Becton Dickinson and : & 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: Europe, EMA (which
includes the Commonwealth of Independent States, the Middle East and Africa);
Greater Asia (which includes countries in Greater China, Japan, South Asia,
Southeast Asia, Korea, and 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 current phase
of value creation, is anchored in three key pillars: grow, simplify and empower.
BD's management team aligns our operations 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 will result in category innovation
and 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;
•Driving an efficient capital structure and strong shareholder returns.
Simplify
•Working across our supply chain to minimize environmental impacts;
•Creating more resilient operations based on an enterprise-wide renewable energy
strategy;
•Reducing complexity across our manufacturing network and rationalizing our
product portfolio;
•Enhancing our quality and risk management systems;
•Simplifying our internal business processes;
•Focusing on cash and expense management in order to improve operating
effectiveness and balance sheet productivity.

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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 quarterly
forecast data, monthly actual results, 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.
COVID-19 Pandemic Impacts and Response
A novel strain of coronavirus disease ("COVID-19") was officially declared a
pandemic by the World Health Organization ("WHO") in March 2020. In efforts to
slow and control the spread of COVID-19, governments around the world issued
stay at home orders, travel restrictions as well as recommendations or mandates
to avoid large gatherings or to self-quarantine. Many governments also
instituted restrictions on certain businesses and their activities, particularly
those that were deemed non-essential. These various measures led to a sudden and
significant decline in economic activity within a number of countries worldwide.
Although the global economy has shown signs of recovery, current economic data
indicates that full recovery has stalled in some major economies. As further
discussed below, disruptions resulting from the ongoing COVID-19 pandemic
unfavorably impacted our results of operations in fiscal year 2020. While
certain of our organizational units realized positive benefits to revenues from
the pandemic, total consolidated revenues in 2020 were unfavorably impacted by
an estimated net $600 million.
Our financial position has remained strong and we continue to generate operating
cash flows that are sufficient to meet our short-term liquidity needs. We also
further secured our financial flexibility during the economic downturn by
increasing the commitments available under our revolving credit facility by $381
million and issuing $3.0 billion of equity securities. Our fiscal year 2020 debt
and equity transactions are further discussed in Notes 3 and 16 to the
consolidated financial statements contained in Item 8. Financial Statements and
Supplementary Data. We believe that given our debt ratings and our capital
allocation strategy, we would have access to additional short-term and long-term
capital should the need arise. We have not observed any impairments of our
assets due to the COVID-19 pandemic and its adverse impact on global economic
activity in 2020.
As noted above, due to government restrictions and a shift in healthcare
priorities, there was a significant decline in medical procedures that resulted
in weakened demand for our products in our fiscal year 2020. A decline in
procedure volumes across acute and non-acute settings led to a decline in demand
for general medical devices. We also saw a deferral in elective procedures and
delays in instrument placements relating to our medication management solutions,
including Pyxis™. There was also a decrease in routine diagnostic testing and
specimen collections, which was offset by demand for COVID-19 testing.
Additionally, there was a decrease in research activity due to laboratory
closures, delays in clinical trial enrollment and reduced clinical testing.
During the last half of our fiscal year 2020, we noted moderate recovery in the
demand for certain products, including those products that are driven by the
volume of elective procedures. However, demand for our products has not yet
fully recovered and due to the continued, 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, will be subject to
volatility. The ultimate impact of the COVID-19 pandemic on our business,
results of operations, financial condition and cash flows is dependent on future
developments, which are uncertain at this time, including:
•The preparedness and effectiveness of countries around the world in preventing
or responding to the ongoing spread of COVID-19, or in countries where the
spread has been controlled, any resurgence of the virus;
•The degree to which COVID-19 testing solutions continue to be made available
and are utilized by governments, healthcare providers and institutions, retail
pharmacies and the general public;
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•The pace at which hospitals and clinical laboratories fully resume patient care
that is not related to the COVID-19 pandemic;
•The timing of when research performed by research laboratories and institutions
will resume to normal operations; and
•The timing and strength of any global economic recovery and the degree of
pressure that the weaker macroeconomic environment will put on future healthcare
utilization and the global demand for our products.

As part of our overall response to the COVID-19 pandemic, we have deployed our
capabilities, expertise and scale to address critical health needs related to
COVID-19 as follows:
•Our COVID-19 antigen detection test that can provide results in 15 minutes
using a simple nasal swab and our portable BD VeritorTM Plus System was approved
for Emergency Use Authorization by the U.S. Food and Drug Administration ("FDA")
and received the CE marking for use in the European Union.
•In addition to this immunoassay test, BD's portfolio of molecular solutions for
COVID-19 testing includes three other tests that have been registered for use
with our BD MaxTM molecular system.
•We have leveraged our category leading position as a manufacturer of needles
and syringes to enter into partnerships with governments around the world to
help prepare for a future COVID-19 vaccination campaign.

Additionally, we have been adhering to guidance provided by the WHO, as well as
by health officials in various countries affected by the COVID-19 pandemic, to
protect the health and safety of BD employees while ensuring continued
availability of BD's critical medical devices and technologies at this
unprecedented time. We have worked closely with governmental officials to keep
our manufacturing facilities (and those of our suppliers) open due to the
essential nature of our products. Due to our enactment of business continuity
plans, we have not experienced any significant disruption to our operations and
supply chain to date. We also enacted certain cost containment measures to
mitigate the unfavorable impact of the COVID-19 pandemic on our results of
operations. Such actions have included travel restrictions, temporary reductions
in executive compensation, a temporary suspension of matching contributions to
certain voluntary defined contribution and other benefit plans, as well as
temporary work reductions for certain manufacturing teams.
Further discussion regarding the impacts of the COVID-19 pandemic on our results
in 2020 is provided below.
Summary of Financial Results
Worldwide revenues in 2020 of $17.117 billion decreased 1.0% from the prior-year
period. This decrease reflected unfavorable impacts from foreign currency
translation and price of approximately 1.0% and 0.2%, respectively. Volume
increased by approximately 0.2%. We estimate that the COVID-19 pandemic reduced
volume growth in 2020 by approximately 3.3%. Volume in 2020 reflected the
following:
•The Medical segment's revenues in 2020 reflected declines in the Medication
Delivery Solutions, Medication Management Solutions and Diabetes Care units that
were partially offset by growth in the Pharmaceutical Systems unit.
•The Life Sciences segment's revenues in 2020 reflected growth that was driven
by the Integrated Diagnostic Solutions unit's sales related to COVID-19
diagnostic testing on the BD VeritorTM Plus and BD MaxTM Systems.
•Interventional segment revenues in 2020 were negatively impacted by decreased
demand associated with the deferral of elective medical procedures as a result
of the COVID-19 pandemic.

We continue to invest in research and development, geographic expansion, and new
product market programs to drive further revenue and profit growth. Our ability
to sustain our long-term growth will depend on a number of factors, including
our ability to expand our core business (including geographical expansion),
develop innovative new products, and continue to improve operating efficiency
and organizational effectiveness. As discussed above, current global economic
conditions are highly volatile due to the COVID-19 pandemic. In addition,
pricing pressure exists globally which could adversely impact our businesses.
As noted above, our financial position remains strong, with cash flows from
operating activities totaling $3.539 billion in 2020. At September 30, 2020, we
had $2.937 billion in cash and equivalents and short-term investments, including
restricted cash. We continued to return value to our shareholders in the form of
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dividends. During fiscal year 2020, we paid cash dividends of $1.026 billion,
including $888 million paid to common shareholders and $137 million paid to
preferred shareholders.

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 stronger U.S. dollar in
2020, compared with 2019, resulted in an unfavorable foreign currency
translation impact to our revenues and earnings during 2020.  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:
                                                                                                     2020 vs. 2019                                                   2019 vs. 2018
                                                                                                    Estimated                                                       Estimated
                                                                                  Total                 FX                                        Total                 FX
(Millions of dollars)          2020             2019             2018            Change               Impact               FXN Change            Change

              Impact               FXN Change
Medication Delivery
Solutions (a)               $ 3,555          $ 3,848          $ 3,627              (7.6) %                (1.4) %                (6.2) %            6.1  %                (2.7) %                 8.8  %
Medication Management
Solutions (a)                 2,454            2,640            2,487              (7.1) %                (0.5) %                (6.6) %            6.2  %                (1.0) %                 7.2  %
Diabetes Care                 1,084            1,110            1,105              (2.4) %                (1.4) %                (1.0) %            0.5  %                (2.4) %                 2.9  %
Pharmaceutical Systems        1,588            1,465            1,397               8.4  %                (1.0) %                 9.4  %            4.8  %                (3.4) %                 8.2  %
Total Medical revenues      $ 8,680          $ 9,064          $ 8,616              (4.2) %                (1.0) %                (3.2) %            5.2  %                (2.3) %                 7.5  %



(a)The presentation of amounts in 2019 and 2018 reflects the reclassification of
$11 million and $17 million, respectively, associated with the movement of
certain products from the Medication Delivery Solutions unit to the Medication
Management Solutions unit, which was effective on October 1, 2019.

The Medical segment's revenues in 2020 reflected declines in the Medication
Delivery Solutions, Medication Management Solutions and Diabetes Care units that
were partially offset by growth in the Pharmaceutical Systems unit. 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 new volume-based procurement process which has been
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. We continue to make progress on our
regulatory filing related to the BD AlarisTM infusion pumps and we currently
expect the filing to be made with the FDA either at the end of the second
quarter or early in the third quarter of BD's fiscal
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year 2021. Fiscal year 2020 revenues in the Diabetes Care unit were unfavorably
impacted by pricing pressures in the United States. The Pharmaceutical Systems
unit's revenues in 2020 reflected continued strength in demand for prefillable
products.
The Medical segment's revenues in 2019 were favorably impacted by the inclusion
of revenues associated with certain C.R. Bard, Inc. ("Bard") products within the
Medication Delivery Solutions unit in the first quarter of fiscal year 2019 but
not in the first quarter of the prior-year period as operating activities of
Bard, which was acquired on December 29, 2017, were not included in our
consolidated results of operations until January 1, 2018. The Medication
Delivery Solution unit's 2019 revenues also reflected strong growth in global
sales of vascular access devices. The Medication Management Solutions unit's
revenues in 2019 reflected sales growth attributable to the installations of
infusion and dispensing systems, as well as growth in sales of disposables. The
Pharmaceutical Systems unit's 2019 revenue growth was driven by sales of
prefillable products and self-injection systems. Strength in the Diabetes Care
unit's sales of pen needles in emerging markets was partially offset by lower
growth in U.S. sales.
Medical segment operating income was as follows:
  (Millions of dollars)                                    2020          

2019 2018

  Medical segment operating income                      $ 2,274       $ 

2,824 $ 2,624

Segment operating income as % of Medical revenues 26.2 % 31.2 % 30.5 %

As discussed in greater detail below, the Medical segment's operating income in
2020 was primarily driven by a decline in gross profit margin. Operating income
in 2019 was driven by improved gross profit margin and operating expense
performance.
•The Medical segment's gross profit margin in 2020 was lower compared with 2019
which reflected a charge to record a probable estimate of future costs
associated with incremental remediation efforts relating to BD AlarisTM infusion
pumps. Gross profit margin in 2020 also reflected unfavorable product mix and
increased levels of manufacturing overhead costs that were recognized in the
period, rather than capitalized within inventory, as a result of the COVID-19
pandemic. Unfavorable product mix in 2020 was also driven by the decline of
sales in China due to the volume-based procurement process noted above. Gross
profit margin in 2020 was also lower due to 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. These
unfavorable impacts were partially offset by lower manufacturing costs resulting
from continuous improvement projects which enhanced the efficiency of our
operations. The Medical segment's gross profit margin in 2019 was higher as
compared with 2018 primarily due to lower manufacturing costs resulting from
continuous improvement projects which enhanced the efficiency of our operations.
Additionally, the comparison of gross profit margin in 2019 with gross profit
margin in 2018 reflected the unfavorable impacts in 2018 of a fair value step-up
adjustment relating to Bard's inventory on the acquisition date and charges to
write down the value of fixed assets, primarily in the Diabetes Care unit. These
favorable impacts to the Medical segment's gross margin in 2019 were partially
offset by unfavorable foreign currency translation, higher raw material costs
and pricing pressures.
•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. Selling and administrative expense as a percentage of
revenues in 2019 was relatively flat compared with 2018.
•Research and development expense as a percentage of revenues was higher in 2020
which reflected the decline in revenues in 2020, as well as our continued
commitment to drive innovation with new products and platforms. Research and
development expense as a percentage of revenues was lower in 2019 compared with
2018 due to recent completion of projects and the timing of project spending.
•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.
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Life Sciences Segment
The following summarizes Life Sciences revenues by organizational unit:
                                                                                                    2020 vs. 2019                                                 2019 vs. 2018
                                                                                                   Estimated                                                     Estimated
                                                                                 Total                FX                                       Total                 FX
 (Millions of dollars)         2020             2019             2018            Change             Impact               FXN Change            Change  

           Impact               FXN Change
Integrated Diagnostic
Solutions (a)
Preanalytical Systems       $ 1,487          $ 1,558          $ 1,553             (4.6) %               (1.5) %                (3.1) %           0.3  %                (3.0) %                 3.3  %
Diagnostic Systems          $ 2,045          $ 1,547          $ 1,536             32.1  %               (1.3) %                33.4  %           0.7  %                (2.6) %                 3.3  %
Total Integrated Diagnostic
Solutions                   $ 3,532          $ 3,106          $ 3,089             13.7  %               (1.4) %                15.1  %           0.5  %                (2.8) %                 3.3  %
Biosciences                 $ 1,143          $ 1,194          $ 1,241             (4.3) %               (0.8) %                (3.5) %          (3.8) %                (2.2) %                (1.6) %
Total Life Sciences
revenues                    $ 4,675          $ 4,300          $ 4,330              8.7  %               (1.2) %                 9.9  %          (0.7) %                (2.6) %                 1.9  %



(a)Effective October 1, 2019, the Life Sciences segment's former Preanalytical
Systems and Diagnostic Systems units were joined to create the new Integrated
Diagnostic Solutions unit. Additional disclosures regarding this change are
provided in Note 7 to the consolidated financial statements contained in Item 8.
Financial Statements and Supplementary Data.

The Life Sciences segment's revenue growth in 2020 was driven by the Integrated
Diagnostic Solutions unit's sales 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.
The Life Sciences segment's revenues in 2019 reflected continued strength in
sales of the Preanalytical Systems unit's sales of core products in emerging
markets. The Diagnostic Systems unit's 2019 revenues reflected growth in its
BD MAXTM molecular platform as well as growth in sales of core microbiology
products. This sales growth in the Diagnostic Systems unit was partially offset
by an unfavorable comparison of the unit's U.S. revenues in 2019 to revenues in
2018, as the prior-year period benefited from a more severe influenza season.
Revenues in the Biosciences unit in 2019 reflected growth in research reagent
sales, as well as growth in U.S. research instrument sales, but were unfavorably
impacted by the unit's divestiture of the Advanced Bioprocessing business. The
Biosciences unit's results for 2018 included revenues associated with the
Advanced Bioprocessing business of $106 million.
Life Sciences segment operating income was as follows:
(Millions of dollars)                               2020                2019                2018

Life Sciences segment operating income $ 1,405 $ 1,248 $ 1,207

Segment operating income as % of Life Sciences
revenues                                              30.0  %             29.0  %             27.9  %



As discussed in greater detail below, the Life Sciences segment's operating
income in 2020 reflected improved operating expense performance, partially
offset by a decline in gross profit margin. Operating income in 2019 was driven
by improved gross profit margin and operating expense performance.
•The Life Sciences segment's gross profit margin as a percentage of revenues in
fiscal year 2020 was lower compared with the 2019 which primarily reflected
unfavorable product mix and increased levels of manufacturing overhead costs
that were recognized in the period, rather than capitalized within
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inventory, as a result of the COVID-19 pandemic. Gross margin in 2020 was also
unfavorably impacted by a charge of $39 million recorded to write down the
carrying value of certain intangible assets in the Biosciences unit and charges
of $17 million recorded to write down fixed assets in the Integrated Diagnostic
Solutions unit. These unfavorable impacts were partially offset by a favorable
impact on product mix from the Integrated Diagnostic Solutions unit's sales
related to COVID-19 testing. The Life Sciences segment's gross profit margin as
a percentage of revenues in fiscal year 2019 was relatively flat compared with
gross margin in 2018. Gross margin in 2019 was favorably impacted by lower
manufacturing costs resulting from continuous improvement projects which
enhanced the efficiency of our operations, as well as by the unfavorable
prior-year impact of the Biosciences unit's write-down of certain intangible and
other assets. These favorable impacts to gross margin in 2019 were offset by
unfavorable foreign currency translation and higher raw material costs.
•Selling and administrative expense as a 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 the result of expense
synergies realized from the combination of the Preanalytical Systems and
Diagnostic Systems units, as noted above, and lower expenses resulting from cost
containment measures. Selling and administrative expense as a percentage of Life
Sciences revenues in 2019 was lower compared to 2018 primarily due to reduced
general and administrative spending.
•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.
Research and development expense as a percentage of revenues in 2019 was lower
compared with 2018 primarily due to the Biosciences unit's recognition of
write-downs in the prior-year period and also due to the timing of project
spending.
Interventional Segment
The following summarizes Interventional revenues by organizational unit:
                                                                                                     2020 vs. 2019                                                 2019 vs. 2018
                                                                                                    Estimated                                                     Estimated
                                                                                  Total                FX                                       Total                FX
 (Millions of dollars)          2020             2019             2018            Change             Impact               FXN Change            Change 

           Impact               FXN Change
Surgery (a)                  $ 1,121          $ 1,242          $ 1,022             (9.7) %               (0.3) %                (9.4) %          21.5  %               (1.2) %                22.7  %
Peripheral Intervention (a)    1,511            1,574            1,239             (4.0) %               (0.9) %                (3.1) %          27.1  %               (2.6) %                29.7  %
Urology and Critical Care
(a)                            1,130            1,110              777              1.8  %               (0.2) %                 2.0  %          43.0  %               (1.4) %                44.4  %
Total Interventional
revenues                     $ 3,762          $ 3,926          $ 3,037             (4.2) %               (0.5) %                (3.7) %          29.3  %               (1.8) %                31.1  %



(a)The presentation of amounts in 2019 and 2018 reflects the reclassification of
$185 million and $194 million, respectively, associated with the movement of
certain products from the Surgery unit and the Urology and Critical Care unit to
the Peripheral Intervention unit, which was effective on October 1, 2019.
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.
The Interventional segment's revenues in 2019 were favorably impacted by the
inclusion of revenues associated with Bard's products in the segment's results
for the first quarter of fiscal year 2019, as noted above. Interventional
segment revenues in 2019 also reflected growth in the Urology and Critical Care
unit's sales of acute urology products and sales by the unit's home care and
targeted temperature management businesses. Fiscal year 2019 revenues in the
Surgery unit reflected growth in sales of the unit's biosurgery and infection
prevention products. The Peripheral Intervention unit's 2019 revenues reflected
growth in emerging
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market sales. This growth was partially offset by an unfavorable impact related
to a letter issued in March 2019 by the FDA to healthcare professionals
regarding the use of paclitaxel-coated devices in the treatment of peripheral
artery disease, which impacted sales of our drug-coated balloon products.
Interventional segment operating income was as follows:
  (Millions of dollars)                                         2020        

2019 2018

  Interventional segment operating income                     $ 724       $ 

903 $ 306

Segment operating income as % of Interventional revenues 19.2 % 23.0 % 10.1 %

As discussed in greater detail below, the Interventional segment's operating
income in 2020 was primarily driven by a decline in gross profit margin.
Operating income in 2019 was driven by improved gross profit margin and
operating expense performance.
•Gross profit margin was lower in 2020 as compared with 2019 primarily due to
unfavorable product mix and increased levels of manufacturing overhead costs
that were recognized in the period, rather than capitalized within inventory, as
a result of the COVID-19 pandemic. Gross profit margin was higher in 2019 as
compared with 2018 primarily due to the unfavorable prior-year impact of
recognizing a fair value step-up adjustment relating to Bard's inventory on the
acquisition date and lower manufacturing costs resulting from continuous
improvement projects, which enhanced the efficiency of our operations, and
synergy initiatives. These favorable impacts to the Interventional segment's
gross margin were partially offset by unfavorable product mix and unfavorable
foreign currency translation.
•Selling and administrative expense as a percentage of revenues in 2020 was
lower compared with 2019 primarily due to lower expenses resulting from cost
containment measures. Selling and administrative expense as a percentage of
revenues in 2019 was relatively flat compared with 2018.
•Lower research and development expense as a percentage of revenues in 2020 as
compared with 2019 primarily reflected the prior-period impact of a write-down
recorded by the Surgery unit. This write-down drove higher research and
development expense as a percentage of revenues in 2019 as compared with 2018.
•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:
                                                                                                      2020 vs. 2019                                                   2019 vs. 2018
                                                                                                     Estimated                                                       Estimated
                                                                                   Total                 FX                                        Total                FX
(Millions of dollars)        2020              2019              2018             Change               Impact               FXN Change            Change              Impact               FXN Change
United States             $  9,716          $  9,730          $  8,768              (0.1) %                   -                   (0.1) %           11.0  %                  -                    11.0  %
International                7,401             7,560             7,215              (2.1) %                (2.2) %                 0.1  %            4.8  %               (5.0) %                  9.8  %
Total revenues            $ 17,117          $ 17,290          $ 15,983              (1.0) %                (1.0) %                   -  %            8.2  %               (2.3) %                 10.5  %



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.
U.S. revenues in 2019 reflected growth in all three segments. U.S. revenues in
2019 were favorably impacted by the inclusion of revenues associated with Bard's
products in results for the first quarter of fiscal year 2019, as noted above.
Revenue growth in 2019 was also attributable to sales in the Medical segment's
Medication Management Solutions unit as well as to sales in the Interventional
segment's Urology and Critical Care and Surgery units. U.S. revenue growth in
2019 was unfavorably impacted by results in the Medical
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segment's Diabetes Care unit, the Life Sciences segment's Diagnostic Systems
unit and the Interventional segment's Peripheral Intervention unit, as
previously noted in the discussions 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.
International revenue growth in 2019 reflected growth in all three segments.
International revenues in 2019 were favorably impacted by the inclusion of
revenues associated with Bard's products in results for the first quarter of
fiscal year 2019, as noted above. Fiscal year 2019 international revenue growth
was also driven by sales in the Medical segment's Medication Delivery Solutions
and Pharmaceutical Systems units as well as by sales in the Life Sciences
segment's Diagnostic Systems and Preanalytical Systems units.
  Emerging market revenues were $2.42 billion, $2.71 billion and $2.53 billion
in 2020, 2019 and 2018, respectively. Foreign currency translation unfavorably
impacted emerging market revenues in 2020 and 2019 by an estimated $100 million
and $155 million, respectively. 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, revenues in our Medication
Delivery Solutions unit were also unfavorably impacted by a new volume-based
procurement process which has been 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. Emerging market revenue
growth in 2019 was favorably impacted by the inclusion of revenues associated
with Bard's products in our results for the first quarter of fiscal year 2019,
as noted above. Underlying growth in 2019 was particularly driven by sales in
China and EMA.
Specified Items
Reflected in the financial results for 2020, 2019 and 2018 were the following
specified items:
(Millions of dollars)                                          2020              2019              2018
Integration costs (a)                                       $    214          $    323          $    344
Restructuring costs (a)                                           95               180               344
Transaction costs (a)                                              1                 1                56
Financing costs (b)                                                -                 -                49
Purchase accounting adjustments (c)                            1,356             1,499             1,733

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

                                                      631               646                 -
Investment gains/losses and asset impairments (e)                100                17              (151)
European regulatory initiative-related costs (f)                 106                51                 -
Impacts of debt extinguishment                                     8                54                16
Hurricane recovery-related impacts                                 -               (24)               17

Total specified items                                          2,510             2,749             2,409
Less: tax impact of specified items and tax reform (g)           395               622              (265)
After-tax impact of specified items                         $  2,114

$ 2,127 $ 2,674

(a)Represents integration, restructuring and transaction costs, recorded
in Acquisitions and other restructurings, which are further discussed below.
(b)Represents financing impacts associated with the Bard acquisition, which were
recorded in Interest income and Interest expense.
(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. The amount in 2018 also included fair value step-up
adjustments of $478 million relating to Bard's inventory on the acquisition
date.
(d)Includes amounts recorded to Other operating expense, net to record product
liability reserves, including related legal defense costs, as further discussed
below. The amount in 2020 also includes net charges, which were recorded to Cost
of products sold and Other income, net, related to the estimates of probable
future product remediation costs. Additional items recorded to Other operating
expense, net in
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2019 included the estimated cumulative costs of a product recall, as well as the
pre-tax gain related to BD's sale of its Advanced Bioprocessing business.
(e)The amounts in 2020, 2019 and 2018 included total charges of $98 million, $30
million and $139 million, respectively, recorded in Cost of products sold and
Research and development expense to write down the carrying value of certain
assets, as previously noted in the segment operating income discussions above.
The amount in 2019 also included an unrealized gain of $13 million recorded
within Other income, net relating to an investment. The amount in 2018 also
included a net income amount of $303 million recorded to Other income,
net related to BD's sale of its non-controlling interest in Vyaire Medical.
(f)Represents costs required to develop processes and systems to comply with
emerging 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 amounts in 2019 and 2018 included additional tax (benefit) expense, net,
of $(50) million and $640 million, respectively relating to new U.S. tax
legislation which is further discussed in Note 17 to the consolidated financial
statements contained in Item 8. Financial Statements and Supplementary Data.
Gross Profit Margin
The comparison of gross profit margins in 2020 and 2019 and the comparison of
gross profit margins in 2019 and 2018 reflected the following impacts:
                                                                            2020                    2019
Gross profit margin % prior-year period                                         47.9  %                 45.5  %
Impact of purchase accounting adjustments, asset write-downs and
other specified items                                                           (2.0) %                  2.9  %

Operating performance                                                           (1.5) %                  0.1  %
Foreign currency translation                                                    (0.1) %                 (0.6) %
Gross profit margin % current-year period                                       44.3  %                 47.9  %



The impacts of purchase accounting adjustments and other specified items include
the following:
•The impact in 2020 includes a net full-year charge of $244 million to record a
probable estimate of future costs within the Medication Management Solutions
unit associated with remediation efforts related to BD AlarisTM infusion pumps.
Based on the course of our remediation efforts, it is possible that this
estimate could change over time. Any remediation actions will continue to be
guided by our proactive commitment to patient safety and we will work closely
with our customers to minimize the disruption of patient care.
•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.
•The impact of purchase accounting adjustments and other specified items in 2019
was favorable due to a comparison to 2018, which included the recognition of
fair value step-up adjustments relating to Bard's inventory on the acquisition
date, as well as write-downs of certain assets in the Biosciences and Diabetes
Care units in 2018 as further discussed above.
Operating performance in 2020 primarily reflected unfavorable product mix and
increased levels of manufacturing overhead costs that were recognized in the
period, rather than capitalized within inventory, as a result of the COVID-19
pandemic. The higher levels of manufacturing overhead costs incurred in the
current-year periods were driven, to a large extent, by the impact of lower
plant utilization in our highly automated manufacturing sites. These unfavorable
impacts to operating performance were partially offset by the favorable impact
on product mix from the Integrated Diagnostic Solutions unit's sales related to
COVID-19 testing, as further discussed above, as well as by lower manufacturing
costs resulting from continuous operations improvement projects and synergy
initiatives.
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The operating performance impact in 2019 reflected lower manufacturing costs
resulting from the continuous improvement projects and synergy initiatives, as
well as the favorable impact of Bard on product mix. Operating performance in
2019 was unfavorably impacted by higher raw material costs and unfavorable
product mix.
Operating Expenses
Operating expenses in 2020, 2019 and 2018 were as follows:
                                                                                                              Increase (decrease) in basis points
(Millions of dollars)                                2020              2019              2018            2020 vs. 2019                   2019 vs. 2018
Selling and administrative expense                $  4,325          $  4,332          $  4,016
% of revenues                                         25.3  %           25.1  %           25.1  %               20                               -

Research and development expense                  $  1,096          $  1,062          $  1,004
% of revenues                                          6.4  %            6.1  %            6.3  %               30                             (20)

Acquisitions and other restructurings             $    309          $    480          $    740

Other operating expense, net                      $    363          $    654          $      -



Selling and administrative
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 our ongoing
focus on disciplined spending and the achievement of cost synergies resulting
from our acquisition of Bard, as well as cost containment measures we enacted to
mitigate the impact of the COVID-19 pandemic on our results of operations.
Selling and administrative expense as a percentage of revenues in 2019 was flat
compared with 2018 as higher revenues and the achievement of cost synergies
offset the impact of higher selling and general administrative costs
attributable to Bard, which had a higher selling and administrative spending
profile than BD, in our results for the first quarter of fiscal year 2019, as
noted above.
Research and development
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. Research and development expense as a percentage of revenues in 2019 was
relatively flat compared with 2018. Spending in 2020, 2019 and 2018 reflected
our continued commitment to invest in new products and platforms. As further
discussed above, expenses in 2019 included certain write-down charges in the
Surgery unit and expenses in 2018 included write-down charges in the Biosciences
unit.
Acquisitions and other restructurings
Costs relating to acquisitions and other restructurings in 2020 and 2019 largely
represented integration and restructuring costs incurred due to our acquisition
of Bard in the first quarter of fiscal year 2018. Restructuring costs in 2020
also included costs related to simplification and other cost saving initiatives.
Costs relating to acquisitions and other restructurings in 2018 also included
integration and restructuring costs related to our fiscal year 2015 CareFusion
acquisition and portfolio rationalization initiatives. For further disclosures
regarding the costs relating to acquisitions and other restructurings, refer to
Notes 10 and 12 to the consolidated financial statements contained in Item 8.
Financial Statements and Supplementary Data.
Other operating expense, net
Other operating expense in 2020 primarily represents charges of $378 million to
record product liability reserves, including related legal defense costs. Net
other operating expense in 2019 included charges of approximately $914
million relating to product liability matters, a charge to record the estimated
cost of $75
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million relating to a product recall in the Medical segment, as further
discussed above, and a pre-tax gain of $336 million recognized on BD's sale of
its Advanced Bioprocessing business. Additional disclosures regarding the
product liability matters and divestiture transaction are provided in Notes 5
and 11, respectively, to the consolidated financial statements contained in
Item 8. Financial Statements and Supplementary Data.

Net Interest Expense

                    (Millions of dollars)     2020        2019        2018
                    Interest expense        $ (528)     $ (639)     $ (706)
                    Interest income              7          12          65
                    Net interest expense    $ (521)     $ (627)     $ (641)



Lower interest expense in 2020 and 2019 compared with the prior-year periods
reflected debt repayments during fiscal year 2019, as well as lower overall
interest rates on debt outstanding as a result of refinancing activities. The
decrease in interest expense in 2019 compared with 2018 also reflected higher
fees incurred in 2018 to draw from a term loan facility we entered in September
2018. Additional disclosures regarding our financing arrangements and debt
instruments are provided in Note 16 to the consolidated financial statements
contained in Item 8. Financial Statements and Supplementary Data.
The decrease in interest income in 2019 compared with 2018 reflected higher
levels of cash on hand in the first quarter of fiscal year 2018 in anticipation
of closing the Bard acquisition at the end of the quarter.
Income Taxes
The income tax rates in 2020, 2019 and 2018 were as follows:
                                                            2020                   2019                   2018
Effective income tax rate                                      11.3  %                 (4.8) %               73.5  %

Impact, in basis points, from specified items and tax
reform                                                         (320)                 (1,920)                5,680



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 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, compared with
additional tax expense of $640 million that was recognized as a result of this
legislation in 2018. For further disclosures regarding our accounting for this
U.S. tax legislation, refer to Note 17 to the consolidated financial statements
contained in Item 8. Financial Statements and Supplementary Data.

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Net Income and Diluted Earnings per Share Net Income and Diluted Earnings per Share in 2020, 2019 and 2018 were as follows:

                                                               2020               2019               2018
Net income (Millions of dollars)                           $     874          $   1,233          $     311
Diluted Earnings per Share                                 $    2.71

$ 3.94 $ 0.60

Unfavorable impact-specified items                         $   (7.49)         $   (7.74)         $  (10.11)
(Unfavorable) favorable impact-foreign currency
translation                                                $   (0.15)         $   (0.62)         $    0.32
Dilutive impact from share issuances                       $       -        

$ - $ (0.30)

The dilutive impact from share issuances in 2018 represents the impact of BD
shares issued in connection with the Bard acquisition. Our equity transactions
and the Bard acquisition are further discussed in Notes 3 and 10 to the
consolidated financial statements contained in Item 8. Financial Statements and
Supplementary Data.

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 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. From time to time, we may purchase forward
contracts and options to hedge certain forecasted transactions that are
denominated in foreign currencies in order to partially protect against a
reduction in the value of future earnings resulting from adverse foreign
exchange rate movements. Gains or losses on derivative instruments are largely
offset by the gains or losses on the underlying hedged transactions. We did not
enter into contracts to hedge cash flows against foreign currency fluctuations
in fiscal year 2020 or 2019.
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, 2020 and 2019, the impact that changes in the U.S. dollar would
have on pre-tax earnings was estimated as follows:
                                                    Increase (decrease)
            (Millions of dollars)                     2020              2019
            10% appreciation in U.S. dollar   $      (52)              $ (16)
            10% depreciation in U.S. dollar   $       52               $  16

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.

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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, 2020 and 2019, 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
                                                            outstanding                   Increase (decrease) to earnings or cash flows
(Millions of dollars)                                 2020                2019                      2020                      2019
10% increase in interest rates                   $        13          $       19          $                  -            $       (4)
10% decrease in interest rates                   $       (14)         $      (19)         $                  -            $        4

Liquidity and Capital Resources

The following table summarizes our consolidated statement of cash flows in 2020, 2019 and 2018:

           (Millions of dollars)                  2020          2019        

2018

           Net cash provided by (used for)
           Operating activities                $  3,539      $  3,330

$ 2,865

           Investing activities                $ (1,232)     $   (741)

$ (15,733)

           Financing activities                $     22      $ (3,223)

$ (58)

Net Cash Flows from Operating Activities

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 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.

Cash flows from operating activities in 2018 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, primarily due to higher income taxes payable as a result of
new U.S. tax legislation , as well as lower levels of inventory, partially
offset by higher levels of trade receivables. The change in cash flows from
operating activities in 2018 also reflected a change to deferred tax asset and
liability balances which were remeasured under new tax legislation, which is
further discussed in Note 17 to the consolidated financial statements contained
in Item 8. Financial Statements and Supplementary Data. The change in cash flows
from operating activities in 2018 additionally reflected discretionary cash
contributions of $287 million to fund our pension obligation.



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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 $810 million, $957 million and $895 million in 2020, 2019 and
2018, 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 2020 primarily reflected our acquisition of
Straub Medical AG in the third quarter of 2020. Cash outflows for acquisitions
in 2018 primarily related to our acquisition of Bard. For further discussion
regarding the Bard acquisition, refer to Note 10 to the consolidated financial
statements contained in Item 8. Financial Statements and Supplementary Data.
Divestitures
Cash inflows relating to divestitures in 2019 and 2018 were $477 million and
$534 million, respectively. For further discussion, refer to Note 11 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 2020, 2019 and 2018 included the following
significant cash flows:
     (Millions of dollars)                              2020          2019          2018
     Cash inflow (outflow)
     Change in credit facility borrowings            $   (485)     $    485      $      -
     Proceeds from long-term debt and term loans     $  3,389      $  2,224      $  5,086
     Payments of debt and term loans                 $ (4,664)     $

(4,744) $ (3,996)

Proceeds from issuances of equity securities $ 2,917 $ -

     $      -

     Dividends paid                                  $ (1,026)     $   (984)     $   (927)



Additional disclosures regarding the equity and debt-related financing
activities detailed above are provided in Notes 3 and 16 to the consolidated
financial statements contained in Item 8. Financial Statements and Supplementary
Data.

Debt-Related Activities

Certain measures relating to our total debt were as follows:

                                                     2020           2019    

2018

Total debt (Millions of dollars)                  $ 17,931       $ 19,390

$ 21,496

Short-term debt as a percentage of total debt 3.9 % 6.8 % 12.1 % Weighted average cost of total debt

                    2.8  %         2.9  

% 3.2 % Total debt as a percentage of total capital (a) 41.3 % 45.6 % 47.8 %

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

The decreases in our total debt at September 30, 2020 and September 30, 2019
reflected repayments and redemptions of certain notes, partially offset by
issuances of long-term notes in 2020 and 2019. Additional disclosures regarding
our debt instruments are provided in Note 16 to the consolidated financial
statements contained in Item 8. Financial Statements and Supplementary Data.

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Cash and Short-term Investments
At September 30, 2020, total worldwide cash and short-term investments were
$2.937 billion, including restricted cash, which were largely held in the United
States.
Financing Facilities
We have a five-year senior unsecured revolving credit facility in place which
will expire in December 2022. The facility agreement includes a provision that
enabled BD, subject to additional commitments made by the lenders, to access up
to an additional $500 million in financing through the facility for a maximum
aggregate commitment of $2.75 billion. In April 2020, we entered into a
supplement to the facility agreement which increased the revolving commitments
available under the facility by $381 million. As such, borrowings provided for
under the agreement increased from $2.25 billion to $2.63 billion. We are also
able to issue up to $100 million in letters of credit under this revolving
credit facility. We use proceeds from this facility to fund general corporate
needs. There were no borrowings outstanding under the revolving credit facility
at September 30, 2020.
The agreement for our revolving credit facility and the supplement entered into
in April 2020 contained the following financial covenants. We were in compliance
with these covenants as of September 30, 2020.
•We are required to maintain an interest expense coverage ratio of not less than
4-to-1 as of the last day of each fiscal quarter.
•We are required to have a leverage coverage ratio of no more than:
•6-to-1 from the closing date of the Bard acquisition until and including the
first fiscal quarter-end thereafter;
•5.75-to-1 for the subsequent four fiscal quarters thereafter;
•5.25-to-1 for the subsequent four fiscal quarters thereafter;
•4.5-to-1 for the subsequent four fiscal quarters thereafter;
•4-to-1 for the subsequent four fiscal quarters thereafter;
•3.75-to-1 thereafter.

In March 2020, we entered into a 364-day senior unsecured term loan facility
with borrowing capacity available of $2.0 billion. During the third quarter of
fiscal year 2020, we repaid $1.9 billion of borrowings outstanding under this
term loan with cash on hand and terminated the facility. 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, 2020. Also over the normal course of our business activities,
we transfer certain trade receivable assets to third parties under factoring
agreements. Additional disclosures regarding these sales of trade receivable
assets are provided in Note 15 to the consolidated financial statements
contained in Item 8. Financial Statements and Supplementary Data.

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, 2020:
                                                S&P           Moody's       Fitch
                Ratings:
                Senior Unsecured Debt           BBB             Ba1          BBB-
                Commercial Paper                A-2             NP
                Outlook                      Negative        Positive       Stable



In March 2020, Standard & Poor's Ratings Services affirmed our September 30,
2019 ratings and revised the agency's outlook regarding the likely direction of
these ratings from Stable to Negative.

Lower corporate debt ratings and further 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
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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. The table below sets forth BD's
significant contractual obligations and related scheduled payments as of
September 30, 2020:
                                                            2022 to      2024 to       2026 and
                                  Total         2021         2023         2025        Thereafter
                                                      (Millions of dollars)
Short-term debt                 $    708      $   708      $     -      $     -      $         -
Long-term debt (a)                23,303          491        6,385        4,369           12,057
Operating leases                     489          115          159           73              142
Purchase obligations (b)           1,436        1,248          183            5                -
Unrecognized tax benefits (c)          -            -            -            -                -
Total (d)                       $ 25,936      $ 2,562      $ 6,727      $ 4,446      $    12,200



(a)Long-term debt obligations include expected principal and interest
obligations.
(b)Purchase obligations are for purchases made in the normal course of business
to meet operational and capital requirements.
(c)Unrecognized tax benefits at September 30, 2020 of $620 million were all
long-term in nature. Due to the uncertainty related to the timing of the
reversal of these tax positions, the related liability has been excluded from
the table.
(d)Required funding obligations for 2021 relating to pension and other
postretirement benefit plans are not expected to be material.
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. 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
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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. Potential impairment of goodwill is generally
identified by comparing the fair value of a reporting unit with its carrying
value. Our annual goodwill impairment test performed on July 1, 2020 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 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, 2020. Additional
disclosures regarding our accounting for income taxes are provided in Note 17 to
the consolidated financial statements contained in Item 8. Financial Statements
and Supplementary Data.

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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 2.80% for 2021, 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
2021, 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 2021 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 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 2021. 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 $12 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.

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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, continued decreases in the demand for our products or disruptions to
our operations and our supply chain, and factors that 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.
•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 the significant additional indebtedness we incurred in
connection with the financing of the Bard acquisition and the impact it may have
on our ability to operate the combined company.
•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.
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•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 the continued consolidation among healthcare providers.
•The impact of changes in U.S. federal laws and policy 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, the ability to maintain favorable supplier
arrangements and relationships (particularly with respect to sole-source
suppliers), and the potential adverse effects of any disruption in the
availability of such items.
•Security breaches of our information systems or our products, which could
impair our ability to conduct business, result in the loss of BD trade secrets
or otherwise compromise sensitive information of BD or its customers, suppliers
and other business partners, or of customers' patients, or result in product
efficacy or safety concerns for certain of our products, 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 regulatory approvals in the United States and abroad,
obtain intellectual property protection for our products, obtain coverage and
adequate reimbursement for new products, or gain and maintain market approval of
products, as well as the possibility of infringement claims by competitors with
respect to patents or other intellectual property rights, all of which can
preclude or delay commercialization of a product. Delays in obtaining necessary
approvals or clearances from United States Food and Drug Administration ("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. This includes the possible
impact of the United Kingdom's exit from the European Union ("EU"), which has
created uncertainties affecting our business operations in the United Kingdom
and the EU, and possibly other countries. 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 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.
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•Natural disasters (including pandemics), war, terrorism, labor disruptions and
international conflicts that could cause significant economic disruption and
political and social instability, resulting in decreased demand for our
products, adversely affect our manufacturing and distribution capabilities, or
cause interruptions in our supply chain.
•Pending and potential future litigation or other proceedings asserting, and/or
subpoenas 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 and
Bard)), antitrust claims, securities law claims, product liability (which may
involve lawsuits seeking class action status or seeking to establish
multi-district litigation proceedings, including claims relating to our hernia
repair implant products, surgical continence products for women and vena cava
filter products), claims with respect to environmental matters, and patent
infringement, and the availability or collectability of insurance relating to
any such claims.
•New or changing laws and regulations affecting our domestic and foreign
operations, or changes in enforcement practices, including laws relating to
trade, monetary and fiscal policies, taxation (including tax reforms that could
adversely impact multinational corporations), sales practices, environmental
protection, price controls, and licensing and regulatory requirements for new
products and products in the postmarketing phase. In particular, the U.S. and
other countries may impose new requirements regarding registration, labeling or
prohibited materials that may require us to re-register products already on the
market or otherwise impact our ability to market our products. Environmental
laws, particularly with respect to the emission of greenhouse gases, are also
becoming more stringent throughout the world, which may increase our costs of
operations or necessitate changes in our manufacturing plants or processes or
those of our suppliers, or result in liability to BD.
•Product efficacy or safety concerns regarding our products resulting in product
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, we are operating under a
consent decree with the FDA relating to our U.S. infusion pump business. The
consent decree authorizes the FDA, in the event of any violations in the future,
to order us to cease manufacturing and distributing products, recall products or
take other actions, and we may be required to pay significant monetary damages
if we fail to comply with any provision of the consent decree. We are
undertaking remediation of our BD Alaris System and cannot fully commercialize
the product until a 510(k) filing has been submitted and cleared by the FDA. No
assurances can be given as to when clearance of the submission 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 Financial Accounting
Standards Board or the Securities and Exchange Commission.
The foregoing list sets forth many, but not all, of the factors that could
impact our ability to achieve results described in any forward-looking
statements. Investors should understand that it is not possible to predict or
identify all such factors and should not consider this list to be a complete
statement of all potential risks and uncertainties.
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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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