Patheon Reports Preliminary Unaudited First Quarter Fiscal 2014 Results

   Patheon Reports Preliminary Unaudited First Quarter Fiscal 2014 Results

PR Newswire

TORONTO, March 6, 2014

TORONTO, March 6, 2014 /PRNewswire/ - Patheon Inc. (TSX: PTI), a leading
provider of contract development and manufacturing services to the global
pharmaceutical industry, with recently acquired proprietary products,
announced today preliminary unaudited fiscal 2014 first-quarter results. Based
on its current expectations, Patheon anticipates the following results for its
first-quarter ended January 31, 2014:

  *Revenues of approximately $266.7 million versus $213.5 million in the
    prior year.
  *Adjusted EBITDA of approximately $36.4 million versus $19.8 million in the
    prior year.
  *Loss from continuing operations of approximately $0.1 million versus a
    loss of $51.4 million in the prior year.

Because Patheon's results of operations for the first quarter of fiscal 2014
have not yet been finalized, the preliminary results included in this press
release are subject to change as a result of the period-end closing process
and review of Patheon's financial statements by its independent registered
public accounting firm. See "Caution Concerning Forward Looking Statements and
Preliminary Financial Results." All currency is expressed in U.S. dollars.

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. Patheon's integrated network consists of 15 locations, including 12
commercial contract manufacturing facilities and 9 product 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 Measures
This press release includes the financial measure Adjusted EBITDA that has not
been prepared in accordance with accounting principles generally accepted in
the United States ("GAAP").

"Adjusted EBITDA" is defined as 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 Patheon's operational
initiatives, purchase accounting adjustments, acquisition-related litigation
expenses and other income and expenses. Readers are cautioned that Adjusted
EBITDA should not be construed as an alternative to loss from continuing
operations determined in accordance with U.S. GAAP as an indicator of
performance. Adjusted EBITDA is used by management as an internal measure of
profitability. Patheon has included Adjusted EBITDA because it believes that
this measure is used by certain investors to assess its financial performance
before non-cash charges and certain costs that it does not believe are
reflective of its underlying business.

Since non-GAAP measures do not have a standardized meaning, they may not be
comparable to similar measures presented by other issuers. Readers are
cautioned that these non-GAAP measures are not based on any comprehensive set
of accounting rules or principles and that they should be considered only in
conjunction with, and not as a substitute for, or superior to, loss from
continuing operations determined in accordance with GAAP as indicators of
performance and not as a substitute for, or superior to, operating cash flow
as an indicator of liquidity, as applicable. These non-GAAP measures are
subject to inherent limitations because (i) they do not reflect all of the
expenses and cash flow associated with loss from continuing operations and
operating cash flow, respectively, determined in accordance with GAAP and (ii)
the composition of these non-GAAP measures involved the exercise of judgment
by management. A reconciliation of these non-GAAP measures to their closest
U.S. GAAP measures is included in this press release.

Caution Concerning Forward-Looking Statements and Preliminary Financial
Results

This press release contains forward-looking statements which reflect Patheon's
expectations regarding its 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 Patheon's current assumptions based upon information currently
available to it and based upon what Patheon believes to be reasonable
assumptions, Patheon cannot be certain that actual results will be consistent
with its expectations and other forward-looking statements. Forward-looking
statements are provided in order to assist stakeholders in understanding
management's expectations as of the date of this press release, and may not be
suitable for other purposes. Patheon's current material assumptions include
assumptions related to its operational excellence initiatives and
transformation activities, 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 Patheon's 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 Patheon's services; regulatory matters affecting manufacturing and
pharmaceutical development services; impacts of acquisitions, divestitures,
restructurings and other strategic transactions (including Patheon's
acquisition by JLL/Delta Patheon Holdings, L.P.) and Patheon's ability to
achieve its intended objectives with respect to such transactions and to
integrate businesses that it may acquire or combine with; implementation of
Patheon's operational excellence initiatives and transformation activities;
Patheon's ability to effectively transfer business between facilities; the
global economic environment; Patheon's exposure to complex production issues;
Patheon's 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 Patheon has a majority
shareholder that can exercise significant influence over it; supply
arrangements; pension plans; derivative financial instruments; and Patheon's
dependence upon key management, scientific and technical personnel. For
additional information regarding risks and uncertainties that could affect
Patheon's business, please see Item 1A "Risk Factors" of Patheon's Annual
Report on Form 10-K/A (Amendment No. 1) for the fiscal year ended October 31,
2013 as further amended by Amendment No. 2 on Form 10-K/A, and its subsequent
filings with the U.S. Securities and Exchange Commission ("SEC") and the
Canadian securities regulators. Although Patheon has 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, Patheon assumes no obligation to
update or revise them to reflect new events or circumstances.

In addition, Patheon is currently undergoing its quarter-end closing and
review process. Because Patheon's results of operations for the quarter ended
January 31, 2014 have not yet been finalized, the preliminary results included
in this press release are subject to change as a result of the period-end
closing process and the review of Patheon's financial statements by its
independent registered public accounting firm, Ernst & Young LLP. These
changes may be material. The preliminary financial results included in this
press release have been prepared by, and are the responsibility of, Patheon's
management. Ernst & Young LLP has not completed its review of Patheon's first
quarter 2014 financial statements, and accordingly, Ernst & Young LLP does not
express an opinion or any form of assurance with respect to these preliminary
financial results. These preliminary financial results are not necessarily
indicative of results of future operations. Accordingly, readers should not
place undue reliance on Patheon's preliminary financial results. These
preliminary financial results should be read in conjunction with Patheon's
previously disclosed consolidated historical financial statements (and related
notes).

Additional Information

On November 18, 2013, Patheon entered into an Arrangement Agreement (the
"Arrangement Agreement") with JLL/Delta Patheon Holdings, L.P., ("Newco")
under which Patheon would be taken private pursuant to a court-approved plan
of arrangement under the Canada Business Corporations Act. This press release
may be deemed to be proxy solicitation material in respect of this proposed
transaction. Copies of the Arrangement Agreement, the proxy statement and
management information circular for the Special Meeting (which includes the
valuation and the fairness opinions obtained by Patheon in connection with the
transaction) and certain related documents have been filed with Canadian and
U.S. securities regulators and are available on the Canadian SEDAR profile of
Patheon at www.sedar.com and the SEC's website (EDGAR) at www.sec.gov. In
addition, investors and securityholders may obtain free copies of the
documents Patheon files with the SEC and with Canadian securities regulators
by directing a written request to Patheon Inc., 2100 Syntex Court,
Mississauga, Ontario, Canada L5N 7K9, Attention: Corporate Secretary. Copies
of Patheon's filings with the SEC and with Canadian securities regulators may
also be obtained at the "Investor Relations" section of Patheon's website at
www.patheon.com.

As noted above, Patheon has filed with the SEC, and on SEDAR, and furnished to
its shareholders a proxy statement and management information circular in
connection with the proposed transaction with Newco. Investors and
securityholders of Patheon are urged to read the proxy statement and
management information circular and the other relevant materials because such
materials contain important information about Patheon, Newco and the proposed
transaction.

Patheon and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from the securityholders of
Patheon in connection with the proposed transaction. Information about Patheon
and its directors and executive officers, including their ownership of Patheon
securities, is set forth in the Annual Report (Form 10-K) which was filed with
the SEC and on SEDAR on January 10, 2014, as amended by Amendment No. 1 on
Form 10-K/A which was filed with the SEC and on SEDAR on January 13, 2014,
and as further amended by Amendment No. 2 on Form 10-K/A, which was filed with
the SEC and on SEDAR on February 21, 2014, and as supplemented by other
Patheon filings with the SEC and Canadian securities regulators. Investors and
securityholders may obtain additional information regarding the direct and
indirect interests of Patheon and its directors and executive officers in the
proposed transaction by reading the proxy statement and management information
circular and other public filings referred to above.

                                 Patheon Inc.
                         CONSOLIDATED BALANCE SHEETS
                         (preliminary and unaudited)
                                                         
                                                         
                                       As of January 31,  As of October 31,
                                               2014                2013
(in millions of U.S. dollars)                   $                  $
                                                                         
Assets                                                                    
Current                                                                   
 Cash and cash equivalents                         45.8               61.6
 Accounts receivable, net                          180.9              191.3
 Inventories                                      143.5              137.8
 Income taxes receivable                             4.0                3.6
 Prepaid expenses and other                         12.1               15.3
 Deferred tax assets - short-term                   6.1                6.1
Total current assets                                392.4              415.7
                                                                         
Capital assets                                     484.4              496.7
Intangible assets                                   67.5               69.2
Deferred financing costs                             19.3               20.2
Deferred tax assets                                  0.1                0.1
Goodwill                                             48.2               48.5
Investments                                           9.4                8.4
Other long-term assets                              22.7               19.0
Total assets                                      1,044.0            1,077.8
                                                                         
Liabilities and shareholders' equity                                      
Current                                                                   
 Short-term borrowings                               0.7                3.0
 Accounts payable and accrued                      204.7              221.9
  liabilities
 Income taxes payable                                2.3                0.1
 Deferred revenues - short-term                     16.3               15.0
 Deferred tax liability - short-term                 0.1                0.1
 Current portion of long-term debt                  6.8                6.8
Total current liabilities                           230.9              246.9
                                                                         
Long-term debt                                     603.0              599.2
Deferred revenues                                   19.4               20.1
Deferred tax liabilities                            43.4               43.4
Other long-term liabilities                          38.0               41.8
Total liabilities                                   934.7              951.4
                                                                         
Shareholders' equity                                                      
 Restricted voting shares                         610.6              610.6
 Contributed surplus                               17.5               16.7
 Accumulated deficit                             (514.6)            (514.5)
 Accumulated other comprehensive                   (4.2)               13.6
  income
Total shareholders' equity                          109.3              126.4
Total liabilities and shareholders'               1,044.0            1,077.8
equity



                                 Patheon Inc.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                         (preliminary and unaudited)
                                                                           
                                                                           
                                               Three months ended January 31,
                                                         2014          2013
(in millions of U.S. dollars, except loss per                $              $
share)                                                            
                                                                         
Revenues                                                266.7         213.5
Cost of goods sold                                       197.8         171.1
Gross profit                                              68.9          42.4
Selling, general and administrative expenses             46.3          35.2
Research and development                                   2.8           1.3
Repositioning expenses                                    0.7           4.0
Acquisition and integration costs                          4.9           4.4
Impairment charge                                           -          10.1
Gain on sale of fixed assets                             (0.4)         (0.3)
Operating income (loss)                                   14.6        (12.3)
Interest expense, net                                     12.8           9.8
Foreign exchange loss, net                                 1.2           0.8
Refinancing expenses                                        -          29.1
Other income, net                                        (1.3)         (0.4)
Income (Loss) from continuing operations before            1.9         (51.6)
income taxes                                                      
Provision for (benefit from) income taxes                 2.0         (0.2)
Loss from continuing operations                          (0.1)        (51.4)
Net loss attributable to restricted voting               (0.1)         (51.4)
shareholders                                                      
                                                                         
Basic and diluted loss per share                                          
            From continuing operations               ($0.001)      ($0.384)
                                                                         
Weighted-average number of shares outstanding
during period -                                 
basic and diluted (in thousands)                        140,936       133,849



                                 Patheon Inc.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (preliminary and unaudited)
                                                                            
                                                                            
                                               Three months ended January 31,
                                                                          
                                                      2014              2013
(in millions of U.S. dollars)                             $                 $
                                                                          
Operating activities                                                       
Loss from continuing operations                       (0.1)            (51.4)
  Add (deduct) charges to operations not
   requiring a current cash payment                                        
         Depreciation and amortization              12.4              11.0
         Impairment charge                              -              10.1
         Other non-cash interest                      1.5               4.9
         Change in other long-term assets and
           liabilities                                (5.5)             (1.6)
         Deferred income taxes                          -             (1.0)
         Amortization of deferred revenues          (5.1)             (4.2)
         Gain on sale of capital assets             (0.4)             (0.3)
         Stock-based compensation expense             0.8               0.8
         Other                                      (1.4)               0.1
                                                       2.2            (31.6)
  Net change in non-cash working capital
   balances related to continuing operations        (17.3)              19.7
  Increase in deferred revenues                        6.5               5.6
                                             
Cash used in operating activities                     (8.6)             (6.3)
                                                                          
Investing activities                                                       
  Additions to capital assets                       (11.4)             (8.4)
  Proceeds on sale of capital assets                   4.4               0.4
  Acquisitions, net of cash acquired                     -           (258.9)
                                             
Cash used in investing activities                     (7.0)           (266.9)
                                                                          
Financing activities                                                       
  Proceeds from long-term borrowings                  13.0             592.1
  Increase in deferred financing costs                   -            (21.7)
  Repayment of debt, net of penalty payment         (12.2)           (315.8)
  Share issue cost                                      -             (0.9)
  Proceeds on issuance of restricted voting
   shares                                                 -              32.9
                                             
Cash provided by financing activities                   0.8             286.6
                                                                          
Effect of exchange rate changes on cash and
cash equivalents                                      (1.0)               2.6
                                                                          
Net (decrease) increase in cash and cash
equivalents during the period                        (15.8)              16.0
Cash and cash equivalents, beginning of period         61.6              39.4
                                                              
Cash and cash equivalents, end of period               45.8              55.4
                                                              



                           ADJUSTED EBITDA BRIDGE
                        (Preliminary and Unaudited)
                                                                         
                                                                         
                                            Three months ended January 31,
                                               2014              2013
(in millions of U.S. dollars)                     $                 $
Loss from continuing operations                    (0.1)            (51.4)
Add (deduct):                                                           
 Provision for (benefit from) income taxes          2.0             (0.2)
 Gain on sale of capital assets                   (0.4)             (0.3)
 Acquisition and integration costs                  4.9               4.4
 Refinancing expenses                                 -              29.1
 Interest expense, net                             12.8               9.8
 Repositioning expenses                             0.7               4.0
 Depreciation and amortization                     12.4              11.0
 Impairment charge                                    -              10.1
 Operational initiatives related           
  consulting costs                                    1.4               0.1
 Acquisition-related litigation expenses            3.1                 -
 Stock-based compensation expense                   0.8               0.8
 Purchase accounting adjustments                      -               2.9
 Other                                            (1.2)             (0.5)
Adjusted EBITDA                                     36.4              19.8
                                                                       







SOURCE Patheon Inc.

Contact:

Contact:
Patheon Inc.
Tel: (919) 226-3200
Email:investorrelations@patheon.com
 
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