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Cambrex Reports First Quarter 2014 Financial Results

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SOURCE Cambrex Corporation

- Company confirms full year 2014 sales and profit guidance and expects a very strong second quarter -

- Conference call at 8:30 a.m. ET on May 2, 2014 -

EAST RUTHERFORD, N.J., May 2, 2014 /PRNewswire/ -- Cambrex Corporation (NYSE: CBM) reports results for the first quarter ended March 31, 2014.

Highlights

  • Full year sales and profit guidance confirmed – second quarter performance expected to result in sales and EBITDA improvement in the first half of 2014 compared to the first half of last year.
  • Due to the timing of orders for certain products, first quarter sales decreased 11% to $66.2 million from $74.6 million in the same period last year.
  • First quarter adjusted EBITDA decreased to $8.4 million compared to $16.8 million in the same period last year (See table at the end of this release).   
  • Debt, net of cash, improved by $18.3 million to $38.2 million at the end of the first quarter. 

"I am pleased to report that we increased the number of Phase 3 projects we are working on from 13 to 15 during the quarter, adding three new late stage projects with one prior late stage product transitioning to commercial status," commented Steven M. Klosk, President and Chief Executive Officer of Cambrex.  "While the timing of orders created a slow start to 2014, we expect strong growth in the second quarter to result in first half growth in both sales and EBITDA compared to the first half of last year.  Likewise, we continue to believe we are positioned to deliver growth consistent with our financial expectations for the full year 2014, similar to the increases we have delivered over the last three years.  We are making significant growth investments in the business in the form of capital improvements and increased personnel within both the business development and R&D areas.  Our increased R&D resources will allow us to add generic APIs to our current development portfolio of 15 products."

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.

First Quarter 2014 Operating Results – Continuing Operations

Sales of $66.2 million were 11.2% lower compared to the same period last year, including the favorable impact of foreign exchange of 0.7%.  Due primarily to the timing of orders, sales of certain branded active pharmaceutical ingredients ("APIs"), generic APIs and custom development products were lower during the quarter, partially offset by higher sales of controlled substances and products utilizing the Company's drug delivery technology.

Gross margins decreased to 25.0% from 33.2% compared to the same period last year.  This decrease was primarily due to lower production volumes and lower pricing, partially offset by a favorable product mix.

Selling, general and administrative expenses were $11.6 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 $2.5 million compared to $2.2 million in the same period last year. 

Operating profit decreased to $2.5 million from $16.1 million in the same period last year and adjusted operating profit was $2.5 million compared to $11.5 million in the same period last year.  The decrease in adjusted operating profit was primarily the result of lower gross profit and higher operating expenses.  EBITDA was $8.4 million compared to $21.5 million in the same period last year and adjusted EBITDA was $8.4 million compared to $16.8 million in the same period last year.  Adjusted operating profit and adjusted EBITDA, for the first quarter of 2013, exclude a gain on sale of an office building of $4.7 million (See table at the end of this release).

Net interest expense was flat at $0.5 million for both the first quarters of 2014 and 2013.

Equity in losses of partially-owned affiliates, primarily representing the Company's portion of Zenara's loss, was $0.3 million compared to $0.5 million in the same period last year.  The Company's share of Zenara's losses included $0.2 million of amortization expense in both the first quarters of 2014 and 2013. 

The provision for income taxes was $0.5 million and resulted in an effective tax rate of 28.0%.  The effective tax rate during the first quarter of 2014 includes a benefit of $0.2 million for a partial reversal of a valuation allowance against certain U.S. tax assets.  The effective tax rate in the first quarter of 2013 includes a benefit due to changes in tax laws of approximately $1.3 million and the impact of the sale of an office building. 

Income from continuing operations was $1.2 million or $0.04 per share compared to $11.4 million or $0.37 per share in the same period last year.  

Capital expenditures and depreciation were $4.1 million and $5.8 million, respectively, compared to $12.7 million and $5.3 million in the same period last year. 

Financial Expectations – Continuing Operations

The Company continues to expect 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 continues to expect that full year 2014 adjusted income from continuing operations will be between $0.99 and $1.10 per share (computed on a basis consistent with first quarter 2014 and 2013 results in the table at the end of this release).  Based on current expectations for the second quarter, the Company expects both sales and EBITDA for the first half of 2014 to reflect growth over the first half of 2013.  The Company expects to reduce debt, net of cash, by between $25 and $30 million during 2014.

The Company expects to reduce the valuation allowance against certain U.S. tax assets by approximately $5 million throughout 2014, which would reduce tax expense accordingly.  The actual amount of the reversal may increase or decrease depending on the amount and type of U.S. income during the rest of the year.  Excluding this benefit, the full year effective tax rate is expected to be between 33% and 37%.  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. 

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 first quarter 2014 Form 10-Q is filed with the SEC.

Conference Call and Webcast

A conference call to discuss the Company's first quarter 2014 results will begin at 8:30 a.m. Eastern Time on Friday, May 2, 2014.  Those wishing to participate should call 1-888-523-1225 for domestic and +719-325-2420 for international.  Please use the pass code 2786828 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 Friday, May 9, 2014 by calling 1-888-203-1112 for domestic and +1-719-457-0820 for international.  Please use the pass code 2786828 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 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 full year 2014 adjusted income from continuing operations will be between $0.99 and $1.10 per share, that both sales and EBITDA for the first half of 2014 will be higher than the first half of 2013, that capital expenditures will be approximately $35 to $39 million in 2014, 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% excluding the impact of any reversal of valuation allowance on deferred tax assets.  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, the timing of orders, 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 March 31, 2014 and 2013

(in thousands, except per-share data)













2014



2013





% of





% of



Amount


Sales



Amount


Sales











Gross Sales

$

66,192




$

74,581



     Commissions, Allowances and Rebates


549





163



Net Sales


65,643





74,418













     Other Revenue


462





467













Net Revenues


66,105





74,885













     Cost of Goods Sold


49,527


74.8%



50,136


67.2%











Gross Profit


16,578


25.0%



24,749


33.2%











Operating Expenses










     Selling, General and Administrative Expenses


11,633


17.6%



11,104


14.9%

     Research and Development Expenses


2,475


3.7%



2,194


2.9%

Total Operating Expenses


14,108


21.3%



13,298


17.8%











     Gain on Sale of Asset


-


-



4,680


6.3%











Operating Profit


2,470


3.7%



16,131


21.6%











Other Expenses/(Income):










     Interest Expense, Net


522





495



     Other Income, Net


(18)





(32)



     Equity in Losses of Partially-Owned Affiliates


346





481













Income Before Income Taxes


1,620


2.4%



15,187


20.4%











     Provision for Income Taxes


454





3,762













Income from Continuing Operations

$

1,166


1.8%


$

11,425


15.3%











Loss from Discontinued Operations, Net of Tax


(184)





(257)













Net Income

$

982


1.5%


$

11,168


15.0%











Basic Earnings/(Loss) per Share of Common Stock:










   Income from Continuing Operations

$

0.04




$

0.38



   Loss from Discontinued Operations, Net of Tax

$

(0.01)




$

(0.01)



   Net Income

$

0.03




$

0.37













Diluted Earnings/(Loss) per Share of Common Stock:









   Income from Continuing Operations

$

0.04




$

0.37



   Loss from Discontinued Operations, Net of Tax

$

(0.01)




$

(0.01)



   Net Income

$

0.03




$

0.36













Weighted Average Shares Outstanding










     Basic


30,546





29,970



     Diluted


31,408





30,788



 

CAMBREX CORPORATION

Consolidated Balance Sheets

As of March 31, 2014 and December 31, 2013

(in thousands)















March 31,



December 31,

Assets


2014



2013







Cash and Cash Equivalents

$

21,780


$

22,745

Trade Receivables, net


41,674



71,276

Other Receivables


11,803



12,943

Inventories, net


98,738



89,965

Prepaid Expenses and Other Current Assets


8,241



5,631

  Total Current Assets


182,236



202,560







Property, Plant and Equipment, net


169,600



171,966

Goodwill


38,663



38,670

Intangible Assets, net


3,944



4,011

Investments in and Advances to Partially-Owned Affiliates


13,864



13,364

Deferred Income Taxes


29,703



19,799

Other Non-Current Assets


6,650



7,667







  Total Assets

$

444,660


$

458,037







Liabilities and Stockholders' Equity












Accounts Payable

$

26,869


$

29,052

Deferred Revenue


23,217



20,121

Accrued Expenses and Other Current Liabilities


41,784



48,098

  Total Current Liabilities


91,870



97,271







Long-Term Debt


60,000



79,250

Deferred Income Taxes


22,852



12,835

Accrued Pension Benefits


38,954



40,123

Other Non-Current Liabilities


17,662



18,338







  Total Liabilities

$

231,338


$

247,817







  Stockholders' Equity

$

213,322


$

210,220







  Total Liabilities and Stockholders' Equity

$

444,660


$

458,037

 

 

CAMBREX CORPORATION

Reconciliation of GAAP to non-GAAP Results

For the Quarters Ended March 31, 2014 and 2013

(in thousands)









First Quarter 2014



First Quarter 2013








Operating Profit

$

2,470



$

16,131








Gain on Sale of Asset


-




(4,680)








Adjusted Operating Profit


2,470




11,451








Depreciation and Amortization


5,883




5,333








Adjusted EBITDA

$

8,353



$

16,784

 


First Quarter 2014


First Quarter 2013





Diluted

EPS





Diluted

EPS

Income from Continuing Operations

$

1,166

$

0.04


$

11,425

$

0.37











Stock-Based Compensation, Net of Tax1


720


0.02



672


0.02

Gain on Sale of Asset, Net of Tax


-


-



(3,173)


(0.10)

Amortization of Purchased Intangibles


274


0.01



302


0.01

Changes in Tax Laws


-


-



(1,271)


(0.04)










Adjusted Income from Continuing Operations

$

2,160

$

0.07


$

7,955

$

0.26











1 Tax rate estimated at 35% for stock-based compensation.

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