Cambrex first-quarter sales down 6.4% to $56.2 million

Cambrex Corporation (NYSE: CBM) reports first quarter results for the period ended March 31, 2010.

Highlights

  • Reported sales decreased by 6.4%, and excluding the impact of foreign currency, sales decreased 10.8% compared to first quarter 2009.  
  • EBITDA was $9.1 million in the first quarter 2010 compared to $13.0 million in the same quarter last year.  
  • Debt, net of cash was $82.6 million at the end of first quarter 2010, an increase of $4.3 million during the quarter excluding the impact of both the acquisition of Cambrex IEP and currency.
  • Net Income was $1.7 million in the first quarter 2010 compared to $4.7 million for the first quarter 2009.  
  • Acquired IEP GmbH, a biocatalysis company based in Germany in March 2010, for approximately $6.8 million.

First Quarter 2010 Operating Results

First quarter 2010 sales of $56.2 million were 6.4% lower than the first quarter 2009.  Excluding a 4.4% favorable impact of foreign exchange, reflecting a weaker U.S. dollar, sales decreased 10.8%.  The decrease is primarily due to the timing of orders for two active pharmaceutical ingredients ("APIs") manufactured under long-term supply agreements, a customer supply chain disruption for an API manufactured under a long-term supply agreement, and a feed additive for which a contract expired.  Lower pricing of certain generic APIs and a product utilizing the Company's drug delivery technology, for which the Company renegotiated a three year agreement at lower price levels in late 2009, also contributed to the decrease.  Partially offsetting these decreases were increased volumes of controlled substances and custom development revenues.

First quarter 2010 Gross Margin decreased to 25.8% of sales from 31.9% during the first quarter 2009, with foreign currency unfavorably impacting gross margin by 4.6% in the first quarter 2010.  Lower pricing of a product utilizing the Company's drug delivery technology and certain generic APIs were the main drivers of the lower margins, this was partially offset by favorable product mix.

Selling, General and Administrative Expenses in the first quarter 2010 were $8.8 million compared to $9.0 million in the same period last year.  The decrease is a result of lower legal fees and insurance premiums partially offset by an unfavorable impact of foreign currency and acquisition costs related to the acquisition of Cambrex IEP.

Research and Development Expenses increased to $2.0 million in the first quarter 2010 from $1.7 million in the first quarter 2009 due to higher costs related to the development of new products and technologies and an unfavorable impact of foreign currency.

Operating Profit decreased to $3.7 million in the first quarter 2010 from $8.3 million in the first quarter 2009.  Lower gross profit, primarily due to lower sales volumes, and an unfavorable impact from foreign currency partially offset by lower spending were the main drivers of lower operating profit.

The Provision for Income Taxes totaled $0.8 million, a 33.0% effective tax rate, in the first quarter 2010 compared to $2.5 million, a 34.7% effective tax rate, in the first quarter 2009.  The Company's effective tax rate has been and is expected to remain highly sensitive to the geographic mix of income due to the Company's inability to recognize tax benefits where there has been a recent history of losses, primarily in the U.S.

Net Income for the first quarter 2010 was $1.7 million or $0.06 per share compared to $4.7 million or $0.16 per share in the first quarter 2009.  

Capital expenditures and depreciation for the first quarter 2010 were $2.7 million and $5.4 million compared to $2.8 million and $4.7 million in the first quarter 2009, respectively.  

Steven M. Klosk, President and Chief Executive Officer, said, "Our full year expectations remain intact and while we will see lower sales in 2010 for some of our larger products compared to last year, we believe that much of the decline is temporary and that volumes and order trends for some of these products should return to higher levels towards the end of 2010 and into 2011.  We are encouraged by the increased level of requests for proposals for clinical stage projects, stronger generic API order trends and continued increases in sales of controlled substances.

We are especially excited about our acquisition of IEP, a biocatalysis business based in Germany.  IEP has a large portfolio of proprietary enzymes, which it licenses and sells, often in conjunction with proprietary processes that enable our customers to perform chemical syntheses more efficiently.  This acquisition significantly enhances our biocatalysis capabilities, creates new selling opportunities and allows us to potentially develop more cost-effective manufacturing processes for existing and new products.  The business is relatively small today, but we believe it has considerable upside potential."

Guidance

The Company continues to expect that sales for 2010, excluding the impact of foreign currency, will be between a decline of 5% and an increase of 1% versus 2009, and that full year 2010 EBITDA will be between $41 and $47 million.

For 2010, capital expenditures are expected to be approximately $12 to $15 million and depreciation is expected to be $22 to $24 million.

The financial information contained in this press release is unaudited, subject to revision and should not be considered final until the first quarter 2010 Form 10-Q is filed with the SEC.

SOURCE Cambrex Corporation

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