Bausch Health Companies Inc. annual report, FY2022

Bausch Health Companies Inc. — 2022 Form 10-K Summary

Reporting period: Fiscal year ended December 31, 2022; filed February 23, 2023. Amounts are U.S. dollars. This is an annual filing, not a standalone fourth-quarter report; the supplied filing text does not provide a complete standalone Q4 financial summary.

Business context

Bausch Health is a multinational specialty pharmaceutical and medical device company operating across GI, dermatology, eye health, international pharmaceuticals and aesthetics. It reports five segments: Salix, International, Solta Medical, Diversified Products and Bausch + Lomb. Bausch Health retained approximately 89% of Bausch + Lomb after its May 2022 IPO; the planned separation remained conditional and incomplete at year-end.

Financial performance

Metric	2022	2021
Revenue	$8.124 billion	$8.434 billion
Operating income	$454 million	$450 million
Net loss attributable to Bausch Health	$225 million	$948 million
Loss per share, basic and diluted	$0.62	$2.64
Net cash from (used in) operating activities	$(728) million	$1.426 billion
Cash and cash equivalents at year-end	$564 million	$582 million

Revenue declined 4% reported, but organic revenue grew 2% (a non-GAAP measure). Reported revenue was reduced by $264 million from foreign exchange, $178 million from divestitures and discontinuations, and $88 million from lower volumes; higher realized pricing contributed $220 million.
Operating margin was approximately 5.6%, versus 5.3% in 2021. Cost of goods sold was 29.0% of product sales, compared with 28.3%. Total segment profit, a management measure excluding specified costs, fell to $3.434 billion from $3.743 billion; segment profit margin declined to 42% from 44%.
Segment revenue was mixed: Salix $2.090 billion (+1%); International $988 million (-15%); Solta Medical $300 million (-3%); Diversified Products $978 million (-13%); and Bausch + Lomb $3.768 billion (approximately flat). Xifaxan accounted for about 81% of Salix revenue and generated $1.692 billion of company revenue.
Operating cash flow fell by $2.154 billion year over year, largely reflecting $1.572 billion of payments for accrued legal settlements, weaker business performance and working-capital changes. Investing cash outflow was $303 million; capital expenditures were $218 million.
Interest expense was $1.464 billion, up from $1.426 billion. The stated weighted-average debt interest rate rose to 7.74% from 5.88%; a 100-basis-point rate increase was estimated to add about $54 million to annual pretax expense on variable-rate debt.

Balance sheet, debt and liquidity

Contractual debt principal was $19.110 billion at year-end, down $3.760 billion from 2021; reported long-term debt, net of premiums, discounts and issuance costs, was $20.766 billion. The difference reflects debt accounting, including a premium recorded on exchanged notes.
During 2022, the company exchanged $5.594 billion of unsecured notes for $3.125 billion of secured notes, reducing principal by $2.469 billion and extending certain maturities. It also repurchased $927 million of notes for approximately $550 million. The transactions contributed to an $875 million gain on extinguishment of debt, including a $570 million exchange-offer gain and a $369 million gain on open-market repurchases, partly offset by refinancing losses.
Cash, cash equivalents, restricted cash and other settlement deposits totaled $591 million. This included $380 million held by Bausch + Lomb entities, generally unavailable to support Bausch Health without a Bausch + Lomb dividend. Year-end current assets were $4.247 billion and current liabilities were $3.941 billion.
At December 31, the company had drawn $470 million of its $975 million revolving facility. As of February 23, 2023, reported remaining availability was approximately $530 million for Bausch Health’s facility and $476 million for Bausch + Lomb’s separate facility; Bausch + Lomb’s facility generally cannot fund Bausch Health.
Management said it expected sufficient liquidity for the next 12 months, expected covenant compliance and debt service during that period, and reported covenant compliance at year-end. These expectations depend on forecasts and continued access to financing and cash flows.

Material changes, outlook and key risks

Impairments and other unusual items: The company recorded $824 million of goodwill impairments in 2022, versus $469 million in 2021, primarily for Neurology and Other ($622 million) and Ortho Dermatologics ($202 million). These non-cash charges weighed on operating results. The debt-exchange and repurchase gains materially reduced the reported pretax loss.
Business trends: Salix revenue increased slightly, with pricing gains offset by lower volumes and wholesaler inventory balancing. Diversified Products faced lower demand and generic competition. Bausch + Lomb’s reported revenue was nearly flat as volume and pricing gains were offset largely by foreign exchange. China revenue fell to $413 million from $490 million, partly reflecting COVID-related restrictions.
Xifaxan litigation: A federal court ruled in August 2022 that certain patents protecting Xifaxan for IBS-D were invalid, while finding other patents covering the hepatic encephalopathy indication valid and infringed. Bausch Health appealed and said it would defend its intellectual property. Xifaxan’s importance to Salix and limited goodwill headroom make the outcome and generic-entry timing significant risks.
Separation: Completing the Bausch + Lomb separation remained subject to targeted leverage ratios and shareholder and other approvals. The filing gives no assured completion date. The Solta IPO was suspended in June 2022.
2023 cash needs: Management estimated $1.649 billion for mandatory debt amortization and interest, approximately $275 million for capital expenditures, and approximately $112 million of contingent consideration and development, approval or sales-based milestone payments. It also identified a potential $45 million NOV03 payment if approved and launched as anticipated. Future separation costs could be material, but their timing and amount were not estimable.
Legal, tax and commercial exposure: Year-end accrued loss contingencies were $326 million, but the company could not reliably estimate the timing or amount of additional losses for other matters. A disputed U.S. tax matter carried a stated worst-case exposure of up to $2.1 billion before penalties and interest; a tentative IRS settlement reached in January 2023 remained subject to approval, with no provision recorded at filing. Other risks include pricing and reimbursement pressure, patent challenges, generic competition, concentrated wholesalers, single-source supply, foreign exchange, interest rates and regulation.
The company reported effective disclosure controls and internal control over financial reporting; its auditor issued an unqualified opinion on the financial statements and internal controls.

Most important facts for investors to verify

Developments in the Norwich appeal, any modified generic Xifaxan filing or launch, and the resulting effect on Xifaxan revenue, cash flows and impairment assumptions.
Debt maturities, actual cash generation, interest costs, revolver availability and covenant headroom—especially given the large debt burden and Bausch + Lomb cash restrictions.
Progress, conditions, tax treatment and costs of the Bausch + Lomb separation, including any changes to the proposed structure or timeline.
Status and financial effect of the IRS dispute and tentative settlement, alongside pending litigation and the adequacy of the $326 million accrued contingency balance.
Revenue-deduction estimates: management estimated that a 1% change in returns experience could affect pretax earnings by about $97 million, and a 1% change in Medicaid rebate assumptions by about $83 million.
Whether lower-performing segments stabilize, generic competition and pricing pressure intensify, and reported revenue trends improve as foreign exchange and China-related pressures change.