Highlights:
- 2Q 2017 revenue of $483
million
- Net income from continuing
operations of $28 million
- Net income from continuing
operations per diluted share of $0.19
- 2Q 2017 Adjusted EBITDA of $94
million
- Adjusted net income from continuing
operations of $29 million
- Adjusted net income from continuing
operations per diluted share of $0.20
Patheon N.V. (NYSE: PTHN), a leading global provider of
pharmaceutical development and manufacturing services, today
reported financial results for the quarter ended April 30,
2017.
Second quarter 2017 revenue was $483 million, compared to $469
million in the prior-year period, and second quarter 2017 adjusted
EBITDA was $94 million, compared to $98 million in the prior-year
period. Revenue for the first six months of fiscal 2017 was $941
million, compared to $875 million in the comparable fiscal 2016
period, representing 8% year-over-year growth. Adjusted EBITDA for
the first six months of fiscal 2017 was $177 million, compared to
$157 million in the comparable fiscal 2016 period, representing 13%
year-over-year growth.
“During the second quarter we continued to build momentum with
customers and make strategic investments to support our long-term
growth outlook,” said Patheon CEO, Jim Mullen. “Looking forward, we
believe the announced sale to Thermo Fisher is a logical next step
in the evolution of our company and is in the best interests of all
stakeholders. Together, both companies will be better positioned to
add scale and new value chain capabilities, delivering even greater
value to customers.”
Second quarter 2017 net income from continuing operations was
$28 million. Second quarter 2017 net income from continuing
operations per diluted share was $0.19.
Second quarter 2017 adjusted net income from continuing
operations was $29 million. Second quarter 2017 adjusted net income
from continuing operations per diluted share was $0.20.
Second Quarter and YTD 2017 Segment Highlights
(in millions)
Revenue Adj.
EBITDA Q2 YTD
Q2 YTD DPS $297 $572 $77
$139 PDS $58 $110 $18 $35 DSS
$129 $259 $26 $58
Financial Position
As of April 30, 2017, cash and cash equivalents were $93 million
and total debt was $2.1 billion, resulting in net debt of
approximately $2.0 billion.
FY17 Financial Outlook and Second Quarter 2017 Conference
Call
In light of the Company’s previously announced agreement to be
acquired by Thermo Fisher Scientific Inc., Patheon does not plan to
provide or update its fiscal year 2017 guidance.
Also as a result of the pending transaction, Patheon will not
hold a conference call to discuss the Company’s second quarter 2017
financial results.
About Patheon
Patheon is a leading global provider of pharmaceutical
development and manufacturing services. With approximately 9,100
employees and contractors worldwide, Patheon provides a
comprehensive, integrated and highly customizable set of solutions
to help customers of all sizes satisfy complex development and
manufacturing needs at any stage of the pharmaceutical development
cycle.
Forward-Looking Statements
This press release contains forward-looking statements which
reflect the current beliefs and expectations of Patheon’s
management regarding the company’s future growth, results of
operations, performance (both operational and financial) and
business prospects and opportunities. The statements in this press
release that are not historical facts may be forward-looking
statements. Readers can identify these forward-looking statements
by the use of words such as ‘‘outlook,’’ ‘‘believes,’’ ‘‘expects,’’
‘‘potential,’’ ‘‘continues,’’ ‘‘may,’’ ‘‘will,’’ ‘‘should,’’
‘‘seeks,’’ ‘‘approximately,’’ ‘‘predicts,’’ ‘‘intends,’’ ‘‘plans,’’
‘‘estimates,’’ ‘‘anticipates’’ or the negative version of these
words or other comparable words. Such forward looking statements
are subject to various risks and uncertainties, which could cause
actual results to differ from those indicated in these forward
looking statements. For more information concerning factors that
could cause actual results to differ materially from those conveyed
in the forward-looking statements, please refer to the "Risk
Factors" section included in the company’s fiscal 2016 Annual
Report on Form 10-K filed with the SEC. The Company undertakes no
obligation to publicly update or review any forward-looking
statement, whether as a result of new information, future
developments or otherwise, except as required by applicable law.
Accordingly, readers should not place undue reliance on
forward-looking statements as a prediction of actual results.
Use of Non-GAAP Financial Measures
We define Adjusted EBITDA as income (loss) from continuing
operations before repositioning expenses (including certain product
returns and inventory write-offs recorded in gross profit),
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, Biologics earnout income and expense, income taxes,
impairment charges, remediation costs, 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. Adjusted EBITDA margin is Adjusted EBITDA
divided by revenues.
We define Adjusted net income as Adjusted EBITDA minus
depreciation expense (excluding amortization from intangibles
acquired in acquisitions), interest expense (excluding amortization
of the deferred financing costs), and tax expense. In addition, we
exclude discrete tax items and apply an estimated tax effect on
adjustments within the calculation. The estimated tax effect is
calculated using statutory tax rates on each expense item, except
in the case where a jurisdiction is under a full valuation
allowance at the time of the expense, in which we apply a tax rate
of 0%. We define Adjusted EPS as Adjusted net income divided by the
average number of shares outstanding on a diluted basis for the
related period.
Our management uses Adjusted EBITDA as one of several metrics to
measure the Company’s operating performance. Adjusted EBITDA is
also a component of the performance objectives used to determine
the short and long-term incentive portions of executive
compensation. We present Adjusted net income and Adjusted EPS
because we believe they are useful supplemental measures in
evaluating the performance of our operations and provide greater
transparency into our results. We believe that providing these
non-GAAP financial measures to investors as a supplement to the
comparable U.S. GAAP measures in evaluating the performance of our
operations provides greater transparency to the information used by
the Company’s management in its financial and operational
decision-making. These non-GAAP financial measures do not have
standard meanings, so they may not be comparable to
similarly-titled measures presented by other companies and should
not be considered in isolation or as a substitute for U.S. GAAP
financial measures of performance. Reconciliations of these
non-GAAP measures to their most comparable U.S. GAAP financial
measures are included with the financial statements in this press
release.
The Company does not provide a reconciliation of forward-looking
non-GAAP financial measures to their comparable GAAP financial
measures because it could not do so without unreasonable effort due
to the unavailability of the information needed to calculate
reconciling items and the variability, complexity and limited
visibility of the adjusting items that would be excluded from the
non-GAAP financial measures in future periods. When planning,
forecasting and analyzing future periods, the Company does so
primarily on a non-GAAP basis without preparing a GAAP analysis as
that would require estimates for various cash and non-cash
reconciling items that would be difficult to predict with
reasonable accuracy. For example, equity compensation expense would
be difficult to estimate because it depends on the Company’s future
hiring and retention needs, as well as the future fair market value
of the Company’s common stock, all of which are difficult to
predict and subject to constant change. It is equally difficult to
anticipate the need for or magnitude of a presently unforeseen
one-time restructuring expense or the values of end-of-period
foreign currency exchange rates. As a result, the Company does not
believe that a GAAP reconciliation to forward-looking on-GAAP
financial measures would provide meaningful supplemental
information about the Company’s outlook.
Patheon N.V.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(unaudited)
Three months ended April 30,
Six months ended April 30,
2017 2016 2017 2016 (in millions of U.S. dollars,
except share data) $ $ $ $ Revenues 483.4 468.6 940.8 874.5 Cost of
goods sold 342.7 330.3 670.4 637.3
Gross profit 140.7 138.3 270.4 237.2 Selling, general and
administrative expenses 92.1 74.8 173.2 148.5 Research and
development 0.4 0.6 1.1 1.3 Repositioning expenses 1.8 1.3 2.4 2.5
Acquisition and integration costs 8.1 7.6 11.6 10.2 Other operating
expense (income) 0.5 1.2 4.1 (3.7 ) Operating
income 37.8 52.8 78.0 78.4 Interest expense, net 30.8 42.6 59.0
86.4 Foreign exchange loss, net 0.7 7.1 5.5 11.4 Refinancing
expenses 6.3 — 6.3 — Bargain purchase gain (26.4 ) — (26.4 ) —
Other loss (income), net 0.3 0.5 0.5 (1.3 )
Income (loss) before income taxes 26.1 2.6 33.1 (18.1 )
(Benefit from) provision for income taxes (1.5 ) 0.7 (22.8 )
—
Net income (loss) from continuing operations 27.6
1.9 55.9 (18.1 ) Net loss from discontinued
operations — (1.0 ) — (3.1 )
Net income (loss)
27.6 0.9 55.9 (21.2 )
Basic earnings
(loss) per ordinary share From continuing operations $ 0.19 $
0.02 $ 0.39 $ (0.16 ) From discontinued operations $ — $ (0.01 ) $
— $ (0.03 )
Diluted earnings (loss) per ordinary
share From continuing operations $ 0.19 $ 0.02 $ 0.38 $ (0.16 )
From discontinued operations $ — $ (0.01 ) $ — $ (0.03 )
Average number of ordinary shares outstanding (in thousands)
Basic 145,136 115,610 145,132 115,610 Diluted 146,267 115,610
146,276 115,610
Patheon N.V.
CONSOLIDATED BALANCE SHEETS
(unaudited)
As of April 30, 2017 As of October 31, 2016 (in millions of
U.S. dollars, except share data) $ $
Assets Current Cash and
cash equivalents 92.7 165.0 Accounts receivable, net 420.9 401.0
Inventories, net 451.6 395.2 Income taxes receivable 14.3 8.7
Prepaid expenses and other 24.1 21.5
Total current
assets 1,003.6 991.4 Capital assets 1,169.3 983.6
Intangible assets 235.2 247.6 Deferred tax assets 30.2 29.8
Goodwill 281.4 281.6 Investments 11.2 11.5 Other long-term assets
39.2 44.1
Total assets 2,770.1 2,589.6
Liabilities and shareholders' deficit Current
Accounts payable and accrued liabilities 382.2 393.6 Income taxes
payable 9.3 6.6 Deferred revenues - current 195.5 154.2 Current
portion of long-term debt 19.4 19.5
Total current
liabilities 606.4 573.9 Long-term debt 2,069.4
2,049.2 Deferred revenues 132.4 102.3 Deferred tax liabilities 96.7
67.1 Other long-term liabilities 147.7 145.5
Total
liabilities 3,052.6 2,938.0 Commitments and
contingencies Shareholders' deficit: Ordinary shares (par value of
€0.01 per share, 500,000,000 shares authorized, 145,144,742 and
145,074,042 shares issued as of April 30, 2017 and October 31,
2016, respectively) 1.6 1.6 Additional paid in capital 602.4 591.4
Treasury shares (at cost, 8,528 ordinary shares as of April 30,
2017) (0.2 ) — Accumulated deficit (786.2 ) (842.1 ) Accumulated
other comprehensive loss (100.1 ) (99.3 ) Total shareholders'
deficit (282.5 ) (348.4 )
Total liabilities and shareholders'
deficit 2,770.1 2,589.6
Patheon N.V.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(unaudited)
Six months ended April 30, 2017 2016 (in millions of
U.S. dollars) $ $
Operating activities Net income (loss)
from continuing operations 55.9 (18.1 ) Adjustments to reconcile
net income to net cash provided by (used in) operating activities:
Depreciation and amortization 61.9 53.5 Increase in deferred
revenues 141.1 172.9 Amortization of deferred revenues (137.2 )
(101.3 ) Non-cash interest 9.5 7.6 Change in other long-term assets
and liabilities 4.0 2.9 Deferred income taxes (29.7 ) (0.9 ) Stock
based compensation expense 11.0 3.0 Gain on bargain purchase (26.4
) — Payment of original issue discount (4.1 ) — Return on capital
from equity investment — 1.3 Foreign exchange loss on debt — 2.2
Other 4.4 (5.1 ) Net change in non-cash working capital balances
(69.5 ) (161.0 ) Cash provided by (used in) operating activities of
continuing operations 20.9 (43.0 ) Cash used in operating
activities of discontinued operations — (2.9 )
Cash
provided by (used in) operating activities 20.9 (45.9 )
Investing activities Additions to capital assets (99.2 )
(95.1 ) Acquisitions (10.3 ) — Proceeds from sale of capital assets
— 0.1 Return of capital from equity investment — 2.3
Cash used in investing activities of continuing operations (109.5 )
(92.7 ) Cash used in investing activities of discontinued
operations — (3.3 )
Cash used in investing activities
(109.5 ) (96.0 )
Financing activities Proceeds from
borrowings 30.0 0.7 Repayment of debt (9.6 ) (9.9 ) Increase in
deferred financing costs (2.7 ) — Treasury share purchases to
satisfy certain tax withholdings (0.1 ) — Cash provided by
(used in) financing activities of continuing operations 17.6 (9.2 )
Cash provided by (used in) financing activities of discontinued
operations — —
Cash provided by (used in)
financing activities 17.6 (9.2 ) Effect of exchange rate
changes on cash and cash equivalents (1.3 ) 7.1
Net
change in cash and cash equivalents during the period (72.3 )
(144.0 ) Cash and cash equivalents, beginning of period 165.0
328.7
Cash and cash equivalents, end of period
92.7 184.7
Patheon N.V.
ADJUSTED EBITDA AND ADJUSTED NET
INCOME
(unaudited)
Three months ended April 30, Six months ended April 30, 2017
2016 2017 2016 (in millions of U.S. dollars) $ $ $ $
Net income from continuing operations 27.6 1.9 55.9 (18.1 )
Depreciation and amortization 34.3 27.0 61.9 53.5 Repositioning
expenses 2.2 1.3 3.5 2.5 Acquisition and integration costs 8.1 7.6
11.6 10.2 Interest expense, net 30.8 42.6 59.0 86.4 Benefit from
(provision for) income taxes (1.5 ) 0.7 (22.8 ) — Refinancing
expenses 6.3 — 6.3 — Operational initiatives related consulting
costs 1.4 1.9 2.5 3.3 IPO costs — 0.4 — 0.8 Acquisition related
litigation expenses 3.7 0.9 6.0 1.9 Stock based compensation
expense 7.0 2.0 11.0 3.0 FDA remediation costs — 10.1 — 18.5
Environmental remediation costs — — 3.7 — Bargain purchase gain
(26.4 ) — (26.4 ) — Other 0.7 1.6 4.5 (5.0 )
Total Adjusted EBITDA 94.2 98.0 176.7 157.0 Depreciation
(28.2 ) (20.9 ) (49.7 ) (41.3 ) Interest expense (28.6 ) (39.3 )
(54.1 ) (79.8 ) Tax expense 1.5 (0.7 ) 22.8 — Discrete tax items
(3.2 ) (3.1 ) (31.3 ) (4.2 ) Estimated tax effect on adjustments
(7.1 ) (6.5 ) (14.6 ) (13.2 )
Adjusted net income 28.6 27.5
49.8 18.5 Weighted Average Shares - Diluted 146.3 115.6
146.3 115.6 Adjusted Net Income per Share - Diluted 0.20
0.24 0.34 0.16
Patheon N.V.
CONSOLIDATED SEGMENT OPERATIONS
(unaudited)
Three months ended April 30, 2017 Revenues Adjusted
EBITDA (in millions of U.S. dollars) $ $ DPS 297.2 77.4 PDS 57.8
18.4 DSS 129.2 26.1 Other — (27.5 ) Intersegment Eliminations (0.8
) (0.2 ) Total 483.4 94.2 Three months ended April
30, 2016 Revenues Adjusted EBITDA (in millions of U.S.
dollars) $ $ DPS 287.4 72.7 PDS 53.4 16.7 DSS 127.9 30.8 Other —
(22.2 ) Intersegment Eliminations (0.1 ) — Total 468.6 98.0
Six months ended April 30, 2017 Revenues
Adjusted EBITDA (in millions of U.S. dollars) $ $ DPS 572.4 138.8
PDS 110.1 34.7 DSS 259.1 58.1 Other — (54.7 ) Intersegment
Eliminations (0.8 ) (0.2 ) Total 940.8 176.7 Six
months ended April 30, 2016 Revenues Adjusted EBITDA (in
millions of U.S. dollars) $ $ DPS 545.9 127.8 PDS 101.9 30.5 DSS
226.8 45.6 Other — (46.9 ) Intersegment Eliminations (0.1 ) —
Total 874.5 157.0
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PatheonFor media:Mari Mansfield, 919-226-3137orFor
investors:Tyler Gronbach, 919-226-3165
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