Discontinued Operations and Other Strategic Initiatives

9 Months Ended

Jul. 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations and Other Strategic Initiatives

DISCONTINUED OPERATIONS AND OTHER STRATEGIC INITIATIVES

Discontinued Operations

Banner Pharmacaps

On May 12, 2015, the Company sold its Banner Pharmacaps entity in Mexico, previously included within the DPS and BLS segments, to the Perrigo Company plc for approximately $36.4 million in cash. The Banner Pharmacaps entity in Mexico produced over-the-counter and nutritional products for consumption in Mexico. The Company acquired the entity in fiscal 2012 and subsequent to this acquisition, the Company shifted its business strategy, focusing more on technological innovation and R&D. The Company recognized a gain on sale of $2.6 million, which included adjustments in the second quarter of 2016 primarily related to working capital adjustments.

Biosolutions Operations in Capua, Italy

On July 31, 2015, the Company sold its Biosolutions facility in Capua, Italy, previously included within the Biosolutions segment, for approximately €0.3 million in cash. The sale occurred as a result of a strategic shift in the Company’s long term business strategy. The Company recognized a loss on sale of $24.0 million, which included an adjustment in the second quarter of 2016 for future retention bonuses at the facility.

DPx Fine Chemicals

On August 31, 2015, the Company sold its DPx Fine Chemicals ("DFC") division, which previously comprised the DFC operating segment. DFC was sold for a cash purchase price of €179.0 million, which included a €3.0 million working capital payment made in the first quarter of 2016. The Company recognized a gain on sale of $107.0 million, which included an adjustment in the first quarter of 2016 for estimated taxes on the sale. The DPx Fine Chemicals division, which was acquired through the DPP Acquisition, developed chemicals that are not in line with the Company’s long term business strategy.

The results of the above dispositions have been recorded as discontinued operations, the results of which for the three and nine months ended July 31, 2016 and 2015 are as follows:

	Three months ended July 31,			Nine months ended July 31,
	2016	2015		2016		2015
	$	$		$		$
Revenues	—	57.9		2.1		192.4
Cost of goods sold	—	47.1		1.9		146.1
Gross profit	—	10.8		0.2		46.3
Selling, general and administrative expenses	—	8.3		0.4		20.4
Research and development	—	—		—		0.5
Repositioning expenses	—	0.3		—		0.3
Acquisition and integration costs	—	—		—		0.1
Loss on sale of capital assets	—	0.1		—		0.1
Loss on disposals, net	—	22.3		2.8		22.3
Operating (loss) income	—	(20.2	)	(3.0	)	2.6
Interest income, net	—	(0.1	)	—		(0.1	)
Foreign exchange income, net	—	(0.1	)	(0.1	)	(0.2	)
Other income, net	—	—		—		(0.1	)
(Loss) income before income taxes	—	(20.0	)	(2.9	)	3.0
Provision for income taxes	—	2.8		0.2		6.1
Net loss	—	(22.8	)	(3.1	)	(3.1	)

Strategic Initiatives

BLS Spinoff

On July 31, 2015, the Company completed a spinoff of its BLS business to the Company's investors. The first day of operations of BLS as a stand-alone from Patheon's operations was August 1, 2015. Each owner received the same ownership interest in the new entity in proportion to its existing ownership interest in the Company. The spinoff was effectuated on a pro-rata basis and, as such, the transaction was completed using the balance sheet carrying values with no resulting gain or loss recorded in connection with the transaction.

The Company has a management services agreement with BLS to provide various management services. Accordingly, the Company has continuing involvement with BLS and therefore the financial results do not qualify as discontinued operations under current U.S. GAAP. As a result, BLS financial information for the three and nine months ended July 31, 2015 has been recorded within continuing operations in the accompanying consolidated statement of operations. Refer to Note 13 for related party transaction information.

Venlo Facility Closure

In February 2015, the Company closed its facility in Venlo, The Netherlands and transferred any remaining production to other Patheon facilities. Because the business in the Venlo facility was transferred within the existing site network, its results of operations are included in continuing operations in the consolidated financial statements. See Note 9 for further information.

Additionally, a $3.2 million impairment charge was recognized in the third quarter of 2015 relating to the value of the land at the facility location. The land was subsequently sold for €3.5 million in September 2015.