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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Catalent Inc | NYSE:CTLT | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.10 | 0.18% | 55.35 | 55.54 | 55.23 | 55.30 | 466,528 | 18:31:37 |
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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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20-8737688
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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14 Schoolhouse Road, Somerset, NJ
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08873
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(Address of principal executive offices)
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(Zip code)
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Large accelerated filer
x
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Accelerated filer
¨
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Non-accelerated filer
¨
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(Do not check if a smaller reporting company)
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Smaller reporting company
¨
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Emerging growth company
¨
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Item
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Page
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Part I.
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Item 1.
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Financial Statements
(unaudited)
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Item 2.
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Item 3.
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Item 4.
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Part II.
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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•
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We participate in a highly competitive market, and increased competition may adversely affect our business.
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•
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The demand for our offerings depends in part on our customers’ research and development and the clinical and market success of their products. Our business, financial condition and results of operations may be harmed if our customers spend less on, or are less successful in, these activities.
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•
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We are subject to product and other liability risks that could adversely affect our results of operations, financial condition, liquidity, and cash flows.
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•
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Failure to comply with existing and future regulatory requirements could adversely affect our results of operations and financial condition or result in claims from customers.
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•
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Failure to provide quality offerings to our customers could have an adverse effect on our business and subject us to regulatory actions or costly litigation.
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•
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The services and offerings we provide are highly exacting and complex, and if we encounter problems providing the services or support required, our business could suffer.
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•
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Our global operations are subject to economic, political, and regulatory risks, including the risks of changing regulatory standards or changing interpretations of existing standards, that could affect the profitability of our operations or require costly changes to our procedures.
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•
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The referendum in the United Kingdom (the "U.K.") and resulting decision of the U.K. government to consider exiting from the European Union could have future adverse effects on our revenues and costs, and therefore our profitability.
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•
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If we do not enhance our existing or introduce new technology or service offerings in a timely manner, our offerings may become obsolete over time, customers may not buy our offerings and our revenue and profitability may decline.
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•
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We and our customers depend on patents, copyrights, trademarks, trade secrets, and other forms of intellectual property protections, but these protections may not be adequate.
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•
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Our future results of operations are subject to fluctuations in the costs, availability, and suitability of the components of the products we manufacture, including active pharmaceutical ingredients, excipients, purchased components, and raw materials.
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•
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Changes in market access or healthcare reimbursement for our customers’ products in the United States or internationally, including the possible repeal or replacement of the Affordable Care Act in the United States, could adversely affect our results of operations and financial condition by affecting demand for our offerings.
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•
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As a global enterprise, fluctuations in the exchange rate of the U.S. dollar against foreign currencies could have a material adverse effect on our financial performance and results of operations.
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•
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Tax legislative or regulatory initiatives or challenges to our tax positions could adversely affect our results of operations and financial condition.
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•
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Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
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Changes to the estimated future profitability of the business may require that we establish an additional valuation allowance against all or some portion of our net U.S. deferred tax assets.
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•
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We are dependent on key personnel.
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•
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We use advanced information and communication systems to run our operations, compile and analyze financial and operational data, and communicate among our employees, customers, and counter-parties, so the risks generally associated with information and communications systems could adversely affect our results of operations.
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•
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We engage, from time to time, in acquisitions and other transactions that may complement or expand our business or divest of non-strategic businesses or assets. We may not be able to complete such transactions, and such transactions, if executed, pose significant risks, including risks relating to our ability to successfully and efficiently integrate acquisitions and realize anticipated benefits therefrom. The failure to execute or realize the full benefits from any such transaction could have a negative effect on our operations.
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•
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Our offerings or our customers’ products may infringe on the intellectual property rights of third parties.
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We are subject to environmental, health, and safety laws and regulations, which could increase our costs and restrict our operations in the future.
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•
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We are subject to labor and employment laws and regulations, which could increase our costs and restrict our operations in the future.
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Certain of our pension plans are underfunded, and additional cash contributions we may make to increase the funding level will reduce the cash available for our business, such as the payment of our interest expense.
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Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or in our industry, expose us to interest-rate risk to the extent of our variable rate debt and prevent us from meeting our obligations under our indebtedness.
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Item 1.
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FINANCIAL STATEMENTS
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Three Months Ended
September 30, |
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2017
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2016
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Net revenue
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$
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543.9
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$
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442.2
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Cost of sales
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403.8
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318.1
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Gross margin
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140.1
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124.1
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Selling, general and administrative expenses
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107.0
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98.2
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Impairment charges and (gain)/loss on sale of assets
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—
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—
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Restructuring and other
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1.2
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1.1
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Operating earnings
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31.9
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24.8
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Interest expense, net
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24.3
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22.1
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Other expense/(income), net
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5.7
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(2.1
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)
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Earnings from continuing operations, before income taxes
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1.9
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4.8
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Income tax expense/(benefit)
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(1.9
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)
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0.2
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Net earnings
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3.8
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4.6
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Earnings per share:
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Basic
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Net earnings
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0.03
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0.04
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Diluted
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Net earnings
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0.03
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0.04
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Three Months Ended
September 30, |
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2017
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2016
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Net earnings
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$
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3.8
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$
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4.6
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Other comprehensive income/(loss), net of tax
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Foreign currency translation adjustments
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38.1
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0.6
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Pension and other post-retirement adjustments
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0.4
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0.8
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Available for sale investments
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(3.4
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)
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—
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Other comprehensive income/(loss), net of tax
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35.1
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1.4
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Comprehensive income
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38.9
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6.0
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September 30,
2017 |
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June 30,
2017 |
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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601.4
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$
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288.3
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Trade receivables, net
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410.5
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488.8
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Inventories
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194.0
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184.9
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Prepaid expenses and other
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124.2
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97.8
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Total current assets
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1,330.1
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1,059.8
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Property, plant, and equipment, net
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1,025.0
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995.9
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Other assets:
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Goodwill
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1,069.6
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1,044.1
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Other intangibles, net
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269.2
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273.1
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Deferred income taxes
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62.6
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53.9
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Other
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28.3
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27.5
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Total assets
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$
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3,784.8
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$
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3,454.3
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
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Current portion of long-term obligations and other short-term borrowings
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$
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23.9
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$
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24.6
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Accounts payable
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166.8
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163.2
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Other accrued liabilities
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266.4
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281.2
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Total current liabilities
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457.1
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469.0
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Long-term obligations, less current portion
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2,082.9
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2,055.1
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Pension liability
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129.3
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129.5
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Deferred income taxes
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30.3
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31.7
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Other liabilities
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46.4
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45.5
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Commitment and contingencies (see Note 13)
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||||
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Shareholders' equity/(deficit):
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Common stock $0.01 par value; 1.0 billion shares authorized on September 30, 2017 and June 30, 2017, 132,841,121 and 125,049,867 issued and outstanding on September 30, 2017 and June 30, 2017, respectively.
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1.3
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1.3
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Preferred stock $0.01 par value; 100 million authorized on September 30, 2017 and June 30, 2017, 0 issued and outstanding on September 30, 2017 and June 30, 2017.
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—
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—
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Additional paid in capital
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2,268.4
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1,992.0
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Accumulated deficit
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(951.9
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)
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(955.7
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)
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Accumulated other comprehensive income/(loss)
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(279.0
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)
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(314.1
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)
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Total shareholders' equity
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1,038.8
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723.5
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Total liabilities and shareholders' equity
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$
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3,784.8
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$
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3,454.3
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Shares of Common Stock
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Common
Stock
|
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Additional
Paid in Capital |
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Accumulated
Deficit
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Accumulated
Other
Comprehensive
Income/(Loss)
|
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Total
Shareholders'
Equity/ (Deficit)
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|||||||||||
Balance at June 30, 2017
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125,049.9
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$
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1.3
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|
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$
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1,992.0
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$
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(955.7
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)
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$
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(314.1
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)
|
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$
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723.5
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Equity offering, sale of common stock
|
7,354.2
|
|
|
—
|
|
|
277.8
|
|
|
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|
|
|
277.8
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|||||||
Share issuances related to equity-based
compensation
|
437.0
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—
|
|
|||||||||
Equity compensation
|
|
|
|
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7.0
|
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7.0
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|||||||||
Cash paid, in lieu of equity, for tax
withholding
|
|
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(8.4
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)
|
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|
|
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|
(8.4
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)
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|||||||||
Net earnings/(loss)
|
|
|
|
|
|
|
3.8
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|
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|
|
3.8
|
|
|||||||||
Other comprehensive income/(loss), net
tax
|
|
|
|
|
|
|
|
|
35.1
|
|
|
35.1
|
|
|||||||||
Balance at September 30, 2017
|
132,841.1
|
|
|
$
|
1.3
|
|
|
$
|
2,268.4
|
|
|
$
|
(951.9
|
)
|
|
$
|
(279.0
|
)
|
|
$
|
1,038.8
|
|
|
Three Months Ended
September 30, |
||||||
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2017
|
|
2016
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
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|
||||
Net earnings
|
$
|
3.8
|
|
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$
|
4.6
|
|
Adjustments to reconcile earnings from continued operations to net cash from operations:
|
|
|
|
||||
Depreciation and amortization
|
39.0
|
|
|
35.8
|
|
||
Non-cash foreign currency transaction (gain)/loss, net
|
8.3
|
|
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(0.7
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)
|
||
Amortization and write off of debt financing costs
|
1.3
|
|
|
1.1
|
|
||
Equity compensation
|
7.0
|
|
|
6.9
|
|
||
Provision/(benefit) for deferred income taxes
|
(1.8
|
)
|
|
(4.1
|
)
|
||
Provision for bad debts and inventory
|
4.9
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|
|
2.0
|
|
||
Change in operating assets and liabilities:
|
|
|
|
||||
Decrease/(increase) in trade receivables
|
87.0
|
|
|
43.9
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||
Decrease/(increase) in inventories
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(7.3
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)
|
|
(16.4
|
)
|
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Increase/(decrease) in accounts payable
|
2.0
|
|
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(1.2
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)
|
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Other assets/accrued liabilities, net - current and non-current
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(60.5
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)
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(23.6
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)
|
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Net cash provided by operating activities
|
83.7
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|
48.3
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CASH FLOWS FROM INVESTING ACTIVITIES:
|
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|
||||
Acquisition of property and equipment and other productive assets
|
(42.7
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)
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|
(27.7
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)
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Payment for acquisitions, net of cash acquired
|
—
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(86.9
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)
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Net cash (used in) investing activities
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(42.7
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)
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|
(114.6
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)
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CASH FLOWS FROM FINANCING ACTIVITIES:
|
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|
||||
Net change in other borrowings
|
(1.7
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)
|
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(4.3
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)
|
||
Proceeds from borrowing, net
|
—
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|
75.0
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Payments related to long-term obligations
|
(4.7
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)
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|
(4.7
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)
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Equity offering, sale of common stock
|
277.8
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|
|
—
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|
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Cash paid, in lieu of equity, for tax withholding obligations
|
(8.4
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)
|
|
(0.1
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)
|
||
Net cash provided by financing activities
|
263.0
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|
|
65.9
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Effect of foreign currency on cash
|
9.1
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|
|
0.9
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NET INCREASE/(DECREASE) IN CASH AND EQUIVALENTS
|
313.1
|
|
|
0.5
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CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
|
288.3
|
|
|
131.6
|
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CASH AND EQUIVALENTS AT END OF PERIOD
|
$
|
601.4
|
|
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$
|
132.1
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|
SUPPLEMENTARY CASH FLOW INFORMATION:
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Interest paid
|
$
|
16.7
|
|
|
$
|
20.2
|
|
Income taxes paid, net
|
$
|
7.9
|
|
|
$
|
10.9
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1
.
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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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2.
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BUSINESS COMBINATION AND RELATED FINANCING TRANSACTIONS
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3
.
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GOODWILL
|
(Dollars in millions)
|
Softgel Technologies
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|
Drug Delivery Solutions
|
|
Clinical Supply Services
|
|
Total
|
||||||||
Balance at June 30, 2017
|
$
|
415.2
|
|
|
$
|
477.2
|
|
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$
|
151.7
|
|
|
$
|
1,044.1
|
|
Additions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Foreign currency translation adjustments
|
10.0
|
|
|
9.1
|
|
|
6.4
|
|
|
25.5
|
|
||||
Balance at September 30, 2017
|
$
|
425.2
|
|
|
$
|
486.3
|
|
|
$
|
158.1
|
|
|
$
|
1,069.6
|
|
4
.
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DEFINITE LIVED LONG-LIVED ASSETS
|
(Dollars in millions)
|
Weighted Average Life
|
|
Gross
Carrying
Value
|
|
Accumulated
Amortization
|
|
Net
Carrying
Value
|
||||||
September 30, 2017
|
|
|
|
|
|
|
|
||||||
Amortized intangibles:
|
|
|
|
|
|
|
|
||||||
Core technology
|
18 years
|
|
$
|
173.9
|
|
|
$
|
(79.2
|
)
|
|
$
|
94.7
|
|
Customer relationships
|
14 years
|
|
260.1
|
|
|
(112.6
|
)
|
|
147.5
|
|
|||
Product relationships
|
12 years
|
|
212.1
|
|
|
(185.1
|
)
|
|
27.0
|
|
|||
Total intangible assets
|
|
|
$
|
646.1
|
|
|
$
|
(376.9
|
)
|
|
$
|
269.2
|
|
(Dollars in millions)
|
Weighted Average Life
|
|
Gross
Carrying
Value
|
|
Accumulated
Amortization
|
|
Net
Carrying
Value
|
||||||
June 30, 2017
|
|
|
|
|
|
|
|
||||||
Amortized intangibles:
|
|
|
|
|
|
|
|
||||||
Core technology
|
18 years
|
|
$
|
170.3
|
|
|
$
|
(74.8
|
)
|
|
$
|
95.5
|
|
Customer relationships
|
14 years
|
|
253.0
|
|
|
(106.1
|
)
|
|
146.9
|
|
|||
Product relationships
|
12 years
|
|
206.9
|
|
|
(176.2
|
)
|
|
30.7
|
|
|||
Total intangible assets
|
|
|
$
|
630.2
|
|
|
$
|
(357.1
|
)
|
|
$
|
273.1
|
|
(Dollars in millions)
|
Remainder
Fiscal 2018 |
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
||||||||||||
Amortization expense
|
$
|
34.5
|
|
|
$
|
40.3
|
|
|
$
|
26.2
|
|
|
$
|
26.2
|
|
|
$
|
26.2
|
|
|
$
|
26.2
|
|
5
.
|
LONG-TERM OBLIGATIONS AND OTHER SHORT-TERM BORROWINGS
|
(Dollars in millions)
|
Maturity as of September 30, 2017
|
|
September 30,
2017 |
|
June 30, 2017
|
||||
Senior Secured Credit Facilities
|
|
|
|
|
|
||||
Term loan facility dollar-denominated
|
May 2021
|
|
$
|
1,241.1
|
|
|
$
|
1,244.2
|
|
Term loan facility euro-denominated
|
May 2021
|
|
365.2
|
|
|
352.0
|
|
||
Euro-denominated 4.75% Senior Notes due 2024
|
December 2024
|
|
441.6
|
|
|
424.3
|
|
||
Capital lease obligations
|
2020 to 2032
|
|
53.9
|
|
|
53.3
|
|
||
Other obligations
|
2017 to 2018
|
|
5.0
|
|
|
5.9
|
|
||
Total
|
|
|
2,106.8
|
|
|
2,079.7
|
|
||
Less: Current portion of long-term obligations and other short-term
borrowings |
|
|
23.9
|
|
|
24.6
|
|
||
Long-term obligations, less current portion
|
|
|
$
|
2,082.9
|
|
|
$
|
2,055.1
|
|
|
|
September 30, 2017
|
|
June 30, 2017
|
||||||||||||
(Dollars in millions)
|
Fair Value Measurement
|
Carrying
Value
|
|
Estimated Fair
Value
|
|
Carrying
Value
|
|
Estimated Fair
Value
|
||||||||
Euro-denominated 4.75% Senior Notes
|
Level 1
|
$
|
441.6
|
|
|
$
|
474.6
|
|
|
$
|
424.3
|
|
|
$
|
454.0
|
|
Senior Secured Credit Facilities & Other
|
Level 2
|
1,665.2
|
|
|
1,664.8
|
|
|
1,655.4
|
|
|
1,653.1
|
|
||||
Total
|
|
$
|
2,106.8
|
|
|
$
|
2,139.4
|
|
|
$
|
2,079.7
|
|
|
$
|
2,107.1
|
|
6
.
|
EARNINGS PER SHARE
|
|
Three Months Ended
September 30, |
||||||
|
2017
|
|
2016
|
||||
Net earnings
|
$
|
3.8
|
|
|
$
|
4.6
|
|
|
|
|
|
||||
Weighted average shares outstanding
|
125,713,246
|
|
|
124,819,466
|
|
||
Dilutive securities issuable-stock plans
|
2,071,275
|
|
|
1,440,255
|
|
||
Total weighted average diluted shares outstanding
|
127,784,521
|
|
|
126,259,721
|
|
||
|
|
|
|
||||
Basic earnings per share of common stock:
|
|
|
|
|
|||
Net earnings
|
$
|
0.03
|
|
|
$
|
0.04
|
|
|
|
|
|
||||
Diluted earnings per share of common stock :
|
|
|
|
||||
Net earnings
|
$
|
0.03
|
|
|
$
|
0.04
|
|
7
.
|
OTHER (INCOME) / EXPENSE, NET
|
|
Three Months Ended
September 30, |
||||||
(Dollars in millions)
|
2017
|
|
2016
|
||||
Other (income)/expense, net
|
|
|
|
||||
Foreign currency (gains) and losses
|
5.6
|
|
|
(2.3
|
)
|
||
Other
|
0.1
|
|
|
0.2
|
|
||
Total Other (Income)/Expense, net
|
$
|
5.7
|
|
|
$
|
(2.1
|
)
|
8
.
|
RESTRUCTURING AND OTHER COSTS
|
|
Three Months Ended
September 30, |
||||||
(Dollars in millions)
|
2017
|
|
2016
|
||||
Restructuring costs:
|
|
|
|
||||
Employee-related reorganization
|
$
|
1.7
|
|
|
$
|
0.8
|
|
Facility exit and other costs
|
0.6
|
|
|
0.3
|
|
||
Total restructuring costs
|
$
|
2.3
|
|
|
$
|
1.1
|
|
Other - insurance recoveries against customer claims
|
(1.1
|
)
|
|
—
|
|
||
Total restructuring and other costs
|
$
|
1.2
|
|
|
$
|
1.1
|
|
9
.
|
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
|
|
Three Months Ended
September 30, |
||||||
(Dollars in millions)
|
2017
|
|
2016
|
||||
Unrealized foreign exchange gain/(loss) within other
comprehensive income
|
$
|
(17.6
|
)
|
|
$
|
(3.5
|
)
|
Unrealized foreign exchange gain/(loss) within statement
of operations
|
$
|
(13.4
|
)
|
|
$
|
(2.5
|
)
|
10
.
|
INCOME TAXES
|
11
.
|
EMPLOYEE RETIREMENT BENEFIT PLANS
|
|
Three Months Ended
September 30, |
||||||
(Dollars in millions)
|
2017
|
|
2016
|
||||
Components of net periodic benefit cost:
|
|
|
|
||||
Service cost
|
$
|
0.9
|
|
|
$
|
0.8
|
|
Interest cost
|
1.8
|
|
|
1.7
|
|
||
Expected return on plan assets
|
(2.9
|
)
|
|
(2.8
|
)
|
||
Amortization
(1)
|
0.6
|
|
|
1.1
|
|
||
Net amount recognized
|
$
|
0.4
|
|
|
$
|
0.8
|
|
(1)
|
Amount represents the amortization of unrecognized actuarial gains/(losses).
|
12
.
|
EQUITY AND ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)
|
|
Three Months Ended
September 30, |
||||||
(Dollars in millions)
|
2017
|
|
2016
|
||||
Foreign currency translation adjustments:
|
|
|
|
||||
Net investment hedge
|
$
|
(17.6
|
)
|
|
$
|
(3.5
|
)
|
Long-term intercompany loans
|
13.5
|
|
|
(7.7
|
)
|
||
Translation adjustments
|
36.1
|
|
|
10.6
|
|
||
Total foreign currency translation adjustment, pretax
|
32.0
|
|
|
(0.6
|
)
|
||
Tax expense/(benefit)
|
(6.1
|
)
|
|
(1.2
|
)
|
||
Total foreign currency translation adjustment, net of tax
|
$
|
38.1
|
|
|
$
|
0.6
|
|
|
|
|
|
||||
Net change in minimum pension liability
|
|
|
|
||||
Net gain/(loss) recognized during the period
|
0.6
|
|
|
1.1
|
|
||
Total pension, pretax
|
0.6
|
|
|
1.1
|
|
||
Tax expense/(benefit)
|
0.2
|
|
|
0.3
|
|
||
Net change in minimum pension liability, net of tax
|
$
|
0.4
|
|
|
$
|
0.8
|
|
|
|
|
|
||||
Net change in available for sale investment:
|
|
|
|
||||
Net gain/(loss) recognized during the period
|
(5.2
|
)
|
|
—
|
|
||
Total available for sale investment, pretax
|
(5.2
|
)
|
|
—
|
|
||
Tax expense/(benefit)
|
(1.8
|
)
|
|
—
|
|
||
Net change in available for sale investment, net of tax
|
$
|
(3.4
|
)
|
|
$
|
—
|
|
|
|
|
|
(Dollars in millions)
|
Foreign Exchange Translation Adjustments
|
|
Pension and Liability Adjustments
|
|
Available for Sale investment Adjustments
|
|
Total
|
||||||||
Balance at June 30, 2017
|
$
|
(280.7
|
)
|
|
$
|
(43.9
|
)
|
|
$
|
10.5
|
|
|
$
|
(314.1
|
)
|
Other comprehensive income/(loss) before reclassifications
|
38.1
|
|
|
—
|
|
|
(3.4
|
)
|
|
34.7
|
|
||||
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
|
0.4
|
|
|
—
|
|
|
0.4
|
|
||||
Net current period other comprehensive income (loss)
|
38.1
|
|
|
0.4
|
|
|
(3.4
|
)
|
|
35.1
|
|
||||
Balance at September 30, 2017
|
$
|
(242.6
|
)
|
|
$
|
(43.5
|
)
|
|
$
|
7.1
|
|
|
$
|
(279.0
|
)
|
13
.
|
COMMITMENTS AND CONTINGENCIES
|
14
.
|
SEGMENT INFORMATION
|
|
Three Months Ended
September 30, |
||||||
(Dollars in millions)
|
2017
|
|
2016
|
||||
Softgel Technologies
|
|
|
|
||||
Net revenue
|
$
|
219.7
|
|
|
$
|
186.4
|
|
Segment EBITDA
|
35.1
|
|
|
30.5
|
|
||
Drug Delivery Solutions
|
|
|
|
||||
Net revenue
|
225.8
|
|
|
191.3
|
|
||
Segment EBITDA
|
47.4
|
|
|
42.0
|
|
||
Clinical Supply Services
|
|
|
|
||||
Net revenue
|
109.7
|
|
|
75.0
|
|
||
Segment EBITDA
|
16.7
|
|
|
10.5
|
|
||
Inter-segment revenue elimination
|
(11.3
|
)
|
|
(10.5
|
)
|
||
Unallocated Costs
(1)
|
(34.0
|
)
|
|
(20.3
|
)
|
||
Combined Totals:
|
|
|
|
||||
Net revenue
|
$
|
543.9
|
|
|
$
|
442.2
|
|
|
|
|
|
||||
EBITDA from continuing operations
|
$
|
65.2
|
|
|
$
|
62.7
|
|
(1)
|
Unallocated costs include restructuring and special items, equity-based compensation, impairment charges, certain other corporate directed costs, and other costs that are not allocated to the segments as follows:
|
|
Three Months Ended
September 30, |
||||||
(Dollars in millions)
|
2017
|
|
2016
|
||||
Equity compensation
|
(7.0
|
)
|
|
(6.9
|
)
|
||
Restructuring and other special items
(2)
|
(12.3
|
)
|
|
(5.9
|
)
|
||
Other income/(expense), net
(3)
|
(5.7
|
)
|
|
2.1
|
|
||
Non-allocated corporate costs, net
|
(9.0
|
)
|
|
(9.6
|
)
|
||
Total unallocated costs
|
$
|
(34.0
|
)
|
|
$
|
(20.3
|
)
|
(2)
|
Segment results do not include restructuring and certain acquisition-related costs.
|
(3)
|
Amounts primarily relate to foreign currency translation gains and losses during all periods presented. Refer to Note
7
for details.
|
|
Three Months Ended
September 30, |
||||||
(Dollars in millions)
|
2017
|
|
2016
|
||||
Earnings from continuing operations
|
$
|
3.8
|
|
|
$
|
4.6
|
|
Depreciation and amortization
|
39.0
|
|
|
35.8
|
|
||
Interest expense, net
|
24.3
|
|
|
22.1
|
|
||
Income tax expense/(benefit)
|
(1.9
|
)
|
|
0.2
|
|
||
EBITDA from continuing operations
|
$
|
65.2
|
|
|
$
|
62.7
|
|
(Dollars in millions)
|
September 30,
2017 |
|
June 30,
2017 |
||||
Assets
|
|
|
|
||||
Softgel Technologies
|
$
|
1,534.7
|
|
|
$
|
1,631.8
|
|
Drug Delivery Solutions
|
1,632.1
|
|
|
1,639.0
|
|
||
Clinical Supply Services
|
635.5
|
|
|
596.2
|
|
||
Corporate and eliminations
|
(17.5
|
)
|
|
(412.7
|
)
|
||
Total assets
|
$
|
3,784.8
|
|
|
$
|
3,454.3
|
|
15
.
|
SUPPLEMENTAL BALANCE SHEET INFORMATION
|
(Dollars in millions)
|
September 30,
2017 |
|
June 30,
2017 |
||||
Raw materials and supplies
|
$
|
118.1
|
|
|
$
|
107.5
|
|
Work-in-process
|
40.0
|
|
|
42.8
|
|
||
Finished goods
|
61.5
|
|
|
56.7
|
|
||
Total inventories, gross
|
219.6
|
|
|
207.0
|
|
||
Inventory cost adjustment
|
(25.6
|
)
|
|
(22.1
|
)
|
||
Inventories
|
$
|
194.0
|
|
|
$
|
184.9
|
|
(Dollars in millions)
|
September 30,
2017 |
|
June 30,
2017 |
||||
Prepaid expenses
|
$
|
23.7
|
|
|
$
|
12.3
|
|
Spare parts supplies
|
11.9
|
|
|
11.8
|
|
||
Prepaid income tax
|
12.1
|
|
|
11.5
|
|
||
Short term deferred financing costs
|
6.1
|
|
|
—
|
|
||
Non-US value added tax
|
23.4
|
|
|
16.0
|
|
||
Available for sale investment
|
13.4
|
|
|
18.6
|
|
||
Other current assets
|
33.6
|
|
|
27.6
|
|
||
Prepaid expenses and other
|
$
|
124.2
|
|
|
$
|
97.8
|
|
(Dollars in millions)
|
September 30,
2017 |
|
June 30,
2017 |
||||
Land, buildings, and improvements
|
$
|
752.5
|
|
|
$
|
735.2
|
|
Machinery, equipment, and capitalized software
|
847.0
|
|
|
825.0
|
|
||
Furniture and fixtures
|
10.4
|
|
|
10.1
|
|
||
Construction in progress
|
165.0
|
|
|
137.4
|
|
||
Property, plant, and equipment, at cost
|
1,774.9
|
|
|
1,707.7
|
|
||
Accumulated depreciation
|
(749.9
|
)
|
|
(711.8
|
)
|
||
Property, plant, and equipment, net
|
$
|
1,025.0
|
|
|
$
|
995.9
|
|
(Dollars in millions)
|
September 30,
2017 |
|
June 30,
2017 |
||||
Accrued employee-related expenses
|
$
|
82.8
|
|
|
$
|
96.4
|
|
Restructuring accrual
|
4.7
|
|
|
5.9
|
|
||
Accrued interest
|
6.4
|
|
|
0.9
|
|
||
Deferred revenue and fees
|
77.0
|
|
|
84.9
|
|
||
Accrued income tax
|
17.8
|
|
|
24.7
|
|
||
Other accrued liabilities and expenses
|
77.7
|
|
|
68.4
|
|
||
Other accrued liabilities
|
$
|
266.4
|
|
|
$
|
281.2
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Three Months Ended
September 30, |
|
FX impact
|
|
Constant Currency Increase/(Decrease)
|
|||||||||||||
(Dollars in millions)
|
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
|
)%
|
||||
Less: Net earnings/(loss) attributable to noncontrolling
interest, net of tax |
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
*
|
|
||||
Net earnings attributable to Catalent
|
$
|
3.8
|
|
|
$
|
4.6
|
|
|
$
|
(0.4
|
)
|
|
$
|
(0.4
|
)
|
|
(9
|
)%
|
|
Three Months Ended
September 30, |
|
FX impact
|
|
Constant Currency Increase/(Decrease)
|
|||||||||||||
(Dollars in millions)
|
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
(1)
|
(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
|
%
|
|
Three Months Ended
September 30, |
||||||
(Dollars in millions)
|
2017
|
|
2016
|
||||
Equity compensation
|
(7.0
|
)
|
|
(6.9
|
)
|
||
Restructuring and other special items
(2)
|
(12.3
|
)
|
|
(5.9
|
)
|
||
Other income/(expense), net
(3)
|
(5.7
|
)
|
|
2.1
|
|
||
Non-allocated corporate costs, net
|
(9.0
|
)
|
|
(9.6
|
)
|
||
Total unallocated costs
|
$
|
(34.0
|
)
|
|
$
|
(20.3
|
)
|
|
Three Months Ended
September 30, |
||||||
(Dollars in millions)
|
2017
|
|
2016
|
||||
Earnings from continuing operations
|
$
|
3.8
|
|
|
$
|
4.6
|
|
Depreciation and amortization
|
39.0
|
|
|
35.8
|
|
||
Interest expense, net
|
24.3
|
|
|
22.1
|
|
||
Income tax expense/(benefit)
|
(1.9
|
)
|
|
0.2
|
|
||
EBITDA from continuing operations
|
$
|
65.2
|
|
|
$
|
62.7
|
|
|
2017 vs. 2016
|
||||
Factors Contributing to Year-Over-Year Change
|
Three Months Ended
September 30, |
||||
|
Net Revenue
|
|
Segment EBITDA
|
||
Revenue/Segment EBITDA without acquisitions
|
2
|
%
|
|
(3
|
)%
|
Impact of acquisitions
|
14
|
%
|
|
18
|
%
|
Constant currency change
|
16
|
%
|
|
15
|
%
|
Foreign currency translation impact on reporting
|
2
|
%
|
|
—
|
%
|
Total % change
|
18
|
%
|
|
15
|
%
|
|
2017 vs. 2016
|
||||
Factors Contributing to Year-Over-Year Change
|
Three Months Ended
September 30, |
||||
|
Net Revenue
|
|
Segment EBITDA
|
||
Revenue/Segment EBITDA without acquisitions
|
13
|
%
|
|
10
|
%
|
Impact of acquisitions
|
4
|
%
|
|
2
|
%
|
Constant currency change
|
17
|
%
|
|
12
|
%
|
Foreign currency translation impact on reporting
|
1
|
%
|
|
1
|
%
|
Total % Change
|
18
|
%
|
|
13
|
%
|
|
2017 vs. 2016
|
||||
Factors Contributing to Year-Over-Year Change
|
Three Months Ended
September 30, |
||||
|
Net Revenue
|
|
Segment EBITDA
|
||
Revenue/Segment EBITDA without acquisitions
|
46
|
%
|
|
58
|
%
|
Impact of acquisitions
|
—
|
%
|
|
—
|
%
|
Constant currency change
|
46
|
%
|
|
58
|
%
|
Foreign currency translation impact on reporting
|
—
|
%
|
|
1
|
%
|
Total % Change
|
46
|
%
|
|
59
|
%
|
|
Three Months Ended
September 30, |
|
|
||||||||
(Dollars in millions)
|
2017
|
|
2016
|
|
Difference
|
||||||
Net cash provided by/(used in):
|
|
|
|
|
|
||||||
Operating activities
|
$
|
83.7
|
|
|
$
|
48.3
|
|
|
$
|
35.4
|
|
Investing activities
|
$
|
(42.7
|
)
|
|
$
|
(114.6
|
)
|
|
$
|
71.9
|
|
Financing activities
|
$
|
263.0
|
|
|
$
|
65.9
|
|
|
$
|
197.1
|
|
•
|
a pledge of 100% of the capital stock of Operating Company and 100% of the equity interests directly held by Operating Company and each guarantor in any wholly owned material subsidiary of Operating Company or any guarantor (which pledge, in the case of any non-U.S. subsidiary of a U.S. subsidiary, will not include more than 65% of the voting stock of such non-U.S. subsidiary); and
|
•
|
a security interest in, and mortgages on, substantially all tangible and intangible assets of Operating Company and of each guarantor, subject to certain limited exceptions.
|
Item 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Item 4.
|
CONTROLS AND PROCEDURES
|
Item 1.
|
LEGAL PROCEEDINGS
|
Item 1A.
|
RISK FACTORS
|
Item 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Item 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
Item 4.
|
MINE SAFETY DISCLOSURES
|
Item 5.
|
OTHER INFORMATION
|
Item 6.
|
EXHIBITS
|
|
|
|
|
Interest Purchase Agreement, dated September 18, 2017, by and among Catalent Pharma Solutions, Inc., Cook Pharmica LLC, Cook Group Incorporated. Disclosure schedules and exhibits have been omitted. The Interest Purchase Agreement as filed identifies such schedules and exhibits, including the general nature of their contents. Catalent, Inc. agrees to furnish a copy of any omitted attachment to the Securities and Exchange Commission on a confidential basis upon request (incorporated by reference to exhibit 2.1 to the Company's Current Report on Form 8-K filed on September 19, 2017, File No. 001-36587).
|
|
|
|
|
|
Second Amended and Restated Certificate of Incorporation of Catalent, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 6, 2017, File No. 001-36587).
|
|
|
|
|
|
Bylaws of Catalent, Inc., adopted November 2, 2017 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on November 6, 2017, File No. 001-36587).
|
|
|
|
|
|
Indenture, dated October 18, 2017, by and among Catalent Pharma Solutions, Inc., the subsidiary guarantors named therein and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on October 18, 2017, File No. 001-36587).
|
|
|
|
|
|
Form of 4.875% Senior Notes due 2026 (included as part of Exhibit 4.1 above).
|
|
|
|
|
|
Catalent Pharma Solutions, Inc. Deferred Compensation Plan as amended and restated effective January 1, 2016†*
|
|
|
|
|
|
Amendment to the Catalent Pharma Solutions, Inc. Deferred Compensation Plan dated October 16, 2017 † *
|
|
|
|
|
|
Amendment No. 3 to Amended and Restated Credit Agreement, dated as of October 18, 2017, by and among Catalent Pharma Solutions, Inc., PTS Intermediate Holdings LLC, Morgan Stanley Senior Funding, Inc., as administrative agent, collateral agent and swing line lender and the lenders party thereto, which amends that certain Amended and Restated Credit Agreement, dated as of May 20, 2014 (as amended), by and among Catalent Pharma Solutions, Inc., PTS Intermediate Holdings LLC, Morgan Stanley Senior Funding, Inc. and JPMorgan Chase Bank, N.A., as L/C Issuers, the other lenders party thereto and the other agents party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 18, 2017, File No. 001-36587)
|
|
|
|
|
|
Form of the Performance Share Unit Agreement for U.S. Employees for the performance period July 1, 2017 through June 30, 2020 †*
|
|
|
|
|
|
Form of the Performance Share Unit Agreement for Non-U.S. Employees for the performance period July 1, 2017 through June 30, 2020 †*
|
|
|
|
|
|
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended*
|
|
|
|
|
|
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended*
|
|
|
|
|
|
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
|
|
|
|
|
|
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
|
|
|
|
|
101.1
|
|
The following financial information from Catalent, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 formatted in XBRL: (i) Consolidated Statements of Operations for the Three Months Ended September 30, 2017 and 2016; (ii) Consolidated Statements of Comprehensive Income/(Loss) for the Three Months Ended September 30, 2017 and 2016 (iii) Consolidated Balance Sheets as of September 30, 2017 and June 30, 2017; (iv) Consolidated Statement of Changes in Shareholders’ Equity/(Deficit) as of September 30, 2017; (v) Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2017 and 2016; and (vi) Notes to Unaudited Consolidated Financial Statements.
|
|
|
CATALENT, INC.
(Registrant)
|
||
|
|
|
|
|
Date:
|
November 6, 2017
|
By:
|
|
/s/ John R. Chiminski
|
|
|
|
|
John R. Chiminski
|
|
|
|
|
President & Chief Executive Officer
|
|
|
|
|
|
Date:
|
November 6, 2017
|
By:
|
|
/s/ Matthew M. Walsh
|
|
|
|
|
Matthew M. Walsh
|
|
|
|
|
Executive Vice President & Chief Financial Officer
|
1 Year Catalent Chart |
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