CAMBREX CORPORATION 
By EAST RUTHERFORD, N.J., Feb. 11, 2014 /PRNewswire/ -- Cambrex Corporation (NYSE: CBM) reports results for the fourth quarter and full year ended December 31, 2013.
Highlights
-- Fourth quarter sales increased 46.3% to $103.0 million from $70.4
million in the same period last year. Full year sales increased 14.1%
and 12.8% excluding the impact of foreign currency.
-- Fourth quarter EBITDA increased to $22.2 million compared to $13.1
million in the same period last year. Full year adjusted EBITDA
increased 17.3% to $67.4 million compared to $57.5 million in 2012.
(See table at the end of this release).
-- Debt, net of cash, was $56.5 million at the end of the fourth quarter,
an improvement of $19.5 million during the quarter. Debt, net of cash,
increased $16.1 million for the full year 2013.
-- 2014 sales are expected to increase between 8% and 12% compared to 2013,
excluding the impact of foreign currency. EBITDA is expected to be
between $70 and $76 million and adjusted income from continuing
operations is expected to be between $0.99 and $1.10 per share (see
Financial Expectations section below).
"We are very pleased that 2013 was our third consecutive year of strong growth in both sales and EBITDA, and believe we are positioned to deliver a similar level of growth in 2014," commented Steven M. Klosk, President and Chief Executive Officer of Cambrex. "We made significant growth investments during 2013 and have built the strongest pipeline of custom development projects and opportunities that we have had in many years. In 2014, we expect to expand our footprint within our generics product category by continuing to add generic APIs to our development portfolio of 15 products, and by earmarking $2 million of additional R&D spending for projects where Cambrex expects to partner with one or more generic drug companies to co-develop finished generic drug products.
"We are well positioned in the controlled substances market and accordingly, expect to see solid growth in this product category in 2014. Finally, we plan to continue making targeted investments in the infrastructure of the business through capital improvements and expansions to support further growth, with expectations of strong cash flow during the year."
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.
Fourth Quarter 2013 Operating Results - Continuing Operations
Sales of $103.0 million were 46.3% higher compared to the same period last year, including the favorable impact of foreign exchange of 1.3%. The increase was primarily due to higher sales of a recently approved branded active pharmaceutical ingredient ("API") and controlled substances, partially offset by lower sales of generic and branded APIs and products utilizing the Company's drug delivery technology.
Gross margins increased to 32.9% from 30.0% compared to the same period last year. This increase was primarily due to increased sales and production volumes driving higher plant efficiencies along with a small positive impact from pricing and was partially offset by an unfavorable mix of products.
Selling, general and administrative ("SG&A") expenses were $14.7 million compared to $11.4 million in the same period last year. The increase was mainly due to higher personnel expenses.
Research and development expenses were $2.8 million compared to $2.2 million in the same period last year.
Operating profit increased to $16.4 million from $7.4 million in the same period last year. The increase in operating profit was primarily the result of higher gross profit partially offset by higher SG&A expenses. EBITDA was $22.2 million compared to $13.1 million in the same period last year.
Net interest expense was $0.6 million compared to $0.5 million in the same period last year.
Equity in losses of partially-owned affiliates, primarily representing the Company's portion of Zenara's loss, was flat at $0.5 million for both the fourth quarters of 2013 and 2012, respectively. These amounts include amortization expense of $0.2 million for both the fourth quarters of 2013 and 2012, respectively.
The provision for income taxes was $5.6 million and resulted in an effective tax rate of 37.4%.
Income from continuing operations was $9.4 million or $0.30 per share compared to $44.2 million or $1.44 per share in the same period last year. Fourth quarter 2012 results include tax benefits of $37.6 million, or $1.22 per share, resulting from the release of a valuation allowance on deferred tax assets for $36.3 million and $1.3 million related to the impact on deferred taxes of a statutory rate change at one of our sites.
Capital expenditures and depreciation were $9.6 million and $5.8 million, respectively, compared to $17.2 million and $5.6 million in the same period last year.
Financial Expectations - Continuing Operations
The Company currently expects that full year 2014 sales, excluding the impact of foreign currency, will increase between 8% and 12% over 2013, and that full year 2014 EBITDA will be between $70 and $76 million. The Company expects that 2014 adjusted income from continuing operations will be between $0.99 and $1.10 per share (computed on a basis consistent with 2013 and 2012 results in the table at the end of this release). Based on current expectations regarding the timing of orders, the Company expects 2014 to start off slowly, with most of the anticipated growth coming from the second quarter and thereafter. The Company also expects to reduce debt, net of cash, by between $25 and $30 million during 2014.
The Company estimates that its 2014 consolidated effective tax rate will be between 33% and 37%. In 2013, the Company began recording tax expense on U.S. income for the first time in several years. Due to certain beneficial tax attributes, the Company currently expects to pay a small amount of cash taxes for the U.S. in 2014, however 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.
Capital expenditures for 2014 are expected to be approximately $35 to $39 million and depreciation is expected to be $25 to $27 million in 2014.
These financial expectations are for continuing operations and exclude the impact of any potential acquisitions, restructuring activities and outcomes of tax disputes, and sales and EBITDA expectations do not reflect the Company's stake in Zenara, which is accounted for using the equity method. Zenara is expected to generate low single digit millions in revenues and a small EBITDA loss in 2014.
The financial information contained in this press release is unaudited, subject to revision and should not be considered final until the Company's 2013 Form 10-K is filed with the SEC.
Conference Call and Webcast
A conference call to discuss the Company's fourth quarter and full year 2013 results will begin at 8:30 a.m. Eastern Time on Tuesday, February 11, 2014. Those wishing to participate should call 1-888-378-0320 for domestic and +719-325-2458 for international. Please use the pass code 8076565 and call approximately 10 minutes prior to start time. A webcast will be available on the Investors section on the Cambrex website located at www.cambrex.com. A telephone replay of the conference call will be available through Tuesday, February 18, 2014 by calling 1-888-203-1112 for domestic and +1-719-457-0820 for international. Please use the pass code 8076565 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 http://www.cambrex.com/www.cambrex.com.
Forward Looking Statements
This document contains "forward-looking statements," including statements 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, including the Company's expectation that full year 2014 sales, excluding the impact of foreign currency, will increase between 8% and 12% versus 2013, that full year 2014 EBITDA will be between $70 and $76 million, that capital expenditures will be approximately $35 to $39 million, that depreciation will be between $25 and $27 million in 2014, that the Company currently expects to pay low single digit millions in cash taxes in the U.S. for 2014, that working capital levels and cash flow will improve, that the Company will spend $2 million of R&D spending related to generic drug products and that its estimated tax rate will be between 33% and 37%. These and other forward looking statements may be identified by the fact that they use words such as "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, government legislation and regulations (particularly environmental issues), tax rate, interest rate, technology, manufacturing and legal issues, including the outcome of outstanding litigation, changes in foreign exchange rates, uncollectible receivables, loss on disposition of assets, cancellations or delays in renewal of contracts, lack of suitable raw materials or packaging 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 is a non-GAAP financial measure, which the Company defines as operating profit plus depreciation and amortization expense. Other companies may have a different definition of EBITDA and, therefore, EBITDA may not be comparable with non-GAAP financial measures provided by other companies. EBITDA 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 as one of several metrics to assess and analyze its operational results and trends. Cambrex also believes EBITDA as well as 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 December 31, 2013 and 2012
(in thousands, except per-share data)
2013 2012
---- ----
% of % of
Amount Sales Amount Sales
------ ----- ------ -----
Gross Sales $103,011 $70,389
Commissions, Allowances and Rebates 576 731
--- ---
Net Sales 102,435 69,658
Other 601 272
--- ---
Net Revenues 103,036 69,930
Cost of Goods Sold 69,098 67.1% 48,847 69.4%
------ ------
Gross Profit 33,938 32.9% 21,083 30.0%
Operating Expenses
Selling, General and Administrative Expenses 14,714 14.3% 11,419 16.2%
Research and Development Expenses 2,840 2.8% 2,247 3.2%
Total Operating Expenses 17,554 17.0% 13,666 19.4%
------ ------
Operating Profit 16,384 15.9% 7,417 10.5%
Other Expenses:
Interest Expense, net 595 534
Other Expenses, net 107 26
Equity in Losses of Partially-Owned Affiliates 605 545
--- ---
Income Before Income Taxes 15,077 14.6% 6,312 9.0%
Provision/(Benefit) for Income Taxes 5,637 (37,930)
----- -------
Income from Continuing Operations $9,440 9.2% $44,242 62.9%
Loss from Discontinued Operations, Net of Tax (541) (594)
---- ----
Net Income $8,899 8.6% $43,648 62.0%
Basic Earnings/(Loss) per Share of Common Stock:
Income from Continuing Operations $0.31 $1.48
Loss from Discontinued Operations, Net of Tax $(0.02) $(0.02)
Net Income $0.29 $1.46
Diluted Earnings/(Loss) per Share of Common Stock:
Income from Continuing Operations $0.30 $1.44
Loss from Discontinued Operations, Net of Tax $(0.01) $(0.02)
Net Income $0.29 $1.42
Weighted Average Shares Outstanding
Basic 30,353 29,874
Diluted 31,166 30,717
CAMBREX CORPORATION
Statements of Profit and Loss
For the Twelve Months Ended December 31, 2013 and 2012
(in thousands, except per-share data)
2013 2012
---- ----
% of % of
Amount Sales Amount Sales
------ ----- ------ -----
Gross Sales $317,212 $277,931
Commissions, Allowances and
Rebates 1,351 2,503
----- -----
Net Sales 315,861 275,428
Other 2,315 1,073
----- -----
Net Revenues 318,176 276,501
Cost of Goods Sold 215,272 67.9% 186,014 66.9%
------- -------
Gross Profit 102,904 32.4% 90,487 32.6%
Operating Expenses
Selling, General and
Administrative Expenses 47,568 15.0% 45,248 16.3%
Research and Development
Expenses 10,387 3.3% 9,544 3.4%
Total Operating Expenses 57,955 18.3% 54,792 19.7%
------ ------
Gain on Sale of Asset 4,680 1.5% - -
Operating Profit 49,629 15.6% 35,695 12.8%
Other Expenses:
Interest Expense, net 2,242 2,439
Other Expenses, net 118 122
Equity in Losses of Partially-
Owned Affiliates 2,262 1,766
----- -----
Income Before Income Taxes 45,007 14.2% 31,368 11.3%
Provision/(Benefit) for Income
Taxes 14,732 (31,861)
------ -------
Income from
Continuing
Operations $30,275 9.5% $63,229 22.7%
Loss from Discontinued
Operations, Net of Tax (4,360) (926)
------ ----
Net Income $25,915 8.2% $62,303 22.4%
Basic Earnings/(Loss) per Share
of Common Stock:
Income from
Continuing
Operations $1.00 $2.13
Loss from
Discontinued
Operations, Net of
Tax $(0.14) $(0.03)
Net Income $0.86 $2.10
Diluted Earnings/(Loss) per Share of Common Stock:
Income from
Continuing
Operations $0.98 $2.09
Loss from
Discontinued
Operations, Net of
Tax $(0.14) $(0.03)
Net Income $0.84 $2.06
Weighted Average Shares
Outstanding
Basic 30,150 29,703
Diluted 30,901 30,314
CAMBREX CORPORATION
Consolidated Balance Sheets
As of December 31, 2013 and 2012
(in thousands)
December 31, December 31,
Assets 2013 2012
------ ---- ----
Cash and Cash
Equivalents $22,745 $23,551
Trade Receivables, net 71,276 43,094
Other Receivables 12,943 2,015
Inventories, net 89,965 71,221
Prepaid Expenses and Other
Current Assets 5,631 4,089
----- -----
Total Current Assets 202,560 143,970
Property, Plant and
Equipment, net 171,966 151,815
Goodwill 38,670 37,312
Intangible Assets, net 4,011 4,091
Investments in and Advances
to Partially-Owned
Affiliates 13,364 15,094
Deferred Income Taxes 19,799 30,786
Other Non-Current Assets 7,667 2,663
----- -----
Total Assets $458,037 $385,731
Liabilities and
Stockholders' Equity
---------------------
Accounts Payable $29,052 $27,612
Deferred Revenue 20,121 11,570
Accrued Expenses and Other
Current Liabilities 48,098 43,301
------ ------
Total Current Liabilities 97,271 82,483
Long-Term Debt 79,250 64,000
Deferred Income Taxes 12,835 10,383
Accrued Pension Benefits 40,123 55,373
Other Non-Current
Liabilities 18,338 10,195
------ ------
Total Liabilities $247,817 $222,434
Stockholders'
Equity $210,220 $163,297
Total Liabilities
and Stockholders'
Equity $458,037 $385,731
CAMBREX CORPORATION
Reconciliation of GAAP to non-GAAP Results
For the Quarters and Twelve Months Ended December 31, 2013 and 2012
(in thousands)
Fourth Quarter 2013 Fourth Quarter 2012
------------------- -------------------
Operating Profit $16,384 $7,417
Depreciation and Amortization 5,842 5,641
----- -----
EBITDA $22,226 $13,058
======= =======
Twelve Months 2013 Twelve Months 2012
------------------ ------------------
Operating Profit $49,629 $35,695
Gain on Sale of Asset (4,680) -
------ ---
Adjusted Operating Profit 44,949 35,695
Depreciation and Amortization 22,473 21,775
------ ------
Adjusted EBITDA $67,422 $57,470
======= =======
Twelve Months 2013 Twelve Months 2012
------------------ ------------------
Diluted Diluted
EPS EPS
Income from Continuing Operations $30,275 $0.98 $63,229 $2.09
Stock-Based Compensation, Net of Tax(1) 3,540 0.11 2,165 0.07
Gain on Sale of Asset, Net of Tax (3,210) (0.10) - -
Amortization of Purchased Intangibles 1,137 0.04 1,212 0.04
Reversal of Tax Valuation Allowance - - (36,287) (1.20)
Changes in Tax Laws (1,155) (0.04) (1,328) (0.04)
Normalization of U.S. Tax Expense(2) - - (4,575) (0.15)
--- ------
Adjusted Income from Continuing Operations $30,587 $0.99 $24,416 $0.81
1 Tax rate estimated at 35% for stock-based compensation.
2 Cambrex began recording tax expense in the U.S. in 2013. 2012 includes an adjustment to reflect U.S. tax
expense at 35%.
SOURCE Cambrex Corporation
