Becton, Dickinson and Company (BDX) Q1 2018 Earnings Report, Transcript and Summary

Hello and welcome to BD's First Fiscal Quarter 2018 Earnings Call. At the request of BD, today's call is being recorded. It will be available for replay through February 13, 2018, on the Investors page of the BD.com website or by phone at 1-800-585-8367 for domestic calls and area code 404-537-3406 for international calls, using confirmation number 4282726. I would like to inform all parties that your lines have been placed on a listen-only mode until the question and answer segment. Beginning today's call is Ms. Monique Dolecki, Vice President of Investor Relations. Ms. Dolecki, you may begin the conference. Monique N. Dolecki - Becton, Dickinson & Co.: Thank you, Crystal. Good morning, everyone, and thank you for joining us to review our first fiscal quarter results. As we referenced in 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 could cause such differences appear in our first 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. The details of purchase accounting and other adjustments can be found in the reconciliations to GAAP measures, in the financial schedules in our press release or the appendix of the Investor Relations slides. As a reminder, our first quarter results are on a standalone basis and represent only BD. We will report the combined BD plus Bard P&L results beginning with the second quarter of fiscal year 2018. In preparation for the newly combined company or newco reporting, we have also provided slides in the appendix of the earnings presentation which illustrate our new reportable segments and the way we will report our geographies going forward. To align the new segment structure to our go to market strategy, approximately $700 million in annual revenues related to several products such as ChloraPrep and V. Mueller have moved from the legacy BD Medical Segment to the new Interventional Segment. Also, approximately $800 million in annual revenues related to several products such as PICCs and midlines have moved from Bard into the BD Medical Segment. Details of the key product families and brands and our new segment structure can be found in the appendix of today's slide presentation. We would also like to note that as the Gore royalty income stream is set to end in August of 2019, BD has concluded the income stream is non-recurring in nature and not central to the ongoing operations of the company. Therefore, the historical amounts recorded by Bard as revenue have been reclassified to other income to reflect BD's future reporting classification. We've provided pro forma historical revenue information consistent with our new reporting structure which can be found in the schedules posted on the Investor Relations page of our website at BD.com which have been updated to include the first quarter of fiscal 2018. Furthermore, I would also point out that while BD and Bard operated on different fiscal years, the information you will see in our guidance slides is presented on the basis of BD's fiscal year which ends on September 30. Our comparable basis revenue guidance includes Bard's results for the full fiscal 2018 and fiscal 2017 periods. For the purposes of today's call, we will provide revenue guidance for BD and Bard as standalone companies, in addition to the combined BD plus Bard outlook. Going forward, all guidance will be on a combined BD and Bard basis. Lastly, our combined company P&L guidance includes the reclassification of certain Bard items to be consistent with BD's legacy reporting structure. Bard's shipping costs have been reclassified from cost of goods sold to SSG&A and quality and regulatory costs have been reclassified from R&D to cost of goods sold. In addition, our P&L guidance also reflects the reporting of the Gore royalty as other income. Leading the call this morning is Vince Forlenza, Chairman and Chief Executive Officer. Also joining us are Chris Reidy, Executive Vice President, Chief Financial Officer and Chief Administration (sic) [Administrative] Officer; Tom Polen, President; and Alberto Mas, Executive Vice President and President of the Life Sciences Segment. It is now my pleasure to turn the call over to Vince. Vincent A. Forlenza - Becton, Dickinson & Co.: Thank you, Monique and good morning to everyone. As most of you are already aware, we are delighted to have closed the acquisition of C.R. Bard on December 29th of 2017. The combination of BD and Bard further accelerates our strategy of providing solutions for our customers. We are committed to providing our customers with products and value-added services all the way through full solutions to enable better, safer care at a lower cost. Together with Bard, the new BD is uniquely positioned to improve both the treatment of disease for patients and the process of care for healthcare providers. Turning to slide 5 and our first quarter highlights. As we stated in our press release, we are proud of our final quarter as the legacy BD. Our results this quarter highlight the continued strength in our core and our reliable, consistent results. We delivered strong underlying revenue growth in both the Medical and Life Science Segments ahead of our initial expectations. And we continue to remain on track with our CareFusion cost and revenue synergy commitments. We are also off to a terrific start with our Bard integration activities which are progressing as planned. In early January, we celebrated Day 1 activities around the globe to welcome Bard and their 16,000 associates. The energy of our associates globally around what we can do as a combined organization to advance the world of health is really incredible. As we come together as the new BD, we have strong momentum across both legacy companies. I'm pleased to report that the Bard's performance in their final standalone quarter was in line with our expectations. Chris will share some high-level details of Bard's results during his commentary this morning. Moving on to slide 6, we are pleased to share our financial outlook today on a combined basis. We anticipate strong revenue and EPS growth consistent with the expectations we communicated upon announcement of the Bard transaction. On a comparable basis, we expect underlying currency-neutral revenue growth of 5% to 6% and mid-teens growth in adjusted earnings per share. I will now turn things over to Chris for a more detailed discussion of our first quarter financial performance and our fiscal year 2018 guidance. Christopher R. Reidy - Becton, Dickinson & Co.: Thanks, Vince, and good morning, everyone. Moving on to slide 8, I'll review our first quarter revenue and EPS results, as well as the key financial highlights. Total first quarter revenues of approximately $3.1 billion grew 3.7% on a currency-neutral basis. As Vince mentioned, our underlying performance is strong. Our first quarter results include the impact from the U.S. dispensing change, which lowered total company revenue growth by approximately 110 basis points. Excluding this impact, we drove revenue growth of approximately 4.8%. Pricing declined about 20 basis points in the first quarter. In addition, as we communicated to you last quarter, we faced the tough comparison this quarter to strong 6.1% growth in the prior year. I'll provide more color on revenue growth in the quarter in a moment when I take you through the results by segment and geography. Adjusted EPS of $2.48 grew 6.4%, or 3.9% on a currency-neutral basis. This reflects the tough comparison to the prior year and the U.S. dispensing change as expected. Adjusting for the U.S. dispensing change, EPS growth was in the high single-digits. At the end of December, upon closing of the Bard transaction, our gross debt leverage was 4.7 times. We expect to begin to delever in the latter half of fiscal 2018. This timing is in line with what we have previously communicated and our commitment to deleverage below 3 times leverage over three years. Moving on to slide 9, I'll review our revenue growth by segment on a currency-neutral basis. BD Medical first quarter revenues increased 1.9%, which includes a headwind of approximately 170 basis points from the U.S. dispensing change. In addition, the Medical Segment in particular faced the tough comparison to the strong revenue growth in the first quarter of the prior year. Adjusting for the combined estimated impact of 340 basis points from the U.S. dispensing change and the tough comparison, the BD Medical Segment grew over 5% on an underlying basis. Medication and Procedural Solutions or MPS revenues grew 5% in the first quarter. Growth was driven by continued strength in our pre-filled flush devices, infection prevention and surgical products. Revenues in Medication Management Solutions or MMS declined 3.4%. Revenue growth was impacted by a headwind of approximately 540 basis points from the U.S. dispensing change. In addition, the timing of capital installations in both dispensing and infusion in the prior year resulted in tough comparison to the prior year where MMS revenues grew 11%. Adjusting for the combined estimated impact of 950 basis points from the U.S. dispensing change and the tough comparison, MMS grew approximately 6%. Diabetes Care revenues grew 2.2%, driven by growth in pen needles. This reflects a tough comparison to the prior year where growth in the U.S. of 7.2% was aided by the timing of customer orders. In Pharmaceutical Systems, revenues grew 3.7% in the first quarter despite a tough comparison in the prior year where growth of 15.5% was aided by the timing of customer orders. Now, turning to slide 10 and the BD Life Sciences Segment. First quarter revenues increased 7.3%. Strength across the segment was aided by an early flu season in comparison to last year, which contributed an estimated 90 basis points to Life Sciences growth. As you're aware, the timing and severity of the flu season can impact our year-over-year comparisons. Revenues in Diagnostic Systems grew 12.5% in the quarter. Performance was driven by strength in core microbiology and continued strong growth in our BD MAX molecular platform as well as timing of Kiestra installations in the U.S., EMA, and Europe. In addition, the earlier flu season contributed an estimated 260 basis points to Diagnostic Systems growth in the quarter. Preanalytical Systems growth of 4% was driven by strength in core products. Biosciences revenues grew 5.3% in the quarter. The strong momentum from the second half of 2017 continued as expected. This reflects growth in our newer research instruments such as the FACSMelody and FACSymphony as well as continued strength in research reagents. Now, moving to slide 11, I'll walk you through our geographic revenues for the first quarter on a currency-neutral basis. U.S. revenues grew 1.6% in the first quarter, which includes an estimated headwind of 200 basis points from the U.S. dispensing change. The previously mentioned tough comparisons to the prior year in MMS and Diabetes Care also impacted revenue growth in the U.S. Growth in the U.S. was driven by strong performance in the MPS unit in the Medical Segment and the Diagnostic Systems and Preanalytical Systems units in the Life Sciences Segment. Growth in MPS reflects strength in infusion-related disposables and infection prevention. Growth in Diagnostic Systems in the U.S. was driven by the earlier flu season in comparison to the prior year as well as continued growth in BD MAX driven by our newer women's health assays. Preanalytical Systems growth was driven by strength across core products. Now, moving on to international, revenues grew 6.3% in the first quarter. Growth was driven by Kiestra installations and strength in core microbiology within Diagnostic Systems and strong sales of our newer research and clinical instruments within our Biosciences unit. Strength in pre-filled flush devices in MPS and strong growth in Pharmaceutical Systems, which was aided by geographic ordering patterns, also contributed to international growth. Developed markets revenues grew 2.5% in the first quarter, including an estimated headwind from the U.S. dispensing change of 130 basis points. Growth in developed markets was driven by strong performance in Europe in Pharmaceutical Systems and Diagnostic Systems. First quarter emerging markets revenues grew 10%, driven by growth of China of 9% and double-digit growth in EMA that was aided by the timing of tenders. Now, turning to slide 12 which recaps the first quarter income statement and highlights our currency-neutral results. As discussed, revenues grew 3.7% in the quarter, which includes approximately 110 basis points negative impact from the U.S. dispensing change. Moving down the P&L, starting with gross profit, despite the loss of gross profit related to the U.S. dispensing change, gross profit margin was a very strong 54.9%, which is an increase of 4.2% year-over-year. I'll provide additional details on gross profit in just a moment. SSG&A as a percentage of revenues was 25.1%. As expected, in the first quarter. we incurred additional shipping costs related to our efforts to scale shipments in late September, as we discussed on our last earnings call. Our results also include the impact of the U.S. dispensing change as well as a tough comparison of the prior year. On an underlying basis, we're very pleased with the leverage we're getting in SSG&A. R&D as a percentage of revenues was 6.2%, which reflects a 5% increase in R&D dollars year-over-year and our continued commitment to invest in innovation. Our tax rate declined to 16.4% in the quarter. Operating income grew 1.2%, and adjusted earnings per share grew 3.9% compared to the prior year. Both operating income and EPS include approximately 500 basis points of negative impact from the U.S. dispensing change. Now, turning to slide 13 and our gross profit and operating margins for the first quarter. As I mentioned, gross profit margin was a very strong 54.9% in the first quarter. On a performance basis, gross profit margin improved by 30 basis points, as continuous improvement initiatives, cost synergies and favorable mix were partially offset by a headwind of 80 basis points from raw materials, pricing, and the U.S. dispensing change. Currency had a positive impact of 30 basis points on gross profit margin. Operating margin declined 30 basis points in the quarter. This was driven by the increase in SSG&A as previously discussed, partially offset by a positive impact of 30 basis points from currency. I'll take you through the combined company guidance inclusive of Bard over the next several slides, but while we're discussing margins, I'd like to point out that for the full year, we expect to deliver significant underlying margin expansion of 200 basis points to 250 basis points. This reflects the inclusion of Bard beginning in the second quarter of fiscal 2018 and is an increase of approximately 100 basis points from our prior guidance of 100 to 150 basis points of margin expansion for legacy BD. Over the four-year period through fiscal year 2018, we expect to deliver approximately 700 basis points of margin expansion. Moving on to slide 15 in our full fiscal year 2018 revenue guidance. Prior to closing the Bard acquisition, on our November earnings call, we provided standalone revenue guidance for BD of 4% to 5% growth on a currency-neutral basis, which represented strong underlying growth of 4.5% to 5.5%, excluding an estimated 50-basis-point impact from the U.S. dispensing change. Now, on a standalone basis, Bard's revenues are expected to grow 5% to 6%. This represents strong growth of 6% to 7% on an underlying basis, which excludes an estimated 100-basis-point adverse impact from Hurricane Maria in Puerto Rico on Bard's results in the quarter that ended December 31 of 2017. Going forward, we do not expect an impact to Bard's revenues related to the hurricane. On the BD side, as you'll recall, the fiscal year 2018 revenue and EPS guidance we provided on our November earnings call did not reflect any potential adverse impact related to Hurricane Maria in Puerto Rico. However, at that time, we had estimated the impact could be up to $40 million in revenues with a corresponding impact of up to 1-percent-point of EPS growth. Subsequent to our November call, thanks to the heroic efforts of many of our associates, we were able to get our plans back online quicker than previously anticipated. As a result, the impact to revenues and EPS has been minimized and our current guidance for fiscal year 2018 now includes a non-material impact related to the hurricane. For the new BD plus Bard, we expect currency-neutral revenue growth of 4.5% to 5.5% on a comparable basis that includes BD and Bard in both the current and prior year periods as if the acquisition had been completed at the beginning of our fiscal 2017 year. This represents strong underlying growth of 5% to 6% and is in line with the expectations we have been communicating since the deal announcement. Turning to slide 16 in our segment revenue guidance, you'll see guidance for our three segments. As a reminder, certain legacy BD Medical and Bard products have been realigned with our go to market strategy. This has resulted in the movement of revenues between the BD Medical and BD Interventional Segments, and as a result, the new BD Interventional Segment is not analogous with legacy Bard. We expect BD Medical to grow between 4% and 5%. We expect our Life Sciences Segment to grow between 4.5% and 5.5%, which is an increase from our prior guidance. And we expect the new BD Interventional Segment to grow between 5.5% and 6.5% excluding the impact from Hurricane Maria in Puerto Rico in the quarter that ended December 31, 2017. We expect revenue growth to be driven by recent product launches across all three segments and strength in both developed and emerging markets. The combination of BD and Bard accelerates our growth profile in both developed and emerging markets and as a result, we now anticipate developed market growth of around 4% in fiscal 2018 or around 4.5% excluding the estimated 50-basis-point impact from the U.S. dispensing change and the hurricane in Puerto Rico. In emerging markets, we now expect low double-digit growth driven by a diversified base with mid-teens growth in China and strength in EMA and Latin America. For transparency, we'd like to take a moment to provide some color on Bard's results for the quarter that ended December 31, which represented the fourth quarter of their fiscal 2017 year. While we do not plan to discuss the results at length, we wanted to share some of the key insights into the business performance in the quarter. Bard's revenues and earnings performance in the December quarter were in line with our expectations and prior Bard guidance. Bard's revenue growth was 3.7% on a currency-neutral basis, which included an adverse impact of approximately 330 basis points from Hurricane Maria in Puerto Rico. Adjusting for the hurricane, Bard's fourth quarter revenues grew 7%, in line with company's prior guidance. Revenue growth was driven by continued strength in China and Latin America and more broadly across emerging markets. In addition, strong high single-digit growth in Peripheral Vascular in the U.S. was aided by the launch of Lutonix AV. As a reminder, these businesses will be reported in BD's new reporting structure going forward. And moving on to slide 17 and our full fiscal year 2018 EPS guidance. There are a number of moving parts that impact earnings per share in fiscal 2018. For modeling purposes and to ensure consistency, I'd like to provide more color on EPS guidance. Starting on the left side of the chart, with the guidance we provided on our November earnings call for legacy BD, we expected adjusted EPS of $10.55 to $10.65. This reflected currency-neutral growth of approximately 10%, driven by strong growth in operating income, partially offset by headwinds of 2% to 3% from the U.S. dispensing change and approximately 3% from an expected increase in our effective tax rate. Assuming foreign currency rates in place at the time, we expected currency would provide a 2% tailwind in fiscal 2018 resulting in expected EPS growth of approximately 12%. Now, continuing to the right in the chart, we expect underlying accretion from the Bard acquisition of 3% to 4%. This is expected to be offset by approximately 2% from a combination of the divestitures of our soft tissue core needle biopsy product line and Bard's Aspira product line of tunneled, home drainage catheters and accessories, as well as the timing of close of the Bard acquisition. The net result is low single-digit accretion, which is in line with what we've been communicating. As you'll see when I take you through our detailed P&L guidance on the next slide, we expect an effective tax rate of 17% to 19% in fiscal 2018. This is a decrease of approximately 1% from the combined effective tax rate of 18% to 20% that we had previously communicated and is driven primarily by U.S. tax reform and results in an increase of approximately 1% to our EPS guidance. From an investment standpoint, consistent with our initial thoughts, we plan to invest approximately $15 million toward Bard revenue synergies and this is dilutive to earnings by approximately 50 basis points. In addition, while our guidance does anticipate an increase related to the flu, we're also seeing increased pressure related to resin pricing that is offsetting the expected flu benefit. The net of these items results in approximately 12% currency-neutral adjusted EPS growth in fiscal 2018 or 14% to 15% on an underlying basis adjusted for the impact from the U.S. dispensing change. This is in line with the mid-teens growth profile we've been communicating to you since the deal announcement. Lastly, we anticipate an incremental currency tailwind of about 150 basis points based on current rates. This assumes a euro to dollar exchange rate of $1.22. All-in, this results in strong newco earnings of $10.85 to $11, which represents 15% to 16% growth. Another important element to note that is while we expect to deliver low single-digit accretion in fiscal year 2018, we are reaffirming our guidance of high single-digit accretion in fiscal year 2019. From a phasing perspective, we expect to achieve $70 million to $80 million in cost synergies in fiscal year 2018, with the balance being fairly ratable over fiscal years 2019 and 2020. We're committed to fully realizing $300 million in annualized cost synergies as we exit fiscal year 2020. Turning to slide 18, I'd like to walk you through the balance of our guidance expectations for the full fiscal year 2018 for the new BD including Bard. This guidance includes the results of Bard as of January 1, 2018, which is the beginning of our second fiscal quarter. We expect reported revenue growth for newco of 30% to 31%, which includes a currency tailwind of approximately 200 basis points. Adjusted gross profit as a percentage of revenue is expected to be approximately 56% to 57%. This is an increase of approximately 200 basis points from our prior standalone BD guidance and is due to the inclusion of Bard's robust gross margin profile. Adjusted SSG&A is expected to be 24.5% to 25.5% of sales. This is an increase compared to our November guidance for standalone BD and is primarily due to Bard's higher SSG&A spend profile which is driven by the direct sales approach, partially offset by anticipated G&A related cost synergies. We expect our R&D investments to be in line with fiscal year 2017 at 6% to 7% of revenues. As a new company, we will continue to invest in new products and platforms. As a result of the items I just detailed, operating margin is expected to be between 25% and 26% of revenues. On a currency-neutral basis, we expect our underlying operating margin to improve by 200 basis points to 250 basis points for the total fiscal year. As we discussed, we expect our tax rate to be between 17% and 19%. For fiscal year 2018, we anticipate our adjusted average fully diluted share count to be approximately 261 million shares. Cash flow is expected to be strong with operating cash flow of about $3.5 billion in fiscal year 2018. Capital expenditures are expected to be between $850 million and $900 million. So in summary, I'm excited about the strong momentum we have across the BD and Bard businesses and I'm confident that we'll be able to deliver on our commitments in fiscal year 2018, which are consistent with what we've been communicating to you since the announcement of the transaction. Now, I'd like to turn the call back over to Vince who'll provide you with an update on our key initiatives and product portfolio. Vincent A. Forlenza - Becton, Dickinson & Co.: Thank you, Chris. And moving on to slide 20. As we have been discussing with you, our integration of CareFusion is largely complete and we are on track to achieve our cost and revenue synergy commitments. At the same time, we're making excellent progress with the integration of Bard. As I discussed in my opening remarks, we have hosted very successful Day 1 activities globally. We are entering 2018 with great momentum across both companies. Our integration plans are well underway and as Chris discussed earlier, we are committed to fully realizing $300 million in annualized cost synergies, as we exit fiscal year 2020. In addition, as Chris mentioned, we've begun our initial investment in revenue synergies. We're continuing to build out our revenue synergy plans at a very detailed level and we look forward to sharing updates with you along the way. Turning to slide 21 and our planned product launches by segment. As we've been discussing with you, we have a very robust product pipeline across the company. I will not review all of the items on slide 21 in detail, but we will share some comments on a few items. Within our Medical Segment, we have recently begun shipping IV solutions to our customers through our partnership with Fresenius. As saline remains limited in supply, the addition of sodium chloride to our Medication Management portfolio will benefit our customers and their patients. Beyond sodium chloride and 5% dextrose, we expect to add additional compounds to our offering this fiscal year, but contingent on our partner's FDA approval. Before we move on to our Life Sciences Segment, I would like to provide an update on a program we've been working on in our Diabetes Care business relating to enabling dose capture for insulin pens. We've made a decision to stop this program due to the reassessment of the near-term commercial opportunity. We've redeployed these resources into our smart Type 2 patch pump and are funding additional clinical trials in anticipation of launch. Including our first in human insulin infusion trial running now, we're very excited about our progress on this transformative initiative, and we'll come back to the pen program later on. Moving on to our Life Sciences Segment, we recently obtained the CE Mark for the BD MAX Check-Points CPO assay. This next generation molecular screening test for antibiotic resistant CPOs provides detection of the five most common carbapenemase genes in less than 2.5 hours as compared to traditional methods that can take up to 24 hours. Together with our plated media and the BD Phoenix CPO detect panels, BD provides comprehensive solutions for screening and infection management to support clinical microbiology laboratories in their AMR programs. We also expect to continue targeted expansion of our BD MAX menu this fiscal year with the launch of our Enteric viral panel and our TB assay. In addition, we anticipate approval of our BD Onclarity HPV assay, which will further differentiate our women's health offering. Moving on to the Interventional Segment, to help bridge the time from Bard's last public update in January 2017 to date, we have provided a list of Bard's product launches for fiscal 2017 in the appendix to today's slide presentation. Focusing now on the list on slide 21, I will highlight a few of the fiscal 2018 items in the Interventional Segment. The AV access drug coated balloon, which launched at the beginning of BD's first quarter, is changing the treatment pathway for the hemodialysis patients suffering from a stenotic fistula. This launch makes a significant new treatment option for the highly vulnerable patient population and is the only DCB approved for this indication in the U.S. Also related to DCB, as most of you are aware, in January, we announced the completed enrollment in our Lutonix below-the-knee trial, which is a significant milestone. This study has enrolled over 450 patients over four-and-a-half years – four-plus years I should say, and it is more important to note that there have been 14 safety monitoring reviews over this time with no safety issues. This speaks highly to the safety of the product. The Lutonix BTK trial is the only ongoing DCB trial for BTK arteries in the U.S. and we anticipate completing six-month follow-up and submission of the PMA to the FDA by the end of calendar year 2018. We look forward to being the first company to have the below-the-knee indication in the U.S. Moving on to some fiscal 2018 anticipated launches, with the Interventional Segment. Our new low profile 5French ProSeries LifeStent platform launched in the EU mid-year 2017 and just received PMA approval. We are building inventory and anticipate launching the product in the U.S. over the next few months. This new stent family built on the LifeStent platform will provide the lowest profile, longest lengths and broadest indications of any peripheral arterial stent. This new launch also expands our 5French ProSeries of chronic total occlusion, percutaneous transluminal angioplasty and drug coated balloon products to a full suite of peripheral arterial disease tools that are 5French compatible. We're also anticipating PMA approval and preparing for the launch of our Covera family of next generation AV access circuit stent grafts. We completed enrollment in IDE studies for both the treatment of AV fistulas and AV access grafts in 2017. Our graft study enrolled a little faster with follow-up completed last fall and PMA submission in December. We currently anticipate a U.S. launch of Covera with the AV access graft indication towards the end of fiscal year 2018, with PMA submission for the fistula indication anticipated about the same time. As you can see, we have a very rich pipeline of new products across our businesses and we look forward to sharing updates with you along the way. Before I move on, I would like to point out that we have included a new slide in the appendix of today's presentation that provides an update on our sustainability initiatives. While we have always been focused on ESG in creating shared value, we have received feedback from the investor community about its increasing relevance to investment decisions. We hope you find the information useful in understanding BD's commitment to this important topic. Moving on to slide 21 (sic) [22], I would like to reiterate the key messages from our presentation today. We delivered strong underlying revenue growth in both the Medical and Life Sciences Segments in our final quarter as legacy BD. Our performance highlights the continued strength in our core and our reliable, consistent results. Looking ahead, we are confident in our fiscal 2018 outlook which is consistent with the expectations we communicated upon the announcement of the Bard transaction. I would like to thank all of the BD and Bard associates for their dedication and hard work that made this combination possible. We have great momentum across both companies as we welcome C.R. Bard to BD, and we are excited about the opportunity we have as a combined company to advance the world of health for our customers and their patients around the world. Thank you. We will now open the call to questions.

The floor is now open for your questions. . Thank you. Our first question comes from the line of Bob Hopkins with Bank of America.

Hello. Thanks very much for taking the questions. I appreciate it. Vincent A. Forlenza - Becton, Dickinson & Co.: Good morning.

Good morning. So the first question I have is just really a clarification on the guidance and some of the information you provided yesterday. So for the 2018 pro forma guide of 5% to 6%, is ex-dispensing changes and the hurricanes, what number is that compared to for 2017? I saw that 5.2% yesterday, but is that also ex-dispensing changes and hurricanes? Christopher R. Reidy - Becton, Dickinson & Co.: No. I think the way to think about it is 5.6% ex-dispensing.

Okay. That's for 2017? Christopher R. Reidy - Becton, Dickinson & Co.: Yes.

Okay. So that compares to the 5% to 6% free (39:21)? Christopher R. Reidy - Becton, Dickinson & Co.: That's right. That's right.

Thanks for that clarification. Christopher R. Reidy - Becton, Dickinson & Co.: Sure.

And then, just one other thing I wanted to ask about is just you mentioned resin cost going up, could you just quantify that for 2018? Christopher R. Reidy - Becton, Dickinson & Co.: Yeah, so we're looking at an incremental $15 million or so. Now – you have more clarity around that in the upcoming quarter, it gets a little bit murkier in the second half of the year. But our best guess right now based on what we're seeing in that market, oil prices certainly have an impact, but the market itself is a difficult market in terms of supply and demand. And so, we're estimating right now about $15 million impact. What we are saying, we're also assuming a benefit from the flu upside, and the two of those basically offset one another as we see it today. Vincent A. Forlenza - Becton, Dickinson & Co.: Bob, thanks for your questions.

Thank you.

Your next question comes from the line of David Lewis with Morgan Stanley. Vincent A. Forlenza - Becton, Dickinson & Co.: Good morning, David. David Ryan Lewis - Morgan Stanley & Co. LLC: Good morning. A couple quick ones for me. One, strategically for – and then, one, actually more financially oriented. So Vince, just on the Gore royalty, this is sort of your first time having to pro forma Bard. Bard had talked about their strategic plans for how they were going to offset the Gore royalty. You've obviously moved that to other income which is the appropriate treatment. But how are you thinking about the opportunity to offset the Gore royalty, either through M&A, SG&A cuts or balance sheet deployment? And I have a quick follow-up for Chris. Vincent A. Forlenza - Becton, Dickinson & Co.: Well, first off, in terms of the Gore royalty, as we've been talking about, we expect to be delevering aggressively. And so, we're going to see a decrease in interest expense. So that's number one on the list and the timing kind of works out very nicely from that standpoint, David. The second thing is, yes, you will also see the rollout of the cost synergies. And third, as we get to that timeframe, we're going to expect the benefit of revenue synergies starting to impact. So when you put that all together, I think we're in good shape. Christopher R. Reidy - Becton, Dickinson & Co.: Yeah. The only thing I would add then as well is you've got the conversion of the mandatory preferred at that timeframe, which helps to offset a little bit as well... Vincent A. Forlenza - Becton, Dickinson & Co.: (41:27) Christopher R. Reidy - Becton, Dickinson & Co.: ...the factors. Yes. The interest goes down. David Ryan Lewis - Morgan Stanley & Co. LLC: So generally, you think you can offset the Gore royalty through a lot of operating and non-op dynamics without deploying material balance sheet. Christopher R. Reidy - Becton, Dickinson & Co.: Yes. Vincent A. Forlenza - Becton, Dickinson & Co.: Yes. We think we're in good shape with that, David. David Ryan Lewis - Morgan Stanley & Co. LLC: Okay. Very clear. And then, Chris, just a few dynamics of earnings here. Thinking about the earnings guidance. To us, currency, based on your euro/dollar assumptions, looks a little conservative. Are there any currency headwinds that we're not thinking about in terms of different pieces there? And your tax rate, another piece there where that number seems conservative based on this quarter's rate going forward. So does that reflect your full appreciation of all the tax dynamics, or does that also look a little conservative here as we start the beginning of the year? So your currency and tax and do those look conservative... Christopher R. Reidy - Becton, Dickinson & Co.: Sure. David Ryan Lewis - Morgan Stanley & Co. LLC: ...are the things we're missing? (42:18) Thanks so much. Christopher R. Reidy - Becton, Dickinson & Co.: Sure. Great. Well, as you know, we do the 30-day moving average on FX, and the quote we have today is at $1.22 to the euro. So there's no other basket of currency impact or whatever. They're all moving consistent with the euro. And obviously, we're at $1.235 I think today, so there is a little bit of upside there. We'll see how that goes. We remain consistent with the 30-day average just to smooth out the bumps and the benefits along the way. But if we do see some currency upside, that will flow through in the future. We would also look, though, to see if there is more investments. We're making the initial investment of the $15 million to drive Bard synergies, and if there's significant amount of FX upside going forward, we might invest some of that. But that's to come. And then, on the tax rate, there's an awful lot of complexity around the tax rate. As you might imagine, they institute the tax reform at the end of December, and it's right on top of a very large transaction with BD and Bard. So there's a lot of things going into that. As we had previously mentioned, we see the benefit of tax reform to our tax rate as being a slight benefit. There's a lot of things that go into that. But that's what's manifested in the impact down from the 18% to 20% that we had announced upon the deal announcement, down about a full percentage point down to the 17% to 19%. There are some impacts in 2019 that would be headwinds, as some pieces of the tax reform act go into effect in 2019 that don't affect us in 2018. But we think that some of the combination with Bard and those kinds of things, we should be able to offset that going forward. So we feel good about the 17% to 19% rate as we get that benefit from tax reform. David Ryan Lewis - Morgan Stanley & Co. LLC: Great. Thanks so much. Vincent A. Forlenza - Becton, Dickinson & Co.: Okay. Thanks, David.

Your next question comes from the line of Mike Weinstein with JPMorgan.

Thank you. My questions are primarily around the guidance as well. So if I think about Bard, that kind of net 1% to 2%, call it, year one accretion, that's before the benefit of – the dollar's moved since you announced the transaction and before the benefit of tax, you're separating those and putting them in the other other (44:57) columns? Is that right? Christopher R. Reidy - Becton, Dickinson & Co.: Yes, that's the right way to think about it, Mike.

So if we really thought about Bard just as a standalone, Bard would be year one much more accretive than that 1% to 2%, because again, the movement of dollar since the time you announced the transaction and the benefit of tax reform? Christopher R. Reidy - Becton, Dickinson & Co.: Yes. Absolutely.

Okay. The $0.07 (45:19) beat this quarter relatively Street expectations, you didn't let that flow through. Could you maybe just comment on why? And then, I don't think you've given us what the incremental tax liability is going to be from reform and is that in your 4.7 times gross debt number? Christopher R. Reidy - Becton, Dickinson & Co.: Sure. So let me take that last piece first. That's important in terms of the tax. We will, as part of the press release, I think in the attachments you'll see, that we lay out the impact of the unremitted earnings. So we took a charge on the BD side of $561 million related to that toll charge. And then, that was offset, though, by a $290 million benefit that relates to the write-down of the net deferred tax liability. But the right one to focus on from a cash standpoint is the $561 million. Now, on the Bard side, in their opening balance sheet, they recorded a charge of $220 million related to the toll charge. So in total, it's $781 million. Now, the good news is that we don't start paying that until next fiscal year, and the way it's allocated, it's back-end loaded, so it's really only 8% a year in the first five years. The reason that's important is it really doesn't have a big impact on our three-year period where we're paying down the debt to the 3 times leverage, so really no material impact on that. And then, as we look forward, you see that our cash this year, we're generating $3.5 billion, that's with only three quarters of Bard included, so that will go up next year and the year after. So we generate a lot of cash. So while I'm not thrilled about paying this $781 million over the next eight years, we have more than enough cash generation going forward to cover that. So those are the details around that. And then, in terms of the first question, we beat the revenue that drove Q1 EPS earnings, and that's still within our 5% to 6% overall revenue guidance that will flow down. So the range I think we've captured within our range the benefit in the first quarter. And frankly, it's still early, so we'll see how it goes going forward.

Okay. Thank you, guys. Vincent A. Forlenza - Becton, Dickinson & Co.: Okay. Thanks, Mike.

Our next question comes from the line of Isaac Ro with Goldman Sachs. Vincent A. Forlenza - Becton, Dickinson & Co.: Good morning, Isaac.

Good morning, guys. Thanks. Hi. How are you? Vincent A. Forlenza - Becton, Dickinson & Co.: Good.

Question for you on the Diagnostics business. There's some changes in reimbursement going through in the U.S. marketplace. Curious what you're seeing so far. You said that labs are facing low reimbursement for some of the more commodity categories that you serve. Vincent A. Forlenza - Becton, Dickinson & Co.: So I'll turn it over to Alberto. Alberto, do you want to get that? Alberto Mas - Becton, Dickinson & Co.: Yes. Hello. Good morning. It's too early to see any impact at this point. We've always seen this as a relatively limited impact to us directly. There will be some overall pressure on pricing we anticipate, but it's not significant. We're told it's U.S. only. Secondly, it's capped every year 10% maximum decrease. It's only for CMS and a lot of our customers are obviously private. And it only impacts the last schedule (48:59) versus the hospital and the DRG. So we're not anticipating this to be a significant impact on us. Vincent A. Forlenza - Becton, Dickinson & Co.: Okay. Thanks.

And then, maybe... Vincent A. Forlenza - Becton, Dickinson & Co.: Yeah, go ahead, Isaac.

Thanks. So Chris, maybe second item on just the expense side, if I think about the long-term with regard to the Bard integration, could you maybe outline some of the longer-term projects that come into play, as you think about back-end operational stuff, because you've done a couple of larger deals for the last two years? I'm curious you said to us (49:32) there are some longer-term projects in the works? Christopher R. Reidy - Becton, Dickinson & Co.: Yes, absolutely. So what I've said is that there's really you think about this in three buckets. So the $300 million, the first year, you're really talking about public company costs as well as procurement kind of savings. So that's what you would expect the first third to be. In the third year, you would expect the more long-term projects that you're referring to which is looking at manufacturing facilities and distribution centers. And obviously, that takes a lot of planning. You want to get that right. And that's what you would see showing up in year three. In year two, you would be looking at some of the functional systems and transformations, putting the two companies on the same kind of systems integrations, going to Workday, for example, those kinds of things and that shows up in year two. So the only other thing I'd say is because it's not a perfect year, we're looking at about $70 million to $80 million of impact in the three quarters this year, and then, pretty much ratable over the next two years.

Thanks, guys. Vincent A. Forlenza - Becton, Dickinson & Co.: Thanks very much.

Our next question comes from the line of Kristen Stewart with Deutsche Bank.

Hi. Good morning. Thanks for taking my question. Christopher R. Reidy - Becton, Dickinson & Co.: Good morning, Kristen. Vincent A. Forlenza - Becton, Dickinson & Co.: Good morning.

I was just wondering with, I guess, now having the acquisition closed for I guess a little over a month now with operating and just seeing the revenue synergies with having the ability now to spend, what sort of spending, where are you targeting it? Is it more for U.S. spend, international spend? Can you maybe just give a little bit of detail what gives you the confidence to spend on revenues and what sort of synergies are you looking at? And I've one follow-up. Vincent A. Forlenza - Becton, Dickinson & Co.: Sure. I'll ask Tom to talk to that. But it's very much in line with our original thinking on the deals. Tom, do you want to just take that? Thomas E. Polen - Becton, Dickinson & Co.: Sure. Hi, Kristen. This is Tom. So from a regional perspective, actually, the U.S. and Europe are the two areas that we're most heavily investing in and about a little less than a third would be in emerging markets, so two-thirds in U.S. and Europe and a little less than a third in emerging markets. From a business unit perspective, those investments are also heavily concentrated within our MDS business unit and the surgery area. And that, as you can imagine, is expected. That's where we see synergies of portfolios coming together. So the PICCs coming in, MDS from Bard in with our catheter and other drug delivery technology, so that's an epicenter of synergies we see. And then, in surgery, where we're moving our ChloraPrep business and V. Mueller business, Interventional Specialties from BD into that area, obviously, ChloraPrep now having channel access, for example, in Europe via the biosurgery team and opportunities for us to further accelerate growth, for example, even in biosurgery channel expansion ex-U.S. So those are the two businesses and two major regions that we're investing in. Thanks for the question.

And what do you think in terms of the payback on these investments? Do you think that you'll get those back in 2020? And then, just a follow-up on the patch pump. Could you just remind us on the timeline to market then and do you think that taking the resources away from the insulin pen can help accelerate that? Thanks. Thomas E. Polen - Becton, Dickinson & Co.: Yes. So Kristen, we see, from a payback period, actually, this first tranche of investments have a relatively short payback period. And so, we won't see – the revenue will start to ramp in the very – really see it come through in 2019, not necessarily notable where it will be visible across the new $16 billion company. But we expect the pay back relatively to break even within a year on the first $15 million of investment. And then, there's other tranches of investments that we'll be making in the future as was alluded to earlier on the call. When it comes to the patch pump, again, it continues to go very well and our targeted launch is at the very end of FY 2019. And I wouldn't say we see an acceleration from the investments that we're making in a faster way there. It's more of we're adding in clinical trials and that's some learnings that we've had, particularly in the diabetes space where we want to do more patient testing prelaunch, and so, we've added in a number of patient trials. You heard Vince mentioned actually an active patient trial that's underway right now. It's actually our first use of Swatch in patients with insulin underway, and all of that's been funded incrementally versus some of our original thinking and plans. Vincent A. Forlenza - Becton, Dickinson & Co.: Yes. Just get more customer data earlier on. Thomas E. Polen - Becton, Dickinson & Co.: Absolutely. Vincent A. Forlenza - Becton, Dickinson & Co.: Kristen, thanks for the questions.

Thank you.

Our next question comes from the line of Brian Weinstein with William Blair. Brian D. Weinstein - William Blair & Co. LLC: Yes. Good morning. Thanks for taking the questions. Moving away from Bard for a second, have you guys seen any improvements in business operations from the business model change in dispensing? And related to that, we keep getting questions on market share between you and your competitor there. So can you talk a little bit about what you see for growth in dispensing on a normalized accounting basis versus the market? And then, I have a follow-up as well. Thanks. Vincent A. Forlenza - Becton, Dickinson & Co.: Yes, we can do that. We have some good data on that that Tom can walk you through. We're feeling very good about that business. Thomas E. Polen - Becton, Dickinson & Co.: Hi, Brian. This is Tom. So we actually continue to see fantastic customer feedback to the new model. We see our Net Promoter Score actually approximately doubling. Since we've made that change, the feedback from customers has been very positive, particularly along with some of the investments that we've made in clinical consultants who are supporting wider use of the features of Pyxis ES. We've always said that folks only were using about a third of the power of the platform, and now, with some of the consultants that we've been able to fund through this new approach, we're really seeing customers being able to adopt and get more value out of the platform. If you look actually at last year, the U.S. dispensing, excluding trace, was about 10% growth for the year, so very, very strong underlying performance. And while we certainly don't make statements about peers or competition, specifically, I would say that we continue to gain momentum in our customer base. As you know, we have a very significant market leadership position, and we continue to expand that position through integration of our Med Management continuum including our IV compounding platform, what we're now calling Pyxis IV Prep, our inventory management system, which we now call Pyxis Logistics, and the new BD Health site platform that we launched at ASHP this year. So overall, really positive feedback from customers and we're seeing very good momentum going forward. Brian D. Weinstein - William Blair & Co. LLC: Great. And then, a quick follow-up on flu. I would have thought the impact potentially could be bigger in Q2. Did I hear you right that you thought that that would potentially just be about $15 million? And are you still producing flu kits for Veritor? There were some rumor that you may have stopped production after you hit some target volumes for the year. Thanks. Christopher R. Reidy - Becton, Dickinson & Co.: I think what you have to remember, Brian, is that last year, the flu was fairly strong in the second quarter. So although we had a nice benefit in the first quarter compared to last year, it's not absolute that it will be higher for the year. But in January, we really did see and it clearly is a strong flu season. That's why as we look out – you don't know what's going to happen, it could drop off, so we'll see. But based on January, we're thinking that there is more flu upside in the remainder of the year. And roughly, it's offset by that $15 million increase in resin prices. So that's the way we currently see it. Vincent A. Forlenza - Becton, Dickinson & Co.: And, Alberto, from production standpoint? Alberto Mas - Becton, Dickinson & Co.: Well, not only have we not stopped it, we have increased it. We are at full capacity, adding shifts, anything that we can do to try to increase production, as we see the demand being very, very high. And as of today, we haven't seen any unusual (57:22) back order, although it is continuing be a very, very high level, so we are a little bit of hand to mouth. But we're doing everything possible to crank up production. Brian D. Weinstein - William Blair & Co. LLC: Thank you. Vincent A. Forlenza - Becton, Dickinson & Co.: Okay. Thanks, Brian. Great to hear from you.

Our next question comes from the line of Larry Biegelsen with Wells Fargo.

Good morning, guys. Thanks for taking the questions. Vincent A. Forlenza - Becton, Dickinson & Co.: Good morning.

Two product-related questions for me. I'll ask them both upfront. First, Vince, you highlighted IV solutions. That was the first product you highlighted in the initiatives for fiscal 2018. Could you help quantify the benefit to BD in fiscal 2018 and beyond? And then second, Lutonix is obviously an important product for Bard, but there are a lot of moving parts or changes in that market from a reimbursement and competition standpoint. But you, obviously, have new indications of geography. So can you talk about your high level expectations for Lutonix over the next few years? Thanks for taking the questions. Vincent A. Forlenza - Becton, Dickinson & Co.: Yeah, sure. So I'm going to turn those over to Tom. In the quarter, the IV solutions was not meaningful. But we do expect to ramp up in the second part of the year. And how far that goes is also going to depend on how much capacity our partner has and do we get new FDA approvals. But Tom, do you want to add anything else to that and then just jump on the drug coated balloons? Thomas E. Polen - Becton, Dickinson & Co.: Hi, Larry. I would just say for IV solutions, think about it in tens of basis points for the MDS business specifically, and then, obviously, that dilutes out further when you take it to the BDX level. Specifically, on Lutonix, I would just say, obviously, the change in reimbursement that you referenced, it's not something that we like, but it's also something that we expect will have only minimal impact on our growth trajectory this year and going forward. We didn't see fundamentally a change year-on-year in growth, think about 2018 growth for Lutonix and DCBs overall being very much in line with growth that was seen in prior years and we expect that to go forward and that's really driven by the very robust pipeline that the business has. Obviously, we've got the new AV indication, we have BTK coming that's going to help that whole category grow for us, and we expect drug coated balloons are going to continue to grow in line with prior year in 2018 and in the years ahead.

Thank you. Vincent A. Forlenza - Becton, Dickinson & Co.: Next question.

Our next question comes from the line of Brandon Couillard with Jefferies.

Thanks. Just two quick ones for Chris. Can you tell us what you're penciling in for ASPs for fiscal 2018? And then, for newco, can you remind us how big resins are as a percent of COGS? Vincent A. Forlenza - Becton, Dickinson & Co.: I'm sorry. Can you ask the question again? There was some static there (01:00:11) Brandon ASPs.

Yeah. What you're penciling in for ASPs for the year, and then, secondly, what resins are as a percent of COGS for newco? Christopher R. Reidy - Becton, Dickinson & Co.: Okay. On the ASPs, what we have said is that we expect pricing across the business to be slightly down. So I think tens of basis points across the business. And then, the percentage of resin, resin across BD is about $250 million. I think that's just the BD side. So that gives you something to work with. Vincent A. Forlenza - Becton, Dickinson & Co.: Partly yes, (01:00:46) it'll be a little bit more... Christopher R. Reidy - Becton, Dickinson & Co.: Yeah, it'll be a little bit more with Bard. Vincent A. Forlenza - Becton, Dickinson & Co.: With Bard, I guess, $300 million or so.

Super. Thanks. Vincent A. Forlenza - Becton, Dickinson & Co.: Great. Sure.

Our next question comes from the line of Bill Quirk with Piper Jaffray. William R. Quirk - Piper Jaffray & Co.: Great. Thanks. Vincent A. Forlenza - Becton, Dickinson & Co.: Good morning, Bill. William R. Quirk - Piper Jaffray & Co.: Good morning, everybody. So recognizing it's a little more difficult to pull up, any way to help us think about the impact of the flu season on some of the ancillary medical products just given the higher rate of hospitalization? And so, I guess what I'm asking about is kind of ex the actual direct flu products themselves. Vincent A. Forlenza - Becton, Dickinson & Co.: Yes, so there is a correlation, of course, with folks ending up in the hospital and having other conditions. Now, how to quantify that, that's extremely difficult. But historically, if we look back, we do see a little bit of a positive impact across multiple product lines. We see it on the Diagnostic side with blood culture and you may see, of course, in catheters and those sorts of things. And there is an increase in cardiac events. As I said, it's not big enough that we can measure it, but it is certainly there. William R. Quirk - Piper Jaffray & Co.: Okay. Got it. Thanks, Vince. And then, Tom, just a quick update on the O.U.S. CareFusion revenue synergies from new product launches and how should we think about that going forward. Thank you. Thomas E. Polen - Becton, Dickinson & Co.: Sure. Hi, Bill. So we're now over 250 active or in-process registrations when it comes to focusing on revenue synergies, so we're continuing to make very good progress there. And while we don't quantify those revenue synergies each quarter, we continue to expect to see growth contributions in the range of tens of basis points as we've shared in the past. We also expect to see those most visible in the international MDS and MMS businesses. And if you'll notice, you'll see those, if you look at the last couple of quarters, those continuing to go very, very strongly, MDS and MMS international. William R. Quirk - Piper Jaffray & Co.: Got it. Thank you. Thomas E. Polen - Becton, Dickinson & Co.: Yes. Vincent A. Forlenza - Becton, Dickinson & Co.: Yes. Thanks a lot.

Our next question comes from the line of Doug Schenkel with Cowen.

Hey. Good morning. Vincent A. Forlenza - Becton, Dickinson & Co.: Good morning.

First, starting on the product realignments, what has been the initial feedback from your sales force and customers? Could you help quantify how this might accelerate the revenue growth outlook for the impacted segments? And should we be contemplating any initial dissynergies related to the realignments? And then, I guess the second thing I just wanted to quickly talk about is Bard's M&A history. As you guys know, strategic tuck-ins have helped boost Bard core growth over time. This was arguably a pretty important part of their strategy. Could you just provide us an update on how much capacity you have to keep that going given where the gross leverage ratio is today? Thank you. Vincent A. Forlenza - Becton, Dickinson & Co.: Yes. Okay. So I'll start on the M&A side. And there's always part of our modeling that we would leave room for strategic M&A. And of course, the way we think about that is more must do. And the conversation we're having with the Interventional Segment is, give us your pipeline so that we can plan that in. And as you said, that's tuck-in M&A, and we take that as kind of the base of what we have to do. The second thing is going on in the other two segments, so we're creating that list right now. And as we have to do it, we will do it. But we think we've got enough capacity planned that we can do that plus get down to the 3 times leverage that we're talking about. So we're in pretty good shape with that. Tom, do you want to pick up the other piece? Thomas E. Polen - Becton, Dickinson & Co.: Yes. Hi, Bill. So on the realignment, the feedback from both the sales team and our customers have been very positive. Obviously, our customers really were excited by the opportunity, particularly on the vascular access side where they saw the power of those two portfolios really helping to meet their needs from one partner, right, the ability to provide short and long-term vascular access, be it peripheral catheters, midlines or PICCs. And so, putting those in one business, we have a program what we call optimal vascular access where we help and we're developing more tools and we'll be working on evidence generation around the power of our portfolio to help prevent bloodstream infections, to help optimize length of stay for the patient and for the caregivers that are inserting that and managing that. It can be quite costly. From a side effect, obviously, bloodstream infections, but also just the longer you can keep that site active and dwelling is very important, particularly in some of the longer care patients like those undergoing cancer treatment. Same thing holds true on the surgery side. Our teams are very excited about that realignment. Of course, we had a surgery group come in from CareFusion who was put in our Med Management business, and so, they felt a little bit out of home. They actually feel very much at home now moving into a group that wakes up and thinks surgery every day of the week. And so, there's efficiencies and effectiveness opportunities from that combination. A good example of it would be the ChloraPrep team who primarily goes into ORs and calls on surgeons now in the surgery group, great opportunity ex-U.S. where Bard has had teams calling on surgeons in Europe. BD never had that in the past. They're now – as part of one of the first areas of revenue synergies that we're investing in is getting those products into more surgery reps in Europe now and starting to expand the use of those products to prevent surgical site infections as an example. So overall, we're hearing very positive feedback. But we're also being very staged in the way that we do that integration, right? We're not looking to just suddenly push the portfolios together through one common sales team everywhere. We're being very staged in the way that we plan and think that through so that we prevent any dissynergies. Vincent A. Forlenza - Becton, Dickinson & Co.: Okay. Thanks, Tom.

Our next question comes from the line of Rick Wise with Stifel. Rick Wise - Stifel, Nicolaus & Co., Inc.: Good morning, everybody. Two questions. First for Chris, and then, a bigger picture one for you, Vince. Vincent A. Forlenza - Becton, Dickinson & Co.: Okay. Rick Wise - Stifel, Nicolaus & Co., Inc.: Chris, I just want to make sure that I'm not missing anything on gross margin or I'm understanding the guidance. On gross margin, just a couple aspects (01:06:58). You talked about the 80 bps of drag in the guidance from currency. A couple things, included in that was dispensing, how much was the dispensing? And then, just looking at it, I'm sure I'm not thinking about it correctly. I know there are a lot of moving pieces, but if I just over-simplistically take the Bard gross margin and the BD gross margin and weight them, annualized basis, that looks like 58%, 59% kind of gross margin range. You're guiding to 56%, 57%. Okay, you only have nine months, that's not a full year. But that feels extra conservative. Am I thinking about this correctly? Is it the Gore royalty? Just a little more color if you would on the right way to think about it. Christopher R. Reidy - Becton, Dickinson & Co.: So your point there was that Gore royalty does have an impact. The impact of dispensing is about 40 basis points. The Gore royalty hits you by about 30 basis points on top of that. And don't forget you only have Bard only for the three quarters, so that doesn't give you the full benefit. So we won't get that. Initially, what we were saying is that Bard would impact us by 300 basis points or so for a full year. So you have to discount that back to three quarters. So when you have all those ins and outs, that's what you come up to with the guidance that we gave you. As we talk about that flowing down, that flows down to operating margin as well, and we're looking at 200 to 250 basis points in FY 2018 and that will basically give us about 700 basis points over the last several years. And then, going back to our initial guidance, we talked about 200 basis points a year in the next two years, so another 400 basis points through 2020. So when you add all that up, it's about 1,100 basis points from the period beginning back in, I guess, 2015 through 2020, so in five years, 1,100 basis points. So we feel good about that. Rick Wise - Stifel, Nicolaus & Co., Inc.: Great. And Vince, I hate to ask you already where the upside drivers might come from. I mean I think you've given us realistic even perhaps conservative guidance, but do the upside drivers as you work hard to make all this happen over the next year or three come from faster debt paydown, more cost cutting, pipeline upside? I know you're excited about the Bard pipeline, the benefits of the now even larger portfolio as you meet with customers. How are you thinking about it? Thank you so much. Vincent A. Forlenza - Becton, Dickinson & Co.: Yes, and thanks, Rick. I'm going to start back with both cores on both businesses look strong. We came into this year with a good pipeline, and we're making good progress on that pipeline on the BD side. And I just walk you through the Bard side. So I feel very good about that. As Tom walked through the revenue synergies, I think we've got a good plan there. The second piece in terms of taking this into more geographies, I think, could be a further upside for us. That's not where we're starting – that's not our primary focus, but there are geographies, Latin America and other parts of Asia where we think it'll take a little longer to get it going, but we see nice upside there. And then, we're looking to come back to some of those product launches that we have talked about such as Barricor and whatnot, where we're actually starting to learn. We've got the product out in Europe. So I think there are some upsides there. So those are the kind of things I'm comfortable with. The cost synergy piece, I think, is really well planned at this point in time. So I don't think it comes from more rapid deleveraging. I think it comes from operational effectiveness and implementing what we're talking about here. Rick Wise - Stifel, Nicolaus & Co., Inc.: Thanks so much.

Our next question comes from the line of Larry Keusch with Raymond James. Lawrence Keusch - Raymond James & Associates, Inc.: Hey, good morning, everyone. Christopher R. Reidy - Becton, Dickinson & Co.: Hey, Larry. Vincent A. Forlenza - Becton, Dickinson & Co.: Hey, Larry. Lawrence Keusch - Raymond James & Associates, Inc.: Hey. Vince, could you just give some thoughts on sort of how you're thinking about the backdrop for the U.S. market now that you've been through the end of the year in 2017 and looking into 2018? Vincent A. Forlenza - Becton, Dickinson & Co.: Sure, Larry. So I think it's a really interesting question that you're asking. We started last year talking about this, and we basically said that we see this as a stable marketplace, number one. Number two that maybe there's a little bit of cyclicality now built into the marketplace because of high deductible plans. I think that's going on. But in addition, of course, we had the flu. But when I look at the U.S. market, I don't see any big negative impacts from the changes that have been made in terms of healthcare reform and whatnot, the Affordable Care Act, impacting a very small piece of the population. We'll have to see what they're doing in terms of going forward. But on the capital side, we're seeing continued focus on spending the capital that has actually got a real return for them in terms of improving productivity in the hospitals, which is what we're doing. So at the end of the day, I would say U.S., stable, and for us, strong from a capital standpoint. We don't see any real issues there. We've seen Europe come back and bounce back nicely, especially on the Life Sciences side of the business in the Diagnostic area. The focus on funding in automation and those sorts of things has been good. The two places that I would comment on, China was strong this quarter and we expect it to continue to be strong and, of course, that's both sides of the business. The one big change from last year is EMA. Where EMA has come back, it's a little stronger than we normally would expect just from the timing of tenders this year, but it is once again growing for us. So all-in-all, good from a market standpoint; Latin America, pretty stable like it was last year. Lawrence Keusch - Raymond James & Associates, Inc.: Okay. Terrific. And then, perhaps just for Tom, I just wanted to come back to IV solutions and really the two parts of the question are, is Fresenius continuing to expand its manufacturing capacity for IV solutions that can be imported into the U.S.? And then, I guess the second part of the question is if you have to sort of look at what capacity they have today and ability to supply you, is that sort of in line with where we were at the start of the fiscal year? Better? Worse? Just trying to calibrate that a little bit. Thomas E. Polen - Becton, Dickinson & Co.: Yeah, thanks, Larry. So we obviously don't comment on Fresenius' specific capacity nor their capacity plans. But I would say that we're very pleased with the relationship. The capacity that – and our supply as part of our partnership is very much in line with our expectations, and we continue to work with them very collaboratively on the long-term capacity planning to serve the U.S. market. Lawrence Keusch - Raymond James & Associates, Inc.: Okay. Terrific. Thanks, guys. Vincent A. Forlenza - Becton, Dickinson & Co.: Okay. Great. Thanks.

Our next question comes from the line of Vijay Kumar with Evercore ISI.

Hey, guys. Vincent A. Forlenza - Becton, Dickinson & Co.: Hey, Vijay.

Thanks for squeezing me in. So maybe one on pipeline and one clarification. So the pipeline question, I think I heard you say the pen program on the Diabetes side was stopped and you're investing on the patch pump side. So maybe could you talk about sort of how the decision was made or why stopping the pen? And I thought on the BTK side, the DCB, below-the-knee trial, we were supposed to have an interim look. Did we have that interim look or any thoughts on that would be helpful? Vincent A. Forlenza - Becton, Dickinson & Co.: So Tom will take both of those. Thomas E. Polen - Becton, Dickinson & Co.: Right. Vincent A. Forlenza - Becton, Dickinson & Co.: I think we've got some pretty good rationale on the pen side of things. Thomas E. Polen - Becton, Dickinson & Co.: Yes. Hi, Vijay, this is Tom. So on the pen side, as you know, we've been working on that program, and as we just routinely look at all of our projects in our portfolio, we made a decision that due to the nearer term commercial opportunity for that first generation product that we wanted to redeploy those resources to really double down on the smart Swatch. And by the way, when we had originally shown Swatch, it was not necessarily smart at launch, we can also accelerate (01:15:41) work, so the product that we're launching is smart and will have well over 10,000 patient days now of Swatch worn by patients delivering insulin by the time of launch. So that's a significant acceleration in terms of real world data that we'll have versus some of the original plans. When it comes to BTK, so of course, it is a blinded study, so we personally, of course, do not look at that data until the study is completed. I would say that just to give a little bit more insight there, so we stopped the enrollment in the trial, but there still will be six-month follow-up as part of the trial that's planned. So think about by the end of August, the last patients would be completed for their follow-up. And then, we would end up preparing for submission at the very end of the calendar year. But because of it is a blinded, we do not – management does not see the data. As you think about when we might be able to present some interim data, obviously, because it's blinded, we're not going to see the data until the follow-up is completed. But we do anticipate the results will be presented after the PMA submission, but at this time, the study remains ongoing and in follow-up.

That's helpful, Tom. And Chris, maybe one quick one on the divestitures. Can you quantify what the magnitude was? Vincent A. Forlenza - Becton, Dickinson & Co.: Divestitures. Christopher R. Reidy - Becton, Dickinson & Co.: In the divestitures? Vincent A. Forlenza - Becton, Dickinson & Co.: Yes.

Yes. Christopher R. Reidy - Becton, Dickinson & Co.: The two are about $50 million in total.

Thank you, guys. Vincent A. Forlenza - Becton, Dickinson & Co.: In revenue. Christopher R. Reidy - Becton, Dickinson & Co.: In revenues.

Yes. Thank you. Vincent A. Forlenza - Becton, Dickinson & Co.: Sure. Thanks, Vijay.

Our next question comes from the line of Richard Newitter with Leerink Partners.

Hi. Thanks for taking the question. Just going back to China and in the context of your revenue synergy discussion, you're guiding to I think you said 15% growth which is above the 11% that you did for Becton standalone in the fiscal first quarter. Vincent A. Forlenza - Becton, Dickinson & Co.: Yes.

Is that just the combination of the two companies and the strong momentum and, obviously, Bard, a little bit faster? Or is there any early revenue synergy baked into that? Vincent A. Forlenza - Becton, Dickinson & Co.: No, that's pretty much straight forward. Christopher R. Reidy - Becton, Dickinson & Co.: Yes. That's straight math. No revenue synergies on top of that to get to the mid-teens.

Okay. And then, the second question that I had was on the AV access market opportunity. I think Bard had talked about a $250 million kind of market opportunity there. Is that how you see it now that you have a little bit of time with the launch commercial? Thomas E. Polen - Becton, Dickinson & Co.: We still see it as that same view from Bard. Actually, the uptake in the first few quarters post-launch has been very much in line with expectations. It's off to a great start and no change in that perspective in terms of the long-term opportunity.

Okay. Thanks.

Our next question comes from the line of Matt Taylor with Barclays.

Hi. Thanks for taking the question. Vincent A. Forlenza - Becton, Dickinson & Co.: Sure, Matt.

Thank you. I was hoping to follow up on that kind of same line of thinking. With the combination of Bard, in the past, you had talked about the potential for a lot of those revenue synergies to come from geographic expansion in the future. So I guess the core of my question is I want to understand what you think the sustainability of that kind of emerging market growth is in the kind of the three-year plan of the Bard-Becton combo. Vincent A. Forlenza - Becton, Dickinson & Co.: Yes. We feel very good about it is what I would say. I think what you heard us talk about is there is some immediate things that we can go after with fast payback. So we're starting there. And then, Tom mentioned as he went through this some more money going into other geographies. And so, we still see it that way. In China, of course, it's – Bard has been focused on, I'll call it, the leading hospitals, the top tier. We see the opportunity to accelerate driving into Tier 2. We think we've got more work to do to plan that out, but we haven't changed our opinion on that. And so, that would be one of the highest priorities, then, the rest of Asia, and then, Latin America. That's the way we're thinking about it. So the answer to that question is absolutely yes.

Okay. Thanks. And then, I wanted to ask about CareFusion versus Bard. It struck me that... Vincent A. Forlenza - Becton, Dickinson & Co.: Sure.

...CareFusion deal has worked out really well for you guys and... Vincent A. Forlenza - Becton, Dickinson & Co.: Yes.

...now, you're guiding to $350 million in synergies. Vincent A. Forlenza - Becton, Dickinson & Co.: Yes.

It's a similar size to Bard in terms of revenue, but can you compare and contrast kind of the synergy opportunities between the two, and then, what we've learned from CareFusion that could apply to Bard? Vincent A. Forlenza - Becton, Dickinson & Co.: Yes. I think in many ways, they are similar synergy opportunities as I talked about before. The public company costs and the procurement initiatives are very similar. And you could say that the manufacturing and the distribution would be the same kind of effort. What I would say, though, is we have the benefit of having the infrastructure in place that just is coming to the conclusion of integrating CareFusion. Know how to do this. We hit the ground running. So it's – we're not trying to build the team to go after it. It's already been done. And that second bucket that I talked about is based upon a lot of the infrastructure we put in as part of CareFusion and took the opportunity to do that. So that's helpful as well.

Thank you.

Our next question comes from the line of Kristen Stewart with Deutsche Bank.

Hi. Thanks for taking the follow-up. Just on the guidance, last quarter, I think you had mentioned that there could be a potential impact from Puerto Rico that could hit later in the year. I was just wondering if you were still anticipating any sort of impact from Puerto Rico from a cost perspective. Christopher R. Reidy - Becton, Dickinson & Co.: Sure. Sure, Kristen. So as I said in my prepared remarks, we did – just to remind everybody, last time, we didn't include it in our guidance, but we said it could be as much as $40 million of revenue and flow down to as much as 1% on EPS. If you remember the timing of when we did that, we were still running on generators. The plants weren't backed up yet. So because of the efforts of a lot of folks, particularly our associates in Puerto Rico and as well as a number of other associates around the world, we got those plants back up and running. They're off generator, although intermittent still, but we don't see the impact. Although on the BD side, we will see some impact. It's smaller and included in our guidance as just one of the many puts and takes, so nowhere near the amounts that we had quantified. And then, on the Bard side, a little bit different. They felt the impact immediately, and they felt it in their fourth quarter. It was right in line with what they had guided to, which was about $30 million of revenue impact, and it came in just a tad higher than that, but right in line with what they had expected, and now, that's behind us. So as we combine as the new company, there is no impact from Puerto Rico in the Bard side going forward.

Okay. And then, they were also having some supply disruptions within their biosurgery business. Is that still ongoing or is that expected to be resolved in I think their latest guidance (01:23:16)? Christopher R. Reidy - Becton, Dickinson & Co.: Yes. So we still have some impact for the next couple of quarters this year. That's built into the guidance that we have, and then, we lap that I think in the fourth quarter. Thomas E. Polen - Becton, Dickinson & Co.: Yes, Kristen, this is Tom. We expect to begin shipping, that's Progel that you're referring to, at the end of 2018. Think about it Q4 2018 we resume shipping (01:23:36). Vincent A. Forlenza - Becton, Dickinson & Co.: Yes. BD's quarter. Thomas E. Polen - Becton, Dickinson & Co.: Yes. Vincent A. Forlenza - Becton, Dickinson & Co.: Yes.

Okay. And that 7% underlying growth rate that I assume was not (01:23:44)... Christopher R. Reidy - Becton, Dickinson & Co.: What was the last part of your question? You broke up. Vincent A. Forlenza - Becton, Dickinson & Co.: You broke up, yes.

Sorry. The 7% underlying growth rate for Bard, that was only adjusted for the hurricane impact, correct? Vincent A. Forlenza - Becton, Dickinson & Co.: You got it. Christopher R. Reidy - Becton, Dickinson & Co.: Yes, that's right. Vincent A. Forlenza - Becton, Dickinson & Co.: That's right. Christopher R. Reidy - Becton, Dickinson & Co.: That's right.

Okay. Perfect. Vincent A. Forlenza - Becton, Dickinson & Co.: Okay. Thanks a lot.

Thanks very much. Vincent A. Forlenza - Becton, Dickinson & Co.: Those were good clarifications. Okay.

At this time, there are no further questions. I will now turn the conference back to Mr. Forlenza for closing remarks. Vincent A. Forlenza - Becton, Dickinson & Co.: Well, first off, thank you, all, for your participation and your questions. Let me just say we're really happy to have closed the deal and brought together two companies with an opportunity for a tremendous impact on improving healthcare around the world. We're off to a strong start as you saw, and we're really excited about the prospects of the combined company going forward. So thank you very much. We look forward to updating you next quarter. Christopher R. Reidy - Becton, Dickinson & Co.: Thanks, everyone. Vincent A. Forlenza - Becton, Dickinson & Co.: Thanks a lot.

Thank you. This does conclude today's teleconference. Please disconnect your lines at this time, and have a wonderful day.