(CAMBREX LOGO)
Date: April 27, 2006
Contact: Luke M. Beshar Anne-Marie Hess
Executive Vice President & CFO Senior Director, Investor Relations
Phone: 201-804-3010 201-804-3062
Email: luke.beshar@cambrex.com annemarie.hess@cambrex.com
Release: Immediate
CAMBREX REPORTS FIRST QUARTER 2006 RESULTS
EAST RUTHERFORD, NJ - April 27, 2006 - Cambrex Corporation (NYSE: CBM)
reports first quarter 2006 results for the period ended March 31, 2006. First
quarter 2006 sales increased 8.3% to $119.6 million, including a 4.9%
unfavorable impact from foreign currency, from $110.5 million in the first
quarter 2005. First quarter 2006 Adjusted diluted earnings per share increased
73.3% to $0.26 from $0.15 per diluted share in the first quarter 2005.
The Company reported first quarter 2006 GAAP diluted earnings per share of
($0.02), before the cumulative effect of a change in accounting principle
(adoption of FAS 123(R)). Adjusted results in the first quarter 2006 exclude:
(i) a charge of $0.20 per diluted share resulting from the previously announced
pre-payment of a portion of the Company's long-term debt, (ii) a payment of
$0.05 per diluted share recorded as in-process R&D related to the previously
announced acquisition of Cutanogen, and (iii) an expense of $0.04 per diluted
share for costs related to the evaluation of strategic alternatives to enhance
shareholder value. A reconciliation of GAAP results to Adjusted (non-GAAP)
results can be found in the un-audited financial tables included in this press
release. Management believes that Adjusted results provide a more meaningful
representation of the Company's operating results for the periods presented.
First quarter 2006 gross margins decreased to 37.6% from 39.2% in the first
quarter 2005 due to lower margins in Human Health partially offset by improved
gross margins in the Biopharma segment. Foreign currency unfavorably impacted
consolidated gross margin by 0.6 percentage points in the first quarter 2006.
STRATEGIC ALTERNATIVES
On February 2, 2006, Cambrex announced that it had retained Bear Stearns as
investment bankers to assist the Board of Directors in identifying and assessing
strategic alternatives to increase shareholder value. There has been significant
progress over the last several months, the process is ongoing and the effort
continues to be a top priority of the Cambrex Board of Directors and executive
management.
1
Cambrex Corporation | One Meadowlands Plaza | East Rutherford, NJ 07073 Phone
201.804.3000 | Fax 201.804.9852 | www.cambrex.com
(CAMBREX LOGO)
BUSINESS SEGMENT RESULTS
BIOPRODUCTS
The Bioproducts segment includes products and services for research and
therapeutic applications. Bioproducts sales in the first quarter 2006 increased
3.6% to $41.3 million from $39.9 million in the first quarter 2005 primarily due
to higher sales of research products, cell therapy manufacturing, testing and
process development services, and therapeutic media, partially offset by a 3.7%
unfavorable impact from foreign currency.
First quarter 2006 Bioproducts gross margin of 55.4% is the same as the
gross margin in the first quarter 2005. Foreign currency favorably impacted
Bioproducts gross margin by 0.7 percentage point in the first quarter 2006.
First quarter 2006 Bioproducts Adjusted operating profit margin decreased
to 20.2% from 24.2% in the first quarter 2005 primarily due to investments in
additional personnel and higher promotional spending to support global sales
efforts. Foreign currency favorably impacted Bioproducts operating profit margin
by 0.5 percentage point in the first quarter 2006.
BIOPHARMA
The Biopharma segment consists of the Company's contract biopharmaceutical
process development and manufacturing business. Sales in the first quarter 2006
increased 79.1% to $13.8 million from $7.7 million in the first quarter 2005 due
to higher suite and material reimbursement revenues, partially offset by lower
process development and labor reimbursement revenues. Approximately $5.2 million
of first quarter 2006 Biopharma revenues resulted from the shipment of all
remaining product inventories to a client that cancelled their project when the
product failed to meet its primary endpoint in the client's confirmatory Phase
III clinical trial in the fourth quarter 2005.
First quarter 2006 Biopharma gross margin increased to 7.3% from -26.7% in
the first quarter 2005 due to higher sales volume, partially offset by the cost
of additional production personnel, higher utilities and adverse product mix.
The first quarter 2006 Biopharma operating loss was $1.5 million versus an
operating loss of $4.9 million in the first quarter 2005 due to higher gross
profit, partially offset by adverse product mix. Foreign currency had no impact
on Biopharma sales, gross margin or operating profit margin.
2
Cambrex Corporation | One Meadowlands Plaza | East Rutherford, NJ 07073 Phone
201.804.3000 | Fax 201.804.9852 | www.cambrex.com
(CAMBREX LOGO)
HUMAN HEALTH
The Human Health segment consists of small molecule active pharmaceutical
ingredients (APIs), advanced intermediates and other products derived from
organic chemistry. Human Health sales in the first quarter 2006 increased 2.6%
to $64.5 million, including a 6.3% unfavorable impact due to foreign currency,
from $62.8 million in the first quarter 2005. Higher net sales volumes were
partially offset by lower pricing and the unfavorable impact of foreign
currency. Higher sales resulted from strong demand for a gastrointestinal API,
x-ray contrast media and nicotine polacrilex used in smoking cessation products,
partially offset by lower volume and pricing for two generic central nervous
system APIs.
First quarter 2006 Human Health gross margin decreased to 32.6% from 36.9%
in the first quarter 2005 primarily due to lower pricing and the unfavorable
impact of foreign currency by 1.4 percentage points, partially offset by
favorable product mix and lower manufacturing expenses.
First quarter 2006 Human Health operating profit margin decreased to 18.0%
from 19.6% in the first quarter 2005 primarily due to lower gross profit and the
unfavorable impact of foreign currency by 1.3 percentage points, partially
offset by lower operating expenses.
FIRST QUARTER 2006 ADJUSTED CONSOLIDATED OPERATING, INTEREST AND TAX EXPENSES
First quarter 2006 Adjusted consolidated operating expenses decreased $1.1
million to $31.3 million, or 26.2% of sales, from $32.4 million, or 29.3% of
sales, in the first quarter 2005 primarily due to lower corporate spending,
partially offset by additional investments in personnel, marketing and
advertising in the Bioproducts segment.
Sales and marketing expense in the first quarter 2006 increased to $9.2
million, or 7.7% of sales, from $8.0 million, or 7.2% of sales in the first
quarter 2005, principally due to additional personnel and marketing and
advertising spending in the Bioproducts segment, partially offset by the
favorable impact of foreign currency.
Adjusted research and development expense for the first quarter 2006
decreased to $4.5 million, or 3.8% of sales compared to $5.9 million, or 5.3% of
sales, in the first quarter 2005 due to the reduction of corporate personnel and
related costs and the favorable impact of foreign currency.
Adjusted administrative expense in the first quarter 2006 decreased to
$17.1 million, or 14.3% of sales, from $18.0 million, or 16.3% of sales, in the
first quarter 2005 due to lower personnel expenses and the favorable impact of
foreign currency.
3
Cambrex Corporation | One Meadowlands Plaza | East Rutherford, NJ 07073 Phone
201.804.3000 | Fax 201.804.9852 | www.cambrex.com
(CAMBREX LOGO)
Adjusted net interest expense in the first quarter 2006 decreased to $2.1
million from $2.7 million in the first quarter 2005. The average interest rate
in the first quarter 2006 and first quarter 2005 is 5.2% and 5.3%, respectively.
Capital expenditures and depreciation for the first quarter 2006 were $8.5
million and $8.1 million compared to $9.0 million and $9.4 million in the first
quarter 2005, respectively.
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE: FAS 123(R)
Under FAS 123(R), the Company is now required to measure stock appreciation
rights (SARs) at fair market value. As a result, the Company recorded $0.2
million in compensation expense as a cumulative effect of an accounting
principle change in accordance with FAS 123(R).
GUIDANCE
The Company is providing full year 2006 guidance for sales growth to be
within the range of 4% to 8% and Adjusted (non-GAAP) net earnings to be in the
range of $0.75 to $0.95 per fully diluted share. The full year 2006 earnings
guidance excludes the costs associated with the previously announced pre-payment
of a portion of the Company's long-term debt ($0.20 per diluted share),
milestone payments for the acquisition of Cutanogen ($0.15 per diluted share)
and costs related to the evaluation of strategic alternatives to enhance
shareholder value.
For the year 2006, guidance for capital expenditures, depreciation and
amortization for continuing operations is currently expected to be approximately
$40 - $45 million, $36 million, and $2.0 million, respectively. The Company
expects the full year 2006 effective tax rate to be approximately 40 - 45%. The
full year and quarterly effective tax rates will continue to be highly sensitive
to the geographic mix of income or losses.
As previously announced, it was determined during the 2005 year-end closing
procedures that certain of the Company's tax balance sheet accounts had not been
properly reconciled in the past. The Company continues to diligently complete
the appropriate analyses. However, until the analyses of the tax accounts are
complete, it cannot be determined whether these matters will result in material
adjustments to previously reported financial statements. The Company expects to
file its 2005 Form 10-K with the US Securities and Exchange Commission as soon
as it completes the above referenced work.
The financial information contained in this press release is unaudited,
subject to revision and should not be considered final until the 2005 Form 10-K
and the first quarter 2006 Form 10-Q are filed with the US Securities and
Exchange Commission.
4
Cambrex Corporation | One Meadowlands Plaza | East Rutherford, NJ 07073 Phone
201.804.3000 | Fax 201.804.9852 | www.cambrex.com
(CAMBREX LOGO)
CAMBREX DECLARES QUARTERLY DIVIDEND
The Cambrex Board of Directors declared the Company's regular quarterly
cash dividend on its common stock of $0.03 per share for its shareholders of
record as of May 5, 2006. The dividend is payable on May 19, 2006.
CONFERENCE CALL AND WEBCAST
The Conference Call to discuss first quarter 2006 earnings will begin at
8:30 a.m. Eastern Time on Friday, April 28, 2006 and last approximately 45
minutes. Those wishing to participate should call 1-888-634-4003 for domestic
and +1-706-634-6653 for international. Please use the pass code 6956169 and call
approximately 10 minutes prior to start time. A webcast is available from the
Investor Relations section on the Cambrex website located at www.cambrex.com and
can be accessed for approximately a month following the call. A telephone replay
of the conference call will be available through Friday, May 5, 2006 by calling
1-800-642-1687 for domestic and +1-706-645-9291 for international. Please use
the pass code 6956169 to access the replay.
FORWARD LOOKING STATEMENTS
This news release contains "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 and Rule 3b-6 under The
Securities Exchange Act of 1934, including, without limitation, statements
regarding expected performance, especially expectations with respect to sales,
research and development expenditures, earnings per share, capital expenditures,
acquisitions, divestitures, collaborations, or other expansion opportunities.
These statements may be identified by the fact that words such as "expects",
"anticipates", "intends", "estimates", "believes" or similar expressions are
used in connection with any discussion of future financial and operating
performance. The 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
including but not limited to, global economic trends, pharmaceutical outsourcing
trends, competitive pricing or product developments, government legislation
and/or regulations (particularly environmental issues), tax rate, interest rate,
technology, manufacturing and legal issues, changes in foreign exchange rates,
performance of minority investments, uncollectible receivables, loss on
disposition of assets, cancellation or delays in renewal of contracts, and lack
of suitable raw materials or packaging materials, the possibility that the value
of the acquisition of PermaDerm(TM) cultured skin may not be realized or that
our plans to obtain a Humanitarian Device Exemption, completion of clinical
trials and commercialization of PermaDerm cultured skin in the United
5
Cambrex Corporation | One Meadowlands Plaza | East Rutherford, NJ 07073 Phone
201.804.3000 | Fax 201.804.9852 | www.cambrex.com
(CAMBREX LOGO)
States may not be successful, the Company may not receive regulatory approval
for its products, and the outcome of the evaluation of strategic alternatives.
For further details and a discussion of these and other risks and
uncertainties, investors are cautioned to review the Cambrex 2004 Annual Report
on Form 10-K, including the Forward-Looking Statement section therein, and other
filings with the Securities and Exchange Commission. The Company undertakes no
obligation to publicly update any forward-looking statement, whether as a result
of new information, future events or otherwise.
ABOUT CAMBREX
Cambrex is a global, diversified life sciences company dedicated to
providing products and services to accelerate and improve the discovery and
commercialization of human therapeutics. The Company employs approximately 2,000
worldwide. For more information, please visit http://www.cambrex.com.
6
Cambrex Corporation | One Meadowlands Plaza | East Rutherford, NJ 07073 Phone
201.804.3000 | Fax 201.804.9852 | www.cambrex.com
(CAMBREX LOGO)
CAMBREX CORPORATION
Adjusted Statement of Profit and Loss - Non-GAAP*
For the Quarters Ended March 31, 2006 and 2005
(in thousands)
2006 2005
---------------- ----------------
% of % of
Amount Sales Amount Sales
-------- ----- -------- -----
Gross Sales $119,607 100.0% $110,462 100.0%
Commissions and Allowances 862 0.7% 989 0.9%
-------- --------
Net Sales 118,745 99.3% 109,473 99.1%
Other Revenues 1,080 0.9% 2,460 2.2%
-------- --------
Net Revenue 119,825 100.2% 111,933 101.3%
Cost of Sales 74,868 62.6% 68,671 62.1%
-------- --------
Gross Profit 44,957 37.6% 43,262 39.2%
Operating Expenses
Sales and Marketing Expense 9,172 7.7% 8,007 7.2%
Research and Development Expense 4,543 3.8% 5,858 5.3%
Administrative Expense 17,088 14.3% 17,951 16.3%
Amortization 488 0.4% 539 0.5%
-------- --------
Total Operating Expenses 31,291 26.2% 32,355 29.3%
-------- --------
Operating Profit 13,666 11.4% 10,907 9.9%
Other Expenses
Interest - Other 2,081 1.7% 2,730 2.5%
Other Expense, net 22 0.0% 190 0.2%
-------- --------
Total Other Expenses 2,103 1.7% 2,920 2.7%
-------- --------
Income Before Taxes 11,563 9.7% 7,987 7.2%
Income Tax Provision 4,529 3.8% 3,897 3.5%
-------- --------
Net Income $ 7,034 5.9% $ 4,090 3.7%
======== ========
Basic Earnings per Share
Net Income $ 0.26 $ 0.16
Diluted Earnings per Share
Net Income $ 0.26 $ 0.15
Weighted Average Shares Outstanding
Basic 26,660 26,346
Diluted 26,759 26,630
* Refer to the GAAP to Adjusted (Non-GAAP) Reconciliation.
7
Cambrex Corporation | One Meadowlands Plaza | East Rutherford, NJ 07073 Phone
201.804.3000 | Fax 201.804.9852 | www.cambrex.com
(CAMBREX LOGO)
CAMBREX CORPORATION
Statement of Profit and Loss - GAAP
For the Quarters Ended March 31, 2006 and 2005
(in thousands)
2006 2005
---------------- ----------------
% of % of
Amount Sales Amount Sales
-------- ----- -------- -----
Gross Sales $119,607 100.0% $110,462 100.0%
Commissions and Allowances 862 0.7% 989 0.9%
-------- --------
Net Sales 118,745 99.3% 109,473 99.1%
Other Revenues 1,080 0.9% 2,460 2.2%
-------- --------
Net Revenue 119,825 100.2% 111,933 101.3%
Cost of Sales 74,868 62.6% 68,671 62.1%
-------- --------
Gross Profit 44,957 37.6% 43,262 39.2%
Operating Expenses
Sales and Marketing Expense 9,172 7.7% 8,007 7.2%
Research and Development Expense 5,881 4.9% 5,858 5.3%
Administrative Expense 18,108 15.1% 17,951 16.3%
Amortization 488 0.4% 539 0.5%
-------- --------
Total Operating Expenses 33,649 28.1% 32,355 29.3%
-------- --------
Operating Profit 11,308 9.5% 10,907 9.9%
Other Expenses
Interest - Other 7,353 6.2% 2,730 2.5%
Other Expense, net 22 0.0% 190 0.2%
-------- --------
Total Other Expenses 7,375 6.2% 2,920 2.7%
-------- --------
Income Before Taxes 3,933 3.3% 7,987 7.2%
Income Tax Provision 4,529 3.8% 3,897 3.5%
-------- --------
(Loss)/Earnings before Cumulative
Effect of a Change in
Accounting Principle $ (596) -0.5% $ 4,090 3.7%
Cumulative Effect of a Change in
Accounting Principle (228) -0.2% -- 0.0%
-------- --------
Net (Loss)/Income $ (824) -0.7% $ 4,090 3.7%
======== ========
Basic Earnings per Share
(Loss)/Earnings before Cumulative
Effect of a Change in
Accounting Principle $ (0.02) $ 0.16
Cumulative Effect of a Change in
Accounting Principle $ (0.01) $ --
-------- --------
Net (Loss)/Income $ (0.03) $ 0.16
Diluted Earnings per Share
(Loss)/Earnings before Cumulative
Effect of a Change in
Accounting Principle $ (0.02) $ 0.15
Cumulative Effect of a Change in
Accounting Principle $ (0.01) $ --
-------- --------
Net (Loss)/Income $ (0.03) $ 0.15
Weighted Average Shares Outstanding
Basic 26,660 26,346
Diluted 26,660 26,630
8
Cambrex Corporation | One Meadowlands Plaza | East Rutherford, NJ 07073 Phone
201.804.3000 | Fax 201.804.9852 | www.cambrex.com
(CAMBREX LOGO)
CAMBREX CORPORATION
Gross Sales, Gross Profit & Operating
Profit by Segment
For the Quarters Ended March 31, 2006 and 2005
(in thousands)
First Quarter 2006
--------------------------------------------------------------------------------------
Operating Adjusted Operating
Gross Gross Profit/(loss) OP% Profit/(loss) - Adjusted OP%-
Sales Profit GP% - GAAP GAAP Non-GAAP* Non-GAAP*
-------- ------- ---- ------------- ----- ------------------ -------------
Bioproducts $ 41,341 $22,904 55.4% $ 7,012 17.0% $ 8,350 20.2%
Biopharma 13,804 1,013 7.3% (1,462) -10.6% (1,462) -10.6%
Human Health 64,462 21,040 32.6% 11,593 18.0% 11,593 18.0%
Corporate -- -- (5,835) (4,815)
-------- ------- ------- -------
Total $119,607 $44,957 37.6% $11,308 9.5% $13,666 11.4%
======== ======= ======= =======
First Quarter 2005
---------------------------------------------------------------------------------------
Operating Adjusted Operating
Gross Gross Profit/(loss) OP% Profit/(loss) - Adjusted OP%-
Sales Profit GP% - GAAP GAAP Non-GAAP* Non-GAAP*
-------- ------- ----- ------------- ----- ------------------ -------------
Bioproducts $ 39,919 $22,135 55.4% $ 9,646 24.2% $ 9,646 24.2%
Biopharma 7,707 (2,057) -26.7% (4,912) -63.7% (4,912) -63.7%
Human Health 62,836 23,184 36.9% 12,309 19.6% 12,309 19.6%
Corporate -- -- (6,136) (6,136)
-------- ------- ------- -------
Total $110,462 $43,262 39.2% $10,907 9.9% $10,907 9.9%
======== ======= ======= =======
Gross Sales Comparison
-------------------------------------
1Q06 1Q05
Gross Gross Change Change
Sales Sales $ %
-------- -------- ------ ------
Bioproducts $ 41,341 $ 39,919 $1,422 3.6%
Biopharma 13,804 7,707 6,097 79.1%
Human Health 64,462 62,836 1,626 2.6%
-------- -------- ------
Total $119,607 $110,462 $9,145 8.3%
======== ======== ======
* Refer to the GAAP to Adjusted (Non-GAAP) Reconciliation.
9
Cambrex Corporation | One Meadowlands Plaza | East Rutherford, NJ 07073 Phone
201.804.3000 | Fax 201.804.9852 | www.cambrex.com
(CAMBREX LOGO)
CAMBREX CORPORATION
GAAP to Adjusted (Non-GAAP) Reconciliation - Net Income
For the Quarters ended March 31, 2006 and 2005
First Quarter 2006 First Quarter 2005
--------------------------- -------------------------
Net
(Loss)/Income Diluted EPS Net Income Diluted EPS
------------- ----------- ----------- -----------
(Loss)/Earnings before Cumulative Effect of a
change in Accounting Principle $ (596) $(0.02) $4,090 $0.15
Cutanogen milestone payment 1,338 0.05 -- --
Evaluation of strategic alternatives 1,020 0.04 -- --
Costs associated with the prepayment of Senior Notes 5,272 0.20 -- --
------ ------ ------ -----
Adjusted Net Income - Non-GAAP $7,034 $ 0.26 $4,090 $0.15
====== ====== ====== =====
CAMBREX CORPORATION
GAAP to Adjusted (Non-GAAP) Reconciliation - Operating Profit by Segment
For the Quarters ended March 31, 2006 and 2005
First Quarter 2006
------------------------------------------------------------
Bioproducts Biopharma Human Health Corporate Total
----------- --------- ------------ --------- -------
Operating Profit/(Loss) - As Reported $7,012 $(1,462) $11,593 $(5,835) $11,308
Cutanogen milestone payment 1,338 -- -- -- 1,338
Evaluation of strategic alternatives -- -- -- 1,020 1,020
------ ------- ------- ------- -------
Adjusted Operating Profit - Non-GAAP $8,350 $(1,462) $11,593 $(4,815) $13,666
====== ======= ======= ======= =======
First Quarter 2005
------------------------------------------------------------
Bioproducts Biopharma Human Health Corporate Total
----------- --------- ------------ --------- -------
Operating Profit/(Loss) - As Reported $9,646 $(4,912) $12,309 $(6,136) $10,907
------ ------- ------- ------- -------
Adjusted Operating Profit - Non-GAAP $9,646 $(4,912) $12,309 $(6,136) $10,907
====== ======= ======= ======= =======
10
Cambrex Corporation | One Meadowlands Plaza | East Rutherford, NJ 07073 Phone
201.804.3000 | Fax 201.804.9852 | www.cambrex.com
(CAMBREX LOGO)
CAMBREX CORPORATION
Consolidated Balance Sheet
As of March 31, 2006 and December 31, 2005
(in thousands)
March 31, December 31,
2006 2005
--------- ------------
Assets
Cash and Cash Equivalents $ 23,681 $ 45,932
Trade Receivables, net 70,334 74,425
Inventories, net 105,785 93,617
Other Current Assets 14,056 17,589
-------- --------
Total Current Assets 213,856 231,563
Property, Plant and Equipment, Net 232,504 229,410
Goodwill and Other Intangibles 147,233 146,708
Other Non-Current Assets 5,337 5,985
-------- --------
Total Assets $598,930 $613,666
======== ========
Liabilities and Stockholders' Equity
Trade Accounts Payable $ 39,804 $ 38,813
Accrued Expenses and Other Current
Liabilities 48,374 52,064
Short-term Debt and Current Portion
of Long-term Debt 1,622 1,514
-------- --------
Total Current Liabilities 89,800 92,391
Long-term Debt 168,136 186,819
Deferred Tax Liabilities 31,683 31,600
Other Non-Current Liabilities 62,909 61,641
-------- --------
Total Liabilities $352,528 $372,451
Stockholders' Equity $246,402 $241,215
-------- --------
Total Liabilities and Stockholders' Equity $598,930 $613,666
======== ========
Note: This balance sheet is unaudited, subject to revision, and should not be
considered final until the 2005 Form 10-K and the first quarter 2006 Form 10-Q
are filed with the U.S. Securities and Exchange Commission.
###
11
Cambrex Corporation | One Meadowlands Plaza | East Rutherford, NJ 07073 Phone
201.804.3000 | Fax 201.804.9852 | www.cambrex.com