Cambrex Corporation Reports Third Quarter 2014 Financial Results

EAST RUTHERFORD, N.J., Oct. 30, 2014 /PRNewswire/ -- Cambrex Corporation (NYSE: CBM) reports results for the third quarter ended September 30, 2014.

Highlights

• Third quarter sales increased 4.0% to $81.1 million from $78.0 million in the same period last year.
• Third quarter EBITDA increased 6.5% to $18.1 million compared to $17.0 million in the same period last year (see table at the end of this release).   
• Debt, net of cash, improved $21.1 million during the third quarter to $33.5 million.
• Company continues to expect full year 2014 sales, excluding the impact of foreign currency, to grow between 13% and 16% from 2013, and full year EBITDA to be between $74 and $78 million.   Adjusted income from continuing operations is now expected to be between $1.11 and $1.19 per share, a $0.04 increase at both the low and high ends of the range (see Financial Expectations Continuing Operations section below).

"We continue to be very pleased with the positive trends in our business and expect a very strong fourth quarter," commented Steven M. Klosk, President and Chief Executive Officer of Cambrex.  "During the third quarter, we added two new late stage clinical products to our portfolio and two of our customers' products in that portfolio were approved for commercial sale.  Demand across all of our product categories remains strong, particularly in custom manufacturing and controlled substances.  Utilization of our large scale assets in both the U.S. and Europe continues to grow as pharmaceutical customers increasingly seek out high quality manufacturers like Cambrex.  Our current view suggests we will maintain our positive momentum with strong expected growth in 2015."

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.

Third Quarter 2014 Operating Results Continuing Operations

Sales were $81.1 million for the quarter, compared to $78.0 million in the same period last year, representing a 4.0% increase, including the unfavorable impact of foreign exchange of 1.0%.  The Company recorded sales increases in most of its product categories, with strong growth in certain branded APIs and controlled substances.  Pricing was flat compared to the third quarter last year.

Gross margins increased to 35.0% from 32.0% compared to the same period last year.  This increase was primarily due to a favorable mix of products, proceeds from an insurance settlement, improved production efficiencies and a favorable currency impact.

Selling, general and administrative expenses were $12.5 million compared to $11.1 million in the same period last year.  The increase was mainly due to higher personnel expenses.

Research and development expenses were $3.8 million compared to $2.6 million in the same period last year.  The increase was primarily the result of increased personnel costs required to develop an increased number of products in the R&D pipeline.

Operating profit increased to $12.0 million from $11.3 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 $18.1 million compared to $17.0 million in the same period last year. 

The provision for income taxes was $2.5 million and included a benefit of $0.8 million for a partial reversal of a valuation allowance against certain U.S. tax assets.  Excluding the impact of this benefit, the effective tax rate would have been 29.4% during the quarter compared to 37.7% in the same period last year.

Income from continuing operations was $8.9 million or $0.28 per share compared to $6.3 million or $0.20 per share in the same period last year.  Adjusted income from continuing operations was $8.8 million or $0.28 per share, compared to $7.1 million or $0.23 per share, respectively, in the same period last year (see table at the end of this release).

Capital expenditures and depreciation were $7.2 million and $5.9 million, respectively, compared to $6.2 million and $5.7 million, respectively, 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.

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 the reconciliation of the year to date results in the tables at the end of this release.

The Company increased its guidance for full year 2014 Adjusted income from continuing operations by $0.04 per share at both the low and high ends of the range due to lower estimates of depreciation and interest expense for 2014.  Depreciation was adjusted downward due to later than expected timing of certain assets being placed in service and foreign currency impact.  Interest expense was adjusted downward due to lower than expected interest rates.

We expect Zenara to generate low to mid single digit millions in revenues and a small EBITDA loss in 2014.  As previously announced, 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 2014 results. The Company's EBITDA expectations for Zenara do not include a loss of $4.1 million recorded in the second quarter of 2014 related to the purchase of the previously unowned shares of Zenara.

The Company expects to reduce the valuation allowance against certain U.S. tax assets by approximately $17.2 million for the full year 2014, which would reduce tax expense accordingly. The valuation allowance released for the third quarter and year to date periods was $0.8 million and $15.2 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 third quarter 2014 Form 10-Q is filed with the SEC.

Conference Call and Webcast

A conference call to discuss the Company's third quarter 2014 results will begin at 8:30 a.m. Eastern Time on Thursday, October 30, 2014 and can be accessed by calling 1-800-505-9568 for domestic and +1-416-204-9271 for international.  Please use the passcode 6387777 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 Thursday, November 6, 2014 by calling 1-888-203-1112 for domestic and +1-719-457-0820 for international. 

To read full press release, please click here.

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