10-Q 1 avtr-20220331.htm 10-Q avtr-20220331
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
━━━━━━━━━
FORM 10-Q
━━━━━━━━━
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 001-38912

avtr-20220331_g1.jpg
Avantor, Inc.
(Exact name of registrant as specified in its charter)


Delaware82-2758923
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
Radnor Corporate Center, Building One, Suite 200
100 Matsonford Road
Radnor, Pennsylvania 19087
(Address of principal executive offices) (zip code)
(610) 386-1700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolExchange on which registered
Common stock, $0.01 par valueAVTRNew York Stock Exchange
6.250% Series A Mandatory Convertible Preferred Stock, $0.01 par valueAVTR PRANew York Stock Exchange




Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ☒ Large Accelerated Filer ☐ Accelerated Filer ☐ Non-accelerated Filer  Smaller reporting company  Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☒ No
On April 22, 2022, 610,338,985 shares of common stock, $0.01 par value per share, were outstanding.



Avantor, Inc. and subsidiaries
Form 10-Q for the quarterly period ended March 31, 2022

i

Glossary
Description
we, us, ourAvantor, Inc. and its subsidiaries
2019 Planthe Avantor, Inc. 2019 Equity Incentive Plan, a stock-based compensation plan
Adjusted EBITDAour earnings or loss before interest, taxes, depreciation, amortization and certain other adjustments
Annual Reportour annual report on Form 10-K for the year ended December 31, 2021
AMEAAsia, Middle-East and Africa
AOCIaccumulated other comprehensive income or loss
cGMPCurrent Good Manufacturing Practice
COVID-19Coronavirus disease of 2019
double-digitgreater than 10%
EURIBORthe basic rate of interest used in lending between banks on the European Union interbank market
GAAPUnited States generally accepted accounting principles
Goldman Sachsan investment banking firm and its affiliates
high single-digit7 - 9%
LIBORthe basic rate of interest used in lending between banks on the London interbank market
low single-digit1 - 3%
M&AMergers and Acquisitions
MCPS6.250% Series A Mandatory Convertible Preferred Stock
mid single-digit4 - 6%
OEMoriginal engineering manufacturers
RSUrestricted stock unit
SECthe United States Securities and Exchange Commission
SG&A expensesselling, general and administrative expenses
Specialty procurementproduct sales related to customer procurement services
VWRVWR Corporation and its subsidiaries, a company we acquired in November 2017

ii

Cautionary factors regarding forward-looking statements
This report contains forward-looking statements. All statements other than statements of historical fact included in this report are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. These statements may be preceded by, followed by or include the words “aim,” “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “outlook,” “plan,” “potential,” “project,” “projection,” “seek,” “can,” “could,” “may,” “should,” “would,” “will,” the negatives thereof and other words and terms of similar meaning.
Forward-looking statements are inherently subject to risks, uncertainties and assumptions; they are not guarantees of performance. You should not place undue reliance on these statements. We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that our assumptions made in connection with the forward-looking statements are reasonable, we cannot assure you that the assumptions and expectations will prove to be correct.
You should understand that the following important factors, in addition to those discussed under Part I, Item 1A “Risk Factors” in our Annual Report, as such risk factors may be updated from time to time in our periodic filings with the SEC and in this report, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:
disruptions to our operations;
competition from other industry providers;
our ability to implement our growth strategy;
our ability to anticipate and respond to changing industry trends;
adverse trends in consumer, business, and government spending;
our dependence on sole or limited sources for some essential materials and components;
our ability to successfully value and integrate acquired businesses;
our products’ satisfaction of applicable quality criteria, specifications and performance standards;
our ability to maintain our relationships with key customers;
our ability to maintain consistent purchase volumes under purchase orders;
our ability to maintain and develop relationships with drug manufacturers and contract manufacturing organizations;
the impact of new laws, regulations, or other industry standards;
changes in the interest rate environment that increase interest on our borrowings;
iii

adverse impacts from currency exchange rates or currency controls imposed by any government in major areas where we operate or otherwise;
our ability to implement and improve processing systems and prevent a compromise of our information systems;
our ability to protect our intellectual property and avoid third-party infringement claims;
exposure to product liability and other claims in the ordinary course of business;
our ability to develop new products responsive to the markets we serve;
the availability of raw materials;
our ability to source certain of our products from certain suppliers;
our ability to contain costs in an inflationary environment;
our ability to avoid negative outcomes related to the use of chemicals;
our ability to maintain highly skilled employees;
our ability to maintain a competitive workforce;
adverse impact of impairment charges on our goodwill and other intangible assets;
fluctuations and uncertainties related to doing business outside the United States;
our ability to obtain and maintain required regulatory clearances or approvals may constrain the commercialization of submitted products;
our ability to comply with environmental, health and safety laws and regulations, or the impact of any liability or obligation imposed under such laws or regulations;
our indebtedness could adversely affect our financial condition and prevent us from fulfilling our debt or contractual obligations;
our ability to generate sufficient cash flows or access sufficient additional capital to meet our debt obligations or to fund our other liquidity needs; and
our ability to maintain an adequate system of internal control over financial reporting.
All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. In addition, all forward-looking statements speak only as of the date of this report. We undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise other than as required under the federal securities laws.
iv

PART I — FINANCIAL INFORMATION
Item 1.    Financial statements
Avantor, Inc. and subsidiaries

1

Avantor, Inc. and subsidiaries
Unaudited condensed consolidated balance sheets
(in millions)
March 31, 2022
December 31, 2021
Assets
Current assets:
Cash and cash equivalents$283.6 $301.7 
Accounts receivable, net of allowances of $26.8 and $26.4
1,345.4 1,222.1 
Inventory896.0 872.0 
Other current assets81.3 81.4 
Total current assets2,606.3 2,477.2 
Property, plant and equipment, net of accumulated depreciation of $463.0 and $445.2
699.9 705.5 
Other intangible assets, net (see note 7)
5,013.0 5,140.3 
Goodwill5,265.2 5,341.1 
Other assets252.0 233.1 
Total assets$13,836.4 $13,897.2 
Liabilities and stockholders’ equity
Current liabilities:
Current portion of debt$44.7 $45.2 
Accounts payable818.2 755.1 
Employee-related liabilities134.9 199.7 
Accrued interest39.8 49.8 
Other current liabilities409.5 401.0 
Total current liabilities1,447.1 1,450.8 
Debt, net of current portion6,815.8 6,978.0 
Deferred income tax liabilities854.4 913.0 
Other liabilities361.1 358.4 
Total liabilities9,478.4 9,700.2 
Commitments and contingencies (see note 8)
Stockholders’ equity:
MCPS including paid-in capital, 20.7 shares outstanding
1,003.7 1,003.7 
Common stock including paid-in capital, 610.3 and 609.7 shares outstanding
2,749.3 2,752.6 
Accumulated earnings
674.3 483.9 
Accumulated other comprehensive loss
(69.3)(43.2)
Total stockholders’ equity4,358.0 4,197.0 
Total liabilities and stockholders’ equity$13,836.4 $13,897.2 

See accompanying notes to the unaudited condensed consolidated financial statements.
2

Avantor, Inc. and subsidiaries
Unaudited condensed consolidated statements of operations
(in millions, except per share data)
Three months ended March 31,
2022
2021
Net sales$1,950.4 $1,785.6 
Cost of sales1,260.5 1,172.8 
Gross profit689.9 612.8 
Selling, general and administrative expenses382.9 346.5 
Operating income
307.0 266.3 
Interest expense(64.8)(51.5)
Loss on extinguishment of debt(1.8)(5.2)
Other income, net
1.4 1.8 
Income before income taxes
241.8 211.4 
Income tax expense
(51.4)(47.4)
Net income
190.4 164.0 
Accumulation of yield on preferred stock(16.1)(16.1)
Net income available to common stockholders
$174.3 $147.9 
Earnings per share:
Basic$0.29 $0.25 
Diluted$0.28 $0.25 
Weighted average shares outstanding:
Basic610.1 581.1 
Diluted681.3 589.1 

See accompanying notes to the unaudited condensed consolidated financial statements.
3

Avantor, Inc. and subsidiaries
Unaudited condensed consolidated statements of comprehensive income or loss
(in millions)
Three months ended March 31,
2022
2021
Net income
$190.4 $164.0 
Other comprehensive loss:
Foreign currency translation — unrealized loss
(27.0)(33.5)
Derivative instruments:
Unrealized loss
(0.3)(0.9)
Reclassification of (gain) loss into earnings
(0.2)0.7 
Activity related to defined benefit plans4.5 0.6 
Other comprehensive loss before income taxes
(23.0)(33.1)
Income tax effect(3.1)(4.7)
Other comprehensive loss
(26.1)(37.8)
Comprehensive income
$164.3 $126.2 
See accompanying notes to the unaudited condensed consolidated financial statements.
4

Avantor, Inc. and subsidiaries
Unaudited condensed consolidated statements of stockholders’ equity
(in millions)
Stockholders’ equity
MCPS including paid-in capitalCommon stock including paid-in capitalAccumulated earnings (deficit)AOCITotal
SharesAmountSharesAmount
Balance at December 31, 2021
20.7 $1,003.7 609.7 $2,752.6 $483.9 $(43.2)$4,197.0 
Comprehensive income (loss)
— — — — 190.4 (26.1)164.3 
Stock-based compensation expense— — — 12.0 — — 12.0 
Accumulation of yield on preferred stock— — — (16.1)— — (16.1)
Stock option exercises and other common stock transactions— — 0.6 0.8 — — 0.8 
Balance at March 31, 2022
20.7 $1,003.7 610.3 $2,749.3 $674.3 $(69.3)$4,358.0 
Balance at December 31, 2020
20.7 $1,003.7 580.1 $1,737.6 $(88.7)$21.7 $2,674.3 
Comprehensive income (loss)
— — — — 164.0 (37.8)126.2 
Stock-based compensation expense— — — 10.8 — — 10.8 
Accumulation of yield on preferred stock— — — (16.1)— — (16.1)
Stock option exercises and other common stock transactions— — 1.7 10.9 — — 10.9 
Balance at March 31, 2021
20.7 $1,003.7 581.8 $1,743.2 $75.3 $(16.1)$2,806.1 

See accompanying notes to the unaudited condensed consolidated financial statements.
5

Avantor, Inc. and subsidiaries
Unaudited condensed consolidated statements of cash flows
(in millions)
Three months ended March 31,
2022
2021
Cash flows from operating activities:
Net income
$190.4 $164.0 
Reconciling adjustments:
Depreciation and amortization114.5 89.0 
Stock-based compensation expense
10.7 11.4 
Provision for accounts receivable and inventory15.9 7.9 
Deferred income tax (benefit)
(22.3)(5.3)
Amortization of deferred financing costs4.4 3.9 
Loss on extinguishment of debt1.8 5.2 
Foreign currency remeasurement (gain) loss
(1.8)2.7 
Changes in assets and liabilities:
Accounts receivable(137.3)(106.8)
Inventory(46.4)(54.3)
Accounts payable73.2 30.3 
Accrued interest(10.0)(17.7)
Other assets and liabilities(46.2)(5.9)
Other, net5.3 2.5 
Net cash provided by operating activities
152.2 126.9 
Cash flows from investing activities:
Capital expenditures(24.5)(15.1)
Cash paid for acquisitions, net of cash acquired(15.3) 
Other0.3 0.5 
Net cash used in investing activities
(39.5)(14.6)
Cash flows from financing activities:
Debt repayments, net(111.9)(208.6)
Payments of dividends on preferred stock(16.1)(16.1)
Proceeds received from exercise of stock options5.7 19.9 
Shares repurchased to satisfy employee tax obligations for vested stock-based awards(4.9)(16.2)
Net cash used in financing activities
(127.2)(221.0)
Effect of currency rate changes on cash(4.2)(5.4)
Net change in cash, cash equivalents and restricted cash(18.7)(114.1)
Cash, cash equivalents and restricted cash, beginning of period327.1 289.2 
Cash, cash equivalents and restricted cash, end of period$308.4 $175.1 

See accompanying notes to the unaudited condensed consolidated financial statements.
6

Avantor, Inc. and subsidiaries
Notes to unaudited condensed consolidated financial statements
1.    Nature of operations and presentation of financial statements
We are a global manufacturer and distributor that provides products and services to customers in the biopharmaceutical, healthcare, education & government and advanced technologies & applied materials industries.
Basis of presentation
The accompanying condensed consolidated financial statements have been prepared pursuant to SEC regulations whereby certain information normally included in GAAP financial statements has been condensed or omitted. The financial information presented herein reflects all adjustments (consisting only of normal, recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. The results for interim periods are not necessarily indicative of the results to be expected for the full year.
We believe that the disclosures included herein are adequate to make the information presented not misleading in any material respect when read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report. Those audited consolidated financial statements include a summary of our significant accounting policies.
Principles of consolidation
All intercompany balances and transactions have been eliminated from the financial statements.
Use of estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported throughout the financial statements. Actual results could differ from those estimates.
2.    Business combinations
On November 1, 2021, we completed the acquisition of Masterflex for preliminary cash consideration of $2,845.3 million. During the three months ended March 31, 2022, we made an additional $15.3 million payment to taxing authorities on behalf of the selling entity for tax liabilities related to periods prior to the acquisition.
7

The preliminary fair value of the net assets acquired on November 1, 2021 included the following:
(in millions)
November 1, 2021
Inventory$31.9 
Property, plant & equipment10.4 
Other intangible assets1,231.5 
Goodwill1,707.4 
Other assets and liabilities
(16.6)
Deferred income taxes, net(104.0)
Total net assets$2,860.6 
During the three months ended March 31, 2022, Masterflex and Ritter have generated revenues of $68.5 million and $46.7 million, respectively.
Pro forma disclosures
The following unaudited pro forma combined financial information is provided for the three months ended March 31, 2022 and 2021. The pro forma information is not necessarily indicative of the results of operations that actually would have occurred under the ownership and management of the Company.
(in millions)
Three months ended March 31,
2022
2021
Revenue$1,950.4 $1,907.4 
Net income
190.4 151.0 
The unaudited pro forma combined financial information presented above includes the accounting effects of the Ritter and Masterflex acquisitions, including, to the extent applicable, amortization charges from acquired intangible assets, depreciation of property, plant and equipment that have been revalued, interest expense on debt acquired to finance the transactions, and the related tax effects.
8

3.    Earnings per share
The following table presents the reconciliation of basic and diluted earnings per share for the three months ended March 31, 2022:
(in millions, except per share data)
Three months ended March 31, 2022
Earnings (numerator)Weighted average shares outstanding (denominator)Earnings per share
Basic$174.3 610.1 $0.29 
Dilutive effect of stock-based awards 8.3 
Dilutive impact of MCPS16.1 62.9 
Diluted$190.4 681.3 $0.28 
For the three months ended March 31, 2022, diluted earnings per share excluded accumulated yield on preferred stock of $16.1 million and included 62.9 million of common stock equivalents under the MCPS as of the beginning of the period because they were dilutive to the calculation.
The following table presents the reconciliation of basic and diluted earnings per share for the three months ended March 31, 2021:
(in millions, except per share data)
Three months ended March 31, 2021
Earnings (numerator)Weighted average shares outstanding (denominator)Earnings per share
Basic$147.9 581.1 $0.25 
Dilutive effect of stock-based awards 8.0 
Diluted$147.9 589.1 $0.25 
For the three months ended March 31, 2021, diluted earnings per share included accumulated yield on preferred stock of $16.1 million and excluded 62.9 million of common stock equivalents under the MCPS because they were anti-dilutive to the calculation.
4.    Segment financial information
We report three geographic segments based on customer location: Americas, Europe and AMEA. Each segment manufactures and distributes solutions for the biopharmaceutical, healthcare, education & government and advanced technologies & applied materials industries. Corporate costs are managed on a standalone basis and not allocated to segments.
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The following table presents information by reportable segment:
(in millions)
Three months ended March 31,
2022
2021
Net sales:
Americas$1,143.4 $1,035.2 
Europe680.4 650.4 
AMEA126.6 100.0 
Total$1,950.4 $1,785.6 
Adjusted EBITDA:
Americas$294.2 $252.0 
Europe143.4 131.1 
AMEA29.3 22.6 
Corporate(43.8)(42.6)
Total$423.1 $363.1 
The amounts above exclude inter-segment activity because it is not material. All of the net sales for each segment are from external customers.
The following table presents the reconciliation of Adjusted EBITDA from net income or loss, the nearest measurement under GAAP:
(in millions)
Three months ended March 31,
2022
2021
Net income
$190.4 $164.0 
Interest expense64.8 51.5 
Income tax expense
51.4 47.4 
Depreciation and amortization114.5 89.0 
Loss on extinguishment of debt1.8 5.2 
Net foreign currency loss from financing activities
0.1 0.8 
Other stock-based compensation (benefit) expense
(1.3)0.6 
Acquisition-related expenses 3.0 
Integration-related expenses1
3.9  
Purchase accounting adjustments2
(4.4) 
Restructuring and severance charges3
1.9 1.6 
Adjusted EBITDA$423.1 $363.1 
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━━━━━━━━━
1.Represents non-recurring direct costs incurred with third parties to integrate acquired companies. These expenses represent incremental costs and are unrelated to normal operations of our business. Integration expenses are incurred over a pre-defined integration period specific to each acquisition.
2.Represents the non-cash reduction of contingent consideration related to the Ritter acquisition.
3.Reflects the incremental expenses incurred in the period related to initiatives to increase profitability and productivity. Typical costs included in this caption are employee severance, site-related exit costs, and contract termination costs.
The following table presents net sales by product line:
(in millions)
Three months ended March 31,
2022
2021
Proprietary materials & consumables$748.0 $565.2 
Third party materials & consumables724.7 758.4 
Services & specialty procurement235.0 219.8 
Equipment & instrumentation242.7 242.2 
Total$1,950.4 $1,785.6 
5.    Supplemental disclosures of cash flow information
The following tables present supplemental disclosures of cash flow information:
(in millions)
March 31, 2022
December 31, 2021
Cash and cash equivalents$283.6 $301.7 
Restricted cash classified as other assets24.8 25.4 
Total$308.4 $327.1 
At March 31, 2022 and December 31, 2021, amounts included in restricted cash primarily represent funds held in escrow to satisfy a long term retention incentive related to the acquisition of Ritter GmbH.
(in millions)
Three months ended March 31,
2022
2021
Cash flows from operating activities:
Cash paid for income taxes, net$47.6 $12.6 
Cash paid for interest, excluding financing leases68.2 62.7 
Cash paid for interest on finance leases1.3 1.3 
Cash paid under operating leases11.5 10.7 
Cash flows from financing activities:
Cash paid under finance leases1.2 1.1 

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6.    Inventory
The following table presents the components of inventory:
(in millions)
March 31, 2022
December 31, 2021
Merchandise inventory$544.2 $562.9 
Finished goods126.4 102.6 
Raw materials168.8 156.1 
Work in process56.6 50.4 
Total$896.0 $872.0 

7.    Other intangible assets
The following table presents the components of other intangible assets:
(in millions)
March 31, 2022
December 31, 2021
Gross valueAccumulated amortizationCarrying valueGross valueAccumulated amortizationCarrying value
Customer relationships$5,431.8 $1,184.2 $4,247.6 $5,474.2 $1,121.6 $4,352.6 
Trade names502.2 197.8 304.4 505.1 194.1 311.0 
Other538.8 170.1 368.7 541.5 157.1 384.4 
Total finite-lived$6,472.8 $1,552.1 4,920.7 $6,520.8 $1,472.8 5,048.0 
Indefinite-lived92.3 92.3 
Total$5,013.0 $5,140.3 

8.    Commitments and contingencies
Our business involves commitments and contingencies related to compliance with environmental laws and regulations, the manufacture and sale of products and litigation. The ultimate resolution of contingencies is subject to significant uncertainty, and it is reasonably possible that contingencies could be decided unfavorably for us.
Environmental laws and regulations
Our environmental liabilities are subject to changing governmental policy and regulations, discovery of unknown conditions, judicial proceedings, method and extent of remediation, existence of other potentially responsible parties and future changes in technology. We believe that known and unknown environmental matters, if not resolved favorably, could have a material effect on our financial position, liquidity and profitability.
Noteworthy matters
The New Jersey Department of Environmental Protection has ordered us to remediate groundwater conditions near our plant in Phillipsburg, New Jersey. At March 31, 2022, our accrued obligation under this order is $3.2 million, which is calculated based on expected cash payments discounted at rates
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ranging from 1.6% in 2022 to 2.6% in 2045. The undiscounted amount of that obligation is $4.1 million. This matter is covered through an indemnification agreement.
In 2016, we assessed the environmental condition of our chemical manufacturing site in Gliwice, Poland. Our assessment revealed specific types of soil and groundwater contamination throughout the site. We are also monitoring the condition of a closed landfill on that site. These matters are not covered by our indemnification arrangement because they relate to an operation we subsequently acquired. At March 31, 2022, our balance sheet includes a liability of $2.7 million for remediation and monitoring costs. That liability is estimated primarily on expected remediation payments discounted through 2023 and is not materially different than its undiscounted amount.
Manufacture and sale of products
Our business involves risk of product liability, patent infringement and other claims in the ordinary course of business arising from the products that we produce ourselves or obtain from our suppliers, as well as from the services we provide. Our exposure to such claims may increase to the extent that we expand our manufacturing operations or service offerings.
We maintain insurance policies to protect us against these risks, including product liability insurance. In many cases the suppliers of products we distribute have indemnified us against such claims. Our insurance coverage or indemnification agreements with suppliers may not be adequate in all pending or any future cases brought against us. Furthermore, our ability to recover under any insurance or indemnification arrangements is subject to the financial viability of our insurers, our suppliers and our suppliers’ insurers, as well as legal enforcement under the local laws governing the arrangements.
We have entered into indemnification agreements with customers of our self-manufactured products to protect them from liabilities and losses arising from our negligence, willful misconduct or sale of defective products. To date, we have not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions.
Litigation
At March 31, 2022, there was no outstanding litigation that we believe would result in material losses if decided against us, and we do not believe that there are any unasserted matters that are reasonably possible to result in a material loss.
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9.    Debt
The following table presents information about our debt:
(dollars in millions)
March 31, 2022
December 31, 2021
Interest termsRateAmount
Receivables facility
LIBOR plus 0.90%
1.35%
$ $ 
Senior secured credit facilities:
Euro term loans
EURIBOR plus 2.50%
2.50%
93.5 133.9 
Euro term loans
EURIBOR plus 2.25%
2.25%
358.1 367.9 
Euro term loans
EURIBOR plus 2.75%
2.75%
666.6 684.9 
U.S. dollar term loans
LIBOR plus 2.00%
2.50%
164.6 229.3 
U.S. dollar term loans
LIBOR plus 2.25%
2.75%
2,058.7 2,063.9 
2.625% secured notesfixed rate
2.625%
721.7 739.6 
3.875% unsecured notesfixed rate
3.875%
800.0 800.0 
3.875% unsecured notesfixed rate
3.875%
444.1 455.1 
4.625 % unsecured notesfixed rate
4.625%
1,550.0 1,550.0 
Finance lease liabilities70.2 71.2 
Other16.4 17.4 
Total debt, gross6,943.9 7,113.2 
Less: unamortized deferred financing costs(83.4)(90.0)
Total debt$6,860.5 $7,023.2 
Classification on balance sheets:
Current portion of debt$44.7 $45.2 
Debt, net of current portion6,815.8 6,978.0 
Credit facilities
The following table presents availability under our credit facilities:
(in millions)
March 31, 2022
Receivables facilityRevolving credit facilityTotal
Capacity$300.0 $515.0 $815.0 
Undrawn letters of credit outstanding(9.5) (9.5)
Outstanding borrowings   
Unused availability$290.5 $515.0 $805.5 
Capacity under the receivables facility depends upon maintaining a sufficient borrowing base of eligible accounts receivable. At March 31, 2022, $582.1 million of accounts receivable were available as collateral under the facility. The receivables facility is with a commercial bank, functions like a line of credit and matures on March 27, 2023. The revolving credit facility under the senior secured credit facilities matures on July 14, 2025.
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Senior secured credit facilities
On March 31, 2022, we made prepayments of $63.7 million on our U.S. dollar term loans and $36.3 million on our Euro term loans. In connection with these prepayments, we expensed $1.8 million of previously unamortized deferred financing costs as a loss on extinguishment of debt.
Debt covenants
Our debt agreements include representations and covenants that we consider usual and customary, and our receivables facility and senior secured credit facilities include a financial covenant that becomes applicable for periods in which we have drawn more than 35% of our revolving credit facility under the senior secured credit facilities. In this circumstance, we are not permitted to have combined borrowings on our senior secured credit facilities and secured notes in excess of a pro forma net leverage ratio, as defined in our credit agreements. As we had not drawn more than 35% of our revolving credit facility in this period, this covenant was not applicable at March 31, 2022.
10.    Accumulated other comprehensive income or loss
The following table presents changes in the components of AOCI:
(in millions)
Foreign currency translationDerivative instrumentsDefined benefit plansTotal
Balance at December 31, 2021
$(19.2)$0.4 $(24.4)$(43.2)
Unrealized (loss) gain
(27.0)(0.3)4.6 (22.7)
Reclassification of gain into earnings
 (0.2)(0.1)(0.3)
Change due to income taxes(2.6)0.1 (0.6)(3.1)
Balance at March 31, 2022
$(48.8)$ $(20.5)$(69.3)
Balance at December 31, 2020
$51.8 $(1.0)$(29.1)$21.7 
Unrealized (loss) gain
(33.5)(0.9)0.6 (33.8)
Reclassification of loss into earnings
 0.7  0.7 
Change due to income taxes(4.7)  (4.7)
Balance at March 31, 2021
$13.6 $(1.2)$(28.5)$(16.1)
The reclassifications and income tax effects shown above were immaterial to the financial statements. The reclassifications were made to either cost of sales or SG&A expenses depending upon the nature of the underlying transaction. The income tax effects in the three months ended March 31, 2022 on foreign currency translation were due to our net investment hedge discussed in note 14.
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11.    Stock-based compensation
The following table presents the components of stock-based compensation expense:
(in millions)
Classification
Three months ended March 31,
2022
2021
Stock optionsEquity$4.0 $4.6 
RSUsEquity7.6 5.7 
OtherBoth(0.9)1.1 
Total$10.7 $11.4 
Balance sheet classification:
Equity$12.0 $10.8 
Liability(1.3)0.6 
At March 31, 2022, unvested awards under our plans have remaining stock-based compensation expense of $107.9 million to be recognized over a weighted average period of 1.9 years.
At March 31, 2022, 9.1 million shares were available for future issuance under the 2019 Plan.
Stock options
The following table presents information about outstanding stock options:
(options and intrinsic value in millions)
Number of optionsWeighted average exercise price per optionAggregate intrinsic valueWeighted average remaining term
Balance at December 31, 2021
16.3 $19.83 
Granted1.0 33.09 
Exercised(0.2)18.25 
Forfeited(0.1)19.23 
Balance at March 31, 2022
17.0 20.67 $224.0 6.9 years
Expected to vest6.0 22.10 70.4 8.2 years
Vested11.0 19.89 153.5 6.1 years
During the three months ended March 31, 2022, we granted stock options that have a contractual life of ten years and will vest annually over four years, subject to the recipient continuously providing service to us through such date.
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RSUs
The following table presents information about unvested RSUs:
(awards in millions)
Number of awardsWeighted average grant date fair value per award
Balance at December 31, 2021
4.4 $19.52 
Granted0.9 34.28 
Vested(0.4)22.55 
Forfeited(0.1)22.49 
Balance at March 31, 2022
4.8 23.35 
During the three months ended March 31, 2022, we granted RSUs that will vest annually over three to four years, subject to the recipient continuously providing service to us through each such date. Certain of those awards contain performance and market conditions that impact the number of shares that will ultimately vest. The expense recorded on such awards for the three months ended March 31, 2022 and March 31, 2021 was $2.3 million and $1.3 million, respectively.
12.    Other income or expense, net
The following table presents the components of other income or expense, net:
(in millions)
Three months ended March 31,
2022
2021
Net foreign currency (loss) from financing activities
$(0.1)$(0.8)
Income related to defined benefit plans
1.4 2.4 
Other0.1 0.2 
Other income, net
$1.4 $1.8 
13.    Income taxes
The following table presents the relationship between income tax expense and income before income taxes:
(in millions)
Three months ended March 31,
2022
2021
Income before income taxes
$241.8 $211.4 
Income tax expense
(51.4)(47.4)
Effective income tax rate21.3 %22.4 %
Income tax expense in the quarter is based upon the estimated income for the full year. The composition of the income in different countries and adjustments, if any, in the applicable quarterly periods influences our expense.
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The relationship between pre-tax income and income tax expense is greatly affected by the impact of losses for which we cannot claim a tax benefit, non-deductible expenses, and other items that increase tax expense without a relationship to income, such as withholding taxes and changes with respect to uncertain tax positions. The change in the effective tax rate for the three months ended March 31, 2022 when compared to the three months ended March 31, 2021, is largely consistent as a percentage of income before income taxes and is primarily related to the change in geographical distribution of our income before income taxes.
14.    Derivative and hedging activities
We engage in hedging activities to reduce our exposure to foreign currency exchange rates. Our hedging activities are designed to manage specific risks according to our strategies, as summarized below, which may change from time to time. In addition to the net investment hedge discussed below in further detail, our hedging activities consist of the following:
Economic hedges — We are exposed to changes in foreign currency exchange rates on certain of our euro-denominated term loans and notes that move inversely from our portfolio of euro-denominated intercompany loans. The currency effects for these non-derivative instruments are recorded through earnings in the period of change and substantially offset one another;
Other hedging activities — Certain of our subsidiaries hedge short-term foreign currency denominated business transactions, external debt and intercompany financing transactions using foreign currency forward contracts. These activities were not material to our consolidated financial statements.
Net investment hedge
We designated all of our outstanding €400.0 million 3.875% senior unsecured notes, issued on July 17, 2020, and maturing on July 15, 2028, as a hedge of our net investment in certain of our European operations. For instruments that are designated and qualify as net investment hedges, the foreign currency transactional gains or losses are reported as a component of AOCI. The gains or losses would be reclassified into earnings upon a liquidation event or deconsolidation of a hedged foreign subsidiary.
Net investment hedge effectiveness is assessed based upon the change in the spot rate of the foreign currency denominated debt. The critical terms of the foreign currency notes match the portion of the net investments designated as being hedged. At March 31, 2022, the net investment hedge was equal to the designated portion of the European operations and was considered to be perfectly effective.
Interest rate and cross-currency swap transactions

In April of 2022, the Company executed a three year, $750 million interest rate swap and related cross-currency swap to convert LIBOR-based floating rate interest on our U.S. dollar-denominated term loans
18

to Euro fixed rate interest. The transactions are intended to mitigate our exposure to fluctuations in interest rates and will terminate on April 30, 2025.
Non-derivative financial instruments which are designated as hedging instruments:
The accumulated (gain) loss related to the foreign currency denominated debt designated as net investment hedges classified in the foreign currency translation adjustment component of AOCI was $(7.5) million and $3.5 million as of March 31, 2022 and December 31, 2021, respectively.
The amount of (gain) related to the foreign currency denominated debt designated as net investment hedges classified in the foreign currency translation adjustment component of other comprehensive income for the three months ended March 31, 2022 and March 31, 2021 are presented below:
(in millions)
Three months ended March 31,
2022
2021
Net investment hedges$(11.0)$(19.6)

15.    Financial instruments and fair value measurements
Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable and debt.
Assets and liabilities for which fair value is only disclosed
The carrying amount of cash and cash equivalents was the same as its fair value and is a Level 1 measurement. The carrying amounts for trade accounts receivable and accounts payable approximated fair value due to their short-term nature and are Level 2 measurements.
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The following table presents the gross amounts, which exclude unamortized deferred financing costs, and the fair values of debt instruments:
(in millions)
March 31, 2022
December 31, 2021
Gross amountFair valueGross amountFair value
Receivables facility$ $ $ $ 
Senior secured credit facilities:
Euro term loans93.5 92.8 133.9 133.7 
Euro term loans358.1 355.0 367.9 367.7 
Euro term loans666.6 658.3 684.9 683.6 
U.S. dollar term loans164.6 165.0 229.3 224.9 
U.S. dollar term loans2,058.7 2,039.5 2,063.9 2,029.1 
2.625% secured notes721.7 732.4 739.6 758.2 
3.875% unsecured notes800.0 757.2 800.0 810.9 
3.875% unsecured notes444.1 447.5 455.1 475.3 
4.625 % unsecured notes1,550.0 1,533.1 1,550.0 1,629.8 
Finance lease liabilities70.2 70.2 71.2 71.2 
Other16.4 16.4 17.4 17.4 
Total$6,943.9 $6,867.4 $7,113.2 $7,201.8 
The fair values of debt instruments are based on standard pricing models that take into account the present value of future cash flows, and in some cases private trading data, which are level 2 measurements.
Item 2.    Management’s discussion and analysis of financial condition and results of operations
In addition to historical financial information, this discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our results may differ materially from those contained in or implied by any forward-looking statements. You should carefully read “Cautionary factors regarding forward-looking statements” for additional information.
Basis of presentation
This discussion should be read in conjunction with the accompanying condensed consolidated financial statements and notes. Pursuant to SEC rules for reports covering interim periods, we have prepared this discussion and analysis to enable you to assess material changes in our financial condition and results of operations since December 31, 2021, the date of our Annual Report. Therefore, we encourage you to read this discussion and analysis in conjunction with the Annual Report.
Overview
We are a leading global provider of mission critical products and services to customers in the biopharmaceutical, healthcare, education & government and advanced technologies & applied materials industries. We have global operations and an extensive product portfolio. We strive to enable customer success through innovation, cGMP manufacturing and comprehensive service offerings. The depth and breadth of our portfolio provides our customers a comprehensive range of products and services and allows us to create customized and integrated solutions for our customers.
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During the three months ended March 31, 2022 we recorded net sales of $1,950.4 million, net income of $190.4 million and Adjusted EBITDA of $423.1 million. Net sales increased by 9.2%, which included 5.1% organic growth compared to the same period in 2021. See “Reconciliations of non-GAAP measures” for a reconciliation of net income to Adjusted EBITDA and “Results of operations” for a reconciliation of net sales growth to organic net sales growth.
Factors and current trends affecting our business and results of operations
The following updates the factors and current trends disclosed in the Annual Report. These updates could affect our performance and financial condition in future periods.
Our results are impacted by acquisitions
We completed the acquisition of Masterflex, Ritter GmbH, and RIM Bio in 2021. Masterflex is a leading global manufacturer of peristaltic pumps and aseptic single-use fluid transfer technologies. Ritter GmbH's current business is focused on performing life sciences research and supplying diagnostic system providers, liquid handling OEMs and end-users with robotic fluid handling tips, plates, and other consumables. RIM Bio is a China-based single-use bioprocess bag manufacturer. RIM Bio's current business provides a complete range of single-use 2D bags, 3D bags, tank liners, bag assemblies and multi-bag manifolds used in the manufacturing of biologics including monoclonal antibodies (mAbs), vaccines, cell and gene therapies, and recombinant proteins.
Our results continue to be impacted by the ongoing global coronavirus outbreak
The results for each of our three regions continue to be impacted by the COVID-19 pandemic for the three months ended March 31, 2022, as described further in the “Results of operations” section below.
For a discussion of the impact of the COVID-19 pandemic and associated economic disruptions, and the actual operational and financial impacts that we experienced through December 31, 2021, see “Part II—Item 7—Management's discussion and analysis of financial condition and results of operations” in the Annual Report. For additional discussion of the potential impact of the COVID-19 pandemic and associated economic disruptions to the Company, see “The COVID-19 pandemic has adversely impacted, and continues to pose risks to, our business, operating results, cash flows and/or financial condition, the nature and extent of which could be material.” included in “Part I—Item 1A—Risk factors” in the Annual Report.
We have been impacted by supply chain constraints and inflationary pressures
We have experienced challenges in sourcing certain products and raw materials as a result of global supply chain disruptions and have experienced inflationary pressures across all of our cost categories. While we have implemented pricing and productivity measures to combat these pressures, they may impact our results.
Key indicators of performance and financial condition
To evaluate our performance, we monitor a number of key indicators including certain non-GAAP financial measurements that we believe are useful to investors, creditors and others in assessing our performance. These measurements should not be considered in isolation or as a substitute for reported GAAP results because they may include or exclude certain items as compared to similar GAAP-based measurements, and such measurements may not be comparable to similarly-titled measurements reported
21

by other companies. Rather, these measurements should be considered as an additional way of viewing aspects of our operations that provide a more complete understanding of our business.
The key indicators that we monitor are as follows:
Net sales, gross margin, operating income and net income or loss. These measures are discussed in the section entitled “Results of operations;”
Organic net sales growth, which is a non-GAAP measure discussed in the section entitled “Results of operations.” Organic net sales growth eliminates from our reported net sales the impacts of earnings from any acquired or disposed businesses and changes in foreign currency exchange rates. We believe that this measurement is useful to investors as a way to measure and evaluate our underlying commercial operating performance consistently across our segments and the periods presented. This measurement is used by our management for the same reason. Reconciliations to the change in reported net sales, the most directly comparable GAAP financial measure, are included in the section entitled “Results of operations;”
Adjusted EBITDA and Adjusted EBITDA margin, which are non-GAAP measures discussed in the section entitled “Results of operations.” Adjusted EBITDA is used by investors to measure and evaluate our operating performance exclusive of interest expense, income tax expense, depreciation, amortization and certain other adjustments. Adjusted EBITDA margin is Adjusted EBITDA divided by net sales as determined under GAAP. We believe that these measurements are useful to investors as a way to analyze the underlying trends in our core business consistently across the periods presented. This measurement is used by our management for the same reason. A reconciliation of net income or loss, the most directly comparable GAAP financial measure, to Adjusted EBITDA is included in the section entitled “Reconciliations of non-GAAP measures;”
Cash flows from operating activities, which we discuss in the section entitled “Liquidity and capital resources—Historical cash flows;”
Free cash flow, which is a non-GAAP measure, is equal to our cash flow from operating activities, plus acquisition-related costs paid in the period, less capital expenditures. We believe that this measurement is useful to investors as it provides a view on the Company’s ability to generate cash for use in financing or investing activities. This measurement is used by management for the same reason. A reconciliation of cash flows from operating activities, the most directly comparable GAAP financial measure, to free cash flows, is included in the section entitled “Liquidity and capital resources—Historical cash flows.”
Results of operations
We present results of operations in the same way that we manage our business, evaluate our performance and allocate our resources. We also provide discussion of net sales and Adjusted EBITDA by geographic segment based on customer location: Americas, Europe and AMEA. Corporate costs are managed on a standalone basis and not allocated to segments.
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Executive summary
(dollars in millions)
Three months ended March 31,Change
20222021
Net sales$1,950.4 $1,785.6 $164.8 
Gross margin35.4 %34.3 %110 bps
Operating income$307.0 $266.3 $40.7 
Net income190.4 164.0 26.4 
Adjusted EBITDA423.1 </