Becton, Dickinson & Co. (NYSE:BDX)

The analysis of the annual current and deferred income tax expense data reveals several notable trends over the six-year period ending September 30, 2021.

Current Income Tax Expense

The current income tax expense exhibits significant volatility throughout the period. Starting with a positive expense of $616 million in 2016, it sharply declined to a negative figure of $50 million in 2017, indicating a benefit or reduction in current tax liability that year. In 2018, there was a substantial increase to $1,124 million, marking the highest current tax expense in the observed period. Afterward, the current tax expense decreased in 2019 to $576 million, further dropping in 2020 to $397 million, before increasing slightly to $438 million in 2021. This pattern reflects fluctuations in taxable income or changes in tax regulations affecting the company's payable taxes annually.

Deferred Income Tax Expense

Deferred income tax expense consistently appears as a negative value across all years, indicating a deferred tax benefit or reduction in tax expense related to timing differences between accounting and tax treatments. It started at a benefit of $519 million in 2016 and reached a low point (largest benefit) in 2019 at $633 million. Subsequent years show a reduction in the deferred tax benefit, with figures of $286 million and $288 million in 2020 and 2021 respectively. This gradual decline suggests a diminishing impact of deferred tax assets or liabilities over time, possibly due to the realization of deferred tax positions or adjustments in tax rates.

Income Tax Provision (Benefit)

The net income tax provision, which combines current and deferred amounts, shows a fluctuating pattern with both positive and negative values. In 2016, it was a modest provision of $97 million. The company experienced an overall tax benefit in 2017, reflected by a negative provision of $124 million, driven by the current tax benefit and deferred tax impact. A sharp rise to $862 million in 2018 represents a substantial tax charge year, primarily influenced by the significant current tax expense increase. The provision turned negative again in 2019 (-$57 million), reflecting a tax benefit situation. Finally, the tax provision increased to $111 million in 2020 and further to $150 million in 2021. This variability illustrates the company's dynamic tax position, influenced by operational performance, tax legislation changes, and timing differences.

The analysis of the annual financial data reveals several notable trends and shifts in tax-related metrics over the six-year period ending September 30, 2021.

Federal statutory tax rate

This rate remained steady at 35% for the years 2016 and 2017, then experienced a marked decline to 24.5% in 2018 followed by a further reduction and stabilization at 21% from 2019 onwards. This indicates a significant change in the federal tax environment, likely reflecting legislative tax reform measures.

State and local income taxes, net of federal tax benefit

Values fluctuated with both positive and negative percentages over the years, starting positive at 1.5% in 2016, dipping to -2.6% in 2017, and varying thereafter with negative values in 2020 and 2021 at -1.9%. These fluctuations suggest variable impacts from state and local tax laws relative to federal tax benefits.

Foreign income tax at rates other than 21%

Data is available from 2018 onward, showing negative percentages each year (e.g., -11.7% in 2018 and -8.1% in 2021). This persistent negative effect suggests the presence of foreign taxes charged at rates differing from the standard 21% federal rate, impacting the overall effective tax rate.

Effect of foreign operations

Reported from 2018, the effect displayed variability ranging from a positive impact of 19% in 2018 and 19.1% in 2020, to negative impacts such as -5.5% in 2019 and nearly neutral at -0.1% in 2021. This inconsistency points to varied profitability or tax treatments associated with foreign operations over time.

Effect of foreign and Puerto Rico earnings (losses) and foreign tax credits (legacy)

This effect was only reported in 2016 and 2017, showing significant negative impacts of -23.7% and -40.8%, respectively, after which no data is provided. The large negative percentages indicate substantial tax credits or losses related to foreign earnings that were relevant during those years.

Effect of Research Credits and FDII/Domestic Production Activities

This effect consistently exerted a negative impact on the tax rate throughout the period, ranging from -4.4% in 2016 to a less negative -1.6% in 2021, with variations in between. This trend implies consistent utilization of tax credits related to research and production activities.

Effect of share-based compensation

This factor had a negative effect in 2017 through 2020, between -7.9% and -3.9%, but turned slightly positive at 0.1% in 2021, indicating a reduction in the tax impact of such compensation over time.

Effect of gain on divestitures

Reported intermittently with minor positive and negative values (e.g., 1.3% in 2018, decreasing to -4.5% in 2020), this effect seems to influence the tax rate negatively in later years, reflecting the impact of gains or losses on divested assets.

Other Effects (including uncertain tax position, valuation allowance release, accounting method changes, nondeductible compensation, and other net impacts)

These items appear selectively and with relatively small magnitudes. For example, uncertain tax position had a minor positive effect (3.3% in 2018), while valuation allowance release shows negative values (-4.8% in 2018 and -1.7% in 2021). These indicate occasional adjustments affecting the tax rate in certain years.

Effective income tax rate, before U.S. tax legislation

The rate shows notable volatility, from a low of -12.7% in 2017 to a high of 18.9% in 2018, dipping to -0.5% in 2019, rising again to 11.3% in 2020, and falling to 6.7% in 2021. This illustrates significant fluctuations driven by underlying tax factors before the impact of U.S. legislation.

Impact of U.S. tax legislation

This factor appears exclusively in 2018 and 2019, with a large positive effect of 54.6% in 2018 and a negative effect of -4.3% in 2019. These numbers correspond to legislative changes that heavily influenced the effective tax rate during these years.

Effective income tax rate

The overall effective tax rate exhibits high variability, influenced largely by the U.S. tax legislation impact and other components. It ranged from 9.1% in 2016, descended to -12.7% in 2017, then spiked sharply to 73.5% in 2018, dropped to -4.8% in 2019, and settled at moderate levels of 11.3% and 6.7% in 2020 and 2021, respectively. This volatility underscores the influence of both legislative shifts and operational factors on tax expense recognition.

The financial data over the analyzed periods reveals several key trends in the company's economic position and accounting categories.

Compensation and Benefits

There is a noticeable decline from 720 million US$ in 2016 to 458 million US$ in 2018, followed by a recovery to 554 million US$ in 2020, and a slight drop to 527 million US$ in 2021. This suggests a period of cost reduction or restructuring in personnel expenses, later stabilizing.

Loss and Credit Carryforwards

The balance steadily increased from 1,101 million US$ in 2016 to 2,107 million US$ in 2021, indicating the accumulation of tax losses or credits that can offset future taxable income. This upward trend could reflect growing tax assets or a strategy to manage tax liabilities more effectively.

Product Recall and Liability Reserves

Data is available only for 2020 and 2021, showing a decrease from 241 million US$ to 191 million US$, which may indicate reduced anticipated costs associated with product recalls or other liabilities, reflecting possible improvements in product quality or risk management.

Other Expenses

Shown under two different rows labeled as 'Other', these amounts fluctuate significantly. One row decreases from 720 million US$ in 2016 to 501 million US$ in 2020 before a rise to 554 million US$ in 2021. Another row shows negative values, declining from -608 million US$ in 2016 to -123 million US$ in 2021, suggesting reductions in certain liabilities or other contra-expense items over time.

Deferred Tax Assets, Before Valuation Allowance

There is a general upward trend, increasing from 2,541 million US$ in 2016 to 3,379 million US$ in 2021, implying recognition of more deferred tax assets possibly due to temporary differences or carryforwards.

Valuation Allowance

The valuation allowance grows in magnitude from -997 million US$ in 2016 to -2,036 million US$ in 2021, which reduces the net recognized deferred tax assets. This increase indicates a growing assessment that some deferred tax assets may not be realizable.

Deferred Tax Assets, Net

After applying the valuation allowance, net deferred tax assets show some fluctuation but generally remain within a range of approximately 1,200 to 1,400 million US$, ending slightly lower at 1,343 million US$ in 2021 compared to previous years.

Property and Equipment

Represented as negative figures, these assets grow in absolute value from -235 million US$ in 2016 to -410 million US$ in 2021, indicating increased investments or capital expenditures in fixed assets.

Intangibles

Intangible assets also show negative values decreasing in magnitude from -1,493 million US$ in 2016 to -2,160 million US$ in 2021, with a peak of -2,948 million US$ in 2018. This pattern suggests recognition of increased intangible assets, possibly acquisitions or capitalized costs, followed by amortization or impairment adjustments lowering the balance.

Deferred Tax Liabilities

These liabilities increase in absolute value from -2,336 million US$ in 2016 to -2,693 million US$ in 2021, though with some volatility. This trend reflects growing temporary taxable differences resulting in higher anticipated future tax payments.

Net Deferred Tax Assets (Liabilities)

Excluding the separate net deferred tax assets line, the net deferred tax position as calculated shows increasing deficits, deteriorating from -792 million US$ in 2016 to -1,350 million US$ in 2021, indicating a larger net liability position over the period examined.

The financial data reveals several distinct trends across the reported and adjusted figures for total liabilities, shareholders' equity, and net income over the six-year period from September 30, 2016, to September 30, 2021.

Total Liabilities

The reported total liabilities exhibit a sharp increase from 17,953 million USD in 2016 to a peak of 32,910 million USD in 2018. Following this peak, liabilities decline gradually to 30,189 million USD by 2021. The adjusted total liabilities trend similarly, rising from 17,161 million USD in 2016 to 30,600 million USD in 2018, then decreasing steadily to 28,839 million USD in 2021. This pattern indicates a significant buildup in liabilities up to 2018, succeeded by a moderate reduction in the subsequent years. The adjusted figures consistently remain slightly below the reported totals, suggesting adjustments related to income tax items have a moderating effect on liability totals.

Shareholders’ Equity

Reported shareholders’ equity shows a consistent upward trajectory, increasing substantially from 7,633 million USD in 2016 to 23,677 million USD in 2021. The most notable jumps occur between 2016 and 2018, where equity nearly triples, followed by a steadier increase thereafter. The adjusted equity also rises throughout the period, from 8,425 million USD in 2016 to 25,027 million USD in 2021, typically exceeding the reported values by a small margin. This steady growth in equity suggests improving retained earnings and capitalization, with the adjustments potentially reflecting deferred tax impacts that increase the equity base.

Net Income

Reported net income displays considerable volatility, beginning at 976 million USD in 2016 and rising to a high of 2,092 million USD in 2021, with a notable dip to 311 million USD in 2018 followed by fluctuations in other years. Adjusted net income also shows high variability but remains lower than reported figures in most years, starting at 457 million USD in 2016, dropping sharply to 49 million USD in 2018, and recovering to 1,804 million USD by 2021. The divergence between reported and adjusted net income indicates the significant impact of income tax adjustments, especially around 2018 when both figures reached their respective troughs. The adjusted figures tend to smooth some of the income volatility, but the swings underscore periods of fluctuating profitability and tax-related adjustments.

Overall, the data depicts a company that experienced rapid growth in liabilities and equity until around 2018, followed by more stable financial positioning. The fluctuations in net income, notably affected by tax adjustments, point to variability in operational performance as well as tax impacts over time. Adjusted values consistently moderate the reported figures, reflecting the importance of deferred income tax considerations in understanding the company's financial health.

Net Profit Margin Trends

The reported net profit margin exhibited significant fluctuations over the examined period. After an initial increase from 7.82% in 2016 to 9.1% in 2017, it sharply declined to 1.95% in 2018. This was followed by a partial recovery reaching 10.33% in 2021. The adjusted net profit margin followed a similar erratic pattern but generally reflected lower profitability levels compared to the reported figures. It started at 3.66% in 2016, dipped to near zero in 2018, and recovered to 8.91% by 2021.

Financial Leverage Evolution

Both reported and adjusted financial leverage ratios showed a consistent downward trend from 2016 to 2021. The reported leverage decreased from 3.35 in 2016 to 2.28 in 2021, indicating a reduction in the use of debt relative to equity. Similarly, adjusted financial leverage fell from 3.04 to 2.15, suggesting a parallel lowering of financial risk when accounting for deferred income tax adjustments.

Return on Equity (ROE) Pattern

The reported ROE closely mirrors the overall profitability trend with notable volatility. It started relatively high at 12.79% in 2016, dropped dramatically to 1.48% in 2018, and then rose again to 8.84% in 2021. Adjusted ROE values were consistently lower, reflecting the impact of tax adjustments, but followed a similar trajectory from 5.42% to 7.21% over the same timeframe.

Return on Assets (ROA) Dynamics

Reported ROA declined sharply from 3.81% in 2016 to 0.58% in 2018 before improving to 3.88% by 2021. The adjusted ROA, which strips out the effects of deferred taxes, showed a similar trend but at reduced levels, starting at 1.79%, dropping to nearly zero in 2018, and increasing to 3.35% in 2021. This suggests that asset efficiency experienced a downturn followed by recovery during the period examined.

Overall Insights

The data indicates a period of financial volatility and stress around 2018 across all profitability metrics, followed by a recovery trend toward 2021. Decreasing financial leverage ratios suggest a strategic shift towards a more conservative capital structure. Adjusted figures consistently report lower profitability and returns, reflecting the impact of deferred income tax considerations on the company's financial performance assessment.

Reported Net Income

The reported net income exhibits a generally increasing trend over the six-year period, with fluctuations. It increased from $976 million in 2016 to $1100 million in 2017, followed by a significant decline to $311 million in 2018. Subsequently, it rose sharply in 2019 to $1233 million, dipped to $874 million in 2020, and then reached a peak of $2092 million in 2021. Despite some volatility, the overall trajectory indicates growth, especially evident in the sharp rise in 2021.

Adjusted Net Income

The adjusted net income shows considerable variability and lower absolute values compared to reported net income. Starting at $457 million in 2016, it sharply increased to $1026 million in 2017 before plunging to a mere $49 million in 2018. It partially recovered to $600 million in 2019 and remained relatively stable in 2020 at $588 million, followed by a substantial increase to $1804 million in 2021. This pattern suggests significant adjustments affecting net income, particularly in 2018 and 2021.

Reported Net Profit Margin

The reported net profit margin follows a fluctuating pattern consistent with net income changes. It increased from 7.82% in 2016 to 9.1% in 2017, then dropped sharply to 1.95% in 2018. After improving to 7.13% in 2019, it decreased again to 5.11% in 2020 before reaching its highest point of 10.33% in 2021. This volatility parallels the fluctuations in reported net income and may reflect operational performance and one-time items impacting profitability.

Adjusted Net Profit Margin

The adjusted net profit margin remains lower than the reported figures and exhibits greater volatility. It starts at 3.66% in 2016, rises to 8.48% in 2017, then falls drastically to 0.31% in 2018. The margin recovers to around 3.4% in both 2019 and 2020 and then substantially increases to 8.91% in 2021. The lower margins and steep declines suggest significant non-recurring expenses or tax adjustments influencing adjusted profitability, especially noticeable in 2018 and the strong rebound in 2021.

Overall Analysis

Both reported and adjusted figures highlight substantial fluctuations in income and profitability across the period. The sharp declines in 2018 across all metrics suggest adverse operational or tax-related impacts that significantly affected earnings. Recovery and growth after 2018 indicate improvement in operational or tax conditions. The 2021 data reflects a strong recovery and robust profitability, with reported and adjusted net incomes reaching their highest levels, and profit margins indicative of enhanced efficiency or favorable tax adjustments. The gap between reported and adjusted figures illustrates the impact of deferred income tax adjustments or other one-time items, underscoring the importance of considering both perspectives in assessing financial performance.

The analyzed financial data reveals several key trends over the six-year period ending in September 2021. Both reported and adjusted shareholders’ equity demonstrate an overall upward trajectory, indicating growth in the company's net worth and retained profits.

Shareholders’ Equity

Reported shareholders’ equity increased significantly from 7,633 million US dollars in 2016 to a peak of 23,765 million in 2020, before experiencing a slight decline to 23,677 million in 2021. This represents a substantial overall increase, reflecting strong capital accumulation.

Adjusted shareholders’ equity, which accounts for deferred income tax adjustments, follows a very similar trend but at slightly higher levels. It rose from 8,425 million in 2016 to a peak of 25,295 million in 2020, then decreased marginally to 25,027 million in 2021. The adjustment results in consistently higher equity values, suggesting the deferred tax adjustments enhance net equity reported.

Financial Leverage

Reported financial leverage shows a declining trend over the period, moving from 3.35 times in 2016 to approximately 2.28 times in 2021. This decline suggests a reduction in the company's reliance on debt relative to equity, indicating improved solvency and potentially lower financial risk.

Adjusted financial leverage, calculated using adjusted shareholders’ equity, is slightly lower than the reported leverage in all years, moving from 3.04 in 2016 down to 2.15 in 2021. The decreasing leverage ratio further supports the observation of strengthened equity bases and reduced leverage when considering deferred income tax effects.

Overall, the trends indicate that the company's equity base has grown substantially during the analyzed period, with a minor correction in the most recent year. Simultaneously, financial leverage has steadily declined, signaling a more conservative capital structure with a relatively lower proportion of debt financing. The adjustments for deferred income taxes consistently enhance equity levels and reduce leverage ratios, providing a more favorable perspective on the company's financial strength.

The financial data reveals a series of fluctuations in both reported and adjusted income figures, shareholders' equity, and corresponding returns on equity (ROE) across the years analyzed.

Net Income Trends

Reported net income demonstrated notable variability, starting at 976 million USD in 2016 and rising sharply to 1100 million USD in 2017. This was followed by a significant decline to 311 million USD in 2018. Subsequently, the figure surged to 1233 million USD in 2019, dropped to 874 million USD in 2020, and peaked at 2092 million USD in 2021. The adjusted net income mirrored the general pattern of fluctuations but displayed a more pronounced volatility, notably dipping to as low as 49 million USD in 2018 and rising sharply to 1804 million USD in 2021. These patterns indicate periods of considerable income instability, possibly due to one-time adjustments or tax-related factors affecting the reported and deferred income tax adjustments.

Shareholders’ Equity Patterns

Reported shareholders' equity increased consistently over the period, starting from 7633 million USD in 2016 to 23677 million USD in 2021, with noticeable growth especially between 2016 and 2018. Adjusted shareholders' equity similarly trended upwards, rising from 8425 million USD to 25027 million USD during the same period. The adjusted figures generally remained higher than the reported ones, suggesting that adjustments related to deferred income taxes positively influenced the equity base each year. The relatively steady increase in equity contrasts with the volatility observed in income figures, indicating a solidification of the capital base over time.

Return on Equity (ROE) Analysis

The reported ROE exhibited a downward trend from 12.79% in 2016 to a low of 1.48% in 2018, recovering somewhat to 8.84% by 2021. The adjusted ROE followed a similar trajectory, starting at 5.42%, dropping to a minimal 0.21% in 2018, and improving to 7.21% in 2021. The substantial declines around 2018 suggest a period of diminished profitability relative to equity, while the recovery in subsequent years indicates improved efficiency or profitability. The adjusted ROE consistently remained lower than reported ROE, implying that the effects of deferred tax adjustments temper the profitability measure when considering equity.

Overall, the analysis reflects a pattern of income volatility amid stable growth in equity, with profitability relative to equity undergoing a challenging phase around 2018 before showing signs of improvement. The adjusted data highlight the influence of income tax effects on financial performance metrics, underscoring the importance of considering both reported and adjusted figures for a comprehensive understanding.

The financial data reveals notable fluctuations in both reported and adjusted net income and return on assets (ROA) over the six-year period ending September 30, 2021.

Reported net income

Reported net income exhibits variability, with a peak of 2,092 million US dollars in 2021, which is the highest in the observed timeframe. After a decline to 311 million in 2018, there is a significant recovery and growth reaching 1,233 million in 2019. A slight decrease to 874 million occurred in 2020 before the substantial increase in 2021.

Adjusted net income

Adjusted net income follows a somewhat similar but distinct pattern. It starts at 457 million in 2016, rises dramatically to 1,026 million in 2017, then sharply dips to 49 million in 2018. The adjusted income recovers partially with a figure of 600 million in 2019 and remains relatively stable around 588 million in 2020 before a notable jump to 1,804 million in 2021. The adjusted figures generally remain below reported income, with some exceptions.

Reported ROA

The reported ROA displays a decreasing trend from 3.81% in 2016 to 0.58% in 2018, reflecting lower profitability relative to assets during that period. Thereafter, it improves to 2.38% in 2019 but again decreases slightly to 1.62% in 2020. In 2021, the reported ROA increases substantially to 3.88%, indicating improved asset utilization and profitability.

Adjusted ROA

Adjusted ROA echoes the general pattern of the reported ROA but at lower percentages. It declines from 1.79% in 2016 to a minimal 0.09% in 2018, signaling very low adjusted profitability relative to assets. This is followed by moderate recovery to 1.16% in 2019 and a slight dip to 1.09% in 2020. The adjusted ROA then increases considerably to 3.35% in 2021, pointing to enhanced operational efficiency after adjustments.

Overall, the data suggests that both reported and adjusted profitability experienced a trough in 2018, with meaningful improvements in subsequent years culminating in strong performance in 2021. The disparity between reported and adjusted figures indicates that non-recurring items or tax-related adjustments significantly influenced net income and returns throughout the period. The sharp recovery and growth in 2021 may reflect effective management strategies or favorable economic conditions affecting reported and adjusted results alike.