Nasdaq

Cambrex Reports Fourth Quarter and Full Year 2017 Financial Results

08-02-2018

- Net Revenue increased 2.5% for the fourth quarter and 9% for the full year 2017-

- Conference call at 8:30 a.m. ET on February 8, 2018 -

EAST RUTHERFORD, N.J., Feb. 08, 2018 (GLOBE NEWSWIRE) -- Cambrex Corporation (NYSE:CBM), a leading manufacturer of small molecule innovator and generic Active Pharmaceutical Ingredients (APIs), reports results for the fourth quarter and full year ended December 31, 2017.

Highlights

Net revenue increased 2.5% to $182.3 million compared to $177.9 million in the same quarter last year. Excluding the impact of foreign exchange, net revenue increased 1%. Full year net revenue increased 9% to $534.5 million, compared to $490.6 million in the full year 2016.
GAAP Diluted EPS from continuing operations increased 4% to $1.20 per share from $1.15 per share in the same quarter last year. Full year GAAP Diluted EPS from continuing operations increased 17% to $3.10 per share from $2.65 per share in the full year 2016.
EBITDA increased to $64.7 million compared to $63.6 million in the same quarter last year. Full year Adjusted EBITDA increased 13% to $174.6 million from $154.2 million in the full year 2016 (see table at the end of this release).
Net cash was $183.3 million at the end of the year, an increase of $64.9 million during the quarter and $109.1 million during the year.
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, Iowa, High Point, North Carolina, Karlskoga, Sweden and Milan, Italy.
The Company expects full year 2018 Adjusted net revenue, excluding the impact of foreign currency and change in accounting principle, to be between -2% and 2% compared to 2017 and Adjusted EBITDA to be between $150 and $160 million. (see Financial Expectations – Continuing Operations section below for related explanations and additional financial guidance).

“We are pleased with our strong financial performance in 2017, our seventh straight year of solid growth. The fourth quarter was a record revenue quarter with Net revenue up 2.5% compared to a record fourth quarter last year. Strong performance at our manufacturing facilities resulted in higher profit margins versus last year,” commented Steven M. Klosk, President and Chief Executive Officer of Cambrex.

“With our recently completed large scale manufacturing capacity projects and the on-going investments in R&D and pilot plant capabilities, we are well positioned to ensure our facilities are able to keep up with the strong market demand.”

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.

Fourth Quarter 2017 Operating Results – Continuing Operations

Net revenue was $182.3 million, an increase of $4.4 million, or 2.5%, compared to the fourth quarter of 2016. Excluding a 1.5% favorable impact of foreign exchange compared to the fourth quarter of 2016, net revenue increased 1%. The increase primarily reflects higher volumes in the generic and controlled substance product categories, partially offset by lower volumes and pricing of certain branded APIs.

Gross margin decreased to 43% from 45% compared to the same quarter last year. Excluding a 1% unfavorable impact of foreign exchange compared to the fourth quarter of 2016, margins were relatively flat year over year.

Selling, general and administrative expenses were $18.7 million, compared to $18.2 million in the same quarter last year. This increase was primarily due to higher expenses related to consulting for an operational excellence initiative.

Research and development expenses were $4.3 million, compared to $3.5 million in the same quarter last year. This increase was primarily driven by costs to develop new generic drug products and higher personnel related expenses.

Operating profit decreased to $55.9 million from $56.7 million in the same quarter last year. This decrease was primarily the result of higher operating expenses as described above.

Adjusted EBITDA was $64.7 million compared to $64.4 million in the same quarter last year (see table at the end of this press release).

Income tax expense was $15.6 million resulting in an effective tax rate of 28% compared to $18.4 million and an effective tax rate of 33% in the same quarter last year. The favorable impact of immediately recognizing certain effects of share-based compensation as required by a recently adopted accounting standard and the unfavorable impact of U.S. tax reform legislation enacted in December 2017, was negligible.

Income from continuing operations was $40.2 million or $1.20 per share compared to $37.9 million or $1.15 per share in the same quarter last year. Adjusted income from continuing operations was $42.4 million or $1.27 per share, compared to $40.8 million or $1.23 per share in the same quarter last year (see table at the end of this press release).

Capital expenditures and depreciation were $13.2 million and $8.3 million, respectively, compared to $11.9 million and $6.6 million, respectively, in the same quarter last year.

Net cash was $183.3 million at the end of the fourth quarter, an increase of $64.9 million during the quarter.

Financial Expectations – Continuing Operations

The following table shows the Company’s current expectations for its full year 2018 financial performance:

			Expectations

	Adjusted net revenue		-2% - 2%

	Adjusted EBITDA		$150 - $160 million

	Adjusted income from continuing operations per share		$2.80 - $3.03

	Free cash flow		$35 - $45 million

	Capital expenditures		$70 - $80 million

	Depreciation and amortization		$33 - $37 million

	Adjusted effective tax rate		23% - 25%

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, outcomes of tax disputes and the adoption of the new revenue recognition guidance effective January 1, 2018. Adjusted net revenue expectations exclude the impact of foreign exchange and change in accounting principle. EBITDA, Adjusted EBITDA and Adjusted income from continuing operations per share for 2018 will be computed on a basis consistent with the reconciliation of the 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 laws or rates 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 2017 Form 10-K is filed with the SEC.

Conference Call and Webcast

A conference call to discuss the Company’s fourth quarter and full year 2017 results will begin at 8:30 a.m. Eastern Time on February 8, 2018 and can be accessed by calling 1-888-394-8218 for domestic and +1-323-701-0226 for international. Please use the passcode 9709552 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 February 15, 2018 by calling 1-888-203-1112 for domestic and +1-719-457-0820 for international. Please use the passcode 9709552 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, and the Company’s Annual Report on Form 10-K for the period ended December 31, 2017, once filed with the SEC, 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, customer and product concentration, the Company’s ability to win new customer contracts and renew existing contracts on favorable terms, 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, and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, once filed with the SEC, including the Forward-Looking Statement sections therein, and other filings with the SEC. The Company cautions investors and potential investors not to place undue 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

Adjusted net revenue, EBITDA, Adjusted EBITDA, Adjusted effective tax rate and Adjusted income from continuing operations are non-GAAP financial measures. Adjusted net revenue excludes the change in an accounting principle related to revenue recognition and 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 Adjusted net revenue, 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. Adjusted net revenue, 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 Adjusted net revenue, 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 Adjusted net revenue, 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 December 31, 2017 and 2016
(in thousands, except per share data)

		2017					2016
				% of					% of
		Amount		Net Revenue			Amount		Net Revenue

Gross Sales	$	175,505				$	178,682
Commissions, Allowances and Rebates		527					468
Net Sales		174,978					178,214

Other Revenues/(Expense), Net		7,299					(348	)

Net Revenue		182,277					177,866

Cost of Goods Sold		103,406		56.7	%		98,699		55.5	%

Gross Profit		78,871		43.3	%		79,167		44.5	%

Operating Expenses:
Selling, General and Administrative Expenses		18,683		10.2	%		18,217		10.2	%
Research and Development Expenses		4,311		2.4	%		3,496		2.0	%
Restructuring Expenses		-		0.0	%		761		0.4	%
Total Operating Expenses		22,994		12.6	%		22,474		12.6	%

Operating Profit		55,877		30.7	%		56,693		31.9	%

Other Expenses/(Income):
Interest Expense, Net		262					360
Other Income, Net		(211	)				(46	)

Income Before Income Taxes		55,826		30.6	%		56,379		31.7	%

Provision for Income Taxes		15,577					18,430

Income from Continuing Operations	$	40,249		22.1	%	$	37,949		21.3	%

Income/(Loss) from Discontinued Operations, Net of Tax		10					(565	)

Net Income	$	40,259		22.1	%	$	37,384		21.0	%

Basic Earnings/(Loss) per Share of Common Stock:
Income from Continuing Operations	$	1.23				$	1.18
Income/(Loss) from Discontinued Operations, Net of Tax	$	0.00				$	(0.02	)
Net Income	$	1.23				$	1.16

Diluted Earnings/(Loss) per Share of Common Stock:
Income from Continuing Operations	$	1.20				$	1.15
Income/(Loss) from Discontinued Operations, Net of Tax	$	0.00				$	(0.02	)
Net Income	$	1.20				$	1.13

Weighted Average Shares Outstanding
Basic		32,810					32,240
Diluted		33,532					33,107

CAMBREX CORPORATION
Statements of Profit and Loss
For the Twelve Months Ended December 31, 2017 and 2016
(in thousands, except per share data)

		2017					2016
				% of					% of
		Amount		Net Revenue			Amount		Net Revenue

Gross Sales	$	525,936				$	491,538
Commissions, Allowances and Rebates		1,995					2,369
Net Sales		523,941					489,169

Other Revenues, Net		10,515					1,475

Net Revenue		534,456					490,644

Cost of Goods Sold		304,369		56.9	%		286,419		58.4	%

Gross Profit		230,087		43.1	%		204,225		41.6	%

Operating Expenses:
Selling, General and Administrative Expenses		70,468		13.2	%		60,422		12.3	%
Research and Development Expenses		16,901		3.2	%		14,292		2.9	%
Restructuring Expenses		-		0.0	%		1,158		0.2	%
Total Operating Expenses		87,369		16.3	%		75,872		15.5	%

Operating Profit		142,718		26.7	%		128,353		26.2	%

Other Expenses/(Income):
Interest Expense, Net		1,253					717
Other (Income)/Expense, Net		(360	)				97

Income Before Income Taxes		141,825		26.5	%		127,539		26.0	%

Provision for Income Taxes		38,061					40,214

Income from Continuing Operations	$	103,764		19.4	%	$	87,325		17.8	%

Loss from Discontinued Operations, Net of Tax		(1,314	)				(5,647	)

Net Income	$	102,450		19.2	%	$	81,678		16.6	%

Basic Earnings/(Loss) per Share of Common Stock:
Income from Continuing Operations	$	3.18				$	2.72
Loss from Discontinued Operations, Net of Tax	$	(0.04	)			$	(0.17	)
Net Income	$	3.14				$	2.55

Diluted Earnings/(Loss) per Share of Common Stock:
Income from Continuing Operations	$	3.10				$	2.65
Loss from Discontinued Operations, Net of Tax	$	(0.04	)			$	(0.17	)
Net Income	$	3.06				$	2.48

Weighted Average Shares Outstanding
Basic		32,662					32,086
Diluted		33,486					32,969

CAMBREX CORPORATION
Consolidated Balance Sheets
As of December 31, 2017 and December 31, 2016
(in thousands)


		December 31,		December 31,
Assets		2017		2016

Cash and Cash Equivalents	$	183,284	$	74,141
Trade Receivables, Net		75,144		110,622
Other Receivables		20,891		6,748
Inventories, Net		138,542		123,184
Prepaid Expenses and Other Current Assets		4,217		7,960
Total Current Assets		422,078		322,655

Property, Plant and Equipment, Net		254,299		217,092
Goodwill		43,626		40,323
Intangible Assets, Net		13,868		14,800
Deferred Income Taxes		3,198		13,061
Other Non-Current Assets		3,496		3,934

Total Assets	$	740,565	$	611,865

Liabilities and Stockholders' Equity

Accounts Payable	$	35,017	$	42,873
Deferred Revenue and Advance Payments		4,707		7,506
Taxes Payable		43		9,469
Accrued Expenses and Other Current Liabilities		42,774		35,614
Total Current Liabilities		82,541		95,462

Advance Payments		39,000		39,000
Deferred Income Taxes		7,806		6,921
Accrued Pension Benefits		41,141		43,109
Other Non-Current Liabilities		25,213		21,946

Total Liabilities	$	195,701	$	206,438

Stockholders’ Equity	$	544,864	$	405,427

Total Liabilities and Stockholders’ Equity	$	740,565	$	611,865

CAMBREX CORPORATION
Reconciliation of GAAP to non-GAAP Results
For the Quarters and Twelve Months Ended December 31, 2017 and 2016
(in thousands)

	Fourth Quarter 2017		Fourth Quarter 2016

Operating Profit	$	55,877	$	56,693

Depreciation and Amortization		8,825		6,948

EBITDA		64,702		63,641

Restructuring Expenses		-		761

Adjusted EBITDA	$	64,702	$	64,402


	Twelve Months 2017		Twelve Months 2016

Operating Profit	$	142,718	$	128,353

Depreciation and Amortization		31,848		24,665

EBITDA		174,566		153,018

Restructuring Expenses		-		1,158

Adjusted EBITDA	$	174,566	$	154,176

CAMBREX CORPORATION
Reconciliation of GAAP to non-GAAP Results
For the Quarters and Twelve Months Ended December 31, 2017 and 2016
(in thousands)

	Fourth Quarter 2017						Fourth Quarter 2016
					Diluted EPS						Diluted EPS
Income from Continuing Operations	$	40,249		$	1.20		$	37,949		$	1.15

Stock-Based Compensation		2,593			0.08			2,577			0.08
Stock-Based Compensation Tax^1.		(908	)		(0.03	)		(902	)		(0.03	)
Impact of New Stock-Based Compensation Standard ^2.		(122	)		(0.00	)		-			-
Amortization of Purchased Intangibles		503			0.02			397			0.01
Restructuring Expenses		-			-			761			0.02
Impact of U.S. Tax Reform^3.		117			0.00			-			-

Adjusted Income from Continuing Operations^4.	$	42,432		$	1.27		$	40,782		$	1.23


	Twelve Months 2017						Twelve Months 2016
					Diluted EPS						Diluted EPS
Income from Continuing Operations	$	103,764		$	3.10		$	87,325		$	2.65

Stock-Based Compensation		8,914			0.27			7,766			0.24
Stock-Based Compensation Tax^1.		(3,120	)		(0.09	)		(2,718	)		(0.08	)
Impact of New Stock-Based Compensation Standard ^2.		(5,236	)		(0.16	)		-			-
Amortization of Purchased Intangibles		1,878			0.06			1,011			0.03
Restructuring Expenses		-			-			1,158			0.04
Impact of U.S. Tax Reform^3.		117			0.00			-			-

Adjusted Income from Continuing Operations^4.	$	106,317		$	3.17		$	94,542		$	2.87


^1.Tax rate estimated at 35% for stock-based compensation.
^2.Represents a tax benefit resulting from the adoption of ASU 2016-09.
^3.Represents tax expense resulting from the U.S. enactment of TCJA tax reform legislation, and a provisional one-time toll charge.
^4.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 Vadaketh
Executive Vice President & CFO
Tel: +201.804.3033
Email: tom.vadaketh@cambrex.com