | 6.1 | % | 10 | |||||||||||
Acquisitions and other restructurings | $ | 76 | $ | 104 | $ | 163 | $ | 225 | |||||||||||||
Other operating income | $ | — | $ | — | $ | (336 | ) | $ | — |
Three months ended March 31, | Six months ended March 31, | ||||||||||||||
(Millions of dollars) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Interest expense | $ | (86 | ) | $ | (99 | ) | $ | (181 | ) | $ | (196 | ) | |||
Interest income | 7 | 3 | 12 | 9 | |||||||||||
Net interest expense | $ | (79 | ) | $ | (96 | ) | $ | (169 | ) | $ | (187 | ) |
Three months ended March 31, | Six months ended March 31, | ||||||||||||||
(Millions of dollars) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Loss on debt extinguishment | $ | — | $ | — | $ | (42 | ) | $ | — | ||||||
Share of Vyaire Medical joint venture results, net of income from transition services agreements | (9 | ) | — | 5 | — | ||||||||||
Gains (losses) on undesignated foreign exchange derivatives, net | 1 | 3 | (3 | ) | 3 | ||||||||||
Other | 3 | 3 | 5 | 8 | |||||||||||
Other (expense) income, net | $ | (5 | ) | $ | 6 | $ | (35 | ) | $ | 11 |
Three months ended March 31, | Six months ended March 31, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Effective income tax rate | 4.9 | % | 10.0 | % | 14.1 | % | 11.7 | % | |||
Favorable impact, in basis points, from specified items | 760 | 1,060 | 70 | 930 |
Three months ended March 31, | Six months ended March 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net Income (Millions of dollars) | $ | 344 | $ | 338 | $ | 905 | $ | 567 | |||||||
Diluted Earnings per Share | $ | 1.58 | $ | 1.56 | $ | 4.15 | $ | 2.62 | |||||||
Unfavorable impact-specified items | $ | (0.72 | ) | $ | (0.62 | ) | $ | (0.47 | ) | $ | (1.52 | ) | |||
Unfavorable impact-foreign currency translation | $ | (0.16 | ) | $ | (0.17 | ) |
Six months ended March 31, | |||||||
(Millions of dollars) | 2017 | 2016 | |||||
Net cash provided by (used for) | |||||||
Operating activities | $ | 1,040 | $ | 1,020 | |||
Investing activities | $ | (155 | ) | $ | (170 | ) | |
Financing activities | $ | (1,861 | ) | $ | (576 | ) |
(Millions of dollars) | March 31, 2017 | September 30, 2016 | |||||
Total debt | $ | 10,306 | $ | 11,551 | |||
Short-term debt as a percentage of total debt | 11.9 | % | 8.7 | % | |||
Weighted average cost of total debt | 3.5 | % | 3.6 | % | |||
Total debt as a percentage of total capital* | 53.3 | % | 57.2 | % |
• | Weakness in the global economy and financial markets, which could increase the cost of operating our business, weaken demand for our products and services, negatively impact the prices we can charge for our products and services, or impair our ability to produce our products. |
• | Competitive factors that could adversely affect our operations, including new product introductions (for example, new forms of drug delivery) by our current or future competitors, increased pricing pressure due to the impact of low-cost manufacturers as certain competitors have established manufacturing sites or have contracted with suppliers in low-cost manufacturing locations as a means to lower their costs, patents attained by competitors (particularly as patents on our products expire), and new entrants into our markets. |
• | The adverse financial impact resulting from unfavorable changes in foreign currency exchange rates. |
• | Regional, national and foreign economic factors, including inflation, deflation, and fluctuations in interest rates, and their potential effect on our operating performance. |
• | Our ability to achieve our projected level or mix of product sales, as our earnings forecasts are based on projected sales volumes and pricing of many product types, some of which are more profitable than others. |
• | Changes in reimbursement practices of third-party payers or adverse decisions relating to our products by such payers, which could reduce demand for our products or the price we can charge for such products. |
• | The impact of the Patient Protection and Affordable Care Act (the "PPACA") in the United States, which implemented an excise tax on U.S. sales of certain medical devices (which has been suspended until January 1, 2018), and which could result in reduced demand for our products, increased pricing pressures or otherwise adversely affect our business. |
• | Future healthcare reform in the United States and other countries in which we do business that may involve changes in government pricing and reimbursement policies or other cost containment reforms. |
• | Changes in domestic and foreign healthcare industry practices that result in a reduction in procedures using our products or increased pricing pressures, including the continued consolidation among healthcare providers and trends toward managed care and healthcare cost containment. |
• | The impact of changes in U.S. federal laws and policy adopted under the new administration and Congress, including the effect that such changes will have on fiscal and tax policies, the potential repeal of all or portions of the PPACA, and international trade agreements and policies. |
• | Fluctuations in the cost and availability of oil-based resins and other raw materials, as well as certain components, used in our products, the ability to maintain favorable supplier arrangements and relationships (particularly with respect to sole-source suppliers), and the potential adverse effects of any disruption in the availability of such items. |
• | Security breaches of our information technology systems or our products, which could impair our ability to conduct business, result in the loss of BD trade secrets or otherwise compromise sensitive information of BD or its customers, suppliers and other business partners, or of customers' patients, or result in product efficacy or safety concerns for certain of our products. |
• | Difficulties inherent in product development, including the potential inability to successfully continue technological innovation, successfully complete clinical trials, obtain regulatory approvals in the United States and abroad, obtain intellectual property protection for our products, obtain coverage and adequate reimbursement for new products, or gain and maintain market approval of products, as well as the possibility of infringement claims by competitors with respect to patents or other intellectual property rights, all of which can preclude or delay commercialization of a product. Delays in obtaining necessary approvals or clearances from the FDA or other regulatory agencies or changes in the regulatory process may also delay product launches and increase development costs. |
• | The impact of business combinations, including any volatility in earnings relating to acquisition-related costs, and our ability to successfully integrate any business we may acquire. |
• | Our ability to penetrate or expand our operations in emerging markets, which depends on local economic and political conditions, and how well we are able to acquire or form strategic business alliances with local companies and make necessary infrastructure enhancements to production facilities and distribution networks. Our international operations also increase our compliance risks, including risks under the Foreign Corrupt Practices Act and other anti-corruption laws. |
• | Political conditions in international markets, including civil unrest, terrorist activity, governmental changes, trade barriers, restrictions on the ability to transfer capital across borders and governmental expropriation of assets. This includes the possible impact of the June 2016 advisory referendum by British voters to exit the European Union, which has created uncertainties affecting business operations in the United Kingdom and the EU. |
• | Deficit reduction efforts or other actions that reduce the availability of government funding for healthcare and research, which could weaken demand for our products and result in additional pricing pressures, as well as create potential collection risks associated with such sales. |
• | Fluctuations in university or U.S. and international governmental funding and policies for life sciences research. |
• | Fluctuations in the demand for products we sell to pharmaceutical companies that are used to manufacture, or are sold with, the products of such companies, as a result of funding constraints, consolidation or otherwise. |
• | The effects of events that adversely impact our ability to manufacture our products (particularly where production of a product line is concentrated in one or more plants) or our ability to source materials or components from suppliers (including sole-source suppliers) that are needed for such manufacturing. |
• | Pending and potential future litigation or other proceedings adverse to BD, including antitrust, product liability, environmental and patent infringement, and the availability or collectability of insurance relating to any such claims. |
• | New or changing laws and regulations affecting our domestic and foreign operations, or changes in enforcement practices, including laws relating to trade, monetary and fiscal policies, taxation (including tax reforms that could adversely impact multinational corporations), sales practices, environmental protection, price controls, and licensing and regulatory requirements for new products and products in the postmarketing phase. In particular, the U.S. and other countries may impose new requirements regarding registration, labeling or prohibited materials that may require us to re-register products already on the market or otherwise impact our ability to market our products. Environmental laws, particularly with respect to the emission of greenhouse gases, are also becoming more stringent throughout the world, which may increase our costs of operations or necessitate changes in our manufacturing plants or processes or those of our suppliers, or result in liability to BD. |
• | Product efficacy or safety concerns regarding our products resulting in product recalls, regulatory action on the part of the U.S. Food and Drug Administration (FDA) or foreign counterparts, declining sales and product liability claims, particularly in light of the current regulatory environment, in which there has been increased enforcement activity by the FDA. As a result of the CareFusion acquisition, we are operating under a consent decree with the FDA relating to our U.S. infusion pump business. The consent decree authorizes the FDA, in the event of any violations in the future, to order us to cease manufacturing and distributing products, recall products or take other actions, and we may be required to pay significant monetary damages if we fail to comply with any provision of the consent decree. |
• | Risks relating to our acquisition of CareFusion, including our ability to continue to successfully combine and integrate the CareFusion operations in order to fully obtain the anticipated benefits and costs savings from the transaction. |
• | Risks related to our pending acquisition of Bard, including: |
◦ | The failure to satisfy the conditions to completing the transaction, including obtaining required regulatory approvals or approval of the Bard stockholders. |
◦ | Conditions to obtaining regulatory approval that may place restrictions on the business of the combined company. |
◦ | Our failure to obtain the anticipated benefits and costs savings from the acquisition. |
◦ | The impact of the additional debt we will incur and the equity and equity-linked securities that we will issue to finance the acquisition, including on our credit ratings and costs of borrowing. |
• | The effect of adverse media exposure or other publicity regarding BD’s business or operations, including the effect on BD’s reputation or demand for its products. |
• | The effect of market fluctuations on the value of assets in BD’s pension plans and on actuarial interest rate and asset return assumptions, which could require BD to make additional contributions to the plans or increase our pension plan expense. |
• | Our ability to obtain the anticipated benefits of restructuring programs, if any, that we may undertake. |
• | Issuance of new or revised accounting standards by the Financial Accounting Standards Board or the Securities and Exchange Commission. |
• | the market price of our common stock could decline; |
• | if the Bard merger agreement is terminated and our board of directors seeks another business combination, our stockholders cannot be certain that we will be able to find a party willing to enter into a transaction on terms equivalent to or more attractive than the terms that Bard has agreed to in the Bard merger agreement; |
• | time and resources, financial and other, committed by our management to matters relating to the Bard acquisition could otherwise have been devoted to pursuing other beneficial opportunities for our company; |
• | we may experience negative reactions from the financial markets or from our customers or employees; and |
• | we will be required to pay our respective costs relating to the Bard acquisition, including legal, accounting, financial advisory, financing and printing fees, whether or not the Bard acquisition is completed. |
• | the diversion of management’s attention from ongoing business concerns and performance shortfalls at one or both of the companies as a result of the devotion of management’s attention to the Bard acquisition; |
• | managing a larger combined company; |
• | maintaining employee morale and retaining key management and other employees; |
• | the possibility of faulty assumptions underlying expectations regarding the integration process; |
• | retaining existing business and operational relationships and attracting new business and operational relationships; |
• | consolidating corporate and administrative infrastructures and eliminating duplicative operations and inconsistencies in standards, controls, procedures and policies; |
• | coordinating geographically separate organizations; |
• | unanticipated issues in integrating information technology, communications and other systems; and |
• | unforeseen expenses or delays associated with the Bard acquisition. |
• | investors’ anticipation of the potential resale in the market of a substantial number of additional shares of our common stock, including common stock received upon conversion of any equity-linked securities; |
• | possible sales of our common stock by investors who view the equity-linked securities as a more attractive means of equity participation in us than owning shares of our common stock; and |
• | hedging or arbitrage trading activity that may develop involving the equity or equity-linked securities. |
For the three months ended March 31, 2017 | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2) | ||||||||
January 1 – 31, 2017 | 2,217 | $ | 164.51 | — | 7,857,742 | |||||||
February 1 – 28, 2017 | 392 | 179.46 | — | 7,857,742 | ||||||||
March 1 – 31, 2017 | — | — | — | 7,857,742 | ||||||||
Total | 2,609 | $ | 166.76 | — | 7,857,742 |
(1) | Includes 2,609 shares purchased during the quarter in open market transactions by the trust relating to BD’s Deferred Compensation and Retirement Benefit Restoration Plan and 1996 Directors’ Deferral Plan. |
(2) | Represents shares available under a repurchase program authorized by the Board of Directors on September 24, 2013 for 10 million shares, for which there is no expiration date. |
Exhibit 2 | Agreement and Plan of Merger, dated as of April 23, 2017, among C.R. Bard, Inc., Becton, Dickinson and Company and Lambda Corp. (incorporated by reference to Exhibit 2.1 of the registrant’s Current Report on Form 8-K dated April 24, 2017). |
Exhibit 3 | Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 of the registrant’s Current Report on Form 8-K dated April 24, 2017). |
Exhibit 10.1 | Performance Incentive Plan, amended and restated as of January 24, 2017. |
Exhibit 10.2 | Commitment Letter (incorporated by reference to Exhibit 10.1 of the registrant’s Current Report on Form 8-K dated April 24, 2017). |
Exhibit 31 | Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to SEC Rule 13a - 14(a). |
Exhibit 32 | Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to Rule 13a - 14(b) and Section 1350 of Chapter 63 of Title 18 of the U.S. Code. |
Exhibit 101 | The following materials from this report, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. |
Becton, Dickinson and Company | |
(Registrant) |
/s/ Christopher Reidy | |
Christopher Reidy | |
Executive Vice President, Chief Financial Officer and Chief Administrative Officer | |
(Principal Financial Officer) | |
/s/ John Gallagher | |
John Gallagher | |
Senior Vice President, Corporate Finance, Controller and Treasurer | |
(Principal Accounting Officer) |
Exhibit Number | Description of Exhibits | |
2 | Agreement and Plan of Merger, dated as of April 23, 2017, among C.R. Bard, Inc., Becton, Dickinson and Company and Lambda Corp. (incorporated by reference to Exhibit 2.1 of the registrant’s Current Report on Form 8-K dated April 24, 2017). | |
3 | Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 of the registrant’s Current Report on Form 8-K dated April 24, 2017). | |
10.1 | Performance Incentive Plan, amended and restated as of January 24, 2017. | |
10.2 | Commitment Letter (incorporated by reference to Exhibit 10.1 of the registrant’s Current Report on Form 8-K dated April 24, 2017). | |
31 | Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to SEC Rule 13a - 14(a). | |
32 | Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to Rule 13a - 14(b) and Section 1350 of Chapter 63 of Title 18 of the U.S. Code. | |
101 | The following materials from this report, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. |
(a) | Theoretical Incentive |
(b) | Incentive Factors |
(c) | Communication |
(d) | Incentive Payment Recommendations |
(a) | Payment |
(b) | Exceptions |
1. | I have reviewed this Quarterly Report on Form 10-Q of Becton, Dickinson and Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Vincent A. Forlenza | |
Vincent A. Forlenza | |
Chairman and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Becton, Dickinson and Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Christopher Reidy | |
Christopher Reidy | |
Executive Vice President, Chief Financial Officer and Chief Administrative Officer |
1. | such Report fully complies with the requirements of Section 13(a) of the Exchange Act; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Becton, Dickinson and Company. |
/s/ Vincent A. Forlenza | |
Name: Vincent A. Forlenza | |
Chief Executive Officer |
1. | such Report fully complies with the requirements of Section 13(a) of the Exchange Act; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Becton, Dickinson and Company. |
/s/ Christopher Reidy | |
Name: Christopher Reidy | |
Chief Financial Officer |
Document and Entity Information |
6 Months Ended |
---|---|
Mar. 31, 2017
shares
| |
Document And Entity Information [Abstract] | |
Entity registrant name | BECTON DICKINSON & CO |
Trading symbol | BDX |
Entity central index key | 0000010795 |
Current fiscal year end date | --09-30 |
Entity filer category | Large Accelerated Filer |
Document type | 10-Q |
Document period end date | Mar. 31, 2017 |
Document fiscal year focus | 2017 |
Document fiscal period focus | Q2 |
Amendment flag | false |
Entity common stock, shares outstanding (shares) | 213,305,385 |
Condensed Consolidated Statements of Income - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Income Statement [Abstract] | ||||
Revenues | $ 2,969 | $ 3,067 | $ 5,892 | $ 6,054 |
Cost of products sold | 1,537 | 1,584 | 3,007 | 3,162 |
Selling and administrative expense | 724 | 732 | 1,432 | 1,480 |
Research and development expense | 187 | 182 | 368 | 369 |
Acquisitions and other restructurings | 76 | 104 | 163 | 225 |
Other operating income | 0 | 0 | (336) | 0 |
Total Operating Costs and Expenses | 2,523 | 2,601 | 4,634 | 5,236 |
Operating Income | 446 | 466 | 1,257 | 818 |
Interest expense | (86) | (99) | (181) | (196) |
Interest income | 7 | 3 | 12 | 9 |
Other (expense) income, net | (5) | 6 | (35) | 11 |
Income Before Income Taxes | 362 | 376 | 1,054 | 642 |
Income tax provision | 18 | 38 | 148 | 75 |
Net Income | $ 344 | $ 338 | $ 905 | $ 567 |
Basic Earnings per Share (USD per share) | $ 1.61 | $ 1.59 | $ 4.24 | $ 2.67 |
Diluted Earnings per Share (USD per share) | 1.58 | 1.56 | 4.15 | 2.62 |
Dividends per Common Share (USD per share) | $ 0.73 | $ 0.66 | $ 1.46 | $ 1.32 |
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net Income | $ 344 | $ 338 | $ 905 | $ 567 |
Other Comprehensive Income (Loss), Net of Tax | ||||
Foreign currency translation adjustments | 136 | 179 | (139) | 63 |
Defined benefit pension and postretirement plans | 15 | 12 | 29 | 24 |
Cash flow hedges | 2 | 1 | 30 | 4 |
Other Comprehensive Gain (Loss), Net of Tax | 153 | 193 | (80) | 91 |
Comprehensive Income | $ 497 | $ 531 | $ 826 | $ 658 |
Basis of Presentation |
6 Months Ended |
---|---|
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, in the opinion of the management of the Company, include all adjustments which are of a normal recurring nature, necessary for a fair presentation of the financial position and the results of operations and cash flows for the periods presented. However, the financial statements do not include all information and accompanying notes required for a presentation in accordance with U.S. generally accepted accounting principles. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s 2016 Annual Report on Form 10-K. Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages and earnings per share amounts presented are calculated from the underlying amounts. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. |
Accounting Changes |
6 Months Ended |
---|---|
Mar. 31, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
Accounting Changes | Accounting Changes New Accounting Principles Adopted On October 1, 2016, the Company prospectively adopted amended requirements issued by the Financial Accounting Standards Board ("FASB") relating to the timing of recognition and classification of share-based compensation award-related income tax effects. Upon the settlement of awards in the first and second quarters of fiscal year 2017, the Company recorded tax benefits for the three and six months ended March 31, 2017 of $21 million and $48 million, respectively, to Income tax provision within its consolidated statement of income. The Company expects to record additional tax benefits through the remainder of fiscal year 2017. These tax benefits were recorded within Capital in excess of par value on the Company's condensed consolidated balance sheet in the prior-year period. Because these excess tax benefits are no longer recorded in Capital in excess of par value, the current-period adjustments for the dilutive impact of share equivalents from share-based plans, which is used in the Company's computation of diluted earnings per share, increased by approximately 1 million shares. Also per the amended guidance, the Company classified the $48 million of excess tax benefits for the six months ended March 31, 2017 on its condensed consolidated statement of cash flows within Net Cash Provided by Operating Activities, rather than Net Cash Used for Financing Activities, which included the excess tax benefits for the six months ended March 31, 2016. The amended guidance allows entities to account for award forfeitures as they occur; however, the Company has elected to continue its determination of compensation cost recognized in each period based upon an estimate of expected future forfeitures. New Accounting Principles Not Yet Adopted In February 2016, the FASB issued a new lease accounting standard which requires lessees to recognize lease assets and lease liabilities on the balance sheet. The new standard also requires expanded disclosures regarding leasing arrangements. The Company is currently evaluating the impact that this new lease accounting standard will have on its consolidated financial statements upon its adoption of the standard on October 1, 2019. In May 2014, the FASB issued a new revenue recognition standard. Under this standard, revenue will be recognized upon the transfer of goods or services to customers and the amount of revenue recognized will reflect the consideration to which a reporting entity expects to be entitled in exchange for those goods or services. The Company intends to adopt the standard, as required, on October 1, 2018 and is currently in the process of completing the initial assessment of the impact that this new revenue recognition standard will have on its consolidated financial statements. As part of the initial assessment, the Company is reviewing a representative sample of its contracts across its various businesses and geographies to identify potential differences that could result from applying the requirements of the new standard. The analysis includes identifying whether there may be differences in timing of revenue recognition under the new standard as well as assessing performance obligations, variable consideration, and contract costs. The Company has not yet estimated the impact, if any, of the new standard on the timing and pattern of its revenue recognition. The Company continues to evaluate the available adoption methods, and apprises both management and its audit committee of the project status regularly. |
Accumulated Other Comprehensive Income (Loss) |
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AOCI Attributable to Parent [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss) | Accumulated Other Comprehensive Income (Loss) The components and changes of Accumulated other comprehensive income (loss) for the six-month period ended March 31, 2017 were as follows:
The amount of foreign currency translation recognized in other comprehensive income during the six months ended March 31, 2017 included a loss relating to net investment hedges, as further discussed in Note 12. The amount recognized in other comprehensive income during the six months ended March 31, 2017 relating to cash flow hedges represented gains on forward starting interest rate swaps entered into in fiscal year 2016, which are also further discussed in Note 12. The tax provision relating to these gains was $1 million and $16 million for the three and six months ended March 31, 2017, respectively. Reclassifications out of Accumulated other comprehensive income (loss) were as follows:
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Earnings Per Share |
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings per Share The weighted average common shares used in the computations of basic and diluted earnings per share (shares in thousands) were as follows:
Using proceeds received from the divestiture of the Respiratory Solutions business in the first quarter of fiscal year 2017, the Company repurchased approximately 1.3 million shares of its common stock under an accelerated share repurchase agreement. The repurchased shares were recorded as a $220 million increase to Common stock in treasury. |
Contingencies |
6 Months Ended |
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Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Contingencies Given the uncertain nature of litigation generally, the Company is not able in all cases to estimate the amount or range of loss that could result from an unfavorable outcome of the litigation to which the Company is a party. In accordance with U.S. generally accepted accounting principles, the Company establishes accruals to the extent probable future losses are estimable (in the case of environmental matters, without considering possible third-party recoveries). In view of the uncertainties discussed below, the Company could incur charges in excess of any currently established accruals and, to the extent available, liability insurance. In the opinion of management, any such future charges, individually or in the aggregate, could have a material adverse effect on the Company’s consolidated results of operations and consolidated cash flows. In June 2007, Retractable Technologies, Inc. (“RTI”) filed a complaint against the Company under the caption Retractable Technologies, Inc. vs. Becton Dickinson and Company (Civil Action No. 2:07-cv-250, U.S. District Court, Eastern District of Texas) alleging that the BD Integra™ syringes infringe patents licensed exclusively to RTI. In its complaint, RTI also alleged that the Company engaged in false advertising with respect to certain of the Company’s safety-engineered products in violation of the Lanham Act; acted to exclude RTI from various product markets and to maintain its market share through, among other things, exclusionary contracts in violation of state and federal antitrust laws; and engaged in unfair competition. In January 2008, the Court severed the patent and non-patent claims into separate cases, and stayed the non-patent claims during the pendency of the patent claims at the trial court level. On April 1, 2008, RTI filed a complaint against BD under the caption Retractable Technologies, Inc. and Thomas J. Shaw v. Becton Dickinson and Company (Civil Action No. 2:08-cv-141, U.S. District Court, Eastern District of Texas) alleging that the BD Integra™ syringes infringe another patent licensed exclusively to RTI. On August 29, 2008, the Court ordered the consolidation of the patent cases. RTI was subsequently awarded $5 million in damages at a jury trial with respect to the patent claims, which has been paid, and the patent cases are now concluded. On September 19, 2013, a jury returned a verdict against BD with respect to RTI’s Lanham Act claim and claim for attempted monopolization based on deception in the safety syringe market. The jury awarded RTI $113.5 million for its attempted monopolization claim (which would be trebled under the antitrust statute). The jury’s verdict rejected RTI’s monopolization claims in the markets for safety syringes, conventional syringes and safety IV catheters; its attempted monopolization claims in the markets for conventional syringes and safety IV catheters; and its claims for contractual restraint of trade and exclusive dealing in the markets for safety syringes, conventional syringes and safety IV catheters. In connection with the verdict, the Company recorded a pre-tax charge of approximately $341 million in the fourth quarter of fiscal year 2013. With respect to RTI's requested injunction relief, in November 2014, the Court granted RTI’s request that BD be ordered to issue certain corrective statements regarding its advertising and enjoined from making certain advertising claims. The Court denied RTI’s request for injunctive relief relating to BD’s contracting practices and BD’s safety syringe advertising, finding that RTI failed to prove that BD’s contracting practices violated the antitrust laws or that BD’s safety syringe advertising is false. On January 14, 2015, the Court granted in part and denied in part BD’s motion for a stay of the injunction. The Court held that, pending appeal, BD would not be required to send the corrective advertising notices to end-user customers, but only to employees, distributors and Group Purchasing Organizations. On January 15, 2015, the Court entered its Final Judgment in the case ordering that RTI recover $341 million for its attempted monopolization claim and $12 million for attorneys’ fees, and awarded pre and post-judgment interest and costs. On February 3, 2015, the Court of Appeals for the Fifth Circuit denied BD’s motion for a stay of the injunction pending the final appeal, and BD thereafter complied with the Court’s order. On April 23, 2015, the Court granted BD’s motion to eliminate the award of pre-judgment interest, and entered a new Final Judgment. BD thereafter appealed to the Court of Appeals challenging the entirety of the Final Judgment. On December 2, 2016, the Court of Appeals issued an opinion reversing the judgment as to RTI’s attempted monopolization claim and rendered judgment on that claim in favor of BD. As a result, the Company reversed $336 million of reserves associated with this judgment. The Court of Appeals affirmed the judgment for Lanham Act liability, and remanded the case to the district court to consider whether and if so how much profit should be disgorged by BD on that claim. The Court of Appeals vacated and remanded the injunction ordered by the Court. On January 31, 2017, RTI filed a petition for a writ of certiorari with the U.S. Supreme Court. On March 20, 2017, the U.S. Supreme Court denied certiorari, and the matter will now return to the district court for a ruling on RTI’s request for disgorgement. On July 17, 2015, a class action complaint was filed against the Company in the U.S. District Court for the Southern District of Georgia. The plaintiffs, Glynn-Brunswick Hospital Authority, trading as Southeast Georgia Health System, and Southeast Georgia Health System, Inc., seek to represent a class of acute care purchasers of BD syringes and IV catheters. The complaint alleges that BD monopolized the markets for syringes and IV catheters through contracts, theft of technology, false advertising, acquisitions, and other conduct. The complaint seeks treble damages but does not specify the amount of alleged damages. The Company filed a motion to dismiss the complaint which was granted on January 29, 2016. On September 23, 2016, the court denied plaintiffs’ motion to alter or amend the judgment to allow plaintiffs to file an amended complaint, and plaintiffs appealed that decision to the Eleventh Circuit Court of Appeals. The plaintiffs thereafter voluntarily dismissed their appeal, and the Court of Appeals dismissed the case on November 21, 2016. The Company is also involved both as a plaintiff and a defendant in other legal proceedings and claims that arise in the ordinary course of business. The Company believes that it has meritorious defenses to the suits pending against the Company and is engaged in a vigorous defense of each of these matters. The Company is a potentially responsible party to a number of federal administrative proceedings in the United States brought under the Comprehensive Environment Response, Compensation and Liability Act, also known as “Superfund,” and similar state laws. The affected sites are in varying stages of development. In some instances, the remedy has been completed, while in others, environmental studies are underway or commencing. For several sites, there are other potentially responsible parties that may be jointly or severally liable to pay all or part of cleanup costs. |
Segment Data |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Data | Segment Data The Company's organizational structure is based upon two principal business segments: BD Medical (“Medical”) and BD Life Sciences (“Life Sciences”). These segments are strategic businesses that are managed separately because each one develops, manufactures and markets distinct products and services. The Company evaluates performance of its business segments and allocates resources to them primarily based upon operating income. Segment operating income represents revenues reduced by product costs and operating expenses. As more fully discussed in Note 9, the Company sold a 50.1% controlling financial interest in its Respiratory Solutions business, a component of the Medical segment, in October 2016. This transaction did not meet the criteria established for reporting discontinued operations and as such, results for the three and six months ended March 31, 2016 included $213 million and $421 million, respectively, of revenues which did not occur in the current-year periods. Financial information for the Company’s segments was as follows:
Revenues by geographic areas were as follows:
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Share-Based Compensation |
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation | Share-Based Compensation The Company grants share-based awards under the 2004 Employee and Director Equity-Based Compensation Plan (the “2004 Plan”), which provides long-term incentive compensation to employees and directors. The Company believes that such awards align the interests of its employees and directors with those of its shareholders. The fair values of stock appreciation rights granted during the annual share-based grants in November of 2016 and 2015, respectively, were estimated on the date of grant using a lattice-based binomial valuation model based on the following assumptions:
The fair value of share-based payments is recognized as compensation expense in net income. For the three months ended March 31, 2017 and 2016, compensation expense charged to income was $39 million and $43 million, respectively. For the six months ended March 31, 2017 and 2016, compensation expense charged to income was $99 million and $119 million, respectively. The amount of unrecognized compensation expense for all non-vested share-based awards as of March 31, 2017 was approximately $254 million, which is expected to be recognized over a weighted-average remaining life of approximately 2.2 years. |
Benefit Plans |
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Benefit Plans | Benefit Plans The Company has defined benefit pension plans covering certain employees in the United States and certain foreign locations. The Company also provides certain postretirement healthcare and life insurance benefits to qualifying domestic retirees. Other postretirement benefit plans in foreign countries are not material. The measurement date used for the Company’s employee benefit plans is September 30. Net pension and postretirement cost included the following components for the three months ended March 31:
Net pension and postretirement cost included the following components for the six months ended March 31:
The amounts provided above for amortization of prior service credit and amortization of loss represent the reclassifications of prior service credits and net actuarial losses that were recognized in Accumulated other comprehensive income (loss) in prior periods. Postemployment benefit costs were $10 million for the three months ended March 31, 2017 and 2016. Postemployment benefit costs were $20 million for the six months ended March 31, 2017 and 2016. Employee termination costs associated with the Company's restructuring activities are provided in Note 10. |
Divestiture |
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Mar. 31, 2017 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Divestiture | Divestiture Respiratory Solutions On October 3, 2016, the Company sold a 50.1% controlling financial interest in its Respiratory Solutions business, a component of the Medical segment, to form a joint venture, Vyaire Medical. The Company retained a 49.9% non-controlling interest in the new standalone entity. The buyer will control the operations and governance of the new entity. The Company accounts for its remaining interest in the new entity as an equity method investment and, beginning on January 1, 2017, records its share of the new entity's earnings or losses on a one-quarter lag to Other income (expense), net. The Company has agreed to various contract manufacturing and certain logistical and transition services agreements with the new entity for a period of up to two years after the sale. The historical financial results for the Respiratory Solutions business, which included approximately $213 million and $421 million of revenues for the three and six months ended March 31, 2016, respectively, have not been classified as a discontinued operation. |
Business Restructuring Charges |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Restructuring Charges | Business Restructuring Charges In connection with the Company's fiscal year 2015 acquisition of CareFusion and other portfolio rationalization initiatives, the Company incurred restructuring costs during the six months ended March 31, 2017, which were recorded as Acquisitions and other restructurings. Restructuring liability activity for the six months ended March 31, 2017 was as follows:
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Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets | Intangible Assets Intangible assets consisted of:
Intangible amortization expense for the three months ended March 31, 2017 and 2016 was $131 million and $138 million, respectively. Intangible amortization expense for the six months ended March 31, 2017 and 2016 was $268 million and $289 million, respectively. The following is a reconciliation of goodwill by business segment:
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Derivative Instruments and Hedging Activities |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities The Company uses derivative instruments to mitigate certain exposures. The effects these derivative instruments and hedged items have on financial position, financial performance, and cash flows are provided below. Foreign Currency Risks and Related Strategies The Company has foreign currency exposures throughout Europe, Greater Asia, Canada and Latin America. Transactional currency exposures that arise from entering into transactions, generally on an intercompany basis, in non-hyperinflationary countries that are denominated in currencies other than the functional currency are mitigated primarily through the use of forward contracts and currency options. Hedges of the transactional foreign exchange exposures resulting primarily from intercompany payables and receivables are undesignated hedges. As such, the gains or losses on these instruments are recognized immediately in income. The offset of these gains or losses against the gains and losses on the underlying hedged items, as well as the hedging costs associated with the derivative instruments, is recognized in Other income (expense), net. The total notional amounts of the Company’s outstanding foreign exchange contracts as of March 31, 2017 and September 30, 2016 were $1.8 billion and $2.3 billion, respectively. In order to mitigate foreign currency exposure relating to its investments in certain foreign subsidiaries, the Company has designated $1.1 billion of euro-denominated debt, issued in December 2016, as net investment hedges. Accordingly, net gains or losses relating to this debt, which are attributable to changes in the euro to U.S. dollar spot exchange rate, are recorded as accumulated foreign currency translation in Other comprehensive income (loss). Recognition of hedge ineffectiveness into earnings will occur if the notional amount of the euro-denominated debt no longer matches the portion of the net investments in foreign subsidiaries which underlie the hedges. The Company's balance of Accumulated other comprehensive income (loss) as of March 31, 2017 included a loss relating to these net investment hedges of $19 million. Additional disclosures regarding the Company's issuance of the euro-denominated debt in December 2016 are provided in Note 14. Interest Rate Risks and Related Strategies The Company’s primary interest rate exposure results from changes in U.S. dollar interest rates. The Company’s policy is to manage interest cost using a mix of fixed and variable rate debt. The Company periodically uses interest rate swaps to manage such exposures. Under these interest rate swaps, the Company exchanges, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps are designated as either fair value or cash flow hedges. For interest rate swaps designated as fair value hedges (i.e., hedges against the exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is attributable to a particular risk), changes in the fair value of the interest rate swaps offset changes in the fair value of the fixed rate debt due to changes in market interest rates. Changes in the fair value of the interest rate swaps designated as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk) are offset by amounts recorded in Other comprehensive income (loss). If interest rate derivatives designated as cash flow hedges are terminated, the balance in Accumulated other comprehensive income (loss) attributable to those derivatives is reclassified into earnings over the remaining life of the hedged debt. The net realized loss related to terminated interest rate swaps expected to be reclassified and recorded in Interest expense within the next 12 months is $5 million, net of tax. The total notional value of the Company's outstanding forward starting interest rate swaps, which were entered into to mitigate the Company's exposure to interest rate risk and were designated as cash flow hedges, was $500 million at March 31, 2017 and September 30, 2016. The total notional amount of the Company’s outstanding interest rate swaps designated as fair value hedges was $375 million at March 31, 2017 and September 30, 2016. The outstanding swaps represent fixed-to-floating interest rate swap agreements the Company entered into to convert the interest payments on $375 million of the Company’s 3.125% notes due 2021 from the fixed rate to a floating interest rate based on LIBOR. Changes in the fair value of the interest rate swaps offset changes in the fair value of the fixed rate debt. The gains (losses) recorded on these fair value hedges, which were offset by losses (gains) recorded to the underlying debt instruments, are provided below.
Other Risk Exposures The Company purchases resins, which are oil-based components used in the manufacture of certain products. Significant increases in world oil prices that lead to increases in resin purchase costs could impact future operating results. From time to time, the Company has managed price risks associated with these commodity purchases. Effects on Consolidated Balance Sheets The location and amounts of derivative instrument fair values in the consolidated balance sheet are segregated below between designated, qualifying hedging instruments and ones that are not designated for hedge accounting.
Effects on Consolidated Statements of Income Cash flow hedges The amounts recognized in other comprehensive income during the three and six months ended March 31, 2017 and 2016 related to the previously discussed forward starting interest rate swaps.
The Company’s derivative instruments designated as cash flow hedges are highly effective. As such, there are no gains or losses, related to hedge ineffectiveness or amounts excluded from hedge effectiveness testing, recognized immediately in income relative to cash flow hedges outstanding in the periods presented. Undesignated hedges The location and amount of gains and losses recognized in income on derivatives not designated for hedge accounting were as follows:
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Financial Instruments and Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments and Fair Value Measurements | Financial Instruments and Fair Value Measurements The fair values of financial instruments, including those not recognized on the statement of financial position at fair value, carried at March 31, 2017 and September 30, 2016 are classified in accordance with the fair value hierarchy in the following tables:
The Company’s institutional money market accounts permit daily redemption and the fair values of these investments are based upon the quoted prices in active markets provided by the holding financial institutions. The Company’s remaining cash equivalents were $528 million and $1.317 billion at March 31, 2017 and September 30, 2016, respectively. Short-term investments are held to their maturities and are carried at cost, which approximates fair value. The cash equivalents consist of liquid investments with a maturity of three months or less and the short-term investments consist of instruments with maturities greater than three months and less than one year. The Company measures the fair value of forward exchange contracts and interest rate swaps based upon the present value of expected future cash flows using market-based observable inputs including credit risk, interest rate yield curves, foreign currency spot prices and forward prices. Long-term debt is recorded at amortized cost. The fair value of long-term debt is measured based upon quoted prices in active markets for similar instruments, which are considered Level 2 inputs in the fair value hierarchy. The fair value of long-term debt was $9.5 billion and $11.3 billion at March 31, 2017 and September 30, 2016, respectively. The fair value of the current portion of long-term debt was $1.1 billion and $798 million at March 31, 2017 and September 30, 2016, respectively. The contingent consideration liabilities were recognized as part of the consideration transferred by the Company for certain acquisitions. The fair values of the contingent consideration liabilities were estimated using probability-weighted discounted cash flow models that were based upon the probabilities assigned with regard to achievement of the contingent events. The estimated fair values of the contingent consideration liabilities are remeasured each reporting period based upon increases or decreases in the probability of the contingent payments. The Company’s policy is to recognize any transfers into fair value measurement hierarchy levels and transfers out of levels at the beginning of each reporting period. There were no transfers in and out of Level 1, Level 2 or Level 3 measurements for the three and six months ended March 31, 2017 and 2016. |
Debt |
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Mar. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt In December 2016, the Company issued euro-denominated debt consisting of 500 million euros ($531 million) of 1.000% notes due December 15, 2022 and 500 million euros ($531 million) of 1.900% notes due December 15, 2026. The Company used the net proceeds from this long-term debt offering, together with other sources of liquidity, to fund the Company's repurchase of certain of its long-term senior notes outstanding. Under this cash tender offer, the Company repurchased the following aggregate principal amounts of its long-term debt at an aggregate market price of $1.764 billion:
The carrying value of these long-term notes was $1.727 billion, and the Company recognized a loss on this debt extinguishment of $42 million, which was recorded in December 2016 as Other income (expense), net, on the Company’s condensed consolidated statements of income. |
Subsequent Events Subsequent Events (Notes) |
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Mar. 31, 2017 | |
Subsequent Event [Abstract] | |
Subsequent Events | Subsequent Events Definitive Agreement to Acquire C.R. Bard, Inc. On April 23, 2017, the Company announced that it had entered into a definitive agreement under which BD will acquire C. R. Bard, Inc. ("Bard") for $317.00 per Bard common share in cash and stock, for a total consideration of approximately $24 billion. The combination will create a highly differentiated medical technology company uniquely positioned to improve both the process of care and the treatment of disease for patients and healthcare providers. Under the terms of the transaction, Bard common shareholders will be entitled to receive approximately $222.93 in cash and 0.5077 shares of BD stock per Bard share, or a total of value of $317.00 per Bard common share based on BD's closing price on April 21, 2017. At closing, Bard shareholders will own approximately 15 percent of the combined company. The Company has secured access to $15.7 billion of fully committed bridge financing and expects to permanently finance the transaction with approximately $1.7 billion of available cash, as well as, subject to market conditions, approximately $10 billion of new debt, approximately $4.5 billion of equity and equity-linked securities issued to the market, and approximately $8 billion of BD common stock. The transaction is subject to regulatory and Bard shareholder approval and customary closing conditions, and is expected to close in the fall of 2017. Amendment to Dispensing Equipment Leases In April 2017, in conjunction with the implementation of a new “go-to-market” business model for the Company's U.S. dispensing business within the Medication Management Solutions (“MMS”) unit of the Medical segment, the Company amended the terms of certain customer leases for dispensing equipment within the MMS unit. The modification provided customers the ability to reduce its dispensing asset base via a return provision, resulting in a more flexible lease term. Prior to the modification, these leases were accounted for as sales-type leases in accordance with Accounting Standards Codification Topic 840, "Leases", as the non-cancellable lease term of five years exceeded 75% of the equipment’s estimated useful life and the present value of the minimum lease payments exceeded 90% of the equipment’s fair value. As a result of the lease modifications, the Company is required to reassess the classification of the leases due to the amended lease term. Accordingly, most amended lease contracts will be classified as operating leases beginning in April 2017. The change in lease classification will require the derecognition of the net investment in sales-type leases and the recognition of the underlying leased assets on the Company’s balance sheet as of the effective date, and will result in an estimated non-cash, net charge to earnings of approximately $400-$500 million in the third quarter of fiscal year 2017. Beginning April 1, 2017 revenue associated with these modified contracts will be recognized on a straight-line basis over the remaining lease term, along with depreciation on the reinstated leased assets. |
Accounting Changes (Policies) |
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Mar. 31, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
New Accounting Principle Adopted | New Accounting Principles Adopted On October 1, 2016, the Company prospectively adopted amended requirements issued by the Financial Accounting Standards Board ("FASB") relating to the timing of recognition and classification of share-based compensation award-related income tax effects. Upon the settlement of awards in the first and second quarters of fiscal year 2017, the Company recorded tax benefits for the three and six months ended March 31, 2017 of $21 million and $48 million, respectively, to Income tax provision within its consolidated statement of income. The Company expects to record additional tax benefits through the remainder of fiscal year 2017. These tax benefits were recorded within Capital in excess of par value on the Company's condensed consolidated balance sheet in the prior-year period. Because these excess tax benefits are no longer recorded in Capital in excess of par value, the current-period adjustments for the dilutive impact of share equivalents from share-based plans, which is used in the Company's computation of diluted earnings per share, increased by approximately 1 million shares. Also per the amended guidance, the Company classified the $48 million of excess tax benefits for the six months ended March 31, 2017 on its condensed consolidated statement of cash flows within Net Cash Provided by Operating Activities, rather than Net Cash Used for Financing Activities, which included the excess tax benefits for the six months ended March 31, 2016. The amended guidance allows entities to account for award forfeitures as they occur; however, the Company has elected to continue its determination of compensation cost recognized in each period based upon an estimate of expected future forfeitures. New Accounting Principles Not Yet Adopted In February 2016, the FASB issued a new lease accounting standard which requires lessees to recognize lease assets and lease liabilities on the balance sheet. The new standard also requires expanded disclosures regarding leasing arrangements. The Company is currently evaluating the impact that this new lease accounting standard will have on its consolidated financial statements upon its adoption of the standard on October 1, 2019. In May 2014, the FASB issued a new revenue recognition standard. Under this standard, revenue will be recognized upon the transfer of goods or services to customers and the amount of revenue recognized will reflect the consideration to which a reporting entity expects to be entitled in exchange for those goods or services. The Company intends to adopt the standard, as required, on October 1, 2018 and is currently in the process of completing the initial assessment of the impact that this new revenue recognition standard will have on its consolidated financial statements. As part of the initial assessment, the Company is reviewing a representative sample of its contracts across its various businesses and geographies to identify potential differences that could result from applying the requirements of the new standard. The analysis includes identifying whether there may be differences in timing of revenue recognition under the new standard as well as assessing performance obligations, variable consideration, and contract costs. The Company has not yet estimated the impact, if any, of the new standard on the timing and pattern of its revenue recognition. The Company continues to evaluate the available adoption methods, and apprises both management and its audit committee of the project status regularly. |
Commitments and Contingencies | Given the uncertain nature of litigation generally, the Company is not able in all cases to estimate the amount or range of loss that could result from an unfavorable outcome of the litigation to which the Company is a party. In accordance with U.S. generally accepted accounting principles, the Company establishes accruals to the extent probable future losses are estimable (in the case of environmental matters, without considering possible third-party recoveries). In view of the uncertainties discussed below, the Company could incur charges in excess of any currently established accruals and, to the extent available, liability insurance. In the opinion of management, any such future charges, individually or in the aggregate, could have a material adverse effect on the Company’s consolidated results of operations and consolidated cash flows. |
Derivatives | The Company’s policy is to manage interest cost using a mix of fixed and variable rate debt. The Company periodically uses interest rate swaps to manage such exposures. Under these interest rate swaps, the Company exchanges, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps are designated as either fair value or cash flow hedges. For interest rate swaps designated as fair value hedges (i.e., hedges against the exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is attributable to a particular risk), changes in the fair value of the interest rate swaps offset changes in the fair value of the fixed rate debt due to changes in market interest rates. Changes in the fair value of the interest rate swaps designated as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk) are offset by amounts recorded in Other comprehensive income (loss). If interest rate derivatives designated as cash flow hedges are terminated, the balance in Accumulated other comprehensive income (loss) attributable to those derivatives is reclassified into earnings over the remaining life of the hedged debt. The Company uses derivative instruments to mitigate certain exposures. The effects these derivative instruments and hedged items have on financial position, financial performance, and cash flows are provided below. Hedges of the transactional foreign exchange exposures resulting primarily from intercompany payables and receivables are undesignated hedges. As such, the gains or losses on these instruments are recognized immediately in income. The offset of these gains or losses against the gains and losses on the underlying hedged items, as well as the hedging costs associated with the derivative instruments, is recognized in Other income (expense), net. |
Fair Value of Financial Instruments | The Company measures the fair value of forward exchange contracts and interest rate swaps based upon the present value of expected future cash flows using market-based observable inputs including credit risk, interest rate yield curves, foreign currency spot prices and forward prices. Long-term debt is recorded at amortized cost. The fair value of long-term debt is measured based upon quoted prices in active markets for similar instruments, which are considered Level 2 inputs in the fair value hierarchy. The fair value of long-term debt was $9.5 billion and $11.3 billion at March 31, 2017 and September 30, 2016, respectively. The fair value of the current portion of long-term debt was $1.1 billion and $798 million at March 31, 2017 and September 30, 2016, respectively. The contingent consideration liabilities were recognized as part of the consideration transferred by the Company for certain acquisitions. The fair values of the contingent consideration liabilities were estimated using probability-weighted discounted cash flow models that were based upon the probabilities assigned with regard to achievement of the contingent events. The estimated fair values of the contingent consideration liabilities are remeasured each reporting period based upon increases or decreases in the probability of the contingent payments. The Company’s policy is to recognize any transfers into fair value measurement hierarchy levels and transfers out of levels at the beginning of each reporting period. |
Accumulated Other Comprehensive Income (Loss) (Tables) |
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AOCI Attributable to Parent [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Components and Changes of Accumulated Other Comprehensive Income (Loss) | The components and changes of Accumulated other comprehensive income (loss) for the six-month period ended March 31, 2017 were as follows:
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Reclassification out of Accumulated Other Comprehensive Income | Reclassifications out of Accumulated other comprehensive income (loss) were as follows:
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Earnings Per Share (Tables) |
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Weighted Average Common Shares Used in Computations of Basic and Diluted Earnings Per Share | The weighted average common shares used in the computations of basic and diluted earnings per share (shares in thousands) were as follows:
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Segment Data (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Information for Company's Segments | Financial information for the Company’s segments was as follows:
|
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Revenues by Geographic Areas | Revenues by geographic areas were as follows:
|
Share-Based Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assumptions for Estimation of Fair Values of Stock Appreciation Rights Granted During Reporting Periods | The fair values of stock appreciation rights granted during the annual share-based grants in November of 2016 and 2015, respectively, were estimated on the date of grant using a lattice-based binomial valuation model based on the following assumptions:
|
Benefit Plans (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Pension and Postretirement Cost | Net pension and postretirement cost included the following components for the three months ended March 31:
Net pension and postretirement cost included the following components for the six months ended March 31:
|
Business Restructuring Charges (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Restructuring Accrual Activity | Restructuring liability activity for the six months ended March 31, 2017 was as follows:
|
Intangible Assets (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Intangible Assets | Intangible assets consisted of:
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Reconciliation of Goodwill by Business Segment | The following is a reconciliation of goodwill by business segment:
|
Derivative Instruments and Hedging Activities (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Gains Recorded on Fair Value Hedges | The gains (losses) recorded on these fair value hedges, which were offset by losses (gains) recorded to the underlying debt instruments, are provided below.
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Effects on Consolidated Balance Sheets | The location and amounts of derivative instrument fair values in the consolidated balance sheet are segregated below between designated, qualifying hedging instruments and ones that are not designated for hedge accounting.
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Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss) [Table Text Block] | The amounts recognized in other comprehensive income during the three and six months ended March 31, 2017 and 2016 related to the previously discussed forward starting interest rate swaps.
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Undesignated Hedges | The location and amount of gains and losses recognized in income on derivatives not designated for hedge accounting were as follows:
|
Financial Instruments and Fair Value Measurements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Values of Financial Instruments | The fair values of financial instruments, including those not recognized on the statement of financial position at fair value, carried at March 31, 2017 and September 30, 2016 are classified in accordance with the fair value hierarchy in the following tables:
|
Debt (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Extinguishment of Debt | Under this cash tender offer, the Company repurchased the following aggregate principal amounts of its long-term debt at an aggregate market price of $1.764 billion:
|
Accounting Changes - Additional Information (Detail) - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Mar. 31, 2017 |
Mar. 31, 2016 |
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Income tax provision | $ 18 | $ 38 | $ 148 | $ 75 |
Excess Tax Benefit from Share-based Compensation, Operating Activities | (48) | $ 0 | ||
New Accounting Pronouncement, Early Adoption, Effect | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Income tax provision | $ 21 | $ 48 | ||
Weighted Average Number of Shares Outstanding, Basic, Increase (Decrease) | 1 | |||
Excess Tax Benefit from Share-based Compensation, Operating Activities | $ 48 |
Accumulated Other Comprehensive Income (Loss) - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2017 |
|
AOCI Attributable to Parent [Abstract] | ||
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, Tax | $ 1 | $ 16 |
Accumulated Other Comprehensive Income (Loss) - Reclassifications out of Accumulated Other Comprehensive Income (Loss) (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Amounts reclassified into income | $ 34 | |||
Benefit Plans | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Reclassification of losses into income | $ 22 | $ 19 | 44 | $ 37 |
Associated tax benefits, benefit plans | (7) | (6) | (14) | (13) |
Amounts reclassified into income | 15 | 12 | 29 | 24 |
Cash Flow Hedges | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Reclassification of losses into income | 2 | 5 | 8 | 9 |
Associated tax benefits, cash flow hedges | (1) | (2) | (3) | (3) |
Amounts reclassified into income | $ 1 | $ 3 | $ 5 | $ 6 |
Earnings Per Share - Weighted Average Common Shares Used in Computations of Basic and Diluted Earnings per Share (Detail) - shares shares in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Earnings Per Share [Abstract] | ||||
Average common shares outstanding (shares) | 213,583 | 212,469 | 213,321 | 212,077 |
Dilutive share equivalents from share-based plans (shares) | 4,283 | 4,069 | 4,665 | 4,618 |
Average common and common equivalent shares outstanding - assuming dilution (shares) | 217,866 | 216,538 | 217,986 | 216,695 |
Earnings Per Share - Additional Information (Detail) shares in Millions, $ in Millions |
3 Months Ended |
---|---|
Dec. 31, 2016
USD ($)
shares
| |
Earnings Per Share [Abstract] | |
Treasury shares acquired (in shares) | shares | 1.3 |
Treasury stock value | $ | $ 220 |
Contingencies - Additional Information (Detail) - RTI Technologies - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jan. 15, 2015 |
Sep. 19, 2013 |
Nov. 09, 2009 |
Dec. 31, 2016 |
Sep. 30, 2013 |
Mar. 31, 2017 |
|
Loss Contingencies [Line Items] | ||||||
Damages awarded | $ 341.0 | $ 113.5 | $ 5.0 | |||
Pre-tax charge relating to an unfavorable litigation verdict | $ 341.0 | |||||
Professional fees | $ (12.0) | $ 336.0 | $ 336.0 |
Segment Data - Additional Information (Detail) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2016
USD ($)
|
Mar. 31, 2017
segment
|
Mar. 31, 2016
USD ($)
|
Oct. 03, 2016 |
|
Segment Reporting Information [Line Items] | ||||
Number of principal business segments (segment) | segment | 2 | |||
Respiratory Solutions | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | $ | $ 213 | $ 421 | ||
Respiratory Solutions | Disposal Group, Held-for-sale, Not Discontinued Operations | ||||
Segment Reporting Information [Line Items] | ||||
Disposal group, percent of business sold | 50.10% |
Segment Data - Financial Information for Company's Segments Footnote (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jan. 15, 2015 |
Dec. 31, 2016 |
Mar. 31, 2017 |
|
RTI Technologies | |||
Segment Reporting Information [Line Items] | |||
Loss Contingency Accrual, Period Increase (Decrease) | $ (12) | $ 336 | $ 336 |
Segment Data - Revenues by Geographic Areas (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Total Revenues | $ 2,969 | $ 3,067 | $ 5,892 | $ 6,054 |
United States | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Total Revenues | 1,627 | 1,719 | 3,257 | 3,410 |
International | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Total Revenues | $ 1,342 | $ 1,349 | $ 2,635 | $ 2,644 |
Share-Based Compensation - Assumptions for Estimation of Fair Values of Stock Appreciation Rights Granted During Reporting Periods (Detail) - Stock Appreciation Rights (SARs) - $ / shares |
6 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Risk-free interest rate | 2.33% | 2.17% |
Expected volatility | 20.00% | 19.00% |
Expected dividend yield | 1.71% | 1.76% |
Expected life | 7 years 6 months | 7 years 7 months 6 days |
Fair value derived (USD per share) | $ 33.81 | $ 27.69 |
Share-Based Compensation - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||
Allocated share-based compensation expense | $ 39 | $ 43 | $ 99 | $ 119 |
Unrecognized compensation expense for all non-vested share-based awards | $ 254 | $ 254 | ||
Weighted-average remaining life non-vested share-based awards | 2 years 2 months 12 days |
Benefit Plans - Net Pension and Postretirement Cost (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Pension Plans | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | $ 27 | $ 20 | $ 51 | $ 41 |
Interest cost | 18 | 18 | 35 | 37 |
Expected return on plan assets | (33) | (27) | (63) | (55) |
Amortization of prior service credit | (4) | (4) | (8) | (7) |
Amortization of loss | 28 | 19 | 52 | 39 |
Settlements | 0 | (1) | 0 | (1) |
Net pension and postretirement cost | 35 | 27 | 67 | 55 |
Other Postretirement Benefits | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | 1 | 1 | 1 | 1 |
Interest cost | 1 | 1 | 2 | 3 |
Expected return on plan assets | 0 | 0 | 0 | 0 |
Amortization of prior service credit | (1) | (1) | (2) | (2) |
Amortization of loss | 0 | 0 | 1 | 1 |
Settlements | 0 | 0 | 0 | 0 |
Net pension and postretirement cost | $ 1 | $ 1 | $ 2 | $ 3 |
Benefit Plans - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Compensation and Retirement Disclosure [Abstract] | ||||
Postemployment benefit costs | $ 10 | $ 10 | $ 20 | $ 20 |
Divestiture - Additional Information (Detail) - Respiratory Solutions - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2016 |
Oct. 03, 2016 |
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Revenues | $ 213 | $ 421 | |
Disposal Group, Held-for-sale, Not Discontinued Operations | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Disposal group, percent of business sold | 50.10% | ||
Disposal group, percent of business retained | 49.90% |
Business Restructuring Charges - Summary of Restructuring Accrual Activity (Detail) $ in Millions |
6 Months Ended |
---|---|
Mar. 31, 2017
USD ($)
| |
Restructuring Reserve [Roll Forward] | |
Balance at September 30, 2016 | $ 69 |
Charged to expense | 46 |
Cash payments | (45) |
Non-cash settlements | (6) |
Other adjustments | 7 |
Balance at March 31, 2017 | 58 |
Employee Termination | |
Restructuring Reserve [Roll Forward] | |
Balance at September 30, 2016 | 67 |
Charged to expense | 18 |
Cash payments | (28) |
Non-cash settlements | 0 |
Other adjustments | 0 |
Balance at March 31, 2017 | 57 |
Other | |
Restructuring Reserve [Roll Forward] | |
Balance at September 30, 2016 | 2 |
Charged to expense | 29 |
Cash payments | (17) |
Non-cash settlements | (6) |
Other adjustments | 7 |
Balance at March 31, 2017 | $ 1 |
Intangible Assets - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Intangible amortization expense | $ 131 | $ 138 | $ 268 | $ 289 |
Intangible Assets - Reconciliation of Goodwill by Business Segment (Detail) $ in Millions |
6 Months Ended |
---|---|
Mar. 31, 2017
USD ($)
| |
Goodwill [Roll Forward] | |
Goodwill as of September 30, 2016 | $ 7,419 |
Acquisitions | 24 |
Divestiture | (25) |
Currency translation | (13) |
Goodwill as of March 31, 2017 | 7,405 |
Medical | |
Goodwill [Roll Forward] | |
Goodwill as of September 30, 2016 | 6,688 |
Acquisitions | 0 |
Divestiture | (25) |
Currency translation | (10) |
Goodwill as of March 31, 2017 | 6,653 |
Life Sciences | |
Goodwill [Roll Forward] | |
Goodwill as of September 30, 2016 | 731 |
Acquisitions | 24 |
Divestiture | 0 |
Currency translation | (3) |
Goodwill as of March 31, 2017 | $ 752 |
Intangible Assets - Reconciliation of Goodwill by Business Segment Footnote (Detail) |
Oct. 03, 2016 |
---|---|
Disposal Group, Held-for-sale, Not Discontinued Operations | Respiratory Solutions | |
Goodwill [Line Items] | |
Disposal group, percent of business sold | 50.10% |
Derivative Instruments and Hedging Activities - Effects on Consolidated Balance Sheets (Detail) - USD ($) $ in Millions |
Mar. 31, 2017 |
Sep. 30, 2016 |
---|---|---|
Derivatives, Fair Value [Line Items] | ||
Asset derivatives | $ 12 | $ 25 |
Liability derivatives | 8 | 31 |
Derivatives Designated as Hedging Instruments | Interest rate swaps | ||
Derivatives, Fair Value [Line Items] | ||
Asset derivatives | 7 | 23 |
Liability derivatives | 4 | 18 |
Derivatives Not Designated as Hedging Instruments | Forward exchange contracts | ||
Derivatives, Fair Value [Line Items] | ||
Asset derivatives | 6 | 3 |
Liability derivatives | $ 5 | $ 13 |
Derivative Instruments and Hedging Activities - Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss) (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||
After-tax loss recognized in other comprehensive income (loss) | $ 1 | $ (2) | $ 25 | $ (2) |
Derivative Instruments and Hedging Activities - Undesignated Hedges (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Derivatives Not Designated as Hedging Instruments | Forward exchange contracts | Other income (expense), net | ||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||||
Amount of (Loss) Gain Recognized in Income on Derivatives | $ 15 | $ 15 | $ (7) | $ 26 |
Financial Instruments and Fair Value Measurements - Additional Information (Detail) - USD ($) |
6 Months Ended | ||
---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Sep. 30, 2016 |
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Remaining cash equivalents | $ 528,000,000 | $ 1,317,000,000 | |
Fair value of long-term debt | 9,500,000,000 | 11,300,000,000 | |
Fair value of debt reclassified from long term to short term | 1,100,000,000 | $ 798,000,000 | |
Transfer of assets in and out of level 1, 2 and 3 measurements during the period | 0 | $ 0 | |
Transfer of liabilities in and out of level 1, 2 and 3 measurements during the period | $ 0 | $ 0 | |
Minimum | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Maturity period of short-term investments at the time of purchase | 3 months | ||
Maximum | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Maturity period of short-term investments at the time of purchase | 1 year |
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