SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________

FORM 10-Q

_________________________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~January~~April 3130, 2017

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-37837

________________________________________

PATHEON N.V.

(Exact name of registrant as specified in its charter)

_______________________________________



The Netherlands	98-1153534
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Evert van de Beekstraat 104 1118 CN, Amsterdam Schiphol The Netherlands
(Address of Registrant’s Principal Executive Offices and Zip Code)
+31 (0) 20 622 3243
Registrant's Telephone Number, including Area Code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ (Do not check if a smaller reporting company) Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of ~~February~~May 2831, 2017, the registrant had 145,144,742 ordinary shares issued and 145,136,214 ordinary shares outstanding.

Patheon N.V.

TABLE OF CONTENTS

Part I. Financial Information 1 Item 1. Financial Statements (Unaudited) 1 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 3337 Item 3. Quantitative and Qualitative Disclosures About Market Risk 4453 Item 4. Controls and Procedures 4554 Part II. Other Information 4655 Item 1. Legal Proceedings 4655 Item 1A. Risk Factors 4655 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 4655 Item 3. Defaults Upon Senior Securities 4655 Item 4. Mine Safety Disclosures 4655 Item 5. Other Information 4655 Item 6. Exhibits 4756

Part I. Financial Information

Item 1. Financial Statements (Unaudited)



Consolidated Balance Sheets	2
Consolidated Statements of Operations	3
Consolidated Statements of Comprehensive Income (Loss)	4
Consolidated Statement of Changes in Shareholders' Deficit	5
Consolidated Statements of Cash Flows	6
Notes to Consolidated Financial Statements	7

Patheon N.V.

CONSOLIDATED BALANCE SHEETS

(unaudited)

	As of January 31, 2017		As of October 31, 2016
	As of April 30, 2017		As of October 31, 2016
(in millions of U.S. dollars, except share data)	$		$
Assets
Current
Cash and cash equivalents	8992.07		165.0
Accounts receivable, net	~~410~~420.39		401.0
Inventories, net	~~407~~451.26		395.2
Income taxes receivable	1214.3		8.7
Prepaid expenses and other	3024.21		21.5
Total current assets	~~949~~1,003.06		991.4
Capital assets	1,~~004~~169.23		983.6
Intangible assets	~~241~~235.2		247.6
Deferred financing costs	47.5		50.3
Deferred tax assets	30.2		29.8
Deferred tax assets	59.4		29.8
Goodwill	281.4		281.6
Goodwill	281.5		281.6
Investments	11.2		11.5
Investments	11.3		11.5
Other long-term assets	39.2		44.1
Other long-term assets	44.4		44.1
Total assets	2,770.1		2,589.6
Total assets	2,638.5		2,639.9
Liabilities and shareholders' deficit
Current
Accounts payable and accrued liabilities	~~354~~382.52		393.6
Income taxes payable	9.13		6.6
Deferred revenues - current	~~158~~195.85		154.2
Current portion of long-term debt	19.64		19.5
Total current liabilities	~~542~~606.04		573.9
Long-term debt	2,~~086~~069.64		2,~~099~~049.52
Deferred revenues	98132.94		102.3
Deferred tax liabilities	6996.87		67.1
Other long-term liabilities	147.07		145.5
Total liabilities	23,~~944~~052.36		2,~~988~~938.30
Commitments and contingencies
Shareholders' deficit:
Ordinary shares (par value of €0.01 per share, 500,000,000 shares authorized, 145,133,567 and 145,074,042 shares issued as of January 31, 2017 and October 31, 2016)	1.6		1.6
Ordinary shares (par value of €0.01 per share, 500,000,000 shares authorized, 145,144,742 and 145,074,042 shares issued as of April 30, 2017 and October 31, 2016, respectively)	1.6		1.6
Additional paid in capital	~~595~~602.4		591.4
Treasury shares (at cost, 4,915 ordinary shares as of January 31, 2017)	(0.1	)	—
Treasury shares (at cost, 8,528 ordinary shares as of April 30, 2017)	(0.2	)	—
Accumulated deficit	(~~813~~786.82	)	(842.1	)
Accumulated other comprehensive loss	(88100.91	)	(99.3	)
Total shareholders' deficit	(~~305~~282.85	)	(348.4	)
Total liabilities and shareholders' deficit	2,~~638~~770.51		2,~~639~~589.96

See accompanying notes

Patheon N.V.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three months ended January 31,
	Three months ended April 30,						Six months ended April 30,
	2017			2016			2017			2016
(in millions of U.S. dollars, except share data)	$			$			$			$
Revenues	~~457~~483.4			~~405~~468.96			940.8			874.5
Cost of goods sold	~~327~~342.7			~~307~~330.03			670.4			637.3
Gross profit	~~129~~140.7			98138.93			270.4			237.2
Selling, general and administrative expenses	8192.1			7374.78			173.2			148.5
Research and development	0.74			0.76			1.1			1.3
Repositioning expenses	01.68			1.23			2.4			2.5
Acquisition and integration costs	38.51			27.6			11.6			10.2
Other operating expense (income)	30.65			(41.92		)	4.1			(3.7		)
Operating income	4037.28			2552.68			78.0			78.4
Interest expense, net	2830.28			4342.86			59.0			86.4
Foreign exchange loss, net	40.87			47.31			5.5			11.4
Other loss (income), net	0.2			(1.8		)
Refinancing expenses	6.3			—			6.3			—
Income (loss) before income taxes	7.0			(20.7		)
Bargain purchase gain	(26.4		)	—			(26.4		)	—
Benefit from income taxes	(21.3		)	(0.7		)
Other loss (income), net	0.3			0.5			0.5			(1.3		)
Net income (loss) from continuing operations	28.3			(20.0		)
Income (loss) before income taxes	26.1			2.6			33.1			(18.1		)
Net loss from discontinued operations	—			(2.1		)
(Benefit from) provision for income taxes	(1.5		)	0.7			(22.8		)	—
Net income (loss)	28.3			(22.1		)
Net income (loss) from continuing operations	27.6			1.9			55.9			(18.1		)
Basic earnings (loss) per ordinary share
Net loss from discontinued operations	—			(1.0		)	—			(3.1		)
From continuing operations	$	0.19		$	(0.17	)
Net income (loss)	27.6			0.9			55.9			(21.2		)
From discontinued operations	$	—		$	(0.02	)
Basic earnings (loss) per ordinary share
Diluted earnings (loss) per ordinary share
From continuing operations	$	0.19		$	0.02		$	0.39		$	(0.16	)
From continuing operations	$	0.19		$	(0.17	)
From discontinued operations	$	—		$	(0.01	)	$	—		$	(0.03	)
From discontinued operations	$	—		$	(0.02	)
Diluted earnings (loss) per ordinary share
Average number of ordinary shares outstanding (in thousands)
From continuing operations	$	0.19		$	0.02		$	0.38		$	(0.16	)
Basic	145,129			115,610
From discontinued operations	$	—		$	(0.01	)	$	—		$	(0.03	)
Diluted	146,286			115,610
Average number of ordinary shares outstanding (in thousands)
Basic	145,136			115,610			145,132			115,610
Diluted	146,267			115,610			146,276			115,610

See accompanying notes

Patheon N.V.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

	Three months ended January 31,
	Three months ended April 30,				Six months ended April 30,
	2017		2016		2017		2016
(in millions of U.S. dollars)	$		$		$		$
Net income (loss)	2827.36		~~(22~~0.19	)	55.9		(21.2	)
Other comprehensive income (loss), net of income taxes:
Foreign currency translation adjustments	(24.67	)	(914.3	)	(7.3	)	5.0
Net gain related to net investment hedge	8.6		6.9
Net (loss) gain related to net investment hedge	(4.6	)	(25.8	)	4.0		(18.9	)
Net loss on intra-entity foreign currency transactions	—		(0.8	)
Net gain on intra-entity foreign currency transactions	—		3.8		—		3.0
Change in value of derivatives designated as foreign currency cash flow hedges	2.(3.4	)	(76.9	)	(1.1	)	(1.0	)
Losses from foreign currency hedges reclassified to consolidated statement of operations (1)	10.47		43.65		2.2		8.1
Net change in minimum pension liability (2)	0.7		0.4		1.4		0.8
Comprehensive income (loss)	3816.73		~~(28~~4.20	)	55.1		(24.2	)

1 Net of an income tax ~~expense~~benefit of $0.01 million for the three and six months ended ~~January~~April 3130, 2017. Income tax expense is not applicable for the ~~three~~six months ended ~~January~~April 3130, 2016 as these amounts are from the Company's Canadian operations which were under a full valuation allowance in the prior period. The valuation allowance was released during the fourth quarter of fiscal 2016. Amounts, gross of tax, have been reclassified to foreign exchange loss, net on the consolidated statements of operations.

2 Net of an income tax expense of $0.0 million for the three and six months ended ~~January~~April 3130, 2017 and 2016, which is included as a component of provision for income taxes on the consolidated statements of operations. Amounts, gross of tax, have been reclassified to cost of goods sold and selling, general and administrative expenses in the consolidated statements of operations. See Note 87 for further information.

See accompanying notes

Patheon N.V.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT

(unaudited)

	Shares Outstanding		Ordinary Shares	Additional Paid-in Capital	Treasury Shares		Accumulated Deficit		Accumulated Other Comprehensive Loss		Shareholders' Deficit
(in millions of U.S. dollars, except share data)			$	$	$		$		$		$
Balance at October 31, 2016	145,074,042		1.6	591.4	—		(842.1	)	(99.3	)	(348.4	)
Ordinary share issuances related to stock based compensation	5970,~~525~~700		—	—	—		—		—		—
Stock based compensation			—	411.0	—		—		—		411.0
Treasury shares acquired, at cost	(48,~~915~~528	)	—	—	(0.12	)	—		—		(0.12	)
Comprehensive income (loss):
Net income							2855.39		—		2855.39
Foreign currency translation adjustments									(27.63	)	(27.63	)
Net gain related to net investment hedge									84.60		84.60
Change in value of derivatives designated as foreign currency cash flow hedges									2(1.31	)	2(1.31	)
Losses from foreign currency hedges reclassified to consolidated statement of operations									12.42		12.42
Net change in minimum pension liability									01.74		01.74
Total comprehensive income							28.3		10.4		38.7
Total comprehensive income (loss)							55.9		(0.8	)	55.1
Balance at January 31, 2017	145,128,652		1.6	595.4	(0.1	)	(813.8	)	(88.9	)	(305.8	)
Balance at April 30, 2017	145,136,214		1.6	602.4	(0.2	)	(786.2	)	(100.1	)	(282.5	)

See accompanying notes

Patheon N.V.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Three months ended January 31,
	Six months ended April 30,
	2017		2016
(in millions of U.S. dollars)	$		$
Operating activities
Net income (loss) from continuing operations	2855.39		(2018.01	)
Adjustments to reconcile net income to net cash used in operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	2761.69		2653.45
Increase in deferred revenues	73141.1		80172.49
Amortization of deferred revenues	(70137.62	)	(43101.13	)
Non-cash interest	39.35		37.96
Change in other long-term assets and liabilities	04.30		62.79
Deferred income taxes	(2229.17	)	(0.19	)
Stock based compensation expense	411.0		13.0
Foreign exchange gain on debt	—		(1.1	)
Gain on bargain purchase	(26.4	)	—
Other	3.7		(6.7	)
Payment of original issue discount	(4.1	)	—
Net change in non-cash working capital balances	(59.3	)	(116.4	)
Return on capital from equity investment	—		1.3
Cash used in operating activities of continuing operations	(11.7	)	(68.8	)
Foreign exchange loss on debt	—		2.2
Cash used in operating activities of discontinued operations	—		(0.4	)
Other	4.4		(5.1	)
Cash used in operating activities	(11.7	)	(69.2	)
Net change in non-cash working capital balances	(69.5	)	(161.0	)
Cash provided by (used in) operating activities of continuing operations	20.9		(43.0	)
Cash used in operating activities of discontinued operations	—		(2.9	)
Cash provided by (used in) operating activities	20.9		(45.9	)
Investing activities
Additions to capital assets	(5999.02	)	(6495.21	)
Cash used in investing activities of continuing operations	(59.0	)	(64.2	)
Acquisitions	(10.3	)	—
Proceeds from sale of capital assets	—		0.1
Return of capital from equity investment	—		2.3
Cash used in investing activities of continuing operations	(109.5	)	(92.7	)
Cash used in investing activities of discontinued operations	—		(3.3	)
Cash used in investing activities	(59109.05	)	(6796.50	)
Financing activities
Repayment of debt	(5.2	)	(5.2	)
Proceeds from borrowings	30.0		0.7
Repayment of debt	(9.6	)	(9.9	)
Increase in deferred financing costs	(2.7	)	—
Treasury share purchases to satisfy certain tax withholdings	(0.1	)	—
Cash used in financing activities	(5.3	)	(5.2	)
Cash provided by (used in) financing activities	17.6		(9.2	)
Effect of exchange rate changes on cash and cash equivalents	—(1.3	)	17.21
Net change in cash and cash equivalents during the period	(7672.03	)	(~~140~~144.70	)
Cash and cash equivalents, beginning of period	165.0		328.7
Cash and cash equivalents, end of period	8992.07		~~188~~184.07

See accompanying notes

Patheon N.V.

NOTES TO CONSOLIDATED FINACIAL STATEMENTS

Note 1	The Company	8
Note 2	Accounting Policies	8
Note 3	~~Discontinued~~Business ~~Operations~~Combinations	10
Note 4	~~Supplemental~~Discontinued ~~Balance Sheet Information~~Operations	1012
Note 5	~~Long-term~~Supplemental ~~Debt~~Balance Sheet Information	1213
Note 6	~~Pension and Post~~Long-~~Retirement~~term ~~Benefits~~Debt	1614
Note 7	~~Earnings~~Pension ~~Per~~and ~~Share~~Post-Retirement Benefits	1618
Note 8	~~Stock~~Earnings ~~Based~~Per ~~Compensation~~Share	1719
Note 9	~~Financial~~Stock ~~Instruments~~Based Compensation	2120
Note 10	~~Segment~~Financial ~~Information~~Instruments	2523
Note 11	~~Repositioning~~Segment ~~Expenses~~Information	2627
Note 12	~~Related~~Repositioning ~~Parties~~Expenses	2730
Note 13	~~Income~~Related ~~Taxes~~Parties	2931
Note 14	~~Other~~Income ~~Information~~Taxes	2932
Note 15	~~Subsequent~~Other ~~Events~~Information	3233
Note 16	Subsequent Events	36

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended ~~January~~April 3130, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

1. THE COMPANY

Patheon N.V. (“Patheon” or "the Company") was formed on December 24, 2013, as Patheon Coöperatief U.A., a Dutch cooperative with excluded liability for its members (coöperative met uitgesloten aansparkelijkheid) and a wholly owned indirect subsidiary of JLL/Delta Patheon Holdings, L.P. (the “Partnership”), which in turn is owned 51% by JLL Patheon Co-Investment Fund L.P. ("JLL") and 49% by Koninklijke DSM N.V. ("DSM"). On June 3, 2016, the Company was converted into a Dutch limited liability company (naamloze vennootschap) and changed its name to Patheon N.V.

On July 21, 2016, the Company amended its articles of association, resulting in a split of the Company's ordinary shares and a $1.2 million contribution by the Partnership to the Company's equity capital in connection with the share split. This share split and capital contribution resulted in a total of 115,609,756 ordinary shares outstanding at a par value of €0.01 per share.

On July 21, 2016, the Company commenced an initial public offering ("IPO") of an additional 29,464,286 ordinary shares at a public offering price of $21.00 per share, which included 4,464,286 ordinary shares sold pursuant to the option granted to the underwriters to purchase additional ordinary shares from the Company. As part of the IPO, DSM sold 4,761,905 ordinary shares to the public that were distributed to them in connection to their ownership in the Partnership. A total of 34,226,191 ordinary shares were sold in connection to the IPO. The Company did not receive any proceeds from the ordinary shares sold by DSM. The IPO was completed on July 26, 2016.

The Company received total net proceeds of approximately $584.8 million from the IPO, after deducting underwriting discounts and commissions, but before deducting estimated offering expenses. The shares offered and sold in the IPO were registered under the Securities Act pursuant to the Company's Registration Statement on Form S-1, which was declared effective by the SEC on July 18, 2016. The Company's ordinary shares began trading on the New York Stock Exchange under the symbol "PTHN" as of July 21, 2016.

As of ~~January~~April 3130, 2017, the Company had 145,~~128~~136,~~652~~214 ordinary shares outstanding with a par value of €0.01 per share. Ordinary shares owned by the public constitute approximately 24% of the outstanding ordinary shares. JLL, DSM and the Partnership own approximately 38%, 34% and 4% of the Company through their ownership of outstanding ordinary shares, respectively. In accordance with the Company's articles of association, each ordinary share shall have one vote in the Company's general meeting. The Partnership's ownership comprises of shares held for the benefit of certain employees. See Note 89 for further discussion.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

Patheon consists of three reportable segments: Drug Product Services ("DPS"), Pharmaceutical Development Services ("PDS"), and Drug Substance Services ("DSS"). Drug Product Services provides manufacturing and packaging for approved prescription, over-the-counter, and nutritional products. Pharmaceutical Development Services provides a wide spectrum of advanced formulation, production, and technical services from the early stages of a product's development to regulatory approval and beyond, as well as for new formulations of approved products for life cycle extension. Drug Substance Services provides development and manufacturing for the biologically active component of a pharmaceutical product from early development through commercial production.

The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). Operating results for the three and six months ended ~~January~~April 3130, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 2017 ("fiscal 2017"). These consolidated financial statements do not include all the information and footnotes required by U.S. GAAP for annual financial statements and therefore should be read in conjunction with the audited consolidated financial statements and notes for the fiscal year ended October 31, 2016 ("fiscal 2016").

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions have been eliminated.

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect: the reported amounts of assets and liabilities; the disclosure of contingent assets and liabilities at the date of the consolidated financial statements; and the reported amounts of revenue and expenses in the reporting period. Management believes that the estimates and assumptions used in preparing its consolidated financial statements are reasonable and prudent; however, actual results could differ from those estimates.

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended ~~January~~April 3130, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

Changes in significant accounting policies

~~There~~As ~~have~~a ~~been~~result noof ~~significant~~early ~~changes~~adopting inAccounting ~~accounting~~Standards ~~policies~~Update 2016-09, 'Improvements to Employee Share-Based Payment Accounting', the Company is electing to account for forfeitures on stock based compensation awards as they occur. No adjustment is required to comply with the early adoption. The Company was previously not estimating forfeitures on stock based compensation awards since the impact of potential forfeiture was immaterial to the consolidated financial statements.

Segment information

U.S. GAAP requires segmentation based on an entity’s internal organization and reporting of revenue and operating income (loss) based upon internal accounting methods commonly referred to as the “management approach.” Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s CODM is its Chief Executive Officer.

The Company’s four operating segments are: North America Drug Product Services, or North America DPS, Europe Drug Product Services, or Europe DPS, Pharmaceutical Development Services, or PDS and Drug Substance Services, or DSS. The North America DPS and Europe DPS operating segments meet the aggregation criteria to be presented as one reportable segment referred to as DPS. As a result, the Company has determined it has three reportable segments: DPS, PDS, and DSS. Corporate is not an individually reportable segment because the quantitative thresholds have not been met and as such has been reported in Other.

Recently adopted accounting pronouncements

In September 2015, the FASB issued Accounting Standards Update No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. This update eliminated the requirement to an acquirer in a business combination to retrospectively adjust provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. Instead, the update requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The Company adopted this pronouncement at the start of fiscal 2017 and the impact will be dependent on future transactions.



Accounting Standards Update ("ASU")	Description	Date Adopted
Improvements to Employee Share-Based Payment Accounting (ASU 2016-09)	This update simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company early-adopted ASU 2016-09 during the second quarter of fiscal 2017, which had no effect on the Company's financial statements.	February 1, 2017
Simplifying the Accounting for Measurement-Period Adjustment (ASU 2015-16)	This update eliminated the requirement to an acquirer in a business combination to retrospectively adjust provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. Instead, the update requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The impact will be dependent on future transactions.	November 1, 2016
Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03)	The pronouncement requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with that of debt discounts. The pronouncement is being applied retrospectively and the Company's October 31, 2016 balance sheet has been adjusted. The April 30, 2017 and October 31, 2016 balance sheets were adjusted to decrease the deferred financing cost asset and decrease the long term debt liability by $45.2 million and $50.3 million, respectively.	November 1, 2016

Recently issued accounting pronouncements

In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This update simplified the subsequent measurement of goodwill by eliminating Step 2 of the goodwill impairment test. Instead, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The amendment also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The amendment is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The amendment is applied prospectively with earlier application permitted. The adoption of this guidance is not expected to have a material impact on the Company’s financial statements.

In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This update narrows the definition of outputs and aligns it with how outputs are described in Topic 606. The amendment also provides a more robust framework to use in determining when a set of assets and activities is a business. The amendment is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The amendment is applied prospectively with earlier application permitted. The impact on the consolidated financial statements from the adoption of this guidance is dependent on future business combinations.

Between March and December 2016, the FASB issued four Accounting Standards Updates relating to Revenue from Contracts with Customers (Topic 606). These updates, identified as No. 2016-08, No. 2016-10, No. 2016-12, and No.2016-20 identified practical expedients and clarified various aspects of the new revenue recognition standard outlined in Accounting Standards Update 2014-09. The effective date and transition requirements for ASU 2014-09 (and updated in ASU 2015-14) were not changed with these pronouncements. The Company will be required to implement the new revenue recognition standard starting in fiscal 2019 and is continuing to evaluate the overall impact.

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date or, in some cases where early adoption is permitted, in advance of the specified effective date. The Company has assessed the recently issued standards that are not yet effective and, unless otherwise discussed above or in our audited consolidated financial statements and notes for fiscal 2016, believes these standards will not have a material impact on the Company’s results of operations, cash flows, or financial position. A more detailed listing of recently issued accounting pronouncements are included in our audited consolidated financial statements and notes for fiscal 2016.

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended ~~January~~April 3130, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

3. DISCONTINUED OPERATIONS



Accounting Standards Update ("ASU")	Description	Expected Impact	Effective Date
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07)	This update requires that an employer disaggregate the service cost component from the other components of net periodic benefit cost. In addition, only the service cost component will be eligible for capitalization. The amendment is applied retrospectively with earlier application permitted.	We are assessing the impact to the individual line items to the Statements of Operations. The Company does not expect there to be a material impact to net income.	November 1, 2018
Simplifying the Test for Goodwill Impairment (ASU 2017-04)	This update simplified the subsequent measurement of goodwill by eliminating Step 2 of the goodwill impairment test. Instead, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The amendment also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The amendment is applied prospectively with earlier application permitted.	We do not expect to have a material impact on the Company’s financial statements.	November 1, 2020
Clarifying the Definition of a Business (ASU 2017-01)	This update narrows the definition of outputs and aligns it with how outputs are described in Topic 606. The amendment also provides a more robust framework to use in determining when a set of assets and activities is a business. The amendment is applied prospectively with earlier application permitted.	The impact on the consolidated financial statements from the adoption of this guidance is dependent on future business combinations.	November 1, 2018
Revenue from Contracts with Customers and related standards (ASU's 2014-09, 2016-08, 2016-10, 2016-12, 2016-20)	This update supersedes the existing revenue recognition guidance and provides a new framework for recognizing revenue. These updates identified practical expedients and clarified various aspects of the new revenue recognition standard outlined in Accounting Standards Update 2014-09. This standard may be adopted using either a retrospective or modified retrospective method. Early adoption is permitted.	We are currently in the process of evaluating the impact of this standard. It is still too early in our process to determine the magnitude of the potential impact. However, based on our preliminary assessment, we believe the timing of revenue recognition for commercial and development contracts may differ from our current revenue recognition policies. The Company is determining the magnitude of this potential change. We plan to adopt the standard on November 1, 2018, and we have not yet selected a transition method.	November 1, 2018

~~Discontinued~~From ~~Operations~~time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date or, in some cases where early adoption is permitted, in advance of the specified effective date. The Company has assessed the recently issued standards that are not yet effective and, unless otherwise discussed above or in our audited consolidated financial statements and notes for fiscal 2016, believes these standards will not have a material impact on the Company’s results of operations, cash flows, or financial position. A more detailed listing of recently issued accounting pronouncements are included in our audited consolidated financial statements and notes for fiscal 2016.

3. BUSINESS COMBINATIONS

The acquisition activity referenced below has been accounted for using the acquisition method of accounting in accordance with ASC Subtopic 805-10, "Business Combinations," and the fair value concepts set forth in ASC Subtopic 820-10, "Fair Value Measurements and Disclosures". The total purchase price for each acquisition was allocated to the assets acquired and liabilities assumed based on their respective fair values as of the acquisition date. The allocation of the purchase price is based

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

on estimates and assumptions that are subject to change within the measurement period. The excess of the fair values of the assets acquired and liabilities assumed over the consideration transferred was recorded as a bargain purchase gain.

RCI Acquisition

Background

On February 1, 2017, the Company acquired the Roche Carolin, Inc. active pharmaceutical ingredients (API) facility located in Florence, South Carolina ("RCI Acquisition") from Roche Holdings, Inc. (Roche). Through the acquisition, the Company entered into a stock purchase agreement in which Roche provided amounts to satisfy certain capital expenditures and other liabilities of the facility and the Company provided an upfront payment of $1.0 million to acquire the stock of Roche Carolina Inc. (RCI) and approximately $9.3 million to acquire inventory, spare parts, prepaid expense and accounts payable and certain transaction expenses of Roche. The RCI Acquisition is included in the DSS segment.

As part of the transaction, the parties entered into (i) a supply agreement for the production of certain pharmaceutical intermediates by the Company for Roche and (ii) a toll manufacturing agreement where the Company will assume the manufacturing of certain products produced by the facility.

The toll manufacturing agreement has a five-year initial term. During the first four years of the term, Roche is subject to a minimum annual purchasing commitment. The Company will manufacture certain existing Roche products and sell the products back to Roche at fiscal year 2016 standard costs. Annual volumes above the minimum annual commitment will be rolled into the subsequent year. If applicable, Roche will pay true-up payments for amounts below the minimum purchase requirement. A liability from this unfavorable product supply contract has been recognized as deferred revenue in order to reflect this liability at fair value as of the acquisition date.

Purchase Price Allocation

The preliminary purchase price allocation for the RCI Acquisition is as follows:



	$
Assets
Inventories	9.4
Prepaid expenses and other	0.1
Capital assets	155.6
Total assets acquired	165.1

Liabilities
Accounts payable and accrued liabilities	2.0
Deferred revenue	67.0
Deferred tax liabilities	59.4
Total liabilities assumed	128.4

Total net assets	36.7
Bargain purchase gain	(26.4	)
Total purchase price	10.3

The bargain purchase gain, net of taxes, is reflected in income before taxes in the statements of operations. In late 2015, Roche analyzed strategic alternatives for the facility, including potentially closing or divesting the facility. The cost to close the facility or continue operating an under utilized facility contributed to the bargain purchase gain noted above.

Financial results

The revenues and net income from continuing operations from the RCI Acquisition for the period from February 1, 2017 to April 30, 2017 included in the consolidated statement of operations are as follows:

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)



	February 1, 2017 to April 30, 2017
	$
Revenues	8.1
Net income from continuing operations ⁽¹⁾	25.9

(1) Net income from continuing operations includes the $26.4 million of the bargain purchase gain.

Pro forma financial information

The following unaudited supplemental pro forma information presents the financial results as if the acquisition had occurred on November 1, 2015. The unaudited supplemental pro forma information does not purport to be indicative of what would have occurred had the acquisition been completed on November 1, 2015, nor is it indicative of any future results.



	Three months ended April 30,			Six months ended April 30,
	2017	2016		2017	2016
	$	$		$	$
Revenues	483.4	484.0		999.1	904.9
Net income from continuing operations	1.2	(6.0	)	11.4	(258.8	)

(1) Net income from continuing operations for the six months ended April 30, 2016 includes $257.8 million of impairment expense related to Roche's strategic realignment of the facility. This is not part of the acquisition transaction and as such is not removed from the pro forma financial information.

The unaudited pro forma financial information was prepared using the acquisition method of accounting and is based on the historical financial information of the Company and RCI, reflecting the Company's and RCI's combined results of operations for the three and six months ended April 30, 2017 and 2016. The historical financial information has been adjusted to give effect to the pro forma events that are (i) directly attributable to the RCI Acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results of the Company and RCI. The unaudited pro forma consolidated results reflect primarily the following pro forma adjustments:


•	additional revenue related to the amortization of deferred revenue on the unfavorable product supply contract;


•	additional cost of goods sold resulting from increases in depreciation expense relating to the fair values of acquired property and equipment;


•	removal of repositioning costs related to the acquisition; and


•	the effect of the bargain purchase gain

4. DISCONTINUED OPERATIONS

Banner Pharmacaps

On May 12, 2015, the Company sold its Banner Pharmacaps entity in Mexico, previously included within the DPS and BLS segments, to the Perrigo Company plc for approximately $36.4 million in cash. The Banner Pharmacaps entity in Mexico produced over-the-counter and nutritional products for consumption in Mexico. The Company acquired the entity in fiscal 2012 and subsequent to this acquisition, the Company shifted its business strategy, focusing more on technological innovation and R&D. The Company recognized a gain on sale of $2.6 million, which included adjustments in the second quarter of 2016 primarily related to working capital adjustments.

Biosolutions Operations in Capua, Italy

On July 31, 2015, the Company sold its Biosolutions facility in Capua, Italy, previously included within the Biosolutions segment, for approximately €0.3 million in cash. The sale occurred as a result of a strategic shift in the Company’s long term business strategy. The Company recognized a loss on sale of $24.0 million, which included an adjustment in the second quarter of 2016 for future retention bonuses at the facility.

DPx Fine Chemicals

On August 31, 2015, the Company sold its DPx Fine Chemicals ("DFC") division, which previously comprised the DFC operating segment. DFC was sold for a cash purchase price of €179.0 million, which included a €3.0 million working capital payment made in the first quarter of 2016. The Company recognized a gain on sale of $107.0 million, which included an adjustment in the first quarter of 2016 for estimated taxes on the sale. The DPx Fine Chemicals division, which was acquired through the DPP Acquisition, developed chemicals that are not in line with the Company’s long term business strategy.

~~The results of the above dispositions have been recorded as discontinued operations, the results of which for the three months ended January 31, 2016 are as follows:~~12

	Three months ended January 31,
	2016
	$
Revenues	2.1
Cost of goods sold	1.9
Gross profit	0.2
Selling, general and administrative expenses	0.4
Loss on disposals, net	1.9
Loss before income taxes	(2.1	)
Provision for income taxes	—
Net loss	(2.1	)

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

~~The~~(Dollar ~~Company~~information ~~did~~in ~~not~~tabular ~~record~~form ~~any~~is ~~discontinued~~expressed ~~operations~~in ~~activity~~millions ~~for~~of ~~the~~U.S. ~~three~~dollars, ~~months~~except ~~ended~~share ~~January 31, 2017.~~data)

4adjustment in the first quarter of 2016 for estimated taxes on the sale. ~~SUPPLEMENTAL~~ ~~BALANCE~~The ~~SHEET~~DPx ~~INFORMATION~~Fine Chemicals division, which was acquired through the DPP Acquisition, developed chemicals that are not in line with the Company’s long term business strategy.

The results of the above dispositions have been presented as discontinued operations, the results of which for the three and six months ended April 30, 2016 are as follows:



	Three months ended April 30,		Six months ended April 30,
	2016		2016
	$		$
Revenues	—		2.1
Cost of goods sold	—		1.9
Gross profit	—		0.2
Selling, general and administrative expenses	—		0.4
Loss on disposals, net	0.9		2.8
Operating loss	(0.9	)	(3.0	)
Foreign exchange income, net	(0.1	)	(0.1	)
Loss before income taxes	(0.8	)	(2.9	)
Provision for income taxes	0.2		0.2
Net loss	(1.0	)	(3.1	)

The Company did not record any discontinued operations activity for the three and six months ended April 30, 2017.

5. SUPPLEMENTAL BALANCE SHEET INFORMATION

Inventories

Inventories consisted of the following:



	April 30, 2017	October 31, 2016
	$	$
Raw materials, packaging components and spare parts	228.7	192.1
Work-in-process	92.3	80.9
Finished goods	130.6	122.2
Balance, end of period	451.6	395.2

Notes to Unaudited Consolidated Financial Statements for the Three Months Ended January 31, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

	January 31, 2017	October 31, 2016
	$	$
Raw materials, packaging components and spare parts	203.7	192.1
Work-in-process	76.7	80.9
Finished goods	126.8	122.2
Balance, end of period	407.2	395.2

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities consisted of the following:

	January 31, 2017	October 31, 2016
	April 30, 2017	October 31, 2016
	$	$
Trade payables	~~248~~277.21	279.3
Interest payable	~~20.~~9.8	14.0
Accrued salaries and related expenses	7178.08	81.8
Customer deposits	4.91	4.3
Repositioning	4.69	5.4
Other accruals	47.95	8.8
Balance, end of period	~~354~~382.52	393.6

Intangible assets

The following table summarizes gross carrying amounts, accumulated amortization, and accumulated impairments related to the Company's identifiable intangible assets as of ~~January~~April 3130, 2017:

Definite-lived intangible assets	Gross carrying value	Accumulated amortization		Net carrying value		Weighted Average Useful Life (in Years)
	$	$		$
Favorable agreements	1.0	(1.0	)	—		—
Trade names	1.6	(0.8	)	0.8		5.6
Developed technology	54.1	(18.1	)	36.0		10.8
Trade secrets and patents	2.5	(0.3	)	2.2		14.5
Customer relationships	248.8	(44.9	)	203.9		14.2
Non-compete agreements	2.6	(2.0	)	0.6		3.0
Subtotal	310.6	(67.1	)	243.5
Foreign exchange				(3.6	)
Balance, end of period				239.9

Indefinite-lived intangible assets	Gross carrying value	Accumulated impairment		Net carrying value
	$	$		$
In-process research and development	2.2	(0.9	)	1.3
Regulatory permits	0.2	—		0.2
Subtotal	2.4	(0.9	)	1.5
Foreign exchange				(0.2	)
Balance, end of period				1.3

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

Notes to Unaudited Consolidated Financial Statements for the Three Months Ended January 31, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

classified as an indefinite-lived intangible asset and either begins to be amortized upon approval and product commercialization or is written-off if the product is not approved.



Definite-lived intangible assets	Gross carrying value	Accumulated amortization		Net carrying value		Weighted Average Useful Life (in Years)
	$	$		$
Favorable agreements	1.0	(1.0	)	—		—
Trade names	1.6	(0.9	)	0.7		5.6
Developed technology	54.1	(19.4	)	34.7		10.8
Trade secrets and patents	2.5	(0.4	)	2.1		14.5
Customer relationships	248.8	(49.5	)	199.3		14.2
Non-compete agreements	2.6	(2.2	)	0.4		3.0
Subtotal	310.6	(73.4	)	237.2
Foreign exchange				(3.3	)
Balance, end of period				233.9



Indefinite-lived intangible assets	Gross carrying value	Accumulated impairment		Net carrying value
	$	$		$
In-process research and development	2.2	(0.9	)	1.3
Regulatory permits	0.2	—		0.2
Subtotal	2.4	(0.9	)	1.5
Foreign exchange				(0.2	)
Balance, end of period				1.3

In-process research and development (“IPR&D”) is classified as definite-lived or indefinite-lived depending on whether the product has been approved and if commercialization has begun. IPR&D for products that have been approved is classified as a definite-lived intangible asset and is amortized over the life of the asset. IPR&D for products that have not been approved is classified as an indefinite-lived intangible asset and either begins to be amortized upon approval and product commercialization or is written-off if the product is not approved.

In the first quarter of fiscal 2016, the Company sold an IPR&D asset to Banner Life Sciences for cash consideration equal to its net carrying value of $3.6 million. At the time of the sale, the asset had a gross carrying value of $7.9 million and had incurred $4.3 million in impairments.

Goodwill

The following table summarizes the changes in the carrying amount of goodwill for the ~~three~~six months ended ~~January~~April 3130, 2017:

	Total
	$
Balance at October 31, 2016 (1)	281.6
Foreign currency translation adjustments	(0.12	)
Balance at January 31, 2017	281.5
Balance at April 30, 2017	281.4

(1) The opening cumulative goodwill balance is reflective of historical impairment charges of the full value of goodwill.

56. LONG-TERM DEBT

Long-term debt in the accompanying consolidated balance sheets at ~~January~~April 3130, 2017 and October 31, 2016 consists of the following:

	As of January 31, 2017		As of October 31, 2016
	$		$
USD Term Loan with a base rate plus 2.25% or LIBOR with a floor of 1% plus 3.25% rate, (currently 4.25%), and maturity date of March 10, 2021 (the "Credit Agreement")	1,136.0		1,138.9
Euro Term Loan with a base rate plus 2.50% or LIBOR with a floor of 1% plus 3.50% rate, (currently 4.50%), and maturity date of March 10, 2021 (the "Credit Agreement")	501.2		511.0
7.50% Senior Notes due February 1, 2022 (the "Notes")	450.0		450.0
Secured Revolving Facility balance at base rate plus 2.25% rate (currently 4.00%), and maturity terms on a rolling basis (currently monthly)	20.0		20.0
Government of Austria research and development loans with annual interest rates ranging from 1.56% to 2.00% and maturities through March 2020	3.0		3.5
Italian subsidized loan with annual interest rate of 0.5%, and maturity date of June 30, 2020	3.5		4.1
Italian bank loan with Euribor 6-month + 7.1% rate, and maturity date of June 30, 2020	0.7		0.7
Capital lease obligations	1.2		0.7
Total long-term debt outstanding	2,115.6		2,128.9
Less original issue discount, net of accumulated amortization of $6.7 million and $6.2 million, respectively	(9.4	)	(9.9	)
Less current portion	(19.6	)	(19.5	)
Balance, end of the period	2,086.6		2,099.5

~~2014~~Notes ~~Term~~to ~~Loans~~Unaudited Consolidated Financial Statements for the Three and ~~Revolving~~Six ~~Line~~Months Ended April 30, 2017

Notes to Unaudited Consolidated Financial Statements for the Three Months Ended January 31, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

On March 11, 2014, the Company completed the refinancing of its existing credit facility (the "Refinancing"), pursuant to which it entered into a credit agreement (the "Credit Agreement") documenting a new credit facility (the "Credit Facility") for a USD denominated secured term loan in the amount of $985.0 million and a Euro denominated secured term loan in the amount of €250.0 million, or $345.0 million, (together, with the incremental term loans described below, the "Secured Term Loans") and a secured multi-currency revolving line in the amount of $200.0 million (the "Secured Revolving Facility"). Up to $75.0 million of the Secured Revolving Facility is available for letters of credit. The Secured Term Loans mature on March 10, 2021, and the Secured Revolving Facility matures on March 10, 2019. The USD denominated Secured Term Loan bears interest at a rate per annum equal to, at the option of the Company, a base rate plus 2.25% or LIBOR with a floor of 1% plus 3.25%. The Euro denominated Secured Term Loan bears interest at a rate per annum equal to, at the option of the Company, a base rate plus 2.50% or LIBOR with a floor of 1% plus 3.50%. Borrowings under the Secured Revolving Facility bear interest for euro dollar loans at LIBOR plus 3.25%, Canadian prime rate loans at the Canadian prime rate plus 2.25%, and base rate loans at the base rate plus 2.25%. The Company will also pay a commitment fee of 0.50% per annum on the unused portion of the Secured Revolving Facility with a step down to 0.375% when the First Lien Leverage Ratio (as defined below) is less than or equal to 3.00 to 1.00.



	As of April 30, 2017		As of October 31, 2016
	$		$
USD Term Loan at LIBOR with a floor of 1% plus 3.25% rate and maturity date of April 20, 2024 (the "Credit Agreement")	1,133.1		—
Euro Term Loan at LIBOR with a floor of 1% plus 3.00% rate and maturity date of April 20, 2024 (the "Credit Agreement")	504.5		—
USD Term Loan with a base rate plus 2.25% or LIBOR with a floor of 1% plus 3.25% rate and maturity date of March 10, 2021 (the "Credit Agreement")	—		1,138.9
Euro Term Loan with a base rate plus 2.50% or LIBOR with a floor of 1% plus 3.50% rate and maturity date of March 10, 2021 (the "Credit Agreement")	—		511.0
7.50% Senior Notes due February 1, 2022 (the "Notes")	450.0		450.0
Secured Revolving Facility balance at LIBOR plus 3.25% rate and maturity terms on a rolling basis	50.0		20.0
Government of Austria research and development loans with annual interest rates ranging from 1.56% to 2.00% and maturities through March 2020	2.7		3.5
Italian subsidized loan with annual interest rate of 0.5%, and maturity date of June 30, 2020	3.6		4.1
Italian bank loan with Euribor 6-month + 7.1% rate, and maturity date of June 30, 2020	0.7		0.7
Capital lease obligations	1.6		0.7
Total long-term debt outstanding	2,146.2		2,128.9
Less original issue discount, net of accumulated amortization of $7.1 million and $6.2 million, respectively	(12.2	)	(9.9	)
Less deferred financing costs	(45.2	)	(50.3	)
Less current portion	(19.4	)	(19.5	)
Balance, end of the period	2,069.4		2,049.2

On2017 ~~September~~Term ~~29,~~Loans ~~2014, the Company entered into Amendment No. 1 to the Credit Agreement which added two incremental term loans to the Credit Facility; a USD denominated term loan in the amount of $160.0 million,~~ and aRevolving Euro denominated term loan in the amount of €70.0 million, or $88.7 million. The Company used the proceeds for these two incremental term loans to fund a portion of the purchase price for the Gallus Acquisition. The other material terms of the incremental term loans are identical to those of the initial term loans.Line

On ~~March~~April 3120, ~~2015~~2017, the Company ~~entered~~completed ~~into~~the ~~Amendment~~refinancing ~~No.~~of 2its toterm loans and amended the ~~Credit~~existing ~~Agreement~~revolving ~~which~~credit ~~added~~facility ~~two~~(the ~~incremental~~"Refinancing'") ~~term~~by ~~loans~~entering tointo ~~the~~Amendment ~~Credit~~No. ~~Facility;~~4 aof ~~Euro~~the ~~denominated~~original ~~term~~credit ~~loan~~facility inagreement ~~the~~dated ~~amount~~as of ~~€155.0~~March ~~million~~11, or2014 ~~$164~~(the "Credit Facility").3 ~~million~~Under ~~and~~Amendment aNo. ~~USD~~4, ~~denominated~~the existing term ~~loan~~loans inwere ~~the~~refinanced ~~amount~~with ofnew ~~$20.0~~term ~~million~~loans ("Tranche B Term Loans"). The ~~Company~~Tranche ~~used~~B ~~the~~Term ~~proceeds~~Loans ~~for~~consisted ~~these~~of ~~two~~(i) ~~incremental~~Tranche ~~term~~B ~~loans~~US toDollar ~~fund~~Term ~~the~~Loans ~~purchase~~in ~~price~~the amount of ~~the~~$1.133 ~~Irix~~billion ~~Acquisition.~~and ~~The~~(ii) ~~other~~Tranche ~~material~~B ~~terms~~Euro ofTerm Loans in the ~~incremental~~amount ~~term~~of ~~loans~~€463.1 ~~are~~million, ~~identical~~or to$496.3 ~~those~~million. ofThe ~~the~~Tranche ~~initial~~B ~~term~~Term ~~loans~~Loans will mature on April 20, 2024.

AsUnder ofAmendment ~~January 31,~~No. ~~2017~~4, the Company ~~held~~increased athe size of the revolver facility (the "Revolving Facility") to $20250.0 million, ~~balance~~of onwhich up to $75.0 million is available for letters of credit. Of the ~~Secured~~total ~~Revolving~~revolving ~~Facility~~commitments, $87.1 ~~The~~million ~~facility~~will ~~has~~terminate aon ~~rolling~~March ~~maturity~~11, ~~date~~2019 (the "Tranche A Commitments") and the ~~balance~~remaining commitments (the "Tranche B Commitments") will ~~renew~~terminate ~~until~~on ~~paid~~April 20, 2022.

~~Under~~The ~~the~~US ~~Secured~~Dollar ~~Revolving~~denominated ~~Facility,~~Tranche ~~the~~B ~~Company~~Term isLoans ~~required~~bear tointerest ~~maintain~~at a ~~First~~rate ~~Lien~~per ~~Leverage~~annum ~~Ratio~~equal ~~below~~to, aat ~~certain~~the ~~amount~~option ~~for each~~ of the ~~Testing~~Company, ~~Periods~~a asbase ~~set~~rate ~~forth~~plus ~~in the Credit Agreement if the Company has borrowed~~ 2.25% ofor ~~the~~LIBOR ~~available~~with ~~credit~~a onfloor ~~the~~of ~~Secured~~1% ~~Revolving~~plus ~~Facility, or $50~~3.~~0 million~~25%. ~~For~~The ~~purposes~~margin ofapplied to the ~~Credit~~base ~~Agreement,~~rate awill ~~Testing~~be ~~Period~~reduced ~~means~~to a2.0% ~~single~~and ~~period consisting of~~ the ~~most~~margin ~~recent~~applied ~~four~~to ~~consecutive~~LIBOR ~~fiscal~~will ~~quarters~~be ~~ending~~reduced onto ~~the covenant determination date~~3.0% Asif ~~of January 31, 2017,~~ the Company ~~was~~achieves, ~~not~~and ~~required~~as tolong ~~calculate the First Lien Leverage Ratio~~ as the Company ~~has~~maintains, ~~not~~a ~~borrowed~~B2/Stable ~~25%~~credit rating or ~~$50.0~~better ~~million~~from ~~under~~Moody's ~~the~~Inventors ~~Secured~~Service, ~~Revolving Facility~~Inc. ~~The following table discloses the maximum First Lien Leverage Ratios permitted under the Credit Agreement:~~

Testing Period Ending	Maximum Ratio
April 30, 2014 through October 31, 2014	6.75 to 1.00
November 1, 2014 through October 31, 2015	6.50 to 1.00
November 1, 2015 through October 31, 2016	6.25 to 1.00
November 1, 2016 through October 31, 2017	6.00 to 1.00
November 1, 2017 and thereafter	5.75 to 1.00

The Euro denominated Tranche B Term Loans bear interest at a rate per annum equal to LIBOR with a floor of 1% plus 3.00%.

~~"First~~Borrowings ~~Lien~~under ~~Leverage~~the ~~Ratio"~~Revolving isFacility ~~generally~~bear ~~defined~~interest inat ~~the~~a ~~Credit~~rate ~~Agreement~~per asannum ~~the~~equal ~~ratio~~to, ofat ~~(i)~~ the ~~sum~~option of the ~~aggregate principal amount of the~~ Company~~'s and its restricted subsidiaries' indebtedness for borrowed money~~, ~~principal~~a ~~amount~~base ofrate ~~capital~~plus ~~lease~~2.25% ~~obligations~~or ~~and~~LIBOR ~~debt~~plus ~~obligations~~an ~~evidenced~~applicable bymargin ~~bonds,~~of ~~promissory~~3.25%. ~~notes,~~The ~~debentures~~Company orwill ~~debt~~also ~~securities~~pay ~~that~~a iscommitment ~~secured~~fee byof a0.50% per ~~first~~annum ~~priority lien~~ on the ~~collateral~~unused ~~minus~~portion ~~unrestricted~~of ~~cash and cash equivalents held by~~ the ~~Company~~Revolving ~~and~~Facility ~~its~~with ~~restricted~~a ~~subsidiaries~~step indown ~~each case set forth in the Credit Agreement~~ to ~~(ii) Consolidated EBITDA~~0.375% ~~Consolidated~~when ~~EBITDA is generally defined in~~ the ~~Credit~~First ~~Agreement~~Lien asLeverage ~~income~~Ratio (~~loss)~~as ~~from~~defined ~~continuing operations before repositioning expenses, interest expense, foreign exchange losses reclassified from other comprehensive income (loss~~below), ~~refinancing~~is ~~expenses,~~less ~~acquisition-related~~than ~~costs,~~or ~~gains~~equal ~~and losses on sale of capital assets, income taxes, asset impairment charges, depreciation and amortization, stock-based compensation expense, consulting costs related~~ to the Company's operational initiatives, purchase accounting adjustments, other income and expenses, non-cash charges, expenses related to the DPP Acquisition, pro forma cost savings from operational excellence initiatives and plant consolidations, pro forma synergies from the DPP Acquisition, and proceeds from business interruption insurance, among other adjustments3.00 ~~Consolidated EBITDA is not equivalent~~ to ~~Adjusted EBITDA, which as discussed in Note 10, is the Company's measure of segment performance~~1.00.

13As of April 30, 2017, the Company borrowed $50.0 million against the Revolving Facility, which will renew until paid.

~~Notes~~Under the Revolving Facility, the Company is required to ~~Unaudited~~maintain ~~Consolidated~~a ~~Financial~~First ~~Statements~~Lien Leverage Ratio below a certain amount for each of the ~~Three~~Testing ~~Months~~Periods ~~Ended~~as ~~January~~set 31forth in the Credit Agreement if the Company has borrowed 25% of the available credit on the Revolving Facility, or $62.5 million. For purposes of the Credit Agreement, a Testing Period means a single period consisting of the most recent four consecutive fiscal quarters ending on the covenant determination date. As of April 30, 2017, the

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

~~The~~ Company iswas not required to ~~make~~calculate the ~~following mandatory prepayments in respect of the Secured Term Loans: (i) 50% of Excess Cash Flow (as defined in the Credit Agreement) when the Company maintains a~~ First Lien Leverage Ratio ofas ~~greater~~the ~~than~~Company ~~4.00~~has tonot ~~1.00,~~borrowed ~~with step downs to (a)~~ 25% ~~when the Company maintains a First Lien Leverage Ratio of less than~~ or ~~equal to 4~~$62.005 tomillion ~~1.00~~under ~~but~~the ~~greater~~Secured ~~than~~Revolving 3Facility.50 toThe ~~1.00~~following ~~and~~table ~~(b)~~discloses ~~0% when~~ the ~~Company~~maximum ~~maintains a~~ First Lien Leverage ~~Ratio~~Ratios ofpermitted less than or equal to 3.50 to 1.00; (ii) 100% of the net cash proceeds of certain asset sales (including insurance and condemnation proceeds), subject to thresholds, reinvestment rights and certain other exceptions; and (iii) 100% of the net cash proceeds of issuances of debt obligations, subject to certain exceptions and thresholds. "Excess Cash Flow" is generally defined as Consolidated EBITDA (as defined in the Credit Agreement) plus, (i) decreases in working capital, (ii) extraordinary or nonrecurring income or gains and (iii) certain other adjustments, minus, (a) increases in working capital, (b) cash interest, (c) cash taxes, (d) cash capital expenditures (e) scheduled debt amortization and (f) certain other adjustments. As the Excess Cash Flow calculation is performed annually, no payment is due for the three months ended January 31, 2017. No Excess Cash Flow payment was required for fiscal 2016. The Company may voluntarily repay borrowings under the Credit ~~Facility at any time.~~Agreement:

If the Company has failed to maintain the applicable First Lien Leverage Ratio, it may nevertheless avoid a default by (i) repaying outstanding borrowings under the Revolving Line in an amount sufficient to avoid triggering the First Lien Leverage Ratio for that fiscal quarter or (ii) accepting a cash contribution of qualified equity in an amount which, if treated as Consolidated EBITDA, would bring the Company into compliance with the applicable First Lien Leverage Ratio for that fiscal quarter, in each case during the 11 business days following the deadline for delivery of the Company’s compliance certificate for that fiscal quarter. In addition, maintenance of the First Lien Leverage Ratio is required only with respect to the Revolving Line; the Term Loans do not directly benefit from the financial covenant and, until the Revolving Line is terminated and all outstanding borrowings thereunder are accelerated, will remain unaffected by a default under the Revolving Line that arises from the Company’s failure to maintain the applicable First Lien Coverage Ratio.



Testing Period Ending	Maximum Ratio
April 30, 2014 through October 31, 2014	6.75 to 1.00
November 1, 2014 through October 31, 2015	6.50 to 1.00
November 1, 2015 through October 31, 2016	6.25 to 1.00
November 1, 2016 through October 31, 2017	6.00 to 1.00
November 1, 2017 and thereafter	5.75 to 1.00

"First Lien Leverage Ratio" is generally defined in the Credit Agreement as the ratio of (i) the sum of the aggregate principal amount of the Company's and its restricted subsidiaries' indebtedness for borrowed money, principal amount of capital lease obligations and debt obligations evidenced by bonds, promissory notes, debentures or debt securities that is secured by a first priority lien on the collateral minus unrestricted cash and cash equivalents held by the Company and its restricted subsidiaries in each case set forth in the Credit Agreement to (ii) Consolidated EBITDA. Consolidated EBITDA is generally defined in the Credit Agreement as income (loss) from continuing operations before repositioning expenses, interest expense, foreign exchange losses reclassified from other comprehensive income (loss), refinancing expenses, acquisition-related costs, gains and losses on sale of capital assets, income taxes, asset impairment charges, depreciation and amortization, stock-based compensation expense, consulting costs related to the Company's operational initiatives, purchase accounting adjustments, other income and expenses, non-cash charges, expenses related to the DPP Acquisition, pro forma cost savings from operational excellence initiatives and plant consolidations, pro forma synergies from the DPP Acquisition, and proceeds from business interruption insurance, among other adjustments. Consolidated EBITDA is not equivalent to Adjusted EBITDA, which as discussed in Note 11, is the Company's measure of segment performance.

The Company is required to make the following mandatory prepayments in respect of the Tranche B Term Loans: (i) 50% of Excess Cash Flow (as defined in the Credit Agreement) when the Company maintains a First Lien Leverage Ratio of greater than 4.00 to 1.00, with step downs to (a) 25% when the Company maintains a First Lien Leverage Ratio of less than or equal to 4.00 to 1.00 but greater than 3.50 to 1.00 and (b) 0% when the Company maintains a First Lien Leverage Ratio of less than or equal to 3.50 to 1.00; (ii) 100% of the net cash proceeds of certain asset sales (including insurance and condemnation proceeds), subject to thresholds, reinvestment rights and certain other exceptions; and (iii) 100% of the net cash proceeds of issuances of debt obligations, subject to certain exceptions and thresholds. "Excess Cash Flow" is generally defined as Consolidated EBITDA (as defined in the Credit Agreement) plus, (i) decreases in working capital, (ii) extraordinary or nonrecurring income or gains and (iii) certain other adjustments, minus, (a) increases in working capital, (b) cash interest, (c) cash taxes, (d) cash capital expenditures (e) scheduled debt amortization and (f) certain other adjustments. As the Excess Cash Flow calculation is performed annually, no payment is due for the six months ended April 30, 2017. No Excess Cash Flow payment was required for fiscal 2016. The Company may voluntarily repay borrowings under the Credit Facility at any time.

If the Company has failed to maintain the applicable First Lien Leverage Ratio, it may nevertheless avoid a default by (i) repaying outstanding borrowings under the Revolving Facility in an amount sufficient to avoid triggering the First Lien Leverage Ratio for that fiscal quarter or (ii) accepting a cash contribution of qualified equity in an amount which, if treated as Consolidated EBITDA, would bring the Company into compliance with the applicable First Lien Leverage Ratio for that fiscal quarter, in each case during the 11 business days following the deadline for delivery of the Company’s compliance certificate for that fiscal quarter. In addition, maintenance of the First Lien Leverage Ratio is required only with respect to the Revolving Line; the Term Loans do not directly benefit from the financial covenant and, until the Revolving Line is terminated and all outstanding borrowings thereunder are accelerated, will remain unaffected by a default under the Revolving Line that arises from the Company’s failure to maintain the applicable First Lien Coverage Ratio.

The Credit Agreement contains other customary terms, including (i) representations, warranties and affirmative covenants, (ii) negative covenants (in addition to the limitation on distributions and the requirement to maintain the First Lien Leverage Ratio levels as described above), such as limitations on indebtedness, liens, mergers, acquisitions, asset sales, investments, prepayments of subordinated debt, and transactions with affiliates, in each case subject to baskets, thresholds and other exceptions, and (iii) events of default, such as for non-payment, breach of other covenants, misrepresentations, cross default to other debt, change in control, bankruptcy events, ERISA events, unsatisfied judgments and actual or asserted invalidity of guarantees or security documents.

As of ~~January~~April 3130, 2017, the Company was in compliance with the covenants in the Credit Facility.

Provided that the Company is in compliance with the First Lien Leverage Ratio test and no default under the Credit Agreement is continuing or would result therefrom, the covenant in the Credit Agreement that limits the Company's ability to pay dividends or make other distributions to its shareholders generally permits (with certain exceptions and qualifications) the Company to pay dividends or make such distributions in an aggregate amount, when taken together with the aggregate amount of any prepayment, repurchase, redemption or defeasance of subordinated indebtedness, not to exceed the greater of (x) 3.00% of Consolidated Total Assets and (y) $65.0 million and (ii) in aggregate amount not to exceed the available amount (as defined in the Credit Agreement) at such time. Other than the return of capital discussed in Note 5, the Company historically has not paid dividends on its membership interests.16

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

The Credit Facility is guaranteed by the Company and certain subsidiaries, and is secured by a first priority pledge on substantially all of the assets of the Company and the subsidiary guarantors, in each case subject to certain exceptions.

2014 Senior Unsecured Notes

In February 2014, the Company issued $450.0 million in aggregate principal amount of 7.50% senior unsecured notes due February 1, 2022 (the "Notes") in a private placement, pursuant to which it entered into an indenture (the “Indenture”) with a commercial bank acting as trustee.

Interest on the Notes accrues at a rate of 7.50% per annum and is payable semiannually in arrears on each February 1 and August 1, commencing on August 1, 2014. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months. The Notes are generally required to be guaranteed by each of the Company’s restricted subsidiaries that guarantees the Credit Facility or that guarantees other material indebtedness of the Company or other Note guarantors.

Except for offers to purchase Notes upon certain asset sales or a change in control of the Company, no mandatory redemption or sinking fund payment is required with respect to the Notes.

Notes to Unaudited Consolidated Financial Statements for the Three Months Ended January 31, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

On and after February 1, 2017, the Company may redeem all or a portion of the Notes at the applicable redemption prices set forth below (expressed as percentages of principal amount redeemed), plus unpaid interest accruing on the principal amount redeemed to the Redemption Date:



Year	%
2017	105.625
2018	103.750
2019	101.875
2020 and thereafter	100.000

In addition, we may redeem all of the Notes at a redemption price equal to the principal amount redeemed, plus unpaid interest accruing to the Redemption Date, upon certain adverse changes in applicable tax laws.

The Notes are guaranteed by the Company and the Indenture does not require the Company to maintain compliance with any financial covenants. The Indenture does contain customary affirmative and negative covenants, including with respect to mergers, asset sales, restricted payments, restricted investments, issuance of debt and equity, liens, and affiliate transactions, subject to baskets and other exceptions. However, the Company will be exempt from many of the negative covenants if the Notes receive investment grade ratings from both Moody’s and S&P. The Indenture also contains customary events of default, such as for non-payment, breach of other covenants, misrepresentation, cross default to other material debt, bankruptcy events, unsatisfied judgments, and actual or asserted invalidity of guarantees.

As of ~~January~~April 3130, 2017, the Company was in compliance with the covenants in the Indenture.

Other Financing Arrangements

During the third quarter of fiscal 2013, the Company received assistance from the Italian government in the form of two loans. One loan is a subsidized loan for approximately €6.0 million, of which the Company received €5.4 million during the third quarter of 2013 and the remaining €0.6 million in the second quarter of 2016. The subsidized loan has an annual interest rate of 0.5%, a maturity date of June 30, 2020 and amortizes in fixed semi-annual installments. The second loan is a bank loan of approximately €0.7 million, of which the Company received €0.6 million during the third quarter of 2013 and the remaining €0.1 million in the second quarter of 2016. The bank loan bears interest at a 6-month Euribor rate plus 7.1%, has a maturity date of June 30, 2020 and amortizes in six variable semi-annual installments beginning in December 2017.

The Company receives research and development loans from the Austrian government. The loans hold various interest rates and have maturity dates through March 31, 2020. The aggregate current balance of these loans as of January 31, 2017 is $3.0 million.17

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

In May 2011, Gallus entered into an agreement with St. Louis County under the county's Chapter 100 program. Under the program, Gallus transferred title of the St. Louis location's buildings and property to St. Louis County in exchange for St. Louis County, Missouri Taxable Industrial Revenue Bonds (Chapter 100 Bonds) of equal value. Gallus then simultaneously leased back the land and facility from St. Louis County. The proceeds of principal and interest on the Chapter 100 Bonds are equal to the lease payment obligations on the Loan. This arrangement was acquired by the Company through the acquisition of Gallus Pharmaceuticals in September 2014.

In August 2015, the agreement with St. Louis County was amended by the Company to extend through December 21, 2029 (originally December 21, 2021), which is consistent with the maturity date of the Chapter 100 Bonds. The Company has determined that it has a legal right of offset for the obligations under the lease agreement with the proceeds receivable from the Chapter 100 Bonds and intends to offset the balance. As a result, the offsetting amounts have not been recorded in the financial statements. The bonds require the Company to maintain a minimum level of employment throughout the term of the loan and an additional investment in the St. Louis facility of at least $47.0 million by December 31, 2019.

In addition to the terms of the bonds indicated above, the Company also entered into an agreement under which it makes "Payments In Lieu Of Taxes" (PILOT) fee payments in lieu of property taxes, which is equal to 50% of the property taxes that would have otherwise been payable on the property. The PILOT fees will increase in years which the Company has not maintained the minimum number of employees as required by the agreement on a prospective basis.

The Company has possessory and equitable title to the property, and at any time can purchase legal title for a nominal fee. In addition, as the holder of the bonds, the Company can waive any default on the lease payments. As the Company retains all benefits of ownership and can take title at any time, at which point the bonds it holds would be redeemed to settle its obligations under the lease agreement, the Company has concluded the land and personal property continue to be assets and are recorded on the consolidated balance sheets.

157. PENSION AND POST-RETIREMENT BENEFITS

Notes to Unaudited Consolidated Financial Statements for the Three Months Ended January 31, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

benefits of ownership and can take title at any time, at which point the bonds it holds would be redeemed to settle its obligations under the lease agreement, the Company has concluded the land and personal property continue to be assets and are recorded on the consolidated balance sheets.

6. PENSION AND POST-RETIREMENT BENEFITS

Employee future benefits

The components of net periodic benefit cost from continuing operations for the defined benefit plans and other benefit plans for the three and six months ended ~~January~~April 3130, 2017 and 2016 were as follows:

	Three months ended January 31,
	Three months ended April 30,
	2017			2016
	Defined benefitpension plans		Other benefitplans	Defined benefitpension plans		Other benefitplans
	$		$	$		$
Service cost	0.6		—	0.54		—
Interest cost	1.0		~~0.1~~—	1.3		~~0.1~~—
Expected return on plan assets	(1.0	)	—	(1.32	)	—
Amortization of actuarial loss	0.7		—	0.4		—
Net periodic benefit costs	1.3		~~0.1~~—	0.9		~~0.1~~—



	Six months ended April 30,
	2017			2016
	Defined benefit pension plans		Other benefit plans	Defined benefit pension plans		Other benefit plans
	$		$	$		$
Service cost	1.2		—	0.9		—
Interest cost	2.0		0.1	2.6		0.1
Expected return on plan assets	(2.0	)	—	(2.5	)	—
Amortization of actuarial loss	1.4		—	0.8		—
Net periodic benefit costs	2.6		0.1	1.8		0.1

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

Based on current information available from actuarial estimates, the Company anticipates that contributions required under its defined benefit pension plans and other benefit plans for fiscal 2017 will be approximately $3.9 million compared to contributions of $5.2 million that were made in fiscal 2016. The decrease in the expected fiscal 2017 contributions compared to fiscal 2016 are primarily the result of decreased obligations on a pension plan for the Bourgoin, France facility due to a workforce reduction in fiscal 2016. Required contributions to defined benefit pension plans in future years may vary and will be dependent upon a number of variables, including the long-term rate of return on plan assets.

The Company recognizes a termination liability for the Company's Italy operations. In accordance with Italian severance pay statutes, an employee benefit is accrued for service to date and is payable when the employee's employment with the Company ceases. The termination indemnity liability is calculated in accordance with local civil and labor laws based on each employee's length of service, employment category and remuneration. The Italian termination liability is adjusted annually by a cost-of-living index provided by the Italian government. Although there is no vesting period, the Italian government has established private accounts for these benefits and has required the Company to contribute $3.9 million and $3.4 million in fiscal 2017 and 2016, respectively, to these accounts, with additional contributions in the future. The liability recorded in the consolidated balance sheets is the amount to which the employees would be entitled if their employment with the Company ceased. The related expenses for the three months ended ~~January~~April 3130, 2017 and 2016 was $0.9 million and $0.7 million, respectively, and the related expenses for the six months ended April 30, 2017 and 2016 was $1.8 million and $1.4 million, respectively.

The employee future benefit expense recorded in continuing operations in connection with defined benefit pension plans, other post-retirement benefit plans and the unfunded termination indemnities for the three months ended ~~January~~April 3130, 2017 and 2016 was $2.32 million and $1.76 million, respectively. For the six months ended April 30, 2017 and 2016, the employee future benefit expense was $4.5 million and $3.3 million, respectively.

78. EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per ordinary share is computed by dividing net income (loss) available to the Company by the weighted-average number of ordinary shares outstanding during the period. Diluted earnings (loss) per ordinary share is computed by dividing net income (loss) available to the Company by the weighted-average number of ordinary shares outstanding adjusted to give effect to potentially dilutive securities.

The details of the computation of basic and diluted earnings (loss) per ordinary share are as follows:



	Three months ended April 30,					Six months ended April 30,
	2017		2016			2017		2016
Numerator (in millions):
Income (loss) from continuing operations	$	27.6	$	1.9		$	55.9	$	(18.1	)
Loss from discontinued operations	$	—	$	(1.0	)	$	—	$	(3.1	)

Denominator:
Weighted-average number of shares of ordinary shares - basic	145,136,214		115,609,756			145,132,349		115,609,756
Effect of dilutive securities:
Restricted stock units	1,092,951		—			1,116,435		—
Stock options	37,963		—			27,567		—
Weighted-average number of shares of ordinary shares - diluted	146,267,128		115,609,756			146,276,351		115,609,756

Earnings (loss) per ordinary share - basic:
From continuing operations	$	0.19	$	0.02		$	0.39	$	(0.16	)
From discontinued operations	$	—	$	(0.01	)	$	—	$	(0.03	)

Earnings (loss) per ordinary share - diluted:
From continuing operations	$	0.19	$	0.02		$	0.38	$	(0.16	)
From discontinued operations	$	—	$	(0.01	)	$	—	$	(0.03	)

~~Notes to Unaudited Consolidated Financial Statements for the Three Months Ended January 31, 2017~~19

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

	Three months ended January 31,
	2017		2016
Numerator (in millions):
Income (loss) from continuing operations	$	28.3	$	(20.0	)
Loss from discontinued operations	$	—	$	(2.1	)
Denominator:
Weighted-average number of shares of ordinary shares - basic	145,128,652		115,609,756
Effect of dilutive securities:
Restricted stock units	1,139,918		—
Stock options	17,170		—
Weighted-average number of shares of ordinary shares - diluted	146,285,740		115,609,756
Earnings (loss) per ordinary share - basic:
From continuing operations	$	0.19	$	(0.17	)
From discontinued operations	$	—	$	(0.02	)
Earnings (loss) per ordinary share - diluted:
From continuing operations	$	0.19	$	(0.17	)
From discontinued operations	$	—	$	(0.02	)

9. STOCK BASED COMPENSATION

~~8. STOCK~~A ~~BASED~~summary ~~COMPENSATION~~of equity based compensation expense recognized during the three and six months ended April 30, 2017 and 2016 is as follows:

A summary of equity based compensation expense recognized during the three months ended January 31, 2017 and 2016 is as follows:



	Three months ended April 30,		Six months ended April 30,
	2017	2016	2017	2016
	$	$	$	$
Management Equity Incentive Plan (MEIP)	1.9	2.0	4.2	3.0
Restricted Stock Units	4.0	—	5.3	—
Stock Options	1.1	—	1.5	—
Stock Based Compensation Expense	7.0	2.0	11.0	3.0

	Three months ended January 31,
	2017	2016
	$	$
Management Equity Incentive Plan (MEIP)	2.3	1.0
Restricted Stock Units	1.3	—
Stock Options	0.4	—
Stock Based Compensation Expense	4.0	1.0

Management Equity Incentive Plan (MEIP)

Prior to the IPO, the Company was a wholly-owned indirect subsidiary of the Partnership. The Partnership adopted the Management Equity Incentive Plan, or the MEIP, with an effective date of March 11, 2014. The purpose of the MEIP is to provide eligible participants with an opportunity to receive grants of profit interests in the Partnership designated as management units. The award of management units pursuant to this MEIP is intended to compensate employees of the Partnership and its subsidiaries, including the Company. The participants in the MEIP, as a group, are eligible to participate in the gain on the investment earned by JLL and DSM with respect to Patheon once certain specified distribution or return thresholds have been achieved. Upon issuance, MEIP units were subject to certain forfeiture (vesting) provisions which meant that if a holder's employment with Patheon terminated prior to the satisfaction of the applicable provision, the unvested MEIP units would be forfeited and the vested MEIP units could be converted into Class A Units in the Partnership on a cashless basis or by making an additional cash contribution in order to receive additional Class A Units ("Partnership Shares").

The aggregate number, class and tranche of management units that were issued under the MEIP was determined by the JLL/Delta Patheon GP Ltd., the general partner of the Partnership. The Partnership last issued MEIP units on December 9, 2015. As a result of the IPO and the adoption of the Patheon N.V. 2016 Omnibus Incentive Plan (the “Omnibus Plan”) described below, the Partnership will no longer grant awards under the MEIP to our employees.

Notes to Unaudited Consolidated Financial Statements for the Three Months Ended January 31, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

The granted MEIP units consist of Class B, Class C, Class D, and Class E units. From June 24, 2014 to December 9, 2015, the Partnership granted units under five different valuation tranches, with each tranche issued at the most recent quarterly valuation of the Company at the time of the grant.

71.4% of the Class B units have a four year service-based component for vesting ("Service-based Class B units") and the remaining Class B units ("Exit Event Class B units") vest if the holder is employed upon the occurrence of an Exit Event. An Exit Event is defined as the earliest to occur of (i) a change of control and (ii) in connection with or following an initial public offering, the sale or disposition by JLL of equity securities such that, immediately following such sale or disposition, JLL and its affiliates either (A) own less than 20% of the equity securities then issued and outstanding, calculated on a fully diluted basis, or (B) have received, in the aggregate, distributions in respect of such sale or distribution (together with any sale or distribution occurring prior thereto) equal to or in excess of 250% of its aggregate capital contributions made in respect of such equity securities prior to such sale or distribution.

Each of the Class C, D, and E units have a performance and service condition related to vesting. These units vest upon the earlier to occur of (i) JLL receiving distributions in the aggregate equal to return on capital thresholds of 2.0x, 2.5x and 3.0x, respectively, or (ii) an Exit Event, as defined above, does not occur prior to the fifth anniversary of an IPO and the return thresholds in (i) are met based on the average price of the Company's publicly traded shares for any twenty day period following the fifth anniversary of an IPO.

If any employee is terminated for any reason prior the achievement of the above vesting conditions, all unvested units in any class are forfeited.

A summary of the MEIP activity for the ~~three~~six months ended ~~January~~April 3130, 2017 is as follows:

	Class B		Class C		Class D		Class E		Total		Weighted Average Fair Value
Outstanding as of October 31, 2016	59,290		8,470		8,470		8,470		84,700		$	687.27
Forfeited	(288	)	(50	)	(50	)	(50	)	(438	)	$	870.09
Outstanding as of January 31, 2017	59,002		8,420		8,420		8,420		84,262		$	686.32

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)



	Class B		Class C		Class D		Class E		Total		Weighted Average Fair Value
Outstanding as of October 31, 2016	59,290		8,470		8,470		8,470		84,700		$	687.27
Forfeited	(288	)	(50	)	(50	)	(50	)	(438	)	$	870.09
Outstanding as of April 30, 2017	59,002		8,420		8,420		8,420		84,262		$	686.32

Through the IPO, JLL and DSM received an aggregate return on capital of approximately 2.9x their invested capital, based on the value of ordinary shares of Patheon distributed by the Partnership to JLL and DSM at the IPO price and the value of cash and in-kind distributions made by the Partnership prior to the IPO.

In connection with the IPO, a total of 6,106,540 ordinary shares ("MEIP shares") were distributed to the Partnership to be held for the benefit of the MEIP participants until an Exit Event occurs or until MEIP participants are otherwise permitted to transfer such interests in accordance with the terms of the partnership agreement of the Partnership and respective MEIP unit award agreements, at which time MEIP participants will receive their allocable distribution of MEIP shares. These shares represent the value of the MEIP units, in the aggregate, as determined under the MEIP, as a result of the distribution of ordinary shares to the limited partners of the Partnership in connection with the IPO. MEIP shares were issued to the Partnership with respect to Class B, C and D units for the first three valuation tranches as the applicable distribution threshold was achieved. No MEIP shares were allocated to the Partnership with respect to the final two valuation tranches or the Class E units, as the distribution thresholds and the 3.0x capital return threshold, respectively, were not achieved as of the IPO.

Because no additional MEIP awards will be granted and because the ordinary shares were distributed to JLL and DSM prior to an Exit Event, the MEIP awards will not benefit from further appreciation of those shares. As such, the Company issued a total of 3,388,481 Restricted Share Units ("MEIP RSUs") under the Omnibus Plan in order to provide the MEIP participants with the opportunity to participate in the additional appreciation the MEIP awards could have generated if the Partnership had not distributed ordinary shares of the Company to JLL and DSM. MEIP RSUs were issued in relation to all unit classes and valuation tranches.

The MEIP shares issued with respect to the Class B Units remain subject to the same vesting conditions as the Class B Units. As a result, MEIP shares issued in relation to Service-based Class B units are vested to the extent of each original MEIP grant's four year vesting schedule. The MEIP shares issued in relation to Exit Event Class B units are still subject to the defined Exit Event and are not vested. Lastly, the MEIP shares issued in relation to Class C and D units are fully vested due to their respective return thresholds being achieved through the IPO. The fair value of the MEIP shares are $21.00, the price of the shares at the IPO.

18The MEIP RSUs are subject to the same time-based vesting criteria as the original MEIP awards as well as the achievement of performance criteria, which is measured by the Company’s stock price at the earlier to occur of (i) an Exit Event, as defined above, or (ii) the 5-year anniversary of the IPO, at which time all or a percentage of RSUs would settle based upon the attainment of an share price target, with the remaining percentage of RSUs (if any) forfeited. The share price target is $48.47 per share, at which 100% of the RSUs would settle on the applicable vesting date with the share price at or above the target. No RSUs would settle on the vesting date with the share price at or below the IPO price of $21.00, with the settlement amount for a share price between $21.00 and $48.47 calculated on a pro rata basis. The estimated fair value of the MEIP RSUs are $8.41 per unit and was estimated using a Monte Carlo simulation model.

~~Notes~~On toDecember ~~Unaudited~~8, ~~Consolidated~~2016, ~~Financial~~the ~~Statements~~Company ~~for~~entered into a separation agreement with a senior officer ("Separation Agreement"). The agreement, in part, replaced the ~~Three~~senior ~~Months~~officer's ~~Ended~~196,485 ~~January~~MEIP RSUs with an equal amount of MEIP RSUs with similar terms but with a provision that the MEIP RSUs will vest, and the performance criteria be measured, on December 31, 2017 (the "Separation Date"). The estimated fair value of these replacement MEIP RSUs was $13.87 per unit and was estimated using a Monte Carlo simulation model.

The Monte Carlo simulation model incorporated the following weighted average assumptions:



Risk free interest rate	0.9	%
Expected volatility	41.6	%
Estimated years to exit event	2.98

The Company previously expensed the service-based Class B units using the graded vesting attribution method and is continuing to do so after the allocation of MEIP shares. In addition, the allocation of MEIP shares and MEIP RSUs in respect to

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

~~The~~the MEIP ~~RSUs~~units ~~are~~resulted ~~subject~~in toan ~~the~~increase ~~same~~in ~~time-based~~fair ~~vesting~~value ~~criteria~~from as the ~~original~~value ~~MEIP~~attributed ~~awards~~to asthe ~~well~~service-based asClass B units at the ~~achievement~~time of ~~performance~~the ~~criteria~~IPO, which ~~is measured by~~ the Company’s ~~stock~~will ~~price~~expense aton ~~the~~a ~~earlier~~straight toline ~~occur~~basis ofover ~~(i) an Exit Event, as defined above, or (ii)~~ the 5-five year ~~anniversary~~period offollowing the IPO date, at which ~~time~~represents ~~all~~the orrequisite aservice ~~percentage~~period of ~~RSUs would settle based upon~~ the ~~attainment~~MEIP ofRSUs. anIn ~~share price target~~total, ~~with~~ the ~~remaining~~Company ~~percentage~~recorded ~~of RSUs (if any) forfeited~~$1.4 ~~The~~million ~~share~~and ~~price target is~~ $482.479 ~~per~~million ~~share,~~of atcompensation ~~which~~expense ~~100%~~for of the ~~RSUs~~three ~~would~~and ~~settle~~six onmonths ~~the~~ended ~~applicable~~April ~~vesting~~30, ~~date~~2017, ~~with~~respectively, ~~the~~relating ~~share~~to ~~price~~these atunits. orThe ~~above~~Company ~~the~~recorded ~~target~~$2.0 Nomillion ~~RSUs~~and ~~would~~3.0 ~~settle~~million onof ~~the~~compensation ~~vesting~~expense ~~date~~for ~~with~~ the ~~share~~three ~~price~~and atsix ormonths ~~below~~ended ~~the~~April ~~IPO~~30, ~~price~~2016, ~~of $21.00~~respectively, ~~with~~relating ~~the~~to ~~settlement~~these ~~amount for a share price between $21~~units.00 ~~and~~The ~~$48.47~~total ~~calculated~~unrecognized oncompensation aexpense ~~pro~~for ~~rata~~the ~~basis.~~Service-based ~~The~~Class ~~estimated~~B ~~fair~~units ~~value~~is ~~of the MEIP RSUs are~~ $8.415 ~~per~~million, ~~unit~~which ~~and~~is ~~was~~expected ~~estimated~~to ~~using~~be arecognized ~~Monte~~through ~~Carlo~~fiscal ~~simulation model~~2021. ~~The model incorporated the following assumptions:~~

Risk free interest rate	0.9	%
Expected volatility	41.6	%
Estimated years to exit event	3.0

For the Exit Event Class B units, the allocation of MEIP shares and MEIP RSUs resulted in an increased fair value which will serve as the basis for recognizing compensation expense for these units. The fair value of the MEIP RSUs will be expensed on a straight line basis over five years, starting with the IPO date. The Company recognized $0.2 million and $0.4 million of compensation expense for the three and six months ended April 30, 2017, respectively. The fair value of the MEIP shares issued in respect of the Exit Event Class B units will remain unrecognized until an Exit Event occurs. The total unrecognized compensation expense for the MEIP shares and MEIP RSUs issued in respect of the Exit Event Class B units is $31.9 million, of which $3.4 million is expected to be recognized through fiscal 2021 and the remaining amount expensed on the occurrence of an Exit Event.

~~The~~In ~~Company previously expensed~~ the ~~service-based~~third ~~Class~~quarter Bof ~~units~~fiscal ~~using~~2016, the ~~graded~~Company ~~vesting~~recorded ~~attribution~~two ~~method~~one ~~and~~time iscompensation ~~continuing~~expenses toin dorelation soto ~~after~~ the allocation of MEIP shares. ~~In addition, the allocation of MEIP shares~~ and MEIP RSUs in respect toof the ~~MEIP~~C, ~~units~~D ~~resulted~~and inE anunits. ~~increase~~A in$9.0 ~~fair~~million ~~value~~expense ~~from~~was ~~the~~recorded ~~value attributed~~ to ~~the~~account ~~service-based~~for ~~Class B units at~~ the ~~time~~fair value of ~~the~~MEIP ~~IPO,~~units ~~which~~that ~~the~~fully ~~Company~~vested ~~will~~as ~~expense on~~ a ~~straight~~result ~~line~~of ~~basis~~their ~~over~~respective ~~the~~return ~~five~~thresholds ~~year~~being ~~period~~met ~~following~~through the IPO ~~date, which represents the requisite service period of the MEIP RSUs~~. ~~In total~~Additionally, ~~the~~a ~~Company recorded~~ $1.5 million ~~and~~expense ~~$1.0~~was ~~million~~recorded ofto ~~compensation~~account ~~expense~~ for the ~~three~~unvested ~~months~~MEIP ~~ended~~units ~~January~~that ~~31,~~were ~~2017~~allocated ~~and~~MEIP ~~2016~~RSUs, ~~respectively,~~in ~~relating~~which torequisite ~~these~~service ~~units.~~requirements ~~The~~had ~~total~~already ~~unrecognized~~been ~~compensation~~partially ~~expense~~met ~~for~~at the ~~Service-based~~time ~~Class~~of Bthe ~~units~~IPO. isThe Company reversed $100.51 million, ~~which~~of isthese ~~expected~~expenses toin bethe ~~recognized~~second ~~through~~quarter of fiscal ~~2021~~2017 due to the Separation Agreement.

~~For~~In ~~the Exit Event Class B units~~addition, the ~~allocation~~Company ofrecognized ~~MEIP~~$0.4 ~~shares~~million and ~~MEIP~~$1.0 ~~RSUs~~million ~~resulted~~of incompensation anexpense ~~increased~~for ~~fair~~the ~~value~~three ~~which~~and ~~will~~six ~~serve~~months asended ~~the~~April ~~basis~~30, ~~for~~2017, ~~recognizing~~respectively, ~~compensation~~to ~~expense~~account for ~~these~~the ~~units.~~remaining ~~The~~ fair value of the C, D and E MEIP ~~RSUs~~units ~~will~~and bethe ~~expensed~~incremental onfair avalue ~~straight~~that ~~line~~resulted ~~basis~~from ~~over~~the ~~five~~conversion ~~years,~~to ~~starting~~MEIP ~~with~~shares ~~the~~and ~~IPO~~MEIP ~~date~~RSUs. ~~The~~These ~~Company~~amounts ~~recognized~~are inclusive of $0.2 million ofreversed ~~compensation~~relating ~~expense~~to ~~for~~ the ~~three~~senior ~~months~~officer's ~~ended~~awards ~~January~~that ~~31,~~were ~~2017.~~replaced ~~The~~in ~~fair value of~~ the ~~MEIP~~Separation ~~shares~~Agreement. ~~issued~~The incompensation ~~respect~~expense ofwill ~~the~~be ~~Exit~~recorded ~~Event~~on ~~Class~~a Bstraight ~~units~~line ~~will~~basis ~~remain~~over ~~unrecognized~~five ~~until an Exit Event occurs~~years. The total unrecognized compensation expense for the ~~MEIP~~C, ~~shares~~D, and ~~MEIP~~E ~~RSUs issued in respect of the Exit Event Class B~~ units is $328.39 million, of which ~~$3.8~~will ~~million is expected to~~ be recognized through fiscal 2021 ~~and the remaining amount expensed on the occurrence of an Exit Event~~.

InAs ~~the~~a ~~third~~result ~~quarter~~ of ~~fiscal~~the ~~2016~~Separation Agreement, the Company recorded ~~two~~$1.0 ~~one~~million ~~time~~of ~~compensation~~additional ~~expenses~~expense in ~~relation to~~ the ~~allocation~~second ofquarter ~~MEIP shares and MEIP RSUs in respect~~ of ~~the~~fiscal C2017, Dnot ~~and~~including Ea ~~units.~~total Aof $9.0.3 million in expense ~~was~~reversals, ~~recorded to account for the fair value of MEIP units that fully vested~~ as aoutlined ~~result~~above. ofThe ~~their~~total ~~respective~~unrecognized ~~return~~compensation ~~thresholds~~expense ~~being~~for ~~met through~~ the ~~IPO.~~replacement ~~Additionally,~~awards ais $1.57 million ~~expense was recorded to account for the unvested MEIP units that were allocated MEIP RSUs~~, in which ~~requisite~~will ~~service~~be ~~requirements~~recognized ~~had~~through ~~already been partially met at~~ the ~~time~~Separation ~~of the IPO~~Date.

In addition, the Company recognized $0.6 million of compensation expense for the three months ended January 31, 2017 to account for the remaining fair value of the C, D and E MEIP units and the incremental fair value that resulted from the conversion to MEIP shares and MEIP RSUs. The compensation expense will be recorded on a straight line basis over five years. The total unrecognized compensation expense for the C, D, and E units is $10.2 million, which will be recognized through fiscal 2021.

Patheon N.V. 2016 Omnibus Incentive Plan

In July 2016, the Company adopted the Omnibus Plan in order to align the long-term financial interests of selected participants with those of our shareholders, strengthen the commitment of such persons to the Company and our affiliates, and attract and retain competent and dedicated persons whose efforts will result in our long-term growth and profitability. The Omnibus Plan provides for the issuance of options, share appreciation rights, restricted shares, restricted shares units, share bonuses, other share-based awards and cash awards to selected officers, employers, non-employee directors and consultants.

Restricted Stock Units

AtAs ~~the time~~ of ~~the~~April ~~IPO~~30, 2017, the Company ~~granted~~has a total of (i) ~~460~~1,~~801~~366,383 restricted stock units outstanding to certain members of management and (ii) 5941,~~525~~635 restricted stock units to non-employee directors (collectively, the "Standard RSUs"), excluding the MEIP RSUs outlined above. The Standard RSUs granted to management vest in equal installments over three years and ~~the~~ Standard RSUs granted to non-employee directors ~~vested~~vest onover ~~November~~one 1,year ~~2016~~or at the conclusion of the director's service to the Company. The Standard RSUs are not subject to performance based criteria and have a weighted average fair value of $2124.~~00, the stock price at the date of grant~~79.

19In the six months ended April 30, 2017, the Company issued 70,700 ordinary shares for vested restricted stock units. To satisfy certain tax withholding requirements, the Company purchased 8,528 of these shares at a weighted average vesting date fair value of $27.15. These shares are currently being held at cost as treasury shares on the balance sheet.

~~Notes~~During tothe ~~Unaudited~~three ~~Consolidated~~and ~~Financial~~six ~~Statements~~months ~~for~~ended April 30, 2017, $3.0 million and $4.3 million of stock compensation expense was recognized in relation to the ~~Three~~Standard ~~Months~~RSUs. ~~Ended~~As ~~January~~of 31April 30, 2017, unrecognized stock compensation expense related to Standard RSUs was $29.5 million, which will be recognized through fiscal 2020.

A summary of Standard RSUs activity for the six months ended April 30, 2017 is as follows:

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

On November 1, 2016, the Company granted 6,000 additional Standard RSUs to members of management, which vest in equal installments over three years. These Standard RSUs have a fair value of $25.61, the stock price at the date of the grant.



	Restricted Share Units		Weighted Average Grant Date Fair Value
			$
Outstanding as of October 31, 2016	450,184		21.00
Granted	1,028,534		26.46
Vested	(70,700	)	21.00
Outstanding as of April 30, 2017	1,408,018		24.79

InAs ~~the first quarter~~ of ~~fiscal~~April 30, 2017, ~~the~~no ~~Company~~Standard ~~issued~~RSUs ~~59,525~~have ~~ordinary~~been ~~shares for the vested restricted stock units granted to non-employee directors~~forfeited. To satisfy certain tax withholding requirements, the Company purchased 4,915 of these shares at the vesting date fair value of $25.61. These shares are currently being held at cost as treasury shares on the balance sheet.

During the three months ended January 31, 2017, $1.3 million of stock compensation expense was recognized in relation to the Standard RSUs. As of January 31, 2017, unrecognized stock compensation expense related to Standard RSUs was $5.5 million, which will be recognized through fiscal 2019.

A summary of Standard RSUs activity for the three months ended January 31, 2017 is as follows:

	Restricted Share Units		Weighted Average Grant Date Fair Value
			$
Outstanding as of October 31, 2016	450,184		21.00
Granted	6,000		25.61
Vested	(59,525	)	21.00
Outstanding as of January 31, 2017	396,659		21.07

As of January 31, 2017, no Standard RSUs have been forfeited.

Stock Options

AtAs ~~the time~~ of ~~the~~April ~~IPO~~30, 2017, the Company has granted 1,~~145~~747,~~338~~750 stock options to certain members of management. The stock options were granted with ana weighted average exercise price of $2123.0028 per share, with ~~431~~1,~~052~~033,465 of the granted stock options ("Regular Options") vesting equally over three years. The remaining stock options ("EBITDA Options") were granted to a senior officer and vest based on performance based criteria, using Credit Agreement Adjusted EBITDA as the performance metric. Credit Agreement Adjusted EBITDA is defined as the Company's Adjusted EBITDA, as defined in Note 1011, plus pro forma cost savings, synergies and pre-acquisition results.

The estimated weighted average fair value of stock options ~~granted at the time of the IPO~~ is $89.2908 per option and was estimated using a Black-Scholes valuation model, using the following weighted average assumptions:

Risk free interest rate	1.36	%
Expected volatility	3938.41	%
Expected life of options (in years)	6.0
Dividend yield	—	%

OnDuring ~~November~~the 1three and six months ended April 30, ~~2016~~2017, ~~the~~$0.8 ~~Company~~million ~~granted~~and ~~9,000~~$1.2 ~~additional~~million ~~Regular~~of ~~Options~~stock compensation expense was recognized in relation to ~~members~~stock options. In the second quarter of ~~management~~fiscal 2017, $0.3 ~~The~~million ~~options~~of ~~were~~stock ~~granted~~compensation ~~with~~expense anwas ~~exercise~~recognized ~~price~~for the EBITDA Options, due to a portion of ~~$25.61~~the ~~and~~performance ~~vest~~based ~~equally~~criteria ~~over~~deemed ~~three~~probable ~~years.~~as ~~The~~of ~~estimated~~April 30, ~~fair~~2017. ~~value~~As of ~~these~~April 30, ~~options~~2017, istotal unrecognized compensation expense related to unvested Regular Options was $98.691 ~~and~~million, ~~was~~which ~~estimated~~is ~~using~~expected ato ~~Black~~be ~~Scholes~~recognized ~~valuation~~through ~~model~~fiscal 2020, ~~using~~and ~~the~~total ~~same~~unrecognized ~~assumptions~~compensation asexpense ~~used~~ for the ~~options~~unvested ~~awarded~~EBITDA asOptions ~~part~~was of$5.6 million, which will be recognized over the ~~IPO~~requisite service period when the performance based criteria is deemed probable to occur.

~~During~~A ~~the~~summary ~~three months ended January 31, 2017, $0.4 million~~ of stock ~~compensation~~option ~~expense~~activity ~~was~~for ~~recognized in relation to stock options. No expense was recognized in relation to~~ the ~~EBITDA~~six ~~Options,~~months asended ~~the~~April ~~performance based criteria is deemed not probable as of January 31~~30, 2017. ~~As of January 31, 2017, total unrecognized compensation expense related to unvested Regular Options was $1.6 million, which~~ is ~~expected~~as to be recognized through fiscal 2019, and total unrecognized compensation expense for the unvested EBITDA Options was $5.9 million, which will be recognized over the requisite service period when the performance based criteria is deemed probable to occur.follows:

A summary of stock option activity for the three months ended January 31, 2017 is as follows:



	Stock Options	Weighted Average Fair Value
		$
Outstanding as of October 31, 2016	1,021,584	8.29
Granted	726,166	10.18
Outstanding as of April 30, 2017	1,747,750	9.08

20As of April 30, 2017, no stock options have been forfeited or exercised.

~~Notes~~10. FINANCIAL toINSTRUMENTS, ~~Unaudited~~FAIR ~~Consolidated~~VALUE ~~Financial~~AND ~~Statements~~RISK ~~for the Three Months Ended January 31, 2017~~MANAGEMENT

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

	Stock Options	Weighted Average Fair Value
		$
Outstanding as of October 31, 2016	1,021,584	8.29
Granted	9,000	9.69
Outstanding as of January 31, 2017	1,030,584	8.30

As of January 31, 2017, no stock options have been forfeited or exercised.

9. FINANCIAL INSTRUMENTS, FAIR VALUE AND RISK MANAGEMENT

The Company has determined the estimated fair values of its financial instruments based on appropriate valuation methodologies; however, considerable judgment is required to develop these estimates. The fair values of the Company's financial instruments are not materially different from their carrying values.

Fair value measurements

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

The Company classifies and discloses its fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: (a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); (b) inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) (Level 2); and (c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

The fair value is principally applied to financial assets and liabilities such as derivative instruments consisting of foreign exchange forward contracts, available-for-sale securities relating to Republic of Austria bonds, held-for-trading securities relating to the Company's U.S. deferred compensation plan, and a liability relating to an earnout payment on future Biologics operating results. The following table provides a summary of the financial assets and liabilities that are measured at fair value as of ~~January~~April 3130, 2017 and October 31, 2016:

	Fair value measurement at January 31, 2017				Fair value measurement at October 31, 2016
	Fair value measurement at April 30, 2017				Fair value measurement at October 31, 2016
Assets measured at fair value	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
	$	$	$	$	$	$	$	$
Foreign exchange forward contracts	—	1.0	—	1.0	—	—	—	—
Available-for-sale securities	1.4	—	—	1.4	1.4	—	—	1.4
Held-for-trading securities	—	1.45	—	1.45	—	1.4	—	1.4
Total assets	1.4	21.45	—	32.89	1.4	1.4	—	2.8

	Fair value measurement at January 31, 2017				Fair value measurement at October 31, 2016
	Fair value measurement at April 30, 2017				Fair value measurement at October 31, 2016
Liabilities measured at fair value	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
	$	$	$	$	$	$	$	$
Foreign exchange forward contracts	—	—1.8	—	—1.8	—	2.7	—	2.7
Earnout liability	—	—	37.49	37.49	—	—	33.8	33.8
Total liabilities	—	—1.8	37.49	3739.47	—	2.7	33.8	36.5

Level 1 - Based on quoted market prices in active markets.

Level 2 - Inputs, other than quoted prices in active markets, that are observable, either directly or indirectly.

Level 3 - Unobservable inputs that are not corroborated by market data.

The following table presents the fair value of the Company's ~~derivative~~ financial instruments and their classifications on the consolidated balance sheets as of ~~January~~April 3130, 2017 and October 31, 2016:



	Assets as of April 30, 2017		Assets as of October 31, 2016
	Balance sheet location	Fair value	Balance sheet location	Fair value
		$		$
Available-for-sale securities	Investments	1.4	Investments	1.4
Held-for-trade securities	Investments	1.5	Investments	1.4
Total		2.9		2.8

Notes to Unaudited Consolidated Financial Statements for the Three Months Ended January 31, 2017



	Liabilities as of April 30, 2017		Liabilities as of October 31, 2016
	Balance sheet location	Fair value	Balance sheet location	Fair value
		$		$
Foreign exchange forward contracts	Accounts payable and accrued liabilities	1.8	Accounts payable and accrued liabilities	2.7
Earnout liability	Other long-term liabilities	37.9	Other long-term liabilities	33.8
Total		39.7		36.5

The Company has the option to net settle its derivatives with the counter party under the terms of its contracts and as such any unrealized positions are recorded net. As of April 30, 2017, the Company had gross unrealized losses of $2.0 million and gross unrealized gains of $0.2 million under its derivative contracts. As of October 31, 2016, the Company had gross unrealized losses of $2.7 million and gross unrealized gains of less than $0.1 million under its derivative contracts.

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

	Assets as of January 31, 2017		Assets as of October 31, 2016
	Balance sheet location	Fair value	Balance sheet location	Fair value
		$		$
Foreign exchange forward contracts	Prepaid expenses and other	1.0	Prepaid expenses and other	—
Available-for-sale securities	Investments	1.4	Investments	1.4
Held-for-trade securities	Investments	1.4	Investments	1.4
Total		3.8		2.8

	Liabilities as of January 31, 2017		Liabilities as of October 31, 2016
	Balance sheet location	Fair value	Balance sheet location	Fair value
		$		$
Foreign exchange forward contracts	Accounts payable and accrued liabilities	—	Accounts payable and accrued liabilities	2.7
Earnout liability	Other long-term liabilities	37.4	Other long-term liabilities	33.8
Total		37.4		36.5

The Company has the option to net settle its derivatives with the counter party under the terms of its contracts and as such any unrealized positions are recorded net. As of January 31, 2017, the Company had gross unrealized gains of $1.5 million and gross unrealized losses of $0.5 million under its derivative contracts. As of October 31, 2016, the Company had gross unrealized losses of $2.7 million and gross unrealized gains of less than $0.1 million under its derivative contracts.

Long-term obligations

As of ~~January~~April 3130, 2017, the fair values and carrying values of the Company’s long-term debt, including the current portion of long-term debt, are categorized in the table below:

	Fair Value
	Level 1	Level 2	Level 3	Total	Carrying Value
	$	$	$	$	$
Long-term debt, including current portion	—	2,~~154~~179.23	—	2,~~154~~179.23	2,~~106~~134.20

As of October 31, 2016, the fair values and carrying values of the Company’s long-term debt, including the current portion of long-term debt, are categorized in the table below:



	Fair Value
	Level 1	Level 2	Level 3	Total	Carrying Value
	$	$	$	$	$
Long-term debt, including current portion	—	2,156.8	—	2,156.8	2,119.0

The fair value of the Company's long-term debt, including the current portion of long-term debt, is based on the quoted market prices for the same issues or on the current rates offered for debt of similar remaining maturities.

Foreign exchange forward contracts and other arrangements

The Company utilizes financial instruments to manage the risk associated with fluctuations in foreign exchange and interest rates. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions.

As of ~~January~~April 3130, 2017, the Company's Canadian operations had entered into foreign exchange forward contracts to sell a net aggregate amount of $7264.70 million ~~(USD)~~U.S. dollars. These contracts hedge the Canadian operations expected exposure to U.S. dollar denominated receivables and mature at the latest on ~~December~~March 2215, ~~2017~~2018, at an average exchange rate of $1.~~3180~~3254 Canadian dollars per U.S. dollar. The mark-to-market value of these financial instruments as of ~~January~~April 3130, 2017 was a net unrealized ~~gain~~loss of $1.08 million, which has been recorded in accumulated other comprehensive income in shareholders' deficit, net of associated income tax.

Notes to Unaudited Consolidated Financial Statements for the Three Months Ended January 31, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

The Company acquired a portion of its Biologics business from DSM ("the DPP acquisition") in March 2014. In connection with the DPP acquisition, DSM was entitled to receive certain additional future contingent payments based on the performance of the acquired biologics business (the "earnout"). Under the terms of the original contribution agreement, the earnout only related to the DSM biologics business acquired in March 2014 and the earnout liability was payable by the Partnership, the parent of the Company before the Company's IPO on July 21, 2016. The value of the earnout liability as of January 29, 2016 was $36.0 million.

On January 29, 2016, the Company, the Partnership, JLL, and DSM entered into an agreement (the "Earnout Agreement") whereby the Partnership’s earnout liability was legally assigned to the Company. The assignment of the liability from the Partnership to the Company was deemed a capital transaction with the Partnership of $36.0 million.

Concurrently, the calculation of the earnout consideration was revised to include the future earnings of the Company’s entire biologics business ("Biologics Adjusted EBITDA"), which includes biologics business acquired in connection with a September 2014 acquisition of Gallus Pharmaceuticals. As a result of executing this Earnout Agreement, the Company will pay additional consideration to DSM based on the achievement of certain Biologics Adjusted EBITDA targets, as defined in the Earnout Agreement, of the Company’s biologics business at the conclusion of the 2020 fiscal year. If the Company sells or disposes of the biologics business prior to the end of the 2020 fiscal year, Biologics Adjusted EBITDA will be calculated by applying a 10% compounded annual growth rate through the remaining period ending October 31, 2020 to the Biologics Adjusted EBITDA for the twelve-month period ended on the last day of the month immediately preceding the date of such sale or disposition. The Company's maximum and minimum payments to DSM under the terms of the Earnout Agreement is $60.0 million and $25.0 million, respectively. Using the revised earnout definition, the value of the earnout liability as of January 31, 2016 was $31.1 million and resulted in the Company recognizing income of $4.9 million in the first quarter of fiscal 2016.

The Company estimated the value of the earnout by valuing the three payout tranches. The first tranche of the $25.0 million minimum earnout payment, which is not contingent to Biologics Adjusted EBITDA performance, was estimated by discounting the $25.0 million using cost of debt of the Company. The values of the remaining two tranches, (i) an additional $25.0 million earnout payment which will be realized gradually as Biologics Adjusted EBITDA reaches $98.0 million, and (ii) an additional $10.0 million earnout payment which will be achieved gradually as Biologics Adjusted EBITDA approaches $110.0 million, were estimated using an option pricing framework, where the Company used a modified Black-Scholes model.

The Company adjusted the earnout value to its estimated fair value as of January 31, 2017 to $37.4 million. The Company recorded $3.6 million of expense and $4.9 million of income in the three months ended January 31, 2017 and 2016, respectively, relating to marking the liability to its estimated fair value. The January 31, 2017 earnout valuation applies an asset volatility of 30% and an asset beta of 0.9. A 1% change in asset volatility would have an impact on the value of +/- $0.2 million while a 0.1 change in beta would have an impact on the value of +/- $0.4 million. Assumptions are Level 3 in nature.25

~~The~~Notes ~~earnout~~to ~~liability~~Unaudited ~~activity~~Consolidated isFinancial ~~summarized~~Statements ~~as follows~~ for the ~~three~~Three ~~months~~and ~~ended~~Six ~~January~~Months 31Ended April 30, 2017:

	Total
	$
Balance at October 31, 2016	33.8
Change in fair value	3.6
Balance at January 31, 2017	37.4

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

the $25.0 million using cost of debt of the Company. The values of the remaining two tranches, (i) an additional $25.0 million earnout payment which will be realized gradually as Biologics Adjusted EBITDA reaches $98.0 million, and (ii) an additional $10.0 million earnout payment which will be achieved gradually as Biologics Adjusted EBITDA approaches $110.0 million, were estimated using an option pricing framework, where the Company used a modified Black-Scholes model.

The Company adjusted the earnout value to its estimated fair value as of April 30, 2017 to $37.9 million. The Company recorded $0.5 million and $4.1 million of expense in the three and six months ended April 30, 2017, respectively, relating to marking the liability to its estimated fair value. The Company recorded $1.2 million of expense and $3.7 million of income in the three and six months ended April 30, 2016, respectively, relating to marking the liability to its estimated fair value. The April 30, 2017 earnout valuation applies an asset volatility of 30% and an asset beta of 0.9. A 1% change in asset volatility would have an impact on the value of +/- $0.3 million while a 0.1 change in beta would have an impact on the value of +/- $0.3 million. Assumptions are Level 3 in nature.

The earnout liability activity is summarized as follows for the six months ended April 30, 2017:



	Total
	$
Balance at October 31, 2016	33.8
Change in fair value	4.1
Balance at April 30, 2017	37.9

The change in fair value relating to the earnout is recorded in other operating income on the consolidated statements of operations.

Risks arising from financial instruments and risk management

The Company's activities expose it to a variety of financial risks: market risk (including foreign exchange and interest rate), credit risk and liquidity risk. The Company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company's financial performance. The Company uses derivative financial instruments to hedge certain risk exposures. The Company does not purchase any derivative financial instruments for speculative purposes.

Financial risk management is the responsibility of the Company's corporate treasury. The corporate treasury works with the Company's operational personnel to identify, evaluate and, where appropriate, hedge financial risks. The Company's corporate treasury also monitors material risks and discusses them with the Audit Committee of the Board of Directors.

Notes to Unaudited Consolidated Financial Statements for the Three Months Ended January 31, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

Foreign exchange risk

As of ~~January~~April 3130, 2017, the Company operated in Canada, the United States, Italy, France, the United Kingdom, The Netherlands, Australia, Germany, Austria, and Japan. Foreign exchange risk arises because the value of the local currency receivable or payable for transactions denominated in foreign currencies may vary due to changes in exchange rates ("transaction exposures") and because the non-U.S. dollar denominated financial statements of the Company may vary on consolidation into the reporting currency of U.S. dollars ("translation exposures").

The Company's most significant transaction exposure is from its Canadian operations. Approximately 90% of the cash receipts and 15% of the cash outflows relating to Canadian operations are transacted in U.S. dollars. As a result, the Company may experience transaction exposures because of volatility in the exchange rate between the Canadian and U.S. dollar. Based on the Company's current U.S. denominated net inflows, as of ~~January~~April 3130, 2017, fluctuations of +/- 10% would, everything else being equal, have an effect on ~~quarterly~~year ~~(loss)~~to date income before income taxes of approximately +/- $35.08 million, prior to hedging activities.

The objective of the Company's foreign exchange risk management activities is to minimize transaction exposures and the resulting volatility of the Company's earnings. The Company manages this risk by entering into foreign exchange contracts. As of ~~January~~April 3130, 2017, the Company has entered into foreign exchange contracts to cover approximately 7168% of its Canadian-U.S. dollar cash flow exposures for the next twelve months.

The amount of the Company's Euro denominated debt designated as a hedge against its net investment in its subsidiaries in Austria, The Netherlands, Germany, France and Italy, is €~~464~~463.31 million as of ~~January~~April 3130, 2017. This hedge was originally designated in March 2014 as a part of the Company's acquisition of manufacturing sites from DSM and is re-designated on a quarterly basis. As of ~~January~~April 3130, 2017, the balance of the net investment hedge was $7974.37 million and is included in accumulated ~~other comprehensive income (loss) in members' deficit. Any unrealized exchange losses are included in the consolidated statement of operations due to ineffectiveness.~~

~~The following table summarizes the net investment hedge foreign exchange activity for the three months ended January 31, 2017 and 2016 since net investment hedge inception:~~26

	Three months ended January 31,
	2017	2016
	$	$
Foreign exchange gain for the period from net investment hedge	8.6	8.0
Release of ineffective portion of net investment hedge to consolidated statement of operations	—	(1.1	)
Net gain to other comprehensive income (loss) for the period related to net investment hedge	8.6	6.9

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

~~Translation~~(Dollar ~~gains~~information ~~and~~in ~~losses~~tabular ~~related~~form tois ~~certain~~expressed ~~foreign~~in ~~currency~~millions ~~denominated intercompany loans are included as part~~ of ~~the~~U.S. ~~net investment in certain foreign subsidiaries~~dollars, ~~and~~except ~~are~~share ~~included in accumulated other comprehensive income (loss~~data) ~~in shareholders' deficit.~~

~~The~~other ~~following~~comprehensive ~~table~~income ~~summarizes~~in ~~the~~shareholders' ~~foreign~~deficit. ~~currency~~Any ~~activity~~unrealized onexchange ~~the~~losses ~~intercompany loans that~~ are included ~~as part of the net investment~~ in ~~certain foreign subsidiaries for~~ the ~~three~~consolidated ~~months~~statement ~~ended~~of ~~January~~operations ~~31,~~due ~~2017~~to ~~and 2016 since net investment hedge inception:~~ineffectiveness.

	Three months ended January 31,
	2017	2016
	$	$
Foreign exchange loss for the period from long-term intercompany loan revaluation	—	(0.8	)

The following table summarizes the net investment hedge foreign exchange activity for the three and six months ended April 30, 2017 and 2016 since net investment hedge inception:



	Three months ended April 30,				Six months ended April 30,
	2017		2016		2017	2016
	$		$		$	$
Foreign exchange (loss) gain for the period from net investment hedge	(4.6	)	(29.0	)	4.0	(21.0	)
Release of ineffective portion of net investment hedge to consolidated statement of operations	—		3.3		—	2.2
Net (loss) gain to other comprehensive income for the period related to net investment hedge	(4.6	)	(25.7	)	4.0	(18.8	)

Translation gains and losses related to certain foreign currency denominated intercompany loans are included as part of the net investment in certain foreign subsidiaries, and are included in accumulated other comprehensive income in shareholders' deficit.

The following table summarizes the foreign currency activity on the intercompany loans that are included as part of the net investment in certain foreign subsidiaries for the three and six months ended April 30, 2017 and 2016 since net investment hedge inception:



	Three months ended April 30,		Six months ended April 30,
	2017	2016	2017	2016
	$	$	$	$
Foreign exchange gain for the period from long-term intercompany loan revaluation	—	3.8	—	3.0

Credit risk

Credit risk arises from cash and cash equivalents held with banks and financial institutions, derivative financial instruments (foreign exchange contracts with positive fair values), and credit exposure to customers, including outstanding accounts receivable. The maximum exposure to credit risk is equal to the carrying value of the financial assets.

24The objective of managing counterparty credit risk is to prevent losses in financial assets. The Company regularly assesses the credit quality of the counterparties, taking into account their financial position, past experience and other factors. Management also regularly monitors the utilization of credit limits. In cases where the credit quality of a customer does not meet the Company's requirements, a cash deposit is received before any services are provided. As of April 30, 2017 and October 31, 2016, the Company held deposits of $4.1 million and $4.3 million, respectively.

Notes to Unaudited Consolidated Financial Statements for the Three Months Ended January 31, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

The objective of managing counterparty credit risk is to prevent losses in financial assets. The Company regularly assesses the credit quality of the counterparties, taking into account their financial position, past experience and other factors. Management also regularly monitors the utilization of credit limits. In cases where the credit quality of a customer does not meet the Company's requirements, a cash deposit is received before any services are provided. As of January 31, 2017 and October 31, 2016, the Company held deposits of $4.9 million and $4.3 million, respectively.

Liquidity risk

Liquidity risk arises when financial obligations exceed financial assets available at a particular point in time. The Company's objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements at all times. The Company mitigates liquidity risk by maintaining cash and cash equivalents on-hand and through the availability of funding from credit facilities. As of ~~January~~April 3130, 2017, the Company was holding cash and cash equivalents of $8992.07 million and had undrawn lines of credit available to it of $~~188~~209.93 million.

1011. SEGMENT INFORMATION

The Company’s four operating segments are: North America DPS, Europe DPS, PDS and DSS. The North America DPS and Europe DPS operating segments meet the aggregation criteria to be presented as one DPS reportable segment. As a result, the Company has three reportable segments: DPS, PDS and DSS. Costs relating to Corporate operations are classified as Other.

The DPS segment includes commercial manufacturing outsourcing services, the PDS segment includes pharmaceutical development services, and the DSS segment includes active pharmaceutical ingredients and pharmaceutical intermediates. Corporate expenses primarily relate to general, administrative and sales and marketing expenses related to the corporate organization. These expenses are centrally directed and controlled and are not included in internal measures of segment operating performance. The CODM does not evaluate its operating segments using discrete asset information.

	Three months ended January 31, 2017
	DPS	PDS	DSS	Other		Total
	$	$	$	$		$
Revenues	275.2	52.3	129.9	—		457.4
Adjusted EBITDA	61.4	16.3	32.0	(27.2	)	82.5
Depreciation and amortization	15.3	1.8	9.7	0.8		27.6
Capital expenditures	36.9	1.4	17.9	2.8		59.0

	Three months ended January 31, 2016
	DPS	PDS	DSS	Other		Total
	$	$	$	$		$
Revenues	258.5	48.5	98.9	—		405.9
Adjusted EBITDA	55.1	13.8	14.8	(24.7	)	59.0
Depreciation and amortization	14.8	1.2	9.9	0.5		26.4
Capital expenditures	45.0	9.7	7.3	2.2		64.2

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

organization. These expenses are centrally directed and controlled and are not included in internal measures of segment operating performance. The CODM does not evaluate its operating segments using discrete asset information.



	Three months ended April 30, 2017
	DPS	PDS	DSS	Other		Intersegment Eliminations		Total
	$	$	$	$		$		$
Revenues	297.2	57.8	129.2	—		(0.8	)	483.4
Adjusted EBITDA	77.4	18.4	26.1	(27.5	)	(0.2	)	94.2
Depreciation and amortization	15.4	1.9	16.1	0.9				34.3
Capital expenditures	19.5	1.7	11.6	7.4				40.2



	Three months ended April 30, 2016
	DPS	PDS	DSS	Other		Intersegment Eliminations		Total
	$	$	$	$		$		$
Revenues	287.4	53.4	127.9	—		(0.1	)	468.6
Adjusted EBITDA	72.7	16.7	30.8	(22.2	)			98.0
Depreciation and amortization	14.9	1.3	10.2	0.6				27.0
Capital expenditures	11.7	5.9	9.0	4.3				30.9



	Six months ended April 30, 2017
	DPS	PDS	DSS	Other		Intersegment Eliminations		Total
	$	$	$	$		$		$
Revenues	572.4	110.1	259.1	—		(0.8	)	940.8
Adjusted EBITDA	138.8	34.7	58.1	(54.7	)	(0.2	)	176.7
Depreciation and amortization	30.7	3.7	25.8	1.7				61.9
Capital expenditures	56.4	3.1	29.5	10.2				99.2



	Six months ended April 30, 2016
	DPS	PDS	DSS	Other		Intersegment Eliminations		Total
	$	$	$	$		$		$
Revenues	545.9	101.9	226.8	—		(0.1	)	874.5
Adjusted EBITDA	127.8	30.5	45.6	(46.9	)			157.0
Depreciation and amortization	29.7	2.5	20.1	1.2				53.5
Capital expenditures	56.7	15.6	16.3	6.5				95.1

The Company evaluates the performance of its segments based on segment Adjusted EBITDA. The Company's Adjusted EBITDA is income (loss) from continuing operations before repositioning expenses (including certain product returns and

inventory write-offs recorded in gross profit), interest expense, foreign exchange losses reclassified from other comprehensive income (loss), refinancing expenses, acquisition and integration costs (including certain product returns and inventory write-offs recorded in gross profit), gains and losses on sale of capital assets, Biologics earnout income and expense, income taxes, impairment charges, remediation costs, depreciation and amortization, stock-based compensation expense, consulting costs related to our operational initiatives, purchase accounting adjustments, acquisition-related litigation expenses and other income and expenses. Adjusted EBITDA is one of several metrics used to measure segment operating performance and is also used to determine executive compensation. "Adjusted EBITDA margin" is Adjusted EBITDA as a percentage of revenues. The Company's presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies and is not equivalent to "Consolidated EBITDA" as defined in the Credit Agreement (as discussed in Note 5).

Below is a reconciliation of Adjusted EBITDA to its most comparable U.S. GAAP measure.

2528

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended ~~January~~April 3130, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

	Three months ended January 31,
	Three months ended April 30,				Six months ended April 30,
	2017		2016		2017		2016
	$		$		$		$
Total Adjusted EBITDA	8294.52		5998.0		176.7		157.0
Depreciation and amortization	(2734.63	)	(2627.40	)	(61.9	)	(53.5	)
Repositioning expenses (1)	(12.32	)	(1.23	)	(3.5	)	(2.5	)
Acquisition and integration costs	(38.51	)	(27.6	)	(11.6	)	(10.2	)
Interest expense, net	(2830.28	)	(4342.86	)	(59.0	)	(86.4	)
Benefit from income taxes	21.3		0.7
Benefit from (provision for) income taxes	1.5		(0.7	)	22.8		—
Operational initiatives related consulting costs	(1.1	)	(1.4	)
Refinancing expenses	(6.3	)	—		(6.3	)	—
IPO costs	—		(0.4	)
Operational initiatives related consulting costs	(1.4	)	(1.9	)	(2.5	)	(3.3	)
Acquisition related litigation expenses	(2.3	)	(1.0	)
IPO costs	—		(0.4	)	—		(0.8	)
Stock based compensation expense	(4.0	)	(1.0	)
Acquisition related litigation expenses	(3.7	)	(0.9	)	(6.0	)	(1.9	)
FDA remediation costs	—		(8.4	)
Stock based compensation expense	(7.0	)	(2.0	)	(11.0	)	(3.0	)
Environmental remediation costs	(3.7	)	—
FDA remediation costs	—		(10.1	)	—		(18.5	)
Other	(3.8	)	6.5
Environmental remediation costs	—		—		(3.7	)	—
Net income (loss) from continuing operations	28.3		(20.0	)
Bargain purchase gain	26.4		—		26.4		—
Other	(0.7	)	(1.6	)	(4.5	)	5.0
Net income (loss) from continuing operations	27.6		1.9		55.9		(18.1	)

(1) Repositioning expenses for the three and six months ended ~~January~~April 3130, 2017 includes $0.74 million and $1.1 million of inventory reserves related to the Swindon wind down recorded in cost of goods sold.

As illustrated in the table below, revenues are attributed to countries based on the location of the customer's billing address, capital assets are attributed to the country in which they are located and goodwill is attributed to the country in which the entity to which the goodwill pertains is located:

	As of and for the three months ended January 31, 2017
	Three months ended April 30, 2017
	Canada	US*	Europe	Other**	Total
	$	$	$	$	$
Revenues	74.02	~~301~~282.18	~~132~~167.79	1628.65	~~457~~483.4
Capital Assets	104.3	528.9	356.2	14.8	1,004.2
Goodwill	2.6	269.4	7.3	2.2	281.5

* Includes Puerto Rico

** Primarily includes Japan



	Three months ended April 30, 2016
	Canada	US*	Europe	Other**	Total
	$	$	$	$	$
Revenues	5.1	317.6	124.8	21.1	468.6

* Includes Puerto Rico

** Primarily includes Japan

	As of and for the three months ended January 31, 2016
	As of and for the six months ended April 30, 2017
	Canada	US*	Europe	Other**	Total
	$	$	$	$	$
Revenues	711.32	~~271~~564.87	~~111~~320.97	1444.92	~~405~~940.98
Capital Assets	91100.61	~~466~~687.6	~~314~~367.5	1514.51	~~888~~1,169.23
Goodwill	2.5	~~272~~269.34	7.34	2.01	~~284~~281.14

* Includes Puerto Rico

** ~~Primarily~~Other ~~includes~~revenues ~~Bermuda,~~primarily ~~Japan~~include ~~and other Asian countries~~Japan

~~11. REPOSITIONING EXPENSES~~29

~~During~~Notes ~~the~~to ~~three~~Unaudited ~~months~~Consolidated ~~ended~~Financial ~~January~~Statements ~~31,~~for ~~2017,~~ the ~~Company~~Three incurred $0.6 million in repositioning expenses, respectively, primarily from severance payments resulting from operational initiatives. In addition, the Company recorded inventory reserves of $0.7 million for raw material and ~~work~~Six inMonths ~~process~~Ended ~~inventory~~April ~~associated with the final phase of the winding down of the older section of the Swindon facility ("Swindon wind down") to allow us to re-purpose that area~~30, ~~which was expensed through cost of goods sold.~~2017

During the three months ended January 31, 2016, the Company incurred $1.2 million in repositioning expenses, primarily from severance payments resulting from a realignment of DPS operations.

Notes to Unaudited Consolidated Financial Statements for the Three Months Ended January 31, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

The following is a summary of these expenses and other charges associated with operational improvements as of and for the three months ended January 31, 2017 and 2016:



	As of and for the six months ended April 30, 2016
	Canada	US*	Europe	Other**	Total
	$	$	$	$	$
Revenues	12.4	589.4	236.7	36.0	874.5
Capital Assets	100.8	487.3	341.6	16.1	945.8
Goodwill	2.8	269.4	7.7	2.2	282.1

	As of and for the three months ended January 31, 2017
	DPS	PDS	DSS	Other	Total
	$	$	$	$	$
Total repositioning liability at October 31, 2016					5.4
Employee-related expenses	0.2	—	—	0.4	0.6
Repositioning expenses paid					(1.5	)
Foreign exchange					0.1
Total repositioning liability at January 31, 2017					4.6

* Includes Puerto Rico

~~The~~** ~~balance~~Other ofrevenues ~~repositioning~~primarily ~~liabilities~~include as of January 31, 2017 was recorded in accounts payable and accrued liabilities on the consolidated balance sheet. The Company does not have any long-term repositioning liabilities as of January 31, 2017.Japan

	As of and for the three months ended January 31, 2016
	DPS	PDS	DSS	Other	Total
	$	$	$	$	$
Total repositioning liability at October 31, 2015					22.9
Employee-related expenses	1.1	—	0.1	—	1.2
Repositioning expenses paid					(18.7	)
Foreign exchange					(0.5	)
Total repositioning liability at January 31, 2016					4.9

12. REPOSITIONING EXPENSES

~~The~~During ~~balance~~the ofthree and six months ended April 30, 2017, the Company incurred $1.8 million and $2.4 million in repositioning ~~liabilities~~expenses, asrespectively, ofprimarily ~~January 31~~from severance payments resulting from operational initiatives. In addition, ~~2016~~the ~~was~~Company recorded ininventory ~~accounts~~reserves ~~payable~~of $0.4 million and ~~accrued~~$1.1 ~~liabilities~~million onfor the ~~consolidated~~three ~~balance~~and ~~sheet.~~six ~~The~~months ~~Company~~ended ~~does~~April ~~not~~30, ~~have~~2017 ~~any~~relating ~~long-term~~to ~~repositioning~~raw ~~liabilities~~material asand work in process inventory associated with the final phase of ~~January 31~~the winding down of the older section of the Swindon facility ("Swindon wind down") to allow us to re-purpose that area, ~~2016~~which was expensed through cost of goods sold.

12During the three and six months ended April 30, 2016, the Company incurred $1. ~~RELATED~~3 ~~PARTIES~~million and $2.5 million in repositioning expenses, primarily from severance payments resulting from a realignment of DPS operations.

The following is a summary of these expenses and other charges associated with operational improvements as of and for the three and six months ended April 30, 2017 and 2016:



	As of and for the three months ended April 30, 2017
	DPS	PDS	DSS	Other	Total
	$	$	$	$	$
Total repositioning liability at January 31, 2017					4.6
Employee-related expenses	1.7	—	—	0.1	1.8
Repositioning expenses paid					(1.6	)
Foreign exchange					0.1
Total repositioning liability at April 30, 2017					4.9



	As of and for the three months ended April 30, 2016
	DPS		PDS	DSS	Other	Total
	$		$	$	$	$
Total repositioning liability at January 31, 2016						4.9
Employee-related expenses	1.6		—	—	—	1.6
Consulting, professional and project management costs	(0.3	)	—	—	—	(0.3	)
Total expenses	1.3		—	—	—	1.3
Repositioning expenses paid						(3.1	)
Foreign exchange						0.3
Total repositioning liability at April 30, 2016						3.4



	As of and for the six months ended April 30, 2017
	DPS	PDS	DSS	Other	Total
	$	$	$	$	$
Total repositioning liability at October 31, 2016					5.4
Employee-related expenses	1.9	—	—	0.5	2.4
Repositioning expenses paid					(3.1	)
Foreign exchange					0.2
Total repositioning liability at April 30, 2017					4.9

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

The balance of repositioning liabilities as of April 30, 2017 was recorded in accounts payable and accrued liabilities on the consolidated balance sheet. The Company does not have any long-term repositioning liabilities as of April 30, 2017.



	As of and for the six months ended April 30, 2016
	DPS		PDS	DSS	Other	Total
	$		$	$	$	$
Total repositioning liability at October 31, 2015						22.9
Employee-related expenses	2.8		—	—	—	2.8
Consulting, professional and project management costs	(0.3	)	—	—	—	(0.3	)
Total expenses	2.5		—	—	—	2.5
Repositioning expenses paid						(21.8	)
Foreign exchange						(0.2	)
Total repositioning liability at April 30, 2016						3.4

The balance of repositioning liabilities as of April 30, 2016 was recorded in accounts payable and accrued liabilities on the consolidated balance sheet. The Company does not have any long-term repositioning liabilities as of April 30, 2016.

13. RELATED PARTIES

Related Party Transactions

JLL Partners

The Company has a service agreement with JLL Partners Inc. and some JLL Partners affiliates whereby the Company will reimburse the parties for management, consulting, financial, and other business services provided under the agreement. The amounts spent on these services, as well as the amounts payable outstanding in relation to these services, are shown in the tables below.

DSM

The Company has transition service agreements ("TSAs") with DSM resulting from the DPP Acquisition whereby DSM performs certain shared service functions on behalf of the Company. Additionally, the Company performs certain services on behalf of DSM. The revenue and expenses relating to these services, as well as the accounts receivable and payable outstanding in relation to these services, are shown in the tables below.

BLS

The Company has a management service agreement with BLS whereby the Company will provide various management, financial, legal and other business services to BLS. The expenses relating to these services are charged to BLS and the related accounts receivable outstanding in relation to these services are shown in the tables below. We performed production services for BLS in the first quarter of fiscal 2016 before BLS sold their commercial business to a third party.



	Three months ended April 30,		Six months ended April 30,
Revenues/Expenses	2017	2016	2017	2016
	$	$	$	$
JLL Partners Expenses	0.1	0.1	0.1	0.2

DSM Revenues	0.1	0.8	0.3	0.9
DSM Expenses	1.9	2.5	5.1	5.2

Banner Life Sciences Revenues	0.7	1.4	0.7	7.9

~~Notes to Unaudited Consolidated Financial Statements for the Three Months Ended January~~ 31~~, 2017~~

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

	Three months ended January 31,
	Balances as of
Revenues/Expenses	2017	2016
Accounts Receivable/Payable Balances	April 30, 2017	October 31, 2016
	$	$
JLL Partners Expenses	—	0.1
JLL Partners Accounts Payable	0.1	—
DSM Revenues	0.2	0.1
DSM Accounts Receivable	0.1	0.4
DSM Expenses	3.2	2.7
DSM Accounts Payable	1.7	0.2
Banner Life Sciences Revenues	—	6.5
Banner Life Sciences Accounts Receivable	1.2	1.1

	Balances as of
Accounts Receivable/Payable Balances	January 31, 2017	October 31, 2016
	$	$
DSM Accounts Receivable	0.4	0.4
DSM Accounts Payable	0.2	0.2
Banner Life Sciences Accounts Receivable	0.7	1.1

Equity Method Investments

Banner Life Sciences

In October 2015, the Company invested $5.0 million in Banner Life Sciences. The investment resulted in Banner Life Sciences becoming a variable interest entity, but the entity is not consolidated as the Company does not have the ability to control the entity and therefore does not have the power to direct Banner Life Sciences' activities. The Company's maximum exposure to loss relating to this variable interest entity is limited to the carrying value of the investment. The investment is presented within investments in the consolidated balance sheets. In March 2016, the Company received a $2.4 million cash distribution from Banner Life Sciences.

Percivia

The Company holds a 50.0% interest in Percivia, a limited liability company for the purpose of performing research and development activities and licensing certain technology. In February 2016, the Company received a $1.2 million return of capital from Percivia in the form of a cash distribution.

Chemiepark

The Company holds a 47.5% interest in Chemiepark, a company tasked with providing fire protection for the chemicals site in Linz, Austria.

	Values as of
Equity Method Investment Values	~~January~~April 3130, 2017	October 31, 2016
	$	$
Banner Life Sciences	2.75	2.9
Percivia	5.7	5.7
Chemiepark	0.1	0.1
Total	8.53	8.7

Investment carrying values are presented within investments in the consolidated balance sheets.



	Three months ended April 30,				Six months ended April 30,
Equity Method (Loss)/Gain	2017		2016		2017		2016
	$		$		$		$
Banner Life Sciences	(0.2	)	(0.5	)	(0.3	)	1.3
Percivia	—		0.1		—		0.2
Total	(0.2	)	(0.4	)	(0.3	)	1.5

Notes to Unaudited Consolidated Financial Statements for the Three Months Ended January 31, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

	Three months ended January 31,
Equity Method (Loss)/Gain	2017		2016
	$		$
Banner Life Sciences	(0.1	)	1.8
Percivia	—		0.1
Total	(0.1	)	1.9

Equity method earnings are presented within other income in the consolidated statement of operations.

1314. INCOME TAXES

The Company accounts for income taxes under FASB ASC 740, Income Taxes ("ASC 740"). The Company calculates its quarterly tax provision consistent with the guidance provided by ASC 740-270, whereby the Company forecasts its estimated annual effective tax rate then applies that rate to its year-to-date pre-tax book (loss) income. The effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective rate, including factors such as the valuation allowances against deferred tax assets, the recognition or de-recognition of tax benefits related to uncertain tax positions, or changes in or the interpretation of tax laws in jurisdictions where the Company conducts business. The Company has recorded valuation allowances against certain Netherlands and other foreign jurisdictions due to insufficient evidence supporting the Company's ability to use these assets in the future.

For the three months ended January 31, 2017 and 2016, the Company recorded a benefit from income taxes in continuing operations of $21.3 million and $0.7 million, respectively. The increase in tax benefit for the three months ended January 31, 2017 was primarily attributable to changes in the Company’s jurisdictional combination of pre-tax income, the Company’s change in tax classification of a United States subsidiary ("US subsidiary") and changes to other discrete tax items, which may have unique tax implications, depending on the nature of the item.32

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended April 30, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

annual effective tax rate then applies that rate to its year-to-date pre-tax book (loss) income. The effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective rate, including factors such as the valuation allowances against deferred tax assets, the recognition or de-recognition of tax benefits related to uncertain tax positions, or changes in or the interpretation of tax laws in jurisdictions where the Company conducts business. The Company has recorded valuation allowances against certain Netherlands and other foreign jurisdictions due to insufficient evidence supporting the Company's ability to use these assets in the future.

For the six months ended April 30, 2017 and 2016, the Company recorded a benefit from income taxes in continuing operations of $22.8 million and $0.0 million, respectively. The increase in tax benefit for the six months ended April 30, 2017 was primarily attributable to changes in the Company’s jurisdictional combination of pre-tax income, the Company’s change in tax classification of a United States subsidiary ("US subsidiary") and changes to other discrete tax items, which may have unique tax implications, depending on the nature of the item.

In the first quarter of fiscal 2017, the Company filed an election to change the tax classification of a US subsidiary from a partnership to an association taxable as a corporation. As a result of the change in tax classification, the Company recognized a $28.3 million deferred tax benefit related to the change in its deferred tax assets and liabilities. The Company previously accounted for the deferred tax basis difference using outside basis of the partnership's investments. The Company derecognized the deferred tax liability for the outside basis difference and recognized deferred tax assets and liabilities for existing temporary differences between the tax basis and financial reporting basis of the assets and liabilities of the subsidiary.

~~Valuation~~In ~~allowances are provided to reduce~~ the ~~related~~second ~~deferred~~quarter ~~income tax assets to an amount which will, more likely than not, be realized. As~~ of ~~January~~fiscal ~~31,~~ 2017, the Company ~~has~~amended ~~multiple~~prior ~~subsidiaries~~year ~~that~~federal ~~continue~~and tostate ~~maintain~~returns, ~~either~~originally ~~full~~filed orby a ~~partial~~predecessor ~~valuation~~owner, ~~allowances~~for ona ~~its~~U.S. ~~deferred~~subsidiary. ~~tax~~As ~~assets~~a asresult ~~there is not sufficient evidence to support the reversal~~ of ~~all or some portion of these allowances. However, given current and anticipated future earnings in~~ the ~~Company's~~amended ~~Austrian subsidiaries~~returns, the Company ~~believes~~recognized ~~that within the next twelve months there is~~ a ~~reasonable~~$3.5 ~~possibility~~million ~~positive~~deferred ~~evidence~~tax ~~will~~benefit ~~become~~for ~~available~~an ~~that~~increase ~~would~~in ~~allow~~net ~~the~~operating ~~release of all or a portion of the valuation allowance recorded at the Company’s Austrian subsidiaries~~losses.

~~The~~Valuation ~~Company~~allowances ~~evaluates~~are ~~uncertain~~provided ~~tax~~to ~~positions~~reduce onthe arelated ~~quarterly~~deferred ~~basis~~income ~~and~~tax ~~considers~~assets ~~various~~to ~~factors,~~an ~~including,~~amount ~~but~~which ~~not limited to~~will, ~~changes~~more inlikely ~~tax~~than ~~law~~not, ~~the~~be ~~measurement~~realized. As of ~~tax~~April ~~positions~~30, ~~taken~~2017, orthe ~~expected~~Company tohas bemultiple ~~taken~~subsidiaries inthat ~~tax~~continue ~~returns,~~to ~~the~~maintain ~~effective~~either ~~settlement~~full ofor ~~matters~~a ~~subject~~partial tovaluation ~~audit,~~allowances ~~information~~on ~~obtained~~their ~~during~~deferred intax ~~process~~assets ~~audit~~as ~~activities~~there ~~and~~is ~~changes~~not insufficient ~~facts~~evidence orto ~~circumstances~~support ~~related~~the toreversal aof ~~tax~~all ~~position.~~or ~~The~~some ~~Company~~portion ~~also~~of ~~accrues~~these ~~for~~allowances. ~~potential~~However, ~~interest~~given current and ~~penalties~~anticipated ~~related~~future toearnings ~~unrecognized~~in ~~tax~~the ~~benefits~~Company's ~~within~~Austrian subsidiaries, the ~~provision~~Company ~~for~~believes ~~income~~that ~~taxes~~within on the ~~consolidated~~next ~~statement~~twelve ~~operations.~~months Asthere ofis ~~January~~a ~~31,~~reasonable ~~2017,~~possibility ~~the~~positive ~~Company~~evidence ~~did~~will ~~not~~become ~~have~~available athat ~~material~~would ~~change~~require in the ~~total~~release ~~amount~~ of ~~unrecognized~~all ~~tax~~or ~~positions~~a ~~and~~portion ~~does~~of ~~not~~the ~~expect~~valuation aallowance ~~material~~recorded ~~change~~at ~~over~~ the ~~next~~Company’s ~~twelve~~Austrian ~~months~~subsidiaries.

14The Company evaluates uncertain tax positions on a quarterly basis and considers various factors, including, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, information obtained during in process audit activities and changes in facts or circumstances related to a tax position. ~~OTHER~~ ~~INFORMATION~~The Company also accrues for potential interest and penalties related to unrecognized tax benefits within the provision for income taxes on the consolidated statement operations. As of April 30, 2017, the Company did not have a material change in the total amount of unrecognized tax positions and does not expect a material change over the next twelve months.

The Company early adopted ASU No. 2016-09 "Improvements to Employee Share-Based Payment Accounting" during the second quarter of fiscal 2017. ASU 2016-09 eliminates the requirement for additional paid in capital ("APIC") pools and requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. The adoption of ASU 2016-09 had no financial statement impact on the Company.

15. OTHER INFORMATION

Foreign exchange

During the three and six months ended ~~January~~April 3130, 2017 ~~and 2016~~, the Company recorded a foreign exchange loss of $40.87 million and $45.35 million, respectively. These amounts resulted from hedge and operating exposures. During the three and six months ended April 30, 2016, the Company recorded foreign exchange losses of $7.1 million and $11.4 million, respectively

Management Incentive Plan

On March 11, 2014, the Company adopted the Management Long-Term Incentive Plan (the "LTIP") to provide long-term incentives to select key management employees of Patheon and its subsidiaries who have contributed and are expected to contribute materially to the success of the Company, and to reward outstanding performance by such employees. Leadership, key positions or identified key talent may be invited to participate in the LTIP during an identified plan year. Compensation is payable under this plan upon an Exit Event by the controlling investors of the Company (JLL and DSM), if the participant is still employed by the Company, or a qualifying termination, as defined.

2933

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended ~~January~~April 3130, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

contribute materially to the success of the Company, and to reward outstanding performance by such employees. Leadership, key positions or identified key talent may be invited to participate in the LTIP during an identified plan year. Compensation is payable under this plan upon an Exit Event by the controlling investors of the Company (JLL and DSM), if the participant is still employed by the Company, or a qualifying termination, as defined.

An Exit Event is defined as the earlier of: (a) a change of control, and (b) in connection with or following an Initial Public Offering ("IPO"), the sale or disposition by JLL or any of its affiliates of equity securities such that, immediately following such sale or disposition, either (i) JLL and its affiliates own less than 20% of the outstanding equity securities of the Partnership or the Partnership offeror, calculated on a fully-diluted basis, or (ii) JLL and its affiliates have received, in the aggregate, distributions in respect of such sale or disposition (together with any sale or disposition occurring prior thereto) equal to or in excess of 250% of the initial capital contributions and any additional capital contributions made by JLL and its affiliates for all equity securities of the Partnership or the Partnership offeror held by JLL and its affiliates prior to such sale or disposition.

Not later than 90 days following commencement of each applicable Company fiscal year that would end during the term of the LTIP, the compensation committee of the board of directors of the Company (the "Compensation Committee") will determine, in its sole and absolute discretion, with respect to such fiscal year, (i) the Participants (as defined in the LTIP) with respect to that fiscal year, (ii) the EBITDA Target (as defined in the LTIP), and (iii) the targeted amount of each Award. Each award shall be evidenced by a written notice and shall be deemed granted on the first day of the fiscal year with respect to which the Compensation Committee resolves to grant such award (the "Grant Date"). Awards are denominated as a percentage of the Participant’s base salary, with the target percentage based on the Participant’s level within the organization, as determined by the Compensation Committee in its sole and absolute discretion. All awards will be paid in the form of cash, or other property having a value equal to such cash payment, as determined by the Compensation Committee in its sole and absolute discretion.

Under the LTIP, the Company has granted $9.6 million in outstanding awards from March 11, 2014 through ~~January~~April 3130, 2017, all of which vest over a five-year period. Through ~~January~~April 3130, 2017, the Company has paid out $0.12 million in payments due to qualified terminations. The Company does not accrue for the overall payout as the Exit Event is deemed to not be probable until the actual occurrence of the event.

Contingencies

Procaps Antitrust Matter

On December 10, 2012, Procaps S.A. (‘‘Procaps’’) filed a complaint against the Company in the United States District Court for the Southern District of Florida (the ‘‘District Court’’) (Case No. 12-cv-24356-DLG). The complaint involves the Company’s collaboration agreement with Procaps, pursuant to which both companies agreed to work together with respect to the marketing of a line of certain prescription pharmaceutical soft-gel development and manufacturing services. Procaps alleges that the Company’s acquisition of Banner, a business that historically has generated less than 10% of its revenues from softgel services for prescription pharmaceuticals, transformed the collaboration agreement into an anticompetitive restraint of trade and an agreement between direct competitors to set prices, divide markets and/or allocate geographic territories. Procaps seeks (i) a declaratory judgment that the collaboration agreement must cease and/or terminate; (ii) an injunction requiring that Patheon divest all of Banner’s soft-gel manufacturing capabilities; and (iii) monetary damages under federal and state antitrust and unfair competition laws, including treble damages for violations of the Sherman Act. Patheon subsequently answered Procaps’ complaint and filed its affirmative defenses to the complaint. In July 2014, upon Motion for Summary Judgment by Patheon, the court dismissed Procaps’ unfair competition claims, leaving only the antitrust claims in dispute. In March 2015, the court ordered trial to commence on November 16, 2015.

In October 2015, the court granted Patheon’s motion for summary judgment with respect to all of Procaps’ remaining claims in this matter. In November 2015, Procaps filed a notice of appeal with the United States Court of Appeals for the Eleventh Circuit (the ‘‘11th Circuit Court’’). Procaps filed its initial brief with the 11th Circuit Court in February 2016 and we filed our reply brief in May 2016. Procaps filed its reply to our reply brief in June 2016. The 11th Circuit Court heard oral argument in this matter in November 2016 and in December 2016 affirmed the District Court's decision in favor of Patheon.

In May 2016, Procaps filed a request for arbitration with the International Court of Arbitration of the International Chamber of Commerce. The request for arbitration involves the above-mentioned collaboration agreement. Procaps alleges that (i) Patheon’s acquisition of Banner violated the exclusivity provision of the collaboration agreement, (ii) Patheon failed to return or destroy confidential information of Procaps, (iii) Patheon was unjustly enriched by obtaining the benefit of such confidential information to which it was not entitled, and (iv) Patheon breached implied duties of good faith and fair dealing in carrying out the collaboration agreement. Procaps seeks (i) with respect to the alleged breaches, compensatory damages and (ii) with respect to the claim for unjust enrichment, (a) disgorgement of profits received by Patheon by using any confidential information of Procaps, (b) repayment for all payments made to Patheon pursuant to the collaboration agreement, and (c) payment for the value of any intellectual property associated with the collaboration agreement. The Company filed its answer to the request for arbitration with the International Court of Arbitration of the International Chamber of Commerce in June 2016. The arbitration hearing on the merits in this matter was held in March 2017 and final arguments were heard in May 2017.

3034

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended ~~January~~April 3130, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

~~value~~The ofCompany ~~any~~has ~~intellectual~~not ~~property~~included ~~associated~~any ~~with~~accrual in the ~~collaboration~~consolidated ~~agreement.~~financial ~~The~~statements ~~Company~~as ~~filed~~of ~~its~~April ~~answer~~30, to2017 ~~the~~related ~~request~~to ~~for~~these ~~arbitration~~matters ~~with~~as ~~the~~a ~~International~~result ~~Court~~ of ~~Arbitration~~its ofassessment that the ~~International~~likelihood ~~Chamber~~ of ~~Commerce~~a material loss in ~~June~~connection ~~2016.~~with ~~The~~these ~~arbitration~~matters ~~hearing~~is onnot ~~the~~probable. ~~merits~~However, an adverse outcome in this matter iscould ~~currently~~have ~~scheduled~~a ~~for~~material ~~March~~adverse ~~2017~~effect on the Company’s business, results of operations and financial condition.

The Company has not included any accrual in the consolidated financial statements as of January 31, 2017 related to these matters as a result of its assessment that the likelihood of a material loss in connection with these matters is not probable. However, an adverse outcome in this matter could have a material adverse effect on the Company’s business, results of operations and financial condition.

Oral Contraceptive Litigation

A civil action is pending in the Commonwealth of Pennsylvania against the Company and one of its customers in connection with the recall of certain lots of allegedly defective products manufactured by the Company for the customer. The customer has given the Company notice of its intent to seek indemnification from the Company for all damages, costs and expenses, pursuant to the manufacturing services agreement between the customer and the Company.

The action was filed in Court of Common Pleas of Philadelphia Country, in Philadelphia, Pennsylvania in November 2015 on behalf of 113 plaintiffs who were originally part of a putative class action commenced in state court in Georgia in October 2011 on behalf of 115 plaintiffs and removed by defendants to the United States District Court for the Northern District of Georgia ("Georgia District Court") under the Class Action Fairness Act ("CAFA"). Defendants opposed class certification and class certification was denied. The Georgia action was ordered to proceed as a two-plaintiff action in the Georgia District Court on behalf of the two named plaintiffs, whereupon plaintiffs' lawyers commenced a new action in the Court of Common Pleas in Philadelphia on behalf of the remaining 113 plaintiffs. The two-plaintiff action was dismissed by the Georgia District Court on October 28, 2016 on a motion for summary judgment brought by defendants.

Defendants removed the action to the United States District Court for the Eastern District of Pennsylvania ("Pennsylvania District Court"). In September 2016, the Pennsylvania District Court remanded the action back to the Court of Common Pleas in Philadelphia. Defendants appealed the order of remand and, in February 2017, the United States Court of Appeals for the Third Circuit reversed and vacated the Pennsylvania District Court's remand order and remanded the matter to the Pennsylvania District Court for further proceedings. As the litigation is at an early stage, the Company is unable to estimate the potential damages for which the Company may be directly or indirectly liable.

Italian Client Dispute

In November 2015, the largest client of Patheon Italia S.p.A.’s (‘‘Patheon Italia’’), Ferentino, Italy facility filed a motion for injunctive relief in a Milan court under Article 700 of the Italian Civil Code. The client claims that remediation actions implemented by the Ferentino facility in response to an FDA inspection in May 2015, including, among other things, the use of a third party to certify all production batches for release, caused a significant slowdown in the quality control testing and batch release processes for the client’s product, thereby impairing the client’s ability to supply product in the amounts needed to fulfill the client's needs. The client sought an injunction ordering the Ferentino facility to (i) deliver products set forth in an October 6-7, 2015 release plan discussed by the parties; (ii) transfer products and documentation to the client to enable the client to perform the necessary quality control testing and release the products; and (iii) continue manufacture of the products at the capacity levels set forth in the supply agreement between the parties. The client further asked the court to impose a penalty of €0.2 million per day for every day that the Ferentino facility failed to comply with the order.

On December 7, 2015, Patheon Italia filed a response to the motion, denying all the claims set forth in the client’s motion and asserting several defenses. In particular, Patheon Italia informed the court that the parties had in fact executed an amendment to the existing quality agreement agreeing to transfer the testing and release responsibilities to the client, such amendment was executed prior to the filing of the motion by the client and should have been disclosed to the court in the client’s motion.

On December 10, 2015, the court held a hearing in this matter and on December 18, 2015, denied the client’s motion. The client has filed an appeal to the court's decision, which was heard on February 11, 2016. On February 29, 2016, the appeals court denied the client's appeal. The supply agreement with the client includes an arbitration provision and in its initial motion, the client indicated its intention to file an arbitration claim seeking money damages in this matter. This matter is in the early stages and the Company is unable to estimate the potential damages for which Patheon Italia may be liable if the client files an arbitration claim and prevails in such proceeding.

Statements of cash flows non-cash investing and financing activities

3135

Notes to Unaudited Consolidated Financial Statements for the Three and Six Months Ended ~~January~~April 3130, 2017

(Dollar information in tabular form is expressed in millions of U.S. dollars, except share data)

	Three months ended January 31,
	Six months ended April 30,
	2017	2016
Non-cash financing activities:	$	$
Assumption of earnout liability from the Partnership (1)	—	36.0
Increase in capital lease obligations	0.6	—
Treasury stock purchases to satisfy certain tax withholdings (2)	0.1	—
Increase in capital lease obligations	1.0	—

(1) Refer to Note 9 for further information

~~15. SUBSEQUENT~~(2) ~~EVENTS~~Represents the tax payable held as of April 30, 2017 relating to a second quarter treasury stock purchase.

~~On February 1, 2017, the Company completed its acquisition ("Roche Acquisition") of an API facility in Florence, SC from Hoffman-La Roche Ltd~~16. SUBSEQUENT ("Roche") for $1.0 million in cash, plus a payment for certain associated inventory and spare parts. Roche has agreed to provide funds for certain accounts payable, capital expenditures and other liabilities of the facility. Additionally, the Company entered into a multi-year supply arrangement to manufacture certain products for Roche.EVENTS

32On May 15, 2017, the Company and Thermo Fisher Scientific Inc. ("Thermo Fisher") and Thermo Fisher (CN) Luxembourg Sarl (the “Buyer”) entered into a Purchase Agreement pursuant to which the Buyer will commence a tender offer to all outstanding shares of the Company for $35.00 per share (the "Offer Consideration"). The transaction represents a purchase price of approximately $7.2 billion, which includes the assumption of approximately $2.0 billion of net debt. The closing of the tender offer (the “Closing”) will constitute an Exit Event under the MEIP and the LTIP and, accordingly, (i) all management units under the MEIP that are unvested as of the Closing will vest in full, (ii) the MEIP RSUs will settle in accordance with their terms based on the Offer Consideration; and (iii) all outstanding awards under the LTIP will become payable. All remaining unvested equity awards under the Company's Omnibus Incentive Plan will convert into an equity award of Thermo Fisher with the same value and substantially similar other terms as the existing Company equity award.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is designed to provide a better understanding of our consolidated financial statements, including a brief discussion of our business, key factors that impact our performance and a summary of our operating results. The following discussion should be read in conjunction with our unaudited consolidated financial statements and the notes thereto included in this Form 10-Q and with our audited consolidated financial statements and notes included in our 2016 Form 10-K.

Cautionary Statement Regarding Forward-Looking Statements

This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are predictions based on our current expectations and our projections about future events, and are not statements of historical fact. Forward-looking statements include statements concerning our business strategy, among other things, including anticipated trends and developments in, and management plans for, our business and the markets in which we operate. In some cases, you can identify these statements by forward-looking words, such as “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “believe,” “forecast,” “foresee,” “likely,” “may,” “should,” “might,” “will,” and “could,” the negative or plural of these words and other comparable terminology. All forward-looking statements included in this Form 10-Q are based upon information available to us as of the filing date of this Form 10-Q, and we undertake no obligation to update any of these forward-looking statements for any reason. You should not place undue reliance on these forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these statements. These factors include the matters discussed in the section entitled “Part II - Other Information - Item 1A - Risk Factors” in this Form 10-Q, and elsewhere in this Form 10-Q. You should carefully consider the risks and uncertainties described under these sections.

Overview

Our Company

Patheon N.V. is a leading global provider of outsourced pharmaceutical development and manufacturing, or CDMO, services. We provide a comprehensive, integrated and highly customizable range of active pharmaceutical ingredient, or API, and finished drug product services to our customers, from formulation development to clinical and commercial-scale manufacturing, packaging, and life cycle management. Our services address both small molecule and large molecule biological drugs. We believe we are the only end-to-end integrated provider of such services, which, combined with our scientific and regulatory expertise and specialized capabilities, allows our customers to partner with a single outsourced provider to address their most complex development and manufacturing needs for a given product or service, or across the spectrum. We believe we have the broadest technological capabilities in our industry, across the full spectrum of development and manufacturing, to support our end-to-end integrated platform.

We believe we are a critical partner for our customers who increasingly rely on our customized formulation, development and manufacturing expertise to address growing drug complexity, cost pressures and regulatory scrutiny. We partner with many of our customers early in the drug development process, providing us the opportunity to continue to expand our relationship with our customers as molecules progress through the clinical phase and into commercial manufacturing. This results in long-term relationships with our customers and a recurring revenue stream. We believe our breadth of services, reliability and scale address our customers’ increasing need to outsource and desire to reduce the number of supply chain partners while maintaining a high quality of service.

We currently operate in the following three reportable business segments:


•	Drug Product Services, or DPS, which provides manufacturing and packaging for approved prescription, OTC, and nutritional products.


•	Pharmaceutical Development Services, or PDS, which provides a wide spectrum of advanced formulation, production and technical services from the early stages of a product’s development to regulatory approval and beyond, as well as for new formulations of approved products for lifecycle extension.


•	Drug Substance Services, or DSS, which provides development and manufacturing for the biologically active component of a pharmaceutical product from early development through commercial production.

3337

Investment Fund L.P. ("JLL") and 49% by Koninklijke DSM N.V. ("DSM"). On June 3, 2016, the Company was converted into a Dutch limited liability company (naamloze vennootschap) and changed its name to Patheon N.V.

On July 21, 2016, the Company consummated an initial public offering ("IPO") of an additional 29,464,286 ordinary shares at a public offering price of $21.00 per share, which included 4,464,286 ordinary shares sold pursuant to the option granted to the underwriters to purchase additional ordinary shares from the Company. As part of the IPO, DSM sold 4,761,905 ordinary shares distributed to them in connection to their Partnership ownership to the public. A total of 34,226,191 ordinary shares were sold in connection to the IPO. The Company did not receive any proceeds from the ordinary shares sold by DSM. The IPO was completed on July 26, 2016.

Ordinary shares owned by the public constitute approximately 24% of the Company. Through their respective ordinary shares, JLL, DSM and the Partnership own approximately 38%, 34% and 4% of the Company. The Partnership's ownership comprises of shares held for the benefit of certain employees.

As the Company has done historically, we will continue to evaluate and pursue strategic investments and acquisitions to support expanding customer needs, complement our existing platform and broaden our capabilities in high value-added product and services offerings in response to market demand. Targets of these strategic investments and acquisitions may include existing CDMO businesses, business operating in logical adjacencies and facilities currently operated by our clients or other pharmaceutical or biotechnology companies for their internal production purposes.

On May 15, 2017, the Company and Thermo Fisher Scientific Inc. ("Thermo Fisher") and Thermo Fisher (CN) Luxembourg Sarl (“Buyer”) entered into a Purchase Agreement pursuant to which the Buyer will commence a tender offer to all outstanding shares of the Company for $35.00 per share. The transaction represents a purchase price of approximately $7.2 billion, which includes the assumption of approximately $2.0 billion of net debt.

In addition, we have streamlined and rationalized our business:


•	We launched our OneSource initiative in 2015 which combines drug substance and drug product development and manufacturing into a single customized solution.


•	Over the prior two years, we sold our DPx Fine Chemicals business, our Biosolutions business and our Banner Pharmacaps entity in Mexico. Additionally, we spun off Banner Life Sciences, our proprietary products business, into a separate legal entity.


•	On February 1, 2017, we completed an acquisition of an API facility in Florence, SC. With this acquisition, the Company expanded its capacity for manufacturing highly potent compounds and added capabilities to support solid state chemistry, micronization and future commercial spray drying.


•	We outsourced certain IT, finance and procurement back-office support functions.

Selected Financial Results

The following is a summary of certain key financial results for the three months ended ~~January~~April 3130, 2017 (a more detailed discussion is contained in "Results of Operations" below):

• Revenues for the three months ended ~~January~~April 3130, 2017 increased $5114.58 million, or 123.72%, to $~~457~~483.4 million from $~~405~~468.96 million for the three months ended ~~January~~April 3130, 2016. On a constant currency basis, revenue would have increased $5523.3 million, or 135.60%.

• Gross profit for the three months ended ~~January~~April 3130, 2017 increased $302.84 million, or ~~31.~~1.7%, to $~~129~~140.7 million from $98138.93 million for the three months ended ~~January~~April 3130, 2016.

• Net income from continuing operations for the three months ended ~~January~~April 3130, 2017 was $2827.36 million, compared to a net ~~loss~~income of $201.09 million for the three months ended ~~January~~April 3130, 2016.

• Adjusted EBITDA for the three months ended ~~January~~April 3130, 2017 ~~increased~~decreased $233.58 million to $8294.52 million, from $5998.0 million for the three months ended ~~January~~April 3130, 2016.

Opportunities and Trends

Our target markets include the highly fragmented global markets for the manufacture of finished pharmaceutical dosage forms, pharmaceutical development services, chemical API manufacturing, and biologic pharmaceutical contract manufacturing. The outsourcing of product development by the pharmaceutical industry is an important driver of growth in our business. In 2016, the pharmaceutical industry spent approximately $157.0 billion on formulation, development and manufacturing, according to Evaluate Pharma, and approximately $40.0 billion was expected to be outsourced to CDMOs such as Patheon in 2015, according to Root Analysis. Currently, only 25% to 30% of pharmaceutical industry spending on formulation, development and manufacturing is outsourced, and in the future it is expected that our customer base will expand the use of outsourcing to

3438

outsourcing of product development by the pharmaceutical industry is an important driver of growth in our business. In 2016, the pharmaceutical industry spent approximately $157.0 billion on formulation, development and manufacturing, according to Evaluate Pharma, and approximately $40.0 billion was outsourced to CDMOs such as Patheon, according to Root Analysis. Currently, only 25% to 30% of pharmaceutical industry spending on formulation, development and manufacturing is outsourced, and in the future it is expected that our customer base will expand the use of outsourcing to CDMOs because of changing industry dynamics, driving growth of our market. Industry resources indicate that the outsourced pharmaceutical manufacturing market is expected to grow at approximately 7 to 8% annually in the foreseeable future. We believe the market for products requiring specialized capabilities (e.g., sterile production, solubility solutions) is growing at a higher rate than the overall market. Furthermore, more than 60% to 90% of all new compounds entering development will require specialized manufacturing and/or molecular profile modification, according to industry research. According to ~~Boston~~Frost ~~Consulting~~& ~~Group~~Sullivan, a global ~~management~~market ~~consulting~~research firm ~~and advisor on business strategy~~, the CDMO API small molecule market for innovative chemical API manufacturing totaled approximately ~~€20~~$19.05B ~~billion~~ in ~~2012~~2016 and may experience growth of approximately 7.-9% annually through ~~2016~~2020. According to High Tech Business Decisions, a business intelligence information provider, the API large molecule market for mammalian biologics pharmaceutical contract manufacturing totaled approximately $12.94 billion in ~~2013~~2016 and may experience growth of approximately 7-9.4% annually through ~~2017~~2022.

Results of Operations

Three months ended April 30, 2017 compared to three months ended April 30, 2016

	Three months ended January 31,
	Three months ended April 30,
	2017		2016		$		%
(in millions of U.S. dollars)	$		$		Change		Change
Revenues	~~457~~483.4		~~405~~468.96		5114.58		123.72
Cost of goods sold	~~327~~342.7		~~307~~330.03		2012.74		63.78
Gross profit	~~129~~140.7		98138.93		302.84		~~31.~~1.7
Selling, general and administrative expenses	8192.1		7374.78		717.43		1023.01
Research and development	0.74		0.76		—(0.2	)	—(33.3	)
Repositioning expenses	01.68		1.23		(0.65	)	~~(50~~38.05	)
Acquisition and integration costs	38.51		27.6		0.95		346.6
Other operating loss (gain)	3.6		(4.9	)	8.5		*
Other operating expense	0.5		1.2		(0.7	)	*
Operating income	4037.28		2552.68		14(15.60	)	57(28.04	)
Interest expense, net	2830.28		4342.86		(1511.68	)	(3527.67	)
Foreign exchange loss, net	40.87		47.31		0(6.54	)	*
Other income, net	0.2		(1.8	)	2.0		*
Refinancing expenses	6.3		—		6.3		—
Income before income taxes	7.0		(20.7	)	27.7		133.8
Bargain purchase gain	(26.4	)	—		(26.4	)	—
Benefit from income taxes	(21.3	)	(0.7	)	(20.6	)	*
Other loss, net	0.3		0.5		(0.2	)	*
Net income (loss) from continuing operations	28.3		(20.0	)	48.3		241.5
Income before income taxes	26.1		2.6		23.5		903.8
Net (loss) from discontinued operations	—		(2.1	)	2.1		*
(Benefit from) provision for income taxes	(1.5	)	0.7		(2.2	)	*
Net income (loss)	28.3		(22.1	)	50.4		228.1
Net income from continuing operations	27.6		1.9		25.7		1,352.6
Net loss from discontinued operations	—		(1.0	)	1.0		*
Net income	27.6		0.9		26.7		2,966.7

* Not meaningful

Operating Income Summary

Revenues for the three months ended ~~January~~April 3130, 2017 increased $5114.58 million, or 123.72%, to $~~457~~483.4 million, from $~~405~~468.96 million for the three months ended ~~January~~April 3130, 2016. On a constant currency basis, revenues would have increased $5523.3 million, or 135.60%.

• DPS revenues for the three months ended ~~January~~April 3130, 2017 increased $169.78 million, or 63.54%, to $~~275~~297.2 million, from $~~258~~287.54 million for the three months ended ~~January~~April 3130, 2016 primarily due to ~~the recovery of volumes lost in the first quarter of fiscal 2016 due to FDA remediation activities at our Ferentino site and~~ new product launches at our Greenville, ~~North~~NC ~~Carolina~~ site, ~~partially~~and ~~offset~~increased bysterile ~~lower~~business ~~revenues~~at ~~due~~our toItalian ~~the Swindon wind down~~sites.

• PDS revenues for the three months ended January 31, 2017 increased $3.8 million, or 7.8%, to $52.3 million, from $48.5 million for the three months ended January 31, 2016 primarily due to continued expansion of PDS services at our Greenville, North Carolina site and increased development activities at our European sites.39

• ~~DSS~~PDS revenues for the three months ended ~~January~~April 3130, 2017 increased $314.04 million, or 318.32%, to $~~129~~57.98 million, from $9853.94 million for the three months ended ~~January~~April 3130, 2016 primarily ~~from~~due ~~significant~~to ~~growth~~recoveries at our ~~Biologics~~Ferentino ~~sites~~site ~~and~~as ~~higher~~well ~~API~~as ~~batch~~continued ~~revenue~~growth ~~from~~in ~~increased~~our ~~customer~~Canadian ~~requirements~~sites.

35• DSS revenues for the three months ended April 30, 2017 increased $1.3 million, or 1.0%, to $129.2 million from $127.9 million for the three months ended April 30, 2016 primarily from increased revenues from the RCI Acquisition, higher shipments in our European API business and increased activity in our Biologics business, partially offset by declining sales in our legacy US API sites.

Gross profit for the three months ended ~~January~~April 3130, 2017 increased $302.84 million, or ~~31.~~1.7%, to $~~129~~140.7 million, from $98138.93 million for the three months ended ~~January~~April 3130, 2016. The ~~increase~~decrease in gross profit margin from 2429.45% for the three months ended ~~January~~April 3130, 2016 to 2829.41% for the three months ended ~~January~~April 3130, 2017 was primarily due to increased investment in quality and other manufacturing support ahead of increased commercialization of our Biologics business, as well as unfavorable mix, partially offset by flow through from increased revenues and the elimination of FDA remediation costs at our Ferentino facility present in prior year gross profit.

Selling, general and administrative expenses for the three months ended ~~January~~April 3130, 2017 increased $717.43 million, or 1023.01%, to $8192.1 million, from $7374.78 million for the three months ended ~~January~~April 3130, 2016, primarily due to increased incentive and stock based compensation, inhigher ~~addition to increased consulting and~~ salary costs associated with the Company's growth strategy and increased public company compliance costs.

Acquisition and integration costs for the three months ended ~~January~~April 3130, 2017 increased $0.95 million to $38.51 million from $27.6 million for the three months ended ~~January~~April 3130, 2016. Acquisition and integration costs during the three months ended ~~January~~April 3130, 2017 primarily related to the Roche Acquisition and other corporate development activities while acquisition and integration costs for the three months ended ~~January~~April 3130, 2016 primarily related to ~~continued~~due ~~Irix~~diligence ~~and~~on ~~Agere~~potential ~~integration and~~ corporate development ~~activity costs~~transactions. The nature of these costs includes due diligence costs, consultants, system and customer conversions, and other integration-related costs. These costs are recognized as operating expenses as incurred.

Other operating loss for the three months ended ~~January~~April 3130, 2017 was $30.65 million, ~~which~~compared ~~primarily relates~~ to ~~the~~$1.2 ~~mark~~million tofor ~~market activity on~~ the ~~Biologics earnout. For the~~ three months ended ~~January~~April 3130, 2016~~, the other operating gain of $4~~.9 ~~million~~These ~~related~~amounts relate to the Company's ~~revising~~mark ~~the~~to ~~earnout~~market ~~calculation~~adjustments ~~upon~~on ~~assuming~~ the earnout liability.

Interest expense for the three months ended ~~January~~April 3130, 2017 was $2830.28 million compared to $4342.86 million for the three months ended ~~January~~April 3130, 2016. The decrease in interest expense is primarily due to the redemption of the Senior PIK Toggle Notes in the fourth quarter of 2016.

~~Benefit~~Refinancing ~~from~~expense ~~income taxes~~ for the three months ended ~~January~~April 3130, 2017 ~~and 2016~~ was $216.3 million ~~and $0.7 million~~, ~~respectively.~~which ~~The~~related ~~increase in tax benefit for the three months ended January 31, 2017 was primarily attributable~~ to ~~changes in~~ the ~~Company’s~~refinancing ~~jurisdictional combination~~ of ~~pre-tax income,~~ the Company’'s ~~change~~Credit inFacility ~~tax classification of a United States subsidiary ("US subsidiary") and changes to other discrete tax items, which may have unique tax implications, depending on the nature of the item~~Agreement. The ~~current year benefit was largely affected by the~~ Company ~~filing~~did annot ~~election~~incur torefinancing ~~change~~expenses the tax classification of a US subsidiary from a partnership to an association taxable as a corporation. As a result of the change in tax classification, the Company recognized a $28.3 million deferred tax benefit related to the change in its deferred tax assets and liabilities. The Company previously accounted for the ~~deferred~~three ~~tax~~months ~~basis~~ended ~~difference~~April ~~using~~30, ~~outside basis of the partnership's investments~~2016. The Company derecognized the deferred tax liability for the outside basis difference and recognized deferred tax assets and liabilities for existing temporary differences between the tax basis and financial reporting basis of the assets and liabilities of the subsidiary.

WeBenefit ~~recorded~~from aincome ~~net~~taxes ~~loss~~for ~~from~~the ~~discontinued~~three ~~operations~~months ofended April 30, 2017 was $2.1.5 million and provision for income taxes for the three months ended ~~January~~April 3130, 2016 aswas a$0.7 ~~result~~million. ofThe ~~miscellaneous~~increase ~~transaction~~in ~~activity~~tax ~~with~~benefit ~~our~~for ~~discontinued~~the ~~operations.~~three Nomonths ~~discontinued~~ended ~~operations~~April ~~activity~~30, 2017 was ~~recorded~~primarily ~~for~~attributable to changes in the ~~three~~Company’s ~~months~~jurisdictional ~~ended~~combination ~~January~~of 31pre-tax income and changes to other discrete tax items, ~~2017~~which may have unique tax implications, depending on the nature of the item.

We recorded a net loss from discontinued operations of $1.0 million for the three months ended April 30, 2016 as a result of miscellaneous transaction activity with our discontinued operations. No discontinued operations activity was recorded for the three months ended April 30, 2017.

Adjusted EBITDA Reconciliation

A reconciliation of Adjusted EBITDA to net income from continuing operations is set forth below:

3640

	Three months ended January 31,
	Three months ended April 30,
	2017		2016
(in millions of U.S. dollars)	$		$
Total Adjusted EBITDA	8294.52		5998.0
Depreciation and amortization	(2734.63	)	(2627.40	)
Repositioning expenses (1)	(12.32	)	(1.23	)
Acquisition and integration costs	(38.51	)	(27.6	)
Interest expense, net	(2830.28	)	(4342.86	)
Benefit from income taxes	21.3		0.7
Benefit from (provision for) income taxes	1.5		(0.7	)
Operational initiatives related consulting costs	(1.1	)	(1.4	)
Refinancing expenses	(6.3	)	—
Operational initiatives related consulting costs	(1.4	)	(1.9	)
IPO costs	—		(0.4	)
Acquisition related litigation expenses	(2.3.7	)	(1.0.9	)
Stock based compensation expense	(47.0	)	(12.0	)
FDA remediation costs	—		(810.41	)
Environmental remediation costs	(3.7	)	—
Bargain purchase gain	26.4		—
Other	(30.87	)	6(1.56	)
Net income (loss) from continuing operations	28.3		(20.0	)
Net income from continuing operations	27.6		1.9

(1) Repositioning expenses for the three months ended ~~January~~April 3130, 2017 includes $0.74 million of inventory reserves related to the Swindon wind down recorded in cost of goods sold.

The following provides certain information regarding our business segments for the three months ended April 30, 2017 and 2016:

	Three months ended January 31,
	Three months ended April 30,
	2017		2016		$		%
(in millions of U.S. dollars)	$		$		Change		Change
Revenues
Drug Product Services	~~275~~297.2		~~258~~287.54		169.78		63.54
Pharmaceutical Development Services	5257.38		4853.54		34.84		7.8.2
Drug Substance Services	129.92		98127.9		311.03		311.30
Total Revenues	457.4		405.9		51.5		12.7
Inter-segment Eliminations	(0.8	)	(0.1	)	(0.7	)	*
Total Revenues	483.4		468.6		14.8		3.2
Adjusted EBITDA
Drug Product Services	6177.4		5572.17		64.37		116.45
Pharmaceutical Development Services	1618.34		1316.87		21.57		1810.12
Drug Substance Services	3226.01		1430.8		17(4.27	)	~~116~~(15.23	)
Other	(27.25	)	(2422.72	)	(2.5.3	)	(1023.19	)
Total Adjusted EBITDA	82.5		59.0		23.5		39.8
Inter-segment Eliminations	(0.2	)	—		(0.2	)	*
Total Adjusted EBITDA	94.2		98.0		(3.8	)	(3.9	)

* Not meaningful

Drug Product Services

Total DPS revenues for the three months ended ~~January~~April 3130, 2017 increased $169.78 million, or 63.54%, to $~~275~~297.2 million, from $~~258~~287.54 million for the three months ended ~~January~~April 3130, 2016. On a constant currency basis, DPS revenues would have increased by $1914.03 million, or 75.40%. The increase was primarily due to ~~the recovery of volumes lost in the first quarter of fiscal 2016 due to FDA remediation activities at our Ferentino site and~~ new product launches at our Greenville, ~~North~~NC ~~Carolina~~ site, ~~partially~~and ~~offset~~increased bysterile ~~lower~~business ~~revenues~~at ~~due~~our toItalian ~~the Swindon wind down~~sites.

Total DPS Adjusted EBITDA for the three months ended January 31, 2017 increased $6.3 million, or 11.4%, to $61.4 million, from $55.1 million for the three months ended January 31, 2016. This represents an Adjusted EBITDA margin of 22.3% for the three months ended January 31, 2017 compared to 21.3% for the three months ended January 31, 2016. The increase in adjusted 41

37Total DPS Adjusted EBITDA for the three months ended April 30, 2017 increased $4.7 million, or 6.5%, to $77.4 million, from $72.7 million for the three months ended April 30, 2016. This represents an Adjusted EBITDA margin of 26.0% for the three months ended April 30, 2017 compared to 25.3% for the three months ended April 30, 2016. The increase in Adjusted EBITDA and margin was primarily due to the flow through from the higher revenue as well as favorable foreign exchange impacts, partially offset by higher inventory write-offs. Consistent with management's definition of Adjusted EBITDA, total DPS Adjusted EBITDA for the three months ended April 30, 2017 did not include repositioning expenses of $2.1 million and stock based compensation of $1.4 million.

EBITDA and margin was primarily due to the flow through from the higher revenue partially offset by increased investment in our quality function. Consistent with management's definition of Adjusted EBITDA, total DPS Adjusted EBITDA for the three months ended January 31, 2017 did not include environmental remediation expenses of $3.7 million and repositioning expenses of $0.9 million.

Pharmaceutical Development Services

Total PDS revenues for the three months ended ~~January~~April 3130, 2017 increased by $34.84 million, or 7.8.2%, to $5257.38 million from $4853.54 million for the three months ended ~~January~~April 3130, 2016. ~~Foreign exchange rates had a minimal impact on revenue in the quarter.~~ Higher revenue was primarily due to ~~continued~~recoveries ~~expansion of PDS services~~ at our ~~Greenville,~~Ferentino ~~North Carolina~~ site ~~and~~as ~~increased~~well ~~development~~as ~~activities~~continued atgrowth in our ~~European~~Canadian sites.

Total PDS Adjusted EBITDA for the three months ended ~~January~~April 3130, 2017 increased $21.57 million, or 1810.12%, to $1618.34 million, from $1316.87 million for the three months ended ~~January~~April 3130, 2016. This represents an Adjusted EBITDA margin of 31.28% for the three months ended ~~January~~April 3130, 2017 compared to 2831.53% for the three months ended ~~January~~April 3130, 2016. The increase in ~~adjusted~~Adjusted EBITDA and margin was primarily due to the flow through from the higher revenue, partially offset by investment in headcount ahead of expected continued growth.

Drug Substance Services

Total DSS revenues for the three months ended ~~January~~April 3130, 2017 increased by $311.03 million, or 311.30%, to $129.92 million from $98127.9 million for the three months ended ~~January~~April 3130, 2016. On a constant currency basis, DSS revenues would have increased by $324.16 million, or 323.56%. Increased revenue was primarily ~~due~~from toincreased ~~significant~~revenues ~~growth~~from atthe RCI Acquisition, higher shipments in our ~~Biologics~~European ~~sites~~API business and ~~higher~~increased ~~API~~activity ~~batch~~in ~~revenue~~our ~~from~~Biologics ~~increased~~business, ~~customer~~partially ~~requirements~~offset by declining sales in our legacy US API sites.

Total DSS Adjusted EBITDA for the three months ended ~~January~~April 3130, 2017 ~~increased~~decreased by $174.27 million, or ~~116~~15.23%, to $3226.01 million from $1430.8 million for the three months ended ~~January~~April 3130, 2016. This represents an Adjusted EBITDA margin of 2420.62% for the three months ended ~~January~~April 3130, 2017 compared to 1524.01% for the three months ended ~~January~~April 3130, 2016. The ~~increase~~decrease in ~~adjusted~~Adjusted EBITDA and margin ~~was~~is primarily due to ~~the~~increased investment in quality and other manufacturing support ahead of increased commercialization of our Biologics business, partially offset by flow through from the ~~higher~~RCI ~~revenue~~Acquisition. Consistent with management's definition of Adjusted EBITDA, total DSS Adjusted EBITDA for the three months ended April 30, 2017 did not include acquisition and integration expenses of $2.5 million and stock based compensation of $0.6 million.

Other

Total Other Adjusted EBITDA loss for the three months ended ~~January~~April 3130, 2017 ~~increased~~decreased by $2.5.3 million, or 1023.19%, to a loss of $27.25 million from a loss of $2422.72 million for the three months ended ~~January~~April 3130, 2016. ~~The increase was primarily~~ due to increased ~~incentive~~ compensation ~~and increased salary~~ costs associated with the Company's growth strategy. Consistent with management's definition of Adjusted EBITDA, total Other Adjusted EBITDA loss for the three months ended ~~January~~April 3130, 2017 ~~excludes~~did ~~$3.3~~not ~~million~~include of acquisition and integration costs of $5.5 million, refinancing expenses of $6.3 million, stock-based compensation ~~expense~~ of $34.8 million, Procaps litigation expenses of $2.3.7 million and consulting costs relating to operational excellence initiatives of $1.03 million.

Six months ended April 30, 2017 compared to six months ended April 30, 2016



	Six months ended April 30,
	2017		2016		$		%
(in millions of U.S. dollars)	$		$		Change		Change
Revenues	940.8		874.5		66.3		7.6
Cost of goods sold	670.4		637.3		33.1		5.2
Gross profit	270.4		237.2		33.2		14.0
Selling, general and administrative expenses	173.2		148.5		24.7		16.6
Research and development	1.1		1.3		(0.2	)	(15.4	)
Repositioning expenses	2.4		2.5		(0.1	)	(4.0	)
Acquisition and integration costs	11.6		10.2		1.4		13.7
Other operating expense (income)	4.1		(3.7	)	7.8		*
Operating income	78.0		78.4		(0.4	)	(0.5	)
Interest expense, net	59.0		86.4		(27.4	)	(31.7	)
Foreign exchange loss, net	5.5		11.4		(5.9	)	*
Refinancing expenses	6.3		—		6.3		—
Bargain purchase gain	(26.4	)	—		(26.4	)	—
Other loss (income), net	0.5		(1.3	)	1.8		*
Income (loss) before income taxes	33.1		(18.1	)	51.2		282.9
Benefit from income taxes	(22.8	)	—		(22.8	)	*
Net income (loss) from continuing operations	55.9		(18.1	)	74.0		408.8
Net loss from discontinued operations	—		(3.1	)	3.1		*
Net income (loss)	55.9		(21.2	)	77.1		(363.7	)

* Not meaningful

Operating Income Summary

Revenues for the six months ended April 30, 2017 increased $66.3 million, or 7.6%, to $940.8 million, from $874.5 million for the six months ended April 30, 2016. On a constant currency basis, revenue would have increased $78.6 million, or 9.0%.

•

DPS revenues for the six months ended April 30, 2017 increased $26.5 million, or 4.9%, to $572.4 million, from $545.9 million for the six months ended April 30, 2016 primarily due to the recovery of volumes lost in the first half of fiscal 2016 due to FDA remediation activities at our Ferentino site and new product launches at our Greenville, North Carolina site, partially offset by lower revenues due to the Swindon wind down.


•	PDS revenues for the six months ended April 30, 2017 increased $8.2 million, or 8.0%, to $110.1 million, from $101.9 million for the six months ended April 30, 2016 primarily due to recoveries at our Ferentino site as well as continued growth in most North America sites.


•	DSS revenues for the six months ended April 30, 2017 increased $32.3 million, or 14.2%, to $259.1 million, from $226.8 million for the six months ended April 30, 2016 primarily from increased revenues from the RCI Acquisition, higher shipments in our European API business and increased activity in our Biologics business, partially offset by lower growth in our legacy US API sites.

Gross profit for the six months ended April 30, 2017 increased $33.2 million, or 14.0%, to $270.4 million, from $237.2 million for the six months ended April 30, 2016. The increase in gross profit margin from 27.1% for the six months ended April 30, 2016 to 28.7% for the six months ended April 30, 2017 was primarily due to flow through from increased revenues and the elimination of FDA remediation costs at our Ferentino facility present in prior year gross profit, partially offset by increased investment in quality and other manufacturing support ahead of increased commercialization of our Biologics business and environmental remediation costs recorded in the first quarter of fiscal 2017.

Selling, general and administrative expenses for the six months ended April 30, 2017 increased $24.7 million, or 16.6%, to $173.2 million, from $148.5 million for the six months ended April 30, 2016 primarily due to increased incentive and stock

based compensation, higher salary costs associated with the Company's growth strategy and increased public company compliance costs.

Acquisition and integration costs for the six months ended April 30, 2017 increased $1.4 million, to $11.6 million, from $10.2 million for the six months ended April 30, 2016. Acquisition and integration costs during the six months ended April 30, 2017 primarily related to the RCI Acquisition and other corporate development activities while acquisition and integration costs for the six months ended April 30, 2016 primarily related to due diligence on potential corporate development transactions. The nature of these costs includes due diligence costs, consultants, system and customer conversions, and other integration-related costs. These costs are recognized as operating expenses as incurred.

Other operating loss for the six months ended April 30, 2017 was $4.1 million, which primarily relates to the mark to market activity on the Biologics earnout. For the six months ended April 30, 2016, the other operating gain of $3.7 million related to the Company revising the earnout calculation upon assuming the earnout liability as well as marking the liability to market on an ongoing basis.

Interest expense for the six months ended April 30, 2017 was $59.0 million compared to $86.4 million for the six months ended April 30, 2016. The decrease in interest expense is primarily due to the redemption of the Senior PIK Toggle Notes in the fourth quarter of 2016.

Refinancing expense for the six months ended April 30, 2017 was $6.3 million, which related to the refinancing of the Company's Credit Facility Agreement. The Company did not incur refinancing expenses for the six months ended April 30, 2016.

Income tax benefit for the six months ended April 30, 2017 was $22.8 million and income tax expense for the six months ended April 30, 2016 was $0.0 million. The increase in tax benefit for the six months ended April 30, 2017 was primarily attributable to changes in the Company’s jurisdictional combination of pre-tax income, the Company’s change in tax classification of a United States subsidiary ("US subsidiary") and changes to other discrete tax items, which may have unique tax implications, depending on the nature of the item. The current year benefit was largely affected by the Company filing an election to change the tax classification of a US subsidiary from a partnership to an association taxable as a corporation. As a result of the change in tax classification, the Company recognized a $28.3 million deferred tax benefit related to the change in its deferred tax assets and liabilities. The Company previously accounted for the deferred tax basis difference using outside basis of the partnership's investments. The Company derecognized the deferred tax liability for the outside basis difference and recognized deferred tax assets and liabilities for existing temporary differences between the tax basis and financial reporting basis of the assets and liabilities of the subsidiary.

We recorded a net loss from discontinued operations of $3.1 million for the six months ended April 30, 2016 which related to minor adjustments as a result of miscellaneous transaction activity with our discontinued operations. No discontinued operations activity was recorded for the six months ended April 30, 2017.

Revenues and Adjusted EBITDA by Business Segment

A reconciliation of Adjusted EBITDA to net loss from continuing operations is set forth below:



	Six months ended April 30,
	2017		2016
(in millions of U.S. dollars)	$		$
Total Adjusted EBITDA	176.7		157.0
Depreciation and amortization	(61.9	)	(53.5	)
Repositioning expenses ⁽¹⁾	(3.5	)	(2.5	)
Acquisition and integration costs	(11.6	)	(10.2	)
Interest expense, net	(59.0	)	(86.4	)
Benefit from income taxes	22.8		—
Refinancing expenses	(6.3	)	—
Operational initiatives related consulting costs	(2.5	)	(3.3	)
IPO costs	—		(0.8	)
Acquisition related litigation expenses	(6.0	)	(1.9	)
Stock based compensation expense	(11.0	)	(3.0	)
FDA remediation costs	—		(18.5	)
Environmental remediation costs	(3.7	)	—
Bargain purchase gain	26.4		—
Other	(4.5	)	5.0
Net income (loss) from continuing operations	55.9		(18.1	)

(1) Repositioning expenses for the three months ended April 30, 2017 includes $1.1 million of inventory reserves related to the Swindon wind down recorded in cost of goods sold.

The following provides certain information regarding our business segments for the six months ended April 30, 2017 and 2016:



	Six months ended April 30,
	2017		2016		$		%
(in millions of U.S. dollars)	$		$		Change		Change
Revenues
Drug Product Services	572.4		545.9		26.5		4.9
Pharmaceutical Development Services	110.1		101.9		8.2		8.0
Drug Substance Services	259.1		226.8		32.3		14.2
Other	—		—		—		—
Inter-segment Eliminations	(0.8	)	(0.1	)	(0.7	)	*
Total Revenues	940.8		874.5		67.0		7.7
Adjusted EBITDA
Drug Product Services	138.8		127.8		11.0		8.6
Pharmaceutical Development Services	34.7		30.5		4.2		13.8
Drug Substance Services	58.1		45.6		12.5		27.4
Other	(54.7	)	(46.9	)	(7.8	)	(16.6	)
Inter-segment Eliminations	(0.2	)	—		(0.2	)	*
Total Adjusted EBITDA	176.7		157.0		19.9		12.7

Drug Product Services

Total DPS revenues for the six months ended April 30, 2017 increased $26.5 million, or 4.9%, to $572.4 million, from $545.9 million for the six months ended April 30, 2016. On a constant currency basis, DPS revenues would have increased $33.3 million, or 6.1%. The increase was primarily due to the recovery of volumes lost in the first half of fiscal 2016 due to FDA

remediation activities at our Ferentino site and new product launches at our Greenville, North Carolina site, partially offset by lower revenues due to the Swindon wind down.

Total DPS Adjusted EBITDA for the six months ended April 30, 2017 increased $11.0 million, or 8.6%, to $138.8 million, from $127.8 million for the six months ended April 30, 2016. This represents an Adjusted EBITDA margin of 24.2% for the six months ended April 30, 2017 compared to 23.4% for the six months ended April 30, 2016. The increase in Adjusted EBITDA and margin was primarily due to the flow through from the higher revenue partially offset by increased investment in

our quality function. Consistent with management's definition of Adjusted EBITDA, total DPS Adjusted EBITDA for the six months ended April 30, 2017 did not include environmental remediation expenses of $3.7 million, repositioning expenses

of $3.0 million and stock-based compensation of $1.6 million.

Pharmaceutical Development Services

Total PDS revenues for the six months ended April 30, 2017 increased by $8.2 million, or 8.0%, to $110.1 million from $101.9 million for the six months ended April 30, 2016. On a constant currency basis, PDS revenues increased by $9.3 million, or 9.1%. Higher revenue was primarily due to recoveries at our Ferentino site as well as continued growth in most North America sites.

Total PDS Adjusted EBITDA for the six months ended April 30, 2017 increased $4.2 million, or 13.8%, to $34.7 million from $30.5 million for the six months ended April 30, 2016. This represents an Adjusted EBITDA margin of 31.5% for the six months ended April 30, 2017 compared to 29.9% for the six months ended April 30, 2016. The increase in adjusted

EBITDA and margin was primarily due to the flow through from the higher revenue.

Drug Substance Services

Total DSS revenues for the six months ended April 30, 2017 increased by $32.3 million, or 14.2%, to $259.1 million from $226.8 million for the six months ended April 30, 2016. On a constant currency basis, DSS revenues increased by $36.7 million, or 16.2%. Increased revenue was primarily from increased revenues from the RCI Acquisition, higher shipments in our European API business and increased activity in our Biologics business, partially offset by lower growth in our legacy US API sites.

Total DSS Adjusted EBITDA for the six months ended April 30, 2017 increased $12.5 million, or 27.4%, to $58.1 million from $45.6 million for the six months ended April 30, 2016. This represents an Adjusted EBITDA margin of 22.4% for the six months ended April 30, 2017 compared to 20.1% for the six months ended April 30, 2016. The increase is primarily due to flow through from higher volumes, including increased revenues from the RCI Acquisition, partially offset by increased investment in quality and other manufacturing support ahead of increased commercialization of our Biologics business. Consistent with management's definition of Adjusted EBITDA, total DSS Adjusted EBITDA for the six months ended April 30, 2017 did not include acquisition and integration expenses of $2.6 million and stock based compensation of $0.7 million.

Other

Total Other Adjusted EBITDA loss for the six months ended April 30, 2017 increased by $7.8 million, or 16.6%, to a loss of $54.7 million from a loss of $46.9 million for the six months ended April 30, 2016. The increase was primarily due to increased compensation costs associated with the Company's growth strategy. Consistent with management's definition of Adjusted EBITDA, total Other Adjusted EBITDA for the six months ended April 30, 2017 did not include acquisition and integration expenses of $8.8 million, stock-based compensation expense of $8.6 million, Procaps litigation expenses of $6.0 million, refinancing expenses of $6.3 million and consulting costs relating to operational excellence initiatives of $2.3 million.

Liquidity and Capital Resources

Overview

Cash and cash equivalents totaled $8992.07 million at ~~January~~April 3130, 2017 and $165.0 million at October 31, 2016. Our total debt was $2,~~106~~088.28 million at ~~January~~April 3130, 2017 and $2,~~119~~068.07 million at October 31, 2016.

Our primary source of liquidity is cash flow from operations and available borrowings under our credit arrangements. Our principal uses of cash have been for operating expenditures, capital expenditures, repositioning expenditures, debt servicing requirements, integration costs associated with our acquisitions and employee benefit obligations. We expect cash flow from operations, cash on hand and available borrowing under our current revolver to be sufficient to fund our existing level of operating expenses, capital expenditures, interest expense and debt payments for at least the next 12 months.

From time to time, we evaluate strategic opportunities, including potential acquisitions, divestitures or investments in complementary businesses, and we anticipate continuing to make such evaluations. We may also access capital markets through the issuance of debt or equity securities in connection with the acquisition of complementary businesses or other significant assets or for other strategic opportunities. Our ability to make acquisitions, divestitures and investments, to issue debt and to declare and pay dividends is limited to varying degrees by the terms and restrictions contained in our debt instruments described below.

Our principal ongoing investment activities are project-related and sustaining capital programs at our network of sites. The majority of our capital allocation is normally invested in project-related programs, which are defined as outlays that will generate growth in capacity and revenues, while sustaining expenditures related to the preservation of existing assets and capacity.

generate growth in capacity and revenues, while sustaining expenditures related to the preservation of existing assets and capacity.

If our cash flow is not sufficient to service our debt and adequately fund our business, we may be required to seek further additional financing or refinancing or dispose of assets. We may not be able to affect any of these alternatives on satisfactory terms or at all. In addition, our financial leverage could adversely affect our ability to raise additional capital to fund our operations, could impair our ability to respond to operational challenges, changing business and economic conditions and new business opportunities and may make us vulnerable in the event of a downturn in our business.

Summary of Cash Flows

Cash Used In Operating Activities

The following table summarizes the cash used in operating activities for the periods indicated:

	Three months ended January 31,
	Six months ended April 30,
	2017		2016
(in millions of U.S. dollars)	$		$
Cash used in operating activities of continuing operations	(11.7	)	(68.8	)
Cash provided by (used in) operating activities of continuing operations	20.9		(43.0	)
Cash used in operating activities of discontinued operations	—		(02.49	)
Cash used in operating activities	(11.7	)	(69.2	)
Cash provided by (used in) operating activities	20.9		(45.9	)

Cash ~~used~~provided inby operating activities of continuing operations for the ~~three~~six months ended ~~January~~April 3130, 2017 ~~decreased~~increased $5763.19 million, to a source of $1120.79 million, from a use of $6843.80 million for the ~~three~~six months ended ~~January~~April 3130, 2016. The ~~decrease~~increase was primarily due to improved operating results and working capital performance, partially offset by a reduced benefit from deferred revenues compared to the prior period.

Cash Used in Investing Activities

The following table summarizes the cash used in investing activities for the periods indicated:

	Three months ended January 31,
	Six months ended April 30,
	2017		2016
(in millions of U.S. dollars)	$		$
Cash used in investing activities of continuing operations	(59109.05	)	(6492.27	)
Cash used in investing activities of discontinued operations	—		(3.3	)
Cash used in investing activities	(59109.05	)	(6796.50	)

Cash used for investing activities of continuing operations for the ~~three~~six months ended ~~January~~April 3130, 2017 ~~decreased~~increased $516.28 million, to $59109.05 million from $6492.27 million for the ~~three~~six months ended ~~January~~April 3130, 2016. Cash used for investing activities in both periods primarily relate to project related capital expenditures.

Cash Used in Financing Activities

The following table summarizes the cash used in financing activities for the periods indicated:

	Three months ended January 31,
	2017		2016
(in millions of U.S. dollars)	$		$
Cash used in financing activities of continuing operations	(5.3	)	(5.2	)
Cash used in financing activities of discontinued operations	—		—
Cash used in financing activities	(5.3	)	(5.2	)

Cash used by financing activities for the three months ended January 31, 2017 was $5.3 million compared to cash provided by financing activities of $5.2 million for the three months ended January 31, 2016. Cash used in financing activities in both periods relate to various repayments required by our debt agreements.



	Six months ended April 30,
	2017	2016
(in millions of U.S. dollars)	$	$
Cash provided by (used in) financing activities of continuing operations	17.6	(9.2	)
Cash provided by (used in) financing activities of discontinued operations	—	—
Cash provided by (used in) financing activities	17.6	(9.2	)

Cash provided by financing activities for the six months ended April 30, 2017 was $17.6 million compared to cash used in financing activities of $9.2 million for the six months ended April 30, 2016. Cash provided by financing activities for the six months ended April 30, 2017 primarily related to long term debt proceeds and repayments as a result of the Refinancing and cash provided by financing activities for the six months ended April 30, 2016 primarily related to various repayments required by our debt agreements.

Financing Arrangements

392017 Term Loans and Revolving Line

On April 20, 2017, the Company completed the refinancing of its term loans and revolving credit facility (the "Refinancing'") existing credit facility (the "Refinancing") by entering into Amendment No. 4 of the original credit facility agreement dated as of March 11, 2014 (the "Credit Facility"). Under Amendment No. 4, the existing term loans were refinanced with new term loans ("Tranche B Term Loans"). The Tranche B Term Loans consisted of (i) Tranche B US Dollar Term Loans in the amount of $1.133 billion and ~~Revolving~~(ii) ~~Line~~Tranche B Euro Term Loans in the amount of €463.1 million, or $496.3 million. The Tranche B Term Loans will mature on April 20, 2024.

OnUnder ~~March~~Amendment ~~11,~~No. ~~2014~~4, ~~we completed~~ the ~~refinancing~~Company ofincreased ~~its existing credit facility (~~the ~~"Refinancing"),~~size ~~pursuant~~of ~~to which it entered into a credit agreement (~~the ~~"Credit~~revolver ~~Agreement") documenting a new credit~~ facility (the "~~Credit~~Revolving Facility") ~~for~~to ~~a USD denominated secured term loan in the amount of~~ $~~985.0 million and a Euro denominated secured term loan in the amount of €~~250.0 million, ~~or $345.0 million, (together, with the incremental term loans described below, the "Secured Term Loans") and a secured multi-currency revolving line in the amount~~ of ~~$200.0~~which ~~million~~up ~~(the "Secured Revolving Facility"). Up~~ to $75.0 million ~~of the Secured Revolving Facility~~ is available for letters of credit. ~~The~~Of ~~Secured~~the ~~Term~~total ~~Loans~~revolving ~~mature on March 10~~commitments, ~~2021,~~$87.1 ~~and~~million ~~the~~will ~~Secured~~terminate ~~Revolving Facility matures~~ on March 1011, 2019. ~~The USD denominated Secured Term Loan bears interest at a rate per annum equal to, at~~ (the ~~option~~"Tranche ofA ~~the~~Commitments") ~~Company,~~and ~~a base rate plus 2.25% or LIBOR with a floor of 1% plus 3.25%. The Euro denominated Secured Term Loan bears interest at a rate per annum equal to, at~~ the ~~option~~remaining ofcommitments (the ~~Company,~~"Tranche aB ~~base~~Commitments") rate plus 2.50% or LIBOR with a floor of 1% plus 3.50%. Borrowings under the Secured Revolving Facility bear interest for eurodollar loans at LIBOR plus 3.25%, Canadian prime rate loans at the Canadian prime rate plus 2.25%, and base rate loans at the base rate plus 2.25%. We will ~~also~~terminate ~~pay a commitment fee of 0.50% per annum~~ on ~~the~~April ~~unused~~20, ~~portion of the Secured Revolving Facility with a step down to 0~~2022.~~375% when the First Lien Leverage Ratio (as defined below) is less than or equal to 3.00 to 1.00.~~

OnThe ~~September~~US ~~29,~~Dollar ~~2014,~~denominated weTranche ~~entered~~B ~~into~~Term ~~Amendment~~Loans ~~No.~~bear 1interest toat ~~the~~a ~~Credit~~rate ~~Agreement~~per ~~which~~annum ~~added~~equal ~~two~~to, ~~incremental~~at ~~term~~the ~~loans~~option toof the ~~Credit~~Company, ~~Facility;~~ a ~~USD~~base ~~denominated~~rate ~~term~~plus ~~loan~~2.25% inor ~~the~~LIBOR ~~amount~~with ofa ~~$160.0~~floor ~~million,~~of ~~and~~1% aplus ~~Euro~~3.25%. ~~denominated~~The ~~term~~margin ~~loan~~applied into the ~~amount~~base ofrate ~~€70.0~~will ~~million,~~be orreduced ~~$88.7~~to ~~million~~2.0% Weand ~~used~~ the ~~proceeds~~margin ~~for~~applied ~~these~~to ~~two~~LIBOR ~~incremental~~will ~~term~~be ~~loans~~reduced to ~~fund~~3.0% aif ~~portion of~~ the ~~purchase~~Company ~~price~~achieves, ~~for~~and ~~the~~as ~~Gallus~~long ~~Acquisition.~~as ~~The other material terms of~~ the ~~incremental~~Company ~~term~~maintains, ~~loans~~a ~~are~~B2/Stable ~~identical~~credit torating ~~those~~or ofbetter ~~the~~from ~~initial~~Moody's ~~term~~Inventors ~~loans~~Service, Inc.

OnThe ~~March 31, 2015, we entered into Amendment No. 2 to the Credit Agreement which added two incremental term loans to the Credit Facility; a~~ Euro denominated ~~term~~Tranche ~~loan~~B inTerm ~~the~~Loans ~~amount~~bear ofinterest ~~€155.0~~at ~~million, or $164.3 million and~~ a ~~USD~~rate ~~denominated~~per ~~term~~annum ~~loan~~equal ~~in the amount of $20.0 million. We used the proceeds for these two incremental term loans~~ to ~~fund~~LIBOR ~~the~~with ~~purchase~~a ~~price~~floor of ~~the~~1% ~~Irix~~plus ~~Acquisition~~3. ~~The other material terms of the incremental term loans are identical to those of the initial term loans~~00%.

AsBorrowings ofunder ~~January 31,~~the ~~2017~~Revolving Facility bear interest at a rate per annum equal to, weat ~~held~~the option of the Company, a ~~$20~~base rate plus 2.025% ~~million~~or ~~balance~~LIBOR plus an applicable margin of 3.25%. The Company will also pay a commitment fee of 0.50% per annum on the ~~Secured~~unused portion of the Revolving Facility with a step down to 0.375% ~~The~~when ~~facility~~the ~~has~~First aLien ~~rolling~~Leverage ~~maturity~~Ratio ~~date~~(as ~~and~~defined ~~the~~below) ~~balance~~is ~~will~~less ~~renew~~than ~~until~~or ~~paid~~equal to 3.00 to 1.00.

Under the Secured Revolving Facility, we are required to maintain a First Lien Leverage Ratio below a certain amount for each of the Testing Periods as set forth in the Credit Agreement after such time as we have borrowed 25% of the available credit under the Secured Revolving Facility, or $50.0 million . For purposes of the Credit Agreement, a Testing Period means a single period consisting of the most recent four consecutive fiscal quarters ending on the covenant determination date. As of ~~January~~April 3130, 2017, ~~we were not required to calculate~~ the ~~First~~Company ~~Lien Leverage Ratio as we have not~~ borrowed ~~25% or~~ $50.0 million ~~under~~against the ~~Secured~~ Revolving Facility., ~~The~~which ~~following~~will ~~table~~renew ~~discloses~~until ~~the maximum First Lien Leverage Ratios permitted under the Credit Agreement:~~paid.

Under the Revolving Facility, we are required to maintain a First Lien Leverage Ratio below a certain amount for each of the Testing Periods as set forth in the Credit Agreement after such time as we have borrowed 25% of the available credit under the Secured Revolving Facility, or $62.5 million. For purposes of the Credit Agreement, a Testing Period means a single period consisting of the most recent four consecutive fiscal quarters ending on the covenant determination date. As of April 30, 2017, we were not required to calculate the First Lien Leverage Ratio as we have not borrowed 25% or $62.5 million under the Secured Revolving Facility. The following table discloses the maximum First Lien Leverage Ratios permitted under the Credit Agreement:



Testing Period Ending	Maximum Ratio
April 30, 2014 through October 31, 2014	6.75 to 1.00
November 1, 2014 through October 31, 2015	6.50 to 1.00
November 1, 2015 through October 31, 2016	6.25 to 1.00
November 1, 2016 through October 31, 2017	6.00 to 1.00
November 1, 2017 and thereafter	5.75 to 1.00

"First Lien Leverage Ratio" is generally defined in the Credit Agreement as the ratio of (i) the sum of the aggregate principal amount of our and our restricted subsidiaries' indebtedness for borrowed money, principal amount of capital lease obligations and debt obligations evidenced by bonds, promissory notes, debentures or debt securities that is secured by a first priority lien on the collateral minus unrestricted cash and cash equivalents held by us and our restricted subsidiaries in each case set forth in the Credit Agreement to (ii) Consolidated EBITDA. Consolidated EBITDA is generally defined in the Credit Agreement as income (loss) from continuing operations before repositioning expenses, interest expense, foreign exchange losses reclassified from other comprehensive income (loss), refinancing expenses, acquisition-related costs, gains and losses on sale of capital assets, income taxes, asset impairment charges, depreciation and amortization, stock-based compensation expense, consulting costs related to our operational initiatives, purchase accounting adjustments, other income and expenses, non-cash charges, expenses related to the DPP Acquisition, pro forma cost savings from operational excellence initiatives and plant consolidations, pro forma synergies from the DPP Acquisition, and proceeds from business interruption insurance, among other adjustments. Consolidated EBITDA is not equivalent to Adjusted EBITDA, which is our measure of segment performance.

40We are required to make the following mandatory prepayments in respect of the Secured Term Loans: (i) 50% of Excess Cash Flow (as defined in the Credit Agreement) when we maintain a First Lien Leverage Ratio of greater than 4.00 to 1.00, with step downs to (a) 25% when we maintain a First Lien Leverage Ratio of less than or equal to 4.00 to 1.00 but greater than 3.50 to 1.00 and (b) 0% when we maintain a First Lien Leverage Ratio of less than or equal to 3.50 to 1.00; (ii) 100% of the net cash proceeds of certain asset sales (including insurance and condemnation proceeds), subject to thresholds, reinvestment rights and certain other exceptions; and (iii) 100% of the net cash proceeds of issuances of debt obligations, subject to certain exceptions and thresholds. "Excess Cash Flow" is generally defined as Consolidated EBITDA (as defined in the Credit Agreement) plus, (i) decreases in working capital, (ii) extraordinary or nonrecurring income or gains and (iii) certain other adjustments, minus, (a) increases in working capital, (b) cash interest, (c) cash taxes, (d) cash capital expenditures (e) scheduled debt amortization and (f) certain other adjustments. No Excess Cash Flow payment was required for fiscal 2015. As the Excess Cash Flow calculation is performed annually, no payment is due for the six months ended April 30, 2017. We may voluntarily repay borrowings under the Credit Facility at any time.

We are required to make the following mandatory prepayments in respect of the Secured Term Loans: (i) 50% of Excess Cash Flow (as defined in the Credit Agreement) when we maintain a First Lien Leverage Ratio of greater than 4.00 to 1.00, with step downs to (a) 25% when we maintain a First Lien Leverage Ratio of less than or equal to 4.00 to 1.00 but greater than 3.50 to 1.00 and (b) 0% when we maintain a First Lien Leverage Ratio of less than or equal to 3.50 to 1.00; (ii) 100% of the net cash proceeds of certain asset sales (including insurance and condemnation proceeds), subject to thresholds, reinvestment rights and certain other exceptions; and (iii) 100% of the net cash proceeds of issuances of debt obligations, subject to certain exceptions and thresholds. "Excess Cash Flow" is generally defined as Consolidated EBITDA (as defined in the Credit Agreement) plus, (i) decreases in working capital, (ii) extraordinary or nonrecurring income or gains and (iii) certain other adjustments, minus, (a) increases in working capital, (b) cash interest, (c) cash taxes, (d) cash capital expenditures (e) scheduled debt amortization and (f) certain other adjustments. No Excess Cash Flow payment was required for fiscal 2015. As the Excess Cash Flow calculation is performed annually, no payment is due for the three months ended January 31, 2017. We may voluntarily repay borrowings under the Credit Facility at any time.

If we fail to maintain the applicable First Lien Leverage Ratio, we may nevertheless avoid a default by (i) repaying outstanding borrowings under the Revolving Line in an amount sufficient to avoid triggering the First Lien Leverage Ratio for that fiscal quarter or (ii) accepting a cash contribution of qualified equity in an amount which, if treated as Consolidated EBITDA, would bring us into compliance with the applicable First Lien Leverage Ratio for that fiscal quarter, in each case during the 11 business days following the deadline for delivery of our compliance certificate for that fiscal quarter. In addition, maintenance of the First Lien Leverage Ratio is required only with respect to the Revolving Line; the Term Loans do not directly benefit from the financial covenant and, until the Revolving Line is terminated and all outstanding borrowings thereunder are accelerated, will remain unaffected by a default under the Revolving Line that arises from our failure to maintain the applicable First Lien Coverage Ratio.

As of ~~January~~April 3130, 2017, we were in compliance with the covenants in the Credit Facility.

Provided that we are in compliance with the First Lien Leverage Ratio test and no default under the Credit Agreement is continuing or would result therefrom, the covenant in the Credit Agreement that limits our ability to pay dividends or make other distributions to its shareholders generally permits (with certain exceptions and qualifications) us to pay dividends or make such distributions in an aggregate amount, when taken together with the aggregate amount of any prepayment, repurchase, redemption or defeasance of subordinated indebtedness, not to exceed the greater of (x) 3.00% of Consolidated Total Assets and (y) $65.0 million and (ii) in aggregate amount not to exceed the available amount (as defined in the Credit Agreement) at such time.

Consolidated EBITDA is based on the definition in the Credit Agreement, is not defined under U.S. GAAP and is subject to important limitations. We have included the calculation of Consolidated EBITDA, and associated reconciliations, for the period presented below as Consolidated EBITDA is a component of certain covenants under the Credit Agreement. Because not all companies use identical calculations, our presentation of Consolidated EBITDA may not be comparable to other similarly titled measures of other companies.

~~Our Consolidated EBITDA for the last four fiscal quarters ended January 31, 2017 based on the definition in our Credit Agreement is calculated as follows:~~49

41presented below as Consolidated EBITDA is a component of certain covenants under the Credit Agreement. Because not all companies use identical calculations, our presentation of Consolidated EBITDA may not be comparable to other similarly titled measures of other companies.

	Twelve months ended
	January 31, 2017
(in millions of U.S. dollars)	$
Consolidated EBITDA per Credit Agreement	455.1
Less:
Pro forma cost savings	(37.2	)
Other	0.2
Adjusted EBITDA	418.1
(Deduct) add:
Depreciation and amortization	(114.2	)
Repositioning expenses	(9.3	)
Acquisition and integration costs	(17.5	)
Interest expense, net	(144.8	)
Benefit from income taxes	44.6
Refinancing expenses	(21.6	)
Operational initiatives related consulting costs	(3.9	)
IPO costs	(1.6	)
Acquisition related litigation expenses	(5.3	)
Stock based compensation expense	(24.6	)
FDA remediation costs	(24.4	)
Environmental remediation costs	(3.7	)
Other	(8.7	)
Income from continuing operations	83.1
Add (deduct):
Depreciation and amortization	114.2
Stock-based compensation	24.6
Net change in non-cash working capital	(118.8	)
Net change in deferred revenues	57.9
Non-cash interest	24.7
Other, primarily changes in long-term assets and liabilities and deferred taxes	(67.8	)
Cash flows from operating activities of continuing operations	117.9
Cash flows from operating activities of discontinued operations	(2.5	)
Cash flows from operating activities	115.4
Cash flows from investing activities	(198.2	)
Cash flows from financing activities	(16.1	)

Our Consolidated EBITDA for the last four fiscal quarters ended April 30, 2017 based on the definition in our Credit Agreement is calculated as follows:

Pro forma cost savings represents the estimated annual financial impact of the actions related to our OE Program initiatives, headcount reductions and plant consolidation savings as if such activities were completed as of February 1, 2016.



	Twelve months ended
	April 30, 2017
(in millions of U.S. dollars)	$
Consolidated EBITDA per Credit Agreement	458.3
Less:
Pro forma cost savings	(37.3	)
Other	(6.7	)
Adjusted EBITDA	414.3
(Deduct) add:
Depreciation and amortization	(121.4	)
Repositioning expenses	(10.2	)
Acquisition and integration costs	(18.0	)
Interest expense, net	(133.0	)
Benefit from income taxes	46.8
Refinancing expenses	(27.9	)
Operational initiatives related consulting costs	(3.4	)
IPO costs	(1.2	)
Acquisition related litigation expenses	(8.1	)
Stock based compensation expense	(29.6	)
FDA remediation costs	(14.3	)
Environmental remediation costs	(3.7	)
Other	(7.9	)
Income from continuing operations	108.8
Add (deduct):
Depreciation and amortization	121.4
Stock-based compensation	29.6
Net change in non-cash working capital	(84.4	)
Net change in deferred revenues	25.0
Non-cash interest	27.2
Bargain purchase gain	(26.4	)
Other, primarily changes in long-term assets and liabilities and deferred taxes	(76.5	)
Cash flows from operating activities of continuing operations	124.7
Cash flows from operating activities of discontinued operations	—
Cash flows from operating activities	124.7

Cash flows from investing activities	(220.2	)
Cash flows from financing activities	10.8

~~The~~Pro ~~calculation~~forma ofcost ~~the~~savings ~~first~~represents ~~lien~~the ~~leverage~~estimated ~~ratio,~~annual iffinancial ~~required,~~impact ~~would include total debt secured by a first priority lien as~~ of ~~January 31,~~the ~~2017~~actions ofrelated ~~$1,637.2~~to ~~million.~~our ~~Net~~OE ~~debt~~Program ~~is then calculated to be $1~~initiatives,~~548.2~~ ~~million~~headcount ~~(total~~reductions ~~debt~~and ~~secured~~plant byconsolidation asavings ~~first priority lien less total cash~~ as ofif ~~January 31,~~such ~~2017~~activities ofwere ~~$89.0~~completed ~~million). As a result our first lien leverage ratio~~ as of ~~January 31~~May 1, ~~2017 would be 3~~2016.~~40.~~

The calculation of the first lien leverage ratio, if required, would include total debt secured by a first priority lien as of April 30, 2017 of $1,637.6 million. Net debt is then calculated to be $1,544.9 million (total debt secured by a first priority lien less total cash as of April 30, 2017 of $92.7 million). As a result our first lien leverage ratio as of April 30, 2017 would be 3.37.

2014 Senior Unsecured Notes

In February 2014, we issued $450.0 million in aggregate principal amount of 7.50% senior unsecured notes due February 1, 2022 (the ‘‘Notes’’) in a private placement, pursuant to which it entered into an indenture (the ‘‘Indenture’’) with a commercial bank acting as trustee (the ‘‘Trustee’’).

Interest on the Notes accrues at a rate of 7.50% per annum and is payable semiannually in arrears on each February 1 and August 1, commencing on August 1, 2014. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months. The Notes are generally required to be guaranteed by each of our restricted subsidiaries that guarantees the Credit Facility or that guarantees other material indebtedness of ours or other Note guarantors.

Except for offers to purchase Notes upon certain asset sales or a change in control, no mandatory redemption or sinking fund payment is required with respect to the Notes.

On and after February 1, 2017, we may redeem all or a portion of the Notes at the applicable redemption prices set forth below, plus unpaid interest accruing on the principal amount redeemed to the Redemption Date:



Year	%
2017	105.625
2018	103.750
2019	101.875
2020 and thereafter	100.000

The Notes are guaranteed by the Company and the Indenture does not require us to maintain compliance with any financial covenants. The Indenture does contain customary affirmative and negative covenants, including with respect to mergers, asset sales, restricted payments, restricted investments, issuance of debt and equity, liens, and affiliate transactions, subject to baskets and other exceptions. However, we will be exempt from many of the negative covenants if the Notes receive investment grade ratings from both Moody’s and S&P. The Indenture also contains customary events of default, such as for non-payment, breach of other covenants, misrepresentation, cross default to other material debt, bankruptcy events, unsatisfied judgments, and actual or asserted invalidity of guarantees.

As of ~~January~~April 3130, 2017, we were in compliance with the covenants in the Indenture.

Financing Ratios

Total interest-bearing debt at ~~January~~April 3130, 2017 was $2,~~106~~088.28 million, $1220.81 million ~~lower~~higher than at October 31, 2016, primarily due to ~~required debt payments and~~ foreign exchange impacts on our Euro denominated debt. At ~~January~~April 3130, 2017, our consolidated ratio of interest-bearing debt to shareholders' deficit was ~~688~~739.84%, compared to ~~608~~593.28% at October 31, 2016.

Off-Balance Sheet Arrangements

We do not have any relationships with entities often referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Recent Accounting Pronouncements

See Note 2 to our unaudited consolidated financial statements contained in this quarterly report for a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements.

Critical Accounting Estimates

For information regarding our critical accounting policies and estimates, please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" contained in our Form 10-K for the fiscal year ended October 31, 2016. There have been no material changes to the critical accounting policies previously disclosed in that report.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes to our exposure to market risks as described in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended October 31, 2016.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company's internal controls over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

The information required by this item is incorporated by reference to Part I, Item 1, Note 1015: Other Information.

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended October 31, 2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit			Incorporated by Reference			Filed
Number		Exhibit Description	Form	Exhibit	Filing Date	Herewith
2.1		Stock Purchase Agreement, dated November 25, 2016, by and among DPI Newco LLC, Roche Carolina Inc., Roche Holdings, Inc., and Patheon Holdings I B.V., solely for the purposes of Article XII thereof	8-K	2.1	2/1/2017
10.1	†	Transition and Retirement Agreement, dated as of December 8, 2016, by and between Patheon Pharmaceutical Services, Inc. and Stuart Grant	8-K	10.1	12/14/2016
2.2		Purchase Agreement, dated as of May 15, 2017, by and between Thermo Fisher Scientific Inc., Thermo Fisher (CN) Luxembourg S.à r.l. and Patheon N.V.	8-K	2.2	5/15/2017
10.2	†	Amended and Restarted Employment Agreement, dated as of October 19, 2015, between Patheon Pharmaceutical Services Inc. and Francisco Negron
10.1		Amendment No. 4 and Refinancing Amendment No. 1 to Credit Agreement and Incremental Revolving Credit Assumption Agreement dated as of April 20, 2017, by and among Patheon Holdings I B.V., the other credit parties party thereto, the lending institutions party thereto and Credit Suisse AG, as successor administrative agent to UBS AG, Stamford Branch	8-K	10.1	4/26/2017
10.3	†	Employment Agreement dated as of May 2, 2016 between Patheon Pharmaceutical Services Inc. and Michel Lagarde
31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				*
31.2		Certification of Periodic Report by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				*
32.1		Certification of Chief Executive Officer and 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.INS		XBRL Instance Document				*
101.SCH		XBRL Taxonomy Extension Schema Document				*
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document				*
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document				*
101.LAB		XBRL Taxonomy Extension Label Linkbase Document				*
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document				*

† Indicates a management contract or compensatory plan or arrangement

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Patheon N.V.

(Registrant)

By: /s/ James Mullen

James Mullen

Chief Executive Officer

(Principal Executive Officer and Duly Authorized Officer)

~~March~~June 179, 2017

By: /s/ Stuart Grant

Stuart Grant

Chief Financial Officer

(Principal Financial Officer and Duly Authorized Officer)

~~March~~June 179, 2017

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