Discontinued Operations and Disposal Groups

9 Months Ended

Jun. 30, 2022

Discontinued Operations and Disposal Groups [Abstract]

Spin-Off of Embecta Corp.

On April 1, 2022, the Company completed the spin-off of its Diabetes Care business as a separate publicly traded company named Embecta Corp. (“Embecta”) through a distribution of Embecta’s publicly traded common stock (listed on NASDAQ under the ticker symbol “EMBC”) to BD’s shareholders of record as of the close of business on March 22, 2022 (the “record date”). The Company distributed one share of Embecta common stock for every five common shares of BD outstanding as of the record date and shareholders received cash in lieu of fractional shares of Embecta common stock. BD retained no ownership interest in Embecta subsequent to the spin-off. The distribution is expected to qualify and has been treated as tax-free to the Company and its shareholders for U.S. federal income tax purposes.

Embecta’s distributions on March 31, 2022 to the Company in connection with the spin-off included the issuance of $200 million of senior unsecured notes to the Company and a cash distribution of approximately $1.266 billion. Additional disclosures regarding the various financing transactions entered into by Embecta and related to the spin-off are provided in Note 13.

The Company and Embecta entered into various agreements to effect the spin-off and provide a framework for the relationship between the Company and Embecta after the spin-off. Such agreements include the separation and distribution agreement, as well as the following ongoing agreements: a cannula supply agreement, an intellectual property matters agreement, a transition services agreement, manufacturing and supply agreements, a lease agreement, a distribution agreement to support commercial operations, a logistics services agreement and other agreements including an employee matters agreement and a tax matters agreement. Under these agreements, the Company will continue to provide certain products and services to Embecta following the spin-off. The agreements do not provide the Company with the ability to influence the operating or financial policies of Embecta subsequent to the spin-off date. Amounts included in the Company’s condensed consolidated statements of income during the three months ended June 30, 2022 as a result of these agreements were immaterial.

The historical results of the Diabetes Care business (previously included in BD’s Medical segment) that was contributed to Embecta in the spin-off, as well as interest expense related to indebtedness incurred by Embecta prior to the spin-off date, have been reflected as discontinued operations in the Company’s condensed consolidated financial statements for all periods prior to the spin-off date of April 1, 2022.

Details of Income from Discontinued Operations, Net of Tax are as follows:


	Three Months Ended June 30,			Nine Months Ended June 30,
Millions of dollars		2021		2022		2021
Revenues		$	284	$	538	$	831
Cost of products sold		80		143		235
Selling and administrative expense		37		78		101
Research and development expense		15		32		41
Acquisition-related integration and restructuring expense		—		—		6
Other operating expense, net		16		95		16
Total Operating Costs and Expenses		148		348		398
Operating Income		136		190		434
Interest expense		—		(4)		—

Other income, net		—		—		2
Income from Discontinued Operations Before Income Taxes		136		186		435
Income tax provision		18		42		57
Income from Discontinued Operations, Net of Tax		$	118	$	144	$	378

During the three months ended June 30, 2022, the Company incurred $30 million of expense which included costs to execute the spin-off and other costs for related residual activities. These costs are recorded within (Loss) Income from Discontinued Operations, Net of Tax for the three and nine months ended June 30, 2022. Separation costs incurred by the Company prior to the spin-off date, including those for consulting, legal, tax and other advisory services associated with the spin-off, were previously recorded within Other operating expense (income), net and are now included as a component of (Loss) Income from Discontinued Operations, Net of Tax.

The Company’s Revenues and Cost of products sold from continuing operations were recast to reflect previously eliminated intercompany transactions that occurred between BD and Embecta and that resulted in a third-party sale in the same period. The impacts of these transactions to Embecta are also reflected as a component of (Loss) Income from Discontinued Operations, Net of Tax.

The following amounts associated with the Diabetes Care business are classified as assets and liabilities of discontinued operations in the Company’s condensed consolidated balance sheet at September 30, 2021:


Millions of dollars	September 30, 2021
Assets
Trade receivables, net	$	147
Inventories	123
Prepaid expenses and other	23
Current Assets of Discontinued Operations	293

Property, Plant and Equipment, Net	390
Goodwill and Other Intangibles, Net	27



Other Assets	6
Noncurrent Assets of Discontinued Operations	$	423

Liabilities
Accounts payable	$	54
Accrued expenses	75
Salaries, wages and related items	28
Current Liabilities of Discontinued Operations	157

Deferred Income Taxes and Other Liabilities	16
Noncurrent Liabilities of Discontinued Operations	$	17

The Company recorded its distribution of net liabilities to Embecta as an increase in Retained earnings. The amount recorded reflected the carrying amounts, as of April 1, 2022, of the net liabilities distributed and included $1.650 billion of debt issued by Embecta, as further discussed above and in Note 13, as well as $265 million of cash. The Company also recorded a net decrease to Accumulated other comprehensive loss of $251 million to derecognize foreign currency translation losses which were attributable to Embecta.

In connection with the spin-off of Embecta, all outstanding (vested and unvested) BD share-based awards which had been granted to Embecta employees were converted into Embecta awards. These awards preserved the same intrinsic value, as well as general terms and conditions, of the original BD awards, as required by the terms of the BD awards. The Company also adjusted share-based awards which had been granted to BD employees so that the intrinsic value of these awards after the spin-off equaled the awards’ intrinsic value prior to the spin-off. These conversions and adjustments did not materially impact the number of BD share-based awards outstanding.