- Net Revenue increased 13% and EBITDA increased 29% vs. prior year quarter -


Cambrex Corporation (NYSE:CBM), a leading manufacturer of small molecule innovator and generic Active Pharmaceutical Ingredients (APIs), reports results for the third quarter 2017.

Highlights

  • Net Revenue increased 13% to $112.6 million compared to $99.4 million in the same quarter last year.  Excluding the impact of foreign exchange, net revenue increased 12%.
  • GAAP Diluted EPS from continuing operations increased 24% to $0.52 from $0.42 in the same quarter last year.  Adjusted Diluted EPS increased 20% to $0.55 compared to $0.46 in the same quarter last year.
  • EBITDA increased 29% to $33.3 million compared to the same quarter last year (see table at the end of this press release).
  • Net cash was $118.4 million at the end of the quarter, an increase of $24.2 million during the quarter.
  • The Company continued to execute on its strategic growth plan, investing in new manufacturing capacity and analytical laboratory space at its facilities in Charles City, High Point, Karlskoga, and Milan.
  • The Company continues to expect full year 2017 Net Revenue, excluding the impact of foreign currency, to increase between 7% and 11% compared to 2016, Adjusted EBITDA to be between $171 and $177 million, an 11% to 15% increase compared to 2016 and Adjusted income from continuing operations to be between $3.00 - $3.12 per share.
  • The Company now expects 2017 free cash flow to be between $60 and $70 million, an increase of $5 million from the mid-point and capital expenditures to be between $65 and $70 million, a reduction of $5 million from the mid-point (see Financial Expectations – Continuing Operations section below for related explanations and additional financial guidance).

“We are pleased with our financial performance in the third quarter, and when combined with an expected strong fourth quarter, we are positioned to finish 2017 within our financial expectations. Continued strong performance at our manufacturing facilities resulted in higher profit margins in the quarter and year-to-date,” commented Steven M. Klosk, President and Chief Executive Officer of Cambrex. 

“We recently completed the installation of new, large scale manufacturing capacity at our Karlskoga and Charles City facilities.  Construction of the new High Potency facility at our Charles City plant has begun, and the recently announced investment in R&D and manufacturing capabilities to support the development of generic APIs at our Milan facility should be completed by the end of this year.  In addition, we are adding pilot plant capacity and new analytical laboratories at our High Point location. These investments will enable Cambrex to increase its capabilities and ensure our facilities continue to address favorable industry trends and the evolving demands of our customers.” 

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.

Third Quarter 2017 Operating Results – Continuing Operations

Net revenue was $112.6 million, an increase of $13.2 million, or 13%, compared to the third quarter of 2016. Excluding a 1% favorable impact of foreign exchange compared to the third quarter of 2016, net revenue increased 12%. The increase primarily reflects higher volumes partially offset by lower pricing.  The increase in volumes was driven primarily by growth in all product categories, as well as the addition of Cambrex High Point.              Gross margin increased to 42% from 38% compared to the same quarter last year.  The increase was primarily driven by high capacity utilization, manufacturing efficiency improvements and favorable product mix, partially offset by lower pricing.

Selling, general and administrative expenses were $17.6 million, compared to $15.0 million in the same quarter last year.  The increase was mainly due to the addition of Cambrex High Point, higher personnel related expenses, and higher expenses related to the evaluation of acquisition opportunities.

Research and development expenses were $4.2 million, compared to $3.2 million in the same quarter last year. The increase was mainly driven by costs to develop new generic drug products. 

Operating profit increased to $25.1 million from $19.5 million in the same quarter last year.  The increase was primarily the result of higher gross profits in 2017 partially offset by higher operating expenses as described above.  Adjusted EBITDA was $33.3 million compared to $25.9 million in the same quarter last year (see table at the end of this press release).              Income tax expense was $7.5 million resulting in an effective tax rate of 30% compared to $5.4 million and an effective tax rate of 28% in the same quarter last year.  Excluding the favorable impact of immediately recognizing certain effects of share-based compensation as required by a recently adopted accounting standard, the effective tax rate in the current period would have been 33%.

Income from continuing operations was $17.3 million or $0.52 per share compared to $13.7 million or $0.42 per share in the same quarter last year.  Adjusted income from continuing operations was $18.5 million or $0.55 per share, compared to $15.1 million or $0.46 per share in the same quarter last year (see table at the end of this press release).

Capital expenditures and depreciation were $14.9 million and $7.7 million, respectively, compared to $11.7 million and $6.2 million, respectively, in the same quarter last year.

Net cash was $118.4 million at the end of the third quarter, an increase of $24.2 million during the quarter.

Financial Expectations – Continuing Operations

The following table shows the Company’s current expectations for its full year 2017 financial performance versus its previous expectations:

 
    Current Expectations   Previous Expectations
       
Net revenue increase   7% - 11%   7% - 11%
         
Adjusted EBITDA   $171 - $177 million   $171 - $177 million
         
Adjusted income from continuing operations per share   $3.00 - $3.12   $3.00 - $3.12
         
Free cash flow   $60 - $70 million   $55 - $65 million
         
Capital expenditures   $65 - $70 million   $70 - $75 million
         
Depreciation and amortization   $32 - $34 million   $32 - $34 million
         
Adjusted effective tax rate   31% - 33%   31% - 33%
         

Consistent with the Company’s usual guidance practices, these financial expectations are for continuing operations and exclude the impact of any potential acquisitions, divestitures, restructuring activities and outcomes of tax disputes.  Net revenue expectations exclude the impact of foreign exchange.  EBITDA, Adjusted EBITDA and Adjusted income from continuing operations per share for 2017 will be computed on a basis consistent with the reconciliation of the third quarter 2017 financial results in the tables at the end of this press release. Free cash flow is defined as the change in debt, net of cash during the year.  Adjusted effective tax rate excludes certain effects of share-based payments that were possibly deferred under the previous guidance.  The tax rate will be sensitive to the Company’s geographic mix of income, changes in the tax codes within the countries in which the Company operates and the effects of certain share-based payments.

The financial information contained in this press release is unaudited, subject to revision and should not be considered final until the Company’s Form 10-Q for third quarter 2017 is filed with the SEC.

Conference Call and Webcast

A conference call to discuss the Company’s third quarter 2017 results will begin at 8:30 a.m. Eastern Time on November 7, 2017 and can be accessed by calling 1-866-548-4713 for domestic and +1-323-794-2093 for international.  Please use the passcode 1511082 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 November 14, 2017 by calling 1-888-203-1112 for domestic and +1-719-457-0820 for international.  Please use the passcode 1511082 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 and controlled substances.  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 the 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, 2016, 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, our ability to successfully integrate acquired businesses, 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, 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, 2016, 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, Adjusted effective tax rate 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 any charges related to the sale of the Company’s Zenara business.  Adjusted effective tax rate excludes certain effects of share-based payments that were possibly deferred under the previous guidance. Adjusted income from continuing operations is calculated in a manner consistent with that shown in the table at the end of this press release.  Other companies may have different definitions of EBITDA, Adjusted EBITDA, Adjusted effective tax rate 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, Adjusted effective tax rate 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, Adjusted effective tax rate 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, Adjusted effective tax rate 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 September 30, 2017 and 2016
(in thousands, except per share data)
                   
     2017      2016
        % of         % of
    Amount   Net Revenue     Amount   Net Revenue
                   
Gross Sales $ 112,233         $ 99,867      
  Commissions, Allowances and Rebates   225           565      
Net Sales   112,008           99,302      
                   
  Other Revenues, Net   611           97      
                   
Net Revenue   112,619           99,399      
                   
  Cost of Goods Sold   65,730     58.4 %     61,797     62.2 %
                   
Gross Profit   46,889     41.6 %     37,602     37.8 %
                   
Operating Expenses:                  
  Selling, General and Administrative Expenses   17,551     15.6 %     14,950     15.0 %
  Research and Development Expenses   4,233     3.8 %     3,193     3.2 %
Total Operating Expenses   21,784     19.3 %     18,143     18.3 %
                   
Operating Profit   25,105     22.3 %     19,459     19.6 %
                   
Other Expenses/(Income):                  
  Interest Expense, Net   337           366      
  Other Income, Net   (6 )         (71 )    
                   
Income Before Income Taxes   24,774     22.0 %     19,164     19.3 %
                   
  Provision for Income Taxes   7,498           5,443      
                   
Income from Continuing Operations $ 17,276     15.3 %   $ 13,721     13.8 %
                   
Income/(Loss) from Discontinued Operations, Net of Tax   20           (4,503 )    
                   
Net Income $ 17,296     15.4 %   $ 9,218     9.3 %
                   
Basic Earnings/(Loss) per Share of Common Stock:                  
  Income from Continuing Operations $ 0.53         $ 0.43      
  Income/(Loss) from Discontinued Operations, Net of Tax $ 0.00         $ (0.14 )    
  Net Income $ 0.53         $ 0.29      
                   
Diluted Earnings/(Loss) per Share of Common Stock:                  
  Income from Continuing Operations $ 0.52         $ 0.42      
  Income/(Loss) from Discontinued Operations, Net of Tax $ 0.00         $ (0.14 )    
  Net Income $ 0.52         $ 0.28      
                   
Weighted Average Shares Outstanding                  
  Basic   32,749           32,149      
  Diluted   33,512           32,999      
CAMBREX CORPORATION
Statements of Profit and Loss
For the Nine Months Ended September 30, 2017 and 2016
(in thousands, except per share data)
                   
     2017      2016
        % of         % of
    Amount   Net Revenue     Amount   Net Revenue
                   
Gross Sales $ 350,431         $ 312,856      
  Commissions, Allowances and Rebates   1,468           1,901      
Net Sales   348,963           310,955      
                   
  Other Revenues, Net   3,216           1,823      
                   
Net Revenue   352,179           312,778      
                   
  Cost of Goods Sold   200,963     57.1 %     187,720     60.0 %
                   
Gross Profit   151,216     42.9 %     125,058     40.0 %
                   
Operating Expenses:                  
  Selling, General and Administrative Expenses   51,785     14.7 %     42,602     13.6 %
  Research and Development Expenses   12,590     3.6 %     10,796     3.5 %
Total Operating Expenses   64,375     18.3 %     53,398     17.1 %
                   
Operating Profit   86,841     24.7 %     71,660     22.9 %
                   
Other Expenses/(Income):                  
  Interest Expense, Net   991           357      
  Other (Income)/Expense, Net   (149 )         143      
                   
Income Before Income Taxes   85,999     24.4 %     71,160     22.8 %
                   
  Provision for Income Taxes   22,484           21,784      
                   
Income from Continuing Operations $ 63,515     18.0 %   $ 49,376     15.8 %
                   
Loss from Discontinued Operations, Net of Tax   (1,324 )         (5,082 )    
                   
Net Income $ 62,191     17.7 %   $ 44,294     14.2 %
                   
Basic Earnings/(Loss) per Share of Common Stock:                  
  Income from Continuing Operations $ 1.95         $ 1.54      
  Loss from Discontinued Operations, Net of Tax $ (0.04 )       $ (0.16 )    
  Net Income $ 1.91         $ 1.38      
                   
Diluted Earnings/(Loss) per Share of Common Stock:                  
  Income from Continuing Operations $ 1.90         $ 1.50      
  Loss from Discontinued Operations, Net of Tax $ (0.04 )       $ (0.15 )    
  Net Income $ 1.86         $ 1.35      
                   
Weighted Average Shares Outstanding                  
  Basic   32,612           32,034      
  Diluted   33,451           32,905      
CAMBREX CORPORATION
Consolidated Balance Sheets
As of September 30, 2017 and December 31, 2016
(in thousands)
           
           
    September 30,     December 31,
Assets   2017     2016
           
Cash and Cash Equivalents $ 118,403   $ 74,141
Trade Receivables, Net   81,776     110,622
Other Receivables   7,901     6,748
Inventories, Net   164,913     123,184
Prepaid Expenses and Other Current Assets   5,089     7,960
  Total Current Assets   378,082     322,655
           
Property, Plant and Equipment, Net   248,945     217,092
Goodwill   43,200     40,323
Intangible Assets, Net   14,229     14,800
Deferred Income Taxes   10,512     13,061
Other Non-Current Assets   3,383     3,934
           
  Total Assets $ 698,351   $ 611,865
           
Liabilities and Stockholders' Equity          
           
Accounts Payable $ 39,874   $ 42,873
Deferred Revenue and Advance Payments   8,024     7,506
Taxes Payable   463     9,469
Accrued Expenses and Other Current Liabilities   35,856     35,614
  Total Current Liabilities   84,217     95,462
           
Advance Payments   39,000     39,000
Deferred Income Taxes   9,103     6,921
Accrued Pension Benefits   44,267     43,109
Other Non-Current Liabilities   23,887     21,946
           
  Total Liabilities $ 200,474   $ 206,438
           
  Stockholders’ Equity $ 497,877   $ 405,427
           
  Total Liabilities and Stockholders’ Equity $ 698,351   $ 611,865
           
CAMBREX CORPORATION
Reconciliation of GAAP to non-GAAP Results
For the Quarters and Nine Months Ended September 30, 2017 and 2016
(in thousands)
             
  Third Quarter 2017     Third Quarter 2016
             
Operating Profit $ 25,105     $ 19,459  
             
Depreciation and Amortization   8,196       6,443  
             
EBITDA   33,301       25,902  
             
Restructuring Expenses   -       (47 )
             
Adjusted EBITDA $ 33,301     $ 25,855  
             
             
             
             
  Nine Months 2017     Nine Months 2016
             
Operating Profit $ 86,841     $ 71,660  
             
Depreciation and Amortization   23,023       17,717  
             
EBITDA   109,864       89,377  
             
Restructuring Expenses   -       397  
             
Adjusted EBITDA $ 109,864     $ 89,774  
 
CAMBREX CORPORATION
Reconciliation of GAAP to non-GAAP Results
For the Quarters and Nine Months Ended September 30, 2017 and 2016
(in thousands)
                     
  Third Quarter 2017   Third Quarter 2016  
        DilutedEPS         DilutedEPS  
Income from Continuing Operations $ 17,276   $ 0.52     $ 13,721   $ 0.42    
                           
Stock-Based Compensation     2,288     0.07       1,889     0.06    
Stock-Based Compensation Tax 1.     (800 )   (0.02 )     (660 )   (0.02 )  
Impact of New Stock-Based Compensation Standard 2.   (735 )   (0.02 )     -     -    
Amortization of Purchased Intangibles   477     0.01       227     0.01    
Restructuring Expenses/(Benefit)     -     -       (47 )   (0.00 )  
                           
Adjusted Income from Continuing Operations 3. $ 18,506   $ 0.55     $ 15,130   $ 0.46    
                           
                     
                           
  Nine Months 2017   Nine Months 2016  
        DilutedEPS         DilutedEPS  
Income from Continuing Operations $ 63,515   $ 1.90     $ 49,376   $ 1.50    
                           
Stock-Based Compensation     6,321     0.19       5,189     0.16    
Stock-Based Compensation Tax 1.     (2,212 )   (0.07 )     (1,816 )   (0.06 )  
Impact of New Stock-Based Compensation Standard 2.   (5,114 )   (0.15 )     -     -    
Amortization of Purchased Intangibles   1,375     0.04       614     0.02    
Restructuring Expenses/(Benefit)     -     -       397     0.01    
                           
Adjusted Income from Continuing Operations 3. $ 63,885   $ 1.91     $ 53,760   $ 1.63    
                           
                           
1.  Tax rate estimated at 35% for stock-based compensation.
                           
2.  Represents a tax benefit resulting from the adoption of ASU 2016-09.
 
3.  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:        

Tom VadakethExecutive Vice President & CFO  Tel: +201.804.3033   Email: tom.vadaketh@cambrex.com  

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