East Rutherford, NJ – Cambrex Corporation (NYSE: CBM, “Cambrex”) reports fourth quarter results for the period ended December 31, 2009.
- Reported sales decreased by 9.9%, and excluding the impact of foreign currency, sales decreased 15.8% compared to fourth quarter 2008. For the full year 2009, reported sales decreased 5.3%, and decreased 1.2% excluding the impact of foreign currency.
- EBITDA was $9.4 million in the fourth quarter 2009 compared to Adjusted EBITDA of $10.5 million in the same quarter last year. For the full year 2009, EBITDA was $47.1 million compared to Adjusted EBITDA of $47.7 million in 2008. See the reconciling table at the end of this release.
- Debt, net of cash was $68.5 million at the end of fourth quarter 2009, a reduction of $10.2 million during the quarter and a reduction of $22.9 million for the year.
- Provision for Income Taxes includes a $5.3 million expense in the fourth quarter 2009 related to an ongoing audit of a European subsidiary.
- Net Loss was $2.8 million in the fourth quarter 2009 compared with $1.0 million for the fourth quarter 2008. Net Income was $10.4 million for the full year 2009 compared to $7.9 million in 2008.
Fourth Quarter 2009 Operating Results
Fourth quarter 2009 sales of $58.7 million were 9.9% lower than the fourth quarter 2008. Excluding a 5.9% favorable impact of foreign exchange, reflecting a weaker U.S. dollar, sales decreased 15.8%. The decrease is primarily due to lower volumes of an active pharmaceutical ingredient (“API”) that utilizes the Company’s polymeric drug delivery technology, lower sales of two APIs manufactured under long-term supply agreements and lower custom development revenues, all due to the timing of orders throughout 2009. Volumes of a feed additive for which a contract expired earlier in 2009 were also lower. Partially offsetting these decreases were increased generic revenues resulting from improved order patterns.
Fourth quarter 2009 Gross Margin increased to 24.7% of sales from 24.2% during the fourth quarter 2008, with foreign currency unfavorably impacting gross margin by 0.6% in the fourth quarter 2009. Cost reductions, and to a lesser extent, positive product mix, were the main drivers of the higher margins. This was partially offset by lower pricing of generic APIs and lower volumes of an API manufactured under a long-term supply agreement.
Selling, General and Administrative Expenses in the fourth quarter 2009 were $8.8 million compared to $9.0 million in the same period last year. The decrease is a result of lower personnel costs and professional fees at the corporate headquarters and the benefit of the termination of certain postretirement benefits partially offset by higher legal fees, higher expenses at the Company’s manufacturing sites and an unfavorable impact of foreign currency.
Research and Development Expenses increased to $2.0 million in the fourth quarter 2009 from $1.6 million in the fourth quarter 2008 due to higher costs related to the development of new products and technologies.
Operating Profit increased to $3.7 million in the fourth quarter 2009 from $1.8 million in the fourth quarter 2008. Excluding Restructuring Expenses and Strategic Alternative Costs of $3.3 million recorded in 2008, Operating Profit decreased $1.4 million quarter over quarter. EBITDA was $9.4 million, or 16.0% of sales, compared to Adjusted EBITDA of $10.5 million, or 16.0% of sales last year.
The Provision for Income Taxes totaled $5.7 million in the fourth quarter 2009 compared to $1.1 million in the fourth quarter 2008. Provision for Income Taxes includes a $5.3 million expense in the fourth quarter 2009 related to an ongoing audit of a European subsidiary. The Company’s effective tax rates have been and are expected to remain highly sensitive to the geographic mix of income due to the Company’s inability to recognize tax benefits where there has been a recent history of losses, primarily in the U.S.
Net Loss for the fourth quarter 2009 was $2.8 million or $0.09 per share compared to $1.0 million or $0.03 per share in the fourth quarter 2008.
Capital expenditures and depreciation for the fourth quarter 2009 were $2.9 million and $5.7 million compared to $7.3 million and $4.9 million in the fourth quarter 2008, respectively. The decrease in capital expenditures is largely due to fourth quarter 2008 spending on two large capital projects for which the majority of work has since been completed.
Steven M. Klosk, President and Chief Executive Officer, said, “We are pleased to finish 2009 at the high end of our prior earnings guidance, with just over $47 million in EBITDA. We successfully managed working capital and expense levels throughout the business and reduced net debt by nearly $23 million during the year.
“As we entered 2009 the macro-economy suggested a conservative approach that led us to focus on reducing costs and maximizing cash flow. While the outlook for the economy appears to have stabilized as we start 2010, our smaller customers continue to face a difficult funding environment and pricing pressures continue to exist in most product categories. The 2010 forecasts for certain of our larger products are lower than we expected, and in some cases lower than 2009, for a variety of reasons. We renegotiated an extension of an important contract for certain drug delivery products during the fourth quarter, and made price and volume concessions in order to maintain the majority of the share of this business over the next three years. These are key factors contributing to our guidance of flat to lower sales and profits for 2010.
“We have opportunities to grow revenues through the advancement of projects in our pipeline of late stage development products, within our controlled substances and drug delivery categories and through the launch of new generic APIs. However, we are convinced that we need to invest more aggressively, both internally and externally, in niche markets, novel technologies, and new geographies that generate sustainable growth. Of course, we will continue to identify ways to further reduce costs and increase cash flow as we focus on growing the business.”
The Company currently expects that sales for 2010, excluding the impact of foreign currency, will be between a decline of 5% and an increase of 1% versus 2009. Full year 2010 EBITDA is currently expected to be between $41 and $47 million.
For 2010, capital expenditures are expected to be approximately $12 to $15 million and depreciation is expected to be $22 to $24 million.
The financial information contained in this press release is unaudited, subject to revision and should not be considered final until the 2009 Form 10-K is filed with the SEC.
Basis of Reporting
The Company has provided a reconciliation from adjusted and other non-GAAP amounts to GAAP amounts at the end of this press release. Management believes that this basis of reporting provides a more meaningful representation of the Company’s historical operating results for the periods presented due to the magnitude and nature of certain recorded expenses in prior years.
Conference Call and Webcast
The Conference Call to discuss fourth quarter 2009 results will begin at 8:30 a.m. Eastern Time on Thursday, February 11, 2010 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 54652678 and call approximately 10 minutes prior to start time. A webcast is available from the Investors section on the Cambrex website located at https://www.cambrex.com/ and can be accessed for 30 days following the conference call. A telephone replay of the conference call will be available through Thursday, February 18, 2010 by calling 1-800-642-1687 for domestic and +1-706-645-9291 for international. Please use the pass code 54652678 to access the replay.
Forward Looking Statements
This document may contain “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, as amended, 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 they use words such as “expects,” “anticipates,” “intends,” “estimates,” “believes” or similar expressions in connection with any discussion of future financial and operating performance. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout the Company’s public filings. 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 including, but not limited to, global economic trends, pharmaceutical outsourcing trends, competitive pricing or product developments, government legislation and regulations (particularly environmental issues), tax rate, interest rate, technology, manufacturing and legal issues, including the outcome of outstanding litigation disclosed in the Company’s public filings, the Company’s ability to satisfy the continued listing standards of the New York Stock Exchange, changes in foreign exchange rates, uncollectible receivables, loss on disposition of assets, cancellation or delays in renewal of contracts, lack of suitable raw materials or packaging materials, the Company’s ability to receive regulatory approvals for its products and other factors described under the caption “Risk Factors That May Affect Future Results” in the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2009. Any forward-looking statement speaks only as of the date on which it is made, and the Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time and it is not possible for the Company to predict which will arise. In addition, the Company cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
For further details and a discussion of these and other risks and uncertainties, investors are cautioned to review the Cambrex 2008 Annual Report on Form 10-K, including the Forward-Looking Statement section therein, and other filings with the U.S. 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.