UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 8, 2013
PATHEON INC.
(Exact name of registrant as specified in its charter)
Canada | 000-54283 | Not Applicable | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
c/o Patheon Pharmaceuticals Services Inc. 4721 Emperor Boulevard, Suite 200 Durham, NC |
27703 | |||
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (919) 226-3200
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition |
On March 8, 2013, Patheon Inc. (the Company) issued a press release announcing its financial results for the three months ended January 31, 2013. The full text of the press release was posted on the Companys internet website and is attached as Exhibit 99.1 to this Current Report on Form 8-K (this Report) and incorporated by reference into this Item 2.02.
Item 7.01 | Regulation FD Disclosure |
As previously announced and as disclosed in the press release attached as Exhibit 99.1 to this Report, the Company plans to hold a conference call at 10:00 a.m. ET on March 8, 2013. A copy of the presentation the Company plans to discuss on the conference call, which will be available on the Companys website prior to the start of the call, is attached as Exhibit 99.2 to this Report and incorporated by reference into this Item 7.01.
Pursuant to General Instruction B.2 of Current Report on Form 8-K, the information in Items 2.02 and 7.01 of this report, including the press release attached as Exhibit 99.1 and the presentation attached as Exhibit 99.2, is furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Furthermore, such information shall not be deemed to be incorporated by reference into the filings of the registrant under the Securities Act of 1933, as amended.
Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits.
See the Exhibit Index attached hereto.
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SIGNATURE
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 hereunto duly authorized.
Date: March 8, 2013 | PATHEON INC. | |||
By: | /s/ Stuart Grant | |||
Stuart Grant | ||||
Executive Vice President, Chief Financial Officer |
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EXHIBIT INDEX
Exhibit |
Description of Document | |
99.1 | Press release dated March 8, 2013. | |
99.2 | Presentation for the Companys conference call on March 8, 2013. |
Exhibit 99.1
PATHEON REPORTS FISCAL 2013 FIRST QUARTER RESULTS
Significant revenue increase and gross profit grew by almost 200 percent. Banner integration is well advanced.
TORONTO (March 8, 2013) Patheon Inc. (TSX: PTI), a leading provider of contract development and commercial manufacturing services to the global pharmaceutical industry, with recently acquired proprietary products and technology that includes softgel formulations, announced today fiscal 2013 first quarter results.
First Quarter Fiscal 2013 Financial Highlights
| Revenues in the quarter increased to $213.5 million from $153.9 million in the same period last year, an increase of $59.6 million or 38.7 percent. Banner represented $23.3 million of the increase and therefore, Patheon standalone revenues grew 23.6 percent compared to the same period last year. |
| Gross profit in the quarter increased to $42.4 million from $14.4 million in the same period last year, an increase of 28.0 million or 194.4 percent. Banner represented $6.0 million of the increase and therefore, Patheon standalone gross profit grew 152.8 percent compared to the same period last year. |
| Adjusted EBITDA increased in the quarter to $19.8 million from negative $1.9 million in the same period last year, an increase of $21.7 million. Patheon standalone Adjusted EBITDA increased by $20.5 million compared to the same period last year. |
| Loss from continuing operations in the quarter was $51.4 million compared to a loss from continuing operations of $19.3 million in the same period last year. This increase was due to costs associated with the Banner acquisition and related refinancing, offset by favorable operating results. |
James C. Mullen, Patheons Chief Executive Officer, said, We continue to be encouraged by the progress we are making in transforming the company. Our top-line growth, gross margin and Adjusted EBITDA in the quarter were strong and further evidence of the success of our transformation activities. The integration of Banner continues and we are on track to implement operational excellence initiatives at these sites in the same way as we have done at Patheon sites.
Fiscal 2013 First Quarter Operating Results from Continuing Operations
Revenue for the first quarter increased $59.6 million, or 38.7 percent, to $213.5 million, from $153.9 million in the same period last year driven by growth in our existing business and $23.3 million of additional revenue resulting from the Banner acquisition.
Commercial manufacturing (CMO) revenues for the first quarter increased $57.3 million, or 46.7 percent, to $180.1 million, from $122.8 million in the same period last year. Pharmaceutical Development Services (PDS) revenues for the first quarter increased $2.3 million, or 7.4 percent, to $33.4 million, from $31.1 million in the same period last year.
Gross profit for the first quarter increased $28.0 million to $42.4 million, from $14.4 million in the same period last year. The increase in gross profit was primarily due to higher volumes, operating efficiencies and favorable material mix.
Loss from continuing operations for the first quarter was $51.4 million, or 38.4¢ per share, both basic and diluted, compared to a loss from continuing operations of $19.3 million, or 15.0¢ per share, both basic and diluted, in the same period last year.
At the end of the first quarter of fiscal 2013, Patheon had liquidity of $128.1 million, an increase of $24.3 million from the fourth quarter in 2012, from cash and cash equivalents of $55.4 million and $72.7 million from available lines of credit.
As previously announced on December 14, 2012, Patheon completed the acquisition of Banner and entered into a new $660.0 million credit facility, comprised of a $575.0 million term loan facility and an $85.0 million revolving facility. Patheon used the new credit facility to finance the purchase of Banner, repurchase its then-existing senior secured notes, repay borrowings outstanding under its previous revolving credit facility and pay fees and expenses associated with the transaction. The revolving credit facility is also available for general corporate purposes.
During the first quarter of fiscal 2013, Patheon incurred expenses of $29.1 million associated with the refinancing, acquisition-related costs of $4.4 million and restructuring charges of $4.0 million.
1
Consistent with Patheons strategy to strengthen core operations through network rationalization, the company will be closing the manufacturing site in Olds, Alberta by the end of fiscal 2013. This decision resulted in impairment charges of $10.1 million in the first quarter. In addition, the company expects to incur approximately $3.7 million in severance and retention expenses along with $1.5 million in closing costs beginning in the second quarter of fiscal 2013. The company expects this closure will save an additional amount of approximately $8 million on an annual basis.
Patheon continues to target annual savings from operational synergies from the Banner acquisition of approximately $12.5 million. Please refer to Appendix A of this press release for the initial allocation of the assets acquired and liabilities assumed in connection with the Banner acquisition.
2013 Outlook
The company anticipates revenues for the combined enterprise to be in excess of $1 billion annually.
Conference Call
Patheon will host a conference call and webcast on March 8, 2013 at 10 a.m. Eastern Standard Time. Interested parties are invited to access the conference call, via telephone, in listen-only mode, toll free at 1-888-231-8191 (U.S., including Puerto Rico) and 1-647-427-7450 (Canada and International). Listeners are encouraged to dial in five to fifteen minutes in advance to avoid delays. The webcast and slides will be available for viewing during the call by accessing Patheons website at http://ir.patheon.com/events.cfm.
A telephone replay of the conference call will be available between March 8, 2013 and March 15, 2013 by dialing 1-855-859-2056 (toll free) or 1-403-451-9481, and by entering identification number 99069353, followed by the number key. The webcast and slides will be archived at http://ir.patheon.com/events.cfm.
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 companys 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 worlds leading pharmaceutical and biotechnology companies. The companys integrated network consists of 18 locations, including 14 commercial contract manufacturing facilities and 12 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 with the first quarter of fiscal 2013, we revised our calculation of Adjusted EBITDA to exclude stock-based compensation expense, consulting costs related to our operational initiatives and purchase accounting adjustments. We believe that excluding these items from Adjusted EBITDA better reflects our underlying performance. Based on the revisions to the definition of Adjusted EBITDA, we have recast the presentation of Adjusted EBITDA for the three months ended January 31, 2012 to be consistent with the current period presentation. Our Adjusted EBITDA (as revised) is now income (loss) from continuing operations before repositioning expenses, interest expense, foreign exchange losses reclassified from other comprehensive income (loss), refinancing expenses, acquisition-related costs, 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 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. We have included Adjusted EBITDA because we believe that this measure is used by certain investors to assess our financial performance before non-cash charges and certain costs that we do not believe are reflective of our underlying business. An Adjusted EBITDA reconciliation of these amounts to the closest U.S. GAAP measure is included with the financial statements in this press release.
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
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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 our acquisition of Banner. 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 and restructurings, including our ability to achieve our intended objectives with respect to such transactions and integrate businesses that we may acquire; implementation of our new corporate strategy; 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 existence of a significant shareholder; 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 in our Annual Report on Form 10-K for the fiscal year ended October 31, 2012 and our subsequent filings with the U.S. Securities and Exchange Commission and with 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. Accordingly, readers should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date of this press release and, except as required by law, we assume no obligation to update or revise them to reflect new events or circumstances.
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Patheon Inc.
CONSOLIDATED BALANCE SHEETS
(unaudited)
As of January 31, 2013 |
As of October 31, 2012 |
|||||||
(in millions of U.S. dollars) | $ | $ | ||||||
Assets |
||||||||
Current |
||||||||
Cash and cash equivalents |
55.4 | 39.4 | ||||||
Accounts receivable |
168.7 | 161.7 | ||||||
Inventories |
141.7 | 82.3 | ||||||
Income taxes receivable |
6.3 | 0.4 | ||||||
Prepaid expenses and other |
11.4 | 11.9 | ||||||
Deferred tax assets - short-term |
6.3 | 4.3 | ||||||
|
|
|
|
|||||
Total current assets |
389.8 | 300.0 | ||||||
|
|
|
|
|||||
Capital assets |
502.4 | 416.4 | ||||||
Intangible assets |
74.4 | | ||||||
Deferred financing costs |
21.7 | 4.9 | ||||||
Deferred tax assets |
1.3 | | ||||||
Goodwill |
43.9 | 3.5 | ||||||
Investments |
7.2 | 6.3 | ||||||
Other long-term assets |
12.2 | 11.8 | ||||||
|
|
|
|
|||||
Total assets |
1,052.9 | 742.9 | ||||||
|
|
|
|
|||||
Liabilities and shareholders equity |
||||||||
Current |
||||||||
Short-term borrowings |
0.6 | 2.4 | ||||||
Accounts payable and accrued liabilities |
193.1 | 186.2 | ||||||
Income taxes payable |
7.4 | 5.7 | ||||||
Deferred revenues - short-term |
17.6 | 13.9 | ||||||
Deferred tax liabilities - short-term |
1.6 | | ||||||
Current portion of long-term debt |
5.8 | | ||||||
|
|
|
|
|||||
Total current liabilities |
226.1 | 208.2 | ||||||
|
|
|
|
|||||
Long-term debt |
583.2 | 310.7 | ||||||
Deferred revenues |
24.9 | 28.9 | ||||||
Deferred tax liabilities |
55.6 | 23.0 | ||||||
Other long-term liabilities |
47.5 | 47.8 | ||||||
|
|
|
|
|||||
Total liabilities |
937.3 | 618.6 | ||||||
|
|
|
|
|||||
Shareholders equity |
||||||||
Restricted voting shares |
606.0 | 572.5 | ||||||
Contributed surplus |
15.8 | 16.5 | ||||||
Accumulated deficit |
(530.0 | ) | (478.6 | ) | ||||
Accumulated other comprehensive income |
23.8 | 13.9 | ||||||
|
|
|
|
|||||
Total shareholders equity |
115.6 | 124.3 | ||||||
|
|
|
|
|||||
Total liabilities and shareholders equity |
1,052.9 | 742.9 | ||||||
|
|
|
|
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Patheon Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three months ended January 31, | ||||||||
2013 | 2012 | |||||||
(in millions of U.S. dollars, except per share information) | $ | $ | ||||||
Revenues |
213.5 | 153.9 | ||||||
Cost of goods sold |
171.1 | 139.5 | ||||||
|
|
|
|
|||||
Gross profit |
42.4 | 14.4 | ||||||
Selling, general and administrative expenses |
35.2 | 34.5 | ||||||
Research and development |
1.3 | | ||||||
Repositioning expenses |
4.0 | 0.8 | ||||||
Acquisition-related costs |
4.4 | | ||||||
Impairment charge |
10.1 | | ||||||
Gain on sale of capital assets |
(0.3 | ) | | |||||
|
|
|
|
|||||
Operating loss |
(12.3 | ) | (20.9 | ) | ||||
Interest expense, net |
9.8 | 6.5 | ||||||
Foreign exchange loss (gain), net |
0.8 | (0.3 | ) | |||||
Refinancing expenses |
29.1 | | ||||||
Other income, net |
(0.4 | ) | (0.1 | ) | ||||
|
|
|
|
|||||
Loss from continuing operations before income taxes |
(51.6 | ) | (27.0 | ) | ||||
Benefit from income taxes |
(0.2 | ) | (7.7 | ) | ||||
|
|
|
|
|||||
Loss from continuing operations |
(51.4 | ) | (19.3 | ) | ||||
Loss from discontinued operations |
| (0.1 | ) | |||||
|
|
|
|
|||||
Net loss attributable to restricted voting shareholders |
(51.4 | ) | (19.4 | ) | ||||
|
|
|
|
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Basic and diluted loss per share |
||||||||
From continuing operations |
($ | 0.384 | ) | ($ | 0.149 | ) | ||
From discontinued operations |
| ($ | 0.001 | ) | ||||
|
|
|
|
|||||
Net loss per share, basic and diluted |
($ | 0.384 | ) | ($ | 0.150 | ) | ||
|
|
|
|
|||||
Weighted-average number of shares outstanding (in thousands) |
||||||||
Basic |
133,849 | 129,639 | ||||||
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|
|
|
|||||
Diluted |
133,849 | 129,639 | ||||||
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|
5
Patheon Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three months ended January 31, | ||||||||
2013 | 2012 | |||||||
(in millions of U.S. dollars) | $ | $ | ||||||
Operating activities |
||||||||
Loss from continuing operations |
(51.4 | ) | (19.3 | ) | ||||
Adjustments to reconcile loss from continuing operations to cash (used in) provided by operating activities |
||||||||
Depreciation and amortization |
11.0 | 10.6 | ||||||
Impairment charge |
10.1 | | ||||||
Foreign exchange loss on debt |
0.1 | | ||||||
Other non-cash interest |
4.9 | 0.3 | ||||||
Change in other long-term assets and liabilities |
(1.6 | ) | (0.5 | ) | ||||
Deferred income taxes |
(1.0 | ) | (0.9 | ) | ||||
Amortization of deferred revenues |
(4.2 | ) | (2.4 | ) | ||||
Gain on sale of capital assets |
(0.3 | ) | | |||||
Stock-based compensation expense |
0.8 | 1.0 | ||||||
|
|
|
|
|||||
(31.6 | ) | (11.2 | ) | |||||
Net change in non-cash working capital balances related to continuing operations |
19.7 | 16.1 | ||||||
Increase in deferred revenues |
5.6 | 5.3 | ||||||
|
|
|
|
|||||
Cash (used in) provided by operating activities of continuing operations |
(6.3 | ) | 10.2 | |||||
Cash used in operating activities of discontinued operations |
| (0.3 | ) | |||||
|
|
|
|
|||||
Cash (used in) provided by operating activities |
(6.3 | ) | 9.9 | |||||
|
|
|
|
|||||
Investing activities |
||||||||
Additions to capital assets |
(8.4 | ) | (6.5 | ) | ||||
Proceeds on sale of capital assets |
0.4 | | ||||||
Acquisitions, net of cash acquired |
(258.9 | ) | | |||||
|
|
|
|
|||||
Cash used in investing activities |
(266.9 | ) | (6.5 | ) | ||||
|
|
|
|
|||||
Financing activities |
||||||||
Decrease in short-term borrowings |
| (1.3 | ) | |||||
Proceeds from long-term borrowings |
592.1 | | ||||||
Increase in deferred financing costs |
(21.7 | ) | | |||||
Repayment of debt, net of penalty payment |
(315.8 | ) | (1.6 | ) | ||||
Share issuance costs |
(0.9 | ) | | |||||
Proceeds on issuance of restricted voting shares |
32.9 | | ||||||
|
|
|
|
|||||
Cash provided by (used in) financing activities |
286.6 | (2.9 | ) | |||||
|
|
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents |
2.6 | (1.4 | ) | |||||
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents during the period |
16.0 | (0.9 | ) | |||||
Cash and cash equivalents, beginning of period |
39.4 | 33.4 | ||||||
|
|
|
|
|||||
Cash and cash equivalents, end of period |
55.4 | 32.5 | ||||||
|
|
|
|
6
ADJUSTED EBITDA BRIDGE
(unaudited)
Three months ended January 31, | ||||||||
2013 | 2012 | |||||||
(in millions of U.S. dollars) |
$ | $ | ||||||
Total Adjusted EBITDA |
19.8 | (1.9 | ) | |||||
Depreciation and amortization |
(11.0 | ) | (10.6 | ) | ||||
Repositioning expenses |
(4.0 | ) | (0.8 | ) | ||||
Acquisition-related costs |
(4.4 | ) | | |||||
Interest expense, net |
(9.8 | ) | (6.5 | ) | ||||
Impairment charge |
(10.1 | ) | | |||||
Gain on sale of capital assets |
0.3 | | ||||||
Benefit from income taxes |
0.2 | 7.7 | ||||||
Refinancing expenses |
(29.1 | ) | | |||||
Operational initiatives related consulting costs |
(0.1 | ) | (6.3 | ) | ||||
Stock-based compensation expense |
(0.8 | ) | (1.0 | ) | ||||
Purchase accounting adjustments |
(2.9 | ) | | |||||
Other |
0.5 | 0.1 | ||||||
|
|
|
|
|||||
Loss from continuing operations |
(51.4 | ) | (19.3 | ) | ||||
|
|
|
|
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APPENDIX A
INITIAL PURCHASE PRICE ALLOCATION
(unaudited)
(in millions of U.S. dollars) |
||||
Cash and cash equivalents |
12.7 | |||
Accounts receivable |
55.1 | |||
Inventories |
54.2 | |||
Income taxes receivable |
4.3 | |||
Prepaid expenses and other |
3.6 | |||
Deferred tax assets - short-term |
1.7 | |||
Capital assets |
90.7 | |||
Intangible assets |
75.1 | |||
Goodwill |
40.5 | |||
Deferred tax assets - long-term |
0.1 | |||
Other long-term assets |
0.3 | |||
|
|
|||
Total Assets |
338.3 | |||
|
|
|||
Accounts payable and accrued liabilities |
32.6 | |||
Deferred tax liabilities - short-term |
0.4 | |||
Other long-term liabilities |
1.4 | |||
Deferred tax liabilities - long-term |
32.3 | |||
|
|
|||
Purchase Price |
$ | 271.6 | ||
|
|
###
SOURCE Patheon Inc.
Contact:
Jennifer Almond
Investor Relations and Corporate Communications
Tel: (919) 226-3200
Email: investorrelations@patheon.com
8
Exhibit 99.2
Patheon
Fiscal 2013 First Quarter Results
March 8, 2013
Forward-looking statements
This presentation contains forward-looking statements or information which reflect our expectations regarding possible events, conditions, our future growth, results of operations, performance, and business prospects and opportunities. All statements, other than statements of historical fact, are forward-looking statements. Forward-looking statements necessarily involve significant known and unknown risks, assumptions and uncertainties that may cause our actual results in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks are described in our 2012 Form 10-K and our subsequent filings with the U.S. Securities and Exchange Commission and the Canadian Securities Administration. Accordingly, you are cautioned not to place undue reliance on forward-looking statements. These forward-looking statements are made as of the date hereof, and except as required by law, we assume no obligation to update or revise them to reflect new events or circumstances.
Use of Non-GAAP Financial Measures
Commencing with the first quarter of fiscal 2013, we revised our calculation of Adjusted EBITDA to exclude stock-based compensation expense, consulting costs related to our operational initiatives and purchase accounting adjustments. We believe that excluding these items from Adjusted EBITDA better reflects our underlying performance. Based on the revisions to the definition of Adjusted EBITDA, we have recast the presentation of Adjusted EBITDA for prior periods to be consistent with the current period presentation. Our Adjusted EBITDA (as revised) is now income (loss) from continuing operations before repositioning expenses, interest expense, foreign exchange losses reclassified from other comprehensive income (loss), refinancing expenses, acquisition-related costs, 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 and other income and expenses. Adjusted EBITDA margin is Adjusted EBITDA as a percentage of revenues. 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. We have included Adjusted EBITDA because we believe that this measure is used by certain investors to assess our financial performance before non-cash charges and certain costs that we do not believe are reflective of our underlying business. Reconciliations of Adjusted EBITDA to the closest GAAP measures are included in the Appendix to this presentation.
1
Fiscal 2013 first quarter highlights
Revenue increased by 38.7% from prior year
Patheon standalone grew by 23.6% from prior year
Conversion to a gross profit increase of 194.4% from prior year
Patheon standalone increased by 152.8% from prior year
Adjusted EBITDA increase of $21.7 million from prior year
Patheon standalone increased by over $20 million from prior year
Transformation continues to yield benefits
2
Strategy
Strengthen core operations
Margins improving
Right first time improving
On time delivery improving
Sell business differently
Revenue growth
Commercial team to focus on key accounts
Executive insights -solicit key customer feedback for business positives and key improvements
Enter logical adjacencies
Banner acquisition adds proprietary technologies and products
Direct exposure to emerging markets (Latin America)
Drive industry consolidation
3
Banner Integration Update
We are working toward the full integration of Banner, at which time we expect the combined enterprise will be structured as three distinct business units
CMO, PDS and Proprietary Products and Technology
Combined enterprise will have a clear vision to drive value-creation through proprietary products and technology added by the Banner acquisition
Banner manufacturing sites have been transitioned to CMO structure
Launching operational efficiency initiatives to increase cost savings
Consolidation of Olds, Alberta facility is consistent with our strategy to strengthen core operations through network rationalization
Fueling growth beyond a USD 1 billion enterprise
4
Revenue increased by $59.6 million from prior year
Banner represented $23.3 million of the increase
Revenue
(U.S. $ in millions)
220 213.5
210.0
203.7
200
181.5
180
160 153.9
140
120
100
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013
38.7% yr-yr revenue growth
5
Gross profit increased by $28.0 million from prior year
Banner represented $6.0 million of the increase
Gross Profit
(U.S. $ in millions)
60
55.5 55.4
55
50
45 42.4
40
34.0
35
30
25
20
14.4
15
10
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013
194.4% yr-yr gross profit growth
6
Adjusted EBITDA increase of $21.7 million from prior year
Patheon standalone Adjusted EBITDA represented $20.5 million of the increase
Adjusted EBITDA
(U.S. $ in millions)
45
36.3 36.5
35
25
19.8
16.5
15
5
-5(1.9)
-15
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013
7
Strong liquidity position
Cash Availability Liquidity
140
126.3 128.1
120
103.8
98.4
100
72.7
79.7
80 93.8
64.4
63.0
60
60.1
40
55.4
20 39.4
32.5 35.4
19.6
0
1Q12 2Q12 3Q12 4Q12 1Q13
8
Summary financial results
Three months ended January 31,
Statement of Operations 2013 2012 Change
(in millions of U.S. dollars) $ $ $
Revenues 213.5 153.9 59.6
Gross Profit 42.4 14.4 28.0
,
Operating loss(12.3)(20.9) 8.6
Loss from continuing operations(51.4)(19.3)(32.1)
Adjusted EBITDA 19.8(1.9) 21.7
Balance Sheets
Q1 2013 Q4 2012
Cash and cash equivalents 55.4 39.4
Inventories 141.7 82.3
Intangible assets 74.4 -
Goodwill 43.9 3.5
Deferred tax liabilities (LT & ST) 57.2 23.0
Total debt (LT & ST) 589.6 313.1
Undrawn lines of credit 72.7 64.4
9
2013 priorities
Drive customer performance
Exceed industry growth rates
Complete Banner integration
Deliver strong financials
10
Thank you
11
Appendix
Adjusted EBITDA
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013
(in millions of U.S. dollars) $ $ $ $ $
Income (loss)from continuing operations(19.3)(79.6) 15.5(23.0)(51.4)
Depreciation and amortization 10.6 10.8 9.3 10.1 11.0
Repositioning expenses 0.8 6.0 0.1(0.8) 4.0
Acquisition-related costs 3.2 4.4
Interest expense, net 6.5 6.5 6.8 6.7 9.8
Impairment charge57.9 10.1
(Gain) loss on sale of capital assets 0.4(0.3)
(Benefit from) provision for income taxes(7.7) 8.0 3.3 39.8(0.2)
Refinancing expenses 29.1
Consulting 6.3 6.0 1.00.1
Stock compensation expense 1.0 0.8 0.7 0.6 0.8
Purchase accounting adjustments 2.9
Other (income) expense, net(0.1) 0.1(0.4)(0.5)(0.5)
Adjusted EBITDA(1.9) 16.5 36.3 36.5 19.8
12
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