avtr-20210331

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐ 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

____________________________

Avantor, Inc.

(Exact name of registrant as specified in its charter)

___________________________________


Delaware			82-2758923
(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 class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $0.01 par value

AVTR

New York Stock Exchange

6.250% Series A Mandatory Convertible Preferred Stock, $0.01 par value

AVTR PRA

New 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 21, 2021, 582,138,223 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, 2021

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			Page
Glossary			ii
Cautionary factors regarding forward-looking statements			iii

PART I — FINANCIAL INFORMATION
Item 1. Financial statements			1
Item 2. Management’s discussion and analysis of financial condition and results of operations			20
Item 3. Quantitative and qualitative disclosures about market risk			29
Item 4. Controls and procedures			29

PART II — OTHER INFORMATION
Item 1. Legal proceedings			29
Item 1A. Risk factors			30
Item 2. Unregistered sales of equity securities and use of proceeds			30
Item 3. Defaults upon senior securities			30
Item 4. Mine safety disclosures			30
Item 5. Other information			30
Item 6. Exhibits			30

Signature			31

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Glossary


			Description
we, us, our			Avantor, Inc. and its subsidiaries
2019 Plan			the Avantor, Inc. 2019 Equity Incentive Plan, a stock-based compensation plan
Adjusted EBITDA			our earnings or loss before interest, taxes, depreciation, amortization and certain other adjustments
Annual Report			our annual report on Form 10-K for the year ended December 31, 2020
AMEA			Asia, Middle-East and Africa
AOCI			accumulated other comprehensive income or loss
CARES			the Coronavirus Aid, Relief, and Economic Security Act
CERCLA			Comprehensive Environmental Response, Compensation, and Liability Act
cGMP			Current Good Manufacturing Practice
COVID-19			Coronavirus disease of 2019
double-digit			greater than 10%
EURIBOR			the basic rate of interest used in lending between banks on the European Union interbank market
FASB			the Financial Accounting Standards Board of the United States
GAAP			United States generally accepted accounting principles
high single-digit			7 - 9%
LIBOR			the basic rate of interest used in lending between banks on the London interbank market
low single-digit			1 - 3%
MCPS			6.250% Series A Mandatory Convertible Preferred Stock
mid single-digit			4 - 6%
PPE			personal protective equipment
RSU			restricted stock unit
SEC			the United States Securities and Exchange Commission
SG&A expenses			selling, general and administrative expenses
Specialty procurement			product sales related to customer procurement services
VWR			VWR Corporation and its subsidiaries, a company we acquired in November 2017

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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 “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 our relationships with distributors;

•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

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•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 avoid negative outcomes related to the use of chemicals;

•our ability to maintain highly skilled employees;

•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.

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PART I — FINANCIAL INFORMATION

Item 1. Financial statements

Avantor, Inc. and subsidiaries

Index to unaudited condensed consolidated financial statements


			Page
Unaudited condensed consolidated balance sheets			2
Unaudited condensed consolidated statements of operations			3
Unaudited condensed consolidated statements of comprehensive income or loss			4
Unaudited condensed consolidated statements of stockholders’ equity			5
Unaudited condensed consolidated statements of cash flows			6
Notes to unaudited condensed consolidated financial statements			7

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Avantor, Inc. and subsidiaries

Unaudited condensed consolidated balance sheets


(in millions)	March 31, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	172.5	$	286.6
Accounts receivable, net of allowances of $25.6 and $26.2	1,201.5		1,113.3
Inventory	777.7		739.6
Other current assets	80.3		91.4
Total current assets	2,232.0		2,230.9
Property, plant and equipment, net of accumulated depreciation of $400.5 and $388.3	537.4		549.9
Other intangible assets, net (see note 7)	3,932.2		4,048.8
Goodwill	2,820.1		2,860.2
Other assets	217.1		216.7
Total assets	$	9,738.8	$	9,906.5
Liabilities and stockholders’ equity
Current liabilities:
Current portion of debt	$	26.5	$	26.4
Accounts payable	706.4		678.9
Employee-related liabilities	140.8		179.3
Accrued interest	26.8		44.5
Other current liabilities	340.2		313.6
Total current liabilities	1,240.7		1,242.7
Debt, net of current portion	4,606.3		4,867.5
Deferred income tax liabilities	713.0		723.9
Other liabilities	372.7		398.1
Total liabilities	6,932.7		7,232.2
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, 581.8 and 580.1 shares outstanding	1,743.2		1,737.6
Accumulated earnings (deficit)	75.3		(88.7)
Accumulated other comprehensive (loss) income	(16.1)		21.7
Total stockholders’ equity	2,806.1		2,674.3
Total liabilities and stockholders’ equity	$	9,738.8	$	9,906.5

See accompanying notes to the unaudited condensed consolidated financial statements.

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Avantor, Inc. and subsidiaries

Unaudited condensed consolidated statements of operations


(in millions, except per share data)	Three months ended March 31,
	2021		2020
Net sales	$	1,785.6	$	1,519.0
Cost of sales	1,172.8		1,017.1
Gross profit	612.8		501.9
Selling, general and administrative expenses	346.5		343.5
Operating income	266.3		158.4
Interest expense	(51.5)		(94.5)
Loss on extinguishment of debt	(5.2)		—
Other income, net	1.8		0.8
Income before income taxes	211.4		64.7
Income tax expense	(47.4)		(17.7)
Net income	164.0		47.0
Accumulation of yield on preferred stock	(16.1)		(16.1)
Net income available to common stockholders	$	147.9	$	30.9

Earnings per share:
Basic	$	0.25	$	0.05
Diluted	$	0.25	$	0.05
Weighted average shares outstanding:
Basic	581.1		573.7
Diluted	589.1		581.3

See accompanying notes to the unaudited condensed consolidated financial statements.

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Avantor, Inc. and subsidiaries

Unaudited condensed consolidated statements of comprehensive income or loss


(in millions)	Three months ended March 31,
	2021		2020
Net income	$	164.0	$	47.0
Other comprehensive loss:
Foreign currency translation — unrealized loss	(33.5)		(68.8)
Derivative instruments:
Unrealized (loss) gain	(0.9)		1.6
Reclassification of loss (gain) into earnings	0.7		(0.1)
Defined benefit plans:
Unrealized gain	0.6		0.4
Reclassification of gain into earnings	—		(0.1)
Other comprehensive loss before income taxes	(33.1)		(67.0)
Income tax effect	(4.7)		(0.4)
Other comprehensive loss	(37.8)		(67.4)
Comprehensive income (loss)	$	126.2	$	(20.4)

See accompanying notes to the unaudited condensed consolidated financial statements.

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Avantor, Inc. and subsidiaries

Unaudited condensed consolidated statements of stockholders’ equity


(in millions)	Stockholders’ equity
	MCPS including paid-in capital			Common stock including paid-in capital			Accumulated earnings (deficit)		AOCI		Total
	Shares	Amount		Shares	Amount
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

Balance at December 31, 2019	20.7	$	1,003.7	572.8	$	1,748.1	$	(203.7)	$	(85.9)	$	2,462.2
Impact of new accounting standard	—	—		—	—		(1.6)		—		(1.6)
Comprehensive income (loss)	—	—		—	—		47.0		(67.4)		(20.4)
Stock-based compensation expense	—	—		—	9.2		—		—		9.2
Accumulation of yield on preferred stock	—	—		—	(16.1)		—		—		(16.1)
Stock option exercises and other common stock transactions	—	—		2.1	6.8		—		—		6.8
Balance at March 31, 2020	20.7	$	1,003.7	574.9	$	1,748.0	$	(158.3)	$	(153.3)	$	2,440.1

See accompanying notes to the unaudited condensed consolidated financial statements.

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Avantor, Inc. and subsidiaries

Unaudited condensed consolidated statements of cash flows


(in millions)	Three months ended March 31,
	2021		2020
Cash flows from operating activities:
Net income	$	164.0	$	47.0
Reconciling adjustments:
Depreciation and amortization	89.0		96.5
Stock-based compensation expense	11.4		8.4
Provision for accounts receivable and inventory	7.9		16.6
Deferred income tax benefit	(5.3)		(4.2)
Amortization of deferred financing costs

SEC Form 10-Q filed by Avantor, Inc.