SEC Filing | Ortho-Clinical Diagnostics

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10-Q

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


☐	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.

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

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.

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.

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.

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.

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		—		—		—