<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT ON FORM 8-K
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) NOVEMBER 26, 1997
CAMBREX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION)
1-10638 22-2476135
(COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
ONE MEADOWLANDS PLAZA, EAST RUTHERFORD, NEW JERSEY 07073
(ADDRESS OF PRINCIPAL EXECUTIVES OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 804-3000
<PAGE> 2
AMENDMENT NO. 1
The undersigned registrant hereby amends the following portion of its Current
Report dated October 8, 1997 on Form 8-K as set forth in the pages attached
hereto:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
CAMBREX CORPORATION
(Registrant)
Dated: November 26, 1997 /s/ DOUGLAS H. MacMILLAN
------------------------
Douglas H. MacMillan,
Vice President/Chief Financial Officer
Total # of pages 30
of which this is page 1
<PAGE> 3
FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(a) Financial Statements of Biowhittaker Inc.
----------------------------------------
Report of Independent Accountants 3
Consolidated Statements of Income for the years ended
October 31, 1996, 1995, and 1994 4
Consolidated Balance Sheets as of October 31, 1996 and 1995 5
Consolidated Statements of Stockholders' Equity for the years ended
October 31, 1996, 1995, and 1994 6
Consolidated Statements of Cash Flows for the years ended
October 31, 1996, 1995, and 1994 7
Notes to Consolidated Financial Statements 8-19
Consolidated Statements of Operations for the nine months ended
September 30, 1997 (unaudited) 20
Condensed Consolidated Balance Sheets as of September 30, 1997 (unaudited) 21
Notes to Condensed Consolidated Financial Statements 22
(b) Pro Forma Financial Information
------------------------------
Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1997 (Unaudited) 24
Pro Forma Condensed Consolidated Statement of Operations
for the nine months ended September 30, 1997 (Unaudited) 25
Pro Forma Condensed Consolidated Statement of
Operations for the year ended
December 31, 1996 (Unaudited) 26
Notes to Pro Forma Condensed Consolidated Financial
Statements (Unaudited) 27-28
(c) Exhibits 29-30
--------
</TABLE>
2
<PAGE> 4
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors
BioWhittaker, Inc.
We have audited the accompanying consolidated balance sheets of BioWhittaker,
Inc., as of October 31, 1996 and 1995, and the related statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended October 31, 1996. Our audits also included the financial statement
schedule listed in the Index on page 2. These financial statements and schedule
are the responsibility to the Company's management. Our responsibility is to
express an opinion on these 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 audit 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
BioWhittaker, Inc. at October 31, 1996 and 1995, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended October 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Baltimore, Maryland
December 6, 1996
3
<PAGE> 5
BIOWHITTAKER, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED OCTOBER 31 ,
----------------------------------------
1996 1995 1994
---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Sales ......................................... $ 51,459 $ 55,797 $ 54,651
Costs and expenses
Cost of sales .............................. 26,616 30,162 31,039
Research and development ................... 2,608 2,789 2,458
Selling, general and administrative ........ 14,106 14,298 13,318
-------- -------- --------
43,330 47,249 46,815
-------- -------- -------
Income From Operations ........................ 8,129 8,548 7,836
Other (income)/expenses
Purchased research and development ......... 4,000 -- --
Litigation expenses ........................ 3,500 -- --
Gain on sale of product line ............... (2,261) -- --
Gain on sale of joint venture .............. -- (2,015) --
Gain on Pharmacia settlement ............... -- (1,710) --
Other income ............................... (362) (326) --
Equity in loss of joint venture ............ -- 749 1,277
Interest ................................... 262 547 843
(Gain)/loss on foreign currency transactions (44) 45 (120)
-------- -------- --------
5,095 (2,710) 2 ,000
-------- -------- --------
Income Before Income Taxes .................... 3,034 11,258 5,836
Provision for income taxes .................... 2,201 4,272 2,302
-------- -------- --------
Net Income .................................... $ 833 $ 6,986 $ 3,534
======== ======== ========
Net Income Per Share .......................... $ 0.08 $ 0.64 $ 0.32
======== ======== ========
Average common and common equivalent
shares outstanding (in thousands) ......... 10,895 10,971 11,042
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 6
BIOWHITTAKER, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT OCTOBER 31,
---------------------
1996 1995
----- ----
(DOLLARS IN THOUSANDS)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ............................................. $ 701 $ 359
Accounts receivable, less allowance for doubtful accounts
of $65 in 1996 and $129 in 1995 ............................... 8,623 8,624
Other receivables ..................................................... 1,233 --
Inventories ........................................................... 21,114 19,138
Assets held for disposal .............................................. -- 10,379
Prepaid expenses ...................................................... 1,687 556
Deferred income taxes ................................................. 119 --
-------- --------
Total Current Assets .............................................. 33,477 39,056
-------- --------
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements ............................................ 167 167
Buildings and improvements ............................................ 17,579 16,993
Equipment ............................................................. 15,849 13,346
-------- --------
33,595 30,506
Less accumulated depreciation ......................................... 16,808 14,631
-------- --------
16,787 15,875
-------- --------
INTANGIBLE ASSETS
Patents ............................................................... 4,018 4,675
Goodwill .............................................................. 3,663 678
Purchased technology .................................................. 3,350 --
Other ................................................................. 1,480 --
-------- --------
12,511 5,353
Less accumulated amortization ......................................... 1,698 671
-------- --------
10,813 4,682
-------- --------
OTHER ASSETS .......................................................... 78 188
-------- --------
$ 61,155 $ 59,801
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable ......................................................... $ 300 $ 900
Current portion of long-term debt ..................................... 291 1,101
Accounts payable ...................................................... 3,857 3,183
Accrued salaries and related expenses ................................. 4,109 3,578
Accrued expenses related to sale of product line ...................... 1,249 --
Other accrued liabilities ............................................. 1,125 1,003
Deferred income taxes ................................................. -- 410
Income taxes payable .................................................. 321 --
-------- --------
Total Current Liabilities .................................. 11,252 10,175
-------- --------
LONG-TERM DEBT ........................................................ 1,443 2,936
-------- --------
DEFERRED INCOME TAXES ................................................. 1,669 732
-------- --------
STOCKHOLDERS' EQUITY
Common stock
Par value $.01, authorized 40 million shares, outstanding 10,759,199
shares in 1996 and 1995 ...................................... 108 108
Additional paid-in capital ............................................ 26,389 26,389
Retained earnings ..................................................... 20,313 19,480
Translation adjustment ................................................ (19) (19)
-------- --------
Total Stockholders' Equity ........................................ 46,791 45,958
-------- --------
$ 61,155 $ 59,801
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE> 7
BIOWHITTAKER, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE THREE YEARS ENDED OCTOBER 31, 1996
----------------------------------------------------------------------------
ADDITIONAL
COMMON STOCK PAID-IN RETAINED TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT TOTAL
------ ------ ------- -------- ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT OCTOBER 31, 1993 ........ 10,581,214 $ 106 $ 26,633 $ 8,960 $ (51) $ 35,648
Net Income ......................... -- -- -- 3,534 -- 3,534
Translation adjustment and other ... -- -- (57) -- (4) (61)
---------- ----- -------- -------- -------- --------
BALANCE AT OCTOBER 31, 1994 ........ 10,581,214 106 26,576 12,494 (55) 39,121
Net Income ......................... -- -- -- 6,986 -- 6,986
Stock options exercised net of stock
tendered in payment ......... 177,985 2 (917) -- -- (915)
Tax benefit from exercise of stock
options ..................... -- -- 730 -- -- 730
Translation adjustment and other ... -- -- -- -- 36 36
---------- ----- -------- -------- -------- --------
BALANCE AT OCTOBER 31, 1995 ........ 10,759,199 108 26,389 19,480 (19) 45,958
Net Income ......................... -- -- -- 833 -- 833
---------- ----- -------- -------- -------- --------
BALANCE AT OCTOBER 31, 1996 ........ 10,759,199 $ 108 $ 26,389 $ 20,313 $ (19) $ 46,791
========== ===== ======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE> 8
BIOWHITTAKER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED OCTOBER 31,
--------------------------------------
1996 1995 1994
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ........................................... $ 833 $ 6,986 $ 3,534
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................... 3,518 4,429 5,052
Purchased research and development ............... 4,000 -- --
Gain on sale of product line ..................... (2,261)
Gain on sale of joint venture .................... -- (2,015) --
Equity in loss of joint venture .................. -- 749 1,277
Deferred income taxes ............................ (1,332) (12) 218
Loss on disposal of property, plant and equipment 63 232 233
Write-down of property, plant and equipment ...... -- 824 --
Changes in operating assets and liabilities:
Accounts receivable ........................ 871 (1,047) 26
Inventories ................................ (638) (5,606) (892)
Prepaid expenses and other assets .......... 732 849 (532)
Prepaid royalty ............................ (1,360) -- --
Accounts payable and accrued liabilities ... (342) (163) 736
-------- ------- -------
Net Cash Provided By Operating Activities ........ 4,084 5,226 9,652
-------- ------- -------
INVESTING ACTIVITIES
Purchases of property, plant and equipment ........... (2,953) (2,861) (5,425)
Proceeds from sale of product line ................... 12,387 -- --
Purchase of Clonetics, net of cash received .......... (8,226) -- --
Purchase of assets of other businesses ............... (1,044) -- --
Investment in joint venture .......................... -- -- (838)
Proceeds from sale of joint venture .................. -- 4,674 --
-------- ------- -------
Net Cash Provided By (Used In) Investing Activities 164 1,813 (6,263)
-------- ------- -------
FINANCING ACTIVITIES
Net repayments of notes payable ...................... (600) (2,600) (3,550)
Issuance of long-term debt ........................... -- -- 1,800
Payment of long-term debt ............................ (3,428) (4,737) (1,304)
Other ................................................ 122 19
-------- ------- -------
(61)
Net Cash Used In Financing Activities ............. (3,906) (7,318) (3,115)
-------- ------- -------
Net Change In Cash ................................ 342 (279) 274
Cash At Beginning Of Year ......................... 359 638 364
-------- ------- -------
Cash At End Of Year ............................... $ 701 $ 359 $ 638
======== ======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest .......................................... $ 312 $ 707 $ 793
======== ======= =======
Income taxes ...................................... $ 2,912 $ 3,431 $ 1,486
======== ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
7
<PAGE> 9
BIOWHITTAKER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1. DESCRIPTION OF THE COMPANY
BioWhittaker, Inc. ("BioWhittaker") is engaged in the development,
manufacture and marketing of cell culture, endotoxin detection and to a lesser
degree, clinical diagnostic testing products.
During 1996, 1995 and 1994, approximately 28%, 27% and 27%, respectively,
of BioWhittaker's sales were to customers outside of the United States,
primarily Western Europe. Substantially all of these sales were attributable to
domestic operations.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts and related disclosures.
Actual results could differ from those estimates.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts of BioWhittaker and its wholly owned subsidiaries, after
elimination of significant intercompany balances and transactions.
Reclassifications: Certain prior years' amounts in the consolidated
financial statements have been reclassified to conform to the 1996 presentation.
Cash Equivalents. The Company considers all highly liquid investments with
an original maturity of three months or less to be cash equivalents.
Inventories: Inventories are stated at the lower of cost or market. Cost
has been determined principally using the first-in, first-out (FIFO) method.
Property and Depreciation: Property, plant and equipment is recorded at
cost. Depreciation is computed generally using the straight-line method.
Depreciation expense was $2,521 in 1996, $3,742 in 1995 and $4,364 in 1994.
Included in property, plant and equipment is construction in progress of $675
and $1,052 for 1996 and 1995, respectively. Of this amount, $287 and $282 is
classified as buildings and improvements, and $388 and $770 is classified as
equipment for 1996 and 1995, respectively.
8
<PAGE> 10
BIOWHITTAKER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
Intangible Assets: Goodwill consists of the cost in excess of fair value of
the net assets of entities acquired in purchase transactions and is amortized on
a straight-line basis over the expected periods of benefit, which range from 10
to 40 years. Patents, purchased technology and other intangibles consist of the
allocated cost of acquiring certain technology and proprietary information in
business combinations accounted for as purchases. These intangibles are
amortized on a straight line basis over 7 to 14 years.
Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of: In fiscal 1996, the Company adopted the provisions of Financial
Accounting Standards Board ("FASB") Statement No. 121, Accounting for Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. The Statement
prescribes the accounting for the impairment of long-lived assets, such as
property and equipment and intangible assets, as well as the accounting for
long-lived assets that are held for disposal. The initial adoption of this
Statement in fiscal 1996 did not have a material impact on the reported results
of operations of the Company.
Advertising: The Company expenses the production costs of advertising as
they are incurred. Advertising expenses were $705, $627 and $743 in 1996, 1995,
and 1994, respectively.
Foreign Currency Translation: The local currency for the Company's foreign
subsidiary is its functional currency. Assets and liabilities of foreign
operations are translated into U.S. dollars at the market rates of exchange as
of the balance sheet dates and the resultant translation adjustments are
included as a component of stockholders' equity. Revenues and expenses are
translated into U.S. dollars using weighted average exchange rates.
Foreign currency transaction gains and losses are the result of the effect
of exchange rate changes on transactions denominated in currencies other than
the functional currency and are included in the Company's Consolidated Statement
of Income.
The major foreign currency in which the Company has risk associated with
foreign exchange rate movements is the pound sterling. This risk is evaluated
regularly, and from time to time, the Company reduces its exposure to
fluctuations in foreign currency exchange rates on firm commitments and
transactions denominated in currencies other than the functional currency by
hedging such exposures. Such exposures are generally hedged using foreign
currency forward contracts. There were no such contracts outstanding at October
31, 1996 and 1995.
Generally, the gains and losses on commitment hedges are deferred and
included in the basis of the transaction underlying the commitment. Gains and
losses on transaction hedges are recognized in income and offset the foreign
exchange gains and losses on the related transaction.
9
<PAGE> 11
BIOWHITTAKER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
Net Income Per Share: Net income per share is computed by dividing net
income by the weighted average number of common and common equivalent shares
outstanding. Common equivalent shares include the dilutive effect of outstanding
stock purchase options and Anasco GmbH's right to maintain its aggregate
percentage voting interest in BioWhittaker (see Note 10), calculated, in each
case, using the treasury stock method. Net income per share determined on a
fully diluted basis is not materially different from the primary net income per
share presented.
Stock Options Granted to Employees: The Company records compensation
expense for all stock-based compensation plans using the intrinsic value method
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees". In
October 1995, the FASB issued Statement No. 123, "Accounting for Stock-Based
Compensation", which encourages companies to recognize expense for stock-based
awards based on their estimated value on the date of grant. Statement No. 123,
effective for fiscal 1997, does not require companies to change their existing
accounting for stock-based awards, but if the new fair value method is not
adopted, pro forma income and earnings per share data should be provided in the
footnotes to the financial statements. The Company intends to continue to
account for stock-based compensation plans using the intrinsic value method and
will supplementally disclose in its fiscal 1997 financial statements the
required pro forma information as if the fair value method had been adopted.
NOTE 3. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------
1996 1995
---- ----
<S> <C> <C>
Raw material................................................. $ 4,050 $ 2,156
Work in process.............................................. 7,323 5,251
Finished goods............................................... 9,741 11,731
------ -------
$21,114 $19,138
======= =======
</TABLE>
NOTE 4. JOINT VENTURE
Prior to April 30, 1995, BioWhittaker had a joint venture and partnership
agreement with a member of the Boehringer Ingelheim Group to manufacture cell
culture products in Belgium. For a 50% interest in the joint venture, the
Company contributed approximately $4,700 and granted the joint venture a
royalty-free exclusive license to use certain BioWhittaker technology. The
investment was accounted for using the equity method.
10
<PAGE> 12
BIOWHITTAKER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 4. JOINT VENTURE - (CONTINUED)
On April 30, 1995, the Company sold to Boehringer Ingelheim International
GmbH ("Boehringer") 100% of the stock of BioWhittaker International, Inc., a
subsidiary which held the Company's 50% interest in the joint venture (the
"Partnership"), for a cash payment of $4,674. The Company also sold 100% of the
stock of BioWhittaker France S.A.R.L. to Boehringer for $724, a price that
approximated BioWhittaker France S.A.R.L.'s book value at April 30, 1995. In
addition, the Company entered into a five year agreement with Boehringer to
provide technical assistance and support for those products covered by the
agreement. Boehringer will pay the Company $362 annually for the length of the
agreement for such assistance.
The impact of the sale, net of the book value of BioWhittaker France
S.A.R.L., the Company's investment in the Partnership and certain costs
associated with the transaction, is reflected as "Gain on sale of joint venture"
of $2,015 in the Company's Consolidated Statement of Income for the year ended
October 31, 1995.
At October 31, 1996 and 1995 there was $881 and $1,179, respectively, due
from parties related to the Boehringer Ingelheim Group.
NOTE 5. LITIGATION
Gain on Pharmacia settlement. On December 23, 1994, BioWhittaker reached an
agreement with Pharmacia AB and certain affiliated companies (together,
"Pharmacia") to settle a lawsuit in which BioWhittaker claimed that Pharmacia
infringed BioWhittaker's patents covering its diagnostic allergy testing system
in the United States, Canada and Australia.
As a result of the settlement agreement, BioWhittaker has granted Pharmacia
a license to use its patents in the United States, Canada and Australia. Under
the terms of this license, Pharmacia agreed to pay 3% of all revenues from the
sale of those products using the patents, subject to an agreed payment of $500
for 1995, for which payment was received in December 1994, and a minimum of $300
for each of the years 1996 through 1999. In addition, Pharmacia also paid
BioWhittaker $3,500 in December 1994, for past infringement, for a total cash
payment upon settlement of $4,000. The proceeds from the settlement, net of
legal fees and certain other expenses, is reflected in the Company's
Consolidated Statement of Income for the year ended October 31,1995.
Litigation expenses. The 1996 Consolidated Statement of Income includes
litigation expenses of $3,500 which is the pre-tax cost associated with the
Company's lawsuit against Minnesota Mining and Manufacturing, Inc.
11
<PAGE> 13
BIOWHITTAKER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 6. ACQUISITIONS AND DIVESTITURES
Clonetics Corporation. On January 17, 1996, the Company acquired 100% of the
stock of Clonetics Corporation ("Clonetics"), a leading supplier of normal human
cells, for $8,733 in cash and the assumption of approximately $3,500 in
liabilities. The operations of Clonetics are included in the Consolidated
Statement of Income from the date of acquisition. The acquisition was accounted
for as a purchase transaction and resulted in the recording of approximately
$2,260 of goodwill, $3,350 of purchased technology and $1,480 of other
intangibles that will be amortized over periods ranging from 7 to 15 years.
$4,000 of the purchase price was allocated to purchased research and development
and expensed on the Company's Consolidated Statement of Income for fiscal 1996.
The expense for purchased research and development is not deductible for income
tax purposes.
Sale of product line. On December 18, 1995, the Company sold to
Carter-Wallace, Inc. ("Carter") its diagnostic test kit business in the EIA
format for $9,000 and on February 2, 1996 sold its related FIAX line for $1,000.
Carter also purchased EIA and FIAX finished goods inventory for approximately
$1,400. BioWhittaker agreed to continue to manufacture EIA and FIAX products for
Carter for up to one and five years, respectively. Under a separate agreement
with one of Carter's contract manufacturers, BioWhittaker agreed to sell certain
raw material and work in process inventory over a two year period.
BioWhittaker also agreed to provide to Carter's customers certain diagnostic
testing instrumentation associated with the EIA and FIAX product lines and to
service the equipment for up to two years. The equipment surcharge typically
paid on each kit purchased by customers will be collected by Carter and remitted
to the Company in the amount of approximately $1,585, the book value of such
diagnostic equipment owned by the Company at closing.
As a result of this transaction, BioWhittaker recorded a pre-tax gain of
$2,261 on its Consolidated Statement of Income for fiscal 1996, which includes
the write-off of approximately $2,200 of unamortized cost of patents and
goodwill. Additional gain or loss in future periods could result from the
continuing transition operations, including the Company's on-going service
obligations for the diagnostic testing instrumentation sold to Carter.
The following table presents proforma consolidated results of operations for
the years ended October 31, 1995 and 1996, assuming that the purchase of
Clonetics Corporation and the sale of the diagnostic test kit business to
Carter-Wallace, Inc. had occurred at the beginning of each of the respective
fiscal periods.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
OCTOBER 31,
------------------
1996 1995
---- ----
<S> <C> <C>
Sales............................................................... $51,288 $50,979
Net Income.......................................................... $ 3,497 $ 7,222
Net Income Per Share................................................ $ 0.32 $ 0.66
</TABLE>
12
<PAGE> 14
BIOWHITTAKER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 6. ACQUISITIONS AND DIVESTITURES - (CONTINUED)
The above proforma information has been derived from the historical
financial statements as adjusted for the proforma results of operations of
Clonetics Corporation prior to its purchase by BioWhittaker, the reduction in
revenue and expenses as a result of the sale to Carter-Wallace, Inc. and an
estimated income tax provision related to the historical results and foregoing
adjustments. The gain on the sale to Carter-Wallace, Inc. and the write-down of
purchased research and development have been excluded from the proforma results
of operations as they are non-recurring events.
The above proforma information is presented for illustrative purposes only
and is not necessarily indicative of the operating results had both the
acquisition of Clonetics Corporation and the sale to Carter-Wallace, Inc.
occurred as of November 1, 1994 and November 1, 1995.
BioWhittaker paid DHI $1,125 as a non-refundable advance against royalties
on future sales. The research and development agreement grants the Company the
right to commercialize additional products under development by DHI or being
contemplated by DHI and BioWhittaker, in exchange for future payments. Such
payments totaled $260 for fiscal 1996.
NOTE 7. DEBT
BioWhittaker maintains a $9,000 unsecured revolving credit facility
(including a letter of credit subfacility) with a bank, which expires in
February 1998. Borrowings under the facility ($300 and $900 at October 31, 1996
and 1995, respectively), bear interest at 1% above the bank's LIBOR rate or at
the bank's prime rate, at BioWhittaker's option. The weighted average interest
rates for these borrowings were 8.57% in 1996 and 7.91% in 1995. The agreement
relating to the facility requires the maintenance of specific levels of net
worth and interest coverage and limits the payment of dividends and repurchase
of outstanding stock. The Company was in compliance with all debt covenants at
October 31, 1996 and expects to continue to meet such covenants over the next
twelve months.
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------
1996 1995
----- ----
<S> <C> <C>
Notes payable with interest at LIBOR plus 1.35% ....................... $ - $ 2,250
Notes due through 2001, net of a present value discount of $414 in
1996 and $552 in 1995 using a discount rate of 8% .................. 1,586 1,787
Capital leases due through 2000........................................ 148 -
-------- ---------
1,734 4,037
Less current maturities............................................... 291 1,101
-------- ---------
$ 1,443 $ 2,936
======== =========
</TABLE>
13
<PAGE> 15
BIOWHITTAKER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 7. DEBT - (CONTINUED)
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
OCTOBER 31,
-----------
<S> <C> <C>
1997 ........................................ $ 291
1998 ........................................ 295
1999 ........................................ 286
2000 ........................................ 286
2001......................................... 301
Subsequent to October 2001...................... 275
</TABLE>
NOTE 8. FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
The fair value of the Company's financial instruments, which consist
primarily of cash and cash equivalents, accounts receivable, accounts payable
and short and long-term debt, approximate their carrying amounts reported in the
Consolidated Balance Sheets.
The Company maintains an allowance for losses on trade receivables based on
the collectibility of all amounts owed. The Company generally does not require
collateral for trade receivables. At October 31, 1996, the Company does not have
any significant concentrations of credit risk.
NOTE 9. INCOME TAXES
At October 31, 1996, a wholly owned subsidiary of the Company had net
operating loss carry forwards of $386 for income tax purposes that expire in
2000 through 2008. The company also has general business tax credit carry
forwards of $180 that expire in 1997 through 2000. The operation of certain
provisions of the Internal Revenue Code will limit the amount of the carry
forwards available to offset taxable income in any one year.
Income before income taxes includes the following components:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-----------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Domestic................................... $ 3,088 $ 10,996 $ 5,326
Foreign.................................... (54) 262 510
---------- ---------- --------
$ 3,034 $ 11,258 $ 5,836
========= ========== =========
</TABLE>
14
<PAGE> 16
BIOWHITTAKER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 9. INCOME TAXES - (CONTINUED)
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-----------------------------------
1996 1995 1994
------- ------- ------
<S> <C> <C> <C>
Current
Federal.................................................. $2,578 $3,664 $1,373
States................................................... (11) 693 591
Foreign.................................................. (4) 90 120
------ ------ ------
2,563 4,447 2,084
Deferred
Federal.................................................. (300) (145) 179
States................................................... (62) (30) 39
------ ------ ------
(362) (175) 218
------ ------ ------
$2,201 $4,272 $2,302
====== ====== ======
</TABLE>
The significant components of the deferred income tax liabilities and
assets are as follows:
<TABLE>
<CAPTION>
OCTOBER 31,
------------------
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss carry forward ......... $ 131 $ --
General business tax credit carry forwards 180 --
Inventory reserves ....................... 195 127
Accrued expenses ......................... 741 511
State taxes .............................. 120 --
Legal fees ............................... 211 193
Other .................................... 91 --
------ ------
Total deferred tax assets ..................... 1,669 831
Deferred tax liabilities:
Inventory ................................ 479 477
Legal fees ............................... 76 329
Prepaid expenses ......................... 236 242
Depreciation and amortization ............ 2,058 769
Other .................................... 33 156
------ ------
Total deferred tax liabilities ................ 2,882 1,973
Net future income tax liability ............... 1,213 1,142
Valuation allowance ........................... 337 --
------ ------
Net deferred tax liability .................... $1,550 $1,142
====== ======
</TABLE>
During 1996, a valuation allowance of $337 was established.
15
<PAGE> 17
BIOWHITTAKER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 9. INCOME TAXES - (CONTINUED)
A reconciliation of income taxes computed at the U.S. federal statutory
rate to the Company's income tax expense is as follows:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-----------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income taxes at federal statutory rate .. $ 1,032 $ 3,828 $1,984
State income taxes, net of federal tax
benefit ............................. 132 490 254
Purchased research and development ...... 1,534 -- --
Tax effect of foreign income ............ (112) -- --
Benefit from sale of product line ....... (320) -- --
Other, net .............................. (65) (46) 64
------- ------- ------
$ 2,201 $ 4,272 $2,302
======= ======= ======
</TABLE>
Unremitted earnings of subsidiaries outside the United States were not
material.
NOTE 10. CAPITAL STOCK
Prior to October 31, 1991, BioWhittaker was a wholly owned subsidiary of
Whittaker Corporation ("Whittaker"). In connection with the spinoff of
BioWhittaker in October 1991, certain employees of BioWhittaker received options
to purchase shares of BioWhittaker common stock ("Substitute Options").
Substitute Options to purchase 692,742 of BioWhittaker common shares at exercise
prices ranging from $2.09 to $5.50 per share were granted. Subsequently, the
Company adopted the BioWhittaker 1991 Long-Term Stock Incentive Plan ("Company
Stock Plan"). The maximum number of shares of BioWhittaker common stock in
respect of which stock-based awards may be granted under the Company Stock Plan
is 1,500,000 shares plus 127,288 shares subject to the Substitute Options. At
October 31, 1996, no stock-based awards, other than stock options, have been
granted. Transactions for the fiscal years ending October 31, 1996 and 1995 are
summarized as follows:
<TABLE>
<CAPTION>
STOCK
OPTIONS
PRICE RANGE
--------------------------------
<S> <C> <C>
Outstanding October 31, 1994 ....................... 1,457,244 $ 2.09- $ 8.88
Options granted during year ended October 31, 1995 . 17,000 $ 6.50- $ 7.75
Options exercised during year ended October 31, 1995 (459,623) $ 2.09- $ 5.50
Options canceled or expired during year ended
October 31, 1995 ............................... (3,333) $ 5.38
--------- --------------
Outstanding October 31, 1995 ....................... 1,011,288 $ 3.57- $ 8.88
Options granted during year ended October 31, 1996 . 27,000 $ 6.75- $ 7.63
Options canceled or expired during year ended
October 31, 1996 ............................... (37,500) $ 5.38- $ 8.75
---------- --------------
Outstanding October 31, 1996 ...................... 1,000,788 $ 3.57- $ 8.88
========== ==============
</TABLE>
16
<PAGE> 18
BIOWHITTAKER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 10. CAPITAL STOCK - (CONTINUED)
Options for 774,962 shares were exerciseable as of October 31, 1996.
In 1991, the Company sold for $23,000 in cash, to Anasco GmbH, a member of
the Boehringer Ingelheim Group, common stock equal to 19.9% of its outstanding
common stock after such sale. The agreement relating to the sale of these
shares included, among other matters, certain limitations on the purchase by
Anasco and its affiliates of additional shares of BioWhittaker stock. In
addition, upon the exercise of any Substitute Options, BioWhittaker must pay
Anasco an amount in cash, voting securities or combination thereof (at
BioWhittaker's option) as determined in accordance with the provisions of the
related stock purchase agreement.
NOTE 11. POST-RETIREMENT BENEFITS
BioWhittaker has established a contributory 401(k) plan and a
noncontributory defined contribution target plan for its eligible employees.
Under BioWhittaker's 401(k) plan, all domestic employees over 21 years of
age who have completed one year of service with the Company are eligible to
participate. Participating employees may voluntarily contribute 1% to 15% of
their pay each year. The Company matches a portion of the employee's
contribution up to 6% of the employee's pay.
Under BioWhittaker's target plan, all domestic employees over 21 years of
age who have completed one year of service with the Company participate. The
target plan is 100% Company-funded, with annual contributions by the Company
based on the employee's targeted benefit, determined by such factors as salary
and expected years of service to age 65.
Total 401(k) and target plan expenses recorded in the accompanying
financial statements were as follows:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
----------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
401(k) plan expense.......................................... $ 389 $ 384 $ 357
Target plan expense.......................................... 486 412 448
------- ------ ------
$ 875 $ 796 $ 805
======= ====== ======
</TABLE>
Effective August 15, 1995, the Company adopted a nonqualified Supplemental
Executive Retirement Program ("SERP") covering certain key employees. The SERP
provides for supplemental defined pension benefits based on compensation and
years of service. The SERP also includes a defined contribution component. No
contributions were made during fiscal 1995 and $107 in matching contributions
were made by the Company in fiscal 1996.
17
<PAGE> 19
BIOWHITTAKER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 11. POST-RETIREMENT BENEFITS - (CONTINUED)
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Service cost-benefits earned during the period $ 59 $11
Interest cost on projected benefit obligation 109 21
Net amortization and deferral ................ 91 19
---- ---
Net periodic pension cost .................... $259 $51
==== ===
Assumptions used in the accounting were:
Discount rate ............................ 8.0% 7.5%
Rate of increase in compensation level ... 5.0% 5.0%
</TABLE>
The following table sets forth the SERP's funded status and amounts
recognized in the Company's consolidated balance sheets:
<TABLE>
<CAPTION>
AT OCTOBER 31,
---------------
1996 1995
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, (100% vested) .............. $ 1,252 $ 1,000
======= =======
Projected benefit obligation for service rendered to date 1,575 1,247
Plan assets at fair value .................................. -- --
------- -------
Projected benefit obligation in excess of plan assets ...... 1,575 1,247
Unrecognized net obligation at August 15, 1995
being recognized over 14 years .......................... (1,265) (1,196)
------- -------
Accrued pension cost included in accrued expenses .......... $ 310 $ 51
======= =======
</TABLE>
BioWhittaker offers no other post-retirement benefits to its employees.
NOTE 12. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QTR QTR QTR QTR
--- --- --- ---
<S> <C> <C> <C> <C>
1996
----
Sales................................... $ 11,912 $ 13,559 $ 12,253 $ 13,735
Cost of sales........................... 6,478 7,187 6,169 6,782
(Loss)/Income Before Income Tax ........ (1,168) 2,025 (1,457) 3,634
Net (Loss)/Income....................... (1,959) 1,367 (910) 2,335
Net (Loss)/Income Per Share ............ (0.18) 0.13 (.08) 0.21
</TABLE>
18
<PAGE> 20
BIOWHITTAKER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 12. QUARTERLY FINANCIAL DATA (UNAUDITED) - (CONTINUED)
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QTR QTR QTR QTR
--- --- --- ---
<S> <C> <C> <C> <C>
1995
- ----
Sales................................... $14,530 $14,147 $13,571 $13,549
Cost of sales........................... 7,686 7,540 7,554 7,382
Income Before Income Tax ............... 3,365 3,619 1,999 2,275
Net Income.............................. 2,079 2,241 1,287 1,379
Net Income Per Share.................... 0.19 0.20 0.12 0.13
</TABLE>
In the fourth quarter of fiscal 1996, the Company recorded an adjustment to
increase the gain on sale of product line (originally recorded in the first
quarter) by $939.
19
<PAGE> 21
BIOWHITTAKER, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the Nine
Months Ended
September 30, 1997
------------------
<S> <C>
Net revenues ................. $ 42,656
Operating costs:
Cost of goods sold ..... 21,475
Selling, general and
administrative costs .. 11,188
Research and development 2,161
--------
Total ............... 34,824
--------
Operating Income ............. 7,832
Other income (expenses):
Interest income ........... 7
Other - net ............... (79)
--------
Income before income taxes ... 7,760
Provision for income taxes ... 2,769
--------
Net income ................... $ 4,991
========
</TABLE>
See accompanying note to unaudited pro forma condensed consolidated
financial statements
20
<PAGE> 22
BIOWHITTAKER, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
As of
September 30, 1997
------------------
<S> <C>
ASSETS
Current assets:
Cash and temporary cash investments .... $ 4,557
Trade and other receivables ............ 6,795
Inventories ............................ 25,081
Other current assets ................... 2,426
--------
Total current assets ............. 38,859
Property, plant and equipment, net ........ 16,793
Intangible assets, net .................... 11,225
Other non-current assets .................. 89
--------
Total assets ....................... $ 66,966
========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 9,905
Income taxes payable ................... 1,493
Current portion of long-term debt ...... 502
--------
Total current liabilities .......... 11,900
Long-term debt ............................ 1,253
Deferred taxes ............................ 1,573
--------
Total liabilities .................. 14,726
--------
Equity:
Common stock ........................... 108
Additional paid-in capital ............. 26,397
Retained earnings ...................... 25,752
Cumulative translation adjustment ...... (17)
--------
Total liabilities and equity .............. $ 66,966
========
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated
financial statements.
21
<PAGE> 23
BIOWHITTAKER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim reporting. In the opinion of management, all adjustments, consisting of
only normal recurring accruals, necessary for a fair presentation of financial
position and results of operations have been included. These interim financial
statements should be read in conjunction with the audited financial statements
of BioWhittaker, Inc., for the year ended October, 31, 1996, included elsewhere
in this document.
(2) Inventories:
Inventories at September 30, 1997 consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Raw materials $ 6,592
Work in process 8,072
Finished Goods 10,413
-------
$25,081
=======
</TABLE>
22
<PAGE> 24
CAMBREX CORPORATION
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
During 1997, Cambrex Corporation ("Cambrex" or the "Company") acquired all
of the outstanding common stock of BioWhittaker, Inc. ("BioWhittaker"), as
described in Note 1 to the attached Condensed Consolidated Financial Statements.
The transaction hereinafter is referred to as the "Acquisition"
The following unaudited pro forma condensed consolidated statement of
operations for the nine months ended September 30, 1997 and the year ended
December 31, 1996 give effect to the Acquisition as if it occurred on January
1, 1996. An unaudited pro forma condensed consolidated balance sheet is
provided as of September 30, 1997, giving effect to the Acquisition as though
it had been consummated on that date. The Acquisition has been accounted for as
a purchase transaction, which requires the assets acquired and liabilities
assumed to be recorded at fair value. The unaudited pro forma information
reflects management's preliminary purchase price allocation and may be subject
to certain revisions when final analyses of such values are completed.
The pro forma financial statements presented herein for the nine months
ended September 30, 1997 are derived from the unaudited financial statements of
Cambrex and the unaudited interim financial statements of BioWhittaker for the
nine months ended September 30, 1997. The balance sheet reported for Cambrex
as of September 30, 1997 includes the value of the 93% of the outstanding stock
of BioWhittaker acquired on that date as reported in the Company's quarterly
report filed on Form 10-Q. Such asset and liability values are included in the
BioWhittaker as reported and the pro forma adjustments columns. The pro forma
information for the year ended December 31, 1996 is derived from the audited
financial statements of Cambrex and the audited financial statements of
BioWhittaker for their fiscal year ended October 31, 1996. Such pro forma
information, in the opinion of Cambrex management, reflects adjustments
necessary for a fair presentation of results. These adjustments give effect to
the depreciation of property, plant and equipment, amortization of identifiable
intangibles and goodwill, the interest on debt incurred to finance the
Acquisition, and the tax effect of each of these adjustments. The unaudited
condensed consolidated statements of operations for the nine months ended
September 30, 1997 and the year ended December 31, 1996 do not include a charge
of approximately $14 million to reflect the allocation of a portion of the
purchase price to in-process research and development which management is
currently reviewing.
The unaudited pro forma financial statements may not be indicative of the
results that actually would have occurred if the combination had been in effect
on the dates indicated or of future results of operations of the combined
companies. The unaudited condensed consolidated pro forma financial statements
should be read in conjunction with the financial statements and notes of Cambrex
as filed in its Annual Report on Form 10-K for the year ended December 31, 1996,
and subsequent filings, and the financial statements of BioWhittaker included
elsewhere herein.
23
<PAGE> 25
CAMBREX CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Cambrex Pro Forma Consolidated
Corporation Adjustments Pro Forma
As Reported (see Note 2) Balance Sheet
----------- ---------- -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments .......... $ 29,726 -- $ 29,726
Trade and other receivables .................. 55,141 -- 55,141
Inventories .................................. 93,261 -- 93,261
Deferred tax asset ........................... 5,325 -- 5,325
Other current assets ......................... 5,605 -- 5,603
--------- --------- ---------
Total current assets ..................... 189,056 -- 189,056
Property, plant and equipment, net .............. 236,111 $ -- 236,111
Intangible assets, net .......................... 108,226 27,964(1) 136,190
Other non-current assets ........................ 3,788 -- 3,788
--------- --------- ---------
Total assets ............................. $ 537,181 $ 27,964 $ 565,145
========= ========= =========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities ..... $ 57,395 -- $ 57,395
Income taxes payable ......................... 8,588 -- 8,588
Current portion of long-term debt ............ 3,297 -- 3,297
--------- --------- ---------
Total current liabilities ................ 69,280 -- 69,280
Long-term debt .................................. 187,503 18,811(2) 206,314
Deferred taxes .................................. 24,685 23,153(3) 47,838
Other non-current liabilities ................... 20,803 -- 20,803
--------- --------- ---------
Total liabilities ........................ 302,271 41,964 344,235
--------- --------- ---------
Stockholders' equity:
Common stock ................................. 1,293 -- 1,293
Additional paid-in capital ................... 153,005 -- 153,005
Retained earnings ............................ 102,677 (14,000)(4) 88,677
Additional minimum pension liability ......... (553) -- (553)
Cumulative translation adjustment ............ (10,664) -- (10,664)
Treasury stock at cost (1,049,069 shares) .... (9,613) -- (9,613)
Shares held in trust ......................... (1,235) -- (1,235)
--------- --------- ---------
Total stockholders' equity ............... 234,910 (14,000) 220,910
--------- --------- ---------
Total liabilities and stockholders' equity $ 537,181 $ 27,964 $ 565,145
========= ========= =========
</TABLE>
See accompanying note to unaudited pro forma Consolidated
balance sheet.
24
<PAGE> 26
CAMBREX CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Cambrex BioWhittaker Pro Forma Consolidated
Corporation Inc. Adjustments Pro Forma
As Reported As Reported (see Note 2) Results
----------- ----------- ---------- -------
<S> <C> <C> <C> <C>
Net revenues......................................... $271,978 $42,656 $314,634
Operating costs:
Cost of goods sold............................. 189,611 21,475 $ (737)(5) 210,349
Selling, general and administrative costs...... 38,137 11,188 3,148 (6) 52,473
Research and development 7,057 2,161 - 9,218
-------- ------- ------- --------
Total....................................... 234,805 34,824 2,411 272,040
-------- ------- ------- --------
Operating Income (loss).............................. 37,173 7,832 (2,411) 42,594
Other income (expenses):
Interest income (expense)........................... (2,763) 7 (6,428)(7) (9,184)
Other - net....................................... 586 (79) - 507
-------- ------- ------- --------
Income (loss) before income taxes.................... 34,996 7,760 (8,839) 33,917
Provision (benefit) for income taxes................. 11,165 2,769 (2,985)(8) 10,949
-------- ------- ------- --------
Net income (loss).................................... $ 23,831 $ 4,991 $(5,854) $ 22,968
======== ======= ======= ========
Weighted average number of shares outstanding:
Primary.......................................... 12,097 12,097
-------- --------
Fully diluted.................................... 12,145 12,145
-------- --------
Net income per share:
Primary.......................................... $ 1.97 $ 1.30
-------- --------
Fully diluted.................................... $ 1.96 $ 1.30
-------- --------
</TABLE>
See accompanying note to unaudited pro forma Consolidated
statement of operations.
25
<PAGE> 27
CAMBREX CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Cambrex BioWhittaker Pro Forma Consolidated
Corporation Inc. Adjustments Pro Forma
As Reported As Reported (see Note 2) Results
----------- ----------- ---------- -------
<S> <C> <C> <C> <C>
Net revenues......................................... $359,385 $ 51,459 $410,844
Operating costs:.....................................
Cost of goods sold............................. 258,049 26,616 $ (983)(5) 283,682
Selling, general and administrative expenses... 45,879 14,106 4,198 (6) 64,183
Research and development....................... 9,183 2,608 - 11,791
-------- -------- ------- --------
Total....................................... 313,111 43,330 3,215 359,656
-------- -------- ------- --------
Operating Income (loss).............................. 46,274 8,129 (3,215) 51,188
Other income (expenses):
Interest income................................... 353 - - 353
Interest expense.................................. (6,152) (262) (8,086)(7) (14,500)
Other - net....................................... 194 (4,833) - (4,639)
-------- -------- ------- --------
Income (loss) before income taxes.................... 40,669 3,034 (11,301) 32,402
Provision (benefit) for income taxes................. 12,444 2,201 (3,801)(8) 10,844
-------- -------- ------- --------
Net income (loss).................................... $ 28,225 $ 833 $( 7,500) $ 21,558
======== ======== == ===== ========
Weighted average number of shares outstanding:.......
Primary.......................................... 11,897 11,897
Fully diluted.................................... 11,910 11,910
Net income per share:
Primary.......................................... $ 2.37 $ 1.81
Fully diluted.................................... $ 2.37 $ 1.81
</TABLE>
See accompanying note to unaudited pro forma Consolidated
statement of operations.
26
<PAGE> 28
CAMBREX CORPORATION
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(1) BASIS OF PRESENTATION
On September 30, 1997, the Company acquired 93% of the outstanding
common stock of BioWhittaker at a price equivalent to $11.625 per share. The
Company acquired the remaining 7% of the outstanding common stock of
BioWhittaker on October 3, 1997 for $11.625 per share. The total purchase price
of $134,768 (including acquisition costs of approximately $4,223) was financed
with borrowings from the Company's Credit Agreement. The unaudited pro forma
condensed consolidated balance sheet as of September 30, 1997 reflects the
Acquisition under the purchase method of accounting and is presented as though
the Acquisition had occurred on that date. The unaudited pro forma condensed
consolidated statements of operations for the nine months ended September 30,
1997 and for the year ended December 31,1996 give effect to the Acquisition as
if it had occurred on January 1, 1996.
<TABLE>
<CAPTION>
<S> <C>
Assets acquired and liabilities assumed are as follows:
Debt incurred to finance acquisition ........................................ $134,768
========
Net book value of assets acquired less
liabilities assumed.............................................. $ 52,240
Adjustments to reflect fair value changes:
Property, plant and equipment.................................... 7,397
Deferred taxes on asset write-up................................. (23,153)
Other Identifiable Intangibles................................... 62,240
In-Process Research and Development.............................. 14,000
Goodwill......................................................... 22,044
--------
Fair value of net assets acquired.................................. $134,768
========
</TABLE>
(2) NOTES TO PRO FORMA ADJUSTMENTS
The pro forma adjustments reflect the acquisition of the remaining 7%
of the outstanding common stock of BioWhittaker, Inc. (as described in Note 1 to
the attached financial statements).
1. Adjustment to record additional goodwill of $22,044 and other
identifiable intangibles of $5,920. The other identifiable
intangibles and goodwill are being amortized over an average life
of 20 years.
2. The net additional long term debt of $18,811 required to finance the
Acquisition of the remaining 7% of the outstanding common stock
and related acquisition costs.
3. To record deferred tax liabilities of $23,153 as a result of the
valuation of identifiable intangible assets as part of the initial
purchase price allocation.
27
<PAGE> 29
CAMBREX CORPORATION NOTES TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(2) NOTES TO PRO FORMA ADJUSTMENTS - (CONTINUED)
4. Adjustment to record the in-process research and development charge
amounting to $14,000. The BiWhittaker research and development efforts
related to this charge are directed at alterations of and adaptations
to existing products and new product development, are not commercially
viable and have no future alternative uses. There can be no assurances
that these efforts will lead to the introduction of one or more new
products. The in-process research and development charge is not
reflected in the unaudited pro forma condensed consolidated statements
of income as it represents a non-recurring charge directly
attributable to the Acquisition.
5. Reduced depreciation expense of $737 and $983 for the nine months ended
September 30, 1997 and the year ended December 31, 1996, respectively.
The reduction in expense is due to longer asset lives used by Cambrex.
6. Increased amortization expense of $3,148 and $4,198 for the nine months
ended September 30, 1997 and the year ended December 31, 1996,
respectively. The increase in expense is due to the higher asset values
for identifiable intangibles and goodwill resulting from the purchase
price allocation.
7. Interest expense incurred by Cambrex to finance the Acquisition of
$6,428 and $8,086 for the nine months ended September 30, 1997 and the
year ended December 31, 1996, respectively. All interest is assumed to
be financed under Cambrex's Credit Agreement which has an average
borrowing rate of 6%.
8. The recognition of the income tax benefit of $2,985 and $3,801 for the
nine months ended September 30, 1997 and the year ended December 31,
1996, respectively based upon an effective rate of 37.2%. The actual
income tax benefit rate is lower than the effective rate due to the
non-deductible amortization expenses.
28
<PAGE> 30
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
23 Consent of Ernst & Young, L.L.P.
</TABLE>
29
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following Registration
Statements on Form S-8 of Cambrex Corporation of our report dated December 6,
1996, with respect to the consolidated financial statements of BioWhittaker,
Inc., included on in the Current Report on Form 8-K/A dated November 26, 1997.
<TABLE>
<CAPTION>
Registration
Name Number Date Filed
---- ------ ----------
<S> <C> <C>
1983 Incentive Stock Plan 33-21374 April 21, 1988
1987 Stock Option Plan
Savings Plan 33-27791 November 14, 1990
Savings Plan 33-81780 July 20, 1994
1989 Senior Executive Stock Option Plan 33-81782 July 20, 1994
1992 Stock Option Plan
1993 Senior Executive Stock Option Plan
1994 Stock Option Plan
1996 Performance Stock Option Plan 33-22017 February 19, 1997
</TABLE>
Baltimore, Maryland
November 19, 1997
