Item 1. Financial Statements
Item 1. Financial Statements and Supplementary Data.
Condensed Combined Statements of Income
Diabetes Care Business
(Unaudited)
Three Months Ended
December 31,
2021
2020
In millions
Revenues
$
289.3
$
285.3
Cost of products sold (1)
85.4
94.0
Gross Profit
$
203.9
$
191.3
Operating expenses:
Selling and administrative expense
62.2
53.2
Research and development expense
16.7
14.0
Other operating expenses
8.4
—
Total Operating Expenses
$
87.3
$
67.2
Operating Income
116.6
124.1
Other income, net
—
1.0
Income Before Income Taxes
$
116.6
$
125.1
Income tax provision
17.8
19.8
Net Income
$
98.8
$
105.3
(1)
Includes costs for inventory purchases from related parties of $ 11.5 million and $ 9.0 million during the three months ended December 31, 2021 and 2020, respectively.
See notes to the condensed combined financial statements.
-1-
Table of Contents
Condensed Combined Statements of Comprehensive Income
Diabetes Care Business
(Unaudited)
Three Months Ended
December 31,
2021
2020
In millions
Net Income
$
98.8
$
105.3
Other Comprehensive Loss
Foreign currency translation adjustments
( 8.8
)
0.1
Other Comprehensive Loss
( 8.8
)
0.1
Comprehensive Income
$
90.0
$
105.4
See notes to the condensed combined financial statements.
-2-
Table of Contents
Condensed Combined Balance Sheets
Diabetes Care Business
December 31,
2021
September 30,
2021
(Unaudited)
In millions
ASSETS
Current Assets
Trade receivables, net
$
118.3
$
150.6
Inventories:
Materials
13.3
13.1
Work in process
21.2
21.0
Finished products
84.6
83.9
119.1
118.0
Prepaid expenses and other
20.9
23.2
Total Current Assets
258.3
291.8
Property, Plant and Equipment, Net
436.5
451.0
Goodwill and Other Intangible Assets
33.9
33.9
Other Assets
11.2
11.3
Total Assets
$
739.9
$
788.0
LIABILITIES AND PARENT’S EQUITY
Current Liabilities
Accounts payable
$
58.1
$
54.2
Accrued expenses
73.0
81.6
Salaries, wages and related items
28.0
28.2
Total Current Liabilities
159.1
164.0
Deferred Income Taxes and Other Liabilities
30.3
29.7
Commitments and Contingencies (Note 5)
—
—
Parent’s Equity
Net parent investment
829.8
864.8
Accumulated other comprehensive loss
( 279.3
)
( 270.5
)
Total Parent’s Equity
550.5
594.3
Total Liabilities and Parent’s Equity
$
739.9
$
788.0
See notes to the condensed combined financial statements.
-3-
Table of Contents
Condensed Combined Statements of Cash Flows
Diabetes Care Business
(Unaudited)
Three Months Ended
December 31,
2021
2020
In millions
Operating Activities
Net income
$
98.8
$
105.3
Adjustments to net income to derive net cash provided by operating activities:
Depreciation and amortization
8.4
9.3
Impairment of property, plant and equipment
—
10.0
Share-based compensation
4.6
3.8
Pension expense
2.2
2.4
Change in operating assets and liabilities:
Trade receivables, net
30.7
( 1.9
)
Inventories
( 4.3
)
( 10.4
)
Prepaid expenses and other
0.9
( 3.4
)
Accounts payable
3.9
( 8.0
)
Accrued expenses
( 7.9
)
9.0
Other current liabilities
1.5
5.3
Net Cash Provided by Operating Activities
138.8
121.4
Investing Activities
Capital expenditures
( 4.3
)
( 11.4
)
Acquisition of intangible assets
—
( 0.5
)
Net Cash Used for Investing Activities
( 4.3
)
( 11.9
)
Financing Activities
Net transfers to Parent
( 134.5
)
( 109.5
)
Net Cash Used for Financing Activities
( 134.5
)
( 109.5
)
Net Change in Cash and Cash Equivalents
—
—
Opening Cash and Cash Equivalents
—
—
Closing Cash and Cash Equivalents
$
—
$
—
See notes to the condensed combined financial statements.
-4-
Table of Contents
Notes to Condensed Combined Financial Statements
Diabetes Care Business
Millions of dollars, or as otherwise specified
Note 1—Background and Basis of Presentation
Background
On May 6, 2021, Becton, Dickinson and Company (“BD” or “Parent”) announced that its Board of Directors approved a plan to spin off its diabetes care business, comprising syringes, pen needles and other products related to the injection or infusion of insulin and other drugs used in the treatment of diabetes (collectively, the “Company” or “Diabetes Care Business”). Under the plan, BD would transfer certain assets and liabilities associated with the Diabetes Care Business to Embecta Corp. (“Embecta”), a newly formed wholly owned subsidiary of BD incorporated on July 8, 2021, and execute a spin-off
of Embecta by way of a pro-rata
distribution of common stock of Embecta to BD’s shareholders at the close of business on the record date of the spin-off.
During the first quarter of 2022, in contemplation of the spin-off,
certain assets, liabilities, and operations attributable to the Diabetes Care Business were contributed to Embecta, which has been reflected in these unaudited condensed combined financial statements. The remaining assets, liabilities, operations, or commitments and contingencies associated with the Diabetes Care Business will be contributed prior to the spin-off
date, at which such
business is fully transferred to Embecta. These condensed combined financial statements reflect the historical results of operations, financial position and cash flows of the Company.
In connection with the spin-off,
BD and Embecta will enter into various agreements to effect the spin-off
and provide a framework for the relationship between BD and Embecta after the spin-off,
including a separation and distribution agreement, a transition services agreement (TSA), manufacturing and supply agreements (MSAs), reverse manufacturing and supply agreements (RMSAs), an employee matters agreement, a tax matters agreement, a lease agreement, and certain other commercial agreements.
The completion of the spin-off
is subject to certain conditions, including effectiveness of the Registration Statement on Form 10, as amended, with the U.S. Securities and Exchange Commission (“SEC”), such effectiveness having occurred on February 10, 2022, and final approval by BD’s Board of Directors (refer to Note 12). There are no assurances as to when the planned spin-off
will be completed, if at all.
Basis of Presentation
The unaudited condensed combined financial statements have been derived from BD’s historical accounting records and were prepared on a standalone basis in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the SEC. The assets, liabilities, revenue and expenses of the Company have been reflected in these condensed combined financial statements on a historical cost basis, as included in the consolidated financial statements of BD, using the historical accounting policies applied by BD. Historically, separate financial statements have not been prepared for the Company and it has not operated as a standalone business from BD. The historical results of operations, financial position, and cash flows of the Company presented in these condensed combined financial statements may not be indicative of what they would have been had the Company actually been an independent standalone public company, nor are they necessarily indicative of the Company’s future results of operations, financial position, and cash flows. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.
The condensed combined financial statements have been prepared in accordance with the instructions to Form 10-Q
and, in the opinion of the management of BD, include all adjustments which are of a normal recurring nature, necessary for a fair presentation of the financial position and the results of operations and cash flows for the periods presented. The accounting policies and basis of preparation adopted in the preparation of these condensed combined financial statements are consistent with those followed in the preparation of the Company’s combined financial statements issued for the year ended September 30, 2021. However, the financial statements do not include all information and accompanying notes required for a presentation in accordance with GAAP. These condensed combined financial statements should be read in conjunction with the audited combined financial statements and the notes thereto included in the Company’s Registration Statement on Form 10. All intercompany transactions and accounts within the Diabetes Care Business have been eliminated.
-5-
Table of Contents
The provision for income taxes for the three months ended December 31, 2021 and 2020 was calculated by applying an estimated annual effective income tax rate for the full year to ordinary income adjusted by the tax impact of discrete items.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates or assumptions affect reported assets, liabilities, revenues and expenses, including determining the allocation of shared costs and expenses from BD, depreciable and amortizable lives, sales returns and allowances, rebate accruals, inventory reserves and taxes on income as reflected in the condensed combined financial statements. Actual results could differ from these estimates.
Note 2 — Parent’s Equity
Changes in certain components of Parent’s Equity were as follows:
Net Parent
Investment
Accumulated
Other
Comprehensive
Loss
Total Parent’s
Equity
In millions
Balance, October 1, 2020
$
833.8
$
( 261.6
)
$
572.2
Net income
105.3
—
105.3
Foreign currency translation
—
0.1
0.1
Net transfers to Parent
( 91.8
)
—
( 91.8
)
Balance, December 31, 2020
$
847.3
$
( 261.5
)
$
585.8
Net Parent
Investment
Accumulated
Other
Comprehensive
Loss
Total Parent’s
Equity
In millions
Balance, October 1, 2021
$
864.8
$
( 270.5
)
$
594.3
Net income
98.8
—
98.8
Foreign currency translation
—
( 8.8
)
( 8.8
)
Net transfers to Parent
( 133.8
)
—
( 133.8
)
Balance, December 31, 2021
$
829.8
$
( 279.3
)
$
550.5
Note 3 — Related Party Transactions and Parent Company Investment
Corporate and Medical Segment Allocations
The Company’s condensed combined financial statements include general corporate expenses of BD and shared segment expenses which were not historically allocated to the Company for certain support functions that are provided on a centralized basis within Parent and not recorded at the business unit level, such as expenses related to finance, human resources, information technology, facilities, and legal, among others (collectively, “General Corporate Expenses”). For purposes of these condensed combined financial statements, the General Corporate Expenses have been allocated to the Company. The General Corporate Expenses are included in the condensed combined statements of income in Cost of products sold
, Selling and administrative expense
, Research and development expense
, and Other income, net
and, accordingly, as a component of Net parent investment
on the condensed combined balance sheets. These expenses have been allocated to the Company on a pro rata basis of
-6-
Table of Contents
global and regional revenues, headcount, research and development spend and other drivers. Management believes the assumptions underlying the condensed combined financial statements, including the assumptions regarding allocating General Corporate Expenses from BD, are reasonable. Nevertheless, the condensed combined financial statements may not include all of the actual expenses that would have been incurred and may not reflect the Company’s condensed combined results of operations, financial position and cash flows had it been a standalone public company during the periods presented. Actual costs that would have been incurred if the Company had been a standalone public company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure.
The allocations of General Corporate Expenses are reflected in the condensed combined statements of income as follows:
Three months ended December 31,
2021
2020
In millions
Cost of products sold
$
1.6
$
4.7
Selling and administrative expense
24.4
24.4
Research and development expense
1.7
1.2
Other (income) expense, net
( 1.0
)
( 1.6
)
Total General Corporate Expenses
$
26.7
$
28.7
Purchases from Parent
In the ordinary course of business, the Company purchases from BD certain materials for use in production of certain medical products, the terms of which are not at arm’s length. During the three months ended December 31, 2021 and 2020, these related party purchases were $ 14.4 million and $ 9.7 million, respectively. Amounts payable to BD for such purchases as of December 31, 2021 and September 30, 2021 were immaterial.
Parent Company Investment
All significant intercompany transactions between the Company and BD have been included in the condensed combined financial statements and are considered to be effectively settled for cash at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the condensed combined statements of cash flows as a financing activity and in the condensed combined balance sheets as Net parent investment
.
-7-
Table of Contents
The following table summarizes the components of the net transfers to Parent in Net parent investment
for three months ended December 30, 2021 and 2020:
Three months ended December 31,
2021
2020
In millions
Cash pooling and general financing activities (a)
$
170.3
$
142.7
Corporate and segment allocations, excluding non-cash
share-based compensation
( 25.1
)
( 27.1
)
Taxes deemed settled with Parent
( 10.7
)
( 6.1
)
Net transfers to Parent as reflected in the condensed combined
statements of cash flows
134.5
109.5
Share-based compensation expense
( 4.6
)
( 3.8
)
Pension expense
( 2.2
)
( 2.4
)
Other transfers to (from) Parent, net
6.1
( 11.5
)
Net transfers to Parent (Note 2)
$
133.8
$
91.8
(a)
The nature of activities includes financing activities for capital transfers, cash sweeps and other treasury services. As part of this activity, cash balances are swept to BD on a daily basis under the BD Treasury function and the Company receives capital from BD for its cash needs.
Note 4 — Spin-Off
Costs
In connection with the spin-off
further described in Note 1, the Company incurred separation and stand-up
costs of approximately $ 8.4 million during the three months ended December 31, 2021, reflected within Other operating expenses
within the condensed combined statement of income. The costs incurred primarily consist of costs associated with legal, supply chain, employee retention and certain other costs to establish certain stand-alone functions to transition to being a stand-alone entity. There were no spin-off
costs incurred during the three months ended December 31, 2020.
The total amount of spin-off costs accrued as of December 31, 2021 and September 30, 2021 was approximately $ 0.5 million and $ 1.6 million, respectively.
Note 5 — Contingencies
The Company regularly monitors and evaluates the status of product liability and other legal matters, and may, from time-to-time,
engage in settlement and mediation discussions taking into consideration developments in the matters and the risks and uncertainties surrounding litigation. These discussions could result in settlements of one or more of these claims at any time. The Company has not identified material legal matters where it believes an unfavorable, material outcome is probable and estimable and, therefore, no reserve is established. Although management currently believes that resolving claims against the Company, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. It is possible that an unfavorable outcome resulting from legal matters or other contingencies could have a material impact on the liquidity, results of operations or financial condition of the Company.
Significant judgment is required in both the determination of probability of loss and the determination as to whether the amount can be reasonably estimated. Accruals are based only on information available at the time of the assessment, due to the uncertain nature of such matters. As additional information becomes available, management reassesses potential liabilities related to pending claims and litigation and may revise its previous estimates, which could materially affect the Company’s results of operations in a given period. The Company was not a party to any material legal proceedings at December 31, 2021 or December 31, 2020, nor is it a party to any material legal proceedings as of the date of issuance of these condensed combined financial statements.
-8-
Table of Contents
Note 6 — Revenues
The Company’s policies for recognizing sales have not changed from those described in the Company’s Registration Statement on Form 10. The Company sells syringes, pen needles and other products used in the treatment of diabetes which are sold to wholesalers and distributors, which in turn sell these products to customers through retail and acute care hospitals, clinics and other institutional channels. End-users
of the Company’s products include healthcare institutions, physicians, life science researchers, clinical laboratories, the pharmaceutical industry, and the general public.
Measurement of Revenues
Payment terms extended to the Company’s customers are based upon commercially reasonable terms for the markets in which the Company’s products are sold. Because the Company generally expects to receive payment within one year or less from when control of a product is transferred to the customer, the Company does not generally adjust its revenues for the effects of a financing component. The Company’s allowance for doubtful accounts reflects the current estimate of credit losses expected to be incurred over the life of its trade receivables. Such estimated credit losses are determined based on historical loss experiences, customer specific credit risk, and reasonable and supportable forward-looking information, such as country or regional risks that are not captured in the historical loss information. Amounts are written off against the allowances for doubtful accounts when the Company determines that a customer account is uncollectible. The allowance for doubtful accounts for trade receivables is not material to the Company’s condensed combined financial results.
The Company’s gross revenues are subject to a variety of deductions which are recorded in the same period that the underlying revenues are recognized. Such variable consideration includes rebates, sales discounts, and sales returns. Because these deductions represent estimates of the related obligations, judgment is required when determining the impact of these revenue deductions on gross revenues for a reporting period. Rebates provided by the Company are based upon prices determined under the Company’s agreements primarily with its end-user
customers. Additional factors considered in the estimate of the Company’s rebate liability include the quantification of inventory that is either in stock at or in transit to the Company’s distributors, as well as the estimated lag time between the sale of product and the payment of corresponding rebates. The Company’s rebate liability at December 31, 2021 and September 30, 2021 was $ 76.9 million and $ 71.7 million, respectively. Rebates recorded as a reduction of gross revenues during the three months ended December 31, 2021 and 2020 were $ 76.4 million and $ 72.1 million, respectively. Sales discounts and sales returns were not material.
Disaggregation of Revenues
Disaggregation of revenue by geographic region is provided within Note 7.
Contract Assets and Liabilities
The Company does not have contract liabilities. Contract assets consist of the Company’s right to consideration that is conditional upon its future performance pursuant to private label agreements and are presented within Prepaid expenses and other
on the condensed combined balance sheets.
The Company’s contract asset balance was $ 1.4 million as of both December 31, 2021 and September 30, 2021.
Note 7 — Segment and Geographical Data
Operating segments are identified as components of an enterprise in which discrete financial information is available for evaluation by the chief operating decision-maker (“CODM”) in making decisions regarding assessing business performance and allocating resources and capital. Management has concluded that the Company operates in one segment based upon the information used by the CODM in evaluating the performance of the Company’s business and allocating resources and capital.
-9-
Table of Contents
Disaggregation of Revenues
The Company has distribution agreements with regional or national distributors (including wholesalers and medical suppliers) to ensure broad availability of its products as well as a direct sales force in certain countries and regions around the world. In the United States and Canada, the Company utilizes its field-based sales representatives and internal sales teams. In certain markets within Europe, the Company has dedicated sales representatives and in certain regions of the Middle East and Africa, the Company has distribution agreements. In Greater Asia, the Company has distribution agreements and in China, the Company relies on its own commercial team to support sales execution. In Latin America, the Company maintains distribution agreements and direct sales representatives.
The Company disaggregates its revenue by geography as management believes this category best depicts how the nature, amount and timing of revenues and cash flows are affected by economic factors.
Revenues by geographic region are as follows:
Three months ended December 31,
2021
2020
In millions
United States
$
150.9
$
149.5
International (a)
138.4
135.8
Total
$
289.3
$
285.3
(a)
During the three months ended December 31, 2021 and 2020, no individual country outside of the United States generated revenue that represented more than 10.0 % of total revenues.
Note 8 — Share-Based Compensation
The following disclosure represents share-based compensation attributable to the Company based on the awards and terms previously granted to Company employees under BD share-based payment plans, and is representative of only those employees who are dedicated to the Company unless otherwise noted. Stock compensation allocated to the Company for BD Corporate and Medical Segment employees who are not dedicated to the Company are included as a component of corporate allocations. The allocation of stock compensation for BD Corporate and Medical Segment employees was $ 1.6 million for the three months ended December 31, 2021 and 2020.
Share-Based Compensation Expense
The fair value of share-based payments is recognized as compensation expense. BD estimates forfeitures based on experience at the time of grant and adjusts expense to reflect actual forfeitures.
The amounts and location of compensation cost relating to both the Company’s employees and an allocation for BD Corporate employees included in the condensed combined statements of income is as follows:
Three months ended December 31,
2021
2020
In millions
Cost of products sold
$
1.0
$
0.9
Selling and administrative expense
2.9
2.2
Research and development expense
0.7
0.7
Total Share-Based Compensation Expense
$
4.6
$
3.8
Tax benefit associated with share-based compensation costs recognized
$
1.0
$
0.9
-10-
Table of Contents
Note 9 — Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets consisted of:
Three months ended December 31,
2021
2020
In millions
Amortized intangible assets
Patents – gross
$
21.5
$
21.2
Less: accumulated amortization
( 7.2
)
( 6.9
)
Patents – net
$
14.3
$
14.3
Customer Relationships and Other – gross
$
5.4
$
5.4
Less: accumulated amortization
( 1.4
)
( 1.4
)
Customer Relationships and Other – net
$
4.0
$
4.0
Total amortized intangible assets
$
18.3
$
18.3
Goodwill
15.6
15.6
Total Goodwill and Other Intangible Assets
$
33.9
$
33.9
Note 10 — Financial Instruments and Fair Value Measurements
Foreign Currency and Other Risks
The Company has foreign currency exposures throughout the various countries in which it operates. Transactional currency exposures that arise from entering into transactions, generally on an intercompany basis, in non-hyperinflationary
countries that are denominated in currencies other than the functional currency are mitigated by BD primarily through the use of forward contracts. In order to mitigate foreign currency exposure relating to its investments in certain foreign subsidiaries, BD hedges the currency risk associated with those investments with instruments, such as foreign currency-denominated debt, cross-currency swaps and currency exchange contracts, which are designated as net investment hedges. The Company does not enter into any derivative transactions, contracts, options, or swaps. Accordingly, derivative assets and liabilities held by BD at the corporate level were not attributable to the Company for any of the periods presented.
Net gains or losses relating to the net investment hedges, which are attributable to changes in foreign currencies to U.S. dollar spot exchange rates, are recorded as a component of foreign currency translation adjustments in Other comprehensive loss
. Upon the termination of a net investment hedge, any net gain or loss included in Accumulated other comprehensive loss
relative to the investment hedge remains until the foreign subsidiary investment is disposed of or is substantially liquidated.
Hedges of the transactional foreign exchange exposures resulting primarily from intercompany payables and receivables are undesignated hedges. As such, the gains or losses on these instruments are recognized immediately in income. These gains and losses are largely offset by gains and losses on the underlying hedged items, as well as the hedging costs associated with the derivative instruments. Due to the Company’s participation in BD’s hedging program, the Company records an allocated portion of the impact of these activities. The net amounts recognized in Other income (expense), net
during the three months ended December 31, 2021 and 2020 were immaterial to the Company’s condensed combined financial results.
Nonrecurring Fair Value Measurements
Non-financial
assets, including property, plant and equipment as well as intangible assets, are measured at fair value when there are indicators of impairment and these assets are recorded at fair value only when an impairment is recognized. These measurements of fair value are generally based upon Level 3 inputs, including values estimated using the income approach.
-11-
Table of Contents
In the quarter ended December 31, 2020, the Company recorded impairment charges totaling $ 10.0 million related to certain construction in progress assets that related to discontinued projects. The impairment charges were recorded to adjust the carrying amount of the assets to the assets’ fair values, which were estimated through a discounted cash flow model that utilized Level 3 inputs. The impairment charges are recognized within Cost of products sold
in the condensed combined statement of income.
There were no impairment charges in the quarter ended December 31, 2021.
Concentration of Credit Risk
On an ongoing basis, the Company’s operations form part of BD’s monitoring of concentrations of credit risk associated with financial institutions with which BD conducts business. Therefore, the Company is exposed to credit loss in the event of nonperformance by such financial institutions. However, this loss is limited to the amounts, if any, by which the obligations of the counterparty to the financial instrument contract exceed the obligations of BD. BD also minimizes exposure to credit risk by dealing with a diversified group of major financial institutions.
Substantially all of the Company’s trade receivables are due from public and private entities involved in the healthcare industry. The Company does not normally require collateral from its customers. Two of the Company’s customers represent at least 10.0 % of the gross trade receivables balance individually and, in the aggregate, represent approximately 23.0 % of the gross trade receivable balance as of December 31, 2021. Two of the Company’s customers represent at least 10.0 % of total revenues individually and, in the aggregate, represent approximately 30.1 % of total revenues for the quarter ended December 31, 2021.
Note 11 — Property, Plant and Equipment
Property, Plant and Equipment, Net consisted of:
As of December
31, 2021
As of September
30, 2021
In millions
Land
$
3.4
$
3.6
Buildings
120.1
120.4
Machinery, equipment and fixtures
559.5
570.8
Leasehold improvements
6.5
6.1
Construction in progress
185.0
190.8
874.5
891.7
Less: accumulated depreciation
( 438.0
)
( 440.7
)
Total Property, Plant and Equipment, Net
$
436.5
$
451.0
Note 12 — Subsequent Events
Management has evaluated subsequent events through March 16, 2022, the date the condensed combined financial statements were available to be issued and determined that no subsequent events have occurred that would require recognition in the condensed combined financial statements or disclosure in the notes to the condensed combined financial statements, except as described below:
Spin-Off
Update
On February 1, 2022, BD’s Board of Directors approved the spin-off
of the Diabetes Care Business. On February 10, 2022, the SEC declared effective Embecta’s Registration Statement on Form 10, as amended. The spin-off
will occur by means of a pro-rata
distribution of all of Embecta’s issued and outstanding shares of common stock on the basis of one share of Embecta common stock for every five shares of BD common stock held as of the close of business on March 22, 2022, the record date for the spin-off.
The distribution is expected to be completed on April 1, 2022. The distribution is expected to qualify as tax-free
to BD and its shareholders for U.S. federal income tax purposes.
-12-
Table of Contents
Upon completion of the distribution, Embecta will be an independent, publicly traded company and BD will retain no ownership interest. “When-issued” trading of Embecta common stock will begin on or shortly before the record date of March 22, 2022, under the ticker symbol “EMBCV,” and will continue until the distribution date. “Regular-way”
trading of Embecta common stock is expected to begin on the spin-off date of April 1, 2022, under the same ticker symbol of “EMBC.”
Financing Arrangements
In February 2022 and in connection with the spin-off,
Embecta issued $ 500.0 million of senior secured 5.000 % notes due February 15, 2030. Prior to the distribution date of April 1, 2022, Embecta expects to enter into a credit agreement which will provide for a $ 1,150.0 million senior secured seven-year term loan facility, as well as a $ 500.0 million senior secured five-year revolving credit facility, which is expected to be undrawn at the spin-off
date. The interest rate on the $ 1,150.0 million term loan is 300 basis points over the secured overnight financing rate (“SOFR”), with a 0.5 % SOFR floor. Embecta is expected to use the aggregate proceeds received from the issuance of the senior secured notes and the term loan facility to make a distribution payment of approximately $ 1,440.0 million to BD in connection with the spin-off
on the effectiveness date of April 1, 2022. Embecta plans to hold approximately $ 160.0 million in cash upon completion of the spin-off.
In addition, Embecta will enter into a Trade Receivables Factoring Agreement with BD effective at the time of the spin-off.
Embecta will owe BD a service fee calculated as 0.1 % of annual revenues related to countries subject to the agreement, in exchange for the services provided by BD pursuant to the Trade Receivables Factoring Agreement.
Embecta and BD Agreements
In connection with the spin-off,
BD and Embecta have entered and will enter into various agreements to effect the spin-off
and provide a framework for the relationship between BD and Embecta after the spin-off,
including a separation and distribution agreement, a transition services agreement (TSA), manufacturing and supply agreements (MSAs), reverse manufacturing and supply agreements (RMSAs), an employee matters agreement, a tax matters agreement, a lease agreement, and certain other commercial agreements. The agreements are expected to go into effect as of the spin-off
date, April 1, 2022.
-13-
Table of Contents
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.