-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J2Re5V8baJCfIo6JPtuv4i8ALBrtl0hXSPSAibYmQ6f2pBtCPMpFIvijqhbCjGly gYUvVojPkMzAClLKEfk85A== 0000950123-97-004223.txt : 19970514 0000950123-97-004223.hdr.sgml : 19970514 ACCESSION NUMBER: 0000950123-97-004223 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAMBREX CORP CENTRAL INDEX KEY: 0000820081 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 222476135 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10638 FILM NUMBER: 97602614 BUSINESS ADDRESS: STREET 1: ONE MEADOWLANDS PLZ CITY: E RUTHERFORD STATE: NJ ZIP: 07073 BUSINESS PHONE: 2018043000 MAIL ADDRESS: STREET 1: ONE MEADOWLANDS PLAZA CITY: E. RUTHERFORD STATE: NJ ZIP: 07073 10-Q 1 FORM 10-Q / CAMBREX CORPORATION 1 CONFORMED SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended March 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from _________ to __________ Commission file number 1-10638 CAMBREX CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 22-2476135 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) ONE MEADOWLANDS PLAZA, EAST RUTHERFORD, NEW JERSEY 07073 (Address of principal executive offices) (201) 804-3000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ APPLICABLE ONLY TO CORPORATE ISSUERS As of May 1, 1997, there were 11,748,179 shares outstanding of the registrant's Common Stock, $.10 par value. Page 1 of 16 2 CAMBREX CORPORATION AND SUBSIDIARIES Form 10-Q For The Quarter Ended March 31, 1997 Table of Contents Page No. Part I Financial information Condensed consolidated balance sheets as of March 31, 1997 and December 31, 1996 3 Condensed consolidated income statements for the three months ended March 31, 1997 and 1996 4 Condensed consolidated statements of cash flows for the three months ended March 31, 1997 and 1996 5 Notes to condensed consolidated financial statements 6 - 8 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 12 Part II Other information Item 4. Matters Submitted to a Vote of Securities Holders 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 Exhibit 11 - Computation of Earnings Per Share 15 Exhibit 27 - Financial Data Schedule 16 - 2 - 3 Part 1 - FINANCIAL INFORMATION CAMBREX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands, except share data)
March 31, December 31, 1997 1996 --------- ------------ ASSETS Current assets: Cash and cash equivalents $ 7,555 $ 7,353 Trade and other receivables, less allowances for doubtful accounts of $1,059 and $1,453 at respective dates 60,606 56,750 Inventories 67,920 64,209 Deferred tax assets 5,063 5,009 Other current assets 4,861 3,541 --------- --------- Total current assets 146,005 136,862 Property, plant and equipment, net 208,615 216,481 Intangible assets, net 44,270 49,573 Other noncurrent assets 1,627 1,528 --------- --------- Total assets $ 400,517 $ 404,444 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities . $ 47,737 $ 54,754 Income taxes payable 9,302 8,085 Short-term debt 7,810 3,880 Current portion of long-term debt 270 7,231 --------- --------- Total current liabilities 65,119 73,950 Long-term debt 73,483 60,152 Deferred tax liabilities 22,102 21,587 Other noncurrent liabilities 19,075 19,710 --------- --------- Total liabilities 179,779 175,399 --------- --------- Stockholders' equity: Common stock 1,277 1,275 Additional paid-in capital 149,780 149,191 Retained earnings 87,470 80,608 Additional minimum pension liability (553) (553) Treasury stock, at cost; 1,042,371 and 1,049,895 shares at respective dates (9,496) (9,449) Shares held in trust, at cost; 132,126 shares at respective dates (718) (718) Cumulative translation adjustment (7,022) 8,691 --------- --------- Total stockholders' equity 220,738 229,045 --------- --------- Total liabilities and stockholders' equity $ 400,517 $ 404,444 ========= =========
See accompanying notes to condensed consolidated financial statements. - 3 - 4 CAMBREX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED INCOME STATEMENTS (unaudited) (in thousands, except per-share data)
Three months ended March 31, ------------------ 1997 1996 ------- ------- Gross sales $93,141 $96,717 Commissions & freight 1,859 2,332 Sales, returns and allowances 424 598 ------- ------- Net sales 90,858 93,787 Other revenues 1,036 138 ------- ------- Net revenues 91,894 93,925 Operating expenses: Cost of goods sold 64,155 67,459 Selling, general and administrative expenses 13,244 12,892 Research and development 2,204 2,150 ------- ------- Total operating expenses 79,603 82,501 ------- ------- Operating profit 12,291 11,424 Other (income) expenses: Interest expense - net 1,132 1,792 Other - net 206 98 ------- ------- Income before income taxes 10,953 9,534 Provision for income taxes 3,505 3,337 ------- ------- Net income $ 7,448 $ 6,197 ======= ======= Weighted average shares outstanding*: Primary 11,994 11,810 Fully diluted 11,994 11,826 Net income per share*: Primary $ 0.62 $ 0.52 ======= ======= Fully diluted $ 0.62 $ 0.52 ======= =======
*Share and per share data reflect adjustments for a three-for-two stock split in the form of a 50% stock dividend paid in July, 1996. See accompanying notes to condensed consolidated financial statements. - 4 - 5 CAMBREX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands)
Three months ended March 31, --------------------- 1997 1996 -------- -------- Cash flows from operations $ 15,644 $ 12,998 Changes in assets and liabilities: Receivables (5,451) (7,323) Inventories (6,576) (1,620) Other current assets (1,434) 2,073 Accounts payable and accrued liabilities . (5,239) (3,075) Income taxes payable 3,121 2,036 Other noncurrent assets and liabilities 174 (330) -------- -------- Net cash provided from operating activities 239 4,759 -------- -------- Cash flows from investing activities: Capital expenditures (8,261) (7,450) Other investing activities -- (833) -------- -------- Net cash (used in) investing activities (8,261) (8,283) -------- -------- Cash flows from financing activities: Dividends (586) (381) Net increase in short-term debt 4,502 (326) Long-term debt activity (including current portion): Borrowings 14,800 6,300 Repayments (8,431) (11,828) Proceeds from the issuance of common stock 281 2,179 Proceeds from the sale of treasury stock . 263 367 -------- -------- Net cash provided from (used in) financing activities 10,829 (3,689) -------- -------- Effect of exchange rate changes on cash (2,605) 3,396 -------- -------- Net increase (decrease) in cash 202 (3,817) Cash at beginning of period 7,353 4,841 -------- -------- Cash at end of period $ 7,555 $ 1,024 ======== ======== Supplemental disclosure: Interest paid $ 1,284 $ 1,035 Income taxes paid $ 169 $ 368 Depreciation expense $ 6,216 $ 5,420 Non-cash financing activities: Liabilities established in connection with exercise of stock options $ -- $ 718
See accompanying notes to condensed consolidated financial statements. - 5 - 6 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands, except per-share amounts) (1) Basis of Presentation Unless otherwise indicated by the context, "Cambrex" or the "Company" means Cambrex Corporation and subsidiaries. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared from the records of the Company. In the opinion of management, the financial statements include all adjustments, consisting of only normal recurring accruals, necessary for a fair presentation of financial position and results of operations in conformity with generally accepted accounting principles. These interim financial statements should be read in conjunction with the financial statements for the year ended December 31, 1996. The results of operations for the three months ended March 31, 1997 are not necessarily indicative of the results to be expected for the full year. (2) Inventories Inventories are stated at the lower of cost, determined on a first-in, first-out basis, or market and include material, labor, and overhead. Inventories at March 31, 1997 and December 31, 1996 consist of the following:
March 31, December 31, 1997 1996 --------- ------------ Finished goods $28,769 $29,443 Work in process 20,325 15,463 Raw materials 13,380 13,179 Fuel oil and supplies 5,446 6,124 ------- ------- Total $67,920 $64,209 ======= =======
(3) Earnings Per Common Share Earnings per common share of common stock are computed on the basis of the weighted average shares of common stock outstanding plus common stock equivalent shares arising from the effect of dilutive stock options, using the treasury stock method. On July 24, 1996, the Company's Board of Directors approved a three-for-two stock split of the Company's Common Stock, $0.10 par value, effected in the form of a 50% stock dividend to holders of record on July 8, 1996. All share and per share data, including stock option plan information have been adjusted to reflect the impact of the three-for-two stock split. The effect of the split was presented retroactively within stockholders' equity at December 31, 1996 by transferring the par value for the additional shares issued from additional paid-in capital to common stock. - 6 - 7 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) 4) Future Impact of Recent Accounting Pronouncements The AICPA's Statement of Position 96-1 "Environmental Remediation Liabilities" requires that environmental remediation liabilities including related legal costs be accrued when it is probable that an environmental remediation will be required and such remediation efforts can be reasonably estimated. The Company has adopted this standard on January 1, 1997. The Company currently considers the criteria of this standard in establishing its environmental liabilities with the exception of the requirement to accrue for certain future external legal costs. The adoption of this standard did not have a material impact on its result of operations. Statement of Financial Accounting Standards No. 128 "Earnings Per Share" changes the reporting requirements for earnings per share (EPS) for publicly traded companies by replacing primary EPS with basic EPS and changing the disclosures associated with this change. The Company is required to adopt this standard in the fourth quarter of 1997 and is currently evaluating the impact of this standard. 5) Short-term Debt Short-term debt at March 31, 1997 and December 31, 1996 consists of the following:
March 31, December 31, 1997 1996 --------- ------------ Export financing facility, Italy $4,736 $2,760 Overdraft protection 3,074 1,120 ------ ------ Total $7,810 $3,880 ====== ======
6) Long-term Debt Long-term debt at March 31, 1997 and December 31, 1996 consists of the following:
March 31, December 31, 1997 1996 --------- ------------ Bank credit facilities $72,500 $66,000 Capital lease 10 13 Notes payable 1,243 1,370 ------- ------- Subtotal 73,753 67,383 Less: current portion 270 7,231 ------- ------- Total $73,483 $60,152 ======= =======
- 7 - 8 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (6) Long-term Debt, continued As of March 31, 1997, the Company has opted to borrow $72,500 of the $100,000 available under the revolving credit facility and completely pay the balance due on the term loan of $66,000. The revolving credit facility is due October 11, 1999. The Company met all the bank covenants for the first quarter of 1997. (7) Shares Held in Trust In 1995, the Company amended its non-qualified deferred compensation plan to permit plan participants to defer receipt of Company stock which would otherwise have been issued to the participants upon the exercise of Company stock options. Such shares are held in trust and thus are included as a reduction of equity. The Company has established a corresponding liability to the plan participants in the amount of $718 which is included in other noncurrent liabilities at March 31, 1997 and December 31, 1996, respectively. (8) Contingencies Refer to Form 10-K for the fiscal year ended December 31, 1996, for disclosure of existing contingencies related to environmental issues. - 8 - 9 CAMBREX CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS) RESULTS OF OPERATIONS The first quarter 1997 results were better than the first quarter 1996 due to higher gross margins, reduced interest expenses and a lower tax rate. The following table shows the gross sales of the Company's five product categories, in dollars and as a percentage of the Company's total gross sales, the net revenues and gross profit for the first quarter 1997 and 1996.
First Quarter Ended March 31, ---------------------------------------- 1997 1996 ------------------ ----------------- $ % $ % -------- ----- -------- ----- Pharmaceutical bulk actives $ 27,152 29.2% $ 27,840 28.8% Pharmaceutical intermediates 18,964 20.3 19,470 20.1 Organic intermediates 18,320 19.7 17,689 18.3 Performance enhancers 17,812 19.1 19,447 20.1 Polymer systems 10,893 11.7 12,271 12.7 -------- ----- -------- ----- Total gross sales $ 93,141 100.0% $ 96,717 100.0% ======== ===== ======== ===== Total net revenues $ 91,894 $ 93,925 ======== ======== Total gross profit $ 27,739 $ 26,466 ======== ========
The following table shows the gross sales and gross profit of the Company's five product categories, and gross profit as a percentage of each product category, for the first quarter 1997 and 1996.
Gross Gross Gross Sales Profit $ Profit % ------- -------- -------- 1997 Pharmaceutical bulk actives $27,152 $11,597 42.7% Pharmaceutical intermediates 18,964 4,858 25.6 Organic intermediates 18,320 2,751 15.0 Performance enhancers 17,812 5,048 28.3 Polymer systems 10,893 3,485 32.0 ------- ------- ---- Total $93,141 $27,739 29.8% ======= ======= ====
- 9 - 10
Gross Gross Gross Sales Profit $ Profit % ------- -------- -------- 1996 Pharmaceutical bulk actives $27,840 $10,124 36.4% Pharmaceutical intermediates 19,470 3,985 20.5 Organic intermediates 17,689 2,996 16.9 Performance enhancers 19,447 6,136 31.6 Polymer systems 12,271 3,225 26.3 ------- ------- ---- Total $96,717 $26,466 27.4% ======= ======= ====
Gross sales in the first quarter 1997 decreased to $93,141 compared to $96,717 in the first quarter 1996 due, in part, to a $1.4 million sales reduction attributed to the impact of foreign currency fluctuations or transactions denominated in currencies other than the respective functional currencies, primarily in our Pharmaceutical bulk actives product category. All product categories experienced decreases except organic intermediates. Pharmaceutical bulk actives of $27,152 were $688 below the first quarter 1996 due to the effect of foreign currency movements, as volumes were consistent with the prior year. Sales volume had decreased in products for cardiovascular preparations as a result of low fourth quarter 1996 production levels, however, sales for 1997 are expected to be at 1996 levels. This decrease was offset by the continued strong demand of 5-ASA. Pharmaceutical intermediates of $18,964 were $506 below the first quarter 1996 due to no sales of PMPA and lower sales of cyclohexenylethlamine to the Dextromethorphan (Dextro) market (cough suppressant). The PMPA business will not return as the contract was cancelled in 1996, but the other products involved in the Dextro market are predicted to recover when excess Dextro inventories are depleted by customers. Part of this reduction was offset by the 2nd shipment of an intermediate for a protease inhibitor used in the treatment of AIDS and the sales of aminopyridines from our new facility in England. Organic intermediates of $18,320 were $631 above the first quarter 1996 due to higher sales of 3-Nitro (up $2.0 million), a poultry feed additive, due to higher production volumes, and increased pyridine sales for herbicides. These increases were offset by a sale of $3.0 million in 2-Cyanopyridine inventory in the first quarter 1996 as a result of a renegotiated contract. Performance enhancers of $17,812 were $1,635 below the first quarter 1996. Key decreases occurred in photographic products and in pyridine derivatives, both of which experienced unusually high first quarter 1996 volumes and are now at expected levels. Polymer systems of $10,893 were $1,378 lower than the first quarter 1996 in the coatings and engineering plastics markets. The coatings products were $0.8 million below last year partly due to lower production capacity available for all customer shipments. Sales of a monomer for polyether sulphone plastics was affected by lower demand from the major customer. Export sales from U.S. businesses of $11,251 in the first quarter 1997 compared to $12,130 in the first quarter 1996 due to the decreased demand in the Dextromethorphan markets, primarily in India. International sales from our European operations totaled $39,010 for the same period in 1997 as compared with $41,431 in 1996. - 10 - 11 Total gross profit of $27,739 increased by $1,273, or 5%, from 1996 resulting in a higher gross margin percentage (as a percentage of gross sales) which increased to 29.8% from 27.4%. The gross margin improvement was due to improved plant operations, good product mix in pharmaceutical bulk actives, continued review of lower margin products, and reduced plant spending, partially offset by increased raw materials costs in our manufacture of pyridine derivatives. Selling, general and administrative and research and development expenses as a percentage of gross sales was 16.6%, up from 15.6% in the first quarter 1996. The first quarter 1997 expense of $15,448 was $406 (3%) above 1996. This increase was due to added administrative and research costs at our subsidiaries, partially offset by the reorganization efforts in our Swedish facility. Net interest expense of $1,132 reflected a decrease of $660 from 1996. This decline was due to the additional cash flow from operations used to pay down a net $24.5 million of outstanding loans from March, 1996. The average interest rate was 7.5% in the first quarter 1997 vs. 7.3% in 1996. The provision for income taxes for the first quarter resulted in an effective rate of 32% versus 35% in the comparable period in 1996. This was due to the implementation of tax planning strategies and the projected composition of taxable income between domestic and international operations. However, actual results may differ in the event of changes in tax regulations or deviations from projections. The Company's first quarter net income increased 20% to $7,448 compared with a net income of $6,197 in 1996. LIQUIDITY AND CAPITAL RESOURCES During the three months ended March 31, 1997, the Company generated cash flows from operations totaling $239,000, a decrease of $4.5 million over the comparable period in 1996. This decrease in cash flow was primarily due to an increase in inventory levels and a decrease in accounts payable, partially offset by the increased net income ($1.3 million). Additionally, increases in long-term debt ($6.4 million) were utilized by the Company to expend $8.3 million on capital expenditures. The increase in the cash balance for the first quarter 1997 was $202,000. Capital expenditures were $8,261 in the first three months of 1997 as compared to $7,450 in the first three months of 1996. The major portion of the funds were used for construction of the pilot plants at our Salsbury, Iowa and Zeeland, Michigan facilities which are expected to be completed by the third quarter, 1997. Effective July 24, 1996, the Board of Directors approved a three-for-two split of the Company's Common Stock, $.10 par value, in the form of a 50% stock dividend. - 11 - 12 As of March 31, 1997, the Company has opted to borrow $72,500 of the $100,000 available under the revolving credit facility to prepay the remaining balance due on the term loan of $66,000. This decision was based on the lower interest rate available under the revolving credit facility. The unutilized borrowing capacity of approximately $27,500 under the revolving credit facility of the Credit Agreement as of March 31, 1997 can be drawn on for general corporate purposes. Management is of the opinion that these amounts, together with other available sources of capital, are adequate for meeting the Company's anticipated financing and capital requirements. During the first quarter 1997, the Company paid cash dividends of $0.05 per share. The Company's primary market risk relates to exposure to foreign currency exchange rate fluctuations on transactions entered into by our foreign operations which are primarily denominated in the U.S. dollar, Deutsche mark and British pound sterling. The Company uses foreign currency forward exchange and put and call option contracts to mitigate the effect of short-term foreign exchange rate movements on the Company's operating results. The notional amount of these contracts is $31,391 which the Company estimates to be approximately 50% of the foreign currency exposure during the period covered resulting in a deferred currency loss of $1,538 at March 31, 1997. An additional $4,736 (8%) of the foreign currency exposure is protected through export financing. - 12 - 13 PART II - OTHER INFORMATION CAMBREX CORPORATION AND SUBSIDIARIES Item 4. Matters Submitted to a Vote of Securities Holders. At the annual meeting of stockholders held on April 24, 1997, Cyril C. Baldwin, Jr., George J. W. Goodman, Kathryn Rudie Harrigan and Robert LeBuhn were elected to hold office as directors of the Company until the 2000 annual meeting of stockholders. In addition, the stockholders ratified the appointment of Coopers & Lybrand L.L.P. as the Company's independent accountants for 1997. Of the 9,962,136 shares represented at the meeting, 9,956,139 votes were cast in favor of the ratification of the appointment of Coopers & Lybrand L.L.P. as auditors, 4,291 votes were cast against, and 1,706 abstained. Item 6. Exhibits and Reports on Form 8-K a) The exhibits filed as part of this report are listed below. Exhibit No. Description ----------- ----------- 11 Statement of computation of per share earnings. 27 Financial Data Schedule. b) Reports on Form 8-K The registrant filed no reports on Form 8-K during the first quarter of the year ended December 31, 1997. - 13 - 14 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 thereunto duly authorized. CAMBREX CORPORATION By /s/Douglas MacMillan ----------------------------------- Douglas MacMillan Vice President (On behalf of the Registrant and as the Registrant's Principal Financial Officer) Date: May 13, 1997 - 14 - 15 EXHIBIT INDEX ------------- Exhibit No. Description ----------- ----------- 11 Statement of computation of per share earnings. 27 Financial Data Schedule. EX-11 2 STATEMENT OF COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 CAMBREX CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (in thousands)
Three months ended March 31, ---------------------- 1997 1996 ------- ------- Income applicable to common shares: Primary earnings $ 7,448 $ 6,197 ======= ======= Fully diluted earnings $ 7,448 $ 6,197 ======= ======= Weighted average number of common shares and common share equivalents outstanding during the period*: Common Stock 11,738 11,480 Stock Options 256 330 ------- ------- Shares outstanding - primary . 11,994 11,880 Additional stock options -- 16 ------- ------- Shares outstanding - fully diluted 11,994 11,826 ======= =======
* Share and per share data reflect adjustments for a three-for-two stock split in the form of a 50% stock dividend paid in July, 1996. - 15 - EX-27 3 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 MAR-31-1997 7,555 0 58,287 1,059 67,920 146,005 323,421 114,806 400,517 65,119 73,483 0 0 1,277 219,461 400,517 90,858 91,894 64,155 64,155 0 0 1,157 10,953 3,505 7,448 0 0 0 7,448 0.62 0.62
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