BECTON DICKINSON & CO Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

The following commentary should be read in conjunction with the 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
Description of the Company and Business Segments
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, Africa, Latin America and certain
countries within Greater Asia. We are primarily focused on certain countries
whose healthcare systems are expanding.
Strategic Objectives
BD remains focused on delivering durable growth and creating shareholder value,
while making appropriate investments for the future. BD 2025, our vehicle for
value creation, is anchored in three key pillars: grow, simplify and empower.
BD's management team aligns our operating model and investments with these key
strategic pillars through continuous focus on the following underlying
objectives:
Grow
•Developing and maintaining a strong portfolio of leading products and solutions
that address significant unmet clinical needs, improve outcomes, and reduce
costs;
•Focusing on our core products, services and solutions that deliver greater
benefits to patients, healthcare workers and researchers;
•Investing in research and development that leads to and expands category
leadership, as well as results in a robust product pipeline;
•Leveraging our global scale to expand our reach in providing access to
affordable medical technologies around the world, including emerging markets;
•Supplementing our internal growth through strategic acquisitions in faster
growing market segments;
•Driving an efficient capital structure and strong shareholder returns.
Simplify
•Driving operating effectiveness and margin expansion by placing controls on
sourcing and transportation costs, as well as by increasing labor productivity
and asset efficiencies;
•Focusing on cash management in order to improve balance sheet productivity;
•Working across our supply chain to reduce environmental impacts;
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•Creating more resilient operations based on an enterprise-wide renewable energy
strategy;
•Reducing complexity across our manufacturing network and rationalizing our
product portfolio to optimize architecture, portfolio and business processes;
•Enhancing our quality and risk management systems;
•Simplifying our internal business processes.
Empower
•Fostering a purpose-driven culture with a focus on positive impact to all
stakeholders-customers, patients, employees and communities;
•Improving our ability to serve customers and enhance customer experiences
through the digitalization of internal processes and go-to-market approaches;
•Cultivating an inclusive work environment that welcomes and celebrates diverse
talent and perspectives.
In assessing the outcomes of these strategies as well as BD's financial
condition and operating performance, management generally reviews forecast data,
monthly actual results, including segment sales, and other similar information.
We also consider trends related to certain key financial data, including gross
profit margin, selling and administrative expense, investment in research and
development, return on invested capital, and cash flows.
BD's Intention to Spin Off Diabetes Care
On May 6, 2021, we announced our intention to spin off our Diabetes Care
business as a separate publicly traded company to BD's shareholders. The
proposed spin-off is intended to be a tax-free transaction for U.S. federal
income tax purposes and is expected to be completed in the first half of
calendar year 2022, subject to the satisfaction of customary conditions,
including final approval from BD's Board of Directors and the effectiveness of a
registration statement on Form 10. The Company believes that as an independent,
publicly traded entity, the Diabetes Care business will be positioned to more
effectively allocate its capital and operational resources with a dedicated
growth strategy. For further discussion of risks relating to the proposed
spin-off of our Diabetes Care business, see Item 1A. Risk Factors-Risks Relating
to the Proposed Spin-off of the Diabetes Care Business.
COVID-19 Pandemic Impacts and Response
A novel strain of coronavirus disease ("COVID-19") was officially declared a
pandemic by the World Health Organization in March 2020 and governments around
the world have been implementing various measures to slow and control the
ongoing spread of COVID-19. These government measures, as well as a shift in
healthcare priorities, resulted in a significant decline in medical procedures
in our fiscal year 2020. Demand for our products showed substantial recovery in
our fiscal year 2021; however, regional resurgences in COVID-19 infections and
the emergence of the Delta variant continued to impact the demand for certain of
our products in our fiscal year 2021. Our 2021 revenues reflected a substantial
benefit from sales related to COVID-19 diagnostic testing on the BD VeritorTM
Plus and BD MaxTM Systems. The factors that affected our revenue growth in
fiscal year 2021, including those related to the COVID-19 pandemic, are
discussed in greater detail further below.
Due to the significant uncertainty that exists relative to the duration and
overall impact of the COVID-19 pandemic, our future operating performance,
particularly in the short-term, may be subject to volatility. While non-acute
utilization rates for most of our products have largely recovered to
pre-pandemic levels, resurgences in COVID-19 infections or new strains of the
virus may weaken future demand for certain of our products and/or disrupt our
operations. We also continue to see challenges posed by the pandemic to global
transportation channels and other aspects of our supply chain, including the
cost and availability of raw materials, as well as logistical challenges
affecting the movement of freight around the globe. The United States and other
governments may enact or use laws and regulations, such as the Defense
Production Act or export restrictions, to ensure availability of needed COVID-19
testing and vaccination delivery devices. Any such action may impact our global
supply chain network.
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The impacts of the COVID-19 pandemic on our business, results of operations,
financial condition and cash flows is dependent on certain factors including:
•The extent to which resurgences in COVID-19 infections or new strains of the
virus, including the Delta variant, result in future deferrals of elective
medical procedures and/or the extent to which the imposition of new governmental
lockdowns, quarantine requirements or other restrictions may weaken demand for
certain of our products and/or disrupt our operations;
•The degree to which demand and pricing for our COVID-19 diagnostics testing
solutions continues to be impacted by reduced infection rates, as well as by
distribution and utilization of available COVID-19 vaccines and the availability
of competitive SARS-CoV-2 diagnostic testing products, which we expect will
result in lower COVID-19 testing revenues in future periods;
•The degree to which the pandemic has escalated challenges that existed for
global healthcare systems prior to the pandemic, such as staffing shortages,
including nursing shortages, and budget constraints;
•The continued momentum of the global economy's recovery from the pandemic and
the degree of pressure that a weakened macroeconomic environment would put on
future healthcare utilization and the global demand for our products.

We remain focused on partnering with governments, healthcare systems, and
healthcare professionals to navigate the COVID-19 pandemic. This focus includes
providing access to our SARS-CoV-2 diagnostics tests and injection devices for
global vaccination campaigns, as well as supplying products and solutions for
ongoing care for patients around the world. We have also remained focused on
protecting the health and safety of BD employees while ensuring continued
availability of BD's critical medical devices and technologies during these
unprecedented times.
Summary of Financial Results
Worldwide revenues in 2021 of $20.248 billion increased 18.3% from the
prior-year period, which primarily reflected an increase in volume, including
increases attributable to our core products, of approximately 15.3%. Revenues in
2021 also reflected a favorable impact from foreign currency translation of
approximately 2.7%, as well as a favorable impact from price of approximately
0.3%.
Volume in 2021 reflected increased demand for our broad portfolio of products
and was driven by the following:
•The Medical segment's revenues in 2021 reflected increased demand in the
Medication Delivery Solutions, Pharmaceutical Systems and Diabetes Care units,
which was partially offset by a decline in the Medication Management Solutions
unit.
•The Life Sciences segment's revenues in 2021 reflected growth in both units.
Growth in the Integrated Diagnostic Solutions unit included approximately $2
billion of revenues driven by COVID-19 diagnostic testing primarily on the BD
VeritorTM Plus and BD MaxTM Systems.
•Interventional segment revenues in 2021 reflected increased demand in all three
units as hospital utilization increased and new product offerings drove higher
sales.
We continue to invest in research and development, geographic expansion, and new
product programs to drive further revenue and profit growth. We have reinvested
over $200 million of the profits from our sales related to COVID-19 diagnostic
testing into our BD 2025 strategy. Our ability to sustain our long-term growth
will depend on a number of factors, including our ability to expand our core
business (including geographical expansion), develop innovative new products,
and continue to improve operating efficiency and organizational effectiveness.
As discussed above, current global economic conditions remain relatively
volatile due to the COVID-19 pandemic. In addition, an inability to increase or
maintain selling prices globally could adversely impact our businesses. Also, we
are experiencing challenges related to global transportation channels and supply
chains. These challenges have subjected certain of our costs, specifically raw
material and freight costs, to inflationary pressures which have unfavorably
impacted our gross profit and operating margins. Additional
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discussion regarding the impacts of these inflationary pressures on our
operating results in 2021 is provided further below.
Our financial position remains strong, with cash flows from operating activities
totaling $4.647 billion in 2021. At September 30, 2021, we had $2.403 billion in
cash and equivalents and short-term investments, including restricted cash. We
continued to return value to our shareholders in the form of dividends. During
fiscal year 2021, we paid cash dividends of $1.048 billion, including $958
million paid to common shareholders and $90 million paid to preferred
shareholders. We also repurchased approximately $1.750 billion of our common
stock during fiscal year 2021.
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. A weaker U.S. dollar, compared
to the prior-year period, resulted in a favorable foreign currency translation
impact to our revenues and an unfavorable impact to our expenses during 2021. 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 Medical revenues by organizational unit:
                                                                                                     2021 vs. 2020                                                   2020 vs. 2019
                                                                                                    Estimated                                                       Estimated
                                                                                  Total                 FX                                        Total                 FX
(Millions of dollars)          2021             2020             2019            Change               Impact               FXN Change            Change               Impact               FXN Change
Medication Delivery
Solutions                   $ 4,057          $ 3,555          $ 3,848              14.1  %                 2.4  %                11.7  %           (7.6) %                (1.4) %                (6.2) %
Medication Management
Solutions                     2,432            2,454            2,640              (0.9) %                 1.4  %                (2.3) %           (7.1) %                (0.5) %                (6.6) %
Diabetes Care                 1,160            1,084            1,110               7.0  %                 2.2  %                 4.8  %           (2.4) %                (1.4) %                (1.0) %

Pharmaceutical Systems        1,829            1,588            1,465              15.2  %                 4.1  %                11.1  %            8.4  %                (1.0) %                 9.4  %
Total Medical revenues      $ 9,479          $ 8,680          $ 9,064               9.2  %                 2.4  %                 6.8  %           (4.2) %                (1.0) %                (3.2) %



The Medical segment's revenue growth in 2021 was aided by a favorable comparison
to 2020, which was impacted by COVID-19 pandemic-related declines, particularly
in the United States and China. These prior-year pandemic-related declines
impacted our Medication Delivery Solutions unit, and to a lesser extent, the
Diabetes Care unit. Fiscal year 2021 revenue growth in the Medication Delivery
Solutions unit reflected strong demand for our core offerings, including U.S.
demand for catheters and vascular care products, as well as strong global demand
for syringes resulting from COVID-19 vaccination efforts. In the Medication
Management
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Solutions unit, lower revenues in 2021 reflected an unfavorable comparison to
2020, which benefited from global pandemic-related infusion pump orders. Growth
in the Diabetes Care unit benefited from the timing of sales, slightly better
than expected market demand and a favorable comparison to 2020, which was
impacted by pandemic-related declines. The Pharmaceutical Systems unit's revenue
growth in 2021 reflected continued strong growth that is being driven by demand
for our pre-filled devices and is enabled by capacity expansion efforts. Demand
for pre-filled devices is being aided by the vial to pre-filled device
conversion for biologics, vaccines, and other injectable drugs.
As previously disclosed, we submitted our 510(k) premarket notification to the
FDA for the BD Alaris™ System in April 2021. The 510(k) submission is intended
to bring the regulatory clearance for the BD Alaris™ System up-to-date,
implement new features to address the open recall issues and provide other
updates, including a new version of the BD Alaris™ System software that will
provide clinical, operational and cybersecurity updates. We are currently
shipping the BD Alaris™ System in the United States, only in cases of medical
necessity and to remediate recalled software versions. We will not be able to
fully resume commercial operations for the BD Alaris System™ in the United
States until a 510(k) submission relating to the product has been cleared by the
FDA. No assurances can be given as to when or if clearance will be obtained from
the FDA.
The Medication Delivery Solutions unit's revenues in 2020 reflected an
unfavorable impact relating to the COVID-19 pandemic due to a decline in
healthcare utilization, particularly in the United States, China and Europe. As
expected, the Medication Delivery Solutions unit's 2020 revenues in China were
also unfavorably impacted by a volume-based procurement process which was
adopted by several of China's provinces. The Medication Management Solutions
unit's revenues in 2020 reflected a hold on U.S. shipments of BD AlarisTM
infusion pumps pending compliance with certain 510(k) filing requirements of the
FDA. This unfavorable impact was partially offset by international sales of
infusion pumps and pandemic-related infusion pump orders placed in the United
States with medical necessity certification. Fiscal year 2020 revenues in the
Diabetes Care unit were unfavorably impacted by pandemic-related declines in
demand and pricing pressures in the United States. The Pharmaceutical Systems
unit's revenues in 2020 reflected continued strength in demand for prefillable
products.
Medical segment operating income was as follows:
  (Millions of dollars)                                    2021          

2020 2019

  Medical segment operating income                      $ 2,583       $ 

2,274 $ 2,824

Segment operating income as % of Medical revenues 27.3 % 26.2 % 31.2 %

As discussed in greater detail below, the Medical segment's operating income in
2021 was driven by higher gross profit margin. Operating income in 2020 was
driven by a decline in gross profit margin.
•The Medical segment's higher gross profit margin in 2021 compared with 2020
primarily reflected the following:
•A favorable comparison to 2020, which was unfavorably impacted by increased
levels of manufacturing overhead costs that were recognized in the period
because of the COVID-19 pandemic, rather than capitalized within inventory, and
$244 million of net charges recorded in 2020, compared with charges of $56
million in 2021, for estimated future costs within the Medication Management
Solutions unit associated with remediation efforts related to AlarisTM infusion
pumps;
•Lower manufacturing costs resulting from continuous improvement projects which
enhanced the efficiency of our operations;
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•The unfavorable impacts from foreign currency translation, investments in
simplification and other cost saving initiatives, higher raw material and
freight costs, as well as product quality remediation expenses.
•The Medical segment's lower gross profit margin in 2020 compared with 2019
primarily reflected the following:
•Net charges of $244 million recorded for remediation efforts related to
AlarisTM infusion pumps, as noted above;
•Unfavorable product mix and the increased levels of manufacturing overhead
costs that were recognized in the period because of the COVID-19 pandemic and
unfavorable product mix driven by the decline of sales in China due to the
volume-based procurement process noted above;
•Charges of $41 million recorded to write down the carrying value of certain
fixed assets, primarily within the Medication Delivery Solutions and
Pharmaceutical Systems units;
•The favorable impact of lower manufacturing costs resulting from continuous
improvement projects which enhanced the efficiency of our operations.
•Selling and administrative expense as a percentage of revenues in 2021 was flat
compared with 2020, primarily due to the increase in revenues in 2021, partially
offset by higher travel and other administrative costs compared with 2020, which
benefited from cost containment measures enacted in response to the COVID-19
pandemic. Selling and administrative expense as a percentage of revenues in 2020
was slightly lower compared with 2019 primarily due to lower expenses resulting
from cost containment measures.
•Research and development expense as a percentage of revenues was higher in 2021
compared with 2020 which primarily reflects our commitment to research and
development through continued reinvestment into our growth initiatives. Research
and development expense as a percentage of revenues was higher in 2020 compared
with 2019 which reflected the decline in revenues in 2020, as well as our
continued commitment to drive innovation with new products and platforms.
•The Medical segment's income in 2019 additionally reflected the estimated
cumulative costs of a product recall of $75 million recorded within Other
operating expense, net. The recall related to a product component, which
generally pre-dated our acquisition of CareFusion in fiscal year 2015, within
the Medication Management Solutions unit's infusion systems platform.

Life Sciences Segment
The following summarizes Life Sciences revenues by organizational unit:
                                                                                                  2021 vs. 2020                                                 2020 vs. 2019
                                                                                                 Estimated                                                     Estimated
                                                                               Total                FX                                       Total                 FX
 (Millions of dollars)       2021             2020             2019            Change             Impact               FXN Change            Change              Impact               FXN Change
Integrated Diagnostic
Solutions                 $ 5,225          $ 3,532          $ 3,106             47.9  %                3.8  %                44.1  %          13.7  %                (1.4) %                15.1  %
Biosciences                 1,305            1,143            1,194             14.2  %                3.1  %                11.1  %          (4.3) %                (0.8) %                (3.5) %
Total Life Sciences
revenues                  $ 6,530          $ 4,675          $ 4,300             39.7  %                3.6  %                36.1  %           8.7  %                (1.2) %                 9.9  %

The Life Sciences segment's revenue growth in 2021 primarily reflected a favorable comparison to 2020, which was significantly impacted by pandemic-related declines in both units. Revenue growth in the Integrated Diagnostic Solutions unit was also driven by sales related to COVID-19 diagnostic testing on the BD VeritorTM

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Plus and BD MaxTM Systems. Routine diagnostic testing levels in the Integrated
Diagnostic Solutions unit continued to improve over the course of 2021 and the
unit benefited from high demand for our specimen management portfolio, automated
blood cultures and ID/AST testing solutions. The Biosciences unit's revenue
growth in 2021 benefited from strong demand for instruments and reagents as lab
utilization returned to normal levels.
The Life Sciences segment's revenues in 2020 were driven by the Integrated
Diagnostic Solutions unit's sales, specifically in the fourth quarter, related
to COVID-19 diagnostic testing on the BD VeritorTM Plus and BD MaxTM Systems.
This growth in the Integrated Diagnostic Solutions unit was partially offset by
pandemic-related declines in routine diagnostic testing and specimen
collections. The Biosciences unit's revenues in 2020 reflected a decline in
demand for instruments and reagents as routine research and clinical lab
activity slowed due to the COVID-19 pandemic.
Life Sciences segment operating income was as follows:
(Millions of dollars)                               2021                2020                2019

Life Sciences segment operating income $ 2,391 $ 1,405 $ 1,248

Segment operating income as % of Life Sciences
revenues                                              36.6  %             30.0  %             29.0  %



As discussed in greater detail below, the Life Sciences segment's operating
income in 2021 reflected improved gross profit margin and operating expense
performance. Operating income in 2020 reflected improved operating expense
performance, partially offset by a decline in gross profit margin.
•The Life Sciences segment's higher gross profit margin in 2021 compared with
2020 primarily reflected the following:
•A favorable impact on product mix from the Integrated Diagnostic Solutions
unit's sales related to COVID-19 testing and the recovery of demand for other
products with higher margins;
•A favorable comparison to the prior-year period which was unfavorably impacted
by increased levels of manufacturing overhead costs that were recognized in the
period because of the COVID-19 pandemic, rather than capitalized within
inventory;
•The unfavorable impacts of foreign currency translation and the recognition of
approximately $93 million of excess and obsolete inventory expenses related to
COVID-19 testing inventory.
•The Life Sciences segment's lower gross profit margin in fiscal year 2020
compared with 2019 primarily reflected the following:
•Unfavorable product mix and the increased levels of manufacturing overhead
costs that were recognized in the period because of the COVID-19 pandemic;
•A charge of $39 million recorded in 2020 to write down the carrying value of
certain intangible assets in the Biosciences unit and charges of $17 million
recorded in 2020 to write down fixed assets in the Integrated Diagnostic
Solutions unit;
•The favorable impact on product mix from the Integrated Diagnostic Solutions
unit's sales related to COVID-19 testing.
•Selling and administrative expense as a percentage of Life Sciences revenues
in 2021 was lower compared with the 2020 primarily due to the increase in
revenues in 2021, partially offset by higher travel and other administrative
costs compared with 2020, which benefited from cost containment measures enacted
in response to the COVID-19 pandemic, as well as higher shipping costs and
selling costs in 2021 associated with COVID-19 testing solutions. Selling and
administrative expense as a
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percentage of Life Sciences revenues in 2020 was lower compared to
2019 primarily due to the increase in revenues that was attributable to COVID-19
testing. Lower selling and administrative expense as a percentage of revenues in
2020 was also driven by cost containment measures and synergies realized from
the combination, effective on October 1, 2019, of the former Preanalytical
Systems and Diagnostic Systems units to create the Integrated Diagnostic
Solutions unit.
•Research and development expense as a percentage of revenues in 2021 was lower
compared with 2020, primarily due to the increase in revenues in 2021, partially
offset by additional investments in COVID-19 testing solutions. Research and
development expense as a percentage of revenues in 2020 was flat compared with
2019 as the increase in revenues that was attributable to COVID-19 testing was
largely offset by investments in COVID-19 testing solutions.
Interventional Segment
The following summarizes Interventional revenues by organizational unit:
                                                                                                     2021 vs. 2020                                                 2020 vs. 2019
                                                                                                    Estimated                                                     Estimated
                                                                                  Total                FX                                       Total                FX
 (Millions of dollars)          2021             2020             2019            Change             Impact               FXN Change            Change 

           Impact               FXN Change
Surgery                      $ 1,296          $ 1,121          $ 1,242             15.7  %                1.3  %                14.4  %          (9.7) %               (0.3) %                (9.4) %
Peripheral Intervention        1,711            1,511            1,574             13.2  %                3.0  %                10.2  %          (4.0) %               (0.9) %                (3.1) %
Urology and Critical Care      1,232            1,130            1,110              9.0  %                1.4  %                 7.6  %           1.8  %               (0.2) %                 2.0  %
Total Interventional
revenues                     $ 4,239          $ 3,762          $ 3,926             12.7  %                2.0  %                10.7  %          (4.2) %               (0.5) %                (3.7) %



The Interventional segment's revenues in 2021 reflected a favorable comparison
to 2020, which was significantly impacted by pandemic-related declines in our
Surgery and Peripheral Intervention units. Fiscal year 2021 revenue growth in
the Interventional segment was also driven by stronger market demand for the
Surgery unit's infection prevention platform and the Peripheral Intervention
unit's oncology products. Revenues in the Peripheral Intervention unit
additionally benefited from sales attributable to its acquisition of Straub
Medical AG, which occurred in the third quarter of fiscal year 2020. Fiscal year
2021 revenue growth in our Surgery and Peripheral Intervention units was
unfavorably impacted by regional resurgences in COVID-19 infections and the
emergence of the Delta variant. The Urology and Critical Care unit's growth in
2021 showed strong demand for acute urology products and the unit's targeted
temperature management portfolio.
The Interventional segment's revenues in 2020, particularly within the Surgery
and Peripheral Intervention units, were negatively impacted by decreased demand
associated with the deferral of elective medical procedures as a result of the
COVID-19 pandemic. Pandemic-related revenue declines in the Urology and Critical
Care unit were offset by demand for the unit's home care and targeted
temperature management businesses, and PureWickTM system.
Interventional segment operating income was as follows:
  (Millions of dollars)                                         2021        

2020 2019

  Interventional segment operating income                     $ 933       $ 

724 $ 903

Segment operating income as % of Interventional revenues 22.0 % 19.2 % 23.0 %

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As discussed in greater detail below, the Interventional segment's operating
income in 2021 was primarily driven by improved gross profit margin. Operating
income in 2020 was driven by a decline in gross profit margin.
•The Interventional segment's higher gross profit margin in 2021 compared with
2020 primarily reflected the following:
•The recovery of demand for products with higher margins;
•A favorable comparison to the prior-year period which was unfavorably impacted
by increased levels of manufacturing overhead costs that were recognized in the
period because of the COVID-19 pandemic, rather than capitalized within
inventory.
•The Interventional segment's lower gross profit margin in fiscal year 2020
compared with 2019 primarily reflected unfavorable product mix and the increased
levels of manufacturing overhead costs that were recognized in the period
because of the COVID-19 pandemic.
•Selling and administrative expense as a percentage of revenues in 2021 was
lower compared with 2020 primarily due the recovery of segment revenues. Selling
and administrative expense in 2020 was lower compared with 2019 primarily due to
lower expenses resulting from cost containment measures.
•Research and development expense as a percentage of revenues was higher in 2021
compared with 2020 which primarily reflects reinvestment into our growth
initiatives. Lower research and development expense as a percentage of revenues
in 2020 as compared with 2019 primarily reflected the prior-period impact of a
$30 million write-down recorded by the Surgery unit.
•The Interventional segment's lower income in 2020 additionally reflected the
expiration in 2019 of a royalty income stream acquired in the Bard transaction.
Geographic Revenues
BD's worldwide revenues by geography were as follows:
                                                                                                      2021 vs. 2020                                                   2020 vs. 2019
                                                                                                     Estimated                                                       Estimated
                                                                                   Total                 FX                                        Total                FX
(Millions of dollars)        2021              2020              2019             Change               Impact               FXN Change            Change              Impact               FXN Change
United States             $ 10,969          $  9,716          $  9,730              12.9  %                   -                   12.9  %           (0.1) %                  -                    (0.1) %
International                9,279             7,401             7,560              25.4  %                 6.2  %                19.2  %           (2.1) %               (2.2) %                  0.1  %
Total revenues            $ 20,248          $ 17,117          $ 17,290              18.3  %                 2.7  %                15.6  %           (1.0) %               (1.0) %                    -  %



U.S. revenue growth in 2021 was primarily driven by sales related to COVID-19
diagnostic testing in the Life Sciences segment's Integrated Diagnostic
Solutions unit, as noted above. Strong fiscal year 2021 U.S. revenue growth in
the Medical segment's Medication Delivery Solutions unit and the Interventional
segment's Surgery and Peripheral Intervention units reflected favorable
comparisons to prior-year period results, which were impacted by COVID-19
pandemic-related declines, as well as growth attributable to core products. U.S.
revenue growth in 2021 also reflected strong demand in the Interventional
segment's Urology and Critical Care unit.
U.S. revenues in 2020 were relatively flat compared with 2019 as the Life
Sciences segment's Integrated Diagnostic Solutions unit's sales related to
COVID-19 diagnostic testing largely offset the declines noted above for the
Medical segment's Medication Management Solutions and Medication Delivery
Solutions units, as well as for the Interventional segment's Surgery and
Peripheral Intervention units.
International revenue growth in 2021 was largely driven by COVID-19 diagnostic
testing-related sales in the Life Sciences segment's Integrated Diagnostic
Solutions unit, as discussed further above, and by demand in the Medical
segment's Pharmaceutical Systems unit. Fiscal year 2021 international revenue
growth was also
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driven by results in the Medical segment's Medication Delivery Solutions and the
Interventional segment's Peripheral Intervention unit due to favorable
comparisons to prior-year period results, which were impacted by COVID-19
pandemic-related declines, and growth attributable to core products. Fiscal year
2021 international revenue growth was unfavorably impacted by a decline in the
Medical segment's Medication Management Solutions unit, as further discussed
above.
International revenues in 2020 were favorably impacted by sales in the Medical
segment's Pharmaceutical Systems and Medication Management Solutions units as
well as by sales in the Life Sciences segment's Integrated Diagnostic Solutions
unit, as discussed further above. International revenues in 2020 were
unfavorably impacted by revenue declines in China and Europe for the Medical
segment's Medication Delivery Solutions unit, as previously discussed.
  Emerging market revenues were as follows:
                                                                                              2021 vs. 2020                                                 2020 vs. 2019
                                                                                             Estimated                                                     Estimated
                                                                           Total                FX                                       Total                FX
(Millions of dollars)    2021             2020             2019            Change             Impact               FXN Change            Change             Impact               FXN Change
Emerging markets      $ 2,866          $ 2,419          $ 2,710             18.5  %                2.9  %                15.6  %         (10.7) %               (3.6) %                (7.1) %



Revenues in emerging markets in 2021 benefited from a favorable comparison to
2020 which was impacted by COVID-19 pandemic-related declines. Revenues in
emerging markets in 2020 were unfavorably impacted by a decline in healthcare
utilization as a result of the COVID-19 pandemic. As previously discussed above,
fiscal year 2020 revenues in our Medication Delivery Solutions unit were also
unfavorably impacted by a volume-based procurement process which was adopted by
several of China's provinces. To date, the impact of these procurement
initiatives to our revenues in China has been limited to our Medication Delivery
Solutions unit.
Specified Items
Reflected in the financial results for 2021, 2020 and 2019 were the following
specified items:
(Millions of dollars)                                          2021              2020              2019
Integration costs (a)                                       $    135          $    214          $    323
Restructuring costs (a)                                           50                95               180

Separation and related costs (b)                                  35                 -                 -
Purchase accounting adjustments (c)                            1,406             1,356             1,499

Transaction gain/loss, product and other litigation-related matters (d)

                                                      272               631               646
Investment gains/losses and asset impairments (e)                (46)              100                17
European regulatory initiative-related costs (f)                 135               106                51
Impacts of debt extinguishment                                   185                 8                54
Hurricane recovery-related impacts                                 -                 -               (24)

Total specified items                                          2,170             2,510             2,749
Less: tax impact of specified items and tax reform (g)           353               395               622
After-tax impact of specified items                         $  1,818

$ 2,114 $ 2,127

(a)Represents integration and restructuring costs recorded in Acquisitions and
other restructurings, which are further discussed below.
(b)Represents costs recorded to Other operating expense, net which were incurred
for consulting, legal, tax and other advisory services associated with the
planned spin-off of BD's Diabetes Care business.
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(c)Includes amortization and other adjustments related to the purchase
accounting for acquisitions impacting identified intangible assets and valuation
of fixed assets and debt. BD's amortization expense is primarily recorded
in Cost of products sold.
(d)Includes amounts recorded to Other operating expense, net which are detailed
further below. The amounts in 2021 and 2020 also included net charges related to
the estimate of probable future product remediation costs, as further discussed
below. Such amounts are recorded within Cost of products sold, or in some cases,
within Other (expense) income, net.
(e)The amount in 2021 reflected unrealized gains recorded within Other (expense)
income, net relating to investments. The amount in 2020 and 2019 included total
charges of $98 million, and $30 million, respectively, recorded in Cost of
products sold and Research and development expense to write down the carrying
value of certain assets. The amount in 2019 also included an unrealized gain of
$13 million recorded within Other (expense) income, net relating to an
investment.
(f)Represents costs required to develop processes and systems to comply with
regulations such as the European Union Medical Device Regulation ("EUMDR") and
General Data Protection Regulation ("GDPR"). These costs were recorded in Cost
of products sold and Research and development expense.
(g)The amount in 2019 included additional tax benefit, net, of $50
million relating to U.S. tax legislation which is further discussed in Note 16
to the consolidated financial statements contained in Item 8. Financial
Statements and Supplementary Data.
Gross Profit Margin
The comparison of gross profit margins in 2021 and 2020 and the comparison of
gross profit margins in 2020 and 2019 reflected the following impacts:
                                                                        2021        2020
Gross profit margin % prior-year period                                44.3  %     47.9  %
Impact of purchase accounting adjustments and other specified items     2.7 

% (2.0) %

Operating performance                                                   0.2  %     (1.5) %
Foreign currency translation                                           (0.6) %     (0.1) %
Gross profit margin % current-year period                              46.6 

% 44.3 %

The impacts of other specified items on gross profit margin reflected the
following:
•The impacts in 2021 and 2020 includes net charges of $56 million and $244
million, respectively, to record estimated future costs within the Medication
Management Solutions unit associated with remediation efforts related to BD
AlarisTM infusion pumps. Based upon the course of our remediation efforts, our
estimate of these future costs may change over time.
•The impact in 2020 also includes $59 million of charges that were recorded to
write down the carrying value of certain fixed assets in the Medical and Life
Sciences segments, as discussed further above, and a $39 million charge to write
down the carrying value of certain intangible assets in the Biosciences unit.
Operating performance in 2021 and 2020 primarily reflected the following:
•Favorable product mix in 2021 was driven by the recovery of demand for products
with higher margins and the Integrated Diagnostic Solutions unit's COVID-19
testing sales. We re-invested over $200 million of the profits from these sales
into our BD 2025 strategy focus on growth, simplification and empowerment.
Unfavorable product mix in 2020 due to pandemic-related declines was partially
offset by the Integrated Diagnostic Solutions unit's sales related to COVID-19
testing.
•Operating performance in 2021 benefited from a favorable comparison to 2020
which was unfavorably impacted by increased levels of manufacturing overhead
costs that were recognized in the period
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because of the COVID-19 pandemic, rather than capitalized within inventory. The
higher levels of manufacturing overhead costs incurred in 2020 were driven, to a
large extent, by the impact of lower plant utilization in our highly automated
manufacturing sites.
•Operating performance in 2021 reflected approximately $93 million of excess and
obsolete inventory expenses related to COVID-19 testing inventory which were
recognized by the Integrated Diagnostic Solutions unit.
•Lower manufacturing costs resulting from continuous improvement projects and
synergy initiatives favorably impacted operating performance in 2021 and 2020.
This favorable impact was largely offset by higher raw material costs in 2021.
Operating Expenses
Operating expenses in 2021, 2020 and 2019 were as follows:
                                                                                                              Increase (decrease) in basis points
(Millions of dollars)                                2021              2020              2019            2021 vs. 2020                   2020 vs. 2019
Selling and administrative expense                $  4,867          $  4,325          $  4,332
% of revenues                                         24.0  %           25.3  %           25.1  %             (130)                             20

Research and development expense                  $  1,339          $  1,096          $  1,062
% of revenues                                          6.6  %            6.4  %            6.1  %               20                              30

Acquisitions and other restructurings             $    185          $    309          $    480

Other operating expense, net                      $    238          $    363          $    654



Selling and administrative
Selling and administrative expense as a percentage of revenues in 2021 was lower
compared with 2020 due to the recovery of revenues in 2021. Selling and
administrative expense as a percentage of revenues in 2021 was unfavorably
impacted by foreign currency translation and higher shipping costs as a result
of expedited shipments relating to COVID-19, as well as by higher selling,
travel and other administrative costs compared with 2020, which benefited from
cost containment measures enacted in response to the COVID-19 pandemic.
Slightly higher selling and administrative expense as a percentage of revenues
in 2020 compared with 2019 reflected the decline in revenues in 2020, higher
shipping costs as a result of expedited shipments relating to COVID-19, as well
as $25 million of funding for the BD Foundation. These unfavorable impacts were
partially offset by lower selling expenses and favorable foreign currency
translation. Selling and administrative spending in 2020 reflected a disciplined
spending and the achievement of cost synergies resulting from our acquisition of
Bard, as well as cost containment measures enacted to mitigate the impact of the
COVID-19 pandemic on our results of operations.
Research and development
Research and development expense as a percentage of revenues in 2021 was higher
compared with 2020 which reflected our reinvestment of COVID-19 testing-related
sales profits into our growth initiatives and additional investments in COVID-19
testing solutions, as further discussed above.
Research and development expense as a percentage of revenues in 2020 was higher
compared with 2019 primarily due to investments in compliance with emerging
regulations and investments in COVID-19 testing solutions, as further discussed
above. Spending in 2021, 2020 and 2019 reflected our continued commitment to
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invest in new products and platforms. As further discussed above, expenses in
2019 included certain write-down charges in the Surgery unit.
Acquisitions and other restructurings
Costs relating to acquisitions and other restructurings in 2021 and 2020
included integration costs incurred due to our acquisition of Bard in the first
quarter of fiscal year 2018. Costs in 2021 and 2020 additionally included
restructuring costs related to simplification and cost saving initiatives. Costs
relating to acquisition and other restructurings in 2020 and 2019 also included
restructuring costs relating to the Bard acquisition. For further disclosures
regarding the costs relating to restructurings, refer to Note 11 to the
consolidated financial statements contained in Item 8. Financial Statements and
Supplementary Data.
Other operating expense, net
Other operating expense in 2021, 2020 and 2019 included the following items
which are further discussed in the Notes to the consolidated financial
statements contained in Item 8. Financial Statements and Supplementary Data:
(Millions of dollars)                                       2021               2020              2019

Charges to record product liability reserves, including related defense costs (See Note 5)

$      361          $    378          $    914
Gains on sale-leaseback transactions (See Note 17)            (158)                -                 -
Separation and related costs (a)                                35                 -                 -
Gain recognized on sale of Advanced Bioprocessing
business (See Note 10)                                           -                 -              (336)

Charge to record the estimated cost of a product recall in the Medical segment

                                           -                 -                75
Other                                                            -               (15)                -
Other operating expense, net                            $      238

$ 363 $ 654

(a)Represents costs incurred for consulting, legal, tax and other advisory services associated with the planned spin-off of BD's Diabetes Care business.

Net Interest Expense

                    (Millions of dollars)     2021        2020        2019
                    Interest expense        $ (469)     $ (528)     $ (639)
                    Interest income              9           7          12
                    Net interest expense    $ (460)     $ (521)     $ (627)



Lower interest expense in 2021 and 2020 compared with the prior-year periods
reflected debt repayments and lower overall interest rates on debt outstanding
during 2021 and 2020. Additional disclosures regarding our financing
arrangements and debt instruments are provided in Note 15 to the consolidated
financial statements contained in Item 8. Financial Statements and Supplementary
Data.
Income Taxes
The income tax rates in 2021, 2020 and 2019 were as follows:
                                                            2021                  2020                   2019
Effective income tax rate                                       6.7  %               11.3  %                (4.8) %

Impact, in basis points, from specified items and tax
reform                                                         (470)                 (320)                (1,920)



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The effective income tax rate in 2021 reflected the impact of discrete tax
items, as well as an impact from specified items in 2021 that was more favorable
compared with the benefit associated with specified items in 2020. The impact
from specified items in 2020 was less favorable compared with the benefit
associated with specified items in 2019. The effective income tax rate in 2019
also reflected a favorable impact relating to the timing of certain discrete
items, as well as the recognition of $50 million of tax benefit recorded for the
impacts of U.S. tax legislation that was enacted in December 2017. For further
disclosures regarding our accounting for this U.S. tax legislation, refer to
Note 16 to the consolidated financial statements contained in Item 8. Financial
Statements and Supplementary Data.

Net Income and Diluted Earnings per Share Net Income and Diluted Earnings per Share in 2021, 2020 and 2019 were as follows:

                                                           2021         

2020 2019

     Net income (Millions of dollars)                    $ 2,092      $   

874 $ 1,233

     Diluted Earnings per Share                          $  6.85      $  

2.71 $ 3.94

     Unfavorable impact-specified items                  $ (6.22)     $ 

(7.49) $ (7.74)

Unfavorable impact-foreign currency translation $ (0.05) $ (0.15) $ (0.62)

Financial Instrument Market Risk
We selectively use financial instruments to manage market risk, primarily
foreign currency exchange risk and interest rate risk relating to our ongoing
business operations. The counterparties to these contracts are highly rated
financial institutions. We do not enter into financial instruments for trading
or speculative purposes.
Foreign Exchange Risk
BD and its subsidiaries transact business in various foreign currencies
throughout Europe, Greater Asia, Canada and Latin America. We face foreign
currency exposure from the effect of fluctuating exchange rates on payables and
receivables relating to transactions that are denominated in currencies other
than our functional currency. These payables and receivables primarily arise
from intercompany transactions. We hedge substantially all such exposures,
primarily through the use of forward contracts. We have also hedged the currency
exposure associated with investments in certain foreign subsidiaries with
instruments such as foreign currency-denominated debt and cross-currency swaps,
which are designated as net investment hedges, as well as currency exchange
contracts. We also face currency exposure that arises from translating the
results of our worldwide operations, including sales, to the U.S. dollar at
exchange rates that have fluctuated from the beginning of a reporting period. We
did not enter into contracts to hedge cash flows against these foreign currency
fluctuations in fiscal year 2021 or 2020.
Derivative financial instruments are recorded on our balance sheet at fair
value. For foreign currency derivatives, market risk is determined by
calculating the impact on fair value of an assumed change in foreign exchange
rates relative to the U.S. dollar. Fair values were estimated based upon
observable inputs, specifically spot currency rates and foreign currency prices
for similar assets and liabilities.
With respect to the foreign currency derivative instruments outstanding at
September 30, 2021 and 2020, the impact that changes in the U.S. dollar would
have on pre-tax earnings was estimated as follows:
                                                    Increase (decrease)
            (Millions of dollars)                     2021              2020
            10% appreciation in U.S. dollar   $      (66)              $ (52)
            10% depreciation in U.S. dollar   $       66               $  52


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These calculations do not reflect the impact of exchange gains or losses on the
underlying transactions that would substantially offset the results of the
derivative instruments.

Interest Rate Risk
When managing interest rate exposures, we strive to achieve an appropriate
balance between fixed and floating rate instruments. We may enter into interest
rate swaps to help maintain this balance and manage debt and interest-bearing
investments in tandem, since these items have an offsetting impact on interest
rate exposure. For interest rate derivative instruments, fair values are
measured based upon the present value of expected future cash flows using
market-based observable inputs including credit risk and interest rate yield
curves. Market risk for these instruments is determined by calculating the
impact to fair value of an assumed change in interest rates across all
maturities.
The impact that changes in interest rates would have on interest rate
derivatives outstanding at September 30, 2021 and 2020, as well as the effect
that changes in interest rates would have on our earnings or cash flows over a
one-year period, based upon our overall interest rate exposure, were estimated
as follows:
                                                 Increase (decrease) to fair value
                                                    of interest rate derivatives            Increase (decrease) to earnings or
                                                            outstanding                                 cash flows
(Millions of dollars)                                 2021                2020                  2021                   2020
10% increase in interest rates                   $         7          $       13          $         -             $         -
10% decrease in interest rates                   $        (7)         $      (14)         $         -             $         -



Liquidity and Capital Resources
Our strong financial position and cash flow performance have provided us with
the capacity to accelerate our innovation pipeline through investments in
research and development, as well as through strategic acquisitions. We believe
that our available cash and cash equivalents, our ability to generate operating
cash flow, and if needed, our access to borrowings from our financing facilities
provide us with sufficient liquidity to satisfy our foreseeable operating needs.
The following table summarizes our consolidated statement of cash flows in 2021,
2020 and 2019:
           (Millions of dollars)                  2021          2020          2019
           Net cash provided by (used for)
           Operating activities                $  4,647      $  3,539      $  3,330
           Investing activities                $ (1,880)     $ (1,232)     $   (741)
           Financing activities                $ (3,306)     $     22      $ (3,223)


Net Cash Flows from Operating Activities
Cash flows from operating activities in 2021 reflected higher net income, which
was driven by strong revenue performance, adjusted by a change in operating
assets and liabilities that was a net source of cash. This net source of cash
primarily reflected higher levels of accounts payable and accrued expenses,
partially offset by higher levels of prepaid expenses, inventory and trade
receivables. Cash flows from operating activities in 2021 additionally reflected
a $16 million discretionary cash contribution to fund our pension obligation.
Cash flows from operating activities in 2020 reflected net income, adjusted by a
change in operating assets and liabilities that was a net source of cash. This
net source of cash primarily reflected higher levels of accounts payable and
accrued expenses and lower levels of prepaid expenses, partially offset by
higher levels of inventory and trade receivables.
Cash flows from operating activities in 2019 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
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payable and accrued expenses and higher levels of inventory, partially offset by
lower levels of prepaid expenses. The lower levels of accounts payable and
accrued expenses were primarily attributable to cash paid related to income
taxes and our product liability matters, as well as the timing and amount of
interest payments due in the period. Cash flows from operating activities in
2019 additionally reflected $200 million of discretionary cash contributions to
fund our pension obligation.
Net Cash Flows from Investing Activities
Capital expenditures
Our investments in capital expenditures are focused on projects that enhance our
cost structure and manufacturing capabilities, and support our strategy of
geographic expansion with select investments in growing markets. Capital
expenditures of $1.231 billion, $810 million and $957 million in 2021, 2020 and
2019, respectively, primarily related to manufacturing capacity expansions.
Details of spending by segment are contained in Note 7 to the consolidated
financial statements contained in Item 8. Financial Statements and Supplementary
Data.
Acquisitions
Cash outflows for acquisitions in 2021 and 2020 included cash payments relating
to various strategic acquisitions we have executed as part of our growth
strategy, including our acquisition of Tepha, Inc. in the fourth quarter of 2021
and our acquisition of Straub Medical AG in the third quarter of 2020.
Divestitures
Cash inflows relating to divestitures in 2019 were $477 million. For further
discussion, refer to Note 10 to the consolidated financial statements contained
in Item 8. Financial Statements and Supplementary Data.
Net Cash Flows from Financing Activities
Net cash from financing activities in 2021, 2020 and 2019 included the following
significant cash flows:
     (Millions of dollars)                              2021          2020          2019
     Cash inflow (outflow)
     Change in credit facility borrowings            $      -      $   

(485) $ 485

Proceeds from long-term debt and term loans $ 4,869 $ 3,389

$ 2,224

     Payments of debt and term loans                 $ (5,112)     $ 

(4,664) $ (4,744)

     Proceeds from issuances of equity securities    $      -      $  2,917      $      -
     Share repurchases                               $ (1,750)     $      -      $      -
     Dividends paid                                  $ (1,048)     $ (1,026)     $   (984)



Additional disclosures regarding the equity and debt-related financing
activities detailed above are provided in Notes 3 and 15 to the consolidated
financial statements contained in Item 8. Financial Statements and Supplementary
Data.


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Debt-Related Activities

Certain measures relating to our total debt were as follows:

                                                     2021           2020    

2019

Total debt (Millions of dollars)                  $ 17,610       $ 17,931

$ 19,390

Short-term debt as a percentage of total debt 2.8 % 3.9 % 6.8 % Weighted average cost of total debt

                    2.4  %         2.8  

% 2.9 % Total debt as a percentage of total capital (a) 41.0 % 41.3 % 45.6 %

(a) Represents shareholders' equity, net non-current deferred income tax liabilities, and debt.

The decreases in our total debt at September 30, 2021 and September 30, 2020
reflected repayments and redemptions of certain notes, partially offset by
issuances of long-term notes in 2021 and 2020. Additional disclosures regarding
our debt instruments are provided in Note 15 to the consolidated financial
statements contained in Item 8. Financial Statements and Supplementary Data.
Cash and Short-term Investments
At September 30, 2021, total worldwide cash and equivalents and short-term
investments, including restricted cash, were $2.403 billion. These assets were
largely held in jurisdictions outside of 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
During the fourth quarter of fiscal year 2021, the Company refinanced its
five-year senior unsecured revolving credit facility that was to expire in
December 2022, with a new five-year senior unsecured revolving credit facility
that will expire in September 2026. The credit facility provides borrowings of
up to $2.75 billion, with separate sub-limits of $100 million for letters of
credit and swingline loans. The expiration date of the credit facility may be
extended for up to two additional one year periods, 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 $3.25 billion. Proceeds from this facility may be
used for general corporate purposes. There were no borrowings outstanding under
the revolving credit facility at September 30, 2021.
The agreement for our revolving credit facility contains the following financial
covenants. We were in compliance with these covenants, as applicable, as
of September 30, 2021.
•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 also have informal lines of credit outside the United States. We may, from
time to time, access the commercial paper market as we manage working capital
over the normal course of our business activities. We had no commercial paper
borrowings outstanding as of September 30, 2021. 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 14 to the consolidated financial
statements contained in Item 8. Financial Statements and Supplementary Data.
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Access to Capital and Credit Ratings
Our corporate credit ratings with the rating agencies Standard & Poor's Ratings
Services ("S&P"), Moody's Investor Service ("Moody's") and Fitch Ratings
("Fitch") were as follows at September 30, 2021:
                                               S&P          Moody's        Fitch
                 Ratings:
                 Senior Unsecured Debt         BBB           Baa3           BBB-
                 Commercial Paper              A-2            P-3
                 Outlook                      Stable       Positive       Positive



In January 2021, S&P affirmed our September 30, 2020 ratings and revised the
agency's outlook on our ratings to Stable from Negative. Also in January 2021,
Moody's upgraded our senior unsecured rating to Baa3 from Ba1, as well as our
commercial paper rating to P-3 from NP. Moody's also affirmed its positive
outlook on our ratings. In May 2021, Fitch affirmed our September 30, 2020
rating and revised its outlook on our ratings from Stable to Positive.
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.
Contractual Obligations
In the normal course of business, we enter into contracts and commitments that
obligate us to make payments in the future. Information regarding our
obligations under purchase, debt and lease arrangements are provided in Notes 5,
15 and 17, respectively, to the consolidated financial statements contained in
Item 8. Financial Statements and Supplementary Data.
Critical Accounting Policies
The following discussion supplements the descriptions of our accounting policies
contained in Note 1 to the consolidated financial statements contained in
Item 8. Financial Statements and Supplementary Data. The preparation of the
consolidated financial statements requires management to use estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses, as well as the disclosure of contingent assets and liabilities at
the date of the consolidated financial statements. Some of those judgments can
be subjective and complex and, consequently, actual results could differ from
those estimates. Management bases its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. For any given estimate or assumption made by
management, it is possible that other people applying reasonable judgment to the
same facts and circumstances could develop different estimates. Actual results
that differ from management's estimates could have an unfavorable effect on our
consolidated financial statements. Management believes the following critical
accounting policies reflect the more significant judgments and estimates used in
the preparation of the consolidated financial statements:
Revenue Recognition
Our revenues are primarily recognized when the customer obtains control of the
product sold, which is generally upon shipment or delivery, depending on the
delivery terms specified in the sales agreement.
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Revenues associated with certain instruments and equipment for which
installation is complex, and therefore significantly affects the customer's
ability to use and benefit from the product, are recognized when customer
acceptance of these installed products has been confirmed. For certain service
arrangements, including extended warranty and software maintenance contracts,
revenue is recognized ratably over the contract term. The majority of revenues
relating to extended warranty contracts associated with certain instruments and
equipment is generally recognized within a few years whereas deferred revenue
relating to software maintenance contracts is generally recognized over a longer
period.
Our agreements with customers within certain organizational units including
Medication Management Solutions, Integrated Diagnostic Solutions and
Biosciences, contain multiple performance obligations including both products
and certain services noted above. Determining whether products and services are
considered distinct performance obligations that should be accounted for
separately may require judgment. The transaction price for these agreements is
allocated to each performance obligation based upon its relative standalone
selling price. Standalone selling price is the amount at which we would sell a
promised good or service separately to a customer. We generally estimate
standalone selling prices using list prices and a consideration of typical
discounts offered to customers. The use of alternative estimates could result in
a different amount of revenue deferral.
Our gross revenues are subject to a variety of deductions, which include rebates
and sales discounts. These deductions represent estimates of the related
obligations and judgment is required when determining the impact on gross
revenues for a reporting period. Additional factors considered in the estimate
of our rebate liability include the quantification of inventory that is either
in stock at or in transit to our distributors, as well as the estimated lag time
between the sale of product and the payment of corresponding rebates.
Impairment of Assets
Goodwill assets are subject to impairment reviews at least annually, or whenever
indicators of impairment arise. Intangible assets with finite lives, including
developed technology, and other long-lived assets, are periodically reviewed for
impairment when impairment indicators are present.
We assess goodwill for impairment at the reporting unit level, which is defined
as an operating segment or one level below an operating segment, referred to as
a component. Our reporting units generally represent one level below reporting
segments. Our review of goodwill for each reporting unit compares the fair value
of the reporting unit, estimated using an income approach, with its carrying
value. Our annual goodwill impairment test performed on July 1, 2021 did not
result in any impairment charges, as the fair value of each reporting unit
exceeded its carrying value.
We generally use the income approach to derive the fair value for impairment
assessments. This approach calculates fair value by estimating future cash flows
attributable to the assets and then discounting these cash flows to a present
value using a risk-adjusted discount rate. We selected this method because we
believe the income approach most appropriately measures the value of our income
producing assets. This approach requires significant management judgment with
respect to future volume, revenue and expense growth rates, changes in working
capital use, appropriate discount rates, terminal values and other assumptions
and estimates. The estimates and assumptions used are consistent with BD's
business plans. The use of alternative estimates and assumptions could increase
or decrease the estimated fair value of the asset. Actual results may differ
from management's estimates.
Income Taxes
BD maintains valuation allowances where it is more likely than not that all or a
portion of a deferred tax asset will not be realized. Changes in valuation
allowances are included in our tax provision in the period of change. In
determining whether a valuation allowance is warranted, management evaluates
factors such as prior earnings history, expected future earnings, carry back and
carry forward periods, and tax strategies that could potentially enhance the
likelihood of realization of a deferred tax asset.
BD conducts business and files tax returns in numerous countries and currently
has tax audits in progress in a number of tax jurisdictions. In evaluating the
exposure associated with various tax filing positions, we
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record accruals for uncertain tax positions based on the technical support for
the positions, our past audit experience with similar situations, and the
potential interest and penalties related to the matters. BD's effective tax rate
in any given period could be impacted if, upon resolution with taxing
authorities, we prevailed in positions for which reserves have been established,
or we were required to pay amounts in excess of established reserves.
We have reviewed our needs in the United States for possible repatriation of
undistributed earnings of our foreign subsidiaries and we continue to invest
foreign subsidiaries earnings outside of the United States to fund foreign
investments or meet foreign working capital and property, plant and equipment
expenditure needs. As a result, we are permanently reinvested with respect to
all of our historical foreign earnings as of September 30, 2021. Additional
disclosures regarding our accounting for income taxes are provided in Note 16 to
the consolidated financial statements contained in Item 8. Financial Statements
and Supplementary Data.
Contingencies
We are involved, both as a plaintiff and a defendant, in various legal
proceedings that arise in the ordinary course of business, including, without
limitation, product liability and environmental matters, as further discussed in
Note 5 to the consolidated financial statements contained in Item 8. Financial
Statements and Supplementary Data. We assess the likelihood of any adverse
judgments or outcomes to these matters as well as potential ranges of probable
losses. We establish accruals to the extent probable future losses are estimable
(in the case of environmental matters, without considering possible third-party
recoveries). A determination of the amount of accruals for these contingencies
is made after careful analysis of each individual matter. When appropriate, the
accrual is developed with the consultation of outside counsel and, as in the
case of certain mass tort litigation, the expertise of an actuarial specialist
regarding the nature, timing and extent of each matter. The accruals may change
in the future due to new developments in each matter or changes in our
litigation strategy. We record expected recoveries from product liability
insurance carriers or other parties when realization of recovery is deemed
probable.
Given the uncertain nature of litigation generally, we are 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 we are a party. In view of these
uncertainties, we 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 BD's consolidated results of operations and
consolidated net cash flows.
Benefit Plans
We have significant net pension and other postretirement and postemployment
benefit obligations that are measured using actuarial valuations which include
assumptions for the discount rate and the expected return on plan assets. These
assumptions have a significant effect on the amounts reported. In addition to
the analysis below, see Note 9 to the consolidated financial statements
contained in Item 8. Financial Statements and Supplementary Data for additional
discussion.
The discount rate is selected each year based on investment grade bonds and
other factors as of the measurement date (September 30). Specifically for the
U.S. pension plan, we will use a discount rate of 2.89% for 2022, which was
based on an actuarially-determined, company-specific yield curve to measure
liabilities as of the measurement date. To calculate the pension expense in
2022, we will apply the individual spot rates along the yield curve that
correspond with the timing of each future cash outflow for benefit payments in
order to calculate interest cost and service cost. Additional disclosures
regarding the method to be used in calculating the interest cost and service
cost components of pension expense for 2022 are provided in Note 9 to the
consolidated financial statements contained in Item 8. Financial Statements and
Supplementary Data. The expected long-term rate of return on plan assets
assumption, although reviewed each year, changes less frequently due to the
long-term nature of the assumption. This assumption does not impact the
measurement of assets or liabilities as of the measurement date; rather, it is
used only in the calculation of pension expense. To determine the expected
long-term rate of return on pension plan assets, we consider many factors,
including our historical assumptions compared with actual results; benchmark
data; expected returns on various plan asset
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classes, as well as current and expected asset allocations. We will use a
long-term expected rate of return on plan assets assumption of 6.25% for the
U.S. pension plan in 2022. We believe our discount rate and expected long-term
rate of return on plan assets assumptions are appropriate based upon the above
factors.
Sensitivity to changes in key assumptions for our U.S. pension and other
postretirement and postemployment plans are as follows:
•Discount rate - A change of plus (minus) 25 basis points, with other
assumptions held constant, would have an estimated $6 million favorable
(unfavorable) impact on the total U.S. net pension and other postretirement and
postemployment benefit plan costs. This estimate assumes no change in the shape
or steepness of the company-specific yield curve used to plot the individual
spot rates that will be applied to the future cash outflows for future benefit
payments in order to calculate interest and service cost.
•Expected return on plan assets - A change of plus (minus) 25 basis points, with
other assumptions held constant, would have an estimated $5 million favorable
(unfavorable) impact on U.S. pension plan costs.
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 Securities
and Exchange Commission, 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, 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 this
report.
•Any impact of the COVID-19 pandemic on our business, including, without
limitation, decreases in the demand for our products or disruptions to our
operations or our supply chain, and factors such as the rate of vaccination, the
rate of infections and competitive factors could impact the demand and pricing
for our COVID-19 diagnostics testing.
•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.
•The risks associated with the proposed spin-off of our Diabetes Care business,
including factors that could delay, prevent or otherwise adversely affect the
completion, timing or terms of the spin-off, our ability to realize the expected
benefits of the spin-off, or the qualification of the spin-off as a tax-free
transaction for U.S. federal income tax purposes.
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•Competitive factors that could adversely affect our operations, including new
product introductions and technologies (for example, new forms of drug delivery)
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.
•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 our overall financial condition at such time.
•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 governments or 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.
•Cost containment efforts in the U.S. or in other countries in which we do
business, such as alternative payment reform and increased use of competitive
bidding and tenders, including, without limitation, any expansion of the
volume-based procurement process in China.
•Changes in the domestic and foreign healthcare industry or in medical practices
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 impact of changes in U.S. federal laws and policies that could affect
fiscal and tax policies, healthcare and international trade, including import
and export regulation and international trade agreements. In particular, tariffs
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.
•Increases in operating costs, including fluctuations in the cost and
availability of oil-based resins and other raw materials, as well as certain
components, used in our products, including any disruptions in the global supply
chain of raw materials and components, inflationary pricing pressure, labor
shortages or increased labor costs, the ability to maintain favorable supplier
and service arrangements and relationships (particularly with respect to
sole-source suppliers and sterilization services), and the potential adverse
effects of any disruption in the availability of such items and services.
•Security breaches of our information 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, 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 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
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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 or divestitures, 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
make necessary infrastructure enhancements to production facilities and
distribution networks.
•Conditions in international markets, including social and political conditions,
civil unrest, terrorist activity, governmental changes, restrictions on the
ability to transfer capital across borders, tariffs and other protectionist
measures, 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 laws, as well as regulatory and privacy
laws.
•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 climate change, weather, regulatory or other events that
adversely impact our supply chain, including our ability to manufacture 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.
•Natural disasters, including the impacts of climate change, 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, or adversely affecting our manufacturing and distribution capabilities
or causing 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 and vena cava filter products), 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 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 post-marketing phase. In particular, the U.S. and
other countries may impose new requirements
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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
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 and product liability 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. We are undertaking certain remediation of our
BD AlarisTM System, and are currently shipping the product in the U.S., only in
cases of medical necessity and to remediate recalled software versions. We will
not be able to fully resume commercial operations for the BD Alaris System in
the U.S. until a 510(k) submission relating to the product has been cleared by
the FDA. No assurances can be given as to when or if clearance will be obtained
from the FDA.
•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.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.
The information required by this item is included in Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations, and in
Notes 1, 14 and 15 to the consolidated financial statements contained in Item 8.
Financial Statements and Supplementary Data, and is incorporated herein by
reference.

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