What changed in this filing

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Item 1. Financial Statements

2023-08-08 compared with 2023-05-12 · 121 added, 115 removed, 414 unchanged (36% of the section changed)

3 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2023 2022 2023 2022

18 unchanged sentences

(1) For periods prior to the Separation, this income statement line includes cost of products sold from related party inventory purchases.

For the three and six month periods ended March 31, 2022, cost of products sold from related party inventory purchases were $ 10.6 million and $ 22.1 million, respectively.

For the nine month period ended June 30, 2022, cost of products sold from related party inventory purchases were $ 22.1 million.

See notes to the Unaudited Condensed Consolidated Financial Statements.

3 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2023 2022 2023 2022

8 unchanged sentences

Embecta Corp.

March 31, 2023 September 30, 2022

June 30, 2023 September 30, 2022

Current Assets

Cash and cash equivalents $ 317.4 $ 330.9

Trade receivables, net (net of allowance for doubtful accounts of $ 1.1 million and $ 1.3 million as of March 31, 2023 and September 30, 2022, respectively)

Trade receivables, net (net of allowance for doubtful accounts of $ 1.1 million and $ 1.3 million as of June 30, 2023 and September 30, 2022, respectively)

Materials 30.3 23.4

26 unchanged sentences

Authorized - 250,000,000

Issued and outstanding - 57,287,537 as of March 31, 2023 and 57,055,327 as of September 30, 2022

Issued and outstanding - 57,302,056 as of June 30, 2023 and 57,055,327 as of September 30, 2022

Additional paid-in capital 23.2 10.0

8 unchanged sentences

Shares Par Value Additional Paid-In Capital Accumulated Deficit Net Investment from Becton, Dickinson and Company Accumulated Other Comprehensive (Loss) Income Total

Balance at January 1, 2022 — $ — $ — $ — $ 829.8 $ ( 279.3 ) $ 550.5

Net income attributable to Diabetes Care Business — — — — 79.6 — 79.6

Balance at April 1, 2022 — $ — $ — $ — $ ( 681.1 ) $ ( 286.4 ) $ ( 967.5 )

Net transfers to Becton, Dickinson and Company including Separation adjustments — — — — 63.3 9.8 73.1

Issuance of common stock in connection with the Separation and reclassification of Net Investment from Becton, Dickinson and Company 57,797,841 0.6 — ( 618.4 ) 617.8 — —

Net income attributable to Embecta Corp.

— — — 62.4 — — 62.4

Other comprehensive loss, net of taxes — — — — — ( 21.4 ) ( 21.4 )

Net transfers to Becton, Dickinson and Company — — — — ( 1,590.5 ) — ( 1,590.5 )

Balance at March 31, 2022 — $ — $ — $ — $ ( 681.1 ) $ ( 286.4 ) $ ( 967.5 )

Balance at January 1, 2023 57,213,757 $ 0.6 $ 12.7 $ ( 550.5 ) $ — $ ( 298.9 ) $ ( 836.1 )

Stock-based compensation plans — — 5.8 — — — 5.8

Issuance of shares related to stock-based compensation plans 8,199 — — — — — —

Balance at June 30, 2022 57,806,040 $ 0.6 $ 5.8 $ ( 556.0 ) $ — $ ( 298.0 ) $ ( 847.6 )

Balance at April 1, 2023 57,287,537 $ 0.6 $ 18.1 $ ( 545.1 ) $ — $ ( 296.2 ) $ ( 822.6 )

Net income attributable to Embecta Corp.

5 unchanged sentences

Issuance of shares related to stock-based compensation plans 14,519 — ( 0.4 ) — — — ( 0.4 )

Balance at March 31, 2023 57,287,537 $ 0.6 $ 18.1 $ ( 545.1 ) $ — $ ( 296.2 ) $ ( 822.6 )

Balance at June 30, 2023 57,302,056 $ 0.6 $ 23.2 $ ( 538.5 ) $ — $ ( 294.7 ) $ ( 809.4 )

See notes to the Unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

Balance at October 1, 2021 — $ — $ — $ — $ 864.8 $ ( 270.5 ) $ 594.3

Net income attributable to Diabetes Care Business — — — — 178.4 — 178.4

Net transfers to Becton, Dickinson and Company including Separation adjustments — — — — ( 395.0 ) 9.8 ( 385.2 )

Issuance of common stock in connection with the Separation and reclassification of Net Investment from Becton, Dickinson and Company 57,797,841 0.6 — ( 618.4 ) 617.8 — —

Net consideration paid to Becton, Dickinson, and Company in connection with Separation — — — — ( 1266.0 ) — ( 1266.0 )

Net income attributable to Embecta Corp.

— — — 62.4 178.4 — 240.8

Other comprehensive loss, net of taxes — — — — — ( 37.3 ) ( 37.3 )

Net transfers to Becton, Dickinson and Company — — — — ( 1,724.3 ) — ( 1,724.3 )

Balance at March 31, 2022 — $ — $ — $ — $ ( 681.1 ) $ ( 286.4 ) $ ( 967.5 )

Stock-based compensation plans — — 5.8 — — — 5.8

Issuance of shares related to stock-based compensation plans 8,199 — — — — — —

Balance at June 30, 2022 57,806,040 $ 0.6 $ 5.8 $ ( 556.0 ) $ — $ ( 298.0 ) $ ( 847.6 )

Balance at October 1, 2022 57,055,327 $ 0.6 $ 10.0 $ ( 577.1 ) $ — $ ( 324.9 ) $ ( 891.4 )

6 unchanged sentences

Issuance of shares related to stock-based compensation plans 246,729 — ( 3.4 ) — — — ( 3.4 )

Balance at March 31, 2023 57,287,537 $ 0.6 $ 18.1 $ ( 545.1 ) $ — $ ( 296.2 ) $ ( 822.6 )

See notes to the Consolidated Financial Statements.

Balance at June 30, 2023 57,302,056 $ 0.6 $ 23.2 $ ( 538.5 ) $ — $ ( 294.7 ) $ ( 809.4 )

See notes to the Unaudited Condensed Consolidated Financial Statements.

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

1 unchanged sentence

Embecta Corp.

Six Months Ended

Nine Months Ended

Operating Activities

44 unchanged sentences

On April 1, 2022, Embecta and Becton, Dickinson and Company ("BD") entered into a Separation and Distribution Agreement (the "Separation and Distribution Agreement").

Pursuant to the Separation and Distribution Agreement, BD agreed to spin off its diabetes care business ("Diabetes Care Business") into Embecta, a new, publicly traded company (the "Separation").

Pursuant to the Separation and Distribution Agreement, BD agreed to spin off its diabetes care business (the "Diabetes Care Business") into Embecta, a new, publicly traded company (the "Separation").

The Separation occurred 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, par value $ 0.01 per share, for every five shares of BD common stock, par value $ 1.00 per share, held as of the close of business on March 22, 2022, the record date for the distribution.

21 unchanged sentences

For periods prior to the Separation, income tax expense and tax balances in the Condensed Combined Financial Statements were calculated on a separate tax return basis.

The separate tax return method applies the accounting guidance for income taxes to the standalone financial statements as if we were a separate taxpayer and a standalone enterprise.

The separate tax return method applies the accounting guidance for income taxes to the standalone financial statements as if the Company was a separate taxpayer and a standalone enterprise.

Management believes the assumptions supporting the allocation and presentation of income taxes on a separate return basis are reasonable.

4 unchanged sentences

Actual results could differ from these estimates.

The following provides updates to our "Summary of Significant Accounting Policies" as disclosed in the Form 10-K.

The following provides updates to the Company's "Summary of Significant Accounting Policies" as disclosed in the Form 10-K.

Cloud Computing Arrangements

2 unchanged sentences

The Company amortizes the costs over the expected term of the hosting arrangement using the straight-line method to the same income statement line as the associated cloud operating expenses.

The total balance of capitalized costs associated with these arrangements as of March 31, 2023 is $ 15.4 million which primarily relates to the implementation of the Company's new enterprise resource planning system ("ERP").

Once the implementation of the new ERP is complete and ready for its intended use, the capitalized costs are expected to be amortized over the term of the hosting arrangement which is expected to be five years .

The total balance of capitalized costs associated with these arrangements as of June 30, 2023 is $ 26.6 million which primarily relates to the implementation of the Company's new enterprise resource planning system ("ERP").

These capitalized costs are included in Deferred Income Taxes and Other Assets.

Once the implementation of the new ERP is complete and ready for its intended use, the capitalized costs are expected to be amortized over the term of the hosting arrangement.

Recently Adopted Accounting Standards

4 unchanged sentences

Reclassification

Certain prior period amounts have been reclassified to conform to current year presentation.

Certain prior period amounts have been reclassified to conform to the current year presentation.

Note 3 — Third Party Arrangements and Related Party Disclosures

1 unchanged sentence

In connection with the Separation, the Company entered into the Separation and Distribution Agreement, which contains provisions that, among other things, relate to (i) assets, liabilities and contracts to be transferred, assumed and assigned to each of Embecta and BD (including certain deferred assets and liabilities) as part of the Separation, (ii) cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of Embecta's business with Embecta and financial responsibility for the obligations and liabilities of BD’s remaining businesses with BD, (iii) procedures with respect to claims subject to indemnification and related matters, (iv) the allocation among Embecta and BD of rights and obligations under existing insurance policies with respect to occurrences prior to completion of the Separation, as well as the right to proceeds and the obligation to incur certain deductibles under certain insurance policies, and (v) procedures governing Embecta’s and BD’s obligations and allocations of liabilities with respect to ongoing litigation matters that may implicate each of BD’s business and Embecta’s business.

Agreements that Embecta entered into with BD that govern aspects of Embecta's relationship with BD following the Separation include, but are not limited to the Transition Services Agreements ("TSA"), Trade Receivables Factoring Agreements ("Factoring Agreements"), Distribution Agreements, Cannula Supply Agreement, Tax Matters Agreement,

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

Logistics Services Agreement, employee matters agreement, an intellectual property matters agreement, local support services agreements, certain other manufacturing arrangements and a process services agreement and lease agreement for a manufacturing facility located in Holdrege, Nebraska.

Agreements ("Factoring Agreements"), Distribution Agreements, Cannula Supply Agreement, Tax Matters Agreement, Logistics Services Agreement, employee matters agreement, an intellectual property matters agreement, local support services agreements, certain other manufacturing arrangements and a process services agreement and lease agreement for a manufacturing facility located in Holdrege, Nebraska.

For details on the rights and responsibilities of the parties under these agreements refer to Note 4 to the audited Consolidated Financial Statements in the 2022 Form 10-K.

The amount due from BD under the above agreements was $ 133.6 million at March 31, 2023 and is reflected in Amounts due from Becton, Dickinson and Company .

The amount due to BD under these agreements was $ 74.3 million at March 31, 2023 and is included in Amounts due to Becton, Dickinson and Company .

The amount due from BD under the above agreements was $ 169.0 million at June 30, 2023 and is included in Amounts due from Becton, Dickinson and Company .

The amount due to BD under these agreements was $ 68.6 million at June 30, 2023 and is included in Amounts due to Becton, Dickinson and Company .

The closing of the transfers of certain assets and liabilities related to the Diabetes Care Business in certain jurisdictions, including China, Mexico, and Italy, as contemplated by the Separation and Distribution Agreement did not occur at Separation.

The transfers of the relevant local assets and liabilities for these deferred countries are expected to close at a future date.

As of March 31, 2023, the Company estimates that amounts due to BD related to certain assets and liabilities in deferred close jurisdictions is $ 45.9 million and are reflected in Accrued expenses .

As of March 31, 2023, the Company estimates that amounts due from BD related to certain assets and liabilities in deferred close jurisdictions are $ 6.3 million and is reflected in Prepaid expenses and other .

As of June 30, 2023, the Company estimates that amounts due to BD related to certain assets and liabilities in deferred close jurisdictions is $ 41.0 million and are reflected in Accrued expenses .

As of June 30, 2023, the Company estimates that amounts due from BD related to certain assets and liabilities in deferred close jurisdictions are $ 7.5 million and is reflected in Prepaid expenses and other .

Prior to the Separation, the Company did not operate as a standalone business and the Condensed Combined Financial Statements were derived from the consolidated financial statements and accounting records of BD.

5 unchanged sentences

The allocations of General Corporate Expenses are reflected in the Condensed Consolidated Statements of Income as follows:

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

Nine months ended June 30,

Cost of products sold $ 2.3

6 unchanged sentences

Nevertheless, the Condensed Consolidated Financial Statements for periods prior to the Separation may not include all of the actual expenses that would have been incurred and may not reflect the Company’s consolidated 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.

Actual costs that would have been incurred if the Company had been a standalone public company would depend on multiple

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

factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure.

Related party transactions

The following transactions represent activity in the ordinary course of business between the Company and BD prior to the Separation for certain materials for use in production of certain medical products that were not at arm’s length.

The following table summarizes related party purchases for the three month and six month periods ended March 31, 2022:

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

The following table summarizes related party purchases for the nine month period ended June 30, 2022:

Nine months ended June 30,

Purchases from BD $ 28.0

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

All significant intercompany transactions between the Company and BD prior to the Separation have been included in the Condensed Consolidated Financial Statements and are considered to be effectively settled for cash at the time the transaction is recorded.

2 unchanged sentences

in the Condensed Consolidated Statements of Equity and represent the net effect of transactions between the Company and BD.

The following table summarizes the components of net transfers to BD for the three months ended March 31, 2022:

Cash pooling and general financing activities (1)

Corporate and segment allocations, excluding non-cash stock-based compensation ( 30.6 )

Taxes deemed settled with BD 1.6

Net consideration paid to BD in connection with the spin off 1,266.0

Related party senior secured notes 197.0

Other transfers to (from) BD, net 78.0

Net transfers to BD $ 1,590.5

The following table summarizes the components of the net transfers to BD for the six months ended March 31, 2022:

The following table summarizes the components of the net transfers to BD for the nine months ended June 30, 2022:

Cash pooling and general financing activities (1)

14 unchanged sentences

The Company believes that both parties are active participants in the operating activities of the collaboration and exposed to certain risks and rewards depending on commercial success.

The transaction included an upfront payment of $ 2.5 million for project costs, which was expensed to Research and development expense during the three and six month periods ended March 31, 2023.

The transaction included an upfront payment of $ 2.5 million for project costs, which was expensed to Research and development expense during the nine month period ended June 30, 2023.

Upon successful commercialization of the iAGC, the Company will be responsible for the sales and marketing effort and would pay a royalty to the third-party based on future product sales to customers.

1 unchanged sentence

Note 5 — Other Operating Expenses

In connection with the Separation, the Company incurred separation and stand-up costs of approximately $ 25.6 million and $ 35.5 million during the three and six months ended March 31, 2023, respectively.

There were $ 7.4 million and $ 15.8 million of separation and stand-up costs incurred during the three and six months ended March 31, 2022, respectively.

In connection with the Separation, the Company incurred separation and stand-up costs of approximately $ 25.6 million and $ 61.1 million during the three and nine months ended June 30, 2023, respectively.

There were $ 7.7 million and $ 23.5

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

costs incurred primarily consist of costs associated with accounting, auditing, legal services, supply chain, employee retention, and certain other costs to establish certain stand-alone functions to assist with the transition to being a stand-alone entity.

million of separation and stand-up costs incurred during the three and nine months ended June 30, 2022, respectively.

The costs incurred primarily consist of costs associated with accounting, auditing, legal services, supply chain, employee retention, costs associated with the implementation of the Company's new ERP, and certain other costs to establish certain stand-alone functions to assist with the transition to being a stand-alone entity.

Note 6 — Contingencies

The Company was not a party to any material legal proceedings at March 31, 2023 or September 30, 2022, nor is it a party to any material legal proceedings as of the date of issuance of these Condensed Consolidated Financial Statements.

The Company was not a party to any material legal proceedings at June 30, 2023 or September 30, 2022, nor is it a party to any material legal proceedings as of the date of issuance of these Condensed Consolidated Financial Statements.

Note 7 — Revenues

8 unchanged sentences

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 Consolidated financial results.

The allowance for doubtful accounts for trade receivables is not material to the Company’s Condensed Consolidated Financial Statements.

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.

3 unchanged sentences

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 liability attributed to variable consideration at March 31, 2023 and September 30, 2022 was $ 37.9 million and $ 43.8 million, respectively.

Sales deductions recorded as a reduction of gross revenues for the three months ended March 31, 2023 and 2022 were $ 95.2 million and $ 78.1 million, respectively.

Sales deductions recorded as a reduction of gross revenues for the six months ended March 31, 2023 and 2022 were $ 187.8 million and $ 163.9 million, respectively.

The Company’s liability attributed to variable consideration at June 30, 2023 and September 30, 2022 was $ 45.7 million and $ 43.8 million, respectively.

Sales deductions recorded as a reduction of gross revenues for the three months ended June 30, 2023 and 2022 were $ 106.2 million and $ 84.8 million, respectively.

Sales deductions recorded as a reduction of gross revenues for the nine months ended June 30, 2023 and 2022 were $ 294.0 million and $ 248.7 million, respectively.

Disaggregation of Revenues

3 unchanged sentences

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 in the Condensed Consolidated Balance Sheets.

The Company’s contract asset balance was $ 1.2 million as of March 31, 2023 and September 30, 2022, respectively.

The Company’s contract asset balance was $ 1.2 million as of both June 30, 2023 and September 30, 2022.

Note 8 — Segment and Geographical Data

6 unchanged sentences

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 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.

1 unchanged sentence

Revenues by geographic region are as follows:

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

2023 2022 (1)

Three months ended June 30, Nine months ended June 30,

2023 2022 2023 2022

3 unchanged sentences

Total $ 286.1 $ 291.1 $ 838.9 $ 854.9

(1) $ 1.5 million was reclassified between United States and International for both the three and six months ended March 31, 2022 respectively to conform to the current year presentation.

(2) For the three and six months ended March 31, 2023 and 2022, no individual country outside of the United States generated net revenues that represented more than 10.0% of total revenues.

(1) For the three and nine months ended June 30, 2023 and 2022, no individual country outside of the United States generated net revenues that represented more than 10.0% of total revenues.

Note 9 — Stock-Based Compensation

Time Vested Restricted Stock Units ("TVUs")

During the six months ended March 31, 2023 , Embecta granted 634,032 of restricted stock units ("RSUs") in the form of TVUs to employees which vest ratably over three years , subject to continued employment of the recipients.

During the nine months ended June 30, 2023 , Embecta granted 634,032 restricted stock units ("RSUs") in the form of TVUs to employees which vest ratably over three years , subject to continued employment of the recipients.

Performance Based Restricted Stock Units ("PSUs")

During the six months ended March 31, 2023 , Embecta awarded 244,192 of RSUs in the form of PSUs to certain executive officers and employees which vest after three years , subject to continued employment of the recipients and the achievement of certain performance metric targets.

During the nine months ended June 30, 2023 , Embecta awarded 244,192 RSUs in the form of PSUs to certain executive officers and employees which vest after three years , subject to continued employment of the recipients and the achievement of certain performance metric targets.

The Company has identified certain performance metrics associated with these awards and certain targets will be fully established at a future date.

1 unchanged sentence

As the service inception date precedes the accounting grant date, the Company recognizes stock-based compensation expense for each separately-vesting tranche over the requisite service period based on the fair value at each reporting date.

Stock-based compensation expense for these awards for the three and six months ended March 31, 2023 was $ 0.5 million and $ 0.6 million, respectively.

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

Stock-based compensation expense for these awards for the three and nine months ended June 30, 2023 was $ 0.3 million and $ 0.9 million, respectively.

Stock-Based Compensation Expense

Total direct and allocated stock-based compensation expense for the three and six months ended March 31, 2023 and 2022 and the respective income tax benefits recognized by the Company in the Condensed Consolidated Statements of Income are as follows:

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

Total direct and allocated stock-based compensation expense for the three and nine months ended June 30, 2023 and 2022 and the respective income tax benefits recognized by the Company in the Condensed Consolidated Statements of Income are as follows:

Three months ended June 30, Nine months ended June 30,

2023 2022 2023 2022

4 unchanged sentences

Tax benefit associated with stock-based compensation costs recognized $ 0.7 $ 1.1 $ 2.2 $ 3.1

A summary of stock appreciation rights ("SARs") outstanding as of March 31, 2023 and changes during the six months ended March 31, 2023 are as follows:

The following table summarizes the Company's total stock-based compensation expense by classification of award:

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

Three months ended June 30, Nine months ended June 30,

2023 2022 2023 2022

Equity Awards $ 5.6 $ 5.8 $ 16.6 $ 14.3

Liability Awards 0.1 — 0.4 —

Total $ 5.7 $ 5.8 $ 17.0 $ 14.3

A summary of stock appreciation rights ("SARs") outstanding as of June 30, 2023 and changes during the nine months ended June 30, 2023 are as follows:

SARs (in thousands) Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value

2 unchanged sentences

Forfeited, canceled or expired — $ —

Balance at March 31 1,891.7 $ 28.08 8.2 $ 0.7

Vested and expected to vest at March 31 1,816.9 $ 29.05 8.2 $ 0.7

Exercisable at March 31 532.1 $ 27.44 7.1 $ 0.6

Balance at June 30 1,891.7 $ 29.08 8.0 $ 0.2

Vested and expected to vest at June 30 1,818.7 $ 29.05 8.0 $ 0.2

Exercisable at June 30 565.1 $ 27.67 6.9 $ 0.2

*The amounts exercised include shares withheld for taxes that are not formally issued to the market.

SARs with an intrinsic val ue of $ 0.3 million and grant date fair value of $ 0.6 million w ere exercised during the six months ended March 31, 2023.

A summary of time-vested RSUs and performance-based RSUs outstanding as of March 31, 2023 and changes during the six months ended March 31, 2023 are as follows:

SARs with an intrinsic val ue of $ 0.3 million and grant date fair value of $ 0.6 million w ere exercised during the nine months ended June 30, 2023.

A summary of time-vested RSUs and performance-based RSUs outstanding as of June 30, 2023 and changes during the nine months ended June 30, 2023 are as follows:

RSUs (in thousands) Weighted Average Grant Date Fair Value

3 unchanged sentences

Forfeited, canceled or expired ( 46.3 ) 29.07

Nonvested at March 31 1,331.0 30.54

Expected to vest at March 31 1,257.9 $ 30.54

Nonvested at June 30 1,292.9 30.54

Expected to vest at June 30 1,226.4 $ 30.53

*The RSUs distributed include shares withheld for taxes that are not formally issued to the market.

The weighted average grant date fair value of time restricted stock units granted during the six months ended March 31, 2023 is $ 32.38 and the total fair value of time vested stock units vested during the six months ended March 31, 2023 is $ 8.8 million.

At March 31, 2023, the weighted average remaining vesting term of time vested restricted stock units is 2.0 years.

The weighted average grant date fair value of time-vested RSUs granted during the nine months ended June 30, 2023 is $ 32.38 and the total fair value of time-vested RSUs vested during the nine months ended June 30, 2023 is $ 9.4 million.

At June 30, 2023, the weighted average remaining vesting term of time-vested RSUs is 2.0 years.

The amount of unrecognized compensation expense for all non-vested stock-based awards granted as of June 30, 2023, is approximately $ 37.7 million, which is expected to be recognized over a weighted-average remaining life of approximately 2.0 years.

At June 30, 2023, 3.5 million shares were authorized for future grants under the 2022 Employee and Director Equity Based Compensation Plan.

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

The amount of unrecognized compensation expense for all non-vested stock-based awards granted as of March 31, 2023, is approximately $ 40.4 million, which is expected to be recognized over a weighted-average remaining life of approximately 2.2 years.

At March 31, 2023, 3.5 million shares were authorized for future grants under the 2022 Employee and Director Equity Based Compensation Plan.

Note 10 — Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets consisted of:

March 31, 2023 September 30, 2022

June 30, 2023 September 30, 2022

Amortized intangible assets

19 unchanged sentences

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

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

As of June 30, 2023, no amount has been drawn on the Revolving Credit Facility.

The Credit Agreement and the indentures for Embecta's outstanding 5.00 % senior secured notes due February 2030 (the " 5.00 % Notes") and 6.75 % senior secured notes due February 2030 (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 the 5.00 % Notes and 6.75 % Notes.

In addition, the Credit Agreement contains covenants that will limit, among other things, Embecta’s ability to prepay, redeem or repurchase its 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.

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

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

The following is a summary of Embecta's total debt outstanding as of June 30, 2023:

Term Loan due March 2029 $ 938.1

6 unchanged sentences

The debt issuance costs on the Term Loan, 5.00 % Notes, 6.75 % Notes and the discount on the Term Loan are reported in the Condensed Consolidated Balance Sheets as a reduction of debt and are amortized as a component of Interest expense, net over the term of the related debt using the effective interest method.

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 fiscal years and thereafter is as follows:

Thereafter $ 1,597.7

The estimated fair value of long-term debt (including current portion) at March 31, 2023 was $ 1,561.8 million compared with a carrying value (which includes a reduction for unamortized debt issuance costs and discounts) of $ 1,605.5 million.

The estimated fair value of long-term debt (including current portion) at June 30, 2023 was $ 1,528.1 million compared with a carrying value (which includes a reduction for unamortized debt issuance costs and discounts) of $ 1,604.5 million.

Fair value was estimated using inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability and would be considered Level 2 in the fair value hierarchy.

2 unchanged sentences

This share amount is utilized for the calculation of earnings per basic and diluted common share for all periods presented prior to the Separation.

The calculation of earnings per basic and diluted common share for the three and six months ended March 31, 2023 and 2022 was as follows:

The calculation of earnings per basic and diluted common share for the three and nine months ended June 30, 2023 and 2022 was as follows:

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

($ in millions and shares in thousands, except per share amounts) 2023 2022 2023 2022

5 unchanged sentences

Earnings per common share - Diluted $ 0.26 $ 1.07 $ 1.12 $ 4.14

For periods prior to the Separation, it is assumed that there were no dilutive equity instruments as there were no equity awards of Embecta outstanding prior to the Separation.

For periods subsequent to the Separation, earnings per diluted share is computed by giving effect to all potentially dilutive stock awards that are outstanding.

Earnings per diluted share is computed by giving effect to all potentially dilutive stock awards that are outstanding.

The computation of earnings per diluted share excludes the effect of the potential exercise of stock-based awards, when the effect of the potential exercise would be anti-dilutive.

For the three and six months ended March 31, 2023 , 2.2 million and 1.8 million, respectively, of dilutive share equivalents issuable under stock-

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

based compensation plans were excluded from the diluted shares outstanding calculation because the result would have been antidilutive.

For the three and nine months ended June 30, 2023 , 2.1 million and 1.9 million, respectively, and for both the three and nine months ended June 30, 2022, 1.8 million, of dilutive share equivalents issuable under stock-based compensation plans were excluded from the diluted shares outstanding calculation because the result would have been antidilutive.

Note 13 — Income Taxes

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The effective tax rate can vary from quarter to quarter because of changes in the global pretax income or geographical mix of the Company's earnings, changes in tax laws and matters related to tax audits.

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.

The effective tax rates were 24.4 % and 15.2 % for the three months ended June 30, 2023 and 2022, respectively, and 36.0 % and 15.2 % for the nine months ended June 30, 2023 and 2022, respectively.

The increase in the Company’s effective tax rates for both comparative periods are primarily due to an increase in the valuation allowance on the utilization of interest expense carryforwards related to U.S.

interest deduction limitation rules, higher tax expense on undistributed earnings of foreign subsidiaries and an increase in non-deductible expenses;

partially offset by lower U.S.

tax expense on earnings of foreign affiliates.

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

Note 14 — Financial Instruments and Fair Value Measurements

The following reconciles Cash and cash equivalents reported within the Condensed Consolidated Balance Sheets as of March 31, 2023 and September 30, 2022, to the total amounts shown in the Condensed Consolidated Statements of Cash Flows:

March 31, 2023 September 30, 2022

The following reconciles Cash and cash equivalents reported within the Condensed Consolidated Balance Sheets as of June 30, 2023 and September 30, 2022, to the total amounts shown in the Condensed Consolidated Statements of Cash Flows:

June 30, 2023 September 30, 2022

Cash and cash equivalents $ 317.4 $ 330.9

Cash and cash equivalents as of March 31, 2023 includes cash held in money market funds and other cash equivalents.

Cash and cash equivalents as of June 30, 2023 includes cash held in money market funds and other cash equivalents.

All cash and cash equivalents are Level 1 in the fair value hierarchy.

Foreign Currency Risks and Related Strategies

The Company has foreign currency exposures throughout Europe, Greater Asia, Canada and Latin America.

The Company has foreign currency exposures throughout Europe, Asia, Canada and Latin America.

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 primarily through the use of forward contracts.

The notional amounts of the Company’s foreign currency-related derivative instruments were as follows as of March 31, 2023 and September 30, 2022, respectively:

Hedge Designation March 31, 2023

The notional amounts of the Company’s foreign currency-related derivative instruments were as follows as of June 30, 2023 and September 30, 2022, respectively:

Hedge Designation June 30, 2023 September 30, 2022

Foreign exchange contracts (a) Undesignated $ 6.1 $ 5.1

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Historically and prior to the Separation, the Company’s operations formed part of BD’s monitoring of concentrations of credit risk associated with financial institutions for which BD conducted business.

As of March 31, 2023, the Company had transferred the majority of its trade receivables to BD under the Factoring Agreements (see Note 3).

As a result, the Company is no longer exposed to credit risk associated with those transferred

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

receivables and does not have material credit risk exposure associated with the remaining $ 19.1 million of trade receivables.

Three of the Company’s customers represent at least 10.0% of total gross revenues individually and, in the aggregate, represented approximately 39.6 % for the three months ended March 31, 2023, and three of the Company's customers represented at least 10.0% of total gross revenues individually and, in the aggregate, represent 40.0 % of total revenues for the six months ended March 31, 2023.

As of June 30, 2023, the Company had transferred the majority of its trade receivables to BD under the Factoring Agreements (see Note 3).

As a result, the Company is no longer exposed to credit risk associated with those transferred receivables and does not have material credit risk exposure associated with the remaining $ 21.1 million of trade receivables.

Three of the Company’s customers represent at least 10.0% of total gross revenues individually and, in the aggregate, represented approximately 39.8 % for the three months ended June 30, 2023, and three of the Company's customers represented at least 10.0% of total gross revenues individually and, in the aggregate, represent 40.0 % of total revenues for the nine months ended June 30, 2023.

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.

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

Note 15 — Property, Plant and Equipment

Property, Plant and Equipment, Net consisted of:

March 31, 2023 September 30, 2022

June 30, 2023 September 30, 2022

Land $ 2.3 $ 1.4

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Finance Leases

Our finance lease assets and liabilities are attributed to our manufacturing site in Holdrege, Nebraska, which has an initial term of ten years and an option for the Company to extend the lease term for an additional period of up to five years .

The Company's finance lease assets and liabilities are attributed to its manufacturing site in Holdrege, Nebraska, which has an initial term of ten years and an option for the Company to extend the lease term for an additional period of up to five years .

This lease is classified as a finance lease because the present value of the sum of the lease payments associated with the lease exceeds substantially all of the fair value of the manufacturing site.

Operating Leases

Our operating leases primarily relate to our real estate leases that are not classified as finance leases.

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

The Company's operating leases primarily relate to its real estate leases that are not classified as finance leases.

Aggregate Lease Information

Our leases are included in our Condensed Consolidated Balance Sheets as follows:

March 31, 2023 September 30, 2022

The Company's leases are included in its Condensed Consolidated Balance Sheets as follows:

June 30, 2023 September 30, 2022

Finance Leases

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Weighted-average discount rate 6.9 % 5.9 %

Supplemental cash flow information related to leases for the six months ended March 31, 2023 and 2022 were as follows:

March 31, 2023 March 31, 2022

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

Supplemental cash flow information related to leases for the nine months ended June 30, 2023 and 2022 were as follows:

June 30, 2023 June 30, 2022

Right of use assets obtained in exchange for lease liabilities

Financing Leases $ — $ 36.7

Operating Leases 17.4 0.9

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

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

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

The Company has options to extend the lease for an additional period of six years and to extend for a subsequent additional period of four years , after the expiration of the first extension period.

Maturities of the Company's finance and operating lease liabilities as of June 30, 2023 by fiscal year are as follows:

Finance Leases Operating Leases Total

10 unchanged sentences

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 1. Financial Statements