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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 June 30, 2002
-------------
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
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CAMBREX CORPORATION
-------------------
(Exact name of registrant as specified in its charter)
DELAWARE 22-2476135
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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 July 31, 2002, there were 26,000,106 shares outstanding of the
registrant's Common Stock, $.10 par value.
CAMBREX CORPORATION AND SUBSIDIARIES
FORM 10-Q
For The Quarter Ended June 30, 2002
Table of Contents
Page No.
--------
Part I Financial information
---------------------
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets as of June 30, 2002 and
December 31, 2001 2
Condensed consolidated income statements for the six months ended
June 30, 2002 and 2001 3
Condensed consolidated statements of cash flows for the six months
ended June 30, 2002 and 2001 4
Notes to condensed consolidated financial statements 5 - 12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 13 - 19
Part II Other information
-----------------
Item 4. Matters Submitted to a Vote of Securities Holders 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
Part 1 - FINANCIAL INFORMATION
CAMBREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
June 30, December 31,
2002 2001
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents ......................... $ 46,045 $ 23,696
Trade receivables, net ............................ 82,488 74,093
Inventories, net .................................. 114,890 107,746
Deferred tax assets ............................... 19,326 18,599
Prepaid expenses and other current assets ......... 25,302 19,526
--------- ---------
Total current assets ............................ 288,051 243,660
Property, plant and equipment, net ................... 300,905 287,605
Goodwill ............................................. 218,315 219,822
Intangible assets, net ............................... 54,170 49,189
Other assets ......................................... 13,945 17,791
--------- ---------
Total assets .................................... $ 875,386 $ 818,067
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities .......... $ 69,098 $ 66,233
Income taxes payable .............................. 7,479 1,263
Short-term debt and current portion of
Long-term debt .................................. 1,970 2,567
--------- ---------
Total current liabilities ............................ 78,547 70,063
Long-term debt ....................................... 305,137 312,524
Deferred tax liabilities ............................. 50,146 48,570
Other noncurrent liabilities ......................... 28,279 27,730
--------- ---------
Total liabilities ............................... 462,109 458,887
--------- ---------
Stockholders' equity:
Common stock, $.10 par value; issued 28,259,959 and
28,007,825 shares at respective dates ......... 2,840 2,823
Additional paid-in capital ........................ 201,599 197,748
Retained earnings ................................. 267,367 237,759
Treasury stock, at cost 2,254,355 and 2,234,421
shares at respective dates ..................... (16,659) (16,911)
Accumulated other comprehensive loss .............. (41,870) (62,239)
--------- ---------
Total stockholders' equity ...................... 413,277 359,180
--------- ---------
Total liabilities and stockholders' equity ...... $ 875,386 $ 818,067
========= =========
See accompanying notes to unaudited condensed consolidated financial statements.
2
CAMBREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(unaudited)
(in thousands, except per-share data)
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
2002 2001 2002 2001
--------- --------- --------- ---------
Gross sales .................................... $ 134,263 $ 122,561 $ 266,718 $ 253,746
Commissions & allowances .................... 1,321 898 2,789 2,154
--------- --------- --------- ---------
Net sales ...................................... 132,942 121,663 263,929 251,592
Other revenues .............................. 5,685 375 7,253 1,723
--------- --------- --------- ---------
NET REVENUES ................................... 138,627 122,038 271,182 253,315
Cost of goods sold ............................. 81,827 74,319 164,688 155,280
--------- --------- --------- ---------
GROSS PROFIT ................................... 56,800 47,719 106,494 98,035
Operating expenses:
Selling, general and administrative ......... 24,684 20,596 47,201 44,052
Research and development .................... 4,601 4,721 8,627 9,317
--------- --------- --------- ---------
Total operating expenses .................. 29,285 25,317 55,828 53,369
OPERATING PROFIT ............................... 27,515 22,402 50,666 44,666
Other (income) expenses:
Interest expense, net ....................... 2,852 2,147 5,779 4,285
Other (income)/expense, net ................. 2,807 (95) 2,773 (239)
--------- --------- --------- ---------
Income before income taxes ..................... 21,856 20,350 42,114 40,620
Provision for income taxes .................. 5,683 5,496 10,950 11,374
--------- --------- --------- ---------
NET INCOME ..................................... $ 16,173 $ 14,854 $ 31,164 $ 29,246
========= ========= ========= =========
Weighted average shares outstanding:
Basic ....................................... 25,991 25,658 25,944 25,533
Effect of dilutive stock options ............ 653 1,010 662 985
--------- --------- --------- ---------
Diluted ..................................... 26,644 26,668 26,606 26,518
Earnings per share of common stock
and common stock equivalents:
Basic ....................................... $ 0.62 $ 0.58 $ 1.20 $ 1.15
========= ========= ========= =========
Diluted ..................................... $ 0.61 $ 0.56 $ 1.17 $ 1.10
========= ========= ========= =========
Cash dividends paid per share .................. $ 0.03 $ 0.03 $ 0.06 $ 0.06
========= ========= ========= =========
See accompanying notes to unaudited condensed consolidated financial statements
3
CAMBREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Six months ended
June 30,
----------------------------
2002 2001
--------- ---------
Cash flows from operating activities:
Net income ......................................... $ 31,164 $ 29,246
Depreciation and amortization ...................... 18,208 23,584
Investment impairment (See Note 7) ................. 2,500 --
Deferred income tax provision ...................... 849 --
Changes in assets and liabilities (net of assets and
liabilities acquired):
Receivables, net ................................. (5,217) 1,487
Inventories ...................................... (3,112) (14,503)
Prepaid expenses and other current assets ........ (720) (6,640)
Accounts payable and accrued liabilities ......... (2,049) (17,274)
Income taxes payable ............................. 3,256 (4,625)
Other noncurrent assets and liabilities .......... 2,099 719
--------- ---------
Net cash provided by operating activities ........ 46,978 11,994
--------- ---------
Cash flows from investing activities:
Capital expenditures ............................... (22,039) (15,293)
Acquisition of businesses (net of cash acquired) ... -- (120,392)
Other investing activities ......................... 586 (139)
--------- ---------
Net cash used in investing activities ............ (21,453) (135,824)
--------- ---------
Cash flows from financing activities:
Dividends .......................................... (1,555) (1,531)
Net increase (decrease) in short-term debt ......... (796) 3,468
Long-term debt activity (including current portion):
Borrowings ....................................... 22,450 249,490
Repayments ....................................... (30,118) (121,724)
Proceeds from the issuance of common stock ......... 3,867 9,412
Purchase of treasury stock ......................... -- (1,532)
--------- ---------
Net cash provided/used by financing activities ... (6,152) 137,583
--------- ---------
Effect of exchange rate changes on cash ............... 2,976 (1,560)
--------- ---------
Net increase in cash and cash equivalents ............. 22,349 12,193
Cash and cash equivalents at beginning of period ...... 23,696 21,721
--------- ---------
Cash and cash equivalents at end of period ............ $ 46,045 $ 33,914
========= =========
See accompanying notes to unaudited condensed consolidated financial statements.
4
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, 2001.
The results of operations for the three months and six months ended June
30, 2002 are not necessarily indicative of the results to be expected for the
full year.
(2) IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Goodwill and Intangible Assets:
-------------------------------
The Company adopted SFAS 142, "Goodwill and Other Intangible Assets" in
the first quarter of fiscal 2002. The effect of this adoption was to cease
amortization of goodwill and certain other indefinite-lived intangible assets,
which resulted in a decrease in amortization expense in the second quarter and
six months ended June 30, 2002 of approximately $2.5 and $5.1 million,
respectively after income taxes. The Company has established reporting units
based on its current segment structure for purposes of testing goodwill for
impairment. Goodwill has been assigned to the reporting units to which the value
of the goodwill relates. The Company completed the first step of the
transitional goodwill impairment test and has determined that no impairment
existed at January 1, 2002. The Company will evaluate goodwill and other
intangible assets at least on an annual basis and whenever events and changes in
circumstances suggest that the carrying amount may not be recoverable based on
the estimated future cash flows.
The changes in the carrying amount of goodwill for the six months ended
June 30, 2002, are as follows:
Rutherford
BioTechnology Human Health Chemicals
Segment Segment Segment Total
---------------------------------------------------------------
Balance as of January 1, 2002 ......... $ 183,941 $ 32,032 $ 3,849 $ 219,822
Purchase Accounting Adjustments
on Recent Acquisitions .............. (5,073) (5,073)
Cumulative Translation Effect ......... 668 2,848 50 3,566
--------- --------- --------- ---------
Balance as of June 30, 2002 ........... $ 179,536 $ 34,880 $ 3,899 $ 218,315
========= ========= ========= =========
Other intangible assets that are not subject to amortization, consist of
the following:
As of June 30, 2002 As of December 31, 2001
--------------------------------------------- -------------------------------------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Net Amount Amortization Net
--------------------------------------------- -------------------------------------------
Proprietary Process .............. $ 4,020 $ (2,345) $ 1,675 $ 4,721 $ (2,345) $ 2,376
License Agreements ............... 4,000 (641) 3,359 4,500 (641) 3,859
Trademarks ....................... 44,038 (9,641) 34,397 44,038 (9,641) 34,397
-------- -------- -------- -------- -------- --------
Total ....................... $ 52,058 $(12,627) $ 39,431 $ 53,259 $(12,627) $ 40,632
======== ======== ======== ======== ======== ========
5
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------
(2) IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
Intangible Assets:
------------------
Other intangible assets, which will continue to be amortized, consist of
the following:
As of As of
June 30, 2002 December 31, 2001
Gross Carrying Gross Carrying
Amount Amount
--------------- ------------------
Patents .............................................. $ 2,478 $ 2,469
Proprietary Process................................... 5,830 1,091
Supply Agreements .................................... 2,100 2,100
Trademarks ........................................... 785 --
Unpatented Technology ................................ 5,235 4,945
Other ................................................ 1,231 1,480
Fully Amortized Assets*............................... 12,347 12,347
-------- --------
Total ........................................... 30,006 24,432
-------- --------
Accumulated Amortization.............................. (15,267) (15,875)
-------- --------
Net .................................................. $ 14,739 $ 8,557
======== ========
*This category includes certain fully amortized patents, proprietary
process and non-compete agreements.
Amortization expense for the quarter and six months ended June 30, 2002
was $387 and $777.
The expected amortization expense related to intangible assets currently
recorded in the future is as follows:
For the year ended December 31, 2002....... $1,555
For the year ended December 31, 2003....... $1,543
For the year ended December 31, 2004....... $1,333
For the year ended December 31, 2005....... $1,308
For the year ended December 31, 2006....... $1,298
Pro-forma net income and diluted earnings per share for the quarter and
six months ended June 30, 2002, reflecting the adoption of SFAS No. 142, were as
follows:
For the Quarter Ended Six Months
June 30, June 30,
------------------------- -------------------------
2002 2001 2002 2001
------- ---------- ------- ----------
Net income as reported .................... $16,173 $ 14,854 $31,164 $ 29,246
Pro-forma amortization effect, after taxes -- 1,975 -- 3,638
------- ---------- ------- ----------
Net income - pro forma .................... $16,173 $ 16,829 $31,164 $ 32,884
Diluted earnings per share as reported .... 0.61 0.56 1.17 1.10
Add back:
Goodwill and other indefinite-lived
amortization expense .............. N/A 0.07 N/A 0.14
------- ---------- ------- ----------
Diluted earnings per share - pro forma .... $ 0.61 $ 0.63 $ 1.17 $ 1.24
======= ========== ======= ==========
6
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------
(2) IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
Accounting for Impairment or Disposal of Long-Lived Assets:
-----------------------------------------------------------
In August 2001, the FASB issued Statement of Financial Accounting
Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"). SFAS 144 primarily addresses the financial accounting and
reporting for the impairment or disposal of long-lived assets. SFAS 144 became
effective on January 1, 2002. Adoption of this Statement had no impact on the
Company's results.
In June 2002, the FASB issued Statement of Financial Accounting Standard
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities"
("SFAS 146"). This Statement addresses financial accounting and reporting for
costs associated with exit or disposal activities. SFAS 146 is effective for
exit or disposal activities that are initiated after December 31, 2002, with
early application encouraged. Adoption of this Statement is not expected to have
material impact on the Company's results.
(3) INVENTORIES
Inventories at June 30, 2002 and December 31, 2001 consist of the
following:
June 30, December 31,
2002 2001
-------- --------
Finished goods ...... $ 53,155 $ 48,184
Work in process ..... 29,464 27,093
Raw materials ....... 28,360 28,777
Fuel oil and supplies 3,911 3,692
-------- --------
Total ............ $114,890 $107,746
======== ========
(4) COMPREHENSIVE INCOME
Comprehensive Income for the three and six months ended June 30, 2002 was
$35,617 and $51,532 respectively. The amounts for the same period in 2001 were
$15,206 and $6,546, respectively. The increase in 2002 versus 2001 is due
primarily to foreign currency translation.
(5) LONG-TERM DEBT
Long-term debt at June 30, 2002 and December 31, 2001 consists of the
following:
June 30, December 31,
2002 2001
--------- ---------
Bank credit facilities $ 291,750 $ 298,350
Other ................ 13,391 14,179
--------- ---------
Subtotal .......... 305,141 312,529
Less: current portion (4) (5)
--------- ---------
Total ............. $ 305,137 $ 312,524
========= =========
The Company met all the bank covenants for the first six months of 2002.
7
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------
(6) RESTRUCTURING AND OTHER CHARGES
On November 30, 2001, the Company announced a plan to realign its
businesses which included the creation of Rutherford Chemicals, Inc., effective
January 1, 2002, in recognition of the Company's strategy to focus on the Life
Sciences businesses. In addition, on November 30, 2001 the Company announced its
commitment to a restructuring and cost savings program which includes impaired
assets, severance, and other costs related to the realignment of the businesses.
The restructuring and cost savings program was largely executed in the fourth
quarter of 2001, with the remaining actions to be completed by the end of 2002.
In the fourth quarter, Cambrex recorded special pre-tax charges of $23.1
million, the majority of which were non-cash items. As a result of the Company's
previously announced business restructuring which created Rutherford Chemicals,
Inc., together with an impairment charge within those businesses, the Company
incurred $18.6 million of charges to operating expense, composed of asset
write-downs of $17.2 million and severance costs of $1.4 million. The Company
also incurred $4.5 million of inventory write-downs charged to cost of sales,
consisting of $2.5 million associated with discontinued products manufactured at
Rutherford Chemical facilities and a separate $2 million Biosciences inventory
charge.
The asset write-downs consisted primarily of fixed asset write-offs and
impairments. A $10.0 million impairment charge was recorded on certain assets at
one of the Company's domestic chemicals sites, based on the estimated fair value
for the assets determined by discounting the expected future cash flows. A $1.6
million impairment was also recorded related to an unused chemical facility to
recognize its estimated current fair value. In addition, a $5.6 million charge
was recorded to write-off fixed assets related to discontinued product lines at
another of the Company's domestic chemical sites.
Severance charges, which apply largely to the Company's various chemical
sites, relate to involuntary terminations of approximately 62 employees. All
affected employees received notification in the fourth quarter 2001. As of June
30, 2002 all employees have been terminated.
The balance in the restructuring reserve was $256 and $900 at June 30,
2002 and December 31, 2001, respectively. The decrease in the first six months
was due to severance payments.
(7) OTHER INCOME AND EXPENSES, NET
Other (income) expense, net was $2,807 and ($95) for the quarters ending
June 30, 2002 and 2001, respectively. 2002 included an impairment charge of $2.5
million related to a prior investment of $3.0 million in an emerging technology
company. The company, in which the investment is held, has been investigating
strategic and financing options. In connection with this process, valuation
information was received in the second quarter 2002 which enabled Cambrex to
estimate a decline in the market value of the company. Accordingly, an
impairment charge was recorded to reflect what Cambrex believes to be the
current market value estimate.
(8) ARBITRATION AWARD
In April 2002, the Company received a favorable arbitration award related
to disputes concerning Rutherford Chemicals toll manufacturing and licensed
product line agreements. The arbitration decision compensated the Company for
lost profits for the years 2001 through 2005. The Company originally paid $4.5
million to acquire the product line rights from Arizona Chemicals Corporation.
The total award, net of legal and other related costs was $4.3 million, of which
$0.5 million was recorded as a reduction of the intangible asset basis and $3.8
million was recorded in Other revenues.
8
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------
(9) SEGMENT INFORMATION
The Company announced in late November 2001 a plan to realign its
businesses in recognition of the Company's strategic emphasis on the growing
opportunities in the life sciences industry. Effective January 1, 2002, the
operating units that primarily produce specialty and fine chemicals, and animal
health and agriculture products were combined under a new subsidiary, Rutherford
Chemicals, Inc. This chemical subsidiary manages CasChem, Inc., Bayonne, New
Jersey; Cosan Chemical Corporation, Carlstadt, New Jersey; Heico Chemicals,
Delaware Water Gap, Pennsylvania; Nepera, Inc., Harriman, New York; Zeeland
Chemicals, Inc., Zeeland, Michigan; and Seal Sands Chemicals Ltd., Teesside,
United Kingdom.
With this realignment, the Company is reporting four operating segments
going forward in 2002: Human Health, Biosciences, Rutherford Chemicals and All
Other.
Following is a summary of business segment information for the following
dates:
Three months ended Six months ended
June 30, June 30,
--------------------------- ---------------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Gross Sales:
Human Health ................ $ 55,916 $ 51,574 $ 112,135 $ 104,007
Biosciences ................. 40,298 27,564 77,493 54,890
Rutherford Chemicals ........ 31,884 37,310 65,145 79,178
All Other ................... 6,165 6,113 11,945 15,671
--------- --------- --------- ---------
Total ....................... $ 134,263 $ 122,561 $ 266,718 $ 253,746
========= ========= ========= =========
Gross Profit:
Human Health ................ $ 24,582 $ 23,809 $ 50,428 $ 47,516
Biosciences ................. 21,310 14,209 38,958 29,128
Rutherford Chemicals ........ 10,050 7,896 15,224 16,826
All Other ................... 858 1,805 1,884 4,565
--------- --------- --------- ---------
Total ....................... $ 56,800 $ 47,719 $ 106,494 $ 98,035
========= ========= ========= =========
Operating Profit*:
Human Health and All Other .. $ 18,674 $ 18,616 $ 39,668 $ 37,711
Biosciences ................. 9,633 3,710 16,048 9,144
Rutherford Chemicals ........ 6,416 3,383 8,568 8,526
Corporate ................... (7,208) (3,307) (13,618) (10,715)
--------- --------- --------- ---------
Total Operating Profit ...... $ 27,515 $ 22,402 $ 50,666 $ 44,666
========= ========= ========= =========
Reconciliation to Net Income:
Interest Expense, net ....... $ 2,852 $ 2,147 $ 5,779 $ 4,285
Other Expense (Income), net . 2,807 (95) 2,773 (239)
Taxes ....................... 5,683 5,496 10,950 11,374
--------- --------- --------- ---------
Net Income .................. $ 16,173 $ 14,854 $ 31,164 $ 29,246
========= ========= ========= =========
Capital Spending:
Human Health and All Other .. $ 6,945 $ 3,587 $ 13,230 $ 7,787
BioSciences ................. 1,297 869 3,143 1,636
Rutherford Chemicals ........ 689 2,569 5,593 4,934
Corporate ................... 16 671 73 936
--------- --------- --------- ---------
Total ....................... $ 8,947 $ 7,696 $ 22,039 $ 15,293
========= ========= ========= =========
9
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------
(9) SEGMENT INFORMATION (CONTINUED)
Three months ended Six months ended
June 30, June 30,
2002 2001 2002 2001
------- ------- ------- -------
Depreciation:
- -------------
Human Health and All Other $ 4,556 $ 4,207 $ 8,906 $ 8,288
BioSciences .............. 1,434 988 2,467 1,978
Rutherford Chemicals ..... 2,559 3,231 5,104 6,475
Corporate ................ 477 535 954 1,071
------- ------- ------- -------
Total .................... $ 9,026 $ 8,961 $17,431 $17,812
======= ======= ======= =======
Amortization:
- -------------
Human Health and All Other $ 3 $ 802 $ 6 $ 1,660
BioSciences .............. 384 2,040 771 3,570
Rutherford Chemicals ..... -- 270 -- 542
------- ------- ------- -------
Total .................... $ 387 $ 3,112 $ 777 $ 5,772
======= ======= ======= =======
June 30, December 31,
2002 2001
-------- --------
Total Assets:
- -------------
Human Health and All Other $305,152 $257,362
Biosciences .............. 359,634 356,450
Rutherford Chemicals ..... 158,500 160,136
Corporate ................ 52,100 44,119
-------- --------
$875,386 $818,067
======== ========
*The operating segments include charges for certain corporate allocations
reflecting services provided. Unallocated corporate spending is included in
"Corporate."
(10) 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 non-current liabilities of $1,400 at June 30, 2002 and December 31, 2001,
for costs associated with the study and remediation of Superfund sites and the
Company's current and former operating sites for matters that are probable and
reasonably estimable. Based on currently available information and analysis, the
Company's accrual represents management's best estimate of what it believes are
the reasonably possible environmental cleanup related costs of a non-capital
nature. 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 financial condition, operating results and cash flows
when resolved in a future reporting period.
10
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(10) CONTINGENCIES (CONTINUED)
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 alleged 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. A lawsuit making similar allegations
against the Company and Profarmaco, and seeking injunctive relief and treble
damages, was filed by the Attorneys General of 31 states 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 were also 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.
On February 9, 2001, a federal court in Washington, DC entered an Order
and Stipulated Permanent Injunction as part of a settlement of the FTC and
Attorneys General's suits. Under these settlement documents Mylan paid over $140
million on its own behalf and on behalf of most of the other defendant companies
including Cambrex and Profarmaco. In the Order and Injunction, the settling
defendants also agreed to monitor certain future conduct.
The Company strongly believes that its licensing arrangements with Mylan
were in accordance with regulatory requirements and will vigorously defend the
various other lawsuits and class actions. The private litigation continues.
However, the Company and Mylan 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. Mylan had been fully
covering the costs for the defense and indemnity of Cambrex and Profarmaco under
certain obligations set forth in the license agreements. Cambrex agreed to cover
separate legal defense costs incurred for Cambrex and Profarmaco on a going
forward basis beginning August 1, 2000. These costs have not been and are not
expected to be significant.
11
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(10) CONTINGENCIES (CONTINUED)
Litigation (continued)
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 fourth quarter of 1999, the Company reached a settlement with the
Government concerning Nepera's alleged role in Vitamin B-3 violations from 1992
to 1995. On October 13, 2000, the Government settlement was finalized with
Nepera entering into a voluntary plea agreement with the Department of Justice.
Under this agreement, Nepera entered a plea of guilty to one count of price
fixing and market allocation of Vitamin B-3 from 1992 to 1995 in violation of
section one of the Sherman Act and agreed to pay a fine of $4.0 million. Under
the plea agreement, Nepera was placed on probation for one year, which has
ended. The fine was paid in February 2001. Nepera has been named as a defendant,
along with several other companies, in a number of private civil actions brought
on behalf of alleged purchasers of Vitamin B-3.
An accrual of $6.0 million was recorded in the fourth quarter 1999 to
cover the anticipated government settlements, related litigation, and legal
expenses. Based on discussions with various plaintiffs counsel, as well as
current estimates of expenditures for legal fees, an additional accrual of $4.4
million was established in the fourth quarter of 2001. The balance of this
accrual as of June 30, 2002 was approximately $1.9 million and at December 31,
2001 was approximately $4.4 million. This accrual has been recorded in Accounts
Payable and Accrued Liabilities. Certain related litigation has been settled,
thus reducing the accrual balance.
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 a unfavorable manner, could
have a material effect on the operating results and cash flows when resolved in
a future reporting period.
OTHER
The Company has a $5 million investment in a privately owned, emerging
biotechnology company. The company, which has therapeutic products in various
stages of clinical trials, recently offered its shares at a price which may
indicate the value of Cambrex's investment has declined. Management is
monitoring the situation to determine if any change in value is other than
temporary. Due to the uncertainty, no impairment has been recognized at this
time.
12
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 SECOND QUARTER 2002 VERSUS SECOND QUARTER 2001
The Company announced in late November 2001 a plan to realign its businesses in
recognition of the Company's strategic emphasis on the growing opportunities in
the life sciences industry. Effective January 1, 2002, the operating units that
primarily produce specialty and fine chemicals, and animal health and
agriculture products were combined under a new subsidiary, Rutherford Chemicals,
Inc.
With this alignment, the Company is reporting four operating segments going
forward in 2002. Human Health, Biosciences, Rutherford Chemical and All Other.
The segment "All Other" is comprised of the non-human health products
manufactured at certain operating sites which are otherwise part of the Human
Health operating segment.
Effective January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets. The effect of this
adoption was to cease amortization of goodwill and certain indefinite-lived
intangible assets. On a pro-forma basis, Q2 2001 net income would have been
$16,829 versus the $14,854 reported last year.
Net income in the second quarter of 2002 was $16,173 versus $14,854 ($16,829 on
a pro-forma basis for the effect of FASB No. 142) in the same period a year ago.
The 2002 results include a $2,294, after tax, favorable arbitration award
related to disputes concerning Rutherford Chemicals toll manufacturing and
licensed product line agreements, which is recorded in Other Revenue. The
arbitration decision compensated the Company for lost profits for the years 2001
through 2005. The quarter also benefited by $1,137, after tax, from a final
insurance claim settlement related to the previously disclosed reactor outage at
a Rutherford Chemicals site, which is recorded against Cost of Goods Sold. These
benefits were partially offset by an investment impairment charge of $1,850,
after tax, which is reflected in Other Expense, and an asset impairment charge
of $259, after tax.
The results reflect higher sales in the Human Health and Biosciences Segments,
higher gross margin in the Bioscience Segment, the favorable items noted above
and the reduced amortization expense as a result of the adoption of FASB No.
142. These items are partly offset by lower sales in Rutherford Chemicals, the
investment and asset impairment charges and higher administrative and interest
costs due to the 2001 acquisitions.
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 June 30, 2002 and 2001.
Quarter Ended June 30,
----------------------
2002 2001
---- ----
$ % $ %
-------- -------- -------- --------
Human Health $ 55,916 41.6% $ 51,574 42.1%
Biosciences 40,298 30.0 27,564 22.5
Rutherford Chemicals 31,884 23.8 37,310 30.4
All Other 6,165 4.6 6,113 5.0
-------- -------- -------- --------
Total gross sales $134,263 100.0% $122,561 100.0%
======== ======== ======== ========
13
RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF SECOND QUARTER 2002 VERSUS SECOND QUARTER 2001 (CONTINUED)
The following table shows the gross sales and gross profit of the Company's four
product segments for the second quarter 2002 and 2001.
Gross Gross Gross
Sales Profit $ Profit %
----- -------- --------
2002
- ----
Human Health $ 55,916 $ 24,582 44.0%
Biosciences 40,298 21,310 52.9
Rutherford Chemicals 31,884 10,050 31.5
All Other 6,165 858 13.9
-------- -------- -------
Total $134,263 $ 56,800 42.3%
======== ======== =======
Gross Gross Gross
Sales Profit $ Profit %
----- -------- --------
2001
- ----
Human Health $ 51,574 $ 23,809 46.2%
Biosciences 27,564 14,209 51.5
Rutherford Chemicals 37,310 7,896 21.2
All Other 6,113 1,805 29.5
-------- -------- -------
Total $122,561 $ 47,719 39.0%
======== ======== =======
Gross sales in the second quarter 2002 increased 9.5% to $134,263 from $122,561
in the second quarter 2001. Sales in the Human Health and Biosciences Segments
increased compared to the second quarter 2001 and more than offset the decrease
in the Rutherford Chemicals.
The Human Health Segment gross sales of $55,916 were $4,342, or 8.4%, above the
second quarter 2001. Gross sales were above the prior year primarily due to
sales of a new amphetamine product used to treat attention deficit disorder,
continued growth of a pharmaceutical intermediate used in therapeutic treatment
of end-stage kidney disease, higher sales of an anti-infective product resulting
from re-entry into this market, and increased sales of pharmaceuticals used in
cardiovascular preparations due to higher U.S. demand as well as timing of
shipments. Partly offsetting these increases was the impact of a new insomnia
product introduction in 2001 along with lower sales of certain active
pharmaceutical ingredients in Europe due to lower demand and competitive
pressures and lower sales of certain pharmaceuticals used in cardiovascular
preparations due to reduced U.S. demand and customer inventory management. Human
Health sales growth would have been 5.8% without the currency impact of the
weaker U.S. dollar.
The Bioscience Segment gross sales of $40,298 increased 46.2% in the second
quarter 2002 primarily due to the impact of the biopharmaceutical manufacturing
acquisitions completed during the second half of 2001 and from strong shipments
of normal human cells, media and endotoxin detection products. Excluding the
impact of the 2001 acquisitions, the sales growth was approximately 6%.
Rutherford Chemicals Segment gross sales of $31,884 in the second quarter 2002
declined $5,426 (14.5%) versus the second quarter 2001, reflecting lower demand
for certain performance enhancing chemicals, timing of campaigns on agricultural
products and continued weakness in the telecommunications industry.
14
RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF SECOND QUARTER 2002 VERSUS SECOND QUARTER 2001 (CONTINUED)
The All Other Segment gross sales of $6,165 was about even with the second
quarter 2001 reflecting a recovery in the photographic market in Europe and
higher crop protection product sales offset by lower animal feed additive sales
due primarily to competitive pricing pressures and customer inventory build-ups,
and the impact of a customer bringing in-house the manufacture of a performance
enhancing polymer product.
Export sales from U.S. businesses of $12,446 in the second quarter 2002
increased 16.0% from $10,725 in the second quarter 2001. International sales
from European operations totaled $61,408 for the second quarter of 2002 as
compared with $61,137 in 2001, an increase of 0.4%.
Gross profit in the second quarter of 2002 was $56,800 compared to $47,719 in
2001. Gross margin increased to 42.3% from 39.0% in the second quarter of 2001.
Included in the second quarter 2002 gross margin are a $1,776 favorable
settlement on an insurance claim recorded against Cost of Goods Sold and $3,760
for a favorable net arbitration award recorded in Other Revenue. Both items
concern the Rutherford Chemicals businesses. Excluding these items, the overall
gross margin was 38.2%. The Bioscience segment experienced higher margins driven
by increased sales, production and favorable product mix. The favorable margins
in Bioscience were offset by lower Human Health margins, reflecting an
unfavorable product mix, and lower Rutherford Chemical and All Other margins
which primarily reflect lower volumes.
Selling, general and administrative expenses as a percentage of gross sales was
18.4% in the second quarter 2002, compared to 16.8% (14.5% on a pro-forma basis
considering adoption of SFAS No. 142) in the second quarter 2001. Higher
administrative costs, excluding the impact of SFAS 142, were due primarily to
the impact of the second half 2001 biopharmaceutical manufacturing acquisitions,
higher accruals for anticipated incentive payments, insurance premiums and
pension costs, and a reduction of environmental accruals in the second quarter
2001.
Research and development expenses of $4,601 were 3.4% of gross sales in the
second quarter 2002, compared to $4,721 or 3.9% of gross sales in 2001.
The operating profit in the second quarter 2002 was $27,515 compared to $22,402
in 2001 ($25,227 on a pro-forma basis considering adoption of SFAS No. 142).
Excluding the impact of the Rutherford insurance and arbitration items and the
asset impairment charge, operating profit for the second quarter 2002 was
$22,404. The results reflect higher sales in the Human Health and Biosciences
Segments, higher gross margin in the Bioscience segment, the favorable insurance
and arbitration items noted above and the reduced amortization expense as a
result of the adoption of FASB No. 142. These items are partly offset by lower
sales in Rutherford Chemicals and higher administrative costs.
Net interest expense of $2,852 in the second quarter 2002 increased $705 from
2001 reflecting the higher average debt balance due to financing of the 2001
acquisitions, partly offset by lower average interest rates. The average
interest rate was 4.27% in the second quarter 2002 versus 5.19% in 2001.
The provision for income taxes for the second quarter 2002 resulted in an
effective rate of 26.0% as compared with 27.0% in the second quarter 2001. The
decrease reflects favorable tax audits, favorable geographic earnings mix and
the impact of the continuing R&D tax credit programs.
15
RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF SIX MONTHS 2002 VERSUS SIX MONTHS 2001 (CONTINUED)
The Company announced in late November 2001 a plan to realign its businesses in
recognition of the Company's strategic emphasis on the growing opportunities in
the life sciences industry. Effective January 1, 2002, the operating units that
primarily produce specialty and fine chemicals, and animal health and
agriculture products were combined under a new subsidiary, Rutherford Chemicals,
Inc.
With this alignment, the Company is reporting four operating segments going
forward in 2002. Human Health, Biosciences, Rutherford Chemical and All Other.
The segment "All Other" is comprised of the non-human health products
manufactured at certain operating sites which are otherwise part of the Human
Health operating segment.
Effective January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets. The effect of this
adoption was to cease amortization of goodwill and certain indefinite-lived
intangible assets. On a pro-forma basis, the first six months 2001 net income
would have been $32,884 versus the $29,246 reported last year.
Net income for the first six months of 2002 was $31,164 versus $29,246 ($32,884
on a pro-forma basis for the effect of FASB No. 142) in the same period a year
ago. The 2002 results include a $2,294, after tax, favorable net arbitration
award related to disputes concerning Rutherford Chemicals toll manufacturing and
licensed product line agreements, which is recorded in Other Revenue. The
arbitration decision compensated the Company for lost profits for the years 2001
through 2005. The six months also benefited by $1,137, after tax, from a final
insurance claim settlement related to the previously disclosed reactor outage at
a Rutherford Chemicals site, which is recorded against Cost of Goods Sold. These
benefits were partially offset by an investment impairment charge of $1,850,
after tax, which is reflected in Other Expense, and an asset impairment charge
of $259, after tax.
The results reflect higher sales in the Human Health and Biosciences Segments,
the favorable items noted above and the reduced amortization expense as a result
of the adoption of FASB No. 142. These items are partly offset by lower sales in
Rutherford Chemicals and All Other segments, the investment and asset impairment
charges and higher administrative and interest costs due to the 2001
acquisitions.
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 first
half 2002 and 2001.
Six Months Ended June 30
------------------------
2002 2001
---- ----
$ % $ %
-------- -------- -------- --------
Human Health $112,135 42.0% $104,007 41.0%
Biosciences 77,493 29.1 54,890 21.6
Rutherford Chemicals 65,145 24.4 79,178 31.2
All Other 11,945 4.5 15,671 6.2
-------- -------- -------- --------
Total gross sales $266,718 100.0% $253,746 100.0%
======== ======== ======== ========
16
RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF SIX MONTHS 2002 VERSUS SIX MONTHS 2001 (CONTINUED)
The following table shows the sales and gross profit of the Company's four
product segments for the six months 2002 and 2001.
Gross Gross Gross
Sales Profit $ Profit %
----- -------- --------
2002
- ----
Human Health $112,135 $ 50,428 45.0%
Biosciences 77,493 38,958 50.3
Rutherford Chemicals 65,145 15,224 23.4
All Other 11,945 1,884 15.8
-------- -------- -------
Total $266,718 $106,494 39.9%
======== ======== =======
Gross Gross Gross
Sales Profit $ Profit %
----- -------- --------
2001
- ----
Human Health $104,007 $ 47,516 45.7%
Biosciences 54,890 29,128 53.1
Rutherford Chemicals 79,178 16,826 21.3
All Other 15,671 4,565 29.1
-------- -------- -------
Total $253,746 $ 98,035 38.6%
======== ======== =======
Gross sales for the first six months 2002 increased 5.1% to $266,718 from
$253,746 in the first six months 2002. Sales in the Biosciences and Human Health
segments increased compared to the first six months 2001 which more than offset
the decrease in the Rutherford Chemicals and All other segments.
The Human Health Segment gross sales of $112,135 were $8,128, or 7.8%, above the
first six months 2001. Gross sales were above the prior year primarily due to
sales of a new amphetamine product used to treat attention deficit disorder,
continued growth of a pharmaceutical intermediate used in therapeutic treatment
of end-state kidney disease, higher sales of an anti-infective product resulting
from re-entry into this market, increased sales of pharmaceuticals used in
central nervous system preparations due to higher U.S. and European demand, as
well as timing of shipments and higher sales of certain gastrointestinal active
pharmaceutical ingredients due to pricing negotiations and higher European
demand. Partly offsetting these increases was the impact of new product
introductions in 2001 for insomnia and an anti-infective treatment, along with
lower sales of certain active pharmaceutical ingredients in Europe due to lower
demand and competitive pressures.
The Bioscience Segment gross sales of $77,493 increased 41.2% in the first six
months 2002 compared to the prior year period primarily due to the impact of the
biopharmaceutical manufacturing acquisitions completed during the second half of
2001 and from strong shipments of normal human cells, media and endotoxin
detection products, partly offset by lower sales of chromatography and fragment
analysis products. Excluding the impact of the 2001 acquisitions, the sales
growth was approximately 3%.
Rutherford Chemicals Segment gross sales of $65,145 in the first six months of
2002 declined $14,033 (17.7%) versus the first six months of 2001, reflecting
lower demand and timing of production campaigns for crop protection products,
lower demand for certain performance enhancing chemicals, and continued weakness
in the telecommunications and industrial coatings industries. These decreases
were partly offset by increased sales of feed additive products.
17
RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF SIX MONTHS 2002 VERSUS SIX MONTHS 2001 (CONTINUED)
The All Other Segment gross sales of $11,945 in the first six months of 2002
were $3,726 (23.8%) below the prior year period of $15,671, reflecting lower
feed additive sales due to customer inventory management and pricing pressures,
weak photographic market demand in Europe, and the impact of a customer bringing
in-house the manufacture of a performance enhancing polymer product, as well as
customer inventory build-ups on another performance enhancing polymer product.
Export sales from U.S. businesses of $25,189 in the first half of 2002 compared
to $24,104 in 2001. International sales from our European operations totaled
$123,374 for the first six months of 2002 compared to $123,916 in 2001.
Gross profit in the first six months of 2002 was $106,494 compared to $98,035 in
2001. Gross margin in 2002 increased to 39.9% from 38.6% in the first six months
of 2001. Included in the 2002 gross margins are a $1,776 favorable settlement on
an insurance claim recorded against Cost of Goods Sold and $3,760 for a
favorable net arbitration award recorded in Other Revenue. Both items concern
the Rutherford Chemicals businesses. Excluding these items, the overall 2002
gross margin was 37.9%. The Human Health gross margins were about even with the
prior year due to a favorable product mix and overall higher volumes offset by
lower production in certain European plants. The Bioscience segment margins
declined due primarily to underabsorption of fixed costs at the
biopharmaceutical contract manufacturing sites particularly in the first
quarter. Excluding the favorable items discussed above, lower Rutherford
Chemicals and All Other segment margins primarily reflect lower volumes.
Selling, general and administrative expenses as a percentage of gross sales was
17.7% in the first six months 2002, compared to 17.4% (15.3% on a pro-forma
basis considering adoption of SFAS No. 142) for the same period in 2001. Higher
administrative costs, excluding the impact of SFAS 142, were due primarily to
the impact of the second half 2001 biopharmaceutical manufacturing acquisitions,
higher accruals for anticipated incentive payments, a reduction of environmental
accruals in the second quarter 2001, higher insurance premiums and pension
expense in 2002.
Research and development expenses of $8,627 were 3.2% of gross sales in the
second quarter 2002, compared to $9,317 or 3.7% of gross sales in 2001,
reflecting open positions in the Biosciences group, seasonality of spending and
staff reductions mainly in Rutherford Chemicals locations.
The operating profit in the first six months of 2002 was $50,666 compared to
$44,666 in 2001 ($49,831 on a pro-forma basis considering adoption of SFAS No.
142). Excluding the impact of the Rutherford insurance settlement and
arbitration award and the asset impairment charge, operating profit for the
first half of 2002 was $45,555. The results reflect higher sales in the Human
Health and Biosciences Segments, the favorable insurance and arbitration items
noted above and the reduced amortization expense as a result of the adoption of
FASB No. 142. These items are partly offset by lower sales in Rutherford
Chemicals and All other segments, and higher administrative costs due to the
2001 acquisitions, higher insurance premiums and pension expense.
Net interest expense of $5,779 in the first half of 2002 increased $1,494 from
2001 reflecting the higher average debt balance due to financing of the 2001
acquisitions, partly offset by lower average interest rates. The average
interest rate was 4.22% for the first six months of 2002 versus 5.7% in 2001.
The provision for income taxes for the first half of 2002 resulted in an
effective rate of 26.0% as compared with 28.0% in the same period of 2001. The
decrease reflects favorable tax audits, favorable geographic earnings mix and
the impact of the continuing R&D tax credit programs.
18
RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 2002, the Company generated cash flows from
operations totaling $46,978, an increase of $34,984 versus the same period a
year ago. This increase in cash flows is due to lower inventory purchases,
timing of trade payables and tax payments and collection of a portion of the
Rutherford insurance claim receivable, partly offset by higher trade receivables
due to higher sales.
Capital expenditures were $22,039 in the six months of 2002 as compared to
$15,293 in 2001. Part of the funds were used for plant and lab upgrades at Bio
Science, BioWhittaker and Nordic facilities, as well as for a new production
line for small scale pharmaceuticals at the Salsbury facility.
Cash flow used by financing activities of $6,152 included net repayment of
debt of $7,668 and payment of $1,555 in dividends, partly offset by proceeds
from the exercise of stock options, $3,867.
During the first six months of 2002, the Company paid cash dividends of $0.06
per share.
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.
19
PART II - OTHER INFORMATION
CAMBREX CORPORATION AND SUBSIDIARIES
ITEM 4. MATTERS SUBMITTED TO A VOTE OF SECURITIES HOLDERS.
Refer to Form 10Q for quarterly period ended March 31, 2001.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 99.1 - CEO Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
b) Exhibit 99.2 - CFO Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
c) Reports on Form 8-K
The registrant did not file any reports on Form 8-K during the
first six months 2002.
20
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 /s/ Salvatore J. Guccione
-----------------------------------
Salvatore J. Guccione
Senior Vice President and
Chief Financial Officer
(On behalf of the Registrant and
as the Registrant's Principal
Financial Officer)
Date: August 14, 2002
21