UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

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

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		(I.R.S. Employer Identification No.)
incorporation or organization)

1 Becton Drive, Franklin Lakes, New Jersey 07417-1880
(Address of principal executive offices)
(Zip Code)

(201) 847-6800

N/A

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 þ No o

     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 þ No o

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

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

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

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

Class of Common Stock		Shares Outstanding as of March  31, 2011
Common stock, par value $1.00		218,751,720

 

 

BECTON, DICKINSON AND COMPANY
FORM 10-Q
For the quarterly period ended March 31, 2011

TABLE OF CONTENTS

		Page Number
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets			3
Condensed Consolidated Statements of Income			4
Condensed Consolidated Statements of Cash Flows			5
Notes to Condensed Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk			36
Item 4. Controls and Procedures			36
Part II. OTHER INFORMATION
Item 1. Legal Proceedings			37
Item 1A. Risk Factors			38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			38
Item 3. Defaults Upon Senior Securities			39
Item 4. Reserved			39
Item 5. Other Information			39
Item 6. Exhibits			39
Signatures			40
Exhibits			41

ITEM 1. FINANCIAL STATEMENTS
BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

Thousands of dollars

		March 31,				September 30,
		2011				2010
		(Unaudited)
Assets
Current Assets:
Cash and equivalents		$	748,588			$	1,215,989
Short-term investments			1,109,832				528,206
Trade receivables, net			1,209,700				1,205,377
Inventories:
Materials			171,724				169,268
Work in process			252,365				225,878
Finished products			852,842				750,191
			1,276,931				1,145,337
Prepaid expenses, deferred taxes and other			511,579				410,341
Total Current Assets			4,856,630				4,505,250
Property, plant and equipment			6,789,566				6,532,062
Less allowances for depreciation and amortization			3,623,883				3,431,570
			3,165,683				3,100,492
Goodwill			866,260				763,961
Core and Developed Technology, Net			411,507				310,783
Other Intangibles, Net			273,625				227,857
Capitalized Software, Net			279,034				254,761
Other			491,484				487,590
Total Assets		$	10,344,223			$	9,650,694
Liabilities and Shareholders’ Equity
Current Liabilities:
Short-term debt		$	241,431			$	202,758
Payables and accrued expenses			1,337,480				1,468,915
Total Current Liabilities			1,578,911				1,671,673
Long-Term Debt			2,484,168				1,495,357
Long-Term Employee Benefit Obligations			905,998				899,109
Deferred Income Taxes and Other			276,085				149,975
Commitments and Contingencies			—				—
Shareholders’ Equity:
Common stock			332,662				332,662
Capital in excess of par value			1,723,267				1,624,768
Retained earnings			9,168,895				8,724,228
Deferred compensation			17,371				17,164
Common shares in treasury — at cost			(5,852,511	)			(4,806,333	)
Accumulated other comprehensive loss			(290,623	)			(457,909	)
Total Shareholders’ Equity			5,099,061				5,434,580
Total Liabilities and Shareholders’ Equity		$	10,344,223			$	9,650,694

See notes to condensed consolidated financial statements

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Thousands of dollars, except per share data

(Unaudited)

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2011				2010				2011				2010
Revenues		$	1,922,023			$	1,799,409			$	3,764,028			$	3,668,227
Cost of products sold			920,589				864,492				1,786,020				1,758,816
Selling and administrative			441,942				421,076				889,897				866,749
Research and development			119,152				100,193				234,693				199,344
Total Operating Costs and Expenses			1,481,683				1,385,761				2,910,610				2,824,909
Operating Income			440,340				413,648				853,418				843,318
Interest income			14,564				9,652				29,786				18,441
Interest expense			(23,921	)			(12,913	)			(39,474	)			(25,900	)
Other (expense) income, net			(2,522	)			164				(7,118	)			(2,190	)
Income From Continuing Operations Before Income Taxes			428,461				410,551				836,612				833,669
Income tax provision			117,399				125,517				211,273				244,542
Income From Continuing Operations			311,062				285,034				625,339				589,127
Income from Discontinued Operations, net			957				12,597				2,617				24,880
Net Income		$	312,019			$	297,631			$	627,956			$	614,007
Basic Earnings per Share:
Income from Continuing Operations		$	1.41			$	1.21			$	2.79			$	2.49
Income from Discontinued Operations			—				0.05				0.01				0.11
Basic Earnings per Share		$	1.41			$	1.26			$	2.80			$	2.60
Diluted Earnings per Share:
Income from Continuing Operations		$	1.38			$	1.18			$	2.72			$	2.43
Income from Discontinued Operations			—				0.05				0.01				0.10
Diluted Earnings per Share (A)		$	1.38			$	1.24			$	2.74			$	2.53
Dividends per Common Share		$	0.410			$	0.370			$	0.820			$	0.740

See notes to condensed consolidated financial statements

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Thousands of dollars

(Unaudited)

		Six Months Ended
		March 31,
		2011				2010
Operating Activities
Net income		$	627,956			$	614,007
Less: Income from discontinued operations, net			2,617				24,880
Income from continuing operations			625,339				589,127
Adjustments to income from continuing operations to derive net cash provided by continuing operating activities, net of amounts acquired:
Depreciation and amortization			245,397				249,012
Share-based compensation			53,720				52,467
Deferred income taxes			27,030				14,125
Change in operating assets and liabilities			(285,068	)			(154,406	)
Pension obligation			33,489				(139,337	)
Other, net			6,981				36,523
Net Cash Provided by Continuing Operating Activities			706,888				647,511
Investing Activities
Capital expenditures			(193,688	)			(227,838	)
Capitalized software			(33,720	)			(50,369	)
(Purchases) proceeds of investments, net			(566,688	)			123,633
Acquisitions of businesses, net of cash acquired			(204,970	)			(281,367	)
Other, net			(24,930	)			(34,591	)
Net Cash Used for Continuing Investing Activities			(1,023,996	)			(470,532	)
Financing Activities
Change in short-term debt			36,787				(202,196	)
Proceeds from long-term debt			991,265				—
Payments of debt			(14	)			(49	)
Repurchase of common stock			(1,057,791	)			(450,000	)
Excess tax benefits from payments under share-based compensation plans			19,133				17,591
Dividends paid			(182,866	)			(174,232	)
Issuance of common stock and other, net			37,996				31,258
Net Cash Used for Continuing Financing Activities			(155,490	)			(777,628	)
Discontinued Operations
Net cash provided by operating activities			780				39,024
Net cash used for investing activities			(88	)			(1,759	)
Net Cash Provided by Discontinued Operations			692				37,265
Effect of exchange rate changes on cash and equivalents			4,505				(172	)
Net decrease in cash and equivalents			(467,401	)			(563,556	)
Opening Cash and Equivalents			1,215,989				1,394,244
Closing Cash and Equivalents		$	748,588			$	830,688

See notes to condensed consolidated financial statements

BECTON, DICKINSON AND COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Dollar and share amounts in thousands, except per share data

March 31, 2011

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 or incorporated by reference in the Company’s 2010 Annual Report on Form 10-K. 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

In October 2009, the Financial Accounting Standards Board (“FASB”) issued revised revenue recognition guidance affecting the accounting for software-enabled devices and multiple-element arrangements. The revisions expand the scope of multiple-element arrangement guidance to include revenue arrangements containing certain nonsoftware elements and related software elements. Additionally, the revised guidance changes the manner in which separate units of accounting are identified within a multiple-element arrangement and modifies the manner in which transaction consideration is allocated across the separately identified deliverables. The Company adopted the revised revenue recognition guidance for new arrangements the Company entered into on or after October 1, 2010. The adoption of these new requirements did not significantly impact the Company’s consolidated financial statements.

In June 2009, the FASB issued guidance amending the variable interest consolidation model. The revised model amends certain guidance for determining whether an entity is a variable interest entity and requires a qualitative, rather than quantitative, analysis to determine the primary beneficiary of a variable interest entity. The Company’s adoption of the amended variable interest consolidation model on October 1, 2010 did not significantly impact the Company’s consolidated financial statements.

Note 3 — Comprehensive Income

Comprehensive income was comprised of the following:

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2011				2010				2011				2010
Net Income		$	312,019			$	297,631			$	627,956			$	614,007
Other Comprehensive Income (Loss), Net of Tax
Foreign currency translation adjustments			175,338				(167,565	)			136,610				(146,233	)
Benefit plans adjustment			10,764				8,059				21,529				16,118
Unrealized gains on cash flow hedges, net of amounts realized			249				37,728				9,147				43,172
			186,351				(121,778	)			167,286				(86,943	)
Comprehensive Income		$	498,370			$	175,853			$	795,242			$	527,064

The gains recorded as foreign currency translation adjustments for the three and six months ended March 31, 2011 are mainly attributable to the strengthening of the Euro against the U.S. dollar during these periods.

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								Six Months Ended
		March 31,								March 31,
		2011				2010				2011				2010
Average common shares outstanding			220,894				235,325				224,528				236,353
Dilutive share equivalents from share-based plans			4,573				5,538				5,001				5,974
Average common and common equivalent shares outstanding — assuming dilution			225,467				240,863				229,529				242,327

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, excess 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.

The Company is named as a defendant in the following purported class action suits brought on behalf of distributors and other entities that purchase the Company’s products (the “Distributor Plaintiffs”), alleging that the Company violated federal antitrust laws, resulting in the charging of higher prices for the Company’s products to the plaintiffs and other purported class members.

Case		Court		Date Filed
Louisiana Wholesale Drug Company, Inc., et. al. vs. Becton Dickinson and Company		U.S. District Court, Newark, New Jersey		March 25, 2005
SAJ Distributors, Inc. et. al. vs. Becton Dickinson & Co.		U.S. District Court, Eastern District of Pennsylvania		September 6, 2005
Dik Drug Company, et. al. vs. Becton, Dickinson and Company		U.S. District Court, Newark, New Jersey		September 12, 2005
American Sales Company, Inc. et. al. vs. Becton, Dickinson & Co.		U.S. District Court, Eastern District of Pennsylvania		October 3, 2005
Park Surgical Co. Inc. et. al. vs. Becton, Dickinson and Company		U.S. District Court, Eastern District of Pennsylvania		October 26, 2005

These actions have been consolidated under the caption “In re Hypodermic Products Antitrust Litigation.”

The Company is also named as a defendant in the following purported class action suits brought on behalf of purchasers of the Company’s products, such as hospitals (the “Hospital Plaintiffs”), alleging that the Company violated federal and state antitrust laws, resulting in the charging of higher prices for the Company’s products to the plaintiffs and other purported class members.

Case		Court		Date Filed
Jabo’s Pharmacy, Inc., et. al. v. Becton Dickinson & Company		U.S. District Court, Greenville, Tennessee		June 7, 2005
Drug Mart Tallman, Inc., et. al. v. Becton Dickinson and Company		U.S. District Court, Newark, New Jersey		January 17, 2006
Medstar v. Becton Dickinson		U.S. District Court, Newark, New Jersey		May 18, 2006
The Hebrew Home for the Aged at Riverdale v. Becton Dickinson and Company		U.S. District Court, Southern District of New York		March 28, 2007

The plaintiffs in each of the above antitrust class action lawsuits seek monetary damages. All of the antitrust class action lawsuits have been consolidated for pre-trial purposes in a Multi-District Litigation (MDL) in Federal court in New Jersey.

On April 27, 2009, the Company entered into a settlement agreement with the Distributor Plaintiffs in these actions. The settlement agreement provided for, among other things, the payment by the Company of $45,000 in exchange for a release by all potential class members of the direct purchaser claims under federal antitrust laws related to the products and acts enumerated in the complaint, and a dismissal of the case with prejudice, insofar as it relates to direct purchaser claims. The release would not cover potential class members that affirmatively opt out of the settlement. On September 30, 2010, the court issued an order denying a motion to approve the settlement agreement, ruling that the Hospital Plaintiffs, and not the Distributor Plaintiffs, are the direct purchasers entitled to pursue damages under the federal antitrust laws for certain sales of BD products. The settlement agreement currently remains in effect, subject to certain termination provisions, and the Distributor Plaintiffs are seeking appellate review of the court’s order. The Company currently cannot estimate the range of reasonably possible losses with respect to these class action matters beyond the amount already reserved and changes to the amount already recognized may be required in the future as additional information becomes available.

In June 2007, Retractable Technologies, Inc. (“RTI”) filed a complaint against the Company under the caption Retractable Technologies, Inc. vs. Becton Dickinson and Company (Civil Action No. 2:07-cv-250, U.S. District Court, Eastern District of Texas). RTI alleges that the BD Integra^TM syringes infringe patents licensed exclusively to RTI. In its complaint, RTI also alleges that the Company engaged in false advertising with respect to certain of the Company’s safety-engineered products in violation of the Lanham Act; acted to exclude RTI from various product markets and to maintain its market share through, among other things, exclusionary contracts in violation of state and federal antitrust laws; and engaged in unfair competition. In January 2008, the court severed the patent and non-patent claims into separate cases, and stayed the non-patent

claims during the pendency of the patent claims at the trial court level. RTI seeks money damages and injunctive relief. On April 1, 2008, RTI filed a complaint against BD under the caption Retractable Technologies, Inc. and Thomas J. Shaw v. Becton Dickinson and Company (Civil Action No.2:08-cv-141, U.S. District Court, Eastern District of Texas). RTI alleges that the BD Integra^TM syringes infringe another patent licensed exclusively to RTI. RTI seeks money damages and injunctive relief. On August 29, 2008, the court ordered the consolidation of the patent cases. On November 9, 2009, at a trial of these consolidated cases, the jury rendered a verdict in favor of RTI on all but one of its infringement claims, but did not find any willful infringement, and awarded RTI $5,000 in damages. On May 19, 2010, the court granted RTI’s motion for a permanent injunction against the continued sale by the Company of its BD Integra^TM products in their current form, but stayed the injunction for the duration of the Company’s appeal. At the same time, the court lifted a stay of RTI’s non-patent claims. The Company’s appeal of the jury verdict was heard by the Court of Appeals for the Federal Circuit on March 10, 2011. On March 15, 2011, the court granted in part and denied in part the Company’s motion to dismiss RTI’s antitrust claims, and permitted RTI to file an amended complaint to address the deficiencies in its original complaint. The trial on RTI’s antitrust and false advertising claims is scheduled to begin in January 2012. With respect to RTI’s antitrust and false advertising claims, the Company cannot estimate the range of reasonably possible losses as the proceedings are in the early stages and there are significant issues to be resolved.

On October 19, 2009, Gen-Probe Incorporated (“Gen-Probe”) filed a patent infringement action against BD in the U.S. District Court for the Southern District of California. The complaint alleges that the BD Viper™ and BD Viper™ XTR™ systems and BD ProbeTec™ specimen collection products infringe certain U.S. patents of Gen-Probe. On March 23, 2010, Gen-Probe filed a complaint, also in the U.S. District Court for the Southern District of California, alleging that the BD Max^TM instrument infringes Gen-Probe patents. The patents alleged to be infringed are a subset of the Gen-Probe patents asserted against the Company in the October 2009 suit. On June 8, 2010, the Court consolidated these cases. Gen-Probe is seeking monetary damages and injunctive relief. The Company currently cannot estimate the range of reasonably possible losses for this matter as the proceedings are in relatively early stages and there are significant issues to be resolved.

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

The Company is also involved both as a plaintiff and a defendant in other legal proceedings and claims that arise in the ordinary course of business.

The Company is a party to a number of Federal 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 commencing. For all sites, there are other potentially responsible parties that may be jointly or severally liable to pay all cleanup costs.

Note 6 — Segment Data

The Company’s organizational structure is based upon its three principal business segments: BD Medical (“Medical”), BD Diagnostics (“Diagnostics”), and BD Biosciences (“Biosciences”). The Company evaluates segment performance based upon operating income. Segment operating income represents revenues reduced by product costs and operating expenses. From time to time, the Company hedges against certain forecasted sales of U.S.-produced products sold outside the United States. Gains and losses associated with these foreign currency translation hedges are reported in segment revenues based upon their proportionate share of these international sales of U.S.-produced products. Financial information for the Company’s segments was as follows:

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2011				2010				2011				2010
Revenues (A)
Medical		$	981,332			$	921,633			$	1,907,877			$	1,892,303
Diagnostics			605,347				555,672				1,207,070				1,151,147
Biosciences			335,344				322,104				649,081				624,777
		$	1,922,023			$	1,799,409			$	3,764,028			$	3,668,227
Segment Operating Income
Medical		$	287,313			$	263,495			$	562,910			$	566,249
Diagnostics			155,866				143,685				317,029				306,086
Biosciences			95,237				97,230				185,701				182,696
Total Segment Operating Income			538,416				504,410				1,065,640				1,055,031
Unallocated Items (B)			(109,955	)			(93,859	)			(229,028	)			(221,362	)
Income from Continuing Operations Before Income Taxes		$	428,461			$	410,551			$	836,612			$	833,669

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2011				2010				2011				2010
Revenues by Organizational Units
BD Medical
Medical Surgical Systems		$	504,591			$	481,264			$	1,017,316			$	1,014,439
Diabetes Care			207,759				187,986				421,642				389,507
Pharmaceutical Systems			268,982				252,383				468,919				488,357
		$	981,332			$	921,633			$	1,907,877			$	1,892,303
BD Diagnostics
Preanalytical Systems		$	306,239			$	287,670			$	618,868			$	587,837
Diagnostic Systems			299,108				268,002				588,202				563,310
		$	605,347			$	555,672			$	1,207,070			$	1,151,147
BD Biosciences
Cell Analysis		$	255,516			$	242,475			$	496,259			$	473,812
Discovery Labware			79,828				79,629				152,822				150,965
		$	335,344			$	322,104			$	649,081			$	624,777
		$	1,922,023			$	1,799,409			$	3,764,028			$	3,668,227

Revenues by the geographic areas were as follows:

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2011				2010				2011				2010
Total Revenues
United States		$	829,181			$	791,759			$	1,657,783			$	1,645,176
International			1,092,842				1,007,650				2,106,245				2,023,051
		$	1,922,023			$	1,799,409			$	3,764,028			$	3,668,227

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 such awards align the interests of its employees and directors with those of its shareholders.

The fair value of share-based payments is recognized as compensation expense in net income. For the three months ended March 31, 2011 and 2010, compensation expense charged to income was $19,639 and $17,147, respectively. For the six months ended March 31, 2011 and 2010, compensation expense was $53,720 and $52,467, respectively. Share-based compensation attributable to discontinued operations was not material.

The amount of unrecognized compensation expense for all non-vested share-based awards as of March 31, 2011 was approximately $140,258, which is expected to be recognized over a weighted-average remaining life of approximately 2.4 years.

The fair values of stock appreciation rights granted during the annual share-based grants in November of 2010 and 2009, respectively, were estimated on the date of grant using a lattice-based binomial valuation model based on the following assumptions:

		2011				2010
Risk-free interest rate			2.40	%			2.60	%
Expected volatility			24.00	%			28.00	%
Expected dividend yield			2.14	%			1.96	%
Expected life		7.8 years				6.5 years
Fair value derived		$	16.80			$	19.70

Note 8 — Benefit Plans

The Company has defined benefit pension plans covering substantially all of its 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.

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

										Other Postretirement
		Pension Plans								Benefits
		2011				2010				2011				2010
Service cost		$	22,749			$	18,398			$	1,445			$	1,254
Interest cost			23,100				22,940				3,283				3,551
Expected return on plan assets			(25,384	)			(25,156	)			—				—
Amortization of prior service (credit) cost			(268	)			(270	)			(172	)			1
Amortization of loss			13,786				10,492				1,115				855
Curtailment/settlement loss			1,083				—				—				—
Net pension and postretirement cost		$	35,066			$	26,404			$	5,671			$	5,661

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

										Other Postretirement
		Pension Plans								Benefits
		2011				2010				2011				2010
Service cost		$	45,653			$	36,711			$	2,918			$	2,503
Interest cost			46,358				45,776				6,567				7,095
Expected return on plan assets			(50,941	)			(50,198	)			—				—
Amortization of prior service (credit) cost			(538	)			(540	)			(344	)			2
Amortization of loss			27,667				20,938				2,232				1,704
Curtailment/settlement loss			1,083				—				—				—
Net pension and postretirement cost		$	69,282			$	52,687			$	11,373			$	11,304

Postemployment benefit costs for the three months ended March 31, 2011 and 2010 were $6,793 and $5,467, respectively. For the six months ended March 31, 2011 and 2010, postemployment benefit costs were $13,587 and $10,934, respectively.

Note 9 — Acquisition

On March 18, 2011, the Company acquired 100% of the outstanding shares of Accuri Cytometers, Inc. (“Accuri”), a company that develops and manufactures personal flow cytometers for researchers. The acquisition-date fair value of consideration transferred totaled $204,970, net of $3,112 in cash acquired.

The Company intends for this acquisition to expand its presence into the emerging affordable personal flow cytometer space. The acquisition is also expected to help expand the use of flow technology by researchers in developing regions where ease of use is critical, as well as by researchers in scientific disciplines that have not traditionally used flow cytometry, such as environmental studies.

The acquisition was accounted for under the acquisition method of accounting for business combinations and Accuri’s results of operations were included in the Biosciences segment’s results from the acquisition date. Pro forma information is not provided as the acquisition did not have a material effect on the Company’s consolidated results. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date. These fair values are based upon the information available as of March 31, 2011 and may be adjusted should further information regarding events or circumstances existing at the acquisition date become available.

Developed technology		$	111,500
Acquired in-process research and development			42,300
Other intangibles			2,850
Deferred tax assets			10,442
Other			8,294
Total identifiable assets acquired			175,386
Deferred tax liabilities			(59,869	)
Other			(4,728	)
Total liabilities assumed			(64,597	)
Net identifiable assets acquired			110,789
Goodwill			94,181
Net assets acquired		$	204,970

The acquired in-process research and development asset of $42,300 represents development of the personal flow cytometry technology that will enable its use in the clinical market. The fair value of this project was determined based on the present value of projected cash flows utilizing an income approach reflecting an appropriate risk-adjusted discount rate based on the applicable technological and commercial risk of the project.

The $94,181 of goodwill was allocated to the Biosciences segment. Goodwill typically results through expected synergies from combining operations of an acquiree and an acquirer as well as from intangible assets that do not qualify for separate recognition. The goodwill recognized as a result of this acquisition includes, among other things, the value of broadening the Company’s potential market for flow cytometry technology. No portion of this goodwill will be deductible for tax purposes. The Company recognized $900 of acquisition-related costs that were expensed in the current year-to-date period and reported in the Consolidated Statements of Income as Selling and administrative.

Note 10 — Divestitures

In the fourth quarter of fiscal year 2010, the Company sold the Ophthalmic Systems unit and the surgical blades, critical care and extended dwell catheter product platforms for $270,000. The Company recognized a pre-tax gain on sale from all of these divestitures of $140,610. The results of operations associated with the Ophthalmic Systems unit, surgical blade platform and critical care platform are reported as discontinued operations for all periods presented in the accompanying Consolidated Statements of Income and Cash Flows and related disclosures. The

Company agreed to perform contract manufacturing for a defined period after the sale of the extended dwell catheter product platform and due to this significant continuing involvement in operations, the associated results of operations are reported within continuing operations.

On July 8, 2009, the Company sold certain assets and liabilities related to the elastics and thermometer components of the Home Healthcare product line of the Medical segment for $51,022. The Company recognized a pre-tax gain on sale of $18,145. Concurrent with the sale, the Company exited the remaining portion of the Home Healthcare product line. The results of operations associated with the Home Healthcare product line are reported as discontinued operations for all periods presented in the accompanying Consolidated Statements of Income and Cash Flows and related disclosures.

Results of discontinued operations were as follows:

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2011				2010				2011				2010
Revenues		$	119			$	45,578			$	3,007			$	94,056
Income from discontinued operations before income taxes			1,334				16,698				3,218				33,598
Less income tax provision			377				4,101				601				8,718
Income from discontinued operations, net		$	957			$	12,597			$	2,617			$	24,880

Note 11 —Intangible Assets

Intangible assets consisted of:

		March 31, 2011								September 30, 2010
		Gross								Gross
		Carrying				Accumulated				Carrying				Accumulated
		Amount				Amortization				Amount				Amortization
Amortized intangible assets
Core and developed technology		$	707,408			$	295,901			$	580,709			$	269,926
Patents, trademarks, and other			313,633				228,023				301,883				219,735
		$	1,021,041			$	523,924			$	882,592			$	489,661
Unamortized intangible assets
Acquired in-process research and development		$	185,300							$	143,000
Trademarks			2,715								2,709
		$	188,015							$	145,709

Intangible amortization expense for the three months ended March 31, 2011 and 2010 was $12,701 and $11,911, respectively. Intangible amortization expense for the six months ended March 31, 2011 and 2010 was $24,435 and $24,072, respectively.

Note 12 — 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, Asia Pacific, Canada, Japan and Latin America. From time to time, the Company may partially hedge forecasted export sales denominated in foreign currencies using forward and option contracts, generally with one-year terms. The Company’s hedging program has been designed to mitigate exposures resulting from movements of the U.S. dollar, from the beginning of a reporting period, against other foreign currencies. The Company’s strategy is to offset the changes in the present value of future foreign currency revenue resulting from these movements with either gains or losses in the fair value of foreign currency derivative contracts. Forward contracts were used to hedge forecasted sales in fiscal year 2010. As of March 31, 2011, the Company has not entered into contracts to hedge cash flows in fiscal year 2011.

The Company designates forward contracts used to hedge these certain forecasted sales denominated in foreign currencies as cash flow hedges. Changes in the effective portion of the fair value of the Company’s forward contracts that are designated and qualify as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk) are included in Other comprehensive income (loss) until the hedged transactions are reclassified in earnings. These changes result from the maturity of derivative instruments as well as the commencement of new derivative instruments. The changes also reflect movements in the period-end foreign exchange rates against the spot rates at the time the Company enters into any given derivative instrument contract. Once the hedged revenue transaction occurs, the gain or loss on the contract is recognized from Accumulated other comprehensive income (loss) to Revenues. The Company records the premium or discount of the forward contracts, which is included in the assessment of hedge effectiveness, to Revenues.

In the event the revenue transactions underlying a derivative instrument are no longer probable of occurring, accounting for the instrument under hedge accounting must be discontinued. Gains and losses previously recognized in Other comprehensive income (loss) must be reclassified into Other income (expense). If only a portion of the revenue transaction underlying a derivative instrument is no longer probable of occurring, only the portion of the derivative relating to those revenues would no longer be eligible for hedge accounting.

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, are recognized in Other income (expense).

The total notional amounts of the Company’s outstanding foreign exchange contracts as of

March 31, 2011 and September 30, 2010 were $1,658,389 and $1,776,046, respectively.

Interest Rate Risks and Related Strategies

The Company’s primary interest rate exposure results from changes in short-term 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 amount, related to terminated interest rate swaps, expected to be reclassified and recorded in Interest expense within the next 12 months is $996, net of tax.

As of both March 31, 2011 and September 30, 2010, the total notional amount of the Company’s outstanding interest rate swaps designated as fair value hedges was $200,000. The current year’s outstanding swap represents a fixed-to-floating rate swap agreement that was entered into to convert the interest payments on $200,000 in 4.55% notes, due April 15, 2013, from the fixed rate to a floating interest rate based on LIBOR. The Company had no outstanding interest rate swaps designated as cash flow hedges as of March 31, 2011.

Risk Exposures Not Hedged

The Company purchases resins, which are oil-based components used in the manufacture of certain products. While the Company has been able to hedge certain purchases of polyethylene, the Company does not currently use any hedges to manage the risk exposures related to other resins. 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 other commodity purchases. The Company had no commodity forward contracts outstanding as of March 31, 2011.

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 under for hedge accounting.

		March 31, 2011				September 30, 2010
Asset derivatives-designated for hedge accounting
Interest rate swaps		$	5,838			$	8,609
Asset derivatives-undesignated for hedge accounting
Forward exchange contracts		$	17,835			$	32,392
Total asset derivatives (A)		$	23,673			$	41,001
Liability derivatives-undesignated for hedge accounting
Forward exchange contracts		$	8,230			$	21,265
Total liability derivatives (B)		$	8,230			$	21,265

Effects on Consolidated Statements of Income

Cash flow hedges

The location and amount of gains and losses on designated derivative instruments recognized in the consolidated statement of income for the three months ended March 31 consisted of:

														Gain (Loss)
		Gain (Loss)												Reclassified from
		Recognized in OCI on												Accumulated OCI into
		Derivatives								Location of Gain (Loss)				Income
Derivatives Accounted for as		Three Months Ended March								Reclassified from				Three Months Ended
Designated Cash Flow Hedging		31,								Accumulated OCI into				March 31,
Relationships		2011				2010				Income				2011				2010
Forward exchange contracts		$	—			$	37,419			Revenues				$	—			$	(26,631	)
Interest rate swaps			249				309			Interest expense					(401	)			(499	)
Total		$	249			$	37,728							$	(401	)		$	(27,130	)

The location and amount of gains and losses on designated derivative instruments recognized in the consolidated statement of income for the six months ended March 31 consisted of:

														Gain (Loss)
		Gain (Loss)												Reclassified from
		Recognized in OCI on												Accumulated OCI into
		Derivatives								Location of Gain (Loss)				Income
Derivatives Accounted for as		Six Months Ended March								Reclassified from				Six Months Ended
Designated Cash Flow Hedging		31,								Accumulated OCI into				March 31,
Relationships		2011				2010				Income				2011				2010
Forward exchange contracts		$	—			$	42,532			Revenues				$	—			$	(41,198	)
Interest rate swaps			9,147				618			Interest expense					(853	)			(996	)
Commodity forward contracts			—				22			Cost of sales					—				(35	)
Total		$	9,147			$	43,172							$	(853	)		$	(42,229	)

The Company’s designated derivative instruments are perfectly effective. As such, there were no gains or losses, related to hedge ineffectiveness and amounts excluded from hedge effectiveness testing, recognized immediately in income for the three-month and six-month periods ending March 31, 2011. The gain recognized in other comprehensive income for the six-month period ended March 31, 2011 is attributable primarily to gains realized on interest rate swaps that were entered into in the first quarter of 2011 in anticipation of issuing $700,000 of 10-year 3.25% notes and $300,000 of 30-year 5.00% notes. These swaps were designated as hedges of the variability in interest payments attributable to changes in the benchmark interest rates against which the notes were priced. These swaps were terminated in November 2010, concurrent with the pricing of the notes. Realized gains on these swaps will be amortized over the life of the notes with an offset to interest expense.

Fair value hedges

The location and amount of gains or losses on the hedged fixed rate debt attributable to changes in the market interest rates and the offsetting gain (loss) on the related interest rate swaps were as follows:

		Gain/(Loss) on Swaps																Gain/(Loss) on Borrowings
		Three Months Ended								Six Months Ended								Three Months Ended								Six Months Ended
Income Statement		March 31,								March 31,								March 31,								March 31,
Classification		2011				2010				2011				2010				2011				2010				2011				2010
Other income (expense) (A)		$	(1,041	)		$	2,366			$	(2,771	)		$	1,689			$	1,041			$	(2,366	)		$	2,771			$	(1,689	)

Undesignated hedges

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

				Amount of Gain (Loss) Recognized in Income on Derivatives
		Location of Gain (Loss)		Three Months Ended								Six Months Ended
Derivatives Not Designated as		Recognized in Income on		March 31,								March 31,
Hedging Instruments		Derivatives		2011				2010				2011				2010
Forward exchange contracts (B)		Other income (expense)		$	25,644			$	(21,158	)		$	8,143			$	(25,594	)

Note 13 — Financial Instruments and Fair Value Measurements

The fair values of financial instruments, including those not recognized on the statement of financial position at fair value, carried at March 31, 2011 and September 30, 2010 are classified in accordance with the fair value hierarchy in the tables below:

						Basis of Fair Value Measurement
		March 31,				Quoted Prices in				Significant
		2011				Active Markets				Other				Significant
		Carrying				for Identical				Observable				Unobservable
		Value				Assets (Level 1)				Inputs (Level 2)				Inputs (Level 3)
Assets
Institutional money market investments		$	149,624			$	149,624			$	—			$	—
Forward exchange contracts			17,835				—				17,835				—
Interest rate swaps			5,838				—				5,838				—
Total Assets		$	173,297			$	149,624			$	23,673			$	—
Liabilities
Forward exchange contracts		$	8,230			$	—			$	8,230			$	—
Long-term debt			2,484,168				—				2,567,925				—
Total Liabilities		$	2,492,398			$	—			$	2,576,155			$	—
						Basis of Fair Value Measurement
		September 30,				Quoted Prices in				Significant
		2010				Active Markets				Other				Significant
		Carrying				for Identical				Observable				Unobservable
		Value				Assets (Level 1)				Inputs (Level 2)				Inputs (Level 3)
Assets
Institutional money market investments		$	277,424			$	277,424			$	—			$	—
Forward exchange contracts			32,392				—				32,392				—
Interest rate swap			8,609				—				8,609				—
Total Assets		$	318,425			$	277,424			$	41,001			$	—
Liabilities
Forward exchange contracts		$	21,265			$	—			$	21,265			$	—
Long-term debt			1,495,357				—				1,790,137				—
Total Liabilities		$	1,516,622			$	—			$	1,811,402			$	—

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 $598,964 and $938,565 at March 31, 2011 and September 30, 2010, 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 currency options using an income approach with significant observable inputs, specifically spot currency rates, market designated forward currency prices and a discount rate. The fair value of interest rate swaps are provided by the financial institutions that are counterparties to these arrangements. The fair value of long-term debt is based upon quoted prices in active markets for similar instruments.

The Company’s policy is to recognize any transfers into fair value measurement hierarchy levels and transfers out of levels at the beginning of each reporting period. There were no transfers in and out of Level 1, Level 2 or Level 3 measurements for the three and six months ended March 31, 2011.

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

Company Overview

Becton, Dickinson and Company (“BD”) is a global medical technology company engaged principally in the development, manufacture and sale of medical devices, instrument systems and reagents used by healthcare institutions, life science researchers, clinical laboratories, the pharmaceutical industry and the general public. Our business consists of three worldwide business segments — BD Medical (“Medical”), BD Diagnostics (“Diagnostics”) and BD Biosciences (“Biosciences”). 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.

Overview of Financial Results

Second quarter revenues of $1.922 billion represented an increase of 6.8% from the same period a year ago, and reflected volume increases of just over 5% and favorable foreign currency translation of 2%, partially offset by price decreases of less than 1%. Second quarter revenue growth reflected an unfavorable comparison to the prior year’s quarter that included strong H1N1 flu pandemic sales, supplemental spending in Japan and U.S. stimulus orders. We estimate that this unfavorable comparison lowered revenue growth for the quarter by approximately 2 percentage points. Sales in the United States of safety-engineered devices in the second quarter of 2011 were $264 million, representing an increase of less than 1% from the prior year’s period. International sales of safety-engineered devices of $178 million in the second quarter of 2011 grew 20% above such sales in the prior year’s period, including an estimated $8 million, or 6%, favorable impact due to foreign currency translation. International safety-engineered device revenue growth continues to be driven by double-digit growth in the Medical segment, with the largest growth in emerging markets, including China and Latin America.

Our financial condition continues to remain strong, with cash flows from continuing operating activities totaling $707 million in the first six months of 2011. In March 2011, we completed the acquisition of Accuri Cytometers, Inc. (“Accuri”), an Ann Arbor, Michigan-based company that develops and manufactures personal flow cytometers for researchers. For further discussion of this acquisition, refer to Note 9 in the Notes to Condensed Consolidated Financial Statements. In November 2010, we issued $700 million of 10-year 3.25% notes and $300 million of 30-year 5.00% notes, as discussed further below. Also, we continued to return value to our shareholders as we repurchased $1.058 billion of our common stock and paid cash dividends of $183 million in the first six months of 2011.

We face currency exposure each reporting period 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. From time to time, we purchase forward contracts and options to partially protect against adverse foreign exchange rate movements. Gains or losses on our derivative instruments are largely offset by the gains or losses on the underlying hedged transactions. We do not enter into derivative instruments for trading or speculative purposes. As of March 31, 2011, we had not entered into contracts to hedge cash flows in fiscal year 2011.

The favorable net impact of foreign currency on revenues for the quarter reflected favorable foreign currency translation and a favorable comparison resulting from hedge losses recognized in the prior year’s period. For further discussion of the hedge losses recognized in the prior year’s period, refer to Note 12 in the Notes to Condensed Consolidated Financial Statements.

The results for the second quarter and six-month period ending March 31, 2011 were unfavorably impacted by the earthquake and tsunami in Japan. However, order volumes for BD products in Japan have now returned to normal levels. Our manufacturing plant in Fukushima sustained some earthquake-related damage, but the prepared plated media manufacturing lines were recently restarted, and manufacturing of BD Hypak^TM Prefillable Syringes is expected to resume during the third fiscal quarter of 2011. Our Fukushima distribution center and an additional distribution center near Tokyo are in operation. We estimate the unfavorable impact of these natural disasters on our revenues in the second fiscal quarter of 2011 was less than $10 million. For the total fiscal year 2011, we anticipate these events to have an aggregate unfavorable impact of $10 to $20 million on revenues, or about $0.05 diluted earnings per share from continuing operations.

The recently-enacted U.S. healthcare reform legislation contains certain tax provisions that will affect BD. The most significant impact is the medical device excise tax which imposes a 2.3% tax on certain U.S. sales of medical devices, beginning in January 2013. Sales of BD products that we estimate to be subject to this tax represented approximately 80% of BD’s total U.S. revenues in fiscal year 2010. This legislation also included a tax provision that eliminated the employer deduction of the Medicare Part D retiree drug subsidy and, as a result, we recorded a charge of $8.9 million, or $0.04 diluted earnings per share from continuing operations, in the second fiscal quarter of 2010.

Results of Operations

Revenues

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

Medical Segment

Second quarter revenues of $981 million represented an increase of $60 million, or 6.5%, compared with the prior year’s quarter, including an estimated $15 million, or 2%, favorable impact due to foreign currency translation.

The following is a summary of second quarter revenues by organizational unit:

		Three months ended March 31,
														Estimated
														Foreign
										Total				Exchange
(millions of dollars)		2011				2010				Change				Impact
Medical Surgical Systems		$	505			$	481				4.8	%			2.5	%
Diabetes Care			208				188				10.5	%			2.4	%
Pharmaceutical Systems			269				252				6.6	%			(0.7	)%
Total Revenues*		$	981			$	922				6.5	%			1.6	%

Medical revenues reflected strong growth of Diabetes Care revenues, which was primarily attributable to pen needle sales. Segment growth was also aided by strong sales in the Pharmaceutical Systems unit, as well as international safety-engineered product sales. Medical revenue growth reflected an unfavorable comparison to the prior year period that included strong sales related to the H1N1 flu pandemic. We estimate that this unfavorable comparison lowered Medical’s revenue growth by approximately 2 percentage points. Global sales of safety-engineered products were $205 million, as compared with $194 million in the prior year’s quarter, and included an estimated $4 million favorable impact due to foreign currency translation. For the six-month period ended March 31, 2011, global sales of safety-engineered products were $418 million, as compared with $415 million in the prior year’s period, and included an estimated $5 million favorable impact due to foreign currency translation. Total Medical revenues for the six-month period ended March 31, 2011 increased by 1% from the prior-year six-month period, primarily as a result of the favorable impact from foreign currency translation.

Medical operating income for the second quarter was $287 million, or 29.3% of Medical revenues, compared with $263 million, or 28.6% of segment revenues, in the prior year’s quarter. Gross profit margin was higher in the current quarter than the second quarter of 2010 due to increased sales of products with relatively higher gross margins and continued strength in manufacturing productivity, and lower manufacturing start-up costs, as well as net favorable foreign currency translation. These favorable impacts on gross profit margin were partially offset by increases in certain raw material costs and higher pension costs allocated to the segment. See further discussion on gross profit margin below. Selling and administrative expense as a percent of Medical revenues in the second quarter of 2011 was lower than the comparable percent in the second quarter of 2010, primarily due to continued spending controls and favorable foreign currency translation, partially offset by higher pension costs. Research and development expenses for the quarter increased $6 million, or 18% above the prior year’s period, reflecting increased investment in new products and platforms. Segment operating income for the six-month period was $563 million, or 29.5% of Medical revenues, compared with $566 million, or 29.9% in the prior year’s period.

Diagnostics Segment

Second quarter revenues of $605 million represented an increase of $50 million, or 9%, over the prior year’s quarter, including an estimated $13 million, or approximately 2%, favorable impact due to foreign currency translation.

The following is a summary of second quarter revenues by organizational unit:

		Three months ended March 31,
														Estimated
														Foreign
										Total				Exchange
(millions of dollars)		2011				2010				Change				Impact
Preanalytical Systems		$	306			$	288				6.5	%			2.1	%
Diagnostic Systems			299				268				11.6	%			2.6	%
Total Revenues		$	605			$	556				8.9	%			2.4	%

Diagnostics revenue growth reflected solid growth in sales of Preanalytical Systems safety-engineered products. Segment revenue also reflected strong growth in the Diagnostic Systems unit’s infectious disease platforms, primarily MRSA and C-Difficile, as well as growth in sales of TriPath instruments outside the United States. Global sales of safety-engineered products in the Preanalytical Systems unit totaled $237 million, compared with $218 million in the prior year’s quarter, and included an estimated $5 million favorable impact due to foreign currency translation. For the six-month period ended March 31, 2011, global sales of safety-engineered products in the Preanalytical Systems unit were $476 million as compared with $444 million in the prior year’s period, and included an estimated $6 million favorable impact due to foreign currency translation. Total Diagnostics revenues for the six-month period ended March 31, 2011 increased by 5% from the prior-year six-month period, including an estimated 1% favorable impact from foreign currency translation.

Diagnostics operating income for the second quarter was $156 million, or 25.7% of Diagnostics revenues, compared with $144 million, or 25.9% of segment revenues, in the prior year’s quarter. Gross profit margin was slightly lower in the current quarter compared with the prior year’s quarter due to increases in certain raw material costs and higher pension costs, offset in part by increased sales of products with relatively higher gross margins, lower manufacturing start-up costs and net favorable foreign currency translation. See further discussion on gross profit margin below. Selling and administrative expense as a percentage of Diagnostics revenues in the second quarter of 2011 was slightly lower than the comparable percent in the second quarter of 2010 due to continued spending controls and favorable foreign currency translation. Research and development expenses in the second quarter of 2011 increased $5 million, or 14% compared with the prior year’s period, reflecting increased investment in new products and platforms. Segment operating income for the six-month period was $317 million, or 26.3% of Diagnostics revenues, compared with $306 million, or 26.6% in the prior year’s period.

Biosciences Segment

Second quarter revenues of $335 million represented an increase of $13 million, or 4%, over the prior year’s quarter, including an estimated $12 million, or 4%, favorable impact due to foreign currency translation.

The following is a summary of second quarter revenues by organizational unit:

		Three months ended March 31,
														Estimated
														Foreign
										Total				Exchange
(millions of dollars)		2011				2010				Change				Impact
Cell Analysis		$	256			$	242				5.4	%			3.7	%
Discovery Labware			80				80				0.2	%			3.5	%
Total Revenues *		$	335			$	322				4.1	%			3.7	%

Biosciences’ revenue growth reflected an unfavorable comparison to the prior year’s period that included strong sales from U.S. stimulus spending and supplemental spending in Japan. We estimate that this unfavorable comparison lowered Biosciences’ revenue growth by approximately 8 percentage points. We also estimate that the recent earthquake and tsunami that occurred in Japan also unfavorably impacted revenue growth by approximately 3 percentage points. Revenue growth of the segment was primarily driven by instrument and reagent sales in the Cell Analysis unit. For the six-month period ended March 31, 2011, total Biosciences revenues increased by 4% from the prior-year six-month period, including an estimated 2% favorable impact from foreign currency translation.

Biosciences operating income for the second quarter was $95 million, or 28.4% of Biosciences revenues, compared with $97 million, or 30.2% of segment revenues, in the prior year’s quarter. Gross profit margin, as a percent of Biosciences revenue, was slightly lower in the current quarter than the second quarter of 2010 primarily due to increases in certain raw material costs, higher pension costs allocated to the segment and unfavorable sales mix in the Discovery Labware business. Gross profit margin in the current quarter was also unfavorably impacted by the effects of the earthquake and tsunami in Japan. These unfavorable variances from the prior year’s period were partially offset by increased sales of products and services with relatively higher gross margins, favorable manufacturing costs and net favorable foreign currency translation. See further discussion on gross profit margin below. Selling and administrative expense as a percent of Biosciences revenues for the quarter increased compared with the prior year’s quarter, reflecting Accuri acquisition costs, partially offset by continued spending controls and favorable foreign currency translation. Research and development spending in the quarter increased $5 million, or 20% above the prior-year period, reflecting increased investment in new products and platforms. Segment operating income for the six-month period was $186 million, or 28.6% of Biosciences revenues, compared with $183 million, or 29.2% in the prior year’s period.

Geographic Revenues

Revenues in the United States for the second quarter of $829 million represented an increase of $37 million, or 5%, over the prior year’s quarter. U.S. Medical revenues reflected strong sales of pen needles and Pharmaceutical Systems products, offset by weaker sales in the Medical Surgical Systems unit. U.S. Diagnostics revenue growth was driven by increased infectious disease testing. Biosciences revenue growth in the United States reflected an unfavorable comparison to the prior year’s period which included U.S. stimulus spending. Revenue growth in Biosciences was driven by the Cell Analysis unit, partially offset by weaker sales of Discovery Labware products.

International revenues for the second quarter of $1.093 billion represented an increase of $85 million, or 8.5%, over the prior year’s quarter, including an estimated $39 million, or 4%, favorable impact due to foreign currency translation. International revenue growth was unfavorably impacted by an estimated 2 percentage points due to an unfavorable comparison to the prior year, which included strong sales related to the H1N1 flu pandemic and supplemental spending in Japan. We experienced solid growth in both the Medical and Diagnostics segments. Biosciences revenue growth was 5% for the quarter and included an estimated 6% favorable impact due to foreign currency translation. International revenue growth in the Biosciences segment reflected an unfavorable impact of an estimated 16 percentage points resulting from both the unfavorable comparison to the prior year’s period which included supplemental spending in Japan, and the impact of the natural disasters in Japan.

Gross Profit Margin

Gross profit margin was 52.1% for the second quarter, compared with 52.0% for the comparable prior-year period. Gross profit margin in the second quarter of 2011 as compared with the prior year’s period reflected an estimated net favorable impact of 40 basis points relating to foreign currency translation. The operating performance impact on gross margin was unfavorable by 10 basis points as compared with the prior year. This resulted from increases in certain raw material costs and higher pension costs, which were partially offset by increased sales of products with relatively higher gross margins and increased productivity as well as lower manufacturing start-up costs. Gross profit margin was also unfavorably impacted by 20 basis points as a result of the natural disasters in Japan. Gross profit margin in the six-month period of 2011 of 52.6% compared with the prior year’s period of 52.1% reflected an estimated favorable impact of foreign currency translation of 60 basis points. The operating performance impact on gross profit margin in the six-month period of 2011 was flat as increased sales of products with relatively higher gross margins and increased productivity were offset by increases in certain raw material costs and higher pension costs. Gross profit margin in the six-month period of 2011 was also unfavorably impacted by 10 basis points as a result of the natural disasters in Japan.

Selling and Administrative Expense

Selling and administrative expense was 23.0% of revenues for the second quarter and 23.6% for the six-month period, compared with 23.4% and 23.6%, respectively, for the prior year’s periods. Aggregate expenses for the second quarter reflected an unfavorable foreign exchange impact of $4 million, an increase in core spending of $10 million, increased pension costs of $4 million, and a $1 million increase in the deferred compensation liability. Aggregate expenses for the quarter also included $2 million related to our global enterprise resource planning initiative to update our business information systems. Aggregate expenses for the six-month period of 2011 reflected $1 million of unfavorable foreign exchange, increases in core spending of $7 million,

increased pension costs of $8 million and a $4 million increase in the deferred compensation plan liability, as further discussed below. Aggregate expenses for the six-month period also included $3 million related to our global enterprise resource planning initiative to update our business information systems.

Research and Development Expense

Research and development expense was $119 million, or 6.2% of revenues, for the second quarter, an increase of 19% compared with the prior year’s amount of $100 million, or 5.6% of revenues. Research and development expense was $235 million, or 6.2% of revenues, for the six-month period in the current year, compared with the prior year’s amount of $199 million, or 5.4% of revenues. The increases in research and development expenditures for the three-month and six-month periods ending March 31, 2011 compared with the prior year’s periods reflected increased spending for new products and platforms in each of our segments.

Non-Operating Expense and Income

Interest income was $15 million in the second quarter compared with $10 million in the prior year’s period. Interest income was $30 million in the six-month period, compared with $18 million in the prior year’s period. The increase in both the three-month and six-month periods ending March 31, 2011 compared with the prior year’s periods resulted from higher interest rates and levels of investments outside the United States, as well as investment gains on assets related to our deferred compensation plan. The related increase in the deferred compensation plan liability was recorded as an increase in selling and administrative expenses. Interest expense was $24 million in the second quarter and $39 million in the six-month period, compared with $13 million and $26 million, respectively, in the prior year’s periods. The increase in both the three-month and six-month periods ending March 31, 2011 compared with the prior year’s periods reflects higher levels of long-term fixed rate debt, partially offset by lower average interest rates on this debt.

Income Taxes

The income tax rate was 27.4% for the second quarter, compared with the prior year’s rate of 30.6%. The six-month tax rate was 25.3% compared with the prior year’s rate of 29.3%. The income tax rates for the three-month and six-month periods ending March 31, 2010 reflected a non-cash charge in the prior year’s period related to healthcare reform impacting Medicare Part D reimbursements as discussed earlier in “Overview of Financial Results.” The decrease in the income tax rate in the first six months of 2011 compared with the prior year period’s rate also reflected a favorable impact due to the timing of certain tax benefits. These benefits resulted from the retroactive extension of the U.S. research tax credit as well as a European restructuring transaction, both of which occurred in the first quarter of 2011.

Income from Continuing Operations and Diluted Earnings Per Share from Continuing Operations

Income from continuing operations and diluted earnings per share from continuing operations for the second quarter of 2011 were $311 million and $1.38, respectively. Income from continuing operations and diluted earnings per share from continuing operations for the prior year’s second quarter were $285 million and $1.18, respectively. The current quarter’s earnings reflected an estimated $0.07 favorable impact due to foreign currency translation. The prior year’s second quarter earnings included a $0.04 non-cash charge related to healthcare reform, as previously discussed. For the six-month periods, income from continuing operations and diluted earnings

per share from continuing operations were $625 million and $2.72, respectively, in 2011 and $589 million and $2.43, respectively, in 2010. The current period’s earnings reflected an estimated $0.12 favorable impact due to foreign currency translation. The prior-year six-month period’s earnings also included the $0.04 non-cash charge related to healthcare reform.

Liquidity and Capital Resources

Cash generated from operations, along with available cash and cash equivalents, including proceeds from the first quarter debt issuance as further discussed below, is expected to be sufficient to fund our normal operating needs. Normal operating needs in fiscal year 2011 include capital expenditures, cash dividends and common stock repurchases. Net cash provided by continuing operating activities was $707 million during the first six months of 2011, compared with $648 million in the same period in 2010. The current period change in operating assets and liabilities was a net use of cash and reflected higher levels of inventory and prepaid expenses, as well as lower levels of trade payables, partially offset by improved collections of accounts receivable. Net cash provided by continuing operating activities in the first six months of 2010 was reduced by changes in the pension obligation resulting partially from discretionary cash contributions of approximately $175 million.

Net cash used for continuing investing activities for the first six months of the current year was $1.024 billion, compared with $471 million in the prior-year period. Cash used for purchases of investments in the current period reflected the extension of maturities of certain highly liquid investments beyond three months. Capital expenditures were $194 million in the first six months of 2011 and $228 million in the same period in 2010. Acquisitions of businesses in the current period reflected the payment of $205 million, net of cash acquired relating to the Accuri acquisition. The prior-year amount reflected the payment of $275 million, net of cash acquired relating to the HandyLab acquisition.

Net cash used for continuing financing activities for the first six months of the current year was $155 million, compared with $778 million in the prior-year period. The prior period’s change in short-term debt reflected the repayment of $200 million of 7.15% Notes, due October 1, 2009. For the first six months of the current year, we repurchased approximately 13.1 million shares of our common stock for $1.058 billion, compared with approximately 5.9 million shares of our common stock for $450 million in the prior-year period. Aggregate common stock repurchases are estimated to be approximately $1.5 billion for the full fiscal year 2011. At March 31, 2011, Board authorization to repurchase an additional 15.5 million common shares remained.

As of March 31, 2011, total debt of $2.7 billion represented 34.3% of total capital (shareholders’ equity, net non-current deferred income tax liabilities, and debt), versus 23.7% at September 30, 2010. Short-term debt decreased to 8.9% of total debt at the end of March 31, 2011, from 12% at September 30, 2010. On November 8, 2010, we issued $700 million of 10-year 3.25% notes and $300 million of 30-year 5.00% notes. The net proceeds from these issuances have been and are expected to be used for general corporate purposes, which may include funding for working capital, capital expenditures, repurchases of our common stock and acquisitions.

We have in place a commercial paper borrowing program that is available to meet our short-term financing needs, including working capital requirements. Borrowings outstanding under this program were $200 million at March 31, 2011. We have available a $1 billion syndicated credit facility with an expiration date in December 2012. This credit facility, under which there were

no borrowings outstanding at March 31, 2011, provides backup support for our commercial paper program and can also be used for other general corporate purposes. This credit facility includes a single financial covenant that requires BD to maintain an interest expense coverage ratio (ratio of earnings before income taxes, depreciation and amortization to interest expense) of not less than 5-to-1 for the most recent four consecutive fiscal quarters. On the last eight measurement dates, this ratio has ranged from 23-to-1 to 32-to-1. In addition, we have informal lines of credit outside the United States.

Government Receivables

Accounts receivable balances include sales to government-owned or government-supported healthcare facilities. Because these customers are government-owned or supported, we could be impacted by declines in sovereign credit ratings or by defaults in these countries.

In particular, we have experienced significant payment delays in Greece due to the government’s liquidity issues that have affected its ability to process payments to suppliers within Greece’s national healthcare system. During the second quarter of fiscal year 2011, BD received a settlement established by Greece’s government to repay all debts associated with its central government hospitals’ suppliers incurred since 2005. Under the plan, suppliers received cash for debts incurred from 2005 through 2006 and zero-coupon bonds for debts incurred from 2007 through 2009. BD sold the bonds received from the settlement during the second quarter of fiscal year 2011.

We continually evaluate all government receivables, particularly in Spain, Italy, and other parts of Western Europe, for potential collection risks associated with the availability of government funding and reimbursement practices. We believe the current reserves related to government receivables are adequate and this concentration of credit risk is not expected to 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,” “anticipate,” “estimate” and other words of similar meaning in conjunction with, among other things, discussions of future operations and financial performance, as well as our strategy for growth, product development, regulatory approvals, market position and expenditures. All statements that address operating performance or events or developments that we expect or anticipate will occur in the future — including statements relating to volume growth, sales and earnings per share growth, cash flows or uses, and statements expressing views about future operating results — are forward-looking statements.

Forward-looking statements are based on 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 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 IA. Risk Factors in our 2010 Annual Report on Form 10-K and Item 1A. Risk Factors of this report.

	•		The current conditions in the global economy and financial markets, and the potential adverse effect on the cost of operating our business, the demand for our products and services, or our ability to produce our products, including the impact on developing countries. Also, the increase in sovereign debt during the financial crisis as a result of governmental intervention in the world economy poses additional risks to the global financial system and economic recovery. We sell to government-owned or government-supported healthcare and research facilities, and any governmental austerity programs or other adverse change in the availability of government funding in these countries, particularly in Western Europe, could result in less demand for our products and additional pricing pressures, as well as create potential collection risks associated with such sales.
	•		The consequences of the recently-enacted healthcare reform legislation in the United States, which implemented an excise tax on U.S. sales of certain medical devices, and which could result in reduced demand for our products, increased pricing pressures or otherwise adversely affect BD’s business.
	•		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 (including changes in reimbursement practices by third party payors).
	•		Regional, national and foreign economic factors, including inflation, deflation, and fluctuations in interest rates and, in particular, foreign currency exchange rates, and the potential effect on our revenues, expenses, margins and credit ratings.
	•		New or changing laws and regulations affecting our domestic and foreign operations, or changes in enforcement practices, including laws relating to trade, monetary and fiscal policies, taxation (including tax reforms that could adversely impact multinational corporations), sales practices, price controls, licensing and regulatory requirements for new products and products in the postmarketing phase. In particular, the U.S. and other countries may impose new requirements regarding registration, labeling or prohibited materials that may require us to re-register products already on the market or otherwise impact our ability to market our products. Environmental laws, particularly with respect to the emission of greenhouse gases, are also becoming more stringent throughout the world, which may increase our costs of operations or necessitate changes in our manufacturing plants or processes or those of our suppliers, or result in liability to BD.

	•		Product efficacy or safety concerns regarding our products resulting in product recalls, regulatory action on the part of the U.S. Food and Drug Administration (FDA) or foreign counterparts, declining sales and product liability claims, particularly in light of the current regulatory environment, including increased enforcement activity by the FDA.
	•		Competitive factors that could adversely affect our operations, including new product introductions (for example, new forms of drug delivery) by our current or future competitors, increased pricing pressure due to the impact of low-cost manufacturers as certain competitors have established manufacturing sites or have contracted with suppliers in low-cost manufacturing locations as a means to lower their costs, patents attained by competitors (particularly as patents on our products expire), and new entrants into our markets.
	•		The effects of natural disasters, including pandemics, earthquakes, fire, wind or other destructive events, or the effects of climate change, on 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 that are needed for such manufacturing.
	•		Fluctuations in the cost and availability of oil-based resins and other raw materials, as well as certain sub-assemblies and finished goods, 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.
	•		Difficulties inherent in product development, including the potential inability to successfully continue technological innovation, complete clinical trials, obtain regulatory approvals in the United States and abroad, obtain 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.
	•		Fluctuations in the demand for products we sell to pharmaceutical companies that are used to manufacture, or are sold with, the products of such companies, as a result of funding constraints, consolidation or otherwise.
	•		Fluctuations in U.S. and international governmental funding and policies for life sciences research.
	•		Our ability to achieve our projected level or mix of product sales. Our earnings forecasts are based on projected volumes and sales of many product types, some of which are more profitable than others.
	•		Our ability to implement our ongoing upgrade of our enterprise resource planning system, as any delays or deficiencies in the design and implementation of our upgrade could adversely affect our business.

	•		Pending and potential future litigation or other proceedings adverse to BD, including antitrust claims, product liability claims, patent infringement claims, and the availability or collectibility of insurance relating to any such claims.
	•		The effect of adverse media exposure or other publicity regarding BD’s business or operations, including the effect on BD’s reputation or demand for its products.
	•		The effects, if any, of governmental and media activities regarding the business practices of group purchasing organizations, which negotiate product prices on behalf of their member hospitals with BD and other suppliers.
	•		The effect of market fluctuations on the value of assets in BD’s pension plans and to actuarial interest rate and asset return assumptions, which could require BD to make additional contributions to the plans or increase our pension plan expense.
	•		Political conditions in international markets, including civil unrest, terrorist activity, governmental changes, restrictions on the ability to transfer capital across borders and expropriation of assets by a government, particularly in light of the recent civil unrest in parts of the Middle East.
	•		Our ability to penetrate developing and emerging markets, which also depends on 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, distribution networks, sales equipment and technology.
	•		The effects, if any, of future healthcare reform in the countries in which we do business, including changes in government pricing and reimbursement policies or other cost containment reforms.
	•		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.