Catalent Pharma Solutions, Inc., one of the leading providers of
advanced technologies and outsourced services to the global
pharmaceutical, biotechnology and consumer health industry announced
its financial results for its second fiscal quarter ended December 31,
2007. Catalent recognized net revenue for the three months then ended
of $464.0 million and EBITDA from continuing operations of $44.8
million for the same period after giving effect to the Acquisition and
related purchase method of accounting adjustments. EBITDA and Adjusted
EBITDA as detailed in the attached schedules for the twelve months
ended December 31, 2007 were $57.1 million and $338.9 million,
respectively. EBITDA and Adjusted EBITDA are defined below under
"Non-GAAP Financial Matters".
Catalent´s President and Chief Executive Officer, John Lowry,
said, "It has been ten months since our separation from Cardinal
Health, and at the halfway point in our first full fiscal year as a
standalone company, we are pleased with our progress. Our efforts to
finalize the separation from Cardinal Health continue ahead of
schedule, and are nearly complete. In the first half of our 2008
fiscal year, we showed growth in revenue and EBITDA over the same
period for our fiscal year 2007 of 10.7% and 27.5%, respectively,
owing to strength in our Oral and Sterile Technologies segments. We
continue to invest in our manufacturing network and we have
significantly increased our investment in product and technology
innovation. Our business fundamentals remain strong, and we are
building momentum for the second half of our fiscal year 2008 and
beyond."
David Eatwell, Catalent´s Chief Financial Officer stated, "We are
pleased to report another strong quarter for our Sterile Technologies
segment, which reported a 22% increase in revenue, and led the way in
the growth of this quarter´s EBITDA. Strong demand also continued to
drive the top line in our Oral Technologies segment, although a
non-cash inventory charge of $10.0 million impacted the EBITDA growth
for the quarter. With Adjusted EBITDA for the twelve months ending
December 31, 2007 at $338.9 million, we are pleased with our
progress."
The definition of Adjusted EBITDA, which excludes costs related to
the separation of Catalent from Cardinal Health, Inc. and costs
related to The Blackstone Group´s acquisition of Catalent, among other
items, and a reconciliation of Adjusted EBITDA to GAAP results are
included in this press release.
Results of Operations - Second Fiscal Quarter Ended December 31,
2007
Net revenue for the three months ended December 31, 2007 was
$464.0 million, an increase of $47.5 million, or 11.4%, compared to
$416.5 million in the same period for 2006. The increase was primarily
due to strong demand for Oral Technologies pharmaceutical products and
increased volumes and throughput within our Sterile Technologies
segment, including increased output from our new sterile facility in
Belgium. The weaker U.S. dollar favorably impacted the Company´s
revenue growth by approximately 6 percentage points.
Gross margin for the three months ended December 31, 2007, was
$107.6 million, including the impact of purchase accounting
adjustments of $2.1 million. During the quarter the Company identified
a prior period error of $11.0 million, including a non-cash inventory
charge of $10.0 million. Excluding both of these items, gross margin
was $120.7 million, an increase of $13.7 million, or 12.8%, compared
to $107.0 million in the same period for 2006. The increase in gross
margin was primarily due to improved utilization within the Sterile
Technologies segment and strong demand for the Oral Technologies
segment´s pharmaceutical products. The weaker U.S. dollar favorably
impacted the Company´s gross margin growth by approximately 6
percentage points.
Selling, general and administrative expenses for the three months
ended December 31, 2007, were $84.2 million, including the impact of
purchase accounting adjustments. Excluding purchase accounting
adjustments, SG&A was $74.1 million, compared to $73.8 million in the
same period for 2006. The savings achieved from operating as a
standalone company were offset by the impact of the weaker U.S. dollar
which increased the SG&A by $3.2 million.
EBITDA from continuing operations for the three months ended
December 31, 2007, was $44.8 million, a decrease of $4.3 million or
8.8 %, compared to the same period in 2006. Compared to the same
period in 2006, the Sterile Technologies segment increased EBITDA by
$4.2 million to $4.6 million due to increased volumes and improved
utilization of facilities, including the ramp-up of our new facility
in Brussels. EBITDA for the Oral Technologies segment decreased by
$5.0 million compared to the same period in 2006, primarily due to an
inventory charge and other adjustments of $11.0 million, of which
$10.0 million was non-cash. Our Packaging Services segment´s EBITDA
was $19.7 million, an increase of $1.6 million, or 8.8 %, compared to
the same period in 2006, with increased demand in Europe and for
clinical services offsetting weaker demand for packaging and printed
components within the U.S.
The Acquisition
On April 10, 2007, an entity controlled by affiliates of The
Blackstone Group acquired from Cardinal Health, Inc. ("Cardinal")
certain businesses of the Pharmaceutical Technologies and Services
segment of Cardinal, which now constitute the Company, for an
aggregate purchase price of approximately $3.3 billion (the
"Acquisition"). The Company has performed an evaluation of the fair
values of the real and personal property, inventory and certain
identifiable intangible assets in connection with the purchase price
allocation related to the Acquisition. The valuation study resulted in
a fair value step-up to real and personal property, inventory and
certain identifiable intangible assets. Catalent is in the process of
finalizing its purchase accounting information. In connection with the
Acquisition, Catalent entered into a senior secured credit facility,
consisting of an approximate $1.4 billion aggregate principal term
loan, a $350.0 million revolving credit facility and issued $565.0
million of 9 1/2%/ 10 1/4% Senior PIK-Election Notes due 2015 and EUR
225.0 million of 9 3/4% euro-denominated ($300.3 million dollar
equivalent) Senior Subordinated Notes due 2017.
Non-GAAP Financial Matters
In addition to disclosing financial results that are determined in
accordance with US GAAP, Catalent discloses EBITDA and Adjusted
EBITDA, which are non-GAAP measures. You should not consider EBITDA or
Adjusted EBITDA as an alternative to operating or net earnings,
determined in accordance with US GAAP, as an indicator of Catalent´s
operating performance, or as an alternative to cash flows from
operating activities, determined in accordance with US GAAP, as an
indicator of cash flows, or as a measure of liquidity. EBITDA is
calculated by the sum of earnings before interest, taxes, depreciation
and amortization.
The Company´s credit facilities and the indentures governing the
outstanding notes have certain covenants that use ratios utilizing a
measure referred to as Adjusted EBITDA ("Adjusted EBITDA"). The
supplementary adjustments to EBITDA to derive Adjusted EBITDA may not
be in accordance with current SEC practices or the rules and
regulations adopted by the SEC that apply to periodic reports filed
under the Securities Exchange Act of 1934. Accordingly, the SEC may
require that Adjusted EBITDA be presented differently in filings that
may be made with the SEC than as presented in this release, or not be
presented at all. The most directly comparable GAAP measure to EBITDA
and Adjusted EBITDA is net earnings (loss). Included in this release
is a reconciliation of net earnings (loss) to EBITDA and to Adjusted
EBITDA.
Conference Call/ Webcast
The Company has scheduled a webcast on February 12th beginning at
10:30 a.m. (EST) to review the results. To access the call and slide
presentation, go to the Investor Center at www.catalent.com. A replay
and transcript will also be available from the Investor Center at
www.catalent.com following the call.
About Catalent
Headquartered in Somerset, New Jersey, Catalent is one of the
leading providers of advanced technologies, and development,
manufacturing and packaging services for pharmaceutical, biotechnology
and consumer healthcare companies in nearly 100 countries. The company
applies its local market expertise and technical creativity to advance
treatments, change markets and enhance patient outcomes. Catalent
employs approximately 10,000 people at more than 30 facilities
worldwide and generates more than $1.7 billion in annual revenue. For
more information, visit www.catalent.com.
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Catalent Pharma Solutions
Condensed Statements of Earnings
(unaudited, in millions)
Successor Predecessor
----------------- -----------------
Three Months Three Months Change
---------------
Ended Ended
December 31, 2007 December 31, 2006 $ %
----------------- ----------------- ------- -------
Net revenue $ 464.0 $ 416.5 $ 47.5 11.4%
Cost of products
sold 356.4 309.5 46.9 15.2%
----------------- ----------------- ------- -------
Gross margin 107.6 107.0 0.6 0.6%
Selling, general
and
administrative
expenses 84.2 73.8 10.4 14.1%
Impairment charges
and (gain)/ loss
on sale of asset - 0.9 (0.9) -100.0%
Restructuring and
other special
items 9.0 5.9 3.1 52.5%
----------------- ----------------- ------- -------
Operating earnings 14.4 26.4 (12.0) -45.5%
Interest expense,
net 52.0 1.0 51.0 N.M.
Other, net 10.6 (0.2) 10.8 N.M.
----------------- ----------------- ------- -------
(Loss)/ earnings
before income
taxes (48.2) 25.6 (73.8) N.M.
Income tax benefit (19.6) (4.1) (15.5) N.M.
Minority interest
expense, net of
tax 0.6 2.0 (1.4) -70.0%
----------------- ----------------- ------- -------
(Loss)/earnings
from continuing
operations (29.2) 27.7 (56.9) N.M.
Loss from
discontinued
operations, net
of tax (1.0) (9.2) 8.2 -89.1%
----------------- ----------------- ------- -------
Net (loss)/
earnings $ (30.2) $ 18.5 $(48.7) N.M.
================= ================= ======= =======
N.M. - percentage not meaningful
Catalent Pharma Solutions
Selected Segment Financial Data
(unaudited, in millions)
Successor Predecessor
----------------- -----------------
Three Months Three Months Change
---------------
Ended Ended
December 31, 2007 December 31, 2006 $ %
----------------- ----------------- ------- -------
Oral Technologies
Net revenue $ 256.9 $ 230.6 $ 26.3 11.4%
Segment EBITDA 50.5 55.5 (5.0) -9.0%
Sterile
Technologies
Net revenue 74.1 60.7 13.4 22.1%
Segment EBITDA 4.6 0.4 4.2 N.M.
Packaging Services
Net revenue 143.7 134.7 9.0 6.7%
Segment EBITDA 19.7 18.1 1.6 8.8%
Intersegment
Eliminations
Net Revenue (10.7) (9.5) (1.2) 12.6%
Other
Unallocated
costs (30.0) (24.9) (5.1) 20.5%
Combined Total
Net revenue 464.0 416.5 47.5 11.4%
EBITDA $ 44.8 $ 49.1 $ (4.3) -8.8%
N.M. - percentage not meaningful.
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Catalent Pharma Solutions
Condensed Statements of Earnings
(unaudited, in millions)
Successor Predecessor
----------------- -----------------
Six Months Six Months Change
---------------
Ended Ended
December 31, 2007 December 31, 2006 $ %
----------------- ----------------- -------- ------
Net revenue $ 902.0 $ 815.0 $ 87.0 10.7%
Cost of products
sold 689.4 621.4 68.0 10.9%
----------------- ----------------- -------- ------
Gross margin 212.6 193.6 19.0 9.8%
Selling, general
and
administrative
expenses 158.5 148.1 10.4 7.0%
Impairment charges
and (gain)/ loss
on sale of asset 0.4 3.1 (2.7) -87.1%
Restructuring and
other special
items 13.3 8.0 5.3 66.3%
----------------- ----------------- -------- ------
Operating earnings 40.4 34.4 6.0 17.4%
Interest expense,
net 101.3 2.6 98.7 N.M.
Other, net 19.8 - 19.8 N.M.
----------------- ----------------- -------- ------
(Loss)/ earnings
before income
taxes (80.7) 31.8 (112.5) N.M.
Income tax benefit (44.0) (3.8) (40.2) N.M.
Minority interest
expense, net of
tax benefit 0.3 2.2 (1.9) -86.4%
----------------- ----------------- -------- ------
(Loss)/ earnings
from continuing
operations (37.0) 33.4 (70.4) N.M.
Loss from
discontinued
operations, net
of tax (4.5) (13.8) 9.3 -67.4%
----------------- ----------------- -------- ------
Net (loss)/
earnings $ (41.5) $ 19.6 $ (61.1) N.M.
================= ================= ======== ======
N.M. - percentage not meaningful
Catalent Pharma Solutions
Selected Segment Financial Data
(unaudited, in millions)
Successor Predecessor
----------------- -----------------
Six Months Six Months Change
---------------
Ended Ended
December 31, 2007 December 31, 2006 $ %
----------------- ----------------- -------- ------
Oral Technologies
Net revenue $ 492.1 $ 447.0 $ 45.1 10.1%
Segment EBITDA 99.9 97.6 2.3 2.4%
Sterile
Technologies
Net revenue 144.6 116.6 28.0 24.0%
Segment EBITDA 10.7 (4.7) 15.4 N.M.
Packaging Services
Net revenue 285.4 272.5 12.9 4.7%
Segment EBITDA 40.5 35.1 5.4 15.4%
Intersegment
Eliminations
Net Revenue (20.1) (21.1) 1.0 -4.7%
Other
Unallocated
costs (48.5) (47.5) (1.0) 2.1%
Combined Totals
Net revenue 902.0 815.0 87.0 10.7%
EBITDA 102.6 80.5 22.1 27.5%
N.M. - percentage not meaningful.
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Catalent Pharma Solutions
Reconciliation of Net Earnings/(Loss) to EBITDA and Adjusted EBITDA
(unaudited, in millions)
Successor Successor Predecessor Combined
---------- ---------- ----------- ----------
April 10, January 1, Twelve
Six Months 2007 2007 Months
Ended to to Ended
December June 30, April 9, December
31, 2007 2007 2007 31, 2007
---------- ---------- ----------- ----------
Earnings/ (loss) from
continuing operations $ (37.0) $ (147.0) $ 4.0 $ (180.0)
Interest expense 101.3 44.1 6.3 151.7
Income tax (benefit)
expense (44.0) (21.2) 1.8 (63.4)
Depreciation and
amortization 82.3 37.2 29.3 148.8
---------- ---------- ----------- ----------
EBITDA $ 102.6 $ (86.9) $ 41.4 57.1
========== ========== ===========
Equity compensation 26.7
Impairment charges
and loss/(gain) on
sale of asset (4.2)
Purchase accounting
and Restructuring
related items 194.5
Other non-recurring/
one-time items 26.0
Estimated cost
savings 21.7
Other adjustments 6.0
Sponsor monitoring
fee 7.2
Disposition
adjustments 3.9
----------
Adjusted EBITDA $ 338.9
==========
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Catalent Pharma Solutions
Condensed Balance Sheets
(unaudited, in millions)
As of As of
December 31, June 30,
2007 2007
------------ ----------
ASSETS
Current assets:
Current assets $ 653.6 $ 693.9
Assets held for sale from discontinued
operations 73.9 82.3
------------ ----------
Total current assets 727.5 776.2
Property and equipment, net 1,050.9 1,056.1
Other non-current assets, including
intangible assets 2,053.8 2,030.0
------------ ----------
Total assets $ 3,832.2 $ 3,862.3
============ ==========
LIABILITIES and EQUITY
Current liabilities:
Current portion of long-term obligations
and other short-term borrowings $ 48.7 $ 36.4
Current liabilities 300.0 289.1
Liabilities from discontinued operations 26.4 36.1
------------ ----------
Total current liabilities 375.1 361.6
Long-term obligations, less current portion 2,324.1 2,275.6
Other non-current liabilities 229.4 314.5
Commitments and contingencies
Total equity 903.6 910.6
------------ ----------
Total liabilities and equity $ 3,832.2 $ 3,862.3
============ ==========
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Catalent Pharma Solutions
Condensed Statements of Cash Flows
(unaudited, in millions)
Successor Predecessor
----------------- -----------------
Six Months Six Months
Ended Ended
December 31, 2007 December 31, 2006
----------------- -----------------
Cash flows from operating
activities
Net cash (used in)/ provided by
operating activities from
continuing operations $ (35.1) $ 82.5
Net cash used in by operating
activities from discontinued
operations (0.8) (0.5)
----------------- -----------------
Net cash (used in)/ provided by
operating activities (35.9) 82.0
----------------- -----------------
Cash flows from investing
activities
Proceeds from sale of assets 0.3 11.7
Additions to property and
equipment (37.5) (33.5)
----------------- -----------------
Net cash used in investing
activities from continuing
operations (37.2) (21.8)
Net cash used in investing
activities from discontinued
operations (1.1) (1.8)
----------------- -----------------
Net cash used in investing
activities (38.3) (23.6)
----------------- -----------------
Cash flows from financing
activities
Net change in debt 3.4 (6.4)
Equity contribution 14.1 4.5
Net transfers to Cardinal
Health, Inc. and affiliates - (28.4)
----------------- -----------------
Net cash provided by/(used in)
financing activities from
continuing operations 17.5 (30.3)
Net cash used in financing
activities from discontinued
operations - -
----------------- -----------------
Net cash provided by/(used in)
financing activities 17.5 (30.3)
----------------- -----------------
Effect of foreign currency
translation on cash 33.5 4.7
Net (decrease)/ increase in cash
and equivalents (23.2) 32.8
Cash and equivalents at beginning
of period 82.7 133.6
----------------- -----------------
Cash and equivalents at end of
period $ 59.5 $ 166.4
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