Catalent(CTLT) - 2021 Q1 - Quarterly Report

Part I. Financial Information This section provides the unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and internal controls assessment for the period Item 1. Financial Statements (unaudited) This section presents the unaudited consolidated financial statements, including statements of operations, balance sheets, cash flows, and comprehensive notes, for the three months ended September 30, 2020 and 2019 Consolidated Statements of Operations This section details the company's revenues, expenses, and net earnings for the three months ended September 30, 2020 and 2019 Consolidated Statements of Operations (Three Months Ended September 30) | Financial Metric | 2020 (in millions) | 2019 (in millions) | | :--- | :--- | :--- | | Net revenue | $845.7 | $664.7 | | Gross margin | $248.9 | $177.7 | | Operating earnings | $81.5 | $34.4 | | Net earnings | $82.4 | $0.1 | | Diluted EPS | $0.41 | $(0.05) | - The company's net earnings attributable to common shareholders swung from a loss of $8.0 million in Q1 2019 to a profit of $68.8 million in Q1 2020[20] Consolidated Balance Sheets This section presents the company's financial position, including assets, liabilities, and equity, as of September 30, 2020, and June 30, 2020 Consolidated Balance Sheet Highlights | Account | Sep 30, 2020 (in millions) | June 30, 2020 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $1,007.0 | $953.2 | | Total current assets | $2,356.1 | $2,293.0 | | Total assets | $7,984.2 | $7,776.5 | | Total current liabilities | $919.7 | $893.2 | | Long-term obligations | $2,985.3 | $2,945.1 | | Total liabilities | $4,305.5 | $4,271.1 | | Total shareholders' equity | $3,072.1 | $2,898.8 | Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities for the three months ended September 30 Consolidated Cash Flows (Three Months Ended September 30) | Cash Flow Activity | 2020 (in millions) | 2019 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $149.7 | $25.2 | | Net cash used in investing activities | $(151.2) | $(84.9) | | Net cash provided by/(used in) financing activities | $49.6 | $(35.8) | | Net increase/(decrease) in cash | $53.8 | $(102.0) | | Cash and equivalents at end of period | $1,007.0 | $243.4 | Notes to Unaudited Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the unaudited consolidated financial statements, including revenue recognition and business combinations Revenue by Segment (Three Months Ended Sep 30, 2020) | Segment | Manufacturing & Commercial | Development Services | Clinical Supply | Total (in millions) | | :--- | :--- | :--- | :--- | :--- | | Biologics | $89.9 | $287.2 | - | $377.1 | | Softgel & Oral Technologies | $190.6 | $30.5 | - | $221.1 | | Oral & Specialty Delivery | $103.5 | $54.8 | - | $158.3 | | Clinical Supply Services | - | - | $92.7 | $92.7 | - On October 28, 2020, the Company entered into an agreement to acquire Skeletal Cell Therapy Support SA for €12.0 million, expanding its cell therapy capacity[127] - The company completed several business combinations, including the acquisition of MaSTherCell Global Inc. in February 2020 for an aggregate purchase price of $323.3 million, which was preliminarily allocated to goodwill ($252.5 million), identifiable intangible assets ($51.0 million), and property, plant and equipment ($25.5 million)[65][67] Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's financial performance, condition, and liquidity for the three months ended September 30, 2020, highlighting key drivers of revenue and earnings changes Financial Performance Summary (Q1 2021 vs Q1 2020) | Metric (in millions) | Q1 2021 (ended Sep 30, 2020) | Q1 2020 (ended Sep 30, 2019) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $845.7 | $664.7 | $181.0 | 27% | | Gross margin | $248.9 | $177.7 | $71.2 | 40% | | Operating earnings | $81.5 | $34.4 | $47.1 | 137% | | Net earnings | $82.4 | $0.1 | $82.3 | 82300% | - Net revenue growth of 26% (constant currency) was driven by a 20% increase from existing operations, an 8% contribution from acquisitions, and a 2% headwind from divestitures[146] - The COVID-19 pandemic has not had a material adverse impact on the business to date; however, the company has observed some customer delays and cancellations, as well as revenue increases related to projects addressing the pandemic[132][134] Segment Review This section provides a detailed analysis of the financial performance and key drivers for each operating segment, including Biologics and Softgel and Oral Technologies Segment Performance (Three Months Ended Sep 30, 2020 vs 2019) | Segment | Net Revenue Change (Constant Currency) | Segment EBITDA Change (Constant Currency) | | :--- | :--- | :--- | | Biologics | +98% | +194% | | Softgel and Oral Technologies | -17% | -20% | | Oral and Specialty Delivery | +17% | -26% | | Clinical Supply Services | +8% | +13% | - The Biologics segment's revenue grew 98% in constant currency, driven by robust end-market demand across all offerings, including COVID-19 related programs[161] - The Softgel and Oral Technologies segment saw a 17% revenue decline in constant currency, primarily due to reduced demand for prescription products in North America and lower demand for consumer health products like cough, cold, and pain relief[165] - Oral and Specialty Delivery Segment EBITDA decreased 26% in constant currency, mainly due to a $12 million charge associated with a voluntary U.S. product recall[169] Liquidity and Capital Resources This section discusses the company's cash flows, debt, and available credit facilities, assessing its ability to meet short-term and long-term financial obligations Cash Flow Summary (Three Months Ended Sep 30) | Cash Flow Activity (in millions) | 2020 | 2019 | | :--- | :--- | :--- | | Operating activities | $149.7 | $25.2 | | Investing activities | $(151.2) | $(84.9) | | Financing activities | $49.6 | $(35.8) | - Cash from operating activities increased significantly to $149.7 million from $25.2 million in the prior-year period, primarily due to higher operating earnings[179] - Cash used in investing activities increased to $151.2 million, driven by a rise in capital expenditures to $149.6 million from $73.5 million in the prior-year period[180] - As of September 30, 2020, the company had a $550 million revolving credit facility available, with $543.3 million of capacity remaining[175] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risks, primarily from interest rate fluctuations on debt and foreign currency exchange rates, and its strategies for mitigation - The company manages interest rate risk on its variable-rate debt through an interest-rate swap agreement, which effectively fixed the rate on $500.0 million of its U.S. dollar-denominated term loan at 3.51%[192][200] - To mitigate foreign currency risk, the company holds euro-denominated debt, which totaled $944.6 million as of September 30, 2020, and is designated as a hedge of its net investment in European operations[193] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal control over financial reporting - The CEO and CFO concluded that as of September 30, 2020, the company's disclosure controls and procedures were effective at a reasonable assurance level[203] - No material changes to the company's internal control over financial reporting occurred during the first quarter ended September 30, 2020[204] Part II. Other Information This section covers other required disclosures, including legal proceedings, risk factors, equity sales, and a list of exhibits Item 1. Legal Proceedings The company is involved in various legal proceedings arising in the ordinary course of business but does not expect them to have a material adverse effect on its consolidated financial statements - The company is subject to ordinary course legal proceedings but does not expect them to have a material adverse effect on its financial statements[206] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended June 30, 2020, were reported, aside from information in forward-looking statements - No material changes to the risk factors disclosed in the Fiscal 2020 10-K were reported, aside from information in the forward-looking statements section[209] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or purchases of equity securities by the company during the period - None reported[210][211] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including management certifications and financial information formatted in inline XBRL - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and financial statements in inline XBRL format (101.1)[216]