Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following commentary should be read in conjunction with the condensed consolidated financial statements and accompanying notes presented in this report. Within the tables presented throughout this discussion, certain columns 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. References to years throughout this discussion relate to our fiscal years, which end on September 30.

Company Overview

Becton, Dickinson and Company (“BD”) is a global medical technology company engaged in the development, manufacture and sale of a broad range of medical supplies, devices, laboratory equipment and diagnostic products used by healthcare institutions, physicians, life science researchers, clinical laboratories, the pharmaceutical industry and the general public. The Company's organizational structure is based upon three principal business segments, BD Medical (“Medical”), BD Life Sciences (“Life Sciences”) and BD Interventional (“Interventional”).

BD’s products are manufactured and sold worldwide. Our products are marketed in the United States and internationally through independent distribution channels and directly to end-users by BD and independent sales representatives. We organize our operations outside the United States as follows: EMEA (which includes Europe, the Middle East and Africa); Greater Asia (which includes countries in Greater China, Japan, South Asia, Southeast Asia, Korea, Australia and New Zealand); Latin America (which includes Mexico, Central America, the Caribbean and South America); and Canada. We continue to pursue growth opportunities in emerging markets, which include the following geographic regions: Eastern Europe, the Middle East and Africa (collectively referred to below as “EMA”), as well as Latin America and certain countries within Greater Asia.

Agreement to Acquire Critical Care Product Group

On June 3, 2024, we announced a definitive agreement under which BD will acquire Edward Lifesciences' Critical Care product group ("Critical Care") for $4.2 billion in cash. The acquisition will expand BD’s portfolio of smart connected care solutions with Critical Care’s growing set of leading monitoring technologies, advanced AI-enabled clinical decision tools and robust innovation pipeline that complement BD’s existing technologies serving operating rooms and intensive care units. Additional discussion regarding the acquisition agreement and debt we issued in the third quarter of fiscal year 2024 to fund the cash consideration payable upon the transaction’s close is provided in Notes 9 and 14 in the Notes to Condensed Consolidated Financial Statements. The transaction is subject to customary regulatory reviews and closing conditions, and is expected to close by the end of calendar year 2024.

Key Trends Affecting Results of Operations

Our BD 2025 strategy for growth is anchored in three pillars: grow, simplify and empower. As we execute this strategy, we continue to invest in research and development, strategic tuck-in acquisitions, geographic expansion, and new product programs to drive further revenue and profit growth. Our ability to sustain our long-term growth will depend on a number of factors, including our ability to expand our core business (including strategic geographical expansion), and develop innovative new products, as well as continue to improve operating efficiency and organizational effectiveness.

Our operations, supply chain, suppliers and customers are exposed to various global macroeconomic factors and we continually evaluate macroeconomic conditions to assess their potential impact to our operations and financial results. Macroeconomic factors which affected our operations and impacted results in the third quarter of fiscal year 2024 included the following:

  • As anticipated, market dynamics in China, such as volume-based procurement programs (“VoBP”) and the government’s focus to improve compliance of healthcare practitioners, had an adverse impact on our results of operations and these dynamics could continue to unfavorably impact our results of operations.

  • As is further discussed below, our labor costs were generally higher in our third quarter compared with the prior-year period. The supply of labor continues to be limited in certain markets and as such, labor availability and costs could continue to unfavorably impact our results of operations.

We have experienced, and may continue to experience, temporary shortages in supply of certain materials or components that are used in our products. The stable flow of global transport is critical to our operations and as such, events affecting the flow of logistics around the globe may adversely impact our supply chain and distribution channels. In general, major disruptions in the sourcing, manufacturing and distribution of our products could adversely impact our results of operations.

In addition, current healthcare delivery has transitioned more care from acute to non-acute settings and has increased focus on chronic disease management; this transition has placed additional financial pressure on hospitals and the broader healthcare system. Healthcare institutions may take actions to mitigate any persistent pressures on their budgets and such actions could impact the future demand for our products and services. Additionally, a deterioration of staffing levels within healthcare

systems may affect the prioritization of healthcare services, which could also impact the demand for certain of our products. Also, reductions or delays in governmental research funding and/or higher interest rates could cause customers for our instruments and reagents to delay or forego purchases of these products.

Certain geopolitical conditions, including the evolving situations in Ukraine, the Middle East and Asia, may impact global macroeconomic conditions, including those discussed above. While these geopolitical conditions have not materially impacted our results of operations to date, the continuation and/or an escalation of these evolving situations may weaken the global economy and could result in additional inflationary pressures and supply chain constraints, including the unavailability and cost of energy.

We have been mitigating the impacts of the macroeconomic and other factors discussed above through various strategies which leverage our procurement, logistics and manufacturing capabilities. However, there can be no assurance that we will be able to effectively mitigate these pressures in future periods and an inability to offset these pressures through our strategies, at least in part, could adversely impact our results of operations. Due to the significant uncertainty that exists relative to the duration and overall impact of the macroeconomic and other factors discussed above, our future operating performance, particularly in the short-term, may be subject to volatility. The impacts of macroeconomic and other conditions on our business, results of operations, financial condition and cash flows are dependent on certain factors, including those discussed in Part I, Item 1A. Risk Factors of our 2023 Annual Report on Form 10-K (the “2023 Annual Report”).

Overview of Financial Results and Financial Condition

For the three months ended June 30, 2024, worldwide revenues of $4.990 billion increased 2.3% from the prior-year period. This increase reflected the following impacts:

Increase (decrease) in current-period revenues
Volume/other (a)4.9%
Impact due to sale of Surgical Instrumentation platform(0.9)%
Pricing0.3%
Foreign currency translation(0.6)%
Acquisitions and other (b)(1.4)%
Increase in revenues from the prior-year period2.3%

(a) Volume/other includes revenues attributable to products, services and licensing.

(b)Represents the recognition of accruals resulting from recent developments relating to the Italian government medical device pay back legislation, as well as another legal matter, and which substantially relate to years prior to the current fiscal year.

Cash flows from continuing operating activities were $2.666 billion in the first nine months of fiscal year 2024. At June 30, 2024, we had $5.338 billion in cash and equivalents and short-term investments, including restricted cash. This balance included net proceeds from debt issued in our third quarter of fiscal year 2024 to fund the cash consideration payable upon our acquisition of Critical Care, as further discussed above and in Note 9 in the Notes to Condensed Consolidated Financial Statements. We continued to return value to our shareholders in the form of dividends. During the first nine months of fiscal year 2024, we paid cash dividends to common shareholders of $825 million.

Each reporting period, we face currency exposure that arises from translating the results of our worldwide operations to the U.S. dollar at exchange rates that fluctuate from the beginning of such period. The third quarter fiscal year 2024 impact of foreign currency translation on our revenues is provided above and the impact on our earnings is provided further below. We evaluate our results of operations on both a reported and a foreign currency-neutral basis, which excludes the impact of fluctuations in foreign currency exchange rates. As exchange rates are an important factor in understanding period-to-period comparisons, we believe the presentation of results on a foreign currency-neutral basis in addition to reported results helps improve investors’ ability to understand our operating results and evaluate our performance in comparison to prior periods. Foreign currency-neutral ("FXN") information compares results between periods as if exchange rates had remained constant period-over-period. We use results on a foreign currency-neutral basis as one measure to evaluate our performance. We calculate foreign currency-neutral percentages by converting our current-period local currency financial results using the prior-period foreign currency exchange rates and comparing these adjusted amounts to our current-period results. These results should be considered in addition to, not as a substitute for, results reported in accordance with U.S. generally accepted accounting principles ("GAAP"). Results on a foreign currency-neutral basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with U.S. GAAP.

Results of Operations

Medical Segment

The following summarizes third quarter Medical revenues by organizational unit:

Three months ended June 30,
(Millions of dollars)20242023Total ChangeEstimated FX ImpactFXN Change
Medication Delivery Solutions$1,123$1,0863.4%(0.5)%3.9%
Medication Management Solutions84075411.5%(0.1)%11.6%
Pharmaceutical Systems5945940.1%(0.8)%0.9%
Total Medical Revenues$2,558$2,4345.1%(0.5)%5.6%

The Medical segment’s revenue growth in the third quarter of 2024 primarily reflected the following:

  • Strong global demand for the Medication Delivery Solutions unit’s Vascular Access Management portfolio, as well as strong U.S. demand for hypodermic products, partially offset by the impact of unfavorable market dynamics in China.

  • Double-digit growth in sales of infusion systems, as well as higher utilization of infusion sets within the Medication Management Solutions unit, partially offset by an unfavorable comparison to placements of dispensing solutions in the prior-year period.

  • Double-digit growth in sales of the Pharmaceutical Systems unit’s prefillable solutions in the biologic drug category, partially offset by customer order patterns relating to other drug categories.

Medical segment total revenues for the nine-month periods were as follows:

Nine months ended June 30,
(Millions of dollars)20242023Total ChangeEstimated FX ImpactFXN Change
Total Medical Revenues$7,237$6,9494.1%0.2%3.9%

Medical segment income for the three and nine-month periods is provided below.

Three months ended June 30,Nine months ended June 30,
(Millions of dollars)2024202320242023
Medical segment income$753$588$1,950$1,783
Segment income as % of Medical revenues29.4%24.2%26.9%25.7%

The Medical segment's operating income as a percentage of revenues in the third quarter of 2024 compared with the third quarter of 2023 reflected the following:

  • Higher gross profit margin in the third quarter of 2024 compared with the third quarter of 2023, which primarily reflected:

◦A favorable comparison to prior-period gross margin, which was impacted by a $90 million charge to adjust the estimate of future product remediation costs, and lower manufacturing costs, which resulted from continuous improvement projects and other productivity initiatives, partially offset by

◦Higher raw material and labor costs as well as unfavorable product mix.

  • Lower selling and administrative expense as a percentage of revenues in the third quarter of 2024 compared with the third quarter of 2023 primarily reflected cost containment measures and lower shipping costs.

  • Research and development expense as a percentage of revenues in the third quarter of 2024 was flat compared with the third quarter of 2023.

Life Sciences Segment

The following summarizes third quarter Life Sciences revenues by organizational unit:

Three months ended June 30,
(Millions of dollars)20242023Total ChangeEstimated FX ImpactFXN Change
Integrated Diagnostic Solutions$896$8584.5%(0.8)%5.3%
Biosciences363368(1.4)%(0.7)%(0.7)%
Total Life Sciences Revenues$1,260$1,2262.7%(0.8)%3.5%

The Life Sciences segment’s revenue growth in the third quarter of 2024 primarily reflected the following:

  • Strong growth in sales of the Integrated Diagnostic Solutions unit’s specimen management portfolio.

  • A decline in the Biosciences unit due to market dynamics which have reduced demand for our instruments, partially offset by strong demand for clinical reagents.

Life Sciences segment total revenues for the nine-month periods were as follows:

Nine months ended June 30,
(Millions of dollars)20242023Total ChangeEstimated FX ImpactFXN Change
Total Life Sciences Revenues$3,852$3,8031.3%0.2%1.1%

Life Sciences segment income for the three and nine-months periods is provided below.

Three months ended June 30,Nine months ended June 30,
(Millions of dollars)2024202320242023
Life Sciences segment income$387$343$1,174$1,171
Segment income as % of Life Sciences revenues30.7%28.0%30.5%30.8%

The Life Sciences segment's operating income as a percentage of revenues in the third quarter of 2024 compared with the third quarter of 2023 primarily reflected the following:

  • Higher gross profit margin in the third quarter of 2024 compared with the third quarter of 2023 primarily reflected lower manufacturing costs resulting from continuous improvement projects and other productivity initiatives, as well as favorable product mix, partially offset by unfavorable foreign currency translation.

  • Selling and administrative expense as a percentage of revenues in the third quarter of 2024 was lower compared with the third quarter of 2023, which primarily reflected lower shipping costs.

  • Lower research and development expense as a percentage of revenues in the third quarter of 2024 compared with the third quarter of 2023, which primarily reflected the timing of project spending.

Interventional Segment

The following summarizes third quarter Interventional revenues by organizational unit:

Three months ended June 30,
(Millions of dollars)20242023Total ChangeEstimated FX ImpactFXN Change
Surgery$376$388(3.0)%(0.5)%(2.5)%
Peripheral Intervention4884811.5%(1.1)%2.6%
Urology and Critical Care3753497.4%(0.9)%8.3%
Total Interventional Revenues$1,240$1,2181.8%(0.8)%2.6%

The Interventional segment’s revenue growth in the third quarter of 2024 primarily reflected the following:

  • Double-digit growth in sales across the Surgery unit’s three major platforms; the prior-year period’s revenues included $43 million attributable to the unit’s former Surgical Instrumentation platform, which was sold in the fourth quarter of fiscal year 2023.

  • Double-digit growth attributable to the Peripheral Intervention unit’s peripheral vascular disease platform, partially offset by a decline in sales of our oncology products in China.

  • Double-digit growth in sales of the Urology and Critical Care unit’s PureWickTM offerings.

Interventional segment total revenues for the nine-month periods were as follows:

Nine months ended June 30,
(Millions of dollars)20242023Total ChangeEstimated FX ImpactFXN Change
Total Interventional Revenues$3,720$3,5335.3%(0.3)%5.6%

Interventional segment income for the three and nine-month periods is provided below.

Three months ended June 30,Nine months ended June 30,
(Millions of dollars)2024202320242023
Interventional segment income$365$323$1,044$922
Segment income as % of Interventional revenues29.5%26.5%28.1%26.1%

The Interventional segment's operating income as a percentage of revenues in the third quarter of 2024 compared with the third quarter of 2023 reflected the following:

  • Higher gross profit margin in the third quarter of 2024 compared with the third quarter of 2023, which primarily reflected favorable impacts from product mix and pricing.

  • Lower selling and administrative expense as a percentage of revenues in the third quarter of 2024 compared with the third quarter of 2023, which primarily reflected cost containment measures.

  • Higher research and development expense as a percentage of revenues in the third quarter of 2024 compared with the third quarter of 2023, which primarily reflected increased project investments.

Geographic Revenues

BD’s worldwide third quarter revenues by geography were as follows:

Three months ended June 30,
(Millions of dollars)20242023Total ChangeEstimated FX ImpactFXN Change
United States$2,891$2,7724.3%—%4.3%
International2,0982,106(0.3)%(1.4)%1.1%
Total Revenues$4,990$4,8782.3%(0.6)%2.9%

U.S. revenue growth in the third quarter of 2024 reflected strong sales in the Medical segment’s Medication Delivery Solutions and Medication Management Solutions units, as well as in the Interventional segment’s Urology and Critical Care unit. This growth was partially offset by a decline in the Medical segment’s Pharmaceutical Systems unit, as further discussed above.

International revenue growth in the third quarter of 2024 was driven by the Medical segment’s Pharmaceutical Systems unit, as well as by strong sales in the Life Sciences segment’s Integrated Diagnostic Solutions unit. International revenue growth in the third quarter of 2024 also reflected the recognition of a $62 million accrual which resulted from recent developments relating to the Italian government medical device pay back legislation and substantially relates to years prior to the current fiscal year. Current-period revenues in emerging markets primarily reflected a decline in China driven by unfavorable market dynamics, as further discussed above, partially offset by strong sales in other countries within Greater Asia:

Three months ended June 30,
(Millions of dollars)20242023Total ChangeEstimated FX ImpactFXN Change
Emerging markets$753$773(2.6)%(1.0)%(1.6)%

Specified Items

Reflected in the financial results for the three and nine-month periods of fiscal years 2024 and 2023 were the following specified items:

Three months ended June 30,Nine months ended June 30,
(Millions of dollars)2024202320242023
Restructuring costs (a)$95$62$262$120
Integration costs (a)781755
Transaction costs (b)10—9—
Financing costs (b)(2)—(2)—
Separation-related items (c)1—710
Purchase accounting adjustments (d)3523621,0761,071
European regulatory initiative-related costs (e)253372103
Product, litigation, and other items (f)1749316997
Total specified items6635581,6101,456
Less: tax impact of specified items and other tax related13398197253
After-tax impact of specified items$529$461$1,413$1,203

(a)Represents amounts associated with restructuring and integration activities, which are recorded in Integration, restructuring and transaction expense and are further discussed below.

(b)Represents transaction costs, which are recorded in Integration, restructuring and transaction expense, and financing impacts, which are recorded in Interest income and Interest expense, associated with the agreement to acquire Critical Care.

(c)Represents costs recorded to Other operating expense (income), net and incurred in connection with the separation of BD's former Diabetes Care business.

(d)Includes amortization and other adjustments related to the purchase accounting for acquisitions. BD’s amortization expense is recorded in Cost of products sold.

(e)Represents costs incurred to develop processes and systems to establish initial compliance with the European Union Medical Device Regulation and the European Union In Vitro Diagnostic Medical Device Regulation, which represent a significant, unusual change to the existing regulatory framework. We consider these costs to be duplicative of previously incurred costs and/or one-off costs, which are limited to a specific period of time. These expenses, which are recorded in Cost of products sold and Research and development expense, include the cost of labor, other services and consulting (in particular, research and development and clinical trials) and supplies, travel and other miscellaneous costs.

(f)Includes certain (income) expense items which are not part of ordinary operations and affect the comparability of the periods presented. Such items may include certain product remediation costs, certain legal matters, certain investment gains and losses, certain asset impairment charges, and certain pension settlement costs. The amounts in the three and nine-month periods of 2024 were primarily recorded to Revenues and Other operating expense (income), net, and largely related to legislative and legal matters, as further discussed above in our geographic revenue discussion, as well as in Notes 5 and 7 in the Notes to Condensed Consolidated Financial Statements. The amounts in the three and nine-month periods of 2023 included a charge to Cost of products sold of $90 million to adjust the estimate of future product remediation costs.

Gross Profit Margin

The comparison of gross profit margin for the three and nine-month periods of fiscal years 2024 and 2023 reflected the following impacts:

Three-month periodNine-month period
June 30, 2023 gross profit margin %43.1%45.3%
Impact of purchase accounting adjustments and other specified items1.5%0.7%
Operating performance2.4%(0.1)%
Foreign currency translation(0.8)%(0.9)%
June 30, 2024 gross profit margin %46.2%45.0%

The favorable impact on gross margin for the three and nine-month periods of 2024 from specified items reflected a favorable comparison to specified items recorded in the prior-year period, which included a $90 million charge recorded in the Medical segment to adjust the estimate of future product remediation costs.

Operating performance in the three-month period of 2024 compared with the prior-year period primarily reflected lower manufacturing costs resulting from our ongoing continuous improvement projects and other productivity initiatives, partially offset by higher raw material and labor costs.

Operating performance in the nine-month period of 2024 compared with the prior-year period primarily reflected higher raw material and labor costs, as well as the absorption impact of planned inventory reductions, partially offset by lower manufacturing costs resulting from our ongoing continuous improvement projects and other productivity initiatives, as well as a favorable impact from pricing.

Operating Expenses

A summary of operating expenses for the three and nine-month periods of fiscal years 2024 and 2023 is as follows:

Three months ended June 30,Increase (decrease) in basis pointsNine months ended June 30,Increase (decrease) in basis points
2024202320242023
(Millions of dollars)
Selling and administrative expense$1,196$1,190$3,601$3,581
% of revenues24.0%24.4%(40)24.4%25.1%(70)
Research and development expense$299$306$888$956
% of revenues6.0%6.3%(30)6.0%6.7%(70)
Integration, restructuring and transaction expense$112$70$288$175
Other operating expense (income), net$98$(13)$86$(7)

Selling and administrative expense

Selling and administrative expense as a percentage of revenues in the three and nine-month periods of 2024 was lower compared with the prior-year periods, which primarily reflected higher revenues and lower shipping costs in the current-year period, partially offset by higher administrative costs.

Research and development expense

Lower research and development expense as a percentage of revenues in the three and nine-month periods of 2024 primarily reflected the timing of project spending.

Integration, restructuring and transaction expense

Integration, restructuring and transaction expense in the three and nine-month periods of 2024 primarily included restructuring costs related to simplification and other cost-saving initiatives, as well as transaction costs, such as legal, advisory and other costs, relating to our agreement to acquire Critical Care. Expenses in the three and nine-month periods of 2023 also included system integration costs. For further disclosures regarding restructuring costs, refer to Note 10 in the Notes to Condensed Consolidated Financial Statements.

Other operating expense (income), net

The amounts in the three and nine-month periods of 2024 largely represented charges relating to legal matters, including a $50 million charge to accrue an estimated liability for the SEC investigation relating to, among other things, certain reporting issues involving BD AlarisTM infusion pumps included in SEC disclosures prior to 2021, as further discussed in Note 5 in the Notes to Condensed Consolidated Financial Statements.

Nonoperating Income

Net interest expense

The components for the three and nine-month periods of fiscal years 2024 and 2023 were as follows:

Three months ended June 30,Nine months ended June 30,
(Millions of dollars)2024202320242023
Interest expense$(137)$(119)$(373)$(339)
Interest income482410840
Net interest expense$(89)$(95)$(265)$(299)

Higher interest expense for the three and nine-month periods of fiscal year 2024 compared with the prior-year periods primarily reflected higher overall interest rates on debt outstanding, as well as higher total debt outstanding at June 30, 2024 compared with June 30, 2023.

Higher interest income for the three and nine-month periods of fiscal year 2024 compared with the prior-year periods primarily reflected higher overall interest rates and levels of cash on hand.

Income Taxes

The income tax rates for the three and nine-month periods of fiscal years 2024 and 2023 are provided below.

Three months ended June 30,Nine months ended June 30,
2024202320242023
Effective income tax rate2.6%13.6%12.5%7.0%
Impact, in basis points, from specified items(1,000)(210)10(520)

The effective income tax rate for the three-month period of fiscal year 2024 compared with the prior-year period primarily reflected the impact of favorable discrete items in the current-year period. The effective income tax rate for the nine-month period of fiscal year 2024 compared with the prior-year period primarily reflected the impact of more favorable discrete items on the prior-period rate.

Net Income and Diluted Earnings per Share

Net income and diluted earnings per share for the three and nine-month periods of fiscal years 2024 and 2023 were as follows:

Three months ended June 30,Nine months ended June 30,
2024202320242023
Net Income (Millions of dollars)$487$407$1,305$1,376
Diluted Earnings per Share$1.68$1.36$4.49$4.60
Unfavorable impact-specified items$(1.82)$(1.60)$(4.85)$(4.20)
Unfavorable impact-foreign currency translation$(0.13)$(0.43)

Liquidity and Capital Resources

The following table summarizes our condensed consolidated statements of cash flows:

Nine months ended June 30,
(Millions of dollars)20242023
Net cash provided by (used for):
Operating activities$2,666$1,665
Investing activities$(1,577)$(853)
Financing activities$1,963$(959)

Net Cash Flows from Operating Activities

Cash flows from operating activities in the first nine months of fiscal year 2024 was largely driven by our net income, adjusted by a change in operating assets and liabilities that was a net use of cash. This net use of cash primarily reflected lower levels of accounts payable and accrued expenses, partially offset by lower levels of prepaid expenses. Cash flows from operating activities in 2024 additionally reflected a discretionary cash contribution of $150 million to fund our pension obligation.

Cash flows from operating activities in the first nine months of fiscal year 2023 reflected net income, adjusted by a change in operating assets and liabilities that was a net use of cash. This net use of cash primarily reflected lower levels of accounts payable and accrued expenses, as well as higher levels of inventory and trade receivables, partially offset by lower levels of prepaid expenses.

Net Cash Flows from Investing Activities

Our investments in capital expenditures are focused on projects that enhance our cost structure and manufacturing capabilities, as well as support our BD 2025 strategy for growth and simplification. Net outflows from investing activities in the first nine months of fiscal year 2024 included capital expenditure-related outflows of $429 million, compared with $580 million in the prior-year period. Current-period outflows from investing activities also included net purchases of investments, primarily in time deposits, of $830 million.

Net Cash Flows from Financing Activities

Net cash flows from financing activities in the first nine months of fiscal years 2024 and 2023 included the following significant cash flows:

Nine months ended June 30,
(Millions of dollars)20242023
Cash inflow (outflow)
Change in short-term debt$—$49
Proceeds from long-term debt$4,517$1,662
Payments of debt$(1,142)$(1,716)
Repurchases of common stock$(500)$—
Dividends paid$(825)$(849)

Certain measures relating to our total debt were as follows:

(Millions of dollars)June 30, 2024September 30, 2023
Total debt$19,324$15,879
Weighted average cost of total debt3.4%3.0%
Total debt as a percentage of total capital*42.1%37.2%
  • Represents shareholders’ equity, net non-current deferred income tax liabilities, and debt.

Cash and Short-Term Investments

At June 30, 2024, total worldwide cash and equivalents and short-term investments, including restricted cash, were approximately $5.338 billion and more than half of these assets were held in the United States. We regularly review the amount of cash and short-term investments held outside of the United States and our historical foreign earnings are used to fund foreign investments or meet foreign working capital and property, plant and equipment expenditure needs. To fund cash needs in the United States, we rely on ongoing cash flow from U.S. operations, access to capital markets and remittances from foreign subsidiaries of earnings that are not considered to be permanently reinvested.

Financing Facilities

We have a senior unsecured revolving credit facility in place which will expire in September 2027. The credit facility provides borrowings of up to $2.750 billion, with separate sub-limits of $100 million and $194 million for letters of credit and swingline loans, respectively. The expiration date of the credit facility may be extended for up to one additional one-year period, subject to certain restrictions (including the consent of the lenders). The credit facility provides that we may, subject to additional commitments by lenders, request an additional $500 million of financing, for a maximum aggregate commitment under the credit facility of up to $3.250 billion. Proceeds from this facility may be used for general corporate purposes and Becton Dickinson Euro Finance S.à r.l., an indirect, wholly-owned finance subsidiary of BD, is authorized as an additional borrower under the credit facility. There were no borrowings outstanding under the revolving credit facility at June 30, 2024.

The agreement for our revolving credit facility contains the following financial covenants. We were in compliance with these covenants, as applicable, as of June 30, 2024.

  • We are required to have a leverage coverage ratio of no more than:

◦4.25-to-1 as of the last day of each fiscal quarter following the closing of the credit facility; or

◦4.75-to-1 for the four full fiscal quarters following the consummation of a material acquisition.

We may access commercial paper programs over the normal course of our business activities. Our U.S. and multicurrency euro commercial paper programs provide for a maximum amount of unsecured borrowings under the two programs, in aggregate, of $2.750 billion. Proceeds from these programs may be used for working capital purposes and general corporate purposes, which may include acquisitions, share repurchases and repayments of debt. We had no commercial paper borrowings outstanding as of June 30, 2024. We have additional informal lines of credit outside the United States. Also, over the normal course of our business activities, we transfer certain trade receivable assets to third parties under factoring agreements. Additional disclosures regarding sales of trade receivable assets are provided in Note 13 in the Notes to Condensed Consolidated Financial Statements.

Access to Capital and Credit Ratings

Our corporate credit ratings with Standard & Poor's Ratings Services (“S&P”), Moody’s Investors Service (“Moody’s) and Fitch Ratings (“Fitch”) at June 30, 2024 were unchanged compared with our ratings at September 30, 2023.

Lower corporate debt ratings and downgrades of our corporate credit ratings or other credit ratings may increase our cost of borrowing. We believe that given our debt ratings, our financial management policies, our ability to generate cash flow and the non-cyclical, geographically diversified nature of our businesses, we would have access to additional short-term and long-term capital should the need arise. A rating reflects only the view of a rating agency and is not a recommendation to buy, sell or hold securities. Ratings can be revised upward or downward at any time by a rating agency if such rating agency decides that circumstances warrant such a change.

Concentrations of Credit Risk

We continually evaluate our accounts receivables for potential credit losses, particularly those resulting from sales to government-owned or government-supported healthcare facilities in certain countries, as payment may be dependent upon the financial stability and creditworthiness of those countries’ national economies. In addition to continually evaluating all governmental receivables for potential credit losses based upon historical loss experiences, we also evaluate such receivables based upon the availability of government funding and reimbursement practices. We believe the current reserves related to all governmental receivables are adequate and that these receivables will not have a material adverse impact on our financial position or liquidity.

To date, we have not experienced a significant increased risk of credit losses in general as a result of current macroeconomic conditions. No assurances can be given that the risk of credit losses will not increase in the future given the uncertainty around the duration of the current macroeconomic challenges and pressures.

Other Matters

Critical Accounting Policies

There were no changes to our critical accounting policies from those disclosed in our 2023 Annual Report.

Regulatory Matters

FDA Warning Letter

On January 11, 2018, BD received a Warning Letter from the FDA with respect to our former BD Preanalytical Systems ("PAS") unit, citing certain alleged violations of quality system regulations and of law. The Warning Letter states that, until BD resolves the outstanding issues covered by the Warning Letter, the FDA will not approve any premarket submissions for Class III devices to which the non-conformances are reasonably related or grant requests for certificates to foreign governments. BD has worked closely with the FDA and implemented corrective actions to address the quality management system concerns identified in the Warning Letter. In March 2020, the FDA conducted a subsequent inspection of PAS, which it classified as Voluntary Action Indicated, which means the FDA will not take or recommend any administrative or regulatory action as a result of the unit’s response to the observations associated with the quality management concerns in the inspection. BD continues to work with the FDA to generate additional clinical evidence and file 510(k)s as remaining commitments associated with the Warning Letter. As of June 30, 2024, BD has received seven clearances. The FDA review of these remaining commitments is ongoing, and no assurances can be given regarding further action by the FDA as a result of these commitments, including but not limited to action pursuant to the Warning Letter.

Ethylene Oxide/Sterilization

On October 28, 2019, BD entered into a consent order with the Environmental Protection Division of the Georgia Department of Natural Resources (the “EPD”), following the filing of a complaint and motion for temporary restraining order by the EPD seeking to enjoin BD from continuing sterilization operations at its Covington, Georgia facility. Under the terms of the consent order, which has been amended two times upon mutual agreement of BD and EPD, BD voluntarily agreed to a number of operational changes at its Covington and Madison, Georgia facilities, as well as at its distribution center in Covington, designed

to further reduce ethylene oxide emissions, including but not limited to operating at a reduced capacity until successful implementation of fugitive emission control technology, ongoing ambient air monitoring and operational controls at such facilities. Following submission of data relating to the implementation of these operational changes, BD was permitted to return to normal operations in December 2021 at its facilities in Georgia in accordance with the operating conditions set forth in its permit applications. The final air permits for (i) the Covington and Madison facilities and (ii) the Covington distribution center were issued by the EPD on May 5, 2023 and July 2, 2024, respectively.

At a broader level, there is increased focus on the use and emission of ethylene oxide by the U.S. Environmental Protection Agency (“EPA”) and state environmental regulatory agencies. Additional regulatory requirements associated with the use and emission of ethylene oxide may be imposed in the future, either domestically or outside the U.S. Ethylene oxide is the most frequently used sterilant for medical devices and healthcare products in the U.S., and in certain cases is the only option to sterilize critical medical device products for the safe administration to patients. Any such increased regulation could require BD or sterilization service providers, including providers used by BD, to temporarily suspend operations to install additional emissions control technology, limit the use of ethylene oxide or take other actions, which would impact BD’s operations and further reduce the available capacity to sterilize medical devices and healthcare products, and could also result in additional costs. To this end, BD has proactively installed fugitive emissions controls at our facilities in East Columbus, NE and Sandy, UT.

On April 5, 2024, the final National Emission Standards for Hazardous Air Pollutants (“NESHAP”): Ethylene Oxide Emissions Standards for Sterilization Facilities regulation issued by the EPA became effective. Companies generally have two years from the effective date to comply with the new requirements of the NESHAP. We are reviewing the details of the final NESHAP regulation to determine the full impact to BD’s operations, including implementation of any changes necessary to ensure compliance by the deadline.

In addition, on April 13, 2023, the EPA published a Pesticide Registration Review: Proposed Interim Decision and Draft Risk Assessment Addendum for Ethylene Oxide (“PID”). The EPA has not yet finalized the PID, which regulates the use of ethylene oxide as a sterilant and is intended to mitigate any human health and environmental risks associated with its use. We cannot predict what the final PID adopted by the EPA may require and therefore we are not able to assess the impact on our sterilization facilities, on the third-party sterilization facilities that BD utilizes and our operations more generally.

If any new or existing regulatory requirements or rulemaking result in the suspension, curtailment or interruption of sterilization operations at BD or at medical device sterilizers used by BD, or otherwise limit the availability of third-party sterilization capacity, this could interrupt or otherwise adversely impact production of certain of our products or lead to civil litigation or other claims against BD. BD has business continuity plans in place to mitigate the impact of any such disruptions, although these plans may not be able to fully offset such impact, for the reasons noted above.

Consent Decree with FDA

As previously reported, our BD AlarisTM infusion pump organizational unit is operating under an amended consent decree entered into by CareFusion (the “Consent Decree”) that includes all infusion pumps manufactured by or for CareFusion 303, Inc., the organizational unit that manufactures and sells BD AlarisTM infusion pumps in the United States.

Following an inspection that began in March 2020 of our Medication Management Systems facility (CareFusion 303, Inc.) in San Diego, California, the FDA issued to BD a Form 483 Notice (the “Form 483 Notice”) that contained a number of observations of non-conformance with the FDA’s quality system regulations. In December 2021, the FDA issued to CareFusion 303, Inc. a letter of non-compliance with respect to the Consent Decree (the “Non-Compliance Letter”) stating that, among other things, it had determined that certain of BD’s corrective actions with respect to the Form 483 Notice appeared to be adequate, some were still in progress such that adequacy could not be determined yet, and certain others were not adequate (e.g., complaint handling and corrective and preventive actions (“CAPA”), design verification and medical device reporting). Per the terms of the Non-Compliance Letter, CareFusion 303, Inc. provided the FDA with a proposed comprehensive corrective action plan and has retained an independent expert to conduct periodic audits of the CareFusion 303, Inc. infusion pump facilities through 2025. CareFusion 303, Inc. will update its corrective action plan to address any observations that may arise during the course of these audits. The FDA’s review of the items raised in the Form 483 Notice and Non-Compliance Letter remains ongoing, and no assurances can be given regarding further action by the FDA as a result of the observations, including but not limited to action pursuant to the Consent Decree, or that corrective actions proposed by CareFusion 303, Inc. will be adequate to address these observations. Additionally, we cannot currently predict the amount of additional monetary investment that will be incurred to resolve this matter or the matter’s ultimate impact on our business.

The Consent Decree authorizes the FDA, in the event of any violations in the future, to order us to cease manufacturing and distributing infusion pumps, recall products and take other actions. We may be required to pay damages of $15,000 per day per violation if we fail to comply with any provision of the Consent Decree, up to $15 million per year.

We may be obligated to pay more costs in the future because, among other things, the FDA may determine that we are not fully compliant with the Consent Decree and Non-Compliance Letter and therefore impose penalties under the Consent Decree, and/or we may also be subject to future proceedings and litigation relating to the matters addressed in the Consent Decree, including, but not limited to, additional fines, penalties, other monetary remedies, and expansion of the terms of the Consent Decree. As of June 30, 2024, we do not believe that a loss is probable in connection with the Consent Decree, and accordingly, we have no accruals associated with compliance with the Consent Decree.

As previously disclosed, on July 21, 2023, BD received 510(k) clearance from the FDA for its updated BD Alaris™ Infusion System, which enables both remediation and a return to market for the BD Alaris™ Infusion System. This clearance covers updated hardware features for Point-of-Care Unit (PCU), large volume pumps, syringe pumps, patient-controlled analgesia (PCA) pumps, respiratory monitoring and auto-identification modules. It also covers a new BD Alaris™ Infusion System software version with enhanced cybersecurity, along with interoperability features that enable smart, connected care with electronic medical record systems. To address all open recalls and ensure all devices at customer sites are running the most recent version of the BD Alaris™ Infusion System Software, all of the current BD Alaris™ Infusion System devices in the U.S. market will be remediated or replaced with the updated 510(k) cleared version over the next several years.

For further discussion of risks relating to the regulations to which we are subject, see Part I, Item 1A, of our 2023 Annual Report.

Cautionary Statement Regarding Forward-Looking Statements

This report includes forward-looking statements within the meaning of the federal securities laws. BD and its representatives may also, from time to time, make certain forward-looking statements in publicly released materials, both written and oral, including statements contained in filings with the SEC, press releases, and our reports to shareholders. Forward-looking statements may be identified by the use of words such as “plan,” “expect,” “believe,” “intend,” “will,” “may,” “anticipate,” “estimate” and other words of similar meaning in conjunction with, among other things, discussions of future operations and financial performance (including volume growth, pricing, sales and earnings per share growth, and cash flows) and statements regarding our strategy for growth, liquidity, future product development, regulatory approvals, competitive position and expenditures. All statements that address our future operating performance or events or developments that we expect or anticipate will occur in the future are forward-looking statements.

Forward-looking statements are, and will be, based on management’s then-current views and assumptions regarding future events, developments and operating performance, and speak only as of their dates. Investors should realize that if underlying assumptions prove inaccurate, or risks or uncertainties materialize, actual results could vary materially from our expectations and projections. Investors are therefore cautioned not to place undue reliance on any forward-looking statements. Furthermore, we undertake no obligation to update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events and developments or otherwise, except as required by applicable law or regulations.

The following are some important factors that could cause our actual results to differ from our expectations in any forward-looking statements. For further discussion of certain of these factors, see Item 1A. Risk Factors in our 2023 Annual Report and our subsequent Quarterly Reports on Form 10-Q.

  • General global, regional or national economic downturns and macroeconomic trends, including heightened inflation, capital market volatility, interest rate and currency rate fluctuations, and economic slowdown or recession, that may result in unfavorable conditions that could negatively affect demand for our products and services, impact the prices we can charge for our products and services, disrupt our transportation networks or other aspects of our supply chain, impair our ability to produce our products, or increase borrowing costs.

  • The impact of inflation and disruptions in our global supply chain on BD and our suppliers (particularly sole-source suppliers and providers of sterilization services), including fluctuations in the cost and availability of oil-based resins and other raw materials, as well as certain components, used in the production or sterilization of our products, transportation constraints, disruptions and delays, product shortages, energy shortages or increased energy costs, labor shortages or disputes, and increased operating and labor costs.

  • Conditions in international markets, including social and political conditions, geopolitical developments such as the continuation and/or escalation of the evolving situations in Ukraine, the Middle East and Asia, civil unrest, terrorist activity, governmental changes, restrictions on the ability to transfer capital across borders, economic sanctions, export controls, tariffs and other protectionist measures, barriers to market participation (such as local company and products preferences), difficulties in protecting and enforcing our intellectual property rights, and governmental expropriation of assets. Our international operations also increase our compliance risks, including risks under the Foreign Corrupt Practices Act and other anti-corruption and bribery laws, as well as regulatory and privacy laws.

  • Competitive factors that could adversely affect our operations, including new product introductions and technologies (for example, new forms of drug delivery or novel medical therapies) by our current or future competitors, consolidation or strategic alliances among healthcare companies, distributors and/or payers of healthcare to improve their competitive position or develop new models for the delivery of healthcare, increased pricing pressure due to the impact of low-cost manufacturers, patents attained by competitors (particularly as patents on our products expire), new entrants into our markets and changes in the practice of medicine.

  • Cost-containment efforts in the U.S. or in other countries in which we do business, such as alternative payment reform, government-imposed pay back provisions, increased use of competitive bidding and tenders, including, without limitation, any expansion of the volume-based procurement process in China or the implementation of similar cost-containment efforts.

  • Changes in the way healthcare services are delivered, including transition of more care from acute to non-acute settings and increased focus on chronic disease management, which may affect the demand for our products and services. Additionally, budget constraints and staffing shortages, particularly shortages of nursing staff, may affect the prioritization of healthcare services, which could also impact the demand for certain of our products and services.

  • 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 the coverage or reimbursement landscape, or adverse decisions relating to our products by governments or third-party payers, which could reduce demand for our products or the price we can charge for such products.

  • Product efficacy or safety concerns or non-compliance with applicable regulatory requirements regarding our products (such as non-compliance of our products with registration requirements resulting from modifications to such products, or other factors, including with respect to BD Alaris™ pumps and related sets and BD VacutainerTM) resulting in product holds or recalls, regulatory action on the part of the FDA or foreign counterparts (including restrictions on future product clearances and civil penalties), declining sales, product liability or other claims and damage to our reputation. As a result of the CareFusion acquisition, our U.S. infusion pump business is operating under a Consent Decree with the FDA. The Consent Decree authorizes the FDA, in the event of any violations in the future, to order our U.S. infusion pump business to cease manufacturing and distributing products, recall products or take other actions, and order the payment of significant monetary damages if the business subject to the decree fails to comply with any provision of the Consent Decree. In accordance with our commitments to the FDA, the overall timing of replacement or remediation of the BD Alaris™ Infusion Systems and return to market in the U.S. may be impacted by, among other things, customer readiness, supply continuity and our continued engagement with the FDA.

  • Risks relating to our overall level of indebtedness, including our ability to service our debt and refinance our indebtedness, which is dependent upon the capital markets and the overall macroeconomic environment and our financial condition at such time.

  • Changes in the domestic and foreign healthcare industry, in medical practices or in the preference of healthcare consumers that result in a reduction in procedures using our products or increased pricing pressures, including cost-reduction measures instituted by and the continued consolidation among healthcare providers.

  • The effects of regulatory or other events (such as public health crises) that adversely impact our supply chain, including our ability to manufacture (including sterilize) our products (particularly where production of a product line or sterilization operations are concentrated in one or more plants), source materials or components or services from suppliers (including sole-source suppliers) that are needed for such manufacturing (including sterilization), or provide products to our customers, including events that impact key distributors. In particular, there has been increased regulatory focus on the use and emission of ethylene oxide in sterilization processes, and additional regulatory requirements may be imposed in the future that could adversely impact BD or our third-party sterilization providers.

  • Information and technology system disruptions, including disruptions caused by security breaches, which could impair our ability or that of our customers, suppliers and other business partners 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 patients, including sensitive personal data, or result in product efficacy or safety concerns for certain of our products, and result in actions by regulatory bodies or civil litigation.

  • Difficulties inherent in product development, including the potential inability to successfully continue technological innovation, successfully complete clinical trials, obtain and maintain regulatory approvals and registrations in the U.S. 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 could 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.

  • 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.

  • The impact of business combinations or divestitures, including any volatility in earnings relating to acquisition-related costs, and our ability to successfully integrate any business we may acquire.

  • Any impact that public health crises, such as pandemics and epidemics, including COVID-19, may have on our business, the global economy and the global healthcare system. This may include decreases in the demand for our products, disruptions to our operations or the operations of our suppliers and customers, disruptions to our supply chain, or increases in transportation costs.

  • The impact of changes in U.S. federal or foreign laws and policies that could affect fiscal and tax policies, taxation (including tax reforms, such as the implementation of a global minimum tax, that could adversely impact multinational corporations), and international trade, including import and export regulation and international trade agreements. In particular, tariffs, sanctions or other trade barriers imposed by the U.S. or other countries could adversely impact our supply chain costs or otherwise adversely impact our results of operations.

  • The risks associated with the qualification of the spin-off of our former Diabetes Care business as a tax-free transaction for U.S. federal income tax purposes.

  • 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 make necessary infrastructure enhancements to production facilities and distribution networks.

  • Our ability to recruit and retain key employees and the impact of labor conditions which could increase employee turnover or increase our labor and operating costs and negatively affect our ability to efficiently operate our business.

  • 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 impact of climate change, or legal, regulatory or market measures to address climate change, such as regulation of greenhouse gas emissions, zero-carbon energy and sustainability mandates, and additional taxes on fuel and energy, and changing customer preferences and requirements, such as those regarding the use of materials of concern, increased demand for products with lower environmental footprints, and for companies to set and demonstrate progress against greenhouse gas reduction plans and targets.

  • Natural disasters, including the impacts of hurricanes, tornadoes, windstorms, fires, earthquakes and floods and other extreme weather events, global health pandemics, war, terrorism, labor disruptions and international conflicts that could cause significant economic disruption and political and social instability, resulting in decreased demand for our products, adversely affect our manufacturing and distribution capabilities or cause interruptions in our supply chain.

  • Pending and potential future litigation or other proceedings asserting, and/or investigations concerning and/or subpoenas and requests seeking information with respect to, alleged violations of law (including in connection with federal and/or state healthcare programs (such as Medicare or Medicaid) and/or sales and marketing practices (such as investigative subpoenas and the civil investigative demands received by BD)), potential anti-corruption and related internal control violations under the Foreign Corrupt Practices Act, antitrust claims, securities law claims, product liability (which may involve lawsuits seeking class action status or seeking to establish multi-district litigation proceedings, including pending claims relating to our hernia repair implant products, surgical continence products for women, vena cava filter products and implantable ports), claims with respect to environmental matters, data privacy breaches 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, without limitation, laws relating to sales practices, environmental protection and reporting, price controls, privacy, cybersecurity, artificial intelligence, and licensing and regulatory requirements for new products and products in the post-marketing 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.

  • 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 FASB or the SEC.

The foregoing list sets forth many, but not all, of the factors that could impact our ability to achieve results described in any forward-looking statements. Investors should understand that it is not possible to predict or identify all such factors and should not consider this list to be a complete statement of all potential risks and uncertainties.

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