PATHEON, INC. 
By Top-line growth at 36.6 percent
TORONTO, Jan. 10, 2014 /PRNewswire/ - Patheon Inc. (TSX: PTI), a leading provider of contract development and commercial manufacturing services to the global pharmaceutical industry, announced today full year results for fiscal 2013.
Highlights for the year include:
-- Revenues for the year increased to $1,023.1 million from $749.1
million in the same period last year, an increase of $274.0
million or 36.6 percent. Revenue resulting from the Banner
acquisition was $217.3 million.
-- Gross profit for the year increased to $249.1 million from
$159.3 million in the same period last year, an increase of
$89.8 million or 56.4 percent.
-- Adjusted EBITDA increased in the current fiscal year to $146.2
million from $87.4 million in the same period last year, an
increase of $58.8 million.
-- Loss from continuing operations improved to $35.7 million from
a loss of $106.4 million in the prior year, an improvement of
$70.7 million.
In addition, as previously announced, Patheon has entered into an arrangement agreement with JLL/Delta Patheon Holdings, L.P., a limited partnership under which Patheon will be taken private pursuant to a court-approved plan of arrangement under the Canada Business Corporations Act. The new company has not been named and is being called NewCo. NewCo will be a leading global contract development and manufacturing organization with anticipated fiscal 2014 sales of about $2.0 billion (pro-forma) and a strong EBITDA and operational cash flow. NewCo is sponsored by an entity controlled by JLL Partners, Inc. and Koninklijke DSM N.V.
About Patheon
Patheon Inc. (TSX: PTI) is a leading provider of contract development and commercial manufacturing services to the global pharmaceutical industry for a full array of solid and sterile dosage forms. Through the company's recent acquisition of Banner Pharmacaps - a market leader in soft gelatin capsule technology - Patheon now also includes a proprietary products and technology business.
Patheon provides the highest quality products and services to approximately 300 of the world's leading pharmaceutical and biotechnology companies. The company's integrated network consists of 15 locations, including 12 commercial contract manufacturing facilities and 9 development centers across North America and Europe. Patheon enables customer products to be launched with confidence anywhere in the world. For more information, visit www.patheon.com.
Use of Non-GAAP Financial Measures
Commencing in fiscal 2013, the Company revised its calculation of Adjusted EBITDA to exclude stock-based compensation expense, consulting costs related to its operational initiatives, purchase accounting adjustments, and acquisition-related litigation expenses. The Company believes that excluding these items from Adjusted EBITDA better reflects the underlying performance. Based on the revisions to the definition of Adjusted EBITDA, the Company has recast the presentation of Adjusted EBITDA for the twelve months ended October 31, 2012, to be consistent with the current period presentation. Adjusted EBITDA is now income (loss) from continuing operations before repositioning expenses, interest expense, foreign exchange losses reclassified from other comprehensive income (loss), refinancing expenses, acquisition and integration costs (including certain product returns and inventory write-offs recorded in gross profit), gains and losses on sale of capital assets, income taxes, asset impairment charges, depreciation and amortization, stock-based compensation expense, consulting costs related to our operational initiatives, purchase accounting adjustments, acquisition-related litigation expenses and other income and expenses. Since Adjusted EBITDA is a non-GAAP measure that does not have a standardized meaning, it may not be comparable to similar measures presented by other issuers. Readers are cautioned that Adjusted EBITDA should not be construed as an alternative to net income (loss) determined in accordance with U.S. GAAP as an indicator of performance. Adjusted EBITDA is used by management as an internal measure of profitability. The Company has included Adjusted EBITDA because it believes that this measure is used by certain investors to assess the Company's financial performance before non-cash charges and certain costs that the Company does not believe are reflective of its underlying business. A reconciliation of Adjusted EBITDA to the closest U.S. GAAP measure is included with the financial statements in this press release.
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Caution Concerning Forward-Looking Statements
This press release contains forward-looking statements which reflect our
expectations regarding our future growth, results of operations,
performance (both operational and financial) and business prospects and
opportunities. All statements, other than statements of historical
fact, are forward-looking statements. Wherever possible, words such as
"plans," "expects," or "does not expect," "forecasts," "anticipates" or
"does not anticipate," "believes," "intends" and similar expressions or
statements that certain actions, events or results "may," "could,"
"should," "would," "might" or "will" be taken, occur or be achieved
have been used to identify these forward-looking statements. Although
the forward-looking statements contained in this press release reflect
our current assumptions based upon information currently available to
us and based upon what we believe to be reasonable assumptions, we
cannot be certain that actual results will be consistent with these
forward-looking statements. Our current material assumptions include
assumptions related to customer volumes, regulatory compliance, foreign
exchange rates, employee severance costs associated with termination
and projected integration savings related to the Banner acquisition.
Forward-looking statements necessarily involve significant known and
unknown risks, assumptions and uncertainties that may cause our actual
results, performance, prospects and opportunities in future periods to
differ materially from those expressed or implied by such
forward-looking statements. These risks and uncertainties include,
among other things, risks related to international operations and
foreign currency fluctuations; customer demand for our services;
regulatory matters affecting manufacturing and pharmaceutical
development services; impacts of acquisitions, divestitures,
restructurings, and other strategic transactions (including our
proposed transaction with JLL/Delta Patheon Holdings, L.P.), including
our ability to achieve our intended objectives with respect to such
transactions and integrate businesses that we may acquire or combine
with; implementation of our operational excellence initiatives and
transformation activities; our ability to effectively transfer business
between facilities; the global economic environment; our exposure to
complex production issues; our substantial financial leverage; interest
rate risks; potential environmental, health and safety liabilities;
credit and customer concentration; competition; rapid technological
change; product liability claims; intellectual property; the fact that
we have a majority shareholder that can exercise significant influence
over us; supply arrangements; pension plans; derivative financial
instruments; and our dependence upon key management, scientific and
technical personnel. For additional information regarding risks and
uncertainties that could affect our business, please see Item 1A "Risk
Factors" of our Annual Report on Form 10-K for the fiscal year ended
October 31, 2013, and our other filings with the U.S. Securities and
Exchange Commission and the Canadian Securities Administrators.
Although we have attempted to identify important risks and factors that
could cause actual actions, events or results to differ materially from
those described in forward-looking statements, there may be other
factors and risks that cause actions, events or results not to be as
anticipated, estimated or intended. There can be no assurance that
forward-looking statements will prove to be accurate, as actual results
and future events could differ materially from those anticipated in
such statements. These forward-looking statements are made as of the
date of this annual report on Form 10-K, and except as required by law,
we assume no obligation to update or revise them to reflect new events
or circumstances.
Patheon Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
Twelve months ended October 31,
2013 2012 2011
(in millions of U.S. dollars, except
loss per share) $ $ $
Revenues 1,023.1 749.1 700.0
Cost of goods sold 774.0 589.8 568.2
Gross profit 249.1 159.3 131.8
Selling, general and administrative
expenses 163.6 128.6 120.2
Research and development 10.9 - -
Repositioning expenses 15.8 6.1 7.0
Acquisition and integration costs 13.1 3.2 -
Impairment charge 13.1 57.9 -
(Gain) loss on sale of fixed assets (1.3) 0.4 0.2
Operating income (loss) 33.9 (36.9) 4.4
Interest expense, net 47.8 26.5 25.6
Foreign exchange loss (gain) 0.8 0.5 (1.6)
Refinancing expenses 29.2 - -
Other income, net (1.6) (0.9) (4.9)
Loss from continuing operations before
income taxes (42.3) (63.0) (14.7)
Current 8.7 9.2 1.6
Future (15.3) 34.2 (0.5)
(Benefit from) provision for income
taxes (6.6) 43.4 1.1
Loss from continuing operations (35.7) (106.4) (15.8)
Loss from discontinued operations (0.2) (0.3) (0.6)
Net loss for the period (35.9) (106.7) (16.4)
Net loss attributable to restricted
voting shareholders (35.9) (106.7) (16.4)
Basic and diluted loss per share
From continuing operations ($0.255) ($0.821) ($0.122)
From discontinued operations ($0.001) ($0.002) ($0.005)
($0.256) ($0.823) ($0.127)
Weighted-average number of shares
outstanding during period -
basic and diluted (in thousands) 140,072 129,639 129,639
Patheon Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended October 31,
2013 2012 2011
(in millions of U.S. dollars) $ $ $
Operating activities
Loss from continuing operations (35.7) (106.4) (15.8)
Add (deduct) charges to operations not
requiring a current cash payment
Depreciation and amortization 48.4 40.8 53.2
Impairment charge 13.1 57.9 -
Other non-cash interest 9.7 1.2 1.1
Change in other long-term assets and
liabilities (14.4) (2.2) (4.0)
Deferred income taxes (15.3) 34.2 (0.6)
Amortization of deferred revenues (18.3) (13.1) (45.0)
(Gain) loss on sale of capital assets (1.3) 0.4 0.2
Stock-based compensation expense 3.2 3.1 3.5
Excess tax benefit from share-based
payment arrangements (1.0) - -
Other (1.3) (0.9) (0.1)
(12.9) 15.0 (7.5)
Net change in non-cash working capital
balances related to continuing operations 8.8 (6.8) 1.0
Increase in deferred revenues 17.3 25.2 30.4
Cash provided by operating activities of
continuing operations 13.2 33.4 23.9
Cash used in operating activities of
discontinued operations (0.2) (0.4) (1.0)
Cash provided by operating activities 13.0 33.0 22.9
Investing activities
Additions to capital assets (49.8) (53.4) (47.8)
Proceeds on sale of capital assets 6.6 0.4 0.4
Proceeds on sale of business, net - 1.0 -
Acquisitions, net of cash acquired (256.1) - -
Cash used in investing activities of
continuing operations (299.3) (52.0) (47.4)
Cash provided by investing activities of
discontinued operations - 0.1 -
Cash used in investing activities (299.3) (51.9) (47.4)
Financing activities
(Decrease) increase in short-term
borrowings - (3.8) 4.2
Proceeds from long-term borrowings 647.0 40.9 13.5
Increase in deferred financing costs (22.7) - -
Repayment of debt, net of penalty (353.5) (11.1) (15.0)
Share issue cost (0.8) - -
Proceeds on issuance of restricted voting
shares 35.9 0.3 -
Excess tax benefit from share-based
payment arrangements 1.0 - -
Cash provided by financing activities of
continuing operations 306.9 26.3 2.7
Cash provided by financing activities 306.9 26.3 2.7
Effect of exchange rate changes on cash and
cash equivalents 1.6 (1.4) 1.7
Net increase (decrease) in cash and cash
equivalents during the period 22.2 6.0 (20.1)
Cash and cash equivalents, beginning of
period 39.4 33.4 53.5
Cash and cash equivalents, end of period 61.6 39.4 33.4
Supplemental cash flow information
Interest paid 42.1 25.4 25.0
Income taxes paid (received), net 13.3 2.2 (1.3)
Patheon Inc.
ADJUSTED EBITDA RECONCILIATION
Twelve months ended October 31,
2013 2012 2011
(in millions of U.S. dollars) $ $ $
Loss from continuing operations (35.7) (106.4) (15.8)
Add (deduct):
(Benefit from) provision for income
taxes (6.6) 43.4 1.1
(Gain) loss on sale of capital
assets (1.3) 0.4 0.2
Acquisition and integration costs 20.2 3.2 --
Refinancing expenses 29.2 -- --
Interest expense, net 47.8 26.5 25.6
Repositioning expenses 15.8 6.1 7.0
Depreciation and amortization 48.4 40.8 53.2
Impairment charge 13.1 57.9 --
Operational initiatives related
consulting costs 2.3 13.3 9.0
Acquisition-related litigation
expenses 6.4 -- --
Stock-based compensation expense 3.2 3.1 3.5
Purchase accounting adjustments 5.0 -- --
Other (1.6) (0.9) (4.9)
Adjusted EBITDA 146.2 87.4 78.9
SOURCE Patheon Inc.
