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Patheon reports fourth quarter and full fiscal 2012 results

December 17, 2012

Underlying business growth of 15.3 percent with strong margin
improvements

Completion of the acquisition of Banner Pharmacaps announced Friday

TORONTO, Dec. 17, 2012 /PRNewswire/ – Patheon Inc. (TSX: PTI), a leading provider of contract development and
manufacturing services to the global pharmaceutical industry, announced
today full year and fourth quarter results for fiscal 2012.

For the full year:

        --  Revenues were $749.1 million versus $700.0 million last year,
            an increase of 7.0 percent.  Excluding the $50.3 million
            benefit from the contract cancellation recorded last year,
            revenue would have increased by 15.3 percent.
        --  Gross profit for the year was $159.3 million compared to $131.8
            million last year, an increase of 20.9 percent. Excluding the
            $50.3 million benefit from the contract cancellation recorded
            last year, gross profit would have increased by 95.5 percent.
        --  The loss before discontinued operations was $106.4 million
            compared to a loss before discontinued operations of $15.8
            million last year.  The increase was primarily due to the asset
            impairment charge of $57.9 million related to the wind down of
            the Swindon, U.K. facility recorded in the second quarter, and
            the $36.6 million Canadian tax valuation reserve recorded on
            the company's Canadian deferred tax asset in the fourth quarter
            of fiscal 2012.
        --  Adjusted EBITDA was $71.1 million compared to $66.4 million
            last year, an increase of 7.1 percent. Excluding the $50.3
            million benefit from the contract cancellation recorded last
            year, Adjusted EBITDA would have increased by $55.0 million.

For the fourth quarter:

        --  Revenues were $210.0 million versus $181.6 million in the same
            period last year.   Excluding currency fluctuations, revenues
            would have been approximately 18.7 percent higher than the same
            period last year.
        --  Gross profit was $55.4 million compared to $33.5 million in the
            same period last year.
        --  The loss before discontinued operations was $23.0 million
            compared to a loss before discontinued operations of $9.8
            million in the same period last year. The fourth quarter of
            fiscal 2012 includes the $36.6 million Canadian tax valuation
            reserve discussed above.
        --  Adjusted EBITDA was $35.9 million compared to $14.5 million in
            the same period last year.

“We had strong revenue growth throughout the year, and we believe the
flow through to Adjusted EBITDA was excellent,” said James C. Mullen,
Patheon’s Chief Executive Officer.  “Our progress with the core
business positioned us to acquire Banner and we are excited to welcome
our Banner colleagues to Patheon.  We look forward to continued success
in executing our strategy in 2013.”

Full Year and Fourth Quarter Operating Results from Continuing
Operations

Revenues were $749.1 million for fiscal 2012 versus $700.0 million in
the same period last year, an increase of 7.0 percent.  Excluding the
impact of foreign exchange, revenue would have increased by 10.1
percent.

Commercial manufacturing (“CMO”) revenues for fiscal 2012 were $610.7
million up from $572.6 million for fiscal 2011, an increase of 6.7
percent. Excluding the $50.3 million benefit from the contract
cancellation recorded last year, revenue would have increased by 17.0
percent. Pharmaceutical Development Services (“PDS”) revenues for
fiscal 2012 were $138.4 million up from $127.4 million for fiscal 2011.

Revenues in the fourth quarter were $210.0 million up from $181.6
million for the same period last year. Excluding currency fluctuations,
revenues would have been approximately 18.7 percent higher than the
same period of the prior year.

CMO revenues for the fourth quarter were $172.7 million up from $146.9
million for the same period last year, an increase of 17.6 percent. PDS
revenues for the fourth quarter fiscal 2012 were $37.5 million up from
$34.9 million for the same period last year, an increase of 7.4
percent.

Gross profit for fiscal 2012 was $159.3 million up from $131.8 million
in the same period last year. Excluding the $50.3 million benefit from
the contract cancellation recorded last year, gross profit would have
increased by $77.8 million. The increase in gross profit was primarily
due to higher revenue and an improved gross profit margin of 21.3
percent for fiscal 2012 versus 18.8 percent for fiscal 2011. The
increase of gross profit was due to savings from our Operational
Excellence and Procurement initiatives, a decrease in depreciation
expense and the impact of higher volumes.

Gross profit for the fourth quarter was $55.4 million up from $33.5
million in the same period last year. The increase in gross profit was
primarily due to higher revenue and an improved gross profit margin of
26.4 percent versus 18.5 percent for the fourth quarter of fiscal 2011.
The increase in gross profit margin was due to savings from our
Operational Excellence and Procurement initiatives, a decrease in
depreciation expense and the impact of higher volumes.

The loss before discontinued operations for fiscal 2012 was $106.4
million or 82.4¢ per share, both basic and diluted, compared to a loss
before discontinued operations of $15.8 million or 12.2¢ per share,
both basic and diluted, in fiscal 2011. The loss before discontinued
operations for fourth quarter was $23.0 million or 17.8¢ per share,
both basic and diluted, compared to a loss before discontinued
operations of $9.7 million or 7.5¢ per share, both basic and diluted,
in fiscal 2011.

Included in the loss before discontinued operations for fiscal 2012 was
the asset impairment charge of $57.9 million recorded in the second
quarter related to the Swindon, U.K. facility wind down, as well as the
$36.6 million Canadian tax valuation reserve recorded on the company’s
net Canadian tax assets in the fourth quarter of fiscal 2012.  If our
Canadian legal entity returns to sustained profitability in future
periods the valuation allowance may be reversed.

At the end of fiscal 2012, Patheon had liquidity of $93.8 million from
cash and cash equivalents of $39.4 million and $64.4 million from
available lines of credit.

2013 Outlook
Patheon recently announced the close of the acquisition of Banner and
expects to provide further guidance on the outlook for the combined
company in connection with its regularly scheduled earnings call for
the first quarter of fiscal 2013.

Conference Call and Webcast Information
Patheon will host a conference call and live internet webcast, along
with a slide presentation, today (December 17, 2012) at 8:30 a.m.
Eastern Time.  Interested parties are invited to access the conference
call, via telephone, 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.  Interested parties may access the accompanying slide
presentation and live internet webcast of the conference call on
Patheon’s company website at http://ir.patheon.com/events.cfm.

A telephone replay of the conference call will be available between
December 17, 2012 and December 24, 2012 by dialing 1-855-859-2056 (toll free) or 1-403-451-9481, and by entering identification number
73696786, followed by the number key.  The internet webcast and slide
presentation will be archived at http://ir.patheon.com/events.cfm.

About Patheon
Patheon Inc. (TSX: PTI) is a leading global provider of contract
manufacturing and development services to the global pharmaceutical
industry.  The company provides the highest quality products and
services to approximately 300 of the world’s leading pharmaceutical and
biotechnology companies.  Patheon’s services range from preclinical
development through commercial manufacturing of a full array of solid
and sterile dosage forms.

The company’s comprehensive range of fully integrated Pharmaceutical
Development Services includes pre-formulation, formulation, analytical
development, clinical manufacturing, scale-up and commercialization. 
The company’s integrated development and manufacturing network of nine
manufacturing facilities and nine development centers across North
America and Europe, 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
References in this press release to “Adjusted EBITDA” are to income
(loss) before discontinued 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, gain on
extinguishment of debt, income taxes, asset impairment charges,
depreciation and amortization 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 these non-GAAP measures
should not be construed as alternatives to income (loss) before
discontinued operations determined in accordance with GAAP as
indicators of performance.  Adjusted EBITDA is used by management as an
internal measure of profitability.  The company has included these
measures because it believes that this information is used by certain
investors to assess its financial performance, before non-cash charges
and certain costs that the company does not believe are reflective of
its 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 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, 2011 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.


                                           Patheon Inc.

                               CONSOLIDATED BALANCE SHEETS

                                                  As of October 31,

    (in millions of U.S. dollars )                2012        2011

                                                     $           $

    Assets                                                          

    Current                                                         

      Cash and cash equivalents                   39.4        33.4  

      Accounts receivable, net                   161.7       158.0  

      Inventories                                 82.3        81.8  

      Income taxes receivable                      0.4         3.1  

      Prepaid expenses and other                  11.9        10.7  

      Deferred tax assets--short term         4.3         8.1  

    Total current assets                         300.0       295.1  

    Capital assets                               416.4       474.2  

    Deferred financing costs                       4.9         6.2  

    Deferred tax assets                        --        39.1  

    Goodwill                                       3.5         3.5  

    Investments                                    6.3         5.3  

    Long-term assets held for sale             --         0.2  

    Other long-term assets                        11.8         1.0  

    Total assets                                 742.9       824.6  

    Liabilities and shareholders' equity                            

    Current                                                         

      Short-term borrowings                        2.4         6.1  

      Accounts payable and accrued liabilities   186.2       181.5  

      Income taxes payable                         5.7     --  

      Deferred revenues--short term          13.9         8.8  

      Current portion of long-term debt        --         1.1  

    Total current liabilities                    208.2       197.5  

    Long-term debt                               310.7       280.1  

    Deferred revenues                             28.9        27.7  

    Deferred tax liabilities                      23.0        27.9  

    Other long-term liabilities                   47.8        53.7  

    Total liabilities                            618.6       586.9  

    Shareholders' equity                                            

      Restricted voting shares                   572.5       571.9  

      Contributed surplus                         16.5        13.5  

      Accumulated deficit                      (478.6)     (371.9)  

      Accumulated other comprehensive income      13.9        24.2  

    Total shareholders' equity                   124.3       237.7  

    Total liabilities and shareholders' equity   742.9       824.6  

 


                                                Patheon Inc.

                              CONSOLIDATED STATEMENT OF OPERATIONS

                        Three months ended October
                                               31,   Year ended October 31,

                           2012               2011      2012           2011

    (in millions of
    U.S. dollars,
    except loss per
    share)                    $                  $         $              $

    Revenues              210.0              181.6     749.1          700.0

    Cost of goods sold    154.6              148.1     589.8          568.2

    Gross profit           55.4               33.5     159.3          131.8

    Selling, general
    and administrative
    expenses               29.5               35.9     128.6          120.2

    Repositioning
    expenses              (0.8)                3.6       6.1            7.0

    Acquisition-related
    costs                   3.2                  -       3.2              -

    Impairment charge         -                  -      57.9              -

    Loss on sale of
    fixed assets            0.4                0.1       0.4            0.2

    Operating income
    (loss)                 23.1              (6.0)    (36.9)            4.4

    Interest expense,
    net                     6.7                6.6      26.5           25.6

    Foreign exchange
    (gain) loss           (0.1)              (4.8)       0.5          (1.6)

    Other (income)
    expense, net          (0.3)                0.9     (0.9)          (4.9)

    Income (loss) from
    continuing
    operations before
    income taxes           16.8              (8.8)    (63.0)         (14.7)

    Provision for
    income taxes           39.8                1.0      43.4            1.1

    Loss before
    discontinued
    operations           (23.0)              (9.8)   (106.4)         (15.8)

    Loss from
    discontinued
    operations            (0.1)              (0.1)     (0.3)          (0.6)

    Net loss for the
    period               (23.1)              (9.9)   (106.7)         (16.4)

    Net loss
    attributable to
    restricted voting
    shareholders         (23.1)              (9.9)   (106.7)         (16.4)

    Basic and diluted
    loss per share                                                         

      From continuing
      operations        (0.178)            (0.075)   (0.824)        (0.122)

      From discontinued
      operations        (0.001)            (0.001)   (0.002)        (0.005)

                        (0.179)            (0.077)   (0.826)        (0.127)

    Average number of
    shares outstanding
    (in thousands)                                                         

      Basic and diluted 129,170            129,168   129,169        129,168

 


                                                Patheon Inc.

                             CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                 Years ended October 31,

    (in millions of U.S. dollars)            2012        2011        2010

                                                $           $           $

    Operating activities                                                   

      Loss before discontinued operations (106.4)      (15.8)       (2.9)  

      Add (deduct) charges to operations
      not requiring a current cash
      payment

        Depreciation and amortization        40.8        53.2        55.6  

        Impairment charge                    57.9     --         3.6  

        Other non-cash interest               1.2         1.1         2.5  

        Change in other long-term assets    (2.2)       (4.0)         2.2
        and liabilities

        Deferred income taxes                34.2       (0.6)      (19.7)  

        Amortization of deferred revenues  (13.1)      (45.0)      (37.4)  

        Loss on sale of capital assets        0.4         0.2         0.2  

        Stock-based compensation expense      3.1         3.5         2.3  

        Other                               (0.9)       (0.1)       (0.5)  

                                             15.0       (7.5)         5.9  

      Net change in non-cash working        (6.8)         1.0       (2.6)
      capital balances related to
      continuing operations

      Increase in deferred revenues          25.2        30.4        47.4  

      Cash provided by operating             33.4        23.9        50.7
      activities of continuing operations

      Cash used in operating activities     (0.4)       (1.0)       (0.7)
      of discontinued operations

    Cash provided by operating activities    33.0        22.9        50.0  

    Investing activities                                                   

      Additions to capital assets          (53.4)      (47.8)      (48.7)  

      Proceeds on sale of capital assets      0.4         0.4     --  

      Proceeds on sale of business, net       1.0     --     --  

      Net increase in investments         --     --       (1.1)  

      Investment in intangibles           --     --       (0.2)  

      Cash used in investing activities    (52.0)      (47.4)      (50.0)
      of continuing operations

      Cash provided by investing              0.1     --     --
      activities of discontinued
      operations

    Cash used in investing activities      (51.9)      (47.4)      (50.0)  

    Financing activities                                                   

      (Decrease) increase in short-term     (3.8)         4.2      (10.7)
      borrowings

      Increase in debt                       40.9        13.5       300.2  

      Increase in deferred financing      --     --       (7.3)
      costs

      Repayment of debt                    (11.1)      (15.0)     (250.6)  

      Proceeds on issuance of restricted      0.3     --     --
      voting shares

      Cash provided by financing             26.3         2.7        31.6
      activities of continuing operations

    Cash provided by financing activities    26.3         2.7        31.6  

    Effect of exchange rate changes on      (1.4)         1.7       (0.4)
    cash and cash equivalents

    Net increase (decrease) in cash and       6.0      (20.1)        31.2
    cash equivalents during the period

    Cash and cash equivalents, beginning     33.4        53.5        22.3
    of period

    Cash and cash equivalents, end of        39.4        33.4        53.5
    period

    Supplemental cash flow information                                     

    Interest paid                            25.4        25.0        21.1  

    Income taxes paid (received), net         2.2       (1.3)         9.1  

 


                                    ADJUSTED EBITDA BRIDGE

                         Three months ended
                            October 31,       Years ended October 31,

                          2012       2011       2012          2011

                            $          $          $             $ 

    Net loss for the
    period               (23.1)       (9.9)   (106.7)          (16.4)

    Loss from
    discontinued
    operations            (0.1)       (0.1)     (0.3)           (0.6)

    Loss before
    discontinued
    operations           (23.0)       (9.8)   (106.4)          (15.8)

    Add (deduct):                                                    

    Provision for income
    taxes                  39.8         1.0      43.4             1.1

    Loss on sale of
    capital assets          0.4         0.1       0.4             0.2

    Acquisition-related
    costs                   3.2           -       3.2               -

    Interest expense,
    net                     6.7         6.6      26.5            25.6

    Repositioning
    expenses              (0.8)         3.5       6.1             7.0

    Depreciation and
    amortization           10.1        12.2      40.8            53.2

    Asset impairment
    charge                    -           -      57.9               -

    Other                 (0.5)         0.9     (0.8)           (4.9)

    Adjusted EBITDA        35.9        14.5      71.1            66.4

 

SOURCE Patheon Inc.


Source: PR Newswire