Cambrex Corporation (NYSE: CBM) reports results for the fourth quarter and full year ended December 31, 2013.
Highlights
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Fourth quarter sales increased 46.3% to $103.0 million from $70.4 million in the same period last year. Full year sales increased 14.1% and 12.8% excluding the impact of foreign currency.
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Fourth quarter EBITDA increased to $22.2 million compared to $13.1 million in the same period last year. Full year adjusted EBITDA increased 17.3% to $67.4 million compared to $57.5 million in 2012.
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Debt, net of cash, was $56.5 million at the end of the fourth quarter, an improvement of $19.5 million during the quarter. Debt, net of cash, increased $16.1 million for the full year 2013.
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2014 sales are expected to increase between 8% and 12% compared to 2013, excluding the impact of foreign currency. EBITDA is expected to be between $70 and $76 million and adjusted income from continuing operations is expected to be between $0.99 and $1.10 per share.
"We are very pleased that 2013 was our third consecutive year of strong growth in both sales and EBITDA, and believe we are positioned to deliver a similar level of growth in 2014," commented Steven M. Klosk, President and Chief Executive Officer of Cambrex. "We made significant growth investments during 2013 and have built the strongest pipeline of custom development projects and opportunities that we have had in many years. In 2014, we expect to expand our footprint within our generics product category by continuing to add generic APIs to our development portfolio of 15 products, and by earmarking $2 million of additional R&D spending for projects where Cambrex expects to partner with one or more generic drug companies to co-develop finished generic drug products.
"We are well positioned in the controlled substances market and accordingly, expect to see solid growth in this product category in 2014. Finally, we plan to continue making targeted investments in the infrastructure of the business through capital improvements and expansions to support further growth, with expectations of strong cash flow during the year."
Basis of Reporting
The Company has provided a reconciliation of GAAP amounts to adjusted (i.e. Non-GAAP) amounts at the end of this press release. Management believes that the adjusted amounts provide useful information to investors due to the magnitude and nature of certain expenses recorded in the GAAP amounts.
Fourth Quarter 2013 Operating Results – Continuing Operations
Sales of $103.0 million were 46.3% higher compared to the same period last year, including the favorable impact of foreign exchange of 1.3%. The increase was primarily due to higher sales of a recently approved branded active pharmaceutical ingredient ("API") and controlled substances, partially offset by lower sales of generic and branded APIs and products utilizing the Company's drug delivery technology.
Gross margins increased to 32.9% from 30.0% compared to the same period last year. This increase was primarily due to increased sales and production volumes driving higher plant efficiencies along with a small positive impact from pricing and was partially offset by an unfavorable mix of products.
Selling, general and administrative ("SG&A") expenses were $14.7 million compared to $11.4 million in the same period last year. The increase was mainly due to higher personnel expenses.
Research and development expenses were $2.8 million compared to $2.2 million in the same period last year.
Operating profit increased to $16.4 million from $7.4 million in the same period last year. The increase in operating profit was primarily the result of higher gross profit partially offset by higher SG&A expenses. EBITDA was $22.2 million compared to $13.1 million in the same period last year.
Net interest expense was $0.6 million compared to $0.5 million in the same period last year.
Equity in losses of partially-owned affiliates, primarily representing the Company's portion of Zenara's loss, was flat at $0.5 million for both the fourth quarters of 2013 and 2012, respectively. These amounts include amortization expense of $0.2 million for both the fourth quarters of 2013 and 2012, respectively.
The provision for income taxes was $5.6 million and resulted in an effective tax rate of 37.4%.
Income from continuing operations was $9.4 million or $0.30 per share compared to $44.2 million or $1.44 per share in the same period last year. Fourth quarter 2012 results include tax benefits of $37.6 million, or $1.22 per share, resulting from the release of a valuation allowance on deferred tax assets for $36.3 million and $1.3 million related to the impact on deferred taxes of a statutory rate change at one of our sites.
Capital expenditures and depreciation were $9.6 million and $5.8 million, respectively, compared to $17.2 million and $5.6 million in the same period last year.
Financial Expectations – Continuing Operations
The Company currently expects that full year 2014 sales, excluding the impact of foreign currency, will increase between 8% and 12% over 2013, and that full year 2014 EBITDA will be between $70 and $76 million. The Company expects that 2014 adjusted income from continuing operations will be between $0.99 and $1.10 per share (computed on a basis consistent with 2013 and 2012 results in the table at the end of this release). Based on current expectations regarding the timing of orders, the Company expects 2014 to start off slowly, with most of the anticipated growth coming from the second quarter and thereafter. The Company also expects to reduce debt, net of cash, by between $25 and $30 million during 2014.
The Company estimates that its 2014 consolidated effective tax rate will be between 33% and 37%. In 2013, the Company began recording tax expense on U.S. income for the first time in several years. Due to certain beneficial tax attributes, the Company currently expects to pay a small amount of cash taxes for the U.S. in 2014, however the tax rate and amount of cash taxes paid will be sensitive to the geographic mix of income, and quarterly effective tax rates may be volatile.
Capital expenditures for 2014 are expected to be approximately $35 to $39 million and depreciation is expected to be $25 to $27 million in 2014.
These financial expectations are for continuing operations and exclude the impact of any potential acquisitions, restructuring activities and outcomes of tax disputes, and sales and EBITDA expectations do not reflect the Company's stake in Zenara, which is accounted for using the equity method. Zenara is expected to generate low single digit millions in revenues and a small EBITDA loss in 2014.
The financial information contained in this press release is unaudited, subject to revision and should not be considered final until the Company's 2013 Form 10-K is filed with the SEC.