From the Wires
Cambrex Reports Third Quarter 2008 Results
Nov. 4, 2008 04:05 PM
EAST RUTHERFORD, N.J., Nov. 4 /PRNewswire-FirstCall/ -- Cambrex
Corporation (NYSE: CBM) reports third quarter 2008 results for the period
ended September 30, 2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/20000613/CAMBREXLOGO )
-- Sales increased 3.2% (-1.7% excluding foreign currency) compared to
third quarter 2007.
-- Adjusted EBITDA for the quarter was up $1.7 million to $11.4 million
versus $9.7 million last year.
-- Debt, net of cash was $92.0 million at the end of third quarter 2008.
Excluding the impact of foreign exchange, debt, net of cash decreased
$2.6 million during the third quarter.
Basis of Reporting
As previously reported, Cambrex sold its Bioproducts and Biopharma
businesses (the "Bio Businesses") to Lonza for $463.9 million in February
2007. Discontinued Operations in the 2007 financial statements include the
results of operations of the Bio Businesses through the date of sale as well
as the corresponding gain on sale.
The Company has provided a reconciliation from adjusted amounts to GAAP
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 2008 Operating Results - Continuing Operations
Third quarter 2008 sales of $56.5 million were 3.2% higher than the third
quarter 2007 and 1.7% lower excluding the effect of foreign currency.
Comparing the current quarter to the same quarter last year, excluding the
currency impact, custom development revenues declined due to weaker demand and
customer and manufacturing delays in certain projects, and lower shipments of
products based on the Company's proprietary technologies due to timing of
order patterns. Certain active pharmaceutical ingredients ("APIs")
experienced price declines compared to the same quarter last year, with the
largest impact resulting from the 2007 renegotiation of a long-term contract
to manufacture the Company's largest API. Volumes associated with feed
additives were lower due largely to the Company's late 2007 decision to exit
this business. These declines were partially offset by higher sales of
generic APIs, particularly certain controlled substances.
Third quarter 2008 Gross Margin decreased to 28.7% of sales from 33.8%
during the third quarter 2007, with foreign currency favorably impacting gross
margin by 2.9%. Unfavorable product mix, lower pricing on the Company's
largest API, higher raw material costs, and higher costs associated with the
validation of the new API finishing facility at the Milan, Italy site, were
the main drivers of the lower margins.
Operating Profit increased to $4.5 million in the third quarter 2008 from
$3.5 million in the third quarter 2007. Adjusted Operating Profit was $5.7
million, or 10.1% of sales, compared to $4.8 million, or 8.8% of sales for the
third quarter last year. Adjusted EBITDA increased to $11.4 million, or 20.2%
of sales, compared to $9.7 million, or 17.8% of sales last year. The
increases in both Adjusted Operating Profit and Adjusted EBITDA were driven
primarily by lower corporate headquarters expenses, lower Selling, General and
Administrative ("SG&A") expenses, and lower research and development expenses,
partially offset by the lower gross profits described above and the negative
impact of foreign currency on operating expenses.
Steven M. Klosk, President and Chief Executive Officer, said, "We are
pleased with the increases in Operating Profit and Adjusted EBITDA for the
quarter. While general business conditions have impacted the number and
timing of new custom development projects, especially those in the early
clinical stages of development, the Company has a strong pipeline of late-
stage Phase III projects. In addition, we continue to see solid growth in our
controlled substances products. Softer market conditions, along with the
previously reported impact of a customer recall, have resulted in lower than
expected year-to-date results and ultimately a moderate downward revision in
our full year earnings guidance.
"We are nearing completion of our new mid-scale API manufacturing facility
at our Swedish operation, which is expected to be on line in early 2009, and
production has started in a portion of our state of the art API finishing
facility in Milan, Italy, with the remainder in the later stages of
validation. Along with our new high potency development center in Iowa, the
completion of these projects cap a three year period of higher than normal
capital investments and position us well for future growth.
"We were pleased with the positive cash generation in the third quarter
net of the impact of foreign exchange. We will continue to aggressively cut
costs and focus on increasing cash flow in 2009 and beyond.
"We have nearly three and a half years remaining on our $200 million
revolving credit facility and believe that cash flows from operations, along
with funds available from this facility, will provide more than enough capital
to execute our plan over the next few years of aggressively growing sales of
products based on our proprietary drug delivery and tastemasking technologies,
controlled substances, new generic APIs, and the transition of late stage
clinical projects to long term supply agreements."
Third Quarter 2008 Operating, Interest and Tax Expenses - Continuing
Operations
SG&A Expenses in the third quarter 2008 were $8.8 million compared to
$10.7 million in the same period last year. The decrease is a result of
corporate headquarters restructuring activities and expense reductions within
the Company's manufacturing facilities, partially offset by the negative
impact of foreign currency.
Research and Development ("R&D") Expenses for the third quarter 2008 were
$1.8 million compared to $3.1 million in the third quarter 2007. The decrease
is primarily due to the Company's decision in 2007 to consolidate its New
Jersey technical center into the Company's Iowa facility in order to create
increased operating efficiencies. Cambrex also utilized certain R&D personnel
on custom development projects resulting in these costs being classified as
Cost of Goods Sold.
Strategic Alternative and Restructuring Costs totaling $1.2 million in the
third quarter 2008 include $0.3 million of costs related to the consolidation
of operations at the New Jersey technical center into the Iowa facility, and
$0.9 million of expense related to severance, change-in-control liabilities,
and the ongoing project to streamline the Company's legal entity structure in
order to lower operating costs and increase tax efficiency.
Net Interest Expense in the third quarter 2008 was $1.0 million compared
to $1.1 million in the third quarter 2007. The Company capitalized interest
of $0.5 million on long-term projects in the third quarter of 2008.
The effective tax rate for the third quarter 2008 was 9.8% and the
Provision for Income Taxes totaled $0.3 million. Favorable resolution of
certain tax issues resulted in a benefit to tax expenses of $1.5 million
during the third quarter 2008. The Company's effective tax rates have been
and are expected to remain highly sensitive to the geographic mix of income
due to the Company's inability to recognize tax benefits for U.S. GAAP
purposes in certain jurisdictions where there has been a recent history of
losses, primarily the U.S.
Third Quarter 2008 Capital Expenditures and Depreciation
Capital expenditures and depreciation for the third quarter 2008 were $5.0
million and $5.7 million compared to $10.2 million and $4.9 million in the
third quarter 2007, respectively. The decrease in capital spending is largely
due to spending on an API purification facility at the Milan facility in the
third quarter of 2007 for which the majority of spending has since been
completed.
Guidance
The Company expects that sales, net of the impact of foreign currency,
will decline between 3% and 5% in 2008 compared to 2007. Adjusted EBITDA for
2008 is now expected to be between $50 and $53 million.
Restructuring and Strategic Alternatives Costs are expected to be
approximately $3.8 million, which includes higher-than expected costs related
to the legal entity restructuring completed during the third quarter of 2008
and charges expected during the fourth quarter of 2008 related to additional
cost reductions at the Company's corporate headquarters (expected to reduce
future administrative expenses by approximately $0.5 million annually). The
legal entity restructuring will reduce annual administrative expenses by
approximately $0.3 million and will reduce income tax expense in 2008 by
approximately $1.0 million. The Company continues to experience delays in
sub-leasing the recently closed New Jersey technical center.
For 2008, capital expenditures are expected to be approximately $32 to $34
million and depreciation is expected to be $21 to $22 million.
Other Matter
The Company previously reported that one of the Company's customers
recalled a product in the U.S. in March of 2008, and that this would result in
a reduction of approximately $6.0 million in revenue compared to original 2008
guidance. The Company continues to expect this level of reduction and the
impact of this expectation is included in the full year 2008 guidance
discussed above.
The financial information contained in this press release is unaudited,
subject to revision and should not be considered final until the third quarter
2008 Form 10-Q is filed with the SEC.
Conference Call and Webcast
The Conference Call to discuss third quarter 2008 earnings will begin at
8:30 a.m. Eastern Time on Wednesday, November 5, 2008 and last approximately
45 minutes. Those wishing to participate should call 1-888-634-4003 for
domestic and +1-706-634-6653 for international. Please use the pass code
68710081 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 Wednesday,
November 12, 2008 by calling 1-800-642-1687 for domestic and +1-706-645-9291
for international. Please use the pass code 68710081 to access the replay.
Forward Looking Statements
This news release may contain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 and Rule 3b-6
under the Securities Exchange Act of 1934, as amended, including, without
limitation, statements regarding expected performance, especially expectations
with respect to sales, research and development expenditures, earnings per
share, capital expenditures, acquisitions, divestitures, collaborations, or
other expansion opportunities. These statements may be identified by the fact
that words such as "expects", "anticipates", "intends", "estimates",
"believes" or similar expressions are used in connection with any discussion
of future financial or operating performance. Any forward-looking statements
are qualified in their entirety by reference to the risk factors discussed in
the Company's periodic reports filed with the U.S. Securities and Exchange
Commission. 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 including, but not limited to, global economic trends,
pharmaceutical outsourcing trends, competitive pricing or product
developments, government legislation or 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 exchange rates, uncollectible
receivables, loss on disposition of assets, cancellation 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 the
accuracy of the Company's current estimates with respect to its earnings and
profits for tax purposes in 2007. Any forward-looking statement speaks only
as of the date on which it is made, and the Company undertakes no obligation
to publicly update any forward-looking statement, whether as a result of new
information, future events or otherwise. New factors emerge from time to time
and it is not possible for the Company to predict which new factors will
arise. In addition, we cannot assess the impact of each factor on the
Company's business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.
For further details and a discussion of these and other risks and
uncertainties, investors and security holders are cautioned to review the
Cambrex 2007 Annual Report on Form 10-K, including the Forward-Looking
Statement section therein, and other subsequent filings with the U.S.
Securities and Exchange Commission, including Current Reports on Form 8-K.
The Company undertakes no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events or otherwise.
About Cambrex
Cambrex provides products and services to accelerate the development and
commercialization of small molecule APIs, advanced intermediates and other
products for branded and generic pharmaceuticals. The Company currently
employs approximately 850 people worldwide. For more information, please
visit http://www.cambrex.com.
CAMBREX CORPORATION
Statement of Profit and Loss
For the Quarters Ended September 30, 2008 and 2007
(in thousands)
2008 2007
% of % of
Amount Sales Amount Sales
Gross Sales $56,508 100.0% $54,742 100.0%
Allowances and Rebates 193 0.3% 227 0.4%
Net Sales 56,315 99.7% 54,515 99.6%
Other Revenues 1,977 3.5% 99 0.2%
Net Revenues 58,292 103.2% 54,614 99.8%
Cost of Goods Sold 42,057 74.5% 36,093 66.0%
Gross Profit 16,235 28.7% 18,521 33.8%
Operating Expenses
Selling, General and
Administrative Expenses 8,767 15.5% 10,669 19.5%
Research and Development
Expenses 1,772 3.1% 3,062 5.6%
Restructuring Expenses 321 0.6% 451 0.8%
Strategic Alternative Costs 833 1.5% 866 1.6%
Total Operating Expenses 11,693 20.7% 15,048 27.5%
Operating Profit 4,542 8.0% 3,473 6.3%
Other Expenses:
Interest Expense, net 956 1.7% 1,069 1.9%
Other Expense, net 485 0.8% 548 1.0%
Income Before Income Taxes 3,101 5.5% 1,856 3.4%
Provision for Income Taxes 304 0.6% 4,592 8.4%
Income/(Loss) from Continuing
Operations $2,797 4.9% $(2,736) -5.0%
Income from Discontinued
Operations, Net of Tax - 0.0% 4,229 7.7%
Net Income $2,797 4.9% $1,493 2.7%
Basic Earnings/(Loss) per Share
Income/(Loss) from Continuing
Operations $0.10 $(0.09)
Income from Discontinued
Operations, Net of Tax $- $0.14
Net Income $0.10 $0.05
Diluted Earnings/(Loss) per Share
Income/(Loss) from Continuing
Operations $0.10 $(0.09)
Income from Discontinued
Operations, Net of Tax $- $0.14
Net Income $0.10 $0.05
Weighted Average Shares Outstanding
Basic 29,163 28,934
Diluted 29,178 28,934
CAMBREX CORPORATION
Statement of Profit and Loss
For the Nine Months Ended September 30, 2008 and 2007
(in thousands)
2008 2007
% of % of
Amount Sales Amount Sales
Gross Sales $184,440 100.0% $182,820 100.0%
Allowances and Rebates 1,137 0.6% 1,001 0.5%
Net Sales 183,303 99.4% 181,819 99.5%
Other Revenues 1,792 1.0% 864 0.5%
Net Revenue 185,095 100.4% 182,683 100.0%
Cost of Sales 127,120 69.0% 115,829 63.4%
Gross Profit 57,975 31.4% 66,854 36.6%
Operating Expenses
Selling, General and
Administrative Expenses 31,511 17.0% 36,572 20.1%
Research and Development Expenses 5,945 3.2% 8,623 4.7%
Restructuring Expenses 1,469 0.8% 4,034 2.2%
Strategic Alternative Costs 1,408 0.8% 28,560 15.6%
Total Operating Expenses 40,333 21.8% 77,789 42.6%
Operating Profit/(Loss) 17,642 9.6% (10,935) -6.0%
Other Expenses/(Income):
Interest Expense/(Income), net 2,302 1.3% (1,341) -0.7%
Other Expenses, net 459 0.2% 930 0.5%
Income/(Loss) Before Income Taxes 14,881 8.1% (10,524) -5.8%
Provision for Income Taxes 6,002 3.3% 4,200 2.3%
Income/(Loss) from Continuing
Operations $8,879 4.8% $(14,724) -8.1%
Income from Discontinued
Operations, Net of Tax - 0.0% 223,707 122.4%
Net Income $8,879 4.8% $208,983 114.3%
Basic Earnings/(Loss) per Share
Income/(Loss) from Continuing
Operations $0.31 $(0.52)
Income from Discontinued
Operations, Net of Tax $- $7.83
Net Income $0.31 $7.31
Diluted Earnings/(Loss) per Share
Income/(Loss) from Continuing
Operations $0.31 $(0.52)
Income from Discontinued
Operations, Net of Tax $- $7.83
Net Income $0.31 $7.31
Weighted Average Shares Outstanding
Basic 29,096 28,575
Diluted 29,101 28,575
CAMBREX CORPORATION
Reconciliation of Gross Sales, Gross Profit & Operating Profit
For the Quarters and Nine Months Ended September 30, 2008 and 2007
(in thousands)
Third Quarter 2008
Operating
Gross Gross Profit/
Sales Profit GP% (Loss) OP%
Pre-Corporate Results Before
Strat. Alt. & Restructuring
Expenses $56,508 $16,235 28.7% $8,017 14.2%
Corporate Results - - (2,286)
Adjusted Operating Profit 5,731 10.1%
Strat. Alt. & Restructuring
Expenses (1,154)
Equity Modification for
Former Executive (35)
As Reported $56,508 $16,235 28.7% $4,542 8.0%
Third Quarter 2007
Gross Gross Operating
Sales Profit GP% Profit/
(Loss) OP%
Pre-Corporate Results Before
Strat. Alt. & Restructuring
Expenses $54,742 $18,521 33.8% $8,792 16.1%
Corporate Results - - (4,002)
Adjusted Operating Profit 4,790 8.8%
Strat. Alt. & Restructuring
Expenses (1,317)
As Reported $54,742 $18,521 33.8% $3,473 6.3%
Nine Months 2008
Gross Gross Operating
Sales Profit GP% Profit/
(Loss) OP%
Pre-Corporate Results Before
Strat. Alt. & Restructuring
Expenses $184,440 $57,975 31.4% $30,627 16.6%
Corporate Results - - (9,476)
Adjusted Operating Profit 21,151 11.5%
Strat. Alt. & Restructuring
Expenses (2,877)
Equity Acceleration &
Modification for Former
Executive (632)
As Reported $184,440 $57,975 31.4% $17,642 9.6%
Nine Months 2007
Gross Gross Operating
Sales Profit GP% Profit/
(Loss) OP%
Pre-Corporate Results Before
Strat. Alt. & Restructuring
Expenses $182,820 $66,854 36.6% $37,783 20.7%
Corporate Results - - (16,124)
Adjusted Operating Profit 21,659 11.8%
Strat. Alt. & Restructuring
Expenses (32,594)
As Reported $182,820 $66,854 36.6% $(10,935) -6.0%
Third Third Nine Nine
Quarter Quarter Months Months
2008 2007 2008 2007
Pre-Corporate Operating
Profit Before Strat. Alt. &
Restructuring Expenses $8,017 $8,792 $30,627 $37,783
Corporate Results (2,286) (4,002) (9,476) (16,124)
Depreciation and
Amortization 5,683 4,934 16,115 14,579
Adjusted EBITDA $11,414 $9,724 $37,266 $36,238
CAMBREX CORPORATION
Consolidated Balance Sheet
As of September 30, 2008 and December 31, 2007
(in thousands)
September 30, December 31,
Assets 2008 2007
Cash and Cash Equivalents $29,173 $38,488
Trade Receivables, net 26,775 45,003
Inventories, net 69,506 61,440
Prepaid Expenses and Other Current Assets 15,803 20,104
Total Current Assets 141,257 165,035
Property, Plant and Equipment, Net 166,001 165,657
Goodwill 35,565 35,552
Other Non-Current Assets 5,702 7,218
Total Assets $348,525 $373,462
Liabilities and Stockholders' Equity
Accounts Payable $18,448 $26,185
Accrued Expenses and Other Current
Liabilities 42,964 69,702
Total Current Liabilities 61,412 95,887
Long-term Debt 121,000 101,600
Deferred Tax Liabilities 18,269 19,086
Accrued Pension and Postretirement
Benefits 28,151 32,104
Other Non-Current Liabilities 17,674 22,728
Total Liabilities $246,506 $271,405
Stockholders' Equity $102,019 $102,057
Total Liabilities and Stockholders'
Equity $348,525 $373,462
SOURCE Cambrex Corporation
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