10-Q 1 bhc-20220331.htm 10-Q bhc-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
March 31, 2022
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: 001-14956
Bausch Health Companies Inc.
(Exact name of registrant as specified in its charter)
British Columbia,
Canada
98-0448205
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
2150 St. Elzéar Blvd. West, Laval, Québec, Canada H7L 4A8
(Address of Principal Executive Offices) (Zip Code)

(514744-6792
(Registrant’s telephone number, including area code)
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Shares, No Par ValueBHCNew York Stock Exchange,Toronto Stock Exchange
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 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 x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x No o
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 filer
Accelerated filer Non-accelerated filerSmaller reporting companyEmerging growth 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 in Rule 12b-2 of the Exchange Act). Yes ☐ No 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common shares, no par value — 361,479,708 shares outstanding as of May 5, 2022.



BAUSCH HEALTH COMPANIES INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
INDEX
Part I.
Financial Information
Item 1.
Item 2.
Item 3.
Item 4.
Part II.
Other Information
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
i


BAUSCH HEALTH COMPANIES INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
Introductory Note
Except where the context otherwise requires, all references in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 (this “Form 10-Q”) to the “Company”, “we”, “us”, “our” or similar words or phrases are to Bausch Health Companies Inc. and its subsidiaries, taken together. In this Form 10-Q, references to “$” are to United States (“U.S.”) dollars, references to “€” are to euros and references to “CAD” are to Canadian dollars. Unless otherwise indicated, the statistical and financial data contained in this Form 10-Q are presented as of March 31, 2022.
Forward-Looking Statements
Caution regarding forward-looking information and statements and “Safe-Harbor” statements under the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws:
To the extent any statements made in this Form 10-Q contain information that is not historical, these statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and may be forward-looking information within the meaning defined under applicable Canadian securities laws (collectively, “forward-looking statements”).
These forward-looking statements relate to, among other things: our business strategy, business plans and prospects and forecasts and changes thereto; product pipeline, prospective products and product approvals, expected launches of new products, product development and future performance and results of current and anticipated products; anticipated revenues for our products; expected research and development (“R&D”) and marketing spend; our expected primary cash and working capital requirements for 2022 and beyond; the Company’s plans for continued improvement in operational efficiency and the anticipated impact of such plans; our liquidity and our ability to satisfy our debt maturities as they become due; our ability to reduce debt levels; our ability to comply with the financial and other covenants contained in our Fourth Amended and Restated Credit and Guaranty Agreement, as amended by the First Incremental Amendment to the Restated Credit Agreement, dated as of November 27, 2018 and the Second Amendment to the Restated Credit Agreement, dated as of May 10, 2022 (the “2022 Restated Credit Agreement”), and senior notes indentures;the ability of our subsidiary, Bausch + Lomb Corporation (“Bausch + Lomb”), to comply with the financial and other covenants contained in its Credit and Guaranty Agreement (the “B+L Credit Agreement”, and the credit facilities thereunder, the “B+L Credit Facilities”), dated as of May 10, 2022; the impact of our distribution, fulfillment and other third-party arrangements; proposed pricing actions; exposure to foreign currency exchange rate changes and interest rate changes; the outcome of contingencies, such as litigation, subpoenas, investigations, reviews, audits and regulatory proceedings; the anticipated impact of the adoption of new accounting standards; general market conditions; our expectations regarding our financial performance, including revenues, expenses, gross margins and income taxes; our impairment assessments, including the assumptions used therein and the results thereof; the anticipated impact of the evolving COVID-19 pandemic and related responses from governments and private sector participants on the Company, its supply chain, third-party suppliers, project development timelines, costs, revenues, margins, liquidity and financial condition, the anticipated timing, speed and magnitude of recovery from these COVID-19 pandemic related impacts and the Company’s planned actions and responses to this pandemic; the Company’s plan to separate its eye health business, including the structure and timing of completing such separation transaction; and the proposed initial public offering (“IPO”) of the Company’s Solta aesthetic medical device business, including the timing of such IPO.
Forward-looking statements can generally be identified by the use of words such as “believe”, “anticipate”, “expect”, “intend”, “estimate”, “plan”, “continue”, “will”, “may”, “could”, “would”, “should”, “target”, “potential”, “opportunity”, “designed”, “create”, “predict”, “project”, “forecast”, “seek”, “strive”, “ongoing”, “decrease” or “increase” and variations or other similar expressions. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements may not be appropriate for other purposes. Although we have previously indicated certain of these statements set out herein, all of the statements in this Form 10-Q that contain forward-looking statements are qualified by these cautionary statements. These statements are based upon the current expectations and beliefs of management. Although we believe that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making such forward-looking statements, including, but not limited to, factors and assumptions regarding the items previously outlined, those factors, risks and uncertainties outlined below and the assumption that none of these factors, risks and uncertainties will cause actual results or events to differ materially from those described in such forward-looking statements. Actual results may differ materially from those expressed or implied in such statements. Important factors, risks
ii


and uncertainties that could cause actual results to differ materially from these expectations include, among other things, the following:
the risks and uncertainties caused by or relating to the evolving COVID-19 pandemic, the fear of that pandemic, the availability and effectiveness of vaccines for COVID-19 (including with respect to current or future variants and subvariants), COVID-19 vaccine immunization rates, the emergence of variant and subvariant strains of COVID-19, the resurgence of the COVID-19 virus and variant and subvariant strains thereof (including, but not limited to, the recent resurgence of COVID-19 cases in China) and any resulting reinstitution of lockdowns and other restrictions, the evolving reaction of governments, private sector participants and the public to that pandemic, and the potential effects and economic impact of the pandemic and the reaction to it, the severity, duration and future impact of which are highly uncertain and cannot be predicted, and which may have a significant adverse impact on the Company, including, but not limited to, its supply chain, third-party suppliers, project development timelines, employee base, liquidity, stock price, financial condition and costs (which may increase) and revenue and margins (both of which may decrease);
the challenges the Company faces as a result of the closing of the IPO of Bausch + Lomb (the “B+L IPO”), including the transitional services being provided by and to Bausch + Lomb, any potential, actual or perceived conflict of interest of some of our directors and officers because of their equity ownership in Bausch + Lomb and/or because they also serve as directors or officers of Bausch + Lomb and our ability to timely consolidate the financial results of the Bausch + Lomb business;
with respect to the proposed separation of Bausch + Lomb, the risks and uncertainties include, but are not limited to, the expected benefits and costs of the separation transaction, the expected timing of completion of the separation transaction and its terms (including the Company’s expectation that the separation transaction will be completed following the expiry of customary lock-ups related to the B+L IPO and achievement of targeted debt leverage ratios, subject to receipt of applicable shareholder and other necessary approvals), the Company’s ability to complete the separation transaction considering the various conditions to the completion of the separation transaction (some of which are outside the Company’s control, including conditions related to regulatory matters and a possible shareholder vote, if applicable), that market or other conditions are no longer favorable to completing the transaction, that any regulatory or other approval (if required) is not obtained on the terms or timelines anticipated or at all, business disruption during the pendency of, or following, the separation transaction, diversion of management time on separation transaction-related issues, retention of existing management team members, the reaction of customers and other parties to the separation transaction, the qualification of the separation transaction as a tax-free transaction for Canadian and/or U.S. federal income tax purposes (including whether or not an advance ruling from the Canada Revenue Agency and/or the Internal Revenue Service will be sought or obtained), the ability of the Company and the separated entity to satisfy the conditions required to maintain the tax-free status of the separation transaction (some of which are beyond their control), other potential tax or other liabilities that may arise as a result of the separation transaction, the potential dissynergy costs resulting from the separation transaction, the impact of the separation transaction on relationships with customers, suppliers, employees and other business counterparties, general economic conditions, conditions in the markets the Company is engaged in, behavior of customers, suppliers and competitors, technological developments, as well as legal and regulatory rules affecting the Company’s business. In particular, the Company can offer no assurance that any separation will occur at all, or that any such transaction will occur on the timelines anticipated by the Company;
with respect to the proposed IPO of the Company’s Solta aesthetic medical device business, the risks and uncertainties include, but are not limited to, risks relating to the expected timing of completion of such transaction (including the Company’s expectation that it will launch such IPO when financial market conditions are favorable, subject to receipt of regulatory, stock exchange and other approvals and other factors) and the Company’s ability to complete such transaction, that market or other conditions are no longer favorable to completing the transaction on a timely basis or at all, the receipt of (or failure to receive) any shareholder, stock exchange, regulatory and other approvals required in connection with the transaction and the timing of receipt of such approvals, business disruption during the pendency of, or following, such transaction, diversion of management time on transaction-related issues, retention of Solta aesthetic medical device management team members, the reaction of customers and other parties to such transaction, the impact of such transaction on relationships with customers, suppliers, employees and other business counterparties, and other events that could adversely impact the completion of such transaction, including industry or economic conditions outside of Bausch Health’s control. In particular, the Company can offer no assurance that any such transaction will occur at all, or that any such transaction will occur on the timelines, structure or terms anticipated by the Company;
ongoing litigation and potential additional litigation, claims, challenges and/or regulatory investigations challenging or otherwise relating to the B+L IPO and the proposed separation of Bausch + Lomb and the costs,
iii


expenses, use of resources, diversion of management time and efforts, liability and damages that may result therefrom;
the expense, timing and outcome of legal and governmental proceedings, investigations and information requests relating to, among other matters, our past distribution, marketing, pricing, disclosure and accounting practices (including with respect to our former relationship with Philidor Rx Services, LLC (“Philidor”)), including a number of pending non-class securities litigations (including certain pending opt-out actions in the U.S. related to the previously settled securities class action (which remains subject to an objector’s petition for rehearing of its appeal of the Court’s final approval order) and certain opt-out actions in Canada relating to the recently settled class action in Canada), certain pending lawsuits and other claims, investigations or proceedings that may be initiated or that may be asserted;
potential additional litigation and regulatory investigations (and any costs, expenses, use of resources, diversion of management time and efforts, liability and damages that may result therefrom), negative publicity and reputational harm on our Company, products and business that may result from the past and ongoing public scrutiny of our past distribution, marketing, pricing, disclosure and accounting practices and from our former relationship with Philidor;
the past and ongoing scrutiny of our legacy business practices, including with respect to pricing, and any pricing controls or price adjustments that may be sought or imposed on our products as a result thereof;
pricing decisions that we have implemented, or may in the future elect to implement, such as the Patient Access and Pricing Committee’s historic practice of limiting the average annual price increase for our branded prescription pharmaceutical products to single digits, or any future pricing actions we may take in 2022 or beyond following review by our Patient Access and Pricing Committee (which is responsible for the pricing of our drugs);
legislative or policy efforts, including those that may be introduced and passed by the U.S. Congress, designed to reduce patient out-of-pocket costs for medicines, which could result in new mandatory rebates and discounts or other pricing restrictions, controls or regulations (including mandatory price reductions);
ongoing oversight and review of our products and facilities by regulatory and governmental agencies, including periodic audits by the U.S. Food and Drug Administration (the “FDA”) and equivalent agencies outside of the U.S. and the results thereof;
actions by the FDA or other regulatory authorities with respect to our products or facilities;
compliance with the legal and regulatory requirements of our marketed products;
our substantial debt (and potential additional future indebtedness) and current and future debt service obligations, our ability to reduce our outstanding debt levels and the resulting impact on our financial condition, cash flows and results of operations;
our ability to comply with the financial and other covenants contained in our senior notes indentures, 2027 Revolving Credit Facility (as defined below), the 2022 Restated Credit Agreement, the B+L Credit Agreement and other current or future credit and/or debt agreements and the limitations including the ability of Bausch + Lomb to comply with its covenants and obligations under the B+L Credit Agreement, restrictions and prohibitions such covenants impose or may impose on the way we conduct our business, including prohibitions on incurring additional debt if certain financial covenants are not met, limitations on the amount of additional obligations we are able to incur pursuant to other covenants, our ability to draw under our 2027 Revolving Credit Facility, Bausch + Lomb’s ability to draw down under the revolving credit facility under the B+L Credit Agreement and restrictions on our ability to make certain investments and other restricted payments;
any default under the terms of our senior notes indentures or the 2022 Restated Credit Agreement (and other current or future credit and/or debt agreements) and our ability, if any, to cure or obtain waivers of such default;
any downgrade by rating agencies in our credit ratings, which may impact, among other things, our ability to raise debt and the cost of capital for additional debt issuances;
iv


any reductions in, or changes in the assumptions used in, our forecasts for fiscal year 2022 or beyond, including as a result of the impacts of the COVID-19 pandemic on our business and operations, which could lead to, among other things: (i) a failure to meet the financial and/or other covenants contained in our 2018 Restated Credit Agreement, the 2022 Restated Credit Agreement, senior notes indentures and/or the B+L Credit Agreement (and other current or future credit and/or debt agreements) and/or (ii) impairment in the goodwill associated with certain of our reporting units or impairment charges related to certain of our products or other intangible assets, which impairments could be material;
changes in the assumptions used in connection with our impairment analyses or assessments, which would lead to a change in such impairment analyses and assessments and which could result in an impairment in the goodwill associated with any of our reporting units or impairment charges related to certain of our products or other intangible assets;
the uncertainties associated with the acquisition and launch of new products, assets and businesses, including, but not limited to, our ability to provide the time, resources, expertise and funds required for the commercial launch of new products, the acceptance and demand for new products, and the impact of competitive products and pricing, which could lead to material impairment charges;
our ability or inability to extend the profitable life of our products, including through line extensions and other life-cycle programs;
our ability to retain, motivate and recruit directors, executives and other key employees;
our ability to implement effective succession planning for our executives and key employees;
factors impacting our ability to stabilize and reposition our Ortho Dermatologics business to generate additional value, including the success of recently launched products and the approval of pipeline products (and the timing of such approvals);
factors impacting our ability to achieve anticipated revenues for our products, including changes in anticipated marketing spend on such products and launch of competing products;
factors impacting our ability to achieve anticipated market acceptance for our products, including acceptance of the pricing, effectiveness of promotional efforts, reputation of our products and launch of competing products;
the challenges and difficulties associated with managing a large complex business, which has, in the past, grown rapidly;
our ability to compete against companies that are larger and have greater financial, technical and human resources than we do, as well as other competitive factors, such as technological advances achieved, patents obtained and new products introduced by our competitors;
our ability to effectively operate and grow our businesses in light of the challenges that the Company has faced and market conditions, including with respect to its substantial debt, pending investigations and legal proceedings, scrutiny of our past pricing and other practices, limitations on the way we conduct business imposed by the covenants contained in our 2018 Restated Credit Agreement, our 2022 Restated Credit Agreement, the B+L Credit Agreement, our senior notes indentures and the agreements governing our other indebtedness, and the impacts of the COVID-19 pandemic;
the extent to which our products are reimbursed by government authorities, pharmacy benefit managers (“PBMs”) and other third-party payors; the impact our distribution, pricing and other practices may have on the decisions of such government authorities, PBMs and other third-party payors to reimburse our products; the impact of obtaining or maintaining such reimbursement on the price and sales of our products; and the launch and implementation of any new pharma-care or dental-care program or related spending by the Canadian federal government;
the inclusion of our products on formularies or our ability to achieve favorable formulary status, as well as the impact on the price and sales of our products in connection therewith;
the consolidation of wholesalers, retail drug chains and other customer groups and the impact of such industry consolidation on our business;
our ability to maintain strong relationships with physicians and other healthcare professionals;
our eligibility for benefits under tax treaties and the continued availability of low effective tax rates for the business profits of certain of our subsidiaries;
v


the implementation of the Organisation for Economic Co-operation and Development inclusive framework on Base Erosion and Profit Shifting, including the global minimum corporate tax rate, by the countries in which we operate;
the outcome of any audits by taxation authorities, which outcomes may differ from the estimates and assumptions that we may use in determining our consolidated tax provisions and accruals;
the actions of our third-party partners or service providers of research, development, manufacturing, marketing, distribution or other services, including their compliance with applicable laws and contracts, which actions may be beyond our control or influence, and the impact of such actions on our Company;
the risks associated with the international scope of our operations, including our presence in emerging markets and the challenges we face when entering and operating in new and different geographic markets (including the challenges created by new and different regulatory regimes in such countries and the need to comply with applicable anti-bribery and economic sanctions laws and regulations);
adverse global economic conditions and credit markets and foreign currency exchange uncertainty and volatility in certain of the countries in which we do business;
the trade conflict between the U.S. and China;
the impact of the ongoing conflict between Russia and Ukraine and the export controls, sanctions and other restrictive actions that have been or may be imposed by the U.S., Canada and other countries against governmental and other entities in Russia, Belarus and parts of Ukraine;
the impact of the United States-Mexico-Canada Agreement (“USMCA”) and any potential changes to other trade agreements;
our ability to obtain, maintain and license sufficient intellectual property rights over our products and enforce and defend against challenges to such intellectual property (such as in connection with the filing by Norwich Pharmaceuticals Inc. (“Norwich”) of its Abbreviated New Drug Application (“ANDA”) for Xifaxan® (rifaximin) 550 mg tablets and the Company’s related lawsuit filed against Norwich in connection therewith);
the introduction of generic, biosimilar or other competitors of our branded products and other products, including the introduction of products that compete against our products that do not have patent or data exclusivity rights;
our ability to identify, finance, acquire, close and integrate acquisition targets successfully and on a timely basis and the difficulties, challenges, time and resources associated with the integration of acquired companies, businesses and products;
any divestitures of our assets or businesses and our ability to successfully complete any such divestitures on commercially reasonable terms and on a timely basis, or at all, and the impact of any such divestitures on our Company, including the reduction in the size or scope of our business or market share, loss of revenue, any loss on sale, including any resultant impairments of goodwill or other assets, or any adverse tax consequences suffered as a result of any such divestitures;
the expense, timing and outcome of pending or future legal and governmental proceedings, arbitrations, investigations, subpoenas, tax and other regulatory audits, examinations, reviews and regulatory proceedings against us or relating to us and settlements thereof;
our ability to negotiate the terms of or obtain court approval for the settlement of certain legal and regulatory proceedings;
our ability to obtain components, raw materials or finished products supplied by third parties (some of which may be single-sourced) and other manufacturing and related supply difficulties, interruptions and delays;
the disruption of delivery of our products and the routine flow of manufactured goods;
economic factors over which the Company has no control, including changes in inflation, interest rates, foreign currency rates, and the potential effect of such factors on revenues, expenses and resulting margins;
interest rate risks associated with our floating rate debt borrowings;
our ability to effectively distribute our products and the effectiveness and success of our distribution arrangements;
our ability to effectively promote our own products and those of our co-promotion partners;
vi


the success of our fulfillment arrangements with Walgreen Co., including market acceptance of, or market reaction to, such arrangements (including by customers, doctors, patients, PBMs, third-party payors and governmental agencies), and the continued compliance of such arrangements with applicable laws;
our ability to secure and maintain third-party research, development, manufacturing, licensing, marketing or distribution arrangements;
the risk that our products could cause, or be alleged to cause, personal injury and adverse effects, leading to potential lawsuits, product liability claims and damages and/or recalls or withdrawals of products from the market;
the mandatory or voluntary recall or withdrawal of our products from the market and the costs associated therewith;
the availability of, and our ability to obtain and maintain, adequate insurance coverage and/or our ability to cover or insure against the total amount of the claims and liabilities we face, whether through third-party insurance or self-insurance;
our indemnity agreements, which may result in an obligation to indemnify or reimburse the relevant counterparty, which amounts may be material;
the difficulty in predicting the expense, timing and outcome within our legal and regulatory environment, including with respect to approvals by the FDA, Health Canada, European Medicines Agency (“EMA”) and similar agencies in other countries, legal and regulatory proceedings and settlements thereof, the protection afforded by our patents and other intellectual and proprietary property, successful generic challenges to our products and infringement or alleged infringement of the intellectual property of others;
the results of continuing safety and efficacy studies by industry and government agencies;
the success of preclinical and clinical trials for our drug development pipeline or delays in clinical trials that adversely impact the timely commercialization of our pipeline products, as well as other factors impacting the commercial success of our products, which could lead to material impairment charges;
uncertainties around the successful improvement and modification of our existing products and development of new products, which may require significant expenditures and efforts;
the results of management reviews of our research and development portfolio (including following the receipt of clinical results or feedback from the FDA or other regulatory authorities), which could result in terminations of specific projects which, in turn, could lead to material impairment charges;
the seasonality of sales of certain of our products;
declines in the pricing and sales volume of certain of our products that are distributed or marketed by third parties, over which we have no or limited control;
compliance by the Company or our third-party partners and service providers (over whom we may have limited influence), or the failure of our Company or these third parties to comply, with health care “fraud and abuse” laws and other extensive regulation of our marketing, promotional and business practices (including with respect to pricing), worldwide anti-bribery laws (including the U.S. Foreign Corrupt Practices Act and the Canadian Corruption of Foreign Public Officials Act), worldwide economic sanctions and/or export laws, worldwide environmental laws and regulation and privacy and security regulations;
the impacts of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 and potential amendment thereof and other legislative and regulatory health care reforms in the countries in which we operate, including with respect to recent government inquiries on pricing;
the impact of any changes in or reforms to the legislation, laws, rules, regulation and guidance that apply to the Company and its businesses and products or the enactment of any new or proposed legislation, laws, rules, regulations or guidance that will impact or apply to the Company or its businesses or products;
the impact of changes in federal laws and policy that may be undertaken under the Biden administration;
illegal distribution or sale of counterfeit versions of our products;
interruptions, breakdowns or breaches in our information technology systems; and
vii


risks in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed on February 23, 2022, risks under Item 1A. “Risk Factors” of Part II of this Form 10-Q and risks detailed from time to time in our other filings with the U.S. Securities and Exchange Commission (“SEC”) and the Canadian Securities Administrators (the “CSA”), as well as our ability to anticipate and manage the risks associated with the foregoing.
Additional information about these factors and about the material factors or assumptions underlying such forward-looking statements may be found in our Annual Report on Form 10-K for the year ended December 31, 2021, filed on February 23, 2022, under Item 1A. “Risk Factors”, under Item 1A. “Risk Factors” of Part II of this Form 10-Q and in the Company’s other filings with the SEC and the CSA. When relying on our forward-looking statements to make decisions with respect to the Company, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. These forward-looking statements speak only as of the date made. We undertake no obligation to update or revise any of these forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect actual outcomes, except as required by law. We caution that, as it is not possible to predict or identify all relevant factors that may impact forward-looking statements, the foregoing list of important factors that may affect future results is not exhaustive and should not be considered a complete statement of all potential risks and uncertainties.
viii


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BAUSCH HEALTH COMPANIES INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except share amounts)
(Unaudited)
March 31,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents$1,249 $582 
Restricted cash and other settlement deposits
1,211 1,537 
Trade receivables, net1,566 1,775 
Inventories, net1,045 993 
Prepaid expenses and other current assets765 720 
Total current assets5,836 5,607 
Property, plant and equipment, net1,579 1,598 
Intangible assets, net6,632 6,948 
Goodwill12,427 12,457 
Deferred tax assets, net2,282 2,252 
Other non-current assets334 340 
Total assets$29,090 $29,202 
Liabilities
Current liabilities:
Accounts payable$471 $407 
Accrued and other current liabilities4,303 4,791 
Total current liabilities4,774 5,198 
Acquisition-related contingent consideration193 202 
Non-current portion of long-term debt23,168 22,654 
Deferred tax liabilities, net552 529 
Other non-current liabilities544 653 
Total liabilities29,231 29,236 
Commitments and contingencies (Note 18)
Deficit
Common shares, no par value, unlimited shares authorized, 361,331,665 and 359,405,748 issued and outstanding at March 31, 2022 and December 31, 2021, respectively
10,373 10,317 
Additional paid-in capital415 462 
Accumulated deficit(9,030)(8,961)
Accumulated other comprehensive loss(1,974)(1,924)
Total Bausch Health Companies Inc. shareholders’ deficit(216)(106)
Noncontrolling interest75 72 
Total deficit(141)(34)
Total liabilities and deficit$29,090 $29,202 
The accompanying notes are an integral part of these consolidated financial statements.
1


BAUSCH HEALTH COMPANIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
20222021
Revenues
Product sales$1,898 $2,003 
Other revenues20 24 
1,918 2,027 
Expenses
Cost of goods sold (excluding amortization and impairments of intangible assets)
543 564 
Cost of other revenues8 10 
Selling, general and administrative622 606 
Research and development
127 112 
Amortization of intangible assets310 357 
Goodwill impairments 469 
Asset impairments, including loss on assets held for sale8 148 
Restructuring, integration, separation and IPO costs13 12 
Other expense (income), net2 (30)
1,633 2,248 
Operating income (loss)285 (221)
Interest income2 2 
Interest expense(362)(368)
Loss on extinguishment of debt (5)
Foreign exchange and other(7)1 
Loss before provision for income taxes(82)(591)
Benefit from (provision for) income taxes16 (16)
Net loss(66)(607)
Net income attributable to noncontrolling interest(3)(3)
Net loss attributable to Bausch Health Companies Inc.$(69)$(610)
Basic and diluted loss per share attributable to Bausch Health Companies Inc.$(0.19)$(1.71)
Basic and diluted weighted-average common shares360.8 356.8 
The accompanying notes are an integral part of these consolidated financial statements.
2


BAUSCH HEALTH COMPANIES INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in millions)
(Unaudited)
Three Months Ended
March 31,
20222021
Net loss$(66)$(607)
Other comprehensive (loss) income
Foreign currency translation adjustment(56)(124)
Pension and postretirement benefit plan adjustments, net of income taxes
6 1 
Other comprehensive loss(50)(123)
Comprehensive loss(116)(730)
Comprehensive income attributable to noncontrolling interest(3)(3)
Comprehensive loss attributable to Bausch Health Companies Inc.$(119)$(733)
The accompanying notes are an integral part of these consolidated financial statements.
3


BAUSCH HEALTH COMPANIES INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
(in millions)
(Unaudited)
 Bausch Health Companies Inc. Shareholders’ Deficit  
 Common SharesAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Bausch Health
Companies Inc.
Shareholders’
(Deficit) Equity
Non-
controlling
Interest
Total
(Deficit)
Equity
 SharesAmount
Three Months Ended March 31, 2022
Balances, January 1, 2022359.4 $10,317 $462 $(8,961)$(1,924)$(106)$72 $(34)
Common shares issued under share-based compensation plans
1.9 56 (54)— — 2 — 2 
Share-based compensation
— — 32 — — 32 — 32 
Employee withholding taxes related to share-based awards
— — (25)— — (25)— (25)
Net (loss) income— — — (69)— (69)3 (66)
Other comprehensive loss— — — — (50)(50)— (50)
Balances, March 31, 2022361.3 $10,373 $415 $(9,030)$(1,974)$(216)$75 $(141)
Three Months Ended March 31, 2021
Balances, January 1, 2021355.4 $10,227 $454 $(8,013)$(2,133)$535 $70 $605 
Common shares issued under share-based compensation plans
2.7 62 (51)— — 11 — 11 
Share-based compensation— — 31 — — 31 — 31 
Employee withholding taxes related to share-based awards
— — (41)— — (41)— (41)
Net (loss) income— — — (610)— (610)3 (607)
Other comprehensive loss— — — (123)(123)— (123)
Balances, March 31, 2021358.1 $10,289 $393 $(8,623)$(2,256)$(197)$73 $(124)
The accompanying notes are an integral part of these consolidated financial statements.
4


BAUSCH HEALTH COMPANIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Three Months Ended
March 31,
20222021
Cash Flows From Operating Activities
Net loss$(66)$(607)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization of intangible assets352 403 
Amortization and write-off of debt premiums, discounts and issuance costs14 13 
Asset impairments, including loss on assets held for sale8 148 
Goodwill impairments 469 
Acquisition-related contingent consideration3 (9)
Allowances for losses on trade receivable and inventories14 17 
Deferred income taxes(83)(14)
Net gain on sale of assets (23)
Reductions to accrued legal settlements(1) 
Payments of accrued legal settlements(360)(118)
Share-based compensation32 31 
Foreign exchange loss(2)12 
Gain excluded from hedge effectiveness (6)
Loss on extinguishment of debt 5 
Other10 (18)
Changes in operating assets and liabilities:
Trade receivables197 60 
Inventories(73)(35)
Prepaid expenses and other current assets(33) 
Accounts payable, accrued and other liabilities(75)115 
Net cash (used in) provided by operating activities(63)443 
Cash Flows From Investing Activities
Purchases of property, plant and equipment(46)(66)
Payments for intangible and other assets(11)(2)
Purchases of marketable securities(5)(5)
Proceeds from sale of marketable securities6 2 
Proceeds from sale of assets and businesses, net of costs to sell 4 
Interest settlements from cross-currency swaps 11 
Net cash used in investing activities(56)(56)
Cash Flows From Financing Activities
Issuance of long-term debt, net of discounts986 (3)
Repayments of long-term debt(485)(200)
Payments of employee withholding taxes related to share-based awards(25)(41)
Payments of acquisition-related contingent consideration(8)(6)
Payments of financing costs(1)(4)
Other1 11 
Net cash provided by (used in) financing activities468 (243)
Effect of exchange rate changes on cash and cash equivalents(8)(13)
Net increase in cash, cash equivalents and restricted cash341 131 
Cash, cash equivalents and restricted cash, beginning of period2,119 1,816 
Cash, cash equivalents and restricted cash, end of period$2,460 $1,947 
Cash and cash equivalents$1,249 $679 
Restricted cash and other settlement deposits1,211 1,214 
Cash and cash equivalents, held for sale 54 
Cash, cash equivalents and restricted cash, end of period$2,460 $1,947 
The accompanying notes are an integral part of these consolidated financial statements.
5

BAUSCH HEALTH COMPANIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.DESCRIPTION OF BUSINESS
Bausch Health Companies Inc. (the “Company” or “Bausch Health”) is a multinational, specialty pharmaceutical and medical device company that develops, manufactures and markets, primarily in the therapeutic areas of eye health, gastroenterology (“GI”) and dermatology, a broad range of branded, generic and branded generic pharmaceuticals, over-the-counter (“OTC”) products and medical devices (contact lenses, intraocular lenses, ophthalmic surgical equipment and aesthetics devices) which are marketed directly or indirectly in approximately 100 countries.
2.SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Use of Estimates
The accompanying unaudited Consolidated Financial Statements have been prepared by the Company in U.S. dollars and in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial reporting, which do not conform in all respects to the requirements of U.S. GAAP for annual financial statements. Accordingly, these notes to the unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements prepared in accordance with U.S. GAAP that are contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission (the “SEC”) and the Canadian Securities Administrators (the “CSA”) on February 23, 2022. The unaudited Consolidated Financial Statements have been prepared using accounting policies that are consistent with the policies used in preparing the Company’s audited Consolidated Financial Statements for the year ended December 31, 2021, except for the new accounting guidance adopted during the period. The unaudited Consolidated Financial Statements reflect all normal and recurring adjustments necessary for a fair statement of the Company’s financial position and results of operations for the interim periods. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year.
Separation of the Bausch + Lomb Eye Health Business and Initial Public Offering of Solta Medical Business
On August 6, 2020, the Company announced its intentions to separate its eye health business into an independent publicly traded entity from the remainder of Bausch Health Companies Inc. (the “B+L Separation”). On August 3, 2021, the Company announced its intentions to conduct an initial public offering (“IPO”) of its aesthetic medical device business, Global Solta (the “Solta IPO”). In January 2022, the Company completed the internal organizational design and structure of the new eye health entity, Bausch + Lomb Corporation (“Bausch + Lomb”), and the new Global Solta entity, Solta Medical Corporation (“Solta”), as previously announced. The registration statement related to the B+L IPO of Bausch + Lomb (the “B+L IPO”) was declared effective on May 5, 2022, and Bausch + Lomb’s common stock began trading on the New York Stock Exchange and the Toronto Stock Exchange, in each case under the ticker symbol “BLCO” on May 6, 2022. Prior to the effectiveness of the registration statement, Bausch + Lomb was an indirect wholly-owned subsidiary of the Company. On May 10, 2022, a wholly owned subsidiary of the Company (the “Selling Shareholder”) sold 35,000,000 common shares of Bausch + Lomb, at an offering price of $18.00, per share, pursuant to the Bausch + Lomb prospectus. The net proceeds from the B+L IPO after deducting underwriting commissions and estimated offering expenses were approximately $560 million. The Company expects to complete the separation of Bausch + Lomb after the expiry of customary lockups related to the B+L IPO and achievement of targeted debt leverage ratios, subject to the receipt of applicable shareholder and other necessary approvals. The launch of the Solta IPO remains subject to when financial market conditions become favorable (and subject to receipt of regulatory, stock exchange and other approvals and other factors). See Note 20, “SUBSEQUENT EVENTS” for additional details regarding the B+L IPO.

The B+L Separation and the proposed Solta IPO will establish three separate companies that include: (i) a fully integrated eye health company which will consist of the Company’s Bausch + Lomb Global Vision Care, Global Surgical, Global Consumer and Global Ophthalmic Pharmaceuticals businesses, (ii) a global provider of aesthetic medical devices which will consist of the Company’s Solta business and (iii) a diversified pharmaceutical company which will include the Company’s Salix, International (formerly International Rx), dentistry, neurology, medical dermatology and generics pharmaceutical businesses. These audited Consolidated Financial Statements do not include any adjustments to give effect to either the B+L Separation or the proposed Solta IPO.
Impacts of COVID-19 Pandemic
The unprecedented nature of the COVID-19 pandemic has, and continues to, adversely impact the global economy. The COVID-19 pandemic and the reactions of governments, private sector participants and the public in an effort to contain the spread of the COVID-19 virus and/or address its impacts have had significant direct and indirect effects on businesses and
6

commerce. This includes, but is not limited to, disruption to supply chains, employee base and transactional activity, facilities closures and production suspensions.
The extent to which these events may continue to impact the Company’s business, financial condition, cash flows and results of operations, in particular, will depend on future developments which are highly uncertain and many of which are outside the Company’s control. Such developments include the availability and effectiveness of vaccines for the COVID-19 virus, the ultimate geographic spread and duration of the pandemic, COVID-19 vaccine immunization rates, the extent and duration of a resurgence of the COVID-19 virus and variant strains thereof, such as the delta and omicron variants, new information concerning the severity of the COVID-19 virus, the effectiveness and intensity of measures to contain the COVID-19 virus and the economic impact of the pandemic and the reactions to it. Such developments, among others, depending on their nature, duration and intensity, could have a significant adverse effect on the Company’s business, financial condition, cash flows and results of operations.
To date, the Company has been able to continue its operations with limited disruptions in supply and manufacturing. Although it is difficult to predict the broad macroeconomic effects that the COVID-19 pandemic will have on industries or individual companies, the Company has assessed the possible effects and outcomes of the pandemic on, among other things, its supply chain, customers and distributors, discounts and rebates, employee base, product sustainability, research and development efforts, product pipeline and consumer demand and currently believes that its estimates are reasonable.
Use of Estimates
In preparing the unaudited Consolidated Financial Statements, management is required to make estimates and assumptions. This includes estimates and assumptions regarding the nature, timing and extent of the impacts that the COVID-19 pandemic will have on its operations and cash flows. The estimates and assumptions used by the Company affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited Consolidated Financial Statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates and the differences could be material.
On an ongoing basis, management reviews its estimates to ensure that these estimates appropriately reflect changes in the Company’s business and new information as it becomes available. If historical experience and other factors used by management to make these estimates do not reasonably reflect future activity, the Company’s results of operations and financial position could be materially impacted.
Principles of Consolidation
The unaudited Consolidated Financial Statements include the accounts of the Company and those of its subsidiaries and any variable interest entities for which the Company is the primary beneficiary. All intercompany transactions and balances have been eliminated.
Reclassifications
Certain reclassifications have been made to prior year amounts to conform to the current year presentation.
Changes in Reportable Segments
Commencing in the first quarter of 2022, the Company operates in the following reportable segments: (i) Bausch + Lomb, (ii) Salix, (iii) International (formerly International Rx), (iv) Solta Medical and (v) Diversified Products. Prior to the first quarter of 2022, the Company operated in the following reportable segments: (i) Bausch + Lomb, (ii) Salix, (iii) International, (iv) Ortho Dermatologics and (v) Diversified Products. Prior period presentations have been recast to conform to the current segment reporting structure. See Note 19, “SEGMENT INFORMATION” for additional information.
3.REVENUE RECOGNITION
The Company’s revenues are primarily generated from product sales, principally in the therapeutic areas of eye health, GI and dermatology, that consist of: (i) branded pharmaceuticals, (ii) generic and branded generic pharmaceuticals, (iii) OTC products and (iv) medical devices (contact lenses, intraocular lenses, ophthalmic surgical equipment and aesthetics devices). Other revenues include alliance and service revenue from the licensing and co-promotion of products and contract service revenue primarily in the areas of dermatology and topical medication. Contract service revenue is derived primarily from contract manufacturing for third parties and is not material. See Note 19, “SEGMENT INFORMATION” for the disaggregation of revenue which depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by the economic factors of each category of customer contracts.
7

Product Sales Provisions
As is customary in the pharmaceutical industry, gross product sales are subject to a variety of deductions in arriving at reported net product sales.  The transaction price for product sales is typically adjusted for variable consideration, which may be in the form of cash discounts, allowances, returns, rebates, chargebacks and distribution fees paid to customers. Provisions for variable consideration are established to reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contract. The amount of variable consideration included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.
Provisions for these deductions are recorded concurrently with the recognition of gross product sales revenue and include cash discounts and allowances, chargebacks, and distribution fees, which are paid to direct customers, as well as rebates and returns, which can be paid to direct and indirect customers. Returns provision balances and volume discounts to direct customers are included in Accrued and other current liabilities. All other provisions related to direct customers are included in Trade receivables, net, while provision balances related to indirect customers are included in Accrued and other current liabilities.
The Company continually monitors its variable consideration provisions and evaluates the estimates used as additional information becomes available. Adjustments will be made to these provisions periodically to reflect new facts and circumstances that may indicate that historical experience may not be indicative of current and/or future results. The Company is required to make subjective judgments based primarily on its evaluation of current market conditions and trade inventory levels related to the Company’s products. These judgments include the potential impact of the COVID-19 pandemic on, among other things, unemployment and related changes in customer health insurance levels, customer behaviors during the COVID-19 pandemic and government stimulus bills that focus on ensuring availability and access to lifesaving drugs during a public health crisis. This evaluation may result in an increase or decrease in the experience rate that is applied to current and future sales, or require an adjustment related to past sales, or both. If the trend in actual amounts of variable consideration varies from the Company’s prior estimates, the Company adjusts these estimates when such trend is believed to be sustainable. At that time, the Company would record the necessary adjustments which would affect net product revenue and earnings reported in the current period. The Company applies this method consistently for contracts with similar characteristics.
The following tables present the activity and ending balances of the Company’s variable consideration provisions for the three months ended March 31, 2022 and 2021.
Three Months Ended March 31, 2022
(in millions)Discounts
and
Allowances
ReturnsRebatesChargebacksDistribution
Fees
Total
Reserve balances, January 1, 2022$222 $482 $944 $170 $45 $1,863 
Current period provisions134 19 581 471 51 1,256 
Payments and credits(162)(54)(599)(359)(53)(1,227)
Reserve balances, March 31, 2022$194 $447 $926 $282 $43 $1,892 
Included in Rebates in the table above are cooperative advertising credits due to customers of approximately $37 million and $36 million as of March 31, 2022 and January 1, 2022, respectively, which are reflected as a reduction of Trade receivables, net in the Consolidated Balance Sheets. There were no price appreciation credits during the three months ended March 31, 2022.
Three Months Ended March 31, 2021
(in millions)Discounts
and
Allowances
ReturnsRebatesChargebacksDistribution
Fees
Total
Reserve balances, January 1, 2021$190 $575 $779 $184 $85 $1,813 
Current period provisions147 34 602 462 55 1,300 
Payments and credits(160)(56)(457)(483)(66)(1,222)
Reserve balances, March 31, 2021$177 $553 $924 $163 $74 $1,891 
Included in Rebates in the table above are cooperative advertising credits due to customers of approximately $34 million and $32 million as of March 31, 2021 and January 1, 2021, respectively. Included as a reduction of Distribution fees in the table above are price appreciation credits of approximately $1 million during the three months ended March 31, 2021.
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Contract Assets and Contract Liabilities
There are no contract assets for any period presented. Contract liabilities consist of deferred revenue, the balance of which is not material to any period presented.
Allowance for Credit Losses
An allowance is maintained for potential credit losses. The Company estimates the current expected credit loss on its receivables based on various factors, including historical credit loss experience, customer credit worthiness, value of collaterals (if any), and any relevant current and reasonably supportable future economic factors.  Additionally, the Company generally estimates the expected credit loss on a pool basis when customers are deemed to have similar risk characteristics. Trade receivable balances are written off against the allowance when it is deemed probable that the trade receivable will not be collected. Trade receivables, net are stated net of certain sales provisions and the allowance for credit losses. The activity in the allowance for credit losses for trade receivables for the three months ended March 31, 2022 and 2021 is as follows.
(in millions)20222021
Balance, beginning of period$35 $39 
Provision (2)
Write-offs (1)
Recoveries3  
Foreign exchange and other
 1 
Balance, end of period$38 $37 
4.LICENSING AGREEMENTS AND DIVESTITURE
Licensing Agreements
In the normal course of business, the Company may enter into select licensing and collaborative agreements for the commercialization and/or development of unique products. These products are sometimes investigational treatments in early stage development that target unique conditions. The ultimate outcome, including whether the product will be: (i) fully developed, (ii) approved by regulatory agencies, (iii) covered by third-party payors or (iv) profitable for distribution, is highly uncertain. The commitment periods under these agreements vary and include customary termination provisions. Expenses arising from commitments, if any, to fund the development and testing of these products and their promotion are recognized as incurred. Royalties due are recognized when earned and milestone payments are accrued when each milestone has been achieved and payment is probable and can be reasonably estimated.
Divestiture of Amoun Pharmaceutical Company S.A.E. (“Amoun”)
On March 31, 2021, the Company announced that it and certain of its affiliates had entered into a definitive agreement to sell all of its equity interests in Amoun for total gross consideration of approximately $740 million (including the assignment to the purchasing entity of an intercompany loan granted by the Company to Amoun), subject to certain adjustments (the “Amoun Sale”). The Amoun Sale closed on July 26, 2021. As part of the Amoun Sale, cash generated by Amoun during the period from the locked-box date of January 1, 2021 through closing was for the benefit of the purchasing entity, subject to working capital during such period. Amoun manufactures, markets and distributes branded generics of human and animal health products. The Amoun business was part of the International segment (previously included within the former Bausch + Lomb/International segment) and was reclassified as held for sale as of December 31, 2020. As a result of meeting the criteria for held for sale classification, the carrying value of the Amoun business, was adjusted to its estimated fair value, less costs to sell, and the Company recognized an impairment loss of $68 million during the three months ended March 31, 2021, included within Asset impairments, including loss on assets held for sale in the Consolidated Statements of Operations. Revenues associated with Amoun were $60 million for the three months ended March 31, 2021.
5.RESTRUCTURING, INTEGRATION, SEPARATION AND IPO COSTS
Restructuring and Integration Costs
The Company evaluates opportunities to improve its operating results and implements cost savings programs to streamline its operations and eliminate redundant processes and expenses. Restructuring and integration costs are expenses associated with the implementation of these cost savings programs and include expenses associated with: (i) reducing headcount, (ii) eliminating real estate costs associated with unused or under-utilized facilities and (iii) implementing contribution margin improvement and other cost reduction initiatives. The liability associated with restructuring and integration costs as of March 31, 2022 was $15 million.
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The Company incurred $3 million and $3 million of restructuring and integration costs and made payments of $7 million and $5 million during the three months ended March 31, 2022 and 2021, respectively.
Separation Costs, Separation-related Costs, IPO Costs and IPO-related Costs
The Company has incurred, and will incur, costs associated with activities to effectuate the B+L Separation and the Solta IPO. These activities include: (i) separating the Bausch + Lomb and Solta Medical businesses from the remainder of the Company and (ii) registering the Bausch + Lomb and Solta Medical businesses as independent publicly traded entities. Separation and IPO costs are incremental costs directly related to the B+L Separation and Solta IPO and include, but are not limited to: (i) legal, audit and advisory fees, (ii) talent acquisition costs and (iii) costs associated with establishing a new board of directors and related board committees for the Bausch + Lomb and Solta Medical entities. Included in Restructuring, integration, separation and IPO costs for the three months ended March 31, 2022 and 2021 are Separation and IPO costs of $10 million and $9 million, respectively.
The Company has also incurred, and will incur, Separation-related and IPO-related costs which are incremental costs indirectly related to the B+L Separation and Solta IPO. Separation-related and IPO-related costs include, but are not limited to: (i) IT infrastructure and software licensing costs, (ii) rebranding costs and (iii) costs associated with facility relocation and/or modification. Included in Selling, general and administrative for the three months ended March 31, 2022 and 2021 are Separation-related and IPO-related costs of $24 million and $20 million, respectively.
The extent and timing of future charges for these costs cannot be reasonably estimated at this time and could be material.
6.FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS
Fair value measurements are estimated based on valuation techniques and inputs categorized as follows:
Level 1 — Quoted prices in active markets for identical assets or liabilities;
Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3 — Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using discounted cash flow methodologies, pricing models, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following fair value hierarchy table presents the components and classification of the Company’s financial assets and liabilities measured at fair value on a recurring basis:
 March 31, 2022December 31, 2021
(in millions)Carrying
Value
Level 1Level 2Level 3Carrying
Value
Level 1Level 2Level 3
Assets:        
Cash equivalents$766 $749 $17 $ $76 $58 $18 $ 
Restricted cash and other settlement deposits$1,211 $1,211 $ $ $1,537 $1,537 $ $ 
Foreign currency exchange contracts
$1 $ $1 $ $1 $ $1 $ 
Liabilities:       
Acquisition-related contingent consideration
$236 $ $ $236 $241 $ $ $241 
Foreign currency exchange contracts
$8 $ $8 $ $ $ $ $ 
Cash equivalents consist of highly liquid investments, primarily money market funds, with maturities of three months or less when purchased, and are reflected in the Consolidated Balance Sheets at carrying value, which approximates fair value due to their short-term nature.
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As of March 31, 2022, Restricted cash and other settlement deposits includes $1,210 million of payments into an escrow fund under the terms of a settlement agreement regarding certain U.S. securities litigation (which settlement agreement is subject to one objector’s appeal of the final court approval of the agreement), and is reflected in the Consolidated Balance Sheets at carrying value, which approximates fair value due to its short-term nature. These payments will remain in escrow until resolution of the appeal of the final court approval of the settlement agreement, as discussed in Note 18, “LEGAL PROCEEDINGS”.
There were no transfers into or out of Level 3 during the three months ended March 31, 2022.
Cross-currency Swaps
During 2019, the Company entered into cross-currency swaps, with aggregate notional amounts of $1,250 million, to mitigate fluctuation in the value of a portion of its euro-denominated net investment in its consolidated financial statements from fluctuation in exchange rates. The euro-denominated net investment being hedged was the Company’s investment in certain euro-denominated subsidiaries. The Company unwound these cross-currency swaps during November 2021.
Due to the unwinding of the cross-currency swaps during November 2021, there were no assets or liabilities associated with the cross-currency swaps included in the Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021.
The following table presents the effect of hedging instruments on the Consolidated Statements of Comprehensive Loss and the Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021:
Three Months Ended
March 31,
(in millions)20222021
Gain recognized in Other comprehensive loss$ $41 
Gain excluded from assessment of hedge effectiveness$ $6 
Location of gain of excluded componentInterest Expense
No portion of the cross-currency swaps was ineffective for the three months ended March 31, 2021. During the three months ended March 31, 2022 and 2021, the Company received $0 and $11 million, respectively, in interest settlements which are reported as investing activities in the Consolidated Statements of Cash Flows.
Foreign Currency Exchange Contracts
Since 2020, the Company has been entering into foreign currency exchange contracts. As of March 31, 2022, these contracts had an aggregate outstanding notional amount of $158 million.
The Company’s foreign currency exchange contracts are remeasured at each reporting date to reflect changes in their fair values determined using forward rates, which are observable market inputs, multiplied by the notional amount. The Company’s foreign currency exchange contracts are economically hedging the foreign exchange exposure on certain of the Company’s intercompany balances. These contracts have not been designated as an accounting hedge, and therefore the net change in their fair value is reported as a gain or loss in the Consolidated Statements of Operations as part of Foreign exchange and other. Settlements of the Company’s foreign currency exchange contracts are reported as a gain or loss in the Consolidated Statements of Operations as part of Foreign exchange and other and reported as operating activities in the Consolidated Statements of Cash Flows.
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The assets and liabilities associated with the Company’s foreign exchange contracts as included in the Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 are as follows:
(in millions)March 31,
2022
December 31,
2021
Accrued and other current liabilities$8 $ 
Prepaid expenses and other current assets$1 $1 
Net fair value$7 $1