UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2017~~2018



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-4802

Becton, Dickinson and Company

(Exact name of registrant as specified in its charter)



New Jersey		22-0760120
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1 Becton Drive, Franklin Lakes, New Jersey 07417-1880

(Address of principal executive offices) (Zip Code)

(201) 847-6800

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.



Large accelerated filer	ý		Accelerated filer	¨

Non-accelerated filer	¨	(Do not check if a smaller reporting company)

			Smaller reporting company	¨

			Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.				¨

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

There were ~~213,305,385~~267,201,840 share of Common Stock, $1.00 par value, outstanding at March 31, ~~2017.~~2018.

BECTON, DICKINSON AND COMPANY

FORM 10-Q

For the quarterly period ended March 31, ~~2017~~2018

TABLE OF CONTENTS



		Page Number
Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income (Loss)	4
	Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1923
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3137
Item 4.	Controls and Procedures	3137

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	3238
Item 1A.	Risk Factors	3339
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3839
Item 3.	Defaults Upon Senior Securities	3940
Item 4.	Mine Safety Disclosures	3940
Item 5.	Other Information	3940
Item 6.	Exhibits	3940

Signatures		4041

Exhibits		4142

ITEM 1. FINANCIAL STATEMENTS

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions of dollars


	March 31, 2017			September 30, 2016
	(Unaudited)						March 31, 2018			September 30, 2017
Assets							(Unaudited)
Current Assets:
Cash and equivalents	$	548		$	1,541		$	1,251		$	14,179
Restricted cash							167			—
Short-term investments	8			27			16			21
Trade receivables, net	1,569			1,618			2,293			1,744
Current portion of net investment in sales-type leases	355			339
Inventories:
Materials	305			316			498			313
Work in process	292			274			355			271
Finished products	1,150			1,129			1,691			1,234
	1,747			1,719			2,543			1,818
Assets held for sale	—			642
Prepaid expenses and other	664			480			1,241			871
Total Current Assets	4,891			6,367			7,512			18,633
Property, Plant and Equipment	8,351			8,419			10,460			9,389
Less allowances for depreciation and amortization	4,411			4,518			5,049			4,752
Property, Plant and Equipment, Net	3,941			3,901			5,411			4,638
Goodwill	7,405			7,419			23,491			7,563
Developed Technology, Net							12,562			2,478
Customer Relationships, Net	2,923			3,022			3,865			2,830
Developed Technology, Net	2,539			2,655
Other Intangibles, Net	579			604			573			585
Capitalized Software, Net	77			70
Net Investment in Sales-Type Leases, Less Current Portion	817			796
Other Assets	948			753			1,159			1,007
Total Assets	$	24,121		$	25,586		$	54,573		$	37,734
Liabilities and Shareholders’ Equity
Current Liabilities:
Short-term debt	$	1,224		$	1,001		$	202		$	203
Payables and accrued expenses	2,794			3,210			4,224			3,139
Liabilities held for sale	—			189
Total Current Liabilities	4,018			4,400			4,426			3,342
Long-Term Debt	9,082			10,550			22,589			18,667
Long-Term Employee Benefit Obligations	1,356			1,319			1,172			1,168
Deferred Income Taxes and Other	1,702			1,684			5,233			1,609
Commitments and Contingencies (See Note 5)
Shareholders’ Equity
Preferred stock							2			2
Common stock	333			333			347			347
Capital in excess of par value	4,742			4,693			16,170			9,619
Retained earnings	13,321			12,727			12,616			13,111
Deferred compensation	22			22			21			19
Common stock in treasury - at cost	(8,445		)	(8,212		)	(6,300		)	(8,427		)
Accumulated other comprehensive loss	(2,009		)	(1,929		)	(1,704		)	(1,723		)
Total Shareholders’ Equity	7,963			7,633			21,152			12,948
Total Liabilities and Shareholders’ Equity	$	24,121		$	25,586		$	54,573		$	37,734

Amounts may not add due to rounding.

See notes to condensed consolidated financial statements

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

Millions of dollars, except per share data

(Unaudited)


	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended March 31,						Six Months Ended March 31,
	2017			2016			2017			2016			2018			2017			2018			2017
Revenues	$	2,969		$	3,067		$	5,892		$	6,054		$	4,222		$	2,969		$	7,302		$	5,892
Cost of products sold	1,537			1,584			3,007			3,162			2,619			1,537			4,148			3,007
Selling and administrative expense	724			732			1,432			1,480			1,057			724			1,831			1,432
Research and development expense	187			182			368			369			260			187			452			368
Acquisitions and other restructurings	76			104			163			225			104			76			458			163
Other operating income (See Note 5)	—			—			(336		)	—
Other operating income, net													—			—			—			(336		)
Total Operating Costs and Expenses	2,523			2,601			4,634			5,236			4,040			2,523			6,889			4,634
Operating Income	446			466			1,257			818			183			446			413			1,257
Interest expense	(86		)	(99		)	(181		)	(196		)	(185		)	(86		)	(343		)	(181		)
Interest income	7			3			12			9			4			7			48			12
Other (expense) income, net	(5		)	6			(35		)	11
Other income (expense), net													4			(5		)	(6		)	(35		)
Income Before Income Taxes	362			376			1,054			642			6			362			111			1,054
Income tax provision	18			38			148			75			18			18			260			148
Net Income	344			338			905			567
Basic Earnings per Share	$	1.61		$	1.59		$	4.24		$	2.67
Diluted Earnings per Share	$	1.58		$	1.56		$	4.15		$	2.62
Net (Loss) Income													(12		)	344			(148		)	905
Preferred stock dividends													(38		)	—			(76		)	—
Net (loss) income applicable to common shareholders													$	(50	)	$	344		$	(224	)	$	905


Basic (Loss) Earnings per Share													$	(0.19	)	$	1.61		$	(0.90	)	$	4.24
Diluted (Loss) Earnings per Share													$	(0.19	)	$	1.58		$	(0.90	)	$	4.15
Dividends per Common Share	$	0.73		$	0.66		$	1.46		$	1.32		$	0.75		$	0.73		$	1.50		$	1.46

Amounts may not add due to rounding.

See notes to condensed consolidated financial statements

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Millions of dollars

(Unaudited)


	Three Months Ended March 31,				Six Months Ended March 31,					Three Months Ended March 31,					Six Months Ended March 31,
	2017		2016		2017			2016		2018			2017		2018			2017
Net Income	$	344	$	338	$	905		$	567
Net (Loss) Income										$	(12	)	$	344	$	(148	)	$	905
Other Comprehensive Income (Loss), Net of Tax
Foreign currency translation adjustments	136		179		(139		)	63		128			136		92			(139		)
Defined benefit pension and postretirement plans	15		12		29			24		(90		)	15		(72		)	29
Cash flow hedges	2		1		30			4		(2		)	2		(1		)	30
Other Comprehensive Gain (Loss), Net of Tax	153		193		(80		)	91
Comprehensive Income	$	497	$	531	$	826		$	658
Other Comprehensive Income (Loss), Net of Tax										36			153		18			(80		)
Comprehensive Income (Loss)										$	24		$	497	$	(130	)	$	826

Amounts may not add due to rounding.

See notes to condensed consolidated financial statements

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Millions of dollars

(Unaudited)


	Six Months Ended March 31,						Six Months Ended March 31,
	2017			2016			2018			2017
Operating Activities
Net income	$	905		$	567
Adjustments to net income to derive net cash provided by operating activities:
Net (loss) income							$	(148	)	$	905
Adjustments to net (loss) income to derive net cash provided by operating activities:
Depreciation and amortization	523			569			844			523
Share-based compensation	99			119			207			99
Deferred income taxes	(43		)	(112		)	(400		)	(43		)
Change in operating assets and liabilities	(474		)	(194		)	702			(474		)
Pension obligation	55			40			(72		)	55
Excess tax benefits from payments under share-based compensation plans	48			—			56			48
Other, net	(74		)	30			(172		)	(74		)
Net Cash Provided by Operating Activities	1,040			1,020			1,017			1,040
Investing Activities
Capital expenditures	(272		)	(258		)	(391		)	(272		)
Proceeds from sale of investments, net	26			10			7			26
Acquisitions of businesses, net of cash acquired	(40		)	—			(15,118		)	(40		)
Proceeds from divestitures, net	165			111			100			165
Other, net	(34		)	(33		)	(138		)	(34		)
Net Cash Used for Investing Activities	(155		)	(170		)	(15,540		)	(155		)
Financing Activities
Change in short-term debt	(50		)	(300		)
Change in credit facility borrowings							380			(50		)
Proceeds from long-term debt	1,054			—			3,622			1,054
Payments of debt	(2,189		)	(1		)	(1,833		)	(2,189		)
Repurchase of common stock	(220		)	—			—			(220		)
Excess tax benefits from payments under share-based compensation plans	—			51
Dividends paid	(312		)	(280		)	(449		)	(312		)
Other, net	(144		)	(45		)	(155		)	(144		)
Net Cash Used for Financing Activities	(1,861		)	(576		)
Net Cash Provided by (Used for) Financing Activities							1,565			(1,861		)
Effect of exchange rate changes on cash and equivalents	(17		)	(2		)	29			(17		)
Net (decrease) increase in cash and equivalents	(993		)	272
Net decrease in cash and equivalents							(12,929		)	(993		)
Opening Cash and Equivalents	1,541			1,424			14,179			1,541
Closing Cash and Equivalents	$	548		$	1,696		$	1,251		$	548

Non-Cash Investing Activities
Fair value of shares issued as acquisition consideration (See Note 8)							$	8,004		$	—
Fair value of equity awards issued as acquisition consideration (See Note 8)							$	613		$	—

Amounts may not add due to rounding.

See notes to condensed consolidated financial statements

BECTON, DICKINSON AND COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, ~~2017~~2018

Note 1 – Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, in the opinion of the management of the Company, include all adjustments which are of a normal recurring nature, necessary for a fair presentation of the financial position and the results of operations and cash flows for the periods presented. However, the financial statements do not include all information and accompanying notes required for a presentation in accordance with U.S. generally accepted accounting ~~principles.~~principles ("U.S. GAAP"). These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s ~~2016~~2017 Annual Report on Form 10-K. Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages and earnings per share amounts presented are calculated from the underlying amounts. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.

Note 2 – Accounting Changes

New Accounting ~~Principles~~Principle Adopted

~~On October 1, 2016,~~In the second quarter of its fiscal year 2018, the Company prospectively adopted ~~amended requirements~~an accounting standard update issued by the Financial Accounting Standards Board ("FASB") relating to the ~~timing of recognition and classification of share-based compensation award-related~~stranded income tax effects. Upon the settlement of awards in the first and second quarters of fiscal year 2017, the Company recorded tax benefits for the three and six months ended March 31, 2017 of $21 million and $48 million, respectively, to ~~Income tax provision~~ ~~within its consolidated statement of income. The Company expects to record additional tax benefits through the remainder of fiscal year 2017. These tax benefits were recorded~~effects on items within ~~Capital~~Accumulated other comprehensive income (loss) resulting from the enactment of new U.S. tax legislation, which legislation is further discussed in ~~excess of par value~~ ~~on the Company's condensed consolidated balance sheet~~Note 14. Additional disclosures regarding this accounting standard adoption are provided in ~~the prior-year period. Because these excess tax benefits are no longer recorded in~~ ~~Capital in excess of par value,~~ the current-period adjustments for the dilutive impact of share equivalents from share-based plans, which is used in the Company's computation of diluted earnings per share, increased by approximately 1 million shares. Also per the amended guidance, the Company classified the $48 million of excess tax benefits for the six months ended March 31, 2017 on its condensed consolidated statement of cash flows within ~~Net Cash Provided by Operating Activities, rather than~~ ~~Net Cash Used for Financing Activities,~~ which included the excess tax benefits for the six months ended March 31, 2016. The amended guidance allows entities to account for award forfeitures as they occur; however, the Company has elected to continue its determination of compensation cost recognized in each period based upon an estimate of expected future forfeitures.Note 3.

New Accounting Principles Not Yet Adopted

In February 2016, the FASB issued a new lease accounting standard which requires lessees to recognize lease assets and lease liabilities on the balance sheet. The new standard also requires expanded disclosures regarding leasing arrangements. The Company is currently evaluating the impact that this new lease accounting standard will have on its consolidated financial statements upon its adoption of the standard on October 1, 2019.

In May 2014, the FASB issued a new revenue recognition standard. Under this standard, revenue will be recognized upon the transfer of goods or services to customers and the amount of revenue recognized will reflect the consideration to which a reporting entity expects to be entitled in exchange for those goods or services. The Company ~~intends to~~will adopt the standard ~~as required,~~ on October 1, 2018 and is currently inplans to use the ~~process of completing the~~modified retrospective method. The Company has completed an initial assessment to identify the potential areas of ~~the~~ impact that this new revenue recognition standard will have on its consolidated financial statements. As part of the initial assessment, the Company ~~is reviewing~~reviewed a representative sample of its contracts across its various businesses and geographies to identify potential differences that could result from applying the requirements of the new standard. The analysis ~~includes~~included identifying whether there may be differences in timing of revenue recognition under the new standard as well as assessing performance obligations, variable consideration, and contract costs. The Company has not yet estimated the impact ~~if any,~~ of the new standard on the timing and pattern of its revenue recognition. The Company continues to ~~evaluate the available adoption methods, and apprises both management and~~apprise its audit committee of the project status regularly.

Note 3 – Accumulated Other Comprehensive Income (Loss)

The components and changes of Accumulated other comprehensive income (loss) for the six-month period ended March 31, ~~2017~~2018 were as follows:

(Millions of dollars) Total
Foreign Currency
Translation
Benefit Plans

Cash Flow Hedges

Balance at September 30, 2016 $ (1,929 ) $ (1,011 ) $ (883 ) $ (35 )
Other comprehensive (loss) income before reclassifications, net of taxes (114 ) (139 ) —
25

Amounts reclassified into income, net of taxes 34
—
29
5

Balance at March 31, 2017 $ (2,009 ) $ (1,151 ) $ (853 ) $ (5 )



(Millions of dollars)	Total			Foreign Currency Translation			Benefit Plans			Cash Flow Hedges
Balance at September 30, 2017	$	(1,723	)	$	(1,001	)	$	(703	)	$	(18	)
Other comprehensive loss before reclassifications, net of taxes	92			92			—			—
Amounts reclassified into income, net of taxes	29			—			26			3
Tax effects reclassified to retained earnings	(103		)	—			(99		)	(4		)
Balance at March 31, 2018	$	(1,704	)	$	(909	)	$	(776	)	$	(20	)

The amount of foreign currency translation recognized in other comprehensive income during the six months ended March 31, ~~2017~~2018 included ~~a loss~~net losses relating to net investment hedges, as further discussed in Note 12. The amount recognized in other comprehensive income during the six months ended March 31, 2017 relating to cash flow hedges represented gains on forward starting interest rate swaps entered into in fiscal year 2016, which are also further discussed in Note 1211. ~~The~~As permitted under recently issued U.S. GAAP guidance, the Company reclassified stranded income tax ~~provision relating to these gains was $1 million and $16 million for the three and six months ended March 31, 2017, respectively.~~

~~Reclassifications out of~~effects on items within Accumulated other comprehensive income (loss)~~were~~ resulting from the enactment of new U.S. tax legislation, which legislation is further discussed in Note 14, to Retained earnings during the second quarter of fiscal year 2018. As further discussed in Note 14, the Company has not completed its accounting for the tax effects of the new legislation and as ~~follows:~~the Company continues to analyze the impact of the legislation on its existing deferred tax balances, the provisional amounts that have been recorded will be updated as required. The reclassified tax effects related to prior service credits and net actuarial losses relating to benefit plans, as well as to terminated cash flow hedges. The tax effects relating to these items are generally recognized as such amounts are amortized into earnings.

Three Months Ended
March 31, Six Months Ended
March 31,
(Millions of dollars) 2017 2016 2017 2016
Benefit Plans
Reclassification of losses into income $ 22
$ 19
$ 44
$ 37
Associated tax benefits (7 ) (6 ) (14 ) (13 )
Amounts reclassified into income, net of taxes (A) $ 15
$ 12
$ 29
$ 24

Cash Flow Hedges
Reclassification of losses into income $ 2
$ 5
$ 8
$ 9
Associated tax benefits (1 ) (2 ) (3 ) (3 )
Amounts reclassified into income, net of taxes (B) $ 1
$ 3
$ 5
$ 6



~~(A)~~	These reclassifications were not recorded into income in their entirety and were included in the computation of net periodic benefit plan costs. Additional details regarding the Company's benefit plans are provided in Note 8.


~~(B)~~	~~These reclassifications were recorded to~~ ~~Interest expense~~ ~~and~~ ~~Cost of products sold. Additional details regarding the Company's cash flow hedges are provided in Note~~ 12.

Note 4 – Earnings per Share

The weighted average common shares used in the computations of basic and diluted earnings per share (shares in thousands) were as follows:

Three Months Ended
March 31, Six Months Ended
March 31,
2017 2016 2017 2016
Average common shares outstanding 213,583
212,469
213,321
212,077
Dilutive share equivalents from share-based plans (A) 4,283
4,069
4,665
4,618
Average common and common equivalent shares outstanding – assuming dilution 217,866
216,538
217,986
216,695


~~(A)~~	The prior-period adjustments to calculate diluted share equivalents from share-based plans included excess tax benefits relating to share-based compensation awards. Upon the Company's adoption, as discussed in Note 2, of new accounting requirements relating to share-based compensation award-related income tax effects, the adjustments in the current-year periods excluded these excess tax benefits.

Using proceeds received from the divestiture of the Respiratory Solutions business in the first quarter of fiscal year 2017, the Company repurchased approximately 1.3 million shares of its common stock under an accelerated share repurchase agreement. The repurchased shares were recorded as a $220 million increase to ~~Common stock in treasury.~~



	Three Months Ended March 31,		Six Months Ended March 31,
	2018	2017	2018	2017
Average common shares outstanding	267,341	213,583	248,484	213,321
Dilutive share equivalents from share-based plans	—	4,283	—	4,665
Average common and common equivalent shares outstanding – assuming dilution	267,341	217,866	248,484	217,986

Share equivalents excluded from the diluted shares outstanding calculation because the result would have been antidilutive:
Mandatory convertible preferred stock	11,685	—	11,685	—
Share-based plans	6,352	—	5,439	—

Note 5 – Contingencies

Given the uncertain nature of litigation generally, the Company is not able, in all cases, to estimate the amount or range of loss that could result from an unfavorable outcome of the litigation to which the Company is a party. In accordance with U.S. generally accepted accounting principles, the Company establishes accruals to the extent probable future losses are estimable (in the case of environmental matters, without considering possible third-party recoveries). With respect to putative class action lawsuits in the United States and certain of the Canadian lawsuits described below relating to product liability matters, the Company is unable to estimate a range of reasonably possible losses for the following reasons: (i) all or certain of the proceedings are in early stages; (ii) the Company has not received and reviewed complete information regarding all or certain of the plaintiffs and their medical conditions; and/or (iii) there are significant factual issues to be resolved. In addition, there is uncertainty as to the likelihood of a class being certified or the ultimate size of the class. With respect to the investigative subpoena issued by the Department of Defense Inspector General and the Department of Health and Human Services and the

civil investigative demand served by the Department of Justice, as discussed below, the Company is unable to estimate a range of reasonably possible losses for the following reasons: (i) all or certain of the proceedings are in early stages; and/or (ii) there are significant factual and legal issues to be resolved.

In view of the uncertainties discussed below, the Company could incur charges in excess of any currently established accruals and, to the extent available, liability insurance. In the opinion of management, any such future charges, individually or in the aggregate, could have a material adverse effect on the Company’s consolidated results of operations and consolidated cash flows.

Product Liability Matters

As is further discussed in Note 8, the Company completed its acquisition of C.R. Bard, Inc. ("Bard") on December 29, 2017 and the following matters include Bard-related legal proceedings and claims that the Company assumed on the acquisition date. The Company believes that some settlements and judgments, as well as some legal defense costs, relating to product liability matters are or may be covered in whole or in part under its product liability insurance policies with a limited number of insurance carriers, or, in some circumstances, indemnification obligations to the Company from other parties, which if disputed, the Company intends to vigorously contest. Amounts recovered under the Company’s product liability insurance policies or indemnification arrangements may be less than the stated coverage limits or less than otherwise expected and may not be adequate to cover damages and/or costs relating to claims. In addition, there is no guarantee that insurers or other parties will pay claims or that coverage or indemnity will be otherwise available.

Hernia Product Claims

As of March 31, 2018, the Company is defending approximately 1,280 product liability claims involving Bard’s line of hernia repair devices (collectively, the “Hernia Product Claims”). The majority of those claims are currently pending in a coordinated proceeding in Rhode Island State Court, but claims are also pending in other state and/or federal court jurisdictions. In addition, those claims include multiple putative class actions in Canada. Generally, the Hernia Product Claims seek damages for personal injury allegedly resulting from use of the products. From time to time, the Company engages in resolution discussions with plaintiffs’ law firms regarding certain of the Hernia Product Claims, but the Company also intends to vigorously defend Hernia Product Claims that do not settle, including through litigation. Trials are scheduled throughout 2018 in various state and federal courts. The Company expects additional trials of Hernia Product Claims to take place over the next 12 months. On April 11, 2018, plaintiffs’ attorneys filed a request for the creation of a new hernia multi-district litigation (“MDL”) in either the Southern District of Ohio or the Western District of Missouri. The Company cannot give any assurances that the resolution of the Hernia Product Claims that have not settled, including asserted and unasserted claims and the putative class action lawsuits, will not have a material adverse effect on the Company’s business, results of operations, financial condition and/or liquidity.

Women’s Health Product Claims

As of March 31, 2018, the Company is defending approximately 3,195 product liability claims involving Bard’s line of pelvic mesh devices. The majority of those claims are currently pending in a federal MDL in the United States District Court for the Southern District of West Virginia, but claims are also pending in other state and/or federal court jurisdictions, including a coordinated proceeding in New Jersey State Court. In addition, those claims include putative class actions filed in the United States. Not included in the figures above are approximately 1,080 filed and unfiled claims that have been asserted or threatened against Bard but lack sufficient information to determine whether a Bard pelvic mesh device is actually at issue. The claims identified above also include products manufactured by both Bard and two subsidiaries of Medtronic plc (as successor in interest to Covidien plc) (“Medtronic”), each a supplier of Bard. Medtronic has an obligation to defend and indemnify Bard with respect to any product defect liability relating to products its subsidiaries had manufactured. As described below, in July 2015 the Company reached an agreement with Medtronic (which was amended in June 2017) regarding certain aspects of Medtronic’s indemnification obligation. The foregoing lawsuits, unfiled claims, putative class actions, and other claims, together with claims that have settled or are the subject of agreements or agreements in principle to settle, are referred to collectively as the “Women’s Health Product Claims.” The Women’s Health Product Claims generally seek damages for personal injury allegedly resulting from use of the products.

As of March 31, 2018, the Company has reached agreements or agreements in principle with various plaintiffs’ law firms to settle their respective inventories of cases totaling approximately 13,658 of the Women’s Health Product Claims. The Company believes that these Women’s Health Product Claims are not the subject of Medtronic’s indemnification obligation. These settlement agreements and agreements in principle include unfiled and previously unknown claims held by various plaintiffs’ law firms, which are not included in the approximate number of lawsuits set forth in the first paragraph of this section. Each agreement is subject to certain conditions, including requirements for participation in the proposed settlements by a certain minimum number of plaintiffs. The Company continues to engage in discussions with other plaintiffs’ law firms regarding potential resolution of unsettled Women’s Health Product Claims, which may include additional inventory settlements.

Starting in 2014 in the MDL, the court entered certain pre-trial orders requiring trial work up and remand of a significant number of Women’s Health Product Claims, including an order entered in the MDL on January 30, 2018, that requires the work up and remand of all remaining unsettled cases (the “WHP Pre-Trial Orders”). The WHP Pre-Trial Orders may result in material additional costs or trial verdicts in future periods in defending Women’s Health Product Claims. Trials are scheduled throughout 2018 in state courts. A trial in the New Jersey coordinated proceeding began in March 2018, and in April 2018 a jury entered a verdict against the Company in the total amount of $68 million ($33 million compensatory; $35 million punitive). The Company intends to challenge that verdict. The Company expects additional trials of Women’s Health Product Claims to take place over the next 12 months.

In July 2015, as part of the agreement with Medtronic noted above, Medtronic agreed to take responsibility for pursuing settlement of certain of the Women’s Health Product Claims that relate to products distributed by Bard under supply agreements with Medtronic, and Bard has paid Medtronic $121 million towards these potential settlements. In June 2017, Bard amended the agreement with Medtronic to transfer responsibility for settlement of additional Women’s Health Product Claims to Medtronic on terms similar to the July 2015 agreement, including with respect to the obligation to make payments to Medtronic towards these potential settlements. Bard also may, in its sole discretion, transfer responsibility for settlement of additional Women’s Health Product Claims to Medtronic on similar terms. The agreements do not resolve the dispute between Bard and Medtronic with respect to Women’s Health Product Claims that do not settle, if any.

During the course of engaging in settlement discussions with plaintiffs’ law firms, the Company has learned, and may in future periods learn, additional information regarding these and other unfiled claims, or other lawsuits, which could materially impact the Company’s estimate of the number of claims or lawsuits against the Company.

Filter Product Claims

In connection with the acquisition of Bard, as of March 31, 2018, the Company is defending approximately 3,789 product liability claims involving Bard’s line of inferior vena cava filters (collectively, the “Filter Product Claims”). The majority of those claims are currently pending in an MDL in the United States District Court for the District of Arizona, but claims are also pending in other state and/or federal court jurisdictions, including a coordinated proceeding in Arizona State Court. In addition, those claims include putative class actions filed in the United States and Canada. The Filter Product Claims generally seek damages for personal injury allegedly resulting from use of the products. The Company has limited information regarding the nature and quantity of certain of the Filter Product Claims. The Company continues to receive claims and lawsuits and may in future periods learn additional information regarding other unfiled or unknown claims, or other lawsuits, which could materially impact the Company’s estimate of the number of claims or lawsuits against the Company. Trials are scheduled throughout 2018 in the MDL and state courts. On March 30, 2018, a jury in the first MDL trial found the Company liable for negligent failure to warn and entered a verdict in favor of plaintiffs. The jury found the Company was not liable for (a) strict liability design defect; (b) strict liability failure to warn; and (c) negligent design. The Company intends to challenge that verdict. The Company expects additional trials of Filter Product Claims may take place over the next 12 months.

In most product liability litigations (like those described above), plaintiffs allege a wide variety of claims, ranging from allegations of serious injury caused by the products to efforts to obtain compensation notwithstanding the absence of any injury. In many of these cases, the Company has not yet received and reviewed complete information regarding the plaintiffs and their medical conditions and, consequently, is unable to fully evaluate the claims. The Company expects that it will receive and review additional information regarding any remaining unsettled product liability matters.

In January 2017, the Company reached an agreement to resolve litigation filed in the Southern District of New York by its insurance carriers in connection with Women’s Health Product Claims and Filter Product Claims. The agreement requires the insurance carriers to reimburse the Company for certain future costs incurred in connection with Filter Product Claims up to an agreed amount. For certain product liability claims or lawsuits, the Company does not maintain or has limited remaining insurance coverage.

Other Legal Matters

In June 2007, Retractable Technologies, Inc. (“RTI”) filed a complaint against the Company under the caption Retractable Technologies, Inc. vs. Becton Dickinson and Company (Civil Action No. 2:07-cv-250, U.S. District Court, Eastern District of Texas) alleging that the BD Integra™ syringes infringe patents licensed exclusively to RTI. InIncluded in its complaint, RTI also alleged that the Company engaged in false advertising with respect to certain of the Company’s safety-engineered products in violation of the Lanham Act; acted to exclude RTI from various product markets and to maintain its market share through, among other things, exclusionary contracts in violation of state and federal antitrust laws; and engaged in unfair competition. In January 2008, the Court severed the patent and non-patent claims into separate ~~cases, and stayed the non-patent claims during the pendency of the patent claims~~cases. BD paid a $5 million award following an adverse infringement verdict at the ~~trial~~district court level. On April 1, 2008, RTI filed a complaint against BD under the caption Retractable Technologies, Inc. and Thomas J. Shaw v. Becton Dickinson and Company (Civil Action No. 2:08-cv-141, U.S. District Court, Eastern District of Texas) alleging that the BD Integra™ syringes infringe another patent licensed exclusively to RTI. On August 29, 2008, the Court ordered the consolidation of the patent cases. RTI was subsequently awarded $5 million in damages at a jury trial with respect to the patent claims, which has been paid, and the ~~patent cases are now concluded.~~Company's unsuccessful appeal.

On September 19, 2013, a jury returned a verdict against BD with respect to RTI’s Lanham Act claim and claim for attempted monopolization based on deception in the safety syringe market. The jury awarded RTI $113.5 million for its attempted

monopolization claim (which would be trebled under the antitrust statute). ~~The jury’s verdict rejected RTI’s monopolization claims in~~Upon issuance of a Court of Appeals decision reversing the ~~markets for safety syringes, conventional syringes and safety IV catheters; its~~ attempted monopolization claims in the markets for conventional syringes and safety IV catheters; and its claims for contractual restraint of trade and exclusive dealing in the markets for safety syringes, conventional syringes and safety IV catheters. In connection with the verdict,claim, the Company recorded a ~~pre-tax charge~~$336 million reversal of ~~approximately $341 million~~reserves associated with the initial judgment, in Other operating (income) expense, net, in the ~~fourth~~first quarter of fiscal year 2013. With respect to RTI's requested injunction relief, in November 2014, the Court granted RTI’s request that BD be ordered to issue certain corrective statements regarding its advertising and enjoined from making certain advertising claims. The Court denied RTI’s request for injunctive relief relating to BD’s contracting practices and BD’s safety syringe advertising, finding that RTI failed to prove that BD’s contracting practices violated the antitrust laws or that BD’s safety syringe advertising is false. On January 14, 2015, the Court granted in part and denied in part BD’s motion for a stay of the injunction. The Court held that, pending appeal, BD would not be required to send the corrective advertising notices to end-user customers, but only to employees, distributors and Group Purchasing Organizations. On January 15, 2015, the Court entered its Final Judgment in the case ordering that RTI recover $341 million for its attempted monopolization claim and $12 million for attorneys’ fees, and awarded pre and post-judgment interest and costs. On February 3, 2015, the Court of Appeals for the Fifth Circuit denied BD’s motion for a stay of the injunction pending the final appeal, and BD thereafter complied with the Court’s order. On April 23, 2015, the Court granted BD’s motion to eliminate the award of pre-judgment interest, and entered a new Final Judgment. BD thereafter appealed to the Court of Appeals challenging the entirety of the Final Judgment. On December 2, 2016, the Court of Appeals issued an opinion reversing the judgment as to RTI’s attempted monopolization claim and rendered judgment on that claim in favor of BD. As a result, the Company reversed $336 million of reserves associated with this judgment.2017. The Court of Appeals affirmed the judgment for Lanham Act liability, and remanded the case to the district court to consider whether and if so how much profit should be disgorged by BD on that claim. The Court of Appeals also vacated and remanded the injunction ordered by the ~~Court.~~district court. On January 31, 2017, RTI filed a petition for a writ of certiorari with the U.S. Supreme Court. On March 20, 2017, the U.S. Supreme Court denied certiorari, and the ~~matter will now return to~~district court thereafter heard RTI’s request for disgorgement. On August 17, 2017, the district court ~~for a ruling on RTI’s request for disgorgement.~~

~~On July 17, 2015, a class action complaint was filed against the Company~~entered judgment in the U.S. District Court for the Southern District of Georgia. The plaintiffs, Glynn-Brunswick Hospital Authority, trading as Southeast Georgia Health System, and Southeast Georgia Health System, Inc., seek to represent a class of acute care purchasersfavor of BD ~~syringes~~ and ~~IV catheters. The complaint~~

~~alleges~~ruled that ~~BD monopolized the markets for syringes and IV catheters through contracts, theft~~RTI is not entitled to any award of ~~technology, false advertising, acquisitions, and other conduct. The complaint seeks treble damages but does not specify the amount of alleged~~money damages. The Company filed a motion to dismiss the complaint which was granted on January 29, 2016. On September 23, 2016, the court denied plaintiffs’ motion to alter or amend the judgment to allow plaintiffs to file an amended complaint, and plaintiffsRTI has appealed ~~that decision~~this ruling to the ~~Eleventh~~Fifth Circuit Court of Appeals. ~~The plaintiffs thereafter voluntarily dismissed their appeal,~~

Since early 2013, the Bard has received subpoenas or Civil Investigative Demands from a number of State Attorneys General seeking information related to the sales and marketing of certain of the Company’s products that are the subject of the Hernia Product Claims and the ~~Court of Appeals dismissed the case on November 21, 2016.~~

Women’s Health Product Claims. The Company is cooperating with these requests. Although the Company has had and continues to have discussions with the State Attorneys General with respect to overall potential resolution of this matter, there can be no assurance that a resolution will be reached or what the terms of any such resolution may be.

In November 2015, the Department of Defense Inspector General issued an investigative subpoena to Bard. The Department of Health and Human Services is also ~~involved both as~~participating in this investigation. The subpoena seeks documents related to the Company’s sales and marketing of certain filter products, drug coated balloon catheters, and peripheral arterial disease detection products. In July 2017, a ~~plaintiff~~separate civil investigative demand was served by the Department of Justice seeking documents and ~~a defendant~~information relating to an investigation into possible violations of the False Claims Act in ~~other legal proceedings~~connection with the sales and ~~claims that arise in the ordinary course~~marketing of ~~business.~~FloChec^® and QuantaFlo^TM devices. The Company ~~believes that~~is cooperating with these requests. Since it ~~has meritorious defenses~~is not feasible to predict the ~~suits pending against~~outcome of these matters, the Company ~~and is engaged in a vigorous defense of each~~cannot give any assurances that the resolution of these ~~matters.~~matters will not have a material adverse effect on the Company’s business, results of operations, financial condition and/or liquidity.

The Company is a potentially responsible party to a number of federal administrative proceedings in the United States brought under the Comprehensive Environment Response, Compensation and Liability Act, also known as “Superfund,” and similar state laws. The affected sites are in varying stages of development. In some instances, the remedy has been completed, while in others, environmental studies are underway or commencing. For several sites, there are other potentially responsible parties that may be jointly or severally liable to pay all or part of cleanup costs. While it is not feasible to predict the outcome of these proceedings, based upon the Company’s experience, current information and applicable law, the Company does not expect these proceedings to have a material adverse effect on its financial condition and/or liquidity. However, one or more of the proceedings could be material to the Company’s business and/or results of operations.

The Company is also involved both as a plaintiff and a defendant in other legal proceedings and claims that arise in the ordinary course of business. The Company believes that it has meritorious defenses to these suits pending against the Company and is engaged in a vigorous defense of each of these matters.

Litigation Reserves

Accruals for Bard-related product liability, legal defense costs and other legal matters amounted to approximately $1.8 billion at March 31, 2018. Such amounts include provisional estimates which have been recorded with respect to the acquired liabilities. These amounts may be adjusted upon the availability of new or additional information regarding facts or circumstances which existed at the acquisition date. As of March 31, 2018, the Company has $165 million in Bard-related qualified settlement funds (“QSFs”), subject to certain settlement conditions, for certain product liability matters. Payments to QSFs are recorded as a component of Restricted cash.

The Company's expected recoveries related to Bard-related product liability matters were approximately $303 million at March 31, 2018. A substantial amount of these expected recoveries at March 31, 2018 relate to the Company’s agreements with Medtronic related to certain Women’s Health Product Claims. The terms of the Company’s agreements with Medtronic are substantially consistent with the assumptions underlying, and the manner in which, the Company has recorded expected recoveries related to the indemnification obligation. The expected recoveries at March 31, 2018 related to the indemnification obligation are not in dispute with respect to claims that Medtronic settles pursuant to the agreements. As described above, the agreements do not resolve the dispute between the Company and Medtronic with respect to Women’s Health Product Claims that do not settle, if any, and the Company also may, in its sole discretion, transfer responsibility for settlement of additional Women’s Health Product Claims to Medtronic on similar terms.

Note 6 – Segment Data

~~The~~Beginning in the second quarter of fiscal year 2018, the Company's organizational structure iswas based upon ~~two~~three principal business segments: BD Medical (“Medical”) ~~and~~, BD Life Sciences (“Life Sciences”) and BD Interventional ("Interventional"). ~~These~~As

is further discussed in Note 8, the Company completed its acquisition of Bard on December 29, 2017. Beginning in the second quarter of fiscal year 2018, the Interventional segment includes the majority of Bard’s product offerings and certain product offerings, as further detailed below, which were previously reported in the Medical segment. Certain of Bard's product offerings are included under the Company's Medical segment, specifically within the new Medication Delivery Solutions unit, which was formerly the Medical segment's Medication and Procedural Solutions unit. In addition to the majority of products reported by the former Medication and Procedural Solutions unit, the new Medication Delivery Solutions unit of the Medical segment includes the following Bard products: peripherally inserted central catheters ("PICCs"), midlines, central venous catheters ("CVCs"), acute dialysis, and ultrasonic imaging.

The Interventional segment consists of the following organizational units:



Organizational Unit		Principal Product Lines
Surgery		Bard products include hernia and soft tissue repair; biological grafts; biosurgery; and other surgical products. Products formerly reported in the Medical segment's former Medication and Procedural Solutions unit that are now reported by the Surgery unit include BD ChloraPrep™ surgical, certain infection prevention products, and V. Mueller™.
Peripheral Intervention		Bard products include catheters; ports; chronic dialysis; feeding; vascular grafts; endovascular radiology; biopsy; drug coated balloons; stents; and other interventional products. Drainage products, which were formerly reported in the Medical segment's former Medication and Procedural Solutions unit, are now reported by the Peripheral Intervention unit.
Urology and Critical Care		Bard products include catheters; continence; urological specialties; cancer diagnostics and therapy; and other products.

The Company's segments are strategic businesses that are managed separately because each one develops, manufactures and markets distinct products and services. Segment disclosures are on a performance basis consistent with internal management reporting. The Company evaluates performance of its business segments and allocates resources to them primarily based upon operating ~~income. Segment operating~~ income, which represents revenues reduced by product costs and operating expenses. ~~As more fully discussed in Note 9,~~Beginning with its first quarter fiscal year 2018, the Company ~~sold a 50.1% controlling financial interest~~changed its management reporting approach so that certain general and administrative costs, which were previously allocated to the segments, are now excluded from the segments' operating expenses. The Medical and Life Sciences segments' operating income for the three months ended March 31, 2017 included allocated general corporate costs of $40 million and $29 million, respectively. The Medical and Life Sciences segments' operating income for the six months ended March 31, 2017 included allocated general corporate costs of $80 million and $54 million, respectively. No such allocations were made in its Respiratory Solutions business, a component of the Medical segment, in October 2016. This transaction did not meet the criteria established for reporting discontinued operations and as such, results for the three and six months ended March 31, ~~2016 included $213 million and $421 million, respectively, of revenues which did not occur in the current-year periods.~~2018.

Financial information for the Company’s segments was as follows:


	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended March 31,						Six Months Ended March 31,
(Millions of dollars)	2017			2016			2017			2016			2018			2017			2018			2017
Revenues ~~(A)~~(a)
Medical	$	1,987		$	2,131		$	3,951		$	4,185
Medical (b)													$	2,172		$	1,815		$	4,024		$	3,606
Life Sciences	982			936			1,940			1,869			1,098			982			2,143			1,940
Interventional (b)													952			173			1,135			346
Total Revenues	$	2,969		$	3,067		$	5,892		$	6,054		$	4,222		$	2,969		$	7,302		$	5,892
Income Before Income Taxes
Medical	$	537		$	513		$	1,085		$	978
Income (Loss) Before Income Taxes
Medical (b) (c)													$	588		$	475		$	1,211		$	960
Life Sciences	177			202			376			404			336			177			652			376
Interventional (b) (c)													(154		)	61			(72		)	126
Total Segment Operating Income	714			715			1,461			1,381			770			714			1,791			1,461
Acquisitions and other restructurings	(76		)	(104		)	(163		)	(225		)	(104		)	(76		)	(458		)	(163		)
Net interest expense	(79		)	(96		)	(169		)	(187		)	(181		)	(79		)	(295		)	(169		)
Other unallocated items (B)	(197		)	(139		)	(76		)	(328		)
Other unallocated items (d)													(479		)	(197		)	(926		)	(76		)
Income Before Income Taxes	$	362		$	376		$	1,054		$	642		$	6		$	362		$	111		$	1,054


~~(A)~~(a)	Intersegment revenues are not material.

~~(B)~~(b)

Prior-year amounts have been reclassified to reflect the movement of certain product offerings previously reported in the Medical segment and which are now reported in the Interventional segment, as further discussed above. Revenues associated with these products were $173 million and $346 million in the three and six month-periods ended March 31, 2017, respectively. Segment operating income associated with these products were $61 million and $126 million in the three and six month-periods ended March 31, 2017, respectively.


(c)	The amounts in 2018 included expense of $53 million and $369 million for the Medical and Interventional segments, respectively, related to the recognition of a fair value step-up adjustment of $422 million related to Bard's inventory on the acquisition date.

(d)

Primarily comprised of foreign exchange, ~~corporate~~certain general and administrative expenses and share-based compensation expense. The amount for the six months ended March 31, 2017 also included ~~a $336 million~~income resulting from the reversal of certain litigation reserves ~~related to an appellate court decision which, among other things, reversed an unfavorable antitrust judgment~~as further discussed in ~~the RTI case. Additional disclosures regarding this legal matter are provided~~ Note 5.

Revenues by geographic areas were as follows:


	Three Months Ended March 31,				Six Months Ended March 31,				Three Months Ended March 31,				Six Months Ended March 31,
(Millions of dollars)	2017		2016		2017		2016		2018		2017		2018		2017
Revenues
United States	$	1,627	$	1,719	$	3,257	$	3,410	$	2,325	$	1,627	$	3,982	$	3,257
International	1,342		1,349		2,635		2,644		1,898		1,342		3,321		2,635
Total Revenues	$	2,969	$	3,067	$	5,892	$	6,054	$	4,222	$	2,969	$	7,302	$	5,892

Note 7 – ~~Share-Based Compensation~~

The Company grants share-based awards under the 2004 Employee and Director Equity-Based Compensation Plan (the “2004 Plan”), which provides long-term incentive compensation to employees and directors. The Company believes that such awards align the interests of its employees and directors with those of its shareholders.

The fair values of stock appreciation rights granted during the annual share-based grants in November of 2016 and 2015, respectively, were estimated on the date of grant using a lattice-based binomial valuation model based on the following assumptions:

2017 2016
Risk-free interest rate 2.33 % 2.17 %
Expected volatility 20.00 % 19.00 %
Expected dividend yield 1.71 % 1.76 %
Expected life 7.5 years
7.6 years
Fair value derived $ 33.81
$ 27.69

The fair value of share-based payments is recognized as compensation expense in net income. For the three months ended March 31, 2017 and 2016, compensation expense charged to income was $39 million and $43 million, respectively. For the six months ended March 31, 2017 and 2016, compensation expense charged to income was $99 million and $119 million, respectively.

The amount of unrecognized compensation expense for all non-vested share-based awards as of March 31, 2017 was approximately $254 million, which is expected to be recognized over a weighted-average remaining life of approximately 2.2 years.

~~Note 8 –~~ Benefit Plans

The Company has defined benefit pension plans covering certain employees in the United States and certain ~~foreign~~international locations. ~~The Company also provides certain postretirement~~Postretirement healthcare and life insurance benefits provided to qualifying domestic ~~retirees. Other~~retirees as well as other postretirement benefit plans in ~~foreign~~international countries are not material. The measurement date used for the Company’s employee benefit plans is September 30.

Net pension ~~and postretirement~~ cost included the following components for the three ~~months ended March 31:~~

Pension Plans Other Postretirement Benefits
(Millions of dollars) 2017 2016 2017 2016
Service cost $ 27
$ 20
$ 1
$ 1
Interest cost 18
18
1
1
Expected return on plan assets (33 ) (27 ) —
—
Amortization of prior service credit (4 ) (4 ) (1 ) (1 )
Amortization of loss 28
19
—
—
Settlements —
1
—
—
Net pension and postretirement cost $ 35
$ 27
$ 1
$ 1

~~Net pension~~ and ~~postretirement cost included the following components for the~~ six months ended March 31:


	Pension Plans						Other Postretirement Benefits						Three Months Ended March 31,						Six Months Ended March 31,
(Millions of dollars)	2017			2016			2017			2016			2018			2017			2018			2017
Service cost	$	51		$	41		$	1		$	1		$	34		$	27		$	64		$	51
Interest cost	35			37			2			3			22			18			41			35
Expected return on plan assets	(63		)	(55		)	—			—			(40		)	(33		)	(72		)	(63		)
Amortization of prior service credit	(8		)	(7		)	(2		)	(2		)	(3		)	(4		)	(7		)	(8		)
Amortization of loss	52			39			1			1			19			28			39			52
Settlements	—			1			—			—			2			—			2			—
Net pension and postretirement cost	$	67		$	55		$	2		$	3		$	35		$	35		$	67		$	67

The amounts provided above for amortization of prior service credit and amortization of loss represent the reclassifications of prior service credits and net actuarial losses that were recognized in Accumulated other comprehensive income (loss) in prior periods.

~~Postemployment benefit costs~~

Note 8 – Acquisition

Bard

On December 29, 2017, the Company completed its acquisition of Bard, to create a medical technology company which is uniquely positioned to improve both the treatment of disease for patients and the process of care for health care providers. Under the terms of the transaction, Bard common shareholders received approximately $222.93 in cash and 0.5077 shares of BD stock per Bard share. The Company financed the cash portion of total consideration transferred with available cash, which included net proceeds raised in the third quarter of fiscal year 2017 through registered public offerings of equity securities and debt transactions of approximately $4.8 billion and $9.6 billion, respectively. The operating activities of Bard from the acquisition date through December 31, 2017 were ~~$10 million~~not material to the Company’s consolidated results of operations. As such, Bard's operating results were included in the Company’s consolidated results of operations beginning on January 1, 2018.

The acquisition-date fair value of consideration transferred consisted of the components below. The fair value of the shares and equity awards issued as consideration was recognized as a $6.5 billion increase to Capital in excess of par value and a $2.1 billion decrease to Common stock in treasury.



(Millions of dollars)
Cash consideration	$	16,400
Non-cash consideration-fair value of shares issued	8,004
Non-cash consideration-fair value of equity awards issued	613
Total consideration transferred	$	25,017

The acquisition-date fair value of the Company’s ordinary shares issued to Bard shareholders was calculated per the following (shares in millions):



(Millions of dollars, except per share data)
Total Bard shares outstanding	73.359
Conversion factor	0.5077
Conversion of Bard shares outstanding	37.243
Conversion of pre-acquisition equity awards	0.104
Total number of the Company's share issued	37.347
Closing price of the Company’s stock	$	214.32
Fair value of the Company’s issued shares	$	8,004

Allocation of Consideration Transferred to Net Assets Acquired

As discussed in Note 6, the majority of Bard's product offerings are reported, beginning with the second quarter of fiscal year 2018, under the new Interventional segment and Bard's remaining product offerings are reported under the Company's Medical segment. The acquisition is being accounted for under the acquisition method of accounting for business combinations. The Company is in the process of finalizing the allocation of the purchase price to the individual assets acquired and liabilities assumed.

The preliminary allocations of the purchase price below provide a reasonable basis for estimating the fair values of assets acquired and liabilities assumed. These provisional estimates will be adjusted upon the availability of further information regarding events or circumstances which existed at the acquisition date and such adjustments may be significant. The assets acquired and liabilities assumed in this acquisition, as recorded in the Company's consolidated balance sheet at March 31, 2018, were largely allocated to the Company's new Interventional segment.



(Millions of dollars)
Cash and equivalents	$	1,467
Trade receivables	491
Inventories	975
Property, plant and equipment	554
Developed technology	10,403
Customer relationships	1,124
Other assets	542
Total identifiable assets acquired	15,555

Payables, accrued expenses and other liabilities	1,142
Short term and long-term debt	1,692
Product liability reserves	1,634
Deferred tax liabilities	1,947
Total liabilities assumed	6,416

Net identifiable assets acquired	9,139

Goodwill	15,877

Net assets acquired	$	25,017

Identifiable Intangible Assets Acquired

The developed technology assets acquired represented Bard’s developed technologies in the fields of vascular, urology, oncology, and surgical specialties. The technologies’ fair values were determined based on the present value of projected cash flows utilizing an income approach with a risk-adjusted discount rate of 8%. The technologies will be amortized over an estimated weighted-average amortization period of 15 years, which is the weighted average period over which the technologies are expected to generate substantial cash flows.

The customer relationships assets acquired represented Bard’s contractual relationships with its customers. The fair value of these customer relationships was determined based on the present value of projected cash flows utilizing an income approach with a risk-adjusted discount rate of 8%. The estimated weighted-average amortization period of the customer relationships was determined to be 13 years and this period corresponds with the weighted average of lives determined for the product technology which underlies the customer contracts.

Goodwill

Goodwill typically results through expected synergies from combining operations of the acquiree and the acquirer, as well as from intangible assets that do not qualify for separate recognition. The goodwill recognized as a result of this acquisition includes, among other things, the value of combining the Company's leadership in medication management and infection prevention with an expanded offering of solutions across the care continuum. Additionally, Bard's strong product portfolio and innovation pipeline are expected to increase the Company's opportunities in fast-growing clinical areas. Revenue synergies are also expected to result from enhanced growth opportunities for the combined company in non-U.S. markets. No portion of goodwill from this acquisition was deductible for tax purposes.

Amounts Related to Bard's Legal Proceedings and Claims

Accruals for Bard-related product liability and other legal matters represented approximately $1.6 billion of the liabilities assumed. Cash and equivalents include a restricted cash balance acquired which largely represents funds that are restricted for

certain product liability matters assumed. Additional disclosures regarding Bard's legal proceedings and claims are provided in Note 5.

The Tax Cuts and Job Act Transition Tax

The net assets acquired included approximately $220 million of transition tax payable based on the Company’s best estimate of its transition tax liability under new U.S. tax legislation which is further discussed in Note 14.

Transaction Costs

Transaction costs incurred during the three and six months ended March 31, ~~2017~~ 2018 were approximately $7 millionand ~~2016. Postemployment benefit~~$51 million. These transaction costs were ~~$20 million~~recorded as Acquisitions and other restructurings and consisted of legal, advisory and other costs.See Note 9 for discussion regarding restructuring costs incurred relative to the Bard acquisition in the six months ended March 31, ~~2017 and 2016. Employee termination costs associated with the Company's restructuring activities are provided in Note~~ 10.2018.

~~Note 9 – Divestiture~~

~~Respiratory Solutions~~Unaudited Pro Forma Information

~~On October 3, 2016,~~As noted above, Bard's operating activities from the acquisition date through December 31, 2017 were not material and the Company ~~sold a 50.1% controlling financial interest~~included Bard in its ~~Respiratory Solutions business, a component~~consolidated results of ~~the Medical segment, to form a joint venture, Vyaire Medical. The Company retained a 49.9% non-controlling interest in the new standalone entity. The buyer will control the~~ operations ~~and governance of the new entity. The Company accounts for its remaining interest in the new entity as an equity method investment and,~~ beginning on January 1, ~~2017, records its share of the new entity's earnings or losses on a one-quarter lag to~~2018. ~~Other income (expense), net.~~Revenues ~~The Company has agreed to various contract manufacturing~~ and certain logistical and transition services agreements with the new entity for a period of up to two years after the sale. The historical financial results for the Respiratory Solutions business, which included approximately $213 million and $421 million of revenuesNet Income (Loss) for the three and six months ended March 31, ~~2016, respectively,~~2018 included revenues and loss attributable to Bard of $1 billion and $202 million, respectively. The following table provides the pro forma results for the three and six months ended March 31, 2018 and 2017 as if Bard had been acquired as of October 1, 2016.



	Three Months Ended March 31,				Six Months Ended March 31,
(Millions of dollars, except per share data)	2018		2017		2018			2017

Revenues	$	4,222	$	3,862	$	8,266		$	7,707

Net Income (Loss)	$	340	$	322	$	(77	)	$	920

Diluted Earnings (Loss) per Share	$	1.10	$	1.17	$	(0.61	)	$	3.07

The pro forma results above include the impact of the following adjustments, as necessary: additional amortization and depreciation expense relating to assets acquired; interest and other financing costs relating to the acquisition transaction; and the elimination of one-time or nonrecurring items. The one-time or nonrecurring items eliminated for the three and six months ended March 31, 2018 were primarily comprised of a fair value step-up adjustment of $422 million recorded relative to Bard's inventory on the acquisition date, the transaction costs discussed above, as well as Bard-related restructuring costs disclosed in Note 9. In addition, amounts previously reported by Bard as revenues related to a royalty income stream have been reclassified to Other income (expense), net to reflect the Company's current and future reporting classification.

The pro forma results do not include any anticipated cost savings or other effects of the planned integration of Bard. Accordingly, the pro forma results above are not necessarily indicative of the results that would have been ~~classified as a discontinued operation.~~if the acquisition had occurred on the dates indicated, nor are the pro forma results indicative of results which may occur in the future.

Note 109 – Business Restructuring Charges

In connection with the Company's ~~fiscal year~~acquisition of Bard, the 2015 acquisition of CareFusion and other portfolio rationalization initiatives, the Company incurred restructuring costs during the six months ended March 31, ~~2017,~~2018, which were recorded as Acquisitions and other restructurings. Restructuring liability activity for the six months ended March 31, ~~2017~~2018 was as follows:


(Millions of dollars)	Employee Termination			Other			Total			Employee Termination						Other						Total
Balance at September 30, 2016	$	67		$	2		$	69
										Bard			CareFusion/Other Initiatives			Bard (a)			CareFusion/Other Initiatives			Bard			CareFusion/Other Initiatives
Balance at September 30, 2017										$	—		$	49		$	—		$	6		$	—		$	55
Charged to expense	18			29			46			161			24			55			15			216			39
Cash payments	(28		)	(17		)	(45		)	(41		)	(45		)	—			(16		)	(41		)	(61		)
Non-cash settlements	—			(6		)	(6		)	—			—			(55		)	—			(55		)	—
Other adjustments	—			(7		)	(7		)	—			—			—			1			—			1
Balance at March 31, 2017	$	57		$	1		$	58
Balance at March 31, 2018										$	120		$	28		—			$	6		$	120		$	34


(a)	Represents the cost associated with the conversion of certain pre-acquisition equity awards of Bard to BD equity awards, partially offset by a gain on the sale of the Company's soft tissue core needle biopsy product line which was recorded in the second quarter of fiscal year 2018.

Note 1110 – Intangible Assets

Intangible assets consisted of:


	March 31, 2017				September 30, 2016				March 31, 2018				September 30, 2017
(Millions of dollars)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets
Developed technology									$	13,948	$	1,386	$	3,508	$	1,029
Customer relationships	$	3,374	$	451	$	3,360	$	339	4,566		702		3,393		564
Developed technology	3,417		879		3,409		754
Product rights	122		46		125		43		131		58		131		54
Trademarks	405		56		405		45		408		71		408		65
Patents and other	351		265		349		254		382		274		370		274
Amortized intangible assets	$	7,670	$	1,696	$	7,648	$	1,435	$	19,435	$	2,490	$	7,811	$	1,986
Unamortized intangible assets
Acquired in-process research and development	$	65			$	66			$	54			$	67
Trademarks	2				2				2				2
Unamortized intangible assets	$	67			$	68			$	56			$	69

Additional disclosures regarding the increases to the developed technology assets and customer relationships as a result of the Bard acquisition are provided in Note 8. Intangible amortization expense for the three months ended March 31, 2018 and 2017 ~~and 2016~~ was ~~$131~~$370 million and ~~$138~~$131 million, respectively. Intangible amortization expense for the six months ended March 31, 2018 and 2017 was $505 million and ~~2016 was~~ $268 million, ~~and $289 million,~~ respectively.

The following is a reconciliation of goodwill by business segment:


(Millions of dollars)	Medical			Life Sciences			Total			Medical			Life Sciences		Interventional			Total
Goodwill as of September 30, 2016	$	6,688		$	731		$	7,419
Goodwill as of September 30, 2017										$	6,802		$	761	$	—		$	7,563
Acquisitions(a)	—			24			24			4,389			76		10,674			15,139
Divestiture (A)	(25		)	—			(25		)
Divestitures										—			—		(57		)	(57		)
Reallocation of goodwill for change in segment and reporting unit composition (b)										(877		)	—		877			—
Purchase accounting adjustments (c)										140			—		685			825
Currency translation	(10		)	(3		)	(13		)	14			5		—			19
Goodwill as of March 31, 2017	$	6,653		$	752		$	7,405
Goodwill as of March 31, 2018										$	10,469		$	843	$	12,179		$	23,491


~~(A)~~(a)	Represents goodwill ~~derecognized~~recognized upon the Company's ~~sale~~acquisition of ~~a 50.1% controlling financial interest~~Bard, which is further discussed in Note 8. Also includes goodwill recognized relative to certain acquisitions which were not material individually or in the ~~Respiratory Solutions business,~~aggregate.


(b)	Represents the reassignment of goodwill, determined based upon a relative fair value allocation approach, associated with the movement of certain product offerings which were previously reported in the Medical segment and which are now reported in the Interventional segment as further discussed in Note 9.6.


(c)	The purchase accounting adjustments increasing goodwill were primarily driven by the valuation of developed technology assets acquired in the Bard transaction and the associated deferred tax liability changes. The change also reflects an increase to goodwill resulting from alignment of the combined organization's accounting policies with respect to accrued liabilities and other accounts.

Note 1211 – Derivative Instruments and Hedging Activities

The Company uses derivative instruments to mitigate certain exposures. The effects these derivative instruments and hedged items have on financial position, financial performance, and cash flows are provided below.

Foreign Currency Risks and Related Strategies

The Company has foreign currency exposures throughout Europe, Greater Asia, Canada and Latin America. Transactional currency exposures that arise from entering into transactions, generally on an intercompany basis, in non-hyperinflationary countries that are denominated in currencies other than the functional currency are mitigated primarily through the use of forward contracts and currency options. Hedges of the transactional foreign exchange exposures resulting primarily from intercompany payables and receivables are undesignated hedges. As such, the gains or losses on these instruments are recognized immediately in income. ~~The~~These gains and losses are largely offset ~~of these gains or losses against the~~by gains and losses on the underlying hedged items, as well as the hedging costs associated with the derivative ~~instruments, is~~instruments. The net amounts recognized in Other income (expense), net., during the three and six months ended March 31, 2018 and 2017 were immaterial to the Company's consolidated financial results. The total notional amounts of the Company’s outstanding foreign exchange contracts as of March 31, ~~2017~~2018 and September 30, ~~2016~~2017 were ~~$1.8~~$1.4 billion and ~~$2.3~~$2.5 billion, respectively.

In order to mitigate foreign currency exposure relating to its investments in certain foreign subsidiaries, the Company has designated ~~$1.1~~$2.5 billion of euro-denominated debt ~~issued in December 2016,~~ as net investment hedges. Accordingly, net gains or losses relating to this debt, which are attributable to changes in the euro to U.S. dollar spot exchange rate, are recorded as

accumulated foreign currency translation in Other comprehensive income (loss). Recognition of hedge ineffectiveness into earnings will occur if the notional amount of the euro-denominated debt no longer matches the portion of the net investments in foreign subsidiaries which underlie the hedges. The ~~Company's balance~~Company has recorded net losses relating to these net investment hedges of $104 million to Accumulated other comprehensive income (loss) ~~as of~~during the six months ended March 31, ~~2017 included a loss relating to these net investment hedges of $19 million. Additional disclosures regarding the Company's issuance of the euro-denominated debt in December 2016 are provided in Note~~ 14.2018.

Interest Rate Risks and Related Strategies

The Company’s primary interest rate exposure results from changes in U.S. dollar interest rates. The Company’s policy is to manage interest cost using a mix of fixed and variable rate debt. The Company periodically uses interest rate swaps to manage such exposures. Under these interest rate swaps, the Company exchanges, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps are designated as either fair value or cash flow hedges.

For interest rate swaps designated as fair value hedges (i.e., hedges against the exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is attributable to a particular risk), changes in the fair value of the interest rate swaps offset changes in the fair value of the fixed rate debt due to changes in market interest rates.

Changes in the fair value of the interest rate swaps designated as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk) are offset by amounts recorded in Other comprehensive income (loss). If interest rate derivatives designated as cash flow hedges are terminated, the balance in Accumulated other comprehensive income (loss) attributable to those derivatives is reclassified into earnings over the remaining life of the hedged debt. The net realized loss related to terminated interest rate swaps expected to be reclassified and recorded in Interest expense within the next 12 months is $5 million, net of tax.

The total notional value of the Company's outstanding forward starting interest rate swaps, which were entered into to mitigate the Company's exposure to interest rate risk and were designated as cash flow hedges, was $500 million at March 31, 2017 and September 30, 2016.

The total notional amount of the Company’s outstanding interest rate swaps designated as fair value hedges was $1.2 billion and $375 million at March 31, ~~2017~~2018 and September 30, ~~2016.~~2017, respectively. The outstanding swaps represent fixed-to-floating interest rate swap agreements the Company entered into to convert the interest payments on ~~$375 million of the Company’s 3.125%~~certain long-term notes ~~due 2021~~ from the fixed rate to a floating interest rate based on LIBOR. Changes in the fair value of the interest rate swaps offset changes in the fair value of the fixed rate debt. The ~~gains (losses)~~amounts recorded ~~on these~~during the three and six months ended March 31, 2018 and 2017 for changes in the fair value of these hedges ~~which~~ were ~~offset by losses (gains) recorded~~immaterial to the ~~underlying debt instruments, are provided below.~~

Company's consolidated financial results

Three Months Ended
March 31, Six Months Ended
March 31,
(Millions of dollars) 2017 2016 2017 2016
(Losses) gains on fair value hedges $ (1 ) $ 11
$ (16 ) $ 24

~~Other Risk Exposures~~

The Company purchases resins, which are oil-based components used in the manufacture of certain products. Significant increases in world oil prices that lead to increases in resin purchase costs could impact future operating results. From time to time, the Company has managed price risks associated with these commodity purchases.

Effects on Consolidated Balance Sheets

The ~~location and amounts~~fair values of derivative ~~instrument fair values in~~instruments outstanding at March 31, 2018 and September 30, 2017 were not material to the Company's consolidated balance ~~sheet are segregated below between designated, qualifying hedging instruments and ones that are not designated for hedge accounting.~~

sheets.

(Millions of dollars) March 31,
2017 September 30,
2016
Asset derivatives-designated for hedge accounting
Interest rate swaps $ 7
$ 23
Asset derivatives-undesignated for hedge accounting
Forward exchange contracts 6
3
Total asset derivatives (A) $ 12
$ 25
Liability derivatives-designated for hedge accounting
Interest rate swaps 4
18
Liability derivatives-undesignated for hedge accounting
Forward exchange contracts 5
13
Total liability derivatives (B) $ 8
$ 31


~~(A)~~	~~All asset derivatives are included in~~ ~~Prepaid expenses and other~~.


~~(B)~~	~~All liability derivatives are included in~~ ~~Payables and accrued expenses~~.

Effects on Consolidated Statements of Income

Cash flow hedges

The amounts recognized in other comprehensive income during the three and six months ended March 31, 2018 and 2017 ~~and 2016 related~~were not material to the ~~previously discussed forward starting interest rate swaps.~~

Three Months Ended
March 31, Six Months Ended
March 31,
(Millions of dollars) 2017 2016 2017 2016
After-tax gains (losses) relating to cash flow hedges recognized in other comprehensive income (loss) $ 1
$ (2 ) $ 25
$ (2 )

Company's consolidated financial results. The Company’s designated derivative instruments ~~designated as cash flow hedges~~ are highly effective. As such, there ~~are~~were no gains or losses, related to hedge ineffectiveness or amounts excluded from hedge effectiveness testing, recognized immediately in income relative to ~~cash flow hedges~~derivative contracts outstanding in the periods presented.

~~Undesignated hedges~~

~~The location and amount of gains and losses recognized in income on derivatives not designated for hedge accounting were as follows:~~

Location of (Loss) Gain
Recognized in
Income on
Derivatives

Amount of (Loss) Gain Recognized in Income on Derivatives

Amount of (Loss) Gain Recognized in Income on Derivatives
Derivatives Not Designated as Hedging Instruments Three Months Ended
March 31, Six Months Ended
March 31,
(Millions of dollars) 2017 2016 2017 2016
Forward exchange contracts (A) Other income (expense), net $ 15
$ 15
$ (7 ) $ 26



~~(A)~~	The gains and losses on forward contracts and currency options utilized to hedge the intercompany transactional foreign exchange exposures are largely offset by gains and losses on the underlying hedged items in ~~Other income (expense), net~~.

Note 1312 – Financial Instruments and Fair Value Measurements

The fair values of financial instruments, including those not recognized on the statement of financial position at fair value, carried at March 31, 2017 and September 30, 2016 are classified in accordance with the fair value hierarchy in the following tables:

Basis of Fair Value Measurement
(Millions of dollars)
March 31, 2017
Total

Quoted Prices in
Active Markets
for Identical
Assets (Level 1)

Significant Other
Observable
Inputs (Level 2)

Significant
Unobservable
Inputs (Level 3)
Assets
Institutional money market investments $ 20
$ 20
$ —
$ —
Interest rate swaps 7
—
7
—
Forward exchange contracts 6
—
6
—
Total Assets $ 32
$ 20
$ 12
$ —
Liabilities
Forward exchange contracts $ 5
$ —
$ 5
$ —
Interest rate swaps 4
—
4
—
Contingent consideration liabilities 63
—
—
63
Total Liabilities $ 71
$ —
$ 8
$ 63

Basis of Fair Value Measurement
(Millions of dollars)
September 30,
2016
Total

Quoted Prices in
Active Markets
for Identical
Assets (Level 1)

Significant Other
Observable
Inputs (Level 2)

Significant
Unobservable
Inputs (Level 3)
Assets
Institutional money market investments $ 224
$ 224
$ —
$ —
Interest rate swaps 23
—
23
—
Forward exchange contracts 3
—
3
—
Total Assets $ 249
$ 224
$ 25
$ —
Liabilities
Forward exchange contracts $ 13
$ —
$ 13
$ —
Interest rate swaps 18
—
18
—
Contingent consideration liabilities 54
—
—
54
Total Liabilities $ 86
$ —
$ 31
$ 54

The Company’s institutional money market accounts permit daily redemption and the fair values of these investments are based upon the quoted prices in active markets provided by the holding financial ~~institutions.~~institutions, which are considered Level 1 inputs in the fair value hierarchy. The fair values of these accounts were $12 million and $2.026 billion at March 31, 2018 and September 30, 2017, respectively. The Company’s remaining cash and equivalents, excluding restricted cash, were ~~$528 million~~$1.238 billion and ~~$1.317~~$12.153 billion at March 31, ~~2017~~2018 and September 30, ~~2016,~~2017, respectively. Short-term investments are held to their maturities and are carried at cost, which approximates fair value. The cash equivalents consist of liquid investments with a maturity of three months or less and the short-term investments consist of instruments with maturities greater than three months and less than one year.

The Company measures the fair value of forward exchange contracts and interest rate swaps based upon the present value of expected future cash flows using market-based observable inputs including credit risk, interest rate yield curves, foreign currency spot prices and forward prices.

Long-term debt is recorded at amortized cost. The fair value of long-term debt is measured based upon quoted prices in active markets for similar instruments, which are considered Level 2 inputs in the fair value hierarchy. The fair value of long-term debt was ~~$9.5~~$22.6 billion and ~~$11.3~~$19.2 billion at March 31, ~~2017~~2018 and September 30, ~~2016,~~2017, respectively. The fair value of the current portion of long-term debt was ~~$1.1 billion~~$200 million and ~~$798~~$206 million at March 31, ~~2017~~2018 and September 30, ~~2016,~~2017, respectively.

~~The~~All other instruments measured by the Company at fair value, including derivatives and contingent consideration liabilities, are immaterial to the Company's consolidated balance sheets.

Note 13 – Debt

Credit Facilities

In connection with the Company's agreement to acquire Bard, the Company entered into a three-year senior unsecured term loan facility of $2.25 billion during the third quarter of fiscal year 2017. During the first quarter of fiscal year 2018, the proceeds from this facility were ~~recognized as part~~used to fund a portion of the cash consideration ~~transferred by~~for the Bard acquisition, as well as the fees and expenses incurred in connection with the acquisition. Borrowings outstanding under the term loan facility were $1.4 billion at March 31, 2018. The Company ~~for certain acquisitions. The fair values~~also entered into a five-year senior unsecured revolving credit facility in the third quarter of the contingent consideration liabilities were estimated using probability-weighted discounted cash flow models that were based upon the probabilities assigned with regard to achievement of the contingent events. The

~~estimated fair values~~fiscal year 2017 which became effective upon the closing of the ~~contingent consideration liabilities~~Bard acquisition and which provides borrowing of up to $2.25 billion. This facility will expire in December 2022 and replaced the $1.5 billion syndicated credit facility the Company previously had in place for general corporate purposes. Borrowings outstanding under the revolving credit facility were $380 million at March 31, 2018.

Exchange of Bard Notes

Also in connection with the Company's acquisition of Bard, the Company exchanged certain outstanding notes issued by Bard for a like-amount of new notes issued by the Company. The exchange offers, which were conditioned upon the closing of the Bard acquisition, expired on December 29, 2017. The aggregate principal amounts of Bard notes which were validly tendered for notes issued by the Company are ~~remeasured each reporting period based upon increases~~provided below.



(Millions of dollars)
Interest Rate and Maturity	Aggregate Principal Amount		Principal Amount Accepted for Exchange
4.400% Notes due January 15, 2021	$	500	$	432
3.000% Notes due May 15, 2026	500		470
6.700% Notes due December 1, 2026	150		137
Total	$	1,150	$	1,039

This exchange transaction was accounted for as a modification of the assumed debt instruments. As such, no gain or ~~decreases~~loss was recognized in the ~~probability~~Company’s consolidated results of operations as a result of this exchange transaction. Following the exchange of the ~~contingent payments.~~notes, the aggregate principal amount of Bard notes that remained outstanding after settlement of the exchange transaction was $111 million.

Repurchase Offer

In January 2018, the Company commenced an offer to repurchase any and all of the outstanding 3.000% Notes due May 15, 2026 that were issued as a result of the exchange transaction discussed above. Under the terms of the repurchase offer, holders were entitled to receive cash equal to 101% of the principal amount of notes validly tendered, plus accrued and unpaid interest, if any, to the date of purchase. The ~~Company’s policy is~~offer to ~~recognize any transfers into fair~~repurchase the 3.000% Notes expired on March 1, 2018 and a total of $461 million aggregate principal amount of notes were validly tendered at a market price of $465 million. Based upon the carrying value ~~measurement hierarchy levels~~of $452 million, the Company recorded a loss relating to this debt extinguishment in the second quarter of fiscal year 2018 of $13 million as Other income (expense), net, on its condensed consolidated statements of income.

Fiscal Year 2018 Debt Issuances

During the second quarter of fiscal year 2018, the Company issued Euro-denominated debt consisting of 300 million Euros ($370 million) of 0.368% notes due June 6, 2019 under an indenture pursuant to which the Company previously issued, in the third quarter of fiscal year 2017, 0.368% notes due June 6, 2019. Also in the second quarter of fiscal year 2018, the Company issued $1 billion of floating rate senior unsecured U.S. notes due December 29, 2020. The Company used the net proceeds from these long-term debt offerings to repay portions of the balances outstanding on its term loan and ~~transfers out of levels at the beginning of each reporting period. There were no transfers in~~revolving credit facilities, which are discussed above, as well as accrued interest, related premiums, fees and ~~out of Level 1, Level 2 or Level 3 measurements for the three and six months ended March 31, 2017 and 2016.~~expenses related to these repaid amounts.

Note 14 – ~~Debt~~Income Taxes

InNew U.S. tax legislation, which is commonly referred to as the Tax Cuts and Job Act ("the Act") and which was enacted on December ~~2016,~~22, 2017, reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign-sourced earnings. Under U.S. generally accepted accounting principles, companies must account for the effects of changes in income tax rates and laws in the period in which the legislation is enacted. However, the U.S. Securities and Exchange Commission (the "SEC") has provided guidance which allows companies to report financial results including provisional amounts that have been recorded for the income tax effects of the Act based upon a reasonable estimate of those effects once the necessary information to determine such an estimate is available. The SEC expects that accounting for the Act should be completed by companies by no later than one year from the enactment date of the Act.

As of March 31, 2018, the Company ~~issued euro-denominated debt consisting~~has not completed its accounting for the tax effects of ~~500 million euros ($531 million)~~enactment of ~~1.000% notes due December 15, 2022 and 500 million euros ($531 million) of 1.900% notes due December 15, 2026. The Company used~~ the net proceeds from this long-term debt offering, together with other sources of liquidity, to fund the Company's repurchase of certain of its long-term senior notes outstanding. Under this cash tender offer,Act; however, the Company ~~repurchased~~has made what it believes is a reasonable estimate of the ~~following aggregate principal amounts of~~effects on its ~~long-term debt at an aggregate market price of $1.764 billion:~~

Interest Rate and Maturity
Aggregate Principal Amount
(Millions of dollars)
1.450% Notes due May 15, 2017 $ 226
1.800% Notes due December 15, 2017    250
5.000% Notes due May 15, 2019 153
6.375% Notes due August 1, 2019    338
2.675% Notes due December 15, 2019    125
3.875% Notes due May 15, 2024    221
3.734% Notes due December 15, 2024    375
Total notes purchased    $ 1,689

~~The carrying value~~existing deferred tax balances and the one-time transition tax. As a result of these ~~long-term notes was $1.727 billion, and~~estimates, the Company recognized a ~~loss on this debt extinguishment~~provisional expense in the amount of ~~$42~~$275 million,

which ~~was recorded~~is reflected in ~~December 2016~~the Company's consolidated statement of income within Income tax provision. The Company will continue to make and adjust its calculations as additional analysis is completed and as it gains a more thorough understanding of the tax law.~~Other income (expense), net~~,

The Company is currently in the process of evaluating the new Global Intangible Low-Taxed Income’s ("GILTI") provisions and has not yet elected an accounting policy with respect to whether to reflect GILTI in its deferred tax calculations or not. Therefore, the Company has not made any adjustments related to the GILTI tax in its financial statements. Under the SEC guidance noted above, the Company will continue to analyze and assess the effects of the GILTI provisions of the Act.

Provisional Amounts

The Company believes that all provisional amounts reflected in its financial statements are based on the ~~Company’s condensed consolidated statements~~best estimates that can be made at this time. The Company will continue to analyze all impacts of ~~income.~~the Act and will update provisional amounts as required.

Deferred tax assets and liabilities

The Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. However, the Company is still analyzing certain aspects of the Act and refining its calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the re-measurement of the Company's deferred tax balance was a tax benefit of $285 million.

Foreign tax effects

The one-time transition tax is based on the Company's total post-1986 earnings and profits ("E&P") that the Company previously deferred from U.S. income taxes. The Company recorded a provisional amount for its one-time transition tax liability for all of its foreign subsidiaries, resulting in an increase in income tax expense of $561 million. However, the Company has not yet completed its calculation of the total post-1986 E&P for these foreign subsidiaries. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when the Company finalizes the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalizes the amounts held in cash or other specified assets. As discussed in Note 8, the Company completed its acquisition of Bard on December 29, 2017. The net assets acquired included approximately $220 million of transition tax payable based on the Company's best estimate of its transition tax liability. The combined company's transition tax liability, 8% of which is payable per year over the next five years with the balance payable over the following three years, is approximately $781 million. The anticipated payment of this tax is expected to begin on January 15, 2019.

No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practicable.

Note 15 – Subsequent ~~Events~~

~~Definitive Agreement to Acquire C.R. Bard, Inc.~~

On April 23, 2017, the Company announced that it had entered into a definitive agreement under which BD will acquire C. R. Bard, Inc. ("Bard") for $317.00 per Bard common share in cash and stock, for a total consideration of approximately $24 billion. The combination will create a highly differentiated medical technology company uniquely positioned to improve both the process of care and the treatment of disease for patients and healthcare providers.

Under the terms of the transaction, Bard common shareholders will be entitled to receive approximately $222.93 in cash and 0.5077 shares of BD stock per Bard share, or a total of value of $317.00 per Bard common share based on BD's closing price on April 21, 2017. At closing, Bard shareholders will own approximately 15 percent of the combined company. The Company has secured access to $15.7 billion of fully committed bridge financing and expects to permanently finance the transaction with approximately $1.7 billion of available cash, as well as, subject to market conditions, approximately $10 billion of new debt, approximately $4.5 billion of equity and equity-linked securities issued to the market, and approximately $8 billion of BD common stock. The transaction is subject to regulatory and Bard shareholder approval and customary closing conditions, and is expected to close in the fall of 2017.

~~Amendment to Dispensing Equipment Leases~~Event

In April 2018, the Company completed the sale of its 49.9% non-controlling interest in Vyaire Medical, a venture formed in the Company's fiscal year 2017 ~~in conjunction with the implementation~~upon its sale of a ~~new “go-to-market” business model for the Company's U.S. dispensing business within the Medication Management~~50.1% controlling financial interest in its former Respiratory Solutions ~~(“MMS”) unit~~business. The Company received gross cash proceeds of ~~the Medical segment, the Company amended the terms of certain customer leases for dispensing equipment within the MMS unit. The modification provided customers the ability~~approximately $435 million, subject to ~~reduce its dispensing asset base via~~post-closing adjustments, and expects to recognize a ~~return provision, resulting in a more flexible lease term. Prior to the modification, these leases were accounted for as sales-type leases in accordance with Accounting Standards Codification~~

Topic 840, "Leases", as the non-cancellable lease term of five years exceeded 75% of the equipment’s estimated useful life and the present value of the minimum lease payments exceeded 90% of the equipment’s fair value. As a result of the lease modifications, the Company is required to reassess the classification of the leases due to the amended lease term. Accordingly, most amended lease contracts will be classified as operating leases beginning in April 2017. The change in lease classification will require the derecognition of the net investment in sales-type leases and the recognition of the underlying leased assetspre-tax gain on the Company’s balance sheet as of the effective date, and will result in an estimated non-cash, net charge to earnings of approximately $400-$500 million in the third quarter of fiscal year 2017. Beginning April 1, 2017 revenue associated with these modified contracts will be recognized on a straight-line basis over the remaining lease term, along with depreciation on the reinstated leased assets.

sale.

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

The following commentary should be read in conjunction with the condensed consolidated financial statements and accompanying notes. 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.

Company Overview

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

and the new BD Interventional (“Interventional”), as further discussed below.

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 Japan and Asia Pacific); 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 Asia Pacific. We are primarily focused on certain countries whose healthcare systems are ~~expanding, in particular, China and India.~~expanding.

Recent Developments

On ~~April 23,~~December 29, 2017, ~~we announced that we have entered into a definitive agreement under which~~ BD ~~will acquire~~completed its acquisition of C. R. Bard, Inc. ("Bard") for ~~$317.00 per Bard common share in~~total consideration transferred, including cash and stock, ~~for a total consideration~~ of approximately ~~$24~~$25 billion. The combination ~~will create~~creates a ~~highly differentiated~~ medical technology company which is uniquely positioned to improve both ~~the process of care and~~ the treatment of disease for patients and ~~healthcare~~the process of care for health care providers. The operating activities of the acquired businesses were included in our consolidated results of operations beginning on January 1, 2018. BD ~~has secured access~~reports the results associated with the majority of Bard's product offerings within a new BD Interventional segment. Bard's remaining product offerings are reported under the Medical segment. For further discussions regarding the reporting of Bard products within BD's segments and the Bard acquisition, refer to ~~fully committed bridge financing~~Notes 6 and expects to permanently finance the transaction with available cash, new debt and equity securities. The transaction is subject to regulatory and Bard shareholder approval and customary closing conditions, and is expected to close in the fall of 2017. Additional discussion regarding this agreement is provided in Note 158 in the Notes to Condensed Consolidated Financial ~~Statements~~Statements.

On December 22, 2017, new U.S. tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Act") was enacted. The new tax legislation, which became effective January 1, 2018, reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign-sourced earnings. As of March 31, 2018, we have not completed our accounting for the tax effects of the Act; however, based upon reasonable estimates of these effects, we recognized a provisional expense of $275 million for the six months ended March 31, 2018 which is reflected in our consolidated statement of income within Income tax provision. We will continue to make and refine our calculations as additional analysis is completed and as we gain a more thorough understanding of the tax law. Additional disclosures regarding our accounting for the Act are provided in Note 14 in the Notes to Condensed Consolidated Financial Statements.

Overview of Financial Results and Financial Condition

For the three months ended March 31, ~~2017,~~2018, worldwide revenues of ~~$2.969~~$4.222 billion ~~decreased 3.2%~~increased 42.2% from the prior-year ~~period. The decrease in revenues~~period, which reflected an ~~approximate 7% reduction in revenues due to~~impact of approximately 33% resulting from the ~~divestiture~~acquisition of ~~the Respiratory Solutions business in October 2016.~~Bard. Second quarter revenue growth also reflected volume growth of ~~more than~~over 5% ~~for our continuing businesses was partially offset by an unfavorable~~, a favorable impact offrom foreign currency translation of approximately ~~1%. Pricing did not materially~~5% and an unfavorable impact ~~second quarter revenues. Additional disclosures regarding our divestiture~~ of ~~the Respiratory Solutions business are provided in Note 9 in the Notes to Condensed Consolidated Financial Statements.~~price of approximately 0.5%. Volume growth in the second quarter of fiscal year ~~2017 reflected~~2018 attributable to the ~~following:~~Medical and Life Sciences segments was as follows:

Medical segment volume growth in the second quarter was driven by sales in the Medication Delivery Solutions, Pharmaceutical Systems and ~~Procedural Solutions and~~Diabetes Care units. The Medication Management Solutions ~~units. Second quarter~~unit's revenues in the ~~Diabetes Care and Pharmaceutical Systems units~~second quarter of 2018 were unfavorably impacted by a modification to dispensing equipment lease contracts with customers in the prior year which impacted the timing of ~~orders that were expected to occur in the second quarter but were received in the first quarter.~~revenue recognition.

Life Sciences segment volume growth in the second quarter was driven by ~~the Preanalytical~~growth in its Diagnostic Systems and ~~Diagnostic Systems~~Biosciences units. ~~Life Sciences segment volume growth in the second quarter was partially offset by the unfavorable timing of instrument orders and the impact of sales fulfillment delays in the Biosciences unit.~~

Worldwide sales of safety-engineered products reflected growth that was attributable to both segments. Second quarter sales in the United States of safety-engineered devices of $459 million increased 3.7% and second quarter international sales of safety-engineered devices of $315 million grew 8.6% over the prior year’s period, inclusive of an estimated 1.7% unfavorable impact due to foreign currency translation.

We continue to invest in research and development, geographic expansion, and new product promotions 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. While the economic environment for the healthcare industry ~~has generally stabilized, pricing pressures continue for some of our products. Healthcare~~and healthcare utilization ~~has stabilized and slightly improved~~ in the United ~~States; however, any~~States have generally stabilized, destabilization in the future could adversely impact our ~~U.S.~~ businesses. Additionally,

macroeconomic challenges in Europe continue to constrain healthcare utilization, although we currently view the environment as stable. In emerging markets, the Company’s growth is dependent primarily on government funding for healthcare systems. In addition, pricing pressure exists for certain geographies and could adversely impact our businesses.

~~Our financial position remains strong, with cash~~Cash flows from operating activities ~~totaling $1.040~~were $1.017 billion in the first six months of fiscal year ~~2017.~~2018. At March 31, ~~2017,~~2018, we had ~~$0.6~~$1.4 billion in cash and equivalents and short-term ~~investments.~~investments, including restricted cash. We continued to return value to our shareholders in the form of dividends. During the first six months of fiscal year ~~2017,~~2018, we paid cash dividends of ~~$312~~$449 million. We also repurchased approximately $220 million of our common stock under an accelerated share repurchase agreement during the first six months of fiscal year 2017. Additional disclosures regarding this share repurchase agreement are provided in Note 4 in the Notes to Condensed Consolidated Financial Statements.

Each reporting period, we face currency exposure that arises from translating the results of our worldwide operations to the U.S. dollar at exchange rates that fluctuate from the beginning of such period. ~~The ongoing relative strength of the~~A weaker U.S. dollar, compared to the prior-year period, resulted in ~~an unfavorable~~a favorable foreign currency translation impact to our revenue and earnings ~~growth~~ during the second quarter of fiscal year ~~2017.~~2018. 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 second quarter Medical revenues by organizational ~~unit, as well as second quarter Medical sales of safety-engineered products:~~unit:


	Three months ended March 31,										Three months ended March 31,
(Millions of dollars)	2017		2016		Total Change (B)		Estimated FX Impact		FXN Change (B)		2018		2017		Total Change		Estimated FX Impact		FXN Change
Medication and Procedural Solutions	$	865	$	831	4.1	%	(0.7	)%	4.8	%
Medication Delivery Solutions (a)											$	958	$	693	38.3	%	4.4	%	33.9	%
Medication Management Solutions ~~(A)~~	567		533		6.3	%	(0.7	)%	7.0	%	581		567		2.5	%	2.0	%	0.5	%
Diabetes Care	243		243		—	%	(0.5	)%	0.5	%	267		243		9.8	%	4.1	%	5.7	%
Pharmaceutical Systems	312		311		0.4	%	(2.2	)%	2.6	%	366		312		17.4	%	9.5	%	7.9	%
Respiratory Solutions (A)	—		213		NM		—	%	NM
Total Medical Revenues	$	1,987	$	2,131	(6.8	)%	(0.9	)%	(5.9	)%	$	2,172	$	1,815	19.7	%	4.4	%	15.3	%

Medical segment safety-engineered products	$	485	$	465	4.3	%	(0.4	)%	4.7	%


~~(A)~~	The presentation of prior-period amounts has been revised to conform with the presentation of current-period amounts, which does not separately present an immaterial adjustment for the amortization of a deferred revenue balance write-down relating to the CareFusion acquisition.

~~(B)~~(a)~~"NM" denotes that~~The presentation of prior-period amounts reflects a reclassification of $173 million of certain product revenues from the ~~percentage is not meaningful.~~Medical segment to the Interventional segment as further discussed in Note 6 in the Notes to Condensed Consolidated Financial Statements.

~~The decrease in total~~Second quarter Medical segment ~~revenues in the second quarter of 2017 compared with the prior-year period reflected the divestiture of the Respiratory Solutions business, as previously discussed. Second quarter revenue~~ growth ~~from the Medical segment's continuing units~~ was favorably impacted by the ~~volume~~inclusion of revenues associated with certain Bard products within the Medication Delivery Solutions unit, beginning on January 1, 2018. The Medical segment's underlying revenue growth was driven by sales of the Medication Delivery Solutions unit's vascular access and vascular care products. In addition, sales of the Pharmaceutical Systems unit's safety-engineered products and the Diabetes Care unit's pen needles also contributed to growth. The Medication Management Solutions unit's revenues were unfavorably impacted by a modification to dispensing ~~capital placements~~equipment lease contracts with customers, which took place in April 2017. As a result of the lease modification, substantially all new lease contracts are accounted for as operating leases with revenue recognized over the agreement term, rather than upon the placement of capital. In the second quarter of 2018, revenues in the Medication Management Solutions unit ~~and the Medication and Procedural Solutions unit's growth from infusion disposables products. Sales~~included $67 million of ~~the Diabetes Care unit's pen needles and the Pharmaceutical Systems unit's self-injection systems were unfavorably impacted by the timing of orders that were expected~~revenues relating to ~~occur in the second quarter but were received in the first quarter.~~preexisting amended lease contracts.

Medical segment total revenues ~~and sales of safety-engineered products~~ for the six-month period were as follows:


	Six months ended March 31,										Six months ended March 31,
(Millions of dollars)	2017		2016		Total Change		Estimated FX Impact		FXN Change		2018		2017		Total Change		Estimated FX Impact		FXN Change
Total Medical Revenues(a)	$	3,951	$	4,185	(5.6	)%	(0.7	)%	(4.9	)%	$	4,024	$	3,606	11.6	%	3.1	%	8.5	%

Medical segment safety-engineered products	$	968	$	932	3.9	%	(0.3	)%	4.2	%

(a)The presentation of prior-period amounts reflects a reclassification of $346 million of certain product revenues from the Medical segment to the Interventional segment as further discussed in Note 6 in the Notes to Condensed Consolidated Financial Statements.

Medical segment operating income for the three and six-month periods ~~were~~was as follows:


	Three months ended March 31,						Six months ended March 31,						Three months ended March 31,						Six months ended March 31,
(Millions of dollars)	2017			2016			2017			2016			2018			2017			2018			2017
Medical segment operating income	$	537		$	513		$	1,085		$	978		$	588		$	475		$	1,211		$	960

Segment operating income as % of Medical revenues	27.0		%	24.1		%	27.5		%	23.4		%	27.1		%	26.2		%	30.1		%	26.6		%

The Medical segment's operating income iswas driven by its performance with respect to gross profit margin and operating expenses. Gross profit margin was ~~higher~~lower in the second quarter of ~~2017~~2018 as compared with the second quarter of ~~2016~~2017 primarily due to amortization of intangible assets acquired in the ~~divestiture~~Bard transaction and $53 million of expense related to the ~~Respiratory Solutions business, which had products with relatively lower~~recognition of a fair value step-up adjustment relating to Bard's inventory on the acquisition date. This unfavorable impact to the Medical segment's gross ~~profit margins. Gross profit~~ margin ~~also reflected~~was partially offset by lower manufacturing costs resulting from continuous improvement projects which enhanced the efficiency of our operations, ~~partially offset by unfavorable foreign currency translation.~~as well as a favorable product mix impact relating to the Bard products reported within the segment. Selling and administrative expense as a percentage of revenues ~~for~~in the second quarter of ~~fiscal year 2017~~2018 was lower compared with the prior-year period, which primarily reflected a reduction in the general and administrative costs allocated to the segment, as ~~a result of~~is further discussed in Note 6 in the ~~divestiture of the Respiratory Solutions business as this business generally had a lower operating margin.~~Notes to Condensed Consolidated Financial Statements. Research and development expense as a percentage of revenues was higher in the second quarter of ~~2017~~2018 as compared with the second quarter of ~~2016, reflecting ongoing~~2017 due to increased investment in new products and platforms.

Life Sciences Segment

The following summarizes second quarter Life Sciences revenues by organizational ~~unit, as well as second quarter Life Sciences sales of safety-engineered products:~~unit:


	Three months ended March 31,										Three months ended March 31,
(Millions of dollars)	2017		2016		Total Change		Estimated FX Impact		FXN Change		2018		2017		Total Change		Estimated FX Impact		FXN Change
Preanalytical Systems	$	363	$	340	6.6	%	(0.9	)%	7.5	%	$	381	$	363	5.1	%	4.1	%	1.0	%
Diagnostic Systems	350		319		9.8	%	(0.7	)%	10.5	%	410		350		17.0	%	4.4	%	12.6	%
Biosciences	269		277		(2.8	)%	(1.0	)%	(1.8	)%	307		269		13.9	%	5.0	%	8.9	%
Total Life Sciences Revenues	$	982	$	936	4.9	%	(0.9	)%	5.8	%	$	1,098	$	982	11.8	%	4.5	%	7.3	%

Life Sciences segment safety-engineered products	$	289	$	268	8.0	%	(1.0	)%	9.0	%

The Life Sciences ~~segment revenues~~segment's revenue growth in the second quarter ~~reflected~~was primarily driven by influenza-related sales in the ~~Diagnostics~~Diagnostic Systems unit due to an earlier and more severe influenza season in the current year compared with the prior-year period. The Diagnostic Systems unit's ~~influenza-related sales,~~revenues were also driven by sales of ~~its~~ core microbiology ~~platform, including the~~ ~~BD BACTEC~~^TM ~~blood culture system and~~ ~~Kiestra~~^TM~~, as well as sales of its~~ ~~BD MAX~~^TM~~molecular platform.~~products. The ~~segment’s~~segment's second quarter revenue growth was also ~~reflected~~driven by the Biosciences unit's sales of ~~the~~recently launched products. The Preanalytical Systems safety-engineered products, primarily in emerging markets and in the United States. Life Sciences segment revenue growth in the current-year period was partially offset by sales fulfillment delays affecting the Biosciences unit, along withunit's revenues reflected an unfavorable ~~timing of instrument orders in certain international markets, compared with~~comparison to the prior-year ~~period.~~period and the impact of a production issue which affected one of the unit's product lines. This production issue was resolved during the quarter.

Life Sciences segment total revenues ~~and sales of safety-engineered products~~ for the six-month period were as follows:


	Six months ended March 31,										Six months ended March 31,
(Millions of dollars)	2017		2016		Total Change		Estimated FX Impact		FXN Change		2018		2017		Total Change		Estimated FX Impact		FXN Change
Total Life Sciences Revenues	$	1,940	$	1,869	3.8	%	(0.7	)%	4.5	%	$	2,143	$	1,940	10.4	%	3.1	%	7.3	%

Life Sciences segment safety-engineered products	$	569	$	538	5.7	%	(1.0	)%	6.7	%

Life Sciences segment operating income for the three and six-month periods ~~were~~was as follows:


	Three months ended March 31,						Six months ended March 31,						Three months ended March 31,						Six months ended March 31,
(Millions of dollars)	2017			2016			2017			2016			2018			2017			2018			2017
Life Sciences segment operating income	$	177		$	202		$	376		$	404		$	336		$	177		$	652		$	376

Segment operating income as % of Life Sciences revenues	18.0		%	21.6		%	19.4		%	21.6		%	30.6		%	18.0		%	30.4		%	19.4		%

The Life Sciences segment's operating income iswas driven by its performance with respect to gross profit margin and operating expenses. Gross profit margin in the second quarter of fiscal year ~~2017~~2018 was ~~lower~~higher compared with the second quarter of ~~2016~~2017 primarily due to inventory reserves, which were required for damaged research reagents in the Biosciences unit, and unfavorable foreign currency translation. These impacts to gross profit margin in the second quarter were partially offset by lower manufacturing costs resulting from continuous improvement projects which enhanced the efficiency of our ~~operations.~~operations, as well as favorable product mix. Selling and administrative expense as a percentage of revenues in the second quarter of ~~2017~~2018 was ~~higher~~lower compared towith the prior-year period, ~~reflecting higher selling costs.~~primarily due to a reduction in the general and administrative costs allocated to the segment, as noted above. Research and development expense as a percentage of revenues was ~~relatively flat~~also lower in the second quarter of ~~2017~~2018 as compared with the second quarter of ~~2016.~~2017 due to the lower allocations of costs.

Interventional Segment

The following summarizes second quarter Interventional revenues by organizational unit:



	Three months ended March 31,
(Millions of dollars)	2018		2017		Total Change	Estimated FX Impact		FXN Change
Surgery (a)	$	351	$	168	NM	—	%	NM
Peripheral Intervention (a)	338		5		NM	—	%	NM
Urology and Critical Care	264		—		NM	—	%	NM
Total Interventional Revenues	$	952	$	173	NM	—	%	NM

(a)The presentation of prior-period amounts reflects a reclassification of $173 million of certain product revenues from the Medical segment to the Interventional segment as further discussed in Note 6 in the Notes to Condensed Consolidated Financial Statements.

Interventional segment total revenues for the six-month period were as follows:



	Six months ended March 31,
(Millions of dollars)	2018		2017		Total Change	Estimated FX Impact		FXN Change
Total Interventional Revenues (a)	$	1,135	$	346	NM	—	%	NM

Interventional segment operating income for the three and six-month periods was as follows:



	Three months ended March 31,						Six months ended March 31,
(Millions of dollars)	2018			2017			2018			2017
Interventional segment operating income	$	(154	)	$	61		$	(72	)	$	126

Segment operating income as % of Interventional revenues	(16.2		)%	35.6		%	(6.4		)%	36.4		%

The Interventional segment's operating (loss) income is driven by its performance with respect to gross profit margin and operating expenses. The Interventional segment's operating income in the current-year periods reflected expense related to the recognition of a fair value step-up adjustment of $369 million relating to Bard's inventory on the acquisition date. The fair value adjustment is a required non-cash adjustment to the value of acquired inventory and is expensed over a four-month period, consistent with an estimate of the period of time to sell the acquired inventory.

Geographic Revenues

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


	Three months ended March 31,										Three months ended March 31,
(Millions of dollars)	2017		2016		Total Change		Estimated FX Impact		FXN Change		2018		2017		Total Change		Estimated FX Impact		FXN Change
United States	$	1,627	$	1,719	(5.4	)%	—		(5.4	)%	$	2,325	$	1,627	42.9	%	—	%	42.9	%
International	1,342		1,349		(0.5	)%	(2.0	)%	1.5	%	1,898		1,342		41.4	%	11.2	%	30.2	%
Total Revenues	$	2,969	$	3,067	(3.2	)%	(0.8	)%	(2.4	)%	$	4,222	$	2,969	42.2	%	5.0	%	37.2	%

~~The~~Second quarter U.S. revenue growth benefited from the inclusion of revenues associated with Bard products in our financial results beginning on January 1, 2018. Underlying second quarter revenue growth in the United States was also driven by the Medical segment's ~~U.S. revenues in the second quarter reflected the divestiture of the Respiratory~~Medication Delivery Solutions ~~business, as previously discussed. This impact was partially offset~~unit and by the ~~volume of the Medication Management Solutions unit's dispensing capital placements and the Medication and Procedural Solutions unit's sales of infusion disposables products. The Medical~~Life Sciences segment's Diagnostic Systems unit. U.S. revenue growth was unfavorably impacted by the ~~timing of orders~~modification to dispensing equipment lease contracts with customers in the ~~Diabetes Care~~Medical segment's Medication Management Solutions unit. ~~U.S. Life Sciences~~

Second quarter international revenue growth benefited from the inclusion of revenues associated with Bard products in the second quarter of fiscal year 2017 was driven by the Diagnostic Systems unit's higher influenza-related sales as well as sales of its core microbiology platform. U.S. Life Sciences segment's revenue growth also reflected the Preanalytical Systems unit's sales of safety-engineered products.

~~The Medical segment's international~~our financial results. International second quarter revenues also reflected ~~the divestiture of the Respiratory Solutions business, partially offset by the Medication Management Solutions unit's dispensing capital placements and the Medication and Procedural Solutions unit's~~increased sales ~~of infusion disposables products. The~~in the Medical segment's ~~second quarter international revenue~~Medication Delivery Solutions and Pharmaceutical Systems units, as well as growth ~~was unfavorably impacted by the timing of orders~~attributable to sales in the ~~Diabetes Care unit. The~~ Life Sciences segment's ~~second quarter international revenue growth was aided by the~~ Diagnostic Systems ~~unit's sales of molecular~~ and microbiology platforms. International Life Sciences revenue growth in the current-year period also reflected the Preanalytical Systems unit's sales of safety-engineered products in emerging markets, partially offset by the previously discussed unfavorable timing of instrument orders in the Biosciences ~~unit.~~

units.

Emerging market revenues for the second quarter were ~~$452~~$631 million, compared with ~~$443~~$452 million in the prior year’s ~~quarter, which included approximately $23 million of revenues associated with divested businesses, primarily the Respiratory Solutions business.~~quarter. Emerging market revenues in the current-year period also included an estimated $4$25 million ~~unfavorable~~favorable impact due to foreign currency translation. Second quarter revenue growth in emerging markets benefited from the inclusion of revenues associated with Bard products in our financial results. Underlying growth was particularly driven by sales in China and ~~Latin America.~~EMA.

Specified Items

Reflected in the financial results for the three and six-month periods of fiscal years ~~2017~~2018 and ~~2016~~2017 were the following specified items:


	Three months ended March 31,				Six months ended March 31,					Three months ended March 31,				Six months ended March 31,
(Millions of dollars)	2017		2016		2017			2016		2018		2017		2018		2017
Integration costs ~~(A)~~(a)	63		40		109			75		$	79	$	63	$	153	$	109
Restructuring costs ~~(A)~~(a)	11		64		46			149		19		11		255		46
Transaction costs ~~(A)~~(a)	8		—		14			—		7		8		51		14
Purchase accounting adjustments (B)	129		115		255			268
Litigation-related item (C)	—		—		(336		)	—
Loss on debt extinguishment (D)	—		—		42			—
Financing impacts (b)										—		—		49		—
Purchase accounting adjustments (c)										790		129		925		255
Hurricane recovery costs (d)										5		—		12		—
Losses on debt extinguishment (e)										13		—		13		42
Litigation-related item (f)										—		—		—		(336		)
Total specified items	211		218		130			492		912		211		1,457		130
Tax impact of specified items	54		85		27			164
Less: tax impact of specified items and tax reform (g)										137		54		2		27
After-tax impact of specified items	$	157	$	134	$	103		$	329	$	775	$	157	$	1,455	$	103


~~(A)~~(a)	Represents integration, restructuring and transaction costs, ~~substantially associated with our fiscal year 2015 acquisition of CareFusion and other portfolio rationalization initiatives. The integration and restructuring costs were~~ recorded in Acquisitions and other restructurings~~. The transactions costs~~, which are further discussed below.


(b)	Represents financing impacts associated with the Bard acquisition, which were recorded in ~~Acquisitions and other restructurings~~Interest income and~~Other (expense) income, net~~ Interest expense.


~~(B)~~(c)	Primarily represents non-cash amortization expense associated with acquisition-related identifiable intangible assets. BD’s amortization expense is primarily recorded in ~~Costs~~Cost of products sold. The amounts in 2018 also included a fair value step-up adjustment of $422 million relating to Bard's inventory on the acquisition date.


~~(C)~~(d)	Represents costs incurred as a result of hurricane-related damage to production facilities in Puerto Rico.


(e)	Represents losses recognized in Other income (expense), net upon our extinguishment of certain long-term senior notes.


(f)	Represents the reversal of certain reserves related to an appellate court decision recorded related to RTI in Other operating income (expense), ~~as further discussed below.~~net.

~~(D)~~(g)

~~Represents~~The amount in the six-month period of fiscal year 2018 includes additional tax expense, net, of $275 million relating to new U.S. tax legislation, as discussed above. An estimated one-time transition tax payable of $561 million, payable over an eight year period with 8% due in each of the first five years, was offset by a ~~loss recognized~~tax benefit of $285 million related to the remeasurement of deferred tax balances due to the lower corporate tax rate at which they are expected to reverse in ~~Other (expense) income, net~~ ~~upon our extinguishment of certain long-term senior notes, as further discussed below.~~

the future.

Gross Profit Margin

Gross profit margin for the three and six-month periods of fiscal year ~~2017~~2018 compared with the prior-year periods in ~~2016~~2017 reflected the following impacts:


	Three-month period		Six-month period		Three-month period		Six-month period
March 31, 2016 gross profit margin %	48.4	%	47.8	%
March 31, 2017 gross profit margin %					48.2	%	49.0	%
Bard acquisition-related asset depreciation, amortization and inventory step-up adjustment					(14.9	)%	(8.6	)%
Impact of Bard on product mix					2.7	%	1.4	%
Operating performance	0.2	%	1.0	%	1.3	%	0.9	%
Impact of divestitures	0.8	%	0.8	%
Foreign currency translation	(1.2	)%	(0.6	)%	0.7	%	0.5	%
March 31, 2017 gross profit margin %	48.2	%	49.0	%
March 31, 2018 gross profit margin %					38.0	%	43.2	%

Operating performance in the current-year periods ~~primarily reflected~~was favorably impacted by lower manufacturing costs resulting from the continuous operations improvement projects discussed above, ~~partially~~ offset by ~~the impact of inventory reserves which were required for damaged research reagents in the Biosciences unit, as previously discussed. Gross profit~~various unfavorable impacts to gross margin for the current-year periods was favorably impacted by businesses divestitures, primarily the divestiture of the Respiratory Solutions business, which as previously discussed, had products with relatively lower gross profit margins.including higher raw material costs and pricing pressure.

Operating Expenses

A summary of operating expenses for the three and six-month periods of fiscal years ~~2017~~2018 and ~~2016~~2017 is as follows:


	Three months ended March 31,						Increase (decrease) in basis points		Six months ended March 31,								Increase (decrease) in basis points		Three months ended March 31,						Increase (decrease) in basis points		Six months ended March 31,						Increase (decrease) in basis points
	2017			2016				2017				2016				2018				2017				2018			2017						Increase (decrease) in basis points
(Millions of dollars)							Increase (decrease) in basis points										Increase (decrease) in basis points
Selling and administrative expense	$	724		$	732				$	1,432			$	1,480					$	1,057		$	724		Increase (decrease) in basis points			$	1,831		$	1,432
% of revenues	24.4		%	23.9		%	50		24.3		%		24.5		%		(20	)	25.0		%	24.4		%	60		25.1		%	24.3		%	80

Research and development expense	$	187		$	182				$	368			$	369					$	260		$	187				$	452		$	368
% of revenues	6.3		%	5.9		%	40		6.2		%		6.1		%		10		6.2		%	6.3		%	(10	)	6.2		%	6.2		%	—

Acquisitions and other restructurings	$	76		$	104				$	163			$	225					$	104		$	76				$	458		$	163

Other operating income	$	—		$	—				$	(336	)		$	—
Other operating (income) expense, net																			$	—		$	—				$	—		$	(336	)

Selling and administrative expense

~~Selling~~The increase in selling and administrative expense as a percentage of revenues in the current year’s three-month period ~~reflected~~was primarily attributable to higher selling ~~costs. Selling~~and general administrative costs, largely driven by the inclusion of Bard in the current-year results. The increase in selling and administrative expense as a percentage of revenues in the current year’s six-month period was ~~relatively flat compared with the prior-year period.~~primarily attributable to higher selling and shipping costs.

Research and development expense

Research and development expense as a percentage of revenues was relatively flat in the ~~three~~current three-month and six-month periods ~~of fiscal year 2017 increased~~ compared with the prior-year periods, ~~in 2016 reflecting ongoing investment~~which reflected our continued commitment to invest in new products and ~~platforms primarily in the Medical segment.~~platforms.

Acquisitions and other restructurings

Costs relating to acquisitions and other restructurings in the current year's three and six-month periods primarily represented ~~integration,~~ restructuring and transaction costs ~~substantially associated with~~incurred due to our acquisition of Bard, and to a lesser extent, restructuring costs related to our fiscal year 2015 acquisition of CareFusion and other portfolio rationalization initiatives. Integration costs incurred in the current three and six-month periods were attributable to both the Bard and CareFusion acquisitions. Substantially all of the integration, restructuring and transaction costs in the prior-year's three and six-month period were attributable to the CareFusion acquisition and other portfolio rationalization initiatives. For further disclosures regarding the Bard acquisition and restructuring costs, refer to ~~Note 10~~Notes 8 and 9 in the Notes to Condensed Consolidated Financial Statements.

Other operating (income) expense, net

Other operating income in the ~~current~~prior year's six-month period ~~represented~~included the $336 million reversal of certain reserves related to an appellate court decision which, among other things, reversed an unfavorable antitrust judgment in the ~~Retractable Technologies, Inc.~~RTI case. Additional disclosures regarding ~~this~~these legal ~~matter~~matters are provided in Note 5 in the Notes to Condensed Consolidated Financial Statements.

Nonoperating Income

Net interest expense

The components for the three and six-month periods of fiscal years ~~2017~~2018 and ~~2016~~2017 were as follows:


	Three months ended March 31,						Six months ended March 31,						Three months ended March 31,						Six months ended March 31,
(Millions of dollars)	2017			2016			2017			2016			2018			2017			2018			2017
Interest expense	$	(86	)	$	(99	)	$	(181	)	$	(196	)	$	(185	)	$	(86	)	$	(343	)	$	(181	)
Interest income	7			3			12			9			4			7			48			12
Net interest expense	$	(79	)	$	(96	)	$	(169	)	$	(187	)	$	(181	)	$	(79	)	$	(295	)	$	(169	)

The ~~decreases~~increases in interest expense for the ~~three-month~~three and six-month periods of fiscal year ~~2017~~2018 compared with the prior year's periods primarily reflected ~~lower~~higher levels of debt ~~as certain~~due to our issuances of senior unsecured U.S. notes ~~matured in June and November 2016 and we repurchased certain senior notes in December 2016. Additional disclosures regarding this debt repurchase are provided in Note 14 in~~during the ~~Notes to Condensed Consolidated Financial Statements.~~third quarter of 2017. The ~~increases~~decrease in interest income for the three-month ~~and six-month~~

~~periods~~period of fiscal year ~~2017~~2018 compared with the prior year’s ~~periods~~period primarily reflected a decline in the value of deferred compensation plan assets. The increase in interest income for the six-month period of fiscal year 2018 compared with the prior year’s period primarily reflected higher ~~investment gains on assets related to our deferred compensation plans. The offsetting movement~~levels of cash held throughout the first quarter of fiscal year 2018, in anticipation of closing the ~~deferred compensation plan liability was recorded in~~ ~~Selling and administrative expense~~. Bard acquisition at the end of the first quarter.

Other income (expense) ~~income,~~, net

The components for the three and six-month periods of fiscal years ~~2017~~2018 and ~~2016~~2017 were as follows:


	Three months ended March 31,					Six months ended March 31,					Three months ended March 31,						Six months ended March 31,
(Millions of dollars)	2017			2016		2017			2016		2018			2017			2018			2017
Loss on debt extinguishment	$	—		$	—	$	(42	)	$	—
Share of Vyaire Medical joint venture results, net of income from transition services agreements	(9		)	—		5			—
Losses on debt extinguishment (a)											$	(13	)	$	—		$	(13	)	$	(42	)
Share of Vyaire Medical venture results, net of income from transition services agreements											(6		)	(9		)	(9		)	5
Other equity investment income											1			2			2			3
Gains (losses) on undesignated foreign exchange derivatives, net	1			3		(3		)	3		6			1			(2		)	(3		)
Royalty income (b)											17			—			17			—
Other	3			3		5			8		—			1			—			2
Other (expense) income, net	$	(5	)	$	6	$	(35	)	$	11
Other income (expense), net											$	4		$	(5	)	$	(6	)	$	(35	)

As discussed above, we repurchased certain senior notes in December 2016 and recognized a loss on this extinguishment of debt in the first quarter of fiscal year 2017. Additional disclosures regarding our divestiture of the Respiratory Solutions business and the Vyaire Medical joint venture formed with this business are provided in Note 9 in the Notes to Condensed Consolidated Financial Statements.


(a)	Represents losses recognized upon our repurchase and extinguishment of certain senior notes.


(b)	Represents the royalty income stream acquired in the Bard transaction, net of non-cash purchase accounting amortization. The royalty income stream was previously reported by Bard as revenues.

Income Taxes

The income tax rates for the three and six-month periods of fiscal years ~~2017~~2018 and ~~2016~~2017 are provided below.


	Three months ended March 31,				Six months ended March 31,				Three months ended March 31,				Six months ended March 31,
	2017		2016		2017		2016		2018		2017		2018		2017
Effective income tax rate	4.9	%	10.0	%	14.1	%	11.7	%	288.8	%	4.9	%	233.3	%	14.1	%

Favorable impact, in basis points, from specified items	760		1,060		70		930
Impact, in basis points, from specified items									27,190		760		21,660		70

The ~~decrease~~increase in the effective income tax rate for the ~~three-month period~~three and six-month periods of fiscal year 2018 is attributable to certain effects of new U.S. tax legislation that was enacted in December 2017. As previously discussed above, we recognized additional year-to-date tax expense of $275 million based upon our reasonable estimates of the effects of the new legislation. This additional expense was partially offset by the favorable tax impacts in the current year periods from specified items. The effective income tax rates for the three and six-month periods in 2017 ~~largely reflected~~were favorably impacted by the tax ~~benefit~~benefits recorded upon the settlement of share-based compensation awards for the three months ended March 31, 2017 of $21 million, as well as a net favorable benefit of several tax audit settlements during the quarter. The share-based compensation-related tax benefit was recognized in connection with ~~BD's adoption of new~~a change in accounting requirements relating to the income tax effects of share-based compensation awards. ~~Additional disclosures regarding this adoption are provided in Note 2 in the Notes to Condensed Consolidated Financial Statements.~~ The ~~favorable impacts to the effective income tax~~ rate in the ~~current-year quarter were partially offset by a less favorable tax impact in the current-year period, compared with the~~ prior-year ~~period, from specified items. The increase in the effective income tax rate for the~~ six-month period ~~of fiscal year 2017 reflected~~was unfavorably impacted

by BD's geographical mix of income and the ~~less favorable~~ tax impact ~~from specified items. The effective income tax rate for~~associated with the ~~six-month period ended March 31, 2017 was favorably impacted by the year-to-date tax benefits recorded upon the settlement~~reversal of ~~share-based compensation awards,~~certain reserves related to an appellate court decision, as previously ~~discussed, of $48 million.~~discussed.

Net Income (Loss) and Diluted Earnings per Share

Net Income and Diluted Earnings per Share for the three and six-month periods of fiscal years ~~2017~~2018 and ~~2016~~2017 were as follows:

Three months ended March 31, Six months ended March 31,
2017 2016 2017 2016
Net Income (Millions of dollars) $ 344
$ 338
$ 905
$ 567
Diluted Earnings per Share $ 1.58
$ 1.56
$ 4.15
$ 2.62

Unfavorable impact-specified items $ (0.72 ) $ (0.62 ) $ (0.47 ) $ (1.52 )
Unfavorable impact-foreign currency translation $ (0.16 ) $ (0.17 )



	Three months ended March 31,						Six months ended March 31,
	2018			2017			2018			2017
Net Income (Loss) (Millions of dollars)	$	(12	)	$	344		$	(148	)	$	905
Diluted Earnings (Loss) per Share	$	(0.19	)	$	1.58		$	(0.90	)	$	4.15

Unfavorable impact-specified items	$	(2.90	)	$	(0.72	)	$	(5.86	)	$	(0.47	)
Favorable impact-foreign currency translation	$	0.16					$	0.22
Dilutive impact of BD shares	$	0.06					$	(0.20	)

The dilutive impact for the three-month period of fiscal year 2018 represents the impact of share equivalents associated with share-based plans that were excluded from the reported diluted shares outstanding calculation because the result would have been antidilutive. The dilutive impact for the six-month period of fiscal year 2018 additionally includes the unfavorable impacts of BD shares issued through public offerings of equity securities in the third quarter of fiscal year 2017, in anticipation of the Bard acquisition, and of BD shares issued as consideration transferred in the first quarter of fiscal year 2018 for the Bard acquisition as is further discussed in Note 8 in the Notes to Condensed Consolidated Financial Statements.

Liquidity and Capital Resources

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


	Six months ended March 31,						Six months ended March 31,
(Millions of dollars)	2017			2016			2018			2017
Net cash provided by (used for)
Operating activities	$	1,040		$	1,020		$	1,017		$	1,040
Investing activities	$	(155	)	$	(170	)	$	(15,540	)	$	(155	)
Financing activities	$	(1,861	)	$	(576	)	$	1,565		$	(1,861	)

Net Cash Flows from Operating Activities

Cash generated from operations, along with available cash and cash equivalents, is expected to be sufficient to fund our normal operating needs for the remainder of fiscal year ~~2017.~~2018. Normal operating needs in fiscal year ~~2017~~2018 include working capital, capital expenditures, and cash dividends. The change in ~~net~~ cash ~~provided by~~flows from operating activities ~~was primarily attributable~~reflected a net loss for the first six months of fiscal year 2018, as well as a change to ~~net income,~~deferred tax asset and liability balances which were remeasured under the recently enacted tax legislation, as ~~adjusted for depreciation and amortization and other non-cash items.~~previously discussed above. The change in cash flows from operating activities in the current-year period also reflected a discretionary cash contribution of $112 million to fund our pension obligation. The current period change in operating assets and liabilities was a net ~~use~~source of cash and primarily reflected higher levels of ~~prepaid~~accounts payable and accrued expenses, primarily due to an increase in income taxes payable, and lower levels of ~~accounts payable~~inventory. As noted above, both the current and ~~accrued expenses. The current-year period also~~prior-year periods reflected ~~the loss~~losses recorded upon our extinguishment of certain long-term notes ~~in December 2016,~~ which isare included within Other, net.

Net Cash Flows from Investing Activities

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 expenditure-related cash outflows ~~of $272~~were $391 million in the first six months of fiscal year ~~2017,~~2018, compared with ~~$258~~$272 million in the prior-year ~~period, were offset by cash inflows in the~~period. The current-year ~~period of $165 million from business divestitures. The prior-year~~ period's net cash flows ~~from~~transferred for acquisitions of $15.118 billion primarily related to the Company's acquisition of Bard. Cash provided by investing activities in the first six months of fiscal years 2018 and 2017 included ~~$111~~$100 million and $165 million of proceeds from ~~the sale of a non-core asset.~~ divestitures, respectively.

Net Cash Flows from Financing Activities

Net cash used for financing activities in the first six months of fiscal year 2017 included cash inflows relating to the issuance of euro-denominated notes in December 2016 of $1,054 million. Net cash used for financing activities during the first six months of fiscal year 2017 also reflected $2,189 million of cash outflows associated with our repurchase of certain long-term notes in December 2016 and our repayment of 1.75% notes due on November 8, 2016. Cash outflows from financing activities also reflected a net reduction of our borrowings under our commercial paper program of $50 million. Additional disclosures regarding our issuance and repurchase of debt during the first quarter of fiscal year 2017 are provided in Note 14 in the Notes to Condensed Consolidated Financial Statements. Net cash used for financing activities in the first six months of fiscal year 2017 also reflected our repurchase of $220 million of common stock under an accelerated share repurchase agreement, as previously discussed. No further share repurchases are planned in 2017, as our share repurchase program has been suspended in connection with the announced agreement to acquire Bard. Net cash flows from financing activities in the first six months of fiscal ~~year 2016~~years 2018 and 2017 included ~~a payment of $300 million to reduce~~ the ~~balance of our commercial paper program.~~following significant cash flows:



	Six months ended March 31,
(Millions of dollars)	2018			2017
Cash inflow (outflow)
Increase (decrease) in borrowings under credit facilities	$	380		$	(50	)
Proceeds from long-term debt	$	3,622		$	1,054
Payments of debt	$	(1,833	)	$	(2,189	)
Share repurchases under accelerated share repurchase agreement	$	—		$	(220	)
Dividends paid	$	(449	)	$	(312	)

Certain measures relating to our total debt were as follows:


(Millions of dollars)	March 31, 2017			September 30, 2016			March 31, 2018			September 30, 2017
Total debt	$	10,306		$	11,551		$	22,791		$	18,870

Short-term debt as a percentage of total debt	11.9		%	8.7		%	0.9		%	1.1		%
Weighted average cost of total debt	3.5		%	3.6		%	3.3		%	3.3		%
Total debt as a percentage of total capital*	53.3		%	57.2		%	49.1		%	57.5		%

* Represents shareholders’ equity, net non-current deferred income tax liabilities, and debt.

The ratio of short-term debt as a percentage of total debt at March 31, 2017 increased as a result of our repurchase of certain long-term debt, as previously discussed, and the reclassification, from long-term debt to short-term debt, of notes due in December 2017. These impacts to the ratio of short-term debt as a percentage of total debt were partially offset by the repayment of $500 million of notes due in November 2016 and the issuance of euro-denominated senior notes.

Cash and Short-term Investments

At March 31, ~~2017,~~2018, total worldwide cash and short-term investments, including restricted cash, were approximately ~~$0.6~~$1.4 billion, ~~substantially all of~~ which was primarily held in jurisdictions outside of the United States. We regularly review the amount of cash and short-term investments held outside the United States and currently intend to use such amounts to fund our international operations and their growth initiatives. ~~In addition, if these amounts were repatriated from foreign jurisdictions to the United States, there could be adverse tax consequences.~~

~~Credit~~Financing Facilities

In May 2017, we entered into a three-year $2.25 billion senior unsecured term loan facility. We ~~have~~used the $2.25 billion of proceeds drawn from this facility in ~~place~~December 2017 to fund a ~~commercial paper borrowing program which allows us to issue a maximum~~portion of ~~$1.5 billion~~the cash consideration for the Bard acquisition, as well as the fees and expenses incurred in ~~notes and which is available to meet our short-term financing needs, including working capital requirements.~~connection with the acquisition. Borrowings outstanding under ~~this program~~the term loan facility were ~~$150 million~~$1.4 billion at March 31, 2018.

Also in May 2017, we entered into a five-year senior unsecured revolving credit facility which ~~reflected a net reduction~~became effective upon the closing of ~~$50 million from our outstanding balance~~the Bard acquisition and which provides borrowing of ~~commercial paper borrowing at September 30, 2016, as previously discussed.~~

~~We also have~~up to $2.25 billion. This facility will expire in ~~place a~~December 2022 and replaced the $1.5 billion syndicated credit facility which provides backup support for our commercial paper program and can also be used for other general corporate purposes. There were no borrowings outstanding under this credit facility at March 31, 2017. During the first quarter of fiscal year 2017, we ~~extended the expiration date of this credit facility to January 2022 from the original~~previously had in place with an expiration date of January ~~2021.~~2022. We ~~may~~will be able to issue up to $100 million in letters of credit under this new revolving credit facility and it also includes a provision that enables 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$2.75 billion. ~~The~~We will use proceeds from this facility to fund general corporate needs and to redeem, repurchase or defease certain of Bard's outstanding senior unsecured notes that were assumed upon the closing of the acquisition. Borrowings outstanding under the revolving credit facility ~~includes a single~~were $380 million at March 31, 2018.

The agreements for both the new term loan and revolving credit facility contained the following financial ~~covenant that requires BD~~covenants. We were in compliance with these covenants as of March 31, 2018.

We are required to maintain an interest expense coverage ratio of not less than ~~5-to-1 for the most recent four consecutive fiscal quarters. We were in compliance with this covenant~~4-to-1 as of ~~March 31, 2017.~~ 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.

We also have informal lines of credit outside the United States. The Company had no commercial paper borrowings outstanding as of March 31, 2018. We may, from time to time, sell certain trade receivable assets to third parties as we manage working capital over the normal course of our business activities.

Debt 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 March 31, 2018:



	S&P	Moody’s	Fitch
Ratings:
Senior Unsecured Debt	BBB	Ba1	BBB-
Commercial Paper	A-2	NP
Outlook	Stable	Stable	Stable

~~In connection with~~Upon our closing the ~~announcement~~Bard acquisition in the first quarter of the acquisition of Bard, we announced that we had secured access to fully committed bridge financing of $15.7 billion and expect to permanently finance the acquisition (in addition to the equity that will be issued to Bard stockholders) with available cash, as well as, subject to market conditions, approximately $10 billion of new debt and approximately $4.5 billion of equity and equity-linked securities. We anticipate that our existing stockholders will experience dilution as a result of the issuance of the equity and equity-linked securities. The debt may be incurred under a new or amended credit facility, our entry into one or more senior unsecured term loan facilities, as well as pursuant to issuance of senior unsecured notes. Following the announcement of the acquisition and anticipated financing plan, Moody’s Investor Service and Standard & Poor’s Ratings Services announced that they plan to downgradefiscal year 2018, S&P lowered our corporate credit rating from the previous rating of BBB+. Also upon the acquisition's closing, Moody's downgraded our corporate credit and commercial paper ratings from the previous ratings of Baa2 and P-2, respectively. The rating assigned to ~~Ba1~~our corporate debt by Fitch was unchanged by the closing of the acquisition.

Lower corporate debt ratings and ~~BBB, respectively. Any downgrade in~~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 upward or downward at any time by a rating agency if such rating agency decides that circumstances warrant such a change.

Concentrations of Credit Risk

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

Regulatory Matters

In May 2017, the United States Food and Drug Administration (“FDA”) conducted inspections at BD’s Preanalytical Systems (“PAS”) facility in Franklin Lakes, New Jersey. In July 2017, the FDA issued a Form 483 to BD PAS in connection with these inspections that contained observations of non-conformance relating to quality system regulations and medical device reporting relating to certain of our BD Vacutainer™ EDTA blood collection tubes. BD PAS submitted responses to the FDA Form 483 on July 27, 2017, September 15, 2017, November 14, 2017 and January 5, 2018. On January 11, 2018, BD received a Warning Letter from the FDA, citing certain alleged violations of quality system regulations and of law. The Warning Letter states that, until BD resolves the outstanding issues covered by the Warning Letter, the FDA will not clear or approve any premarket submissions for Class III devices to which the non-conformances are reasonably related or grant requests for certificates to foreign governments. We submitted our response to the Warning Letter on January 31, 2018. BD PAS is working closely with the FDA and intends to fully implement corrective actions to address the concerns identified in the Warning Letter. The products to which the Warning Letter relate remain available for sale. However, BD cannot give any assurances that the FDA will be satisfied with its response to the Warning Letter or as to the expected date of resolution of matters included in the Warning Letter. While BD does not believe that the issues identified in the Warning Letter will have a material impact on BD’s operation, no assurances can be given that the resolution of these matters will not have a material adverse effect on BD’s business, results of operations, financial conditions and/or liquidity.

Cautionary Statement Regarding Forward-Looking Statements

BD and its representatives may 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, sales and earnings per share growth, and ~~changes in~~ 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 our ~~2016~~2017 Annual Report on Form 10-K.

Weakness in the global economy and financial markets, which could increase the cost of operating our business, weaken demand for our products and services, negatively impact the prices we can charge for our products and services, or impair our ability to produce our products.

Competitive factors that could adversely affect our operations, including new product introductions (for example, new forms of drug delivery) by our current or future competitors, increased pricing pressure due to the impact of low-cost manufacturers, ~~as certain competitors have established manufacturing sites or have contracted with suppliers in low-cost manufacturing locations as a means to lower their costs,~~ patents attained by competitors (particularly as patents on our products expire), and new entrants into our markets.

Risks relating to our acquisition of Bard, including our ability to successfully combine and integrate the Bard operations in order to obtain the anticipated benefits and costs savings from the transaction, and the significant additional indebtedness we incurred in connection with the financing of the acquisition and the impact this increased indebtedness may have on our ability to operate the combined company.

The impact resulting from the recent U.S. tax reform, commonly referred to as the Tax Cuts and Job Act (the “Act”), which, among other things, reduces the U.S. federal corporate tax rate, imposes a one-time tax on earnings of certain foreign subsidiaries that were previously tax deferred, and imposes a new minimum tax on foreign earnings. While BD has previously recognized a provisional expense based on what it believes is a reasonable estimate of the income tax effects of the Act, this expense could change materially as BD refines its analysis.

The adverse financial impact resulting from unfavorable changes in foreign currency exchange rates.

Regional, national and foreign economic factors, including inflation, deflation, and fluctuations in interest rates, and their potential effect on our operating performance.

Our ability to achieve our projected level or mix of product sales, as our earnings forecasts are based on projected sales volumes and pricing of many product types, some of which are more profitable than others.

Changes in reimbursement practices of third-party payers or adverse decisions relating to our products by such payers, which could reduce demand for our products or the price we can charge for such products.

The impact of the medical device excise tax under the Patient Protection and Affordable Care Act ~~(the "PPACA")~~ in the United ~~States, which implemented an excise~~States. While this tax ~~on U.S. sales of certain medical devices (which~~ has been suspended ~~until January 1, 2018), and which could result in reduced demand for our products, increased pricing pressures or otherwise adversely affect our business.~~through December 31, 2019, it is uncertain whether the suspension will be extended beyond that date.

~~Future healthcare~~Healthcare reform in the ~~United States and~~U.S. or in other countries in which we do business that may involve changes in government pricing and reimbursement policies or other cost containment reforms.

Changes in domestic and foreign healthcare industry practices that result in a reduction in procedures using our products or increased pricing pressures, including the continued consolidation among healthcare providers and trends toward managed care and healthcare cost containment.

The impact of changes in U.S. federal laws and policy ~~adopted under the new administration and Congress, including the effect~~ that ~~such changes will have on~~could affect fiscal and tax policies, ~~the potential repeal of all or portions of the PPACA,~~healthcare, and international trade, ~~agreements~~including import and ~~policies.~~export regulation and international trade agreements. Recently, the U.S. and China have imposed tariffs on products imported into their respective countries. While we currently do not anticipate that these tariffs will have a material impact on our business, the list of items subject these tariffs is not yet finalized and it is possible that they could adversely impact our supply chain costs or our ability to sell certain of our products in China. Additional tariffs or other trade barriers imposed by the U.S. or other countries could adversely impact our results of operations.

Fluctuations in the cost and availability of oil-based resins and other raw materials, as well as certain components, used in our products, the ability to maintain favorable supplier arrangements and relationships (particularly with respect to sole-source suppliers), and the potential adverse effects of any disruption in the availability of such items.

Security breaches of our information technology systems or our products, which could impair our ability to conduct business, result in the loss of BD trade secrets or otherwise compromise sensitive information of BD or its customers, suppliers and other business partners, or of customers' patients, or result in product efficacy or safety concerns for certain of our products.

Difficulties inherent in product development, including the potential inability to successfully continue technological innovation, successfully complete clinical trials, obtain regulatory approvals in the United States and abroad, obtain intellectual property protection for our products, obtain coverage and adequate reimbursement for new products, or gain and maintain market approval of products, as well as the possibility of infringement claims by competitors with respect to patents or other intellectual property rights, all of which can preclude or delay commercialization of a product. Delays in obtaining necessary approvals or clearances from ~~the FDA~~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, including any volatility in earnings relating to acquisition-related costs, and our ability to successfully integrate any business we may acquire.

Our ability to penetrate or expand our operations in emerging markets, which depends on local economic and political conditions, and how well we are able to acquire or form strategic business alliances with local companies and make necessary infrastructure enhancements to production facilities and distribution networks. Our international operations also increase our compliance risks, including risks under the Foreign Corrupt Practices Act and other anti-corruption laws, as well as privacy laws.

~~Political conditions~~Conditions in international markets, including social and political conditions, civil unrest, terrorist activity, governmental changes, trade barriers, restrictions on the ability to transfer capital across borders, difficulties in protecting and enforcing our intellectual property rights and governmental expropriation of assets. This includes the possible impact of the June 2016 advisory referendum by British voters to exit the European Union, which has created uncertainties affecting business operations in the United Kingdom and the EU.

Deficit reduction efforts or other actions that reduce the availability of government funding for healthcare and research, which could weaken demand for our products and result in additional pricing pressures, as well as create potential collection risks associated with such sales.

Fluctuations in university or U.S. and international governmental funding and policies for life sciences research.

Fluctuations in the demand for products we sell to pharmaceutical companies that are used to manufacture, or are sold with, the products of such companies, as a result of funding constraints, consolidation or otherwise.

The effects of events that adversely impact our ability to manufacture our products (particularly where production of a product line is concentrated in one or more plants) or our ability to source materials or components from suppliers (including sole-source suppliers) that are needed for such manufacturing.

Pending and potential future litigation or other proceedings ~~adverse~~asserting, and/or subpoenas seeking information with respect to, ~~BD, including~~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 the civil investigative demands received by BD)), antitrust 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 ~~U.S. Food and Drug Administration (FDA)~~FDA or foreign counterparts (including restrictions on future product clearances and civil penalties), declining sales and product liability claims, ~~particularly in light of the current regulatory environment, in which there has been increased enforcement activity by the FDA.~~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.

Risks relating to our acquisition of CareFusion, including our ability to continue to successfully combine and integrate the CareFusion operations in order to fully obtain the anticipated benefits and costs savings from the transaction.

~~Risks related to our pending acquisition of Bard, including:~~


◦	~~The failure to satisfy the conditions to completing the transaction, including obtaining required regulatory approvals or approval of the Bard stockholders.~~


◦	~~Conditions to obtaining regulatory approval that may place restrictions on the business of the combined company.~~


◦	~~Our failure to obtain the anticipated benefits and costs savings from the acquisition.~~


◦	~~The impact of the additional debt we will incur and the equity and equity-linked securities that we will issue to finance the acquisition, including on our credit ratings and costs of borrowing.~~

The effect of adverse media exposure or other publicity regarding BD’s business or operations, including the effect on BD’s reputation or demand for its products.

The effect of market fluctuations on the value of assets in BD’s pension plans and on actuarial interest rate and asset return assumptions, which could require BD to make additional contributions to the plans or increase our pension plan expense.

Our ability to obtain the anticipated benefits of restructuring programs, if any, that we may undertake.

Issuance of new or revised accounting standards by the Financial Accounting Standards Board or the Securities and Exchange Commission.

The foregoing list sets forth many, but not all, of the factors that could impact our ability to achieve results described in any

forward-looking statements. Investors should understand that it is not possible to predict or identify all such factors and should not consider this list to be a complete statement of all potential risks and uncertainties.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in information reported since the end of the fiscal year ended September 30, ~~2016.~~2017.

Item 4. Controls and Procedures

An evaluation was carried out by BD’s management, with the participation of BD’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of BD’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of March 31, ~~2017.~~2018. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were, as of the end of the period covered by this report, effective and designed to ensure that material information relating to BD and its consolidated subsidiaries would be made known to them by others within these entities. On December 29, 2017, BD completed the acquisition of Bard. BD has extended its oversight and monitoring processes that support our internal control over financial reporting, as well as its disclosure controls and procedures, to include Bard’s operations. BD is continuing to integrate the acquired operations of Bard. There were no other changes in our internal control over financial reporting during the fiscal quarter ended March 31, ~~2017~~2018 identified in connection with the above-referenced evaluation that have materially affected, or are reasonably likely to materially affect, BD’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are involved, both as a plaintiff and a defendant, in various legal proceedings which arise in the ordinary course of business, including product liability and environmental matters as set forth in our ~~2016~~2017 Annual Report on Form 10-K and in Note 5 of the Notes to Condensed Consolidated Financial Statements in this report. Since December 31, ~~2016,~~2017, there have been no material developments with respect to the legal proceedings in which we are involved, except as provided below.

Hernia Product Claims

~~Antitrust~~On April 11, 2018, plaintiffs’ attorneys filed a request for the creation of a new hernia multi-district litigation in either the Southern District of Ohio or the Western District of Missouri.

Women's Health Product Claims

A trial in the New Jersey coordinated proceeding began in March 2018, and ~~False Advertising Action~~in April 2018 a jury entered a verdict against the BD in the total amount of $68 million. BD intends to challenge that verdict.

Filter Product Claims

~~As previously reported, on December 2, 2016,~~On March 30, 2018, a jury in the ~~Court of Appeals issued an opinion reversing~~first MDL trial found the ~~district court judgment as~~company liable for negligent failure to ~~RTI’s attempted monopolization claim~~warn and ~~rendered judgment on that claim~~entered a verdict in favor of ~~BD.~~plaintiffs. The ~~Court of Appeals affirmed the district court judgment~~jury found BD was not liable for ~~Lanham Act~~(a) strict liability design defect; (b) strict liability failure to warn; and ~~remanded the case~~(c) negligent design. BD intends to ~~the district court to consider whether and if so how much profit should be disgorged by BD on~~challenge that ~~claim. The Court of Appeals vacated and remanded the injunction ordered by the Court.~~

On January 31, 2017, RTI filed a petition for a writ of certiorari with the U.S. Supreme Court. On March 20, 2017, the U.S. Supreme Court denied certiorari, and the matter will now return to the district court for a ruling on RTI’s request for disgorgement.

~~Summary~~verdict.

Given the uncertain nature of litigation generally, BD is not able in all cases to estimate the amount or range of loss that could result from an unfavorable outcome of the litigation to which BD is a party. In accordance with U.S. generally accepted accounting principles, BD establishes accruals to the extent probable future losses are estimable (in the case of environmental matters, without considering possible third-party recoveries). In view of the uncertainties discussed above, BD could incur charges in excess of any currently established accruals and, to the extent available, excess 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 cash flows.

Item 1A. Risk Factors

There were no material changes during the period covered by this report in the risk factors previously disclosed in Part I, Item 1A, of our ~~2016~~2017 Annual Report on Form ~~10-K during the period covered by this report, except as follows:~~

~~Risks Related to the Bard Acquisition~~

~~Completion of the Bard acquisition is subject to conditions and if these conditions are not satisfied or waived, the Bard acquisition will not be completed.~~

The obligations of us and Bard to complete the Bard acquisition are subject to satisfaction or waiver of a number of conditions, including approval of the Bard acquisition by the Bard stockholders, the expiration or termination of the applicable waiting period in connection with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), the receipt of any authorization or consent from certain other governmental authorities required to be obtained with respect to the merger under applicable foreign antitrust laws, the effectiveness of a registration statement on Form S-4 to be filed with respect to shares of our common stock to be issued in the Bard acquisition, approval of the listing on the NYSE of shares of our common stock to be issued in the Bard acquisition, and the absence of an injunction prohibiting the Bard acquisition. Each party’s obligation to complete the Bard acquisition is subject to the satisfaction or waiver (to the extent permitted under applicable law) of certain other customary conditions, the accuracy of the representations and warranties of the other party under the Bard merger agreement (subject to the materiality standards set forth in the Bard merger agreement), the performance by the other party of its respective obligations under the Bard merger agreement in all material respects and delivery of officer certificates by the other party certifying satisfaction of the two preceding conditions. Either we or Bard may, subject to certain exceptions, terminate the Bard merger agreement upon mutual consent or if the Bard acquisition has not been consummated on or before January 23, 2018 (or before April 23, 2018 if all closing conditions have been satisfied other than the receipt of required competition approvals).

The failure to satisfy all of the required conditions could delay the completion of the Bard acquisition for a significant period of time or prevent it from occurring. If the Bard acquisition is not completed, our ongoing business may be materially adversely affected and, without realizing any of the benefits of having completed the Bard acquisition, we will be subject to a number of risks, including the following:

~~the market price of our common stock could decline;~~

if the Bard merger agreement is terminated and our board of directors seeks another business combination, our stockholders cannot be certain that we will be able to find a party willing to enter into a transaction on terms equivalent to or more attractive than the terms that Bard has agreed to in the Bard merger agreement;

time and resources, financial and other, committed by our management to matters relating to the Bard acquisition could otherwise have been devoted to pursuing other beneficial opportunities for our company;

~~we may experience negative reactions from the financial markets or from our customers or employees; and~~

we will be required to pay our respective costs relating to the Bard acquisition, including legal, accounting, financial advisory, financing and printing fees, whether or not the Bard acquisition is completed.

In addition, if the Bard acquisition is not completed, we could be subject to litigation related to any failure to complete the Bard acquisition or related to any enforcement proceeding commenced against us to perform our obligations under the Bard merger agreement. The materialization of any of these risks could materially and adversely impact our ongoing business.

Similarly, any delay in completing the Bard acquisition could, among other things, result in additional transaction costs, loss of revenue or other negative effects associated with uncertainty about completion of the Bard acquisition and cause us not to realize some or all of the benefits that we expect to achieve if the Bard acquisition is successfully completed within its expected timeframe. There can be no assurance that the conditions to the closing of the Bard acquisition will be satisfied or waived or that the Bard acquisition will be consummated.

In order to complete the Bard acquisition, we and Bard must make certain governmental filings and obtain certain governmental authorizations, and if such filings and authorizations are not made or granted or are granted with conditions, completion of the Bard acquisition may be jeopardized or the anticipated benefits of the Bard acquisition could be reduced.

Although we and Bard have agreed in the Bard merger agreement to use reasonable best efforts, subject to certain limitations, to make certain governmental filings, to obtain the required expiration or termination of the waiting period under the HSR Act and to obtain any authorization or consent from certain other governmental authorities required to be obtained with respect to the merger under applicable foreign antitrust laws, there can be no assurance that such approvals will be obtained. As a condition to granting termination of the waiting period under the HSR Act and to adoption of approvals of the10-K.

Bard acquisition, governmental authorities may impose requirements, limitations or costs or require divestitures or place restrictions on the conduct of our business after completion of the Bard acquisition.

Under the terms of the Bard merger agreement, subject to certain exceptions, we and our subsidiaries are required to accept certain conditions and take certain actions imposed by certain governmental authorities that would apply to, or affect, the businesses, assets or properties of us, our subsidiaries or Bard and its subsidiaries. There can be no assurance that regulators will not impose conditions, terms, obligations or restrictions and that such conditions, terms, obligations or restrictions will not have the effect of (i) delaying completion of the Bard acquisition, (ii) imposing additional material costs on or materially limiting the revenues of the combined company following the Bard acquisition, or (iii) otherwise adversely affecting our businesses and results of operations after completion of the Bard acquisition. In addition, we can provide no assurance that these conditions, terms, obligations or restrictions will not result in the delay or abandonment of the Bard acquisition.

Each party is subject to business uncertainties and contractual restrictions while the proposed merger is pending, which could adversely affect each party’s or the combined company’s business and operations.

In connection with the pendency of the Bard acquisition, it is possible that some customers, suppliers and other persons with whom we or Bard have a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationships with us or Bard, as the case may be, as a result of the Bard acquisition, which could negatively affect our or Bard’s respective revenues, earnings and cash flows, regardless of whether the Bard acquisition is completed. If the Bard acquisition is completed, such terminations, changes or renegotiations could negatively affect the revenues, earnings and cash flows of the combined company. These risks may be exacerbated by delays or other adverse developments with respect to the completion of the Bard acquisition.

~~Risks Relating to the Combined Company After Completion of the Bard Acquisition~~

~~Combining the two companies may be more difficult, costly or time consuming than expected and the anticipated benefits and cost savings of the Bard acquisition may not be realized.~~

We and Bard have operated and, until the completion of the Bard acquisition, will continue to operate, independently. The success of the Bard acquisition, including anticipated benefits and cost savings, will depend, in part, on our ability to successfully combine and integrate our business with the business of Bard.

The Bard acquisition will involve the integration of Bard’s business with our existing business, which is a complex, costly and time-consuming process. It is possible that the pendency of the Bard acquisition and/or the integration process could result in material challenges, including, without limitation:

the diversion of management’s attention from ongoing business concerns and performance shortfalls at one or both of the companies as a result of the devotion of management’s attention to the Bard acquisition;

~~managing a larger combined company;~~

~~maintaining employee morale and retaining key management and other employees;~~

~~the possibility of faulty assumptions underlying expectations regarding the integration process;~~

~~retaining existing business and operational relationships and attracting new business and operational relationships;~~

~~consolidating corporate and administrative infrastructures and eliminating duplicative operations and inconsistencies in standards, controls, procedures and policies;~~

~~coordinating geographically separate organizations;~~

~~unanticipated issues in integrating information technology, communications and other systems; and~~

~~unforeseen expenses or delays associated with the Bard acquisition.~~

Many of these factors will be outside of the combined company’s control and any one of them could result in delays, increased costs, decreases in revenues and diversion of management’s time and energy, which could materially affect the combined company’s financial position, results of operations and cash flows.

If we experience difficulties with the integration process, the anticipated benefits of the Bard acquisition may not be realized fully or at all, or may take longer to realize than expected. These integration matters could have an adverse effect on (i) each of us and Bard during this transition period and (ii) the combined company for an undetermined period after completion of the Bard acquisition. In addition, the actual cost savings of the Bard acquisition could be less than anticipated.

In addition, certain risks associated with our industry and business described herein and in our public filings may become more significant following consummation of the Bard acquisition, including, but not limited to, risks relating to: the continued focus by third-party payors on cost containment and government scrutiny of the healthcare industry’s sales and

marketing practices, various healthcare reform proposals that have emerged on the federal and state levels and in other jurisdictions where the combined company sells its products, collective bargaining and labor activity and the integrity of our information systems that are run by third party vendors and such vendors’ ability to maintain their systems and reduce any vulnerability to natural and system disruptions and prevent cyber-attacks and other unauthorized access.

~~The future results of the combined company may be adversely impacted if the combined company does not effectively manage its expanded operations following the completion of the Bard acquisition.~~

Following the completion of the Bard acquisition, the size of the combined company’s business will be significantly larger than the current size of either our or Bard’s respective businesses. The combined company’s ability to successfully manage this expanded business will depend, in part, upon management’s ability to design and implement strategic initiatives that address not only the integration of two discrete companies, but also the increased scale and scope of the combined business with its associated increased costs and complexity. There can be no assurances that the combined company will be successful or that it will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the Bard acquisition.

~~The combined company is expected to incur substantial expenses related to the completion of the Bard acquisition and the integration of BD and Bard.~~

We and Bard have incurred, and expect to continue to incur, a number of non-recurring costs associated with the Bard acquisition and combining the operations of the two companies. The substantial majority of non-recurring expenses will be comprised of transaction and regulatory costs related to the Bard acquisition.

We also will incur transaction fees and costs related to formulating and implementing integration plans, including facilities and systems consolidation costs and employment-related costs. We continue to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the Bard acquisition and the integration of the two companies’ businesses. Although we expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow us to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all.

In connection with the Bard acquisition, we will incur significant additional indebtedness, and certain of Bard’s indebtedness will remain outstanding, which could adversely affect us, including by decreasing our business flexibility, and will increase our interest expense.

Our consolidated indebtedness as of March 31, 2017 was approximately $10.3 billion. We will have substantially increased indebtedness following completion of the Bard acquisition, including the incurrence of new indebtedness to finance the Bard acquisition and assumption of Bard’s existing indebtedness, in comparison to our indebtedness on a recent historical basis, which could have the effect of, among other things, reducing our flexibility to respond to changing business and economic conditions and increasing our interest expense.

The amount of cash required to pay interest on our increased indebtedness levels following completion of the Bard acquisition, and thus the demands on our cash resources, will be greater than the amount of cash flows required to service our indebtedness prior to the Bard acquisition. The increased levels of indebtedness following completion of the Bard acquisition could also reduce funds available for working capital, capital expenditures, acquisitions, the repayment or refinancing of our indebtedness as it becomes due and other general corporate purposes and may create competitive disadvantages for us relative to other companies with lower debt levels. In addition, certain of the indebtedness to be incurred in connection with the Bard acquisition may bear interest at variable interest rates. If interest rates increase, variable rate debt will create higher debt service requirements, which could further adversely affect our cash flows. If we do not achieve the expected benefits and cost savings from the Bard acquisition, or if the financial performance of the combined company does not meet current expectations, then our ability to service our indebtedness may be adversely impacted.

In addition, our credit ratings affect the cost and availability of future borrowings and, accordingly, our cost of capital. Our ratings reflect each rating organization’s opinion of our financial strength, operating performance and ability to meet our debt obligations. In connection with the debt financing for the Bard acquisition, it is anticipated that we will seek ratings of our indebtedness from one or more nationally recognized statistical rating organizations. There can be no assurance that we will achieve a particular rating or maintain a particular rating in the future or that we will be able to maintain our current rating. Furthermore, we expect that our combined company’s credit ratings will be lower following the Bard acquisition, including below “investment grade” by Moody’s Investors Service, Inc., which may further increase the combined company’s future borrowing costs and reduce the combined company’s access to capital.

Moreover, in the future we may be required to raise substantial additional financing to fund working capital, capital expenditures, the repayment or refinancing of our indebtedness, acquisitions or other general corporate requirements. Our ability to arrange additional financing or refinancing will depend on, among other factors, our financial position and performance, as well as prevailing market conditions and other factors beyond our control. We cannot assure you that it will be able to obtain additional financing or refinancing on terms acceptable to us or at all.

We may not be able to service all of the combined company’s indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful. Our failure to meet our debt service obligations could have a material adverse effect on our business, financial condition and results of operations.

We depend on cash on hand and cash flows from operations to make scheduled debt payments. We expect to be able to meet the estimated cash interest payments on the combined company’s debt following the Bard acquisition through a combination of the expected cash flows from operations of the combined company. However, our ability to generate sufficient cash flow from operations of the combined company and to utilize other methods to make scheduled payments will depend on a range of economic, competitive and business factors, many of which are outside of our control. There can be no assurance that these sources will be adequate. If we are unable to service our indebtedness and fund our operations, we will be forced to reduce or delay capital expenditures, seek additional capital, sell assets or refinance our indebtedness. Any such action may not be successful and we may be unable to service our indebtedness and fund our operations, which could have a material adverse effect on our business, financial condition or results of operations.

The agreements that will govern the indebtedness to be incurred in connection with the Bard acquisition may contain various covenants that impose restrictions on us and certain of our subsidiaries that may affect our ability to operate our businesses.

The agreements that will govern the indebtedness to be incurred in connection with the Bard acquisition may contain various affirmative and negative covenants that may, subject to certain significant exceptions, restrict the ability of certain of our subsidiaries to incur debt and the ability of us and certain of our subsidiaries to, among other things, have liens on our property, and/or merge or consolidate with any other person or sell or convey certain of our assets to any one person, engage in certain transactions with affiliates and change the nature of our business. In addition, the agreements may also require us to comply with certain financial covenants, including financial ratios. The ability of us and our subsidiaries to comply with these provisions may be affected by events beyond our control. Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could accelerate our repayment obligations and could result in a default and acceleration under other agreements containing cross-default provisions. Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations.

Uncertainties associated with the Bard acquisition may cause a loss of management personnel and other key employees of Bard or us, which could adversely affect the future business and operations of the combined company following the Bard acquisition.

We and Bard are dependent on the experience and industry knowledge of our respective officers and other key employees to execute our respective business plans. The combined company’s success after the Bard acquisition will depend in part upon its ability to retain key management personnel and other key employees of us and Bard. Current and prospective employees of us and Bard may experience uncertainty about their future roles with the combined company following the Bard acquisition, which may materially adversely affect the ability of each of us and Bard to attract and retain key personnel during the pendency of and after the Bard acquisition. Accordingly, no assurance can be given that the combined company will be able to retain key management personnel and other key employees of us and Bard.

Completion of the Bard acquisition will trigger change in control or other provisions in certain agreements to which Bard is a party, which may have an adverse impact on the combined company’s business and results of operations.

The completion of the Bard acquisition will trigger change in control and other provisions in certain agreements to which Bard is a party. If we and Bard are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if we and Bard are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to Bard or the combined company. Any of the foregoing or similar developments may have an adverse impact on the combined company’s business and results of operations.

For example, if the ratings of certain of Bard’s outstanding senior notes are reduced beyond certain thresholds within certain time periods prior to or following the consummation of the Bard acquisition, Bard could be required to offer to

~~repurchase such notes at 101% of the aggregate principal amount of such notes plus any accrued and unpaid interest to the repurchase date.~~

~~Following the consummation of the Bard acquisition, the combined company will assume certain potential liabilities relating to Bard, including certain products liability and mass torts claims.~~

Following the consummation of the Bard acquisition, the combined company will have assumed certain potential liabilities relating to Bard, including certain products liability and mass tort claims with respect to the design, manufacture and marketing of medical devices and related settlement agreements and judgements. Such claims include Hernia Product Claims, Women’s Health Product Claims, Filter Product Claims and other claims. As of March 31, 2017, Bard has reported that there are: (i) approximately 25 federal and 80 state lawsuits involving individual claims by approximately 105 plaintiffs, as well as one putative class action in the United States, are currently pending against Bard with respect to the Hernia Product Claims, (ii) product liability lawsuits involving individual claims by approximately 5,305 plaintiffs are currently pending against Bard in various federal and state jurisdictions with respect to the Women’s Health Product Claims and (iii) product liability lawsuits involving individual claims by approximately 1,755 plaintiffs are currently pending against Bard in various federal and state jurisdictions with respect to the Filter Product Claims.

Bard does not maintain or has limited remaining insurance coverage for certain of these claims and the combined company may not be able to obtain additional insurance on acceptable terms or at all that will provide adequate protection against potential liabilities. Moreover, in some circumstances adverse events arising from or associated with the design, manufacture, quality or marketing of our combined company’s products could result in the FDA suspending or delaying its review of our applications for new product approvals, or imposing post market approval requirements. In addition, reserves established by Bard or the combined company for estimated losses, including with respect to these claims, do not represent an exact calculation of actual liability but instead represent estimates of the probable loss at the time the reserve is established. Due to the inherent uncertainty underlying loss reserve estimates, additional reserves may be established from time-to-time, and actual losses relating to the assumed Bard liabilities may be materially higher or lower than the related reserve. Any of the foregoing could have a material adverse effect on our business, financial condition or results of operations.

~~Risks Related to Ownership of Our Common Stock~~

~~Future sales and issuances of our shares of common stock could reduce the market price of our shares of common stock.~~

We will issue a significant number of shares of our common stock in connection with the Bard acquisition. Many Bard stockholders may decide not to hold the shares of our common stock they will receive in the Bard acquisition. Other Bard stockholders, such as funds with limitations on their permitted holdings of stock in individual issuers, may be required to sell the shares of our common stock that they receive in the Bard acquisition. Such sales of our common stock could have the effect of depressing the market price for our common stock and may take place promptly following the Bard acquisition.

In addition, we expect to issue a significant amount of equity and equity-linked securities to finance a portion of the Bard acquisition. To the extent we issue equity or equity-linked securities that are convertible into shares of our common stock, the market price of our common stock could become more volatile and could be depressed by:

investors’ anticipation of the potential resale in the market of a substantial number of additional shares of our common stock, including common stock received upon conversion of any equity-linked securities;

~~possible sales of our common stock by investors who view the equity-linked securities as a more attractive means of equity participation in us than owning shares of our common stock; and~~

~~hedging or arbitrage trading activity that may develop involving the equity or equity-linked securities.~~

~~Any of these events may dilute your ownership interest in our company and have an adverse impact on the price of our common stock.~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The table below sets forth certain information regarding our purchases of common stock of BD during the quarter ended March 31, ~~2017.~~2018.

Issuer Purchases of Equity Securities

For the three months ended March 31, 2017
Total Number of
Shares Purchased (1)

Average Price
Paid per
Share

Total Number of
Shares Purchased
as Part of
Publicly
Announced Plans
or Programs

Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs (2)
January 1 – 31, 2017 2,217
$ 164.51
—
7,857,742
February 1 – 28, 2017 392
179.46
—
7,857,742
March 1 – 31, 2017 —
—
—
7,857,742
Total 2,609
$ 166.76
—
7,857,742



For the three months ended March 31, 2018	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2)
January 1 – 31, 2018	1,729	$	223.53	—	7,857,742
February 1 – 28, 2018	585	211.13		—	7,857,742
March 1 – 31, 2018	—	—		—	7,857,742
Total	2,314	$	220.39	—	7,857,742


(1)	~~Includes 2,609~~Consists of 2,314 shares purchased during the quarter in open market transactions by the trust relating to BD’s Deferred Compensation and Retirement Benefit Restoration Plan and 1996 Directors’ Deferral Plan.


(2)	Represents shares available under a repurchase program authorized by the Board of Directors on September 24, 2013 for 10 million shares, for which there is no expiration date.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Alexandre Conroy has been appointed BD’s Worldwide President, BD Medical - Medication and Procedural Solutions, effective May 1, 2017. Mr. Conroy had been serving as BD’s Executive Vice President and President, Europe, EMA and Americas since 2011.Not applicable.

Item 6. Exhibits


Exhibit 23.1	~~Agreement and Plan of Merger, dated~~By-laws, as amended as of April ~~23, 2017, among C.R. Bard, Inc., Becton, Dickinson and Company and Lambda Corp. (incorporated by reference to Exhibit 2.1 of the registrant’s Current Report on Form 8-K dated April~~ 24, ~~2017).~~


~~Exhibit 3~~	~~Amended and Restated Bylaws~~2018 (incorporated by reference to Exhibit 3.1 of the ~~registrant’s~~ Current Report on Form 8-K ~~dated~~filed by the registrant on April ~~24, 2017)~~25, 2018).


Exhibit ~~10.1~~4.1	~~Performance Incentive Plan, amended and restated as~~Form of ~~January 24, 2017.~~0.368% Notes due on June 6, 2019 (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K of the registrant filed on February 22, 2018).


Exhibit ~~10.2~~4.2	~~Commitment Letter~~Form of Floating Rate Notes due December 29, 2020 (incorporated by reference to Exhibit ~~10.1~~4.1 of the ~~registrant’s~~ Current Report on Form 8-K ~~dated April 24, 2017)~~of the registrant filed on March 1, 2018).


Exhibit 31	Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to SEC Rule 13a - 14(a).


Exhibit 32	Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to Rule 13a - 14(b) and Section 1350 of Chapter 63 of Title 18 of the U.S. Code.


Exhibit 101	The following materials from this report, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	Becton, Dickinson and Company
	(Registrant)

Dated: May ~~2, 2017~~3, 2018



	/s/ Christopher Reidy
	Christopher Reidy
	Executive Vice President, Chief Financial Officer and Chief Administrative Officer
	(Principal Financial Officer)

	/s/ John Gallagher
	John Gallagher
	Senior Vice President, Corporate Finance, Controller and Treasurer
	(Principal Accounting Officer)

INDEX TO EXHIBITS



Exhibit Number		Description of Exhibits

2		~~Agreement and Plan of Merger, dated~~
3.1		By-laws, as amended as of April ~~23, 2017, among C.R. Bard, Inc., Becton, Dickinson and Company and Lambda Corp.~~24, 2018 (incorporated by reference to Exhibit ~~2.1~~3.1 of the ~~registrant’s~~ Current Report on Form 8-K ~~dated~~filed by the registrant on April ~~24, 2017)~~25, 2018).

4.1		Form of 0.368% Notes due on June 6, 2019 (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K of the registrant filed on February 22, 2018).

3 4.2		~~Amended and Restated Bylaws~~Form of Floating Rate Notes due December 29, 2020 (incorporated by reference to Exhibit ~~3.1~~4.1 of the ~~registrant’s~~ Current Report on Form 8-K ~~dated April 24, 2017)~~of the registrant filed on March 1, 2018).

~~10.1~~		~~Performance Incentive Plan, amended and restated as of January 24, 2017.~~

~~10.2~~		~~Commitment Letter (incorporated by reference to Exhibit 10.1 of the registrant’s Current Report on Form 8-K dated April 24, 2017).~~

31		Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to SEC Rule 13a - 14(a).

32		Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to Rule 13a - 14(b) and Section 1350 of Chapter 63 of Title 18 of the U.S. Code.

101		The following materials from this report, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements.

4142



	2017			2016
Risk-free interest rate	2.33		%	2.17		%
Expected volatility	20.00		%	19.00		%
Expected dividend yield	1.71		%	1.76		%
Expected life	7.5 years			7.6 years
Fair value derived	$	33.81		$	27.69



	Location of (Loss) Gain Recognized in Income on Derivatives	Amount of (Loss) Gain Recognized in Income on Derivatives				Amount of (Loss) Gain Recognized in Income on Derivatives
Derivatives Not Designated as Hedging Instruments	Location of (Loss) Gain Recognized in Income on Derivatives	Three Months Ended March 31,				Six Months Ended March 31,
(Millions of dollars)		2017		2016		2017			2016
Forward exchange contracts (A)	Other income (expense), net	$	15	$	15	$	(7	)	$	26



			Basis of Fair Value Measurement
(Millions of dollars)	March 31, 2017 Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Institutional money market investments	$	20	$	20	$	—	$	—
Interest rate swaps	7		—		7		—
Forward exchange contracts	6		—		6		—
Total Assets	$	32	$	20	$	12	$	—
Liabilities
Forward exchange contracts	$	5	$	—	$	5	$	—
Interest rate swaps	4		—		4		—
Contingent consideration liabilities	63		—		—		63
Total Liabilities	$	71	$	—	$	8	$	63



			Basis of Fair Value Measurement
(Millions of dollars)	September 30, 2016 Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Institutional money market investments	$	224	$	224	$	—	$	—
Interest rate swaps	23		—		23		—
Forward exchange contracts	3		—		3		—
Total Assets	$	249	$	224	$	25	$	—
Liabilities
Forward exchange contracts	$	13	$	—	$	13	$	—
Interest rate swaps	18		—		18		—
Contingent consideration liabilities	54		—		—		54
Total Liabilities	$	86	$	—	$	31	$	54



Interest Rate and Maturity	Aggregate Principal Amount (Millions of dollars)
1.450% Notes due May 15, 2017	$	226
1.800% Notes due December 15, 2017	250
5.000% Notes due May 15, 2019	153
6.375% Notes due August 1, 2019	338
2.675% Notes due December 15, 2019	125
3.875% Notes due May 15, 2024	221
3.734% Notes due December 15, 2024	375
Total notes purchased	$	1,689