How our performance metrics support BD’s business strategy
BD remains focused on delivering sustainable growth and shareholder value, while making appropriate investments for the future. BD management operates the business consistent with the following core strategies:
Increasing revenue growth by focusing on our core products, services and solutions that deliver greater benefits to patients, healthcare workers and researchers;
Supplementing our internal growth through strategic acquisitions;
Investing in research and development for platform extensions and innovative new products;
Growing our operations in emerging markets;
Improving operating effectiveness and balance sheet productivity; and
Driving an efficient capital structure and strong shareholder returns.
The Compensation Committee believes it is important that our compensation program reinforce and reward behaviors that support these business objectives. In addition, the Compensation Committee believes executive compensation should be based in part on how BD’s performance compares to peer companies facing the same market conditions as BD. These considerations inform the Compensation Committee’s selection of the performance measures for BD’s performance-based compensation.
Performance Period and Metrics for
1 Year (PIP awards)
3 years (Performance Units)
10 years (SARs)
Free cash flow as a percentage of sales*
Stock price appreciation
Adjusted by eliminating the effect of unbudgeted currency fluctuations.
PIP. We evaluate corporate performance under the PIP using the following metrics:
Adjusted EPS (weighted 40%). “Adjusted EPS” is our GAAP diluted earnings per share less acquisition-related purchase accounting adjustments and finance, integration, restructuring and transaction costs. We use Adjusted EPS because it is the primary basis on which BD sets performance expectations for the year and earnings is a widely-used measure of overall company performance. The use of Adjusted EPS is consistent with how we report our operating results to the financial community.
Revenue (weighted 40%). Revenue measures BD’s ability to innovate and compete in the global marketplace. This measure focuses management on achieving strong “top-line” growth, consistent with our business strategy.
Free cash flow as a percentage of sales (weighted 20%). This metric recognizes the importance of the efficient use of cash to our ability to fund ongoing investments in our business, including product development, innovation and geographic expansion. “Free cash flow” means net cash from operations, less capital expenditures and capitalized software.
The Compensation Committee believes that, together, these three measures provide a balanced set of performance targets that focus on growth, profitability and operating efficiency.
When measuring actual performance against the targets, adjustments are made to account for the impact of foreign currency exchange rates in effect during the year, whether favorable or unfavorable to BD, compared to the rates we budgeted when the targets were set. We eliminate this impact of foreign currency translation so that only BD’s underlying performance is considered in determining PIP awards.