Becton, Dickinson And's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Becton, Dickinson and (BDX)

Q2 2012 Earnings Call

May 01, 2012 8:00 am ET

Executives

Monique Dolecki -

Vincent A. Forlenza - Chief Executive Officer, President and Director

David V. Elkins - Chief Financial Officer and Executive Vice President

Tom Polen - President

Gary M. Cohen - Executive Vice President

William A. Kozy - Executive Vice President

Analysts

Kristen M. Stewart - Deutsche Bank AG, Research Division

Amit Bhalla - Citigroup Inc, Research Division

James Francescone - Morgan Stanley, Research Division

David H. Roman - Goldman Sachs Group Inc., Research Division

Jon Davis Wood - Jefferies & Company, Inc., Research Division

Jonathan P. Groberg - Macquarie Research

Frederick A. Wise - Leerink Swann LLC, Research Division

Brian Weinstein - William Blair & Company L.L.C., Research Division

Kimberly Weeks Gailun - JP Morgan Chase & Co, Research Division

Jonathan J. Palmer - Credit Agricole Securities (USA) Inc., Research Division

Peter Lawson - Mizuho Securities USA Inc., Research Division

William R. Quirk - Piper Jaffray Companies, Research Division

Doug Schenkel - Cowen and Company, LLC, Research Division

Bill Bonello - RBC Capital Markets, LLC, Research Division

Sara Michelmore - Brean Murray, Carret & Co., LLC, Research Division

Jeffrey Frelick - Canaccord Genuity, Research Division

Presentation

Operator

Hello, and welcome to BD's Second Fiscal Quarter 2012 Earnings Call. At the request of BD, today's call is being recorded. It will be available for replay through Tuesday, May 8, 2012, on the Investors page of the bd.com website or by phone at (800) 585-8367 for domestic calls and area code (404) 537-3406 for international calls, using conference ID 68128968.

[Operator Instructions] Beginning today's call is Ms. Monique Dolecki. Ms. Dolecki, you may begin.

Monique Dolecki

Thank you, Jackie. Good morning, everyone, and thank you for joining us to review our second fiscal quarter results. As we referenced in our press release, we are presenting a set of slides to accompany our remarks on this call. The presentation is posted on the Investor Relations page of our website at bd.com.

During today's call, we will make forward-looking statements, and it is possible that actual results could differ from our expectations. Factors that cause such differences appear in our second fiscal quarter press release and in the MD&A sections of our recent SEC filings.

We will also discuss some non-GAAP financial measures with respect to our performance. A reconciliation to GAAP measures can be found in our press release and its related financial schedules and in the slides. A copy of the release, including the financial schedules, is posted on the bd.com website.

Leading the call this morning is Vince Forlenza, Chief Executive Officer and President. Also joining us are David Elkins, Executive Vice President and Chief Financial Officer; BD Executive Vice Presidents, Gary Cohen and Bill Kozy; and Tom Polen, President of Diagnostic Systems.

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

Vincent A. Forlenza

Thank you, Monique, and good morning, everyone. As we stated in our press release, we are very pleased with our second quarter results. We believe we continue to demonstrate BD's commitment to drive revenue growth and our focus on high-growth areas with our recent acquisition of KIESTRA Lab Automation.

This acquisition offers total lab automation solutions to hospitals and laboratories worldwide and nicely complements our microbiology portfolio. We expect this acquisition to add about 1 percentage point of growth through the Diagnostic Systems unit in the near future. The integration is going as planned, and the KIESTRA platform was very well received at the European Conference of Clinical Microbiology and Infectious Diseases back in March.

Recently, we announced our plans to sell the majority of our Discovery Labware unit, excluding Advanced Bioprocessing. This sale will enable BD Biosciences to focus resources and management attention on both our recent Biosciences acquisition and our recently launched new instrumentation products, which are important to our accelerated growth efforts. David will provide more details around this later in the call.

In the second quarter, we continued to face challenges in our Biosciences business in the U.S. due to an uncertain research spending environment and lack of overall demand for instrument and in research reagents. David will provide more details around this later in his financial discussion.

Despite these headwinds, we posted solid overall revenue growth, driven by our Medical and Diagnostics segments. We believe our results this quarter highlight the diversity of our portfolio with softness in 1 segment being offset by strength in our other 2 segments. We saw organic growth from new product launches in addition to growth coming from recent acquisitions.

On a positive note, we continue to see strong growth in the international safety sales and emerging markets. Also our initiatives around new products are in line with our expectations as we continue to invest for a future growth.

We recently went live with our new ERP system in North America with BD Biosciences as the first implementation under EVEREST. This is our global ERP project that we have been discussing for the past few years. Our largest go live will be next year with the balance of North America, which includes our manufacturing plants.

Our results year-to-date give us confidence to increase the bottom end of our currency neutral revenue growth guidance to 3% to 4%. We expect currency neutral EPS growth to be 4% to 5% as we continue to invest in new products and absorb costs from our recent acquisitions.

On Slide 5, we've outlined our second quarter revenue and EPS results, which I will speak to on a currency-neutral basis. Revenues were solid, increasing by 4.6%. Fully diluted EPS came in at $1.38, growing at 2.9% over the prior year as expected. For the 6-month year-to-date results, revenue growth was 3.5%. EPS of $2.59 declined by 3.3% due to a difficult comparison over the prior year period as we outlined on our first quarter conference call.

Now I'd like to turn things over to David for a more detailed discussion of our second quarter financial performance.

David V. Elkins

Thank you, Vince, and good morning, everyone. I'd like to begin by discussing the key financial highlights for the second quarter.

As Vince just stated, we're very pleased with the results, which were in line with our financial projections. We saw solid growth in our Medical and Diagnostics segments. As expected, we experienced higher SSG&A expenses in the quarter due to increased investments in emerging markets, new product launches and acquisition-related expenses and EVEREST costs, as Vince just mentioned.

We are raising the bottom end of our total year revenue growth guidance to 3% to 4%. We expect EPS growth of 4% to 5% as we increase investments in new products and absorb costs from our recent acquisitions. I'll provide additional guidance detail later on the call.

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