Waters (NYSE: WAT) closes BD Biosciences & Diagnostic Solutions merger in $4.0B Reverse Morris Trust deal
Waters Corporation completed its previously announced Reverse Morris Trust transaction combining Becton, Dickinson’s Biosciences and Diagnostic Solutions business with Waters. BD shareholders received 38,541,851 shares of Waters common stock and now hold about 39.2% of the combined company on a fully diluted basis, while former Waters shareholders hold about 60.8%.
The BD carve-out business (SpinCo) paid BD $4.0 billion in cash funded by a new $4.0 billion unsecured term loan facility, split between a $3.5 billion 364‑day tranche and a $500 million two‑year tranche, guaranteed by Waters and key subsidiaries. For the year ended September 30, 2025, the acquired BDS Business generated $3,296 million in revenue and $353 million in net income.
Waters also expanded its board from 10 to 11 members and appointed genome scientist Claire M. Fraser, Ph.D., who will receive standard non‑employee director cash and equity compensation, including an initial equity grant valued at $229,166.
Positive
- Large, profitable acquisition: The BD Biosciences and Diagnostic Solutions business adds $3,296 million of annual revenue and $353 million of net income (year ended September 30, 2025), materially increasing Waters’ scale in life sciences and diagnostics.
- Strategic ownership balance: Post-transaction, prior Waters shareholders hold about 60.8% and BD shareholders 39.2% of the combined company on a fully diluted basis, aligning both investor bases behind the new platform.
Negative
- Increased leverage and near-term refinancing need: SpinCo funded a $4.0 billion cash payment to BD with new unsecured term loans, including a $3.5 billion tranche maturing 364 days after funding, putting focus on refinancing or repayment alongside leverage and interest coverage covenants.
Insights
Transformative BD carve-out adds scale but increases short-term debt.
The combination brings BD’s Biosciences and Diagnostic Solutions business into Waters via a Reverse Morris Trust. BD shareholders now own
The acquired BDS Business contributed revenue of
SpinCo borrowed
Overall, the deal appears strategically positive due to the scale and profitability of the acquired business, though investors will likely focus on refinancing or paying down the
Board strengthened with independent director tied to new business.
Waters increased its board size from 10 to 11 and appointed Claire M. Fraser, Ph.D., an independent director under NYSE standards, effective
Compensation matches Waters’ standard non‑employee director program, including an initial equity grant valued at
This appointment ties board expertise more closely to the enlarged diagnostics and biosciences footprint created by the BD combination, while preserving independence and using a pay structure that links director compensation to long‑term equity performance.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
Waters Corporation
(Exact name of registrant as specified in its charter)
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
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N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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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. ☐
Introductory Note.
On February 9, 2026 (the “Closing Date”), Waters Corporation, a Delaware corporation (“Waters”), and Becton, Dickinson and Company, a New Jersey corporation (“BD”), announced that they consummated the previously announced spin-off of BD’s Biosciences and Diagnostic Solutions business (the “SpinCo Business”) and combination of the SpinCo Business with Waters. In accordance with the terms and conditions of the Agreement and Plan of Merger, dated as of July 13, 2025 (the “Merger Agreement”), by and among Waters, BD, Augusta SpinCo Corporation, a Delaware corporation and a wholly owned subsidiary of BD (“SpinCo”), and Beta Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Waters (“Merger Sub”), and the Separation Agreement, dated as of July 13, 2025 (the “Separation Agreement”), by and among Waters, BD and SpinCo, as amended by that certain Amendment No. 1, by and among Waters, BD and SpinCo, dated as of February 9, 2026, (1) BD transferred, and SpinCo accepted and assumed, all of the rights, titles and interests to and under certain assets and liabilities relating to the SpinCo Business such that the SpinCo Business was separated from the remainder of BD’s businesses (the “Separation”), (2) following the Separation, BD distributed, on a pro rata basis (the “Distribution”), one share of SpinCo common stock, par value $0.01 per share (“SpinCo Common Stock”), to each holder of BD common stock (other than any subsidiary of BD) as of the close of business on February 5, 2026 (the “Record Date”, and such holders of BD common stock as of the Record Date, the “Record Date BD Shareholders”) and (3) following the Distribution, Merger Sub merged with and into SpinCo, with SpinCo as the surviving entity (the “Merger”), and each share of SpinCo Common Stock (except for any such shares held as treasury stock, or held by BD, SpinCo or any subsidiary of BD, if any, which shares were canceled) was converted into the right to receive 0.135343148384084 shares of common stock, $0.01 par value per share, of Waters (“Waters Common Stock”) (collectively, the “Transactions”). In addition, pursuant to the terms of the Separation Agreement, prior to the Distribution and the Merger, SpinCo made a cash payment to BD of $4.0 billion. Upon completion of the Distribution and the Merger, Waters issued 38,541,851 shares of Waters Common Stock to the Record Date BD Shareholders. As a result, the Record Date BD Shareholders owned approximately 39.2% of the outstanding shares of Waters Common Stock, and former Waters shareholders owned approximately 60.8% of the outstanding shares of Waters Common Stock, in each case, on a fully diluted basis. As a result of the Merger, Merger Sub ceased to exist as a separate legal entity, and SpinCo became a wholly owned subsidiary of Waters.
| Item 1.01. | Entry into a Material Definitive Agreement. |
Transaction Agreements
On the Closing Date, in connection with the consummation of the Transactions and in accordance with the Merger Agreement and the Separation Agreement, Waters, BD and SpinCo, entered into certain additional agreements, including:
| • | a Tax Matters Agreement (the “Tax Matters Agreement”), which governs the parties’ respective rights, responsibilities and obligations with respect to taxes, tax attributes, the preparation and filing of tax returns, responsibility for and preservation of the expected tax-free status of the transactions contemplated by the Separation Agreement and certain other tax matters; |
| • | an Employee Matters Agreement (the “Employee Matters Agreement”), which governs, among other things, the parties’ obligations with respect to current and former employees of BD and of the SpinCo Business; |
| • | an Intellectual Property Matters Agreement (the “Intellectual Property Matters Agreement”), which allocates rights and interests in certain intellectual property rights relating to the SpinCo Business and BD; and |
| • | a Transition Services Agreement (the “Transition Services Agreement”), which governs, among other things, the parties’ respective rights and obligations with respect to the provision of certain transition services. |
A summary of the material terms of the Tax Matters Agreement, Employee Matters Agreement, Intellectual Property Matters Agreement and Transition Services Agreement described above is also contained in the section entitled “Additional Agreements Related to the Separation, the Distribution and the Merger” in Waters’ Registration Statement on Form S-4 (Registration No. 333-292087), as amended, which was declared effective by the Securities and Exchange Commission on December 23, 2025 (the “Waters Registration Statement”), which description is incorporated herein by reference. Each of the foregoing descriptions does not purport to be complete and is qualified in its entirety by reference to the full text of each of the Tax Matters Agreement, Employee Matters Agreement, Intellectual Property Matters Agreement and Transition Services Agreement, as applicable, copies of which are attached hereto as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, and incorporated herein by reference.
Financing Matters
Term Loan Credit Agreement
In connection with the Transactions, on January 8, 2026, SpinCo entered into a Term Loan Credit Agreement with the lenders named therein, Barclays Bank PLC, as administrative agent (the “Agent”), and the other parties party thereto (the “Credit Agreement”). On the February 6, 2026 (the “Funding Date”), SpinCo borrowed $4.0 billion of unsecured term loans under the Credit Agreement, consisting of a $3.5 billion tranche which will mature and be payable in full 364 days after the Funding Date (“Tranche 1”) and a $500.0 million tranche which will mature and be payable in full on the second anniversary of the Funding Date (“Tranche 2”), and such funds were used by SpinCo on the Funding Date to finance a cash distribution to BD in connection with the Transactions.
Upon consummation of the Transactions, SpinCo became a wholly owned subsidiary of Waters and in connection therewith, Waters entered into a Parent Guarantee Agreement on the Closing Date (the “Parent Guarantee Agreement”), by and among Waters, SpinCo and the Agent, to add Waters as a guarantor of the obligations of SpinCo under the Credit Agreement. The subsidiaries of Waters that had provided a guaranty of the obligations under (i) the Amendment and Restatement Agreement, dated as of May 22, 2025 in respect of that certain Amended and Restated Credit Agreement, dated as of September 17, 2021, and amended as of March 3, 2023, by and among Waters and certain of its subsidiaries, as guarantors, with the lenders and issuing banks party thereto, and JPMorgan Chase Bank, N.A., as administrative agent and (ii) the note purchase agreements governing Waters’ outstanding senior guaranteed notes, prior to the consummation of the Transactions, have also entered into a Subsidiary Guarantee Agreement on the Closing Date (the “Subsidiary Guarantee Agreement”), by and among such subsidiaries, Waters, SpinCo and the Agent, pursuant to which such subsidiaries have guaranteed the obligations of SpinCo under the Credit Agreement.
Borrowings under the Credit Agreement bear interest at a fluctuating rate per annum equal to, at SpinCo’s option, an alternate base rate or Term SOFR rate, in each case, plus an applicable margin calculated based on Waters’ public debt ratings. The applicable margin ranges from 87.5 basis points to 135 basis points per annum over Term SOFR and 0 basis points to 35 basis points per annum over the alternate base rate, and, in the case of Tranche 1 loans, will increase every 90 days after the Closing Date by up to an additional 25 basis points, in each case, as determined in accordance with the provisions of the Credit Agreement.
Voluntary prepayments of the loans and voluntary reductions of the unutilized portion of the commitments under the Credit Agreement are permissible without penalty (other than customary SOFR loan breakage), subject to certain conditions pertaining to minimum notice and minimum prepayment and reduction amounts. The loans and/or commitments under Tranche 1 must be automatically and permanently prepaid or reduced, as applicable, upon receipt of net cash proceeds in respect of certain debt incurrences, equity issuances and sales or other dispositions of certain assets of SpinCo or its subsidiaries, in each case, subject to certain exceptions.
The Credit Agreement contains affirmative and negative covenants, including limitations on subsidiary debt, liens, sale and leaseback transactions, mergers and certain restrictive agreements, as well as financial covenants requiring maintenance of a leverage ratio not to exceed 3.50 to 1.00 as of the last day of any fiscal quarter (which may be increased to 4.25 to 1.00 at Waters’ election as of the last day of the fiscal quarter during which Waters closes a material acquisition for which the aggregate consideration involves cash in the amount of $500.0 million or more, with such increase automatically applying to the consummation of the Transactions) and an interest coverage ratio of at least 3.50 to 1.00 that will apply unless Waters obtains a certain public corporate rating set forth in the Credit Agreement. The Credit Agreement contains certain representations, warranties and events of default (which are, in some cases, subject to certain exceptions, thresholds and grace periods) including, but not limited to, non-payment of principal and interest, failure to perform or observe covenants, breaches of representations and warranties and certain bankruptcy-related events.
The foregoing descriptions of each of the Credit Agreement, Parent Guarantee Agreement and Subsidiary Guarantee Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of each of the Credit Agreement, Parent Guarantee Agreement or Subsidiary Guarantee Agreement, as applicable, copies of which are attached hereto as Exhibits 10.5, 10.6 and 10.7, respectively, and incorporated herein by reference.
| Item 2.01. | Completion of Acquisition or Disposition of Assets. |
The information set forth in the Introductory Note and Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.
| Item 2.03. | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information set forth in Item 1.01 of this Current Report on Form 8-K with respect to the Credit Agreement, the Parent Guarantee Agreement and the Subsidiary Guarantee Agreement is incorporated herein by reference.
| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
Appointment of New Director
In connection with the closing of the Transactions and in accordance with the terms of the Merger Agreement, the board of directors (the “Board”) of Waters increased the size of the Board from 10 to 11 members and appointed Claire M. Fraser, Ph.D. to the Board, effective February 9, 2026, to fill the vacancy so created. Dr. Fraser will serve as a director until Waters’ 2026 annual meeting of stockholders (the “2026 AGM”) or until her earlier resignation, death or removal.
The Board has determined that Dr. Fraser meets the independence standards established under the New York Stock Exchange corporate governance listing standards. There are no related party transactions between Waters and Dr. Fraser that would require disclosure under Item 404(a) of Regulation S-K.
Dr. Fraser will receive the standard compensation paid by Waters to all of its non-employee directors. Following her initial appointment to the Board, Dr. Fraser will be awarded an initial equity grant valued at $229,166, comprised of 50% of such value in the form of a restricted stock award and 50% of such value in the form of a non-qualified stock option award, both of which will vest on the first anniversary of the Closing Date. Dr. Fraser will also be entitled to a prorated cash retainer for her service for the period from her appointment until the 2026 AGM in accordance with Waters’ non-employee director compensation program, as well as Board meeting fees and expense reimbursement.
| Item 7.01 | Regulation FD Disclosure. |
On February 9, 2026, Waters issued a press release announcing the closing of the Transactions and related matters. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.
The information (including Exhibit 99.1) being furnished pursuant to this Item 7.01 shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
| Item 9.01 | Financial Statements and Exhibits. |
| (a) | Financial Statements of the SpinCo Business |
The audited historical combined financial statements of the SpinCo Business as of September 30, 2025 and 2024, and for each of the three years in the period ended September 30, 2025, and the notes related thereto, were included in the Waters Registration Statement, and are incorporated herein by reference.
| (b) | Pro Forma Information |
The pro forma financial information required by this Item 9.01(b) was included in the Waters Registration Statement and is incorporated herein by reference.
| (c) | Not applicable |
| (d) | Exhibits |
The following documents are filed herewith unless otherwise indicated.
| Exhibit No. |
Description | |
| 2.1 | Separation Agreement, dated as of July 13, 2025, by and among Waters Corporation, Becton, Dickinson and Company and Augusta SpinCo Corporation (incorporated herein by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Waters on July 14, 2025).* | |
| 2.2 | Amendment No. 1 to Separation Agreement, dated as of February 9, 2026, by and among Waters Corporation, Becton, Dickinson and Company and Augusta SpinCo Corporation.* | |
| 2.3 | Agreement and Plan of Merger, dated as of July 13, 2025, by and among Waters Corporation, Becton, Dickinson and Company, Beta Merger Sub, Inc. and Augusta SpinCo Corporation (incorporated herein by reference to Exhibit 2.2 to the Current Report on Form 8-K filed by Waters on July 14, 2025).* | |
| 10.1 | Tax Matters Agreement, dated as of February 9, 2026, by and among Waters Corporation, Becton, Dickinson and Company and Augusta SpinCo Corporation.* | |
| 10.2 | Employee Matters Agreement, dated as of February 9, 2026, by and among Waters Corporation, Becton, Dickinson and Company and Augusta SpinCo Corporation.* | |
| 10.3 | Intellectual Property Matters Agreement, dated as of February 9, 2026, by and among Waters Corporation, Becton, Dickinson and Company and Augusta SpinCo Corporation.* | |
| 10.4 | Transition Services Agreement, dated as of February 9, 2026, by and among Waters Corporation, Becton, Dickinson and Company and Augusta SpinCo Corporation.* | |
| 10.5 | Term Loan Credit Agreement, dated as of January 8, 2026, by and among Augusta SpinCo Corporation, the lenders party thereto and Barclays Bank PLC, as administrative agent, and the other parties party thereto.* | |
| 10.6 | Parent Guarantee Agreement, dated as of February 9, 2026, by and among Augusta SpinCo Corporation, Waters Corporation and Barclays Bank PLC, as administrative agent.* | |
| 10.7 | Subsidiary Guarantee Agreement, dated as of February 9, 2026, by and among Augusta SpinCo Corporation, Waters Corporation, the subsidiaries of Waters Corporation party thereto and Barclays Bank PLC, as administrative agent.* | |
| 23.1 | Consent of Ernst & Young LLP as to the audited financial statements of the SpinCo Business. | |
| 99.1 | Press release, dated as of February 9, 2026. | |
| 99.2 | Audited combined financial statements of the SpinCo Business as of September 30, 2025 and 2024 and for the fiscal years ended September 30, 2025, 2024 and 2023. | |
| 99.3 | Unaudited pro forma condensed combined financial information of Waters Corporation and the SpinCo Business as of September 27, 2025 and for the fiscal year ended December 31, 2024 and the nine months ended September 27, 2025. | |
| 104 | The cover page from this Current Report on Form 8-K, formatted in Inline XBRL. | |
| * | Schedules (or similar attachments) to this Exhibit have been omitted in accordance with Item 601(a)(5) and/or Item 601(b)(2) of Regulation S-K. Waters Corporation agrees to furnish supplementally a copy of all omitted schedules to the Securities and Exchange Commission on a confidential basis upon request. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: February 9, 2026
| WATERS CORPORATION | ||
| By: | /s/ Amol Chaubal | |
| Amol Chaubal | ||
| Senior Vice President and Chief Financial Officer | ||
Exhibit 99.1
Waters Completes Combination with BD’s Biosciences & Diagnostic Solutions Businesses
| • | Announces appointment of Claire M. Fraser, Ph.D., to its Board of Directors |
| • | Forms a global life sciences and diagnostics leader focused on high-volume testing in regulated applications |
| • | Announces formation of four divisions: Waters Analytical Sciences, Waters Biosciences, Waters Advanced Diagnostics, and Waters Materials Sciences |
MILFORD, Mass., February 9, 2026 – Waters Corporation (NYSE: WAT) (“Waters”) today announced it has completed the previously announced combination with the Biosciences & Diagnostic Solutions businesses of Becton, Dickinson and Company (NYSE: BDX) (“BD”). The transaction forms a global life sciences and diagnostics leader, equipped with best-in-class technologies, and an industry-leading financial outlook. The Company also announced the appointment of Claire M. Fraser, Ph.D., to its Board of Directors (the “Waters Board”), increasing the size of the Waters Board to a total of 11 members.
Dr. Fraser is a globally acclaimed genome scientist, with three decades of experience managing large research institutes. Most recently, she served as Director of The Institute for Genome Sciences, which she founded in 2007, at the University of Maryland School of Medicine, where she also served as a Professor of Medicine and Microbiology and Immunology. Dr. Fraser received a B.S. in Biology from Rensselaer Polytechnic Institute in Troy, NY, and a Ph.D. in Pharmacology from the State University of New York at Buffalo.
“As we reach this important milestone, I want to welcome our new colleagues to Waters and Dr. Claire Fraser to our Board,” said Flemming Ørnskov, M.D., M.P.H., Chairman, Waters. “Dr. Fraser is an internationally recognized scientist with an extensive background in genomics, infectious diseases, and molecular diagnostics. We will benefit from her expertise and deep knowledge of the business to help oversee our next era of growth and value creation.”
“Our combination with BD’s Biosciences & Diagnostic Solutions businesses marks a pivotal moment for Waters, bringing together world-class scientific expertise across chemistry, physics, and biology, with rich histories of innovation,” said Udit Batra, Ph.D., President and Chief Executive Officer, Waters. “As we enter this next chapter, our focus is clear: address our customers’ unmet needs, deliver long-term value for our shareholders, and provide solutions that advance global health. Through our category-defining products and shared culture of innovation, I am confident that together we will accelerate the benefits of pioneering science.”
With the transaction now closed, Waters has established four divisions that reflect the Company’s continued focus on high-volume testing in regulated applications and its decisive expansion into high-growth adjacent markets. The divisions bring together leading scientific teams to support the development and manufacturing of large and small molecule therapeutics and food and environmental testing, and to advance specialty diagnostics in attractive molecular, microbiology, and multiplex applications.
| • | Waters Analytical Sciences (formerly Waters Division, excluding Waters Clinical Business): comprised of products, service, and compliant informatics linked to separations science and physical molecular characterization, including liquid chromatography instruments, chemistry consumables, and mass spectrometry, UV, light scattering, and particle analysis detection technologies. |
| • | Waters Biosciences (formerly BD Biosciences): comprised of products, service, and informatics linked to the field of biology, spanning cellular sorting and analysis, including flow cytometry instruments and reagents, and single-cell multiomics solutions. |
| • | Waters Advanced Diagnostics (formerly BD Diagnostic Solutions and Waters Clinical Business): comprised of products and service for high-value diagnostic workflows in regulated clinical settings. This includes microbiology, molecular, LC-MS-based multiplex testing, automation solutions, and point-of-care testing. |
| • | Waters Materials Sciences (formerly TA Division): comprised of products, service, and informatics spanning a diverse range of materials characterization techniques, including thermal analysis, rheology, and microcalorimetry, serving batteries, electronics, and pharmaceutical applications. |
Transaction Information
The combination was effected through a Reverse Morris Trust transaction, where BD’s Biosciences & Diagnostic Solutions businesses (the “Business”) were spun off into a separate entity which merged with a wholly owned subsidiary of Waters, and thus became a wholly owned subsidiary of Waters. Upon consummation of the transaction, Waters shareholders prior to the closing of the transaction owned common stock representing 60.8% of the combined company on a fully diluted basis and BD shareholders owned 39.2% of the combined company on a fully diluted basis. In connection with the transaction, BD shareholders will receive approximately 0.135 shares of Waters common stock for each share of BD common stock that they held as of the close of business on February 5, 2026, the record date for the spin-off, with cash in lieu of any fractional shares of Waters common stock.
Barclays served as financial advisor to Waters, and Kirkland & Ellis LLP served as lead legal counsel.
About Waters Corporation
Waters Corporation (NYSE: WAT) is a global leader in life sciences and diagnostics, dedicated to accelerating the benefits of pioneering science through analytical technologies, informatics, and service. With a focus on regulated, high-volume testing environments, our innovative portfolio harnesses deep scientific expertise across chemistry, physics, and biology. We collaborate with customers around the world to advance the release of effective, high-quality medicines, ensure the safety of food and water, and drive better patient outcomes by detecting diseases earlier, managing routine infections, and combating antibiotic resistance. Through a shared culture of relentless innovation, our passionate team of ~16,000 colleagues turn scientific challenges into breakthroughs that improve lives worldwide. For more information, please visit www.waters.com/combination.
Cautionary Statement
This release contains “forward-looking” statements regarding future results and events, including statements regarding the expected benefits of the transaction. For this purpose, any statements that are not statements of historical fact may be deemed forward-looking statements. Without limiting the foregoing, the words “will,” “feels”, “believes”, “anticipates”, “plans”, “expects”, “intends”, “suggests”, “appears”, “estimates”, “projects” and similar expressions, whether in the negative or affirmative, are intended to identify forward-looking statements. Our actual future results may differ significantly from the results discussed in the forward-looking statements within this release for a variety of reasons, including and without limitation, risks or uncertainties related to, and expectations regarding our ability to realize commercial success subsequent to the completion of our acquisition of the Business and other risk factors detailed from time to time in Waters’ reports filed with the Securities and Exchange Commission (“SEC”). Such factors and others that are discussed more fully in the sections entitled “Forward-Looking Statements” and “Risk Factors” of Waters’ annual report on Form 10-K for the year ended December 31, 2024 as filed with the SEC, which discussions are incorporated by reference in this release, as updated by Waters’ subsequent filings with the SEC. The forward-looking statements included in this release represent Waters’ estimates or views as of the date of this release and should not be relied upon as representing Waters’ estimates or views as of any date subsequent to the date of this release. Except as required by law, Waters does not assume any obligation to update any forward-looking statements.
Contacts
Molly Gluck
Head of External Communications
Waters Corporation
508.498.9732
PR@waters.com
Caspar Tudor
Head of Investor Relations
Waters Corporation
508.482.3448
investor_relations@waters.com
Exhibit 99.2
INDEX TO COMBINED FINANCIAL STATEMENTS
| Item | Page | |||
| Report of Independent Registered Public Accounting Firm |
F-2 | |||
| Combined Statements of Income for the Years Ended September 30, 2025, 2024 and 2023 |
F-4 | |||
| Combined Statements of Comprehensive Income for the Years Ended September 30, 2025, 2024 and 2023 |
F-5 | |||
| Combined Balance Sheets as of September 30, 2025 and 2024 |
F-6 | |||
| Combined Statements of Cash Flows for the Years Ended September 30, 2025, 2024 and 2023 |
F-7 | |||
| Notes to Combined Financial Statements |
F-8 | |||
F-1
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Becton, Dickinson and Company
Opinion on the Financial Statements
We have audited the accompanying combined balance sheets of the Biosciences and Diagnostic Solutions Business of Becton, Dickinson and Company (“BDS Business”) as of September 30, 2025 and 2024, the combined statements of income, comprehensive income and cash flows for each of the three years in the period ended September 30, 2025 and the related notes (collectively referred to as the “combined financial statements”). In our opinion, the combined financial statements present fairly, in all material respects, the financial position of the BDS Business at September 30, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2025, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the BDS Business’s management. Our responsibility is to express an opinion on the BDS Business’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the BDS Business in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The BDS Business is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the BDS Business’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the combined financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F-2
| Income taxes – Application of Separate Return Method | ||
| Description of the Matter |
As discussed in Notes 1 and 11, the income tax provision and related income tax accounts on the balance sheet in the combined financial statements were calculated as if the BDS Business filed a separate tax return as a standalone entity. As a result, the recognition and measurement of certain items reflected in the combined financial statements may be different than how they are reflected in the Becton, Dickinson and Company’s consolidated financial statements. The BDS Business recognized a combined provision for income taxes of $70 million for the year ended September 30, 2025, a liability for unrecognized tax benefits of $54 million, deferred tax assets net of valuation allowance of $222 million and deferred tax liabilities, net of $94 million as of September 30, 2025.
Auditing the BDS Business’s income tax accounts is especially challenging because of the complexities and significant management judgment in the allocations and assumptions necessary to prepare the income tax accounts on a separate return basis as a standalone entity. | |
| How We Addressed the Matter in Our Audit |
To evaluate the BDS Business’s income tax provision and related income tax accounts on the balance sheet, we performed audit procedures that included, among others, testing management’s assumptions and attribution of current and deferred income tax assets and liabilities of Becton, Dickinson and Company to the BDS Business, and evaluation of applicable tax law, tax regulations and other regulatory guidance. We also involved our tax subject matter professionals in our testing over the income tax provision, deferred income taxes, uncertain tax positions and transfer pricing. We also evaluated the adequacy of the BDS Business’s income tax disclosures included in Note 1 and 11 to the combined financial statements in relation to these matters. | |
We have served as the BDS Business’s auditor since 2025.
/s/ Ernst & Young LLP
New York, New York
December 11, 2025
F-3
Combined Statements of Income
BDS Business
Years Ended September 30
| Millions of dollars | 2025 | 2024 | 2023 | |||||||||
| Revenues: |
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| Product sales |
$ | 2,866 | $ | 2,945 | $ | 3,026 | ||||||
| Service sales |
430 | 398 | 368 | |||||||||
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| Total net sales |
3,296 | 3,343 | 3,394 | |||||||||
| Operating costs and expenses: |
||||||||||||
| Cost of product sales |
1,390 | 1,443 | 1,426 | |||||||||
| Cost of service sales |
276 | 270 | 270 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total cost of sales |
1,666 | 1,713 | 1,696 | |||||||||
|
|
|
|
|
|
|
|||||||
| Selling and administrative expense |
865 | 866 | 849 | |||||||||
| Research and development expense |
321 | 306 | 342 | |||||||||
| Integration, restructuring and transaction expense |
5 | 89 | 55 | |||||||||
| Other operating income, net |
— | (2 | ) | (5 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Total Operating Costs and Expenses |
2,857 | 2,972 | 2,937 | |||||||||
|
|
|
|
|
|
|
|||||||
| Operating Income |
439 | 371 | 457 | |||||||||
| Other expense, net |
(16 | ) | (5 | ) | (3 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Income Before Income Taxes |
423 | 366 | 454 | |||||||||
| Income tax provision |
70 | 45 | 39 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net Income |
$ | 353 | $ | 321 | $ | 415 | ||||||
|
|
|
|
|
|
|
|||||||
See notes to combined financial statements.
F-4
Combined Statements of Comprehensive Income
BDS Business
Years Ended September 30
| Millions of dollars | 2025 | 2024 | 2023 | |||||||||
| Net Income |
$ | 353 | $ | 321 | $ | 415 | ||||||
| Other Comprehensive Income, Net of Tax |
||||||||||||
| Foreign currency translation adjustments |
20 | 38 | 81 | |||||||||
| Other Comprehensive Income, Net of Tax |
20 | 38 | 81 | |||||||||
|
|
|
|
|
|
|
|||||||
| Comprehensive Income |
$ | 373 | $ | 359 | $ | 496 | ||||||
|
|
|
|
|
|
|
|||||||
See notes to combined financial statements.
F-5
Combined Balance Sheets
BDS Business
September 30
| Millions of dollars | 2025 | 2024 | ||||||
| Assets |
||||||||
| Current Assets |
||||||||
| Cash and equivalents |
$ | 74 | $ | 64 | ||||
| Trade receivables, net |
597 | 572 | ||||||
| Inventories, net |
743 | 695 | ||||||
| Prepaid expenses and other |
133 | 133 | ||||||
|
|
|
|
|
|||||
| Total Current Assets |
1,547 | 1,464 | ||||||
| Property, Plant and Equipment, Net |
647 | 662 | ||||||
| Goodwill |
896 | 886 | ||||||
| Other Intangibles, Net |
179 | 226 | ||||||
| Other Assets |
762 | 738 | ||||||
|
|
|
|
|
|||||
| Total Assets |
$ | 4,031 | $ | 3,976 | ||||
|
|
|
|
|
|||||
| Liabilities and Parent’s Equity |
||||||||
| Current Liabilities |
||||||||
| Accounts payable |
$ | 197 | $ | 217 | ||||
| Accrued expenses and other liabilities |
300 | 324 | ||||||
| Salaries, wages and related items |
153 | 156 | ||||||
|
|
|
|
|
|||||
| Total Current Liabilities |
650 | 697 | ||||||
| Deferred Income Taxes and Other Liabilities |
413 | 427 | ||||||
| Parent’s Equity |
||||||||
| Accumulated other comprehensive loss |
(92 | ) | (112 | ) | ||||
| Net parent investment |
3,060 | 2,964 | ||||||
|
|
|
|
|
|||||
| Total Parent’s Equity |
2,968 | 2,852 | ||||||
|
|
|
|
|
|||||
| Total Liabilities and Parent’s Equity |
$ | 4,031 | $ | 3,976 | ||||
|
|
|
|
|
|||||
See notes to combined financial statements.
F-6
Combined Statements of Cash Flows
BDS Business
Years Ended September 30
| Millions of dollars | 2025 | 2024 | 2023 | |||||||||
| Operating Activities |
||||||||||||
| Net income |
$ | 353 | $ | 321 | $ | 415 | ||||||
| Adjustments to net income to derive net cash provided by operating activities: |
||||||||||||
| Depreciation and amortization |
170 | 174 | 169 | |||||||||
| Share-based compensation |
43 | 44 | 46 | |||||||||
| Impairment of intangible assets |
31 | — | — | |||||||||
| Loss on settlement of investment |
10 | — | — | |||||||||
| Pension and other postretirement benefit expense |
8 | 16 | 21 | |||||||||
| Deferred income taxes |
(25 | ) | (45 | ) | (51 | ) | ||||||
| Contingent consideration fair value adjustment |
— | (7 | ) | (17 | ) | |||||||
| Change in operating assets and liabilities: |
||||||||||||
| Trade receivables, net |
(18 | ) | 49 | (87 | ) | |||||||
| Inventories, net |
(45 | ) | 5 | 5 | ||||||||
| Prepaid expenses and other |
(28 | ) | (15 | ) | (4 | ) | ||||||
| Accounts payable, income taxes and other liabilities |
(44 | ) | 68 | (66 | ) | |||||||
| Other, net |
7 | 31 | (60 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Net Cash Provided by Operating Activities |
462 | 641 | 371 | |||||||||
|
|
|
|
|
|
|
|||||||
| Investing Activities |
||||||||||||
| Capital expenditures |
(50 | ) | (64 | ) | (73 | ) | ||||||
| Investment in placed instruments |
(82 | ) | (81 | ) | (91 | ) | ||||||
| Acquisition, net of cash acquired |
(12 | ) | — | — | ||||||||
| Acquisitions of intangible assets |
(9 | ) | (10 | ) | (8 | ) | ||||||
| Other, net |
10 | 8 | (7 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Net Cash Used for Investing Activities |
(143 | ) | (147 | ) | (179 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Financing Activities |
||||||||||||
| Net transfers to Parent |
(309 | ) | (470 | ) | (174 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net Cash Used for Financing Activities |
(309 | ) | (470 | ) | (174 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net Increase in Cash and equivalents |
10 | 24 | 18 | |||||||||
| Opening Cash and equivalents |
64 | 40 | 22 | |||||||||
|
|
|
|
|
|
|
|||||||
| Closing Cash and equivalents |
$ | 74 | $ | 64 | $ | 40 | ||||||
|
|
|
|
|
|
|
|||||||
See notes to combined financial statements.
F-7
Notes to Combined Financial Statements
BDS Business
Millions of dollars, or as otherwise specified
Note 1 — Background and Basis of Presentation
Background
On July 13, 2025, Becton, Dickinson and Company (“BD” or the “Parent”) entered into a definitive agreement to combine the Biosciences and Diagnostic Solutions Businesses of BD (together, the “Company” or the “BDS Business”) through an initial spin-off, followed by a merger executed as a Reverse Morris Trust transaction with Waters Corporation (“Waters” and such transaction, the “Transaction”). In order to effect the Transaction, Waters and BD entered into a number of agreements, including a merger and separation agreement. These agreements provide for (1) the separation of the BDS Business from BD’s other businesses and the subsequent transfer of the BDS Business into Augusta SpinCo Corporation (“SpinCo”) and its subsidiaries, (2) a cash distribution to BD up to $4 billion, subject to certain adjustments (the “SpinCo Cash Distribution”), (3) the delivery to BD shareholders of all of the issued and outstanding shares of SpinCo Common Stock held by BD by way of a pro rata distribution, and (4) the merger of SpinCo with Beta Merger Sub, Inc. (“Merger Sub”), with SpinCo continuing as the surviving corporation of the merger and becoming a wholly owned subsidiary of Waters. The BDS Business is composed of instruments and informatics, reagents, single-cell multiomics tools, and a range of products focused on microbiology and infectious disease diagnostics, including molecular testing, cervical cancer screening, microbiology automation, and point-of-care solutions. SpinCo had no assets, liabilities, operations, or commitments and contingencies during the periods presented in these combined financial statements and will not have any assets, liabilities, operations or commitments in respect of the BDS Business until such business’ assets and liabilities are transferred to SpinCo. These combined financial statements reflect the combined historical results of operations, financial position and cash flows of the BDS Business.
The Transaction is expected to close around the end of the first quarter of calendar year 2026, subject to receipt of required regulatory approvals, Waters shareholder approval, compliance with applicable U.S. Securities and Exchange Commission (the “SEC”) requirements, the receipt of a private letter ruling from the Internal Revenue Service (“IRS”) regarding certain matters germane to the U.S. federal income tax consequences of the transactions, and satisfaction of other customary closing conditions. There are no assurances as to when the planned spin-off will be completed, if at all.
Basis of Presentation
The combined financial statements have been derived from BD’s historical accounting records and were prepared on a stand-alone 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 BDS Business have been reflected in these 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 BDS Business and it has not operated as a stand-alone business from BD. The historical results of operations, financial position and cash flows of the BDS Business presented in these combined financial statements may not be indicative of what they would have been had the BDS Business actually been an independent stand-alone company, nor are they necessarily indicative of the BDS Business’s future results of operations, financial position and cash flows.
BDS Business has historically functioned together with other BD businesses. Accordingly, the BDS Business relied on certain of BD’s Corporate and Life Sciences segment support functions to operate. BD’s Life Sciences segment includes three organizational units, including the Biosciences, Diagnostic Solutions, and Specimen Management Businesses. The combined financial statements include all revenues and costs directly attributable
F-8
to the BDS Business, as well as an allocation of expenses related to certain BD corporate functions and shared functions within BD’s Life Sciences segment (Note 5). These expenses have been allocated to the BDS Business on a pro rata basis of global and regional revenues, as well as headcount. The BDS Business considers these allocations to be a reasonable reflection of the utilization of services or the benefit received. However, the allocations may not be indicative of the actual expense that would have been incurred had the BDS Business operated as an independent, stand-alone entity, nor are they indicative of the BDS Business’s future expenses.
Following the Transaction, certain functions that BD provided to the BDS Business prior to the Transaction will either continue to be provided to the BDS Business by BD under transition services agreements or will be performed using the BDS Business’s own resources or third-party service providers.
The combined financial statements were prepared on a going concern basis and include assets and liabilities specifically attributable to the BDS Business. Cash and equivalents and liabilities legally held by the BDS Business were included in the combined balance sheets. BD uses a centralized approach to cash management and financing of its operations. As part of BD, the BDS Business has been and will continue to be dependent upon BD for substantially all of its working capital and financing requirements. The BDS Business believes the financial support of BD is sufficient to allow it to continue to fund its operations for at least twelve months from the issuance of these combined financial statements. These arrangements are not reflective of the manner in which the business would have financed its operations had it been a stand-alone company separate from BD during the periods presented. Cash pooling, related interest, and intercompany arrangements are excluded from the asset and liability balances in the combined balance sheets. These amounts are reported in Net parent investment as a component of Parent’s Equity.
The Parent’s debt and related interest expense have not been attributed to the BDS Business for any of the periods presented.
All intercompany transactions and balances within the BDS Business have been eliminated. Transactions between the BDS Business and BD have been included in these combined financial statements and are considered related party transactions (Note 5). Transactions with Parent are reflected in Parent’s Equity as Net transfers to parent and in the accompanying combined balance sheets within Net parent investment (Note 4).
The Income tax provision in the combined statements of income has been calculated as if the BDS Business filed a separate tax return and was operating as a stand-alone company. Therefore, tax expense, cash tax payments, and items of current and deferred taxes may not be reflective of the BDS Business’s actual tax balances prior to or subsequent to the distribution.
Management has concluded that the BDS Business operates in two segments based upon the information used by the chief operating decision-maker (“CODM”) in evaluating the performance of the BDS Business and allocating resources and capital.
Financial information is disclosed in millions unless otherwise noted. The BDS Business’s fiscal year ends on September 30. Within the combined financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes.
Note 2 — Summary of Significant Accounting Policies
Presentation
Certain reclassifications of prior-period amounts have been made to conform to the current-period presentation of disaggregated product and service revenues and the related costs for the BDS Business. These reclassifications do not impact total revenues or results for any periods presented. See Note 3 for further details on new accounting principles adopted in the current-period, and Note 7 for further information on revenues.
F-9
Cash and Equivalents
Cash and equivalents consist of all highly liquid investments with a maturity of three months or less at time of purchase. Cash and equivalents include term deposits with one-month durations of $35 million as of September 30, 2025 and 2024. The BDS Business held restricted cash of $1 million as of September 30, 2024. There were no requirements to hold restricted cash as of September 30, 2025.
Revenue Recognition
The BDS Business recognizes revenue from product sales when the customer obtains control of the product, which is generally upon shipment or delivery, depending on the delivery terms specified in the sales agreement. Revenues associated with certain instruments and equipment for which installation is complex, and therefore significantly affect the customer’s ability to use and benefit from the product, are recognized upon customer acceptance of these installed products. Revenue for certain service arrangements, including extended warranty and software maintenance contracts, is recognized ratably over the contract term. When arrangements include multiple performance obligations, the total transaction price of the contract is allocated to each performance obligation based on the estimated relative stand-alone selling prices of the promised goods or services underlying each performance obligation. The BDS Business generally estimates stand-alone selling prices using its list prices and a consideration of typical discounts offered to customers. Variable consideration, such as rebates, sales discounts and sales returns, is estimated and treated as a reduction of revenue in the same period the related revenue is recognized. These estimates are based on contractual terms, historical practices, and current trends, and are adjusted as new information becomes available. Revenues exclude any taxes that the BDS Business collects from customers and remits to tax authorities.
Additional disclosures regarding the BDS Business’s accounting for revenue recognition are provided in Note 7.
Trade Receivables
The BDS Business grants credit to customers in the normal course of business and the resulting trade receivables are stated at their net realizable value. The allowance for doubtful accounts represents the BDS Business’s estimate of expected credit losses relating to trade receivables and is determined based on historical experience, current conditions, reasonable and supportable forecasts and other specific account data. Amounts are written off against the allowances for doubtful accounts when the BDS Business determines that a customer account is not collectable. See Note 13 for further information.
Inventories
Inventories are stated at the lower of approximate cost or net realizable value determined on the first-in, first-out basis.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is principally provided on the straight-line basis over estimated useful lives, which range from 20 to 45 years for buildings, four to 20 years for machinery and equipment and one to 20 years for leasehold improvements. Depreciation expense was $60 million, $62 million and $59 million in the fiscal years 2025, 2024 and 2023, respectively.
Goodwill and Other Intangible Assets
Unamortized intangible assets include goodwill and in-process research and development assets that arise from certain acquisitions made by the BDS Business. Acquired in-process research and development assets are reviewed at least annually for impairment, using qualitative and quantitative models. Goodwill is reviewed at
F-10
least annually for impairment using qualitative and quantitative models at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. The BDS Business has two reporting units or operating segments, which are further described in Note 8. The BDS Business reviews goodwill for each reporting unit by first performing a qualitative analysis and determining if it is more likely than not that the carrying value of the reporting unit exceeds the fair value. The quantitative model includes comparing the fair value of the reporting unit, estimated using an income approach, with the estimated carrying value. The annual impairment review performed on July 1, 2025 indicated that the reporting units’ fair values exceeded their respective carrying values.
Amortized intangible assets include developed technology, customer relationships and internally developed patents. Developed technology assets represent acquired intellectual property that is already technologically feasible upon the acquisition date or acquired in-process research and development assets that are completed subsequent to acquisition. These assets are generally amortized over periods ranging from 15 to 20 years, using the straight-line method. Customer relationship assets are generally amortized over periods ranging from 10 to 15 years, using the straight-line method. Other intangibles with finite useful lives, which include patents, are amortized over periods principally ranging from one to 20 years, using the straight-line method. Finite-lived intangible assets are periodically reviewed when impairment indicators are present to assess recoverability from future operations using undiscounted cash flows. The carrying values of these finite-lived assets are compared to the undiscounted cash flows they are expected to generate, and an impairment loss is recognized in operating results to the extent any finite-lived intangible asset’s carrying value exceeds its calculated fair value.
Foreign Currency Translation
Generally, foreign subsidiaries’ functional currencies are the local currencies of operations, and the net assets of foreign operations are translated into U.S. dollars using current exchange rates. The U.S. dollar results that arise from such translation are included in Accumulated other comprehensive loss.
Shipping and Handling Costs
The BDS Business considers its shipping and handling costs to be contract fulfillment costs and records them within Selling and administrative expense. Shipping expenses were $76 million, $71 million and $70 million in 2025, 2024 and 2023 respectively.
Contingencies
The BDS Business establishes accruals for contingent losses which are both probable and can be reasonably estimated. Additional disclosures regarding the accounting for contingencies are provided in Note 6.
Benefit Plans
Certain employees, retirees, and former employees participate in defined benefit pension plans, as well as defined contribution and other postretirement benefit plans, which are sponsored by BD and include participants from other BD businesses (collectively, the “Shared Plans”) in the United States and in certain international locations. The participation in the Shared Plans is accounted for as a multiemployer benefit plan. Accordingly, the BDS Business does not record an asset or liability to recognize any portion of the funded status of the Shared Plans. The amount recognized as expense represents an allocation of net periodic pension and postretirement benefit cost based on the headcount of participants in the Shared Plans. Service costs are recorded to Cost of sales, Selling and administrative expense and Research and development expense while all other components of net periodic pension and postretirement benefit costs are recorded to Other expense, net in the combined statements of income. The pension and postretirement benefit expense attributable to the BDS Business participants in the Shared Plans for the years ended September 30, 2025, 2024 and 2023 was $8 million, $16 million and $21 million respectively.
F-11
BD has voluntary defined contribution plans for the benefit of substantially all the BDS Business employees meeting certain eligibility requirements. Employer contributions to such plans for the BDS Business employees were $30 million, $24 million and $19 million in 2025, 2024 and 2023 respectively.
Effective September 30, 2024, BD froze its U.S. pension plan, and its plan participants no longer accrue benefits under the plan subsequent to this date. This plan had already been frozen to new participants effective January 1, 2018.
Share-Based Compensation
Certain employees of the BDS Business have historically participated in the BD 2004 Employee and Director Equity-Based Compensation Plan, which provides long-term incentive compensation to employees and directors consisting of: stock appreciation rights, performance-based restricted stock units, time-vested restricted stock units and other stock awards. All significant awards granted under the plan will settle in shares of BD’s Class A Common Stock and are approved by BD’s Compensation and Human Capital Committee of the BD Board. As such, all related equity account balances, other than allocations of compensation expense, remained at the BD level. Stock compensation allocated for BD Corporate and Life Sciences Segment employees, who are not dedicated to the BDS Business, are included as a component of corporate allocations. The allocation of stock compensation for BD Corporate and Life Sciences employees was $13 million, $14 million and $15 million for the years ended September 30, 2025, 2024 and 2023, respectively.
The fair value of share-based payments is recognized as compensation expense. BD estimates forfeitures based on experience at the time of grant and adjusts expense to reflect actual forfeitures.
The amounts and location of compensation cost relating to both the BDS Business employees and an allocation for BD Corporate and Life Sciences employees included in the combined statements of income is as follows:
| (Millions of dollars) | 2025 | 2024 | 2023 | |||||||||
| Cost of sales |
$ | 9 | $ | 9 | $ | 9 | ||||||
| Selling and administrative expense |
27 | 28 | 30 | |||||||||
| Research and development expense |
7 | 7 | 7 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Share-Based Compensation Expense |
$ | 43 | $ | 44 | $ | 46 | ||||||
|
|
|
|
|
|
|
|||||||
Income Taxes
Most of the BDS Business’s operations are included in the consolidated tax returns of BD. Income taxes as presented in the historical combined financial statements of the BDS Business attribute current and deferred income tax assets and liabilities of BD to the BDS Business in a manner that is systematic, rational and consistent with the asset and liability method prescribed by the accounting guidance for income taxes. The BDS Business’s income tax provision is prepared using the separate return method. The separate return method applies the accounting guidance for income taxes to the stand-alone financial statements as if the BDS Business were a separate taxpayer and a stand-alone enterprise. The BDS Business believes the assumptions supporting the allocation and presentation of income taxes on a separate return basis are reasonable.
The BDS Business has reviewed its needs in the United States for possible repatriation of undistributed earnings of its foreign subsidiaries and continues to invest foreign subsidiaries’ earnings outside of the United States to fund foreign investments or meet foreign working capital and property, plant and equipment expenditure needs. As a result, the BDS Business is permanently reinvested with respect to all of its historical foreign earnings as of September 30, 2025. Deferred taxes are not provided on undistributed earnings of foreign subsidiaries that are indefinitely reinvested. The determination of the amount of the unrecognized deferred tax liability related to the undistributed earnings is not practicable because of the complexities associated with its hypothetical calculation.
F-12
BD conducts business and files tax returns in numerous countries and currently has tax audits in progress in a number of tax jurisdictions. The BDS Business operations are included in the consolidated tax returns of BD. In evaluating the exposure associated with various tax filing positions, the BDS Business records accruals for uncertain tax positions, based on the technical support for the positions, past audit experience with similar situations, and the potential interest and penalties related to the matters. The effects of tax adjustments and settlements from taxing authorities are presented in the historical combined financial statements of the BDS Business in the period to which they relate as if the BDS Business was a separate filer.
The BDS Business maintains valuation allowances where it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances are included in the tax provision in the period of change. In determining whether a valuation allowance is warranted, the BDS Business evaluates factors such as prior earnings history, expected future earnings, carryback and carryforward periods and tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset.
The BDS Business is subject to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The BDS Business has elected to account for its GILTI tax due as a period expense in the year the tax is incurred.
The BDS Business maintains income tax payable and receivable accounts for entities that are being contributed as part of the spin-off and file separate income tax returns. All other income tax payables and receivables are deemed to be settled with the tax-paying entities in their respective jurisdictions and are classified as changes in Net parent investment. However, the combined balance sheets reflect liabilities for unrecognized income tax benefits, along with related interest and penalties.
Additional disclosures regarding the BDS Business’s accounting for income taxes are provided in Note 11.
Segment Data
The BDS Business operates and reports its financial information as two segments. In making this determination, the BDS Business (i) determines its CODM; (ii) identifies and analyzes potential business components; (iii) identifies its operating segments and (iv) determines whether there are multiple operating segments requiring presentation as reportable segments. The BDS Business’s decision to report as two segments is based upon the following: (1) its internal organizational structure; (2) the manner in which its operations are managed; and (3) the criteria used by the BDS Business’s President, its CODM, to evaluate performance of the BDS Business and allocate resources and capital.
Use of Estimates
The preparation of financial statements in conformity with U.S. 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 combined financial statements. Actual results could differ from these estimates.
Note 3 — Accounting Changes
New Accounting Principles Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard update that requires more disaggregated expense information about a public entity’s reportable segments on an annual and interim basis. This standard became effective for the BDS Business, on a retrospective basis, for its fiscal year 2025 reporting and for interim periods beginning in its fiscal year 2026. Disclosures regarding the BDS Business’s reportable segments are provided in Note 8.
F-13
In September 2022, the FASB issued an accounting standard update that requires additional qualitative and quantitative disclosures regarding supplier finance programs. The new disclosure requirements are intended to help investors better consider the effect of these programs on a company’s working capital, liquidity, and cash flows. The BDS Business adopted this accounting standard on October 1, 2023. Disclosures regarding the BDS Business’s supplier finance programs are provided in Note 10.
New Accounting Principles Not Yet Adopted
In September 2025, the FASB issued an accounting standard update to amend the criteria for capitalizing internal-use software costs. This update is intended to modernize the accounting for software costs by replacing the legacy guidance under which capitalization is based on the nature of costs and the project development stage. This update requires software capitalization to begin when (1) management has authorized and committed funding to the software project and (2) it is probable that the project will be completed, and the software will be used to perform the function intended. The update is effective for the BDS Business beginning in its fiscal year 2029, with early adoption permitted. The BDS Business is currently assessing the potential impact of this update on its combined financial statements.
In November 2024, the FASB issued an accounting standard update that requires the BDS Business to disclose more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization and depletion) included in each relevant income statement expense caption. The update is effective for the BDS Business beginning with its fiscal year 2028 reporting and for interim reporting beginning with its fiscal year 2029. Early adoption is permitted. The BDS Business is currently evaluating the impact that this update will have on its disclosures.
In December 2023, the FASB issued an accounting standard update that requires more disaggregated information to be included in the income tax rate reconciliation and income taxes paid annual disclosures. This update is effective for the BDS Business beginning in its fiscal year 2026 and the BDS Business is currently evaluating the impact that this update will have on its disclosures.
Note 4 — Parent’s Equity
Changes in certain components of Parent’s Equity were as follows:
| (Millions of dollars) | Net Parent Investment |
Accumulated Other Comprehensive Loss |
Total Parent’s Equity |
|||||||||
| Balance, October 1, 2022 |
$ | 2,738 | $ | (231 | ) | $ | 2,507 | |||||
| Net income |
415 | — | 415 | |||||||||
| Foreign currency translation |
— | 81 | 81 | |||||||||
| Net transfers to Parent |
(100 | ) | — | (100 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Balance, September 30, 2023 |
$ | 3,053 | $ | (150 | ) | $ | 2,903 | |||||
| Net income |
321 | — | 321 | |||||||||
| Foreign currency translation |
— | 38 | 38 | |||||||||
| Net transfers to Parent |
(410 | ) | — | (410 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Balance, September 30, 2024 |
$ | 2,964 | $ | (112 | ) | $ | 2,852 | |||||
| Net income |
353 | — | 353 | |||||||||
| Foreign currency translation |
— | 20 | 20 | |||||||||
| Net transfers to Parent |
(257 | ) | — | (257 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Balance, September 30, 2025 |
$ | 3,060 | $ | (92 | ) | $ | 2,968 | |||||
|
|
|
|
|
|
|
|||||||
F-14
Note 5 — Related Party Transactions and Parent Company Investment
Corporate and Life Sciences Segment Allocations
The BDS Business’s combined financial statements include general corporate expenses of BD and shared segment expenses, which were not historically allocated to the BDS Business for certain support functions that are centralized within the Parent and Life Sciences segment and not recorded at the business unit level, such as expenses related to the executive leadership team and other functions such as finance, human resources, information technology, facilities, and legal (collectively, “General Corporate Expenses”). For purposes of these combined financial statements, the General Corporate Expenses have been allocated to the BDS Business. The General Corporate Expenses are included in the combined statements of income in Cost of sales, Selling and administrative expense, Research and development expense and Other expense, net and, accordingly, as a component of Net parent investment on the combined balance sheets. These expenses have been allocated to the BDS Business on a pro rata basis of global revenues, regional revenues or headcount. Management believes the assumptions underlying the combined financial statements, including the assumptions regarding allocating General Corporate Expenses from BD, are reasonable. Nevertheless, the combined financial statements may not include all of the actual expenses that would have been incurred and may not reflect the BDS Business’s combined results of operations, financial position and cash flows had it been a stand-alone company during the periods presented. Actual costs that would have been incurred if the BDS Business had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. The BDS Business does not believe, however, that it is practicable to estimate what these expenses would have been had the BDS Business operated as an independent entity, including any expenses associated with obtaining any of these services from unaffiliated entities.
The allocations of General Corporate Expenses are reflected in the combined statements of income as follows:
| (Millions of dollars) | 2025 | 2024 | 2023 | |||||||||
| Cost of sales |
$ | 45 | $ | 45 | $ | 41 | ||||||
| Selling and administrative expense |
299 | 318 | 317 | |||||||||
| Research and development expense |
16 | 20 | 22 | |||||||||
| Other expense, net |
1 | (2 | ) | (4 | ) | |||||||
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|||||||
| Total General Corporate Expenses |
$ | 361 | $ | 381 | $ | 376 | ||||||
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F-15
Parent Company Investment
All significant intercompany transactions between the BDS Business and BD have been included in the combined financial statements and are considered to be effectively settled at the time the transaction is closed. The total net effect of the settlement of these intercompany transactions is reflected in the combined statements of cash flows as a financing activity and in the combined balance sheets as Net parent investment.
The following table summarizes the components of the net transfers to Parent in Net parent investment for the years ended September 30, 2025, 2024 and 2023:
| (Millions of dollars) | 2025 | 2024 | 2023 | |||||||||
| Cash pooling and general financing activities (a) |
$ | 733 | $ | 906 | $ | 601 | ||||||
| Corporate and segment allocations, excluding non-cash share-based compensation |
(348 | ) | (367 | ) | (361 | ) | ||||||
| Taxes deemed settled with parent |
(76 | ) | (69 | ) | (66 | ) | ||||||
| Net transfers to Parent as reflected in the combined statements of cash flows |
309 | 470 | 174 | |||||||||
| Share-based compensation |
(43 | ) | (44 | ) | (46 | ) | ||||||
| Pension expense |
(8 | ) | (16 | ) | (21 | ) | ||||||
| Other transfers from Parent, net |
(1 | ) | — | (7 | ) | |||||||
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| Net transfers to Parent (Note 4) |
$ | 257 | $ | 410 | $ | 100 | ||||||
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| (a) | 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 BDS Business receives capital from BD for its cash needs. |
Note 6 — Commitments and Contingencies
Commitments
The BDS Business has certain future purchase commitments entered in the normal course of business to meet operational and capital expenditure requirements. As of September 30, 2025, these commitments totaled approximately $3 million, nearly all of which are expected to be expended within the next year.
Contingencies
The BDS Business 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. Although management currently believes that resolving claims against the BDS Business, 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 BDS Business, 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 BDS Business.
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 BDS Business’s results of operations in a given period.
F-16
Italy Legislation
In 2015, legislation was enacted in Italy which requires medical technology companies to make payments to the Italian government if Italy’s medical device expenditures exceed annual regional expenditure ceilings. The amount of these payments is based on the amount by which the regional ceilings for the given year were exceeded. Considerable uncertainty has existed regarding the enforceability and implementation of this payback legislation since it was enacted and the BDS Business, as well as other medical device companies, have filed appeals which challenge the enforceability of this legislation. In July 2024, the Italian Constitutional Court issued two judgments which concluded that the medical device payback legislation is constitutional. In fiscal year 2024, the BDS Business recorded an accrual of $17 million as an impact to Total net sales as a preliminary estimate of the liability related to this matter, which substantially relates to years prior to fiscal year 2024. During its fourth quarter of fiscal year 2025, the BDS Business made a payment to settle its obligations for calendar years 2015 through 2018 in accordance with an Economy Decree issued by the Italian government in June 2025 which allowed companies, upon their closure of all pending litigation relating to amounts due for calendar years 2015 through 2018, to pay 25% of the invoiced amounts for those years. No payment requests have been issued to the BDS Business for any subsequent years and ultimate resolution for amounts that may be due for these later years is unknown at this time. As such, it is possible that the amount of the BDS Business’s liability could differ from its currently accrued amount. Remaining accruals for this matter are recorded within Deferred Income Taxes and Other Liabilities on the combined balance sheet.
Note 7 — Revenues
The BDS Business sells products through the Biosciences and Diagnostic Solutions Business of BD. The Biosciences business sells immunology and cancer research solutions and related clinical diagnostics, including instruments & informatics and reagents, and has innovative single-cell multiomics tools. The Diagnostic Solutions business sells microbiology and infectious disease diagnostics, including molecular diagnostics, cervical cancer screening, microbiology automation and point-of-care offerings. These services and products are sold through independent distribution channels and directly by BD through sales representatives. End-users of the BDS Business’s products include healthcare institutions, physicians, life science researchers, clinical laboratories, the pharmaceutical industry, academic and government institutions and the general public. In the current and prior-year periods, the BDS Business generated revenues attributable to licensing, which includes consideration received in exchange for the use of the BDS Business’s intellectual property by third parties.
Timing of Revenue Recognition
The BDS Business’s revenues are primarily recognized when the customer obtains control of the product sold, which is generally upon shipment or delivery, depending on the delivery terms specified in the sales agreement. Revenues associated with certain instruments and equipment for which installation is complex, and therefore significantly affects the customer’s ability to use and benefit from the product, are recognized when customer acceptance of these installed products has been confirmed. For certain service arrangements, including extended warranty and software maintenance contracts, revenue is recognized ratably over the contract term. The majority of revenues relating to extended warranty contracts associated with certain instruments and equipment is generally recognized within a few years, whereas deferred revenue relating to software maintenance contracts is generally recognized over a longer period.
Measurement of Revenues
The BDS Business acts as the principal in substantially all of its customer arrangements and as such, generally records revenues on a gross basis. Revenues exclude any taxes that the BDS Business collects from customers and remits to tax authorities.
Payment terms extended to the BDS Business’s customers are based upon commercially reasonable terms for the markets in which the BDS Business’s products are sold. Because the BDS Business generally expects to receive
payment within one year or less from when control of a product is transferred to the customer, the BDS Business
F-17
does not generally adjust its revenues for the effects of a financing component. Additional disclosures regarding the amounts recognized relating to allowance for doubtful accounts are provided in Note 13.
The BDS Business’s gross revenues are subject to a variety of deductions that 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 BDS Business are based upon prices determined under the BDS Business agreements primarily with its end-user customers. Additional factors considered in the estimate of the rebate liability include the quantification of inventory that is either in stock at or in transit to the BDS Business’s distributors, as well as the estimated lag time between the sale of product and the payment of corresponding rebates. Rebate liabilities classified as an offset to Trade receivables, net were $88 million, and $68 million at September 30, 2025 and 2024, respectively. Rebates recorded as a reduction of gross revenues during the years ended September 30, 2025, 2024 and 2023, were $444 million, $453 million and $449 million, respectively. For the same periods, sales discounts and sales returns recorded as a reduction of gross revenues were $116 million, $137 million and $162 million, respectively.
Disaggregation of Revenues
Revenues by geographic region for the years ended September 30, 2025, 2024 and 2023 consisted of:
| (Millions of dollars) | 2025 | 2024 | 2023 | |||||||||
| United States |
$ | 1,348 | $ | 1,361 | $ | 1,469 | ||||||
| China |
279 | 337 | 336 | |||||||||
| Other international (a) |
1,669 | 1,645 | 1,589 | |||||||||
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| Total |
$ | 3,296 | $ | 3,343 | $ | 3,394 | ||||||
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| (a) | During the years ended September 30, 2025, 2024 and 2023, no individual country other than the United States and China generated revenue that represented more than 10% of total revenues. |
Costs to Obtain Revenue Contracts
Due to the nature of the majority of the products, the BDS Business typically does not incur costs to fulfill a contract in advance of providing the customer with goods or services. The BDS Business’s costs to obtain contracts are comprised of sales commissions, which are paid to employees or third-party agents. Sales commissions incurred by the BDS Business relate to revenue that is recognized over a period that is less than one year and, as such, the BDS Business has elected a practical expedient provided under ASC 606 to record its expense associated with sales commissions as it is incurred. Sales commissions are recorded within Selling and administrative expense in the combined statements of income.
Contract Assets and Liabilities
The BDS Business records contract liabilities when consideration from a customer is received prior to the satisfaction of performance obligations, such as extended warranty and software maintenance contracts, which are performed over time. These amounts are presented within Accrued expenses and other liabilities on the BDS Business’s combined balance sheet. As of September 30, 2025 and 2024, contract liabilities totaled approximately $145 million and $126 million, respectively.
Contract assets represent the BDS Business’s conditional right to consideration for revenue recognized from performance obligations that were satisfied or partially satisfied in advance of customer billings. These amounts are recorded within Prepaid expenses and other and Other assets on the combined balance sheets. The BDS Business’s contract asset balances as of September 30, 2025 and 2024 were $15 million and $13 million, respectively.
F-18
Remaining Performance Obligations
The BDS Business’s obligations relating to service contracts, and pending installations of equipment, represent unsatisfied performance obligations of the BDS Business. The revenues under existing contracts with original expected durations of more than one year, which are attributable to products and/or services that have not yet been installed or provided, are estimated to be approximately $247 million at September 30, 2025. The BDS Business expects to recognize the majority of this revenue over the next three years.
Some of the BDS Business’s contracts also contain minimum purchase commitments of reagents or other consumables and the future sales of these consumables represent additional unsatisfied performance obligations of the BDS Business. The revenue attributable to the unsatisfied minimum purchase commitment-related performance obligations, for contracts with original expected durations of more than one year, is estimated to be approximately $470 million at September 30, 2025. This revenue will be recognized over the customer relationship periods.
Note 8 — Segment Data
The BDS Business’s organizational structure is based upon two worldwide business segments: Biosciences and Diagnostic Solutions. The worldwide business segments are strategic businesses that are managed separately because each one develops, manufactures, and markets distinct products and services. The BD Life Sciences President is the BDS Business’s chief operating decision maker (“CODM”).
Biosciences
The Biosciences business offers a comprehensive portfolio of instruments, software and informatics, reagents, and single cell multiomics solutions, supporting the advanced analysis of cell populations for use in fields such as immunology, oncology, and infectious disease research. Its products are used by a broad range of customers, including academic and government institutions, pharmaceutical and biotechnology companies, and clinical laboratories. In addition to supporting basic research, the business provides essential tools that facilitate drug discovery and development, contributing to advancements in precision medicine, as well as tools for clinical diagnostics. Biosciences operates through a common global commercial infrastructure that includes a specialized sales force, technical application specialists and channel partners dedicated to serving the life sciences market.
Diagnostic Solutions
The Diagnostic Solutions business provides a broad range of diagnostic instrumentation, assays, consumables, automation, and informatics that support the detection, identification and drug susceptibility testing of infectious disease organisms. Key areas of focus are sepsis, tuberculosis, sexually transmitted infections, healthcare-associated infections, women’s health conditions, and cervical cancer screening. The Diagnostic Solutions portfolio employs several technologies and innovations, centered across three key areas, microbiology solutions, molecular diagnostics platforms, and diagnostic testing performed near the patient to deliver rapid results that can inform immediate care decisions designed to deliver rapid results in decentralized healthcare settings. These technologies serve a global customer base of hospitals, clinical laboratories, public health agencies and integrated delivery networks. The Diagnostic Solutions business plays a central role in improving clinical workflows, enhancing diagnostic accuracy, and supporting timely treatment decisions.
Additional Segment Information
Distribution of products is primarily through independent distribution channels, and directly to end-users by the BDS Business and independent sales representatives. No customer accounted for 10% or more of revenues in any of the three years presented.
The BDS Business presents segment results on a consistent basis with internal reporting regularly reviewed by the CODM, on both a reported and a foreign currency-neutral basis, to evaluate business segment performance, as compared to budget, and allocate resources such as capital and headcount. Business segment performance is
F-19
evaluated based on operating income before taxes excluding certain corporate expenses and other adjustments that are not considered part of ordinary operations. Such adjustments primarily include: amortization and other adjustments related to the purchase accounting for acquisitions; amounts related to certain legal matters; costs associated with restructuring and integration activities; and costs incurred to develop processes and systems to establish initial compliance with the European Union Medical Device Regulation and the European Union In Vitro Diagnostic Medical Device Regulation. These amounts are included in the reconciliation of segment operating income to the BDS Business’s Income Before Income Taxes, below. Prior period segment expense amounts have been recast to conform to the current year presentation.
The BDS Business’s CODM does not receive any asset information by business segment and, as such, the BDS Business does not report asset information by business segment.
The BDS Business’s segment revenues are detailed below. The BDS Business has no intersegment revenues.
| (Millions of dollars) | 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| United States |
International | Total | United States |
International | Total | United States |
International | Total | ||||||||||||||||||||||||||||
| Biosciences |
$ | 593 | $ | 865 | $ | 1,458 | $ | 577 | $ | 935 | $ | 1,512 | $ | 603 | $ | 906 | $ | 1,509 | ||||||||||||||||||
| Diagnostic Solutions |
755 | 1,083 | 1,838 | 784 | 1,064 | 1,848 | 866 | 1,019 | 1,885 | |||||||||||||||||||||||||||
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| Total segment revenues |
$ | 1,348 | $ | 1,948 | $ | 3,296 | $ | 1,361 | $ | 1,999 | $ | 3,360 | $ | 1,469 | $ | 1,925 | $ | 3,394 | ||||||||||||||||||
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| Other (a) |
$ | — | $ | — | $ | — | $ | — | $ | (17 | ) | $ | (17 | ) | $ | — | $ | — | $ | — | ||||||||||||||||
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| Total BDS Business |
$ | 1,348 | $ | 1,948 | $ | 3,296 | $ | 1,361 | $ | 1,982 | $ | 3,343 | $ | 1,469 | $ | 1,925 | $ | 3,394 | ||||||||||||||||||
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| (a) | Represents the recognition of an accrual relating to the Italian government medical device pay back legislation which substantially relates to years prior to fiscal year 2024. Such amounts were not allocated to the BDS Business’s reportable segments, and this matter is further discussed in Note 6. |
The following tables include the significant expenses by segment that are regularly provided to the CODM and a reconciliation of segment operating income to Income Before Income Taxes.
| Fiscal Year 2025 | ||||||||||||
| (Millions of dollars) | Biosciences | Diagnostic Solutions | Total | |||||||||
| Revenues |
$ | 1,458 | $ | 1,838 | $ | 3,296 | ||||||
| Segment expenses: |
||||||||||||
| Total cost of sales |
561 | 1,018 | 1,579 | |||||||||
| % of revenues |
38.5 | % | 55.4 | % | ||||||||
| Selling and administrative expense |
247 | 301 | 548 | |||||||||
| % of revenues |
16.9 | % | 16.4 | % | ||||||||
| Research and development expense |
140 | 130 | 270 | |||||||||
| % of revenues |
9.6 | % | 7.1 | % | ||||||||
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| Segment Operating Income |
$ | 510 | $ | 389 | $ | 899 | ||||||
| % of revenues |
35.0 | % | 21.2 | % | ||||||||
| Unallocated items |
||||||||||||
| Net interest income |
|
2 | ||||||||||
| Corporate administrative and other unallocated (a) |
|
(398 | ) | |||||||||
| Specified items: |
|
|||||||||||
| Purchase accounting adjustments (b) |
|
(33 | ) | |||||||||
| Integration, restructuring and transaction expense (c) |
|
(5 | ) | |||||||||
| Product, litigation, and other items (d) |
|
(42 | ) | |||||||||
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| Income Before Income Taxes |
|
$ | 423 | |||||||||
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F-20
| Fiscal Year 2024 | ||||||||||||
| (Millions of dollars) | Biosciences | Diagnostic Solutions | Total | |||||||||
| Revenues |
$ | 1,512 | $ | 1,848 | $ | 3,360 | ||||||
| Segment expenses: |
||||||||||||
| Total cost of sales |
581 | 1,049 | 1,630 | |||||||||
| % of revenues |
38.4 | % | 56.8 | % | ||||||||
| Selling and administrative expense |
239 | 293 | 532 | |||||||||
| % of revenues |
15.8 | % | 15.9 | % | ||||||||
| Research and development expense |
128 | 147 | 275 | |||||||||
| % of revenues |
8.5 | % | 8.0 | % | ||||||||
| Other operating income, net |
(1 | ) | (1 | ) | (2 | ) | ||||||
| % of revenues |
(0.1 | )% | (0.1 | )% | ||||||||
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| Segment Operating Income |
$ | 565 | $ | 360 | $ | 925 | ||||||
| % of revenues |
37.4 | % | 19.5 | % | ||||||||
| Unallocated items |
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| Net interest income |
|
2 | ||||||||||
| Corporate administrative and other unallocated (a) |
|
(416 | ) | |||||||||
| Specified items: |
|
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| Purchase accounting adjustments (b) |
|
(26 | ) | |||||||||
| Integration, restructuring and transaction expense (c) |
|
(89 | ) | |||||||||
| Product, litigation, and other items (d) |
|
(21 | ) | |||||||||
| European regulatory initiative-related costs (e) |
|
(9 | ) | |||||||||
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| Income Before Income Taxes |
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$ | 366 | |||||||||
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F-21
| Fiscal Year 2023 | ||||||||||||
| (Millions of dollars) | Biosciences | Diagnostic Solutions | Total | |||||||||
| Revenues |
$ | 1,509 | $ | 1,885 | $ | 3,394 | ||||||
| Segment expenses: |
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| Total cost of sales |
589 | 1,025 | 1,614 | |||||||||
| % of revenues |
39.0 | % | 54.4 | % | ||||||||
| Selling and administrative expense |
242 | 284 | 526 | |||||||||
| % of revenues |
16.0 | % | 15.1 | % | ||||||||
| Research and development expense |
145 | 163 | 308 | |||||||||
| % of revenues |
9.6 | % | 8.6 | % | ||||||||
| Other operating income, net |
(4 | ) | (1 | ) | (5 | ) | ||||||
| % of revenues |
(0.3 | )% | (0.1 | )% | ||||||||
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| Segment Operating Income |
$ | 537 | $ | 414 | $ | 951 | ||||||
| % of revenues |
35.6 | % | 22.0 | % | ||||||||
| Unallocated items |
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| Corporate administrative and other unallocated (a) |
|
(413 | ) | |||||||||
| Specified items: |
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| Purchase accounting adjustments (b) |
|
(17 | ) | |||||||||
| Integration, restructuring and transaction expense (c) |
|
(55 | ) | |||||||||
| European regulatory initiative-related costs (e) |
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(12 | ) | |||||||||
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| Income Before Income Taxes |
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$ | 454 | |||||||||
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| (a) | Primarily comprised of corporate general and administrative expenses, share-based compensation expense, and foreign exchange. |
| (b) | Includes amortization and other adjustments related to the purchase accounting for acquisitions. The BDS Business’s amortization expense is recorded in Cost of sales across all years. The amortization in 2024 and 2023 is partially offset by amounts recorded in Selling and administrative expense related to the change in fair value of contingent consideration. |
| (c) | Represents amounts associated with restructuring and integration activities which are recorded in Integration, restructuring and transaction expense. |
| (d) | Includes certain items which are not part of ordinary operations and affect the comparability of the periods presented. Such items may include amounts related to certain legal matters, certain investment gains and losses, certain asset impairment charges, and certain pension settlement costs. The amount in 2025 included a non-cash asset impairment charge of $30 million recorded to Research and development expense to write down the carrying value of acquired in-process research and development assets in the Diagnostic Solutions segment which is further discussed in Note 10. The amount in 2024 included a $17 million accrual recorded in Total net sales relating to the Italian government medical device pay back legislation, which substantially relates to years prior to 2024 and is further discussed in Note 6. |
| (e) | Represents costs incurred to develop processes and systems to establish initial compliance with the European Union Medical Device Regulation, which constitute a significant, unusual change to the existing regulatory framework. The BDS Business considers these costs to be duplicative of previously incurred costs and/or one-off costs, which are limited to a specific period of time. These expenses, which are recorded in Cost of sales and Research and development expense, include the cost of labor, other services, and consulting (in particular, research and development and clinical trials) and supplies, travel, and other miscellaneous costs. |
F-22
Segment information for both capital expenditures and depreciation and amortization is provided below:
| (Millions of dollars) | 2025 | 2024 | 2023 | |||||||||
| Capital Expenditures |
||||||||||||
| Biosciences |
$ | 13 | $ | 23 | $ | 23 | ||||||
| Diagnostic Solutions |
37 | 41 | 50 | |||||||||
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| Total Capital Expenditures |
$ | 50 | $ | 64 | $ | 73 | ||||||
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| Depreciation and Amortization |
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| Biosciences |
$ | 51 | $ | 52 | $ | 52 | ||||||
| Diagnostic Solutions |
119 | 122 | 117 | |||||||||
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| Total Depreciation and Amortization (a) |
$ | 170 | $ | 174 | $ | 169 | ||||||
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| (a) | Consists of depreciation and amortization amounts disclosed in Note 2 and Note 9 in addition to amortization of placed instruments of $71 million, $74 million, and $70 million and capitalized software amortization of $1 million, $1 million and $2 million in fiscal years 2025, 2024 and 2023, respectively. |
Geographic Information
The countries in which the BDS Business has local revenue-generating operations have been combined into the following geographic areas: the United States (including Puerto Rico); EMEA (which includes Europe, the Middle East and Africa); Greater Asia (which includes countries in Greater China, Japan, South Asia, Southeast Asia, Korea, and Australia and New Zealand); and Other, which is comprised of Latin America (which includes Mexico and South America) and Canada.
Revenues to unaffiliated customers are generally based upon the source of the product shipment. Long-lived assets, which include net property, plant and equipment, are based upon physical location.
The table below shows revenues and long-lived assets by geographic area:
| (Millions of dollars) | 2025 | 2024 | 2023 | |||||||||
| Revenues |
||||||||||||
| United States |
$ | 1,348 | $ | 1,361 | $ | 1,469 | ||||||
| EMEA |
994 | 956 | 909 | |||||||||
| Greater Asia |
709 | 766 | 781 | |||||||||
| Other |
245 | 260 | 235 | |||||||||
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| $3,296 | $3,343 | $3,394 | ||||||||||
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| Long-Lived Assets |
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| United States |
$ | 1,836 | $ | 1,883 | $ | 1,625 | ||||||
| EMEA |
367 | 344 | 314 | |||||||||
| Greater Asia |
174 | 181 | 175 | |||||||||
| Other |
107 | 104 | 106 | |||||||||
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| $2,484 | $2,512 | $2,220 | ||||||||||
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F-23
Note 9 — Goodwill and Intangible Assets
Intangible assets as of September 30 consisted of:
| 2025 | 2024 | |||||||||||||||||||||||
| (Millions of dollars) | Gross Carrying Amount |
Accumulated Amortization |
Net Carrying amount |
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying amount |
||||||||||||||||||
| Amortized intangible assets |
||||||||||||||||||||||||
| Developed technology |
$ | 798 | $ | (710 | ) | $ | 88 | $ | 787 | $ | (687 | ) | $ | 100 | ||||||||||
| Customer relationships |
58 | (33 | ) | 25 | 57 | (29 | ) | 28 | ||||||||||||||||
| Patents, trademarks and other |
218 | (168 | ) | 50 | 212 | (160 | ) | 52 | ||||||||||||||||
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| Amortized intangible assets |
$ | 1,074 | $ | (911 | ) | $ | 163 | $ | 1,056 | $ | (876 | ) | $ | 180 | ||||||||||
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| Unamortized intangible assets |
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| Acquired in-process research and development |
$ | 14 | $ | 44 | ||||||||||||||||||||
| Trademarks |
2 | 2 | ||||||||||||||||||||||
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| Unamortized intangible assets |
$ | 16 | $ | 46 | ||||||||||||||||||||
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Intangible amortization expense was $38 million, $37 million, and $38 million in 2025, 2024, and 2023, respectively. The estimated aggregate amortization expense for the fiscal years ending September 30, 2026 to 2030 are as follows: 2026 — $33 million; 2027 — $18 million; 2028 — $16 million; 2029 — $15 million; 2030 — $14 million.
The following is a reconciliation of goodwill by business segment:
| (Millions of dollars) | Biosciences | Diagnostic Solutions |
Total | |||||||||
| Goodwill as of October 1, 2023 |
$ | 448 | $ | 431 | $ | 879 | ||||||
| Currency translation |
5 | 2 | 7 | |||||||||
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| Goodwill as of September 30, 2024 |
$ | 453 | $ | 433 | $ | 886 | ||||||
| Acquisitions (a) |
4 | — | 4 | |||||||||
| Currency translation |
4 | 2 | 6 | |||||||||
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| Goodwill as of September 30, 2025 |
$ | 461 | $ | 435 | $ | 896 | ||||||
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| (a) | Represents the goodwill recognized within the Biosciences segment in connection with the acquisition of NIRvana Sciences, Inc. during fiscal year 2025. This transaction is further discussed in Note 13. |
Note 10 — Financial Instruments and Fair Value Measurements
Foreign Currency and Other Risks
The BDS Business has foreign currency exposures throughout the various countries in which it operates. BD uses derivative instruments at the corporate level to mitigate these exposures. BD does not enter into derivative financial instruments for trading or speculative purposes.
Transactional currency exposures that arise from entering into transactions, generally on an intercompany basis, in non-hyperinflationary countries that are denominated in currencies other than the functional currency are mitigated by BD primarily through the use of forward contracts that are recorded as undesignated hedges. In order to mitigate transactional foreign currency exposures resulting from anticipated intercompany purchases and sales denominated in a currency other than local functional currencies, BD entered into certain instruments such as foreign exchange forward and option contracts to hedge a portion of this currency risk, which are designated as cash flow hedges.
F-24
The BDS Business does not enter into any derivative transactions. Accordingly, derivative assets and liabilities held by BD at the corporate level and the related impacts recorded within BD’s Accumulated other comprehensive loss were not attributable to the BDS Business for any of the periods presented.
As the hedges of the transactional foreign exchange exposures resulting primarily from intercompany payables and receivables are undesignated hedges, the gains or losses on these instruments are recognized immediately in income. These gains and losses are largely offset by gains and losses on the underlying hedged items, as well as the hedging costs associated with the derivative instruments. Due to the BDS Business’s participation in BD’s hedging program, the BDS Business records an allocated portion of the impact of these activities. The net foreign exchange loss amounts recognized in Other expense, net during the years ending September 30, 2025, 2024 and 2023 were $7 million, $8 million, and $6 million, respectively.
Net gains or losses resulting from the change in fair value of the foreign exchange contracts designated as cash flow hedges are initially recorded by BD within Other comprehensive loss and reclassified into earnings upon the occurrence of the related underlying third-party transaction. If foreign exchange contracts designated as cash flow hedges are terminated prematurely as a result of the hedged transaction being probable of not occurring, the balance in Accumulated other comprehensive loss attributable to those derivatives is immediately reclassified into Net sales or Cost of sales (depending on whether the hedged item is an intercompany sale or purchase). Amounts reclassified from Accumulated other comprehensive loss into earnings related to these cash flow hedges were immaterial during 2025, and no amounts were reclassified from Accumulated other comprehensive loss into earnings relating to these cash flow hedges during 2024. BD did not have foreign exchange contracts designated as cash flow hedges during 2023. The amounts expected to be reclassified from Accumulated other comprehensive loss into earnings within the next 12 months, are not material to the BDS Business’s combined financial results.
Fair Value of Financial Instruments
The fair value of an asset or liability is the price that would be received to sell an asset or transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value hierarchy is applied to prioritize inputs used in measuring fair value. The three levels of inputs used to measure fair value are detailed below.
Level 1 — Inputs to the valuation methodology which represent unadjusted quoted prices in active markets for identical assets and liabilities.
Level 2 — Inputs to the valuation methodology which include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability.
Level 3 — Inputs to the valuation methodology which are unobservable and significant to the fair value measurement.
The carrying value of cash and cash equivalents, accounts receivable, net and accounts payable, as reflected in the BDS Business’s combined balance sheets, approximates fair value due to the short-term maturities of these financial instruments.
Level 3 inputs were used to determine the fair value of contingent consideration owed by the BDS Business. As part of an acquisition entered into by the BDS Business in 2020, the BDS Business agreed to make contingent cash payments to the former owners of the acquired company based upon achievement of certain development related milestones following the acquisition date. As of September 30, 2025 and September 30, 2024, the fair value of the contingent consideration was determined to have a fair value of zero due to the remote likelihood of achieving certain development related milestones. The decreases in the fair value of the contingent consideration
F-25
of $7 million and $17 million in the fiscal years ended 2024 and 2023, respectively were recorded within Selling and administrative expense. Additionally, further information about fair value measurements regarding the acquisition of NIRvana Sciences, Inc. (“NIRvana”) can be found in Note 13.
Nonrecurring Fair Value Measurements
Non-financial assets, including property, plant and equipment as well as intangible assets, are measured at fair value when there are indicators of impairment and these assets are recorded at fair value only when an impairment is recognized. These measurements of fair value are generally estimated, based upon a market participant’s perspective, using Level 3 inputs, including values estimated using the income approach.
During the fiscal year 2025, a non-cash asset impairment charge of $30 million was recorded to Research and development expense to write down the carrying value of acquired in-process research and development assets in the Diagnostic Solutions segment.
Concentration of Credit Risk
The BDS Business maintains cash deposits in excess of government-provided insurance limits. Such cash deposits are exposed to loss in the event of nonperformance by financial institutions. Substantially all of the BDS Business’s trade receivables are due from public and private entities involved in the healthcare industry. Due to the large size and diversity of the BDS Business’s customer base, concentrations of credit risk with respect to trade receivables are limited. The BDS Business does not normally require collateral.
The BDS Business continually evaluates its accounts receivables for potential collection risks. The BDS Business believes the current reserves related to all receivables are adequate and that concentration of credit risk will not have a material adverse impact on its financial position or liquidity.
Supplier Finance Programs
The BDS Business has agreements where participating suppliers are provided the ability to receive early payment of the BDS Business’s obligations at a nominal discount through supplier finance programs entered into with third party financial institutions. The BDS Business is not a party to these arrangements, and these programs do not impact the BDS Business’s obligations or affect the BDS Business’s payment terms, which generally range from 90 to 150 days. The agreements with the financial institutions do not require the BDS Business to pledge assets as security or provide other forms of guarantees for the supplier finance programs. Outstanding payables related to supplier finance programs are recorded within Accounts payable on the combined balance sheets. A rollforward of the BDS Business’s outstanding obligations under its supplier financing programs is provided below.
| (Millions of dollars) | ||||
| Balance at September 30, 2024 |
$ | 14 | ||
| Additions |
89 | |||
| Settlements |
(79 | ) | ||
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| Balance at September 30, 2025 |
$ | 24 | ||
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F-26
Note 11 — Income Taxes
Provision for Income Taxes
The provision (benefit) for income taxes for the years ended September 30, 2025, 2024 and 2023 consisted of:
| (Millions of dollars) | 2025 | 2024 | 2023 | |||||||||
| Current: |
||||||||||||
| Federal |
$ | 23 | $ | 19 | $ | 18 | ||||||
| State and local |
11 | 4 | 5 | |||||||||
| Foreign |
63 | 67 | 67 | |||||||||
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| $97 | $90 | $90 | ||||||||||
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|||||||
| Deferred: |
||||||||||||
| Domestic |
$ | (33 | ) | $ | (41 | ) | $ | (40 | ) | |||
| Foreign |
6 | (4 | ) | (11 | ) | |||||||
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| (27) | (45) | (51) | ||||||||||
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| Income tax provision |
$ | 70 | $ | 45 | $ | 39 | ||||||
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The BDS Business’s domestic and foreign operations are included in BD’s domestic consolidated and foreign tax returns, and payments to most tax authorities are made by BD on the BDS Business’s behalf. The BDS Business files its own foreign tax return and makes its own foreign tax payments in Canada, China, and Spain. The BDS Business’s current tax liabilities computed under the separate return method are considered to be effectively settled in the combined financial statements at the time the transaction is recorded, with the offset recorded against Net parent investment.
The components of Income Before Income Taxes for the years ended September 30, 2025, 2024 and 2023 consisted of:
| (Millions of dollars) | 2025 | 2024 | 2023 | |||||||||
| Domestic, including Puerto Rico |
$ | 113 | $ | 109 | $ | 155 | ||||||
| Foreign |
310 | 257 | 299 | |||||||||
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|||||||
| Income Before Income Taxes |
$ | 423 | $ | 366 | $ | 454 | ||||||
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|||||||
F-27
Unrecognized Tax Benefits
The table below summarizes the gross amounts of unrecognized tax benefits without regard to reduction in tax liabilities or additions to deferred tax assets and liabilities if such unrecognized tax benefits were settled. The BDS Business believes it is reasonably possible that the amount of unrecognized tax benefits will change during the next twelve months due to one or more of the following events: expiring statutes, audit activity, tax payments, other activity, or final decisions in matters that are the subject of controversy in various taxing jurisdictions in which the BDS Business operates. However, the BDS Business does not expect changes to have a significant effect on its results of operations, financial condition, or cash flows.
| Fiscal Year | ||||||||||||
| (Millions of dollars) | 2025 | 2024 | 2023 | |||||||||
| Balance at October 1 |
$ | 51 | $ | 47 | $ | 44 | ||||||
| Increase due to current year tax positions |
5 | 4 | 5 | |||||||||
| Increase due to prior year tax positions |
— | — | 10 | |||||||||
| Decrease due to prior year tax positions |
(1 | ) | — | (6 | ) | |||||||
| Decrease due to settlements with tax authorities |
— | — | (1 | ) | ||||||||
| Decrease due to lapse of statutes with limitations |
(1 | ) | (1 | ) | (5 | ) | ||||||
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|||||||
| Balance at September 30 |
$ | 54 | $ | 50 | $ | 47 | ||||||
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| Unrecognized tax benefits that would affect the effective tax rate if recognized |
$ | 54 | $ | 50 | $ | 47 | ||||||
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The following were included for the years ended September 30, 2025, 2024 and 2023 as a component of Income tax provision on the combined statements of income.
| (Millions of dollars) | 2025 | 2024 | 2023 | |||||||||
| Interest and penalties associated with unrecognized tax benefits |
$ | 12 | $ | 9 | $ | 6 | ||||||
BD conducts business and files tax returns in numerous countries and currently has tax audits in progress in a number of tax jurisdictions. In most jurisdictions, the BDS Business has historically been included in BD’s income tax return filings. The IRS has completed its audit for the BD combined company through fiscal year 2017. The IRS is reviewing BD’s fiscal years 2018 through 2023. For the other major tax jurisdictions where BD conducts business, tax years are generally open after 2016.
Deferred Income Taxes
Deferred income taxes at September 30, 2025 and 2024 consisted of:
| 2025 | 2024 | |||||||||||||||
| (Millions of dollars) | Assets | Liabilities | Assets | Liabilities | ||||||||||||
| Compensation and benefits |
$ | 21 | $ | — | $ | 24 | $ | — | ||||||||
| Property and equipment |
— | 48 | — | 54 | ||||||||||||
| Intangibles |
— | 43 | — | 50 | ||||||||||||
| Loss and credit carryforwards |
145 | — | 113 | — | ||||||||||||
| Product recall and liability reserves |
57 | — | 52 | — | ||||||||||||
| Capitalized research and development expenses |
140 | — | 124 | — | ||||||||||||
| Other |
12 | 3 | 15 | 2 | ||||||||||||
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|||||||||
| 375 | 94 | 328 | 106 | |||||||||||||
| Valuation allowance |
(153 | ) | — | (120 | ) | — | ||||||||||
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|||||||||
| Net (a) |
$ | 222 | $ | 94 | $ | 208 | $ | 106 | ||||||||
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| (a) | Net deferred tax assets are included in Other Assets and net deferred tax liabilities are included in Deferred Income Taxes and Other Liabilities on the combined balance sheets. |
F-28
Deferred tax assets and liabilities are netted on the balance sheet by separate tax jurisdictions. The BDS Business asserts indefinite reinvestment for all historical unremitted foreign earnings as of September 30, 2025. Deferred taxes have not been provided on undistributed earnings of foreign subsidiaries as of September 30, 2025 since the determination of the total amount of unrecognized deferred tax liability is not practicable.
Generally, deferred tax assets have been established as a result of net operating losses and credit carryforwards with expiration dates from 2032 to an unlimited expiration date. Valuation allowances have been established as a result of an evaluation of the uncertainty associated with the realization of certain deferred tax assets on these losses and credit carryforwards. Valuation allowances are also maintained with respect to state deferred tax assets, including losses and credit carryforwards that may not be realized. The net change during the year in the total valuation allowance is attributable to foreign losses, federal and state credit carryforwards, and certain state deferred tax assets and net operating losses carryforwards.
Tax Rate Reconciliation
A reconciliation of the federal statutory tax rate to the BDS Business’s effective income tax rate was as follows:
| 2025 | 2024 | 2023 | ||||||||||
| Federal statutory tax rate |
21.0 | % | 21.0 | % | 21.0 | % | ||||||
| State and local income taxes, net of federal tax benefit |
0.1 | 0.2 | 0.4 | |||||||||
| Foreign income tax at rates other than 21% |
(11.9 | ) | (9.5 | ) | (7.3 | ) | ||||||
| Effect of foreign operations |
4.9 | 2.4 | (1.4 | ) | ||||||||
| Effect of research credits and FDII |
(1.9 | ) | (3.0 | ) | (3.9 | ) | ||||||
| Effect of valuation allowance |
3.8 | 1.6 | 0.6 | |||||||||
| Other, net |
0.4 | (0.3 | ) | (0.8 | ) | |||||||
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| Effective income tax rate |
16.4 | % | 12.4 | % | 8.6 | % | ||||||
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Tax Holiday
The approximate tax impact related to the tax holiday in which the BDS Business does business is provided below. The tax holiday expires in 2037. The BDS Business’s income tax payments, net of refunds are also provided below.
| (Millions of dollars) | 2025 | 2024 | 2023 | |||||||||
| Tax impact related to tax holiday |
$ | 102 | $ | 81 | $ | 73 | ||||||
| Income tax payments, net of refunds |
20 | 17 | 10 | |||||||||
Tax Legislation
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted. The OBBBA introduces amendments to U.S. tax laws, effective on various dates from 2025 to 2027. The BDS Business is assessing the implications of this new U.S. tax legislation; however, it did not materially impact the BDS Business’s combined financial results from fiscal year 2025.
Note 12 — Leases
The BDS Business leases real estate, vehicles and other equipment which are used in their manufacturing, administrative, and research and development activities.
The BDS Business identifies a contract that contains a lease as one which conveys a right, either explicitly or implicitly, to control the use of an identified asset in exchange for consideration. The BDS Business’s lease
F-29
arrangements are generally classified as operating leases. These arrangements have remaining terms ranging from less than one year to approximately 13 years and the weighted-average remaining lease term of the BDS Business’s leases is approximately 10.7 years as of September 30, 2025. An option to renew or terminate the current term of a lease arrangement is included in the lease term if the BDS Business is reasonably certain to exercise that option.
The BDS Business does not recognize a right-of-use asset and lease liability for short-term leases, which have terms of 12 months or less, on its combined balance sheets. For the longer-term lease arrangements that are recognized on the BDS Business’s combined balance sheets, the right-of-use asset and lease liability are initially measured at the commencement date based upon the present value of the lease payments due under the lease. These payments represent the combination of the fixed lease and fixed non-lease components that are due under the arrangement. The costs associated with short-term leases, as well as variable costs relating to the BDS Business’s lease arrangements, are not material to its combined financial results.
The implicit interest rates of the BDS Business’s lease arrangements are generally not readily determinable and as such, the BDS Business uses BD’s incremental borrowing rate, which is established based upon the information available at the lease commencement date, to determine the present value of lease payments due under an arrangement. The weighted-average incremental borrowing rate that has been applied to measure the BDS Business’s lease liabilities is 5.5%.
The BDS Business’s lease costs recorded in its combined statements of income for the years ended September 30, 2025, 2024 and 2023 were $50 million, $62 million, and $26 million, respectively. Lease costs include those related to real estate leases for the Milpitas, California and San Diego, California facilities that commenced in fiscal year 2024.
Cash payments arising from the BDS Business’s lease arrangements are reflected on its combined statements of cash flows as outflows used for operating activities. The right-of-use assets and lease liabilities recognized on the BDS Business’s combined balance sheet as of September 30, 2025, and 2024, were as follows:
| (Millions of dollars) | September 30, 2025 |
September 30, 2024 |
||||||
| Right-of-use assets recorded in Other Assets |
$ | 349 | $ | 377 | ||||
| Current lease liabilities recorded in Accrued expenses and other liabilities |
$ | 23 | $ | 26 | ||||
| Non-current lease liabilities recorded in Deferred Income Taxes and Other Liabilities |
$ | 252 | $ | 270 | ||||
The BDS Business’s payments due under its operating leases are as follows:
| (Millions of dollars) | ||||
| 2026 |
$ | 37 | ||
| 2027 |
34 | |||
| 2028 |
31 | |||
| 2029 |
30 | |||
| 2030 |
30 | |||
| Thereafter |
208 | |||
|
|
|
|||
| Total payments due |
370 | |||
| Less: imputed interest |
95 | |||
|
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|
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| Total |
$ | 275 | ||
|
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|
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F-30
Note 13 — Supplemental Financial Information
Trade Receivables, Net
The BDS Business’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 BDS Business determines that a customer account is uncollectible. The amounts recognized in September 30, 2025 and 2024 relating to allowances for doubtful accounts and cash discounts, which are netted against trade receivables, are provided in the following table:
| (Millions of dollars) | Allowance for Doubtful Accounts |
Allowance for Cash Discounts |
Total | |||||||||
| Balance at October 1, 2022 |
$ | 11 | $ | 1 | $ | 12 | ||||||
| Additions charged to costs and expenses |
3 | 18 | 21 | |||||||||
| Deductions and other |
(3 | ) (a) | (18 | ) | (21 | ) | ||||||
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|
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|
|
|||||||
| Balance at September 30, 2023 |
$ | 11 | $ | 1 | $ | 12 | ||||||
| Additions charged to costs and expenses |
4 | 15 | 19 | |||||||||
| Deductions and other |
(2 | ) (a) | (15 | ) | (17 | ) | ||||||
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|
|||||||
| Balance at September 30, 2024 |
$ | 13 | $ | 1 | $ | 14 | ||||||
|
|
|
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|
|||||||
| Additions charged to costs and expenses |
4 | 13 | 17 | |||||||||
| Deductions and other |
(2 | ) (a) | (13 | ) | (15 | ) | ||||||
|
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|
|||||||
| Balance at September 30, 2025 |
$ | 15 | $ | 1 | $ | 16 | ||||||
|
|
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|
|
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| (a) | Accounts written off. |
Inventories, net
Inventories at September 30, 2025 and 2024 consisted of:
| (Millions of dollars) | 2025 | 2024 | ||||||
| Materials |
$ | 134 | $ | 134 | ||||
| Work in process |
137 | 108 | ||||||
| Finished products |
472 | 453 | ||||||
|
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|
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| Total inventories, net |
$ | 743 | $ | 695 | ||||
|
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|
|||||
Property, Plant and Equipment, Net
Property, plant and equipment, net at September 30, 2025 and 2024 consisted of:
| (Millions of dollars) | 2025 | 2024 | ||||||
| Land |
$ | 14 | $ | 14 | ||||
| Buildings |
542 | 529 | ||||||
| Machinery, equipment and fixtures |
752 | 725 | ||||||
| Leasehold improvements |
17 | 17 | ||||||
| Construction in progress |
158 | 167 | ||||||
|
|
|
|
|
|||||
| 1,483 | 1,452 | |||||||
| Less: accumulated depreciation |
836 | 790 | ||||||
|
|
|
|
|
|||||
| Total property, plant and equipment, net |
$ | 647 | $ | 662 | ||||
|
|
|
|
|
|||||
F-31
Prepaid Expenses and Other
Prepaid expenses and other at September 30, 2025 and 2024 consisted of:
| (Millions of dollars) | 2025 | 2024 | ||||||
| Net investment in sales-type leases |
$ | 22 | $ | 21 | ||||
| Contract assets |
15 | 13 | ||||||
| Royalty receivables |
4 | 7 | ||||||
| Notes receivable non-trade(a) |
— | 11 | ||||||
| Deposits, bids and advances |
15 | 14 | ||||||
| VAT taxes (b) |
11 | 13 | ||||||
| Income tax receivable |
42 | 35 | ||||||
| Other |
24 | 19 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 133 | $ | 133 | ||||
|
|
|
|
|
|||||
| (a) | During fiscal year 2025, a loss of $10 million was recorded to Other expense, net, related to the settlement of an investment made by the Diagnostic Solutions segment, which included the write-off of non-trade notes receivable associated with the investment. |
| (b) | Value Added Tax. |
Other Assets
Other assets at September 30, 2025 and 2024 consisted of:
| (Millions of dollars) | 2025 | 2024 | ||||||
| Placed instruments, net |
$ | 177 | $ | 164 | ||||
| Right-of-use assets |
349 | 377 | ||||||
| Deferred income tax assets noncurrent, net of valuation allowance |
159 | 133 | ||||||
| Other |
77 | 64 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 762 | $ | 738 | ||||
|
|
|
|
|
|||||
Deferred Income Taxes and Other Liabilities
Deferred income taxes and other liabilities at September 30, 2025 and 2024 consisted of:
| (Millions of dollars) | 2025 | 2024 | ||||||
| Deferred income |
$ | 23 | $ | 26 | ||||
| Lease liability (a) |
252 | 270 | ||||||
| Deferred income tax |
31 | 31 | ||||||
| Employee benefit obligations |
18 | 17 | ||||||
| Income tax reserves (b) |
66 | 59 | ||||||
| Other |
23 | 24 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 413 | $ | 427 | ||||
|
|
|
|
|
|||||
| (a) | Includes the BDS Business’s lease obligations for the Milpitas, California and San Diego, California facilities, as further discussed in Note 12. |
| (b) | FIN 48 Uncertain Tax Liability and any correlated interest/penalties. |
F-32
NIRvana Sciences Acquisition
On May 1, 2025, the BDS Business acquired 100% of the equity of NIRvana, a North Carolina-based developer of synthetic bacteriochlorin and fluorescent dyes. The acquisition is intended to complement the Biosciences business’s products using a flow cytometry approach that captures full emission spectra from fluorochromes to enable better separation of overlapping signals in high-parameter panels. The acquisition was accounted for under the acquisition method of accounting for business combinations. The total purchase price of $15 million includes an upfront cash payment of $12 million and an additional $3 million that is contingent upon the sellers achieving a knowledge transfer milestone within two years following the closing date. The fair value of the contingent consideration was estimated using the probability-weighted expected return method.
The assets acquired and liabilities assumed in this acquisition included a developed technology intangible asset of $12 million and $1 million of other net liabilities. The goodwill recorded from the excess of the purchase price over the fair value of the acquired net assets was $4 million, which related to the future economic benefits arising from synergies and growth opportunities within the Biosciences business. The goodwill is not deductible for tax purposes.
The acquired business did not contribute to revenues and had an immaterial impact to earnings for the period from May 1, 2025 to September 30, 2025.
Note 14 — Subsequent Events
Management has evaluated subsequent events through December 11, 2025, the date the combined financial statements were available to be issued. Based on this review, management did not identify any subsequent events that would have required adjustment or disclosure in the combined financial statements.
F-33
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On July 13, 2025, Waters and BD entered into certain agreements to effect the transfer of the BDS Business to Waters. The transactions contemplated by the agreements provide for the separation of the BDS Business from BD, the distribution of SpinCo Common Stock to BD shareholders and the subsequent merger of Merger Sub with and into SpinCo, with SpinCo surviving as a wholly owned subsidiary of Waters. As a result of and immediately following these transactions, it is expected that the shares of SpinCo Common Stock will be converted into approximately 39.2% of the outstanding shares of Waters Common Stock on a fully diluted basis immediately following the Merger. However, in order to preserve the tax-free nature of the Distribution for U.S. federal income tax purposes, the Merger Agreement provides that the Exchange Ratio will be adjusted if necessary, in certain circumstances such that the number of shares of Waters Common Stock issued in the Merger to shareholders of SpinCo will be increased. In the event that the Exchange Ratio is adjusted upward, Waters will issue the Waters Special Dividend and, depending on the size of the adjustment of the Exchange Ratio, the SpinCo Cash Distribution could be decreased, in each case, to account for the value of the additional shares issued to BD’s shareholders (as required pursuant to the Merger Agreement).
The unaudited pro forma condensed combined financial information have been prepared in accordance with Article 11 of Regulation S-X in order to give effect to the Transactions and the incurrence of indebtedness under the SpinCo Financing and/or the Permanent SpinCo Financing, as applicable, and the Waters Bridge Facility and/or the Permanent Waters Financing, as applicable (all applicable financings related to the Transactions collectively, the “Transaction Financing”).
The unaudited pro forma condensed combined financial information should be read in conjunction with the historical financial statements of Waters and the BDS Business referenced below:
| • | Waters’ unaudited consolidated financial statements and the notes thereto for the nine months ended September 27, 2025, which are included in Waters’ Quarterly Report on Form 10-Q for the quarterly period ended September 27, 2025, filed on November 4, 2025, which is incorporated by reference into Waters’ Registration Statement on Form S-4 (Registration No. 333-292087), as amended, which was declared effective by the Securities and Exchange Commission on December 23, 2025 (the “Waters Registration Statement”); |
| • | Waters’ audited consolidated financial statements and the notes thereto for the year ended December 31, 2024, which are included in Waters’ Annual Report on Form 10-K for the year ended December 31, 2024, filed on February 25, 2025, which is incorporated by reference into the Waters Registration Statement; and |
| • | the BDS Business’s audited combined statements of income for the years ended September 30, 2025, 2024 and 2023, audited combined balance sheets as of September 30, 2025 and 2024, and the notes thereto, included elsewhere in the Waters Registration Statement. |
For the purposes of the preparation of the unaudited pro forma condensed combined financial information, the BDS Business’s results for the nine months ended September 30, 2025 have been used to prepare the unaudited pro forma condensed combined statement of operations for the nine months ended September 27, 2025. The BDS Business’s results for the nine months ended September 30, 2025 have been derived by utilizing the BDS Business’s audited historical financial data for the fiscal year ended September 30, 2025 and subtracting the unaudited interim historical financial data for the three-month period ended December 31, 2024.
Autonomous entity adjustments are adjustments that would be necessary to reflect the operations and financial position of the BDS Business as an autonomous entity given that the BDS Business is not currently a stand-alone entity. There are currently no autonomous entity adjustments included in the unaudited pro forma condensed combined financial information as they are not reasonable and supportable as of the date of the Waters Registration Statement. No management adjustments or adjustments related to forward-looking information were included in the notes to the unaudited pro forma condensed combined financial information.
The unaudited pro forma adjustments represent Waters’ estimates based on information available as of the date of the Waters Registration Statement and are subject to change as additional information becomes available and
1
analyses are performed. The Transactions have not been consummated as of the date of the preparation of the unaudited pro forma condensed combined financial information and their completion is subject to numerous conditions, including the occurrence of certain events contemplated by the Merger Agreement and the Separation Agreement. The pro forma purchase price allocation of the BDS Business assets to be acquired and liabilities to be assumed is based on preliminary estimates of the fair values of the assets acquired and liabilities assumed.
Upon the completion of the Transactions, final valuations will be performed. The completion of the valuation accounting for the Transactions and the allocation of the purchase price may be different than that of the amounts reflected in the pro forma purchase price allocation, and any differences could be material. Such differences could affect the purchase price and allocation of the purchase price, which may affect the value assigned to the tangible or intangible assets and amount of depreciation and amortization expense recorded in the condensed combined statements of operations. Under the Merger Agreement, BD may accelerate on a prorated basis the vesting of BD equity awards held by non-employee directors of BD who will become non-employee directors of Waters on or prior to the Closing Date. The unaudited pro forma adjustments do not give effect to accelerated BD vesting as acceleration is not probable as of the date of the preparation of the unaudited pro forma condensed combined financial information. Should this acceleration occur, it will not have a material impact on the purchase price or the post-Merger share-based compensation expense. Additionally, prior to or at the Closing, the SpinCo Financing may be replaced by the Permanent SpinCo Financing and the Waters Bridge Facility may be replaced by the Permanent Waters Financing. Since the terms of the Permanent SpinCo Financing and the Permanent Waters Financing are currently unavailable, the unaudited pro forma condensed combined financial information is prepared using the terms of the SpinCo Financing and the Waters Bridge Facility, as further discussed in Note 7—Transaction Adjustments. As a result, debt assumed, debt issuance costs, financing fees, and interest expense could significantly differ. See the section entitled “Risk Factors” for additional discussion of risk factors associated with the unaudited pro forma condensed combined financial information. Waters management believes that the assumptions included herein provide a reasonable basis for presenting the significant effects of the Transactions as contemplated, and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
Transaction accounting adjustments are intended to represent the necessary adjustments to account for the Transactions. The process of evaluating accounting policies for conformity is still in the preliminary stages. Following the consummation of the Transactions, Waters management will perform a detailed review of the BDS Business’s accounting policies and may identify additional differences, which could have a material impact on the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not necessarily indicative of the financial position or results that would have occurred had the events been consummated as of the dates indicated, nor is it indicative of any future results.
2
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 27, 2025
(In thousands)
| Historical | ||||||||||||||||||||||||||||
| As of September 27, 2025 |
As of September 30, 2025 |
Separation and Pre-Merger Adjustments (Note 4 & Note 5) |
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| Waters | BDS Business after Reclassification (Note 3) |
Note | Transaction Accounting Adjustments (Note 7) |
Note | Pro Forma Combined |
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| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
$ | 459,118 | $ | 73,729 | $ | (5,067 | ) | 5(a) | $ | (87,413 | ) | 7(a) | $ | 440,367 | ||||||||||||||
| Accounts receivable, net |
748,519 | 600,787 | — | — | 1,349,306 | |||||||||||||||||||||||
| Inventories |
572,941 | 742,594 | — | 227,706 | 7(b) | 1,543,241 | ||||||||||||||||||||||
| Other current assets |
138,612 | 128,790 | — | (5,506 | ) | 7(c) | 261,896 | |||||||||||||||||||||
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| Total current assets |
1,919,190 | 1,545,900 | (5,067 | ) | 134,787 | 3,594,810 | ||||||||||||||||||||||
| Property, plant and equipment, net |
636,964 | 824,473 | — | 350,227 | 7(d) | 1,811,664 | ||||||||||||||||||||||
| Intangible assets, net |
570,773 | 178,574 | — | 9,549,426 | 7(e) | 10,298,773 | ||||||||||||||||||||||
| Goodwill |
1,338,358 | 896,017 | — | 8,658,853 | 7(f) | 10,893,228 | ||||||||||||||||||||||
| Operating lease assets |
76,426 | 348,706 | — | (73,980 | ) | 7(g) | 351,152 | |||||||||||||||||||||
| Other assets |
320,853 | 237,030 | — | — | 557,883 | |||||||||||||||||||||||
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| Total assets |
$ | 4,862,564 | $ | 4,030,700 | $ | (5,067 | ) | $ | 18,619,313 | $ | 27,507,510 | |||||||||||||||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
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| Current liabilities: |
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| Notes payable |
$ | 460,000 | $ | — | $ | — | $ | — | $ | 460,000 | ||||||||||||||||||
| Account payable |
115,728 | 196,993 | — | — | 312,721 | |||||||||||||||||||||||
| Short-term debt |
— | 336 | 3,495,567 | 5(a) | 4,433 | 7(h) | 3,500,336 | |||||||||||||||||||||
| Accrued employee compensation |
80,331 | 153,785 | 220 | 4(a) | — | 234,336 | ||||||||||||||||||||||
| Deferred revenue and customer advances |
301,342 | 144,648 | — | — | 445,990 | |||||||||||||||||||||||
| Current operating lease liabilities |
28,487 | 22,915 | — | — | 51,402 | |||||||||||||||||||||||
| Accrued income taxes |
56,370 | 1,188 | — | (10,594 | ) | 7(i) | 46,964 | |||||||||||||||||||||
| Accrued warranty |
11,569 | 15,870 | — | — | 27,439 | |||||||||||||||||||||||
| Other current liabilities |
197,468 | 114,615 | — | (25,863 | ) | 7(a) | 286,220 | |||||||||||||||||||||
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| Total current liabilities |
1,251,295 | 650,350 | 3,495,787 | (32,024 | ) | 5,365,408 | ||||||||||||||||||||||
| Long-term liabilities: |
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| Long-term debt |
947,206 | 343 | 499,366 | 5(a) | 634 | 7(h) | 1,447,549 | |||||||||||||||||||||
| Long-term portion of retirement benefits |
47,744 | 18,443 | 26,900 | 4(a) | — | 93,087 | ||||||||||||||||||||||
| Long-term income tax liabilities |
30,880 | 97,611 | (66,947 | ) | 4(a)(b)(c) | 2,414,027 | 7(i) | 2,475,571 | ||||||||||||||||||||
| Long-term operating lease liabilities |
50,472 | 251,811 | — | — | 302,283 | |||||||||||||||||||||||
| Other long-term liabilities |
204,274 | 44,431 | (17,000 | ) | 4(b) | — | 231,705 | |||||||||||||||||||||
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| Total long-term liabilities |
1,280,576 | 412,639 | 442,319 | 2,414,661 | 4,550,195 | |||||||||||||||||||||||
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| Total liabilities |
2,531,871 | 1,062,989 | 3,938,106 | 2,382,637 | 9,915,603 | |||||||||||||||||||||||
| Stockholders’ equity: |
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| Preferred stock |
— | — | — | — | — | |||||||||||||||||||||||
| Common stock |
1,631 | — | — | 387 | 7(j) | 2,018 | ||||||||||||||||||||||
| Additional paid-in capital |
2,396,477 | — | — | 15,317,289 | 7(j) | 17,713,766 | ||||||||||||||||||||||
| Retained earnings |
10,206,070 | — | — | (56,462 | ) | 7(j) | 10,149,608 | |||||||||||||||||||||
| Treasury stock, at cost |
(10,162,316 | ) | — | — | — | (10,162,316 | ) | |||||||||||||||||||||
| Accumulated other comprehensive loss |
(111,169 | ) | (92,294 | ) | — | 92,294 | 7(j) | (111,169 | ) | |||||||||||||||||||
| Net parent investment |
— | 3,060,005 | (3,943,173 | ) | |
4(a)(b)(c) 5(a) |
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883,168 | 7(j) | — | ||||||||||||||||||
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| Total stockholders’ equity |
2,330,693 | 2,967,711 | (3,943,173 | ) | 16,236,676 | 17,591,907 | ||||||||||||||||||||||
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| Total liabilities and stockholders’ equity |
$ | 4,862,564 | $ | 4,030,700 | $ | (5,067 | ) | $ | 18,619,313 | $ | 27,507,510 | |||||||||||||||||
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3
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 27, 2025
(In thousands, except per share data)
| Historical | ||||||||||||||||||||||||||||
| Nine Months Ended September 27, 2025 |
Nine Months Ended September 30, 2025 |
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| Waters | BDS Business After Reclassification (Note 3) |
Pre-Merger Adjustments (Note 5) |
Note | Transaction Accounting Adjustments (Note 7) |
Note | Pro Forma Combined |
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| Revenues: |
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| Product sales |
$ | 1,373,894 | $ | 2,138,127 | $ | — | $ | — | $ | 3,512,021 | ||||||||||||||||||
| Service sales |
859,030 | 323,585 | — | — | 1,182,615 | |||||||||||||||||||||||
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| Total net sales |
2,232,924 | 2,461,712 | — | — | 4,694,636 | |||||||||||||||||||||||
| Costs and operating expenses: |
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| Cost of product sales |
579,686 | 1,074,465 | — | 2,820 | 7(m)(o) | 1,656,971 | ||||||||||||||||||||||
| Cost of service sales |
346,272 | 211,922 | — | — | 558,194 | |||||||||||||||||||||||
| Selling and administrative expenses |
590,367 | 587,305 | — | (17,467 | ) | 7(m)(o) | 1,160,205 | |||||||||||||||||||||
| Research and development expenses |
148,813 | 214,768 | — | (3,402 | ) | 7(m)(o) | 360,179 | |||||||||||||||||||||
| Purchased intangibles amortization |
35,714 | 28,975 | — | 504,456 | 7(n) | 569,145 | ||||||||||||||||||||||
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| Total costs and operating expenses |
1,700,852 | 2,117,435 | — | 486,407 | 4,304,694 | |||||||||||||||||||||||
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| Operating income (loss) |
532,072 | 344,277 | — | (486,407 | ) | 389,942 | ||||||||||||||||||||||
| Other income (expense), net |
778 | (16,501 | ) | — | — | (15,723 | ) | |||||||||||||||||||||
| Interest expense |
(55,261 | ) | (58 | ) | (166,358 | ) | 5(b) | — | (221,677 | ) | ||||||||||||||||||
| Interest income |
13,108 | 1,763 | — | — | 14,871 | |||||||||||||||||||||||
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| Income (loss) before income taxes |
490,697 | 329,481 | (166,358 | ) | (486,407 | ) | 167,413 | |||||||||||||||||||||
| Provision (benefit) for income taxes |
73,282 | 54,099 | (39,926 | ) | 5(c) | (116,738 | ) | 7(q) | (29,283 | ) | ||||||||||||||||||
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| Net income (loss) |
$ | 417,415 | $ | 275,382 | $ | (126,432 | ) | $ | (369,669 | ) | $ | 196,696 | ||||||||||||||||
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| Net income per basic common share |
$ | 7.02 | $ | 2.00 | ||||||||||||||||||||||||
| Weighted-average number of basic common shares Basic |
59,496 | 98,240 | ||||||||||||||||||||||||||
| Net income per diluted common share |
$ | 7.00 | $ | 2.00 | ||||||||||||||||||||||||
| Weighted-average number of diluted common shares and equivalents |
59,656 | 98,432 | ||||||||||||||||||||||||||
4
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2024
(In thousands, except per share data)
| Historical | ||||||||||||||||||||||||||
| Year Ended December 31, 2024 |
Year Ended September 30, 2024 |
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| Waters | BDS Business After Reclassification (Note 3) |
Pre-Merger Adjustments (Note 5) |
Note | Transaction Accounting Adjustments (Note 7) |
Note | Pro Forma Combined |
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| Revenues: |
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| Product sales |
$ | 1,844,176 | $ | 2,944,750 | $ | — | $ | — | $ | 4,788,926 | ||||||||||||||||
| Service sales |
1,114,211 | 398,237 | — | — | 1,512,448 | |||||||||||||||||||||
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| Total net sales |
2,958,387 | 3,342,987 | — | — | 6,301,374 | |||||||||||||||||||||
| Costs and operating expenses: |
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| Cost of product sales |
747,920 | 1,502,033 | — | 227,131 | 7(k)(m)(o) | 2,477,084 | ||||||||||||||||||||
| Cost of service sales |
452,281 | 270,568 | — | — | 722,849 | |||||||||||||||||||||
| Selling and administrative expenses |
690,148 | 851,912 | — | 38,571 | 7(l)(m)(o) | 1,580,631 | ||||||||||||||||||||
| Research and development expenses |
183,027 | 310,666 | — | (4,608 | ) | 7(m)(o) | 489,085 | |||||||||||||||||||
| Purchased intangibles amortization |
47,090 | 37,147 | — | 674,093 | 7(n) | 758,330 | ||||||||||||||||||||
| Litigation provision |
11,568 | — | — | — | 11,568 | |||||||||||||||||||||
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| Total costs and operating expenses |
2,132,034 | 2,972,326 | — | 935,187 | 6,039,547 | |||||||||||||||||||||
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| Operating income (loss) |
826,353 | 370,661 | — | (935,187 | ) | 261,827 | ||||||||||||||||||||
| Other income (expense), net |
776 | (5,991 | ) | — | — | (5,215 | ) | |||||||||||||||||||
| Interest expense |
(89,677 | ) | (4 | ) | (221,882 | ) | 5(b) | (7,211 | ) | 7(p) | (318,774 | ) | ||||||||||||||
| Interest income |
17,416 | 1,684 | — | — | 19,100 | |||||||||||||||||||||
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| Income (loss) before income taxes |
754,868 | 366,350 | (221,882 | ) | (942,398 | ) | (43,062 | ) | ||||||||||||||||||
| Provision (benefit) for income taxes |
117,034 | 45,137 | (53,252 | ) | 5(c) | (222,166 | ) | 7(q) | (113,247 | ) | ||||||||||||||||
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| Net income (loss) |
$ | 637,834 | $ | 321,213 | $ | (168,630 | ) | $ | (720,232 | ) | $ | 70,185 | ||||||||||||||
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| Net income per basic common share |
$ | 10.75 | $ | 0.72 | ||||||||||||||||||||||
| Weighted-average number of basic common shares Basic |
59,333 | 98,077 | ||||||||||||||||||||||||
| Net income per diluted common share |
$ | 10.71 | $ | 0.71 | ||||||||||||||||||||||
| Weighted-average number of diluted common shares and equivalents |
59,552 | 98,328 | ||||||||||||||||||||||||
5
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
NOTE 1 – Description of the Transaction
On July 13, 2025, Waters, BD, Merger Sub and SpinCo, as applicable, entered into transactions to effect the transfer of the BDS Business to Waters in accordance with the Merger Agreement and the Separation Agreement, pursuant to which and subject to the terms and conditions therein:
| • | Prior to the Distribution and the Merger, BD will transfer (or cause to be transferred) and SpinCo will accept and assume (or cause to be accepted and assumed) all of the rights, titles and interests to and under certain assets and liabilities relating to the BDS Business; |
| • | Prior to the Distribution and the Merger, SpinCo expects to incur indebtedness under the SpinCo Financing and/or the Permanent SpinCo Financing in an aggregate principal amount of up to $4.0 billion. The aggregate proceeds of the SpinCo Financing and/or the Permanent SpinCo Financing, as applicable, will be used by SpinCo to make the SpinCo Cash Distribution, subject to certain adjustments set forth in the Merger Agreement, and to pay fees and expenses related to the Transactions. In addition, following the Merger, any proceeds of the SpinCo Financing and/or the Permanent SpinCo Financing, if applicable, in excess of the foregoing may be used to pay all or any portion of the Waters Special Dividend; |
| • | In connection with the Closing, Waters may incur new indebtedness in the form of the Waters Bridge Facility and/or the Permanent Waters Financing in an aggregate principal amount of up to $1.8 billion. The aggregate proceeds of the Waters Bridge Facility and/or the Permanent Waters Financing may be used by Waters to (i) pay all or any portion of the Waters Special Dividend and (ii) to pay fees and expenses in connection with the Transactions. To the extent the Waters Bridge Facility is undrawn as of the payment date of the Waters Special Dividend, the commitments automatically terminate upon that date; |
| • | Following the SpinCo Cash Distribution, BD will distribute to its shareholders all of the issued and outstanding shares of SpinCo Common Stock held by BD by way of a pro rata distribution and for no consideration; and |
| • | Following the Distribution, Merger Sub will be merged with and into SpinCo, with SpinCo as the surviving entity and all SpinCo Common Stock will be converted into the right to receive shares of Waters Common Stock, as calculated and subject to adjustment as set forth in the Merger Agreement. When the Merger is completed, SpinCo will become a wholly owned subsidiary of Waters. |
As a result of the Merger, each share of SpinCo Common Stock as of immediately prior to the Effective Time (other than (A) shares held by SpinCo as treasury stock or by Waters or Merger Sub, in each case, as of immediately prior to the Merger that are automatically canceled and (B) any shares of Hook Stock) will be converted into the right to receive a number of shares of newly issued Waters Common Stock equal to the Exchange Ratio, which is subject to (i) required adjustments from stock splits, recapitalizations or similar equity transactions in Waters Common Stock and, (ii) if applicable, required adjustments to the Exchange Ratio to satisfy the Threshold Percentage as described below, with cash paid in lieu of fractional shares of Waters Common Stock in accordance with the Merger Agreement. Prior to the adjustment described in the Merger Agreement, the Exchange Ratio is designed to result in the issued and outstanding shares of Waters Common Stock on a fully diluted basis, immediately following the Merger, being owned approximately 39.2% by the former holders of SpinCo Common Stock (in their capacity as such) and approximately 60.8% by the Waters shareholders (in their capacity as such) immediately prior to the Merger. As described below and more fully set out in the Merger Agreement, under certain circumstances, the Exchange Ratio will be adjusted to the extent necessary to ensure that, immediately following the Closing, former holders of SpinCo Common Stock (including the Overlap Shareholders) own, for U.S. federal income tax purposes, at least the Threshold Percentage of the outstanding shares of Waters Common Stock. If the Exchange Ratio is adjusted and the number
6
of shares of Waters Common Stock that Waters issues in the Merger would represent greater than 39.2% of the issued and outstanding shares of Waters Common Stock immediately following the Merger, then (i) Waters would pay a cash dividend to Waters shareholders who held shares of Waters Common Stock as of the Waters Special Dividend record date, which record date will be a date prior to the date of the Merger, and (ii) the SpinCo Cash Distribution may be decreased. While the Waters Special Dividend will be paid only to shareholders of record of Waters Common Stock as of the Waters Special Dividend record date, which will be a date before the Merger, Waters expects the payment date for any Waters Special Dividend would be following the Closing. The Waters Special Dividend is designed to preserve the nominal economic allocation between the holders of SpinCo Common Stock (in their capacity as such) and Waters shareholders (in their capacity as such) that would have resulted from the Exchange Ratio if it were not adjusted. Additionally, all outstanding BD SAR Awards (whether vested or unvested) held by a SpinCo Employee as of immediately prior to the Distribution Time will be converted, as of the Effective Time, into Waters SAR Awards, and all BD TVU Awards and BD PSU Awards held by a SpinCo Employee as of immediately prior to the Distribution Time will be converted, as of the Effective Time, into Waters RSU Awards as set forth in the Employee Matters Agreement.
As described elsewhere in the Waters Registration Statement, the Transactions are structured as a Reverse Morris Trust transaction. The parties determined that the Reverse Morris Trust structure was the superior choice for the Transactions because, among other things, the anticipated tax-free nature of the Contribution and Distribution for U.S. federal income tax purposes provides a tax efficient method to separate the BDS Business from BD that is not provided by other structures, thereby making the Reverse Morris Trust structure economically more appealing than alternative transaction structures. Further, the parties determined that a Reverse Morris Trust transaction that included the counting of Overlap Shares for purposes of Section 355(e) of the Code, for purposes of determining how many shares would be received by former shareholders of SpinCo Common Stock prior to the Merger, was preferable because it is expected to permit Waters to issue fewer shares of its common stock in the Merger and therefore pay a smaller Waters Special Dividend, if any, to Waters shareholders. The unaudited pro forma condensed combined financial information and related notes were prepared assuming that no Waters Special Dividend will be paid based on facts and circumstances existing at the time of the filing of the Waters Registration Statement. Refer to Note 9—Additional Presentation to Reflect Possible Waters Special Dividend—for additional information on alternative scenarios. For more information about Waters and BD’s reasons for the Transactions, see the section entitled “The Transactions—Waters’ Reasons for the Merger; Recommendation of Waters’ Board of Directors” and “The Transactions—BD’s Reasons for the Merger; Recommendation of BD’s Board.”
The SpinCo Cash Distribution will be funded by newly issued debt in the form of the SpinCo Financing (which may be replaced by the Permanent SpinCo Financing prior to or at the Closing). Following the Merger, Waters and certain of its subsidiaries are expected to guarantee all indebtedness incurred by SpinCo in connection with the payment of the SpinCo Cash Distribution. Refer to Note 5—Pre-Merger Adjustments for additional information.
NOTE 2 – Basis of Presentation
The unaudited pro forma condensed combined financial information and notes thereto have been prepared by Waters in accordance with Article 11 of Regulation S-X in order to give effect to the Transactions, including full consolidation of the BDS Business at Closing, and the incurrence of indebtedness under the Transaction Financing. Prior to or at the Closing, the SpinCo Financing may be replaced by the Permanent SpinCo Financing and the Waters Bridge Facility may be replaced by the Permanent Waters Financing. Since the terms of the Permanent SpinCo Financing and the Permanent Waters Financing are currently unavailable, the unaudited pro forma condensed combined financial information is prepared using the terms of the SpinCo Financing and the Waters Bridge Facility, as further discussed in Note 7—Transaction Adjustments.
The unaudited pro forma condensed combined financial information is based on Waters’ historical consolidated financial information and the BDS Business’s historical combined financial information prepared on a carve-out
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basis from BD’s consolidated financial information using the historical results of operations, assets and liabilities of the BDS Business and include allocations of expenses from BD. As a result, the BDS Business’s historical financial information may not necessarily reflect what its financial condition and results of operations would have been had the BDS Business been an independent, stand-alone entity during the periods presented.
The unaudited pro forma condensed combined statements of operations for nine months ended September 27, 2025 and for fiscal year ended December 31, 2024 give effect to the Transactions and the incurrence of indebtedness under the Transaction Financing as if they had occurred on January 1, 2024, the beginning of the earliest period presented. Waters has a December 31 fiscal year-end date, while the BDS Business has historically operated with a September 30 fiscal year-end date.
Because the difference between Waters’ fiscal period representing the nine months ended September 27, 2025 and the BDS Business’s fiscal period representing the nine months ended September 30, 2025 is within one quarter of one another, the BDS Business’s results for the nine months ended September 30, 2025 have been used to prepare the unaudited pro forma condensed combined statement of operations for the nine months ended September 27, 2025. The BDS Business’s results for the nine months ended September 30, 2025 have been derived by utilizing the BDS Business’s audited historical financial data for the fiscal year ended September 30, 2025 and subtracting the unaudited interim historical financial data for the three month period ended December 31, 2024. As a result, the BDS Business’s results for three months ended December 31, 2024 have not been included in any of the unaudited pro forma condensed combined financial information periods presented and are not included in the Waters Registration Statement. Revenue and net income of the BDS Business for three months ended December 31, 2024, were $834 million and $78 million, respectively.
The unaudited pro forma condensed combined balance sheet as of September 27, 2025 gives effect to the Transactions and the incurrence of indebtedness under the Transaction Financing as if they had occurred on September 27, 2025 and combines the balance sheet of Waters as of September 27, 2025 with that of the BDS Business as of September 30, 2025.
Additionally, because the difference between Waters’ fiscal year end of December 31, 2024 and the BDS Business’s fiscal year end of September 30, 2024 is within one quarter of one another, the BDS Business’s fiscal results for the year ended September 30, 2024 have been used to prepare the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2024, as permitted under Rule 11-02 of Regulation S-X.
The historical financial information has been adjusted in the unaudited pro forma condensed combined financial information to give pro forma effect to transaction accounting adjustments that reflect the accounting for the Transactions and the incurrence of indebtedness under the Transaction Financing under U.S. GAAP.
The unaudited pro forma condensed combined financial information and related notes were prepared by applying the acquisition method of accounting to the Merger in accordance with ASC 805, Business Combinations, with Waters as the accounting acquirer of the BDS Business. In identifying Waters as the accounting acquirer, Waters’ conclusion is based primarily upon the following facts: (1) the issuance of Waters Common Stock in the Merger, (2) the proposed composition of the senior management of Waters after the Merger, (3) the proposed composition of the Waters Board after the Merger and (4) the relative voting interests in the combined company after the Merger. ASC 805 requires, among other things, that the assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. For purposes of the unaudited pro forma condensed combined balance sheet, the estimated purchase consideration has been allocated to the assets acquired and liabilities assumed of the BDS Business based upon Waters management’s preliminary estimate of their fair values. Accordingly, the preliminary purchase price allocation and related adjustments reflected in this unaudited pro forma condensed combined financial information are subject to further adjustment as additional information becomes available and as additional analyses and final valuations are completed. There can be no assurances that these additional analyses and final valuations will not result in significant changes to the estimates of fair value set forth below.
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The historical financial information of the BDS Business reflects the combined historical results of operations, financial position and cash flows of the BDS Business of BD as they were historically managed in conformity with U.S. GAAP. Therefore, the historical combined financial information of the BDS Business may not be indicative of the BDS Business’s future performance and do not necessarily reflect what the BDS Business’s combined results of operations, financial condition and cash flows would have been had the BDS Business operated as a separate, standalone company during the periods presented, particularly because of changes expected to occur in the future as a result of the separation of the BDS Business from BD, including changes in the financing, cash management, operations, cost structure and personnel needs of the business.
The historical financial information of the BDS Business includes certain assets and liabilities specifically attributable to the BDS Business. BD employs a centralized approach to cash management and the financing of its operations. For all periods presented, cash and cash equivalents, and liabilities legally held by the BDS Business were included in the combined balance sheets. BD’s debt and related interest expense have not been attributed to the BDS Business for any of the periods presented. These arrangements are not reflective of the manner in which the BDS Business would have financed operations as a stand-alone company separate from BD during the periods presented. Cash pooling, related interest and intercompany arrangements are excluded from the asset and liability balances in the combined balance sheets. These amounts have instead been reported as Net parent investment on the combined balance sheet.
Additionally, BD provides certain services, such as legal, accounting, information technology, human resources and other infrastructure support to the BDS Business. The cost of these services have been included in the BDS Business combined financial information through allocations based upon a proportion of revenue or headcount. BD considers these allocations to be reflective of the benefits received by the BDS Business during the periods presented in the historical combined financial information of the BDS Business, as required by and in conformity with U.S. GAAP. While these allocations include an apportionment of BD’s corporate and public company costs, such allocated costs may not be indicative or necessary if the BDS Business operated as a part of another existing public company nor are they necessarily representative of the costs expected to be incurred in the future, following the completion of the Transactions. Actual costs that would have been incurred if the BDS Business had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure.
Following the completion of the Transactions, certain functions previously provided by BD to the BDS Business will either continue to be delivered to the BDS Business under the Transition Services Agreement or will be assumed by Waters, either through internal resources or third-party service providers. Additionally, under one or more Contract Manufacturing Agreements, BD will manufacture certain products for the BDS Business and its subsidiaries following the Distribution.
In order to preserve the tax-free nature of the Distribution for U.S. federal income tax purposes, the Merger Agreement generally provides that the Exchange Ratio (designed to result in the issued and outstanding shares of Waters Common Stock on a fully diluted basis, immediately following the Merger, being owned approximately 39.2% by the former holders of SpinCo Common Stock (in their capacity as such) and approximately 60.8% by the Waters shareholders (in their capacity as such) immediately prior to the Merger) will be adjusted and increased if necessary to ensure that, immediately following the Closing, former holders of SpinCo Common Stock (including the Overlap Shareholders) own, for U.S. federal income tax purposes, at least the Threshold Percentage (which is 50.5%) of the outstanding shares of Waters Common Stock. See the section entitled “The Transactions—Calculation and Adjustments to the Exchange Ratio; Amount of Waters Special Dividend” and “U.S. Federal Income Tax Consequences of the Distribution and the Merger.” The Threshold Percentage noted above for U.S. federal income tax purposes includes the Overlap Shareholders in the calculation of ownership percentages. For accounting purposes, contingent upon any potential adjustments, the Exchange Ratio is calculated to result in approximately 39% of the outstanding shares of Waters Common Stock being owned by the former holders of SpinCo Common Stock (in their capacity as such) and approximately 61% of the outstanding shares of Waters Common Stock being owned by the Waters shareholders (in their capacity as such) immediately prior to the Merger.
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In addition, in connection with the Transactions, the parties will seek the IRS Ruling (see the section entitled “The Transactions—IRS Ruling”) with respect to certain U.S. federal income tax aspects of the Transactions, including matters relating to the nature and extent of shareholders who may be counted as Overlap Shareholders for purposes of determining the Exchange Ratio.
In the event that the number of shares that Waters will issue to former holders of SpinCo at the completion of the Transactions is increased in the manner described above, including as a result of the inability to count the Overlap Shareholders, the Merger Agreement provides that Waters will declare the Waters Special Dividend to its shareholders in an amount that will depend in part on the number of shares being issued, but which may range in amount between $0.01 per share and approximately $4.0 billion (the “Maximum Special Dividend”). Additionally, in certain circumstances where the Exchange Ratio increases, the SpinCo Cash Distribution may also be reduced as a result of the inability to count the Overlap Shareholders; the SpinCo Cash Distribution may be reduced by up to $2.3 billion.
The determination of how the Overlap Shareholders’ ownership will be treated for U.S. federal income tax purposes depends on the issuance of the IRS Ruling, which is within the discretion of the IRS. Waters, BD and SpinCo can offer no assurance concerning the extent of the Overlap Shareholders upon the completion of the Transactions or assurance that the IRS Ruling will be received.
While BD and Waters believe, based on information available to them as of the date of the Waters Registration Statement, that it is a reasonable assumption that the outcome of the variables will likely result in no Waters Special Dividend being paid, there can be no assurance that a result somewhere between zero (the “Minimum Special Dividend”) and the Maximum Special Dividend will be the case and substantial uncertainty exists regarding the final determination of the Exchange Ratio and the amount, if any, of the Waters Special Dividend. As noted above, the unaudited pro forma condensed combined financial information and related notes were prepared assuming that no Waters Special Dividend will be paid based on facts and circumstances existing at the time of the filing of the Waters Registration Statement. The receipt of the IRS Ruling is a condition to the Distribution and the Merger. Therefore, the parties will not complete the Merger until the third business day following the earlier of the date on which (i) the IRS Ruling is received from the IRS or (ii) BD withdraws its request for the IRS Ruling and waives the condition to closing. As of the date of the Waters Registration Statement, Waters believes that the assumption of no Waters Special Dividend is the most meaningful representation based on current analysis and estimates of Overlap Shareholders. Refer to Note 9—Additional Presentation to Reflect Possible Waters Shares of Common Stock to be Issued in the Merger for additional information regarding the impact of the Overlap Shareholders and the Waters Special Dividend on the unaudited pro forma condensed combined financial information. See the section entitled “The Transactions—Calculation and Adjustments to the Exchange Ratio; Amount of Waters Special Dividend.”
The unaudited pro forma condensed combined financial information, including the preliminary purchase price allocation, are presented for illustrative purposes only and do not necessarily reflect the operating results or financial position that would have occurred if the Transactions and the incurrence of indebtedness under the Transaction Financing had been consummated on the dates indicated, nor is it necessarily indicative of the results of operations or financial condition that may be expected for any future period or date. Accordingly, such information should not be relied upon as an indicator of future performance, financial condition or liquidity.
NOTE 3 – Reclassification Adjustments
Based on a preliminary review of the accounting policies of Waters and the BDS Business, Waters is not aware of any differences that would have a material impact on the unaudited pro forma condensed combined financial information. Following the completion of the Transactions, or as more information becomes available, Waters will perform a full and detailed review of the BDS Business’s accounting policies and financial information. As a result of the review, accounting policy differences may be identified and these differences, if identified, could produce results that are materially different from the results reflected in the unaudited pro forma condensed combined financial information.
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During the preparation of the unaudited pro forma condensed combined financial information related to the transactions between Waters, Merger Sub, BD, and SpinCo, Waters’ management performed a preliminary analysis of the BDS Business’s financial information to identify differences in financial statement presentation compared to the presentation of Waters. Certain reclassifications have been made to the historical consolidated presentation of the BDS Business to conform to the financial statement presentation of Waters.
Balance Sheet Reclassifications:
The table below summarizes the mapping of financial statement line items between the BDS Business and Waters and the reclassification adjustments made to present the audited historical combined balance sheet of the BDS Business as of September 30, 2025, in conformity with the audited historical consolidated balance sheet of Waters as of September 27, 2025 (in thousands).
| BDS Business |
Waters Presentation |
Historical BDS Business |
Reclassifications | Note | Historical BDS Business (Reclassified) |
|||||||||||||
| Assets |
||||||||||||||||||
| Cash and cash equivalents |
Cash and cash equivalents | $ | 73,729 | $ | — | $ | 73,729 | |||||||||||
| Trade receivables, net |
Accounts receivable, net | 596,814 | 3,973 | (a | ) | 600,787 | ||||||||||||
| Inventories, net |
Inventories | 742,594 | — | 742,594 | ||||||||||||||
| Prepaid expenses and other |
Other current assets | 132,763 | (3,973 | ) | (a | ) | 128,790 | |||||||||||
| Property, Plant and Equipment, Net |
Property, plant and equipment, net | 647,415 | 177,058 | (b | ) | 824,473 | ||||||||||||
| Goodwill |
Goodwill | 896,017 | — | 896,017 | ||||||||||||||
| Other Intangibles, Net |
Intangible assets, net | 178,574 | — | 178,574 | ||||||||||||||
| Operating lease assets | — | 348,706 | (b | ) | 348,706 | |||||||||||||
| Other Assets |
Other assets | 762,794 | (525,764 | ) | (b | ) | 237,030 | |||||||||||
| Liabilities |
||||||||||||||||||
| Accounts payable |
Accounts payable | 196,993 | — | 196,993 | ||||||||||||||
| Salaries, wages and related items |
Accrued employee compensation |
153,498 | 287 | (c | ) | 153,785 | ||||||||||||
| Deferred revenue and customer advances | — | 144,648 | (c | ) | 144,648 | |||||||||||||
| Current operating lease liabilities | — | 22,915 | (c | ) | 22,915 | |||||||||||||
| Accrued income taxes | — | 1,188 | (c | ) | 1,188 | |||||||||||||
| Accrued warranty | — | 15,870 | (c | ) | 15,870 | |||||||||||||
| Short-term debt | 336 | (c | ) | 336 | ||||||||||||||
| Accrued expenses and other liabilities |
Other current liabilities |
299,859 | (185,244 | ) | (c | ) | 114,615 | |||||||||||
| Long-term debt | — | 343 | (d | ) | 343 | |||||||||||||
| Long-term portion of retirement benefits | — | 18,443 | (d | ) | 18,443 | |||||||||||||
| Long-term income tax liabilities | — | 97,611 | (d | ) | 97,611 | |||||||||||||
| Long-term operating lease liabilities | — | 251,811 | (d | ) | 251,811 | |||||||||||||
| Deferred Income Taxes and Other Liabilities |
Other long-term liabilities | 412,639 | (368,208 | ) | (d | ) | 44,431 | |||||||||||
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| BDS Business |
Waters Presentation |
Historical BDS Business |
Reclassifications | Note | Historical BDS Business (Reclassified) |
|||||||||||||
| Parent’s Equity |
||||||||||||||||||
| Accumulated other comprehensive loss |
Accumulated other comprehensive loss |
(92,294 | ) | — | (92,294 | ) | ||||||||||||
| Net parent investment |
3,060,005 | — | 3,060,005 | |||||||||||||||
Notes:
| a. | The BDS Business’s historical presentation included Prepaid expenses and other of $133 million, of which $4 million related to royalty receivables determined to be trade related and were reclassified to Accounts receivable, net to conform to Waters’ presentation. |
| b. | Waters separately reflected Operating lease assets as its own caption in its historical presentation such that $349 million of right of use assets reflected within Other assets in the BDS Business’s historical presentation was reclassified to Operating lease assets to conform to Waters’ presentation. Additionally, $177 million of placed instruments that were historically presented in BDS Business’s balance sheet within Other assets were reclassified to Property, plant and equipment, net to conform to Waters’ presentation of placed and other instrumentation. |
| c. | The BDS Business’s historical Accrued expenses and other liabilities caption aggregated several amounts for which Waters has a separate caption presented in its historical presentation to disaggregate balances in more detail. Of the BDS Business’s total balance in Accrued expenses and other of $300 million, the following adjustments were made to conform to Waters’ presentation of each of these balances in separate captions: |
| • | An immaterial amount of accrued employee expenses were reclassified to Accrued employee compensation, |
| • | Deferred income of $145 million was reclassified to Deferred revenue and customer advances, |
| • | Accrued lease liabilities of $23 million were reclassified to Current operating lease liabilities, |
| • | Income tax accruals of $1 million were reclassified to Accrued income taxes, |
| • | Warranty reserve balances of $16 million were reclassified to Accrued warranty, |
| • | An immaterial amount of the current portion of long-term debt was reclassified to Short-term debt. |
The remaining balance of $115 million within the BDS Business’s Accrued expenses and other caption relating to accrued marketing, taxes, freight, royalties expenses corresponds to Other current liabilities in Waters’ presentation.
| d. | The BDS Business’s historical Deferred income taxes and other liabilities caption aggregated several amounts for which Waters has separate captions presented in its historical presentation to disaggregate balances in more detail. Of the BDS Business’s total balance in Deferred income taxes and other liabilities of $413 million, the following adjustments were made to conform to Waters’ presentation of each of these balances in separate captions: |
| • | An immaterial amount of non-current debt of the BDS Business was reclassified from Deferred Income taxes and other liabilities to Long-term debt, |
| • | Long-term employee benefit obligations of $18 million were reclassified to Long-term portion of retirement benefits, |
| • | $98 million was reclassified to Long-term income tax liabilities, and |
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| • | Long-term lease liabilities of $252 million were reclassified to Long-term operating lease liabilities. |
The remaining balance of $44 million within the BDS Business’s Deferred income taxes and other liabilities caption relating to long-term liabilities of a more general nature corresponds to Other long-term liabilities in Waters’ presentation.
Statements of Operations Reclassifications:
The table below summarizes the mapping of financial statement line items between the BDS Business and Waters and the reclassification adjustments made to present the unaudited historical combined statement of income of the BDS Business for the nine months ended September 30, 2025 in conformity with the unaudited historical consolidated statement of operations of Waters for the nine months ended September 27, 2025 (in thousands).
| BDS Business |
Waters Presentation |
Historical BDS Business |
Reclassifications | Note | Historical BDS Business (Reclassified) |
|||||||||||||
| Product sales |
Product sales | 2,138,127 | — | 2,138,127 | ||||||||||||||
| Service sales |
Service sales | 323,585 | — | 323,585 | ||||||||||||||
| Cost of product sales |
Cost of product sales | 1,047,661 | 26,804 | (e) (f) | 1,074,465 | |||||||||||||
| Cost of service sales |
Cost of service sales | 211,922 | — | 211,922 | ||||||||||||||
| Selling and administrative expense |
Selling and administrative expenses |
639,865 | (52,560 | ) | (f) (g) | 587,305 | ||||||||||||
| Research and development expense |
Research and development expenses |
214,768 | — | 214,768 | ||||||||||||||
| Purchased intangibles amortization | 28,975 | (e) | 28,975 | |||||||||||||||
| Integration, restructuring, and transaction expense |
3,219 | (3,219 | ) | (g | ) | — | ||||||||||||
| Other expense, net |
Other income (expense), net | (14,796 | ) | (1,705 | ) | (h | ) | (16,501 | ) | |||||||||
| Interest expense | — | (58 | ) | (h | ) | (58 | ) | |||||||||||
| Interest income | — | 1,763 | (h | ) | 1,763 | |||||||||||||
| Income tax provision |
Provision (benefit) for income taxes | 54,099 | — | 54,099 | ||||||||||||||
Notes:
| e. | Waters separately reflects purchased intangibles amortization in its own caption such that $29 million of amortization reflected within Cost of products sold in the BDS Business’s historical presentation was reclassified to Purchased intangibles amortization to conform to Waters’ presentation. |
| f. | The BDS Business’s shipping expenses were historically reflected within Selling and administrative expense while Waters records these amounts within Cost of product sales such that $56 million of shipping expenses were reclassified from Selling and administrative expense to Cost of product sales. |
| g. | Integration and restructuring expenses of $3 million that were separately reflected in the BDS Business’s historical presentation were reclassified to Selling and administrative expense to conform to Waters’ presentation. |
| h. | An immaterial amount of interest expense and $2 million of interest income that were reflected within Other expense, net in the BDS Business’s historical presentation were reclassified to Interest expense |
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| and Interest income, respectively, to conform to Waters’ presentation. The remaining balance of $17 million within Other expense, net in the BDS Business’s historical presentation corresponds to the Other income (expense), net caption in Waters’ presentation. |
The table below summarizes the mapping of financial statement line items between the BDS Business and Waters and the reclassification adjustments made to present the unaudited historical combined statement of income of the BDS Business for the year ended September 30, 2024, in conformity with the audited historical consolidated statement of operations of Waters for the year ended December 31, 2024 (in thousands).
| BDS Business |
Waters Presentation |
Historical BDS Business |
Reclassifications | Note | Historical BDS Business (Reclassified) |
|||||||||||
| Product sales |
Product sales | 2,944,750 | — | 2,944,750 | ||||||||||||
| Service sales |
Service sales | 398,237 | — | 398,237 | ||||||||||||
| Cost of product sales |
Cost of product sales | 1,442,808 | 59,225 | (i) (j) (k) | 1,502,033 | |||||||||||
| Cost of service sales |
Cost of service sales | 270,568 | — | 270,568 | ||||||||||||
| Selling and administrative expense |
Selling and administrative expenses |
865,718 | (13,806 | ) | (j) (k) (l) | 851,912 | ||||||||||
| Research and development expense |
Research and development expenses |
306,152 | 4,514 | (k) | 310,666 | |||||||||||
| Purchased intangibles amortization | 37,147 | (i) | 37,147 | |||||||||||||
| Integration, restructuring, and transaction expense |
88,707 | (88,707 | ) | (k) | — | |||||||||||
| Other operating income, net |
1,627 | (1,627 | ) | (l) | — | |||||||||||
| Other expense, net |
Other income (expense), net | (4,311 | ) | (1,680 | ) | (m) | (5,991 | ) | ||||||||
| Interest expense | (4 | ) | (m) | (4 | ) | |||||||||||
| Interest income | 1,684 | (m) | 1,684 | |||||||||||||
| Income tax provision |
Provision (benefit) for income taxes | 45,137 | — | 45,137 | ||||||||||||
Notes:
| i. | Waters separately reflects purchased intangibles amortization in its own caption such that $37 million of amortization reflected within Cost of products sold in the BDS Business’s historical presentation was reclassified to Purchased intangibles amortization to conform to Waters’ presentation. |
| j. | The BDS Business’s shipping expenses were historically reflected within Selling and administrative expense while Waters records these amounts within Cost of product sales such that $71 million of shipping expenses were reclassified from Selling and administrative expense to Cost of product sales. |
| k. | Integration and restructuring expenses of $89 million were separately reflected in the BDS Business’s historical presentation. As there is no such separate caption in the Waters’ presentation, the balance was allocated to separate captions based on the nature of the expenses. A majority of the expenses are general in nature such that $59 million was reclassified to Selling and administrative expense to conform to Waters’ presentation. The remaining $30 million related to salaries, equipment and leases which relate to various functions included in other captions resulting in reclassifications of $25 million to Cost of product sales and $5 million to Research and development expenses. |
| l. | Other operating income, net of $2 million that was separately reflected in the BDS Business’s historical presentation was reclassified to Selling and administrative expenses to conform to Waters’ presentation. |
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| m. | An immaterial amount of interest expense and $2 million of interest income that were reflected within Other expense, net in the BDS Business’s historical presentation were reclassified to Interest expense and Interest income, respectively, to conform to Waters’ presentation. The remaining balance of $6 million within Other expense, net in the BDS Business’s historical presentation corresponds to the Other income (expense), net caption in Waters’ presentation. |
NOTE 4 – Separation Adjustments
| a. | The BDS Business’s audited combined balance sheet as of September 30, 2025 excludes certain assets and liabilities related to pension and other post-retirement and post-employment benefit plans that have historically been held at the BD corporate level but are specifically identifiable or otherwise attributable to employees transferred to the BDS Business. Pro forma adjustments are included in the unaudited pro forma condensed combined balance sheet to reflect the impact of defined benefit plans of BD that will be transferred to the BDS Business pursuant to the Separation Agreement based on the amounts attributed to transferred employees of the BDS Business. These adjustments are based on an actuarial valuation performed based on a preliminary analysis of participant’s data as of September 30, 2025 and include assumptions that have a significant effect on the amounts reported. The pro forma adjustments recorded to the unaudited pro forma condensed combined balance sheet related to these plans are as follows: |
| • | An increase of an immaterial amount in Accrued employee compensation and of $27 million in Long-term portion of retirement benefits related to the defined benefit plan obligations of employees transferring to Waters; |
| • | A decrease of $6 million to Long-term income tax liabilities to reflect deferred tax assets resulting from defined benefit plan obligations for employees transferring to Waters; |
| • | A decrease of $21 million to Net parent investment for the related impact of the defined benefit plan obligations attributed to transferred employees of the BDS Business; |
A 10% change in the valuation of the defined benefit plan obligation would cause a corresponding increase or decrease in the balance of Goodwill by $2 million and in the balance of Long-term income tax liabilities by $1 million as of September 27, 2025.
| b. | In 2015, legislation was enacted in Italy which requires medical technology companies to make payments to the Italian government if Italy’s medical device expenditures exceed annual regional expenditure ceilings. The amount of these payments is based on the amount by which the regional ceilings for the given year were exceeded. Considerable uncertainty has existed regarding the enforceability and implementation of this payback legislation since it was enacted and the BDS Business, as well as other medical device companies, have filed appeals which challenge the enforceability of this legislation. As specified in the Separation Agreement, all historical liabilities resulting from this legislation and litigation are retained by BD and are not assumed by Waters. Since this historical liability is not being assumed by Waters as per the Separation Agreement, the following pro forma adjustments are made to remove the effects of the litigation accruals to the BDS Business in the unaudited pro forma condensed combined balance sheet: |
| • | A decrease of $17 million to Other long-term liabilities related to the liability that is not retained by the BDS Business; |
| • | An increase of $3 million to Long-term income tax liabilities to exclude deferred tax assets related to the litigation liability; |
| • | An increase of $14 million to Net parent investment for the related impact of the liability that is not retained by the BDS Business. |
| c. | The BDS Business’s audited combined balance sheet as of September 30, 2025 includes uncertain tax benefits that are retained by BD and are not assumed by Waters. The following pro forma adjustments |
15
| remove the effects of the uncertain tax benefits to the BDS Business in the unaudited pro forma condensed combined balance sheet: |
| • | A decrease of $63 million to Long-term income tax liabilities related to the uncertain tax benefits that are not retained by the BDS Business. |
| • | An increase of $63 million to Net parent investment for the related impact of the uncertain tax benefits that are not retained by the BDS Business. |
NOTE 5 – Pre-Merger Adjustments
The SpinCo Cash Distribution and related financing arrangements are required pre-Merger steps under the Separation Agreement and Merger Agreement to effect the Separation and Distribution. These capital structure adjustments are not discretionary, but contractual conditions precedent to consummation of the Transactions. The amount of the SpinCo Cash Distribution is equal to $4.0 billion, subject to adjustment for cash, working capital, and indebtedness of SpinCo and subject to decrease if additional shares of Waters Common Stock will be issued to the former holders of SpinCo.
Concurrently with the execution of the Merger Agreement, SpinCo entered into the SpinCo Bridge Commitment Letter with certain financial institutions, pursuant to which such financial institutions committed to provide senior unsecured bridge loans (the “SpinCo Bridge Loan”) under a 364-day senior unsecured bridge loan credit facility in an aggregate principal amount of up to $4.0 billion, subject to the terms and conditions of the SpinCo Bridge Commitment Letter. The SpinCo Bridge Commitment Letter was subsequently terminated on July 29, 2025, in connection with the entry into the Amended and Restated SpinCo Term Loan Commitment Letter, pursuant to which the SpinCo Commitment Parties fully committed to provide senior unsecured term loans under a senior unsecured term loan credit facility in an aggregate principal amount of up to $4.0 billion, subject to the terms and conditions of the Amended and Restated SpinCo Term Loan Commitment Letter. The debt financing contemplated by the Amended and Restated SpinCo Term Loan Commitment Letter (which is referred to herein as the SpinCo Financing) will be used to fund the SpinCo Cash Distribution subject to certain adjustments set forth in the Merger Agreement, and to pay fees and expenses related to the Transactions.
The following adjustments are included in the unaudited pro forma condensed combined balance sheet and unaudited pro forma condensed combined statements of operations to reflect the impact of these pre-Merger transactions.
Balance Sheet
The following summarizes the pre-Merger pro forma adjustments to give effect to those transactions that would occur immediately prior to the Merger, as if the Merger had been completed on September 27, 2025 for the purposes of the unaudited pro forma condensed combined balance sheet.
| a. | Represents adjustments related to the debt issuance and cash payment in connection with the SpinCo Bridge Loan, SpinCo Financing, and SpinCo Cash Distribution. The adjustment reflects the following impact on the unaudited pro forma condensed combined balance sheet: |
16
Cash and Cash Equivalents
| As of September 27, 2025 (in thousands) |
||||
| Proceeds from the issuance of the SpinCo Financing |
$ | 4,000,000 | ||
| SpinCo Cash Distribution to BD |
(4,000,000 | ) | ||
| Debt issuance costs and financing fees related to the SpinCo Financing (i) |
(5,067 | ) | ||
|
|
|
|||
| Pro forma adjustment to Cash and cash equivalents |
$ | (5,067 | ) | |
| (i) | Of the total debt issuance costs and financing fees related to the SpinCo Financing of $11 million, $6 million were already paid by Waters and included in Waters’ income statement for nine months ended September 27, 2025 such that the pro forma adjustment above includes only those incremental costs of $5 million that have not been included in Waters’ historical financial statements as of September 27, 2025. |
Additionally, debt issuance costs and financing fees related to the SpinCo Bridge Loan of $7 million were already paid by Waters and included in Waters’ income statement for nine months ended September 27, 2025 and therefore are excluded from the pro forma adjustments above.
Short-Term Debt and Long-Term Debt
| As of September 27, 2025 (in thousands) |
||||
| Proceeds from the issuance of the SpinCo Financing |
$ | 4,000,000 | ||
|
|
|
|||
| Debt issuance costs and financing fees related to the SpinCo Financing (i) |
(5,067 | ) | ||
|
|
|
|||
| Total pro forma adjustment for debt |
$ | 3,994,933 | ||
|
|
|
|||
| Pro forma adjustment to Short-term debt |
$ | 3,495,567 | ||
|
|
|
|||
| Pro forma adjustment to Long-term debt |
499,366 | |||
|
|
|
|||
The first tranche of the SpinCo Financing totaling $3.5 billion matures one year following the Merger, while the second tranche of $0.5 billion matures two years following the Merger. Therefore, the first tranche is classified as Short-term debt while the second tranche is classified as Long-term debt. Waters expects to replace this debt with longer term financing at or before maturity.
| (i) | Of the total debt issuance costs and financing fees related to the SpinCo Financing of $11 million, $6 million were already recognized in interest expense by Waters as of September 27, 2025 such that the pro forma adjustment above includes only the incremental contra-debt amount of $5 million that has not been included in Waters’ unaudited consolidated balance sheet as of September 27, 2025. |
Equity
Represents a pro forma adjustment to reduce Net parent investment to reflect the SpinCo Cash Distribution to BD of $4.0 billion.
17
Statements of Operations
The following summarizes the pre-Merger pro forma adjustments to give effect to those transactions that would occur immediately prior to the Merger, for the purposes of the unaudited pro forma condensed combined statements of operations for nine months ended September 27, 2025 and for the year ended December 31, 2024.
| b. | Represents an adjustment of $166 million for the nine months ended September 27, 2025 and $222 million for the year ended December 31, 2024 for incremental Interest expense related to the SpinCo Financing. Although the first tranche of the SpinCo Financing totaling $3.5 billion matures one year following the Merger and the second tranche of $0.5 billion matures two years following the Merger, the calculation of interest expense assumes that the first tranche of the SpinCo Financing will be replaced by permanent financing. Therefore, pro forma interest expense is reflected for the entire pro forma period presented based on a commensurate level of financing as if the first tranche was outstanding through September 27, 2025. |
The interest rate on the SpinCo Financing reflects an assumed SOFR rate plus an applicable margin per the terms of the SpinCo Financing. As of December 5, 2025, the rate inclusive of these elements was determined to be 3.93% plus 1.225% of an applicable margin. The applicable margin is based on the credit rating of SpinCo; the applicable margin will increase approximately every 90 days over the term of the SpinCo Financing for the first tranche and will remain constant for the full duration of the second tranche. A sensitivity analysis has been performed to consider the effect that a change of 0.125% to the interest rate would have on Interest expense. A 0.125% increase or decrease in interest rates would result in a change in Interest expense of approximately $4 million for the nine months ended September 27, 2025 and $5 million for the year ended December 31, 2024.
The SpinCo Bridge Loan was terminated prior to the Transactions and replaced with the SpinCo Financing. Debt issuance costs and financing fees related to the SpinCo Bridge Loan of $7 million were recognized in their entirety as Interest expense in Waters’ unaudited consolidated statement of operations for the nine months ended September 27, 2025. Therefore, no pro forma adjustment is included for this amount.
| c. | Represents an adjustment of $40 million for the nine months ended September 27, 2025 and $53 million for the year ended December 31, 2024 to reflect the estimated tax impacts of the pro forma adjustments in Provision for income taxes in the unaudited pro forma condensed combined statements of operations. The adjustment was determined by using a blended statutory tax rate of 24% for both the nine months ended September 27, 2025 and the year ended December 31, 2024. The total effective tax rate of the combined company could be significantly different depending on the geographical mix of income and other factors following the completion of the Transactions. Because the tax rate used for the unaudited pro forma condensed combined financial information is an estimate, it will likely vary from the actual rate in periods subsequent to the completion of the Transactions and those differences may be material. |
There is no adjustment related to the tax impact of undistributed earnings included in the unaudited pro forma condensed combined balance sheet as the final transaction structure and chain of ownership has not been determined. Therefore, an adjustment for the potential tax impact is not reasonable and supportable as of the date of the Waters Registration Statement.
NOTE 6 – Preliminary Purchase Consideration
Pursuant to the Merger, absent adjustment of the Exchange Ratio as detailed in the Merger Agreement and described elsewhere in the Waters Registration Statement, the Exchange Ratio is designed to result in the issued and outstanding shares of Waters Common Stock on a fully diluted basis, immediately following the Merger being owned approximately 39.2% by the former holders of SpinCo Common Stock and approximately 60.8% by the Waters shareholders immediately prior to the Merger.
18
The following table represents the preliminary estimate of the purchase consideration to be paid in the Merger:
| (in thousands, except per share amounts and exchange ratio) |
||||
| Estimated number of fully diluted shares of Waters Common Stock immediately prior to the Merger (a) |
60,069 | |||
| Share issuance ratio (b) |
0.64474 | |||
|
|
|
|||
| Estimated number of shares of Waters Common Stock to be issued to SpinCo shareholders as a result of the Merger |
38,729 | |||
| Waters Common Stock price (c) |
$ | 394.81 | ||
|
|
|
|||
| Estimated fair value of Waters Common Stock to be issued |
$ | 15,290,477 | ||
| Estimated fair value of share-based compensation awards to be issued to BDS Business Employees related to pre-combination services (d) |
27,199 | |||
|
|
|
|||
| Estimated preliminary purchase consideration |
$ | 15,317,676 | ||
| a. | Estimated number of fully diluted shares of Waters Common Stock: |
| Number of shares of Waters Common Stock issued and outstanding (excluding Waters Common Stock held in treasury) |
59,546 | |||
| Number of shares of Waters Common Stock issuable upon conversion of Waters equity awards |
523 | |||
|
|
|
|||
| 60,069 |
| b. | The number of shares of Waters Common Stock to be issued as a result of the Merger will be calculated such that immediately after the Merger such shares of Waters Common Stock issued to former holders of SpinCo Common Stock will represent approximately 39.2% of Waters Common Stock issued and outstanding on a fully diluted basis immediately following the Merger, and the shareholders of Waters Common Stock issued and outstanding immediately prior to the Merger will collectively own approximately 60.8% of Waters Common Stock issued and outstanding immediately following the Merger, i.e. the number of shares of Waters Common Stock immediately prior to the Merger (calculated on a fully diluted basis) multiplied by the quotient of 39.2% divided by 60.8%. |
| c. | Represents the closing price per share of Waters Common Stock as reported by the NYSE on December 5, 2025. The actual value of Waters Common Stock to be issued in the Merger will depend on the market price of shares of Waters Common Stock on the Closing Date. Therefore, the actual purchase consideration will fluctuate until the Merger is consummated. The final purchase consideration may differ significantly from the consideration assumed for purposes of preparing the unaudited pro forma condensed combined financial information. |
| d. | Estimated consideration for replacement of SpinCo’s outstanding equity awards. All outstanding BD SAR Awards (whether vested or unvested) held by a SpinCo Employee as of immediately prior to the Distribution Time will be converted, as of the Effective Time, into Waters SAR Awards and all BD TVU Awards and BD PSU Awards held by a SpinCo Employee as of immediately prior to the Distribution Time will be converted, as of the Effective Time, into Waters RSU Awards as set forth in the Employee Matters Agreement. A portion of the fair value of equity awards held by SpinCo Employees and replaced as a result of the Merger represents consideration transferred because it relates to services rendered by such BDS Business Employees to BD prior to the Merger. This amount is calculated based on the ratio of the pre-combination service period (from the grant date until assumed |
19
| the Closing Date) to the longer of the original total service period or the modified service period, if any, multiplied by the fair value of the BD awards (the number of BD awards multiplied by the BD share price on the Closing Date). The compensation expense related to services provided post-Merger is discussed in item 7(o) below. |
The table below depicts a sensitivity analysis of the estimated purchase consideration and goodwill, assuming a 10% increase or decrease of Waters’ Common Stock closing price used to determine the total estimated purchase consideration. This 10% is not indicative of Waters’ expectation for future stock price performance. For purposes of this calculation, the total number of shares of Waters Common Stock to be issued to holders of SpinCo Common Stock has been assumed to be the same as in the table above.
| Waters Common Stock closing price per share |
Estimated preliminary purchase consideration (in thousands) |
Goodwill (in thousands) |
||||||||||
| As presented in the unaudited pro forma condensed combined financial information |
$ | 394.81 | $ | 15,317,676 | $ | 9,554,870 | ||||||
| A 10% increase in Waters Common Stock price |
434.29 | 16,846,724 | 11,083,918 | |||||||||
| A 10% decrease in Waters Common Stock price |
355.33 | 13,788,628 | 8,025,822 | |||||||||
Preliminary purchase price allocation
The table below summarizes the preliminary allocation of purchase price to the assets acquired and liabilities assumed, as if the Merger had been completed on September 27, 2025. The allocation has not been finalized. The final determination of these estimated fair values, the assets’ useful lives and the amortization methods are dependent upon certain valuations and other analyses that have not yet been completed, and as previously stated could differ materially from the amounts presented in the unaudited pro forma condensed combined financial information. The final determination will be completed as soon as practicable but no later than one year after the consummation of the Merger.
20
The preliminary purchase price allocation is presented below:
| As of September 27, 2025 (in thousands) |
||||
| Estimated preliminary purchase consideration |
$ | 15,317,676 | ||
|
|
|
|||
| Assets |
||||
|
|
|
|||
| Cash and cash equivalents |
68,662 | |||
| Accounts receivable, net |
600,787 | |||
| Inventories |
970,300 | |||
| Other current assets |
128,790 | |||
| Property, plant and equipment, net |
1,174,700 | |||
| Intangible assets, net |
9,728,000 | |||
| Operating lease assets |
274,726 | |||
| Other assets |
237,030 | |||
|
|
|
|||
| Liabilities |
||||
|
|
|
|||
| Accounts payable |
196,993 | |||
| Short-term debt (i) |
3,500,336 | |||
| Accrued employee compensation |
154,005 | |||
| Deferred revenue and customer advances |
144,648 | |||
| Current operating lease liabilities |
22,915 | |||
| Accrued income taxes |
1,188 | |||
| Accrued warranty |
15,870 | |||
| Other current liabilities |
114,615 | |||
| Long-term debt (i) |
500,343 | |||
| Long-term portion of retirement benefits |
45,343 | |||
| Long-term income tax liabilities |
2,444,691 | |||
| Long-term operating lease liabilities |
251,811 | |||
| Other long-term liabilities |
27,431 | |||
|
|
|
|||
| Net Assets Acquired |
5,762,806 | |||
|
|
|
|||
| Goodwill |
$ | 9,554,870 | ||
|
|
|
|||
| (i) | Includes the assumption of $4 billion of short-term and long-term debt incurred by SpinCo to fund the SpinCo Cash Distribution to BD prior to the completion of the Merger. |
Any increase or decrease in the fair value of the net assets acquired, as compared to the information shown herein, could also change the portion of the purchase consideration allocable to goodwill and could impact the operating results of the combined company following the Transactions due to differences in the allocation of the purchase consideration, and changes in the depreciation and amortization related to some of these assets and liabilities.
21
NOTE 7 – Transaction Accounting Adjustments
Balance Sheet
The following summarizes the transaction accounting adjustments to give effect as if the Transactions and the incurrence of indebtedness under the Transaction Financing had been completed on September 27, 2025 for the purposes of the unaudited pro forma condensed combined balance sheet.
| a. | Represents an adjustment to Cash and cash equivalents consisting of the following: |
| As of September 27, 2025 (in thousands) |
||||
| Waters Bridge Facility debt issuance costs and financing fees (i) |
$ | (1,705 | ) | |
| Transaction fees and expenses (ii) |
(85,708 | ) | ||
|
|
|
|||
| Pro forma adjustment to Cash and cash equivalents |
$ | (87,413 | ) | |
|
|
|
|||
| (i) | Of the total debt issuance costs and financing fees related to the Waters Bridge Financing of $7 million, $5 million were already paid by Waters as of September 27, 2025 such that the pro forma adjustment above includes only those incremental costs of $2 million that have not yet been paid as of September 27, 2025. |
| (ii) | Of the total estimated costs of $95 million expected to be incurred by Waters through the closing of the Transactions for professional, legal and other fees, the unaudited pro forma condensed combined balance sheet reflects an adjustment for future costs not yet paid of $86 million reflected as a decrease to Cash and cash equivalents. |
Though $86 million of transaction fees and expenses remain to be paid, $26 million have been incurred and accrued by Waters as of September 27, 2025. Therefore, the payment of transaction fees and expenses above results in corresponding adjustments to decrease Other current liabilities by $26 million and to decrease Retained earnings by $60 million. These adjustments reduce the liability accrued for expenses incurred but not paid and reduce equity for the remaining expenses that have not yet been incurred, respectively. The remaining effect to Retained earnings from the cash adjustment for the Waters Bridge Facility debt issuance costs and financing fees is described in item 7(c) below.
| b. | Represents an adjustment of $228 million to Inventories to reflect the estimated step-up in fair value of SpinCo’s inventory acquired, valued using a cost-based approach. The calculated value is preliminary and subject to change and could vary materially from the final purchase price allocation. |
| As of September 27, 2025 (in thousands) |
||||
| Finished Goods |
$ | 668,400 | ||
| WIP |
168,400 | |||
| Raw Materials |
133,500 | |||
| Less: Historical Inventories |
(742,594 | ) | ||
|
|
|
|||
| Pro forma adjustment to Inventories |
$ | 227,706 | ||
|
|
|
|||
| c. | Of the total debt issuance costs and financing fees related to the Waters Bridge Financing of $7 million, $5 million were already paid by Waters as of September 27, 2025 and capitalized to Other assets. Therefore, a pro forma adjustment reclassifies $5 million of previously capitalized costs to reflect the amount in Retained earnings as of September 27, 2025. An incremental adjustment to Retained earnings records the debt issuance costs not yet incurred of $2 million related to the Waters Bridge Facility that is recognized as interest expense upon the Closing Date due to extinguishment of the Waters Bridge Facility. In total, Retained earnings is |
22
| adjusted by $7 million to reflect the total debt issuance costs and financing fees expensed as of the Closing Date. |
| d. | Represents an adjustment of $350 million to Property, plant and equipment, net to reflect the estimated step-up in fair value of those SpinCo assets acquired. The fair value estimate was determined based on the cost and market approaches. The calculated value is preliminary and subject to change and could vary materially from the final valuation. |
| As of September 27, 2025 (in thousands) |
||||
| Land and land improvements |
$ | 64,600 | ||
| Buildings and leasehold improvements |
433,100 | |||
| Production and other equipment |
521,000 | |||
| Construction in progress |
156,000 | |||
| Less: Historical Property, plant and equipment, net |
(824,473 | ) | ||
|
|
|
|||
| Pro forma adjustment to Property, plant and equipment, net |
$ | 350,227 | ||
| e. | Represents an adjustment of $9.5 billion to Intangible assets, net to reflect the estimated fair value of intangible assets acquired consisting of the following: |
| As of September 27, 2025 (in thousands) |
||||
| Trade Names |
$ | 134,000 | ||
| Developed Technology |
2,679,000 | |||
| Customer Relationships |
6,915,000 | |||
| Less: Historical Intangible assets, net |
(178,574 | ) | ||
|
|
|
|||
| Pro forma adjustment to Intangible assets, net |
$ | 9,549,426 | ||
The fair value estimates for identifiable intangible assets are preliminary and are based upon assumptions that market participants would use in pricing an asset. The fair values of the trade name portfolio, developed technology, and customer relationships are valued based on earning and royalty-based methodologies, which incorporate assumptions and methods suitable for estimating the future economic benefits of these assets. The calculated value is preliminary and subject to change and could vary materially from the final valuations.
A 10% change in the valuation of intangible assets would cause a corresponding increase or decrease in the balance of Goodwill and Long-term income tax liabilities by $739 million and $233 million, respectively, as of September 27, 2025.
| f. | Represents an adjustment to Goodwill to reflect the resulting goodwill that would have been recorded if the Merger occurred on September 27, 2025. |
| As of September 27, 2025 (in thousands) |
||||
| Goodwill resulting from the Merger |
$ | 9,554,870 | ||
| Less: Historical goodwill of the BDS Business |
(896,017 | ) | ||
|
|
|
|||
| Pro forma adjustment to Goodwill |
$ | 8,658,653 | ||
| g. | Represents an adjustment to decrease Operating lease assets by $74 million to reflect the remeasurement of the BDS Business’s leases based on Waters’ estimated incremental borrowing rate as of the date of the Transactions. |
23
| h. | Represents adjustments to Short-term debt and Long-term debt of $4 million and $1 million, respectively, to reflect the adjustment to the fair value of the SpinCo Financing assumed in the Merger. As debt issuance costs and financing fees do not meet the definition of an asset, $5 million in financing fees were not recognized as part of the Merger. Consistent with item 5(a) above, of the total debt issuance costs and financing fees related to the SpinCo Financing of $11 million, $6 million were already recorded to interest expense by Waters as of September 27, 2025 such that the adjustment adjusts the fair value only for those remaining debt issuance costs and financing fees not yet reflected in Waters’ unaudited consolidated financial information as of September 27, 2025. |
| i. | Represents an adjustment to Long-term income tax liabilities of $2.4 billion for the estimated tax impacts of the pro forma adjustments to deferred income taxes as a result of purchase accounting, in the unaudited pro forma condensed combined balance sheet as of September 27, 2025 by using a blended statutory tax rate of 24%. Additionally, an adjustment of $11 million is recorded in Accrued income taxes to reflect a decrease to current income taxes payable related to the tax effect of deductible transaction costs assuming a blended statutory tax rate of 24%. The reduction of the accrued liability results in a corresponding adjustment to increase Retained earnings by $11 million. The total effective tax rate of the combined company could be significantly different than the blended statutory tax rate applied depending on the geographical mix of income and other factors following the completion of the Transactions. Because the tax rate used for this unaudited pro forma condensed combined financial information is an estimate, it will likely vary from the actual rate in periods subsequent to the completion of the business combination and those differences may be material. |
| j. | Represents an adjustment to Total stockholders’ equity as of September 27, 2025 consisting of the following: |
| in thousands) | Common stock |
Additional paid-in capital |
Retained earnings |
Accumulated other comprehensive losses |
Net parent investment |
|||||||||||||||
| Elimination of total historical equity of SpinCo |
$ | — | $ | — | $ | $ | 92,294 | $ | 883,168 | |||||||||||
| Issuance of shares of Waters Common Stock |
387 | 15,290,090 | — | — | ||||||||||||||||
| Replacement of share-based compensation awards related to pre-combination services |
— | 27,199 | — | — | ||||||||||||||||
| Payment of transaction fees and expenses (i) |
(59,845 | ) | ||||||||||||||||||
| Payment of Waters Bridge Facility debt issuance costs and financing fees (ii) |
(7,211 | ) | ||||||||||||||||||
| Reduction to accrued income taxes related to deductible transaction costs (iii) |
10,594 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Pro forma adjustment to Total stockholders’ equity |
$ | 387 | $ | 15,317,289 | $ | (56,462 | ) | $ | 92,294 | $ | 883,168 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (i) | Refer to item 7(a) for supporting details. |
| (ii) | Refer to item 7(c) for supporting details. |
| (iii) | Refer to item 7(i) for supporting details. |
Statements of Operations
| k. | Represents an adjustment to Cost of product sales from the run-off of the estimated step-up in fair value of inventory acquired. As all inventory is expected to be sold within a year following the Merger, no adjustment is needed for the nine months ended September 27, 2025, and $228 million is reflected as an adjustment for the year ended December 31, 2024. |
| l. | Represents an adjustment to Selling and administrative expenses of $61 million for the year ended December 31, 2024 resulting from estimated transaction-related costs that are not currently reflected in the |
24
| historical consolidated financial information of Waters, which consist of professional, legal, and other acquisition-related fees. |
| m. | Represents an adjustment for the incremental depreciation expense of $11 million for the nine months ended September 27, 2025 and $8 million for the year ended December 31, 2024 relating to the estimated step-up in fair value of Property, plant and equipment, net. Depreciation expense is based on a straight-line methodology over the estimated useful lives noted below. Given that depreciation is reflected in multiple captions based on the nature of the asset, the adjustment is applicable to the captions as noted below. |
| Estimated Useful Life (in years) |
Nine months ended September 27, 2025 (in thousands) |
Year ended December 31, 2024 (in thousands) |
||||||||||
| Depreciation expense – Land improvements |
7 | $ | 304 | $ | 406 | |||||||
| Depreciation expense – Buildings and leasehold improvements |
12 - 22 | 15,204 | 20,272 | |||||||||
| Depreciation expense – Production and other equipment |
2 - 7 | 37,302 | 49,736 | |||||||||
| Less: Historical depreciation expense related to property, plant and equipment |
(41,977 | ) | (62,068 | ) | ||||||||
|
|
|
|
|
|||||||||
| Total incremental depreciation expense: |
$ | 10,833 | $ | 8,346 | ||||||||
|
|
|
|
|
|||||||||
| Pro forma adjustment to Cost of product sales |
|
$ | 8,865 | $ | 6,748 | |||||||
| Pro forma adjustment to Selling and administrative expenses |
|
668 | 510 | |||||||||
| Pro forma adjustment to Research and development expenses |
|
1,300 | 1,088 | |||||||||
| n. | Represents the net adjustment to Purchased intangibles amortization of $504 million for the nine months ended September 27, 2025 and $674 million for the year ended December 31, 2024 relating to the estimated fair values of the Intangible assets recognized in the Transaction. |
| Estimated Useful Life (in years) |
Nine months ended September 27, 2025 (in thousands) |
Year ended December 31, 2024 (in thousands) |
||||||||||
| Amortization on Trade Names |
3 | $ | 33,500 | $ | 44,667 | |||||||
| Amortization of Developed Technology |
11-12 | 175,790 | 234,386 | |||||||||
| Amortization of Customer Relationships |
16 | 324,141 | 432,188 | |||||||||
| Less: Historical Purchased intangibles amortization |
(28,975 | ) | (37,148 | ) | ||||||||
|
|
|
|
|
|||||||||
| Pro forma adjustment to Purchased intangibles amortization |
$ | 504,456 | $ | 674,093 | ||||||||
|
|
|
|
|
|||||||||
A 10% change in the valuation of intangible assets would cause a corresponding increase or decrease in the amount of amortization expense by $53 million for the nine months ended September 27, 2025 and $71 million for the year ended December 31, 2024.
| o. | Represents an adjustment of $29 million for the nine months ended September 27, 2025 and an adjustment of $36 million for the year ended December 31, 2024 resulting from the recognition of replacement share-based awards attributable to post-combination services, net of historical share-based compensation that has |
25
| been reversed. Pro forma share-based compensation expense has been calculated by using the acquisition-date fair value of the Waters replacement awards (the number of BD awards converted to Waters awards using the Exchange Ratio, multiplied by the Waters share price on the Closing Date) less the amount attributed to pre-combination services disclosed in Note 6 – Preliminary Purchase Consideration. Given that share-based compensation expense is reflected in multiple captions based on the nature of the award, the adjustment is applicable to the captions as noted below: |
| Nine months ended September 27, 2025 (in thousands) |
Year ended December 31, 2024 (in thousands) |
|||||||
| Pro forma share-based compensation expense |
$ | 3,368 | $ | 8,197 | ||||
| Less: Historical share-based compensation expense |
(32,250 | ) | (44,000 | ) | ||||
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|
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| Total reduction in share-based compensation expense |
$ | (28,882 | ) | $ | (35,803 | ) | ||
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|
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| Pro forma adjustment to Cost of product sales |
$ | (6,045 | ) | $ | (7,323 | ) | ||
| Pro forma adjustment to Selling and administrative expenses |
(18,135 | ) | (22,784 | ) | ||||
| Pro forma adjustment to Research and development expenses |
(4,702 | ) | (5,696 | ) | ||||
| p. | Represents an adjustment for the incremental Interest expense related to the Waters Bridge Facility to reflect the amount as interest expense as of the Closing Date given that the debt is not expected to be drawn. This results in an adjustment of $7 million for the year ended December 31, 2024. As of the date of the Waters Registration Statement, Waters believes that the assumption of no Waters Special Dividend is the most meaningful representation based on current analysis and estimates of Overlap Shareholders as described above. Accordingly, Waters does not expect to replace the Waters Bridge Facility with permanent financing at or before maturity. As a result, no adjustment is needed for the nine months ended September 27, 2025. |
| q. | Represents an adjustment for the estimated tax impacts of the pro forma adjustments in Provision for income taxes in the unaudited pro forma condensed combined statement of operations by using a blended statutory tax rate of 24% for both the nine months ended September 27, 2025 and the year ended December 31, 2024. This results in an adjustment of $117 million for the nine months ended September 27, 2025 and $222 million for the year ended December 31, 2024. |
The total effective tax rate of the combined company could be significantly different depending on the geographical mix of income and other factors following the completion of the Transactions. Because the tax rate used for this pro forma financial information is an estimate, it will likely vary from the actual rate in periods subsequent to the completion of the business combination and those differences may be material.
There is no adjustment related to the tax impact of undistributed earnings included in the unaudited pro forma condensed combined statements of operations as the final transaction structure and chain of ownership has not been determined. Therefore, an adjustment for the potential tax impact is not reasonable and supportable as of the date of the Waters Registration Statement.
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NOTE 8 — Earnings per Share
As a result of the adjustments as described above, an adjustment to earnings per share (“EPS”) for the nine months ended September 27, 2025 and for the year ended December 31, 2024 was made to present pro forma basic and diluted weighted average shares of the combined company using the historical weighted average shares of Waters Common Stock outstanding combined with the additional Waters equity awards issued in connection with the Merger. The following table sets forth a reconciliation of the numerators and denominators used to compute pro forma basic and diluted earnings per share:
| Pro Forma Basic Weighted-Average Shares |
Nine months ended September 27, 2025 (in thousands, except per share data) |
Year ended December 31, 2024 (in thousands, except per share data) |
||||||
| Pro forma net income attributable to common shareholders |
$ | 196,696 | $ | 70,185 | ||||
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|
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| Historical weighted-average number of basic common shares |
59,496 | 59,333 | ||||||
| Issuance of shares to SpinCo common stock shareholders |
38,729 | 38,729 | ||||||
| Impact of Waters RSUs and SARs to replace SpinCo RSUs and SARs |
15 | 15 | ||||||
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|
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| Pro forma weighted average shares (basic) |
98,240 | 98,077 | ||||||
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|
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| Pro forma basic EPS |
$ | 2.00 | $ | 0.72 | ||||
| Pro Forma Diluted Weighted-Average Shares |
Nine months ended September 27, 2025 (in thousands, except per share data) |
Year ended December 31, 2024 (in thousands, except per share data) |
||||||
| Pro forma net income attributable to common shareholders |
$ | 196,696 | $ | 70,185 | ||||
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|
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| Historical weighted-average number of diluted common shares and equivalents |
59,656 | 59,552 | ||||||
| Issuance of shares to SpinCo common stock shareholders |
38,729 | 38,729 | ||||||
| Dilutive impact of Waters RSUs and SARs to replace SpinCo RSUs and SARs |
47 | 47 | ||||||
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|
|
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| Pro forma weighted average shares (diluted) |
98,432 | 98,328 | ||||||
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| Pro forma diluted EPS |
$ | 2.00 | $ | 0.71 | ||||
NOTE 9 — Additional Presentation to Reflect Possible Waters Special Dividend
As described in Note 2—Basis of Presentation, the number of shares of Waters Common Stock that Waters will issue at the completion of the Transactions may change depending on the nature and extent of shareholders who may be counted as Overlap Shareholders for purposes of determining the Exchange Ratio. The Merger Agreement provides that Waters may declare a Waters Special Dividend to its shareholders in an amount that will depend on the number of shares being issued, but which may range in amount between $0.01 per share and approximately $4.0 billion. In the event that the Exchange Ratio is increased, requiring a Waters Special Dividend, the SpinCo Cash Distribution will also decrease, by up to $2.3 billion.
27
The extent of the Overlap Shareholders is outside of Waters’ and BD’s control and will not be known until the completion of the Transactions. The grant of the IRS Ruling is at the discretion of the IRS. Waters, BD, and SpinCo can offer no assurance concerning the extent of the Overlap Shareholders at the completion of the Transactions or assurance that the IRS Ruling will be received.
The unaudited pro forma condensed combined financial information and related notes were prepared assuming an illustrative scenario, which represents the amount of Waters common shares that will be exchanged in the Transactions assuming no payment of the Waters Special Dividend based on facts and circumstances existing at the time of the filing of the Waters Registration Statement, including an assumption that the IRS Ruling will be received, assumption as to its contents and an assumption of the extent of the Overlap Shareholders that will exist at Closing.
The additional presentation below gives effect to another possible result that will depend on the extent of the Overlap Shareholders. The possible result below is presented as the “Maximum Special Dividend” (reflecting $4.0 billion cash dividend paid to Waters shareholders upon completion of the Transactions and the incurrence of indebtedness under the Transaction Financing). The Maximum Special Dividend scenario presented below assumes that Waters would fully draw upon the Waters Bridge Facility entered in connection with the Transactions to fund the Waters Special Dividend, resulting in additional financing fees and incremental interest expense. Where the Exchange Ratio increases and requires a Waters Special Dividend of $4.0 billion, the SpinCo Cash Distribution will decrease by $2.3 billion, from $4.0 billion to $1.8 billion. If the Waters Special Dividend is paid, Waters directors participating in the Waters Director Deferred Compensation Plan who have elected to receive fees in Common Stock Units will be kept whole pursuant to the existing anti-dilution provisions in the applicable plan documents. Any such participation will depend upon the amount of the Waters Special Dividend, determinations made by the Compensation Committee of the Waters Board and other facts and circumstances as of the date of the dividend. Given the mechanism to keep Waters directors whole has not been determined, no adjustment has been reflected. Further assessment of impacts to existing agreements and arrangements as a result of the Maximum Bridge Facility Dividend may affect the assumptions set forth.
The following table represents the preliminary estimate of the purchase consideration to be paid in the Transaction under the Maximum Special Dividend scenario:
| (in thousands, except per share data) |
Illustrative Scenario |
Maximum Special Dividend |
||||||
| Estimated number of shares of Waters Common Stock to be issued in the Merger in the illustrative scenario (i) |
38,729 | 38,729 | ||||||
| Plus: Incremental number of shares of Waters Common Stock to be issued in the Maximum Special Dividend scenario (ii) |
— | 17,907 | ||||||
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|
|
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| Total estimated number of shares of Waters common stock to be issued in the Merger |
38,729 | 56,636 | ||||||
| Waters common stock price |
$ | 394.81 | $ | 394.81 | ||||
| Less: Impact of Waters Special Dividend on Waters Common Stock per share (per share)(iii) |
— | (66.59 | ) | |||||
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| Waters Common Stock price after impact of Waters Special Dividend on Waters price per share (per share) |
$ | 394.81 | $ | 328.22 | ||||
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| Estimated fair value of Waters common stock to be issued |
$ | 15,290,477 | $ | 18,589,065 | ||||
| Estimated equity consideration related to pre-combination share-based compensation awards |
27,199 | 27,199 | ||||||
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|
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| Estimated preliminary purchase consideration |
$ | 15,317,676 | $ | 18,616,264 | ||||
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| (i) | For the illustrative scenario, the estimated number of shares of Waters Common Stock to be issued in the Merger was calculated as the product of (a) the estimated number of fully diluted shares of Waters Common Stock immediately prior to the Merger multiplied by (b) the share issuance ratio, as detailed in Note 6 – Preliminary Purchase Consideration. |
| (ii) | The incremental shares of Waters Common Stock to be issued in the Maximum Special Dividend scenario was calculated based on the terms of the Merger Agreement as the quotient of (c) the Aggregate Cap of $6.25 billion divided by (d) $349.02. The payment of the Maximum Special Dividend of $4.0 billion assumes an Aggregate Adjustment Amount up to the Aggregate Cap of $6.25 billion. The Aggregate Adjustment Amount is calculated based on the product of (e) the amount by which the Exchange Ratio increases, (f) $349.02, and (g) the number of outstanding shares of SpinCo Common Stock outstanding immediately prior to the Effective Time. Noting that the number of incremental shares of Waters Common Stock to be issued is a function of (e) and (g) in the preceding calculation, the incremental shares of Waters Common Stock to be issued in the Maximum Special Dividend scenario is calculated based on the Aggregate Adjustment Amount of $6.25 billion divided by $349.02. |
| (iii) | Because the payment of the Waters Special Dividend is conditioned on the closing of the Merger, it is anticipated that the market value of Waters Common Stock will decline as a result of the Waters Special Dividend. The estimated Waters Special Dividend per share is derived by the total amount of the Waters Special Dividend (estimated to be $4.0 billion) over the number of Waters common stock issued and outstanding immediately prior to the Effective Time (estimated to be 60 million shares). BD shareholders who receive Waters Common Stock in the Merger will not be entitled to the Waters Special Dividend since the record date for the Waters Special Dividend will be prior to the Effective Time. |
The following represents the impact of the Maximum Special Dividend on the unaudited pro forma condensed combined balance sheet as of September 27, 2025. The Incremental Pre-Merger Adjustments and Incremental Transaction Accounting Adjustments reflect the impact of the Maximum Special Dividend scenario compared to the Pre-Merger Adjustments and Transaction Accounting Adjustments calculated in the Illustrative Scenario.
| Illustrative Scenario | Maximum Special Dividend | |||||||||||||||||||||||||||||||
| (in thousands) | Separation and Pre- Merger Adjustments |
Transaction Accounting Adjustments |
Pro Forma Combined |
Incremental Separation and Pre- Merger Adjustments |
Note | Incremental Transaction Accounting Adjustments |
Note | Pro Forma Combined |
||||||||||||||||||||||||
| Cash and cash equivalents |
$ | (5,067 | ) | $ | (87,413 | ) | $ | 440,367 | $ | 2,250,000 | 9 | (a) | $ | (2,206,800 | ) | 9 | (c) | $ | 483,567 | |||||||||||||
| Other current assets |
— | (5,506 | ) | 261,896 | — | — | 261,896 | |||||||||||||||||||||||||
| Goodwill |
— | 8,658,853 | 10,893,228 | — | 1,048,588 | 9 | (e) | 11,941,816 | ||||||||||||||||||||||||
| Short-term debt |
3,495,567 | 4,433 | 3,500,336 | — | 1,785,989 | 9 | (d) | 5,286,325 | ||||||||||||||||||||||||
| Other current liabilities |
— | (25,863 | ) | 286,220 | 4,000,000 | 9 | (b) | (4,000,000 | ) | 9 | (c) | 286,220 | ||||||||||||||||||||
| Long-term debt |
499,366 | 634 | 1,447,549 | — | — | 1,447,549 | ||||||||||||||||||||||||||
| Common stock |
— | 387 | 2,018 | — | 179 | 9 | (f) | 2,197 | ||||||||||||||||||||||||
| Additional paid-in capital |
— | 15,317,289 | 17,713,766 | — | 3,298,409 | 9 | (f) | 21,012,175 | ||||||||||||||||||||||||
| Retained earnings |
— | (56,462 | ) | 10,149,608 | (4,000,000 | ) | 9 | (b) | 7,211 | 9 | (d) | 6,156,819 | ||||||||||||||||||||
| Net parent investment |
(3,943,173 | ) | 883,168 | — | 2,250,000 | 9 | (a) | (2,250,000 | ) | 9 | (f) | — | ||||||||||||||||||||
29
The following represents the impact of the Maximum Special Dividend on the unaudited pro forma condensed combined statement of operations for the nine months ended September 27, 2025.
| Illustrative Scenario | Maximum Special Dividend | |||||||||||||||||||||||||||||||
| (in thousands) | Pre-Merger Adjustments |
Transaction Accounting Adjustments |
Pro Forma Combined |
Incremental Pre-Merger Adjustments |
Note | Incremental Transaction Accounting Adjustments |
Note | Pro Forma Combined |
||||||||||||||||||||||||
| Operating income |
$ | — | $ | (486,407 | ) | $ | 389,942 | $ | — | $ | — | $ | 389,942 | |||||||||||||||||||
| Other expense, net |
— | — | (15,723 | ) | — | — | (15,723 | ) | ||||||||||||||||||||||||
| Interest expense |
(166,358 | ) | — | (221,677 | ) | — | (86,012 | ) | 9 | (d) | (307,689 | ) | ||||||||||||||||||||
| Interest income |
— | — | 14,871 | — | — | 14,871 | ||||||||||||||||||||||||||
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| Income (loss) before income taxes |
(166,358 | ) | (486,407 | ) | 167,413 | — | (86,012 | ) | 81,401 | |||||||||||||||||||||||
| Provision for income taxes |
(39,926 | ) | (116,738 | ) | (29,283 | ) | — | (20,643 | ) | 9 | (g) | (49,926 | ) | |||||||||||||||||||
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| Net income |
(126,432 | ) | (369,669 | ) | 196,696 | — | (65,369 | ) | 131,327 | |||||||||||||||||||||||
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| Net income per basic common share |
$ | 2.00 | $ | 1.13 | ||||||||||||||||||||||||||||
| Weighted-average number of basic common shares Basic |
98,240 | 116,132 | ||||||||||||||||||||||||||||||
| Net income per diluted common share |
$ | 2.00 | $ | 1.13 | ||||||||||||||||||||||||||||
| Weighted-average number of diluted common shares and equivalents |
98,432 | 116,292 | ||||||||||||||||||||||||||||||
30
The following represents the impact of the Maximum Special Dividend on the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2024.
| Illustrative Scenario | Maximum Special Dividend | |||||||||||||||||||||||||||||||
| (in thousands) | Pre-Merger Adjustments |
Transaction Accounting Adjustments |
Pro Forma Combined |
Incremental Pre-Merger Adjustments |
Note | Incremental Transaction Accounting Adjustments |
Note | Pro Forma Combined |
||||||||||||||||||||||||
| Operating income |
$ | — | $ | (935,187 | ) | $ | 261,827 | $ | — | $ | — | $ | 261,827 | |||||||||||||||||||
| Other expense, net |
— | — | (5,215 | ) | — | — | (5,215 | ) | ||||||||||||||||||||||||
| Interest expense |
(221,882 | ) | (7,211 | ) | (318,774 | ) | — | (107,471 | ) | 9 | (d) | (426,245 | ) | |||||||||||||||||||
| Interest income |
— | — | 19,100 | — | — | 19,100 | ||||||||||||||||||||||||||
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| Income (loss) before income taxes |
(221,882 | ) | (942,398 | ) | (43,062 | ) | — | (107,471 | ) | (150,533 | ) | |||||||||||||||||||||
| Benefit for income taxes |
(53,252 | ) | (222,166 | ) | (113,247 | ) | — | (25,793 | ) | 9 | (g) | (139,040 | ) | |||||||||||||||||||
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| Net income (loss) |
$ | (168,630 | ) | $ | (720,232 | ) | $ | 70,185 | $ | — | $ | (81,678 | ) | $ | (11,493 | ) | ||||||||||||||||
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| Net income (loss) per basic common share |
$ | 0.72 | $ | (0.10 | ) | |||||||||||||||||||||||||||
| Weighted-average number of basic common shares Basic |
98,077 | 115,984 | ||||||||||||||||||||||||||||||
| Net income (loss) per diluted common share |
$ | 0.71 | $ | (0.10 | ) | |||||||||||||||||||||||||||
| Weighted-average number of diluted common shares and equivalents(1) |
98,328 | 115,984 | ||||||||||||||||||||||||||||||
| (1) | There was no difference in the weighted average number of common shares used for the calculation of pro forma basic and diluted loss per share in the Maximum Special Dividend scenario as the effect of all potentially dilutive shares outstanding would have been anti-dilutive. |
Incremental Pre-Merger Adjustments
| a. | The SpinCo Cash Distribution decreases from $4.0 billion to $1.8 billion. However, SpinCo will continue to draw the entirety of the $4.0 billion SpinCo Financing and use the remainder of the funds to pay the Waters Special Dividend as further described below. The change to the SpinCo Cash Distribution results in the following incremental adjustments: |
Cash and cash equivalents
While the SpinCo Cash Distribution is decreased to $1.8 billion, SpinCo will still draw the entirety of the $4.0 billion SpinCo Financing. Therefore, Cash and cash equivalents reflects an incremental adjustment of $2.3 billion as of September 27, 2025 to include the cash retained by SpinCo from the SpinCo Financing.
31
Net parent investment
As SpinCo pays only $1.8 billion for the reduced SpinCo Cash Distribution, the adjustment to Net parent investment is reduced by $2.3 billion as compared to the illustrative scenario as of September 27, 2025.
| b. | The Waters Special Dividend is declared prior to the Merger, but is not paid until after the Merger, when the requisite cash is obtained from the funds SpinCo retains from the SpinCo Financing. This results in the following incremental adjustments: |
Other current liabilities
An incremental adjustment is made to increase Other current liabilities to reflect a dividend payable of $4.0 billion for Waters based on the dividend declared but not yet paid.
Retained earnings
As a result of the divided declaration, an incremental adjustment is reflected to decrease Retained earnings by $4.0 billion.
Incremental Transaction Accounting Adjustments
| c. | Waters will draw $1.8 billion from the Waters Bridge Facility to fund, in part, the Waters Special Dividend of $4.0 billion. The remaining portion of the Waters Special Dividend will be paid from the excess cash from SpinCo’s draw on the SpinCo Financing that is acquired in the Merger. The payment of the Waters Special Dividend through these funds results in the following incremental adjustments: |
Cash and cash equivalents
Waters will draw $1.8 billion from the Waters Bridge Facility to fund, in part, the Waters Special Dividend of $4.0 billion. The remaining portion of the Waters Special Dividend will be paid from the excess cash from the SpinCo’s draw on the SpinCo Financing that is acquired in the Merger. The proceeds of $1.8 billion from the Waters Bridge Facility is offset by the payment of the Waters Special Dividend of $4.0 billion, resulting in a net decrease to Cash and cash equivalents of $2.2 billion. Further, the draw of Waters Bridge Facility increases financing fees for incremental contingent fees that are incurred upon the draw, resulting in a further decrease to cash of $7 million for Waters’ payment of the fees. The Waters Bridge Facility, therefore, results in a decrease to Cash and cash equivalents of $2.2 billion as of September 27, 2025.
Other current liabilities
The payment of $4.0 billion for the Waters Special Dividend as described above extinguishes the previously recorded dividend liability, resulting in a $4.0 billion adjustment to reduce Other current liabilities.
| d. | The draw of the Waters Bridge Facility will also result in the following incremental adjustments related to the resulting debt accounting: |
Short-term debt
As the Waters Bridge Facility is drawn in the Maximum Special Dividend scenario, an incremental adjustment is made to Short-term debt to reflect the debt proceeds of $1.8 billion, net of $14 million of debt issuance and financing fees incurred upon the draw of the Waters Bridge Facility. This results in a
32
net incremental adjustment to Short-term debt of $1.8 billion as of September 27, 2025. This obligation is classified as Short-term debt based on its term of one year. Waters expects to replace this debt with permanent financing at or before maturity.
Retained earnings
The illustrative scenario assumed that the Waters Bridge Facility would not be drawn and therefore reflected an adjustment of $7 million to Retained earnings for debt issuance and financing fees recognized as interest expense upon the extinguishment of the debt commitments. However, upon the draw of the Waters Bridge Facility in the Maximum Special Dividend scenario, all such costs are included in the carrying value of the debt. Therefore, an adjustment increases Retained earnings by $7 million to reverse the impact of the expense recognition in the illustrative scenario.
Interest expense
In the illustrative scenario, $7 million of interest expense for the year ended December 31, 2024 was reflected related to the debt issuance costs and financing fees for the undrawn Waters Bridge Facility extinguished as of the Closing Date. As the Waters Bridge Facility is drawn in the Maximum Special Dividend scenario, interest expense is calculated under the effective interest method resulting in interest of $86 million for the nine months ended September 27, 2025 and $114 million for the year ended December 31, 2024. Therefore, an incremental adjustment increases Interest expense by $86 million for the nine months ended September 27, 2025 and $107 million for the year ended December 31, 2024. Although the term of the Waters Bridge Facility is only one year, Waters expects to replace this debt with permanent financing at or before maturity under the Maximum Special Dividend scenario. As a result, the adjustment to record interest expense assumes the Waters Bridge Loan was outstanding for the nine months ended September 27, 2025 and for the entire year ended December 31, 2024. A sensitivity analysis has been performed to consider the effect of a change of 0.125% to the interest rate would have on Interest expense. A 0.125% increase or decrease in interest rates would result in a change in Interest expense of approximately $2 million for the nine months ended September 27, 2025 and $2 million for the year ended December 31, 2024.
| e. | Goodwill |
As a result of the changes to purchase consideration and the changes in net assets acquired based on prior incremental adjustments, each as described above, an incremental adjustment of $1.0 billion to Goodwill is reflected as of September 27, 2025.
| f. | Given the changes in purchase price and the adjustment to Net parent investment, each as described above, incremental adjustments are reflected for Stockholders’ equity as noted below: |
Common stock and Additional paid-in capital
The incremental Waters common stock to be issued in the Maximum Special Dividend scenario results in an incremental adjustment to Common stock of an immaterial amount and to Additional paid-in capital of $3.3 billion, both as of September 27, 2025.
Net parent investment
Noting the reduced adjustment to Net parent investment of $2.3 billion in the pre-Merger adjustments resulting from the decreased SpinCo Cash Distribution, an incremental offsetting adjustment of $2.3 billion is recorded as part of the transaction accounting adjustments to fully eliminate the historical equity of the BDS Business.
33
| g. | Provision for income taxes |
As a result of the incremental Interest expense for the Waters Bridge Facility noted above, an incremental adjustment is recorded in Provision for income taxes of $21 million for the nine months ended September 27, 2025 and $26 million for the year ended December 31, 2024. The amount was calculated using a blended statutory tax rate of 24% for both the nine months ended September 27, 2025 and the year ended December 31, 2024.
The total effective tax rate of the combined company could be significantly different depending on the post-acquisition geographical mix of income and other factors. Because the tax rate used for this pro forma financial information is an estimate, it will likely vary from the actual rate in periods subsequent to the completion of the business combination and those differences may be material.
34
FAQ
What transaction did Waters Corporation (WAT) complete with BD’s Biosciences & Diagnostic Solutions business?
How is ownership of the combined Waters and BD Biosciences & Diagnostic Solutions business structured?
How was the $4.0 billion cash payment to BD financed in the Waters–BD combination?
What are the key financial metrics of BD’s Biosciences & Diagnostic Solutions business acquired by Waters?
What debt covenants apply to the new $4.0 billion SpinCo term loan guaranteed by Waters?
Who is the new director appointed to Waters’ board and what compensation will she receive?
How will BD shareholders receive Waters shares in the completed transaction?
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