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~~April 3, ~~2021~~2022


☐	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. ☐

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~~April 29, ~~2021~~2022, the registrant had ~~236~~237,~~889~~734,~~470~~877 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	65
	Notes to Unaudited Consolidated Financial Statements	76
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2721
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4232
Item 4.	Controls and Procedures	4334
PART II.	OTHER INFORMATION	4435
Item 1.	Legal Proceedings	4435
Item 1A.	Risk Factors	4435
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4735
Item 3.	Defaults Upon Senior Securities	4736
Item 4.	Mine Safety Disclosures	4736
Item 5.	Other Information	4736
Item 6.	Exhibits	4837

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
	April 3, 2022			April 4, 2021
Net revenue	$	~~522~~500.51		$	~~451~~506.18		$	~~1,521.8~~		$	~~1,249.6~~
Cost of revenue, excluding amortization of intangible assets		~~252~~249.45			~~234~~248.12			~~748.7~~			~~650.2~~
Gross profit		270.1			217.0			773.1			599.4
Selling, marketing and administrative expenses		129.5			131.5
Selling, marketing and administrative expenses		140.9			121.0			411.0			347.9
Research and development expense		32.2			28.9
Research and development expense		32.1			32.7			91.3			82.1
Amortization of intangible assets		33.2			33.4
Amortization of intangible assets		33.3			33.1			100.3			98.7
Other operating expense, net		8.6			7.4
Other operating expense, net		9.8			9.5			27.7			22.8
Income from operations		47.1			57.4
Income from operations		54.0			20.7			142.8			47.9
Interest expense, net		32.5			43.4
Interest expense, net		36.1			48.9			112.5			148.6
Tax indemnification income, net		(0.2	)		(0.2	)
Tax indemnification (income) expense, net		(0.2	)		16.5			(0.6	)		11.6
Other (income) expense, net		(3.5	)		50.0
Other (income) expense, net		(2.6	)		(5.9	)		50.8			61.1
Income (loss) before income taxes		18.3			(35.8	)
Income (loss) before income taxes		20.7			(38.8	)		(20.0	)		(173.4	)
Provision for income taxes		3.5			3.3
Provision for (benefit from) income taxes		6.0			(10.3	)		24.4			(2.4	)
Net income (loss)	$	14.8		$	(39.1	)
Net income (loss)	$	14.7		$	(28.5	)	$	(44.4	)	$	(171.0	)
Basic net income (loss) per ordinary share	$	0.06		$	(0.19	)
Basic net income (loss) per ordinary share	$	0.06		$	(0.20	)	$	(0.20	)	$	(1.17	)
Basic weighted-average ordinary shares outstanding		237.2			206.2
Basic weighted-average ordinary shares outstanding		235.6			146.4			225.4			146.4
Diluted net income (loss) per ordinary share	$	0.06		$	(0.19	)
Diluted net income (loss) per ordinary share	$	0.06		$	(0.20	)	$	(0.20	)	$	(1.17	)
Diluted weighted-average ordinary shares outstanding		242.0			206.2
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
	April 3, 2022			April 4, 2021
Net income (loss)	$	14.78		$	(2839.51	)	$	~~(44.4~~	)	$	~~(171.0~~	)
Other comprehensive income (loss), before tax:
Other comprehensive income, before tax:
Foreign currency derivatives		(2.18	)		(3.56	)		~~6.4~~			~~(2.3~~	)
Interest rate derivatives		521.94			112.04			~~22.7~~			~~(49.0~~	)
Foreign currency translation adjustments		(136.96	)		(8.18	)		~~(21.7~~	)		~~1.7~~
Other comprehensive income (loss), before tax		(5.9	)		5.6			7.5			(49.6	)
Other comprehensive income, before tax		12.0			7.2
Income tax provision related to items of other comprehensive income (loss)		—			—			—			—
Income tax provision related to items of other comprehensive income		—			—
Other comprehensive income (loss), net of tax		(5.9	)		5.6			7.5			(49.6	)
Other comprehensive income, net of tax		12.0			7.2
Comprehensive income (loss)	$	826.78		$	(2231.9	)	$	~~(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
	April 3, 2022			January 2, 2022
Assets
Current assets:
Cash and cash equivalents	$	~~255~~281.91		$	~~132~~309.87
Accounts receivable (net of allowance for credit losses of $9.7 and $9.8, respectively)		237.8			318.7
Accounts receivable (net of allowance for credit losses of $8.9 and $8.6, respectively)		241.0			257.2
Inventories		~~308~~316.37			~~278~~305.74
Other current assets		~~141~~150.8			~~127~~139.04
Total current assets		~~943~~989.86			~~857~~1,011.27
Property, plant and equipment, net		~~782~~784.62			~~832~~791.04
Goodwill		~~570~~572.8			~~580~~573.16
Intangible assets, net		~~912~~840.57			~~1,016~~879.72
Deferred income taxes		79.17			89.07
Other assets		93119.04			~~107~~98.52
Total assets	$	3,~~309~~316.94		$	3,~~401~~363.58
Liabilities and Shareholders’ Equity (Deficit)
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	~~139~~169.35		$	~~146~~181.20
Accrued liabilities		~~251~~259.5			~~284~~299.76
Deferred revenue		3230.65			3534.5
Current portion of borrowings		6463.42			~~160~~63.04
Total current liabilities		~~487~~522.7			~~626~~578.45
Long-term borrowings		2,~~206~~177.91			32,~~558~~186.57
Employee-related obligations		3936.9			3937.31
Other liabilities		9467.24			~~120~~78.89
Deferred income taxes		8469.40			6772.31
Total liabilities		2,~~913~~873.01			42,~~412~~953.3
Commitments and contingencies (Note 15)
Commitments and contingencies (Note 14)
Shareholders’ Equity (Deficit):
Shareholders’ Equity:
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			—
Preferred redeemable shares, $1.39 nominal value per share, 50,000 shares issued and outstanding as of both April 3, 2022 and January 2, 2022, respectively		0.1			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		—			—
Ordinary shares, $0.00001 par value, 1,000,000,000 shares authorized, 237,612,459 and 237,203,879 shares issued and outstanding as of April 3, 2022 and January 2, 2022, respectively		—			—
Additional paid-in capital		2,~~419~~431.79			~~975~~2,425.19
Accumulated deficit		(1,~~961~~957.90	)		(1,~~917~~971.58	)
Accumulated other comprehensive loss		(6131.07	)		(6843.47	)
Total shareholders’ equity (deficit)		396.9			(1,010.8	)
Total shareholders’ equity		443.3			410.5
Total liabilities and shareholders’ equity (deficit)	$	3,309.9		$	3,401.5
Total liabilities and shareholders’ equity	$	3,316.4		$	3,363.8

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)

	Ordinaryshares issued			Ordinarysharepar value			Preferred redeemableshares issued			Preferred redeemableshares par value			Additionalpaid-incapital			Accumulateddeficit				Accumulatedothercomprehensiveloss				Total
		Preferred redeemableshares issued			Preferred redeemableshares par value			Ordinaryshares issued			Ordinarysharepar value			Additionalpaid-incapital			Accumulateddeficit				Accumulatedothercomprehensiveloss				Total
Balance as of July 4, 2021		234,921,002		$	—			50,000		$	0.1		$	2,407.0		$	(1,976.6	)		$	(54.9	)		$	375.6
Balance as of January 2, 2022			50,000		$	0.1			237,203,879		$	—		$	2,425.9		$	(1,971.8	)		$	(43.7	)		$	410.5
Net income		—	—		—	—		—	—		—	—		—	—		~~14.7~~	14.8			—	—			~~14.7~~	14.8
Exercise of stock options		1,436,782			—			—			—			7.6			—				—				7.6
Exercise of stock options, net of shares retained for taxes			—			—			405,544			—			3.4			—				—				3.4
Restricted stock units vested, net of shares withheld for taxes		321,653			—			—			—			—			—				—				—
Restricted stock grant, net of shares retained for taxes			—			—			3,036			—			—			—				—				—
Recognition of stock-based compensation		—	—		—	—		—	—		—	—		~~5.1~~	2.6		—	—			—	—			~~5.1~~	2.6
Foreign currency derivatives, net of tax of $0.0		—	—		—	—		—	—		—	—		—	—		—	—			~~2.1~~	(2.8	)		~~2.1~~	(2.8	)
Interest rate derivatives, net of tax of $0.0		—	—		—	—		—	—		—	—		—	—		—	—			~~5.9~~	21.4			~~5.9~~	21.4
Foreign currency translation adjustments		—	—		—	—		—	—		—	—		—	—		—	—			~~(13.9~~	)(6.6	)		~~(13.9~~	)(6.6	)
Balance as of October 3, 2021		236,679,437		$	—			50,000		$	0.1		$	2,419.7		$	(1,961.9	)		$	(61.0	)		$	396.9
Balance as of April 3, 2022			50,000		$	0.1			237,612,459		$	—		$	2,431.9		$	(1,957.0	)		$	(31.7	)		$	443.3

	Ordinaryshares issued			Ordinarysharepar value			Preferred redeemableshares issued			Preferred redeemableshares par value			Additionalpaid-incapital			Accumulateddeficit				Accumulatedothercomprehensiveloss				Total
		Preferred redeemableshares issued			Preferred redeemableshares par value			Ordinaryshares issued			Ordinarysharepar value			Additionalpaid-incapital			Accumulateddeficit				Accumulatedothercomprehensiveloss				Total
Balance as of June 28, 2020		146,560,341		$	—			—		$	—		$	968.7		$	(1,848.1	)		$	(127.1	)		$	(1,006.5	)
Balance as of January 3, 2021			—		$	—			147,295,511		$	—		$	975.1		$	(1,917.5	)		$	(68.4	)		$	(1,010.8	)
Net loss		—	—		—	—		—	—		—	—		—	—		~~(28.5~~	)(39.1	)		—	—			~~(28.5~~	)(39.1	)
Exercise of stock options		21,394			—			—			—			—			—				—				—
Issuance of ordinary shares upon completion of initial public offering, net of commissions, underwriting discounts and offering costs			—			—			87,400,000			—			1,414.7			—				—				1,414.7
Restricted stock grant, net of shares retained for taxes		2,831			—			—			—			—			—				—				—
Issuance of incorporation shares consisting of ordinary share and preferred redeemable shares			50,000			0.1			1			—			—			—				—				0.1
Recognition of stock-based compensation		—			—			—			—			2.4			—				—				2.4
Exercise of stock options			—			—			147,540			—			1.0			—				—				1.0
Foreign currency derivatives, net of tax of $0.0		—			—			—			—			—			—				(3.5	)			(3.5	)
Recognition of stock-based compensation			—			—			—			—			3.5			—				—				3.5
Interest rate derivatives, net of tax of $0.0		—			—			—			—			—			—				1.0				1.0
Foreign currency derivatives, net of tax of $0.0			—			—			—			—			—			—				3.6				3.6
Foreign currency translation adjustments		—			—			—			—			—			—				8.1				8.1
Interest rate derivatives, net of tax of $0.0			—			—			—			—			—			—				12.4				12.4
Balance as of September 27, 2020		146,584,566		$	—			—		$	—		$	971.1		$	(1,876.6	)		$	(121.5	)		$	(1,027.0	)
Foreign currency translation adjustments			—			—			—			—			—			—				(8.8	)			(8.8	)
Balance as of April 4, 2021			50,000		$	0.1			234,843,052		$	—		$	2,394.3		$	(1,956.6	)		$	(61.2	)		$	376.6

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)

	Ordinaryshares issued		Ordinarysharepar value		Preferred redeemableshares issued		Preferred redeemableshares par value		Additionalpaid-incapital		Accumulateddeficit			Accumulatedothercomprehensiveloss			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		—		—		—		9.9		—			—			9.9
Restricted stock units vested, net of shares withheld for taxes		321,653		—		—		—		—		—			—			—
Recognition of stock-based compensation		—		—		—		—		19.6		—			—			19.6
Foreign currency derivatives, net of tax of $0.0		—		—		—		—		—		—			6.4			6.4
Interest rate derivatives, net of tax of $0.0		—		—		—		—		—		—			22.7			22.7
Foreign currency translation adjustments		—		—		—		—		—		—			(21.7	)		(21.7	)
Balance as of October 3, 2021		236,679,437	$	—		50,000	$	0.1	$	2,419.7	$	(1,961.9	)	$	(61.0	)	$	396.9

	Ordinaryshares issued		Ordinarysharepar value		Preferred redeemableshares issued		Preferred redeemableshares par value		Additionalpaid-incapital		Accumulateddeficit			Accumulatedothercomprehensiveloss			Total
Balance as of December 29, 2019		146,437,574	$	—		—	$	—	$	964.7	$	(1,705.6	)	$	(71.9	)	$	(812.8	)
Net loss		—		—		—		—		—		(171.0	)		—			(171.0	)
Exercise of stock options		144,161		—		—		—		0.2		—			—			0.2
Restricted stock grant, net of shares retained for taxes		2,831		—		—		—		—		—			—			—
Recognition of stock-based compensation		—		—		—		—		6.2		—			—			6.2
Foreign currency derivatives, net of tax of $0.0		—		—		—		—		—		—			(2.3	)		(2.3	)
Interest rate derivatives, net of tax of $0.0		—		—		—		—		—		—			(49.0	)		(49.0	)
Foreign currency translation adjustments		—		—		—		—		—		—			1.7			1.7
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 Cash Flows

(Unaudited)

(Dollars in millions)

	Fiscal Nine Months Ended
	Fiscal Quarter Ended
	October 3, 2021			September 27, 2020
	April 3, 2022			April 4, 2021
Cash Flows from Operating Activities:
Net loss	$	(44.4	)	$	(171.0	)
Net income (loss)	$	14.8		$	(39.1	)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Adjustments to reconcile net income (loss) to cash used in operating activities:
Depreciation and amortization		~~246~~79.64			~~239~~82.67
Unrealized foreign exchange (gains) losses, net		(1810.21	)		5122.10
Loss on extinguishment of debt		~~50.3~~—			1250.63
Amortization of deferred financing costs and original issue discount		62.50			82.04
Stock-based compensation		192.6			63.25
Deferred tax provision		18.6			4.3
Deferred tax (benefit) provision		(0.8	)		1.0
Change in allowance for credit losses		10.26			10.43
Other, net		(90.76	)		1(15.49	)
Changes in operating assets and liabilities:
Accounts receivable		7313.7			34(10.53	)
Inventories		(~~117~~35.38	)		(~~126~~41.97	)
Other current and non-current assets		(1425.42	)		(2715.60	)
Accounts payable and accrued liabilities		(2839.98	)		(7556.85	)
Deferred revenue		(23.79	)		(91.30	)
Other current and non-current liabilities		7(2.31	)		27.94
Cash provided by (used in) operating activities		188.2			(48.6	)
Cash used in operating activities		(4.0	)		(9.9	)
Cash Flows from Investing Activities:
Purchases of property, plant and equipment		(27.2	)		(28.4	)
Purchase of property, plant and equipment		(27.0	)		(13.4	)
Proceeds from cross currency swaps		~~15.2~~—			2.74
Milestone payments and other, net		(0.2	)		(10.83	)
Cash used in investing activities		(1127.72	)		(2710.57	)
Cash Flows from Financing Activities:
Proceeds from initial public offering		~~1,426.4~~—			—1,426.4
Payment of initial public offering costs		~~(9.2~~—	)		—(5.0	)
Proceeds from long-term borrowings		—			1,421.0
Payments on long-term borrowings		(1.3	)		(1,375.9	)
Payments on long-term borrowings		(1,407.9	)		(1,347.7	)
Payments on short-term borrowings, net		—			(5.4	)
Payments on short-term borrowings, net		(81.1	)		(2.2	)
Proceeds from exercise of stock options		3.4			1.0
Proceeds from exercise of stock options		9.9			0.2
Cash provided by financing activities		2.1			41.1
Cash (used in) provided by financing activities		(61.9	)		71.3
Effect of exchange rate changes on cash		0.5			(0.2	)
Effect of exchange rate changes on cash		(1.0	)		0.5
(Decrease) increase in cash, cash equivalents and restricted cash		(28.6	)		20.3
Increase (decrease) in cash, cash equivalents and restricted cash		113.5			(4.3	)
Cash, cash equivalents and restricted cash at beginning of period		311.6			144.2
Cash, cash equivalents and restricted cash at beginning of period		144.2			84.0
Cash, cash equivalents and restricted cash at end of period	$	283.0		$	164.5
Cash, cash equivalents and restricted cash at end of period	$	257.7		$	79.7

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

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

~~October~~April 3, ~~2021~~2022

(Dollars in millions, unless otherwise stated)

(1) General and description of the business

Ortho Clinical Diagnostics Holdings plc ~~(“UK~~and ~~Holdco”),~~its ~~formerly~~consolidated ~~known~~subsidiaries as (“Ortho~~-Clinical~~” ~~Diagnostics~~or ~~Bermuda Co. Ltd. (~~“~~Bermuda~~the ~~Holdco~~Company”), is a ~~public~~leading ~~limited~~global ~~company~~provider ~~incorporated under the laws~~ of ~~England~~in-vitro ~~and~~diagnostics ~~Wales.~~(“IVD”) UKsolutions ~~Holdco~~to ~~became~~ the ~~new~~clinical ~~holding~~laboratory ~~company~~and oftransfusion ~~Bermuda~~medicine ~~Holdco~~communities. ~~and~~The ~~its~~Company ~~subsidiaries~~maintains ~~and~~a ~~upon~~commercial ~~incorporation,~~presence UKin ~~Holdco~~more ~~had~~than an130 ~~initial~~countries ~~share~~and ~~capital~~territories. ofThe ~~one~~Company’s ~~ordinary~~instruments, ~~share and 50~~assays,~~000~~ ~~preferred~~reagents ~~redeemable~~and ~~shares~~other ~~(“Incorporation~~consumables ~~Shares”).~~are Onused ~~January~~in 25hospitals, ~~2021~~laboratories, ~~The~~clinics, ~~Carlyle~~blood ~~Group~~banks ~~L.P. (“Carlyle”),~~ and ~~all~~donor ~~other~~centers ~~shareholders~~worldwide. ofThe ~~Bermuda~~Company ~~Holdco~~is ~~contributed~~globally ~~all~~operated ofwith ~~their~~manufacturing ~~outstanding~~facilities ~~equity~~in ~~interests~~the inUnited ~~Bermuda~~States ~~Holdco~~(“U.S.”) toand UKthe ~~Holdco~~United inKingdom ~~exchange~~(“U.K.”) ~~for~~and ~~ordinary~~with ~~shares~~sales ofcenters, UKadministrative ~~Holdco~~offices onand awarehouses ~~1-for-1~~located ~~basis~~throughout ~~(“Reorganization~~the ~~Transactions”)~~world.

UKBusiness ~~Holdco~~Combination ~~is a holding company~~ with no business operations or assets other than cash, intercompany receivables, miscellaneous administrative costs and guarantees of certain obligations of Ortho-Clinical Diagnostics, Inc. (“Ortho U.S.”) and 100% of its ownership interest of Ortho-Clinical Diagnostics Holdings Luxembourg S.à r.l., which itself is a holding company with no operations or assets other than cash, intercompany receivables, miscellaneous administrative costs and its ownership of 100% of the capital stock of Ortho-Clinical Diagnostics S.A. (“LuxCo”). LuxCo, together with its indirect wholly owned subsidiary, Ortho U.S., are co-borrowers under the Senior Secured Credit Facilities and co-issuers of the Notes (each as defined in Note 7). UK Holdco’s global operations are conducted by indirect wholly owned subsidiaries. The terms “we”, “us”, “our”, “its”, and the “Company” refer to UK Holdco and its consolidated subsidiaries after giving effect to the Reorganization Transactions.Quidel

~~The~~On December 22, 2021, the Company, isCoronado Topco, Inc., a ~~leading~~Delaware ~~global~~corporation ~~provider~~and a wholly owned subsidiary of ~~in-vitro~~the ~~diagnostics~~Company (“~~IVD~~Coronado Topco”), ~~solutions~~Laguna toMerger ~~the~~Sub, ~~clinical~~Inc., ~~laboratory~~a Delaware corporation and ~~transfusion~~a ~~medicine~~wholly ~~communities~~owned subsidiary of Topco (“U.S. ~~The~~Merger ~~Company~~Sub”), ~~maintains~~Orca Holdco, Inc., a ~~commercial~~Delaware ~~presence~~corporation inand ~~more~~a ~~than~~wholly ~~130~~owned ~~countries~~subsidiary ~~and~~of ~~territories~~Topco (“U.S. ~~The~~Holdco ~~Company’s~~Sub”), ~~instruments~~Orca Holdco 2, ~~assays~~Inc., ~~reagents~~a Delaware corporation and ~~other~~a ~~consumables~~wholly ~~are~~owned ~~used~~subsidiary inof ~~hospitals~~U.S. Holdco Sub (“U.S. Holdco Sub 2”) and Quidel Corporation, ~~laboratories~~a Delaware corporation (“Quidel”) entered into a Business Combination Agreement (the “Business Combination Agreement,” ~~clinics~~and the transactions contemplated thereby, ~~blood~~the ~~banks~~“Combinations”), pursuant to which, among other things and ~~donor~~subject ~~centers~~to ~~worldwide.~~the ~~The~~terms and conditions contained therein, (i) under a scheme of arrangement under UK corporate law, each issued and outstanding share of the Company iswill ~~globally~~be ~~operated~~acquired ~~with~~by ~~manufacturing~~a ~~facilities~~depository innominee (or transferred within the ~~United~~depository ~~States~~nominee) on behalf of Coronado Topco in exchange for (“Ux) 0.S1055 shares of common stock of Coronado Topco and (y) $7.14 in cash (the “Ortho Scheme”) and (ii) immediately after the ~~United~~consummation ~~Kingdom~~of (“the Ortho Scheme, U.KS.”) Merger Sub will merge with and into Quidel, pursuant to which each issued and outstanding share of Quidel common stock will be converted into one share of Coronado Topco common stock, with ~~sales~~Quidel ~~centers~~surviving as a wholly owned subsidiary of Coronado Topco. The boards of directors of both the Company and Quidel have unanimously approved the terms of the Business Combination Agreement, ~~administrative~~which ~~offices~~is expected to close during the first half of fiscal year 2022. Upon completion of the Combinations, which requires shareholder approval, the Company's shareholders are expected to own approximately 38% of Coronado Topco and ~~warehouses~~Quidel ~~located~~stockholders ~~throughout~~are expected to own approximately 62% of Coronado Topco on a fully diluted basis, based on the ~~world~~respective capitalizations of the Company and Quidel as of the date the parties entered into the Business Combination Agreement.

~~Both~~In the ~~Company’s~~event ~~domestic~~that ~~and~~the ~~international~~Business ~~operations~~Combination ~~have~~Agreement ~~been~~is ~~and~~terminated ~~continue to be affected~~ by ~~the~~Ortho ~~ongoing~~as ~~global~~a ~~pandemic~~result of athe ~~novel~~occurrence ~~strain~~ of ~~coronavirus~~certain ~~(“COVID-19”)~~terms and ~~the~~conditions ~~resulting~~as ~~volatility~~specified ~~and~~therein, ~~uncertainty it has caused in~~ the ~~U.S.~~Company ~~and~~must ~~international~~pay ~~markets.~~Quidel ~~The Company has~~ a ~~direct~~termination ~~commercial~~fee ~~presence~~of inapproximately ~~more~~$46.9 ~~than 30 countries~~million, ~~including~~less ~~many~~any ofexpenses ~~the~~reimbursable ~~regions most impacted~~ by ~~the~~Quidel ~~COVID-19~~pursuant ~~pandemic. A decrease in shipments~~ to the ~~Company’s~~Business ~~customers~~Combination ~~began~~Agreement. toIf ~~occur during~~ the ~~fiscal~~Business ~~quarter~~Combination ~~ended~~Agreement ~~June~~is ~~28,~~terminated ~~2020~~by inQuidel ~~many~~as ~~countries, including the U.S. As~~ a result, ~~during~~of the ~~fiscal~~occurrence ~~year~~of ~~ended~~certain ~~January~~terms ~~3, 2021, the Company experienced decreased revenues~~ and ~~incurred~~conditions ~~idle~~as orspecified ~~underutilized facilities costs~~therein, ~~higher freight and higher distribution costs compared to~~ the ~~periods prior to the pandemic. During the fiscal quarter ended January 3, 2021, the~~ Company ~~started~~will toreceive ~~experience~~approximately ~~a recovery in the base business of its core revenue, which continued through the fiscal nine months ended October 3, 2021~~$207.8 ~~During the same period~~million, ~~the~~less ~~Company~~any ~~also~~expenses ~~continued~~reimbursable toby ~~experience~~Ortho ~~higher~~pursuant ~~distribution costs due~~ to ~~higher shipping rates as a result of~~ the ~~COVID-19~~Business ~~pandemic.~~Combination Agreement.

~~During~~Costs ~~the~~incurred ~~fiscal~~related ~~quarter~~to ~~ended April 4, 2021,~~ the ~~Company~~proposed ~~completed its initial public offering (“IPO”) of ordinary shares at a price of $17.00 per share. The Company issued and sold 87~~transaction,~~400,000~~ ~~ordinary~~including ~~shares~~integration-related ~~in the IPO~~activities, ~~including~~were ~~11,400,000 ordinary shares issued pursuant to the full exercise of the underwriters’ option to purchase additional shares~~$5.7 ~~The~~million ~~ordinary~~during ~~shares sold in~~ the ~~IPO~~fiscal ~~were~~quarter ~~registered~~ended ~~under~~April ~~the Securities Act of 1933~~3, as2022 ~~amended~~and ~~(the~~were ~~“Securities~~recorded ~~Act”) pursuant~~ to aOther ~~Registration~~operating ~~Statement on Form S-1~~expenses, ~~which~~net ~~was~~in ~~declared effective by~~ the ~~Securities~~consolidated ~~and~~statement ~~Exchange Commission (“SEC”) on January 29, 2021. The offering generated net proceeds~~ of ~~$1,426~~operations.~~4 million after deducting underwriting discounts and commissions.~~

The Company used a portion of the net proceeds from the IPO (i) to redeem $160.0 million of its 2025 Notes (as defined in Note 7), plus accrued interest thereon and $11.8 million of redemption premium, (ii) to redeem $270.0 million of its 2028 Notes (as defined in Note 7), plus accrued interest thereon and $19.6 million of redemption premium, (iii) to repay $892.7 million in aggregate principal amount of borrowings under its Dollar Term Loan Facility (as defined in Note 7) and (iv) for working capital and general corporate purposes.

In September 2021, the Company completed an underwritten secondary offering (the “Secondary Offering”) of 25.3 million ordinary shares held by a selling shareholder affiliated with Carlyle, including 3.3 million ordinary shares pursuant to the full exercise of the underwriters’ option to purchase additional shares. The ordinary shares sold in the Secondary Offering were registered under the Securities Act pursuant to a Registration Statement on Form S-1, which was declared effective by the SEC on September 9, 2021. The Company did not offer any ordinary shares in this transaction and did not receive any proceeds from the sale of the ordinary shares by the selling shareholder. The Company incurred costs of $1.1 million in relation to the Secondary Offering for the three and nine months ended October 3, 2021, which were recorded in selling, marketing and administrative expenses in the unaudited consolidated statement of operations.

These unaudited consolidated financial statements have been prepared on a basis which assumes that the Company will continue as a going concern and contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. As shown in the unaudited consolidated financial statements, the Company has total Cash and cash equivalents of $255.9 million and an

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

October 3, 2021

(Dollars in millions, unless otherwise stated)

Accumulated deficit of $1,961.9 million as of October 3, 2021. The Company reported a Net loss of $44.4 million and Cash provided by operating activities of $188.2 million during the fiscal nine months ended October 3, 2021. The Company’s primary future cash needs will be to meet debt service requirements, working capital needs and capital expenditures. Management is required to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued and, if so, disclose that fact.

The Company’s debt agreements contain various covenants that may restrict the Company’s ability to borrow on available credit facilities and future financing arrangements and require the Company to remain below a specific credit coverage threshold. The Company’s Credit Agreement (as defined in Note 7) has a financial covenant referred to as the First Lien Net Leverage Ratio, (as defined in the Credit Agreement, not to exceed 5.5-to-1, subject to a 50 basis point step-down on September 30, 2022) that is tested when borrowings and letters of credit issued under the Revolving Credit Facility (as defined in Note 7) exceed 30% of the committed amount at any period end reporting date. Under the terms of the Credit Agreement, during the fiscal quarter ended July 4, 2021, the Company achieved a 50 basis point step-down on the interest rate on its Senior Secured Credit Facilities (as defined in Note 7) as a result of meeting its First Lien Net Leverage Ratio targets. As of October 3, 2021, the Company had no outstanding borrowings under its Revolving Credit Facility and letters of credit issued under the Revolving Credit Facility totaled $45.0 million. As of October 3, 2021, the Company was in compliance with the financial covenant. In the event the Company does not comply with the financial covenant of the Revolving Credit Facility, the lenders will have the right to call on all of the borrowings under the Revolving Credit Facility. If the lenders on the Revolving Credit Facility terminate their commitments and accelerate the loans, this would become a cross default to other material indebtedness.

The Company evaluated its liquidity position and ability to comply with financial covenants in its Revolving Credit Facility as of the date of the issuance of these unaudited consolidated financial statements. Based on this evaluation, management believes that the Company’s financial position, Cash provided by operating activities combined with Cash and cash equivalents, and borrowing capacity available under its Revolving Credit Facility, will be sufficient to fund its current obligations, capital spending, debt service requirements and working capital requirements for a period of at least the next 12 months from the issuance of these unaudited consolidated financial statements.

Should it become necessary, the Company may seek to raise additional capital within the next 12 months through borrowings on credit facilities, other financing activities and/or the public or private sale of equity securities. The Company may also need to control discretionary spending, which could impact its planned general and administrative, research and development, or capital spend in an effort to provide sufficient funds to continue its operations or maintain compliance with the financial covenants, and the Company may be subject to adverse business conditions due to the global COVID-19 pandemic, all of which could adversely affect the Company’s business.

(2) Basis of presentation of the unaudited consolidated financial statements

These unaudited consolidated financial statements for the Company include the accounts of UKthe ~~Holdco~~Company and its subsidiaries. All intercompany accounts and transactions have been eliminated. These unaudited consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and Regulation S-X. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included. Results for the fiscal quarter ~~and nine months~~ ended ~~October~~April 3, ~~2021~~2022 should not be considered indicative of results for the fiscal year ending January 21, ~~2022~~2023. These unaudited consolidated financial statements do not represent complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto for the fiscal year ended January 32, ~~2021~~2022 in the Company’s most recent Annual Report on Form 10-K.

The Company follows the concept of a fiscal year which ends on the Sunday nearest to the end of the month of December, and fiscal quarters which end on the Sunday nearest to the end of the months of March, June, and September. Each fiscal quarter presented in this Quarterly Report on Form 10-Q consists of 13 weeks.

Amounts reported in millions have been calculated based on underlying, unrounded amounts. Amounts presented in tables may not total due to rounding. Percentages have been calculated using underlying, unrounded amounts.

~~Stock~~These ~~Split~~unaudited consolidated financial statements have been prepared on a basis which assumes that the Company will continue as a going concern and contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. As shown in the unaudited consolidated financial statements, the Company has total Cash and cash equivalents of $281.1 million and an Accumulated deficit of $1,957.0 million as of April 3, 2022. The Company reported Net income of $14.8 million and Cash used in operating activities of

On January 18, 2021, the Company approved an issuance of 54,860,691 shares, or an additional 0.5934 share for each existing share, which effected a 1.5934-for-1 stock split of its ordinary shares. All references to share and per share amounts in the Company’s unaudited consolidated financial statements have been retrospectively revised to reflect the stock split.6

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

~~October~~April 3, ~~2021~~2022

(Dollars in millions, unless otherwise stated)

$4.0 million during the fiscal quarter ended April 3, 2022. The Company’s primary future cash needs will be to meet debt service requirements, working capital needs and capital expenditures. Management is required to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued and, if so, disclose that fact.

The Company’s debt agreements contain various covenants that may restrict the Company’s ability to borrow on available credit facilities and future financing arrangements and require the Company to remain below a specific credit coverage threshold. The Company’s credit agreement that governs its Senior Secured Credit Facilities (as defined in Note 7–Borrowings, the “Credit Agreement”) has a financial covenant referred to as the First Lien Net Leverage Ratio, (as defined in the Credit Agreement, not to exceed 5.5-to-1, subject to a 50 basis point step-down on September 30, 2022) that is tested when borrowings and letters of credit issued under the Revolving Credit Facility (as defined in Note 7–Borrowings) exceed 30% of the committed amount at any period end reporting date. As of April 3, 2022, the Company had no outstanding borrowings under its Revolving Credit Facility and letters of credit issued under the Revolving Credit Facility totaled $43.7 million. As of April 3, 2022, the Company was in compliance with the financial covenant. In the event the Company does not comply with the financial covenant of the Revolving Credit Facility, the lenders will have the right to call on all of the borrowings under the Revolving Credit Facility. If the lenders on the Revolving Credit Facility terminate their commitments and accelerate the loans, this would become a cross default to other material indebtedness.

(3) Recent accounting pronouncements

In ~~December~~July ~~2019~~2021, the ~~Financial Accounting Standards Board (“~~FASB”) issued ~~Accounting Standards Update (“~~ASU”) ~~2019~~2021-1205, ~~Income~~Leases ~~Taxes~~ (Topic ~~740~~842): ~~Simplifying~~Lessors – Certain Leases with Variable Lease Payments, which amends the ~~Accounting~~accounting for ~~Income~~lease ~~Taxes~~contracts that have variable lease payments that do not depend on a reference index or rate, and which ~~enhances~~would ~~and~~have ~~simplifies~~resulted ~~various~~in ~~aspects~~the recognition of ~~the~~a ~~income~~loss ~~tax~~at ~~accounting~~lease ~~guidance~~commencement ~~related~~if toclassified ~~intra~~as ~~period~~a ~~tax~~sales-type ~~allocations~~or direct financing lease. Upon adoption, ~~interim~~lessors ~~period~~will ~~accounting~~classify and account for ~~enacted~~leases ~~changes~~with invariable ~~tax~~payments ~~law~~that do not depend on a reference index or rate as an operating lease if the lease would have been classified as a sales-type or direct financing lease, and if the ~~year-to-date~~lessor would have otherwise recognized a loss ~~limitation~~at lease commencement. The guidance in ~~interim~~ASU ~~period~~2021-05 ~~tax~~is ~~accounting~~effective for fiscal years beginning after December 15, 2021 and can be applied either prospectively or retrospectively for reporting entities that have adopted Topic 842 prior to the issuance date of this amendment. The Company adopted this guidance prospectively on January 43, ~~2021~~2022, and the adoption did not have a material impact on ~~the~~its ~~Company’s~~ unaudited consolidated financial statements.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies that certain optional expedients and exceptions in Topic 848 apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The guidance in ASU 2021-01 is optional and may be elected over time as reference rate reform activities occur. The optional amendments can be applied on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued. The guidance is not currently applicable to the Company. In a future period, the Company may apply elections and evaluate the impact of adoption, as applicable.

In July 2021, the FASB issued ASU 2021-05, Leases (Topic 842): Lessors – Certain Leases with Variable Lease Payments, which amends the accounting for lease contracts that have variable lease payments that do not depend on a reference index or rate, and which would have resulted in the recognition of a loss at lease commencement if classified as a sales-type or direct financing lease. Upon adoption, lessors will classify and account for leases with variable payments that do not depend on a reference index or rate as an operating lease if the lease would have been classified as a sales-type or direct financing lease, and if the lessor would have otherwise recognized a loss at lease commencement. The guidance in ASU 2021-05 is effective for fiscal years beginning after December 15, 2021 and can be applied either prospectively or retrospectively for reporting entities that have adopted Topic 842 prior to the issuance date of this amendment. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.

(4) Net income (loss) per share

Basic net income (loss) per ordinary share is based on the weighted-average number of ordinary shares outstanding during the period. Diluted net income (loss) per ordinary share is based on the weighted-average number of ordinary shares and ordinary share equivalents, calculated using the treasury stock method, outstanding during the period. The Company excludes potential ordinary share equivalents from the calculation if the effect would be anti-dilutive. For ~~each period specified below,~~ the ~~Company incurred a Net loss, except for~~ fiscal quarter ended ~~October~~April 34, 2021, induring which the Company ~~reported Net income. For the periods in which the Company~~ incurred a Net loss, it excluded potential ordinary share equivalents from the calculations of Diluted net loss per ordinary share because the effect was anti-dilutive. The weighted-average number of ordinary shares used in the computation of ~~basic~~Basic and ~~diluted~~Diluted net income (loss) per share were as follows:

	Fiscal Quarter Ended					~~Fiscal Nine Months Ended~~
(In millions)	~~October~~April 3, ~~2021~~2022		~~September 27, 2020~~	April 4, 2021	~~October 3, 2021~~		~~September 27, 2020~~
Basic weighted-average ordinary shares outstanding	~~235.6~~	237.2	~~146.4~~		~~225~~206.42		~~146.4~~
Effect of stock options, unvested restricted shares and restricted stock units	~~7.2~~	4.8	—		—		—
Diluted weighted-average ordinary shares	~~242.8~~	242.0	~~146.4~~		~~225~~206.42		~~146.4~~

~~The following table provides the total outstanding ordinary share equivalents, unaffected by the treasury stock method weighted-average calculation, as of the end of each period below:~~7

	Fiscal Quarter Ended				Fiscal Nine Months Ended
(In millions)	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
Stock options		13.9		16.2		13.9		16.2
Unvested restricted shares and restricted stock units		0.6		0.3		0.6		0.3
		14.5		16.5		14.5		16.5

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

~~October~~April 3, ~~2021~~2022

(Dollars in millions, unless otherwise stated)

The following table provides the total outstanding ordinary share equivalents, unaffected by the treasury stock method weighted-average calculation, as of the end of each period below:


	Fiscal Quarter Ended
(In millions)	April 3, 2022		April 4, 2021
Stock options		12.6		15.9
Unvested restricted shares and restricted stock units		0.5		1.0
		13.1		16.9

(5) Revenue

Contract balances

Timing of revenue recognition may differ from timing of invoicing to customers. The Company records an asset when revenue is recognized prior to invoicing a customer (“contract asset”). Contract assets are included within Other current assets or Other assets in the Company’s unaudited consolidated balance sheet and are transferred to accounts receivable when the right to payment becomes unconditional. The balance of Contract assets recorded in the Company’s unaudited consolidated balance sheets were as follows:

	October 3, 2021		January 3, 2021
	April 3, 2022		January 2, 2022
Other current assets	$	4752.82	$	4047.42
Other assets		~~0.8~~—		21.40
Total contract assets	$	4852.72	$	4248.81

The contract asset balance consists of the following components:

•

A customer supply agreement under which the difference between the timing of invoicing and revenue recognition resulted in a contract asset of $129.70 million ~~and $15.1 million~~ as of ~~October~~April 3, ~~2021~~2022 ~~and~~was recorded in Other current assets. As of January 32, ~~2021~~2022, ~~respectively,~~the balance of ~~which~~the contract asset related to this agreement was $012.84 million, ~~and~~of which $211.45 million ~~were~~was recorded in Other current assets asand of$1.0 ~~October~~million 3,was ~~2021~~recorded ~~and~~in ~~January~~Other ~~3, 2021 respectively~~assets.

•

Contractual arrangements with certain customers under which the Company invoices the customers based on reportable results generated by its reagents; however, control of the goods transfers to the customers upon shipment or delivery of the products, as determined under the terms of the contract. Using the expected value method, the Company estimates the number of reagents that will generate a reportable result. The Company records the revenue upon shipment and an associated contract asset, and relieves the contract asset upon completion of the invoicing. The balance of the contract asset related to these arrangements was $3643.02 million and $2435.37 million as of ~~October~~April 3, ~~2021~~2022 and January 32, ~~2021~~2022, respectively.

~~One~~The ~~of the~~ Company’s reviews contract ~~manufacturing~~assets ~~agreements~~for ~~that~~expected ~~recognizes~~credit ~~revenue~~losses asresulting from the ~~products~~collectability ~~are~~of ~~manufactured~~customer accounts. ~~The~~Expected ~~balance~~losses ofare ~~the~~established ~~contract~~based ~~asset~~on ~~related~~historical tolosses, ~~this~~customer ~~arrangement~~mix ~~was~~and ~~immaterial~~credit aspolicies, ofcurrent ~~October~~economic 3conditions in customers’ country or industry, ~~2021~~and expectations associated with reasonable and $3supportable forecasts.4 ~~million~~No ascredit oflosses ~~January~~related to contract assets were recognized during the fiscal quarters ended April 3, 2022 and April 4, 2021.

The Company ~~reviews~~recognizes a contract ~~assets~~liability ~~for~~when ~~expected~~a ~~credit~~customer ~~losses~~pays ~~resulting~~an ~~from~~invoice prior to the ~~collectability~~Company transferring control of the goods or services (“contract liabilities”). The Company’s contract liabilities consist of deferred revenue primarily related to customer ~~accounts~~service contracts. ~~Expected~~The ~~losses~~Company ~~are~~classifies ~~established~~deferred revenue as current or noncurrent based on ~~historical~~the ~~losses,~~timing ~~customer~~of ~~mix~~the ~~and~~transfer ~~credit~~of ~~policies,~~control ~~current~~or ~~economic~~performance ~~conditions~~of inthe ~~customers~~service. The balance of the Company’s ~~country~~current ordeferred ~~industry,~~revenue was $30.5 million and ~~expectations~~$34.5 ~~associated~~million ~~with~~as ~~reasonable~~of April 3, 2022 and ~~supportable~~January ~~forecasts~~2, 2022, respectively. NoThe ~~credit~~Company ~~losses~~has ~~related~~one toarrangement ~~contract~~with ~~assets~~a ~~were~~customer where the revenue is expected to be recognized ~~during~~beyond one year. The balance of the ~~fiscal~~deferred ~~quarter~~revenue included in long-term liabilities was $8.7 million and ~~nine~~$5.6 ~~months~~million ~~ended~~as ~~October~~of April 3, ~~2021~~2022 and ~~September~~January 272, ~~2020~~2022, respectively, and was included in Other liabilities in the unaudited consolidated balance sheets. The amount of deferred revenue as of January 2, 2022 that was recorded in Net revenue during the fiscal quarter ended April 3, 2022 was $19.3 million.

The Company recognizes a contract liability when a customer pays an invoice prior to the Company transferring control of the goods or services (“contract liabilities”). The Company’s contract liabilities consist of deferred revenue primarily related to customer service contracts. The Company classifies deferred revenue as current or noncurrent based on the timing of the transfer of control or performance of the service. The balance of the Company’s current deferred revenue was $32.6 million and $35.5 million as of October 3, 2021 and January 3, 2021, respectively. The Company has one arrangement with a customer where the revenue is expected to be recognized beyond one year. The balance of the deferred revenue included in long-term liabilities was $5.8 million and $6.6 million as of October 3, 2021 and January 3, 2021, respectively, and was included in Other liabilities in the unaudited consolidated balance sheets. The amount of deferred revenue as of January 3, 2021 that was recorded in Net revenue during the fiscal nine months ended October 3, 2021 was $31.3 million.

Disaggregation of revenue

The Company generates product revenue in the following lines of business:

Clinical Laboratories—Focused on clinical chemistry and immunoassay instruments and tests to detect and monitor disease progression across a broad spectrum of therapeutic areas.

Transfusion Medicine—Focused on (i) immunohematology instruments and tests used for blood typing to ensure patient-donor compatibility in blood transfusions, and (ii) donor screening instruments and tests used for blood and plasma screening for infectious diseases for customers primarily in the United States.

Other Product Revenue—Includes revenues primarily from contract manufacturing.

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

~~October~~April 3, ~~2021~~2022

(Dollars in millions, unless otherwise stated)

~~The~~Disaggregation Company also enters into collaboration and license agreements pursuant to which the Company derives collaboration and royalty revenues. During the fiscal quarter ended October 3, 2021, the Company received an award of ~~$8.5 million in connection with an arbitration proceeding related to one of its collaboration agreements, which was recorded in Net~~ revenue. During the fiscal quarter ended September 27, 2020, the Company entered into two agreements with the Biomedical Advanced Research and Development Authority (“BARDA”), a division of the U.S. Department of Health and Human Services (“HHS”), for two awards of up to $13.6 million to develop and submit Emergency Use Authorizations and 510(k) applications to the U.S. Food and Drug Administration (“FDA”) for its COVID-19 antigen and antibody tests, respectively. An additional award was granted to the Company on April 16, 2021 for an amount up to $3.6 million to submit a 510(k) application for its COVID-19 antigen test. During the fiscal quarter and nine months ended October 3, 2021, the Company recognized $1.5 million and $7.3 million, respectively, of Net revenue related to these grants based upon project milestones completed to date. During both the fiscal quarter and nine months ended September 27, 2020, the Company recognized $2.5 million of Net revenue related to these grants.

The ~~following~~Company ~~table~~generates ~~summarizes~~product ~~Net~~ revenue byin ~~line of business for~~ the ~~fiscal~~following ~~quarter~~lines ~~and~~of ~~nine months ended October 3, 2021 and September 27, 2020~~business:

•

	Fiscal Quarter Ended				Fiscal Nine Months Ended
	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
Clinical Laboratories	$	336.6	$	300.1	$	993.9	$	816.7
Transfusion Medicine		170.7		140.6		494.5		414.5
Other Product Revenue		—		3.3		5.6		3.7
Total Product Revenue		507.4		444.1		1,494.1		1,234.9
Collaborations and Other Revenue		15.1		7.0		27.8		14.7
Net Revenue	$	522.5	$	451.1	$	1,521.8	$	1,249.6

Clinical Laboratories—Focused on (i) clinical chemistry, which is the measurement of target chemicals in bodily fluids for the evaluation of health and the clinical management of patients, (ii) immunoassay instruments, which test the measurement of proteins as they act as antigens in the spread of disease, antibodies in the immune response spurred by disease, or markers of proper organ function and health, and (iii) testing to detect and monitor disease progression across a broad spectrum of therapeutic areas.

•

Other Product Revenue—Includes revenues primarily from contract manufacturing.

The Company also enters into collaboration and license agreements pursuant to which the Company derives collaboration and royalty revenues. During the fiscal quarter ended September 27, 2020, the Company entered into two agreements with the Biomedical Advanced Research and Development Authority, a division of the U.S. Department of Health and Human Services, for two awards of up to $13.6 million to develop and submit Emergency Use Authorizations and 510(k) applications to the U.S. Food and Drug Administration for its COVID-19 antigen and antibody tests. An additional award was granted to the Company on April 16, 2021 for an amount up to $3.6 million to submit a 510(k) application for its COVID-19 antigen test. During the fiscal quarter ended April 3, 2022 and April 4, 2021, the Company recognized $0.2 million and $4.0 million, respectively, of Net revenue related to these grants based upon project milestones completed to date.

The following table summarizes Net revenue by line of business for the fiscal quarter ended April 3, 2022 and April 4, 2021:


	Fiscal Quarter Ended
	April 3, 2022		April 4, 2021
Clinical Laboratories	$	321.2	$	334.0
Transfusion Medicine		173.6		161.4
Other Product Revenue		0.4		4.3
Total Product Revenue		495.2		499.7
Collaborations and Other Revenue		4.8		7.1
Net Revenue	$	500.1	$	506.8

(6) Inventories

The Company’s inventories were as follows:

	October 3, 2021		January 3, 2021
	April 3, 2022		January 2, 2022
Raw materials and supplies	$	7174.58	$	7776.24
Goods in process		3834.37		3532.24
Finished goods		~~198~~207.62		~~166~~196.35
Total Inventories	$	~~308~~316.37	$	~~278~~305.74

~~(7) Borrowings and other arrangements~~9

As of October 3, 2021 and January 3, 2021, the components of borrowings were as follows:

	October 3, 2021			January 3, 2021
Senior Secured Credit Facilities
Dollar Term Loan Facility	$	1,292.8		$	2,185.5
Euro Term Loan Facility		357.2			408.9
Revolving Credit Facility		—			—
2028 Notes		405.0			675.0
2025 Notes		240.0			400.0
Accounts Receivable Financing		—			75.0
Sale and Leaseback Financing		—			20.5
Finance lease obligation		0.8			1.0
Other short-term borrowings		0.8			0.9
Other long-term borrowings		2.9			3.9
Unamortized deferred financing costs		(22.6	)		(40.9	)
Unamortized original issue discount		(5.6	)		(11.3	)
Total borrowings		2,271.3			3,718.5
Less: Current portion		(64.4	)		(160.0	)
Long-term borrowings	$	2,206.9		$	3,558.5

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

~~October~~April 3, ~~2021~~2022

(Dollars in millions, unless otherwise stated)

(7) Borrowings

As of April 3, 2022 and January 3, 2021, the components of borrowings were as follows:


	April 3, 2022			January 2, 2022
Senior Secured Credit Facilities
Dollar Term Loan Facility	$	1,292.8		$	1,292.8
Euro Term Loan Facility		324.8			335.8
Revolving Credit Facility		—			—
2028 Notes		405.0			405.0
2025 Notes		240.0			240.0
Finance lease obligation		0.8			0.7
Other long-term borrowings		2.2			2.6
Unamortized deferred financing costs		(20.2	)		(21.4	)
Unamortized original issue discount		(4.9	)		(5.3	)
Total borrowings		2,240.4			2,250.2
Less: Current portion		(63.2	)		(63.4	)
Long-term borrowings	$	2,177.1		$	2,186.7

Senior secured credit facilities

OnThe ~~February 5, 2021, the~~ Company’s ~~entered~~Senior ~~into~~Secured aCredit ~~fifth~~Facilities ~~amendment~~consist of ~~its credit agreement~~ (asi) ~~amended,~~ the ~~“Credit~~senior ~~Agreement”)~~secured ~~governing~~term ~~its~~loan ~~senior~~facility ~~secured~~in ~~credit~~an ~~facilities,~~amount ~~which~~of ~~consist~~$2,325.0 ofmillion (i) the “Dollar Term Loan Facility”), (ii) the euro-denominated senior secured term loan facility in an amount equal to €337.4 million (the “Euro Term Loan Facility”, as described below, and, together with the Dollar Term Loan Facility, the “Term Loan Facilities”), and (iii) the multi-currency senior secured revolving facility with commitments of $500.0 million (the “Revolving Credit Facility”) ~~(collectively, the “Senior Secured Credit Facilities”), which increased the Revolving Credit Facility contained in the credit agreement by $150~~.0 million to an aggregate amount of $500.0 million and extended the maturity date to February 5, 2026, provided that such date may be accelerated subject to certain circumstances as set forth in the fifth amendment. To the extent that the aggregate principal amount of the Dollar Term Loan Facility and Euro Term Loan Facility (and any Refinancing Indebtedness (as defined in the Credit Agreement) with respect thereto that matures on or prior to June 30, 2025) outstanding as of March 31, 2025 exceeds $500.0 million then the maturity date with respect to the Revolving Credit Facility shall be March 31, 2025. All other terms of the Senior Secured Credit Facilities will remain substantially the same except as otherwise amended by the fifth amendment.

In February 2021, the Company used a portion of the proceeds from its initial public offering (“IPO”) to repay $892.7 million of borrowings under the Dollar Term Loan Facility and recognized a loss on early extinguishment of debt of $11.4 million, which is recorded as a component of Other expense, net during the fiscal ~~nine~~quarter ~~months~~ ended ~~October~~April 34, 2021.

As of ~~October~~April 3, ~~2021~~2022, there was no outstanding balance under the Revolving Credit Facility, and letters of credit issued under the Revolving Credit Facility totaled $4543.07 million, which reduced the availability under the Revolving Credit Facility to $~~455~~456.03 million. The Senior Secured Credit Facilities are subject to various covenants that may restrict the Company’s ability to borrow on available credit facilities and future financing arrangements or require the Company to remain below a specific credit coverage threshold as indicated in our debt agreements. The Senior Secured Credit Facilities include a financial covenant that is tested when borrowings and letters of credit issued under the Revolving Credit Facility exceed 30% of the committed amount at any period end reporting date and provides that Ortho-Clinical Diagnostics S.A. (“LuxCo”) will not permit the First Lien Net Leverage Ratio as of the end of ~~such~~each fiscal quarter of ~~the~~ LuxCo and its Restricted Subsidiaries (as defined in the Credit Agreement) to be greater than (i) 5.50:1.00 for each fiscal quarter ending on or prior to September 30, 2022 and (ii) 5.00:1:00 for each fiscal quarter ending thereafter. Under the terms of the Credit Agreement, during the fiscal quarter ended July 4, 2021, the Company achieved a 50 basis point step-down on the interest rate on its Senior Secured Credit Facilities as a result of meeting its First Lien Net Leverage Ratio targets. The Company was in compliance with the covenants as of ~~October~~April 3, ~~2021~~2022.

As of ~~October~~April 3, ~~2021~~2022 and January 32, ~~2021~~2022, the remaining balance of deferred financing costs related to the Dollar Term Loan Facility was $87.65 million and $178.31 million, respectively. As of ~~October~~April 3, ~~2021~~2022 and January 32, ~~2021~~2022, the remaining balance of deferred financing costs related to the Euro Term Loan Facility was $3.84 million and $43.6 million, respectively. As of ~~October~~April 3, ~~2021~~2022 and January 32, ~~2021~~2022, the remaining unamortized balance related to the Revolving Credit Facility was $32.12 million and $32.47 million, respectively. The effective interest rate of the Dollar Term Loan Facility and Euro Term Loan Facility as of ~~October~~April 3, ~~2021~~2022 is 5.76% and 3.88%, respectively.

Original issue discount related to the Senior Secured Credit Facilities was recorded as a reduction of the principal amount of the borrowings and is amortized using the effective interest method as a component of interest expense over the life of the Senior Secured Credit Facilities. As of April 3, 2022 and January 2, 2022, the remaining unamortized balance was $4.9 million and $5.3 million, respectively.

2025 Notes

On June 11, 2020, ~~the~~ LuxCo and Ortho-Clinical UDiagnostics, Inc.S. (collectively, the “Issuers”), issued $400.0 million aggregate principal amount of 7.375% Senior Notes due 2025 (the “2025 Notes’), on which interest is payable semi-annually in arrears on June 1 and December 1 of each year. The 2025 Notes will mature on June 1, 2025. The 2025 Notes and guarantees thereof are senior unsecured obligations and rank equally in right of payment with all of the Issuers’ and guarantors’ existing and future senior debt, including the 2028 Notes (as defined below). The 2025 Notes and the guarantees thereof are effectively subordinated to any of the Issuers’ and guarantors’ existing and future secured debt, including the Senior Secured Credit Facilities, to the extent of the value of the assets securing such debt. In addition, the 2025 Notes and the guarantees thereof rank senior in right of payment to all of the Issuers’ and guarantors’ future subordinated debt and will be structurally subordinated to the liabilities of the Issuers’ non-guarantor subsidiaries. The Company incurred deferred financing costs of $7.5 million related to the 2025 Notes, which were capitalized as deferred financing costs and are being amortized using the effective interest method as a component of interest expense over the life of the 2025 Notes.

~~On or after June 1, 2022, the Issuers have the option to redeem all or part of the 2025 Notes at the following redemption prices (expressed as percentages of principal amount):~~10

Year		Price
2022		103.688%
2023		101.844%
2024 and thereafter		100.000%

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

~~October~~April 3, ~~2021~~2022

(Dollars in millions, unless otherwise stated)

2025 Notes and the guarantees thereof are effectively subordinated to any of the Issuers’ and guarantors’ existing and future secured debt, including the Senior Secured Credit Facilities, to the extent of the value of the assets securing such debt. In addition, the 2025 Notes and the guarantees thereof rank senior in right of payment to all of the Issuers’ and guarantors’ future subordinated debt and will be structurally subordinated to the liabilities of the Issuers’ non-guarantor subsidiaries. The Company incurred deferred financing costs of $7.5 million related to the 2025 Notes, which were capitalized as deferred financing costs and are being amortized using the effective interest method as a component of interest expense over the life of the 2025 Notes.

On or after June 1, 2022, the Issuers have the option to redeem all or part of the 2025 Notes at the following redemption prices (expressed as percentages of principal amount):


Year		Price
2022		103.688%
2023		101.844%
2024 and thereafter		100.000%

Notwithstanding the foregoing, at any time and from time to time prior to June 1, 2022, the Issuers may at their option redeem in the aggregate up to 100% of the original aggregate principal amount of the 2025 Notes plus accrued and unpaid interest, if any to, but not including, the date of redemption, plus a “make-whole premium.” The Issuers may also, at their option, redeem up to 40% of the principal amount of the 2025 Notes with the net cash proceeds of certain equity offerings at a redemption price of 107.375% of the principal amount of the 2025 Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

On February 5, 2021, the Company used a portion of the proceeds from its IPO to redeem $160.0 million aggregate principal amount of the 2025 Notes, plus accrued interest thereon and $11.8 million of redemption premium, which was recorded as a component of Other expense, net, during the fiscal ~~nine~~quarter ~~months~~ ended ~~October~~April 34, 2021. The redemption resulted in an extinguishment loss recognized of $14.5 million, which consisted of $2.7 million of unamortized deferred issuance costs and $11.8 million of the redemption premium. As of ~~October~~April 3, ~~2021~~2022 and January 32, ~~2021~~2022, the remaining unamortized balance of deferred issuance costs was $3.62 million and $73.04 million, respectively. The effective interest rate on the 2025 Notes is 8.03%.

2028 Notes

On January 27, 2020, the Issuers, issued $675.0 million aggregate principal amount of 7.250% Senior Notes due 2028 (the “2028 Notes” and together with the 2025 Notes, the “Notes”), on which interest is payable semi-annually in arrears on February 1 and August 1 of each year. The 2028 Notes will mature on February 1, 2028. The 2028 Notes and the guarantees thereof are senior unsecured obligations and rank equally in right of payment with all of the Issuers’ and guarantors’ existing and future senior debt, including the 2025 Notes. The 2028 Notes and the guarantees thereof are effectively subordinated to any of the Issuers’ and guarantors’ existing and future secured debt, including the Senior Secured Credit Facilities, to the extent of the value of the assets securing such debt. In addition, the 2028 Notes and the guarantees thereof rank senior in right of payment to all of the Issuers’ and guarantors’ future subordinated debt and will be structurally subordinated to the liabilities of the Issuers’ non-guarantor subsidiaries. The Company incurred deferred financing costs of $12.9 million related to the 2028 Notes, which were capitalized as deferred financing costs and are being amortized using the effective interest method as a component of interest expense over the life of the 2028 Notes.

On or after February 1, 2023, the Issuers have the option to redeem all or part of the 2028 Notes at the following redemption prices (expressed as percentages of principal amount):


Year		Price
2023		103.625%
2024		101.813%
2025 and thereafter		100.000%

Notwithstanding the foregoing, at any time and from time to time prior to February 1, 2023, the Issuers may at their option redeem in the aggregate up to 100% of the original aggregate principal amount of the 2028 Notes plus accrued and unpaid interest, if any to, but not including, the date of redemption, plus a “make-whole premium.” The Issuers may also, at their option, redeem up to 40% of the principal amount of the 2028 Notes with the net cash proceeds of certain equity offerings at a redemption price of 107.25% of the principal amount of the 2028 Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

On February 5, 2021, the Company used a portion of the proceeds from its IPO to redeem $270.0 million aggregate principal amount of the 2028 Notes, plus accrued interest thereon and $19.6 million of redemption premium. The redemption resulted in an extinguishment loss recognized of $24.3 million, which consisted of $4.7 million of unamortized deferred issuance costs and $19.6 million of the redemption premium, which is recorded as a component of Other expense, net during the fiscal nine months ended October 3, 2021. As of October 3, 2021 and January 3, 2021, the remaining unamortized balance of deferred issuance costs was $6.6 million and $11~~.8 million, respectively. The effective interest rate on the 2028 Notes is 7.76%.~~

2022 Notes

On January 28, 2020, the Company used the net proceeds from the issuance of the Euro Term Loan Facility and 2028 Notes, after payment of fees and expenses, to fund the redemption and discharge of $1.0 billion of the $1.3 billion in aggregate principal amount of 6.625% Senior Notes due 2022 (the “2022 Notes”). On June 12, 2020 the Company used the net proceeds from the issuance of the 2025 Notes, after payments of fees and expenses, to fund the redemption and discharge of the remaining $300.0 million of the 2022 Notes. The redemption of the 2022 Notes was accounted for as an extinguishment of debt. During the fiscal nine months ended September 27, 2020, the Company

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

~~October~~April 3, ~~2021~~2022

(Dollars in millions, unless otherwise stated)

~~recorded~~On February 5, 2021, the Company used a portion of the proceeds from its IPO to redeem $12270.0 million aggregate principal amount of the 2028 Notes, plus accrued interest thereon and $19.6 million ~~loss~~of onredemption premium. The redemption resulted in an extinguishment loss recognized of ~~debt~~$24.3 million, ~~primarily~~which ~~related~~consisted toof ~~the~~$4.7 million of unamortized deferred ~~financings~~issuance costs onand ~~the~~$19.6 ~~redeemed~~million ~~2022~~of ~~Notes~~the redemption premium, ~~included~~which is recorded as a component of Other expense, net during the fiscal quarter ended April 4, 2021. As of April 3, 2022 and January 2, 2022, the remaining unamortized balance of deferred issuance costs was $6.2 million and $6.4 million, respectively. The effective interest rate on the 2028 Notes is 7.76%.

~~Sale~~The following table provides the detail of amounts within Interest expense, net for the fiscal quarter ended April 3, 2022 and ~~leaseback~~April ~~financing~~4, 2021:

In June 2016, the Company entered into a sale-leaseback financing arrangement with a third-party financing company (the “Buyer-lessor”) related to specific property and equipment of the Company. The property and equipment were sold for $36.3 million and leased back over an initial term of two years. The monthly lease payments were $1.5 million until the equipment is repurchased or the lease is terminated. At the end of the initial term, the Company could repurchase the property and equipment at a price to be negotiated with the Buyer-lessor or terminate the lease arrangement, return the property or (possibly) enter into a new lease agreement. During the fiscal quarter ended July 1, 2018, the Company gave notice to the Buyer-lessor that it intends to negotiate with the Buyer-lessor the purchase of the property and equipment at the end of the initial term and have had discussions on negotiating the repurchase price for the property and equipment. Pursuant to the sale-leaseback financing agreement, if the parties do not reach a new lease agreement to purchase the property and equipment at the end of the initial term, the lease will automatically renew for another year, and afterwards, the lease will automatically be renewed for successive six month periods, provided that each of the Company and the Buyer-lessor have a right to terminate the lease agreement 30 days prior to the end of each six month renewal period. A security deposit for the leaseback was retained by the third-party financing company, the balance of which was $9.1 million as of January 3, 2021 and was included in Other current assets in the consolidated balance sheet. The transaction did not meet the criteria for sale-leaseback accounting as the security deposit constitutes a continuing involvement. Therefore, the Company accounted for this arrangement as a financing over 42 months and recorded a financing obligation amounting to $36.3 million at inception.


	Fiscal Quarter Ended
	April 3, 2022		April 4, 2021
Interest expense:
Dollar Term Loan Facility	$	10.2	$	14.1
Euro Term Loan Facility		2.9		3.6
Revolving Credit Facility		0.7		—
2028 Notes		7.4		9.1
2025 Notes		4.5		5.5
Accounts receivable financing		—		0.9
Amortization of:
Deferred financing costs		1.6		1.7
Original issue discount		0.4		0.3
Derivative instruments and other		4.8		8.2
Interest expense, net	$	32.5	$	43.4

On February 9, 2021, the Company and the Buyer-lessor agreed on a re-purchase price for the property and equipment, which included the outstanding balance of the financing plus accrued interest. The Company paid the full amount of the negotiated price during the fiscal nine months ended October 3, 2021.

Accounts receivable financing

In September 2016, the Company entered into an accounts receivable financing program (the “Financing Program”) with a financial institution. The Financing Program, which was fully paid off in June 2021 in connection with entry into the RPA (as defined below), was set to mature on January 24, 2022 and was secured by receivables from the Company’s U.S. business that are sold or contributed to a wholly-owned, consolidated, bankruptcy remote subsidiary. The bankruptcy remote subsidiary’s sole business consisted of the purchase or receipt of the receivables and subsequent granting of a security interest to the financial institution under the program, and its assets were available first to satisfy obligations and were not available to pay creditors of the Company’s other legal entities. Under the Financing Program, the Company could borrow up to the lower of $75.0 million or 85% of the accounts receivable borrowing base.

Interest on outstanding borrowings under the Financing Program was charged based on a per annum rate equal to the London Inter-bank Offered Rate (the “LIBOR Rate”) (with a floor of zero percent and as defined in the agreement) plus the LIBOR Rate margin (2.25 percentage points) if the related loan was a LIBOR Rate loan. Otherwise, the per annum rate was equal to a Base Rate (as defined in the Financing Program agreement) plus the base rate margin (1.25 percentage points). Interest was due and payable, in arrears, on the first day of each month. The Financing Program was also subject to termination under standard events of default as defined.

On June 11, 2021, Ortho-Clinical Diagnostics FinanceCo I, LLC (“Ortho FinanceCo I”), a wholly owned receivables financing subsidiary of the Company, entered into a receivables purchase agreement (the “RPA”) with Wells Fargo Bank, N.A., as administrative agent (the “Agent”), and certain purchasers. Under the RPA, Ortho FinanceCo I may sell receivables in amounts up to a $75.0 million limit. Transfers of receivables under the RPA are accounted for as a sale by the Company, resulting in a reduction in accounts receivables on the unaudited consolidated balance sheet.

The $75.0 million limit is subject to certain conditions, including that, at any date of determination, the aggregate capital paid to Ortho FinanceCo I does not exceed a “capital coverage amount,” equal to an adjusted net receivables pool balance minus a required reserve. Ortho FinanceCo I has guaranteed the prompt payment of the sold receivables, and to secure the prompt payment and performance of such guaranteed obligations, Ortho FinanceCo I has granted a security interest to the Agent, for the benefit of the purchasers, in all assets of Ortho FinanceCo I. The Company, in its capacity as master servicer under the RPA, is responsible for administering and collecting the receivables and has made customary representations, warranties, covenants and indemnities. The Company has also provided a performance guarantee for the benefit of Ortho FinanceCo I to cause the due and punctual performance by Ortho of its obligations as master servicer. The proceeds of the RPA were used, in part, to pay off the outstanding balance of the Financing Program. The impact on the Company’s unaudited consolidated statements of operations related to the RPA during the fiscal quarter and nine months ended October 3, 2021 was not material.

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

October 3, 2021

(Dollars in millions, unless otherwise stated)

The RPA is subject to customary events of termination for transactions of this type and, in addition, includes a financial covenant termination event if the “first lien net leverage ratio,” calculated as of the last day of each fiscal quarter, of the Company exceeds (i) 5.50:1.00 for each fiscal quarter ending on or prior to September 30, 2022, and (ii) 5.00:1:00 for each fiscal quarter ending thereafter. The RPA has a scheduled termination date which is the earlier of (i) June 11, 2024, and (ii) the date that is 90 days prior to the maturity of the indebtedness incurred under the Company’s Senior Secured Credit Facilities. As of October 3, 2021, the Company was in full compliance with all debt covenant requirements.

The following table provides the detail of amounts within Interest expense, net for the fiscal quarter and nine months ended October 3, 2021 and September 27, 2020:

	Fiscal Quarter Ended				Fiscal Nine Months Ended
	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
Interest expense:
Dollar Term Loan Facility	$	10.2	$	19.1	$	34.8	$	68.6
Euro Term Loan Facility		3.3		3.5		10.3		9.0
Revolving Credit Facility		1.5		0.2		2.1		3.4
2028 Notes		7.3		12.1		23.7		32.8
2025 Notes		4.4		7.3		14.3		8.8
2022 Notes		—		—		—		14.1
Accounts Receivable Financing		—		1.1		0.7		3.7
Amortization of:
Deferred financing costs		1.6		2.2		4.9		6.5
Original issue discount		0.4		0.6		1.1		1.8
Derivative instruments and other		7.6		2.8		20.7		(0.1	)
Interest expense, net	$	36.1	$	48.9	$	112.5	$	148.6

Future repayments

Below is a schedule of required future repayments of all borrowings outstanding as of October 3, 2021:

Remainder of 2021	$	45.8
2022		63.5
2023		63.1
2024		62.8
2025		1,659.4
Thereafter		405.0
	$	2,299.5

(8) Supplemental balance sheet information

Cash and cash equivalents and restricted cash within the unaudited consolidated balance sheets are presented below:

	October 3, 2021		January 3, 2021
	April 3, 2022		January 2, 2022
Cash and cash equivalents	$	~~255~~281.91	$	~~132~~309.87
Restricted cash included in Other assets		1.89		111.49
Cash, cash equivalents and restricted cash	$	~~257~~283.70	$	~~144~~311.26

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

October 3, 2021

(Dollars in millions, unless otherwise stated)

Accrued liabilities included in Total current liabilities consisted of the following:

	October 3, 2021		January 3, 2021
	April 3, 2022		January 2, 2022
Accrued compensation and employee-related obligations	$	~~101~~79.82	$	~~110~~123.59
Accrued commissions and rebates		2834.34		2432.96
Accrued taxes other than income		1822.79		1422.39
Accrued interest		1716.35		4219.28
Current portion of operating lease liabilities		12.0		15.1
Derivatives		12.5		5.4
Derivatives		3.2		10.3
Current portion of operating lease liabilities		12.5		13.4
Other accrued liabilities		70.3		67.4
Income taxes payable		7.3		7.3
Total accrued liabilities	$	251.5	$	284.7
Other accrued liabilities		74.3		74.4
Total accrued liabilities	$	259.5	$	299.6

(9) Collaborations and other relationships

In the normal course of business, the Company has entered into various collaboration arrangements which provide the Company with rights to develop, produce and market products using certain know-how, technology and patent rights maintained by the Company’s collaborative partners. The arrangements are often entered into in order to share risks and rewards related to a specific program or product. The Company’s collaborative arrangements include agreements with respect to transition services and a number of on-going relationships.

~~Grifols / Novartis Vaccines and Diagnostics, Inc.~~12

Quotient Limited

Pursuant to the Letter Agreement, the Company made an initial, non-refundable upfront payment of $7.5 million to Quotient on the date of the Letter Agreement, and recorded a corresponding $7.5 million charge to Research and development expense for the fiscal quarter and nine months ended September 27, 2020. In addition to the initial $7.5 million upfront payment, the Company may be required to make up to an additional $60.0 million of payments upon achievement of certain regulatory milestones and commercial sales benchmarks, which include up to $25.0 million of payments upon the achievement by the Company of certain cumulative revenue milestones. The Company did not make such payments during the fiscal nine months ended October 3, 2021 and does not anticipate making any such payments for the remainder of fiscal year 2021.

In the Letter Agreement, the Company and Quotient have agreed that the Company will have the right to distribute exclusively in the U.S., the European Economic Area, the U.K. and Switzerland a transfusion diagnostic patient immunohematology microarray (“PIM”), intended for use with Quotient’s MosaiQ Instruments, on which multiple compounds are placed which, when exposed to human blood samples, generate reactions that indicate the presence or absence of certain blood characteristics and antigens and is intended for immuno-hematological testing of the blood of medical patients during the course of their care or treatment.

During the fiscal quarter and nine months ended October 3, 2021, under a separate supply agreement, the Company purchased inventories from a subsidiary of Quotient amounting to $5.1 million and $17.1 million, respectively. The Company purchased inventories from

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

~~October~~April 3, ~~2021~~2022

(Dollars in millions, unless otherwise stated)

~~the~~Grifols ~~Quotient~~/ ~~subsidiary~~Novartis ~~amounting~~Vaccines ~~to $6.4 million~~ and ~~$17.1 million during the fiscal quarter and nine months ended September 27~~Diagnostics, ~~2020, respectively~~Inc. As of October 3, 2021 and January 3, 2021, Accounts payable included amounts related to purchases from the Quotient subsidiary of $2.9 million and $2.3 million, respectively. During both the fiscal quarter and nine months ended October 3, 2021, sales to Quotient were $0.1 million. During the fiscal quarter and nine months ended September 27, 2020, sales to Quotient were $0.1 million and $0.2 million, respectively. As of October 3, 2021 and January 3, 2021, amounts due from Quotient were immaterial.

The Company and Grifols Diagnostic Solutions, Inc. (“Grifols”) have an ongoing collaboration arrangement (the “Joint Business”) to pursue income-generating opportunities through the development of certain intellectual properties (“IP”). The governance of the Joint Business is shared through a Supervisory Board made up of equal representation by the Company and Grifols, which is responsible for all significant decisions relating to the Joint Business that are not exclusively assigned to either the Company or Grifols, as defined in the Joint Business agreement. The Company’s portion of the pre-tax net profit shared under the Joint Business was $10.3 million and $10.8 million during the fiscal quarter ended April 3, 2022 and April 4, 2021, respectively. This includes the Company's portion of the pre-tax net profit of $5.6 million and $7.6 million during the fiscal quarter ended April 3, 2022 and April 4, 2021, respectively, on sales transactions with third parties where the Company is the principal. The Company recognized revenues, cost of revenue, excluding amortization of intangible assets, and operating expenses on a gross basis on these sales transactions in their respective lines in the consolidated statements of operations. This also includes revenue from collaboration and royalty agreements, which is presented on a net basis within Collaboration and other revenues, of $4.7 million, and $3.2 million during the fiscal quarter ended April 3, 2022 and April 4, 2021, respectively.

Quotient Limited

In January 2015, the Company entered into an exclusive agreement with Quotient Limited (“Quotient”), a commercial-stage diagnostics company, to distribute and sell Quotient’s transfusion diagnostics platform MosaiQ™. Under the terms of a distribution and supply agreement, Quotient is responsible for the development and launch of MosaiQ™, while the Company will leverage its worldwide commercial capabilities to sell the product to customers. The Company has exclusive rights to distribute MosaiQ™ for the global patient testing market (for blood grouping) and the donor testing market in the developing world and Japan (for blood grouping and serological disease screening). Quotient retains all rights to commercialize MosaiQ™ in the developed world, excluding Japan, for the donor testing market. On September 4, 2020, the Company and Quotient amended the distribution and supply agreement and entered into a binding letter agreement (the “Letter Agreement”), under which the Company may be required to make up to $60.0 million of payments upon achievement of certain regulatory milestones and commercial sales benchmarks, which include up to $25.0 million of payments upon the achievement by the Company of certain cumulative revenue milestones. The Company did not make such payments during the fiscal quarter ended April 3, 2022 and does not anticipate making any such payments for the remainder of fiscal year 2022.

During the fiscal quarter ended April 3, 2022 and April 4, 2021, under a separate supply agreement, the Company purchased inventories from a subsidiary of Quotient amounting to $6.2 million and $5.5 million, respectively. As of April 3, 2022 and January 2, 2022, Accounts payable included amounts related to purchases from the Quotient subsidiary of $3.2 million and $4.1 million, respectively. During the fiscal quarters ended April 3, 2022 and April 4, 2021, sales to Quotient were immaterial. As of April 3, 2022 and January 2, 2022, amounts due from Quotient were immaterial.

(10) Income taxes

During the fiscal quarter ended ~~October~~April 3, ~~2021~~2022, the Company reported income before provision for income taxes of $2018.73 million and recognized a provision for income taxes of $63.05 million, resulting in an effective tax rate of 2919.1%. During the fiscal nine months ended October 3, 2021, the Company incurred a loss before provision for income taxes of $20.0 million and recognized a provision for income taxes of $24.4 million, resulting in a negative effective tax rate of 122.2%. The effective tax rate for the fiscal ~~nine~~quarter ~~months~~ ended ~~October~~April 3, ~~2021~~2022 differs from the U.S. federal statutory rate primarily due to (i) a net cost of $272.5 million for the impacts of operating losses in certain subsidiaries not being benefited due to the establishment of valuation allowances, and (ii) a net benefit of $102.95 million related to non-U.S. earnings being taxed at rates that are different than the U.S. statutory rate~~, and (iii) a net cost of $10~~.~~6 million for the tax expense associated with the remeasurement of deferred tax assets and liabilities due to the enactment of new tax rates, primarily in the United Kingdom.~~

During the fiscal quarter ended ~~September~~April 274, ~~2020~~2021, the Company incurred a loss before provision for income taxes of $3835.8 million and recognized ~~an income tax benefit of $10.3 million, resulting in an effective tax rate of 26.5%. During the fiscal nine months ended September 27, 2020, the Company incurred~~ a ~~loss before~~ provision for income taxes of $~~173~~3.43 million ~~and recognized an income tax benefit of $2.4 million~~, resulting in ana negative effective tax rate of 19.42%. The effective tax rate for the fiscal ~~nine~~quarter ~~months~~ ended ~~September~~April 274, ~~2020~~2021 differs from the U.S. federal statutory rate primarily due to (i) a net cost of $3914.8 million for the impacts of operating losses in certain subsidiaries not being benefited due to the establishment of valuation allowances, and (ii) a net benefit of $~~12 million related to the increase in the Company’s interest expense on prior year reserves for uncertain tax positions, and (iii) a net cost of $9~~4.79 million due to the non-U.S. earnings being taxed at rates that are different than the U.S. statutory rate.

The balance of unrecognized tax benefits at ~~October~~April 3, ~~2021~~2022, not including interest and penalties, was $2827.39 million, of which $23.80 million would affect the effective income tax rate in future periods, if recognized. The Company also recognizes interest and penalties related to unrecognized tax benefits in tax expense. At ~~October~~April 3, ~~2021~~2022, the Company had approximately $6.76 million of interest and penalties accrued related to unrecognized tax benefits. The Company estimates that within the next twelve months, its uncertain tax positions, excluding interest, will ~~not~~decrease ~~significantly~~by ~~decrease~~$3.0 million.

~~Indemnification assets~~13

On January 16, 2014, Bermuda Holdco entered into a stock and asset purchase agreement (the “Acquisition Agreement”) of (i) certain assets and liabilities, and (ii) all of the equity interests and substantially all of the assets and liabilities of certain entities which, together with their subsidiaries, comprised the Ortho Clinical Diagnostics business from Johnson & Johnson. The Acquisition Agreement generally provided that Johnson & Johnson retained all income tax liabilities accrued as of the date of the acquisition, including reserves for unrecognized tax benefits. The indemnification receivable from Johnson & Johnson totaled $17.6 million and $17.0 million as of October 3, 2021 and January 3, 2021, respectively. The Company recorded $0.2 million and $0.6 million of interest and penalties during the fiscal quarter and nine months ended October 3, 2021, respectively. These receivables are included as a component of Other current assets and Other assets on the unaudited consolidated balance sheets.

(11) Stock-based compensation

Stock-based compensation for the fiscal quarter and nine months ended October 3, 2021 and September 27, 2020 are presented in the unaudited consolidated statements of operations in the following captions:

	Fiscal Quarter Ended				Fiscal Nine Months Ended
	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
Cost of revenue	$	0.1	$	0.2	$	0.4	$	0.6
Selling, marketing and administrative expenses		4.9		2.1		18.9		5.4
Research and development expense		0.1		0.1		0.4		0.2
Total stock-based compensation	$	5.1	$	2.4	$	19.6	$	6.2

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

~~October~~April 3, ~~2021~~2022

(Dollars in millions, unless otherwise stated)

OnIndemnification May 3, 2021, the Board of Directors approved the modifications to the vesting of restricted stock and Liquidity Event option awards held by certain current and former members of management. The modification of restricted stock pertained to an award granted to a current member of management, for which the original vesting pattern was on a cliff-vesting basis over a three-year period. Upon modification, the vesting for 50% of the award was accelerated to six months from the date of the Company’s IPO. The result of the modification was an additional $0.3 million and $1.6 million of stock-based compensation expense recorded for the fiscal quarter and nine months ended October 3, 2021, respectively. There was no modification to the vesting conditions for the remaining 50% of the award and no additional shares granted as a result of the modification. The total unrecognized expense relating to unvested shares for this award as of the fiscal quarter ended October 3, 2021 was $0.7 million and will be recognized over a period of one year. The other modification related to an award granted to a former member of management for which the original vesting was contingent on a certain liquidity event as defined by the option agreement. The modification changed the vesting for the award such that the entirety of the award vested on the date the modification was approved by the Board of Directors. The modification resulted in an additional $4.6 million of stock-based compensation expense recognized during the fiscal quarter ended July 4, 2021. The additional expense related to both award modifications is recorded as a component of Selling, marketing and administrative expenses.assets

On January 16, 2014, Bermuda Holdco entered into a stock and asset purchase agreement (12the “Acquisition Agreement”) ~~Segment~~ of (i) certain assets and ~~geographic~~liabilities ~~information~~ and (ii) all of the equity interests and substantially all of the assets and liabilities of certain entities which, together with their subsidiaries, comprised the Ortho Clinical Diagnostics business from Johnson & Johnson. The Acquisition Agreement generally provided that Johnson & Johnson retained all income tax liabilities accrued as of the date of the acquisition, including reserves for unrecognized tax benefits. The indemnification receivable from Johnson & Johnson totaled $16.5 million and $16.1 million as of April 3, 2022 and January 2, 2022, respectively. The Company recorded $0.2 million of interest and penalties during the fiscal quarter ended April 3, 2022. These receivables are included as a component of Other current assets and Other assets on the unaudited consolidated balance sheets.

(11) Segment and geographic information

The Company has three geographically-based reportable segments: Americas, Europe, the Middle East and Africa (“EMEA”), and Greater China. Although all three segments are engaged in the marketing, distribution and sale of diagnostic instruments and assays for hospitals, laboratories and/or blood and plasma centers worldwide, each region is managed separately to better align with the market dynamics of the specific geographic region. Japan and Asia Pacific (“ASPAC”) are immaterial operating segments not considered as reportable segments and are included in “Other.”

Net revenue by segment is as follows:

Fiscal Quarter Ended

~~Fiscal Nine Months Ended~~

October 3, 2021

September 27, 2020

October 3, 2021

September 27, 2020

April 3, 2022

April 4, 2021

Americas

~~306~~315.54

~~264~~321.24

~~924.2~~

~~755.8~~

EMEA

6768.27

5868.65

~~203.5~~

~~168.2~~

Greater China

8554.65

7255.70

~~199.1~~

~~162.3~~

Net revenue of reportable segments

~~459~~438.37

~~395~~444.59

~~1,326.8~~

~~1,086.3~~

Other

6361.24

5561.69

~~195.1~~

~~163.2~~

Net revenue

~~522~~500.51

~~451~~506.18

~~1,521.8~~

~~1,249.6~~

~~Effective January 4, 2021, the Company changed the basis for which it measures segment profit or loss from Management EBITDA to~~ Adjusted EBITDA. ~~The new basis has been retroactively applied to the prior year period presented. Adjusted EBITDA~~ by segment is as follows:

	Fiscal Quarter Ended						~~Fiscal Nine Months Ended~~
	October 3, 2021			September 27, 2020			October 3, 2021			September 27, 2020
	April 3, 2022			April 4, 2021
Americas	$	~~125~~143.02		$	~~116~~141.81		$	~~394.2~~		$	~~329.9~~
EMEA		1719.27			1017.75			~~47.7~~			~~31.4~~
Greater China		4224.27			4125.12			~~91.7~~			~~78.9~~
Other		1917.0			1619.74			~~61.4~~			~~49.9~~
Corporate(a)		(63.8	)		(65.9	)		(174.8	)		(167.8	)
Total Segment Adjusted EBITDA (a)		204.6			203.2
Adjusted EBITDA	$	139.6		$	119.5		$	420.1		$	322.4
Corporate (b)		(65.2	)		(50.8	)
Depreciation and amortization		(79.4	)		(82.7	)
Interest expense, net		(32.5	)		(43.4	)
Loss on extinguishment of debt		—			(50.3	)
Stock-based compensation		(2.5	)		(3.5	)
Restructuring and severance-related costs		(1.0	)		(1.3	)
Quidel acquisition-related costs		(5.7	)		—
Tax indemnification income, net		0.2			0.2
Costs related to Ortho's initial public offering		—			(3.8	)
EU medical device regulation transition costs		(0.7	)		(0.9	)
Other adjustments		0.4			(2.5	)
Income (loss) before provision for income taxes	$	18.3		$	(35.8	)

(a)

For a reconciliation of Net income (loss) to Adjusted EBITDA, refer to Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Use of Non-GAAP Financial Measures - Reconciliation of Net Income (Loss) to Adjusted EBITDA.

(b)

Corporate primarily consists of costs related to executive and staff functions, including certain finance, human resources, manufacturing and information technology, which benefit the Company as a whole. These costs are primarily related to the general management of these functions on a corporate level and the design and development of programs, policies and procedures that are then implemented in the individual segments, with each segment bearing its own cost of implementation. The Company’s corporate function also includes debt and stock-based compensation associated with all employee stock-based awards.

1814

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

~~October~~April 3, ~~2021~~2022

(Dollars in millions, unless otherwise stated)

~~The reconciliation of Net income~~ (~~loss~~12) Noncash toinvesting ~~Adjusted~~and ~~EBITDA~~financing isactivities ~~as follows:~~

	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	)
Interest expense, net		36.1			48.9			112.5			148.6
Provision for (benefit from) income taxes		6.0			(10.3	)		24.4			(2.4	)
Depreciation and amortization		80.8			79.9			246.6			239.6
Stock-based compensation		5.0			2.4			19.5			6.2
Restructuring and severance-related costs		1.7			4.7			4.7			9.3
Arbitration award		(7.4	)		—			(7.4	)		—
Tax indemnification (income) expense, net		(0.2	)		16.5			(0.6	)		11.6
Loss on extinguishment of debt		—			—			50.3			12.6
Quotient upfront payment		—			7.5			—			7.5
Unrealized foreign currency exchange (gains) losses, net		—			(6.3	)		—			46.0
Other adjustments		2.9			4.7			14.5			14.4
Adjusted EBITDA	$	139.6		$	119.5		$	420.1		$	322.4

During the fiscal quarter ended April 3, 2022 and April 4, 2021, the Company made noncash transfers of instrument inventories from Inventories to Property, plant and equipment, net of $21.9 million and $25.6 million, respectively.

~~For~~As ~~the~~of ~~fiscal~~April ~~quarter~~3, 2022 and ~~nine~~January ~~months ended September 27~~2, ~~2020~~2022, ~~unrealized~~Accounts ~~foreign~~payable ~~currency~~and ~~exchange~~Accrued ~~(gains)~~liabilities ~~losses,~~included ~~net~~amounts ~~relate~~related to ~~the~~purchases ~~remeasurement~~ of ~~transactions denominated in foreign currencies~~property, ~~primarily~~plant ~~intercompany~~and ~~loans.~~equipment ~~Beginning~~and incapitalized ~~fiscal~~internal-use ~~2021,~~software ~~the~~costs ~~Company~~of ~~initiated~~$8.2 ~~programs~~million toand ~~mitigate~~$17.2 ~~the~~million, ~~impact~~respectively. As of ~~foreign~~April ~~currency~~4, ~~exchange~~2021 ~~rate~~and ~~fluctuations~~January ~~from~~3, ~~intercompany~~2021, ~~loans.~~Accounts ~~The~~payable ~~Company~~and ~~recognized~~Accrued ~~unrealized~~liabilities ~~foreign~~included ~~currency~~amounts ~~exchange~~related ~~net~~to ~~gains~~purchases of ~~$4.3~~property, ~~million~~plant inand ~~the~~equipment ~~fiscal~~and ~~quarter~~capitalized ~~ended~~internal-use ~~October~~software 3,costs ~~2021~~of ~~and~~ $381.09 million inand ~~the~~$11.4 ~~fiscal nine months ended October 3~~million, ~~2021~~respectively. The ~~Company~~changes ~~intends~~in ~~for~~ these ~~programs~~balances toare ~~mitigate~~excluded ~~the~~from ~~impact~~changes ofin ~~foreign~~Accounts ~~currency~~payable ~~exchange~~and ~~rate~~Accrued ~~fluctuations~~liabilities ~~related to intercompany loans~~ in ~~current and future periods. Therefore, effective January 4, 2021,~~ the ~~Company~~unaudited noconsolidated ~~longer~~statements ~~excludes~~of ~~noncash~~cash ~~unrealized gains and losses from Adjusted EBITDA~~flows.

(13) ~~Noncash~~Related ~~investing~~party ~~and~~transactions ~~financing activities~~

~~During~~The Company entered into consulting services agreements with Carlyle Investment Management, L.L.C. (“CIM”), pursuant to which the ~~fiscal~~Company ~~nine~~pays ~~months~~CIM ~~ended~~a ~~October~~fee 3for advisory, ~~2021~~consulting and ~~September~~other 27services to be provided to the Company (the “Consulting Services Agreement”). Pursuant to the Consulting Services Agreement, ~~2020~~which has an initial term of ten years, the Company ~~made~~pays ~~noncash~~an ~~transfers~~annual management fee to CIM of ~~instrument~~$3.0 ~~inventories~~million ~~from~~(the ~~Inventories~~“Management Fee”). The Management Fee is payable on a quarterly basis. The Company will also reimburse CIM’s reasonable out-of-pocket expenses incurred in connection with services provided pursuant to ~~Property~~the Consulting Services Agreement, ~~plant~~and the Company may pay CIM additional fees associated with other future transactions or in consideration of any additional services provided to the Company under the Consulting Services Agreement. During both the fiscal quarter ended April 3, 2022 and ~~equipment~~April 4, ~~net~~2021, ofthe Company recorded $820.68 million of Management Fee expense and ~~$91~~other out-of-pocket expenses.5 ~~million~~As of April 3, ~~respectively~~2022 and January 2, 2022, there were no amounts due to CIM.

AsThe ~~of October 3~~Company, ~~2021~~as ~~and~~part ~~January~~of 3,the ~~2021,~~normal ~~Accounts~~course ~~payable~~of ~~and~~business, ~~Accrued~~entered ~~liabilities~~into ~~included~~agreements ~~amounts~~to ~~related~~sell toproducts ~~purchases~~and ofprovide ~~property,~~services ~~plant~~to ~~and~~healthcare ~~equipment~~diagnostics ~~and~~companies ~~capitalized~~that ~~internal-use~~are ~~software~~portfolio ~~costs~~companies of ~~$10.4~~a ~~million~~fund ~~and~~affiliated ~~$11~~with Carlyle.4 ~~million,~~During ~~respectively.~~the Asfiscal ofquarter ~~September~~ended 27April 3, ~~2020~~2022 and ~~December~~April 294, ~~2019~~2021, ~~Accounts~~the ~~payable~~Company ~~and~~recognized ~~Accrued~~revenues ~~liabilities~~from ~~included~~business ~~amounts~~conducted ~~related~~with tothese ~~purchases~~healthcare ofdiagnostics ~~property,~~companies ~~plant and equipment and capitalized internal-use software costs~~ of $31.5 million and $140.19 million, respectively. ~~The~~As ~~changes~~of inApril 3, 2022 Accounts receivable included amounts related to these ~~balances~~healthcare ~~are~~diagnostics ~~excluded~~companies ~~from~~of ~~changes~~$1.3 inmillion. As of January 2, 2022, Accounts ~~payable~~receivable ~~and~~included ~~Accrued~~amounts ~~liabilities~~related into ~~the~~these ~~unaudited~~healthcare ~~consolidated~~diagnostics ~~statements~~companies of ~~cash~~$1.2 ~~flows~~million.

~~There~~The ~~was~~Company, ~~$3.0~~as ~~million~~part of ~~initial~~the ~~public~~normal ~~offering~~course ~~costs~~of ~~remaining~~business, inpurchased ~~Accounts~~inventories ~~payable~~from ~~and~~a ~~Accrued~~healthcare ~~liabilities~~equipment ascompany that is a portfolio company of ~~January~~a fund affiliated with Carlyle. During the fiscal quarter ended April 3, 2022 and April 4, 2021, the Company recorded expenses for business conducted with this healthcare equipment company of $0.3 ~~There~~million ~~were~~and no$0.8 million, respectively. As of April 3, 2022 Accounts payable included $0.1 million of amounts ~~related~~due to ~~initial~~this ~~public~~healthcare ~~offering~~equipment ~~costs~~company. inAs of January 2, 2022, Accounts payable ~~and~~included ~~Accrued~~immaterial ~~liabilities~~amounts asdue ofto ~~October~~this 3,healthcare ~~2021~~equipment company.

Portfolio companies of funds affiliated with Carlyle provide Information Technology (14“IT”) ~~Related~~ ~~party~~services ~~transactions~~to the Company. During the fiscal quarter ended April 3, 2022, the Company recorded expenses for business conducted with these companies of $0.2 million. During the fiscal quarter ended April 4, 2021. the Company recorded expenses for business conducted with these companies of $0.3 million. As of April 3, 2022. Accounts payable included $0.1 million of amounts related to these companies. As of January 2, 2022, Accounts payable included immaterial amounts related to these companies.

~~The~~A ~~Company~~portfolio ~~entered~~company ~~into~~of ~~consulting~~a ~~services~~fund ~~agreements~~affiliated with Carlyle ~~Investment~~provides ~~Management, L.L.C. (“CIM”), pursuant to which the Company pays CIM a fee for advisory,~~ consulting ~~and other~~ services to ~~be provided to~~ the Company ~~(the “Consulting Services Agreement”)~~. ~~Pursuant~~During to the ~~Consulting~~fiscal ~~Services~~quarter ~~Agreement,~~ended ~~which~~April ~~has~~3, an2022 ~~initial~~and ~~term~~April of4, ~~ten years~~2021, the Company ~~pays~~recorded ~~an annual management fee to CIM of $3.0 million (the “Management Fee”). The Management Fee is payable on a quarterly basis. The Company will also reimburse CIM’s reasonable out-of-pocket~~ expenses ~~incurred~~for inbusiness ~~connection~~conducted with ~~services~~this ~~provided~~portfolio ~~pursuant~~company ~~to the Consulting Services Agreement, and the Company may pay CIM additional fees associated with other future transactions or in consideration~~ of ~~any additional services provided to the Company under the Consulting Services Agreement~~$0.1 ~~During~~million ~~both the fiscal quarter ended October 3, 2021~~ and ~~September 27, 2020, the Company recorded~~ $0.87 million, ofrespectively. ~~Management~~As ~~Fee and other out-~~of~~-pocket~~ ~~expenses.~~January ~~During both the fiscal nine months ended October 3~~2, ~~2021 and September 27~~2022, ~~2020,~~Accounts ~~the~~payable ~~Company~~included ~~recorded~~immaterial ~~$2.3~~amounts ~~million~~related ofto ~~Management~~this ~~Fee~~portfolio ~~and other out-of-pocket expenses~~company. As of ~~January~~April 3, ~~2021~~2022, ~~and~~there ~~October~~were 3,no ~~2021,~~ amounts due to ~~CIM~~this ~~were~~portfolio ~~immaterial~~company.

~~The~~A security services company that is affiliated with Carlyle provides services to the Company, asat ~~part~~one of its facilities. This was a new Carlyle investment in 2021. During the ~~normal~~fiscal ~~course~~quarter ofended ~~business~~April 3, ~~entered~~2022, ~~into~~the ~~agreements~~Company torecorded ~~sell~~expenses ~~products~~for ~~and~~these ~~provide~~ services toof ~~health~~$0.3 ~~care~~million. ~~diagnostics~~As ~~companies~~of ~~that~~April ~~are~~3, ~~portfolio~~2022, ~~companies~~Accounts payable included $0.1 million of aamounts ~~fund~~due ~~affiliated~~to ~~with~~this ~~Carlyle~~company. ~~During~~As ~~the~~of ~~fiscal~~January ~~quarter~~2, ~~ended~~2022, ~~October~~Accounts 3,payable ~~2021~~included ~~and~~$0.2 million of amounts due to this company.

19A pharmacy benefit management organization that is a portfolio company of a fund affiliated with Carlyle provides pharmacy services to the Company. During the fiscal quarter ended April 3, 2022 and April 4, 2021, the Company recorded expenses for business conducted with this pharmacy benefit management organization of $1.4 million and $1.6 million, respectively. As of both April 3, 2022 and January 2, 2022, Accounts payable included amounts related to this pharmacy benefit management organization of $0.3 million.

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

~~October~~April 3, ~~2021~~2022

(Dollars in millions, unless otherwise stated)

September 27, 2020, the Company recognized revenues from business conducted with these health care diagnostics companies of $3.2 million and $0.4 million, respectively. During the fiscal nine months ended October 3, 2021 and September 27, 2020, the Company recognized revenues from business conducted with these health care diagnostics companies of $5.0 million and $1.3 million, respectively. As of both October 3, 2021 and January 3, 2021, Accounts receivable included amounts related to these health care diagnostics companies of $1.2 million.

The Company, as part of the normal course of business, purchased inventories from a healthcare equipment company that is a portfolio company of a fund affiliated with Carlyle. During the fiscal quarter and nine months ended October 3, 2021, the Company recorded expenses for business conducted with this healthcare equipment company of $1.3 million and $2.2 million, respectively. The Company did not record any expenses for business conducted with this healthcare equipment company during fiscal quarter and nine months ended September 27, 2020. As of October 3, 2021, Accounts payable included immaterial amounts due to this healthcare equipment company. As of January 3, 2021, there were no amounts due to this healthcare equipment company.

Portfolio companies of funds affiliated with Carlyle provide Information Technology (“IT”) services to the Company. During the fiscal quarter ended October 3, 2021 and September 27, 2020, the Company recorded expenses for business conducted with these companies of $0.3 million and $0.2 million, respectively. During the fiscal nine months ended October 3, 2021 and September 27, 2020, the Company recorded expenses for business conducted with these companies of $1.0 million and $0.2 million, respectively. As of both October 3, 2021 and January 3, 2021, Accounts payable included amounts related to these companies of $0.1 million.

A portfolio company of a fund affiliated with Carlyle provides consulting services to the Company. During the fiscal quarter ended October 3, 2021 and September 27, 2020, the Company recorded expenses for business conducted with this portfolio company of $0.1 million and $0.3 million, respectively. During the fiscal nine months ended October 3, 2021 and September 27, 2020, the Company recorded expenses for business conducted with this portfolio company of $1.3 million and $0.7 million, respectively. As of January 3, 2021, Accounts payable included amounts related to this portfolio company of $0.3 million. As of October 3, 2021, there were no amounts due to this portfolio company.

A security services company that is affiliated with Carlyle provides services to the Company at one of its facilities. This was a new Carlyle investment in 2021. During the fiscal quarter and nine months ended October 3, 2021, the Company recorded expenses for these services of $0.2 million and $0.8 million, respectively. As of both October 3, 2021 and January 3, 2021, Accounts payable included $0.1 million of amounts due to this company.

A pharmacy benefit management organization that is a portfolio company of a fund affiliated with Carlyle provides pharmacy services to the Company. During the fiscal quarter ended October 3, 2021 and September 27, 2020, the Company recorded expenses for business conducted with this pharmacy benefit management organization of $1.5 million and $1.6 million, respectively. During the fiscal nine months ended October 3, 2021 and September 27, 2020, the Company recorded expenses for business conducted with this pharmacy benefit management organization of $4.4 million and $4.6 million, respectively. As of October 3, 2021, Accounts payable included amounts related to this pharmacy benefit management organization of $0.4 million. As of January 3, 2021, Accrued liabilities included amounts related to this pharmacy benefit management organization of $0.6 million.

As part of the normal course of business, the Company may purchase from or sell to portfolio companies of funds affiliated with Carlyle or the Company’s officers and directors. These expenses and revenues are not expected to be material.

(1514) Commitments and contingencies

At times, the entities that carry out the Company’s business are the subject of governmental investigations and various legal actions and claims from governmental agencies and other parties. The outcomes of these matters are not within the Company’s complete control and may not be known for prolonged periods of time. The Company records a liability in the unaudited consolidated financial statements for loss contingencies when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. When determining the estimated loss or range of loss, significant judgment is required to estimate the amount and timing of a loss to be recorded. Estimates of probable losses resulting from these matters are inherently difficult to predict.

The Company is involved in an arbitration related to a commercial contract dispute. Although the Company believes it has meritorious defenses against the claim which it intends to pursue vigorously, arbitration is inherently uncertain and it could result in an unfavorable ruling to the Company. Given the early stage of this matter, an estimate of the possible loss or range of loss cannot be made at this time.

20(15) Fair value measurements

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

October 3, 2021

(Dollars in millions, unless otherwise stated)

(16) Fair value measurements

The carrying amount of cash and cash equivalents, current accounts receivable, accounts payable, and short term borrowings approximates fair value because of their short outstanding terms.

The estimated fair values of the Company’s Long-term borrowings were based on trades as reported by a third-party bond pricing service. Due to the infrequency of trades of the Notes and Term Loans, these inputs are considered Level 2 inputs. The following table presents the fair values of Long-term borrowings:

	October 3, 2021		January 3, 2021
	April 3, 2022		January 2, 2022
Long-term borrowings:
Dollar Term Loan Facility	$	1,~~496~~288.80	$	21,~~627~~291.74
Euro Term Loan Facility		~~357~~322.12		~~401~~335.17
2028 Notes		~~434~~416.46		~~710~~435.4
2025 Notes		~~252~~247.05		~~424~~253.02

(1716) Derivative instruments and hedging activities

The Company selectively uses derivative and non-derivative instruments to manage market risk associated with changes in interest rates and foreign currency exchange rates. The use of derivatives is intended for hedging purposes only, and the Company does not enter into derivative transactions for speculative purposes. The Company’s derivative contracts do not require cash collateral.

Interest rate hedging instruments

The Company’s interest rate risk relates primarily to interest rate exposures on variable rate debt including the Senior Secured Credit Facilities. Refer to Note 7–Borrowings for additional information on the currently outstanding components of the Senior Secured Credit Facilities. The Company entered into a series of interest rate cap and swap agreements to hedge the related risk of the variability to the Company’s cash flows due to the rates specified for these credit facilities.

The Company designates certain interest rate derivative instruments as cash flow hedges, including a portion of the outstanding interest rate swaps. The Company records gains and losses due to changes in fair value of the derivatives within Other comprehensive income (loss) (“OCI”) and reclassifies these amounts to Interest expense, net in the same period or periods for which the underlying hedged transaction affects earnings. In the event the Company determines the hedged transaction is no longer probable to occur or concludes the hedge relationship is no longer effective, the ~~remaining~~hedge ~~gain or loss within Accumulated other comprehensive income (“AOCI”)~~ is ~~reclassified~~prospectively ~~to earnings at that time~~de-designated. The pre-tax unrealized ~~loss~~gain of $161.21 million within OCI as of ~~October~~April 3, ~~2021~~2022 is expected to be reclassified to earnings in the next 12 months.

~~The following tables summarize the Company’s interest rate derivative agreements as of October 3, 2021:~~16

Effective date		Expiration date		Interest rate cap amount		Notional amount				Hedge designation
December 31, 2020		December 31, 2023		3.5%		$	1,500.0			Non-designated

Effective date

Expiration date

Description

Fixed rate

Floating rate

Notional amount(a)

Hedge designation

September 27,2019

December 31,2023

Pay fixed,receive float

1.635%

1-month LIBOR rate

1,500.0

Cash FlowHedge

The notional value of this instrument is expected to be $1,000 million in fiscal 2022 and $500 million in fiscal 2023.

The Company previously entered into an interest rate cap that was designated as a cash flow hedge. During the fiscal quarter ended September 29, 2019, the Company de-designated its 3.5% interest rate caps upon entering into the interest rate swap agreement that hedges a portion of the Company’s borrowings under the Senior Secured Credit Facilities. Upon de-designation, the Company began prospectively recognizing mark-to-market gains and losses within Other expense, net on the interest rate caps. The remaining loss on the interest rate caps that was deferred in OCI was amortized to Interest expense, net until the Company concluded that a portion of the interest on the Company’s previously hedged borrowings was no longer probable of being paid due to the pay down of a portion of the borrowings using proceeds from the IPO. Accordingly, $0.6 million of losses that had previously been deferred within OCI were released into Interest expense, net during the fiscal quarter ended April 4, 2021. During the fiscal quarter and nine months ended October 3, 2021, the Company reclassified $0.9 million and $2.6 million, respectively, of deferred losses from AOCI to Interest expense, net. As of October 3, 2021, the remaining balance of the deferred loss in AOCI was $6.7 million. As of January 3, 2021, the balance of the deferred loss in AOCI was $9.8 million.

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

~~October~~April 3, ~~2021~~2022

(Dollars in millions, unless otherwise stated)

~~During~~The ~~the~~following ~~fiscal~~tables ~~quarter~~summarize ~~ended April 4, 2021,~~ the Company ~~concluded that a portion of the interest on the Company~~’s ~~previously hedged borrowings related to the~~ interest rate ~~swap~~derivative ~~was~~agreements noas ~~longer probable~~ of being paid due to the pay down of a portion of the borrowings using the proceeds from the IPO. Due to this reduction in the hedged borrowings, the Company de-designated the hedging relationship, and contemporaneously re-designated the remaining borrowings. Accordingly, $3.1 million of losses that had previously been deferred within AOCI were released into Interest expense, net during the fiscal quarter ended April ~~4, 2021. As of October~~ 3, ~~2021, the remaining balance of the deferred loss in AOCI was $24.5 million.~~ 2022:


Effective date	Expiration date	Interest rate cap amount	Notional amount (a)		Hedge designation
December 31, 2020	December 31, 2023	3.5%	$	1,000.0	Non-designated

Effective date

Expiration date

Description

Fixed rate

Floating rate

Notional amount(a)

Hedge designation

September 27,
2019

December 31,
2023

Pay fixed,
receive float

1.635%

1-month LIBOR rate

1,000.0

Cash Flow
Hedge

(a)

The notional value of this instrument is expected to be $500.0 million in fiscal 2023.

The Company previously entered into an interest rate cap that was designated as a cash flow hedge. During the fiscal quarter ended September 29, 2019, the Company de-designated its 3.5% interest rate caps upon entering into the interest rate swap agreement that hedges a portion of the Company’s borrowings under the Senior Secured Credit Facilities. Upon de-designation, the Company began prospectively recognizing mark-to-market gains and losses within Other expense, net on the interest rate caps. The remaining loss on the interest rate caps that was deferred in Accumulated other comprehensive income (loss) (“AOCI”) was amortized to Interest expense, net until the Company concluded that a portion of the interest on the Company’s previously hedged borrowings was no longer probable of being paid due to the pay down of a portion of the borrowings using proceeds from the IPO. Accordingly, $0.6 million of losses that had previously been deferred within AOCI were released into Interest expense, net during the fiscal quarter ended April 4, 2021. During the fiscal quarter ended April 3, 2022, the Company reclassified $0.9 million of deferred losses from AOCI to Interest expense, net. As of April 3, 2022 and January 2, 2022, the remaining balance of the deferred loss in AOCI was $4.7 million and $5.6 million, respectively.

In February 2021, the Company concluded that a portion of the interest on the Company’s previously hedged borrowings related to the interest rate swap was no longer probable of being paid due to the pay down of a portion of the borrowings using the proceeds from the IPO. Due to this reduction in the hedged borrowings, the Company de-designated the hedging relationship, and contemporaneously re-designated the remaining borrowings. Accordingly, $3.1 million of losses that had previously been deferred within AOCI were released into Interest expense, net during the fiscal quarter ended April 4, 2021. As of April 3, 2022 and January 2, 2022, the remaining balance of the deferred gain and deferred loss in AOCI was $6.7 million and $13.9 million, respectively.

Currency hedging instruments

The Company has currency risk exposures relating primarily to foreign currency denominated monetary assets and liabilities and forecasted foreign currency denominated intercompany and third-party transactions. The Company uses foreign currency forward, option contracts and cross currency swaps to manage its currency risk exposures. The Company’s foreign currency forward contracts are denominated primarily in Australian Dollar, Brazilian Real, British Pound, Canadian Dollar, Chilean Peso, Chinese Yuan/Renminbi, Colombian Peso, Euro, Indian Rupee, Japanese Yen, Mexican Peso, Philippine Peso, Singapore Dollar, Swiss Franc and the Thai Baht.

The Company designates certain foreign currency forward contracts as cash flow hedges. The Company records gains and losses due to changes in fair value of the derivatives within OCI and reclassifies these amounts to Cost of revenue, excluding amortization of intangible assets in the same period or periods for which the underlying hedged transaction affects earnings. In the event the Company determines the hedged transaction is no longer probable to occur or concludes the hedge relationship is no longer effective, the ~~remaining~~hedge ~~gain or loss within AOCI~~ is ~~reclassified~~de-designated ~~to earnings at that time~~prospectively. The pre-tax unrealized ~~gain~~loss of $1.61 million within OCI as of ~~October~~April 3, ~~2021~~2022 is expected to be reclassified to earnings in the next 12 months.

Foreign exchange risk is also managed through the use of foreign currency debt. During the fiscal quarter ended ~~October~~April 3, ~~2021~~2022, €260.0 million ($~~301~~287.51 million) of the Company's senior secured Euro Term Loan Facility has been designated as, and is effective as, economic hedges of the net investment in a foreign operation. Accordingly, foreign currency transaction gains or losses due to spot rate fluctuations on the Euro-denominated debt instruments are included in foreign currency translation adjustments within AOCI. In April 2022, the Company de-designated the net investment hedge.

The Company also enters into foreign currency forward contracts that are not part of designated hedging relationships, which are intended to mitigate exchange rate risk of monetary assets and liabilities and related forecasted transactions. The Company records these non-designated derivatives at mark-to-market with gains and losses recognized currently in earnings within Other expense, net.

Concurrent with the issuance of the 2028 Notes, the Company entered into U.S. Dollar to Japanese Yen cross currency swaps for total notional of $350.0 million at a weighted average interest rate of 5.56%, with a five-year term to lower interest expense on the 2028 Notes. These cross currency swaps were not designated for hedge accounting, and consequently, changes in their fair value ~~are~~were recorded to Other expense, net. ~~The Company terminated the cross currency swaps on April 1, 2021 and received $12.8 million of cash from net settlement during the fiscal nine months ended October 3, 2021.~~

~~The following table provides details of the currency hedging instruments outstanding as of October 3, 2021:~~17

Description	Notional amount		Hedge designation
Foreign Currency Forward Contracts	$	161.5	Cash Flow Hedge
Foreign Currency Forward Contracts		262.2	Non-designated

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

~~October~~April 3, ~~2021~~2022

(Dollars in millions, unless otherwise stated)

~~Gains~~The ~~and~~Company ~~losses~~terminated ~~from~~the ~~designated~~cross ~~derivative~~currency ~~and~~swaps ~~non-derivative~~on ~~instruments~~April ~~within~~1, ~~AOCI~~2021 ~~during~~and ~~the~~received ~~fiscal~~$12.8 ~~quarter~~million ~~and~~of ~~nine~~cash ~~months~~from ~~ended~~net ~~October~~settlement 3,subsequent ~~2021~~to ~~and~~April ~~September 27~~4, ~~2020 were recorded as follows:~~2021.

Designated Hedging Instruments	Amount of loss(gain) recognizedin OCI on hedges			Location of amountsreclassifiedfrom AOCI into income	Amount of loss(gain) reclassifiedfrom AOCI into income
Fiscal Quarter Ended October 3, 2021
Cash flow hedges:
Foreign currency forward contracts	$	(1.0	)	Cost of revenue, excluding amortization of intangible assets	$	1.1
Interest rate derivative contracts		—		Interest expense, net		5.9
Net investment hedges:
Foreign currency-denominated debt(a)		0.8		N/A	N/A
Fiscal Nine Months Ended October 3, 2021
Cash flow hedges:
Foreign currency forward contracts	$	(3.7	)	Cost of revenue, excluding amortization of intangible assets	$	2.7
Interest rate derivative contracts		(1.8	)	Interest expense, net		20.9
Net investment hedges:
Foreign currency-denominated debt(a)		3.8		N/A	N/A

The following table provides details of the currency hedging instruments outstanding as of April 3, 2022:


Description	Notional amount		Hedge designation
Foreign currency forward contracts	$	356.4	Cash Flow Hedge
Foreign currency forward contracts		333.2	Not designated

Gains and losses from designated derivative and non-derivative instruments within AOCI during the fiscal quarter ended April 3, 2022 and April 4, 2021 were recorded as follows:


Designated Hedging Instruments	Amount of loss (gain) recognized in OCI on hedges			Location of amounts reclassified from AOCI into income	Amount of loss (gain) reclassified from AOCI into income
Fiscal Quarter Ended April 3, 2022
Cash flow hedges:
Foreign currency forward contracts	$	1.5		Cost of revenue, excluding amortization of intangible assets	$	(1.3	)
Interest rate derivative contracts		(16.8	)	Interest expense, net		4.6
Net investment hedges:
Foreign currency-denominated debt(a)		(8.9	)	N/A	N/A
Fiscal Quarter Ended April 4, 2021
Cash flow hedges:
Foreign currency forward contracts	$	(3.5	)	Cost of revenue, excluding amortization of intangible assets	$	0.1
Interest rate derivative contracts		(3.3	)	Interest expense, net		9.1

(a)

The amount of loss (gain) recognized in OCI for the foreign-currency denominated debt is presented within the CTA component of OCI. These gains and losses will remain in CTA until the related hedged item affects earnings, which would occur upon disposal or complete or substantial liquidation of the underlying hedged entities.

Designated Hedging Instruments	Amount of loss(gain) recognizedin OCI on hedges			Location of amountsreclassifiedfrom AOCI into income	Amount of loss(gain) reclassifiedfrom AOCI into income
Fiscal Quarter Ended September 27, 2020
Cash flow hedges:
Foreign currency forward contracts	$	1.5		Cost of revenue, excluding amortization of intangible assets	$	(2.0	)
Interest rate derivative contracts		(0.5	)	Interest expense, net		0.5
Fiscal Nine Months Ended September 27, 2020
Cash flow hedges:
Foreign currency forward contracts	$	(2.2	)	Cost of revenue, excluding amortization of intangible assets	$	(4.5	)
Interest rate derivative contracts(a)		47.1		Interest expense, net		(1.9	)

For the fiscal nine months ended September 27, 2020, the $47.1 million loss recognized in OCI for the interest rate derivative contracts does not include the $3.7 million loss from the cumulative effect of change in accounting standard, which is presented in Note 18.

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

October 3, 2021

(Dollars in millions, unless otherwise stated)

The following tables present the effect of the Company’s designated derivative instruments within Interest expense, net and Cost of revenue, excluding amortization of intangible assets in the unaudited consolidated statements of operations:

	Fiscal quarter ended October 3, 2021					Fiscal quarter ended September 27, 2020
	Fiscal Quarter Ended April 3, 2022					Fiscal Quarter Ended April 4, 2021
	Interest expense, net		Cost of revenue, excluding amortization of intangible assets				Interest expense, net		Cost of revenue, excluding amortization of intangible assets
Total amount of line item in unaudited consolidated statements of operations where effects of hedges are presented:	$	3632.15	$	~~252~~249.45			$	4843.94	$	~~234~~248.12
Effects of cash flow hedging relationships
Loss (Gain) on cash flow hedging relationships
Foreign currency forward contracts:
Amount of loss (gain) reclassified from AOCI into income	N/A		$	(1.13	)		N/A		$	~~(2.~~0.1	)
Amount reclassified from AOCI into income due to forecast transaction that is no longer probable of occurring	N/A		$	—			N/A		$	~~(0.1~~—	)
Interest rate derivative contracts:
Amount of net loss reclassified from AOCI into income	$	54.96	N/A				$	09.51	N/A
Amount reclassified from AOCI into income due to a forecast transaction that is no longer probable of occurring (a)	$	—	N/A				$	3.7	N/A

	Fiscal nine months ended October 3, 2021				Fiscal nine months ended September 27, 2020
	Interest expense, net		Cost of revenue, excluding amortization of intangible assets			Interest expense, net			Cost of revenue, excluding amortization of intangible assets
Total amount of line item in unaudited consolidated statements of operations in which effects of hedges are presented:	$	112.5	$	748.7		$	148.6		$	650.2
Effects of cash flow hedging relationships
Foreign currency forward contracts:
Amount of loss (gain) reclassified from AOCI into income	N/A			2.7		N/A				(4.5	)
Amount reclassified from AOCI into income due to forecast transaction that is no longer probable of occurring	N/A			—		N/A				(0.2	)
Interest rate derivative contracts:
Amount of loss (gain) reclassified from AOCI into income		20.9	N/A				(1.9	)	N/A
Amount reclassified from AOCI into income due to forecast transaction that is no longer probable of occurring(a)		3.7	N/A				—		N/A

(a) The amount is included within the total amount of loss (gain) reclassified from accumulated OCI into income.

The following table presents mark-to-market (gains) and losses on non-designated derivatives recognized currently within the unaudited consolidated statements of operations:

	Location of amounts	Fiscal Quarter Ended					Fiscal Nine Months Ended
Non-designated hedging instruments	recognized in earnings on derivatives	October 3, 2021			September 27, 2020		October 3, 2021			September 27, 2020
Interest rate derivative contracts	Other expense, net	$	0.1		$	0.4	$	—		$	1.3
Foreign currency forward contracts	Other expense, net		(1.6	)		1.5		32.6			3.1
Cross-currency interest rate swap contracts	Other expense, net		—			2.5		(24.0	)		(2.6	)

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

~~October~~April 3, ~~2021~~2022

(Dollars in millions, unless otherwise stated)

(a) The amount is included within the total amount of loss (gain) reclassified from AOCI into income.

Fair value (gains) and losses of derivative contracts, as determined using Level 2 inputs, that do not qualify for hedge accounting treatment are recorded in other expense, net and were as follows:


	Fiscal Quarter Ended
	April 3, 2022			April 4, 2021
Interest rate cap derivatives	$	(1.9	)	$	0.2
Foreign currency derivatives		8.3			30.4
Cross currency swaps		—			(24.0	)

The following table presents the location and fair values of designated hedging instruments recognized within the unaudited consolidated balance sheets. The fair values of designated hedging instruments have been determined using Level 2 inputs.

	October 3, 2021		January 3, 2021
	April 3, 2022		January 2, 2022
Interest rate derivative contracts:
Interest rate derivatives:
Accrued liabilities	$	0.1	$	0.1
Other assets	$	6.7	$	—
Other liabilities		~~25.4~~—		4413.19
Foreign currency forward contracts:
Other current assets		37.86		4.25
Accrued liabilities		28.47		104.03

The following table presents the location and fair values of non-designated hedging instruments recognized within the unaudited consolidated balance sheets. The fair values of non-designated hedging instruments have been determined using Level 2 inputs.

	October 3, 2021		January 3, 2021
	April 3, 2022		January 2, 2022
Interest rate derivative contracts:
Interest rate derivatives:
Accrued liabilities	$	—	$	0.1
Other liabilities	$	2.4	$	5.2
Other liabilities		6.8		11.1
Foreign currency forward contracts:
Other current assets		10.76		0.39
Accrued liabilities		03.7		01.1
Cross currency interest rate swap contracts:
Other current assets		—		2.0
Other liabilities		—		10.8

(1817) Accumulated other comprehensive income (loss)

The balances of ~~accumulated other comprehensive income (loss)~~AOCI, net of tax, were as follows for the fiscal ~~quarter~~quarters ~~and nine months~~ ended ~~October~~April 3, ~~2021~~2022 and ~~September~~April 274, ~~2020~~2021:

	Pension andOtherPostemploymentBenefits			ForeignCurrencyDerivatives			InterestRate Derivatives			UnrealizedForeignCurrencyTranslationAdjustments			AccumulatedOtherComprehensiveLoss
Balance at July 4,2021	$	(4.5	)	$	(0.6	)	$	(37.1	)	$	(12.8	)	$	(54.9	)
Balance at January 2, 2022	$	(3.3	)	$	1.7		$	(19.5	)	$	(22.6	)	$	(43.7	)
Current period deferrals		—			(1.05	)		—16.8			(136.96	)		~~(12~~8.97	)
Amounts reclassified to net income		—			(1.13	)		54.96			—			73.03
Net change		—			(2.18	)		521.94			(136.96	)		(512.90	)
Balance at October 3, 2021	$	(4.5	)	$	1.5		$	(31.2	)	$	(26.7	)	$	(61.0	)
Balance at April 3, 2022	$	(3.3	)	$	(1.2	)	$	1.9		$	(29.2	)	$	(31.7	)

	Pension andOtherPostemploymentBenefits			ForeignCurrencyDerivatives			~~InterestRateDerivatives~~InterestRate Derivatives			UnrealizedForeignCurrencyTranslationAdjustments			AccumulatedOtherComprehensiveLoss
Balance at June 28, 2020	$	(4.3	)	$	3.9		$	(55.8	)	$	(70.9	)	$	(127.1	)
Balance at January 3, 2021	$	(4.5	)	$	(4.9	)	$	(53.9	)	$	(5.1	)	$	(68.4	)
Current period deferrals		—			(13.5	)		03.53			(8.18	)		7(2.10	)
Amounts reclassified to net loss		—			~~(2.~~0.1	)		09.51			—			(19.52	)
Net change		—			(3.56	)		112.04			(8.18	)		57.62
Balance at September 27, 2020	$	(4.3	)	$	0.4		$	(54.8	)	$	(62.8	)	$	(121.5	)
Balance at April 4, 2021	$	(4.5	)	$	(1.3	)	$	(41.5	)	$	(13.9	)	$	(61.2	)

2519

Ortho Clinical Diagnostics Holdings plc

Notes to unaudited consolidated financial statements

~~October~~April 3, ~~2021~~2022

(Dollars in millions, unless otherwise stated)

	Pension andOtherPostemploymentBenefits			ForeignCurrencyDerivatives			InterestRate Derivatives			UnrealizedForeignCurrencyTranslationAdjustments			AccumulatedOtherComprehensiveLoss
Balance at January 3, 2021	$	(4.5	)	$	(4.9	)	$	(53.9	)	$	(5.1	)	$	(68.4	)
Current period deferrals		—			3.7			1.8			(21.7	)		(16.1	)
Amounts reclassified to net loss		—			2.7			20.9			—			23.6
Net change		—			6.4			22.7			(21.7	)		7.5
Balance at October 3, 2021	$	(4.5	)	$	1.5		$	(31.2	)	$	(26.7	)	$	(61.0	)

(18) Other (income) expense, net

	Pension andOtherPostemploymentBenefits			ForeignCurrencyDerivatives			InterestRateDerivatives			UnrealizedForeignCurrencyTranslationAdjustments			AccumulatedOtherComprehensiveLoss
Balance at December 29, 2019	$	(4.3	)	$	2.7		$	(5.8	)	$	(64.5	)	$	(71.9	)
Current period deferrals		—			2.2			(43.4	)		1.7			(39.5	)
Amounts reclassified to net loss		—			(4.5	)		(1.9	)		—			(6.4	)
Cumulative effect of change in accounting standard		—			—			(3.7	)		—			(3.7	)
Net change		—			(2.3	)		(49.0	)		1.7			(49.6	)
Balance at September 27, 2020	$	(4.3	)	$	0.4		$	(54.8	)	$	(62.8	)	$	(121.5	)

Other income, net was $3.5 million for the fiscal quarter ended April 3, 2022, comprised primarily of $1.7 million of net foreign currency gains and fair value gains of $1.9 million from interest rate caps.

~~(19)~~ Other ~~(income)~~ expense, net was $50.0 million for the fiscal quarter ended April 4, 2021, comprised primarily of loss on early extinguishment of debt of $50.3 million, which was related to the use of proceeds from the IPO to redeem portions of the Company's outstanding 2025 Notes, 2028 Notes and Dollar Term Loan Facility. This was partially offset by $0.9 million of net foreign currency gains, of which $22.9 million of realized gains were partially offset by $22.0 million of unrealized losses, primarily related to the unwinding of the cross currency swaps.

Other income, net was $2.6 million for the fiscal quarter ended October 3, 2021, comprised primarily of $0.7 million of net foreign currency gains and fair value gains of $1.5 million from interest rate caps. Other expense, net was $50.8 million for the fiscal nine months ended October 3, 2021 and was comprised primarily of loss on early extinguishment of debt of $50.3 million, which was related to the use of proceeds from the IPO to redeem portions of the Company’s outstanding 2025 Notes, 2028 Notes and Dollar Term Loan Facility.20

Other income, net was $5.9 million for the fiscal quarter ended September 27, 2020, comprised primarily of $5.4 million of net foreign currency gains, of which $3.9 million was unrealized, primarily related to intercompany loans denominated in currencies other than the functional currency of the affected subsidiaries and fair value gains of $0.5 million from interest rate caps. Other expense, net was $61.1 million for the fiscal nine months ended September 27, 2020 and was comprised primarily of $49.4 million of net foreign currency losses, of which $51.1 million was unrealized, mainly related to intercompany loans denominated in currencies other than the functional currency of the affected subsidiaries, and loss on early extinguishment of $12.6 million related to debt refinancing activities.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion summarizes the significant factors affecting the operating results, financial condition, liquidity and cash flows of our company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with the unaudited interim consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Some of the discussion includes forward-looking statements related to future events and our future operating performance that are based on current expectations and are subject to risk and uncertainties. Without limiting the foregoing, the words as “anticipate,” “expect,” “suggest,” “plan,” “believe,” “intend,” “project,” “forecast,” “estimates,” “targets,” “projections,” “should,” “could,” “would,” “may,” “might,” “will,” and the negative thereof and similar words and expressions are intended to identify forward-looking statements. The cautionary statements made in this report should be read as applying to all related forward-looking statements wherever they appear in this report. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including, but not limited to: the ongoing global coronavirus (“COVID-19”) pandemic; risks related to the proposed acquisition of Ortho by Quidel Corporation, including (i) failure to complete the proposed transaction on the proposed terms or on the anticipated timeline, or at all, (ii) risks and uncertainties related to securing the necessary regulatory and shareholder approvals, the sanction of the High Court of Justice of England and Wales and satisfaction of other closing conditions to consummate the proposed transaction; (iii) the occurrence of any event, change or other circumstance that could give rise to the termination of the definitive transaction agreement relating to the proposed transaction; (iv) the challenges and costs of closing, integrating, restructuring and achieving anticipated synergies; (v) the ability to retain key employees; and (vi) the economic, business, competitive, and/or regulatory factors affecting the business of the Company and Quidel; increased competition; manufacturing problems or delays or failure to develop and market new or enhanced products or services; adverse developments in global market, economic and political conditions; our ability to obtain additional capital on commercially reasonable terms may be limited or non-existent; our inability to implement our strategies for improving growth or to realize the anticipated benefits of any acquisitions and divestitures, including as a result of difficulties integrating acquired businesses with, or disposing of divested businesses from, our current operations; a need to recognize impairment charges related to goodwill, identified intangible assets and fixed assets; our inability to achieve some or all of the operational cost improvements and other benefits that we expect to realize; our ability to operate according to our business strategy should our collaboration partners fail to fulfill their obligations; risk that the insurance we will maintain may not fully cover all potential exposures; product recalls or negative publicity may harm our reputation or market acceptance of our products; decreases in the number of surgical procedures performed, and the resulting decrease in blood demand; fluctuations in our cash flows as a result of our reagent rental model; terrorist acts, conflicts, wars and natural disasters that may materially adversely affect our business, financial condition and results of operations; the outcome of legal proceedings instituted against us and/or others; risks associated with our non-U.S. operations, including currency translation risks, the impact of possible new tariffs and compliance with applicable trade embargoes; the effect of the U.K.’s withdrawal from the European Union; our inability to deliver products and services that meet customers’ needs and expectations; failure to maintain a high level of confidence in our products; significant changes in the healthcare industry and related industries that we serve, in an effort to reduce costs; reductions in government funding and reimbursement to our customers; price increases or interruptions in the supply of raw materials, components for our products, and products and services provided to us by certain key suppliers and manufacturers; our ability to recruit and retain the experienced and skilled personnel we need to compete; work stoppages, union negotiations, labor disputes and other matters associated with our labor force; consolidation of our customer base and the formation of group purchasing organizations; unexpected payments to any pension plans applicable to our employees; our inability to obtain required clearances or approvals for our products; failure to comply with applicable regulations, which may result in significant costs or the suspension or withdrawal of previously obtained clearances or approvals; the inability of government agencies to hire, retain or deploy personnel or otherwise prevent new or modified products from being developed, cleared or approved or commercialized in a timely manner; disruptions resulting from President Biden’s invocation of the Defense Production Act; results of clinical studies, which may be delayed or fail to demonstrate the safety and effectiveness of our products; costs to comply with environmental and health and safety requirements, or costs related to liability for contamination or other potential environmental harm; healthcare fraud and abuse regulations that could result in liability, require us to change our business practices and restrict our operations in the future; failure to comply with the anti-corruption laws of the United States and various international jurisdictions; failure to comply with anti-terrorism laws and regulations and applicable trade embargoes; failure to comply with the requirements of federal, state and international laws pertaining to the privacy and security of health information; our inability to maintain our data management and information technology systems; data corruption, cyber-based attacks, security breaches and privacy violations; our inability to protect and enforce our intellectual property rights or defend against intellectual property infringement suits against us by third parties; risks related to changes in income tax laws and regulations; risks related to our substantial indebtedness; our ability to generate cash flow to service our substantial debt obligations; difficulties complying with the rules of the Nasdaq Global Select Market regarding the composition of our Board of Directors and certain committees now that we are no longer a “controlled company;” risks related to the ownership of our ordinary shares; and risks related to the ongoing military action between Russia and Ukraine; as well as other risks discussed from time to time in our filings with the Securities and Exchange Commission, including, without limitation, the risk factors set forth in Part II, Item 1A,“Risk Factors” of this Quarterly Report on Form 10-Q, if any, as well as the risk factors set forth in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 2, 2022.

The ongoing global coronavirus (COVID-19) pandemic; increased competition; manufacturing problems or delays or failure to develop and market new or enhanced products or services; adverse developments in global market, economic and political conditions; our ability to obtain additional capital on commercially reasonable terms may be limited or non-existent; our inability to implement our strategies for improving growth or to realize the anticipated benefits of any acquisitions and divestitures, including as a result of difficulties integrating acquired businesses with, or disposing of divested businesses from, our current operations; a need to recognize impairment charges related to goodwill, identified intangible assets and fixed assets; our inability to achieve some or all of the operational cost improvements and other benefits that we expect to realize; our ability to operate according to our business strategy should our collaboration partners fail to fulfill their obligations; risk that the insurance we will maintain may not fully cover all potential exposures; product recalls or negative publicity may harm our reputation or market acceptance of our products; decreases in the number of surgical procedures performed, and the resulting decrease in blood demand; fluctuations in our cash flows as a result of our reagent rental model; terrorist acts, conflicts, wars and natural disasters that may materially adversely affect our business, financial condition and results of operations; the outcome of legal proceedings instituted against us and/or others; risks associated with our non-U.S. operations, including currency translation risks, the impact of possible new tariffs and compliance with applicable trade embargoes; the effect of the United Kingdom’s withdrawal from the European Union; our inability to deliver products and services that meet customers’ needs and expectations; failure to maintain a high level of confidence in our products; significant changes in the healthcare industry and related industries that we serve, in an effort to reduce costs; reductions in government funding and reimbursement to our customers; price increases or interruptions in the supply of raw materials, components for our products, and products and services provided to us by certain key suppliers and manufacturers; our ability to recruit and retain the experienced and skilled personnel we need to compete; work stoppages, union negotiations, labor disputes and other matters associated with our labor force; consolidation of our customer base and the formation of group purchasing organizations; unexpected payments to any pension plans applicable to our employees; our inability to obtain required clearances or approvals for our products; failure to comply with applicable regulations, which may result in significant costs or the suspension or withdrawal of previously obtained clearances or approvals; the inability of government agencies to hire, retain or deploy personnel or otherwise prevent new or modified products from being developed, cleared or approved or commercialized in a timely manner; disruptions resulting from President Biden’s invocation of the Defense Production Act; results of clinical studies, which may be delayed or fail to demonstrate the safety and effectiveness of our products; costs to comply with environmental and health and safety requirements, or costs related to liability for contamination or other potential environmental harm; healthcare fraud and abuse regulations that could result in liability, require us to change our business practices and restrict our operations in the future; failure to comply with the anti-corruption laws of the United States and various international jurisdictions; failure to comply with anti-terrorism laws and regulations and applicable trade embargoes; failure to comply with the requirements of federal, state and international laws pertaining to the privacy and security of health information; our inability to maintain our data management and information technology systems; data corruption, cyber-based attacks, security breaches and privacy violations; our inability to protect and enforce our intellectual property rights or defend against intellectual property infringement suits against us by third parties; risks related to changes in income tax laws and regulations; risks related to our substantial indebtedness; our ability to generate cash flow to service our substantial debt obligations; difficulties complying with Nasdaq rules regarding the composition of our Board of Directors and certain committees now that we are no longer a “controlled company”; and risks related to the ownership of our ordinary shares, as well as other risks discussed from time to time in our filings with the Securities and Exchange Commission, including, without limitation, the risk factors set forth in Part II, Item 1A,“Risk Factors” of this Quarterly Report on Form 10-Q, if any, as well as the risk factors set forth in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 3, 2021. 21

Overview

We are a pure-play in vitro diagnostics (“IVD”) business pioneering life-impacting advances in diagnostics for over 80 years, from our earliest work in blood typing, to our innovation in infectious diseases and our latest developments in laboratory solutions. We are driven by ~~our~~the credo, “Because Every Test is A Life.” This guiding principle reflects the crucial role diagnostics play in global health and guides our priorities as an organization. As a leader in IVD, we impact approximately 800,000 patients every day. We are dedicated to improving outcomes for these patients and saving lives through providing innovative and reliable diagnostic testing solutions to the clinical laboratory and transfusion medicine communities. Our global infrastructure and commercial reach allow us to serve these markets with significant scale. We have an intense focus on the customer. We support our customers with high quality diagnostic instrumentation, a broad test portfolio and market leading service. Our products deliver consistently fast, accurate and reliable results that allow clinicians to make better-informed treatment decisions. Our business model generates significant recurring revenues and strong cash flow streams, primarily from the ongoing sales of high margin consumables. In the fiscal quarter ended April 3, 2022, these recurring revenues contributed approximately 94% of both our total and core revenue. We maintain close connectivity with customers through a global presence, with approximately 4,800 employees, including approximately 2,300 commercial sales, service and marketing teammates. This global organization allows us to support our customers across more than 130 countries and territories.

27We manage our business geographically to better align with the market dynamics of the specific geographic region with our reportable segments being Americas, Europe, the Middle East and Africa (“EMEA”) and Greater China. We generate revenue primarily in the following lines of business:

global infrastructure and commercial reach allow us to serve these markets with significant scale. We have an intense focus on the customer. We support our customers with high quality diagnostic instrumentation, a broad test portfolio and market leading service. Our products deliver consistently fast, accurate and reliable results that allow clinicians to make better-informed treatment decisions. Our business model generates significant recurring revenues and strong cash flow streams from ongoing sales of high margin consumables. These consumables contribute more than 90% of our total revenue. We maintain close connectivity with our customers through our global presence, with approximately 4,700 employees, including approximately 2,200 commercial sales, service and marketing teammates. This global organization allows us to support our customers across more than 130 countries and territories.

We manage our business geographically to better align with the market dynamics of the specific geographic region with our reportable segments being Americas, EMEA and Greater China. We generate revenue primarily in the following lines of business:

Core:

•

Clinical Laboratories—Focused on (i) clinical chemistry, which is the measurement of target chemicals in bodily fluids for the evaluation of health and the clinical management of patients, (ii) immunoassay instruments, which test the measurement of proteins as they act as antigens in the spread of disease, antibodies in the immune response spurred by disease, or markers of proper organ function and health, and (iii) tests to detect and monitor disease progression across a broad spectrum of therapeutic areas, including grant revenue related to development of our COVID-19 antibody and antigen tests.

•

Non-core:

•

Other Product Revenue—Includes revenues primarily from contract manufacturing.

•

Collaboration and Other Revenue—Includes collaboration and license agreements pursuant to which we derive collaboration and royalty revenues.

All non-core revenue is recorded in the Americas segment for all periods presented.

~~Impact~~Definitive ofagreement ~~the~~in ~~initial~~which ~~public~~Quidel ~~offering~~Corporation will acquire Ortho

~~Use~~On December 22, 2021, Ortho, Coronado Topco, Inc., a Delaware corporation and a wholly owned subsidiary of ~~proceeds~~the Company (“Coronado Topco”), Laguna Merger Sub, Inc., a Delaware corporation and ~~impact~~a wholly owned subsidiary of ~~debt~~Topco ~~extinguishment~~(“U.S. Merger Sub”), Orca Holdco, Inc., a Delaware corporation and a wholly owned subsidiary of Topco (“U.S. Holdco Sub”), Orca Holdco 2, Inc., a Delaware corporation and a wholly owned subsidiary of U.S. Holdco Sub (“U.S. Holdco Sub 2”) and Quidel Corporation, a Delaware corporation (“Quidel”) entered into a Business Combination Agreement (the “Business Combination Agreement,” and the transactions contemplated thereby, the “Combinations”), pursuant to which, among other things and subject to the terms and conditions contained therein, (i) under a scheme of arrangement under U.K. corporate law, each issued and outstanding share of Ortho will be acquired by a depository nominee (or transferred within the depository nominee) on behalf of Coronado Topco in exchange for (x) 0.1055 shares of common stock of Coronado Topco and (y) $7.14 in cash (the “Ortho Scheme”) and (ii) immediately after the consummation of the Ortho Scheme, U.S. Merger Sub will merge with and into Quidel, pursuant to which each issued and outstanding share of Quidel common stock will be converted into one share of Coronado Topco common stock, with Quidel surviving as a wholly owned subsidiary of Coronado Topco. The boards of directors of both Ortho and Quidel have unanimously approved the terms of the Business Combination Agreement, which is expected to close during the first half of fiscal year 2022. Upon completion of the Combinations, which requires shareholder approval, Ortho shareholders are expected to own approximately 38% of Coronado Topco and Quidel stockholders are expected to own approximately 62% of Coronado Topco on a fully diluted basis, based on the respective capitalizations of Ortho and Quidel as of the date the parties entered into the Business Combination Agreement.

On February 1, 2021, we completed the initial public offering (“IPO”) of our ordinary shares at a price of $17.00 per share. We issued and sold 76,000,000 ordinary shares in the IPO and issued and sold an additional 11,400,000 ordinary shares on February 4, 2021 pursuant to the full exercise of the underwriters’ option to purchase additional shares from us. The ordinary shares sold in the IPO were registered under the Securities Act pursuant to a Registration Statement on Form S-1 (the “IPO Registration Statement”), which was declared effective by the SEC on January 29, 2021. Our ordinary shares are listed on Nasdaq under the symbol “OCDX.” The offering, including proceeds from the full exercise of the underwriters’ option to purchase additional shares, generated net proceeds to us of $1,426.4 million after deducting underwriting discounts and commissions.22

WeIn ~~used~~the event that the ~~net~~Business ~~proceeds~~Combination ~~from~~Agreement ~~the~~is ~~IPO~~terminated ~~(i)~~by toOrtho ~~redeem~~as ~~$160~~a ~~million~~result of ~~our~~the ~~2025~~occurrence ~~Notes~~of certain terms and conditions as specified therein, ~~plus~~we ~~accrued~~must ~~interest~~pay ~~thereon~~Quidel ~~and~~a termination fee of approximately $1146.89 million, ofless ~~redemption~~any ~~premium,~~expenses ~~(ii)~~reimbursable by Quidel pursuant to ~~redeem~~the ~~$270~~Business ~~million~~Combination ofAgreement. ~~our~~If ~~2028~~the ~~Notes,~~Business ~~plus~~Combination ~~accrued~~Agreement ~~interest~~is ~~thereon~~terminated ~~and~~by ~~$19.6~~Quidel ~~million~~as a result of ~~redemption~~the ~~premium,~~occurrence ~~(iii)~~of tocertain ~~repay~~terms ~~$892.7~~and ~~million~~conditions inas ~~aggregate~~specified ~~principal~~therein, ~~amount~~we ofwill ~~borrowings~~receive ~~under~~approximately ~~our~~$207.8 ~~Dollar~~million, ~~Term~~less ~~Loan~~any ~~Facility,~~expenses ~~and~~reimbursable ~~(iv)~~by ~~for~~us ~~working~~pursuant ~~capital~~to ~~and~~the ~~general~~Business ~~corporate~~Combination ~~purposes~~Agreement.

~~Incremental~~During ~~public~~the ~~company~~fiscal ~~expenses~~quarter ended April 3, 2022, we entered into agreements with certain of our officers related to the vesting of certain outstanding equity awards in connection with the consummation of the Combinations. Additionally, our Compensation Committee approved an amendment to our outstanding equity awards to provide for immediate vesting of unvested options in the event that the option holder’s service with Ortho is terminated without cause whether before, on or after the consummation of the Combinations. These agreements are contingent upon the closing of the acquisition of Ortho by Quidel. Accordingly, we have not recorded any impact to our results of operations related to these agreements or the amendment to our outstanding equity awards during the fiscal quarter ended April 3, 2022, as the Combinations have not yet been completed.

AsCosts aincurred ~~new~~related ~~public~~to ~~company,~~the weproposed ~~will incur significant expenses on an ongoing basis that we did not incur as a private company~~transaction, including ~~increased~~integration-related ~~director and officer liability insurance expense~~activities, aswere ~~well~~$5.7 asmillion ~~third-party~~during ~~and~~the ~~internal~~fiscal ~~resources~~quarter ~~related~~ended toApril ~~accounting~~3, ~~auditing,~~2022 ~~Sarbanes-Oxley Act compliance, legal,~~ and ~~investor~~were ~~and~~recorded ~~public~~to ~~relations~~Other operating expenses., ~~These~~net ~~costs~~on ~~will~~the ~~generally~~unaudited beconsolidated ~~included~~statement inof ~~selling, marketing and administrative expenses~~operations.

Stock-based compensation expense

In connection with our IPO, in the fiscal year 2021, we may incur a one-time stock-based compensation expense related to performance-based options held by members of management that may vest upon the completion of certain liquidity and realization

events. On May 3, 2021, the Board of Directors approved the modifications to the vesting of restricted stock and Liquidity Event option awards held by certain current and former members of management in accordance with the 2014 Equity Incentive Plan, which governs these grants. As a result of the modification, we recorded additional stock-based compensation expense of $0.3 million for the fiscal quarter ended October 3, 2021 and $1.6 million for the fiscal nine months ended October 3, 2021. Furthermore, during the fiscal quarter ended April 4, 2021, the Board of Directors approved the share pool associated with our long-term equity incentive plan.

Underwritten secondary offering

In September 2021, we completed an underwritten secondary offering of 25.3 million ordinary shares held by a selling shareholder affiliated with Carlyle, including 3.3 million ordinary shares pursuant to the full exercise of the underwriters’ option to purchase additional shares. The ordinary shares sold in the secondary offering were registered under the Securities Act pursuant to a Registration Statement on Form S-1, which was declared effective by the SEC on September 9, 2021. We did not offer any ordinary shares in this transaction and did not receive any proceeds from the sale of the ordinary shares by the selling shareholder. We incurred costs of $1.1 million in relation to the secondary public offering for the three and nine months ended October 3, 2021, which were recorded in Selling, marketing and administrative expenses in the unaudited consolidated statement of operations.

Impact of COVID-19 pandemic

In response to the global COVID-19 pandemic, we mobilized our research and development teams to bring to market COVID-19 antibody and antigen tests. Our COVID-19 antibody tests detect whether a patient has been previously infected by COVID-19 and our COVID-19 antigen test detects whether a patient is currently infected by COVID-19. We have received a combination of Emergency Use Authorization (“EUA”) from the U.S. Food and Drug Administration (the “FDA”), authority to affix a CE Mark for sale in the European Union and various other regulatory approvals globally for our COVID-19 antibody tests. We have also received authority to affix a CE Mark for sale in the European Union and the FDA accepted our EUA for our COVID-19 antigen test. We sell these tests in various other markets globally and continue to work on gaining further regulatory approvals in other markets. All of our COVID-19 antibody and antigen tests run on our existing instruments.

InSince ~~February~~the fiscal quarter ended June 28, 2020, weour ~~began~~results toof ~~see~~operations awere ~~decrease~~supplemented with revenue from sales of our COVID-19 antibody and antigen tests. However, starting in the ~~number~~fiscal quarter ended July 4, 2021 and continuing through the end of fiscal year 2021, this supplemental revenue from sales of our COVID-19 antibody and antigen tests ~~run~~began into ~~China~~decline. ~~This~~During ~~decline~~the ~~spread~~fiscal toquarter ~~certain~~ended ~~other~~April ~~countries~~3, in2022, ~~EMEA~~sales related to our COVID-19 antibody and ~~ASPAC~~antigen intests ~~early~~were ~~March~~relatively ~~2020~~consistent ~~and~~with ~~resulted~~the inprior aquarter, ~~worldwide~~however, ~~decrease~~they were $16.8 million lower than the sales made in the ~~number~~fiscal ofquarter ~~tests~~ended ~~run~~April ~~globally~~4, by2021. During the ~~end~~fiscal quarter ended April 3, 2022, we also continued to experience higher distribution costs due to higher shipping rates as a result of ~~that~~the ~~month~~COVID-19 pandemic and continued to experience some supply chain disruptions. InThese ~~many~~supply ~~countries~~chain disruptions have resulted in shortages or delays in receipts for certain key components of our instruments and assays. Additionally, we ~~also~~have experienced distribution challenges, which has affected our ability to fulfill customer orders on a ~~lag~~timely ~~between~~basis, ~~the~~including ~~timing~~instrument placements. These supply chain and distribution challenges have impacted, and we expect will continue to impact, our results of ~~the~~operations ~~decrease~~and resulted in ~~the~~disruption ~~number~~to ofour ~~tests~~business ~~run~~operations. We are continuously evaluating our supply chain to identify potential gaps and ~~the~~take ~~decrease~~steps into ~~shipments~~ensure continuity, including working closely with our primary suppliers of these components and pursuing additional ~~products~~suppliers tofor ~~our~~certain ~~customers~~of these components, ~~which~~in ~~began~~order to ~~occur~~maintain ~~during~~supply to our customers. During the fiscal quarter ended ~~June~~April 283, ~~2020~~2022, pandemic-related lockdowns in Greater China began to impact our business operations. AsWhile athe ~~result,~~impact ~~during~~of the recent lockdowns in Greater China was not material to our results of operations in the fiscal ~~year~~quarter ended ~~January~~April 3, ~~2021~~2022, we ~~experienced~~continue ~~decreased~~to ~~revenues~~monitor ~~and~~the ~~incurred~~potential ~~idle~~impact orof ~~underutilized~~any ~~facilities~~further ~~costs,~~lockdowns ~~higher~~in ~~freight~~Greater China and ~~higher~~the ~~distribution~~other ~~costs~~issues ~~compared~~noted toabove ~~the~~regarding ~~periods~~our ~~prior to the pandemic~~business.

~~During~~We ~~the~~are ~~fiscal~~continually ~~quarter~~monitoring ~~ended~~our ~~January~~business 3,continuity ~~2021,~~plans. weDue ~~started~~ to ~~experience a recovery in~~ the ~~base~~fact ~~business~~that of our ~~core~~products ~~revenue,~~and ~~which~~services ~~continued~~are ~~through~~considered ~~the~~to ~~fiscal~~be ~~nine~~medically ~~months ended October 3~~critical, ~~2021. Additionally, since the fiscal quarter ended June 28, 2020,~~ our ~~results~~manufacturing ~~of operations were supplemented with revenue from sales of our COVID-19 antibody~~ and ~~antigen~~research ~~tests. However, starting in the fiscal quarter ended July 4, 2021~~ and ~~continuing~~development ~~through~~sites ~~the~~are ~~fiscal~~generally ~~quarter~~exempt ~~ended October 3, 2021, this supplemental revenue~~ from ~~sales~~governmental oforders ~~our~~in ~~COVID-19~~the ~~antibody~~U.S. and ~~antigen~~other ~~tests~~countries ~~began~~requiring tobusinesses ~~decline and we expect such decline~~ to ~~continue~~cease ~~into~~or ~~the~~reduce ~~fourth quarter of fiscal year 2021~~operations. ~~During~~For ~~the~~these ~~fiscal nine months ended October 3~~sites, ~~2021,~~ we ~~also~~have ~~continued~~implemented tosteps ~~experience higher distribution costs due~~ to ~~higher~~protect ~~shipping~~our ~~rates~~employees. asOur ~~a result of the COVID~~office-19based ~~pandemic,~~work ~~and~~sites ~~during~~in the ~~fiscal quarter ended October 3, 2021, began to experience some supply chain disruptions~~U.S. Weare ~~continue~~subject to ~~monitor~~operating ~~the~~restrictions ~~potential~~consistent ~~impact~~with ofapplicable ~~these~~health ~~issues on our business~~guidelines.

WeOn ~~are~~September ~~continually~~9, ~~monitoring~~2021, ~~our~~President ~~business~~Biden ~~continuity~~issued ~~plans.~~the ~~Due~~Executive toOrder ~~the~~on ~~fact~~Ensuring ~~that~~Adequate ~~our~~COVID ~~products~~Safety ~~and~~Protocols ~~services~~for ~~are~~Federal ~~considered~~Contractors to(the be“Executive ~~medically critical~~Order”), ~~our~~which ~~manufacturing~~directs ~~and~~executive ~~research~~departments and ~~development~~agencies ~~sites~~to ~~are~~ensure ~~generally~~that ~~exempt~~contracts ~~from~~covered ~~governmental~~by ~~orders~~the inExecutive ~~the~~Order ~~U.S.~~require ~~and~~relevant ~~other~~federal ~~countries~~contractors ~~requiring~~and ~~businesses~~subcontractors to ~~cease~~mandate ortheir ~~reduce~~employees ~~operations.~~to ~~For~~be ~~these~~fully ~~sites,~~vaccinated weagainst ~~have~~COVID-19 ~~implemented~~by ~~steps~~certain dates that continue to ~~protect~~be ~~our~~extended ~~employees~~by the government. ~~Our~~The ~~office-based~~Executive ~~work~~Order ~~sites~~has infaced several legal challenges and on December 7, 2021, the U.S. ~~are~~District ~~subject~~Court tofor ~~operating~~the ~~restrictions~~Southern ~~consistent~~District ~~with~~of ~~applicable~~Georgia ~~health~~issued ~~guidelines.~~a Wenationwide ~~permit~~injunction ~~limited~~blocking ~~domestic~~enforcement ~~travel~~of ~~for~~the ~~our~~federal ~~employees,~~contractor mandate which ~~has~~was ~~reduced~~upheld ~~our~~by ~~travel-related~~the ~~operating~~Eleventh ~~expenses~~Circuit on December 17, 2021. We continue to monitor all court developments as well as impacts of requirements as it relates to any applicable contracts.

On September 9, 2021, President Biden issued Executive Order on Ensuring Adequate COVID Safety Protocols for Federal Contractors (the “Executive Order”), which directs executive departments and agencies to ensure that contracts covered by the Executive Order require relevant federal contractors and subcontractors to mandate their employees to be fully vaccinated against COVID-19 by December 18, 2021. We have been assessing our obligations under the Executive Order as it relates to any applicable contracts.

As the global COVID-19 pandemic is an ongoing matter, our future assessment of the magnitude and duration of the COVID-19 pandemic, as well as other factors, could result in material impacts to our consolidated financial statements in future reporting periods.

2923

Results of operations

The following discussion should be read in conjunction with the information contained in the accompanying interim unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Our historical results of operations may not necessarily reflect what will occur in the future.

Net income (loss)

Net income for the fiscal quarter ended ~~October~~April 3, ~~2021~~2022 was $14.78 million compared to net loss of $2839.51 million for fiscal quarter ended ~~September~~April 274, ~~2020~~2021, representing a change of $4353.29 million. The change resulting in net income was primarily due to ~~higher~~the ~~net~~$50.3 ~~revenue~~million ~~resulting~~extinguishment ~~from~~of debt in the ~~growth~~prior ofyear ~~our~~period ~~base~~in ~~business,~~connection ~~driven~~with bythe ~~strong~~use ~~instrument~~of ~~placements,~~our ~~especially~~proceeds offrom our ~~integrated~~initial ~~clinical~~public ~~lab~~offering ~~systems~~(“IPO”), as well as a decrease in interest expense in the current year period as a result of our debt pay down in the prior year period. These impacts were partially offset by anlower ~~increase~~revenues inand ~~operating~~increased ~~expenses~~research and adevelopment ~~higher~~costs ~~provision~~in ~~for~~the ~~income~~current ~~taxes~~year period.

During the fiscal nine months ended October 3, 2021, reported net loss of $44.4 million decreased by $126.6 million compared with the fiscal nine months ended September 27, 2020. The decrease in net loss was primarily due to higher net revenue, a reduction in interest expense as a result of the debt pay down and a decrease in foreign currency losses, partially offset by higher operating expense and provision for income taxes. We also incurred losses on early extinguishment of debt due to our use of proceeds from our IPO to redeem portions of our 2025 Notes, 2028 Notes and Dollar Term Loan Facility.

Net revenue

Net revenue for the fiscal quarter ended ~~October~~April 3, ~~2021~~2022 ~~increased~~decreased by $716.48 million, or 151.83%, compared with the fiscal quarter ended ~~September~~April 274, ~~2020~~2021. Revenues for the fiscal quarter ended ~~October~~April 3, ~~2021~~2022 included an operational net revenue increase of 140.31%, ~~and~~more athan ~~positive~~offset by the negative impact of 1.54% from foreign currency fluctuations, which was primarily driven by the ~~weakening~~strengthening of the U.S. Dollar against a variety of currencies~~, primarily the Chinese Yuan~~. The operational net increase in Core revenues for the fiscal quarter ended ~~October~~April 3, ~~2021~~2022 was 4.2%, excluding the negative impact of 1.5% from foreign currency ~~exchange,~~fluctuations ~~was~~and ~~mainly~~the ~~driven~~decrease byin ~~our~~sales ~~Core~~of ~~lines~~COVID-19 ofantibody ~~business,~~and asantigen wetests ~~recorded~~of ~~higher~~$16.8 ~~revenues~~million, inand ~~all~~was ~~geographic~~primarily ~~segments~~driven ofby ~~our~~increased ~~Clinical~~revenues ~~Laboratories~~in ~~and~~our Transfusion Medicine ~~businesses~~business.

Net revenue for the fiscal nine months ended October 3, 2021 increased by $272.3 million, or 21.8%, compared with the fiscal nine months ended September 27, 2020. Revenues for the fiscal nine months ended October 3, 2021 included an operational net revenue increase of 19.3% and a positive impact of 2.5% from foreign currency fluctuations, which was primarily driven by the weakening of the U.S. Dollar against a variety of currencies, primarily the Chinese Yuan, Euro and British Pound, partially offset by the strengthening of the Brazilian Real and Japanese Yen. The increase in revenues for the fiscal nine months ended October 3, 2021, excluding the impact of foreign currency exchange, was mainly driven by our Core lines of business, as we recorded higher revenues in certain geographic segments of our Clinical Laboratories business, and in all geographic segments of our Transfusion Medicine business.

The following table shows net revenue by line of business:

	Fiscal Quarter Ended							~~Fiscal Nine Months Ended~~
(Dollars in millions)	~~October~~April 3, ~~2021~~2022		~~September~~April 274, ~~2020~~2021		% Change			~~October 3, 2021~~		~~September 27, 2020~~		~~% Change~~
Clinical Laboratories	$	~~338~~321.23	$	~~302~~338.70		11(4.79	)%	$	~~1,001.3~~	$	~~819.2~~		~~22.2~~	%
Transfusion Medicine		~~170~~173.76		~~140~~161.64		217.46	%		~~494.5~~		~~414.5~~		~~19.3~~	%
Core Revenue		~~508~~495.90		~~443~~499.3		14(0.89	)%		~~1,495.8~~		~~1,233.7~~		~~21.2~~	%
Other Product Revenue		—0.4		34.3		(~~100~~90.03	%)%		~~5.6~~		~~3.7~~		~~59.8~~	%
Collaboration and Other Revenue		134.67		43.52	~~N.M.~~	48.5	%		~~20.4~~		~~12.2~~		~~66.9~~	%
Non-Core Revenue		135.61		7.85		74(31.7	)%		~~26.0~~		~~15.9~~		~~65.3~~	%
Net Revenue	$	~~522~~500.51	$	~~451~~506.18		15(1.83	)%	$	~~1,521.8~~	$	~~1,249.6~~		~~21.8~~	%

Core revenue

Clinical Laboratories revenue for the fiscal quarter ended ~~October~~April 3, ~~2021~~2022 ~~increased~~decreased by $3516.57 million, or 114.79% compared with the fiscal quarter ended ~~September~~April 274, ~~2020~~2021, ~~net~~including ~~of a decrease in sales of $9.1 million from our COVID-19 antibody and antigen tests. This increase included~~ an operational net revenue ~~increase~~decrease of 94.81% and a ~~positive~~negative impact of 10.98% from foreign currency fluctuations. The ~~increase~~decrease in Clinical Laboratories revenue was primarily due to ~~higher~~lower ~~reagent~~revenues ~~revenue~~related to the sales ~~across~~of ~~all~~our ~~regions,~~COVID-19 ~~driven~~antibody byand ~~strong~~antigen ~~instrument~~tests. ~~placements,~~We ~~especially~~recorded revenue of $12.2 million related to our ~~integrated~~COVID-19 ~~clinical~~antibody ~~lab~~and ~~systems~~antigen tests in the fiscal quarter ended April 3, 2022, compared with $29.0 million in the fiscal quarter ended April 4, 2021.

30Transfusion Medicine revenue for the fiscal quarter ended April 3, 2022 increased by $12.3 million, or 7.6%, compared with the fiscal quarter ended April 4, 2021, including an operational net revenue increase of 10.5%, partially offset by a negative impact of 2.9% from foreign currency fluctuations. The increase in Transfusion Medicine revenue, excluding the impact of foreign currency exchange, was primarily driven by increased reagent and instrument revenues related to our Immunohematology business, mainly in the Americas and EMEA, and to a lesser extent, increased revenue related to our Donor Screening business in the United States.

Clinical Laboratories revenue for the fiscal nine months ended October 3, 2021 increased by $181.9 million, or 22.2%, compared with the fiscal nine months ended September 27, 2020, including an increase of $9.9 million from our COVID-19 antibody and antigen tests, driven by the year-over-year increase in revenue from COVID-19 antibody and antigen tests in the first half of the year. This increase included an operational net revenue increase of 19.7% and a positive impact of 2.5% from foreign currency fluctuations. The increase in Clinical Laboratories revenue was primarily due to higher reagent revenue, driven by the recovery of testing volumes, and higher instrument sales in the Americas, EMEA and Greater China regions.

Transfusion Medicine revenue for the fiscal quarter ended October 3, 2021 increased by $30.1 million, or 21.4%, compared with the fiscal quarter ended September 27, 2020. This increase included an operational net revenue increase of 20.6% and a positive impact of 0.8% from foreign currency fluctuations. The increase in Transfusion Medicine revenue, excluding the impact of foreign currency exchange, was primarily driven by strength in both Immunohematology and Donor Screening, including a new customer in our Donor Screening business in the United States.

Transfusion Medicine revenue for the fiscal nine months ended October 3, 2021 increased by $80.1 million, or 19.3%, compared with the fiscal nine months ended September 27, 2020. This increase included an operational net revenue increase of 16.8% and a positive impact of 2.5% from foreign currency fluctuations. The increase in Transfusion Medicine revenue, excluding the impact of foreign currency exchange, was primarily driven by a new customer in our Donor Screening business in the United States and higher reagent revenue in all geographical regions.

Non-core revenue

Other product revenue, related to our contract manufacturing business, decreased by $3.39 million for the fiscal quarter ended ~~October~~April 3, ~~2021~~2022 compared with the fiscal quarter ended ~~September~~April 274, ~~2020~~2021, due to the completion of our performance obligations related to a contract manufacturing arrangement in the prior year.

~~Other~~Collaboration ~~product~~and other revenue, ~~related~~for tothe ~~our~~fiscal ~~contract~~quarter ~~manufacturing~~ended ~~business~~April 3, 2022 increased by $2.1.5 million ~~for the fiscal nine months ended October 3, 2021~~ compared with the fiscal ~~nine~~quarter ~~months~~ ended ~~September~~April 274, ~~2020~~2021, primarily due to the timing of ~~satisfying~~shipments ~~certain~~under ~~performance~~one ~~obligations~~of ~~related~~our tolicense ~~a contract manufacturing arrangement in the current fiscal period~~agreements.

Collaboration and other revenue for the fiscal quarter ended October 3, 2021 increased by $9.1 million compared with the fiscal quarter ended September 27, 2020. The increase was primarily due to an $8.5 million award from an arbitration proceeding related to one of our collaboration agreements.24

~~Collaboration~~Cost ~~and~~of ~~other~~ revenue ~~for the fiscal nine months ended October 3~~, ~~2021~~excluding ~~increased~~amortization ~~by $8.2 million, or 66.9%, compared with the fiscal nine months ended September 27, 2020. The increase was primarily due to an $8.5 million award from an arbitration proceeding related to one~~ of ~~our~~intangible ~~collaboration agreements.~~assets

Cost of revenue, excluding amortization of intangible assets, and Gross profit


	Fiscal Quarter Ended
(Dollars in millions)	April 3, 2022		% of Net Revenue			April 4, 2021		% of Net Revenue
Cost of revenue, excluding amortization of intangible assets	$	249.5		49.9	%	$	248.2		49.0	%

	Fiscal Quarter Ended										Fiscal Nine Months Ended
(Dollars in millions)	October 3, 2021		% of NetRevenue			September 27, 2020		% of NetRevenue			October 3, 2021		% of TotalRevenue			September 27, 2020		% of TotalRevenue
Cost of revenue, excluding amortization of intangible assets	$	252.4		48.3	%	$	234.1		51.9	%	$	748.7		49.2	%	$	650.2		52.0	%
Gross profit		270.1		51.7	%		217.0		48.1	%		773.1		50.8	%		599.4		48.0	%

The increase in Cost of revenue, excluding amortization of intangible assets for the fiscal quarter ended April 3, 2022 compared with the fiscal quarter ended April 4, 2021 was primarily due to higher freight costs and the decrease in sales of COVID-19 antibody and antigen tests with favorable margin.

The decrease in Cost of revenue, excluding amortization of intangible assets, and increase in Gross profit as a percentage of net revenue for the fiscal quarter ended October 3, 2021 compared with the fiscal quarter ended September 27, 2020 was primarily due to lower manufacturing costs and lower underutilized facility costs and inventory reserves, as well as the impact of the previously mentioned award from an arbitration proceeding related to one of our collaboration agreements, partially offset by higher freight costs and the decrease in sales of COVID-19 antibody and antigen tests with favorable margin.

The decrease in Cost of revenue, excluding amortization of intangible assets, and increase in Gross profit as a percentage of net revenue for the fiscal nine months ended October 3, 2021 compared with the fiscal nine months ended September 27, 2020 was primarily due to favorable product mix, including sales of COVID-19 antibody and antigen tests, lower manufacturing costs and lower underutilized facility costs, as well as the impact of the previously mentioned award from an arbitration proceeding related to one of our collaboration agreements, partially offset by higher freight costs.

Operating expenses

The following table provides a summary of certain operating expenses:

	Fiscal Quarter Ended										~~Fiscal Nine Months Ended~~
(Dollars in millions)	~~October~~April 3, ~~2021~~2022		% of NetRevenue			~~September~~April 274, ~~2020~~2021		% of NetRevenue			~~October 3, 2021~~		~~% of TotalRevenue~~			~~September 27, 2020~~		~~% of TotalRevenue~~
Selling, marketing and administrative expenses	$	~~140~~129.95		2725.09	%	$	~~121~~131.05		2625.89	%	$	~~411.0~~		~~27.0~~	%	$	~~347.9~~		~~27.8~~	%
Research and development expense		32.12		6.14	%		3228.79		75.27	%		~~91.3~~		~~6.0~~	%		~~82.1~~		~~6.6~~	%
Amortization of intangible assets		33.32		6.46	%		33.14		76.36	%		~~100.3~~		~~6.6~~	%		~~98.7~~		~~7.9~~	%
Other operating expense, net		9.8.6		1.97	%		97.54		2.1.5	%		~~27.7~~		~~1.8~~	%		~~22.8~~		~~1.8~~	%

Selling, marketing and administrative expenses

Selling, marketing and administrative expenses were $~~140~~129.95 million for the fiscal quarter ended ~~October~~April 3, ~~2021~~2022, or 2725.09% of net revenue, as compared with $~~121~~131.05 million for the fiscal quarter ended ~~September~~April 274, ~~2020~~2021, or 2625.89% of net revenue, ana ~~increase~~decrease of $192.90 million. The ~~increase~~decrease in Selling, marketing and administrative expenses was primarily due to ~~higher~~lower employee-related and facilities costs, ~~including~~partially ~~stock-based~~offset ~~compensation~~by increased travel expenses due to the lifting of travel restrictions that were in place during the prior year period.

Selling, marketing and administrative expenses were $411.0 million for the fiscal nine months ended October 3, 2021, or 27.0% of net revenue, as compared with $347.9 million for the fiscal nine months ended September 27, 2020, or 27.8% of net revenue, an increase of $63.1 million. The increase in Selling, marketing and administrative expenses was primarily due to higher employee-related costs, including stock-based compensation, increased distribution costs due to higher shipment volumes and higher shipping rates as a result of the ongoing global COVID-19 pandemic, partially offset by decreased travel-related costs for our employees due to global travel restrictions.

Research and development expense

Research and development expense was $32.12 million for the fiscal quarter ended ~~October~~April 3, ~~2021~~2022, or 6.14% of net revenue, as compared with $3228.79 million for the fiscal quarter ended ~~September~~April 274, ~~2020~~2021, or 75.27% of net revenue, aan ~~decrease~~increase of $03.63 million. The ~~decrease~~increase was primarily due to ~~the~~higher ~~$7.5 million up~~employee-~~front~~related ~~payment~~costs ~~made~~and ~~to Quotient Limited (“Quotient”) upon the signing of a binding letter agreement in the prior year period, partially offset by~~ increased ~~investment~~investments in ~~costs~~certain toresearch ~~develop~~and ~~new~~development ~~assays, as well as an increase in employee-related costs~~projects.

Research and development expense was $91.3 million for the fiscal nine months ended October 3, 2021, or 6.0% of net revenue, as compared with $82.1 million for the fiscal nine months ended September 27, 2020, or 6.6% of net revenue, an increase of $9.2 million. The increase was primarily due to an increased investment in costs to develop new assays, as well as an increase in employee-related costs, partially offset by the $7.5 million up-front payment made to Quotient in the prior year period.

Amortization of intangible assets

Amortization of intangible assets was $33.32 million for the fiscal quarter ended ~~October~~April 3, ~~2021~~2022 as compared with $33.14 million for the fiscal quarter ended ~~September~~April 274, ~~2020~~2021. There were no significant changes in the composition of our intangible assets in the fiscal quarter ended ~~October~~April 3, ~~2021~~2022 compared to the fiscal quarter ended ~~September~~April 274, ~~2020~~2021.

Amortization of intangible assets was $100.3 million for the fiscal nine months ended October 3, 2021 as compared with $98.7 million for the fiscal nine months ended September 27, 2020. There were no significant changes in the composition of our intangible assets in the fiscal nine months ended October 3, 2021 compared to the fiscal nine months ended September 27, 2020.

Other operating expense, net

Other operating expense, net was $9.8.6 million, or 1.97% of net revenue, for the fiscal quarter ended ~~October~~April 3, ~~2021~~2022, as compared with $97.54 million, or 2.1.5% of net revenue, for the fiscal quarter ended ~~September~~April 274, ~~2020~~2021, an increase of $01.32 million. ~~There~~The ~~were~~increase noin ~~significant~~Other ~~changes~~operating inexpense, ~~the~~net ~~balance~~was primarily due to $5.7 million of ~~Other~~acquisition ~~operating~~and ~~expense,~~integration-related ~~net~~costs in the ~~fiscal~~current ~~quarter~~year ~~ended~~period ~~October~~related 3to the proposed acquisition by Quidel, ~~2021~~partially ~~compared~~offset toby a decrease in profit share expense in the ~~fiscal~~current ~~quarter~~year ~~ended~~period ~~September~~related ~~27,~~to ~~2020~~our Joint Business.

Other operating expense, net was $27.7 million, or 1.8% of net revenue, for the fiscal nine months ended October 3, 2021, as compared with $22.8 million, or 1.8% of net revenue, for the fiscal nine months ended September 27, 2020, an increase of $4.9 million.

The increase was primarily due to higher profit share expense in the current year due to lower manufacturing costs related to our Joint Business, partially offset by the timing of government subsidies earned.

Non-operating items

Interest expense, net

Interest expense, net was $3632.15 million for the fiscal quarter ended ~~October~~April 3, ~~2021~~2022, as compared with $4843.94 million for the fiscal quarter ended ~~September~~April 274, ~~2020~~2021. The decrease of $1210.89 million was primarily related to lower borrowings due to the use of the net proceeds from ~~the~~our IPO in the prior year period to (i) redeem $160 million of our 2025 Notes, (ii) redeem $270 million of our 2028 Notes, and (iii) repay $892.7 million in aggregate principal amount of borrowings under our Dollar Term Loan Facility.

Interest expense, net was $112.5 million for the fiscal nine months ended October 3, 2021, as compared with $148.6 million for the fiscal nine months ended September 27, 2020. The decrease of $36.1 million was primarily related to lower borrowings due to our use of net proceeds from the IPO for debt repayment, as detailed above.25

Tax indemnification (income~~) expense~~, net

Tax indemnification income was $0.2 million ~~and~~in ~~$0.6~~each ~~million~~of ~~for~~ the fiscal ~~quarter~~quarters ~~and~~ended ~~nine~~April ~~months~~3, ~~ended~~2022 ~~October~~and 3April 4, 2021, ~~respectively.~~and ~~This~~was primarily related to interest on our indemnification receivables related to certain tax matters included in our pre-acquisition audit reserves. Tax indemnification expense was $16.5 million and $11.6 million for the fiscal quarter and nine months ended September 27, 2020, respectively. This primarily related to the release of certain tax reserves upon the settlement of certain state tax matters, with an offsetting benefit recorded to income tax expense.

Other (income) expense, net

Other income, net was $23.65 million for the fiscal quarter ended ~~October~~April 3, ~~2021~~2022, comprised primarily of $01.7 million of net foreign currency gains, and fair value gains of $1.59 million infrom interest rate caps. Other expense, net was $50.8 million for the fiscal nine months ended October 3, 2021 and was comprised primarily of loss on early extinguishment of debt of $50.3 million, which was related to the use of proceeds from the IPO to redeem portions of our outstanding 2025 Notes, 2028 Notes and Dollar Term Loan Facility.

Other ~~income~~expense, net was $550.90 million for the fiscal quarter ended ~~September~~April 274, ~~2020~~2021 and was comprised primarily of ~~$5.4~~loss ~~million~~on ofearly ~~net~~extinguishment ~~foreign~~of ~~currency~~debt ~~gains,~~ of ~~which~~ $350.93 million ~~was unrealized~~, ~~mainly~~ related to ~~intercompany loans denominated in currencies other than~~ the ~~functional~~use ~~currency~~ of ~~the~~proceeds ~~affected~~from ~~subsidiaries,~~the ~~and~~IPO ~~fair~~to ~~value~~redeem ~~gains~~portions of ~~$0.5~~our ~~million~~outstanding ~~from~~2025 ~~interest~~Notes, ~~rate~~2028 ~~caps.~~Notes ~~Other~~and ~~expense,~~Dollar ~~net~~Term ~~was~~Loan ~~$61~~Facility.1 ~~million~~This ~~for the fiscal nine months ended September 27, 2020 and~~ was ~~comprised~~partially ~~primarily~~offset ofby $490.49 million of net foreign currency ~~losses~~gains, of which $5122.19 million ~~was~~of ~~unrealized,~~realized ~~mainly~~gains ~~related~~were topartially ~~intercompany~~offset ~~loans~~by ~~denominated~~$22.0 inmillion ~~currencies other than the functional currency~~ of ~~the~~unrealized ~~affected subsidiaries~~losses, ~~and~~primarily ~~loss~~related onto ~~early~~the ~~extinguishment~~unwinding of ~~the~~our ~~2022~~cross ~~Notes~~currency ~~of $12~~swaps.6 ~~million.~~

Provision for ~~(benefit from)~~ income taxes

During the fiscal quarter ended ~~October~~April 3, ~~2021~~2022, we reported income before provision for income taxes of $2018.73 million and recognized a provision for income taxes of $63.05 million, resulting in an effective tax rate of 2919.1%. During the fiscal nine months ended October 3, 2021, we incurred a loss before provision from income taxes of $20.0 million and recognized a provision for income taxes of $24.4 million, resulting in a negative effective tax rate of 122.2%. The effective tax rate for the fiscal ~~nine~~quarter ~~months~~ ended ~~October~~April 3, ~~2021~~2022 differs from the U.S. federal statutory rate primarily due to (i) a net cost of $272.5 million for the impacts of operating losses in certain subsidiaries not being benefited due to the establishment of valuation allowances, and (ii) a net benefit of $102.95 million related to non-U.S. earnings being taxed at rates that are different than the U.S. statutory rate~~, and (iii) a net cost of $10~~.~~6 million for the tax expense associated with the remeasurement of deferred tax assets and liabilities due to the enactment of new tax rates, primarily in the United Kingdom.~~

During the fiscal quarter ended ~~September~~April 274, ~~2020~~2021, we incurred a loss before provision for income taxes of $3835.8 million and recognized an ~~income tax benefit of $10.3 million, resulting in an effective tax rate of 26.5%. During the fiscal nine months ended September 27, 2020, we incurred a loss before~~ provision for income taxes of $~~173~~3.43 million ~~and recognized an income tax benefit of $2.4 million~~, resulting in ana negative effective tax rate of 19.42%. The effective tax rate for the fiscal ~~nine~~quarter ~~months~~ ended ~~September~~April 274, ~~2020~~2021 differs from the U.S. federal statutory rate primarily due to (i) a net cost of $3914.8 million for the impacts of operating losses in certain subsidiaries not being benefited due to the establishment of valuation allowances, and (ii) a net benefit of $~~12 million related to the increase in the Company’s interest expense on prior year reserves for uncertain tax positions, and (iii) a net cost of $9~~4.79 million due to the non-U.S. earnings being taxed at rates that are different than the U.S. statutory rate.

Use of Non-GAAP Financial Measures

Reconciliation of Net Income (Loss) to Adjusted EBITDA

We believe that our financial statements and the other financial data included in this Quarterly Report on Form 10-Q have been prepared in a manner that complies, in all material respects, with GAAP, and are consistent with current practice, with the exception of the inclusion of financial measures that differ from measures calculated in accordance with GAAP, including Adjusted EBITDA. Adjusted EBITDA consists of net income (loss) before interest expense, net, provision for ~~(benefit from)~~ income taxes and depreciation and amortization and eliminates (i) certain non-operating income or expense, and (ii) impacts of certain noncash, unusual or other items that are included in net income (loss) that we do not consider indicative of our ongoing operating performance.

We use these financial measures in the analysis of our financial and operating performance because they assist in the evaluation of underlying trends in our business. Additionally, Adjusted EBITDA is the basis we use for assessing the profitability of our geographic-based reportable segments and is also utilized as a basis for calculating certain management incentive compensation programs. In the case of Adjusted EBITDA, we believe that making such adjustments provides management and investors meaningful information to understand our operating performance and ability to analyze financial and business trends on a period-to-period basis. We believe that the presentation of these financial measures enhances an investor’s understanding of our financial performance. We use certain of these financial measures for business planning purposes and measuring our performance relative to that of our competitors.

Other companies in our industry may calculate Adjusted EBITDA differently than we do. As a result, these financial measures have limitations as analytical and comparative tools and you should not consider these items in isolation, or as a substitute for analysis of our results as reported under GAAP. Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. In calculating these financial measures, we make certain adjustments that are based on assumptions and estimates that may prove to have been inaccurate. In addition, in evaluating these financial measures, you should be aware that in the future we may incur expenses similar to those eliminated in the presentation of these metrics included in this Quarterly Report on Form 10-Q. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items or changes in our customer base. Additionally, our presentation of Adjusted EBITDA may differ from that included in the Credit Agreement, the indenture ~~for~~governing the 2025 Notes and the indenture ~~for~~governing the 2028 Notes for purposes of covenant calculation.

Adjusted EBITDA has important limitations as an analytical tool and you should not consider it in isolation or as substitutes for analysis of our results as reported under GAAP. Some of these limitations include the fact that Adjusted EBITDA:

•

~~Does~~does not reflect the significant interest expense on our debt, including the Senior Secured Credit Facilities, the 2025 Notes and the 2028 Notes;

•

eliminates the impact of income taxes on our results of operations; and

•

does not reflect any cash requirements for any future replacements of assets being depreciated and amortized, although the assets being depreciated and amortized will often have to be replaced in the future.

We compensate for these limitations by relying primarily on our GAAP results and using these financial measures only as a supplement to our GAAP results.

The following tables reconcile Net income (loss) to Adjusted EBITDA for the periods presented:

	Fiscal Quarter Ended						~~Fiscal Nine Months Ended~~
(Dollars in millions)	~~October~~April 3, ~~2021~~2022			~~September~~April 274, ~~2020~~2021			~~October 3, 2021~~			~~September 27, 2020~~
Net income (loss)	$	14.78		$	(2839.51	)	$	~~(44.4~~	)	$	~~(171.0~~	)
Interest expense, net		36.1			48.9			112.5			148.6
Depreciation and amortization		79.4			82.7
Provision for (benefit from) income taxes		6.0			(10.3	)		24.4			(2.4	)
Interest expense, net		32.5			43.4
Depreciation and amortization		80.8			79.9			246.6			239.6
Provision for income taxes		3.5			3.3
Stock-based compensation (a)		52.05			23.45			~~19.5~~			~~6.2~~
Restructuring and severance-related costs (b)		1.70			41.73			~~4.7~~			~~9.3~~
Loss on extinguishment of debt		—			—50.3			~~50.3~~			~~12.6~~
Arbitration award (c)		(7.4	)		—			(7.4	)		—
Quidel acquisition-related costs (c)		5.7			—
Tax indemnification (income) expense, net		(0.2	)		16.5			(0.6	)		11.6
Tax indemnification income, net		(0.2	)		(0.2	)
Unrealized foreign currency exchanges (gains) losses, net (d)		—			(6.3	)		—			46.0
Costs related to Ortho's initial public offering (d)		—			3.8
Quotient upfront payment (e)		—			7.5			—			7.5
EU medical device regulation costs (e)		0.7			0.9
Other adjustments (f)		2(0.94	)		42.75			~~14.5~~			~~14.4~~
Adjusted EBITDA	$	139.65		$	~~119~~152.54		$	~~420.1~~		$	~~322.4~~

(a)

Represents expenses related to awards granted under our 2014 Equity Incentive Plan.

(b)

Represents restructuring and severance costs related to several discrete initiatives intended to strengthen operational performance and to support building our commercial capabilities.

(c)

Represents anacquiree-related ~~award~~transaction ~~from~~and anintegration ~~arbitration~~costs ~~proceeding~~ related to ~~one~~the ofBusiness ~~our~~Combination ~~collaboration~~Agreement ~~agreements~~with ~~of $8~~Quidel.5 ~~million, partially offset by related legal fees of $1.1 million.~~

(d) Represents ~~noncash~~costs ~~unrealized~~incurred ~~gains and losses resulting from the remeasurement of transactions denominated~~ in ~~foreign~~connection ~~currencies~~with ~~primarily related to intercompany loans. Beginning in fiscal year 2021, we initiated programs to mitigate the impact of foreign currencies related to intercompany loans in~~ our ~~results, and such noncash net unrealized gains were approximately $4~~IPO.3 million and $38.0 million for the fiscal quarter and nine months ended October 3, 2021, respectively. We intend for these programs to mitigate the impact of foreign currency exchange rate fluctuations related to intercompany loans in current and future periods. Therefore, effective January 4, 2021, we no longer exclude non-cash unrealized gains and losses from Adjusted EBITDA.

~~Represents~~(e) European anMedical ~~initial,~~Device ~~non-refundable~~Regulation ~~upfront~~costs ~~payment~~represent ~~made~~incremental toconsulting ~~Quotient,~~costs ~~one~~and ofR&D manufacturing site costs for our ~~partners~~previously ~~and~~registered ~~suppliers.~~products ~~See~~under ~~Note~~the 9In Vitro Diagnostic Regulation (“IVDR”) to ~~our~~align ~~unaudited~~existing, ~~consolidated~~on-market ~~financial~~products, ~~statements~~with ~~for~~the ~~further~~revised ~~discussion~~expectations under the IVDR. IVDR is a replacement of the ~~Quotient~~existing ~~relationship~~European In Vitro Diagnostics Directive regulatory framework, and manufacturers of currently marketed medical devices are required to comply with EU IVDR beginning in May 2022.

(f) Represents miscellaneous other adjustments related to unusual items impacting our results, including ~~the~~management ~~elimination~~fees to our principal shareholder of ~~management~~$0.8 ~~fees~~million in each of the fiscal quarters ended April 3, 2022 and April 4, 2021; noncash derivative mark-to-market (gains) of $1.9 million and losses of $0.6 ~~See~~million ~~information~~during ~~below:~~the fiscal quarter ended April 3, 2022 and April 4, 2021, respectively; costs related to our executive leadership reorganization, initiated in fiscal year 2019, of $0.5 million and $0.4 million during the fiscal quarter ended April 3, 2022 and April 4, 2021, respectively; and other individually immaterial adjustments.

	Fiscal Quarter Ended						Fiscal Nine Months Ended
(Dollars in millions)	October 3, 2021			September 27, 2020			October 3, 2021		September 27, 2020
EU medical device regulation transition costs	$	1.1		$	1.0		$	2.9	$	3.3
Principal shareholder management fee		0.8			0.8			2.3		2.3
Derivative mark-to-market (gain) loss		(0.9	)		(0.5	)		0.6		(0.7	)
Other		2.0			3.4			8.7		9.5
Total other adjustments	$	2.9		$	4.7		$	14.5	$	14.4

Segment Results

The key indicators that we monitor are as follows:

•

Net revenue — This measure is discussed in the section entitled “Results of operations.”

•

Adjusted EBITDA — Adjusted EBITDA by reportable segment is used by our management to measure and evaluate the internal operating performance of our segments. It is also the basis for calculating certain management incentive compensation programs. We believe that this measurement is useful to investors as a way to analyze the underlying trends ~~in our core business, including at the segment level, consistently across the periods presented and also to evaluate performance under management incentive compensation programs.~~

3527

	Fiscal Quarter Ended							Fiscal Nine Months Ended
(Dollars in millions)	October 3, 2021		September 27, 2020		% Change			October 3, 2021		September 27, 2020		%Change
Segment net revenue
Americas	$	306.5	$	264.2		16.0	%	$	924.2	$	755.8		22.3	%
EMEA		67.2		58.6		14.6	%		203.5		168.2		20.9	%
Greater China		85.6		72.7		17.8	%		199.1		162.3		22.6	%
Other		63.2		55.6		13.7	%		195.1		163.2		19.6	%
Net revenue	$	522.5	$	451.1		15.8	%	$	1,521.8	$	1,249.6		21.8	%

in our core business, including at the segment level, consistently across the periods presented and also to evaluate performance under management incentive compensation programs.

	Fiscal Quarter Ended									~~Fiscal Nine Months Ended~~
(Dollars in millions)	~~October~~April 3, ~~2021~~2022			~~September~~April 274, ~~2020~~2021			% Change			~~October 3, 2021~~			~~September 27, 2020~~			~~%Change~~
Segment Adjusted EBITDA
Segment net revenue
Americas	$	125.0		$	116.8			7.1	%	$	394.2		$	329.9			19.5	%
Americas (1)	$	315.4		$	321.4			(1.9	)%
EMEA		1768.27			1068.75			~~60.~~0.3	%		~~47.7~~			~~31.4~~			~~52.0~~	%
Greater China		4254.25			4155.10			2(0.78	)%		~~91.7~~			~~78.9~~			~~16.1~~	%
Other		1961.04			1661.79			13(0.58	)%		~~61.4~~			~~49.9~~			~~23.0~~	%
Corporate		(63.8	)		(65.9	)		(3.3	)%		(174.8	)		(167.8	)		4.2	%
Net revenue	$	500.1		$	506.8			(1.3	)%
Adjusted EBITDA	$	139.6		$	119.5			16.9	%	$	420.1		$	322.4			30.4	%

(1) Americas segment revenue includes non-core revenue.

Americas

Net revenue was $~~306~~315.54 million for the fiscal quarter ended ~~October~~April 3, ~~2021~~2022 compared to net revenue of $~~264~~321.24 million for the fiscal quarter ended ~~September~~April 274, ~~2020~~2021, including a decrease in ~~sales~~revenue of $613.87 million from our COVID-19 antibody and antigen ~~tests~~test sales. The ~~increase~~decrease of $426.30 million, or 161.09%, which ~~included~~was ~~operational~~minimally ~~net~~impacted ~~revenue~~by ~~growth~~the ~~of 15.3% and a positive~~ impact of ~~0.7% from~~ foreign currency ~~fluctuations~~exchange rates, was ~~primarily~~also ~~due~~driven toby ~~higher~~lower reagent revenue in our Clinical Laboratories business, ~~driven~~primarily byrelated to the ~~strong~~decrease ~~instrument~~in ~~placements,~~revenues ~~especially~~related to sales of our ~~integrated~~COVID-19 ~~clinical~~tests. ~~lab~~Excluding ~~systems,~~the aimpact ~~new~~of ~~customer~~the $13.7 million decrease in our ~~Donor~~COVID-19 ~~Screening~~antibody ~~business~~and inantigen ~~the~~test ~~United~~sales, ~~States~~net ~~and~~revenues anincreased $87.57 million, ~~award~~or ~~from~~2.5%, anprimarily ~~arbitration~~driven ~~proceeding~~by ~~related~~increased toreagent ~~one~~revenues ofin our ~~collaboration~~Immunohematology ~~agreements~~business in the United States and Latin America and our Donor Screening business in the United States.

~~Net~~Adjusted ~~revenue~~EBITDA was $~~924~~143.2 million for the fiscal ~~nine~~quarter ~~months~~ ended ~~October~~April 3, ~~2021~~2022 compared to ~~net revenue of~~ $~~755~~141.81 million for the fiscal ~~nine~~quarter ~~months~~ ended ~~September~~April 274, ~~2020, including incremental sales of $3~~2021.9 ~~million from our COVID-19 antibody and antigen tests.~~ The increase of $~~168~~2.41 million, or 221.35%, ~~which included operational net revenue growth of 21.7% and a positive impact of 0.6% from foreign currency fluctuations,~~ was primarily due to ~~higher~~the ~~reagent~~lower ~~revenue~~overall inexpenses ~~our Clinical Laboratories business, higher instrument sales~~ in ~~our Clinical Laboratories business, a new customer in our Donor Screening business in~~ the ~~United~~current ~~States,~~year ~~grant revenue related to development of our COVID-19 antibody and antigen tests and an $8~~period.~~5 million award from an arbitration proceeding related to one of our collaboration agreements.~~

Adjusted EBITDA was $125.0 million for the fiscal quarter ended October 3, 2021 compared to Adjusted EBITDA of $116.8 million for the fiscal quarter ended September 27, 2020. The increase of $8.2 million, or 7.1%, was primarily due to higher revenues, partially offset by higher operating costs.

Adjusted EBITDA was $394.2 million for the fiscal nine months ended October 3, 2021 compared to Adjusted EBITDA of $329.9 million for the fiscal nine months ended September 27, 2020. The increase of $64.3 million, or 19.5%, was primarily due to higher revenues.

EMEA

Net revenue was $6768.27 million for the fiscal quarter ended ~~October~~April 3, ~~2021~~2022 compared to net revenue of $5868.65 million for the fiscal quarter ended ~~September~~April 274, ~~2020~~2021, including a decrease in ~~sales~~revenue of $02.39 million from our COVID-19 antibody and antigen ~~tests~~test sales. The increase of $80.52 million, or 140.63%, which included operational net revenue growth of 136.17%, ~~and~~partially offset by a ~~positive~~negative impact of 16.4% from foreign currency fluctuations, was primarily due to higher reagent and instrument revenue in our ~~Clinical~~Immunohematology ~~Laboratories~~ business ~~driven by the continued recovery of testing volumes~~.

~~Net~~Adjusted ~~revenue~~EBITDA was $~~203~~19.57 million for the fiscal ~~nine~~quarter ~~months~~ ended ~~October~~April 3, ~~2021~~2022 compared to ~~net~~Adjusted ~~revenue~~EBITDA of $~~168~~17.25 million for the fiscal ~~nine~~quarter ~~months~~ ended ~~September~~April 274, ~~2020, including incremental sales of $6~~2021.0 ~~million from our COVID-19 antibody and antigen tests.~~ The increase of $352.2 million, or 2012.97%, ~~which included operational net revenue growth of 14.8% and a positive impact of 6.1% from foreign currency fluctuations,~~ was primarily due to ~~higher~~increased ~~reagent~~revenues ~~revenue~~and infavorable ~~our~~cost ~~Clinical~~of ~~Laboratories business~~revenues, ~~higher~~excluding ~~instrument~~amortization ~~sales~~of inintangible ~~our Clinical Laboratories business and higher reagent revenue in our Immunohematology business~~assets.

Adjusted EBITDA was $17.2 million for the fiscal quarter ended October 3, 2021 compared to Adjusted EBITDA of $10.7 million for the fiscal quarter ended September 27, 2020. The increase of $6.4 million, or 60.0%, was primarily due to higher revenues.

Adjusted EBITDA was $47.7 million for the fiscal nine months ended October 3, 2021 compared to Adjusted EBITDA of $31.4 million for the fiscal nine months ended September 27, 2020. The increase of $16.3 million, or 52.0%, was primarily due to higher revenues.

Greater China

Net revenue was $8554.65 million for the fiscal quarter ended ~~October~~April 3, ~~2021~~2022 compared to net revenue of $7255.70 million for the fiscal quarter ended ~~September~~April 274, ~~2020~~2021. The ~~increase~~decrease of $120.94 million, or 170.8%, which included operational net revenue ~~growth~~decline of 102.39%, ~~and~~partially offset by a positive impact of 72.41% from foreign currency fluctuations, was primarily due to ~~higher~~lower ~~reagent~~instrument revenue in our Clinical Laboratories business, primarily due to supply chain constraints, and ~~higher~~to ~~instrument~~a ~~sales~~lesser extent the impact of the recent COVID-19 related lockdowns. These decreases partially offset by increased reagent revenues in our ~~Immunohematology~~Clinical Laboratories business.

~~Net~~Adjusted ~~revenue~~EBITDA was $~~199~~24.17 million for the fiscal ~~nine~~quarter ~~months~~ ended ~~October~~April 3, ~~2021~~2022 compared to ~~net~~Adjusted ~~revenue~~EBITDA of $~~162~~25.32 million for the fiscal ~~nine~~quarter ~~months~~ ended ~~September~~April 274, ~~2020~~2021. The ~~increase~~decrease of $360.75 million, or 222.60%, ~~which included operational net revenue growth of 13.9% and a positive impact of 8.7% from foreign currency fluctuations,~~ was primarily due to ~~higher~~lower ~~reagent revenue and instrument sales in our Clinical Laboratories business and higher reagent revenue in our Immunohematology business~~revenues.

Adjusted EBITDA was $42.2 million for the fiscal quarter ended October 3, 2021 compared to Adjusted EBITDA of $41.1 million for the fiscal quarter ended September 27, 2020. The increase of $1.1 million, or 2.7%, was primarily due to higher revenues, partially offset by a government subsidy received in the prior year.

Adjusted EBITDA was $91.7 million for the fiscal nine months ended October 3, 2021 compared to Adjusted EBITDA of $78.9 million for the fiscal nine months ended September 27, 2020. The increase of $12.7 million, or 16.1%, was primarily due to higher revenues.

Other

Net revenue was $6361.24 million for the fiscal quarter ended ~~October~~April 3, ~~2021~~2022 compared to net revenue of $5561.69 million for the fiscal quarter ended ~~September~~April 274, ~~2020~~2021. The ~~increase~~decrease of $70.65 million, or 130.78%, which included operational net revenue growth of 156.70%, ~~and~~more athan offset by the negative impact of 26.08% from foreign currency fluctuations, was primarily due to higher reagent ~~revenue~~and instrument revenues in our Clinical Laboratories business in our Asia Pacific region.

~~Net~~Adjusted ~~revenue~~EBITDA was $~~195~~17.10 million for the fiscal ~~nine~~quarter ~~months~~ ended ~~October~~April 3, ~~2021~~2022 compared to ~~net~~Adjusted ~~revenue~~EBITDA of $~~163~~19.24 million for the fiscal ~~nine~~quarter ~~months~~ ended ~~September~~April 274, ~~2020~~2021. The ~~increase~~decrease of $312.94 million, or 1912.64%, ~~which included operational net revenue growth of 18.6% and a positive impact of 1.0% from foreign currency fluctuations,~~ was primarily due to ~~higher~~unfavorable ~~reagent~~foreign ~~revenue~~currency ~~in our Clinical Laboratories business~~fluctuations.

Adjusted EBITDA was $19.0 million for the fiscal quarter ended October 3, 2021 compared to Adjusted EBITDA of $16.7 million for the fiscal quarter ended September 27, 2020. The increase of $2.3 million, or 13.5%, was primarily due to higher revenues.28

Adjusted EBITDA was $61.4 million for the fiscal nine months ended October 3, 2021 compared to Adjusted EBITDA of $49.9 million for the fiscal nine months ended September 27, 2020. The increase of $11.5 million, or 23.0%, was primarily due to higher revenues.

Liquidity and capital resources

As of ~~October~~April 3, ~~2021~~2022 and January 32, ~~2021~~2022, we had $~~255~~281.91 million and $~~132~~309.87 million of Cash and cash equivalents, respectively. As of ~~October~~April 3, ~~2021~~2022 and January 32, ~~2021~~2022, $~~186~~224.27 million and $~~108~~157.85 million, respectively, of these Cash and cash equivalents were maintained in non-U.S. jurisdictions, primarily held in foreign currencies. We believe our organizational structure allows us the necessary flexibility to move funds throughout our subsidiaries to meet our operational working capital needs.

37Notwithstanding the foregoing, until the Quidel Effective Time (as defined in the Business Combination Agreement) or termination of the Business Combination Agreement in accordance with its terms, subject to certain specified exceptions, we are subject to a variety of restrictions as specified under the Business Combination Agreement. Unless Quidel approves in writing (which approval will not be unreasonably withheld, conditioned or delayed, subject to certain exceptions), we may not, among other things, engage in another merger, restructuring or reorganization; incur indebtedness for borrowed money or issued debt securities, except for borrowing in amounts not to exceed $25.0 million in the aggregate (including pursuant to drawdowns of credit facilities outstanding on the date of the Business Combination Agreement) (excluding with respect to financing required in order to consummate the Combinations); or lease, license, transfer, exchange or swap, mortgage, pledge, abandon, allow to lapse or otherwise dispose of any of our assets, except for dispositions individually or in the aggregate that have a fair market value of less than $25.0 million, transactions between us and any of our subsidiaries, or in the ordinary course of business.

Historical cash flows

The following table presents a summary of our net cash inflows (outflows) for the periods shown:

	Fiscal Nine Months Ended
	Fiscal Quarter Ended
(Dollars in millions)	~~October~~April 3, ~~2021~~2022			~~September~~April 274, ~~2020~~2021
Net cash provided by (used in) operating activities	$	188.2		$	(48.6	)
Net cash used in operating activities	$	(4.0	)	$	(9.9	)
Net cash used in investing activities		(1127.72	)		(2710.57	)
Net cash (used in) provided by financing activities		(61.9	)		71.3
Net cash provided by financing activities		2.1			41.1

Fiscal ~~nine~~quarter ~~months~~ ended ~~October~~April 3, ~~2021~~2022

Net cash flows ~~provided~~used byin operating activities

Net cash ~~provided~~used byin operating activities was $~~188~~4.20 million for the fiscal ~~nine~~quarter ~~months~~ ended ~~October~~April 3, ~~2021~~2022. Factors resulting in Cash ~~provided~~used byin operating activities included ~~strong~~settlement ~~collections on Accounts receivable, as well as the impact~~ of ~~our~~accrued ~~new receivables purchase agreement~~liabilities, ~~and cash inflows from earnings before interest, taxes, depreciation and amortization expense. These increases were partially offset by the~~ payment of ~~interest on borrowings of~~ $~~109~~29.2 million, ~~settlement~~ of ~~Accrued~~interest ~~liabilities~~on borrowings, and ~~increased~~an ~~investments~~increase in ~~inventories~~our ofinvestment ~~$117.3~~in ~~million~~inventories, which includes $8221.69 million of instrument inventories that were transferred from Inventories to Property, plant and equipment, net. These activities were partially offset by strong collections on Accounts receivable, ~~related~~and tocash ~~customer~~inflows ~~leased~~from ~~instruments~~earnings before interest, taxes, depreciation and amortization expense.

Net cash flows used in investing activities

Net cash used in investing activities was $1127.72 million for the fiscal ~~nine~~quarter ~~months~~ ended ~~October~~April 3, ~~2021.~~2022 ~~The~~primarily ~~primary~~related ~~factor~~to ~~resulting~~purchases ~~in Cash used in investing activities was Purchases~~ of property, plant and equipment ~~during the fiscal nine months ended October 3, 2021 of $27~~.~~2 million, offset by proceeds of $15.2 million related to the net settlement of our terminated cross currency swaps.~~

Net cash flows ~~used~~provided inby financing activities

Net cash ~~used~~provided inby financing activities was $612.91 million for the fiscal ~~nine~~quarter ~~months~~ ended ~~October~~April 3, ~~2021~~2022. During the fiscal ~~nine~~quarter ~~months~~ ended ~~October~~April 3, ~~2021~~2022, ~~payments~~we onreceived ~~long-term~~proceeds ~~borrowings~~from ofthe ~~$1,407.9~~exercise ~~million~~of ~~and~~stock ~~payments~~options ~~on short-term borrowings, net~~ of $813.14 million, ~~including~~which ~~the~~was ~~repayment of the outstanding balance of our Financing Program, were~~ partially offset by ~~net~~$1.3 ~~proceeds~~million ~~from~~of ~~our~~payments ~~initial~~on ~~public~~long-term ~~offering of $1,426~~borrowings.~~4 million.~~

Fiscal ~~nine~~quarter ~~months~~ ended ~~September~~April 274, ~~2020~~2021

Net cash flows used in operating activities

Net cash used in operating activities was $489.69 million for the fiscal ~~nine~~quarter ~~months~~ ended ~~September~~April 274, ~~2020~~2021. Factors resulting in cash used in operating activities included payment of interest on borrowings of $~~155~~53.58 million, settlement of accounts payable and an increased investment in inventories of $~~126~~41.97 million, which includes $9125.56 million of instrument inventories that were transferred from “Inventories” to “Property, plant and equipment, net,” related to customer leased instruments as well as an increase in other current and non-current assets of $27.6 million. These cash outflows were offset by cash inflows from earnings before interest, taxes, depreciation and amortization expense and other noncash items, as well as net collections of accounts receivable of $3410.53 ~~million.~~

million. These cash outflows were offset by cash inflows from earnings before interest, taxes, depreciation and amortization expense and other non-cash items.

Net cash flows used in investing activities

Net cash used in investing activities was $2710.57 million for the fiscal ~~nine~~quarter ~~months~~ ended ~~September~~April 274, ~~2020~~2021. Purchases of property, plant and equipment during the fiscal ~~nine~~quarter ~~months~~ ended ~~September~~April 274, ~~2020~~2021 were $2813.4 million. In addition, we made noncash transfers of $25.6 million of instrument inventories from Inventories to Property, plant and equipment, net, further increasing our investment in property, plant and equipment.

transfers of $91.5 million of instrument inventories from “Inventories” to “Property, plant and equipment, net,” further increasing our investment in property, plant and equipment.

Net cash flows provided by financing activities

During the ~~fiscal~~quarter ~~nine months~~ ended ~~September~~April 274, ~~2020~~2021, net proceeds from ~~the~~our ~~issuance~~IPO of ~~the 2025 Notes, 2028 Notes and Euro Term Loan Facility of~~ $1,421.04 million were partially offset by payments ~~on the 2022 Notes~~ of ~~$1,347.7 million. Net payments on short~~long-term borrowings ~~were~~of $21,375.29 million.

Debt capitalization

The following table details our debt outstanding as of ~~October~~April 3, ~~2021~~2022 and January 32, ~~2021~~2022:

(Dollars in millions)	~~October~~April 3, ~~2021~~2022			January 32, ~~2021~~2022
Senior Secured Credit Facilities
Dollar Term Loan Facility	$	1,292.8		$	21,~~185~~292.58
Euro Term Loan Facility		~~357~~324.28			~~408~~335.98
Revolving Credit Facility		—			—
2028 Notes		405.0			~~675~~405.0
2025 Notes		240.0			~~400~~240.0
Accounts Receivable Financing		—			75.0
Finance lease obligation		0.8			0.7
Sale and Leaseback Financing		—			20.5
Other long-term borrowings		2.2			2.6
Finance lease obligation		0.8			1.0
Unamortized deferred financing costs		(20.2	)		(21.4	)
Other short-term borrowings		0.8			0.9
Unamortized original issue discount		(4.9	)		(5.3	)
Other long-term borrowings		2.9			3.9
Total borrowings		2,240.4			2,250.2
Unamortized deferred financing costs		(22.6	)		(40.9	)
Less: Current portion		(63.2	)		(63.4	)
Unamortized original issue discount		(5.6	)		(11.3	)
Long-term borrowings	$	2,177.1		$	2,186.7
Total borrowings		2,271.3			3,718.5
Less: Current portion		(64.4	)		(160.0	)
Long-term borrowings	$	2,206.9		$	3,558.5

As of ~~October~~April 3, ~~2021~~2022 and January 32, ~~2021~~2022, there were no outstanding borrowings under the Revolving Credit Facility. As of ~~October~~April 3, ~~2021~~2022 and January 32, ~~2021~~2022, letters of credit issued under the Revolving Credit Facility totaled $4543.07 million and $3746.53 million, respectively, which reduced the availability under the Revolving Credit Facility. Availability under the Revolving Credit Facility was $~~455~~456.03 million and $~~312~~453.57 million as of ~~October~~April 3, ~~2021~~2022 and January 32, ~~2021~~2022, respectively. Our debt agreements contain various covenants that may restrict our ability to borrow on available credit facilities and future financing arrangements or require us to remain below a specific credit coverage threshold. We believe that we are and will continue to be in compliance with these covenants.

OnAs ~~February~~of 5,April ~~2021~~3, we2022 ~~entered~~and ~~into~~January a2, ~~fifth amendment of our Credit Agreement (as amended~~2022, the ~~“Credit~~remaining ~~Agreement”)~~balance ~~governing~~of ~~our~~deferred ~~Senior~~financing ~~Secured~~costs ~~Credit~~related ~~Facilities,~~to ~~which increased~~ the ~~Revolving~~Dollar ~~Credit~~Term Loan Facility ~~contained~~was ~~in the credit agreement by~~ $~~150~~7.05 million toand ~~an aggregate amount of~~ $~~500~~8.01 million, ~~and~~respectively. ~~extended~~As ~~the~~of ~~maturity~~April ~~date~~3, to2022 ~~February~~and 5January 2, ~~2026~~2022, ~~provided~~the ~~that~~remaining ~~such~~balance ~~date~~of ~~may~~deferred befinancing ~~accelerated~~costs ~~subject~~related to ~~certain circumstances as set forth in~~ the ~~fifth~~Euro ~~amendment. To the extent that the aggregate principal amount of the Dollar~~ Term Loan Facility ~~and~~was ~~Euro~~$3.4 ~~Term~~million ~~Loan Facility (~~and ~~any~~$3.6 ~~Refinancing Indebtedness (as defined in the Credit Agreement) with respect thereto that matures on or prior to June 30~~million, ~~2025)~~respectively. ~~outstanding~~As as of ~~March~~April 313, ~~2025~~2022 ~~exceeds~~and ~~$500.0~~January ~~million~~2, ~~then~~2022, the ~~maturity~~remaining ~~date~~unamortized ~~with~~balance ~~respect~~related to the Revolving Credit Facility ~~shall~~was be$2.2 ~~March~~million 31and $2.7 million, ~~2025~~respectively. ~~All~~The ~~other~~effective ~~terms~~interest rate of the ~~Senior~~Dollar ~~Secured~~Term ~~Credit~~Loan ~~Facilities~~Facility ~~will~~and ~~remain~~Euro ~~substantially~~Term ~~the~~Loan ~~same~~Facility ~~except~~ as ~~otherwise~~of ~~amended~~April by3, ~~the~~2022 ~~fifth~~is ~~amendment~~5.76% and 3.88%, respectively.

AsOn January 27, 2020, we issued $675.0 million aggregate principal amount of ~~October~~7.250% 3Senior Notes due 2028 (“2028 Notes”), ~~2021~~on which interest is payable semi-annually in arrears on February 1 and ~~January~~August 3,1 ~~2021~~of each year. The 2028 Notes will mature on February 1, 2028. The 2028 Notes and the ~~remaining~~guarantees ~~balance~~thereof ofare ~~deferred~~our ~~financing~~senior ~~costs~~unsecured ~~related~~obligations toand the ~~Dollar~~2028 ~~Term~~Notes ~~Loan~~and ~~Facility~~the ~~was~~guarantees ~~$8.6~~rank ~~million~~equally ~~and~~in ~~$17~~right of payment with all of Ortho-Clinical Diagnostics S.3A.’s ~~million~~and Ortho-Clinical Diagnostics, ~~respectively~~Inc.’s As(together, ofthe ~~October~~“Issuers”) 3,and ~~2021~~guarantors’ existing and ~~January~~future 3,senior ~~2021~~debt, including the ~~remaining~~2025 ~~balance~~Notes. ofThe ~~deferred~~2028 ~~financing~~Notes ~~costs~~and ~~related~~the guarantees thereof are effectively subordinated to any of the ~~Euro~~Issuers’ ~~Term~~and ~~Loan~~guarantors’ ~~Facility~~existing ~~was~~and ~~$3.8~~future ~~million~~secured ~~and~~debt, ~~$4.6~~including ~~million~~the Senior Secured Credit Facilities, ~~respectively.~~to Asthe extent of ~~October~~the 3value of the assets securing such debt. In addition, ~~2021~~the 2028 Notes and ~~January~~the 3,guarantees ~~2021,~~thereof rank senior in right of payment to all of the ~~remaining~~Issuers’ ~~unamortized~~and ~~balance~~guarantors’ ~~related~~future subordinated debt and will be structurally subordinated to the ~~Revolving~~liabilities ~~Credit~~of ~~Facility~~our ~~was~~non-guarantor $3subsidiaries.1 ~~million~~We ~~and~~incurred deferred financing costs of $312.49 million related to the 2028 Notes, ~~respectively.~~which ~~The~~were capitalized as deferred financing costs and are being amortized using the effective interest ~~rate~~method as a component of interest expense over the ~~Dollar~~life ~~Term~~of ~~Loan~~the ~~Facility~~2028 ~~and~~Notes. ~~Euro~~On ~~Term~~February ~~Loan~~5, ~~Facility~~2021, aswe used a portion of ~~October~~the 3,proceeds ~~2021~~from isour 5IPO to redeem $270.~~76%~~0 million aggregate principal amount of the 2028 Notes, plus accrued interest thereon and 3$19.~~88%,~~6 ~~respectively~~million of redemption premium. The redemption resulted in an

On January 27, 2020, we issued $675.0 million aggregate principal amount of 7.250% Senior Notes due 2028, on which interest is payable semi-annually in arrears on February 1 and August 1 of each year. The 2028 Notes will mature on February 1, 2028. The 2028 Notes and the guarantees thereof are our senior unsecured obligations and the 2028 Notes and the guarantees rank equally in right of payment with all of the Lux Co-Issuer’s and U.S. Co-Issuer’s (together, the “Issuers”) and guarantors’ existing and future senior debt, including the 2025 Notes. The 2028 Notes and the guarantees thereof are effectively subordinated to any of the Issuers’ and guarantors’ 30

39extinguishment loss recognized of $24.3 million for the fiscal quarter ended April 4, 2021, which consisted of $4.7 million of unamortized deferred issuance costs and $19.6 million of the redemption premium.

~~existing~~Concurrent ~~and~~with ~~future secured debt, including~~ the ~~Senior~~issuance ~~Secured Credit Facilities, to the extent~~ of the ~~value of the assets securing such debt. In addition, the~~ 2028 Notes, ~~and~~we ~~the~~entered ~~guarantees~~into ~~thereof~~a rank senior in right of payment to all of the Issuers’ and guarantors’ future subordinated debt and will be structurally subordinated to the liabilities of our non-guarantor subsidiaries. We incurred deferred financing costs of $12350.90 million ~~related~~U.S. toDollar ~~the~~equivalent ~~2028~~swap ~~Notes,~~to ~~which~~Japanese ~~were~~Yen-denominated ~~capitalized as deferred financing costs and are being amortized using the effective~~ interest ~~method~~at as a ~~component~~weighted ofaverage ~~interest~~rate ~~expense over the life~~ of ~~the 2028 Notes. On February~~ 5.56%, ~~2021,~~for ~~we used~~ a ~~portion~~five-year ~~of the proceeds from our IPO to redeem $270~~term.0 ~~million~~We ~~aggregate~~terminated ~~principal amount of~~ the ~~2028~~cross ~~Notes,~~currency ~~plus~~swaps ~~accrued~~on ~~interest~~April ~~thereon and $19.6 million of redemption premium. The redemption resulted in an extinguishment loss recognized of $24.3 million for the fiscal nine months ended October 3~~1, 2021, ~~which~~and ~~consisted~~received of $412.78 million of ~~unamortized~~cash ~~deferred~~from ~~issuance~~net ~~costs~~settlement ~~and~~subsequent ~~$19.6~~to ~~million~~April of4, ~~the redemption premium~~2021.

On ~~Concurrent~~June ~~with~~11, 2020, we issued $400.0 million aggregate principal amount of 7.375% Senior Notes due 2025 (“2025 Notes”) on which interest is payable semi-annually in arrears on June 1 and December 1 of each year. The 2025 Notes will mature on June 1, 2025. The 2025 Notes and the ~~issuance~~guarantees thereof are our unsecured obligations and the 2025 Notes and the guarantees thereof rank equally in right of payment with all of the Issuers’ and guarantors’ existing and future senior debt, including the 2028 Notes. The 2025 Notes and the guarantees thereof are effectively subordinated to any of the Issuers’ and guarantors’ existing and future secured debt, weincluding ~~entered~~the ~~into~~Senior aSecured ~~$350.0~~Credit ~~million~~Facilities, Uto the extent of the value of the assets securing such debt.S. ~~Dollar~~In ~~equivalent~~addition, ~~swap~~the 2025 Notes and the guarantees thereof rank senior in right of payment to ~~Japanese~~all ~~Yen~~of the Issuers’ and guarantors’ future subordinated debt and will be structurally subordinated to the liabilities of the Issuers’ non-~~denominated~~guarantor ~~interest~~subsidiaries. atWe aincurred ~~weighted~~deferred ~~average~~financing ~~rate~~costs of 5$7.~~56%~~5 million related to the 2025 Notes, ~~for~~which were capitalized as deferred financing costs and are being amortized using the effective interest method as a ~~five-year~~component ~~term.~~of Weinterest ~~terminated~~expense over the ~~cross~~life ~~currency~~of ~~swaps~~the on2025 ~~April~~Notes. 1On February 5, 2021, ~~and~~we ~~received~~used a portion of the proceeds from our IPO to redeem $12160.0 million aggregate principal amount of the 2025 Notes, plus accrued interest thereon and $11.8 million of ~~cash~~redemption ~~from~~premium. ~~net~~The ~~settlement~~redemption resulted in ~~the~~an ~~fiscal~~extinguishment ~~nine~~loss ~~months~~recognized of $14.5 million during the quarter ended ~~October~~April 34, 2021, which consisted of $2.7 million of unamortized deferred issuance costs and $11.8 million of the redemption premium.

OnWe ~~June~~or ~~11,~~our ~~2020~~affiliates, weincluding ~~issued~~investment ~~$400.0~~funds ~~million~~affiliated ~~aggregate~~with ~~principal~~Carlyle, ~~amount~~at ofany ~~7.375%~~time ~~Senior Notes due 2025 on which interest is payable semi-annually in arrears on June 1~~ and ~~December~~from 1time ofto ~~each year. The 2025 Notes will mature on June 1~~time, ~~2025.~~may ~~The~~purchase ~~2025 Notes and~~ the ~~guarantees thereof are our unsecured obligations and the~~ 2025 Notes, ~~and~~ the ~~guarantees~~2028 ~~thereof~~Notes ~~rank~~or ~~equally~~other inindebtedness ~~right~~ of ~~payment with all of~~ the ~~Issuers’~~Company. ~~and~~Any ~~guarantors’~~such ~~existing~~purchases ~~and~~may ~~future~~be ~~senior~~made ~~debt,~~through ~~including~~ the ~~2028~~open ~~Notes.~~market ~~The~~or ~~2025~~privately ~~Notes~~negotiated ~~and~~transactions ~~the~~with ~~guarantees~~third ~~thereof~~parties ~~are~~or ~~effectively~~pursuant ~~subordinated~~ to ~~any~~one ofor ~~the~~more ~~Issuers’~~tender ~~and~~or ~~guarantors’~~exchange ~~existing~~offers ~~and~~or ~~future secured debt~~otherwise, ~~including~~upon ~~the~~such ~~Senior~~terms ~~Secured~~and ~~Credit~~at ~~Facilities~~such prices, toas ~~the~~well ~~extent~~as ofwith ~~the value of the assets securing~~ such ~~debt.~~consideration, Inas ~~addition~~we, ~~the~~or ~~2025~~any ~~Notes and the guarantees thereof rank senior in right~~ of ~~payment~~our toaffiliates, ~~all~~may ofdetermine. ~~the~~Such ~~Issuers’~~purchases ~~and~~could ~~guarantors’~~result ~~future~~in ~~subordinated~~a ~~debt~~change ~~and will be structurally subordinated~~ to the ~~liabilities~~allocation ofbetween the Issuers’ ~~non-guarantor subsidiaries. We incurred deferred financing costs~~ of ~~$7.5~~the ~~million~~indebtedness ~~related~~represented toby the 2025 Notes, ~~which were capitalized as deferred financing costs~~ and ~~are being amortized using~~ the ~~effective~~2028 ~~interest method as a component of interest expense over the life of the 2025~~ Notes. Onand ~~February~~could 5,have ~~2021,~~important wetax ~~used~~consequences afor ~~portion~~holders of the ~~proceeds from our IPO to redeem $160.0 million aggregate principal amount of the~~ 2025 Notes, ~~plus accrued interest thereon~~ and ~~$11.8 million of redemption premium. The redemption resulted in an extinguishment loss recognized of $14.5 million for~~ the ~~fiscal~~2028 ~~nine months ended October 3, 2021, which consisted of $2~~Notes.~~7 million of unamortized deferred issuance costs and $11.8 million of the redemption premium.~~

In September 2016, we entered into an accounts receivable financing program (the “Financing Program”) with a financial institution. The Financing Program, which was fully paid off in June 2021 in connection with entry into the RPA (as defined below), was set to mature on January 24, 2022 and was secured by receivables from our U.S. business that are sold or contributed to a wholly-owned, consolidated, bankruptcy remote subsidiary. The bankruptcy remote subsidiary’s sole business consists of the purchase or receipt of the receivables and subsequent granting of a security interest to the financial institution under the program, and its assets were available first to satisfy obligations and were not available to pay creditors of our other legal entities. Under the Financing Program, we could borrow up to the lower of $75.0 million or 85% of the accounts receivable borrowing base. Interest on outstanding borrowings under the Financing Program was charged based on a per annum rate equal to the London Inter-bank Offered Rate (the “LIBOR Rate”) (with a floor of zero percent and as defined in the agreement) plus the LIBOR Rate margin (2.25 percentage points) if the related loan was a LIBOR Rate loan. Otherwise, the per annum rate was equal to a Base Rate (as defined in the Financing Program agreement) plus the base rate margin (1.25 percentage points). Interest was due and payable, in arrears, on the first day of each month. The Financing Program was also subject to termination under standard events of default as defined.

On June 11, 2021, Ortho-Clinical Diagnostics FinanceCo I, LLC (“Ortho FinanceCo I”), a wholly owned receivables financing subsidiary of us, entered into a receivables purchase agreement (the “RPA”) with Wells Fargo, N.A., as administrative agent (the “Agent”), and certain purchasers. Under the RPA, Ortho FinanceCo I may sell receivables in amounts up to a $75.0 million limit, subject to certain conditions, including that, at any date of determination, the aggregate capital paid to Ortho FinanceCo I does not exceed a “capital coverage amount,” equal to an adjusted net receivables pool balance minus a required reserve. Ortho FinanceCo I has guaranteed the prompt payment of the sold receivables, and to secure the prompt payment and performance of such guaranteed obligations, Ortho FinanceCo I has granted a security interest to the Agent, for the benefit of the purchasers, in all assets of Ortho FinanceCo I. We, in our capacity as master servicer under the RPA, are responsible for administering and collecting the receivables and have made customary representations, warranties, covenants and indemnities. We have also provided a performance guarantee for the benefit of Ortho FinanceCo I to cause the due and punctual performance by us of our obligations as master servicer. The proceeds of the RPA were used, in part, to pay off the outstanding balance of the Financing Program.

We or our affiliates, including investment funds affiliated with Carlyle, at any time and from time to time, may purchase Senior Notes or other indebtedness of the Company. Any such purchases may be made through the open market or privately negotiated transactions with third parties or pursuant to one or more tender or exchange offers or otherwise, upon such terms and at such prices, as well as with such consideration, as we, or any of our affiliates, may determine. Such purchases could result in a change to the allocation between the Issuers of the indebtedness represented by the Senior Notes and could have important tax consequences for holders of the Senior Notes.

Liquidity Outlook

Short-term liquidity outlook

We expect that our cash and cash equivalents, cash flows from operations and amounts available under the Revolving Credit Facility will be sufficient to meet debt service requirements, working capital requirements, and capital expenditures for the next 12 months from the issuance of these unaudited consolidated financial statements. Our ability to make scheduled payments of principal or interest on, or to refinance, our indebtedness or to fund working capital requirements, capital expenditures and other current obligations will depend on our ability to generate cash from operations. Such cash generation is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

We are focused on expanding the number of instruments placed in the field and solidifying long-term contractual relationships with customers. In order to achieve this goal, in certain jurisdictions where it is permitted, we have leveraged a reagent rental model that has been recognized as more attractive to certain customers. In this model, we lease, rather than sell, instruments to our customers. Over the term of the contract, the purchase price of the instrument is embedded in the price of the assays and reagents. Going forward, we intend to increase the number of reagent rental placements in developed markets, a strategy that we believe is beneficial to our commercial goals because it lowers our customers’ upfront capital costs and therefore allows purchasing decisions to be made at the lab manager level. For these same reasons, the reagent rental model also benefits our commercial strategy in emerging markets. We believe that the shift in our sales strategy will grow our installed base, thereby increasing sales of higher-margin assays, reagents and other consumables over the life of the customer contracts and enhancing our recurring revenue and cash flows. During the fiscal ~~nine~~quarter ~~months~~ ended ~~October~~April 3, ~~2021~~2022, we transferred $8221.69 million of instrument inventories from Inventories to Property, plant and equipment, further increasing our investment in property, plant and equipment. We currently estimate that we will transfer additional instrument inventories of approximately $40125 million during the remainder of fiscal year ~~2021~~2022.

Based on our forecasts, we believe that cash flow from operations, available cash on hand and available borrowing capacity under our Revolving Credit Facility will be sufficient to fund continuing operations for the next 12 months from the issuance of these unaudited consolidated financial statements. Our debt agreements contain various covenants that may restrict our ability to borrow on available credit facilities and future financing arrangements and require us to remain below a specific credit coverage threshold. Our credit agreement has a financial covenant (ratio of Net First Lien Secured Debt to Adjusted EBITDA not to exceed 5.5-to-1, subject to a 50 basis point step-down on September 30, 2022) that is tested when borrowings and letters of credit issued under the Revolving Credit Facility exceed 30% of the committed amount at any period end reporting date. As of ~~October~~April 3, ~~2021~~2022, we had no outstanding borrowings under our Revolving Credit Facility. Due to the current economic and business uncertainty resulting from the ongoing COVID-19 pandemic, from time to time we may borrow from our Revolving Credit Facility, if needed, for the remainder of fiscal year 2021. We believe that we will continue to comply with the financial covenant for the next 12 months. In the event we do not comply with the financial covenant of the Revolving Credit Facility, the lenders will have the right to call on all of the borrowings under the Revolving Credit Facility. If the lenders on the Revolving Credit Facility terminate their commitments and accelerate the loans, this would become a cross default to other material indebtedness. We believe that we will continue to be in compliance with these covenants. However, should it become necessary, we may seek to raise additional capital within the next 12 months through borrowings on credit facilities, other financing activities and/or the private sale of equity securities.

pandemic, from time to time we may borrow from our Revolving Credit Facility, if needed, for the remainder of fiscal year 2022. We believe that we will continue to comply with the financial covenant for the next 12 months. In the event we do not comply with the financial covenant of the Revolving Credit Facility, the lenders will have the right to call on all of the borrowings under the Revolving Credit Facility. If the lenders on the Revolving Credit Facility terminate their commitments and accelerate the loans, this would become a cross default to other material indebtedness. We believe that we will continue to be in compliance with these covenants. However, should it become necessary, we may seek to raise additional capital within the next 12 months through borrowings on credit facilities, other financing activities and/or the private sale of equity securities.

Long-term liquidity outlook

UKWe ~~Holdco~~are is a holding company with no business operations or assets other than cash, the capital stock of our direct and indirect subsidiaries, miscellaneous administrative costs and intercompany loan receivables. Consequently, UKwe ~~Holdco~~are is dependent on loans, dividends, interest and other payments from its subsidiaries to make principal and interest payments on our indebtedness, meet working capital requirements and make capital expenditures. As presently structured, ~~its~~our operating subsidiaries are the sole source of cash for such payments and there is no assurance that the cash for those interest payments will be available. We believe our organizational structure will allow the necessary flexibility to move funds throughout our subsidiaries to meet our operational working capital needs. In the future, the Issuers and borrowers under our Senior Secured Credit Facilities may also need to refinance all or a portion of the borrowings under the ~~Senior~~2025 Notes, the 2028 Notes and the Senior Secured Credit Facilities on or prior to maturity. If refinancing is necessary, there can be no assurance that we will be able to secure such financing on acceptable terms, or at all.

Our ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future. This is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control as well as the factors described in Part 1, Item 1A, “Risk ~~factors~~Factors” and “~~Special note regarding forward~~Forward-looking statements” in our Annual Report on Form 10-K for the fiscal year ended January 32, ~~2021~~2022.

Recent accounting pronouncements

Information regarding new accounting pronouncements is included in Note 3 – Recent accounting pronouncements to the unaudited consolidated financial statements.

Critical accounting estimates and summary of significant accounting policies

Significant accounting policies are those accounting policies that can have a significant impact on the presentation of our financial condition and results of operations and that require the use of complex and subjective estimates based upon past experience and management’s judgment. Because of the uncertainty inherent in such estimates, actual results may differ materially from these estimates. The policies applied preparing our interim unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q are those that management believes are the most dependent on estimates and assumptions. There have been no changes to our critical accounting estimates and significant accounting policies previously disclosed in our Annual Report on Form 10-K for the fiscal year ended January 32, ~~2021~~2022.

Off-balance sheet arrangements

We do not have any significant off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Our business and financial results are affected by fluctuations in world financial markets, including interest rates and currency exchange rates. We manage these risks through normal operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. We have policies governing our use of derivative instruments, and we do not enter into financial instruments for trading or speculative purposes.

Interest rate risk

We are subject to interest rate market risk in connection with our long-term debt. Our principal interest exposure will relate to outstanding amounts under our Senior Secured Credit Facilities. Our Senior Secured Credit Facilities provide for variable rate borrowings of up to $2,~~150~~325.0 million under the Dollar Term Loan Facility, ~~including~~€337.4 upmillion tounder the Euro Term Loan Facility and $500.0 million under our Revolving Credit Facility. Assuming our Senior Secured Credit Facilities are fully drawn (and to the extent that LIBOR is in excess of the ~~zero~~0.00% floor rate of our Senior Secured Credit Facilities), each one-eighth percentage point increase or decrease in the applicable interest rates would correspondingly change our interest expense on our Senior Secured Credit Facilities by approximately $2.76 million per year before considering the impact of derivative instruments. For further discussion of the risks related to our Senior Secured Credit Facilities, see “Risk factors—Risks related ~~with~~to our indebtedness—Our substantial indebtedness could adversely affect our financial condition, limit our ability to raise additional capital to fund our operations and prevent us from fulfilling our obligations under our indebtedness” in our Annual Report on Form 10-K for the fiscal year ended January 32, ~~2021~~2022.

We selectively use derivative instruments to reduce market risk associated with changes in interest rates. The use of derivatives is intended for hedging purposes only and we do not enter into derivative instruments for speculative purposes. As of October 3, 2021, we have an interest rate cap agreement to hedge our interest rate exposures related to our variable rate borrowings under the Senior Secured Credit Facilities with an interest rate cap amount of 3.5%, with caplets that mature through December 31, 2023.32

We ~~also~~selectively ~~have~~use ~~entered~~derivative ~~into~~instruments anto ~~interest~~reduce ~~rate~~market ~~swap~~risk ~~agreement,~~associated ~~which~~with ~~fixed~~changes ain ~~portion of the variable~~ interest ~~due~~rates. onThe ~~our~~use ~~variable~~of ~~rate~~derivatives ~~debt.~~is ~~Under~~intended ~~the~~for ~~terms~~hedging ofpurposes ~~the~~only ~~agreement,~~and we ~~will~~do ~~pay~~not aenter ~~fixed~~into ~~rate~~derivative ofinstruments ~~1.635%~~for ~~and~~speculative ~~receive~~purposes. aAs ~~variable rate~~ of ~~interest~~April ~~based~~3, on2022, ~~one-month~~we ~~LIBOR~~have ~~(as~~an ~~defined)~~interest ~~from~~rate ~~the~~cap ~~counterparty~~agreement ~~which~~to ishedge ~~reset~~our ~~every~~interest ~~month~~rate ~~through~~exposures ~~December~~related ~~31,~~to ~~2023.~~our Asvariable ofrate ~~October~~borrowings 3,under ~~2021,~~ the ~~notional~~Senior ~~amount~~Secured ofCredit ~~the~~Facilities with an interest rate ~~swap~~cap ~~was~~amount ~~$1,500~~of ~~million~~3.5%, ~~The~~with ~~notional~~caplets ~~value~~that ofmature ~~this~~through ~~instrument~~December ~~is expected to be $1~~31,~~000~~ ~~million in fiscal 2022 and $500 million in fiscal~~ 2023.

We also have entered into an interest rate swap agreement, which fixed a portion of the variable interest due on our variable rate debt. Under the terms of the agreement, we will pay a fixed rate of 1.635% and receive a variable rate of interest based on one-month LIBOR (as defined) from the counterparty which is reset every month through December 31, 2023. As of April 3, 2022, the notional amount of the interest rate swap was $1,000.0 million. The notional value of this instrument is expected to be $500.0 million in fiscal 2023.

Foreign exchange rates risk

We are exposed to foreign currency risk by virtue of our international operations. We derived approximately 4946% of our revenue for the fiscal ~~nine~~quarter ~~months~~ ended ~~October~~April 3, ~~2021~~2022 outside the United States. For translation of operations in non-U.S. Dollar currencies, the local currency of most entities is the functional currency. Our foreign assets and liabilities are translated into U.S. Dollars at the exchange rates existing at the respective balance sheet dates, and income and expense items are translated at the average exchange rate for each relevant period. Foreign exchange effects from the translation of our balance sheet resulted in a comprehensive loss of $136.96 million and $218.78 million for the fiscal quarter ~~and nine months~~ ended ~~October~~April 3, ~~2021,~~2022 ~~respectively. Foreign exchange effects from the translation of our balance sheet resulted in a comprehensive gain of $8.1 million~~ and ~~$1.7~~April ~~million for the fiscal quarter and nine months ended September 27~~4, ~~2020~~2021, respectively. Adjustments resulting from the re-measurement of transactions denominated in foreign currencies other than the functional currency of our subsidiaries are expensed as incurred.

In the majority of our jurisdictions, we earn revenue and incur costs in the currency used in such jurisdiction. We incur significant costs in foreign currencies including Brazilian Real, British Pound, Chinese Yuan/Renminbi, Euro, Indian Rupee, Japanese Yen, Mexican Peso, and the Swiss Franc. As a result, movements in exchange rates cause our revenue and expenses to fluctuate, impacting our profitability and cash flows. Future business operations and opportunities, including the continued expansion of our business outside North America, may further increase the risk that cash flows resulting from these activities may be adversely affected by changes in currency exchange rates.

Like many multi-national companies, we have exposure to the British Pound. We are negatively impacted by a lower British Pound exchange rate from translation impact when compared to the U.S. Dollar, but we also benefit from expenses denominated in British Pound, as well as some cross-border transactions at a lower exchange rate. The magnitude of the impact is dependent on our business volumes in the UKU.K., forward contract hedge positions, cross currency volume and the exchange rate.

Additionally, in order to fund the purchase price for the assets and capital stock of certain non-U.S. entities, a combination of equity contributions and intercompany loans were utilized to capitalize certain non-U.S. subsidiaries. In many instances, the intercompany loans are denominated in currencies other than the functional currency of the affected subsidiaries. Where intercompany loans are not a component of permanently invested capital of the affected subsidiaries, increases or decreases in the value of the subsidiaries’ functional currency against other currencies will affect our results of operations. During the fiscal quarter ~~and nine months~~ ended ~~October~~April 3, ~~2021,~~2022 ~~we recorded foreign currency exchange gains of $0.7 million~~ and ~~$0.3~~April ~~million~~4, ~~respectively.~~2021 ~~During the fiscal quarter and nine months ended September 27, 2020,~~ we recorded net foreign currency exchange gains of $51.47 million and ~~foreign currency exchange losses of~~ $490.49 million, respectively. The foreign currency gains/losses in each period primarily consist of unrealized gains/losses related to intercompany loans denominated in currencies other than the functional currency of the affected subsidiaries. We may enter into derivative instruments to manage our foreign currency exposure on these intercompany loans in the future.

Foreign exchange risk is also managed through the use of foreign currency debt. During the fiscal quarter ended ~~October~~April 3, ~~2021~~2022, €260.0 million ($~~301~~287.51 million) of our senior secured Euro Term Loan Facility has been designated as, and is effective as, economic hedges of the net investment in a foreign operation. Accordingly, foreign currency transaction gains or losses due to spot rate fluctuations on the Euro-denominated debt instruments are included in foreign currency translation adjustments within AOCI.

We have entered into foreign-currency forward contracts to manage our foreign currency exposures on foreign currency denominated firm commitments and forecasted foreign currency denominated intercompany and third-party transactions. We had forward contracts outstanding with total notional amount of $~~423~~689.76 million as of ~~October~~April 3, ~~2021~~2022, with maturity dates through ~~January~~November 2022. Foreign-currency forward contracts that qualified and were designated for hedge accounting are recorded at their fair value as of ~~October~~April 3, ~~2021~~2022 and the unrealized loss of $1.61 million is reported as a component of other comprehensive loss, all of which is expected to be reclassified to earnings in the next 12 months. Actual gains (losses) upon settlement will be recognized in earnings, within the line item impacted, during the estimated time in which the transactions are incurred. Actual losses upon settlement of $21.75 million and gains upon settlement of $43.5 million were recognized in earnings during the fiscal ~~nine~~quarter ~~months~~ ended ~~October~~April 3, ~~2021~~2022 and ~~September~~April 274, ~~2020~~2021, respectively.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

~~Our~~As ~~management~~required by Rule 13a-15 under the Exchange Act, as amended, we carried out an evaluation under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), ~~has~~of ~~evaluated~~ the effectiveness of the design and operation of our disclosure controls and procedures. ~~(as~~Regulations ~~that~~under ~~term~~the isExchange Act require public companies, including us, to maintain “disclosure controls and procedures,” as defined in ~~Rules~~Rule 13a-15(e) and 15d-15(e) under the ~~Securities~~ Exchange Act ofto ~~1934,~~mean asa ~~amended~~company’s (controls and other procedures that are designed to ensure that information required to be disclosed in reports that it files or submits under the “Exchange Act~~”))~~ asis ofrecorded, ~~the~~processed, ~~end~~summarized, ofand reported within the ~~period~~time ~~covered~~periods byspecified ~~this~~in ~~Quarterly~~the ~~Report~~SEC’s onrules ~~Form~~and ~~10-Q.~~forms ~~Based~~and onthat such ~~evaluation~~information is accumulated and communicated to management, including our CEO and CFO, ~~have~~or ~~concluded~~persons ~~that~~performing assimilar ~~of such date~~functions, ~~our~~as ~~disclosure~~appropriate ~~controls~~to ~~and~~allow ~~procedures~~timely ~~were~~decisions ~~effective~~regarding atrequired ~~the~~or ~~reasonable~~necessary ~~assurance level~~disclosures.

InThere ~~designing~~are ~~and~~inherent ~~evaluating~~limitations to the effectiveness of any system of disclosure controls and procedures, ~~management~~including ~~recognizes~~the ~~that~~possibility ~~any~~of human error and the circumvention or overriding of the controls and procedures. Accordingly, noeven ~~matter~~effective ~~how~~disclosure ~~well~~controls ~~designed~~ and ~~operated,~~procedures can ~~provide~~ only provide reasonable assurance of achieving ~~the~~their ~~desired~~ control objectives. Based on such evaluation, our CEO and CFO have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as ~~that term is~~ defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended ~~October~~April 3, ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

4334

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are from time to time a party to legal proceedings which arise in the normal course of business. We do not believe any pending litigation to be material, the outcome of which would, in management’s judgment based on information currently available, have a material adverse effect on our results of operations or financial condition. See Note ~~15 -~~ 14–Commitments and contingencies to the interim unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors.

Except as set forth herein, there are no other material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for our fiscal year ended January 32, ~~2021~~2022 or any of our subsequently filed reports.

~~Our~~The ~~collection,~~ongoing ~~use~~military ~~and~~action ~~disclosure~~between ofRussia ~~personal information, including health information, is subject to federal~~ and ~~state privacy and security regulations~~Ukraine, ~~as well as data privacy~~ and ~~security~~the ~~laws~~global ~~outside~~response ~~the~~to ~~United States~~it, ~~including~~could inadversely ~~the~~affect ~~European~~our ~~Economic Area (the “EEA”)~~business, ~~the~~financial ~~United~~condition ~~Kingdom~~ and ~~the~~results ~~People’s Republic~~ of ~~China, and our failure to comply with those laws and regulations or to adequately secure the information we hold could result in significant liability or reputational harm~~operations.

~~The~~On ~~Health~~February ~~Insurance~~24, ~~Portability and Accountability Act of 1996~~2022, asRussian ~~amended~~military byforces ~~the~~commenced ~~Health~~military ~~Information~~operations ~~Technology~~in ~~for~~Ukraine, ~~Economic~~ and ~~Clinical~~sustained ~~Health~~conflict ~~Act of 2009~~ and ~~their~~disruption ~~implementing~~in ~~regulations (collectively referred to as “HIPAA”) as well as numerous other federal and state laws and regulations, govern~~ the ~~collection,~~region ~~dissemination,~~is ~~use,~~likely. ~~privacy,~~The ~~security~~length, ~~confidentiality,~~impact ~~integrity~~ and ~~availability~~outcome of ~~personally~~the ~~identifiable~~ongoing ~~information~~military ~~(“PII”),~~conflict ~~including~~in ~~protected~~Ukraine ~~health~~is ~~information~~highly ~~(“PHI”).~~unpredictable ~~HIPAA applies national privacy~~ and ~~security~~could ~~standards~~lead ~~for PHI~~ to ~~covered~~significant ~~entities,~~market ~~including certain types of health care entities~~ and ~~their~~other ~~service providers that access PHI~~disruptions, ~~known~~including assignificant ~~business~~volatility ~~associates.~~in ~~HIPAA~~commodity ~~requires~~prices ~~covered entities~~ and ~~business~~supply ~~associates~~of toenergy ~~maintain policies and procedures governing PHI that is used or disclosed~~resources, ~~and~~instability toin ~~implement~~financial ~~administrative~~markets, ~~physical~~supply ~~and~~chain ~~technical safeguards to protect PHI~~interruptions, ~~including~~political ~~PHI maintained, used~~ and ~~disclosed~~social ~~in electronic form. These safeguards include employee training~~instability, ~~identifying~~changes business associates with whom covered entities need to enter into HIPAA-compliant contractual arrangements and various other measures. While we undertake substantial efforts to secure the PHI we maintain, use and disclose in ~~electronic~~consumer ~~form, a cyberattack~~ or ~~other~~purchaser ~~intrusion~~preferences ~~that~~as ~~bypasses~~well ~~our~~as ~~information~~increase ~~security systems causing an information security breach, loss of PHI, PII or other data subject to privacy laws or a material disruption of our operational systems could result~~ in acyberattacks ~~material adverse impact on our business, along with potentially substantial fines~~ and ~~penalties~~espionage. ~~Ongoing implementation and oversight of these security measures involves significant time, effort and expense.~~

~~HIPAA~~The ~~requires~~military ~~covered~~conflict ~~entities~~in Ukraine has led to an unprecedented expansion of sanction programs imposed against Russia by the United States, Canada, the European Union, the United Kingdom, Switzerland, and Japan, among others, that in relevant part, impose sanctions against some of the largest state-owned and private Russian financial institutions (and their ~~business~~subsequent ~~associates~~removal tofrom ~~report~~the ~~breaches~~Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system) and certain Russian businesses, some of ~~unsecured~~which ~~PHI~~have significant financial and trade ties to ~~affected~~the ~~individuals~~European ~~without~~Union. ~~unreasonable~~In ~~delay~~response to new international sanctions, and inas nopart ~~case~~of ~~later~~measures ~~than~~to 60stabilize ~~days~~and ~~after~~support the ~~discovery~~volatile Russian financial and currency markets, the Russian authorities imposed significant currency control measures aimed at restricting the outflow of foreign currency and capital from Russia, imposed various restrictions on transacting with non-Russian parties, banned exports of various products and imposed other economic and financial restrictions. The situation is rapidly evolving, and the ~~breach~~United byStates, the ~~covered~~European ~~entity~~Union, the United Kingdom and other countries may implement additional sanctions, export controls or ~~its~~other ~~agents~~measures against Russia and other countries, regions, officials, individuals or industries in the respective territories. Such sanctions and measures, as well as existing and potential further responses from Russia or other countries, could adversely affect the global economy and financial markets, as well as our business, financial condition and results of operations, which may also magnify the impact of other risks described in our Annual Report on Form 10-K for our fiscal year ended January 2, 2022.

~~Notification~~We ~~must~~are ~~also~~actively bemonitoring ~~made to~~ the ~~U.S.~~situation ~~Department~~in ofUkraine ~~Health~~ and ~~Human~~assessing ~~Services~~its ~~(“HHS”)~~impact ~~and~~on our business, inincluding ~~certain~~our ~~situations~~business ~~involving~~partners ~~large~~and ~~breaches~~customers, toalthough ~~the~~our ~~media.~~business ~~The~~operations ~~HIPAA~~involving ~~rules~~Russia ~~created~~and aUkraine ~~presumption~~do ~~that~~not ~~all~~constitute ~~non-permitted~~a ~~uses~~material orportion ~~disclosures~~ of ~~unsecured~~our ~~PHI~~business. ~~are~~However, ~~breaches unless~~ the ~~covered~~extent ~~entity~~and ~~establishes~~duration ~~that~~of ~~there is a low probability~~ the ~~information~~military ~~has~~action, ~~been~~sanctions ~~compromised.~~and Aresulting ~~data~~market ~~breach~~disruptions ~~affecting~~could ~~sensitive~~be ~~personal~~significant ~~information,~~and ~~including~~could ~~health~~potentially ~~information,~~have ~~also~~substantial ~~could~~impact ~~result~~on inthe ~~significant~~global ~~legal~~economy and ~~financial~~our ~~exposure~~business ~~and~~for ~~reputational damages that could potentially have~~ an ~~adverse~~unknown ~~effect~~period onof ~~our business~~time.

HIPAA also authorizes state attorney generals to bring civil actions seeking either an injunction or damages in response to violations of HIPAA privacy and security regulations that threaten the privacy of state residents. While HIPAA does not create a private right of action allowing individuals to sue us in civil court for violations of HIPAA’s requirements, its standards have been used as a basis for the duty of care in state civil suits, such as those for negligence or recklessness in the handling of PHI. In addition, HIPAA mandates that the Secretary of HHS conduct periodic compliance audits of covered entities and business associates.

In addition, many states in which we operate may impose laws that are more protective of the privacy and security of PII than HIPAA. Where these state laws are more protective than HIPAA, we may have to comply with their stricter provisions. Not only may some of these state laws impose fines and penalties upon violators, but some may afford private rights of action to individuals who believe their PII has been misused.

Both state and federal laws and regulations are subject to modification or enhancement of privacy and security protections at any time. Our business will continue to remain subject to any federal and state privacy-related laws and regulations that are more restrictive than the privacy regulations issued under HIPAA. Sweeping privacy measures in certain states such as the California Consumer Privacy Act impose European-like standards for the protection of personal data and allow for a private right of action. These statutes vary and could impose additional requirements on us and more severe penalties for disclosures of confidential health information. New health and consumer information standards could have a significant effect on the manner in which we do business, and the cost of complying with new standards could be significant. We may not remain in compliance with the diverse privacy and

security requirements in all of the jurisdictions in which we do business. If we fail to comply with such state laws, we could incur substantial civil monetary or criminal penalties.

We are also subject to data privacy and security laws in jurisdictions outside of the United States. For example, in the EEA and the United Kingdom, we are subject to the General Data Protection Regulation 2016/679 (the “GDPR”), which could limit our ability to collect, control, process, share, disclose and otherwise use personal data (including health and medical information which are subject to strict requirements). Complying with the GDPR could cause our compliance costs to increase, ultimately having an adverse impact on our business. We are implementing measures to comply with these laws as part of our comprehensive compliance program with input from external advisors to address our compliance with these obligations under the GDPR. Failure to comply with the GDPR may result in fines up to the greater of €20 million or 4% of total annual revenue. In addition to the foregoing, a breach of the GDPR could result in regulatory investigations, reputational damage, orders to cease or change our processing of our data, enforcement notices or assessment notices (for a compulsory audit). We may also face civil claims including representative actions and other class action type litigation (where individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, diversion of internal resources and reputational harm. In addition, beginning in 2021 when the transitional period following Brexit expires, we will be required to comply with both the GDPR and the Data Protection Act of 2018 (the “U.K. GDPR”), with each regime having the ability to fine up to the greater of €20 million (in the case of the GDPR) or £17 million (in the case of the U.K. GDPR) and 4% of total annual revenue. The relationship between the United Kingdom and the European Union in relation to certain aspects of data protection law remains unclear including, for example, how data transfers between EU member states and the United Kingdom will be treated and the role of the Information Commissioner’s Office following the end of the transitional period. These changes could lead to additional costs and increase our overall risk exposure.

We are also subject to European Union rules with respect to cross-border transfers of personal data out of the EEA and the United Kingdom. Recent legal developments in Europe have created complexity and uncertainty regarding transfers of personal data from the EEA to the United States. For instance, on July 16, 2020, the Court of Justice of the European Union (the “CJEU”) invalidated the EU-U.S. Privacy Shield Framework (the “Privacy Shield”) under which personal data could be transferred from the EEA to U.S. entities who had self-certified under the Privacy Shield scheme.

While the CJEU did not invalidate standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism, and potential alternative to the Privacy Shield), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances. We currently rely on the standard contractual clauses among other data transfer mechanisms allowed pursuant to the GDPR to transfer personal data outside the EEA or the United Kingdom, including to the United States. These recent developments will require us to review and consider amending the legal mechanisms by which we make and receive personal data transfers to the United States and other countries outside the EEA/UK. As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints, regulatory investigations or fines, and if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services and the geographical location or segregation of our relevant systems and operations, which could adversely affect our financial results.

We depend on a number of third parties in relation to the operation of our business, a number of which process personal data on our behalf. With each such third party, we attempt to mitigate the associated risks of using third parties by performing applicable security assessments and detailed due diligence, entering into contractual arrangements to require that providers only process personal data according to our instructions, and that they have sufficient technical and organizational security measures in place. Where we transfer personal data outside the EEA or the United Kingdom to such third parties, we do so in compliance with the relevant data export requirements, as described above. There is no assurance that these contractual measures and our own privacy and security-related safeguards will fully protect us from the risks associated with the third-party processing. Any violation of data or security laws by our third party processors could have a material adverse effect on our business and result in the fines and penalties outlined below.

We are also subject to evolving privacy laws on cookies and e-marketing. In the European Union, regulators are increasingly focusing on compliance with requirements in the online behavioral advertising ecosystem, and current national laws that implement the ePrivacy Directive will be replaced by an EU regulation known as the ePrivacy Regulation which will significantly increase fines for non-compliance. While the text of the ePrivacy Regulation is still under development, a recent European court decision and regulators’ recent guidance are driving increased attention to cookies and tracking technologies. In the United States, the Federal Trade Commission and many state laws have increasingly focused on the collection and use of behavioral data including geolocation and biometric information. As regulators start to enforce a strict approach (which has already started in Germany), this could lead to substantial costs, require significant systems changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, adversely affect our margins, increase costs and subject us to additional liabilities.

Recently, many countries have enacted legislation to strengthen privacy laws to protect their residents’ personal data. Some countries’ laws have been modeled on GDPR, including fines and penalties such as Brazil’s enacted data protection law and similar

pending legislation in Chile. We are currently monitoring the evolving data protection landscape so that we can comply with the requirements in the countries in which we do business.

Data compliance in other countries outside EEA, the United Kingdom and the United States are even more complex and varied making it difficult to comply with them all. China’s legislation and regulation of the health care industry involves multiple pieces of legislation prescribing complex regulatory requirements governing different types of data across a continuum of care, and various supervisory authorities frequently conduct inspections and investigations. For example, under China’s Cybersecurity Law, any collection, use, transfer and storage of personal information of a Chinese citizen through a network by the network operator should be based on the three principles of legitimacy, justification and necessity and requires the consent of the data subject. The rules, purposes, methods and ranges of such collection should also be disclosed to the data subject. China’s data localization requirements are becoming increasingly common in sector-specific regulations. China’s Cybersecurity Law requires operators of critical information infrastructure (“CIIOs”) to store personal information and important data collected and generated from the critical information infrastructure within China. Failure to do so can result in fines of up to RMB 100,000 for the relevant entity as well as for the personnel directly responsible.

Building on this, China’s Data Security Law (“Data Security Law”) became effective on September 1, 2021. The primary purpose of the Data Security Law is to regulate data activities, safeguard data security, promote data development and usage, protect individuals and entities’ legitimate rights and interests, and safeguard state sovereignty, state security and development interests. The Data Security Law applies extraterritorially, and to a broad range of activities that involve “data” (not only personal or sensitive data). Under the Data Security Law, entities and individuals carrying out data activities must abide by various data security obligations. For example, the Data Security Law proposes to classify and protect data based on the importance of data to the state’s economic development, as well as the degree of harm it will cause to national security, public interests, or legitimate rights and interests of individuals or organizations when such data is tampered with, destroyed, leaked, or illegally acquired or used. The appropriate level of protective measures is required to be taken for each respective class of data. The Data Security Law also echoes the data localization requirement in the Cybersecurity Law and requires important data to be stored locally in China. Such important data may only be transferred outside of China subject to compliance with certain data transfer restrictions, such as passing a security assessment organized by the relevant authorities.

Notably, the PIPL, similar to the GDPR, applies extraterritorially. The PIPL is intended to clarify the scope of application, the definitions of personal information and sensitive personal information (which includes medical and health information), the legality of personal information processing and the basic requirements of notice and consent, among other things. The PIPL also sets out data localization requirements for CIIOs and personal information processors who process personal information above a certain threshold prescribed by the relevant authorities. The PIPL also includes a list of rules which must be complied with prior to the transfer of personal information outside of China, such as compliance with a security assessment or certification by an agency designated by the relevant authorities or entering into standard form model contracts approved by the relevant authorities with the overseas recipient. Failure to comply with PIPL can result in fines of up to RMB 50 million or 5% of the prior year’s total annual revenue for the personal information processor and/or a suspension of services or data processing activities. Other potential penalties include a fine of up to RMB 1 million on the person in charge or directly responsible personnel and, in serious cases, individuals and entities may be exposed to criminal liabilities under other local Chinese law, such as the Criminal Law of the People’s Republic of China. The PIPL also prohibits responsible personnel for violations of the PIPL from holding high level management or data protection officer positions in relevant enterprises.

In addition to China’s Cybersecurity Law, the Data Security Law and the PIPL, the relevant government authorities of People Republic of China promulgated several regulations or released a number of draft regulations for public comments which are designed to provide further implemental guidance in accordance with the laws mentioned above.

We cannot predict what impact the new laws and regulations, in particular the Data Security Law or PIPL, or the increased costs of compliance, if any, will have on our operations in China due to their recent enactment and the limited guidance available, particularly on PIPL, which entities are awaiting further guidance on. It is also generally unclear how the laws will be interpreted and enforced in practice by the relevant government authorities as often the abovementioned laws are drafted broadly and thus leaves great discretion to the relevant government authorities to exercise.

Compliance with China’s data laws mentioned above, GDPR and the various other global data privacy laws that we are subject to has required, and may continue to require, significant company resources and expenditures, and may require further changes in our products, services or business model that increase competition or reduce revenue.

We are no longer a “controlled company” within the meaning of Nasdaq rules and the rules of the SEC and may have difficulties complying with Nasdaq rules relating to the composition of our Board of Directors and certain committees.

Our ordinary shares are listed on Nasdaq. Prior to September 2021, we were a “controlled company” within the meaning of the corporate governance standards of Nasdaq. Under these rules, we were not subject to a number of corporate governance rules relating to the composition of our Board of Directors and certain committees. Following the sale of our ordinary shares by the Principal

Shareholder in September 2021, we are no longer a controlled company. Under Nasdaq rules and the rules of the SEC, we are permitted to phase into compliance with certain corporate governance requirements from which we were previously exempt, including:

• the requirement that a majority of our Board of Directors consist of “independent directors” as defined under the rules of Nasdaq;

• the requirement that we have a compensation committee that is composed entirely of directors who meet the Nasdaq independence standards for compensation committee members; and

• the requirement that our director nominations be made, or recommended to our full Board of Directors, by our independent directors or by a nominations committee that consists entirely of independent directors.

While we intend to comply with these Nasdaq rules, we may not be able to attract and retain the number of independent directors required of our Board of Directors or certain of our committees.

The Principal Shareholder will continue to have the ability to significantly influence our decisions, and their interests may not be aligned with yours.

As of September 14, 2021, the Principal Shareholder owned approximately 49.9% of our ordinary shares and continues to exercise significant influence over our affairs and policies. Pursuant to our Articles of Association, the Principal Shareholder continues to have the ability to nominate for appointment up to eight of our directors until it owns less than 35% of our ordinary shares. As a result, the Principal Shareholder and its designees to our Board of Directors currently have the ability to control: the appointment of management, the entry into mergers, sales of substantially all of our assets and other extraordinary transactions. The directors appointed have authority to issue additional shares, implement stock repurchase programs, declare interim dividends, recommend final dividends, and make other decisions. The interests of the Principal Shareholder could conflict with your interests. For example, the Principal Shareholder may also have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in its judgment, could enhance its equity investments. Additionally, the Principal Shareholder is in the business of making investments in companies, and may from time to time acquire interests in businesses that directly or indirectly compete with certain portions of our business or are suppliers or customers of ours.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.


Period	(a) Total Number of Shares Purchased (1)		(b) Average Price Paid Per Share (1)		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
First Quarter:
1/3/2022 - 1/30/2022		214	$	21.12		—	$	—
1/31/2022 - 2/27/2022		—	$	—		—	$	—
2/28/2022 - 4/3/2022		214	$	18.66		—	$	—
Total as of and for the quarter ended April 3, 2022		428	$	19.89		—	$	—

(1) The 428 shares acquired as of and for the quarter ended April 3, 2022 represent ordinary shares acquired by us from a director who surrendered shares to satisfy his minimum statutory tax withholding requirements on equity awards granted under our 2021 Incentive Award Plan.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

ExhibitNumber	Description	Form	File No.	Exhibit	Filing Date
10.1	Form of Retention/Loyalty Bonus Opportunity and Agreement	8-K	001-39956	99.1	January 18, 2022
10.2	Omnibus Amendment to Award Agreements, approved by the Compensation Committee on April 1, 2022	8-K	001-39956	99.1	April 7, 2022
10.3	Letter Agreement dated April 7, 2022 between the Company and Michael Schlesinger	8-K	001-39956	99.2	April 7, 2022
10.4	Letter Agreement dated April 3, 2022 between the Company and Christopher Smith	8-K	001-39956	99.3	April 7, 2022
10.5	Amended and restated Special Advisor Agreement dated April 3, 2022 between Christopher Smith and Coronado Topco, Inc.	8-K	001-39956	99.4	April 7, 2022
31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				Filed Herewith
31.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				Filed Herewith
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				Furnished Herewith
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				Furnished Herewith
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags areembedded within the Inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema Document				Filed Herewith
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document				Filed Herewith
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document				Filed Herewith
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document				Filed Herewith
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document				Filed Herewith
104	Cover Page Interactive Data File––the cover page interactive data file does not appear in the Interactive Data File becauseits XBRL tags are embedded within the Inline XBRL document

4837

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Ortho Clinical Diagnostics Holdings plc
Date: November 8, 2021	By:	/s/ Christopher M. Smith
Date: May 9, 2022	By:	/s/ Christopher M. Smith
		Christopher M. Smith
		Chairman and Chief Executive Officer
Date: November 8, 2021	By:	/s/ Joseph M. Busky
		(Principal Executive Officer)
Date: May 9, 2022	By:	/s/ Joseph M. Busky
		Joseph M. Busky
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

4938

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