UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

━━━━━━━━━

FORM 10-Q

━━━━━━━━━

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

For the quarterly period ended March 31, ~~2020~~2021

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

For the transition period from __________ to __________

Commission file number: 001-38912

____________________________

Avantor, Inc.

(Exact name of registrant as specified in its charter)



Delaware			82-2758923
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

Radnor Corporate Center, Building One, Suite 200

100 Matsonford Road

Radnor, Pennsylvania 19087

(Address of principal executive offices) (zip code)

(610) 386-1700

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common ~~Stock,~~stock, $0.01 par value

AVTR

New York Stock Exchange

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

AVTR PRA

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ☐☒ Large Accelerated Filer ☐ Accelerated Filer ☒☐ Non-accelerated Filer ☐ Smaller reporting company ☐ Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

On April 21, ~~2020, 574,929,861~~2021, 582,138,223 shares of common stock, $0.01 par value per share, were outstanding.

Avantor, Inc. and subsidiaries

Form 10-Q for the quarterly period ended March 31, ~~2020~~2021

Table of contents

~~Table of contents~~

~~Glossary~~



Signature			31

Table of contents

Glossary


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

Table of contents

Cautionary factors regarding forward-looking statements

This report contains forward-looking statements. All statements other than statements of historical fact included in this report are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. These statements may be preceded by, followed by or include the words “aim,” “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “outlook,” “plan,” “potential,” “project,” “projection,” “seek,” “can,” “could,” “may,” “should,” “would,” “will,” the negatives thereof and other words and terms of similar meaning.

Forward-looking statements are inherently subject to risks, uncertainties and assumptions; they are not guarantees of performance. You should not place undue reliance on these statements. We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that our assumptions made in connection with the forward-looking statements are reasonable, we cannot assure you that the assumptions and expectations will prove to be correct.

~~In the first quarter of 2020, we updated our risk factors to reflect new developments in the scale and scope of the new global coronavirus pandemic under Part II, Item 1A, “Risk Factors.”~~ You should ~~also~~ understand that the following important factors, in addition to those discussed under “Risk Factors” in our Annual Report, as such risk factors may be updated from time to time in our periodic filings with the SEC and in this report, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:

•disruptions to our operations;

•competition from other industry providers;

•our ability to implement our growth strategy;

•our ability to anticipate and respond to changing industry trends;

•adverse trends in consumer, business, and government spending;

•our dependence on sole or limited sources for some essential materials and components;

•our ability to successfully value and integrate acquired businesses;

•our products’ satisfaction of applicable quality criteria, specifications and performance standards;

•our ability to maintain our relationships with key customers;

•our ability to maintain our relationships with distributors;

~~iii~~

~~Table of contents~~

•our ability to maintain consistent purchase volumes under purchase orders;

•our ability to maintain and develop relationships with drug manufacturers and contract manufacturing organizations;

•the impact of new laws, regulations, or other industry standards;

•changes in the interest rate environment that increase interest on our borrowings;

iii

Table of contents

•adverse impacts from currency exchange rates or currency controls imposed by any government in major areas where we operate or otherwise;

•our ability to implement and improve processing systems and prevent a compromise of our information systems;

•our ability to protect our intellectual property and avoid third-party infringement claims;

•exposure to product liability and other claims in the ordinary course of business;

•our ability to develop new products responsive to the markets we serve;

•the availability of raw materials;

•our ability to avoid negative outcomes related to the use of chemicals;

•our ability to maintain highly skilled employees;

•adverse impact of impairment charges on our goodwill and other intangible assets;

•fluctuations and uncertainties related to doing business outside the United States;

•our ability to obtain and maintain required regulatory clearances or approvals may constrain the commercialization of submitted products;

•our ability to comply with environmental, health and safety laws and regulations, or the impact of any liability or obligation imposed under such laws or regulations;

•our indebtedness could adversely affect our financial condition and prevent us from fulfilling our debt or contractual obligations;

•our ability to generate sufficient cash flows or access sufficient additional capital to meet our debt obligations or to fund our other liquidity needs; and

•our ability to maintain an adequate system of internal control over financial reporting.

All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. In addition, all forward-looking statements speak only as of the date of this report. We undertake no obligations to update or

~~Table of contents~~

revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise other than as required under the federal securities laws.

Table of contents

PART I — FINANCIAL INFORMATION


~~Item 1.~~	~~Financial statements~~

Item 1. Financial statements

Avantor, Inc. and subsidiaries

Index to unaudited condensed consolidated financial statements



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

Table of contents

Avantor, Inc. and subsidiaries

Unaudited condensed consolidated balance sheets


(in millions)	March 31, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	172.5	$	286.6
Accounts receivable, net of allowances of $25.6 and $26.2	1,201.5		1,113.3
Inventory	777.7		739.6
Other current assets	80.3		91.4
Total current assets	2,232.0		2,230.9
Property, plant and equipment, net of accumulated depreciation of $400.5 and $388.3	537.4		549.9
Other intangible assets, net (see note 7)	3,932.2		4,048.8
Goodwill	2,820.1		2,860.2
Other assets	217.1		216.7
Total assets	$	9,738.8	$	9,906.5
Liabilities and stockholders’ equity
Current liabilities:
Current portion of debt	$	26.5	$	26.4
Accounts payable	706.4		678.9
Employee-related liabilities	140.8		179.3
Accrued interest	26.8		44.5
Other current liabilities	340.2		313.6
Total current liabilities	1,240.7		1,242.7
Debt, net of current portion	4,606.3		4,867.5
Deferred income tax liabilities	713.0		723.9
Other liabilities	372.7		398.1
Total liabilities	6,932.7		7,232.2
Commitments and contingencies (see note 8)	0		0
Stockholders’ equity:
MCPS including paid-in capital, 20.7 shares outstanding	1,003.7		1,003.7
Common stock including paid-in capital, 581.8 and 580.1 shares outstanding	1,743.2		1,737.6
Accumulated earnings (deficit)	75.3		(88.7)
Accumulated other comprehensive (loss) income	(16.1)		21.7
Total stockholders’ equity	2,806.1		2,674.3
Total liabilities and stockholders’ equity	$	9,738.8	$	9,906.5

See accompanying notes to the unaudited condensed consolidated financial statements.

(in millions) March 31, 2020 December 31, 2019
Assets
Current assets:
Cash and cash equivalents $ 346.3
$ 186.7
Accounts receivable, net of allowances of $24.6 and $18.6 1,041.1
988.8
Inventory 686.1
711.2
Other current assets 123.1
134.8
Total current assets 2,196.6
2,021.5
Property, plant and equipment, net of accumulated depreciation of $321.3 and $307.8 556.0
557.0
Other intangible assets, net (see note 8) 4,097.7
4,220.2
Goodwill 2,736.4
2,769.4
Other assets 199.5
205.2
Total assets $ 9,786.2
$ 9,773.3
Liabilities and stockholders’ equity
Current liabilities:
Current portion of debt $ 14.3
$ 93.5
Accounts payable 610.9
560.2
Employee-related liabilities 114.0
114.3
Accrued interest 135.0
74.2
Other current liabilities 252.4
232.3
Total current liabilities 1,126.6
1,074.5
Debt, net of current portion 5,040.4
5,023.0
Deferred income tax liabilities 767.4
785.4
Other liabilities 411.7
428.2
Total liabilities 7,346.1
7,311.1
Commitments and contingencies, see note 10

Stockholders’ equity:
MCPS including paid-in capital, 20.7 shares outstanding 1,003.7
1,003.7
Common stock including paid-in capital, 574.9 and 572.8 shares outstanding 1,748.0
1,748.1
Accumulated deficit (158.3 ) (203.7 )
Accumulated other comprehensive loss (153.3 ) (85.9 )
Total stockholders’ equity 2,440.1
2,462.2
Total liabilities and stockholders’ equity $ 9,786.2
$ 9,773.3

Table of contents

Avantor, Inc. and subsidiaries

Unaudited condensed consolidated statements of operations


(in millions, except per share data)	Three months ended March 31,
	2021		2020
Net sales	$	1,785.6	$	1,519.0
Cost of sales	1,172.8		1,017.1
Gross profit	612.8		501.9
Selling, general and administrative expenses	346.5		343.5
Operating income	266.3		158.4
Interest expense	(51.5)		(94.5)
Loss on extinguishment of debt	(5.2)		0
Other income, net	1.8		0.8
Income before income taxes	211.4		64.7
Income tax expense	(47.4)		(17.7)
Net income	164.0		47.0
Accumulation of yield on preferred stock	(16.1)		(16.1)
Net income available to common stockholders	$	147.9	$	30.9

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

See accompanying notes to the unaudited condensed consolidated financial statements.

(in millions, except per share data) Three months ended March 31,
2020 2019
Net sales $ 1,519.0
$ 1,480.1
Cost of sales 1,017.1
1,004.9
Gross profit 501.9
475.2
Selling, general and administrative expenses 343.5
337.6
Operating income 158.4
137.6
Interest expense (94.5 ) (128.6 )
Other income (expense), net 0.8
(5.1 )
Income before income taxes 64.7
3.9
Income tax expense (17.7 ) (10.1 )
Net income (loss) 47.0
(6.2 )
Accumulation of yield on preferred stock (16.1 ) (71.8 )
Net income (loss) available to common stockholders $ 30.9
$ (78.0 )

Earnings (loss) per share:
Basic $ 0.05
$ (0.59 )
Diluted $ 0.05
$ (0.59 )
Weighted average shares outstanding:
Basic 573.7
132.8
Diluted 581.3
132.8

Table of contents

Avantor, Inc. and subsidiaries

Unaudited condensed consolidated statements of comprehensive income or loss


(in millions)	Three months ended March 31,
	2021		2020
Net income	$	164.0	$	47.0
Other comprehensive loss:
Foreign currency translation — unrealized loss	(33.5)		(68.8)
Derivative instruments:
Unrealized (loss) gain	(0.9)		1.6
Reclassification of loss (gain) into earnings	0.7		(0.1)
Defined benefit plans:
Unrealized gain	0.6		0.4
Reclassification of gain into earnings	0		(0.1)
Other comprehensive loss before income taxes	(33.1)		(67.0)
Income tax effect	(4.7)		(0.4)
Other comprehensive loss	(37.8)		(67.4)
Comprehensive income (loss)	$	126.2	$	(20.4)

See accompanying notes to the unaudited condensed consolidated financial statements.

(in millions) Three months ended March 31,
2020 2019
Net income (loss) $ 47.0
$ (6.2 )
Other comprehensive loss:
Foreign currency translation — unrealized loss (68.8 ) (8.9 )
Derivative instruments:
Unrealized gain (loss) 1.6
(0.3 )
Reclassification of gain into earnings (0.1 ) (0.3 )
Defined benefit plans:
Unrealized gain (loss) 0.4
(0.1 )
Reclassification of gain into earnings (0.1 ) (0.2 )
Other comprehensive loss before income taxes (67.0 ) (9.8 )
Income tax effect (0.4 ) 0.2
Other comprehensive loss (67.4 ) (9.6 )
Comprehensive loss $ (20.4 ) $ (15.8 )

Table of contents

Avantor, Inc. and subsidiaries

Unaudited condensed consolidated statements of stockholders’ equity ~~or deficit~~


(in millions)	Stockholders’ equity
	MCPS including paid-in capital			Common stock including paid-in capital			Accumulated earnings (deficit)		AOCI		Total
	Shares	Amount		Shares	Amount
Balance at December 31, 2020	20.7	$	1,003.7	580.1	$	1,737.6	$	(88.7)	$	21.7	$	2,674.3
Comprehensive income (loss)	—	—		—	—		164.0		(37.8)		126.2
Stock-based compensation expense	—	—		—	10.8		—		—		10.8
Accumulation of yield on preferred stock	—	—		—	(16.1)		—		—		(16.1)
Stock option exercises and other common stock transactions	—	—		1.7	10.9		—		—		10.9
Balance at March 31, 2021	20.7	$	1,003.7	581.8	$	1,743.2	$	75.3	$	(16.1)	$	2,806.1

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

See accompanying notes to the unaudited condensed consolidated financial statements.

(in millions) Stockholders’ equity (deficit)
MCPS including paid-in capital Common stock including paid-in capital Accumulated deficit AOCI Total
Shares Amount Shares Amount
Balance at December 31, 2019 20.7
$ 1,003.7
572.8
$ 1,748.1
$ (203.7 ) $ (85.9 ) $ 2,462.2
Cumulative effect of adopting new accounting standard —
—
—
—
(1.6 ) —
—
(1.6 )
Comprehensive income (loss) —
—
—
—
47.0
(67.4 ) (20.4 )
Stock-based compensation expense —
—
—
9.2
—
—
9.2
Accumulation of yield on preferred stock —
—
—
(16.1 ) —
—
(16.1 )
Exercise of stock options —
—
2.1
6.8
—
—
6.8
Balance at March 31, 2020 20.7
$ 1,003.7
574.9
$ 1,748.0
$ (158.3 ) $ (153.3 ) $ 2,440.1

Balance at December 31, 2018 —
$ —
132.8
$ (2,746.8 ) $ (238.4 ) $ (66.5 ) $ (3,051.7 )
Cumulative effect of adopting new accounting standard —
—
—
—
(3.1 ) —
(3.1 )
Comprehensive loss —
—
—
—
(6.2 ) (9.6 ) (15.8 )
Stock-based compensation expense —
—
—
4.0
—
—
4.0
Accumulation of yield on preferred stock —
—
—
(71.8 ) —
—
(71.8 )
Balance at March 31, 2019 —
$ —
132.8
$ (2,814.6 ) $ (247.7 ) $ (76.1 ) $ (3,138.4 )

Table of contents

Avantor, Inc. and subsidiaries

Unaudited condensed consolidated statements of cash flows


(in millions)	Three months ended March 31,
	2021		2020
Cash flows from operating activities:
Net income	$	164.0	$	47.0
Reconciling adjustments:
Depreciation and amortization	89.0		96.5
Stock-based compensation expense	11.4		8.4
Provision for accounts receivable and inventory	7.9		16.6
Deferred income tax benefit	(5.3)		(4.2)
Amortization of deferred financing costs	3.9		6.9
Loss on extinguishment of debt	5.2		0
Foreign currency remeasurement loss	2.7		6.7
Changes in assets and liabilities:
Accounts receivable	(106.8)		(80.1)
Inventory	(54.3)		2.3
Accounts payable	30.3		67.0
Accrued interest	(17.7)		60.8
Other assets and liabilities	(5.9)		24.5
Other, net	2.5		0.7
Net cash provided by operating activities	126.9		253.1
Cash flows from investing activities:
Capital expenditures	(15.1)		(12.6)
Other	0.5		0.7
Net cash used in investing activities	(14.6)		(11.9)
Cash flows from financing activities:
Debt repayments	(208.6)		(63.8)
Payments of dividends on preferred stock	(16.1)		(16.1)
Proceeds received from exercise of stock options	19.9		6.8
Shares repurchased to satisfy employee tax obligations for vested stock-based awards	(16.2)		0
Net cash used in financing activities	(221.0)		(73.1)
Effect of currency rate changes on cash	(5.4)		(8.5)
Net change in cash and cash equivalents	(114.1)		159.6
Cash, cash equivalents and restricted cash, beginning of period	289.2		189.3
Cash, cash equivalents and restricted cash, end of period	$	175.1	$	348.9

See accompanying notes to the unaudited condensed consolidated financial statements.

(in millions) Three months ended March 31,
2020 2019
Cash flows from operating activities:
Net income (loss) $ 47.0
$ (6.2 )
Reconciling adjustments:
Depreciation and amortization 96.5
98.3
Stock-based compensation expense 8.4
4.8
Provision for accounts receivable and inventory 13.6
7.7
Deferred income tax benefit (4.2 ) (21.5 )
Amortization of deferred financing costs 6.9
10.4
Foreign currency remeasurement loss 6.7
7.2
Changes in assets and liabilities:
Accounts receivable (80.1 ) (54.2 )
Inventory 5.3
(41.2 )
Accounts payable 67.0
5.4
Accrued interest 60.8
59.7
Other assets and liabilities 24.5
5.5
Other, net 0.7
(0.9 )
Net cash provided by operating activities 253.1
75.0
Cash flows from investing activities:
Capital expenditures (12.6 ) (12.4 )
Other 0.7
4.5
Net cash used in investing activities (11.9 ) (7.9 )
Cash flows from financing activities:
Debt borrowings —
3.6
Debt repayments (63.8 ) (109.7 )
Payments of dividends on preferred stock (16.1 ) —
Other 6.8
—
Net cash used in financing activities (73.1 ) (106.1 )
Effect of currency rate changes on cash (8.5 ) (1.8 )
Net change in cash and cash equivalents 159.6
(40.8 )
Cash, cash equivalents and restricted cash, beginning of period 189.3
187.7
Cash, cash equivalents and restricted cash, end of period $ 348.9
$ 146.9

Table of contents

Avantor, Inc. and subsidiaries

Notes to unaudited condensed consolidated financial statements


1.	~~Nature of operations and presentation of financial statements~~

1. Nature of operations and presentation of financial statements

We are a global manufacturer and distributor that provides products and services to customers in the biopharmaceutical, healthcare, education & government and advanced technologies & applied materials industries.

Basis of presentation

~~We have prepared these~~The accompanying condensed consolidated financial statements have been prepared pursuant to SEC regulations whereby certain information normally included in GAAP financial statements has been condensed or omitted. The financial information presented herein reflects all adjustments (consisting only of normal, recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. The results for interim periods are not necessarily indicative of the results to be expected for the full year.

We believe that the disclosures included herein are adequate to make the information presented not misleading in any material respect when read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report. Those audited consolidated financial statements include a summary of our significant accounting ~~policies, updates to which are included in note 2.~~policies.

Principles of consolidation

All intercompany balances and transactions have been eliminated from the financial statements.

~~Reclassifications~~

In 2019, we changed our presentation of disaggregated net sales (see note 5) to depict the product line categories that are regularly used by management. Product sales associated with our service offerings, referred to as specialty procurement, have been reclassified from third party materials & consumables and combined with net sales from services into the services & specialty procurement product line for all periods presented.

Use of estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported throughout the financial statements. Actual results could differ from those estimates.

~~Global coronavirus outbreak~~Correction of immaterial classification error

~~The ongoing coronavirus outbreak known as COVID-19 has adversely affected global economies,~~We identified and corrected an immaterial classification error between certain product sales in our previously reported net sales by product lines financial ~~markets and the overall environment~~table disclosed in ~~which we do business, and the~~

~~Table of contents~~

~~extent to which it may impact~~ our ~~future results of operations and overall~~segment financial ~~performance remains uncertain. We will continue to monitor for developments as the outbreak continues.~~


2.	~~Summary of significant accounting policies~~

~~Interim update to segment reporting policy~~

~~Effective~~information footnote included in our previously reported unaudited condensed consolidated financial statements as of and for the ~~quarter~~three months ended March 31, 2020. The correction of this error allows for a more accurate presentation of net sales of our product lines and had no impact on the Company’s previously reported unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2020 ~~our Chief Executive Officer, who is our chief operating decision maker, changed~~other than those previously mentioned. The following table presents the measure he uses to evaluate segment profitability from Management EBITDA to Adjusted EBITDA. All disclosures relating to segment profitability, including those for comparative periods, have been revised as a resultimpact of this ~~change.~~correction for the three months ended March 31, 2020.

Table of contents


3.	~~New accounting standards~~


(in millions)	Three months ended March 31, 2020
	Previously reported		Adjustment		As adjusted
Proprietary materials & consumables	$	533.1	$	(54.6)	$	478.5
Third party materials & consumables	604.6		45.8		650.4
Services & specialty procurement	178.0		13.1		191.1
Equipment & instrumentation	203.3		(4.3)		199.0
Total	$	1,519.0	$	0	$	1,519.0

Correction of previously reported consolidated statement of cash flows

We identified and corrected an immaterial classification error in our previously reported unaudited condensed consolidated statement of cash flows for the three months ended March 31, 2020. The correction of this error within the net cash provided by operating activities resulted in an increase in the line-item referred to as Provision for accounts receivable and inventory and a decrease in the line-item referred to as Inventory by $3.0 million, respectively, from the previously reported amounts of $13.6 million to $16.6 million and $5.3 million to $2.3 million, respectively. The correction of this error had no effect on our previously reported net cash provided by operating activities for the three months ended March 31, 2020, or on any other previously reported amounts in our unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2020 other than those previously mentioned.

Entry into a definitive agreement

On April 12, 2021, the Company entered into a definitive agreement to acquire privately held Ritter GmbH and its affiliates in an all-cash transaction with an upfront equity purchase price of approximately €890.0 million subject to final adjustments at closing and additional payments based on achieving future business performance milestones. The acquisition is expected to close in 2021 and is subject to customary conditions, including receipt of applicable regulatory approvals.

2. New accounting standards

New tax standard

~~In December 2019,~~On January 1, 2021, we implemented the ~~FASB issued a~~FASB’s new standard to simplify the accounting for income taxes, by removing certain exceptions to the existing guidance and also providing for additional clarification. This standard encompasses multiple amendments, and requires adoption either retrospectively, prospectively, or using a modified retrospective approach, depending on the amendment. For the amendmentswhich was issued in which we are given the choice between adopting retrospectively or on a modified retrospective basis, we expect to adopt on a modified retrospective basis. All other amendments will be adopted using the method prescribed by the standard.December 2019. The ~~standard is effective on January 1, 2021 and we are currently evaluating its impact.~~

~~New credit losses standard~~

~~In June 2016, the FASB issued a~~provisions of this new standard ~~that modifies the recognition of credit losses related~~did not result in our having to ~~financial assets. Under the new standard,~~record an entity must measure and record its total expected credit losses, rather than recording such losses when it is probable that they have occurred, as was required under the previous standard. We adopted the new guidance on January 1, 2020 using a modified retrospective approach applied to our portfolio of trade receivables as of that date. On the adoption date, we (i) recorded a $1.6 million cumulative effect adjustment to increase accumulated deficit, (ii) increased our allowance for credit losses to accounts receivable by $2.2 million, and (iii) recognized a $0.6 million reduction to deferred income tax liabilities.impact upon adoption.

Other

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

Table of contents

3. Earnings or loss per share


4.	~~Earnings or loss per share~~

The following table presents the reconciliation of basic and diluted earnings per share for the three months ended March 31, 2021:


(in millions, except per share data)	Three months ended March 31, 2021
	Earnings /(loss) (numerator)		Weighted average shares outstanding (denominator)	Earnings / (loss) per share
Basic	$	147.9	581.1	$	0.25
Dilutive effect of stock-based awards	0		8.0
Diluted	$	147.9	589.1	$	0.25

For the three months ended March 31, 2021, diluted earnings per share included accumulated yield on preferred stock of $16.1 million and excluded 62.9 million of common stock equivalents under the MCPS because they were anti-dilutive to the calculation.

The following table presents the reconciliation of basic and diluted earnings per share for the three months ended March 31, 2020:


(in millions, except per share data)							(in millions, except per share data)	Three months ended March 31, 2020
	Earnings (numerator)		Weighted average shares outstanding (denominator)		Earnings per share			Earnings /(loss) (numerator)		Weighted average shares outstanding (denominator)	Earnings / (loss) per share
Basic	$	30.9	573.7		$	0.05	Basic	$	30.9	573.7	$	0.05
Dilutive effect of stock-based awards	—		7.6				Dilutive effect of stock-based awards	0		7.6
Diluted	$	30.9	$	581.3	$	0.05	Diluted	$	30.9	581.3	$	0.05

For the three months ended March 31, 2020, diluted earnings per share included ~~accumulation of~~accumulated yield on preferred stock of $16.1 million and excluded 73.9 million of common stock equivalents under the MCPS because they were anti-dilutive to the calculation.

For the three months ended March 31, 2019, basic and diluted loss per share calculations were the same because we reported a net loss available to common stockholders. Stock options for 21.0 million shares of common stock were excluded from the calculation of diluted loss per share because their effect would have been anti-dilutive.

4. Segment financial information


5.	~~Segment financial information~~

We report ~~based on~~ three geographic segments based on customer location: Americas, Europe and AMEA. Each segment manufactures and distributes solutions for the biopharmaceutical, healthcare, education & government and advanced technologies & applied materials industries. Corporate costs are managed on a standalone basis and not allocated to segments.

Table of contents

The following table presents information by reportable segment:


(in millions)	Three months ended March 31,						(in millions)	Three months ended March 31,
	2020			2019				2021		2020
Net sales:							Net sales:
Americas	$	899.1		$	857.3		Americas	$	1,035.2	$	899.1
Europe	544.0			542.1			Europe	650.4		544.0
AMEA	75.9			80.7			AMEA	100.0		75.9
Total	$	1,519.0		$	1,480.1		Total	$	1,785.6	$	1,519.0
Adjusted EBITDA:							Adjusted EBITDA:
Americas	$	190.0		$	166.3		Americas	$	252.0	$	190.0
Europe	91.7			89.7			Europe	131.1		91.7
AMEA	13.4			18.5			AMEA	22.6		13.4
Corporate	(32.3		)	(26.5		)	Corporate	(42.6)		(32.3)
Total	$	262.8		$	248.0		Total	$	363.1	$	262.8



	Page
Glossary		ii
Cautionary factors regarding forward-looking statements		iii

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

PART II — OTHER INFORMATION
Item 1. Legal proceedings		3029
Item 1A. Risk factors		30
Item 2. Unregistered sales of equity securities and use of proceeds		3230
Item 3. Defaults upon senior securities		3230
Item 4. Mine safety disclosures		3230
Item 5. Other information		3230
Item 6. Exhibits		3330

~~Signature~~	34



(in millions)	Three months ended March 31,
	2020		2019
Cash flows from operating activities:
Cash paid for income taxes, net	$	12.2	$	19.7
Cash paid for interest	27.2		58.6
Cash paid under operating leases	10.0		13.5
Cash paid under finance leases	1.3		1.1
Cash flows from financing activities:
Cash paid under finance leases	1.1		1.4


(in millions)	March 31, 2021		December 31, 2020
Merchandise inventory	$	480.4	$	463.0
Finished goods	112.6		115.9
Raw materials	142.8		123.2
Work in process	41.9		37.5
Total	$	777.7	$	739.6



(in millions)	March 31, 2020		December 31, 2019
Merchandise inventory	$	411.3	$	445.2
Finished goods	112.4		104.4
Raw materials	123.3		125.1
Work in process	39.1		36.5
Total	$	686.1	$	711.2


(in millions)	March 31, 2021						December 31, 2020
	Gross value		Accumulated amortization		Carrying value		Gross value		Accumulated amortization		Carrying value
Customer relationships	$	4,644.9	$	944.2	$	3,700.7	$	4,701.6	$	894.9	$	3,806.7
VWR trade name	271.5		184.8		86.7		275.7		184.3		91.4
Other	184.6		132.1		52.5		185.4		127.0		58.4
Total finite-lived	$	5,101.0	$	1,261.1	3,839.9		$	5,162.7	$	1,206.2	3,956.5
Indefinite-lived					92.3						92.3
Total					$	3,932.2					$	4,048.8



(in millions)	Stockholders’ equity (deficit)
	MCPS including paid-in capital			Common stock including paid-in capital				Accumulated deficit			AOCI				Total
	Shares	Amount		Shares	Amount			Accumulated deficit			AOCI				Total
Balance at December 31, 2019	20.7	$	1,003.7	572.8	$	1,748.1		$	(203.7	)	$	(85.9	)		$	2,462.2
Cumulative effect of adopting new accounting standard	—	—		—	—			(1.6		)	—			—	(1.6		)
Comprehensive income (loss)	—	—		—	—			47.0			(67.4		)		(20.4		)
Stock-based compensation expense	—	—		—	9.2			—			—				9.2
Accumulation of yield on preferred stock	—	—		—	(16.1		)	—			—				(16.1		)
Exercise of stock options	—	—		2.1	6.8			—			—				6.8
Balance at March 31, 2020	20.7	$	1,003.7	574.9	$	1,748.0		$	(158.3	)	$	(153.3	)		$	2,440.1

Balance at December 31, 2018	—	$	—	132.8	$	(2,746.8	)	$	(238.4	)	$	(66.5	)		$	(3,051.7	)
Cumulative effect of adopting new accounting standard	—	—		—	—			(3.1		)	—				(3.1		)
Comprehensive loss	—	—		—	—			(6.2		)	(9.6		)		(15.8		)
Stock-based compensation expense	—	—		—	4.0			—			—				4.0
Accumulation of yield on preferred stock	—	—		—	(71.8		)	—			—				(71.8		)
Balance at March 31, 2019	—	$	—	132.8	$	(2,814.6	)	$	(247.7	)	$	(76.1	)		$	(3,138.4	)


(dollars in millions)	March 31, 2021				December 31, 2020
	Interest terms	Rate	Amount
Receivables facility	LIBOR plus 0.90%	1.01%	$	0	$	0
Senior secured credit facilities:
Euro term loans	EURIBOR plus 2.50%	2.50%	254.7		344.8
U.S. dollar term loans	LIBOR plus 2.25%	3.25%	420.7		546.7
U.S. dollar term loans	LIBOR plus 2.25%	3.25%	1,172.1		1,175.0
2.625% secured notes	fixed rate	2.625%	763.2		795.0
3.875% unsecured notes	fixed rate	3.875%	469.6		489.2
4.625 % unsecured notes	fixed rate	4.625%	1,550.0		1,550.0
Finance lease liabilities			71.7		71.5
Total debt, gross			4,702.0		4,972.2
Less: unamortized deferred financing costs			(69.2)		(78.3)
Total debt			$	4,632.8	$	4,893.9
Classification on balance sheets:
Current portion of debt			$	26.5	$	26.4
Debt, net of current portion			4,606.3		4,867.5


(in millions)	Foreign currency translation			Derivative instruments			Defined benefit plans			Total			(in millions)	Foreign currency translation		Derivative instruments		Defined benefit plans		Total
Balance at December 31, 2020													Balance at December 31, 2020	$	51.8	$	(1.0)	$	(29.1)	$	21.7
Unrealized (loss) gain													Unrealized (loss) gain	(33.5)		(0.9)		0.6		(33.8)
Reclassification of loss into earnings													Reclassification of loss into earnings	0		0.7		0		0.7
Income tax effect													Income tax effect	(4.7)		0		0		(4.7)
Balance at March 31, 2021													Balance at March 31, 2021	$	13.6	$	(1.2)	$	(28.5)	$	(16.1)

Balance at December 31, 2019	$	(62.3	)	$	(0.5	)	$	(23.1	)	$	(85.9	)	Balance at December 31, 2019	$	(62.3)	$	(0.5)	$	(23.1)	$	(85.9)
Unrealized (loss) gain	(68.8		)	1.6			0.4			(66.8		)	Unrealized (loss) gain	(68.8)		1.6		0.4		(66.8)
Reclassification of gain into earnings	—			(0.1		)	(0.1		)	(0.2		)	Reclassification of gain into earnings	0		(0.1)		(0.1)		(0.2)
Income tax effect	—			(0.4		)	—			(0.4		)	Income tax effect	0		(0.4)		0		(0.4)
Balance at March 31, 2020	$	(131.1	)	$	0.6		$	(22.8	)	$	(153.3	)	Balance at March 31, 2020	$	(131.1)	$	0.6	$	(22.8)	$	(153.3)

Balance at December 31, 2018	$	(59.0	)	$	1.1		$	(8.6	)	$	(66.5	)
Unrealized loss	(8.9		)	(0.3		)	(0.1		)	(9.3		)
Reclassification of gain into earnings	—			(0.3		)	(0.2		)	(0.5		)
Income tax effect	—			0.2			—			0.2
Balance at March 31, 2019	$	(67.9	)	$	0.7		$	(8.9	)	$	(76.1	)


(in millions)	Classification	Three months ended March 31,					(in millions)	Classification	Three months ended March 31,
		2020			2019				2021		2020
Stock options	Equity	$	3.9		$	3.8	Stock options	Equity	$	4.6	$	3.9
RSUs	Equity	4.9			0.2		RSUs	Equity	5.7		4.9
Optionholder awards	Liability	0.3			0.8		Optionholder awards	Liability	0		0.3
Other	Both	(0.7		)	—		Other	Both	1.1		(0.7)
Total	Total	$	8.4		$	4.8	Total		$	11.4	$	8.4
Balance sheet classification:	Balance sheet classification:						Balance sheet classification:
Equity	Equity	$	9.2		$	4.0	Equity		$	10.8	$	9.2
Liability	Liability	(0.8		)	0.8		Liability		0.6		(0.8)


(options and intrinsic value in millions)	Number of options	Weighted average exercise price per option		Aggregate intrinsic value		Weighted average remaining term
Balance at December 31, 2020	20.0	$	18.80
Granted	1.5	27.70
Exercised	(1.0)	21.40
Forfeited	(0.1)	15.88
Balance at March 31, 2021	20.4	19.32		$	197.0	7.5 years
Expected to vest	9.0	19.80		83.2		8.6 years
Vested	11.4	18.93		113.7		6.6 years



	Three months ended March 31, 2020
Grant date fair value per option	$	5.41
Assumptions used to determine grant date fair value:
Expected stock price volatility	28		%
Risk free interest rate	1.4		%
Expected dividend rate	nil
Expected life of options	6.2 years



(in millions)	Three months ended March 31, 2020
Fair value of options vested	$	0.7
Intrinsic value of options exercised	27.5
Tax benefit of options exercised	7.1


(awards in millions)	Number of awards	Weighted average grant date fair value per award
Balance at December 31, 2020	4.9	$	15.31
Granted	1.1	29.17
Vested	(0.7)	15.38
Forfeited	0	18.51
Balance at March 31, 2021	5.3	18.73


~~16.~~	~~Financial instruments and fair value measurements~~


~~Item 2.~~	~~Management’s discussion and analysis of financial condition and results of operations~~


(dollars in millions)	Three months ended March 31,						Change
	2021			2020
Net sales	$	1,785.6		$	1,519.0		$	266.6
Gross margin	34.3		%	33.0		%	130 bps
Operating income	$	266.3		$	158.4		$	107.9
Net income	164.0			47.0			117.0
Adjusted EBITDA	363.1			262.8			100.3
Adjusted EBITDA margin	20.3		%	17.3		%	300 bps


(in millions)	Three months ended March 31,				Reconciliation of net sales growth to organic net sales growth										(in millions)		Three months ended March 31,						Reconciliation of net sales growth to organic net sales growth
					Net sales growth				Foreign currency impact			Organic net sales growth											Net sales growth		Foreign currency impact		Organic net sales growth
	2020		2019					2021									2020
Americas	$	899.1	$	857.3			$	41.8						$	(4.5	)		$	46.3	Americas	$	1,035.2	$	899.1	$	136.1	$	4.9	$	131.2
Europe	544.0		542.1		1.9				(15.8		)	17.7			Europe		650.4				544.0		106.4		51.1		55.3
AMEA	75.9		80.7		(4.8		)		(0.7		)	(4.1		)	AMEA		100.0				75.9		24.1		3.6		20.5
Total	$	1,519.0	$	1,480.1	$	38.9			$	(21.0	)	$	59.9		Total		$	1,785.6			$	1,519.0	$	266.6	$	59.6	$	207.0


*	~~Includes changes to our accounts receivable, inventory and accounts payable balances.~~


~~Item 3.~~	~~Quantitative and qualitative disclosures about market risk~~


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



	Avantor, Inc.

Date: April ~~29, 2020~~28, 2021	By:	/s/ Steven Eck
		Name:	Steven Eck
		Title:	Senior Vice President, Chief Accounting Officer (Principal Accounting Officer)