EAST RUTHERFORD, N.J., Aug. 1, 2014 /PRNewswire/ -- Cambrex Corporation (NYSE: CBM) reports results for the second quarter ended June 30, 2014.
Highlights
-- Second quarter sales increased 59% to $98.0 million from $61.6 million in the same period last year. -- Second quarter EBITDA increased 86% to $21.2 million compared to $11.4 million in the same period last year (see table at the end of this release). -- Full year 2014 sales guidance increased, excluding the impact of foreign currency, to between 13% and 16% over 2013, and full year EBITDA guidance increased to between $74 and $78 million (see Financial Expectations below). -- Remaining 49% of Zenara Pharma ("Zenara") purchased by the Company for $2.7 million.
"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 Reporting
The 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 Operations
Sales 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 Operations
The following table shows the Company's current expectations for its full year 2014 financial performance versus its expectations from the previous quarter:
Current Previous Expectations Expectations ------------ ------------ Gross sales increase 13% - 16% 8% - 12% Adjusted EBITDA $74 - $78 million $70 - $76 Million Adjusted income from continuing $1.07 - $1.15 $0.99 - $1.10 operations per share Reduction of debt, net of cash $25 - $30 million $25 - $30 million Capital expenditures $35 - $39 million $35 - $39 million Depreciation $25 - $27 million $25 - $27 million Effective tax rate 33% - 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 Webcast
A 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 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. 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 Statements
This 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 Measures
EBITDA 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 CORPORATION Statements of Profit and Loss For the Quarters Ended June 30, 2014 and 2013 (in thousands, except per-share data) 2014 2013 ---- ---- % of % of Amount Sales Amount Sales ------ ----- ------ ----- Gross Sales $97,972 $61,628 Commissions, Allowances and Rebates 625 65 --- --- Net Sales 97,347 61,563 Other Revenue 546 1,240 --- ----- Net Revenues 97,893 62,803 Cost of Goods Sold 64,478 65.8% 43,552 70.7% ------ ------ Gross Profit 33,415 34.1% 19,251 31.2% Operating Expenses Selling, General and Administrative Expenses 14,560 14.9% 10,622 17.2% Research and Development Expenses 3,631 3.7% 2,765 4.5% Total Operating Expenses 18,191 18.6% 13,387 21.7% ------ ------ Operating Profit 15,224 15.5% 5,864 9.5% Other Expenses/(Income): Interest Expense, Net 543 488 Other (Income)/Expenses, Net (3) 38 Equity in Losses of Partially-Owned Affiliates 4,272 668 ----- --- Income Before Income Taxes 10,412 10.6% 4,670 7.6% (Benefit)/Provision for Income Taxes (9,415) 1,534 ------ ----- Income from Continuing Operations $19,827 20.2% $3,136 5.1% Loss from Discontinued Operations, Net of Tax (160) (862) ---- ---- Net Income $19,667 20.1% $2,274 3.7% Basic Earnings/(Loss) per Share of Common Stock: Income from Continuing Operations $0.65 $0.10 Loss from Discontinued Operations, Net of Tax $(0.01) $(0.03) ------ ------ Net Income $0.64 $0.07 Diluted Earnings/(Loss) per Share of Common Stock: Income from Continuing Operations $0.63 $0.10 Loss from Discontinued Operations, Net of Tax $0.00 $(0.03) ----- ------ Net Income $0.63 $0.07 Weighted Average Shares Outstanding Basic 30,647 30,089 Diluted 31,428 30,956
CAMBREX CORPORATION Statements of Profit and Loss For the Six Months Ended June 30, 2014 and 2013 (in thousands, except per-share data) 2014 2013 ---- ---- % of % of Amount Sales Amount Sales ------ ----- ------ ----- Gross Sales $164,164 $136,209 Commissions, Allowances and Rebates 1,174 228 ----- --- Net Sales 162,990 135,981 Other 1,008 1,707 ----- ----- Net Revenues 163,998 137,688 Cost of Goods Sold 114,005 69.4% 93,688 68.8% ------- ------ Gross Profit 49,993 30.5% 44,000 32.3% Operating Expenses Selling, General and Administrative Expenses 26,193 16.0% 21,726 16.0% Research and Development Expenses 6,106 3.7% 4,959 3.6% Total Operating Expenses 32,299 19.7% 26,685 19.6% ------ ------ Gain on Sale of Asset - 0.0% 4,680 3.4% Operating Profit 17,694 10.8% 21,995 16.1% Other Expenses: Interest Expense, net 1,065 983 Other (Income)/Expense, net (21) 6 Equity in Losses of Partially-Owned Affiliates 4,618 1,149 ----- ----- Income Before Income Taxes 12,032 7.3% 19,857 14.6% (Benefit)/Provision for Income Taxes (8,961) 5,296 ------ ----- Income from Continuing Operations $20,993 12.8% $14,561 10.7% Loss from Discontinued Operations, Net of Tax (344) (1,119) ---- ------ Net Income $20,649 12.6% $13,442 9.9% Basic Earnings/(Loss) per Share of Common Stock: Income from Continuing Operations $0.69 $0.48 Loss from Discontinued Operations, Net of Tax $(0.02) $(0.03) ------ ------ Net Income $0.67 $0.45 Diluted Earnings/(Loss) per Share of Common Stock: Income from Continuing Operations $0.67 $0.47 Loss from Discontinued Operations, Net of Tax $(0.01) $(0.03) ------ ------ Net Income $0.66 $0.44 Weighted Average Shares Outstanding Basic 30,596 30,029 Diluted 31,398 30,870
CAMBREX CORPORATION Consolidated Balance Sheets As of June 30, 2014 and December 31, 2013 (in thousands) June 30, December 31, Assets 2014 2013 ------ ---- ---- Cash and Cash Equivalents $19,450 $22,745 Trade Receivables, net 69,751 71,276 Other Receivables 11,551 12,943 Inventories, net 103,006 89,965 Prepaid Expenses and Other Current Assets 9,224 5,631 ----- ----- Total Current Assets 212,982 202,560 Property, Plant and Equipment, net 170,164 171,966 Goodwill 47,811 38,670 Intangible Assets, net 8,566 4,011 Investments in and Advances to Partially-Owned Affiliates 787 13,364 Deferred Income Taxes 30,102 19,799 Other Non-Current Assets 5,658 7,667 ----- ----- Total Assets $476,070 $458,037 Liabilities and Stockholders' Equity ------------------------------------ Accounts Payable $28,490 $29,052 Deferred Revenue 22,131 20,121 Accrued Expenses and Other Current Liabilities 47,501 48,098 ------ ------ Total Current Liabilities 98,122 97,271 Long-Term Debt 74,000 79,250 Deferred Income Taxes 13,353 12,835 Accrued Pension Benefits 37,614 40,123 Other Non-Current Liabilities 17,444 18,338 ------ ------ Total Liabilities $240,533 $247,817 Stockholders' Equity $235,537 $210,220 Total Liabilities and Stockholders' Equity $476,070 $458,037
CAMBREX CORPORATION Reconciliation of GAAP to non-GAAP Results For the Quarters Ended June 30, 2014 and 2013 (in thousands) Second Quarter 2014 Second Quarter 2013 ------------------- ------------------- Operating Profit $15,224 $5,864 Depreciation and Amortization 5,966 5,553 ----- ----- EBITDA $21,190 $11,417 Six Months 2014 Six Months 2013 --------------- --------------- Operating Profit $17,694 $21,995 Gain on Sale of Asset - (4,680) --- ------ Adjusted Operating Profit 17,694 17,315 Depreciation and Amortization 11,849 10,886 ------ ------ Adjusted EBITDA $29,543 $28,201
CAMBREX CORPORATION Reconciliation of GAAP to non-GAAP Results For the Quarters Ended June 30, 2014 and 2013 (in thousands) Second Quarter 2014 Second Quarter 2013 ------------------- ------------------- Diluted Diluted EPS EPS Income from Continuing Operations $19,827 $0.63 $3,136 $0.10 Stock-Based Compensation, Net of Tax(1) 944 0.03 695 0.02 Loss on Acquisition of Zenara Shares 4,122 0.13 - - Amortization of Purchased Intangibles 231 0.01 301 0.01 Release of Valuation Allowance (14,161) (0.45) - - Adjusted Income from Continuing Operations $10,963 $0.35 $4,132 $0.13 Six Months 2014 Six Months 2013 --------------- --------------- Diluted Diluted EPS EPS Income from Continuing Operations $20,993 $0.67 $14,561 $0.47 Stock-Based Compensation, Net of Tax(1) 1,664 0.05 1,367 0.04 Loss on Acquisition of Zenara Shares 4,122 0.13 - - Gain on Sale of Asset - - (3,173) (0.10) Amortization of Purchased Intangibles 505 0.02 603 0.02 Release of Valuation Allowance (14,359) (0.46) - - Changes in Tax Laws - - (1,271) (0.04) ----- Adjusted Income from Continuing Operations $12,925 $0.41 $12,087 $0.39 1 Tax rate estimated at 35% for stock-based compensation.
SOURCE Cambrex Corporation