XML 27 R13.htm IDEA: XBRL DOCUMENT

FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2024

FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

Fair value measurements are estimated based on valuation techniques and inputs categorized as follows:

•Level 1 — Quoted prices in active markets for identical assets or liabilities;

•Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

•Level 3 — Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using discounted cash flow methodologies, pricing models, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following fair value hierarchy table presents the components and classification of the Company’s financial assets and liabilities measured at fair value on a recurring basis:


	March 31, 2024								December 31, 2023
(in millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	293	$	287	$	6	$	—	$	425	$	417	$	8	$	—
Restricted cash	$	22	$	22	$	—	$	—	$	15	$	15	$	—	$	—
Foreign currency exchange contracts	$	2	$	—	$	2	$	—	$	3	$	—	$	3	$	—

Liabilities:
Acquisition-related contingent consideration	$	281	$	—	$	—	$	281	$	292	$	—	$	—	$	292
Cross-currency swaps	$	68	$	—	$	68	$	—	$	84	$	—	$	84	$	—
Foreign currency exchange contracts	$	1	$	—	$	1	$	—	$	6	$	—	$	6	$	—

Cash equivalents consist of highly liquid investments, primarily money market funds, with maturities of three months or less when purchased, and are reflected in the Condensed Consolidated Balance Sheets at carrying value, which approximates fair value due to their short-term nature. Cash, cash equivalents and restricted cash as presented in the Condensed Consolidated Balance Sheet as of March 31, 2024 includes $325 million of cash, cash equivalents and restricted cash held by legal entities of Bausch + Lomb. Cash held by Bausch + Lomb legal entities and any future cash from the operating, investing and financing activities of Bausch + Lomb is expected to be retained by Bausch + Lomb entities and is generally not available to support the operations, investing and financing activities of other legal entities, including Bausch Health unless paid as a dividend which would be determined by the Board of Directors of Bausch + Lomb and paid pro rata to Bausch + Lomb’s shareholders.

There were no transfers into or out of Level 3 assets or liabilities during the three months ended March 31, 2024.

Cross-currency Swaps

During the third quarter of 2022, Bausch + Lomb entered into cross-currency swaps, with aggregate notional amounts of $1,000 million, to mitigate fluctuation in the value of a portion of its euro-denominated net investment from fluctuation in exchange rates. The euro-denominated net investment being hedged is Bausch + Lomb’s investment in certain Bausch + Lomb euro-denominated subsidiaries. Bausch + Lomb’s cross-currency swaps qualify for and have been designated as a hedge of the foreign currency exposure of a net investment in a foreign operation and are remeasured at each reporting date to reflect changes in their fair values.

The assets and liabilities associated with Bausch + Lomb’s cross-currency swaps as included in the Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 are as follows:


(in millions)	March 31, 2024		December 31, 2023
Other non-current liabilities	$	(70)	$	(90)
Prepaid expenses and other current assets	$	2	$	6
Net fair value	$	(68)	$	(84)

The following table presents the effect of hedging instruments on the Condensed Consolidated Statements of Comprehensive Loss and the Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023:


	Three Months Ended March 31,
(in millions)	2024		2023
Gain (loss) recognized in Other comprehensive loss	$	20	$	(6)
Gain excluded from assessment of hedge effectiveness	$	3	$	3
Location of gain of excluded component	Interest Expense

No portion of the cross-currency swaps were ineffective for the three months ended March 31, 2024. During each of the three months ended March 31, 2024 and 2023, the Company received $6 million in interest settlements, which are reported as investing activities in the Condensed Consolidated Statements of Cash Flows.

Foreign Currency Exchange Contracts

The Company’s foreign currency exchange contracts are remeasured at each reporting date to reflect changes in their fair values determined using forward rates, which are observable market inputs, multiplied by the notional amount. The Company’s foreign currency exchange contracts are economically hedging the foreign exchange exposure on certain of the Company’s intercompany balances. As of March 31, 2024, the Company’s outstanding foreign currency exchange contracts had an aggregate notional amount of $594 million.

The assets and liabilities associated with the Company’s foreign exchange contracts as included in the Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 are as follows:


(in millions)	March 31, 2024		December 31, 2023
Accrued and other current liabilities	$	(1)	$	(6)
Prepaid expenses and other current assets	$	2	$	3
Net fair value	$	1	$	(3)

The following table presents the effect of the Company’s foreign exchange contracts on the Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023:


	Three Months Ended March 31,
(in millions)	2024		2023
Gain related to changes in fair value	$	4	$	1
Gain (loss) related to settlements	$	1	$	(5)

Acquisition-related Contingent Consideration Obligations

The fair value measurement of contingent consideration obligations arising from business combinations is determined via a probability-weighted discounted cash flow analysis, using unobservable (Level 3) inputs. These inputs may include: (i) the estimated amount and timing of projected cash flows, (ii) the probability of the achievement of the factor(s) on which the contingency is based and (iii) the risk-adjusted discount rate used to present value the probability-weighted cash flows. Significant increases or decreases in any of those inputs in isolation could result in a significantly higher or lower fair value measurement. At March 31, 2024, the fair value measurements of acquisition-related contingent consideration were determined using risk-adjusted discount rates ranging from 6% to 28%, and a weighted average risk-adjusted discount rate of 7%. The weighted average risk-adjusted discount rate was calculated by weighting each contract’s relative fair value at March 31, 2024.

The following table presents a reconciliation of contingent consideration obligations measured on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2024 and 2023:


	March 31,
(in millions)	2024				2023
Balance, beginning of period			$	292			$	241
Adjustments to Acquisition-related contingent consideration:
Accretion for the time value of money	$	5			$	4
Fair value adjustments due to changes in estimates of other future payments	(7)				27
Acquisition-related contingent consideration			(2)				31
Additions			—				5
Payments/Settlements			(9)				(8)

Balance, end of period			281				269
Current portion			56				50
Non-current portion			$	225			$	219

Fair Value of Long-term Debt

The fair value of long-term debt as of March 31, 2024 and December 31, 2023 was $15,706 million and $16,270 million, respectively, and was estimated using the quoted market prices for the same or similar debt issuances (Level 2)

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details