UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x

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

For the quarterly period ended~~June 30, 2015~~

March 31, 2016



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

For the transition period fromto

Commission file number001-4802

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)

N/A

(Former name, former address and former fiscal year,

if changed since last report)

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 xý 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 xý No ¨

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

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



Class of Common Stock		Shares Outstanding as of ~~June 30, 2015~~ March 31, 2016
Common stock, par value $1.00		~~210,254,373~~212,202,004

BECTON, DICKINSON AND COMPANY

FORM 10-Q

For the quarterly period ended ~~June 30, 2015~~

March 31, 2016

TABLE OF CONTENTS



		Page Number
Part I.		~~Page~~ ~~Number~~FINANCIAL INFORMATION

~~Part I.~~		~~FINANCIAL INFORMATION~~

Item 1.		Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets	3
		3
		Condensed Consolidated Statements of Income	4
		4
		Condensed Consolidated Statements of Comprehensive Income	5
		5
		Condensed Consolidated Statements of Cash Flows	6
		6
		Notes to Condensed Consolidated Financial Statements		7
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		27	18
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29

44Part II.	OTHER INFORMATION
~~Item 4.~~		~~Controls and Procedures~~		44

~~Part II.~~		~~OTHER INFORMATION~~

Item 1.		Legal Proceedings		45	30
Item 1A.		Risk Factors		46	31
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		46	31
Item 3.		Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	32

47 Signatures		33

~~Item 4.~~ Exhibits		~~Mine Safety Disclosures~~34		47
~~Item 5.~~		~~Other Information~~		47
~~Item 6.~~		~~Exhibits~~		47

~~Signatures~~				48

~~Exhibits~~				49

ITEM 1. FINANCIAL STATEMENTS

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions of dollars

   June 30,
2015 September 30,
2014
   (Unaudited)
Assets

Current Assets:

Cash and equivalents
   $ 1,559    $ 1,861
Short-term investments
   29    884
Trade receivables, net
   1,645    1,187
Current portion of net investment in sales-type leases
   130    5
Inventories:

Materials
   393    248
Work in process
   300    260
Finished products
   1,326    987


   2,020    1,495
Prepaid expenses, deferred taxes and other
   921    698


Total Current Assets
   6,303    6,131
Property, Plant and Equipment
   8,283    7,765
Less allowances for depreciation and amortization
   4,236    4,160


Property, Plant and Equipment, Net
   4,047    3,605
Goodwill
   7,464    1,090
Customer Relationships, Net
   3,313    8
Developed Technology, Net
   2,962    513
Other Intangibles, Net
   849    239
Capitalized Software, Net
   385    365
Net Investment in Sales-Type Leases, Less Current Portion
   1,082    9
Other Assets
   674    488


Total Assets
   $ 27,079    $ 12,447


Liabilities and Shareholders’ Equity

Current Liabilities:

Short-term debt
   $ 1,804    $ 203
Payables and accrued expenses
   2,713    2,031


Total Current Liabilities
   4,517    2,235
Long-Term Debt
   11,367    3,768
Long-Term Employee Benefit Obligations
   1,007    1,009
Deferred Income Taxes and Other
   2,936    383
Commitments and Contingencies
   —      —
Shareholders’ Equity

Common stock
   333    333
Capital in excess of par value
   4,418    2,198
Retained earnings
   12,260    12,105
Deferred compensation
   19    19
Common stock in treasury - at cost
   (8,242 ) (8,601 )
Accumulated other comprehensive (loss) income
   (1,535 ) (1,001 )


Total Shareholders’ Equity
   7,253    5,053


Total Liabilities and Shareholders’ Equity
   $ 27,079    $ 12,447



	March 31, 2016			September 30, 2015
	(Unaudited)
Assets
Current Assets:
Cash and equivalents	$	1,696		$	1,424
Short-term investments	15			20
Trade receivables, net	1,574			1,618
Current portion of net investment in sales-type leases	311			75
Inventories:
Materials	314			384
Work in process	302			280
Finished products	1,229			1,295
	1,846			1,959
Assets held for sale	618			—
Prepaid expenses and other	551			563
Total Current Assets	6,612			5,659
Property, Plant and Equipment	8,170			8,277
Less allowances for depreciation and amortization	4,390			4,217
Property, Plant and Equipment, Net	3,779			4,060
Goodwill	7,448			7,537
Customer Relationships, Net	3,128			3,250
Developed Technology, Net	2,721			2,977
Other Intangibles, Net	682			797
Capitalized Software, Net	346			362
Net Investment in Sales-Type Leases, Less Current Portion	826			1,118
Other Assets	694			717
Total Assets	$	26,236		$	26,478
Liabilities and Shareholders’ Equity
Current Liabilities:
Short-term debt	$	1,651		$	1,452
Payables and accrued expenses	2,527			2,930
Liabilities held for sale	202			—
Total Current Liabilities	4,380			4,381
Long-Term Debt	10,864			11,370
Long-Term Employee Benefit Obligations	1,146			1,133
Deferred Income Taxes and Other	2,181			2,430
Commitments and Contingencies (See Note 5)
Shareholders’ Equity
Common stock	333			333
Capital in excess of par value	4,600			4,475
Retained earnings	12,600			12,314
Deferred compensation	20			20
Common stock in treasury - at cost	(8,240		)	(8,239		)
Accumulated other comprehensive loss	(1,647		)	(1,738		)
Total Shareholders’ Equity	7,666			7,164
Total Liabilities and Shareholders’ Equity	$	26,236		$	26,478

Amounts may not add due to rounding.

See notes to condensed consolidated financial statements

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Millions of dollars, except per share data

(Unaudited)

   Three Months Ended
June 30, Nine Months Ended
June 30,
   2015 2014 2015 2014
Revenues
   $ 3,120    $ 2,157    $ 7,222    $ 6,244
Cost of products sold
   1,932    1,046    3,943    3,045
Selling and administrative expense
   764    528    1,820    1,584
Research and development expense
   178    137    437    410
Acquisition-related costs
   108    —      244    —


Total Operating Costs and Expenses
   2,983    1,712    6,444    5,039


Operating Income
   137    445    779    1,204
Interest expense
   (105 ) (33 ) (272 ) (99 )
Interest income
   2    12    20    36
Other income (expense), net
   5    (2 ) 23    4


Income Before Income Taxes
   39    423    549    1,145
Income tax (benefit) provision
   (23 ) 97    35    261


Net Income
   62    326    514    884


Basic Earnings per Share
   $ 0.30    $ 1.69    $ 2.58    $ 4.57


Diluted Earnings per Share
   $ 0.29    $ 1.65    $ 2.52    $ 4.47


Dividends per Common Share
   $ 0.600    $ 0.545    $ 1.800    $ 1.635



	Three Months Ended March 31,						Six Months Ended March 31,
	2016			2015			2016			2015
Revenues	$	3,067		$	2,051		$	6,054		$	4,102
Cost of products sold	1,584			1,005			3,162			2,011
Selling and administrative expense	732			511			1,480			1,055
Research and development expense	182			129			369			258
Acquisitions and other restructurings	104			113			225			136
Total Operating Costs and Expenses	2,601			1,758			5,236			3,460
Operating Income	466			293			818			642
Interest expense	(99		)	(91		)	(196		)	(167		)
Interest income	3			8			9			19
Other income, net	6			15			11			17
Income Before Income Taxes	376			225			642			510
Income tax provision	38			9			75			58
Net Income	338			216			567			452
Basic Earnings per Share	$	1.59		$	1.10		$	2.67		$	2.32
Diluted Earnings per Share	$	1.56		$	1.08		$	2.62		$	2.28
Dividends per Common Share	$	0.66		$	0.60		$	1.32		$	1.20

Amounts may not add due to rounding.

See notes to condensed consolidated financial statements

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Millions of dollars

(Unaudited)

   Three Months Ended
June 30, Nine Months Ended
June 30,
   2015 2014 2015 2014
Net Income
   $ 62    $ 326    $ 514    $ 884
Other Comprehensive Income (Loss), Net of Tax

Foreign currency translation adjustments
   80    (11 ) (558 ) 3
Defined benefit pension and postretirement plans
   11    8    33    51
Net unrealized (losses) gains on cash flow hedges, net of reclassifications
   (2 ) 1    (8 ) 4


Other Comprehensive Income (Loss), Net of Tax
   88    (2 ) (533 ) 58


Comprehensive Income
   $ 150    $ 324    $ (19 ) $ 943



	Three Months Ended March 31,					Six Months Ended March 31,
	2016		2015			2016		2015
Net Income	$	338	$	216		$	567	$	452
Other Comprehensive Income (Loss), Net of Tax
Foreign currency translation adjustments	179		(497		)	63		(638		)
Defined benefit pension and postretirement plans	12		11			24		22
Net unrealized gains (losses) on cash flow hedges, net of reclassifications	1		2			4		(6		)
Other Comprehensive Income (Loss), Net of Tax	193		(484		)	91		(621		)
Comprehensive Income (Loss)	$	531	$	(267	)	$	658	$	(169	)

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)

   Nine Months Ended
June 30,
   2015 2014
Operating Activities

Net income
   $ 514    $ 884
Adjustments to net income to derive net cash provided by operating activities, net of amounts acquired:

Depreciation and amortization
   576    413
Share-based compensation
   138    91
Deferred income taxes
   (137 ) (53 )
Change in operating assets and liabilities
   (42 ) (114 )
Pension obligation
   17    (41 )
Other, net
   (14 ) 27


Net Cash Provided by Operating Activities
   1,052    1,207


Investing Activities

Capital expenditures
   (387 ) (339 )
Capitalized software
   (26 ) (41 )
Proceeds from (purchases of) investments, net
   837    (244 )
Acquisitions of businesses, net of cash acquired
   (8,334 ) (40 )
Other, net
   (92 ) (66 )


Net Cash Used for Investing Activities
   (8,003 ) (730 )


Financing Activities

Change in short-term debt
   846    (3 )
Proceeds from long-term debt
   6,164    —
Payments of debt
   (3 ) —
Repurchase of common stock
   —      (400 )
Excess tax benefits from payments under share-based compensation plans
   48    26
Dividends paid
   (358 ) (316 )
Issuance of common stock and other, net
   (30 ) (7 )


Net Cash Provided by (Used for) Financing Activities
   6,667    (701 )


Effect of exchange rate changes on cash and equivalents
   (17 ) (5 )


Net decrease in cash and equivalents
   (302 ) (229 )
Opening Cash and Equivalents
   1,861    1,890


Closing Cash and Equivalents
   $ 1,559    $ 1,661



	Six Months Ended March 31,
	2016			2015
Operating Activities
Net income	$	567		$	452
Adjustments to net income to derive net cash provided by operating activities:
Depreciation and amortization	569			277
Share-based compensation	119			92
Deferred income taxes	(112		)	(13		)
Change in operating assets and liabilities	(194		)	(255		)
Pension obligation	40			(3		)
Other, net	30			(37		)
Net Cash Provided by Operating Activities	1,020			514
Investing Activities
Capital expenditures	(258		)	(252		)
Capitalized software	(11		)	(17		)
Proceeds from investments, net	10			813
Acquisitions of businesses, net of cash acquired	—			(8,307		)
Divestitures of businesses	111			—
Other, net	(22		)	(66		)
Net Cash Used for Investing Activities	(170		)	(7,829		)
Financing Activities
Change in short-term debt	(300		)	1,502
Proceeds from long-term debt	—			6,164
Payments of debt	(1		)	(2		)
Excess tax benefits from payments under share-based compensation plans	51			40
Dividends paid	(280		)	(232		)
Issuance of common stock and other, net	(45		)	(79		)
Net Cash (Used for) Provided by Financing Activities	(576		)	7,392
Effect of exchange rate changes on cash and equivalents	(2		)	(26		)
Net increase in cash and equivalents	272			51
Opening Cash and Equivalents	1,424			1,861
Closing Cash and Equivalents	$	1,696		$	1,912

Amounts may not add due to rounding.

See notes to condensed consolidated financial statements

BECTON, DICKINSON AND COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June 30, 2015~~

March 31, 2016

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. These condensed consolidated financial statements should be read in conjunction with the ~~updated~~consolidated financial statements and the notes thereto included in the Company’s ~~Current~~2015 Annual Report on Form ~~8-K dated March 13, 2015.~~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

In ~~June 2013,~~November 2015, the Financial Accounting Standards Board ~~(“FASB”~~("FASB") issued amended guidance that requires ~~the netting of unrecognized tax benefits against a~~entities to present deferred tax ~~asset for a loss or other carryforward that would apply in settlement~~assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. Early adoption is permitted under the uncertain tax positions. In March 2013, the FASB issued amendments to resolve diversity in practice relating to the release of cumulative translation adjustments into earnings upon the occurrence of certain derecognition events involving a foreign entity.amendments. The Company ~~prospectively~~has retrospectively adopted ~~both accounting standard updates, which did not impact its consolidated financial statements, on~~the guidance effective October 1, ~~2014.~~

2015 and as such, the condensed consolidated balance sheet as of September 30, 2015 reflects the reclassification of current deferred tax assets of $387 million as noncurrent amounts, after giving effect to jurisdictional netting requirements.

New Accounting Principle Not Yet Adopted

In ~~May 2014,~~February 2016, the FASB issued a new ~~revenue recognition standard. Under this~~lease accounting standard ~~revenue will be recognized upon~~which requires lessees to recognize lease assets and lease liabilities on 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.balance sheet. The new standard also requires expanded disclosures regarding leasing arrangements. The Company is currently evaluating the impact that this new ~~revenue recognition~~lease accounting standard will have on its consolidated financial statements ~~and the Company currently intends to adopt~~upon its adoption of the standard on October 1, ~~2018, as is allowed under the FASB’s July 2015 amendment which deferred the effective date for this standard.~~

2019.

Note 3 – Accumulated Other Comprehensive Income (Loss) ~~Income~~

The components and changes ofAccumulated other comprehensive income (loss) ~~income~~for the ~~nine-month~~six-month period ended ~~June 30, 2015~~March 31, 2016 were as follows:

(Millions of dollars) Total Foreign Currency
Translation Adjustments Benefit Plans
Adjustments Unrealized Losses on
Cash Flow Hedges
Balance at September 30, 2014
$ (1,001 ) $ (270 ) $ (705 ) $ (26 )
Other comprehensive income before reclassifications, net of taxes
(571 ) (558 ) — (12 )
Amounts reclassified into income, net of taxes^(A)
38 — 33 4

Balance at June 30, 2015
$ (1,535 ) $ (828 ) $ (672 ) $ (34 )



(Millions of dollars)	Total			Foreign Currency Translation				Benefit Plans			Cash Flow Hedges
Balance at September 30, 2015	$	(1,738	)	$	(961	)		$	(741	)	$	(36	)
Other comprehensive income before reclassifications, net of taxes	61			63			(A)	—			(2		)
Amounts reclassified into income, net of taxes	30			—				24			6
Balance at March 31, 2016	$	(1,647	)	$	(899	)		$	(717	)	$	(32	)

(A)

The ~~reclassification amount related to benefit plans~~gain for the ~~three~~six months ended ~~June 30, 2015~~March 31, 2016 was ~~$11 million. The reclassification amounts for~~primarily attributable to the ~~three~~strengthening of certain European and ~~nine months ended June 30, 2014 were $8 million and $25 million, respectively. The benefit plan-related amounts~~Asian currencies against the U.S. dollar during the period.

Reclassifications out of Accumulated other comprehensive income (loss) were as follows:



	Three Months Ended March 31,						Six Months Ended March 31,
(Millions of dollars)	2016			2015			2016			2015
Benefit Plans
Reclassification of losses into income	$	19		$	17		$	37		$	34
Associated tax benefits	(6		)	(6		)	(13		)	(12		)
Amounts reclassified into income, net of taxes (A)	$	12		$	11		$	24		$	22

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


(A)	These reclassifications were not ~~reclassified~~recorded into income in their entirety and ~~these reclassifications~~ were included in the computation of net periodic benefit plan costs. Additional details are provided in Note ~~8. The reclassification amount related~~8.

(B)

These reclassifications were recorded to cash flow hedges for the three months ended June 30, 2015 was $2 million. The reclassification amounts for the three and nine months ended June 30, 2014 were $1 million and $4 million, respectively. The cash flow hedge-related reclassification amounts for the three and nine months ended June 30, 2015 and 2014 were primarily recorded inInterest expense and ~~additional details are provided in Note 12.~~Cost of products sold.

The loss in foreign currency translation adjustments for the nine months ended June 30, 2015 was primarily attributable to the weakening of the Euro, and of currencies in Latin America and Asia Pacific, against the U.S. dollar during the period.

The income tax benefits associated with the benefit plan-related reclassification adjustments for amortization of prior service credit and amortization of net actuarial losses for the three months ended June 30, 2015 and 2014 were $6 million and $4 million, respectively. The income tax benefits associated with the benefit plan-related reclassification adjustments for amortization of prior service credit and amortization of net actuarial losses for the nine months ended June 30, 2015 and 2014 were $17 million and $13 million, respectively.

The income tax benefits recorded for losses recognized in other comprehensive income relating to cash flow hedges for the three and nine months ended June 30, 2015 were $2 million and $8 million, respectively. Additional disclosures regarding these losses are provided in Note 12. There were no amounts recognized in other comprehensive income relating to cash flow hedges for the three months or nine months ended June 30, 2014. The income taxes recorded for reclassification adjustments for realized amounts relating to cash flow hedges were immaterial for the three and nine months ended June 30, 2015 and 2014.

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
June 30,    Nine Months Ended
June 30,
   2015    2014    2015    2014
Average common shares outstanding
   210,175       193,054       199,690       193,624
Dilutive share equivalents from share-based plans
   4,753       3,951       4,546       4,189








Average common and common equivalent shares outstanding – assuming dilution
   214,928       197,005       204,236       197,813

Upon closing the acquisition of CareFusion Corporation (“CareFusion”) on March 17, 2015, the Company issued approximately 15.9 million of its common shares as part of the purchase consideration. Additional disclosures regarding this acquisition are provided in Note 9.



	Three Months Ended March 31,		Six Months Ended March 31,
	2016	2015	2016	2015
Average common shares outstanding	212,469	196,085	212,077	194,447
Dilutive share equivalents from share-based plans	4,069	3,853	4,618	4,046
Average common and common equivalent shares outstanding – assuming dilution	216,538	199,938	216,695	198,493

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). 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.

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)~~. RTI alleges~~ alleging that the BD Integra™ syringes infringe patents licensed exclusively to RTI. In its complaint, RTI also ~~alleges~~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 at the trial court level. ~~RTI seeks money damages and injunctive relief.~~ 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)~~. RTI alleges~~ alleging that the BD Integra™ syringes infringe another patent licensed exclusively to RTI. ~~RTI seeks money damages and injunctive relief.~~ On August 29, 2008, the court ordered the consolidation of the patent cases. ~~On November 9, 2009, at a trial of these consolidated cases,~~As further set forth in the ~~jury rendered a verdict in favor of~~Company's 2015

Annual Report on Form 10-K, RTI ~~on all but one of its infringement claims, but did not find any willful infringement, and~~was subsequently awarded ~~RTI~~ $5 million in damages at a jury trial with respect to the patent claims, which has been ~~paid. On May 19, 2010,~~paid, and the court granted RTI’s motion for a permanent injunction against the continued sale by the Company of its BD Integra™ products in their current form, but stayed the injunction for the duration of the Company’s appeal. At the same time, the court lifted a stay of RTI’s non-patent claims. On July 8, 2011, the Court of Appeals for the Federal Circuit reversed the District Court judgment that the Company’s 3ml BD Integra™ products infringed the asserted RTI patents and affirmed

the District Court judgment of infringement against the Company’s discontinued 1ml BD Integra™ products. On October 31, 2011, the Federal Circuit Court of Appeals denied RTI’s request for an en banc rehearing. In January 2013, RTI’s petition for review with the U.S. Supreme Court was denied. BD’s motion for further proceedings on damages was denied by the District Court on the grounds that the District Court did not have authority to modify the $5 million damage award. BD appealed this ruling to the Federal Circuit Court of Appeals, and on July 7, 2014, the Court affirmed the District Court ruling leaving the damages award intact. On September 19, 2014, the Federal Circuit Court of Appeals denied BD’s request for an en banc rehearing. On January 16, 2015, BD filed a petition for U.S. Supreme Court review of the Federal Circuit Court of Appeals decision leaving the damages award intact. On April 20, 2015, the U.S. Supreme Court denied BD’s petition.

patent cases are now concluded.

On September 19, 2013, a jury returned a verdict against ~~BD with respect to certain of RTI’s non-patent claims. The verdict was unfavorable to~~ 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 will be trebled under the antitrust statute). The jury’s verdict rejected RTI’s monopolization claims in 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, the Company recorded a pre-tax charge of approximately $341 million in the fourth quarter of fiscal year 2013. ~~On September 30,~~With respect to RTI's requested injunction relief, in November 2014, the Court issued a ruling denying BD’s post-trial motion for judgment as a matter of law. On November 10, 2014, the Court issued a ruling denying RTI’s request for disgorgement of BD profits for false advertising on the ground that any profit to which RTI is entitled is included within the amount of the antitrust damage award. 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. ~~The Court concluded that RTI is entitled to certain categories of attorneys’ fees that it requested, but that its total fee recovery should be reduced by 50%.~~ 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. ~~The Court otherwise upheld its November 10, 2014 Order regarding the injunction.~~ On January 15, 2015, the Court entered its Final Judgment in the ~~case. In the Final Judgment, the Court ordered~~case ordering that RTI recovers $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.~~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 has filed its appeal to the Court of Appeals challenging the entirety of the Final Judgment.

On November 4, 2013, the Secretariat of Foreign Trade of the Federal Republic of Brazil initiated an administrative anti-dumping investigation of imports of vacuum plastic tubes for blood collection into Brazil from the United States, the United Kingdom of Great Britain and Northern Ireland, the Federal Republic of Germany and the People’s Republic of China during the period from January 2012 through December 2012. BD, through its United States and international subsidiaries, exports vacuum plastic tubes for blood collection into Brazil from the United States and the United Kingdom of Great Britain and Northern Ireland and cooperated with the investigation. On April 30, 2015, Brazilian Foreign Trade Board (“CAMEX”) issued a decision determining the application of anti-dumping measures including, without limitation, the imposition of duties on such vacuum plastic tubes imported into Brazil of 45.3% for products from the United States of America and 71.5% for products from the United Kingdom of Great Britain and Northern Ireland. These anti-dumping measures, effective from April 30, 2015, will last for a minimum period of five years. Subsequent to

the decision, CAMEX announced that it would initiate a proceeding to assess the duties from a public interest perspective. This proceeding could result in a suspension or modification of the CAMEX decision, although no assurance can be given in that regard. BD has also filed an administrative appeal. In any event, the Company does not believe that the CAMEX decision will materially affect its results of operations.

On October 5, 2014, CareFusion and the Company entered into an Agreement and Plan of Merger (which we refer to as the merger agreement) that provides for the acquisition of CareFusion by the Company. Under the terms of the merger agreement, a subsidiary of the Company (“the merger subsidiary”) merged with and into CareFusion on March 17, 2015, with CareFusion surviving the merger as a wholly owned subsidiary of the Company. Several putative class action lawsuits have been filed against CareFusion, its directors, the Company and the merger subsidiary in the Delaware Court of Chancery and in the Superior Court of California, San Diego County. These lawsuits generally allege that the members of the board of directors of CareFusion breached their fiduciary duties in connection with the merger by, among other things, carrying out a process that plaintiffs allege did not ensure adequate and fair consideration to CareFusion stockholders. The plaintiffs in these actions further allege that CareFusion and the Company aided and abetted the individual defendants’ breaches of their fiduciary duties. The plaintiffs seek, among other things, equitable relief to enjoin consummation of the merger, rescission of the merger and/or rescissory damages, and attorneys’ fees and costs.

On December 30, 2014, the parties to the actions filed in the Delaware Court of Chancery (the “Delaware Actions”) entered into an agreement in principle to settle the Delaware Actions on the basis of additional disclosures made in a CareFusion Schedule 14A, filed with the SEC on January 5, 2015. The settlement terms are reflected in a Memorandum of Understanding (“MOU”). On December 31, 2014, plaintiffs’ counsel notified the Delaware Court of Chancery of the settlement and MOU. The parties to the Delaware Actions have entered into a stipulation and agreement of compromise, settlement and release and presented the matter to the Delaware Court of Chancery for approval. The Delaware Court of Chancery has scheduled a hearing for September 17, 2015 to consider the matter. The actions filed in the Superior Court of California are not part of the proposed settlement and are still pending.

On July 17, 2015, a class action complaint was filed against the Company 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 purchasers of BD syringes and IV catheters. The complaint alleges that BD monopolized the markets for syringes and IV catheters through contracts, theft of technology, false advertising, acquisitions, and other conduct. The complaint seeks treble damages but does not specify the amount of alleged damages.

The Company filed a motion to dismiss the complaint which was granted on January 29, 2016. Plaintiffs have sought to file an amended complaint, which BD has opposed.

The Company believes that it has meritorious defenses to each of the above-mentioned suits pending against the Company and is engaged in a vigorous defense of each of these matters.

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 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 ~~all~~several sites, there are other potentially responsible parties that may be jointly or severally liable to pay all cleanup costs.

Note 6 – Segment Data

~~Effective October 1, 2014, the Company’s~~

The Company's organizational structure ~~was realigned to better complement its customer-focused solutions strategy and~~ is based upon two principal business segments: BD Medical (“Medical”) and BD Life Sciences (“Life Sciences”). The composition of the Medical segment did not change from its historical composition as a result of this realignment. The Life Sciences segment consists of the former BD Diagnostics and BD Biosciences segments. Beginning on October 1, 2014, decisions about resource allocation and performance assessment are made separately for the Medical and Life Sciences segments. Prior-period information presented for comparative purposes has been revised to reflect the new two-segment organizational structure. CareFusion, which was acquired on March 17, 2015, operates as part of the Company’s Medical segment. The Company’s two principal businessThese segments are strategic businesses that are managed separately because each one develops, manufactures and markets distinct products and services. The Company evaluates performance of its business segments and allocates resources to them primarily based upon operating income. Segment operating income represents revenues reduced by product costs and operating expenses.

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

   Three Months Ended
June 30, Nine Months Ended
June 30,
(Millions of dollars)    2015 2014 2015 2014
Revenues (A)

Medical
   $ 2,199 (B) $ 1,201    $ 4,377 (B) $ 3,381
Life Sciences
   921    956    2,845    2,863


Total Revenues
   $ 3,120    $ 2,157    $ 7,222    $ 6,244


Segment Operating Income

Medical
   $ 483 (C) $ 356 (D) $ 1,115 (C) $ 968 (D)
Life Sciences
   197    221    610    653 (E)


Total Segment Operating Income
   680    578    1,725    1,621
Unallocated Items (F)
   (641 ) (G) (155 ) (1,176 ) (H) (476 ) (I)


Income Before Income Taxes
   $ 39    $ 423    $ 549    $ 1,145



	Three Months Ended March 31,						Six Months Ended March 31,
(Millions of dollars)	2016			2015			2016			2015
Revenues (A)
Medical	$	2,131		$	1,106		$	4,185		$	2,177
Life Sciences	936			945			1,869			1,925
Total Revenues	$	3,067		$	2,051		$	6,054		$	4,102
Income Before Income Taxes
Medical (B)	$	513		$	328		$	978		$	632
Life Sciences	202			200			404			413
Total Segment Operating Income	715			528			1,381			1,045
Acquisitions and other restructurings	(104		)	(113		)	(225		)	(136		)
Net interest expense	(96		)	(83		)	(187		)	(149		)
Other unallocated items (C)	(139		)	(107		)	(328		)	(250		)
Income Before Income Taxes	$	376		$	225		$	642		$	510


(A)	Intersegment revenues are not material.

(B)

~~Includes $13~~The amounts for the three and six months ended March 31, 2016 include increases of $116 million and $246 million in the three and six-month periods, respectively, of non-cash amortization ~~of the acquisition-date write-down of CareFusion’s deferred revenue balance that was recorded~~expense associated with acquisition-related identifiable intangible assets related to ~~reflect a fair value measurement as of the acquisition date.~~CareFusion.

(C)

~~Includes an increase~~Primarily comprised of $130 million in non-cash amortization expense relating to the identifiable intangible assets acquired in the CareFusion transaction as well as depreciation expense relating to the fixed assets acquired in the transaction. Additional disclosures regarding the assets acquired in this acquisition are provided in Note 9. Also includes a $5 million adjustment to decrease the liability for employee termination costs recorded relative to certain workforce reduction actions taken in the fourth quarter of fiscal year 2014.

~~(D)~~

~~Includes a $9 million charge associated with the decision to terminate a research~~foreign exchange, corporate expenses, and ~~development program; the charge relates to program asset write-offs and obligations.~~

~~(E)~~

Includes an $11 million charge that resulted from the early termination of a European distributor agreement as well as a $20 million charge primarily resulting from the discontinuance of an instrument product development program. The development-related charge is largely attributable to capitalized product software, but also includes a lesser amount attributable to fixed assets.

~~(F)~~

~~Includes primarily interest, net; foreign exchange; corporate expenses;~~ share-based compensation ~~expense; and acquisition-related costs.~~expense.

~~(G)~~

Includes financing, transaction, integration and restructuring costs associated with the CareFusion. Also includes $281 million in recognition of the fair value step-up adjustment recorded relative to CareFusion’s inventory on the acquisition date. Additional disclosures regarding this acquisition are provided in Note 9.

~~(H)~~

Includes financing, transaction, integration and restructuring costs associated with the CareFusion acquisition, as well as the recognition of the inventory step-up adjustment, as noted above. Also includes a $12 million charge for RTI’s attorneys’ fees associated with the unfavorable verdict returned in the antitrust and false advertising lawsuit RTI filed against BD. For further discussion, refer to Note 5 in the notes to the financial statements. Additionally includes an acquisition-date accounting gain of $9 million on the previously held investment in CRISI Medical Systems, Inc. (“CRISI”), which the Company fully acquired during the second quarter of 2015.

~~(I)~~

~~Includes an $8 million gain resulting from the Company’s receipt of cash proceeds from the sale of a company in which it held a small equity ownership interest.~~

Revenues by geographic areas were as follows:

   Three Months Ended
June 30,    Nine Months Ended
June 30,
(Millions of dollars)    2015    2014    2015    2014
Revenues

United States
   $ 1,693       $ 871       $ 3,437       $ 2,546
International
   1,427       1,286       3,785       3,698








Total Revenues
   $ 3,120       $ 2,157       $ 7,222       $ 6,244



	Three Months Ended March 31,				Six Months Ended March 31,
(Millions of dollars)	2016		2015		2016		2015
Revenues
United States	$	1,719	$	863	$	3,410	$	1,744
International	1,349		1,188		2,644		2,358
Total Revenues	$	3,067	$	2,051	$	6,054	$	4,102

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 ~~2014~~2015 and ~~2013,~~2014, respectively, were estimated on the date of grant using a lattice-based binomial valuation model based on the following assumptions:

   2015 2014
Risk-free interest rate
   2.20 % 2.31 %
Expected volatility
   19.00 % 19.00 %
Expected dividend yield
   1.78 % 2.00 %
Expected life
   7.6 years    7.8 years
Fair value derived
   $ 24.82    $ 19.90



	2016			2015
Risk-free interest rate	2.17		%	2.20		%
Expected volatility	19.00		%	19.00		%
Expected dividend yield	1.76		%	1.78		%
Expected life	7.6 years			7.6 years
Fair value derived	$	27.69		$	24.82

The fair value of share-based payments is recognized as compensation expense in net income. For the three months ended ~~June 30,~~March 31, 2016 and 2015, ~~and 2014,~~ compensation expense charged to income was ~~$46~~$43 million and ~~$24~~$44 million, respectively. For the ~~nine~~six months ended ~~June 30,~~March 31, 2016 and 2015, ~~and 2014,~~ compensation expense charged to income was ~~$138~~$119 million and ~~$91~~$92 million, respectively.

The amount of unrecognized compensation expense for all non-vested share-based awards as of March 31, 2016 was approximately $259 million, which is expected to be recognized over a weighted-average remaining life of approximately 2.2 years. Certain pre-acquisition equity awards of CareFusion were converted into BD restricted stock awards or BD stock options with accelerated vesting terms at the acquisition date. In addition, as an incentive to encourage post-acquisition employee retention, certain pre-acquisition equity awards of CareFusion were converted into either BD restricted stock awards or BD stock options, as applicable, as of the acquisition date, with substantially the same terms and conditions as were applicable under such CareFusion awards immediately prior to the acquisition date. ~~Compensation expense for the three and nine months ended June 30, 2015 included $20 million and $37 million, respectively, associated with these replacement awards and was recorded in~~~~Acquisition-related costs~~.

The amount of unrecognized compensation expense for all non-vested share-based awards as of June 30, 2015 was approximately $205 million, which is expected to be recognized over a weighted-average remaining life of approximately 2.0 years. Included in the unrecognized compensation expense is ~~$52~~$20 million associated with ~~the CareFusion~~these replacement ~~awards described above. As of June 30, 2015, there were approximately 2 million of such replacement awards outstanding.~~

awards.

Note 8 – Benefit Plans

The Company has defined benefit pension plans covering certain employees in the United States and certain foreign locations. The Company also provides certain postretirement healthcare and life insurance benefits to qualifying domestic retirees. Other postretirement benefit plans in foreign 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 ~~June 30:~~

   Pension Plans    Other Postretirement Benefits
(Millions of dollars)    2015    2014    2015    2014
Service cost
   $ 20       $ 18       $ 1       $ 1
Interest cost
   22       23       2       2
Expected return on plan assets
   (32 )    (32 )    —         —
Amortization of prior service credit
   (4 )    (4 )    (1 )    (1 )
Amortization of loss
   18       12       1       —








Net pension and postretirement cost
   $ 24       $ 18       $ 2       $ 2

March 31:



	Pension Plans						Other Postretirement Benefits
(Millions of dollars)	2016			2015			2016			2015
Service cost	$	20		$	19		$	1		$	1
Interest cost	18			21			1			2
Expected return on plan assets	(27		)	(30		)	—			—
Amortization of prior service credit	(4		)	(4		)	(1		)	(1		)
Amortization of loss	19			17			—			1
Settlements	1			—			—			—
Net pension and postretirement cost	$	27		$	23		$	1		$	2

Net pension and postretirement cost included the following components for the ~~nine~~six months ended ~~June 30:~~

   Pension Plans    Other Postretirement Benefits
(Millions of dollars)    2015    2014    2015    2014
Service cost
   $ 58       $ 53       $ 2       $ 3
Interest cost
   66       69       6       7
Expected return on plan assets
   (93 )    (94 )    —         —
Amortization of prior service credit
   (12 )    (11 )    (4 )    (3 )
Amortization of loss
   52       36       2       2








Net pension and postretirement cost
   $ 70       $ 53       $ 7       $ 8

March 31:



	Pension Plans						Other Postretirement Benefits
(Millions of dollars)	2016			2015			2016			2015
Service cost	$	41		$	38		$	1		$	2
Interest cost	37			43			3			4
Expected return on plan assets	(55		)	(61		)	—			—
Amortization of prior service credit	(7		)	(8		)	(2		)	(2		)
Amortization of loss	39			34			1			1
Settlements	1			—			—			—
Net pension and postretirement cost	$	55		$	46		$	3		$	4

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 inAccumulated other comprehensive income (loss) ~~income~~in prior periods.

Postemployment benefit costs were $10 million ~~and $12 million~~ for the three-month periods ended ~~June 30, 2015~~March 31, 2016 and ~~2014, respectively.~~2015. Postemployment benefit costs were ~~$31~~$20 million and ~~$35~~$21 million for the ~~nine-month~~six-month periods ended ~~June 30,~~March 31, 2016 and 2015, ~~and 2014,~~ respectively. ~~During the fourth quarter of fiscal year 2014, the Company recognized a $36 million charge~~Employee termination costs associated with ~~unusually broad and significant workforce reduction actions that were not contemplated when~~ the postemployment benefit plan obligation was measured on September 30, 2013. As of June 30, 2015, the Company’s remaining liability relating to these workforce reductions, reflecting payments and a change in estimate which decreased the liability by $5 million, was $9 million. During the three and nine months ended June 30, 2015, the Company recognized charges of $53 million and $87 million, respectively, for employee termination costs in connection with its acquisition of CareFusion. Additional disclosures regarding the CareFusion acquisitionCompany's restructuring activities are provided in Note ~~9 and additional disclosures regarding the Company’s restructuring activities that relate to this acquisition are provided in Note 10.~~

11.

Note 9 – ~~Acquisitions~~

Acquisition

CareFusion Corporation

~~Overview of Transaction and Consideration Transferred~~

On March 17, 2015, ~~pursuant to a definitive agreement announced on October 5, 2014,~~ the Company acquired a 100% interest in CareFusion, a global medical technology company with a comprehensive portfolio of products in the areas of medication management, infection prevention, operating room and procedural effectiveness, and respiratory care, to create a global leader in medication management and patient safety solutions. Under the terms of the transaction, CareFusion shareholders received $49.00 in cash and 0.0777 of a share of the Company for each share of CareFusion. The value of the total consideration transferred for accounting purposes was based on the closing share price of the Company’s stock on the last trading day prior to the closing date of the transaction. The fair value of consideration transferred was $12.538 billion and consisted of the components below.

(Millions of dollars)
Cash consideration
   $ 10,085
Noncash consideration-fair value of shares issued
   2,269
Noncash consideration-fair value of stock options and other equity awards
   184


Total consideration transferred
   $ 12,538

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

(Millions of dollars, except per share data)
Total CareFusion shares outstanding
   205.3
Conversion factor
   0.0777


Number of the Company’s shares issued
   15.9
Closing price of the Company’s stock on March 16, 2015
   $ 142.29


Fair value of the Company’s issued shares
   $ 2,269

~~Additional disclosures regarding the financing arrangements the Company entered into to fund the cash portion of the consideration transferred relative to this acquisition are provided in Note 14.~~

~~Allocation of Consideration Transferred to Net Assets Acquired~~

The Company is in the process of finalizing the allocation of the purchase price to the individual assets acquired and liabilities assumed as of the acquisition date. The preliminary allocations of the purchase price below as of June 30, 2015 provide a reasonable basis for estimating the fair values of assets acquired and liabilities assumed. These 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.

~~All of the assets acquired and liabilities assumed in this acquisition have been allocated to the Company’s Medical segment.~~

(Millions of dollars)
Cash and equivalents
   $ 1,903
Trade receivables, net
   486
Inventories
   828
Net investment in sales-type leases
   1,208
Property, plant and equipment
   503
Customer relationships
   3,360
Developed technology
   2,510
Trademarks
   380
Other intangible assets
   185
Other assets
   435


Total identifiable assets acquired
11,798


Long-term debt
(2,181 )
Deferred tax liabilities
(2,648 )
Other liabilities
(764 )


Total liabilities assumed
(5,592 )


Net identifiable assets acquired
6,205
Goodwill
6,333


Net assets acquired
$ 12,538

~~Net Investment in Sales-Type Leases Acquired~~

The fair value of the net investment in sales-type leases acquired was based upon a determination that the interest rate implicit in the lease contract portfolio represented a market interest rate as well as a determination that the residual value of the overall lease contract portfolio represents fair market value.

~~Identifiable Intangible Assets Acquired~~

The customer relationships asset acquired represented CareFusion’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 11%. The amortization period of the customer relationships was determined to be 15 years and this period corresponds with the weighted average of lives determined for the product technology which underlies the customer contracts.

The developed technology assets acquired represented CareFusion’s developed technologies in the areas of medication management, infection prevention, operating room and procedural effectiveness, and respiratory care. 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 11%. The technologies will be amortized over a weighted-average amortization period of 12 years, which is the weighted average period over which the technologies are expected to generate substantial cash flows.

The trademark assets acquired represented the value of registered trademarks protecting the intellectual property underlying CareFusion’s product technologies. The fair value of the trademarks represents the present value of projected cash flows, specifically the estimated cost savings from not being required to pay royalties for use of these intellectual properties, utilizing an income approach with a risk-adjusted discount rate of 11%. The trademarks will be amortized over a weighted-average amortization period of 22 years, which is the weighted average period over which the trademarks are expected to generate substantial cash flows.

Other intangible assets acquired included $110 million relating to acquired in-process research and development assets representing development projects relating to various product technologies. The probability of success associated with the projects, based upon the applicable technological and commercial risk, was assumed to be 80% to 85%, depending upon the project. The projects’ fair values were determined based on the present value of projected cash flows utilizing an income approach with a risk-adjusted discount rate of 12%. The launches of the various projects are expected to occur from 2016 to 2022.

~~Other Liabilities Assumed~~

~~The balance of other liabilities assumed included a $36 million liability recorded due to a recall relating to AVEA~~^® ventilators, which is one of CareFusion’s respiratory solutions products. The liability represents the costs expected to be incurred in connection with voluntary field corrections for a portion of the installed base of ventilators.

~~Goodwill~~

Goodwill typically results through expected synergies from combining operations of an acquiree and an 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 complementary product portfolios of the Company and CareFusion to offer integrated medication management solutions and smart devices. Synergies are expected from combining the two companies’ products to meet unmet needs in hospitals, hospital pharmacies and alternate sites of care to increase efficiencies, reduce medication administration errors and improve patient and healthcare worker safety. Synergies are also expected to result from solid positions in patient safety to maximize outcomes in infection prevention, respiratory care, and acute care procedural effectiveness. No portion of goodwill from this acquisition is currently expected to be deductible for tax purposes.

~~Financing, Transaction, Integration and Restructuring Costs~~

In connection with the acquisition, the Company incurred financing, transaction, integration and restructuring costs throughout the first nine months of fiscal year 2015. The financing costs totaled $5 million and $107 million for the three and nine months ended June 30, 2015, respectively, and were recorded as~~Interest expense. Transaction costs of $9 million and $52 million for the three and nine months ended June 30, 2015, respectively, were recorded as~~~~Acquisition-related costs~~~~, and consisted of legal, advisory and other costs.~~

~~Acquisition-related costs~~ also included $24 million and $75 million of integration and restructuring costs, respectively, in the three months ended June 30, 2015 and $55 million and $136 million of integration and restructuring costs, respectively, for nine months ended June 30, 2015. See Note 10 for further discussion of restructuring activity relating to this acquisition. The Company is in the process of executing its integration plans to combine businesses, sales organizations, systems and locations and, as a result, the Company is expected to continue to incur fairly substantial integration costs through to fiscal year 2016.

~~Unaudited Pro Forma Information~~

The acquisition was accounted for under the acquisition method of accounting for business combinations. The operating activities from the acquisition date through March 31, 2015 were not material to the Company’s consolidated results of operations. As such, CareFusion’s operating results were included in the Company’s consolidated results of operations beginning on April 1, 2015.Revenues ~~and~~~~Operating Income~~ for the three and ~~nine-month periods ending June 30, 2015~~six months ended March 31, 2016 include revenues ~~and operating loss~~ attributable to CareFusion of $1$1.017 billion and ~~$261 million,~~$2.033 billion, respectively.

The operating income of the acquired CareFusion operation is no longer specifically identifiable due to the progression of the Company's integration activities.

The following table provides the pro forma results for the ~~three~~six months ended March 31, 2016 and ~~nine-month periods ended June 30,~~ 2015 ~~and 2014~~ as if CareFusion had been acquired as of ~~October 1, 2013.~~

   Three Months Ended
June 30,    Nine Months Ended
June 30,
(Millions of dollars, except per share data)    2015    2014    2015    2014
Revenues
   $ 3,133       $ 3,279       $ 9,301       $ 9,256








Net Income
$ 326    $ 361    $ 966    $ 919








Diluted Earnings per Share
$ 1.52    $ 1.69    $ 4.49    $ 4.28

the beginning of the periods presented.



(Millions of dollars, except per share data)	Six Months Ended March 31,
	2016		2015

Revenues	$	6,063	$	6,168

Net Income	$	719	$	640

Diluted Earnings per Share	$	3.32	$	2.98

The pro forma results above reflect the following adjustments, which were adjusted for the applicable tax impact to derive the net income amounts above:

Additional amortization expense related to the fair value of intangible assets acquired;

Additional depreciation expense related to the fair value of property, plant and equipment acquired;

Additional interest expense and financing costs associated with the Company’s financing arrangements relating to this acquisition, as well as the adjustment to interest expense relating to the fair value of long-term debt assumed;

Elimination of one-time financing fees, transaction, integration and restructuring costs incurred relative to this acquisition;

Exclusion of the income statement effects of the fair value adjustments to inventory and deferred revenue obligations acquired as such adjustments are not recurring in nature.

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

~~Other Transactions~~

~~During the first quarter of fiscal year 2015,~~

Note 10 – Divestiture

Respiratory Solutions

In March 2016, the Company ~~acquired GenCell Biosystems (“GenCell”),~~signed a ~~privately-held Irish biotech company that has developed proprietary technologies that address key biological analysis protocols including library preparation~~definitive agreement to sell 50.1% of ~~Next Generation Sequencing~~its Respiratory Solutions business and ~~genotyping applications. During~~form a joint venture with respect to this business. Under the ~~second quarter of fiscal year 2015,~~agreement, the Company will transfer the Respiratory Solutions business to a new standalone entity in which it will retain a 49.9% non-controlling interest, and the buyer will own the remainder. The buyer will control the operations and governance of the joint venture. The condensed consolidated balance sheet at March 31, 2016 includes assets and liabilities held for sale under this agreement of approximately $588 million and $202 million, respectively. The Respiratory Solutions business was acquired ~~CRISI,~~in the CareFusion acquisition in 2015 and was a ~~San Diego-based medical technology company dedicated~~component of the Medical segment. The transaction is expected to ~~improving~~close later in 2016, subject to regulatory approvals and the ~~safety and delivery~~satisfaction of ~~IV injectable medications. During~~

customary closing conditions. The historical financial results for the ~~third quarter of fiscal year 2015, the Company acquired the ARX group of companies,~~Respiratory Solutions business will not be classified as a ~~leading pharmacy automation distributor in Western Europe.~~

discontinued operation.

Note 1011 – Business Restructuring Charges

In connection with the CareFusion acquisition and portfolio rationalization initiatives, the Company incurred restructuring costs ~~throughout fiscal year 2015,~~during the six months ended March 31, 2016, which were recorded as~~Acquisition-related costs~~Acquisitions and other restructurings. Restructuring ~~accrual~~liability activity for the ~~nine~~six months ended ~~June 30, 2015~~March 31, 2016 was as follows:

(Millions of dollars)    Total    Employee
Termination    Share-based
Compensation    Other
Balance at September 30, 2014
   $ —         $ —         $ —         $ —
Assumed liability
   19       19       —         —
Charged to expense
   136       87       37       12
Cash payments
   (51 )    (48 )    —         (3 )
Non-cash settlements
   (37 )    —         (37 )    —
Other adjustments
   (18 )    (9 )    —         (9 )








Balance at June 30, 2015
   $ 49       $ 49       $ —         $ —

~~Additional disclosures regarding these restructuring activities and the related costs are provided in Notes 7, 8 and 9.~~



(Millions of dollars)	Employee Termination			Share-based Compensation (A)			Other (B)			Total
Balance at September 30, 2015	$	62		$	—		$	—		$	62
Charged to expense	33			25			91			149
Cash payments	(52		)	—			(32		)	(84		)
Non-cash settlements	—			(25		)	—			(25		)
Other adjustments	—			—			(59		)	(59		)
Balance at March 31, 2016	$	43		$	—		$	—		$	43


(A)	Additional disclosures are provided in Note 7.


(B)	Includes a non-cash charge of $28 million, after-tax, relating to the Company's agreement reached in December 2015 to sell a non-core asset.

Note 1112 – Intangible Assets

Intangible assets consisted of:

   June 30, 2015    September 30, 2014
(Millions of dollars)    Gross
Carrying
Amount    Accumulated
Amortization    Gross
Carrying
Amount    Accumulated
Amortization
Amortized intangible assets

Customer relationships
   $ 3,375       $ 62       $ 10       2
Developed technology
   3,412       449       893       379
Product rights
   130       34       148       31
Trademarks
   405       22       27       19
Patents and other
   331       189       232       163








Amortized intangible assets
   $ 7,653       $ 756       $ 1,308       $ 594








Unamortized intangible assets

Acquired in-process research and development
   $ 226          $ 44
Trademarks
   2          2





Unamortized intangible assets
   $ 228          $ 46

Additional information regarding the increases to the intangible asset classes detailed above as a result of the CareFusion acquisition is provided in Note 9. The increase to developed technology assets additionally included $49 million of assets recognized upon the Company’s acquisition of CRISI in the second quarter of fiscal year 2015. The increase in acquired in-process research and development project assets additionally included $81 million of assets recognized upon the Company’s acquisition of GenCell in the first quarter of fiscal year 2015.



	March 31, 2016				September 30, 2015
(Millions of dollars)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets
Customer relationships	$	3,361	$	233	$	3,370	$	120
Developed technology	3,355		635		3,487		510
Product rights	131		40		128		35
Trademarks	405		36		405		26
Patents and other	338		241		333		212
Amortized intangible assets	$	7,590	$	1,185	$	7,723	$	903
Unamortized intangible assets
Acquired in-process research and development	$	124			$	203
Trademarks	2				2
Unamortized intangible assets	$	126			$	205

Intangible amortization expense for the three months ended ~~June 30,~~March 31, 2016 and 2015 ~~and 2014~~ was ~~$151~~$138 million and ~~$21~~$20 million, respectively. Intangible amortization expense for the ~~nine~~six months ended ~~June 30,~~March 31, 2016 and 2015 ~~and 2014~~ was ~~$192~~$289 million and ~~$63~~$40 million, respectively.

The increase in intangible amortization expense in the current-year periods is mostly attributable to identifiable intangible assets acquired in the CareFusion transaction.

The following is a reconciliation of goodwill by business segment:

(Millions of dollars)    Medical Life Sciences Total
Goodwill as of September 30, 2014
   $ 482    $ 608    $ 1,090
Acquisitions
   6,585 (A) 64 (B) 6,649
Currency translation/other (C)
   (263 ) (12 ) (275 )


Goodwill as of June 30, 2015
$ 6,804    $ 659    $ 7,464



(Millions of dollars)	Medical				Life Sciences		Total
Goodwill as of September 30, 2015	$	6,807			$	730	$	7,537
Purchase accounting adjustments/currency translation	(90		)	(A)	1		(89		)
Goodwill as of March 31, 2016	$	6,718			$	731	$	7,448

(A)

~~Primarily represents goodwill recognized upon~~Comprised of acquisition accounting adjustments made during the ~~Company’s acquisition of CareFusion in the second quarter of fiscal year 2015. Additional disclosures regarding~~period relating to the CareFusion acquisition ~~are provided in Note 9. Also includes $22~~of $94 million ~~of goodwill associated with individually immaterial acquisitions, including the CRISI acquisition in the second quarter of fiscal year 2015.~~

~~(B)~~

~~Represents goodwill recognized upon the Company’s acquisition of GenCell in the first quarter of fiscal year 2015.~~

~~(C)~~

~~Includes amounts~~primarily resulting from ~~foreign currency translation as well as acquisition accounting adjustments.~~adjustment to the deferred tax liability accounts.

Note 1213 – 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, ~~Pacific,~~ Canada ~~Japan~~ 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 offset of these gains or losses against the gains and losses on the underlying hedged items, as well as the hedging costs associated with the derivative instruments, is recognized inOther income (expense), net.

The total notional amounts of the Company’s outstanding foreign exchange contracts as of ~~June 30, 2015~~March 31, 2016 and September 30, ~~2014~~2015 were ~~$1.5~~$1.3 billion and ~~$1.8~~$2.2 billion, respectively.

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

inOther comprehensive income (loss). If interest rate derivatives designated as cash flow hedges are terminated, the balance inAccumulated 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 inInterest expense within the next 12 months is $6 million, net of tax.

The total notional value of the Company's outstanding forward starting interest rate swaps designated as cash flow hedges was $250 million at March 31, 2016. The Company entered into these contracts in March 2016 to mitigate its exposure to interest rate risk. The Company had no outstanding interest rate swaps designated as cash flow hedges as of ~~June 30, 2015 or as of~~ September 30, ~~2014.~~

2015.

The total notional amount of the Company’s outstanding interest rate swaps designated as fair value hedges was $375 million at ~~June 30, 2015~~March 31, 2016 and September 30, ~~2014.~~2015. The outstanding swaps represent fixed-to-floating interest rate swap agreements the Company entered into ~~in March and September 2014,~~ to convert the interest payments on $375 million of the Company’s 3.125% notes due ~~November 8,~~ 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 ~~(loss) gain~~gains recorded on these fair value hedges, ~~and the offsetting (gain) loss~~which were offset by losses recorded onto the underlying debt instruments, ~~was $(7) million and $9 million for the three and nine months ended June 30, 2015, respectively.~~

are provided below.

Three Months Ended
March 31, Six Months Ended
March 31,
(Millions of dollars) 2016 2015 2016 2015
Gain (loss) on fair value hedges $ 11
$ 6
$ 24
$ 16

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. In April 2015, the Company entered into cash-settled forward contracts to hedge approximately 13% of its expected global resin purchase volumes throughout fiscal years 2015 and 2016. These contracts were designated as cash flow hedges and theThe total notional amount of ~~these~~cash-settled forward contracts entered into in April 2015 to hedge global resin purchase volume throughout 2015 and 2016 was 24 million pounds ($13 million) and 49 million pounds ($25 million) at ~~June~~March 31, 2016 and September 30, 2015, ~~was 61 million pounds ($31 million). The Company had no outstanding commodity derivative contracts designated as cash flow hedges as of September 30, 2014.~~

respectively.

Effects on Consolidated Balance Sheets

The location and amounts of derivative instrument fair values in the consolidated balance sheet are segregated below between designated, qualifying hedging instruments and ones that are not designated for hedge accounting.

(Millions of dollars)    June 30, 2015    September 30,
2014
Asset derivatives-designated for hedge accounting

Interest rate swaps
   $ 9       $ 3




Asset derivatives-undesignated for hedge accounting
Forward exchange contracts
8    20




Total asset derivatives (A)
$ 17    $ 23




Liability derivatives-designated for hedge accounting
Commodity forward contracts
6    —




Liability derivatives-undesignated for hedge accounting
Forward exchange contracts
13    14




Total liability derivatives (B)
$ 19    $ 14



(Millions of dollars)	March 31, 2016		September 30, 2015
Asset derivatives-designated for hedge accounting
Interest rate swaps	$	24	$	19
Asset derivatives-undesignated for hedge accounting
Forward exchange contracts	22		13
Total asset derivatives (A)	$	46	$	32
Liability derivatives-designated for hedge accounting
Commodity forward contracts	$	5	$	10
Interest rate swaps	3		—
Liability derivatives-undesignated for hedge accounting
Forward exchange contracts	9		21
Total liability derivatives (B)	$	16	$	30


(A)	All asset derivatives are included inPrepaid expenses ~~deferred taxes~~ and other.


(B)	All liability derivatives are included inPayables and accrued expenses.

Effects on Consolidated Statements of Income

Cash flow hedges

~~After-tax~~

The after-tax losses ~~of $4 million~~ recognized for the three and six months ended March 31, 2016 in~~Other~~ other comprehensive income ~~(loss)~~relating to the previously discussed cash flow hedges were $2 million. There were no amounts recognized in other comprehensive income relating to cash flow hedges for the three months ended ~~June 30,~~March 31, 2015. After-tax losses of $8 million recognized in Other comprehensive income (loss) for the six months ended March 31, 2015 were attributable to ~~the forward contracts entered into in April 2015 to hedge the risk associated with resin purchases. After-tax losses of $12 million recognized in~~~~Other comprehensive income (loss)~~ ~~for the nine months ended June 30, 2015 included the $4 million loss relating to the commodity forward contracts as well as $8 million attributable to~~ interest rate swaps ~~with a total notional amount of $2.3 billion~~ that were entered into during the first quarter of fiscal year 2015 to partially hedge interest rate risk associated with the anticipated issuance of senior unsecured notes in connection with the Company’s acquisition of CareFusion. These swaps were designated as hedges of the variability in interest payments attributable to changes in the benchmark interest rate during the period preceding the Company’s issuance of the notes. The swaps were terminated at losses, concurrent with the pricing of notes issued in December 2014, and the realized losses will be amortized over the lives of the notes with an offset to~~Interest expense. There were no amounts recognized in other comprehensive income relating to cash flow hedges for the three and nine months ended June 30, 2014.~~ Additional disclosures regarding amounts recognized in the condensed consolidated statements of income for the three and ~~nine~~six months ended ~~June 30,~~March 31, 2016 and 2015 ~~and 2014~~ relating to cash flow hedges are provided in Note 3. Additional disclosures regarding the acquisition of CareFusion are provided in Note 9 and additional disclosures regarding the Company’s debt issuance during the first quarter of fiscal year 2015 are provided in Note 14.

The Company’s designated derivative instruments are highly effective. As such, there are no gains or losses, related to hedge ineffectiveness or amounts excluded from hedge effectiveness testing, recognized immediately in income relative to 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 Gain
(Loss) Recognized in
Income on
Derivatives


Amount of Gain (Loss) Recognized in Income on Derivatives

Derivatives Not Designated as Hedging Instruments
      Three Months Ended
June 30, Nine Months Ended
June 30,
(Millions of dollars)       2015    2014 2015 2014
Forward exchange contracts (A)
   Other income (expense), net    $ 50       $ (10 ) $ (46 ) $ (5 )



	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives
Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivatives	Three Months Ended March 31,					Six Months Ended March 31,
(Millions of dollars)		2016		2015			2016		2015
Forward exchange contracts (A)	Other income (expense), net	$	15	$	(94	)	$	26	$	(96	)


(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 inOther income (expense), net.

Note 1314 – 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 ~~June 30, 2015~~March 31, 2016 and September 30, ~~2014~~2015 are classified in accordance with the fair value hierarchy in the following tables:

      Basis of Fair Value Measurement
(Millions of dollars)    June 30, 2015
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
   $ 217       $ 217       $ —         $ —
Interest rate swaps
   9       —         9       —
Forward exchange contracts
   8       —         8       —








Total Assets
   $ 234       $ 217       $ 17       $ —








Liabilities

Forward exchange contracts
   $ 13       $ —         $ 13       $ —
Commodity forward contracts
   6       —         6       —
Contingent consideration liabilities
   50       —         —         50








Total Liabilities
   $ 69       $ —         $ 19       $ 50

      Basis of Fair Value Measurement
(Millions of dollars)    September 30,
2014
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
   $ 1,040       $ 1,040       $ —         $ —
Interest rate swaps
   3       —         3       —
Forward exchange contracts
   20       —         20       —








Total Assets
   $ 1,063       $ 1,040       $ 23       $ —








Liabilities

Forward exchange contracts
   $ 14       $ —         $ 14       $ —
Contingent consideration liabilities
   14       —         —         14








Total Liabilities
   $ 29       $ —         $ 14       $ 14



			Basis of Fair Value Measurement
(Millions of dollars)	March 31, 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	$	477	$	477	$	—	$	—
Interest rate swaps	24		—		24		—
Forward exchange contracts	22		—		22		—
Total Assets	$	523	$	477	$	46	$	—
Liabilities
Forward exchange contracts	$	9	$	—	$	9	$	—
Commodity forward contracts	5		—		5		—
Interest rate swaps	3		—		3		—
Contingent consideration liabilities	57		—		—		57
Total Liabilities	$	73	$	—	$	16	$	57



			Basis of Fair Value Measurement
(Millions of dollars)	September 30, 2015 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	$	147	$	147	$	—	$	—
Interest rate swaps	19		—		19		—
Forward exchange contracts	13		—		13		—
Total Assets	$	179	$	147	$	32	$	—
Liabilities
Forward exchange contracts	$	21	$	—	$	21	$	—
Commodity forward contracts	10		—		10		—
Contingent consideration liabilities	77		—		—		77
Total Liabilities	$	108	$	—	$	30	$	77

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. The Company’s remaining cash equivalents were ~~$1.342~~$1.219 billion and ~~$821 million~~$1.277 billion at ~~June 30, 2015~~March 31, 2016 and September 30, ~~2014,~~2015, 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 ~~$11.509~~$11.5 billion and ~~$4.1~~$11.6 billion at ~~June 30, 2015~~March 31, 2016 and September 30, ~~2014,~~2015, respectively. ~~The fair value~~During the first quarter of fiscal year 2016, the Company reclassified $500 million of 1.75% notes due on November 8, 2016 from Long-Term Debt to Short-term debt. During the third quarter of fiscal year 2015, the Company reclassified $750 million of floating rates due on June 15, 2016 ~~that were~~from Long-Term Debt to Short-term debt. The fair value of reclassified ~~from long-term debt to short-term debt during the third quarter of fiscal year 2015,~~notes was ~~$749~~$1.3 billion and $750 million at ~~June~~March 31, 2016 and September 30, ~~2015.~~

2015, respectively.

The contingent consideration liabilities were recognized as part of the consideration transferred by the Company for certain acquisitions. The fair values 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 of the contingent consideration liabilities are remeasured at each reporting period based upon increases or decreases in the probability of the contingent payments. The ~~increase~~change to the ~~total~~ contingent consideration liability as of March 31, 2016 reflected the impact of a net decrease recorded in the ~~nine months ended June 30, 2015 was mostly attributable to a~~second quarter of $22 million in the fair value of contingent consideration ~~liability of $36 million recognized in connection~~liabilities associated with ~~the Company’s acquisition of GenCell in the first quarter of fiscal year 2015.~~

certain product development milestones.

The Company’s policy is to recognize any transfers into fair value measurement hierarchy levels and transfers out of levels at the beginning of each reporting period. There were no transfers in and out of Level 1, Level 2 or Level 3 measurements for the three and ~~nine~~six months ended ~~June 30, 2015~~March 31, 2016 and ~~2014.~~

~~Note 14 – Debt~~

~~As disclosed in Note 9, the Company acquired CareFusion on March 17,~~ 2015. As part of its plan for financing the cash requirements relative to this acquisition, the Company issued senior unsecured notes in December 2014 with a total aggregate principal amount of $6.2 billion. Details regarding this debt issuance were as follows:

Interest Rate and Maturity
   Aggregate
Principal
Amount
(Millions of dollars)
Floating Rate Notes due June 15, 2016
   $ 750
1.800% Notes due December 15, 2017
   1,250
2.675% Notes due December 15, 2019
   1,250
3.734% Notes due December 15, 2024
   1,750
4.685% Notes due December 15, 2044
   1,200


Total long-term debt issued in connection with CareFusion acquisition
$ 6,200

Also in December 2014, the Company entered into a 364-day term loan agreement that provides for a $1 billion term loan facility, the proceeds under which could only be used to pay the cash consideration due pursuant to the CareFusion acquisition agreement, as well as to pay financing fees, other related fees and other expenses associated with the CareFusion acquisition. In April 2015, the Company made a $650 million principal payment to reduce the outstanding balance of this term loan facility. Borrowings of $350 million were outstanding under this term loan facility at June 30, 2015. In July 2015, the Company made a $250 million payment to further reduce the outstanding balance of this term loan facility.

Concurrent with the execution of the agreement to acquire CareFusion, the Company secured $9.1 billion of fully committed bridge financing to ensure its ability to fund the cash portion of consideration due under the agreement, as well as to pay fees and expenses related to the acquisition. This bridge credit agreement was terminated upon the closing of the CareFusion acquisition in March 2015.

In January 2015, in anticipation of the closing of the CareFusion acquisition, the Company entered into a commercial paper program under which it may issue up to $1 billion in short-term, unsecured commercial paper notes. A former commercial paper program which had been in place to meet short-term financing needs was terminated in February 2015 and the outstanding borrowings of $200 million under the former program were rolled into the new commercial paper program. Borrowings of $700 million were outstanding under the current commercial paper program at June 30, 2015, of which $500 million was used to finance the Company’s acquisition of CareFusion and to pay related fees and expenses.

Upon the closing of the CareFusion acquisition in March 2015, the Company assumed the indebtedness of CareFusion, including senior unsecured notes with an aggregate principal amount of $2 billion, which was recorded on the acquisition date at a fair value of $2.174 billion. In March 2015, subsequent to closing the acquisition of CareFusion, the Company commenced offers to exchange all validly tendered and accepted notes issued by CareFusion for notes to be issued by the Company. This offer expired in April 2015 and the aggregate principal amounts below of each series of the CareFusion notes were validly tendered and exchanged for notes issued by the Company.

Interest Rate and Maturity
   Aggregate
Principal Amount
(Millions of dollars)    Percentage of
Total
Outstanding
Principal
Amount of such
Series of
Existing Notes
1.450% senior notes due May 15, 2017
   $ 293       97.64 %
6.375% senior notes due August 1, 2019
   665       95.00 %
3.300% senior notes due March 1, 2023
   294       97.95 %
3.875% senior notes due May 15, 2024
   397       99.37 %
4.875% senior notes due May 15, 2044
   300       99.96 %



Total senior notes issued under exchange transaction
   $ 1,949

This exchange transaction was accounted for as a modification of the original debt instruments. As such, no gain or loss was recognized in the Company’s consolidated results of operations as a result of this exchange transaction. Following the exchange of the notes, the aggregate principal amount of CareFusion notes that remain outstanding across the five series is $51 million.

~~Note 15 – Financing Receivables~~

As disclosed in Note 9, the net assets acquired in the Company’s acquisition of CareFusion included a $1.208 billion net investment in sales-type leases which primarily arose from the leasing of dispensing equipment. The methodology for determining the allowance for credit losses for these financing receivables is based on the collective population and is not stratified by class or portfolio segment. Allowances for credit losses on the entire portfolio are recorded based on historical experience loss rates and the potential impact of anticipated changes in business practices, market dynamics, and economic conditions. The net investment in sales-type

leases is predominantly evaluated for impairment on a collective basis; however, some immaterial allowances for individual balances are recorded based on the evaluation of customers’ specific circumstances. No interest is accrued on past due financing receivables, which are generally considered past due 30 days after the billing date. Amounts are written off against the allowance for credit losses when determined to be uncollectible. The allowance for credit losses on these financing receivables was immaterial at June 30, 2015.

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 ~~principally~~ 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. ~~Effective October 1, 2014, BD’s~~The Company's organizational structure ~~was realigned to better complement its customer-focused solutions strategy and~~ is ~~now~~ based upon two ~~worldwide~~principal business segments, BD Medical (“Medical”) and BD Life Sciences (“Life Sciences”). The composition of the Medical segment was not changed by this realignment and the Life Sciences segment consists of the former BD Diagnostics and BD Biosciences segments. The commentary provided further below reflects this two-segment organizational structure and additional discussion regarding this organization realignment is provided in Note 6 in the Notes to Condensed Consolidated Financial Statements. CareFusion Corporation (“CareFusion”), which was acquired on March 17, 2015, operates as part of our Medical segment, 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~~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 ~~Brazil)~~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 ~~particularly~~primarily focused on certain countries whose ~~economic~~healthcare systems are expanding, in particular, China and ~~healthcare sectors are growing rapidly, in particular: China, India, Brazil and Turkey.~~

India.

Acquisition of CareFusion

On March 17, 2015, ~~pursuant to a definitive agreement announced on October 5, 2014,~~ BD acquired a 100% interest in CareFusion for total consideration of approximately $12.5 billion to create a global leader in medication management and patient safety solutions. The operating activities of CareFusion from the acquisition date through March 31, 2015 were not material to BD’s consolidated results of operations and as such,Corporation ("CareFusion"). CareFusion’s operating results were included in BD’s consolidated results of operations beginning on April 1, ~~2015.~~2015 and as such, the consolidated results of operations for the prior-year periods ended March 31, 2015 referenced in the commentary provided further below did not include CareFusion's results. CareFusion operates as part of our Medical segment, which now includes the following organizational units, in addition to the Diabetes Care and Pharmaceutical Systems units: Medication and Procedural Solutions, which encompasses BD’s former Medical Surgical Systems unit; Medication Management Solutions; and Respiratory Solutions. Additional discussion regarding this acquisition is provided in Note 9 in the Notes to Condensed Consolidated Financial Statements and disclosures regarding BD’s financing arrangements relating to this transaction are provided in Note 14 in the Notes to Condensed Consolidated Financial Statements.

segment.

Overview of Financial Results and Financial Condition

~~Third quarter~~

For the three months ended March 31, 2016, revenues increased ~~44.6%~~49.6% to ~~$3.120~~$3.067 billion from the prior ~~year’s period. This increase~~year, which primarily reflected ~~a favorable~~an impact of ~~50.3% due~~$1.017 billion from the inclusion of CareFusion revenues in the current quarter’s results. Revenue growth for BD's legacy operations was primarily driven by volume, and to a lesser extent price, but was offset by the impact of unfavorable foreign currency translation.

The current-year period’s total revenues reflected the following:

Second quarter Medical segment revenue growth reflected the inclusion of CareFusion’s sales in the ~~current quarter’s~~current-year period's results, as well as

~~volume increases of approximately 4.7%, partially offset by unfavorable foreign currency translation of approximately 10.4%. Pricing did not materially impact revenues for~~ continued growth attributable to the ~~quarter. The current-year period’s total revenues also reflected solid growth~~segment's BD legacy products in ~~BD’s legacy units’ sales. Third quarter Medical segment revenue growth reflected strong growth in our~~the Medication and Procedural Solutions, ~~unit’s international sales of safety-engineered products, as well as the favorable timing of orders in the~~Diabetes Care and Pharmaceutical Systems ~~unit. Medical~~units.

Life Sciences segment revenue growth in the second quarter ~~was unfavorably impacted by lower U.S. sales~~reflected growth ~~in the Diabetes Care unit, as further discussed below, partially offset by solid sales in international markets. Revenue growth in the Life Sciences segment was primarily driven by strong sales~~ in the Preanalytical Systems and ~~Biosciences~~Diagnostic Systems units. ~~Growth in the Preanalytical Systems unit’s sales was driven by~~

Worldwide sales of safety-engineered products ~~and sales in emerging markets. The Biosciences unit’s revenues~~ reflected ~~strong growth in~~the inclusion of CareFusion's sales of ~~research instruments and reagents~~safety-engineered products in the current year's quarter, as well as ~~the favorable timing of orders for Advanced Bioprocessing products in the United States. Third~~growth that was attributable to BD's legacy safety-engineered products. Second quarter sales in the United States of safety-engineered devices of ~~$427~~$443 million increased ~~40.4% compared with the prior year’s quarter, primarily reflecting the inclusion of CareFusion’s sales of safety-engineered products in the current quarter’s results. Third~~50.7% and second quarter international sales of safety-engineered devices of ~~$304~~$290 million grew ~~14.7%~~13.1% over the prior year’s period, ~~including~~inclusive of an estimated ~~18.5%~~12.0% unfavorable impact due to foreign currency translation. International safety-engineered device revenue growth reflected the inclusion of CareFusion’s sales of safety-engineered products in the current period’s results, as well as good performance in Western Europe.

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, including through the integration of CareFusion. While the economic environment for the healthcare industry has stabilized, pricing pressures continue for some of our products. Healthcare utilization and research spending has stabilized and slightly improved in the United States; however, any 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.

Our financial position remains strong, with cash flows from operating activities totaling ~~$1.052~~$1.020 billion in the first ~~nine~~six months of fiscal year ~~2015.~~2016. At ~~June 30, 2015,~~March 31, 2016, we had ~~$1.6~~$1.7 billion in cash and equivalents and short-term investments. We continued to

return value to our shareholders in the form of dividends. During the first ~~nine~~six months of fiscal year ~~2015,~~2016, we paid cash dividends of ~~$358~~$280 million. No shares were repurchased during the first ~~nine~~six months of fiscal year ~~2015 and no share repurchases are planned for the remainder of fiscal year 2015 as our share repurchase program has been suspended in connection with the CareFusion acquisition.~~

2016.

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 ~~strengthening~~relative strength of the U.S. dollar resulted in an unfavorable foreign currency translation impact to our revenue growth during the ~~quarter, as discussed above.~~quarter. 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. ~~From time~~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 ~~time,~~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 ~~purchase forward contracts~~not be comparable to similarly titled measures used by other companies and ~~options~~are not measures of performance presented in accordance with U.S. GAAP.

Results of Operations

Revenues

Medical Segment

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



	Three months ended March 31,
(Millions of dollars)	2016			2015		Total Change		Estimated FX Impact		FXN Change
Medication and Procedural Solutions	$	831		$	565	47.2	%	(6.0	)%	53.2	%
Medication Management Solutions	536			—		NM		NM		NM
Diabetes Care	243			247		(1.3	)%	(4.9	)%	3.6	%
Pharmaceutical Systems	311			294		5.6	%	(5.4	)%	11.0	%
Respiratory Solutions	213			—		NM		NM		NM
Deferred revenue adjustment (A)	(4		)	—		NM		NM		NM
Total Medical Revenues	$	2,131		$	1,106	92.8	%	(6.4	)%	99.2	%

Medical segment safety-engineered products	$	465		$	281	65.5	%	(6.1	)%	71.6	%

(A)

In accordance with U.S. GAAP business combination accounting rules, CareFusion’s deferred revenue balance was written down to reflect a fair value measurement as of the acquisition date. The deferred revenue adjustment represents the amortization of this write-down which primarily relates to software maintenance contracts in the United States. Revenues for these contracts is typically deferred and recognized over the term of the contracts.

Overall Medical segment revenue growth in the current year's quarter largely reflected the inclusion of CareFusion’s sales in the current period’s results. Revenue growth in our Medication and Procedural Solutions unit, which includes our former Medical Surgical Systems unit, additionally reflected growth in sales of safety-engineered and infusion therapy products. Revenue growth for the Diabetes Care unit was driven by sales of pen needles and syringes. The Pharmaceutical Systems unit's revenue growth reflected sales of self-injection systems and the earlier than anticipated placement of orders within the current fiscal year.

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



	Six months ended March 31,
(Millions of dollars)	2016		2015		Total Change		Estimated FX Impact		FXN Change
Total Medical Revenues	$	4,185	$	2,177	92.2	%	(7.8	)%	100.0	%

Medical segment safety-engineered products	$	932	$	577	61.6	%	(6.4	)%	68.0	%

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



	Three months ended March 31,						Six months ended March 31,
(Millions of dollars)	2016			2015			2016			2015
Medical segment operating income	$	513		$	328		$	978		$	632

Segment operating income as % of Medical revenues	24.1		%	29.7		%	23.4		%	29.0		%

The Medical segment's operating income is driven by its performance with respect to ~~partially protect against adverse foreign exchange rate movements. Gains or losses~~gross profit margin and other operating expenses. Gross profit margin was lower in the current quarter as compared with the second quarter of 2015 primarily due to amortization of $116 million for intangible assets acquired in the CareFusion transaction. This unfavorable impact on ~~our derivative instruments are largely~~gross margin was partially offset by lower manufacturing costs resulting from continuous improvement projects improving the ~~gains or losses on~~efficiency of our operations. Selling and administrative expense for the ~~underlying hedged transactions. We do not enter into derivative instruments for trading or speculative purposes. For further discussion, refer~~second quarter of fiscal year 2016 was higher due to ~~Note 12~~depreciation of fixed assets acquired in the ~~Notes~~CareFusion acquisition. Research and development expenses for the quarter increased $57 million, or 148% above the prior year’s period, primarily due to ~~Condensed Consolidated Financial Statements.~~

the inclusion of CareFusion’s costs in the current period’s results.

Life Sciences Segment

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



	Three months ended March 31,
(Millions of dollars)	2016		2015		Total Change		Estimated FX Impact		FXN Change
Preanalytical Systems	$	340	$	339	0.4	%	(5.3	)%	5.7	%
Diagnostic Systems	319		318		0.4	%	(4.2	)%	4.6	%
Biosciences	277		289		(4.1	)%	(3.6	)%	(0.5	)%
Total Life Sciences Revenues	$	936	$	945	(1.0	)%	(4.4	)%	3.4	%

Life Sciences segment safety-engineered products	$	268	$	269	(0.5	)%	(5.1	)%	4.6	%

Life Sciences segment revenue growth for the quarter was driven by the Preanalytical Systems and Diagnostic Systems units. The Preanalytical Systems unit's revenue growth was driven by U.S. sales of safety-engineered products as well as by sales in Europe and emerging markets. The Diagnostic Systems unit's second quarter revenue growth rates reflected growth in sales of microbiology products. The Diagnostic Systems unit's second quarter revenues also benefited from a late start to the influenza season compared with the prior-year period. The Biosciences unit’s second quarter revenues were relatively flat compared with the prior-year period. Introductions of new products, continued increased demand for high-parameter instruments and growth in research reagents was offset by unfavorable timing of orders in Europe and delayed clinical tenders in Africa.

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



	Six months ended March 31,
(Millions of dollars)	2016		2015		Total Change		Estimated FX Impact		FXN Change
Total Life Sciences Revenues	$	1,869	$	1,925	(2.9	)%	(5.4	)%	2.5	%

Life Sciences segment safety-engineered products	$	538	$	547	(1.6	)%	(5.9	)%	4.3	%

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



	Three months ended March 31,						Six months ended March 31,
(Millions of dollars)	2016			2015			2016			2015
Life Sciences segment operating income	$	202		$	200		$	404		$	413

Segment operating income as % of Life Sciences revenues	21.6		%	21.1		%	21.6		%	21.5		%

The Life Sciences segment's operating income is driven by its performance with respect to gross profit margin and other operating expenses. Gross profit margin in the second quarter of fiscal year 2016 was in line with the second quarter of 2015 as the unfavorable impact of foreign currency translation was offset by margin gains primarily resulting from operational efficiencies. Selling and administrative expense as a percentage of Life Sciences revenues in the second quarter of 2016 was also in line with the second quarter of 2015. Research and development expense in the second quarter of 2016 decreased by $4 million, or 5%, which was primarily influenced by the timing of project spending.

Geographic Revenues

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



	Three months ended March 31,
(Millions of dollars)	2016		2015		Total Change		Estimated FX Impact		FXN Change
United States	$	1,719	$	863	99.2	%	—		99.2	%
International	1,349		1,188		13.5	%	(9.5	)%	23.0	%
Total Revenues	$	3,067	$	2,051	49.6	%	(5.5	)%	55.1	%

U.S. revenues reflected growth from both segments. The Medical segment's U.S. revenues reflected the inclusion of CareFusion’s U.S. sales of approximately $806 million as well as growth in sales of the Medication and Procedural Solutions unit's infusion therapy products and the earlier than anticipated placement of orders within the fiscal year in the Pharmaceutical Systems unit, as previously discussed. U.S. Life Sciences revenue growth in the second quarter of fiscal year 2016 was driven by new product introductions, continued increased demand for high-parameter instruments and growth in research reagents in the Biosciences unit. U.S. Life Sciences revenue growth was also driven by the Diagnostic Systems unit's sales of microbiology products and molecular diagnostic platforms as well as by the Preanalytical Systems unit's sales of safety-engineered products. The Diagnostic Systems unit's second quarter revenues also benefited from a late start to the influenza season compared with the prior-year period.

In addition to the inclusion of CareFusion’s sales of approximately $211 million in the current year’s quarter, the Medical segment's international revenue growth reflected growth in the Medication and Procedural Solutions unit's sales of safety-engineered products, particularly in China. International revenue growth in the Medical segment also benefited from the earlier placement of orders in the Pharmaceutical Systems unit, as previously discussed. The Life Sciences segment's second quarter international revenue growth reflected growth of the Preanalytical Systems unit's sales of safety-engineered products in Western Europe and Asia Pacific and of the Diagnostic Systems unit's sales of microbiology products in Western Europe and Latin America. International revenue growth in the Life Sciences segment was negatively impacted by both the unfavorable timing of orders in Europe and delayed clinical tenders in Africa for the Biosciences unit.

Effective October 1, 2015, we changed the composition of countries that we define as emerging markets within the Asia Pacific region. On this redefined basis, emerging market revenues for the second quarter were $443 million, compared with $428 million in the prior year’s quarter, and included an estimated $46 million unfavorable impact due to foreign currency

translation. Revenue growth in emerging markets for the second quarter was primarily driven by the inclusion of CareFusion's sales in the period.

Specified Items

Reflected in the financial results for the three and ~~nine-month~~six-month periods of fiscal years ~~2015~~2016 and ~~2014~~2015 are the following specified items:

   Three months ended June 30, Nine months ended June 30,
(Millions of dollars)    2015 2014 2015 2014
Financing costs^(A)
   $ 5    $ —      $ 107    $ —
Transaction costs^(A)
   9    —      52    —
Integration costs^(A)
   24    —      55    —
Restructuring costs^(A)
   75    —      136    —
Purchase accounting adjustments
   439 ^(B) 19 ^(D) 466 ^(C) 56 ^(D)
Employee termination cost-related amounts^(E)
   (5 ) —      (5 ) —
Research and development charges^(F)
   —      9    —      29
Litigation-related charge^(G)
   —      —      12    —
Other specified items, net^(H)
   —      —      —      2


Total specified items
   548    28    824    88
Tax impact of specified items
   169    10    277    29


After-tax impact of specified items
   $ 379    $ 19    $ 547    $ 59



	Three months ended March 31,				Six months ended March 31,
(Millions of dollars)	2016		2015		2016		2015
Financing costs (A)	$	—	$	58	$	—	$	102
Transaction costs (A)	—		33		—		43
Integration costs (A)	40		18		75		31
Restructuring costs (A)	64		62		149		62
Purchase accounting adjustments (B)	115		9		268		27
Litigation-related charge (C)	—		—		—		12
Total specified items	218		180		492		277
Tax impact of specified items	85		77		164		108
After-tax impact of specified items	$	134	$	102	$	329	$	169

(A)

Represents financing, transaction, integration and restructuring costs associated with the CareFusion ~~acquisition.~~acquisition and portfolio rationalization. The financing costs were recorded inInterest expense. The transaction, integration and restructuring costs were recorded in~~Acquisition-related costs~~Acquisitions and other restructurings. ~~For further discussion, refer to Note 9 in the Notes to Condensed Consolidated Financial Statements.~~

(B)

~~Represents~~

Primarily represents non-cash amortization expense ~~of $148 million pre-tax~~ associated with ~~acquisition related~~acquisition-related identifiable intangible assets, including ~~CareFusion, as well as~~$116 million and $246 million in the ~~net amortization of purchase accounting adjustments of $291 million pre-tax~~current quarter and six-month period, respectively, related to ~~reflect CareFusion’s inventory, fixed assets, debt and deferred revenue balances at fair value as of the acquisition date.~~CareFusion. BD’s amortization expense is primarily recorded inCosts of products sold.

~~(C)~~

~~Represents non-cash amortization expense~~ The adjustments in the three and six-month periods of ~~$184 million pre-tax associated with acquisition related identifiable intangible assets, including CareFusion, as well as~~fiscal year 2016 also include a net decrease in the ~~net amortization of purchase accounting adjustments of $291 million pre-tax to reflect CareFusion’s inventory, fixed assets, debt and deferred revenue balances at~~ fair value as of certain contingent consideration liabilities of $22 million that was recognized in the ~~acquisition date.~~second quarter. The adjustment ~~also~~for the three and six months ended March 31, 2015 additionally reflected a pre-tax acquisition-date accounting gain of $9 million on ~~the~~a previously held ~~investment in CRISI Medical Systems, Inc., a company BD fully acquired in March 2015.~~investment.

~~(D)~~

~~Includes the non-cash expense associated with the amortization of acquisition-related identifiable intangible assets.~~

~~(E)~~(C)

Represents an adjustment to decrease the liability for employee termination costs recorded relative to workforce reduction actions taken in the fourth quarter of fiscal year 2014. For further discussion, refer to Note 8 in the Notes to Condensed Consolidated Financial Statements.

~~(F)~~

Includes a $9 million charge associated with the decision to terminate a research and development program in the Medical segment; the charge relates to program asset write-offs and obligations. The amount for the nine months ended June 30, 2014 additionally includes a $20 million charge recorded by our Life Sciences segment for asset write-offs primarily resulting from the discontinuance of an instrument product development program. The asset write-offs were largely attributable to capitalized product software, but also included a lesser amount attributable to fixed assets.

~~(G)~~

Represents a charge for ~~RTI’s~~plaintiff attorneys’ fees, recorded inSelling and administrative expense, associated with ~~the unfavorable verdict returned in~~ the antitrust and false advertising lawsuit RTI filed against BD. For further discussion, refer to Note 5 in the Notes to Condensed Consolidated Financial Statements.

~~(H)~~

~~Includes an $11 million charge recorded by our Life Sciences segment in~~~~Selling and administrative expense~~ ~~for contract termination costs that resulted from the early termination of a European distributor arrangement. Also includes a gain of $8 million in~~~~Other income (expense), net~~~~, resulting from the sale of a company in which we held a small equity ownership interest.~~

~~Results of Operations~~

~~Revenues~~

~~Refer to Note 6 in the Notes to Condensed Consolidated Financial Statements for segment financial data.~~

~~Medical Segment~~

~~The following is a summary of third quarter Medical revenues by organizational unit:~~

   Three months ended June 30,
(Millions of dollars)
   2015    2014    Total
Change Estimated
FX
Impact
Medication and Procedural Solutions
   $ 848       $ 590       43.8 % (8.4 )%
Medication Management Solutions
   554       —         NM    NM
Diabetes Care
   245       258       (5.2 )% (8.6 )%
Pharmaceutical Systems
   333       353       (5.5 )% (13.5 )%
Respiratory Solutions
   232       —         NM    NM
Deferred revenue adjustment^(A)
   (13 )    —         NM    NM






Total Medical Revenues
$ 2,199    $ 1,201    83.1 % (12.4 )%

~~(A)~~

Represents the amortization of the acquisition-date write-down of CareFusion’s deferred revenue balance to reflect a fair value measurement as of the acquisition date. The write-down primarily related to software maintenance contracts in the United States. Revenues for these contracts is typically deferred and recognized over the term of the contracts.

Medical segment revenue growth in the current quarter largely reflected the inclusion of CareFusion’s sales in the current period’s results beginning on April 1, 2015. Segment revenue growth additionally reflected strong growth in international sales of flush and safety-engineered products in our Medication and Procedural Solutions unit, which includes our former Medical Surgical Systems unit. Revenue growth for the Diabetes Care unit was unfavorably impacted by lower sales growth in the United States due primarily to the slowing of the conversion from syringes to pen needles and the flattening of price trends. This unfavorable impact to the Diabetes Care unit’s revenues in the quarter was partially offset by solid sales in international markets. The Pharmaceutical Systems unit’s revenue growth reflected a favorable timing of orders during the quarter. Global sales of safety-engineered products were $456 million, as compared with $284 million in the prior year’s quarter, reflecting the inclusion of CareFusion’s sales in the current quarter’s results. Global sales of safety-engineered products in the quarter also included an estimated $27 million unfavorable impact due to foreign currency translation. Total Medical revenues for the nine-month period ended June 30, 2015 increased by 29.5% from the prior-year nine-month period, reflecting the inclusion of CareFusion’s current quarter’s sales in the current year-to-date period’s results and an estimated 7.5% unfavorable impact from foreign currency translation. For the nine-month period ended June 30, 2015, global sales of safety-engineered products were $1.033 billion, compared with $832 million in the prior year’s period, reflecting the inclusion of CareFusion’s safety-engineered sales in the current quarter’s results. Global sales of safety-engineered products in the nine-month period also included an estimated $47 million unfavorable impact due to foreign currency translation.

~~Medical operating income for the third quarter was $483 million, or 22.0% of Medical revenues, compared with $356 million, or 29.7% of segment revenues, in the prior year’s quarter.~~

Gross Profit Margin

Gross profit margin ~~was lower in~~for the ~~current quarter as~~three and six-month periods of fiscal year 2016 compared with the ~~third~~prior-year periods in 2015 reflected the following impacts:



	Three-month period		Six-month period
March 31, 2015 gross profit margin %	51.0	%	51.0	%
CareFusion acquisition-related asset depreciation and amortization	(4.0	)%	(4.4	)%
Foreign currency translation	(0.2	)%	(0.6	)%
Operating performance	1.6	%	1.8	%
March 31, 2016 gross profit margin %	48.4	%	47.8	%

The operating performance impacts for the current year's quarter ~~of 2014 due to the amortization of intangible assets acquired in the CareFusion transaction~~ and ~~the amortization of the acquisition-date write-down of CareFusion’s deferred revenue balance, as previously discussed. These unfavorable impacts on gross margin were partially offset by~~

six-month period reflected lower manufacturing costs resulting from continuous improvement ~~projects. Aggregate selling~~projects improving the efficiency of our operations.

Operating Expenses

A summary of operating expenses for the three and six months ended March 31, 2016 and 2015 is as follows:



	Three months ended March 31,						Increase (decrease) in basis points		Six months ended March 31,						Increase (decrease) in basis points
	2016			2015			Increase (decrease) in basis points		2016			2015			Increase (decrease) in basis points
(Millions of dollars)
Selling and administrative expense	$	732		$	511				$	1,480		$	1,055
% of revenues	23.9		%	24.9		%	(100	)	24.5		%	25.7		%	(120	)

Research and development expense	$	182		$	129				$	369		$	258
% of revenues	5.9		%	6.3		%	(40	)	6.1		%	6.3		%	(20	)

Acquisitions and other restructurings	$	104		$	113				$	225		$	136

Selling and administrative expense for the third quarter primarily reflected the inclusion of CareFusion’s spending in the current quarter’s results. Medical segment selling and administrative expense for the third quarter also included the depreciation of the fair value step-up adjustment recorded upon the acquisition date relative to CareFusion’s fixed assets. Research and development expenses for the quarter increased $38 million, or 70% above the prior year’s period. This increase is primarily attributable to the inclusion of CareFusion’s costs in the current period’s results, partially offset by a favorable comparison to the prior year period which included a $9 million charge associated with the decision to terminate a research and development program, as previously discussed. Segment operating income for the nine-month period was $1.115 billion, or 25.5% of Medical revenues, compared with $968 million, or 28.6%, in the prior year’s period.

~~Life Sciences Segment~~

~~The following is a summary of third quarter Life Sciences revenues by organizational unit:~~

   Three months ended June 30,
(Millions of dollars)
   2015    2014    Total
Change Estimated
FX
Impact
Preanalytical Systems
   $ 349       $ 364       (4.0 )% (8.1 )%
Diagnostic Systems
   302       315       (4.2 )% (7.9 )%
Biosciences
   269       277       (2.7 )% (7.8 )%






Total Life Sciences Revenues
$ 921    $ 956    (3.7 )% (7.9 )%

Life Sciences segment revenue growth for the quarter was primarily driven by growth in the Preanalytical and Biosciences units. Revenue growth in the Diagnostic Systems unit reflected solid growth in sales of core microbiology platforms and double-digit growth in sales of the BD Max^™ ~~molecular platform, partially offset by the impact of guidelines providing for increased Pap smear testing intervals and continued pressure on sales of the BD ProbeTec~~^™ ~~ET and BD Viper~~^™ platforms. The Preanalytical Systems unit’s revenue growth was driven by sales of safety-engineered products and sales in emerging markets. Global sales of safety-engineered products in the Preanalytical Systems unit totaled $275 million, compared with $285 million in the prior year’s quarter, and included an estimated $23 million unfavorable impact due to foreign currency translation. The Biosciences unit’s revenue growth reflected strong growth in sales of research instruments and reagents as well as the favorable timing of orders for Advanced Bioprocessing products in the United States. Total Life Sciences revenues for the nine-month period ended June 30, 2015 decreased by 0.6% from the prior-year nine-month period, including an estimated 5.7% unfavorable impact from foreign currency translation. For the nine-month period ended June 30, 2015, global sales of safety-engineered products in the Preanalytical Systems unit were $822 million, compared with $825 million in the prior year’s period, and included an estimated $46 million unfavorable impact due to foreign currency translation.

Life Sciences operating income for the third quarter was $197 million, or 21.4% of Life Sciences revenues, compared with $221 million, or 23.1% of segment revenues, in the prior year’s quarter. Gross profit margin was lower in the third quarter of fiscal year 2015 compared with the third quarter of 2014 primarily due to unfavorable foreign currency translation, as well as other various immaterial items.

Selling and administrative expense as a percentage of ~~Life Sciences~~ revenues in the third quarter of 2015 was slightly lower compared with the third quarter of 2014, due to various immaterial items. An increase in research and development expense in the third quarter of 2015 of $5 million, or 7.5%, primarily reflected the timing of project spending as well as increased investment in new products and platforms. Segment operating income for the nine-month period was $610 million, or 21.4% of Life Sciences revenues, compared with $653 million, or 22.8%, in the prior year’s period.

~~Geographic Revenues~~

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

   Three months ended June 30,
(Millions of dollars)
   2015    2014    Total
Change Estimated
FX
Impact
United States
   $ 1,693       $ 871       94.4 % —
International
   1,427       1,286       10.9 % (17.5 )%






Total Revenues
$ 3,120    $ 2,157    44.6 % (10.4 )%

~~U.S. revenue growth in our Medical segment reflected the inclusion of CareFusion’s sales~~ in the current year’s ~~quarter. U.S. Medical segment growth was unfavorably impacted by weaker U.S. sales in~~three and six-month periods reflected cost synergies resulting from the ~~Diabetes Care unit~~CareFusion acquisition and an unfavorable comparison to the prior-year period for the Pharmaceutical Systems unit due to relatively strong sales in the prior-year period. U.S. Life Sciences revenue growth reflected strong growth in sales of research instruments and reagents, as well as the favorable timing of orders for Advanced Bioprocessing products in the Biosciences unit. U.S. Life Sciences revenue growth also reflected continued growth in the Diagnostic Systems unit’s sales of its core microbiology platforms and its BD Max^TM ~~molecular platform,~~foreign currency translation, partially offset by the ~~impact of increased testing intervals, as previously discussed, and continued pressure on sales of the unit’s BD Probe Tec~~^TM ~~ET and BD Viper~~^TM ~~platforms in the United States.~~

International revenue growth in the Medical segment reflected the inclusion of CareFusion’s sales in the current year’s quarter. International Medical growth also reflected strong performance in the Pharmaceutical Systems unit’s international sales as well as in the Medication and Procedural Solutions unit’s sales of its safety engineered products. The Diabetes Care unit’s revenues reflected solid sales in international markets. International revenue growth in the Life Sciences segment reflected strong growth in the Preanalytical Systems and Diagnostic Systems units. Emerging market revenues for the third quarter of $539 million represented an increase of 1.6% over the prior year’s quarter, including a 9.4% unfavorable impact due to foreign currency translation. Revenue growth in emerging markets for the third quarter was driven by sales in Latin America and China.

~~Gross Profit Margin and Operating Expenses~~

~~A summary of gross profit margin, selling and administrative expense and research and development expense for the three and nine months ended June 30, 2015 and 2014 is as follows:~~

   Three months ended June 30, Nine months ended June 30,
   2015 2014 2015 2014
(Millions of dollars)
Gross profit margin %
   38.1 % 51.5 % 45.4 % 51.2 %
Selling and administrative expense
   $ 764    $ 528    $ 1,820    $ 1,584
% of revenues
   24.5 % 24.5 % 25.2 % 25.4 %
Research and development expense
   $ 178    $ 137    $ 437    $ 410
% of revenues
   5.7 % 6.4 % 6.0 % 6.6 %

~~Gross profit margin~~

The decrease in gross profit margin for the third quarter of fiscal year 2015 compared with the prior-year period in 2014 primarily reflected an unfavorable impact of 1,230 basis points due to the recognition of the fair value step-up adjustment recorded relative to CareFusion’s inventory on the acquisition date as well as the amortization and depreciation of ~~intangible and~~ fixed ~~assets, respectively, that were acquired in the CareFusion transaction. For further discussion regarding the inventory and intangible~~ assets acquired in the CareFusion transaction, refer to Note 9 in the Notes to Condensed Consolidated Financial Statements. The decrease in gross profit margin for the third quarter of fiscal year 2015 also reflected an estimated unfavorable impact of 140 basis points relating to foreign currency translation. The favorable impact in the current year’s quarter from operating performance of 30 basis points was primarily driven by lower manufacturing costs from continuous improvement projects and lower raw material costs, partially offset by higher pension costs.

The decrease in gross profit margin for the nine-month period reflected an unfavorable impact of 540 basis points due to the inventory step-up adjustment, intangible asset amortization and fixed asset depreciation impacts noted above. Gross margin for the current nine-month period also reflected an estimated unfavorable impact of 70 basis points relating to foreign currency translation and a favorable operating performance impact of approximately 30 basis points. Operating performance in the nine-month period reflected lower manufacturing costs from continuous improvement projects, favorable product mix and lower raw material costs, partially offset by higher pension costs and price decreases.

~~Selling and administrative expense~~

Aggregate expenses in the current year’s period primarily reflected the inclusion of CareFusion’s selling and administrative expenses in the current quarter’s results, as well as depreciation of the fair value step-up adjustment recorded upon the acquisition date relative to CareFusion’s fixed assets.acquisition. Selling and administrative expense ~~for~~as a percentage of revenues in the ~~third quarter of fiscal year 2015 was favorably impacted by foreign currency translation of approximately $46 million.~~

~~Aggregate expenses for the current nine-month~~prior-year six-month period reflected ~~the inclusion~~a charge of CareFusion’s selling and administrative expenses in the current quarter’s results, as well as the depreciation of the fair value step-up adjustment, as noted above. Selling and administrative expense in the current year’s nine-month period was favorably impacted by foreign currency translation of approximately $88 million. Aggregate expenses for the current year’s nine-month period also included increased spending of $38 million relating to the expansion of our business in emerging markets and the global enterprise resource planning initiative to update our business information systems, as well as a $12 million ~~charge~~ relating to the RTI litigation matter, as previously discussed. Aggregate expenses in the prior year’s nine-month period included the $11 million charge relating to the early termination of a distributor arrangement previously discussed as well as the favorable impact of a $6 million reversal of bad debt expense that was recorded upon receiving a payment relating to outstanding receivables due from the Spanish government.

Research and development expense

The ~~increase~~increases in research and development expense for ~~the third quarter,~~three and six-month periods of fiscal year 2016 compared with the ~~prior year’s period,~~prior-year periods in 2015 primarily reflected the inclusion of CareFusion’s research and development expenses in the current ~~quarter’s~~periods' results. BD’s spending in the current year’s quarter relative to its legacy units was slightly lower due to the timing of projects. Research and development expense in the prior period’s quarter reflected a $9 million charge associated with the decision to terminate a research and development program in the Medical segment, as previously discussed.

The ~~increase~~decreases in research and development expense ~~for the nine-month period reflected the inclusion~~as a percentage of ~~CareFusion’s current quarter’s research and development expenses~~revenues in the current ~~quarter’s results. Research~~

year's periods reflected the timing of project spending.

Acquisitions and ~~development expenses~~other restructurings

Costs relating to acquisitions and other restructurings in the current nine-month period also reflected a favorable comparison to the prior-year period’s expense, which included the program termination in the Medical segment, as noted above, as well as the $20 million asset write-off charge recorded in the second quarter of fiscal year 2014 upon the discontinuance of a program in the Life Sciences segment, as previously discussed.

~~Acquisition-related costs~~

~~Acquisition-related costs were $108 million in the third quarter of fiscal year 2015, which reflected~~three and six-month periods represented transaction, integration and restructuring costs ~~of $9 million, $24 million~~associated with the CareFusion acquisition and $75 million, respectively. Acquisition-related costs in the nine-month period ending June 30, 2015 were $244 million which reflected transaction, integration and restructuring costs of $52 million, $55 million and $136 million, respectively.portfolio rationalization. The transaction and integration costs ~~in both the three and nine-month periods reflected~~specifically included advisory, legal, and other costs incurred in connection with the CareFusion acquisition. ~~The restructuring costs in the current quarter reflected employee termination costs, share-based compensation expense and other restructuring costs relating to the acquisition.~~ For further ~~discussion~~disclosures regarding ~~these~~the restructuring costs, refer to ~~Notes 7, 8 and 9~~Note 11 in the Notes to Condensed Consolidated Financial Statements.

Net Interest Expense

The components of net interest expense for the three and six-month periods were as follows:

   Three months ended June 30,    Nine months ended June 30,
(Millions of dollars)    2015    2014    2015    2014
Interest expense
   $ (105 )    $ (33 )    $ (272 )    $ (99 )
Interest income
   2       12       20       36








Net interest expense
   $ (103 )    $ (20 )    $ (252 )    $ (63 )



	Three months ended March 31,						Six months ended March 31,
(Millions of dollars)	2016			2015			2016			2015
Interest expense	$	(99	)	$	(91	)	$	(196	)	$	(167	)
Interest income	3			8			9			19
Net interest expense	$	(96	)	$	(83	)	$	(187	)	$	(149	)

The increases in interest expense for the three and ~~nine-month~~six-month periods of fiscal year ~~2015~~2016 compared with the prior ~~year~~year's periods primarily reflected increased financing costs associated with the CareFusion acquisition, including interest on $6.2 billion of senior unsecured notes issued in December 2014, in anticipation of closing the CareFusion acquisition. Interest expense for the current year’s periods also reflected $8 million due to thepartially offset by favorable amortization of the acquisition-date fair value-step recorded on CareFusion’s long-term debt ~~partially offset~~as well as by ~~$5 million of costs associated with our April 2015 exchange of CareFusion notes assumed in~~favorable comparison to the ~~acquisition for BD notes. Interest expense in the current nine-month period additionally~~prior-year periods, which included commitment fees for a bridge loan facility entered into concurrently with the execution of the agreement to acquire CareFusion to ensure our ability to fund the cash portion of consideration due under the agreement. Additional disclosures regarding the debt issuance, exchange offer and bridge loan facility are providedthat was terminated in ~~Note 14 in the Notes to Condensed Consolidated Financial Statements.~~

March 2015.

The decreases in interest income infor the ~~current year’s~~ three and ~~nine-month~~six-month periods of fiscal year 2016 compared with the prior year’s periods primarily reflected lower cash levels outside of the United States ~~as well as~~and lower investment gains on assets related to our deferred compensation plans. The offsetting movements in the deferred compensation plan liability were recorded inSelling and administrative expense.

Income Taxes

The income tax ~~rate was (60.0)%~~rates for the ~~third quarter~~three and six-month periods are provided below. The tax benefits of ~~fiscal year 2015 compared with 23.0% in~~ the ~~third quarter of fiscal year 2014. The effective~~specified items shown earlier reduced the current and prior-year periods' income tax ~~rate for~~rates as the ~~current year’s quarter would have been higher by 8,480 basis points excluding the impact on BD’s income mix of the previously discussed specified items. The~~ tax benefits on these specified items were primarily incurred in higher tax jurisdictions. ~~The nine-month tax rate was 6.4% compared with the prior year’s rate of 22.8%. The effective income tax rate for the current~~

year’s nine-month period would have been higher by 1,630 basis points excluding the impact on BD’s income mix of the third quarter specified items, which, as discussed above, were affected by higher tax benefits, as well as the impact of previously discussed specified items recorded in the first and second quarters of fiscal year 2015. The decrease in the income tax rate for the nine-month period of 2015 additionally reflected the extension of the U.S. research and development income tax credit, which was partially offset by the unfavorable impact of one-time discrete items.

Three months ended March 31, Six months ended March 31,
2016 2015 2016 2015
Effective income tax rate 10.0 % 3.9 % 11.7 % 11.4 %

Favorable impact, in basis points, from tax benefits of specified items 1,060
1,740
930
980

Net Income and Diluted Earnings per Share

Net ~~income~~Income and ~~diluted earnings~~Diluted Earnings per ~~share~~Share for the ~~third quarter of 2015~~three and six-month periods were $62 million and $0.29, respectively. Net income and diluted earnings per share for the prior year’s third quarter were $326 million and $1.65, respectively. The current quarter’s earnings per share reflected an unfavorable impact of $1.76 relating to the previously discussed specified items, as well as an estimated unfavorable impact due to foreign currency translation of $0.29. Net income and diluted earnings per share for the nine-month period of 2015 were $514 million and $2.52, respectively, compared with $884 million and $4.47, respectively, in the prior year’s period. The current year-to-date period’s earnings per share reflected an unfavorable impact of $2.68 relating to the previously discussed specified items, as well as an estimated unfavorable impact due to foreign currency translation of $0.52. Additionally, diluted earnings per share for nine-month period of 2015 reflected a dilutive impact of $0.02 from the shares BD issued, as part of the total consideration transferred upon the closing of the CareFusion acquisition, prior to the inclusion of CareFusion in our consolidated results of operations.

follows:



	Three months ended March 31,						Six months ended March 31,
	2016			2015			2016			2015
Net Income (Millions of dollars)	$	338		$	216		$	567		$	452
Diluted Earnings per Share	$	1.56		$	1.08		$	2.62		$	2.28

Unfavorable impact-specified items	$	(0.62	)	$	(0.51	)	$	(1.52	)	$	(0.85	)
Unfavorable impact-foreign currency translation	$	(0.14	)				$	(0.40	)

Liquidity and Capital Resources

The following table summarizes our consolidated statement of cash flows:

Six months ended March 31,
(Millions of dollars) 2016 2015
Net cash provided by (used for)
Operating activities $ 1,020
$ 514
Investing activities $ (170 ) $ (7,829 )
Financing activities $ (576 ) $ 7,392

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 ~~2015.~~2016. Normal operating needs in fiscal year ~~2015~~2016 include working capital, capital expenditures, and cash dividends. ~~Net~~The change in net cash provided by operating activities was ~~$1.052 billion during the first nine months of fiscal year 2015, compared with $1.207 billion in the same period in 2014, reflecting a decrease in~~primarily attributable to income from continuing operations, as adjusted for depreciation and ~~amortization.~~amortization and other non-cash items. The ~~current-period~~current period change in operating assets and liabilities was a net use of cash and primarily reflected ~~higher levels of accounts receivables and prepayments and~~ lower levels of accounts payable and accrued expenses ~~partially offset by lower~~and higher levels of inventory. The lower levels of inventory reflected the impact of the third quarter fiscal year 2015 recognition of the acquisition fair value step-up adjustment recorded relative to CareFusion’s inventory on the acquisition date.accounts receivables. Net cash provided by operating activities in the first ~~nine~~six months of ~~both~~ fiscal ~~years~~year 2015 ~~and 2014~~ was reduced by ~~changes in the pension obligation resulting primarily from~~a discretionary cash ~~contributions~~contribution of $40 million ~~and $75 million in the first nine months of fiscal years 2015 and 2014, respectively.~~

to fund our pension obligation.

Net Cash Flows from Investing Activities

Capital expenditures were $258 million in the first six months of fiscal year 2016 compared with $252 million in the prior-year period. Net cash used for investing activities in the current-year period reflected $111 million of proceeds from the sale of a non-core asset. Net cash used for investing activities in the ~~first nine months~~prior-year period reflected cash outflows of ~~the current year was $8.003~~$8.3 billion ~~compared with $730 million~~related to our acquisition of CareFusion and other smaller acquisitions occurring in the prior-year period. ~~Cash inflows from~~These cash outflows in the prior-year period were partially offset by sales of investments of ~~$837~~$813 million ~~were attributable~~due to the maturities of time deposits in Europe, Latin America and Asia Pacific. Cash outflows relating to acquisitions of $8.3 billion were primarily attributable to the completion of the CareFusion acquisition in the second quarter of fiscal year 2015. Cash outflows relating to acquisitions in the current year’s nine-month period also included cash payments relating to other acquisitions, including GenCell Biosystems, CRISI Medical Systems, Inc. and the ARX group of companies in the first, second and third quarters of fiscal year 2015, respectively. Cash outflows relating to acquisitions were $40 million in the first nine months of the prior year as a result of the Company’s acquisition of Alverix, Inc. in the second quarter of fiscal year 2014. Capital expenditures were $387 million in the first nine months of fiscal year 2015 compared with $339 million in the prior-year period.

Net Cash Flows from Financing Activities

Net ~~cash provided by financing activities for the first nine months of fiscal year 2015 was $6.667 billion, compared with net~~ cash used for financing activities ~~of $701 million~~ in the ~~prior-year period.~~

~~Debt-related Activities~~

first six months of fiscal year 2016 included a payment of $300 to reduce the balance of our commercial paper program. Net cash provided by financing activities in the ~~current~~prior-year period included the proceeds from $6.2 billion of notes issued in December 2014 as well as ~~$850 million~~$1.5 billion total proceeds from net borrowings under commercial paper programs and a term loan facility. These proceeds were used to finance the completion of our acquisition of CareFusion in March 2015. For additional information regarding these financing arrangements, refer to Note 14 in the Notes to Condensed Consolidated Financial Statements and for additional information regarding the CareFusion acquisition, refer to Note 9 in the Notes to Condensed Consolidated Financial Statements.

Debt-related Activities

Certain measures relating to our total debt ~~which was $13.2 billion at June 30, 2015 and $4.0 billion at September 30, 2014,~~ were as follows:

   June 30,
2015 September 30,
2014
Short-term debt as a percentage of total debt
   13.7 % 5.1 %
Weighted average cost of total debt
   3.2 % 3.7 %
Total debt as a percentage of total capital*
   58.3 % 43.4 %

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



(Millions of dollars)	March 31, 2016			September 30, 2015
Total debt	$	12,515		$	12,822

Short-term debt as a percentage of total debt	13.2		%	11.3		%
Weighted average cost of total debt	3.4		%	3.3		%
Total debt as a percentage of total capital*	58.1		%	59.4		%

* 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 ~~June 30, 2015~~March 31, 2016 reflected the reclassification, from long-term debt to short-term debt, of ~~$750~~$500 million of ~~floating rate~~1.75% notes due on ~~June 15,~~November 8, 2016.

~~Repurchase~~ The ratio of ~~Common Stock~~

~~There were no share repurchases during the first nine months~~debt as a percentage of fiscal year 2015 as our share repurchase program has been suspended throughout fiscal year 2015 beginning with our announced agreement to acquire CareFusion. For the first nine months of fiscal year 2014, we repurchased approximately 3.6 million shares of our common stock for $400 million. At Junetotal capital at September 30, 2015 ~~a total~~reflects adjustments to the condensed consolidated balance sheet resulting from our adoption of ~~approximately 9.1 million common shares remained available for purchase under~~revised presentation requirements relating to deferred taxes. Additional information regarding this adoption is provided in Note 2 in the ~~Board of Directors’ September 2013 repurchase authorization.~~

Notes to Condensed Consolidated Financial Statements.

Cash and Short-term Investments

At ~~June 30, 2015,~~March 31, 2016, total worldwide cash and short-term investments were approximately ~~$1.6~~$1.7 billion, of which ~~$849 million~~$1.05 billion was 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 Facilities

~~In January 2015 and~~

We have in ~~connection with our agreement to acquire CareFusion, we entered into~~place a commercial paper borrowing program which is available to meet our short-term financing needs, including working capital requirements. In February 2016, we increased the size of this program by $500 million so that it allows us to issue a maximum of $1$1.5 billion in notes. ~~A former commercial paper program which had been in place to meet short-term financing needs was terminated in February 2015 and the~~Borrowings outstanding ~~borrowings of $200 million~~ under ~~the former~~this program were ~~rolled into~~$400 million at March 31, 2016, which reflected a payment of $300 million during the new commercial paper program. Also in connection with the CareFusion acquisition, we entered into a 364-day term loan agreement in December 2014 that provides for a $1.0 billion term loan facility. Under the financial covenants of the term loan facility, BD is required to maintain an interest expense coverage ratio (ratio of earnings as defined under the agreement to interest expense) of not less than 5-to-1 as of the last day of any fiscal quarter. Additionally,

BD is required to maintain a leverage ratio (ratio of debt to earnings as defined under the agreement) as of the last day of any fiscal quarter of no greater than 4.75-to-1. We were in compliance with these covenants as of June 30, 2015.

At June 30, 2015, subsequent to the completion of the CareFusion acquisition on March 17, 2015, borrowings outstanding under the current commercial paper program were $700 million. At June 30, 2015, borrowings outstanding under the term loan agreement were $350 million reflecting a $650 million principal payment made in April 2015. In July 2015, we made a $250 million principal payment to further reduce the outstanding balance on the term loan facility. The $9.1 billion of fully committed bridge financing we secured in the firstsecond quarter of fiscal year 2015, concurrently with our execution of the agreement to acquire CareFusion, was terminated upon completion of the acquisition. Additional disclosures regarding BD’s financing arrangements relating to the CareFusion acquisition are provided in Note 14 in the Notes to Condensed Consolidated Financial Statements.

~~We have available a~~2016, as previously discussed.

In January 2016, we replaced an existing $1 billion syndicated credit facility with a $1.5 billion syndicated credit facility that has an expiration date of ~~May 2018. This~~January 2021. There were no borrowings outstanding under this credit facility at March 31, 2016. The credit facility, under which ~~there were no borrowings outstanding at June 30, 2015,~~we may issue up to $100 million in letters of credit, provides backup support for our commercial paper ~~programs~~program and can also be used for other general corporate purposes. It 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 ~~$1.5~~$2 billion. The credit facility includes a single financial covenant that requires BD to maintain an interest expense coverage ratio of not less than5-to-1 for the most recent four consecutive fiscal quarters. We were in compliance with this covenant as of ~~June 30, 2015. In addition to the U.S. credit facilities discussed above, we~~March 31, 2016. We also have informal lines of credit outside the United States.

~~CareFusion Debt Assumed~~

Upon the closing of the CareFusion acquisition in March 2015, BD assumed senior unsecured notes issued by CareFusion with an aggregate principal amount of $2 billion. Subsequent to closing the acquisition, BD commenced offers to exchange these CareFusion notes for notes issued by BD and this exchange offer expired in April 2015. Additional disclosures regarding this exchange offer are provided in Note 14 in the Notes to Condensed Consolidated Financial Statements.

~~Access to Capital and Credit Ratings~~

Subsequent to BD’s announcement regarding our acquisition of CareFusion, the two major corporate debt rating organizations, Moody’s Investors Service (Moody’s) and Standard & Poor’s Ratings Services (S&P), provided guidance that they expected to downgrade our debt ratings as a result of the anticipated increase in BD’s net leverage. In December 2014, S&P downgraded BD’s long-term debt and commercial paper ratings from A to BBB+ and from A-1 to A-2, respectively. Following our announced completion of the CareFusion acquisition on March 17, 2015, Moody’s converted its provisional downgrade of BD’s long-term debt rating, from A3 to Baa2, to a definitive downgrade. Concurrently with these downgrade actions, BD’s ratings with both S&P and Moody’s were removed from further review.

BD’s credit ratings remain investment grade after these downgrades. As such, we do not expect these downgrades to have a significant impact on our liquidity or future flexibility to access additional liquidity given our strong balance sheet, our syndicated credit facility, and our commercial paper program. While such downgrades in our credit ratings may increase the costs associated with maintaining and borrowing under our existing credit arrangements, the downgrades do not affect our ability to draw on these credit facilities, nor do they result in an acceleration of the scheduled maturities of any outstanding debt. 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. Due to recent economic conditions and other factors in certain European countries, the average length of time it has taken us to collect government receivables in these countries has been longer than the payment patterns experienced in the United States and other international markets. We continually ~~monitor these government~~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 ~~these government~~all governmental receivables are adequate and that this concentration of credit risk will not have a material adverse impact on our financial position or liquidity. ~~Specifically relative to the recent economic developments in Greece, potential exposures to our revenues, accounts receivable and other assets are not material.~~

~~Update of Critical Accounting Policies~~

The preparation of the consolidated financial statements requires management to use estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Some of those judgments can be subjective and complex and, consequently, actual results could differ from those estimates. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. For any given estimate or assumption made by management, it is possible that other people applying reasonable judgment to the same facts and circumstances could develop different estimates. Actual results that differ from management’s estimates could have an unfavorable effect on our consolidated financial statements. Upon our acquisition of CareFusion on March 17, 2015, we have implemented the following critical accounting policies. There have been no other material changes to our critical accounting policies since September 30, 2014.

~~Accounting for Sales-Type Leases~~

Our accounting for sales-type leases is based upon certain assumptions including the economic life of our leased products and the fair value of our leased products, which is used to determine the interest rate implicit to the lease. These assumptions affect that amount of gross investment in the lease, unearned income, and the sales price that is recognized relative to each sales-type lease transaction. Based upon our anticipation of future technological advances of our products or that of our competitors, the economic life of our leased products is five years as this is the estimated period during which the leased product is expected to be economically usable, without limitation by the lease term. Additionally, five years represents the most frequent contractual lease term for our leased products. Our product configurations are customized for each customer’s specific specifications, and as such, there is no significant after-market for our used equipment. Residual values, if any, are established at lease inception using estimates of the fair value of reclaimable component parts of the products at the end of the lease term.

The fair value of our leased products is estimated on a quarterly basis, based upon transacted cash sales prices during the preceding twelve-month period, and represents normal selling price, reflecting any volume or trade discounts that may apply. Because our products are sold as part of customized systems to a diverse range of customers, many of which are affiliated with a group purchasing organization or integrated delivery network,

there is a wide range of negotiated cash selling prices for our products. Accordingly, we stratify our cash selling transactions based on product configuration and customer class to determine a best estimate of fair value for each product specific, within determined customer classes. Based upon this stratification, we calculate the weighted average selling price of each configured product using the interquartile range methodology and remove outliers from the population of normal cash selling prices, which narrows the range of selling prices within each stratified customer class. The resulting weighted average selling price is the single point estimate of fair value that we use as the normal selling price and this fair value estimate is used to determine the implicit interest rate for each product subject to a sales-type lease arrangement. The interest rate implicit to the lease is then used to determine the amount of revenue recognized at the inception of the lease and the revenue recognized over the life of the lease.

Approximately 15-25% of our lease transactions in a given year do not have corresponding cash selling transactions for the same product configuration and customer class. Therefore, for these transactions, the estimated fair value is determined by: (1) reviewing the estimated fair value of the same product line with the closest similar configuration sold to the same customer class and adjusting this fair value by the expected pricing impact of the difference in product configuration; or (2) reviewing the estimated fair value of the same product configuration sold to a different customer class and adjusting this fair value by the expected pricing impact of the difference in customer class.

Our net investment in sales-type leases primarily arises from the leasing of dispensing equipment and as such, the methodology for determining the relating allowance for credit losses is based on the collective population and is not stratified by class or portfolio segment. The allowance for credit losses is based on historical experience loss rates as well as on management’s judgments regarding the potential impact of anticipated changes in business practices, market dynamics, and economic conditions. These assumptions are inherently subjective and it is possible that we will experience actual credit losses that are different from our current estimates.

~~Accounting for Software Products~~

We sell and lease products with embedded software and as such, we must evaluate these products to determine if industry-specific revenue recognition requirements apply to these sales transactions. This evaluation process is often complex and subject to significant judgment. If software is considered not essential to the non-software elements of a product but is considered more than incidental to a product as a whole, the product’s software elements must be separated from its non-software elements under the requirements relating to multiple-element arrangements. The product’s software elements must be accounted for under software industry-specific revenue recognition requirements and the application of these requirements may significantly affect the timing and amount of revenue recognized.

We have determined that the software embedded within our infusion products, when sold with safety software, patient identification products, and certain diagnostic equipment, as well as the software embedded within our research and clinical instruments sold by our Biosciences unit, is more than incidental to these product offerings as a whole. However, we have determined that the non-software elements and software elements in these product offerings work together to deliver the essential functionality of these products as a whole. As such, the accounting for these product offerings does not fall within the scope of software industry-specific accounting requirements. We have determined the embedded software within certain other products, primarily dispensing and respiratory products, is incidental to the products as a whole and therefore the accounting for these products also falls outside the scope of software-specific requirements. Generally, our standalone software application sales and any related post-contract support related to these sales are accounted for under the software industry-specific revenue recognition requirements.

~~Accounting for Multiple-Element Arrangements~~

Some of our sales transactions qualify as multiple-element arrangements which require us to identify separate units of accounting within the arrangement and allocate the transaction consideration across these separate accounting units. For arrangements that include software and non-software elements, the transaction consideration is allocated to the software elements as a group as well as to the individual non-software elements that have been separately identified. The identification of accounting units and the allocation of total transaction consideration for multiple-element arrangements may be subjective and requires a degree of management judgment. Management’s judgments relative to multiple-element arrangements may significantly affect the timing of revenue recognition.

Transaction consideration for separately identified non-software units of accounting within an arrangement is recognized upon the completion of each deliverable based on its relative selling price. When applying the relative selling price method, the selling price of each deliverable is determined based upon the following hierarchy of evidence: vendor-specific objective evidence, which is generally based upon historical prices in stand-alone transactions; third-party evidence, which is generally based on market data on sales of similar products and services, if available; and management’s best estimate of selling price. Management’s best estimate of selling price is generally based upon the following considerations: stand-alone sales prices, established price lists, costs to produce, profit margins for similar products, market conditions, and customer stratification.

For software and software-related products, we use the relative fair value method to allocate transaction consideration to each unit of accounting; whereby the evidence used in the determination of fair value estimates are based solely on vendor-specific objective evidence. To the extent that vendor specific objective evidence does not exist for delivered elements of the transaction, we apply the residual method.

The revenue allocated to equipment or instruments in multiple-element arrangements is recognized upon transfer of title and risk of loss to the customer. The revenue allocated to extended warranty contracts and software maintenance contracts is deferred and recognized as these deliverables are performed under the arrangement. The majority of deferred revenue relating to extended warranty contracts is generally recognized within a few years whereas deferred revenue relating to software maintenance contracts is generally recognized over several years.

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,” “anticipate,” “estimate” and other words of similar meaning in conjunction with, among other things, discussions of future operations and financial performance, as well as our strategy for growth, product development, regulatory approvals, market position and expenditures. All statements that address operating performance or events or developments that we expect or anticipate will occur in the future – including statements relating to volume growth, sales and earnings per share growth, cash flows or uses, and statements expressing views about future operating results – are forward-looking statements.

Forward-looking statements are based on our current expectations of future events. The 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 unknown 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 ~~2014~~2015 Annual Report on Form 10-K.

Weakness in the global economy and financial markets, and the potential adverse effect on the cost of operating our business, the demand for our products and services, the prices for our products and services due to increases in pricing pressure, or our ability to produce our products, including the impact on developing countries.

Deficit reduction efforts or other adverse changes in the availability of government funding for healthcare and research ~~particularly in the United States and Europe,~~ that could further weaken demand for our products and result in additional pricing pressures, as well as create potential collection risks associated with such sales.

~~��~~

Risks relating to our acquisition of CareFusion, including our ability to successfully combine and integrate the CareFusion 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 consequences of the Patient Protection and Affordable Care Act in the United States, which implemented an excise 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.

Future healthcare reform in the 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. For example, changes to guidelines providing for increased cervical cancer screening intervals has and may continue to negatively impact sales of our Women’s Health and Cancer platform.

Changes in reimbursement practices of governmental or private third-party payers.

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.

Political conditions in international markets, including civil unrest, terrorist activity, governmental changes, trade barriers, restrictions on the ability to transfer capital across borders and expropriation of assets by a government.

Security breaches of our computer and communications systems or our products, including computer viruses, “hacking” and “cyber-attacks,” which could impair our ability to conduct business, or result in the loss of BD trade secrets or otherwise compromise sensitive information of BD or its customers, suppliers and other business ~~partners.~~partners, or of customers' patients, or result in product efficacy or safety concerns.

Fluctuations in the cost and availability of oil-based resins and other raw materials, as well as certain components, 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.

Regional, national and foreign economic factors, including inflation, deflation, fluctuations in interest rates and, in particular, foreign currency exchange rates, and the potential effect on our revenues, expenses, margins and credit ratings.

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 recalls, regulatory action on the part of the U.S. Food and Drug Administration (FDA) or foreign counterparts, declining sales and product liability claims, particularly in light of the current regulatory environment, ~~including~~in which there has been increased enforcement activity by the FDA. 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.

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.

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, including pandemics, natural disasters, or environmental factors.

Difficulties inherent in product development, including the potential inability to successfully continue technological innovation, 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 or other regulatory agencies or changes in the regulatory process may also delay product launches and increase development costs.

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.

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

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.

Our ability to complete the implementation of our ongoing upgrade of our enterprise resource planning system, as any delays or deficiencies in completing the implementation could adversely affect our business.

Pending and potential future litigation or other proceedings adverse to BD, including antitrust, product liability, environmental and patent infringement, and the availability or collectability of insurance relating to any such claims.

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.

The impact of business combinations, including any volatility in earnings relating to acquired in-process research and development assets, and our ability to successfully integrate any business we may acquire.

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~~

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, ~~2014.~~

2015.

~~Item 4.~~

~~Controls and Procedures~~

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 ~~June 30, 2015.~~March 31, 2016. 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 March 17, 2015, BD completed the acquisition of CareFusion Corporation (“CareFusion”). 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 CareFusion’s operations. BD is continuing to integrate the acquired operations of CareFusion. There were no ~~other~~ changes in our internal control over financial reporting during the fiscal quarter ended ~~June 30, 2015~~March 31, 2016 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~~

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 ~~2014~~2015 Annual Report on Form 10-K and in Note 5 of the Notes to Condensed Consolidated Financial Statements in this report. Since ~~March~~December 31, 2015, the following developments have occurred with respect to the legal proceedings in which we are involved:

~~Brazil~~

~~BD has filed an administrative appeal relating to the Brazilian Foreign Trade Board’s decision regarding anti-dumping measures.~~

~~CareFusion Shareholder Litigation~~

The parties to the action filed in the Delaware Court of Chancery have entered into a stipulation and agreement of compromise, settlement and release and presented the matter to the Delaware Court of Chancery for approval. The Delaware Court of Chancery has scheduled a hearing for September 17, 2015 to consider the matter.

~~Antitrust Class Action Complaint~~

~~On July 17, 2015, a class action complaint was filed against the Company 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~~

Plaintiffs have sought to ~~represent a class of acute care purchasers of~~file an amended complaint, which BD syringes and IV catheters. The complaint alleges that BD monopolized the markets for syringes and IV catheters through contracts, theft of technology, false advertising, acquisitions, and other conduct. The complaint seeks treble damages but does not specify the amount of alleged damages.

has opposed.

Summary

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~~

Item 1A. Risk Factors

There were no material changes in the risk factors previously disclosed in Part I, Item 1A, of our ~~2014~~2015 Annual Report on Form 10-K during the period covered by this report.

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

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 ~~June 30, 2015.~~

March 31, 2016.

Issuer Purchases of Equity Securities

For the three months ended June 30, 2015
   Total Number of
Shares Purchased
(1)    Average Price
Paid per
Share    Total Number of
Shares Purchased
as Part of
Publicly
Announced Plans
or Programs (2)    Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs (2)
April 1 – 30, 2015
   1,957       141.77       —         9,147,060
May 1 – 31, 2015
   817       143.85       —         9,147,060
June 1 – 30, 2015
   —         —         —         9,147,060








Total
   2,774       142.39       —         9,147,060



For the three months ended March 31, 2016	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2)
January 1 – 31, 2016	2,166	$	144.66	—	9,147,060
February 1 – 29, 2016	966	145.41		—	9,147,060
March 1 – 31, 2016	—	—		—	9,147,060
Total	3,132	$	144.89	—	9,147,060


(1)	Represents ~~2,774~~3,132 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)	~~These shares are available under a~~Any repurchases would be made pursuant to the repurchase program ~~covering 10 million additional shares~~ authorized by the Board of Directors on September 24, 2013 ~~(the “2013 Program”). There~~for 10 million shares, for which there is no expiration ~~date for the 2013 Program.~~date.

~~Item 3.~~

~~Defaults Upon Senior Securities~~

Item 3. Defaults Upon Senior Securities

Not applicable.

~~Item 4.~~

~~Mine Safety Disclosures~~

Item 4. Mine Safety Disclosures

Not applicable.

~~Item 5.~~

~~Other Information~~

Item 5. Other Information

Not applicable.

Item 6. Exhibits

~~Item 6.~~

~~Exhibits~~


Exhibit 310(a)		~~By-Laws,~~2004 Employee and Director Equity-Based Compensation Plan, as amended and restated as of ~~July 28, 2015~~January 26, 2016 (incorporated by reference to Exhibit ~~3.1~~10 of the registrant’s Current Report on Form ~~8-K filed~~10-K dated January 29, 2016).


Exhibit 10(b)	Five Year Credit Agreement, dated as of January 29, 2016, among Becton, Dickinson and Company, the banks named therein and Citibank, N.A., as administrative agent (incorporated by reference to Exhibit 10 of the registrant’s Current Report on ~~July 29, 2015)~~Form 10-K dated February 4, 2016).


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: ~~August~~May 6, ~~2015~~

2016



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

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

INDEX TO EXHIBITS



Exhibit Number		Description of Exhibits

3		~~By-Laws,~~
10(a)		2004 Employee and Director Equity-Based Compensation Plan, as amended and restated as of ~~July 28, 2015~~January 26, 2016 (incorporated by reference to Exhibit ~~3.1~~10 of the registrant’s Current Report on Form ~~8-K filed on July~~10-K dated January 29, ~~2015)~~2016).
10(b)		Five Year Credit Agreement, dated as of January 29, 2016, among Becton, Dickinson and Company, the banks named therein and Citibank, N.A., as administrative agent (incorporated by reference to Exhibit 10 of the registrant’s Current Report on Form 10-K dated February 4, 2016).

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.


	June 30, 2015			September 30, 2014
	(Unaudited)
Assets
Current Assets:
Cash and equivalents	$	1,559		$	1,861
Short-term investments		29			884
Trade receivables, net		1,645			1,187
Current portion of net investment in sales-type leases		130			5
Inventories:
Materials		393			248
Work in process		300			260
Finished products		1,326			987

		2,020			1,495
Prepaid expenses, deferred taxes and other		921			698

Total Current Assets		6,303			6,131

Property, Plant and Equipment		8,283			7,765
Less allowances for depreciation and amortization		4,236			4,160

Property, Plant and Equipment, Net		4,047			3,605
Goodwill		7,464			1,090
Customer Relationships, Net		3,313			8
Developed Technology, Net		2,962			513
Other Intangibles, Net		849			239
Capitalized Software, Net		385			365
Net Investment in Sales-Type Leases, Less Current Portion		1,082			9
Other Assets		674			488

Total Assets	$	27,079		$	12,447


Liabilities and Shareholders’ Equity
Current Liabilities:
Short-term debt	$	1,804		$	203
Payables and accrued expenses		2,713			2,031

Total Current Liabilities		4,517			2,235

Long-Term Debt		11,367			3,768
Long-Term Employee Benefit Obligations		1,007			1,009
Deferred Income Taxes and Other		2,936			383

Commitments and Contingencies		—			—

Shareholders’ Equity
Common stock		333			333
Capital in excess of par value		4,418			2,198
Retained earnings		12,260			12,105
Deferred compensation		19			19
Common stock in treasury - at cost		(8,242	)		(8,601	)
Accumulated other comprehensive (loss) income		(1,535	)		(1,001	)

Total Shareholders’ Equity		7,253			5,053

Total Liabilities and Shareholders’ Equity	$	27,079		$	12,447


	Three Months Ended June 30,						Nine Months Ended June 30,
	2015			2014			2015			2014
Revenues	$	3,120		$	2,157		$	7,222		$	6,244

Cost of products sold		1,932			1,046			3,943			3,045
Selling and administrative expense		764			528			1,820			1,584
Research and development expense		178			137			437			410
Acquisition-related costs		108			—			244			—

Total Operating Costs and Expenses		2,983			1,712			6,444			5,039


Operating Income		137			445			779			1,204

Interest expense		(105	)		(33	)		(272	)		(99	)
Interest income		2			12			20			36
Other income (expense), net		5			(2	)		23			4


Income Before Income Taxes		39			423			549			1,145

Income tax (benefit) provision		(23	)		97			35			261


Net Income		62			326			514			884


Basic Earnings per Share	$	0.30		$	1.69		$	2.58		$	4.57


Diluted Earnings per Share	$	0.29		$	1.65		$	2.52		$	4.47


Dividends per Common Share	$	0.600		$	0.545		$	1.800		$	1.635


(Millions of dollars)	Total			Foreign Currency Translation Adjustments			Benefit Plans Adjustments			Unrealized Losses on Cash Flow Hedges
Balance at September 30, 2014	$	(1,001	)	$	(270	)	$	(705	)	$	(26	)
Other comprehensive income before reclassifications, net of taxes		(571	)		(558	)		—			(12	)
Amounts reclassified into income, net of taxes^(A)		38			—			33			4

Balance at June 30, 2015	$	(1,535	)	$	(828	)	$	(672	)	$	(34	)


(Millions of dollars)
Cash consideration	$	10,085
Noncash consideration-fair value of shares issued		2,269
Noncash consideration-fair value of stock options and other equity awards		184

Total consideration transferred	$	12,538


(Millions of dollars, except per share data)
Total CareFusion shares outstanding		205.3
Conversion factor		0.0777

Number of the Company’s shares issued		15.9
Closing price of the Company’s stock on March 16, 2015	$	142.29

Fair value of the Company’s issued shares	$	2,269


(Millions of dollars)
Cash and equivalents	$	1,903
Trade receivables, net		486
Inventories		828
Net investment in sales-type leases		1,208
Property, plant and equipment		503
Customer relationships		3,360
Developed technology		2,510
Trademarks		380
Other intangible assets		185
Other assets		435

Total identifiable assets acquired		11,798


Long-term debt		(2,181	)
Deferred tax liabilities		(2,648	)
Other liabilities		(764	)

Total liabilities assumed		(5,592	)


Net identifiable assets acquired		6,205

Goodwill		6,333


Net assets acquired	$	12,538


	June 30, 2015				September 30, 2014
(Millions of dollars)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets
Customer relationships	$	3,375	$	62	$	10		2
Developed technology		3,412		449		893		379
Product rights		130		34		148		31
Trademarks		405		22		27		19
Patents and other		331		189		232		163

Amortized intangible assets	$	7,653	$	756	$	1,308	$	594


Unamortized intangible assets
Acquired in-process research and development	$	226			$	44
Trademarks		2				2

Unamortized intangible assets	$	228			$	46


(Millions of dollars)	June 30, 2015		September 30, 2014
Asset derivatives-designated for hedge accounting
Interest rate swaps	$	9	$	3


Asset derivatives-undesignated for hedge accounting
Forward exchange contracts		8		20


Total asset derivatives (A)	$	17	$	23


Liability derivatives-designated for hedge accounting
Commodity forward contracts		6		—


Liability derivatives-undesignated for hedge accounting
Forward exchange contracts		13		14


Total liability derivatives (B)	$	19	$	14


			Basis of Fair Value Measurement
(Millions of dollars)	June 30, 2015 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	$	217	$	217	$	—	$	—
Interest rate swaps		9		—		9		—
Forward exchange contracts		8		—		8		—

Total Assets	$	234	$	217	$	17	$	—

Liabilities
Forward exchange contracts	$	13	$	—	$	13	$	—
Commodity forward contracts		6		—		6		—
Contingent consideration liabilities		50		—		—		50

Total Liabilities	$	69	$	—	$	19	$	50


			Basis of Fair Value Measurement
(Millions of dollars)	September 30, 2014 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	$	1,040	$	1,040	$	—	$	—
Interest rate swaps		3		—		3		—
Forward exchange contracts		20		—		20		—

Total Assets	$	1,063	$	1,040	$	23	$	—

Liabilities
Forward exchange contracts	$	14	$	—	$	14	$	—
Contingent consideration liabilities		14		—		—		14

Total Liabilities	$	29	$	—	$	14	$	14


Interest Rate and Maturity	Aggregate Principal Amount (Millions of dollars)
Floating Rate Notes due June 15, 2016	$	750
1.800% Notes due December 15, 2017		1,250
2.675% Notes due December 15, 2019		1,250
3.734% Notes due December 15, 2024		1,750
4.685% Notes due December 15, 2044		1,200

Total long-term debt issued in connection with CareFusion acquisition	$	6,200


Interest Rate and Maturity	Aggregate Principal Amount (Millions of dollars)		Percentage of Total Outstanding Principal Amount of such Series of Existing Notes
1.450% senior notes due May 15, 2017	$	293		97.64	%
6.375% senior notes due August 1, 2019		665		95.00	%
3.300% senior notes due March 1, 2023		294		97.95	%
3.875% senior notes due May 15, 2024		397		99.37	%
4.875% senior notes due May 15, 2044		300		99.96	%

Total senior notes issued under exchange transaction	$	1,949


	Three months ended June 30,						Nine months ended June 30,
(Millions of dollars)	2015			2014			2015			2014

Financing costs^(A)	$	5		$	—		$	107		$	—
Transaction costs^(A)		9			—			52			—
Integration costs^(A)		24			—			55			—
Restructuring costs^(A)		75			—			136			—
Purchase accounting adjustments		439	^(B)		19	^(D)		466	^(C)		56	^(D)
Employee termination cost-related amounts^(E)		(5	)		—			(5	)		—
Research and development charges^(F)		—			9			—			29
Litigation-related charge^(G)		—			—			12			—
Other specified items, net^(H)		—			—			—			2

Total specified items		548			28			824			88
Tax impact of specified items		169			10			277			29

After-tax impact of specified items	$	379		$	19		$	547		$	59


For the three months ended June 30, 2015	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2)
April 1 – 30, 2015		1,957		141.77		—		9,147,060
May 1 – 31, 2015		817		143.85		—		9,147,060
June 1 – 30, 2015		—		—		—		9,147,060

Total		2,774		142.39		—		9,147,060

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company