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Cambrex Reports Second Quarter 2016 Financial Results

20:00 EDT 27 Jul 2016 | Globe Newswire

- Sales increased 12% for the quarter and full year sales and profit guidance increased -

- New $50 million production facility in Iowa completed and in operation -

- Conference call at 8:30 a.m. ET on July 28, 2016 -

EAST RUTHERFORD, N.J., July 28, 2016 (GLOBE NEWSWIRE) -- Cambrex Corporation (NYSE:CBM) reports results for the second quarter ended June 30, 2016.

Highlights

  • Sales increased 12% (11% excluding the impact of foreign currency) to $119.1 million compared to $106.4 million in the same quarter last year.  
  • GAAP Diluted EPS from continuing operations was $0.63 compared to $0.60 in the same quarter last year and Adjusted Diluted EPS was $0.68 compared to $0.63 in the same quarter last year.
  • Adjusted EBITDA increased 6% to $36.7 million compared to $34.6 million in the same quarter last year (see table at the end of this release).     
  • Net cash was $52.5 million at the end of the second quarter, a decrease of $33.1 million during the quarter.
  • The Company closed on a new five-year $500 million Senior Revolving Credit Facility that provides significant flexibility to execute its growth strategy.
  • The Company increased its financial guidance for full year sales and Adjusted EBITDA.  The Company expects full year 2016 sales, excluding the impact of foreign currency, to increase between 10% and 13% compared to 2015.  The Company expects Adjusted EBITDA to be between $144 and $149 million, a 12% to 16% increase compared to 2015 (see Financial Expectations section below).

“We are very pleased with our second quarter and year to date results.  Sales growth and profit margins year to date are in line with our outlook coming into the year and we expect continued strong growth in the second half of 2016,” commented Steven M. Klosk, President and Chief Executive Officer of Cambrex. “We saw growth across all product categories and we were also awarded two new late stage projects, demonstrating that we continue to be favorably positioned to take advantage of positive market dynamics.  Our first half results, coupled with our visibility into the rest of the year, provide the basis for our increased financial guidance.

“Earlier this month we announced the completion and validation of our $50 million state-of-the-art production and warehousing expansion at our Charles City, Iowa facility. As overall industry trends remain favorable, we will continue to invest aggressively to increase our small and large scale capabilities.”

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.  Cambrex 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 2016 Operating Results – Continuing Operations
Sales were $119.1 million, compared to $106.4 million in the same period last year, representing a 12% increase.  Foreign exchange favorably impacted reported sales growth by 1%.  The sales increase primarily reflects higher volumes in all of our product categories, partially offset by lower pricing. 

Gross margins decreased to 41% from 43% compared to the same quarter last year.  The decrease was primarily due to lower pricing and higher inventory reserves, including higher reprocessing costs, partially offset by favorable product mix.  Foreign currency had a negligible impact on gross margins in the second quarter of 2016.

Selling, general and administrative expenses were $13.6 million, compared to $14.1 million in the same quarter last year.  The decrease was mainly due to lower bonus, recruiting and relocation expenses, partially offset by increased personnel costs and sales and marketing expenses.

Research and development expenses were $4.1 million, compared to $2.7 million in the same quarter last year.  The increase is primarily related to increased personnel costs and costs to develop new generic drug products.

Operating profit increased to $30.8 million from $29.2 million in the same quarter last year. The increase in operating profit was primarily the result of higher gross profit, partially offset by higher research and development and sales and marketing expenses.  Adjusted EBITDA was $36.7 million compared to $34.6 million in the same quarter last year. 

Income tax expense was $9.8 million resulting in an effective tax rate of 32% compared to expense of $9.5 million and an effective tax rate of 33% in the same quarter last year.

Income from continuing operations was $20.8 million or $0.63 per share compared to $19.5 million or $0.60 per share in the same quarter last year.  Adjusted income from continuing operations was $22.3 million or $0.68 per share, compared to $20.5 million or $0.63 per share in the same quarter last year (see table at the end of this release).

Capital expenditures and depreciation were $9.9 million and $5.5 million, respectively, compared to $14.5 million and $5.2 million, respectively, in the same quarter last year.

The decrease in net cash of $33.1 million during the quarter was primarily due to the timing of accounts receivable collections, increased inventory production and capital spending.

Financial Expectations – Continuing Operations
The following table shows the Company’s current expectations for its full year 2016 financial performance versus its expectations from the previous quarter:

   Current
Expectations
 Previous
Expectations
      
 Gross sales increase 10% - 13% 8% - 12%
      
 Adjusted EBITDA $144 - $149 million $142 - $148 million
      
 Adjusted income from continuing operations per share $2.49 - $2.61 $2.46 - $2.58
      
 Free cash flow $60 - $70 million $60 - $70 million
      
 Capital expenditures $70 - $75 million $70 - $75 million
      
 Depreciation $25 - $27 million $26 - $28 million
      
 Effective tax rate 32% - 34% 32% - 34%
      

Consistent with prior guidance for the full year 2016, these financial expectations are for continuing operations and exclude the impact of any potential acquisitions, divestitures, restructuring activities, outcomes of tax disputes and any charges related to any future sale of the Company’s Zenara business located in Hyderabad, India.  Sales expectations exclude the impact of foreign exchange.  EBITDA, Adjusted EBITDA and Adjusted income from continuing operations per share for 2016 will be computed on a basis consistent with the reconciliation of the second quarter 2016 financial results in the tables at the end of this release.  Free cash flow is defined as the change in debt, net of cash during the year.  The tax rate will be sensitive to the Company’s geographic mix of income.  

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 2016 Form 10-Q is filed with the SEC.

Conference Call and Webcast
A conference call to discuss the Company’s second quarter 2016 results will begin at 8:30 a.m. Eastern Time on July 28, 2016 and can be accessed by calling 1-844-244-1943 for domestic and +1-513-988-8630 for international.  Please use the passcode 56378506 and call approximately 10 minutes prior to the start time.  A webcast will be available in the Investors section on the Cambrex website located at www.cambrex.com.  A telephone replay of the conference call will be available through August 4, 2016 by calling 1-855-859-2056 for domestic and +1-404-537-3406 for international.  Please use the passcode 56378506 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,” “Highlights” 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 “guidance,” “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, 2015, 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, market acceptance and adoption rate of its customers’ products, 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, environmental matters, changes in foreign exchange rates, uncollectible receivables, the timing of orders or shipments and the Company’s ability to meet its production plan and customer delivery schedules, expected timing of completion of capacity expansions, loss on disposition of assets, the Company’s ability to dispose of Zenara assets held for sale, cancellations or delays in renewal of contracts, lack of suitable raw materials, the Company’s ability to receive regulatory approvals for its products, continued demand in the U.S. for late stage clinical products and 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, 2015, 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 the Company’s 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, Adjusted EBITDA and Adjusted Income from Continuing Operations are non-GAAP financial measures.  The Company defines EBITDA as operating profit plus depreciation and amortization expense and Adjusted EBITDA excludes the impact of any potential acquisitions, restructuring activities and charges related to any future sale or closure of the Company’s Zenara business located in Hyderabad, India.  Adjusted Income from Continuing Operations is calculated in a manner consistent with that shown in the table at the end of this release.  Other companies may have different definitions of EBITDA, Adjusted EBITDA and Adjusted Income from Continuing Operations.  Therefore, these measures may not be comparable with non-GAAP financial measures provided by other companies.  EBITDA, Adjusted EBITDA and Adjusted Income from Continuing Operations should not be considered alternatives 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, Adjusted EBITDA and Adjusted Income from Continuing Operations among several other metrics to assess and analyze its operational results and trends.  Cambrex also believes EBITDA, Adjusted EBITDA and 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, 2016 and 2015
(in thousands, except per-share data)
          
   2016    2015 
    % of    % of
  Amount Sales  Amount Sales
          
Gross Sales$   119,054     $   106,379   
  Commissions, Allowances and Rebates    833        365   
Net Sales    118,221        106,014   
          
  Other Revenue    417        621   
          
Net Revenues    118,638        106,635   
          
  Cost of Goods Sold    70,081   58.9%     60,690   57.1%
          
Gross Profit    48,557   40.8%     45,945   43.2%
          
Operating Expenses:         
  Selling, General and Administrative Expenses    13,607   11.4%     14,078   13.2%
  Research and Development Expenses    4,125   3.5%     2,703   2.5%
Total Operating Expenses    17,732   14.9%     16,781   15.8%
          
Operating Profit    30,825   25.9%     29,164   27.4%
          
Other Expenses/(Income):         
  Interest Expense, Net    46        474   
  Other Expenses/(Income), Net    180        (232)  
          
Income Before Income Taxes    30,599   25.7%     28,922   27.2%
          
  Provision for Income Taxes    9,789        9,472   
          
Income from Continuing Operations$   20,810   17.5% $   19,450   18.3%
          
(Loss)/Income from Discontinued Operations, Net of Tax    (316)       213   
          
Net Income$   20,494   17.2% $   19,663   18.5%
          
Basic Earnings/(Loss) per Share of Common Stock:         
  Income from Continuing Operations$   0.65    $   0.62   
  (Loss)/Income from Discontinued Operations, Net of Tax$   (0.01)   $   0.01   
  Net Income$   0.64    $   0.63   
          
Diluted Earnings/(Loss) per Share of Common Stock:         
  Income from Continuing Operations$   0.63    $   0.60   
  (Loss)/Income from Discontinued Operations, Net of Tax$   (0.01)   $   0.01   
  Net Income$   0.62    $   0.61   
          
Weighted Average Shares Outstanding         
  Basic    32,063        31,344   
  Diluted    32,926        32,440   


CAMBREX CORPORATION
Statements of Profit and Loss
For the Six Months Ended June 30, 2016 and 2015
(in thousands, except per-share data)
          
   2016    2015 
    % of    % of
  Amount Sales  Amount Sales
          
Gross Sales$   212,989     $   184,563   
  Commissions, Allowances and Rebates    1,336        816   
Net Sales    211,653        183,747   
          
  Other Revenue    1,726        413   
          
Net Revenues    213,379        184,160   
          
  Cost of Goods Sold    125,923   59.1%     109,136   59.1%
          
Gross Profit    87,456   41.1%     75,024   40.6%
          
Operating Expenses:         
  Selling, General and Administrative Expenses    27,652   13.0%     27,829   15.1%
  Research and Development Expenses    7,603   3.6%     5,358   2.9%
Total Operating Expenses    35,255   16.6%     33,187   18.0%
          
Operating Profit    52,201   24.5%     41,837   22.7%
          
Other (Income)/Expenses:         
  Interest (Income)/Expense, Net    (9)       950   
  Other Expense/(Income), Net    214        (170)  
          
Income Before Income Taxes    51,996   24.4%     41,057   22.2%
          
  Provision for Income Taxes    16,341        13,239   
          
Income from Continuing Operations$   35,655   16.7% $   27,818   15.1%
          
Loss from Discontinued Operations, Net of Tax    (579)       (162)  
          
Net Income$   35,076   16.5% $   27,656   15.0%
          
Basic Earnings/(Loss) per Share of Common Stock:         
  Income from Continuing Operations$   1.12    $   0.89   
  Loss from Discontinued Operations, Net of Tax$   (0.02)   $   (0.01)  
  Net Income$   1.10    $   0.88   
          
Diluted Earnings/(Loss) per Share of Common Stock:         
  Income from Continuing Operations$   1.09    $   0.86   
  Loss from Discontinued Operations, Net of Tax$   (0.02)   $   0.00   
  Net Income$   1.07    $   0.86   
          
Weighted Average Shares Outstanding         
  Basic    31,975        31,271   
  Diluted    32,848        32,309   
          


CAMBREX CORPORATION
Consolidated Balance Sheets
As of June 30, 2016 and December 31, 2015
(in thousands)
      
  June 30,  December 31,
Assets 2016  2015
      
Cash and Cash Equivalents$  52,473  $  43,974
Trade Receivables, Net   67,692    90,920
Other Receivables   10,828    7,278
Inventories, Net   140,136    109,920
Prepaid Expenses and Other Current Assets   8,778    7,187
  Total Current Assets   279,907    259,279
      
Property, Plant and Equipment, Net   204,178    186,487
Goodwill   32,552    32,063
Intangible Assets, Net   7,469    6,691
Deferred Income Taxes   9,446    19,259
Other Non-Current Assets   3,323    1,760
      
  Total Assets$  536,875  $  505,539
      
Liabilities and Stockholders' Equity     
      
Accounts Payable$  36,639  $  39,257
Deferred Revenue and Advance Payments   7,467    16,298
Accrued Expenses and Other Current Liabilities   36,608    44,247
Short-Term Debt   -     30,000
  Total Current Liabilities   80,714    129,802
      
Advance Payments   39,000    - 
Deferred Income Taxes   7,697    7,735
Accrued Pension Benefits   41,724    42,661
Other Non-Current Liabilities   14,689    14,506
      
  Total Liabilities$  183,824  $  194,704
      
  Stockholders’ Equity$  353,051  $  310,835
      
  Total Liabilities and Stockholders’ Equity$  536,875  $  505,539


CAMBREX CORPORATION
Reconciliation of GAAP to non-GAAP Results
For the Quarters and Six Months Ended June 30, 2016 and 2015
(in thousands)
       
 Second Quarter 2016  Second Quarter 2015
       
Operating Profit$30,825  $29,164
       
Restructuring Expenses   154     - 
       
Adjusted Operating Profit   30,979     29,164
       
Depreciation and Amortization   5,696     5,388
       
Adjusted EBITDA$  36,675  $  34,552
       
       
 Six Months 2016  Six Months 2015
       
Operating Profit$52,201  $41,837
       
Restructuring Expenses   444     - 
       
Adjusted Operating Profit   52,645     41,837
       
Depreciation and Amortization   11,274     10,685
       
Adjusted EBITDA$  63,919  $  52,522


CAMBREX CORPORATION 
Reconciliation of GAAP to non-GAAP Results 
For the Quarters and Six Months Ended June 30, 2016 and 2015 
(in thousands) 
               
    Second Quarter 2016 Second Quarter 2015  
       Diluted
EPS
    Diluted
EPS
  
Income from Continuing Operations$  20,810$  0.63 $  19,450$  0.60  
               
Restructuring Expenses    154   0.00    -    -   
Stock-Based Compensation, Net of Tax 1   1,146   0.03    862   0.03  
Amortization of Purchased Intangibles   211   0.01    166   0.01  
               
Adjusted Income from Continuing Operations 2$  22,321$  0.68 $  20,478$  0.63  
               
               
               
    Six Months 2016 Six Months 2015  
       Diluted
EPS
    Diluted
EPS
  
Income from Continuing Operations$  35,655$  1.09 $  27,818$  0.86  
               
Restructuring Expenses    444   0.01    -    -   
Stock-Based Compensation, Net of Tax 1   2,144   0.07    1,562   0.05  
Amortization of Purchased Intangibles   387   0.01    335   0.01  
               
Adjusted Income from Continuing Operations 2$  38,630$  1.18 $  29,715$  0.92  
               
               
Tax rate estimated at 35% for stock-based compensation.
Diluted earnings per share for adjusted income from continuing operations is based on the weighted number of diluted shares outstanding for the quarter and year. As such, the sum of the quarters may not necessarily equal the full year. In addition, the sum of the line items may not equal due to rounding.

 

Contact:	
Gregory P. Sargen			
Executive Vice President & CFO			
Phone: 201-804-3055				
Email: gregory.sargen@cambrex.com		 

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