~~0001722482us-gaap:SecuredDebtMember2021-06-30~~

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 ~~June~~September 30, 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 ~~July 21,~~October 20, 2021, ~~584,163,209~~609,452,726 shares of common stock, $0.01 par value per share, were outstanding.

Avantor, Inc. and subsidiaries

Form 10-Q for the quarterly period ended ~~June~~September 30, 2021

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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
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%
OEM			original engineering manufacturers
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			7
Notes to unaudited condensed consolidated financial statements			8

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Avantor, Inc. and subsidiaries

Unaudited condensed consolidated balance sheets


(in millions)	(in millions)	June 30, 2021		December 31, 2020		(in millions)	September 30, 2021		December 31, 2020
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	223.0	$	286.6	Cash and cash equivalents	$	1,426.1	$	286.6
Accounts receivable, net of allowances of $26.0 and $26.2		1,268.8		1,113.3
Accounts receivable, net of allowances of $26.3 and $26.2						Accounts receivable, net of allowances of $26.3 and $26.2	1,184.7		1,113.3
Inventory	Inventory	840.9		739.6		Inventory	844.0		739.6
Other current assets	Other current assets	90.0		91.4		Other current assets	109.8		91.4
Total current assets	Total current assets	2,422.7		2,230.9		Total current assets	3,564.6		2,230.9
Property, plant and equipment, net of accumulated depreciation of $408.8 and $388.3		652.6		549.9
Property, plant and equipment, net of accumulated depreciation of $429.3 and $388.3						Property, plant and equipment, net of accumulated depreciation of $429.3 and $388.3	682.7		549.9
Other intangible assets, net (see note 8)	Other intangible assets, net (see note 8)	4,372.0		4,048.8		Other intangible assets, net (see note 8)	4,205.6		4,048.8
Goodwill	Goodwill	3,557.8		2,860.2		Goodwill	3,506.3		2,860.2
Other assets	Other assets	244.6		216.7		Other assets	240.0		216.7
Total assets	Total assets	$	11,249.7	$	9,906.5	Total assets	$	12,199.2	$	9,906.5
Liabilities and stockholders’ equity	Liabilities and stockholders’ equity					Liabilities and stockholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of debt	Current portion of debt	$	39.5	$	26.4	Current portion of debt	$	37.0	$	26.4
Accounts payable	Accounts payable	755.3		678.9		Accounts payable	698.8		678.9
Employee-related liabilities	Employee-related liabilities	147.3		179.3		Employee-related liabilities	176.8		179.3
Accrued interest	Accrued interest	44.7		44.5		Accrued interest	27.0		44.5
Other current liabilities	Other current liabilities	390.9		313.6		Other current liabilities	380.5		313.6
Total current liabilities	Total current liabilities	1,377.7		1,242.7		Total current liabilities	1,320.1		1,242.7
Debt, net of current portion	Debt, net of current portion	5,611.5		4,867.5		Debt, net of current portion	5,549.8		4,867.5
Deferred income tax liabilities	Deferred income tax liabilities	863.0		723.9		Deferred income tax liabilities	821.5		723.9
Other liabilities	Other liabilities	411.6		398.1		Other liabilities	403.0		398.1
Total liabilities	Total liabilities	8,263.8		7,232.2		Total liabilities	8,094.4		7,232.2
Commitments and contingencies (see note 9)	Commitments and contingencies (see note 9)	0		0		Commitments and contingencies (see note 9)	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
MCPS including paid-in capital, 20.7 shares outstanding	MCPS including paid-in capital, 20.7 shares outstanding	1,003.7		1,003.7		MCPS including paid-in capital, 20.7 shares outstanding	1,003.7		1,003.7
Common stock including paid-in capital, 583.7 and 580.1 shares outstanding		1,747.7		1,737.6
Common stock including paid-in capital, 609.4 and 580.1 shares outstanding						Common stock including paid-in capital, 609.4 and 580.1 shares outstanding	2,749.3		1,737.6
Accumulated earnings (deficit)	Accumulated earnings (deficit)	233.1		(88.7)		Accumulated earnings (deficit)	389.9		(88.7)
Accumulated other comprehensive income		1.4		21.7
Accumulated other comprehensive (loss) income						Accumulated other comprehensive (loss) income	(38.1)		21.7
Total stockholders’ equity	Total stockholders’ equity	2,985.9		2,674.3		Total stockholders’ equity	4,104.8		2,674.3
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	11,249.7	$	9,906.5	Total liabilities and stockholders’ equity	$	12,199.2	$	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)	(in millions, except per share data)	Three months ended June 30,				Six months ended June 30,				(in millions, except per share data)	Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Net sales	Net sales	$	1,858.6	$	1,478.7	$	3,644.2	$	2,997.7	Net sales	$	1,834.3	$	1,605.0	$	5,478.5	$	4,602.7
Cost of sales	Cost of sales	1,232.1		988.1		2,404.9		2,005.2		Cost of sales	1,218.4		1,098.6		3,623.3		3,103.8
Gross profit	Gross profit	626.5		490.6		1,239.3		992.5		Gross profit	615.9		506.4		1,855.2		1,498.9
Selling, general and administrative expenses	Selling, general and administrative expenses	371.8		324.0		718.3		667.5		Selling, general and administrative expenses	378.7		329.2		1,097.0		996.7
Operating income	Operating income	254.7		166.6		521.0		325.0		Operating income	237.2		177.2		758.2		502.2
Interest expense	Interest expense	(51.0)		(92.1)		(102.5)		(186.6)		Interest expense	(54.1)		(65.2)		(156.6)		(251.8)
Loss on extinguishment of debt	Loss on extinguishment of debt	(3.2)		0		(8.4)		0		Loss on extinguishment of debt	—		(226.4)		(8.4)		(226.4)
Other income, net	Other income, net	14.6		4.2		16.4		5.0		Other income, net	3.4		6.6		19.8		11.6
Income before income taxes		215.1		78.7		426.5		143.4
Income tax expense		(57.3)		(18.5)		(104.7)		(36.2)
Net income		157.8		60.2		321.8		107.2
Income (loss) before income taxes										Income (loss) before income taxes	186.5		(107.8)		613.0		35.6
Income tax (expense) benefit										Income tax (expense) benefit	(29.7)		65.6		(134.4)		29.4
Net income (loss)										Net income (loss)	156.8		(42.2)		478.6		65.0
Accumulation of yield on preferred stock	Accumulation of yield on preferred stock	(16.2)		(16.2)		(32.3)		(32.3)		Accumulation of yield on preferred stock	(16.1)		(16.1)		(48.4)		(48.4)
Net income available to common stockholders		$	141.6	$	44.0	$	289.5	$	74.9
Net income (loss) available to common stockholders										Net income (loss) available to common stockholders	$	140.7	$	(58.3)	$	430.2	$	16.6

Earnings per share:
Earnings (loss) per share:										Earnings (loss) per share:
Basic	Basic	$	0.24	$	0.08	$	0.50	$	0.13	Basic	$	0.24	$	(0.10)	$	0.74	$	0.03
Diluted	Diluted	$	0.24	$	0.08	$	0.49	$	0.13	Diluted	$	0.24	$	(0.10)	$	0.73	$	0.03
Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	582.6		575.6		581.9		574.6		Basic	588.5		577.2		584.1		575.5
Diluted	Diluted	591.1		582.1		590.3		581.7		Diluted	598.1		577.2		593.0		582.5

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)	(in millions)	Three months ended June 30,				Six months ended June 30,				(in millions)	Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Net income		$	157.8	$	60.2	$	321.8	$	107.2
Other comprehensive income (loss):
Foreign currency translation — unrealized gain (loss)		16.5		44.7		(17.0)		(24.1)
Net income (loss)										Net income (loss)	$	156.8	$	(42.2)	$	478.6	$	65.0
Other comprehensive (loss) income:										Other comprehensive (loss) income:
Foreign currency translation — unrealized (loss) gain										Foreign currency translation — unrealized (loss) gain	(38.2)		55.1		(55.2)		31.0
Derivative instruments:	Derivative instruments:									Derivative instruments:
Unrealized (loss) gain		(1.2)		0.7		(2.1)		2.3
Unrealized gain (loss)										Unrealized gain (loss)	—		0.3		(2.0)		2.6
Reclassification of loss (gain) into earnings	Reclassification of loss (gain) into earnings	1.5		(0.7)		2.2		(0.8)		Reclassification of loss (gain) into earnings	0.9		(0.7)		3.0		(1.5)
Adjustments to defined benefit plans	Adjustments to defined benefit plans	(0.2)		(0.3)		0.4		0		Adjustments to defined benefit plans	0.6		(0.7)		1.0		(0.7)
Other comprehensive income (loss) before income taxes		16.6		44.4		(16.5)		(22.6)
Other comprehensive (loss) income before income taxes										Other comprehensive (loss) income before income taxes	(36.7)		54.0		(53.2)		31.4
Income tax effect	Income tax effect	0.9		0.1		(3.8)		(0.3)		Income tax effect	(2.8)		0.1		(6.6)		(0.2)
Other comprehensive income (loss)		17.5		44.5		(20.3)		(22.9)
Other comprehensive (loss) income										Other comprehensive (loss) income	(39.5)		54.1		(59.8)		31.2
Comprehensive income	Comprehensive income	$	175.3	$	104.7	$	301.5	$	84.3	Comprehensive income	$	117.3	$	11.9	$	418.8	$	96.2

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)	(in millions)	Stockholders’ equity												(in millions)	Stockholders’ equity
		MCPS including paid-in capital			Common stock including paid-in capital			Accumulated earnings (deficit)		AOCI		Total			MCPS including paid-in capital			Common stock including paid-in capital			Accumulated earnings (deficit)		AOCI		Total
		Shares	Amount		Shares	Amount									Shares	Amount		Shares	Amount
Balance at March 31, 2021		20.7	$	1,003.7	581.8	$	1,743.2	$	75.3	$	(16.1)	$	2,806.1
Comprehensive income		—	—		—	—		157.8		17.5		175.3
Balance at June 30, 2021														Balance at June 30, 2021	20.7	$	1,003.7	583.7	$	1,747.7	$	233.1	$	1.4	$	2,985.9
Comprehensive income (loss)														Comprehensive income (loss)	—	—		—	—		156.8		(39.5)		117.3
Issuance of stock, net of issuance costs														Issuance of stock, net of issuance costs	—	—		23.8	967.0		—		—		967.0
Stock-based compensation expense	Stock-based compensation expense	—	—		—	11.5		—		—		11.5		Stock-based compensation expense	—	—		—	11.9		—		—		11.9
Accumulation of yield on preferred stock	Accumulation of yield on preferred stock	—	—		—	(16.2)		—		—		(16.2)		Accumulation of yield on preferred stock	—	—		—	(16.1)		—		—		(16.1)
Stock option exercises and other common stock transactions	Stock option exercises and other common stock transactions	—	—		1.9	9.2		—		—		9.2		Stock option exercises and other common stock transactions	—	—		1.9	38.8		—		—		38.8
Balance at June 30, 2021		20.7	$	1,003.7	583.7	$	1,747.7	$	233.1	$	1.4	$	2,985.9
Balance at September 30, 2021														Balance at September 30, 2021	20.7	$	1,003.7	609.4	$	2,749.3	$	389.9	$	(38.1)	$	4,104.8

Balance at March 31, 2020		20.7	$	1,003.7	574.9	$	1,748.0	$	(158.3)	$	(153.3)	$	2,440.1
Comprehensive income		—	—		—	—		60.2		44.5		104.7
Balance at June 30, 2020														Balance at June 30, 2020	20.7	$	1,003.7	576.3	$	1,744.0	$	(98.1)	$	(108.8)	$	2,540.8
Comprehensive (loss) income														Comprehensive (loss) income	—	—		—	—		(42.2)		54.1		11.9
Issuance of stock, net of issuance costs														Issuance of stock, net of issuance costs	—	—		—	—		—		—		—
Stock-based compensation expense	Stock-based compensation expense	—	—		—	10.3		—		—		10.3		Stock-based compensation expense	—	—		—	10.6		—		—		10.6
Accumulation of yield on preferred stock	Accumulation of yield on preferred stock	—	—		—	(16.2)		—		—		(16.2)		Accumulation of yield on preferred stock	—	—		—	(16.1)		—		—		(16.1)
Stock option exercises and other common stock transactions	Stock option exercises and other common stock transactions	—	—		1.4	1.9		—		—		1.9		Stock option exercises and other common stock transactions	—	—		1.7	5.1		—		—		5.1
Balance at June 30, 2020		20.7	$	1,003.7	576.3	$	1,744.0	$	(98.1)	$	(108.8)	$	2,540.8
Balance at September 30, 2020														Balance at September 30, 2020	20.7	$	1,003.7	578.0	$	1,743.6	$	(140.3)	$	(54.7)	$	2,552.3

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 (continued)


(in millions)	(in millions)	Stockholders’ equity												(in millions)	Stockholders’ equity
		MCPS including paid-in capital			Common stock including paid-in capital			Accumulated earnings (deficit)		AOCI		Total			MCPS including paid-in capital			Common stock including paid-in capital			Accumulated earnings (deficit)		AOCI		Total
		Shares	Amount		Shares	Amount									Shares	Amount		Shares	Amount
Balance at December 31, 2020	Balance at December 31, 2020	20.7	$	1,003.7	580.1	$	1,737.6	$	(88.7)	$	21.7	$	2,674.3	Balance at December 31, 2020	20.7	$	1,003.7	580.1	$	1,737.6	$	(88.7)	$	21.7	$	2,674.3
Comprehensive income		—	—		—	—		321.8		(20.3)		301.5
Comprehensive income (loss)														Comprehensive income (loss)	—	—		—	—		478.6		(59.8)		418.8
Issuance of stock, net of issuance costs														Issuance of stock, net of issuance costs	—	—		23.8	967.0		—		—		967.0
Stock-based compensation expense	Stock-based compensation expense	—	—		—	22.3		—		—		22.3		Stock-based compensation expense	—	—		—	34.2		—		—		34.2
Accumulation of yield on preferred stock	Accumulation of yield on preferred stock		—		—	(32.3)		—		—		(32.3)		Accumulation of yield on preferred stock		—		—	(48.4)		—		—		(48.4)
Stock option exercises and other common stock transactions	Stock option exercises and other common stock transactions	—	—		3.6	20.1		—		—		20.1		Stock option exercises and other common stock transactions	—	—		5.5	58.9		—		—		58.9
Balance at June 30, 2021		20.7	$	1,003.7	583.7	$	1,747.7	$	233.1	$	1.4	$	2,985.9
Balance at September 30, 2021														Balance at September 30, 2021	20.7	$	1,003.7	609.4	$	2,749.3	$	389.9	$	(38.1)	$	4,104.8

Balance at December 31, 2019	Balance at December 31, 2019	20.7	$	1,003.7	572.8	$	1,748.1	$	(203.7)	$	(85.9)	$	2,462.2	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	Impact of new accounting standard	—	—		—	—		(1.6)		—		(1.6)		Impact of new accounting standard	—	—		—	—		(1.6)		—		(1.6)
Comprehensive income		—	—		—	—		107.2		(22.9)		84.3
Comprehensive (loss) income														Comprehensive (loss) income	—	—		—	—		65.0		31.2		96.2
Issuance of stock, net of issuance costs														Issuance of stock, net of issuance costs	—	—		—	—		—		—		—
Stock-based compensation expense	Stock-based compensation expense	—	—		—	19.5		—		—		19.5		Stock-based compensation expense	—	—		—	30.1		—		—		30.1
Accumulation of yield on preferred stock	Accumulation of yield on preferred stock	—	—		—	(32.3)		—		—		(32.3)		Accumulation of yield on preferred stock	—	—		—	(48.4)		—		—		(48.4)
Stock option exercises and other common stock transactions	Stock option exercises and other common stock transactions	—	—		3.5	8.7		—		—		8.7		Stock option exercises and other common stock transactions	—	—		5.2	13.8		—		—		13.8
Balance at June 30, 2020		20.7	$	1,003.7	576.3	$	1,744.0	$	(98.1)	$	(108.8)	$	2,540.8
Balance at September 30, 2020														Balance at September 30, 2020	20.7	$	1,003.7	578.0	$	1,743.6	$	(140.3)	$	(54.7)	$	2,552.3

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)	(in millions)	Six months ended June 30,				(in millions)	Nine months ended September 30,
		2021		2020			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	321.8	$	107.2	Net income	$	478.6	$	65.0
Reconciling adjustments:	Reconciling adjustments:					Reconciling adjustments:
Depreciation and amortization	Depreciation and amortization	175.1		194.3		Depreciation and amortization	275.1		293.4
Stock-based compensation expense	Stock-based compensation expense	23.6		20.0		Stock-based compensation expense	37.0		31.4
Provision for accounts receivable and inventory	Provision for accounts receivable and inventory	24.1		32.5		Provision for accounts receivable and inventory	33.5		54.9
Deferred income tax benefit	Deferred income tax benefit	(5.3)		(22.1)		Deferred income tax benefit	(24.0)		(90.7)
Amortization of deferred financing costs	Amortization of deferred financing costs	7.6		13.1		Amortization of deferred financing costs	11.7		19.0
Loss on extinguishment of debt	Loss on extinguishment of debt	8.4		0		Loss on extinguishment of debt	8.4		226.4
Foreign currency remeasurement loss		2.8		4.1
Foreign currency remeasurement loss (gain)						Foreign currency remeasurement loss (gain)	5.4		(1.2)
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable	Accounts receivable	(122.0)		(16.1)		Accounts receivable	(66.5)		(50.6)
Inventory	Inventory	(103.0)		(55.6)		Inventory	(117.8)		(56.9)
Accounts payable	Accounts payable	63.1		31.1		Accounts payable	1.9		67.8
Accrued interest	Accrued interest	0.2		0		Accrued interest	(17.5)		(10.7)
Other assets and liabilities	Other assets and liabilities	(10.2)		33.6		Other assets and liabilities	20.5		75.3
Other, net	Other, net	4.5		0.2		Other, net	6.3		0.7
Net cash provided by operating activities	Net cash provided by operating activities	390.7		342.3		Net cash provided by operating activities	652.6		623.8
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(38.5)		(26.1)		Capital expenditures	(71.1)		(41.4)
Cash paid for acquisitions, net of cash acquired	Cash paid for acquisitions, net of cash acquired	(1,166.7)		0		Cash paid for acquisitions, net of cash acquired	(1,168.9)		—
Other	Other	1.3		1.7		Other	1.8		1.1
Net cash used in investing activities	Net cash used in investing activities	(1,203.9)		(24.4)		Net cash used in investing activities	(1,238.2)		(40.3)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Debt borrowings	Debt borrowings	1,134.6		0		Debt borrowings	1,134.6		2,001.6
Debt repayments	Debt repayments	(316.1)		(67.5)		Debt repayments	(323.1)		(2,171.5)
Payments of debt financing costs	Payments of debt financing costs	(20.1)		0		Payments of debt financing costs	(22.5)		(198.0)
Proceeds from issuance of stock, net of issuance costs						Proceeds from issuance of stock, net of issuance costs	967.0		—
Payments of dividends on preferred stock	Payments of dividends on preferred stock	(32.3)		(32.3)		Payments of dividends on preferred stock	(48.4)		(48.4)
Proceeds received from exercise of stock options	Proceeds received from exercise of stock options	37.5		13.4		Proceeds received from exercise of stock options	76.4		13.8
Shares repurchased to satisfy employee tax obligations for vested stock-based awards	Shares repurchased to satisfy employee tax obligations for vested stock-based awards	(25.8)		0		Shares repurchased to satisfy employee tax obligations for vested stock-based awards	(25.8)		—
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	777.8		(86.4)		Net cash provided by (used in) financing activities	1,758.2		(402.5)
Effect of currency rate changes on cash	Effect of currency rate changes on cash	(4.5)		(2.9)		Effect of currency rate changes on cash	(10.0)		2.8
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(39.9)		228.6		Net change in cash and cash equivalents	1,162.6		183.8
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	289.2		189.3		Cash, cash equivalents and restricted cash, beginning of period	289.2		189.3
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	249.3	$	417.9	Cash, cash equivalents and restricted cash, end of period	$	1,451.8	$	373.1

See accompanying notes to the unaudited condensed consolidated financial statements.

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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.

~~Acquisitions~~Secondary equity offering

On September 15, 2021 we issued 23.81 million shares of our common stock, at a public offering price of $42.00 per share. The proceeds from this offering were $967.0 million, net of $33.0 million of offering costs. The proceeds will be used to partially finance the pending acquisition of Masterflex as discussed below.

Entry into a definitive agreement

On September 7, 2021, we entered into a definitive agreement to acquire the Masterflex bioprocessing business and related assets (collectively "Masterflex") of Antylia Scientific. The all-cash transaction is preliminarily valued at $2,900.0 million, subject to final adjustments at closing. Given anticipated tax benefits from the transaction structure, the net purchase price is approximately $2,700.0 million. We have

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received all regulatory approvals and expect the transaction to close on or about November 1, 2021. Acquisition-related costs incurred to date are immaterial.

On June 1, 2021 and June 10, 2021, we acquired RIM Bio and Ritter GmbH and its affiliates (“Ritter GmbH”) ~~on June 1, 2021 and June 10, 2021,~~, respectively. Further ~~detail on the companies and transactions is~~details are included in note 3.

Correction of immaterial classification error

We identified and corrected an immaterial classification error between certain product sales in our previously reported net sales by product lines financial table disclosed in our segment financial information footnote included in our previously reported unaudited condensed consolidated financial statements as of and for the three and ~~six~~nine months ended ~~June~~September 30, 2020. The correction of this error allows for a more accurate presentation of net sales of our product lines and had no impact on ~~the Company’s~~our previously reported unaudited condensed consolidated financial statements as of and for the three and ~~six~~nine months ended ~~June~~September 30, 2020 other than those previously mentioned. The following table presents the impact of this correction for the three and ~~six~~nine months ended ~~June~~September 30, 2020.

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(in millions)	(in millions)	Three months ended June 30, 2020						Six months ended June 30, 2020						(in millions)	Three months ended September 30, 2020						Nine months ended September 30, 2020
		Previously reported		Adjustment		As adjusted		Previously reported		Adjustment		As adjusted			Previously reported		Adjustment		As adjusted		Previously reported		Adjustment		As adjusted
Proprietary materials & consumables	Proprietary materials & consumables	$	558.9	$	(75.3)	$	483.6	$	1,092.1	$	(129.9)	$	962.2	Proprietary materials & consumables	$	562.2	$	(43.7)	$	518.5	$	1,654.3	$	(173.6)	$	1,480.7
Third party materials & consumables	Third party materials & consumables	549.6		79.4		629.0		1,154.1		125.2		1,279.3		Third party materials & consumables	610.0		45.3		655.3		1,764.1		170.5		1,934.6
Services & specialty procurement	Services & specialty procurement	186.6		(5.0)		181.6		364.6		8.1		372.7		Services & specialty procurement	215.4		(4.6)		210.8		580.0		3.5		583.5
Equipment & instrumentation	Equipment & instrumentation	183.6		0.9		184.5		386.9		(3.4)		383.5		Equipment & instrumentation	217.4		3.0		220.4		604.3		(0.4)		603.9
Total	Total	$	1,478.7	$	0	$	1,478.7	$	2,997.7	$	0	$	2,997.7	Total	$	1,605.0	$	—	$	1,605.0	$	4,602.7	$	—	$	4,602.7

Correction of previously reported consolidated statement of cash flows

We identified and corrected an immaterial classification error in our previously reported unaudited condensed consolidated statement of cash flows for the ~~six~~nine months ended ~~June~~September 30, 2020. The correction of this error within the net cash provided by operating activities resulted in an increase in the line-item referred to as Provision for accounts receivable and inventory and a decrease in the line-item referred to as Inventory by ~~$9.2~~$23.4 million, respectively, from the previously reported amounts of ~~$23.3~~$31.5 million to ~~$32.5~~$54.9 million and ~~$(46.4)~~$(33.5) million to ~~$(55.6)~~$(56.9) million, respectively. The correction of this error had no effect on our previously reported net cash provided by operating activities for the ~~six~~nine months ended ~~June~~September 30, 2020, or on any other previously reported amounts in our unaudited condensed consolidated financial statements as of and for the ~~six~~nine months ended ~~June~~September 30, 2020 other than those previously mentioned.

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2. New accounting standards

New tax standard

On January 1, 2021, we implemented the FASB’s new standard to simplify the accounting for income taxes, which was issued in December 2019. The adoption of this new standard did not have an impact on our financial statements.

Other

There were no other new accounting standards that we expect to have a material impact on our financial position or results of operations upon adoption.

3. Business combinations

Ritter GmbH acquisition

On June 10, 2021, we completed the acquisition of Ritter GmbH for preliminary net cash consideration of ~~$1,077.5~~$1,079.8 million, and contingent consideration with an initial preliminary fair value of $35.6 million. Ritter GmbH's current business is focused on providing diagnostic system providers and liquid handling OEMs with robotic fluid handling tips, plates, and other consumables. The combination of our companies will expand our proprietary offerings to ~~the~~our biopharma and healthcare ~~end markets~~customers and enhance our offerings for critical lab automation workflows. The combined businesses also share similar characteristics including a

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recurring, specification-driven revenue profile and a consumable-driven portfolio of products produced to exacting standards that enhances our unique customer value proposition.

To fund the acquisition, we issued debt under our senior secured term loan facility in an aggregate principal amount of $1,134.6 million. ~~See note 10 for further details.~~

The preliminary purchase consideration was as follows:


(in millions)	June 10, 2021
Cash paid at closing	$	1,084.5
Cash acquired	~~(7.0)~~(4.7)
Preliminary net cash consideration	~~1,077.5~~1,079.8
Preliminary fair value of acquisition contingent consideration	35.6
Preliminary purchase price	$	~~1,113.1~~1,115.4

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The contingent consideration has a maximum potential payout of $336.0 million over three years. The preliminary fair value of the contingent consideration was determined using a monte carlo simulation as further described in note 16.

The preliminary fair values of the net assets acquired on June 10, 2021 was ~~$1,113.1~~$1,115.4 million, which included the following:


(in millions)	June 10, 2021
Accounts receivable	$	~~47.6~~33.3
Inventory	~~25.4~~30.5
Property, plant & equipment	~~111.2~~141.2
Other intangible assets	~~476.5~~430.0
Goodwill	~~685.2~~679.1
Other assets and liabilities	~~(0.6)~~0.9
Accounts payable	~~(14.1)~~(21.5)
Accrued expenses	~~(51.4)~~(28.6)
Debt	(20.4)
Deferred income tax liabilities	~~(146.3)~~(129.1)
Total net assets	$	~~1,113.1~~1,115.4

~~Due to the timing and complexity of the acquisition, the~~The assets acquired and liabilities assumed ~~were~~are recorded at their preliminary estimated fair values as part of our Europe operating segment atas of June ~~30,~~10, 2021. The preliminary balances of the acquired assets and liabilities have changed from what we previously reported to reflect additional information relating to their fair values; and the preliminary purchase price allocation isremains subject to change as we complete our determination of the final working capital and the fair value of the acquired assets and liabilities assumed, the impact of which could be material.

The following table summarizes the preliminary fair value of intangible assets acquired on June 10, 2021 and their related weighted average amortization period:

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(in millions)	Fair value		Weighted average estimated life
~~Tradename~~Customer relationships	$	~~39.2~~	~~7.0 years~~
~~Customer relationships~~	~~350.1~~330.0		18.0 years
Developed technology	~~87.2~~100.0		7.0 years
Total	$	~~476.5~~430.0

The preliminary intangible asset allocation is based on an industry benchmarking analysis of recent comparable transactions. The difference between the benchmark estimate and the final fair value of intangible assets identified may be material.

The goodwill represents intellectual capital and the acquired assembled workforce, none of which qualify for recognition as a separate intangible asset. Of the goodwill recognized, none is deductible for tax purposes.

Since the acquisition date, Ritter generated revenues of $49.2 million and $59.4 million during the three and nine months ended September 30, 2021, respectively.

The following unaudited pro forma combined financial information for the three and nine months ended September 30, 2021 and 2020 gives effect to the Ritter acquisition as if it had occurred on January 1, 2020. The pro forma information is presented for informational purposes only and is not necessarily

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indicative of the results of operations that actually would have occurred under the ownership and management of the Company.


(in millions)	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Revenue	$	1,834.3	$	1,643.2	$	5,575.9	$	4,687.7
Net income (loss) available to common stockholders	140.7		(60.1)		454.2		(20.3)
Basic earnings (loss) per share	0.24		(0.10)		0.78		0.04
Diluted earnings (loss) per share	0.24		(0.10)		0.77		0.03

The unaudited pro forma combined financial information presented above includes the accounting effects of the Ritter acquisitions, including, to the extent applicable, amortization charges from acquired intangible assets; transaction costs; interest expense; and the related tax effects.

RIM Bio acquisition

On June 1, 2021, we completed the acquisition of RIM Bio, 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. The addition of RIM Bio enables us to better serve our customers by expanding our single-use manufacturing, distribution, and cleanroom capabilities to the AMEA region. The impact of this acquisition is not material to our financial statements.

Acquisition-related costs of completed acquisitions

For the three and ~~six~~nine months ended ~~June~~September 30, 2021, we incurred ~~$21.6 million~~$0 and $24.6 million in acquisition-related costs, which consist of non-recurring legal, accounting, investment banking and consulting fees incurred to complete the acquisitions of Ritter GmbH and RIM Bio. All acquisition costs are expensed in the period incurred and excluded from Adjusted EBITDA, as shown in footnote 5. These acquisition costs have been primarily recorded within the Europe and Corporate operating segments and presented in SG&A in the unaudited condensed consolidated statements of operations.

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4. Earnings per share

The following table presents the reconciliation of basic and diluted earnings per share for the three and ~~six~~nine months ended ~~June~~September 30, 2021:

(in millions, except per share data) Three months ended June 30, 2021 Six months ended June 30, 2021
Earnings (numerator) Weighted average shares outstanding (denominator) Earnings per share Earnings (numerator) Weighted average shares outstanding (denominator) Earnings per share
Basic $ 141.6 582.6 $ 0.24 $ 289.5 581.9 $ 0.50
Dilutive effect of stock-based awards 0 8.5 0 8.4
Diluted $ 141.6 591.1 $ 0.24 $ 289.5 590.3 $ 0.49

~~The following table presents the reconciliation of basic and diluted earnings per share for the three and six months ended June 30, 2020:~~


(in millions, except per share data)	(in millions, except per share data)	Three months ended June 30, 2020					Six months ended June 30, 2020					(in millions, except per share data)	Three months ended September 30, 2021							Nine months ended September 30, 2021
		Earnings (numerator)		Weighted average shares outstanding (denominator)	Earnings per share		Earnings (numerator)		Weighted average shares outstanding (denominator)	Earnings per share				(in millions, except per share data)	Earnings (numerator)				Weighted average shares outstanding (denominator)		Earnings per share				Earnings (numerator)				Weighted average shares outstanding (denominator)		Earnings per share
Basic	Basic	$	44.0	575.6	$	0.08	$	74.9	574.6	$	0.13				$	140.7			588.5		$	0.24			$	430.2			584.1		$	0.74
Dilutive effect of stock-based awards	Dilutive effect of stock-based awards	0		6.5			0		7.1						Dilutive effect of stock-based awards		—			9.6							—			8.9
Diluted	Diluted	$	44.0	582.1	$	0.08	$	74.9	581.7	$	0.13				Diluted		$	140.7		598.1			$	0.24			$	430.2		593.0			$	0.73

For the three and ~~six~~nine months ended ~~June~~September 30, 2021, ~~and June 30, 2020,~~ diluted earnings per share included accumulated yield on preferred stock of ~~$16.2~~$16.1 million and ~~$32.3~~$48.4 million, respectively, and excluded 62.9 million of common stock equivalents under the MCPS because they were anti-dilutive to the calculations.

The following table presents the reconciliation of basic and diluted earnings per share for the three and nine months ended September 30, 2020:


(in millions, except per share data)	Three months ended September 30, 2020					Nine months ended September 30, 2020
	Earnings (numerator)		Weighted average shares outstanding (denominator)	Earnings per share		Earnings (numerator)		Weighted average shares outstanding (denominator)	Earnings per share
Basic	$	(58.3)	577.2	$	(0.10)	$	16.6	575.5	$	0.03
Dilutive effect of stock-based awards	—		—			—		7.0
Diluted	$	(58.3)	577.2	$	(0.10)	$	16.6	582.5	$	0.03

For the three months ended September 30, 2020, basic and diluted loss per share calculations were the same because there was a net loss available to common stockholders. As a result, 22.6 million of stock options, 5.2 million of restricted stock units and 62.9 million of MCPS were excluded from the calculation of diluted loss per share as their effect would be anti-dilutive.

For the nine months ended September 30, 2020, diluted earnings per share included accumulated yield of $48.4 million and excluded 62.9 million of common stock equivalents under the MCPS because they were anti-dilutive to the calculation.

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5. 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)	(in millions)	Three months ended June 30,				Six months ended June 30,				(in millions)	Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Net sales:	Net sales:									Net sales:
Americas	Americas	$	1,069.8	$	857.5	$	2,104.9	$	1,756.6	Americas	$	1,045.0	$	950.5	$	3,149.9	$	2,707.1
Europe	Europe	666.0		521.0		1,316.4		1,065.0		Europe	674.7		562.1		1,991.1		1,627.1
AMEA	AMEA	122.8		100.2		222.9		176.1		AMEA	114.6		92.4		337.5		268.5
Total	Total	$	1,858.6	$	1,478.7	$	3,644.2	$	2,997.7	Total	$	1,834.3	$	1,605.0	$	5,478.5	$	4,602.7
Adjusted EBITDA:	Adjusted EBITDA:									Adjusted EBITDA:
Americas	Americas	$	251.7	$	197.4	$	503.7	$	387.4	Americas	$	236.3	$	203.6	$	740.0	$	591.0
Europe	Europe	123.8		88.3		254.9		180.0		Europe	135.5		98.4		390.4		278.4
AMEA	AMEA	28.5		22.5		51.1		35.9		AMEA	29.5		20.9		80.5		56.8
Corporate	Corporate	(37.4)		(34.9)		(80.0)		(67.2)		Corporate	(42.1)		(37.3)		(122.0)		(104.5)
Total	Total	$	366.6	$	273.3	$	729.7	$	536.1	Total	$	359.2	$	285.6	$	1,088.9	$	821.7

The amounts above exclude inter-segment activity because it is not material. All of the net sales for each segment are from external customers.

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The following table presents the reconciliation of Adjusted EBITDA from net income, the nearest measurement under GAAP:


(in millions)	(in millions)	Three months ended June 30,				Six months ended June 30,				(in millions)	Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Net income		$	157.8	$	60.2	$	321.8	$	107.2
Net income (loss)										Net income (loss)	$	156.8	$	(42.2)	$	478.6	$	65.0
Interest expense	Interest expense	51.0		92.1		102.5		186.6		Interest expense	54.1		65.2		156.6		251.8
Income tax expense		57.3		18.5		104.7		36.2
Income tax expense (benefit)										Income tax expense (benefit)	29.7		(65.6)		134.4		(29.4)
Depreciation and amortization	Depreciation and amortization	86.1		97.8		175.1		194.3		Depreciation and amortization	100.0		99.1		275.1		293.4
Loss on extinguishment of debt	Loss on extinguishment of debt	3.2		0		8.4		0		Loss on extinguishment of debt	—		226.4		8.4		226.4
Net foreign currency loss (gain) from financing activities		1.2		(1.8)		2.0		(0.2)
Net foreign currency (gain) loss from financing activities										Net foreign currency (gain) loss from financing activities	(0.8)		(4.1)		1.2		(4.3)
Other stock-based compensation expense	Other stock-based compensation expense	0.7		1.1		1.3		0		Other stock-based compensation expense	1.6		0.6		2.9		0.6
Acquisition-related expenses1	Acquisition-related expenses1	21.6		0		24.6		0		Acquisition-related expenses1	3.2		—		27.8		—
Integration-related expenses2	Integration-related expenses2	0.5		2.2		0.5		7.6		Integration-related expenses2	7.9		3.9		8.4		11.5
Restructuring and severance charges3		0.2		3.2		1.8		4.4
Receipt of disgorgement penalty4		(13.0)		0		(13.0)		0
Purchase accounting adjustments3										Purchase accounting adjustments3	6.3		—		6.3		—
Restructuring and severance charges4										Restructuring and severance charges4	0.4		2.3		2.2		6.7
Receipt of disgorgement penalty5										Receipt of disgorgement penalty5	—		—		(13.0)		—
Adjusted EBITDA	Adjusted EBITDA	$	366.6	$	273.3	$	729.7	$	536.1	Adjusted EBITDA	$	359.2	$	285.6	$	1,088.9	$	821.7

━━━━━━━━━

1.Represents legal, accounting, investment banking and consulting fees incurred related to completed and pending acquisitions. Generally, these expenses are incurred prior to and at the ~~acquisition~~closing of ~~acquired companies.~~acquisitions.

2.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.

3.Represents the amortization of the purchase accounting adjustment we made to reflect Ritter’s acquired inventory at fair value upon acquisition, as shown in note 3 to our unaudited interim financial statements.

4.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.

4.5.As described in note ~~13.~~13 to our unaudited interim financial statements.

The following table presents net sales by product line:


(in millions)	(in millions)	Three months ended June 30,				Six months ended June 30,				(in millions)	Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
				(5)				(5)					(6)				(6)
Proprietary materials & consumables	Proprietary materials & consumables	$	630.8	$	483.6	$	1,196.0	$	962.2	Proprietary materials & consumables	$	651.2	$	518.5	$	1,847.2	$	1,480.7
Third party materials & consumables	Third party materials & consumables	739.4		629.0		1,497.8		1,279.3		Third party materials & consumables	712.2		655.3		2,210.0		1,934.6
Services & specialty procurement	Services & specialty procurement	232.2		181.6		452.0		372.7		Services & specialty procurement	226.5		210.8		678.5		583.5
Equipment & instrumentation	Equipment & instrumentation	256.2		184.5		498.4		383.5		Equipment & instrumentation	244.4		220.4		742.8		603.9
Total	Total	$	1,858.6	$	1,478.7	$	3,644.2	$	2,997.7	Total	$	1,834.3	$	1,605.0	$	5,478.5	$	4,602.7

━━━━━━━━━

5.6. As adjusted, see note 1.

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6. Supplemental disclosures of cash flow information

The following tables present supplemental disclosures of cash flow information:


(in millions)	(in millions)	June 30, 2021		December 31, 2020		(in millions)	September 30, 2021		December 31, 2020
Cash and cash equivalents	Cash and cash equivalents	$	223.0	$	286.6	Cash and cash equivalents	$	1,426.1	$	286.6
Restricted cash classified as other assets	Restricted cash classified as other assets	26.3		2.6		Restricted cash classified as other assets	25.7		2.6
Total	Total	$	249.3	$	289.2	Total	$	1,451.8	$	289.2

At ~~June~~September 30, 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)	(in millions)	Six months ended June 30,				(in millions)	Nine months ended September 30,
		2021		2020			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Cash paid for income taxes, net	Cash paid for income taxes, net	$	69.5	$	25.5	Cash paid for income taxes, net	$	130.2	$	32.0
Cash paid for interest		92.9		173.9
Cash paid for interest, excluding financing leases						Cash paid for interest, excluding financing leases	154.3		248.7
Cash paid for interest on finance leases						Cash paid for interest on finance leases	3.8		3.9
Cash paid under operating leases	Cash paid under operating leases	21.8		20.5		Cash paid under operating leases	32.4		31.7
Cash paid under finance leases		2.5		2.6
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Cash paid under finance leases	Cash paid under finance leases	2.3		2.2		Cash paid under finance leases	3.5		3.3


(in millions)	(in millions)	Six months ended June 30,				(in millions)	Nine months ended September 30,
		2021		2020			2021		2020
Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
Preliminary fair value of acquisition contingent consideration	Preliminary fair value of acquisition contingent consideration	$	35.6	$	0	Preliminary fair value of acquisition contingent consideration	$	35.6	$	—
Accrued but unpaid dividends on MCPS	Accrued but unpaid dividends on MCPS	8.1		8.1		Accrued but unpaid dividends on MCPS	8.1		8.1

7. Inventory

The following table presents the components of inventory:


(in millions)	(in millions)	June 30, 2021		December 31, 2020		(in millions)	September 30, 2021		December 31, 2020
Merchandise inventory	Merchandise inventory	$	512.3	$	463.0	Merchandise inventory	$	496.7	$	463.0
Finished goods	Finished goods	122.4		115.9		Finished goods	137.4		115.9
Raw materials	Raw materials	162.7		123.2		Raw materials	162.9		123.2
Work in process	Work in process	43.5		37.5		Work in process	47.0		37.5
Total	Total	$	840.9	$	739.6	Total	$	844.0	$	739.6

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8. Other intangible assets

The following table presents the components of other intangible assets:


(in millions)	(in millions)	June 30, 2021						December 31, 2020						(in millions)	September 30, 2021						December 31, 2020
		Gross value		Accumulated amortization		Carrying value		Gross value		Accumulated amortization		Carrying value			Gross value		Accumulated amortization		Carrying value		Gross value		Accumulated amortization		Carrying value
Customer relationships	Customer relationships	$	5,019.4	$	1,005.4	$	4,014.0	$	4,701.6	$	894.9	$	3,806.7	Customer relationships	$	4,960.5	$	1,060.9	$	3,899.6	$	4,701.6	$	894.9	$	3,806.7
VWR trade name	VWR trade name	272.7		188.9		83.8		275.7		184.3		91.4		VWR trade name	269.6		189.9		79.7		275.7		184.3		91.4
Other	Other	318.8		136.9		181.9		185.4		127.0		58.4		Other	278.9		144.9		134.0		185.4		127.0		58.4
Total finite-lived	Total finite-lived	$	5,610.9	$	1,331.2	4,279.7		$	5,162.7	$	1,206.2	3,956.5		Total finite-lived	$	5,509.0	$	1,395.7	4,113.3		$	5,162.7	$	1,206.2	3,956.5
Indefinite-lived	Indefinite-lived					92.3						92.3		Indefinite-lived					92.3						92.3
Total	Total					$	4,372.0					$	4,048.8	Total					$	4,205.6					$	4,048.8

9. Commitments and contingencies

Our business is subject to 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 we will experience adverse outcomes related to these matters.

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~~Known and unknown environmental matters, if not resolved favorably, could have a material effect on our financial position, liquidity and profitability.

Other matters

The New Jersey Department of Environmental Protection has ordered us to remediate groundwater conditions near our plant in Phillipsburg, New Jersey. This matter is covered by the indemnification arrangement previously described. At ~~June~~September 30, 2021, our accrued obligation under this order is $3.5 million, which is calculated based on expected cash payments discounted at rates ranging from 0.0% in 2021 to 2.1% in 2045. The undiscounted amount of that obligation is $4.2 million.

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 ~~June~~September 30, 2021, our balance sheet includes a liability of ~~$3.3~~$3.2 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.

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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 ~~June~~September 30, 2021, 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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10. Debt

The following table presents information about our debt:


(dollars in millions)	(dollars in millions)	June 30, 2021				December 31, 2020		(dollars in millions)	September 30, 2021				December 31, 2020
		Interest terms	Rate	Amount					Interest terms	Rate	Amount
Receivables facility	Receivables facility	LIBOR plus 0.90%	1.00%	$	0	$	0	Receivables facility	LIBOR plus 0.90%	0.98%	$	—	$	—
Senior secured credit facilities:	Senior secured credit facilities:							Senior secured credit facilities:
Euro term loans	Euro term loans	EURIBOR plus 2.25%	2.25%	218.3		344.8		Euro term loans	EURIBOR plus 2.25%	2.25%	212.3		344.8
Euro term loans	Euro term loans	EURIBOR plus 2.25%	2.25%	385.1		0		Euro term loans	EURIBOR plus 2.25%	2.25%	375.2		—
Euro term loans	Euro term loans	EURIBOR plus 2.75%	2.75%	716.9		0		Euro term loans	EURIBOR plus 2.75%	2.75%	698.6		—
U.S. dollar term loans	U.S. dollar term loans	LIBOR plus 2.00%	3.00%	357.3		546.7		U.S. dollar term loans	LIBOR plus 2.00%	2.50%	356.4		546.7
U.S. dollar term loans	U.S. dollar term loans	LIBOR plus 2.25%	3.25%	1,169.2		1,175.0		U.S. dollar term loans	LIBOR plus 2.25%	2.75%	1,169.1		1,175.0
2.625% secured notes	2.625% secured notes	fixed rate	2.625%	770.3		795.0		2.625% secured notes	fixed rate	2.625%	752.5		795.0
3.875% unsecured notes	3.875% unsecured notes	fixed rate	3.875%	474.0		489.2		3.875% unsecured notes	fixed rate	3.875%	463.0		489.2
4.625 % unsecured notes	4.625 % unsecured notes	fixed rate	4.625%	1,550.0		1,550.0		4.625 % unsecured notes	fixed rate	4.625%	1,550.0		1,550.0
Finance lease liabilities	Finance lease liabilities			72.4		71.5		Finance lease liabilities			72.0		71.5
Other	Other			19.8		0		Other			18.3		—
Total debt, gross	Total debt, gross			5,733.3		4,972.2		Total debt, gross			5,667.4		4,972.2
Less: unamortized deferred financing costs	Less: unamortized deferred financing costs			(82.3)		(78.3)		Less: unamortized deferred financing costs			(80.6)		(78.3)
Total debt	Total debt			$	5,651.0	$	4,893.9	Total debt			$	5,586.8	$	4,893.9
Classification on balance sheets:	Classification on balance sheets:							Classification on balance sheets:
Current portion of debt	Current portion of debt			$	39.5	$	26.4	Current portion of debt			$	37.0	$	26.4
Debt, net of current portion	Debt, net of current portion			5,611.5		4,867.5		Debt, net of current portion			5,549.8		4,867.5

Credit facilities

The following table presents availability under our credit facilities:


(in millions)	(in millions)	June 30, 2021						(in millions)	September 30, 2021
		Receivables facility		Revolving credit facility		Total			Receivables facility		Revolving credit facility		Total
Capacity	Capacity	$	300.0	$	515.0	$	815.0	Capacity	$	300.0	$	515.0	$	815.0
Undrawn letters of credit outstanding	Undrawn letters of credit outstanding	(8.8)		(1.6)		(10.4)		Undrawn letters of credit outstanding	(9.2)		(1.6)		(10.8)
Outstanding borrowings	Outstanding borrowings	0		0		0		Outstanding borrowings	—		—		—
Unused availability	Unused availability	$	291.2	$	513.4	$	804.6	Unused availability	$	290.8	$	513.4	$	804.2

Maximum availability	Maximum availability	$	300.0	$	515.0	$	815.0	Maximum availability	$	300.0	$	515.0	$	815.0

Capacity under the receivables facility depends upon maintaining a sufficient borrowing base of eligible accounts receivable. At ~~June~~September 30, 2021, ~~$519.7~~$497.3 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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Debt financing transactions

On September 7, 2021, we obtained a commitment to secure $2,900.0 million to finance the acquisition of Masterflex under our senior secured credit facilities. This commitment was reduced by $967.0 million through our secondary equity offering, as described in footnote 1 to our financial statements and the issuance of $800.0 million aggregate principal amount of 3.875% senior notes, which closed on October 26, 2021. The notes are due on November 1, 2029, with interest payable semi-annually on May 1 and November 1 of each year. In the event that the acquisition is not consummated, the notes will be subject to special mandatory redemption. The special mandatory redemption price is equal to 100% of the issue price plus any accrued and unpaid interest to, but excluding, the applicable date of redemption. We expect to secure additional funding through an amendment to our senior secured credit facilities, which will provide for $900.0 million of incremental U.S. Dollar term loans at Libor plus 2.25%. This amendment will be executed and funded at the time that the Masterflex acquisition closes, subject to customary closing conditions.

Senior secured credit facilities

On July 7, 2021, we amended our U.S. Dollar terms loans under our senior secured credit facilities. The amendment reduced the LIBOR floor in our interest calculation from 1.00% to 0.50%. The costs to complete the amendment were not material.

On June 30, 2021, we made prepayments of $61.9 million on our U.S. dollar term loans and $39.1 million on our Euro term loans. In connection with these prepayments, we expensed $3.2 million of previously unamortized deferred financing costs as a loss on extinguishment of debt.

On June 10, 2021, in connection with the acquisition of Ritter GmbH, we issued $396.5 million and $738.1 million of term loans that mature on June 9, 2026 and June 9, 2028, respectively. The debt bears interest at variable rates, and the interest rates for each respective instrument at ~~June~~September 30, 2021 are presented in the table above. We capitalized issuance costs of $20.1 million and $2.4 million related to these term loans in the second quarter and third quarter respectively.

On March 31, 2021, we made prepayments of $124.5 million on our U.S. dollar term loans and $77.6 million on our Euro term loans. In connection with these prepayments, we expensed $5.2 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. As we had not drawn more than 35% of our revolving credit facility in this period, this covenant was not applicable at ~~June~~September 30, 2021.

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11. Accumulated other comprehensive income or loss

The following table presents changes in the components of AOCI:


(in millions)	(in millions)	Foreign currency translation		Derivative instruments		Defined benefit plans		Total		(in millions)	Foreign currency translation		Derivative instruments		Defined benefit plans		Total
Balance at March 31, 2021		$	13.6	$	(1.2)	$	(28.5)	$	(16.1)
Balance at June 30, 2021										Balance at June 30, 2021	$	31.1	$	(1.0)	$	(28.7)	$	1.4
Unrealized (loss) gain										Unrealized (loss) gain	(38.2)		—		0.6		(37.6)
Reclassification of loss into earnings										Reclassification of loss into earnings	—		0.9		—		0.9
Income tax effect										Income tax effect	(2.6)		(0.2)		—		(2.8)
Balance at September 30, 2021										Balance at September 30, 2021	$	(9.7)	$	(0.3)	$	(28.1)	$	(38.1)

Balance at June 30, 2020										Balance at June 30, 2020	$	(86.4)	$	0.6	$	(23.0)	$	(108.8)
Unrealized gain (loss)	Unrealized gain (loss)	16.5		(1.2)		0		15.3		Unrealized gain (loss)	55.1		0.3		(0.6)		54.8
Reclassification of loss (gain) into earnings		0		1.5		(0.2)		1.3
Income tax effect		1.0		(0.1)		0		0.9
Balance at June 30, 2021		$	31.1	$	(1.0)	$	(28.7)	$	1.4

Balance at March 31, 2020		$	(131.1)	$	0.6	$	(22.8)	$	(153.3)
Unrealized gain		44.7		0.7		0		45.4
Reclassification of gain into earnings	Reclassification of gain into earnings	0		(0.7)		(0.3)		(1.0)		Reclassification of gain into earnings	—		(0.7)		(0.1)		(0.8)
Income tax effect	Income tax effect	0		0		0.1		0.1		Income tax effect	—		0.1		—		0.1
Balance at June 30, 2020		$	(86.4)	$	0.6	$	(23.0)	$	(108.8)
Balance at September 30, 2020										Balance at September 30, 2020	$	(31.3)	$	0.3	$	(23.7)	$	(54.7)

Balance at December 31, 2020	Balance at December 31, 2020	$	51.8	$	(1.0)	$	(29.1)	$	21.7	Balance at December 31, 2020	$	51.8	$	(1.0)	$	(29.1)	$	21.7
Unrealized loss		(17.0)		(2.1)		0		(19.1)
Unrealized (loss) gain										Unrealized (loss) gain	(55.2)		(2.0)		1.0		(56.2)
Reclassification of loss into earnings	Reclassification of loss into earnings	0		2.2		0.4		2.6		Reclassification of loss into earnings	—		3.0		—		3.0
Income tax effect	Income tax effect	(3.7)		(0.1)		0		(3.8)		Income tax effect	(6.3)		(0.3)		—		(6.6)
Balance at June 30, 2021		$	31.1	$	(1.0)	$	(28.7)	$	1.4
Balance at September 30, 2021										Balance at September 30, 2021	$	(9.7)	$	(0.3)	$	(28.1)	$	(38.1)

Balance at December 31, 2019	Balance at December 31, 2019	$	(62.3)	$	(0.5)	$	(23.1)	$	(85.9)	Balance at December 31, 2019	$	(62.3)	$	(0.5)	$	(23.1)	$	(85.9)
Unrealized (loss) gain		(24.1)		2.3		0		(21.8)
Unrealized gain (loss)										Unrealized gain (loss)	31.0		2.6		(0.4)		33.2
Reclassification of gain into earnings	Reclassification of gain into earnings	0		(0.8)		0		(0.8)		Reclassification of gain into earnings	—		(1.5)		(0.3)		(1.8)
Income tax effect	Income tax effect	0		(0.4)		0.1		(0.3)		Income tax effect	—		(0.3)		0.1		(0.2)
Balance at June 30, 2020		$	(86.4)	$	0.6	$	(23.0)	$	(108.8)
Balance at September 30, 2020										Balance at September 30, 2020	$	(31.3)	$	0.3	$	(23.7)	$	(54.7)

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 and ~~six~~nine months ended ~~June~~September 30, 2021 on foreign currency translation were due to our net investment hedge discussed in note 15.

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12. Stock-based compensation

The following table presents the components of stock-based compensation expense:


(in millions)	(in millions)	Classification	Three months ended June 30,				Six months ended June 30,				(in millions)	Classification	Three months ended September 30,				Nine months ended September 30,
			2021		2020		2021		2020				2021		2020		2021		2020
Stock options	Stock options	Equity	$	4.7	$	4.5	$	9.3	$	8.4	Stock options	Equity	$	4.8	$	4.2	$	14.0	$	12.6
RSUs	RSUs	Equity	6.5		5.5		12.2		10.4		RSUs	Equity	6.5		6.0		18.7		16.4
Optionholder awards	Optionholder awards	Liability	0		0.1		0		0.4		Optionholder awards	Liability	—		0.2		—		0.6
Other	Other	Both	1.0		1.5		2.1		0.8		Other	Both	2.2		1.0		4.3		1.8
Total	Total		$	12.2	$	11.6	$	23.6	$	20.0	Total		$	13.5	$	11.4	$	37.0	$	31.4
Balance sheet classification:	Balance sheet classification:										Balance sheet classification:
Equity	Equity		$	11.5	$	10.3	$	22.3	$	19.5	Equity		$	11.9	$	10.6	$	34.2	$	30.1
Liability	Liability		0.7		1.3		1.3		0.5		Liability		1.6		0.8		2.8		1.3

At ~~June~~September 30, 2021, unvested awards under our plans have remaining stock-based compensation expense of ~~$98.6~~$87.5 million to be recognized over a weighted average period of ~~1.9~~1.7 years.

At ~~June~~September 30, 2021, 10.8 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)	(options and intrinsic value in millions)	Number of options	Weighted average exercise price per option		Aggregate intrinsic value		Weighted average remaining term	(options and intrinsic value in millions)	Number of options	Weighted average exercise price per option		Aggregate intrinsic value		Weighted average remaining term
Balance at December 31, 2020	Balance at December 31, 2020	20.0	$	18.80				Balance at December 31, 2020	20.0	$	18.80
Granted	Granted	1.5	27.71					Granted	1.5	27.71
Exercised	Exercised	(2.5)	15.23					Exercised	(4.2)	17.79
Forfeited	Forfeited	(0.6)	19.36					Forfeited	(0.6)	19.08
Balance at June 30, 2021		18.4	19.96		$	287.0	7.4 years
Balance at September 30, 2021								Balance at September 30, 2021	16.7	19.82		$	404.1	7.2 years
Expected to vest	Expected to vest	7.9	20.29		121.1		8.4 years	Expected to vest	7.7	20.29		183.3		8.2 years
Vested	Vested	10.5	19.71		165.9		6.6 years	Vested	9.0	19.41		220.8		6.4 years

During the ~~six~~nine months ended ~~June~~September 30, 2021, 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 each such date.

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RSUs

The following table presents information about unvested RSUs:


(awards in millions)	(awards in millions)	Number of awards	Weighted average grant date fair value per award		(awards in millions)	Number of awards	Weighted average grant date fair value per award
Balance at December 31, 2020	Balance at December 31, 2020	4.9	$	15.31	Balance at December 31, 2020	4.9	$	15.31
Granted	Granted	1.1	29.18		Granted	1.1	29.30
Vested	Vested	(1.1)	14.84		Vested	(1.1)	14.86
Forfeited	Forfeited	(0.5)	17.91		Forfeited	(0.5)	18.09
Balance at June 30, 2021		4.4	19.23
Balance at September 30, 2021					Balance at September 30, 2021	4.4	19.30

During the ~~six~~nine months ended ~~June~~September 30, 2021, we granted RSUs that will vest annually over four years, subject to the recipient continuously providing service to us through each such date. Additionally, we granted certain employees RSUs that cliff vest over three years and contain performance and market conditions that impact the number of shares that will ultimately vest, subject to the recipient continuously providing service to us through each such date. The expense recorded related to the RSUs with performance and market conditions was not material.

13. Other income or expense, net

The following table presents the components of other income or expense, net:


(in millions)	(in millions)	Three months ended June 30,				Six months ended June 30,				(in millions)	Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Net foreign currency (loss) gain from financing activities		$	(1.2)	$	1.8	$	(2.0)	$	0.2
Net foreign currency gain (loss) from financing activities										Net foreign currency gain (loss) from financing activities	$	0.8	$	4.1	$	(1.2)	$	4.3
Income related to defined benefit plans	Income related to defined benefit plans	2.6		2.3		5.0		4.6		Income related to defined benefit plans	2.6		2.4		7.6		7.0
Other1	Other1	13.2		0.1		13.4		0.2		Other1	—		0.1		13.4		0.3
Other income, net	Other income, net	$	14.6	$	4.2	$	16.4	$	5.0	Other income, net	$	3.4	$	6.6	$	19.8	$	11.6

━━━━━━━━━

1.We recognized $13.0 million of other income during the ~~three month period~~nine months ended ~~June~~September 30, 2021 related to the disgorgement of disallowed trading profits from Goldman Sachs, which was a related party until December 31, 2020.

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14. Income taxes

The following table presents the relationship between income tax expense and income before income taxes:


(in millions)	(in millions)	Three months ended June 30,						Six months ended June 30,						(in millions)	Three months ended September 30,						Nine months ended September 30,
		2021			2020			2021			2020				2021			2020			2021			2020
Income before income taxes		$	215.1		$	78.7		$	426.5		$	143.4
Income tax expense		(57.3)			(18.5)			(104.7)			(36.2)
Income (loss) before income taxes														Income (loss) before income taxes	$	186.5		$	(107.8)		$	613.0		$	35.6
Income tax (expense) benefit														Income tax (expense) benefit	(29.7)			65.6			(134.4)			29.4
Effective income tax rate	Effective income tax rate	26.6		%	23.5		%	24.5		%	25.2		%	Effective income tax rate	15.9		%	(60.9)		%	21.9		%	(82.6)		%

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.

The relationship between pre-tax income and income tax expense is greatly ~~affected~~impacted 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 and ~~six~~nine months ended ~~June~~September 30, 2021 when compared to the three and ~~six~~nine months ended ~~June~~September 30, 2020, ~~is largely consistent as a percentage of income before income taxes and~~ is primarily related to a reduced benefit from uncertain tax positions in the ~~change in geographical distribution of our income before income taxes.~~current year. Our current year tax rate also benefited from large deductions resulting from stock options exercises.

15. 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

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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 ~~June~~September 30, 2021, the net investment hedge was equal to the designated portion of the European operations and were considered to be perfectly effective.

Non-derivative financial instruments which are designated as hedging instruments:

The accumulated loss related to the foreign currency denominated debt designated as net investment hedges classified in the foreign currency translation adjustment component of AOCI was ~~$22.4~~$11.4 million and $37.6 million as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

The amount of ~~(loss)~~ 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 and ~~six~~nine months ended ~~June~~September 30, 2021 is presented below:


(in millions)	(in millions)	Three months ended June 30,				Six months ended June 30,				(in millions)	Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Net investment hedges	Net investment hedges	$	(4.4)	$	0	$	15.2	$	0	Net investment hedges	$	11.0	$	17.7	$	26.2	$	17.7

16. 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 carrying values, which exclude unamortized deferred financing costs, and the fair values of debt instruments:


(in millions)	(in millions)	June 30, 2021				December 31, 2020				(in millions)	September 30, 2021				December 31, 2020
		Carrying value		Fair value		Carrying value		Fair value			Carrying value		Fair value		Carrying value		Fair value
Receivables facility	Receivables facility	$	0	$	0	$	0	$	0	Receivables facility	$	—	$	—	$	—	$	—
Senior secured credit facilities:	Senior secured credit facilities:									Senior secured credit facilities:
Euro term loans	Euro term loans	218.3		218.3		344.8		346.5		Euro term loans	212.3		212.3		344.8		346.5
Euro term loans	Euro term loans	385.1		385.6		0		0		Euro term loans	375.2		375.5		—		—
Euro term loans	Euro term loans	716.9		719.2		0		0		Euro term loans	698.6		698.6		—		—
U.S. dollar term loans	U.S. dollar term loans	357.3		358.0		546.7		548.1		U.S. dollar term loans	356.4		351.9		546.7		548.1
U.S. dollar term loans	U.S. dollar term loans	1,169.2		1,170.6		1,175.0		1,178.7		U.S. dollar term loans	1,169.1		1,161.1		1,175.0		1,178.7
2.625% secured notes	2.625% secured notes	770.3		789.9		795.0		815.7		2.625% secured notes	752.5		770.4		795.0		815.7
3.875% unsecured notes	3.875% unsecured notes	474.0		500.5		489.2		515.0		3.875% unsecured notes	463.0		484.7		489.2		515.0
4.625 % unsecured notes	4.625 % unsecured notes	1,550.0		1,635.7		1,550.0		1,648.7		4.625 % unsecured notes	1,550.0		1,635.5		1,550.0		1,648.7
Finance lease liabilities	Finance lease liabilities	72.4		72.4		71.5		71.5		Finance lease liabilities	72.0		72.0		71.5		71.5
Other	Other	19.8		19.8		0		0		Other	18.3		18.2		—		—
Total	Total	$	5,733.3	$	5,870.0	$	4,972.2	$	5,124.2	Total	$	5,667.4	$	5,780.2	$	4,972.2	$	5,124.2

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.

The following table presents changes to contingent consideration liabilities:


(in millions)	(in millions)	Six months ended June 30,				(in millions)	Nine months ended September 30,
		2021		2020			2021		2020
Beginning balance	Beginning balance	$	0	$	0	Beginning balance	$	—	$	—
Acquisitions	Acquisitions	35.6		0		Acquisitions	35.6		—
Changes to estimated fair value	Changes to estimated fair value	0		0		Changes to estimated fair value	—		—
Cash payments	Cash payments	0		0		Cash payments	—		—
Currency translation	Currency translation	(0.4)		0		Currency translation	(1.8)		—
Ending balance	Ending balance	$	35.2	$	0	Ending balance	$	33.8	$	—

We estimated the fair value of contingent consideration on a recurring basis using the average of probability-weighted potential payments specified in the purchase agreements, which were level 3 measurements. Changes to the estimated fair value will be recorded within selling, general and administrative expenses. The significant assumptions used in these calculations include forecasted results and the estimated likelihood of achievement for each performance scenario.

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

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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, 2020, 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.

~~We completed the acquisitions of Ritter GmbH and RIM Bio in the second quarter. These acquisitions did not materially impact the results of our operations for~~During the three ~~and six~~ months ended ~~June~~September 30, ~~2021.~~

~~In the second quarter of~~ 2021, we recorded net sales of ~~$1,858.6~~$1,834.3 million, net income of ~~$157.8~~$156.8 million and Adjusted EBITDA of ~~$366.6~~$359.2 million. Net sales increased by ~~25.7%~~14.3%, which included ~~20.5%~~10.2% organic growth compared to the same period in 2020. 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 acquisitions of Ritter GmbH and Rim Bio in the second quarter of 2021, the results of which are included in the “Results of operations” section below. Additionally, we entered into a definitive agreement to acquire Masterflex on September 7, 2021, which we expect to close on or about November 1, 2021. Details of these transactions can be found in footnote 1 to our financial statements.

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 and ~~six~~nine months ended ~~June~~September 30, 2021, as described further in the “Results of operations” section below. COVID-19 has also affected the ability of certain suppliers and vendors to provide products and services to certain of our businesses. While we have not experienced significant or widespread disruption to our supply chain, we have seen increased supply constraints that could have a material impact on our operations.

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, 2020, see “Part II—Item 7—Management's discussion and analysis of financial condition and results of operations” in the

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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.

~~Table~~ ~~of contents~~

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 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. The acquisitions of Ritter GmbH and RIM Bio did not materially impact the results of our operations for the three and ~~six~~nine months ended ~~June~~September 30, 2021. 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 equal to our cash flow from operating activities, plus acquisition-related costs paid in the period, less capital expenditures. We have amended our definition of free cash flow to exclude acquisition-related costs as they may be significant, individually or in aggregate, and may make it more difficult for investors to understand the free cash flows associated with the normal operations of our business. We believe that this measurement is useful to investors as it

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provides a view on the Company’s ability to generate cash for use in financing or investment activities. This measurement is used by management for the same reason.

~~Table~~ ~~of contents~~

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.

Executive summary


(dollars in millions)	(dollars in millions)	Three months ended June 30,						Change		(dollars in millions)	Three months ended September 30,						Change
		2021			2020						2021			2020
Net sales	Net sales	$	1,858.6		$	1,478.7		$	379.9	Net sales	$	1,834.3		$	1,605.0		$	229.3
Gross margin	Gross margin	33.7		%	33.2		%	50 bps		Gross margin	33.6		%	31.6		%	200 bps
Operating income	Operating income	$	254.7		$	166.6		$	88.1	Operating income	$	237.2		$	177.2		$	60.0
Net income	Net income	157.8			60.2			97.6		Net income	156.8			(42.2)			199.0
Adjusted EBITDA	Adjusted EBITDA	366.6			273.3			93.3		Adjusted EBITDA	359.2			285.6			73.6
Adjusted EBITDA margin	Adjusted EBITDA margin	19.7		%	18.5		%	125 bps		Adjusted EBITDA margin	19.6		%	17.8		%	180 bps

~~Second~~

Third quarter revenue growth reflects strong growth in the biopharma end market, along with modest growth in the healthcare ~~education & government~~ and advanced technologies & applied materialsend markets. ~~Our~~We continue to generate high single-digit demand in our core business, ~~continues to show a strong recovery as the global economy reopens following COVID-19 lockdowns. This growth was~~ augmented by our COVID-19 related sales of PPE and solutions to support diagnostic testing and vaccine production. Double-digit growth of our proprietary materials and consumables product group, commercial excellence ~~productivity~~ and ~~cost containment~~productivity contributed to gross margin and Adjusted EBITDA margin expansion.

Net sales

Three months ended


(in millions)	(in millions)	Three months ended June 30,				Reconciliation of net sales growth to organic net sales growth						(in millions)	Three months ended September 30,				Reconciliation of net sales growth to organic net sales growth
						Net sales growth		Foreign currency impact		Organic net sales growth							Net sales growth		Foreign currency impact		M&A Impact		Organic net sales growth
		2021		2020									2021		2020
Americas	Americas	$	1,069.8	$	857.5	$	212.3	$	9.6	$	202.7	Americas	$	1,045.0	$	950.5	$	94.5	$	3.8	$	4.2	$	86.5
Europe	Europe	666.0		521.0		145.0		59.0		86.0		Europe	674.7		562.1		112.6		9.1		41.9		61.6
AMEA	AMEA	122.8		100.2		22.6		6.2		16.4		AMEA	114.6		92.4		22.2		2.4		4.7		15.1
Total	Total	$	1,858.6	$	1,478.7	$	379.9	$	74.8	$	305.1	Total	$	1,834.3	$	1,605.0	$	229.3	$	15.3	$	50.8	$	163.2

Net sales increased ~~$379.9~~$229.3 million or ~~25.7%~~14.3%, which included ~~$74.8~~$15.3 million or ~~5.2%~~0.9% of favorable foreign currency impact and $50.8M or 3.2% of M&A impact. Organic growth in net sales was ~~$305.1~~$163.2 million or ~~20.5%~~10.2% and was primarily due to strong growth in our core business and a modest contribution from COVID-19 related sales. ~~The acquisitions of Ritter GmbH and RIM Bio did not materially impact the results of our operations for the three months ended June 30, 2021.~~

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In the Americas, net sales increased ~~$212.3~~$94.5 million or ~~24.8%~~10.0%, which included ~~$9.6~~$3.8 million or ~~1.2%~~0.4% of favorable foreign currency impact and $4.2 million or 0.5% of M&A impact. Organic growth in net sales was ~~$202.7~~$86.5 million or ~~23.6%~~9.1%. Additional information by end market is as follows:

•Biopharma — Sales grew double-digits ~~with~~driven by continued strong ~~growth~~demand in biopharma production ~~led by COVID-19 vaccine-related offerings~~ as well as ~~strong growth~~sequential improvement of demand in ~~the~~ research ~~& development business.~~and development.

•Healthcare — Sales ~~increased double-digits~~declined low single-digits primarily driven by a reduction of COVID-19 related diagnostic testing revenue. This was partially offset by double-digit growth of our biomaterials platform as demand for ~~materials and consumables in our medical/clinical reference lab business, COVID-19 diagnostic testing offerings and increased demand for our proprietary silicone offerings driven by recovery in~~ elective surgical ~~procedures.~~procedures continues to strengthen.

•Education and government — Sales ~~increased double-digits~~declined low single-digits primarily due to a reduction of Government purchases of COVID-19 related consumables. This was partially offset from a continued recovery in education demand from academic labs that had been closed ~~during the prior period~~ due to COVID-19. ~~This contributed to strong growth in university research as lab capacity continues to approach near full levels.~~

•Advanced technologies & applied materials — Sales increased ~~mid~~low single-digits driven by ~~high single-digit growth~~sales of proprietary materials and consumables ~~sales to our~~into production platforms such as semiconductors and aerospace and defense and continued improvement in industrial ~~customers and modest growth in our proprietary offerings into the semiconductor industry.~~demand.

In Europe, net sales increased ~~$145.0~~$112.6 million or ~~27.8%~~20.0%, which included ~~$59.0~~$9.1 million or ~~11.3%~~1.6% of favorable foreign currency impact and $41.9 million or 7.5% of M&A impact. Organic growth in net sales was ~~$86.0~~$61.6 million or ~~16.5%~~10.9%. Additional information by end market is as follows:

•Biopharma — Sales grew ~~in the~~ double-digits driven by continued strong demand in biopharma production for process ingredients, excipients and single-use ~~solutions to support COVID-19 vaccine production, as well as consumables and PPE.~~solutions.

•Healthcare — Sales grew ~~in the~~ double-digits due primarily to ~~sales of COVID-19 testing content and~~ increased demand for our proprietary silicone offerings driven by recovery in elective surgical ~~procedures.~~procedures and sales of COVID-19 testing content.

•Education & government — Sales ~~grew in the double-digits~~declined low single-digits primarily ~~from a recovery in education demand from academic labs that had been closed during the prior period~~ due to ~~COVID-19. This contributed to strong growth in university research as lab capacity continues to approach near full levels.~~a reduction of government purchases of COVID-19 related consumables.

•Advanced technologies & applied materials — Sales grew ~~in the~~ double-digits asdriven by sales of our laboratory materials, consumables and equipment and instrumentation ~~offerings returned to normalized levels.~~offering.

In AMEA, net sales increased ~~$22.6~~$22.2 million or ~~22.6%~~24.1%, which included ~~$6.2~~$2.4 million or ~~6.2%~~2.6% of favorable foreign currency impact and $4.7 million or 5.1% of M&A impact. Organic growth in net sales was ~~$16.4~~$15.1 million or 16.4%. Additional information by end market is as follows:

•Biopharma — Sales grew ~~in the double-digits~~high-single digits driven by strong ~~growth in~~demand for our proprietary ~~biopharma production materials~~offering of process ingredients, chromatography resins, excipients, and ~~single-use offerings.~~single use solutions.

•Advanced technologies & applied materials — Sales grew ~~mid single-digits~~double-digits primarily driven by ~~double-digit growth of~~strong demand for our proprietary offerings into the semiconductor industry.

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~~Six~~Nine months ended


(in millions)	(in millions)	Six months ended June 30,				Reconciliation of net sales growth to organic net sales growth						(in millions)	Nine months ended September 30,				Reconciliation of net sales growth to organic net sales growth
						Net sales growth		Foreign currency impact		Organic net sales growth							Net sales growth		Foreign currency impact		M&A Impact		Organic net sales growth
		2021		2020									2021		2020
Americas	Americas	$	2,104.9	$	1,756.6	$	348.3	$	14.4	$	333.9	Americas	$	3,149.9	$	2,707.1	$	442.8	$	18.6	$	4.2	$	420.0
Europe	Europe	1,316.4		1,065.0		251.4		110.0		141.4		Europe	1,991.1		1,627.1		364.0		119.1		41.9		203.0
AMEA	AMEA	222.9		176.1		46.8		9.9		36.9		AMEA	337.5		268.5		69.0		12.3		4.7		52.0
Total	Total	$	3,644.2	$	2,997.7	$	646.5	$	134.3	$	512.2	Total	$	5,478.5	$	4,602.7	$	875.8	$	150.0	$	50.8	$	675.0

Net sales increased ~~$646.5~~$875.8 million or ~~21.6%~~19.0%, which included ~~$134.3~~$150.0 million or ~~4.6%~~3.3% of favorable foreign currency impact and $50.8 million or 1.1% of M&A impact. Organic growth in net sales was ~~$512.2~~$675.0 million or ~~17.0%~~14.6% and was due to ~~both~~ growth in both our core business as well as COVID-19 related sales. ~~The acquisitions of Ritter GmbH and RIM Bio did not materially impact the results of our operations for the six months ended June 30, 2021.~~

In the Americas, net sales increased ~~$348.3~~$442.8 million or ~~19.8%~~16.4%, which included ~~$14.4~~$18.6 million or ~~0.8%~~0.7% of favorable foreign currency impact and $4.2 million or 0.2% of M&A impact. Organic growth in net sales was ~~$333.9~~$420.0 million or ~~19.0%~~15.5% for reasons similar to the three month period. Additionally, year-to-date revenue benefited from tailwinds associated with COVID-19 related diagnostic testing revenue in the first six months of 2021.

In Europe, net sales increased ~~$251.4~~$364.0 million or ~~23.6%~~22.4%, which included ~~$110.0~~$119.1 million or ~~10.3%~~7.3% of favorable foreign currency impact and $41.9 million or 2.6% of M&A impact. Organic growth in net sales was ~~$141.4~~$203.0 million or ~~13.3%~~12.5% for reasons similar to the three month period.

In AMEA, net sales increased ~~$46.8~~$69.0 million or ~~26.6%~~25.7%, which included ~~$9.9~~$12.3 million or ~~5.6%~~4.6% of favorable foreign currency impact and $4.7 million or 1.7% of M&A impact. Organic growth in net sales was ~~$36.9~~$52.0 million or ~~21.0%~~19.4% for reasons similar to the three month period.

Gross margin


		Three months ended June 30,				Change	Six months ended June 30,				Change		Three months ended September 30,				Change	Nine months ended September 30,				Change
		2021		2020			2021		2020				2021		2020			2021		2020
Gross margin	Gross margin	33.7	%	33.2	%	50 bps	34.0	%	33.1	%	90 bps	Gross margin	33.6	%	31.6	%	200 bps	33.9	%	32.6	%	130 bps

Three and ~~six~~nine months ended

Gross margin for the three and ~~six~~nine months ended ~~June~~September 30, 2021 increased 50200 basis points and 90130 basis points, respectively, resulting primarily from commercial excellence, productivity and favorable product mix due to strong sales of our proprietary product offerings.

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Operating income


(in millions)	(in millions)	Three months ended June 30,				Change		Six months ended June 30,				Change		(in millions)	Three months ended September 30,				Change		Nine months ended September 30,				Change
		2021		2020				2021		2020					2021		2020				2021		2020
Gross profit	Gross profit	$	626.5	$	490.6	$	135.9	$	1,239.3	$	992.5	$	246.8	Gross profit	$	615.9	$	506.4	$	109.5	$	1,855.2	$	1,498.9	$	356.3
Operating expenses	Operating expenses	371.8		324.0		47.8		718.3		667.5		50.8		Operating expenses	378.7		329.2		49.5		1,097.0		996.7		100.3
Operating income	Operating income	$	254.7	$	166.6	$	88.1	$	521.0	$	325.0	$	196.0	Operating income	$	237.2	$	177.2	$	60.0	$	758.2	$	502.2	$	256.0

Three and ~~six~~nine months ended

Gross profit for the three and ~~six~~nine months ended ~~June~~September 30, 2021 increased ~~$135.9~~$109.5 million and ~~$246.8~~$356.3 million, respectively, due to the reasons described above. The increase in operating expenses primarily relates to acquisition-related expenses, ~~and~~ increased incentive compensation expense due to our strong performance in the first ~~half~~nine months of ~~2021.~~2021 and unfavorable foreign exchange impacts.

Net income or loss


(in millions)	(in millions)	Three months ended June 30,				Change		Six months ended June 30,				Change		(in millions)	Three months ended September 30,				Change		Nine months ended September 30,				Change
		2021		2020				2021		2020					2021		2020				2021		2020
Operating income	Operating income	$	254.7	$	166.6	$	88.1	$	521.0	$	325.0	$	196.0	Operating income	$	237.2	$	177.2	$	60.0	$	758.2	$	502.2	$	256.0
Interest expense	Interest expense	(51.0)		(92.1)		41.1		(102.5)		(186.6)		84.1		Interest expense	(54.1)		(65.2)		11.1		(156.6)		(251.8)		95.2
Loss on extinguishment of debt	Loss on extinguishment of debt	(3.2)		—		(3.2)		(8.4)		—		(8.4)		Loss on extinguishment of debt	—		(226.4)		226.4		(8.4)		(226.4)		218.0
Other income, net	Other income, net	14.6		4.2		10.4		16.4		5.0		11.4		Other income, net	3.4		6.6		(3.2)		19.8		11.6		8.2
Income tax expense		(57.3)		(18.5)		(38.8)		(104.7)		(36.2)		(68.5)
Net income		$	157.8	$	60.2	$	97.6	$	321.8	$	107.2	$	214.6
Income tax (expense) benefit														Income tax (expense) benefit	(29.7)		65.6		(95.3)		(134.4)		29.4		(163.8)
Net income (loss)														Net income (loss)	$	156.8	$	(42.2)	$	199.0	$	478.6	$	65.0	$	413.6

Three and ~~six~~nine months ended

Net income for the three and ~~six~~nine months ended ~~June~~September 30, 2021 increased by ~~$97.6~~$199.0 million and ~~$214.6~~$413.6 million, respectively, primarily driven by the operating income growth detailed above, ~~and~~ lower interest expense from the repricings and refinancings of our debt for more favorable interest rates in ~~the second half of~~ 2020 and lower ~~debt. This~~net debt driven by our strong free cash flows. These refinancings also resulted in a loss on extinguishment of debt in 2020. The growth in operating income and reduction in interest expense was partially offset by higher income tax expense as a result of our higher pretax income and ~~a loss on extinguishment~~the absence of ~~debt~~an income tax benefit related to ~~optional prepayments.~~the release of valuation allowances in the third quarter of 2020.

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Adjusted EBITDA and Adjusted EBITDA margin

For a reconciliation of Adjusted EBITDA to Net income or loss, the most directly comparable measure under GAAP, see “Reconciliations of non-GAAP financial measures.”


(in millions)	(in millions)	Three months ended June 30,						Change			Six months ended June 30,						Change			(in millions)	Three months ended September 30,						Change			Nine months ended September 30,						Change
		2021			2020						2021			2020							2021			2020						2021			2020
Adjusted EBITDA:	Adjusted EBITDA:																			Adjusted EBITDA:
Americas	Americas	$	251.7		$	197.4		$	54.3		$	503.7		$	387.4		$	116.3		Americas	$	236.3		$	203.6		$	32.7		$	740.0		$	591.0		$	149.0
Europe	Europe	123.8			88.3			35.5			254.9			180.0			74.9			Europe	135.5			98.4			37.1			390.4			278.4			112.0
AMEA	AMEA	28.5			22.5			6.0			51.1			35.9			15.2			AMEA	29.5			20.9			8.6			80.5			56.8			23.7
Corporate	Corporate	(37.4)			(34.9)			(2.5)			(80.0)			(67.2)			(12.8)			Corporate	(42.1)			(37.3)			(4.8)			(122.0)			(104.5)			(17.5)
Total	Total	$	366.6		$	273.3		$	93.3		$	729.7		$	536.1		$	193.6		Total	$	359.2		$	285.6		$	73.6		$	1,088.9		$	821.7		$	267.2

Adjusted EBITDA margin	Adjusted EBITDA margin	19.7		%	18.5		%	1.2		%	20.0		%	17.9		%	2.1		%	Adjusted EBITDA margin	19.6		%	17.8		%	1.8		%	19.9		%	17.9		%	2.0		%

Three months ended

Adjusted EBITDA increased ~~$93.3~~$73.6 million or ~~34.2%~~25.8%, which included a favorable foreign currency translation impact of ~~$13.5~~$2.7 million or ~~5.0%. The reasons for the remaining growth of $79.8~~0.9% and $15.5 million or ~~29.2%, are discussed below:~~5.4% M&A impact.

In the Americas, Adjusted EBITDA grew ~~$54.3~~$32.7 million or ~~27.5%~~16.1%, or ~~26.5%~~14.9% when adjusted for favorable foreign currency translation ~~impact.~~impact and M&A. Gross margin expansion from commercial excellence, favorable volume, ~~commercial excellence~~strong mix from proprietary products and ~~product mix~~reduced inventory charges was partially offset by increased incentive compensation expense and ~~higher SG&A expenses when compared to reductions in the prior year related to COVID-19 lockdowns.~~inflationary pressures.

In Europe, Adjusted EBITDA grew ~~$35.5~~$37.1 million or ~~40.3%~~37.8%, or ~~28.8%~~24.3% when adjusted for favorable foreign currency translation impact and M&A, due to gross margin expansion from favorable volume and commercial excellence and strong mix from proprietary products partially offset by increased incentive compensation expense, inflationary pressures and ~~higher SG&A expenses when compared to reductions in the prior year related to COVID-19 lockdowns.~~operational foreign exchange impacts.

In AMEA, Adjusted EBITDA grew ~~$6.0~~$8.6 million or ~~26.2%~~41.1%, or ~~19.9%~~28.7% when adjusted for favorable foreign currency ~~translation.~~translation impact and M&A. In addition to the favorable sales volume ~~lower bad debt expense contributed to Adjusted EBITDA growth.~~we experienced a strong mix of proprietary products. This was partially offset by increased incentive compensation expense, inflationary pressures and ~~higher SG&A expenses when compared to reductions in the prior year related to COVID-19 lockdowns.~~operational foreign exchange impacts.

In Corporate, Adjusted EBITDA declined ~~$2.5~~$4.8 million or ~~7.0%~~12.8% reflecting higher incentive compensation expense, inflationary pressures and increased stock-based compensation expense.

~~Six~~Nine months ended

Adjusted EBITDA increased ~~$193.6~~$267.2 million or ~~36.1%~~32.5%, which included a favorable foreign currency translation impact of ~~$24.5~~$26.9 million or ~~4.5%. The reasons for the remaining growth of $169.1 million~~3.2% and $15.5M or ~~31.6%, are discussed below:~~

~~Table~~ ~~of contents~~

1.9% M&A impact.

In the Americas, Adjusted EBITDA grew ~~$116.3~~$149.0 million or ~~30.0%~~25.2%, or ~~29.2%~~24.3% when adjusted for favorable foreign currency translation impact and M&A for reasons similar to the three month period.

Table of contents

In Europe, Adjusted EBITDA grew ~~$74.9~~$112.0 million or ~~41.6%~~40.3%, or ~~31.0%~~28.7% when adjusted for favorable foreign currency translation impact and M&A for reasons similar to the three month period.

In AMEA, Adjusted EBITDA grew ~~$15.2~~$23.7 million or ~~42.2%~~41.7%, or ~~35.3%~~32.7% when adjusted for favorable foreign currency translation and M&A for reasons similar to the three month period.

In Corporate, Adjusted EBITDA declined ~~$12.8~~$17.5 million or ~~18.9%~~16.7% for reasons similar to the three month period.

Reconciliations of non-GAAP financial measures

The following table presents the reconciliation of net income or loss to Adjusted EBITDA:


(in millions)	(in millions)	Three months ended June 30,				Six months ended June 30,				(in millions)	Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Net income		$	157.8	$	60.2	$	321.8	$	107.2
Net income (loss)										Net income (loss)	$	156.8	$	(42.2)	$	478.6	$	65.0
Interest expense	Interest expense	51.0		92.1		102.5		186.6		Interest expense	54.1		65.2		156.6		251.8
Income tax expense		57.3		18.5		104.7		36.2
Income tax expense (benefit)										Income tax expense (benefit)	29.7		(65.6)		134.4		(29.4)
Depreciation and amortization	Depreciation and amortization	86.1		97.8		175.1		194.3		Depreciation and amortization	100.0		99.1		275.1		293.4
Loss on extinguishment of debt	Loss on extinguishment of debt	3.2		—		8.4		—		Loss on extinguishment of debt	—		226.4		8.4		226.4
Net foreign currency loss (gain) from financing activities		1.2		(1.8)		2.0		(0.2)
Net foreign currency (gain) loss from financing activities										Net foreign currency (gain) loss from financing activities	(0.8)		(4.1)		1.2		(4.3)
Other stock-based compensation expense	Other stock-based compensation expense	0.7		1.1		1.3		—		Other stock-based compensation expense	1.6		0.6		2.9		0.6
Acquisition-related expenses1	Acquisition-related expenses1	21.6		—		24.6		—		Acquisition-related expenses1	3.2		—		27.8		—
Integration-related expenses2	Integration-related expenses2	0.5		2.2		0.5		7.6		Integration-related expenses2	7.9		3.9		8.4		11.5
Restructuring and severance charges3		0.2		3.2		1.8		4.4
Receipt of disgorgement penalty4		(13.0)		—		(13.0)		—
Purchase accounting adjustments3										Purchase accounting adjustments3	6.3		—		6.3		—
Restructuring and severance charges4										Restructuring and severance charges4	0.4		2.3		2.2		6.7
Receipt of disgorgement penalty5										Receipt of disgorgement penalty5	—		—		(13.0)		—
Adjusted EBITDA	Adjusted EBITDA	$	366.6	$	273.3	$	729.7	$	536.1	Adjusted EBITDA	$	359.2	$	285.6	$	1,088.9	$	821.7

━━━━━━━━━

4.5.As described in note 13 to our unaudited interim financial statements.

Liquidity and capital resources

We fund short-term cash requirements primarily from operating cash flows. Most of our long-term financing is from indebtedness. For the three and ~~six~~nine month periods ended ~~June~~September 30, 2021, we generated ~~$263.8~~$261.9 million and ~~$390.7~~$652.6 million of cash from operating activities, respectively, ended the ~~quarter with~~

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~~$223.0~~quarter with $1,426.1 million of cash and cash equivalents and our availability under credit facilities was ~~$804.6~~$804.2 million. Required debt repayments due in the next twelve months other than required term loan payments are ~~$33.6~~$30.1 million. Included in our cash and cash equivalents balance at September 30, 2021 is $967.0 million of net proceeds that we raised through a secondary offering of our common stock on September 15, 2021, which will be used to partially finance the acquisition of Masterflex.

Liquidity

The following table presents our primary sources of liquidity:


(in millions)	(in millions)	June 30, 2021						(in millions)	September 30, 2021
		Receivables facility		Revolving credit facility		Total			Receivables facility		Revolving credit facility		Total
Unused availability under credit facilities:	Unused availability under credit facilities:							Unused availability under credit facilities:
Capacity	Capacity	$	300.0	$	515.0	$	815.0	Capacity	$	300.0	$	515.0	$	815.0
Undrawn letters of credit outstanding	Undrawn letters of credit outstanding	(8.8)		(1.6)		(10.4)		Undrawn letters of credit outstanding	(9.2)		(1.6)		(10.8)
Outstanding borrowings	Outstanding borrowings	—		—		—		Outstanding borrowings	—		—		—
Unused availability	Unused availability	$	291.2	$	513.4	$	804.6	Unused availability	$	290.8	$	513.4	$	804.2
Cash and cash equivalents	Cash and cash equivalents					223.0		Cash and cash equivalents					1,426.1
Total liquidity	Total liquidity					$	1,027.6	Total liquidity					$	2,230.3

~~We fund short-term cash requirements primarily from operating cash flows.~~ Some of our credit line availability depends upon maintaining a sufficient borrowing base of eligible accounts receivable. We believe that we have sufficient capital resources to meet our liquidity needs.

At ~~June~~September 30, 2021, ~~$194.1~~$236.6 million or ~~87.0%~~16.6% of our ~~$223.0~~$1,426.1 million in cash and cash equivalents was held by our non-U.S. subsidiaries and may be subject to certain taxes upon repatriation, primarily where foreign withholding taxes apply.

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Historical cash flows

The following table presents a summary of cash provided by (used in) various activities:


(in millions)	(in millions)	Six months ended June 30,				Change		(in millions)	Nine months ended September 30,				Change
		2021		2020					2021		2020
Operating activities:	Operating activities:							Operating activities:
Net income	Net income	$	321.8	$	107.2	214.6		Net income	$	478.6	$	65.0	413.6
Non-cash items	Non-cash items	236.3		241.9		(5.6)		Non-cash items	347.1		533.2		(186.1)
Working capital changes1,2	Working capital changes1,2	(158.7)		(35.2)		(123.5)		Working capital changes1,2	(175.1)		(31.1)		(144.0)
All other		(8.7)		28.4		(37.1)
All other1								All other1	2.0		56.7		(54.7)
Total	Total	$	390.7	$	342.3	$	48.4	Total	$	652.6	$	623.8	$	28.8
Investing activities	Investing activities	$	(1,203.9)	$	(24.4)	$	(1,179.5)	Investing activities	$	(1,238.2)	$	(40.3)	$	(1,197.9)
Cash paid for acquisitions, net of cash acquired	Cash paid for acquisitions, net of cash acquired	(1,166.7)		—		(1,166.7)		Cash paid for acquisitions, net of cash acquired	(1,168.9)		—		(1,168.9)
Capital expenditures	Capital expenditures	(38.5)		(26.1)		(12.4)		Capital expenditures	(71.1)		(41.4)		(29.7)
Financing activities	Financing activities	777.8		(86.4)		864.2		Financing activities	1,758.2		(402.5)		2,160.7

━━━━━━━━━

1.The ~~amount~~amounts previously reported as ~~working~~“working capital ~~changes~~changes” and “all other” for ~~six~~the nine months ended ~~June~~September 30, 2020 ~~has~~have been revised in the above table to give effect to the correction of an immaterial classification error disclosed in note 1 to our unaudited interim financial statements.

2.Includes changes to our accounts receivable, inventory, contract assets and accounts payable.

Cash flows from operating activities provided ~~$48.4~~$28.8 million more cash in 2021 primarily due to significantly higher net income offset by increased working capital requirements and larger payouts under our incentive compensation plan due to the strong performance of our business.

Investing activities used ~~$1,179.5~~$1,197.9 million more cash in 2021, reflecting cash paid to acquire Ritter GmbH and RIM Bio, as well as increased capital spending.

Financing activities provided ~~$864.2~~$2,160.7 million more cash in 2021 primarily due to our secondary equity offering, the issuance of new tranches of Euro term loans to finance the acquisition of Ritter GmbH, ~~offset by optional prepayments on our existing term loans under our senior secured credit facilities.~~and higher proceeds from employees exercising stock options.

Free cash flow


(in millions)	(in millions)	Six months ended June 30,				Change		(in millions)	Nine months ended September 30,				Change
		2021		2020					2021		2020
Net cash provided by operating activities	Net cash provided by operating activities	$	390.7	$	342.3	$	48.4	Net cash provided by operating activities	$	652.6	$	623.8	$	28.8
Acquisition-related expenses paid	Acquisition-related expenses paid	24.6		—		24.6		Acquisition-related expenses paid	24.6		—		24.6
Capital expenditures	Capital expenditures	(38.5)		(26.1)		(12.4)		Capital expenditures	(71.1)		(41.4)		(29.7)
Free cash flow	Free cash flow	$	376.8	$	316.2	$	60.6	Free cash flow	$	606.1	$	582.4	$	23.7

Free cash flow was ~~$60.6~~$23.7 million higher in 2021 due to the changes in cash flows from operating activities noted above, which included the payment of $24.6 million of non-recurring costs related to the ~~acquisitions of~~

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acquisitions of Ritter and RIM Bio, offset by an increase in capital spending. Refer to “Reconciliations of non-GAAP financial measures” for disclosure regarding acquisition-related expenses.

Indebtedness

For information about our indebtedness, refer to the section entitled “Liquidity” and note 10 to our unaudited condensed consolidated financial statements included in Part I, Item 1 — “Financial statements.”

New accounting standards

For information about new accounting standards, see note 2 to our unaudited condensed consolidated financial statements included in Part I, Item 1 — “Financial statements.”

Item 3. Quantitative and qualitative disclosures about market risk

There have been no significant changes to the disclosures about market risk included in our Annual Report.

Item 4. Controls and procedures

Management’s evaluation of disclosure controls and procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~June~~September 30, 2021, the design and operation of our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the fiscal quarter ended ~~June~~September 30, 2021 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal proceedings

In April 2018 the EPA notified us of potential liabilities under the Toxic Substances Control Act and the Emergency Planning and Community Right to Know Act that were identified in March 2017 and June 2017 inspections of our Phillipsburg, New Jersey facility. The alleged violations relate to our failure to timely file reports regarding the Phillipsburg facility. We have also become aware of additional potential liabilities under the Toxic Substances Control Act relating to failure to timely file reports regarding the Paris, Kentucky facility, and relating to export shipments of elemental mercury, which we have voluntarily disclosed to the EPA. We have taken steps to correct these errors and have filed amended reports. Through our cooperation with the EPA, we believe that we will settle the matter for less than $1 million.

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For additional information regarding legal proceedings and matters, see note 9 to our unaudited condensed consolidated financial statements included in Part I, Item 1 — “Financial Statements,” which information is incorporated into this item by reference.

Item 1A. Risk factors

For information regarding factors that could affect the Company's results of operations, financial condition and liquidity, see the risk factors discussed in Part I, Item 1A “Risk Factors” in our Annual Report. There have been no material changes to the risk factors disclosed in Part I—Item 1A of the Annual Report.

Item 2. Unregistered sales of equity securities and use of proceeds

None.

Item 3. Defaults upon senior securities

None.

Item 4. Mine safety disclosures

Not applicable.

Item 5. Other information

None.

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Item 6. Exhibits

Location of exhibits

Exhibit no.

Exhibit description

Form

Exhibit no.

Filling date

Exhibit no.

Exhibit description

Form

Exhibit no.

Filling date

3.1

Third Amended and Restated Certificate of Incorporation, effective May 13, 2021

8-K

3.1

5/17/2021

10.1

Amendment No. 6 to the Credit Agreement, dated as of November 21, 2017 (as amended by Amendment No. 1 to Credit Agreement, dated as of November 27, 2018, Amendment No. 2 to Credit Agreement, dated as of June 18, 2019, Amendment No. 3 to Credit Agreement, dated as of January 24, 2020, Amendment No. 4 to Credit Agreement, dated as of July 14, 2020 and Amendment No. 5 to Credit Agreement, dated as of November 6, 2020), among Vail Holdco Sub LLC, Avantor Funding, Inc., each of the Guarantors, each of the lenders from time to time party thereto and Goldman Sachs Bank USA, as administrative agent and collateral agent, Swing Line Lender and an L/C Issuer, the lenders party thereto and Citibank, N.A., as the New Term Lender

8-K

10.1

6/14/2021

10.1

Indenture, dated as of October 26, 2021, among Avantor Funding, Inc., the guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee.

8-K

4.1

10/26/2021

10.2

Amendment No. 7 to the Credit Agreement, dated as of November 21, 2017 (as amended by Amendment No. 1 to Credit Agreement, dated as of November 27, 2018, Amendment No. 2 to Credit Agreement, dated as of June 18, 2019, Amendment No. 3 to Credit Agreement, dated as of January 24, 2020, Amendment No. 4 to Credit Agreement, dated as of July 14, 2020, Amendment No. 5 to Credit Agreement, dated as of November 6, 2020 and Amendment No. 6 to Credit Agreement, dated as of June 10, 2021), among Vail Holdco Sub LLC, Avantor Funding, Inc., each of the Guarantors, each of the lenders from time to time party thereto and Goldman Sachs Bank USA, as administrative agent and collateral agent, Swing Line Lender and an L/C Issuer, the lenders party thereto and Bank of America, N.A., as the Additional Initial B-4 Dollar Term Lender and as the Additional Incremental B-5 Dollar Term Lender

8-K

10.1

7/09/2021

10.3

Amended and Restated Employment Letter Agreement, dated April 2, 2019, between Michael Wondrasch and VWR Management Services, LLC

31.1

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.1

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)

32.1

Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)

32.2

Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)

32.2

Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)

101

XBRL exhibits

101

XBRL exhibits

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

━━━━━━━━━

* Filled herewith

** Furnished herewith

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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 thereunto duly authorized.


	Avantor, Inc.

Date: ~~July 30,~~October 29, 2021	By:	/s/ Steven Eck
		Name:	Steven Eck
		Title:	Senior Vice President, Chief Accounting Officer (Principal Accounting Officer)

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(in millions, except per share data)	Three months ended June 30, 2021					Six months ended June 30, 2021
	Earnings (numerator)		Weighted average shares outstanding (denominator)	Earnings per share		Earnings (numerator)		Weighted average shares outstanding (denominator)	Earnings per share
Basic	$	141.6	582.6	$	0.24	$	289.5	581.9	$	0.50
Dilutive effect of stock-based awards	0		8.5			0		8.4
Diluted	$	141.6	591.1	$	0.24	$	289.5	590.3	$	0.49