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Washington, D.C. 20549

━━━━━━━━━

━━━━━━━━━

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

☐ 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

(Exact name of registrant as specified in its charter)

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

Exchange on which registered

Common stock, $0.01 par value

AVTR

New York Stock Exchange

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

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

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

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

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

On July 21, 2023, 675,918,430 shares of common stock, $0.01 par value per share, were outstanding.

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,” “prospects,” “seek,” “can,” “could,” “may,” “should,” “would,” “will,” the negatives thereof and other words and terms of similar meaning.

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

You should understand that the following important factors, in addition to those discussed under Part I, Item 1A “Risk Factors” in our Annual Report, as such risk factors may be updated from time to time in our periodic filings with the SEC and in this report, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:

•disruptions to our operations;

•competition from other industry providers;

•our ability to implement our growth strategy;

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

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

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

•our ability to successfully value and integrate acquired businesses;

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

•our ability to maintain our relationships with key customers;

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

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

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

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

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

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

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

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

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

•the availability of raw materials;

•our ability to source certain of our products from certain suppliers;

•our ability to contain costs in an inflationary environment;

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

•our ability to maintain highly skilled employees;

•our ability to maintain a competitive workforce;

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

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

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

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

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

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

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

All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. In addition, all forward-looking statements speak only as of the date of this report. We undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise other than as required under the federal securities laws.

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.

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.

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

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.

The Company’s long-lived assets include property, plant and equipment, finite-lived intangible assets and certain other assets. For impairment testing purposes, long-lived assets may be grouped with working capital and other types of assets or liabilities if they generate cash flows on a combined basis. We evaluate long-lived assets or asset groups for impairment whenever events or changes in circumstances indicate a potential inability to recover their carrying amounts. The test to determine if long-lived assets or asset groups are impaired first compares their carrying values to their estimated undiscounted future cash flows. If the carrying values exceed the estimated undiscounted cash flows, an impairment charge is calculated as the amount that the carrying values exceed their fair values.

Persistently high customer inventory in the end markets served by Ritter and an overall slowdown in research activity has caused Ritter’s revenue to decline compared to prior expectations. Due to these sustained declines, we performed an impairment test of the Ritter asset group, which resulted in a fair value that was lower than its carrying value. As a result, we recorded impairment charges of $106.4 million on Ritter’s finite-lived intangible assets and $54.4 million on Ritter’s property, plant & equipment in the second quarter of 2023 in the unaudited condensed consolidated statements of operations.

These charges impact our Europe reportable segment.

Our impairment test was performed as of June 30, 2023 and utilized our latest estimates of Ritter’s projected cash flows, including revenues, gross margin, SG&A expenses, capital expenditures to maintain the acquired assets, and investments in debt free net working capital, as well as current market assumptions for the discount rate.

The following table presents the reconciliation of basic and diluted earnings (loss) per share for the three and six months ended June 30, 2023:

For the three months ended June 30, 2023, basic and diluted loss per share calculations were the same because there was a net loss available to common stockholders. As a result, 1.6 million of stock options and 0.8 million of restricted stock units were excluded from the calculation of diluted loss per share as their effect would be anti-dilutive.

The following table presents the reconciliation of basic and diluted earnings per share for the three and six months ended June 30, 2022:

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

The following table presents information by reportable segment:

(in millions)			Three months ended June 30,												Six months ended June 30,
			2023						2022						2023						2022
Net sales:
Americas			$	1,025.6					$	1,156.6					$	2,057.6					$	2,300.0
Europe			606.9						623.8						1,237.1						1,304.2
AMEA			111.4						130.1						229.5						256.7
Total			$	1,743.9					$	1,910.5					$	3,524.2					$	3,860.9
Adjusted EBITDA:
Americas			$	247.2					$	289.8					$	487.6					$	584.0
Europe			111.2						119.3						232.9						262.7
AMEA			26.4						36.1						59.9						65.4
Corporate			(41.8)						(41.1)						(91.2)						(84.9)
Total			$	343.0					$	404.1					$	689.2					$	827.2

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

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

(in millions)			Three months ended June 30,												Six months ended June 30,
			2023						2022						2023						2022
Net (loss) income			$	(7.3)					$	187.4					$	114.2					$	377.8
Interest expense			73.4						63.9						147.1						128.7
Income tax expense			6.0						38.9						40.3						90.3
Depreciation and amortization			102.6						89.7						203.7						204.2
Loss on extinguishment of debt			1.6						6.1						3.9						7.9
Net foreign currency (gain) loss from financing activities			(1.6)						0.9						(1.8)						1.0
Other stock-based compensation benefit			(0.1)						(0.4)						—						(1.7)
Integration-related expenses1			(0.6)						3.3						8.1						7.2
Purchase accounting adjustments2			—						13.8						—						9.4
Restructuring and severance charges3			7.2						0.5						11.9						2.4
Reserve for certain legal matters			1.0						—						1.0						—
Impairment charges4			160.8						—						160.8						—
Adjusted EBITDA			$	343.0					$	404.1					$	689.2					$	827.2

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1.Represents non-recurring direct costs incurred with third parties and the accrual of a long-term retention incentive to integrate acquired companies. These expenses represent incremental costs and are unrelated to normal operations of our business. Integration expenses are incurred over a pre-defined integration period specific to each acquisition.

2.Represents the non-cash reduction of contingent consideration related to the Ritter acquisition and the amortization of the purchase accounting adjustment to record inventory acquired from Masterflex at fair value.

3.Reflects the incremental expenses incurred in the period related to initiatives to increase profitability and productivity. Typical costs included in this caption are employee severance, site-related exit costs, and contract termination costs.

4.As described in note 1.

The following table presents net sales by product line:

(in millions)			Three months ended June 30,												Six months ended June 30,
			2023						2022						2023						2022
Proprietary materials & consumables			$	622.3					$	741.3					$	1,291.4					$	1,489.3
Third party materials & consumables			648.2						688.0						1,296.2						1,412.7
Services & specialty procurement			242.0						232.2						473.8						467.2
Equipment & instrumentation			231.4						249.0						462.8						491.7
Total			$	1,743.9					$	1,910.5					$	3,524.2					$	3,860.9

The following tables present supplemental disclosures of cash flow information:

(in millions)			June 30, 2023						December 31, 2022
Cash and cash equivalents			$	236.4					$	372.9
Restricted cash classified as other assets			24.4						24.0
Total			$	260.8					$	396.9

At June 30, 2023 and December 31, 2022, amounts included in restricted cash primarily represent funds held in escrow to satisfy a long-term retention incentive related to the acquisition of Ritter GmbH.

The following table presents the components of inventory:

(in millions)			June 30, 2023						December 31, 2022
Merchandise inventory			$	549.2					$	556.1
Finished goods			95.4						117.1
Raw materials			178.5						181.2
Work in process			67.3						59.1
Total			$	890.4					$	913.5

The following table presents the components of other intangible assets:

(in millions)			June 30, 2023																		December 31, 2022
			Gross value						Accumulated amortization and impairment1						Carrying value						Gross value						Accumulated amortization and impairment1						Carrying value
Customer relationships			$	4,850.0					$	1,535.6					$	3,314.4					$	4,806.4					$	1,333.5					$	3,472.9
Trade names			357.4						216.9						140.5						354.4						205.1						149.3
Other			634.0						285.8						348.2						630.9						212.1						418.8
Total finite-lived			$	5,841.4					$	2,038.3					3,803.1						$	5,791.7					$	1,750.7					4,041.0
Indefinite-lived															92.3																		92.3
Total															$	3,895.4																	$	4,133.3

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1.As of June 30, 2023, accumulated impairment losses on Customer relationships were $65.9 million and on Other were $40.5 million totaling $106.4 million. As of December 31, 2022, there were no accumulated impairment losses.

Our business involves commitments and contingencies related to compliance with environmental laws and regulations, the manufacture and sale of products and litigation. The ultimate resolution of contingencies is subject to significant uncertainty, and it is reasonably possible that contingencies could be decided unfavorably against us.

Our environmental liabilities are subject to changing governmental policy and regulations, discovery of unknown conditions, judicial proceedings, method and extent of remediation, existence of other potentially responsible parties and future changes in technology. We believe that known and unknown environmental matters, if not resolved favorably, could have a material effect on our financial position, liquidity and profitability. Matters to be disclosed are as follows:

The New Jersey Department of Environmental Protection has ordered us to remediate groundwater conditions near our plant in Phillipsburg, New Jersey. At June 30, 2023, our accrued obligation under this order is $2.5 million, which is calculated based on expected cash payments discounted at rates ranging from 3.8% to 5.4% between 2023 and 2045. The undiscounted amount of that obligation is $3.9 million. We are indemnified against any losses incurred in this matter as stipulated through the agreement referenced in our Annual Report.

In 2016, we assessed the environmental condition of our chemical manufacturing site in Gliwice, Poland. Our assessment revealed specific types of soil and groundwater contamination throughout the site. We are also monitoring the condition of a closed landfill on that site. These matters are not covered by our indemnification arrangement because they relate to an operation we subsequently acquired. At June 30, 2023, our balance sheet includes a liability of $1.1 million for remediation and monitoring costs. That liability is estimated primarily on discounted expected remediation payments and is not materially different from its undiscounted amount.

Our business involves risk of product liability, patent infringement and other claims in the ordinary course of business arising from the products that we produce ourselves or obtain from our suppliers, as well as from the services we provide. Our exposure to such claims may increase to the extent that we expand our manufacturing operations or service offerings.

We maintain insurance policies to protect us against these risks, including product liability insurance. In many cases the suppliers of products we distribute have indemnified us against such claims. Our insurance coverage or indemnification agreements with suppliers may not be adequate in all pending or any future cases brought against us. Furthermore, our ability to recover under any insurance or indemnification arrangements is subject to the financial viability of our insurers, our suppliers and our suppliers’ insurers, as well as legal enforcement under the local laws governing the arrangements.

We have entered into indemnification agreements with customers of our self-manufactured products to protect them from liabilities and losses arising from our negligence, willful misconduct or sale of defective products. To date, we have not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions.

At June 30, 2023, there was no outstanding litigation that we believe would result in material losses if decided against us, and we do not believe that there are any unasserted matters that are reasonably possible to result in a material loss.

The following table presents information about our debt:

(dollars in millions)			June 30, 2023																		December 31, 2022
			Interest terms						Rate						Amount
Receivables facility			SOFR1 plus 0.80%						6.04%						$	275.9					$	327.2
Senior secured credit facilities:
Euro term loans B-4			EURIBOR plus 2.50%						5.70%						647.2						636.7
Euro term loans B-5			EURIBOR plus 2.00%						5.20%						347.7						342.0
U.S. dollar term loans B-5			SOFR1 plus 2.25%						7.50%						1,087.9						1,488.3
2.625% secured notes			fixed rate						2.625%						709.5						694.5
3.875% unsecured notes			fixed rate						3.875%						800.0						800.0
3.875% unsecured notes			fixed rate						3.875%						436.6						427.3
4.625% unsecured notes			fixed rate						4.625%						1,550.0						1,550.0
Finance lease liabilities															68.4						68.9
Other															13.0						14.2
Total debt, gross															5,936.2						6,349.1
Less: unamortized deferred financing costs															(51.9)						(61.6)
Total debt															$	5,884.3					$	6,287.5
Classification on balance sheets:
Current portion of debt															$	314.0					$	364.2
Debt, net of current portion															5,570.3						5,923.3

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1.SOFR includes credit spread adjustment.

The following table presents availability under our credit facilities:

(in millions)			June 30, 2023
			Receivables facility						Revolving credit facility						Total
Capacity			$	320.2					$	975.0					$	1,295.2
Undrawn letters of credit outstanding			(15.4)						—						(15.4)
Outstanding borrowings			(275.9)						—						(275.9)
Unused availability			$	28.9					$	975.0					$	1,003.9

Capacity under the receivables facility is calculated as the lower of eligible borrowing base or facility limit of $400.0 million. Eligible borrowing base is determined as total available accounts receivable less ineligible accounts receivable and other adjustments. At June 30, 2023, total available accounts receivable under the receivables facility were $591.0 million.

In June 2023, we amended the revolving credit facility to increase its funding limit up to $975.0 million and extended the term to June 29, 2028. We capitalized $2.3 million of fees in connection with this transaction.

In June 2023, the Company entered into an Amendment to the Receivables Purchase Agreement to increase the Delinquency Ratio cap from 13.0% to 16.0%.

During the quarter ended June 30, 2023, we made prepayments of $170.0 million on our U.S. dollar term loan B-5 that matures on November 8, 2027. In connection with this prepayment, we expensed $1.6 million of previously unamortized deferred financing costs as a loss on extinguishment of debt. We also amended our U.S. dollar term loan B-5 from LIBOR based floating rate interest to SOFR based floating rate interest. This amendment was done in accordance with Accounting Standards Codification (ASC) 848 and had no impact on the financial statements. The Company is applying optional expedients and exceptions to certain contract modifications and hedging relationships as permitted under ASU 2020-04 and 2022-06.

The following table presents changes in the components of AOCI:

(in millions)			Foreign currency translation						Derivative instruments						Defined benefit plans						Total
Balance at March 31, 2023			$	(111.7)					$	14.9					$	7.1					$	(89.7)
Unrealized gain (loss)			8.7						16.8						(0.8)						24.7
Reclassification of gain into earnings			—						(7.6)						—						(7.6)
Change due to income taxes			2.6						(2.2)						0.3						0.7
Balance at June 30, 2023			$	(100.4)					$	21.9					$	6.6					$	(71.9)
Balance at March 31, 2022			$	(48.8)					$	—					$	(20.5)					$	(69.3)
Unrealized (loss) gain			(71.0)						7.3						—						(63.7)
Reclassification of gain into earnings			—						(1.1)						—						(1.1)
Change due to income taxes			(12.7)						(1.5)						—						(14.2)
Balance at June 30, 2022			$	(132.5)					$	4.7					$	(20.5)					$	(148.3)
Balance at December 31, 2022			$	(131.3)					$	19.9					$	11.1					$	(100.3)
Unrealized gain (loss)			25.6						16.7						(5.7)						36.6
Reclassification of gain into earnings			—						(14.1)						—						(14.1)
Change due to income taxes			5.3						(0.6)						1.2						5.9
Balance at June 30, 2023			$	(100.4)					$	21.9					$	6.6					$	(71.9)
Balance at December 31, 2021			$	(19.2)					$	0.4					$	(24.4)					$	(43.2)
Unrealized (loss) gain			(98.0)						7.0						4.6						(86.4)
Reclassification of gain into earnings			—						(1.3)						(0.1)						(1.4)
Change due to income taxes			(15.3)						(1.4)						(0.6)						(17.3)
Balance at June 30, 2022			$	(132.5)					$	4.7					$	(20.5)					$	(148.3)

The reclassifications and income tax effects shown above were immaterial to the financial statements and were made to either cost of sales or SG&A expenses depending upon the nature of the underlying transaction. The income tax effects in the three and six months ended June 30, 2023 on foreign currency translation were due to our net investment hedge and cross-currency swap discussed in note 13.

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

(in millions)			Classification						Three months ended June 30,												Six months ended June 30,
									2023						2022						2023						2022
Stock options			Equity						$	3.6					$	4.0					$	7.2					$	8.0
RSUs			Equity						5.5						9.1						14.2						16.7
Other			Both						0.1						(0.1)						0.5						(1.0)
Total									$	9.2					$	13.0					$	21.9					$	23.7
Award classification:
Equity									$	9.3					$	13.4					$	21.9					$	25.4
Liability									(0.1)						(0.4)						—						(1.7)

At June 30, 2023, unvested awards under our plans have remaining stock-based compensation expense of $103.5 million to be recognized over a weighted average period of 1.9 years.

The following table presents information about outstanding stock options:

(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, 2022			16.1						$	20.90
Granted			1.8						24.05
Exercised			(0.2)						14.67
Forfeited			(0.3)						22.67
Balance at June 30, 2023			17.4						21.28						$	30.4					6.0 years
Expected to vest			4.1						25.27						1.4						8.6 years
Vested			13.3						20.06						29.0						5.2 years

During the six months ended June 30, 2023, we granted stock options that have a contractual life of ten years and will vest annually over four years, subject to the recipient continuously providing service to us through such date.

The following table presents information about unvested RSUs:

(awards in millions)			Number of awards						Weighted average grant date fair value per award
Balance at December 31, 2022			4.2						$	24.29
Granted			1.9						26.34
Vested			(1.6)						18.67
Forfeited			(0.1)						27.11
Balance at June 30, 2023			4.4						27.07

During the six months ended June 30, 2023, we granted RSUs that will vest annually over three to four years, subject to the recipient continuously providing service to us through each such date. Certain of those awards contain performance and market conditions that impact the number of shares that will ultimately vest. We recorded expense on such awards of $(0.5) million and $2.7 million for the three months ended June 30, 2023 and June 30, 2022, respectively, and $1.8 million and $5.0 million for the six months ended June 30, 2023 and June 30, 2022, respectively.

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

(in millions)			Three months ended June 30,												Six months ended June 30,
			2023						2022						2023						2022
Net foreign currency gain (loss) from financing activities			$	1.6					$	(0.9)					$	1.8					$	(1.0)
Income related to defined benefit plans			0.3						1.6						0.7						3.0
Other			0.1						—						0.1						0.1
Other income, net			$	2.0					$	0.7					$	2.6					$	2.1

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

(in millions)			Three months ended June 30,												Six months ended June 30,
			2023						2022						2023						2022
(Loss) income before income taxes			$	(1.3)					$	226.3					$	154.5					$	468.1
Income tax expense			(6.0)						(38.9)						(40.3)						(90.3)
Effective income tax rate			(461.5)		%				17.2		%				26.1		%				19.3		%

Income tax expense in the quarter is based upon the estimated income for the full year. The composition of the income in different countries and adjustments, if any, in the applicable quarterly periods influences our expense.

The relationship between pre-tax income and income tax expense is affected by the impact of losses for which we cannot claim a tax benefit, non-deductible expenses, and other items that increase tax expense without a relationship to income, such as withholding taxes and changes with respect to uncertain tax positions.

The change in the effective tax rate for the three and six months ended June 30, 2023 when compared to the three and six months ended June 30, 2022, is primarily due to an impairment loss that was recorded in the second quarter of 2023 against the Company’s investment in its Ritter business, and the establishment of new valuation allowances against deferred tax assets not expected to be realized as a result of the impairment.

We engage in hedging activities to reduce our exposure to foreign currency exchange rates and interest rates. Our hedging activities are designed to manage specific risks according to our strategies, as summarized below, which may change from time to time. Our hedging activities consist of the following:

•Economic hedges — We are exposed to changes in foreign currency exchange rates on certain of our euro-denominated term loans and notes that move inversely from our portfolio of euro-denominated intercompany loans. The currency effects for these non-derivative instruments are recorded through earnings in the period of change and substantially offset one another;

•Other hedging activities — Certain of our subsidiaries hedge short-term foreign currency denominated business transactions, external debt and intercompany financing transactions using foreign currency forward contracts. These activities were not material to our consolidated financial statements.

In April of 2023, the Company executed a $100.0 million interest rate swap to convert SOFR based floating rate interest to fixed rate interest. The transaction is intended to mitigate our exposure to fluctuations in interest rates and will terminate on October 27, 2025. In addition, in April of 2023, we amended our $750.0 million interest rate swap from LIBOR based floating rate interest to SOFR based floating rate interest. This amendment was done in accordance with ASC 848 and had no impact on the financial statements. The Company is applying optional expedients and exceptions to certain contract modifications and hedging relationships as permitted under ASU 2020-04 and 2022-06.

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. 

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional $19.7 million will be reclassified as a reduction to interest expense.

As of June 30, 2023, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:

The table below presents the effect of cash flow hedge accounting on AOCI for the three and six months ended June 30, 2023 and June 30, 2022.

The table below presents the effect of our derivative financial instruments on the statement of operations for the three and six months ended June 30, 2023 and June 30, 2022.

We are exposed to fluctuations in foreign exchange rates on investments we hold in foreign entities, specifically our net investment in Avantor Holdings B.V., a EUR-functional-currency consolidated subsidiary, against the risk of changes in the EUR-USD exchange rate.

For derivatives designated as net investment hedges, the gain or loss on the derivative is reported in AOCI as part of the cumulative translation adjustment. Amounts are reclassified out of AOCI into earnings when the hedged net investment is either sold or substantially liquidated.

As of June 30, 2023, we had the following outstanding foreign currency derivatives that were used to hedge its net investments in foreign operations:

The table below presents the effect of our net investment hedges on AOCI and the statement of operations for the three and six months ended June 30, 2023 and June 30, 2022.

The Company did not reclassify any other deferred gains or losses related to cash flow hedges from accumulated other comprehensive income (loss) to earnings for the three and six months ended June 30, 2023 and June 30, 2022.

The table below presents the fair value of our derivative financial instruments as well as their classification on the Balance Sheet as of June 30, 2023 and December 31, 2022: