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Washington, D.C. 20549

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☒ 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 April 22, 2024, 679,266,323 shares of common stock, $0.01 par value per share, were outstanding.

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and are subject to the safe harbor created thereby under the Private Securities Litigation Reform Act of 1995. 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,” “projection,” “prospects,” “continue,” “goal,” “objective,” “opportunity,” “near-term,” “long-term,” “assumption,” “project,” “guidance,” “target,” “trend,” “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 strategies for improving growth and optimizing costs;

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

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

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

•our ability to successfully value and integrate acquired businesses;

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

•our ability to maintain our relationships with key customers;

•our ability to maintain our relationships with distributors;

•our ability to maintain our customer base and our expected volume of customer 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 or personal data;

•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;

•supply chain constraints and 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;

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

•our ability to obtain and maintain required regulatory clearances or approvals, which 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, which could adversely affect our financial condition or 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 effective 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.

Effective January 1, 2024, we changed our operating model and reporting segment structure from three reportable segments to two reportable segments: Laboratory Solutions and Bioscience Production. This structure aligns with how our Chief Executive Officer, who is our chief operating decision maker, measures segment operating performance and allocates resources across our operating segments.

In November 2023, the FASB issued Accounting Standards Update 2023-07, Improvements to Reportable Segment Disclosures, which amends the existing segment reporting guidance (ASC Topic 280) to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount for other segment items by reportable segment and a description of its composition, the title and position of the chief operating decision maker and an explanation of how the chief operating decision maker uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources.

The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact of our pending adoption of this standard on our financial statement disclosures.

In December 2023, the FASB issued Accounting Standards Update 2023-09, Improvements to Income Tax Disclosures, which amends the existing income taxes guidance (ASC Topic 740) to require additional disclosures surrounding annual rate reconciliation, income taxes paid and other income tax related disclosures.

The amendments in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact of our pending adoption of this standard on our financial statement disclosures.

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

On March 6, 2024, the SEC adopted final rules to require registrants to disclose certain climate-related information in registration statements and annual reports.

On April 4, 2024, the SEC issued an order staying the final rules pending completion of judicial review of the petitions challenging the final rules. The order does not amend the compliance dates contemplated by the final rules, which are applicable to the Company for fiscal years beginning with the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2025. We are currently evaluating the impact of our pending adoption of these requirements on our financial statement disclosures.

The following table presents the reconciliation of basic and diluted earnings per share for the three months ended March 31, 2024:

The following table presents the reconciliation of basic and diluted earnings per share for the three months ended March 31, 2023:

As described in note 1, effective January 1, 2024, we changed our operating model and reporting segment structure into two reportable business segments: Laboratory Solutions and Bioscience Production. Corporate costs are managed on a standalone basis, certain of which are allocated to our reportable segments.

In connection with this change, our chief operating decision maker changed the measure used to evaluate segment profitability from Adjusted EBITDA to Adjusted Operating Income. All disclosures relating to segment profitability, including those for comparative periods, have been revised as a result of this change.

The following table presents information by reportable segment:

(in millions)			Three months ended March 31,
			2024						2023
Net sales:
Laboratory Solutions			$	1,157.1					$	1,203.0
Bioscience Production			522.7						577.3
Total			$	1,679.8					$	1,780.3
Adjusted Operating Income:
Laboratory Solutions			$	148.2					$	172.2
Bioscience Production			126.9						167.5
Corporate			(16.7)						(16.6)
Total			$	258.4					$	323.1

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 net income, the nearest measurement under GAAP, to Adjusted Operating Income :

(in millions)			Three months ended March 31,
			2024						2023
Net income			$	60.4					$	121.5
Interest expense, net			64.3						73.7
Income tax expense			20.2						34.3
Loss on extinguishment of debt			2.5						2.3
Other income, net			(1.1)						(0.6)
Operating income			146.3						231.2
Amortization			75.3						78.4
Other stock-based compensation expense			0.3						0.1
Integration-related expenses1			—						8.7
Restructuring and severance charges2			23.2						4.7
Transformation expenses3			13.3						—
Adjusted Operating Income			$	258.4					$	323.1

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1.Represents 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.Reflects the incremental expenses incurred in the period related to restructuring initiatives to increase profitability and productivity. Costs included in this caption are specific to employee severance, site-related exit costs, and contract termination costs. The expenses recognized in 2024 represent costs incurred to achieve the Company’s publicly-announced cost transformation initiative.

3.Represents incremental expenses directly associated with the Company’s publicly-announced cost transformation initiative, primarily related to the cost of external advisors.

The following table presents net sales by product category:

(in millions)			Three months ended March 31,
			2024						2023
Proprietary			$	883.5					$	952.2
Third-party			796.3						828.1
Total			$	1,679.8					$	1,780.3

The following table presents supplemental disclosures of cash flow information:

(in millions)			March 31, 2024						December 31, 2023
Cash and cash equivalents			$	234.9					$	262.9
Restricted cash classified as other assets			24.3						24.8
Total			$	259.2					$	287.7

At March 31, 2024 and December 31, 2023, amounts included in restricted cash primarily represent funds held in escrow to satisfy a long-term retention incentive related to the acquisition of Ritter.

The following table presents the components of inventory:

(in millions)			March 31, 2024						December 31, 2023
Merchandise inventory			$	465.0					$	503.5
Finished goods			105.0						91.0
Raw materials			166.1						167.2
Work in process			74.5						66.4
Total			$	810.6					$	828.1

As described in note 1, we reorganized our segment reporting structure effective January 1, 2024. The segment reporting reorganization also resulted in a change to our reporting units for the purpose of goodwill impairment testing. Our new reporting units are Manufactured Products, Buy Sell Production, NuSil, Buy Sell Lab, Proprietary Lab and Services. As a result of the reorganization, our goodwill was reassigned to the new reporting units making up our Laboratory Solutions and Bioscience Production reporting segments.

We have reassigned goodwill as of January 1, 2024 to align to our new segment structure by using a relative fair value approach. We tested goodwill for impairment immediately before and after the realignment; no impairment was identified.

The following table presents goodwill by our reportable segments, on the effective date of the change:

The following table presents the components of other intangible assets:

(in millions)			March 31, 2024																		December 31, 2023
			Gross value						Accumulated amortization and impairment1						Carrying value						Gross value						Accumulated amortization and impairment1						Carrying value
Customer relationships			$	4,829.6					$	1,713.8					$	3,115.8					$	4,883.2					$	1,670.3					$	3,212.9
Trade names			356.0						230.0						126.0						359.7						228.3						131.4
Other			632.2						303.4						328.8						635.5						296.8						338.7
Total finite-lived			$	5,817.8					$	2,247.2					3,570.6						$	5,878.4					$	2,195.4					3,683.0
Indefinite-lived															92.3																		92.3
Total															$	3,662.9																	$	3,775.3

━━━━━━━━━

1.As of March 31, 2024 and December 31, 2023, accumulated impairment losses on Customer relationships were $65.9 million and on Other were $40.5 million totaling $106.4 million.

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 March 31, 2024, our accrued obligation under this order is $2.4 million, which is calculated based on expected cash payments discounted at rates ranging from 4.2% to 5.1% between 2024 and 2046. The undiscounted amount of that obligation is $3.8 million. We are indemnified against any losses incurred in this matter as stipulated through the agreement and guaranty 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 March 31, 2024, 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 March 31, 2024, 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)			March 31, 2024																		December 31, 2023
			Interest terms						Rate						Amount
Receivables facility			SOFR1 plus 0.80%						6.23%						$	262.2					$	221.0
Senior secured credit facilities:
Euro term loans B-4			EURIBOR plus 2.50%						6.33%						424.4						630.1
Euro term loans B-5			EURIBOR plus 2.00%						5.83%						341.0						350.4
U.S. dollar term loans B-5			SOFR1 plus 2.25%						7.68%						772.4						787.6
2.625% secured notes			fixed rate						2.625%						701.4						718.7
3.875% unsecured notes			fixed rate						3.875%						800.0						800.0
3.875% unsecured notes			fixed rate						3.875%						431.6						442.3
4.625% unsecured notes			fixed rate						4.625%						1,550.0						1,550.0
Finance lease liabilities															68.2						68.3
Other															9.7						11.6
Total debt, gross															5,360.9						5,580.0
Less: unamortized deferred financing costs															(37.9)						(43.4)
Total debt															$	5,323.0					$	5,536.6
Classification on balance sheets:
Current portion of debt															$	299.1					$	259.9
Debt, net of current portion															5,023.9						5,276.7

━━━━━━━━━

1.SOFR includes credit spread adjustment.

Interest expense, net includes interest income of $17.9 million and $14.5 million for the three months ended March 31, 2024 and March 31, 2023, respectively. The interest income primarily relates to income on our interest rate swaps and cross currency swaps. Refer to note 14 to the unaudited consolidated financial statements for more information.

The following table presents availability under our credit facilities:

(in millions)			March 31, 2024
			Receivables facility						Revolving credit facility						Total
Capacity			$	320.5					$	975.0					$	1,295.5
Undrawn letters of credit outstanding			(14.9)						—						(14.9)
Outstanding borrowings			(262.2)						—						(262.2)
Unused availability			$	43.4					$	975.0					$	1,018.4

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 March 31, 2024, total available accounts receivable under the receivables facility were $538.3 million.

On April 2, 2024, we amended the credit agreement to reprice the U.S. Dollar term loan under our senior secured credit facilities. Pursuant to the agreement, the interest rate applicable to the U.S. Dollar term loan reduced from SOFR plus a spread of 2.25% per annum to SOFR plus a spread of 2.00% per annum. The principal amount of U.S. Dollar term loan outstanding immediately prior to the amendment and the outstanding principal amount of U.S. Dollar term loan immediately following the amendment each totaled $772.4 million. The final stated maturity of the U.S. Dollar term loan remains November 6, 2027. The costs to complete the amendment were not material.

During the quarter ended March 31, 2024, we made prepayments of $10.0 million on our U.S. dollar term loan B-5 that matures on November 6, 2027 and prepayments of $190.6 million on our Euro term loan B-4 that matures on June 10, 2028. In connection with these prepayments, we expensed $2.5 million of previously unamortized deferred financing costs as a loss on extinguishment of debt.

The following table presents changes in the components of AOCI:

(in millions)			Foreign currency translation						Derivative instruments						Defined benefit plans						Total
Balance at December 31, 2023			$	(82.8)					$	12.6					$	1.2					$	(69.0)
Unrealized (loss) gain			(22.0)						9.8						(0.2)						(12.4)
Reclassification of gain into earnings			—						(8.5)						—						(8.5)
Change due to income taxes			(6.9)						(0.3)						0.1						(7.1)
Balance at March 31, 2024			$	(111.7)					$	13.6					$	1.1					$	(97.0)
Balance at December 31, 2022			$	(131.3)					$	19.9					$	11.1					$	(100.3)
Unrealized gain (loss)			16.9						(0.1)						(4.9)						11.9
Reclassification of gain into earnings			—						(6.5)						—						(6.5)
Change due to income taxes			2.7						1.6						0.9						5.2
Balance at March 31, 2023			$	(111.7)					$	14.9					$	7.1					$	(89.7)

The reclassifications effects shown above were immaterial to the financial statements and were made to either cost of sales, SG&A expense or interest expense depending upon the nature of the underlying transaction. The income tax effects in the three months ended March 31, 2024 on foreign currency translation were due to our net investment hedge and cross-currency swap discussed in note 14.

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

(in millions)			Award Classification						Three months ended March 31,
									2024						2023
Stock options			Equity						$	3.1					$	3.6
RSUs			Equity						8.8						8.7
Other			Both						0.8						0.4
Total									$	12.7					$	12.7
Award classification:
Equity									$	12.4					$	12.6
Liability									0.3						0.1

At March 31, 2024, unvested awards under our plans have remaining stock-based compensation expense of $116.4 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, 2023			16.4						$	21.37
Granted			0.7						24.35
Exercised			(2.0)						21.92
Forfeited			(0.4)						24.40
Balance at March 31, 2024			14.7						$	21.34					$	70.8					5.5 years
Expected to vest			3.1						25.11						5.2						8.9 years
Vested			11.6						20.34						65.6						4.7 years

During the three months ended March 31, 2024, we granted stock options that have a contractual life of ten years and will vest annually over three 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, 2023			4.0						$	26.35
Granted			2.0						25.81
Vested			(0.8)						27.16
Forfeited			(0.1)						30.81
Balance at March 31, 2024			5.1						$	26.64

During the three months ended March 31, 2024, we granted RSUs that will vest annually over three years, subject to the recipient continuously providing service to us throughout the vesting period. 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 $2.1 million and $2.3 million for the three months ended March 31, 2024 and March 31, 2023, respectively.

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

(in millions)			Three months ended March 31,
			2024						2023
Net foreign currency gain from financing activities			$	0.8					$	0.2
Income related to defined benefit plans			0.3						0.4
Other income, net			$	1.1					$	0.6

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

(in millions)			Three months ended March 31,
			2024						2023
Income before income taxes			$	80.6					$	155.8
Income tax expense			(20.2)						(34.3)
Effective income tax rate			25.1		%				22.0		%

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 months ended March 31, 2024 when compared to the three months ended March 31, 2023, is primarily due to valuation allowances against deferred tax assets not expected to be realized.

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.

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 $17.0 million will be reclassified as a reduction to interest expense.

As of March 31, 2024, 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 months ended March 31, 2024 and March 31, 2023.

The table below presents the effect of our derivative financial instruments on the statement of operations for the three months ended March 31, 2024 and March 31, 2023.

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 March 31, 2024, we had the following outstanding foreign currency derivatives that were used to hedge 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 months ended March 31, 2024 and March 31, 2023.

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 months ended March 31, 2024 and March 31, 2023.

The table below presents the fair value of our derivative financial instruments as well as their classification on the Balance Sheet as of March 31, 2024 and December 31, 2023:

We designated all of our outstanding €400.0 million 3.875% senior unsecured notes, issued on July 17, 2020, and maturing on July 15, 2028, as a hedge of our net investment in certain of our European operations. For instruments that are designated and qualify as net investment hedges, the foreign currency transactional gains or losses are reported as a component of AOCI. The gains or losses would be reclassified into earnings upon a liquidation event or deconsolidation of a hedged foreign subsidiary.

Net investment hedge effectiveness is assessed based upon the change in the spot rate of the foreign currency denominated debt. The critical terms of the foreign currency notes match the portion of the net investments designated as being hedged. At March 31, 2024, the net investment hedge was equal to the designated portion of the European operations and was considered to be perfectly effective.

The accumulated gain related to the foreign currency denominated debt designated as net investment hedges classified in the foreign currency translation adjustment component of AOCI was $20.0 million and $9.3 million as of March 31, 2024 and December 31, 2023, respectively.

The amount of (gain) loss related to the foreign currency denominated debt designated as net investment hedges classified in the foreign currency translation adjustment component of other comprehensive income or loss for the three months ended March 31, 2024 and March 31, 2023 are presented below:

Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable and debt.

The carrying amount of cash and cash equivalents was the same as its fair value and is a Level 1 measurement. The carrying amounts for trade accounts receivable and accounts payable approximated fair value due to their short-term nature and are Level 2 measurements.

The following table presents the gross amounts, which exclude unamortized deferred financing costs, and the fair values of debt instruments:

(in millions)			March 31, 2024												December 31, 2023
			Gross amount						Fair value						Gross amount						Fair value
Receivables facility			$	262.2					$	262.2					$	221.0					$	221.0
Senior secured credit facilities:
Euro term loans B-4			424.4						425.5						630.1						630.9
Euro term loans B-5			341.0						342.3						350.4						351.1
U.S. dollar term loans B-5			772.4						774.3						787.6						791.0
2.625% secured notes			701.4						685.7						718.7						705.3
3.875% unsecured notes			800.0						720.4						800.0						727.3
3.875% unsecured notes			431.6						420.6						442.3						434.3
4.625 % unsecured notes			1,550.0						1,469.3						1,550.0						1,489.1
Finance lease liabilities			68.2						68.2						68.3						68.3
Other			9.7						9.7						11.6						11.6
Total			$	5,360.9					$	5,178.2					$	5,580.0					$	5,429.9

The fair values of debt instruments are based on standard pricing models that take into account the present value of future cash flows, and in some cases private trading data, which are level 2 measurements.

This discussion should be read in conjunction with the accompanying condensed consolidated financial statements and notes. Pursuant to SEC rules for reports covering interim periods, we have prepared this discussion and analysis to enable you to assess material changes in our financial condition and results of operations since December 31, 2023, the date of our Annual Report. Therefore, we encourage you to read this discussion and analysis in conjunction with the Annual Report.

During the three months ended March 31, 2024, we recorded net sales of $1,679.8 million, net income of $60.4 million, Adjusted EBITDA of $283.0 million and Adjusted Operating Income of $258.4 million. Net sales decreased by 5.6%, which included a 6.3% decline in organic sales compared to the same period in 2023. See “Reconciliations of non-GAAP measures” for reconciliations of net income to Adjusted EBITDA and Adjusted Operating Income, and net income margin to Adjusted EBITDA margin and Adjusted Operating Income margin. See “Results of operations” for a reconciliation of net sales growth (decline) to organic net sales growth (decline).

Effective January 1, 2024, we changed our operating model and reporting segment structure from three

reportable segments to two reportable segments, Laboratory Solutions and Bioscience Production. This structure aligns with how our Chief Executive Officer, who is our chief operating decision maker, intends to measure segment operating performance and allocate resources across our operating segments. This reportable segment change has no impact on our consolidated operating results.

In connection with the operating model and reporting structure change, our chief operating decision

maker changed the measure used to evaluate segment profitability from Adjusted EBITDA to Adjusted Operating Income. All disclosures relating to segment profitability, including those for comparative periods, have been revised as a result of this change.

The following updates the factors and current trends disclosed in the Annual Report. These updates may affect our performance and financial condition in future periods.

Customer demand and required inventory levels continue to normalize in the transition from the COVID-19 pandemic. For a discussion of this trend and associated economic disruptions, and the actual operational and financial impacts that we experienced through December 31, 2023, see “Part II—Item 7—Management's discussion and analysis of financial condition and results of operations” in the Annual Report.

We have experienced inventory fluctuations and build up at customers as a result of global supply chain disruptions and have experienced inflationary pressures across all of our cost categories. While we have implemented pricing and productivity measures to combat these pressures, they may continue to adversely impact our results.

Our consolidated results of operations are comprised of many different functional currencies that translate into our U.S. Dollar reporting currency. The movement of the U.S. Dollar against those functional currencies, particularly the Euro, has caused significant variability in our results and may continue to do so in the future.

To evaluate our performance, we monitor a number of key indicators. As appropriate, we supplement our results of operations determined in accordance with U.S. generally accepted accounting principles (“GAAP”) with certain non-GAAP financial measurements that we believe are useful to investors, creditors and others in assessing our performance. These measures should not be considered in isolation or as a substitute for reported GAAP results because they may include or exclude certain items as compared to similar GAAP-based measures, and such measures may not be comparable to similarly titled measures reported by other companies. Rather, these measures should be considered as an additional way of viewing aspects of our operations that provide a more complete understanding of our business.

The key indicators that we monitor are as follows:

•Net sales, gross margin, operating income, operating income margin, net income or loss and net income or loss margin. These measures are discussed in the section entitled “Results of operations”;

•Organic net sales growth, which is a non-GAAP measure discussed in the section entitled “Results of operations.” Organic net sales growth (decline) eliminates from our reported net sales change the impacts of revenues from any acquired businesses that have been owned for less than one year and changes in foreign currency exchange rates. We believe that this measurement is useful to investors as a way to measure and evaluate our underlying commercial operating performance consistently across our segments and the periods presented. This measurement is used by our management for the same reason. Reconciliations to the change in reported net sales, the most directly comparable GAAP financial measure, are included in the section entitled “Results of operations”;

•Adjusted EBITDA and Adjusted EBITDA margin,, which are non-GAAP measures discussed in the section entitled “Results of operations.” Adjusted EBITDA is our net income or loss adjusted for the following items: (i) interest expense, (ii) income tax expense, (iii) amortization of acquired intangible assets, (iv) depreciation expense, (v) losses on extinguishment of debt, (vi) charges associated with the impairment of certain assets, (vii) and certain other adjustments. Adjusted EBITDA margin is Adjusted EBITDA divided by net sales as determined under GAAP. We believe that these measurements are useful as a way to analyze the underlying trends in our business consistently across the periods presented. These measurements are used by our management for the same reason. A reconciliation of net income or loss and net income or loss margin, the most directly comparable GAAP financial measures, to Adjusted EBITDA and Adjusted EBITDA margin, respectively, are included in the section entitled “Reconciliations of non-GAAP measures”;

•Adjusted Operating Income and Adjusted Operating Income margin, which are non-GAAP measures discussed in the section entitled “Results of operations.” Adjusted operating income is our net income or loss adjusted for the following items: (i) interest expense, (ii) income tax expense, (iii) amortization of acquired intangible assets, (iv) losses on extinguishment of debt, (v) charges associated with the impairment of certain assets, (vi) and certain other adjustments. This measurement is our segment reporting profitability measure under generally accepted accounting principles. Adjusted Operating Income margin is Adjusted Operating Income divided by net sales as determined under GAAP. We believe that these measurements are useful to investors as a way to analyze the underlying trends in our business consistently across the periods presented. These measurements are used by our management for the same reason. A reconciliation of net income or loss and net income or loss margin, the most directly comparable GAAP financial measures, to Adjusted Operating Income and Adjusted Operating Income margin, respectively, are included in the section entitled “Reconciliations of non-GAAP measures”;

•Cash flows from operating activities, which we discuss in the section entitled “Liquidity and capital resources—Historical cash flows”;

•Free cash flow, which is a non-GAAP measure, is equal to our cash flows from operating activities, plus acquisition-related costs paid in the period, less capital expenditures. We believe that this measurement is useful to investors as it provides a view on the Company’s ability to generate cash for use in financing or investing activities. This measurement is used by management for the same reason. A reconciliation of cash flows from operating activities, the most directly comparable GAAP financial measure, to free cash flow, is included in the section entitled “Liquidity and capital resources—Historical cash flows.”

We present results of operations in the same way that we manage our business, evaluate our performance and allocate our resources. We also provide discussion of net sales and Adjusted Operating Income by segment: Laboratory Solutions and Bioscience Production. Corporate costs are managed on a standalone basis, certain of which are allocated to our reportable segments.

The first quarter net sales decline was driven by decreases in both segments primarily due to reduced customer demand. Unfavorable product mix contributed to contraction in gross margin. Softness in sales volume and unfavorable product mix drove Adjusted EBITDA and Adjusted Operating Income margin contraction.

Net sales decreased $100.5 million or 5.6%, which included $12.0 million or 0.7% of favorable foreign currency impact. Organic net sales decreased by $112.5 million or 6.3%.

In the Laboratory Solutions segment, net sales decreased $45.9 million or 3.8%, which included $9.0 million or 0.7% of favorable foreign currency impact. Organic net sales decreased $54.9 million or 4.5%. Sales decline was primarily driven by decreased demand in biopharma and healthcare end markets.

In the Bioscience Production segment, net sales decreased $54.6 million or 9.5%, which included $3.0 million or 0.5% of favorable foreign currency impact. Organic net sales decreased by $57.6 million or 10.0%. Sales decline was primarily driven by decreased demand in biopharma and healthcare end markets.

Gross margin for the three months ended March 31, 2024 contracted by 110 basis points resulting primarily from unfavorable product mix.

Operating income decreased primarily from lower gross profit, as previously discussed and higher operating expenses driven by restructuring and severance charges, transformation expenses and inflationary pressures on salary expenses.

Net income decreased primarily due to lower operating income, as previously discussed, partially offset by lower interest expense on account of debt repayments made over the last twelve months and lower income tax expense due to lower income before income taxes.

For a reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to net income and net income margin, respectively, the most directly comparable measures under GAAP, see “Reconciliations of non-GAAP financial measures.”

Adjusted EBITDA decreased by $63.2 million or 18.3%, which included a favorable foreign currency translation impact of $1.0 million or 0.3%.The remaining decline was $64.2 million or 18.6% primarily driven by lower sales volume and unfavorable product mix.

For a reconciliation of Adjusted Operating Income and Adjusted Operating Income margin to net income and net income margin, respectively, the most directly comparable measures under GAAP, see “Reconciliations of non-GAAP financial measures.”

Adjusted Operating Income decreased $64.7 million or 20.0%, which included a favorable foreign currency translation impact of $0.9 million or 0.3%. The remaining decline was $65.6 million or 20.3% which is further discussed below.

In the Laboratory Solutions segment, Adjusted Operating Income declined $24.0 million or 13.9%, or 13.7% when adjusted for unfavorable foreign currency translation impact. The decrease was due to lower sales volume.

In the Bioscience Production segment, Adjusted Operating Income declined $40.6 million or 24.2%, or 24.3% when adjusted for favorable foreign currency translation impact. The decrease was driven primarily by lower sales volume.

In Corporate, Adjusted Operating Income decreased $0.1 million or 0.6%, due to immaterial offsetting factors.

The following table presents the reconciliation of net income and net income margin to Adjusted EBITDA and Adjusted EBITDA margin, respectively:

(dollars in millions)			Three months ended March 31,
			2024												2023
			$						%						$						%
Net income			$	60.4					3.6		%				$	121.5					6.8		%
Interest expense, net			64.3						3.8		%				73.7						4.1		%
Income tax expense			20.2						1.2		%				34.3						2.0		%
Depreciation and amortization			99.6						5.9		%				101.1						5.6		%
Loss on extinguishment of debt			2.5						0.1		%				2.3						0.1		%
Net foreign currency gain from financing activities			(0.8)						—		%				(0.2)						—		%
Other stock-based compensation expense			0.3						—		%				0.1						—		%
Integration-related expenses1			—						—		%				8.7						0.5		%
Restructuring and severance charges2			23.2						1.4		%				4.7						0.3		%
Transformation expenses3			13.3						0.8		%				—						—		%
Adjusted EBITDA			$	283.0					16.8		%				$	346.2					19.4		%