EAST RUTHERFORD, N.J., Nov. 08, 2018 (GLOBE NEWSWIRE) -- Cambrex Corporation (NYSE: CBM), a leading manufacturer of small molecule innovator and generic Active Pharmaceutical Ingredients, and finished dosage forms, reports results for the third quarter ended September 30, 2018.

Third Quarter 2018 Highlights

• Completed the acquisition of Halo Pharma (“Halo”), a leading finished dosage form Contract Development and Manufacturing Organization (“CDMO”) specializing in product development and commercial manufacturing, for $425 million in total cash consideration.
• Net revenue decreased 7% under current U.S. GAAP, ASC 606 – Revenue from Contracts with Customers (“ASC 606”). Under ASC 605, the previous revenue recognition standard, Net revenue decreased 9% compared to the same quarter last year.
• Under ASC 606, Diluted EPS from continuing operations was $0.79 per share compared to $0.52 per share in the same quarter last year. 2018 performance reflects a lower tax rate resulting from tax reform in the United States and New Jersey. Under ASC 605, Diluted EPS from continuing operations would have been $0.94 per share.
• Under ASC 606, EBITDA decreased to $15.8 million from $33.7 million in the same quarter last year. Adjusted EBITDA, which excludes the impact of adopting ASC 606, Halo’s results and acquisition and integration costs, was $28.1 million (see table at the end of this press release).
• Net debt was $227.9 million at the end of the quarter, an increase of $399.2 million during the quarter primarily driven by the acquisition of Halo Pharma and partially offset by cash flows from operations during the quarter.
• The Company now expects full year 2018 Adjusted Net revenue, which excludes the impact of foreign currency and the adoption of ASC 606, to be between -1% and -3% compared to 2017 and Adjusted EBITDA to be between $153 and $159 million, excluding the impact of the Halo acquisition (see Financial Expectations – Continuing Operations section below for related explanations and additional financial guidance).

“We’re very pleased to have closed the Halo acquisition this quarter, which diversifies our business into the large, growing market for outsourced finished dosage form contract development and manufacturing. Halo’s capabilities complement Cambrex’s existing global API manufacturing expertise and Halo expands our customer base and broadens our small molecule funnel. Integration is well underway and we are confident that this business will allow us to better meet the needs of our global network of customers and create future growth synergies,” commented Steven M. Klosk, President and Chief Executive Officer of Cambrex.

“Market conditions in the Innovator sector remain strong and the addition of a new late stage project during the third quarter brings our total to 18 such products. A key component of our long term growth strategy is to steadily increase the number of late stage products in our portfolio. We believe that Cambrex is increasingly well positioned to execute against this strategy.”

Basis of Reporting

The Company has provided a reconciliation of GAAP to adjusted (i.e. Non-GAAP) amounts at the end of this press release. Cambrex management believes that the adjustments provide useful information to investors due to the magnitude and nature of certain amounts recorded under GAAP.

Third Quarter 2018 Operating Results – Consolidated, Continuing Operations

Net revenue under ASC 606 was $104.6 million. Under ASC 605, the previous revenue recognition standard, Net revenue decreased to $102.7 million, or 9%, from $112.6 million in the same quarter last year. Net revenue during the quarter includes the acquisition of Halo which contributed revenue of $5.2 million under ASC 606 and $6.3 million under ASC 605. Results under ASC 606 and ASC 605 include a 1% unfavorable impact of foreign exchange compared to the third quarter of 2017.

Gross margins under ASC 606 were 31%. Under ASC 605, gross margins were 38% compared to 42% in the same quarter last year.

Selling, general and administrative expenses were $14.5 million, compared to $17.2 million in the same quarter last year. The decrease was mainly due to lower personnel related costs, an accounts receivable write-off in the same quarter last year and the impact of foreign currency.

Research and development expenses were flat year over year at $4.2 million.

Acquisition and integration expenses of $7.4 million represents costs associated with the acquisition of Halo.

Operating profit under ASC 606 was $6.6 million. Under ASC 605, operating profit was $13.2 million compared to $25.5 million in the same quarter last year. The decrease was primarily the result of higher operating expenses related to the purchase of Halo and lower gross profit. Adjusted EBITDA was $28.1 million compared to $33.7 million in the same quarter last year (see table at the end of this press release).

Income tax expense was a benefit of $15.4 million compared to an expense of $7.5 million and an effective tax rate of 30% in the same quarter last year. The income tax benefit during the quarter reflects the immediate recognition of certain effects of share-based compensation, acquisition and integration expenses, unrealized gain on investment in equity securities, a $2.1 million benefit for the finalization of the toll charge on undistributed foreign earnings under U.S. tax reform, and a $12.2 million benefit for the release of a state valuation allowance and the revaluation of state deferred tax balances due to New Jersey tax reform enacted during the third quarter of 2018. Excluding these items, the effective tax rate would have been approximately 20% during the quarter.

Income from continuing operations under ASC 606 was $26.8 million or $0.79 per share.

Adjusted income from continuing operations, calculated under ASC 605 and including other adjustments described in the table at the end of this press release, was $16.7 million or $0.49 per share, compared to $18.5 million or $0.55 per share in the same quarter last year.

Capital expenditures were $10.8 million and depreciation and amortization was $9.2 million compared to $15.4 million and $8.2 million, respectively, in the same quarter last year.

Net debt was $227.9 million at the end of the third quarter, an increase of $399.2 million during the quarter. The increase was driven by the acquisition of Halo and partially offset by cash flows from operations.

Third Quarter 2018 Operating Results - Finished Dosage Form (“FDF”) segmentThe acquisition of Halo resulted in the creation of the FDF segment for Cambrex. Included in Cambrex’s consolidated results for the third quarter of 2018 are the results of Halo for the period from acquisition date, September 12, 2018, through September 30, 2018 and are as follows.

Net revenue in the third quarter of 2018 under ASC 606 was $5.2 million. Net revenue under ASC 605 was $6.3 million.

Gross margins under ASC 606 in the third quarter of 2018 were 32%. Gross margins under ASC 605 were 28%.

Selling, general and administrative expenses were $1.1 million in the third quarter of 2018.

Operating profit under ASC 606 was $0.5 million. Under ASC 605, operating profit was $0.6 million. Both exclude $0.4 million in integration costs and includes increased depreciation and amortization expense resulting from the application of purchase accounting.

Financial Expectations – Continuing Operations

The following table shows the Company’s current expectations for its full year 2018 financial performance versus its expectations from the previous quarter. The expectations in the table below reflect expected results from the business excluding the recent acquisition of Halo and are consistent with the basis on which prior guidance was provided.

About Cambrex

Cambrex Corporation is an innovative life sciences company that provides products, services and technologies to accelerate the development and commercialization of small molecule therapeutics. The Company offers Active Pharmaceutical Ingredients (APIs), finished dosage forms (FDF), advanced intermediates and enhanced drug delivery products for branded and generic pharmaceuticals. Development and manufacturing capabilities include enzymatic biotransformations, high potency APIs, high energy chemical synthesis, controlled substances and continuous processing. For more information, please visit www.cambrex.com.