Becton, Dickinson and Company (BDX)

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Becton, Dickinson and (BDX)

Q4 2010 Earnings Call

November 04, 2010 10:00 am ET


William Kozy - Executive Vice President

Zachary Nagle - Vice President of Investor Relations

Tom Polen -

Vince Forlenza - President and Chief Operating Officer

David Elkins - Chief Financial Officer and Executive Vice President

Gary Cohen - Executive Vice President

William Rhodes -

Edward Ludwig - Chairman of the Board, Chief Executive Officer and Chairman of Executive Committee


David Clair - Piper Jaffray Companies

Brian Weinstein - William Blair & Company L.L.C.

David Roman - Goldman Sachs Group Inc.

Jonathan Groberg - Macquarie Research

Peter Lawson - Mizuho Securities USA, Inc.

Kristen Stewart - Deutsche Bank AG

Sara Michelmore - Cowen and Company, LLC

David Lewis - Morgan Stanley

Frederick Wise - Leerink Swann LLC

Vinit Sethi - Greenlight Capital

Lawrence Keusch - Morgan Keegan & Company, Inc.

Kimberly Gailun - JP Morgan Chase & Co

Jon Wood - Jefferies & Company, Inc.

Amit Bhalla - Citigroup Inc



Hello, and welcome to BD's Fourth Fiscal Quarter 2010 Earnings Call. At the request of BD, today's call is being recorded. It will be available for replay through Thursday, November 11, 2010, on the Investors page of the website or by phone at (800) 642-1687 for domestic calls and area code (706) 645-9291 for international calls, using conference ID 15660232. [Operator Instructions] Beginning today's call is Mr. Zachary Nagle, Vice President of Investor Relations. Mr. Nagle, you may begin.

Zachary Nagle

Thank you, Jackie. Good morning, everyone, and thank you for joining us for Q4 2010 Earnings Conference Call.

As referenced in our press release, we are presenting a set of slides to accompany our remarks on this call. The slide presentation is posted on the Investor Relations page of our website at

During today's call, we will make forward-looking statements, and it is possible that actual results could differ from our expectations. Factors that could cause such differences appear in our press release and in the MD&A sections of our SEC filings. We will discuss some non-GAAP financial information relative to our performance. A reconciliation to GAAP can be found in our press release and accompanying financial tables and in our slide presentation. A copy of the release, the financial schedules and our presentation are posted on our website at

Leading the call this morning is Ed Ludwig, Chairman and Chief Executive Officer; and joining us are Vince Forlenza, President and Chief Operating Officer; David Elkins, Executive Vice President and Chief Financial Officer; BD Executive Vice Presidents Gary Cohen and Bill Kozy; as well as Bill Rhodes, President of BD Biosciences.

At this time, I would also like to introduce Tom Polen, the new President of BD Diagnostics Systems, effective October 1. Tom's responsibilities will include Molecular Diagnostics, TriPath, points of care, Microbiology Systems and GeneOhm. Tom began his BD career in 1997 and held a number of sales and marketing leadership roles with increasing responsibilities in both BD Biosciences and BD Diagnostics. In 2005, Tom left BD to join Baxter Healthcare, where he held a number of senior leadership positions, most recently as General Manager for Baxter Global Injectables.

Last year, Tom rejoined BD as the President of Preanalytical Systems. We are delighted to have Tom joining our team and believe that his diverse experience across the diagnostic and medical device and pharmaceutical industries make him ideal to lead BD Diagnostics Systems through its next phase of growth. Philippe Jacon, who formerly led BD Diagnostics Systems, has a new role reporting directly to Vince.

It is now my pleasure to turn the call over to Ed.

Edward Ludwig

Thank you, Zach, and good morning, everyone. Today, I'll begin with a brief overview of BD's performance for Q4 and the full year 2010 and provide some context around BD's consistency in delivering against our commitments to shareholders over time. Then I'll spend some time highlighting the company's strategy and key focus areas for 2011 and beyond. Next, David will provide a drill down financial view of our company overall and segment performance, as well as key components of our 2011 guidance, including our capital structure and some of the key risks and opportunities over the near term. Lastly, Vince will spend the balance of our time discussing in greater detail how we will execute our strategies and the key things to think about relative to BD's strategy going forward. After that, we'll open the floor for questions.

Starting with Slide 4. BD's performance in both the Q4 and full year 2010 was solid. We delivered against our own internal targets and against our commitments to our shareholders. This is the 10th consecutive year BD has achieved its annual objectives. It is also the 38th consecutive year of increasing our dividends. In addition, in 2010, we maintained consistent operational excellence across the P&L. We invested in capital expenditures, invested in emerging market infrastructure, increased our investment in R&D and delivered steady predictable cash flow and return to shareholders through both dividends and share repurchases.

Moving on to Slide 5. Going forward, our strategy remains sound. BD's strategy is to apply technology to address unmet and sometimes underappreciated, but important needs within healthcare and life sciences. Our four areas of focus are as follows: number one, enabling safer, simpler and more effective parenteral drug delivery, and this translates to safer drug delivery for patients and for healthcare workers; number two, improving clinical outcomes through new, accurate faster diagnostics; number three, providing tools and technologies to the research community that facilitate basic science, drug discovery and cell therapy; and number four, enhancing disease management in Diabetes, Women's Health and Cancer and Infection Control. If you sum these four areas up, essentially BD is all about helping life science research and healthcare work better. We do this by helping them to lower their costs and improve the quality of their outcomes. And it's very consistent with our purpose of helping all people live healthy lives. We are confident that these four areas of focus are rich with opportunities for BD to add value and to continue to grow.

Turning to Slide 6. Despite these challenging economic times, the company remains committed to driving both top line and bottom line growth through an intense focus on strengthening the core, which remains a significant lever for BD's success. In addition, as Vince will discuss in detail later, we will leverage our core by making focused investments in R&D for platform extensions and innovative new products. We're also making significant investments in growing our businesses in emerging markets. And also very importantly, we continue to focus on operational excellence and the programs that we're building across the P&L to maintain and build upon a strong cost position, as well as to return free cash flow to shareholders.

On Slide 7, you will see our guidance for the full year fiscal 2011, which takes into account all of the key points I've discussed in my opening remarks. David will discuss the guidance in more detail, but the net is guidance for 2011 of 4% revenue growth and 10% to 11% adjusted EPS growth or a range of EPS between $5.45 and $5.55. As you will hear from David in a minute, the 4% revenue growth is FX neutral and really represents about 6% growth over 2010 if you normalize for flu, stimulus and supplemental spending events in 2010.

Our guidance for operating income growth of about 5% includes about five points of headwind due to investments we are making in infrastructure and R&D in 2011. So that allowing for these investments, we're showing good operating margin improvement in 2011. Looking further out, our outlook for 2011, 2012 is for an average revenue growth of 6% and an average EPS growth of 10% to 12% over this three-year period, and this was previously communicated on our Q3 2010 earnings call.

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