UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended June 30, ~~2016~~2017



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

For the transition period from to

Commission file number 001-4802

Becton, Dickinson and Company

(Exact name of registrant as specified in its charter)



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

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

(Address of principal executive offices) (Zip Code)

~~(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 ý No ¨

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

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



Large accelerated filer	ý		Accelerated filer	¨

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

			Smaller reporting company	¨

			Emerging growth company	¨

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

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

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

There were 227,564,969 share of Common Stock, $1.00 par value, outstanding at June 30, 2017.



~~Class of Common Stock~~		~~Shares Outstanding as of June 30, 2016~~
~~Common stock, par value $1.00~~		~~212,925,842~~

BECTON, DICKINSON AND COMPANY

FORM 10-Q

For the quarterly period ended June 30, ~~2016~~2017

TABLE OF CONTENTS



		Page Number
Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income (Loss)	4
	Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1821
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2934
Item 4.	Controls and Procedures	2934

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	3035
Item 1A.	Risk Factors	3136
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3136
Item 3.	Defaults Upon Senior Securities	3237
Item 4.	Mine Safety Disclosures	3237
Item 5.	Other Information	3237
Item 6.	Exhibits	3237

Signatures		3339

Exhibits		3440

ITEM 1. FINANCIAL STATEMENTS

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions of dollars



	June 30, 2017			September 30, 2016
Assets	(Unaudited)
Current Assets:
Cash and equivalents	$	13,852		$	1,541
Short-term investments	17			27
Trade receivables, net	1,749			1,618
Current portion of net investment in sales-type leases	35			339
Inventories:
Materials	320			316
Work in process	293			274
Finished products	1,216			1,129
	1,829			1,719
Assets held for sale	—			642
Prepaid expenses and other	731			480
Total Current Assets	18,212			6,367
Property, Plant and Equipment	8,975			8,419
Less allowances for depreciation and amortization	4,565			4,518
Property, Plant and Equipment, Net	4,410			3,901
Goodwill	7,513			7,419
Customer Relationships, Net	2,867			3,022
Developed Technology, Net	2,533			2,655
Other Intangibles, Net	588			604
Capitalized Software, Net	61			70
Net Investment in Sales-Type Leases, Less Current Portion	43			796
Other Assets	938			753
Total Assets	$	37,166		$	25,586
Liabilities and Shareholders’ Equity
Current Liabilities:
Short-term debt	$	453		$	1,001
Payables and accrued expenses	2,820			3,210
Liabilities held for sale	—			189
Total Current Liabilities	3,273			4,400
Long-Term Debt	18,563			10,550
Long-Term Employee Benefit Obligations	1,337			1,319
Deferred Income Taxes and Other	1,406			1,684
Commitments and Contingencies (See Note 5)
Shareholders’ Equity
Preferred stock	2			—
Common stock	347			333
Capital in excess of par value	9,586			4,693
Retained earnings	12,989			12,727
Deferred compensation	22			22
Common stock in treasury - at cost	(8,437		)	(8,212		)
Accumulated other comprehensive loss	(1,923		)	(1,929		)
Total Shareholders’ Equity	12,587			7,633
Total Liabilities and Shareholders’ Equity	$	37,166		$	25,586

June 30,
2016 September 30,
2015
(Unaudited)
Assets
Current Assets:
Cash and equivalents $ 1,686
$ 1,424
Short-term investments 15
20
Trade receivables, net 1,618
1,618
Current portion of net investment in sales-type leases 345
75
Inventories:
Materials 315
384
Work in process 303
280
Finished products 1,218
1,295
1,835
1,959
Assets held for sale 625
—
Prepaid expenses and other 409
563
Total Current Assets 6,534
5,659
Property, Plant and Equipment 8,282
8,277
Less allowances for depreciation and amortization 4,469
4,217
Property, Plant and Equipment, Net 3,813
4,060
Goodwill 7,425
7,537
Customer Relationships, Net 3,075
3,250
Developed Technology, Net 2,658
2,977
Other Intangibles, Net 673
797
Capitalized Software, Net 340
362
Net Investment in Sales-Type Leases, Less Current Portion 785
1,118
Other Assets 712
717
Total Assets $ 26,016
$ 26,478
Liabilities and Shareholders’ Equity
Current Liabilities:
Short-term debt $ 1,351
$ 1,452
Payables and accrued expenses 2,672
2,930
Liabilities held for sale 195
—
Total Current Liabilities 4,219
4,381
Long-Term Debt 10,561
11,370
Long-Term Employee Benefit Obligations 1,159
1,133
Deferred Income Taxes and Other 2,045
2,430
Commitments and Contingencies (See Note 5)

Shareholders’ Equity
Common stock 333
333
Capital in excess of par value 4,650
4,475
Retained earnings 12,850
12,314
Deferred compensation 20
20
Common stock in treasury - at cost (8,215 ) (8,239 )
Accumulated other comprehensive loss (1,605 ) (1,738 )
Total Shareholders’ Equity 8,033
7,164
Total Liabilities and Shareholders’ Equity $ 26,016
$ 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 (LOSS)

Millions of dollars, except per share data

(Unaudited)


	Three Months Ended June 30,						Nine Months Ended June 30,						Three Months Ended June 30,						Nine Months Ended June 30,
	2016			2015			2016			2015			2017			2016			2017			2016
Revenues	$	3,198		$	3,120		$	9,252		$	7,222		$	3,035		$	3,198		$	8,927		$	9,252
Cost of products sold	1,651			1,946			4,813			3,957			1,532			1,651			4,539			4,813
Selling and administrative expense	728			751			2,209			1,806			719			728			2,151			2,209
Research and development expense	207			178			575			436			186			207			554			575
Acquisitions and other restructurings	96			108			321			244			81			96			243			321
Other operating expense, net													741			—			405			—
Total Operating Costs and Expenses	2,682			2,983			7,918			6,444			3,258			2,682			7,892			7,918
Operating Income	516			137			1,334			779
Operating (Loss) Income													(223		)	516			1,035			1,334
Interest expense	(97		)	(105		)	(293		)	(272		)	(184		)	(97		)	(364		)	(293		)
Interest income	5			2			14			20			19			5			31			14
Other (expense) income, net	(1		)	5			10			23			(16		)	(1		)	(51		)	10
Income Before Income Taxes	422			39			1,065			549
Income tax provision (benefit)	32			(23		)	107			35
Net Income	390			62			958			514
(Loss) Income Before Income Taxes													(404		)	422			650			1,065
Income tax (benefit) provision													(271		)	32			(123		)	107
Net (Loss) Income													(132		)	390			773			958
Preferred stock dividends													(32		)	—			(32		)	—
Net (loss) income applicable to common shareholders													$	(165	)	$	390		$	741		$	958


Basic Earnings per Share	$	1.83		$	0.30		$	4.51		$	2.58		$	(0.75	)	$	1.83		$	3.43		$	4.51
Diluted Earnings per Share	$	1.80		$	0.29		$	4.41		$	2.52		$	(0.75	)	$	1.80		$	3.36		$	4.41
Dividends per Common Share	$	0.66		$	0.60		$	1.98		$	1.80		$	0.73		$	0.66		$	2.19		$	1.98

Amounts may not add due to rounding.

See notes to condensed consolidated financial statements

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Millions of dollars

(Unaudited)


	Three Months Ended June 30,						Nine Months Ended June 30,						Three Months Ended June 30,						Nine Months Ended June 30,
	2016			2015			2016			2015			2017			2016			2017			2016
Net Income	$	390		$	62		$	958		$	514
Net (Loss) Income													$	(132	)	$	390		$	773		$	958
Other Comprehensive Income (Loss), Net of Tax
Foreign currency translation adjustments	38			80			101			(558		)	87			38			(52		)	101
Defined benefit pension and postretirement plans	12			11			36			33			15			12			44			36
Net unrealized losses on cash flow hedges, net of reclassifications	(7		)	(2		)	(3		)	(8		)
Other Comprehensive Income (Loss), Net of Tax	43			88			134			(533		)
Comprehensive Income (Loss)	$	433		$	150		$	1,091		$	(19	)
Cash flow hedges													(15		)	(7		)	15			(3		)
Other Comprehensive Income, Net of Tax													86			43			7			134
Comprehensive (Loss) Income													$	(46	)	$	433		$	780		$	1,091

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,						Nine Months Ended June 30,
	2016			2015			2017			2016
Operating Activities
Net income	$	958		$	514		$	773		$	958
Adjustments to net income to derive net cash provided by operating activities:
Depreciation and amortization	841			576			802			841
Share-based compensation	158			138			138			158
Deferred income taxes	(150		)	(137		)	(339		)	(150		)
Change in operating assets and liabilities	(49		)	(42		)	(665		)	(49		)
Pension obligation	63			17			56			63
Excess tax benefits from payments under share-based compensation plans							60			—
Lease contract modification-related charge							741			—
Other, net	34			(14		)	(142		)	34
Net Cash Provided by Operating Activities	1,854			1,052			1,424			1,854
Investing Activities
Capital expenditures	(405		)	(387		)	(467		)	(405		)
Capitalized software	(19		)	(26		)
Proceeds from investments, net	12			837
Proceeds from sale of investments, net							17			12
Acquisitions of businesses, net of cash acquired	—			(8,334		)	(158		)	—
Divestitures of businesses	158			—
Proceeds from divestitures, net							165			158
Other, net	(64		)	(92		)	(94		)	(83		)
Net Cash Used for Investing Activities	(318		)	(8,003		)	(536		)	(318		)
Financing Activities
Change in short-term debt	(150		)	846			50			(150		)
Proceeds from long-term debt	—			6,164			11,462			—
Payments of debt	(751		)	(3		)	(3,980		)	(751		)
Proceeds from issuance of equity securities							4,827			—
Repurchase of common stock							(220		)	—
Excess tax benefits from payments under share-based compensation plans	75			48			—			75
Dividends paid	(421		)	(358		)	(478		)	(421		)
Issuance of common stock and other, net	(29		)	(30		)
Net Cash (Used for) Provided by Financing Activities	(1,276		)	6,667
Other, net							(229		)	(29		)
Net Cash Provided by (Used for) Financing Activities							11,433			(1,276		)
Effect of exchange rate changes on cash and equivalents	2			(17		)	(11		)	2
Net increase (decrease) in cash and equivalents	262			(302		)
Net increase in cash and equivalents							12,310			262
Opening Cash and Equivalents	1,424			1,861			1,541			1,424
Closing Cash and Equivalents	$	1,686		$	1,559		$	13,852		$	1,686

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, ~~2016~~2017

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 consolidated financial statements and the notes thereto included in the Company’s ~~2015~~2016 Annual Report on Form 10-K. Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages and earnings per share amounts presented are calculated from the underlying amounts. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.

Note 2 – Accounting Changes

New Accounting ~~Principle~~Principles Adopted

~~In November 2015,~~On October 1, 2016, the Company prospectively adopted amended requirements issued by the Financial Accounting Standards Board ("FASB") ~~issued amended guidance that requires entities~~relating to ~~present deferred~~the timing of recognition and classification of share-based compensation award-related income tax ~~assets~~effects. Upon the settlement of awards in the first three quarters of fiscal year 2017, the Company recorded tax benefits for the three and ~~liabilities as noncurrent~~nine months ended June 30, 2017 of $12 million and $60 million, respectively, to Income tax provision (benefit) within its consolidated statement of income. The Company expects to record additional tax benefits in the fourth quarter of fiscal year 2017. These tax benefits were recorded within Capital in excess of par value on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. Early adoption is permitted under the amendments. The Company has retrospectively adopted the guidance effective October 1, 2015 and as such, theCompany's condensed consolidated balance sheet in the prior-year period. Because these excess tax benefits are no longer recorded in Capital in excess of par value, the current year-to-date adjustment for the dilutive impact of share equivalents from share-based plans, which is used in the Company's computation of diluted earnings per share, increased by approximately 1 million shares. Also per the amended guidance, the Company classified the $60 million of excess tax benefits for the nine months ended June 30, 2017 on its condensed consolidated statement of cash flows within Net Cash Provided by Operating Activities, rather than Net Cash Provided by (Used for) Financing Activities, which included the excess tax benefits for the nine months ended June 30, 2016. The amended guidance allows entities to account for award forfeitures as they occur; however, the Company has elected to continue its determination of ~~September 30, 2015 reflects the reclassification~~compensation cost recognized in each period based upon an estimate of ~~current deferred tax assets of $387 million as noncurrent amounts, after giving effect to jurisdictional netting requirements.~~expected future forfeitures.

New Accounting ~~Principle~~Principles Not Yet Adopted

In March 2016, the FASB issued guidance which amends certain aspects of the accounting for share-based compensation awards to employees. The aspects of share-based compensation accounting which are affected by the guidance include the timing of recognition for award-related income tax effects and the classification of awards as either equity or liabilities on the balance sheet. The amended guidance is effective for the Company on October 1, 2017 and early adoption is permitted. The Company is currently evaluating the impact that the guidance will have on its consolidated financial statements.

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

In May 2014, the FASB issued a new revenue recognition standard. Under this standard, revenue will be recognized upon the transfer of goods or services to customers and the amount of revenue recognized will reflect the consideration to which a reporting entity expects to be entitled in exchange for those goods or services. The Company intends to adopt the standard, as required, on October 1, 2018 and is currently ~~evaluating~~in the process of completing the initial assessment of the impact that this new revenue recognition standard will have on its consolidated financial ~~statements and~~statements. As part of the initial assessment, the Company ~~currently intends~~is reviewing a representative sample of its contracts across its various businesses and geographies to ~~adopt~~identify potential differences that could result from applying the requirements of the new standard. The analysis includes identifying whether there may be differences in timing of revenue recognition under the new standard as well as assessing performance obligations, variable consideration, and contract costs. The Company has not yet estimated the impact, if any, of the new standard on ~~October 1, 2018, as is allowed under~~ the ~~FASB's July 2015 amendment which deferred~~timing and pattern of its revenue recognition. The Company continues to evaluate the ~~effective date for this standard.~~available adoption methods, and apprises both management and its audit committee of the project status regularly.

Note 3 – Accumulated Other Comprehensive Income (Loss)

The components and changes of Accumulated other comprehensive income (loss) for the nine-month period ended June 30, ~~2016~~2017 were as follows:

(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 (loss) before reclassifications, net of taxes 89
101
(A) —
(12 )
Amounts reclassified into income, net of taxes 45
—
36
9

Balance at June 30, 2016 $ (1,605 ) $ (861 ) $ (705 ) $ (39 )



(Millions of dollars)	Total			Foreign Currency Translation			Benefit Plans			Cash Flow Hedges
Balance at September 30, 2016	$	(1,929	)	$	(1,011	)	$	(883	)	$	(35	)
Other comprehensive (loss) income before reclassifications, net of taxes	(44		)	(52		)	—			8
Amounts reclassified into income, net of taxes	50			—			44			7
Balance at June 30, 2017	$	(1,923	)	$	(1,064	)	$	(839	)	$	(20	)


~~(A)~~	~~The gain for the nine months ended June 30, 2016 was primarily attributable to the strengthening of certain European and Asian currencies against the U.S. dollar during the period.~~

The amount of foreign currency translation recognized in other comprehensive income during the nine months ended June 30, 2017 included net losses relating to net investment hedges, as further discussed in Note 13. The amount recognized in other comprehensive income during the nine months ended June 30, 2017 relating to cash flow hedges represented net gains on forward starting interest rate swaps, which are also further discussed in Note 13. The tax provision relating to these net gains was $5 million. The tax benefit relating to net losses on cash flow hedges recognized in other comprehensive income for the three months ended June 30, 2017 was $10 million.

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


	Three Months Ended June 30,						Nine Months Ended June 30,						Three Months Ended June 30,						Nine Months Ended June 30,
(Millions of dollars)	2016			2015			2016			2015			2017			2016			2017			2016
Benefit Plans
Reclassification of losses into income	$	18		$	17		$	55		$	51		$	22		$	18		$	66		$	55
Associated tax benefits	(6		)	(6		)	(19		)	(17		)	(7		)	(6		)	(22		)	(19		)
Amounts reclassified into income, net of taxes (A)	$	12		$	11		$	36		$	33		$	15		$	12		$	44		$	36

Cash Flow Hedges
Reclassification of losses into income	$	5		$	2		$	14		$	7		$	2		$	5		$	11		$	14
Associated tax benefits	(2		)	(1		)	(5		)	(3		)	(1		)	(2		)	(4		)	(5		)
Amounts reclassified into income, net of taxes (B)	$	3		$	2		$	9		$	4		$	1		$	3		$	7		$	9


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


(B)	These reclassifications were recorded to Interest expense and Cost of products sold. Additional details regarding the Company's cash flow hedges are provided in Note 13.

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,		Three Months Ended June 30,		Nine Months Ended June 30,
	2016	2015	2016	2015	2017	2016	2017	2016
Average common shares outstanding	213,083	210,175	212,411	199,690	220,807	213,083	215,817	212,411
Dilutive share equivalents from share-based plans	4,289	4,753	4,735	4,546
Dilutive share equivalents from share-based plans (A) (B)					—	4,289	4,589	4,735
Average common and common equivalent shares outstanding – assuming dilution	217,372	214,928	217,146	204,236	220,807	217,372	220,406	217,146

(A)

For the three months ended June 30, 2017, 4 million dilutive share equivalents from share-based plans and 6 million dilutive share equivalents associated with mandatory convertible preferred stock were excluded from the diluted shares outstanding calculation because the result would have been antidilutive under the “if-converted” method. For the nine months ended June 30, 2017, 2 million dilutive share equivalents associated with mandatory convertible preferred stock were excluded from the diluted shares outstanding calculation because the result would have been antidilutive.


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

Accelerated Share Repurchase Agreement

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

Common and Preferred Stock Offerings

In May 2017 and in connection with the Company's pending agreement to acquire C.R. Bard, Inc. ("Bard"), which is further discussed in Note 9, the Company completed registered public offerings of equity securities including:

14.025 million shares of the Company's common stock for net proceeds of $2.4 billion (gross proceeds of $2.5 billion).

2.475 million shares of the Company's mandatory convertible preferred stock (ownership is held in the form of depositary shares, each representing a 1/20th interest in a share of preferred stock) for net proceeds of $2.4 billion (gross proceeds of $2.5 billion). If and when declared, dividends on the mandatory convertible preferred stock will be payable on a cumulative basis at an annual rate of 6.125% on the liquidation preference of $1,000 per preferred share ($50 per depositary share). The shares of preferred stock are convertible to a minimum of 11.7 million and up to a maximum of 14.0 million shares of Company common stock at an exchange ratio, based on the market price of the Company’s common stock at the date of conversion, and no later than the mandatory conversion date of May 1, 2020.

The Company will use the net proceeds from these offerings to finance a portion of the cash consideration payable upon the closing of the Bard acquisition, which the Company expects to occur in the fourth calendar quarter of 2017.

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) alleging that the BD Integra™ syringes infringe patents licensed exclusively to RTI. In its complaint, RTI also alleged that the Company engaged in false advertising with respect to certain of the Company’s safety-engineered products in violation of the Lanham Act; acted to exclude RTI from various product markets and to maintain its market share through, among other things, exclusionary contracts in violation of state and federal antitrust laws; and engaged in unfair competition. In January 2008, the ~~court~~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. On April 1, 2008, RTI filed a complaint against BD under the caption Retractable Technologies, Inc. and Thomas J. Shaw v. Becton Dickinson and Company (Civil Action No. 2:08-cv-141, U.S. District Court, Eastern District of Texas) alleging that the BD Integra™ syringes infringe another patent licensed exclusively to RTI. On August 29, 2008, the ~~court~~Court ordered the consolidation of the patent cases. ~~As further set forth in the Company's 2015 Annual Report on Form 10-K,~~ RTI was subsequently awarded $5 million in damages at a jury trial with respect to the patent claims, which has been paid, and the patent cases are now concluded.

On September 19, 2013, a jury returned a verdict against BD with respect to RTI’s Lanham Act claim and claim for attempted monopolization based on deception in the safety syringe market. The jury awarded RTI $113.5 million for its attempted monopolization claim (which ~~will~~would 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. With respect to RTI's requested injunction relief, in November 2014, the Court granted RTI’s request that BD be ordered to issue certain corrective statements regarding its advertising and enjoined from making certain advertising claims. The Court denied RTI’s request for injunctive relief relating to BD’s contracting practices and BD’s safety syringe advertising, finding that RTI failed to prove that BD’s contracting practices violated the antitrust laws or that BD’s safety syringe advertising is false. On January 14, 2015, the Court granted in part and denied in part BD’s motion for a stay of the injunction. The Court held that, pending appeal, BD would not be required to send the corrective advertising notices to end-user customers, but only to employees, distributors and Group Purchasing Organizations. On January 15, 2015, the Court entered its Final Judgment in the case ordering that RTI ~~recovers~~recover $341 million for its attempted monopolization claim and $12 million for attorneys’ fees, and awarded pre and post-judgment interest and costs. On February 3, 2015, the Court of Appeals for the Fifth Circuit denied BD’s motion for a stay of the injunction pending the final appeal, and BD thereafter complied with the Court’s order. On April 23, 2015, the Court granted BD’s motion to eliminate the award of pre-judgment interest, and entered a new Final Judgment. BD ~~has filed its appeal~~thereafter appealed to the Court of Appeals challenging the entirety of the Final Judgment. On December 2, 2016, the Court of Appeals issued an opinion reversing the judgment as to RTI’s attempted monopolization claim and rendered judgment on that claim in favor of BD. As a result, the Company reversed $336 million of reserves associated with this judgment, which was recorded in Other operating (income) expense, net. The Court of Appeals affirmed the judgment for Lanham Act liability, and remanded the case to the district court to consider whether and if so how much profit should be disgorged by BD on that claim. The Court of Appeals vacated and remanded the injunction ordered by the Court. On January 31, 2017, RTI filed a petition for a writ of certiorari with the U.S. Supreme Court. On March 20, 2017, the U.S. Supreme Court denied certiorari, and the district court will rule on RTI’s request for disgorgement.

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~~On September 23, 2016, the court denied plaintiffs’ motion to alter or amend the judgment to allow plaintiffs to file an amended complaint, ~~which BD has opposed.~~

and plaintiffs appealed that decision to the Eleventh Circuit Court of Appeals. The ~~Company believes that it has meritorious defenses to each~~plaintiffs thereafter voluntarily dismissed their appeal, and the Court of Appeals dismissed the ~~above-mentioned suits pending against the Company and is engaged in a vigorous defense of each of these matters.~~case on November 21, 2016.

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

The Company is a potentially responsible party to a number of federal administrative proceedings in the United States brought under the Comprehensive Environment Response, Compensation and Liability Act, also known as “Superfund,” and similar state laws. The affected sites are in varying stages of development. In some instances, the remedy has been completed, while in others, environmental studies are underway or commencing. For several sites, there are other potentially responsible parties that may be jointly or severally liable to pay all or part of cleanup costs.

Note 6 – Segment Data

The Company's organizational structure is based upon two principal business segments: BD Medical (“Medical”) and BD Life Sciences (“Life Sciences”). These 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. As more fully discussed in Note 10, the Company sold a 50.1% controlling financial interest in its Respiratory Solutions business, a component of the Medical segment, in October 2016. This transaction did not meet the criteria established for reporting discontinued operations and as such, results for the three and nine months ended June 30, 2016 included $199 million and $620 million, respectively, of revenues which did not occur in the current-year periods.

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


	Three Months Ended June 30,						Nine Months Ended June 30,						Three Months Ended June 30,						Nine Months Ended June 30,
(Millions of dollars)	2016			2015			2016			2015			2017			2016			2017			2016
Revenues (A)
Medical	$	2,235		$	2,199		$	6,420		$	4,377		$	2,038		$	2,235		$	5,989		$	6,420
Life Sciences	963			921			2,832			2,845			997			963			2,937			2,832
Total Revenues	$	3,198		$	3,120		$	9,252		$	7,222		$	3,035		$	3,198		$	8,927		$	9,252
Income Before Income Taxes
Medical	$	571		$	483		$	1,549		$	1,115		$	553		$	571		$	1,638		$	1,549
Life Sciences	200			197			604			610			199			200			574			604
Total Segment Operating Income	771			680			2,152			1,725			751			771			2,212			2,152
Acquisitions and other restructurings	(96		)	(108		)	(321		)	(244		)	(81		)	(96		)	(243		)	(321		)
Net interest expense	(92		)	(103		)	(279		)	(252		)	(165		)	(92		)	(334		)	(279		)
Other unallocated items (B)	(160		)	(430		)	(488		)	(680		)	(909		)	(160		)	(985		)	(488		)
Income Before Income Taxes	$	422		$	39		$	1,065		$	549
(Loss) Income Before Income Taxes													$	(404	)	$	422		$	650		$	1,065


(A)	Intersegment revenues are not material.

(B)

Primarily comprised of foreign exchange, corporate expenses, and share-based compensation expense. The amounts infor the three and ~~nine-month periods of fiscal year 2015~~nine months ended June 30, 2017 also included a ~~fair value step-up adjustment~~$741 million non-cash charge resulting from a modification to the Company's dispensing equipment lease contracts with customers. The amount for the nine months ended June 30, 2017 included a $336 million reversal of ~~$281 million recorded relative~~certain reserves related to ~~CareFusion’s inventory on~~an appellate court decision which, among other things, reversed an unfavorable antitrust judgment in the ~~acquisition date.~~RTI case. Additional disclosures regarding the legal matter and the lease contract modification are provided in Notes 5 and 16, respectively.

Revenues by geographic areas were as follows:


	Three Months Ended June 30,				Nine Months Ended June 30,				Three Months Ended June 30,				Nine Months Ended June 30,
(Millions of dollars)	2016		2015		2016		2015		2017		2016		2017		2016
Revenues
United States	$	1,735	$	1,693	$	5,145	$	3,437	$	1,603	$	1,735	$	4,859	$	5,145
International	1,463		1,427		4,107		3,785		1,433		1,463		4,068		4,107
Total Revenues	$	3,198	$	3,120	$	9,252	$	7,222	$	3,035	$	3,198	$	8,927	$	9,252

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 ~~2015~~2016 and ~~2014,~~2015, respectively, were estimated on the date of grant using a lattice-based binomial valuation model based on the following assumptions:


	2016			2015			2017			2016
Risk-free interest rate	2.17		%	2.20		%	2.33		%	2.17		%
Expected volatility	19.00		%	19.00		%	20.00		%	19.00		%
Expected dividend yield	1.76		%	1.78		%	1.71		%	1.76		%
Expected life	7.6 years			7.6 years			7.5 years			7.6 years
Fair value derived	$	27.69		$	24.82		$	33.81		$	27.69

The fair value of share-based payments is recognized as compensation expense in net income. ~~For the three months ended June 30, 2016 and 2015, compensation~~Compensation expense charged to income was $39 million for the three months ended June 30, 2017 and ~~$46 million, respectively. For~~2016. Compensation expense charged to income for the nine months ended June 30, 2017 and 2016 ~~and 2015, compensation expense charged to income~~ was ~~$158~~$138 million and ~~$138~~$158 million, respectively.

The amount of unrecognized compensation expense for all non-vested share-based awards as of June 30, ~~2016~~2017 was approximately ~~$217~~$216 million, which is expected to be recognized over a weighted-average remaining life of approximately 2.1 years. 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. Included in the unrecognized compensation expense is $14 million associated with these replacement 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						Pension Plans						Other Postretirement Benefits
(Millions of dollars)	2016			2015			2016			2015			2017			2016			2017			2016
Service cost	$	20		$	20		$	1		$	1		$	27		$	20		$	1		$	1
Interest cost	18			22			1			2			18			18			1			1
Expected return on plan assets	(27		)	(32		)	—			—			(34		)	(27		)	—			—
Amortization of prior service credit	(4		)	(4		)	(1		)	(1		)	(4		)	(4		)	(1		)	(1		)
Amortization of loss	19			18			—			1			28			19			—			—
Settlements	3			—			—			—			—			3			—			—
Net pension and postretirement cost	$	29		$	24		$	1		$	2		$	36		$	29		$	1		$	1

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


	Pension Plans						Other Postretirement Benefits						Pension Plans						Other Postretirement Benefits
(Millions of dollars)	2016			2015			2016			2015			2017			2016			2017			2016
Service cost	$	61		$	58		$	2		$	2		$	79		$	61		$	2		$	2
Interest cost	54			66			4			6			53			54			3			4
Expected return on plan assets	(82		)	(93		)	—			—			(97		)	(82		)	—			—
Amortization of prior service credit	(11		)	(12		)	(4		)	(4		)	(12		)	(11		)	(4		)	(4		)
Amortization of loss	58			52			1			2			80			58			1			1
Settlements	4			—			—			—			—			4			—			—
Net pension and postretirement cost	$	85		$	70		$	4		$	7		$	103		$	85		$	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 in Accumulated other comprehensive income (loss) in prior periods.

Postemployment benefit costs accounted for under a service-based approach were $10 million for the ~~three-month periods~~three months ended June 30, ~~2016~~2017 and ~~2015.~~2016. Postemployment benefit costs were $30 million ~~and $31 million~~ for the ~~nine-month periods~~nine months ended June 30, ~~2016~~2017 and ~~2015, respectively.~~2016. Employee termination costs associated with the Company's restructuring activities are provided in Note ~~Note~~ 11.

Note 9 – ~~Acquisition~~Acquisitions

~~CareFusion Corporation~~Definitive Agreement to Acquire Bard

On ~~March 17, 2015,~~April 23, 2017, the Company ~~acquired~~announced that it had entered into a definitive agreement under which BD will acquire Bard for an implied value of $317.00 per Bard common share in cash and stock, for estimated total consideration of approximately $24 billion. The combination will create a highly differentiated medical technology company uniquely positioned to improve both the process of care and the treatment of disease for patients and healthcare providers.

Under the terms of the transaction, Bard common shareholders will be entitled to receive approximately $222.93 in cash and 0.5077 shares of BD stock per Bard share, or an implied value of $317.00 per Bard common share based on BD's closing price on April 21, 2017. At closing, Bard shareholders will own approximately 15 percent of the combined company. The Company will finance the cash portion of total consideration transferred with available cash, which will include $4.8 billion of net proceeds raised in the third quarter through registered public offerings of equity securities and approximately $9.6 billion of net proceeds also raised in the third quarter through debt transactions. The total consideration transferred will also include an estimated $8 billion of BD common stock. The transaction is subject to regulatory and Bard shareholder approval and customary closing conditions, and is expected to close in the fourth calendar quarter of 2017.

Acquisition of Remaining Interest in Caesarea Medical Electronics

Upon the Company's acquisition of a 100% interest in CareFusion Corp. ("CareFusion") in March 2015, it acquired a 40% ownership interest in Caesarea Medical Electronics ("CME"), an Israeli-based 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.~~infusion pump systems manufacturer. The ~~acquisition was~~Company previously accounted for ~~under~~this interest as an equity investment. On April 3, 2017, the ~~acquisition method of accounting for business combinations. The operating activities from~~Company acquired 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~~remaining 60% ownership interest in the Company’s consolidated results of operations beginning on April 1, 2015. The revenues and operating income of the acquired CareFusion operation are no longer specifically identifiable due to the progression of the Company's integration activities.

~~The following table provides the pro forma results for the nine months ended June 30, 2016 and 2015 as if CareFusion had been acquired as of the beginning of the periods presented.~~

(Millions of dollars, except per share data) Nine Months Ended
June 30,
2016 2015

Revenues $ 9,263
$ 9,301

Net Income $ 1,169
$ 966

Diluted Earnings per Share $ 5.38
$ 4.49

~~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.CME.

Note 10 – Divestiture

Respiratory Solutions

~~In March~~On October 3, 2016, the Company ~~signed~~sold a ~~definitive agreement to sell~~ 50.1% ofcontrolling financial interest in its Respiratory Solutions business, ~~and~~a component of the Medical segment, to form a ~~joint~~ venture, ~~with respect to this business. Under the agreement, the~~Vyaire Medical. The Company ~~will transfer the Respiratory Solutions business to a new standalone entity in which it will retain~~retained a 49.9% non-controlling interest ~~and~~in the ~~buyer will own the remainder.~~new standalone entity. The buyer will control the operations and governance of the ~~joint venture. Assets and liabilities held~~new entity. The Company accounts for sale on the condensed consolidated balance sheet at June 30, 2016 include assets and liabilities subject to this agreement of approximately $614 million and $195 million, respectively. The Respiratory Solutions business was acquiredits remaining interest in the ~~CareFusion acquisition in 2015~~new entity as an equity method investment and, ~~was a component~~beginning on January 1, 2017, records its share of the ~~Medical segment.~~new entity's earnings or losses on a one-quarter lag to Other income (expense), net. The ~~transaction is expected~~Company has agreed to ~~close later in 2016, subject~~various contract manufacturing and certain logistical and transition services agreements with the new entity for a period of up to ~~regulatory approvals and~~two years after the ~~satisfaction of customary closing conditions.~~sale. The historical financial results for the Respiratory Solutions business, which included approximately $199 million and $620 million of revenues for the three and nine months ended June 30, 2016, respectively, have not been classified as a discontinued operation.

Note 11 – Business Restructuring Charges

In connection with the Company's fiscal year 2015 acquisition of CareFusion ~~acquisition~~ and other portfolio rationalization initiatives, the Company incurred restructuring costs during the nine months ended June 30, ~~2016,~~2017, which were recorded as Acquisitions and other restructurings. Restructuring liability activity for the nine months ended June 30, ~~2016~~2017 was as follows:


(Millions of dollars)	Employee Termination			Share-based Compensation (A)			Other (B)			Total			Employee Termination			Other			Total
Balance at September 30, 2015	$	62		$	—		$	—		$	62
Balance at September 30, 2016													$	67		$	2		$	69
Charged to expense	53			33			113			199			3			51			54
Cash payments	(65		)	—			(47		)	(112		)	(22		)	(34		)	(56		)
Non-cash settlements	—			(33		)	—			(33		)	—			(9		)	(9		)
Other adjustments	—			—			(66		)	(66		)	—			(7		)	(7		)
Balance at June 30, 2016	$	50		$	—		$	—		$	50
Balance at June 30, 2017													$	48		$	3		$	51


~~(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 12 – Intangible Assets

Intangible assets consisted of:


	June 30, 2016				September 30, 2015				June 30, 2017				September 30, 2016
(Millions of dollars)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets
Customer relationships	$	3,361	$	286	$	3,370	$	120	$	3,375	$	508	$	3,360	$	339
Developed technology	3,358		700		3,487		510		3,484		951		3,409		754
Product rights	131		43		128		35		123		49		125		43
Trademarks	405		41		405		26		408		61		405		45
Patents and other	342		248		333		212		363		264		349		254
Amortized intangible assets	$	7,597	$	1,317	$	7,723	$	903	$	7,754	$	1,833	$	7,648	$	1,435
Unamortized intangible assets
Acquired in-process research and development	$	124			$	203			$	66			$	66
Trademarks	2				2				2				2
Unamortized intangible assets	$	126			$	205			$	68			$	68

Intangible amortization expense for the three months ended June 30, 2017 and 2016 ~~and 2015~~ was ~~$133~~$132 million and ~~$151~~$133 million, respectively. Intangible amortization expense for the nine months ended June 30, 2017 and 2016 was $400 million and ~~2015 was~~ $422 million, ~~and $192 million,~~ respectively. ~~The increase in intangible amortization expense in the current nine-month period is primarily 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, 2015 $ 6,807
   $ 730
   $ 7,537
Divestiture (32 ) —
(32 )
Purchase accounting adjustments/currency translation (82 ) (A) 2
(80 )
Goodwill as of June 30, 2016 $ 6,694
   $ 732
   $ 7,425



(Millions of dollars)	Medical			Life Sciences		Total
Goodwill as of September 30, 2016	$	6,688		$	731	$	7,419
Acquisitions (A)	97			24		121
Divestiture (B)	(25		)	—		(25		)
Currency translation	(1		)	—		(1		)
Goodwill as of June 30, 2017	$	6,758		$	755	$	7,513


(A)	~~Comprised of acquisition accounting adjustments~~Represents goodwill recognized upon the Company's acquisitions made during the ~~first and second quarters~~year. Such acquisitions were not material individually or in the aggregate.


(B)	Represents goodwill derecognized upon the Company's sale of ~~fiscal year 2016 relating to~~a 50.1% controlling financial interest in the ~~CareFusion acquisition of $94 million primarily resulting from adjustment to the deferred tax liability accounts.~~Respiratory Solutions business, as further discussed in Note 10.

Note 13 – Derivative Instruments and Hedging Activities

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

Foreign Currency Risks and Related Strategies

The Company has foreign currency exposures throughout Europe, Greater Asia, Canada and Latin America. Transactional currency exposures that arise from entering into transactions, generally on an intercompany basis, in non-hyperinflationary countries that are denominated in currencies other than the functional currency are mitigated primarily through the use of forward contracts and currency options. Hedges of the transactional foreign exchange exposures resulting primarily from intercompany payables and receivables are undesignated hedges. As such, the gains or losses on these instruments are recognized immediately in income. The 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 in Other income (expense), net. The total notional amounts of the Company’s outstanding foreign exchange ~~hedges of transactional foreign exchange exposures were $1.4 billion and $2.2 billion~~contracts as of June 30, ~~2016~~2017 and September 30, ~~2015,~~2016 were $1.3 billion and $2.3 billion, respectively.

In order to mitigate foreign currency exposure relating to its investments in certain foreign subsidiaries, the Company has designated $1.9 billion of euro-denominated debt, issued during the first and third quarters of fiscal year 2017, as net investment hedges. Accordingly, net gains or losses relating to this debt, which are attributable to changes in the euro to U.S. dollar spot exchange rate, are recorded as accumulated foreign currency translation in Other comprehensive income (loss). Recognition of hedge ineffectiveness into earnings will occur if the notional amount of the euro-denominated debt no longer matches the portion of the net investments in foreign subsidiaries which underlie the hedges. The Company's balance of Accumulated other comprehensive income (loss) as of June 30, 2017 included net losses relating to these net investment hedges of $57 million. Additional disclosures regarding the Company's issuances of the euro-denominated debt in fiscal year 2017 are provided in Note 15.

Interest Rate Risks and Related Strategies

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

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

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

~~The~~At September 30, 2016, the total notional value of the Company's outstanding forward starting interest rate swaps, which were entered into to mitigate the Company's exposure to interest rate risk and were designated as cash flow hedges was $500 ~~million at June 30, 2016. The~~million. These interest rate swaps, as well as additional forward starting interest rate swaps the Company entered into ~~these contracts~~during the third quarter of fiscal year 2017 with a notional amount of $1.75 billion, were terminated at a net loss, concurrent with the issuance of senior unsecured U.S. notes in ~~March and April 2016~~the third quarter. This net loss will be amortized over the lives of the notes issued with an offset to ~~mitigate its exposure to interest rate risk. The Company had no outstanding interest rate swaps designated as cash flow hedges as~~Interest expense. Additional disclosures regarding the Company's issuance of ~~September 30, 2015.~~senior unsecured U.S. notes are provided in Note 15.

The total notional amount of the Company’s outstanding interest rate swaps designated as fair value hedges was $375 million at June 30, ~~2016~~2017 and September 30, ~~2015.~~2016. The outstanding swaps represent fixed-to-floating interest rate swap agreements the Company entered into to convert the interest payments on $375 million of the Company’s 3.125% notes due 2021 from the fixed rate to a floating interest rate based on LIBOR. Changes in the fair value of the interest rate swaps offset changes in the fair value of the fixed rate debt. The gains (losses) recorded on these fair value hedges, which were offset by losses (gains) recorded to the underlying debt instruments, are provided below.


	Three Months Ended June 30,					Nine Months Ended June 30,				Three Months Ended June 30,				Nine Months Ended June 30,
(Millions of dollars)	2016		2015			2016		2015		2017		2016		2017			2016
Gains (losses) on fair value hedges	$	3	$	(7	)	$	9	$	9	$	1	$	3	$	(14	)	$	9

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. The total notional amount of cash-settled forward contracts entered into in April 2015 to hedge global resin purchase volume throughout 2015 and 2016 was 12 million pounds ($6 million) and 49 million pounds ($25 million) at June 30, 2016 and September 30, 2015, 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, 2016		September 30, 2015		June 30, 2017		September 30, 2016
Asset derivatives-designated for hedge accounting
Interest rate swaps	$	27	$	19	$	8	$	23
Asset derivatives-undesignated for hedge accounting
Forward exchange contracts	12		13		4		3
Total asset derivatives (A)	$	39	$	32	$	13	$	25
Liability derivatives-designated for hedge accounting
Commodity forward contracts	$	2	$	10
Interest rate swaps	19		—		—		18
Liability derivatives-undesignated for hedge accounting
Forward exchange contracts	8		21		1		13
Total liability derivatives (B)	$	30	$	30	$	1	$	31


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


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

Effects on Consolidated Statements of Income

Cash flow hedges

~~All derivative instrument-related~~The amounts recognized in other comprehensive income ~~and earnings~~ during the three and ~~nine-month periods~~nine months ended June 30, ~~2016~~2017 and ~~2015 relate to interest rate swaps and commodity forward contracts.~~

Three Months Ended
June 30, Nine Months Ended
June 30,
(Millions of dollars) 2016 2015 2016 2015
After-tax losses relating to cash flow hedges recognized in other comprehensive income (loss) $ (10 ) $ (4 ) $ (12 ) $ (12 )

~~The losses recognized for the three and nine-month periods ended June 30,~~ 2016 ~~primarily~~ related to the previously discussed forward starting interest rate ~~swaps entered into in fiscal year 2016.~~ swaps.



	Three Months Ended June 30,						Nine Months Ended June 30,
(Millions of dollars)	2017			2016			2017		2016
After-tax (losses) gains relating to cash flow hedges recognized in other comprehensive income (loss)	$	(17	)	$	(10	)	$	8	$	(12	)

The losses recognized for the three months ended June 30, 2015 were attributable to the previously discussed commodity forward contracts entered into in April 2015. The losses for the nine months ended June 30, 2015 included the losses relating to the commodity forward contractsCompany’s derivative instruments designated as well as $8 million attributable to interest rate swaps 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. Additional disclosures regarding amounts recognized in the condensed consolidated statements of income relating to cash flow hedges ~~are provided in~~ ~~Note 3~~.

~~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~~cash flow hedges outstanding in the periods presented.

Undesignated hedges

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


	Location of (Loss) Gain Recognized in Income on Derivatives	Amount of (Loss) Gain Recognized in Income on Derivatives										Location of (Loss) Gain Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives					Amount of Gain Recognized in Income on Derivatives
Derivatives Not Designated as Hedging Instruments	Location of (Loss) Gain Recognized in Income on Derivatives	Three Months Ended June 30,					Nine Months Ended June 30,					Location of (Loss) Gain Recognized in Income on Derivatives	Three Months Ended June 30,					Nine Months Ended June 30,
(Millions of dollars)		2016			2015		2016		2015				2017		2016			2017		2016
Forward exchange contracts (A)	Other income (expense), net	$	(13	)	$	50	$	13	$	(46	)	Other income (expense), net	$	13	$	(13	)	$	6	$	13


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

Note 14 – 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, ~~2016~~2017 and September 30, ~~2015~~2016 are classified in accordance with the fair value hierarchy in the following tables:


			Basis of Fair Value Measurement								Basis of Fair Value Measurement
(Millions of dollars)	June 30, 2016 Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		June 30, 2017 Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Institutional money market investments	$	404	$	404	$	—	$	—	$	1,659	$	1,659	$	—	$	—
Interest rate swaps	27		—		27		—		8		—		8		—
Forward exchange contracts	12		—		12		—		4		—		4		—
Total Assets	$	442	$	404	$	39	$	—	$	1,671	$	1,659	$	13	$	—
Liabilities
Forward exchange contracts	$	8	$	—	$	8	$	—	$	1	$	—	$	1	$	—
Commodity forward contracts	2		—		2		—
Interest rate swaps	19		—		19		—
Contingent consideration liabilities	53		—		—		53		21		—		—		21
Total Liabilities	$	83	$	—	$	30	$	53	$	22	$	—	$	1	$	21


			Basis of Fair Value Measurement								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)		September 30, 2016 Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Institutional money market investments	$	147	$	147	$	—	$	—	$	224	$	224	$	—	$	—
Interest rate swaps	19		—		19		—		23		—		23		—
Forward exchange contracts	13		—		13		—		3		—		3		—
Total Assets	$	179	$	147	$	32	$	—	$	249	$	224	$	25	$	—
Liabilities
Forward exchange contracts	$	21	$	—	$	21	$	—	$	13	$	—	$	13	$	—
Commodity forward contracts	10		—		10		—
Interest rate swaps									18		—		18		—
Contingent consideration liabilities	77		—		—		77		54		—		—		54
Total Liabilities	$	108	$	—	$	30	$	77	$	86	$	—	$	31	$	54

The Company’s institutional money market accounts permit daily redemption and the fair values of these investments are based upon the quoted prices in active markets provided by the holding financial institutions. The Company’s remaining cash equivalents were ~~$1.283~~$12.193 billion and ~~$1.277~~$1.317 billion at June 30, ~~2016~~2017 and September 30, ~~2015,~~2016, 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 ~~$11.4~~$19.0 billion and ~~$11.6~~$11.3 billion at June 30, ~~2016~~2017 and September 30, ~~2015,~~2016, respectively. During the first and third quarters of fiscal year 2016, the Company reclassified $500 million of 1.750% notes due on November 8, 2016 and $300 million of 1.450% notes due on May 15, 2017, respectively, from ~~Long-Term Debt~~ to ~~Short-term debt~~. The fair value of ~~reclassified notes~~the current portion of long-term debt was ~~$802~~$207 million and ~~$750~~$798 million at June 30, ~~2016~~2017 and September 30, ~~2015,~~2016, respectively. ~~The balance of reclassified notes at September 30, 2015, which has been repaid, represented $750 million of floating rate notes due on June 15, 2016.~~

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 each reporting period based upon increases or

decreases in the probability of the contingent payments. The ~~change~~decrease to the total contingent consideration liability ~~for~~in the nine months ended June 30, ~~2016~~2017 is primarily ~~reflected~~attributable to a ~~net decrease~~$40 million payment of ~~$26 million, which was~~a contingent consideration liability recorded in ~~Selling and administrative expense,~~ ~~in the fair value of contingent consideration liabilities associated~~connection with ~~certain product development milestones.~~a previously closed acquisition.

The ~~Company’s~~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 months ended June 30, 2017 and 2016.

Note 15 – Debt

First Fiscal Quarter Ended December 31, 2016-Euro-Denominated Debt Issuance and Tender Offer

In December 2016, the Company issued euro-denominated debt consisting of 500 million euros ($531 million) of 1.000% notes due December 15, 2022 and ~~2015.~~500 million euros ($531 million) of 1.900% notes due December 15, 2026. The Company used the net proceeds from this long-term debt offering, together with other sources of liquidity, to fund the Company's repurchase of certain of its long-term senior notes outstanding. Under this cash tender offer, the Company repurchased the following aggregate principal amounts of its long-term debt at an aggregate market price of $1.764 billion:



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

The carrying value of these long-term notes was $1.727 billion, and the Company recognized a loss on this debt extinguishment of $42 million, which was recorded in December 2016 as Other income (expense), net, on the Company’s condensed consolidated statements of income.

Third Fiscal Quarter Ended June 30, 2017-Debt Issuances and Redemptions

In connection with the Company's agreement to acquire Bard, as previously discussed in Note 9, the Company's capital structure was impacted by the debt-related transactions discussed below.

The Company entered into a three-year senior unsecured term loan facility of $2.25 billion. The proceeds from this facility may only be used to fund a portion of the cash consideration for the Bard acquisition, as well as the fees and expenses incurred in connection with this acquisition, which is expected to close in the fourth calendar quarter of 2017.

The Company also entered into a five-year senior unsecured revolving credit facility that will provide borrowing of up to $2.25 billion when the facility becomes effective upon the closing of the Bard acquisition. The facility, which will expire in May 2022, will replace the $1.5 billion syndicated credit facility the Company currently has in place and which has an expiration date of January 2022. The Company intends to use the new revolving facility to fund general corporate needs and to redeem, repurchase or defease certain of Bard's outstanding senior unsecured notes that will be assumed upon the closing of the acquisition.

The Company issued senior unsecured U.S. notes including the following:



Interest Rate and Maturity	Aggregate Principal Amount (Millions of dollars)
2.133% Notes due June 6, 2019	$	725
2.404% Notes due June 5, 2020	1,000
2.894% Notes due June 6, 2022	1,800
Floating Rate Notes due June 6, 2022	500
3.363% Notes due June 6, 2024	1,750
3.700% Notes due June 6, 2027	2,400
4.669% Notes due June 6, 2047	1,500
Total aggregate principal amount issued	$	9,675

If the Company's acquisition of Bard does not close by April 23, 2018, or if the agreement to acquire Bard is terminated prior to this date, the Company will be required to redeem all of the senior unsecured U.S. notes issued as detailed above, except for the notes which are due in 2019. The notes would be redeemed at a special mandatory redemption price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest to, but excluding, the redemption date.

The Company issued Euro-denominated debt consisting of 700 million euros ($784 million) of 0.368% Notes due June 6, 2019.

The Company redeemed the following aggregate principal amounts of its long-term senior notes outstanding at an aggregate market price of $1.776 billion:



Interest Rate and Maturity	Aggregate Principal Amount (Millions of dollars)
1.800% Notes due December 15, 2017	$	1,000
5.000% Notes due May 15, 2019	347
6.375% Notes due August 1, 2019	326
Notes issued by CareFusion	44
Total notes redeemed	$	1,717

The carrying value of these long-term notes was $1.745 billion and the Company recognized a loss on this debt extinguishment of $31 million, which was recorded in June 2017 as Other income (expense), net, on the Company’s condensed consolidated statements of income.

Upon securing the permanent financing arrangements discussed above, an agreement for $15.7 billion of fully committed bridge financing that was entered into concurrently with the execution of the agreement to acquire Bard was terminated.

Third Fiscal Quarter Ended June 30, 2017-Exchange Offers for Bard Notes

Also in connection with the Company's agreement to acquire Bard, the Company commenced offers to exchange certain outstanding notes issued by Bard for a like-amount of new notes to be issued by the Company. The offers are conditioned upon the closing of the Bard acquisition and the expiration of these offers will be extended until the acquisition closes. The aggregate principal amounts of Bard notes which have been validly tendered for notes issued by the Company since the offers were commenced in May are provided below.



(Millions of dollars)
Interest Rate and Maturity	Aggregate Principal Amount		Principal Amount Accepted for Exchange
4.400% Notes due January 15, 2021	$	500	$	428
3.000% Notes due May 15, 2026	500		467
6.700% Notes due December 1, 2026	150		137
Total	$	1,150	$	1,031

Note 16 – Lease Accounting

In April 2017, in conjunction with the implementation of a new “go-to-market” business model for the Company's U.S. dispensing business within the Medication Management Solutions (“MMS”) unit of the Medical segment, the Company amended the terms of certain customer leases for dispensing equipment within the MMS unit. The modification provided customers the ability to reduce its dispensing asset base via a return provision, resulting in a more flexible lease term. Prior to the modification, these leases were accounted for as sales-type leases in accordance with Accounting Standards Codification Topic 840, "Leases", as the non-cancellable lease term of five years exceeded 75% of the equipment’s estimated useful life and the present value of the minimum lease payments exceeded 90% of the equipment’s fair value. As a result of the lease modification, the Company was required to reassess the classification of the leases due to the amended lease term. Accordingly, most amended lease contracts were classified as operating leases beginning in April 2017. The change in lease classification resulted in a pre-tax charge to earnings in the third quarter of fiscal year 2017 of $741 million, which was recorded in Other operating (income) expense, net, relating to the derecognition of the net investment in sales-type leases of $1.057 billion, partially offset by the recognition of the underlying leased assets, as Property, Plant and Equipment on the Company’s balance sheet, as of the effective date of $316 million. Beginning April 1, 2017, revenue associated with these modified contracts is recognized on a straight-line basis over the remaining lease term, along with depreciation on the reinstated leased assets.

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

The following commentary should be read in conjunction with the condensed consolidated financial statements and accompanying notes. Within the tables presented throughout this discussion, certain columns may not add due to the use of rounded numbers for disclosure purposes. Percentages and earnings per share amounts presented are calculated from the underlying amounts.

Company Overview

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

BD’s products are manufactured and sold worldwide. Our products are marketed in the United States and internationally through independent distribution channels and directly to end-users by BD and independent sales representatives. We organize our operations outside the United States as follows: Europe; EMA (which includes the Commonwealth of Independent States, the Middle East and Africa); Greater Asia (which includes Japan and Asia Pacific); Latin America (which includes Mexico, Central America, the Caribbean, and South America); and Canada. We continue to pursue growth opportunities in emerging markets, which include the following geographic regions: Eastern Europe, the Middle East, Africa, Latin America and certain countries within Asia Pacific. We are primarily focused on certain countries whose healthcare systems are expanding, in particular, China and India.

~~Acquisition~~On April 23, 2017, we announced that we have entered into a definitive agreement under which BD will acquire C. R. Bard, Inc. ("Bard") for an implied value of ~~CareFusion~~

~~On March 17, 2015, BD acquired~~$317.00 per Bard common share in cash and stock, for estimated total consideration of approximately $24 billion. The combination will create a ~~100% interest~~highly differentiated medical technology company uniquely positioned to improve both the process of care and the treatment of disease for patients and healthcare providers. Additional discussion regarding the acquisition agreement and the related financing the Company has secured, through equity and debt issuances, is provided in ~~CareFusion Corporation ("CareFusion"). CareFusion’s operating results were included in BD’s consolidated results of operations beginning on April 1, 2015~~Notes 4, 9 and ~~as such, the consolidated results of operations for the first six months of the nine-month period ended June 30, 2015 referenced~~15 in the ~~commentary provided further below did not include CareFusion's results. CareFusion operates as part~~Notes to Condensed Consolidated Financial Statements. The transaction is subject to regulatory and Bard shareholder approval and customary closing conditions, and is expected to close in the fourth calendar quarter of ~~our Medical segment.~~2017.

Overview of Financial Results and Financial Condition

For the three months ended June 30, ~~2016,~~2017, worldwide revenues of ~~$3.198~~$3.035 billion ~~increased 2.5%~~decreased 5.1% from the ~~prior year~~prior-year period. The ~~increase~~decrease reflected an approximate 6% reduction in ~~revenue was attributable~~revenues due to the divestiture of the Respiratory Solutions business in October 2016. Third quarter volume growth of ~~3.5%, which includes a net~~more than 2% for our continuing businesses was partially offset by an unfavorable impact of ~~0.5% resulting from the termination~~foreign currency translation of ~~a distribution agreement in~~approximately 1%. Pricing did not materially impact third quarter revenues. Additional disclosures regarding our divestiture of the Respiratory Solutions ~~unit and,~~business are provided in Note 10 in the Notes to ~~a lesser extent,~~Condensed Consolidated Financial Statements. Volume growth in the ~~impact~~third quarter of purchase accounting on deferred revenue related to the acquisition of CareFusion. Revenue growth attributable to volume was offset by approximately 0.9% of foreign currency translation. Price was not a material driver of growth for the period and accounted for approximately 0.1% of growth.

~~The current-year period’s volume impact~~fiscal year 2017 reflected the following:

~~Third quarter~~ Medical segment ~~sales were driven~~volume growth in the third quarter was unfavorably impacted by ~~growth~~a modification to our dispensing equipment lease contracts with customers in the Medication Management Solutions ~~Diabetes Care~~unit. As a result of this modification, which is further discussed below and in Note 16 in the Notes to Condensed Consolidated Financial Statements, substantially all of the revenues associated with dispensing equipment lease contracts are now recognized over the agreement term, rather than upon the placement of capital. Third quarter revenue growth in the Medical segment reflected sales growth in the Medication and Procedural Solutions, Diabetes Care, and Pharmaceutical Systems units. ~~Third quarter revenues in the Respiratory Solutions unit were unfavorably impacted by the termination of a distribution contract, as noted above.~~

Life Sciences segment ~~sales~~volume growth in the third quarter ~~primarily reflected~~was driven by growth in all three of its organizational units, particularly by the ~~Diagnostic Systems and Preanalytical Systems units.~~strength of sales in its Biosciences unit.

~~Worldwide sales of safety-engineered products reflected growth that was attributable to both segments.~~ Third quarter sales in the United States of safety-engineered devices of ~~$450~~$457 million increased ~~5.3%~~1.5% and third quarter international sales of safety-engineered devices of ~~$334~~$320 million ~~grew 10.8%~~decreased by 4.4% over the prior year’s period, inclusive of an estimated ~~3.1%~~2.4% unfavorable impact due to foreign currency translation.

We continue to invest in research and development, geographic expansion, and new product promotions to drive further revenue and profit growth. Our ability to sustain our long-term growth will depend on a number of factors, including our ability to expand our core business (including geographical expansion), develop innovative new products, and continue to improve operating efficiency and organizational ~~effectiveness, including through the integration of CareFusion.~~effectiveness. While the economic environment for the healthcare industry ~~has~~and healthcare utilization in the United States have generally stabilized, pricing pressures continue for some of our ~~products. Healthcare utilization~~products 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 ~~$1.854~~$1.424 billion in the first nine months of fiscal year ~~2016.~~2017. At June 30, ~~2016,~~2017, we had ~~$1.7~~$13.9 billion in cash and equivalents and short-term ~~investments.~~investments, which included net proceeds raised through registered public offerings of equity securities and debt transactions during the third quarter of approximately $4.8 billion and $9.6 billion, respectively. We continued to return value to our shareholders in the form of dividends. During the first nine months of fiscal year ~~2016,~~2017, we paid cash dividends of ~~$421~~$478 million. ~~No shares were~~We also repurchased approximately $220 million of our common stock under an accelerated share repurchase agreement during the first nine months of fiscal year ~~2016.~~2017.

Each reporting period, we face currency exposure that arises from translating the results of our worldwide operations to the U.S. dollar at exchange rates that fluctuate from the beginning of such period. The ongoing relative strength of the U.S. dollar resulted in an unfavorable foreign currency translation impact to our revenue and earnings growth during the ~~quarter.~~third quarter of fiscal year 2017. We evaluate our results of operations on both a reported and a foreign currency-neutral basis, which excludes the impact of fluctuations in foreign currency exchange rates. As exchange rates are an important factor in understanding period-to-period comparisons, we believe the presentation of results on a foreign currency-neutral basis in addition to reported results helps improve investors’ ability to understand our operating results and evaluate our performance in comparison to prior periods. Foreign currency-neutral ("FXN") information compares results between periods as if exchange rates had remained constant period-over-period. We use results on a foreign currency-neutral basis as one measure to evaluate our performance. We calculate foreign currency-neutral percentages by converting our current-period local currency financial results using the prior-period foreign currency exchange rates and comparing these adjusted amounts to our current-period results. These results should be considered in addition to, not as a substitute for, results reported in accordance with U.S. generally accepted accounting principles ("GAAP"). Results on a foreign currency-neutral basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with U.S. GAAP.

Results of Operations

~~Revenues~~

Medical Segment

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


	Three months ended June 30,												Three months ended June 30,
(Millions of dollars)	2016			2015			Total Change		Estimated FX Impact		FXN Change		2017		2016		Total Change (B)		Estimated FX Impact		FXN Change
Medication and Procedural Solutions	$	851		$	848		0.3	%	(1.8	)%	2.1	%	$	870	$	851	2.2	%	(1.1	)%	3.3	%
Medication Management Solutions(A)	587			554			5.9	%	(0.3	)%	6.2	%	556		585		(5.0	)%	(0.8	)%	(4.2	)%
Diabetes Care	258			245			5.5	%	(1.1	)%	6.6	%	263		258		1.7	%	(1.0	)%	2.7	%
Pharmaceutical Systems	342			333			2.5	%	1.0	%	1.5	%	350		342		2.5	%	(1.4	)%	3.9	%
Respiratory Solutions(A)	199			232			(13.9	)%	(0.2	)%	(13.7	)%	—		199		NM		—	%	NM
Deferred revenue adjustment (A)	(2		)	(13		)	(82.9	)%	—	%	(82.9	)%
Total Medical Revenues	$	2,235		$	2,199		1.6	%	(0.8	)%	2.4	%	$	2,038	$	2,235	(8.8	)%	(1.0	)%	(7.8	)%

Medical segment safety-engineered products	$	493		$	454		8.6	%	(1.0	)%	9.6	%	$	478	$	493	(3.0	)%	(0.9	)%	(2.1	)%

(A)

~~In accordance~~The presentation of prior-period amounts has been revised to conform with ~~U.S. GAAP business combination accounting rules, CareFusion’s~~the presentation of current-period amounts, which does not separately present an immaterial adjustment for the amortization of a deferred revenue balance ~~was written down~~write-down relating to ~~reflect a fair value measurement as of~~ the ~~acquisition date. The deferred revenue adjustment represents~~CareFusion acquisition.


(B)	"NM" denotes that the ~~amortization of this write-down which primarily relates to software maintenance contracts in the United States. Revenues for these contracts~~percentage is ~~typically deferred and recognized over the term of the contracts.~~not meaningful.

Third quarter ~~revenues in~~revenue growth from the Medical segment's units was driven by the Medication and Procedural Solutions ~~unit reflected growth in~~unit's sales of infusion ~~therapy~~disposables products, particularly in international markets, and ~~safety-engineered products.~~the Diabetes Care unit's sales of pen needles in the United States and emerging markets. International growth in the Diabetes Care unit was impacted by weaker revenues in Europe, primarily in the United Kingdom, due to increasing pressure from government payers as part of austerity measures. The ~~Medication Management Solutions~~Pharmaceutical Systems unit's revenue growth reflected ~~installations~~the timing of ~~dispensing capital and sales of infusion systems. The Diabetes Care unit's revenue growth~~ customer orders which favorably impacted revenues

in ~~the quarter was driven by sales of pen needles. Third quarter revenue growth in~~Europe but unfavorably impacted U.S. revenues. This favorable impact to the Pharmaceutical Systems unit's revenues in Europe was partially offset by the timing of orders within fiscal year 2017, as order placements for this unit ~~reflected growth in sales of self-injection systems and safety-engineered products. The timing,~~occurred earlier than anticipated, in the ~~second~~first quarter of the current fiscal ~~year, of earlier than anticipated customer orders~~year. The decrease in total Medical segment revenues in the ~~Pharmaceutical Systems and capital placements in~~third quarter of 2017 compared with the prior-year period was primarily driven by the divestiture of the Respiratory Solutions business and the modification to dispensing equipment lease contracts with customers in the Medication Management Solutions unit, ~~unfavorably impacted~~which took place in April 2017. As a result of the lease modification, substantially all new lease contracts entered into beginning in April 2017 will be accounted for as operating leases with revenue recognized over the agreement term, rather than upon the placement of capital. In the third quarter of 2017, revenues ~~as compared to the prior-year period. Third quarter revenues, as compared to the prior year,~~ in the ~~Respiratory~~Medication Management Solutions unit ~~were also unfavorably impacted by the termination~~included $80 million of ~~a distribution contract, as previously discussed.~~

revenues relating to preexisting amended lease contracts.

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


	Nine months ended June 30,										Nine months ended June 30,
(Millions of dollars)	2016		2015		Total Change		Estimated FX Impact		FXN Change		2017		2016		Total Change		Estimated FX Impact		FXN Change
Total Medical Revenues	$	6,420	$	4,377	46.7	%	(4.2	)%	50.9	%	$	5,989	$	6,420	(6.7	)%	(0.8	)%	(5.9	)%

Medical segment safety-engineered products	$	1,425	$	1,031	38.2	%	(4.0	)%	42.2	%	$	1,446	$	1,425	1.5	%	(0.5	)%	2.0	%

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


	Three months ended June 30,						Nine months ended June 30,						Three months ended June 30,						Nine months ended June 30,
(Millions of dollars)	2016			2015			2016			2015			2017			2016			2017			2016
Medical segment operating income	$	571		$	483		$	1,549		$	1,115		$	553		$	571		$	1,638		$	1,549

Segment operating income as % of Medical revenues	25.5		%	22.0		%	24.1		%	25.5		%	27.1		%	25.5		%	27.3		%	24.1		%

The Medical segment's operating income is driven by its performance with respect to gross profit margin and operating expenses. Gross profit margin was higher in the ~~current~~third quarter of 2017 as compared with the third quarter of ~~2015~~2016 primarily due to the divestiture of the Respiratory Solutions business, which had products with relatively lower gross profit margins. Gross profit margin also reflected lower manufacturing costs resulting from continuous improvement projects ~~improving~~which enhanced the efficiency of our ~~operations and lower raw material costs, partially offset by unfavorable foreign currency translation.~~operations. Selling and administrative expense as a percentage of revenues for the third quarter of fiscal year ~~2016~~2017 was ~~lower primarily due~~relatively flat compared to the ~~suspension of the medical device excise tax imposed under the U.S. Patient Protection Affordable Care Act.~~prior-year period. Research and development ~~expenses for~~expense as a percentage of revenues in the third quarter ~~increased $18 million, or 19% above~~of 2017 was also relatively flat compared with the ~~prior year’s period, which reflected increased investment in new products and platforms.~~third quarter of 2016, reflecting the timing of project-related spend.

Life Sciences Segment

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


	Three months ended June 30,										Three months ended June 30,
(Millions of dollars)	2016		2015		Total Change		Estimated FX Impact		FXN Change		2017		2016		Total Change		Estimated FX Impact		FXN Change
Preanalytical Systems	$	366	$	349	4.8	%	(1.8	)%	6.6	%	$	376	$	366	2.6	%	(1.3	)%	3.9	%
Diagnostic Systems	327		302		8.2	%	(1.3	)%	9.5	%	335		327		2.6	%	(1.2	)%	3.8	%
Biosciences	270		269		0.4	%	(0.8	)%	1.2	%	286		270		5.8	%	(1.3	)%	7.1	%
Total Life Sciences Revenues	$	963	$	921	4.6	%	(1.4	)%	6.0	%	$	997	$	963	3.5	%	(1.3	)%	4.8	%

Life Sciences segment safety-engineered products	$	291	$	275	5.9	%	(1.7	)%	7.6	%	$	298	$	291	2.4	%	(1.3	)%	3.7	%

~~The~~

Life Sciences segment revenues in the third quarter reflected growth in global sales of the Preanalytical Systems unit's safety-engineered products and of the Diagnostics Systems unit's sales of its core microbiology platform, particularly in emerging

markets. The segment’s third quarter revenue growth was also driven by ~~U.S.~~increased Biosciences unit sales in both developed and ~~international sales of safety-engineered products. Growth in the Diagnostic Systems unit was driven by core microbiology sales, including~~ ~~BD Kiestra~~^TM installations, and sales of molecular diagnostic platforms during the quarter. The Biosciences unit’s third quarter revenues reflected pressure on sales of HIV-related clinical products in Africa and delayed government funding, primarily in Western Europe and Japan, offset by growth in sales of research instruments in the United States and global sales of research reagents.

emerging markets.

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


	Nine months ended June 30,										Nine months ended June 30,
(Millions of dollars)	2016		2015		Total Change		Estimated FX Impact		FXN Change		2017		2016		Total Change		Estimated FX Impact		FXN Change
Total Life Sciences Revenues	$	2,832	$	2,845	(0.5	)%	(4.2	)%	3.7	%	$	2,937	$	2,832	3.7	%	(0.9	)%	4.6	%

Life Sciences segment safety-engineered products	$	829	$	822	0.9	%	(4.5	)%	5.4	%	$	867	$	829	4.5	%	(1.1	)%	5.6	%

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


	Three months ended June 30,						Nine months ended June 30,						Three months ended June 30,						Nine months ended June 30,
(Millions of dollars)	2016			2015			2016			2015			2017			2016			2017			2016
Life Sciences segment operating income	$	200		$	197		$	604		$	610		$	199		$	200		$	574		$	604

Segment operating income as % of Life Sciences revenues	20.8		%	21.4		%	21.3		%	21.4		%	19.9		%	20.8		%	19.6		%	21.3		%

The Life Sciences segment's operating income is driven by its performance with respect to gross profit margin and operating expenses. Gross profit margin in the third quarter of fiscal year ~~2016~~2017 was lower compared with the third quarter of ~~2015~~2016 primarily due to ~~the~~ unfavorable ~~impact of~~ foreign currency translation and unfavorable product mix, partially offset by lower manufacturing costs resulting from continuous improvement projects ~~improving~~which enhanced the efficiency of our operations. Selling and administrative expense as a percentage of ~~Life Sciences~~ revenues in the third quarter of ~~2016~~2017 was ~~also lower~~higher compared towith the prior-year period, ~~primarily due to the suspension of the medical device excise tax.~~reflecting higher shipping costs. Research and development expense as a percentage of revenues was lower in the third quarter of 2017 as compared with the third quarter of 2016, ~~increased by $7 million, or 10% above~~primarily due to the ~~prior year’s period, which reflected increased investment in new products and platforms.~~timing of project-related spend.

Geographic Revenues

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


	Three months ended June 30,										Three months ended June 30,
(Millions of dollars)	2016		2015		Total Change		Estimated FX Impact		FXN Change		2017		2016		Total Change		Estimated FX Impact		FXN Change
United States	$	1,735	$	1,693	2.5	%	—		2.5	%	$	1,603	$	1,735	(7.6	)%	—		(7.6	)%
International	1,463		1,427		2.5	%	(2.1	)%	4.6	%	1,433		1,463		(2.1	)%	(2.3	)%	0.2	%
Total Revenues	$	3,198	$	3,120	2.5	%	(0.9	)%	3.4	%	$	3,035	$	3,198	(5.1	)%	(1.1	)%	(4.0	)%

U.S. revenues in the third quarter primarily reflected ~~growth from both segments. The~~the Medical segment's divestiture of the Respiratory Solutions business and the modification to dispensing equipment lease contracts with customers in the Medical segment's Medication Management Solutions unit, as previously discussed. These impacts to U.S. revenues ~~reflected growth~~ in the third quarter were partially offset by increased sales ofin the Medical segment's Medication and Procedural Solutions and Diabetes Care ~~unit's pen needles~~units, as well as in the Life Sciences segment's Preanalytical Systems and Biosciences units.

International third quarter revenues reflected increased sales in the Medical segment's Medication and Procedural Solutions and Pharmaceutical Systems units, as well as growth from the Medication Management Solutions unit's dispensing equipment and infusion systems. U.S. revenue growth in the Medical segment also reflected sales of self-injection systems and safety-engineered products in the Pharmaceutical Systems unit. U.S. growth in the Respiratory Solutions unit was negatively impacted by the termination of a distribution contract, as previously discussed. U.S. Life Sciences revenue growth in the third quarter of fiscal year 2016 was driven by sales of the Preanalytical Systems unit's products as well as the Diagnostic Systems unit's blood culture and molecular diagnostic platforms. U.S. Life Sciences revenue growth also reflected research instrument placements and research reagentattributable to sales in the Life Sciences segment's Diagnostic Systems and Biosciences ~~unit.~~

~~The~~units, partially offset by the impact of the Medical segment's international revenue growth was driven by sales in China and by sales of safety-engineered products. The Medication Management Solutions unit's international revenue growth was driven by dispensing equipment installations. International revenue growth in the Medical segment was negatively impacted by the timing of orders in the Pharmaceutical Systems unit and by the timingdivestiture of the Respiratory Solutions ~~unit's capital placements, as previously discussed. The Life Sciences segment's third quarter international revenue growth reflected the Diagnostic Systems unit's~~ ~~BD Kiestra~~^TM installations in Western Europe as well as sales of core microbiology products and cervical cancer-related product offerings. The Preanalytical Systems unit's international revenue growth was driven by sales of safety-engineered products in all regions. International revenue growth in the Biosciences unit was negatively impacted by the previously discussed funding delays and pressure on sales of HIV-related clinical products in Africa.business.

~~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~~Emerging market revenues for the third quarter were ~~$485~~$503 million, compared with ~~$491~~$485 million in the prior year’s quarter, ~~and~~which included approximately $24 million of revenues associated with divested businesses, primarily the Respiratory Solutions business. Emerging market revenues in the current-year period also included an estimated ~~$31~~$9 million unfavorable impact due to foreign currency translation. Third quarter revenue growth in emerging markets ~~reflected growth~~was driven by sales in Greater Asia, including China, and ~~Latin America, partially offset by declines in the Middle East and Africa.~~EMA.

Specified Items

Reflected in the financial results for the three and nine-month periods of fiscal years 2017 and 2016 ~~and 2015 are~~were the following specified items:


	Three months ended June 30,					Nine months ended June 30,				Three months ended June 30,				Nine months ended June 30,
(Millions of dollars)	2016		2015			2016		2015		2017		2016		2017			2016
Financing costs (A)	$	—	$	5		$	—	$	107
Transaction costs (A)	7		9			7		52
Integration costs (A)	40		24			115		55		50		40		159			115
Restructuring costs (A)	49		75			198		136		8		49		54			198
Transaction costs (A)										23		7		37			7
Financing costs (B)										87		—		87			—
Purchase accounting adjustments ~~(B)~~(C)	127		439			395		466		106		127		361			395
Lease contract modification-related charge (D)										741		—		741			—
Litigation-related item (E)										—		—		(336		)	—
Loss on debt extinguishment (F)										31		—		73			—
Pension settlement charges	3		—			3		—		—		3		—			3
Other (C)	—		(5		)	—		7
Total specified items	226		548			718		824		1,046		226		1,176			718
Tax impact of specified items	106		169			270		277		377		106		404			270
After-tax impact of specified items	$	120	$	379		$	449	$	547	$	669	$	120	$	772		$	449

(A)

Represents ~~financing, transaction,~~ integration and restructuring costs, ~~substantially associated with the CareFusion acquisition and portfolio rationalization. The financing costs were~~ recorded in ~~Interest expense~~Acquisitions and other restructurings~~. The transaction, integration~~, which are associated with our fiscal year 2015 acquisition of CareFusion and ~~restructuring~~other portfolio rationalization initiatives. Transaction costs, which relate to the pending agreement to acquire Bard as well as to other portfolio rationalization initiatives, were primarily recorded in Acquisitions and other restructurings.


(B)	Represents financing costs incurred in connection with the agreement to acquire Bard including bridge financing commitment fees of $79 million, which were recorded in Interest expense.

(C)

Primarily represents non-cash amortization expense associated with acquisition-related identifiable intangible assets. BD’s amortization expense is primarily recorded in ~~Costs~~Cost of products sold. The adjustment in the nine-month period of fiscal year 2016 also included a net decrease in the fair value of certain contingent consideration liabilities of $26 million. The adjustments in the three and nine-month periods of fiscal year 2015 also included a fair value step-up adjustment of $281 million recorded relative to CareFusion’s inventory on the acquisition date. The adjustment for the nine months ended June 30, 2015 additionally reflected a pre-tax acquisition-date accounting gain of $9 million on a previously held investment.

~~(C)~~(D)

~~The adjustments in the three and nine-month periods ended June 30, 2015 include~~Represents a decrease to the liability for employee termination costs recorded relative to workforce reduction actions taken in the fourth quarter of fiscal year 2014. The adjustment in the nine-month period additionally includes anon-cash charge, ~~for plaintiff attorneys’ fees,~~which was recorded in ~~Selling and administrative~~Other operating expense ~~associated~~,resulting from a modification to our dispensing equipment lease contracts with customers, as further discussed below.


(E)	Represents the ~~antitrust and false advertising lawsuit RTI filed against BD. For~~reversal of certain reserves related to an appellate court decision recorded in Other operating expense, as further ~~discussion, refer to Note 5~~discussed below.


(F)	Represents losses recognized in Other (expense) income, net upon our extinguishment of certain long-term senior notes in the ~~Notes to Condensed Consolidated Financial Statements.~~first and third quarters, as further discussed below.

Gross Profit Margin

Gross profit margin for the three and nine-month periods of fiscal year ~~2016~~2017 compared with the prior-year periods in ~~2015~~2016 reflected the following impacts:


	Three-month period		Nine-month period		Three-month period		Nine-month period
June 30, 2015 gross profit margin %	37.6	%	45.2	%
CareFusion acquisition-related asset depreciation and amortization	9.4	%	0.4	%
June 30, 2016 gross profit margin %					48.4	%	48.0	%
Operating performance	2.0	%	3.0	%	0.5	%	0.8	%
Impact of divestitures					0.9	%	0.9	%
Foreign currency translation	(0.6	)%	(0.6	)%	(0.3	)%	(0.5	)%
June 30, 2016 gross profit margin %	48.4	%	48.0	%
June 30, 2017 gross profit margin %					49.5	%	49.2	%

~~Gross profit margin~~Operating performance in the current-year periods benefited from a favorable comparison to the prior-year periods, which reflected the recognition of a fair value step-up adjustment recorded relative to CareFusion’s inventory on the acquisition date, as previously discussed. The operating performance impacts for the current year's quarter and nine-month period primarily reflected lower manufacturing costs resulting from the continuous operations improvement projects ~~improving~~discussed above. Gross profit margin for the ~~efficiency~~current-year periods was favorably impacted by businesses divestitures, primarily the divestiture of ~~our operations, as well as~~the Respiratory Solutions business which had products with relatively lower ~~raw material costs.~~gross profit margins.

Operating Expenses

A summary of operating expenses for ~~the~~ three and ~~nine months ended June 30,~~nine-month periods of fiscal years 2017 and 2016 ~~and 2015~~ is as follows:


	Three months ended June 30,						Increase (decrease) in basis points			Nine months ended June 30,								Increase (decrease) in basis points		Three months ended June 30,						Increase (decrease) in basis points		Nine months ended June 30,						Increase (decrease) in basis points
	2016			2015					2016				2015				2017				2016				2017			2016						Increase (decrease) in basis points
(Millions of dollars)							Increase (decrease) in basis points											Increase (decrease) in basis points
Selling and administrative expense	$	728		$	751					$	2,209			$	1,806					$	719		$	728		Increase (decrease) in basis points			$	2,151		$	2,209
% of revenues	22.8		%	24.1		%	(130	)		23.9		%		25.0		%		(110	)	23.7		%	22.8		%	90		24.1		%	23.9		%	20

Research and development expense	$	207		$	178					$	575			$	436					$	186		$	207				$	554		$	575
% of revenues	6.5		%	5.7		%	80			6.2		%		6.0		%		20		6.1		%	6.5		%	(40	)	6.2		%	6.2		%	—

Acquisitions and other restructurings	$	96		$	108					$	321			$	244					$	81		$	96				$	243		$	321

Other operating (income) expense, net																				$	741		$	—				$	405		$	—

Selling and administrative expense

Selling and administrative expense as a percentage of revenues in the current year’s ~~three and nine-month periods~~three-month period reflected ~~cost synergies resulting from~~ the ~~CareFusion acquisition as well as~~impact of lower revenues in the ~~benefit from suspension of the medical device excise tax, as previously discussed.~~current year's quarter. Selling and administrative expense as a percentage of revenues in the current year’s nine-month period ~~also reflected favorable foreign currency translation, partially offset by~~was relatively flat compared with the ~~unfavorable impact of depreciation recorded in the first half of the fiscal year relating to fixed assets acquired in the CareFusion acquisition.~~prior-year period.

Research and development expense

~~The increase in research~~Research and development expense ~~for~~as a percentage of revenues was lower in the ~~three-month period~~third quarter of ~~fiscal year 2016~~2017 compared with the prior-year period primarily due to the timing of expenses in ~~2015~~the current-year period. Research and development expense as a percentage of revenues was relatively flat in the current nine-month period compared with the prior-year period, which also primarily reflected the timing of project spending and an increase in the number of ongoing projects. Research and development expense for nine-month period of fiscal year 2016 was also higher compared with the prior-year period due to the inclusion of CareFusion’s research and development expenses in the Company's results during the first half of fiscal year 2016.expenses.

Acquisitions and other restructurings

Costs relating to acquisitions and other restructurings in the three and nine-month periods represented ~~transaction,~~ integration and restructuring costs substantially associated with ~~the~~our fiscal year 2015 acquisition of CareFusion ~~acquisition and portfolio rationalization. The transaction and integration costs specifically included advisory, legal,~~ and other portfolio rationalization initiatives, as well as transaction costs ~~substantially incurred in connection with~~related to the ~~CareFusion acquisition.~~pending agreement to acquire Bard and other portfolio rationalization initiatives. For further disclosures regarding the pending acquisition and restructuring costs, refer to Notes 9 and 11 in the Notes to Condensed Consolidated Financial Statements.

Other operating (income) expense, net

Other operating expense in the three and nine-month periods of fiscal year 2017 included the $741 million non-cash chargeresulting from the modification to our dispensing equipment lease contracts with customers. Additional disclosures regarding this lease contract modification are provided in Note 1116 in the Notes to Condensed Consolidated Financial Statements. Other operating income in the current nine-month period included the $336 million reversal of certain reserves related to an appellate court decision which, among other things, reversed an unfavorable antitrust judgment in the Retractable Technologies, Inc. case. Additional disclosures regarding this legal matter are provided in Note 5 in the Notes to Condensed Consolidated Financial Statements.

Nonoperating Income

Net ~~Interest Expense~~interest expense

The components ~~of net interest expense~~ for the three and nine-month periods of fiscal years 2017 and 2016 were as follows:


	Three months ended June 30,						Nine months ended June 30,						Three months ended June 30,						Nine months ended June 30,
(Millions of dollars)	2016			2015			2016			2015			2017			2016			2017			2016
Interest expense	$	(97	)	$	(105	)	$	(293	)	$	(272	)	$	(184	)	$	(97	)	$	(364	)	$	(293	)
Interest income	5			2			14			20			19			5			31			14
Net interest expense	$	(92	)	$	(103	)	$	(279	)	$	(252	)	$	(165	)	$	(92	)	$	(334	)	$	(279	)

The ~~decrease~~increases in interest expense for the three-month ~~period~~and nine-month periods of fiscal year ~~2016~~2017 compared with the prior year's ~~period~~periods primarily reflected ~~a favorable comparison~~higher levels of debt due to our issuances of senior unsecured U.S. notes during the ~~prior-year period, which included~~third quarter of 2017, as well as bridge financing commitment fees ~~incurred to exchange CareFusion notes assumed~~of $79 million. Additional disclosures regarding our debt-related transactions are provided in Note 15 in the ~~acquisition for BD notes.~~Notes to Condensed Consolidated Financial Statements. The increase in interest expense for the nine-month period of fiscal year 2016 reflected increased financing costs, recorded in the first half of fiscal year 2016, associated with the CareFusion acquisition, partially offset by favorable amortization of the acquisition-date fair value-step, recorded in the first half of fiscal year 2016, on CareFusion’s long-term debt. This net year-to-date increase in financing costs relating to the CareFusion acquisition was partially offset by the prior-year impact of fees incurred to exchange CareFusion's notes, as discussed above, and commitment fees incurred for a bridge loan facility that was terminated in March 2015.

~~The increase~~increases in interest income for the three-month ~~period~~and nine-month periods of fiscal year ~~2016~~2017 compared with the prior year’s ~~period~~periods primarily reflected ~~the realization~~higher levels of ~~investment gains~~cash on ~~assets related to~~hand, as a result of our ~~deferred compensation plans, compared with the realization~~

third quarter issuances of ~~losses in the prior year's quarter. The decrease in interest income for the nine-month period of fiscal year 2016 reflected lower cash levels outside of the United States, partially offset by~~debt and equity securities, as well as higher investment gains on assets related to our deferred compensation plans. The offsetting ~~movements~~movement in the deferred compensation plan liability ~~were~~was recorded in Selling and administrative expense. Additional disclosures regarding our issuance of equity securities during the third quarter are provided in Note 4 in the Notes to Condensed Consolidated Financial Statements.

Other (expense) income, net

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



	Three months ended June 30,						Nine months ended June 30,
(Millions of dollars)	2017			2016			2017			2016
Losses on debt extinguishment	$	(31	)	$	—		$	(73	)	$	—
Share of Vyaire Medical venture results, net of income from transition services agreements	(5		)	—			—			—
Losses on undesignated foreign exchange derivatives, net	(5		)	(4		)	(7		)	(1		)
Gain on previously held investment	23			—			23			—
Other	2			3			7			12
Other (expense) income, net	$	(16	)	$	(1	)	$	(51	)	$	10

We repurchased or redeemed certain senior notes in fiscal year 2017 and recognized losses on the extinguishment of these debt instruments of $42 million and $31 million in the first and third quarters of fiscal year 2017, respectively. Additional disclosures regarding these debt transactions are provided in Note 15 in the Notes to Condensed Consolidated Financial Statements. Additional disclosures regarding our divestiture of the Respiratory Solutions business and the Vyaire Medical venture formed with this business are provided in Note 10 in the Notes to Condensed Consolidated Financial Statements. Other income in the current-year periods also included an acquisition-date accounting gain related to a previously-held equity method investment in an entity that we acquired during the third quarter of fiscal year 2017.

Income Taxes

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



	Three months ended June 30,				Nine months ended June 30,
	2017		2016		2017		2016
Effective income tax rate - (benefit) provision	(67.2	)%	7.6	%	(18.9	)%	10.1	%

Favorable impact, in basis points, from specified items	8,370		1,370		3,430		1,100

The ~~tax benefits of~~decreases in the ~~specified items shown earlier reduced the current and prior-year periods' income tax rates, as the tax benefits on these specified items were primarily incurred in higher tax jurisdictions. The~~effective income tax rates for the ~~current-year~~three and nine-month periods ~~are higher compared with~~of fiscal year 2017 largely reflected the ~~prior periods' rates as the specified charges incurred~~more favorable tax impacts in the current-year periods, ~~were lower~~ compared with ~~charges incurred~~the prior-year periods, from specified items. The decreases in the ~~prior-year periods.~~effective income tax rates for the three and nine-month periods of fiscal year 2017 also reflected the tax

Three months ended June 30, Nine months ended June 30,
2016 2015 2016 2015
Effective income tax rate 7.6 % (60.0 )% 10.1 % 6.4 %

Favorable impact, in basis points, from tax benefits of specified items 1,370
8,480
1,100
1,630

benefits recorded, upon the settlement of share-based compensation awards, for the three and nine months ended June 30, 2017 ended June 30, 2017 of $12 million and $60 million, respectively. The share-based compensation-related tax benefits were recognized in connection with BD's adoption of new accounting requirements relating to the income tax effects of share-based compensation awards. Additional disclosures regarding this adoption are provided in Note 2 in the Notes to Condensed Consolidated Financial Statements.

Net Income (Loss) and Diluted Earnings per Share

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


	Three months ended June 30,						Nine months ended June 30,						Three months ended June 30,						Nine months ended June 30,
	2016			2015			2016			2015			2017			2016			2017			2016
Net Income (Millions of dollars)	$	390		$	62		$	958		$	514
Net (Loss) Income (Millions of dollars)													$	(132	)	$	390		$	773		$	958
Diluted Earnings per Share	$	1.80		$	0.29		$	4.41		$	2.52		$	(0.75	)	$	1.80		$	3.36		$	4.41

Unfavorable impact-specified items	$	(0.55	)	$	(1.76	)	$	(2.07	)	$	(2.68	)	$	(3.03	)	$	(0.55	)	$	(3.50	)	$	(2.07	)
Unfavorable impact-foreign currency translation	$	(0.10	)				$	(0.51	)				$	(0.07	)				$	(0.24	)
Dilutive impact of BD shares issued in anticipation of the pending acquisition of Bard													$	(0.18	)				$	(0.22	)

Liquidity and Capital Resources

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


	Nine months ended June 30,						Nine months ended June 30,
(Millions of dollars)	2016			2015			2017			2016
Net cash provided by (used for)
Operating activities	$	1,854		$	1,052		$	1,424		$	1,854
Investing activities	$	(318	)	$	(8,003	)	$	(536	)	$	(318	)
Financing activities	$	(1,276	)	$	6,667		$	11,433		$	(1,276	)

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 ~~2016.~~2017. Normal operating needs in fiscal year ~~2016~~2017 include working capital, capital expenditures, and cash dividends. The change in net cash provided by operating activities was primarily attributable to net income, ~~from continuing operations,~~ as adjusted for depreciation and amortization and other non-cash items. The current period change in operating assets and liabilities was a net use of cash and primarily reflected higher levels of ~~accounts~~prepaid expenses, trade receivables and inventory, as well as lower levels of accounts payable and accrued ~~expenses, partially offset by lower levels~~expenses. The current-year period also reflected the non-cash chargeresulting from the modification to our dispensing equipment lease contracts with customers, as previously discussed, and the losses recorded upon our extinguishment of ~~prepaid expenses and financing receivables. Net cash provided by operating activities~~certain long-term notes in the first nine months of fiscal year ~~2015 was reduced by a discretionary cash contribution of $40 million to fund our pension obligation.~~2017, which are included within Other, net.

Net Cash Flows from Investing Activities

Our investments in capital expenditures are focused on projects that enhance our cost structure and manufacturing capabilities, and support our strategy of geographic expansion with select investments in growing markets. Capital ~~expenditures~~expenditure-related cash outflows were ~~$405~~$467 million in the first ~~nine-months~~nine months of fiscal year ~~2016~~2017, compared with ~~$387~~$405 million in the prior-year period. ~~Net~~The current-year period's net cash flows used for investing activities also included acquisitions which were immaterial both individually and in the ~~current-year period reflected~~aggregate. These cash outflows in the first nine months of fiscal year 2017 were partially offset by cash inflows of $165 million from business divestitures. The prior-year period's net cash flows from investing activities included $158 million of proceeds from the sales of non-core assets.

of non-core assets. Net cash used for investing activities in the prior-year period reflected cash outflows of $8.3 billion related to our acquisition of CareFusion and other smaller acquisitions occurring in the prior-year period. These cash outflows in the prior-year period were partially offset by sales of investments of $837 million due to the maturities of time deposits in Europe, Latin America and Asia Pacific.

Net Cash Flows from Financing Activities

Net cash used for financing activities in the first ~~nine-months~~nine months of fiscal year 2017 included the following significant cash flows:



(Millions of dollars)	Nine months ended June 30, 2017
Cash inflow (outflow)
Issuances of senior unsecured U.S. notes	$	9,616
Issuances of euro-denominated notes	$	1,846
Payments of debt	$	(3,980	)
Issuances of equity securities	$	4,827
Share repurchases under accelerated share repurchase agreement	$	(220	)

Additional disclosures regarding the equity and debt-related financing activities detailed above are provided in Notes 4 and 15 in the Notes to Condensed Consolidated Financial Statements. No further share repurchases are planned in 2017, as our share repurchase program has been suspended in connection with the announced agreement to acquire Bard. Net cash flows from financing activities in the first nine months of fiscal year 2016 included ~~a net $150 million reduction of our commercial paper program balance and~~ the ~~third quarter~~ repayment of $750 million ofin floating rate notes due onin June ~~15,~~ 2016. Net cash provided by financing activities in the prior-year period included the proceeds from $6.2 billion of notes issued in December 2014 as well as $850 million 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.

~~Debt-related Activities~~

Certain measures relating to our total debt were as follows:


(Millions of dollars)	June 30, 2016			September 30, 2015			June 30, 2017			September 30, 2016
Total debt	$	11,913		$	12,822		$	19,016		$	11,551

Short-term debt as a percentage of total debt	11.3		%	11.3		%	2.4		%	8.7		%
Weighted average cost of total debt	3.5		%	3.3		%	3.3		%	3.6		%
Total debt as a percentage of total capital*	56.0		%	59.4		%	58.6		%	57.2		%

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

The ~~ratio of~~decrease in short-term debt as a percentage of total debt at June 30, ~~2016 reflected~~2017 was largely driven by our issuance of $9.675 billion of senior unsecured U.S. notes during the ~~reclassifications, from long-term debt to short-term debt,~~third quarter of $500 million of 1.75% notes due on November 8, 2016 and $300 million of 1.450% notes due May 15, 2017, offset by the repayment of $750 million of floating rate notes, as previously discussed. The ratio of debt as a percentage of total capital at September 30, 2015 reflects adjustments to the condensed consolidated balance sheet resulting from our adoption of revised presentation requirements relating to deferred taxes. Additional information regarding this adoption is provided in Note 2 in the Notes to Condensed Consolidated Financial Statements.fiscal year 2017.

Cash and Short-term Investments

At June 30, ~~2016,~~2017, total worldwide cash and short-term investments were approximately ~~$1.70~~$13.9 billion, of which ~~$1.25~~$1.0 billion was held in jurisdictions outside of the United States. Total cash at June 30, 2017 included net proceeds raised through public offerings of equity securities and debt transactions which occurred during the third quarter of fiscal year 2017, as previously discussed. 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

We have in 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 $1.5 billion in notes. Borrowings outstanding under this program were $550 million at June 30, 2016, which reflected a net reduction of $150 million from our outstanding balance of commercial paper borrowings at September 30, 2015, 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 January 2021.~~which can be used for general corporate purposes. There were no borrowings outstanding under this credit facility at June 30, ~~2016. The~~2017. During the first quarter of fiscal year 2017, we extended the expiration date of this credit facility ~~under which we~~to January 2022 from the original expiration date of January 2021. We may issue up to $100 million in letters of credit ~~provides backup support for our commercial paper program~~under this facility and ~~can~~it 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 $2 billion. The credit facility includes a single financial covenant that requires BD to maintain an interest expense coverage ratio of not less than 5-to-1 for the most recent four consecutive fiscal quarters. We were in compliance with this covenant as of June 30, ~~2016.~~2017. We also have informal lines of credit outside the United States.

The developments discussed below have occurred relative to our credit facilities in connection with the announcement of the acquisition of Bard.

Term loan and revolving credit facilities

In May 2017, we entered into a three-year $2.25 billion senior unsecured term loan facility. The proceeds from this facility may only be used to fund a portion of the cash consideration for the Bard acquisition, as well as the fees and expenses incurred in connection with this acquisition. Also in May 2017, we entered into a five-year senior unsecured revolving credit facility that will provide borrowing of up to $2.25 billion when the facility becomes effective upon the closing of the Bard acquisition. This facility will expire in May 2022. Upon the effective date of the facility, it will replace the $1.5 billion syndicated credit facility discussed further above. We will be able to issue up to $100 million in letters of credit under this new revolving credit facility and it also includes a provision that enables BD, subject to additional commitments made by the lenders, to access up to an additional $500 million in financing through the facility for a maximum aggregate commitment of $2.75 billion. We will use proceeds from this facility to fund general corporate needs and to redeem, repurchase or defease certain of Bard's outstanding senior unsecured notes that will be assumed upon the closing of the acquisition.

The agreements for both the new term loan and revolving credit facility contain the following financial covenants:

We are required to maintain an interest expense coverage ratio of not less than 4-to-1 as of the last day of each fiscal quarter. We were in compliance with this covenant relative to the term loan facility as of June 30, 2017. This covenant becomes effective for the revolving credit facility upon the effective date of the facility.

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


◦	6-to-1 from the closing date of the Bard acquisition until and including the first fiscal quarter-end thereafter;


◦	5.75-to-1 for the subsequent four fiscal quarters thereafter;


◦	5.25-to-1 for the subsequent four fiscal quarters thereafter;


◦	4.5-to-1 for the subsequent four fiscal quarters thereafter;


◦	4-to-1 for the subsequent four fiscal quarters thereafter;


◦	3.75-to-1 thereafter.

Commercial paper program and bridge facility

We currently have in place a commercial paper borrowing program which allows us to issue a maximum of $1.5 billion in notes and which is available to meet our short-term financing needs, including working capital requirements. Borrowings outstanding under this program were $250 million at June 30, 2017, which reflected a net increase of $50 million from our outstanding balance of commercial paper borrowing at September 30, 2016.

Upon securing permanent financing, including the issuances of senior unsecured U.S. notes and equity securities in the third quarter of fiscal year 2017, as previously discussed above, an agreement for fully committed bridge financing of $15.7 billion we had secured in concurrence with the announcement of the acquisition agreement was terminated.

Debt ratings

Our corporate credit ratings with the rating agencies Standard & Poor's Ratings Services ("S&P") and Moody's Investor Service (Moody's) were as follows at September 30, 2016:



	S&P	Moody’s
Ratings:
Senior Unsecured Debt	BBB+	Baa2
Commercial Paper	A-2	P-2
Outlook	Stable	Stable

Upon our announcement of the agreement to acquire Bard, S&P placed our corporate credit rating of BBB+ on CreditWatch. The BBB+ rating S&P assigned to our new term loan facility and the senior unsecured U.S. notes we issued in the third quarter of fiscal year 2017 have also been placed on CreditWatch by the ratings agency. S&P has indicated that this placement will be resolved upon the acquisition's closing, which is expected to occur in the fourth calendar quarter of 2017, and that our corporate debt rating by S&P will be lowered one notch to BBB. S&P also assigned a BBB- rating to the previously discussed mandatory convertible preferred stock we issued in May 2017. Also upon our announcement of the agreement to acquire Bard, Moody's placed our Baa2 and P-2 ratings on review for downgrade and these ratings currently remain under review. Additionally, Moody's assigned a corporate credit rating of Ba1 to our new term loan facility and to all of the tranches of senior unsecured U.S. notes issued in the third quarter, except for the tranche of 2.133% notes due June 6, 2019, which was assigned a corporate credit rating of Baa2. Moody's assigned a corporate credit rating of Baa2 to euro-denominated notes we also issued in the third quarter of fiscal year 2017. Moody's has placed the ratings assigned to the tranche of 2.133% notes and the euro-denominated

notes on review for downgrade. Moody's also assigned a Ba1 rating to the BD notes we are offering in exchange of exiting Bard notes.

Additionally upon our announcement of the Bard agreement, Fitch Ratings ("Fitch") assigned corporate debt ratings to BD for the first time and assigned BD a Long-term Issuer Default Rating of BBB- and an outlook of Stable. Fitch also assigned a BBB- rating to the euro-denominated notes we issued in the third quarter.

Lower corporate debt ratings and further downgrades of our corporate credit ratings or other credit ratings may increase our cost of borrowing.

Concentrations of Credit Risk

We continually evaluate our accounts receivables for potential collection risks, particularly those resulting from sales to government-owned or government-supported healthcare facilities in certain countries, as payment may be dependent upon the

financial stability and creditworthiness of those countries’ national economies. We continually evaluate all governmental receivables for potential collection risks associated with the availability of government funding and reimbursement practices. We believe the current reserves related to all governmental receivables are adequate and that these receivables will not have a material adverse impact on our financial position or liquidity.

Cautionary Statement Regarding Forward-Looking Statements

BD and its representatives may from time to time make certain forward-looking statements in publicly released materials, both written and oral, including statements contained in filings with the Securities and Exchange Commission, press releases, and our reports to shareholders. Forward-looking statements may be identified by the use of words such as “plan,” “expect,” “believe,” “intend,” “will,”, “may”, “anticipate,” “estimate” and other words of similar meaning in conjunction with, among other things, discussions of future operations and financial performance ~~as well as~~(including volume growth, sales and earnings per share growth, and changes in cash flows) and statements regarding our strategy for growth, future product development, regulatory approvals, ~~market~~competitive position and expenditures. All statements that address our future operating performance or events or developments that we expect or anticipate will occur in the future ~~– 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 ~~2015~~2016 Annual Report on Form 10-K.

Weakness in the global economy and financial markets, ~~and the potential adverse effect on~~which could increase the cost of operating our business, ~~the~~weaken demand for our products and services, negatively impact the prices we can charge for our products and services, ~~due to increases in pricing pressure,~~ or impair our ability to produce our ~~products,~~products.

Competitive factors that could adversely affect our operations, including new product introductions (for example, new forms of drug delivery) by our current or future competitors, increased pricing pressure due to the impact of low-cost manufacturers, patents attained by competitors (particularly as patents on ~~developing countries.~~our products expire), and new entrants into our markets.

~~Deficit reduction efforts or other~~The adverse financial impact resulting from unfavorable changes in ~~the availability~~foreign currency exchange rates.

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

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

Changes in reimbursement practices of third-party payers or adverse decisions relating to our products by such payers, which could ~~further weaken~~reduce demand for our products ~~and result in additional pricing pressures, as well as create potential collection risks associated with~~or the price we can charge for 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.products.

The ~~consequences~~impact of any efforts to repeal or amend the Patient Protection and Affordable Care Act (the "PPACA") in the United States or other legislative or regulatory changes to the U.S. health care system, which could result in reducing

medical procedure volumes and the demand for our products or the prices at which our products are sold, or otherwise negatively affect our business. The PPACA implemented an excise tax on U.S. sales of certain medical ~~devices (which~~devices. This tax has been suspended ~~until January 1, 2018),~~through December 31, 2017, and ~~which could result in reduced demand for our products, increased pricing pressures or otherwise adversely affect our business.~~it is uncertain whether the suspension will be extended beyond that date.

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

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

The impact of changes in U.S. federal laws and policy adopted under the current administration and Congress, including the effect that such changes will have on fiscal and tax policies, healthcare, and international trade agreements and policies.

Fluctuations in the cost and availability of oil-based resins and other raw materials, as well as certain components, used in our products, the ability to ~~guidelines providing for increased cervical cancer screening intervals has~~maintain favorable supplier arrangements and ~~may continue~~relationships (particularly with respect to ~~negatively impact sales~~sole-source suppliers), and the potential adverse effects of any disruption in the availability of such items.

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

~~Changes~~Difficulties inherent in product development, including the potential inability to successfully continue technological innovation, successfully complete clinical trials, obtain regulatory approvals in the United States and abroad, obtain intellectual property protection for our products, obtain coverage and adequate reimbursement ~~practices~~for new products, or gain and maintain market approval of ~~private third-party payers.~~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.

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

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

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

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

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. The June ~~23,~~ 2016 advisory referendum by British voters to exit the European Union, ~~(“EU”)~~which has created uncertainties affecting business operations in the United Kingdom ~~(“UK”)~~ and the EU. ~~Following~~

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

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

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

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

Pending and ~~there may be continued volatility in exchange rates~~potential future litigation or other proceedings adverse to BD, including antitrust, product liability, environmental and economic conditions as the UK negotiates its exit from the EU. Until the terms and timing of the UK’s exit from the EU are determined, it is difficult to predict its impact. It is possible that the referendum and proposed withdrawal could, among other things, affect the legal and regulatory schemes to which our businesses are subject, impact trade between the UKpatent infringement, and the ~~EU and other parties and create economic uncertainty in the region.~~ availability or collectability of insurance relating to any such claims.

New or changing laws and regulations affecting our domestic and foreign operations, or changes in enforcement practices, including laws relating to trade, monetary and fiscal policies, taxation (including tax reforms that could adversely impact multinational corporations), sales practices, environmental protection, price controls, and licensing

and regulatory requirements for new products and products in the postmarketing phase. In particular, the U.S. and other countries may impose new requirements regarding registration, labeling or prohibited materials that may require us to re-register products already on the market or otherwise impact our ability to market our products. Environmental laws, particularly with respect to the emission of greenhouse gases, are also becoming more stringent throughout the world, which may increase our costs of operations or necessitate changes in our manufacturing plants or processes or those of our suppliers, or result in liability to BD.

Product efficacy or safety concerns regarding our products resulting in product 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, 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~~Risks relating to our ~~operations,~~acquisition of CareFusion, 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~~continue to successfully ~~continue technological innovation, complete clinical trials,~~combine and integrate the CareFusion operations in order to fully obtain ~~regulatory approvals in~~ the ~~United States~~anticipated benefits 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 clearancescosts savings from the ~~FDA or other regulatory agencies or changes in the regulatory process may also delay product launches and increase development costs.~~transaction.

~~Fluctuations in the demand for products we sell~~Risks related to ~~pharmaceutical companies that are used to manufacture, or are sold with, the products~~our pending acquisition of ~~such companies, as a result of funding constraints, consolidation or otherwise.~~Bard, including:

~~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.

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


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


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


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

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

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

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

There have been no material changes in information reported since the end of the fiscal year ended September 30, ~~2015.~~2016.

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, ~~2016.~~2017. 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. There were no changes in our internal control over financial reporting during the fiscal quarter ended June 30, ~~2016~~2017 identified in connection with the above-referenced evaluation that have materially affected, or are reasonably likely to materially affect, BD’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are involved, both as a plaintiff and a defendant, in various legal proceedings which arise in the ordinary course of business, including product liability and environmental matters as set forth in our ~~2015~~2016 Annual Report on Form 10-K and in Note ~~Note~~ 5 of the Notes to Condensed Consolidated Financial Statements in this report. Since March ~~31, 2016,~~30, 2017, there have been no material developments with respect to the legal proceedings in which we are involved.

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

There were no material changes during the period covered by this report in the risk factors previously disclosed in Part I, Item 1A, of our ~~2015~~2016 Annual Report on Form 10-K ~~during the period covered by this report.~~and in our subsequent filings on Form 10-Q.

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, ~~2016.~~2017.

Issuer Purchases of Equity Securities

For the three months ended June 30, 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)
April 1 – 30, 2016 2,063
$ 152.84
—
9,147,060
May 1 – 31, 2016 571
160.82
—
9,147,060
June 1 – 30, 2016 —
—
—
9,147,060
Total 2,634
$ 154.57
—
9,147,060



For the three months ended June 30, 2017	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2)
April 1 – 30, 2017	1,923	$	183.66	—	7,857,742
May 1 – 31, 2017	235	184.51		—	7,857,742
June 1 – 30, 2017	—	—		—	7,857,742
Total	2,158	$	183.76	—	7,857,742


(1)	~~Represents 2,634~~Includes 2,158 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)	~~Any repurchases would be made pursuant to the~~Represents shares available under a repurchase program authorized by the Board of Directors on September 24, 2013 for 10 million shares, for which there is no expiration date.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits


Exhibit ~~3.1~~ 2	~~By-laws, as amended~~Agreement and ~~restated~~Plan of Merger, dated as of ~~July 26, 2016~~April 23, 2017, among C.R. Bard, Inc., Becton, Dickinson and Company and Lambda Corp. (incorporated by reference to Exhibit 2.1 of the registrant’s Current Report on Form 8-K dated April 24, 2017).


Exhibit 3.1	Certificate of Amendment of the Company’s Restated Certificate of Incorporation, filed with the State of New Jersey Department of Treasury and effective May 15, 2017 (incorporated by reference to Exhibit 4.1 of the registrant’s registration statement on Form 8-A filed on May 16, 2017).


Exhibit 3.2	Amended and Restated By-Laws (incorporated by reference to Exhibit 3.1 of the registrant’s Current Report on Form 8-K dated April 24, 2017).


Exhibit 4.1	Form of Certificate for the 6.125% Mandatory Convertible Preferred Stock, Series A (incorporated by reference to Exhibit 4.2 of the registrant’s registration statement on Form 8-A filed ~~July 28, 2016)~~on May 16, 2017).

Exhibit 4.2

Deposit Agreement, dated as of May 16, 2017, among Becton, Dickinson and Company and Computershare Inc. and Computershare Trust Company, N.A., acting jointly as depositary and Computershare Trust Company, N.A., acting as Registrar and Transfer Agent, on behalf of the holders from time to time of the depositary receipts described therein (incorporated by reference to Exhibit 4.3 of the registrant’s registration statement on Form 8-A filed on May 16, 2017).


Exhibit 4.3	Form of Depositary Receipt for the Depositary Shares (incorporated by reference to Exhibit 4.4 of the registrant’s registration statement on Form 8-A filed on May 16, 2017).


Exhibit 4.4	Form of 2.133% Notes due June 6, 2019 (incorporated by reference to Exhibit 4.1 of the registrant’s Current Report on Form 8-K filed on June 6, 2017).


Exhibit 4.5	Form of 2.404% Notes due June 5, 2020 (incorporated by reference to Exhibit 4.2 of the registrant’s Current Report on Form 8-K filed on June 6, 2017).


Exhibit 4.6	Form of 2.894% Notes due June 6, 2022 (incorporated by reference to Exhibit 4.3 of the registrant’s Current Report on Form 8-K filed on June 6, 2017).


Exhibit 4.7	Form of Floating Rate Notes due June 6, 2022 (incorporated by reference to Exhibit 4.4 of the registrant’s Current Report on Form 8-K filed on June 6, 2017).


Exhibit 4.8	Form of 3.363% Notes due June 6, 2024 (incorporated by reference to Exhibit 4.5 of the registrant’s Current Report on Form 8-K filed on June 6, 2017).


Exhibit 4.9	Form of 3.700% Notes due June 6, 2027 (incorporated by reference to Exhibit 4.6 of the registrant’s Current Report on Form 8-K filed on June 6, 2017).


Exhibit 4.10	Form of 4.669% Notes due June 6, 2047 (incorporated by reference to Exhibit 4.7 of the registrant’s Current Report on Form 8-K filed on June 6, 2017).


Exhibit 4.11	Form of 0.368% Notes due June 6, 2019 (incorporated by reference to Exhibit 4.8 of the registrant’s Current Report on Form 8-K filed on June 6, 2017).


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


Exhibit 10.2	Three-Year Term Loan Agreement, dated as of May 12, 2017, by and among Becton, Dickinson and Company, the lenders party thereto and Citibank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on May 16, 2017).


Exhibit 10.3	Credit Agreement, dated as of May 12, 2017, by and among Becton, Dickinson and Company, the banks and issuers of letters of credit party thereto and Citibank, N.A., as administrative agent agent (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on May 16, 2017).


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 ~~4, 2016~~3, 2017



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

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

INDEX TO EXHIBITS



Exhibit Number		Description of Exhibits

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

3.1		~~By-laws, as amended~~Certificate of Amendment of the Company’s Restated Certificate of Incorporation, filed with the State of New Jersey Department of Treasury and ~~restated as~~effective May 15, 2017 (incorporated by reference to Exhibit 4.1 of ~~July 26, 2016~~the registrant’s registration statement on Form 8-A filed on May 16, 2017).

3.2		Amended and Restated By-Laws (incorporated by reference to Exhibit 3.1 of the registrant’s Current Report on Form 8-K dated April 24, 2017).

4.1		Form of Certificate for the 6.125% Mandatory Convertible Preferred Stock, Series A (incorporated by reference to Exhibit 4.2 of the registrant’s registration statement on Form 8-A filed ~~July 28, 2016)~~on May 16, 2017).

4.2		Deposit Agreement, dated as of May 16, 2017, among Becton, Dickinson and Company and Computershare Inc. and Computershare Trust Company, N.A., acting jointly as depositary and Computershare Trust Company, N.A., acting as Registrar and Transfer Agent, on behalf of the holders from time to time of the depositary receipts described therein (incorporated by reference to Exhibit 4.3 of the registrant’s registration statement on Form 8-A filed on May 16, 2017).

4.3		Form of Depositary Receipt for the Depositary Shares (incorporated by reference to Exhibit 4.4 of the registrant’s registration statement on Form 8-A filed on May 16, 2017).

4.4		Form of 2.133% Notes due June 6, 2019 (incorporated by reference to Exhibit 4.1 of the registrant’s Current Report on Form 8-K filed on June 6, 2017).

4.5		Form of 2.404% Notes due June 5, 2020 (incorporated by reference to Exhibit 4.2 of the registrant’s Current Report on Form 8-K filed on June 6, 2017).

4.6		Form of 2.894% Notes due June 6, 2022 (incorporated by reference to Exhibit 4.3 of the registrant’s Current Report on Form 8-K filed on June 6, 2017).

4.7		Form of Floating Rate Notes due June 6, 2022 (incorporated by reference to Exhibit 4.4 of the registrant’s Current Report on Form 8-K filed on June 6, 2017).

4.8		Form of 3.363% Notes due June 6, 2024 (incorporated by reference to Exhibit 4.5 of the registrant’s Current Report on Form 8-K filed on June 6, 2017).

4.9		Form of 3.700% Notes due June 6, 2027 (incorporated by reference to Exhibit 4.6 of the registrant’s Current Report on Form 8-K filed on June 6, 2017).

4.10		Form of 4.669% Notes due June 6, 2047 (incorporated by reference to Exhibit 4.7 of the registrant’s Current Report on Form 8-K filed on June 6, 2017).

4.11		Form of 0.368% Notes due June 6, 2019 (incorporated by reference to Exhibit 4.8 of the registrant’s Current Report on Form 8-K filed on June 6, 2017).

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

10.2		Three-Year Term Loan Agreement, dated as of May 12, 2017, by and among Becton, Dickinson and Company, the lenders party thereto and Citibank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on May 16, 2017).

10.3		Credit Agreement, dated as of May 12, 2017, by and among Becton, Dickinson and Company, the banks and issuers of letters of credit party thereto and Citibank, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on May 16, 2017).

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

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

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

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