2014

Cambrex Reports Third Quarter 2011 Results

EAST RUTHERFORD, N.J., Nov. 3, 2011 /PRNewswire/ -- Cambrex Corporation (NYSE: CBM) reports third quarter results for the period ended September 30, 2011.

Highlights

  • Reported sales increased by 17.9%, and excluding the impact of foreign currency, sales increased 10.9% compared to the third quarter of 2010.
  • EBITDA was $11.1 million in the quarter, an increase of 30.2% compared to Adjusted EBITDA of $8.5 million in the third quarter of 2010.
  • Debt, net of cash was $69.3 million at the end of the quarter, an improvement of $6.2 million during the quarter which includes a negative $2.6 million currency impact on foreign cash balances.
  • New $250 million five-year revolving credit facility entered into on November 2, 2011 provides sufficient access to capital to execute growth plans.

Basis of Reporting

The Company has provided a reconciliation from GAAP amounts to adjusted amounts at the end of this press release.  Management believes that the adjusted amounts provide a more meaningful representation of the Company's operating results for the periods presented due to the magnitude and nature of certain expenses recorded.

Third Quarter of 2011 Operating Results – Continuing Operations

Sales in the third quarter of 2011 of $58.2 million were 17.9% higher than the third quarter of 2010.  Excluding a 7.0% favorable impact of foreign exchange, reflecting a weaker U.S. dollar, sales increased 10.9%. The increase is primarily due to higher volumes of an active pharmaceutical ingredient ("API") for a customer who experienced a disruption in its supply chain for most of 2010, higher volumes of controlled substances, products utilizing the Company's drug delivery technology and a recently approved innovator product. These increases were partially offset by lower pricing across several product categories, lower sales of generic APIs and lower custom development shipments.  

Gross margins in the third quarter of 2011 increased to 30.6% from 28.6% in the third quarter of 2010.  Excluding a favorable impact from foreign currency, third quarter of 2011 margins decreased to 27.3%.  The decline in currency adjusted gross margins was a result of lower pricing partially offset by higher production volumes and favorable product mix.  

Selling, General and Administrative Expenses in the third quarter of 2011 were $9.8 million compared to $7.9 million in the same period last year.  The increase is primarily due to increased personnel costs and foreign exchange.

Operating Profit increased to $5.4 million in the third quarter of 2011 from $1.3 million in the third quarter of 2010.  Operating Profit in the third quarter of 2011 increased $2.2 million compared to 2010 Adjusted Operating Profit of $3.2 million for the same period in 2010, driven primarily by favorable foreign exchange, higher sales volumes and favorable product mix partially offset by lower pricing and higher operating expenses.

Equity in Losses of Partially-Owned Affiliate of $0.5 million in the third quarter of 2011 represents the Company's share of losses in Zenara Pharma, a pharmaceutical company focused on the formulation of finished dosage form products.  Cambrex acquired a 51% stake in Zenara during the fourth quarter of 2010.  The Company's share of Zenara's losses includes $0.3 million of amortization of intangibles and depreciation.

Net Interest Expense decreased to $0.6 million in the third quarter of 2011 from $1.2 million in the third quarter of 2010.  This decrease is primarily due to the maturing of the Company's fixed interest rate swaps in October 2010.

The Provision for Income Taxes totaled $1.2 million in the third quarter of 2011.  The Company's effective tax rate has been and is expected to remain highly sensitive to the geographic mix of income due to the Company's inability to recognize tax benefits where there has been a recent history of losses, primarily in the U.S.

Income from continuing operations for the third quarter of 2011 was $3.1 million or $0.10 per share compared to a loss from continuing operations of $1.3 million or $0.04 per share in the third quarter of 2010.

Capital expenditures and depreciation for the third quarter of 2011 were $4.7 million and $5.7 million compared to $3.5 million and $5.3 million in the third quarter of 2010, respectively.

On November 2, 2011, the Company entered into a $250 million five-year syndicated senior revolving credit facility, replacing the Company's existing facility that was set to expire in April 2012.  The Company will pay interest on the facility at LIBOR plus 1.75% to 2.50% based upon certain financial measurements.  The facility also includes financial covenants regarding interest coverage and leverage ratios.

Steven M. Klosk, President and Chief Executive Officer, said, "I am pleased with our third quarter performance with increased revenues from custom manufacturing, controlled substances and drug delivery products.  While generic API revenues were slightly lower during the quarter, incoming orders remain strong for this product category.  We continue to focus on generating free cash flow, lowering our production costs and developing new products to support continued growth."

Guidance – Continuing Operations

The Company currently expects that full year 2011 sales, excluding the impact of foreign currency, will increase between 5% and 7% versus 2010, and that full year 2011 EBITDA will be between $44 and $48 million.  EBITDA guidance is for continuing operations and excludes the impact of any M&A or restructuring activities.  The above guidance does not reflect Zenara, which is accounted for using the equity method, and as such is not consolidated into the Company's results.  Cambrex's income statement reflects 51% of Zenara's net results as Equity in Losses of Partially-Owned Affiliate.  For 2011, the Company continues to expect Zenara to have revenues in the low to mid single digit millions and a small EBITDA loss.

Capital expenditures are expected to be approximately $14 to $16 million and depreciation is expected to be $22 to $24 million in 2011.

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 2011 Form 10-Q is filed with the SEC.

Conference Call and Webcast

The Conference Call to discuss third quarter of 2011 results will begin at 8:30 a.m. Eastern Time on Friday, November 4, 2011 and last approximately 45 minutes.  Those wishing to participate should call 1-800-723-6751 for domestic and +1-785-830-7980 for international.  Please use the pass code 6146431 and call approximately 10 minutes prior to start time.  A webcast is available from the Investors section on the Cambrex website located at www.cambrex.com and can be accessed for 30 days following the conference call.  A telephone replay of the conference call will be available through Friday, November 11, 2011 by calling 1-888-203-1112 for domestic and +1-719-457-0820 for international.  Please use the pass code 6146431 to access the replay.  

Forward Looking Statements

This document contains “forward-looking statements,” including statements regarding expected performance, especially expectations with respect to sales, gross margins, operating expenses, earnings per share, cash flows, capital expenditures, acquisitions, divestitures, collaborations, other expansion opportunities and those set forth under the heading “Guidance – Continuing Operations,” including the Company’s expectation that full year 2011 sales, excluding the impact of foreign currency, will increase between 5% and 7% versus 2010, that full year 2011 EBITDA will be between $44 and $48 million, that Zenara will have revenues in the low to mid single digit millions and a small EBITDA loss, that capital expenditures will be approximately $14 to $16 million and that depreciation will be $22 to $24 million in 2011.  These 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, 2010, captioned “Risk Factors,” or otherwise described in the Company’s filings with the Securities and Exchange Commission, as well as any cautionary language in the Company’s Annual Report on Form 10-K for the period ended December 31, 2010, 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 disclosed in the Company’s public filings, changes in foreign currency exchange rates, uncollectable receivables, loss on disposition of assets, cancellation or delays in renewal of contracts, lack of suitable raw materials or packaging materials, and the Company’s ability to receive regulatory approvals for its products.

For further details and a discussion of these and other risks and uncertainties, investors are cautioned to review the Cambrex 2010 Annual Report on Form 10-K, including the Forward-Looking Statement section therein, and other filings with the U.S. Securities and Exchange Commission.  

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.  We offer Active Pharmaceutical Ingredients ("APIs"), advanced intermediates and enhanced drug delivery products for branded and generic pharmaceuticals. Our 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.  

CAMBREX CORPORATION

Statements of Profit and Loss

For the Quarters Ended September 30, 2011 and 2010

(in thousands, except per-share data)













2011



2010





% of





% of



Amount


Sales



Amount


Sales











Gross Sales

$

58,203




$

49,356



    Commissions, Allowances and Rebates


412





492



Net Sales


57,791





48,864













    Other


1,364





(1,090)













Net Revenues


59,155





47,774













    Cost of Goods Sold


41,326


71.0%



33,664


68.2%











Gross Profit


17,829


30.6%



14,110


28.6%











Operating Expenses










    Selling, General and Administrative Expenses


9,818


16.9%



7,879


16.0%

    Research and Development Expenses


2,615


4.5%



3,080


6.2%

    Restructuring Expenses


-


-



1,187


2.4%

    Merger and Acquisition Expenses


-


-



711


1.4%

Total Operating Expenses


12,433


21.4%



12,857


26.0%











Operating Profit


5,396


9.3%



1,253


2.5%











Other Expenses:










    Interest Expense, net


564





1,233



    Other Expenses, net


14





52



    Equity in Losses of Partially-Owned Affiliate


497





-













Income/(Loss) Before Income Taxes


4,321


7.4%



(32)


-0.1%











    Provision for Income Taxes


1,227





1,252













Income/(Loss) from Continuing Operations

$

3,094


5.3%


$

(1,284)


-2.6%











Loss from Discontinued Operations, Net of Tax


(333)





(170)













Net Income/(Loss)

$

2,761


4.7%


$

(1,454)


-2.9%











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










  Income/(Loss) from Continuing Operations


$   0.10





$ (0.04)



  Loss from Discontinued Operations, Net of Tax


$ (0.01)





$ (0.01)



  Net Income/(Loss)


$   0.09





$ (0.05)













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










  Income/(Loss) from Continuing Operations


$   0.10





$ (0.04)



  Loss from Discontinued Operations, Net of Tax


$ (0.01)





$ (0.01)



  Net Income/(Loss)


$   0.09





$ (0.05)













Weighted Average Shares Outstanding










    Basic


29,483





29,373



    Diluted


29,528





29,373





CAMBREX CORPORATION

Statements of Profit and Loss

For the Nine Months Ended September 30, 2011 and 2010

(in thousands, except per-share data)


















2011



2010





% of





% of



Amount


Sales



Amount


Sales











Gross Sales

$

187,341




$

162,914



    Commissions, Allowances and Rebates


1,226





1,204



Net Sales


186,115





161,710













    Other


2,007





374













Net Revenues


188,122





162,084













    Cost of Goods Sold


133,781


71.4%



115,548


70.9%











Gross Profit


54,341


29.0%



46,536


28.6%











Operating Expenses










    Selling, General and Administrative Expenses


28,097


15.0%



24,784


15.2%

    Research and Development Expenses


8,247


4.4%



7,906


4.9%

    Restructuring Expenses


-


-



1,187


0.7%

    Merger and Acquisition Expenses


-


-



786


0.5%

Total Operating Expenses


36,344


19.4%



34,663


21.3%











Operating Profit


17,997


9.6%



11,873


7.3%











Other Expenses/(Income):










    Interest Expense, net


1,742





3,602



    Other (Income)/Expenses, net


(271)





69



    Equity in Losses of Partially-Owned Affiliate


1,164





-













Income Before Income Taxes


15,362


8.2%



8,202


5.0%











    Provision for Income Taxes


4,656





4,137













Income from Continuing Operations

$

10,706


5.7%


$

4,065


2.5%











(Loss)/Income  from Discontinued Operations, Net of Tax


(479)





935













Net Income

$

10,227


5.5%


$

5,000


3.1%











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










  Income from Continuing Operations


$     0.36





$     0.14



  (Loss)/Income from Discontinued Operations, Net of Tax


$   (0.01)





$     0.03



  Net Income


$     0.35





$     0.17













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










  Income from Continuing Operations


$     0.36





$     0.14



  (Loss)/Income from Discontinued Operations, Net of Tax


$   (0.01)





$     0.03



  Net Income


$     0.35





$     0.17













Weighted Average Shares Outstanding










    Basic


29,450





29,341



    Diluted


29,517





29,443





CAMBREX CORPORATION

Consolidated Balance Sheets

As of September 30, 2011 and December 31, 2010

(in thousands)















September 30,



December 31,

Assets


2011



2010







Cash and Cash Equivalents

$

29,710


$

29,614

Trade Receivables, net


31,801



39,025

Inventories, net


65,809



61,408

Prepaid Expenses and Other Current Assets


7,081



5,082

 Total Current Assets


134,401



135,129







Property, Plant and Equipment, net


142,446



150,483

Goodwill


38,015



37,694

Intangible Assets, net


4,511



4,687

Investment in Partially-Owned Affiliate


16,810



19,709

Other Non-Current Assets


2,850



4,049







 Total Assets

$

339,033


$

351,751







Liabilities and Stockholders' Equity












Accounts Payable

$

18,372


$

19,480

Accrued Expenses and Other Current Liabilities


36,505



33,503

 Total Current Liabilities


54,877



52,983







Long-term Debt


99,000



115,900

Deferred Income Taxes


17,191



17,893

Accrued Pension and Postretirement Benefits


38,739



43,921

Other Non-Current Liabilities


11,077



13,419







 Total Liabilities

$

220,884


$

244,116







 Stockholders’ Equity

$

118,149


$

107,635







 Total Liabilities and Stockholders’ Equity

$

339,033


$

351,751



CAMBREX CORPORATION

Reconciliation of GAAP to non-GAAP Results

For the Quarters and Nine Months Ended September 30, 2011 and 2010

(in thousands)









Third Quarter 2011



Third Quarter 2010








Operating Profit

$

5,396



$

1,253








Restructuring Expenses


-




1,187








Merger and Acquisition Expenses


-




711








Adjusted Operating Profit


5,396




3,151








Depreciation and Amortization


5,718




5,388








Adjusted EBITDA

$

11,114



$

8,539
















Nine Months 2011



Nine Months 2010








Operating Profit

$

17,997



$

11,873








Restructuring Expenses


-




1,187








Merger and Acquisition Expenses


-




786








Adjusted Operating Profit


17,997




13,846








Depreciation and Amortization


17,321




15,997








Adjusted EBITDA

$

35,318



$

29,843



SOURCE Cambrex Corporation



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