Analysis of Debt
Total Debt (Carrying Amount)
Becton, Dickinson & Co., balance sheet: debt
US$ in millions
Based on: 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30).
Between 2016 and 2021, total debt experienced an initial period of aggressive expansion followed by a consistent multi-year reduction. Total carrying amounts peaked in 2018 before initiating a downward trend that continued through 2021.
- Long-Term Debt Evolution
- A substantial increase in long-term leverage occurred between September 30, 2016, and September 30, 2017, with obligations rising from 10,550 million US$ to 18,667 million US$. After reaching a peak of 18,894 million US$ in 2018, long-term debt entered a phase of gradual decline, ending the period at 17,110 million US$ in 2021.
- Short-Term Debt Volatility
- Short-term debt exhibited significant fluctuations, characterized by a sharp decline in 2017 followed by a substantial spike to 2,601 million US$ in 2018. Following this peak, short-term obligations decreased consistently over the subsequent three years, reaching 500 million US$ by September 30, 2021.
- Aggregate Debt Trajectory
- The total carrying amount of debt rose from 11,551 million US$ in 2016 to a maximum of 21,495 million US$ in 2018. From 2019 through 2021, a steady deleveraging pattern is observed, as total debt decreased annually to 17,610 million US$. This represents a reduction of approximately 18% from the 2018 peak, driven by simultaneous decreases in both short-term and long-term borrowing.
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Total Debt (Fair Value)
| Sep 30, 2021 | |
|---|---|
| Selected Financial Data (US$ in millions) | |
| Commercial paper borrowings | —) |
| Current portion of long-term debt | 503) |
| Term Loan Facility | —) |
| Other | —) |
| Total short-term debt (fair value) | 503) |
| Long-term debt, excluding current portion | 18,537) |
| Total debt (fair value) | 19,040) |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | 1.08 |
Based on: 10-K (reporting date: 2021-09-30).
Weighted-average Interest Rate on Debt
Weighted-average interest rate on debt: 2.65%
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| 1.15% | 500) | 6) | |
| 1.00% | 579) | 6) | |
| 1.40% | 347) | 5) | |
| 0.63% | 926) | 6) | |
| 0.00% | 463) | —) | |
| 3.88% | 146) | 6) | |
| 3.36% | 994) | 33) | |
| 3.73% | 873) | 33) | |
| 3.02% | 336) | 10) | |
| 0.03% | 577) | —) | |
| 1.21% | 693) | 8) | |
| 6.70% | 168) | 11) | |
| 1.90% | 577) | 11) | |
| 3.70% | 1,716) | 63) | |
| 7.00% | 174) | 12) | |
| 6.70% | 173) | 12) | |
| 0.33% | 1,037) | 3) | |
| 2.82% | 744) | 21) | |
| 1.96% | 992) | 19) | |
| 1.21% | 690) | 8) | |
| 6.00% | 246) | 15) | |
| 5.00% | 124) | 6) | |
| 1.34% | 1,034) | 14) | |
| 4.88% | 246) | 12) | |
| 4.69% | 1,033) | 48) | |
| 4.67% | 1,481) | 69) | |
| 3.79% | 742) | 28) | |
| Total | 17,611) | 467) | |
| 2.65% | |||
Based on: 10-K (reporting date: 2021-09-30).
1 US$ in millions
2 Weighted-average interest rate = 100 × 467 ÷ 17,611 = 2.65%
Interest Costs Incurred
Becton, Dickinson & Co., interest costs incurred
US$ in millions
Based on: 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30).
Total interest costs exhibited a period of significant volatility between 2016 and 2021, characterized by a sharp increase in the first three years followed by a steady three-year decline. The total expenditure peaked in 2018 before trending downward toward 2021 levels.
- Total Interest Cost Trends
- Interest costs rose from 418 million USD in 2016 to a peak of 748 million USD in 2018, representing a 78.9% increase over two years. Following this peak, costs declined consistently, falling to 683 million USD in 2019, 571 million USD in 2020, and ultimately 512 million USD by September 30, 2021.
- Operational Interest Dynamics
- The primary driver of total interest expense was the amount charged to operations. This figure mirrored the overall trend, increasing from 388 million USD in 2016 to 706 million USD in 2018. The subsequent reduction in operational interest costs—dropping to 469 million USD by 2021—indicates a systematic reduction in the cost of debt servicing or a decrease in total operational borrowings during the latter half of the period.
- Capitalized Interest Stability
- In contrast to operational expenses, capitalized interest remained relatively stable. These costs grew modestly from 30 million USD in 2016 to 44 million USD in 2019, before plateauing at 43 million USD for both 2020 and 2021. This stability suggests a consistent level of investment in long-term assets that required interest capitalization, regardless of the fluctuations seen in operational debt costs.
The divergence between the volatile operational interest and the stable capitalized interest confirms that the overall interest cost fluctuations were driven by operational financing activities rather than capital project investments.
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Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30).
2021 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense
= 2,711 ÷ 469 = 5.78
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs
= 2,711 ÷ 512 = 5.29
The analysis of interest coverage metrics reveals a period of decline and stabilization followed by a significant improvement in the company's ability to service its debt obligations between 2016 and 2021.
- Adjusted Interest Coverage Ratio Trends
- The adjusted interest coverage ratio, which accounts for capitalized interest, experienced a downward trend in the early part of the period, falling from 3.50 in 2016 to a low of 2.51 in 2018. This decline indicates a relative reduction in the margin available to cover interest payments. A period of stabilization followed between 2019 and 2020, with the ratio remaining nearly flat at 2.66 and 2.65, respectively. A sharp expansion occurred in 2021, where the ratio surged to 5.29, marking the highest level of coverage within the observed timeframe.
- Comparative Ratio Analysis
- A consistent gap is observed between the interest coverage ratio without capitalized interest and the adjusted ratio. The ratio without capitalized interest remained higher across all years, peaking at 5.78 in 2021. The parallel movement of both metrics suggests that the underlying drivers of coverage—earnings and interest expenses—affected both calculations similarly, while the capitalized interest consistently placed a modest additional burden on the adjusted coverage capacity.
- Overall Solvency Implications
- The trajectory indicates that after a three-year period of weakening coverage and two years of stagnation, the company significantly strengthened its debt-servicing capacity by 2021. The substantial increase in the final year suggests either a significant rise in operating income or a strategic reduction in interest-bearing liabilities, resulting in a more robust financial cushion against interest obligations.
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