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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended October 3, 2021

OR

 

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

 

Commission File Number: 001-39956

 

Ortho Clinical Diagnostics Holdings plc

(Exact name of registrant as specified in its charter)

 

 

England and Wales

98-1574150

(State or other jurisdiction of

incorporation or organization)

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

 

 

1001 Route 202

Raritan, New Jersey

08869

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: 908-218-8000

 

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

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Ordinary shares, $0.00001 par value per ordinary share

 

OCDX

 

Nasdaq Global Select Market

 

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, 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

As of October 29, 2021, the registrant had 236,889,470 ordinary shares outstanding ($0.00001 par value per share).

 

 


Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

 

Consolidated Statements of Operations

1

 

Consolidated Statements of Comprehensive Income (Loss)

2

 

Consolidated Balance Sheets

3

 

Consolidated Statements of Changes in Shareholders’ Equity (Deficit)

4

 

Consolidated Statements of Cash Flows

6

 

Notes to Unaudited Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

42

Item 4.

Controls and Procedures

43

PART II.

OTHER INFORMATION

44

Item 1.

Legal Proceedings

44

Item 1A.

Risk Factors

44

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

47

Item 3.

Defaults Upon Senior Securities

47

Item 4.

Mine Safety Disclosures

47

Item 5.

Other Information

47

Item 6.

Exhibits

48

 

 

 

i


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Ortho Clinical Diagnostics Holdings plc

Consolidated Statements of Operations

(Unaudited)

(In millions, except per share data)

 

 

Fiscal Quarter Ended

 

 

Fiscal Nine Months Ended

 

 

October 3, 2021

 

 

September 27, 2020

 

 

October 3, 2021

 

 

September 27, 2020

 

Net revenue

$

522.5

 

 

$

451.1

 

 

$

1,521.8

 

 

$

1,249.6

 

Cost of revenue, excluding amortization of intangible assets

 

252.4

 

 

 

234.1

 

 

 

748.7

 

 

 

650.2

 

Gross profit

 

270.1

 

 

 

217.0

 

 

 

773.1

 

 

 

599.4

 

Selling, marketing and administrative expenses

 

140.9

 

 

 

121.0

 

 

 

411.0

 

 

 

347.9

 

Research and development expense

 

32.1

 

 

 

32.7

 

 

 

91.3

 

 

 

82.1

 

Amortization of intangible assets

 

33.3

 

 

 

33.1

 

 

 

100.3

 

 

 

98.7

 

Other operating expense, net

 

9.8

 

 

 

9.5

 

 

 

27.7

 

 

 

22.8

 

Income from operations

 

54.0

 

 

 

20.7

 

 

 

142.8

 

 

 

47.9

 

Interest expense, net

 

36.1

 

 

 

48.9

 

 

 

112.5

 

 

 

148.6

 

Tax indemnification (income) expense, net

 

(0.2

)

 

 

16.5

 

 

 

(0.6

)

 

 

11.6

 

Other (income) expense, net

 

(2.6

)

 

 

(5.9

)

 

 

50.8

 

 

 

61.1

 

Income (loss) before income taxes

 

20.7

 

 

 

(38.8

)

 

 

(20.0

)

 

 

(173.4

)

Provision for (benefit from) income taxes

 

6.0

 

 

 

(10.3

)

 

 

24.4

 

 

 

(2.4

)

Net income (loss)

$

14.7

 

 

$

(28.5

)

 

$

(44.4

)

 

$

(171.0

)

Basic net income (loss) per ordinary share

$

0.06

 

 

$

(0.20

)

 

$

(0.20

)

 

$

(1.17

)

Basic weighted-average ordinary shares outstanding

 

235.6

 

 

 

146.4

 

 

 

225.4

 

 

 

146.4

 

Diluted net income (loss) per ordinary share

$

0.06

 

 

$

(0.20

)

 

$

(0.20

)

 

$

(1.17

)

Diluted weighted-average ordinary shares outstanding

 

242.8

 

 

 

146.4

 

 

 

225.4

 

 

 

146.4

 

 

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

1


Ortho Clinical Diagnostics Holdings plc

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(In millions)

 

 

 

Fiscal Quarter Ended

 

 

Fiscal Nine Months Ended

 

 

 

October 3, 2021

 

 

September 27, 2020

 

 

October 3, 2021

 

 

September 27, 2020

 

Net income (loss)

 

$

14.7

 

 

$

(28.5

)

 

$

(44.4

)

 

$

(171.0

)

Other comprehensive income (loss), before tax:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency derivatives

 

 

2.1

 

 

 

(3.5

)

 

 

6.4

 

 

 

(2.3

)

Interest rate derivatives

 

 

5.9

 

 

 

1.0

 

 

 

22.7

 

 

 

(49.0

)

Foreign currency translation adjustments

 

 

(13.9

)

 

 

8.1

 

 

 

(21.7

)

 

 

1.7

 

Other comprehensive income (loss), before tax

 

 

(5.9

)

 

 

5.6

 

 

 

7.5

 

 

 

(49.6

)

Income tax provision related to items of other
   comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax

 

 

(5.9

)

 

 

5.6

 

 

 

7.5

 

 

 

(49.6

)

Comprehensive income (loss)

 

$

8.7

 

 

$

(22.9

)

 

$

(36.9

)

 

$

(220.6

)

 

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

2


Ortho Clinical Diagnostics Holdings plc

Consolidated Balance Sheets

(Unaudited)

(In millions, except share and per share data)

 

 

 

October 3, 2021

 

 

January 3, 2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

255.9

 

 

$

132.8

 

Accounts receivable (net of allowance for credit losses of $9.7 and
   $
9.8, respectively)

 

 

237.8

 

 

 

318.7

 

Inventories

 

 

308.3

 

 

 

278.7

 

Other current assets

 

 

141.8

 

 

 

127.0

 

Total current assets

 

 

943.8

 

 

 

857.2

 

Property, plant and equipment, net

 

 

782.6

 

 

 

832.0

 

Goodwill

 

 

570.8

 

 

 

580.1

 

Intangible assets, net

 

 

912.5

 

 

 

1,016.7

 

Deferred income taxes

 

 

7.1

 

 

 

8.0

 

Other assets

 

 

93.0

 

 

 

107.5

 

Total assets

 

$

3,309.9

 

 

$

3,401.5

 

Liabilities and Shareholders’ Equity (Deficit)

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

139.3

 

 

$

146.2

 

Accrued liabilities

 

 

251.5

 

 

 

284.7

 

Deferred revenue

 

 

32.6

 

 

 

35.5

 

Current portion of borrowings

 

 

64.4

 

 

 

160.0

 

Total current liabilities

 

 

487.7

 

 

 

626.4

 

Long-term borrowings

 

 

2,206.9

 

 

 

3,558.5

 

Employee-related obligations

 

 

39.9

 

 

 

39.3

 

Other liabilities

 

 

94.2

 

 

 

120.8

 

Deferred income taxes

 

 

84.4

 

 

 

67.3

 

Total liabilities

 

 

2,913.0

 

 

 

4,412.3

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

Shareholders’ Equity (Deficit):

 

 

 

 

 

 

Preferred redeemable shares, $1.39 nominal value per share, 50,000 and no 
   shares issued and outstanding as of October 3, 2021 and January 3, 2021,
   respectively

 

 

0.1

 

 

 

 

Ordinary shares, $0.00001 par, 1,000,000,000 shares authorized, 236,679,437
   and
147,295,511 shares issued and outstanding as of October 3, 2021
   and January 3, 2021, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

2,419.7

 

 

 

975.1

 

Accumulated deficit

 

 

(1,961.9

)

 

 

(1,917.5

)

Accumulated other comprehensive loss

 

 

(61.0

)

 

 

(68.4

)

Total shareholders’ equity (deficit)

 

 

396.9

 

 

 

(1,010.8

)

Total liabilities and shareholders’ equity (deficit)

 

$

3,309.9

 

 

$

3,401.5

 

 

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

3


Ortho Clinical Diagnostics Holdings plc

Consolidated Statements of Changes in Shareholders’ Equity (Deficit)

(Unaudited)

(In millions, except share data)

 

 

 

Ordinary
shares issued

 

 

Ordinary
share
par value

 

 

Preferred redeemable
shares issued

 

 

Preferred redeemable
shares
par value

 

 

Additional
paid-in
capital

 

 

Accumulated
deficit

 

 

Accumulated
other
comprehensive
loss

 

 

Total

 

Balance as of July 4, 2021

 

234,921,002

 

 

$

 

 

 

50,000

 

 

$

0.1

 

 

$

2,407.0

 

 

$

(1,976.6

)

 

$

(54.9

)

 

$

375.6

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14.7

 

 

 

 

 

 

14.7

 

Exercise of stock options

 

1,436,782

 

 

 

 

 

 

 

 

 

 

 

 

7.6

 

 

 

 

 

 

 

 

 

7.6

 

Restricted stock units vested, net of
   shares withheld for taxes

 

321,653

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recognition of stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

5.1

 

 

 

 

 

 

 

 

 

5.1

 

Foreign currency derivatives,
   net of tax of $
0.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.1

 

 

 

2.1

 

Interest rate derivatives,
   net of tax of $
0.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5.9

 

 

 

5.9

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13.9

)

 

 

(13.9

)

Balance as of October 3, 2021

 

236,679,437

 

 

$

 

 

 

50,000

 

 

$

0.1

 

 

$

2,419.7

 

 

$

(1,961.9

)

 

$

(61.0

)

 

$

396.9

 

 

 

 

Ordinary
shares issued

 

 

Ordinary
share
par value

 

 

Preferred redeemable
shares issued

 

 

Preferred redeemable
shares
par value

 

 

Additional
paid-in
capital

 

 

Accumulated
deficit

 

 

Accumulated
other
comprehensive
loss

 

 

Total

 

Balance as of June 28, 2020

 

146,560,341

 

 

$

 

 

 

 

 

$

 

 

$

968.7

 

 

$

(1,848.1

)

 

$

(127.1

)

 

$

(1,006.5

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28.5

)

 

 

 

 

 

(28.5

)

Exercise of stock options

 

21,394

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock grant, net of shares
   retained for taxes

 

2,831

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recognition of stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

2.4

 

 

 

 

 

 

 

 

 

2.4

 

Foreign currency derivatives,
   net of tax of $
0.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3.5

)

 

 

(3.5

)

Interest rate derivatives,
   net of tax of $
0.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.0

 

 

 

1.0

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8.1

 

 

 

8.1

 

Balance as of September 27, 2020

 

146,584,566

 

 

$

 

 

 

 

 

$

 

 

$

971.1

 

 

$

(1,876.6

)

 

$

(121.5

)

 

$

(1,027.0

)

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

4


Ortho Clinical Diagnostics Holdings plc

Consolidated Statements of Changes in Shareholders’ Equity (Deficit)

(Unaudited)

(In millions, except share data)

 

 

 

Ordinary
shares issued

 

 

Ordinary
share
par value

 

 

Preferred redeemable
shares issued

 

 

Preferred redeemable
shares
par value

 

 

Additional
paid-in
capital

 

 

Accumulated
deficit

 

 

Accumulated
other
comprehensive
loss

 

 

Total

 

Balance as of January 3, 2021

 

147,295,511

 

 

$

 

 

 

 

 

$

 

 

$

975.1

 

 

$

(1,917.5

)

 

$

(68.4

)

 

$

(1,010.8

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(44.4

)

 

 

 

 

 

(44.4

)

Issuance of ordinary shares upon
   completion of initial public offering,
   net of commissions, underwriting discounts
   and offering costs

 

87,400,000

 

 

 

 

 

 

 

 

 

 

 

 

1,415.2

 

 

 

 

 

 

 

 

 

1,415.2

 

Issuance of incorporation shares
   consisting of ordinary share and
   preferred redeemable shares

 

1

 

 

 

 

 

 

50,000

 

 

 

0.1

 

 

 

 

 

 

 

 

 

 

 

 

0.1

 

Exercise of stock options

 

1,662,272