UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2019

OR

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

For the transition period from                      to                     

Commission file number 001-4802

Becton, Dickinson and Company

(Exact name of registrant as specified in its charter)

New Jersey				22-0760120
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)
1 Becton Drive,	Franklin Lakes,	New Jersey	07417-1880	(201)	847-6800
(Address of principal executive offices) (Zip Code)				(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common stock, par value $1.00	BDX	New York Stock Exchange
Depositary Shares, each representing 1/20th of a share of 6.125% Cumulative Preferred Stock Series A	BDXA	New York Stock Exchange
1.000% Notes due December 15, 2022	BDX22A	New York Stock Exchange
1.900% Notes due December 15, 2026	BDX26	New York Stock Exchange
1.401% Notes due May 24, 2023	BDX23A	New York Stock Exchange
3.020% Notes due May 24, 2025	BDX25	New York Stock Exchange
0.174% Notes due June 4, 2021	BDX/21	New York Stock Exchange
0.632% Notes due June 4, 2023	BDX/23A	New York Stock Exchange
1.208% Notes due June 4, 2026	BDX/26A	New York Stock Exchange

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  ☒    No  ☐

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

There were 269,954,141 shares of Common Stock, $1.00 par value, outstanding at June 30, 2019.

BECTON, DICKINSON AND COMPANY

FORM 10-Q

For the quarterly period ended June 30, 2019

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 Comprehensive Income	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	41
Signatures		42
Exhibits		43

2

ITEM 1. FINANCIAL STATEMENTS

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions of dollars

	June 30, 2019			September 30, 2018
Assets	(Unaudited)
Current Assets:
Cash and equivalents	$	523		$	1,140
Restricted cash	71			96
Short-term investments	12			17
Trade receivables, net	2,220			2,319
Inventories:
Materials	569			510
Work in process	317			297
Finished products	1,743			1,644
	2,629			2,451
Assets held for sale	—			137
Prepaid expenses and other	1,326			1,251
Total Current Assets	6,781			7,411
Property, Plant and Equipment	11,040			10,485
Less allowances for depreciation and amortization	5,491			5,111
Property, Plant and Equipment, Net	5,550			5,375
Goodwill	23,498			23,600
Developed Technology, Net	11,334			12,184
Customer Relationships, Net	3,507			3,723
Other Intangibles, Net	500			534
Other Assets	1,063			1,078
Total Assets	$	52,233		$	53,904
Liabilities and Shareholders’ Equity
Current Liabilities:
Short-term debt	$	2,168		$	2,601
Payables and accrued expenses	4,069			4,615
Total Current Liabilities	6,237			7,216
Long-Term Debt	18,016			18,894
Long-Term Employee Benefit Obligations	862			1,056
Deferred Income Taxes and Other	5,621			5,743
Commitments and Contingencies (See Note 5)
Shareholders’ Equity
Preferred stock	2			2
Common stock	347			347
Capital in excess of par value	16,227			16,179
Retained earnings	12,997			12,596
Deferred compensation	23			22
Common stock in treasury - at cost	(6,201		)	(6,243		)
Accumulated other comprehensive loss	(1,897		)	(1,909		)
Total Shareholders’ Equity	21,497			20,994
Total Liabilities and Shareholders’ Equity	$	52,233		$	53,904

Amounts may not add due to rounding.

See notes to condensed consolidated financial statements

3

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Millions of dollars, except per share data

(Unaudited)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2019			2018			2019			2018
Revenues	$	4,350		$	4,278		$	12,706		$	11,581
Cost of products sold	2,276			2,262			6,684			6,405
Selling and administrative expense	1,076			1,086			3,238			2,915
Research and development expense	282			277			792			727
Acquisitions and other restructurings	90			142			281			600
Other operating expense, net	—			—			61			—
Total Operating Costs and Expenses	3,725			3,767			11,056			10,647
Operating Income	626			512			1,649			933
Interest expense	(156		)	(182		)	(498		)	(525		)
Interest income	2			8			8			55
Other (expense) income, net	(11		)	310			19			295
Income Before Income Taxes	460			647			1,178			759
Income tax provision	9			53			107			313
Net Income	451			594			1,071			446
Preferred stock dividends	(38		)	(38		)	(114		)	(114		)
Net income applicable to common shareholders	$	413		$	556		$	957		$	332
Basic Earnings per Share	$	1.53		$	2.08		$	3.55		$	1.30
Diluted Earnings per Share	$	1.51		$	2.03		$	3.49		$	1.27
Dividends per Common Share	$	0.77		$	0.75		$	2.31		$	2.25

Amounts may not add due to rounding.

See notes to condensed consolidated financial statements

4

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Millions of dollars

(Unaudited)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2019			2018			2019			2018
Net Income	$	451		$	594		$	1,071		$	446
Other Comprehensive (Loss) Income, Net of Tax
Foreign currency translation adjustments	(68		)	(214		)	(27		)	(122		)
Defined benefit pension and postretirement plans	12			16			40			(57		)
Cash flow hedges	(3		)	1			(2		)	—
Other Comprehensive (Loss) Income, Net of Tax	(58		)	(197		)	12			(179		)
Comprehensive Income	$	393		$	397		$	1,082		$	267

Amounts may not add due to rounding.

See notes to condensed consolidated financial statements

5

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Millions of dollars

(Unaudited)

	Nine Months Ended June 30,
	2019			2018
Operating Activities
Net income	$	1,071		$	446
Adjustments to net income to derive net cash provided by operating activities:
Depreciation and amortization	1,700			1,412
Share-based compensation	208			261
Deferred income taxes	(172		)	(472		)
Change in operating assets and liabilities	(661		)	430
Pension obligation	(150		)	(228		)
Excess tax benefits from payments under share-based compensation plans	45			63
Gain on sale of Vyaire interest	—			(308		)
Gain on sale of business	(336		)	—
Product liability-related charge	331			—
Other, net	(77		)	(45		)
Net Cash Provided by Operating Activities	1,959			1,559
Investing Activities
Capital expenditures	(599		)	(588		)
Proceeds from sale of investments, net	4			13
Acquisitions of businesses, net of cash acquired	—			(14,998		)
Proceeds from divestitures, net	477			534
Other, net	(182		)	(133		)
Net Cash Used for Investing Activities	(300		)	(15,173		)
Financing Activities
Change in credit facility borrowings	300			200
Proceeds from long-term debt and term loans	2,224			4,335
Payments of debt and term loans	(3,882		)	(2,723		)
Dividends paid	(737		)	(687		)
Other, net	(204		)	(176		)
Net Cash (Used for) Provided by Financing Activities	(2,300		)	949
Effect of exchange rate changes on cash and equivalents and restricted cash	(1		)	(5		)
Net decrease in cash and equivalents and restricted cash	(642		)	(12,670		)
Opening Cash and Equivalents and Restricted Cash	1,236			14,179
Closing Cash and Equivalents and Restricted Cash	$	594		$	1,509
Non-Cash Investing Activities
Fair value of shares issued as acquisition consideration	$	—		$	8,004
Fair value of equity awards issued as acquisition consideration	$	—		$	613

Amounts may not add due to rounding.

See notes to condensed consolidated financial statements

6

BECTON, DICKINSON AND COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

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 Becton, Dickinson and Company (the "Company" or "BD"), 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 ("U.S. GAAP"). These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s 2018 Annual Report on Form 10-K. Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages and earnings per share amounts presented are calculated from the underlying amounts. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.

Note 2 – Accounting Changes

New Accounting Principles Adopted

On October 1, 2018, the Company adopted Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers" ("ASC 606") using the modified retrospective method. Under ASC 606, revenue is recognized upon the transfer of control of goods or services to customers and reflects the amount of consideration to which a reporting entity expects to be entitled in exchange for those goods or services. The Company assessed the impact of this new standard on its consolidated financial statements based upon a review of contracts that were not completed as of October 1, 2018. Amounts presented in the Company's financial statements for the prior-year periods have not been revised and are reflective of the revenue recognition requirements which were in effect for those periods. This accounting standard adoption, which is further discussed in Note 6, did not materially impact any line items of the Company's consolidated income statements and balance sheet.

On October 1, 2018, the Company retrospectively adopted an accounting standard update which requires all components of net periodic pension and postretirement benefit costs to be disaggregated from the service cost component and to be presented on the income statement outside a subtotal of income from operations, if one is presented. Upon the Company's adoption of the accounting standard update, which did not have a material impact on its consolidated financial statements, all components of the Company’s net periodic pension and postretirement benefit costs, aside from service cost, are recorded to Other income (expense), net on its consolidated income statements for all periods presented. Revisions of prior-year period amounts were estimated based upon previously disclosed amounts.

On October 1, 2018, the Company adopted an accounting standard update which requires that the income tax effects of intercompany sales or transfers of assets, except those involving inventory, be recognized in the income statement as income tax expense (or benefit) in the period that the sale or transfer occurs. The Company adopted this accounting standard update, which did not have a material impact on its consolidated financial statements, using the modified retrospective method.

New Accounting Principle Not Yet Adopted

In February 2016, the FASB issued a new lease accounting standard which requires lessees to recognize lease assets and lease liabilities on the balance sheet.  The new standard also requires expanded disclosures regarding leasing arrangements.  The Company is in the process of evaluating the impact on its consolidated financial statements and anticipates most of its current operating leases will result in the recognition of right-of-use assets and corresponding lease liabilities on its consolidated balance sheet. The new standard is not expected to materially impact the Company's results of operations. The Company will adopt the standard on October 1, 2019 and will elect the transition method that allows application of the new standard at its adoption date, rather than at the earliest comparative period presented in the financial statements.

7

Note 3 – Shareholders' Equity

Changes in certain components of shareholders' equity for the first three quarters of fiscal years 2019 and 2018 were as follows:

	Common Stock  Issued at Par Value		Capital in Excess of Par Value			Retained Earnings			Deferred Compensation			Treasury Stock
(Millions of dollars)												Shares (in thousands)		Amount
Balance at September 30, 2018	$	347	$	16,179		$	12,596		$	22		(78,463	)	$	(6,243	)
Net income	—		—			599			—			—		—
Common dividends ($0.77 per share)	—		—			(207		)	—			—		—
Preferred dividends	—		—			(38		)	—			—		—
Common stock issued for share-based compensation and other plans, net	—		(97		)	—			2			851		9
Share-based compensation	—		92			—			—			—		—
Common stock held in trusts, net (a)	—		—			—			—			(12	)	—
Effect of changes in accounting principles (see Note 2)	—		—			68			—			—		—
Balance at December 31, 2018	$	347	$	16,174		$	13,018		$	24		(77,624	)	$	(6,235	)
Net income	—		—			20			—			—		—
Common dividends ($0.77 per share)	—		—			(208		)	—			—		—
Preferred dividends	—		—			(38		)	—			—		—
Common stock issued for share-based compensation and other plans, net	—		(57		)	(1		)	(1		)	618		42
Share-based compensation	—		60			—			—			—		—
Common stock held in trusts, net (a)	—		—			—			—			50		—
Balance at March 31, 2019	$	347	$	16,177		$	12,792		$	23		(76,955	)	$	(6,192	)
Net income	—		—			451			—			—		—
Common dividends ($0.77 per share)	—		—			(208		)	—			—		—
Preferred dividends	—		—			(38		)	—			—		—
Common stock issued for share-based compensation and other plans, net	—		(6		)	—			—			219		(8		)
Share-based compensation	—		56			—			—			—		—
Common stock held in trusts, net (a)	—		—			—			—			4		—
Balance at June 30, 2019	$	347	$	16,227		$	12,997		$	23		(76,733	)	$	(6,201	)

8

	Common Stock  Issued at Par Value		Capital in Excess of Par Value			Retained Earnings			Deferred Compensation		Treasury Stock
(Millions of dollars)											Shares (in thousands)		Amount
Balance at September 30, 2017	$	347	$	9,619		$	13,111		$	19	(118,745	)	$	(8,427	)
Net loss	—		—			(136		)	—		—		—
Common dividends ($0.75 per share)	—		—			(172		)	—		—		—
Preferred dividends	—		—			(38		)	—		—		—
Common stock issued for acquisition	—		6,487			—			—		37,306		2,121
Common stock issued for share-based compensation and other plans, net	—		(51		)	—			—		1,021		(37		)
Share-based compensation	—		142			—			—		—		—
Common stock held in trusts, net (a)	—		—			—			—		(27	)	—
Balance at December 31, 2017	$	347	$	16,197		$	12,765		$	19	(80,445	)	$	(6,343	)
Net loss	—		—			(12		)	—		—		—
Common dividends ($0.75 per share)	—		—			(201		)	—		—		—
Preferred dividends	—		—			(38		)	—		—		—
Common stock issued for acquisition	—		(9		)	—			—		—		—
Common stock issued for share-based compensation and other plans, net	—		(94		)	(1		)	2		943		44
Share-based compensation	—		76			—			—		—		—
Common stock held in trusts, net (a)	—		—			—			—		17		—
Effect of changes in accounting principles	—		—			103			—		—		—
Balance at March 31, 2018	$	347	$	16,170		$	12,616		$	21	(79,485	)	$	(6,300	)
Net income	—		—			594			—		—		—
Common dividends ($0.75 per share)	—		—			(201		)	—		—		—
Preferred dividends	—		—			(38		)	—		—		—
Common stock issued for share-based compensation and other plans, net	—		(25		)	(1		)	1		364		24
Share-based compensation	—		48			—			—		—		—
Common stock held in trusts, net (a)	—		—			—			—		(2	)	—
Balance at June 30, 2018	$	347	$	16,193		$	12,971		$	22	(79,124	)	$	(6,275	)

(a) Common stock held in trusts represents rabbi trusts in connection with deferred compensation under the Company’s employee salary and bonus deferral plan and directors’ deferral plan.

9

The components and changes of Accumulated other comprehensive income (loss) for the first three quarters of fiscal years 2019 and 2018 were as follows:

(Millions of dollars)	Total			Foreign Currency Translation			Benefit Plans			Cash Flow Hedges
Balance at September 30, 2018	$	(1,909	)	$	(1,162	)	$	(729	)	$	(17	)
Other comprehensive (loss) income before reclassifications, net of taxes	(32		)	(35		)	3			(1		)
Amounts reclassified into income, net of taxes	14			—			13			1
Balance at December 31, 2018	$	(1,927	)	$	(1,197	)	$	(714	)	$	(16	)
Other comprehensive income (loss) before reclassifications, net of taxes	74			76			—			(2		)
Amounts reclassified into income, net of taxes	14			—			13			1
Balance at March 31, 2019	$	(1,839	)	$	(1,121	)	$	(701	)	$	(17	)
Other comprehensive loss before reclassifications, net of taxes	(68		)	(68		)	—			—
Amounts reclassified into income, net of taxes	10			—			12			(2		)
Balance at June 30, 2019	$	(1,897	)	$	(1,189	)	$	(689	)	$	(19	)

(Millions of dollars)	Total			Foreign Currency Translation			Benefit Plans			Cash Flow Hedges
Balance at September 30, 2017	$	(1,723	)	$	(1,001	)	$	(703	)	$	(18	)
Other comprehensive loss before reclassifications, net of taxes	(36		)	(36		)	—			—
Amounts reclassified into income, net of taxes	18			—			17			1
Balance at December 31, 2017	$	(1,740	)	$	(1,037	)	$	(686	)	$	(17	)
Other comprehensive income before reclassifications, net of taxes	128			128			—			—
Amounts reclassified into income, net of taxes	11			—			9			2
Tax effects reclassified into retained earnings	(103		)	—			(99		)	(4		)
Balance at March 31, 2018	$	(1,704	)	$	(909	)	$	(776	)	$	(20	)
Other comprehensive (loss) income before reclassifications, net of taxes	(210		)	(214		)	4			—
Amounts reclassified into income, net of taxes	13			—			12			1
Balance at June 30, 2018	$	(1,902	)	$	(1,123	)	$	(760	)	$	(18	)

The amount of foreign currency translation recognized in other comprehensive income during the three and nine months ended June 30, 2019 and 2018 included net gains (losses) relating to net investment hedges, as further discussed in Note 13. During the second quarter of 2018, as permitted under U.S. GAAP guidance, the Company reclassified stranded income tax effects on items within Accumulated other comprehensive income (loss) resulting from the enactment of new U.S. tax legislation to Retained earnings. The reclassified tax effects related to prior service credits and net actuarial losses relating to benefit plans, as well as to terminated cash flow hedges. The tax effects relating to these items are generally recognized as such amounts are amortized into earnings.

10

Note 4 – Earnings per Share

The weighted average common shares used in the computations of basic and diluted earnings per share (shares in thousands) were as follows:

	Three Months Ended June 30,		Nine Months Ended June 30,
	2019	2018	2019	2018
Average common shares outstanding	270,249	267,836	269,719	254,934
Dilutive share equivalents from share-based plans	4,087	6,089	4,791	5,926
Average common and common equivalent shares outstanding – assuming dilution	274,336	273,925	274,510	260,860
Share equivalents excluded from the diluted shares outstanding calculation because the result would have been antidilutive:
Mandatory convertible preferred stock	11,685	11,685	11,685	11,685

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. GAAP, the Company establishes accruals to the extent probable future losses are estimable (in the case of environmental matters, without considering possible third-party recoveries). With respect to putative class action lawsuits in the United States and certain of the Canadian lawsuits described below relating to product liability matters, the Company is unable to estimate a range of reasonably possible losses for the following reasons: (i) all or certain of the proceedings are in early stages; (ii) the Company has not received and reviewed complete information regarding all or certain of the plaintiffs and their medical conditions; and/or (iii) there are significant factual issues to be resolved. In addition, there is uncertainty as to the likelihood of a class being certified or the ultimate size of the class. With respect to the civil investigative demand served by the Department of Justice, as discussed below, the Company is unable to estimate a range of reasonably possible losses for the following reasons: (i) all or certain of the proceedings are in early stages; and/or (ii) there are significant factual and legal issues to be resolved.

In view of the uncertainties discussed below, the Company could incur charges in excess of any currently established accruals and, to the extent available, liability insurance. In the opinion of management, any such future charges, individually or in the aggregate, could have a material adverse effect on the Company’s consolidated results of operations and consolidated cash flows.

Product Liability Matters

The Company believes that certain settlements and judgments, as well as legal defense costs, relating to product liability matters are or may be covered in whole or in part under its product liability insurance policies with a limited number of insurance carriers, or, in some circumstances, indemnification obligations to the Company from other parties, which if disputed, the Company intends to vigorously contest. Amounts recovered under the Company’s product liability insurance policies or indemnification arrangements may be less than the stated coverage limits or less than otherwise expected and may not be adequate to cover damages and/or costs relating to claims. In addition, there is no guarantee that insurers or other parties will pay claims or that coverage or indemnity will be otherwise available.

Hernia Product Claims

As of June 30, 2019, the Company is defending approximately 8,795 product liability claims involving the Company’s line of hernia repair devices (collectively, the “Hernia Product Claims”). The majority of those claims are currently pending in a coordinated proceeding in Rhode Island State Court, but claims are also pending in other state and/or federal court jurisdictions. In addition, those claims include multiple putative class actions in Canada. Generally, the Hernia Product Claims seek damages for personal injury allegedly resulting from use of the products. From time to time, the Company engages in resolution discussions with plaintiffs’ law firms regarding certain of the Hernia Product Claims, but the Company also intends to vigorously defend Hernia Product Claims that do not settle, including through litigation. Trials are scheduled throughout 2020 in various state and/or federal courts. The Company expects additional trials of Hernia Product Claims to take place over the next 12 months. In August 2018, a new hernia multi-district litigation (“MDL”) was ordered to be established in the Southern District of Ohio. The Company cannot give any assurances that the resolution of the Hernia Product Claims that have not settled, including asserted and unasserted claims and the putative class action lawsuits, will not have a material adverse effect

11

on the Company’s business, results of operations, financial condition and/or liquidity.

Women’s Health Product Claims

As of June 30, 2019, the Company is defending approximately 985 product liability claims involving the Company’s line of pelvic mesh devices. The majority of those claims are currently pending in either the federal MDL in the United States District Court for the Southern District of West Virginia, or a coordinated proceeding in New Jersey State Court, but claims are also pending in other state and/or federal court jurisdictions. In addition, those claims include putative class actions filed in the United States. Not included in the figures above are approximately 1,010 filed and unfiled claims that have been asserted or threatened against the Company but lack sufficient information to determine whether a pelvic mesh device of the Company is actually at issue. The claims identified above also include products manufactured by both the Company and two subsidiaries of Medtronic plc (as successor in interest to Covidien plc) (“Medtronic”), each a supplier of the Company. Medtronic has an obligation to defend and indemnify the Company with respect to any product defect liability relating to products its subsidiaries had manufactured. As described below, in July 2015 the Company reached an agreement with Medtronic (which was amended in June 2017) regarding certain aspects of Medtronic’s indemnification obligation. The foregoing lawsuits, unfiled claims, putative class actions, and other claims, together with claims that have settled or are the subject of agreements or agreements in principle to settle, are referred to collectively as the “Women’s Health Product Claims.” The Women’s Health Product Claims generally seek damages for personal injury allegedly resulting from use of the products.

As of June 30, 2019, the Company has reached agreements or agreements in principle with various plaintiffs’ law firms to settle their respective inventories of cases totaling approximately 15,160 of the Women’s Health Product Claims. The Company believes that these Women’s Health Product Claims are not the subject of Medtronic’s indemnification obligation. These settlement agreements and agreements in principle include unfiled and previously unknown claims held by various plaintiffs’ law firms, which are not included in the approximate number of lawsuits set forth in the first paragraph of this section. Each agreement is subject to certain conditions, including requirements for participation in the proposed settlements by a certain minimum number of plaintiffs. The Company continues to engage in discussions with other plaintiffs’ law firms regarding potential resolution of unsettled Women’s Health Product Claims, which may include additional inventory settlements.

Starting in 2014 in the MDL, the court entered certain pre-trial orders requiring trial work up and remand of a significant number of Women’s Health Product Claims, including an order entered in the MDL on January 30, 2018, that requires the work up and remand of all remaining unsettled cases (the “WHP Pre-Trial Orders”). The WHP Pre-Trial Orders may result in material additional costs or trial verdicts in future periods in defending Women’s Health Product Claims. Trials are anticipated throughout 2019 in state courts. A trial in the New Jersey coordinated proceeding began in March 2018, and in April 2018 a jury entered a verdict against the Company in the total amount of $68 million ($33 million compensatory; $35 million punitive). The Company is in the process of appealing that verdict. A consolidated trial involving two plaintiffs is scheduled to begin in September 2019 in the New Jersey coordinated proceeding. The Company expects additional trials of Women’s Health Product Claims to take place over the next 12 months, which may potentially include consolidated trials.

In July 2015, as part of the agreement with Medtronic noted above, Medtronic agreed to take responsibility for pursuing settlement of certain of the Women’s Health Product Claims that relate to products distributed by the Company under supply agreements with Medtronic, and the Company has paid Medtronic $121 million towards these potential settlements. In June 2017, the Company amended the agreement with Medtronic to transfer responsibility for settlement of additional Women’s Health Product Claims to Medtronic on terms similar to the July 2015 agreement, including with respect to the obligation to make payments to Medtronic towards these potential settlements. The Company also may, in its sole discretion, transfer responsibility for settlement of additional Women’s Health Product Claims to Medtronic on similar terms. The agreements do not resolve the dispute between the Company and Medtronic with respect to Women’s Health Product Claims that do not settle, if any.

During the course of engaging in settlement discussions with plaintiffs’ law firms, the Company has learned, and may in future periods learn, additional information regarding these and other unfiled claims, or other lawsuits, which could materially impact the Company’s estimate of the number of claims or lawsuits against the Company.

Filter Product Claims

As of June 30, 2019, the Company is defending approximately 4,525 product liability claims involving the Company’s line of inferior vena cava filters (collectively, the “Filter Product Claims”). The majority of those claims are currently pending in an MDL in the United States District Court for the District of Arizona, but claims are also pending in other state and/or federal court jurisdictions, including a coordinated proceeding in Arizona State Court. In addition, those claims include putative class actions filed in the United States and Canada. The Filter Product Claims generally seek damages for personal injury allegedly resulting from use of the products. The Company has limited information regarding the nature and quantity of certain of the Filter Product Claims. The Company continues to receive claims and lawsuits and may in future periods learn additional

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information regarding other unfiled or unknown claims, or other lawsuits, which could materially impact the Company’s estimate of the number of claims or lawsuits against the Company. On May 31, 2019, the MDL Court ceased accepting direct filings or transfers into the Filter Product Claims MDL and remands for non-settled cases are expected to begin within the next three to six months. The MDL trials are scheduled throughout 2019 and 2020 in certain state and federal courts. As of June 30, 2019, the Company entered into settlement agreements and/or settlement agreements in principle for approximately 4,200 cases. On March 30, 2018, a jury in the first MDL trial found the Company liable for negligent failure to warn and entered a verdict in favor of plaintiffs. The jury found the Company was not liable for (a) strict liability design defect; (b) strict liability failure to warn; and (c) negligent design. The Company has appealed that verdict. On June 1, 2018, a jury in the second MDL trial unanimously found in favor of the Company on all claims. On August 17, 2018, the Court entered summary judgment in favor of the Company on all claims in the third MDL trial. On October 5, 2018, a jury in the fourth MDL trial unanimously found in favor of the Company on all claims. The Company expects additional trials of Filter Product Claims may take place over the next 12 months.

In most product liability litigations (like those described above), plaintiffs allege a wide variety of claims, ranging from allegations of serious injury caused by the products to efforts to obtain compensation notwithstanding the absence of any injury. In many of these cases, the Company has not yet received and reviewed complete information regarding the plaintiffs and their medical conditions and, consequently, is unable to fully evaluate the claims. The Company expects that it will receive and review additional information regarding any remaining unsettled product liability matters.

In January 2017, the Company reached an agreement to resolve litigation filed in the Southern District of New York by its insurance carriers in connection with Women’s Health Product Claims and Filter Product Claims. The agreement requires the insurance carriers to reimburse the Company for certain future costs incurred in connection with Filter Product Claims up to an agreed amount. For certain product liability claims or lawsuits, the Company does not maintain or has limited remaining insurance coverage.

Other Legal Matters

Since early 2013, the Company has received subpoenas or Civil Investigative Demands from a number of State Attorneys General seeking information related to the sales and marketing of certain of the Company’s products that are the subject of the Hernia Product Claims and the Women’s Health Product Claims. The Company is cooperating with these requests. Although the Company has had, and continues to have, discussions with the State Attorneys General with respect to overall potential resolution of this matter, there can be no assurance that a resolution will be reached or what the terms of any such resolution may be.

In July 2017, a civil investigative demand was served by the Department of Justice seeking documents and information relating to an investigation into possible violations of the False Claims Act in connection with the sales and marketing of FloChec^® and QuantaFlo^TM devices. The Company is cooperating with these requests. Since it is not feasible to predict the outcome of these matters, the Company cannot give any assurances that the resolution of these matters will not have a material adverse effect on the Company’s business, results of operations, financial condition and/or liquidity.

The Company is a potentially responsible party to a number of federal administrative proceedings in the United States brought under the Comprehensive Environment Response, Compensation and Liability Act, also known as “Superfund,” and similar state laws. The affected sites are in varying stages of development. In some instances, the remedy has been completed, while in others, environmental studies are underway or commencing. For several sites, there are other potentially responsible parties that may be jointly or severally liable to pay all or part of cleanup costs. While it is not feasible to predict the outcome of these proceedings, based upon the Company’s experience, current information and applicable law, the Company does not expect these proceedings to have a material adverse effect on its financial condition and/or liquidity. However, one or more of the proceedings could be material to the Company’s business and/or results of operations.

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

Litigation Reserves

The Company regularly monitors and evaluates the status of product liability and other legal matters, and may, from time-to-time, engage in settlement and mediation discussions taking into consideration developments in the matters and the risks and uncertainties surrounding litigation. These discussions could result in settlements of one or more of these claims at any time.

In the second quarter of 2019, the Company recorded a pre-tax charge to Other operating expense, net, of approximately $331 million related to certain of the product liability matters discussed above under the heading “Product Liability Matters,”

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including the related legal defense costs. The Company recorded this charge based on additional information obtained during the quarter, including but not limited to: the allegations and documentation supporting or refuting such allegations; publicly available information regarding similar medical device mass tort settlements; historical information regarding other product liability settlements involving the Company; and the stage of litigation.

Accruals for the Company's product liability claims which are specifically discussed above, as well as the related legal defense costs, amounted to approximately $1.9 billion at June 30, 2019 and