June 4, 1998: Second Quarter Financial Results - Higher Margin Services Fuel Profitable Growth
Mr. Robert C. Tedford, Chief Executive Officer of Patheon Inc. announced results for the
second quarter ended April 30,1998.
Second quarter revenues increased 45% to $18,302,000 from $12,640,000 a year ago. Net
earnings climbed 82% to $1,120,000 (3 cents per share) from $615,000 (2 cents per share)
in the same quarter last year.
Revenues for the six months rose 38% to $31,017,000 from $22,468,000 in the same period
of the previous year, and net earnings increased 55% to $1,607,000 (5 cents per share)
from $1,038,000 (3 cents per share) a year earlier. Cash flow from operations grew 32% to
$2,683,000 (8 cents per share) from $2,026,000 (6 cents per share).
Operating income climbed by 69% in the first half of 1998, and 92% in the second quarter.
Operating margin percentages were higher in both reporting periods because of a better
mix of higher margin "prescription" production and development services provided by the
new Syntex Court facility. These improved results were gained even as higher human
resource recruitment costs, marketing and selling expenses are being incurred to position
the company to continue the pace of growth for the balance of 1998, and in 1999 and
beyond. "Our progress through the end of the second quarter," noted CEO Robert Tedford,
"reflects the successful marketing and sales initiatives we have been leading to attract
new, higher-margin business - consistent with our focused growth strategy. Furthermore,
the higher level of operating income and cash flow being generated by our Syntex Court
facility, confirms that significant demand exists among the pharmaceutical industry for
the special capability that we have at Syntex Court to produce highly potent prescription
products. We continue to sign new development contracts for drug products with major
pharmaceutical companies and also with entities in the emerging biotech sector, with
commitments for commercial production upon regulatory approval of such products."
We are also pleased to report that during the month of April, the Syntex Court facility
was approved by both the U.K. Medicines Control Agency (MCA), representing the European
Union, and the U.S. Federal Drug Administration (FDA) as the manufacturing site for
certain newly approved prescription products for both the European and U.S. market.
As we reported to you at the Annual Shareholders' Meeting, our growth strategy includes
the acquisition of additional manufacturing sites. We are increasing our efforts to
identify and evaluate available facilities.
The outlook for the balance of the year is favourable based on the current demand from
our clients for commercial manufacturing and pharmaceutical development services.
Outstanding orders at April 30, 1998, for delivery in the subsequent three months, are
approximately $18 million, about 39% higher than a year ago.
Patheon Inc. is one of North America's leading independent providers of manufacturing and
drug development services in the rapidly growing pharmaceutical outsourcing sector. The
Company and its 48%- owned Global Pharm affiliate operate five cGMP facilities in Canada
employing over 700 people. Patheon serves fifteen of the world's twenty-five largest
pharmaceutical companies, and a growing number of pharmaceutical biotechnology companies.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE PERIOD ENDED APRIL 30, 1998
Six Months Ended Three Months Ended
April 30 April 30
1998 1997 % 1998 1997 %
Change Change (in
thousands of dollars, except earnings per share)
REVENUES 31,017 22,468 +38% 18,302 12,640 +45%
OPERATING INCOME
BEFORE DEPRECIATION 4,278 2,533 +69% 2,755 1,437 +92%
AND
INTEREST
(% to Revenues) (13.8%) (11.3%) (15.1%) (11.4%)
Depreciation 1,107 618 +79% 629 302 +108%
Interest 707 305 +132% 384 206 +86%
EARNINGS BEFORE 2,464 1,610 +53% 1,742 929 +88%
INCOME
TAXES
Income taxes 857 572 +50% 622 314 +98%
NET EARNINGS FOR THE 1,607 1,038 +55% 1,120 615 +82%
PERIOD
EARNINGS PER SHARE
Basic and fully 4.7 3.0 3.3 1.8
diluted
(cents)
Average number of shares outstanding
during period 34,333,000 34,230,000 34,364,000 34,277,000
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended Three Months Ended
April 30 April 30
1998 1997 1998 1997
(in thousands)
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net earnings for the period $1,607 $1,038 $1,120 $615
Depreciation 1,107 618 629 302
Amortization
of deferred
revenue (62) (62) (31) (31)
Deferred income taxes 31 432 14 437
Cash flow from operations 2,683 2,026 1,732 1,323
Net change
in non-cash working capital balances
related to operations (3,877) (423) (361) (145)
Cash provided by operating
activities (1,194) 1,603 1,371 1,178
INVESTING ACTIVITIES
Additions to capital assets (3,972) (2,193) (2,363) (1,922)
Purchase of Syntex Court - (14,155) - -
Deferred charges - 360 - -
Investments (356) (363) - -
(4,328) (16,351) (2,363) (1,922)
FINANCING ACTIVITIES
Term loan 2,000 6,277 1,000 -
Mortgage payable - 1,500 - -
Repayment of long-term debt (172) (6,465) (86) (87)
Net proceeds
- equity
offering - 12,878 - -
Issue of
common shares on acquisition of
Global Pharm Inc 252 137 252 137
Issue of
common shares
for cash 8 18 8 18
2,088 14,345 1,174 68
INCREASE (DECREASE) IN BANK INDEBTEDNESS DURING
THE PERIOD 3,434 403 (182) 676
Bank
indebtedness,
beginning of period 3,927 3,711 7,543 3,438
BANK INDEBTEDNESS, END
OF PERIOD $7,361 $4,114 $7,361 $4,114
CONSOLIDATED BALANCE SHEETS
As at April 30 1998 1997 (in thousands)
ASSETS CURRENT
Accounts receivable $11,434 $ 6,446
Inventories 7,736 7,314
TOTAL CURRENT ASSETS 19,170 13,760
Capital assets 36,348 30,907
Investments 1,616 4,159
$57,134 $48,826
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT $ 7,361 $ 4,114
Bank indebtedness Accounts payable and
accrued liabilities 7,654 7,239
Current portion of long-term
debt 1,509 466
TOTAL CURRENT LIABILITIES 16,524 11,819
Long-term debt 14,577 10,966
Deferred revenue 247 371
Deferred income taxes 1,303 1,174
TOTAL LIABILITIES 32,651 24,330
SHAREHOLDERS' EQUITY
Capital stock 17,312 17,074
Retained earnings 7,171 7,422
TOTAL SHAREHOLDERS' EQUITY 24,483 24,496
$57,134 $48,826
TEL: (905) 812-6760 Mr. Robert C. Tedford |
