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Item 8. Financial Statements and Supplementary Data

2023-11-29 compared with 2022-12-22 · 323 added, 218 removed, 750 unchanged (42% of the section changed)

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Embecta Corp.

(the Company) as of September 30, 2022 and 2021, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended September 30, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Embecta Corp (the Company) as of September 30, 2023 and 2022, the related consolidated statements of income, comprehensive income , equity, and cash flows for each of the three years in the period ended September 30, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2023, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated November 29, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Income Taxes — Application of Separate Return Method and post Separation tax provision

Description of the Matter As described in Notes 2, 3 and 13 to the consolidated financial statements, the provision for income taxes for the period prior to Separation was based on a separate tax return basis and calculated by applying an estimated full year effective income tax rate to ordinary income adjusted by the tax impact of discrete items.

When calculating the income tax provision for the period prior to the Separation, management made certain estimates and assumptions when identifying and measuring deferred tax assets and liabilities and identifying and allocating uncertain tax positions.

For periods post Separation, the Company will file tax returns on its own behalf and the provision for income taxes contemplates its stand-alone legal entity structure.

Description of the Matter As described in Notes 3 and 14 to the consolidated financial statements, the Company’s provision for income taxes post-Separation contemplates its stand-alone legal entity structure.

The Company’s income tax provision for 2023 was $35.3 million.

In addition, as of September 30, 2023, the Company recorded a liability for unrecognized tax benefits of $7.2 million, and total deferred tax assets and liabilities of $78.1 million and $33.3 million, respectively.

Given the multijurisdictional nature of the business, the complexity of the tax rules across the various countries the Company operates in, and the legal entity structure, auditing management’s provision for income taxes, including the application of the separate return method for periods prior to Separation and the Company’s stand-alone tax structure and provision post Separation, required a high degree of auditor judgment and increased extent of effort, including the need to involve our tax subject matter professionals.

How We Addressed the Matter in Our Audit With the support of our tax subject matter professionals, our audit procedures related to management’s application of the separate return method included evaluating the accuracy and completeness of the Company’s income tax provision.

For example, we evaluated the appropriateness of transfer pricing assumptions underlying the income tax provision for the period prior to Separation.

We developed an expectation of the foreign income tax expense by jurisdiction and compared it to the recorded balances.

Additionally, we assessed the reasonableness of management’s significant judgments regarding the identification and allocation of uncertain tax positions by analyzing the Company’s evaluation of the Parent’s uncertain tax positions to determine which positions were attributable to the separate operations of the Company.

For the period post-separation, we obtained and reviewed the Company’s transfer pricing assumptions including review of relevant analyses.

Given the multi-jurisdictional nature of the business, the complexity of the tax rules across the various countries the Company operates in, and the stand-alone legal entity structure, auditing management’s accounting for uncertain tax positions required a high degree of auditor judgment and increased extent of effort, including the need to involve our tax subject matter professionals.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s evaluation of uncertain tax positions, including assessment of technical merits of positions.

With the support of our tax subject matter professionals, our audit procedures included evaluating the appropriateness of transfer pricing assumptions underlying the income tax provision.

For example, we developed an expectation of the foreign income tax expense by jurisdiction and compared it to the recorded balances.

We involved our tax subject matter professionals to evaluate the technical merits of the Company’s accounting for its tax positions, including assessing correspondence with the relevant tax authorities and evaluating third-party advice obtained.

With respect to book to tax differences, we assessed the appropriateness of significant deferred items, tested completeness and existence of book and tax bases of significant timing differences, and recalculated related deferred tax assets and liabilities.

/s/ ERNST & YOUNG LLP

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New York, New York

December 22, 2022

November 29, 2023

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Embecta Corp.

Opinion on Internal Control Over Financial Reporting

We have audited Embecta Corp’s internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria).

In our opinion, Embecta Corp.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of September 30, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements of the Company as of September 30, 2023 and 2022, the related consolidated statements of income, comprehensive income and cash flows for each of the three years in the period ended September 30, 2023, and the related notes and our report dated November 29, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ ERNST & YOUNG LLP

New York, New York

November 29, 2023

Consolidated Statements of Income

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Other Comprehensive Income (Loss), net of tax

Benefit plan net loss and prior service credit, net of amortization ( 1.6 ) — —

Foreign currency translation adjustments 17.4 ( 64.2 ) ( 8.9 )

Other Comprehensive Income (Loss), net of tax $ ( 64.2 ) $ ( 8.9 ) $ 16.4

$ 15.8 $ ( 64.2 ) $ ( 8.9 )

Comprehensive Income $ 86.2 $ 159.4 $ 405.9

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Cash and cash equivalents $ 326.5 $ 330.9

Trade receivables, net 22.2 150.6

Trade receivables, net (net of allowance for doubtful accounts of $ 1.0 million and $ 1.3 million as of September 30, 2023 and September 30, 2022, respectively)

Materials 32.1 23.4

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Finished products 111.9 93.8

$ 122.8 $ 118.0

Total Inventories $ 152.1 $ 122.8

Amounts due from Becton, Dickinson and Company 142.4 110.9

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Authorized - 250,000,000

Issued and outstanding - 57,055,327

Issued and outstanding - 57,333,353 as of September 30, 2023 and 57,055,327 as of September 30, 2022

Additional paid-in capital 27.9 10.0

Accumulated deficit ( 541.1 ) ( 577.1 )

Net Investment from Becton, Dickinson and Company — 864.8

Accumulated other comprehensive loss ( 309.1 ) ( 324.9 )

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

Net income attributable to Diabetes Care Business — — — — 414.8 — 414.8

Net transfers to Becton, Dickinson and Company including Separation adjustments — — — — ( 390.3 ) 9.8 ( 380.5 )

Issuance of common stock in connection with the Separation and reclassification of Net Investment from Becton, Dickinson and Company 57,012,925 0.6 — ( 613.7 ) 613.1 — —

Net consideration paid to Becton, Dickinson, and Company in connection with Separation — — — — ( 1,266.0 ) — ( 1,266.0 )

Net income attributable to Embecta Corp.

— — — 45.2 178.4 — 223.6

Other comprehensive loss, net of taxes — — — — — ( 64.2 ) ( 64.2 )

Net transfers to Becton, Dickinson and Company — — — — ( 383.8 ) — ( 383.8 )

Stock-based compensation plans — — 10.0 — — — 10.0

Common dividends ($ 0.15 per share)

— — — ( 8.6 ) — — ( 8.6 )

Issuance of shares related to stock-based compensation plans 42,402 — — — — — —

Balance at September 30, 2022 57,055,327 $ 0.6 $ 10.0 $ ( 577.1 ) $ — $ ( 324.9 ) $ ( 891.4 )

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— — — 70.4 — — 70.4

Net transfers to Becton, Dickinson and Company including Separation adjustments — — — — ( 390.3 ) 9.8 ( 380.5 )

Other comprehensive loss, net of taxes — — — — — 15.8 15.8

Stock-based compensation plans — — 21.5 — — — 21.5

Common dividends ($ 0.15 per share)

— — — ( 34.4 ) — — ( 34.4 )

Net consideration paid to Becton, Dickinson, and Company in connection with Separation — — — — ( 1,266.0 ) — ( 1,266.0 )

Issuance of common stock in connection with the Separation and reclassification of Net Investment from Becton, Dickinson and Company 57,012,925 0.6 — ( 613.7 ) 613.1 — —

Stock-based compensation plans — — 10.0 — — — 10.0

Issuance of shares related to stock-based compensation plans 278,026 — ( 3.6 ) — — — ( 3.6 )

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Stock-based compensation 21.5 18.7 12.8

Net periodic pension benefit and other postretirement costs 10.2 9.4 9.4

Deferred income taxes 14.3 ( 26.5 ) ( 2.8 )

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Income and other net taxes payable ( 12.6 ) 10.3 —

Other assets, net 0.5 0.5 —

Other assets and liabilities, net ( 16.1 ) 7.1 0.5

Net Cash Provided by Operating Activities $ 67.7 $ 412.2 $ 456.3

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Payment of revolving credit facility fees — ( 5.6 ) —

Payments related to tax withholding for stock-based compensation ( 3.6 ) — —

Payments on finance lease ( 1.2 ) ( 1.8 ) —

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The Company has a broad portfolio of marketed products, including a variety of pen needles, syringes and safety devices, which are complemented by a proprietary digital application designed to assist people with managing their diabetes.

The Company primarily sells products to wholesalers and distributors that sell to retail and institutional channels who in turn sell to patients.

The Company primarily sells 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.

On April 1, 2022 (the "Separation Date"), 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 (the "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, 2023, the record date for the distribution.

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Cash generated by the Diabetes Care Business was routinely transferred into accounts managed by BD’s centralized treasury function and cash disbursements related to operations prior to the Separation were funded as needed by BD.

Balances held by the Diabetes Care Business with BD for cash transfers and loans were reflected as Due to related party prior to the Separation.

Balances held by the Diabetes Care Business with BD for cash transfers and loans were reflected as Amounts due to Becton, Dickinson and Company prior to the Separation.

All other cash and cash equivalents and related transfers between BD and the Diabetes Care Business were generally held centrally through accounts controlled and maintained by BD and were not specifically identifiable to the Diabetes Care Business.

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BD’s third-party debt and related interest expense were not attributed to the Diabetes Care Business because the business was not the legal obligor of the debt and the borrowings were not specifically identifiable to the business.

For the Diabetes Care Business, transactions with BD affiliates were included in the Consolidated Statements of Income and related balances were reflected as Due to related party , Due from related party or Related Party Loans Payable .

For the Diabetes Care Business, transactions with BD affiliates were included in the Consolidated Statements of Income and related balances were reflected as Amounts due to Becton, Dickinson and Company , Amounts due from Becton, Dickinson and Company or Related Party Loans Payable .

Other balances between the Diabetes Care Business and BD were considered to be effectively settled in the Consolidated Financial Statements at the time the transactions were recorded.

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Net Investment from Becton, Dickinson and Company represented BD’s interest in the recorded assets of the Diabetes Care Business and the cumulative investment by BD through the date of the Separation, inclusive of operating results.

Income tax expense and tax balances in the Consolidated 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.

For periods prior to the Separation, income tax expense and tax balances in the Consolidated 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 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.

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The Company recognizes revenue from product sales and considers performance obligations satisfied when the customer obtains control of the product, which is generally upon shipment or delivery, depending on the delivery terms specified in the sales agreement.

The Company acts as the principal in its customer arrangements and therefore records revenue on a gross basis.

When arrangements include multiple performance obligations, the total transaction price of the contract is allocated to each performance obligation based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation.

The point in time upon which shipment or delivery occurs is the most faithful depiction of when control of the goods transfers to the customer.

Variable consideration such as rebates, sales discounts, and sales returns are estimated and treated as a reduction of revenue in the same period the related revenue is recognized.

Variable consideration such as rebates, chargebacks, sales discounts, and sales returns are estimated and treated as a reduction of revenue in the same period the related revenue is recognized.

These estimates are based on contractual terms, historical practices and current trends, and are adjusted as new information becomes available.

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Additional disclosures regarding the Company’s accounting for revenue recognition are provided in Note 8.

Cash Equivalents

Cash equivalents are comprised of certain highly liquid investments with original maturities of three months or less.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with a maturity of three months or less at the date of acquisition.

Interest income on Cash and cash equivalents is recorded as earned.

Trade Receivables

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Inventories are stated at the lower of approximate cost or net realizable value determined on the first-in, first-out basis.

Cloud Computing Arrangements

The Company capitalizes costs incurred to implement cloud computing arrangements that are service contracts within Prepaid expenses and other and Deferred Income Taxes and Other Assets in the Company's Condensed Consolidated Balance Sheets.

Implementation costs associated with cloud computing arrangements are capitalized when incurred during the application development phase.

Once the implementation of a cloud computing arrangement is complete and ready for its intended use, 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 September 30, 2023 is $ 38.0 million which primarily relates to the implementation of the Company's new enterprise resource planning ("ERP") system.

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

Costs amortized during fiscal year ended September 30, 2023 were not material to the Company's consolidated financial results.

As of September 30, 2023, cloud computing arrangement assets in-service have useful lives which range from approximately three to nine years .

In 2022, the Company commenced on the process of building a new ERP system to replace the existing systems provided by BD.

The ERP system is designed to accurately maintain the Company's financial records used to report operating results.

The implementation of the ERP will occur in phases.

The first phase of the ERP system implementation began in the fourth quarter of 2023.

Property, Plant and Equipment

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Recoverability is determined by comparing the carrying values of the assets or asset groups to the undiscounted cash flows to be generated from the use and eventual disposition of such assets or asset groups.

If the asset’s or asset group’s carrying value exceeds such undiscounted cash flows, the assets or asset groups are not recoverable and an impairment loss is recognized based on the amount by which the carrying value of the asset or asset group exceeds its calculated fair value.

If the asset’s or asset group’s carrying value exceeds such

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

undiscounted cash flows, the assets or asset groups are not recoverable and an impairment loss is recognized based on the amount by which the carrying value of the asset or asset group exceeds its calculated fair value.

Capitalized Interest

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When no debt is incurred specifically for a project, interest is capitalized on project expenditures using the weighted average cost of the Company's outstanding borrowings.

For the year ended September 30, 2022, the Company capitalized $ 5.2 million of interest expense into Property, Plant and Equipment, Net .

For the years ended September 30, 2023 and 2022, the Company capitalized $ 4.6 million and $ 5.2 million of interest expense, respectively, into Property, Plant and Equipment, Net and capitalized $ 0.9 million of interest expense into Deferred Income Taxes and Other Assets during the year ended September 30, 2023.

Advertising Costs

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If carrying value is greater than fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill).

We completed the annual goodwill impairment

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

test as of July 1, 2022 and concluded that no impairment to goodwill was necessary as the fair value of the Company's one reporting unit was significantly in excess of the carrying value.

The Company completed the annual goodwill impairment test as of July 1, 2023 and concluded that no impairment to goodwill was necessary as the fair value of the Company's one reporting unit was significantly in excess of the carrying value.

No goodwill impairments were identified during the years ended September 30, 2022, or 2021, and no accumulated impairment losses are recorded.

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Effective April 1, 2022, the Company established the 2022 Employee and Director Equity Based Compensation Plan (the "Plan").

The Plan provides for the grant of various types of awards, including restricted stock unit awards, stock appreciation rights, stock options, performance-based awards and cash awards.

Under the Plan, the exercise price of awards, if any, is set on the grant date and generally may not be less than the fair market value per share on that date.

The Plan provides for the grant of various types of awards, including restricted stock unit ("RSU") awards, stock appreciation rights, stock options, performance-based awards and cash awards.

Under the Plan, the exercise price of awards, if any, is set on the grant date and generally may not be less than

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

the fair market value per share on that date.

The Company measures stock-based compensation for equity awards at fair value on the date of grant and records stock-based compensation as a charge to earnings net of the estimated impact of forfeited awards.

Accordingly, the Company recognizes stock-based compensation cost only for those stock-based awards that are estimated to ultimately vest over their requisite service period, based on the vesting provisions of the individual grants.

For awards that ultimately settle in cash, we treat them as liability awards and mark the award to market each reporting period and recognize any adjustment in our Consolidated Statements of Income.

The Company recognizes stock-based compensation cost only for those stock-based awards that are estimated to ultimately vest over their requisite service period, based on the vesting provisions of the individual grants.

The cumulative effect on current and prior periods of a change in the estimated forfeiture rate is recognized as compensation cost in earnings in the period of the change (see Note 10).

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The Company's participation in the defined pension and postretirement benefit plans sponsored by BD concluded upon the completion of the Separation on April 1, 2022.

At Separation, Embecta became the plan sponsor for certain non-United States defined benefit pension plans (see Note 17).

At and after Separation, Embecta became the plan sponsor for certain non-United States defined benefit pension plans (see Note 18).

Research and Development

Research and development costs are expensed as incurred.

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

Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax basis of assets and liabilities at the applicable tax rates.

We maintain valuation allowances where it is more likely than not that all or a portion of a deferred tax asset will not be realized.

The Company maintains valuation allowances where it is more likely than not that all or a portion of a deferred tax asset will not be realized.

Changes in valuation allowances are included in the tax provision in the period of change.

In determining whether a valuation allowance is warranted, we evaluate factors such as prior earnings history, expected future earnings, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset.

In determining whether a valuation allowance is warranted, the Company evaluates factors such as prior earnings history, expected future earnings, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset.

From time to time, the Company engages in transactions in which tax consequences may be subject to uncertainty.

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It is also possible that changes in facts and circumstances could cause the Company to either materially increase or reduce the carrying amount of its tax reserve.

The Tax Cuts and Jobs Act was enacted on December 22, 2017 and introduced an additional U.S.

tax on certain non-US.

Subsidiaries’ earnings which are referred to as Global Intangible Low Taxed Income (“GILTI”) .

The Tax Cuts and Jobs Act was enacted on December 22, 2017 and introduced an additional United States tax on the earnings of non-United States subsidiaries which are referred to as Global Intangible Low Taxed Income (“GILTI”).

The Company has elected to treat GILTI as a period cost.

Prior to the Separation, our operations were included in the tax returns of BD.

Income taxes as presented in the Consolidated Financial Statements attribute current and deferred income tax assets and liabilities of BD to us in a manner that is systematic, rational, and consistent with the asset and liability method prescribed by the accounting guidance for income taxes.

Our income tax provision prior to the Separation was prepared using the separate return method.

The separate 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.

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

Additional disclosures regarding our accounting for income taxes are provided in Note 13.

Prior to the Separation, the Company's operations were included in the tax returns of BD.

Income taxes as presented in the Consolidated Financial Statements attribute current and deferred income tax assets and liabilities of BD to the Company in a manner that is systematic, rational, and consistent with the asset and liability method prescribed by the accounting guidance for income taxes.

The Company's income tax provision prior to the Separation was prepared using the separate return method.

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

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

Additional disclosures regarding the Company's accounting for income taxes are provided in Note 14.

The Company operates and reports its financial information as one segment.

In making this determination, the Company (i) determines its Chief Operating Decision Maker (“CODM”), (ii) identifies and analyzes potential business components, (iii) identifies its operating segments and (iv) determines whether there are multiple operating segments requiring presentation as reportable segments.

In making this determination, the Company (i) determines its Chief Operating Decision Maker (“CODM”), (ii) identifies and analyzes potential business components, (iii)

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

identifies its operating segments and (iv) determines whether there are multiple operating segments requiring presentation as reportable segments.

The Company’s decision to report as one segment is based upon the following:

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Level 3—Inputs to the valuation methodology which are unobservable and significant to the fair value measurement.

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

We determine whether an arrangement contains a lease at inception.

If a lease is identified in an arrangement, we recognize a right-of-use asset and liability in our Consolidated Balance Sheets and determine whether the lease should be classified as a finance or operating lease.

We do not recognize assets or liabilities for leases with lease terms of less than 12 months.

The Company determines whether an arrangement contains a lease at inception.

If a lease is identified in an arrangement, the Company recognizes a right-of-use asset and liability in the Company's Consolidated Balance Sheets and determine whether the lease should be classified as a finance or operating lease.

The Company does not recognize assets or liabilities for leases with lease terms of less than 12 months.

A lease qualifies as a finance lease if any of the following criteria are met at the inception of the lease:

(i) there is a transfer of ownership of the leased asset to Embecta by the end of the lease term, (ii) we hold an option to purchase the leased asset that we are reasonably certain to exercise, (iii) the lease term is for a major part of the remaining economic life of the leased asset, (iv) the present value of the sum of lease payments equals or exceeds substantially all of the fair value of the leased asset, or (v) the nature of the leased asset is specialized to the point that it is expected to provide the lessor no alternative use at the end of the lease term.

(i) there is a transfer of ownership of the leased asset to Embecta by the end of the lease term, (ii) the Company holds an option to purchase the leased asset that the Company is reasonably certain to exercise, (iii) the lease term is for a major part of the remaining economic life of the leased asset, (iv) the present value of the sum of lease payments equals or exceeds substantially all of the fair value of the leased asset, or (v) the nature of the leased asset is specialized to the point that it is expected to provide the lessor no alternative use at the end of the lease term.

All other leases are recorded as operating leases.

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Variable lease payments are expensed as incurred.

If a lease includes an option to extend or terminate the lease, we reflect the option in the lease term if it is reasonably certain we will exercise the option.

Finance leases are recorded in Property, Plant and Equipment, Ne t, Current finance lease liabilities , and Non Current Finance Lease Liabilities and operating leases are recorded in Deferred Income Taxes and Other Assets , Accrued expenses , and Deferred Income Taxes and Other Liabilities in our Consolidated Balance Sheets.

If a lease includes an option to extend or terminate the lease, the Company reflects the option in the lease term if it is reasonably certain the Company will exercise the option.

Finance leases are recorded in Property, Plant and Equipment, Net , Current finance lease liabilities , and Non Current Finance Lease Liabilities and operating leases are recorded in Deferred Income Taxes and Other Assets , Accrued expenses , and Deferred Income Taxes and Other Liabilities in the Company's Consolidated Balance Sheets.

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 Consolidated Financial Statements.

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, restructuring costs, inventory reserves and taxes on income as reflected in the Consolidated Financial Statements.

Actual results could differ from these estimates.

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See Notes 2 and 4 for additional information.

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

Supplemental Disclosures Of Cash Flow Information

Cash paid for interest related to debt during the year ended September 30, 2022 was $ 38.9 million.

The Company did not have any debt outstanding during the years ended September 30, 2021 and 2020.

Cash paid for income taxes, net of refunds, for the year ended September 30, 2022 was $ 15.6 million.

For the years ended September 30, 2021 and 2020, the Company's current tax liabilities computed under the separate return method are considered to be effectively settled at the time the transaction is recorded, with the offset recorded against Net investment from Becton, Dickinson and Company .

Cash paid for interest related to debt during the year ended September 30, 2023 and 2022 was $ 111.0 million and $ 38.9 million, respectively.

The Company did not have any debt outstanding during the year ended September 30, 2021.

Cash paid for income taxes, net of refunds, for the years ended September 30, 2023 and 2022 was $ 30.4 million and $ 15.6 million, respectively.

For the year ended September 30, 2021, the Company's current tax liabilities computed under the separate return method are considered to be effectively settled at the time the transaction is recorded, with the offset recorded against Net investment from Becton, Dickinson and Company .

Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740).

The updated guidance simplifies the accounting for income taxes by removing certain exceptions in Topic 740 and clarifying and amending existing guidance.

The amendments are effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

The Company adopted the provisions of this new accounting standard at the beginning of fiscal 2022 and adoption did not have a material impact on its consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted

In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-08, "Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts

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

with Customers" ("ASU No.

2021-08 will require companies to apply the definition of a performance obligation under Accounting Standards Codification ("ASC") Topic 606 to recognize and measure contract assets and contract liabilities (i.e., deferred revenue) relating to contracts with customers that are acquired in a business combination.

Under current GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date.

2021-08 will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606.

2021-08 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted.

The Company intends to early adopt this ASU effective October 1, 2022.

In October 2021, the Financial Accounting Standards Board issued Accounting Standards Update 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

The new guidance requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers, as if it had originated the contracts.

The Company adopted this guidance at the beginning of fiscal year 2023 and it did not materially impact the Company's Condensed Consolidated Financial Statements.

Note 4 — Third Party Arrangements and Related Party Disclosures

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The agreed-upon charges for such services are generally intended to allow the servicing party to charge a price comprised of out-of-pocket costs and expenses and a predetermined profit in the form of a mark-up of such out-of-pocket costs and expenses.

The services will terminate no later than 24 months following the Separation.

The services will terminate no later than 24 months following the Separation, subject to the Extension.

The Extension is conditioned upon BD obtaining a supplemental private letter ruling.

The service recipient may terminate any services by giving prior written notice to the provider of such services and paying any applicable wind-down charges.

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• Distribution Agreements - Embecta and BD entered into distribution agreements for certain territories, principally in the Asia Pacific Region and Latin America, whereby a subsidiary of BD is appointed as a distributor of Embecta or its relevant subsidiaries to support certain commercial operations of the diabetes care business on a transitional basis in these regions for a maximum of two years .

The distribution agreements will each continue until either (1) certain governmental approvals needed to distribute products in the defined territory are obtained and order-to-cash processes and other services of the Company for such territory are migrated to an alternative commercial arrangement between the parties or (2) the applicable services are transitioned to a third-party distributor or independently performed by Embecta, but in any event no longer than the maximum term of two years .

Embecta shall pay BD a return of 1.5 % to 2.0 % of net revenue for each territory.

• Cannula Supply Agreement - Embecta and BD entered into a cannula supply agreement whereby BD sells to Embecta cannulas for incorporation into Embecta's existing syringes and pen needles, safety syringes and safety pen needles, and insulin patch pump, pen needles and safety pen needle currently under development.

The distribution agreements will each continue

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

ownership of all cannula technology, cannula production activities and the intellectual property rights therein.

until either (1) certain governmental approvals needed to distribute products in the defined territory are obtained and order-to-cash processes and other services of the Company for such territory are migrated to an alternative commercial arrangement between the parties or (2) the applicable services are transitioned to a third-party distributor or independently performed by Embecta, but in any event no longer than the maximum term of two years , except certain such agreements may be extended in connection with the Extension.

Embecta shall pay BD a return of 1.5 % to 2.0 % of net revenue for each territory.

BD retains ownership of all cannula technology, cannula production activities and the intellectual property rights therein.

Embecta is limited to a maximum number of cannulas that it can purchase under the cannula supply agreement, which will be an absolute upper limit of cannulas per year and yearly limits that vary with annual demand.

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and (vi) entering into any other corporate transaction which would cause Embecta to undergo a 50 % or greater change in its stock ownership.

• Logistics Services Agreement - Embecta and BD entered into a logistics services agreement whereby BD provides Embecta with certain order-to-cash and logistics services to support certain commercial operations for a maximum term of two years .

Embecta will pay BD (i) reimbursable costs, including all shipping costs, selling costs, general administration costs, costs of goods, research and development services costs, and other income and expenses related solely to the diabetes care business, that are incurred by BD directly, as allocated costs or as costs payable to a third party and (ii) a monthly administrative fee of 1.0 % of net revenue.

• Other agreements that Embecta entered into with BD include, but are not limited to, the employee matters agreement ("EMA"), 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.

See Note 17 for more information on the lease agreement for Holdrege.

As it pertains to the Distribution Agreements noted above, Embecta has determined it is the principal under these arrangements and is entitled to all the benefits, and is liable for all the risks, related to the inventory and receivables.

Additionally, Embecta has latitude in pricing, has the ability to direct BD regarding decisions over inventory, and is responsible for all credit and collections risks and losses associated with the related receivables when there is no factoring agreement in place.

As such, Embecta recognizes these sales on a gross basis.

The amount due from BD under the above agreements was $ 142.4 million at September 30, 2023 and is reflected in Amounts due from Becton, Dickinson and Company .

The amount due to BD under these agreements was $ 73.1 million at September 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

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

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

As of September 30, 2023, the Company estimates that amounts due to BD related to certain assets and liabilities in deferred close jurisdictions is $ 29.7 million and are reflected in Accrued expenses .

As of September 30, 2023, the Company estimates that amounts due from BD related to certain assets and liabilities in deferred close jurisdictions are $ 8.4 million and is reflected in Prepaid expenses and other .

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

The following disclosure summarizes activity between the Company and BD up to the Separation, including the affiliates of BD that were not part of the Separation.

For the years ended September 30, 2022, 2021 and 2020, cost of products sold from related party inventory purchases were $ 28.0 million, $ 40.6 million and $ 43.4 million, respectively.

For the years ended September 30, 2022 and 2021, cost of products sold from related party inventory purchases were $ 28.0 million and $ 40.6 million, respectively.

For the year ended September 30, 2023 there were no cost of products sold from related party inventory purchases.

Corporate and Medical Segment Allocations from BD

BD provided significant corporate, finance, human resources, information technology, facilities, and legal services, among others (collectively, “General Corporate Expenses”) to the Company.

Some of these services continue to be provided by BD to the Company on a temporary basis under the Transition Services Agreement.

For purposes of these Consolidated

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

Financial Statements for the periods prior to the Separation, the General Corporate Expenses have been allocated to the Company.

Prior to the Separation, BD provided significant corporate, finance, human resources, information technology, facilities, and legal services, among others (collectively, “General Corporate Expenses”) to the Company.

Some of these services continue to be provided by BD to the Company on a temporary basis under the TSA.

For purposes of these Consolidated Financial Statements for the periods prior to the Separation, the General Corporate Expenses have been allocated to the Company.

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

Year ended September 30,

2022 2021 2020

Cost of products sold $ 2.3 $ 13.0

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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 as follows:

The following table summarizes such former related party purchases as follows:

Year ended September 30,

2022 2021 2020

Purchases from BD $ 28.0 $ 40.6

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

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

The following table summarizes the components of the net transfers to BD as follows:

Year ended September 30,

2022 2021 2020

Cash pooling and general financing activities (1)

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Net transfers to BD $ 1,712.9 $ 383.8

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

(1) The nature of activities includes financing activities for capital transfers, cash sweeps and other treasury services.

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Refer to Note 12 for further information.

Note 5 — Collaboration Agreement

In March 2023, the Company entered into a collaboration agreement with a third-party to develop and commercialize an interoperable automated glycemic controller ("iAGC") to complement the Company's insulin patch pump currently in development.

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 year ended September 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.

The Company expects that it will be the principal in the end customer sale and 100 % of product sales will be included in Revenues and any royalty payments and continued project costs after commercialization will be included in Cost of products sold as they are incurred.

Note 6 — Other Operating Expenses

In connection with the Separation further described in Note 1, the Company incurred separation and stand-up costs of approximately $ 44.7 million and $ 4.8 million during the years ended September 30, 2022 and 2021, respectively.

There were no separation and stand-up costs incurred during the year ended September 30, 2020.

The costs incurred primarily relate to accounting, auditing, and legal services, including costs to establish certain stand-alone corporate functions and other costs associated with the abandonment of certain manufacturing production lines.

In connection with the Separation, the Company incurred separation and stand-up costs of approximately $ 92.7 million, $ 44.7 million, and $ 4.8 million during the years ended September 30, 2023, 2022, and 2021, respectively.

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

During the year ended September 30, 2023, the Company recorded approximately $ 5.6 million of severance costs related to the optimization of certain business functions.

These costs were primarily recorded in the U.S.

and severance costs were not material to any comparable prior year periods presented.

Liabilities for costs associated with these activities were not material to any period presented.

For the years ended September 30, 2022, and 2021 severance costs were not material to the Company's Consolidated Statements of Income.

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

Note 7 — Contingencies

The Company is subject to potential liabilities under government regulations and various claims and legal actions that are pending or may be asserted from time-to-time.

These matters arise in the ordinary course and conduct of the Company’s business and include, for example, commercial, intellectual property, environmental, securities and employment matters.

These matters arise in the ordinary course and conduct of the Company’s business and include, for example, commercial, product liability, breach of contract and tort, intellectual property, product liability, environmental, securities and employment matters.

The Company intends to continue to defend itself vigorously in such matters and when warranted, take legal action against others.

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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.

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

The Company’s liability attributed to variable consideration at September 30, 2023 and September 30, 2022 was $ 36.4 million and $ 43.8 million, respectively.

The decrease is primarily attributed to the Factoring Agreements by which certain trade receivables are factored to BD net of variable consideration.

Sales deductions recorded as a reduction of gross revenues for the years ended September 30, 2023, 2022 and 2021 were $ 411.1 million, $ 336.4 million, and $ 298.7 million respectively.

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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 Consolidated Balance Sheets.

The Company’s contract asset balance was $ 1.2 million and $ 1.4 million as of September 30, 2022 and 2021, respectively.

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

Note 9 — Segment and Geographical Data

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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.

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

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 large and small key account managers that call on payers, retailers, wholesalers and institutional customers, and field-based territory managers that call on health care providers and pharmacies.

In the United States and Canada, the Company utilizes its large and small key account managers that call on payers, retailers, wholesalers and institutional customers, and field-based territory managers that call on health care providers and pharmacies.

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.

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Additionally, share-based compensation expense was allocated to the Diabetes Care Business for BD Corporate and Medical Segment employees who were not dedicated solely to the Diabetes Care Business.

This stock-based compensation expense was allocated using a proportional cost allocation method and is included as a component of corporate allocations for periods prior to the

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

This stock-based compensation expense was allocated using a proportional cost allocation method and is included as a component of corporate allocations for periods prior to the Separation.

The amounts presented for the periods prior to the Separation are not necessarily indicative of future awards and do not necessarily reflect the costs that the Company would have incurred as an independent company.

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As a result of the award modification, Embecta will incur $ 6.1 million of incremental stock-based compensation expense.

Of this amount, $ 2.3 million was recognized during the year ended September 30, 2022.

Of this amount, $ 1.8 million and $ 2.3 million was recognized during the year ended September 30, 2023 and 2022, respectively.

$ 2.0 million will be recognized at a future date over the awards' remaining vesting period.

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A total of 7,000,000 shares of common stock are authorized under the Plan.

The Plan provides for the grant of various types of awards including restricted stock unit ("RSU") awards, SARs, stock options, performance-based awards and other stock-based awards.

The Plan provides for the grant of various types of awards including RSU awards, SARs, stock options, performance-based awards and other stock-based awards.

Under the Plan, the exercise price of awards, if any, is set on the grant date and may not be less than the fair market value per share on that date.

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The cumulative effect on current and prior periods of a change in the estimated forfeiture rate is recognized as compensation cost in earnings in the period of the change.

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

On April 1, 2022, Embecta granted 48,192 potential shares to non-employee directors in the form of RSUs, which vest at the earlier of (i) the first anniversary of the grant date or (ii) the date of the first annual meeting of stockholders, subject to continued service of the recipients.

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Tax benefit associated with stock-based compensation costs recognized $ 2.7 $ 2.9 $ 2.8

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

2023 2022 2021

Equity Awards $ 21.5 $ 18.7 $ 12.8

Liability Awards 0.4 — —

Total $ 21.9 $ 18.7 $ 12.8

The following table summarizes the Company's total stock-based compensation expense by award type for the years ended September 30, 2023 and 2022, subsequent to the Separation:

Time-Vested Restricted Stock Units (TVUs)

Performance-Based Restricted Stock Units (PSUs)

Stock Appreciation Rights (SARs)

Total $ 21.9 $ 10.3

Time Vested Restricted Stock Units

During the year ended September 30, 2023 , Embecta granted 680,281 RSUs in the form of TVUs to employees which vest ratably over three years , subject to continued employment of the recipients.

TVUs vest on a graded basis over a period of three years .

The related stock-based compensation expense is recorded over the requisite service period, which is the vesting period or is based on retirement eligibility.

The fair value of all TVUs is based on the market value of the Company’s stock on the date of grant.

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

A summary of TVUs outstanding as of September 30, 2023 and changes during the year then ended is as follows:

Stock Units (in thousands) Weighted Average Grant Date Fair Value

Nonvested at October 1 977.5 $ 28.34

Granted 680.3 31.00

Distributed* ( 386.6 ) 28.07

Forfeited, canceled or expired ( 82.4 ) 29.47

Nonvested at September 30 1,188.8 $ 29.42

Expected to vest at September 30 1,134.6 $ 29.39

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

The weighted average grant date fair value of TVUs granted during the years 2023 and 2022 are as follows:

Weighted average grant date fair value of units granted $ 31.00 $ 31.23

The total fair value of TVUs vested during the years 2023 and 2022 was as follows:

Total fair value of units vested $ 10.9 $ 1.6

At September 30, 2023, the weighted average remaining vesting term of TVUs is 1.5 years.

Performance Based Restricted Stock Units

During the year ended September 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.

For a portion of these awards, the Company has identified certain performance metrics and targets that will be fully established at a future date.

The Company has determined that the service inception date precedes the grant date for these awards as (a) the awards were authorized prior to establishing an accounting grant date, (b) the recipients began providing services prior to the grant date, and (c) there are performance conditions that, if not met by the accounting grant date, will result in the forfeiture of the awards.

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.

PSUs cliff vest on the third anniversary after grant date.

The related stock-based compensation expense is recorded over the requisite service period, which is the vesting period or is based on retirement eligibility.

The fair value of all PSUs is based on the market value of the Company’s stock on the date of grant.

A summary of PSUs outstanding as of September 30, 2023 and changes during the year then ended is as follows:

Stock Units (in thousands) Weighted Average Grant Date Fair Value

Nonvested at October 1 — $ —

Granted 61.0 30.24

Forfeited, canceled or expired ( 3.2 ) 30.24

Nonvested at September 30 57.8 $ 30.24

Expected to vest at September 30 54.6 $ 30.24

The weighted average grant date fair value of PSUs granted during 2023 is as follows:

Weighted average grant date fair value of units granted $ 30.24

At September 30, 2023, the weighted average remaining vesting term of PSUs is 2.2 years.

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

Stock Appreciation Rights

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BD's historical data for Embecta employees was used to estimate equity award exercise and employee termination behavior within the valuation model.

The expected term represents the amount of time

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

that SARs granted are expected to be outstanding based on historical and forecasted exercise behavior.

The expected term represents the amount of time that SARs granted are expected to be outstanding based on historical and forecasted exercise behavior.

The weighted average fair value of SARs was determined using the following assumptions:

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Fair value per SAR $ 9.38

A summary of SARs outstanding as of September 30, 2022 and changes since the Separation Date are as follows:

A summary of SARs outstanding as of September 30, 2023 and changes and changes during the year then ended is as follows:

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

Balance at April 1 1,379.8 $ 27.70

Granted 660.2 31.40

Balance at October 1 1,916.7 $ 28.98

Exercised* ( 25.1 ) 21.98

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

SARs with an intrinsic value of $ 0.1 million and grant date fair value of $ 6.1 million were exercised since the Separation Date.

Time-Vested Restricted Stock Units

Time vested restricted stock unit awards vest on a graded basis over a period of three years .

The related stock-based compensation expense is recorded over the requisite service period, which is the vesting period or is based on retirement eligibility.

The fair value of all time vested restricted stock units is based on the market value of the Company’s stock on the date of grant.

A summary of time-vested restricted stock units outstanding as of September 30, 2022 and changes since the Separation Date are as follows:

Stock Units (in thousands) Weighted Average Grant Date Fair Value

Nonvested at April 1 847.0 $ 27.41

Granted 248.6 31.23

Distributed* ( 58.5 ) 27.41

Forfeited, canceled or expired ( 59.6 ) 28.03

Nonvested at September 30 977.5 $ 28.34

Expected to vest at September 30 930.8 $ 28.34

*The amounts 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 since the Separation Date is $ 31.23 and the total fair value of time vested stock units vested since the Separation Date is $ 1.6 million.

At September 30, 2022, the weighted average remaining vesting term of time vested restricted stock units is 1.7 years.

A summary of SARs exercised during the years 2023 and 2022 is as follows:

Total intrinsic value of SARs exercised $ 0.3 $ 0.1

Total fair value of SARs exercised $ 0.6 $ 6.1

Unrecognized Compensation Expense and Other Stock Plans

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 as of September 30, 2023, is approximately $ 28.2 million, which is expected to be recognized over a weighted-average remaining life of approximately 1.8 years.

At September 30, 2023, 3.4 million shares were authorized for future grants under the Plan.

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

Note 11 — Goodwill and Other Intangible Assets

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Total Goodwill and Other Intangible Assets $ 24.7 $ 24.6

Intangible asset amortization expense was $ 0.7 million for the year ended September 30, 2022 and $ 0.3 million for the years ended September 30, 2021 and 2020, respectively.

Intangible asset amortization expense was $ 1.2 million for the year ended September 30, 2023, $ 0.7 million for the year ended September 30, 2022 and $ 0.3 million for the year ended September 30, 2021, respectively.

The estimated intangible asset amortization expense for each of the fiscal years ended September 30, 2024 through 2028 is expected to approximate $ 1.1 million per year and $ 3.6 million for years subsequent thereafter.

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• a Revolving Credit Facility (the "Revolving Credit Facility") in an aggregate principal amount of up to $ 500.0 million, with a five -year term that matures in 2027.

Borrowings under the Revolving Credit Facility bear interest, at Embecta’s option, at an annual rate equal to (a) in the case of loans denominated in United

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

States dollars (i) the SOFR or (ii) the alternate base rate or (b) in the case of loans denominated in Euros, the EURIBOR rate, in each case plus an applicable margin specified in the credit agreement.

Borrowings under the Revolving Credit Facility bear interest, at Embecta’s option, at an annual rate equal to (a) in the case of loans denominated in United States dollars (i) the SOFR or (ii) the alternate base rate or (b) in the case of loans denominated in Euros, the EURIBOR rate, in each case plus an applicable margin specified in the credit agreement.

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

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

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

The credit agreement and the senior secured notes are secured by substantially all assets of Embecta and each subsidiary guarantor, subject to certain exceptions.

The Credit Agreement and the indentures for the 5.00 % and 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 % and 6.75 % Notes.

The Credit Agreement and the indentures for Embecta's outstanding 5.00 % Notes and 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.

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

Term Loan $ 945.3

Term Loan due March 2029 $ 935.8

5.00 % Notes due February 2030

6.75 % Notes due February 2030

Total principal debt issued $ 1,635.8

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Thereafter $ 1,588.3

The estimated fair value of long-term debt (including current portion) at September 30, 2022 was $ 1,531.3 million compared with a carrying value (which includes a reduction for amortized debt issuance costs and discounts) of $ 1,607.6 million.

The estimated fair value of long-term debt (including current portion) at September 30, 2023 was $ 1,474.2 million compared with a carrying value (which includes a reduction for unamortized debt issuance costs and discounts) of $ 1,603.4 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.

Note 13 — Earnings per Share

On April 1, 2022, the date of the Separation, 57,012,925 shares of Embecta's common stock, par value $ 0.01 per share, were distributed to BD shareholders of record as of March 22, 2022, the record date of the transaction.

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

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

In connection with the Separation, and in accordance with the EMA, Embecta's employees with outstanding former BD share-based awards received replacement share-based awards under the Plan.

The ratio used to convert the BD share-based awards was designed to preserve the aggregate intrinsic value of the award immediately after the Separation when compared to the aggregate intrinsic value of the award immediately prior to the Separation (see Note 10 for additional details).

The calculation of basic and diluted earnings per common share for the years ended September 30, 2022, 2021 and 2020 were as follows:

The calculation of earnings per basic and diluted common share for the years ended September 30, 2023, 2022 and 2021 were as follows:

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

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

For 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.

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 both 2023 and 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 14 — Income Taxes

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Income before income taxes $ 105.7 $ 256.6 $ 494.9

Provision for Income Taxes

Provision (benefit) for Income Taxes

The provision (benefit) for income taxes for the years ended September 30 consisted of:

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Income tax provision $ 35.3 $ 33.0 $ 80.1

The Company's income tax provision for the first half of 2022 and the years ended September 30, 2021 and 2020 were prepared using a separate return method.

The Company's income tax provision for the first half of 2022 and the year ended September 30, 2021 were prepared using a separate return method.

The separate 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.

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

For a portion of 2022 and all periods prior to the Separation, the Company’s domestic and foreign operations are included in BD’s domestic consolidated and foreign tax returns, and payments to all tax authorities are made by BD on the Company’s behalf.

The Company files its own foreign tax return and makes its own foreign tax payments in Ireland.

The Company’s current tax liabilities computed under the separate return method are considered to be effectively settled in the consolidated financial statements at the time the transaction is recorded, with the offset recorded against Net parent investment.

For a portion of fiscal year 2022 and all periods prior to the Separation, the Company’s domestic and foreign operations were included in BD’s domestic consolidated and foreign tax returns, and payments to all tax authorities were made by BD on the Company’s behalf.

The Company filed its own foreign tax return and made its own foreign tax payments in Ireland.

The Company’s current tax liabilities computed under the separate return method were considered to be effectively settled in the consolidated financial statements at the time the transaction was recorded, with the offset recorded against Net parent investment.

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

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Tax reserves ( 0.4 ) ( 1.8 ) 0.5

Valuation allowances 14.0 — —

Tax credits ( 1.5 ) ( 0.7 ) ( 0.4 )

Nontaxable items ( 8.6 ) ( 1.1 ) —

Nondeductible compensation 2.5 — —

Other, net 0.1 ( 0.1 ) —

Effective income tax rate 33.4 % 12.9 % 16.2 %

The decrease in the Company's effective income tax rate from 2022 as compared to 2021 was primarily due to the change in geographical mix of earnings and favorable unrecognized tax benefits recorded in 2022;

The increase in the Company's effective income tax rate for fiscal year 2023 as compared to fiscal year 2022 was primarily due to the establishment of a valuation allowance against interest expense carryforwards in the U.S., an increase in U.S.

tax on foreign earnings primarily because of limitations on the utilization of foreign tax credits and higher withholding taxes on unremitted foreign earnings;

partially offset by increased tax benefits from non-taxable items and change in geographical mix of earnings.

For fiscal year 2023, the Other, net included a tax benefit for the establishment of net deferred tax assets incurred in connection with the ongoing separation of the Diabetes Care Business from BD, partially offset by a return to provision adjustment from the prior year.

The decrease in the Company's effective income tax rate for fiscal year 2022 as compared to fiscal year 2021 was primarily due to the change in geographical mix of earnings and favorable unrecognized tax benefits recorded in fiscal year 2022;

partially offset by tax expense that have been provided on undistributed earnings of foreign subsidiaries.

The increase in the Company's effective income tax rate from 2021 as compared to 2020 was primarily impacted by favorable unrecognized tax benefits recorded in 2020.

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

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Capitalized research and development expenses 16.6 7.0

Leases 12.9 9.7

Interest expense carryforwards 16.4 —

Tax loss and credit carryforwards 6.6 0.5

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Deferred tax liabilities:

Property, plant and equipment $ — $ ( 8.3 )

Taxes on unremitted foreign earnings ( 20.5 ) ( 8.2 )

Right of use asset ( 12.8 ) ( 9.5 )

Other — ( 2.0 )

Total deferred tax liabilities $ ( 33.3 ) ( 17.7 )

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Deferred tax assets and liabilities are netted in the Consolidated Balance Sheets by separate tax jurisdictions.

As of September 30, 2022, the Company has recorded deferred taxes on undistributed earnings of foreign subsidiaries.

As of September 30, 2021 the Company has not provided deferred taxes on undistributed earnings in 2021.

The determination of the amount of the unrecognized deferred tax liability in 2021 related to the undistributed earnings is not practicable because of the complexities associated with its hypothetical calculation.

The Company has recorded valuation allowances of $ 10.4 million for certain foreign deferred tax assets due to uncertainty that exists regarding future realizability.

As of September 30, 2023 and September 30, 2022, the Company has recorded deferred taxes on undistributed earnings of foreign subsidiaries.

The vast majority of these taxes were accrued, in part, because the Company does not meet certain holding period requirements for stock ownership.

During fiscal year 2024, the Company anticipates that it will meet these requirements at which time approximately $ 18.0 million of the accrued balance as of September 30, 2023 will be recorded as a reduction to income tax expense.

As of September 30, 2023 the Company has recorded valuation allowances of $ 31.6 million due to the uncertainty that exists regarding future realizability of certain deferred tax assets primarily for interest expense carryforwards in the U.S.

related to limitations on the annual deductibility of such interest, state net operating losses, state tax credits and deferred tax assets related to certain foreign manufacturing operations.

As of September 30, 2022, the Company has recorded valuation allowances of $ 10.4 million for deferred tax assets related to certain foreign manufacturing operations.

The approximate tax reduction related to a tax holiday in Switzerland in which the Company does business is $ 2.1 million and $ 0.04 impact on diluted earnings per share in fiscal year 2023.

The tax holiday will expire in 2026.

Tax loss and credit carryforwards consist of approximately $ 1.0 million of state income tax credit carryforwards and $ 5.6 million net operating loss carryforwards in various jurisdictions.

Approximately $ 1.0 million of net operating loss carryforwards will not expire and the remaining carryforwards expire in varying amounts from 2028 through 2042.

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

Unrecognized Tax Benefits

The table below summarizes the gross amounts of unrecognized tax benefits without regard to reduction in tax liabilities or additions to deferred tax assets and liabilities if such unrecognized tax benefits were settled.

The Company believes it is reasonably possible that the amount of unrecognized tax benefits will change due to one or more of the following events in the next twelve months:

expiring statutes, audit activity, and tax payments in matters that are the subject of controversy in various taxing jurisdictions in which the Company operates.

2023 2022 2021

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Unrecognized tax benefits including interest and penalties that would affect the effective tax rate if recognized $ 7.2 $ 7.2 $ 20.0

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

For a portion of 2022 and all periods prior to the Separation, the Company’s domestic and foreign operations were included in BD’s domestic consolidated and foreign tax returns, with the exception of Ireland.

The Company conducts business and files tax returns in numerous countries and currently has no tax audits in progress for the period after the Separation.

The following were included for the years ended September 30 as a component of Income tax provision in the Consolidated Statements of Income.

The following were included for the years ended September 30 as a component of Income tax provision in the Consolidated Statements of Income and the Consolidated Balance Sheets.

2023 2022 2021

Interest and penalties associated with unrecognized tax benefits $ 1.5 $ 4.0 $ 2.9

Interest and penalties expense (benefit) associated with unrecognized tax benefits on the Consolidated Statements of Income $ ( 1.2 ) $ ( 1.5 ) $ 0.9

Interest and penalties associated with unrecognized tax benefits on the Consolidated Balance Sheets $ 0.2 $ 1.5 $ 4.0

Note 15 — Financial Instruments and Fair Value Measurements

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

Interest income on Cash and cash equivalents was $ 9.4 million for the year ended September 30, 2023 and is included as a component of Interest expense, net .

For the years ended September 30, 2022 and 2021, interest income was not material to the Company's Consolidated Statements of Income.

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.

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Gains and losses on these instruments are recognized immediately in Other income (expense), net .

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.

These gains and losses are largely offset by gains and losses on the underlying hedged items, as well as the

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

hedging costs associated with the derivative instruments.

Gains and losses recognized to date on these instruments were not material to the Company's Consolidated Financial Statements.

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These measurements of fair value are generally based upon Level 3 inputs, including values estimated using the income approach.

During the year ended September 30, 2023, the Company recorded impairment charges of $ 2.5 million related to the abandonment of certain manufacturing equipment in China that is no longer in use that were inherited as part of the spin from BD.

These assets were previously included as a component of Machinery, equipment and fixtures within Property, Plant and Equipment .

The impairment charges are recognized within Impairment expense in the Consolidated Statements of Income.

During the year ended September 30, 2022, the Company recorded impairment charges of $ 58.9 million related to the abandonment of certain manufacturing production lines in the United States that are no longer expected to be completed.

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The impairment charges are recognized within Cost of products sold in the Consolidated Statements of Income.

There were no impairment charges incurred during the year ended 2020.

Concentration of Credit Risk

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.

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

As of September 30, 2023, the Company had transferred the majority of its trade receivables to BD under the Factoring Agreements (see Note 4).

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 $ 16.7 million of trade receivables.

Three of the Company’s customers represented at least 10.0% of total gross revenues individually and, in the aggregate, represented approximately 40.1 % for the year ended September 30, 2022.

Two customers represented at least 10.0% of total revenues individually and, in the aggregate, represented 30.7 % and 32.7 % of total revenues for the years ended September 30, 2021 and 2020, respectively.

Three of the Company’s customers represented at least 10.0% of total gross revenues individually and, in the aggregate, represented approximately 40.2 % and 40.1 % for the years ended September 30, 2023 and 2022, respectively.

Two customers represented at least 10.0% of total revenues individually and, in the aggregate, represented approximately 30.7 % of total revenues for the year ended September 30, 2021.

Substantially all of the Company’s trade receivables are due from public and private entities involved in the healthcare industry.

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Total Property, Plant and Equipment, Net $ 300.2 $ 301.6

These assets were previously included as a component of Machinery, equipment and fixtures within Property, Plant and Equipment .

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

These assets were previously included as a component of Construction in progress within Property, Plant and Equipment, Net.

These assets were previously included as a component of Construction in progress within Property, Plant and Equipment .

The impairment charges are recognized within Impairment expense in the Consolidated Statements of Income.

Note 17 — Leases

Finance Lease

Our finance lease assets and liabilities are attributed to our manufacturing site in Holdrege, Nebraska.

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.

Holdrege Lease

In conjunction with the Separation, the Company 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 10 years.

The Company determined that the manufacturing space and equipment are highly interdependent and interrelated.

Consequently, the Company concluded that the manufacturing space and equipment represent a single lease component.

This finance lease is recorded in Buildings within Property, Plant and Equipment, Net , Current finance lease liabilities , and Non Current Finance Lease Liabilities .

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 .

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 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.

For the year ended September 30, 2023, the Company recorded total finance lease costs of $ 4.8 million which is comprised of $ 2.4 million attributable to depreciation of assets and $ 2.4 million attributable to interest expense associated with the lease liability.

The amounts are included in Cost of products sold and Interest expense, net, respectively.

For the year ended September 30, 2022, total finance lease costs were not material to the Company's Consolidated Statements of Income.

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.

The Company entered into a real estate lease for a new Corporate Headquarters located in Parsippany, NJ which commenced during the second quarter of fiscal year 2023 for an initial term of ten years .

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

For the year ended September 30, 2023 operating lease costs were $ 4.5 million.

For the years ended September 30, 2022, and 2021 total operating lease costs were not material to the Company's Consolidated Statements of Income.

Aggregate Lease Information

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

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

As of September 30, 2023 As of September 30, 2022

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Weighted-average discount rate 6.9 % 5.9 %

Supplemental cash flow information related to leases for the year ended September 30, 2022 was as follows:

September 30, 2022

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

Supplemental cash flow information related to leases was as follows as of September 30, 2023 and 2022:

September 30, 2023 September 30, 2022

Right of use assets obtained in exchange for lease liabilities

Financing Lease $ 36.7

Finance Lease

Operating Leases 19.0 2.8

There were no right of use assets obtained in exchange for lease liabilities during the years ended September 30, 2021 and 2020.

For the years ended September 30, 2022, 2021, and 2020 lease expense and cash paid for leases were not material.

Maturities of our finance and operating lease liabilities as of September 30, 2022 by fiscal year are as follows:

For the year ended September 30, 2021 right of use assets obtained in exchange for lease liabilities was not material.

September 30, 2023

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from Operating Leases

Financing cash flows from Finance Lease

Operating cash flows from Finance Lease

For the years ended September 30, 2022, and 2021 cash paid for amounts included in the measurement of lease liabilities were not material.

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

Finance Leases Operating Leases Total

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

On April 1, 2022, the Company entered into a real estate lease for a new Corporate Headquarters located in Parsippany, NJ that has not yet commenced.

The lease is expected to commence during the first half of fiscal year 2023.

The lease is expected to commence during the first half of fiscal year 2023 and is in existence for an initial term of 10 years.

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

Note 18 — Benefit Plans

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The Consolidated Statements of Income include expense allocations for these benefits, which were determined using a proportional allocation method.

Total benefit plan expense allocated to the Company for the years ended September 30, 2022, 2021 and 2020 was $ 3.6 million, $ 9.0 million and $ 9.0 million, respectively.

The Company's participation in the defined pension and postretirement benefit plans sponsored by BD concluded upon the completion of the Separation on April 1, 2022.

Total benefit plan expense allocated to the Company for the years ended September 30, 2022 and 2021 was $ 3.6 million and $ 9.0 million, respectively.

Except for deferred closing countries, the Company's participation in the defined pension and postretirement benefit plans sponsored by BD concluded upon the completion of the Separation on April 1, 2022.

As of April 1, 2022, Embecta became the plan sponsor for certain global defined benefit pension plans.

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The Company uses September 30 as the year-end measurement date for these plans.

Net periodic benefit cost for the Company’s global defined benefit pension plans for the year ended September 30, 2022 was $ 0.7 million.

Net periodic benefit cost for the Company’s global defined benefit pension plans for the years ended September 30, 2023 and 2022 was $ 1.0 million and $ 0.7 million, respectively.

Of the plans, the defined benefit pension plan covering employees in Switzerland (the "Swiss Plan") is the only defined benefit pension plan material to the Company's Consolidated Financial Statements.

Our Swiss Plan is a government-mandated retirement cash balance plan.

The plan requires a minimum investment determined annually by the Swiss government and was 1.00% in 2022.

Under the Swiss plan, the Company and certain employees with annual earnings in excess of government determined amounts are required to make contributions to the plan.

The Company's Swiss Plan is a government-mandated retirement account balance plan.

Companies within the Swiss regulatory environment have substantial freedom in setting their pension plan design (e.g.

with regards to the salary covered, level of retirement benefits, or overall benefit design) provided the benefits are always at least equal to the minimum requirements as defined by law.

Most employers provide higher benefits than those required by law, which is the case for Embecta.

The minimum level of retirement benefit is expressed by a cash balance formula with age-related contribution rates (or "retirement credits") based on an insured salary defined by law, and a minimum required interest crediting rate which is set by the government (1.00% in 2023 and 2022).

The sum of the Company's contributions should be at least equal to the sum of employee contributions.

Required minimum employee contributions are based on the respective employee’s age, salary and gender.

Contributions to the Swiss Plan are invested into a diversified fund managed by an investment fiduciary.

As of September 30, 2022, the Swiss plan had an unfunded net pension obligation of $ 0.6 million, and plan assets that totaled $ 8.0 million.

Since Separation, we recognized net periodic benefit cost totaling $ 0.2 million, related to our Swiss plan, of which $ 0.1 million was included in Other income (expense), net .

As of September 30, 2023 and 2022, the Swiss plan had an unfunded net pension obligation of $ 1.9 million and $ 0.6 million, respectively, and plan assets that totaled $ 14.1 million and $ 8.0 million, respectively.

Since the Separation, the Company recognized net periodic benefit cost totaling $ 0.9 million and $ 0.2 million during the fiscal years ended September 30, 2023 and 2022, respectively, related to the Company's Swiss plan, of which $ 0.3 million and $ 0.1 million was included in Other income (expense), net during the fiscal years ended September 30, 2023 and 2022, respectively.

Defined Contribution Plans

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The Company matches a certain percentage of each employee’s contributions as per the provisions of the plans.

Total employer contributions by the Company to the plans were $ 8.9 million.

Between April 1, 2022 and September 30, 2022, BD remained the defined pension plan sponsor for certain Embecta employees in Ireland.

Total employer contributions by the Company to the plans were $ 14.1 million and $ 8.9 million for the fiscal years ended September 30, 2023 and 2022, respectively.

Between April 1, 2022 and September 30, 2022, BD remained the defined benefit pension plan sponsor for certain Embecta employees in Ireland.

The Company accounts for this plan as though it was a participant in a multi-employer plan with other businesses of BD.

The amount of contributions to BD for this plan are included in the amounts noted above.

At the Separation Date, Embecta effectuated an Embecta sponsored defined contribution savings plan for certain other employees in Ireland.

On October 1, 2022, certain employees participation in the BD defined benefit pension plan ceased and these employees began participating in an Embecta sponsored defined contribution savings plan that was effectuated at the Separation Date.

At the Separation Date, Embecta effectuated an Embecta sponsored defined contribution pension plan for certain other employees in Ireland.

On October 1, 2022, any Embecta employees who remained participating in the BD defined benefit pension plan ceased participating and these employees began participating in an Embecta sponsored defined contribution pension plan that was effectuated at the Separation Date.

Deferred Compensation Plan

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A participant's deferrals are “invested” at the direction of the employee in a hypothetical portfolio of investments which are tracked by an administrator.

The amounts accrued under this plan were $ 3.7 million as of September 30, 2022.

The amounts accrued under this plan were $ 6.1 million and $ 3.7 million as of September 30, 2023, and 2022, respectively.

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

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Additions charged to costs and expenses ( 0.3 ) ( 18.1 ) ( 18.4 )

Deductions and other 1.1 (a) 15.1 16.2

Deductions and other 2.1 (b) 21.1 23.2

Balance at September 30, 2022 ( 1.3 ) ( 0.1 ) ( 1.4 )

Additions charged to costs and expenses ( 0.2 ) ( 18.7 ) ( 18.9 )

Deductions and other 2.1 (b) 21.1 23.2

Deductions and other 0.5 (a) 18.8 19.3

Balance at September 30, 2023 ( 1.0 ) — ( 1.0 )

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Europe, Middle East, and Africa 176.9 174.5

Greater Asia 42.3 50.4

Asia 38.4 42.3

Other 0.4 0.1

$ 324.9 $ 326.2

Note 20 — Subsequent Events

Performance-Based and Time-Vested Restricted Stock Units

In November 2023 and pursuant to the Company's 2022 Employee and Director Equity Based Compensation Plan (the "Plan"), the Company granted approximately 1.3 million TVUs in connection with the Company's annual grant which vest on a graded basis over a period of three years , subject to continuous service to the Company by the employee.

The Company also awarded approximately 0.5 million PSUs to certain executive officers and employees in connection with the Company's annual grant 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 and targets that will be fully established at a future date.

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

1 unchanged sentence

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-K

Item 8. Financial Statements and Supplementary Data