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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2023
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-41186
https://cdn.kscope.io/5219b8f46184ba30c1b011bbd7d8d682-embecta_rgb_sm.jpg
EMBECTA CORP.
(Exact name of registrant as specified in its charter)
Delaware87-1583942
(State or other jurisdiction of
incorporation or organization)
(I.R.S. employer
identification no.)
300 Kimball Drive, Suite 300, Parsippany, New Jersey
07054
(Address of principal executive offices)(Zip code)
(862) 401-0000
(Registrant’s telephone number, including area code)


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Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
symbol(s)
Name of each exchange
on which registered
Common Stock, par value $0.01 per shareEMBC
The Nasdaq Stock Market LLC (Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer
Emerging growth companySmaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of shares of Embecta Corp. common stock outstanding as of May 3, 2023 was 57,293,549 shares, par value $0.01 per share.


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Embecta Corp.
Form 10-Q
For the Quarterly Period ended March 31, 2023
Table of Contents
  Page
Item 1.
4
5
6
Item 2.
Item 3.
Item 4.
Item 1A.
Item 6.

-i-

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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Supplementary Data.
Condensed Consolidated Statements of Income
Embecta Corp.
(Unaudited)
 Three Months Ended
March 31,
Six Months Ended
March 31,
 202320222023 2022
 
Revenues$277.1 $274.5 $552.8 $563.8 
Cost of products sold(1)
87.3 83.3 174.2 168.7 
Gross Profit$189.8 $191.2 $378.6 $395.1 
Operating expenses:
Selling and administrative expense85.2 66.9 158.0 129.1 
Research and development expense22.1 18.0 39.0 34.7 
Other operating expenses26.9 7.4 37.2 15.8 
Total Operating Expenses$134.2 $92.3 $234.2 $179.6 
Operating Income$55.6 $98.9 $144.4 $215.5 
Interest expense, net(26.8)(4.9)(52.4)(4.9)
Other income (expense), net(4.3)(0.1)(11.4)(0.1)
Income Before Income Taxes$24.5 $93.9 $80.6 $210.5 
Income tax provision10.5 14.3 31.4 32.1 
Net Income$14.0 $79.6 $49.2 $178.4 
Net Income per common share:
Basic$0.24 $1.38 $0.86 $3.09 
Diluted$0.24 $1.38 $0.85 $3.09 
(1)For periods prior to the Separation, this income statement line includes cost of products sold from related party inventory purchases. For the three and six month periods ended March 31, 2022, cost of products sold from related party inventory purchases were $10.6 million and $22.1 million, respectively.
See notes to the Unaudited Condensed Consolidated Financial Statements.
Dollar amounts are in millions except per share amounts or as otherwise specified.
1

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Condensed Consolidated Statements of Comprehensive Income
Embecta Corp.
(Unaudited)
 Three Months Ended
March 31,
Six Months Ended
March 31,
 202320222023 2022
 
Net Income$14.0 $79.6 $49.2 $178.4 
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustments2.7 (7.1)28.7 (15.9)
Other Comprehensive Income (Loss)$2.7 $(7.1)$28.7 $(15.9)
Comprehensive Income$16.7 $72.5 $77.9 $162.5 
See notes to the Unaudited Condensed Consolidated Financial Statements.
Dollar amounts are in millions except per share amounts or as otherwise specified.
2

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Condensed Consolidated Balance Sheets
Embecta Corp.
 March 31, 2023September 30, 2022
(Unaudited)
 
Assets
Current Assets
Cash and cash equivalents$346.4 $330.9 
Trade receivables, net (net of allowance for doubtful accounts of $1.1 million and $1.3 million as of March 31, 2023 and September 30, 2022, respectively)
19.1 22.2 
Inventories:
Materials29.9 23.4 
Work in process8.7 5.6 
Finished products119.0 93.8 
Total Inventories$157.6 $122.8 
Amounts due from Becton, Dickinson and Company133.6 110.9 
Prepaid expenses and other99.6 77.9 
Total Current Assets$756.3 $664.7 
Property, Plant and Equipment, Net313.5 301.6 
Goodwill and Other Intangible Assets24.0 24.6 
Deferred Income Taxes and Other Assets116.2 95.5 
Total Assets$1,210.0 $1,086.4 
Liabilities and Equity
Current Liabilities
Accounts payable$52.5 $41.4 
Accrued expenses146.6 104.3 
Amounts due to Becton, Dickinson and Company74.3 66.5 
Salaries, wages and related items35.7 48.5 
Current debt obligations9.5 9.5 
Current finance lease liabilities3.6 3.6 
Income taxes35.5 27.2 
Total Current Liabilities$357.7 $301.0 
Deferred Income Taxes and Other Liabilities46.9 46.1 
Long-Term Debt1,596.0 1,598.1 
Non Current Finance Lease Liabilities32.0 32.6 
Commitments and Contingencies
Embecta Corp. Equity
Common stock, $0.01 par value
Authorized - 250,000,000
Issued and outstanding - 57,287,537 as of March 31, 2023 and 57,055,327 as of September 30, 2022
$0.6 $0.6 
Additional paid-in capital18.1 10.0 
Accumulated deficit(545.1)(577.1)
Accumulated other comprehensive loss(296.2)(324.9)
Total Equity$(822.6)$(891.4)
Total Liabilities and Equity$1,210.0 $1,086.4 
See notes to the Unaudited Condensed Consolidated Financial Statements.
Dollar amounts are in millions except per share amounts or as otherwise specified.
3

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Condensed Consolidated Statements of Equity
Embecta Corp.
(Unaudited)
 Common Stock
 SharesPar ValueAdditional Paid-In CapitalAccumulated DeficitNet Investment from Becton, Dickinson and CompanyAccumulated Other Comprehensive (Loss) IncomeTotal
Balance at January 1, 2022— $— $— $— $829.8 $(279.3)$550.5 
Net income attributable to Diabetes Care Business— — — — 79.6 — 79.6 
Other comprehensive loss, net of taxes— — — — — (7.1)(7.1)
Net transfers to Becton, Dickinson and Company— — — — (1,590.5)— (1,590.5)
Balance at March 31, 2022— $— $— $— $(681.1)$(286.4)$(967.5)
Balance at January 1, 202357,213,757 $0.6 $12.7 $(550.5)$— $(298.9)$(836.1)
Net income attributable to Embecta Corp.— — — 14.0 — — 14.0 
Other comprehensive income, net of taxes— — — — — 2.7 2.7 
Stock-based compensation plans— — 5.6 — — — 5.6 
Common dividends ($0.15 per share)
— — — (8.6)— — (8.6)
Issuance of shares related to stock-based compensation plans73,780 — (0.2)— — — (0.2)
Balance at March 31, 202357,287,537 $0.6 $18.1 $(545.1)$— $(296.2)$(822.6)
See notes to the Unaudited Condensed Consolidated Financial Statements.
Dollar amounts are in millions except per share amounts or as otherwise specified.
4

Table of Contents
 Common Stock
 SharesPar ValueAdditional Paid-In CapitalAccumulated DeficitNet Investment from Becton, Dickinson and CompanyAccumulated Other Comprehensive (Loss) IncomeTotal
Balance at October 1, 2021— $— $— $— $864.8 $(270.5)$594.3 
Net income attributable to Diabetes Care Business— — — — 178.4 — 178.4 
Other comprehensive loss, net of taxes— — — — — (15.9)(15.9)
Net transfers to Becton, Dickinson and Company— — — — (1,724.3)— (1,724.3)
Balance at March 31, 2022— $— $— $— $(681.1)$(286.4)$(967.5)
Balance at October 1, 202257,055,327 $0.6 $10.0 $(577.1)$— $(324.9)$(891.4)
Net income attributable to Embecta Corp.— — — 49.2 — — 49.2 
Other comprehensive income, net of taxes— — — — — 28.7 28.7 
Stock-based compensation plans— — 11.1 — — — 11.1 
Common dividends ($0.30 per share)
— — — (17.2)— — (17.2)
Issuance of shares related to stock-based compensation plans232,210 — (3.0)— — — (3.0)
Balance at March 31, 202357,287,537 $0.6 $18.1 $(545.1)$— $(296.2)$(822.6)
See notes to the Consolidated Financial Statements.
Dollar amounts are in millions except per share amounts or as otherwise specified.
5

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Condensed Consolidated Statements of Cash Flows
Embecta Corp.
(Unaudited)
 Six Months Ended
March 31,
 20232022
Operating Activities
Net income$49.2 $178.4 
Adjustments to net income to derive net cash provided by operating activities:
Depreciation and amortization15.2 15.1 
Amortization of debt issuance costs3.2 0.1 
Stock-based compensation11.3 8.5 
Net periodic pension benefit and other postretirement costs2.6 3.6 
Deferred income taxes1.2  
Change in operating assets and liabilities:
Trade receivables, net4.3 133.3 
Inventories(30.7)(10.0)
Due from/due to Becton, Dickinson and Company(14.9) 
Prepaid expenses and other(16.0)(2.4)
Accounts payable, accrued expenses and other current liabilities19.5 (15.3)
Income and other net taxes payable10.6 9.7 
Other assets and liabilities, net(8.1)0.4 
Net Cash Provided by Operating Activities$47.4 $321.4 
Investing Activities
Capital expenditures$(10.5)$(9.7)
Acquisition of intangible assets (0.4)
Net Cash Used for Investing Activities$(10.5)$(10.1)
Financing Activities
Proceeds from the issuance of long-term debt1,450.0 
Payments on long-term debt$(4.8)$ 
Payment of long-term debt issuance costs(33.3)
Payment of revolving credit facility fees(5.6)
Payments related to tax withholding for stock-based compensation(3.0) 
Payments on finance lease(1.8) 
Dividend payments(17.2) 
Net consideration paid to Becton, Dickinson and Company in connection with the Separation(1,266.0)
Net transfers to Becton, Dickinson and Company(189.3)
Net Cash Used for Financing Activities$(26.8)$(44.2)
Effect of exchange rate changes on cash and cash equivalents5.4 (2.8)
Net Change in Cash and cash equivalents$15.5 $264.3 
Opening Cash and cash equivalents330.9  
Closing Cash and cash equivalents$346.4 $264.3 
See notes to the Unaudited Condensed Consolidated Financial Statements.
Dollar amounts are in millions except per share amounts or as otherwise specified.
6

Table of Contents
Notes to Unaudited Condensed Consolidated Financial Statements
Embecta Corp.
Note 1 — Background
Embecta Corp. ("Embecta" or the "Company") is a leading global medical device company focused on providing solutions to improve the health and well-being of people living with diabetes. 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 or use the products to deliver insulin injections to patients.
On April 1, 2022, Embecta and Becton, Dickinson and Company ("BD") entered into a Separation and Distribution Agreement (the "Separation and Distribution Agreement"). Pursuant to the Separation and Distribution Agreement, BD agreed to spin off its diabetes care business ("Diabetes Care Business") into Embecta, a new, publicly traded company (the "Separation").
The Separation occurred by means of a pro-rata distribution of all of Embecta’s issued and outstanding shares of common stock on the basis of one share of Embecta common stock, par value $0.01 per share, for every five shares of BD common stock, par value $1.00 per share, held as of the close of business on March 22, 2022, the record date for the distribution. Embecta is now a standalone publicly traded company and, on April 1, 2022, regular-way trading of Embecta common stock commenced on the Nasdaq Global Select Market under the ticker symbol "EMBC".
In connection with the Separation, BD and Embecta entered into various agreements to provide a framework for the relationship between BD and Embecta after the Separation, including, but not limited to, a separation and distribution agreement, a transition services agreement, a tax matters agreement, an employee matters agreement, a cannula supply agreement, contract manufacturing agreements, an intellectual property matters agreement, a logistics services agreement, distribution agreements, factoring and receivables agreements, local support and service agreements and other transaction documents.
Note 2 — Basis of Presentation
On April 1, 2022, the Company became a standalone publicly traded company, and its financial statements are now presented on a consolidated basis. Prior to the Separation on April 1, 2022, the Company’s historical combined financial statements were prepared on a standalone basis and were derived from BD's Consolidated Financial Statements and accounting records. The unaudited financial statements for all periods presented, including the historical results of the Company prior to April 1, 2022, are now referred to as "Condensed Consolidated Financial Statements", and have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by United States generally accepted accounting principles ("GAAP") for complete consolidated financial statements are not included herein. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year. In the Company’s opinion, all adjustments necessary for a fair statement of these interim statements have been included and are of a normal and recurring nature. These interim statements should be read in conjunction with the audited financial statements and notes thereto included in Embecta’s Annual Report on Form 10-K for the year ended September 30, 2022 filed with the Securities and Exchange Commission on December 22, 2022 (the "2022 Form 10-K").
Prior to the Separation, the Company was referred to as the Diabetes Care Business. The assets, liabilities, revenue and expenses of the Diabetes Care Business were reflected in the Condensed Combined Financial Statements on a historical cost basis, as included in the consolidated financial statements of BD, using the historical accounting policies applied by BD. The Condensed Combined Financial Statements did not purport to reflect what the Company’s results of operations, comprehensive income, financial position, equity or cash flows would have been had the Company operated as a standalone public company during the periods presented.
The Diabetes Care Business had historically functioned together with the other businesses controlled by BD. Accordingly, the Diabetes Care Business relied on BD’s corporate and other support functions for its business. Therefore, for the period prior to the Separation, certain corporate and shared costs were allocated to the Diabetes Care Business based on a specific identification basis or, when specific identification was not practicable, a proportional cost allocation method. Refer to Note 2 of the audited Consolidated Financial Statements in the 2022 Form 10-K for additional details on Embecta's basis of presentation during periods prior to the Separation, at Separation and post Separation.
As the separate legal entities that made up the Diabetes Care Business were not historically held by a single legal entity, Net Investment from Becton, Dickinson and Company was shown in lieu of stockholders’ equity in these Condensed Consolidated Financial Statements. Net Investment from Becton, Dickinson and Company represented BD’s interest in the
Dollar amounts are in millions except per share amounts or as otherwise specified.
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recorded assets of the Diabetes Care Business and the cumulative investment by BD through the date of the Separation, inclusive of operating results.
For periods prior to the Separation, income tax expense and tax balances in the Condensed Combined Financial Statements were calculated on a separate tax return basis. The separate tax return method applies the accounting guidance for income taxes to the standalone financial statements as if we were a separate taxpayer and a standalone enterprise. Management believes the assumptions supporting the allocation and presentation of income taxes on a separate return basis are reasonable.
As part of the Separation, Net Investment from Becton, Dickinson and Company was reclassified as Common Stock and Accumulated Deficit.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates or assumptions affect reported assets, liabilities, revenues and expenses, including determining the allocation of shared costs and expenses from BD, depreciable and amortizable lives, sales returns and allowances, rebate accruals, inventory reserves and taxes on income as reflected in the Condensed Consolidated Financial Statements. Actual results could differ from these estimates.
The following provides updates to our "Summary of Significant Accounting Policies" as disclosed in the Form 10-K.
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. The Company amortizes the costs over the expected term of the hosting arrangement using the straight-line method to the same income statement line as the associated cloud operating expenses. The total balance of capitalized costs associated with these arrangements as of March 31, 2023 is $15.4 million which primarily relates to the implementation of the Company's new enterprise resource planning system ("ERP"). Once the implementation of the new ERP is complete and ready for its intended use, the capitalized costs are expected to be amortized over the term of the hosting arrangement which is expected to be five years.
Recently Adopted Accounting Standards
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.
Reclassification
Certain prior period amounts have been reclassified to conform to current year presentation.
Note 3 — Third Party Arrangements and Related Party Disclosures
Pursuant to the Separation, BD ceased to be a related party to Embecta and accordingly, no related party transactions or balances are reported subsequent to April 1, 2022.
In connection with the Separation, the Company entered into the Separation and Distribution Agreement, which contains provisions that, among other things, relate to (i) assets, liabilities and contracts to be transferred, assumed and assigned to each of Embecta and BD (including certain deferred assets and liabilities) as part of the Separation, (ii) cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of Embecta's business with Embecta and financial responsibility for the obligations and liabilities of BD’s remaining businesses with BD, (iii) procedures with respect to claims subject to indemnification and related matters, (iv) the allocation among Embecta and BD of rights and obligations under existing insurance policies with respect to occurrences prior to completion of the Separation, as well as the right to proceeds and the obligation to incur certain deductibles under certain insurance policies, and (v) procedures governing Embecta’s and BD’s obligations and allocations of liabilities with respect to ongoing litigation matters that may implicate each of BD’s business and Embecta’s business.
Agreements that Embecta entered into with BD that govern aspects of Embecta's relationship with BD following the Separation include, but are not limited to the Transition Services Agreements ("TSA"), Trade Receivables Factoring Agreements ("Factoring Agreements"), Distribution Agreements, Cannula Supply Agreement, Tax Matters Agreement,
Dollar amounts are in millions except per share amounts or as otherwise specified.
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Logistics Services Agreement, employee matters agreement, an intellectual property matters agreement, local support services agreements, certain other manufacturing arrangements and a process services agreement and lease agreement for a manufacturing facility located in Holdrege, Nebraska. For details on the rights and responsibilities of the parties under these agreements refer to Note 4 to the audited Consolidated Financial Statements in the 2022 Form 10-K.
The amount due from BD under the above agreements was $133.6 million at March 31, 2023 and is reflected in Amounts due from Becton, Dickinson and Company. The amount due to BD under these agreements was $74.3 million at March 31, 2023 and is included in Amounts due to Becton, Dickinson and Company.
The closing of the transfers of certain assets and liabilities related to the Diabetes Care Business in certain jurisdictions, including China, Mexico, and Italy, as contemplated by the Separation and Distribution Agreement did not occur at Separation. The transfers of the relevant local assets and liabilities for these deferred countries are expected to close at a future date. As of March 31, 2023, the Company estimates that amounts due to BD related to certain assets and liabilities in deferred close jurisdictions is $45.9 million and are reflected in Accrued expenses. As of March 31, 2023, the Company estimates that amounts due from BD related to certain assets and liabilities in deferred close jurisdictions are $6.3 million and is reflected in Prepaid expenses and other.
Prior to the Separation, the Company did not operate as a standalone business and the Condensed Combined Financial Statements were derived from the consolidated financial statements and accounting records of BD. 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.
Corporate and Medical Segment Allocations from BD
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 Transition Services Agreement. For purposes of these Condensed 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 Condensed Consolidated Statements of Income as follows:
 Three months ended March 31,Six months ended March 31,
 2022 2022
Cost of products sold$0.7 $2.3 
Selling and administrative expense23.547.9
Research and development expense1.83.5
Other (income) expense, net0.4(0.6)
Total General Corporate Expenses$26.4 $53.1 
These expenses were allocated to the Company on a pro rata basis of global and regional revenues, headcount, research and development spend and other drivers. Management believes the assumptions underlying the Condensed Consolidated Financial Statements, including the assumptions regarding allocating General Corporate Expenses from BD, are reasonable. Nevertheless, the Condensed Consolidated Financial Statements for periods prior to the Separation may not include all of the actual expenses that would have been incurred and may not reflect the Company’s consolidated results of operations, financial position and cash flows had it been a standalone public company during the periods presented. Actual costs that would have been incurred if the Company had been a standalone public company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure.
Related party transactions
The following transactions represent activity in the ordinary course of business between the Company and BD prior to the Separation for certain materials for use in production of certain medical products that were not at arm’s length. The following table summarizes related party purchases for the three month and six month periods ended March 31, 2022:
 Three months ended March 31,Six months ended March 31,
20222022
Purchases from BD$13.6 $28.0 
Dollar amounts are in millions except per share amounts or as otherwise specified.
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All significant intercompany transactions between the Company and BD prior to the Separation have been included in the Condensed Consolidated Financial Statements and are considered to be effectively settled for cash at the time the transaction is recorded. For the period prior to the Separation, the total net effect of the settlement of these intercompany transactions is reflected in the Condensed Consolidated Statements of Cash Flows as a financing activity and in the Condensed Consolidated Balance Sheets as Net Investment from Becton, Dickinson and Company.
Prior to the Separation, net transfers to BD were included within Net Investment from Becton, Dickinson and Company. in the Condensed Consolidated Statements of Equity and represent the net effect of transactions between the Company and BD.
The following table summarizes the components of net transfers to BD for the three months ended March 31, 2022:

Cash pooling and general financing activities(1)
$78.5 
Corporate and segment allocations, excluding non-cash stock-based compensation(30.6)
Taxes deemed settled with BD1.6 
Net consideration paid to BD in connection with the spin off1,266.0 
Related party senior secured notes197.0 
Other transfers to (from) BD, net78.0
Net transfers to BD$1,590.5 
The following table summarizes the components of the net transfers to BD for the six months ended March 31, 2022:
Cash pooling and general financing activities(1)
$255.9 
Corporate and segment allocations, excluding non-cash stock-based compensation(50.4)
Taxes deemed settled with BD0.0
Other Separation related adjustments, net(16.2)
Net transfers to BD as reflected in the Condensed Consolidated Statements of Cash Flows189.3
Stock-based compensation expense(8.5)
Pension expense(3.6)
Net Consideration paid to BD in connection with the Separation1,266.0 
Related party senior secured notes197.0 
Other transfers to (from) BD, net84.1 
Net transfers to BD$1,724.3 

(1)The nature of activities includes financing activities for capital transfers, cash sweeps and other treasury services. As part of this activity, cash balances were swept to BD on a daily basis under the BD Treasury function and the Company receives capital from BD for its cash needs.
Note 4 — 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 three and six month periods ended March 31, 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 5 — Other Operating Expenses
In connection with the Separation, the Company incurred separation and stand-up costs of approximately $25.6 million and $35.5 million during the three and six months ended March 31, 2023, respectively. There were $7.4 million and $15.8 million of separation and stand-up costs incurred during the three and six months ended March 31, 2022, respectively. The
Dollar amounts are in millions except per share amounts or as otherwise specified.
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costs incurred primarily consist of costs associated with accounting, auditing, legal services, supply chain, employee retention, and certain other costs to establish certain stand-alone functions to assist with the transition to being a stand-alone entity.
Note 6 — Contingencies
The Company was not a party to any material legal proceedings at March 31, 2023 or September 30, 2022, nor is it a party to any material legal proceedings as of the date of issuance of these Condensed Consolidated Financial Statements.
Note 7 — Revenues
The Company’s policies for recognizing sales have not changed from those described in the 2022 Form 10-K. The Company sells syringes, pen needles and other products used in the management of diabetes which are primarily sold 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. End-users of the Company’s products include healthcare institutions, physicians, life science researchers, clinical laboratories, the pharmaceutical industry, and the general public.
Measurement of Revenues
Payment terms extended to the Company’s customers are based upon commercially reasonable terms for the markets in which the Company’s products are sold. Because the Company generally expects to receive payment within one year or less from when control of a product is transferred to the customer, the Company does not generally adjust its revenues for the effects of a financing component. The Company’s allowance for doubtful accounts reflects the current estimate of credit losses expected to be incurred over the life of its trade receivables. Such estimated credit losses are determined based on historical loss experiences, customer specific credit risk, and reasonable and supportable forward-looking information, such as country or regional risks that are not captured in the historical loss information. Amounts are written off against the allowances for doubtful accounts when the Company determines that a customer account is uncollectible. The allowance for doubtful accounts for trade receivables is not material to the Company’s Condensed Consolidated financial results.
The Company’s gross revenues are subject to a variety of deductions which are recorded in the same period that the underlying revenues are recognized. Such variable consideration includes rebates, sales discounts, and sales returns. Because these deductions represent estimates of the related obligations, judgment is required when determining the impact of these revenue deductions on gross revenues for a reporting period. Rebates provided by the Company are based upon prices determined under the Company’s agreements primarily with its end-user customers. Additional factors considered in the estimate of the Company’s rebate liability include the quantification of inventory that is either in stock at or in transit to the Company’s distributors, as well as the estimated lag time between the sale of product and the payment of corresponding rebates.
The Company’s liability attributed to variable consideration at March 31, 2023 and September 30, 2022 was $37.9 million and $43.8 million, respectively. Sales deductions recorded as a reduction of gross revenues for the three months ended March 31, 2023 and 2022 were $95.2 million and $78.1 million, respectively. Sales deductions recorded as a reduction of gross revenues for the six months ended March 31, 2023 and 2022 were $187.8 million and $163.9 million, respectively.
Disaggregation of Revenues
Disaggregation of revenue by geographic region is provided within Note 8.
Contract Assets and Liabilities
The Company does not have contract liabilities. Contract assets consist of the Company’s right to consideration that is conditional upon its future performance pursuant to private label agreements and are presented within Prepaid expenses and other in the Condensed Consolidated Balance Sheets.
The Company’s contract asset balance was $1.2 million as of March 31, 2023 and September 30, 2022, respectively.
Note 8 — Segment and Geographical Data
Operating segments are identified as components of an enterprise in which discrete financial information is available for evaluation by the chief operating decision-maker (“CODM”) in making decisions regarding assessing business performance and allocating resources and capital. Management has concluded that the Company operates in one segment based upon the information used by the CODM in evaluating the performance of the Company’s business and allocating resources and capital.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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Disaggregation of Revenues
The Company has distribution agreements with regional or national distributors (including wholesalers and medical suppliers) to ensure broad availability of its products as well as a direct sales force in certain countries and regions around the world. In the United States and Canada, the Company utilizes its 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 Latin America, the Company maintains distribution agreements and direct sales representatives.
The Company disaggregates its revenue by geography as management believes this category best depicts how the nature, amount, and timing of revenues and cash flows are affected by economic factors.
Revenues by geographic region are as follows:
 Three months ended March 31,Six months ended March 31,
2023
2022(1)
2023
2022(1)
United States$146.4 $141.3 $295.7 $292.2 
International(2)
130.7133.2257.1271.6
Total$277.1 $274.5 $552.8 $563.8 
(1)$1.5 million was reclassified between United States and International for both the three and six months ended March 31, 2022 respectively to conform to the current year presentation.
(2)For the three and six months ended March 31, 2023 and 2022, no individual country outside of the United States generated net revenues that represented more than 10.0% of total revenues.
Note 9 — Stock-Based Compensation
Time Vested Restricted Stock Units ("TVUs")
During the six months ended March 31, 2023, Embecta granted 634,032 of restricted stock units ("RSUs") in the form of TVUs to employees which vest ratably over three years, subject to continued employment of the recipients.
Performance Based Restricted Stock Units ("PSUs")
During the six months ended March 31, 2023, Embecta awarded 244,192 of RSUs in the form of PSUs to certain executive officers and employees which vest after three years, subject to continued employment of the recipients and the achievement of certain performance metric targets. The Company has identified certain performance metrics associated with these awards and certain targets 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. Stock-based compensation expense for these awards for the three and six months ended March 31, 2023 was $0.5 million and $0.6 million, respectively.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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Stock-Based Compensation Expense
Total direct and allocated stock-based compensation expense for the three and six months ended March 31, 2023 and 2022 and the respective income tax benefits recognized by the Company in the Condensed Consolidated Statements of Income are as follows:
 Three months ended March 31,Six months ended March 31,
2023202220232022
Cost of products sold$0.6 $0.7 $1.2 $1.7 
Selling and administrative expense4.7 2.8 9.3 5.7 
Research and development expense0.5 0.4 0.8 1.1 
Total Stock-Based Compensation Expense$5.8 $3.9 $11.3 $8.5 
Tax benefit associated with stock-based compensation costs recognized$0.7 $1.0 $1.5 $2.0 
A summary of stock appreciation rights ("SARs") outstanding as of March 31, 2023 and changes during the six months ended March 31, 2023 are as follows:
SARs (in thousands)Weighted Average Exercise PriceWeighted Average Remaining Contractual Term (Years)Aggregate Intrinsic Value
Balance at October 11,916.7 $28.98 
Granted  
Exercised*(25.0)21.98 
Forfeited, canceled or expired $ 
Balance at March 311,891.7 $28.08 8.2$0.7 
Vested and expected to vest at March 311,816.9 $29.05 8.2$0.7 
Exercisable at March 31532.1 $27.44 7.1$0.6 
*The amounts exercised include shares withheld for taxes that are not formally issued to the market.
SARs with an intrinsic value of $0.3 million and grant date fair value of $0.6 million were exercised during the six months ended March 31, 2023.
A summary of time-vested RSUs and performance-based RSUs outstanding as of March 31, 2023 and changes during the six months ended March 31, 2023 are as follows:
RSUs (in thousands)Weighted Average Grant Date Fair Value
Nonvested at October 1977.5 $28.34 
Granted695.1 32.38 
Distributed*(311.6)27.97 
Forfeited, canceled or expired(30.0)28.18 
Nonvested at March 311,331.0 30.54 
Expected to vest at March 311,257.9 $30.54 
*The RSUs distributed include shares withheld for taxes that are not formally issued to the market.
The weighted average grant date fair value of time restricted stock units granted during the six months ended March 31, 2023 is $32.38 and the total fair value of time vested stock units vested during the six months ended March 31, 2023 is $8.8 million.
At March 31, 2023, the weighted average remaining vesting term of time vested restricted stock units is 2.0 years.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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The amount of unrecognized compensation expense for all non-vested stock-based awards granted as of March 31, 2023, is approximately $40.4 million, which is expected to be recognized over a weighted-average remaining life of approximately 2.2 years. At March 31, 2023, 3.5 million shares were authorized for future grants under the 2022 Employee and Director Equity Based Compensation Plan.
Note 10 — Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets consisted of:
March 31, 2023September 30, 2022
Amortized intangible assets
Patents – gross$9.4 $9.4 
Less: accumulated amortization(4.2)(3.9)
Patents – net$5.2 $5.5 
Customer Relationships and Other – gross$5.2 $5.2 
Less: accumulated amortization(2.1)(1.8)
Customer Relationships and Other – net$3.1 $3.4 
Total amortized intangible assets$8.3 $8.9 
Goodwill15.7 15.7 
Total Goodwill and Other Intangible Assets$24.0 $24.6 
Note 11 — Long-Term Debt
Credit Agreement
On March 31, 2022, Embecta entered into a credit agreement (the “Credit Agreement”), providing for:
a Term Loan B Facility (the "Term Loan") in the amount of $950.0 million, with a seven-year term that matures in March 2029. The interest rate is 300 basis points over the secured overnight financing rate (“SOFR”), with a 0.50% SOFR floor. The Term Loan was issued at a discount of 0.50%. Principal and interest payments on the Term Loan commenced on June 30, 2022. Such quarterly principal payments are calculated as 0.25% of the initial principal amount, with the remaining balance payable upon maturity; and
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 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 March 31, 2023, no amount has been drawn on the Revolving Credit Facility.
The Credit Agreement and the indentures for Embecta's outstanding 5.00% senior secured notes due February 2030 (the "5.00% Notes") and 6.75% senior secured notes due February 2030 (the "6.75% Notes") contain customary financial covenants, including a total net leverage ratio covenant, which measures the ratio of (i) consolidated total net debt to (ii) consolidated earnings before interest, taxes, depreciation and amortization, and subject to other adjustments, must meet certain defined limits which are tested on a quarterly basis in accordance with the terms of the Credit Agreement and the 5.00% Notes and 6.75% Notes. In addition, the Credit Agreement contains covenants that will limit, among other things, Embecta’s ability to prepay, redeem or repurchase its subordinated and junior lien debt, incur additional debt, make acquisitions, merge with other entities, pay dividends or distributions, redeem or repurchase equity interests, and create or become subject to liens.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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The following is a summary of Embecta's total debt outstanding as of March 31, 2023:
Term Loan due March 2029$940.5
5.00% Notes due February 2030
500.0
6.75% Notes due February 2030
$200.0
Total principal debt issued$1,640.5
Less: current debt obligations(9.5)
Less: debt issuance costs and discounts(35.0)
Long-term debt$1,596.0
The debt issuance costs on the Term Loan, 5.00% Notes, 6.75% Notes and the discount on the Term Loan are reported in the Condensed Consolidated Balance Sheets as a reduction of debt and are amortized as a component of Interest expense, net over the term of the related debt using the effective interest method.
The schedule of principal payments required on long-term debt for the next five fiscal years and thereafter is as follows:
2023$4.8 
2024$9.5 
2025$9.5 
2026$9.5 
2027$9.5 
Thereafter$1,597.7 
The estimated fair value of long-term debt (including current portion) at March 31, 2023 was $1,561.8 million compared with a carrying value (which includes a reduction for unamortized debt issuance costs and discounts) of $1,605.5 million. 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 12 — Earnings per Share
On April 1, 2022, the date of the Separation, 57,012,925 shares of Embecta's common stock, par value $0.01 per share, were distributed to BD shareholders of record as of March 22, 2022, the record date of the distribution. This share amount is utilized for the calculation of earnings per basic and diluted common share for all periods presented prior to the Separation.
The calculation of earnings per basic and diluted common share for the three and six months ended March 31, 2023 and 2022 was as follows:
Three Months Ended
March 31,
Six Months Ended
March 31,
($ in millions and shares in thousands, except per share amounts)2023202220232022
Net Income attributable to Embecta$14.0 $79.6 $49.2 $178.4 
Basic weighted average number of shares outstanding57,26057,79857,18657,798
Stock awards and equity units (share equivalent)253 426 
Diluted weighted average shares outstanding57,51357,79857,61257,798
Earnings per common share - Basic$0.24 $1.38 $0.86 $3.09 
Earnings per common share - Diluted$0.24 $1.38 $0.85 $3.09 
For periods prior to the Separation, it is assumed that there were no dilutive equity instruments as there were no equity awards of Embecta outstanding prior to the Separation.
For periods subsequent to the Separation, earnings per diluted share is computed by giving effect to all potentially dilutive stock awards that are outstanding. The computation of earnings per diluted share excludes the effect of the potential exercise of stock-based awards, when the effect of the potential exercise would be anti-dilutive. For the three and six months ended March 31, 2023, 2.2 million and 1.8 million, respectively, of dilutive share equivalents issuable under stock-
Dollar amounts are in millions except per share amounts or as otherwise specified.
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based compensation plans were excluded from the diluted shares outstanding calculation because the result would have been antidilutive.
Note 13 — Income Taxes
The Company is subject to income tax in the various jurisdictions in which it operates. A significant portion of the Company's earnings are taxed in jurisdictions with tax rates that are lower than the statutory tax rate of the United States. The effective tax rate can vary from quarter to quarter because of changes in the global pretax income or geographical mix of the Company's earnings, changes in tax laws and matters related to tax audits.
The effective tax rates were 42.9% and 15.2% for the three months ended March 31, 2023 and 2022, respectively, and 39.0% and 15.2% for the six months ended March 31, 2023 and 2022, respectively. The increase in the Company’s effective tax rates from both prior comparative periods are primarily due to the establishment of a valuation allowance against the utilization of interest expense carryforwards generated during the current periods resulting from U.S. interest deduction limitation rules, higher tax expense on undistributed earnings of foreign subsidiaries and higher U.S. taxes on the earnings of foreign subsidiaries. This was partially offset by tax benefits from non-taxable permanent differences.
Note 14 — Financial Instruments and Fair Value Measurements
The following reconciles Cash and cash equivalents reported within the Condensed Consolidated Balance Sheets as of March 31, 2023 and September 30, 2022, to the total amounts shown in the Condensed Consolidated Statements of Cash Flows:
March 31, 2023September 30, 2022
Cash and cash equivalents$346.4 $330.9 
Cash and cash equivalents as of March 31, 2023 includes cash held in money market funds and other cash equivalents. All cash and cash equivalents are Level 1 in the fair value hierarchy.
Foreign Currency Risks and Related Strategies
The Company has foreign currency exposures throughout Europe, Greater Asia, Canada and Latin America. Transactional currency exposures that arise from entering into transactions, generally on an intercompany basis, in non-hyperinflationary countries that are denominated in currencies other than the functional currency are mitigated primarily through the use of forward contracts.
The notional amounts of the Company’s foreign currency-related derivative instruments were as follows as of March 31, 2023 and September 30, 2022, respectively:
Hedge DesignationMarch 31, 2023
Foreign exchange contracts (a)Undesignated$5.1 
a.Represent hedges of transactional foreign exchange exposures resulting primarily from intercompany payables and receivables. 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. Gains and losses recognized to date on these instruments were not material to the Company's Condensed Consolidated Financial Statements.
Nonrecurring Fair Value Measurements
Non-financial assets, including property, plant and equipment as well as intangible assets, are measured at fair value when there are indicators of impairment and these assets are recorded at fair value only when an impairment is recognized. These measurements of fair value are generally based upon Level 3 inputs, including values estimated using the income approach.
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.
As of March 31, 2023, the Company had transferred the majority of its trade receivables to BD under the Factoring Agreements (see Note 3). As a result, the Company is no longer exposed to credit risk associated with those transferred
Dollar amounts are in millions except per share amounts or as otherwise specified.
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receivables and does not have material credit risk exposure associated with the remaining $19.1 million of trade receivables.
Three of the Company’s customers represent at least 10.0% of total gross revenues individually and, in the aggregate, represented approximately 39.6% for the three months ended March 31, 2023, and three of the Company's customers represented at least 10.0% of total gross revenues individually and, in the aggregate, represent 40.0% of total revenues for the six months ended March 31, 2023.
Substantially all of the Company’s trade receivables are due from public and private entities involved in the healthcare industry. The Company does not normally require collateral from its customers.
Note 15 — Property, Plant and Equipment
Property, Plant and Equipment, Net consisted of:
 March 31, 2023September 30, 2022
Land$2.5 $1.4 
Buildings128.5 123.7 
Machinery, equipment and fixtures571.2 505.1 
Leasehold improvements6.6 6.5 
Construction in progress40.6 64.9 
 $749.4 $701.6 
Less: accumulated depreciation(435.9)(400.0)
Total Property, Plant and Equipment, Net$313.5 $301.6 
Note 16 — Leases
Finance Leases
Our finance lease assets and liabilities are attributed to our manufacturing site in Holdrege, Nebraska, which has an initial term of ten years and an option for the Company to extend the lease term for an additional period of up to five years. This lease is classified as a finance lease because the present value of the sum of the lease payments associated with the lease exceeds substantially all of the fair value of the manufacturing site.
Operating Leases
Our operating leases primarily relate to our real estate leases that are not classified as finance leases.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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Aggregate Lease Information
Our leases are included in our Condensed Consolidated Balance Sheets as follows:
 March 31, 2023September 30, 2022
Finance Leases
Property, Plant, and Equipment, Net$34.3 $35.5 
Total Finance Lease Assets$34.3 $35.5 
Current finance lease liabilities$3.6 $3.6 
Non Current Finance Lease Liabilities32.0 32.6 
Total Finance Lease Liabilities$35.6 $36.2 
Weighted-average remaining lease term (years)14.014.5
Weighted-average discount rate6.8 %6.8 %
Operating Leases
Other Assets$18.5 $6.3 
Total Operating Lease Assets$18.5 $6.3 
Accrued expenses$3.7 $2.0 
Deferred Income Taxes and Other Liabilities15.4 4.3 
Total Operating Lease Liabilities$19.1 $6.3 
Weighted-average remaining lease term (years)8.03.2
Weighted-average discount rate7.0 %5.9 %
Supplemental cash flow information related to leases for the six months ended March 31, 2023 and 2022 were as follows:
 March 31, 2023March 31, 2022
Right of use assets obtained in exchange for lease liabilities
Operating Leases14.0  
On April 1, 2022, the Company entered into a real estate lease for a new Corporate Headquarters located in Parsippany, NJ. The lease commenced during the second quarter of fiscal year 2023 and has an initial term of ten years. The Company has an option to extend the lease for additional periods of six years and four years, respectively.
Maturities of our finance and operating lease liabilities as of March 31, 2023 by fiscal year are as follows:
 Finance LeasesOperating LeasesTotal
2023$1.8 $1.5 $3.3 
20243.6 3.8 7.4 
20253.7 2.8 6.5 
20263.7 2.7 6.4 
20273.8 2.2 6.0 
Thereafter40.1 13.3 53.4 
Total lease payments$56.7 $26.3 $83.0 
Less: amount representing interest21.1 7.2 28.3 
Present value of lease liabilities$35.6 $19.1 $54.7 
Dollar amounts are in millions except per share amounts or as otherwise specified.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Certain Factors Affecting Forward-Looking Statements
The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements and accompanying notes contained elsewhere in this Quarterly Report on Form 10-Q. This discussion contains a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and other factors described throughout this discussion and analysis, particularly in the section “Cautionary Statement Concerning Forward-Looking Statements.”
Company Overview
We are a leading global medical device company focused on providing solutions to improve the health and well-being of people living with diabetes. Over the close to 100 year history of our business, we believe that our products have become one of the most widely recognized and respected brands in diabetes management in the world. We estimate that our products are used by nearly 30 million people in over 100 countries for insulin administration and to aid with the daily management of diabetes. Our business traces its origins to 1924, when BD developed the first dedicated insulin syringe. Since then, we have built a world-class organization with a unique manufacturing, supply chain and commercial footprint.
We have a broad portfolio of marketed products, including a variety of pen needles, syringes and safety injection devices, which are complemented by our proprietary digital application designed to assist people with managing their diabetes. Our pen needles are sterile, single-use, medical devices, designed to be used in conjunction with pen injectors that inject insulin or other diabetes medications. We also sell safety pen needles, which have shields on both ends of the cannula that automatically deploy after the injection to help prevent needlestick exposure and injury during injection and disposal. Our traditional and safety pen needles are compatible and frequently used with widely available pen injectors in the market today. In addition to pen needles, we sell sterile, single-use insulin syringes, which are used to inject insulin drawn from insulin vials. We also sell safety insulin syringes, which have sliding safety shield that can be activated with one-hand after the injection to help prevent needlestick exposure and injury during injection and disposal.
We primarily sell our products to wholesalers and distributors that sell to retail and institutional channels who in turn sell to patients or use the products to deliver insulin injections to patients.
Separation from BD
Pursuant to the Separation and Distribution Agreement, the Separation from BD was completed on April 1, 2022. On March 22, 2022, the record date for the distribution, 57,012,925 issued and outstanding shares of Embecta common stock were distributed pro-rata to BD stockholders as of the close of business, determined by applying a ratio of one share of Embecta common stock for every five shares of BD common stock. "Regular-way" trading of Embecta common stock began on April 1, 2022, under the ticker symbol "EMBC".
Periods Prior to Separation
Prior to the Separation, the Company was referred to as the Diabetes Care Business.