EAST RUTHERFORD, N.J., Aug. 1, 2014 /PRNewswire/ -- Cambrex Corporation (NYSE: CBM) reports results for the second quarter ended June 30, 2014.
"I am extremely pleased with our strong second quarter and first half financial results and look forward to an even stronger second half of the year," commented Steven M. Klosk, President and Chief Executive Officer of Cambrex. "Our recent and ongoing investments in both capital improvements and personnel have allowed us to significantly increase our volumes. We are focused on maintaining a high level of customer service and plant efficiency while we continue to expand capacity and improve our capabilities. During the first half of the year, we also made significant progress in strengthening relationships with certain key customers, winning strategic supplier status with a large pharmaceutical customer and putting Cambrex in a position to win future projects with another.
"We are also pleased to have purchased the remaining shares in Zenara Pharma during the second quarter. While it will take some time, we believe Zenara's capabilities will complement our strong position in the API market."
Basis of ReportingThe 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.
Second Quarter 2014 Operating Results – Continuing OperationsSales were $98.0 million for the quarter, compared to $61.6 million in the same period last year, representing a 59.0% increase, including the favorable impact of foreign exchange of 1.0%. The Company recorded sales increases in all of its product categories, with strong growth in certain branded APIs, controlled substances and generic APIs. Pricing was lower by approximately 1.8% compared to the second quarter last year.
Gross margins increased to 34.1% from 31.2% compared to the same period last year. This increase was primarily due to favorable product mix partially offset by lower pricing and higher production costs.
Selling, general and administrative expenses were $14.6 million compared to $10.6 million in the same period last year. The increase was mainly due to higher personnel expenses as well as higher spending on costs related to the transaction to purchase the remaining shares in Zenara and expenses related to due diligence on various acquisition opportunities.
Research and development expenses were $3.6 million compared to $2.8 million in the same period last year.
Operating profit increased to $15.2 million from $5.9 million in the same period last year. The increase in operating profit was primarily the result of higher gross profit partially offset by higher operating expenses. EBITDA was $21.2 million compared to $11.4 million in the same period last year.
Net interest expense was flat at $0.5 million for both the second quarters of 2014 and 2013.
Equity in losses of partially-owned affiliates, primarily representing Zenara's results, was $4.3 million compared to $0.7 million in the same period last year. The second quarter of 2014 included a loss of $4.1 million related to the purchase of the remaining 49% of Zenara. The loss was primarily due to the write-off of $4.4 million of cumulative translation adjustments previously recorded within the Stockholder's Equity section of the Company's balance sheet. Zenara's revenues, operating profit and EBITDA after the purchase of the shares in May are included in the Company's consolidated results, and were not material. Zenara's results prior to the purchase of the remaining shares are included in equity in losses of partially-owned affiliates.
The provision for income taxes in the quarter was a benefit of $9.4 million and included a benefit of $14.2 million for a partial reversal of a valuation allowance against certain U.S. tax assets. Excluding the impact of this benefit and the impact on pre-tax income related to the purchase of the remaining Zenara shares, the effective tax rate would have been 32.7% during the quarter compared to an effective tax rate of 32.8% in the same period last year.
Income from continuing operations was $19.8 million or $0.63 per share compared to $3.1 million or $0.10 per share in the same period last year. Adjusted income from continuing operations was $11.0 million or $0.35 per share, compared to $4.1 million or $0.13, respectively in 2013 (see table at the end of this release).
Capital expenditures and depreciation were $6.0 million and $5.9 million, respectively, compared to $13.1 million and $5.5 million in the same period last year.
Financial Expectations – Continuing OperationsThe following table shows the Company's current expectations for its full year 2014 financial performance versus its expectations from the previous quarter:Current
ExpectationsGross sales increase13% - 16%8% - 12%Adjusted EBITDA$74 - $78 million$70 - $76 MillionAdjusted income from continuing
operations per share$1.07 - $1.15$0.99 - $1.10Reduction of debt, net of cash$25 - $30 million$25 - $30 millionCapital expenditures$35 - $39 million$35 - $39 millionDepreciation$25 - $27 million$25 - $27 millionEffective tax rate33% - 36%33% - 37%Consistent with prior guidance for the full year 2014, these financial expectations are for continuing operations and exclude the impact of any potential acquisitions, restructuring activities and outcomes of tax disputes and do not reflect Zenara's results. Sales expectations exclude the impact of foreign currency. Adjusted EBITDA and Adjusted income from continuing operations per share are computed on a basis consistent with results in the tables at the end of this release.
We continue to expect Zenara to generate low single digit millions in revenues and a small EBITDA loss in 2014. As described earlier in this release, the Company purchased all previously unowned shares in Zenara Pharma and as such, has consolidated Zenara's results from the purchase date of May 23, 2014 in its second quarter 2014 results and will do so for all future periods.
The Company expects to reduce the valuation allowance against certain U.S. tax assets by approximately $17.5 million for the full year 2014, which would reduce tax expense accordingly. The valuation allowance released for the second quarter and year to date periods was $14.2 million and $14.4 million, respectively. The actual amount of the reduction in the valuation allowance may be higher or lower depending on the amount and type of U.S. income during the rest of the year. The full year effective tax rate included in the table above excludes this benefit and the impact of the purchase of the remaining Zenara shares. 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.
The financial information contained in this press release is unaudited, subject to revision and should not be considered final until the Company's second quarter 2014 Form 10-Q is filed with the SEC.
Conference Call and WebcastA conference call to discuss the Company's second quarter 2014 results will begin at 8:30 a.m. Eastern Time on Friday, August 1, 2014. Those wishing to participate should call 1-888-417-8465 for domestic and +719-457-1512 for international. Please use the passcode 1762072 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, August 8, 2014 by calling 1-888-203-1112 for domestic and +1-719-457-0820 for international. Please use the passcode 1762072 to access the replay.
About CambrexCambrex 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 StatementsThis document contains "forward-looking statements," including statements or tables 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. 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 (including those pertaining to 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, 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 MeasuresEBITDA 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 CORPORATIONStatements of Profit and LossFor the Quarters Ended June 30, 2014 and 2013(in thousands, except per-share data)20142013% of% ofAmountSalesAmountSalesGross Sales
61,628Commissions, Allowances and Rebates62565Net Sales97,34761,563Other Revenue5461,240Net Revenues97,89362,803Cost of Goods Sold64,47865.8%43,55270.7%Gross Profit33,41534.1%19,25131.2%Operating ExpensesSelling, General and Administrative Expenses14,56014.9%10,62217.2%Research and Development Expenses3,6313.7%2,7654.5%Total Operating Expenses18,19118.6%13,38721.7%Operating Profit15,22415.5%5,8649.5%Other Expenses/(Income):Interest Expense, Net543488Other (Income)/Expenses, Net(3)38Equity in Losses of Partially-Owned Affiliates4,272668Income Before Income Taxes10,41210.6%4,6707.6%(Benefit)/Provision for Income Taxes(9,415)1,534Income from Continuing Operations
3,1365.1%Loss from Discontinued Operations, Net of Tax(160)(862)Net Income
2,2743.7%Basic Earnings/(Loss) per Share of Common Stock:Income from Continuing Operations$ 0.65$ 0.10Loss from Discontinued Operations, Net of Tax$ (0.01)$ (0.03)Net Income$ 0.64$ 0.07Diluted Earnings/(Loss) per Share of Common Stock:Income from Continuing Operations$ 0.63$ 0.10Loss from Discontinued Operations, Net of Tax$ 0.00$ (0.03)Net Income$ 0.63$ 0.07Weighted Average Shares OutstandingBasic30,64730,089Diluted31,42830,956 CAMBREX CORPORATIONStatements of Profit and LossFor the Six Months Ended June 30, 2014 and 2013(in thousands, except per-share data)20142013% of% ofAmountSalesAmountSalesGross Sales
136,209Commissions, Allowances and Rebates1,174228Net Sales162,990135,981Other1,0081,707Net Revenues163,998137,688Cost of Goods Sold114,00569.4%93,68868.8%Gross Profit49,99330.5%44,00032.3%Operating ExpensesSelling, General and Administrative Expenses26,19316.0%21,72616.0%Research and Development Expenses6,1063.7%4,9593.6%Total Operating Expenses32,29919.7%26,68519.6%Gain on Sale of Asset-0.0%4,6803.4%Operating Profit17,69410.8%21,99516.1%Other Expenses:Interest Expense, net1,065983Other (Income)/Expense, net(21)6Equity in Losses of Partially-Owned Affiliates4,6181,149Income Before Income Taxes12,0327.3%19,85714.6%(Benefit)/Provision for Income Taxes(8,961)5,296Income from Continuing Operations
14,56110.7%Loss from Discontinued Operations, Net of Tax(344)(1,119)Net Income
13,4429.9%Basic Earnings/(Loss) per Share of Common Stock:Income from Continuing Operations$
.48Loss from Discontinued Operations, Net of Tax$ (0.02)$ (0.03)Net Income$
.45Diluted Earnings/(Loss) per Share of Common Stock:Income from Continuing Operations$
.47Loss from Discontinued Operations, Net of Tax$ (0.01)$ (0.03)Net Income$
.44Weighted Average Shares OutstandingBasic30,59630,029Diluted31,39830,870 CAMBREX CORPORATIONConsolidated Balance SheetsAs of June 30, 2014 and December 31, 2013(in thousands)June 30,December 31,Assets20142013Cash and Cash Equivalents
22,745Trade Receivables, net69,75171,276Other Receivables11,55112,943Inventories, net103,00689,965Prepaid Expenses and Other Current Assets9,2245,631 Total Current Assets212,982202,560Property, Plant and Equipment, net170,164171,966Goodwill47,81138,670Intangible Assets, net8,5664,011Investments in and Advances to Partially-Owned Affiliates78713,364Deferred Income Taxes30,10219,799Other Non-Current Assets5,6587,667 Total Assets
458,037Liabilities and Stockholders' EquityAccounts Payable
29,052Deferred Revenue22,13120,121Accrued Expenses and Other Current Liabilities47,50148,098 Total Current Liabilities98,12297,271Long-Term Debt74,00079,250Deferred Income Taxes13,35312,835Accrued Pension Benefits37,61440,123Other Non-Current Liabilities17,44418,338 Total Liabilities
247,817 Stockholders' Equity
210,220 Total Liabilities and Stockholders' Equity
458,037 CAMBREX CORPORATIONReconciliation of GAAP to non-GAAP ResultsFor the Quarters Ended June 30, 2014 and 2013(in thousands)Second Quarter 2014Second Quarter 2013Operating Profit
5,864Depreciation and Amortization5,9665,553EBITDA
11,417Six Months 2014Six Months 2013Operating Profit
21,995Gain on Sale of Asset-(4,680)Adjusted Operating Profit17,69417,315Depreciation and Amortization11,84910,886Adjusted EBITDA
28,201 CAMBREX CORPORATIONReconciliation of GAAP to non-GAAP ResultsFor the Quarters Ended June 30, 2014 and 2013(in thousands)Second Quarter 2014Second Quarter 2013Diluted
EPSIncome from Continuing Operations
0.10Stock-Based Compensation, Net of Tax19440.036950.02Loss on Acquisition of Zenara Shares4,1220.13--Amortization of Purchased Intangibles2310.013010.01Release of Valuation Allowance(14,161)(0.45)--Adjusted Income from Continuing Operations
0.13Six Months 2014Six Months 2013Diluted
EPSIncome from Continuing Operations
0.47Stock-Based Compensation, Net of Tax11,6640.051,3670.04Loss on Acquisition of Zenara Shares4,1220.13--Gain on Sale of Asset--(3,173)(0.10)Amortization of Purchased Intangibles5050.026030.02Release of Valuation Allowance(14,359)(0.46)--Changes in Tax Laws--(1,271)(0.04)Adjusted Income from Continuing Operations
Tax rate estimated at 35% for stock-based compensation.
|SOURCE Cambrex Corporation|
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