EX-99.1 3 y88676exv99w1.txt PRESS RELEASE [CAMBREX LETTERHEAD] CAMBREX ANNOUNCES SECOND QUARTER 2003 RESULTS OF OPERATIONS East Rutherford, NJ - July 24, 2003 - Cambrex Corporation (NYSE: CBM) today reported second quarter 2003 earnings of $8.1 million or $0.31 diluted earnings per share (including a $0.01 diluted earnings per share benefit described below) versus $16.2 million or $0.61 diluted earnings per share in the second quarter 2002 (including an $0.08 diluted earnings per share benefit described below). Worldwide sales for the second quarter 2003 improved 1.6% to $136.4 million from $134.3 million in the second quarter of 2002. The results reflect increased sales in Human Health, Rutherford Chemicals and All Other segments offset by lower sales in the Biosciences segment. Gross profit for the quarter was $44.2 million (32.4% of sales) versus $53.0 million (39.5% of sales) in the second quarter 2002. Second quarter gross sales were favorably impacted 6.7% due to foreign currency. James A. Mack, Chairman, President and CEO commented, "We are, of course, disappointed with our current earnings performance primarily driven by temporary lower utilization in our biopharmaceutical business and price pressure on certain generic active pharmaceutical ingredients. We are seeing positive trends in the order backlog for generics and increased requests for project proposals from innovative pharmaceutical and biotechnology companies. Our life science business model continues to expand with the broadest line of capabilities for the development and manufacture of small-molecule, biologic and cell therapeutics in a world-class quality and regulatory environment. In spite of recent difficulties, we remain confident about our positioning in the high growth segments of the life science market." During the second quarter of 2003, the Company generated cash flow from operations of approximately $12.6 million, which contributed to fund capital expenditures of $10.1 million and to pay down $7.7 million of debt. The second quarter 2003 results include a $0.01 diluted earnings per share benefit from the tax effect of the previously disclosed Mylan settlement. The second quarter 2002 results included an $0.08 diluted earnings per share favorable impact from the net effect of (i) a pre-tax $1.8 million favorable insurance settlement related to a reactor outage, (ii) a pre-tax $3.8 million favorable arbitration award related to a toll manufacturing agreement, partially offset by (iii) a pre- tax $2.5 million investment write-down, and (iv) a pre-tax $0.4 million asset impairment charge. HUMAN HEALTH SEGMENT The Human Health segment is comprised of active pharmaceutical ingredients (APIs), pharmaceutical intermediates, and development and manufacturing services using organic chemistry that are provided to generic and innovative pharmaceutical companies. Second quarter 2003 Human Health sales of $57.8 million increased 3.4% from $55.9 million in the second quarter of 2002. The increased sales revenue reflects higher demand for a gastrointestinal active pharmaceutical ingredient to support a customer's new dosage formulation, increased new product introductions to support customers' clinical trials, and order timing. These increases were offset by lower demand for generic amphetamine salts, cardiovascular and central nervous system APIs, and x-ray contrast media products. Human Health sales in the quarter were favorably impacted 11.2% due to foreign currency. Second quarter 2003 Human Health gross profit of $22.7 million (39.3% of sales) decreased from $24.6 million (44.0% of sales) in the second quarter 2002. The change in segment gross profit reflects changes in product mix, lower production volumes, and the continued impact of price competition on generic active pharmaceutical ingredients, partly offset by the favorable effects of hedge contract gains and currency translation. Hedge gains are reflected in Other Revenue. BIOSCIENCES SEGMENT The Biosciences segment is comprised of products and services for drug discovery, bioresearch and biopharmaceuticals that are sold to research organizations, biotechnology and pharmaceutical companies worldwide. Second quarter 2003 Biosciences sales of $38.5 million declined 4.5% versus $40.3 million in the same period last year. The sales decline was mainly due to lower overall suite occupancy in the contract manufacturing business, primarily driven by the previously announced loss of a biopharmaceutical customer whose product failed to receive FDA approval, and changes in the terms of an existing contract. These decreases in sales were partly offset by increased sales of cells, media, and endotoxin detection products and cell therapy services. Biosciences sales in the quarter were favorably impacted 4.6% due to foreign currency. Second quarter 2003 Biosciences gross profit of $16.6 million (43.2% of sales), decreased from $21.3 million (52.9% of sales), in the second quarter 2002 primarily due to reduced plant utilization in the contract biopharmaceutical manufacturing sites. Gross profit was also impacted by reduced revenue in the quarter resulting from changes in the timing and terms of an existing contract and additional reserves for certain outstanding customer receivables. These were partly offset by the favorable gross profit impact of cost reduction activities and increased pricing of cells and media. RUTHERFORD CHEMICALS SEGMENT The Rutherford Chemicals segment is comprised of specialty and fine chemicals for a variety of industrial applications, feed additives and agricultural intermediates. Second quarter 2003 Rutherford Chemicals sales of $33.3 million increased 4.5% from $31.9 million in the second quarter 2002. The increased sales reflect increased demand for a polymer product, higher pricing and improved product availability of feed additives, and increased overseas demand for personal care products. The increased demand was somewhat offset by reduced agricultural intermediate sales due to the timing of production campaigns and lower photographic product demand. Rutherford Chemicals sales in the quarter were favorably impacted 1.8% due to foreign currency. Second quarter 2003 Rutherford Chemicals segment gross profit of $3.4 million (10.3% of sales) declined from $6.3 million (19.7% of sales), in the second quarter 2002, due to the receipt of a favorable insurance settlement of $1.8 million in 2002, and unfavorable mix of pyridine products and higher raw material costs in the second quarter 2003. ALL OTHER SEGMENT The All Other segment is comprised of feed additives and specialty and fine chemical products that are manufactured in life sciences facilities. All Other segment sales for the second quarter 2003 of $6.8 million increased 9.6% from $6.2 million in the second quarter 2002 primarily as a result of increased crop protection product sales due to the addition of new higher production capacity equipment and increased animal feed additive sales due to timing of customer demand. The All Other segment gross profit increased in the second quarter 2003 to $1.4 million (20.9% of sales) versus $0.9 million (13.9% of sales) in the second quarter of 2002 due primarily to production efficiencies from higher sales volumes. SECOND QUARTER 2003 OPERATING EXPENSES Second quarter 2003 marketing, sales, administrative and amortization expenses of $25.8 million, or 18.9% of sales, increased from $24.6 million, or 18.3% of sales, in the second quarter 2002. The increase reflects higher sales and marketing costs resulting from an increase in the sales force in the Biosciences segment and the impact of foreign currency. Research and development expenses of $5.0 million were 3.6% of gross sales in the second quarter 2003 compared to $4.7 million or 3.5% of gross sales in 2002 reflecting increased Biosciences segment R&D and the impact of foreign currency exchange. Net interest expense of $2.7 million in the second quarter 2003 decreased from $2.9 million in the second quarter 2002 primarily reflecting lower average debt balances and interest rates. The average interest rate was 4.1% in the second quarter 2003 versus 4.4% in 2002. The effective tax rate for the second quarter 2003 and 2002 was 26.0%. GUIDANCE For 2003, the Company targets sales revenue growth of 3-5% for the Human Health segment, 0-3% for Biosciences, and 4-8% for the Rutherford Chemicals segments. Diluted earnings per share for 2003 are expected to be in the range of $0.75 - $0.95 including the unfavorable impact of the previously disclosed Mylan settlement of $0.28 diluted earnings per share. Capital expenditures, depreciation, and amortization for 2003 are expected to be approximately $50-55 million, $40-45 million, and $1.5 million, respectively. The effective tax rate is expected to be 26.0% for 2003. CONFERENCE CALL The Conference Call to discuss second quarter earnings will begin at 8:30 a.m. Eastern Daylight Time on Friday, July 25, 2003 and last approximately one hour. Those wishing to participate should call the MCI Conference Coordinator at 1-888-809-8966 for Domestic, and +1-773-756-4602 for International. Please use the password CAMBREX and call approximately 10 minutes before the start time. ABOUT CAMBREX Cambrex is a global, diversified life sciences company dedicated to providing high quality products and services to accelerate drug discovery, development, and manufacturing processes for customers focused on health and the prevention of disease. The Company employs approximately 2200 worldwide. For more information, please visit our website at http://www.cambrex.com. FORWARD LOOKING STATEMENTS This news release may contain "forward-looking statements" for the purposes of the Securities and Exchange Commission's "safe harbor" provisions under the Private Securities Litigation Reform Act of 1995 and Rule 3B-6 under The Exchange Act, 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. The forward-looking statements contained herein involve risks and uncertainties that may cause results to differ materially from the Company's 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), technology, manufacturing and legal issues, unfavorable results shipments, changes in foreign exchange rates, performance of minority investments, un-collectable receivables, loss on disposition of assets, cancellation or delays in renewal of contracts, and lack of suitable raw materials or packaging materials. Investors are cautioned to review risk factors in the Cambrex Annual Report on Form 10K and other filings with the Securities and Exchange Commission. CAMBREX CORPORATION Financial Summary Quarters Ended June 30, 2003 and 2002 (in thousands, except earnings per share)
2003 2002* -------- -------- Gross Sales................................... $136,363 $134,263 Operating Profit ............................. $ 13,334 $ 23,755 Profit Before Tax ............................ $ 10,880 $ 21,856 Net Income ................................... $ 8,051 $ 16,173 Earnings per share data (basic): Net Income ................................ $ 0.31 $ 0.62 Average Shares Outstanding ................ 25,732 25,991 Earnings per share data (diluted): Net Income ................................ $ 0.31 $ 0.61 Average Shares Outstanding ................ 25,973 26,644
Six Months Ended June 30, 2003 and 2002 (in thousands, except earnings per share)
2003** 2002* -------- -------- Gross Sales...................................... $276,283 $266,718 Operating Profit................................. $ 18,977 $ 46,906 Profit Before Tax................................ $ 14,068 $ 42,114 Net Income....................................... $ 10,410 $ 31,164 Earnings per share data (basic): Net Income.................................... $ 0.40 $ 1.20 Average Shares Outstanding.................... 25,792 25,944 Earnings per share data (diluted): Net Income.................................... $ 0.40 $ 1.17 Average Shares Outstanding.................... 26,092 26,606
* - The second quarter and six months ended June 30, 2002 results include the following pre-tax benefits and charges: a benefit recorded in cost of sales related to a favorable insurance settlement of $1,776, an asset impairment charge of $425 recorded in administration expense, an Investment write-down of $2,500 recorded in other expense and a benefit of $3,760 due to an arbitration award recorded in other income. These net benefits increased diluted EPS by $0.08 and $0.07 for the second quarter and six months ended June 30, 2002, respectively, including related tax effects. ** - The six months ended June 30, 2003 results include a pre-tax charge of $11,342 for the previously announced settlement of certain class action lawsuits involving Mylan Laboratories, Inc. and Gyma Laboratories of America, Inc. This charge had a $0.30 per diluted share impact on the year-to-date results, including related tax effects. CAMBREX CORPORATION Gross Sales & Gross Profit by Segment Quarters Ended June 30, 2003 and 2002 (in thousands)
Second Quarter 2003 Second Quarter 2002 ----------------------------- --------------------------------- Gross Gross Gross Gross Sales Profit GP% Sales Profit GP% ----------------------------- --------------------------------- Human Health $ 57,809 $22,727 39.3% $ 55,915 $24,582 44.0% Biosciences 38,488 16,614 43.2% 40,298 21,310 52.9% Rutherford Chemicals 33,311 3,423 10.3% 31,884 6,290 19.7% (a) All Other 6,755 1,415 20.9% 6,166 858 13.9% -------- ------- -------- ------ Total $136,363 $44,179 32.4% $134,263 $53,040 39.5% (b) ======== ======= ======== ======
GROSS SALES COMPARISON ------------------------------------------ 2003 2002 Gross Gross Change Change Sales Sales $ % ------------------------------------------ Human Health $ 57,809 $ 55,915 $ 1,894 3.4% Biosciences 38,488 40,298 (1,810) (4.5%) Rutherford Chemicals 33,311 31,884 1,427 4.5% All Other 6,755 6,166 589 9.6% ------- ------- ------- Total $136,363 $134,263 $ 2,100 1.6% ======= ======= =======
(a) Rutherford Chemicals' results include a benefit for a favorable insurance settlement of $1,776, which increased gross margin by 5.5 percentage points. (b) The insurance settlement of $1,776 increased consolidated gross margin by 1.3 percentage points. CAMBREX CORPORATION Gross Sales & Gross Profit by Segment Six Months Ended June 30, 2003 and 2002 (in thousands)
Six Months 2003 Six Months 2002 -------------------------------- --------------------------------- Gross Gross Gross Gross Sales Profit GP% Sales Profit GP% -------------------------------- --------------------------------- Human Health $113,232 $ 45,996 40.6% $112,135 $ 50,428 45.0% Biosciences 82,593 38,554 46.7% 77,493 38,958 50.3% Rutherford Chemicals 68,036 7,111 10.5% 65,145 11,464 17.6% (a) All Other 12,422 2,203 17.7% 11,945 1,884 15.8% -------- -------- -------- -------- Total $276,283 $ 93,864 34.0% $266,718 $102,734 38.5% (b) ======== ======== ======== ========
GROSS SALES COMPARISON --------------------------------------------- 2003 2002 Gross Gross Change Change Sales Sales $ % --------------------------------------------- Human Health $113,232 $112,135 $ 1,097 1.0% Biosciences 82,593 77,493 5,100 6.6% Rutherford Chemicals 68,036 65,145 2,891 4.4% All Other 12,422 11,945 477 4.0% -------- -------- ------- Total $276,283 $266,718 $ 9,565 3.6% ======== ======== =======
(a) Rutherford Chemicals' results include a benefit for a favorable insurance settlement of $1,776, which increase gross margin by 2.7 percentage points. (b) The insurance settlement of $1,776 increased consolidated gross margin by 0.6 percentage points. CAMBREX CORPORATION Statement of Profit and Loss For the Quarters Ended June 30, 2003 and 2002 (in thousands)
2003 2002 -------------------- -------------------- % of % of Amount Sales Amount Sales -------------------- -------------------- Gross Sales $136,363 100.0% $134,263 100.0% Commissions and Allowances 1,427 1.0% 564 0.4% -------- -------- Net Sales 134,936 99.0% 133,699 99.6% Other Revenues 2,067 1.5% 1,168 0.8% -------- -------- Net Revenue 137,003 100.5% 134,867 100.4% Cost of Sales 92,824 68.1% 81,827 60.9% -------- -------- Gross Profit 44,179 32.4% 53,040 39.5% Operating Expenses Marketing/Sales Expenses 7,478 5.5% 6,642 4.9% Research & Development Expenses 5,014 3.6% 4,692 3.5% Administrative Expenses 18,000 13.2% 17,564 13.1% Amortization 353 0.3% 387 0.3% -------- -------- Total Operating Expenses 30,845 22.6% 29,285 21.8% -------- -------- Operating Profit 13,334 9.8% 23,755 17.7% Other Expenses Interest - Other 2,689 2.0% 2,852 2.1% Other Expenses/(Income) (235) (0.2)% (953) (0.7)% -------- -------- Total Other Expenses 2,454 1.8% 1,899 1.4% -------- -------- Profit Before Tax 10,880 8.0% 21,856 16.3% Provision for Income Taxes 2,829 2.1% 5,683 4.2% -------- -------- Net Income $ 8,051 5.9% $ 16,173 12.1% ======== ========
CAMBREX CORPORATION Statement of Profit and Loss For the Six Months Ended June 30, 2003 and 2002 (in thousands)
2003 2002 -------------------- -------------------- % of % of Amount Sales Amount Sales -------------------- -------------------- Gross Sales $276,283 100.0% $266,718 100.0% Commissions and Allowances 2,516 0.9% 2,032 0.8% -------- -------- Net Sales 273,767 99.1% 264,686 99.2% Other Revenues 5,040 1.8% 2,736 1.0% -------- -------- Net Revenue 278,807 100.9% 267,422 100.2% Cost of Sales 184,943 66.9% 164,688 61.7% -------- -------- Gross Profit 93,864 34.0% 102,734 38.5% Operating Expenses Marketing/Sales Expenses 14,744 5.3% 12,630 4.7% Research & Development Expenses 9,656 3.5% 8,627 3.2% Administrative Expenses 38,401 13.9% 33,794 12.7% Legal Settlement 11,342 4.1% - 0.0% Amortization 744 0.3% 777 0.3% -------- -------- Total Operating Expenses 74,887 27.1% 55,828 20.9% -------- -------- Operating Profit 18,977 6.9% 46,906 17.6% Other Expenses Interest - Other 5,023 1.8% 5,779 2.2% Other Expenses/(Income) (114) 0.0% (987) (0.4)% -------- -------- Total Other Expenses 4,909 1.8% 4,792 1.8% -------- -------- Profit Before Tax 14,068 5.1% 42,114 15.8% Provision for Income Taxes 3,658 1.3% 10,950 4.1% -------- -------- Net Income $ 10,410 3.8% $ 31,164 11.7% ======== ========
CAMBREX CORPORATION Consolidated Balance Sheet As of June 30, 2003 and December 31, 2002 (in thousands)
2003 2002 -------- -------- Current Assets Cash and Cash Equivalents $ 41,311 $ 33,296 Trade Receivables, net 79,813 79,571 Inventories, net 108,613 109,832 Deferred Tax Asset 31,627 35,612 Other Current Assets 21,110 17,447 -------- -------- Total Current Assets 282,474 275,758 Property, Plant and Equipment, Net 317,464 310,501 Goodwill and Other Intangibles 270,049 267,752 Other Assets 13,395 13,517 -------- -------- Total Assets $883,382 $867,528 ======== ======== Current Liabilities Trade Accounts Payable $ 35,363 $ 39,627 Accrued Liabilities 53,457 49,391 Short-term Debt and Current Portion of Long-term Debt 3,450 2,364 -------- -------- Total Current Liabilities 92,270 91,382 Long-term Debt 247,657 267,434 Deferred Tax Liabilities 52,630 52,630 Other Liabilities 51,907 43,400 -------- -------- Total Liabilities $444,464 $454,846 Shareholders' Equity $438,918 $412,682 -------- -------- Total Liabilities and Shareholders' Equity $883,382 $867,528 ======== ========
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