UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
November 5, 2015
ALBANY MOLECULAR RESEARCH, INC.
(Exact Name of Registrant as Specified in
Charter)
| Delaware |
001-35622 |
14-1742717 |
|
(State or other jurisdiction
of incorporation) |
(Commission
File Number) |
(IRS Employer
Identification No.) |
| 26 Corporate Circle, Albany, NY |
12212 |
| (Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including
area code: (518) 512-2000
(Former name or former address, if changed since last report)
Check the appropriate
box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the
following provisions ( see General Instruction A.2. below):
| ¨ | Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02 | Results
of Operations and Financial Conditions |
On November 5, 2015, Albany Molecular Research,
Inc. (the “Company”) issued a press release announcing its financial results for the third quarter ended September
30, 2015. That release referred to certain attached financial highlights for the third quarter ended September 30, 2015. The full
text of the press release, including the financial tables referred to within the release, which were posted on the Company’s
internet website, is furnished in Exhibit 99.1 hereto and is incorporated by reference herein.
| Item 9.01 | Financial
Statement and Exhibits |
| 99.1 | Press
release and financial tables dated November 5, 2015, issued by Albany Molecular Research, Inc. |
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
| Date: November 5, 2015 |
ALBANY MOLECULAR RESEARCH, INC. |
| |
|
| |
|
| |
By: |
/s/ Felicia Ladin |
| |
|
Senior Vice President, Chief Financial Officer and Treasurer |
Exhibit 99.1
AMRI Announces Third Quarter 2015 Results
Albany, NY (November 5, 2015) – AMRI
(NASDAQ: AMRI) today reported financial and operating results for the third quarter ended September 30 2015.
Highlights:
| · | Third quarter contract revenue of $101.4
million, a 76% increase from 2014 |
| · | Adjusted contract margins expand to 25% |
| · | Third quarter adjusted diluted EPS of
$0.14, including a $0.04 decrease in EPS from royalties in the current quarter |
| · | Operating cash flow of $18.5 million |
| · | Reiterates Full Year 2015 total revenue
of $400 to $416 million; adjusted EPS guidance maintained at between $0.90 and $0.95 per diluted share
"Adjusted contract margins” and “Adjusted diluted
EPS" are Non-GAAP measurements. See discussion under the heading "Non-GAAP Adjustment Items" in this release.
|
“We
achieved a significant milestone this quarter, achieving over $100 million in contract revenue and expanded adjusted contract margins
of 25%,” said William S. Marth, AMRI’s president and chief executive officer. “Recent
acquisitions and organic growth, combined with cost reduction initiatives and efficiency efforts, contributed to our continued
strong performance.
With the addition of Gadea Pharmaceuticals,
we’ve tripled the number of commercial APIs in our portfolio, providing us with a solid foundation in our API business in
targeted segments. These APIs are approved and sold globally, providing us expanded market access for the rest of our portfolio.
Our integrated drug discovery center in
Buffalo NY is now operational to meet the demands of customers who are looking for a US-based discovery service offering. The integration
of biology and chemistry along with state of the art technology and our informatics partnership with PerkinElmer, as well as the
high caliber of talent we are recruiting, will facilitate fast data turnaround and program progression.
Outsourcing trends continue to expand, and
as industry assets and capacity continue to shift, we see opportunities for AMRI. As we continue to grow, we will continue to integrate,
align and scale our capabilities and asset base to respond to our customer’s expanding needs as we look to be a leading provider
of discovery services, API and drug product to the industry.”
Third Quarter 2015 Results
Total revenue for the third quarter of 2015
was $104.6 million, an increase of 67% compared to total revenue of $62.5 million reported in the third quarter of 2014.
Total contract revenue
for the third quarter of 2015 was $101.4 million, an increase of 76% compared to total contract revenue of $57.5 million reported
in the third quarter of 2014. Adjusted contract margins were 25% for the third quarter of 2015, compared with 8% for the third
quarter of 2014. Margins benefited from recent acquisitions, product mix within the Active Pharmaceutical Ingredients (API) segment
and the impact of the cost reduction initiatives and facility optimization activities.
Royalty revenue in the third quarter of 2015
was $3.2 million, a decrease of 35% from $5.0 million in the third quarter of 2014 due primarily to lower royalties on Allegra
(fexofenadine) products which have ended. Royalty revenue for the third quarter of 2015 includes royalties from the net sales of
certain amphetamine salts sold by Allergan (formerly Actavis) and royalties from net sales of an API sourced in Spain.
Net loss under U.S. GAAP was $(4.2) million,
or $(0.12) per share, in the third quarter of 2015, compared to U.S. GAAP net loss of $(8.6) million, or $(0.27) per share for
the third quarter of 2014. Net income on an adjusted non-GAAP basis in the third quarter of 2015 was $5.1 million or $0.14 per
diluted share, compared to adjusted net loss of $(0.6) million or $(0.02) per diluted share for 2014. For a reconciliation of U.S.
GAAP net income and earnings per diluted share as reported to adjusted net income and earnings per diluted share for the 2015 and
2014 reporting periods, please see Tables 2 and 3 at the end of this press release.
Beginning in the
second quarter 2015, AMRI implemented an updated non-GAAP definition, which includes the impact of cash interest expense and excludes
the impact of non-cash stock-based compensation, both of which had previously been excluded and included, respectively in the Company’s
calculations of these non-GAAP financial measures. These changes have redefined non-GAAP cost of contract revenue, SG&A, interest
expense, net income, and EBITDA financial measures from the prior non-GAAP definition. We believe these financial measures provide
investors with appropriate non-GAAP measurements that emphasize the cash earnings potential of the business and better reflect
the underlying financial performance of the business. Historic non-GAAP reported operating results have been adjusted to match
this new definition.
Year-to-Date Results
Total revenue for the nine-month period ended
September 30, 2015 was $275.9 million, an increase of 45% compared to total revenue of $190.0 million reported for the nine-month
period of 2014.
Total contract revenue
for the first nine months of 2015 was $261.7 million, an increase of 54% compared to total contract revenue of $170.0 million in
2014. Adjusted contract margins were 25% for the first nine months of 2015, compared with 18% for 2014.
Royalty revenue in the first nine months of
2015 was $14.2 million, a decrease of 29% from $20.0 million in 2014 due primarily to lower royalties on Allegra (fexofenadine)
products. Royalty revenue for the first nine months of 2015 includes royalties from the fexofenadine products,
royalties from the net sales of certain amphetamine salts sold by Allergan and royalties from the net sales of an API sourced
in Spain. Net loss under U.S. GAAP was $(4.1) million, or $(0.12) per share, in the first nine months of 2015, compared to U.S.
GAAP net loss of $(1.4) million, or $(0.05) per share in 2014. Net income on an adjusted non-GAAP basis in the first nine months
of 2015 was $18.9 million or $0.56 per diluted share, compared to adjusted net income of $11.7 million or $0.37 per diluted share
for 2014.
Segment Results
| Drug Discovery Services (DDS) | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
| |
| | |
Three Months Ended | | |
Nine Months Ended | |
| | |
September 30, | | |
September 30, | |
| (Unaudited; $ in thousands) | |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| | |
| | |
| | |
| | |
| |
| DDS Contract Revenue | |
$ | 23,137 | | |
$ | 17,108 | | |
$ | 65,764 | | |
$ | 55,223 | |
| Cost of Contract Revenue | |
| 16,742 | | |
| 14,051 | | |
| 48,936 | | |
| 45,091 | |
| Contract Gross Profit | |
| 6,395 | | |
| 3,057 | | |
| 16,828 | | |
| 10,132 | |
| Contract Gross Margin | |
| 27.6 | % | |
| 17.9 | % | |
| 25.6 | % | |
| 18.3 | % |
| | |
| | | |
| | | |
| | | |
| | |
| Adjusted Contract Gross Profit (1) (2) | |
| 6,833 | | |
| 3,180 | | |
| 17,990 | | |
| 10,506 | |
| Adjusted Contract Gross Margin (1) (2) | |
| 29.5 | % | |
| 18.6 | % | |
| 27.4 | % | |
| 19.0 | % |
| (1) | Refer to Table 1 included in this release for the reconciliation
of U.S. GAAP contract gross profit and contract gross margin to adjusted contract gross profit and adjusted contract gross margin
as a percentage of contract revenue. |
| (2) | A portion of the 2014 amounts were reclassified from
DDS to API to better align business activities within our reporting segments. |
Discovery and Development
Services (DDS) contract revenue for the third quarter of 2015 increased $6.0 million or 35% compared to the third quarter of 2014,
primarily due to $4.6 million of incremental revenues from the acquisition of SSCI in February 2015. DDS adjusted contract margins
increased 11 percentage points in the third quarter of 2015, driven by the margins realized on SSCI revenues, as well as the benefits
of cost reduction initiatives and facility optimization.
For the nine months
ending September 30, 2015, DDS contract revenue increased $10.5 million or 19% primarily due to $10.7 million of incremental SSCI
revenues. DDS adjusted gross margins increased 8 percentage points, driven by the margins realized on SSCI revenues, as well as
the benefits of cost reduction initiatives and facility optimization.
| Active Pharmaceutical Ingredients (API) | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
| |
| | |
Three Months Ended | | |
Nine Months Ended | |
| | |
September 30, | | |
September 30, | |
| (Unaudited; $ in thousands) | |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| | |
| | |
| | |
| | |
| |
| API Contract Revenue | |
$ | 56,156 | | |
$ | 30,548 | | |
$ | 134,001 | | |
$ | 99,918 | |
| Cost of Contract Revenue | |
| 43,410 | | |
| 29,778 | | |
| 100,427 | | |
| 79,499 | |
| Contract Gross Profit | |
| 12,746 | | |
| 770 | | |
| 33,574 | | |
| 20,419 | |
| Contract Gross Margin | |
| 22.7 | % | |
| 2.5 | % | |
| 25.1 | % | |
| 20.4 | % |
| | |
| | | |
| | | |
| | | |
| | |
| Adjusted Contract Gross Profit (1) (2) | |
| 16,243 | | |
| 891 | | |
| 37,461 | | |
| 20,685 | |
| Adjusted Contract Gross Margin (1) (2) | |
| 28.9 | % | |
| 2.9 | % | |
| 28.0 | % | |
| 20.7 | % |
| (1) | Refer to Table 1 included in this release for the reconciliation
of U.S. GAAP contract gross profit and contract gross margin to adjusted contract gross profit and adjusted contract gross margin
as a percentage of contract revenue. |
| (2) | A portion of the 2014 amounts were reclassified from
DDS to API to better align business activities within our reporting segments. |
API contract revenue
for the third quarter of 2015 increased $25.6 million or 84% compared to the third quarter 2014, primarily due to $17.8 million
of incremental revenues from the acquisition of Gadea Pharmaceuticals in July 2015 and product mix. API adjusted contract margin
for the third quarter of 2015 increased 26 percentage points, driven by the margins realized on Gadea’s revenues, an improved
product mix and pricing impacts.
For the first nine
months of 2015, API contract revenue increased $34.1 million or 34%, due to the addition of Gadea and increased product volumes.
API adjusted gross margin increased 7 percentage points in 2015, due to the addition of Gadea, an improved product mix and pricing
impacts.
| Drug Product Manufacturing (DPM) | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
| |
| | |
Three Months Ended | | |
Nine Months Ended | |
| | |
September 30, | | |
September 30, | |
| (Unaudited; $ in thousands) | |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| | |
| | |
| | |
| | |
| |
| DPM Contract Revenue | |
$ | 22,055 | | |
$ | 9,825 | | |
$ | 61,941 | | |
$ | 14,852 | |
| Cost of Contract Revenue | |
| 20,052 | | |
| 12,585 | | |
| 53,648 | | |
| 18,472 | |
| Contract Gross Profit (Loss) | |
| 2,003 | | |
| (2,760 | ) | |
| 8,293 | | |
| (3,620 | ) |
| Contract Gross Margin | |
| 9.1 | % | |
| -28.1 | % | |
| 13.4 | % | |
| -24.4 | % |
| | |
| | | |
| | | |
| | | |
| | |
| Adjusted Contract Gross Profit (Loss) (1) | |
| 1,979 | | |
| 572 | | |
| 9,094 | | |
| (274 | ) |
| Adjusted Contract Gross Margin (1) | |
| 9.0 | % | |
| 5.8 | % | |
| 14.7 | % | |
| -1.8 | % |
| (1) | Refer to Table 1 included in this release for the reconciliation
of U.S. GAAP contract gross loss and contract gross margin to adjusted contract gross profit (loss) and adjusted contract gross
margin as a percentage of contract revenue. |
Drug Product Manufacturing
contract revenue for the third quarter of 2015 increased $12.2 million or 124% compared to the third quarter 2014, and includes
$4.1 million of revenue from the Glasgow facility that was acquired in January 2015. Drug Product adjusted contract margins for
the third quarter of 2015 increased 3 percentage points, driven primarily by the addition of the Glasgow business. In the third
quarter 2014, Drug Product contract revenue and gross margin were impacted due to a business disruption at the Albuquerque facility.
For the first nine
months of 2015, Drug Product contract revenue increased $47.1 million, due primarily to increased revenue at the Albuquerque facility
and the addition of $11.5 million in revenue from Glasgow. Drug Product adjusted gross margins improved 17 percentage points, due
to the addition of the Glasgow business.
Liquidity and Capital Resources
At September 30, 2015, AMRI had cash, cash
equivalents and restricted cash of $82.4 million, compared to $45.6 million at June 30, 2015. The increase in cash and cash equivalents
for the quarter ended September 30 2015 was primarily due to cash generated by operating activities of $18.5 million, net proceeds
from debt financing of $16.3 million, and $11.0 million from the Gadea acquisition, which was partially offset by $6.1 million
in capital expenditures. Total common shares outstanding, net of treasury shares, were 35,497,776 at September 30, 2015.
Financial Outlook
AMRI’s guidance takes into account a
number of factors, including expected results for the fourth quarter 2015, anticipated tax rates and shares outstanding. Please
refer to the financial supplement document included on the Investor Relations page of our website at: ir.amriglobal.com for further
information on our full year 2015 guidance.
AMRI’s outlook
for 2015 is as follows:
| · | Full Year 2015 total revenue of $400 to $416
million |
| · | Full year contract revenue of between $384
and $398 million*, an increase of 56% at the midpoint |
| · | Adjusted contract margins of approximately
26% |
| · | Royalty revenue of between $16 and $18 million* |
| · | Adjusted SG&A expenses at approximately
15% of contract revenue |
| · | R&D of approximately $5 million |
| · | Adjusted EBITDA between $75 and $78 million,
up 53% at the midpoint |
| · | Adjusted diluted EPS of between $0.90 and
$0.95, compared to $0.65 in 2014, based on an average fully diluted share count of approximately 34 million shares |
| · | Adjusted effective tax rate of 32% |
| · | Capital expenditures of between $24 and $26
million
*Forecasted contract revenue and royalties have been adjusted by $2.0
million from the previous forecast, based on a reclass of an API from contract revenue to royalties. |
Third Quarter Results Conference Call
AMRI will
host a conference call and webcast today at 8:30 a.m. ET to discuss third
quarter 2015 results. The conference call can be accessed by dialing (866) 208-5728
(domestic calls) or (224) 633-1279 (international calls) at 8:20 a.m. ET and entering
passcode 62660027. The webcast and supplementing slides can be accessed on the company’s
website at www.amriglobal.com.
A replay of the conference call can be accessed
for 24 hours beginning at 11:30 a.m. ET at (855) 859-2056 (domestic calls) or (404)
537-3406 (international calls) and entering passcode 62660027.
Replays of the webcast can also be accessed for up to 90 days after the call via the investor area of the company’s website
at http://ir.amriglobal.com.
About AMRI
Albany Molecular Research Inc. (AMRI) is a
global contract research and manufacturing organization that has been working with the Life Sciences industry to improve patient
outcomes and the quality of life for more than two decades. With locations in North America, Europe and Asia, our key business
segments include Discovery and Development Solutions (DDS), Active Pharmaceutical Ingredients (API), and Drug Product Manufacturing
(DPM). Our DDS segment provides comprehensive services from hit identification to IND, including expertise with diverse chemistry,
library design and synthesis, in vitro biology and pharmacology, drug metabolism and pharmacokinetics, as well as natural products.
API supports the chemical development and cGMP manufacture of complex API, including potent, controlled substances, biologics,
peptides, steroids, hormones, cytotoxic compounds and sterile API. DPM supports development through commercial scale production
of complex liquid-filled and lyophilized parenterals, sterile suspensions and ophthalmic formulations. For more information about
AMRI, please visit our website at www.amriglobal.com or follow us on Twitter (@amriglobal).
Forward-looking Statements
This press release
includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks
and uncertainties. These statements include, but are not limited to, statements regarding the company's estimates of revenue, contract
revenue, adjusted EBITDA, adjusted diluted earnings per share, and all information and other statements regarding the estimates
of results and financial outlook for 2015, statements made by the company's Chief Executive Officer, statements under the caption
“Financial Outlook,” statements regarding the strength of the company’s business and prospects, statements regarding
the impact of recent acquisition activity, and statements concerning the company’s momentum and long-term growth, including
expected results for 2015. Readers should not place undue reliance on our forward-looking statements. The company’s actual
results may differ materially from such forward-looking statements as a result of numerous factors, some of which the company may
not be able to predict and may not be within the company’s control. Factors that could cause such differences include, but
are not limited to, trends in pharmaceutical and biotechnology companies’ outsourcing of manufacturing services and chemical
research and development, including softness in these markets; the success of the sales of the products for which the company receives
royalties; the risk that the company will not be able to replicate either in the short or long term the revenue stream that has
been derived from the royalties payable under the Allegra® license agreements; the risk that clients may terminate or reduce
demand under any strategic or multi-year deal; the company’s ability to enforce its intellectual property and technology
rights; the company’s ability to obtain financing sufficient to meet its business needs; the company’s ability to successfully
comply with heightened FDA scrutiny on aseptic fill/finish operations; the results of further FDA inspections; the company’s
ability to effectively maintain compliance with applicable FDA and DEA regulations; the company’s ability to integrate past
or future acquisitions, including the Gadea Pharmaceutical Group, Aptuit West Lafayette and Glasgow operations, Cedarburg Pharmaceuticals
and Oso Biopharmaceuticals Manufacturing, and make such acquisitions accretive to the company’s business model, the company’s
ability to take advantage of proprietary technology and expand the scientific tools available to it, the ability of the company’s
strategic investments and acquisitions to perform as expected, as well as those risks discussed in the company’s Annual Report
on Form 10-K for the year ended December 31, 2014 as filed with the Securities and Exchange Commission on March 16, 2015, and the
company's other SEC filings. All financial guidance offered by senior management today represents a point-in-time estimate and
are based on information as of the date of this press release. Senior management has made numerous assumptions in providing this
guidance which, while believed to be reasonable, may not prove to be accurate. Numerous factors, including those noted above, may
cause actual results to differ materially from the guidance provided. The company expressly disclaims any current intention or
obligation to update the guidance provided or any other forward-looking statement in this press release to reflect future events
or changes in facts assumed for purposes of providing this guidance or otherwise affecting the forward-looking statements contained
in this press release.
Non-GAAP Adjustment
Items
To supplement our
financial results prepared in accordance with U.S. GAAP, we have presented non-GAAP measures of contract gross profit, contract
gross margin, income from operations, and net income and income per diluted share as adjusted to exclude certain impairment charges,
restructuring charges, executive transition costs, non-cash debt interest and amortization charges, business acquisition costs,
share-based compensation expense, non-recurring professional fees, ERP implementation costs, depreciation and amortization of purchase
accounting adjustments, write-offs of deferred financing costs, insurance recoveries, non-recurring income tax adjustments, and
postretirement benefit plan settlement gains in the 2015 and 2014 periods. We have also presented non-GAAP measures of adjusted
EBITDA, which in addition to the items excluded above, further excluded the impact of interest income and expense, depreciation
and amortization expense, and income tax expense or benefit. Exclusion of these non-recurring items allows comparisons of operating
results that are consistent over time. We believe presentation of these non-GAAP measures enhances an overall understanding of
our historical financial performance because we believe they are an indication of the performance of our base business. Management
uses these non-GAAP measures as a basis for evaluating our financial performance as well as for budgeting and forecasting of future
periods. For these reasons, we believe they can be useful to investors. The presentation of this additional information should
not be considered in isolation or as a substitute for income (loss) from operations, net income (loss) or income (loss) per diluted
share, prepared in accordance with U.S. GAAP. Reconciliations of these non-GAAP measures to the most directly comparable GAAP financial
measures are set forth in Tables 1-3.
Contacts:
Investors: Patty Eisenhaur, 518-512-2936
Media: Gina Rothe, 518-512-2512
Albany Molecular Research, Inc.
Selected Consolidated Balance Sheet Data
(unaudited)
| (Dollars in thousands) | |
September 30, | | |
December 31, | |
| | |
2015 | | |
2014 | |
| | |
| | |
| |
| Cash and cash equivalents | |
$ | 79,462 | | |
$ | 46,995 | |
| Restricted cash | |
| 2,963 | | |
| 4,052 | |
| Accounts receivable, net | |
| 88,306 | | |
| 71,644 | |
| Royalty income receivable | |
| 4,762 | | |
| 5,061 | |
| Inventory | |
| 104,668 | | |
| 49,880 | |
| Total current assets | |
| 303,429 | | |
| 191,012 | |
| Property and equipment, net | |
| 213,686 | | |
| 165,475 | |
| Total assets | |
| 819,868 | | |
| 515,868 | |
| | |
| | | |
| | |
| Total current liabilities | |
| 99,284 | | |
| 48,690 | |
| Long-term debt, excluding current installments, net of unamortized discount | |
| 344,373 | | |
| 155,985 | |
| Total liabilities | |
| 531,131 | | |
| 274,046 | |
| Total stockholders’ equity | |
| 288,737 | | |
| 241,822 | |
| Total liabilities and stockholders’ equity | |
| 819,868 | | |
| 515,868 | |
Albany Molecular Research, Inc.
Condensed Consolidated Statements of
Operations
(unaudited)
| | |
Three Months Ended | | |
Nine Months Ended | |
| (Dollars in thousands, except for per share data) | |
September 30, 2015 | | |
September 30, 2014 | | |
September 30, 2015 | | |
September 30, 2014 | |
| | |
| | |
| | |
| | |
| |
| Contract revenue | |
$ | 101,348 | | |
$ | 57,481 | | |
$ | 261,706 | | |
$ | 169,993 | |
| Recurring royalties | |
| 3,231 | | |
| 4,990 | | |
| 14,238 | | |
| 19,978 | |
| Total revenue | |
| 104,579 | | |
| 62,471 | | |
| 275,944 | | |
| 189,971 | |
| | |
| | | |
| | | |
| | | |
| | |
| Cost of contract revenue | |
| 80,204 | | |
| 56,414 | | |
| 203,011 | | |
| 143,062 | |
| Technology incentive award | |
| (6 | ) | |
| 260 | | |
| 554 | | |
| 1,277 | |
| Research and development | |
| 1,903 | | |
| 568 | | |
| 2,778 | | |
| 775 | |
| Selling, general and administrative | |
| 21,219 | | |
| 11,568 | | |
| 55,211 | | |
| 34,944 | |
| Postretirement benefit plan settlement gain | |
| – | | |
| – | | |
| – | | |
| (1,285 | ) |
| Restructuring charges | |
| 709 | | |
| 2,164 | | |
| 3,828 | | |
| 3,436 | |
| Impairment charges | |
| 540 | | |
| 1,232 | | |
| 3,155 | | |
| 4,950 | |
| Total operating expenses | |
| 104,569 | | |
| 72,206 | | |
| 268,537 | | |
| 187,159 | |
| | |
| | | |
| | | |
| | | |
| | |
| Income (loss) from operations | |
| 10 | | |
| (9,735 | ) | |
| 7,407 | | |
| 2,812 | |
| | |
| | | |
| | | |
| | | |
| | |
| Interest expense, net | |
| (6,318 | ) | |
| (2,575 | ) | |
| (12,532 | ) | |
| (8,256 | ) |
| Other income, net | |
| 798 | | |
| 235 | | |
| 1,901 | | |
| 3 | |
| | |
| | | |
| | | |
| | | |
| | |
| Loss before income taxes | |
| (5,510 | ) | |
| (12,075 | ) | |
| (3,224 | ) | |
| (5,441 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Income tax (benefit) expense | |
| (1,340 | ) | |
| (3,434 | ) | |
| 862 | | |
| (4,024 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Net loss | |
$ | (4,170 | ) | |
$ | (8,641 | ) | |
$ | (4,086 | ) | |
$ | (1,417 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Basic loss per share | |
$ | (0.12 | ) | |
$ | (0.27 | ) | |
$ | (0.12 | ) | |
$ | (0.05 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Diluted loss per share | |
$ | (0.12 | ) | |
$ | (0.27 | ) | |
$ | (0.12 | ) | |
$ | (0.05 | ) |
Table 1: Reconciliation of three and nine
months ended September 30, 2015 and 2014 reported contract gross profit (loss) and contract gross margin to adjusted contract gross
profit (loss) and adjusted contract gross margin:
| Non-GAAP Measures | |
Three Months Ended | | |
Nine Months Ended | |
| (Dollars in thousands) | |
September 30, | | |
September 30, | |
| | |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| | |
| | |
| | |
| | |
| |
| Consolidated Contract Revenue, as reported | |
$ | 101,348 | | |
$ | 57,481 | | |
$ | 261,706 | | |
$ | 169,993 | |
| Consolidated Cost of Contract Revenue, as reported | |
$ | 80,204 | | |
$ | 56,414 | | |
$ | 203,011 | | |
$ | 143,062 | |
| Consolidated Contract Gross Profit, as reported | |
| 21,144 | | |
| 1,067 | | |
| 58,695 | | |
| 26,931 | |
| | |
| | | |
| | | |
| | | |
| | |
| add: Share-based compensation expense | |
| 246 | | |
| 157 | | |
| 723 | | |
| 472 | |
| add: Purchase accounting adjustments | |
| 3,665 | | |
| 268 | | |
| 5,127 | | |
| 363 | |
| add: Business interruption charges | |
| - | | |
| 3,117 | | |
| - | | |
| 3,117 | |
| add: Business acquisition costs | |
| - | | |
| 34 | | |
| - | | |
| 34 | |
| Consolidated Contract Gross Profit, as adjusted | |
$ | 25,055 | | |
$ | 4,643 | | |
$ | 64,545 | | |
$ | 30,917 | |
| Consolidated Contract Gross Margin, as reported | |
| 20.9 | % | |
| 1.9 | % | |
| 22.4 | % | |
| 15.8 | % |
| Consolidated Contract Gross Margin, as adjusted | |
| 24.7 | % | |
| 8.1 | % | |
| 24.7 | % | |
| 18.2 | % |
| | |
| | | |
| | | |
| | | |
| | |
| DDS Segment Contract Revenue, as reported | |
$ | 23,137 | | |
$ | 17,108 | | |
$ | 65,764 | | |
$ | 55,223 | |
| DDS Segment Cost of Contract Revenue, as reported | |
| 16,742 | | |
| 14,051 | | |
| 48,936 | | |
| 45,091 | |
| DDS Segment Contract Gross Profit, as reported | |
| 6,395 | | |
| 3,057 | | |
| 16,828 | | |
| 10,132 | |
| | |
| | | |
| | | |
| | | |
| | |
| add: Share-based compensation expense | |
| 147 | | |
| 123 | | |
| 449 | | |
| 374 | |
| add: Purchase accounting adjustments | |
| 291 | | |
| - | | |
| 713 | | |
| - | |
| DDS Segment Contract Gross Profit, as adjusted | |
$ | 6,833 | | |
$ | 3,180 | | |
$ | 17,990 | | |
$ | 10,506 | |
| DDS Segment Contract Gross Margin, as reported | |
| 27.6 | % | |
| 17.9 | % | |
| 25.6 | % | |
| 18.3 | % |
| DDS Segment Contract Gross Margin, as adjusted | |
| 29.5 | % | |
| 18.6 | % | |
| 27.4 | % | |
| 19.0 | % |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| API Segment Contract Revenue, as reported | |
$ | 56,156 | | |
$ | 30,548 | | |
$ | 134,001 | | |
$ | 99,918 | |
| API Segment Cost of Contract Revenue, as reported | |
| 43,410 | | |
| 29,778 | | |
| 100,427 | | |
| 79,499 | |
| API Segment Contract Gross Profit, as reported | |
| 12,746 | | |
| 770 | | |
| 33,574 | | |
| 20,419 | |
| | |
| | | |
| | | |
| | | |
| | |
| add: Share-based compensation expense | |
| 69 | | |
| 26 | | |
| 189 | | |
| 76 | |
| add: Purchase accounting adjustments | |
| 3,428 | | |
| 95 | | |
| 3,698 | | |
| 190 | |
| API Segment Contract Gross Profit, as adjusted | |
$ | 16,243 | | |
$ | 891 | | |
$ | 37,461 | | |
$ | 20,685 | |
| API Segment Contract Gross Margin, as reported | |
| 22.7 | % | |
| 2.5 | % | |
| 25.1 | % | |
| 20.4 | % |
| API Segment Contract Gross Margin, as adjusted | |
| 28.9 | % | |
| 2.9 | % | |
| 28.0 | % | |
| 20.7 | % |
| | |
| | | |
| | | |
| | | |
| | |
| Drug Product Segment Contract Revenue, as reported | |
$ | 22,055 | | |
$ | 9,825 | | |
$ | 61,941 | | |
$ | 14,852 | |
| Drug Product Segment Cost of Contract Revenue, as reported | |
| 20,052 | | |
| 12,585 | | |
| 53,648 | | |
| 18,472 | |
| Drug Product Segment Contract Gross Profit (Loss), as reported | |
| 2,003 | | |
| (2,760 | ) | |
| 8,293 | | |
| (3,620 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| add: Share-based compensation expense | |
| 30 | | |
| 8 | | |
| 85 | | |
| 22 | |
| add: Purchase accounting adjustments | |
| (54 | ) | |
| 173 | | |
| 716 | | |
| 173 | |
| add: Business interruption charges | |
| - | | |
| 3,117 | | |
| - | | |
| 3,117 | |
| add: Business acquisition costs | |
| - | | |
| 34 | | |
| - | | |
| 34 | |
| Drug Product Segment Contract Gross Profit (Loss), as adjusted | |
$ | 1,979 | | |
$ | 572 | | |
$ | 9,094 | | |
$ | (274 | ) |
| Drug Product Segment Contract Margin, as reported | |
| 9.1 | % | |
| -28.1 | % | |
| 13.4 | % | |
| -24.4 | % |
| Drug Product Segment Contract Margin, as adjusted | |
| 9.0 | % | |
| 5.8 | % | |
| 14.7 | % | |
| -1.8 | % |
Table 2: Reconciliation of the three and
nine months ended September 30, 2015 and 2014 reported income from operations, net income and earnings per diluted share to adjusted
income from operations, adjusted net income and adjusted diluted earnings per share:
| | |
Third Quarter | | |
Third Quarter | | |
YTD
September 30, | | |
YTD
September 30, | |
| | |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| Income (loss) from operations, as reported | |
$ | 10 | | |
$ | (9,735 | ) | |
$ | 7,407 | | |
$ | 2,812 | |
| Impairment charges | |
| 540 | | |
| 1,232 | | |
| 3,155 | | |
| 4,950 | |
| Restructuring charges | |
| 709 | | |
| 2,164 | | |
| 3,828 | | |
| 3,436 | |
| Business interruption charges | |
| - | | |
| 3,117 | | |
| - | | |
| 3,117 | |
| Executive transition costs | |
| 469 | | |
| - | | |
| 1,405 | | |
| 626 | |
| Business acquisition costs | |
| 1,630 | | |
| 970 | | |
| 3,302 | | |
| 2,638 | |
| Purchase accounting adjustments | |
| 4,962 | | |
| 753 | | |
| 7,838 | | |
| 1,028 | |
| Postretirement benefit plan settlement gain | |
| - | | |
| - | | |
| - | | |
| (1,285 | ) |
| ERP Implementation costs | |
| 467 | | |
| - | | |
| 765 | | |
| - | |
| Non-recurring professional fees | |
| 115 | | |
| - | | |
| 826 | | |
| - | |
| Share-based compensation expense | |
| 1,796 | | |
| 1,018 | | |
| 4,816 | | |
| 2,975 | |
| Income (loss) from operations, as adjusted | |
$ | 10,698 | | |
$ | (481 | ) | |
$ | 33,342 | | |
$ | 20,297 | |
| | |
| | | |
| | | |
| | | |
| | |
| Net loss, as reported | |
$ | (4,170 | ) | |
$ | (8,641 | ) | |
$ | (4,086 | ) | |
$ | (1,417 | ) |
| Impairment charges | |
| 540 | | |
| 1,232 | | |
| 3,155 | | |
| 4,950 | |
| Restructuring charges | |
| 709 | | |
| 2,164 | | |
| 3,828 | | |
| 3,436 | |
| Business interruption charges | |
| - | | |
| 3,117 | | |
| - | | |
| 3,117 | |
| Executive transition costs | |
| 469 | | |
| - | | |
| 1,405 | | |
| 626 | |
| Business acquisition costs | |
| 1,630 | | |
| 970 | | |
| 3,302 | | |
| 2,638 | |
| Purchase accounting adjustments | |
| 4,962 | | |
| 753 | | |
| 7,838 | | |
| 1,028 | |
| Postretirement benefit plan settlement gain | |
| - | | |
| - | | |
| - | | |
| (1,285 | ) |
| ERP Implementation costs | |
| 467 | | |
| - | | |
| 765 | | |
| - | |
| Non-recurring professional fees | |
| 115 | | |
| - | | |
| 826 | | |
| - | |
| Non-cash debt interest and amortization charges | |
| 2,694 | | |
| 1,696 | | |
| 6,220 | | |
| 5,019 | |
| Share-based compensation expense | |
| 1,796 | | |
| 1,018 | | |
| 4,816 | | |
| 2,975 | |
| Insurance recovery - business interruption | |
| - | | |
| - | | |
| (600 | ) | |
| - | |
| Write-off of deferred financing costs | |
| - | | |
| - | | |
| - | | |
| 439 | |
| Tax effect for above items | |
| (4,105 | ) | |
| (2,896 | ) | |
| (8,605 | ) | |
| (7,069 | ) |
| Non-recurring income tax adjustments | |
| - | | |
| - | | |
| - | | |
| (2,715 | ) |
| Net income (loss), as adjusted | |
$ | 5,107 | | |
$ | (587 | ) | |
$ | 18,864 | | |
$ | 11,742 | |
| | |
| | | |
| | | |
| | | |
| | |
| Loss per share, as reported | |
$ | (0.12 | ) | |
$ | (0.27 | ) | |
$ | (0.12 | ) | |
$ | (0.05 | ) |
| Impairment charges | |
| 0.02 | | |
| 0.04 | | |
| 0.09 | | |
| 0.12 | |
| Restructuring charges | |
| 0.02 | | |
| 0.06 | | |
| 0.10 | | |
| 0.09 | |
| Business interruption charges | |
| - | | |
| 0.06 | | |
| - | | |
| 0.06 | |
| Executive transition costs | |
| 0.01 | | |
| - | | |
| 0.03 | | |
| 0.01 | |
| Business acquisition costs | |
| 0.03 | | |
| 0.02 | | |
| 0.06 | | |
| 0.06 | |
| Purchase accounting adjustments | |
| 0.09 | | |
| 0.02 | | |
| 0.16 | | |
| 0.02 | |
| Postretirement benefit plan settlement gain | |
| - | | |
| - | | |
| - | | |
| (0.03 | ) |
| ERP Implementation costs | |
| 0.01 | | |
| - | | |
| 0.02 | | |
| - | |
| Non-recurring professional fees | |
| - | | |
| - | | |
| 0.02 | | |
| - | |
| Non-cash debt interest and amortization charges | |
| 0.05 | | |
| 0.03 | | |
| 0.12 | | |
| 0.10 | |
| Share-based compensation expense | |
| 0.03 | | |
| 0.02 | | |
| 0.09 | | |
| 0.06 | |
| Insurance recovery - business interruption | |
| - | | |
| - | | |
| (0.01 | ) | |
| - | |
| Write-off of deferred financing costs | |
| - | | |
| - | | |
| - | | |
| 0.01 | |
| Non-recurring income tax adjustments | |
| - | | |
| - | | |
| - | | |
| (0.08 | ) |
| Earnings (loss) per diluted share, as adjusted | |
$ | 0.14 | | |
$ | (0.02 | ) | |
$ | 0.56 | | |
$ | 0.37 | |
Table 3: Reconciliation
of the three and nine months ended September 30, 2015 and 2014 reported net loss to adjusted
EBITDA:
| | |
Third Quarter | | |
Third Quarter | | |
YTD
September 30, | | |
YTD
September 30, | |
| | |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| Net loss, as reported | |
$ | (4,170 | ) | |
$ | (8,641 | ) | |
$ | (4,086 | ) | |
$ | (1,417 | ) |
| Income tax (benefit) expense | |
| (1,340 | ) | |
| (3,434 | ) | |
| 862 | | |
| (4,024 | ) |
| Interest expense, net | |
| 6,318 | | |
| 2,575 | | |
| 12,532 | | |
| 8,256 | |
| Depreciation and amortization | |
| 6,908 | | |
| 5,042 | | |
| 18,670 | | |
| 13,066 | |
| EBITDA | |
| 7,716 | | |
| (4,458 | ) | |
| 27,978 | | |
| 15,881 | |
| Impairment charges | |
| 540 | | |
| 1,232 | | |
| 3,155 | | |
| 4,950 | |
| Restructuring charges | |
| 709 | | |
| 2,164 | | |
| 3,828 | | |
| 3,436 | |
| Business interruption charges | |
| - | | |
| 3,117 | | |
| - | | |
| 3,117 | |
| Executive transition costs | |
| 469 | | |
| - | | |
| 1,405 | | |
| 626 | |
| Business acquisition costs | |
| 1,630 | | |
| 970 | | |
| 3,302 | | |
| 2,638 | |
| Purchase accounting adjustments | |
| 3,081 | | |
| - | | |
| 3,081 | | |
| - | |
| Postretirement benefit plan settlement gain | |
| - | | |
| - | | |
| - | | |
| (1,285 | ) |
| ERP Implementation costs | |
| 467 | | |
| - | | |
| 765 | | |
| - | |
| Non-recurring professional fees | |
| 115 | | |
| - | | |
| 826 | | |
| - | |
| Share-based compensation expense | |
| 1,796 | | |
| 1,018 | | |
| 4,816 | | |
| 2,975 | |
| Insurance recovery - business interruption | |
| - | | |
| - | | |
| (600 | ) | |
| - | |
| Adjusted EBITDA | |
$ | 16,523 | | |
$ | 4,043 | | |
$ | 48,556 | | |
$ | 32,338 | |
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