What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-02 compared with 2023-08-03 · 400 added, 378 removed, 833 unchanged (48% of the section changed)

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and its subsidiaries, taken together.

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the unaudited interim Condensed Consolidated Financial Statements and the related notes (the “Financial Statements ” ) included elsewhere in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023 (this “Form 10-Q”).

The matters discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contain certain forward-looking statements within the meaning of Section 27A of The Securities Act of 1933, as amended, and Section 21E of The Securities Exchange Act of 1934, as amended, and that may be forward-looking information within the meaning of applicable Canadian securities laws (collectively “Forward-Looking Statements”).

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Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Our accompanying unaudited interim Condensed Consolidated Financial Statements as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

Our accompanying unaudited interim Condensed Consolidated Financial Statements as of September 30, 2023 and for the three and nine months ended September 30, 2023 and 2022 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for interim financial statements, and should be read in conjunction with our Consolidated Financial Statements for the year ended December 31, 2022, which were included in our Annual Report on Form 10-K filed on February 23, 2023.

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Upon the closing of the B+L IPO and after giving effect to the subsequent partial exercise of the over-allotment option by the underwriters, Bausch Health indirectly holds 310,449,643 common shares of Bausch + Lomb, which represents approximately 89% of B+L’s outstanding common shares as of the date of this filing.

We continue to believe that completing the B+L Separation makes strategic sense.

We continue to believe the separation of B+L, which includes the transfer of all or a portion of our remaining direct or indirect equity interest in B+L to our shareholders, makes strategic sense.

The completion of the B+L Separation is subject to the achievement of targeted debt leverage ratios and the receipt of applicable shareholder and other necessary approvals.

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• Bausch Health excluding Bausch + Lomb - a diversified pharmaceutical company with leading positions in gastroenterology, hepatology, dermatology, neurology and international pharmaceuticals, and aesthetic medical devices.

The remaining pharmaceutical entity will comprise a diversified portfolio of our leading durable brands across the Salix, International, dentistry, neurology, medical dermatology and generics, and aesthetic medical devices businesses;

The remaining pharmaceutical entity will comprise a diversified portfolio of our brands across the Salix, International, dentistry, neurology, medical dermatology and generics, and aesthetic medical devices businesses;

• Bausch + Lomb - a fully integrated eye health company built on the iconic Bausch + Lomb brand and its long history of innovation.

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Effectively Managing Our Capital Structure

At the time of our announcement of the B+L Separation, we emphasized that it is important that the post-separation entities be well capitalized, with appropriate leverage and with access to additional capital, if and when needed, to provide each entity with the ability to independently allocate capital to areas that will strengthen their own competitive positions in their respective lines of business and position each entity for sustainable growth.

Therefore, we see the appropriate

capitalization and leverage of these businesses post-separation as a key to maximizing value across our portfolio of assets and, as such, it is a primary objective of our plan of separation.

At the time of our announcement of the B+L Separation, we emphasized that it is important that the post-separation entities be appropriately capitalized, with appropriate leverage and with access to additional capital, if and when needed, to provide each entity with the ability to independently allocate capital to areas that will strengthen their own competitive

positions in their respective lines of business and position each entity for sustainable growth.

Therefore, we see the appropriate capitalization and leverage of these businesses post-separation as a key to maximizing value across our portfolio of assets and, as such, it is a primary objective of our plan of separation.

For additional details on the B+L Separation, see “Separation of the Bausch + Lomb Eye Health Business” in Note 2, “SIGNIFICANT ACCOUNTING POLICIES” to our unaudited interim Condensed Consolidated Financial Statements.

B+L Term Loan B Facility and Senior Secured Notes

On September 29, 2023, Bausch + Lomb entered into a new term loan facility (“B+L September 2028 Term Loan B Facility”) of $500 million and issued new Senior Secured Notes (“B+L October 2028 Secured Notes”) of $1,400 million to finance the $1,750 million upfront payment related to the acquisition of XIIDRA ® and certain other ophthalmology assets from Novartis and associated acquisition-related transaction and financing costs, (as discussed in “-Strategic Acquisitions” below and Note 10, “FINANCING ARRANGEMENTS” to our unaudited interim Condensed Consolidated Financial Statements).

Accounts Receivable Credit Facility

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(i) the unfunded portion of the lenders’ commitments or (ii) 50% of the total lenders’ commitments.

As of June 30, 2023, there were no outstanding borrowings under the AR Credit Facility.

During the period July 1, 2023 through the date of this filing, August 3, 2023, we have drawn $350 million, in the aggregate, of borrowings.

Borrowings under our AR Credit Facility are for general corporate purposes.

As of September 30, 2023, there were $350 million in outstanding borrowings under the AR Credit Facility.

See Note 10, “FINANCING ARRANGEMENTS” to our unaudited interim Condensed Consolidated Financial Statements and “— Liquidity and Capital Resources — Liquidity and Debt — Long-term Debt” below for additional details.

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The net proceeds from these transactions, along with cash on hand, allowed us to:

(i) repay certain amounts outstanding under our then existing June 2025 Term Loan B Facility and November 2025 Term Loan B Facility (each as defined and discussed in Note 10, “FINANCING ARRANGEMENTS” to our unaudited interim Condensed Consolidated Financial Statements), (ii) replace our existing revolving credit facility which was due to mature in 2023, with revolving credit facilities that mature in 2027, (iii) redeem in full all of our then outstanding 6.125% Senior Unsecured Notes due 2025 (the “April

2025 Unsecured Notes”) and (iv) replace our then remaining amounts outstanding under our June 2025 Term Loan B Facility and November 2025 Term Loan B Facility with term loan facilities that were to expire in 2027.

Early Extinguishment of Debt - During 2022, through a series of transactions we repurchased and retired outstanding senior unsecured notes with an aggregate par value of $927 million in the open market for approximately $550 million using:

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(i) $1,774 million in aggregate principal amount of new 11.00% First Lien Secured Notes due 2028 (the “11.00% First Lien Secured Notes”) issued by the Company, (ii) $352 million in aggregate principal amount of new 14.00% Second Lien Secured Notes due 2030 (the “14.00% Second Lien Secured Notes”, and, together with the 11.00% First Lien Secured Notes, the “New BHC Secured Notes”) issued by the Company and (iii) $999 million in aggregate principal amount of new 9.00% Senior Secured Notes due 2028 (the “9.00% Intermediate Holdco Secured Notes”, and, together with the New BHC Secured Notes, the “New Secured Notes”) issued by 1375209 B.C.

(“Intermediate Holdco”), an existing wholly-owned unrestricted subsidiary of the Company that holds 38.6% of the issued and outstanding common shares of Bausch + Lomb.

Maturities of our principal balances of debt obligations as of June 30, 2023 were as follows:

(“Intermediate Holdco”), an existing wholly-owned unrestricted subsidiary of the Company that held 38.5% of the issued and outstanding common shares of Bausch + Lomb as of September 30, 2023.

Maturities of our principal balances of debt obligations as of September 30, 2023 were as follows:

(in millions) Remainder of 2023 2024 2025 2026 2027 2028 Thereafter Total

Total debt obligations $ 39 $ 155 $ 2,794 $ 896 $ 6,648 $ 7,218 $ 3,202 $ 20,952

We believe these transactions improve our overall capitalization and leverage.

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As of December 31, 2022, approximately 1,300 dedicated R&D and quality assurance employees in 25 R&D facilities were involved in our R&D efforts internally.

As of June 30, 2023, we had approximately 100 projects in our global pipeline.

As of September 30, 2023, we had approximately 100 projects in our global pipeline.

Certain core internal R&D projects that have received a significant portion of our R&D investment in current and prior periods are listed below.

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We expect to complete enrollment of two global Phase 3 trials in the first quarter of 2024.

Based on the top line results of a Phase 2 study, patients receiving 40 mg twice daily showed a statistically significant separation from placebo.

We have completed scientific advisory meetings with the Medicines Evaluation Board in the Netherlands and with Health Canada, and have received feedback on the program from National Medical Products Administration in China.

We are currently planning to meet with authorities in Japan later this year.

◦ Recently received orphan drug designation for sickle cell disease.

A phase 2 study with novel dosage formulation is currently enrolling patients for the treatment of sickle cell disease.

We are currently planning to meet with regulatory authorities in Japan later this year.

◦ Received orphan drug designation for sickle cell disease.

A phase 2 study with novel dosage formulation completed enrolling patients for the treatment of sickle cell disease.

◦ Development of a fit for purpose Patient Reported Outcomes tool for small intestinal bacterial overgrowth, or “SIBO”, is continuing in 2023 and will be validated in an upcoming clinical trial.

• Amiselimod (S1P modulator) - A Phase 2 study to evaluate Amiselimod (S1P modulator) for the treatment of mild to moderate ulcerative colitis completed enrollment in July 2023 and the study is expected to be completed in the fourth quarter of 2023.

• Amiselimod (S1P modulator) - A Phase 2 study to evaluate Amiselimod (S1P modulator) for the treatment of mild to moderate ulcerative colitis completed enrollment in July 2023 and the induction portion of the study is expected to be completed in the fourth quarter of 2023.

Solta Medical

• Clear + Brilliant ® Touch - Next generation Clear + Brilliant ® laser is designed to deliver a customized and more comprehensive treatment protocol by providing patients of all ages and skin types the benefits of two wavelengths with submissions in Europe and Canada planned in 2024, and in Asia Pacific markets in 2025.

• Fraxel ® - Next Generation Fraxel ® is a fractionated laser device for skin resurfacing and is planned for FDA submission later in 2023.

• Internal Development Project (“IDP”) - 126 - An acne product with a fixed combination of benzoyl peroxide, clindamycin phosphate and adapalene.

The FDA has accepted our New Drug Application (“NDA”) with an October 20, 2023 Prescription Drug User Fee Act (“PDUFA”) date.

• Fraxel ® - Next Generation Fraxel ® is a fractionated laser device for skin resurfacing and is planned for FDA submission in the first quarter of 2024.

• Internal Development Project - 126 - An acne product with a fixed combination of benzoyl peroxide, clindamycin phosphate and adapalene.

On October 20, 2023, the FDA approved the New Drug Application (“NDA”) for CABTREO TM Topical Gel (formerly Internal Development Project - 126), the first and only FDA-approved fixed-dose, triple-combination topical treatment for acne.

We plan to launch CABTREO TM Topical Gel in the U.S.

during the first quarter of 2024.

A New Drug Submission was submitted to Health Canada on May 30, 2023.

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To date, SiHy Daily has been launched in approximately 50 countries, under the brand names INFUSE ® , ULTRA ® ONE DAY and AQUALOX ® ONE DAY.

Bausch + Lomb plans to launch its SiHy Daily lenses into additional countries throughout 2023.

Bausch + Lomb continues to plan to launch its SiHy Daily lenses into additional countries throughout 2023.

In addition, Bausch + Lomb launched its first silicone hydrogel daily disposable multifocal contact lens in May 2023 and plans to launch a toric lens in 2024.

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To date, Bausch + Lomb has launched and acquired the right to launch Lumify ® in various countries.

Bausch + Lomb also has several innovative new line extension formulations under development, including Lumify ® Eye Illuminations which Bausch + Lomb expects to launch in 2023, Lumify Preservative Free, for which an NDA was submitted to the FDA in May 2023 and Lumify ® Allergy, for which an NDA is expected to be submitted to the FDA during 2024.

Bausch + Lomb also has several innovative new line extension formulations under development, including Lumify ® Eye Illuminations which launched in the U.S.

in September 2023, Lumify Preservative Free, for which an NDA was submitted to the FDA in May 2023 and Lumify ® Allergy, for which an NDA is expected to be submitted to the FDA during 2024.

• Bausch + Lomb is expanding its portfolio of premium intraocular lenses (“IOL”) built on the enVista ® platform with Aspire TM (Monofocal Plus), Envy TM Trifocal and BEYOND TM (extended depth of focus (“EDOF”)) optical designs with two options:

non-Toric and Toric for astigmatism patients.

Bausch + Lomb expects that they will be commercialized together with a new preloaded EyeGility inserter.

Bausch + Lomb anticipates launching Monofocal Plus, Trifocal and EDOF optical designs for presbyopia in the U.S.

enVista ® Aspire monofocal and toric IOLs with Intermediate Optimized optics began launching in the U.S.

during October 2023 and Bausch + Lomb anticipates launching Trifocal and EDOF optical designs for presbyopia in the U.S.

in 2024 and 2025/2026, respectively.

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In being selective, we seek to enter into only those acquisitions that provide us with significant synergies with our existing business, thereby minimizing risks to our core businesses and providing long-term growth opportunities.

During July 2023, Bausch + Lomb acquired the Blink ® product line of eye and contact lens drops from Johnson & Johnson Vision, which consists of Blink ® Tears Lubricating Eye Drops, Blink ® Tears Preservative Free Lubricating Eye Drops, Blink GelTears ® Lubricating Eye Drops, Blink ® Triple Care Lubricating Eye Drops, Blink Contacts ® Lubricating Eye Drops, and Blink-N-Clean ® Lens Drops.

In September 2023, Bausch + Lomb acquired XIIDRA ® , the first and only non-steroid eye drop specifically approved to treat the signs and symptoms of dry eye disease focusing on inflammation associated with dry eye, which Bausch + Lomb expects to begin facing loss of exclusivity (“LOE”) in the second quarter of 2032, and certain other ophthalmology assets from Novartis Pharma AG and Novartis Finance Corporation (together with Novartis Pharma AG, “Novartis”) (the “XIIDRA Acquisition”).

As part of the XIIDRA Acquisition, Bausch + Lomb also acquired libvatrep (also known as SAF312), an investigational compound being studied for the treatment of chronic ocular surface pain, and AcuStream ® technology, an investigational device that may have the potential to facilitate precise dosing and accurate delivery of certain topical ophthalmic medications to the eye, and OJL332, a noncompetitive antagonist (inhibitor) of TRPV1 that is still in the pre-clinical stage.

Bausch + Lomb believes the XIIDRA Acquisition will complement and grow its existing dry eye franchise.

In July 2023, Bausch + Lomb acquired the Blink ® OTC product line of eye and contact lens drops from Johnson & Johnson Vision, which consists of Blink ® Tears Lubricating Eye Drops, Blink ® Tears Preservative Free Lubricating Eye Drops, Blink GelTears ® Lubricating Eye Drops, Blink ® Triple Care Lubricating Eye Drops, Blink Contacts ® Lubricating Eye Drops, and Blink-N-Clean ® Lens Drops (collectively, the “Blink ® Product Line”)).

Bausch + Lomb believes this acquisition will enable it to continue to grow its global OTC business.

During June 2023, Bausch + Lomb entered into a definitive agreement with Novartis Pharma AG and Novartis Finance Corporation (together with Novartis Pharma AG, “Novartis”) to acquire XIIDRA ® , the first and only non-steroid eye drop specifically approved to treat the signs and symptoms of dry eye disease focusing on inflammation associated with dry eye.

As part of the transaction Bausch + Lomb will also acquire libvatrep, an investigational compound being studied for the treatment of chronic ocular surface pain, and AcuStream ® technology, an investigational device that may have the potential to facilitate precise dosing and accurate delivery of certain topical ophthalmic medications to the eye.

Bausch + Lomb believes this acquisition will complement and grow its existing dry eye franchise.

The transaction is expected to close by the end of 2023, subject to receipt of regulatory approval and other customary closing conditions.

See Item 1A “Risk Factors” of Part II of this Form 10-Q for additional information on the risks relating to the acquisition of XIIDRA ® .

During January 2023, Bausch + Lomb acquired AcuFocus, Inc., an ophthalmic medical device company that has delivered small aperture intraocular technology to address the diverse unmet needs in eye care.

See Note 4, “LICENSING AGREEMENTS AND ACQUISITIONS” to our unaudited interim Condensed Consolidated Financial Statements for additional information.

In January 2023, Bausch + Lomb acquired AcuFocus, Inc., an ophthalmic medical device company that has delivered small aperture intraocular technology to address the diverse unmet needs in eye care.

The IC-8 ® Apthera™ IOL was approved by the FDA in July 2022 as the first and only small aperture non-toric EDOF IOL for certain cataract patients who have as much as 1.5 diopters of corneal astigmatism and wish to address presbyopia at the same time.

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Salix - We believe in our GI product portfolio and we have implemented initiatives, including increasing our marketing investment in Xifaxan ® , to further capitalize on the value of the infrastructure we have built around these products to extend our market share.

We are increasing our investment in Xifaxan ® direct-to-consumer (“DTC”) advertising and new sales force capabilities.

We have increased our investment in Xifaxan ® direct-to-consumer (“DTC”) advertising and new sales force capabilities.

We also continue to invest in our product line.

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Diversified - We continue to seek out ways to bring out value in our promoted and nonpromoted products within our Diversified portfolios.

In 2023 we anticipate making additional investments in the marketing and advertising of Aplenzin ® as the only approved major depressive disorder product for Seasonal Affective Disorder, and also expanding our consumer awareness campaign for Jublia ® .

In addition, in support of our established acne product portfolio we also have a project in our pipeline, IDP-126, which is a fixed combination of benzoyl peroxide, clindamycin phosphate and adapalene.

The FDA has accepted our NDA with an October 20, 2023 PDUFA date.

In 2023 we have increased our investments in the marketing and advertising of Aplenzin ® as the only approved major depressive disorder product for Seasonal Affective Disorder, and also expanding our consumer awareness campaign for Jublia ® .

In addition, expanding our established acne product portfolio, on October 20, 2023, the FDA approved the NDA for CABTREO TM Topical Gel, the first and only FDA-approved fixed-dose, triple-combination topical treatment for acne.

We plan to launch CABTREO TM Topical Gel in the U.S.

during the first quarter of 2024.

In our generics portfolio, we are focused on effectively managing this portfolio of non-promoted products.

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As military activity and sanctions against Russia, Belarus and specific areas of Ukraine have continued, the war has affected economic and global financial markets as well as ongoing economic challenges, including issues such as high levels of inflation and global supply-chain disruption.

Our revenues attributable to Russia, Ukraine and Belarus, in the aggregate, were approximately $77 million and $71 million for the six months ended June 30, 2023 and 2022, respectively.

Our revenues attributable to Russia, Ukraine and Belarus, in the aggregate, were approximately $115 million and $135 million for the nine months ended September 30, 2023 and 2022, respectively.

The Company does not have any research or manufacturing facilities in Russia, Ukraine or Belarus.

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These lockdowns began to ease during the fourth quarter of 2022.

Our revenues in China for the six months ended June 30, 2023 and 2022 were $202 million and $177 million, respectively, an increase of $25 million.

Our revenues in China for the nine months ended September 30, 2023 and 2022 were $315 million and $293 million, respectively, an increase of $22 million.

To date, we have dealt with these issues in China with only a minimal impact on our manufacturing and distribution processes and we continue to monitor the impact of COVID-19 on all aspects of our business.

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first generic competitor product for Uceris ® Foam was introduced.

Following a loss of exclusivity (“LOE”) of and/or generic competition for a product, we would anticipate that product sales for such product would decrease significantly shortly following the LOE or entry of a generic competitor.

Following a LOE of and/or generic competition for a product, we would anticipate that product sales for such product would decrease significantly shortly following the LOE or entry of a generic competitor.

Where we have the rights, we may elect to launch an authorized generic (“AG”) of such product (either ourselves or through a third-party) prior to, upon or following generic entry, which may mitigate the anticipated decrease in product sales;

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We believe the entry into the market of generic competition generally would have an adverse impact on the volume and/or pricing of the affected products, however we are unable to predict the magnitude or timing of this impact.

In addition, for a number of our products (including Xifaxan ® 550 mg, Arazlo ® , Duobrii ® , Trulance ® and Lumify ® in the U.S.

and Jublia ® in Canada), we have commenced (or anticipate commencing) and have (or may have) ongoing infringement proceedings against potential generic competitors in the U.S.

In addition, for a number of our products (including Xifaxan ® 550 mg, Arazlo ® , Duobrii ® , Trulance ® and Lumify ® in the U.S), we have commenced (or anticipate commencing) and have (or may have) ongoing infringement proceedings against potential generic competitors in the U.S.

If we are not successful in these proceedings, we may face increased generic competition for these products.

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In the normal course of business, our products, devices and facilities are the subject of ongoing oversight and review by regulatory and governmental agencies, including general, for cause and pre-approval inspections by the relevant competent authorities where we have business operations.

Through the date of this filing, all of our global operations and facilities have the relevant operational good manufacturing practices certificates and all Company products and all operating sites are in good compliance standing with all relevant notified bodies and global health authorities.

Through the date of this filing, except as discussed below, all of our global operations and facilities have the relevant operational good manufacturing practices certificates and all Company products and all operating sites are in good compliance standing with all relevant notified bodies and global health authorities.

Further, all sites under FDA jurisdiction are rated as either No Action Indicated (where there was no Form 483 observation) or Voluntary Action Indicated (“VAI”) (where there was a Form 483 with one or more observations).

In the case of VAI inspection outcomes, the FDA has accepted our responses to the issues cited, which will be verified when the agency makes its next inspection of those specific facilities.

In October 2023, following a good manufacturing practices inspection of our Tecnofarma manufacturing facility in Mexico, the Mexico regulatory authority COFEPRIS suspended all cephalosporin manufacturing operations as a result of their observation that the cephalosporin manufacturing facility design no longer complies with current standards.

No other manufacturing areas of our Tecnofarma facility are impacted.

This action is not expected to have a material impact to the Company, as revenues from production of the impacted products were not material for the nine months ended September 30, 2023 and 2022.

FINANCIAL PERFORMANCE HIGHLIGHTS

The following table provides selected unaudited financial information for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30, Six Months Ended June 30,

The following table provides selected unaudited financial information for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended September 30, Nine Months Ended September 30,

(in millions, except per share data) 2023 2022 Change 2023 2022 Change

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Operating income $ 14 $ 244 $ (230) $ 601 $ 690 $ (89)

Income (loss) before income taxes $ 79 $ (129) $ 208 $ (57) $ (211) $ 154

Net income (loss) attributable to Bausch Health Companies Inc.

(Loss) income before income taxes $ (326) $ 439 $ (765) $ (383) $ 228 $ (611)

Net (loss) income attributable to Bausch Health Companies Inc.

$ (378) $ 399 $ (777) $ (553) $ 185 $ (738)

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Financial Performance

Summary of the Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

Revenues for the three months ended June 30, 2023 and 2022 were $2,167 million and $1,967 million, respectively, an increase of $200 million, or 10%.

The increase was primarily due to growth in the Bausch + Lomb, Salix, Solta Medical and International segments driven by higher volumes and improved net pricing, partially offset by:

(i) lower volumes in our Diversified segment, (ii) the unfavorable impact of foreign currencies, primarily in Asia and Europe and (iii) the impact of divestitures and discontinuations.

Operating income for the three months ended June 30, 2023 and 2022 was $412 million and $161 million, respectively, and included non-cash charges for Depreciation and amortization of intangible assets of $315 million and $347 million, Goodwill impairments of $0 and $83 million, Asset impairments of $37 million and $6 million and Share-based compensation of $33 million and $26 million, respectively.

The increase in our operating results of $251 million reflects, among other factors:

Summary of the Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022

Revenues for the three months ended September 30, 2023 and 2022 were $2,238 million and $2,046 million, respectively, an increase of $192 million, or 9%.

The increase was primarily due to growth across all our segments driven by:

(i) improved net pricing, (ii) higher volumes in our Salix, Bausch + Lomb and Solta Medical segments, (iii) incremental sales attributable to acquisitions and (iv) the favorable impact of foreign currencies, partially offset by lower volumes in our Diversified and International segments and the impact of divestitures and discontinuations.

Operating income for the three months ended September 30, 2023 and 2022 was $14 million and $244 million, respectively, and included non-cash charges for Depreciation and amortization of intangible assets of $301 million and $335 million, Goodwill impairments of $402 million and $119 million and Share-based compensation of $29 million and $33 million, respectively.

The decrease in our operating results of $230 million reflects, among other factors:

• an increase in contribution (Product sales revenue less Cost of goods sold, excluding amortization and impairments of intangible assets) of $152 million primarily due to the increase in revenues as previously discussed;

• an increase in selling, general and administrative (“SG&A”) of $54 million primarily attributable to higher:

(i) selling, advertising and promotion expenses, (ii) compensation and (iii) certain administrative expenses, partially offset by:

(i) a decrease in separation-related costs and (ii) the favorable impact of foreign currencies;

(i) selling, advertising and promotion expenses, (ii) professional services and (iii) compensation, partially offset by a decrease in certain administrative expenses;

• an increase in R&D expenses of $20 million primarily attributable to higher spend, primarily on certain Salix projects;

• a decrease in Amortization of intangible assets of $37 million primarily attributable to fully amortized intangible assets no longer being amortized in 2023;

• an increase in Asset impairments of $31 million during the three months ended June 30, 2023, primarily attributable to the launch of a generic competitor to Uceris ® Foam;

• a favorable change in Other (income) expense, net of $83 million, primarily attributable to:

(i) insurance recoveries and (ii) adjustments to reflect changes in estimates of the liability for Acquisition-related contingent consideration.

Income before income taxes for the three months ended June 30, 2023, was $79 million as compared to a loss before income taxes of $129 million, for the three months ended June 30, 2022, an increase of $208 million.

The increase is primarily attributable to:

(i) the increase in our operating results of $251 million, as previously discussed and (ii) a decrease in interest expense of $91 million, partially offset by a decrease in Gain on extinguishment of debt of $113 million.

• an increase in Goodwill impairments of $283 million as during the three months ended September 30, 2023, we recognized impairments to the goodwill of the Dermatology and Neurology reporting units;

• an unfavorable change in Other expense, net of $56 million, primarily attributable to:

(i) adjustments to reflect changes in estimates of the liability for Acquisition-related contingent consideration, (ii) higher adjustments related to the settlements of certain litigation matters and (iii) adjustments related to acquisition related transaction costs.

Loss before income taxes for the three months ended September 30, 2023 was $326 million as compared to income before income taxes for the three months ended September 30, 2022 of $439 million, a decrease of $765 million.

The decrease is primarily attributable to:

(i) the decrease in Gain on extinguishment of debt of $570 million, (ii) the decrease in our operating results of $230 million, as previously discussed, and (iii) the unfavorable change in foreign exchange and other of $14 million, partially offset by a decrease in interest expense of $46 million.

The decrease in interest expense is primarily due to the impact of the accounting treatment for a portion of interest payments on the New Secured Notes, which reduced reported interest expense by $73 million relative to contractual interest cost.

Net income attributable to Bausch Health for the three months ended June 30, 2023 was $26 million and Net loss attributable to Bausch Health for the three months ended June 30, 2022 was $145 million, an increase of $171 million, due to:

(i) the increase in our Income before income taxes of $208 million as previously discussed, and (ii) the decrease in Net income attributable to noncontrolling interest of $5 million and offset by an unfavorable change in income taxes of $42 million.

Summary of the Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

Revenues for the six months ended June 30, 2023 and 2022 were $4,111 million and $3,885 million, respectively, an increase of $226 million, or 6%.

The increase was primarily due to growth in the Bausch + Lomb, Salix, Solta Medical and International segments driven by higher volumes and improved net pricing, partially offset by:

(i) lower revenues in our Diversified segment, (ii) the unfavorable impact of foreign currencies, primarily in Europe and Asia and (iii) the impact of divestitures and discontinuations.

Operating income for the six months ended June 30, 2023 and 2022 was $587 million and $446 million, respectively, and included non-cash charges for Depreciation and amortization of intangible assets of $634 million and $699 million, Asset impairments of $50 million and $14 million, Goodwill impairments of $0 and $83 million and Share-based compensation of $74 million and $58 million, respectively.

The increase in our operating results of $141 million reflects, among other factors:

Net loss attributable to Bausch Health for the three months ended September 30, 2023 was $378 million as compared to Net income attributable to Bausch Health for the three months ended September 30, 2022 of $399 million, a decrease of $777 million, due to:

(i) the decrease in our Income before income taxes of $765 million as previously discussed, and (ii)

unfavorable change in income taxes of $20 million, partially offset by an increase in Net loss (income) attributable to noncontrolling interest of $8 million.

Summary of the Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022

Revenues for the nine months ended September 30, 2023 and 2022 were $6,349 million and $5,931 million, respectively, an increase of $418 million, or 7%.

The increase was primarily due to growth in the Bausch + Lomb, Salix, International and Solta Medical segments driven by:

(i) higher volumes in our Bausch + Lomb, Salix, Solta Medical and International segments, (ii) improved net pricing across all our segments and (iii) incremental sales attributable to acquisitions, partially offset by:

(i) the unfavorable impact of foreign currencies, primarily in Asia and Europe, (ii) the impact of divestitures and discontinuations and (iii) lower revenues in our Diversified segment.

Operating income for the nine months ended September 30, 2023 and 2022 was $601 million and $690 million, respectively, and included non-cash charges for Depreciation and amortization of intangible assets of $935 million and $1,034 million, Asset impairments of $54 million and $15 million, Goodwill impairments of $402 million and $202 million and Share-based compensation of $103 million and $91 million, respectively.

The decrease in our operating results of $89 million reflects, among other factors:

• an increase in contribution of $277 million primarily due to the increase in revenues as previously discussed;

• an increase in SG&A of $192 million primarily attributable to higher:

(i) selling, advertising and promotion expenses, (ii) compensation and (iii) certain administrative expenses, partially offset by:

(i) compensation, (ii) selling, advertising and promotion expenses and (iii) certain administrative expenses, partially offset by:

(i) a decrease in separation-related costs and (ii) the favorable impact of foreign currencies;

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• a decrease in Amortization of intangible assets of $107 million primarily attributable to fully amortized intangible assets no longer being amortized in 2023;

• a decrease in Goodwill impairments of $83 million.

Goodwill impairments associated with our Dermatology reporting unit were $83 million for the six months ended June 30, 2022;

• an increase in Asset impairments of $36 million during six months ended June 30, 2023, primarily attributable to the launch of a generic competition to Uceris ® Foam;

• an increase in Goodwill impairments of $200 million as during the nine months ended September 30, 2023, we recognized impairments to the goodwill of the Dermatology and Neurology reporting units;

• an increase in Asset impairments of $39 million during nine months ended September 30, 2023, primarily attributable to the launch of a generic competitor to Uceris ® Foam;

• a decrease in Restructuring, integration, separation and IPO costs of $18 million;

• a favorable change in Other (income) expense, net of $62 million primarily attributable to:

(i) insurance recoveries and (ii) adjustments to reflect changes in estimates of the liability for Acquisition-related contingent consideration.

Loss before income taxes for the six months ended June 30, 2023 and 2022 was $57 million and $211 million, respectively, an increase in our results of $154 million.

The increase is primarily attributable to:

(i) a decrease in Interest expense of $146 million and (ii) the increase in our operating results of $141 million, as previously discussed, partially offset by:

(i) a decrease in Gain on extinguishment of debt of $113 million and (ii) the unfavorable net change in Foreign exchange and other of $28 million.

• a favorable change in Other expense, net of $6 million primarily attributable to insurance recoveries, partially offset by:

(i) adjustments to reflect changes in estimates of the liability for Acquisition-related contingent consideration and (ii) adjustments related to acquisition related transaction costs.

Loss before income taxes for the nine months ended September 30, 2023 was $383 million as compared to income before income taxes for the nine months ended September 30, 2022 of $228 million, a decrease in our results of $611 million.

The decrease is primarily attributable to:

(i) a decrease in Gain on extinguishment of debt of $683 million, (ii) the decrease in our operating results of $89 million, as previously discussed, and (iii) the unfavorable net change in Foreign exchange and other of $42 million, partially offset by:

(i) a decrease in Interest expense of $192 million and (ii) an increase in Interest income of $11 million.

Net loss attributable to Bausch Health for the six months ended June 30, 2023 and 2022 was $175 million and $214 million, respectively, an increase in our results of $39 million.

The increase in our results was primarily due to the increase in our Income before income taxes of $154 million, as previously discussed, partially offset by the unfavorable change in our provision for income taxes of $131 million.

Net loss attributable to Bausch Health for the nine months ended September 30, 2023 was $553 million as compared to Net income attributable to Bausch Health for the nine months ended September 30, 2022 of $185 million, a decrease in our results of $738 million.

The decrease in our results was primarily due to:

(i) the decrease in our Income before income taxes of $611 million, as previously discussed, and (ii) the unfavorable change in our provision for income taxes of $151 million, partially offset by an increase in Net income attributable to noncontrolling interest of $24 million.

RESULTS OF OPERATIONS

Our unaudited operating results for the three and six months ended June 30, 2023 and 2022 were as follows:

Three Months Ended June 30, Six Months Ended June 30,

Our unaudited operating results for the three and nine months ended September 30, 2023 and 2022 were as follows:

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2023 2022 Change 2023 2022 Change

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Restructuring, integration, separation and IPO costs 14 10 4 40 58 (18)

Other (income) expense, net (83) — (83) (60) 2 (62)

Other expense, net 60 4 56 — 6 (6)

2,224 1,802 422 5,748 5,241 507

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Foreign exchange and other (7) 7 (14) (38) 4 (42)

Income (loss) before income taxes 79 (129) 208 (57) (211) 154

(Provision for) benefit from income taxes (52) (10) (42) (125) 6 (131)

Net income (loss) 27 (139) 166 (182) (205) 23

Net (income) loss attributable to noncontrolling interest (1) (6) 5 7 (9) 16

Net income (loss) attributable to Bausch Health Companies Inc.

(Loss) income before income taxes (326) 439 (765) (383) 228 (611)

Provision for income taxes (56) (36) (20) (181) (30) (151)

Net (loss) income (382) 403 (785) (564) 198 (762)

Net loss (income) attributable to noncontrolling interest 4 (4) 8 11 (13) 24

Net (loss) income attributable to Bausch Health Companies Inc.

$ (378) $ 399 $ (777) $ (553) $ 185 $ (738)

Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022

The Company’s revenues are primarily generated from product sales, primarily in the therapeutic areas of GI, hepatology, neurology, dermatology and eye health, that consist of:

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Other revenues include alliance and service revenue from the licensing and co-promotion of products and contract service revenue which is derived primarily from contract manufacturing for third parties and which is not material.

Our revenues were $2,167 million and $1,967 million for the three months ended June 30, 2023 and 2022, respectively, an increase of $200 million, or 10%.

Our revenues were $2,238 million and $2,046 million for the three months ended September 30, 2023 and 2022, respectively, an increase of $192 million, or 9%.

The increase was primarily due to:

(i) an increase in volumes of $145 million attributable to our Bausch + Lomb, Solta Medical, Salix and International segments, (ii) an increase in net realized pricing of $76 million primarily attributable to our Salix and Bausch + Lomb segments and (iii) incremental sales attributable to acquisitions of $2 million, partially offset by:

(i) the unfavorable impact of foreign currencies of $17 million, primarily in Europe and Asia and (ii) the impact of divestitures and discontinuations of $6 million.

The changes in our segment revenues and segment profits for the three months ended June 30, 2023, are discussed in further detail in the respective subsequent section “ — Reportable Segment Revenues and Profits.”

(i) an increase in net realized pricing of $98 million attributable to all our segments, (ii) an increase in volumes of $77 million attributable to our Salix, Bausch + Lomb and Solta Medical segments, (iii) incremental sales attributable to acquisitions of $15 million and (iv) the favorable impact of foreign currencies of $6 million, primarily in Europe and Asia, partially offset by the impact of divestitures and discontinuations of $4 million.

The changes in our segment revenues and segment profits for the three months ended September 30, 2023, are discussed in further detail in the respective subsequent section “ — Reportable Segment Revenues and Profits.”

Cash Discounts and Allowances, Chargebacks and Distribution Fees

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We also concentrate on managing our relationships with our payors and wholesalers, reviewing the ranges of our offerings and being disciplined as to the amount and type of incentives we negotiate.

Provisions recorded to reduce gross product sales to net product sales and revenues for the three months ended June 30, 2023 and 2022 were as follows:

Three Months Ended June 30,

Provisions recorded to reduce gross product sales to net product sales and revenues for the three months ended September 30, 2023 and 2022 were as follows:

Three Months Ended September 30,

(in millions) Amount Pct.

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Revenues $ 2,238 $ 2,046

Cash discounts and allowances, returns, rebates, chargebacks and distribution fees as a percentage of gross product sales were 40.8% and 42.8% for the three months ended June 30, 2023 and 2022, respectively, a decrease of 2.0 percentage points due primarily to the following factors:

• discounts and allowances as a percentage of gross product sales were higher primarily due to an increase in gross product sales of certain branded products such as Xifaxan ® and Trulance ® and our branded authorized generic (“AG”) Diastat ® AG;

• returns as a percentage of gross product sales were lower as the Company continues to focus on maximizing operational efficiencies and actions to reduce product returns, including, but not limited to:

(i) monitoring and reducing customer inventory levels, (ii) instituting disciplined pricing policies and (iii) improving contracting.

Cash discounts and allowances, returns, rebates, chargebacks and distribution fees as a percentage of gross product sales were 40.1% and 41.4% for the three months ended September 30, 2023 and 2022, respectively, a decrease of 1.3 percentage points due primarily to the following factors:

• returns as a percentage of gross product sales remain below 1% as the Company continues to focus on maximizing operational efficiencies and actions to reduce product returns, including, but not limited to:

(i) monitoring and reducing customer inventory levels, (ii) maintaining disciplined pricing policies and (iii) improving contracting.

These actions have had the effect of improving the sales return experience;

• rebates as a percentage of gross product sales were unchanged primarily due to an increase in gross product sales and higher rebate rates for certain branded products such as Xifaxan ® , Trulance ® and Jublia ® and were offset by lower gross product sales for certain branded products such as Uceris ® Tablets, Retin-A ® Cream and Duobrii ® ;

• chargebacks as a percentage of gross product sales were lower primarily due to lower gross product sales of certain generic products such as Metronidazole and Nifediac and certain branded generics such as Clindagel ® AG and Fenoglide ® AG.

• rebates as a percentage of gross product sales were lower primarily due to an increase in gross product sales and were offset by higher rebate rates for certain branded products such as Xifaxan ® , Trulance ® and Jublia ® ;

• chargebacks as a percentage of gross product sales were lower primarily due to lower gross product sales of certain generic products such as Nifediac and certain branded generics such as Clindagel ® AG.

These decreases were partially offset by:

(i) higher chargeback rates for certain generics and

branded generics, (ii) increased volumes for our GI product Xifaxan ® and (iii) increased gross product sales and higher chargeback rate for our neurology product Librax ® ;

• distribution service fees as a percentage of gross product sales were unchanged as the impact of higher volumes for our GI products Xifaxan ® and Trulance ® was offset by the impact of lower volumes for certain of our dermatology products such as Retin-A ® Cream and our GI product Uceris ® Tablets.

(i) higher chargeback rates for certain generics and branded generics, (ii) increased volumes for our GI product Xifaxan ® and (iii) increased gross product sales and a higher chargeback rate for our neurology product Librax ® ;

• distribution service fees as a percentage of gross product sales were higher as the impact of higher volumes for our GI products Xifaxan ® and Trulance ® were partially offset by the impact of lower volumes for certain of our

dermatology products such as Retin-A ® Cream and our GI product Uceris ® Tablets.

Price appreciation credits are offset against distribution service fees when due to wholesalers.

There were no price appreciation credits for the three months ended June 30, 2023 and 2022.

There were no price appreciation credits for the three months ended September 30, 2023 and 2022.

Cost of Goods Sold (excluding amortization and impairments of intangible assets)

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Cost of goods sold excludes the amortization and impairments of intangible assets.

Cost of goods sold was $640 million and $568 million for the three months ended June 30, 2023 and 2022, respectively, an increase of $72 million, or 13%.

Cost of goods sold was $612 million and $573 million for the three months ended September 30, 2023 and 2022, respectively, an increase of $39 million, or 7%.

The increase was primarily driven by:

(i) the increase in volumes as previously discussed, and (ii) charges related to the Injector recall discussed below, partially offset by the favorable impact of foreign currencies.

Cost of goods sold as a percentage of product sales revenue were 29.8% and 29.2% for the three months ended June 30, 2023 and 2022, respectively, an increase of 0.6 percentage points.

(i) the increase in volumes as previously discussed, and (ii) the unfavorable impact of foreign currencies, partially offset by favorable manufacturing variances.

Cost of goods sold as a percentage of product sales revenue were 27.7% and 28.3% for the three months ended September 30, 2023 and 2022, respectively, a decrease of 0.6 percentage points.

Cost of goods sold as a percentage of product sales revenue was unfavorably impacted by:

(i) changes in product mix and (ii) inflationary pressures, partially offset by:

(i) higher net realized pricing, as discussed above and (ii) the favorable impact of foreign currencies.

In May 2023 we initiated a voluntary recall in EMEA and Canada of our Emerade epinephrine auto-injectors (0.3 mg and 0.5 mg) (the “Injector”) used to deliver an emergency treatment of epinephrine to patients who are at risk of serious allergic reactions (anaphylaxis).

The recall resulted in inventory provisions of approximately $7 million, product return provisions of approximately $2 million and other costs of approximately $3 million.

It is possible that additional charges may be incurred based on future developments associated with this voluntary recall.

(i) changes in product mix and (ii) the unfavorable impact of foreign currencies, partially offset by:

(i) higher net realized pricing, as discussed above and (ii) favorable manufacturing variances.

Selling, General and Administrative Expenses

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These separation-related and IPO-related costs include, but are not limited to:

(i) IT infrastructure and software licensing costs, (ii) rebranding costs and (iii) costs associated with facility relocation and/or modification.

SG&A expenses were $711 million and $676 million for the three months ended June 30, 2023 and 2022, respectively, an increase of $35 million, or 5%.

(i) IT infrastructure and software licensing costs, (ii) rebranding costs, (iii) costs associated with facility relocation and/or modification and (iv) research and development costs.

SG&A expenses were $715 million and $661 million for the three months ended September 30, 2023 and 2022, respectively, an increase of $54 million, or 8%.

The increase was primarily attributable to higher:

(i) selling, advertising and promotion expenses, (ii) compensation and (iii) certain administrative expenses, due in part to incremental costs associated with the separation of certain functions in connection with the B+L Separation.

These increases were partially offset by:

(i) lower professional fees and (ii) the favorable impact of foreign currencies.

(i) selling, advertising and promotion expenses, (ii) professional services and (iii) compensation, partially offset by a decrease in certain administrative expenses.

Research and Development Expenses

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and other third-party costs.

R&D expenses were $156 million and $127 million for the three months ended June 30, 2023 and 2022, respectively, an increase of $29 million, or 23%.

R&D expenses were $153 million and $133 million for the three months ended September 30, 2023 and 2022, respectively, an increase of $20 million, or 15%.

The increase was primarily attributable to higher spend on certain Salix projects.

R&D expenses as a percentage of Product sales were approximately 7% for each of the three months ended June 30, 2023 and 2022.

R&D expenses as a percentage of Product sales were approximately 7% for each of the three months ended September 30, 2023 and 2022.

Amortization of Intangible Assets

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Management continually assesses the useful lives related to the Company’s long-lived assets to reflect the most current assumptions.

Amortization of intangible assets was $269 million and $302 million for the three months ended June 30, 2023 and 2022, respectively, a decrease of $33 million.

Amortization of intangible assets was $253 million and $290 million for the three months ended September 30, 2023 and 2022, respectively, a decrease of $37 million.

The decrease was primarily attributable to fully amortized intangible assets no longer being amortized in 2023.

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Where the qualitative assessment suggests that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative fair value test is performed for that reporting unit.

There were no goodwill impairments for the three months ended June 30, 2023.

Goodwill impairments for the three months ended June 30, 2022, were $83 million.

During the three months ended June 30, 2022, increases in interest rates and, to a lesser extent, higher than expected inflation in the U.S.

and other macroeconomic factors impacted key assumptions used to value the Dermatology reporting unit at March 31, 2022 (the last time goodwill of the Dermatology reporting unit was tested).

Given the limited headroom of the Dermatology reporting unit as calculated on March 31, 2022, the Company believed that these facts and circumstances suggest the fair value of the Dermatology reporting unit could be less than its carrying amount, and therefore a quantitative fair value test was performed for the reporting unit.

The quantitative fair value test utilized the Company’s then most recent cash flow projections as revised in the second quarter of 2022 which reflected current market conditions and current trends in business performance.

Our latest discounted cash flow model for the Dermatology reporting unit included a range of potential outcomes for, among other matters, macroeconomic factors such as higher than expected inflation for many commodities, volatility in many of the equity markets and pressures on market interest rates.

The quantitative fair value test utilized a long-term growth rate of 1% and a discount rate of 10%.

The discount rate increased 1% since the assessment performed at March 31, 2022, as a result of changes in macroeconomic conditions, including an increase in the risk free rate during the three months ended June 30, 2022.

Based on the quantitative fair value test, the carrying value of the Dermatology reporting unit exceeded its fair value at June 30, 2022, and we recognized a goodwill impairment of $83 million.

See Note 8, “INTANGIBLE ASSETS AND GOODWILL” to our unaudited interim Condensed Consolidated Financial Statements for further details related to our goodwill.

Goodwill impairments were $402 million and $119 million for the three months ended September 30, 2023 and 2022, respectively, an increase of $283 million.

2023 Assessment.

Through the nine months ended September 30, 2023, the Dermatology and Neurology reporting units had performed largely in line with the forecasted results used in their long term forecasts as of September 30, 2022 and October 1, 2022, respectively, when a fair value quantitative test for each of these reporting units was last performed.

During the third quarter of 2023, for reasons discussed in Note 8, “INTANGIBLE ASSETS AND GOODWILL” to our unaudited interim Condensed Consolidated Financial Statements, the Company’s preliminary assessment of future business performance indicated that the future financial results of these reporting units were expected to be below the assumptions used in their last quantitative fair value tests.

After considering the limited headroom as a result of the impairment to goodwill of the Dermatology reporting unit (September 30, 2022) and the Neurology reporting unit (October 1, 2022) when last tested, the Company determined that these changes in facts and circumstances, as well as increases in market interest rates during the three months ended September 30, 2023, suggested that the fair values of these reporting units could be less than their respective carrying amounts, and therefore a quantitative fair value test for each of these reporting units was performed.

The quantitative fair value tests utilized the Company’s most recent cash flow projections for the Dermatology and Neurology reporting units as revised in the third quarter of 2023 which reflected current market conditions and current trends in business performance.

The quantitative fair value tests utilized long-term growth rates of 0.0% and -2.5% and discount rates of 10.75% and 10.50% for the Dermatology and Neurology reporting units, respectively.

Based on the quantitative fair value tests, the carrying values of the Dermatology and Neurology reporting units exceeded their fair values at September 30, 2023 by $151 million and $251 million, respectively, and we recognized goodwill impairments of $402 million.

2022 Assessment.

As a result of an impairment to the goodwill of the Dermatology reporting unit recognized in second quarter of 2022, the reporting unit had no headroom as calculated on June 30, 2022.

We considered the increases in interest rates, higher than expected inflation in the U.S.

and other macroeconomic factors which would impact the key assumptions used to value the Dermatology reporting unit at June 30, 2022 (the last time goodwill of the Dermatology reporting unit was tested).

We believed these facts and circumstances suggest the fair value of the Dermatology reporting unit could be less than its carrying amount, and therefore a quantitative fair value test was performed for the reporting unit.

The quantitative fair value test utilized the Company’s then most recent cash flow projections as revised in the third quarter of 2022 which reflected current market conditions and current trends in business performance.

The Company updated revenue assumptions for a certain product and other products reaching LOE and updated its assumptions regarding selling, advertising and promotion investments.

The Company also increased the discount rate used in the valuation of the reporting unit from 10.0% utilized in the June 30, 2022 testing to 10.5% utilized in the September 30, 2022 testing which reflected the increases in market interest rates.

The Company did not change its long-term growth rate assumption of 1%.

Based on the quantitative fair value test, the carrying value of the Dermatology reporting unit exceeded its fair value at September 30, 2022, and we recognized a goodwill impairment of $119 million.

See Note 8, “INTANGIBLE ASSETS AND GOODWILL” to our unaudited interim Condensed Consolidated Financial Statements and “CRITICAL ACCOUNTING POLICIES AND ESTIMATES” for further details related to our goodwill.

Asset impairments

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The undiscounted cash flow model relies on assumptions regarding revenue growth rates, gross profit, selling, general and administrative expenses and research and development expenses.

Asset impairments were $37 million and $6 million for the three months ended June 30, 2023 and 2022, respectively, an increase of $31 million.

Asset impairments for the three months ended June 30, 2023 of $37 million were primarily related to the impairment to the intangible assets associated with our Uceris ® Foam product as discussed below.

Asset impairments for the three months ended June 30, 2022 were $6 million and were primarily related to changes in forecasted revenue and production costs of a neurology product.

Uceris ® Foam - On April 12, 2023, the FDA approved an ANDA submitted by a competitor, for a budesonide (a steroid (cortisone-like) medicine) foam to help treat mild to moderate active ulcerative colitis.

This product is a generic version of our Uceris ® Foam product.

As of June 30, 2023, the carrying value of the Uceris ® Foam product related intangible assets exceeded the undiscounted expected cash flows from the Uceris ® Foam.

As a result, the Company recognized an impairment of $37 million to reduce the carrying value of the Uceris ® Foam product related intangible assets to their estimated fair value.

As of June 30, 2023, the carrying value of the Uceris ® Foam product related intangible assets was not material.

Asset impairments were not material for the three months ended September 30, 2023 and 2022.

See Note 8, “INTANGIBLE ASSETS AND GOODWILL” to our unaudited interim Condensed Consolidated Financial Statements for further details related to our intangible assets.

Restructuring, Integration, Separation and IPO Costs

Restructuring, integration, separation and IPO costs were $16 million and $35 million for the three months ended June 30, 2023 and 2022, respectively, a decrease of $19 million.

Restructuring, integration, separation and IPO costs were $14 million and $10 million for the three months ended September 30, 2023 and 2022, respectively, an increase of $4 million.

Restructuring and Integration Costs

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(i) reducing headcount, (ii) eliminating real estate costs associated with unused or under-utilized facilities and (iii) implementing contribution margin improvement and other cost reduction initiatives.

Restructuring and integration costs were $16 million and $22 million for the three months ended June 30, 2023 and 2022, respectively.

Restructuring and integration costs were $12 million and $3 million for the three months ended September 30, 2023 and 2022, respectively.

The Company continues to evaluate opportunities to streamline its operations and identify additional cost savings globally.

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(i) legal, audit and advisory fees, (ii) talent acquisition costs and (iii) costs associated with establishing a new board of directors and related board committees for Bausch + Lomb.

Separation and IPO costs were less than $1 million and $13 million for the three months ended June 30, 2023 and 2022, respectively.

Separation and IPO costs were approximately $2 million and $7 million for the three months ended September 30, 2023 and 2022, respectively.

The extent and timing of future charges of these costs to complete the B+L Separation cannot be reasonably estimated at this time and could be material.

See Note 5, “RESTRUCTURING, INTEGRATION, SEPARATION AND IPO COSTS” to our unaudited interim Condensed Consolidated Financial Statements for further details regarding these actions.

Other (Income) Expense, Net

Other (Income) Expense, Net for the three months ended June 30, 2023 and 2022 consists of the following:

Other Expense, Net

Other Expense, Net for the three months ended September 30, 2023 and 2022 consists of the following:

Three Months Ended

September 30,

(in millions) 2023 2022

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Acquisition-related contingent consideration 26 4

Loss (Gain) on sale of assets, net 1 (3)

Acquired in-process research and development costs — 1

Gain on sale of assets, net (5) —

Acquisition-related transaction costs 15 —

Other, Net 1 (1)

For the three months ended June 30, 2023, Litigation and other matters primarily relates to insurance recoveries associated with certain legacy litigation matters.

As a result of revisions to an existing royalty agreement of certain branded products during the three months ended June 30, 2023, the Company has revised its long-term sales forecast for those products.

Acquisition-related contingent consideration for the three months ended June 30, 2023, primarily includes adjustments to reflect the reduction in estimates of the future royalty payments related to those branded products.

Acquisition-related contingent consideration for the three months ended September 30, 2023, primarily includes adjustments for changes in estimates in the timing and amounts of the future royalty and milestone payments related to certain branded products.

Acquisition-related transaction costs for the three months ended September 30, 2023, primarily include transaction costs attributable to the acquisitions of XIIDRA ® and the Blink ® Product line by Bausch + Lomb .

Non-Operating Income and Expense

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Interest expense primarily consists of interest payments due, amortization and write-off of debt discounts, premiums and debt issuance costs under our credit facilities and notes as well as the amortization of amounts excluded from the assessment of hedge effectiveness over the term of the Company’s cross-currency swaps.

Interest expense was $319 million and $410 million, and included non-cash amortization and write-offs of debt premiums, discounts and deferred issuance costs of $12 million and $50 million, for the three months ended June 30, 2023 and 2022, respectively.

Interest expense for the three months ended June 30, 2023 decreased $91 million, or 22%, as compared to the three months ended June 30, 2022, primarily due to:

(i) the accounting for contractual interest payments on the New Secured Notes, portions of which are recorded as a reduction of related premiums and not as interest expense, which had the impact of reducing interest expense by $74 million relative to contractual interest cost and (ii) the impact of lower outstanding debt balances in 2023 as compared to 2022, partially offset by higher interest rates.

The weighted average stated rate of interest as of June 30, 2023 and 2022 was 7.91% and 6.34%, respectively.

Interest expense was $339 million and $385 million, and included non-cash amortization and write-offs of debt premiums, discounts and deferred issuance costs of $28 million and $22 million, for the three months ended September 30, 2023 and 2022, respectively.

Interest expense for the three months ended September 30, 2023 decreased $46 million, or 12%, as compared to the three months ended September 30, 2022, primarily due to the accounting for contractual interest payments on the New Secured Notes, portions of which are recorded as a reduction of related premiums and not as interest expense, which had the impact of reducing interest expense by $73 million relative to contractual interest cost, partially offset by higher interest rates.

The weighted average stated rate of interest as of September 30, 2023 and 2022 was 8.05% and 7.24%, respectively.

The increase in the weighted average stated rate of interest of 81 bps is primarily attributable to the New Secured Notes and higher interest rates on our variable rate debt.

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Gain on extinguishment of debt represents the differences between the amounts paid to settle extinguished debts and the carrying value of the related extinguished debt.

There was no gain on extinguishment of debt for the three months ended June 30, 2023.

Gain on extinguishment of debt was $113 million for the three months ended June 30, 2022.

The gain on extinguishment of debt for the three months ended June 30, 2022 includes $176 million of gains associated with the early retirement of senior unsecured notes as discussed below, partially offset by $63 million of losses associated with the refinancing and modification to certain debt obligations completed in connection with the B+L IPO and represents the differences between the amounts paid to settle the extinguished debt and its carrying value.

During June 2022, through a series of transactions we repurchased and retired, outstanding senior unsecured notes with an aggregate par value of $481 million in the open market for approximately $300 million using:

(i) the net proceeds from the partial exercise of the over-allotment option in the B+L IPO by the underwriters, after deducting underwriting commissions, (ii) amounts available under our revolving credit facility and (iii) cash on hand.

The senior unsecured notes retired had maturities of January 2028 through February 2031 and had a weighted average interest rate of approximately 5.35%.

As a result of these transactions, we recognized a gain on the extinguishment of debt of approximately $176 million, net of write-offs of debt premiums, discounts and deferred issuance costs, representing the differences between the amounts paid to retire the senior unsecured notes and their carrying value.

There was no gain on extinguishment of debt for the three months ended September 30, 2023.

Gain on extinguishment of debt was $570 million for the three months ended September 30, 2022 and was attributable to the Exchange Offer.

See Note 10, “FINANCING ARRANGEMENTS” to our unaudited interim Condensed Consolidated Financial Statements for further details.

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Foreign exchange and other primarily includes:

(i) translation gains/losses on intercompany loans and third-party liabilities and (ii) the gain/loss due to foreign currency exchange contracts.

Foreign exchange and other was a loss of $21 million for the three months ended June 30, 2023, as compared to a gain of $4 million for the three months ended June 30, 2022, an unfavorable net change of $25 million, primarily due to:

(i) translation gains/losses on intercompany loans and third-party liabilities and (ii) the gain/loss due to foreign currency exchange contracts.

Provision for income taxes was $52 million and $10 million for the three months ended June 30, 2023 and 2022, respectively, an unfavorable change of $42 million.

Our effective income tax rate for the three months ended June 30, 2023 differs from the statutory Canadian income tax rate primarily due to:

(i) transaction gains/losses on intercompany balances and third-party liabilities and (ii) the gain/loss due to foreign currency exchange contracts.

Foreign exchange and other was a loss of $7 million for the three months ended September 30, 2023, as compared to a gain of $7 million for the three months ended September 30, 2022, an unfavorable net change of $14 million, primarily due to:

(i) transaction gains/losses on intercompany balances and third-party liabilities and (ii) the gain/loss due to foreign currency exchange contracts.

Provision for income taxes was $56 million and $36 million for the three months ended September 30, 2023 and 2022, respectively, an unfavorable change of $20 million.

Our effective income tax rate for the three months ended September 30, 2023 differs from the statutory Canadian income tax rate primarily due to:

(i) the tax provision generated from our annualized mix of earnings by jurisdiction, (ii) the recording of valuation allowances on entities for which no tax benefit of losses is expected and (iii) the discrete treatment of certain tax matters, primarily related to changes in uncertain tax positions.

Our effective income tax rate for the three months ended June 30, 2022 differs from the statutory Canadian income tax rate primarily due to:

(i) the recording of valuation allowance on entities for which no tax benefit of losses is expected, (ii) the tax benefit generated from our annualized mix of earnings by jurisdiction and (iii) the discrete treatment of certain tax matters, primarily related to:

(a) adjustments for book to income tax return provisions, (b) a tax deduction for stock compensation and (c) changes in uncertain tax positions.

Our effective income tax rate for the three months ended September 30, 2022 differs from the statutory Canadian income tax rate primarily due to:

(a) changes in uncertain tax positions, (b) adjustments for book to income tax return provisions and (c) changes to the tax deduction for stock compensation.

See Note 15, “INCOME TAXES” to our unaudited interim Condensed Consolidated Financial Statements for further details.

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Certain costs such as Amortization of intangible assets, Asset impairments, Goodwill impairments, Restructuring, integration, separation and IPO costs and Other (income) expense, net, are not included in the measure of segment profit, as management excludes these items in assessing segment financial performance.

See Note 18, “SEGMENT INFORMATION” to our unaudited interim Condensed Consolidated Financial Statements for a reconciliation of segment profit to Income (loss) before income taxes.

The following table presents segment revenues, segment revenues as a percentage of total revenues, and the period-over-period changes in segment revenues for the three months ended June 30, 2023 and 2022.

The following table also presents segment profits, segment profits as a percentage of segment revenues and the period-over-period changes in segment profits for the three months ended June 30, 2023 and 2022.

Three Months Ended June 30,

See Note 18, “SEGMENT INFORMATION” to our unaudited interim Condensed Consolidated Financial Statements for a reconciliation of segment profit to (Loss) income before income taxes.

Three Months Ended September 30,

2023 2022 Change

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Organic revenue and change in organic revenue exclude from the prior period, all revenues attributable to each divestiture and discontinuance during the twelve months prior to the day of divestiture or discontinuance, as there are no revenues from those businesses and assets included in the comparable current period.

The following table presents a reconciliation of GAAP revenues to organic revenues (non-GAAP) and the period-over-period changes in organic revenue (non-GAAP) for the three months ended June 30, 2023 and 2022 by segment.

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 Change in

Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Change in

Organic Revenue (Non-GAAP)

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The Salix segment includes our Xifaxan ® product line.

Revenues from our Xifaxan ® product line accounted for approximately 80% of the Salix segment revenues for each of the three months ended June 30, 2023 and 2022.

Revenues from our Xifaxan ® product line accounted for approximately 80% of the Salix segment revenues for each of the three months ended September 30, 2023 and 2022.

No other single product group represents 10% or more of the Salix segment product sales.

Salix segment revenue for the three months ended June 30, 2023 and 2022 was $557 million and $501 million, respectively, an increase of $56 million, or 11%.

Salix segment revenue for the three months ended September 30, 2023 and 2022 was $614 million and $544 million, respectively, an increase of $70 million, or 13%.

The increase is primarily attributable to increases in:

(i) in net realized pricing of $30 million and (ii) volumes of $26 million, primarily driven by Xifaxan ® .

(i) volumes of $45 million, primarily driven by wholesaler stocking patterns associated with certain products including Xifaxan ® and (ii) net realized pricing of $25 million.

Salix Segment Profit

The Salix segment profit for the three months ended June 30, 2023 and 2022 was $386 million and $354 million, respectively, an increase of $32 million, or 9%.

The Salix segment profit for the three months ended September 30, 2023 and 2022 was $429 million and $391 million, respectively, an increase of $38 million, or 10%.

The increase was primarily driven by an increase in contribution attributable to the increase in revenues, as previously discussed, partially offset by higher:

(i) R&D expenses, including for our global RED-C program, as previously discussed, (ii) advertising and promotion primarily due to increased Xifaxan ® investments and (iii) selling expenses.

(i) R&D expenses, including expenses for our global RED-C program, as previously discussed, (ii) advertising and promotion primarily due to increased Xifaxan ® investments and (iii) selling expenses.

International Segment:

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The International segment has a diversified product line with no single product group representing 10% or more of its product sales.

The International segment revenue was $259 million and $233 million for the three months ended June 30, 2023 and 2022, respectively, an increase of $26 million, or 11%.

The International segment revenue was $275 million and $250 million for the three months ended September 30, 2023 and 2022, respectively, an increase of $25 million, or 10%.

The increase was primarily attributable to:

(i) an increase in volumes of $16 million, (ii) an increase in net realized pricing of $10 million and (iii) the favorable impact of foreign currencies of $4 million, partially offset by the impact of divestitures and discontinuations of $4 million.

Revenues for the three months ended June 30, 2022, also reflect charges of $11 million representing a change in the estimated future returns in one market, driven by lower estimated demand following the easing of local COVID-19 lockdown restrictions as well as a change in distributors.

(i) the favorable impact of foreign currencies of $17 million and (ii) an increase in net realized pricing of $12 million, partially offset by:

(i) a decrease in volumes of $3 million and (ii) the impact of divestitures and discontinuations of $1 million.

International Segment Profit

The International segment profit for the three months ended June 30, 2023 and 2022 was $68 million and $66 million, respectively, an increase of $2 million, or 3%.

The increase was primarily driven by an increase in contribution attributable to the increase in revenues, as previously discussed, partially offset by higher manufacturing variances.

The International segment profit for the three months ended September 30, 2023 and 2022 was $91 million and $85 million, respectively, an increase of $6 million, or 7%.

The increase was primarily driven by:

(i) lower manufacturing variances and (ii) the favorable impact of foreign currencies, partially offset by the increase in advertising and promotion.

Solta Medical Segment:

Solta Medical Segment Revenue

The Solta Medical segment includes the Thermage ® product line, which accounted for approximately 83% and 70% of the Solta Medical segment revenues for the three months ended June 30, 2023 and 2022, respectively.

The Solta Medical segment revenue for the three months ended June 30, 2023 and 2022 was $88 million and $57 million, respectively, an increase of $31 million, or 54%.

The Solta Medical segment includes the Thermage ® product line, which accounted for approximately 84% and 81% of the Solta Medical segment revenues for the three months ended September 30, 2023 and 2022, respectively.

The Solta Medical segment revenue for the three months ended September 30, 2023 and 2022 was $83 million and $72 million, respectively, an increase of $11 million, or 15%.

The increase was primarily attributable to:

(i) an increase in volumes of $10 million and (ii) an increase in net realized pricing of $2 million, partially offset by the unfavorable impact of foreign currencies of $1 million.

The increase in volumes is attributable in part to the impact of the COVID-19 pandemic restrictions in China for the three months ended June 30, 2022, on our revenues for the Asia-Pacific region.

The increase in volumes is attributable in part to the impact of the COVID-19 pandemic restrictions in China for the three months ended September 30, 2022.

Solta Medical Segment Profit

The Solta Medical segment profit for the three months ended June 30, 2023 and 2022 was $45 million and $20 million, respectively, an increase of $25 million, or 125%.

The increase was primarily attributable to the increase in contribution attributable to the increase in revenues, as previously discussed.

The Solta Medical segment profit for each of the three months ended September 30, 2023 and 2022 was $33 million.

Segment profit was flat as the increase in revenues was offset by the impact of increased selling, general and administrative expenses.

Diversified Segment:

Diversified Segment Revenue

The Diversified segment revenue for the three months ended June 30, 2023 and 2022 was $228 million and $235 million, respectively, a decrease of $7 million, or 3%.

The decrease was primarily driven by decreases in volumes of $13 million, primarily in our Neurology and other businesses, partially offset by increased net realized pricing of $6 million, in our Dermatology and Neurology and other businesses.

The Diversified segment revenue for the three months ended September 30, 2023 and 2022 was $259 million and $238 million, respectively, an increase of $21 million, or 9%.

The increase was primarily driven by increased net realized pricing of $37 million, in our Dermatology, Generics and Neurology businesses, partially offset by decrease in volumes of $16 million.

Diversified Segment Profit

The Diversified segment profit for the three months ended June 30, 2023 and 2022 was $138 million and $141 million, respectively, a decrease of $3 million, or 2%.

The decrease was primarily driven by lower contribution attributable to the net decrease in revenues, as previously discussed, partially offset by lower advertising and promotion expenses.

The Diversified segment profit for the three months ended September 30, 2023 and 2022 was $172 million and $151 million, respectively, an increase of $21 million, or 14%.

The increase was primarily driven by higher contribution attributable to the increase in revenues, as previously discussed, partially offset by higher advertising and promotion expenses.

Bausch + Lomb Segment:

Bausch + Lomb Segment Revenue

The Bausch + Lomb segment revenue was $1,035 million and $941 million for the three months ended June 30, 2023 and 2022, respectively, an increase of $94 million, or 10%.

The Bausch + Lomb segment revenue was $1,007 million and $942 million for the three months ended September 30, 2023 and 2022, respectively, an increase of $65 million, or 7%.

The increase was attributable to:

(i) an increase in volumes of $84 million, across the Bausch + Lomb businesses, (ii) net realized pricing of $28 million primarily driven by the Vision Care business and (iii) incremental sales attributable to acquisitions of $2 million within the Surgical business, partially offset by:

(i) the unfavorable impact of foreign currencies of $18 million, primarily in Asia and Europe and (ii) the impact of divestitures and discontinuations of $2 million.

(i) an increase in volumes of $41 million, across all the Bausch + Lomb businesses, (ii) an increase in net realized pricing of $22 million primarily driven by the Vision Care business and (iii) incremental sales attributable to acquisitions of $15 million, primarily driven by the acquisition of the Blink ® Product Line in July 2023, partially offset by:

(i) the unfavorable impact of foreign currencies of $10 million, primarily in Asia and (ii) the impact of divestitures and discontinuations of $3 million.

Bausch + Lomb Segment Profit

The Bausch + Lomb segment profit for the three months ended June 30, 2023 and 2022 was $244 million and $208 million, respectively, an increase of $36 million, or 17%.

The increase was primarily driven by higher contribution, attributable to the increase in volume and pricing, as previously discussed, partially offset by an increase in selling expenses primarily attributable to increased headcount and distribution costs, and higher advertising and promotional expenses.

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

Our revenue was $4,111 million and $3,885 million for the six months ended June 30, 2023 and 2022, respectively, an increase of $226 million, or 6%.

The Bausch + Lomb segment profit for the three months ended September 30, 2023 and 2022 was $244 million and $226 million, respectively, an increase of $18 million, or 8%.

The increase was primarily driven by higher contribution, attributable to the increase in volume and pricing, as previously discussed, partially offset by an increase in selling expenses and advertising and promotion expenses due to product launches during the quarter.

Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022

Our revenue was $6,349 million and $5,931 million for the nine months ended September 30, 2023 and 2022, respectively, an increase of $418 million, or 7%.

The increase was primarily due to:

(i) an increase in volumes of $222 million attributable to our Bausch + Lomb, Salix, Solta Medical and International segments, (ii) an increase in net realized pricing of $68 million in the Bausch + Lomb, International, Salix and Solta Medical segments and (iii) incremental sales attributable to acquisitions of $4 million, partially offset by:

(i) an increase in volumes of $297 million attributable to our Bausch + Lomb, Salix, Solta Medical and International segments, (ii) an increase in net realized pricing of $168 million across all our segments and (iii) incremental sales attributable to acquisitions of $19 million, partially offset by:

(i) the unfavorable impact of foreign currencies of $51 million, primarily in Asia and Europe and (ii) the impact of divestitures and discontinuations of $15 million.

The changes in our segment revenues and segment profits for the six months ended June 30, 2023, are discussed in further detail in the respective subsequent section “ — Reportable Segment Revenues and Profits”.

The changes in our segment revenues and segment profits for the nine months ended September 30, 2023, are discussed in further detail in the respective subsequent section “ — Reportable Segment Revenues and Profits”.

Cash Discounts and Allowances, Chargebacks and Distribution Fees

Provisions recorded to reduce gross product sales to net product sales and revenues for the six months ended June 30, 2023 and 2022 were as follows:

Six Months Ended June 30,

Provisions recorded to reduce gross product sales to net product sales and revenues for the nine months ended September 30, 2023 and 2022 were as follows:

Nine Months Ended September 30,

(in millions) Amount Pct.

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Revenues $ 6,349 $ 5,931

Cash discounts and allowances, returns, rebates, chargebacks and distribution fees as a percentage of gross product sales were 41.2% and 41.4% for the six months ended June 30, 2023 and 2022, respectively, a decrease of 0.2 percentage points and includes:

• discounts and allowances as a percentage of gross product sales were higher primarily due to increases in gross product sales of certain branded products such as Xifaxan ® and Trulance ® and our branded generic Diastat ® AG;

• returns were higher primarily due to reductions in the estimates of variable consideration for sales returns related to past sales in 2022.

Cash discounts and allowances, returns, rebates, chargebacks and distribution fees as a percentage of gross product sales were 40.8% and 41.4% for the nine months ended September 30, 2023 and 2022, respectively, a decrease of 0.6 percentage points and includes:

• discounts and allowances as a percentage of gross product sales were unchanged primarily due to increases in gross product sales of certain branded products such as Xifaxan ® and Trulance ® and our branded generic Diastat ® AG;

• returns were higher primarily due to reductions in 2022 of the estimates of variable consideration for sales returns related to past sales.

The Company continues to focus on maximizing operational efficiencies and actions to reduce product returns, including, but not limited to:

(i) monitoring and reducing customer inventory levels, (ii) instituting disciplined pricing policies and (iii) improving contracting.

(i) monitoring and reducing customer inventory levels, (ii) maintaining disciplined pricing policies and (iii) improving contracting.

These actions have had the effect of improving the sales return experience;

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Price appreciation credits are offset against distribution service fees when due to wholesalers.

There were no price appreciation credits for the six months ended June 30, 2023 and 2022.

There were no price appreciation credits for the nine months ended September 30, 2023 and 2022.

Cost of Goods Sold (excluding amortization and impairments of intangible assets)

Cost of goods sold was $1,212 million and $1,104 million for the six months ended June 30, 2023 and 2022, respectively, an increase of $108 million, or 10%.

Cost of goods sold was $1,824 million and $1,677 million for the nine months ended September 30, 2023 and 2022, respectively, an increase of $147 million, or 9%.

The increase was primarily driven by:

(i) the increase in volumes as previously discussed, and (ii) charges related to the Injector recall, as previously discussed, partially offset by:

(i) lower unfavorable manufacturing variances and (ii) the favorable impact of foreign currencies.

Cost of goods sold as a percentage of product sales revenue was 29.8% and 28.8% for the six months ended June 30, 2023 and 2022, respectively, an increase of 1.0 percentage points.

Costs of goods sold as a percentage of Product sales

revenue was unfavorably impacted by:

(i) the increase in volumes as previously discussed, and (ii) charges related to the Injector recall, as discussed below, partially offset by:

(i) lower manufacturing variances and (ii) the favorable impact of foreign currencies.

Cost of goods sold as a percentage of product sales revenue was 29.0% and 28.6% for the nine months ended September 30, 2023 and 2022, respectively, an increase of 0.4 percentage points.

Costs of goods sold as a percentage of Product sales revenue was unfavorably impacted by:

(i) changes in product mix and (ii) inflationary pressures, partially offset by higher net realized pricing, as discussed above.

The recall resulted in inventory provisions of approximately $9 million, product return provisions of approximately $2 million and other costs of approximately $3 million for the nine months ended September 30, 2023.

It is possible that additional charges may be incurred based on future developments associated with this voluntary recall.

Selling, General and Administrative Expenses

SG&A expenses were $1,436 million and $1,298 million for the six months ended June 30, 2023 and 2022, respectively, an increase of $138 million, or 11%.

SG&A expenses were $2,151 million and $1,959 million for the nine months ended September 30, 2023 and 2022, respectively, an increase of $192 million, or 10%.

The increase was primarily attributable to higher:

(i) compensation, (ii) selling, advertising and promotion expenses and (iii) certain administrative expenses.

These increases were partially offset by:

(i) lower professional fees and (ii) the favorable impact of foreign currencies.

(i) lower professional fees associated with the separation of certain functions in connection with the B+L Separation and (ii) the favorable impact of foreign currencies.

Research and Development

R&D expenses were $299 million and $254 million for the six months ended June 30, 2023 and 2022, respectively, an increase of $45 million, or 18%.

R&D expenses as a percentage of Product sales were approximately 7% for each of the six months ended June 30, 2023 and 2022.

R&D expenses were $452 million and $387 million for the nine months ended September 30, 2023 and 2022, respectively, an increase of $65 million, or 17%.

R&D expenses as a percentage of Product sales were approximately 7% for each of the nine months ended September 30, 2023 and 2022.

The increase was primarily due to higher spend on certain Salix projects.

Amortization of Intangible Assets

Amortization of intangible assets was $542 million and $612 million for the six months ended June 30, 2023 and 2022, respectively, a decrease of $70 million, or 11%.

Amortization of intangible assets was $795 million and $902 million for the nine months ended September 30, 2023 and 2022, respectively, a decrease of $107 million, or 12%.

The decrease was primarily attributable to fully amortized intangible assets no longer being amortized in 2023.

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Goodwill Impairments

There were no goodwill impairments for the six months ended June 30, 2023.

Goodwill impairments for the six months ended June 30, 2022, were $83 million.

As previously discussed, the Company believed that increases in interest rates and other macroeconomic factors during the three months ended June 30, 2022, impacted key assumptions used to value the Dermatology reporting unit at March 31, 2022 (the last time goodwill of the Dermatology reporting unit was tested) and therefore the Company performed a quantitative fair value test for the reporting unit.

Goodwill impairments were $402 million and $202 million for the nine months ended September 30, 2023 and 2022, respectively, an increase of $200 million.

2023 Assessment.

During the third quarter, we continued to monitor the market conditions impacting the Dermatology and Neurology reporting units and determined that facts and circumstances suggest the fair value of the Dermatology and Neurology reporting units could be less than their respective carrying amounts, and therefore a quantitative fair value test was performed for each of these reporting units.

Based on the quantitative fair value tests, the carrying values of the Dermatology and Neurology reporting units exceeded their fair values at September 30, 2023 by $151 million and $251 million, respectively, and accordingly, we recognized goodwill impairments of $402 million in the third quarter of 2023.

2022 Assessment.

During the three months ended June 30, 2022, increases in interest rates and, to a lesser extent, higher than expected inflation in the U.S.

and other macroeconomic factors impacted key assumptions used to value the Dermatology reporting unit at March 31, 2022 (the last time goodwill of the Dermatology reporting unit was tested).

The quantitative fair value test utilized a long-term growth rate of 1% and a discount rate of 10%.

The discount rate increased 1% since the assessment performed at March 31, 2022, as a result of changes in

macroeconomic conditions, including an increase in the risk free rate during the three months ended June 30, 2022.

Based on the quantitative fair value test, the carrying value of the Dermatology reporting unit exceeded its fair value at June 30, 2022, and we recognized a goodwill impairment of $83 million.

See Note 8, “INTANGIBLE ASSETS AND GOODWILL” to our unaudited interim Condensed Consolidated Financial Statements for further details related to our goodwill.

During the third quarter of 2022 we continued to monitor the market conditions impacting the Dermatology reporting unit and determined that facts and circumstances suggest the fair value of the Dermatology reporting unit could be less than its carrying amount, and therefore a quantitative fair value test was performed for the reporting unit.

Based on the quantitative fair value test, the carrying value of the Dermatology reporting unit exceeded its fair value at September 30, 2022, and we recognized a goodwill impairment of $119 million.

Asset impairments

Asset impairments were $50 million and $14 million for the six months ended June 30, 2023 and 2022, respectively, an increase of $36 million.

Asset impairments for the six months ended June 30, 2023 includes:

(i) impairments of $37 million to the intangible assets associated with Uceris ® Foam product related intangible assets, as previously discussed, (ii) impairments of $8 million, in aggregate, attributable to certain trade names no longer in use and (iii) impairments of $5 million, in aggregate, related to the discontinuance of certain product lines.

Asset impairments for the six months ended June 30, 2022 include:

Asset impairments were $54 million and $15 million for the nine months ended September 30, 2023 and 2022, respectively, an increase of $39 million.

Asset impairments for the nine months ended September 30, 2023 includes:

(i) $37 million related to the impairment to the intangible assets associated with our Uceris ® Foam product as discussed below, (ii) impairments of $8 million, in aggregate, attributable to certain trade names no longer in use and (iii) impairments of $9 million, in aggregate related to the discontinuance of certain product lines.

This product is a generic version of our Uceris ® Foam product.

As of June 30, 2023, the carrying value of the Uceris ® Foam product related intangible assets exceeded the undiscounted expected cash flows from the Uceris ® Foam.

As a result, the Company recognized an impairment of $37 million to reduce the carrying value of the Uceris ® Foam product related intangible assets to their estimated fair value.

Asset impairments for the nine months ended September 30, 2022 include:

(i) impairments of $10 million, in aggregate, due to decreases in forecasted sales of certain product lines and (ii) impairments of $5 million, in aggregate, related to the discontinuance of certain product lines.

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Restructuring, Integration, Separation and IPO Costs

Restructuring, integration, separation and IPO costs were $26 million and $48 million for the six months ended June 30, 2023 and 2022, respectively, a decrease of $22 million.

Restructuring, integration, separation and IPO costs were $40 million and $58 million for the nine months ended September 30, 2023 and 2022, respectively, a decrease of $18 million.

Restructuring and Integration Costs

Restructuring and integration costs were $25 million for each of the six months ended June 30, 2023 and 2022.

Restructuring and integration costs were $37 million and $28 million for the nine months ended September 30, 2023 and 2022, respectively.

The Company continues to evaluate opportunities to streamline its operations and identify additional cost savings globally.

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Separation and IPO Costs

Separation and IPO costs were $1 million and $23 million for the six months ended June 30, 2023 and 2022, respectively.

Separation and IPO costs were $3 million and $30 million for the nine months ended September 30, 2023 and 2022, respectively.

The extent and timing of future charges of these costs to complete the B+L Separation cannot be reasonably estimated at this time and could be material.

See Note 5, “RESTRUCTURING, INTEGRATION, SEPARATION AND IPO COSTS” to our unaudited interim Condensed Consolidated Financial Statements for further details regarding these actions.

Other (Income) Expense, Net

Other (income) expense, net for the six months ended June 30, 2023 and 2022 consists of the following:

Six Months Ended June 30,

Other Expense, Net

Other expense, net for the nine months ended September 30, 2023 and 2022 consists of the following:

Nine Months Ended September 30,

(in millions) 2023 2022

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Acquisition-related contingent consideration 40 2

Loss (Gain) on sale of assets, net 1 (3)

Gain on sale of assets, net (4) (3)

Acquired in-process research and development costs — 1

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Other, net 1 (1)

For the six months ended June 30, 2023, the Litigation and other matters primarily relates to insurance recoveries associated with certain legacy litigation matters.

As a result of revisions to an existing royalty agreement of certain branded products during the six months ended June 30, 2023, the Company has revised its long-term sales forecast for those products.

Acquisition-related contingent consideration for the six months ended June 30, 2023, primarily includes adjustments to reflect the reduction in estimates of the future royalty payments related to those branded products.

For the nine months ended September 30, 2023, the Litigation and other matters primarily relates to insurance recoveries associated with certain legacy litigation matters.

As a result of revisions to an existing royalty agreement of certain branded products during the nine months ended September 30, 2023, the Company has revised its long-term sales forecast for those products.

Acquisition-related contingent consideration for the nine months ended September 30, 2023, primarily includes adjustments for changes in estimates in the timing and amounts of the future royalty and milestone payments related to those branded products.

Acquisition-related transaction costs for the nine months ended September 30, 2023, primarily include transaction costs attributable to the acquisitions of XIIDRA ® and the Blink ® Product line by Bausch + Lomb.

Non-Operating Income and Expense

Interest Expense

Interest expense was $626 million and $772 million and included non-cash amortization and write-offs of debt premiums, discounts and deferred issuance costs of $23 million and $64 million for the six months ended June 30, 2023 and 2022, respectively.

Interest expense decreased $146 million, or 19%, primarily due to:

(i) the accounting for contractual interest payments on the New Secured Notes, portions of which are recorded as a reduction of related premiums and not as interest expense, which had the impact of reducing interest expense by $148 million relative to contractual interest cost and (ii) the impact of lower outstanding debt balances in 2023 as compared to 2022, partially offset by higher interest rates.

The weighted average stated rate of interest as of June 30, 2023 and 2022 was 7.91% and 6.34%, respectively.

Interest expense was $965 million and $1,157 million and included non-cash amortization and write-offs of debt premiums, discounts and deferred issuance costs of $51 million and $86 million for the nine months ended September 30, 2023 and 2022, respectively.

Interest expense decreased $192 million, or 17%, primarily due to the accounting for contractual interest payments on the New Secured Notes, portions of which are recorded as a reduction of related premiums and not as interest expense, which had the impact of reducing interest expense by $221 million relative to contractual interest cost, partially offset by higher interest rates.

The weighted average stated rate of interest as of September 30, 2023 and 2022 was 8.05% and 7.24%, respectively.

The increase in the weighted average stated rate of interest of 81 bps is primarily attributable to the New Secured Notes and higher interest rates on our variable rate debt.

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Gain on Extinguishment of Debt

The gain on extinguishment of debt was $0 and $113 million for the six months ended June 30, 2023 and 2022, respectively.

The gain on extinguishment of debt for the six months ended June 30, 2022 includes $176 million of gains associated with the early retirement of senior unsecured notes as previously discussed, partially offset by $63 million of losses associated with the refinancing and modification to certain debt obligations completed in connection with the B+L IPO and represents the differences between the amounts paid to settle the extinguished debt and its carrying value.

There was no gain on extinguishment of debt for the nine months ended September 30, 2023.

Gain on extinguishment of debt was $683 million for the nine months ended September 30, 2022.

The gain on extinguishment of debt for the nine months ended September 30, 2022 includes:

(i) the gain associated with the Exchange Offer of $570 million and (ii) the gains associated with the early retirement of certain senior unsecured notes of $176 million discussed below, partially offset by $63 million of losses associated with the refinancing and modification to certain debt obligations completed in connection with the B+L IPO and represents the differences between the amounts paid to settle the extinguished debt and its carrying value.

During June 2022, through a series of transactions, we repurchased and retired outstanding senior unsecured notes with an aggregate par value of $481 million in the open market for approximately $300 million using:

The senior unsecured notes retired had maturities of January 2028 through February 2031 and had a weighted average interest rate of approximately 5.35%.

As a result of these transactions, we recognized a gain on the extinguishment of debt of approximately $176 million, net of write offs of debt premiums, discounts and deferred issuance costs, representing the differences between the amounts paid to retire the senior unsecured notes and their carrying value.

See Note 10, “FINANCING ARRANGEMENTS” to our unaudited interim Condensed Consolidated Financial Statements for further details.

Foreign Exchange and Other

Foreign exchange and other was a loss of $31 million and $3 million for the six months ended June 30, 2023 and 2022, respectively, an unfavorable net change of $28 million, primarily due to:

(i) translation gains/losses on intercompany loans and third-party liabilities and (ii) the gain/loss due to foreign currency exchange contracts.

Provision for income taxes was $125 million for the six months ended June 30, 2023 as compared to a Benefit from income taxes of $6 million for the six months ended June 30, 2022, an unfavorable change of $131 million.

Our effective income tax rate for the six months ended June 30, 2023 differs from the statutory Canadian income tax rate primarily due to:

(i) the recording of valuation allowance on entities for which no tax benefit of losses is expected, (ii) the tax provision generated from our annualized mix of earnings by jurisdiction and (iii) the discrete treatment of certain tax matters, primarily related to:

(a) final and potential settlements of various tax audits accrued in the six months ended June 30, 2023, (b) changes in uncertain tax positions, (c) income tax expense associated with the establishment of a valuation allowance against deferred tax assets of B+L’s Canadian parent and (d) income tax expense associated with stock compensation.

Our effective income tax rate for the six months ended June 30, 2022 differs from the statutory Canadian income tax rate primarily due to:

(a) changes in uncertain tax positions, (b) adjustments for book to income tax return provisions and (c) a tax deduction for stock compensation.

Foreign exchange and other was a loss of $38 million for the nine months ended September 30, 2023, as compared to a gain of $4 million for the nine months ended September 30, 2022, an unfavorable net change of $42 million, primarily due to:

(i) transaction gains/losses on intercompany balances and third-party liabilities and (ii) the gain/loss due to foreign currency exchange contracts.

Provision for income taxes was $181 million and $30 million for the nine months ended September 30, 2023 and 2022, respectively, an unfavorable change of $151 million.

Our effective income tax rate for the nine months ended September 30, 2023 differs from the statutory Canadian income tax rate primarily due to:

(i) the recording of valuation allowances on entities for which no tax benefit of losses is expected, (ii) the tax provision generated from our annualized mix of earnings by jurisdiction and (iii) the discrete treatment of certain tax matters, primarily related to:

(a) final and potential settlements of various tax audits accrued in the nine months ended September 30, 2023, (b) changes in uncertain tax positions, (c) income tax expense associated with the establishment of a valuation allowance against deferred tax assets of B+L’s Canadian parent and (d) income tax expense associated with stock compensation.

Our effective income tax rate for the nine months ended September 30, 2022 differs from the statutory Canadian income tax rate primarily due to:

(a) a net income tax benefit associated with certain legal settlements, (b) changes in uncertain tax positions, (c) the tax provision related to potential and recognized withholding tax on intercompany dividends, (d) adjustments for book to income tax return provisions and (e) income tax expense associated with stock compensation.

See Note 15, “INCOME TAXES” to our unaudited interim Condensed Consolidated Financial Statements for further details.

Reportable Segment Revenues and Profits

The following table presents segment revenues, segment revenues as a percentage of total revenues, and the year-over-year changes in segment revenues for the six months ended June 30, 2023 and 2022.

The following table also presents segment profits, segment profits as a percentage of segment revenues and the year-over-year changes in segment profits for the six months ended June 30, 2023 and 2022.

Six Months Ended June 30,

The following table presents segment revenues, segment revenues as a percentage of total revenues, and the year-over-year changes in segment revenues for the nine months ended September 30, 2023 and 2022.

The following table also presents segment profits, segment profits as a percentage of segment revenues and the year-over-year changes in segment profits for the nine months ended September 30, 2023 and 2022.

Nine Months Ended September 30,

2023 2022 Change

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Total segment profits $ 2,595 41 % $ 2,487 42 % $ 108 4 %

The following table presents organic revenue (non-GAAP) and the year-over-year changes in organic revenue (non-GAAP) for the six months ended June 30, 2023 and 2022 by segment.

The following table presents organic revenue (non-GAAP) and the year-over-year changes in organic revenue (non-GAAP) for the nine months ended September 30, 2023 and 2022 by segment.

Organic revenues (non-GAAP) and organic growth (non-GAAP) rates are defined in the previous section titled “Reportable Segment Revenues and Profits”.

Six Months Ended June 30, 2023 Six Months Ended June 30, 2022 Change in

Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Change in

Organic Revenue (Non-GAAP)

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The Salix segment includes the Xifaxan ® product line.

Revenues from our Xifaxan ® product line accounted for approximately 80% of the Salix segment revenues for each of the six months ended June 30, 2023 and 2022.

Revenues from our Xifaxan ® product line accounted for approximately 80% of the Salix segment revenues for each of the nine months ended September 30, 2023 and 2022.

No other single product group represents 10% or more of the Salix segment product sales.

The Salix segment revenue for the six months ended June 30, 2023 and 2022 was $1,053 million and $965 million, respectively, an increase of $88 million, or 9%.

The Salix segment revenue for the nine months ended September 30, 2023 and 2022 was $1,667 million and $1,509 million, respectively, an increase of $158 million, or 10%.

The increase was primarily attributable to increases in:

(i) volumes of $75 million, primarily driven by Xifaxan ® and (ii) net realized pricing of $13 million.

(i) volumes of $119 million, which reflected growth and underlying demand as well as the impact of a benefit in the third quarter from wholesaler stocking patterns associated with certain products including Xifaxan ® and (ii) net realized pricing of $39 million.

Salix Segment Profit

The Salix segment profit for the six months ended June 30, 2023 and 2022 was $700 million and $676 million, respectively, an increase of $24 million, or 4%.

The Salix segment profit for the nine months ended September 30, 2023 and 2022 was $1,129 million and $1,067 million, respectively, an increase of $62 million, or 6%.

The increase was primarily driven by an increase in contribution attributable to the increase in revenues, as previously discussed, partially offset by higher:

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The International segment has a diversified product line with no single product group representing 10% or more of its product sales.

The International segment revenue was $506 million and $477 million for the six months ended June 30, 2023 and 2022, respectively, an increase of $29 million, or 6%.

The International segment revenue was $781 million and $727 million for the nine months ended September 30, 2023 and 2022, respectively, an increase of $54 million, or 7%.

The increase was primarily attributable to:

(i) an increase in net realized pricing of $21 million and (ii) an increase in volumes of $17 million, partially offset by:

(i) the impact of divestitures and discontinuations of $7 million and (ii) the unfavorable impact of foreign currencies of $2 million, primarily in Canada and Europe.

Revenues for the six months ended June 30, 2022, also reflect charges of $11 million representing a change in estimated future returns in one market, driven by lower estimated demand following the easing of local COVID-19 lockdown restrictions as well as a change in distributors.

(i) an increase in net realized pricing of $34 million, (ii) the favorable impact of foreign currencies of $15 million and (iii) an increase in volumes of $13 million, partially offset by the impact of divestitures and discontinuations of $8 million.

Revenues for the nine months ended September 30, 2022, also reflect charges of $13 million representing a change in estimated future returns in one market, driven by lower estimated demand following the easing of local COVID-19 lockdown restrictions as well as a change in distributors.

International Segment Profit

The International segment profit for the six months ended June 30, 2023 and 2022 was $145 million and $157 million, respectively, a decrease of $12 million, or 8%.

The International segment profit for the nine months ended September 30, 2023 and 2022 was $236 million and $242 million, respectively, a decrease of $6 million, or 2%.

The decrease was primarily attributable to an increase in:

(i) General and administrative expenses and (ii) advertising and promotion expenses.

(i) advertising and promotion expenses and (ii) selling expenses, partially offset by:

(i) lower manufacturing variances and (ii) the favorable impact of foreign currencies.

Solta Medical Segment:

Solta Medical Segment Revenue

The Solta Medical segment includes the Thermage ® product line, which accounted for approximately 81% and 73% of the Solta Medical segment revenues for the six months ended June 30, 2023 and 2022, respectively.

The Solta Medical segment includes the Thermage ® product line, which accounted for approximately 82% and 76% of the Solta Medical segment revenues for the nine months ended September 30, 2023 and 2022, respectively.

No other single product group represents 10% or more of the Solta Medical segment revenues.

The Solta Medical segment revenue for the six months ended June 30, 2023 and 2022 was $161 million and $129 million, respectively, an increase of $32 million, or 25%.

The Solta Medical segment revenue for the nine months ended September 30, 2023 and 2022 was $244 million and $201 million, respectively, an increase of $43 million, or 21%.

The increase was attributable to:

(i) an increase in volumes of $46 million and (ii) an increase in net realized pricing of $4 million, partially offset by the unfavorable impact of foreign currencies of $7 million.

The increase in volumes is attributable in part

to the impact of the COVID-19 pandemic restrictions in China for the six months ended June 30, 2022, on our revenues for the Asia-Pacific region.

The increase in volumes is attributable in part to the impact of the COVID-19 pandemic restrictions in China for the nine months ended September 30, 2022, on our revenues for the Asia-Pacific region.

Solta Medical Segment Profit

The Solta Medical segment profit for the six months ended June 30, 2023 and 2022 was $81 million and $55 million, respectively, an increase of $26 million, or 47%.

The increase is attributable to the increase in revenues, as previously discussed.

The Solta Medical segment profit for the nine months ended September 30, 2023 and 2022 was $114 million and $88 million, respectively, an increase of $26 million, or 30%.

The increase is driven by the increase in contribution attributable to the increase in revenues as previously discussed, partially offset by:

(i) the unfavorable impact of foreign currencies and (ii) higher selling expenses.

Diversified Segment:

Diversified Segment Revenue

The Diversified segment revenue for the six months ended June 30, 2023 and 2022 was $425 million and $484 million, respectively, a decrease of $59 million, or 12%.

The decrease was primarily driven by decreases in:

(i) volumes of $32 million, primarily in our Neurology and other business and (ii) net realized pricing of $27 million, across all our Diversified businesses.

The Diversified segment revenue for the nine months ended September 30, 2023 and 2022 was $684 million and $722 million, respectively, a decrease of $38 million, or 5%.

The decrease was primarily driven by decrease in volumes of $48 million, primarily in our Neurology and Dermatology businesses, partially offset by an increase in net realized pricing of $10 million, primarily in our Dermatology and Neurology businesses.

Diversified Segment Profit

The Diversified segment profit for the six months ended June 30, 2023 and 2022 was $245 million and $299 million, respectively, a decrease of $54 million, or 18% and was primarily driven by lower contribution attributable to the net decrease in revenues, as previously discussed, partially offset by lower advertising and promotion expenses.

The Diversified segment profit for the nine months ended September 30, 2023 and 2022 was $417 million and $450 million, respectively, a decrease of $33 million, or 7% and was primarily driven by lower contribution attributable to the net decrease in revenues, as previously discussed, partially offset by lower:

(i) selling, general and administrative expenses and (ii) advertising and promotion expenses.

Bausch + Lomb Segment:

Bausch + Lomb Segment Revenue

The Bausch + Lomb segment revenue was $1,966 million and $1,830 million for the six months ended June 30, 2023 and 2022, respectively, an increase of $136 million, or 7.0%.

The Bausch + Lomb segment revenue was $2,973 million and $2,772 million for the nine months ended September 30, 2023 and 2022, respectively, an increase of $201 million, or 7.0%.

The increase was primarily attributable to:

(i) an increase in volumes across the Bausch + Lomb businesses of $126 million, (ii) an increase in net realized pricing of $59 million, primarily driven by the Vision Care business and (iii) incremental sales attributable to acquisitions of $4 million within the Surgical business.

(i) an increase in volumes of $167 million across all the Bausch + Lomb businesses, (ii) an increase in net realized pricing of $81 million, primarily driven by the Vision Care business and (iii) incremental sales attributable to acquisitions of $19 million, primarily driven by the acquisition of the Blink ® Product Line in July 2023.

The increase in revenue was partially offset by:

(i) the unfavorable impact of foreign currencies of $49 million, primarily in Europe and Asia and (ii) the impact of divestitures and discontinuations of $4 million.

(i) the unfavorable impact of foreign currencies of $59 million, primarily in Asia and Europe and (ii) the impact of divestitures and discontinuations of $7 million.

Bausch + Lomb Segment Profit

The Bausch + Lomb segment profit for the six months ended June 30, 2023 and 2022 was $455 million and $414 million, respectively, an increase of $41 million, or 10%.

The Bausch + Lomb segment profit for the nine months ended September 30, 2023 and 2022 was $699 million and $640 million, respectively, an increase of $59 million, or 9%.

The increase was primarily driven by higher contribution, attributable to the increase in revenues, as previously discussed, partially offset by:

(i) increased cost of goods sold, driven by inflationary pressures and higher manufacturing ramp-up costs of Daily SiHy lenses, (ii) selling expenses attributable to increased headcount and distribution costs and (iii) higher advertising and promotional expenses.

(i) increased cost of goods sold, driven by inflationary pressures and higher manufacturing ramp-up costs of Daily SiHy lenses during the first half of 2023, (ii) selling expenses attributable to increased distribution costs and (iii) higher advertising and promotion expenses.

LIQUIDITY AND CAPITAL RESOURCES

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions) 2023 2022 Change

Net loss $ (182) $ (205) $ 23

Adjustments to reconcile net loss to net cash provided by operating activities 806 370 436

Cash provided by operating activities before changes in operating assets and liabilities 624 165 459

Net (loss) income $ (564) $ 198 $ (762)

Adjustments to reconcile net (loss) income to net cash provided by operating activities 1,618 (1,027) 2,645

Cash provided by (used in) operating activities before changes in operating assets and liabilities 1,054 (829) 1,883

Changes in operating assets and liabilities (412) (374) (38)

Net cash provided by operating activities 360 60 300

Net cash provided by (used in) operating activities 642 (1,203) 1,845

Net cash used in investing activities (1,997) (167) (1,830)

Net cash used in financing activities (262) (162) (100)

Net cash provided by (used in) financing activities 1,554 (198) 1,752

Effect of exchange rate changes on cash, cash equivalents and other (10) (54) 44

Net decrease in cash, cash equivalents, restricted cash and other settlement deposits (3) (240) 237

Net increase (decrease) in cash, cash equivalents, restricted cash and other settlement deposits 189 (1,622) 1,811

Cash, cash equivalents, restricted cash and other settlement deposits, beginning of period 591 2,119 (1,528)

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Operating Activities

Net cash provided by operating activities was $360 million and $60 million for the six months ended June 30, 2023 and 2022, respectively, an increase of $300 million.

Net cash provided by operating activities was $642 million for the nine months ended September 30, 2023, as compared to net cash used in operating activities of $1,203 million for the nine months ended September 30, 2022, an increase of $1,845 million.

The increase was attributable to the increase in Cash provided by operating activities before changes in operating assets and liabilities, partially offset by the reduction in cash from Changes in operating assets and liabilities.

Cash provided by operating activities before changes in operating assets and liabilities was $624 million and $165 million for the six months ended June 30, 2023 and 2022, respectively, an increase of $459 million.

Cash provided by operating activities before changes in operating assets and liabilities was $1,054 million for the nine months ended September 30, 2023 as compared to cash used in operating activities before changes in operating assets and liabilities of $829 million for the nine months ended September 30, 2022, an increase of $1,883 million.

The increase is primarily attributable to:

(i) a decrease in payments of accrued legal settlements related to the Glumetza Antitrust Litigation paid during 2022, (ii) insurance recoveries regarding certain legacy litigation matters in 2023, (iii) changes in business performance and (iv) lower payments of interest included in Operating activities as, due to the accounting treatment for the Exchange Offer, the portion of contractual interest payments on the New Secured Notes which reduce the premium on the New Secured Notes is reported as a Financing activity.

During the six months ended June 30, 2023, contractual interest payments on the New Secured Notes allocated to the reduction of the recorded premium were $134 million and are included in Cash flows from financing activities.

Changes in operating assets and liabilities resulted in a net decrease in cash of $264 million for the six months ended June 30, 2023, as compared to $105 million for the six months ended June 30, 2022, a decrease of $159 million.

During the six months ended June 30, 2023, Changes in operating assets and liabilities were negatively impacted by:

(i) a decrease in inventories of $160 million and (ii) the timing of other payments in the ordinary course of business of $159 million, partially offset by the timing of collection of trade receivables of $55 million.

During the six months ended June 30, 2022, Changes in operating assets and liabilities was positively impacted by:

(i) an increase in inventories of $138 million and (ii) the timing of other payments in the ordinary course of business of $74 million, partially offset by the collection of trade receivables of $107 million.

(i) a decrease in payments of accrued legal settlements related to the Securities Class Action Settlement, the Glumetza Antitrust Litigation and a RICO class action matter paid during 2022, (ii) insurance recoveries regarding certain legacy litigation matters received in 2023, (iii) changes in business performance and (iv) lower payments of interest included in Operating activities as, due to the accounting treatment for the Exchange Offer, the portion of contractual interest payments on the New Secured Notes which reduce the premium on the New Secured Notes is reported as a Financing activity.

During the nine months ended September 30, 2023, contractual interest payments on the New Secured Notes allocated to the reduction of the recorded premium were $174 million and are included in Cash flows from financing activities.

Changes in operating assets and liabilities resulted in a net decrease in cash of $412 million for the nine months ended September 30, 2023, as compared to $374 million for the nine months ended September 30, 2022, a decrease of $38 million.

During the nine months ended September 30, 2023, Changes in operating assets and liabilities were negatively impacted by:

(i) an increase in inventories of $222 million, (ii) increases in trade receivables of $176 million and (iii) the timing of other payments in the ordinary course of business of $14 million.

During the nine months ended September 30, 2022, Changes in operating assets and liabilities were negatively impacted by:

(i) an increase in inventories of $194 million, (ii) the timing of other payments in the ordinary course of business of $154 million, driven in part by the impact of the interest payments made on September 30, 2022 associated with the notes tendered in the Exchange Offer and (iii) increases in trade receivables of $26 million.

Investing Activities

Net cash used in investing activities was $108 million for the six months ended June 30, 2023 and was primarily driven by Purchases of property, plant and equipment of $75 million and acquisitions and other investments of $31 million.

Net cash used in investing activities was $114 million for the six months ended June 30, 2022 and was primarily driven by Purchases of property, plant and equipment of $98 million.

Net cash used in investing activities was $1,997 million for the nine months ended September 30, 2023 and was primarily driven by payments of $1,887 million related to the XIIDRA Acquisition, the acquisition of the Blink ® Product Line and the acquisition of AcuFocus, each as previously discussed, and purchases of property, plant and equipment of $117 million.

Net cash used in investing activities was $167 million for the nine months ended September 30, 2022 and was primarily driven by Purchases of property, plant and equipment of $152 million.

Financing Activities

Net cash used in financing activities was $262 million for the six months ended June 30, 2023 and was primarily driven by the repayment of long-term debt of $690 million which includes:

(i) the repayment of $480 million of amounts outstanding under our 2027 Revolving Credit Facility, (ii) the $134 million of contractual interest payments on the New Secured Notes allocated to the reduction of the recorded premiums, as discussed above, and (iii) payments of $75 million on

the Term Loan B Facilities, partially offset by draws of $455 million under the 2027 Revolving Credit Facility and the B+L Revolving Credit Facility.

Net cash used in financing activities was $162 million for the six months ended June 30, 2022 and was primarily driven by:

Net cash provided by financing activities was $1,554 million for the nine months ended September 30, 2023 and was primarily driven (i) the issuance of long-term debt, net of $3,145 million, related to the B+L October 2028 Secured Notes and the B+L September 2028 Term Loan B Facility of $1,870 million, as discussed below, and borrowings under our Revolving Credit Facility of $615 million, (ii) borrowings under the AR Credit Facility of $350 million and (iii) borrowings under the B+L Revolving Credit Facility of $310 million, partially offset by the repayment of long-term debt of $1,507 million which includes the repayment of $1,220 million of amounts outstanding under our 2027 Revolving Credit Facility and B+L Revolving Credit Facility, the $174 million of contractual interest payments on the New Secured Notes allocated to the reduction of the recorded premiums, as discussed above, and payments of $113 million on the Term Loan B Facilities.

Net cash used in financing activities was $198 million for the nine months ended September 30, 2022 and was primarily driven by:

(i) the issuance of long-term debt, net of discounts, of $6,481 million related to the February 2027 Secured Notes, 2027 Term Loan B Facility, draws on the 2027 Revolving Credit Facility and the B+L Term Loan Facility and (ii) net proceeds from the B+L IPO of $675 million, partially offset by the repayment of long-term debt of $7,224 million related to:

(i) the repayment of the outstanding balance under our 2023 Revolving Credit Facility, (ii) the repayment of the outstanding balance of our 6.125% Senior Unsecured Notes, (iii) the repayment of the outstanding balances under our 2025 Term Loan B Facilities and (iv) the repurchase and retirement of certain outstanding Senior Secured Notes in the open market with an aggregate par value of $481 million for approximately $300 million.

(i) the repayment of the outstanding balance under our 2023 Revolving Credit Facility, (ii) the repayment of the outstanding balance of our 6.125% Senior Unsecured Notes, (iii) the repayment of the outstanding balances under our 2025 Term Loan B Facilities and (iv) the repurchase and retirement of certain outstanding senior unsecured notes in the open market with an aggregate par value of $481 million for approximately $300 million.

See Note 10, “FINANCING ARRANGEMENTS” to our unaudited interim Condensed Consolidated Financial Statements for additional information regarding the financing activities described above, including the definitions of certain defined terms used above.

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If opportunities are favorable, the Company may refinance, repurchase or exchange existing debt or issue equity or equity-linked securities.

Cash, cash equivalents and restricted cash as presented in the Condensed Consolidated Balance Sheet as of June 30, 2023 includes $392 million of cash, cash equivalents and restricted cash held by legal entities of Bausch + Lomb.

Cash held by Bausch + Lomb legal entities and any future cash from the operating, investing and financing activities of Bausch + Lomb is expected to be retained by Bausch + Lomb entities and are generally not available to support the operations, investing and financing activities of other legal entities, including Bausch Health unless paid as a dividend which would be determined by the Board of Directors of Bausch + Lomb and paid pro rata to Bausch + Lomb’s shareholders.

Cash, cash equivalents and restricted cash as presented in the Condensed Consolidated Balance Sheet as of September 30, 2023 includes $360 million of cash, cash equivalents and restricted cash held by legal entities of Bausch + Lomb.

Cash held by Bausch + Lomb legal entities and any future cash from the operating, investing and financing activities of Bausch + Lomb is expected to be retained by Bausch + Lomb entities and is generally not available to support the operations, investing and financing activities of other legal entities, including Bausch Health unless paid as a dividend which would be determined by the Board of Directors of Bausch + Lomb and paid pro rata to Bausch + Lomb’s shareholders.

Long-term Debt

Long-term debt, net of unamortized premiums, discounts and issuance costs was $20,552 million and $20,766 million as of June 30, 2023 and December 31, 2022, respectively.

Aggregate contractual principal amounts due under our debt obligations were $19,010 million and $19,110 million as of June 30, 2023 and December 31, 2022, respectively, a decrease of $100 million.

Long-term debt, net of unamortized premiums, discounts and issuance costs was $22,430 million and $20,766 million as of September 30, 2023 and December 31, 2022, respectively.

Aggregate contractual principal amounts due under our debt obligations were $20,952 million and $19,110 million as of September 30, 2023 and December 31, 2022, respectively, an increase of $1,842 million.

See Note 10, “FINANCING ARRANGEMENTS” to our unaudited interim Condensed Consolidated Financial Statements for additional information regarding long term debt.

Senior Secured Credit Facilities under the B+L Credit Agreement

On May 10, 2022, Bausch + Lomb entered into a credit agreement (the “B+L Credit Agreement”, and the credit facilities thereunder, the “B+L Credit Facilities”).

Prior to the September 2023 Credit Facility Amendment (as defined below), the Credit Agreement provided for a term loan of $2,500 million with a five-year term to maturity (the “B+L May 2027 Term Loan B Facility”) and a five-year revolving credit facility of $500 million (the “B+L Revolving Credit Facility”).

B+L 8.375% Senior Secured Notes and B+L Term Loan B Facility - September 2023 Financing

On September 29, 2023, Bausch + Lomb entered into an incremental term loan facility secured on a pari passu basis with its existing B+L May 2027 Term Loan B Facility.

This incremental term loan facility was entered into in the form of an incremental amendment (the “September 2023 Credit Facility Amendment”) to Bausch + Lomb’s existing Credit Agreement (the Credit Agreement, as amended by the September 2023 Credit Facility Amendment, the “B+L Amended Credit Agreement”) and consisted of borrowings of $500 million in new term B loans with a five-year term to maturity (the “B+L September 2028 Term Loan B Facility” and, together with the B+L May 2027 Term Loan B Facility and the B+L Revolving Credit Facility, the “ B+L Senior Secured Credit Facilities”).

A portion of the proceeds from the B+L September 2028 Term Loan B Facility and the B+L October 2028 Secured Notes were used to finance the $1,750 million upfront payment related to the XIIDRA Acquisition (as discussed further in Note 4, “LICENSING AGREEMENTS AND ACQUISITIONS” to our unaudited interim Condensed Consolidated Financial Statements) and related acquisition and financing costs.

The B+L Senior Secured Credit Facilities are secured by substantially all of the assets of Bausch + Lomb and its material, wholly-owned Canadian, U.S., Dutch and Irish subsidiaries, subject to certain exceptions.

The B+L May 2027 Term Loan B Facility and B+L September 2028 Term Loan B Facility are denominated in U.S.

dollars, and borrowings under the B+L Revolving Credit Facility may be made available in U.S.

dollars, euros, pounds sterling and Canadian dollars.

As of September 30, 2023, the B+L Revolving Credit Facility had $175 million of outstanding borrowings, $25 million of issued and outstanding letters of credit and $300 million of remaining availability.

On September 29, 2023, Bausch + Lomb issued $1,400 million aggregate principal amount of 8.375% Senior Secured Notes due October 2028.

A portion of the proceeds from the B+L October 2028 Secured Notes, along with the proceeds of B+L September 2028 Term Loan B Facility, were used to finance the $1,750 million upfront payment related to the XIIDRA Acquisition (as discussed above) and related acquisition and financing costs.

The B+L October 2028 Secured Notes accrue interest at a rate of 8.375% per year, payable semi-annually in arrears on each April 1 and October 1, commencing on April 1, 2024.

See Note 10, “FINANCING ARRANGEMENTS” to our unaudited interim Condensed Consolidated Financial Statements for additional details.

Accounting for the Exchange Offer

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The portion of each contractual interest payment allocated to reduce the recorded premium is determined as the difference between the payment due and the calculated interest at the effective interest rate of the underlying carry amount of the associated note.

During the six months ended June 30, 2023, the Company made contractual interest payments of $155 million related to the New Secured Notes, of which $134 million was recorded as a reduction of the recorded premium.

During the nine months ended September 30, 2023, the Company made contractual interest payments of $200 million related to the New Secured Notes, of which $174 million was recorded as a reduction of the recorded premium.

The following table presents the future scheduled contractual interest payments of the New Secured Notes.

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In connection with the closing of the B+L IPO, the discharge of the April 2025 Unsecured Notes Indenture and the related release under the 2022 Amended Credit Agreement described above, the guarantees and related security provided by Bausch + Lomb and its subsidiaries in respect of the existing senior notes of the Company and BHA were released.

On a non-consolidated basis, the non-guarantor subsidiaries had total assets of $13,076 million and total liabilities of $5,750 million as of June 30, 2023, and revenues of $2,192 million and operating income of $54 million for the six months ended June 30, 2023.

On a non-consolidated basis, the non-guarantor subsidiaries had total assets of $15,752 million and total liabilities of $8,337 million as of September 30, 2023, and revenues of $3,323 million and operating income of $85 million for the nine months ended September 30, 2023.

Accounts Receivable Credit Facility

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Availability Under Revolving Credit Facilities

As of August 3, 2023, there were no outstanding borrowings, $23 million of issued and outstanding letters of credit and approximately $952 million of remaining availability under the 2027 Revolving Credit Facility.

As of June 30, 2023, there were no outstanding borrowings under the AR Credit Facility.

During the period July 1, 2023 through August 3, 2023, we have drawn $350 million, in the aggregate, of borrowings.

Borrowings under our AR Credit Facility are for general corporate purposes.

As of August 3, 2023, there were $250 million of outstanding borrowings, $25 million of issued and outstanding letters of credit and $225 million remaining availability under the B+L Revolving Credit Facility.

As of November 2, 2023, there were no outstanding borrowings, $23 million of issued and outstanding letters of credit and approximately $952 million of remaining availability under the 2027 Revolving Credit Facility.

As of November 2, 2023, we have $350 million of outstanding borrowings, in the aggregate, and the AR Facility Agreement provides for up to an additional $250 million of availability, subject to certain borrowing base tests.

As of November 2, 2023, there were $175 million of outstanding borrowings, $25 million of issued and outstanding letters of credit and $300 million of remaining availability under the B+L Revolving Credit Facility.

Absent the payment of a dividend, which would be determined by the Board of Directors of Bausch + Lomb and paid pro rata to Bausch + Lomb’s shareholders, proceeds from the B+L Revolving Credit Facility are not available to fund the operations, investing and financing activities of any other subsidiaries of Bausch Health.

Covenant Compliance

As of June 30, 2023, the Company was in compliance with its financial maintenance covenant related to its outstanding debt.

As of September 30, 2023, the Company was in compliance with its financial maintenance covenant related to its outstanding debt.

The Company, based on its current forecast, expects to remain in compliance with the financial maintenance covenant and meet its debt service obligations for at least the twelve months following the date of issuance of this Form 10-Q.

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In connection therewith, Bausch + Lomb and its subsidiaries are unrestricted subsidiaries of the Company and, as a result, are not subject to the covenants under the relevant Bausch Health indentures, and the earnings and debt of Bausch + Lomb, as defined in the relevant indentures, are also not included in the calculation of the Company’s financial maintenance covenant.

The Company continues to take steps to seek to improve its operating results to ensure continual compliance with its financial maintenance covenant and take other actions to reduce its debt levels and improve its capital structure to align with the Company’s long-term strategy.

The Company continues to take steps to seek to ensure continual compliance with its financial maintenance covenant and take other actions to reduce its debt levels and improve its capital structure to align with the Company’s long-term strategy.

The Company may consider taking other actions, including divesting other businesses, refinancing debt, and issuing equity or equity-linked securities including secondary offerings of the common shares of Bausch + Lomb, as deemed appropriate, to provide additional coverage in complying with the financial maintenance covenant and meeting its debt service obligations.

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Therefore, interest expense recorded in our financial statements will differ significantly from the contractual interest rates of the New Secured Notes and term loan facilities.

The weighted average interest rate of our debt as reported in our financial statements and the weighted average stated rate of interest was 6.29% and 7.91%, respectively, as of June 30, 2023.

The weighted average interest rate of our debt as reported in our financial statements and the weighted average stated rate of interest was 6.59% and 8.05%, respectively, as of September 30, 2023.

Focus on Capitalization of the Post-separation Entities

In connection with the B+L Separation, we have emphasized that it is important that the post-separation entities be well-capitalized, with appropriate leverage and with access to additional capital, if and when needed, to provide each entity with the ability to independently allocate capital to areas that will strengthen their own competitive positions in their respective lines of business and position each entity for sustainable growth.

In connection with the B+L Separation, we have emphasized that it is important that the post-separation entities be appropriately capitalized, with appropriate leverage and with access to additional capital, if and when needed, to provide each entity with the ability to independently allocate capital to areas that will strengthen their own competitive positions in their respective lines of business and position each entity for sustainable growth.

Therefore, we see the appropriate capitalization and leverage of these businesses post-separation as a key to bringing out additional value across our portfolio of assets and it continues to be a primary objective of our plan of separation.

Credit Rating

As of August 3, 2023, the credit ratings and outlook from Moody’s, Standard & Poor’s (“S&P’s”) and Fitch for certain outstanding obligations of the Company were as follows:

As of November 2, 2023, the credit ratings and outlook from Moody’s, Standard & Poor’s (“S&P’s”) and Fitch for certain outstanding obligations of the Company were as follows:

Bausch Health Companies Inc.

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Standard & Poor’s CCC CCC+ CCC- Negative B- B- Positive

Fitch CCC B CC No Outlook B- BB- Rating Watch Evolving

Fitch CCC B C No Outlook B- BB- Rating Watch Evolving

Bausch Health Companies Inc.

- There were no changes to the corporate credit ratings or other credit ratings of the Company during the second quarter of 2023.

Bausch + Lomb Corporation - There were no changes to the corporate credit ratings of Bausch + Lomb Corporation during the second quarter of 2023.

- On October 3, 2023, Fitch lowered its senior unsecured rating to C.

Bausch + Lomb Corporation - There were no changes to the corporate credit ratings of Bausch + Lomb Corporation during the third quarter of 2023.

Any downgrade in our corporate credit ratings or other credit ratings may increase our cost of borrowing and may negatively impact our ability to raise additional debt capital.

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We regularly consider licensing and acquisition opportunities within our core therapeutic areas, some of which could be sizable.

In addition to our working capital requirements, as of June 30, 2023, we expect our primary cash requirements during the remainder of 2023 to include:

• Debt repayments and interest payments —Based on our debt portfolio as of August 3, 2023, we anticipate making mandatory amortization and interest payments of approximately $836 million during the period July 1, 2023 through December 31, 2023.

In addition to our working capital requirements, as of September 30, 2023, we expect our primary cash requirements during the remainder of 2023 to include:

• Debt repayments and interest payments —We anticipate making mandatory amortization and interest payments of approximately $481 million during the period October 1, 2023 through December 31, 2023.

We have, and in the future may also elect to make additional principal payments under certain circumstances.

Further, in the ordinary course of business, we may borrow and repay additional amounts under our credit facilities using cash on hand, cash from operations and cash provided from the sale of common stock and additional debt financings in connection with the B+L Separation;

• Capital expenditures —We expect to make payments of approximately $200 million for property, plant and equipment during the period July 1, 2023 through December 31, 2023;

• Contingent consideration and milestone payments —We expect to make contingent consideration payments of approximately $65 million during the period July 1, 2023 through December 31, 2023.

These payments include a $45 million payment in connection with Bausch + Lomb’s agreement with Novaliq GmbH for MIEBO TM (formerly known as NOV03), for the treatment of the signs and symptoms of dry eye disease.

Bausch + Lomb anticipates launching MIEBO TM in the U.S.

• Capital expenditures —We expect to make payments of approximately $105 million for property, plant and equipment during the period October 1, 2023 through December 31, 2023;

• Contingent consideration and milestone payments —We expect to make contingent consideration payments of approximately $55 million during the period October 1, 2023 through December 31, 2023.

These payments include a $45 million payment in connection with Bausch + Lomb’s agreement with Novaliq GmbH for MIEBO TM (formerly known as NOV03), which was launched in the U.S.

in the third quarter of 2023;

• Benefit obligations —We expect to make aggregate payments under our pension and postretirement obligations of $4 million during the period July 1, 2023 through December 31, 2023.

• Benefit obligations —We expect to make aggregate payments under our pension and postretirement obligations of $2 million during the period October 1, 2023 through December 31, 2023.

Litigation Payments

In the ordinary course of business, the Company is involved in litigation, claims, government inquiries, investigations, charges and proceedings.

As of June 30, 2023, the Company’s Condensed Consolidated Balance Sheet includes accrued loss contingencies of $326 million related to matters which are both probable and reasonably estimable, however, a reliable estimate of the period in which the remaining loss contingencies will be payable, if ever, cannot be made.

As of September 30, 2023, the Company’s Condensed Consolidated Balance Sheet includes accrued loss contingencies of $348 million related to matters which are both probable and reasonably estimable, however, a reliable estimate of the period in which the remaining loss contingencies will be payable, if ever, cannot be made.

Our ability to successfully defend the Company against pending and future litigation may impact future cash flows.

See Note 17, “LEGAL PROCEEDINGS” to our unaudited interim Condensed Consolidated Financial Statements for further details.

Acquisition of XIIDRA ®

As previously discussed, on June 30, 2023, Bausch + Lomb entered into a definitive agreement with Novartis to acquire XIIDRA ® and certain other ophthalmology assets.

Under the terms of the agreement, Bausch + Lomb, through its affiliate, has agreed to make an upfront cash payment of $1,750 million, with additional payments that may become due upon achievement of future pipeline commercialization and future sales milestones.

The transaction is expected to close by the end of 2023, subject to receipt of regulatory approval and other customary closing conditions.

Bausch + Lomb intends to finance the $1,750 million upfront cash payment with new debt prior to the closing of the transaction.

See Item 1A “Risk Factors” of Part II of this Form 10-Q for additional information on the risks relating to the acquisition of XIIDRA ® .

Acquisition of Blink ® Product Line

During July 2023, Bausch + Lomb made the upfront cash payment of $107 million to Johnson & Johnson Vision in connection with the closing of the previously discussed acquisition of the Blink ® product line of eye and contact lens drops.

Future Cost Savings Programs

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In connection with these agreements, the Company may pay an upfront fee to secure the agreement.

See Note 4, “LICENSING AGREEMENTS AND ACQUISITIONS” to our unaudited interim Condensed Consolidated Financial Statements.

See Note 4, “LICENSING AGREEMENTS AND

ACQUISITIONS” to our unaudited interim Condensed Consolidated Financial Statements.

Payments associated with the upfront fee for these agreements cannot be reasonably estimated at this time and could be material.

Unrecognized Tax Benefits

As of June 30, 2023, the Company had unrecognized tax benefits totaling $901 million, of which, $4 million is expected to be realized during the remainder of 2023, however a reliable estimate of the period in which the remaining uncertain tax positions will be payable, if ever, cannot be made.

As of September 30, 2023, the Company had unrecognized tax benefits totaling $924 million, of which, $4 million is expected to be realized in the next 12 months, however a reliable estimate of the period in which the remaining uncertain tax positions will be payable, if ever, cannot be made.

Future Repurchases of Debt

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Our common shares trade on the New York Stock Exchange and the Toronto Stock Exchange under the symbol “BHC”.

At July 28, 2023, we had 364,334,264 issued and outstanding common shares.

In addition, as of July 28, 2023, we had outstanding 11,572,015 stock options and 10,716,174 time-based restricted share units that each represent the right of a holder to receive one of the Company’s common shares, and 730,125 performance-based restricted share units that represent the right of a holder to receive a number of the Company’s common shares up to a specified maximum.

At October 27, 2023, we had 365,195,048 issued and outstanding common shares.

In addition, as of October 27, 2023, we had outstanding 10,986,900 stock options and 8,964,950 time-based restricted share units that each represent the right of a holder to receive one of the Company’s common shares, and 588,259 performance-based restricted share units that represent the right of a holder to receive a number of the Company’s common shares up to a specified maximum.

A maximum of 1,176,518 common shares could be issued upon vesting of the performance-based restricted share units outstanding.

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Management has reassessed the critical accounting policies and estimates as disclosed in Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC and the CSA on February 23, 2023, and determined that there were no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2023.

Interim Goodwill Assessment

No events occurred, or circumstances changed during the three months ended June 30, 2023, that indicated that the fair value of any reporting unit might be below its respective carrying value.

However, as a result of certain market conditions,

macroeconomic factors and other business specific related factors that existed in 2022, the Company continues to monitor changes in the facts and circumstances which may impact the fair value of its Dermatology and Neurology and other reporting units.

As a result of the impairment of goodwill in 2022, the Dermatology reporting unit had no headroom on September 30, 2022.

As such, we continue to monitor conditions which may impact the valuation of the reporting unit including the reporting unit’s performance and revisions, if any, to its long-term forecasts in light of current market conditions, current trends in business performance and the expected impacts of management’s latest business strategies.

Our current evaluation of these matters supports our previous expectations for the long-term business performance.

Additionally, based on reference interest rates as of June 30, 2023, the Company concluded that discount rates would not have increased as compared to the discount rate used in determining the fair value as of September 30, 2022 when the unit was last tested.

Based on our evaluation, we have not identified any changes in facts or circumstances that would suggest that it is more likely than not that the fair value of this reporting unit is less than its carrying value.

However, given the limited headroom for this reporting unit, if market conditions deteriorate, or if we are unable to execute on our strategies, it may be necessary to record impairment charges in the future and those charges could be material.

Neurology and Other

As a result of the impairment of goodwill in 2022, the Neurology and Other reporting unit had no headroom on October 1, 2022.

Our current evaluation of these matters supports our previous expectations for the long-term business performance.

Additionally, based on reference interest rates, the Company concluded that discount rates would not have increased as compared to the discount rate used in determining the fair value as of October 1, 2022 when the reporting unit was last tested.

However, if market conditions deteriorate, or if we are unable to execute on our strategies, it may be necessary to record impairment charges in the future and those charges could be material.

No events occurred or circumstances changed during the period of October 1, 2022 (the date of the last annual goodwill assessment) through September 30, 2023 that would indicate that the fair value of any reporting unit, other than the Dermatology and Neurology reporting units, might be below its carrying value.

As the Dermatology reporting unit was impaired on September 30, 2022, there was no difference between the carrying value of the Dermatology reporting unit and its fair value at that time.

During the third quarter of 2023, as a result of lower realized pricing attributable to shifts in the coverage mix for certain products, discontinuation of certain products as a result of the impact of recent legislation, and revised expectations of future selling, advertising, and promotion costs required to mitigate further revenue erosion, our preliminary assessment of future business performance indicated that the reporting unit’s future financial results were expected to be below the assumptions used in the last quantitative fair value test.

After considering the limited headroom as a result of the impairment to goodwill of the Dermatology reporting unit when last tested (September 30, 2022), we believed that these changes in facts and circumstances suggested the fair value of the Dermatology reporting unit could be less than its carrying amount, and therefore a quantitative fair value test was performed for the reporting unit.

The quantitative fair value test utilized the Company’s most recent cash flow projections for the Dermatology reporting unit as revised in the third quarter of 2023 which reflected current market conditions and current trends in business performance.

The quantitative fair value test utilized a long-term growth rate of 0.0% and a discount rate of 10.75%.

on the quantitative fair value test, the carrying value of the Dermatology reporting unit exceeded its fair value at September 30, 2023, and we recognized a goodwill impairment of $151 million for the three months ended September 30, 2023.

Management estimates that a change in the discount rate of 0.25% or a change in the long-term growth rate of 1% would result in a change to the impairment to the Dermatology reporting unit of approximately $13 million and $26 million, respectively, with all other factors remaining constant.

As the Neurology reporting unit was impaired on October 1, 2022, there was no difference between the carrying value of the Neurology reporting unit and its fair value at that time.

During the third quarter of 2023, as a result of actions taken by management in response to changing market dynamics driven by recent legislation, including changes to the future expected commercial insurance coverage for certain key products, and a projected shift in the channels of business, our preliminary assessment of future business performance indicated that the reporting unit’s future financial results were expected to be below the assumptions used in the last quantitative fair value test.

After considering the limited headroom as a result of the impairment to goodwill of the Neurology reporting unit when last tested (October 1, 2022), we believed that these facts and circumstances suggested the fair value of the Neurology reporting unit could be less than its carrying amount, and therefore a quantitative fair value test was performed for the reporting unit.

The quantitative fair value test utilized the Company’s most recent cash flow projections for the Neurology reporting unit as revised in the third quarter of 2023 to reflect current market conditions and current trends in business performance.

The quantitative fair value test utilized a long-term growth rate of -2.5% and a discount rate of 10.50%.

Based on the quantitative fair value test, the carrying value of the Neurology reporting unit exceeded its fair value at September 30, 2023, and we recognized a goodwill impairment of $251 million for the three months ended September 30, 2023.

Management estimates that a change in the discount rate of 0.25% or a change in the long-term growth rate of 1% would result in a change to the impairment to the Neurology reporting unit of approximately $24 million and $33 million, respectively, with all other factors remaining constant.

See Note 8, “INTANGIBLE ASSETS AND GOODWILL” to our unaudited interim Condensed Consolidated Financial Statements for further details related to goodwill.

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our ability to reduce debt levels;

our ability to comply with the financial and other covenants contained in the 2022 Amended Credit Agreement and senior notes indentures;

the ability of our subsidiary, Bausch + Lomb, to comply with the financial and other covenants contained in the B+L Credit Agreement;

our ability to comply with the financial and other covenants contained in the 2022 Amended Credit Agreement, senior notes indentures and the AR Facility Agreement;

the ability of our subsidiary, Bausch + Lomb, to comply with the financial and other covenants contained in the B+L Senior Secured Credit Facilities and the B+L October 2028 Secured Notes;

the impact of our distribution, fulfillment and other third-party arrangements;

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the impact of the COVID-19 pandemic;

anticipated impact from the ongoing conflict between Russia and Ukraine;

the anticipated impact from the ongoing conflict between Russia and Ukraine;

and the Company’s plan to separate its eye health business, including the structure and timing of completing such separation transaction.

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and the results thereof;

• actions by the FDA or other regulatory authorities with respect to our products or facilities;

• actions, including inspections, by the FDA or other regulatory authorities with respect to our products or facilities;

• compliance with the legal and regulatory requirements of our marketed products;

• our substantial debt (and potential additional future indebtedness) and current and future debt service obligations, our ability to reduce our outstanding debt levels and the resulting impact on our financial condition, cash flows and results of operations;

• our ability to comply with the financial and other covenants contained in our senior notes indentures, the 2027 Revolving Credit Facility, the 2022 Amended Credit Agreement, the B+L Credit Agreement and other current or future credit and/or debt agreements, including the ability of Bausch + Lomb to comply with its covenants and obligations under the B+L Credit Agreement, restrictions and prohibitions such covenants impose or may impose on the way we conduct our business, including prohibitions on incurring additional debt if certain financial covenants are not met, limitations on the amount of additional obligations we are able to incur pursuant to other covenants, our ability to draw under our 2027 Revolving Credit Facility, Bausch + Lomb’s ability to draw down under the revolving credit facility under the B+L Credit Agreement and restrictions on our ability to make certain investments and other restricted payments;

• any default under the terms of our senior notes indentures or the 2022 Amended Credit Agreement (and other current or future credit and/or debt agreements) and our ability, if any, to cure or obtain waivers of such default;

• our ability to comply with the financial and other covenants contained in our senior notes indentures, the 2027 Revolving Credit Facility, the 2022 Amended Credit Agreement, the AR Credit Facility and other current or future credit and/or debt agreements or amendments thereto, including the ability of Bausch + Lomb to comply with its covenants and obligations under the B+L Senior Secured Credit Facilities and the B+L October 2028 Secured Notes, restrictions and prohibitions such covenants impose or may impose on the way we conduct our business, including prohibitions on incurring additional debt if certain financial covenants are not met, limitations on the amount of additional obligations we are able to incur pursuant to other covenants, our ability to draw under our 2027 Revolving Credit Facility, Bausch + Lomb’s ability to draw down under the revolving credit facility under the B+L Credit Agreement and restrictions on our ability to make certain investments and other restricted payments;

• any default under the terms of our senior notes indentures or the 2022 Amended Credit Agreement (and other current or future credit and/or debt agreements or amendments thereto) and our ability, if any, to cure or obtain waivers of such default;

• any downgrade by rating agencies in our credit ratings, which may impact, among other things, our ability to raise debt and the cost of capital for additional debt issuances;

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• changes in the assumptions used in connection with our impairment analyses or assessments, which would lead to a change in such impairment analyses and assessments and which could result in an impairment in the goodwill associated with any of our reporting units or impairment charges related to certain of our products or other intangible assets;

• the risks and uncertainties relating to Bausch + Lomb’s recently-announced transaction for the acquisition of XIIDRA ® and certain other assets, including its ability to consummate that transaction and the timing thereof, the possibility that any or all of the conditions to the consummation of the transaction may not be satisfied or waived, including failure to receive required regulatory approvals, the effect of the announcement or pendency of the transaction on its ability to maintain relationships with customers, suppliers, and other business partners, risks relating to potential diversion of management attention away from its ongoing business operations, its ability to finance the transaction as anticipated, risks relating to our increased levels of debt as a result of debt expected to be incurred to finance such acquisition and risks that Bausch + Lomb may not realize the expected benefits of the acquisition on a timely basis or at all;

• the risks and uncertainties relating to Bausch + Lomb’s recently completed acquisition of XIIDRA ® and certain other assets, including risks relating to our increased levels of debt as a result of debt incurred to finance such acquisition and risks that Bausch + Lomb may not realize the expected benefits of the acquisition on a timely basis or at all, as well as risks associated with Bausch + Lomb’s guarantee of certain obligations of its acquiring affiliate pursuant to the terms of the XIIDRA Acquisition and potential liability for payment of related contingent consideration;

• the risks and uncertainties relating to Bausch + Lomb’s recent acquisition of the Blink ® Product Line, including risks that Bausch + Lomb may not realize the expected benefits of the acquisition on a timely basis or at all;

• the uncertainties associated with the acquisition and launch of new products, assets and businesses, including, but not limited to, our ability to provide the time, resources, expertise and funds required for the commercial launch of new products, the acceptance and demand for new products, and the impact of competitive products and pricing, which could lead to material impairment charges;

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• our ability to compete against companies that are larger and have greater financial, technical and human resources than we do, as well as other competitive factors, such as technological advances achieved, patents obtained and new products introduced by our competitors;

• our ability to effectively operate and grow our businesses in light of the challenges that the Company has faced and market conditions, including with respect to its substantial debt, pending investigations and legal proceedings, scrutiny of our past pricing and other practices, limitations on the way we conduct business imposed by the covenants contained in our 2022 Amended Credit Agreement, the B+L Credit Agreement, our senior notes indentures and the agreements governing our other indebtedness, and the impacts of the COVID-19 pandemic;

• our ability to effectively operate and grow our businesses in light of the challenges that the Company has faced and market conditions, including with respect to its substantial debt, pending investigations and legal proceedings, scrutiny of our past pricing and other practices, limitations on the way we conduct business imposed by the covenants contained in our 2022 Amended Credit Agreement, AR Facility Agreement, the B+L Senior Secured Credit Facilities, our senior notes indentures, the senior notes indenture of B+L and the agreements governing our other indebtedness, and the impacts of the COVID-19 pandemic;

• the extent to which our products are reimbursed by government authorities, pharmacy benefit managers (“PBMs”) and other third-party payors;

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• the impact of the United States-Mexico-Canada Agreement (“USMCA”) and any potential changes to other trade agreements;

• the impact of the recent escalation in conflict in the Middle East, including attacks on Israel by Hamas and any related military conflict, including potential impact on our operations, sale of products and revenues in this region;

• the possibility that the unaudited pro forma financial information included in this Form 10-Q may not necessarily be indicative of what the consolidated results of operations would have been, had the XIIDRA Acquisition been completed on January 1, 2022 and may differ materially from the future results of operations of the combined company;

• our ability to obtain, maintain and license sufficient intellectual property rights over our products and enforce and defend against challenges to such intellectual property (such as in connection with the filing by Norwich Pharmaceuticals Inc.

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• our ability to successfully appeal the decision of the U.S.

District Court for the District of Delaware in the Company’s lawsuit against Norwich in connection with Norwich’s ANDA and challenge Norwich’s ability to achieve a modified ANDA that avoids the August 10, 2022 final judgment by the District Court and omits the Xifaxan ® hepatic encephalopathy (“HE”) indication and HE safety data;

District Court for the District of Delaware in the Company’s lawsuit against Norwich in connection with Norwich’s ANDA and challenge Norwich’s lawsuit filed in the U.S.

District Court for the District of Columbia against the FDA alleging that the FDA acted improperly by only granting tentative approval to Norwich’s ANDA, rather than final approval, in June 2023;

• the fact that a substantial amount of our revenues are derived from the Xifaxan ® product line, and that we may be materially impacted by the entry of a generic rifaximin product earlier than January 2028, including the risk of a competitor launching a generic rifaximin at risk prior to a final unappealable decision;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis