UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q

______________________________

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

For the quarterly period ended ~~December~~March 31, ~~2021~~2022

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

001-36587

(Commission File Number)

_____________________________

Catalent, Inc.

(Exact name of registrant as specified in its charter)

_____________________________

Delaware

20-8737688

~~(State~~ (State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

14 Schoolhouse Road,

~~14 Schoolhouse Road,~~

Somerset,

08873

~~(Address~~ (Address of principal executive offices)_______

(Zip code)

(732) 537-6200

Registrant's telephone number, including area code

____________________________________

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 and posted 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

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbols(s)	Name of each exchange on which registered
Common Stock	CTLT	New York Stock Exchange

On ~~January 25,~~April 26, 2022, there were ~~179,104,173~~179,213,237 shares of the Registrant's common stock, par value $0.01 per share, issued and outstanding.

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CATALENT, INC.

Index to Form 10-Q

For the Three and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2021~~2022


Item		Page

Part I.	Financial Information

Item 1.	Financial Statements (unaudited)	5

	Consolidated Statements of Operations for the Three and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2021~~202 2 and ~~December~~March 31, ~~2020~~202 1	5

	Consolidated Statements of Comprehensive Income for the Three and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2021~~202 2 and ~~December~~March 31, ~~2020~~202 1	6

	Consolidated Balance Sheets as of ~~December~~March 31, ~~2021~~202 2 and June 30, 2021	7

	Consolidated Statement of Changes in Shareholders' Equity for the Three and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2021~~202 2 and ~~December~~March 31, ~~2020~~202 1	8

	Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~December~~March 31, ~~2021~~202 2 and ~~December~~March 31, ~~2020~~202 1	10

	Notes to Unaudited Consolidated Financial Statements	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3132

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4950

Item 4.	Controls and Procedures	5051

Part II.	Other Information	5152

Item 1.	Legal Proceedings	5152

Item 1A.	Risk Factors	5152

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5152

Item 3.	Defaults Upon Senior Securities	5152

Item 4.	Mine Safety Disclosures	5152

Item 5.	Other Information	5152

Item 6.	Exhibits	5253

Signatures		5354

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Special Note Regarding Forward-Looking Statements

In addition to historical information, this Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. All statements, other than statements of historical facts, included in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words.

These statements are based on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments, and other factors they believe to be appropriate. Any forward-looking statement is subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements.

Some of the factors that may cause actual results, developments and business decisions to differ materially from those contemplated by such forward-looking statements include, but are not limited to, those described under the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 (the “Fiscal 2021 10-K”) and others, which are summarized below:

Risks Relating to Our Business and the Industry in Which We Operate

•Our business, financial condition, and operations may be adversely affected by global health developments, including the pandemic resulting from the SARS-Co-V-2 strain of coronavirus and its variants (“COVID-19”).

•The continually evolving nature of the COVID-19 pandemic and the resulting public health response, including the changing demand for various COVID-19 vaccines and treatments from both patients and governments around the world, may affect sales of our products and services, including the COVID-19 products we manufacture.

•We participate in a highly competitive market, and increased competition may adversely affect our business.

•The demand for our offerings depends in part on our customers’ research and development and the clinical and market success of their products.

•We are subject to product and other liability risks that could exceed our anticipated costs or adversely affect our results of operations, financial condition, liquidity, and cash flows.

•We are a part of the highly regulated healthcare industry, subject to stringent regulatory standards and other applicable laws and regulations, which can change unexpectedly and may adversely impact our business.

•Any failure to implement fully, monitor, and improve our quality management strategy could lead to quality or safety issues and expose us to significant costs, potential liability, and adverse publicity.

•If we cannot keep pace with rapid technological advances, our services may become uncompetitive or obsolete.

•Any failure to protect or maintain our intellectual property may adversely affect our competitive edge and result in loss of revenue and reputation.

•Future price fluctuations, material shortages of raw materials, or changes in healthcare policies may have an adverse effect on our results of operations and financial conditions.

•Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

•We may be unable to attract or retain key personnel.

•We may be unsuccessful in integrating our acquisitions, and we may expend substantial amounts of cash and incur debt in making acquisitions.

•Our global operations are subject to economic and political risks, which could affect the profitability of our operations or require costly changes to our procedures.

•As a global enterprise, fluctuations in the exchange rate of the United States ("U.S.") dollar, our reporting currency, against other currencies could have a material adverse effect on our financial performance and results of operations.

•Tax legislative or regulatory initiatives, new interpretations or developments concerning existing tax laws, or challenges to our tax positions could adversely affect our results of operations and financial condition.

•We use advanced information and communication systems to run our operations, compile and analyze financial and operational data, and communicate among our employees, customers, and counter-parties, and the risks generally associated with information and communications systems could adversely affect our results of operations. We are

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continuously working to install new, and upgrade existing systems and provide employee awareness training around phishing, malware, and other cyber security risks to enhance the protections available to us, but such protections may be inadequate to address malicious attacks or inadvertent compromises of data security.

•Cell and gene therapies are relatively new modes of treatment and subject to changing public opinion, continuing research, and increased regulatory scrutiny, each of which may affect our customers' ability to conduct their business, or obtain approvals for their therapies, and thereby adversely affect our cell or gene therapy offerings.

•Future revenue may be subject to increased volatility because a material portion of our net revenue is derived from a limited number of customers.

Risks Relating to Our Indebtedness

•Our substantial ~~leverage~~indebtedness could limit our ability to operate our business and to finance future operations or acquisitions that would enhance our growth.

•Our debt agreements contain restrictions that may limit our flexibility in conducting certain current and future operations.

•We may not be able to pay our indebtedness when it becomes due.

•Our current and potential future use of derivative financial instruments may expose us to economic losses in the event of price or currency fluctuations.

Risks Relating to Ownership of Our Common Stock

•Our stock price has historically been and may continue to be volatile.

•Because we have no plan to pay cash dividends on our common stock, par value $0.01 (the “Common Stock”) for the foreseeable future, receiving a return on an investment in our Common Stock may require a sale for a net price greater than was paid for it.

•Provisions in our organizational documents could delay or prevent a change of control.

We caution you that the risks, uncertainties, and other factors referenced above may not contain all of the risks, uncertainties, and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits, or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. There can be no assurance that (i) we have correctly measured or identified all of the factors affecting our business or the extent of these factors’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct, or (iv) our strategy, which is based in part on this analysis, will be successful. All forward-looking statements in this report apply only as of the date of this report or as of the date they were made and we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as required by law.

Social Media

We use our website (catalent.com), our corporate Facebook page (https://facebook.com/CatalentPharmaSolutions), and our corporate Twitter account (@catalentpharma) as channels for the distribution of information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, Securities and Exchange Commission (“SEC”) filings, and public conference calls and webcasts. The contents of our website and social media channels are not, however, a part of this report.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Catalent, Inc.

Consolidated Statements of Operations

(Unaudited; dollars in millions, except per share data)


		Three Months Ended December 31,				Six Months Ended December 31,					Three Months Ended March 31,				Nine Months Ended March 31,
		2021		2020		2021		2020			2022		2021		2022		2021
Net revenue	Net revenue	$	1,217	$	911	$	2,242	$	1,757	Net revenue	$	1,273	$	1,053	$	3,515	$	2,810
Cost of sales	Cost of sales	812		613		1,513		1,210		Cost of sales	850		687		2,363		1,897
Gross margin	Gross margin	405		298		729		547		Gross margin	423		366		1,152		913
Selling, general, and administrative expenses	Selling, general, and administrative expenses	228		165		411		330		Selling, general, and administrative expenses	207		173		618		503
Gain on sale of subsidiary	Gain on sale of subsidiary	—		—		(1)		—		Gain on sale of subsidiary	—		(184)		(1)		(184)
Other operating expense	Other operating expense	16		6		20		9		Other operating expense	5		8		25		17
Operating earnings	Operating earnings	161		127		299		208		Operating earnings	211		369		510		577
Interest expense, net	Interest expense, net	32		26		58		51		Interest expense, net	33		27		91		78
Other expense (income), net		14		(8)		23		(19)
Other expense, net										Other expense, net	2		25		25		5
Earnings before income taxes	Earnings before income taxes	115		109		218		176		Earnings before income taxes	176		317		394		494
Income tax expense	Income tax expense	18		21		28		5		Income tax expense	35		85		63		91

Net earnings	Net earnings	97		88		190		171		Net earnings	141		232		331		403

Less: Net earnings attributable to preferred shareholders	Less: Net earnings attributable to preferred shareholders	(4)		(11)		(13)		(26)		Less: Net earnings attributable to preferred shareholders	—		(15)		(15)		(43)
Net earnings attributable to common shareholders	Net earnings attributable to common shareholders	$	93	$	77	$	177	$	145	Net earnings attributable to common shareholders	$	141	$	217	$	316	$	360

Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic									Basic

Net earnings	Net earnings	$	0.53	$	0.46	$	1.02	$	0.88	Net earnings	$	0.78	$	1.27	$	1.81	$	2.15
Diluted	Diluted									Diluted

Net earnings	Net earnings	$	0.52	$	0.45	$	1.01	$	0.87	Net earnings	$	0.78	$	1.26	$	1.79	$	2.12

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Catalent, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited; dollars in millions)

Three Months Ended
December 31, Six Months Ended
December 31,
2021 2020 2021 2020
Net earnings $ 97 $ 88 $ 190 $ 171
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments (18) 39 (32) 55
Pension and other post-retirement adjustments — 1 1 1
Net change in marketable securities (1) — (1) —
Derivatives and hedges 3 — 4 1
Other comprehensive (loss) income, net of tax (16) 40 (28) 57
Comprehensive income $ 81 $ 128 $ 162 $ 228


	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Net earnings	$	141	$	232	$	331	$	403
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments	(22)		—		(54)		55
Pension and other post-retirement adjustments	1		1		2		1
Net change in marketable securities	(1)		—		(2)		—


Derivatives and hedges	17		5		21		6
Other comprehensive (loss) income, net of tax	(5)		6		(33)		62
Comprehensive income	$	136	$	238	$	298	$	465

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Catalent, Inc.

Consolidated Balance Sheets

(Unaudited; in millions, except share and per share data)


		December 31, 2021		June 30, 2021			March 31, 2022		June 30, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	849	$	896	Cash and cash equivalents	$	786	$	896
Trade receivables, net of allowance for credit losses of $23 and $12, respectively		871		1,012
Trade receivables, net of allowance for credit losses of $28 and $12, respectively						Trade receivables, net of allowance for credit losses of $28 and $12, respectively	932		1,012
Inventories	Inventories	688		563		Inventories	676		563
Prepaid expenses and other	Prepaid expenses and other	500		376		Prepaid expenses and other	537		376
Marketable securities	Marketable securities	66		71		Marketable securities	94		71
Total current assets	Total current assets	2,974		2,918		Total current assets	3,025		2,918
Property, plant, and equipment, net of accumulated depreciation of $1,255 and $1,179, respectively		2,727		2,524
Property, plant, and equipment, net of accumulated depreciation of $1,308 and $1,179, respectively						Property, plant, and equipment, net of accumulated depreciation of $1,308 and $1,179, respectively	2,820		2,524
Other assets:	Other assets:					Other assets:
Goodwill	Goodwill	3,026		2,519		Goodwill	3,012		2,519
Other intangibles, net	Other intangibles, net	1,132		817		Other intangibles, net	1,097		817
Deferred income taxes	Deferred income taxes	65		66		Deferred income taxes	68		66
Other long-term assets	Other long-term assets	279		268		Other long-term assets	300		268
Total assets	Total assets	$	10,203	$	9,112	Total assets	$	10,322	$	9,112

LIABILITIES, REDEEMABLE PREFERRED STOCK, AND SHAREHOLDERS' EQUITY	LIABILITIES, REDEEMABLE PREFERRED STOCK, AND SHAREHOLDERS' EQUITY					LIABILITIES, REDEEMABLE PREFERRED STOCK, AND SHAREHOLDERS' EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of long-term obligations and other short-term borrowings	Current portion of long-term obligations and other short-term borrowings	$	29	$	75	Current portion of long-term obligations and other short-term borrowings	$	29	$	75
Accounts payable	Accounts payable	363		385		Accounts payable	401		385
Other accrued liabilities	Other accrued liabilities	653		736		Other accrued liabilities	616		736
Total current liabilities	Total current liabilities	1,045		1,196		Total current liabilities	1,046		1,196
Long-term obligations, less current portion	Long-term obligations, less current portion	4,191		3,166		Long-term obligations, less current portion	4,157		3,166
Pension liability	Pension liability	127		137		Pension liability	122		137
Deferred income taxes	Deferred income taxes	189		164		Deferred income taxes	211		164
Other liabilities	Other liabilities	170		175		Other liabilities	154		175
Commitment and contingencies (see Note 15)	Commitment and contingencies (see Note 15)	—		—		Commitment and contingencies (see Note 15)	—		—

Total liabilities	Total liabilities	5,722		4,838		Total liabilities	5,690		4,838
Redeemable preferred stock, $0.01 par value; 0 and 1 million shares authorized at December 31 and June 30, 2021, respectively; 0 and 0.4 million shares issued and outstanding at December 31 and June 30, 2021, respectively		—		359
Redeemable preferred stock, $0.01 par value; 0 and 1 million shares authorized at March 31, 2022 and June 30, 2021, respectively; 0 and 0.4 million shares issued and outstanding at March 31, 2022 and June 30, 2021, respectively						Redeemable preferred stock, $0.01 par value; 0 and 1 million shares authorized at March 31, 2022 and June 30, 2021, respectively; 0 and 0.4 million shares issued and outstanding at March 31, 2022 and June 30, 2021, respectively	—		359
Shareholders' equity:	Shareholders' equity:					Shareholders' equity:
Common stock, $0.01 par value; 1.00 billion shares authorized at December 31 and June 30, 2021; 179 million and 171 million issued and outstanding at December 31 and June 30, 2021, respectively		2		2
Preferred stock, $0.01 par value; 100 million shares and 99 million shares authorized at December 31 and June 30, 2021, respectively; 0 shares issued and outstanding at December 31 and June 30, 2021		—		—
Common stock, $0.01 par value; 1.00 billion shares authorized at March 31, 2022 and June 30, 2021; 179 million and 171 million issued and outstanding at March 31, 2022 and June 30, 2021, respectively						Common stock, $0.01 par value; 1.00 billion shares authorized at March 31, 2022 and June 30, 2021; 179 million and 171 million issued and outstanding at March 31, 2022 and June 30, 2021, respectively	2		2
Preferred stock, $0.01 par value; 100 million shares and 99 million shares authorized at March 31, 2022 and June 30, 2021, respectively; 0 shares issued and outstanding at March 31, 2022 and June 30, 2021						Preferred stock, $0.01 par value; 100 million shares and 99 million shares authorized at March 31, 2022 and June 30, 2021, respectively; 0 shares issued and outstanding at March 31, 2022 and June 30, 2021	—		—

Additional paid in capital	Additional paid in capital	4,615		4,205		Additional paid in capital	4,630		4,205
Retained earnings	Retained earnings	209		25		Retained earnings	350		25
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(345)		(317)		Accumulated other comprehensive loss	(350)		(317)

Total shareholders' equity	Total shareholders' equity	4,481		3,915		Total shareholders' equity	4,632		3,915
Total liabilities, redeemable preferred stock, and shareholders' equity	Total liabilities, redeemable preferred stock, and shareholders' equity	$	10,203	$	9,112	Total liabilities, redeemable preferred stock, and shareholders' equity	$	10,322	$	9,112

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Catalent, Inc.

Consolidated Statement of Changes in Shareholders' Equity

(Unaudited; dollars in millions, except share data in thousands)

Three Months Ended ~~December~~March 31, ~~2021~~2022


		Shares of Common Stock	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity		Redeemable Preferred Stock			Shares of Common Stock	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity		Redeemable Preferred Stock
Balance at September 30, 2021		171,033	$	2	$	4,234	$	114	$	(329)	$	4,021	$	359
Balance at December 31, 2021															Balance at December 31, 2021	179,050	$	2	$	4,615	$	209	$	(345)	$	4,481	$	—

Share issuances related to stock- based compensation	Share issuances related to stock- based compensation	199	—		—		—		—		—		—		Share issuances related to stock- based compensation	97	—		—		—		—		—		—
Conversion of redeemable preferred stock		7,818	—		362		—		—		362		(359)

Stock-based compensation	Stock-based compensation	—	—		11		—		—		11		—		Stock-based compensation	—	—		10		—		—		10		—
Cash paid, in lieu of equity, for tax withholding		—	—		(5)		—		—		(5)		—

Exercise of stock options	Exercise of stock options	—	—		11		—		—		11		—		Exercise of stock options	—	—		2		—		—		2		—
Employee stock purchase plan	Employee stock purchase plan	—	—		2		—		—		2		—		Employee stock purchase plan	—	—		3		—		—		3		—

Preferred dividend ($12.50 per share of redeemable preferred stock)		—	—		—		(2)		—		(2)		—

Net earnings	Net earnings	—	—		—		97		—		97		—		Net earnings	—	—		—		141		—		141		—
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—	—		—		—		(16)		(16)		—		Other comprehensive income, net of tax	—	—		—		—		(5)		(5)		—
Balance at December 31, 2021		179,050	$	2	$	4,615	$	209	$	(345)	$	4,481	$	—
Balance at March 31, 2022															Balance at March 31, 2022	179,147	$	2	$	4,630	$	350	$	(350)	$	4,632	$	—

Three Months Ended ~~December~~March 31, ~~2020~~2021


		Shares of Common Stock	Common Stock		Additional Paid in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Shareholders' Equity		Redeemable Preferred Stock			Shares of Common Stock	Common Stock		Additional Paid in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Shareholders' Equity		Redeemable Preferred Stock
Balance at September 30, 2020		164,567	$	2	$	3,901	$	(461)	$	(370)	$	3,072	$	607
Balance at December 31, 2020															Balance at December 31, 2020	170,133	$	2	$	4,161	$	(377)	$	(330)	$	3,456	$	359

Share issuances related to stock- based compensation	Share issuances related to stock- based compensation	174	—		—		—		—		—		—		Share issuances related to stock- based compensation	166	—		—		—		—		—		—
Conversion of redeemable preferred stock		5,392	—		253		—		—		253		(248)

Stock-based compensation	Stock-based compensation	—	—		12		—		—		12		—		Stock-based compensation	—	—		8		—		—		8		—
Cash paid, in lieu of equity, for tax withholding	Cash paid, in lieu of equity, for tax withholding	—	—		(7)		—		—		(7)		—		Cash paid, in lieu of equity, for tax withholding	—	—		(1)		—		—		(1)		—

Exercise of stock options															Exercise of stock options	—	—		15		—		—		15		—
Employee stock purchase plan	Employee stock purchase plan	—	—		2		—		—		2		—		Employee stock purchase plan	—	—		2		—		—		2		—
Preferred dividend ($12.50 per share of redeemable preferred stock)	Preferred dividend ($12.50 per share of redeemable preferred stock)	—	—		—		(4)		—		(4)		—		Preferred dividend ($12.50 per share of redeemable preferred stock)	—	—		—		(5)		—		(5)		—
Net earnings	Net earnings	—	—		—		88		—		88		—		Net earnings	—	—		—		232		—		232		—
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—	—		—		—		40		40		—		Other comprehensive income, net of tax	—	—		—		—		6		6		—
Balance at December 31, 2020		170,133	$	2	$	4,161	$	(377)	$	(330)	$	3,456	$	359
Balance at March 31, 2021															Balance at March 31, 2021	170,299	$	2	$	4,185	$	(150)	$	(324)	$	3,713	$	359

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Catalent, Inc.

Consolidated Statement of Changes in Shareholders' Equity

(Unaudited; dollars in millions, except share data in thousands)

~~Six months~~Nine Months ended ~~December~~March 31, ~~2021~~2022


		Shares of Common Stock	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity		Redeemable Preferred Stock			Shares of Common Stock	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity		Redeemable Preferred Stock
Balance at June 30, 2021	Balance at June 30, 2021	170,549	$	2	$	4,205	$	25	$	(317)	$	3,915	$	359	Balance at June 30, 2021	170,549	$	2	$	4,205	$	25	$	(317)	$	3,915	$	359

Share issuances related to stock- based compensation	Share issuances related to stock- based compensation	683	—		—		—		—		—		—		Share issuances related to stock- based compensation	780	—		—		—		—		—		—
Conversion of redeemable preferred stock	Conversion of redeemable preferred stock	7,818	—		362		—		—		362		(359)		Conversion of redeemable preferred stock	7,818	—		362		—		—		362		(359)
Stock-based compensation	Stock-based compensation	—	—		32		—		—		32		—		Stock-based compensation	—	—		42		—		—		42		—
Cash paid, in lieu of equity, for tax withholding	Cash paid, in lieu of equity, for tax withholding	—	—		(9)		—		—		(9)		—		Cash paid, in lieu of equity, for tax withholding	—	—		(9)		—		—		(9)		—
Exercise of stock options	Exercise of stock options	—	—		19		—		—		19		—		Exercise of stock options	—	—		21		—		—		21		—
Employee stock purchase plan	Employee stock purchase plan	—	—		6		—		—		6		—		Employee stock purchase plan	—	—		9		—		—		9		—
Preferred dividend ($12.50 per share of redeemable preferred stock)	Preferred dividend ($12.50 per share of redeemable preferred stock)	—	—		—		(6)		—		(6)		—		Preferred dividend ($12.50 per share of redeemable preferred stock)	—	—		—		(6)		—		(6)		—
Net earnings	Net earnings	—	—		—		190		—		190		—		Net earnings	—	—		—		331		—		331		—
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—	—		—		—		(28)		(28)		—		Other comprehensive loss, net of tax	—	—		—		—		(33)		(33)		—
Balance at December 31, 2021		179,050	$	2	$	4,615	$	209	$	(345)	$	4,481	$	—
Balance at March 31, 2022															Balance at March 31, 2022	179,147	$	2	$	4,630	$	350	$	(350)	$	4,632	$	—

~~Six~~Nine Months Ended ~~December~~March 31, ~~2020~~2021

Shares of Common Stock Common Stock Additional Paid in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Shareholders' Equity Redeemable Preferred Stock
Balance at June 30, 2020 162,788 $ 2 $ 3,819 $ (535) $ (387) $ 2,899 $ 607
Equity offering, sale of common
     stock 1,163 — 82 — — 82 —
Share issuances related to stock-
     based compensation
790 — — — — — —
Conversion of redeemable
     preferred stock 5,392 — 253 — — 253 (248)
Stock-based compensation — — 30 — — 30 —
Cash paid, in lieu of equity, for
     tax withholding — — (27) — — (27) —
Employee stock purchase plan — — 4 — — 4 —
Preferred dividend ($12.50 per
     share of redeemable preferred
     stock) — — — (13) — (13) —
Net earnings — — — 171 — 171 —
Other comprehensive income,
net of tax — — — — 57 57 —
Balance at December 31, 2020 170,133 $ 2 $ 4,161 $ (377) $ (330) $ 3,456 $ 359


	Shares of Common Stock	Common Stock		Additional Paid in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Shareholders' Equity		Redeemable Preferred Stock
Balance at June 30, 2020	162,788	$	2	$	3,818	$	(535)	$	(386)	$	2,899	$	607



Equity offering, sale of common stock	1,163	—		82		—		—		82		—
Share issuances related to stock- based compensation	956	—		—		—		—		—		—
Conversion of redeemable preferred stock	5,392	—		253		—		—		253		(248)
Stock-based compensation	—	—		38		—		—		38		—
Cash paid, in lieu of equity, for tax withholding	—	—		(27)		—		—		(27)		—
Exercise of stock options	—	—		15		—		—		15		—
Employee stock purchase plan	—	—		6		—		—		6		—
Preferred dividend ($12.50 per share of redeemable preferred stock)	—	—		—		(18)		—		(18)		—
Net earnings	—	—		—		403		—		403		—
Other comprehensive income, net of tax	—	—		—		—		62		62		—
Balance at March 31, 2021	170,299	$	2	$	4,185	$	(150)	$	(324)	$	3,713	$	359

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Catalent, Inc.

Consolidated Statements of Cash Flows

(Unaudited; dollars in millions)


		Six Months Ended December 31,					Nine Months Ended March 31,
		2021		2020			2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	Net earnings	$	190	$	171	Net earnings	$	331	$	403

Adjustments to reconcile net earnings to net cash from operations:	Adjustments to reconcile net earnings to net cash from operations:					Adjustments to reconcile net earnings to net cash from operations:
Depreciation and amortization	Depreciation and amortization	179		140		Depreciation and amortization	278		216
Non-cash foreign currency transaction loss (gain), net	Non-cash foreign currency transaction loss (gain), net	25		(12)		Non-cash foreign currency transaction loss (gain), net	25		(7)
Amortization of debt issuance costs	Amortization of debt issuance costs	4		3		Amortization of debt issuance costs	5		9
Impairments charges and loss (gain) on sale of assets	Impairments charges and loss (gain) on sale of assets	19		2		Impairments charges and loss (gain) on sale of assets	21		8
Gain on sale of subsidiary	Gain on sale of subsidiary	(1)		—		Gain on sale of subsidiary	(1)		(184)
Financing-related charges	Financing-related charges	4		—		Financing-related charges	4		17
Gain on derivative instrument	Gain on derivative instrument	(2)		(16)		Gain on derivative instrument	(2)		(16)
Stock-based compensation	Stock-based compensation	32		30		Stock-based compensation	42		38
Provision for (benefit from) deferred income taxes		1		(5)
Provision for deferred income taxes						Provision for deferred income taxes	13		18
Provision for bad debts and inventory	Provision for bad debts and inventory	9		18		Provision for bad debts and inventory	14		40
Change in operating assets and liabilities:	Change in operating assets and liabilities:					Change in operating assets and liabilities:
Decrease in trade receivables		131		88
Decrease (increase) in trade receivables						Decrease (increase) in trade receivables	60		(1)
Increase in inventories	Increase in inventories	(148)		(140)		Increase in inventories	(93)		(240)
Increase in accounts payable		3		14
(Decrease) increase in accounts payable						(Decrease) increase in accounts payable	(34)		37
Other assets/accrued liabilities, net—current and non-current	Other assets/accrued liabilities, net—current and non-current	(214)		(69)		Other assets/accrued liabilities, net—current and non-current	(293)		(39)

Net cash provided by operating activities	Net cash provided by operating activities	232		224		Net cash provided by operating activities	370		299
CASH FLOWS USED IN INVESTING ACTIVITIES:	CASH FLOWS USED IN INVESTING ACTIVITIES:					CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisition of property, equipment, and other productive assets	Acquisition of property, equipment, and other productive assets	(277)		(339)		Acquisition of property, equipment, and other productive assets	(425)		(497)
Proceeds from maturity of marketable securities		4		—
Purchases of marketable securities						Purchases of marketable securities	(25)		(75)

Settlement on sale of subsidiaries, net		(3)		—
(Settlement on) proceeds from sale of subsidiaries, net						(Settlement on) proceeds from sale of subsidiaries, net	(3)		287

Payment for acquisitions, net of cash acquired	Payment for acquisitions, net of cash acquired	(1,020)		(14)		Payment for acquisitions, net of cash acquired	(1,033)		(147)
Payment made for investments	Payment made for investments	(3)		(1)		Payment made for investments	(4)		(4)

Net cash used in investing activities	Net cash used in investing activities	(1,299)		(354)		Net cash used in investing activities	(1,490)		(436)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings	Proceeds from borrowings	1,100		2		Proceeds from borrowings	1,100		167

Payments related to long-term obligations	Payments related to long-term obligations	(64)		(55)		Payments related to long-term obligations	(72)		(55)
Financing fees paid	Financing fees paid	(15)		—		Financing fees paid	(15)		(18)

Dividends paid	Dividends paid	(4)		(13)		Dividends paid	(4)		(18)
Proceeds from sale of common stock, net	Proceeds from sale of common stock, net	—		82		Proceeds from sale of common stock, net	—		82
Cash paid, in lieu of equity, for tax-withholding obligations	Cash paid, in lieu of equity, for tax-withholding obligations	(9)		(27)		Cash paid, in lieu of equity, for tax-withholding obligations	(9)		(27)
Exercise of stock options	Exercise of stock options	19		—		Exercise of stock options	21		22
Other financing activities	Other financing activities	6		4		Other financing activities	9		6

Net cash provided by (used in) financing activities		1,033		(7)
Net cash provided by financing activities						Net cash provided by financing activities	1,030		159
Effect of foreign currency exchange on cash and cash equivalents	Effect of foreign currency exchange on cash and cash equivalents	(13)		17		Effect of foreign currency exchange on cash and cash equivalents	(20)		13
NET DECREASE IN CASH AND CASH EQUIVALENTS		(47)		(120)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS						NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(110)		35
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	896		953		CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	896		953
CASH AND CASH EQUIVALENTS AT END OF PERIOD	CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	849	$	833	CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	786	$	988
SUPPLEMENTARY CASH FLOW INFORMATION:	SUPPLEMENTARY CASH FLOW INFORMATION:					SUPPLEMENTARY CASH FLOW INFORMATION:
Interest paid	Interest paid	$	50	$	52	Interest paid	$	93	$	97
Income taxes paid, net	Income taxes paid, net	$	27	$	19	Income taxes paid, net	$	40	$	25

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Catalent, Inc.

Notes to Unaudited Consolidated Financial Statements

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Catalent, Inc. (“Catalent” or the “Company”) directly and wholly owns PTS Intermediate Holdings LLC (“Intermediate Holdings”). Intermediate Holdings directly and wholly owns Catalent Pharma Solutions, Inc. (“Operating Company”). The financial results of Catalent are comprised of the financial results of Operating Company and its subsidiaries on a consolidated basis.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the year ending June 30, 2022. The consolidated balance sheet at June 30, 2021 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information on the Company's accounting policies and footnotes, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2021 filed with the Securities and Exchange Commission (the “SEC”).

Foreign Currency Translation

The financial statements of the Company’s operations are generally measured using the local currency as the functional currency. Adjustments to translate the assets and liabilities of operations outside the U.S. into U.S. dollars are accumulated as a component of other comprehensive income utilizing period-end exchange rates. Since July 1, 2018, the Company has accounted for its Argentine operations as highly inflationary.

Depreciation

Depreciation expense was ~~$64~~$66 million and ~~$48~~$53 million for the three months ended ~~December~~March 31, ~~2021~~2022 and ~~2020,~~2021, respectively. Depreciation expense was ~~$122~~$188 million and ~~$94~~$147 million for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 and ~~2020,~~2021, respectively. Depreciation expense includes amortization of assets related to finance leases. The Company charges repairs and maintenance costs to expense as incurred.

Research and Development Costs

The Company expenses research and development costs as incurred. Research and development costs amounted to $6 million and $5$3 million for the three months ended ~~December~~March 31, ~~2021~~2022 and ~~2020,~~2021, respectively. Research and development costs amounted to ~~$12~~$18 million and $15 million for the ~~six~~nine months ended ~~December~~March 31, 2022 and 2021, ~~and 2020.~~respectively.

Marketable Securities

The Company classifies its marketable securities as available-for-sale, because it may sell certain of its marketable securities prior to the stated maturity for various reasons, including management of liquidity, credit risk, duration, relative return, and asset allocation. The Company determines the fair value of each marketable security in its portfolio at each period end and recognizes gains and losses in the portfolio in other comprehensive income. As of ~~December~~March 31, ~~2021,~~2022, the amortized cost basis of marketable securities approximates fair value and all outstanding marketable securities mature within one year.

Recent Financial Accounting Standards

Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which eliminates certain exceptions related to the incremental approach for intra-period allocation, deferred tax recognition requirement for changes in

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equity method investments and non-U.S. subsidiaries, and methodology for calculating income taxes in an interim period. The guidance also simplifies certain aspects of the accounting for franchise taxes, the accounting for step-up in the tax basis of goodwill, and accounting for the change in the enacted change in tax laws or rates. The Company adopted the guidance on July 1, 2021. The adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations.

In August 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plan, which removes certain disclosures and added additional disclosures around weighted-average interest crediting rates for cash balance plans and explanation for significant gains and losses related to change in the benefit obligation for the period. The Company adopted the guidance on July 1, 2021. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

New Accounting Standards Not Adopted as of ~~December~~March 31, ~~2021~~2022

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential burden in accounting for the discontinuation of a reference rate such as LIBOR, formerly known as the London Interbank Offered Rate, because of reference rate reform. The expedients and exceptions provided by the guidance do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The ASU is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements.

2. REVENUE RECOGNITION

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The Company generally earns its revenue by supplying goods or providing services under contracts with its customers in three primary revenue streams: manufacturing and commercial product supply, development services, and clinical supply services. The Company measures the revenue from customers based on the consideration specified in its contracts, excluding any sales incentive or amount collected on behalf of a third party.

The Company generally expenses sales commissions as incurred because either the amortization period is one year or less, or the balance with an amortization period greater than one year is not material.

The following tables allocate revenue for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 and ~~2020,~~2021, by type of activity and reporting segment (in millions):


Three Months Ended December 31, 2021		Biologics		Softgel and Oral Technologies		Oral and Specialty Delivery		Clinical Supply Services		Total
Three Months Ended March 31, 2022												Three Months Ended March 31, 2022	Biologics		Softgel and Oral Technologies		Oral and Specialty Delivery		Clinical Supply Services		Total
Manufacturing & commercial product supply	Manufacturing & commercial product supply	$	169	$	289	$	96	$	—	$	554	Manufacturing & commercial product supply	$	200	$	280	$	90	$	—	$	570
Development services	Development services	469		40		60		—		569		Development services	498		44		64		—		606
Clinical supply services	Clinical supply services	—		—		—		99		99		Clinical supply services	—		—		—		101		101
Total	Total	$	638	$	329	$	156	$	99	$	1,222	Total	$	698	$	324	$	154	$	101	$	1,277
				Inter-segment revenue elimination						(5)					Inter-segment revenue elimination						(4)
						Combined net revenue				$	1,217						Combined net revenue				$	1,273


Three Months Ended December 31, 2020		Biologics		Softgel and Oral Technologies		Oral and Specialty Delivery		Clinical Supply Services		Total
Three Months Ended March 31, 2021												Three Months Ended March 31, 2021	Biologics		Softgel and Oral Technologies		Oral and Specialty Delivery		Clinical Supply Services		Total
Manufacturing & commercial product supply	Manufacturing & commercial product supply	$	124	$	214	$	114	$	—	$	452	Manufacturing & commercial product supply	$	148	$	212	$	118	$	—	$	478
Development services	Development services	280		33		56		—		369		Development services	396		32		53		—		481
Clinical supply services	Clinical supply services	—		—		—		93		93		Clinical supply services	—		—		—		100		100
Total	Total	$	404	$	247	$	170	$	93	$	914	Total	$	544	$	244	$	171	$	100	$	1,059
				Inter-segment revenue elimination						(3)					Inter-segment revenue elimination						(6)
						Combined net revenue				$	911						Combined net revenue				$	1,053

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Six Months Ended December 31, 2021		Biologics		Softgel and Oral Technologies		Oral and Specialty Delivery		Clinical Supply Services		Total
Nine Months Ended March 31, 2022												Nine Months Ended March 31, 2022	Biologics		Softgel and Oral Technologies		Oral and Specialty Delivery		Clinical Supply Services		Total
Manufacturing & commercial product supply	Manufacturing & commercial product supply	$	303	$	496	$	184	$	—	$	983	Manufacturing & commercial product supply	$	503	$	776	$	274	$	—	$	1,553
Development services	Development services	881		76		118		—		1,075		Development services	1,379		120		182		—		1,681
Clinical supply services	Clinical supply services	—		—		—		195		195		Clinical supply services	—		—		—		296		296
Total	Total	$	1,184	$	572	$	302	$	195	$	2,253	Total	$	1,882	$	896	$	456	$	296	$	3,530
				Inter-segment revenue elimination						(11)					Inter-segment revenue elimination						(15)
						Combined net revenue				$	2,242						Combined net revenue				$	3,515


Six Months Ended December 31, 2020		Biologics		Softgel and Oral Technologies		Oral and Specialty Delivery		Clinical Supply Services		Total
Nine Months Ended March 31, 2021												Nine Months Ended March 31, 2021	Biologics		Softgel and Oral Technologies		Oral and Specialty Delivery		Clinical Supply Services		Total
Manufacturing & commercial product supply	Manufacturing & commercial product supply	$	214	$	405	$	217	$	—	$	836	Manufacturing & commercial product supply	$	362	$	616	$	335	$	—	$	1,313
Development services	Development services	567		63		111		—		741		Development services	963		95		165		—		1,223
Clinical supply services	Clinical supply services	—		—		—		186		186		Clinical supply services	—		—		—		286		286
Total	Total	$	781	$	468	$	328	$	186	$	1,763	Total	$	1,325	$	711	$	500	$	286	$	2,822
				Inter-segment revenue elimination						(6)					Inter-segment revenue elimination						(12)
						Combined net revenue				$	1,757						Combined net revenue				$	2,810

The following table allocates revenue by the location where the goods were made or the service performed:


		Three Months Ended December 31,				Six Months Ended December 31,					Three Months Ended March 31,				Nine Months Ended March 31,
(Dollars in millions)	(Dollars in millions)	2021		2020		2021		2020		(Dollars in millions)	2022		2021		2022		2021

United States	United States	$	793	$	535	$	1,423	$	1,052	United States	$	847	$	670	$	2,270	$	1,722
Europe	Europe	370		326		722		610		Europe	373		345		1,095		955
Other	Other	83		72		155		139		Other	80		62		235		201
Elimination of revenue attributable to multiple locations	Elimination of revenue attributable to multiple locations	(29)		(22)		(58)		(44)		Elimination of revenue attributable to multiple locations	(27)		(24)		(85)		(68)
Total	Total	$	1,217	$	911	$	2,242	$	1,757	Total	$	1,273	$	1,053	$	3,515	$	2,810

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Contract Liabilities

Contract liabilities relate to cash consideration that the Company receives in advance of satisfying the related performance obligations. The contract liabilities balance (current and non-current) as of ~~December~~March 31, ~~2021~~2022 and June 30, 2021 are as follows:


(Dollars in millions)

Balance at June 30, 2021	$	321




Balance at ~~December~~March 31, ~~2021~~2022	$	~~289~~198
Revenue recognized in the period from amounts included in contracts liability at the beginning of the period:	$	~~182~~252

Contract liabilities that will be recognized within 12 months of ~~December~~March 31, ~~2021~~2022 are accounted for in Other accrued liabilities and those that will be recognized longer than 12 months after ~~December~~March 31, ~~2021~~2022 are accounted for within Other liabilities.

Contract Assets

Contract assets primarily relate to the Company's conditional right to receive consideration for services that have been performed for customers as of ~~December~~March 31, ~~2021~~2022 relating to the Company's development services but had not yet been invoiced as of ~~December~~March 31, ~~2021.~~2022. Contract assets are transferred to trade receivables, net when the Company’s right to receive the consideration becomes unconditional. Contract assets totaled ~~$308~~$327 million and $181 million as of ~~December~~March 31, ~~2021~~2022 and June 30, 2021, respectively. Contract assets are included in prepaid expenses and other in the consolidated balance sheets.

3. BUSINESS COMBINATIONS AND DIVESTITURES

Skeletal Cell Therapy Support SA Acquisition

In November 2020, the Company acquired 100% of the equity interest in Skeletal Cell Therapy Support SA (“Skeletal”) for $15 million, as well as related supply agreements with the seller. Skeletal operates a cell therapy manufacturing facility in Gosselies, Belgium. The operations were assigned to the Company’s Biologics segment, expanding the Company’s cell therapy capacity for clinical and commercial supply. The acquisition, when combined with the Company's other European-based facilities and capabilities in cell therapy, has created an integrated European center of excellence in cell therapy.

The Company accounted for the Skeletal acquisition using the acquisition method in accordance with ASC 805, Business Combinations. The Company funded the entire purchase price with cash on hand and allocated the purchase price among the acquired assets, recognizing goodwill of $9 million. The Company allocated the remainder of the purchase price to trade receivables, property, plant, and equipment, and other current and non-current assets and liabilities assumed in the acquisition. Results for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 were not material to the Company’s statement of operations, financial position, or cash flows.

Acorda Therapeutics, Inc. Acquisition

In February 2021, the Company acquired the manufacturing and packaging operations of the Acorda Therapeutics, Inc. (“Acorda”) dry powder inhaler and spray dry manufacturing business, including its manufacturing facility located near Boston, Massachusetts, for $83 ~~million, subject to customary adjustments.~~million. In connection with the purchase, Acorda and the Company entered into a long-term supply agreement, under which the Company will continue the manufacture and packaging of an Acorda product at the facility. The facility and operations became part of the Company’s Oral and Specialty Delivery segment. Results of the business acquired were not material to the Company's statement of operations, financial position, or cash flows for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021.~~2022.

The Company accounted for the Acorda transaction using the acquisition method in accordance with ASC 805. The Company funded the entire purchase price with cash on hand and ~~preliminarily~~ allocated the purchase price among the acquired assets, recognizing property, plant, and equipment of $79 million, inventory of $2 million, and goodwill of $2 million. The remainder of the purchase price was ~~preliminarily~~ allocated to other current and non-current assets and liabilities assumed in the acquisition.

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The Company has not completed its analysis regarding the assets acquired and liabilities assumed. Therefore, the allocation to goodwill and inventory are preliminary and subject to finalization. The Company expects to finalize its allocation within one year from the acquisition date.

Delphi Genetics SA Acquisition

In February 2021, the Company acquired 100% of the equity interest in Delphi Genetics SA (“Delphi”) for $50 ~~million, subject to customary adjustments.~~million. Delphi is a plasmid DNA (pDNA) cell and gene therapy contract development and manufacturing organization based in Gosselies, Belgium. The facility and operations acquired became part of the Company’s Biologics segment. Results of the business acquired were not material to the Company's statement of operations, financial position, or cash flows for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~.2022.

The Company accounted for the Delphi transaction using the acquisition method in accordance with ASC 805. The Company funded the entire purchase price with cash on hand and allocated the purchase price among the acquired assets, recognizing property, plant, and equipment of $4 million, intangible assets of $7 million, other current assets of $3 million, assumed debt of $6 million, other current liabilities of $1 million, and goodwill of $43 million.

Hepatic Cell Therapy Support SA Asset Acquisition

In April 2021, the Company acquired 100% of the equity interest in Hepatic Cell Therapy Support SA (“Hepatic”) for approximately $15 million, net of cash acquired and debt assumed. Hepatic operates a manufacturing facility at the same location where Skeletal operates a cell therapy manufacturing facility in Gosselies, Belgium. The acquired facility expands the Company’s cell therapy capacity for clinical and commercial supply in its Biologics segment.

The Company accounted for the Hepatic transaction as an asset acquisition in accordance with ASC 805. The Company funded the entire purchase price with cash on hand and allocated the purchase price to the assets acquired and liabilities assumed, recognizing property, plant, and equipment of $13 million, other current and non-current assets of $3 million, and assumed debt of $1 million.

RheinCell Therapeutics GmbH Acquisition

In August 2021, the Company acquired 100% of the equity interest in RheinCell Therapeutics GmbH (“RheinCell”) for approximately $26 million, net of cash acquired. RheinCell is a developer and manufacturer of induced pluripotent stem cells (“iPSCs”), including iPSCs meeting current good manufacturing practices (“CGMP”) standards, based in Lagenfeld, Germany. The operations became part of the Company’s Biologics segment and builds upon Catalent’s existing custom cell therapy process development and manufacturing capabilities with proprietary CGMP cell lines for iPSC-based therapies.

The Company accounted for the RheinCell transaction using the acquisition method in accordance with ASC 805. The Company funded the entire purchase price with cash on hand and preliminarily allocated the purchase price among the assets acquired, recognizing ~~of $2 million of current assets, $3 million of other assets,~~ $4 million of current liabilities, $5$1 million of other liabilities, $14 million of intangible assets, and goodwill of ~~$16~~$17 million. Results of this business were not material to the Company's statement of operations, financial position, or cash flows for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~.2022.

The Company has not completed its analysis regarding the assets acquired and liabilities assumed. Therefore, the allocation to inventory, goodwill and income taxes are preliminary and subject to finalization. The Company expects to finalize its allocation over the next several months, but, in any event, within one year from the acquisition date.

Bettera Holdings, LLC Acquisition

In October 2021, the Company acquired 100% of the equity interest in Bettera Holdings, LLC (“Bettera”) for approximately $1 billion, subject to customary adjustments. Bettera is a manufacturer of nutraceuticals and nutritional supplements in gummy, soft chew, and lozenge delivery formats.

The Company accounted for the Bettera transaction using the acquisition method in accordance with ASC 805. The Company estimated fair values at the date of acquisition for the preliminary allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed. The Company has not completed its analysis regarding the assets acquired and liabilities assumed. Therefore, the allocation to ~~current liabilities,~~ property, plant and equipment, intangible assets, goodwill and income taxes are preliminary and subject to finalization. During the measurement period ending no later than one year after the acquisition date, the Company will continue to obtain information to assist in finalizing the fair values of the net assets acquired, which may differ materially from these preliminary estimates. If any measurement period adjustment is material, the Company will record such adjustment, including any related impact on net income, in the reporting period in which the adjustment is determined.

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The preliminary purchase price allocation to assets acquired and liabilities assumed in the transaction, subject to finalization, is as follows:


(Dollars in millions)	Preliminary Purchase Price Allocation
Cash and cash equivalents	$	23
Trade receivables, net	16
Inventories	3231
Other current assets	4
Property, plant, and equipment	7372
Other intangibles, net (1)	361
~~Other assets~~	1
Current liabilities	~~(21)~~(22)
Goodwill	~~528~~532
Total assets acquired and liabilities assumed	$	1,017

(1) Other intangibles, net includes core technology of $338 million and customer relationships of $23 million.

The carrying value of trade receivables, inventory, and trade payables, as well as certain other current and non-current assets and liabilities, generally represented the fair value at the date of acquisition.

Property, plant, and equipment was valued using the cost approach, which is based on current replacement and/or reproduction cost of the asset as new, less depreciation attributable to physical, functional, and economic factors. The Company then determined the remaining useful life based on the anticipated life of the asset and Company policy for similar assets.

Core technology intangible assets of $338 million were valued using the multi-period, excess-earnings method, a method that values the intangible asset using the present value of the after-tax cash flows attributable to the intangible asset only. The significant assumptions used in developing the valuation included the estimated annual net cash flows (including application of an appropriate margin to forecasted revenue, selling and marketing costs, return on working capital, contributory asset charges, and other factors), the discount rate that appropriately reflects the risk inherent in each future cash flow stream, and an assessment of the asset’s life cycle, as well as other factors. The assumptions used in the financial forecasts were based on historical data, supplemented by current and anticipated growth rates, management plans, and market-comparable information. Fair-value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. Preliminary assumptions may change and may result in significant changes to the final valuation. The core technology intangible asset has a weighted average useful life of 10 years.

Goodwill has been allocated to the Softgel and Oral Technologies segment as shown in Note 4, Goodwill. Goodwill is mainly comprised of the growth from an expected increase in capacity utilization and potential new customers. The goodwill resulting from the Bettera acquisition is deductible for tax purposes.

Results of the business acquired were not material to the Company's consolidated statement of operations, financial position, or cash flows for the three and nine months ended ~~December~~March 31, ~~2021.~~2022.

Blow-Fill-Seal Divestiture

In March 2021, the Company sold 100% of the shares of Catalent USA Woodstock, Inc. and certain related assets (collectively, the “Blow-Fill-Seal Business”) to a subsidiary of SK Capital Partners, LP for $300 million cash, a $50 million note receivable (estimated fair value of $47 million) as well as potential additional contingent consideration (up to $50 million) dependent upon the performance of aspects of the Blow-Fill-Seal Business. The Blow-Fill-Seal Business was part of the Oral and Specialty Delivery segment. The carrying value of the net assets sold was $149 million, which included goodwill of $54 million. As a result of the sale, the Company realized a gain from sale of subsidiary of $182 million, net of transaction costs, for the fiscal year ended June 30, 2021.

During the ~~six~~nine months ended ~~December~~March 31, ~~2021,~~2022, the Company settled a post-closing purchase price adjustment, which resulted in a gain on sale of subsidiary of $1 million.

All consideration received was measured at its divestiture date fair value. The Company valued the total consideration received from divestiture of the Blow-Fill-Seal Business as follows:

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(Dollars in millions)	Fair value of consideration received
Cash, gross	$	300
Note receivable (1)	47
Contingent consideration (2)	—
Other (3)	(16)
Total	$	331

(1) The note receivable, which provides for interest at a rate of 5.0% paid in kind, had an estimated fair value of $47 million, which is the $50 million aggregate principal amount less a $3 million discount determined using a discounted cash flow model with the market interest rate as a significant input.

(2) The Company determined that the estimated fair value of the contingent consideration from the sale of the Blow-Fill-Seal Business at ~~December~~March 31, ~~2021~~2022 is zero, and therefore, no contingent consideration was recorded as a result of the divestiture of the Blow-Fill-Seal Business. If any contingent consideration is subsequently received, it will be recorded in the period in which it is received. The Company has elected an accounting policy to recognize increases in the carrying amount of the contingent consideration asset using the gain contingency guidance in ASC 450, Contingencies.

(3) Other includes $8 million of transaction expenses, a working capital adjustment of $6 million, and a $2 million assumption of liabilities to create cumulative net cash proceeds of $284 million.

4. GOODWILL

The following table summarizes the changes between June 30, 2021 and ~~December~~March 31, ~~2021~~2022 in the carrying amount of goodwill in total and by segment:


(Dollars in millions)	(Dollars in millions)	Biologics		Softgel and Oral Technologies		Oral and Specialty Delivery		Clinical Supply Services		Total		(Dollars in millions)	Biologics		Softgel and Oral Technologies		Oral and Specialty Delivery		Clinical Supply Services		Total
Balance at June 30, 2021	Balance at June 30, 2021	$	1,531	$	516	$	316	$	156	$	2,519	Balance at June 30, 2021	$	1,531	$	516	$	316	$	156	$	2,519
Additions(1)	Additions(1)	14		528		—		—		542		Additions(1)	15		532		—		—		547

Foreign currency translation adjustments	Foreign currency translation adjustments	(17)		(11)		(4)		(3)		(35)		Foreign currency translation adjustments	(26)		(15)		(8)		(5)		(54)
Balance at December 31, 2021		$	1,528	$	1,033	$	312	$	153	$	3,026
Balance at March 31, 2022												Balance at March 31, 2022	$	1,520	$	1,033	$	308	$	151	$	3,012

(1) The additions to goodwill arise from the Bettera (Softgel and Oral Technologies) and RheinCell and Delphi (Biologics) acquisitions. For further details, see Note 3, Business Combinations and Divestitures.

The Company recorded no impairment charge to goodwill in the current period.

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5. OTHER INTANGIBLES, NET

The details of other intangibles as of ~~December~~March 31, ~~2021~~2022 and June 30, 2021 are as follows:


(Dollars in millions)	(Dollars in millions)	Weighted Average Life	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		(Dollars in millions)	Weighted Average Life	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
December 31, 2021
March 31, 2022									March 31, 2022
Amortized intangibles:	Amortized intangibles:								Amortized intangibles:
Core technology	Core technology	11 years	$	487	$	(104)	$	383	Core technology	11 years	$	484	$	(113)	$	371
Customer relationships	Customer relationships	13 years	1,037		(337)		700		Customer relationships	13 years	1,032		(354)		678
Product relationships	Product relationships	8 years	249		(209)		40		Product relationships	8 years	246		(208)		38
Other	Other	5 years	19		(10)		9		Other	5 years	21		(11)		10

Total other intangibles	Total other intangibles		$	1,792	$	(660)	$	1,132	Total other intangibles		$	1,783	$	(686)	$	1,097


(Dollars in millions)	Weighted Average Life	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
June 30, 2021
Amortized intangibles:
Core technology	19 years	$	140	$	(94)	$	46
Customer relationships	14 years	1,024		(306)		718
Product relationships	11 years	281		(237)		44
Other	5 years	17		(8)		9
Total other intangibles		$	1,462	$	(645)	$	817

Amortization expense related to other intangible assets was ~~$34~~$33 million and ~~$57~~$90 million for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021,~~2022, respectively, and $23 million and ~~$46~~$69 million for the three and ~~six~~nine months ended ~~December~~March 31, ~~2020,~~2021, respectively.

Future amortization expense related to other intangible assets for the next five fiscal years is estimated to be:


(Dollars in millions)	(Dollars in millions)	Remainder Fiscal 2022		2023		2024		2025		2026		2027		(Dollars in millions)	Remainder Fiscal 2022		2023		2024		2025		2026		2027
Amortization expense	Amortization expense	$	66	$	132	$	132	$	129	$	122	$	105	Amortization expense	$	33	$	132	$	132	$	129	$	122	$	105

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6. LONG-TERM OBLIGATIONS AND SHORT-TERM BORROWINGS

Long-term obligations and short-term borrowings consisted of the following at ~~December~~March 31, ~~2021~~2022 and June 30, 2021:


(Dollars in millions)	(Dollars in millions)	Maturity	December 31, 2021		June 30, 2021		(Dollars in millions)	Maturity	March 31, 2022		June 30, 2021
Senior secured credit facilities	Senior secured credit facilities						Senior secured credit facilities

Term loan facility B-3	Term loan facility B-3	February 2028	$	1,440	$	997	Term loan facility B-3	February 2028	$	1,437	$	997

5.000% senior notes due 2027	5.000% senior notes due 2027	July 2027	500		500		5.000% senior notes due 2027	July 2027	500		500
2.375% euro senior notes due 2028(1)	2.375% euro senior notes due 2028(1)	March 2028	933		984		2.375% euro senior notes due 2028(1)	March 2028	905		984
3.125% senior notes due 2029	3.125% senior notes due 2029	February 2029	550		550		3.125% senior notes due 2029	February 2029	550		550
3.500% senior notes due 2030	3.500% senior notes due 2030	April 2030	650		��		3.500% senior notes due 2030	April 2030	650		—
Deferred purchase consideration	Deferred purchase consideration		—		50		Deferred purchase consideration		—		50
Financing lease obligations	Financing lease obligations	2022 to 2038	188		193		Financing lease obligations	2022 to 2038	184		193
Other obligations	Other obligations	2022 to 2028	3		3		Other obligations	2022 to 2028	3		3
Unamortized discount and debt issuance costs	Unamortized discount and debt issuance costs		(44)		(36)		Unamortized discount and debt issuance costs		(43)		(36)
Total debt	Total debt		$	4,220	$	3,241	Total debt		$	4,186	$	3,241
Less: current portion of long-term obligations and other short-term borrowings	Less: current portion of long-term obligations and other short-term borrowings		29		75		Less: current portion of long-term obligations and other short-term borrowings		29		75
Long-term obligations, less current portion	Long-term obligations, less current portion		$	4,191	$	3,166	Long-term obligations, less current portion		$	4,157	$	3,166

(1) The decrease in euro-denominated debt was primarily due to large fluctuations in foreign currency exchange rates.

Senior Secured Credit Facilities and Sixth Amendment to the Credit Agreement

In September 2021, Operating Company entered into Amendment No. 6 (the "Sixth Amendment") to its Amended and Restated Credit Agreement, dated May 20, 2014 (as subsequently amended, the "Credit Agreement"). Pursuant to the Sixth Amendment, Operating Company incurred an additional $450 million aggregate principal amount of U.S. dollar-denominated term loans (the "Incremental Term B-3 Loans") and amended the quarterly amortization from 0.25% to 0.2506% for the Incremental Term B-3 Loans and all of the remaining U.S. dollar-denominated term loans outstanding (together with the Incremental Term B-3 Loans, the “Term B-3 Loans”). The Incremental Term B-3 Loans otherwise feature the same principal terms as the existing Term B-3 Loans, with an interest rate of one-month LIBOR (subject to a floor of 0.50%) plus 2.00% per annum and a maturity date of February 2028. The proceeds of the Incremental Term B-3 Loans, after payment of the offering fees and expenses, were used in part to fund a portion of the consideration paid at the closing of the Bettera acquisition.

3.500% Senior Notes due 2030

In September 2021, Operating Company completed a private offering of $650 million aggregate principal amount of 3.500% Senior Notes due 2030 (the "2030 Notes"). The 2030 Notes are fully and unconditionally guaranteed, jointly and severally, by all of the wholly owned U.S. subsidiaries of Operating Company that guarantee its senior secured credit facilities. The 2030 Notes were offered in the U.S. to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) and outside the U.S. only to non-U.S. investors pursuant to Regulation S under the Securities Act. The 2030 Notes will mature on April 1, 2030 and bear interest at the rate of 3.500% per annum payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2022. The proceeds of the 2030 Notes, after payment of the offering fees and expenses, were used to fund a portion of the consideration paid at the closing of the Bettera acquisition.

Deferred Purchase Consideration

In connection with the acquisition of Catalent Indiana, LLC in October 2017, $200 million of the $950 million aggregate nominal purchase price was payable in $50 million installments on each of the first four anniversaries of the closing date. The Company made the ~~first three~~ installment payments in October 2018, October 2019, ~~and~~ October 2020, and ~~the final installment payment in~~ October 2021.

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Measurement of the Estimated Fair Value of Debt

The estimated fair value of the Company’s senior secured credit facilities and other senior indebtedness is classified as a Level 2 determination (see Note 11, Fair Value Measurements, for a description of the method by which fair value classifications are determined) in the fair-value hierarchy and is calculated by using a discounted cash flow model with a market interest rate as a significant input. The carrying amounts and the estimated fair values of the Company’s principal categories of debt as of ~~December~~March 31, ~~2021~~2022 and June 30, 2021 are as follows:


			December 31, 2021				June 30, 2021						March 31, 2022				June 30, 2021
(Dollars in millions)	(Dollars in millions)	Fair Value Measurement	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value		(Dollars in millions)	Fair Value Measurement	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value

5.000% senior notes due 2027	5.000% senior notes due 2027	Level 2	$	500	$	531	$	500	$	539	5.000% senior notes due 2027	Level 2	$	500	$	506	$	500	$	539
2.375% Euro senior notes due 2028	2.375% Euro senior notes due 2028	Level 2	933		936		984		993		2.375% Euro senior notes due 2028	Level 2	905		850		984		993
3.125% senior notes due 2029	3.125% senior notes due 2029	Level 2	550		541		550		524		3.125% senior notes due 2029	Level 2	550		504		550		524
3.500% senior notes due 2030	3.500% senior notes due 2030	Level 2	650		639		—		—		3.500% senior notes due 2030	Level 2	650		611		—		—
Senior secured credit facilities & other	Senior secured credit facilities & other	Level 2	$	1,631	$	1,608	$	1,243	$	1,209	Senior secured credit facilities & other	Level 2	1,624		1,645		1,243		1,209
Subtotal	Subtotal		$	4,264	$	4,255	$	3,277	$	3,265	Subtotal		$	4,229	$	4,116	$	3,277	$	3,265
Unamortized discount and debt issuance costs	Unamortized discount and debt issuance costs		(44)		—		(36)		—		Unamortized discount and debt issuance costs		(43)		—		(36)		—
Total debt	Total debt		$	4,220	$	4,255	$	3,241	$	3,265	Total debt		$	4,186	$	4,116	$	3,241	$	3,265

7. EARNINGS PER SHARE

The Company computes earnings per share of the Company’s common stock, par value $0.01 (the “Common Stock”) using the two-class method required due to the participating nature of the Series A Preferred Stock (as defined and discussed in Note 14, Equity, Redeemable Preferred Stock, and Accumulated Other Comprehensive Loss). Diluted net earnings per share is computed using the weighted average number of shares of Common Stock outstanding plus the weighted average number of shares of Common Stock that would be issued assuming exercise or conversion of all potentially dilutive instruments. Dilutive securities having an anti-dilutive effect on diluted net earnings per share and are excluded from the calculation. The dilutive effect of the securities that are issuable under the Company’s equity incentive plans are reflected in diluted earnings per share by application of the treasury stock method. The Company applies the if-converted method to compute the potentially dilutive effect of the Series A Preferred Stock. The reconciliations between basic and diluted earnings per share attributable to Catalent common shareholders for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 and ~~2020,~~2021, respectively, are as follows:


		Three Months Ended December 31,				Six Months Ended December 31,					Three Months Ended March 31,				Nine Months Ended March 31,
(In millions except per share data)	(In millions except per share data)	2021		2020		2021		2020		(In millions except per share data)	2022		2021		2022		2021

Net earnings	Net earnings	$	97	$	88	$	190	$	171	Net earnings	$	141	$	232	$	331	$	403
Less: Net earnings attributable to preferred shareholders	Less: Net earnings attributable to preferred shareholders	(4)		(11)		(13)		$	(26)	Less: Net earnings attributable to preferred shareholders	—		(15)		(15)		(43)
Net earnings attributable to common shareholders	Net earnings attributable to common shareholders	$	93	$	77	$	177	$	145	Net earnings attributable to common shareholders	$	141	$	217	$	316	$	360

Weighted average shares outstanding - basic	Weighted average shares outstanding - basic	175		167		173		166		Weighted average shares outstanding - basic	180		170		176		167
Weighted average dilutive securities issuable - stock plans	Weighted average dilutive securities issuable - stock plans	2		2		2		2		Weighted average dilutive securities issuable - stock plans	1		2		1		2
Weighted average shares outstanding - diluted	Weighted average shares outstanding - diluted	177		169		175		168		Weighted average shares outstanding - diluted	181		172		177		169

Earnings per share:	Earnings per share:									Earnings per share:

Basic	Basic	$	0.53	$	0.46	$	1.02	$	0.88	Basic	$	0.78	$	1.27	$	1.81	$	2.15

Diluted	Diluted	$	0.52	$	0.45	$	1.01	$	0.87	Diluted	$	0.78	$	1.26	$	1.79	$	2.12

The Company's Series A Preferred Stock was deemed a participating security, meaning that it ~~has~~had the right to participate in undistributed earnings with the Company's Common Stock. On November 23, 2020 (the “Partial Conversion Date”), the holders of Series A Preferred Stock converted 265,223 shares of Series A Preferred Stock and $2 million of unpaid accrued dividends into shares of Common Stock (the “Partial Conversion”). These holders received 20.33 shares of Common Stock for

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each converted share of Series A Preferred Stock, resulting in the aggregate issuance of 5,392,280 shares of Common Stock by the Company. On November 18, 2021 (the “Final Conversion Date”), the holders of Series A Preferred Stock converted the remaining 384,777 shares of Series A Preferred Stock and $2 million of unpaid accrued dividends into shares of Common Stock (the “Final Conversion”). These holders received 20.32 shares of Common Stock for each converted share of Series A Preferred Stock, resulting in the aggregate issuance of 7,817,554 shares of Common Stock by the Company. See Note 14, Equity, Redeemable Preferred Stock and Accumulated Other Comprehensive Loss for further details.

The diluted weighted average number of shares outstanding as of ~~December~~March 31, ~~2021~~2022 did not include the following shares of Common Stock associated with the Series A Preferred Stock or the shares associated with the following types of outstanding equity grants due to their antidilutive effect:

Three Months Ended
December 31, Six Months Ended
December 31,
(share counts in millions) 2021 2020 2021 2020
Stock options — — — —
Time-based restricted stock units — — — —
Performance-based restricted stock units — — — —
Series A Preferred Stock — 8 — 8


	Three Months Ended March 31,		Nine Months Ended March 31,
(share counts in millions)	2022	2021	2022	2021



Series A Preferred Stock	—	8	—	11

8. OTHER EXPENSE, ~~(INCOME),~~ NET

The components of other expense, ~~(income),~~ net for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021 are as follows:


		Three Months Ended December 31,				Six Months Ended December 31,					Three Months Ended March 31,				Nine Months Ended March 31,
(Dollars in millions)	(Dollars in millions)	2021		2020		2021		2020		(Dollars in millions)	2022		2021		2022		2021

Debt financing costs (1)	Debt financing costs (1)	$	—	$	—	$	4	$	—	Debt financing costs (1)	$	—	$	17	$	4	$	17

Foreign currency losses (gains) (2)		15		—		24		(1)
Foreign currency losses (2)										Foreign currency losses (2)	4		7		28		6
Other (3)	Other (3)	(1)		(8)		(5)		(18)		Other (3)	(2)		1		(7)		(18)
Total other expense (income), net		$	14	$	(8)	$	23	$	(19)
Total other expense, net										Total other expense, net	$	2	$	25	$	25	$	5

(1) Debt financing costs for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 includes $4 million of financing charges related to the Company’s Incremental Term B-3 Loans.

(2) Foreign currency remeasurement losses ~~(gains)~~ include both cash and non-cash transactions.

(3) Other, for the ~~six~~nine months ended ~~December~~March 31, ~~2021,~~2022, includes a gain of $2 million related to the fair value of the derivative liability associated with the formerly outstanding Series A Preferred Stock. Other, for the ~~three and six~~nine months ended ~~December~~March 31, ~~2020,~~2021, includes a ~~total unrealized~~ gain of ~~$7 million~~ ~~and~~$16 million, ~~respectively,~~ related to the fair value of the derivative liability associated with the formerly outstanding Series A Preferred Stock.

9. RESTRUCTURING COSTS

From time to time, the Company has implemented plans to restructure certain operations, both domestically and internationally. The restructuring plans focused on various aspects of operations, including closing and consolidating certain manufacturing operations, rationalizing headcount and aligning operations in a strategic and more cost-efficient structure. In addition, the Company may incur restructuring charges in the future in cases where a material change in the scope of operation with its business occurs. Employee-related costs consist primarily of severance costs and also include outplacement services provided to employees who have been involuntarily terminated and duplicate payroll costs during transition periods. Facility exit and other costs consist of equipment relocation costs and costs associated with planned facility expansions and closures to streamline Company operations.

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During the fiscal year ended June 30, 2021, the Company adopted a plan to reduce costs and optimize its infrastructure in Europe by closing its Clinical Supply Services facility in Bolton, United Kingdom (“U.K.”) In connection with this restructuring plan, the Company reduced its headcount by approximately ~~180~~170 employees and incurred cumulative charges of $8$9 million, primarily associated with employee severance benefits. For the ~~three months and six~~nine months ended ~~December~~March 31, ~~2021,~~2022, restructuring charges associated with the Bolton facility closure were ~~$1 million and~~ $2 ~~million, respectively.~~million.

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Total restructuring charges, inclusive of the charges associated with the Bolton facility closure, were $1$3 million ~~and $5 million~~ for each of the three months ended ~~December~~March 31, ~~2021~~2022 and ~~2020, respectively.~~2021. Total restructuring charges, inclusive of the charges associated with the Bolton facility closure, were $2$5 million and $6$9 million for the ~~six~~nine months ended ~~December~~March 31, 2022 and 2021, respectively. Restructuring costs for the three and ~~2020, respectively.~~nine months ended March 31, 2022 and 2021, were recorded in Other Operating Expense in the Consolidated Statement of Operations.

10. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

The Company is exposed to fluctuations in the currency exchange rates applicable to its investments in operations outside the U.S. While the Company does not actively hedge against changes in foreign currency, the Company has mitigated its exposure from its investments in its European operations by denominating a portion of its debt in euros. At ~~December~~March 31, ~~2021,~~2022, the Company had euro-denominated debt outstanding of ~~$933~~$905 million (U.S. dollar equivalent), which is designated and qualifies as a hedge against its net investment in its European operations. For non-derivatives designated and qualifying as net investment hedges, the effective portion of translation gains or losses are reported in accumulated other comprehensive loss as part of the cumulative translation adjustment. The non-hedge portions of the euro-denominated debt translation gains or losses are reported in the consolidated statement of operations. The following table includes net investment hedge activity during the ~~six~~three and nine months ended ~~December~~March 31, ~~2021~~2022 and ~~2020.~~2021.


		Three Months Ended December 31,				Six Months Ended December 31,					Three Months Ended March 31,				Nine Months Ended March 31,
(Dollars in millions)	(Dollars in millions)	2021		2020		2021		2020		(Dollars in millions)	2022		2021		2022		2021
Unrealized foreign exchange gain (loss) within other comprehensive income	Unrealized foreign exchange gain (loss) within other comprehensive income	$	40	$	(45)	$	62	$	(78)	Unrealized foreign exchange gain (loss) within other comprehensive income	$	28	$	33	$	90	$	(45)
Unrealized foreign exchange loss within statement of operations		$	(8)	$	(3)	$	(11)	$	(4)
Unrealized foreign exchange gain (loss) within statement of operations										Unrealized foreign exchange gain (loss) within statement of operations	$	—	$	1	$	(11)	$	(3)

The net accumulated gain on the instrument designated as a hedge as of ~~December~~March 31, ~~2021~~2022 within other comprehensive loss was approximately ~~$68~~$96 million. Amounts are reclassified out of accumulated other comprehensive loss into earnings when the entity to which the gains and losses relate is either sold or substantially liquidated.

Preferred Stock Derivative Liability

As discussed in Note 14, Equity, Redeemable Preferred Stock, and Accumulated Other Comprehensive Loss, in May 2019, the Company issued shares of Series A Preferred Stock in exchange for net proceeds of $646 million after taking into account the $4 million issuance cost.

The dividend rate used to determine the amount of the quarterly dividend payable on shares of the Series A Preferred Stock was subject to adjustment so as to provide holders of Series A Preferred Stock with certain protections against a decline in the trading price of shares of Common Stock. The Company determined that this feature should be accounted for as a derivative liability, since the feature fluctuates inversely to changes in the trading price and is also linked to the performance of the S&P 500 stock index. Accordingly, the Company bifurcated the adjustable dividend feature from the remainder of the Series A Preferred Stock and accounted for this feature as a derivative liability at fair value.

The Company recorded a total gain of $0 million and $7 million on the change in the estimated fair value of the derivative liability for the three months ended December 31, 2021 and 2020, respectively, which is reflected as other expense (income), net in the consolidated statements of operations.

A portion of the derivative liability was settled on the Partial Conversion Date due to the Partial Conversion. The fair value of the derivative liability as of the Partial Conversion Date was $9 million, of which $4 million was related to the converted portion of the outstanding shares of Series A Preferred Stock. The remainder of the derivative liability was settled on the Final Conversion Date due to the Final Conversion. The fair value of the derivative liability as of the Final Conversion Date

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was $1 million. See Note 14, Equity, Redeemable Preferred Stock, and Accumulated Other Comprehensive Loss for details of the Partial and Final Conversion.

Interest-Rate Swap

In April 2020, pursuant to its interest rate and risk management strategy, the Company entered into an interest-rate swap agreement with Bank of America N.A. (the “2020 Rate Swap”) as a hedge against the economic effect of a portion of the variable interest obligation associated with its U.S. dollar-denominated term loans under its senior secured credit facilities. The

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2020 Rate Swap effectively fixed the rate of interest payable on that portion of the debt, thereby reducing the impact of future interest rate changes on future interest expense.

In February 2021, in connection with an amendment to the Credit Agreement, the Company paid $2 million in cash to Bank of America N.A to settle the 2020 Rate Swap. This loss is deferred in stockholders’ equity, net of income taxes, as a component of accumulated other comprehensive loss, and amortized as an adjustment to interest expense, net over the original term of the formerly outstanding term loans. The net amount of deferred losses on cash flow hedges that is expected to be reclassified from accumulated other comprehensive loss into interest expense, net within the next twelve months is not material.

In February 2021, the Company entered into a new interest-rate swap agreement with Bank of America N.A. (the “2021 Rate Swap”) as a hedge against the economic effect of a portion of the variable interest obligation associated with its Term B-3 Loans. The 2021 Rate Swap effectively fixed the rate of interest payable on that portion of the Term B-3 Loans, thereby reducing the impact of future interest rate changes on future interest expense. As a result of the 2021 Rate Swap, the variable portion of the applicable interest rate on $500 million of the Term B-3 Loans is now effectively fixed at 0.9985%.

The 2021 Rate Swap qualifies for and is designated as a cash-flow hedge. The Company evaluates hedge effectiveness at the inception of the hedge and on an ongoing basis. The cash flows associated with the 2021 Rate Swap is reported in cash provided by operating activities in the consolidated statements of cash flows. The unrealized gain ~~or loss~~recorded in stockholder's equity from marking the 2021 Rate Swap to market during the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 was ~~immaterial in each period.~~$17 million and $21 million, respectively.

A summary of the estimated fair value of the 2021 Rate Swap reported in the consolidated balance sheets is stated in the table below:
December 31, 2021 June 30, 2021
(Dollars in millions) Balance Sheet Classification Estimated Fair Value Balance Sheet Classification Estimated Fair Value
Interest-rate swap Other long-term assets $ 7 Other long-term assets $ 2

March 31, 2022

June 30, 2021

(Dollars in millions)

Balance Sheet Classification

Estimated Fair Value

Balance Sheet Classification

Estimated Fair Value

Interest-rate swap

Other long-term assets

11. FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurement, defines fair value as the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement that should be determined using assumptions that market participants would use in pricing an asset or liability. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which Level 1 and Level 2 are considered observable and Level 3 is considered unobservable:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Value is determined using pricing models, discounted cash flow methodologies, or similar techniques and also includes instruments for which the determination of fair value requires significant judgment or estimation.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses of the Company approximate fair value based on the short maturities of these instruments.

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The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level of classification as of the end of each reporting period. The following table sets forth the Company’s financial assets and liabilities that were measured at fair value on a recurring basis and the fair value measurement for such assets and liabilities at ~~December~~March 31, ~~2021~~2022 and June 30, 2021, respectively:

(Dollars in millions) Basis of Fair Value Measurement
December 31, 2021 Total Level 1 Level 2 Level 3
Assets:
Marketable securities $ 66 $ 66 $ — $ —
Interest-rate swap 7 — 7 —
Trading securities 2 2 — —
June 30, 2021
Assets:
Marketable securities $ 71 $ 71 $ — $ —
Interest-rate swap 2 — 2 —
Trading securities 1 1 — —
Liabilities:
Series A Preferred Stock derivative liability 3 — — 3

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(Dollars in millions)	Basis of Fair Value Measurement
March 31, 2022	Total		Level 1		Level 2		Level 3
Assets:
Marketable securities	$	94	$	94	$	—	$	—


Interest-rate swap	30		—		30		—
Trading securities	2		2		—		—





June 30, 2021
Assets:

Marketable securities	$	71	$	71	$	—	$	—
Interest-rate swap	2		—		2		—
Trading securities	1		1		—		—


Liabilities:

Series A Preferred Stock derivative liability	$	3	—		—		$	3

The fair value of the 2021 Rate Swap is determined at the end of each reporting period based on valuation models that use interest rate yield curves and discount rates as inputs. The discount rates are based on U.S. deposit or U.S. Treasury rates. The significant inputs used in the valuation models are readily available in public markets or can be derived from observable market transactions, and the valuation is therefore classified as Level 2 in the fair-value hierarchy.

The estimated fair value of the Series A Preferred Stock derivative was determined using an option pricing methodology, specifically both a Monte Carlo simulation and a binomial lattice model. The methodology incorporated the terms and conditions of the preferred stock arrangement, historical stock price volatility, the risk-free interest rate, a credit spread based on the yield indexes of high-yield bonds, and the trading price of shares of Common Stock. The calculation of the estimated fair value of the derivative liability was highly sensitive to changes in unobservable inputs, such as the expected volatility and the Company’s credit spread. The estimated fair value of the Series A Preferred Stock derivative liability was classified as Level 3 in the fair-value hierarchy due to the significant management judgment required to make the assumptions underlying the calculation of value.

The following table sets forth a summary of changes in the estimated fair value of the Series A Preferred Stock derivative liability from June 30, 2021 to ~~December~~March 31, ~~2021:~~2022:


(Dollars in millions)	Fair Value Measurements of Series A Preferred Stock Derivative Liability Using Significant Unobservable Inputs (Level 3)
Balance at June 30, 2021	$	3
Change in estimated fair value of Series A Preferred Stock derivative liability	(2)
Settlement of derivative liability upon Final Conversion	(1)
Balance at ~~December~~March 31, ~~2021~~2022	$	—

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

Long-lived assets, goodwill, and other intangible assets are subject to non-recurring fair value measurement for the evaluation of potential impairment. Other than the fair value estimates disclosed in Note 3, Business Combinations and Divestitures, there was no non-recurring fair value measurement during the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 and ~~2020.~~2021.

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12. INCOME TAXES

The Company accounts for income taxes in accordance with ASC 740, Income Taxes. Generally, fluctuations in the effective tax rate are due to changes in relative amounts of U.S. and non-U.S. pretax income, the tax impact of special items,

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and other discrete tax items. Discrete items include, but are not limited to, changes in non-U.S. statutory tax rates, amortization of certain assets, changes in the Company’s reserve for uncertain tax positions, and tax impact of certain equity compensation.

In the normal course of business, the Company is subject to examination by taxing authorities around the world, including major jurisdictions as the U.S., Germany, and the U.K. The Company is no longer subject to examinations by any relevant tax authority for years prior to fiscal year 2009. The Company is presently under audit in select jurisdictions in the United States and in Europe, but no material impact is expected to the financial results once these audits are completed.

ASC 740 provides guidance for the accounting of uncertain income tax positions recognized in the Company's tax filings. This guidance provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that, based on technical merits, the position will be sustained upon examination, including resolution of any related appeal or litigation process. As of ~~December~~March 31, ~~2021~~2022 and June 30, 2021, the Company's reserve against uncertain income tax positions remained substantially unchanged at ~~approximately~~ $5 million. Interest and penalties related to uncertain tax positions are recognized as a component of income tax expense.

The Company recorded a provision for income taxes for the three months ended ~~December~~March 31, ~~2021~~2022 of ~~$18~~$35 million relative to earnings before income taxes of ~~$115~~$176 million. The Company recorded a provision for income taxes for the three months ended ~~December~~March 31, ~~2020~~2021 of ~~$21~~$85 million relative to earnings before income taxes of ~~$109~~$317 million. The decrease in income tax provision relative to the prior-year period was largely the result of the discrete tax expense the Company incurred on the gain on the sale of its Blow-Fill-Seal Business recognized in the prior-period and a shift in non-domestic pretax income ~~in international~~to tax jurisdictions with favorable tax rates. Generally, fluctuations in the effective tax rate are due to changes in the geographic distribution of ~~our~~the Company's pretax income resulting from ~~our~~the Company's business mix, changes in the tax impact of permanent differences, restructuring, special items, certain equity related compensation, and other discrete tax items that may have unique tax implications depending on the nature of the item.

The Company recorded a provision for income taxes for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 of ~~$28~~$63 million relative to earnings before income taxes of ~~$218~~$394 million. The Company recorded a provision for income taxes for the ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 of $5$91 million relative to earnings before income taxes of ~~$176~~$494 million. The ~~increase~~decrease in the provision relative to the prior-year period was largely the result of the discrete tax expense the Company incurred on the gain on the sale of its Blow-Fill-Seal Business recognized in the prior-period and a ~~decrease~~shift in non-domestic pretax income to tax jurisdictions with favorable tax rates, partially offset by non-U.S. tax credits claimed on an amended U.S. federal income tax ~~filing compared to the prior-year period.~~filing. The provision for income taxes in each of these periods was also impacted by the relative amount and mix of permanent tax adjustments included in the income tax computation and other discrete tax items recognized in the periods.

13. EMPLOYEE RETIREMENT BENEFIT PLANS

Components of the Company’s net periodic benefit costs are as follows:


		Three Months Ended December 31,				Six Months Ended December 31,					Three Months Ended March 31,				Nine Months Ended March 31,
(Dollars in millions)	(Dollars in millions)	2021		2020		2021		2020		(Dollars in millions)	2022		2021		2022		2021
Components of net periodic benefit cost:	Components of net periodic benefit cost:									Components of net periodic benefit cost:
Selling, general, and administrative expenses:	Selling, general, and administrative expenses:									Selling, general, and administrative expenses:
Service cost	Service cost	$	1	$	1	$	2	$	2	Service cost	$	1	$	1	$	3	$	3
Other expense (income), net:
Other expense, net:										Other expense, net:
Interest cost	Interest cost	1		1		2		2		Interest cost	1		1		3		3
Expected return on plan assets	Expected return on plan assets	(3)		(2)		(5)		(5)		Expected return on plan assets	(2)		(3)		(7)		(7)
Amortization (1)	Amortization (1)	1		—		2		2		Amortization (1)	1		1		3		2
Net amount recognized	Net amount recognized	$	—	$	—	$	1	$	1	Net amount recognized	$	1	$	—	$	2	$	1

(1) Amount represents the amortization of unrecognized actuarial losses.

As previously disclosed, the Company notified the trustees of a multi-employer pension plan of its withdrawal from participation in such plan in fiscal 2012. The actuarial review process administered by the plan trustees ended in fiscal 2015. The liability reported reflects the present value of the Company’s expected future long-term obligations. The estimated discounted value of the projected contributions related to such plans was $38 million as of ~~December~~March 31, ~~2021~~2022 and June 30,

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2021, and is included within pension liability on the consolidated balance sheets. The annual cash impact associated with the Company’s obligations in such plan is approximately $2 million.

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14. EQUITY, REDEEMABLE PREFERRED STOCK, AND ACCUMULATED OTHER COMPREHENSIVE LOSS

Description of Capital Stock

The Company is authorized to issue 1.00 billion shares of its Common Stock and 100 million shares of preferred stock, par value $0.01 per share. In accordance with the Company’s amended and restated certificate of incorporation, each share of Common Stock has one vote, and the Common Stock votes together as a single class.

Redeemable Preferred Stock

In May 2019, the Company designated 1 million shares of its preferred stock, par value $0.01, as its Series A Convertible Preferred Stock (the “Series A Preferred Stock”), pursuant to a certificate of designation of preferences, rights, and limitations (as amended, the “Certificate of Designation”) ~~filed with the Delaware Secretary of State,~~, and issued and sold 650,000 shares of the Series A Preferred Stock for an aggregate ~~purchase~~ price of $650 million, to affiliates of Leonard Green & Partners, L.P., each share having ~~an initial~~a stated value of ~~$1,000 (as such value may be adjusted in accordance with the terms of the Certificate of Designation).~~$1,000. The Series A Preferred Stock ranked senior to the ~~Company’s~~ Common Stock with respect to dividend rights and rights upon ~~the voluntary or involuntary~~any liquidation, dissolution, or winding up of the ~~affairs of the Company.~~Company's affairs.

Proceeds from ~~the offering of~~ the Series A Preferred Stock offering, net of ~~stock~~ issuance costs, were $646 million, $40 million of which was allocated to the dividend-adjustment feature at its issuance and separately accounted for as a derivative liability. Any change in the derivative's fair value ~~of derivative liability~~ during a fiscal quarter iswas recorded as a non-operating expense in the consolidated statement of operations.

As described in Note 7, Earnings Per Share, on the Partial Conversion Date, holders of Series A Preferred Stock converted 265,223 shares (approximately 41% of their holdings) and $2 million of unpaid accrued dividends into ~~shares of Common Stock. These holders received 20.33 shares of Common Stock for each converted share of Series A Preferred Stock, resulting in the issuance of~~ 5,392,280 shares of Common ~~Stock by the Company. There was~~Stock.. The Company recognized no gain or loss ~~recognized~~ upon the Partial Conversion as it occurred in accordance with the terms of the Certificate of Designation.

As a result of the Partial Conversion, additional paid in capital increased $253 million, which ~~includes~~included $4 million related to the fair value of the portion of the derivative liability that was settled upon the Partial Conversion and $2 million related to anthe unpaid accrued dividend.

On the Final Conversion Date, holders of Series A Preferred Stock converted the remaining 384,777 shares and $2 million of unpaid accrued dividends into shares of Common Stock. These holders received 20.32 shares of Common Stock for each converted share of Series A Preferred Stock, resulting in the issuance of 7,817,554 shares of Common ~~Stock by the Company. There was~~Stock. The Company recognized no gain or loss ~~recognized~~ upon the Final Conversion as it occurred in accordance with the terms of the Certificate of Designation. See Note 10, Derivative Instruments and Hedging Activities, for detail concerning the change in the derivative's fair value ~~of the derivative~~ during the ~~six~~nine months ended ~~December~~March 31, ~~2021.~~2022.

As a result of the Final Conversion, additional paid in capital increased $362 million, which ~~includes~~included $1 million related to the fair value of the portion of the derivative liability that was settled upon the Final Conversion and $2 million related to anthe unpaid accrued dividend.

Following the Final Conversion, no share of the Series A Preferred Stock remains outstanding, and the Company has re-assigned all of the authorized shares of Series A Preferred Stock as undesignated shares of preferred stock, par value $0.01.

Accumulated Other Comprehensive Loss

The components of the changes in the cumulative translation adjustment, derivatives and hedges, minimum pension liability, and marketable securities for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021 are presented below.

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		Three Months Ended December 31,				Six Months Ended December 31,					Three Months Ended March 31,				Nine Months Ended March 31,
(Dollars in millions)	(Dollars in millions)	2021		2020		2021		2020		(Dollars in millions)	2022		2021		2022		2021
Foreign currency translation adjustments:	Foreign currency translation adjustments:									Foreign currency translation adjustments:
Net investment hedge	Net investment hedge	$	40	$	(45)	$	62	$	(78)	Net investment hedge	$	28	$	33	$	90	$	(45)
Long-term intercompany loans	Long-term intercompany loans	(4)		16		(7)		23		Long-term intercompany loans	(8)		15		(15)		38
Translation adjustments	Translation adjustments	(45)		59		(73)		94		Translation adjustments	(36)		(40)		(109)		54
Total foreign currency translation adjustment, pretax	Total foreign currency translation adjustment, pretax	(9)		30		(18)		39		Total foreign currency translation adjustment, pretax	(16)		8		(34)		47
Tax expense (benefit)	Tax expense (benefit)	9		(9)		14		(16)		Tax expense (benefit)	6		8		20		(8)
Total foreign currency translation adjustment, net of tax	Total foreign currency translation adjustment, net of tax	$	(18)	$	39	$	(32)	$	55	Total foreign currency translation adjustment, net of tax	$	(22)	$	—	$	(54)	$	55

Net change in derivatives and hedges:	Net change in derivatives and hedges:									Net change in derivatives and hedges:
Net gain recognized during the period	Net gain recognized during the period	$	4	$	—	$	5	$	1	Net gain recognized during the period	$	23	$	7	$	28	$	8
Total derivatives and hedges, pretax	Total derivatives and hedges, pretax	4		—		5		1		Total derivatives and hedges, pretax	23		7		28		8
Tax expense	Tax expense	1		—		1		—		Tax expense	6		2		7		2
Net change in derivatives and hedges, net of tax	Net change in derivatives and hedges, net of tax	$	3	$	—	$	4	$	1	Net change in derivatives and hedges, net of tax	$	17	$	5	$	21	$	6

Net change in minimum pension liability:	Net change in minimum pension liability:									Net change in minimum pension liability:

Net gain recognized during the period	Net gain recognized during the period	$	—	$	1	$	1	$	1	Net gain recognized during the period	$	1	$	1	$	2	$	1

Total pension liability, pretax	Total pension liability, pretax	—		1		1		1		Total pension liability, pretax	1		1		2		1
Tax benefit	Tax benefit	—		—		—		—		Tax benefit	—		—		—		—
Net change in minimum pension liability, net of tax	Net change in minimum pension liability, net of tax	$	—	$	1	$	1	$	1	Net change in minimum pension liability, net of tax	$	1	$	1	$	2	$	1

Net change in marketable securities:	Net change in marketable securities:									Net change in marketable securities:
Net loss recognized during the period	Net loss recognized during the period	$	(1)	$	—	$	(1)	$	—	Net loss recognized during the period	$	(2)	$	—	$	(3)	$	—
Total available for sale investment, pretax	Total available for sale investment, pretax	(1)		—		(1)		—		Total available for sale investment, pretax	(2)		—		(3)		—
Tax benefit	Tax benefit	—		—		—		—		Tax benefit	(1)		—		(1)		—
Net change in marketable securities, net of tax	Net change in marketable securities, net of tax	$	(1)	$	—	$	(1)	$	—	Net change in marketable securities, net of tax	$	(1)	$	—	$	(2)	$	—

For the three months ended ~~December~~March 31, ~~2021,~~2022, the changes in accumulated other comprehensive loss, net of tax by component are as follows:


(Dollars in millions)	(Dollars in millions)	Foreign Exchange Translation Adjustments		Pension and Liability Adjustments		Derivatives and Hedges		Marketable Securities		Other		Total		(Dollars in millions)	Foreign Exchange Translation Adjustments		Pension and Liability Adjustments		Derivatives and Hedges		Marketable Securities		Other		Total
Balance at September 30, 2021		$	(282)	$	(46)	$	1	$	(1)	$	(1)	$	(329)
Balance at December 31, 2021														Balance at December 31, 2021	$	(300)	$	(46)	$	4	$	(2)	$	(1)	$	(345)
Other comprehensive (loss) income before reclassifications	Other comprehensive (loss) income before reclassifications	(18)		—		3		(1)		—		(16)		Other comprehensive (loss) income before reclassifications	(22)		—		17		(1)		—		(6)
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	—		—		—		—		—		—		Amounts reclassified from accumulated other comprehensive loss	—		1		—		—		—		1
Net current period other comprehensive (loss) income	Net current period other comprehensive (loss) income	(18)		—		3		(1)		—		(16)		Net current period other comprehensive (loss) income	(22)		1		17		(1)		—		(5)
Balance at December 31, 2021		$	(300)	$	(46)	$	4	$	(2)	$	(1)	$	(345)
Balance at March 31, 2022														Balance at March 31, 2022	$	(322)	$	(45)	$	21	$	(3)	$	(1)	$	(350)

For the ~~six~~nine months ended ~~December~~March 31, ~~2021,~~2022, the changes in accumulated other comprehensive loss, net of tax by component are as follows:

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(Dollars in millions)	(Dollars in millions)	Foreign Exchange Translation Adjustments		Pension and Liability Adjustments		Derivatives and Hedges		Marketable Securities		Other		Total		(Dollars in millions)	Foreign Exchange Translation Adjustments		Pension and Liability Adjustments		Derivatives and Hedges		Marketable Securities		Other		Total
Balance at June 30, 2021	Balance at June 30, 2021	$	(268)	$	(47)	$	—	$	(1)	$	(1)	$	(317)	Balance at June 30, 2021	$	(268)	$	(47)	$	—	$	(1)	$	(1)	$	(317)
Other comprehensive (loss) income before reclassifications	Other comprehensive (loss) income before reclassifications	(32)		—		4		(1)		—		(29)		Other comprehensive (loss) income before reclassifications	(54)		—		21		(2)		—		(35)
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	—		1		—		—		—		1		Amounts reclassified from accumulated other comprehensive loss	—		2		—		—		—		2
Net current period other comprehensive (loss) income	Net current period other comprehensive (loss) income	(32)		1		4		(1)		—		(28)		Net current period other comprehensive (loss) income	(54)		2		21		(2)		—		(33)
Balance at December 31, 2021		$	(300)	$	(46)	$	4	$	(2)	$	(1)	$	(345)
Balance at March 31, 2022														Balance at March 31, 2022	$	(322)	$	(45)	$	21	$	(3)	$	(1)	$	(350)

15. COMMITMENTS AND CONTINGENCIES

From time to time, the Company may be involved in legal proceedings arising in the ordinary course of business, including, without limitation, inquiries and claims concerning environmental contamination as well as litigation and allegations in connection with acquisitions, product liability, manufacturing or packaging defects, and claims for reimbursement for the cost of lost or damaged active pharmaceutical ingredients, the cost of any of which could be significant. The Company intends to vigorously defend itself against any such litigation and does not currently believe that the outcome of any such litigation will have a material adverse effect on the Company’s consolidated financial statements. In addition, the healthcare industry is highly regulated and government agencies continue to scrutinize certain practices affecting government programs and otherwise.

From time to time, the Company receives subpoenas or requests for information relating to the business practices and activities of customers or suppliers from various governmental agencies or private parties, including from state attorneys general, the U.S. Department of Justice, and private parties engaged in patent infringement, antitrust, tort, and other litigation. The Company generally responds to such subpoenas and requests in a timely and thorough manner, which responses sometimes require considerable time and effort and can result in considerable costs being incurred. The Company expects to incur costs in future periods in connection with future requests.

16. SEGMENT INFORMATION

The Company conducts its business within the following operating segments: Biologics, Softgel and Oral Technologies, Oral and Specialty Delivery, and Clinical Supply Services. The Company evaluates the performance of its segments based on segment earnings before other (expense) income, impairments, restructuring costs, interest expense, income tax expense, ~~(benefit),~~ and depreciation and amortization (“Segment EBITDA”).

Segment EBITDA is subject to important limitations. These consolidated financial statements include information concerning Segment EBITDA (a) because Segment EBITDA is an operational measure used by management in the assessment of the operating segments, the allocation of resources to the segments, and the setting of strategic goals and annual goals for the segments, and (b) in order to provide supplemental information that the Company considers relevant for the readers of the consolidated financial statements. The Company’s presentation of Segment EBITDA may not be comparable to similarly titled measures used by other companies.

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The following tables include ~~net revenue and~~ Segment EBITDA for each of the Company's current reporting segments during the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 and ~~2020:~~2021:

(Dollars in millions) Three Months Ended
December 31, Six Months Ended
December 31,
2021 2020 2021 2020
Net revenue:
Biologics $ 638 $ 404 $ 1,184 $ 781
Softgel and Oral Technologies 329 247 572 468
Oral and Specialty Delivery 156 170 302 328
Clinical Supply Services 99 93 195 186
Inter-segment revenue elimination (5) (3) (11) (6)
Total net revenue $ 1,217 $ 911 $ 2,242 $ 1,757


(Dollars in millions)	(Dollars in millions)	Three Months Ended December 31,				Six Months Ended December 31,				(Dollars in millions)	Three Months Ended March 31,				Nine Months Ended March 31,
		2021		2020		2021		2020			2022		2021		2022		2021
Segment EBITDA reconciled to net earnings:	Segment EBITDA reconciled to net earnings:									Segment EBITDA reconciled to net earnings:
Biologics	Biologics	$	197	$	136	$	363	$	242	Biologics	$	216	$	180	$	579	$	422
Softgel and Oral Technologies	Softgel and Oral Technologies	78		46		119		83		Softgel and Oral Technologies	75		59		194		143
Oral and Specialty Delivery	Oral and Specialty Delivery	44		44		77		66		Oral and Specialty Delivery	41		31		118		97
Clinical Supply Services	Clinical Supply Services	27		25		53		50		Clinical Supply Services	30		27		83		77
Sub-Total	Sub-Total	$	346	$	251	$	612	$	441	Sub-Total	$	362	$	297	$	974	$	739
Reconciling items to net earnings	Reconciling items to net earnings									Reconciling items to net earnings
Unallocated costs (1)	Unallocated costs (1)	(101)		(45)		(157)		(74)		Unallocated costs (1)	(54)		123		(211)		49
Depreciation and amortization	Depreciation and amortization	(98)		(71)		(179)		(140)		Depreciation and amortization	(99)		(76)		(278)		(216)
Interest expense, net	Interest expense, net	(32)		(26)		(58)		(51)		Interest expense, net	(33)		(27)		(91)		(78)
Income tax expense	Income tax expense	(18)		(21)		(28)		(5)		Income tax expense	(35)		(85)		(63)		(91)

Net earnings	Net earnings	$	97	$	88	$	190	$	171	Net earnings	$	141	$	232	$	331	$	403

(1) Unallocated costs include restructuring and special items, stock-based compensation, gain on sale of subsidiary, impairment charges, certain other corporate directed costs, and other costs that are not allocated to the segments as follows:


(Dollars in millions)	(Dollars in millions)	Three Months Ended December 31,				Six Months Ended December 31,				(Dollars in millions)	Three Months Ended March 31,				Nine Months Ended March 31,
		2021		2020		2021		2020			2022		2021		2022		2021
Impairment charges and gain (loss) on sale of assets (a)	Impairment charges and gain (loss) on sale of assets (a)	$	(16)	$	(1)	$	(19)	$	(2)	Impairment charges and gain (loss) on sale of assets (a)	$	(2)	$	(5)	$	(21)	$	(8)
Stock-based compensation	Stock-based compensation	(11)		(11)		(32)		(30)		Stock-based compensation	(10)		(8)		(42)		(38)
Restructuring and other special items (b)	Restructuring and other special items (b)	(23)		(15)		(31)		(20)		Restructuring and other special items (b)	(12)		(3)		(43)		(23)
Gain on sale of subsidiary (c)	Gain on sale of subsidiary (c)	—		—		1		—		Gain on sale of subsidiary (c)	—		184		1		184

Other (expense) income, net (d)		(14)		8		(23)		19
Other expense, net (d)										Other expense, net (d)	(2)		(25)		(25)		(5)
Unallocated corporate costs, net	Unallocated corporate costs, net	(37)		(26)		(53)		(41)		Unallocated corporate costs, net	(28)		(20)		(81)		(61)
Total unallocated costs	Total unallocated costs	$	(101)	$	(45)	$	(157)	$	(74)	Total unallocated costs	$	(54)	$	123	$	(211)	$	49

(a) Impairment charges and gain (loss) on sale of assets during the ~~three and six~~nine months ended ~~December~~March 31, ~~2021~~2022 include fixed asset impairment charges associated with a product in our ~~respiratory~~Oral and ~~specialty platform.~~

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Specialty Delivery segment.

(b) Restructuring and other special items during the three months ended ~~December~~March 31, ~~2021~~2022 include (i) ~~transaction and~~ integration costs primarily associated with the Bettera acquisition and (ii) unrealized losses on venture capital investments. Restructuring and other special items during the nine months ended March 31, 2022 also include transaction and integration costs associated with the Delphi, Hepatic, Acorda and RheinCell acquisitions.

Restructuring and other special items during the three months ended March 31, 2021 include transaction and integration costs associated with the Delphi, Acorda, and Skeletal acquisitions, and restructuring costs associated with the closure of the Bolton facility. Restructuring and other special items during the ~~six~~nine months ended ~~December~~March 31, 2021 also include ~~(i) transaction and integration costs associated with the Delphi, Hepatic, RheinCell, and Bettera acquisitions and (ii) restructuring costs associated with the closure of the Bolton facility.~~

~~Restructuring and other special items during the three and six months ended December 31, 2020 include (i)~~ transaction costs associated with the sale of the Blow-Fill-Seal Business, ~~and (ii) restructuring costs associated with the closure of the Bolton facility. Restructuring and other special items during the six months ended December 31, 2020 also include~~ transaction and integration costs associated with acquisitions of facilities in Italy and Belgium, the disposal of a site in Australia, and other restructuring initiatives across the Company's network of sites.

(c) Gain on sale of subsidiary for the ~~six~~three months ended ~~December~~March 31, 2021 and nine months ended March 31, 2022 and 2021 was due to the sale of the Blow-Fill-Seal Business.

(d) Refer to Note 8, Other Expense, ~~(Income),~~ Net for details of financing charges and foreign currency translation adjustments recorded within other expense, ~~(income),~~ net.

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The following table includes total assets for each segment, as well as reconciling items necessary to total the amounts reported in the consolidated financial statements.


(Dollars in millions)	(Dollars in millions)	December 31, 2021		June 30, 2021		(Dollars in millions)	March 31, 2022		June 30, 2021
Assets:	Assets:					Assets:
Biologics	Biologics	$	5,208	$	4,973	Biologics	$	5,296	$	4,973
Softgel and Oral Technologies	Softgel and Oral Technologies	2,591		1,604		Softgel and Oral Technologies	2,639		1,604
Oral and Specialty Delivery	Oral and Specialty Delivery	1,210		1,269		Oral and Specialty Delivery	1,210		1,269
Clinical Supply Services	Clinical Supply Services	465		483		Clinical Supply Services	456		483
Corporate and eliminations	Corporate and eliminations	729		783		Corporate and eliminations	721		783
Total assets	Total assets	$	10,203	$	9,112	Total assets	$	10,322	$	9,112

For the nine months ended March 31, 2022, the Company had one customer that represented 10% or $368 million, of its net revenue, which was primarily recorded in the Biologics segment.

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17. SUPPLEMENTAL BALANCE SHEET INFORMATION

Supplemental balance sheet information at ~~December~~March 31, ~~2021~~2022 and June 30, 2021 is detailed in the following tables.

Inventories

Work-in-process and inventories include raw materials, labor, and overhead. Total inventories consist of the following:


(Dollars in millions)	(Dollars in millions)	December 31, 2021		June 30, 2021		(Dollars in millions)	March 31, 2022		June 30, 2021
Raw materials and supplies	Raw materials and supplies	$	592	$	469	Raw materials and supplies	$	618	$	469
Work-in-process	Work-in-process	153		151		Work-in-process	115		151

Total inventories, gross	Total inventories, gross	745		620		Total inventories, gross	733		620
Inventory cost adjustment	Inventory cost adjustment	(57)		(57)		Inventory cost adjustment	(57)		(57)
Total inventories	Total inventories	$	688	$	563	Total inventories	$	676	$	563

Prepaid expenses and other

Prepaid expenses and other consist of the following:


(Dollars in millions)	(Dollars in millions)	December 31, 2021		June 30, 2021		(Dollars in millions)	March 31, 2022		June 30, 2021
Prepaid expenses	Prepaid expenses	$	54	$	46	Prepaid expenses	$	74	$	46

Contract assets	Contract assets	308		181		Contract assets	327		181

Spare parts supplies	Spare parts supplies	21		30		Spare parts supplies	21		30
Prepaid income tax	Prepaid income tax	21		22		Prepaid income tax	21		22

Non-U.S. value-added tax	Non-U.S. value-added tax	35		50		Non-U.S. value-added tax	38		50

Other current assets	Other current assets	61		47		Other current assets	56		47
Total prepaid expenses and other	Total prepaid expenses and other	$	500	$	376	Total prepaid expenses and other	$	537	$	376

Other accrued liabilities

Other accrued liabilities consist of the following:


(Dollars in millions)	(Dollars in millions)	December 31, 2021		June 30, 2021		(Dollars in millions)	March 31, 2022		June 30, 2021
Accrued employee-related expenses	Accrued employee-related expenses	$	136	$	184	Accrued employee-related expenses	$	188	$	184
Operating lease liabilities	Operating lease liabilities	14		16		Operating lease liabilities	14		16
Restructuring accrual	Restructuring accrual	1		4		Restructuring accrual	1		4

Accrued interest	Accrued interest	33		27		Accrued interest	22		27

Contract liabilities	Contract liabilities	271		305		Contract liabilities	190		305
Accrued income tax	Accrued income tax	20		30		Accrued income tax	36		30

Other	Other	178		170		Other	165		170
Total other accrued liabilities	Total other accrued liabilities	$	653	$	736	Total other accrued liabilities	$	616	$	736

18. SUBSEQUENT EVENTS

The Vaccine Manufacturing and Innovation Centre UK Limited Asset Acquisition

In April 2022, the Company, through its wholly owned subsidiary, Catalent Oxford Limited, acquired a development and manufacturing facility under construction and certain related assets from The Vaccine Manufacturing and Innovation Centre UK Limited for $133 million in cash, which included $8 million of closing costs. The Company funded this acquisition with cash on hand.

Operating results from the facility acquired will become part of the Company’s Biologics segment. The initial accounting for this acquisition is pending. Significant, relevant information needed to complete the initial accounting analysis is not yet available because the valuation of the assets acquired and liabilities assumed is not complete. As a result, determination of these values is not practicable and the Company is unable to disclose these values or provide other related disclosures at this time.

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Princeton Cell Therapy Development and Manufacturing Acquisition

In April 2022, the Company acquired cell therapy commercial manufacturing operations and a facility in Princeton, New Jersey, from Erytech Pharma S.A. and affiliates for $45 million in cash, subject to customary adjustments. The Company funded this acquisition with cash on hand.

The operations acquired have become part of the Company’s Biologics segment. The initial accounting for this acquisition is pending. Significant, relevant information needed to complete the initial accounting analysis is not yet available because the valuation of the assets acquired and liabilities assumed is not complete. As a result, determination of these values is not practicable and the Company is unable to disclose these values or provide other related disclosures at this time.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company

We provide differentiated development and manufacturing solutions for drugs, protein-based biologics, cell and gene therapies, and consumer health products at over ~~fifty~~50 facilities across four continents under rigorous quality and operational standards. Our oral, injectable, and respiratory delivery technologies, along with our state-of-the-art protein and cell and gene therapy manufacturing capacity, address a wide and growing range of modalities and therapeutic and other categories across the biopharmaceutical and consumer health industries. Through our extensive capabilities, growth-enabling capacity, and deep expertise in product development, regulatory compliance, and clinical trial supply, we can help our customers take products to market faster, ~~including~~and have done so for nearly half of new drug products approved by the U.S. Food and Drug Administration (the “FDA”) in

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the last decade. Our development and manufacturing platforms, which include those in our Biologics, Softgel and Oral Technologies, and Oral and Specialty Delivery segments, our proven formulation, supply, and regulatory expertise, and our broad and deep development and manufacturing know-how enable our customers to advance and then bring to market more products and better treatments for patients and consumers. Our commitment to reliably supply our customers’ and their patients’ needs is the foundation for the value we provide; annually, we produce more than 70 billion doses for nearly 7,000 customer products, or approximately 1 in every 24 doses of such products taken each year by patients and consumers around the world. We believe that through our investments in state-of-the-art facilities and capacity expansion, including investments in facilities focused on new treatment modalities and other attractive market segments, our continuous improvement activities devoted to operational and quality excellence, the sales of existing and introduction of new customer products, and, in some cases, our innovation activities and patents, we will continue to attract premium opportunities and realize the growth potential from these areas.

We currently operate in four operating segments, which also constitute our four reporting segments: Biologics, Softgel and Oral Technologies, Oral and Specialty Delivery, and Clinical Supply Services.

The COVID-19 Pandemic

Our response to COVID-19

Since the start of the COVID-19 pandemic, we have taken and continue to take steps to protect our employees, ensure the integrity and quality of our products and services, and to maintain business continuity for our customers and their patients who depend on us to manufacture and supply critical products to the market. To address the multiple dimensions of the pandemic, senior, multi-disciplinary teams reporting directly to our Chief Executive Officer have been continuously monitoring the global situation, executing mitigation activities whenever and wherever required, and implementing a phased and structured return to our facilities as circumstances have permitted for those employees who have been working remotely.

Among other things, we implemented measures to avoid or reduce infection or contamination in line with guidelines issued by the U.S. Centers for Disease Control and Prevention, the World Health Organization, and local authorities where we operate, re-emphasized good hygiene practices, restricted non-employee access to our sites, reorganized our workflows where permitted to maximize physical distancing, limited employee travel, facilitated safer alternatives to travel to and from work, and employed remote-working strategies. We have reviewed and will continue to analyze our supply chain to identify any risk, delay, or concern that may have an impact on our ability to deliver our services and products. To date, we have not identified any significant risk, delay, or concern that would have a substantial effect on such delivery. We have adopted various procedures to minimize and manage any future disruption to our ongoing operations, including the creation and activation of new and existing business continuity plans when needed. Our existing procedures, which are consistent with current good manufacturing practices and other regulatory standards, are intended to assure the integrity of our supply against any contamination. We have a detailed response plan to manage any impact of the virus on employee health, site operations, and

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product supply, including immediate assessment of the health of employees reporting symptoms, comprehensive risk assessment of any impact to quality, additional cleaning protocols, and alternative shift patterns to compensate should fewer employees be available.

Impact of COVID-19 on Our Business and Results of Operations

We continue to assess any impact the COVID-19 pandemic may have on our business and results of operations. We have seen increased demand and significant revenue increases and the potential for further revenue increases from COVID-19-related products, particularly in our Biologics segment. As part of our response to the COVID-19 pandemic, we accelerated and enhanced certain of our capital improvement plans to expand capacity for manufacturing drug substance and drug product for protein-based biologics and cell and gene therapies, particularly at our drug product facilities in Bloomington, Indiana, and Anagni, Italy, as well as our commercial-scale viral vector manufacturing facility in Maryland. We have also implemented various strategies to protect our financial condition and results of operations should we experience a reduction in demand for COVID-19 related products, such as ensuring contractual take-or-pay and minimum volume requirements for the manufacture of certain COVID-19 related products. However, the extent and duration of revenue associated with COVID-19-related products is uncertain and dependent, in important respects, on factors outside our control.

The ~~COVID-19-vaccines we manufacture are still pending approval from the FDA and other non-U.S. regulatory authorities and may not receive approval. The~~ future duration and extent of the COVID-19 pandemic and the future demand for COVID-19 vaccines and therapies is unknown. Public opinion of certain COVID-19 vaccines and therapies and the product owners and manufacturers can change quickly and affect the demand for certain products and ~~services, although they should not affect any required minimum payment for a COVID-19 related product subject to a “take-or-pay” provision.~~services. In addition, any

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concentration of revenue from certain COVID-19 vaccine products enhances our operational risk with respect to quality, security, regulatory inspections and business disruption resulting from any unforeseen event that affects any of the facilities and communities in which we manufacture COVID-19 vaccines. Because some of our work on COVID-19 vaccines is performed under subcontracts to U.S. government contracts, new regulations affecting U.S. federal government prime and subcontractors may affect our operations, efficiency, and ability to deliver on our obligations to customers for COVID-19 vaccines, other COVID-19 related products, and other unrelated products and services. We have implemented various mechanisms to protect our customers, their material and product, and our business continuity, such as enhanced security measures at certain facilities and heightened cybersecurity controls.

Critical Accounting Policies and Estimates

We prepare our financial statements in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). Management made certain estimates and assumptions during the preparation of the consolidated financial statements in accordance with U.S. GAAP. These estimates and assumptions affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities in the consolidated financial statements. These estimates also affect the reported amount of net earnings during the reporting periods. Actual results could differ from those estimates. Because of the size of the financial statement elements to which they relate, some of our accounting policies and estimates have a more significant impact on the consolidated financial statements than others.

There was no material change to our critical accounting policies or in the underlying accounting assumptions and estimates from those described in our Fiscal 2021 10-K, other than recently adopted accounting principles disclosed in Note 1, Basis of Presentation and Summary of Significant Accounting Policies to the unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q (the “Consolidated Financial Statements”), which adoptions had no material impact on our financial condition or results of operations.

Non-GAAP Metrics

EBITDA from operations

Management measures operating performance based on consolidated earnings from operations before interest expense, expense ~~(benefit)~~ for income taxes, and depreciation and amortization, adjusted for the income or loss attributable to non-controlling interests (“EBITDA from operations”). EBITDA from operations is not defined under U.S. GAAP, is not a measure of operating income, operating performance, or liquidity presented in accordance with U.S. GAAP, and is subject to important limitations.

We believe that the presentation of EBITDA from operations enhances an investor’s understanding of our financial performance. We believe this measure is a useful financial metric to assess our operating performance from period to period by excluding certain items that we believe are not representative of our core business and use this measure for business planning purposes. In addition, given the significant historical investments that we have made ~~in the past~~ in property, plant, and equipment, depreciation and amortization expenses represent a meaningful portion of our cost structure. We believe that EBITDA from

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operations will provide investors with a useful tool for assessing the comparability between periods of our ability to generate cash from operations sufficient to pay taxes, to service debt, and to undertake capital expenditures because it eliminates depreciation and amortization expense. We present EBITDA from operations in order to provide supplemental information that we consider relevant for the readers of our Consolidated Financial Statements, and such information is not meant to replace or supersede U.S. GAAP measures. Our definition of EBITDA from operations may not be the same as similarly titled measures used by other companies. The most directly comparable measure to EBITDA from operations defined under U.S. GAAP is net earnings. Included in this Management’s Discussion and Analysis is a reconciliation of net earnings to EBITDA from operations.

In addition, we evaluate the performance of our segments based on segment earnings before non-controlling interests, other expense (income), impairments, restructuring costs, interest expense, income tax expense, ~~(benefit),~~ and depreciation and amortization (“Segment EBITDA”).

Use of Constant Currency

As exchange rates are an important factor in understanding period-to-period comparisons, we believe the presentation of results on a constant-currency basis in addition to reported results helps improve investors’ ability to understand our operating results and evaluate our performance in comparison to prior periods. Constant-currency information compares results between periods as if exchange rates had remained constant period-over-period. We use results on a constant-currency basis as one measure to evaluate our performance. In this Quarterly Report on Form 10-Q, we compute constant currency by calculating current-year results using prior-year foreign currency exchange rates. We generally refer to such amounts calculated on a

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constant-currency basis as excluding the impact of foreign currency exchange. These results should be considered in addition to, not as a substitute for, results reported in accordance with U.S. GAAP. Results on a constant-currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with U.S. GAAP.

Other Non-GAAP Measures

Organic revenue growth and Segment EBITDA growth are measures we use to explain the underlying results and trends in the business. Organic revenue growth and Segment EBITDA growth are measures used to show current year sales and earnings from existing operations. Organic revenue growth and Segment EBITDA growth exclude the impact of foreign currency exchange, acquisitions of operating or legal entities, and divestitures within the year. These measures should be considered in addition to, not as a substitute for, performance measures reported in accordance with U.S. GAAP. These measures, as we present them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with U.S. GAAP.

Three Months Ended ~~December~~March 31, ~~2021~~2022 Compared to the Three Months Ended ~~December~~March 31, ~~2020~~2021

The below tables summarize several financial metrics we use to measure performance for the three months ended ~~December~~March 31, ~~2021~~2022 and ~~three months ended December 31, 2020.~~2021. Refer to the discussions below regarding performance and use of key financial metrics.

Results for the three months ended ~~December~~March 31, ~~2021~~2022 compared to the three months ended ~~December~~March 31, ~~2020~~2021 were as follows:

Three Months Ended
December 31, FX Impact Constant Currency Increase (Decrease)
(Dollars in millions) 2021 2020 Change $ Change %
Net revenue $ 1,217 $ 911 $ (13) $ 319 35 %
Cost of sales 812 613 (8) 207 34 %
Gross margin 405 298 (5) 112 38 %
Selling, general, and administrative expenses 228 165 (1) 64 38 %
Other operating expense 16 6 (1) 11 185 %
Operating earnings 161 127 (3) 37 30 %
Interest expense, net 32 26 — 6 24 %
Other expense (income), net 14 (8) (2) 24 (292) %
Earnings before income taxes 115 109 (1) 7 6 %
Income tax expense 18 21 — (3) (14) %
Net earnings $ 97 $ 88 $ (1) $ 10 11 %

~~Change % calculations are based on amounts prior to rounding~~

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	Three Months Ended March 31,				FX Impact		Constant Currency Increase (Decrease)
(Dollars in millions)	2022		2021				Change $		Change %
Net revenue	$	1,273	$	1,053	$	(24)	$	244	23	%
Cost of sales	850		687		(15)		178		26	%
Gross margin	423		366		(9)		66		18	%
Selling, general, and administrative expenses	207		173		(2)		36		21	%

Gain on sale of subsidiary	—		(184)		—		184		*
Other operating expense	5		8		—		(3)		(39)	%

Operating earnings	211		369		(7)		(151)		(41)	%
Interest expense, net	33		27		(1)		7		25	%
Other expense, net	2		25		(2)		(21)		(85)	%
Earnings before income taxes	176		317		(4)		(137)		(43)	%
Income tax expense	35		85		—		(50)		(58)	%




Net earnings	$	141	$	232	$	(4)	$	(87)	(38)	%

Change % calculations are based on amounts prior to rounding

*Percentage not meaningful

Net Revenue


	~~2021~~2022 vs. ~~2020~~2021
Year-Over-Year Change	Three Months Ended ~~December~~March 31,
	Net Revenue
Organic	3220	%
Impact of acquisitions	65	%
Impact of divestitures	~~(3)~~(2)	%
Constant-currency change	3523	%
Foreign currency translation impact on reporting	~~(1)~~(2)	%
Total % change	3421	%

Net revenue increased ~~$319~~$244 million, or ~~35%~~23%, excluding the impact of foreign exchange, compared to the three months ended ~~December~~March 31, ~~2020. Net revenue decreased 3% inorganically principally due to the sale of Catalent USA Woodstock, Inc. and certain related assets (collectively, the “Blow-Fill-Seal Business”) in March~~ 2021. Net revenue increased ~~32%~~20% organically ~~on a constant-currency basis,~~ primarily due to (i) broad-based strength across our Biologics segment in part related to demand for COVID-19-related programs, and (ii) increased demand for our customers' prescription products, a continued rebound in our consumer health products, particularly in cough, cold, and over-the-counter pain relief products, and growth in development services in our Softgel and Oral Technologies segment.

Net revenue increased 5% inorganically as a result of acquisitions, which was partially offset by a 2% decrease in net revenue due to the sale of of Catalent USA Woodstock, Inc. and certain related assets (collectively, the “Blow-Fill-Seal Business”) in March 2021. We acquired Delphi Genetics SA (“Delphi”) and the manufacturing and packaging assets of Acorda Therapeutics, Inc. (“Acorda”) in February 2021, RheinCell Therapeutics GmbH (“RheinCell”) in August 2021, and Bettera Holdings, LLC (“Bettera”) in October 2021.

Gross Margin

Gross margin increased ~~$112~~$66 million, or ~~38%~~18%, compared to the three months ended ~~December~~March 31, ~~2020,~~2021, excluding the impact of foreign exchange, primarily as a result of the strong margin profile on broad-based offerings in our Biologics segment, in part for COVID-19 related programs, a favorable impact from the decline in recall charges in our Oral and Specialty Delivery segment, and increased demand for our prescription products and development growth in our Softgel and Oral Technologies segment, partially offset by a ~~$13~~$9 million increase in depreciation and amortization ~~expense.~~expense, a one-time non-cash $7 million fair value inventory adjustment associated with our Bettera acquisition and an unfavorable impact from remediation related activities at our facility in Brussels, Belgium. On a constant-currency basis, gross margin, as a percentage of revenue, ~~increased 60~~decreased 140 basis points to 33.3% in the three months ended ~~December~~March 31, ~~2021,~~2022, compared to ~~32.7%~~34.7% in the prior-year period, primarily due to the factors described above.

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Selling, General, and Administrative Expenses

Selling, general, and administrative expenses increased ~~$64~~$36 million, or ~~38%~~21%, compared to the three months ended ~~December~~March 31, ~~2020,~~2021, excluding the impact of foreign exchange, which includes ~~$15~~$14 million in net incremental expenses from acquired and divested companies. The year-over-year increase in selling, general, and administrative expenses was primarily due to ~~an $18~~a $6 million increase in ~~employee-related~~employee health and welfare costs, ~~principally incurred for wages and bonuses, $13 million in transaction and integration costs primarily associated with our acquisition of Bettera Holdings, LLC (“Bettera”), $5~~$4 million of amortization and depreciation, and $4$3 million of bad debt expense.

Other Operating Expense

Other operating expense for the three months ended ~~December~~March 31, ~~2021 increased~~2022 decreased by ~~$11~~$3 million, or ~~185%~~39%, compared to the three months ended ~~December~~March 31, ~~2020,~~2021, when excluding the impact of foreign exchange. The year-over-year ~~increase~~decrease was primarily due to ~~a $15~~$3 million ~~increase~~ in lower fixed asset impairment ~~charges primarily associated with a product in our respiratory and specialty platform.~~charges.

Interest Expense, net

Interest expense, net of ~~$32~~$33 million for the three months ended ~~December~~March 31, ~~2021~~2022 increased $6$7 million, or ~~24%~~25%, compared to the three months ended ~~December~~March 31, ~~2020,~~2021, excluding the impact of foreign exchange. The savings from repayment of our formerly outstanding term loans and 4.875% senior notes due 2026 (the “2026 Notes”) were offset by increases in interest expense due to incremental borrowing to fund our Bettera acquisition. The incremental borrowing includes our most recent tranche of term loans, ~~3.125% senior notes due 2029 (the “2029 Notes”),~~ and 3.500% senior notes due 2030 (the “2030 Notes”).

For additional information concerning our debt and financing arrangements, including the changing mix of debt and equity in our capital structure, see “Liquidity and Capital Resources” and Note 6, Long-Term Obligations and Short-Term Borrowings to our Consolidated Financial Statements.

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Other Expense, ~~(Income),~~ net

Other expense, net of ~~$14~~$2 million for the three months ended ~~December~~March 31, ~~2021~~2022 was primarily driven by ~~$15~~$4 million of foreign currency losses.

Other ~~income,~~expense, net of $8$25 million for the three months ended ~~December~~March 31, ~~2020~~2021 was primarily driven by (i) a ~~gain~~$11 million premium on early redemption of the 2026 Notes, (ii) a write-off of $4 million of previously capitalized financing charges related to our repaid term loans and our redeemed 2026 Notes, (iii) $2 million of financing charges related to our outstanding term loans, and (iv) $7 million ~~related to the change in fair value~~ of ~~the derivative liability arising from the dividend-adjustment mechanism of our formerly outstanding Series A convertible preferred stock, par value $0.01 (the “Series A Preferred Stock”).~~foreign currency losses.

Income Tax Expense

Our provision for income taxes for the three months ended ~~December~~March 31, ~~2021~~2022 was ~~$18~~$35 million relative to earnings before taxes of ~~$115~~$176 million. Our provision for income taxes for the three months ended ~~December,~~March 31, ~~2020~~2021 was ~~$21~~$85 million relative to earnings before taxes of ~~$109~~$317 million. The decrease in income tax provision relative to the prior-year period was ~~primarily~~largely the result of the discrete tax expense we incurred on the gain on the sale of our Blow-Fill-Seal Business recognized in the prior-period and a shift in non-domestic pretax income ~~in international~~to tax jurisdictions with favorable tax rates. Generally, fluctuations in the effective tax rate are due to changes in the geographic distribution of our pretax income resulting from our business mix, changes in the tax impact of permanent differences, restructuring, special items, certain equity related compensation, and other discrete tax items that may have unique tax implications depending on the nature of the item.

Segment Review

The following charts depict the percentages of net revenue from each of our four reporting segments for the three months ended ~~December~~March 31, ~~2021~~2022 compared to the three months ended ~~December~~March 31, ~~2020.~~2021. Refer below for discussions regarding each segment’s net revenue and EBITDA performance and to “Non-GAAP Metrics” for a discussion of our use of Segment EBITDA, a measure that is not defined under U.S. GAAP.

Table of Contents

Our results on a segment basis for the three months ended ~~December~~March 31, ~~2021~~2022 compared to the three months ended ~~December~~March 31, ~~2020~~2021 were as follows:

~~Table of Contents~~


		Three Months Ended December 31,				FX Impact		Constant Currency Increase (Decrease)					Three Months Ended March 31,				FX Impact		Constant Currency Increase (Decrease)
(Dollars in millions)	(Dollars in millions)	2021		2020				Change $		Change %		(Dollars in millions)	2022		2021				Change $		Change %
Biologics	Biologics											Biologics
Net revenue	Net revenue	$	638	$	404	$	(6)	$	240	60	%	Net revenue	$	698	$	544	$	(10)	$	164	30	%
Segment EBITDA	Segment EBITDA	197		136		(2)		63		47	%	Segment EBITDA	216		180		(5)		41		23	%
Softgel and Oral Technologies	Softgel and Oral Technologies											Softgel and Oral Technologies
Net revenue	Net revenue	329		247		(6)		88		36	%	Net revenue	324		244		(9)		89		37	%
Segment EBITDA	Segment EBITDA	78		46		(1)		33		73	%	Segment EBITDA	75		59		(2)		18		29	%
Oral and Specialty Delivery	Oral and Specialty Delivery											Oral and Specialty Delivery
Net revenue	Net revenue	156		170		—		(14)		(8)	%	Net revenue	154		171		(3)		(14)		(8)	%
Segment EBITDA	Segment EBITDA	44		44		—		—		—	%	Segment EBITDA	41		31		(1)		11		37	%
Clinical Supply Services	Clinical Supply Services											Clinical Supply Services
Net revenue	Net revenue	99		93		(2)		8		7	%	Net revenue	101		100		(2)		3		3	%
Segment EBITDA	Segment EBITDA	27		25		(1)		3		9	%	Segment EBITDA	30		27		(1)		4		14	%
Inter-segment revenue elimination	Inter-segment revenue elimination	(5)		(3)		1		(3)		(61)	%	Inter-segment revenue elimination	(4)		(6)		—		2		34	%
Unallocated Costs (1)	Unallocated Costs (1)	(101)		(45)		2		(58)		(130)	%	Unallocated Costs (1)	(54)		123		2		(179)		(146)	%
Combined totals	Combined totals											Combined totals
Net revenue	Net revenue	$	1,217	$	911	$	(13)	$	319	35	%	Net revenue	$	1,273	$	1,053	$	(24)	$	244	23	%

EBITDA from operations	EBITDA from operations	$	245	$	206	$	(2)	$	41	20	%	EBITDA from operations	$	308	$	420	$	(7)	$	(105)	(25)	%

Change % calculations are based on amounts prior to rounding

(1) Unallocated costs include restructuring and special items, stock-based compensation, impairment charges, certain other corporate directed costs, and other costs that are not allocated to the segments as follows:

Three Months Ended
December 31,
(Dollars in millions) 2021 2020
Impairment charges and gain (loss) on sale of assets (a)
$ (16) $ (1)
Stock-based compensation (11) (11)
Restructuring and other special items (b)
(23) (15)
Other (expense) income, net (c)
(14) 8
Unallocated corporate costs, net (37) (26)
Total unallocated costs $ (101) $ (45)

Table of Contents


	Three Months Ended March 31,
(Dollars in millions)	2022		2021
Impairment charges and gain (loss) on sale of assets	$	(2)	$	(5)
Stock-based compensation	(10)		(8)
Restructuring and other special items (a)	(12)		(3)
Gain on sale of subsidiary (b)	—		184


Other expense, net (c)	(2)		(25)
Unallocated corporate costs, net	(28)		(20)
Total unallocated costs	$	(54)	$	123

(a) Impairment charges and gain (loss) on sale of assets during the three months ended December 31, 2021 include fixed asset impairment charges associated with a product in our respiratory and specialty platform.

~~(b)~~ Restructuring and other special items during the three months ended ~~December~~March 31, ~~2021~~2022 include ~~(i) transaction and~~ integration costs primarily associated with the Bettera acquisition, ~~of Bettera, (ii) restructuring costs associated with the closure of our Clinical Supply Services facility in Bolton, U.K.~~and unrealized losses on venture capital investments. Restructuring and other special items during the three months ended ~~December~~March 31, ~~2020~~2021 include transaction costs for the sale of our Blow-Fill-Seal Business, and restructuring costs associated with the closure of our Bolton facility.

(b) For the three months ended March 31, 2021, gain on sale of subsidiary was due to the divestiture of our Blow-Fill-Seal Business.

(c) Refer to Note 8, Other Expense, ~~(Income),~~ Net for details of financing charges and foreign currency translation adjustments recorded within other expense, ~~(income),~~ net in our Consolidated Financial Statements.

Provided below is a reconciliation of net earnings to EBITDA from operations:

~~Table of Contents~~


		Three Months Ended December 31,					Three Months Ended March 31,
(Dollars in millions)	(Dollars in millions)	2021		2020		(Dollars in millions)	2022		2021
Net earnings	Net earnings	$	97	$	88	Net earnings	$	141	$	232
Depreciation and amortization	Depreciation and amortization	98		71		Depreciation and amortization	99		76
Interest expense, net	Interest expense, net	32		26		Interest expense, net	33		27
Income tax expense (benefit)		18		21
Income tax expense						Income tax expense	35		85

EBITDA from operations	EBITDA from operations	$	245	$	206	EBITDA from operations	$	308	$	420

Biologics segment


		2021 vs. 2020					2022 vs. 2021
Year-Over-Year Change	Year-Over-Year Change	Three Months Ended December 31,				Year-Over-Year Change	Three Months Ended March 31,
		Net Revenue		Segment EBITDA			Net Revenue		Segment EBITDA
Organic	Organic	59	%	48	%	Organic	30	%	23	%
Impact of acquisitions	Impact of acquisitions	1	%	(1)	%	Impact of acquisitions	—	%	—	%
Constant-currency change	Constant-currency change	60	%	47	%	Constant-currency change	30	%	23	%
Foreign exchange translation impact on reporting	Foreign exchange translation impact on reporting	(2)	%	(2)	%	Foreign exchange translation impact on reporting	(2)	%	(3)	%
Total % change	Total % change	58	%	45	%	Total % change	28	%	20	%

Biologics net revenue increased by ~~$240~~$164 million, or ~~60%~~30%, excluding the impact of foreign exchange, compared to the three months ended ~~December~~March 31, ~~2020.~~2021. The increase was driven by ~~robust~~strong end-market demand for our drug product, drug substance, and cell and gene therapy offerings, in part related to demand for COVID-19 related programs.

Biologics Segment EBITDA increased by ~~$63~~$41 million, or ~~47%~~23%, excluding the impact of foreign exchange, compared to the three months ended ~~December~~March 31, ~~2020.~~2021. The increase was driven by ~~robust~~strong end-market demand for our drug product, drug substance, and cell and gene therapy offerings, in part related to demand for COVID-19 related ~~programs.~~ programs, partially offset by an unfavorable impact from remediation-related activities at our Brussels facility.

We completed the acquisition of RheinCell in August 2021. For the three months ended March 31, 2022, this acquisition had an immaterial impact on our net revenue and Segment EBITDA compared to the corresponding prior-year period.

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Softgel and Oral Technologies segment


		2021 vs. 2020					2022 vs. 2021
Year-Over-Year Change	Year-Over-Year Change	Three Months Ended December 31,				Year-Over-Year Change	Three Months Ended March 31,
		Net Revenue		Segment EBITDA			Net Revenue		Segment EBITDA
Organic	Organic	14	%	43	%	Organic	14	%	16	%
Impact of acquisitions	Impact of acquisitions	22	%	30	%	Impact of acquisitions	23	%	13	%
Constant-currency change	Constant-currency change	36	%	73	%	Constant-currency change	37	%	29	%
Foreign currency translation impact on reporting	Foreign currency translation impact on reporting	(3)	%	(3)	%	Foreign currency translation impact on reporting	(4)	%	(3)	%
Total % change	Total % change	33	%	70	%	Total % change	33	%	26	%

Softgel and Oral Technologies net revenue increased by ~~$88~~$89 million, or ~~36%~~37%, excluding the impact of foreign exchange, compared to the three months ended ~~December~~March 31, ~~2020.~~2021. The increase in organic revenue was driven by ~~strong end-market demand for prescription products,~~ a continued rebound in consumer health products, particularly in cough, cold, and over-the-counter pain relief products, ~~and~~ growth in development ~~services.~~services, and increased end-market demand for prescription products.

Softgel and Oral Technologies Segment EBITDA increased ~~$33~~$18 million, or ~~73%~~29%, excluding the impact of foreign exchange, compared to the three months ended ~~December~~March 31, ~~2020.~~2021. The organic portion of the increase, similar to that of net revenue, was driven by ~~an increase in end-market demand in prescription products,~~ a continued rebound in consumer health products, particularly in cough, cold, and over-the-counter pain relief products, ~~and~~ growth in development ~~services.~~services, and increased end-market demand for prescription products.

We completed the Bettera acquisition in October 2021, which increased net revenue and Segment EBITDA on an inorganic basis by ~~22%~~23% and ~~30%~~13%, respectively, in the three months ended ~~December~~March 31, ~~2021,~~2022, compared to the corresponding prior-year period.

~~Table of Contents~~

For the three months ended March 31, 2022, in association with our Bettera purchase accounting, we recorded a one-time non-cash inventory fair value adjustment for $7 million, which unfavorably impacted Segment EBITDA.

Oral and Specialty Delivery segment


		2021 vs. 2020					2022 vs. 2021
Year-Over-Year Change	Year-Over-Year Change	Three Months Ended December 31,				Year-Over-Year Change	Three Months Ended March 31,
		Net Revenue		Segment EBITDA			Net Revenue		Segment EBITDA
Organic	Organic	5	%	24	%	Organic	4	%	64	%
Impact of acquisitions	Impact of acquisitions	2	%	(7)	%	Impact of acquisitions	1	%	(10)	%
Impact of divestitures		(15)	%	(17)	%
Constant currency change		(8)	%	—	%
Impact of divestiture						Impact of divestiture	(13)	%	(17)	%
Constant-currency change						Constant-currency change	(8)	%	37	%
Foreign currency translation impact on reporting	Foreign currency translation impact on reporting	—	%	—	%	Foreign currency translation impact on reporting	(2)	%	(4)	%
Total % change	Total % change	(8)	%	—	%	Total % change	(10)	%	33	%

Oral and Specialty Delivery net revenue decreased by $14 million, or 8%, excluding the impact of foreign exchange, compared to the three months ended ~~December~~March 31, ~~2020.~~2021. Net revenue increased 5%4%, compared to the three months ended ~~December~~March 31, ~~2020,~~2021, excluding the impact of acquisitions and divestitures, primarily driven by demand for early-phase development ~~programs and orally delivered Zydis commercial products.~~programs.

Oral and Specialty Delivery Segment EBITDA ~~remained unchanged,~~increased $11 million, or 37%, excluding the impact of foreign exchange, compared to the three months ended ~~December~~March 31, ~~2020.~~2021. Segment EBITDA increased ~~24%~~64%, compared to the three months ended ~~December~~March 31, ~~2020,~~2021, excluding the impact of acquisitions and divestitures. The increase in Segment EBITDA from the prior-year period was primarily driven by ~~the increased~~ demand for ~~commercial products~~early-phase development programs and a favorable impact from ~~prior year~~prior-year recall costs in our respiratory and specialty platform.

We completed the acquisition of the manufacturing and packaging operations of the Acorda ~~Therapeutics, Inc. (“Acorda”)~~ dry powder inhaler and spray dry manufacturing business in February 2021. For the three months ended ~~December~~March 31, ~~2021,~~2022, this acquisition increased our net revenue and unfavorably impacted Segment EBITDA on an inorganic basis by 2%1% and 7%10%, respectively, compared to the corresponding prior-year period.

Table of Contents

We completed the Blow-Fill-Seal Business divestiture in March 2021. For the three months ended ~~December~~March 31, ~~2021,~~2022, this divestiture decreased our net revenue and ~~unfavorably impacted~~ Segment EBITDA on an inorganic basis by ~~15%~~13% and 17%, respectively, compared to the corresponding prior-year period.

Clinical Supply Services segment


		2021 vs. 2020					2022 vs. 2021
Year-Over-Year Change	Year-Over-Year Change	Three Months Ended December 31,				Year-Over-Year Change	Three Months Ended March 31,
		Net Revenue		Segment EBITDA			Net Revenue		Segment EBITDA
Organic	Organic	7	%	9	%	Organic	3	%	14	%

Constant currency change		7	%	9	%
Constant-currency change						Constant-currency change	3	%	14	%
Foreign currency translation impact on reporting	Foreign currency translation impact on reporting	—	%	(1)	%	Foreign currency translation impact on reporting	(2)	%	(4)	%
Total % change	Total % change	7	%	8	%	Total % change	1	%	10	%

Clinical Supply Services net revenue increased by $8$3 million, or 7%3%, excluding the impact of foreign exchange, compared to the three months ended ~~December~~March 31, ~~2020.~~2021. The increase was driven by growth in our manufacturing and packaging ~~and storage and distribution~~ offerings in North America.

Clinical Supply Services Segment EBITDA increased $3$4 million, or 9%14%, excluding the impact of foreign exchange, compared to the three months ended ~~December~~March 31, ~~2020.~~2021. The increase, similar to that of net revenue, was driven by ~~demand~~growth in our manufacturing and packaging ~~and storage and distribution~~ offerings in North America.

~~Six~~Nine Months Ended ~~December~~March 31, ~~2021~~2022 Compared to the ~~Six~~Nine Months Ended ~~December~~March 31, ~~2020~~

~~Table of Contents~~

2021

The below tables summarize several financial metrics we use to measure performance for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 and ~~six~~nine months ended ~~December~~March 31, ~~2020.~~2021. Refer to the discussions below regarding performance and use of key financial metrics.

Results for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 were as follows:

Six Months Ended
December 31, FX Impact Constant Currency Increase (Decrease)
(Dollars in millions) 2021 2020 Change $ Change %
Net revenue $ 2,242 $ 1,757 $ (6) $ 491 28 %
Cost of sales 1,513 1,210 (4) 307 25 %
Gross margin 729 547 (2) 184 34 %
Selling, general, and administrative expenses 411 330 — 81 24 %
Gain on sale of subsidiary (1) — — (1) *
Other operating expense 20 9 (1) 12 138 %
Operating earnings 299 208 (1) 92 44 %
Interest expense, net 58 51 1 6 12 %
Other expense (income), net 23 (19) (1) 43 (223) %
Earnings before income taxes 218 176 (1) 43 24 %
Income tax expense 28 5 — 23 400 %
Net earnings $ 190 $ 171 $ (1) $ 20 11 %

Table of Contents


	Nine Months Ended March 31,				FX Impact		Constant Currency Increase (Decrease)
(Dollars in millions)	2022		2021				Change $		Change %
Net revenue	$	3,515	$	2,810	$	(30)	$	735	26	%
Cost of sales	2,363		1,897		(19)		485		26	%
Gross margin	1,152		913		(11)		250		27	%
Selling, general, and administrative expenses	618		503		(2)		117		23	%
Gain on sale of subsidiary	(1)		(184)		—		183		(99)	%
Other operating expense	25		17		—		8		46	%
Operating earnings	510		577		(9)		(58)		(10)	%
Interest expense, net	91		78		—		13		17	%
Other expense, net	25		5		(4)		24		465	%
Earnings before income taxes	394		494		(5)		(95)		(19)	%
Income tax expense	63		91		—		(28)		(30)	%


Net earnings	$	331	$	403	$	(5)	$	(67)	(17)	%

Change % calculations are based on amounts prior to rounding

*Percentage not meaningful

~~Table of Contents~~

Net Revenue


	~~2021~~2022 vs. ~~2020~~2021
Year-Over-Year Change	~~Six~~Nine Months Ended ~~December~~March 31,
	Net Revenue
Organic	2726	%
Impact of acquisitions	42	%
Impact of divestitures	~~(3)~~(2)	%
~~Constant currency~~Constant-currency change	2826	%
Foreign currency translation impact on reporting	— (1)	%
Total % change	2825	%

Net revenue increased by ~~$491~~$735 million, or ~~28%~~26%, excluding the impact of foreign exchange, compared to the ~~six~~nine months ended ~~December~~March 31, 2020. Net revenue increased 4% inorganically as a result of acquisitions, which was partially offset by a 3% decrease in net revenue due to the sale of our Blow-Fill-Seal Business. We acquired Skeletal Cell Therapy Support (“Skeletal”) in November 2020, Delphi Genetics SA (“Delphi”) and the manufacturing and packaging assets of Acorda in February 2021, and Bettera in October 2021. Net revenue increased ~~27%~~26% organically on a constant-currency basis, primarily related to (i) ~~robust demand~~broad-based strength across all our Biologics offerings, in particular demand for our drug product and drug substance offerings for COVID-19-related programs, (ii) increased demand for our customers' prescription products, a continued rebound in our consumer health products, particularly in cough, cold, and over-the-counter pain relief products, and growth in development services in our Softgel and Oral Technologies segment.

Net revenue increased 2% inorganically as a result of acquisitions, which was partially offset by a 2% decrease in net revenue due to the sale of our Blow-Fill-Seal Business. We acquired Skeletal Cell Therapy Support (“Skeletal”) in November 2020, Delphi and the manufacturing and packaging assets of Acorda in February 2021, RheinCell in August 2021, and Bettera in October 2021.

Gross Margin

Gross margin increased by ~~$184~~$250 million, or ~~34%~~27%, compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020,~~2021, excluding the impact of foreign exchange, primarily due to the strong margin profile for all Biologics segment offerings, including demand across our drug product and drug substance offerings for COVID-19 related programs. Additional factors for such growth included an increased demand for prescription products and continued rebound in consumer health products in our Softgel and Oral Technologies segment and a favorable impact from the decline in recall charges in our Oral and Specialty Delivery segment. Margin growth was offset in part by a ~~$23~~$32 million increase in depreciation and amortization ~~expense.~~expense, a one-time non-cash $7 million fair value inventory adjustment associated with our Bettera acquisition and an unfavorable impact from remediation related activities at our Brussels facility. On a constant-currency basis, gross margin, as a percentage of revenue, increased ~~140~~30 basis points to ~~32.5%~~32.8% in the ~~six~~nine months ended ~~December~~March 31, ~~2021,~~2022, compared to ~~31.1%~~32.5% in the corresponding prior-year period.

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Selling, General, and Administrative ~~Expenses~~Expense

Selling, general, and administrative ~~expenses~~expense increased by ~~$81~~$117 million, or ~~24%~~23%, compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020,~~2021, excluding the impact of foreign exchange, which includes ~~$16~~$31 million in net incremental expenses from acquired and divested companies. The year-over-year increase in selling, general, and administrative ~~expenses~~expense was primarily due to ~~$28~~$16 million in acquisition, transaction and integration costs primarily associated with the Bettera acquisition, $13 million associated with employee health and welfare costs, $11 million for employee-related costs principally incurred for wages and bonuses, ~~$16 million in transaction and integration costs primarily associated with our Bettera acquisition, $6 million of incremental depreciation and amortization expense,~~ a $6$10 million increase in information technology spend associated with additional ~~cyber security~~cyber-security initiatives, $10 million of incremental depreciation and $4amortization expense, and $7 million of bad debt ~~expense, partially offset by $4 million in cost savings associated with employee health and welfare costs.~~expense.

Other Operating Expense

Other operating expense of ~~$20~~$25 million for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 increased by ~~$12~~$8 million, or ~~138%~~46%, compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020,~~2021, excluding the impact of foreign exchange. The year-over-year increase was primarily due to a ~~$15~~$13 million increase in fixed asset impairment charges primarily associated with a product in our respiratory and specialty ~~platform.~~platform partially offset by a $5 million decrease in restructuring costs.

Interest Expense, net

Interest expense, net of ~~$58~~$91 million for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 increased by $6$13 million, or ~~12%~~17%, compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020,~~2021, excluding the impact of foreign exchange. The savings from repayment of our formerly outstanding term loans and ~~4.875% senior notes due~~the 2026 Notes were more than offset by increases in interest expense due to our most recent tranche of term loans, the 2029 Notes, and the 2030 Notes. The savings also includes a $3$5 million reduction in capitalized interest costs for the ~~six~~nine months ended ~~December~~March 31, ~~2021.~~2022.

Other Expense, ~~(Income),~~ net

~~Table of Contents~~

Other expense, net of ~~$23~~$25 million for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 was primarily driven by ~~$24~~$28 million of foreign currency losses, $4 million of financing charges related to our outstanding term loans, partially offset by a $2 million gain related to the change in fair value of the derivative liability arising from the dividend-adjustment mechanism of our formerly outstanding Series A Preferred Stock.

Other ~~income,~~expense, net for the ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 of ~~$19~~$5 million was primarily driven by a ~~gain~~$11 million premium on early redemption of ~~$16~~the 2026 Notes, a write-off of $4 million of previously capitalized financing charges related to ~~the change in fair value~~our repaid term loans and our redeemed 2026 Notes, $2 million of ~~the derivative liability arising from the dividend-adjustment mechanism~~financing charges related to our outstanding term loans, and foreign currency losses of ~~our Series A Preferred Stock.~~$6 million.

Income Tax Expense

Our provision for income taxes for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 was ~~$28~~$63 million relative to earnings before income taxes of ~~$218~~$394 million. Our provision for income taxes for the ~~six~~nine months ended ~~December~~March 31, ~~2020 of $5~~2021 was $91 million relative to earnings before income taxes of ~~$176~~$494 million. The ~~increase~~decrease in the provision relative to the prior-year period was largely the result of the discrete tax expense we incurred on the gain on the sale of our Blow-Fill-Seal Business recognized in the prior-period and a ~~decrease~~shift in non-domestic pretax income to tax jurisdictions with favorable tax rates, partially offset by non-U.S. tax credits claimed on an amended U.S. federal income tax ~~filing compared to the prior-year period.~~filing. The provision for income taxes in each of these periods was also impacted by the relative amount and mix of permanent tax adjustments included in the income tax computation and other discrete tax items recognized in the periods.

Segment Review

The below charts depict the percentage of revenue for each of our four segments for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020.~~2021. Refer below for discussions regarding each segment's revenue and EBITDA performance.

Table of Contents

Our results on a segment basis for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 were as follows:


		Six Months Ended December 31,				FX Impact		Constant Currency Increase/(Decrease)					Nine Months Ended March 31,				FX Impact		Constant Currency Increase (Decrease)
(Dollars in millions)	(Dollars in millions)	2021		2020				Change $		Change %		(Dollars in millions)	2022		2021				Change $		Change %
Biologics	Biologics											Biologics
Net revenue	Net revenue	$	1,184	$	781	$	(5)	$	408	52	%	Net revenue	$	1,882	$	1,325	$	(15)	$	572	43	%
Segment EBITDA	Segment EBITDA	363		242		(1)		122		50	%	Segment EBITDA	579		422		(6)		163		39	%
Softgel and Oral Technologies	Softgel and Oral Technologies											Softgel and Oral Technologies
Net revenue	Net revenue	572		468		(4)		108		23	%	Net revenue	896		711		(13)		198		28	%
Segment EBITDA	Segment EBITDA	119		83		(1)		37		44	%	Segment EBITDA	194		143		(3)		54		38	%
Oral and Specialty Delivery	Oral and Specialty Delivery											Oral and Specialty Delivery
Net revenue	Net revenue	302		328		4		(30)		(9)	%	Net revenue	456		500		—		(44)		(9)	%
Segment EBITDA	Segment EBITDA	77		66		2		9		15	%	Segment EBITDA	118		97		1		20		22	%
Clinical Supply Services	Clinical Supply Services											Clinical Supply Services
Net revenue	Net revenue	195		186		—		9		5	%	Net revenue	296		286		(2)		12		4	%
Segment EBITDA	Segment EBITDA	53		50		—		3		5	%	Segment EBITDA	83		77		(1)		7		8	%
Inter-segment revenue elimination	Inter-segment revenue elimination	(11)		(6)		(1)		(4)		(67)	%	Inter-segment revenue elimination	(15)		(12)		—		(3)		(19)	%
Unallocated Costs (1)	Unallocated Costs (1)	(157)		(74)		—		(83)		(114)	%	Unallocated Costs (1)	(211)		49		3		(263)		(537)	%
Combined totals	Combined totals											Combined totals
Net revenue	Net revenue	$	2,242	$	1,757	$	(6)	$	491	28	%	Net revenue	$	3,515	$	2,810	$	(30)	$	735	26	%

EBITDA from operations	EBITDA from operations	$	455	$	367	$	—	$	88	24	%	EBITDA from operations	$	763	$	788	$	(6)	$	(19)	(2)	%

Change % calculations are based on amounts prior to rounding

(1) Unallocated costs include restructuring and special items, stock-based compensation, gain on sale of subsidiary, impairment charges, certain other corporate-directed costs, and other costs that are not allocated to the segments as follows:


	Nine Months Ended March 31,
(Dollars in millions)	2022		2021
Impairment charges and gain (loss) on sale of assets (a)	$	(21)	$	(8)
Stock-based compensation	(42)		(38)
Restructuring and other special items (b)	(43)		(23)
Gain on sale of subsidiary (c)	1		184


Other expense, net (d)	(25)		(5)
Non-allocated corporate costs, net	(81)		(61)
Total unallocated costs	$	(211)	$	49

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Six Months Ended
December 31,
(Dollars in millions) 2021 2020
Impairment charges and gain (loss) on sale of assets (a)
$ (19) $ (2)
Equity compensation (32) (30)
Restructuring and other special items (b)
(31) (20)
Gain on sale of subsidiary (c)
1 —
Other expense (income), net (d)
(23) 19
Non-allocated corporate costs, net (53) (41)
Total unallocated costs $ (157) $ (74)

(a) Impairment charges and gain (loss) on sale of assets during the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 include fixed asset impairment charges associated with a product in our respiratory and specialty platform.

(b) Restructuring and other special items during the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 include (i) transaction and integration costs associated with the acquisitions of Delphi, Hepatic Cell Therapy Support SA, Acorda, RheinCell, ~~Therapeutics GmbH,~~ and Bettera, (ii) unrealized losses on venture capital investments, and ~~(ii)~~(iii) restructuring costs associated with the closure of the Bolton facility.

Restructuring and other special items during the ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 include transaction costs for the sale of our Blow-Fill-Seal Business, ~~acquisitions~~transaction and integration costs associated with the Acorda acquisition and acquisition of facilities in Italy and Belgium, disposal of a site in Australia, restructuring costs associated with the closure of the Bolton facility, and other restructuring initiatives across our network of sites.

(c) For the ~~six~~nine months ended ~~December~~March 31, 2022 and 2021, gain on sale of subsidiary was due to the divestiture of our Blow-Fill-Seal Business.

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(d) Refer to Note 8, Other expense, ~~(income),~~ netfor details of financing charges and foreign currency translation adjustments recorded within other expense, net in our Consolidated Financial Statements.

Provided below is a reconciliation of net earnings to EBITDA from operations:


		Six Months Ended December 31,					Nine Months Ended March 31,
(Dollars in millions)	(Dollars in millions)	2021		2020		(Dollars in millions)	2022		2021
Net earnings	Net earnings	$	190	$	171	Net earnings	$	331	$	403
Depreciation and amortization	Depreciation and amortization	179		140		Depreciation and amortization	278		216
Interest expense, net	Interest expense, net	58		51		Interest expense, net	91		78
Income tax expense	Income tax expense	28		5		Income tax expense	63		91

EBITDA from operations	EBITDA from operations	$	455	$	367	EBITDA from operations	$	763	$	788

Biologics segment


		2021 vs. 2020					2022 vs. 2021
Year-Over-Year Change	Year-Over-Year Change	Six Months Ended December 31,				Year-Over-Year Change	Nine Months Ended March 31,
		Net Revenue		Segment EBITDA			Net Revenue		Segment EBITDA
Organic	Organic	52	%	51	%	Organic	43	%	40	%
Impact of acquisitions	Impact of acquisitions	—	%	(1)	%	Impact of acquisitions	—	%	(1)	%
Constant-currency change	Constant-currency change	52	%	50	%	Constant-currency change	43	%	39	%
Foreign exchange translation impact on reporting	Foreign exchange translation impact on reporting	—	%	—	%	Foreign exchange translation impact on reporting	(1)	%	(2)	%
Total % change	Total % change	52	%	50	%	Total % change	42	%	37	%

Net revenue in our Biologics segment increased by ~~$408~~$572 million, or ~~52%~~43%, excluding the impact of foreign exchange, compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020.~~2021. The increase was driven across all segment offerings with ~~robust~~strong end-market demand for our drug product, drug substance, and cell and gene therapy offerings, primarily related to demand for COVID-19-related programs.

Biologics Segment EBITDA increased by ~~$122~~$163 million, or ~~50%~~39%, excluding the impact of foreign exchange, compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020.~~2021. Segment EBITDA increased ~~51%~~40%, compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020,~~2021, excluding the impact of acquisitions. The increase was driven across all segment offerings with ~~robust~~strong end-market demand for our drug product, drug substance, and cell and gene therapy offerings, primarily related to demand for COVID-19-related ~~programs.~~programs, partially offset by an unfavorable impact from remediation related activities at our Brussels facility.

We completed the acquisition of RheinCell in August 2021. For the nine months ended March 31, 2022, this acquisition had an immaterial impact on our net revenue and decreased Segment EBITDA on an inorganic basis by 1% compared to the corresponding prior-year period.

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Softgel and Oral Technologies segment


		2021 vs. 2020					2022 vs. 2021
Year-Over-Year Change	Year-Over-Year Change	Six Months Ended December 31,				Year-Over-Year Change	Nine Months Ended March 31,
		Net Revenue		Segment EBITDA			Net Revenue		Segment EBITDA
Organic	Organic	12	%	28	%	Organic	13	%	23	%
Impact of acquisitions	Impact of acquisitions	11	%	16	%	Impact of acquisitions	15	%	15	%

Constant-currency change	Constant-currency change	23	%	44	%	Constant-currency change	28	%	38	%
Foreign exchange translation impact on reporting	Foreign exchange translation impact on reporting	(1)	%	(2)	%	Foreign exchange translation impact on reporting	(2)	%	(3)	%
Total % change	Total % change	22	%	42	%	Total % change	26	%	35	%

Softgel and Oral Technologies net revenue increased ~~$108~~$198 million, or ~~23%~~28%, excluding the impact of foreign exchange, compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020.~~2021. Net revenue increased ~~12%~~13%, compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020,~~2021, excluding the impact of acquisitions. The increase in organic revenue primarily relates to strong end-market demand for prescription products, a continued rebound in consumer health products, particularly in cough, cold, and over-the-counter pain relief products, and growth in development ~~services within North America~~

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services.

Softgel and Oral Technologies Segment EBITDA increased ~~$37~~$54 million, or ~~44%~~38%, excluding the impact of foreign exchange, compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020.~~2021. Segment EBITDA increased ~~28%~~23%, compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020,~~2021, excluding the impact of acquisitions. The organic portion of the increase, similar to that of net revenue, was primarily driven by an increase in demand in both the prescription and consumer health portfolio of products, as well as the margin generated from strong development revenue growth.

We completed the Bettera acquisition in October 2021, which increased net revenue and Segment EBITDA on an inorganic basis by ~~11% and 16%~~15%, ~~respectively, in~~during the ~~six~~nine months ended ~~December~~March 31, ~~2021,~~2022, compared to the corresponding prior-year period. For the nine months ended March 31, 2022, in association with our Bettera purchase accounting, we recorded a one-time non-cash inventory fair value adjustment for $7 million, which unfavorably impacted Segment EBITDA.

Oral and Specialty Delivery segment


		2021 vs. 2020					2022 vs. 2021
Year-Over-Year Change	Year-Over-Year Change	Six Months Ended December 31,				Year-Over-Year Change	Nine Months Ended March 31,
		Net Revenue		Segment EBITDA			Net Revenue		Segment EBITDA
Organic	Organic	4	%	50	%	Organic	4	%	55	%
Impact of acquisitions	Impact of acquisitions	1	%	(12)	%	Impact of acquisitions	1	%	(12)	%
Impact of divestitures	Impact of divestitures	(14)	%	(23)	%	Impact of divestitures	(14)	%	(21)	%
Constant-currency change	Constant-currency change	(9)	%	15	%	Constant-currency change	(9)	%	22	%
Foreign exchange translation impact on reporting	Foreign exchange translation impact on reporting	1	%	3	%	Foreign exchange translation impact on reporting	—	%	1	%
Total % change	Total % change	(8)	%	18	%	Total % change	(9)	%	23	%

Net revenue in our Oral and Specialty Delivery segment decreased by ~~$30~~$44 million, or 9%, compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020,~~2021, excluding the impact of foreign exchange. Net revenue increased 4%, compared to the ~~six~~nine months ended ~~December 31. 2020,~~March 31, 2021, excluding the impact of acquisitions and divestitures, primarily driven by demand for the segment’s orally delivered Zydis commercial products and early-phase development programs.

Oral and Specialty Delivery’s Segment EBITDA increased by $9$20 million, or ~~15%~~22%, compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020,~~2021, excluding the impact of foreign exchange. Segment EBITDA increased ~~50%~~55%, compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020,~~2021, excluding the impact of acquisitions and divestitures. The organic portion of the increase from the corresponding prior-year period was primarily driven by increased demand for the segment’s orally delivered Zydis commercial products, and early-phase development programs and a favorable impact from ~~prior year~~prior-year recall costs in our respiratory and specialty platform.

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We completed the acquisition of the manufacturing and packaging operations of the Acorda dry powder inhaler and spray dry manufacturing business in February 2021. For the nine months ended March 31, 2022, this acquisition increased our net revenue and unfavorably impacted Segment EBITDA on an inorganic basis by 1% and 12%, respectively, compared to the corresponding prior-year period.

We completed the Blow-Fill-Seal Business divestiture in March 2021. For the nine months ended March 31, 2022, this divestiture decreased our net revenue and Segment EBITDA on an inorganic basis by 14% and 21%, respectively, compared to the corresponding prior-year period.

Clinical Supply Services segment


		2021 vs. 2020					2022 vs. 2021
Year-Over-Year Change	Year-Over-Year Change	Six Months Ended December 31,				Year-Over-Year Change	Nine Months Ended March 31,
		Net Revenue		Segment EBITDA			Net Revenue		Segment EBITDA
Organic	Organic	5	%	5	%	Organic	4	%	8	%

Constant-currency change	Constant-currency change	5	%	5	%	Constant-currency change	4	%	8	%
Foreign exchange translation impact on reporting	Foreign exchange translation impact on reporting	—	%	1	%	Foreign exchange translation impact on reporting	—	%	(1)	%
Total % change	Total % change	5	%	6	%	Total % change	4	%	7	%

Clinical Supply Services’ net revenue increased by $9$12 million, or 5%4%, compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020,~~2021, excluding the impact of foreign exchange. The increase was driven by ~~strong demand~~growth in our manufacturing and packaging and storage and distribution offerings in North America.

Clinical Supply Services’ Segment EBITDA increased by $3$7 million, or 5%8%, excluding the impact of foreign exchange, compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020,~~2021, similar to that of net revenue, primarily due to ~~strong demand~~growth in our manufacturing and packaging and storage and distribution ~~offering~~offerings in North America.

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Liquidity and Capital Resources

Sources and Uses of Cash

Our principal sources of liquidity have been cash flows generated from operations and occasional capital market activities. The principal uses of cash are to fund operating and capital expenditures, business or asset acquisitions, interest payments on debt, and any mandatory or discretionary principal payment on our debt. As of ~~December~~March 31, ~~2021,~~2022, Catalent Pharma Solutions, Inc., our principal operating subsidiary (“Operating Company”), following the September 2021 execution of Amendment No. 6 to the amended and restated credit agreement, dated as of May 20, 2014, governing our senior secured credit facilities (as amended, the “Credit Agreement”), had available a $725 million revolving credit facility that matures in May 2024, the capacity of which was reduced by $5$4 million in letters of credit outstanding as of ~~December~~March 31, ~~2021.~~2022. The revolving credit facility includes borrowing capacity available for ~~letter~~sletters of credit and for short-term borrowings, referred to as swing-line borrowings.

~~On October 1, 2021,~~In April 2022, through our wholly owned subsidiary, Catalent Oxford Limited, we acquired ~~Bettera, a manufacturer of nutraceuticals specializing~~certain related assets from The Vaccine Manufacturing and Innovation Centre UK Limited for $133 million in ~~gummy, soft chew, and lozenge delivery systems paying approximately $1.00 billion in cash. We~~cash, funded with cash on hand, customary adjustments. In connection with this acquisition, ~~through a combination of additional borrowings under our senior secured credit facilities and the net proceeds~~in April 2022, we also paid $37 million for future development of the ~~2030 Notes.~~facility. Also in April 2022, we acquired cell therapy commercial manufacturing operations and a facility in Princeton, New Jersey, for $45 million in cash, funded with cash on hand, subject to customary adjustments.

We believe that our cash on hand, cash from operations, and available borrowings under our revolving credit facility will be adequate to meet our liquidity needs for at least the next 12 months, as well as the amounts expected to become due with respect to our pending capital projects. We have no significant maturity under any of our bank or note debt until the July 2027 maturity of our 5.000% senior notes ~~due 2027~~ (the "2027 Notes”).

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Cash Flows

The following table summarizes our consolidated statements of cash flows:


		Six Months Ended December 31,							Nine Months Ended March 31,
(Dollars in millions)	(Dollars in millions)	2021		2020		$ Change		(Dollars in millions)	2022		2021		$ Change
Net cash provided by (used in):	Net cash provided by (used in):							Net cash provided by (used in):
Operating activities	Operating activities	$	232	$	224	$	8	Operating activities	$	370	$	299	$	71
Investing activities	Investing activities	$	(1,299)	$	(354)	$	(945)	Investing activities	$	(1,490)	$	(436)	$	(1,054)
Financing activities	Financing activities	$	1,033	$	(7)	$	1,040	Financing activities	$	1,030	$	159	$	871

Operating Activities

For the ~~six~~nine months ended ~~December~~March 31, ~~2021,~~2022, cash provided by operating activities was ~~$232~~$370 million, compared to ~~$224~~$299 million for the ~~corresponding prior-year period.~~nine months ended March 31, 2021. This increase in cash flow from operating activities was primarily due to an increase in operating ~~earnings, which increased~~income, excluding the gain derived from ~~$208 million~~the sale of the Blow-Fill-Seal business in ~~the corresponding prior-year period to $299 million for the six months ended December 31,~~March 2021, ~~and~~ a favorable impact from the timing of collection of trade receivables, and a favorable impact from inventory, which was ~~primarily~~partially offset by an unfavorable impact from the timing of payments of accounts payable and unfavorable impact from the increase in contract assets.

Investing Activities

For the ~~six~~nine months ended ~~December~~March 31, ~~2021,~~2022, cash used in investing activities was ~~$1.30~~$1.49 billion, compared to ~~$354~~$436 million for the ~~six~~nine months ended ~~December~~March 31, ~~2020.~~2021. The increase in cash used in investing activities was primarily driven by a ~~$1.00 billion~~$886 million increase in cash used for business acquisition activities, partially offset by a ~~$62~~$72 million decrease in cash used for purchases of property, plant, and equipment.

Financing Activities

For the ~~six~~nine months ended ~~December~~March 31, ~~2021,~~2022, cash provided by financing activities was $1.03 billion, compared to cash ~~used in~~provided by financing activities of $7$159 million for the ~~six~~nine months ended ~~December~~March 31, ~~2020. Cash~~2021. The increase in cash provided by financing activities was primarily driven by ~~the $1.1 billion~~a $933 million increase in net cash received from the issuance of ~~the 2030 Notes and incurrence of our most recent tranche of term loans.~~

Cash used in financing activities for the six months ended December 31, 2020 was primarily driven by an annual installment on the deferred purchase consideration for the acquisition of Catalent Indiana, LLC and cash paid, in lieu of equity, for tax withholdingsdebt, partially offset by the July 2020 exercise of an over-allotment option on 1.2 million additional shares by the underwriter for the equity offering in June 2020, resulting in net proceeds of $82 million.

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Guarantees and Security

The Senior Notes

All obligations under Operating Company's 2027 Notes, 2.375% euro-denominated senior notes due 2028, 2029 Notes, and 2030 Notes (collectively, the "Senior Notes") are general, unsecured, and subordinated to all existing and future secured indebtedness of the guarantors to the extent of the value of the assets securing such indebtedness. Each of the Senior Notes is separately guaranteed by all of our wholly owned U.S. subsidiaries that guarantee the senior secured credit facilities. None of the Senior Notes is guaranteed by either PTS Intermediate Holdings LLC or Catalent, Inc.

Debt Covenants

Senior Secured Credit Facilities

The Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our (and our restricted subsidiaries’) ability to incur additional indebtedness or issue certain preferred shares; create liens on assets; engage in mergers and consolidations; sell assets; pay dividends and distributions or repurchase capital stock; repay subordinated indebtedness; engage in certain transactions with affiliates; make investments, loans, or advances; make certain acquisitions; enter into sale and leaseback transactions; amend material agreements governing our subordinated indebtedness; and change our lines of business.

The Credit Agreement also contains change-of-control provisions and certain customary affirmative covenants and events of default. The revolving credit facility requires compliance with a net leverage covenant when there is a 30% or more draw outstanding at a period end. As of ~~December~~March 31, ~~2021,~~2022, we were in compliance with all material covenants under the Credit Agreement.

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Subject to certain exceptions, the Credit Agreement permits us and our restricted subsidiaries to incur certain additional indebtedness, including secured indebtedness. None of our non-U.S. subsidiaries or our Puerto Rico subsidiary is a guarantor of the loans.

Under the Credit Agreement, our ability to engage in certain activities such as incurring certain additional indebtedness, making certain investments, and paying certain dividends is tied to ratios based on Adjusted EBITDA (which is defined as “Consolidated EBITDA” in the Credit Agreement). Adjusted EBITDA is based on the definitions in the Credit Agreement, is not defined under U.S. GAAP, and is subject to important limitations.

As market conditions warrant, we and our affiliates may from time to time seek to purchase our outstanding debt in privately negotiated or open-market transactions, by tender offer or otherwise. Subject to any applicable limitation contained in the Credit Agreement, any purchase made by us may be funded by the use of cash on hand or the incurrence of new secured or unsecured debt. The amounts involved in any such purchase transaction, individually or in the aggregate, may be material. Any such purchase may be with respect to a substantial amount of a particular class or series of debt, with the attendant reduction in the trading liquidity of such class or series. In addition, any such purchase made at prices below the “adjusted issue price” (as defined for U.S. federal income tax purposes) may result in taxable cancellation of indebtedness income to us, which amounts may be material, or in related adverse tax consequences to us.

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The Senior Notes

The several indentures governing each series of the Senior Notes (collectively, the “Indentures”) contain certain covenants that, among other things, limit our ability to incur or guarantee more debt or issue certain preferred shares; pay dividends on, repurchase, or make distributions in respect of their capital stock or make other restricted payments; make certain investments; sell certain assets; create liens; consolidate, merge, sell; or otherwise dispose of all or substantially all of their assets; enter into certain transactions with their affiliates, and designate their subsidiaries as unrestricted subsidiaries. These covenants are subject to a number of exceptions, limitations, and qualifications as set forth in the Indentures. The Indentures also contain customary events of default, including, but not limited to, nonpayment, breach of covenants, and payment or acceleration defaults in certain other indebtedness of Operating Company or certain of its subsidiaries. Upon an event of default, either the holders of at least 30% in principal amount of each of the then-outstanding series of Senior Notes, or the applicable Trustee under the Indentures, may declare the applicable Senior Notes immediately due and payable; or in certain circumstances, the applicable Senior Notes will become automatically immediately due and payable. As of ~~December~~March 31, ~~2021,~~2022, Operating Company was in compliance with all material covenants under the Indentures.

Geographic Allocation of Cash

As of ~~December~~March 31, ~~2021~~2022 and June 30, 2021, our non-U.S. subsidiaries held cash and cash equivalents of ~~$360~~$368 million and $351 million, respectively, out of the total consolidated cash and cash equivalents of ~~$849~~$786 million and $896 million, respectively. These balances are dispersed across many locations around the world.

Interest Rate Risk Management

A portion of the debt used to finance our operations is exposed to interest-rate fluctuations. We may use various hedging strategies and derivative financial instruments to create an appropriate mix of fixed- and floating-rate assets and liabilities. In February 2021, we replaced one interest-rate swap agreement with Bank of America N.A. with another, and each acts or acted as a hedge against the economic effect of a portion of the variable-interest obligation associated with our U.S. dollar-denominated term loans under our senior secured credit facilities, so that the interest payable on that portion of the debt becomes fixed at a certain rate, thereby reducing the impact of future interest-rate changes on future interest expense. The applicable rate for the U.S. dollar-denominated term loan under the Credit Agreement was LIBOR (subject to a floor of 0.50%) plus 2.00% as of ~~December~~March 31, ~~2021;~~2022; however, as a result of the current interest-rate swap agreement, the variable portion of the applicable rate on $500 million of the term loan was effectively fixed at 0.9985% as of February 2021.

Currency Risk Management

We are exposed to fluctuations in the euro-U.S. dollar exchange rate on our investments in our operations in Europe. While we do not actively hedge against changes in foreign currency, we have mitigated the exposure of our investments in our European operations by denominating a portion of our debt in euros. At ~~December~~March 31, ~~2021,~~2022, we had ~~$933~~$905 million of euro-denominated debt outstanding that qualifies as a hedge of a net investment in European operations. Refer to Note 10, Derivative Instruments and Hedging Activities, to our Consolidated Financial Statements for further discussion of net investment hedge activity in the period.

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From time to time, we may use forward foreign currency exchange contracts to manage our exposure to the variability of cash flows primarily related to the foreign exchange rate changes of future foreign currency transaction costs. In addition, we may use such contracts to protect the value of existing foreign currency assets and liabilities. Currently, we do not use any forward foreign currency exchange contracts. We continue to evaluate hedging opportunities for foreign currency in the future.

Off-Balance Sheet Arrangements

Other than short-term operating leases and outstanding letters of credit as discussed above, we do not have any material off-balance sheet arrangement as of ~~December~~March 31, ~~2021.~~2022.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of our quantitative and qualitative disclosures about market risks, see the section titled Quantitative and Qualitative Disclosures About Market Risks in our Fiscal 2021 10-K. As of ~~December~~March 31, ~~2021,~~2022, there has been no material change in this information.

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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Senior Vice President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any control or procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our management, with the participation of our Chief Executive Officer and our Senior Vice President and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and our Senior Vice President and Chief Financial Officer concluded that, as of ~~December~~March 31, ~~2021,~~2022, our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There was no change that materially affected, or is reasonably likely to materially affect, Catalent’s internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may be involved in legal proceedings arising in the ordinary course of business, including, without limitation, inquiries and claims concerning environmental contamination as well as litigation and allegations in connection with acquisitions, product liability, manufacturing or packaging defects, and claims for reimbursement for the cost of lost or damaged active pharmaceutical ingredients, the cost of any of which could be significant. We intend to vigorously defend ourselves against any such litigation and do not currently believe that the outcome of any such litigation will have a material adverse effect on our consolidated financial statements. In addition, the healthcare industry is highly regulated, and government agencies continue to scrutinize certain practices affecting government programs and otherwise.

From time to time, we receive subpoenas or requests for information relating to the business practices and activities of customers or suppliers from various governmental agencies or private parties, including from state attorneys general, the U.S. Department of Justice, and private parties engaged in patent infringement, antitrust, tort, and other litigation. We generally respond to such subpoenas and requests in a timely and thorough manner, which responses sometimes require considerable time and effort and can result in considerable costs being incurred. We expect to incur costs in future periods in connection with future requests.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in the section entitled “Risk Factors” in our Fiscal 2021 10-K, which could materially affect our business, financial condition, or future results. The risks described in such report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, or operating results.

Other than what was disclosed in the Special Note Regarding Forward-Looking Statements, there has been no material change to the risk factors disclosed in our Fiscal 2021 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

Purchase of Equity Securities

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS

Exhibits:






~~3.1~~						Fourth Amended and Restated Certificate of Incorporation of Catalent, Inc., as filed with the Secretary of State of the State of Delaware on October 28, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 2, 2021).

3.2						Bylaws of Catalent, Inc., effective ~~October 28, 2021~~January 27, 2022 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on ~~November 2, 2021)~~February 1, 2022).





















10.1						Employment Agreement, dated January 4, 2022, by and between Catalent, Inc. and Alessandro Maselli (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 5, 2022).

10.2						Amended and Restated Employment Agreement, dated January 4, 2022, by and between Catalent, Inc. and John R. Chiminski (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on January 5, 2022).

31.1						Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended. *

31.2						Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended. *

32.1						Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

32.2						Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

101						The following financial information from Catalent, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~December~~March 31, ~~2021~~2022 formatted in inline XBRL: (i) Consolidated Statements of Operations for the Three and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2021~~2022 and ~~2020;~~2021; (ii) Consolidated Statements of Comprehensive Income for the Three and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021 (iii) Consolidated Balance Sheets as of ~~December~~March 31, ~~2021~~2022 and June 30, 2021; (iv) Consolidated Statement of Changes in Shareholders’ Equity ~~as of December~~for the Three and Nine Months Ended March 31, ~~2021~~2022 and ~~2020;~~2021; (v) Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~December~~March 31, ~~2021~~2022 and ~~2020;~~2021; and (vi) Notes to Unaudited Consolidated Financial Statements.

104						The cover page of this Quarterly Report on Form 10-Q, formatted as Inline XBRL and contained in Exhibit 101.


*						Filed herewith
**						Furnished herewith

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SIGNATURES

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.

CATALENT, INC.

(Registrant)

Date:

~~February 1,~~May 3, 2022

By:

/s/ RICKY HOPSON

Ricky Hopson

Vice President, Chief Accounting Officer

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