Cambrex Reports Third Quarter 2011 Results

03 Nov, 2011, 16:11 ET from Cambrex Corporation

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



RELATED LINKS

http://www.cambrex.com