ALBANY, N.Y., Sept. 15, 2015 /PRNewswire/ -- Following the acquisition of Gadea Pharmaceutical Group, AMRI (NASDAQ: AMRI) has updated guidance for full year 2015.
"We are very pleased to provide our updated outlook for 2015 results which reflect the recent addition of Gadea Pharmaceutical Group," said William S. Marth, AMRI's president and chief executive officer. "Gadea brought us over 90 technically complex API programs, greatly enhancing our commercial portfolio and opportunities for expanded business. With Gadea's strong EBITDA and margins, combined with our expanding base business, we remain confident in our outlook which includes full year contract revenue growth of over 50% and adjusted diluted EPS growth of over 40% at the midpoint."
In addition to the Gadea acquisition, the Company's guidance takes into account a number of factors, including expected results for the third and fourth quarter 2015, anticipated tax rates and shares outstanding. Please refer to the financial supplement documents included on the Investor Relations page of our website here for further information on this updated guidance.
AMRI's outlook for 2015 is as follows:
- Full year contract revenue is expected to be between $386 and $400 million, an increase of 56% at the midpoint
- Adjusted contract margins of approximately 26%
- Royalty revenue of between $14 and $16 million, including approximately $5.5 million of Allegra royalties, which have expired
- Adjusted selling, general and administrative (SG&A) expenses at approximately 15% of contract revenue
- R&D of approximately $5 million, reflecting Gadea investment in generic and 505(b)(2) development programs
- Adjusted EBITDA between $75 and $78 million, up 53% at the midpoint
- Adjusted diluted EPS is expected to be between $0.90 and $0.95, compared to $0.65 in 2014, based on an average fully diluted share count of approximately 34 million shares
- Effective tax rate of approximately 32%
- Capital expenditures of between $24 and $26 million
The Company intends to announce third quarter 2015 results in early November and currently expects the percentage of total revenue in the second half of 2015 to be approximately 40% in the third quarter and 60% in the fourth quarter and adjusted diluted EPS in the second half of 2015 to be approximately 25% in the third quarter and 75% in the fourth quarter, reflecting the historic seasonality in AMRI's business and greater revenue contribution from Gadea in the fourth quarter.
AMRI's estimates for 2015 reflect the acquisition of Gadea Pharmaceutical Group which closed in July 2015. The purchase price was $174 million, including the issuance of 2.2 million shares of common stock, valued at $43.8 million, with the balance paid in $97.0 million in cash and through the assumption of $33.2 million of debt. In connection with the acquisition, AMRI secured financing on a $200 million Term Loan, which bears interest at 5.75% and repaid its $74 million revolving credit facility. These changes will result in incremental interest expense of approximately $5 million in 2015.
Beginning in the second quarter 2015, AMRI implemented an updated non-GAAP definition, which includes the impact of cash interest expense and excludes the impact of non-cash stock-based compensation, both of which had previously been excluded and included, respectively in the Company's calculations of these non-GAAP financial measures. These changes have redefined non-GAAP cost of contract revenue, SG&A, interest expense, net income, and EBITDA financial measures from the prior non-GAAP definition. We believe these financial measures provide investors with appropriate non-GAAP measurements that emphasize the cash earnings potential of the business and better reflect the underlying financial performance of the business. Historic non-GAAP reported operating results have been adjusted to match this new definition.
In conjunction with this change, AMRI provided adjusted non-GAAP financial results in line with the updated non-GAAP definition for full year 2014. The supplemental documents are available here at the Investor Relations page of the company's website. This change does not impact any prior period financial statements presented on a GAAP basis.
Albany Molecular Research Inc. (AMRI) is a global contract research and manufacturing organization that has been working with the Life Sciences industry to improve patient outcomes and the quality of life for more than two decades. With locations in North America, Europe and Asia, our key business segments include Discovery and Development Solutions (DDS), Active Pharmaceutical Ingredients (API), and Drug Product Manufacturing (DPM). Our DDS segment provides comprehensive services from hit identification to IND, including expertise with diverse chemistry, library design and synthesis, in vitro biology and pharmacology, drug metabolism and pharmacokinetics, as well as natural products. API supports the chemical development and cGMP manufacture of complex API, including potent, controlled substances, biologics, peptides, steroids, hormones, cytotoxic compounds and sterile API. DPM supports development through commercial scale production of complex liquid-filled and lyophilized parenterals, sterile suspensions and ophthalmic formulations. For more information about AMRI, please visit our website at www.amriglobal.com/ or follow us on Twitter (@amriglobal).
This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These statements include, but are not limited to, statements regarding the company's estimates of royalty revenue, contract revenue, adjusted EBITDA, adjusted diluted earnings per share, and all information and other statements regarding the estimates of results and financial outlook for 2015, statements made by the company's Chief Executive Officer, statements regarding the strength of the company's business and prospects, statements regarding the impact of recent acquisition activity, statements regarding the expected financial results for the third and fourth quarter 2015, and statements concerning the company's momentum and long-term growth, including expected results for 2015. Readers should not place undue reliance on our forward-looking statements. The company's actual results may differ materially from such forward-looking statements as a result of numerous factors, some of which the company may not be able to predict and may not be within the company's control. Factors that could cause such differences include, but are not limited to, trends in pharmaceutical and biotechnology companies' outsourcing of manufacturing services and chemical research and development, including softness in these markets; the success of the sales of other products for which the company receives royalties; the risk that the company will not be able to replicate either in the short or long term the revenue stream that has been derived from the royalties payable under the Allegra® license agreements; the risk that clients may terminate or reduce demand under any strategic or multi-year deal; the company's ability to enforce its intellectual property and technology rights; the company's ability to obtain financing sufficient to meet its business needs; the company's ability to successfully comply with heightened FDA scrutiny on aseptic fill/finish operations; the results of further FDA inspections; the company's ability to effectively maintain compliance with applicable FDA and DEA regulations; the company's ability to integrate past or future acquisitions, including the Gadea Pharmaceutical Group, Aptuit West Lafayette and Glasgow operations, Cedarburg Pharmaceuticals and Oso Biopharmaceuticals Manufacturing, and make such acquisitions accretive to the company's business model, the company's ability to take advantage of proprietary technology and expand the scientific tools available to it, the ability of the company's strategic investments and acquisitions to perform as expected, as well as those risks discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2014 as filed with the Securities and Exchange Commission on March 16, 2015, and the company's other SEC filings. Contract revenue, adjusted EBITDA, adjusted diluted EPS and other financial guidance offered today represent a point-in-time estimate and are based on information as of the date of this press release. Senior management has made numerous assumptions in providing this guidance which, while believed to be reasonable, may not prove to be accurate. Numerous factors, including those noted above, may cause actual results to differ materially from the guidance provided. The company expressly disclaims any current intention or obligation to update the guidance provided or any other forward-looking statement in this press release to reflect future events or changes in facts assumed for purposes of providing this guidance or otherwise affecting the forward-looking statements contained in this press release.
Non-GAAP Adjustment Items
To supplement our financial results prepared in accordance with U.S. GAAP, we have and plan in the future to present non-GAAP measures of contract gross profit, contract gross margin, income from operations, and net income and income per diluted share as adjusted to exclude certain impairment charges, restructuring charges, executive transition costs, non-cash debt interest and amortization charges, business acquisition costs, share-based compensation expense, non-recurring professional fees, ERP implementation costs, depreciation and amortization of purchase accounting adjustments, write-offs of deferred financing costs, insurance recoveries, non-recurring income tax adjustments, and postretirement benefit plan settlement gains. We also present non-GAAP measures of adjusted EBITDA, which in addition to the items excluded above, further excluded the impact of interest income and expense, depreciation and amortization expense, and income tax expense or benefit. Exclusion of these non-recurring items allows comparisons of operating results that are consistent over time. We believe presentation of these non-GAAP measures enhances an overall understanding of our historical financial performance because we believe they are an indication of the performance of our base business. Management uses these non-GAAP measures as a basis for evaluating our financial performance as well as for budgeting and forecasting of future periods. For these reasons, we believe they can be useful to investors. The presentation of this additional information should not be considered in isolation or as a substitute for income (loss) from operations, net income (loss) or income (loss) per diluted share, prepared in accordance with U.S. GAAP. Reconciliations of our quarterly and annual results as reported in these non-GAAP measures will be reconciled to the most directly comparable GAAP financial measures when such actual results are announced by AMRI.