What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-12 compared with 2023-02-14 · 102 added, 75 removed, 184 unchanged (49% of the section changed)

14 unchanged sentences

In addition to pen needles, we sell sterile, single-use insulin syringes, which are used to inject insulin drawn from insulin vials.

We also sell safety insulin syringes, which have sliding safety arm that can be activated with one-hand after the injection to help prevent needlestick exposure and injury during injection and disposal.

We primarily sell our products to wholesalers and distributors that sell to retail and institutional channels who in turn sell to patients.

We also sell safety insulin syringes, which have sliding safety shield that can be activated with one-hand after the injection to help prevent needlestick exposure and injury during injection and disposal.

We primarily sell our products to wholesalers and distributors that sell to retail and institutional channels who in turn sell to patients or use the products to deliver insulin injections to patients.

Separation from BD

Pursuant to the Separation and Distribution Agreement, the Separation from BD was completed on April 1, 2022.

57,012,925 issued and outstanding shares of Embecta common stock were distributed pro-rata to BD stockholders as of the close of business on March 22, 2022, the record date for the distribution, determined by applying a ratio of one share of Embecta common stock for every five shares of BD common stock.

On March 22, 2022, the record date for the distribution, 57,012,925 issued and outstanding shares of Embecta common stock were distributed pro-rata to BD stockholders as of the close of business, determined by applying a ratio of one share of Embecta common stock for every five shares of BD common stock.

"Regular-way" trading of Embecta common stock began on April 1, 2022, under the ticker symbol "EMBC".

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Prior to the Separation, the Company was referred to as the Diabetes Care Business.

For periods prior to April 1, 2022, the Condensed Consolidated Financial Statements included certain assets and liabilities that were historically been held at the BD corporate level but are specifically identifiable or otherwise allocable to the Diabetes Care Business.

For periods prior to April 1, 2022, the Condensed Consolidated Financial Statements included certain assets and liabilities that were historically held at the BD corporate level but are specifically identifiable or otherwise allocable to the Diabetes Care Business.

Periods Post Separation

For the period subsequent to April 1, 2022, as a standalone publicly traded company, Embecta presents its financial statements on a consolidated basis.

For the periods subsequent to April 1, 2022, as a standalone publicly traded company, Embecta presents its financial statements on a consolidated basis.

The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

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Introduction of new drugs and increased penetration of oral anti-diabetic drugs (e.g., SGLT-2s) and GLP-1s and GLP-1 combination products have delayed initiation of insulin therapy and contributed to less demand for our products.

COVID-19 Impacting Delivery and Allocation of Healthcare.

Continuing Impact From COVID-19 on Delivery and Allocation of Healthcare.

The COVID-19 pandemic has accelerated the adoption of, and reimbursement by governments and private payers for, the delivery of healthcare using digital technologies, including telehealth technologies and other at-home self-care solutions and various media for virtual engagement with healthcare providers.

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As further discussed below, our future operating performance may be subject to further volatility due to the significant uncertainty with respect to the duration and overall impact of the COVID-19 pandemic.

The impacts of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows is dependent on certain factors including:

The impacts of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows are dependent on certain factors including:

• the extent to which resurgences in COVID-19 infections or new strains of the virus, result in the imposition of new governmental lockdowns, quarantine requirements or other restrictions that may disrupt our operations;

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For all periods presented, our net sales in Russia and Ukraine were not material to our consolidated net revenues.

Although operations in both Russia and Ukraine do not constitute a material portion of our business, there is uncertainty around the military conflict and the impact it will have on the global economy, supply chains and fuel prices generally, and therefore our business.

Refer to the "Risk Factors" set forth in the 2022 Form 10-K for further details.

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Our unaudited Condensed Consolidated Statements of Income are as follows:

Three months ended December 31,

Three months ended March 31, Six months ended March 31,

Revenues $ 277.1 $ 274.5 0.9 % $ 552.8 $ 563.8 (2.0) %

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Operating Income 55.6 98.9 (43.8) 144.4 215.5 (33.0)

Interest expense, net (25.6) — nm

Other income (expense), net (7.1) — nm

Interest expense, net (26.8) (4.9) nm (52.4) (4.9) nm

Other income (expense), net (4.3) (0.1) nm (11.4) (0.1) nm

Income Before Income Taxes 24.5 93.9 (73.9) 80.6 210.5 (61.7)

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Net Income per common share:

Basic $ 0.62 $ 1.73 nm

Diluted $ 0.61 $ 1.73 nm

Basic $ 0.24 $ 1.38 nm $ 0.86 $ 3.09 nm

Diluted $ 0.24 $ 1.38 nm $ 0.85 $ 3.09 nm

nm = not meaningful

Three Months Ended December 31, 2022 Summary (on a comparative basis)

Key financial results for the three months ended December 31, 2022 were as follows:

• Revenue decreased by $13.6 million to $275.7 million from $289.3 million;

Three Months Ended March 31, 2023 Summary (on a comparative basis)

Key financial results for the three months ended March 31, 2023 were as follows:

• Revenue increased by $2.6 million to $277.1 million from $274.5 million;

• Gross profit decreased by $1.4 million to $189.8 million from $191.2 million.

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Dollar amounts are in millions except per share amounts or as otherwise specified.

Our revenues decreased by $13.6 million, or 4.7%, to $275.7 million for the three months ended December 31, 2022 as compared to revenues of $289.3 million for the three months ended December 31, 2021.

Six Months Ended March 31, 2023 Summary (on a comparative basis)

Key financial results for the six months ended March 31, 2023 were as follows:

• Revenue decreased by $11.0 million to $552.8 million from $563.8 million;

• Gross profit decreased by $16.5 million to $378.6 million, compared to $395.1 million.

Gross profit as a percent of revenue was 68.5%, as compared to 70.1% in the prior year comparative period;

• Operating income decreased by $71.1 million to $144.4 million from $215.5 million;

• Net income decreased by $129.2 million to $49.2 million from $178.4 million.

Our revenues increased by $2.6 million, or 0.9%, to $277.1 million for the three months ended March 31, 2023 as compared to revenues of $274.5 million for the three months ended March 31, 2022.

Changes in our revenues are driven by the volume of goods that we sell, the prices we negotiate with customers and changes in foreign exchange rates.

Of this decrease, $15.6 million was attributable to unfavorable effects from foreign currency translation primarily due to the strengthening of the U.S.

Subsequent to the Separation Date, we contract manufacture certain products for BD that favorably impacted our revenues in the current period.

Changes in price and volume period over period favorably impacted our revenues from customers primarily in our international regions.

Changes in price and volume period over period unfavorably impacted our revenues from customers primarily in the U.S.

The increase in revenues was driven by favorable impacts of $11.0 million related to increase in price and volume period over period in our international regions and the U.S.

Contract manufacturing revenue in the current period also contributed to the increase period over period.

This was partially offset by an unfavorable $8.4 million related to the impact of foreign currency translation primarily due to the strengthening of the U.S.

Our revenues decreased by $11.0 million, or 2.0%, to $552.8 million for the six months ended March 31, 2023 as compared to revenues of $563.8 million for the six months ended March 31, 2022.

The decrease in revenues was primarily driven by an unfavorable $24.0 million related to the impact of foreign currency translation primarily attributed to the strengthening of the US dollar.

This was partially offset by favorable impacts of $13.0 million related to increase in price and volume period over period in our international regions and the U.S.

Contract manufacturing revenue in the current period also contributed to the increase period over period.

Revenues by geographic region are as follows:

Three months ended March 31, Six months ended March 31,

2023 2022 2023 2022

United States $ 146.4 $ 141.3 $ 295.7 $ 292.2

International 130.7 133.2 257.1 271.6

Total $ 277.1 $ 274.5 $ 552.8 $ 563.8

Cost of products sold

Cost of products sold increased by $1.5 million, or 1.8%, to $86.9 million for the three months ended December 31, 2022 as compared to $85.4 million for the three months ended December 31, 2021.

Cost of products sold as a percentage of revenues was 31.5% for the three months ended December 31, 2022 as compared to 29.5% for the three months ended December 31, 2021.

The increase in cost of products sold between periods was primarily driven by the negative impact of inflation on raw materials costs (including freight), direct labor, and overhead.

We intend to continue to work to improve productivity to help offset these increased costs.

Cost of products sold increased by $4.0 million, or 4.8%, to $87.3 million for the three months ended March 31, 2023 as compared to $83.3 million for the three months ended March 31, 2022.

Cost of products sold as a percentage of revenues was 31.5% for the three months ended March 31, 2023 as compared to 30.3% for the three months ended March 31, 2022.

Cost of products sold increased by $5.5 million, or 3.3%, to $174.2 million for the six months ended March 31, 2023 as compared to $168.7 million for the six months ended March 31, 2022.

Cost of products sold as a percentage of revenues were 31.5% for the six months ended March 31, 2023 as compared to 29.9% in the six months ended March 31, 2022.

The increases in cost of products sold for the three and six month comparative periods were primarily driven by the impact of inflation on costs of certain raw materials (including freight), direct labor, and overhead.

We intend to continue to work to improve productivity to help partially offset these increased costs.

Selling and administrative expenses

Selling and administrative expenses increased by $10.6 million, or 17.0%, to $72.8 million for the three months ended December 31, 2022 as compared to $62.2 million for the three months ended December 31, 2021.

The increase was primarily driven by an increase in compensation and benefit costs due to increased headcount attributed to the Separation and Embecta becoming a stand-alone publicly-traded company.

Selling and administrative expenses increased by $18.3 million, or 27.4%, to $85.2 million for the three months ended March 31, 2023 as compared to $66.9 million for the three months ended March 31, 2022.

Selling and administrative expenses increased by $28.9 million, or 22.4%, to $158.0 million for the six months ended March 31, 2023 as compared to $129.1 million for the six months ended March 31, 2022.

The increases for the three and six month comparative periods were primarily driven by an increase in compensation and benefit costs due to increased headcount attributed to the Separation and Embecta becoming a stand-alone publicly-traded company.

Dollar amounts are in millions except per share amounts or as otherwise specified.

Research and development expenses

Research and development expenses increased by $0.2 million, or 1.2%, to $16.9 million for the three months ended December 31, 2022 as compared to $16.7 million for the three months ended December 31, 2021.

The increase for the three month comparative period was primarily driven by timing of research and development projects.

Research and development expenses increased by $4.1 million, or 22.8%, to $22.1 million for the three months ended March 31, 2023 as compared to $18.0 million for the three months ended March 31, 2022.

Research and development expenses increased by $4.3 million, or 12.4%, to $39.0 million for the six months ended March 31, 2023 as compared to $34.7 million for the six months ended March 31, 2022.

The increases for the three and six month comparative periods were primarily driven by amounts paid in connection with a collaboration arrangement and the timing of research and development projects.

For details on the collaboration arrangement refer to Note 4 within the Notes to Condensed Consolidated Financial Statements within this Form 10-Q.

Other operating expenses

We incurred other operating expenses of $10.3 million and $8.4 million for the three months ended December 31, 2022 and 2021, respectively, driven by costs related to the Separation.

We incurred other operating expenses of $26.9 million and $7.4 million for the three months ended March 31, 2023 and 2022, respectively, and $37.2 million and $15.8 million for the six months ended March 31, 2023 and 2022, respectively, driven by costs related to the Separation.

The costs incurred primarily relate to accounting, auditing, and legal services, including costs to establish certain stand-alone corporate functions and other transaction costs attributed to being a stand-alone publicly traded company.

Interest expense, net

Interest expense, net increased to $25.6 million for the three months ended December 31, 2022, primarily due to the higher interest rates on our variable rate debt that was issued on March 31, 2022.

Interest expense, net increased to $26.8 million and $52.4 million for the three and six months ended March 31, 2023, primarily as a result of debt outstanding for a longer period of time for fiscal year 2023 as compared to fiscal year 2022 and higher interest rates on our variable rate debt that was issued on March 31, 2022.

If the United States Federal Reserve continues to raise the benchmark interest rate, then we would expect the interest expense on our variable rate debt to increase during the remainder of fiscal 2023.

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Other income (expense), net

Other income (expense), net, was $(7.1) million for the three months ended December 31, 2022.

The costs incurred primarily relate to amounts due to BD for tax liabilities incurred in deferred jurisdictions where BD is considered the primary obligor.

Dollar amounts are in millions except per share amounts or as otherwise specified.

Other income (expense), net, was $(4.3) million and $(11.4) million for the three and six months ended March 31, 2023, respectively.

The costs incurred primarily relate to amounts due to BD for income taxes payable incurred in deferred jurisdictions where BD is considered the primary obligor.

Costs incurred for the three and six months ended March 31, 2022 were not material.

Income tax provision

The effective tax rates were 37.3% and 15.3% for the three months ended December 31, 2022 and 2021, respectively.

The increase in the Company’s effective tax rate from the prior comparative period is primarily due to the establishment of a valuation allowance against the utilization of interest expense carryforwards generated during the three months ended December 31, 2022 resulting from U.S.

interest deduction limitation rules, increased tax expense on undistributed earnings of foreign subsidiaries and increased U.S.

taxes on the earnings of foreign subsidiaries, partially offset by tax benefits from non-taxable permanent differences.

The effective tax rates were 42.9% and 15.2% for the three months ended March 31, 2023 and 2022, respectively, and 39.0% and 15.2% for the six months ended March 31, 2023 and 2022, respectively.

The increase in the Company’s effective tax rates from both prior comparative periods are primarily due to the establishment of a valuation allowance against the utilization of interest expense carryforwards generated during the current periods resulting from U.S.

interest deduction limitation rules, higher tax expense on undistributed earnings of foreign subsidiaries and higher U.S.

taxes on the earnings of foreign subsidiaries.

This was partially offset by tax benefits from non-taxable permanent differences.

LIQUIDITY AND CAPITAL RESOURCES

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In February 2022, and in connection with the Separation, Embecta issued $500.0 million aggregate principal amount of 5.00% senior secured notes due February 15, 2030.

Interest payments on the 5.00% Notes are due semi-annually in February and August until maturity, with the first interest payment due in August 2022 .

Interest payments on the 5.00% Notes are due semi-annually in February and August until maturity, with the first interest payment beginning in August 2022 .

In March 2022, we entered into a credit agreement, providing for the Term Loan in the amount of $950.0 million, with a seven -year term that matures in March 2029 and a Revolving Credit Facility in an aggregate principal amount of up to $500.0 million, with a five -year term that matures in 2027.

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Principal and interest payments on the Term Loan began on June 30, 2022.

Such quarterly principal payments are calculated as 0.25% of the initial principal amount, with the remaining balance payable upon maturity.

Dollar amounts are in millions except per share amounts or as otherwise specified.

quarterly principal payments are calculated as 0.25% of the initial principal amount, with the remaining balance payable upon maturity.

Principal amounts repaid under the Term Loan may not be reborrowed by us.

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A commitment fee applies to the unused portion of the Revolving Credit Facility, equal to 0.25% per annum .

As of December 31, 2022, no amount has been drawn on the Revolving Credit Facility.

As of March 31, 2023, no amount has been drawn on the Revolving Credit Facility.

Additionally we have outstanding the 6.75% Notes, which carry an interest rate of 6.75% and are due February 2030.

Interest payments on the 6.75% Notes are due semi-annually in February and August until maturity, with the first interest payment due in August 2022.

Interest payments on the 6.75% Notes are due semi-annually in February and August until maturity, with the first interest payment beginning in August 2022.

The credit agreement and the indentures for the 5.00% Notes and the 6.75% Notes contain customary financial covenants, including a total net leverage ratio covenant, which measures the ratio of (i) consolidated total net debt to (ii) consolidated earnings before interest, taxes, depreciation and amortization, and subject to other adjustments, must meet certain defined limits which are tested on a quarterly basis in accordance with the terms of the credit agreement and 5.00% Notes and the 6.75% Notes.

In addition, the credit agreement contains covenants that limit, among other things, our ability to prepay, redeem or repurchase our subordinated and junior lien debt, incur additional debt, make acquisitions, merge with other entities, pay dividends or distributions, redeem or repurchase equity interests, and create or become subject to liens.

As of December 31, 2022, we were in compliance with all of such covenants.

The following is a summary of Embecta's total debt outstanding as of December 31, 2022:

As of March 31, 2023, we were in compliance with all of such covenants.

The following is a summary of Embecta's total debt outstanding as of March 31, 2023:

Term Loan $ 940.5

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Long-term debt $ 1,596.0

Dollar amounts are in millions except per share amounts or as otherwise specified.

The schedule of principal payments required on long-term debt for the next five years and thereafter is as follows:

Thereafter $ 1,597.7

Certain measures relating to our total debt outstanding as of December 31, 2022 were as follows:

Certain measures relating to our total debt outstanding as of March 31, 2023 were as follows:

Total debt $ 1,605.5

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For additional information related to the Company's debt related activities, refer to Note 11 within the Notes to Condensed Consolidated Financial Statements within this Form 10-Q.

Dollar amounts are in millions except per share amounts or as otherwise specified.

In conjunction with the Separation, we entered into a lease agreement with BD pursuant to which the Company would lease approximately 278,000 square feet of manufacturing space and equipment at BD's manufacturing facility in Holdrege, Nebraska for an initial term of ten years.

The lease is classified as a finance lease.

Base rent payments commenced in the third quarter of 2022.

The Company has an option to extend the lease term for an additional period of up to five years.

Maturities of our finance lease and operating lease liabilities as of December 31, 2022 by fiscal year are as follows:

On April 1, 2022, we entered into a real estate lease for a new Corporate Headquarters located in Parsippany, New Jersey, United States.

The lease commenced during the second quarter of fiscal year 2023 and has an initial term of ten years.

The lease is classified as an operating lease.

The Company has an option to extend the lease for additional periods of six years and four years, respectively.

Maturities of our finance lease and operating lease liabilities as of March 31, 2023 by fiscal year are as follows:

Finance Lease Operating Leases Total

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Total lease payments $ 56.7 $ 26.3 $ 83.0

On April 1, 2022, we entered into a real estate lease for a new Corporate Headquarters located in Parsippany, New Jersey, United States.

The lease commenced during the second quarter of fiscal year 2023 and is in existence for an initial term of ten years.

We have an option to extend the lease for additional periods of six years and four years, respectively.

For additional information related to our leases, refer to Note 16 within the Notes to Condensed Consolidated Financial Statements of this Form 10-Q.

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Access to Capital and Credit Ratings

In January 2023 and January 2022, Moody’s Investor Services and Standard & Poor’s Ratings Services assigned credit ratings to Embecta of Ba3 and B+, respectively.

Dollar amounts are in millions except per share amounts or as otherwise specified.

In January 2023 and February 2023, Moody’s Investor Services and Standard & Poor’s Ratings Services published updates to our credit ratings of Ba3 and B+, respectively.

These ratings remain unchanged from the initial published ratings from January 2022.

The following table summarizes our Condensed Consolidated Statements of Cash Flows:

Three Months Ended

Six Months Ended

Net cash provided by (used for)

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Financing activities $ (26.8) $ (44.2)

Dollar amounts are in millions except per share amounts or as otherwise specified.

Net Cash Flows from Operating Activities

Net cash provided by operating activities during the three months ended December 31, 2022 was attributable to net income of $35.2 million and net adjustments of $25.2 million, which includes $16.9 million of non-cash adjustments related to depreciation and amortization, stock-based compensation, deferred income taxes and pension expense, and $8.3 million of net cash provided relating to changes in working capital.

Cash provided relating to working capital was driven by an increase in accounts payable, accrued expenses and other current liabilities of $19.4 million, an increase of $18.2 million in income and other net taxes payables, and a decrease in trade receivables, net of $3.0 million.

Offsetting the amounts above is cash used for working capital related to increases in amounts due from BD of $9.5 million, an increase of $14.7 million in inventories, an increase of $6.6 million in prepaid expenses and other, and an increase of $1.5 million in other assets and liabilities, net.

The increase in accounts payable, accrued expenses and other current liabilities is related to increases in net liabilities for deferred closing entities.

The increase in income and other net taxes payable is primarily due to the timing of required tax payments as compared to the amounts accrued in the ordinary course of business during the three months ended December 31, 2022.

The increase in inventories is primarily driven by a concerted effort to build inventory to meet expected demand.

The increase in amounts due from BD primarily relates to factored receivables for which payment has not yet been collected from BD as of December 31, 2022.

Net cash provided by operating activities during the six months ended March 31, 2023 was attributable to net income of $49.2 million and net adjustments of $1.8 million, which includes $33.5 million of non-cash adjustments that primarily relate to depreciation and amortization, stock-based compensation, deferred income taxes and pension expense, and a use of cash of $35.3 million related to changes in our assets and liabilities.

This was driven by a $30.7 million increase in inventories which is primarily driven by a concerted effort to build inventory to meet expected demand as we execute our separation and stand-up projects;

an increase of $16.0 million in prepaid expenses and other as a result of increased subscription contracts and increases in net assets for deferred closing entities;

an increase in amounts due from BD of $14.9 million, which is primarily related to factored receivables for which payment has not yet been collected from BD as of March 31, 2023;

and an $8.1 million increase in other assets and liabilities, net, is primarily due to costs capitalized related to the implementation of the Company's new ERP.

This was partially offset by an increase of $19.5 million in accounts payable, accrued expenses and other current liabilities, due to increases in net liabilities for deferred closing entities, which was offset by our annual incentive bonus payment in January 2023;

and an increase of $10.6 million in income and other net taxes payable that is primarily due to the timing of required tax payments.

All other movements related to working capital were due to timing of payments and receipts of cash in the ordinary course of business.

Net cash provided by operating activities during the three months ended December 31, 2021 was attributable to net income of $98.8 million and net adjustments of $40.0 million, which includes $15.2 million of non-cash adjustments related to depreciation and amortization, stock-based compensation, and pension expense, and $24.8 million of cash provided relating to changes in working capital.

Cash provided relating to working capital was driven by a decrease in trade receivables of $30.7 million, partially offset by an increase in inventories of $4.3 million and a decrease in accounts payable and accrued expenses of $2.5 million.

Net cash provided by operating activities during the six months ended March 31, 2022 was attributable to net income of $178.4 million and net adjustments of $143.0 million, which includes $27.3 million of non-cash adjustments related to depreciation and amortization, stock-based compensation, and pension expense, and $115.7 million of cash provided relating to changes our assets and liabilities.

Cash provided relating to changes in our assets and liabilities was driven by a decrease in trade receivables of $133.3 million, an increase of $9.7 million in income and other net taxes payable, and a decrease of $0.4 million in other assets and liabilities, net, partially offset by an increase in inventories of $10.0 million, a decrease of $15.3 million in accounts payable, accrued expenses and other current liabilities, and an increase in prepaid expenses and other of $2.4 million.

The decrease in trade receivables can be attributed to the timing of payments made in the normal course of business and a decrease in certain rebate and cash discount reserves.

The increase in inventories is primarily driven by a concerted effort in the first three months of fiscal year 2022 to build inventory in preparation for the spin-off.

The decrease in accounts payable and accrued expenses is mainly driven by the timing of payments made in the normal course of business for managed care rebates payments and a decrease in accrued professional services in connection with various market research and consulting projects.

The increase in income and other net taxes payable that is primarily due to the timing of required tax payments.

The increase in inventories is primarily driven by a concerted effort in the first six months of fiscal year 2022 to build inventory in preparation for the spin-off.

The decrease in accounts payable, accrued expense and other current liabilities is mainly driven by the timing of payments made in the normal course of business for managed care rebates payments and a decrease in accrued professional services in connection with various market research and consulting projects.

Net Cash Flows from Investing Activities

Net cash used for investing activities was primarily comprised of capital expenditures of $4.7 million and $4.3 million during the three months ended December 31, 2022 and 2021, respectively, to support further expansion of our business and operations.

Dollar amounts are in millions except per share amounts or as otherwise specified.

Net cash used for investing activities was primarily comprised of capital expenditures of $10.5 million and $9.7 million during the six months ended March 31, 2023 and 2022, respectively, to support further expansion of our business and operations.

Net Cash Flows from Financing Activities

Net cash used for financing activities for the three months ended December 31, 2022, represents $2.8 million of payments related to tax withholding for stock-based compensation, $2.4 million of required payments on long-term debt, and $0.9 million in payments on our finance lease.

Net cash used for financing activities for the three months ended December 31, 2021, represents net transfers entirely to BD (see Note 3 within the Notes to Condensed Consolidated Financial Statements of this Form 10-Q).

On February 14, 2023, the Company’s Board of Directors declared a quarterly dividend of $0.15 for each issued and outstanding share of the Company’s common stock.

The dividend is payable on March 13, 2023 to stockholders of record at the close of business on February 27, 2023.

Net cash used for financing activities for the six months ended March 31, 2023, was attributable to $17.2 million of dividend payments, $4.8 million of required payments on long-term debt, $3.0 million of payments related to tax withholding for stock-based compensation, and $1.8 million in payments on our finance lease.

Net cash used for financing activities for the six months ended March 31, 2022, was attributable to $1,266.0 million of net consideration paid to BD in connection with the Separation, $189.3 million related to net transfers to BD, $33.3 million of payments for long-term debt issuance costs, and $5.6 million of payments for debt fees associated with the Revolving Credit Facility.

This was offset by proceeds from the issuance of long-term debt of $1,450.0 million.

On May 12, 2023, the Company’s Board of Directors declared a quarterly dividend of $0.15 for each issued and outstanding share of the Company’s common stock.

The dividend is payable on June 13, 2023 to stockholders of record at the close of business on May 29, 2023.

Contractual Obligations

Our contractual obligations as of December 31, 2022, which require material cash requirements in the future, consist of purchase obligations and lease obligations.

Our contractual obligations as of March 31, 2023, which require material cash requirements in the future, consist of purchase obligations and lease obligations.

Purchase obligations are enforceable and legally binding obligations for purchases of goods and services which include inventory purchase commitments.

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Refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2022 Form 10-K for further details.

As of December 31, 2022, there have been no material changes to our contractual obligations outside the ordinary course of business.

As of March 31, 2023, there have been no material changes to our contractual obligations outside the ordinary course of business.

Dollar amounts are in millions except per share amounts or as otherwise specified.

Critical Accounting Policies

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See Note 2 within the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information on the adoption of new accounting standards during the current fiscal year.

There have been no changes to our accounting policies as of December 31, 2022.

A discussion of accounting estimates considered critical because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates are disclosed in the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Embecta's 2022 Form 10-K.

There have been no changes to our critical accounting policies as of March 31, 2023.

Cautionary Statements Regarding Forward-Looking Statements

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• Increases in operating costs, including fluctuations in the cost and availability of oil-based resins, other raw materials, and energy as well as certain components, used in its products, the ability to maintain favorable supplier arrangements and relationships, and the potential adverse effects of any disruption in the availability of such items.

Dollar amounts are in millions except per share amounts or as otherwise specified.

• Changes in reimbursement practices of governments or private payers or other cost containment measures.

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• Risks associated with indebtedness and our use of indebtedness available to us.

Dollar amounts are in millions except per share amounts or as otherwise specified.

• The risk that dis-synergy costs, costs of restructuring transactions and other costs incurred in connection with the Separation will exceed Embecta's estimates.

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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