Catalent, Inc. Reports First Quarter Fiscal 2018 Results
- Q1'18 revenue of
$543.9 million increased 23% as-reported, or 22% in constant currency from the prior-year period. - Announced and closed the acquisition of
Cook Pharmica , a privately held, biologics-focused contract development and manufacturing organization. - Issued 8-year
$450 million , 4.875% coupon, USD senior notes with proceeds used to fund theCook Pharmica acquisition; concurrently re-priced and extended our term loans (USD tranche 50 bps and EUR tranche 75 bps lower). - FY’18 guidance updated to reflect acquisition.
First quarter 2018 revenue of
First quarter 2018 net earnings were
First quarter 2018 EBITDA from continuing operations of
First quarter 2018 Adjusted EBITDA (see the non-GAAP reconciliation for a discussion of this metric) was
First quarter 2018 Adjusted Net Income (see the non-GAAP reconciliation) was
“We’re pleased with our performance during the first quarter, where we recorded double-digit revenue growth on a constant-currency basis across all three of our reporting segments,” said
First Quarter 2018 Segment Highlights
Revenue Highlights by Business Segment
Revenue from the Softgel Technologies segment was
Revenue from the Drug Delivery Solutions segment was
Revenue from the Clinical Supply Services segment was
Segment EBITDA Highlights
Softgel Technologies segment EBITDA (see the discussion of non-GAAP measures below) in the first quarter of fiscal 2018 was
Drug Delivery Solutions segment EBITDA in the first quarter of fiscal 2018 was
Clinical Supply Services segment EBITDA in the first quarter of fiscal 2018 was
Additional Financial Highlights
First quarter 2018 gross margin of 25.8% decreased 230 basis points as-reported, from 28.1% in the first quarter a year ago. The decrease was primarily attributable to unfavorable “same store” product mix within the Softgel Technologies segment, the Accucaps acquisition, and a decrease in product participation revenue within the Drug Delivery Solutions segment.
First quarter 2018 selling, general and administrative expenses were
Backlog for the Clinical Supply Services segment, defined as estimated future service revenues from work not yet completed under signed contracts, was
Balance Sheet and Liquidity
As of
After the end of the quarter, on
Concurrently, the Company completed an amendment to its senior secured credit facilities to lower the interest rates on its
Fiscal Year 2018 Outlook
Management is updating its guidance, which will now reflect the recently completed acquisition of
Earnings Webcast
The Company’s management will host a webcast to discuss the results at
About
Non-GAAP Financial Measures
Use of EBITDA from continuing operations, Adjusted EBITDA, Adjusted Net Income and Segment EBITDA
Management measures operating performance based on consolidated earnings from continuing operations before interest expense, expense/(benefit) for income taxes, and depreciation and amortization, and it is adjusted for the income or loss attributable to non-controlling interest (“EBITDA from continuing operations”). EBITDA from continuing operations is not defined under
The Company believes that the presentation of EBITDA from continuing operations enhances an investor’s understanding of its financial performance. The Company believes this measure is a useful financial metric to assess its operating performance from period to period by excluding certain items that it believes are not representative of its core business and uses this measure for business planning purposes.
In addition, given the significant investments that
Management also measures operating performance based on Adjusted Net Income/(loss) and Adjusted Net Income/(loss) per share. Adjusted Net Income/(loss) is not defined under
The most directly comparable GAAP measure to EBITDA from continuing operations and Adjusted EBITDA is earnings/(loss) from continuing operations. The most directly comparable GAAP measure to Adjusted Net Income/(loss) is net earnings/(loss). Included in this release is a reconciliation of earnings/(loss) from continuing operations to EBITDA from continuing operations and Adjusted EBITDA and a reconciliation of net earnings/(loss) to Adjusted Net Income.
The Company does not provide a reconciliation of forward-looking non-GAAP financial measures to their comparable GAAP financial measures because it could not do so without unreasonable effort due to the unavailability of the information needed to calculate reconciling items and due to the variability, complexity and limited visibility of the adjusting items that would be excluded from the non-GAAP financial measures in future periods. When planning, forecasting and analyzing future periods, the Company does so primarily on a non-GAAP basis without preparing a GAAP analysis as that would require estimates for various cash and non-cash reconciling items that would be difficult to predict with reasonable accuracy. For example, equity compensation expense would be difficult to estimate because it depends on the Company’s future hiring and retention needs, as well as the future fair market value of the Company’s common stock, all of which are difficult to predict and subject to constant change. It is equally difficult to anticipate the need for or magnitude of a presently unforeseen one-time restructuring expense or the values of end-of-period foreign currency exchange rates. As a result, the Company does not believe that a GAAP reconciliation would provide meaningful supplemental information about the Company’s outlook.
Use of Constant Currency
As changes in exchange rates are an important factor in understanding period-to-period comparisons, the Company believes the presentation of results on a constant currency basis in addition to reported results helps improve investors’ ability to understand its operating results and evaluate its performance in comparison to prior periods. Constant currency information compares results between periods as if exchange rates had remained constant period over period. The Company uses results on a constant currency basis as one measure to evaluate its performance. The Company calculates constant currency by calculating current-year results using prior-year foreign currency exchange rates. The Company generally refers to such amounts calculated on a constant currency basis as excluding the impact of foreign exchange or being on a constant currency basis. These results should be considered in addition to, not as a substitute for, results reported in accordance with
Forward-Looking Statements
This release contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally can be identified by the use of statements that include phrases such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “plan,” “project,” “foresee,” “likely,” “may,” “will,” “would” or other words or phrases with similar meanings. Similarly, statements that describe the Company’s objectives, plans or goals are, or may be, forward-looking statements. These statements are based on current expectations of future events. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could vary materially from
More products. Better treatments. Reliably supplied.™
Consolidated Statements of Operations (Dollars in millions, except per share data) |
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Three Months Ended |
FX impact |
Constant Currency |
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2017 | 2016 | Change $ | Change % | |||||||||||||||||||||
Net revenue | $ | 543.9 | $ | 442.2 | $ | 6.5 | $ | 95.2 | 22 | % | ||||||||||||||
Cost of sales | 403.8 | 318.1 | 6.1 | 79.6 | 25 | % | ||||||||||||||||||
Gross margin | 140.1 | 124.1 | 0.4 | 15.6 | 13 | % | ||||||||||||||||||
Selling, general and administrative expenses | 107.0 | 98.2 | 0.3 | 8.5 | 9 | % | ||||||||||||||||||
Restructuring and other | 1.2 | 1.1 | — | 0.1 | 9 | % | ||||||||||||||||||
Operating earnings | 31.9 | 24.8 | 0.1 | 7.0 | 28 | % | ||||||||||||||||||
Interest expense, net | 24.3 | 22.1 | — | 2.2 | 10 | % | ||||||||||||||||||
Other (income)/expense, net | 5.7 | (2.1 | ) | 0.8 | 7.0 | * | ||||||||||||||||||
Earnings from continuing operations, before income
taxes |
1.9 | 4.8 | (0.7 | ) | (2.2 | ) | (46 | )% | ||||||||||||||||
Income tax expense/(benefit) | (1.9 | ) | 0.2 | (0.3 | ) | (1.8 | ) | * | ||||||||||||||||
Net earnings | $ | 3.8 | $ | 4.6 | $ | (0.4 | ) | $ | (0.4 | ) | (9 | )% | ||||||||||||
Weighted average shares outstanding | 125.7 | 124.8 | ||||||||||||||||||||||
Weighted average diluted shares outstanding | 127.8 | 126.3 | ||||||||||||||||||||||
Earnings per share: | ||||||||||||||||||||||||
Basic | ||||||||||||||||||||||||
Net earnings | 0.03 | 0.04 | ||||||||||||||||||||||
Diluted | ||||||||||||||||||||||||
Net earnings | 0.03 | 0.04 | ||||||||||||||||||||||
* - percentage not meaningful
Selected Segment Financial Data (Dollars in millions) |
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Three Months Ended |
FX impact |
Constant Currency |
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2017 | 2016 | Change $ | Change % | |||||||||||||||||||||
Softgel Technologies | ||||||||||||||||||||||||
Net revenue | $ | 219.7 | $ | 186.4 | $ | 4.0 | $ | 29.3 | 16 | % | ||||||||||||||
Segment EBITDA | 35.1 | 30.5 | — | 4.6 | 15 | % | ||||||||||||||||||
Drug Delivery Solutions | ||||||||||||||||||||||||
Net revenue | 225.8 | 191.3 | 2.5 | 32.0 | 17 | % | ||||||||||||||||||
Segment EBITDA | 47.4 | 42.0 | 0.3 | 5.1 | 12 | % | ||||||||||||||||||
Clinical Supply Services | ||||||||||||||||||||||||
Net revenue | 109.7 | 75.0 | 0.4 | 34.3 | 46 | % | ||||||||||||||||||
Segment EBITDA | 16.7 | 10.5 | 0.1 | 6.1 | 58 | % | ||||||||||||||||||
Inter-segment revenue elimination | (11.3 | ) | (10.5 | ) | (0.4 | ) | (0.4 | ) | 4 | % | ||||||||||||||
Unallocated Costs | (34.0 | ) | (20.3 | ) | (0.9 | ) | (12.8 | ) | 63 | % | ||||||||||||||
Combined Total | ||||||||||||||||||||||||
Net revenue | $ | 543.9 | $ | 442.2 | $ | 6.5 | $ | 95.2 | 22 | % | ||||||||||||||
EBITDA from continuing operations | $ | 65.2 | $ | 62.7 | $ | (0.5 | ) | $ | 3.0 | 5 | % | |||||||||||||
Refer to the Company's description of non-GAAP measures including segment EBITDA as referenced above.
Reconciliation of Earnings/(Loss) from Continuing Operations to EBITDA from Continuing Operations and Adjusted EBITDA* (Dollars in millions) |
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Quarter Ended |
Twelve |
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2016 |
2016 |
2017 |
2017 |
2017 |
2017 |
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Earnings from continuing operations | $ | 4.6 | $ | 17.4 | $ | 26.0 | $ | 61.8 | $ | 3.8 | $ | 109.0 | ||||||||||||||||||
Interest expense, net | 22.1 | 22.8 | 22.6 | 22.6 | 24.3 | 92.3 | ||||||||||||||||||||||||
Income tax expense/(benefit) | 0.2 | 9.5 | 8.7 | 7.4 | (1.9 | ) | 23.7 | |||||||||||||||||||||||
Depreciation and amortization | 35.8 | 35.5 | 36.5 | 38.7 | 39.0 | 149.7 | ||||||||||||||||||||||||
EBITDA from continuing operations | 62.7 | 85.2 | 93.8 | 130.5 | 65.2 | 374.7 | ||||||||||||||||||||||||
Equity compensation | 6.9 | 4.9 | 4.6 | 4.5 | 7.0 | 21.0 | ||||||||||||||||||||||||
Impairment charges and (gain)/loss on sale of assets | — | 0.5 | 1.8 | 7.5 | — | 9.8 | ||||||||||||||||||||||||
Financing related expenses
and other |
— | 4.3 | — | — | — | 4.3 | ||||||||||||||||||||||||
US GAAP Restructuring and
Other |
1.1 | 3.3 | 0.1 | 3.5 | 1.2 | 8.1 | ||||||||||||||||||||||||
Acquisition, integration and other special items | 4.8 | 3.9 | 8.4 | 8.5 | 11.0 | 31.8 | ||||||||||||||||||||||||
Foreign Exchange loss/(gain) (included in other, net) (1) | (0.5 | ) | (3.2 | ) | 9.2 | 4.1 | 6.5 | 16.6 | ||||||||||||||||||||||
Other adjustments | — | (0.8 | ) | (0.1 | ) | 0.5 | — | (0.4 | ) | |||||||||||||||||||||
Adjusted EBITDA | $ | 75.0 | $ | 98.1 | $ | 117.8 | $ | 159.1 | $ | 90.9 | $ | 465.9 | ||||||||||||||||||
FX impact (unfavorable) | (0.4 | ) | ||||||||||||||||||||||||||||
Adjusted EBITDA - Constant Currency | $ | 91.3 | ||||||||||||||||||||||||||||
* Refer to the Company's description of non-GAAP measures including Adjusted EBITDA as referenced above.
(1) | Foreign exchange loss of |
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Reconciliation of Net Earnings/(Loss) to Adjusted Net Income* (Dollars in millions) |
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Quarter Ended |
Twelve |
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2016 |
2016 |
2017 |
2017 |
2017 |
2017 |
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Net earnings | $ | 4.6 | $ | 17.4 | $ | 26.0 | $ | 61.8 | $ | 3.8 | $ | 109.0 | ||||||||||||||||||
Amortization (1) | 11.0 | 11.1 | 11.0 | 11.2 | 11.4 | 44.7 | ||||||||||||||||||||||||
Equity compensation | 6.9 | 4.9 | 4.6 | 4.5 | 7.0 | 21.0 | ||||||||||||||||||||||||
Impairment charges and loss on sale of assets | — | 0.5 | 1.8 | 7.5 | — | 9.8 | ||||||||||||||||||||||||
Financing related expenses | — | 4.3 | — | — | — | 4.3 | ||||||||||||||||||||||||
|
1.1 | 3.3 | 0.1 | 3.5 | 1.2 | 8.1 | ||||||||||||||||||||||||
Acquisition, integration and other special items | 4.8 | 3.9 | 8.4 | 8.5 | 11.0 | 31.8 | ||||||||||||||||||||||||
Foreign exchange loss/(gain) (included in other (income)/expense, net) | (0.5 | ) | (3.2 | ) | 9.2 | 4.1 | 6.5 | 16.6 | ||||||||||||||||||||||
Other adjustments | — | (0.8 | ) | (0.1 | ) | 0.5 | — | (0.4 | ) | |||||||||||||||||||||
Estimated tax effect of
adjustments(2) |
(6.5 | ) | (6.5 | ) | (10.7 | ) | (12.2 | ) | (11.2 | ) | (40.6 | ) | ||||||||||||||||||
Discrete income tax expense/(benefit) items(3) | (1.8 | ) | (0.2 | ) | (1.6 | ) | (6.8 | ) | (2.6 | ) | (11.2 | ) | ||||||||||||||||||
Adjusted net income | $ | 19.6 | $ | 34.7 | $ | 48.7 | $ | 82.6 | $ | 27.1 | $ | 193.1 | ||||||||||||||||||
* Refer to the Company's description of non-GAAP measures including Adjusted Net Income as referenced above.
(1) | Represents the amortization attributable to purchase accounting for previously completed business combinations. | ||||
(2) | The tax effect of adjustments to Adjusted Net Income is computed by applying the statutory tax rate in the jurisdictions to the income or expense items which are adjusted in the period presented; if a valuation allowance exists, the rate applied is zero. | ||||
(3) | Discrete period income tax expense/(benefit) items are unusual or infrequently occurring items primarily including: changes in judgment related to the realizability of deferred tax assets in future years, changes in measurement of a prior year tax position, deferred tax impact of changes in tax law, and purchase accounting. | ||||
Consolidated Balance Sheets (Dollars in millions) |
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2017 |
2017 |
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ASSETS | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 601.4 | $ | 288.3 | |||||
Trade receivables, net | 410.5 | 488.8 | |||||||
Inventories | 194.0 | 184.9 | |||||||
Prepaid expenses and other | 124.2 | 97.8 | |||||||
Total current assets | 1,330.1 | 1,059.8 | |||||||
Property, plant, and equipment, net | 1,025.0 | 995.9 | |||||||
Other non-current assets, including intangible assets | 1,429.7 | 1,398.6 | |||||||
Total assets | $ | 3,784.8 | $ | 3,454.3 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||
Current liabilities: | |||||||||
Current portion of long-term obligations and other short-term borrowings | $ | 23.9 | $ | 24.6 | |||||
Accounts payable | 166.8 | 163.2 | |||||||
Other accrued liabilities | 266.4 | 281.2 | |||||||
Total current liabilities | 457.1 | 469.0 | |||||||
Long-term obligations, less current portion | 2,082.9 | 2,055.1 | |||||||
Other non-current liabilities | 206.0 | 206.7 | |||||||
Commitment and contingencies (1) | — | — | |||||||
Total shareholders' equity | 1,038.8 | 723.5 | |||||||
Total liabilities and shareholders' equity | $ | 3,784.8 | $ | 3,454.3 | |||||
(1) | Please refer to note 13 of the consolidated financial statements within our Quarterly Report on Form 10-Q for the quarter ended |
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Condensed Consolidated Statements of Cash Flows (Dollars in millions) |
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Three Months Ended |
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2017 | 2016 | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||
Net cash provided by operating activities | 83.7 | 48.3 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||
Acquisition of property and equipment and other productive assets | (42.7 | ) | (27.7 | ) | ||||||
Payment for acquisitions, net of cash acquired | — | (86.9 | ) | |||||||
Net cash (used in) investing activities | (42.7 | ) | (114.6 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||
Net change in other borrowings | (1.7 | ) | (4.3 | ) | ||||||
Proceeds from borrowing, net | — | 75.0 | ||||||||
Payments related to long-term obligations | (4.7 | ) | (4.7 | ) | ||||||
Equity offering, sale of common stock | 277.8 | — | ||||||||
Cash paid, in lieu of equity, for tax withholding obligations | (8.4 | ) | (0.1 | ) | ||||||
Net cash provided by financing activities | 263.0 | 65.9 | ||||||||
Effect of foreign currency on cash | 9.1 | 0.9 | ||||||||
NET INCREASE/(DECREASE) IN CASH AND EQUIVALENTS | 313.1 | 0.5 | ||||||||
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD | 288.3 | 131.6 | ||||||||
CASH AND EQUIVALENTS AT END OF PERIOD | $ | 601.4 | $ | 132.1 | ||||||
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