<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 27, 1995
REGISTRATION NO. 33-59273
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
CAMBREX CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 22-2476135
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
ONE MEADOWLANDS PLAZA
EAST RUTHERFORD, NEW JERSEY 07073
(201) 804-3000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
PETER E. THAUER, ESQ.
Vice President -- Law and Environment,
General Counsel and Secretary
CAMBREX CORPORATION
One Meadowlands Plaza
East Rutherford, New Jersey 07073
(201) 804-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies of communications to:
<TABLE>
<S> <C>
ANDREW L. SOMMER, ESQ. JEFFREY SMALL, ESQ.
DEBEVOISE & PLIMPTON DAVIS POLK & WARDWELL
875 Third Avenue 450 Lexington Avenue
New York, New York 10022 New York, New York 10017
(212) 909-6000 (212) 450-4000
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box: / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
CAMBREX CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501 OF REGULATION S-K, SHOWING LOCATION IN
PROSPECTUS OF INFORMATION REQUIRED BY PART I OF FORM S-3
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM AND HEADING LOCATION OR CAPTION IN PROSPECTUS
---------------------------------------- ------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus.............................. Forepart of Registration Statement; Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus..................... Inside Front Cover Page of Prospectus; Available
Information
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges...... Prospectus Summary; The Company; Risk Factors
4. Use of Proceeds......................... Use of Proceeds
5. Determination of Offering Price......... Underwriters
6. Dilution................................ Not Applicable
7. Selling Security Holders................ Not Applicable
8. Plan of Distribution.................... Outside Front Cover Page of Prospectus;
Underwriters
9. Description of Securities to be
Registered.............................. Outside Front Cover Page of Prospectus;
Prospectus Summary; Description of Capital Stock
10. Interests of Named Experts and
Counsel................................. Not Applicable
11. Material Changes........................ Not Applicable
12. Incorporation of Certain Information by
Reference............................... Incorporation of Certain Documents by Reference
13. Disclosure of Commission Position
on Indemnification for Securities Act
Liabilities............................. Not Applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS (Subject to Completion)
Issued June 27, 1995
1,500,000 Shares
CAMBREX CORPORATION
COMMON STOCK
------------------------
ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE COMPANY.
THE COMPANY'S COMMON STOCK IS LISTED ON THE AMERICAN STOCK EXCHANGE UNDER
THE SYMBOL "CBM." ON JUNE 23, 1995, THE REPORTED LAST SALE PRICE
OF THE COMMON STOCK ON THE AMERICAN STOCK EXCHANGE
COMPOSITE TAPE WAS $34.00 PER SHARE.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR INFORMATION THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
PRICE $ A SHARE
--------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
---------- ------------------------ ------------
<S> <C> <C> <C>
Per Share............................ $ $ $
Total(3)............................. $ $ $
</TABLE>
- ------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses payable by the Company estimated at $797,279.
(3) The Company has granted the Underwriters an option, exercisable within 30
days from the date hereof, to purchase up to an aggregate of 225,000
additional Shares at the price to public less underwriting discounts and
commissions, for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option in full, the total price to public,
underwriting discounts and commissions and proceeds to Company will be
$ , $ and $ , respectively. See "Underwriters."
------------------------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Davis Polk & Wardwell, counsel for the Underwriters. It is expected that
delivery of the Shares will be made on or about July , 1995 at the office
of Morgan Stanley & Co. Incorporated, New York, New York, against payment
therefor in New York funds.
------------------------
MORGAN STANLEY & CO. WERTHEIM SCHRODER & CO.
Incorporated Incorporated
, 1995
<PAGE> 4
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON
STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO
SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 8
The Company................................ 12
Use of Proceeds............................ 13
Common Stock Price Range and Dividends..... 13
Capitalization............................. 14
Pro Forma Combined Financial Information... 15
Selected Consolidated Financial
Information.............................. 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 17
Business................................... 30
Management................................. 47
Description of Capital Stock............... 50
Underwriters............................... 54
Legal Matters.............................. 55
Experts.................................... 55
Index to Consolidated Financial
Statements............................... F-1
</TABLE>
------------------------
AVAILABLE INFORMATION
Cambrex Corporation (the "Company") is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information filed by the Company with the
Commission in accordance with the Exchange Act can be inspected and copied at
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following regional offices of the Commission:
Seven World Trade Center, Suite 1300, New York, New York 10048; and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
In addition, the Company's Common Stock is listed on the American Stock Exchange
and similar information concerning the Company can be inspected and copied at
the American Stock Exchange, 86 Trinity Place, New York, New York 10006.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference:
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1994
including the portions incorporated therein of the Company's definitive
Proxy Statement dated March 23, 1995;
2. Current Report on Form 8-K, dated October 12, 1994;
3. Amendment No. 1 to Current Report on Form 8-K, filed on Form 8-K/A dated
December 29, 1994;
4. Form 8-A, dated August 24, 1987; and
5. Quarterly Report on Form 10-Q, dated May 12, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and before the
termination of the offering of the Common Stock offered hereby shall be deemed
incorporated herein by reference, and such documents shall be deemed to be a
part hereof from the date of filing of such documents. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of any such person, a copy of any or all of the above documents
incorporated herein by reference (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into the documents that
this Prospectus incorporates). Requests should be directed to Cambrex
Corporation, One Meadowlands Plaza, East Rutherford, New Jersey 07073,
Attention: Vice President -- Law and Environment, General Counsel and Secretary
(201-804-3000).
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the information and
financial statements and notes thereto appearing elsewhere in this Prospectus or
incorporated by reference herein. Unless otherwise indicated or the context
otherwise requires, all references to the "Company" or "Cambrex" herein include
Cambrex Corporation and its subsidiaries. Unless otherwise indicated, references
to pro forma financial information refer to the relevant combined pro forma
financial information of the Company giving effect to the Company's October 12,
1994 acquisition of Profarmaco Nobel S.r.l. and Nobel Chemicals A.B. from Akzo
Nobel A.B. (the "Nobel/Profarmaco Acquisition") and the January 31, 1994
acquisition of the Seal Sands business from Hexcel Chemical Products Limited
(the "Seal Sands Acquisition") as if such transactions had occurred on January
1, 1994. See "Business -- Growth Strategy -- External Growth." Except as
otherwise indicated, the information contained in this Prospectus assumes the
Underwriters' over-allotment option is not exercised. For information concerning
certain considerations relating to the Offering, see "Risk Factors."
THE COMPANY
Cambrex Corporation, in business since 1981, manufactures a broad line of
specialty and fine chemicals for a wide variety of end use markets. The
Company's operations are conducted in five product categories: (i) Health and
Pharmaceuticals; (ii) Specialty and Fine Chemicals; (iii) Agricultural
Intermediates and Additives; (iv) Performance Chemicals; and (v) Coatings.
During the first quarter of 1995, over 72% of the Company's gross revenues were
attributable to sales of products in its Health and Pharmaceuticals and
Specialty and Fine Chemicals product categories, and over 34% of its gross
revenues consisted of sales made outside the United States. The Company's
products are manufactured at seven facilities located in the United States and
three facilities located in Europe.
Since 1990, when the Company substantially strengthened its management
team, Cambrex has sought to optimize returns from its existing businesses while
identifying and capitalizing on new business opportunities within its diverse
product categories that offer the most favorable prospects for growth. The
Company is currently focused on opportunities for growth in its Health and
Pharmaceuticals and Specialty and Fine Chemicals product categories, which the
Company believes offer opportunities to manufacture and sell higher margin
products. In January of 1994, the Company completed the Seal Sands Acquisition
and in October of 1994, it completed the Nobel/Profarmaco Acquisition, thereby
substantially expanding its Health and Pharmaceuticals and Specialty and Fine
Chemicals businesses. The Company believes that the continuation of a variety of
recent trends, including an increase in outsourcing by chemical and
pharmaceutical companies, will impact these product categories favorably. In
addition, increased use of generic drugs and certain demographic factors are
expected to enable the Company to expand its sales of bulk actives and
pharmaceutical intermediates for use in prescription and over-the-counter
pharmaceuticals. The Company also believes that the Nobel/Profarmaco Acquisition
offers it important growth opportunities in these categories by increasing its
market presence in Europe, thereby positioning it to increase sales of its
products outside of the United States.
Since 1990, the Company has experienced significant growth in sales and
earnings, due primarily to acquisitions, productivity enhancements and new
product developments. The Company's net revenues for the year ended December 31,
1994 were approximately $242 million, and have grown since 1990 at a compounded
annual growth rate of approximately 13%. The Company's net income for the year
ended December 31, 1994 was approximately $11 million, and has grown by at least
25% each year since 1990.
PRINCIPAL PRODUCTS
- Health and Pharmaceuticals. The Company's Health and Pharmaceuticals
products include: (i) bulk actives and pharmaceutical intermediates, primarily
utilized for the active ingredients in over-the-counter and prescribed
medications (which accounted for 66% and 83% of 1994's gross sales in this
product category on an historical and pro forma basis, respectively); (ii)
compounds used in the formulation of cosmetics; and (iii) personal care products
and vitamins.
3
<PAGE> 6
- Specialty and Fine Chemicals. The Company's Specialty and Fine Chemicals
product category includes: (i) specialty additives used for lubricants and
surfactant intermediates; (ii) organic intermediates; (iii) photographic
chemicals; and (iv) catalysts. These products are employed in a wide variety of
end uses, including shatterproof glass, the manufacture of sealant and caulking
products, dye receptors in textiles, flame retardants for polycarbonate plastics
and high performance polysulphonate engineering plastics.
- Agricultural Intermediates and Additives. The Company's Agricultural
Intermediates and Additives product line consists of: (i) animal feed additives;
and (ii) intermediates used in the synthesis of herbicides. Sales volumes of
individual products in this category are generally greater, and more
concentrated, than in the Company's other product categories.
- Performance Chemicals; Coatings. Performance Chemicals include gels used
in fiber optic cable manufacture, urethane-based encapsulants used by the
telephone industry for encasing copper cable splices, and polyurethane sealants
and potting compounds used in medical devices such as blood oxygenators,
catheters and filter elements in kidney dialysis machines. Coatings include
additives used in the automotive and construction industries.
OPERATING STRATEGIES
The Company's objective is to be a leading provider of specialty chemicals
in a wide variety of niche markets in which its technical expertise,
manufacturing capabilities and strong customer relationships provide a
competitive advantage. The Company also seeks to increase its profitability
through its productivity enhancement program. Strategies that are important to
the Company's achievement of these objectives include:
- Niche Markets. The Company generally focuses on products that have the
potential to generate sales volume of up to $10 million and that require a high
degree of technical expertise. The Company believes that these kinds of products
are unattractive to many larger chemical companies, thus reducing competition
and making such products candidates for outsourcing.
- Technical Expertise. The Company believes that its high level of
expertise in a variety of areas of chemistry as well as in process engineering
enables it to handle complex, technical product formulation and manufacturing
problems for its customers.
- Quality Manufacturing. The Company believes that it has a reputation
among industry participants as a high quality manufacturer capable of meeting
the rigorous process required to comply with the Food and Drug Administration's
current Good Manufacturing Practices and to ensure that its products meet
customers' own stringent requirements. The Company believes that the long lead
time required for the successful development and approval of new products, and
the complexity of the processes involved, are significant sources of stability
in the Company's relationships with its customers.
- Customer Relationships. The Company believes that its technical
expertise, manufacturing flexibility and customer support capabilities have
enabled it to foster strong relationships with many of its customers. The
Company's customers include some of the world's leading drug and chemical
companies, including A.L. Laboratories, AT&T, Dow Elanco, Hoechst Celanese,
Hoffman-LaRoche, Mylan Laboratories, Polaroid, Procter & Gamble and Zeneca.
- Productivity Enhancements. The Company has an ongoing cost-saving and
productivity program, which includes yield improvement, the discontinuation of
unprofitable or low margin product lines and, where appropriate, rationalization
of the Company's workforce.
GROWTH STRATEGY
The Company seeks to achieve revenue and earnings growth by identifying and
capitalizing on favorable trends in the markets it serves. Over the past five
years the Company has achieved growth principally through acquisitions. The
Company is now focused on internal growth of its existing businesses,
particularly its Health and Pharmaceuticals and Specialty and Fine Chemicals
categories. The Company's primary plans for growth include: (i) focused product
development; (ii) capitalizing on favorable trends in its product markets; and
4
<PAGE> 7
(iii) capacity expansion. The Company will continue to review opportunities for
expansion through the acquisition of businesses that have product lines and
technology complementary to those of the Company and that have substantial
positions in niche markets.
THE OFFERING
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<S> <C>
Common Stock offered......................................... 1,500,000 shares
Common Stock to be outstanding after the Offering............ 7,010,102 shares(1)(2)
Use of proceeds.............................................. The net proceeds to the
Company from the Offering will
be used to repay certain
indebtedness.
American Stock Exchange symbol............................... "CBM"
</TABLE>
- ---------------
(1) Based on the number of shares outstanding on May 31, 1995. Does not include
799,250 shares of Common Stock reserved for issuance upon exercise of
outstanding options granted under employees' and directors' stock plans.
(2) If the over-allotment option granted to the Underwriters is exercised in
full, 7,235,102 shares of Common Stock will be outstanding after the
Offering. See "Underwriters."
5
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The table below sets forth summary consolidated financial data for the
Company for each of the years in the five-year period ended December 31, 1994
and for the three-month periods ended March 31, 1995 and March 31, 1994 and
certain pro forma financial data. The consolidated financial statements of the
Company as of December 31, 1994 and December 31, 1993 and for each of the years
in the three-year period ended December 31, 1994 and the accountants' report
thereon and unaudited consolidated financial statements of the Company as of
March 31, 1995 and for the three-month periods ended March 31, 1995 and March
31, 1994 are included elsewhere in this Prospectus. In the opinion of
management, the unaudited interim consolidated financial statements have been
prepared on a basis consistent with the audited consolidated financial
statements and contain all adjustments necessary to present fairly the results
of operations for such periods and financial positions at the end of such
periods. However, the results of the three-month period ended March 31, 1995 are
not necessarily indicative of results for the whole year. Moreover, the summary
consolidated financial information is not necessarily indicative of the results
of future operations of the Company. The as adjusted and pro forma financial
data is presented for informational purposes only and may not be indicative of
the results that would have actually occurred if the transactions reflected
therein had occurred as indicated or of future results of the operations of the
Company. The information presented below should be read in conjunction with the
Company's consolidated financial statements and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the "Pro Forma Combined Financial Information" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS YEARS ENDED DECEMBER 31,
ENDED MARCH 31, ------------------------------------------------------------------
------------------ PRO FORMA
1995 1994 1994(1) 1994(2) 1993(3) 1992(4) 1991(5) 1990
-------- -------- --------- --------- --------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................... $ 93,389 $ 51,047 $ 328,538 $ 241,634 $ 197,203 $ 179,452 $144,500 $133,628
Gross profit................... 24,485 11,403 87,072 57,881 51,778 46,036 26,326 28,730
Selling, general and
administrative............... 12,167 6,276 47,784 31,216 29,286 28,201 22,743 20,828
Research and development....... 1,842 1,213 8,151 5,689 5,843 4,046 3,279 3,496
Restructuring charge........... -- -- -- -- -- -- -- 9,427(7)
Operating profit (loss)........ 10,476 3,914 31,137 20,976 16,649 13,789 304 (5,021)
Interest expense, net.......... 3,443 363 6,410 4,581 2,771 2,437 2,532 2,115
Other (income) expense, net.... (170) 172 (740) (497) 446 1,054 (2,280)(6) 186
(Gain) on sale of assets....... -- -- -- -- -- -- -- (3,070)(8)
Income (loss) before taxes..... 7,203 3,379 25,467 16,892 13,412 10,298 52 (4,252)
Net income (loss).............. 4,394 2,128 16,622 11,126 8,641 6,230 31 (5,075)
PER SHARE DATA:
Earnings (loss) per common share
and common share equivalents:
Primary........................ $ 0.76 $ 0.38 $ 2.32 $ 1.96 $ 1.64 $ 1.27 $ 0.01 $ (1.05)
Fully diluted.................. $ 0.75 $ 0.38 $ 2.31 $ 1.95 $ 1.60 $ 1.23 $ 0.01 $ (1.05)
Pro forma......................
Weighted average shares
outstanding:
Primary........................ 5,792 5,638 7,174 5,674 5,282 4,888 4,704 4,818
Fully diluted.................. 5,839 5,638 7,199 5,699 5,484 5,242 4,738 4,818
Dividends per common share:...... $ 0.05 $ 0.05 $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1995
-----------------------------
AS
ACTUAL ADJUSTED(9)
------------- ---------
<S> <C> <C>
BALANCE SHEET DATA:
(at end of period)
Working capital....................................................................... $ 32,118 $ 82,118
Total assets.......................................................................... 369,922 369,922
Long-term debt........................................................................ 122,759 124,309
Total stockholders' equity............................................................ 104,771 153,221
</TABLE>
- ---------------
See footnotes on following page.
6
<PAGE> 9
Footnotes for prior page.
(1) The unaudited pro forma combined statement of operations data gives effect
to the following transactions as if they had occurred at January 1, 1994:
(i) the Nobel/Profarmaco Acquisition, (ii) the Seal Sands Acquisition and
(iii) the consummation of this Offering (at an assumed public offering price
of $34.00 per share) and the application of the net proceeds therefrom and
other funds as described under "Use of Proceeds." See "Pro Forma Combined
Financial Information" for additional pro forma information concerning the
Company, including pro forma income statement information only giving effect
to the Nobel/Profarmaco Acquisition and the Seal Sands Acquisition.
(2) Includes the results of the Company's Seal Sands and Nobel/Profarmaco
businesses from their respective dates of acquisition, January 31, 1994 and
October 12, 1994, through December 31, 1994. See "Business -- Growth
Strategy -- External Growth."
(3) Includes the results of the Company's fiber optic gel business acquired from
Viscosity Oil from March 12, 1993, the date of acquisition, through December
31, 1993.
(4) Includes the results of the Company's Zeeland business from March 31, 1992,
the date of acquisition, through December 31, 1992. See "Business -- Growth
Strategy -- External Growth."
(5) Includes the results of the Company's Salsbury business from July 1, 1991,
the date of acquisition, through December 31, 1991.
(6) Includes $2.8 million of income related to the reduction of accruals
previously established in connection with the disposition of certain product
lines.
(7) The Company recorded a $9.4 million restructuring charge in 1990 consisting
of write-offs and write-downs of certain tangible and intangible assets, and
personnel severance costs relating to the abandonment and discontinuance of
certain nonperforming products and product lines.
(8) The Company recorded a $3.1 million gain in 1990 in connection with the sale
of the intellectual property and commercial rights to its organic biocides,
driers, and flocculants businesses.
(9) The unaudited consolidated balance sheet data as of March 31, 1995, has been
adjusted to give effect to the Offering as if it had occurred at March 31,
1995 (at an assumed public offering price of $34.00 per share) and the
application of the net proceeds therefrom and other funds as described under
"Use of Proceeds."
7
<PAGE> 10
RISK FACTORS
In addition to the other information in this Prospectus, an investor should
consider the following factors carefully before purchasing the shares of Common
Stock offered by this Prospectus.
ABILITY TO CONTINUE ACQUISITIONS PROGRAM;
ABILITY TO INTEGRATE ACQUIRED BUSINESSES
Over the past five years, the Company has achieved growth principally
through acquisitions, and will continue to review acquisition opportunities in
the future. See "Business -- Growth Strategy -- External Growth." There can be
no assurance, however, that the Company will be able to continue to acquire
businesses on satisfactory terms.
The Company's acquisition of Profarmaco Nobel S.r.l. ("Profarmaco") and
Nobel Chemicals A.B. ("Nobel," and, together with Profarmaco,
"Nobel/Profarmaco") from Akzo Nobel A.B. (the "Nobel/ Profarmaco Acquisition")
is the Company's most recent acquisition and its largest completed to date. As
more fully described under "Business -- Growth Strategy -- External Growth," the
Company believes that the Nobel/Profarmaco Acquisition has better positioned it
to take advantage of growth opportunities in its Health and Pharmaceuticals and
Specialty and Fine Chemicals product categories and to increase sales of its
products outside of the United States. There can be no assurance, however, that
the Company's expectations for the performance of the Nobel/Profarmaco
businesses will be met or that certain industry trends upon which the Company
sought to capitalize in acquiring these businesses will continue. In addition,
although the Company believes that operating synergies can be achieved in
connection with the Nobel/Profarmaco Acquisition and does not foresee any major
difficulties in integrating Nobel/Profarmaco into its existing organizational
structure, there can be no assurance that such synergies will be achieved or
that such integration can be accomplished within a reasonable time period and
without diversion of management resources. Such integration also will require
the Company to continue the improvement of financial control systems and the
hiring of additional finance personnel which is currently in progress.
POSSIBLE COSTS AND LIABILITIES RELATING TO ENVIRONMENTAL MATTERS
Production of many of the Company's chemicals involves the use, storage,
transportation and disposal of toxic and hazardous materials. The Company's
operations are subject to extensive international and United States federal,
state and local laws and regulations relating to the storage, handling,
emission, transportation and discharge of materials into the environment and the
maintenance of safe conditions in the workplace.
The Company's acquisitions were made subject to known environmental
conditions. Also, risks of substantial costs and liabilities are inherent in
certain plant operations and certain products produced at the Company's plants,
as they are with other companies engaged in the chemical business, and there can
be no assurance that significant costs and liabilities will not be incurred.
Additionally, prevailing legislation and common law tends to hold chemical
companies primarily responsible for the proper disposal of their chemical wastes
even if transferred to third party waste disposal facilities. Moreover, other
future developments, such as increasingly strict environmental, safety and
health laws and regulations, and enforcement policies thereunder, could result
in substantial costs and liabilities to the Company and could subject the
Company's handling, manufacture, use, reuse, or disposal of substances or
pollutants at its plants to more rigorous scrutiny than at present.
The Company is involved in several claims, litigations, administrative
proceedings and investigations relating to environmental matters. The ultimate
extent of liabilities with respect to such matters as well as the timing of
related cash disbursements cannot be determined with certainty. The Company has
accrued in the past amounts ranging from $0 to $3.2 million in a given year for
these matters and anticipates an amount in this range will be necessary in 1995.
Management is of the opinion that while the ultimate liability resulting
from these matters may have a material adverse effect on the results of
operations of the Company in any given year, they will not have a material
adverse effect upon the Company's liquidity or financial position. There can be
no assurance,
8
<PAGE> 11
however, that this will be the case. See "Business -- Manufacturing Facilities,"
"Business -- Environmental and Safety Regulations," "Business -- Legal
Proceedings" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Environmental."
DISRUPTIONS IN AVAILABILITY AND PRICE OF RAW MATERIALS
The Company uses significant amounts of castor oil and compounds derived
from petrochemical feedstocks in manufacturing a number of its products. See
"Business -- Raw Materials." Castor oil, which is not produced in the United
States, is an agricultural product the market price of which is affected by
natural factors relating to the castor bean crop from which the oil is produced.
Castor oil is produced commercially in a few foreign countries, with India
currently being the largest exporter. The Company maintains a substantial supply
of castor oil and has the ability to reduce its bulk sales of low margin castor
oil derivatives to divert supply of castor oil to production of higher margin
products. Notwithstanding periodic efforts by castor oil producing countries to
impose substantial price increases, the Company has been able to obtain adequate
supplies of castor oil generally at acceptable prices in the past and expects to
be able to do so in the future. There can be no assurance, however, that
adequate supplies of castor oil will continue to be available on this basis.
Recent price increases in certain compounds derived from petrochemical
feedstocks and used by the Company in the production of pyridine and its
co-product, beta-picoline, adversely affected the Company's operating margin for
such products in 1994 and the first quarter of 1995, as the Company was not able
to fully pass on such price increases to its customers. Although the price of
one such petrochemical feedstock has decreased in 1995 as compared to fourth
quarter 1994, others remained level and such decreases have not been sufficient
to restore the Company's previous operating margins on these products. There can
be no assurance that future price changes will not adversely affect the
Company's operating results. See "Business -- Raw Materials" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
First Quarter 1995 Compared to First Quarter 1994" and "-- 1994 Compared to
1993."
CURRENCY AND OTHER RISKS ATTENDANT TO EXPANSION OF
INTERNATIONAL OPERATIONS
As a result of the Nobel/Profarmaco Acquisition and the Company's
acquisition of the Seal Sands business from Hexcel Chemical Products Limited
(the "Seal Sands Acquisition"), the Company has substantial assets located
outside of the United States and a substantial portion of the Company's sales
and earnings are attributable to operations conducted abroad and to export
sales. See "Business -- Growth Strategy -- External Growth." In the first
quarter 1995, approximately 53% of the Company's assets were located in Europe,
and approximately 34% of the Company's gross revenues consisted of sales made
outside the United States, predominantly in Western Europe, with the balance
principally in Asia and Latin America. This expansion of the Company's
international operations subjects the Company to certain risks, including
increased exposure to currency exchange rate fluctuations. The Company has
retained the services of an outside consulting firm to assist it in developing
systems to better manage and control its currency risk exposure. The Company's
growing international operations also subject it to certain other risks,
including adverse political or economic developments in the foreign countries in
which it conducts business, foreign governmental regulation, dividend
restrictions, tariffs, and potential adverse tax consequences, including payment
of taxes in jurisdictions that have higher tax rates than does the United
States. Although the Company's export sales business has generally been
profitable in the past and Nobel/Profarmaco has conducted business outside of
the United States for many years prior to its acquisition by the Company, there
can be no assurance that one or more of these factors will not have a material
adverse effect on the Company's financial position or results of operations in
the future. See "Business -- International Operations."
RELIANCE ON CONTINUED OPERATION AND SUFFICIENCY
OF MANUFACTURING FACILITIES
The Company's revenues are dependent on the continued operation of its
various manufacturing facilities. Although presently all operating plants are
considered to be in good condition, the operation of manufacturing
9
<PAGE> 12
plants involves many risks, including the breakdown, failure or substandard
performance of equipment, the improper installation or operation of equipment,
extreme weather conditions, and natural disasters. The occurrence of material
operational problems, including but not limited to the above events, may
adversely affect the profitability of a particular manufacturing facility or the
Company as a whole during the period of such operational difficulties. The
Company's pyridine and arsenical feed additive product groups are each
manufactured at a single facility, and production would not be transferrable to
another site. See "Business -- Manufacturing Facilities."
In addition, compliance with governmental laws and regulations, including
environmental laws and regulations, requires the Company to obtain permits
issued by appropriate foreign, federal, state and local regulatory agencies.
Permits generally require periodic renewal or review of their conditions and
public comment is often solicited in the permitting process. The Company cannot
predict whether it will be able to obtain all necessary permits or renew all
existing permits, or whether material changes in permit conditions will be
imposed or material public opposition will surface. Failure to obtain or renew
certain permits could result in the shutdown of certain facilities or the
imposition of significant fines.
NEPERA RELEASES
Nepera, Inc. ("Nepera"), the Company's subsidiary located in Harriman and
Woodbury, New York, manufactures the chemical pyridine and its derivatives, and
is the Company's sole manufacturer of these products. See
"Business -- Manufacturing Facilities." These chemicals are characterized by a
malodorous nature at extremely low concentrations. Since February of this year
Nepera has experienced several accidental releases of these chemicals. There has
been some disruption of neighborhood activities, a few reports of physical
discomfort and irritation by people in the vicinity of the releases, and a
number of inquiries regarding the releases by governmental officials. In
cooperation with local officials, the Company has accelerated its program to
improve its community early alert system and its communication with local
officials and community leaders, to upgrade its fence line monitoring equipment,
and to continue to enhance its equipment and maintenance activities. The planned
improvements are anticipated to require approximately $1 million in capital
spending. While the Company believes these occurrences to be a series of
unrelated events, there can be no assurance that similar events will not recur
or that these events will not result in litigation against the Company or
limitations on the Company's future operations. The Nepera facility operates
under a number of permits, including a permit issued under the zoning laws of
the Town of Woodbury, which expires in October 1995.
RELIANCE ON KEY MANAGEMENT
The Company is dependent on its senior management and on the senior
management of its operating companies. There can be no assurance that the
Company will be able to retain the services of its executive officers and other
key managers. The loss of key managers could have an adverse effect on the
Company's financial position or results of operations. See "Management."
Under the terms of the Credit Agreement dated as of September 21 1994 among
the Company and a syndicate of lenders with NBD Bank, N.A., as Agent, it is an
event of default for certain senior members of the Company's management to cease
to hold their offices; provided, that no event of default shall occur if such
cessation of employment shall be due to death, disability or voluntary
retirement, and successor officers acceptable to the Agent and the other lenders
shall have been appointed and taken office within a specified period of time.
There can be no assurance that any such future changes in the Company's senior
management would be acceptable to the Agent and the other lenders under the
Credit Agreement.
NOTICE OF TAX DEFICIENCY
The Company received a notice of deficiency in May 1995 from the Internal
Revenue Service (the "IRS") covering the years 1988 through 1990. The asserted
deficiency would result in an increase in the Company's federal income tax
liability for the years 1988 through 1990 of approximately $1.9 million
(including asserted penalties and interest). In addition, the Company's Federal
income tax returns for the
10
<PAGE> 13
years 1991 through 1993 are currently under audit by the IRS. The ultimate
extent of the Company's liability with respect to these matters cannot be
predicted with certainty. However, management is of the opinion that the
Company's ultimate liability resulting from these matters will not have a
material adverse effect upon results of operations in any given year or upon the
Company's liquidity or its financial position. See "Business -- Tax Matters."
DETERRENT EFFECT OF TAKEOVER PROVISIONS
The Company's Restated Certificate of Incorporation and By-laws contain
certain provisions that could make more difficult the acquisition of the Company
by means of a tender offer, proxy contest or otherwise. These provisions
include: (i) a classified board of directors; (ii) advance notice procedures for
stockholders to nominate candidates for election as directors of the Company and
with regard to certain matters to be brought before an annual meeting of
stockholders of the Company; (iii) special voting requirements for removal of
directors and for amendment of certain provisions of the Restated Certificate of
Incorporation and the By-laws; and (iv) authorization of the Series Preferred
Stock of the Company, the powers, preferences, and rights of which are fixed by
the Board of Directors. In addition, the Company is subject to Section 203 of
the Delaware General Corporation Law, which limits transactions between a
publicly held company and "interested stockholders" (generally, those
stockholders who, together with their affiliates and associates, own 15% or more
of a company's outstanding capital stock). This provision of Delaware law also
may have the effect of deterring certain potential acquisitions of the Company.
See "Description of Capital Stock -- Delaware Law."
POSSIBLE EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE
ON MARKET PRICE OF COMMON STOCK
Upon consummation of the Offering, the Company will have outstanding
7,010,102 shares of Common Stock, all of which will be freely transferable
without restriction or further registration under the Securities Act of 1933, as
amended (the "Securities Act"), except for shares held by affiliates. The
Company and certain of its stockholders, officers and directors have agreed not
to offer, pledge, sell, contract to sell or otherwise dispose of any shares of
Common Stock or securities convertible into or exchangeable or exercisable for
shares of Common Stock, except in certain circumstances, for 90 days after the
date of this Prospectus without the prior written consent of Morgan Stanley &
Co. Incorporated. See "Underwriters." Following the Offering, sales or the
expectation of sales of substantial numbers of shares of Common Stock in the
public market could adversely affect the prevailing market price for the Common
Stock.
11
<PAGE> 14
THE COMPANY
Cambrex Corporation, in business since 1981, manufactures a broad line of
specialty and fine chemicals for a wide variety of end use markets. The
Company's operations are conducted in five product categories: (i) Health and
Pharmaceuticals; (ii) Specialty and Fine Chemicals; (iii) Agricultural
Intermediates and Additives; (iv) Performance Chemicals; and (v) Coatings.
During the first quarter of 1995, over 72% of the Company's gross revenues were
attributable to sales of products in its Health and Pharmaceuticals and
Specialty and Fine Chemicals product categories, and over 34% of its gross
revenues consisted of sales made outside the United States. The Company's
products are manufactured at seven facilities located in the United States and
three facilities located in Europe.
Since 1990, when the Company substantially strengthened its management
team, Cambrex has sought to optimize returns from its existing businesses while
identifying and capitalizing on new business opportunities within its diverse
product categories that offer the most favorable prospects for growth. The
Company is currently focused on opportunities for growth in its Health and
Pharmaceuticals and Specialty and Fine Chemicals product categories, which the
Company believes offer opportunities to manufacture and sell higher margin
products. In January of 1994, the Company completed the Seal Sands Acquisition
and in October of 1994, it completed the Nobel/Profarmaco Acquisition, thereby
substantially expanding its Health and Pharmaceuticals and Specialty and Fine
Chemicals businesses. The Company believes that the continuation of a variety of
recent trends, including an increase in outsourcing by chemical and
pharmaceutical companies, will impact these product categories favorably. In
addition, increased use of generic drugs and certain demographic factors are
expected to enable the Company to expand its sales of bulk actives and
pharmaceutical intermediates for use in prescription and over-the-counter
pharmaceuticals. The Company also believes that the Nobel/Profarmaco Acquisition
offers it important growth opportunities in these categories by increasing its
market presence in Europe, thereby positioning it to increase sales of its
products outside of the United States.
Since 1990, the Company has experienced significant growth in sales and
earnings, due primarily to acquisitions, productivity enhancements and new
product developments. The Company's net revenues for the year ended December 31,
1994 were approximately $242 million, and have grown since 1990 at a compounded
annual growth rate ("CAGR") of approximately 13%. The Company's net income for
the year ended December 31, 1994 was approximately $11 million, and has grown by
at least 25% each year since 1990.
The Company was founded in 1981 by Cyril C. Baldwin, Jr., the current
Chairman of the Company's Board of Directors, and Arthur Mendolia, a former
Chairman of the Company's Board. The Company's principal executive offices are
located at One Meadowlands Plaza, East Rutherford, N.J. 07073, and its telephone
number is (201) 804-3000.
12
<PAGE> 15
USE OF PROCEEDS
The Company intends to use the net proceeds of the Offering, together with
funds borrowed under its revolving credit facility, to repay amounts due under a
$50 million bridge loan (the "Bridge Loan"), due October 11, 1995, extended to
the Company pursuant to the Credit Agreement (the "Credit Agreement") dated as
of September 21, 1994 among the Company and a syndicate of lenders with NBD
Bank, N.A., as Agent. The Company applied the proceeds of the Bridge Loan to the
funding of the Nobel/Profarmaco Acquisition. See "Business -- Growth
Strategy -- External Growth." The Credit Agreement permits the Company to choose
between various interest rate options for the Bridge Loan: (i) U.S. prime rate
plus the applicable margin (ranging from 1/2 of 1% to 2%); or (ii) LIBOR plus
the applicable margin (ranging from 1/2 of 1% to 2%). The Bridge Loan currently
bears interest at a rate of 7.3%.
COMMON STOCK PRICE RANGE AND DIVIDENDS
The Common Stock is listed for trading on the American Stock Exchange under
the symbol "CBM." The following table sets forth the closing high and low sale
prices of the Common Stock as reported on the American Stock Exchange for the
fiscal periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C> <C>
1992
First Quarter...................................... $11 7/8 $8 3/8
Second Quarter..................................... 13 1/4 10 5/8
Third Quarter...................................... 15 7/8 11 1/4
Fourth Quarter..................................... 18 3/8 14 1/8
1993
First Quarter...................................... 20 1/4 16 3/4
Second Quarter..................................... 19 7/8 18 3/4
Third Quarter...................................... 21 1/4 19 1/4
Fourth Quarter..................................... 20 1/4 19 1/8
1994
First Quarter...................................... 24 1/4 19 7/8
Second Quarter..................................... 22 7/8 20 5/8
Third Quarter...................................... 27 1/8 20 5/8
Fourth Quarter..................................... 26 7/8 23 5/8
1995
First Quarter...................................... 31 1/2 26 5/8
Second Quarter through June 23..................... 35 3/8 31 1/8
</TABLE>
The reported last sale price of the Common Stock on the American Stock
Exchange Composite Tape as of a recent date is set forth on the cover page of
this Prospectus.
As of March 15, 1995, there were 162 holders of record of the outstanding
Common Stock and the Company estimates that, at such date, there were
approximately 1,800 beneficial holders.
Since the fourth quarter of 1989, the Company has paid a regular $.05 per
share quarterly dividend on the Common Stock. Any future payment of dividends is
subject to the discretion of the Company's Board of Directors, which may
consider the Company's earnings and financial condition and such other factors
as it deems relevant. In addition, the Credit Agreement prohibits the payment of
cash dividends in respect of the Company's capital stock, if before such payment
an event of default shall have occurred and be continuing under the Credit
Agreement or if such payment would cause such a default.
13
<PAGE> 16
CAPITALIZATION
The following table sets forth the Company's consolidated short-term debt
and capitalization (i) at March 31, 1995 and (ii) as adjusted to give effect to
(x) the sale by the Company of the 1,500,000 shares of Common Stock offered
hereby (at an assumed offering price of $34.00 per share), and (y) the
application of the net proceeds from the Offering, together with other funds, to
repay the Bridge Loan as described under "Use of Proceeds." The following
information should be read in conjunction with the Company's consolidated
financial statements and notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1995
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Short-term debt (including current portion of long-term debt)
Bridge loan......................................................... $ 50,000 $ --
Lira export financing facility(1)................................... 2,115 2,115
Current portion of long-term debt................................... 4,101 4,101
-------- -----------
Total short-term debt....................................... $ 56,216 $ 6,216
======== =========
Long-term debt (excluding current portion)
Bank credit facilities.............................................. $121,574 $ 123,124
Capitalized leases.................................................. 36 36
Notes payable....................................................... 1,149 1,149
-------- -----------
Total long-term debt........................................ 122,759 124,309
-------- -----------
Stockholders' equity
Common stock -- $.10 par value; 20,000,000 shares authorized;
5,479,963 (actual) and 6,979,963 (as adjusted) issued and
outstanding(2)................................................... 623 773
Additional paid-in capital.......................................... 74,862 123,162
Retained earnings................................................... 40,058 40,058
Treasury common stock at cost, 744,375 shares....................... (9,535) (9,535)
Cumulative translation adjustment................................... (1,237) (1,237)
-------- -----------
Total stockholders' equity.................................. 104,771 153,221
-------- -----------
Total capitalization.................................................. $227,530 $ 277,530
======== =========
</TABLE>
- ---------------
(1) Profarmaco maintains credit facilities with several local banks aggregating
21 billion lira ($13 million) which facilitates export sales and permits
hedging against the associated currency risks. Under such facilities,
Profarmaco, upon making an export sale in a currency other than lira, may
incur a liability wherein the proceeds are denominated in lira and the
obligation for repayment is denominated in the amount of and currency of the
related export sale. The interest rates of such obligations are a function
of the currency in which they are to be repaid.
(2) Does not include shares of Common Stock reserved for issuance upon exercise
of outstanding options granted under the Company's employees' and directors'
stock plans.
14
<PAGE> 17
PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined statement of operations for the
year ended December 31, 1994 has been derived from the audited consolidated
statement of operations of the Company for the year ended December 31, 1994 and
adjusts such information to give effect to the following transactions as if such
transactions had occurred at the beginning of such period: (i) the
Nobel/Profarmaco Acquisition; (ii) the Seal Sands Acquisition; and (iii) this
Offering (at an assumed public offering price of $34.00 per share) and the
application of the net proceeds therefrom and other funds as described under
"Use of Proceeds." In the opinion of management, all adjustments necessary to
present fairly this pro forma financial information have been made.
The pro forma combined statement of operations and accompanying notes
should be read in conjunction with the consolidated financial statements and
related notes thereto appearing elsewhere in this Prospectus. The pro forma
combined statement of operations is presented for informational purposes only
and may not be indicative of the results that actually would have occurred if
such transactions had occurred as indicated or of future results of operations
of the Company.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1994
(in thousands, except per share data)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA % OF PRO FORMA
CAMBREX UNAUDITED ADJUSTMENTS COMBINED COMBINED
CORPORATION ACQUIRED PRO FORMA PRO FORMA GIVING EFFECT AFTER NET REVENUES
AS REPORTED(1) BUSINESSES(2) ADJUSTMENTS COMBINED TO OFFERING OFFERING AFTER OFFERING
-------------- ------------- ----------- --------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues....... $241,634 $86,904 -- $328,538 -- $328,538 100.0%
Gross profit....... 57,881 30,269 $(1,078)(3) 87,072 -- 87,072 26.5%
Selling, general
and
administrative... 31,216 14,112 2,296(3) 47,624 $ 160(7) 47,784 14.5%
Research and
development...... 5,689 2,408 54(4) 8,151 -- 8,151 2.5%
Operating profit
(loss)........... 20,976 13,749 (3,428) 31,297 (160) 31,137 9.5%
Interest expense,
net.............. 4,581 662 5,351(5) 10,594 (4,184)(8) 6,410 2.0%
Other (income)
expense, net..... (497) (243) -- (740) -- (740) (0.2%)
Income (loss)
before taxes..... 16,892 13,330 (8,779) 21,443 4,024 25,467 7.8%
Provision for
income taxes..... 5,766 4,231 (2,544)(6) 7,453 1,392(9) 8,845 2.7%
Net income
(loss)........... $ 11,126 $ 9,099 $(6,235) $ 13,990 $ 2,632 $ 16,622 5.1%
Earnings per common
share and common
share
equivalents:
Primary.......... $ 1.96 $ 2.47 $ 2.32
Fully diluted.... $ 1.95 $ 2.45 $ 2.31
Weighted average
shares
outstanding:
Primary.......... 5,674 5,674 7,174
Fully diluted.... 5,699 5,699 7,199
</TABLE>
- ---------------
(1) Represents the actual consolidated results for the year ended December 31,
1994 as reported in the audited consolidated financial statements of the
Company included elsewhere in this Prospectus. Included in the actual
results for the year are the following amounts pertaining to Seal Sands from
January 31, 1994, and Nobel/Profarmaco from October 12, 1994, their
respective dates of acquisition by the Company:
<TABLE>
<S> <C>
Net revenues $34,424
Gross profit 8,862
Selling, general and administrative 4,113
Research and development 1,107
Operating profit $ 3,642
</TABLE>
(2) Represents the unaudited combined results of operations of Seal Sands from
January 1, 1994 through January 31, 1994 and of Nobel/Profarmaco from
January 1, 1994 through October 12, 1994 derived from the respective
unaudited results of operations of such companies.
(3) Represents additional depreciation and amortization expenses, respectively,
relating to the property, plant and equipment and goodwill acquired in
connection with the Nobel/Profarmaco Acquisition and the Seal Sands
Acquisition that would have been recorded by the Company due to increased
asset values and shorter estimated useful lives.
(4) Represents additional research and development costs assumed to be incurred
by the Company in connection with the Nobel/Profarmaco Acquisition and the
Seal Sands Acquisition.
(5) Represents additional interest expense assumed to be incurred by the Company
in connection with the debt obligations incurred to finance the
Nobel/Profarmaco and Seal Sands Acquisitions, net of the elimination of
intercompany interest income included in the unaudited acquired businesses
column.
(6) The recognition of tax benefit of additional expenses to the extent tax
liabilities could be reduced.
(7) Represents amortization of the approximately $800,000 in costs incurred to
consummate the Offering.
(8) Adjustment to pro forma combined interest expense is calculated by applying
the estimated borrowing rate which would have been offered to the Company
(8%) on the portion of the Bridge Loan repaid with the net proceeds of the
Offering and a decline in the interest rate (due to improved leverage) of
1/4 of 1% on the long-term debt of the Company assumed to be outstanding
after the Offering.
(9) Represents additional income taxes calculated on the increase in taxable
income due to the reduction in interest expense using the Company's
effective tax rate at the end of 1994.
15
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The table below sets forth selected consolidated financial data for the
Company for each of the years in the five-year period ended December 31, 1994
and for the three-month periods ended March 31, 1995 and March 31, 1994. The
consolidated financial statements of the Company as of December 31, 1994 and
December 31, 1993 and for each of the years in the three-year period ended
December 31, 1994 and the accountants' report thereon and unaudited consolidated
financial statements of the Company as of March 31, 1995 and for the three-month
periods ended March 31, 1995 and March 31, 1994 are included elsewhere in this
Prospectus. In the opinion of management, the unaudited interim consolidated
financial statements have been prepared on a basis consistent with the audited
consolidated financial statements and contain all adjustments necessary to
present fairly the results of operations for such periods and financial
positions at the end of such periods. However, the results of the three-month
period ended March 31, 1995 are not necessarily indicative of results for the
whole year. Moreover, the selected consolidated financial information is not
necessarily indicative of the results of future operations of the Company. The
information presented below should be read in conjunction with the financial
statements of the Company and the notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
--------------------- -------------------------------------------------------------
1995 1994 1994(1) 1993(2) 1992(3) 1991(4) 1990
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME DATA:
Net revenues.......................... $ 93,389 $ 51,047 $241,634 $197,203 $179,452 $144,500 $133,628
Gross profit.......................... 24,485 11,403 57,881 51,778 46,036 26,326 28,730
Selling, general and administrative... 12,167 6,276 31,216 29,286 28,201 22,743 20,828
Research and development.............. 1,842 1,213 5,689 5,843 4,046 3,279 3,496
Restructuring charge.................. -- -- -- -- -- -- 9,427(6)
Operating profit (loss)............... 10,476 3,914 20,976 16,649 13,789 304 (5,021)
Interest expense, net................. 3,443 363 4,581 2,771 2,437 2,532 2,115
Other (income) expense, net........... (170) 172 (497) 446 1,054 (2,280)(5) 186
(Gain) on sale of assets.............. -- -- -- -- -- -- (3,070)(7)
Income (loss) before taxes............ 7,203 3,379 16,892 13,412 10,298 52 (4,252)
Net income (loss)..................... 4,394 2,128 11,126 8,641 6,230 31 (5,075)
PER SHARE DATA:
Earnings (loss) per common share and
common share equivalents:
Primary............................... $ 0.76 $ 0.38 $ 1.96 $ 1.64 $ 1.27 $ 0.01 $ (1.05)
Fully diluted......................... $ 0.75 $ 0.38 $ 1.95 $ 1.60 $ 1.23 $ 0.01 $ (1.05)
Weighted average shares outstanding:
Primary............................... 5,792 5,638 5,674 5,282 4,888 4,704 4,818
Fully diluted......................... 5,839 5,638 5,699 5,484 5,242 4,738 4,818
Dividends per common share:............. $ 0.05 $ 0.05 $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20
BALANCE SHEET DATA:
(at end of period)
Working capital....................... $ 32,118 $ 45,109 $ 19,925(8) $ 38,497 $ 35,852 $ 31,359 $ 39,408
Total assets.......................... 369,922 180,225 360,477 166,845 148,406 111,603 110,149
Long-term debt........................ 122,759 45,770 115,975 36,261 39,808 19,021 18,490
Total stockholders' equity............ 104,771 90,162 101,966 87,569 75,177 68,717 69,204
</TABLE>
- ---------------
(1) Includes the results of the Company's Seal Sands and Nobel/Profarmaco
businesses from their respective dates of acquisition, January 31, 1994 and
October 12, 1994, through December 31, 1994. See "Business -- Growth
Strategy -- External Growth."
(2) Includes the results of the Company's fiber optic gel business acquired from
Viscosity Oil from March 12, 1993, the date of acquisition, through December
31, 1993.
(3) Includes the results of the Company's Zeeland business from March 31, 1992,
the date of acquisition, through December 31, 1992. See "Business -- Growth
Strategy -- External Growth."
(4) Includes the results of the Company's Salsbury business from July 1, 1991,
the date of acquisition, through December 31, 1991. See "Business -- Growth
Strategy -- External Growth."
(5) Includes $2.8 million of income related to the reduction of accruals
previously established in connection with the disposition of certain product
lines.
(6) The Company recorded a $9.4 million restructuring charge in 1990 consisting
of write-offs and write-downs of certain tangible and intangible assets, and
personnel severance costs relating to the abandonment and discontinuance of
certain nonperforming products and product lines.
(7) The Company recorded a $3.1 million gain in 1990 in connection with the sale
of the intellectual property and commercial rights to its organic biocides,
driers, and flocculants businesses.
(8) The decrease in working capital is mainly due to the incurrence of the $50
million Bridge Loan. See "Use of Proceeds."
16
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from the selected consolidated financial information as a percentage of net
revenues.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
--------------- -------------------------
1995 1994 1994 1993 1992
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues....................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit....................................... 26.2 22.3 24.0 26.3 25.7
Selling, general and administrative................ 13.0 12.3 12.9 14.9 15.7
Research and development........................... 2.0 2.4 2.4 3.0 2.3
Operating profit................................... 11.2 7.7 8.7 8.4 7.7
Interest expense................................... 3.7 0.7 1.9 1.4 1.4
Other (income) expense, net........................ (0.2) 0.3 (0.2) 0.2 0.6
Net income......................................... 4.7 4.2 4.6 4.4 3.5
</TABLE>
The Company's product mix has changed substantially over the periods
indicated, principally as a result of acquisitions. See "Business -- Growth
Strategy -- External Growth." The following tables show, for the periods
indicated, the gross revenues of the Company's five product categories, in
dollars and as a percentage of the Company's total gross revenues.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- ----------------------------------
1995 1994(1) 1994(2) 1993(3) 1992(4)
------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
GROSS REVENUES
Health and Pharmaceuticals........... $47,322 $ 14,238 $ 74,163 $ 55,550(5) $ 59,167
Specialty and Fine Chemicals......... 22,020 13,280 66,548 48,841 37,623
Agricultural Intermediates and
Additives.......................... 15,306 13,914 59,751 51,153 49,120
Performance Chemicals................ 7,220 7,341 31,769 30,880 20,441
Coatings............................. 4,210 4,014 17,452 16,884 18,527
------- -------- -------- -------- --------
Total gross revenues............... $96,078 $ 52,787 $249,683 $203,308 $184,878
======= ======== ======== ======== ========
Total net revenues................. $93,389 $ 51,047 $241,634 $197,203 $179,452
======= ======== ======== ======== ========
Total gross profit................. $24,485 $ 11,403 $ 57,881 $ 51,778 $ 46,036
======= ======== ======== ======== ========
</TABLE>
- ---------------
(1) Revenues from the Seal Sands Acquisition, in January 1994, are included from
the date of acquisition.
(2) Revenues from the Seal Sands Acquisition in January 1994, and the
Nobel/Profarmaco Acquisition in October 1994, are included from the date of
acquisition.
(3) Revenues from Viscosity Oil's fiber optic gel business, acquired in March
1993, are included from the date of acquisition.
(4) Revenues from Zeeland, acquired in March 1992, are included from the date of
acquisition.
(5) Decreases from 1992 to 1993 in gross revenues in the Company's Health and
Pharmaceuticals product category resulted from unusually high sales of a
bulk pharmaceutical in 1992, and from reduced shipments of niacinamide
(Vitamin B3) intermediates to the Asia-Pacific region due to economic
problems and increased competition.
17
<PAGE> 20
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------ -------------------------------
1995 1994 1994 1993 1992
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
GROSS REVENUES DISTRIBUTION
Health and Pharmaceuticals........... 49.3% 27.0% 29.7% 27.3% 32.0%
Specialty and Fine Chemicals......... 22.9 25.1 26.7 24.0 20.3
Agricultural Intermediates and
Additives.......................... 15.9 26.4 23.9 25.2 26.6
Performance Chemicals................ 7.5 13.9 12.7 15.2 11.1
Coatings............................. 4.4 7.6 7.0 8.3 10.0
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
FIRST QUARTER 1995 COMPARED TO FIRST QUARTER 1994
Results in the first quarter of 1995 were significantly better than the
first quarter of 1994 due to the Nobel/Profarmaco Acquisition in October 1994,
and to the improvements in the base business. The impact of these is shown in
the table below:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
----------------------------------------------------
ACQUIRED
BUSINESSES BASE BUSINESS
1995 1995 1995 1994
------- ---------- ------------- -------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
(UNAUDITED)
Net revenue.................................... $93,389 $ 35,866 $57,523 $51,047
Operating expenses
Cost of goods sold........................... 68,904 25,613 43,291 39,644
Selling, general and administrative.......... 12,167 3,820 8,347 6,276
Research and development..................... 1,842 724 1,118 1,213
------- ---------- ------------- -------
Total operating expenses....................... 82,913 30,157 52,756 47,133
------- ---------- ------------- -------
Operating profit............................... 10,476 5,709 4,767 3,914
Other (income) expenses:
Interest income.............................. (177) (166) (11) --
Interest expense............................. 3,620 3,059 561 363
Other -- net................................. (170) (200) 30 172
------- ---------- ------------- -------
Income before income taxes..................... 7,203 3,016 4,187 3,379
Provision for income taxes..................... 2,809 1,296 1,513 1,251
------- ---------- ------------- -------
Net income..................................... 4,394 1,720 2,674 2,128
======= ======== ========== =======
</TABLE>
Net revenues for the first quarter 1995 increased 83% to $93,389,000 from
$51,047,000 reported in the first quarter 1994. The $42,342,000 increase was due
to the acquisitions of Nobel in Sweden and Profarmaco in Italy, and to increased
sales in the Specialty and Fine Chemicals and Agricultural Intermediates and
Additives categories. The table below shows the contribution of the
Nobel/Profarmaco Acquisition to the product categories and changes in the base
business.
18
<PAGE> 21
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-----------------------------------------------
NOBEL/ BASE
PROFARMACO BUSINESS
1995 1995 1995 1994
-------- ---------- ------- -------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Health & Pharmaceuticals.......................... $ 47,322 $ 32,682 $14,640 $14,238
Specialty & Fine Chemicals........................ 22,020 4,004 18,016 13,280
Agricultural Intermediates & Additives............ 15,306 -- 15,306 13,914
Performance Chemicals............................. 7,220 -- 7,220 7,341
Coatings.......................................... 4,210 -- 4,210 4,014
-------- ---------- ------- -------
Total gross revenues.................... $ 96,078 $ 36,686 $59,392 $52,787
======= ======== ======= =======
Total net revenues...................... $ 93,389 $ 35,866 $57,523 $51,047
======= ======== ======= =======
</TABLE>
Health and Pharmaceuticals' revenues increased $33,084,000 of which Nobel
and Profarmaco contributed sales of $32,682,000. Revenues from the base business
had increases in sales from a pharmaceutical used for ulcerative colitis and
from the introduction of a bulk intermediate for dextromephorphan, an over-the-
counter cough suppressant. These increases more than offset the $1,500,000 in
lost sales from the Company's Hydrogels and Wicken cosmetic lines which were
divested late in 1994.
Specialty and Fine Chemicals' revenues increased $8,740,000 (66%) over the
first quarter 1994. The Nobel/Profarmaco Acquisition accounted for $4,004,000 of
this increase. Revenues from the base business increased $4,736,000 (36%) from
first quarter 1994. This was due to an increase in several fine chemical
products including sales of a dye receptor in acrylic yarns, cross-linking
agents to improve the performance of polycarbonate resins, a polymer used in
instant film, a tin based catalyst used in silicone caulks and adhesives, and
products used in soaps, lubricants and flavors.
Agricultural Intermediates and Additives revenues increased $1,392,000
(10%) from the first quarter 1994. The increase was due to growth in the
Company's base business, with no contribution from the Seal Sands Acquisition or
the Nobel/Profarmaco Acquisition. Sales of organo-arsenical feed additives used
to control disease and to enhance chicken growth and improve feed performance
increased due to wider market demand. This increase was offset by declines in
sales of feed grade Vitamin B3 and intermediates which decreased due to a
decision to maintain price increases at the expense of lower volume. The sales
of agricultural intermediates products used in the manufacture of herbicides and
insecticides were up $1,561,000 from the first quarter 1994. Sales of pyridine,
the largest item in this group, increased 20% from the first quarter 1994, and
sales of another pyridine compound used in the manufacture of a herbicide
increased 114%, or $1.3 million, from 1994 due to an uneven customer order
pattern.
Performance Chemicals' and Coatings revenues were at the same level as
1994.
Export sales from the U.S. were $7,564,000 in the first quarter 1995 versus
$10,084,000 in the first quarter 1994 mainly due to the reduced shipments of
feedgrade Vitamin B3 and its intermediates. International sales from all
European operations totaled $41,769,000 versus $2,451,000 in the first quarter
1994 due to the Nobel/Profarmaco Acquisition and the Seal Sands Acquisition in
1994.
Gross profit in the first quarter 1995 of $24,485,000 (26.2%) compared to
$11,403,000 (22.3%) in the first quarter 1994. The Nobel/Profarmaco Acquisition
contributed $10,300,000 to the increased gross profit. The base business had an
increase of $2,800,000. The gross profit percentage of the base business
increased to 24.7% versus 22.3% in 1994. Improved pricing added $2,400,000 to
the base business' gross profit; and sales volume increases added $700,000.
Costs decreased $1,700,000 due to improved plant efficiencies. The improvement
in plant efficiencies was due to a return to more normal weather conditions
compared to the extremely low temperatures encountered in the first quarter of
1994. Some of this improvement was offset by $2,000,000 in increased raw
material costs.
19
<PAGE> 22
The price of methanol, which is used in the manufacture of pyridine
products decreased in the first quarter 1995 versus the fourth quarter 1994 but
is above first quarter 1994 levels. See "Business -- Raw Materials."
Selling, general and administrative expenses as a percentage of net
revenues was 15%, which was the same as the first quarter 1994. The marketing
and research and development expenses as a percentage of net revenues decreased
particularly in the Company's Agricultural Intermediates and Additives and
Performance Chemicals business areas. These decreases were offset by increases
in administrative expenses associated with the Nobel/Profarmaco Acquisition.
Net interest expense of $3,443,000 in the first quarter 1995 increased
$3,080,000 over 1994. This increase was due to the additional borrowing for
acquisitions and an increase in the interest rate of approximately 2%.
The provision for income taxes for the first quarter 1995 resulted in an
effective tax rate of 39% versus 37% in 1994. This increase was due to higher
effective tax rates attributable to the Company's Profarmaco operation in Italy.
The Company's net income increased 106% to $4,394,000 compared with a net
income of $2,128,000 in the first quarter 1994.
1994 COMPARED TO 1993
Net revenues in 1994 increased $44,431,000 (22.5%) due to the Seal Sands
Acquisition and the Nobel/ Profarmaco Acquisition, and to increased sales of
animal feed additives. The table below shows the contribution of the
acquisitions to the product categories and the changes in the continuing
business.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
ACQUIRED BASE
BUSINESSES BUSINESS
1994 1994 1994 1993
---------- ------------ -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Health and Pharmaceuticals..................... $ 74,163 $ 17,093 $ 57,070 $ 55,550
Specialty and Fine Chemicals................... 66,548 17,710 48,838 48,841
Agricultural Intermediates and Additives....... 59,751 -- 59,751 51,153
Performance Chemicals.......................... 31,769 -- 31,769 30,880
Coatings....................................... 17,452 -- 17,452 16,884
---------- ------------ -------- --------
Gross revenues....................... $249,683 $ 34,803 $214,880 $203,308
======== ========= ======== ========
</TABLE>
Health and Pharmaceuticals' revenues increased $18,613,000 (33.5%), with
major increases in bulk pharmaceuticals and in pharmaceutical intermediates. The
Nobel/Profarmaco Acquisition in October 1994 added $16,400,000 of new product
sales to Cambrex.
Sales of bulk pharmaceuticals represented $24,300,000, or 33%, of this
category's 1994 gross revenues and were $14,600,000 higher than 1993, with the
Nobel/Profarmaco Acquisition adding $12,400,000 in new products. Increased sales
also came from a generic drug for ulcerative colitis, which recovered from
depressed levels in 1993.
Sales of pharmaceutical intermediates represented $24,500,000, or 33%, of
this category's 1994 revenues and were $9,900,000 higher than 1993. The
Nobel/Profarmaco Acquisition contributed $3,400,000 in increased sales. The key
increase of existing business was due to growth in two intermediates for
dextromephorphan, an over-the-counter cough suppressant. Growth for one
intermediate, an established product, was supplemented by sales under a contract
for a second intermediate used in the synthesis of this material.
Sales of cosmetic and toiletry related compounds represented $19,700,000,
or 27%, of this category's 1994 revenues and were $3,000,000 lower than 1993.
The main decrease of $1,800,000 in sales was due to the end of a contract to
make citrates at the Company's Zeeland, Michigan facility. Sales of pyridine
based products totaled $5,600,000 in 1994 and were $600,000 lower than the prior
year due to reduced pricing and lower sales volume to a key customer in the
United States caused by competitive pressure.
20
<PAGE> 23
Sales of Vitamin B3 and its chemical precursors represented $5,600,000, or
7%, of this category's 1994 revenues and were $2,900,000 lower than 1993. These
decreases were due to reduced shipments of Vitamin B3 and its chemical
precursors to customers worldwide, due to price competition.
Sales of Specialty and Fine Chemicals increased by $17,707,000 (36.3%).
That increase included $14,400,000 from the Seal Sands Acquisition and
$3,300,000 from the Nobel/Profarmaco Acquisition. One of the Seal Sands
products, used in the manufacture of high performance plastics, accounted for
35% of their sales.
Sales of specialty additive products represented $29,900,000, or 45%, of
this category's 1994 revenues and were $16,600,000 higher than 1993. The
increase includes $13,700,000 in sales attributable to the Seal Sands
Acquisition. In existing operations, increases occurred in an application for a
product used as a dye receptor in acrylic yarns.
Sales of organic intermediate products represented $13,600,000, or 20%, of
this category's 1994 revenues and were $2,800,000 higher than 1993. This
increase is attributable to $2,400,000 in sales of new products from the
Nobel/Profarmaco Acquisition.
Sales of photographic chemical products were $11,600,000, or 17%, of this
category's 1994 revenues, $2,100,000 lower than 1993. The decrease was in sales
of a polymer used in instant film, due to our customer reaching their desired
inventory levels, and in export sales of a photographic chemical intermediate to
a Japanese company. The Company expects sales levels to continue to decline in
1995.
Sales of catalyst products represented $10,400,000, or 16%, of this
category's 1994 revenues and were $600,000 higher than 1993. The increase is
primarily attributable to tin based catalysts used in various industrial
applications.
Revenues from Agricultural Intermediates and Additives increased by
$8,598,000 (16.8%). The increase was due to growth in the Company's existing
business, with no contribution from the Seal Sands Acquisition and the
Nobel/Profarmaco Acquisition.
The sales of animal feed additives were $36,000,000, or 60%, of this
category's 1994 revenues, up $7,600,000 from 1993. Sales of organo-arsenical
feed additives used to control disease and to enhance chicken growth and improve
feed performance, increased 25% over the prior year due to growth in poultry
production coupled with the customer's penetration of domestic and international
markets. All sales of this product are made to A.L. Laboratories under a
long-term contract. Sales of feed grade Vitamin B3 increased due to the
installation of new packaging facilities late in 1993 which allowed penetration
of non-U.S. markets. Shipments of Vitamin B3 intermediates to India and the
Asia/Pacific area also increased. While volume increased, the feed grade Vitamin
B3 market experienced lower prices due to competitive pricing, adversely
affecting margins on these products. Prices were increased in the fourth quarter
1994 and are anticipated to increase in the first quarter 1995, although no
assurances can be given that such price increases will occur.
The sales of products used in the manufacture of herbicides and
insecticides amounted to $23,800,000, or 40%, of this category's 1994 revenues
and were up 4% from 1993. Sales of pyridine, the largest item in this group,
were up 12% from 1993. The largest pyridine customer is Zeneca, Inc. who uses it
in herbicide manufacture. The Company produces another major pyridine compound
and is the exclusive supplier of this product to Dow Elanco who uses it in
production of a different herbicide. Sales of this compound decreased 21% in
1994 due to the customer reducing inventory levels after very high customer
production in 1993. Sales of other pyridine derivatives in this category
decreased $756,000 from 1993 due to competitive pressures.
Performance Chemicals' sales increased $889,000 (2.9%) from 1993 due to
increases in the fiber optic gel sales which included the full year effect of
sales from the acquisition of a fiber optic gel business in March 1993 and to
increased sealant applications for the biomedical market. All other
telecommunications and adhesive products maintained 1993 sales levels. Price
increases were achieved for most performance chemical products.
Coatings' revenues increased $568,000 (3.4%) from 1993. This increase was
due to a 14% growth in castor oil based products used in coatings for the
housing and automotive industries. The improvement was
21
<PAGE> 24
also due to additional sales to two new customers. These increases were offset
by a tolling agreement for biocides that ended in May 1993, which had 1993 sales
of $800,000.
Export sales increased by $6,839,000, or 18.3%, to $44,135,000. Exports
were 17.7% of gross revenues in 1994 versus 18.3% in 1993. International sales,
comprised of all sales from the Company's operations in Europe, totaled
$34,800,000.
Total gross profit of $57,881,000 increased by $6,103,000, or 11.8%, from
1993. The increased gross profit was principally due to the Nobel/Profarmaco
Acquisition and the Seal Sands Acquisition, and to sales increases in Health and
Pharmaceuticals and Agricultural Intermediates and Additives. The gross profit
as a percent of net revenues declined from 26.3% in 1993 to 24.0% in 1994.
Without the Nobel/Profarmaco Acquisition, the gross profit percent would have
been 23.0% in 1994. Loss of margin was principally due to sales price decreases
and raw material price increases in the pyridine and related businesses, and
higher manufacturing costs due to weather related problems in the first quarter
1994.
Selling, general and administrative expenses as a percentage of net
revenues was 12.9% in 1994, down from 14.9% in 1993. The 1994 expense of
$31,216,000 was $1,930,000 (6.6%) above 1993. The increased operating expenses
of the new acquisitions were mostly offset by reduced spending, including staff
reductions, reduced legal costs, and lower environmental provisions.
Periodically, the Company conducts a comprehensive review of its
environmental and litigation issues, prepares estimates of the range of
potential costs of each issue wherever possible, and adjusts the accruals for
environmental contingencies as circumstances warrant. No additional
environmental provision was recorded in 1994. The 1993 provision was $1,029,000.
A discussion of such matters is included in the footnotes to the financial
statements. A settlement with insurance companies relating to coverage of
environmental remediation costs allowed the Company to recover $1,000,000 of
legal expenses spent in 1993 and 1994, pursuing this recovery.
Research and development expenses of $5,689,000 were 2.4% of net revenues
in 1994, and represented a 2.6% decrease from 1993. Decreased spending at the
Company's Harriman and Bayonne facilities was offset by increased spending at
the Company's other domestic facilities and at the Company's newly acquired
sites in England, Sweden and Italy. This was consistent with the Company's
strategic focus on the Health and Pharmaceuticals and Specialty and Fine
Chemicals product categories.
The operating profit in 1994 increased 26.0% to $20,976,000 from
$16,649,000 in 1993. The increased operating profits were due to the
Nobel/Profarmaco Acquisition, and to cost reductions in selling, general and
administration, and in research and development.
Net interest expense of $4,581,000 in 1994 reflected an increase of
$1,810,000 from 1993. The increase was due to financing activities of
$138,000,000 necessary for the Seal Sands Acquisition and the Nobel/ Profarmaco
Acquisition and higher interest rates.
Other income in 1994 was $497,000 compared with other expense of $446,000
in 1993. The difference included 1994 currency gains at Profarmaco.
The provision for income taxes for 1994 resulted in an effective rate of
34.1% versus 35.6% in 1993. The rate decreased due to the mix of income from
international and domestic subsidiaries.
The Company's net income increased 28.8% to $11,126,000 compared with a net
income of $8,641,000 in 1993.
1993 COMPARED TO 1992
Net revenues in 1993 increased $17,751,000 (9.9%) over 1992 as a result of
including a full year of sales by Zeeland Chemicals, Inc. ("Zeeland"), the
increased performance chemicals business due to the acquisition of a fiber optic
gel business, and increased feed additive sales. The Health and Pharmaceuticals
business declined in 1993.
22
<PAGE> 25
Health and Pharmaceuticals' revenues decreased $3,617,000 (6.1%) from 1992.
The full year effect of the acquisition of Zeeland in March 1992 added
$3,215,000 to this sales category. This category's performance was affected by
decreases in the shipments of bulk pharmaceuticals from unusually high levels in
1992, and from reduced shipments of niacinamide (Vitamin B3) intermediates to
the Asia-Pacific region due to economic problems and increased competition.
Sales of cosmetic and toiletry related compounds represented $22,700,000,
or 41%, of this category's 1993 revenues and were $200,000 higher than 1992. An
increase of $1,200,000 in sales is due to products associated with the Zeeland
acquisition. Sales of castor oil based personal care products totaled $8,900,000
in 1993 and were $700,000 lower than the prior year. Sales of pyridine based
products totaled $6,200,000 in 1993 and were $300,000 lower than the prior year
due to reduced demand in the Asia-Pacific region and competitive pressure in
China.
Sales of pharmaceutical intermediates represented $14,600,000, or 26%, of
this category's 1993 revenues and were $300,000 higher than 1992. The increase
is due to a variety of products associated with the Zeeland acquisition and an
increase in x-ray contrast preparations. This increase was partially offset by
decreases in pyridine based intermediates used in the pharmaceutical industry in
Europe that were due to depressed economic conditions. The overall market for
x-ray contrast drugs continues to grow as less toxic compounds are developed.
Sales of bulk pharmaceuticals represented $9,700,000, or 18%, of this
category's 1993 revenues and were $2,700,000 lower than 1992. The decrease was
due to the unusually high 1992 sales caused by a disruption in the supply chain
that resulted in distributors building excessive inventories. Sales were below
normal levels in 1993 due to this inventory correction.
Sales of Vitamin B3 and its chemical precursors represented $8,500,000, or
15%, of this category's 1993 revenues and were $1,400,000 lower than 1992. The
Company's strategy to convert more of the intermediate into niacinamide (Vitamin
B3) produced increased sales of USP grade B3 offset by reduced sales of the
intermediate. Overall sales were lower because of currency restrictions in China
and depressed economic conditions in Europe.
Revenues from Agricultural Intermediates and Additives increased by
$2,033,000 (4.1%) over 1992. The increase was due to higher sales of
organo-arsenical feed additives to the poultry industry and to increased
shipments of a pyridine compound to a major herbicide producer. This category
was negatively affected by the end of a contract for a herbicide intermediate in
the fourth quarter 1992, and a decrease in export sales of pyridine derivatives.
The sales of products used in the manufacture of herbicides and
insecticides amounted to $22,800,000, or 45%, of this category's 1993 revenues
and were down 12% from 1992. Sales of pyridine, the largest item in this group,
were at the same level as 1992. The largest pyridine customer is Zeneca, Inc.
who uses it in the manufacture of herbicides. The Company produces another major
pyridine compound and is the exclusive supplier of this product to Dow Elanco
who uses it in production of a herbicide. Sales of this compound increased 88%
in 1993 due to Dow resuming normal ordering patterns after reducing their
inventories in 1992. Sales of other pyridine derivatives in this category
decreased 80% from 1992 due to high inventory positions in the Asia-Pacific
region and reduced use of a wheat fungicide in Europe.
The sales of animal additive products was $28,400,000, or 55%, of this
category's 1993 revenues, up 23% from 1992. Sales of organo-arsenical feed
additives increased 33% over the prior year due to a competitor stopping
production, increased dosages by poultry producers, and increased poultry
production in the U.S.
Sales from Specialty and Fine Chemicals increased by $11,218,000 (29.8%).
This increase included the effect of Zeeland for a full year of $5,957,000.
Increases in this category included photographic chemicals, specialty additives,
organic intermediates, specialty catalysts and custom manufactured products. The
most significant improvement in this category was due to the expansion in
production capabilities of a polymer used in instamatic film.
23
<PAGE> 26
Sales of photographic chemical products represented $13,700,000, or 28%, of
this category's 1993 revenues and were $5,500,000 higher than 1992. The increase
is due to a substantial increase in production capacity of a photochemical used
as a polymer in instamatic film.
Sales of specialty additive products represented $13,300,000, or 28%, of
this category's 1993 revenues and were $3,500,000 higher than 1992. This
increase is primarily attributable to sales of a chemical used in a fire
retardant fiber and for cooling tower water treatments, and to sales of a
product used as a cross linker for strengthening plastic.
Sales of organic intermediate products represented $10,800,000, or 22%, of
this category's 1993 revenues and were $1,800,000 higher than 1992. This
increase is attributable to a wide variety of products used as chemical
intermediates.
Sales of catalyst chemical products represented $9,800,000, or 20%, of this
category's 1993 revenues and were $1,400,000 higher than 1992. The increase is
primarily attributable to a variety of products associated with the Zeeland
acquisition.
Performance Chemicals' sales increased $10,439,000 (51.1%) from 1992 due to
increases in fiber optic cable gels and encapsulants to the telecommunications
industry. The acquisition of a complementary fiber optic gel business in March
1993 contributed $8,900,000 in increased revenues. The encapsulant sales were 8%
above 1992 primarily due to penetration of international markets.
Coatings' revenues decreased $1,643,000 (8.9%) from 1992 primarily due to a
tolling agreement for paint additives and corrosion inhibitors that ended in May
1993. Sales of castor oil derivatives were at the same level as 1992.
Export and international sales decreased by $7,200,000, or 16.2%. Exports
were 18.3% of gross revenues in 1993 versus 24.1% in 1992 due to lower export
sales caused by poor economic conditions in Europe and payment problems in the
Asia-Pacific region.
Total gross profit of $51,778,000 increased by $5,742,000, or 12.5%, from
1992. The gross profit as a percent of net revenues improved from 25.7% in 1992
to 26.3% in 1993. The increased gross profit was due to an improvement in sales
mix and the Company's continued effort to improve manufacturing costs and
production processes.
Selling, general and administrative expenses as a percentage of net
revenues was 14.9% in 1993, down from 15.7% in 1992. The 1993 expense of
$29,286,000 was $1,085,000 (3.8%) above 1992, due to the full year effect of the
Zeeland acquisition and the costs of establishing a sales office in Hong Kong.
Bonus payments to employees declined by 40% to $1,700,000 in 1993 based on a
formula using year-to-year changes in net income and return on investment
achieved.
Periodically, the Company conducts a comprehensive review of its
environmental and litigation issues, prepares estimates of the range of
potential costs of each issue wherever possible, and adjusts the accruals for
environmental contingencies as circumstances warrant. An environmental provision
of $1,029,000 was recorded in 1993 attributable to activity in a number of
pending environmental matters; $1,747,000 was recorded in 1992.
Research and development expenses of $5,843,000 were 3.0% of net revenues
in 1993, and represented a 44.4% increase over 1992. The increase of $1,797,000
in 1993 was largely due to the commitment to develop new products and processes
to ensure future growth in profitability. This commitment will continue in the
future.
The operating profit in 1993 increased 20.7% to $16,649,000 from
$13,789,000 in 1992. The increased operating profits were due to increased sales
and gross margin, partially offset by the increases in research and development
spending.
Net interest expense of $2,771,000 in 1993 reflected an increase of
$334,000 from 1992. The increase was due to higher borrowings in order to
finance acquisition activity and the capital program.
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<PAGE> 27
Other expense in 1993 was $466,000 compared with other expense of
$1,054,000 in 1992. The decrease was due to a 1992 provision of $553,000 for the
write-off of a receivable.
The provision for income taxes for 1993 resulted in an effective rate of
35.6% versus 39.5% in 1992. The rate decreased due to the realization of the
benefit of tax planning strategies.
The Company's net income increased 38.7% to $8,641,000 compared with a net
income of $6,230,000 in 1992.
1992 COMPARED TO 1991
Net revenues in 1992 increased $34,952,000 (24.2%) as a result of the
acquisition of Zeeland in March 1992, increased revenues from the 1991
acquisition of Salsbury Chemicals, Inc. ("Salsbury") included for a full year,
and price increases. The increased revenues were partially offset by declines in
coatings business volume.
Health and Pharmaceuticals' revenues increased $20,783,000 (54.1%) over
1991. The acquisition of Zeeland added $11,264,000 to this sales category with
sales of intermediates for cough and cold preparations and pharmaceuticals, a
reagent in the manufacture of antibiotics for respiratory infections, and a food
additive for soft drinks. The full year effect of Salsbury added $9,404,000 to
sales.
Sales of cosmetic and toiletry related compounds represented $22,500,000,
or 38%, of this category's 1992 revenues and were $5,200,000 higher than 1991.
An increase of $3,400,000 is attributable to a variety of products associated
with the Zeeland acquisition. The remaining increase of $1,800,000 is primarily
attributable to increases in castor oil based personal care products and
pyridine based products. Sales of castor oil based personal care products
totaled $9,600,000 in 1992 and were $600,000 higher than the prior year due to
increased market penetration. Sales of pyridine based products totaled
$6,500,000 in 1992 and were $1,200,000 higher than the prior year due to
increasing use of pyridine in cosmetic applications.
Sales of pharmaceutical intermediates represented $14,300,000, or 24%, of
this category's 1992 revenues and were $8,700,000 higher than 1991. An increase
of $7,400,000 is attributable to a variety of products associated with the
Zeeland acquisition. The remaining increase of $1,300,000 is primarily
attributable to increased sales due to the July 1991 acquisition of Salsbury.
Sales of bulk pharmaceuticals represented $12,400,000, or 21%, of this
category's 1992 revenues and were $7,800,000 higher than 1991. The increase was
due to the inclusion of the first full year associated with the Salsbury
acquisition.
Sales of Vitamin B3 and its chemical precursors represented $9,900,000, or
17%, of this category's 1992 revenues and were $1,000,000 lower than 1991. That
decrease is attributable to the Company's decision to devote limited production
capacity to other products with higher profit margins.
Revenues from Agricultural Intermediates and Additives increased by
$13,222,000 (36.8%) over 1991. The Salsbury acquisition, which occurred in July
1991, contributed $7,605,000 of the increased sales. Another factor in the
increased sales was the renewal of a contract (which had been terminated in
1990) for the manufacture of a herbicide intermediate by the Company's facility
in Delaware Water Gap, Pennsylvania. This contract was completed in November
1992. The sales of feed grade Vitamin B3 also increased both in terms of volume
and in price.
The sales of products used in the manufacture of herbicides and
insecticides amounted to $26,000,000, or 53%, of this category's 1992 revenues.
Sales of pyridine, the largest item in this group, declined 4% from 1991 levels
primarily due to the increasing requirements for the manufacture of pyridine
derivatives. The bulk of the pyridine sales are to Imperial Chemical Industries
PLC (ICI) who uses it in the manufacture of its widely used herbicides
Gramoxone(R) and Diquat(R). Another major component of this product category is
2-cyanopyridine. The Company is the exclusive supplier of this product to Dow
Elanco who uses it in production of the herbicide Tordon(R). The sales of
2-cyanopyridine declined 10% in 1992 due to Dow holding an unusually high level
of inventory at the end of 1991. Sales for pyridine derivatives in this category
grew by
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58% over 1991 due to increased sales to Europe and China. The derivatives are
used in new rice herbicides and wheat fungicides and as a cotton growth
regulator.
The sales of animal feed additive products was $23,100,000, or 47%, of this
category's 1992 revenues. Sales of feed grade Vitamin B3 and its chemical
precursors increased 34% from 1991. The Company has a program to increase its
capacity to produce niacinamide (Vitamin B3) thereby increasing sales and
improving its market position, and reducing sales of the chemical precursors.
Sales of organo-arsenical feed additives substantially increased over the prior
year due to a full year of sales from Salsbury plus increased market penetration
by the Company's customer, A.L. Laboratories, the sole marketer of such
products.
Sales from Specialty and Fine Chemicals increased by $9,738,000 (34.9%)
mainly due to the Zeeland acquisition which contributed $11,482,000 to this
total. The major Zeeland products include products for the photographic
industry, catalysts, organic intermediates and specialty additives.
Sales of organic intermediate products represented $9,000,000, or 24%, of
this category's 1992 revenues and were $2,400,000 lower than 1991. This decrease
is attributable to increased competition by offshore companies and a strategic
decision not to sell in certain markets at depressed prices.
Sales of specialty additive products represented $9,800,000, or 27%, of
this category's 1992 revenues and were $3,600,000 higher than 1991. The increase
is attributable to sales related to the acquisitions of Zeeland and Salsbury.
Sales of catalyst products represented $8,400,000, or 22%, of this
category's 1992 revenues and were $3,500,000 higher than 1991. That increase is
primarily attributable to a variety of products associated with the Zeeland
acquisition.
Sales of photographic chemical products represented $8,200,000, or 22%, of
this category's 1992 revenues and were $4,800,000 higher than 1991. That
increase is primarily attributable to a variety of products associated with the
Zeeland acquisition. Zeeland is the key supplier of a photochemical to a major
film manufacturer and plans to increase production capacity for that product
during 1993.
Performance Chemicals' sales decreased $583,000 (2.8%) from the prior year.
Sales of encapsulant products declined approximately 3% from 1991 reflecting a
continued decline in the use of copper cables in the telecommunications sector,
but rebuilding after Hurricane Andrew in Florida and Louisiana helped to reduce
the decline. Pricing of encapsulants, however, was slightly better than in 1991.
Coatings' revenues decreased $8,577,000 (31.6%) from 1991 due to the
withdrawal of rheological additive products and mercury biocides in 1991. Castor
oil based products sold in this category increased due to sales to the
construction and automotive industries.
Export and international sales increased by $7,110,000, or 19.0%. Exports
were 24.1% of gross revenues in 1992 versus 24.9% in 1991 due to lower export
percentages from Zeeland and Salsbury than the overall Cambrex average. The
increased export activity was attributable to Zeeland, which exported $4,500,000
in 1992 (mostly to Europe), and higher pyridine derivative sales to the Far East
and Europe.
Total gross profit of $46,036,000 increased by $19,710,000, or 74.9%, from
the 1991 level. The gross profit as a percent of net revenues improved from
18.2% in 1991 to 25.7% in 1992. The improved gross profit was due to the
increased sales of higher margin products, lower cost of major raw materials,
and a $4,000,000 charge in 1991 for obsolete and off specification inventories
and the related waste disposal costs for products manufactured at the Bayonne,
New Jersey facility.
Selling, general and administrative expenses as a percentage of net
revenues was 15.7% in 1992, consistent with 1991. The 1992 expense of
$28,201,000 was $5,458,000 above 1991, due to the addition of Salsbury and
Zeeland, and the cost of bonus payments to management and to other employees in
1992 of $2,800,000.
Periodically, the Company conducts a comprehensive review of its
environmental and litigation issues, prepares estimates of the range of
potential costs of each issue, where it can be estimated, and adjusts the
accruals for environmental contingencies as circumstances warrant. An
environmental provision of $1,747,000
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was recorded in 1992 attributable to activity in a number of pending
environmental matters. The 1992 provision compares favorably with that of the
prior year which included a $2,538,000 provision related to estimated
remediation costs for a particular site.
Research and development expenses of $4,046,000 were 2.3% of net revenues
in 1992, and represent the same percentage as 1991. The increase of $767,000 in
1992 was largely due to the Zeeland acquisition and a full year of operations at
Salsbury. Spending by all the Company's other businesses was comparable to 1991
levels.
Operating profit in 1992 was $13,789,000 compared to $304,000 in 1991. The
increased operating profit was due to the improved gross profit, partially
offset by higher selling, general and administrative expenses and research and
development expenses.
Net interest expense of $2,437,000 in 1992 reflected a decrease by $94,000
from 1991. The lower average interest rate, based on better terms in the credit
agreement negotiated in February 1992 and lower market rates, offset higher
average loan balances in 1992, relating to acquisition activities.
Other expense in 1992 was $1,054,000 compared with other income of
$2,279,000 in 1991. The key item in 1992 was a $553,000 provision for the
potential write-off of an other receivable related to a product previously
manufactured by Cambrex for a specific customer in prior years. The 1991 other
income consisted primarily of $2,758,000 which represented the elimination of
the remaining balance of a $3,400,000 accrual previously established in
connection with the sale of certain product lines in 1990.
In 1992, the Company reported net income of $6,230,000 compared with a net
income of $31,000 in 1991.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow from operations was $3,920,000 for the first quarter 1995
compared with $1,958,000 in the first quarter 1994. The increase in cash flow is
primarily due to increased earnings and additional depreciation and
amortization.
Net cash flow from operations was $27,429,000 for December 31, 1994
compared with $16,390,000 in 1993. The increase in cash flow was primarily due
to increased earnings and additional depreciation.
The Company has budgeted $35,000,000 for capital expenditures in 1995.
Capital expenditures were $8,131,000 in the first quarter 1995 as compared to
$3,861,000 in the first quarter 1994. The largest expenditures in the first
quarter 1995 were for (1) continued construction of a new facility at the
Salsbury site in Charles City, Iowa to increase production levels for several
products and to generate steam, and (2) a facility at Nobel in Karlskoga, Sweden
to increase capacity for pharmaceutical intermediates.
Capital expenditures were $20,825,000 in 1994, $15,535,000 in 1993, and
$9,133,000 in 1992. The largest expenditures in 1994 were for (1) a new facility
at the Salsbury site in Charles City, Iowa, to increase production levels for
several products and to generate steam; and (2) a new facility at the Zeeland
site in Zeeland, Michigan, to manufacture a cough suppressant intermediate for a
major customer.
An additional amount of $126,000,000 was used in 1994 to consummate the
Nobel/Profarmaco Acquisition on October 12, 1994 and $7,400,000 was used to
consummate the Seal Sands Acquisition on January 31, 1994.
On September 21, 1994, the Company entered into the $225,000,000 Credit
Agreement with a syndicate of lenders (the "Banks") and with NBD Bank, N.A., as
Agent. The Credit Agreement provides for (i) a one-year $50,000,000 bridge loan,
due October 11, 1995; (ii) a $75,000,000 term loan, with mandatory $1,000,000
quarterly payments until September 30, 1997 and mandatory quarterly payments of
$3,938,000 for each quarter thereafter until September 30, 2001; and (iii) a
$100,000,000 revolving credit facility, due October 11, 1997. The revolving
credit facility will be extended for successive two-year periods subsequent to
October 11, 1997 unless either the Company or the Banks elect not to so extend
the facility.
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On October 11, 1994, the Company borrowed $32,200,000 and L4,265,000 under
the Credit Agreement to repay all of its obligations under a prior loan
agreement and the prior loan agreement was terminated. On October 12, 1994, the
Company borrowed $126,000,000 under the Credit Agreement, including all of the
$50,000,000 Bridge Loan and all of the $75,000,000 seven-year term loan, to
finance the Nobel/Profarmaco Acquisition. On October 31, 1994, the Company
borrowed $4,150,000 under the Credit Agreement to retire a variable rate
Industrial Development Revenue Bond relating to its manufacturing facility in
Zeeland, Michigan. The net proceeds of the Offering, together with other funds,
will be used to repay the Bridge Loan. See "Use of Proceeds."
The Credit Agreement permits the Company to choose from various interest
rate options and to specify the portion of the borrowing to be covered by each
interest rate option. In addition, the Credit Agreement permits the Company to
borrow in most major currencies.
The Company had undrawn borrowing capacity of approximately $46,500,000 and
$55,600,000 under the Credit Agreement as of March 31, 1995 and December 31,
1994, respectively, which can be used for general corporate purposes, including
the repayment of the Bridge Loan. Management is of the opinion that these
amounts, together with other available sources of capital, are adequate for
meeting the Company's financing and capital requirements.
During the first quarter of 1995, the Company declared a cash dividend of
$0.05 per share, and in 1994, the Company paid cash dividends of $0.20 per
share.
The Company buys materials and sells products in a variety of currencies,
and owns property in various parts of the world. Its results are, therefore,
impacted by changes in the relative value of currencies in which it deals. Prior
to the Nobel/Profarmaco Acquisition, this risk was not considered to be
significant and the Company had no formal program to mitigate it. Since the
Nobel/Profarmaco Acquisition, the potential impact of changes in relative
currencies' values has increased significantly. The Company has begun to put in
place a process to monitor and control such exposures. Until the formal system
is complete, management is monitoring for identifiable exposures and taking
action where appropriate.
ENVIRONMENTAL
The Company maintains environmental and industrial safety and health
compliance programs at its plants, and believes that its manufacturing
operations are in general compliance with all applicable safety, health and
environmental laws.
Beginning in 1990, CasChem, Inc. ("CasChem"), one of the Company's
subsidiaries, was the subject of an investigation by the Environmental
Protection Agency and the Federal Bureau of Investigation concerning the
handling, storage, and disposal of hazardous wastes. During 1994, a settlement
was reached wherein that subsidiary pleaded guilty to the unpermitted storage of
one drum of hazardous waste and the payment of a $1 million fine, which was paid
in January 1995. As a related liability had been previously established, the
resolution of this matter has had no effect upon the results of operations in
1994.
Through the activities of its predecessors and third parties in connection
with the handling and disposal of hazardous and other wastes, the Company has in
the past and may in the future become liable, irrespective of fault, for certain
site remediation costs under federal and state environmental statutes. For
further information concerning such environmentally related contingencies, see
the notes to the consolidated financial statements of the Company included
elsewhere herein and "Business -- Legal Proceedings."
The resolution of such matters often spans several years and frequently
involves regulatory oversight and/or adjudication. Additionally, many
remediation requirements are not fixed and are likely to be affected by future
technological, site and regulatory developments. Consequently, the ultimate
extent of liabilities with respect to such matters as well as the timing of
related cash disbursements cannot be determined with certainty. However,
management is of the opinion that while the ultimate liability resulting from
these matters may have a material adverse effect upon the results of operations
in any given year, they will not have a material adverse effect upon the
Company's liquidity nor its financial position.
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IMPACT OF RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standard No. 112 "Employer's Accounting
for Postemployment Benefits" (SFAS 112) requires the recognition on an accrual
basis of all types of postemployment benefits provided to former or inactive
employees subsequent to employment but before retirement. The Company currently
provides limited benefits in this regard and adopted SFAS 112 effective January
1, 1994. The net effect upon 1994 pretax operating results and the related
annual expense was immaterial. The Company does not anticipate significant
increases in the annual expense related to SFAS 112.
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<PAGE> 32
BUSINESS
Cambrex Corporation, in business since 1981, manufactures a broad line of
specialty and fine chemicals for a wide variety of end use markets. The
Company's operations are conducted in five product categories: (i) Health and
Pharmaceuticals; (ii) Specialty and Fine Chemicals; (iii) Agricultural
Intermediates and Additives; (iv) Performance Chemicals; and (v) Coatings.
During the first quarter of 1995, over 72% of the Company's gross revenues were
attributable to sales of products in its Health and Pharmaceuticals and
Specialty and Fine Chemicals product categories, and over 34% of its gross
revenues consisted of sales made outside the United States. The Company's
products are manufactured at seven facilities located in the United States and
three facilities located in Europe.
Since 1990, when the Company substantially strengthened its management
team, Cambrex has sought to optimize returns from its existing businesses while
identifying and capitalizing on new business opportunities within its diverse
product categories that offer the most favorable prospects for growth. The
Company is currently focused on opportunities for growth in its Health and
Pharmaceuticals and Specialty and Fine Chemicals product categories, which the
Company believes offer opportunities to manufacture and sell higher margin
products. In January of 1994, the Company completed the Seal Sands Acquisition
and in October of 1994, it completed the Nobel/Profarmaco Acquisition, thereby
substantially expanding its Health and Pharmaceuticals and Specialty and Fine
Chemicals businesses. The Company believes that the continuation of a variety of
recent trends, including an increase in outsourcing by chemical and
pharmaceutical companies, will impact these product categories favorably. In
addition, increased use of generic drugs and certain demographic factors are
expected to enable the Company to expand its sales of bulk actives and
pharmaceutical intermediates for use in prescription and over-the-counter
pharmaceuticals. The Company also believes that the Nobel/Profarmaco Acquisition
offers it important growth opportunities in these categories by increasing its
market presence in Europe, thereby positioning it to increase sales of its
products outside of the United States.
Since 1990, the Company has experienced significant growth in sales and
earnings, due primarily to acquisitions, productivity enhancements and new
product developments. The Company's net revenues for the year ended December 31,
1994 were approximately $242 million, and have grown since 1990 at a CAGR of
approximately 13%. The Company's net income for the year ended December 31, 1994
was approximately $11 million, and has grown by at least 25% each year since
1990.
OPERATING STRATEGIES
The Company's objective is to be a leading provider of specialty chemicals
in a wide variety of niche markets in which its technical expertise,
manufacturing capabilities and strong customer relationships provide a
competitive advantage. The Company also seeks to increase its profitability
through its productivity enhancement program. Strategies that are important to
the Company's achievement of these objectives include:
- Niche Markets. The Company generally focuses on products that have the
potential to generate sales volume of up to $10 million and that require a high
degree of technical expertise. The Company believes that the sales volume
associated with these kinds of products, combined with the need to tailor many
of them to the requirements of specific customers, make such products
unattractive to many larger chemical companies, thus reducing competition and
making such products candidates for outsourcing. The Company manufactures over
450 products, of which more than 250 are Health and Pharmaceuticals or Specialty
and Fine Chemicals products.
- Technical Expertise. The Company believes that its high level of
expertise in a variety of areas of chemistry as well as in process engineering
enables it to handle complex, technical product formulation and manufacturing
problems for its customers. As part of its niche market strategy, the Company
seeks to develop core technologies that enable it to achieve a leading market
position and favorable profit margins. The Company believes that its ability to
tailor products to customers' specifications and its flexible manufacturing
operations, which enable it to produce batches ranging in size from a few
kilograms to several thousand kilograms, are important competitive factors.
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- Quality Manufacturing. The quality of the Company's products is often
critical to the performance of its customers' products. As a result, the Company
believes that its customers are generally less concerned with price than with
contracting with manufacturers who offer a reliable and high quality source of
supply. The Company believes that it has a reputation among industry
participants as a high quality manufacturer capable of meeting the rigorous
process required to comply with the Food and Drug Administration (the "FDA")
current Good Manufacturing Practices ("cGMP") standards and to ensure that its
products meet customers' own stringent requirements. The Company believes that
the long lead time required for the successful development and approval of new
products, and the complexity of the processes involved, are significant sources
of stability in the Company's relationships with its customers.
- Customer Relationships. The Company believes that its technical
expertise, manufacturing flexibility and customer support capabilities have
enabled it to foster strong relationships with many of its customers. The
Company's customers include some of the world's leading drug and chemical
companies, including A.L. Laboratories, AT&T, Dow Elanco, Hoechst Celanese,
Hoffman-LaRoche, Mylan Laboratories, Polaroid, Procter & Gamble and Zeneca. The
Company believes that these relationships provide significant opportunities to
cross-sell its products and to expand its reputation within its target markets.
- Productivity Enhancements. The Company has an ongoing cost-saving and
productivity program, which includes yield improvement, the discontinuation of
unprofitable or low margin product lines and, where appropriate, rationalization
of the Company's workforce. These initiatives already have yielded significant
cost savings.
The Company operates its businesses on a decentralized basis. It has ten
operating companies: CasChem; Heico Chemicals, Inc., a division of CasChem
("Heico"); Cosan Chemical Corp. ("Cosan"); Nepera; The Humphrey Chemical Co.,
Inc. ("Humphrey"); Salsbury; Zeeland; Seal Sands Chemicals Limited ("Seal
Sands"); Profarmaco; and Nobel. Each of these operating companies has
substantial operating autonomy. The Company believes that this structure enables
it better to service its customers by responding more quickly to their needs.
The Company seeks to achieve in a number of ways the benefits associated
with more centralized organizational structures. Cambrex's management works with
the general managers of the operating companies to establish strategic and
profit objectives, and carefully monitors their progress in achieving them.
Cambrex's management also provides key business functions, including accounting
and finance, human resources and legal services. Further organizational
coordination is achieved through the use of formal and informal teams that
facilitate activities such as research and development and purchasing. The
Company seeks to foster a culture of customer service through its total quality
management program. Moreover, to further encourage collaboration and cooperation
among its operating companies, the Company bases the incentive compensation of
its operating companies' general managers partly on the performance of the
entire Company.
GROWTH STRATEGY
INTERNAL GROWTH
The Company seeks to achieve revenue and earnings growth by identifying and
capitalizing on favorable trends in the markets it serves. The Company believes
that its most attractive current opportunities for growth are in its Health and
Pharmaceuticals and Specialty and Fine Chemicals businesses. The Company's
primary plans for growth include:
- Focused Product Development. A significant portion of the Company's
efforts to expand sales are focused on product development. The Company's
marketing and technical personnel work in tandem to identify new product
opportunities with existing or potential customers that draw upon the Company's
strength in a particular area of chemistry or in process engineering. Product
development and marketing activities focus on three distinct areas: (i)
adaptation of the Company's chemical processes and manufacturing facilities to
custom manufacture products to a single customer's specifications; (ii) finding
new applications and markets for existing product lines; and (iii) refining
existing chemical processes to generate new products. The Company seeks to
minimize the risks inherent in product development by targeting projects that
require
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<PAGE> 34
relatively small capital outlays to develop products for identified customers or
markets on a long-term basis consistent with the Company's profit objectives.
The Company believes that the relatively large number of ethical drugs whose
patents will expire in the next several years will provide one fertile source of
new product opportunities for the Company.
- Market Opportunities. The Company believes that industry trends within
various markets may present particular opportunities in the next several years
to increase sales in several of its product areas. The most general of such
trends is the aging of the American population, which may be expected to
increase demand for health care products and thus support the long-term growth
of the health and pharmaceuticals industry. An additional trend that may
contribute to increased sales of the Company's Health and Pharmaceuticals
products is the growth in demand for generic drugs. For reasons of
cost-effectiveness, managed-care and other health care providers increasingly
prefer the prescription of generics, which typically are priced at discounts of
50% or more in comparison to their branded counterparts. The Company had gross
revenues of $24 million in 1994 (or 11% of gross sales) attributable to its
manufacture of bulk active ingredients for use in generic drugs. Lastly, the
Company also believes it is well positioned to benefit from the growing practice
among some large chemical and pharmaceutical companies of "outsourcing," i.e.,
contracting out the manufacture of components of a final branded product. See
"-- Principal Products -- Health and Pharmaceuticals -- Industry Factors" and
"-- Principal Products -- Specialty and Fine Chemicals -- Industry Factors."
- Capacity Expansion. The Company's plans to increase sales will require
continued investing in capacity expansions for key product lines currently
operating at or near full capacity, and making other capital expenditures
designed to improve the quality of its products. The Company's current major
capacity expansion projects include a new plant at Salsbury's Charles City, Iowa
site, which will expand the Company's capacity for production of Specialty and
Fine Chemicals and generic bulk active products. In 1993 and 1994, prior to
their acquisition by the Company, Nobel and Profarmaco made an aggregate of $7
million and $10 million of capital expenditures, respectively, principally to
upgrade their facilities and expand capacity. The Company anticipates making an
aggregate of an additional $15 million of capital expenditures for Nobel and
Profarmaco during 1995. Of the Company's projected expenditures of $35 million
in 1995, $24 million are for capacity expansions and processing improvements
designed to increase the consistency and performance of the Company's products
and $4 million will be dedicated to environmental improvements.
- Internal Synergies. The Company believes its acquisitions create
opportunities for operating synergies among its operating companies in the form
of technology sharing, backward integration of sources of supply, and
cross-selling that have the potential to increase revenues and profitability.
Technology sharing takes a number of forms, ranging from informal consultations
between technical personnel to solve manufacturing process and product
formulation problems for customers, to Profarmaco's recent provision of
assistance to Salsbury in designing Salsbury's new manufacturing facility to
meet cGMP standards. The Company is also beginning to take advantage of
opportunities for backward integration of its product lines. For example, the
Company expects that in the near future, Salsbury's sulfapyridine product will
utilize aminopyridine produced at Seal Sands, which in turn will utilize
pyridine manufactured by Nepera.
EXTERNAL GROWTH
Historically the Company has achieved growth principally through
acquisitions, completing five acquisitions over the past five years.
- Nobel/Profarmaco. On October 12, 1994, the Company acquired Nobel and
Profarmaco from Akzo Nobel A.B. for approximately $126 million. Nobel/Profarmaco
manufactures fine chemical intermediates and bulk active ingredients for
pharmaceuticals products. The business is conducted through Nobel in Karlskoga,
Sweden, Profarmaco in Milan, Italy and sales companies located in Germany,
England and the United States. The Company believes that the Nobel/Profarmaco
Acquisition offers it important growth opportunities in its Health and
Pharmaceuticals and Specialty and Fine Chemicals product categories and
increases the Company's market presence in Europe, thereby positioning it to
increase sales of its products outside of the United States.
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- Seal Sands. On January 31, 1994, the Company purchased substantially all
of the assets of the fine chemicals business of Hexcel Chemical Products Limited
operated out of Middlesbrough, England, for a purchase price of approximately
$7.4 million and the assumption of $2.1 million in certain current liabilities.
This business, now conducted as Seal Sands, manufactures chemical intermediates
used in the pharmaceutical, photographic, water treatment, health care and
plastics industries.
- Zeeland. On March 31, 1992, the Company acquired substantially all of
the assets of the fine chemicals business of Hexcel Corporation operated out of
Zeeland, Michigan for a purchase price of approximately $20 million and the
assumption of certain liabilities. This business, conducted as Zeeland,
manufactures synthetic organic chemicals for the pharmaceuticals, food additive,
photographic, agricultural, personal care and plastics industries.
- Salsbury. On July 1, 1991, the Company purchased substantially all the
assets of the chemicals business of Solvay Animal Health, Inc., located in
Charles City, Iowa, for a purchase price of approximately $12.3 million. This
business, now conducted as Salsbury, manufactures custom and fine chemicals, as
well as pharmaceutical intermediates, generic pharmaceuticals, animal feed
additives, and photographic and polymer chemicals.
The Company will continue to review opportunities for expansion through the
acquisition of businesses that have product lines and technology complementary
to those of the Company and that have substantial positions in niche markets.
The Company generally looks for acquisition candidates that are compatible with
the Company's operating structure and existing businesses, that can contribute
immediately to the Company's profitability and that will meet the Company's
financial return criteria.
PRINCIPAL PRODUCTS
The following table sets forth for the periods indicated information
concerning gross revenues from the Company's five product categories.
<TABLE>
<CAPTION>
THREE
MONTHS YEARS ENDED DECEMBER 31,
ENDED ---------------------------------------------------------------
MARCH 31, PRO FORMA
1995 1994(1) 1994(2) 1993(3) 1992(4) 1991 1990
----------- ----------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
Health and Pharmaceuticals......... $47,322 $ 149,299 $74,163 $55,550(5) $59,167 $38,384 $29,144
Specialty and Fine Chemicals....... 22,020 79,964 66,548 48,841 37,623 27,885 23,153
Agricultural Intermediates and
Additives........................ 15,306 59,751 59,751 51,153 49,120 35,898 33,107
Performance Chemicals.............. 7,220 31,769 31,769 30,880 20,441 21,024 20,960
Coatings........................... 4,210 17,452 17,452 16,884 18,527 27,104 32,009
</TABLE>
- ---------------
(1) The pro forma information gives effect to the Nobel/Profarmaco Acquisition
and the Seal Sands Acquisition as if such transactions had occurred on
January 1, 1994. See "Pro Forma Combined Financial Information."
(2) Revenues from the Seal Sands Acquisition, in January 1994, and the
Nobel/Profarmaco Acquisition, in October 1994, are included from the date of
acquisition.
(3) Revenues from Viscosity Oil's fiber optic gel business, acquired in March
1993, are included from the date of acquisition.
(4) Revenues from Zeeland, acquired in March 1992, are included from the date of
acquisition.
(5) Decreases from 1992 to 1993 in gross revenues in the Company's Health and
Pharmaceuticals product category resulted from unusually high sales of a
bulk pharmaceutical in 1992, and from reduced shipments of niacinamide
(Vitamin B3) intermediates to the Asia-Pacific region due to economic
problems and increased competition.
HEALTH AND PHARMACEUTICALS
The Company manufactures and sells chemicals used in many applications
within the Health and Pharmaceuticals industry. Products in the Health and
Pharmaceuticals category are generally complex chemical compounds that make
significant contributions to the functionality of the finished product while
33
<PAGE> 36
representing a small portion of its cost. In addition, the Company's bulk active
and specialty intermediate products generally command higher prices and provide
higher margins than the Company's other products.
This category consists of four principal product groups:
- Bulk actives -- Bulk actives are chemical entities utilized as the active
ingredients in over-the-counter and prescribed medications such as
tranquilizers, anti-inflammatories, diuretics and cardiovascular prescriptive
drugs. 5-aminosalicylic acid, used in drugs to treat ulcerative colitis, is an
example of these types of products. Bulk actives accounted for 33% of the
Company's total gross revenues in the Health and Pharmaceuticals product group
during 1994.
- Pharmaceutical intermediates -- Pharmaceutical intermediates are
intermediates that are converted into active ingredients primarily utilized in
over-the-counter medications. 5-nitro isophthalic acid, an intermediate designed
for production of X-ray contrast products, is an example of these types of
products. Pharmaceutical intermediates accounted for 33% of the Company's total
gross revenues in the Health and Pharmaceuticals product group during 1994.
- Cosmetic and toiletry related compounds -- Cosmetic and toiletry related
compounds are compounds utilized in the formation of cosmetics and toiletries,
such as facial creams, soaps and shampoos. Examples include specialty castor oil
derivatives that impart "feel" to cosmetic creams. These products accounted for
27% of the Company's total gross revenues in the Health and Pharmaceuticals
product group during 1994.
- Vitamins -- The Company produces Vitamin B3 and its chemical precursors.
These products accounted for 7% of the Company's total gross revenues in the
Health and Pharmaceuticals product group during 1994.
The Company generally focuses on developing and marketing Health and
Pharmaceuticals products that have the potential to generate sales volume of up
to $10 million and that require a high degree of technical expertise. The
Company manufactures over 140 Health and Pharmaceuticals products and sells them
to a diverse group of more than 900 customers. The Company is currently
expanding its Salsbury and Karlskoga facilities to allow increased ability to
manufacture Health and Pharmaceuticals products.
Many of the Company's Health and Pharmaceuticals products must be
manufactured under the FDA's cGMP standards and otherwise require extensive
quality control procedures. Each of the six facilities at which the Company
manufactures bulk pharmaceuticals and related products is periodically subjected
to inspections to ensure continued compliance with applicable FDA regulations.
The Company believes that it has a reputation as a high-quality manufacturer
whose products are capable of meeting these regulatory standards and its
customers' own stringent requirements.
Gross revenues attributable to Health and Pharmaceuticals products during
fiscal 1992, 1993 and 1994 were $59 million, $56 million and $74 million,
respectively, representing 32%, 27% and 30%, respectively, of the Company's
total gross revenues. During 1994, $16.5 million of the Company's sales in this
product category were attributable to the Nobel/Profarmaco Acquisition.
Products and Customers. The Company's major Health and Pharmaceuticals
products, principal applications for these products and representative customers
include the following:
<TABLE>
<CAPTION>
REPRESENTATIVE
PRODUCTS APPLICATIONS CUSTOMERS
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
Cyclohexenylethylamine; Back pain remedies; Colitis Chelsea Labs; Ciba Geigy;
5-nitroisophthalic acid; treatment; Dextromethorphan Hoffman-LaRoche;
Magnesium salicylate; (the active ingredient in Mallinckrodt; Mutual
Mesalamine; Niacinamide; N, cough suppressants); Food Pharmaceutical; Mylan
N-dimethylaminopyridine; starch modifier; Ketone Laboratories; National
Octenyl succinic anhydride; reducing agent; Vitamin B3; Starch; Olin; Procter &
Para methoxyphenylacetic X-ray contrast media; Zinc Gamble; Schering Plough;
acid; Pyridine; omadine (the active Solvay
Sulfasalazine; Vitride(R) ingredient in anti-dandruff
shampoos)
</TABLE>
34
<PAGE> 37
The Company believes that its technical expertise, manufacturing
flexibility and customer support capabilities have enabled it to foster strong
relationships with many of its customers, including some of the customers listed
above. The Company believes that these relationships provide significant
opportunities to cross-sell its products and to expand its reputation within its
target markets.
Industry Factors. The Company is currently focused on opportunities for
growth in its Health and Pharmaceuticals product category, where the Company
believes it may benefit in the future from the effects of the continuation of
certain recent industry-wide trends.
The most general of such trends is the aging of the American population,
which may be expected to increase demand for health care products and thus
support the long-term growth of the health and pharmaceuticals industry.
A second industry trend that may contribute to increased sales of the
Company's Health and Pharmaceuticals products is the growth in demand for
generic drugs. For reasons of cost-effectiveness, managed care and other health
care providers increasingly prefer the prescription of generics, which typically
are priced at discounts of 50% or more in comparison to their branded
counterparts. Industry analysts expect generics soon to represent approximately
two-thirds of all prescriptions written in the U.S., as compared to 40% in 1993
and 23% in 1980. The U.S. Commerce Department estimates an expansion of the
generics market to more than $21 billion in 1995, from less than $5 billion in
1989. The Company expects the market for generic drugs to be fueled through 2002
by the expirations of patents covering branded pharmaceutical products with
aggregate annual sales of over $15 billion.
The Company also believes itself to be well positioned to benefit from the
growing practice among some large drug companies of "outsourcing," i.e.,
contracting out the manufacture of intermediates. The Company believes that
demand for outsourcing is growing among major pharmaceutical companies as such
companies, under pressure to reduce costs and to comply with the proliferation
of complex regulatory restrictions, conclude that their core competencies lie in
the area of discovery and marketing, rather than manufacturing. The Company
believes that outsourcing may be especially attractive to those pharmaceutical
companies that have chosen to limit capital and research and development
commitments. In addition, many new pharmaceutical products have a much narrower
target market, resulting in high value, low volume products. The production of
the active materials in such products may not occupy a drug producer's facility
for the full year, thereby increasing the attractiveness of outsourcing. The
Company believes that its technical expertise and strong regulatory compliance
program enable it to serve such customers by producing a new product in each of
its developmental stages, thus minimizing the customer's exposure during the
drug's development.
SPECIALTY AND FINE CHEMICALS
The Company manufactures chemicals for sale to various industrial,
electronic and consumer product manufacturers. These products are generally high
priced, small volume complex chemical compounds that contribute a specific
functionality to the end use product into which they are incorporated. The
manufacturing process for most of these products normally requires expertise in
a particular chemical technology, thereby enabling the Company to capitalize on
its high level of expertise in a variety of areas of chemistry as well as in
process engineering across a broad spectrum of chemical applications. The
Company believes that its ability to tailor products to customers'
specifications and its flexible manufacturing applications, which enable it to
produce batches ranging in size from a few kilograms to several thousand
kilograms, are important competitive factors in this product category.
The Specialty and Fine Chemicals category consists of four principal
product groups:
- Specialty additives -- Specialty additives typically are used in small
volumes to add a specific property or to promote certain reactions in the
production of large volume products. Examples of these products include
1,1,1-tris (p-hydroxyphenyl) ethane ("THPE") and sodium p-sulfophenylmethallyl
ether ("SPME"). THPE is used as a cross linking agent to improve the performance
of polycarbonate resins. These resins find use in rigid extrusion and
blow-molded applications, such as shatterproof window panes. SPME is used as a
dye receptor in acrylic fibers for textile applications. Specialty additives
accounted for 45% of the Company's total revenues in the Specialty and Fine
Chemicals product category in 1994.
35
<PAGE> 38
- Organic intermediates -- Organic intermediates are used for the
production of specialty chemical products. Examples of these products include
4,4-dichlorodiphenyl sulphone, which is used to make polymers for industrial and
electronic applications and potassium diphenyl sulphone sulphonate, a flame
retardant product for use in polycarbonate manufacturing. Organic intermediates
accounted for 20% of the Company's total revenues in the Speciality and Fine
Chemicals product category in 1994.
- Photographic chemicals -- Photographic chemicals are fine inorganic
chemicals utilized in a variety of photographic applications, including the
manufacture of color print film and instant film. Sales of these products
accounted for 17% of the Company's total revenues in the Specialty and Fine
Chemicals product category in 1994.
- Catalysts -- Catalysts are used to promote specific controlled chemical
reactions. Examples of these products include catalysts used in sealant and
caulking compounds. Catalysts accounted for 16% of the Company's total revenues
in the Specialty and Fine Chemicals product category in 1994.
The Company manufactures over 110 Specialty and Fine Chemicals products and
sells them to a diverse group of more than 1,200 customers. The Company is
currently expanding facilities at the Salsbury and Karlskoga locations, and
adapting a facility at the Zeeland location, to allow increased ability to
manufacture internally developed and customer specific compounds in this product
category.
Gross revenues of Specialty and Fine Chemicals products during fiscal 1992,
1993 and 1994 were $38 million, $49 million and $67 million, respectively,
representing 20%, 24% and 27%, respectively, of the Company's total gross
revenues. $14.4 million of the Company's net revenues in this product category
during 1994 were attributable to the Seal Sands Acquisition and $3.3 million of
such revenues were attributable to the Nobel/Profarmaco Acquisition.
Products and Customers. The Company's major Specialty and Fine Chemicals
products, principal applications for these products and representative customers
include the following:
<TABLE>
<CAPTION>
REPRESENTATIVE
PRODUCTS APPLICATIONS CUSTOMERS
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
Distearlydimethyl ammonium- Color film; Engineering Dow Elanco; General Electric;
methosulfate; Ethylene maleic thermoplastics; Instant film; Hoechst Celanese; Monsanto;
anhydride copolymer; 4,4- Phase transfer catalyst; Polaroid; Xerox
dichlorodiphenylsulphone; Polymer antioxidant; Polymer
Sodium p-sulfophenylmethallyl modifier; Silicone sealants;
ether; Tetrabutylammonium Static control agents
bromide; Topanol; 2,5
bistetramethyl butyl
hydroquinone
</TABLE>
Industry Factors. The Company believes that its sales in the Specialty and
Fine Chemicals area may benefit in the future from the trend among some large
chemical companies toward outsourcing. As with pharmaceutical companies, the
Company believes that demand for outsourcing is growing among chemical producers
as such companies, in order to reduce costs, decide to focus their resources in
the areas of research and development and marketing. See "-- Principal Products
- -- Health and Pharmaceuticals -- Industry Factors."
AGRICULTURAL INTERMEDIATES AND ADDITIVES
The Agricultural Intermediates and Additives product category consists of
two principal product groups:
- Animal feed additives -- These products are used as dietary supplements
for animals. The Company's two major animal feed additives are (i) 3-Nitro(R),
an organo-arsenical poultry feed additive which is used to control disease and
enhance growth in poultry, and (ii) feed grade niacinamide (Vitamin B3), which
is added to animal feed to improve metabolism and increase growth rate in hogs,
poultry and dairy cattle. Animal feed additives accounted for 60% of the
Company's total revenues in the Agricultural Intermediates and Additives product
category during 1994.
36
<PAGE> 39
- Herbicide intermediates -- These products are used in the manufacture of
a variety of herbicides and insecticides, including Gramoxone(R) Extra herbicide
(paraquat), Fusilade(R), Tordon(R) and Patrol(R). The Company's largest customer
for these products is Zeneca, Inc., which manufactures and sells Gramoxone(R)
Extra herbicide (paraquat). The Company also is the exclusive supplier of
2-cyanopyridine to Dow Elanco, which uses it to produce the herbicide Tordon(R).
Herbicide intermediates accounted for 40% of the Company's total revenues in the
Agricultural Intermediates and Additives product category during 1994.
The Company's Agricultural Intermediates and Additives are sold to
approximately 70 customers. Other than feed grade niacinamide (Vitamin B3),
which is sold to premix blenders worldwide, substantially all products in this
category have only two or three customers. A.L. Laboratories and Zeneca
accounted for 30% and 24%, respectively, of the Company's 1994 revenues in this
category.
This product line, while generally not offering the growth potential of the
Health and Pharmaceuticals and Specialty and Fine Chemicals categories,
contributes significantly to the Company's profitability and cash flow. Gross
revenues of Agricultural Intermediates and Additives products during fiscal
1992, 1993 and 1994 were $49 million, $51 million and $60 million, respectively,
representing 27%, 25% and 24% of the Company's gross revenues during these
respective periods.
Products and Customers. The Company's major Agricultural Intermediates and
Additives products, principal applications for these products and representative
customers include the following:
<TABLE>
<CAPTION>
REPRESENTATIVE
PRODUCTS APPLICATIONS CUSTOMERS
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
Beta-picoline; Feed grade Feed additives; Herbicides A.L. Laboratories; Dow
niacinamide; Elanco; Hoffman-LaRoche;
Organo-arsenicals; Zeneca
Piperidine; Pyridine;
2-cyanopyridine
</TABLE>
PERFORMANCE CHEMICALS
The Company manufactures and sells a variety of Performance Chemicals used
in the telecommunications, electronics and health care industries. Performance
Chemicals are sold based on their performance in the end-use application, rather
than on their chemical content. Like the Company's Coatings product line, this
category represents a diversification of the markets served by the Company and
contributes to its profitability and cash flow while supporting its strategy of
focusing on niche markets. These products are sold to approximately 150
customers.
These products include Bufferite(R) gels used in fiber optic cable
manufacture, urethane based encapsulant used by the telephone industry for
encasing copper cable splices, and polyurethane sealants and potting compounds
used in medical devices such as blood oxygenators, catheters and filter elements
in kidney dialysis machines.
Products and Customers. Gross revenues of Performance Chemicals products
during fiscal 1992, 1993 and 1994 were $20 million, $31 million and $32 million,
respectively, representing 11%, 15% and 13% of the Company's total gross sales
during these respective periods.
The Company's major Performance Chemicals products, principal applications
for these products and representative customers include the following:
<TABLE>
<CAPTION>
REPRESENTATIVE
PRODUCTS APPLICATIONS CUSTOMERS
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
Artificial turf adhesives; Elastomers; Electronics; AT&T; Bell South
Biomedical device sealants; Health care; Recreation and Communications; GTE; Siecor
Bufferite(R) gels for fiber sports; Telecommunications
optic cable; Electronic and
electrical potting compounds;
Re-enterable encapsulants for
underground telephone copper
cable splices
</TABLE>
37
<PAGE> 40
COATINGS
The Company manufactures and sells products that are used as intermediates
or performance enhancing additives in the manufacture of paints and other
coatings. Like the Company's Performance Chemicals product line, this category
represents a diversification of the markets served by the Company and
contributes to its profitability and cash flow while supporting its strategy of
focusing on niche markets. These products are sold to approximately 220
customers. One customer accounted for 15% of the Company's total gross revenues
in the Coatings category during 1994.
Coatings products include Caspol(R), a castor oil based product that can
reduce the amount of solvents required in a solvent based coating and improve
its performance. The Company has applied its understanding of the technology
used in Caspol(R) to develop a similar product designed for use in water
reducible paints. This product reduces the solvent content of water reducible
coatings and imparts improved hardness, flexibility and gloss to the end
product.
Gross revenues of Coatings products during fiscal 1992, 1993 and 1994 were
$19 million, $17 million and $17 million, respectively, representing 10%, 8% and
7%, respectively, of the Company's total gross revenues during these respective
periods.
Products and Customers. The Company's major Coatings products, principal
applications for these products and representative customers include the
following:
<TABLE>
<CAPTION>
REPRESENTATIVE
PRODUCTS APPLICATIONS CUSTOMERS
- ------------------------------------ ------------------------------------ -----------------
<S> <C> <C>
Corrosion inhibitors; Aircraft topcoats; Automotive; D.R. O'Shea
Hydroxyl-terminated polyols; Construction; Equipment housing; Company
Prepolymers; Specialty castor oil House paints; Industrial (a distributor);
derivatives; Specialty castor oil maintenance; Marine; Plastics; DuPont; Sherwin
polyols and esters Recreation; Transportation; Wood Williams
finishing
</TABLE>
PRODUCT DEVELOPMENT AND MARKETING
HEALTH AND PHARMACEUTICALS AND SPECIALTY AND FINE CHEMICALS
The Company's Health and Pharmaceuticals and Specialty and Fine Chemicals
products are marketed through a decentralized sales force assigned to each of
the Company's operating companies that manufacture products in these categories.
The Company has focused these product categories on narrow market niches in
which there exist only one or a small number of potential customers who tend to
purchase their requirements from a single stable source of supply. Accordingly,
a significant portion of the Company's marketing efforts are focused on the
development of new products.
Marketing and technical personnel work in tandem to identify new product
opportunities with existing or potential customers which draw upon the Company's
strength in a particular area of chemistry or in process engineering. The
Company considers the following to be key factors to the success of its
marketing and product development efforts:
- Technical Expertise. The Company believes that its high level of
expertise in a variety of areas of chemistry as well as in process engineering
enables it to handle complex, technical product formulation and manufacturing
problems for its customers. As part of its niche market strategy, the Company
seeks to develop core technologies that enable it to achieve a leading market
position and favorable profit margins. The Company believes that its ability to
tailor products to customers' specifications and its flexible manufacturing
operations, which enable it to produce batches ranging in size from a few
kilograms to several thousand kilograms, are important competitive factors.
- Quality Manufacturing. The quality of the Company's products is often
critical to the performance of its customers' products. As a result, the Company
believes that its customers are generally less concerned with price than with
contracting with manufacturers who offer a reliable and high quality source of
supply. The Company believes that it has a reputation among industry
participants as a high quality manufacturer capable of meeting the rigorous
process required to comply with the FDA's cGMP standards and to ensure that the
38
<PAGE> 41
products meet customers' own stringent requirements. The Company believes that
the long lead time required for the successful development and approval of new
products, and the complexity of the processes involved, are significant sources
of stability in the Company's relationships with its customers.
- Customer Relationships. The Company believes that its technical
expertise, manufacturing flexibility and customer support capabilities have
enabled it to foster strong relationships with many of its customers. The
Company's customers include some of the world's leading drug and chemical
companies, including A.L. Laboratories, AT&T, Dow Elanco, Hoechst Celanese,
Hoffman-LaRoche, Mylan Laboratories, Polaroid, Procter & Gamble and Zeneca. The
Company believes that these relationships provide significant opportunities to
cross-sell its products and to expand its reputation within its target markets.
Product development and marketing activities focus on three distinct areas:
(i) adaptation of the Company's chemical processes and manufacturing facilities
to custom manufacture products to a single customer's specifications, in some
cases relying in part on proprietary technology provided by the customer; (ii)
finding new applications and markets for existing product lines; and (iii)
refining existing chemical processes to generate new products.
The Company seeks to minimize the risks inherent in product development by
targeting projects that require relatively small capital outlays to develop
products for identified customers or markets on a long-term basis consistent
with the Company's profit objectives. Where the Company perceives a higher level
of risk in bringing a product to market relative to the financial or technical
commitment required, it generally negotiates with its customer a long-term
contract or a compensation arrangement that covers its development costs.
In 1994, approximately 60% of the Company's Health and Pharmaceuticals and
Specialty and Fine Chemicals products were sold through the Company's
approximately 55 marketing and sales personnel worldwide, with the balance sold
through approximately 100 independent sales agents. Independent agents are
generally utilized in connection with sales of established products where direct
sales would be uneconomic, particularly in connection with export sales by the
Company's U.S. and European subsidiaries.
OTHER PRODUCT CATEGORIES
The Company devotes a smaller proportion of its resources to development of
new products in its remaining product categories. Marketing and distribution in
these categories is more typical of chemical companies generally, with products
being sold to customers from inventories in volumes ranging from rail cars to
five gallon pails.
Approximately 90% of the Company's products in these product categories
were sold through the Company's direct sales force in 1994, with the balance
sold through approximately 30 independent sales agents.
MANUFACTURING FACILITIES
Set forth below is information relating to the Company's manufacturing
facilities:
<TABLE>
<CAPTION>
OPERATING
LOCATION ACREAGE SUBSIDIARY PRODUCT LINES MANUFACTURED
- ----------------------- --------- ----------- -----------------------------------------------
<S> <C> <C> <C>
Bayonne, NJ 8 acres CasChem Health and Pharmaceuticals; Specialty and Fine
Chemicals; Performance Chemicals; Coatings
Carlstadt, NJ 3 acres Cosan Performance Chemicals; Coatings
Harriman, NY 29 acres Nepera Health and Pharmaceuticals; Specialty and Fine
Chemicals; Agricultural Intermediates and
Additives
Delaware Water Gap, PA 12 acres Heico Health and Pharmaceuticals; Specialty and Fine
Chemicals; Agricultural Intermediates and
Additives; Coatings
North Haven, CT 4 acres Humphrey Health and Pharmaceuticals; Specialty and Fine
Chemicals
</TABLE>
39
<PAGE> 42
<TABLE>
<CAPTION>
OPERATING
LOCATION ACREAGE SUBSIDIARY PRODUCT LINES MANUFACTURED
- ----------------------- --------- ----------- -----------------------------------------------
<S> <C> <C> <C>
Charles City, IA 57 acres Salsbury Health and Pharmaceuticals; Specialty and Fine
Chemicals; Agricultural Intermediates and
Additives
Zeeland, MI 14 acres Zeeland Health and Pharmaceuticals; Specialty and Fine
Chemicals
Middlesbrough, England 12 acres Seal Sands Health and Pharmaceuticals; Specialty and Fine
Chemicals
Karlskoga, Sweden 42 acres Nobel Health and Pharmaceuticals; Specialty and Fine
Chemicals
Paullo (Milan), Italy 13 acres Profarmaco Health and Pharmaceuticals
</TABLE>
The Company owns all the above facilities and properties, with the
exception of the twelve acre tract it leases in Middlesbrough, England. In
addition, the Company owns thirty-one acres of undeveloped land adjacent to the
North Haven facility, one hundred and three acres of undeveloped land adjacent
to the Harriman facility and sixty-six acres of undeveloped land adjacent to the
Zeeland facility. The Company believes its facilities to be in good condition,
well maintained and adequate for its current needs. In line with its strategy
for growth, the Company is currently expanding its owned manufacturing
facilities in its locations in Iowa and Sweden. See "-- Growth
Strategy -- Internal Growth."
Most of the Company's products are manufactured in multipurpose facilities.
Each product has a unique requirement for equipment, and occupies such equipment
for varying amounts of time. This, combined with the variations in demand for
individual products, makes it difficult to estimate actual overall capacity. It
is generally possible to transfer manufacture of a particular product to another
facility should capacity constraints dictate. However, the Company's pyridine
and arsenical feed additive product groups are each manufactured at a single
facility, and production of such products would not be transferrable to another
site. See "-- Principal Products -- Health and Pharmaceuticals" and
"-- Principal Products -- Agricultural Intermediates and Additives."
The Company plans to continue to expand capacity to meet growing needs by
process improvements and construction of new facilities where needed. See
"-- Growth Strategy -- Internal Growth -- Capacity Expansion."
RAW MATERIALS
The Company uses a wide array of raw materials in the conduct of its
businesses. In particular, the Company uses significant amounts of castor oil
and compounds derived from petroleum feedstocks in manufacturing a number of its
products.
The Company believes it is one of the largest purchasers of castor oil in
the United States, and has the ability to take delivery and store a large
quantity of castor oil on site. Under advantageous market conditions, the
Company sells this commodity in bulk quantities as simple castor oil
derivatives. Castor oil is used primarily in the manufacture of the Company's
Health and Pharmaceuticals and Coatings products.
Castor oil, which is not produced in the United States, is an agricultural
product the market price of which is affected by natural factors relating to the
castor bean crop from which the oil is produced. Castor oil is produced
commercially in a few foreign countries, with India currently being the largest
exporter. The Company obtains its castor oil from several suppliers and
negotiates castor oil purchases directly with principals of those organizations
or their selling agents. The Company has been able to obtain adequate supplies
of castor oil generally at acceptable prices in the past and expects to be able
to do so in the future.
In addition, pyridine, which accounted for 11.3%, 12.5% and 13.4% of gross
revenues in 1994, 1993 and 1992, respectively, is produced by the Company by a
process involving the high temperature reaction of acetaldehyde, formalin and
ammonia. Acetaldehyde's feedstock is ethylene, which is produced from natural
gas liquids or crude oil. Ethylene is readily available, although its price is
often affected by market conditions. Acetaldehyde is available from two
suppliers in North America. The price of acetaldehyde increased
40
<PAGE> 43
approximately 20% during 1994. Formalin's feedstock is methanol, which is also
used by the petro-chemical industry in the manufacture of
methyl-tert-butyl-ether ("MTBE"). The production of and demand for MTBE has
increased rapidly in connection with its use as a gasoline additive. This
increased demand has triggered an unfavorable effect on methanol pricing, which
in turn caused the price of formalin to increase by approximately 80% in 1994.
Although the price of methanol has decreased in 1995 compared to the fourth
quarter of 1994, such decreases have not been sufficient to restore the
Company's previous operating margins on its pyridine-based products. Ammonia has
been widely available in the past and the Company believes that it will continue
to be so in the future.
The Company obtains acetaldehyde and formalin pursuant to long-term supply
contracts under which the price for the raw material adjusts to market
conditions, with a time lag. The Company sometimes has difficulty passing on
these increases to its customers, particularly if the increases are precipitous
rather than general.
Historically, the other raw materials used by the Company in the conduct of
its businesses have been in adequate supply and have been available from
multiple suppliers.
PATENTS AND TRADEMARKS
The Company has patent protection in some of its product areas. However,
the Company mostly relies on know-how in many of its manufacturing processes and
techniques not generally known to other chemical companies, for developing and
maintaining its market position. The Company requires employees to sign
confidentiality and non-compete agreements where appropriate.
The Company currently owns approximately 66 United States patents, which
have varying durations and which cover selected items in each of the Company's
major product areas. The Company also owns the foreign equivalent of many of its
United States patents. In addition, the Company has applied for patents for
various concepts and is in the process of preparing patent applications for
other concepts.
The Company has trademarks registered in the United States and a number of
foreign countries for use in connection with the Company's products and
businesses. The Company believes that many of its trademarks are generally
recognized in its industry. Such trademarks include Naturechem(R), Bufferite(R)
and Vitride(R).
The Company has from time to time received communications alleging possible
infringement of certain intellectual property rights of others. The Company does
not believe that the ultimate resolution of pending proceedings with respect to
any such allegations will have a material adverse effect on its financial
condition.
COMPETITION
Competition with respect to products in the Company's Health and
Pharmaceuticals and Specialty and Fine Chemicals categories is largely focused
in the early stages of development and introduction of a product. This is due to
the variety of barriers to entry for potential competitors once the Company has
established itself as a customer's principal supplier of a product. The Company
believes that such barriers include: (i) the need to make significant capital
and research and development expenditures (which are often large compared to the
potential sales of a particular product); (ii) the high level of expertise
required to solve technical problems for customers; (iii) the need for
manufacturing and product formulation expertise; (iv) lengthy product
development processes; (v) lengthy approval processes by customers, government
authorities or both; and (vi) customers' general aversion to contracting with
unproven suppliers of Health and Pharmaceuticals and Specialty and Fine
Chemicals products. As noted above in "-- Product Development and Marketing,"
where the Company perceives a significant competitive risk with respect to the
development and introduction of a product, it generally negotiates with its
customers long-term contracts or compensation arrangements that cover
development costs before proceeding.
Competition with respect to the rest of the Company's business is more
typical of chemical markets generally. Competition exists from other producers
of the Company's products and other products that may offer equivalent
properties. Competition in these areas is generally based on customer service,
product quality and price.
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<PAGE> 44
ENVIRONMENTAL AND SAFETY REGULATIONS
General. Production of many of the Company's chemicals involves the use,
storage, transportation and disposal of toxic and hazardous materials. The
Company's operations are subject to extensive international and United States
federal, state and local laws and regulations relating to the storage, handling,
emission, transportation and discharge of materials into the environment and the
maintenance of safe conditions in the work place.
The Company's acquisitions were made subject to known environmental
conditions. Also, risks of substantial costs and liabilities are inherent in
certain plant operations and certain products produced at the Company's plants,
as they are with other companies engaged in the chemical business, and there can
be no assurance that significant costs and liabilities will not be incurred.
Additionally, prevailing legislation and common law tends to hold chemical
companies primarily responsible for the proper disposal of their chemical wastes
even if transferred to third party waste disposal facilities. Moreover, other
future developments, such as increasingly strict environmental, safety and
health laws and regulations, and enforcement policies thereunder, could result
in substantial costs and liabilities to the Company and could subject the
Company's handling, manufacture, use, reuse, or disposal of substances or
pollutants at its plants to more rigorous scrutiny than at present.
For further information concerning certain environmental matters and
proceedings see "-- Legal Proceedings" and the notes to the consolidated
financial statements of the Company included elsewhere in this Prospectus.
Present and Future Environmental Expenditures. The Company's policy is to
comply with all legal requirements of applicable environmental, health and
safety laws and regulations, and the Company believes it is in general
compliance with such requirements and has adequate professional staff and
systems in place to remain in compliance, although there can be no assurances in
this regard. In some cases, compliance can only be achieved by capital
expenditures; the Company made capital expenditures of approximately $2.5
million in 1994, $1.7 million in 1993, and $1.3 million in 1992 for
environmental projects and has budgeted approximately $4 million in 1995 for
such projects. The Company anticipates that capital requirements will increase
in subsequent years as a result of the Clean Air Act Amendments and other
pending environmental laws. Additionally, as the environmental proceedings in
which the Company is involved progress from the remedial investigation and
feasibility study stage to implementation of remedial measures, related
expenditures will probably increase. The Company considers costs for
environmental compliance to be a normal cost of doing business, and includes
such costs in pricing decisions.
FDA AND RELATED REGULATION
The Company is subject to extensive regulation by numerous governmental
authorities, principally the FDA and corresponding state and foreign agencies,
and to various domestic and foreign safety standards. Six of the Company's ten
manufacturing facilities are subject to FDA regulations respecting registration
of manufacturing facilities and compliance with the FDA's cGMP standards. The
Company is also subject to periodic on-site inspection for compliance with such
standards. The Company's ability to supply its customers is dependent upon the
results of such inspections. In 1994 the FDA concluded inspections of the
Company's Profarmaco and CasChem facilities. The FDA also has broad regulatory
powers with respect to preclinical and clinical testing of new health and
pharmaceuticals products and the manufacturing, marketing and advertising of
health and pharmaceuticals products.
The Company's regulatory compliance programs have been expanded to
encompass compliance with international standards known as ISO 9000 standards.
Seal Sands and Nobel had become qualified for ISO 9000 registration prior to
their acquisition by the Company. In addition, in 1994, two of the Company's
other manufacturing facilities qualified for ISO 9000 registration. ISO 9000
standards will become mandatory in Europe in 1999. The FDA is in the process of
adopting the ISO 9000 standards as regulatory standards for the United States,
and it is anticipated these standards will be phased in for U.S. manufacturers
over a period of time.
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<PAGE> 45
EMPLOYEES
At March 31, 1995 the Company had 1,320 employees (598 of whom were
employed in the Company's international operations).
All hourly plant employees at the Bayonne, New Jersey facility are
represented by Local 8-406 of the Oil, Chemical and Atomic Workers International
Union under a contract expiring September 17, 1997; the hourly plant employees
at the Carlstadt, New Jersey plant are represented by the Amalgamated Industrial
Union of East Orange, New Jersey under a contract expiring November 30, 1997;
and the hourly plant employees at the Harriman, New York facility are
represented by Local 810 of the International Brotherhood of Teamsters under a
contract expiring June 30, 1995. The Company is currently renegotiating this
contract. Nobel/ Profarmaco production, administration, scientific and technical
employees are represented by various local and national unions. The contracts
with these unions expire at various times through December 31, 1995. The Company
believes its labor relations are satisfactory.
SEASONALITY
Like many other businesses in the specialty chemicals industry, the Company
has historically experienced some seasonality as sales traditionally increase
during the second quarter. In addition, like many other businesses operating in
Europe, Nobel and Profarmaco have experienced some seasonality. Sales of both
companies traditionally have decreased in the third quarter due to the impact of
the extended summer holiday. Profarmaco historically also has experienced
decreased sales in the fourth quarter due to the extended Christmas holiday.
Operating results for any quarter, however, are not necessarily indicative of
results for any future period. In particular, as a result of various factors
such as acquisitions and plant shutdowns, the Company believes that
period-to-period comparisons of its operating results should not be relied upon
as an indication of future performance.
INTERNATIONAL OPERATIONS
The Company's international operations include manufacturing and sales
activities abroad, as well as the export of products from the United States. The
Nobel/Profarmaco Acquisition in October 1994, following by several months the
Seal Sands Acquisition in January 1994, has significantly increased the scope of
the Company's international manufacturing and sales. Nobel/Profarmaco conducts
its business through manufacturing facilities located in Karlskoga, Sweden and
Paullo (Milan), Italy, and markets its products through sales companies located
in Germany, England and the United States. Approximately 50% of
Nobel/Profarmaco's 1994 sales were in Europe, and approximately 40% were in the
U.S., with the balance in Asia and Latin America.
Exporting also plays an important role in the Company's international
operations. The Company's U.S. facilities export products to various foreign
markets, principally in Western Europe, Asia and Latin America.
Export sales from in the U.S. in 1994, 1993 and 1992 amounted to $44.1
million, $37.3 million and $44.5 million, respectively. See note 17 to the
consolidated financial statements of the Company included elsewhere in this
Prospectus for further information concerning the Company's geographic areas of
operation.
The expansion of the Company's international operations subjects the
Company to certain risks, including increased exposure to currency exchange rate
fluctuations. The Company has retained the services of an outside consulting
firm to assist it in developing systems to better manage and control its
currency risk exposure. The Company's growing international operations also
subject it to certain other risks, including adverse political or economic
developments in the foreign countries in which it operates, foreign governmental
regulation, dividend restrictions, tariffs, and potential adverse tax
consequences, including payment of taxes in jurisdictions that have higher tax
rates than does the United States. Although the Company's export sales business
has generally been profitable in the past and Nobel/Profarmaco has conducted
business outside of the United States for many years prior to its acquisition by
the Company, there can be no assurance that one or more of these factors will
not have a material adverse effect on the Company's financial condition or
results of operations in the future.
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<PAGE> 46
LEGAL PROCEEDINGS
The Company is involved in several claims, litigations, administrative
proceedings and investigations relating to environmental matters, the most
significant of which are described below. Neither the ultimate extent of
liabilities with respect to such matters nor the timing of cash disbursements
can be determined with certainty. However, the Company is of the opinion that
while the ultimate liability resulting from environmental matters may have a
material effect upon the results of operations of the Company in any given year,
they will not have a material adverse effect upon the Company's liquidity or
financial position. In addition, the Company is a party to a number of other
legal and administrative proceedings.
ENVIRONMENTAL LIABILITIES
Maybrook. Cambrex's subsidiary Nepera was named in 1987 as a Potentially
Responsible Party ("PRP") along with certain prior owners of the Maybrook site
in Hamptonburgh, New York by the United States Environmental Protection Agency
(the "EPA") in connection with the disposition, under appropriate permits, of
wastewater at that site prior to Cambrex's acquisition of Nepera in 1986. The
Maybrook site, which is presently owned by Nepera, is on the EPA's National
Priorities List for remedial work and clean-up. However, to date the EPA has
entrusted the management of the remediation effort to the New York State
Department of Environmental Conservation (the "DEC"). Although the periods of
ownership of the site and the extent of its use for wastewater disposal are well
established, the PRPs have not been able to agree upon an allocation method for
future remediation costs. However, a prior owner has participated with Nepera in
the performance of the activities described in the following paragraphs.
During 1992, Nepera prepared a draft Remedial Investigation/Feasibility
Study ("RI/FS") report which enumerated several remediation alternatives and
submitted the Remedial Investigation portion to the DEC for review.
During 1993, the DEC requested the performance of additional site
investigation prior to reviewing the Feasibility Study portion of the report.
Nepera prepared a plan for such additional site investigation and submitted it
for review.
During 1994, the DEC requested the performance of additional site
investigation beyond the 1993 proposed plan and requested the Feasibility Study
portion of the report. Nepera updated the FS, prepared a revised plan for
additional site investigation, submitted the revised plan and updated FS for
review and utilized such documents to update the estimated liability of this
matter. Additionally, a DEC administrative law judge issued a decision ordering
one of the former owners to remediate the site. However, that former owner is
appealing the decision.
During 1995, the DEC requested the performance of additional site
investigation. Nepera prepared a revised plan for such additional investigation,
which has been approved by the DEC, and expects to conduct such investigation
within the next few months and submit a revised RI/FS to the DEC by October
1995.
Harriman. Nepera was named in 1987 as a responsible party along with
certain prior owners of Nepera's Harriman, New York production facility by the
DEC in connection with contamination at that site. Nepera believes that any
remediation to be conducted at that site is primarily related to contamination
attributable to material handling and disposal practices, including drum burial
at the site, which occurred prior to Cambrex's acquisition of Nepera in 1986. A
prior owner has participated with Nepera in the performance of the activities
described in the following paragraphs. Over the past several years, Nepera, with
the agreement of the DEC, has been performing an interim remedial measure
involving the pumping and treatment of groundwater to mitigate the possibility
of contamination progressing beyond the site boundaries.
During 1992, Nepera prepared a draft RI/FS report which enumerated several
remediation alternatives and submitted the Remedial Investigation portion to the
DEC for review.
During 1993, Nepera had not received commentary from the DEC concerning the
Remedial Investigation portion of the report.
During 1994, the DEC requested the Feasibility Study portion of the report.
Nepera updated the FS and submitted it for review.
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<PAGE> 47
During 1995, the DEC requested that certain risk assessment work be
completed. Nepera expects to complete such work within the next few months and
submit a revised RI/FS to the DEC by October 1995.
Bayonne. Cambrex's subsidiary CasChem was subject to an investigation
commenced in 1990 by agents of the EPA and the Federal Bureau of Investigation
pursuant to a search warrant indicating an interest in the handling, storage and
disposal of hazardous wastes.
During 1994, a settlement was reached wherein CasChem pleaded guilty to the
unpermitted storage of one drum of hazardous waste and the payment of a $1
million fine. That amount was paid during January 1995. As a related liability
had been previously accrued, the resolution of this matter had no impact upon
the results of operations of the Company in 1994.
Carlstadt. Cambrex's subsidiary Cosan entered into an Administrative
Consent Order in 1985 with the New Jersey Department of Environmental Protection
("NJDEP") under New Jersey's Industrial Site Recovery Act ("ISRA," which was
previously known as the Environmental Conservation and Recovery Act) in order to
consummate the sale of the controlling interest in Cosan to the Company. Through
that action, Cosan became required to determine whether its facility located in
Carlstadt, New Jersey was contaminated by hazardous materials and, if
appropriate, effect a cleanup.
During 1992, based upon the results of an evaluation of the site, Cosan
proposed the installation of a groundwater recovery system to remove
contaminants from the soil. Presently, Cosan is awaiting the NJDEP's approval of
that proposal.
SCP. Nepera was named in the early 1990's as a PRP along with
approximately 130 other companies by the EPA in connection with the SCP
Corporation ("SCP") site in Carlstadt, New Jersey. The site is on the EPA's
National Priorities List for remedial work and cleanup. SCP, under appropriate
permit, sewer disposed of a significant amount of process wastewater and
disposed of minor amounts of other material for Nepera during the 1970's.
The EPA has directed an Interim Remedial Measure for this site consisting
of the construction of slurry walls and a pump and treat facility. Presently, a
proportionate allocation of responsibility has not been established. However,
Nepera's responsibility may be relatively large in relation to other parties.
Nepera is cooperating with other PRPs in contesting the proposed basis for the
allocation of responsibility for this site, and believes it has grounds to, and
will, oppose any efforts to charge it with excessive responsibility.
During 1994, the cost of capping the site was estimated by the PRP group to
range from $5 million to $8 million. Although such a remediation alternative has
not been approved by the EPA, Nepera has assumed it to be the minimum effort
which will be required at the site.
Additionally, during 1994, Nepera reached a settlement agreement with
certain insurers who agreed to pay a certain portion of future expenditures
associated with the SCP site and incurred by Nepera. A receivable has not been
recorded in connection with this agreement as the payments are not realizable
until Nepera's liability has been determined and funds actually expended.
Clifton. Cosan was named in 1991 as a defendant in a suit filed by the
owners of a manufacturing site in Clifton, New Jersey that had been owned and
operated by Cosan from 1968 to 1979. The plaintiffs allege that Cosan
contributed to the contamination at the site and seek to compel Cosan to
contribute toward present and future costs of remediation of the site under
ISRA. Cosan continues to defend this action. The source of all contamination at
the site has not been definitively identified. Sampling conducted at an adjacent
upgradient site revealed extensive contamination with the same substances found
on the plaintiff's site and, in some instances, at higher concentrations.
In mid-April 1995, the plaintiffs submitted a cleanup plan to the NJDEP for
review. This plan is under review by the Company. Presently, settlement
negotiations with the plaintiffs are ongoing and the matter is moving toward a
trial date.
45
<PAGE> 48
NEPERA RELEASES
Nepera, the Company's subsidiary located in Harriman and Woodbury, New
York, manufactures the chemical pyridine and its derivatives, and is the
Company's sole manufacturer of these products. See "-- Manufacturing
Facilities." These chemicals are characterized by a malodorous nature at
extremely low concentrations. Since February of this year Nepera has experienced
several accidental releases of these chemicals. There has been some disruption
of neighborhood activities, a few reports of physical discomfort and irritation
by people in the vicinity of the releases, and a number of inquiries regarding
the releases by governmental officials. In cooperation with local officials, the
Company has accelerated its program to improve its community early alert system
and its communication with local officials and community leaders, to upgrade its
fence line monitoring equipment, and to continue to enhance its equipment and
maintenance activities. The planned improvements are anticipated to require
approximately $1 million in capital spending. While the Company believes these
occurrences to be a series of unrelated events, there can be no assurance that
similar events will not recur or that these events will not result in litigation
against the Company or limitations on the Company's future operations. The
Nepera facility operates under a number of permits, including a permit issued
under the zoning laws of the Town of Woodbury, which expires in October 1995.
TAX MATTERS
In May 1995, the Company received a notice from the IRS asserting a
deficiency with respect to the Company's federal income taxes for the years 1988
through 1990. The asserted deficiency would result in an increase in the
Company's federal income tax liability for the years 1988 through 1990 of
approximately $1.9 million (including asserted penalties and interest). The
deficiency notice relates primarily to deductions attributable to the Company's
investment in assets it acquired between 1981 and 1989. The Company estimates
that, if the IRS's position with respect to the 1988-1990 tax years were applied
to 1991-1994, the Company's cumulative federal income tax liability would
increase by approximately an additional $0.6 million for those years. Before it
received the notice, the Company had attempted to resolve this issue with the
IRS administratively but was unable to do so. The Company has challenged the
deficiency asserted by the IRS in United States Tax Court. The Company will not
be required to pay any amount of the asserted deficiency until the Tax Court
litigation is resolved. Any additional state tax liability resulting from the
asserted deficiency is not expected to be material.
The ultimate extent of the Company's liability with respect to these
matters cannot be predicted with certainty. However, management is of the
opinion that the Company's ultimate liability resulting from these matters will
not have a material adverse effect upon results of operations in any given year
or upon the Company's liquidity or its financial position.
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<PAGE> 49
MANAGEMENT
The following table sets forth the name, age and positions of each of the
Company's directors and officers.
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE POSITION
- ------------------------------ --- -------------- ------------------------------------------
<S> <C> <C> <C>
James A. Mack................. 57 1990 President, Chief Executive Officer and
Director
Peter Tracey.................. 53 N/A Executive Vice President, Finance, and
Chief Financial Officer
Peter E. Thauer............... 55 N/A Vice President-Law & Environment, General
Counsel and Corporate Secretary
Steven M. Klosk............... 37 N/A Vice President, Administration
Burton M. Rein................ 56 N/A Senior Vice President
Albert L. Eilender............ 51 N/A Executive Vice President
Roger H. Noack................ 48 N/A President and Chief Operating Officer of
Nepera, Inc.
Russell C. Smith.............. 53 N/A Vice President and General Manager of
Salsbury Chemicals, Inc.
Robert M. Parlman............. 44 N/A Vice President and General Manager of
Zeeland Chemicals, Inc.
Karl A. Behrend............... 36 N/A General Manager of Heico Chemicals, Inc.
and Humphrey Chemical Company, Inc.
John V. Van Hulle............. 37 N/A President of CasChem, Inc. and Cosan
Chemical Corporation
Claes Glassell................ 43 N/A Vice President, Cambrex and Managing
Director of Cambrex Limited
Cyril C. Baldwin, Jr. ........ 67 1981 Chairman of the Board of Directors
Rosina B. Dixon, M.D. ........ 52 1995 Director
Francis X. Dwyer.............. 69 1989 Director
George J. W. Goodman.......... 64 1981 Director
Kathryn Rudie Harrigan, 44 1994 Director
Ph.D. ......................
Leon J. Hendrix, Jr. ......... 53 1995 Director
Ilan Kaufthal................. 47 1981 Director
Robert LeBuhn................. 62 1981 Director
Dean P. Phypers............... 66 1988 Director
</TABLE>
The Company expects the composition of its Board of Directors to remain the
same following the Offering.
Mr. Mack has been Chief Executive Officer since Mr. Baldwin's retirement on
April 1, 1995. Mr. Mack was appointed President and Chief Operating Officer and
a director of the Company in February 1990. For five years prior thereto he was
Vice President in charge of the worldwide Performance Chemicals businesses of
Olin Corporation, a manufacturer of chemical products, metal products, and
ammunition and defense-related products. Mr. Mack was Executive Vice President
of Oakite Products, Inc. from 1982 to 1984. Prior to joining Oakite, he held
various positions with The Sherwin-Williams Company, most recently as President
and General Manager of the Chemicals Division from 1977 to 1981. Mr. Mack is a
past Chairman of the Board of Governors of the Synthetic Organic Chemical
Manufacturing Association and is a member of the Board of Trustees of the
Michigan Tech Alumni Fund.
Mr. Tracey was appointed Executive Vice President and Chief Financial
Officer in November 1994. Mr. Tracey joined the Company in November 1990 as Vice
President and Chief Financial Officer. For three years prior to joining Cambrex,
he was Vice President-Finance and Chief Financial Officer for Joyce
International Inc., a manufacturer of office products. From 1986 to 1987, he was
Vice President-Finance and Chief Financial Officer for Robotic Vision Systems,
Inc., a manufacturer of industrial automation systems. Prior to 1986, Mr. Tracey
was a principal in the firm of Sirius Management Consultants.
Mr. Thauer was appointed Vice President-Law & Environment in December 1992,
and General Counsel and Corporate Secretary in August 1989. From 1987 until he
joined Cambrex, he was Counsel to the business and finance group of the firm of
Crummy, Del Deo, Dolan, Griffinger and Vecchione. From 1971 to 1987,
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<PAGE> 50
Mr. Thauer held various positions with Avon Products, Inc., including U.S. Legal
Department Head and Corporate Assistant Secretary.
Mr. Klosk joined the Company in October 1992 as Vice President,
Administration. From February 1988 until he joined Cambrex, he was Vice
President, Administration and Corporate Secretary for the Genlyte Group, Inc., a
lighting fixture manufacturer. From 1985 to January 1988, he was Vice President,
Administration for Lightolier, Inc., a subsidiary of the Genlyte Group, Inc.
Dr. Rein was appointed Senior Vice President in April 1993. He joined the
Company in May 1991 as President of Cambrex Fine Chemicals Group. For more than
five years prior thereto, he was Director of Commercial Planning for W. R. Grace
& Company.
Mr. Eilender was appointed Executive Vice President in December 1994. He
previously held the position of President of CasChem, Inc. and Cosan Chemical
Corporation. He was employed by the Company's Cosan Chemical Corporation
subsidiary when it was acquired by the Company in October 1985, and joined the
Company as a result of the acquisition. For more than three years prior to
October 1985 he held various executive positions with Cosan, including Vice
President, Research and Development and Executive Vice President. He was
President of Cosan from October 1986 until July 1989, at which time he was
appointed to the additional position of President of CasChem, Inc.
Mr. Noack joined the Company in December 1991 as President and Chief
Operating Officer of Nepera, Inc. For more than five years prior thereto he held
various positions with Hexcel Corporation, including General Manager of the
Chemical Products Division.
Mr. Smith was appointed Vice President, General Manager of Salsbury
Chemicals, Inc. upon its acquisition by the Company in July 1991. Prior to the
acquisition, Mr. Smith had many years of service with Solvay Animal Health,
Inc., starting in 1968 as Chemical Engineer through his appointment as Director,
Chemical Operations in 1982.
Dr. Parlman joined the Company as Vice President and General Manager of
Zeeland Chemicals, Inc. in March 1994. Prior to such time, he was Vice President
and General Manager of the Tretolite Division of Petrolite. Dr. Parlman has
extensive experience in market development and research and development.
Mr. Behrend joined the Company in 1988 as Manager, Business Analysis. In
July 1991, he was named Director, Operations of Fine Chemicals Group, with
responsibility for plant operations at the Heico, Humphrey, Salsbury and Zeeland
facilities. In September 1992, Mr. Behrend was appointed General Manager of
Heico Chemicals, Inc. and The Humphrey Chemical Company. Prior to joining
Cambrex, Mr. Behrend was associated with Colgate Palmolive, and also had been a
Portfolio Specialist.
Mr. Van Hulle was appointed President of CasChem, Inc. in December 1994. He
joined CasChem in July 1994 as Executive Vice President. For more than five
years prior thereto he was General Manager of the Fine Chemicals Group for
General Chemical Corporation, and had extensive experience with Air Products &
Chemicals, Inc.
Mr. Glassell was appointed Vice President of Cambrex in November 1994. As
Managing Director of Cambrex Limited and President of Cambrex Limited, the newly
acquired Nobel/Profarmaco business, he is responsible for Cambrex's European
operations. After extensive management experience at Nobel/ Profarmaco, he
joined Cambrex as a result of the Nobel/Profarmaco Acquisition. In 1989, he
joined Nobel as President and CEO for Nobel's Chemistry Business. From 1986 to
1989, he worked for the agricultural division of Berol Europe Ltd.
Mr. Baldwin has been Chairman of the Board since July 1991, and a director
of the Company since it began business in December 1981. On January 26, 1995,
Mr. Baldwin announced his retirement, effective April 1, 1995, as Chief
Executive Officer of the Company, a position he also had held since December
1981. Mr. Baldwin retired as an employee of the Company effective April 30,
1995. He is a member of the Environmental and Governance Committees of the
Company's Board of Directors, and he is a director of Church & Dwight Co., Inc.
and Congoleum Corporation.
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<PAGE> 51
Dr. Dixon, who serves on the Audit, Compensation and Environmental
Committees of the Company's Board of Directors, has been a consultant to the
pharmaceutical industry since May 1986. Prior to that time, she was Vice
President and Secretary of Medical Market Specialties Incorporated, as well as a
member of its Board of Directors. Dr. Dixon previously served as Medical
Director, Schering Laboratories, Schering-Plough Corporation. Prior to that, she
was Executive Director Biodevelopment, Pharmaceuticals Division, CIBA-GEIGY
Corporation. She is a member of the Boards of Directors of Church & Dwight Co.,
Inc. and Enzon, Inc.
Mr. Dwyer is Chairman of the Environmental Committee and a member of the
Compensation Committee of the Company's Board of Directors. Mr. Dwyer served as
President of Nuodex Inc., a chemical manufacturer, from its formation in 1982
until its acquisition by Huls AG of West Germany in 1985. Thereafter, he was
Chairman of the Board of Huls America Inc., a chemical manufacturer, until May
1991. Since May 1991, he has been Chairman of International Dioxide, Inc., a
chemical manufacturer.
Mr. Goodman is a member of the Audit, Compensation and Environmental
Committees of the Company's Board of Directors. Since 1971 he has been President
of Continental Fidelity, Inc., an editorial consulting services and products
firm. He is a director of USAir Group, Inc., and a trustee of The Urban
Institute.
Professor Harrigan is a member of the Audit, Environmental and Governance
Committees of the Company's Board of Directors. Since 1981 she has been a
Professor in the Management of Organizations Division of the Columbia University
Business School, where she also has been, since 1994, Faculty Director of the
Chazen Institute for International Business and, since 1993, the Henry R. Kravis
Professor of Business Leadership. Professor Harrigan has been a member of the
Advisory Board of Ronin Development since 1988, and was an External Member of
the Strategic Planning Committee of the Panasonic Industrial Controls Division,
Matsushita Corporation, from 1989 to 1992. She served as a member of the Board
of Governors of the Academy of Management from 1986 to 1988.
Mr. Hendrix has been a principal of Clayton, Dubilier & Rice, a private
investment firm, since November 1994. From 1973 until that time, Mr. Hendrix
served with Reliance Electric Company, a manufacturer and seller of industrial
and telecommunications equipment and services, in a series of executive level
positions, including the positions of chief operating officer and director from
1992 until his departure. Mr. Hendrix is a member of the Compensation and
Environmental Committees of the Company's Board of Directors. Mr. Hendrix is a
director of Keithley Instruments, Inc., National City Bank of Cleveland, Allison
Engine Co., Wesco Distribution, Inc., and Remington Arms Co. He is also a
director of the Clemson University Foundation, and previously served on the
Board of Governors of the National Electrical Manufacturers Association and the
Board of Directors of the Cleveland Chapter of the American Red Cross.
Mr. Kaufthal is Chairman of the Audit Committee and a member of the
Environmental Committee of the Company's Board of Directors. He has been a
Managing Director of the investment firm of Wertheim Schroder & Co. Incorporated
since 1987. Prior to 1987, he held various executive positions with NL
Industries, Inc., a firm in the chemicals and petroleum services businesses,
where he served as Senior Vice President and Chief Financial Officer beginning
in 1983. Mr. Kaufthal is a director of Rexene Corporation, Russ Bernie and
Company, Inc. and United Retail Group, Inc.
Mr. LeBuhn is Chairman of the Governance Committee and a member of the
Audit and Environmental Committees of the Company's Board of Directors. He is a
former Chairman of Investor International (U.S.), Inc., a private investment
firm, where he served from 1984 until 1993 as President, and until October 1994
as Chairman of the Board. Mr. LeBuhn is a director of USAir Group, Inc.,
Acceptance Insurance Lomas Financial Corp., Amdura Corp. and Enzon Corp.
Mr. Phypers is Chairman of the Compensation Committee and a member of the
Environmental and Governance Committees of the Company's Board of Directors. In
February 1987 he retired as Senior Vice President and director of International
Business Machines Corporation, after 32 years in various positions including
Chief Financial Officer, member of the Management Committee, Corporate Office
contact for international operations and head of the Corporate Operations Staff.
Mr. Phypers is a director of American International Group Inc., Bethlehem Steel
Corporation and Church & Dwight Co., Inc.
49
<PAGE> 52
DESCRIPTION OF CAPITAL STOCK
The Restated Certificate of Incorporation of the Company provides that the
authorized capital stock consists of 20,000,000 shares of Common Stock, par
value $.10 per share, 730,746 shares of Nonvoting Common Stock, par value $.10
per share, 400,000 shares of Class A 8.25% Cumulative Preferred Stock, par value
$.10 per share (the "Class A Preferred Stock"), 40,597 shares of Class B 8.25%
Cumulative Convertible Preferred Stock, par value $.10 per share (the "Class B
Preferred Stock"), 19,403 shares of Class C Convertible Preferred Stock, par
value $.10 per share (the "Class C Preferred Stock"), 73,089 shares of Class D
8% Convertible Preferred Stock, par value $.10 per share (the "Class D Preferred
Stock"), and 5,000,000 shares of Series Preferred Stock, par value $.10 per
share. As of May 31, 1995 there were 5,510,102 shares of Common Stock
outstanding, and no shares of Nonvoting Common Stock, Class A Preferred Stock,
Class B Preferred Stock, Class C Preferred Stock, Class D Preferred Stock or
Series Preferred Stock outstanding.
COMMON STOCK AND NONVOTING COMMON STOCK
The Common Stock and Nonvoting Common Stock (collectively, for purposes of
this section, the "Common Shares") have the same rights and privileges and rank
equally, share ratably in any dividends or distributions on liquidation and are
identical in all respects except with respect to voting rights. The holders of
Common Stock are entitled to one vote for each share held of record on each
matter submitted to a vote of stockholders. Holders of Common Stock may not
cumulate their votes in the election of directors. The holders of Nonvoting
Common Stock are not entitled to vote on any matter except as otherwise required
by law.
The Common Shares have no preemptive, subscription or similar rights and
are not subject to redemption. Dividends may be paid on the Common Shares in the
discretion of the Board of Directors from sources legally available therefor,
subject to any limitations which may be imposed by the terms of any outstanding
series of Series Preferred Stock. Upon any dissolution of the Company, holders
of Common Shares would be entitled to share pro rata in the assets remaining
after payment of corporate debts and expenses and all other priority claims,
including the claims of holders of shares of Series Preferred Stock that may be
issued and outstanding. The Common Shares currently outstanding are, and the
shares of Common Stock offered hereby when issued will be, fully paid and
non-assessable.
In accordance with the Restated Certificate of Incorporation, each
outstanding share of Nonvoting Common Stock, at the option of the holder
thereof, is convertible into a share of Common Stock to the extent that the
holder thereof is not prohibited by law or regulation (such as laws or
regulations relating to investments by subsidiaries of bank holding companies)
from owning voting stock of the Company.
CLASS A, B, C AND D PREFERRED STOCK
By certificates dated October 27, 1987 and filed with the Delaware
Secretary of State, all of the authorized shares of Class A Preferred Stock,
Class B Preferred Stock, Class C Preferred Stock and Class D Preferred Stock,
respectively, were retired. The Restated Certificate of Incorporation provides
that upon retirement of such shares, such shares are not reissuable.
SERIES PREFERRED STOCK
The Board of Directors of the Company has the authority without any further
vote or action by the stockholders to provide for the issue of up to 5,000,000
shares of Series Preferred Stock in one or more series. Each series may have
such rights, designations, preferences (including preferences as to dividends
and upon any liquidation of the Company), and relative, participation, optional
and other special rights, and such qualifications, limitations and restrictions
as are stated in the resolutions of the Board of Directors providing for the
issue of such series, and consequently could have powers and rights (including
voting and conversion rights) which could adversely affect the rights, including
the voting power, of the holders of Common Stock.
50
<PAGE> 53
SPECIAL CHARTER AND BY-LAW PROVISIONS
The Restated Certificate of Incorporation and the By-Laws of the Company
contain provisions that could have certain anti-takeover effects.
The description of such provisions set forth below is intended as a summary
only and is qualified in its entirety by reference to the Restated Certificate
of Incorporation and the By-Laws, which are included as exhibits to the
Registration Statement of which this Prospectus is a part. The Board of
Directors has no current plans to formulate or effect additional measures that
could have anti-takeover effects.
Classified Board of Directors. The Certificate of Incorporation provides
for the Board of Directors to be divided into three classes of directors serving
staggered three-year terms. As a result, approximately one-third of the Board of
Directors is elected each year.
The classification of directors has the effect of making it more difficult
for stockholders to change the composition of the Board of Directors in a
relatively short period of time. At least two annual meetings of stockholders,
instead of one, generally are required to effect a change in a majority of the
Board of Directors. Such a delay may help ensure that the Board of Directors and
the stockholders, if confronted by a stockholder attempting to force a stock
repurchase at a premium above market, a proxy contest or an extraordinary
corporate transaction, will have sufficient time to review the proposal and
appropriate alternatives to the proposal and to act in what is believed to be
the best interests of the stockholders. The classified board provision also
could have, however, the effect of discouraging a third party from making a
tender offer or otherwise attempting to obtain control of the Company, even
though such an attempt might otherwise be desired by the Company's stockholders.
Number of Directors; Removal; Filling Vacancies. The Certificate of
Incorporation provides that the number of directors will be fixed by, or in the
manner provided in, the By-Laws. The By-Laws provide that the entire Board of
Directors shall consist of not less than three members, the exact number to be
set from time to time by the Board of Directors. Accordingly, the Board of
Directors, and not the stockholders, have the authority to determine the number
of directors and could prevent any stockholder from obtaining majority
representation on the Board of Directors by enlarging the Board of Directors and
filling the new directorships with its own nominees. Moreover, under Delaware
law and as is provided in the Restated Certificate of Incorporation, in the case
of a corporation having a classified board, stockholders may remove a director
only for cause. This provision, when coupled with the provision of the Restated
Certificate of Incorporation authorizing the Board of Directors to fill vacant
directorships, precludes a stockholder from removing incumbent directors without
cause and simultaneously gaining control of the Board of Directors by filling
the vacancies created by such removal with its own nominees.
No Stockholder Action by Written Consent; Special Meetings. The Restated
Certificate of Incorporation provides that any action required or permitted to
be taken by the stockholders of the Company may be effected only at an annual or
special meeting of stockholders, and prohibits stockholder action by written
consent in lieu of a meeting. The By-Laws provide that special meetings of
stockholders may be called only by the Board of Directors, the Chairman of the
Board of Directors or the President of the Company. Stockholders are not
permitted to call a special meeting or to require that the Board of Directors
call a special meeting of stockholders.
The provisions of the Restated Certificate of Incorporation prohibiting
stockholder action by written consent may have the effect of delaying
consideration of a stockholder proposal until the next annual meeting unless a
special meeting is called by the Board of Directors, the Chairman of the Board
of Directors or the President of the Company. These provisions would also
prevent the holders of a majority of the outstanding shares of Common Stock from
using the written consent procedure to take stockholder action and from taking
action by consent without giving all the stockholders of the Company entitled to
vote on a proposed action the opportunity to participate in determining such
proposed action.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The By-Laws establish an advance notice procedure with regard to
the nomination, other than by or at the direction of the Board of Directors or a
committee thereof, of candidates for election as directors (the "Nomination
51
<PAGE> 54
Procedure") and with regard to certain matters to be brought before an annual
meeting of stockholders of the Company (the "Business Procedure").
The Nomination Procedure provides that the notice of proposed stockholder
nominations for the election of directors must be timely given in writing to the
Secretary of the Company prior to the meeting at which directors are to be
elected. The Business Procedure provides that at an annual meeting and subject
to any other applicable requirements, only such business may be conducted as has
been brought before the meeting by, or at the direction of, the Board of
Directors or by a stockholder who has given timely prior written notice to the
Secretary of the Company of such stockholder's intention to bring such business
before the meeting. To be timely, notice must be received (i) in the case of the
Nomination Procedure, not less than 90 days prior to the anniversary date of the
immediately preceding annual meeting and (ii) in the case of the Business
Procedure, not less than 60 days nor more than 90 days prior to the meeting (or
if fewer than 70 days' prior public disclosure of the meeting date is given or
made by the Company, not later than the tenth day following the day on which the
public disclosure was made).
Notice to the Company from a stockholder who proposes to nominate a person
at a meeting for election as a director must contain all information about that
person as would be required to be included in a proxy statement soliciting
proxies for the election of the proposed nominee (including such person's
written consent to serving as a director if elected) and certain information
about the stockholder proposing to nominate that person. Notice relating to the
conduct of other business at an annual meeting must contain certain information
about such business and about the stockholder who proposes to bring the business
before the meeting, including a brief description of the business the
stockholder proposes to bring before the meeting, the class and the number of
shares of the Company beneficially owned by such stockholder, and any material
interest of such stockholder in the business so proposed.
The purpose of the Nomination Procedure, by requiring advance notice of
nominations by stockholders, is to afford the Board of Directors a meaningful
opportunity to consider the qualifications of the proposed nominees and, to the
extent deemed necessary or desirable by the Board of Directors, to inform
stockholders about such qualifications. The purpose of the Business Procedure,
by requiring advance notice of proposed business, is to provide a more orderly
procedure for conducting annual meetings of stockholders and, to the extent
deemed necessary or desirable by the Board of Directors, to provide the Board of
Directors with a meaningful opportunity to inform stockholders, prior to the
meeting, of any business proposed to be conducted at such meeting, together with
any recommendation as to the Board of Directors' position or belief as to action
to be taken with respect to such business, so as to enable stockholders better
to determine whether they desire to attend such meeting or grant a proxy as to
the disposition of any such business.
Although the By-Laws do not give the Board of Directors any power to
approve or disapprove stockholder nominations for the election of directors or
any other business desired by stockholders to be conducted at an annual meeting,
the By-Laws may have the effect of precluding a nomination for the election of
directors or precluding the conducting of business at a particular meeting if
the proper procedures are not followed, and may discourage or deter a third
party from conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempting to obtain control of the Company, even if the
conduct of such solicitation or such attempt might otherwise be desired by the
Company's stockholders.
Special Voting Requirement for Removal of Directors. The Restated
Certificate of Incorporation requires the affirmative vote of holders of at
least two-thirds of the voting power of all the outstanding shares of stock
entitled to vote generally in the election of directors, voting together as a
single class, to remove a director for cause. The requirement of a two-thirds
vote to effect such removal could enable a minority of the stockholders of the
Company to prevent such occurrence.
Amendment of Certain Provisions of the Restated Certificate of
Incorporation and the By-Laws. The Restated Certificate of Incorporation
requires the affirmative vote of the holders of at least two-thirds of the
voting power of all the outstanding shares of stock entitled to vote generally
in the election of directors, voting together as a single class, for any
amendment of the provisions of the Restated Certificate of Incorporation
described above or of the By-Laws. These provisions will make it more difficult
for stockholders to make changes in the Restated Certificate of Incorporation or
By-Laws, including changes designed to facilitate the exercise of control over
the Company. In addition, the requirement for approval by at least a two-thirds
52
<PAGE> 55
stockholder vote would enable the holders of a minority of the voting stock of
the Company to prevent the holders of a majority or more of the stock from
amending such provisions of the Restated Certificate of Incorporation and the
By-Laws.
Series Preferred Stock. The Restated Certificate of Incorporation
authorizes the Board of Directors to fix, with respect to any series of the
Series Preferred Stock, the powers, preferences and rights of the shares of such
series. Although the Company has no intention at the present time of doing so,
it could issue Series Preferred Stock that could, depending on its terms, either
impede or facilitate the completion of a merger, tender offer or other takeover
attempt. Although the Board of Directors is required to make any determination
to issue such stock based on its judgment as to the best interests of the
stockholders of the Company, the Board of Directors could act in a manner that
would discourage an acquisition attempt or other transaction that some, or a
majority, of the stockholders might believe to be in their best interests or in
which stockholders might receive a premium for their stock over the then market
price of such stock. The Board of Directors does not at present intend to seek
stockholder approval prior to any issuance of currently authorized stock, unless
otherwise required by law. Frequently, opportunities arise that require prompt
action, and the Board of Directors believes that the delay occasioned by seeking
stockholder approval of a specific issuance could be to the detriment of the
Company and its stockholders.
DELAWARE LAW
The Company is subject to Section 203 of the General Corporation Law of
Delaware (the "Delaware Law"). In general, Section 203 of the Delaware Law
prohibits certain publicly held Delaware corporations from engaging in a
"business combination" with an "interested stockholder" for a period of three
years following the date of the transaction in which the person or entity became
an interested stockholder, unless the business combination is approved in a
prescribed manner or certain other exemptions apply. For purposes of Section
203, "business combination" is defined broadly to include mergers, asset sales
and other transactions resulting in a financial benefit to the interested
stockholder. Generally, an "interested stockholder" is any person or entity who,
together with affiliates and associates, owns (or within the three immediately
preceding years did own) 15% or more of the corporation's voting stock.
Stockholders who owned 15% or more of the Company's voting stock on December 23,
1987 are not considered interested stockholders under Section 203 of the
Delaware Law.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.
53
<PAGE> 56
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, the Underwriters named below have severally
agreed to purchase, and the Company has agreed to sell to them severally, the
respective number of shares of Common Stock set forth opposite the names of such
Underwriters below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
------------------------------------------------------------------ ---------
<S> <C>
Morgan Stanley & Co. Incorporated.................................
Wertheim Schroder & Co. Incorporated..............................
---------
Total................................................... 1,500,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to take
and pay for all of the shares of Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any such shares are
taken.
The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a concession
not in excess of $ a share below the public offering price. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ a share to other Underwriters or to certain other dealers. After
the initial offering of the shares of Common Stock, the offering price and other
selling terms may from time to time be varied by the Underwriters.
Pursuant to the Underwriting Agreement, the Company has granted to the
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to 225,000 additional shares of Common Stock at the
public offering price set forth on the cover page hereof, less underwriting
discounts and commissions. The Underwriters may exercise such option to purchase
solely for the purpose of covering over-allotments, if any, made in connection
with the Offering. To the extent such option is exercised, each Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional shares of Common Stock as the number set
forth next to such Underwriter's name in the preceding table bears to the total
number of shares of Common Stock offered by the Underwriters hereby.
The Company and certain of its stockholders, officers and directors have
agreed in the Underwriting Agreement not to offer, pledge, sell, contract to
sell or otherwise dispose of any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for shares of Common Stock, for
a period of 90 days after the date of this Prospectus, without the prior written
consent of Morgan Stanley & Co. Incorporated, as representative of the several
Underwriters; other than (i) the shares of Common Stock offered hereby or (ii)
shares of Common Stock issuable upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof of which the
Underwriters have been advised in writing.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
From time to time, Wertheim Schroder & Co. Incorporated and its affiliates
have provided investment banking services to the Company, for which they
received normal and customary fees.
54
<PAGE> 57
The Common Stock is listed for trading on the American Stock Exchange under
the symbol "CBM."
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock being offered
hereby will be passed upon for the Company by Debevoise & Plimpton, 875 Third
Avenue, New York, New York 10022. Certain legal matters will be passed upon for
the Underwriters by Davis Polk & Wardwell, 450 Lexington Avenue, New York, New
York 10017.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1994 and December 31, 1993, and for each of the three years in the period ended
December 31, 1994, included in this Prospectus have been so included in reliance
on the report of Coopers & Lybrand L.L.P., independent accountants, given upon
the authority of said firm as experts in accounting and auditing.
55
<PAGE> 58
CAMBREX CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants..................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1993.......................... F-3
Consolidated Income Statements for the years ended December 31, 1994, 1993 and 1992... F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994,
1993 and 1992....................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and
1992................................................................................ F-6
Notes to Consolidated Financial Statements............................................ F-7
Unaudited Condensed Consolidated Balance Sheets as of March 31, 1995 and December 31,
1994................................................................................ F-26
Unaudited Condensed Consolidated Income Statements for the three months ended March
31, 1995 and 1994................................................................... F-27
Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended
March 31, 1995 and 1994............................................................. F-28
Notes to Unaudited Condensed Consolidated Financial Statements........................ F-29
</TABLE>
F-1
<PAGE> 59
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
of Cambrex Corporation:
We have audited the accompanying consolidated balance sheets of Cambrex
Corporation and Subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1994. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Cambrex Corporation and Subsidiaries as of December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in Notes 9 and 15 to the consolidated financial statements, in
1993 the Company changed its method of accounting for income taxes and changed
its method of accounting for postretirement benefits other than pensions.
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
January 19, 1995
F-2
<PAGE> 60
CAMBREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 9,087 $ 161
Receivables:
Trade accounts, less allowance for doubtful accounts of $1,288 and
$355 at respective dates......................................... 47,742 27,778
Other............................................................. 5,112 237
-------- --------
52,854 28,015
Inventories.......................................................... 61,979 33,730
Deferred tax asset................................................... 1,089 1,315
Other current assets................................................. 5,689 3,557
-------- --------
Total current assets......................................... 130,698 66,778
Property, plant and equipment, net..................................... 172,282 89,784
Intangible assets, net................................................. 56,991 7,621
Other assets........................................................... 506 2,662
-------- --------
Total assets................................................. $360,477 $166,845
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities............................. $ 48,402 $ 20,872
Income taxes payable................................................. 5,982 3,409
Short-term debt...................................................... 52,368
Current portion of long-term debt.................................... 4,021 4,000
-------- --------
Total current liabilities.................................... 110,773 28,281
Long-term debt......................................................... 115,975 36,261
Deferred taxes......................................................... 14,258 5,986
Other noncurrent liabilities........................................... 17,505 8,748
-------- --------
Total liabilities................................................. $258,511 $ 79,276
Commitments and contingencies
Stockholders' equity:
Common Stock, $.10 par value; issued 6,078,781 and 6,014,681 shares
at respective dates............................................... 607 601
Additional paid-in capital........................................... 73,673 72,627
Retained earnings.................................................... 35,935 25,859
Additional minimum pension liability................................. (1,030)
Treasury stock, at cost; 756,806 and 819,049 shares at respective
dates............................................................. (9,690) (10,488)
Cumulative translation adjustment.................................... 1,441
-------- --------
Total stockholders' equity................................... 101,966 87,569
-------- --------
Total liabilities and stockholders' equity................... $360,477 $166,845
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 61
CAMBREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Net revenues............................................... $241,634 $197,203 $179,452
Operating expenses:
Cost of goods sold....................................... 183,753 145,425 133,416
Selling, general and administrative...................... 31,216 29,286 28,201
Research and development................................. 5,689 5,843 4,046
-------- -------- --------
Total operating expenses......................... 220,658 180,554 165,663
-------- -------- --------
Operating profit........................................... 20,976 16,649 13,789
Other (income) expenses
Interest income.......................................... (95) (41) (26)
Interest expense......................................... 4,676 2,812 2,463
Other -- net............................................. (497) 466 1,054
-------- -------- --------
Income before income taxes................................. 16,892 13,412 10,298
Provision for income taxes................................. 5,766 4,771 4,068
-------- -------- --------
Net income................................................. $ 11,126 $ 8,641 $ 6,230
======== ======== ========
Earnings per share of common stock and common stock
equivalents:
Primary.................................................. $ 1.96 $ 1.64 $ 1.27
Fully diluted............................................ $ 1.95 $ 1.60 $ 1.23
Weighted average shares outstanding:
Primary.................................................. 5,674 5,282 4,888
Fully diluted............................................ 5,699 5,484 5,242
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 62
CAMBREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
------------------ NONVOTING ADDITIONAL
PAR COMMON MINIMUM CUMULATIVE TOTAL
SHARES VALUE STOCK PAID-IN RETAINED PENSION TREASURY TRANSLATION STOCKHOLDERS'
ISSUED ($.10) (PAR $.10) CAPITAL EARNINGS LIABILITY STOCK ADJUSTMENT EQUITY
---------- ------ ---------- ------- -------- ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1991.................. 5,656,184 $566 $67,030 $12,922 $(11,801) $ 68,717
Net income........... 6,230 6,230
Cash dividends at
$0.20 per share.... (950) (950)
Exercise of stock
options............ 49,550 5 306 311
Shares issued under
savings plan....... 378 749 1,127
Purchase of treasury
stock.............. (258) (258)
---------- ------ --- ------- -------- ---------- -------- ---------- ------------
Balance at December 31,
1992................. 5,705,734 571 -- 67,714 18,202 -- (11,310) -- 75,177
Net income........... 8,641 8,641
Cash dividends at
$0.20 per share.... (984) (984)
Exercise of stock
options............ 51,550 5 334 339
Conversion of
subordinated
notes.............. 257,397 25 3,965 3,990
Additional minimum
pension
liability.......... $ (1,030) (1,030)
Shares issued under
savings plan....... 614 822 1,436
---------- ------ --- ------- -------- ---------- -------- ---------- ------------
Balance at December 31,
1993................. 6,014,681 601 -- 72,627 25,859 (1,030) (10,488) -- 87,569
Net income........... 11,126 11,126
Cash dividends at
$0.20 per share.... (1,050) (1,050)
Exercise of stock
options............ 64,100 6 395 401
Additional minimum
pension
liability.......... 1,030 1,030
Shares issued under
savings plan....... 651 798 1,449
Adjustment for
foreign currency
translation........ $1,441 1,441
---------- ------ --- ------- -------- ---------- -------- ---------- ------------
Balance at December 31,
1994................. 6,078,781 $607 $-- $73,673 $35,935 -- $ (9,690) $1,441 $101,966
========= ===== ======== ======= ======= ======== ======== ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 63
CAMBREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
--------- -------- --------
<S> <C> <C> <C>
Cash flows from operations:
Net income.............................................. $ 11,126 $ 8,641 $ 6,230
Depreciation and amortization........................... 15,937 11,779 10,323
Provision for environmental contingencies............... 1,029 1,747
Increase (decrease) in deferred taxes................... 3,183 1,112 (16)
Changes in assets and liabilities:
Receivables.......................................... (3,349) (228) 862
Inventories.......................................... (1,212) (3,709) (1,941)
Other current assets................................. (44) (684) (1,100)
Accounts payable and accrued liabilities............. 3,625 1,016 6,666
Income taxes payable................................. (1,852) 57 1,757
Other noncurrent assets and liabilities.............. 15 (2,623) (506)
--------- -------- --------
Net cash provided from operations.................... 27,429 16,390 24,022
--------- -------- --------
Cash flows from investing activities:
Capital expenditures.................................... (20,825) (15,535) (9,133)
Acquisition of businesses............................... (131,697) (5,886) (20,228)
Proceeds from sale of product lines..................... 2,152
--------- -------- --------
Net cash (used in) investing activities.............. (150,370) (21,421) (29,361)
--------- -------- --------
Cash flows from financing activities:
Dividends............................................... (1,050) (984) (950)
Increase in short-term debt............................. 50,784
Long-term debt activity (including current portion):
Borrowings........................................... 134,679 42,111 65,544
Repayments........................................... (56,244) (38,274) (59,985)
Proceeds from the issuance of common stock.............. 401 339 311
Proceeds from the sale of treasury stock................ 1,449 1,436 1,127
Purchase of treasury stock.............................. (257)
--------- -------- --------
Net cash provided from financing activities............. 130,019 4,628 5,790
--------- -------- --------
Effect of exchange rate changes on cash................... 1,848
---------
Net increase (decrease) in cash........................... 8,926 (403) 451
Cash at beginning of year................................. 161 564 113
--------- -------- --------
Cash at end of year....................................... $ 9,087 $ 161 $ 564
========= ======== ========
Supplemental disclosure:
Interest paid........................................ $ 4,996 $ 2,810 $ 2,182
Income taxes paid.................................... $ 4,854 $ 4,126 $ 3,203
Noncash transactions:
Conversion of subordinated notes to common stock........ $ 3,990
Additional minimum pension liability recorded as a
charge to stockholders' equity in 1993 and eliminated
in 1994.............................................. $ (1,030) $ 1,030
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 64
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(1) THE COMPANY
Cambrex Corporation supplies a broad line of pharmaceutical related
products, specialty chemicals, fine chemicals and commodity chemical
intermediates to a diverse customer base for use in a wide variety of
applications.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Cash Equivalents
Temporary cash investments with an original maturity of less than three
months are considered cash equivalents.
Financial Instruments
Financial instruments consist principally of accounts receivable.
Concentration of credit risk exists inasmuch as the Company sells its products
to customers primarily in the chemical and pharmaceutical industries. However,
receivables are spread among many customers and are geographically dispersed. No
customer represents more than 10% of sales nor receivables.
Inventories
Inventories are stated at the lower of cost, determined on a first-in,
first-out basis, or market.
Property, Plant and Equipment
Property, plant and equipment is stated at cost, net of accumulated
depreciation. Plant and equipment are depreciated on a straight-line basis over
the estimated useful lives for each applicable asset group as follows:
<TABLE>
<S> <C>
Buildings and improvements.................................. 15 to 20 years
Machinery and equipment..................................... 5 to 10 years
Furniture and fixtures...................................... 3 to 5 years
</TABLE>
When assets are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts, and any resulting gain
or loss is reflected in other (income) expense, net. Total interest capitalized
in 1994 amounted to $461.
Intangible Assets
Intangible assets are recorded at cost and amortized on a straight-line
basis as follows:
<TABLE>
<S> <C>
Patents....................................... Amortized over the remaining
life of individual patents
(average 5 years)
Goodwill...................................... 4 to 20 years
Product technology............................ 5 to 17 years
Non-compete agreements........................ 5 years
Trademarks and other.......................... 1 to 40 years
</TABLE>
F-7
<PAGE> 65
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
At each balance sheet date, the Company evaluates the realizability of
intangibles based upon expectations of non-discounted cash flows and operating
income for each subsidiary having material intangible balances.
Income Taxes
The Company files a consolidated Federal income tax return which includes
all domestic subsidiaries and foreign income where appropriate.
Deferred taxes are recorded based upon differences between the financial
statement and tax bases of assets and liabilities, and available tax credit
carryforwards.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes." Prior to that date,
income taxes were accounted for in accordance with the provisions of Accounting
Principles Board Opinion No. 11.
Foreign Currency
The functional currency of the Company's foreign subsidiaries is the
applicable local currency. The translation of the applicable foreign currencies
into U.S. dollars is performed for balance sheet accounts using current exchange
rates in effect at the balance sheet date and for revenue and expense accounts
and cash flows using average rates of exchange prevailing during the year.
Adjustments resulting from the translation of foreign currency financial
statements are accumulated in a separate component of stockholders' equity until
the entity is sold or substantially liquidated. Gains or losses resulting from
foreign currency transactions are included in the results of operations, except
for those relating to intercompany transactions of a long-term investment nature
which are accumulated in stockholders' equity.
Earnings Per Common Share
The calculation of primary earnings per common share is based on the
weighted average number of common shares and common share equivalents
outstanding during the applicable period. Fully diluted earnings per share
assumes conversion of the outstanding convertible subordinated notes in 1993 and
prior years, and the elimination of the related interest expense, net of tax.
(3) ACQUISITIONS AND DIVESTITURES
(a) On October 12, 1994, the Company completed the acquisition of the stock
of Nobel's Pharma Chemistry Business ("Nobel/Profarmaco") from Akzo Nobel for
approximately $126,000. The business consists of Nobel Chemicals AB in
Karlskoga, Sweden, Profarmaco Nobel S.r.1. in Milan, Italy and sales companies
in Germany, England and the United States. Nobel/Profarmaco manufactures fine
chemical intermediates and bulk active ingredients for pharmaceutical products.
The transaction was accounted for as a purchase and was financed with the
Company's new credit agreement, and resulted in goodwill of $45,756 which is
being amortized on a straight line basis over 17.5 years.
On January 31, 1994, Cambrex purchased substantially all of the assets of
Hexcel Corporation's fine chemicals business located in Middlesbrough, England,
for approximately $7,400 and the assumption of certain current liabilities in
the amount of $2,100. The business, now known as Seal Sands Chemicals, Ltd.
("Seal Sands"), manufactures chemical intermediates used in the pharmaceutical,
photographic, water treatment, health care, and plastics industries. On May 27,
1994, the Company purchased the Topanol product line from Zeneca Limited to
complement the Seal Sands operation for $4,600. These transactions
F-8
<PAGE> 66
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(3) ACQUISITIONS AND DIVESTITURES -- (CONTINUED)
were accounted for as purchases and were financed with the Company's credit
agreement, and resulted in goodwill of $1,881 for Seal Sands and $504 for
Topanol which are being amortized on a straight line basis over 17.5 years and 5
years, respectively.
(b) On March 12, 1993, the Company purchased substantially all of the
assets of Viscosity Oil's fiber optic gel business for $5,886. The transaction
was accounted for as a purchase and was financed with the Company's credit
agreement. No goodwill resulted from this transaction.
(c) On March 31, 1992, the Company purchased substantially all of the
assets of the fine chemicals business of Hexcel Fine Chemicals, now known as
Zeeland Chemicals, Inc. ("Zeeland"), for $20,251, and the assumption of certain
liabilities including a variable rate Industrial Development Revenue Bond in the
principal amount of $4,150, and the remaining payments of a capital lease
obligation with a net present value of $8,214. The transaction was accounted for
as a purchase and was financed with the Company's credit agreement. No goodwill
resulted from this transaction.
(d) Unaudited pro forma results as if the Nobel/Profarmaco and Seal Sands
acquisitions and the Topanol product line purchase had occurred at January 1 of
each of 1994 and 1993 are presented below. Unaudited pro forma results as if the
Zeeland acquisition had occurred at January 1 of 1992 are also presented below.
The pro forma financial information is not necessarily indicative of results of
operations that would have occurred had the combinations been in effect at the
beginning of the periods nor of future results of operations of the combined
companies.
These transactions were accounted for as purchases and were financed with
the Company's credit agreement.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Net revenues............................... $ 328,538 $ 295,704 $ 186,569
Net income................................. 13,990 7,469 6,598
Earnings per share
Primary.................................. 2.47 1.41 1.35
Fully diluted............................ 2.45 1.36 1.30
</TABLE>
F-9
<PAGE> 67
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(3) ACQUISITIONS AND DIVESTITURES -- (CONTINUED)
Assets acquired and liabilities assumed are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1992
-------- --------
<S> <C> <C>
Cash................................................... $ 6,305
Receivables............................................ 20,638 $ 4,653
Inventories............................................ 28,791 3,845
Deferred tax asset..................................... 481
Other current assets................................... 3,574 32
Property, plant and equipment.......................... 76,103 26,348
Goodwill............................................... 51,381
Accounts payable and accrued liabilities............... (26,090) (306)
Income taxes payable................................... (4,551)
Deferred taxes......................................... (6,005)
Other non-current liabilities.......................... (9,752) (14,344)
-------- --------
$140,875 $ 20,228
======== ========
</TABLE>
The pro forma information has not been adjusted for the effect of the fiber
optic gel business, acquired in March of 1993, as such amounts cannot be
reasonably separated from existing operations and are deemed to be immaterial.
(e) In 1994, the Company sold three small businesses: Wicken cosmetic
esters, black and white photographic chemicals and the Hydrogels business for
$2,152. No gain or loss resulted from the sales of these businesses.
(4) FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standard No. 112 "Employers' Accounting
for Postemployment Benefits" (SFAS 112) requires the recognition on an accrual
basis of all types of postemployment benefits provided to former or inactive
employees subsequent to employment but before retirement. The Company currently
provides limited benefits in this regard. The Company adopted SFAS 112 effective
January 1, 1994. The net effect upon 1994 pretax operating results was
immaterial.
Statement of Financial Accounting Standard No. 119 "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments"
requires disclosure about amounts, nature, and terms of derivative financial
instruments held or issued and encourages disclosure of quantitive information
about the market risks associated with those instruments. As of December 31,
1994, the Company had not issued nor did it hold such instruments.
F-10
<PAGE> 68
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(5) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
------- -------
<S> <C> <C>
Finished goods........................................... $31,473 $17,988
Raw materials............................................ 27,603 13,878
Supplies................................................. 2,903 1,864
------- -------
Total.......................................... $61,979 $33,730
======= =======
</TABLE>
(6) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- --------
<S> <C> <C>
Land................................................... $ 7,937 $ 4,349
Buildings and improvements............................. 42,261 22,698
Machinery and equipment................................ 162,383 100,910
Furniture and fixtures................................. 5,752 4,361
Construction in progress............................... 23,509 13,919
-------- --------
Total........................................ 241,842 146,237
Accumulated depreciation............................... (69,560) (56,453)
-------- --------
Net.......................................... $172,282 $ 89,784
======== ========
</TABLE>
Depreciation expense amounted to $13,983, $10,735 and $9,349 for the years
ended December 31, 1994, 1993 and 1992, respectively.
(7) INTANGIBLE ASSETS
Components of intangible assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- --------
<S> <C> <C>
Goodwill............................................... $ 51,467 $ 3,900
Other.................................................. 17,609 15,886
-------- --------
Total........................................ 69,076 19,786
Accumulated amortization............................... (12,085) (12,165)
-------- --------
Net.......................................... $ 56,991 $ 7,621
======== ========
</TABLE>
F-11
<PAGE> 69
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(8) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The components of accounts payable and accrued liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
------- -------
<S> <C> <C>
Accounts payable......................................... $31,047 $12,996
Salaries, wages and employee benefits payable............ 8,113 3,780
Other accrued liabilities................................ 9,242 4,096
------- -------
Total.......................................... $48,402 $20,872
======= =======
</TABLE>
(9) INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standard No. 109 (SFAS 109), the effect of which was not material.
In summary, SFAS 109 requires the determination of deferred tax assets and
liabilities by applying applicable tax rates to the difference between the
financial statement and tax bases of assets and liabilities. Additionally, it
requires separate balance sheet disclosure of deferred tax assets and
liabilities and has different recognition criteria for certain deferred tax
assets than Accounting Principles Board Opinion No. 11 (APB 11), the standard
under which the Company's financial statements were previously prepared. As
permitted under SFAS 109, prior year financial statements have not been
restated.
Pretax income consisted of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Domestic...................................... $15,571 $13,412 $10,298
Foreign....................................... 1,321 -- --
------- ------- -------
Total............................... $16,892 $13,412 $10,298
======= ======= =======
</TABLE>
The provision for income taxes consists of the following expenses
(benefits):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1994 1993 1992
------- ------ ------
<S> <C> <C> <C>
Current:
Federal....................................... $ 3,142 $3,216 $3,515
State......................................... 529 443 569
Foreign....................................... (1,088) -- --
------- ------ ------
2,583 3,659 4,084
------- ------ ------
Deferred:
Federal....................................... 1,537 974 120
State......................................... 328 138 (136)
Foreign....................................... 1,318 -- --
------- ------ ------
3,183 1,112 (16)
------- ------ ------
Total................................. $ 5,766 $4,771 $4,068
======= ====== ======
</TABLE>
The significant components of the deferred tax expense (benefit) are
presented in the schedule below. For 1994 and 1993, the components of the
deferred tax expense (benefit) were computed in accordance with
F-12
<PAGE> 70
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(9) INCOME TAXES -- (CONTINUED)
the provisions of SFAS 109. For 1992, the components of the deferred income tax
expense (benefit) were computed in accordance with the provisions of APB 11.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Depreciation..................................... $2,558 $2,047 $1,746
Environmental reserves........................... (290) (453) (693)
Self insurance................................... (83) (79) (351)
Inventory capitalization......................... 153 (123) (361)
Alternative minimum tax credits.................. 538 (727) --
Other............................................ 307 447 (357)
------ ------ ------
$3,183 $1,112 $ (16)
====== ====== ======
</TABLE>
The provision for income taxes differs from the statutory Federal income
tax rate of 34% as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Income tax at Federal statutory rate............. $5,743 $4,560 $3,501
State and local taxes (benefits), net of Federal
income tax benefits............................ 566 383 286
Difference between Federal statutory rate and
statutory rates on foreign income.............. (350)
Other............................................ (193) (172) 281
------ ------ ------
Provision for income taxes....................... $5,766 $4,771 $4,068
====== ====== ======
</TABLE>
The components of deferred tax assets and liabilities as of December 31,
1994 and 1993 relate to temporary differences and carryforwards as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
------- -------
<S> <C> <C>
Deferred tax assets:
Inventory.............................................. $ 1,103 $ 1,552
Prepaid pension expense................................ (495) (623)
Other.................................................. 481 386
------- -------
Total.......................................... $ 1,089 $ 1,315
======= =======
Deferred tax liabilities:
Depreciation........................................... $19,715 $11,814
Environmental expenses................................. (3,510) (3,220)
Loss carryforwards net of valuation allowance of
$2,329.............................................. (1,000)
Alternative minimum tax credits........................ (1,546) (2,084)
Research and development credits....................... (560) (493)
Other.................................................. 1,159 (31)
------- -------
Total.......................................... $14,258 $ 5,986
======= =======
</TABLE>
F-13
<PAGE> 71
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(9) INCOME TAXES -- (CONTINUED)
Under the tax laws of various countries in which the Company operates, net
operating losses (NOLs) may be carried forward, subject to statutory
limitations, to reduce taxable income in future years. The tax effect of such
NOLs aggregated approximately $3,329 at December 31, 1994, the majority of which
are available on an indefinite carryforward basis. However, a valuation reserve
of $2,329 has been established to reflect uncertainties associated with the
realization of such future benefits. Alternative minimum tax credits totaling
$1,546 are available to offset future Federal income taxes on an indefinite
carryforward basis. Research and development credit carryforwards totaling $560
expire between the years 2001 and 2005.
Presently, the Company's Federal income tax returns for the years 1988
through 1992 are under audit. Management believes that the resolution of those
audits will not have a significant effect upon results of operations in any
given year.
(10) SHORT-TERM DEBT
On September 21, 1994, the Company entered into a new Loan Agreement (the
"Credit Agreement") with NBD Bank, N.A., United Jersey Bank, National
Westminster Bank NJ, Wachovia Bank of Georgia, N.A., BHF-Bank, The First
National Bank of Boston, Chemical Bank New Jersey, N.A., and National City Bank.
The Credit Agreement provides for a bridge loan in the aggregate principal
amount of $50,000 due October 11, 1995. The Credit Agreement permits the Company
to choose between various interest rate options for the bridge loan: (a) U.S.
prime rate plus the applicable margin (ranging from 1/2 of 1% to 2%); or (b)
LIBOR plus the applicable margin (ranging from 1/2 of 1% to 2%). The applicable
margin is adjusted based upon the Funded Indebtedness to Cash Flow Ratio of
Cambrex Corporation. See Long-term Debt note regarding collateralization and
covenants.
In addition to the $50,000 one year term loan, the remaining short-term
debt represents the outstanding export financing facility (the "Facility") in
Italy. The Facility provides for $13,000 (Lira 21 billion) in financing, of
which $2,368 (Lira 3.841 billion) was outstanding at December 31, 1994.
(11) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
--------- --------
<S> <C> <C>
Bank credit facilities(a)............................... $ 118,648 $ 36,111
Industrial development revenue bond(b).................. -- 4,150
Capitalized leases...................................... 57 --
Notes payable(c)........................................ 1,291 --
--------- --------
Subtotal...................................... 119,996 40,261
Less: current portion................................... 4,021 4,000
--------- --------
Total......................................... $ 115,975 $ 36,261
======== =======
</TABLE>
(a) On September 21, 1994, the Company entered into a new Loan Agreement
(the "Credit Agreement") with NBD Bank, N.A., United Jersey Bank, National
Westminster NJ, Wachovia Bank of Georgia, N.A., BHF-Bank, The First National
Bank of Boston, Chemical Bank New Jersey, N.A., and National City Bank. The
Credit Agreement replaces the existing Revolving Credit and Term Loan Agreement
(the "Old Credit Agreement") with NBD Bank, N.A., United Jersey Bank, and
National Westminster Bank NJ. In addition to the one year loan of $50,000 (see
Short-term Debt note), the Credit Agreement provides
F-14
<PAGE> 72
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(11) LONG-TERM DEBT -- (CONTINUED)
for a seven year term loan in the aggregate principal amount of $75,000 (payable
$1,000 per quarter for twelve quarters beginning January 1995 and $3,938 for the
remaining quarters), and a revolving credit facility in the aggregate principal
amount of $100,000 due October 11, 1997 (evergreen renewal; automatic two year
extensions if non-renewal notice not given).
The Credit Agreement permits the Company to choose between various interest
rate options and to specify the portion of the borrowing to be covered by each
interest rate option. Under the Revolving Credit Agreement, the interest rate
options available to the Company are: (a) U.S. prime rate plus the applicable
margin (ranging from 0% to 3/4 of 1%) or (b) LIBOR plus the applicable margin
(ranging from 1/2 of 1% to 2%). The applicable margin is adjusted based upon the
Funded Indebtedness to Cash Flow Ratio of the Company. The seven year term loan
has the same interest rate options plus 1/2%. Additionally, the Company pays a
commitment fee of between 1/5 of 1% and 3/8 of 1% on the unused portion of the
Revolving Credit facility.
The Credit Agreement retains virtually all of the restrictive covenants
contained in the Company's Old Credit Agreement, but provides for certain
changes to the minimum consolidated net worth and deferred pledge of asset
requirements, as defined, and certain financial ratios. If these covenants are
not met, the loan is collateralized by the assets of the Company's domestic
subsidiaries and 66% of the outstanding capital stock of each of the foreign
subsidiaries.
On October 11, 1994, the Company borrowed $32,200 and L4,265 from the new
Credit Agreement to satisfy the Old Credit Agreement. On October 12, 1994, the
Company borrowed $126,000 from the new Credit Agreement (of which $50,000 is
Short-term Debt) to purchase the stock of Nobel/Profarmaco.
(b) On October 31, 1994, the Company borrowed from the Credit Agreement to
repay the full principal amount of $4,150 along with all accrued interest on the
Industrial Development Revenue Bond (due March 1, 2008) which was assumed as
part of the purchase of the assets of Zeeland Chemicals, Inc.
(c) As part of the October 12 acquisition of Nobel/Profarmaco, the Company
assumed a government loan made to Profarmaco S.r.1. to finance technological
innovations. The Loan of $1,291, bearing interest at 9.21%, is amortized over
ten annual payments starting July 26, 1995 and ending July 26, 2004.
(d) Aggregate maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1995.............................................................. $ 4,021
1996.............................................................. 4,092
1997.............................................................. 47,748
1998.............................................................. 7,048
1999.............................................................. 15,870
Thereafter........................................................ 41,217
---------
Total................................................... $ 119,996
========
</TABLE>
(12) STOCKHOLDERS' EQUITY
The Company has two classes of common shares designated Common Stock and
Nonvoting Common Stock. Authorized shares of Common Stock were 20,000,000 at
December 31, 1994 and 1993. Authorized shares of Nonvoting Common Stock were
730,746 at December 31, 1994 and 1993.
F-15
<PAGE> 73
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(12) STOCKHOLDERS' EQUITY -- (CONTINUED)
At December 31, 1994, authorized shares of Common Stock were reserved for
issuance as follows:
<TABLE>
<S> <C>
Stock option plans................................................ 1,018,000
Cambrex savings plan.............................................. 82,396
----------
Total shares............................................ 1,100,396
========
</TABLE>
Nonvoting Common Stock has equal rights with Common Stock, with the
exception of voting power. Nonvoting Common Stock is convertible, share for
share, into Common Stock, subject to any legal requirements applicable to
holders restricting the extent to which they may own voting stock. In 1991, all
113,182 outstanding shares were converted.
In 1990, Cambrex purchased 1,000,000 shares of its Common Stock as part of
a previously announced stock buy back program. These shares were purchased in
the open market at an average purchase price of $12.12 per share. All of the
acquired shares are held as Common Stock in treasury, less shares issued to the
Cambrex Savings Plan. The Company held 756,806 and 819,049 shares of treasury
stock at December 31, 1994 and 1993, respectively.
In 1987, the Company authorized 5,000,000 shares of Series Preferred Stock,
par value $0.10, issuable in series and with rights, powers and preferences as
may be fixed by the Board of Directors. At December 31, 1994 and 1993, there was
no preferred stock outstanding.
(13) STOCK OPTIONS
On October 24, 1983, the Company's stockholders approved the 1983 Incentive
Stock Option Plan ("1983 Plan"), which provides for the grant of options
intended to qualify as incentive stock options to management and other key
employees of Cambrex. On September 1, 1987 the Company's stockholders approved
the 1987 Stock Option Plan ("1987 Plan"), which provides for the granting to key
employees both non-qualified stock options and incentive stock options. On May
7, 1990, the Company's stockholders approved the 1989 Senior Executive Stock
Option Plan ("1989 Plan"), which provides for the grant of options intended to
qualify as additional incentives to the Company's Senior Executive Officers. On
May 1, 1992, the Company's stockholders approved the 1992 Stock Option Plan
("1992 Plan"), which provides for the granting to key employees both
non-qualified stock options and incentive stock options. On April 28, 1994, the
Company's stockholders approved the 1993 Senior Executive Stock Option Plan
("1993 Plan"), which provides for the grant of options intended to qualify as
additional incentives to the Company's Senior Executive Officers. On April 28,
1994, the Company's stockholders also approved the 1994 Stock Option Plan ("1994
Plan"), which provides for the granting to key employees both non-qualified and
incentive stock options. The 1994 Plan also provides for the granting of
non-qualified stock options to non-employee directors.
F-16
<PAGE> 74
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(13) STOCK OPTIONS -- (CONTINUED)
As of December 31, 1994, 298,000 options had been exercised. Shares of
Common Stock subject to outstanding options under the Plans were as follows:
<TABLE>
<CAPTION>
SUBJECT TO
AUTHORIZED OUTSTANDING
FOR ISSUANCE OPTIONS
-------------- -----------
<S> <C> <C>
1983 Plan.......................................... 216,000 43,650
1987 Plan.......................................... 200,000 108,850
1989 Plan.......................................... 400,000 370,000
1992 Plan.......................................... 100,000 93,350
1993 Plan.......................................... 300,000 285,000
1994 Plan.......................................... 100,000 73,500
-------------- -----------
Total shares............................. 1,316,000 974,350
========== =========
</TABLE>
Information regarding the Company's stock option plans is summarized below:
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF OPTION PRICE SHARES
SHARES PER SHARE $ EXERCISABLE
--------- --------------- -----------
<S> <C> <C> <C>
Outstanding at December 31, 1991............. 650,050 4.750 - 16.000 274,050
Granted.................................... 124,000 11.500 - 18.125
Exercised.................................. (49,550) 4.750 - 7.750
Cancelled.................................. (30,000) 5.750
---------
Outstanding at December 31, 1992............. 694,500 4.750 - 18.125 547,833
Granted.................................... 14,000 17.875 - 19.375
Exercised.................................. (51,550) 4.750 - 14.000
---------
Outstanding at December 31, 1993............. 656,950 4.750 - 19.375 523,617
Granted.................................... 382,000 19.875 - 24.250
Exercised.................................. (64,100) 4.750 - 19.875
Cancelled.................................. (500) 7.375
---------
Outstanding at December 31, 1994............. 974,350 4.750 - 24.250 658,850
========
</TABLE>
(14) RETIREMENT PLANS
On December 31, 1994, the Company merged The Cambrex Salaried Pension Plan
(the "Cambrex Plan") with The CasChem Hourly Pension Plan (the "CasChem Plan").
Thus, as of December 31, 1994, the Company maintains two U.S. defined-benefit
pension plans which cover substantially all eligible employees: (1) the Nepera
Hourly Pension Plan (the "Nepera Plan") which covers the union employees at the
Harriman, New York plant, and (2) The Cambrex Pension Plan (the "Cambrex Plan")
which covers all other eligible employees.
Benefits for the salaried and certain hourly employees are based on salary
and years of service, while those for employees covered by a collective
bargained agreement are based on negotiated benefits and years of service. The
Company's policy is to fund pension costs currently to the extent deductible for
income tax purposes. Pension plan assets consist primarily of equity and fixed
income securities.
F-17
<PAGE> 75
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(14) RETIREMENT PLANS -- (CONTINUED)
The 1994 measurement date has been changed to September 30 from December
31. The expense for both 1993 and 1994 are based on a 12 month period, and were
based on valuations of the plan as of January 1, 1993 and January 1, 1994,
respectively. However, the reconciliation of funded status this year is
determined as of September 30, 1994, whereas the last reconciliation was as of
December 31, 1993.
In accordance with the requirements of Statement of Financial Accounting
Standard No. 87 "Employers' Accounting for Pensions" (SFAS 87), the overfunded
and underfunded U.S. plans are presented separately. As a result of the
aforementioned merger of the Cambrex Plan and the CasChem Plan, the remaining
plans are overfunded as of December 31, 1994. The funded status of these plans
as of September 30, 1994 and December 31, 1993 is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994 DECEMBER 31, 1993
------------------ --------------------------
OVERFUNDED UNDERFUNDED OVERFUNDED
------------------ ----------- ----------
<S> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefits........................... $(14,096) $ (13,798) $ (2,146)
Non-vested benefits....................... (1,271) (984) (214)
--------- ---------- ---------
Accumulated benefit obligation............ (15,367) (14,782) (2,360)
Additional benefits based on estimated
future salary levels................... (939) (1,115) 0
--------- ---------- ---------
Projected benefit obligation for service
rendered through December 31, 1994 and
1993...................................... (16,306) (15,897) (2,360)
Plan assets at fair market value............ 18,224 13,854 4,879
--------- ---------- ---------
Funded status............................... 1,918 (2,043) 2,519
Unrecognized net transition (asset)......... (300) 4 (405)
Unrecognized prior service cost............. (270) (270) (194)
Other -- unrecognized net loss (gain) on
past experience........................... 184 2,343 (189)
Additional minimum liability................ 0 (1,030) 0
--------- ---------- ---------
Prepaid (accrued) pension cost.............. $ 1,532 $ (996) $ 1,731
========= ========== =========
</TABLE>
Assumptions used to develop the U.S. 1994 and 1993 net periodic pension
expense and the September 30, 1994 and December 31, 1993 actuarial present value
of projected benefit obligations:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994 DECEMBER 31, 1993
------------------ --------------------------
OVERFUNDED UNDERFUNDED OVERFUNDED
------------------ ----------- ----------
<S> <C> <C> <C>
PENSION EXPENSE
Weighted-average discount rate...................... 7.5% 8.0% 8.0%
Expected long-term rate of return on assets......... 8.5% 8.5% 8.5%
Rate of increase in future compensation levels
(noncollective bargained employees)............... 5.0% 5.0% N/A
ACTUARIAL PRESENT VALUE OF PROJECTED BENEFIT
OBLIGATIONS
Weighted-average discount rate...................... 8.5% 7.5% 7.5%
Expected long-term rate of return on assets......... 8.5% 8.5% 8.5%
Rate of increase in future compensation levels
(noncollective bargained employees)............... 5.0% 5.0% N/A
</TABLE>
F-18
<PAGE> 76
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(14) RETIREMENT PLANS -- (CONTINUED)
Certain foreign subsidiaries of the Company maintain pension plans for
their employees which conform to the common practice in their respective
countries.
The funded status of the Company's international pension plans as of
December 31, 1994 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------
UNDERFUNDED
-----------------
<S> <C>
Actuarial present value of benefit obligations:
Vested benefits............................................ $(3,879)
-----------------
Accumulated benefit obligation............................. (3,879)
Additional benefits based on estimated future salary
levels.................................................. (1,179)
-----------------
Projected benefit obligation for service rendered through
December 31, 1994.......................................... (5,058)
Plan assets at fair market value............................. 848
-----------------
Funded status................................................ (4,210)
Unrecognized net transition (asset).......................... (420)
Other -- unrecognized net (gain) on past experience.......... (776)
-----------------
Accrued pension liability.................................... $(5,406)
=============
</TABLE>
Assumptions used to develop the 1994 actuarial present value of projected
benefit obligations for the Company's foreign pension plans:
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------
<S> <C>
ACTUARIAL PRESENT VALUE OF PROJECTED BENEFIT OBLIGATIONS:
Weighted average discount rate............................... 9.0% to 9.5%
Expected long-term rate of return on assets.................. 10.0%
Rate of increase in future compensation levels............... 5.0% to 7.0%
</TABLE>
The Company's net pension costs included in operating results amounted to
$1,157, $713 and $450 in 1994, 1993 and 1992, respectively, and were comprised
of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1994 1993 1992
------- ------- ------
<S> <C> <C> <C>
Service cost........................................... $ 1,242 $ 843 $ 825
Interest cost on projected benefit obligation.......... 1,757 1,299 1,152
Return on plan assets.................................. 370 (2,131) (576)
Amortization of excess plan net assets at adoption of
SFAS 87.............................................. (101) (93) (171)
Other items -- deferred investment gain (loss)......... (2,111) 795 (780)
------- ------- ------
Net pension cost..................................... $ 1,157 $ 713 $ 450
======= ======= ======
</TABLE>
Included in the net periodic pension cost is the amortization of prior
service cost over a period of twelve to nineteen years and the amortization of
the SFAS 87 transition obligation over a period of ten to seventeen years. The
pension expense for foreign pension plans of $512 is included in the 1994 net
periodic pension expense of $1,157.
F-19
<PAGE> 77
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(14) RETIREMENT PLANS -- (CONTINUED)
Cambrex also makes available to all employees a savings plan as permitted
under Sections 401(k) and 401(a) of the Internal Revenue Code. Employee
contributions are matched in part by Cambrex. The cost of this plan amounted to
$1,449, $1,436, and $1,145 in 1994, 1993 and 1992, respectively.
In addition to the above plans, Cambrex also established a Supplemental
Executive Retirement Plan in 1994. The net periodic pension cost for 1994
amounted to $104.
(15) OTHER POSTRETIREMENT BENEFITS
Cambrex provides postretirement health and life insurance benefits
("postretirement benefits") to all eligible retired employees. Employees who
retire at or after age 55 with ten years of service are eligible to participate
in the postretirement benefit plans. The Company's responsibility for such
premiums for each plan participant is based upon years of service subject to an
annual maximum of one thousand dollars. Such plans are self-insured and are not
funded.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standard No. 106 "Employers' Accounting for Postretirement Benefits
Other than Pensions" (SFAS 106). SFAS 106 requires such benefits to be accounted
for on an accrual basis. Previously, such costs were expensed as claims were
incurred. In connection with the adoption of SFAS 106, the Company has elected
to amortize the transition obligation of $1,853 over twenty years. The net
effect upon 1994 and 1993 pretax operating results, including the amortization
of the transition obligation, resulted in a cost of $312 and $301, respectively.
The Company has reviewed its health care benefit plans for retirees and does not
anticipate significant increases in the annual expense related to SFAS 106.
The periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
1994 1993
-------- --------
<S> <C> <C>
Service cost of benefits earned.......................... $ 68 $ 58
Interest cost on accumulated postretirement benefit
obligation............................................. 151 150
Amortization of transition obligation.................... 93 93
-------- --------
Total periodic postretirement benefit cost............. $ 312 $ 301
======= =======
</TABLE>
Accumulated postretirement benefit obligation:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Retirees................................................. $ 957 $ 990
Fully eligible plan participants......................... 283 320
Other active plan participants........................... 631 799
------- -------
Total obligation......................................... 1,871 2,109
Unrecognized net loss.................................... 248 (149)
Unrecognized transition obligation....................... (1,669) (1,760)
------- -------
Accrued postretirement benefit cost recognized in the
balance sheet.......................................... $ 450 $ 200
======= =======
</TABLE>
The discount rate used to determine the accumulated postretirement benefit
obligation was 7.5%. The assumed health care cost trend rate used to determine
the accumulated postretirement benefit obligation was
F-20
<PAGE> 78
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(15) OTHER POSTRETIREMENT BENEFITS -- (CONTINUED)
initially 16%, declining ratably to 6% in 2002 and thereafter. A
one-percentage-point increase in the assumed health care cost trend rate would
have no effect upon the accumulated postretirement benefit obligation.
The cost of all health and life insurance benefits is recognized as
incurred and was approximately $3,994, $3,797 and $3,258 in 1994, 1993 and 1992,
respectively. The cost of providing these benefits for the 199, 181 and 186
retirees in 1994, 1993 and 1992, respectively, is not separable from the cost of
providing benefits for the 732, 791 and 746 active U.S. employees.
(16) OTHER INCOME AND EXPENSE
Other income in 1994 was $497 including $380 in currency gains at
Profarmaco. There were no other individually significant components in other
income in 1994.
Other expense in 1992 consisted primarily of a $553 provision for the
potential write-off of an other receivable related to a product manufactured by
Cambrex for a specific customer in prior years. The receivable and corresponding
reserve were written-off in 1993; $250 of other income was recorded as a result
of payment received from the customer. There were no individually significant
components in other expense in 1993.
(17) FOREIGN OPERATIONS AND EXPORT SALES
In 1994, the Company acquired Nobel Chemicals AB in Karlskoga, Sweden,
Profarmaco Nobel S.r.1. in Milan, Italy and Seal Sands Chemicals, Ltd. in
Middlesbrough, England. These companies will operate as subsidiaries of Cambrex
Ltd., England, which was organized in 1987.
Summarized data for the Company's operations for 1994 are as follows:
<TABLE>
<CAPTION>
DOMESTIC EUROPEAN TOTAL
-------- -------- --------
<S> <C> <C> <C>
Gross revenues............................. $214,880 $ 34,803 $249,683
Operating profit........................... 17,334 3,642 20,976
Net income................................. 10,514 612 11,126
Identifiable assets........................ $167,725 $192,752 $360,477
</TABLE>
Export sales, included in domestic gross revenues, in 1994, 1993 and 1992
amounted to $44,135, $37,296 and $44,536, respectively. No country, in any of
the given years, represents more than 10% of total revenues.
(18) COMMITMENTS
The Company currently has no significant capital lease obligations.
The Company has operating leases expiring on various dates through the year
2013. The leases are primarily for office and laboratory equipment and vehicles.
At December 31, 1994, future minimum commitments under operating lease
arrangements were as follows:
<TABLE>
<S> <C>
Year ended December 31:
1995............................................................. $ 1,853
1996............................................................. 1,002
1997............................................................. 827
1998............................................................. 632
1999 and thereafter.............................................. 11,764
-------
Net commitments.................................................... $16,078
=======
</TABLE>
F-21
<PAGE> 79
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(18) COMMITMENTS -- (CONTINUED)
Total operating lease expense was $1,958, $872 and $1,097 for the years
ended December 31, 1994, 1993 and 1992, respectively.
The Company has three letters of credit outstanding aggregating $752 as of
December 31, 1994. These letters of credit were issued in connection with
various administrative or environmental activities.
(19) CONTINGENCIES
Contingencies exist for certain subsidiaries of Cambrex because of legal
and administrative proceedings arising out of the normal course of business.
Such contingencies include environmental proceedings directly and indirectly
against the subsidiaries as well as matters internally identified. The
resolution of such matters often spans several years and frequently involves
regulatory oversight and/or adjudication. Additionally, many remediation
requirements are not fixed and are likely to be affected by future
technological, site, and regulatory developments. Consequently, the ultimate
extent of liabilities with respect to such matters as well as the timing of cash
disbursements cannot be determined with certainty. However, management is of the
opinion that while the ultimate liability resulting from these matters may have
a material effect upon the results of operations in any given year, they will
not have a material adverse effect upon the Company's liquidity nor its
financial position.
The following table exclusively addresses matters wherein the related
liabilities are considered estimable. It summarizes the estimated range of the
Company's share of costs associated with such matters, the related accruals, and
the activity associated with those accruals. The changes in the estimated ranges
between the current and prior year reflect revisions to estimates, the addition
of matters that were quantified for the first time during the current year, and
the satisfaction of others. The related accruals represent management's
assessment of the aggregate liability associated with estimable matters.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
------- -------
<S> <C> <C>
Estimated range of the Company's share of costs associated with
estimable matters:
Minimum........................................................ $ 9,542 $ 7,085
======= =======
Maximum........................................................ $18,032 $14,835
======= =======
Accrual and related activity:
Balance, beginning of year..................................... $ 9,058 $ 7,388
Additions:
Accruals established in connection with acquisition
activity.................................................. 1,510 --
Adjustment recorded in connection with adoption of SFAS
#109*..................................................... -- 1,320
Income statement charges.................................... -- 1,029
Deductions for expenditures.................................... (357) (679)
------- -------
Balance, end of year........................................... $10,211 $ 9,058
======= =======
Classification of year end accrual:
Current........................................................ $ 2,610 $ 310
Non-current.................................................... 7,601 8,748
------- -------
$10,211 $ 9,058
======= =======
</TABLE>
- ---------------
* Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standard #109, "Accounting for Income Taxes." At that date and in
accordance with the provisions of that Statement, a deferred tax asset of
$1,320 previously netted against this accrual was reclassified to non-current
assets.
F-22
<PAGE> 80
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(19) CONTINGENCIES -- (CONTINUED)
During 1992, income statement charges for additions to the accrual for
environmental contingencies aggregated $1,747.
Significant matters wherein the related liability or range of liability is
estimable, are summarized as follows:
a) Nepera, Inc. ("Nepera") was named in 1987 as a Potentially Responsible
Party (PRP) along with certain prior owners of the Maybrook Site in
Hamptonburgh, New York by the United States Environmental Protection Agency
(EPA) in connection with the disposition, under appropriate permits, of
wastewater at that site prior to Cambrex's acquisition of Nepera in 1986. The
Hamptonburgh site is on the EPA's National Priorities List for remedial work and
clean-up. However, to date the EPA has entrusted the management of the
remediation effort to the New York State Department of Environmental
Conservation (DEC). Although the periods of ownership of the site and the extent
of its use for wastewater disposal are well established, the PRP's have not been
able to agree upon an allocation method for future remediation costs. However, a
prior owner has participated with Nepera in the performance of the activities
described in the following paragraphs.
During 1992, Nepera prepared a draft Remedial Investigation/Feasibility
Study (RI/FS) report which enumerated several remediation alternatives and
submitted the Remedial Investigation portion to the DEC for review.
Consequently, although this RI/FS had not been approved by the DEC, Nepera
utilized it to revise the estimated liability for this matter previously
included in the accrual for environmental contingencies. This estimate
considered the probability of cost sharing with prior owners of the site.
During 1993, the DEC requested the performance of additional site
investigation prior to reviewing the Feasibility Study portion of the report.
Nepera prepared a plan for such additional site investigation and submitted it
for review.
During 1994, the DEC requested the performance of additional site
investigation beyond the 1993 proposed plan and requested the Feasibility Study
portion of the report. Nepera updated the RI/FS, prepared a revised plan for
additional site investigation, submitted them for review and utilized them to
update the estimated liability for this matter. Additionally, a DEC
administrative law judge issued a decision ordering one of the former owners to
remediate the site. However, that former owner is appealing the decision.
b) Nepera was named in 1987 as a responsible party along with certain prior
owners of Nepera's Harriman, New York production facility by the DEC in
connection with contamination at that site. Nepera believes that any remediation
to be conducted at that site is primarily related to contamination attributable
to material handling and disposal practices, including drum burial at the site,
which occurred prior to Cambrex's acquisition of Nepera in 1986. A prior owner
has participated with Nepera in the performance of the activities described in
the following paragraphs. Over the past several years, Nepera, with the
agreement of the DEC, has been performing an interim remedial measure involving
the pumping and treatment of groundwater to mitigate the possibility of
contamination progressing beyond the site boundaries.
During 1992, Nepera prepared a draft RI/FS report which enumerated several
remediation alternatives and submitted the Remedial Investigation portion to the
DEC for review. Consequently, although this RI/FS had not been approved by the
DEC, Nepera utilized it to develop a range of estimated liabilities for this
matter and considered such estimates when determining the accrual for
environmental contingencies. That estimate considered the probability of cost
sharing with prior owners of the site.
During 1993, Nepera had not received commentary from the DEC concerning the
Remedial Investigation portion of the report.
F-23
<PAGE> 81
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(19) CONTINGENCIES -- (CONTINUED)
During 1994, the DEC requested the Feasibility Study portion of the report.
Nepera updated the RI/FS and submitted it for review.
c) CasChem, Inc. (CasChem) was subject to an investigation commenced in
1990 by agents of the EPA and the Federal Bureau of Investigation pursuant to a
search warrant indicating an interest in the handling, storage, and disposal of
hazardous wastes.
During 1994, a settlement was reached wherein CasChem pleaded guilty to the
unpermitted storage of one drum of hazardous waste and the payment of a $1,000
fine. That amount was paid during January 1995.
d) Cosan, Inc. (Cosan) entered into an Administrative Consent Order in 1985
with the New Jersey Department of Environmental Protection (NJDEP) under New
Jersey's Industrial Site Recovery Act ("ISRA", which was previously known as the
Environmental Conservation and Recovery Act or ECRA) in order to consummate the
sale of the controlling interest in Cosan to the Company. Through that action,
Cosan became required to determine whether its facility located in Carlstadt,
New Jersey was contaminated by hazardous materials and, if appropriate, effect a
cleanup.
During 1992, based upon the results of an evaluation of the site, Cosan
proposed the installation of a groundwater recovery system to remove
contaminates from the soil. Presently, Cosan is awaiting the NJDEP's approval of
that proposal.
e) As more fully described in Note #3, in 1992 Cambrex acquired
substantially all of the assets of the fine chemicals business of Hexcel Fine
Chemicals, now known as Zeeland Chemicals, Inc. In connection with that
transaction, an accrual of $3,300 was established for environmental conditions
existing as of the date of the acquisition.
f) Nepera was named in the early 1980's as a PRP along with approximately
130 other companies by the EPA in connection with the SCP Corporation (SCP) site
in Carlstadt, New Jersey. The site is on the EPA's National Priorities List for
remedial work and cleanup. SCP disposed of process wastewater and minor amounts
of other material for Nepera during the 1970's.
The EPA has directed an Interim Remedial Measure for this site consisting
of the construction of slurry walls and a pump and treat facility. Presently, a
proportionate allocation of responsibility has not been established. However,
Nepera's responsibility may be relatively large in relation to other parties.
Nepera is contesting the proposed basis for the allocation of responsibility for
this site, and believes it has grounds to, and will, oppose any efforts to
charge it with excessive responsibility.
During 1994, the cost of capping the site was estimated by the PRP group to
range from $5,000 to $8,000. Although such a remediation alternative has not
been approved by the EPA, Nepera has assumed it to be the minimum effort which
will be required at the site. Consequently, Nepera utilized such information to
develop a range of estimated liabilities for this matter and considered such
estimates when determining the accrual for environmental contingencies.
Additionally, during 1994, Nepera reached a settlement agreement with
certain insurers who agreed to pay a certain portion of future expenditures
associated with the site and incurred by Nepera. A receivable has not been
recorded in connection with this agreement as the payments are not realizable
until Nepera's liability has been determined and funds actually expended.
g) Cosan was named in 1992 as a defendant in a suit filed by the owners of
a manufacturing site in Clifton, New Jersey that had been owned and operated by
Cosan from 1968 to 1979. The plaintiffs alleged Cosan contributed to the
contamination at the site and seek to compel Cosan to contribute toward present
and
F-24
<PAGE> 82
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(19) CONTINGENCIES -- (CONTINUED)
future costs of remediation of the site under ISRA. However, the source of all
contamination at the site has not been definitively identified. Sampling
conducted at an adjacent site revealed extensive contamination with the same
substances found on the plaintiff's site and, in some instances, higher
concentrations.
To date, the parties cannot agree upon a remediation plan for the site and
related costs, nor has any remediation plan been submitted to the NJDEP for
review. Presently, settlement negotiations with the plaintiffs are ongoing and
the matter is moving toward a trial date.
h) As more fully described in Note #3, Cambrex acquired Akzo Nobel's Pharma
Chemistry Business. In connection with that transaction, an accrual of $1,510
was established for environmental conditions existing as of the date of the
acquisition.
i) Cosan received notice in 1990 of a proposed NJDEP administrative fine of
$2,308 relating to exceeding alleged permit levels for discharges into a local
sewerage treatment plant during the 1980's. Cosan contested the proposed fine
stating that Cosan was installing a modern treatment plant to meet effluent
limits in a new permit and that Cosan fully advised the NJDEP of all activities
at the time.
During 1993, Cosan agreed to a settlement consisting of a payment of $650.
Such settlement did not constitute any admission of fact or acknowledgment of
any fault or liability on the part of Cosan. The payment was charged to the
accrual for contingent liabilities.
j) In addition to the matters identified above, Cambrex's subsidiaries are
party to a number of other proceedings. Management is of the opinion that the
ultimate liability resulting from those proceedings will not have a material
adverse effect upon Cambrex's results of operations nor its financial position.
------------------------
During 1994, Nepera arrived at an agreement partially described in "f"
above with certain insurers whereby $2,450 was made available through a trust
arrangement for remediation and administrative expenditures in connection with a
number of relatively small sites. During 1994, certain amounts were designated
to be expended by the trust for past expenditures. The remaining balance will be
available for future expenditures and has been considered in the determination
of the accrual for environmental contingencies at December 31, 1994.
F-25
<PAGE> 83
CAMBREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 13,411 $ 9,087
Trade and other receivables, less allowances for doubtful
accounts of $1,495 and $1,288 at respective dates........... 59,168 52,854
Inventories.................................................... 64,302 61,979
Deferred tax asset............................................. 1,183 1,089
Other current assets........................................... 4,461 5,689
----------- ------------
Total current assets................................... 142,525 130,698
Property, plant and equipment, net............................... 173,249 172,282
Intangible assets, net........................................... 53,424 56,991
Other noncurrent assets.......................................... 724 506
----------- ------------
Total assets........................................... $ 369,922 $360,477
========= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities....................... $ 48,759 $ 48,402
Income taxes payable........................................... 5,432 5,982
Short-term debt................................................ 52,115 52,368
Current portion of long-term debt.............................. 4,101 4,021
----------- ------------
Total current liabilities.............................. 110,407 110,773
Long-term debt................................................... 122,759 115,975
Deferred taxes................................................... 13,987 14,258
Other noncurrent liabilities..................................... 17,998 17,505
----------- ------------
Total liabilities...................................... 265,151 258,511
Commitments and contingencies
Stockholders' equity:
Common stock................................................... 623 607
Additional paid-in capital..................................... 74,862 73,673
Retained earnings.............................................. 40,058 35,935
Treasury stock, at cost; 744,735 and 756,806 shares at
respective dates............................................ (9,535) (9,690)
Cumulative translation adjustment.............................. (1,237) 1,441
----------- ------------
Total stockholders' equity............................. 104,771 101,966
----------- ------------
Total liabilities and stockholders' equity............. $ 369,922 $360,477
========= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-26
<PAGE> 84
CAMBREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1995 1994
------- -------
<S> <C> <C>
Net revenues............................................................. $93,389 $51,047
Operating expenses:
Cost of goods sold..................................................... 68,904 39,644
Selling, general and administrative expenses........................... 12,167 6,276
Research and development............................................... 1,842 1,213
------- -------
Total operating expenses....................................... 82,913 47,133
------- -------
Operating profit......................................................... 10,476 3,914
Other (income) expenses:
Interest expense -- net................................................ 3,443 363
Other -- net........................................................... (170) 172
------- -------
Income before income taxes............................................... 7,203 3,379
Provision for income taxes............................................... 2,809 1,251
------- -------
Net income............................................................... $ 4,394 $ 2,128
======= =======
Weighted average shares outstanding:
Primary................................................................ 5,792 5,638
Fully diluted.......................................................... 5,839 5,638
Net income per share:
Primary................................................................ $ 0.76 $ 0.38
======= =======
Fully diluted.......................................................... $ 0.75 $ 0.38
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-27
<PAGE> 85
CAMBREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
---------------------
1995 1994
------- -------
<S> <C> <C>
Cash flows from operations............................................. $10,791 $ 5,261
Changes in assets and liabilities:
Receivables.......................................................... (6,608) (3,203)
Inventories.......................................................... (2,625) (780)
Other current assets................................................. 1,124 (14)
Accounts payable and accrued liabilities............................. 637 (1,649)
Income taxes payable................................................. 2,714 188
Other noncurrent assets and liabilities.............................. (2,113) 2,155
------- -------
Net cash provided from operations................................. 3,920 1,958
------- -------
Cash flows from investing activities:
Capital expenditures................................................. (8,131) (3,861)
Acquisition of businesses............................................ (7,255)
------- -------
Net cash (used in) investing activities........................... (8,131) (11,116)
------- -------
Cash flows from financing activities:
Dividends............................................................ (271) (260)
Increase in short-term debt.......................................... (144) --
Long-term debt activity (including current portion):
Borrowings........................................................ 16,625 22,797
Repayments........................................................ (9,700) (13,300)
Proceeds from the issuance of common stock........................... 1,017 45
Proceeds from the sale of treasury stock............................. 343 352
------- -------
Net cash provided from financing activities....................... 7,870 9,634
------- -------
Effect of exchange rate changes on cash................................ 665 --
------- -------
Net increase in cash................................................... 4,324 476
Cash at beginning of period............................................ 9,087 161
------- -------
Cash at end of period.................................................. $13,411 $ 637
======= =======
Supplemental disclosure:
Interest paid........................................................ $ 3,535 $ 502
Income taxes paid.................................................... $ 19 $ 1,033
Depreciation expense................................................. $ 5,211 $ 2,824
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-28
<PAGE> 86
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(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, 1994.
The results of operations for the three months ended March 31, 1995 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, 1995 and December 31, 1994 consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
<S> <C> <C>
Finished goods....................................... $28,908 $ 31,473
Raw materials........................................ 30,082 27,603
Fuel oil and supplies................................ 5,312 2,903
--------- ------------
$64,302 $ 61,979
======= ==========
</TABLE>
(3) EARNINGS PER COMMON SHARE
The calculation of primary and fully diluted earnings per common share is
based on the weighted average number of common shares and common share
equivalents outstanding during the applicable period.
(4) ACQUISITIONS
On October 12, 1994, the Company completed the acquisition of the stock of
Nobel's Pharma Chemistry Business ("Nobel/Profarmaco") from Akzo Nobel for
approximately $126,000. The business consists of Nobel Chemicals AB in
Karlskoga, Sweden, Profarmaco Nobel S.r.1. in Milan, Italy, and sales companies
in Germany, England and the United States. Nobel/Profarmaco manufactures fine
chemical intermediates and bulk active ingredients for pharmaceutical products.
The transaction was accounted for as a purchase and was financed with the
Company's new credit agreement, and resulted in goodwill of $45,756 which is
being amortized on a straight line basis over 17.5 years.
On January 31, 1994, the Company completed the acquisition of the assets of
Hexcel Corporation's fine chemicals business located in Middlesbrough, England,
for approximately $7,400 and the assumption of certain current liabilities in
the amount of $2,100. The business, now known as Seal Sands Chemicals Ltd.
("Seal Sands"), manufactures chemical intermediates used in the pharmaceutical,
photographic, water treatment, health care, and plastics industries. On May 27,
1994, the Company purchased the Topanol product line from Zeneca Limited to
complement the Seal Sands operations for $4,600. These transactions were
accounted for as purchases and were financed with the Company's credit
agreement, and resulted in
F-29
<PAGE> 87
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
goodwill of $1,881 for Seal Sands and $504 for Topanol which are being amortized
on a straight line basis over 17.5 years and 5 years, respectively.
Unaudited pro forma results as if the Nobel/Profarmaco and Seal Sands
acquisitions and the Topanol product line purchase had occurred at January 1 of
1994 are presented below. The pro forma financial information is not necessarily
indicative of results of operations that would have occurred had the
combinations been in effect at the beginning of the periods nor of future
results of operations of the combined companies.
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31, 1994
--------------
<S> <C>
Net revenues................................................... $ 78,795
Net income..................................................... 3,042
Earnings per share:
Primary...................................................... 0.54
Fully diluted................................................ 0.54
</TABLE>
(5) SHORT-TERM DEBT
Short-term debt at March 31, 1995 and December 31, 1994 consists of the
following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
<S> <C> <C>
One year term loan........................................... $50,000 $ 50,000
Export financing facility, Italy............................. 2,115 2,368
--------- ------------
Total................................................. $52,115 $ 52,368
======= ==========
</TABLE>
(6) LONG-TERM DEBT
Long-term debt at March 31, 1995 and December 31, 1994 consists of the
following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
<S> <C> <C>
Bank credit facilities....................................... $ 125,574 $118,648
Capital lease................................................ 57 57
Notes payable................................................ 1,229 1,291
--------- ------------
Subtotal.............................................. 126,860 119,996
Less: current portion........................................ 4,101 4,021
--------- ------------
Total................................................. $ 122,759 $115,975
======== ==========
</TABLE>
The Company met all the bank covenants for the first quarter of 1995.
(7) POSTEMPLOYMENT BENEFITS
Statement of Financial Accounting Standard No. 112 "Employers' Accounting
for Postemployment Benefits" (SFAS 112) requires the recognition on an accrual
basis of all types of postemployment benefits provided to former or inactive
employees subsequent to employment but before retirement. The Company currently
provides limited benefits in this regard. The Company adopted SFAS 112 effective
January 1, 1994. The net effect upon 1994 and first quarter 1995 pretax
operating results was immaterial.
(8) CONTINGENCIES
Refer to footnote 19 to the Notes to Consolidated Financial Statements for
the year ended December 31, 1994, for disclosure of existing contingencies
related to environmental issues.
F-30
<PAGE> 88
CAMBREX CORPORATION
SELECTED QUARTERLY FINANCIAL DATA
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1ST QUARTER
- ---------------------------------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues...................... $93,389
Gross profit...................... 24,485
Net income........................ 4,394
Earnings per share:(1)
Primary......................... $ 0.76
Fully diluted................... $ 0.75
Average shares:
Primary......................... 5,792
Fully diluted................... 5,839
</TABLE>
<TABLE>
<CAPTION>
1994 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER YEAR
- ---------------------------------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Net revenues...................... $51,047 $58,224 $57,608 $74,755 $241,634
Gross profit...................... 11,403 14,593 13,265 18,620 57,881
Net income........................ 2,128 3,380 2,440 3,178 11,126
Earnings per share:(1)
Primary......................... $ 0.38 $ 0.60 $ 0.43 $ 0.55 $ 1.96
Fully diluted................... $ 0.38 $ 0.60 $ 0.43 $ 0.55 $ 1.95
Average shares:
Primary......................... 5,638 5,648 5,679 5,729 5,674
Fully diluted................... 5,638 5,648 5,711 5,733 5,699
</TABLE>
<TABLE>
<CAPTION>
1993 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER YEAR
- ---------------------------------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Net revenues...................... $47,648 $52,779 $48,065 $48,711 $197,203
Gross profit...................... 11,919 14,210 13,411 12,238 51,778
Net income........................ 1,794 2,427 2,194 2,226 8,641
Earnings per share:(1)
Primary......................... $ 0.35 $ 0.47 $ 0.42 $ 0.40 $ 1.64
Fully diluted................... $ 0.34 $ 0.45 $ 0.41 $ 0.40 $ 1.60
Average shares:
Primary......................... 5,169 5,191 5,273 5,498 5,282
Fully diluted................... 5,486 5,466 5,482 5,502 5,484
</TABLE>
- ---------------
(1) Earnings per share calculations for each of the quarters are based on the
weighted average number of shares outstanding for each period, as such, the
sum of the quarters may not necessarily equal the earnings per share amount
for the year.
F-31
<PAGE> 89
[Intentionally left blank for back cover LOGO]
<PAGE> 90
[Intentionally left blank for back cover LOGO]
<PAGE> 91
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expense in connection with the
Offering:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............... $ 20,299
American Stock Exchange and NASD Filing Fees...................... 23,887
Printing and Engraving Expenses................................... 135,000
Accounting Fees and Expenses...................................... 225,000
Legal Fees and Expenses (including Blue Sky Fees and Expenses).... 313,093
Transfer Agent Fees............................................... 5,000
Miscellaneous..................................................... 75,000
--------
Total................................................... $797,279
========
</TABLE>
The Company will pay all expenses.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law empowers a Delaware
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of such corporation) by reason of the fact that such person
is or was a director, officer, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation or enterprise. A corporation may indemnify such
person against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. A Delaware corporation may
indemnify officers and directors in an action by or in the right of the
corporation to procure a judgment in its favor under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
(including attorneys' fees) which he actually and reasonably incurred in
connection therewith. The indemnification provided is not deemed to be exclusive
of any other rights to which an officer or director may be entitled under any
corporation's by-laws, agreement, vote or otherwise.
In accordance with Section 145 of the Delaware General Corporation Law, the
Restated Certificate of Incorporation of the Registrant contains the following
provisions with respect to indemnification of directors, officers, employees or
agents of the Registrant and with respect to limitations on the personal
liability of directors of the Registrant:
"EIGHTH: The Corporation shall, to the fullest extent authorized by Section
145 of the General Corporation Law of the State of Delaware, as the same exists
or may hereafter be amended (but in the case of any such amendment, other than
one mandating lesser indemnification, only to the extent that such amendment
permits the Corporation to provide broader indemnification than said law
permitted the Corporation to provide prior to such amendment) indemnify all
persons whom it may indemnify pursuant thereto.
[. . . .]
TENTH: No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of such director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General
II-1
<PAGE> 92
Corporation Law of the State of Delaware, or (iv) for any transaction from which
such director derived any improper personal benefit.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification."
The Company's By-Laws provide in relevant part, in Article VI thereof, as
follows:
"Section 1. NATURE OF INDEMNITY.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was or has agreed to become a director or
officer of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or by reason of any
action alleged to have been taken or omitted in such capacity, and may indemnify
any person who was or is a party or is threatened to be made a party to such an
action, suit or proceeding by reason of the fact that he is or was or has agreed
to become an employee or agent of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as an employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or on his behalf in
connection with such action, suit or proceeding and any appeal therefrom, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding had no reasonable cause to believe his conduct was
unlawful; except that in the case of an action or suit by or in the right of the
Corporation to procure a judgment in its favor (1) such indemnification shall be
limited to expenses (including attorneys' fees) actually and reasonably incurred
by such person in the defense or settlement of such action or suit, and (2) no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
[. . . .]
Section 4. ADVANCE PAYMENT OF EXPENSES.
Expenses incurred by a director or officer in defending a civil or criminal
action, suit or proceeding, shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized in this Article VI. Such expenses incurred by
other employees and agents may be so paid upon such terms and conditions, if
any, as the Board of Directors deems appropriate. The Board of Directors may
authorize the Corporation's counsel to represent such director, officer,
employee or agent in any action, suit or proceeding, whether or not the
Corporation is a party to such action, suit or proceeding.
[. . . .]
Section 6. SURVIVAL; PRESERVATION OF OTHER RIGHTS.
The foregoing indemnification provisions shall be deemed to be a contract
between the Corporation and each director, officer, employee and agent who
serves in any such capacity at any time while these provisions as well as the
relevant provisions of the Delaware General Corporation Law are in effect and
any repeal or
II-2
<PAGE> 93
modification thereof shall not affect any right or obligation then existing with
respect to any state of facts then or previously existing or any action, suit or
proceeding previously or thereafter brought or threatened based in whole or in
part upon any such state of facts. Such a "contract right" may not be modified
retroactively without the consent of such director, officer, employee or agent.
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person."
ITEM 16. EXHIBITS
EXHIBIT NO.
<TABLE>
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.
4.1 -- Common Stock Specimen.*
5.1 -- Opinion of Debevoise & Plimpton.
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Debevoise & Plimpton (included in Exhibit 5.1).
24.1 -- Power of Attorney.
</TABLE>
- ---------------
* Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide Offering
thereof.
(2) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide Offering thereof.
Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 15, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 94
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized in the City of East Rutherford, State of New Jersey on
the 27th day of June, 1995.
CAMBREX CORPORATION
By: /s/ JAMES A. MACK
------------------------------------
James A. Mack
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------- --------------
<C> <S> <C>
/s/ JAMES A. MACK President, Chief Executive Officer June 27, 1995
- ------------------------------------------ and Director
James A. Mack
/s/ PETER TRACEY Executive Vice President, June 27, 1995
- ------------------------------------------ Finance, and Chief Financial
Peter Tracey Officer
/s/ CYRIL C. BALDWIN, JR.* Chairman of the Board June 27, 1995
- ------------------------------------------
Cyril C. Baldwin, Jr.
/s/ ROSINA B. DIXON* Director June 27, 1995
- ------------------------------------------
Rosina B. Dixon
/s/ FRANCIS X. DWYER* Director June 27, 1995
- ------------------------------------------
Francis X. Dwyer
/s/ GEORGE J. W. GOODMAN* Director June 27, 1995
- ------------------------------------------
George J. W. Goodman
/s/ KATHRYN RUDIE HARRIGAN* Director June 27, 1995
- ------------------------------------------
Kathryn Rudie Harrigan
/s/ LEON J. HENDRIX, JR.* Director June 27, 1995
- ------------------------------------------
Leon J. Hendrix, Jr.
/s/ ILAN KAUFTHAL* Director June 27, 1995
- ------------------------------------------
Ilan Kaufthal
</TABLE>
II-4
<PAGE> 95
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ROBERT LEBUHN* Director June 27, 1995
- ------------------------------------------
Robert LeBuhn
/s/ DEAN P. PHYPERS* Director June 27, 1995
- ------------------------------------------
Dean P. Phypers
</TABLE>
---------------
* The undersigned attorney-in-fact, by signing his name below, does hereby sign
this Amendment No. 1 to the Registration Statement on behalf of Registrant and
the above indicated officers and directors of CAMBREX CORPORATION
(constituting a majority of the directors) pursuant to a power of attorney
executed by such persons and filed with the Securities and Exchange Commission
contemporaneously herewith.
By: /s/ PETER E. THAUER
----------------------------------
Attorney-in-Fact
II-5
<PAGE> 96
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ------ ------- ------------
<C> <C> <S> <C>
1.1 -- Form of Underwriting Agreement.
4.1 -- Common Stock Specimen.*
5.1 -- Opinion of Debevoise & Plimpton.
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Debevoise & Plimpton (included in Exhibit 5.1).
24.1 -- Power of Attorney.
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 1.1
_______________ Shares
CAMBREX CORPORATION
Common Stock, $0.10 par value
UNDERWRITING AGREEMENT
__________, 1995
<PAGE> 2
_____________, 1995
Morgan Stanley & Co. Incorporated
Wertheim Schroder & Co. Incorporated
c/o Morgan Stanley & Co. Incorporated
1251 Avenue of the Americas
New York, New York 10020
Dear Sirs and Mesdames:
Cambrex Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "Underwriters") _______________ shares of its common stock, par
value $0.10 (the "Firm Shares"). The Company also proposes to issue and sell
to the several Underwriters not more than an additional ______________ shares
of its common stock, par value $0.10 (the "Additional Shares") if and to the
extent that you, as Managers of the offering, shall have determined to
exercise, on behalf of the Underwriters, the right to purchase such shares of
common stock granted to the Underwriters in Section 2 hereof. The Firm Shares
and the Additional Shares are hereinafter collectively referred to as the
"Shares." The shares of common stock, par value $0.10 of the Company to be
outstanding after giving effect to the sales contemplated hereby are
hereinafter referred to as the "Common Stock."
The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, including a prospectus,
relating to the Shares. The registration statement as amended at the time it
becomes effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "Securities Act"), is hereinafter
referred to as the "Registration Statement"; the prospectus in the form first
used to confirm sales of Shares is hereinafter referred to as the "Prospectus"
(including, in the case of all references to the Registration Statement and the
Prospectus, documents incorporated therein by reference).
1. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to and agrees with each of the Underwriters that:
<PAGE> 3
(a) The Registration Statement has become effective; no
stop order suspending the effectiveness of the Registration Statement
is in effect, and no proceedings for such purpose are pending before
or threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed
pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and incorporated by reference in the Prospectus
complied or will comply when so filed in all material respects with
the Exchange Act and the applicable rules and regulations of the
Commission thereunder, (ii) each part of the Registration Statement,
when such part became effective, did not contain and each such part,
as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, (iii) the Registration Statement and the Prospectus comply
and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iv) the Prospectus does
not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this
paragraph 1(b) do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished to the Company in writing by
such Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
2
<PAGE> 4
(d) Each of CasChem, Inc., Cosan Chemical Corp., Nepera,
Inc., Salsbury Chemicals, Inc. and Zeeland Chemicals, Inc.
(collectively, the "Domestic Subsidiaries") has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as
a whole.
(e) Each of Seal Sands Chemicals Limited (the "English
Subsidiary"), Profarmaco Nobel S.r.l. (the "Italian Subsidiary") and
Nobel Chemicals AB (the "Swedish Subsidiary" and together with the
Domestic Subsidiaries, the English Subsidiary and the Italian
Subsidiary the "Significant Subsidiaries"), has been duly incorporated
and is validly existing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business in each jurisdiction in which the
conduct of its business or ownership or leasing of property requires
such qualification, except to the extent that failure to be so
qualified would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(f) All of the outstanding shares of capital stock of, or
other equity interests in, each of the Significant Subsidiaries are
owned directly or indirectly by the Company free and clear of any
security interest, mortgage, pledge, claim, lien or encumbrance and
except for the Significant Subsidiaries, no other subsidiary of the
Company accounted for more than 5% of the consolidated net revenues of
the Company and its subsidiaries as reported in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994 as filed with
the Commission.
(g) This Agreement has been duly authorized, executed and
delivered by the Company.
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<PAGE> 5
(h) The authorized capital stock of the Company conforms
as to legal matters to the description thereof contained in the
Prospectus.
(i) The shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly
issued, fully paid and non-assessable.
(j) The Shares have been duly authorized and, when issued
and delivered in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable, and the issuance of
such Shares will not be subject to any preemptive or similar rights.
(k) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the certificate
of incorporation or by-laws of the Company or any agreement or other
instrument binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole, or any
judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company or any subsidiary, and no
consent, approval, authorization or order of, or qualification with,
any governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, except such as may be
required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares.
(l) There has not occurred any material adverse change,
or any development involving a prospective material adverse change, in
the condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(m) There are no legal or governmental proceedings
pending or threatened to which the Company or any of its subsidiaries
is a party or to which any of the properties of the Company or any of
its subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or
any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement
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<PAGE> 6
or the Prospectus or to be filed as exhibits to the Registration
Statement that are not described or filed as required.
(n) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities
Act and the applicable rules and regulations of the Commission
thereunder.
(o) The Company is not an "investment company" or an
entity "controlled" by an "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended.
(p) The Company and its subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), (ii) have
received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(q) In the ordinary course of its business, the Company
conducts a periodic review of the effect of Environmental Laws on the
business, operations and properties of the Company and its
subsidiaries, in the course of which it identifies and evaluates
associated costs and liabilities (including, without limitation, any
capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws or any permit,
license or approval, any related constraints on operating activities
and any potential liabilities to third parties) as well as probable
cost recoveries (including insurance recoveries and recoveries from
third parties under contracts of indemnity). On the basis of such
review, and taking into account any reserves reflected on the books of
the Company, the Company has reasonably
5
<PAGE> 7
concluded that such associated costs and liabilities would not, singly
or in the aggregate, have a material adverse effect on the liquidity
and financial position of the Company and its subsidiaries, taken as a
whole.
(r) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company or to
require the Company to include such securities with the Shares
registered pursuant to the Registration Statement.
(s) The Company has complied with all provisions of
Section 517.075, Florida Statutes relating to doing business with the
Government of Cuba or with any person or affiliate located in Cuba.
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees to
sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares set forth in Schedule I hereto
opposite its name at $______ a share (the "Purchase Price").
On the basis of the representations and warranties contained
in this Agreement, and subject to its terms and conditions, the Company agrees
to sell to the Underwriters the Additional Shares, and the Underwriters shall
have a one-time right to purchase, severally and not jointly, up to
_______________ Additional Shares at the Purchase Price. If you, on behalf of
the Underwriters, elect to exercise such option, you shall so notify the
Company in writing not later than 30 days after the date of this Agreement,
which notice shall specify the number of Additional Shares to be purchased by
the Underwriters and the date on which such shares are to be purchased. Such
date may be the same as the Closing Date (as defined below) but not earlier
than the Closing Date nor later than ten business days after the date of such
notice. Additional Shares may be purchased as provided in Section 4 hereof
solely for the purpose of covering over-allotments made in connection with the
offering of the Firm Shares. If any Additional Shares are to be purchased,
each Underwriter agrees, severally and not jointly, to purchase the number of
Additional Shares (subject to such adjustments to eliminate fractional shares
as you may determine) that bears the same proportion to the total number of
Additional Shares to be purchased as the
6
<PAGE> 8
number of Firm Shares set forth in Schedule I hereto opposite the name of such
Underwriter bears to the total number of Firm Shares.
The Company hereby agrees that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it
will not, during the period ending 90 days after the date of the Prospectus,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (ii) enter into any swap or
other agreement that transfers, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise. The foregoing sentence
shall not apply to (A) the Shares to be sold hereunder or (B) any shares of
Common Stock issued by the Company upon the exercise of an option or warrant or
the conversion of a security outstanding on the date hereof of which the
Underwriters have been advised in writing.
3. TERMS OF PUBLIC OFFERING. The Company is advised by you that
the Underwriters propose to make a public offering of their respective portions
of the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the public initially at
$_____________ a share (the "Public Offering Price") and to certain dealers
selected by you at a price that represents a concession not in excess of
$______ a share under the Public Offering Price, and that any Underwriter may
allow, and such dealers may reallow, a concession, not in excess of $_____ a
share, to any Underwriter or to certain other dealers.
4. PAYMENT AND DELIVERY. Payment for the Firm Shares shall be
made by certified or official bank check or checks payable to the order of the
Company in New York Clearing House funds at the office of Davis Polk &
Wardwell, 450 Lexington Avenue, New York, New York 10017 at 10:00 A.M., local
time, on ____________, 1995, or at such other time on the same or such other
date, not later than _________, 1995, as shall be designated in writing by you.
The time and date of such payment are hereinafter referred to as the "Closing
Date."
7
<PAGE> 9
Payment for any Additional Shares shall be made by certified
or official bank check or checks payable to the order of the Company in New
York Clearing House funds at the office of Davis Polk & Wardwell at 10:00 A.M.,
local time, on the date specified in the notice described in Section 2 or on
such other date, in any event not later than _______, 1995, as shall be
designated in writing by you. The time and date of such payment are
hereinafter referred to as the "Option Closing Date."
Certificates for the Firm Shares and Additional Shares shall
be in definitive form and registered in such names and in such denominations as
you shall request in writing not later than two full business days prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes
payable in connection with the transfer of the Shares to the Underwriters duly
paid, against payment of the Purchase Price therefor.
5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations
of the Company to sell the Shares to the Underwriters and the several
obligations of the Underwriters to purchase and pay for the Shares on the
Closing Date are subject to the condition that the Registration Statement shall
have become effective not later than [_____] (New York time) on the date
hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date:
(i) there shall not have occurred any
downgrading, nor shall any notice have been given of any
intended or potential downgrading or of any review for a
possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any
change, or any development involving a prospective change, in
the condition, financial or otherwise,
8
<PAGE> 10
or in the earnings, business or operations of the Company and
its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your
judgment, impracticable to market the Shares on the terms and
in the manner contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing
Date a certificate, dated the Closing Date and signed by an
executive officer of the Company, to the effect set forth in clause
(a)(i) above and to the effect that the representations and
warranties of the Company contained in this Agreement are true and
correct as of the Closing Date and that the Company has complied
with all of the agreements and satisfied all of the conditions on
its part to be performed or satisfied hereunder on or before the
Closing Date.
The officer signing and delivering such certificate may rely
upon the best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing
Date an opinion of Debevoise & Plimpton, outside counsel for the
Company, dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated,
is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to
conduct its business as described in the Prospectus;
(ii) each of CasChem, Inc., Cosan Chemical
Corp. and Nepera, Inc. has been duly incorporated, is validly
existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power
and authority to own its property and to conduct its business
as described in the Prospectus;
(iii) the authorized capital stock of the
Company conforms as to legal matters to the description
thereof contained in the Prospectus;
9
<PAGE> 11
(iv) the Shares have been duly authorized
and, when issued and delivered in accordance with the terms of
this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be
subject to any preemptive or similar rights;
(v) this Agreement has been duly authorized,
executed and delivered by the Company;
(vi) the execution and delivery by the
Company of, and the performance by the Company of its
obligations under, this Agreement will not contravene any
provision of applicable law or the certificate of
incorporation or by-laws of the Company, and no consent,
approval, authorization or order of, or qualification with,
any governmental body or agency is required for the
performance by the Company of its obligations under this
Agreement, except such as may be required by the securities or
Blue Sky laws of the various states in connection with the
offer and sale of the Shares;
(vii) the statements (A) in the Prospectus
under the captions "Description of Capital Stock" and
"Underwriters" and (B) in the Registration Statement in Item
15, in each case insofar as such statements constitute
summaries of the legal matters, documents or proceedings
referred to therein, fairly present the information called for
with respect to such legal matters, documents and proceedings
and fairly summarize the matters referred to therein;
(viii) after due inquiry, such counsel does not
know of any statutes, regulations, contracts or other
documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described
or filed as required;
(ix) the Company is not an "investment
company" or an entity "controlled" by an "investment company,"
as such terms are defined in the Investment Company Act of
1940, as amended;
(x) such counsel (A) is of the opinion that
each document filed pursuant to the Exchange Act and
incorporated by reference in the
10
<PAGE> 12
Registration Statement and Prospectus (except for financial
statements and schedules as to which such counsel need not
express any opinion) complied when so filed as to form in all
material respects with the Exchange Act and the applicable
rules and regulations of the Commission thereunder and (B) is
of the opinion that the Registration Statement and Prospectus
(except for financial statements and schedules included
therein as to which such counsel need not express any opinion)
comply as to form in all material respects with the Securities
Act and the applicable rules and regulations of the
Commission thereunder; and
(xi) in the course of their review and
discussion of the contents of the Registration Statement and
Prospectus with certain officers and employees of the Company
and its independent accountants, but without independent check
or verification, no facts have come to their attention that
would cause them to believe that the Registration Statement
and the prospectus included therein (other than the financial
statements and other financial and statistical information
contained therein, as to which they need express no belief),
at the time it became effective, contained an untrue statement
of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements contained therein not misleading, or that the
Prospectus (other than the financial statements and other
financial and statistical information contained therein, as
to which they need express no belief) contains any untrue
statement of a material fact or omits to state a material
fact necessary in order to make the statements contained
therein, in the light of the circumstances under which they
were made, not misleading.
The opinion of Debevoise & Plimpton described in paragraph (c)
above shall be rendered to the Underwriters at the request of the
Company and shall so state therein.
(d) The Underwriters shall have received on the Closing
Date an opinion of Davis Polk & Wardwell, counsel for the
Underwriters, dated the Closing Date, covering the matters referred to
in subparagraphs (iv), (v), (vii) (but only as to the statements in
the Prospectus under "Description of Capital Stock" and
"Underwriters") and (xi) of paragraph (c) above.
11
<PAGE> 13
With respect to subparagraph (xi) of paragraph (c) above,
Debevoise & Plimpton and Davis Polk & Wardwell may state that their
opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and any
amendments or supplements thereto and documents incorporated therein
by reference and review and discussion of the contents thereof, but
are without independent check or verification, except as specified.
(e) The Underwriters shall have received on the Closing
Date an opinion of ________, local Michigan counsel for the Company,
dated the Closing Date, to the effect that:
(i) Zeeland Chemicals, Inc. has been duly
incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is
in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires
such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries,
taken as a whole.
The opinion of ____________ described in paragraph
(e) above shall be rendered to the Underwriters at the request of the
Company and shall so state therein.
(f) The Underwriters shall have received on the Closing
Date an opinion of ________, local Iowa counsel for the Company, dated
the Closing Date, to the effect that:
(i) Salsbury Chemicals, Inc. has been duly
incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is
in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires
such qualification, except to the extent that the
12
<PAGE> 14
failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
The opinion of ____________ described in paragraph
(f) above shall be rendered to the Underwriters at the request of the
Company and shall so state therein.
(g) The Underwriters shall have received on the Closing
Date an opinion of [ ], special Italian counsel
to the Company, dated the Closing Date, to the effect that:
(i) the Italian Subsidiary has been duly
incorporated and is validly existing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified to transact
business in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole; and
(ii) after due inquiry, such counsel does not
know of any legal or governmental proceedings pending or
threatened in Italy to which the Italian Subsidiary is a party
or to which any of the properties of the Italian Subsidiary is
subject except such as would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
The opinion of ____________ described in paragraph
(g) above shall be rendered to the Underwriters at the request of the
Company and shall so state therein.
(h) The Underwriters shall have received on the Closing
Date an opinion of [ ], special Swedish counsel
to the Company, dated the Closing Date, to the effect that:
(i) the Swedish Subsidiary has been duly
incorporated and is validly existing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its
13
<PAGE> 15
property and to conduct its business as described in the
Prospectus and is duly qualified to transact business in each
jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified would
not have a material adverse effect on the Company and its
subsidiaries, taken as a whole; and
(ii) after due inquiry, such counsel does not
know of any legal or governmental proceedings pending or
threatened in Sweden to which the Swedish Subsidiary is a
party or to which any of the properties of the Swedish
Subsidiary is subject except such as would not have a material
adverse effect on the Company and its subsidiaries, taken as a
whole.
The opinion of ____________ described in paragraph
(h) above shall be rendered to the Underwriters at the request of the
Company and shall so state therein.
(i) The Underwriters shall have received on the Closing
Date an opinion of [ ], special English counsel
to the Company, dated the Closing Date, to the effect that:
(i) the English Subsidiary has been duly
incorporated and is validly existing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified to transact
business in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole; and
(ii) after due inquiry, such counsel does not
know of any legal or governmental proceedings pending or
threatened in the United Kingdom to which the English
Subsidiary is a party or to which any of the properties of the
English Subsidiary is subject except such as would not have a
material adverse effect on the Company and its subsidiaries,
taken as a whole.
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<PAGE> 16
The opinion of ____________ described in paragraph
(i) above shall be rendered to the Underwriters at the request of the
Company and shall so state therein.
(j) The Underwriters shall have received on the Closing
Date an opinion of Peter E. Thauer, General Counsel for the Company,
dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated,
is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be
in good standing would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole;
(ii) each Domestic Subsidiary of the Company
has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole;
(iii) each of the Italian Subsidiary, the
Swedish Subsidiary and the English Subsidiary has been duly
incorporated and is validly existing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified to transact
business in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the
15
<PAGE> 17
failure to be so qualified would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
(iv) the authorized capital stock of the
Company conforms as to legal matters to the description
thereof contained in the Prospectus;
(v) the shares of Common Stock outstanding
prior to the issuance of the Shares have been duly authorized
and are validly issued, fully paid and non-assessable;
(vi) the Shares have been duly authorized
and, when issued and delivered in accordance with the terms of
this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be
subject to any preemptive or similar rights;
(vii) this Agreement has been duly authorized,
executed and delivered by the Company;
(viii) the execution and delivery by the
Company of, and the performance by the Company of its
obligations under, this Agreement will not contravene any
provision of applicable law or the certificate of
incorporation or by-laws of the Company or, to the best of
such counsel's knowledge, any agreement or other instrument
binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a
whole, or, to the best of such counsel's knowledge, any
judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary,
and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is
required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the
securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares;
(ix) the statements (A) in the Prospectus
under the captions "Business - Legal Proceedings",
"Description of Capital Stock" and "Underwriters" and (B) in
the Registration Statement in Item 15, in each case insofar as
such statements constitute summaries of the legal matters,
documents or
16
<PAGE> 18
proceedings referred to therein, fairly present the
information called for with respect to such legal matters,
documents and proceedings and fairly summarize the matters
referred to therein;
(x) after due inquiry, such counsel does not
know of any legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is
a party or to which any of the properties of the Company or
any of its subsidiaries is subject that are required to be
described in the Registration Statement or the Prospectus and
are not so described or of any statutes, regulations,
contracts or other documents that are required to be described
in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement that are not
described or filed as required;
(xi) the Company is not an "investment
company" or an entity "controlled" by an "investment company,"
as such terms are defined in the Investment Company Act of
1940, as amended;
(xii) the Company (A) is in compliance with
any and all applicable Environmental Laws, (B) has received
all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business and (C)
is in compliance with all terms and conditions of any such
permit, license or approval, except where such noncompliance
with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals
would not, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
(xiii) such counsel (A) is of the opinion that
each document filed pursuant to the Exchange Act and
incorporated by reference in the Registration Statement and
Prospectus (except for financial statements and schedules as
to which such counsel need not express any opinion) complied
when so filed as to form in all material respects with the
Exchange Act and the applicable rules and regulations of the
Commission thereunder and (B) is of the opinion that the
Registration Statement and Prospectus (except for financial
statements and schedules included therein as to
17
<PAGE> 19
which such counsel need not express any opinion) comply as to
form in all material respects with the Securities Act and the
applicable rules and regulations of the Commission
thereunder; and
(xiv) in the course of his review and
discussion of the contents of the Registration Statement and
Prospectus with certain officers and employees of the Company
and its independent accountants, but without independent check
or verification, no facts have come to his attention that
would cause him to believe that the Registration Statement and
the prospectus included therein (other than the financial
statements and other financial and statistical information
contained therein, as to which he need express no belief), at
the time it became effective, contained an untrue statement of
a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements
contained therein not misleading, or that the Prospectus
(other than the financial statements and other financial and
statistical information contained therein, as to which he need
express no belief) contains any untrue statement of a material
fact or omits to state a material fact necessary in order to
make the statements contained therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinion Peter Thauer may, to the
extent the laws of the State of Michigan or Iowa or the laws of Italy,
Sweden or the United Kingdom are relevant to such opinion, with your
approval, rely upon the opinions of ________, _______, ____ _,
__________ and __________ delivered pursuant to paragraphs (e), (f),
(g), (h) and (i) above.
With respect to subparagraph (xiv) of paragraph (j) above,
Peter Thauer may state that his opinion and belief are based upon his
participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and documents
incorporated therein by reference and review and discussion of the
contents thereof, but are without independent check or verification,
except as specified.
(k) The Underwriters shall have received, on each of the
date hereof and the Closing Date, a letter dated the date hereof or
the Closing Date, as the case may
18
<PAGE> 20
be, in form and substance satisfactory to the Underwriters, from
Coopers & Lybrand L.L.P., independent public accountants, containing
statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in or
incorporated by reference into the Registration Statement and the
Prospectus.
(l) The "lock-up" agreements, each substantially in the
form of Exhibit A hereto, between you and certain shareholders,
officers and directors of the Company relating to sales and certain
other dispositions of shares of Common Stock or certain other
securities, delivered to you on or before the date hereof, shall be in
full force and effect on the Closing Date.
The several obligations of the Underwriters to purchase
Additional Shares hereunder are subject to the delivery to you on the Option
Closing Date of such documents as you may reasonably request with respect to
the good standing of the Company, the due authorization and issuance of the
Additional Shares and other matters related to the issuance of the Additional
Shares.
6. COVENANTS OF THE COMPANY. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with
each Underwriter as follows:
(a) To furnish to you, without charge, 3 signed copies of
the Registration Statement (including exhibits thereto and documents
incorporated by reference) and for delivery to each other Underwriter
a conformed copy of the Registration Statement (without exhibits
thereto but including documents incorporated by reference) and, during
the period mentioned in paragraph (c) below, as many copies of the
Prospectus, any documents incorporated therein by reference, and any
supplements and amendments thereto or to the Registration Statement as
you may reasonably request. The terms "supplement" and "amendment" or
"amend" as used in this Agreement shall include all documents
subsequently filed by the Company with the Commission pursuant to the
Exchange Act that are deemed to be incorporated by reference in the
Prospectus.
(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to
19
<PAGE> 21
you a copy of each such proposed amendment or supplement and not to
file any such proposed amendment or supplement to which you reasonably
object.
(c) If, during such period after the first date of the
public offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to
a purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the
Commission and furnish, at its own expense, to the Underwriters and to
the dealers (whose names and addresses you will furnish to the
Company) to which Shares may have been sold by you on behalf of the
Underwriters and to any other dealers upon request, either amendments
or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will
comply with law.
(d) To endeavor to qualify the Shares for offer and sale
under the securities or Blue Sky laws of such jurisdictions as you
shall reasonably request.
(e) To make generally available to the Company's security
holders and to you as soon as practicable an earning statement
covering the twelve-month period ending December 31, 1996 that
satisfies the provisions of Section 11(a) of the Securities Act and
the rules and regulations of the Commission thereunder.
(f) To pay all expenses incident to the performance of
its obligations under this Agreement, including: (i) the preparation
and filing of the Registration Statement and the Prospectus and all
amendments and supplements thereto; (ii) the preparation, issuance and
delivery of the Shares, including any transfer taxes payable in
connection with the transfer of the Shares to the Underwriters; (iii)
the fees and disbursements of the Company's counsel and accountants;
(iv) the qualification of the Shares under state securities or Blue
Sky laws in accordance with
20
<PAGE> 22
the provisions of Section 6(d), including filing fees and the fees and
disbursements of counsel for the Underwriters in connection therewith
and in connection with the preparation of any Blue Sky or Legal
Investment Memoranda; (v) the printing and delivery to the
Underwriters in quantities as hereinabove stated of copies of the
Registration Statement and all amendments thereto and of each
preliminary prospectus and the Prospectus and any amendments or
supplements thereto; (vi) the printing and delivery to the
Underwriters of copies of any Blue Sky or Legal Investment Memoranda;
(vii) the filing fees and expenses, if any, incurred with respect to
any filing with the National Association of Securities Dealers, Inc.
made in connection with the offering of the Shares; (viii) any
expenses incurred by the Company in connection with a "road show"
presentation to potential investors and (ix) the listing of the Common
Stock on the American Stock Exchange.
7. INDEMNITY AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred by any Underwriter or any such
controlling person in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein; provided, however, that the foregoing indemnity agreement with
respect to any preliminary prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages or
liabilities purchased Shares, or any person controlling such Underwriter, if a
copy of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to
21
<PAGE> 23
such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such losses, claims, damages or liabilities.
(b) Each Underwriter agrees, severally and not jointly,
to indemnify and hold harmless the Company, its directors, its officers who
sign the Registration Statement and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company to such Underwriter, but only with reference to information
relating to such Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use in the Registration Statement, any
preliminary prospectus, the Prospectus or any amendments or supplements
thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to paragraph (a) or (b) of this Section 7,
such person (the "indemnified party") shall promptly notify the person against
whom such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding
and shall pay the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (i) the indemnifying party and
the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by Morgan Stanley
& Co. Incorporated, in the case of parties indemnified pursuant to
22
<PAGE> 24
the second preceding paragraph, and by the Company, in the case of parties
indemnified pursuant to the first preceding paragraph. The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse
the indemnified party for fees and expenses of counsel as contemplated by the
second and third sentences of this paragraph, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (A) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (B) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 7 is unavailable to an indemnified party
or insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under such paragraph, in lieu
of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Underwriters on the other hand from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and of the Underwriters on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Underwriters
23
<PAGE> 25
on the other hand in connection with the offering of the Shares shall be deemed
to be in the same respective proportions as the net proceeds from the offering
of the Shares (before deducting expenses) received by the Company and the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover of the Prospectus, bear to the
aggregate Public Offering Price of the Shares. The relative fault of the
Company on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the respective number of Shares they have
purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would
not be just or equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in paragraph (d) of
this Section 7. The amount paid or payable by an indemnified party as a result
of the losses, claims, damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages that such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The remedies provided for in this
Section 7 are not exclusive and shall not limit any rights or remedies which
may otherwise be available to any indemnified party at law or in equity.
24
<PAGE> 26
(f) The indemnity and contribution provisions contained
in this Section 7 and the representations, warranties and other statements of
the Company contained in this Agreement shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter or by or on behalf of the Company, its officers or directors or
any person controlling the Company and (iii) acceptance of and payment for any
of the Shares.
8. TERMINATION. This Agreement shall be subject to termination
by notice given by you to the Company, if (a) after the execution and delivery
of this Agreement and prior to the Closing Date (i) trading generally shall
have been suspended or materially limited on or by, as the case may be, any of
the New York Stock Exchange, the American Stock Exchange, the National
Association of Securities Dealers, Inc., the Chicago Board of Options Exchange,
the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of
any securities of the Company shall have been suspended on any exchange or in
any over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a)(i) through (iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable
to market the Shares on the terms and in the manner contemplated in the
Prospectus.
9. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Shares that it has or they have agreed to purchase hereunder on such
date, and the aggregate number of Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than
one-tenth of the aggregate number of the Shares to be purchased on such date,
the other Underwriters shall be obligated severally in the proportions that the
number of Firm Shares set forth opposite their respective names in Schedule I
bears to the aggregate number of Firm Shares set forth opposite the names of
all such non-defaulting Underwriters, or in such other proportions as you may
specify, to purchase the Shares which such
25
<PAGE> 27
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
on such date; provided that in no event shall the number of Shares that any
Underwriter has agreed to purchase pursuant to this Agreement be increased
pursuant to this Section 9 by an amount in excess of one-ninth of such number
of Shares without the written consent of such Underwriter. If, on the Closing
Date, any Underwriter or Underwriters shall fail or refuse to purchase Firm
Shares and the aggregate number of Firm Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Firm Shares to
be purchased, and arrangements satisfactory to you and the Company for the
purchase of such Firm Shares are not made within 36 hours after such default,
this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Company. In any such case either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. If, on the Option Closing Date, any Underwriter
or Underwriters shall fail or refuse to purchase Additional Shares and the
aggregate number of Additional Shares with respect to which such default occurs
is more than one-tenth of the aggregate number of Additional Shares to be
purchased, the non-defaulting Underwriters shall have the option to (i)
terminate their obligation hereunder to purchase Additional Shares or (ii)
purchase not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or
any of them, because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company shall be unable to perform its obligations under
this Agreement, the Company will reimburse the Underwriters or such
Underwriters as have so terminated this Agreement with respect to themselves,
severally, for all out-of-pocket expenses (including the fees and disbursements
of their counsel) reasonably incurred by such Underwriters in connection with
this Agreement or the offering contemplated hereunder.
10. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original,
26
<PAGE> 28
with the same effect as if the signatures thereto and hereto were upon the same
instrument.
11. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
12. HEADINGS. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
27
<PAGE> 29
Very truly yours,
CAMBREX CORPORATION
By_________________________
Name:
Title:
Accepted as of the date hereof:
Morgan Stanley & Co. Incorporated
Wertheim Schroder & Co. Incorporated
Acting severally on behalf
of themselves and the
several Underwriters named
herein.
By Morgan Stanley & Co.
Incorporated
By___________________________
Name:
Title:
28
<PAGE> 30
SCHEDULE I
<TABLE>
<CAPTION>
Number of
Firm Shares
Underwriter To Be Purchased
----------- ---------------
<S> <C> <C>
Morgan Stanley & Co. Incorporated
Wertheim Schroder & Co. Incorporated
[NAMES OF OTHER UNDERWRITERS]
---------------
Total ........
===============
</TABLE>
<PAGE> 31
Exhibit A
[FORM OF LOCK-UP CONTRACT]
____________, 1995
Morgan Stanley & Co. Incorporated
1251 Avenue of the Americas
New York, NY 10020
Dear Sirs:
The undersigned understands that you, as Representative(s) of
the several Underwriters, propose to enter into an Underwriting Agreement with
Cambrex Corporation, a Delaware corporation (the "Company") providing for the
public offering (the "Public Offering") by the several Underwriters, including
yourselves, of ___ shares (the "Shares") of the Common Stock, par value $0.10
of the Company (the "Common Stock").
In consideration of the Underwriters' agreement to purchase
and make the Public Offering of the Shares, and for other good and valuable
consideration receipt of which is hereby acknowledged, the undersigned hereby
agrees that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the Underwriters, it will not, during the period
ending 90 days after the date of the Prospectus, (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, or (2) enter into any swap or other agreement that transfers, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (1) or (2) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (A) the Shares to be sold
pursuant to the Public Offering or (B) any shares of Common Stock issued by the
Company upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof of which the Underwriters have been
advised in writing.
<PAGE> 32
Very truly yours,
_________________________
(Name)
_________________________
(Address)
Accepted as of the date
first set forth above:
MORGAN STANLEY & CO. INCORPORATED
By:_______________________
<PAGE> 1
EXHIBIT 5.1
[D&P LETTERHEAD]
June 27, 1995
Cambrex Corporation
One Meadowlands Plaza
East Rutherford, New Jersey 07073
Cambrex Corporation
Registration Statement on Form S-3
(File No. 33-59273)
----------------------------------
Dear Sirs:
We have acted as counsel to Cambrex Corporation, a Delaware
corporation (the "Company"), in connection with the Registration Statement on
Form S-3 referenced above, as amended (as so amended, the "Registration
Statement"), filed by the Company with the Securities and Exchange Commission
(the "Commission") pursuant to the Securities Act of 1933, as amended (the
"Act"), relating to 1,500,000 shares of the Company's Common Stock, par value
$.10 per share, being offered by the Company and up to an additional 225,000
shares of the Company's Common Stock solely to cover over-allotments
(collectively, the "Shares").
In so acting, we have examined and relied upon the originals,
or copies certified or otherwise identified to our satisfaction, of such
records, documents, certificates and other instruments, and have made such
other investigations, as in our judgment are necessary or appropriate to enable
us to render the opinion expressed below.
<PAGE> 2
Cambrex Corporation -2- June 27, 1995
We are of the opinion that upon issuance and delivery of, and
payment for, the Shares in the manner described in the Registration Statement
in accordance with the terms of the Underwriting Agreement (the form of which
is filed as Exhibit 1.1 to the Registration Statement), the Shares will be duly
authorized, validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an Exhibit
to the Registration Statement and to the reference to our firm under the
caption "Legal Matters" in the Prospectus forming a part thereof. In giving
such consent, we do not thereby concede that we are within the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission thereunder.
Very truly yours,
/s/ DEBEVOISE & PLIMPTON
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the registration statement of Cambrex
Corporation on this Form S-3 of our report dated January 19, 1995, on our audits
of the consolidated financial statements of Cambrex Corporation as of December
31, 1994 and 1993, and for each of the three years in the period ended December
31, 1994. We also consent to the reference to our firm under the caption
"Experts."
/s/ COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
Parsippany, New Jersey
June 26, 1995
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Peter E. Thauer as his or her true and lawful
attorney-in-fact and agent, with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Registration Statement on Form S-3 of Cambrex Corporation, relating to the
Common Stock issued by Cambrex Corporation (the "Registration Statement"),
and any or all amendments or post-effective amendments to the Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she might or could
in person, hereby ratify and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Dated: April 7, 1995
/s/ CYRIL C. BALDWIN, JR.
-------------------------------
Cyril C. Baldwin, Jr.
Chairman of the Board
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Peter E. Thauer as his or her true and lawful
attorney-in-fact and agent, with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Registration Statement on Form S-3 of Cambrex Corporation, relating to the
Common Stock issued by Cambrex Corporation (the "Registration Statement"),
and any or all amendments or post-effective amendments to the Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she might or could
in person, hereby ratify and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Dated: May 8, 1995
/s/ FRANCIS X. DWYER
-------------------------------
Francis X. Dwyer
Director
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Peter E. Thauer as his or her true and lawful
attorney-in-fact and agent, with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Registration Statement on Form S-3 of Cambrex Corporation, relating to the
Common Stock issued by Cambrex Corporation (the "Registration Statement"),
and any or all amendments or post-effective amendments to the Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she might or could
in person, hereby ratify and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Dated: May 8, 1995
/s/ GEORGE J.W. GOODMAN
-------------------------------
George J.W. Goodman
Director
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Peter E. Thauer as his or her true and lawful
attorney-in-fact and agent, with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Registration Statement on Form S-3 of Cambrex Corporation, relating to the
Common Stock issued by Cambrex Corporation (the "Registration Statement"),
and any or all amendments or post-effective amendments to the Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she might or could
in person, hereby ratify and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Dated: May 2, 1995
/s/ KATHRYN RUDIE HARRIGAN
-------------------------------
Kathryn Rudie Harrigan
Director
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Peter E. Thauer as his or her true and lawful
attorney-in-fact and agent, with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Registration Statement on Form S-3 of Cambrex Corporation, relating to the
Common Stock issued by Cambrex Corporation (the "Registration Statement"),
and any or all amendments or post-effective amendments to the Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she might or could
in person, hereby ratify and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Dated: May 8, 1995
/s/ LEON J. HENDRIX, JR.
-------------------------------
Leon J. Hendrix, Jr.
Director
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Peter E. Thauer as his or her true and lawful
attorney-in-fact and agent, with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Registration Statement on Form S-3 of Cambrex Corporation, relating to the
Common Stock issued by Cambrex Corporation (the "Registration Statement"),
and any or all amendments or post-effective amendments to the Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she might or could
in person, hereby ratify and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Dated: May 8, 1995
/s/ ILAN KAUFTHAL
-------------------------------
Ilan Kaufthal
Director
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Peter E. Thauer as his or her true and lawful
attorney-in-fact and agent, with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Registration Statement on Form S-3 of Cambrex Corporation, relating to the
Common Stock issued by Cambrex Corporation (the "Registration Statement"),
and any or all amendments or post-effective amendments to the Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she might or could
in person, hereby ratify and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Dated: May 8, 1995
/s/ ROBERT LEBUHN
-------------------------------
Robert LeBuhn
Director
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Peter E. Thauer as his or her true and lawful
attorney-in-fact and agent, with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Registration Statement on Form S-3 of Cambrex Corporation, relating to the
Common Stock issued by Cambrex Corporation (the "Registration Statement"),
and any or all amendments or post-effective amendments to the Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she might or could
in person, hereby ratify and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Dated: May 8, 1995
/s/ DEAN P. PHYPERS
-------------------------------
Dean P. Phypers
Director
<PAGE> 9
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Peter E. Thauer as his or her true and lawful
attorney-in-fact and agent, with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Registration Statement on Form S-3 of Cambrex Corporation, relating to the
Common Stock issued by Cambrex Corporation (the "Registration Statement"),
and any or all amendments or post-effective amendments to the Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she might or could
in person, hereby ratify and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Dated: May 8, 1995
/s/ ROSINA B. DIXON
-------------------------------
Rosina B. Dixon
