CAMBREX CORPORATION EAST RUTHERFORD, N.J., Oct. 30, 2014 /PRNewswire/ -- Cambrex Corporation (NYSE: CBM) reports results for the third quarter ended September 30, 2014.
Highlights
-- Third quarter sales increased 4.0% to $81.1 million from $78.0 million
in the same period last year.
-- Third quarter EBITDA increased 6.5% to $18.1 million compared to $17.0
million in the same period last year (see table at the end of this
release).
-- Debt, net of cash, improved $21.1 million during the third quarter to
$33.5 million.
-- Company continues to expect full year 2014 sales, excluding the impact
of foreign currency, to grow between 13% and 16% from 2013, and full
year EBITDA to be between $74 and $78 million. Adjusted income from
continuing operations is now expected to be between $1.11 and $1.19 per
share, a $0.04 increase at both the low and high ends of the range (see
Financial Expectations - Continuing Operations section below).
"We continue to be very pleased with the positive trends in our business and expect a very strong fourth quarter," commented Steven M. Klosk, President and Chief Executive Officer of Cambrex. "During the third quarter, we added two new late stage clinical products to our portfolio and two of our customers' products in that portfolio were approved for commercial sale. Demand across all of our product categories remains strong, particularly in custom manufacturing and controlled substances. Utilization of our large scale assets in both the U.S. and Europe continues to grow as pharmaceutical customers increasingly seek out high quality manufacturers like Cambrex. Our current view suggests we will maintain our positive momentum with strong expected growth in 2015."
Basis of Reporting
The Company has provided a reconciliation of GAAP amounts to adjusted (i.e. Non-GAAP) amounts at the end of this press release. Management believes that the adjusted amounts provide useful information to investors due to the magnitude and nature of certain expenses recorded in the GAAP amounts.
Third Quarter 2014 Operating Results - Continuing Operations
Sales were $81.1 million for the quarter, compared to $78.0 million in the same period last year, representing a 4.0% increase, including the unfavorable impact of foreign exchange of 1.0%. The Company recorded sales increases in most of its product categories, with strong growth in certain branded APIs and controlled substances. Pricing was flat compared to the third quarter last year.
Gross margins increased to 35.0% from 32.0% compared to the same period last year. This increase was primarily due to a favorable mix of products, proceeds from an insurance settlement, improved production efficiencies and a favorable currency impact.
Selling, general and administrative expenses were $12.5 million compared to $11.1 million in the same period last year. The increase was mainly due to higher personnel expenses.
Research and development expenses were $3.8 million compared to $2.6 million in the same period last year. The increase was primarily the result of increased personnel costs required to develop an increased number of products in the R&D pipeline.
Operating profit increased to $12.0 million from $11.3 million in the same period last year. The increase in operating profit was primarily the result of higher gross profit partially offset by higher operating expenses. EBITDA was $18.1 million compared to $17.0 million in the same period last year.
The provision for income taxes was $2.5 million and included a benefit of $0.8 million for a partial reversal of a valuation allowance against certain U.S. tax assets. Excluding the impact of this benefit, the effective tax rate would have been 29.4% during the quarter compared to 37.7% in the same period last year.
Income from continuing operations was $8.9 million or $0.28 per share compared to $6.3 million or $0.20 per share in the same period last year. Adjusted income from continuing operations was $8.8 million or $0.28 per share, compared to $7.1 million or $0.23 per share, respectively, in the same period last year (see table at the end of this release).
Capital expenditures and depreciation were $7.2 million and $5.9 million, respectively, compared to $6.2 million and $5.7 million, respectively, in the same period last year.
Financial Expectations - Continuing Operations
The following table shows the Company's current expectations for its full year 2014 financial performance versus its expectations from the previous quarter.
Current Previous
Expectations Expectations
------------ ------------
Gross sales increase 13% - 16% 13% - 16%
Adjusted EBITDA $74 - $78 million $74 - $78 million
Adjusted income from
continuing $1.11 - $1.19 $1.07 - $1.15
operations per share
Reduction of debt, net
of cash $25 - $30 million $25 - $30 million
Capital expenditures $35 - $39 million $35 - $39 million
Depreciation $24 - $25 million $25 - $27 million
Effective tax rate 33% - 36% 33% - 36%
Consistent with prior guidance for the full year 2014, these financial expectations are for continuing operations and exclude the impact of any potential acquisitions, restructuring activities and outcomes of tax disputes and do not reflect Zenara's results. Sales expectations exclude the impact of foreign currency. Adjusted EBITDA and Adjusted income from continuing operations per share are computed on a basis consistent with the reconciliation of the year to date results in the tables at the end of this release.
The Company increased its guidance for full year 2014 Adjusted income from continuing operations by $0.04 per share at both the low and high ends of the range due to lower estimates of depreciation and interest expense for 2014. Depreciation was adjusted downward due to later than expected timing of certain assets being placed in service and foreign currency impact. Interest expense was adjusted downward due to lower than expected interest rates.
We expect Zenara to generate low to mid single digit millions in revenues and a small EBITDA loss in 2014. As previously announced, the Company purchased all previously unowned shares in Zenara Pharma and as such, has consolidated Zenara's results from the purchase date of May 23, 2014 in its 2014 results. The Company's EBITDA expectations for Zenara do not include a loss of $4.1 million recorded in the second quarter of 2014 related to the purchase of the previously unowned shares of Zenara.
The Company expects to reduce the valuation allowance against certain U.S. tax assets by approximately $17.2 million for the full year 2014, which would reduce tax expense accordingly. The valuation allowance released for the third quarter and year to date periods was $0.8 million and $15.2 million, respectively. The actual amount of the reduction in the valuation allowance may be higher or lower depending on the amount and type of U.S. income during the rest of the year. The full year effective tax rate included in the table above excludes this benefit and the impact of the purchase of the remaining Zenara shares. The Company expects to pay only a small amount of cash taxes in the U.S. during the year. The tax rate and amount of cash taxes paid will be sensitive to the geographic mix of income, and quarterly effective tax rates may be volatile.
The financial information contained in this press release is unaudited, subject to revision and should not be considered final until the Company's third quarter 2014 Form 10-Q is filed with the SEC.
Conference Call and Webcast
A conference call to discuss the Company's third quarter 2014 results will begin at 8:30 a.m. Eastern Time on Thursday, October 30, 2014 and can be accessed by calling 1-800-505-9568 for domestic and +1-416-204-9271 for international. Please use the passcode 6387777 and call approximately 10 minutes prior to the start time. A webcast will be available in the Investors section on the Cambrex website located at www.cambrex.com. A telephone replay of the conference call will be available through Thursday, November 6, 2014 by calling 1-888-203-1112 for domestic and +1-719-457-0820 for international. Please use the passcode 6387777 to access the replay.
About Cambrex
Cambrex Corporation is an innovative life sciences company that provides products, services and technologies to accelerate the development and commercialization of small molecule therapeutics. The Company offers Active Pharmaceutical Ingredients ("APIs"), advanced intermediates and enhanced drug delivery products for branded and generic pharmaceuticals. Development and manufacturing capabilities include enzymatic biotransformations, high potency APIs, high energy chemical synthesis, controlled substances and formulation of finished dosage form products. For more information, please visit www.cambrex.com.
Forward Looking Statements
This document contains "forward-looking statements," including statements or tables regarding expected performance, especially those set forth under the heading "Financial Expectations - Continuing Operations," and those attributed to our President and Chief Executive Officer in this document. These and other forward looking statements may be identified by the fact that they use words such as "guidance," "expects," "anticipates," "intends," "estimates," "believes" or similar expressions. Any forward-looking statements contained herein are based on current plans and expectations and involve risks and uncertainties that could cause actual outcomes and results to differ materially from current expectations. The factors described in Item 1A of Part I of the Company's Annual Report on Form 10-K for the period ended December 31, 2013, captioned "Risk Factors," or otherwise described in the Company's filings with the SEC provide examples of such risks and uncertainties that may cause the Company's actual results to differ materially from the expectations the Company describes in its forward-looking statements, including, but not limited to, pharmaceutical outsourcing trends, competitive pricing or product developments, market acceptance and adoption rate of our customers' products, government legislation and regulations (including those pertaining to environmental issues), tax rate, interest rate, technology, manufacturing and legal issues, including the outcome of outstanding litigation, changes in foreign exchange rates, uncollectible receivables, the timing of orders and the Company's ability to meet its production plan and its customer delivery schedules, particularly during the fourth quarter of 2014, loss on disposition of assets, cancellations or delays in renewal of contracts, lack of suitable raw materials, the Company's ability to receive regulatory approvals for its products and continued demand in the U.S. for late stage clinical products or the successful outcome of the Company's investment in new products.
For further details and a discussion of these and other risks and uncertainties, investors are encouraged to review the Cambrex Annual Report on Form 10-K for the fiscal year ended December 31, 2013, including the Forward-Looking Statement sections therein, and other filings with the SEC. The Company cautions investors and potential investors not to place significant reliance on the forward-looking statements contained in this press release and to give careful consideration to the risks and uncertainties listed above and contained in our SEC filings. The forward-looking statements in this press release speak only as of the date of this document, and the Company undertakes no obligation to update or revise any of these statements.
Use of Non-GAAP Financial Measures
EBITDA and Adjusted Income from Continuing Operations are non-GAAP financial measures. The Company defines EBITDA as operating profit plus depreciation and amortization expense and Adjusted Income from Continuing Operations is calculated in a manner consistent with that shown in the tables at the end of this release. Other companies may have a different definition of EBITDA and Adjusted Income from Continuing Operations, therefore, these measures may not be comparable with non-GAAP financial measures provided by other companies. EBITDA and Adjusted Income from Continuing Operations should not be considered an alternative to measurements required by U.S. GAAP, such as net income or operating profit, and should not be considered a measure of Cambrex's liquidity. Cambrex uses EBITDA and Adjusted Income from Continuing Operations among several other metrics to assess and analyze its operational results and trends. Cambrex also believes EBITDA and Adjusted Income from Continuing Operations are useful to investors because they are common operating performance metrics as well as metrics routinely used to assess potential enterprise value. Cambrex has provided a reconciliation of U.S. GAAP amounts to non-GAAP amounts at the end of this press release.
CAMBREX CORPORATION
Statements of Profit and Loss
For the Quarters Ended September 30, 2014 and 2013
(in thousands, except per-share data)
2014 2013
---- ----
% of % of
Amount Sales Amount Sales
------ ----- ------ -----
Gross Sales $81,145 $77,992
Commissions, Allowances and Rebates 504 547
--- ---
Net Sales 80,641 77,445
Other Revenue 659 7
--- ---
Net Revenues 81,300 77,452
Cost of Goods Sold 52,894 65.2% 52,486 67.3%
------ ------
Gross Profit 28,406 35.0% 24,966 32.0%
Operating Expenses
Selling, General and Administrative Expenses 12,541 15.5% 11,128 14.3%
Research and Development Expenses 3,839 4.7% 2,588 3.3%
Total Operating Expenses 16,380 20.2% 13,716 17.6%
------ ------
Operating Profit 12,026 14.8% 11,250 14.4%
Other Expenses:
Interest Expense, Net 570 664
Equity in Losses of Partially-Owned Affiliates - 508
Other Expenses, Net 37 5
--- ---
Income Before Income Taxes 11,419 14.1% 10,073 12.9%
Provision for Income Taxes 2,537 3,799
----- -----
Income from Continuing Operations $8,882 10.9% $6,274 8.0%
Loss from Discontinued Operations, Net of Tax (113) (2,700)
---- ------
Net Income $8,769 10.8% $3,574 4.6%
Basic Earnings/(Loss) per Share of Common Stock:
Income from Continuing Operations $0.29 $0.21
Loss from Discontinued Operations, Net of Tax $(0.01) $(0.09)
Net Income $0.28 $0.12
Diluted Earnings/(Loss) per Share of Common Stock:
Income from Continuing Operations $0.28 $0.20
Loss from Discontinued Operations, Net of Tax $(0.00) $(0.08)
Net Income $0.28 $0.12
Weighted Average Shares Outstanding
Basic 30,801 30,184
Diluted 31,599 31,052
CAMBREX CORPORATION
Statements of Profit and Loss
For the Nine Months Ended September 30, 2014 and 2013
(in thousands, except per-share data)
2014 2013
---- ----
% of % of
Amount Sales Amount Sales
------ ----- ------ -----
Gross Sales $245,309 $214,201
Commissions, Allowances and Rebates 1,678 775
----- ---
Net Sales 243,631 213,426
Other Revenue 1,667 1,714
----- -----
Net Revenues 245,298 215,140
Cost of Goods Sold 166,899 68.0% 146,174 68.2%
------- -------
Gross Profit 78,399 32.0% 68,966 32.2%
Operating Expenses
Selling, General and Administrative Expenses 38,734 15.8% 32,854 15.3%
Research and Development Expenses 9,945 4.1% 7,547 3.5%
Total Operating Expenses 48,679 19.8% 40,401 18.9%
------ ------
Gain on Sale of Office Building - 0.0% 4,680 2.2%
Operating Profit 29,720 12.1% 33,245 15.5%
Other Expenses:
Interest Expense, Net 1,635 1,647
Equity in Losses of Partially-Owned Affiliates 4,618 1,657
Other Expenses, Net 16 11
--- ---
Income Before Income Taxes 23,451 9.6% 29,930 14.0%
(Benefit)/Provision for Income Taxes (6,424) 9,095
------ -----
Income from Continuing Operations $29,875 12.2% $20,835 9.7%
Loss from Discontinued Operations, Net of Tax (457) (3,819)
---- ------
Net Income $29,418 12.0% $17,016 7.9%
Basic Earnings/(Loss) per Share of Common Stock:
Income from Continuing Operations $0.97 $0.69
Loss from Discontinued Operations, Net of Tax $(0.01) $(0.12)
Net Income $0.96 $0.57
Diluted Earnings/(Loss) per Share of Common Stock:
Income from Continuing Operations $0.95 $0.67
Loss from Discontinued Operations, Net of Tax $(0.02) $(0.12)
Net Income $0.93 $0.55
Weighted Average Shares Outstanding
Basic 30,665 30,081
Diluted 31,486 30,938
CAMBREX CORPORATION
Consolidated Balance Sheets
As of September 30, 2014 and December 31, 2013
(in thousands)
September 30, December 31,
Assets 2014 2013
------ ---- ----
Cash and
Cash
Equivalents $26,505 $22,745
Trade Receivables,
Net 45,642 71,276
Other Receivables 11,873 12,943
Inventories, Net 101,405 89,965
Prepaid Expenses and
Other Current Assets 8,977 5,631
----- -----
Total Current Assets 194,402 202,560
Property, Plant and
Equipment, Net 162,269 171,966
Goodwill 45,108 38,670
Intangible Assets,
Net 8,908 4,011
Investments in and
Advances to
Partially-Owned
Affiliates 788 13,364
Deferred Income Taxes 27,830 19,799
Other Non-Current
Assets 5,027 7,667
----- -----
Total Assets $444,332 $458,037
Liabilities and
Stockholders' Equity
---------------------
Accounts
Payable $34,004 $29,052
Deferred Revenue 11,787 20,121
Accrued Expenses and
Other Current
Liabilities 43,510 48,098
------ ------
Total Current
Liabilities 89,301 97,271
Long-Term Debt 60,000 79,250
Deferred Income Taxes 11,533 12,835
Accrued Pension
Benefits 34,634 40,123
Other Non-Current
Liabilities 16,459 18,338
------ ------
Total
Liabilities $211,927 $247,817
Stockholders'
Equity $232,405 $210,220
Total
Liabilities
and
Stockholders'
Equity $444,332 $458,037
CAMBREX CORPORATION
Reconciliation of GAAP to non-GAAP Results
For the Quarters and Nine Months Ended September 30, 2014 and 2013
(in thousands)
Third Quarter Third Quarter
2014 2013
------------- -------------
Operating Profit $12,026 $11,250
Depreciation and
Amortization 6,066 5,745
----- -----
EBITDA $18,092 $16,995
Nine Months Nine Months
2014 2013
------------ ------------
Operating Profit $29,720 $33,245
Gain on Sale of Office
Building - (4,680)
--- ------
Adjusted Operating Profit 29,720 28,565
Depreciation and
Amortization 17,915 16,631
------ ------
Adjusted EBITDA $47,635 $45,196
CAMBREX CORPORATION
Reconciliation of GAAP to non-GAAP Results
For the Quarters and Nine Months Ended September 30, 2014 and 2013
(in thousands)
Third Quarter 2014 Third Quarter 2013
------------------ ------------------
Diluted Diluted
EPS EPS
Income from Continuing Operations $8,882 $0.28 $6,274 $0.20
Stock-Based Compensation, Net of Tax(1) 609 0.02 573 0.02
Amortization of Purchased Intangibles 182 0.01 270 0.01
Release of Valuation Allowance (824) (0.03) - -
Adjusted Income from Continuing Operations $8,849 $0.28 $7,117 $0.23
Nine Months 2014 Nine Months 2013
---------------- ----------------
Diluted Diluted
EPS EPS
Income from Continuing Operations $29,875 $0.95 $20,835 $0.67
Stock-Based Compensation, Net of Tax(1) 2,273 0.07 1,940 0.06
Loss on Acquisition of Zenara Shares 4,122 0.13 - -
Gain on Sale of Office Building, Net of Tax - - (3,173) (0.10)
Amortization of Purchased Intangibles 687 0.02 873 0.03
Release of Valuation Allowance (15,183) (0.48) - -
Changes in Tax Laws - - (1,271) (0.04)
-----
Adjusted Income from Continuing Operations $21,774 $0.69 $19,204 $0.62
1 Tax rate estimated at 35% for stock-based compensation.
SOURCE Cambrex Corporation
