<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from ______ to _____
Commission file number 1-10638
CAMBREX CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 22-2476135
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
ONE MEADOWLANDS PLAZA, EAST RUTHERFORD, NEW JERSEY 07073
(Address of principal executive offices)
(201) 804-3000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
As of May 1, 2000, there were 24,839,672 shares outstanding of the
registrant's Common Stock, $.10 par value.
<PAGE> 2
CAMBREX CORPORATION AND SUBSIDIARIES
FORM 10-Q
For The Quarter Ended March 31, 2000
Table of Contents
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I Financial information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets as of
March 31, 2000 and December 31, 1999 2
Condensed consolidated income statements
for the three months ended March 31, 2000 and 1999 3
Condensed consolidated statements of comprehensive
income for the three months ended March 31, 2000 and 1999 4
Condensed consolidated statements of cash flows
for the three months ended March 31, 2000 and 1999 5
Notes to condensed consolidated financial statements 6 - 12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13 - 16
Part II Other information
Item 4. Matters Submitted to a Vote of Securities Holders 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
Exhibit 27 - Financial Data Schedule 19
</TABLE>
<PAGE> 3
Part 1 - FINANCIAL INFORMATION
CAMBREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ..................... $ 44,799 $ 39,796
Trade receivables, net ........................ 79,401 72,227
Inventories, net .............................. 95,860 92,439
Deferred tax assets ........................... 16,422 16,422
Prepaid expenses and other current assets ..... 16,317 14,403
--------- ---------
Total current assets ........................ 252,799 235,287
Property, plant and equipment, net ............... 290,416 280,163
Intangible assets, net ........................... 145,852 149,307
Other assets ..................................... 9,458 8,890
--------- ---------
Total assets ................................ $ 698,525 $ 673,647
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities ...... $ 70,559 $ 57,567
Income taxes payable .......................... 9,304 11,276
Short-term debt and current portion of
Long-term debt .............................. 3,273 3,279
--------- ---------
Total current liabilities ........................ 83,136 72,122
Long-term debt ................................... 223,220 225,922
Deferred tax liabilities ......................... 59,457 55,172
Other noncurrent liabilities ..................... 28,136 25,066
--------- ---------
Total liabilities ........................... 393,949 378,282
--------- ---------
Stockholders' equity:
Common stock, $.10 par value; issued 26,881,695
and 26,719,924 shares at respective dates . 2,682 2,667
Additional paid-in capital .................... 168,339 166,288
Retained earnings ............................. 179,245 167,655
Treasury stock, at cost 2,100,690
shares at respective dates ................. (10,172) (10,172)
Accumulated other comprehensive loss .......... (35,518) (31,073)
--------- ---------
Total stockholders' equity .................. 304,576 295,365
--------- ---------
Total liabilities and stockholders' equity .. $ 698,525 $ 673,647
========= =========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
2
<PAGE> 4
CAMBREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(unaudited)
(in thousands, except per-share data)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------
2000 1999
---- ----
<S> <C> <C>
Gross sales .................................................... $ 128,986 $ 117,519
Commissions, freight and allowances ......................... 2,310 1,217
--------- ---------
Net sales ...................................................... 126,676 116,302
Other revenues .............................................. 702 1,097
--------- ---------
Net revenues ................................................... 127,378 117,399
Cost of goods sold ............................................. 81,229 76,896
--------- ---------
Gross Profit ................................................... 46,149 40,503
Operating expenses:
Selling, general and administrative ......................... 20,977 19,480
Research and development .................................... 3,731 3,609
--------- ---------
Total operating expenses .................................. 24,708 23,089
Operating profit ............................................... 21,441 17,414
Other expenses:
Interest expense, net ....................................... 3,089 2,177
Other expense, net .......................................... (161) 43
--------- ---------
Income before income taxes ..................................... 18,513 15,194
Provision for income taxes .................................. 6,201 5,014
--------- ---------
Net income ..................................................... $ 12,312 $ 10,180
========= =========
Weighted average shares outstanding:
Basic ....................................................... 24,706 24,533
Effect of dilutive stock options ............................ 1,146 851
--------- ---------
Diluted ..................................................... 25,852 25,384
Earnings per share of common stock and common stock equivalents:
Basic ....................................................... $ 0.50 $ 0.41
========= =========
Diluted ..................................................... $ 0.48 $ 0.40
========= =========
Cash dividends paid per share .................................. $ 0.03 $ 0.03
========= =========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
3
<PAGE> 5
CAMBREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------
2000 1999
---- ----
<S> <C> <C>
Net income ..................................... $ 12,312 $ 10,180
Other comprehensive loss
Foreign currency translation adjustments* .. (4,445) (8,872)
-------- --------
Comprehensive income ........................... $ 7,867 $ 1,308
======== ========
</TABLE>
- ---------
* The Company does not provide for U.S. income taxes on foreign currency
translation adjustments because it does not provide for such taxes on
undistributed earnings of foreign subsidiaries.
See accompanying notes to unaudited condensed consolidated financial statements.
4
<PAGE> 6
CAMBREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------------------
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income .................................................................. $ 12,312 $ 10,180
Depreciation and amortization ............................................... 12,138 10,324
Deferred income tax provision ............................................... (252) 944
Changes in assets and liabilities (net of assets and liabilities acquired):
Receivables, net ........................................................ (8,602) (9,599)
Inventories ............................................................. (1,470) 1,988
Prepaid expenses and other current assets .............................. (72) (1,260)
Accounts payable and accrued liabilities ............................... 11,111 9,413
Income taxes payable ................................................... (1,462) (462)
Other noncurrent assets and liabilities ................................ 209 (529)
-------- --------
Net cash provided by operating activities ................................. 23,912 20,999
-------- --------
Cash flows from investing activities:
Capital expenditures ........................................................ (8,125) (6,230)
Acquisition of businesses (net of cash acquired) ............................ (2,608) (37,336)
Other investing activities .................................................. (814) (745)
-------- --------
Net cash used in investing activities ..................................... (11,547) (44,311)
-------- --------
Cash flows from financing activities:
Dividends ................................................................... (738) (735)
Net increase (decrease) in short-term debt .................................. (2,217) 1,145
Long-term debt activity (including current portion):
Borrowings ................................................................ 5,300 5,500
Repayments ................................................................ (8,841) (6,401)
Proceeds from the issuance of common stock .................................. 2,066 476
Purchase of treasury stock .................................................. -- (446)
-------- --------
Net cash provided by financing activities ................................. (4,340) (461)
-------- --------
Effect of exchange rate changes on cash ........................................ (3,022) (5,302)
-------- --------
Net increase/(decrease) in cash and cash equivalents ........................... 5,003 (29,075)
Cash and cash equivalents at beginning of period ............................... 39,796 48,527
-------- --------
Cash and cash equivalents at end of period ..................................... $ 44,799 $ 19,452
======== ========
Supplemental disclosure:
Interest paid (net of capitalized interest) ................................. $ 3,692 $ 2,135
Income taxes paid ........................................................... $ 3,460 $ 3,879
Depreciation expense ........................................................ $ 9,038 $ 8,184
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
5
<PAGE> 7
CAMBREX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per-share amounts)
(1) BASIS OF PRESENTATION
Unless otherwise indicated by the context, "Cambrex" or the "Company" means
Cambrex Corporation and subsidiaries.
The accompanying unaudited Condensed Consolidated Financial Statements have
been prepared from the records of the Company. In the opinion of management, the
financial statements include all adjustments 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, 1999.
The results of operations for the three months ended March 31, 2000 are not
necessarily indicative of the results to be expected for the full year.
(2) INVENTORIES
Inventories at March 31, 2000 and December 31, 1999 consist of the
following:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---- ----
<S> <C> <C>
Finished goods ......................... $34,462 $34,509
Work in process ........................ 28,717 27,214
Raw materials .......................... 28,334 26,322
Fuel oil and supplies .................. 4,347 4,394
------- -------
Total ............................... $95,860 $92,439
======= =======
</TABLE>
(3) ACQUISITIONS
On March 2, 2000, the Company completed the acquisition of Conti BPC NV, a
manufacturer and supplier of pharmaceutical intermediates and active
pharmaceutical ingredients, located in Landen, Belgium. The Company paid
approximately $6,200 in cash and assumed debt for the business. The acquisition
has been accounted for under the purchase method of accounting. Assets acquired
and liabilities assumed have been recorded at their estimated fair values, and
are subject to adjustment when additional information concerning asset and
liability valuations is finalized. At the time of the transaction, goodwill was
recorded at $910 and will be amortized over 20 years.
Proforma information is not presented, as the acquired company's results of
operations prior to the date of acquisition are not material to the Company.
6
<PAGE> 8
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) LONG-TERM DEBT
Long-term debt at March 31, 2000 and December 31, 1999 consists of the
following:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
-------- --------
<S> <C> <C>
Bank credit facilities .............. $217,000 $218,500
Other ............................... 6,682 7,888
-------- --------
Subtotal ......................... 223,682 226,388
Less: current portion .............. 462 466
-------- --------
Total ............................ $223,220 $225,922
======== ========
</TABLE>
The Company met all the bank covenants for the first three months of 2000.
7
<PAGE> 9
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) SEGMENT INFORMATION
Following is a summary of business segment information for the following
dates:
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------
2000 1999
---- ----
<S> <C> <C>
Gross Sales:
Human Health ............................. $ 61,412 $ 55,645
Biosciences .............................. 25,204 17,619
Animal Health/Agriculture ................ 12,159 15,856
Specialty and Fine Chemicals ............. 30,211 28,399
-------- --------
$128,986 $117,519
======== ========
Gross Profit:
Human Health ............................. $ 24,547 $ 21,570
Biosciences .............................. 13,800 9,075
Animal Health/Agriculture ................ 1,618 2,890
Specialty and Fine Chemicals ............. 6,184 6,968
-------- --------
$ 46,149 $ 40,503
======== ========
Net Income:
Biosciences .............................. $ 1,780 $ 470
Human Health, Animal Health/
Agriculture & Specialty and
Fine Chemicals .......................... 10,532 9,710
-------- --------
$ 12,312 $ 10,180
======== ========
Capital Spending:
Biosciences .............................. $ 1,305 $ 484
Human Health, Animal Health/
Agriculture & Specialty and
Fine Chemicals .......................... 6,820 5,746
-------- --------
$ 8,125 $ 6,230
======== ========
Depreciation:
Biosciences .............................. $ 773 $ 593
Human Health, Animal Health/
Agriculture & Specialty and
Fine Chemicals .......................... 8,265 7,591
-------- --------
$ 9,038 $ 8,184
======== ========
Amortization:
Biosciences .............................. $ 1,566 $ 1,137
Human Health, Animal Health/
Agriculture & Specialty and
Fine Chemicals .......................... 1,534 1,003
-------- --------
$ 3,100 $ 2,140
======== ========
</TABLE>
8
<PAGE> 10
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---- ----
<S> <C> <C>
Total Assets:
Biosciences .............................. $189,337 $186,405
Human Health, Animal Health/
Agriculture & Specialty and
Fine Chemicals .......................... 509,188 487,242
-------- --------
$698,525 $673,647
======== ========
</TABLE>
9
<PAGE> 11
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) CONTINGENCIES
The Company is subject to various investigations, claims and legal
proceedings covering a wide range of matters that arise in the ordinary course
of its business activities.
Environmental
In connection with laws and regulations pertaining to the protection of the
environment, the Company is a party to several environmental remediation
investigations and cleanups and, along with other companies, has been named a
"potentially responsible party" for certain waste disposal sites (Superfund
sites). Each of these matters is subject to various uncertainties, and it is
possible that some of these matters will be decided unfavorably against the
Company. The Company had accruals, included in current accrued liabilities and
other noncurrent liabilities, of $6,400 at March 31, 2000, and $3,400 at
December 31, 1999, for costs associated with the study and remediation of
Superfund sites and current and former Company's operating sites and other
potential environmental liabilities for matters that are probable and reasonably
estimable. On March 2, 2000, the Company completed the acquisition of Conti BPC
NV in Landen, Belgium. In connection with this acquisition, the Company
established an accrual of $3,000. This liability has been recorded at its
estimated fair value and is subject to adjustment when information concerning
this liability is finalized. In addition, in the first quarter 2000 the Company
settled certain environmental claims involving the Cosan Chemical Corporation (a
subsidiary) with insurance companies for recoveries of $900. This amount was
recorded in selling, generally and administrative expenses. After reviewing
information currently available, management believes any amounts paid in excess
of the accrued liabilities will not have a material effect on its financial
position or results of operations. However, these matters, if resolved in a
manner different from the estimates, could have a material adverse effect on the
Company's financial condition, operating results and cash flows when resolved in
a future reporting period.
Litigation
The Company and its subsidiary, Profarmaco S.r.l. ("Profarmaco") were
named as defendants in a proceeding instituted by the Federal Trade Commission
("FTC") on December 21, 1998, in the United States District Court for the
District of Columbia. The complaint alleges that exclusive license agreements
which Profarmaco entered into with Mylan Laboratories, Inc. ("Mylan") covering
the drug master files for (and, therefore, the right to buy and use) two active
pharmaceutical ingredients ("APIs"), lorazepam and clorazepate, were part of an
effort on Mylan's part to restrict competition in the supply of lorazepam and
clorazepate and to increase the price charged for these products when Mylan sold
them as generic pharmaceuticals. The complaint further alleges that these
agreements violate the Federal Trade Commission Act, and that Mylan, Cambrex,
Profarmaco, and Gyma Laboratories of America, Inc., Profarmaco's distributor in
the United States, engaged in an unlawful restraint of trade and conspired to
monopolize and attempted to monopolize the markets for the generic
pharmaceuticals incorporating the APIs.
10
<PAGE> 12
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) CONTINGENCIES (CONTINUED)
The FTC seeks a permanent injunction and other relief, including disgorgement of
the profits generated through the licensing arrangements, which the FTC alleges
to be in excess of $120,000 for all defendants. In accordance with the license
agreement, the Company received royalties of approximately $19,300 and $1,000
for the years ended December 31, 1998 and 1997, respectively.
A lawsuit making similar allegations against the Company and Profarmaco,
and seeking injunctive relief and treble damages, has been filed by the
Attorneys General of 31 states and the District of Columbia in the United States
District Court for the District of Columbia on behalf of those states and
persons in those states who were purchasers of the generic pharmaceuticals. The
Company and Profarmaco have also been named in purported class action complaints
brought by private plaintiffs in various state courts on behalf of purchasers of
lorazepam and clorazepate in generic form, making allegations essentially
similar to those raised in the FTC's complaint and seeking various forms of
relief including treble damages.
The Company strongly believes that its licensing arrangements with Mylan
are in accordance with regulatory requirements and will vigorously defend the
FTC's actions and various other lawsuits and class actions. However, the Company
and Mylan have terminated the exclusive licenses to the drug master files as of
December 31, 1998. In entering these licensing arrangements, the Company elected
not to raise the price of its products and had no control or influence over the
pricing of the final generic product. Under the terms of the Agreement, Mylan
has agreed to indemnify the Company and Profarmaco against damages, losses,
costs and expenses arising from any claim, lawsuit or other action.
On May 14, 1998, the Company's Nepera subsidiary, a manufacturer and seller
of niacinamide (Vitamin B-3) received a Federal Grand Jury subpoena for the
production of documents relating to the pricing and possible customer allocation
with regard to that product. The Company understands that the subpoena was
issued as part of the Federal Government's ongoing anti-trust investigation into
various business practices in the vitamin industry generally. In the forth
quarter of 1999, the Company reached a settlement in principle with the
government concerning Nepera's alleged role in Vitamin B-3 violations from 1992
to 1995. On May 5, 2000, this government settlement was finalized with Nepera
entering into a voluntary plea agreement with the Department of Justice. Under
this agreement Nepera will enter a plea of guilty to one count of price fixing
and market allocation of Vitamin B3 from 1992 to 1995 in violation of section
one of the Sherman Act and pay a fine of $4,000. This agreement is subject to
review and approval by the United States District Court for the Northern
District of Texas. Nepera has been named as a defendant, along with several
other companies, in five civil actions brought on behalf of alleged purchasers
of Vitamin B-3. In the fourth quarter of 1999 the Company accrued $6,000 to
cover settlement and related litigation and legal expenses. This accrual has
been recorded in accounts payable and accrued liabilities. The balance at March
31, 2000 is $5,972.
11
<PAGE> 13
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) CONTINGENCIES (CONTINUED)
While it is not possible to predict with certainty the outcome of the above
litigation matters and various other lawsuits, it is the opinion of management
that the ultimate resolution of these proceedings should not have a material
adverse effect on the Company's results of operations, cash flows and financial
position. These matters, if resolved in an unfavorable manner, could have a
material effect on the operating results and cash flows when resolved in a
future reporting period.
12
<PAGE> 14
CAMBREX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(in thousands, except per-share amounts)
RESULTS OF OPERATIONS
COMPARISON OF FIRST QUARTER 2000 VERSUS FIRST QUARTER 1999
The results for the first quarter of 2000 were above the same period a year ago
due to increased sales in the Human Health and Biosciences Segments and the
higher gross margin on sales.
The following tables show the gross sales of the Company's four segments, in
dollars and as a percentage of the Company's total gross sales for the quarters
ended March 31, 2000 and 1999.
<TABLE>
<CAPTION>
Quarter Ended March 31,
----------------------------------------------
2000 1999
------------------- ------------------
$ % $ %
-- -- -- --
<S> <C> <C> <C> <C>
Human Health .................. $ 61,412 47.6% $ 55,645 47.3%
Biosciences ................... 25,204 19.6 17,619 15.0
Animal Health/Agriculture ..... 12,159 9.4 15,856 13.5
Specialty and Fine Chemicals .. 30,211 23.4 28,399 24.2
-------- -------- -------- --------
Total gross sales ....... $128,986 100.0% $117,519 100.0%
======== ======== ======== ========
</TABLE>
The following table shows the gross profit of the Company's four product
segments for the first quarter 2000 and 1999.
<TABLE>
<CAPTION>
Gross Gross Gross
Sales Profit $ Profit %
----- -------- --------
<S> <C> <C> <C>
2000
Human Health .................... $ 61,412 $ 24,547 40.0%
Biosciences ..................... 25,204 13,800 54.8
Animal Health/Agriculture ....... 12,159 1,618 13.3
Specialty and Fine Chemicals .... 30,211 6,184 20.5
-------- -------- ------
Total ..................... $128,986 $ 46,149 35.8%
======== ======== ======
</TABLE>
<TABLE>
<CAPTION>
Gross Gross Gross
Sales Profit $ Profit %
----- -------- --------
<S> <C> <C> <C>
1999
Human Health .................... $ 55,645 $ 21,570 38.8%
Biosciences ..................... 17,619 9,075 51.5
Animal Health/Agriculture ....... 15,856 2,890 18.2
Specialty and Fine Chemicals .... 28,399 6,968 24.5
-------- -------- ------
Total ..................... $117,519 $ 40,503 34.5%
======== ======== ======
</TABLE>
13
<PAGE> 15
RESULTS OF OPERATIONS (CONTINUED)
Gross sales in the first quarter 2000 increased 9.8% to $128,986 from $117,519
in the first quarter 1999. Sales in the Human Health, Biosciences and
Specialized Fine Chemicals Product Segments increased compared to the first
quarter 1999 and more than offset the decreases in the Animal
Health/Agricultural segment.
The effect of foreign currency exchange rates on gross sales for the first
quarter resulted in a negative impact on sales of $1,656 compared to
corresponding period in 1999. Gross sales for 2000 would have been $130,642
using 1999 exchange rates compared to 1999 sales of $117,519.
The foreign currency translation adjustments decreased by $4,445, to a negative
($33,853). This decrease is attributable to exchange rate fluctuations in the
Italian Lira, Swedish Krona and Pound Sterling against the U.S. dollar in the
first quarter 2000. The exchange rate decreased from 1,932 Lira to the dollar at
December 31, 1999 to 2,023 Lira to the dollar at March 31, 2000, a decline of
5%. The Swedish Krona and Pound Sterling declined 1% in the first quarter of
2000.
The Human Health Segment gross sales of $61,412 were $5,767 (10.4%) above the
first quarter 1999. Gross sales were above the prior year primarily due to sales
generated by our acquisition of Irotec in Ireland in March 1999, as well as
increased demand for generic pharmaceuticals used in cardiovascular and central
nervous system preparations. Partially offsetting these increases was the
reduced sales of gastro-intestinal products in the European markets.
The Bioscience Segment gross sales of $25,204 were $7,585 (43.1%) above the
first quarter 1999 primarily due to the acquisition of BioWhittaker Molecular
Applications, Inc. (formerly the BioProducts business of FMC Corporation), as
well as from increased shipments of cell culture products,
The Animal Health/Agriculture Segment gross sales of $12,159 in the first
quarter 2000 were $3,697 (23%) below the first quarter 1999. The first quarter
decrease was mainly due to reduced sales of Agricultural Intermediates and
Vitamin B-3. The Agricultural Intermediates decreased from the first quarter
1999 primarily due to lower shipments of 2-cyanopyridine. This was due to the
timing of a production campaign and the unusually high shipments in the first
quarter of 1999. Sales were also adversely affected by the temporary shutdown of
the Nepera, Inc. facility for two weeks in February/March 2000 as a result of a
New York State Department of Environmental Conservation Summary Abatement order
resulting from an odor release. Also, sales to China were lower due to a poor
year in cotton production. Sales of Animal Health products (Vitamin B-3) to the
feed market were also affected by the plant shutdown at Nepera, Inc.
The Specialty Business Segment gross sales of $30,211 increased $1,812 (6%)
above the first quarter 1999 reflecting increased sales of encapsulants,
specialty additives used in fuel/oil markets and polymers used in
telecommunications and electronics.
14
<PAGE> 16
RESULTS OF OPERATIONS (CONTINUED)
Export sales from U.S. businesses of $19,149 in the first quarter 2000 increased
10% from the first quarter 1999. International sales from our European
operations totaled $54,637 for the first quarter of 2000 as compared with
$48,936 in 1999, an increase of 12%.
The gross profit in the first quarter 2000 was $46,149 compared to $40,503 in
1999. The gross margin percentage increased to 35.8% in the first quarter 2000
from 34.5% in 1999. The gross margin percent for the Animal Health/Agriculture
Segment was adversely affected by the temporary shutdown of the Nepera, Inc.
facility in February/March 2000. Margins in Specialty and Fine Chemicals were
below the first quarter 1999 due to The Humphrey Chemical Company, Inc. shutdown
expenses of approximately $600, and one-time startup expenses of approximately
$1,000 for the Company's new sebacic acid facility at CasChem, Inc.
Selling, general and administrative expenses as a percentage of gross sales was
16.3% in the first quarter 2000, down from 16.6% in the first quarter 1999. The
first quarter 2000 continued to benefit from the consolidation of administrative
functions in the Specialty and Fine Chemicals and Animal/Health/Agricultural
businesses, as well as a $900 insurance recovery related to previously incurred
environmental expenses. Additional expenses were incurred in the first quarter
2000 for the shutdown of the Humphrey Chemical Company, Inc., and for the
selling, general and administration expenses incurred at the companies acquired
(Irotec in March 1999, BioWhittaker Molecular Applications in July 1999 and
Conti in March 2000).
Research and development expenses of $3,731 were 2.9% of gross sales in the
first quarter 2000, and represented a 3% increase from 1999. This increase was
due to research costs resulting from the acquisition of BioWhittaker Molecular
Applications.
The operating profit in the first quarter 2000 was $21,441, an increase of 23%
compared to $17,414 in 1999 due to the increased sales and improved gross
margin.
Net interest expense of $3,089 in the first quarter 2000 reflected an increase
of $912 from 1999 as the result of the additional financing by the Company for
the acquisitions of BioWhittaker Molecular Applications, and the increase in the
interest rate. The average interest rate was 6.5% in the first quarter 2000
versus 6.0% in 1999.
The provision for income taxes for the first quarter 2000 resulted in an
effective rate of 33.5% as compared with 33% in the first quarter 1999. The
increase is due to higher taxes in Europe, especially Italy.
The Company's net income for the first quarter 2000 increased 20.9% to $12,312
compared with a net income of $10,180 in the first quarter 1999.
15
<PAGE> 17
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 2000, the Company generated cash flows
from operations totaling $23,912, an increase of $2,913 over the same period a
year ago. This increase in cash flows is due primarily to increased
profitability, as well as increase in accounts payable and accrued liabilities.
Capital expenditures were $8,125 in the three months of 2000 as compared to
$6,230 in the three months of 1999. Part of the funds were used for upgrading
water systems at our Salsbury facility, waste treatment plant at the Nordic
Synthesis AB facility, continued construction of a new quality laboratory at the
Profarmaco facility, and the new Niacinamide (Vitamin B-3) plant at the Nepera
facility.
During the first three months of 1999, the Company paid cash dividends of $0.03
per share.
The Company's primary market risk relates to exposure to foreign currency
exchange rate fluctuations on transactions entered into by our international
operations which are primarily denominated in the U.S. dollar, Swedish Krona and
Italian Lira. The Company currently uses foreign currency forward exchange
contracts to mitigate the effect of short-term foreign exchange rate movements
on the Company's operating results. The net notional amount of these contracts
is $44,849 which the Company estimates to be approximately 67% of the foreign
currency exposure during the period covered resulting in a deferred currency
loss of ($1,700) at March 31, 2000.
In March 2000, Cambrex acquired Conti for $6,200 in cash and assumed debt.
Management believes that existing sources of capital, together with cash flows
from operations, will be sufficient to meet foreseeable cash flow requirements.
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements. Investors should be aware of
factors that could cause Cambrex actual results to vary materially from those
projected in the forward-looking statements. These factors include, but are not
limited to, global economic trends; competitive pricing or product development
activities; markets, alliances, and geographic expansions developing differently
than anticipated; government legislation and/or regulation (particularly on
environmental issues); and technology, manufacturing and legal issues.
16
<PAGE> 18
PART II - OTHER INFORMATION
CAMBREX CORPORATION AND SUBSIDIARIES
ITEM 4. MATTERS SUBMITTED TO A VOTE OF SECURITIES HOLDERS.
1. At the Annual Meeting of Stockholders held on April 27, 2000, Cyril C.
Baldwin, Jr., George J. W. Goodman, Kathryn Rudie Harrigan, and Robert
LeBuhn were elected to hold office as Directors in Class I of the
Company until the 2003 Annual Meeting of Stockholders.
2. In addition, the Stockholders voted for the appointment of
PricewaterhouseCoopers LLP as the Company's Independent Accountants
for 2000. Of the 20,624,640 shares represented at the meeting,
20,605,472 votes were cast in favor of the appointment of
PricewaterhouseCoopers LLP as Auditors, 7,088 were cast against and
12,080 abstained.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) The exhibits filed as part of this report are listed below.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
27 Financial Data Schedule.
</TABLE>
b) Reports on Form 8-K
The registrant filed no reports on Form 8-K during the first quarter
of the year ended March 31, 2000.
17
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAMBREX CORPORATION
By ________________________________
Douglas MacMillan
Vice President
(On behalf of the Registrant and
as the Registrant's Principal
Financial Officer)
Date: May 12, 2000
18
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 44,799
<SECURITIES> 0
<RECEIVABLES> 80,484
<ALLOWANCES> 1,083
<INVENTORY> 95,860
<CURRENT-ASSETS> 252,799
<PP&E> 488,643
<DEPRECIATION> 198,227
<TOTAL-ASSETS> 698,525
<CURRENT-LIABILITIES> 83,136
<BONDS> 223,220
0
0
<COMMON> 2,682
<OTHER-SE> 301,894
<TOTAL-LIABILITY-AND-EQUITY> 698,525
<SALES> 126,676
<TOTAL-REVENUES> 127,378
<CGS> 81,229
<TOTAL-COSTS> 24,708
<OTHER-EXPENSES> 161
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,089
<INCOME-PRETAX> 18,513
<INCOME-TAX> 6,201
<INCOME-CONTINUING> 12,312
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,312
<EPS-BASIC> 0.50
<EPS-DILUTED> 0.48
</TABLE>
