embc-20220331

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, 2022


☐			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

EMBECTA CORP.

(Exact name of registrant as specified in its charter)


Delaware						87-1583942
(State or other jurisdiction of incorporation or organization)						(I.R.S. employer identification no.)

300 Kimball Drive, Parsippany, New Jersey						07054
(Address of principal executive offices)						(Zip code)

(201) 847-6880

(Registrant’s telephone number, including area code)

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 share

EMBC

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

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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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒ (Do not check if a smaller reporting company)

Smaller reporting company

☐

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 5, 2022 was 57,798,098 shares, par value $0.01 per share.

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EMBECTA CORP.

Form 10-Q

For the Quarterly Period ended March 31, 2022

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		Page
Part I. Financial Information		1
Item 1.	Financial Statements and Supplementary Data	1
	Condensed Combined Statements of Income	1
	Condensed Combined Statement s of Comprehensive Income	2
	Condensed Combined Balance Sheets	3
	Condensed Combined Statement s of Cash Flows	4
	Notes to Condensed Combined Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
Part II. Other Information		26

Item 1A.	Risk Factors	26




Item 6.	Exhibits	26
Signatures		29

-i-

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data.

Condensed Combined Statements of Income

Diabetes Care Business

(Unaudited)


	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021

Revenues	$	274.5	$	284.2	$	563.8	$	569.5
Cost of products sold(1)	83.3		87.9		168.7		181.9
Gross Profit	$	191.2	$	196.3	$	395.1	$	387.6
Operating expenses:
Selling and administrative expense	66.9		55.8		129.1		109.0
Research and development expense	18.0		14.1		34.7		28.1
Other operating expenses	7.4		—		15.8		—
Total Operating Expenses	$	92.3	$	69.9	$	179.6	$	137.1
Operating Income	$	98.9	$	126.4	$	215.5	$	250.5
Interest expense	(4.9)		—		(4.9)		—
Other income (expense), net	(0.1)		2.1		(0.1)		3.1
Income Before Income Taxes	$	93.9	$	128.5	$	210.5	$	253.6
Income tax provision	14.3		20.6		32.1		40.4
Net Income	$	79.6	$	107.9	$	178.4	$	213.2

Earnings per Share - Basic and Diluted:	$	1.38	$	1.87	$	3.09	$	3.69

Number of Basic and Diluted Shares Outstanding	57,797,841		57,797,841		57,797,841		57,797,841

(1)Includes costs of products sold from related party inventory purchases of $10.6 million and $10.0 million during the three month periods ended March 31, 2022 and 2021, respectively. Costs of products sold from related party inventory purchases were $22.1 million and $19.0 million during the six month periods ended March 31, 2022 and 2021, respectively.

See notes to the condensed combined financial statements.


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

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Condensed Combined Statements of Comprehensive Income

Diabetes Care Business

(Unaudited)


	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021

Net Income	$	79.6	$	107.9	$	178.4	$	213.2
Other Comprehensive Loss
Foreign currency translation adjustments	(7.1)		(3.8)		(15.9)		(3.7)
Other Comprehensive Loss	$	(7.1)	$	(3.8)	$	(15.9)	$	(3.7)
Comprehensive Income	$	72.5	$	104.1	$	162.5	$	209.5

See notes to the condensed combined financial statements.


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

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Condensed Combined Balance Sheets

Diabetes Care Business


	March 31, 2022		September 30, 2021
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	264.3	$	—
Trade receivables, net	15.2		150.6
Inventories:
Materials	12.3		13.1
Work in process	17.5		21.0
Finished products	92.6		83.9
	$	122.4	$	118.0
Prepaid expenses and other	24.6		23.2
Total Current Assets	$	426.5	$	291.8
Property, Plant and Equipment, Net	355.7		451.0
Goodwill and Other Intangible Assets	34.7		33.9
Other Assets	16.6		11.3
Total Assets	$	833.5	$	788.0
LIABILITIES AND PARENT’S EQUITY
Current Liabilities
Accounts payable	$	50.8	$	54.2
Accrued expenses	76.6		81.6
Salaries, wages and related items	23.5		28.2
Current debt obligations	9.5		—
Income taxes	8.5		—
Total Current Liabilities	$	168.9	$	164.0
Deferred Income Taxes and Other Liabilities	31.4		29.7
Long-Term Debt	1,403.7		—
Related Party Note Payable	197.0		—
Commitments and Contingencies (Note 5)	—		—
Parent’s Equity
Net parent investment	(681.1)		864.8
Accumulated other comprehensive loss	(286.4)		(270.5)
Total Parent’s Equity	$	(967.5)	$	594.3
Total Liabilities and Parent’s Equity	$	833.5	$	788.0

See notes to the condensed combined financial statements.


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

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Condensed Combined Statements of Cash Flows

Diabetes Care Business

(Unaudited)


	Six Months Ended March 31,
	2022		2021
Operating Activities
Net income	$	178.4	$	213.2
Adjustments to net income to derive net cash provided by operating activities:
Depreciation and amortization	15.1		19.5
Amortization of debt issuance costs	0.1		—
Impairment of property, plant and equipment	—		10.0
Share-based compensation	8.5		6.7
Pension expense	3.6		4.9
Change in operating assets and liabilities:
Trade receivables, net	133.3		0.6
Inventories	(10.0)		(9.1)
Prepaid expenses and other	(2.4)		(5.8)
Accounts payable	(2.9)		(13.8)
Accrued expenses	(8.5)		13.6
Other current liabilities	5.8		1.1
Other, net	0.4		0.2
Net Cash Provided by Operating Activities	$	321.4	$	241.1
Investing Activities
Capital expenditures	(9.7)		(16.6)
Acquisition of intangible assets	(0.4)		(1.6)
Net Cash Used for Investing Activities	$	(10.1)	$	(18.2)
Financing Activities
Proceeds from the issuance of long-term debt	1,450.0		—
Payment of long-term debt issuance costs	(33.3)		—
Net consideration paid to Parent in connection with the spin off	(1,266.0)		—
Payment of revolving credit facility fees	(5.6)		—
Net transfers to Parent	(189.3)		(222.9)
Net Cash Used for Financing Activities	$	(44.2)	$	(222.9)
Effect of exchange rate changes on cash and cash equivalents	(2.8)		—
Net Change in Cash and cash equivalents	$	264.3	$	—
Opening Cash and cash equivalents	—		—
Closing Cash and cash equivalents	$	264.3	$	—

See notes to the condensed combined financial statements.


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

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Notes to Condensed Combined Financial Statements

Diabetes Care Business

Note 1—Background and Basis of Presentation

Background

On May 6, 2021, Becton, Dickinson and Company (“BD” or “Parent”) announced that its Board of Directors approved a plan to spin off its diabetes care business, comprising pen needles, syringes, and other products related to the injection or infusion of insulin and other drugs used in the treatment of diabetes (collectively, the “Company” or “Diabetes Care Business”). Under the plan, BD would transfer certain assets and liabilities associated with the Diabetes Care Business to Embecta Corp. (“embecta”), a newly formed wholly owned subsidiary of BD incorporated on July 8, 2021, and execute a spin off of embecta by way of a pro-rata distribution of common stock of embecta to BD’s shareholders at the close of business on the record date of the spin off. During the first half of 2022, in contemplation of the spin off, certain assets, liabilities, and operations attributable to the Diabetes Care Business were contributed to embecta, which has been reflected in these unaudited condensed combined financial statements. These condensed combined financial statements reflect the historical results of operations, financial position and cash flows of the Company.

In February 2022 and in connection with separation and distribution, embecta issued $500.0 million of senior secured 5.00% notes due February 15, 2030. Furthermore, on March 31, 2022 and also in connection with the spin off, embecta issued to BD $200.0 million of senior secured 6.75% notes due February 2030, entered into a $950.0 million senior secured seven-year term loan B facility, and entered into a $500.0 million senior secured five-year credit facility.

Refer to Note 3 and Note 10 for further details regarding the related party notes and long-term debt.

On February 1, 2022, BD’s Board of Directors approved the spin off of the Diabetes Care Business. On February 10, 2022, the Securities and Exchange Commission ("SEC") declared effective embecta’s Registration Statement on Form 10, as amended. The spin off 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 for every five shares of BD common stock held as of the close of business on March 22, 2022, the record date for the distribution. The distribution, which qualified as tax-free to BD and its shareholders for U.S. federal income tax purposes, was completed on April 1, 2022.

Upon completion of the distribution, embecta became an independent, publicly traded company and BD retained no ownership interest. “When-issued” trading of embecta common stock began on the record date of March 22, 2022, under the ticker symbol “EMBCV”, and continued until the distribution date. “Regular-way” trading of embecta common stock began on the spin off date of April 1, 2022, under the ticker symbol of “EMBC”.

In connection with the spin off, BD and embecta entered into various agreements to effect the spin off and provide a framework for the relationship between BD and embecta after the spin off, including 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 and other transaction agreements.

Refer to Note 14 for further details regarding the spin off.

Basis of Presentation

The unaudited condensed combined financial statements have been derived from BD’s historical accounting records and were prepared on a standalone basis in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the SEC. The assets, liabilities, revenue and expenses of the Company have been reflected in these 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. Historically, separate financial statements have not been prepared for the Company and it has not operated as a standalone business from BD. The historical results of operations, financial position, and cash flows of the Company presented in these condensed combined financial statements may not be indicative of what they would have been had the Company actually been an independent standalone public company, nor are they necessarily indicative of the Company’s future results of operations, financial position, and cash flows. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.

The condensed combined financial statements have been prepared in accordance with the instructions to Form 10-Q and, in the opinion of management, include all adjustments which are of a normal recurring nature, necessary for a fair presentation of the financial position and the results of operations and cash flows for the periods presented. The accounting policies and basis of preparation adopted in the preparation of these condensed combined financial statements are consistent with those followed in the preparation of the Company’s combined financial statements issued for the year ended September 30, 2021. However, the financial statements do not include all information and accompanying notes required for a presentation in accordance with GAAP. These condensed combined financial statements should be read in


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

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conjunction with the audited combined financial statements and the notes thereto included in the Company’s Registration Statement on Form 10. All intercompany transactions and accounts within the Diabetes Care Business have been eliminated.

The provision for income taxes for the three and six months ended March 31, 2022 and 2021 was calculated by applying an estimated annual effective income tax rate for the full year to ordinary income adjusted by the tax impact of discrete items.

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 combined financial statements. Actual results could differ from these estimates.

Note 2 — Parent’s Equity

Changes in certain components of Parent’s Equity were as follows:


	Net Parent Investment		Accumulated Other Comprehensive Loss		Total Parent’s Equity
Balance, October 1, 2021	$	864.8	$	(270.5)	$	594.3
Net income	98.8		—		98.8
Foreign currency translation	—		(8.8)		(8.8)
Net transfers to Parent	(133.8)		—		(133.8)
Balance, December 31, 2021	$	829.8	$	(279.3)	$	550.5
Net income	79.6		—		79.6
Foreign currency translation	—		(7.1)		(7.1)
Net transfers to Parent	(1,590.5)		—		(1,590.5)
Balance, March 31, 2022	$	(681.1)	$	(286.4)	$	(967.5)


	Net Parent Investment		Accumulated Other Comprehensive Loss		Total Parent’s Equity
Balance, October 1, 2020	$	833.8	$	(261.6)	$	572.2
Net income	105.3		—		105.3
Foreign currency translation	—		0.1		0.1
Net transfers to Parent	(91.8)		—		(91.8)
Balance, December 31, 2020	$	847.3	$	(261.5)	$	585.8
Net income	107.9		—		107.9
Foreign currency translation	—		(3.8)		(3.8)
Net transfers to Parent	(109.2)		—		(109.2)
Balance, March 31, 2021	$	846.0	$	(265.3)	$	580.7

Note 3 — Related Party Transactions and Parent Company Investment

Corporate and Medical Segment Allocations

The Company’s condensed combined financial statements include general corporate expenses of BD and shared segment expenses which were not historically allocated to the Company for certain support functions that are provided on a centralized basis by Parent and not recorded at the business unit level, such as expenses related to finance, human resources, information technology, facilities, and legal, among others (collectively, “General Corporate Expenses”). For purposes of these condensed combined financial statements, the General Corporate Expenses have been allocated to the Company. The General Corporate Expenses are included in the condensed combined statements of income in Cost of products sold, Selling and administrative expense, Research and development expense, and Other income (expense), net and, accordingly, as a component of Net parent investment on the condensed combined balance sheets. These expenses


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

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have been 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 combined financial statements, including the assumptions regarding allocating General Corporate Expenses from BD, are reasonable. Nevertheless, the condensed combined financial statements may not include all of the actual expenses that would have been incurred and may not reflect the Company’s condensed combined 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.

The allocations of General Corporate Expenses are reflected in the condensed combined statements of income as follows:


	Three months ended March 31,				Six months ended March 31,
	2022		2021		2022		2021
Cost of products sold	$	0.7	$	3.2	$	2.3	$	7.9
Selling and administrative expense	23.5		23.7		47.9		48.1
Research and development expense	1.8		1.3		3.5		2.5
Other (income) expense, net	0.4		(0.5)		(0.6)		(2.1)
Total General Corporate Expenses	$	26.4	$	27.7	$	53.1	$	56.4

Purchases from Parent

In the ordinary course of business, the Company purchases from BD certain materials for use in production of certain medical products, the terms of which prior to separation from BD were not at arm’s length. The following table summarizes related party purchases for the three and six month periods ended March 31, 2022 and 2021:


	Three months ended March 31,				Six months ended March 31,
	2022		2021		2022		2021
Purchases from Parent	$	13.6	$	10.6	$	28.0	$	20.3

Amounts payable to BD for such purchases as of March 31, 2022 and September 30, 2021 were immaterial.

Parent Company Investment

All significant intercompany transactions between the Company and BD have been included in the condensed combined financial statements and are considered to be effectively settled for cash at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the condensed combined statements of cash flows as a financing activity and in the condensed combined balance sheets as Net parent investment.

The following table summarizes the components of net transfers to Parent for the three months ended March 31, 2022 and 2021:


	Three months ended March 31,
	2022		2021
Cash pooling and general financing activities(1)	$	78.5	$	146.7
Corporate and segment allocations	(30.6)		(32.0)
Taxes deemed settled with Parent	1.6		(6.7)
Net Consideration paid to Parent in connection with the spin off	1,266.0		—
Related party senior secured notes	197.0		—
Other transfers to Parent, net	78.0		1.2
Net transfers to Parent (Note 2)	$	1,590.5	$	109.2


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

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(1)The nature of activities includes financing activities for capital transfers, cash sweeps and other treasury services. As part of this activity, cash balances are swept to BD on a daily basis under the BD Treasury function and the Company receives capital from BD for its cash needs.

The following table summarizes the components of the net transfers to Parent for the six months ended March 31, 2022 and 2021:


	Six months ended March 31,
	2022		2021
Cash pooling and general financing activities(1)	$	255.9	$	303.1
Corporate and segment allocations, excluding non-cash share-based compensation	(50.4)		(53.7)
Taxes deemed settled with Parent	(16.2)		(26.5)
Net transfers to Parent as reflected in the condensed combined statements of cash flows	189.3		222.9
Share-based compensation expense	(8.5)		(6.7)
Pension expense	(3.6)		(4.9)
Net Consideration paid to Parent in connection with the spin off	1,266.0		—
Related party senior secured notes	197.0		—
Other transfers to (from) Parent, net	84.1		(10.3)
Net transfers to Parent (Note 2)	$	1,724.3	$	201.0

Related Party Senior Secured Notes

On March 31, 2022, embecta issued $200.0 million of senior secured notes to BD (the "Related Party Notes") at a discount of $3.0 million. The Related Party Notes carry an interest rate of 6.75% and are due February 2030. Interest payments on the Related Party Notes are due semi-annually in February and August until maturity, with the first interest payment due in August 2022. The discount on the Related Party Notes is reported in the condensed combined balance sheet as a reduction of debt that is amortized as a component of interest expense over the term of the debt using the effective interest method.

The Related Party Notes issued to BD were not issued for cash and instead were subject to a debt-for-debt exchange which occurred on April 1, 2022. As such, the issuance of the Related Party Notes is a non-cash financing activity and is not presented on the condensed combined statements of cash flows for the six months ended March 31, 2022. Refer to Note 14 for further information.

The estimated fair value of the Related Party Notes at March 31, 2022 was $200.0 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.

Related Party Trade Receivables Factoring

As part of the spin off, embecta entered into a trade receivables factoring agreement with BD (the "Factoring Agreement"), under which embecta transfers certain trade receivable assets to BD, and pays a service fee calculated as 0.1% of annual revenues related to countries subject to the Factoring Agreement in exchange for the services provided by BD. Per the terms of the Factoring Agreement, the Company surrenders control of such trade receivables upon transfer. Accordingly, embecta accounts for the transfer as sales of trade receivables by recognizing an increase to Cash and cash equivalents and a decrease to Trade Receivables, net on the condensed combined balance sheets when proceeds from the transactions are received. The transfers are presented on the condensed combined statements of cash flows as operating activities and the related service fee is presented as a component of Other income (expense), net in the condensed combined statements of income.

As of March 31, 2022, the Company transferred $105.2 million of trade receivables to BD pursuant to the Factoring Agreement. The service fee incurred by the Company during the three and six months ended March 31, 2022 was immaterial to the Company's condensed combined financial results.

Note 4 — Spin-off Costs

In connection with the spin off further described in Note 1, the Company incurred separation and stand-up costs of approximately $7.4 million and $15.8 million during the three and six months ended March 31, 2022, respectively,


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

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reflected within Other operating expenses in the condensed combined statements of income. The costs incurred primarily consist of costs associated with legal, supply chain, employee retention and certain other costs to establish certain stand-alone functions to transition to being a stand-alone entity. There were no spin off costs incurred during the three and six months ended March 31, 2021.

The total amount of spin off costs accrued as of March 31, 2022 and September 30, 2021 was approximately $1.0 million and $1.6 million, respectively.

Note 5 — Contingencies

The Company regularly monitors and evaluates the status of product liability and other legal matters, and may, from time-to-time, engage in settlement and mediation discussions taking into consideration developments in the matters and the risks and uncertainties surrounding litigation. These discussions could result in settlements of one or more of these claims at any time. The Company has not identified material legal matters where it believes an unfavorable, material outcome is probable and estimable and, therefore, no reserve is established. Although management currently believes that resolving claims against the Company, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. It is possible that an unfavorable outcome resulting from legal matters or other contingencies could have a material impact on the liquidity, results of operations or financial condition of the Company.

Significant judgment is required in both the determination of probability of loss and the determination as to whether the amount can be reasonably estimated. Accruals are based only on information available at the time of the assessment, due to the uncertain nature of such matters. As additional information becomes available, management reassesses potential liabilities related to pending claims and litigation and may revise its previous estimates, which could materially affect the Company’s results of operations in a given period. The Company was not a party to any material legal proceedings at March 31, 2022 or September 30, 2021, nor is it a party to any material legal proceedings as of the date of issuance of these condensed combined financial statements.

Note 6 — Revenues

The Company’s policies for recognizing sales have not changed from those described in the Company’s Registration Statement on Form 10. The Company sells syringes, pen needles and other products used in the treatment of diabetes which are sold to wholesalers and distributors, which in turn sell these products to customers through retail and acute care hospitals, clinics and other institutional channels. 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 combined 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 rebate liability at March 31, 2022 and September 30, 2021 was $

SEC Form 10-Q filed by Embecta Corp.