Controls and Procedures.
−Removed: An evaluation was carried out by Embecta’s management, with the participation of Embecta’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Embecta’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of June 30, 2024.
−Removed: Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were, as of the end of the period covered by this report, effective and designed to ensure that material information relating to Embecta and its consolidated subsidiaries would be made known to them by others within these entities.
+Added: Evaluation of Disclosure Controls and Procedures
+Added: Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934), as amended.
+Added: Based upon that evaluation as of December 31, 2024, our Chief Executive Officer and Chief Financial Officer each concluded that, as of the end of such period, our disclosure controls and procedures were not effective due to the material weakness in our internal control over financial reporting, as described in Management's Report on Internal Control Over Financial Reporting in "Item 9A.
+Added: Control and Procedures" in the Annual Report on Form 10-K for the year ended September 30, 2024.
In 2022, the Company commenced the process of implementing a new ERP system and other Business Continuity Processes 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.
−Removed: The implementation of the ERP system and other Business Continuity Processes is highly complex and will occur in phases across our geographies.
−Removed: The first phase of the implementation began in the fourth quarter of fiscal year 2023.
−Removed: The second phase began in the first quarter of fiscal year 2024 and will continue thorough the fiscal year with the remaining phases expected to be completed in fiscal year 2025.
−Removed: A standardized internal control framework was implemented with each phase as we move away from relying on BD’s systems and controls.
−Removed: The Company continues to evaluate the design and effectiveness of certain controls, including, but not limited to, the information technology controls supporting the recently implemented ERP system and certain controls supporting the Business Continuity Processes, which will continue through the end of this fiscal year and into fiscal year 2025 for Latin America and India.
−Removed: Up until the second phase of the implementation of the Business Continuity Processes discussed previously, we relied on certain material processes and internal controls over financial reporting performed by BD.
−Removed: Subsequent to the second phase of this implementation, we have and will continue to rely on certain processes and internal controls over financial reporting performed by BD for Latin America and India.
−Removed: Except as set forth above, there were no changes in our internal controls over financial reporting during the fiscal quarter ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, Embecta's internal controls over financial reporting.
+Added: The implementation of the ERP system and other Business Continuity Processes is highly complex and has occurred and will continue to occur in phases across our geographies.
+Added: The implementations of North America, EMEA, Asia and Greater China were completed in phases within fiscal years 2023 and 2024.
+Added: The Latin America implementation was completed in the first quarter of fiscal year 2025.
+Added: The implementation for India is expected to be completed in fiscal year 2025, subject to the timely receipt of the required government and health authority approvals.
+Added: A standardized internal control framework is implemented as the Company moves away from relying on BD’s systems and controls.
+Added: Since the final phase has not been completed as of the date of this Quarterly Report on Form 10-Q, the Company continues to rely on certain processes and internal control over financial reporting performed by BD.
+Added: Management's Remediation Plan
+Added: Upon the identification of the material weakness, management immediately effectuated a plan to remediate the design and operation of the related control activities.
+Added: The execution of this plan has commenced and will continue to progress through fiscal year 2025.
+Added: Remediation activities include, but are not limited to the following actions:
+Added: • reassess the design of processes and internal controls related to certain account reconciliations and certain analyses;
+Added: • execute a robust and formal training program regarding diligence in control performance and Sarbanes-Oxley Act requirements and emphasis of certain finance policies;
+Added: • implement enhanced oversight and governance over account reconciliations and certain financial analyses;
+Added: • enhance control documentation and design to include additional procedures regarding confirmation of the completeness and accuracy of data used to perform controls and the precision of control activities;
+Added: • leverage existing technology to develop enhanced reporting and to drive process efficiencies and automation.
+Added: The Company is committed to remediating the material weakness.
+Added: The actions are subject to ongoing management review, as well as oversight from the Audit Committee.
+Added: When fully implemented and operational, the Company believes the measures described above will remediate the underlying cause of the material weakness and will strengthen the Company's internal control over financial reporting.
+Added: However, the Company will not be able to fully remediate this material weakness until these steps have been completed and have been operating effectively for a sufficient period of time.
+Added: The Company may also identify additional measures that may be required to remediate the material weakness in its internal control over financial reporting, necessitating further action.
+Added: The Company will continue to build on the progress made in the remediation plan.
+Added: A determination cannot be made on when the remediation plan will be fully completed, and the Company cannot provide any assurance that these remediation efforts will be successful or that internal control over financial reporting will be effective as a result of these efforts.
+Added: Changes in Internal Control over Financial Reporting
+Added: The Company is working towards executing the remediation plan to address the material weakness.
+Added: However, none of these efforts have resulted in the remediation of the material weakness as of December 31, 2024.
+Added: There have been no changes in internal control over financial reporting during the three months ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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