Cambrex Corporation Annual Report 1994

1 ---------------------------------------------------------------------------------------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 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) 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) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201)-804-3000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- Common Stock, $.10 par value American Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item405 of Regulation S-K is not contained herein, and will not be contained, to thebest of the registrant's knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. / / The aggregate market value of the voting stock held by non-affiliates ofthe registrant was approximately $142,654,000 as of February 28, 1995. APPLICABLE ONLY TO CORPORATE REGISTRANTS As of February 28, 1995, there were 5,435,067 shares outstanding of theregistrant's Common Stock, $.10 par value. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's definitive Proxy Statement for the 1995 AnnualMeeting are incorporated by reference into Part III of this report.---------------------------------------------------------------------------------------------------------------------------------------------------------------- 2 PART I ITEM 1 BUSINESS. GENERAL Cambrex Corporation (the "Company" or "Cambrex"), a Delaware corporation,began business in December 1981 through its predecessor, and now wholly-ownedsubsidiary, CasChem, Inc. ("CasChem"). The Company manufactures and markets a broad line of specialty chemicalsand commodity chemical intermediates and also manufactures chemicals to customerspecifications. There are five product categories: health and pharmaceuticals;specialty and fine chemicals; agricultural intermediates and additives;performance chemicals; and coatings. Currently the Company is focusing ongrowing its health and pharmaceuticals and specialty and fine chemicals productcategories, because the Company feels they offer the best prospects for salesgrowth and higher profitability. Within each of the product categories, the Company uses a consistentbusiness approach: 1. It focuses on niche products requiring high technical experience. 2. Core products are those in which the Company is a leading supplier, and for which price competition is not the primary market determinant. 3. Products and product lines are continually reviewed and those not meeting operating profit goals are eliminated and replaced with new products with higher returns. In order to manage a business with a large number of products and a dynamicbusiness mix, the Company runs a decentralized organization. The business isconducted by eight subsidiary organizations headed by an experienced businessmanager. Each subsidiary controls all the resources required for the success ofits business and is responsible for its financial performance. CambrexCorporation provides oversight of the subsidiaries and, where performance isconsidered unsatisfactory, becomes directly involved to help correct anydeficiencies. It also provides support services that are not fundamental to thesuccess of the subsidiaries' business endeavors; such services include finances,risk management, and pension and benefits management. Important objectives of the Company are to expand its operations throughinternal growth and to make strategic acquisitions of product lines, technologyand companies that have substantial positions in niche markets. The Company's plans for internal growth include: - developing new applications for technologies in which the Company has expertise; - expanding product offerings to increase use of existing equipment and resources; and - expanding domestic and international markets for existing products. On October 12, 1994, the Company completed the acquisition of the stock ofNobel's Pharma Chemistry Business ("Nobel/Profarmaco") from Akzo Nobel forapproximately $126,000,000. The business consists of Nobel Chemicals AB inKarlskoga, Sweden, Profarmaco Nobel S.r.1. in Milan, Italy and sales companiesin Germany, England and the United States. Nobel/Profarmaco manufactures finechemical intermediates and bulk active ingredients for pharmaceutical products. On January 31, 1994, Cambrex purchased substantially all of the assets ofHexcel Corporation's fine chemicals business located in Middlesbrough, England,for approximately $7,400,000 and the assumption of certain current liabilitiesin the amount of $2,100,000. The business, now known as Seal Sands Chemicals,Ltd. ("Seal Sands"), manufactures chemical intermediates used in thepharmaceutical, photographic, water treatment, health care, and plasticsindustries. On May 27, 1994, the Company purchased the Topanol product line fromZeneca Limited to complement the Seal Sands operation for $4,600,000. On March 12, 1993, the Company purchased substantially all of the assets ofViscosity Oil's fiber optic gel business for $5,886,000. 1 3 On March 31, 1992, the Company acquired substantially all of the assets ofthe fine chemicals business of Hexcel Fine Chemicals, located in Zeeland,Michigan, for $20,251,000 and the assumption of certain liabilities including avariable rate Industrial Development Revenue Bond in the principal amount of$4,150,000, and a capital lease maturing in 1997 with a then net present valueof $8,214,000. The business, now known as Zeeland Chemicals, Inc. ("Zeeland"),manufactures synthetic organic chemicals for the pharmaceutical, food additive,photographic, agricultural, personal care, and plastics industries. On July 1, 1991, the Company purchased substantially all of the assets ofthe chemicals business of Solvay Animal Health, Inc., located in Charles City,Iowa, for $12,299,000. The business, now known as Salsbury Chemicals, Inc.("Salsbury"), manufactures custom and fine chemicals, as well as pharmaceuticalintermediates, generic pharmaceuticals, animal feed additives, and photographicand polymer chemicals. The table below shows the contribution of the 1994 acquisitions to theproduct categories and the changes in the continuing business. 1994 -------------------------------------- CONTINUING 1993 BUSINESS ACQUISITIONS TOTAL -------- ---------- ------------ -------- (IN THOUSANDS) Health and pharmaceuticals............... $ 55,550 $ 57,070 $ 17,093 $ 74,163 Specialty and fine chemicals............. 48,841 48,838 17,710 66,548 Agricultural intermediates and additives.............................. 51,153 59,751 -- 59,751 Performance chemicals.................... 30,880 31,769 -- 31,769 Coatings................................. 16,884 17,452 -- 17,452 -------- ---------- ------------ -------- Gross revenues................. $203,308 $214,880 $ 34,803 $249,683 ======== ======== ========= ======== PRODUCTS The following table sets forth for the periods indicated informationconcerning gross revenues from the Company's five product categories: YEARS ENDED DECEMBER 31, ------------------------------- 1994(1) 1993(3) 1992(4) ------- ------- ------- (IN THOUSANDS) Health and pharmaceuticals............................ $74,163 $55,550(2) $59,167 Specialty and fine chemicals.......................... 66,548 48,841 37,623 Agricultural intermediates and additives.............. 59,751 51,153 49,120 Performance chemicals................................. 31,769 30,880 20,441 Coatings.............................................. 17,452 16,884 18,527 ---------------(1) Revenues from Seal Sands, acquired in January 1994, and Nobel/Profarmaco, acquired in October 1994, are included from the date of acquisition. The Company expanded its health and pharmaceuticals, and specialty and fine chemicals product categories through these acquisitions. (2) Decreases from 1992 to 1993 in the health and pharmaceuticals product category resulted from unusually high sales of bulk pharmaceuticals in 1992, and from reduced shipments of niacinamide intermediates to the Asia-Pacific region due to economic problems and increased competition. (3) Revenues from Viscosity Oil's fiber optic gel business, acquired in March 1993, are included from the date of acquisition. The Company expanded its performance chemicals product category through this acquisition. (4) Revenues from Zeeland, acquired in March 1992, are included from the date of acquisition. The Company expanded its health and pharmaceuticals, and specialty and fine chemicals product categories through this acquisition. The Company manufactures and markets a broad line of specialty chemicalsand commodity chemical intermediates and also manufactures chemicals to customerspecifications. The chemical families of castor oil, pyridine, organometallics,alkenyl succinic anhydrides, organobromines, nitroaromatics, aryl sulfonates,products made in liquid ammonia solvent, quaternary ammonium compounds, chemicalresolving agents and aromatic amines are the basis for compounds in theCompany's five product categories. 2 4 Health and Pharmaceuticals. This category consists of four principalproduct groups: (1) bulk pharmaceuticals utilized as the active ingredients inover-the-counter and prescribed medications, (2) intermediates converted intothe active ingredients in a variety of food additives and over-the-countermedications, (3) specialty compounds utilized in the formulation of cosmeticsand toiletries, and (4) Vitamin B3 and its chemical precursors and other vitaminintermediates. Such health and pharmaceutical products are sold to a diversegroup of more than 900 customers. Products in this category are generally complex chemical compounds thatmake significant contributions to the functionality of the finished productwhile representing a small portion of the cost. Many of them must bemanufactured under strict Food and Drug Administration regulations and requireextensive quality control procedures. Some of the items included are bulk activedrugs sold to generic formulators, intermediates for the production ofdextromephorphan, a cough suppressant, and specialty castor oil derivatives thatimpart "feel" to cosmetic creams. During 1994, sales of health and pharmaceuticals increased $18,613,000(34%) from 1993 to $74,163,000, with major increases in specialty intermediatesand bulk pharmaceuticals. The acquisition of Nobel/Profarmaco in October 1994added $16,400,000 of sales to the health and pharmaceuticals category. Sales of bulk pharmaceuticals represented $24,300,000, or 33%, of thiscategory's 1994 gross revenues and were $14,600,000 higher than 1993, with theacquisition of Nobel/Profarmaco adding $12,400,000 in new products. Increasedsales, excluding the acquired products, were from a generic drug for ulcerativecolitis which recovered from depressed levels in 1993. Sales of pharmaceutical intermediates represented $24,500,000, or 33%, ofthis category's 1994 revenues and were $9,900,000 higher than 1993. Theacquisition of Nobel contributed $3,400,000 in increased sales. The key increaseof existing business was due to continued market development of an existingintermediate and a contract for producing a second intermediate used in thesynthesis of over-the-counter cough suppressants. Sales of cosmetic and toiletry related compounds represented $19,700,000,or 27%, of this category's 1994 revenues and were $3,000,000 lower than 1993.The main decrease of $1,800,000 in sales was due to the end of a contract tomake citrates at our Zeeland, Michigan facility. Sales of pyridine basedproducts totaled $5,600,000 in 1994 and were $600,000 lower than the prior yeardue to reduced pricing and lower sales volume to a key customer in the UnitedStates caused by competitive pressure. Sales of Vitamin B3 and its chemical precursors represented $5,600,000, or7%, of this category's 1994 revenues and were $2,900,000 lower than 1993. Thisdecrease was due to reduced shipments to customers worldwide, due to pricecompetition. Specialty and Fine Chemicals. This category principally consists of fourproduct groups: (1) specialty additives used for lubricants and surfactantintermediates, (2) organic intermediates, (3) photographic chemicals, and (4)catalysts. The Company is currently expanding facilities at the Salsbury andZeeland locations to allow increased ability to manufacture internally developedand customer specific compounds in this category. Such specialty and finechemical products are sold to a diverse group of more than 1,200 customers. Products in this category are generally high priced, small volume complexchemical compounds that contribute specific functionality to the end product.They normally require expertise in a particular chemical technology in which oneor more of the Cambrex subsidiaries specialize. Included are products such as amonomer used in the manufacture of polyestersulphone, PES, high performanceplastics, a cross linking agent used in production of polycarbonate sheets, anda component of color print film. In many cases these products are developed jointly with our customer, withthe customer developing the application, and Cambrex developing a process forreliable, high quality production with reasonable economics. During 1994, sales of specialty and fine chemical products increased$17,707,000, a 36% rise from 1993. That increase included $14,400,000 from SealSands acquired in January 1994 and $3,300,000 from the October 1994 acquisitionof Nobel. 3 5 Sales of specialty additive products represented $29,900,000, or 45%, ofthis category's 1994 revenues and were $16,600,000 higher than 1993. Theincrease includes $13,700,000 in sales attributable to the acquisition of SealSands in January 1994. The increase in sales of the base business was due togrowth of the application of one of our products as a dye receptor in acrylicyarns initiated in 1993. Sales of organic intermediate products represented $13,600,000, or 20%, ofthis category's 1994 revenues and were $2,800,000 higher than 1993. Thisincrease is attributable to $2,400,000 in sales of new products from the Nobelacquisition. Sales of photographic chemical products were $11,600,000, or 17%, of thiscategory's 1994 revenues, $2,100,000 lower than 1993. The decrease was in salesof a polymer used in instant film, due to our customer reaching their desiredinventory levels, and in export sales of a photographic chemical intermediate toa Japanese company. We expect sales levels to continue to decline in 1995. Sales of catalyst products represented $10,400,000, or 16%, of thiscategory's 1994 revenues and were $600,000 higher than 1993. The increase isprimarily attributable to tin based catalysts used in various industrialapplications. Agricultural Intermediates and Additives. This category includes twoprincipal product groups: (1) animal feed additives and (2) intermediates foruse in the manufacture of herbicides and insecticides. The Company'sagricultural intermediates and additives are sold to approximately 70 customers.Two customers accounted for 30% and 24% of 1994 revenues in this category. Total sales in this category increased $8,598,000, or 17%, in 1994. Theincrease was due to growth in our existing business, with no contribution fromacquisitions made in 1994. The sales of animal feed additives were $36,000,000, or 60%, of thiscategory's 1994 revenues, up $7,600,000 from 1993. Sales of organo-arsenicalfeed additives used to control disease and to enhance chicken growth and improvefeed performance, increased 25% over the prior year due to growth in poultryproduction coupled with the customer's penetration of domestic and internationalmarkets. All sales of this product are made to A.L. Laboratories under along-term contract. Sales of feed grade Vitamin B3 increased due to theinstallation of new packaging facilities late in 1993 that allowed sales intothe international market. Sales of Vitamin B3 intermediates increased due toadditional shipments to the Asia-Pacific area and India. Although sales volumeof Vitamin B3 and its intermediates increased significantly, prices decreasedbecause of competitive pressure. Prices were increased in the fourth quarter1994 and are anticipated to increase in the first quarter 1995. The sales of products used in the manufacture of herbicides andinsecticides amounted to $23,800,000, or 40%, of this category's 1994 revenuesand were up 4% from 1993. Sales of pyridine, the largest item in this group,were up 12% from 1993. The largest pyridine customer is Zeneca, Inc. who uses itin herbicide manufacture. The Company produces another major pyridine compoundand is the exclusive supplier of this product to Dow Elanco who uses it inproduction of a different herbicide. Sales of this compound decreased 21% in1994 due to the customer reducing inventory levels after very high customerproduction in 1993. Sales of other pyridine derivatives in this categorydecreased $756,000 from 1993 due to competitive pressures. Performance Chemicals. The Company's urethane elastomers are used in thetelecommunications and electronics industries as encapsulants for wiringconnections, and as biomedical devices to seal filter elements. The principalcompetitors in the telecommunications and electronics markets include twocompanies that have substantially greater resources than the Company.Competitors in the other end-use markets for performance products are numerousand varied. The Company competes in these markets on the basis of its patent andproprietary positions, technical expertise, and customer service. Performancechemicals are sold to approximately 150 customers with one customer accountingfor 21% of this category's 1994 revenues. Total sales of performance products increased $889,000, or 3%, from 1993levels. This increase was due to increases in sales of fiber optic cable gels tothe telecommunications industry and to increased sealant applications for thebiomedical market. 4 6 Coatings. The Company manufactures and sells products that are used asintermediates or performance-enhancing additives in the manufacture of paintsand other coatings. The Company's coatings products compete based on a varietyof factors including price, performance and technical support, depending on theparticular market involved. These products are sold to approximately 220customers. One customer accounted for 15% of 1994 revenues in this category. Sales of coatings products increased $568,000, or 3%, from 1993. Thisincrease was due to a 14% growth in castor oil based products used in coatingsfor the housing and automotive industries. This increase was offset by the endof a tolling agreement for biocides in May 1993, which had 1993 sales of$800,000. MARKETING AND DISTRIBUTION The Company's health and pharmaceuticals and specialty and fine chemicalsproducts are generally high value, low volume products requiring significanttechnical efforts for the development and manufacture. Marketing generallyrequires significant cooperative effort between a small highly trained marketingstaff, technical staff who can assess the technical fit and estimatemanufacturing economics, and the business management to determine the strategicand business fit. Such a process may take from two to five years before acommercial product is fully established. Because of this long lead time and thecomplexity of the technical efforts, these are usually long-term relationshipswith major corporations who become significant customers. Sales of establishedproducts may be handled by agents in those areas where direct sales efforts areuneconomic. For other product categories, marketing and distribution is more typical ofchemical companies, with products being sold to customers from inventory involumes ranging from rail cars to five gallon pails. Sales may be handled bycompany sales people, distributors or agents as appropriate. RAW MATERIALS The Company uses significant amounts of castor oil in the manufacture of anumber of its products and, under advantageous market conditions, sells it inbulk quantities as simple castor oil derivatives. The Company believes it is one of the largest purchasers of castor oil inthe United States and, currently, the only buyer which has the ability to takedelivery and store a large quantity of castor oil (up to 23 million pounds) onsite. Castor oil, which is not produced in the United States, is an agriculturalproduct whose market price is affected by natural factors relating to the castorbean crop from which the oil is produced. Castor oil is produced commercially ina few foreign countries with India, Brazil and China being the largestproducers. The Company obtains its castor oil from several suppliers andnegotiates castor oil purchases directly with principals of those organizationsor their selling agents. The Company has been able to obtain adequate suppliesof castor oil generally at acceptable prices in the past and expects to be ableto do so in the future. Pyridine is produced by the Company with a process involving the hightemperature reaction of acetaldehyde, formalin and ammonia. Acetaldehyde'sfeedstock is ethylene, which is produced from natural gas liquids or crude oil.Ethylene is readily available although its price is often affected by marketconditions. Acetaldehyde is available from two suppliers in North America. Theprice of acetaldehyde increased approximately 20% during 1994. Although pricesare expected to decrease during 1995, no assurances can be given that suchdecreases will materialize. Formalin's feedstock is methanol, which is also usedby the petro-chemical industry in the manufacture of methyl-tert-butyl-ether(MTBE). The production of and demand for MTBE has increased rapidly inconnection with its use as a gasoline additive. This increased demand hastriggered an unfavorable effect on methanol pricing, which in turn has causedthe price of formalin to increase by approximately 80% in 1994. Prices offormalin are expected to decrease in 1995, as the supply of methanol increases.Ammonia has been widely available in the past and the Company believes that itwill continue to be so in the future. The Company obtains acetaldehyde and formalin pursuant to long-term supplycontracts under which the price for the raw material adjusts to marketconditions, with a time lag. The Company sometimes has 5 7 difficulty passing on these increases to its customers, particularly if theincreases are precipitous rather than general. The Company uses a wide array of other raw materials, in addition to thosepreviously described, in the conduct of its business, all of which are inadequate supply and most of which are available from multiple suppliers. RESEARCH AND DEVELOPMENT The Company's research and development program is designed to increase theCompany's competitiveness through improving its technology and developingprocesses for the manufacture of new products to meet customer requirements. Thegoal is to improve the Company's manufacturing processes to reduce costs,improve quality and increase capacity and to identify market opportunities whichwarrant a significant technical effort, and offer the prospects of a long term,profitable business relationship. Research and development activities arecarried on at most of the Company's manufacturing facilities in both the UnitedStates and Europe. Eighty employees are involved directly in research anddevelopment activities. The Company spent approximately $5,700,000, $5,800,000 and $4,000,000 in1994, 1993 and 1992, respectively, on research and development. Decreasedspending at our Harriman and Bayonne facilities were offset by increasedspending to our other domestic facilities and at our newly acquired sites inEngland, Sweden and Italy. PATENTS AND TRADEMARKS The Company has patent protection in some of its product areas. However,the Company mostly relies on know-how in many of its manufacturing processes andtechniques not generally known to other chemical companies, for developing andmaintaining its market position. The Company currently owns approximately 66 United States patents whichhave varying durations and which cover selected items in each of the Company'smajor product areas. The Company also owns the foreign equivalent of many of itsUnited States patents. In addition, the Company has applied for patents forvarious concepts and is in the process of preparing patent applications forother concepts. The Company has trademarks registered in the United States and a number offoreign countries for use in connection with the Company's products andbusiness. The Company believes that many of its trademarks are generallyrecognized in its industry. Such trademarks include Naturechem(R), Bufferite(R)and Vitride(R). The Company requires employees to sign confidentiality and non-competeagreements where appropriate. COMPETITION Because of the nature of the Company's products in its health andpharmaceuticals and specialty and fine chemicals categories and its strategicapproach, it is not possible to identify a group of direct competitors. Wherecompetition exists, it is typically specific to a certain product, or is focusedearly in the process, where an initial market position is being established.Where the Company perceives significant competitive risk and a need for largetechnical or financial commitment, it generally negotiates long-term contractsor capital guarantees from its targeted customer before proceeding. The rest of the Company's business competition is more typical of chemicalmarkets. Competition exists from other producers of the Company's products andother products that may offer equivalent properties. Competition in these areasare generally based on customer service, product quality and pricing. ENVIRONMENTAL AND SAFETY REGULATIONS AND PROCEEDINGS General. Production of certain of the Company's chemicals involves theuse, storage and transportation of toxic and hazardous materials. The Company'soperations are subject to extensive international and domestic federal, stateand local laws and regulations relating to the storage, handling, emission,transportation and discharge of materials into the environment and themaintenance of safe conditions in the work place. The 6 8 Company maintains environmental and industrial safety and health complianceprograms at its plants, and believes that its manufacturing operations are ingeneral compliance with all applicable safety, health and environmental laws. The Company's acquisitions were made subject to known environmentalconditions. Also, risks of substantial costs and liabilities are inherent incertain plant operations and certain products produced at the Company's plants,as they are with other companies engaged in the chemical business, and there canbe no assurance that significant costs and liabilities will not be incurred.Additionally, prevailing legislation tends to hold chemical companies primarilyresponsible for the proper disposal of their chemical wastes even aftertransferral to third party waste disposal facilities. Moreover, other futuredevelopments, such as increasingly strict environmental, safety and health lawsand regulations, and enforcement policies thereunder, could result insubstantial costs and liabilities to the Company and could subject the Company'shandling, manufacture, use, reuse, or disposal of substances or pollutants atits plants to more rigorous scrutiny than at present. Although the Company hasno direct operations and conducts its business through subsidiaries, certainlegal principles that provide the basis for the assertion against a parentcompany of liability for the actions of its subsidiaries may support the directassertion against the Company of environmental liabilities of its subsidiaries. Beginning in 1990, CasChem, Inc., one of the Company's subsidiaries, wasthe subject of an investigation by the Environmental Protection Agency and theFederal Bureau of Investigation concerning the handling, storage, and disposalof hazardous wastes. During 1994, a settlement was reached wherein thatsubsidiary pleaded guilty to the unpermitted storage of one drum of hazardouswaste and the payment of a $1,000,000 fine, which was paid in January 1995. As arelated liability had been previously accrued, the resolution of this matter hashad no effect upon the results of operations in 1994. Known environmental matters which may result in liabilities to the Companyand the related estimates and accruals are summarized in Note #19 to the CambrexCorporation and Subsidiaries Consolidated Financial Statements. Present and Future Environmental Expenditures. The Company's policy is tocomply with all legal requirements of applicable environmental, health andsafety laws and regulations, and the Company believes it is in generalcompliance with such requirements and has adequate professional staff andsystems in place to remain in compliance. In some cases, compliance can only beachieved by capital expenditures, and the Company made capital expenditures ofapproximately $2,500,000 in 1994, $1,700,000 in 1993, and $1,300,000 in 1992 forenvironmental projects and has budgeted approximately $4,000,000 in 1995 forsuch projects. The Company anticipates that capital requirements will increasein subsequent years as a result of the Clean Air Act Amendments and otherpending environmental laws. Additionally, as the environmental proceedings inwhich the Company is involved progress from the remedial investigation andfeasibility study stage to implementation of remedial measures, relatedexpenditures will probably increase. The Company considers costs forenvironmental compliance to be a normal cost of doing business, and includessuch costs in pricing decisions. EMPLOYEES At December 31, 1994 the Company had 1,336 employees (604 of whom were fromour international operations). All hourly plant employees at the Bayonne, New Jersey facility arerepresented by Local 8-406 of the Oil, Chemical and Atomic Workers InternationalUnion under a contract expiring September 17, 1997; the hourly plant employeesat the Carlstadt, New Jersey plant are represented by the Amalgamated IndustrialUnion of East Orange, New Jersey under a contract expiring November 30, 1997;and the hourly plant employees at the Harriman, New York facility arerepresented by Local 810 of the International Brotherhood of Teamsters under acontract expiring June 30, 1995. Nobel/Profarmaco production, administration,scientific and technical employees are represented by various local and nationalunions. The contracts with these unions expire at various times through December31, 1995. The Company believes its labor relations are satisfactory. 7 9 SEASONALITY Like many other businesses in the specialty chemicals industry, the Companyexperiences some seasonality as sales traditionally increase during the secondquarter. Operating results for any quarter, however, are not necessarilyindicative of results for any future period. In particular, as a result ofvarious factors such as acquisitions and plant shutdowns, the Company believesthat period-to-period comparisons of its operating results should not be reliedupon as an indication of future performance. EXPORT AND INTERNATIONAL SALES The Company exports numerous products to various areas, principally WesternEurope, Asia and Latin America. Export sales in 1994, 1993 and 1992 amounted to$44,100,000, $37,300,000 and $44,500,000, respectively. Sales from internationaloperations were $34,800,000 in 1994. Refer to Note #17 to the CambrexCorporation and Subsidiaries Consolidated Financial Statements. ITEM 2 PROPERTIES. The Company's domestic manufacturing facilities are located on an eightacre tract in Bayonne, New Jersey, a three acre tract in Carlstadt, New Jersey,a twenty-nine acre tract in Harriman, New York, a twelve acre tract in DelawareWater Gap, Pennsylvania, a four acre tract in North Haven, Connecticut, afifty-seven acre tract in Charles City, Iowa, and a fourteen acre tract inZeeland, Michigan. In addition, the Company owns thirty-one acres of undevelopedland adjacent to the North Haven facility, 103 acres of undeveloped landadjacent to the Harriman facility, and sixty-six acres of undeveloped landadjacent to the Zeeland facility. The international manufacturing facilitiesinclude a twelve acre tract in Middlesbrough, England, a forty-two acre tract inKarlskoga, Sweden, and a thirteen acre tract in Paullo, Italy. The Companybelieves its facilities to be in good condition, well maintained and adequatefor its current needs. The Company is currently expanding its ownedmanufacturing facilities at its locations in Iowa and Michigan. The Company owns all the facilities and properties on which itssubsidiaries operate, with the exception of the leased twelve acre tract inMiddlesbrough, England. Set forth below is information relating to the places of manufacture of theCompany's products: MANUFACTURING PRODUCT AREA FACILITY ------------ ------------- Health and pharmaceuticals.......................... Bayonne, NJ Charles City, IA Delaware Water Gap, PA Harriman, NY North Haven, CT Zeeland, MI Middlesbrough, England Karlskoga, Sweden Paullo, Italy Specialty and fine chemicals........................ Bayonne, NJ Charles City, IA Delaware Water Gap, PA Harriman, NY North Haven, CT Zeeland, MI Middlesbrough, England Karlskoga, Sweden Agricultural intermediates and additives............ Charles City, IA Delaware Water Gap, PA Harriman, NY Performance chemicals............................... Bayonne, NJ Carlstadt, NJ Coatings............................................ Bayonne, NJ Carlstadt, NJ Delaware Water Gap, PA 8 10 ITEM 3 LEGAL PROCEEDINGS. See "Environmental and Safety Regulations and Proceedings" under Item 1hereof with respect to various proceedings involving the Company in connectionwith environmental matters. The Company is party to a number of otherproceedings. Management is of the opinion that while the ultimate liabilityresulting from those proceedings, as well as environmental matters, may have amaterial effect upon the results of operations in any given year, they will nothave a material adverse effect upon the Company's liquidity nor its financialposition. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None EXECUTIVE OFFICERS OF THE REGISTRANT The following table lists the executive officers of the Company and thechief operating officers of the Company's operating subsidiaries: NAME AGE OFFICE(1) ---- --- --------- Cyril C. Baldwin, Jr......................... 67 Chairman of the Board and Chief Executive OfficerJames A. Mack................................ 57 President and Chief Operating OfficerPeter Tracey................................. 53 Executive Vice President, Finance, Chief Financial OfficerPeter E. Thauer.............................. 55 Vice President -- Law & Environment, General Counsel & Corporate SecretarySteven M. Klosk.............................. 37 Vice President, AdministrationBurton M. Rein............................... 56 Senior Vice PresidentBurton M. Rein............................... 56 Senior Vice PresidentAlbert L. Eilender........................... 51 Executive Vice PresidentRoger H. Noack............................... 48 President and Chief Operating Officer of Nepera, Inc.Russell C. Smith............................. 53 Vice President and General Manager of Salsbury Chemicals, Inc.Robert M. Parlman............................ 44 Vice President and General Manager of Zeeland Chemicals, Inc.Karl A. Behrend.............................. 36 General Manager of Heico Chemicals, Inc. and Humphrey Chemical Company, Inc.John V. Van Hulle............................ 37 President of CasChem, Inc. and Cosan Chemical CorporationClaes Glassell............................... 37 Vice President, Cambrex Managing Director of Cambrex Limited ---------------(1) Unless otherwise indicated, positions shown are with the Company. The Company's executive officers are elected by the Board of Directors andserve at the Board's discretion. Mr. Baldwin, who was elected Chairman of the Board in July 1991, has beenChief Executive Officer and a director of the Company since it began business inDecember 1981. On January 26, 1995, Mr. Baldwin announced his retirement asChief Executive Officer of the Company effective April 1, 1995 and as anemployee effective April 30, 1995. Mr. Baldwin will remain as Chairman of theBoard and may at his option elect to enter into a consulting arrangement withthe Company to provide certain financial, consulting and advisory services tothe Company following his retirement. 9 11 Mr. Mack was appointed President and Chief Operating Officer and a directorof the Company in February 1990. For five years prior thereto he was VicePresident in charge of the performance chemicals businesses worldwide of OlinCorporation, a manufacturer of chemical products, metal products, and ammunitionand defense-related products. Mr. Mack has been elected Chief Executive Officerfollowing Mr. Baldwin's resignation effective April 1, 1995. Mr. Tracey was appointed Executive Vice President and Chief FinancialOfficer in November 1994. Mr. Tracey joined the Company in November 1990 as VicePresident and Chief Financial Officer. For three years prior to joining Cambrex,he was Vice President-Finance and Chief Financial Officer for JoyceInternational Inc., a manufacturer of office products. From 1986 to 1987, he wasVice President-Finance and Chief Financial Officer for Robotic Vision Systems,Inc., a manufacturer of industrial automation systems. Prior to 1986, Mr. Traceywas a principal in the firm of Sirius Management Consultants. Mr. Thauer was appointed Vice President, Law & Environment in December1992, and General Counsel and Corporate Secretary in August 1989. Prior tojoining Cambrex, he was Counsel to the business and finance group of the firm ofCrummy, Del Deo, Dolan, Griffinger and Vecchione since 1987. From 1971 to 1987,Mr. Thauer had held various positions with Avon Products, Inc. including U. S.Legal Department Head and Corporate Assistant Secretary. Mr. Klosk joined the Company in October 1992 as Vice President,Administration. Prior to joining Cambrex, he was Vice President, Administrationand Corporate Secretary for the Genlyte Group, Inc., a lighting fixturemanufacturer, since February 1988. From 1985 to January 1988, he was VicePresident, Administration for Lightolier, Inc., a subsidiary of the GenlyteGroup, Inc. Dr. Rein was appointed Senior Vice President in April 1993. He joined theCompany in May 1991 as President of Cambrex Fine Chemicals Group. For more thanfive years prior thereto, he was Director of Commercial Planning for W. R. Grace& Company. Mr. Eilender was elected Executive Vice President in December 1994. Hepreviously held the position of President of CasChem, Inc. and Cosan ChemicalCorporation. He was employed by the Company's Cosan Chemical Corporationsubsidiary when it was acquired by the Company in October 1985, and joined theCompany as a result of the acquisition. For more than three years prior toOctober 1985 he held various executive positions with Cosan including VicePresident, Research and Development and Executive Vice President. He wasPresident of Cosan from October 1986 until July 1989 at which time he wasappointed to the additional position of President of CasChem, Inc. Mr. Noack joined the Company in December 1991 as President and ChiefOperating Officer of Nepera, Inc. For more than five years prior thereto he heldvarious positions with Hexcel Corporation, including General Manager of theChemical Products Division. Mr. Smith was appointed Vice President, General Manager of SalsburyChemicals, Inc. upon the Company's acquisition of the Salsbury facility in July1991. Prior to the acquisition, Mr. Smith had many years of service with SolvayAnimal Health, Inc., starting in 1968 as Chemical Engineer through hisappointment as Director, Chemical Operations in 1982. Dr. Parlman joined the Company as Vice President and General Manager ofZeeland Chemicals, Inc. in March 1994. He was Vice President and General Managerof the Tritolife Division of Petrolite. Dr. Parlman also has extensiveexperience in market development and research and development. Mr. Behrend joined the Company in 1988 as Manager, Business Analysis. InJuly 1991, he was named to Director, Operations of Fine Chemicals Group withresponsibility for plant operations at Heico, Humphrey, Salsbury and Zeeland. InSeptember 1992, Mr. Behrend was appointed General Manager of Heico Chemicals,Inc. and The Humphrey Chemical Company. Prior to joining Cambrex, Mr. Behrendwas associated with Colgate Palmolive and has also been a Portfolio Specialist. Mr. Van Hulle was appointed President of CasChem, Inc. in December 1994. Hejoined CasChem in July 1994 as Executive Vice President. For more than fiveyears prior thereto he was General Manager of the 10 12 Fine Chemicals Group for General Chemical Corporation, and had extensiveexperience with Air Products & Chemicals, Inc. Mr. Glassell was appointed Vice President of Cambrex in November 1994. AsManaging Director of Cambrex Limited and President of the newly acquiredNobel/Profarmaco business, he is responsible for Cambrex's European operations.He joined Cambrex as a result of the acquisition of Nobel/Profarmaco in October1994, where he had extensive management experience. In 1989, he joined Nobel asPresident and CEO for the Pharma Chemistry Business. From 1986 to 1989 he workedfor the agricultural division of Berol Europe Ltd. PART II ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. (a) Since November 15, 1990, the Company's Common Stock, $.10 par value,has been traded on the American Stock Exchange (AMEX) under the symbol CBM. TheCommon Stock previously had been quoted on the National Association ofSecurities Dealers Automated Quotation (NASDAQ) National Market System. Thefollowing table sets forth the high and low market prices of the Common Stockfor the indicated periods as reported by AMEX: HIGH LOW ---- ---- ---- ---- 1994 First Quarter................................................ $24 1/4 $19 7/8 Second Quarter............................................... 22 7/8 20 5/8 Third Quarter................................................ 27 1/8 20 5/8 Fourth Quarter............................................... 26 7/8 23 5/8 HIGH LOW ---- ---- 1993 First Quarter................................................ $20 1/4 $16 3/4 Second Quarter............................................... 19 7/8 18 3/4 Third Quarter................................................ 21 1/4 19 1/4 Fourth Quarter............................................... 20 1/4 19 1/8 (b) As of March 17, 1995, the Company estimates that there wereapproximately 1,800 beneficial holders of the outstanding Common Stock of theCompany. (c) Since the fourth quarter of 1989, Cambrex has paid a regular $.05 pershare quarterly dividend on the Common Stock. 11 13 ITEM 6 SELECTED FINANCIAL DATA. The following selected consolidated financial data of the Company for eachof the years in the five year period ended December 31, 1994 are derived fromaudited financial statements. The consolidated financial statements of theCompany as of December 31, 1994 and December 31, 1993 and for each of the yearsin the three year period ended December 31, 1994 and the accountants' reportsthereon are included elsewhere in this annual report. The data presented belowshould be read in conjunction with the financial statements of the Company andthe notes thereto and "Management's Discussion and Analysis of FinancialCondition and Results of Operations" included elsewhere herein. YEARS ENDED DECEMBER 31, ------------------------------------------------------------ 1994(1) 1993(2) 1992(3) 1991(4) 1990 -------- -------- -------- -------- -------- (DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA) INCOME DATA: Net revenues...................... $241,634 $197,203 $179,452 $144,500 $133,628 Gross profit...................... 57,881 51,778 46,036 26,326 28,730 Selling, general and administrative................. 31,216 29,286 28,201 22,743 20,828 Research and development.......... 5,689 5,843 4,046 3,279 3,496 Restructuring charge.............. -- -- -- -- 9,427 Operating profit (loss)........... 20,976 16,649 13,789 304 (5,021) Interest expense, net............. 4,581 2,771 2,437 2,532 2,115 Other (income) expense, net....... (497) 446 1,054 (2,280) 186 (Gain) on sale of assets.......... -- -- -- -- (3,070) Income (loss) before taxes........ 16,892 13,412 10,298 52 (4,252) Net income (loss)................. 11,126 8,641 6,230 31 (5,075)EARNINGS PER SHARE DATA: Earnings (loss) per common share and common share equivalents: Primary........................ $ 1.96 $ 1.64 $ 1.27 $ 0.01 $ (1.05) Fully diluted.................. $ 1.95 $ 1.60 $ 1.23 $ 0.01 $ (1.05) Weighted average shares outstanding: Primary........................ 5,674 5,282 4,888 4,704 4,818 Fully diluted.................. 5,699 5,484 5,242 4,738 4,818DIVIDENDS PER COMMON SHARE............................. $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20BALANCE SHEET DATA: (at end of period) Working capital................... $ 19,925 $ 38,497 $ 35,852 $ 31,359 $ 39,408 Total assets...................... 360,477 166,845 148,406 111,603 110,149 Long-term obligations............. 115,975 36,261 39,808 19,021 18,490 Total stockholders' equity........ 101,966 87,569 75,177 68,717 69,204 ---------------(1) Includes the results of Seal Sands and Nobel/Profarmaco from their respective dates of acquisition, January 31, 1994 and October 12, 1994, through December 31, 1994. (2) Includes the results of Viscosity Oil's fiber optic gel business from March 12, 1993, the date of acquisition, through December 31, 1993. (3) Includes the results of Zeeland from March 31, 1992, the date of acquisition, through December 31, 1992. (4) Includes the results of Salsbury Chemicals, Inc., which the Company acquired on July 1, 1991. 12 14 ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, certain itemsfrom the Selected Financial Data as a percentage of net revenues. YEARS ENDED DECEMBER 31, ------------------------- 1994 1993 1992 ----- ----- ----- Net revenues................................................ 100.0% 100.0% 100.0% Gross profit................................................ 24.0 26.3 25.7 Selling, general and administrative......................... 12.9 14.9 15.7 Research and development.................................... 2.4 3.0 2.3 Operating profit............................................ 8.7 8.4 7.7 Interest expense............................................ 1.9 1.4 1.4 Other (income) expense, net................................. (0.2) 0.2 0.6 Net income.................................................. 4.6 4.4 3.5 The Company's product mix has changed substantially over the periodsindicated, principally as a result of acquisitions. The following tables showthe gross revenues of the Company's five product categories. YEARS ENDED DECEMBER 31, ---------------------------------- 1994 1993 1992 -------- -------- -------- (IN THOUSANDS) REVENUES Health and pharmaceuticals......................... $ 74,163 $ 55,550 $ 59,167 Specialty and fine chemicals....................... 66,548 48,841 37,623 Agricultural intermediates and additives........... 59,751 51,153 49,120 Performance chemicals.............................. 31,769 30,880 20,441 Coatings........................................... 17,452 16,884 18,527 -------- -------- -------- Total gross revenues..................... $249,683 $203,308 $184,878 ======== ======== ======== Total net revenues....................... $241,634 $197,203 $179,452 Total net revenues....................... $241,634 $197,203 $179,452 ======== ======== ======== Total gross profit....................... $ 57,881 $ 51,778 $ 46,036 ======== ======== ======== YEARS ENDED DECEMBER 31, ------------------------- 1994 1993 1992 ----- ----- ----- GROSS REVENUES DISTRIBUTION Health and pharmaceuticals.................................. 29.7% 27.3% 32.0% Specialty and fine chemicals................................ 26.7 24.0 20.3 Agricultural intermediates and additives.................... 23.9 25.2 26.6 Performance chemicals....................................... 12.7 15.2 11.1 Coatings.................................................... 7.0 8.3 10.0 ----- ----- ----- 100.0% 100.0% 100.0% ===== ===== ===== 13 15 1994 COMPARED TO 1993 Net revenues in 1994 increased $44,431,000 (22.5%) due to the acquisitionsof Seal Sands in England, Nobel Chemicals in Sweden, and Profarmaco in Italy,and to increased sales of animal feed additives. The table below shows thecontribution of the acquisitions to the product categories and the changes inthe continuing business. 1994 -------------------------------------- CONTINUING 1993 BUSINESS ACQUISITIONS TOTAL -------- ---------- ------------ -------- (IN THOUSANDS) Health and pharmaceuticals............... $ 55,550 $ 57,070 $ 17,093 $ 74,163 Specialty and fine chemicals............. 48,841 48,838 17,710 66,548 Agricultural intermediates and additives.............................. 51,153 59,751 -- 59,751 Performance chemicals.................... 30,880 31,769 -- 31,769 Coatings................................. 16,884 17,452 -- 17,452 -------- ---------- ------------ -------- Gross revenues................. $203,308 $214,803 $ 34,803 $249,683 ======== ======== ========= ======== HEALTH AND PHARMACEUTICALS' revenues increased $18,613,000 (33.5%), withmajor increases in bulk pharmaceuticals and in pharmaceutical intermediates. Theacquisition of Nobel/Profarmaco in October 1994 added $16,400,000 of new productsales to Cambrex. Sales of bulk pharmaceuticals represented $24,300,000, or 33%, of thiscategory's 1994 gross revenues and were $14,600,000 higher than 1993, with theacquisition of Nobel/Profarmaco adding $12,400,000 in new products. Increasedsales also came from a generic drug for ulcerative colitis, which recovered fromdepressed levels in 1993. Sales of pharmaceutical intermediates represented $24,500,000, or 33%, ofthis category's 1994 revenues and were $9,900,000 higher than 1993. Theacquisition of Nobel contributed $3,400,000 in increased sales. The key increaseof existing business was due to growth in two intermediates fordextromephorphan, an over-the-counter cough suppressant. Growth for oneintermediate, an established product, was supplemented by sales under a contractfor a second intermediate used in the synthesis of this material. Sales of cosmetic and toiletry related compounds represented $19,700,000,or 27%, of this category's 1994 revenues and were $3,000,000 lower than 1993.The main decrease of $1,800,000 in sales was due to the end of a contract tomake citrates at our Zeeland, Michigan facility. Sales of pyridine basedproducts totaled $5,600,000 in 1994 and were $600,000 lower than the prior yeardue to reduced pricing and lower sales volume to a key customer in the UnitedStates caused by competitive pressure. Sales of Vitamin B3 and its chemical precursors represented $5,600,000, or7%, of this category's 1994 revenues and were $2,900,000 lower than 1993. Thesedecreases were due to reduced shipments of Vitamin B3 and its chemicalprecursors to customers worldwide, due to price competition. Sales of SPECIALTY AND FINE CHEMICALS increased by $17,707,000 (36.3%).That increase included $14,400,000 from Seal Sands acquired in January 1994 and$3,300,000 from the October 1994 acquisition of Nobel. One of the Seal Sandsproducts, used in the manufacture of high performance plastics, accounted for35% of their sales. Sales of specialty additive products represented $29,900,000, or 45%, ofthis category's 1994 revenues and were $16,600,000 higher than 1993. Theincrease includes $13,700,000 in sales attributable to the acquisition of SealSands in January 1994. In existing operations, increases occurred in anapplication for a product used as a dye receptor in acrylic yarns. Sales of organic intermediate products represented $13,600,000, or 20%, ofthis category's 1994 revenues and were $2,800,000 higher than 1993. Thisincrease is attributable to $2,400,000 in sales of new products from the Nobelacquisition. 14 16 Sales of photographic chemical products were $11,600,000, or 17%, of thiscategory's 1994 revenues, $2,100,000 lower than 1993. The decrease was in salesof a polymer used in instant film, due to our customer reaching their desiredinventory levels, and in export sales of a photographic chemical intermediate toa Japanese company. We expect sales levels to continue to decline in 1995. Sales of catalyst products represented $10,400,000, or 16%, of thiscategory's 1994 revenues and were $600,000 higher than 1993. The increase isprimarily attributable to tin based catalysts used in various industrialapplications. Revenues from AGRICULTURAL INTERMEDIATES AND ADDITIVES increased by$8,598,000 (16.8%). The increase was due to growth in our existing business,with no contribution from acquisitions made in 1994. The sales of animal feed additives were $36,000,000, or 60%, of thiscategory's 1994 revenues, up $7,600,000 from 1993. Sales of organo-arsenicalfeed additives used to control disease and to enhance chicken growth and improvefeed performance, increased 25% over the prior year due to growth in poultryproduction coupled with the customer's penetration of domestic and internationalmarkets. All sales of this product are made to A.L. Laboratories under along-term contract. Sales of feed grade Vitamin B3 increased due to theinstallation of new packaging facilities late in 1993 which allowed penetrationof non-U.S. markets. Shipments of Vitamin B3 intermediates to India and theAsia/Pacific area also increased. While volume increased, the feed grade VitaminB3 market experienced lower prices due to competitive pricing, adverselyaffecting margins on these products. Prices were increased in the fourth quarter1994 and are anticipated to increase in the first quarter 1995, although noassurances can be given that such price increases will occur. The sales of products used in the manufacture of herbicides andinsecticides amounted to $23,800,000, or 40%, of this category's 1994 revenuesand were up 4% from 1993. Sales of pyridine, the largest item in this group,were up 12% from 1993. The largest pyridine customer is Zeneca, Inc. who uses itin herbicide manufacture. The Company produces another major pyridine compoundand is the exclusive supplier of this product to Dow Elanco who uses it inproduction of a different herbicide. Sales of this compound decreased 21% in1994 due to the customer reducing inventory levels after very high customerproduction in 1993. Sales of other pyridine derivatives in this categorydecreased $756,000 from 1993 due to competitive pressures. PERFORMANCE CHEMICALS' sales increased $889,000 (2.9%) from 1993 due toincreases in the fiber optic gel sales which included the full year effect ofsales from the acquisition of a fiber optic gel business in March 1993 and toincreased sealant applications for the biomedical market. All othertelecommunications and adhesive products maintained 1993 sales levels. Priceincreases were achieved for most performance chemical products. COATINGS' revenues increased $568,000 (3.4%) from 1993. This increase wasdue to a 14% growth in castor oil based products used in coatings for thehousing and automotive industries. The improvement was also due to additionalsales to two new customers. These increases were offset by a tolling agreementfor biocides that ended in May 1993, which had 1993 sales of $800,000. Export sales increased by $6,839,000, or 18.3%, to $44,135,000. Exportswere 17.7% of gross revenues in 1994 versus 18.3% in 1993. International sales,comprised of all sales from our acquired operations in Europe, totaled$34,800,000. Total gross profit of $57,881,000 increased by $6,103,000, or 11.8%, from1993. The increased gross profit was principally due to the Nobel/Profarmaco andSeal Sands acquisitions, and to sales increases in health and pharmaceuticalsand agricultural intermediates and additives. The gross profit as a percent ofnet revenues declined from 26.3% in 1993 to 24.0% in 1994. Without theacquisition of Nobel/Profarmaco, the gross profit percent would have been 23.0%in 1994. Loss of margin was principally due to sales price decreases and rawmaterial price increases in the pyridine and related businesses, and highermanufacturing costs due to weather related problems in the first quarter 1994. Selling, general and administrative expenses as a percentage of netrevenues was 12.9% in 1994, down from 14.9% in 1993. The 1994 expense of$31,216,000 was $1,930,000 (6.6%) above 1993. The increased 15 17 operating expenses of the new acquisitions were mostly offset by reducedspending, including staff reductions, reduced legal costs, and lowerenvironmental provisions. Periodically, the Company conducts a comprehensive review of itsenvironmental and litigation issues, prepares estimates of the range ofpotential costs of each issue wherever possible, and adjusts the accruals forenvironmental contingencies as circumstances warrant. No additionalenvironmental provision was recorded in 1994. The 1993 provision was $1,029,000.A discussion of such matters is included in the footnotes to the financialstatements. A settlement with insurance companies relating to coverage ofenvironmental remediation costs allowed us to recover $1,000,000 of legalexpenses spent in 1993 and 1994, pursuing this recovery. Research and development expenses of $5,689,000 were 2.4% of net revenuesin 1994, and represented a 2.6% decrease from 1993. Decreased spending at ourHarriman and Bayonne facilities were offset by increased spending to our otherdomestic facilities and at our newly acquired sites in England, Sweden andItaly. This was consistent with our strategic focus on the Health andPharmaceuticals and Fine Chemicals product categories. The operating profit in 1994 increased 26.0% to $20,976,000 from$16,649,000 in 1993. The increased operating profits were due to the acquisitionof Nobel/Profarmaco; and to cost reductions in selling, general andadministration, and in research and development. Net interest expense of $4,581,000 in 1994 reflected an increase of$1,810,000 from 1993. The increase was due to financing activities necessary forthe acquisitions of Seal Sands and Nobel/Profarmaco of $138,000,000 and higherinterest rates. Other income in 1994 was $497,000 compared with other expense of $446,000in 1993. The difference included 1994 currency gains at Profarmaco. The provision for income taxes for 1994 resulted in an effective rate of34.1% versus 35.6% in 1993. The rate decreased due to the mix of income frominternational and domestic subsidiaries. The Company's net income increased 28.8% to $11,126,000 compared with a netincome of $8,641,000 in 1993. 1993 COMPARED TO 1992 Net revenues in 1993 increased $17,751,000 (9.9%) over 1992 as a result ofincluding a full year of Zeeland sales, the increased performance chemicalsbusiness due to the acquisition of a fiber optic gel business, and increasedfeed additive sales. The health and pharmaceuticals business declined in 1993. HEALTH AND PHARMACEUTICALS' revenues decreased $3,617,000 (6.1%) from 1992.The full year effect of the acquisition of Zeeland in March 1992 added$3,215,000 to this sales category. This category's performance was affected bydecreases in the shipments of bulk pharmaceuticals from unusually high levels in1992, and from reduced shipments of niacinamide (Vitamin B3) intermediates tothe Asia-Pacific region due to economic problems and increased competition. Sales of cosmetic and toiletry related compounds represented $22,700,000,or 41%, of this category's 1993 revenues and were $200,000 higher than 1992. Anincrease of $1,200,000 in sales is due to products associated with the Zeelandacquisition. Sales of castor oil based personal care products totaled $8,900,000in 1993 and were $700,000 lower than the prior year. Sales of pyridine basedproducts totaled $6,200,000 in 1993 and were $300,000 lower than the prior yeardue to reduced demand in the Asia-Pacific region and competitive pressure inChina. Sales of pharmaceutical intermediates represented $14,600,000, or 26%, ofthis category's 1993 revenues and were $300,000 higher than 1992. The increaseis due to a variety of products associated with the Zeeland acquisition and anincrease in x-ray contrast preparations. This increase was partially offset bydecreases in pyridine based intermediates used in the pharmaceutical industry inEurope that were due to depressed economic conditions. The overall market forx-ray contrast drugs continues to grow as less toxic compounds are developed. 16 18 Sales of bulk pharmaceuticals represented $9,700,000, or 18%, of thiscategory's 1993 revenues and were $2,700,000 lower than 1992. The decrease wasdue to the unusually high 1992 sales caused by a disruption in the supply chainthat resulted in distributors building excessive inventories. Sales were belownormal levels in 1993 due to this inventory correction. Sales of Vitamin B3 and its chemical precursors represented $8,500,000, or15%, of this category's 1993 revenues and were $1,400,000 lower than 1992. TheCompany's strategy to convert more of the intermediate into niacinamide (VitaminB3) produced increased sales of USP grade B3 offset by reduced sales of theintermediate. Overall sales were lower because of currency restrictions in Chinaand depressed economic conditions in Europe. Revenues from AGRICULTURAL INTERMEDIATES AND ADDITIVES increased by$2,033,000 (4.1%) over 1992. The increase was due to higher sales oforgano-arsenical feed additives to the poultry industry and to increasedshipments of a pyridine compound to a major herbicide producer. This categorywas negatively affected by the end of a contract for a herbicide intermediate inthe fourth quarter 1992, and a decrease in export sales of pyridine derivatives. The sales of products used in the manufacture of herbicides andinsecticides amounted to $22,800,000, or 45%, of this category's 1993 revenuesand were down 12% from 1992. Sales of pyridine, the largest item in this group,were at the same level as 1992. The largest pyridine customer is Zeneca, Inc.who uses it in the manufacture of herbicides. The Company produces another majorpyridine compound and is the exclusive supplier of this product to Dow Elancowho uses it in production of a herbicide. Sales of this compound increased 88%in 1993 due to Dow resuming normal ordering patterns after reducing theirinventories in 1992. Sales of other pyridine derivatives in this categorydecreased 80% from 1992 due to high inventory positions in the Asia-Pacificregion and reduced use of a wheat fungicide in Europe. The sales of animal additive products was $28,400,000, or 55%, of thiscategory's 1993 revenues, up 23% from 1992. Sales of organo-arsenical feedadditives increased 33% over the prior year due to a competitor stoppingproduction, increased dosages by poultry producers, and increased poultryproduction in the U.S. Sales from SPECIALTY AND FINE CHEMICALS increased by $11,218,000 (29.8%).This increase included the effect of Zeeland for a full year of $5,957,000.Increases in this category included photographic chemicals, specialty additives,organic intermediates, specialty catalysts and custom manufactured products. Themost significant improvement in this category was due to the expansion inproduction capabilities of a polymer used in instamatic film. Sales of photographic chemical products represented $13,700,000, or 28%, ofthis category's 1993 revenues and were $5,500,000 higher than 1992. The increaseis due to a substantial increase in production capacity of a photochemical usedas a polymer in instamatic film. Sales of specialty additive products represented $13,300,000, or 28%, ofthis category's 1993 revenues and were $3,500,000 higher than 1992. Thisincrease is primarily attributable to sales of a chemical used in a fireretardant fiber and for cooling tower water treatments, and to sales of aproduct used as a cross linker for strengthening plastic. Sales of organic intermediate products represented $10,800,000, or 22%, ofthis category's 1993 revenues and were $1,800,000 higher than 1992. Thisincrease is attributable to a wide variety of products used as chemicalintermediates. Sales of catalyst chemical products represented $9,800,000, or 20%, of thiscategory's 1993 revenues and were $1,400,000 higher than 1992. The increase isprimarily attributable to a variety of products associated with the Zeelandacquisition. PERFORMANCE CHEMICALS' sales increased $10,439,000 (51.1%) from 1992 due toincreases in fiber optic cable gels and encapsulants to the telecommunicationsindustry. The acquisition of a complimentary fiber optic gel business in March1993 contributed $8,900,000 in increased revenues. The encapsulant sales were 8%above 1992 primarily due to penetration of international markets. 17 19 COATINGS' revenues decreased $1,643,000 (8.9%) from 1992 primarily due to atolling agreement for paint additives and corrosion inhibitors that ended in May1993. Sales of castor oil derivatives were at the same level as 1992. Export and international sales decreased by $7,200,000, or 16.2%. Exportswere 18.3% of gross revenues in 1993 versus 24.1% in 1992 due to lower exportsales caused by poor economic conditions in Europe and payment problems in theAsia-Pacific region. Total gross profit of $51,778,000 increased by $5,742,000, or 12.5%, from1992. The gross profit as a percent of net revenues improved from 25.7% in 1992to 26.3% in 1993. The increased gross profit was due to an improvement in salesmix and the continued effort to improve manufacturing costs and productionprocesses. Selling, general and administrative expenses as a percentage of netrevenues was 14.9% in 1993, down from 15.7% in 1992. The 1993 expense of$29,286,000 was $1,085,000 (3.8%) above 1992, due to the full year effect of theZeeland acquisition and the costs of establishing a sales office in Hong Kong.Bonus payments to employees declined by 40% to $1,700,000 in 1993 based on aformula using year-to-year changes in net income and return on investmentachieved. Periodically, the Company conducts a comprehensive review of itsenvironmental and litigation issues, prepares estimates of the range ofpotential costs of each issue wherever possible, and adjusts the accruals forenvironmental contingencies as circumstances warrant. An environmental provisionof $1,029,000 was recorded in 1993 attributable to activity in a number ofpending environmental matters; $1,747,000 was recorded in 1992. Research and development expenses of $5,843,000 were 3.0% of net revenuesin 1993, and represented a 44.4% increase over 1992. The increase of $1,797,000in 1993 was largely due to the commitment to develop new products and processesto ensure future growth in profitability. This commitment will continue in thefuture. The operating profit in 1993 increased 20.7% to $16,649,000 from$13,789,000 in 1992. The increased operating profits were due to increased salesand gross margin, partially offset by the increases in research and developmentspending. Net interest expense of $2,771,000 in 1993 reflected an increase of$334,000 from 1992. The increase was due to higher borrowings in order tofinance acquisition activity and the capital program. Other expense in 1993 was $466,000 compared with other expense of$1,054,000 in 1992. The decrease was due to a 1992 provision of $553,000 for thewrite-off of a receivable. The provision for income taxes for 1993 resulted in an effective rate of35.6% versus 39.5% in 1992. The rate decreased due to the realization of thebenefit of tax planning strategies. The Company's net income increased 38.7% to $8,641,000 compared with a netincome of $6,230,000 in 1992. 1992 COMPARED TO 1991 Net revenues in 1992 increased $34,952,000 (24.2%) as a result of theacquisition of Zeeland in March 1992, increased revenues from the Salsbury 1991acquisition included for a full year, and price increases. The increasedrevenues were partially offset by declines in coatings business volume. HEALTH AND PHARMACEUTICALS' revenues increased $20,783,000 (54.1%) over1991. The acquisition of Zeeland added $11,264,000 to this sales category withsales of intermediates for cough and cold preparations and pharmaceuticals, areagent in the manufacture of antibiotics for respiratory infections, and a foodadditive for soft drinks. The full year effect of Salsbury added $9,404,000 tosales. Sales of cosmetic and toiletry related compounds represented $22,500,000,or 38%, of this category's 1992 revenues and were $5,200,000 higher than 1991.An increase of $3,400,000 is attributable to a variety of 18 20 products associated with the Zeeland acquisition. The remaining increase of$1,800,000 is primarily attributable to increases in castor oil based personalcare products and pyridine based products. Sales of castor oil based personalcare products totaled $9,600,000 in 1992 and were $600,000 higher than the prioryear due to increased market penetration. Sales of pyridine based productstotaled $6,500,000 in 1992 and were $1,200,000 higher than the prior year due toincreasing use of pyridine in cosmetic applications. Sales of pharmaceutical intermediates represented $14,300,000, or 24%, ofthis category's 1992 revenues and were $8,700,000 higher than 1991. An increaseof $7,400,000 is attributable to a variety of products associated with theZeeland acquisition. The remaining increase of $1,300,000 is primarilyattributable to increased sales due to the July 1991 acquisition of Salsbury. Sales of bulk pharmaceuticals represented $12,400,000, or 21%, of thiscategory's 1992 revenues and were $7,800,000 higher than 1991. The increase wasdue to the inclusion of the first full year associated with the Salsburyacquisition. Sales of Vitamin B3 and its chemical precursors represented $9,900,000, or17%, of this category's 1992 revenues and were $1,000,000 lower than 1991. Thatdecrease is attributable to the Company's decision to devote limited productioncapacity to other products with higher profit margins. Revenues from AGRICULTURAL INTERMEDIATES AND ADDITIVES increased by$13,222,000 (36.8%) over 1991. The Salsbury acquisition, which occurred in July1991, contributed $7,605,000 of the increased sales. Another factor in theincreased sales was the renewal of a contract (which had been terminated in1990) for the manufacture of a herbicide intermediate by our facility inDelaware Water Gap, Pennsylvania. This contract was completed in November 1992.The sales of feed grade Vitamin B3 also increased both in terms of volume and inprice. The sales of products used in the manufacture of herbicides andinsecticides amounted to $26,000,000, or 53%, of this category's 1992 revenues.Sales of pyridine, the largest item in this group, declined 4% from 1991 levelsprimarily due to the increasing requirements for the manufacture of pyridinederivatives. The bulk of the pyridine sales are to Imperial Chemical IndustriesPLC (ICI) who uses it in the manufacture of its widely used herbicidesGramoxone(R) and Diquat. Another major component of this product category is2-cyanopyridine. The Company is the exclusive supplier of this product to DowElanco who uses it in production of the herbicide Tordon(R). The sales of2-cyanopyridine declined 10% in 1992 due to Dow holding an unusually high levelof inventory at the end of 1991. Sales for pyridine derivatives in this categorygrew by 58% over 1991 due to increased sales to Europe and China. Thederivatives are used in new rice herbicides and wheat fungicides and as a cottongrowth regulator. The sales of animal feed additive products was $23,100,000, or 47%, of thiscategory's 1992 revenues. Sales of feed grade Vitamin B3 and its chemicalprecursors increased 34% from 1991. The Company has a program to increase itscapacity to produce niacinamide (Vitamin B3) thereby increasing sales andimproving its market position, and reducing sales of the chemical precursors.Sales of organo-arsenical feed additives substantially increased over the prioryear due to a full year of sales from Salsbury plus increased market penetrationby our customer, A. L. Laboratories, the sole marketer of such products. Sales from SPECIALTY AND FINE CHEMICALS increased by $9,738,000 (34.9%)mainly due to the Zeeland acquisition which contributed $11,482,000 to thistotal. The major Zeeland products include products for the photographicindustry, catalysts, organic intermediates and specialty additives. Sales of organic intermediate products represented $9,000,000, or 24%, ofthis category's 1992 revenues and were $2,400,000 lower than 1991. This decreaseis attributable to increased competition by offshore companies and a strategicdecision not to sell in certain markets at depressed prices. Sales of specialty additive products represented $9,800,000, or 27%, ofthis category's 1992 revenues and were $3,600,000 higher than 1991. The increaseis attributable to sales related to the acquisitions of Zeeland and Salsbury. 19 21 Sales of catalyst products represented $8,400,000, or 22%, of thiscategory's 1992 revenues and were $3,500,000 higher than 1991. That increase isprimarily attributable to a variety of products associated with the Zeelandacquisition. Sales of photographic chemical products represented $8,200,000, or 22%, ofthis category's 1992 revenues and were $4,800,000 higher than 1991. Thatincrease is primarily attributable to a variety of products associated with theZeeland acquisition. Zeeland is the key supplier of a photochemical to a majorfilm manufacturer and plans to increase production capacity for that productduring 1993. PERFORMANCE CHEMICALS' sales decreased $583,000 (2.8%) from prior year.Sales of encapsulant products declined approximately 3% from 1991 reflecting acontinued decline in the use of copper cables in the telecommunications sector,but rebuilding after Hurricane Andrew in Florida and Louisiana helped to reducethe decline. Pricing of encapsulants, however, was slightly better than in 1991. COATINGS' revenues decreased $8,577,000 (31.6%) from 1991 due to thewithdrawal of rheological additive products and mercury biocides in 1991. Castoroil based products sold in this category increased due to sales to theconstruction and automotive industries. Export and international sales increased by $7,110,000, or 19.0%. Exportswere 24.1% of gross revenues in 1992 versus 24.9% in 1991 due to lower exportpercentages from Zeeland and Salsbury than the overall Cambrex average. Theincreased export activity was attributable to Zeeland, which exported $4,500,000in 1992 (mostly to Europe), and higher pyridine derivative sales to the Far Eastand Europe. Total gross profit of $46,036,000 increased by $19,710,000, or 74.9%, fromthe 1991 level. The gross profit as a percent of net revenues improved from18.2% in 1991 to 25.7% in 1992. The improved gross profit was due to theincreased sales of higher margin products, lower cost of major raw materials,and a $4,000,000 charge in 1991 for obsolete and offspecification inventoriesand the related waste disposal costs for products manufactured at the Bayonne,New Jersey facility. Selling, general and administrative expenses as a percentage of netrevenues was 15.7% in 1992, consistent with 1991. The 1992 expense of$28,201,000 was $5,458,000 above 1991, due to the addition of Salsbury andZeeland, and the cost of bonus payments to management and to other employees in1992 of $2,800,000. Periodically, the Company conducts a comprehensive review of itsenvironmental and litigation issues, prepares estimates of the range ofpotential costs of each issue, where it can be estimated, and adjusts theaccruals for environmental contingencies as circumstances warrant. Anenvironmental provision of $1,747,000 was recorded in 1992 attributable toactivity in a number of pending environmental matters. The 1992 provisioncompares favorably with that of the prior year which included a $2,538,000provision related to estimated remediation costs for a particular site. Research and development expenses of $4,046,000 were 2.3% of net revenuesin 1992, and represent the same percentage as 1991. The increase of $767,000 in1992 was largely due to the Zeeland acquisition and a full year of operations atSalsbury. Spending by all our other businesses was comparable to 1991 levels. Operating profit in 1992 was $13,789,000 compared to $304,000 in 1991. Theincreased operating profit was due to the improved gross profit, partiallyoffset by higher selling, general and administrative expenses and research anddevelopment expenses. Net interest expense of $2,437,000 in 1992 reflected a decrease by $94,000from 1991. The lower average interest rate, based on better terms in the creditagreement negotiated in February 1992 and lower market rates, offset higheraverage loan balances in 1992, relating to acquisition activities. Other expense in 1992 was $1,054,000 compared with other income of$2,279,000 in 1991. The key item in 1992 was a $553,000 provision for thepotential write-off of an other receivable related to a product previouslymanufactured by Cambrex for a specific customer in prior years. The 1991 otherincome consisted primarily of $2,758,000 which represented the elimination ofthe remaining balance of a $3,400,000 accrual previously established inconnection with the sale of certain product lines in 1990. 20 22 In 1992, the Company reported net income of $6,230,000 compared with a netincome of $31,000 in 1991. LIQUIDITY AND CAPITAL RESOURCES Net cash flow from operations was $27,429,000 for December 31, 1994compared with $16,390,000 in 1993. The increase in cash flow is primarily due toincreased earnings and additional depreciation. Capital expenditures were $20,825,000 in 1994, $15,535,000 in 1993, and$9,133,000 in 1992. The largest expenditures were for (1) a new facility at theSalsbury site in Charles City, Iowa, to increase production levels for severalproducts and to generate steam; and (2) a new facility at the Zeeland site inZeeland, Michigan, to manufacture a cough suppressant intermediate for a majorcustomer. An additional amount of $126,000,000 was used to acquire the stock ofNobel/Profarmaco on October 12, 1994 and $7,400,000 was used to acquire SealSands Chemicals Ltd. on January 31, 1994. On September 21, 1994, the Company entered into a new $225,000,000 LoanAgreement (the "Credit Agreement") with a syndicate of lenders (the "Banks") andwith NBD Bank, N.A., as Agent. The Credit Agreement provides for (i) a one-year$50,000,000 bridge loan, due October 11, 1995; (ii) a $75,000,000 term loan,with mandatory $1,000,000 quarterly payments until September 30, 1997 andmandatory quarterly payments of $3,938,000 for each quarter thereafter untilSeptember 30, 2001; and (iii) a $100,000,000 revolving credit facility, dueOctober 11, 1997. The revolving credit facility will be extended for successivetwo-year periods subsequent to October 11, 1997 unless either the Company or theBanks elect not to so extend the facility. The Credit Agreement permits the Company to choose from various interestrate options and to specify the portion of the borrowing to be covered by eachinterest rate option. It also retains virtually all of the affirmative andnegative covenants contained in the Company's previous senior bank creditagreement (the "Old Credit Agreement"), but provides for certain changes to theminimum net worth and deferred pledge of assets covenants. On October 11, 1994, the Company borrowed $32,200,000 and L4,265,000 underthe Credit Agreement to repay all of its obligations under the Old CreditAgreement, and the Old Credit Agreement was terminated. On October 12, 1994, theCompany borrowed $126,000,000 under the Credit Agreement, including all of the$50,000,000 bridge loan facility and all of the $75,000,000 seven-year termloan, to finance the acquisition of Nobel/Profarmaco. On October 31, 1994, theCompany borrowed $4,150,000 under the Credit Agreement to retire a variable rateIndustrial Development Revenue Bond relating to its manufacturing facility inZeeland, Michigan. The Company has undrawn borrowing capacity of approximately $55,600,000under the Credit Agreement as of December 31, 1994, which can be used forgeneral corporate purposes. Management is of the opinion that these amounts,together with other available sources of capital, are adequate for meeting theCompany's financing and capital requirements. During 1994, the Company paid cash dividends of $0.20 per share. The Company buys materials and sells products in a variety of currencies,and owns property in various parts of the world. Its results are, therefore,impacted by changes in the relative value of currencies in which it deals. Priorto the acquisition of Nobel/Profarmaco, this risk was not considered to besignificant and the Company had no program to mitigate it. Since the acquisition of Nobel/Profarmaco, the potential impact of changesin relative currencies' values has increased significantly. The Company hasbegun to put in place a process to monitor and control such exposures. Until theformal system is complete, management is monitoring for identifiable exposuresand taking appropriate action where necessary. 21 23 ENVIRONMENTAL The Company maintains environmental and industrial safety and healthcompliance programs at its plants, and believes that its manufacturingoperations are in general compliance with all applicable safety, health andenvironmental laws. Beginning in 1990, CasChem, Inc., one of the Company's subsidiaries, wasthe subject of an investigation by the Environmental Protection Agency and theFederal Bureau of Investigation concerning the handling, storage, and disposalof hazardous wastes. During 1994, a settlement was reached wherein thatsubsidiary pleaded guilty to the unpermitted storage of one drum of hazardouswaste and the payment of a $1,000,000 fine, which was paid in January 1995. As arelated liability had been previously established, the resolution of this matterhas had no effect upon the results of operations in 1994. Through the activities of its predecessors and third parties in connectionwith the handling and disposal of hazardous and other wastes, the Company maybecome liable, irrespective of fault, for certain site remediation costs underfederal and state environmental statutes. Descriptions of such environmentallyrelated contingencies are presented in Note #19 to the financial statements andincorporated herein by reference. The resolution of such matters often spans several years and frequentlyinvolves regulatory oversight and/or adjudication. Additionally, manyremediation requirements are not fixed and are likely to be affected by futuretechnological, site and regulatory developments. Consequently, the ultimateextent of liabilities with respect to such matters as well as the timing ofrelated cash disbursements cannot be determined with certainty. However,management is of the opinion that while the ultimate liability resulting fromthese matters may have a material effect upon the results of operations in anygiven year, they will not have a material adverse effect upon the Company'sliquidity nor its financial position. IMPACT OF RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standard No. 112 "Employer's Accountingfor Postemployment Benefits" (SFAS 112) requires the recognition of an accrualbasis of all types of postemployment benefits provided to former or inactiveemployees subsequent to employment but before retirement. The Company currentlyprovides limited benefits in this regard and adopted SFAS 112 effective January1, 1994. The net effect upon 1994 pretax operating results and the relatedannual expense was immaterial. The Company does not anticipate significantincreases in the annual expense related to SFAS 112. 22 24 ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The following consolidated financial statements and selected quarterlyfinancial data of the Company are filed under this item: PAGE NUMBER (IN THIS REPORT) ---------------- Independent Accountants' Report............................................... 24Consolidated Balance Sheets as of December 31, 1994 and 1993.................. 25Consolidated Income Statements for the Years Ended December 31, 1994, 1993 and 1992........................................................................ 26Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1994, 1993 and 1992..................................................... 27Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992............................................................... 28Notes to Consolidated Financial Statements.................................... 29Consolidated Quarterly Financial Data (unaudited) for the Years Ended December 31, 1994 and 1993........................................................... 47 The financial statements and schedules are filed pursuant to Item 14 ofthis report. 23 25 REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders and Board of Directors of Cambrex Corporation: We have audited the accompanying consolidated balance sheets of CambrexCorporation and Subsidiaries as of December 31, 1994 and 1993, and the relatedconsolidated statements of income, stockholders' equity and cash flows and theconsolidated financial statement schedules for each of the three years in theperiod ended December 31, 1994, as listed in Item 14(a) of this Form 10-K. Theseconsolidated financial statements and financial statement schedules are theresponsibility of the Company's management. Our responsibility is to express anopinion on these consolidated financial statements and financial statementschedules based on our audits. We conducted our audits in accordance with generally accepted auditingstandards. Those standards require that we plan and perform the audits to obtainreasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to abovepresent fairly, in all material respects, the consolidated financial position ofCambrex Corporation and Subsidiaries as of December 31, 1994 and 1993, and theconsolidated results of their operations and their cash flows for each of thethree years in the period ended December 31, 1994, in conformity with generallyaccepted accounting principles. In addition, in our opinion, the consolidatedfinancial statement schedules referred to above, when considered in relation tothe basic consolidated financial statements taken as a whole, present fairly, inall material respects, the information required to be included therein. As discussed in Notes 9 and 15 to the consolidated financial statements, in1993 the Company changed its method of accounting for income taxes and changedits method of accounting for postretirement benefits other than pensions. COOPERS & LYBRAND L.L.P. Parsippany, New JerseyJanuary 19, 1995 24 26 CAMBREX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS) 1994 1993 -------- -------- ASSETSCurrent assets: Cash and cash equivalents............................................ $ 9,087 $ 161 Receivables: Trade accounts, less allowance for doubtful accounts of $1,288 and $355 at respective dates......................................... 47,742 27,778 Other............................................................. 5,112 237 -------- -------- 52,854 28,015 Inventories.......................................................... 61,979 33,730 Deferred tax asset................................................... 1,089 1,315 Other current assets................................................. 5,689 3,557 -------- -------- Total current assets......................................... 130,698 66,778Property, plant and equipment, net..................................... 172,282 89,784Intangible assets, net................................................. 56,991 7,621Other assets........................................................... 506 2,662 -------- -------- Total assets................................................. $360,477 $166,845 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable and accrued liabilities............................. $ 48,402 $ 20,872 Income taxes payable................................................. 5,982 3,409 Short-term debt...................................................... 52,368 Current portion of long-term debt.................................... 4,021 4,000 -------- -------- Total current liabilities.................................... 110,773 28,281Long-term debt......................................................... 115,975 36,261Deferred taxes......................................................... 14,258 5,986Other noncurrent liabilities........................................... 17,505 8,748 -------- -------- Total liabilities............................................ 258,511 79,276Commitments and contingenciesStockholders' equity: Common Stock, $.10 par value; issued 6,078,781 and 6,014,681 shares at respective dates.............................. 607 601 Additional paid-in capital........................................... 73,673 72,627 Retained earnings.................................................... 35,935 25,859 Additional minimum pension liability................................. (1,030) Treasury stock, at cost; 756,806 and 819,049 shares at respective dates............................................................. (9,690) (10,488) Cumulative translation adjustment.................................... 1,441 -------- -------- Total stockholders' equity................................... 101,966 87,569 -------- -------- Total liabilities and stockholders' equity................... $360,477 $166,845 ======== ======== See accompanying notes to consolidated financial statements. 25 27 CAMBREX CORPORATION AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (IN THOUSANDS, EXCEPT PER-SHARE DATA) YEARS ENDED DECEMBER 31, ---------------------------------- 1994 1993 1992 -------- -------- -------- Net revenues............................................... $241,634 $197,203 $179,452Operating expenses: Cost of goods sold....................................... 183,753 145,425 133,416 Selling, general and administrative...................... 31,216 29,286 28,201 Research and development................................. 5,689 5,843 4,046 -------- -------- -------- Total operating expenses......................... 220,658 180,554 165,663 -------- -------- --------Operating profit........................................... 20,976 16,649 13,789Other (income) expenses Interest income.......................................... (95) (41) (26) Interest expense......................................... 4,676 2,812 2,463 Other -- net............................................. (497) 466 1,054 -------- -------- --------Income before income taxes................................. 16,892 13,412 10,298Provision for income taxes................................. 5,766 4,771 4,068 -------- -------- --------Net income................................................. $ 11,126 $ 8,641 $ 6,230 ======== ======== ======== Earnings per share of common stock and common stock equivalents: Primary............................................... $ 1.96 $ 1.64 $ 1.27 Fully diluted......................................... $ 1.95 $ 1.60 $ 1.23 Weighted average shares outstanding: Primary............................................... 5,674 5,282 4,888 Fully diluted......................................... 5,699 5,484 5,242 See accompanying notes to consolidated financial statements. 26 28 CAMBREX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA) COMMON STOCK NONVOTING ----------------- COMMON ADDITIONAL TOTAL PAR STOCK MINIMUM CUMULATIVE STOCK- SHARES VALUE (PAR PAID- IN RETAINED PENSION TREASURY TRANSLATION HOLDERS' ISSUED ($.10) $.10) CAPITAL EARNINGS LIABILITY STOCK ADJUSTMENT EQUITY ---------- ----- --------- ------- -------- ---------- -------- ---------- -------- Balance at December 31, 1991....................... 5,656,184 $566 $67,030 $12,922 $(11,801) $ 68,717 Net income................. 6,230 6,230 Cash dividends at $0.20 per share.................... (950) (950) Exercise of stock options.................. 49,550 5 306 311 Shares issued under savings plan..................... 378 749 1,127 Purchase of treasury stock.................... (258) (258) ---------- ----- --------- ------- -------- ---------- -------- ---------- --------Balance at December 31, 1992....................... 5,705,734 571 -- 67,714 18,202 -- (11,310) -- 75,177 Net income................. 8,641 8,641 Cash dividends at $0.20 per share.................... (984) (984) Exercise of stock options.................. 51,550 5 334 339 Conversion of subordinated notes.................... 257,397 25 3,965 3,990 Additional minimum pension liability................ $ (1,030) (1,030) Shares issued under savings plan..................... 614 822 1,436 ---------- ----- --------- ------- -------- ---------- -------- ---------- --------Balance at December 31, 1993....................... 6,014,681 601 -- 72,627 25,859 (1,030) (10,488) -- 87,569 Net income................. 11,126 11,126 Cash dividends at $0.20 per share.................... (1,050) (1,050) Exercise of stock options.................. 64,100 6 395 401 Additional minimum pension liability................ 1,030 1,030 Shares issued under savings plan..................... 651 798 1,449 Adjustment for foreign currency translation..... $1,441 1,441 ---------- ----- --------- ------- -------- ---------- -------- ---------- --------Balance at December 31, 1994....................... 6,078,781 $607 $ -- $73,673 $35,935 -- $ (9,690) $1,441 $101,966 ======== ===== ========= ======= ======== ========= ======== ========== ======== See accompanying notes to consolidated financial statements. 27 29 CAMBREX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) YEARS ENDED DECEMBER 31, ----------------------------------- 1994 1993 1992 --------- -------- -------- Cash flows from operations: Net income.............................................. $ 11,126 $ 8,641 $ 6,230 Depreciation and amortization........................... 15,937 11,779 10,323 Provision for environmental contingencies............... 1,029 1,747 Increase (decrease) in deferred taxes................... 3,183 1,112 (16) Changes in assets and liabilities: Receivables.......................................... (3,349) (228) 862 Inventories.......................................... (1,212) (3,709) (1,941) Other current assets................................. (44) (684) (1,100) Accounts payable and accrued liabilities............. 3,625 1,016 6,666 Income taxes payable................................. (1,852) 57 1,757 Other noncurrent assets and liabilities.............. 15 (2,623) (506) --------- -------- -------- Net cash provided from operations.................... 27,429 16,390 24,022 --------- -------- --------Cash flows from investing activities: Capital expenditures.................................... (20,825) (15,535) (9,133) Acquisition of businesses............................... (131,697) (5,886) (20,228) Proceeds from sale of product lines..................... 2,152 --------- -------- -------- Net cash (used in) investing activities.............. (150,370) (21,421) (29,361) --------- -------- --------Cash flows from financing activities: Dividends............................................... (1,050) (984) (950) Increase in short-term debt............................. 50,784 Long-term debt activity (including current portion): Borrowings........................................... 134,679 42,111 65,544 Repayments........................................... (56,244) (38,274) (59,985) Proceeds from the issuance of common stock.............. 401 339 311 Proceeds from the sale of treasury stock................ 1,449 1,436 1,127 Purchase of treasury stock.............................. (257) --------- -------- -------- Net cash provided from financing activities.......... 130,019 4,628 5,790 --------- -------- --------Effect of exchange rate changes on cash................... 1,848 --------- -------- --------Net increase (decrease) in cash........................... 8,926 (403) 451Cash at beginning of year................................. 161 564 113 --------- -------- --------Cash at end of year....................................... $ 9,087 $ 161 $ 564 ========= ======== ========Supplemental disclosure: Interest paid........................................ $ 4,996 $ 2,810 $ 2,182 Income taxes paid.................................... $ 4,854 $ 4,126 $ 3,203Noncash transactions: Conversion of subordinated notes to common stock........ $ 3,990 Additional minimum pension liability recorded as a charge to stockholders' equity in 1993 and eliminated in 1994.............................................. $ (1,030) $ 1,030 See accompanying notes to consolidated financial statements. 28 30 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (1) THE COMPANY Cambrex Corporation supplies a broad line of pharmaceutical relatedproducts, specialty chemicals, fine chemicals and commodity chemicalintermediates to a diverse customer base for use in a wide variety ofapplications. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Companyand its wholly owned subsidiaries. All significant intercompany balances andtransactions have been eliminated in consolidation. Cash Equivalents Temporary cash investments with an original maturity of less than threemonths are considered cash equivalents. Financial Instruments Financial instruments consist principally of accounts receivable.Concentration of credit risk exists inasmuch as the Company sells its productsto customers primarily in the chemical and pharmaceutical industries. However,receivables are spread among many customers and are geographically dispersed. Nocustomer represents more than 10% of sales nor receivables. Inventories Inventories are stated at the lower of cost, determined on a first-in,first-out basis, or market. Property, Plant and Equipment Property, plant and equipment is stated at cost, net of accumulateddepreciation. Plant and equipment are depreciated on a straight-line basis overthe estimated useful lives for each applicable asset group as follows: Buildings and improvements................... 15 to 20 years Machinery and equipment...................... 5 to 10 years Furniture and fixtures....................... 3 to 5 years When assets are retired or otherwise disposed of, the cost and relatedaccumulated depreciation are removed from the accounts, and any resulting gainor loss is reflected in other (income) expense, net. Total interest capitalizedin 1994 amounted to $461. Intangible Assets Intangible assets are recorded at cost and amortized on a straight-linebasis as follows: Patents......................... Amortized over the remaining life of individual patents (average 5 years) Goodwill........................ 4 to 20 years Product technology.............. 5 to 17 years Non-compete agreements.......... 5 years Trademarks and other............ 1 to 40 years 29 31 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) At each balance sheet date, the Company evaluates the realizability ofintangibles based upon expectations of non-discounted cash flows and operatingincome for each subsidiary having material intangible balances. Income Taxes The Company files a consolidated Federal income tax return which includesall domestic subsidiaries and foreign income where appropriate. Deferred taxes are recorded based upon differences between the financialstatement and tax bases of assets and liabilities, and available tax creditcarryforwards. Effective January 1, 1993, the Company adopted Statement of FinancialAccounting Standard No. 109, "Accounting for Income Taxes." Prior to that date,income taxes were accounted for in accordance with the provisions of AccountingPrinciples Board Opinion No. 11. Foreign Currency The functional currency of the Company's foreign subsidiaries is theapplicable local currency. The translation of the applicable foreign currenciesinto U.S. dollars is performed for balance sheet accounts using current exchangerates in effect at the balance sheet date and for revenue and expense accountsand cash flows using average rates of exchange prevailing during the year.Adjustments resulting from the translation of foreign currency financialstatements are accumulated in a separate component of stockholders' equity untilthe entity is sold or substantially liquidated. Gains or losses resulting fromforeign currency transactions are included in the results of operations, exceptfor those relating to intercompany transactions of a long-term investment naturewhich are accumulated in stockholders' equity. Earnings Per Common Share The calculation of primary earnings per common share is based on theweighted average number of common shares and common share equivalentsoutstanding during the applicable period. Fully diluted earnings per shareassumes conversion of the outstanding convertible subordinated notes in 1993 andprior years, and the elimination of the related interest expense, net of tax. (3) ACQUISITIONS AND DIVESTITURES (a) On October 12, 1994, the Company completed the acquisition of the stockof Nobel's Pharma Chemistry Business ("Nobel/Profarmaco") from Akzo Nobel forapproximately $126,000. The business consists of Nobel Chemicals AB inKarlskoga, Sweden, Profaramaco Nobel S.r.1. in Milan, Italy and sales companiesin Germany, England and the United States. Nobel/Profarmaco manufactures finechemical intermediates and bulk active ingredients for pharmaceutical products.The transaction was accounted for as a purchase and was financed with theCompany's new credit agreement, and resulted in goodwill of $45,756 which isbeing amortized on a straight line basis over 17.5 years. On January 31, 1994, Cambrex purchased substantially all of the assets ofHexcel Corporation's fine chemicals business located in Middlesbrough, England,for approximately $7,400 and the assumption of certain current liabilities inthe amount of $2,100. The business, now known as Seal Sands Chemicals, Ltd.("Seal Sands"), manufactures chemical intermediates used in the pharmaceutical,photographic, water treatment, health care, and plastics industries. On May 27,1994, the Company purchased the Topanol product line from Zeneca Limited tocomplement the Seal Sands operation for $4,600. These transactions wereaccounted for as purchases and were financed with the Company's creditagreement, and resulted in goodwill of $1,881 for Seal Sands and $504 forTopanol which are being amortized on a straight line basis over 17.5 years and 5years, respectively. 30 32 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (3) ACQUISITIONS AND DIVESTITURES -- (CONTINUED) (b) On March 12, 1993, the Company purchased substantially all of theassets of Viscosity Oil's fiber optic gel business for $5,886. The transactionwas accounted for as a purchase and was financed with the Company's creditagreement. No goodwill resulted from this transaction. (c) On March 31, 1992, the Company purchased substantially all of theassets of the fine chemicals business of Hexcel Fine Chemicals, now known asZeeland Chemicals, Inc. ("Zeeland"), for $20,251, and the assumption of certainliabilities including a variable rate Industrial Development Revenue Bond in theprincipal amount of $4,150, and the remaining payments of a capital leaseobligation with a net present value of $8,214. The transaction was accounted foras a purchase and was financed with the Company's credit agreement. No goodwillresulted from this transaction. (d) Unaudited pro forma results as if the Nobel/Profarmaco and Seal Sandsacquisitions and the Topanol product line purchase had occurred at January 1 ofeach of 1994 and 1993 are presented below. Unaudited pro forma results as if theZeeland acquisition had occurred at January 1 of 1992 are also presented below.The pro forma financial information is not necessarily indicative of results ofoperations that would have occurred had the combinations been in effect at thebeginning of the periods nor of future results of operations of the combinedcompanies. These transactions were accounted for as purchases and were financed withthe Company's credit agreement. YEARS ENDED DECEMBER 31, ---------------------------------- 1994 1993 1992 -------- -------- -------- Net revenues....................................... $328,538 $295,704 $186,569 Net income......................................... 13,990 7,469 6,598 Earnings per share Primary.......................................... 2.47 1.41 1.35 Fully diluted.................................... 2.45 1.36 1.30 Assets acquired and liabilities assumed are as follows: 1994 1992 -------- -------- Cash........................................................... $ 6,305 Receivables.................................................... 20,638 $ 4,653 Inventories.................................................... 28,791 3,845 Deferred tax asset............................................. 481 Other current assets........................................... 3,574 32 Property, plant and equipment.................................. 76,103 26,348 Goodwill....................................................... 51,381 Accounts payable and accrued liabilities....................... (26,090) (306) Income taxes payable........................................... (4,551) Deferred taxes................................................. (6,005) Other non-current liabilities.................................. (9,752) (14,344) -------- -------- $140,875 $ 20,228 ======== ======== The pro forma information has not been adjusted for the effect of the fiberoptic gel business, acquired in March of 1993, as such amounts cannot bereasonably separated from existing operations and are deemed to be immaterial. 31 33 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (3) ACQUISITIONS AND DIVESTITURES -- (CONTINUED) (e) In 1994, the Company sold three small businesses: Wicken cosmeticesters, black and white photographic chemicals and the Hydrogels business for$2,152. No gain or loss resulted from the sales of these businesses. (4) FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standard No. 112 "Employers' Accountingfor Postemployment Benefits" (SFAS 112) requires the recognition on an accrualbasis of all types of postemployment benefits provided to former or inactiveemployees subsequent to employment but before retirement. The Company currentlyprovides limited benefits in this regard. The Company adopted SFAS 112 effectiveJanuary 1, 1994. The net effect upon 1994 pretax operating results wasimmaterial. Statement of Financial Accounting Standard No. 119 "Disclosure aboutDerivative Financial Instruments and Fair Value of Financial Instruments"requires disclosure about amounts, nature, and terms of derivative financialinstruments held or issued and encourages disclosure of quantitive informationabout the market risks associated with those instruments. As of December 31,1994, the Company had not issued nor did it hold such instruments. (5) INVENTORIES Inventories consist of the following: DECEMBER 31, ------------------- 1994 1993 ------- ------- Finished goods................................................... $31,473 $17,988 Raw materials.................................................... 27,603 13,878 Supplies......................................................... 2,903 1,864 Supplies......................................................... 2,903 1,864 ------- ------- Total.......................................................... $61,979 $33,730 ======= ======= (6) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following: DECEMBER 31, --------------------- 1994 1993 -------- -------- Land........................................................... $ 7,937 $ 4,349 Buildings and improvements..................................... 42,261 22,698 Machinery and equipment........................................ 162,383 100,910 Furniture and fixtures......................................... 5,752 4,361 Construction in progress....................................... 23,509 13,919 -------- -------- Total........................................................ 241,842 146,237 Accumulated depreciation....................................... (69,560) (56,453) -------- -------- Net.......................................................... $172,282 $ 89,784 ======== ======== Depreciation expense amounted to $13,983, $10,735 and $9,349 for the yearsended December 31, 1994, 1993 and 1992, respectively. 32 34 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (7) INTANGIBLE ASSETS Components of intangible assets are as follows: DECEMBER 31, --------------------- 1994 1993 -------- -------- Goodwill....................................................... $ 51,467 $ 3,900 Other.......................................................... 17,609 15,886 -------- -------- Total........................................................ 69,076 19,786 Accumulated amortization....................................... (12,085) (12,165) -------- -------- Net.......................................................... $ 56,991 $ 7,621 ======== ======== (8) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES The components of accounts payable and accrued liabilities are as follows: DECEMBER 31, ------------------- 1994 1993 ------- ------- Accounts payable................................................. $31,047 $12,996 Salaries, wages and employee benefits payable.................... 8,113 3,780 Other accrued liabilities........................................ 9,242 4,096 ------- ------- Total.......................................................... $48,402 $20,872 ======= ======= (9) INCOME TAXES Effective January 1, 1993, the Company adopted Statement of FinancialAccounting Standard No. 109 (SFAS 109), the effect of which was not material. In summary, SFAS 109 requires the determination of deferred tax assets andliabilities by applying applicable tax rates to the difference between thefinancial statement and tax bases of assets and liabilities. Additionally, itrequires separate balance sheet disclosure of deferred tax assets andliabilities and has different recognition criteria for certain deferred taxassets than Accounting Principles Board Opinion No. 11 (APB 11), the standardunder which the Company's financial statements were previously prepared. Aspermitted under SFAS 109, prior year financial statements have not beenrestated. Pretax income consisted of the following: YEARS ENDED DECEMBER 31, ------------------------------- 1994 1993 1992 ------- ------- ------- Domestic.............................................. $15,571 $13,412 $10,298 Foreign............................................... 1,321 -- -- ------- ------- ------- Total............................................... $16,892 $13,412 $10,298 ======= ======= ======= 33 35 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (9) INCOME TAXES -- (CONTINUED) The provision for income taxes consists of the following expenses(benefits): YEARS ENDED DECEMBER 31, ----------------------------- 1994 1993 1992 ------- ------ ------ Current: Federal............................................... $ 3,142 $3,216 $3,515 State................................................. 529 443 569 Foreign............................................... (1,088) -- -- ------- ------ ------ 2,583 3,659 4,084 ------- ------ ------ Deferred: Federal............................................... 1,537 974 120 State................................................. 328 138 (136) Foreign............................................... 1,318 -- -- ------- ------ ------ 3,183 1,112 (16) ------- ------ ------ ------- ------ ------ Total.............................................. $ 5,766 $4,771 $4,068 ======= ====== ====== The significant components of the deferred tax expense (benefit) arepresented in the schedule below. For 1994 and 1993, the components of thedeferred tax expense (benefit) were computed in accordance with the provisionsof SFAS 109. For 1992, the components of the deferred income tax expense(benefit) were computed in accordance with the provisions of APB 11. YEARS ENDED DECEMBER 31, ---------------------------- 1994 1993 1992 ------ ------ ------ Depreciation..................................................... $2,558 $2,047 $1,746Environmental reserves........................................... (290) (453) (693)Self insurance................................................... (83) (79) (351)Inventory capitalization......................................... 153 (123) (361)Alternative minimum tax credits.................................. 538 (727) --Other............................................................ 307 447 (357) ------ ------ ------ $3,183 $1,112 $ (16) ====== ====== ====== The provision for income taxes differs from the statutory Federal incometax rate of 34% as follows: YEARS ENDED DECEMBER 31, ---------------------------- 1994 1993 1992 ------ ------ ------ Income tax at Federal statutory rate............................. $5,743 $4,560 $3,501State and local taxes (benefits), net of Federal income tax benefits....................................................... 566 383 286Difference between Federal statutory rate and statutory rates on foreign income................................................. (350)Other............................................................ (193) (172) 281 ------ ------ ------Provision for income taxes....................................... $5,766 $4,771 $4,068 ====== ====== ====== 34 36 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (9) INCOME TAXES -- (CONTINUED) The components of deferred tax assets and liabilities as of December 31,1994 and 1993 relate to temporary differences and carryforwards as follows: 1994 1993 ------- ------- Deferred tax assets: Inventory...................................................... $ 1,103 $ 1,552 Prepaid pension expense........................................ (495) (623) Other.......................................................... 481 386 ------- ------- Total....................................................... $ 1,089 $ 1,315 ======= ======= Deferred tax liabilities: Depreciation................................................... $19,715 $11,814 Depreciation................................................... $19,715 $11,814 Environmental expenses......................................... (3,510) (3,220) Loss carryforwards net of valuation allowance of $2,329........ (1,000) Alternative minimum tax credits................................ (1,546) (2,084) Research and development credits............................... (560) (493) Other.......................................................... 1,159 (31) ------- ------- Total....................................................... $14,258 $ 5,986 ======= ======= Under the tax laws of various countries in which the Company operates, netoperating losses (NOLs) may be carried forward, subject to statutorylimitations, to reduce taxable income in future years. The tax effect of suchNOLs aggregated approximately $3,329 at December 31, 1994, the majority of whichare available on an indefinite carryforward basis. However, a valuation reserveof $2,329 has been established to reflect uncertainties associated with therealization of such future benefits. Alternative minimum tax credits totaling$1,546 are available to offset future Federal income taxes on an indefinitecarryforward basis. Research and development credit carryforwards totaling $560expire between the years 2001 and 2005. Presently, the Company's Federal income tax returns for the years 1988through 1992 are under audit. Management believes that the resolution of thoseaudits will not have a significant effect upon results of operations in anygiven year. (10) SHORT-TERM DEBT On September 21, 1994, the Company entered into a new Loan Agreement (the"Credit Agreement") with NBD Bank, N.A., United Jersey Bank, NationalWestminster Bank NJ, Wachovia Bank of Georgia, N.A., BHF-Bank, The FirstNational Bank of Boston, Chemical Bank New Jersey, N.A., and National City Bank.The Credit Agreement provides for a bridge loan in the aggregate principalamount of $50,000 due October 11, 1995. The Credit Agreement permits the Companyto choose between various interest rate options for the bridge loan: (a) U.S.prime rate plus the applicable margin (ranging from 1/2 of 1% to 2%). Theapplicable margin is adjusted based upon the Funded Indebtedness to Cash FlowRatio of Cambrex Corporation. See Long-term Debt note regardingcollateralization and covenants. In addition to the $50,000 one year term loan, the remaining short-termdebt represents the outstanding export financing facility (the "Facility") inItaly. The Facility provides for $13,000 (Lira 21 billion) in financing, ofwhich $2,368 (Lira 3.841 billion) was outstanding at December 31, 1994. TheFacility bears no interest. 35 37 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (11) LONG-TERM DEBT Long-term debt consists of the following: DECEMBER 31, --------------------- 1994 1993 --------- -------- Bank credit facilities (a)...................................... $ 118,648 $ 36,111 Industrial development revenue bond (b)......................... -- 4,150 Capitalized leases.............................................. 57 -- Notes payable (c)............................................... 1,291 -- --------- -------- --------- -------- Subtotal...................................................... 119,996 40,261 Less: current portion........................................... 4,021 4,000 --------- -------- Total......................................................... $ 115,975 $ 36,261 ======== ======= (a) On September 21, 1994, the Company entered into a new Loan Agreement(the "Credit Agreement") with NBD Bank, N.A., United Jersey Bank, NationalWestminster NJ, Wachovia Bank of Georgia, N.A., BHF-Bank, The First NationalBank of Boston, Chemical Bank New Jersey, N.A., and National City Bank. TheCredit Agreement replaces the existing Revolving Credit and Term Loan Agreement(the "Old Credit Agreement") with NBD Bank, N.A., United Jersey Bank, andNational Westminster Bank NJ. In addition to the one year loan of $50,000 (seeShort-term Debt note), the Credit Agreement provides for a seven year term loanin the aggregate principal amount of $75,000 (payable $1,000 per quarter fortwelve quarters and $3,938 for the remaining quarters beginning January 1995),and a revolving credit facility in the aggregate principal amount of $100,000due October 11, 1997 (evergreen renewal; automatic two year extensions ifnon-renewal notice not given). The Credit Agreement permits the Company to choose between various interestrate options and to specify the portion of the borrowing to be covered by eachinterest rate option. Under the Revolving Credit Agreement, the interest rateoptions available to the Company are: (a) U.S. prime rate plus the applicablemargin (ranging from 0% to 3/4 of 1%) or (b) LIBOR plus the applicable margin(ranging from 1/2 of 1% to 2%). The applicable margin is adjusted based upon theFunded Indebtedness to Cash Flow Ratio of the Company. The seven year term loanhas the same interest rate options plus 1/2%. Additionally, the Company pays acommitment fee of between 1/5 of 1% and 3/8 of 1% on the unused portion of theRevolving Credit facility. The Credit Agreement retains virtually all of the restrictive covenantscontained in the Company's Old Credit Agreement, but provides for certainchanges to the minimum consolidated net worth and deferred pledge of assetrequirements, as defined, and certain financial ratios. If these covenants arenot met, the loan is collateralized by the assets of the Company's domesticsubsidiaries and 66% of the outstanding capital stock of each of the foreignsubsidiaries. On October 11, 1994, the Company borrowed $32,200 and L4,265 from the newCredit Agreement to satisfy the Old Credit Agreement. On October 12, 1994, theCompany borrowed $126,000 from the new Credit Agreement (of which $50,000 isShort-term Debt) to purchase the stock of Nobel/Profarmaco. (b) On October 31, 1994, the Company borrowed from the Credit Agreement torepay the full principal amount of $4,150 along with all accrued interest on theIndustrial Development Revenue Bond (due March 1, 2008) which was assumed aspart of the purchase of the assets of Zeeland Chemicals, Inc. (c) As part of the October 12 acquisition of Nobel/Profarmaco, the Companyassumed a government loan made to Profarmaco S.r.1. to finance technologicalinnovations. The Loan of $1,291, bearing interest at 9.21%, is amortized overten annual payments starting July 26, 1995 and ending July 26, 2004. 36 38 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (11) LONG-TERM DEBT -- (CONTINUED) (d) Aggregate maturities of long-term debt are as follows: 1995.............................................. $ 4,021 1996.............................................. 4,092 1997.............................................. 47,748 1998.............................................. 7,048 1999.............................................. 15,870 Thereafter........................................ 41,217 -------- Total........................................ $119,996 ======== (12) STOCKHOLDERS' EQUITY The Company has two classes of common shares designated Common Stock andNonvoting Common Stock. Authorized shares of Common Stock were 20,000,000 atDecember 31, 1994 and 1993. Authorized shares of Nonvoting Common Stock were730,746 at December 31, 1994 and 1993. At December 31, 1994, authorized shares of Common Stock were reserved forissuance as follows: Stock option plans................................ 1,018,000 Cambrex savings plan.............................. 82,396 --------- Total shares................................. 1,100,396 ======== Nonvoting Common Stock has equal rights with Common Stock, with theexception of voting power. Nonvoting Common Stock is convertible, share forshare, into Common Stock, subject to any legal requirements applicable toholders restricting the extent to which they may own voting stock. In 1991, all113,182 outstanding shares were converted. In 1990, Cambrex purchased 1,000,000 shares of its Common Stock as part ofa previously announced stock buy back program. These shares were purchased inthe open market at an average purchase price of $12.12 per share. All of theacquired shares are held as Common Stock in treasury, less shares issued to theCambrex Savings Plan. The Company held 756,806 and 819,049 shares of treasurystock at December 31, 1994 and 1993, respectively. In 1987, the Company authorized 5,000,000 shares of Series Preferred Stock,par value $0.10, issuable in series and with rights, powers and preferences asmay be fixed by the Board of Directors. At December 31, 1994 and 1993, there wasno preferred stock outstanding. (13) STOCK OPTIONS On October 24, 1983, the Company's stockholders approved the 1983 IncentiveStock Option Plan ("1983 Plan"), which provides for the grant of optionsintended to qualify as incentive stock options to management and other keyemployees of Cambrex. On September 1, 1987 the Company's stockholders approvedthe 1987 Stock Option Plan ("1987 Plan"), which provides for the granting to keyemployees both non-qualified stock options and incentive stock options. On May7, 1990, the Company's stockholders approved the 1989 Senior Executive StockOption Plan ("1989 Plan"), which provides for the grant of options intended toqualify as additional incentives to the Company's Senior Executive Officers. OnMay 1, 1992, the Company's stockholders approved the 1992 Stock Option Plan("1992 Plan"), which provides for the granting to key employees bothnon-qualified stock options and incentive stock options. On April 28, 1994, theCompany's stockholders approved the 1993 Senior Executive Stock Option Plan("1993 Plan"), which 37 39 39 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (13) STOCK OPTIONS -- (CONTINUED)provides for the grant of options intended to qualify as additional incentivesto the Company's Senior Executive Officers. On April 28, 1994, the Company'sstockholders also approved the 1994 Stock Option Plan ("1994 Plan"), whichprovides for the granting to key employees both non-qualified and incentivestock options. The 1994 Plan also provides for the granting of non-qualifiedstock options to non-employee directors. As of December 31, 1994, 298,000 options had been exercised. Shares ofCommon Stock subject to outstanding options under the Plans were as follows: AUTHORIZED SUBJECT TO FOR ISSUANCE OUTSTANDING OPTIONS ------------ ------------------- 1983 Plan.............................................. 216,000 43,650 1987 Plan.............................................. 200,000 108,850 1989 Plan.............................................. 400,000 370,000 1992 Plan.............................................. 100,000 93,350 1993 Plan.............................................. 300,000 285,000 1994 Plan.............................................. 100,000 73,500 ------------ ---------- Total shares...................................... 1,316,000 974,350 ========= =============== Information regarding the Company's stock option plans is summarized below: NUMBER OF NUMBER OF OPTION PRICE SHARES SHARES PER SHARE $ EXERCISABLE --------- --------------- ------------ Outstanding at December 31, 1991..................... 650,050 4.750 - 16.000 274,050 Granted............................................ 124,000 11.500 - 18.125 Exercised.......................................... (49,550) 4.750 - 7.750 Cancelled.......................................... (30,000) 5.750 ---------Outstanding at December 31, 1992..................... 694,500 4.750 - 18.125 547,833 Granted............................................ 14,000 17.875 - 19.375 Exercised.......................................... (51,550) 4.750 - 14.000 ---------Outstanding at December 31, 1993..................... 656,950 4.750 - 19.375 523,617 Granted............................................ 382,000 19.875 - 24.250 Exercised.......................................... (64,100) 4.750 - 19.875 Cancelled.......................................... (500) 7.375 ---------Outstanding at December 31, 1994..................... 974,350 4.750 - 24.250 658,850 ======== (14) RETIREMENT PLANS On December 31, 1994, the Company merged The Cambrex Salaried Pension Plan(the "Cambrex Plan") with The CasChem Hourly Pension Plan (the "CasChem Plan").Thus, as of December 31, 1994, the Company maintains two U.S. defined-benefitpension plans which cover substantially all eligible employees: (1) the NeperaHourly Pension Plan (the "Nepera Plan") which covers the union employees at theHarriman, New York plant, and (2) The Cambrex Pension Plan (the "Cambrex Plan")which covers all other eligible employees. Benefits for the salaried and certain hourly employees are based on salaryand years of service, while those for employees covered by a collectivebargained agreement are based on negotiated benefits and years of 38 40 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (14) RETIREMENT PLANS -- (CONTINUED)service. The Company's policy is to fund pension costs currently to the extentdeductible for income tax purposes. Pension plan assets consist primarily ofequity and fixed income securities. The 1994 measurement date has been changed to September 30 from December31. The expense for both 1993 and 1994 are based on a 12 month period, and werebased on valuations of the plan as of January 1, 1993 and January 1, 1994,respectively. However, the reconciliation of funded status this year isdetermined as of September 30, 1994, whereas the last reconciliation was as ofDecember 31, 1993. In accordance with the requirements of Statement of Financial AccountingStandard No. 87 "Employers' Accounting for Pensions" (SFAS 87), the overfundedand underfunded U.S. plans are presented separately. As a result of theaforementioned merger of the Cambrex Plan and the CasChem Plan, the remainingplans are overfunded as of December 31, 1994. The funded status of these plansas of September 30, 1994 and December 31, 1993 is as follows: SEPTEMBER 30, 1994 DECEMBER 31, 1993 ------------------ -------------------------- OVERFUNDED UNDERFUNDED OVERFUNDED ------------------ ----------- ---------- Actuarial present value of benefit obligations: Vested benefits................................... $(14,096) $ (13,798) $ (2,146) Non-vested benefits............................... (1,271) (984) (214) ------------------ ----------- ---------- Accumulated benefit obligation.................... (15,367) (14,782) (2,360) Additional benefits based on estimated future salary levels.................................. (939) (1,115) 0 ------------------ ----------- ----------Projected benefit obligation for service rendered through December 31, 1994 and 1993................ (16,306) (15,897) (2,360)Plan assets at fair market value.................... 18,224 13,854 4,879 ------------------ ----------- ----------Funded status....................................... 1,918 (2,043) 2,519Unrecognized net transition (asset)................. (300) 4 (405)Unrecognized prior service cost..................... (270) (270) (194)Other -- unrecognized net loss (gain) on past experience........................................ 184 2,343 (189)Additional minimum liability........................ 0 (1,030) 0 ------------------ ----------- ----------Prepaid (accrued) pension cost...................... $ 1,532 $ (996) $ 1,731 ============== ========= ======== Assumptions used to develop the U.S. 1994 and 1993 net periodic pensionexpense and the September 30, 1994 and December 31, 1993 actuarial present valueof projected benefit obligations: SEPTEMBER 30, 1994 DECEMBER 31, 1993 ------------------ -------------------------- OVERFUNDED UNDERFUNDED OVERFUNDED ------------------ ----------- ---------- PENSION EXPENSEWeighted-average discount rate...................... 7.5% 8.0% 8.0%Expected long-term rate of return on assets......... 8.5% 8.5% 8.5%Rate of increase in future compensation levels (non- collective bargained employees)................... 5.0% 5.0% N/AACTUARIAL PRESENT VALUE OF PROJECTED BENEFIT OBLIGATIONSWeighted-average discount rate...................... 8.5% 7.5% 7.5%Expected long-term rate of return on assets......... 8.5% 8.5% 8.5%Rate of increase in future compensation levels (non- collective bargained employees)................... 5.0% 5.0% N/A 39 41 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (14) RETIREMENT PLANS -- (CONTINUED) Certain foreign subsidiaries of the Company maintain pension plans fortheir employees which conform to the common practice in their respectivecountries. The funded status of the Company's international pension plans as ofDecember 31, 1994 is as follows: DECEMBER 31, 1994 UNDERFUNDED ----------------- Actuarial present value of benefit obligations: Vested benefits................................................... $(3,879) ----------------- Accumulated benefit obligation.................................... (3,879) Additional benefits based on estimated future salary levels....... (1,179) ----------------- Projected benefit obligation for service rendered through December 31, 1994.......................................................... (5,058) Plan assets at fair market value.................................... 848 ----------------- Funded status....................................................... (4,210) Unrecognized net transition (asset)................................. (420) Other -- unrecognized net (gain) on past experience................. (776) ----------------- Accrued pension liability........................................... $(5,406) ============== Assumptions used to develop the 1994 actuarial present value of projectedbenefit obligations for the Company's foreign pension plans: DECEMBER 31, 1994 ----------------- ACTUARIAL PRESENT VALUE OF PROJECTED BENEFIT OBLIGATIONS: Weighted-average discount rate....................................... 9.0% to 9.5% Expected long-term rate of return on assets.......................... 10.0% Rate of increase in future compensation levels....................... 5.0% to 7.0% The Company's net pension costs included in operating results amounted to$1,157, $713 and $450 in 1994, 1993 and 1992, respectively, and were comprisedof the following: YEARS ENDED DECEMBER 31, ------------------------------ 1994 1993 1992 ------- ------- ------ Service cost........................................... $ 1,242 $ 843 $ 825 Interest cost on projected benefit obligation.......... 1,757 1,299 1,152 Return on plan assets.................................. 370 (2,131) (576) Return on plan assets.................................. 370 (2,131) (576) Amortization of excess plan net assets at adoption of SFAS 87.................................. (101) (93) (171) Other items -- deferred investment gain (loss)......... (2,111) 795 (780) ------- ------- ------ Net pension cost............................. $ 1,157 $ 713 $ 450 ======= ======= ====== Included in the net periodic pension cost is the amortization of priorservice cost over a period of twelve to nineteen years and the amortization ofthe SFAS 87 transition obligation over a period of ten to seventeen years. Thepension expense for foreign pension plans of $512 is included in the 1994 netperiodic pension expense of $1,157. Cambrex also makes available to all employees a savings plan as permittedunder Sections 401(k) and 401(a) of the Internal Revenue Code. Employeecontributions are matched in part by Cambrex. The cost of this plan amounted to$1,449, $1,436, and $1,145 in 1994, 1993 and 1992, respectively. 40 42 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (14) RETIREMENT PLANS -- (CONTINUED) In addition to the above plans, Cambrex also established a SupplementalExecutive Retirement Plan in 1994. The net periodic pension cost for 1994amounted to $104. (15) OTHER POSTRETIREMENT BENEFITS Cambrex provides postretirement health and life insurance benefits("postretirement benefits") to all eligible retired employees. Employees whoretire at or after age 55 with ten years of service are eligible to participatein the postretirement benefit plans. The Company's responsibility for suchpremiums for each plan participant is based upon years of service subject to anannual maximum of one thousand dollars. Such plans are self-insured and are notfunded. Effective January 1, 1993, the Company adopted Statement of FinancialAccounting Standard No. 106 "Employers' Accounting for Postretirement BenefitsOther than Pensions" (SFAS 106). SFAS 106 requires such benefits to be accountedfor on an accrual basis. Previously, such costs were expensed as claims wereincurred. In connection with the adoption of SFAS 106, the Company has electedto amortize the transition obligation of $1,853 over twenty years. The neteffect upon 1994 and 1993 pretax operating results, including the amortizationof the transition obligation, resulted in a cost of $312 and $301, respectively.The Company has reviewed its health care benefit plans for retirees and does notanticipate significant increases in the annual expense related to SFAS 106. The periodic postretirement benefit cost includes the following components: YEARS ENDED DECEMBER 31, ------------------- 1994 1993 ------- ------- Service cost of benefits earned.................................. $ 68 $ 58 Interest cost on accumulated postretirement benefit obligation... 151 150 Amortization of transition obligation............................ 93 93 ------- ------- Total periodic postretirement benefit cost..................... $ 312 $ 301 ======= ======= Accumulated postretirement benefit obligation: 1994 1993 ------- ------- Retirees......................................................... $ 957 $ 990 Fully eligible plan participants................................. 283 320 Other active plan participants................................... 631 799 ------- ------- Total obligation................................................. 1,871 2,109 Unrecognized net loss............................................ 248 (149) Unrecognized transition obligation............................... (1,669) (1,760) ------- ------- Accrued postretirement benefit cost recognized in the balance sheet.......................................................... $ 450 $ 200 ======= ======= The discount rate used to determine the accumulated postretirement benefitobligation was 7.5%. The assumed health care cost trend rate used to determinethe accumulated postretirement benefit obligation was initially 16%, decliningratably to 6% in 2002 and thereafter. A one-percentage-point increase in theassumed health care cost trend rate would have no effect upon the accumulatedpostretirement benefit obligation. The cost of all health and life insurance benefits is recognized asincurred and was approximately $3,994, $3,797 and $3,258 in 1994, 1993 and 1992,respectively. The cost of providing these benefits for the 199, 181 and 186retirees in 1994, 1993 and 1992, respectively, is not separable from the cost ofproviding benefits for the 732, 791 and 746 active U.S. employees. 41 43 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (16) OTHER INCOME AND EXPENSE Other income in 1994 was $497 including $380 in currency gains atProfarmaco. There were no other individually significant components in otherincome in 1994. Other expense in 1992 consisted primarily of a $553 provision for thepotential write-off of an other receivable related to a product manufactured byCambrex for a specific customer in prior years. The receivable and correspondingreserve were written-off in 1993; $250 of other income was recorded as a resultof payment received from the customer. There were no individually significantcomponents in other expense in 1993. (17) FOREIGN OPERATIONS AND EXPORT SALES In 1994, the Company acquired Nobel Chemicals AB in Karlskoga, Sweden,Profarmaco Nobel S.r.1. in Milan, Italy and Seal Sands Chemicals, Ltd. inMiddlesbrough, England. These companies will operate as subsidiaries of CambrexLtd., England, which was organized in 1987. Summarized data for the Company's operations for 1994 are as follows: DOMESTIC EUROPEAN TOTAL --------- -------- --------- Gross revenues...................................... $ 214,880 $ 34,803 $ 249,683 Operating profit.................................... 17,334 3,642 20,976 Net income.......................................... 10,514 612 11,126 Net income.......................................... 10,514 612 11,126 Identifiable assets................................. 167,725 192,752 360,477 Export sales, included in domestic gross revenues, in 1994, 1993 and 1992amounted to $44,135, $37,296 and $44,536, respectively. No country, in any ofthe given years, represents more than 10% of total revenues. (18) COMMITMENTS The Company currently has no significant capital lease obligations. The Company has operating leases expiring on various dates through the year2013. The leases are primarily for office and laboratory equipment and vehicles.At December 31, 1994, future minimum commitments under operating leasearrangements were as follows: Year ended December 31: 1995............................................. $ 1,853 1996............................................. 1,002 1997............................................. 827 1998............................................. 632 1999 and thereafter.............................. 11,764 -------- Net commitments.................................... $ 16,078 ======= Total operating lease expense was $1,958, $872 and $1,097 for the yearsended December 31, 1994, 1993 and 1992, respectively. The Company has three letters of credit outstanding aggregating $752 as ofDecember 31, 1994. These letters of credit were issued in connection withvarious administrative or environmental activities. (19) CONTINGENCIES Contingencies exist for certain subsidiaries of Cambrex because of legaland administrative proceedings arising out of the normal course of business.Such contingencies include environmental proceedings directly and indirectlyagainst the subsidiaries as well as matters internally identified. Theresolution of such matters 42 44 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (19) CONTINGENCIES -- (CONTINUED)often spans several years and frequently involves regulatory oversight and/oradjudication. Additionally, many remediation requirements are not fixed and arelikely to be affected by future technological, site, and regulatorydevelopments. Consequently, the ultimate extent of liabilities with respect tosuch matters as well as the timing of cash disbursements cannot be determinedwith certainty. However, management is of the opinion that while the ultimateliability resulting from these matters may have a material effect upon theresults of operations in any given year, they will not have a material adverseeffect upon the Company's liquidity nor its financial position. The following table exclusively addresses matters wherein the relatedliabilities are considered estimable. It summarizes the estimated range of theCompany's share of costs associated with such matters, the related accruals, andthe activity associated with those accruals. The changes in the estimated rangesbetween the current and prior year reflect revisions to estimates, the additionof matters that were quantified for the first time during the current year, andthe satisfaction of others. The related accruals represent management'sassessment of the aggregate liability associated with estimable matters. DECEMBER 31, ------------------- 1994 1993 ------- ------- Estimated range of the Company's share of costs associated with estimable matters: Minimum..................................................... $ 9,542 $ 7,085 ======= ======= Maximum..................................................... $18,032 $14,835 ======= ======= Accrual and related activity: Balance, beginning of year..................................... $ 9,058 $ 7,388 Additions: Accruals established in connection with acquisition activity.................................................. 1,510 -- Adjustment recorded in connection with adoption of SFAS #109*..................................................... -- 1,320 Income statement charges.................................... -- 1,029 Deductions for expenditures.................................... (357) (679) ------- ------- Balance, end of year........................................... $10,211 $ 9,058 ======= ======= Classification of year end accrual: Current........................................................ $ 2,610 $ 310 Non-current.................................................... 7,601 8,748 ------- ------- $10,211 $ 9,058 ======= ======= ---------------* Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standard #109, "Accounting for Income Taxes." At that date and in accordance with the provisions of that Statement, a deferred tax asset of $1,320 previously netted against this accrual was reclassified to non-current assets. During 1992, income statement charges for additions to the accrual forenvironmental contingencies aggregated $1,747. Significant matters wherein the related liability or range of liability isestimable, are summarized as follows: a) Nepera, Inc. ("Nepera") was named in 1987 as a Potentially ResponsibleParty (PRP) along with certain prior owners of the Maybrook Site inHamptonburgh, New York by the United States Environmental 43 45 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (19) CONTINGENCIES -- (CONTINUED)Protection Agency (EPA) in connection with the disposition, under appropriatepermits, of wastewater at that site prior to Cambrex's acquisition of Nepera in1986. The Hamptonburgh site is on the EPA's National Priorities List forremedial work and clean-up. However, to date the EPA has entrusted themanagement of the remediation effort to the New York State Department ofEnvironmental Conservation (DEC). Although the periods of ownership of the siteand the extent of its use for wastewater disposal are well established, thePRP's have not been able to agree upon an allocation method for futureremediation costs. However, a prior owner has participated with Nepera in theperformance of the activities described in the following paragraphs. During 1992, Nepera prepared a draft Remedial Investigation/FeasibilityStudy (RI/FS) report which enumerated several remediation alternatives andsubmitted the Remedial Investigation portion to the DEC for review.Consequently, although this RI/FS had not been approved by the DEC, Neperautilized it to revise the estimated liability for this matter previouslyincluded in the accrual for environmental contingencies. This estimateconsidered the probability of cost sharing with prior owners of the site. During 1993, the DEC requested the performance of additional siteinvestigation prior to reviewing the Feasibility Study portion of the report.Nepera prepared a plan for such additional site investigation and submitted itfor review. During 1994, the DEC requested the performance of additional siteinvestigation beyond the 1993 proposed plan and requested the Feasibility Studyportion of the report. Nepera updated the RI/FS, prepared a revised plan foradditional site investigation, submitted them for review and utilized them toupdate the estimated liability for this matter. Additionally, a DECadministrative law judge issued a decision ordering one of the former owners toremediate the site. However, that former owner is appealing the decision. b) Nepera was named in 1987 as a responsible party along with certain priorowners of Nepera's Harriman, New York production facility by the DEC inconnection with contamination at that site. Nepera believes that any remediationto be conducted at that site is primarily related to contamination attributableto material handling and disposal practices, including drum burial at the site,which occurred prior to Cambrex's acquisition of Nepera in 1986. A prior ownerhas participated with Nepera in the performance of the activities described inthe following paragraphs. Over the past several years, Nepera, with theagreement of the DEC, has been performing an interim remedial measure involvingthe pumping and treatment of groundwater to mitigate the possibility ofcontamination progressing beyond the site boundaries. During 1992, Nepera prepared a draft RI/FS report which enumerated severalremediation alternatives and submitted the Remedial Investigation portion to theDEC for review. Consequently, although this RI/FS had not been approved by theDEC, Nepera utilized it to develop a range of estimated liabilities for thismatter and considered such estimates when determining the accrual forenvironmental contingencies. That estimate considered the probability of costsharing with prior owners of the site. During 1993, Nepera had not received commentary from the DEC concerning theRemedial Investigation portion of the report. During 1994, the DEC requested the Feasibility Study portion of the report.Nepera updated the RI/FS and submitted it for review. c) CasChem, Inc. (CasChem) was subject to an investigation commenced in1990 by agents of the EPA and the Federal Bureau of Investigation pursuant to asearch warrant indicating an interest in the handling, storage, and disposal ofhazardous wastes. During 1994, a settlement was reached wherein CasChem pleaded guilty to theunpermitted storage of one drum of hazardous waste and the payment of a $1,000fine. That amount was paid during January 1995. 44 46 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (19) CONTINGENCIES -- (CONTINUED) d) Cosan, Inc. (Cosan) entered into an Administrative Consent Order in 1985with the New Jersey Department of Environmental Protection (NJDEP) under NewJersey's Industrial Site Recovery Act ("ISRA", which was previously known as theEnvironmental Conservation and Recovery Act or ECRA) in order to consummate thesale of the controlling interest in Cosan to the Company. Through that action,Cosan became required to determine whether its facility located in Carlstadt,New Jersey was contaminated by hazardous materials and, if appropriate, effect acleanup. During 1992, based upon the results of an evaluation of the site, Cosanproposed the installation of a groundwater recovery system to removecontaminates from the soil. Presently, Cosan is awaiting the NJDEP's approval ofthat proposal. e) As more fully described in Note #3, in 1992 Cambrex acquiredsubstantially all of the assets of the fine chemicals business of Hexcel FineChemicals, now known as Zeeland Chemicals, Inc. In connection with thattransaction, an accrual of $3,300 was established for environmental conditionsexisting as of the date of the acquisition. f) Nepera was named in the early 1980's as a PRP along with approximately130 other companies by the EPA in connection with the SCP Corporation (SCP) sitein Carlstadt, New Jersey. The site is on the EPA's National Priorities List forremedial work and cleanup. SCP disposed of process wastewater and minor amountsof other material for Nepera during the 1970's. The EPA has directed an Interim Remedial Measure for this site consistingof the construction of slurry walls and a pump and treat facility. Presently, aproportionate allocation of responsibility has not been established. However,Nepera's responsibility may be relatively large in relation to other parties.Nepera is contesting the proposed basis for the allocation of responsibility forthis site, and believes it has grounds to, and will, oppose any efforts tocharge it with excessive responsibility. During 1994, the cost of capping the site was estimated by the PRP group torange from $5,000 to $8,000. Although such a remediation alternative has notbeen approved by the EPA, Nepera has assumed it to be the minimum effort whichwill be required at the site. Consequently, Nepera utilized such information todevelop a range of estimated liabilities for this matter and considered suchestimates when determining the accrual for environmental contingencies. Additionally, during 1994, Nepera reached a settlement agreement withcertain insurers who agreed to pay a certain portion of future expendituresassociated with the site and incurred by Nepera. A receivable has not beenrecorded in connection with this agreement as the payments are not realizableuntil Nepera's liability has been determined and funds actually expended. g) Cosan was named in 1992 as a defendant in a suit filed by the owners ofa manufacturing site in Clifton, New Jersey that had been owned and operated byCosan from 1968 to 1979. The plaintiffs alleged Cosan contributed to thecontamination at the site and seek to compel Cosan to contribute toward presentand future costs of remediation of the site under ISRA. However, the source ofall contamination at the site has not been definitively identified. Samplingconducted at an adjacent site revealed extensive contamination with the samesubstances found on the plaintiff's site and, in some instances, higherconcentrations. To date, the parties cannot agree upon a remediation plan for the site andrelated costs, nor has any remediation plan been submitted to the NJDEP forreview. Presently, settlement negotiations with the plaintiffs are ongoing andthe matter is moving toward a trial date. 45 47 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (19) CONTINGENCIES -- (CONTINUED) h) As more fully described in Note #3, Cambrex acquired Akzo Nobel's PharmaChemistry Business. In connection with that transaction, an accrual of $1,510was established for environmental conditions existing as of the date of theacquisition. i) Cosan received notice in 1990 of a proposed NJDEP administrative fine of$2,308 relating to exceeding alleged permit levels for discharges into a localsewerage treatment plant during the 1980's. Cosan contested the proposed finestating that Cosan was installing a modern treatment plant to meet effluentlimits in a new permit and that Cosan fully advised the NJDEP of all activitiesat the time. During 1993, Cosan agreed to a settlement consisting of a payment of $650.Such settlement did not constitute any admission of fact or acknowledgement ofany fault or liability on the part of Cosan. The payment was charged to theaccrual for contingent liabilities. j) In addition to the matters identified above, Cambrex's subsidiaries areparty to a number of other proceedings. Management is of the opinion that theultimate liability resulting from those proceedings will not have a materialadverse effect upon Cambrex's results of operations nor its financial position. ------------------ During 1994, Nepera arrived at an agreement partially described in "f"above with certain insurers whereby $2,450 was made available through a trustarrangement for remediation and administrative expenditures in connection with anumber of relatively small sites. During 1994, certain amounts were designatedto be expended by the trust for past expenditures. The remaining balance will beavailable for future expenditures and has been considered in the determinationof the accrual for environmental contingencies at December 31, 1994. 46 48 CAMBREX CORPORATION SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) 1ST 2ND 3RD 4TH 1994 QUARTER QUARTER QUARTER QUARTER YEAR-------------------------------------- ----------- ----------- ----------- ----------- ------------ Net revenues.......................... $51,047 $58,224 $57,608 $74,755 $241,634Gross profit.......................... 11,403 14,593 13,265 18,620 57,881Net income............................ 2,128 3,380 2,440 3,178 11,126Earnings per share:(1) Primary............................. $ 0.38 $ 0.60 $ 0.43 $ 0.55 $ 1.96 Fully diluted....................... $ 0.38 $ 0.60 $ 0.43 $ 0.55 $ 1.95Average shares: Primary............................. 5,638 5,648 5,679 5,729 5,674 Fully diluted....................... 5,638 5,648 5,711 5,733 5,699 1993----Net revenues.......................... $47,648 $52,779 $48,065 $48,711 $197,203Gross profit.......................... 11,919 14,210 13,411 12,238 51,778Net income............................ 1,794 2,427 2,194 2,226 8,641Earnings per share:(1) Primary............................. $ 0.35 $ 0.47 $ 0.42 $ 0.40 $ 1.64 Fully diluted....................... $ 0.34 $ 0.45 $ 0.41 $ 0.40 $ 1.60Average shares: Primary............................. 5,169 5,191 5,273 5,498 5,282 Fully diluted....................... 5,486 5,466 5,482 5,502 5,484 ---------------(1) Earnings per share calculations for each of the quarters are based on the weighted average number of shares outstanding for each period, as such, the sum of the quarters may not necessarily equal the earnings per share amount for the year. 47 49 ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Directors not standing for re-election and therefore not included in theregistrant's definitive proxy statement for the 1995 Annual Meeting ofStockholders. Robert W. Lear (age 77). Director since the Company commenced business in1981. Chairman of the Organization and Compensation Committee and member of theAudit, Environmental, and Nominating Committees of the Board of Directors.Executive-in-Residence at Columbia University Business School since 1977.Director of The Korea Fund, Inc., Scudder Funds and Institutional Funds, Welsh,Curson, Anderson and Stowe Venture Capital Funds and an independent generalpartner of Equitable Capital Partners, L.P. and Equitable Capital Partners(Fund), L.P. Arthur I. Mendolia (age 77). Director since the Company commenced businessin 1981 and Chairman of the Board from 1981 until the 1991 Annual Meeting ofShareholders. Former Vice President and General Manager of the ExplosivesDepartment, E.I. du Pont de Nemours and Company and served under President Nixonas Assistant Secretary of Defense for Installation and Logistics from 1973 until1975. Member of the Audit and Environmental Committees of the Board ofDirectors. ITEM 11 EXECUTIVE COMPENSATION. ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information called for by Part III is hereby incorporated by referenceto the information set forth under the captions "Principal Stockholders," "Boardof Directors," "Election of Directors," and "Executive Compensation" in theregistrant's definitive proxy statement for the 1995 Annual Meeting ofStockholders, which meeting involves the election of directors, which definitiveproxy statement is being filed with the Securities and Exchange Commissionpursuant to Regulation 14A. In addition, information concerning the registrant's executive officers hasbeen included in Part I above under the caption "Executive Officers of theRegistrant." 48 50 PART IV ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) 1. The following consolidated financial statements of the Company arefiled as part of this report: PAGE NUMBER (IN THIS REPORT) ---------------- Independent Accountants' Report................................................ 24Consolidated Balance Sheets as of December 31, 1994 and 1993................... 25Consolidated Income Statements for the Years Ended December 31, 1994, 1993 and 1992..................................................................... 26Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1994, 1993 and 1992.......................................................... 27Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992................................................................ 28Notes to Consolidated Financial Statements..................................... 29Consolidated Quarterly Financial Data (unaudited) for the Years Ended December 31, 1994 and 1993............................................................ 47 (a) 2.(i) The following schedule to the consolidated financial statementsof the Company as filed herein and the Report of Independent Certified PublicAccountants on Schedules are filed as part of this report. PAGE NUMBER (IN THIS REPORT) ---------------- Independent Accountants' Report (included in the accountants' reports on the registrant's consolidated financial statements).............................. 24Schedule II -- Valuation and Qualifying Accounts............................... 50 All other schedules are omitted because they are not applicable or notrequired or because the required information is included in the consolidatedfinancial statements of the Company or the notes thereto. (ii) Separate financial statements of Cosan Canada, Ltd., which is 42.5%owned by the Company, have been omitted as neither the assets nor income fromcontinuing operations before taxes of Cosan Canada, Ltd. exceeds 20 percent ofthe Company's related consolidated totals. (a) 3. The exhibits filed in this report are listed in the Exhibit Index onpage 52. The registrant agrees, upon request of the Securities and ExchangeCommission, to file as an exhibit each instrument defining the rights of holdersof long-term debt of the registrant and its consolidated subsidiaries which hasnot been filed for the reason that the total amount of securities authorizedthereunder does not exceed 10% of the total assets of the registrant and itssubsidiaries on a consolidated basis. (b) Reports on Form 8-K The registrant filed the following reports on Form 8-K during the lastquarter of the year ended December 31, 1994: DATE OF REPORT ITEMS REPORTED------------------- --------------------------------------------- October 26, 1994 Acquisition of Nobel/ProfarmacoOctober 26, 1994 New Loan AgreementDecember 29, 1994 Amendment to Form 8-K filed October 26, 1994 49 51 SCHEDULE II CAMBREX CORPORATION VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (DOLLARS IN THOUSANDS) COLUMN C ADDITIONS COLUMN B ----------------------- COLUMN E -------- CHARGED -------- COLUMN A BALANCE TO COST CHARGED TO COLUMN D BALANCE-------------------------------------- BEGINNING AND OTHER ---------- END OF CLASSIFICATION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS YEAR-------------------------------------- -------- -------- ---------- ---------- -------- Year Ended December 31, 1994: Doubtful trade receivables and returns and allowances........... $ 355 $ 280 $ 822(1) $ 169 $1,288 Inventory and obsolescence losses... 1,517 280 4,184(1) 403 5,578Year Ended December 31, 1993: Doubtful trade receivables and returns and allowances........... 607 120 -- 372 355 Doubtful other receivables.......... 553 -- -- 553 -- Inventory and obsolescence losses... 2,579 103 -- 1,165 1,517Year Ended December 31, 1992: Doubtful trade receivables and returns and allowances........... 440 183 -- 16 607 Doubtful other receivables.......... -- 553 -- -- 553 Inventory and obsolescence losses... 3,036 1,073 -- 1,530 2,579 ---------------(1) Reserve of Nobel/Profarmaco and Seal Sands, acquired during 1994. 50 52 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized. CAMBREX CORPORATION By /s/ CYRIL C. BALDWIN, JR. ------------------------------------ Cyril C. Baldwin, Jr. Chairman of the Board and Chief Executive Officer Date: March 21, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, thisreport has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE---------------------------------------- ------------------------------ --------------- /s/ CYRIL C. BALDWIN, JR. Chairman of the Board and March 21, 1995---------------------------------------- Chief Executive Officer andCyril C. Baldwin, Jr. Director/s/ PETER TRACEY Executive Vice President - March 21, 1995---------------------------------------- Finance, Principal FinancialPeter Tracey Officer and Principal Accounting Officer /s/ FRANCIS X. DWYER* Director March 21, 1995----------------------------------------Francis X. Dwyer /s/ ROBERT W. LEAR* Director March 21, 1995----------------------------------------Robert W. Lear /s/ KATHRYN RUDIE HARRIGAN, PHD* Director March 21, 1995----------------------------------------Kathryn Rudie Harrigan, PhD /s/ ROBERT LEBUHN* Director March 21, 1995----------------------------------------Robert LeBuhn /s/ GEORGE J. W. GOODMAN* Director March 21, 1995----------------------------------------George J. W. Goodman /s/ JAMES A. MACK* Director March 21, 1995----------------------------------------James A. Mack /s/ ILAN KAUFTHAL* Director March 21, 1995----------------------------------------Ilan Kaufthal /s/ DEAN P. PHYPERS* Director March 21, 1995----------------------------------------Dean P. Phypers /s/ ARTHUR I. MENDOLIA* Director March 21, 1995----------------------------------------Arthur I. Mendolia *By /s/ CYRIL C. BALDWIN, JR. ------------------------------------ Cyril C. Baldwin, Jr. Attorney-in-Fact 51 53 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION----------- ------------------------------------------------------------------------------ 3.1 -- Restated Certificate of Incorporation of registrant (A) -- Exhibit 3(a). 3.2 -- By Laws of registrant. (E) -- Exhibit 4.2. 4.1 -- Form of Certificate for shares of Common Stock of registrant. (A) -- Exhibit 4(a). 4.2 -- Article Fourth of the Restated Certificate of Incorporation. (A) -- Exhibit 4(b). 4.3 -- Loan Agreement dated September 21, 1994 by and among the registrant, NBD Bank, N.A., United Jersey Bank, National Westminster Bank NJ, Wachovia Bank of Georgia, N.A., BHF-Bank, The First National Bank of Boston, Chemical Bank New Jersey, N.A., and National City Bank. (K). 10.1 -- Purchase Agreement dated July 11, 1986, as amended, between the registrant and ASAG, Inc. (A) -- Exhibit 10(r). 10.2 -- Asset Purchase Agreement dated as of June 5, 1989 between Whittaker Corporation and the registrant. (C) -- Exhibit 10(a). 10.3 -- Asset Purchase Agreement dated as of July 1, 1991 between Solvay Animal Health, Inc. and the registrant. (F). 10.4 -- Asset Purchase Agreement dated as of March 31, 1992 between Hexcel Corporation and the registrant. (H). 10.5 -- Stock Purchase Agreement dated as of September 15, 1994 between Akzo Nobel AB, Akzo Nobel NV and the registrant, for the purchase of Nobel Chemicals AB. (K). 10.6 -- Stock Purchase Agreement dated as of September 15, 1994 between Akzo Nobel AB, Akzo Nobel and the registrant, for the purchase of Profarmaco Nobel, S.r.1. (K). 10.10 -- 1983 Incentive Stock Option Plan, as amended. (B). 10.11 -- 1987 Long-term Incentive Plan. (A) -- Exhibit (g). 10.12 -- 1987 Stock Option Plan. (B). 10.13 -- 1989 Senior Executive Stock Option Plan. (J). 10.14 -- 1992 Stock Option Plan. (J). 10.15 -- 1993 Senior Executive Stock Option Plan. (J). 10.16 -- 1994 Stock Option Plan. (J). 10.20 -- Form of Employment Agreement between the registrant and its executive officers named in the Revised Schedule of Parties thereto. (D) -- Exhibit 10.A. 10.21 -- Revised Schedule of Parties to Employment Agreement (exhibit 10.20 hereto). (G). 10.22 -- Cambrex Corporation Savings Plan. (I). 10.23 -- Cambrex Corporation Supplemental Retirement Plan. (L). 10.24 -- Deferred Compensation Plan of Cambrex Corporation. (L). 10.25 -- Cambrex Earnings Improvement Plan. (L). 10.26 -- Consulting Agreement dated December 15, 1994 between the registrant and Arthur I. Mendolia. (L). 10.27 -- Consulting Agreement dated December 15, 1994 between the registrant and Cyril C. Baldwin, Jr. (L). 10.28 -- Consulting Agreement between the registrant and James A. Mack. (L). 10.29 -- Additional Retirement Payment Agreement dated December 15, 1994 between the registrant and Arthur I. Mendolia. (L).---------------See legend on following page. 52 54 EXHIBIT NO. DESCRIPTION----------- ------------------------------------------------------------------------------ 10.30 -- Additional Retirement Payment Agreement dated December 15, 1994 between the registrant and Cyril C. Baldwin, Jr. (L). 10.31 -- Additional Retirement Payment Agreement between the registrant and James A. Mack. (L). 10.40 -- Registration Rights Agreement dated as of June 6, 1985 between the registrant and the purchasers of its Class D Convertible Preferred stock and 9% Convertible Subordinated Notes due 1997. (A) -- Exhibit 10(m). 10.41 -- Administrative Consent Order dated September 16, 1985 of the New Jersey Department of Environmental Protection to Cosan Chemical Corporation. (A) -- Exhibit 10(q). 10.50 -- Manufacturing Agreement dated as of July 1, 1991 between the registrant and A.L. Laboratories, Inc. (G). 11 -- Statement re computation of earnings per share. (L). 21 -- Subsidiaries of registrant. (L). 23 -- Consent of Coopers & Lybrand to the incorporation by reference of its report herein in Registration Statement Nos. 33-21374, 33-37791, 33-81780 and 33-81782 on Form S-8 of the registrant. (L). 24 -- Powers of Attorney to sign this report. (L). 27 -- Financial Data Schedule. (L). --------------- (A) Incorporated by reference to the indicated Exhibit to registrant's Registration Statement on Form S-1 (Registration No. 33-16419). (B) Incorporated by reference to registrant's Registration Statement on Form S-8 (Registration No. 33-21374) and Amendment No. 1. (C) Incorporated by reference to registrant's Annual Report on Form 10-K dated June 5, 1989. (D) Incorporated by reference to the indicated Exhibit to registrant's Annual Report on Form 10-K for 1989. (E) Incorporated by reference to the indicated Exhibit to registrant's Registration Statement on Form S-8 (Registration No. 33-37791). (F) Incorporated by reference to registrant's Current Report on Form 8-K dated July 1, 1991. (G) Incorporated by reference to the registrant's Annual Report on Form 10-K for 1991. (H) Incorporated by reference to the registrant's Current Report on Form 8-K dated April 10, 1992 and Amendment No. 1 to its Current Report. (I) Incorporated by reference to registrant's Registration Statement on Form S-8 (Registration No. 33-81780) dated July 20, 1994. (J) Incorporated by reference to registrant's Registration Statement on Form S-8 (Registration No. 33-81782) dated July 20, 1994. (K) Incorporated by reference to registrant's Current Report on Form 8-K dated October 26, 1994. (L) Filed herewith. 53 1 CAMBREX CORPORATION EXHIBIT 10.23 CAMBREX CORPORATION SUPPLEMENTAL RETIREMENT PLAN ARTICLE I INTRODUCTION The Cambrex Corporation Supplemental Executive Retirement Plan(the "Supplemental Plan") has been established effective January 1, 1994 topreserve certain benefits for selected officers and key employees (each, an"Employee") of Cambrex Corporation (the "Corporation") and any participatingsubsidiaries (a "Participating Subsidiary") which may not be provided under theCorporation's qualified pension plan (the "Retirement Plan") by reason of thedollar limitations contained in Sections 401(a)(17) of the Internal RevenueCode of 1986, as amended (the "Code") hereinafter referred to as the"Compensation Limit." The Supplemental Plan is intended to be a plan for thebenefit of a select group of management or highly compensated individuals, assuch terms are defined in the Employee Retirement Income Security Act of 1974,as amended ("ERISA"). ARTICLE II SUPPLEMENTARY RETIREMENT PROVISIONS 2.1. Eligibility. Each Employee who is a Participant in theRetirement Plan as of the date hereof and who is also an officer of theCorporation or is highly 2compensated shall be eligible to participate in the Supplementary RetirementProvisions of this Supplemental Plan (a "Participant"). 2.2. Vesting. Each Participant shall vest in the benefitsmade available hereunder at the same time and under the same circumstances asapply to the Retirement Plan benefits supplemented hereby. 2.3. Determination of Supplementary Retirement Benefits.Each Participant shall be entitled to receive an annual retirement benefithereunder equal to (i) the annual retirement benefit which would have beenpayable to such Participant under the Retirement Plan as in effect on theretirement date of such Participant but for the Compensation Limits, reduced by(ii) any retirement benefit actually payable to a Participant under theRetirement Plan and under any other plan, program or arrangement (includingindividual agreements) maintained by the Corporation. 2.4. Payment of Benefits. Amounts payable to a Participantin accordance with Article II shall be paid to such Participant at the sametime, in the same manner (including, with respect to death or survivorbenefits, to the same beneficiary) and subject to the same reductions as thebenefits payable to such Participant under the Retirement Plan. 2 3 ARTICLE III GENERAL PROVISIONS 3.1. No Rights to Specific Assets. Benefits payable underthe Supplemental Plan shall be paid directly from the general assets of theCorporation or a Participating Subsidiary. Nothing contained in thisSupplemental Plan and no action taken pursuant to the provisions of thisSupplemental Plan shall create or be construed to create a trust or separatefund of any kind or a fiduciary relationship between the Corporation or anyParticipating Subsidiary and any Participant, any designated beneficiary or anyother person. TO THE EXTENT THAT ANY PERSON ACQUIRES A RIGHT TO RECEIVEPAYMENTS UNDER THIS SUPPLEMENTAL PLAN SUCH RIGHT SHALL BE NO GREATER THAN THERIGHT OF AN UNSECURED GENERAL CREDITOR. Notwithstanding the forgoing, theCorporation may establish a grantor trust or purchase securities to assist itin meeting its obligations hereunder; provided, however, that in no event shallany Participant have any interest in such trust or property other than as anunsecured general creditor. 3.2. Committee. The Supplemental Plan shall be administeredby the Benefits Administration Committee. The Committee shall have, to theextent appropriate, the same 3 4powers, rights, duties and obligations with respect to the Supplemental Plan asprovided in this Supplemental Plan. 3.3. Non-Guarantee of Employment. Nothing contained in thisSupplemental Plan shall be construed as a contract of employment between theCorporation or a Participating Subsidiary and any Employee, or as a right ofany Employee to continued employment, or to affect the right of the Corporationor a Participating Subsidiary to discharge any of its Employees, with orwithout cause. 3.4. Interests Not Transferable. No supplemental benefitspayable at any time under the Supplemental Plan shall be subject in any mannerto alienation, sale, transfer, assignment, pledge, attachment or other legalprocess, or encumbrance of any kind. Any attempt to alienate, sell, transfer,assign, pledge or otherwise encumber any such benefits, whether currently orthereafter payable, shall be void. No supplemental benefit shall, in anymanner, be liable for or subject to the debts or liabilities of any personentitled to such benefits. If any person shall attempt to, or shall alienate,sell, transfer, assign, pledge or otherwise encumber his supplemental benefitsunder the Supplemental Plan, or if by any reason of his bankruptcy or otherevent happening at any time, such benefits would devolve upon any other personor would not be enjoyed by the 4 5person entitled thereto under the Supplemental Plan, then the BenefitsAdministration Committee, in its discretion, may terminate the interest in anysuch benefits of the person entitled thereto under the Supplemental Plan andhold or apply them to or for the benefit of such person entitled thereto underthe Supplemental Plan, his spouse, children, other dependents or designatedbeneficiary, or any of the above, in such manner as the Benefits AdministrationCommittee may deem proper. 3.5. Facility of Payment. Any amounts payable hereunder toany person under legal disability or who, in the judgment of the BenefitsAdministration Committee, is unable to properly manage his financial affairs,may be paid to the legal representative of such person, or may be applied forthe benefit of such person in any manner which the Committee may select. 3.6. Gender and Number. Words in the masculine gender shallinclude the feminine gender, the plural shall include the singular and thesingular shall include the plural. 3.7. Controlling Law. To the extent not superseded by thelaw of the United States, the law of the State of New Jersey shall becontrolling in all matters relating to the Supplemental Plan. 5 6 3.8. Action by Cambrex. Any action required of or permittedby the Corporation under the Supplemental Plan shall be by resolution of theCorporation's Board of Directors or the committee appointed by such Board ofDirectors. 3.9. Successors. This Supplemental Plan is binding on theCorporation and each Participating Subsidiary designated by the Corporation tobe covered by the Supplemental Plan and will inure to the benefit of anysuccessor of the Corporation or any such Participating Subsidiary whether bypurchase, merger, consolidation or otherwise. 3.10. Amendment and Termination. The Benefits AdministrationCommittee may, at any time, amend or terminate the Supplemental Plan; providedthat no such amendment or termination shall impair the rights of a Participantwith respect to any supplemental retirement benefits accrued under the Plan. 3.11. Legal Fees. In the event that any Participant (or thebeneficiary or legal representative of such Participant) shall make demand forpayment of benefits due under the terms of the Supplemental Plan and prevail asto any material aspect of such claim, the Corporation shall pay all of theParticipant's expenses in conjunction with pursuing such claim (including,without limitation, legal fees) and interest on the amount or amounts due fromthe date each 6 7such amount should have been paid hereunder in an amount equal to 10% per annumcompounded, semiannually. IN WITNESS WHEREOF, and as conclusive evidence of the adoptionof the Supplemental Plan, the Corporation has caused the Supplemental Plan tobe duly executed in its name and behalf by its proper officers thereunderauthorized as of January 1, 1994.ATTEST: CAMBREX CORPORATIONBy: _____________________ By: ______________________ Secretary 7 1 CAMBREX CORPORATION EXHIBIT 10.24 Deferred Compensation Plan of Cambrex Corporation Effective January 1, 1994 (As Amended and Restated as of January 1, 1995)1. Eligibility Each officer or other key employee (a "Key Employee") whoparticipates in the annual incentive compensation plan maintained by CambrexCorporation (the "Corporation") shall be eligible to participate in theDeferred Compensation Plan of Cambrex Corporation (the "Plan"), provided that,notwithstanding any other provision of the Plan to the contrary, the V.P. ofAdministration may impose such terms, conditions or limitations on theparticipation of any Key Employee or any class of Key Employees that he deemsnecessary or appropriate for the proper administration of the Plan. The V.P.of Administration shall provide a copy of the Plan to each Key Employeetogether with a form of letter which may be used by the Key Employee to notifythe Corporation of his election to participate in the Plan.2. Participation a. Bonus Deferral Election. On or before December 31st ofany calendar year, a Key Employee may elect to defer receipt of all or any partof any annual bonus payable in United States currency for services performed 2during such year which, but for such election, is expected to be paid to him inthe next following calendar year. b. Salary Deferral Election. On or before December 31st ofany calendar year, a Key Employee may elect to defer receipt of all or any partof that portion of his annual base salary payable in United States currency inthe following calendar year which exceeds the sum of (i) the Social Securitywage base with respect to old age, survivor and disability income taxes ineffect for such following calendar year and (ii) $10,000. Notwithstanding theforegoing, a Key Employee who (x) receives an annual base salary in UnitedStates currency in excess of the sum of (i) and (ii) above and (y) is notsubject to withholding for old age survivor and disability employment taxesunder U.S. law may elect to defer receipt of all or a portion of his annualbase salary for the following calendar year which is payable in United Statescurrency. c. Form and Duration of Deferral Election. An election todefer bonus or salary shall be made by written notice filed on a designatedform with the V.P. of Administration. The minimum amount that each KeyEmployee may defer under the Plan for each year shall be $5,000 (or such otheramount as the V.P. of Administration shall determine). Any such election shallcontinue in effect (including with 2 3respect to compensation payable for subsequent calendar years) unless and untilthe Key Employee revokes or modifies such election by written notice on adesignated form filed with the V.P. of Administration. Any such revocation ormodification of a deferral election shall become effective only with respect tocompensation payable in the calendar year following receipt of such revocationor modification by the V.P. of Administration. d. Renewal. A Key Employee who has revoked an election toparticipate in the Plan may file a new election to defer compensation payablein the calendar year following the year in which such election is filed.3. Key Employee's Account a. Establishment of Account. The Corporation shall maintaina separate memorandum account (the "Account") for each Key Employee who haselected to participate in the Plan, and shall make additions to andsubtractions from such Account as provided in this Section 3. b. Additions to Account. Compensation allocated to a KeyEmployee's Account pursuant to this Section 3 shall be credited to such Accountas of the date such compensation would otherwise have been paid to the KeyEmployee. c. Designation of Phantom Investment Funds. The BenefitsAdministration Committee shall select one or more 3 4mutual funds or other investment vehicles (the "Phantom Funds") which shall beused to determine the hypothetical investment experience of each Key Employee'sAccount under the Plan; provided, however, that unless the BenefitsAdministration Committee otherwise determines the Phantom Funds shall be theinvestment funds available to employees as investment options from time to timeunder the Company's qualified savings plan (the "Savings Plan"). d. Investment Election. Each Key Employee shall from time totime designate on a form approved by the V.P. of Administration the PhantomFund or Funds that shall determine the investment experience with respect tosuch Key Employee's Account; provided, however, that the V.P. of Administrationmay require that the Key Employee's Account be credited or debited as thoughsuch Account were invested in the same Phantom Funds, and in the samepercentages, as such Key Employee's account balance is invested from time totime under the Savings Plan. The V.P. of Administration may, in hisdiscretion, (i)establish minimum amounts (in terms of dollar amounts or apercentage of a Key Employee's Account), which may be allocated to any PhantomFund, (ii) preclude any Key Employee who is an executive officer of the Companyfrom designating any Phantom Fund which invests primarily in securities issuedby the Company, (iii) estab- 4 5lish rules regarding the time at which any such election (or any change in suchelection permitted under Section 3(e) shall become effective, and (iv) permitdifferent designations with respect to a Key Employee's existing Account balanceand amounts to be credited to such Account under Section 3.2 after the date theelection form is filed with the V.P. of Administration. If a Key Employee failsto make a valid election with respect to any portion of his Account (or if anysuch election ceases to be effective for any reason), such Key Employee shall bedeemed to have elected to have his entire Account deemed invested in the PhantomFund which the V.P. of Administration determines generally to have the leastrisk of loss of principal. e. Change in Designation of Phantom Fund. Effective as ofthe first business day of the calendar quarter commencing more than 10 businessdays after the proper form is filed with the V.P. of Administration (or suchother time as the V.P. of Administration shall permit), a Key Employee maychange the Phantom Funds designated with respect to all or any portion of hisAccount. Any such change shall comply with all rules applicable with respectto any initial designation of such Phantom Funds. f. Crediting of Phantom Investment Experience. As of thelast day of each calendar quarter (or such other 5 6time as the V.P. of Administration shall establish from time to time), each KeyEmployee's Account shall be credited or debited, as the case may be, with anamount equal to the net investment gain or loss which such Key Employee wouldhave realized had he actually invested in each Phantom Fund an amount equal tothe portion of his Account designated as deemed invested in such Phantom Fundduring that calendar quarter (or such other period as may have been establishedby the V.P. of Administration). g. No Actual Investment. Notwithstanding anything else inthis Section 3 to the contrary, no amount standing to the credit of any KeyEmployee's Account shall be set aside or invested in any actual fund on behalfof such Key Employee; provided, however, that, nothing in this Section 3 (g)shall be deemed to preclude the Company from making investments for its ownaccount in any Phantom Funds (whether directly or through a grantor trust) toassist it in meeting its obligations to the Key Employees hereunder.4. Distribution from Account a. Distribution Election. Each Key Employee shall file withthe V.P. of Administration a written election (a "Distribution Election") withrespect to the timing and manner of distribution of the aggregate amount, ifany, credited to his Account at any time. A Key Employee may 6 7elect to receive a distribution from his Account in one lump-sum payment, or insuch number of annual installments (not to exceed ten) as the Key Employee maydesignate. Subject to such limitations as the V.P. of Administration shallimpose, a Key Employee may also elect to receive all or a portion of theaggregate amount credited to his Account as of the first day of any calendaryear while he is an employee. If a distribution election is not made or ifsuch election does not apply to the entire balance in such Account, the balancein the Key Employee's Account shall be distributed in a single lump-sum paymentas soon as administratively possible after the first business day of thecalendar year immediately following the year of separation from employment. Inthe case of any distribution being made in annual installments, eachinstallment after the first installment shall be paid as soon asadministratively possible after the first business day of each calendar yearfollowing the year in which such first installment is paid until the entireamount subject such installment Distribution Election shall have been paid. b. Amendment of Distribution Election. A Key Employee may,at any time during active employment, elect to change the time at whichdistributions from his Account will commence; provided, however, that no suchelection shall be 7 8effective unless at least one full calendar year elapses between (i) the dateas of which such election is filed and (ii) (A) the date as of which adistribution would otherwise have commenced and (B) the date as which suchdistribution will commence under such election. If a Participant receives anydistribution from his Account while still eligible to make deferrals hereunder,the V.P. of Administration may suspend the Participant's right to deferadditional amounts Account during such calendar year in accordance with Section2. c. Amount of Installment Payments. Where the Key Employeereceives the balance of his Account in annual installments, the amount of eachinstallment shall be approximately equal to the product of (i) the balancecredited to such Account on the date of such payment and (ii) a fraction, thenumerator of which is one (1) and the denominator of which is the total numberof installments remaining to be paid at that time.5. Distribution on Death If a Key Employee shall die before payment of all amountscredited to the Key Employee's Account has been completed, the total unpaidbalance then credited to such Key Employee's Account shall be paid to the KeyEmployee's designated beneficiaries or estate in a single lump-sum 8 9payment as of the first business day of the first calendar month commencingafter the date of the Key Employee's death, or as soon, thereafter, oradministratively possible.6. Designation of a Beneficiary A Key Employee may designate a beneficiary or beneficiaries(which may be an entity other than a natural person) to receive any payments tobe made upon the Key Employee's death pursuant to Section 5 hereof. At anytime, and from time to time, any such designation may be changed or canceled bythe Key Employee without the consent of any beneficiary. Any such designation,change or cancellation must be made by written notice filed with the V.P. ofAdministration. If a Key Employee designates more than one beneficiary, anypayments to such beneficiaries made pursuant to Section 5 shall be made inequal shares unless the Key Employee has designated otherwise, in which casethe payments shall be made in the shares designated by the Key Employee. If nobeneficiary has been named by a Key Employee, payment shall be made to the KeyEmployee's spouse or, if the Key Employee has no spouse at the time of hisdeath, to the Key Employee's estate.7. Amendment and Termination The Benefits Administration Committee may, at any time, amendor terminate the Plan; provided no such amend- 9 10ment or termination shall impair the rights of a Key Employee with respect toamounts then credited to his Account under the Plan.8. Miscellaneous a. Unfunded Plan. The Corporation shall not be obligated tofund its liabilities under the Plan, the Account established for each KeyEmployee electing deferment shall not constitute trusts, and a Key Employeeshall have no claim against the Corporation or its assets other than as anunsecured general creditor. Without limiting the generality of the foregoing,the Key Employee's claim at any time shall be for the amount credited to suchKey Employee's Account at such time. Notwithstanding the forgoing, theCorporation may establish a grantor trust or purchase securities to assist itin meeting its obligations hereunder; provided, however, that in no event shallany Key Employee have any interest in such trust or property other than as anunsecured general creditor. b. Non-alienation. The right of a Key Employee to receive adistribution of the value of such Key Employee's Account payable pursuant tothe Plan shall not be subject to assignment or alienation. c. No Right to Continued Employment. Nothing in this Planshall be construed to give any Key Employee the 10 11right to continue in the employ of the Corporation or any of its subsidiaries. d. Legal Fees. In the event that any Key Employee (or thebeneficiary or legal representative of such Key Employee) shall make demand forpayment of benefits due under the terms of the Plan and prevail as to anymaterial aspect of such claim, the Corporation shall pay all of the KeyEmployee's expenses in conjunction with pursuing such claim (including, withoutlimitation, legal fees) and interest on the amount due from the date of suchdemand in an amount equal to the greater of (i) the amount of earnings creditedto the Key Employee's Account hereunder or (ii) 10% per annum compoundedsemi-annually. 11 1 CAMBREX CORPORATION EXHIBIT 10.25 1994 EARNINGS IMPROVEMENT PLAN The Cambrex Earnings Improvement Plan (EIP) is an executivecompensation arrangement designed to provide individual participant awards froma Bonus Pool based on the financial results of the company. The individualawards are based on individual percentage of salary targets which are used as aguideline only. The Bonus Pool is determined according to the following corporatefinancial results:BASE POOL: Net Income After Tax (after Bonus Pool deduction) times actualReturn On Investment (Net Income divided by Shareholder Equity plus FundedDebt), plusEARNINGS IMPROVEMENT: 25% on the increase in Net Income After Tax over theprior year.Individual payouts will be determined by the Office of the Chairman with theapproval of the Compensation Committee. These payouts will be based 60% on theCompany's financial results and 40% on individual performance measured againstkey personal objectives. For 1994 particular emphasis will be placed on eachindividual's contribution to increasing return on investment.For Cambrex executives, the individual payout will be based solely on overallcorporate results. Subsidiaries executives' payouts will be based on corporateresults adjusted for individual unit performance. If the subsidiary Net IncomeAfter Tax is less than 70% of budget, no payout will be made to participants atthat subsidiary.Individual awards will be capped at one times salary and the total Bonus Poolwill be capped at 18% of corporate Net Income After Tax. If Net Income AfterTax is equal to or less than the prior year's net income, the Bonus Pool willbe reduced by 15%. 1 CAMBREX CORPORATION EXHIBIT 10.26 CONSULTING AGREEMENT THIS AGREEMENT, made as of the 15th day of December, 1994, by andbetween CAMBREX CORPORATION, a Delaware corporation, having its principaloffices located at One Meadowlands Plaza, East Rutherford, New Jersey 07073(hereinafter referred to as the "Company"), and ARTHUR I. MENDOLIA, residing atRiver Road, Titusville, NJ 08560 (hereinafter referred to as the "Consultant"), W I T N E S S E T H: WHEREAS, the Consultant is knowledgeable and has extensive experiencein the business of the formulation, production, marketing and distribution ofchemicals and chemical products of various kinds and descriptions, and in themanaging, advising and administering of various companies and ventures engagedin such businesses; WHEREAS, by agreement dated October 26, 1989, the Company andConsultant have agreed that the Consultant shall provide certain services uponConsultant's severance from active employment with the Company, and the partieswish to amend the terms of such prior agreement; WHEREAS, the Company desires to continue the consulting services ofthe Consultant to promote its growth and development over the near and longerterms, and to provide Company with financial, consulting and advisory servicesas described herein (the "Services"), and the Consultant desires to continue tomake the Services available to Company on a regular and permanent basis, on theterms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the mutualcovenants and agreements hereinafter set forth, the Company and Consultanthereby agree as follows: Section 1. ENGAGEMENT. 1.1 The agreement between the parties dated October 26, 1989, ishereby canceled and replaced in its entirety by this Consulting Agreement andby an Additional Retirement Payment Agreement of even date herewith. 2 1.2 The Company hereby engages and retains the Consultant toprovide the Services and to perform the other duties provided for herein, andthe Consultant accepts such engagement with the Company on the terms andconditions set forth herein. Section 2. THE SERVICES. The Consultant shall, at the request of theChief Executive Officer of the Company, perform, faithfully and diligently, theServices and other consulting duties, provided that Consultant shall not berequired to devote more than two (2) days per week to the providing of theServices and other consulting duties. Section 3. TERM. This Agreement shall commence as of the date firstset forth above, and shall continue in full force and effect during Consultant'slifetime, unless sooner terminated as hereinafter provided in Section 8 of thisAgreement. Section 4. COMPENSATION. 4.1 In consideration of the performance of the Services andother consulting duties, the Company shall pay the Consultant a fee of OneHundred Thousand Dollars ($100,000.) per year, payable quarterly in advance onthe first day of each quarter, the payment of such amount to commence as of thedate Notice of Commencement is received from Consultant and be prorated forsuch quarter. 4.2 In the event that the Consultant shall be required totravel to perform the Services and other consulting duties assigned to him bythe Company, the Company shall reimburse the Consultant for first class airfare and other reasonable travel expenses and for reasonable meals and lodgingselected by the Consultant. 4.3 Except as may be required by the terms of a specific planor plans, on and after the date of this Agreement, the Consultant shall not beconsidered as having employee status during the term of this Agreement for thepurpose of any employee benefit plan applicable to the Company's employeesgenerally. 3 Section 5. NON-DISCLOSURE. 5.1 Consultant acknowledges that during the term of thisAgreement, he will have access to secret and confidential information (all suchinformation is hereinafter referred to as "Confidential Information") withrespect to some or all of the following: (a) product and business plans, budgets, salesforecasts, design plans, research and engineering data,inventions, methods, systems, processes, formulae and methods of manufacture, (b) customers, suppliers and employees, and (c) trade secrets. 5.2 Consultant agrees that (except as authorized in writingby the Company or required pursuant to legal or administrative process) he willnot reveal, divulge or make known to any person, firm or corporation any suchConfidential Information. 5.3 Consultant agrees that if after any termination of thisAgreement for any reason, he shall discover any such Confidential Informationin his possession, he shall forthwith deliver the same to the Company. 5.4 Consultant agrees that any breach or threatened breach byhim of any provision of this Section 5 shall entitle the Company, in additionto any other legal or equitable remedies available to it, to apply to any courtof competent jurisdiction to enjoin such breach or threatened breach withoutposting any bond or other security. Section 6. ASSIGNMENT, SUCCESSORS, ETC. This Agreement shall bebinding upon any successors (whether direct or indirect, by purchase, merger,consolidation or otherwise) to all or substantially all of the business and/orassets of the Company. Section 7. RELATIONSHIP BETWEEN THE PARTIES. The relationship ofConsultant to the Company shall be that of an independent contractor.Consequently, the Consultant shall have no authority to act for or on behalf ofthe Company or to bind the Company without its express approval in writing. 4 Section 8. TERMINATION. Notwithstanding any provision hereof, thisAgreement shall terminate and the Consultant shall cease to be engaged andretained by the Company upon the occurrence of any of the following events: 8.1 The mutual agreement of the Consultant and the Company; or 8.2 The death of the Consultant; or 8.3 The inability of Consultant to perform the Services andother consulting duties for any reason whatever. Section 9. CONSULTANT'S COVENANTS. During the term of this Agreement,Consultant will not, without the prior written consent of the Company, directlyor indirectly: (a) own, manage, operate, control or participate in theownership, management, operation or control of, or be connected as astockholder, partner, joint venturer or otherwise with, or accept employment ofany kind with, any business which, or any business or organization any part ofwhich, competes with the businesses of the Company and its subsidiaries as suchbusinesses are now conducted, in any geographical area in which such businessesnow are or heretofore have been conducted (except that nothing herein containedshall prevent Consultant from investing as a passive investor in securities ofa corporation which are publicly traded on a National Securities Exchange (assuch term is used in the Securities Exchange Act of 1934) provided suchinvestment shall at no time exceed 5% of the issued and outstanding capitalstock of such corporation); or (b) solicit, cause or authorize, directly or indirectly, to besolicited, for or on behalf of himself or third parties from parties who are orwere customers for products now or heretofore produced by the businesses of theCompany and its subsidiaries and sales of products which are the same as, orcompetitive with, the products now or heretofore produced by such businesses,or accept or cause or authorize, directly or indirectly, to be accepted, for oron behalf of himself or third parties, and such business from any suchcustomer; or (c) solicit or cause or authorize, directly or indirectly, tobe solicited for employment for or on behalf of himself or third parties, anyperson who is an employee of the Company or any of its subsidiaries as of thedate of cessation of Consultant's employment with the Company or any of itssubsidiaries. 5 Section 10. NOTICES. Any and all notices, designations, consents,offers, acceptances or any other communication provided for herein shall besufficient if given in writing by registered or certified mail, return receiptrequested, to the party to whom such notice is directed at the party's addressfirst above written. Section 11. FAILURE TO DEMAND STRICT PERFORMANCE. The Company's orthe Consultant's failure to demand strict performance and compliance with anypart of this Agreement during the Consultant's engagement shall not be deemedto be a waiver of any of the Company's or the Consultant's rights under thisAgreement or by operation of law. Section 12. RELIEF. In the event that either party seeks judicialenforcement of this Agreement, seeking either legal or equitable relief, orboth, the prevailing party shall be entitled to recover from the other thereasonable attorneys' fees and costs which the prevailing party will pay orbecome obligated to pay. The Consultant consents and agrees to venue andservice of process in New Jersey. Section 13. SEVERABILITY. If any provision or portion of thisAgreement shall be determined by a court of competent jurisdiction to beinvalid or unenforceable, the remaining provisions or portions of thisAgreement shall be unaffected thereby and shall remain in full force and effectto the fullest extent permitted by law. Section 14. NO ASSIGNMENTS. This Agreement is personal to each ofthe parties hereto, and neither party may assign nor delegate any of the rightsor obligations hereunder without first obtaining the written consent of theother party. Section 15. ENTIRE AGREEMENT. This Agreement contains all theunderstandings and representations between the parties hereto pertaining to thesubject matter hereof and supersedes all undertakings and agreements, whetheroral or in writing, if there be any, previously entered into by them withrespect thereto. Section 16. AMENDMENTS. No provision of this Agreement may beamended or waived unless such amendment or waiver is agreed to in writing bythe parties hereto. Except as otherwise specifically provided in thisAgreement, no waiver by any party hereto of any breach of any condition orprovision of this Agreement shall be deemed a waiver of a similar or dissimilarcondition or provision at the same or any prior or subsequent time. 6 Section 17. APPLICABLE LAW. This Agreement shall be governed in allrespects, whether as to validity, construction, capacity, performance orotherwise, by the laws of the State of New Jersey. Section 18. HEADINGS. The Section headings used in this Agreementare included solely for convenience and shall not affect, or be used inconnection with, the interpretation of this Agreement. Section 19. COUNTERPARTS. This Agreement may be executed incounterparts, each of which shall be deemed an original and which togethershall constitute a single instrument. IN WITNESS WHEREOF, the Company has caused these presents tobe signed by its duly authorized corporate officers and its corporate seal tobe hereunto affixed, and the Consultant has hereunto affixed his hand and seal,the day and year first above written.ATTEST: CAMBREX CORPORATION___________________________ BY:_____________________________ C. C. BALDWIN, JR. Chairman of the BoardWitness:___________________________ ________________________________ ARTHUR I. MENDOLIA, Consultant 1 CAMBREX CORPORATION EXHIBIT 10.27 CONSULTING AGREEMENT THIS AGREEMENT, made as of the 15th day of December, 1994 by andbetween CAMBREX CORPORATION, a Delaware corporation, having its principaloffices located at One Meadowlands Plaza, East Rutherford, New Jersey 07073(hereinafter referred to as the "Company"), and CYRIL C. BALDWIN, JR., residingat 751 Manatee Cove, Johns Island, Vero Beach, FL 32963 (hereinafter referredto as the "Consultant"), W I T N E S S E T H: WHEREAS, the Consultant is currently the Chairman and Chief ExecutiveOfficer of the Company, and is knowledgeable and has extensive experience inthe business of the formulation, production, marketing and distribution ofchemicals and chemical products of various kinds and descriptions, and in themanaging, advising and administering of various companies and ventures engagedin such businesses; WHEREAS, the Company desires to retain the consulting services of theConsultant after his separation from active employment, to promote its growthand development over the near and longer terms, and to provide Company withfinancial, consulting and advisory services as described herein (the"Services"), and the Consultant desires to make the Services available tocompany on a regular and permanent basis, on the terms and conditionshereinafter set forth; WHEREAS, by agreement dated September 30, 1990, the Company andConsultant have agreed that the Consultant shall provide certain services uponConsultant's severance from active employment with the Company, and the partieswish to amend the terms of such prior agreement; NOW, THEREFORE, in consideration of the premises and the mutualcovenants and agreements hereinafter set forth, the Company and Consultanthereby agree as follows: Section 1. ENGAGEMENT. 1.1 The agreement between the parties dated September 30, 1990, ishereby canceled and replaced in its entirety by this Consulting Agreement andby an Additional Retirement Payment Agreement of even date herewith. 2 1.2 The Company hereby engages and retains the Consultant to providethe Services and to perform the other duties provided for herein, and theConsultant accepts such engagement with the Company on the terms and conditionsset forth herein. Section 2. THE SERVICES. The Consultant shall, at the request of theChief Executive Officer of the Company, perform, faithfully and diligently, theServices and other consulting duties, provided that Consultant shall not berequired to devote more than two (2) days per week to the providing of theServices and other consulting duties. Section 3. TERM. This Agreement shall commence as of the dateConsultant gives Company written Notice of Commencement, but not sooner than thefirst day of January, 1994, and shall continue in full force and effect duringConsultant's lifetime, unless sooner terminated as hereinafter provided inSection 8 of this Agreement. Section 4. COMPENSATION. 4.1 In consideration of the performance of the Services andother consulting duties, the Company shall pay the Consultant a fee of OneHundred Forty Thousand Dollars ($140,000.) per year, such amount to be proratedfor portions of a year, from the date Notice of Commencement is received andcontinuing as provided herein, such amount to be payable on the last day ofeach quarter commencing with the quarter in which Notice of Commencement isreceived from Consultant. 4.2 In the event that the Consultant shall be required totravel to perform the Services and other consulting duties assigned to him bythe Company, the Company shall reimburse the Consultant for first class airfare and other reasonable travel expenses and for reasonable meals and lodgingselected by the Consultant. 4.3 Except as may be required by the terms of a specific planor plans, on and after the date Consultant gives Notice of Commencement underthis Agreement, the Consultant shall not be considered as having employeestatus during the term of this Agreement for the purpose of any employeebenefit plan applicable to the Company's employees generally. 3 Section 5. NON-DISCLOSURE. 5.1 Consultant acknowledges that during the term of thisAgreement, he will have access to secret and confidential information (all suchinformation is hereinafter referred to as "Confidential Information") withrespect to some or all of the following: (a) product and business plans, budgets, sales forecasts, design plans, research and engineering data, inventions, methods, systems, processes, formulae and methods of manufacture; (b) customers, suppliers and employees; and (c) trade secrets. 5.2 Consultant agrees that (except as authorized in writingby the Company or required pursuant to legal or administrative process) he willnot reveal, divulge or make known to any person, firm or corporation any suchConfidential Information. 5.3 Consultant agrees that if after any termination of thisAgreement for any reason, he shall discover any such Confidential Informationin his possession, he shall forthwith deliver the same to the Company. 5.4 Consultant agrees that any breach or threatened breach byhim of any provision of this Section 5 shall entitle the Company, in additionto any other legal or equitable remedies available to it, to apply to any courtof competent jurisdiction to enjoin such breach or threatened breach withoutposting any bond or other security. Section 6. ASSIGNMENT, SUCCESSORS, ETC. This Agreement shall bebinding upon any successors (whether direct or indirect, by purchase, merger,consolidation or otherwise) to all or substantially all of the business and/orassets of the Company. Section 7. RELATIONSHIP BETWEEN THE PARTIES. The relationship ofConsultant to the Company shall be that of an independent contractor.Consequently, the Consultant shall have no authority to act for or on behalf ofthe Company or to bind the Company without its express approval in writing. 4 Section 8. TERMINATION. Notwithstanding any provision hereof, thisAgreement shall terminate and the Consultant shall cease to be engaged andretained by the Company upon the occurrence of any of the following events: 8.1 The mutual agreement of the Consultant and the Company; or 8.2 The death of the Consultant; or 8.3 The inability of Consultant to perform the Services andother consulting duties for any reason whatever. Section 9. CONSULTANT'S COVENANTS. During the term of this Agreement,Consultant will not, without the prior written consent of the Company, directlyor indirectly: 9.1 own, manage, operate, control or participate in theownership, management, operation or control of, or be connected as astockholder, partner, joint venturer or otherwise with, or accept employment ofany kind with, any business which, or any business or organization any part ofwhich, competes with the businesses of the Company and its subsidiaries as suchbusinesses are now conducted, in any geographical area in which such businessesnow are or heretofore have been conducted (except that nothing herein containedshall prevent Consultant from investing as a passive investor in securities ofa corporation which are publicly traded on a National Securities Exchange (assuch term is used in the Securities Exchange Act of 1934) provided suchinvestment shall at no time exceed 5% of the issued and outstanding capitalstock of such corporation); or 9.2 solicit, cause or authorize, directly or indirectly, tobe solicited, for or on behalf of himself or third parties from parties who areor were customers for products now or heretofore produced by the businesses ofthe Company and its subsidiaries and sales of products which are the same as,or competitive with, the products now or heretofore produced by suchbusinesses, or accept or cause or authorize, directly or indirectly, to beaccepted, for or on behalf of himself or third parties, and such business fromany such customer; or 9.3 solicit or cause or authorize, directly or indirectly, tobe solicited for employment for or on behalf of himself or third parties, anyperson who is an employee of the Company or any of its subsidiaries as of thedate of cessation of Consultant's employment with the Company or any of itssubsidiaries. Section 10. NOTICES. Any and all notices, designations, consents,offers, acceptances or any other communication provided for herein shall besufficient if given in writing by registered or certified mail, return receiptrequested, to the party to whom such notice is directed at the party's addressfirst above written. 5 Section 11. FAILURE TO DEMAND STRICT PERFORMANCE. The Company's orthe Consultant's failure to demand strict performance and compliance with anypart of this Agreement during the Consultant's engagement shall not be deemedto be a waiver of any of the Company's or the Consultant's rights under thisAgreement or by operation of law. Section 12. RELIEF. In the event that either party seeks judicialenforcement of this Agreement, seeking either legal or equitable relief, orboth, the prevailing party shall be entitled to recover from the other thereasonable attorneys' fees and costs which the prevailing party will pay orbecome obligated to pay. The Consultant consents and agrees to venue andservice of process in New Jersey. Section 13. SEVERABILITY. If any provision or portion of thisAgreement shall be determined by a court of competent jurisdiction to beinvalid or unenforceable, the remaining provisions or portions of thisAgreement shall be unaffected thereby and shall remain in full force and effectto the fullest extent permitted by law. Section 14. NO ASSIGNMENTS. This Agreement is personal to each ofthe parties hereto, and neither party may assign nor delegate any of the rightsor obligations hereunder without first obtaining the written consent of theother party. Section 15. ENTIRE AGREEMENT. This Agreement contains all theunderstandings and representations between the parties hereto pertaining to thesubject matter hereof and supersedes all undertakings and agreements, whetheroral or in writing, if there be any, previously entered into by them withrespect thereto. Section 16. AMENDMENTS. No provision of this Agreement may beamended or waived unless such amendment or waiver is agreed to in writing bythe parties hereto. Except as otherwise specifically provided in thisAgreement, no waiver by any party hereto of any breach of any condition orprovision of this Agreement shall be deemed a waiver of a similar or dissimilarcondition or provision at the same or any prior or subsequent time. Section 17. APPLICABLE LAW. This Agreement shall be governed in allrespects, whether as to validity, construction, capacity, performance orotherwise, by the laws of the State of New Jersey. 6 Section 18. HEADINGS. The Section headings used in this Agreementare included solely for convenience and shall not affect, or be used inconnection with, the interpretation of this Agreement. Section 19. COUNTERPARTS. This Agreement may be executed incounterparts, each of which shall be deemed an original and which togethershall constitute a single instrument. IN WITNESS WHEREOF, the Company has caused these presents tobe signed by its duly authorized corporate officers and its corporate seal tobe hereunto affixed, and the Consultant has hereunto affixed his hand and seal,the day and year first above written.ATTEST: CAMBREX CORPORATION___________________________________ BY:______________________________ JAMES A. MACK President & Chief Operating OfficerWitness:___________________________________ __________________________________ CYRIL C. BALDWIN, JR., Consultant 1 CAMBREX CORPORATION EXHIBIT 10.28 CONSULTING AGREEMENT THIS AGREEMENT, made as of the 26th day of January, 1995 by andbetween CAMBREX CORPORATION, a Delaware corporation, having its principaloffices located at One Meadowlands Plaza, East Rutherford, New Jersey 07073(hereinafter referred to as the "Company"), and JAMES A. MACK, residing at 51Bermuda Road, Westport, CT 06880 (hereinafter referred to as the"Consultant"). W I T N E S S E T H: WHEREAS, the Consultant is currently the President and Chief ExecutiveOfficer of the Company, and is knowledgeable and has extensive experience inthe business of the formulation, production, marketing and distribution ofchemicals and chemical products of various kinds and descriptions, and in themanaging, advising and administering of various companies and ventures engagedin such businesses; WHEREAS, the Company desires to retain the consulting services of theConsultant after his separation from active employment, to promote its growthand development over the near and longer terms, and to provide Company withfinancial, consulting and advisory services as described herein (the"Services"), and the Consultant desires to make the Services available tocompany on a regular and permanent basis, on the terms and conditionshereinafter set forth; NOW, THEREFORE, in consideration of the premises and the mutualcovenants and agreements hereinafter set forth, the Company and Consultanthereby agree as follows: Section 1. ENGAGEMENT. The Company hereby agrees to engage and retainthe Consultant to provide the Services and to perform the other duties providedfor herein, and the Consultant agrees to accept such engagement with theCompany, each on the terms and conditions set forth herein. 2 Section 2. THE SERVICES. The Consultant shall, at the request of theChief Executive Officer of the Company, perform, faithfully and diligently, theServices and other consulting duties, provided that Consultant shall not berequired to devote more than two (2) days per week to the providing of theServices and other consulting duties. Section 3. TERM. This Agreement shall commence as of the dateConsultant gives Company written Notice of Commencement, but not sooner thanthe first day of January, 2000, and shall continue in full force and effectduring Consultant's lifetime, unless sooner terminated as hereinafter providedin Section 8 of this Agreement, provided that if a "Change in Control" of theCorporation shall occur, the Notice may be given at any time following suchChange. For the purpose of this Agreement, a "Change of Control" shall meanthe acquisition (other than by or from the Corporation or any employee benefitplan of the Corporation) by any person or group of beneficial ownership oftwenty percent (20%) or more of the then outstanding shares of Stock of theCorporation; or individuals who, as of the date hereof, constitute the Board ofDirectors of the Corporation (the "Board" and as of the date hereof the"Incumbent Board") cease for any reason to constitute at least a majority ofthe Board; provided that any person becoming a member of the Board subsequentto the date hereof whose election (other than a nomination of an individualwhose initial assumption of office is in connection with an actual orthreatened election contest relating to the election of the directors of theCorporation, as such terms are used in Rule 14a-11 of Regulation 14Apromulgated under the Exchange Act) was approved by a vote of at least amajority of the directors then comprising the Incumbent Board shall be, forpurposes of this Agreement, considered a member of the Incumbent Board; orapproval by the stockholders of the Corporation of either a reorganization, ormerger, or consolidation, with respect to which persons who were thestockholders of the Corporation immediately prior to such reorganization,merger or consolidation do not, immediately thereafter, own more than fiftypercent (50%) of the combined voting power entitled to vote generally in theelection of directors of the reorganized, merged or consolidated entity's thenoutstanding voting securities, or a liquidation or dissolution of theCorporation, or the sale of all or substantially all of the assets of theCorporation; or any other event or series of events which, notwithstanding anyof the foregoing provisions to the contrary, is determined by a majority of theIncumbent Board to constitute a Change of Control for the purposes of thisAgreement. Section 4. COMPENSATION. 4.1 In consideration of the performance of the Services andother consulting duties, the Company shall pay the Consultant a fee of OneHundred Thousand Dollars ($100,000.) per year, such amount to be prorated forportions of a year, from the date Notice of Commencement is received andcontinuing as provided herein, such amount to be payable on the last day ofeach quarter commencing with the quarter in which Notice of Commencement isreceived from Consultant. 3 4.2 In the event that the Consultant shall be required totravel to perform the Services and other consulting duties assigned to him bythe Company, the Company shall reimburse the Consultant for first class airfare and other reasonable travel expenses and for reasonable meals and lodgingselected by the Consultant. 4.3 Except as may be required by the terms of a specific planor plans, on and after the date Consultant gives Notice of Commencement underthis Agreement, the Consultant shall not be considered as having employeestatus during the term of this Agreement for the purpose of any employeebenefit plan applicable to the Company's employees generally. Section 5. NON-DISCLOSURE. 5.1 Consultant acknowledges that during the term of thisAgreement, he will have access to secret and confidential information (all suchinformation is hereinafter referred to as "Confidential Information") withrespect to some or all of the following: (a) product and business plans, budgets, sales forecasts, design plans, research and engineering data, inventions, methods, systems, processes, formulae and methods of manufacture; (b) customers, suppliers and employees; and (c) trade secrets. 5.2 Consultant agrees that (except as authorized in writingby the Company or required pursuant to legal or administrative process) he willnot reveal, divulge or make known to any person, firm or corporation any suchConfidential Information. 5.3 Consultant agrees that if after any termination of thisAgreement for any reason, he shall discover any such Confidential Informationin his possession, he shall forthwith deliver the same to the Company. 5.4 Consultant agrees that any breach or threatened breach byhim of any provision of this Section 5 shall entitle the Company, in additionto any other legal or equitable remedies available to it, to apply to any courtof competent jurisdiction to enjoin such breach or threatened breach withoutposting any bond or other security. Section 6. ASSIGNMENT, SUCCESSORS, ETC. This Agreement shall bebinding upon any successors (whether direct or indirect, by purchase, merger,consolidation or otherwise) to all or substantially all of the business and/orassets of the Company. 4 Section 7. RELATIONSHIP BETWEEN THE PARTIES. The relationship ofConsultant to the Company shall be that of an independent contractor.Consequently, the Consultant shall have no authority to act for or on behalf ofthe Company or to bind the Company without its express approval in writing. Section 8. TERMINATION. Notwithstanding any provision hereof, thisAgreement shall terminate and the Consultant shall cease to be engaged andretained by the Company upon the occurrence of any of the following events: 8.1 The mutual agreement of the Consultant and the Company; or 8.2 The death of the Consultant; or 8.3 The inability of Consultant to perform the Services andother consulting duties for any reason whatever. Section 9. CONSULTANT'S COVENANTS. During the term of this Agreement,Consultant will not, without the prior written consent of the Company, directlyor indirectly: 9.1 own, manage, operate, control or participate in theownership, management, operation or control of, or be connected as astockholder, partner, joint venturer or otherwise with, or accept employment ofany kind with, any business which, or any business or organization any part ofwhich, competes with the businesses of the Company and its subsidiaries as suchbusinesses are now conducted, in any geographical area in which such businessesnow are or heretofore have been conducted (except that nothing herein containedshall prevent Consultant from investing as a passive investor in securities ofa corporation which are publicly traded on a National Securities Exchange (assuch term is used in the Securities Exchange Act of 1934) provided suchinvestment shall at no time exceed 5% of the issued and outstanding capitalstock of such corporation); or 9.2 solicit, cause or authorize, directly or indirectly, tobe solicited, for or on behalf of himself or third parties from parties who areor were customers for products now or heretofore produced by the businesses ofthe Company and its subsidiaries and sales of products which are the same as,or competitive with, the products now or heretofore produced by suchbusinesses, or accept or cause or authorize, directly or indirectly, to beaccepted, for or on behalf of himself or third parties, and such business fromany such customer; or 9.3 solicit or cause or authorize, directly or indirectly, tobe solicited for employment for or on behalf of himself or third parties, anyperson who is an employee of the Company or any of its subsidiaries as of thedate of cessation of Consultant's employment with the Company or any of itssubsidiaries. 5 Section 10. NOTICES. Any and all notices, designations, consents,offers, acceptances or any other communication provided for herein shall besufficient if given in writing by registered or certified mail, return receiptrequested, to the party to whom such notice is directed at the party's addressfirst above written. Section 11. FAILURE TO DEMAND STRICT PERFORMANCE. The Company's orthe Consultant's failure to demand strict performance and compliance with anypart of this Agreement during the Consultant's engagement shall not be deemed tobe a waiver of any of the Company's or the Consultant's rights under thisAgreement or by operation of law. Section 12. RELIEF. In the event that either party seeks judicialenforcement of this Agreement, seeking either legal or equitable relief, orboth, the prevailing party shall be entitled to recover from the other thereasonable attorneys' fees and costs which the prevailing party will pay orbecome obligated to pay. The Consultant consents and agrees to venue andservice of process in New Jersey. Section 13. SEVERABILITY. If any provision or portion of thisAgreement shall be determined by a court of competent jurisdiction to beinvalid or unenforceable, the remaining provisions or portions of thisAgreement shall be unaffected thereby and shall remain in full force and effectto the fullest extent permitted by law. Section 14. NO ASSIGNMENTS. This Agreement is personal to each ofthe parties hereto, and neither party may assign nor delegate any of the rightsor obligations hereunder without first obtaining the written consent of theother party. Section 15. ENTIRE AGREEMENT. This Agreement contains all theunderstandings and representations between the parties hereto pertaining to thesubject matter hereof and supersedes all undertakings and agreements, whetheroral or in writing, if there be any, previously entered into by them withrespect thereto. Section 16. AMENDMENTS. No provision of this Agreement may beamended or waived unless such amendment or waiver is agreed to in writing bythe parties hereto. Except as otherwise specifically provided in thisAgreement, no waiver by any party hereto of any breach of any condition orprovision of this Agreement shall be deemed a waiver of a similar or dissimilarcondition or provision at the same or any prior or subsequent time. Section 17. APPLICABLE LAW. This Agreement shall be governed in allrespects, whether as to validity, construction, capacity, performance orotherwise, by the laws of the State of New Jersey. 6 Section 18. HEADINGS. The Section headings used in this Agreementare included solely for convenience and shall not affect, or be used inconnection with, the interpretation of this Agreement. Section 19. COUNTERPARTS. This Agreement may be executed incounterparts, each of which shall be deemed an original and which togethershall constitute a single instrument. IN WITNESS WHEREOF, the Company has caused these presents tobe signed by its duly authorized corporate officers and its corporate seal tobe hereunto affixed, and the Consultant has hereunto affixed his hand and seal,the day and year first above written.ATTEST: CAMBREX CORPORATION___________________________________ BY:_____________________________ C.C.BALDWIN, JR. Chairman of the BoardWitness:___________________________________ ________________________________ JAMES A. MACK Consultant 1 CAMBREX CORPORATION EXHIBIT 10.29 ADDITIONAL RETIREMENT PAYMENT AGREEMENT THIS AGREEMENT, made as of the 15th day of December, 1994 by andbetween CAMBREX CORPORATION, a Delaware corporation, having its principaloffices located at One Meadowlands Plaza, East Rutherford, New Jersey 07073(hereinafter referred to as the "Company"), and ARTHUR I. MENDOLIA, residing atRiver Road, Titusville, NJ 08560 (hereinafter referred to as the "Employee"). W I T N E S S E T H: WHEREAS, the Employee has or will provide services to the Company fora period of years both as an employee and as a consultant thereafter; and WHEREAS, Employee and the Company wish to provide for supplementalretirement payments to be made to Employee commencing on the date when he is nolonger able to provide services to the Company; NOW, THEREFORE, in consideration of the premises and the mutualcovenants and agreements hereinafter set forth, the Company and Employee herebyagree as follows: Section 1. ADDITIONAL RETIREMENT BENEFITS. Commencing at the time whenthe Employee receives no further compensation as an employee or fees as aconsultant, and Employee has retiree status, the Company hereby agrees to pay toEmployee, in addition to any other payment based on retirement which may be dueto Employee, an additional retirement benefit, the amount of One HundredThousand Dollars ($100,000.) per year (prorated for portions of a year andpayable on the last day of each quarter) as an additional retirement benefit,during the remainder of Employee's lifetime. 2 Section 2. PAYMENT OF ADDITIONAL BENEFITS. Amounts payable to Employeeunder this agreement shall be payable to Employee only during his lifetime,without any right of survivorship, and shall be subject to the applicablereductions that are similar to those applicable to the benefits payable to suchParticipant under the Company's Retirement Plan. Section 3. NO RIGHTS TO SPECIFIC ASSETS. Additional benefits payableunder this agreement shall be paid directly from the general assets of theCompany. Nothing contained in this agreement and no action taken pursuant heretoshall create or be construed to create a trust or separate fund of any kind or afiduciary relationship between the Company and the Employee or any other person.TO THE EXTENT THAT EMPLOYEE ACQUIRES A RIGHT TO RECEIVE PAYMENTS UNDER THISAGREEMENT SUCH RIGHT SHALL BE NO GREATER THAN THE RIGHT OF AN UNSECURED GENERALCREDITOR. Notwithstanding the forgoing, the Company may establish a grantortrust or purchase securities to assist it in meeting its obligations hereunder;provided, however, that in no event shall Employee have any interest in suchtrust or property other than as an unsecured general creditor. Section 4. INTERESTS NOT TRANSFERRABLE. No additional benefits payableunder this Agreement shall be subject in any manner to alienation, sale,transfer, assignment, pledge, attachment or other legal process, or encumbranceof any kind. Any attempt to alienate, sell, transfer, assign, pledge orotherwise encumber any such benefits, whether currently or thereafter payable,shall be void. No additional payment shall, in any manner, be liable for orsubject to the debts or liabilities of any person entitled to such benefits. IfEmployee shall attempt to, or shall alienate, sell, transfer, assign, pledge orotherwise encumber his additional benefits hereunder, or if by reason of hisbankruptcy or other event happening at any time, such benefits would devolveupon any other person or would not be enjoyed by Employee, then the Company may,in its discretion, terminate the interest of Employee in any such benefits andhold or apply them to the benefit of the Employee, in such manner as the Companymay deem proper. Section 5. FACILITY OF PAYMENT. Any amounts payable hereunder toEmployee who is under legal disability, may be paid to the legal representativeof Employee. Section 6. SUCCESSORS. This agreement is binding upon the Company andwill inure to the benefit of any successor of the Company whether by purchase,merger, consolidation or otherwise. 3 Section 7. NOTICES. Any and all notices, designations, consents,offers, acceptances or any other communication provided for herein shall besufficient if given in writing by registered or certified mail, return receiptrequested, to the party to whom such notice is directed at the party's addressfirst above written. Section 8. SEVERABILITY. If any provision or portion of this Agreementshall be determined by a court of competent jurisdiction to be invalid orunenforceable, the remaining provisions or portions of this Agreement shall beunaffected thereby and shall remain in full force and effect to the fullestextent permitted by law. Section 9. ENTIRE AGREEMENT. This Agreement contains all theunderstandings and representations between the parties hereto pertaining to thesubject matter hereof and supersedes all undertakings and agreements, whetheroral or in writing, if there be any, previously entered into by them withrespect thereto. Section 10. AMENDMENTS. No provision of this Agreement may beamended or waived unless such amendment or waiver is agreed to in writing bythe parties hereto. Except as otherwise specifically provided in thisAgreement, no waiver by any party hereto of any breach of any condition orprovision of this Agreement shall be deemed a waiver of a similar or dissimilarcondition or provision at the same or any prior or subsequent time. Section 11. APPLICABLE LAW. This Agreement shall be governed in allrespects, whether as to validity, construction, capacity, performance orotherwise, by the laws of the State of New Jersey. Section 12. HEADINGS. The Section headings used in this Agreementare included solely for convenience and shall not affect, or be used inconnection with, the interpretation of this Agreement. Section 13. COUNTERPARTS. This Agreement may be executed incounterparts, each of which shall be deemed an original and which togethershall constitute a single instrument. 4 IN WITNESS WHEREOF, the Company has caused these presents tobe signed by its duly authorized corporate officers and its corporate seal tobe hereunto affixed, and the Employee has hereunto affixed his hand and seal,the day and year first above written.ATTEST: CAMBREX CORPORATION___________________________________ BY:_____________________________ C.C.BALDWIN, JR. Chairman of the BoardWitness:___________________________________ ________________________________ ARTHUR I. MENDOLIA, Employee 1 CAMBREX CORPORATION EXHIBIT 10.30 ADDITIONAL RETIREMENT PAYMENT AGREEMENT THIS AGREEMENT, made as of the 15th day of December, 1994 by andbetween CAMBREX CORPORATION, a Delaware corporation, having its principaloffices located at One Meadowlands Plaza, East Rutherford, New Jersey 07073(hereinafter referred to as the "Company"), and CYRIL C. BALDWIN, JR., residingat 751 Manatee Cove, Johns Island, Vero Beach, FL 32963 (hereinafter referredto as the "Employee"), W I T N E S S E T H: WHEREAS, the Employee has or will provide services to the Company fora period of years both as an employee and as a consultant thereafter; and WHEREAS, Employee and the Company wish to provide for supplementalretirement payments to be made to Employee commencing on the date when he is nolonger able to provide services to the Company; NOW, THEREFORE, in consideration of the premises and the mutualcovenants and agreements hereinafter set forth, the Company and Employee herebyagree as follows: Section 1. ADDITIONAL RETIREMENT BENEFITS. Commencing at the time whenthe Employee receives no further compensation as an employee or fees as aconsultant, and Employee has retiree status, the Company hereby agrees to pay toEmployee, in addition to any other payment based on retirement which may be dueto Employee, an additional retirement benefit, the amount of One Hundred FortyThousand Dollars ($140,000.) per year (prorated for portions of a year andpayable on the last day of each quarter) as an additional retirement benefit,during the remainder of Employee's lifetime. Section 2. PAYMENT OF ADDITIONAL BENEFITS. Amounts payable to Employeeunder this agreement shall be payable to Employee only during his lifetime,without any right of survivorship, and shall be subject to the applicablereductions that are similar to those applicable to the benefits payable to suchParticipant under the Company's Retirement Plan. 2 Section 3. NO RIGHTS TO SPECIFIC ASSETS. Additional benefits payableunder this agreement shall be paid directly from the general assets of theCompany. Nothing contained in this agreement and no action taken pursuant heretoshall create or be construed to create a trust or separate fund of any kind or afiduciary relationship between the Company and the Employee or any other person.TO THE EXTENT THAT EMPLOYEE ACQUIRES A RIGHT TO RECEIVE PAYMENTS UNDER THISAGREEMENT SUCH RIGHT SHALL BE NO GREATER THAN THE RIGHT OF AN UNSECURED GENERALCREDITOR. Notwithstanding the forgoing, the Company may establish a grantortrust or purchase securities to assist it in meeting its obligations hereunder;provided, however, that in no event shall Employee have any interest in suchtrust or property other than as an unsecured general creditor. Section 4. INTERESTS NOT TRANSFERRABLE. No additional benefits payableunder this Agreement shall be subject in any manner to alienation, sale,transfer, assignment, pledge, attachment or other legal process, or encumbranceof any kind. Any attempt to alienate, sell, transfer, assign, pledge orotherwise encumber any such benefits, whether currently or thereafter payable,shall be void. No additional payment shall, in any manner, be liable for orsubject to the debts or liabilities of any person entitled to such benefits. IfEmployee shall attempt to, or shall alienate, sell, transfer, assign, pledge orotherwise encumber his additional benefits hereunder, or if by reason of hisbankruptcy or other event happening at any time, such benefits would devolveupon any other person or would not be enjoyed by Employee, then the Company may,in its discretion, terminate the interest of Employee in any such benefits andhold or apply them to the benefit of the Employee, in such manner as the Companymay deem proper. Section 5. FACILITY OF PAYMENT. Any amounts payable hereunder toEmployee who is under legal disability, may be paid to the legal representativeof Employee. Section 6. SUCCESSORS. This agreement is binding upon the Company andwill inure to the benefit of any successor of the Company whether by purchase,merger, consolidation or otherwise. Section 7. NOTICES. Any and all notices, designations, consents,offers, acceptances or any other communication provided for herein shall besufficient if given in writing by registered or certified mail, return receiptrequested, to the party to whom such notice is directed at the party's addressfirst above written. Section 8. SEVERABILITY. If any provision or portion of thisAgreement shall be determined by a court of competent jurisdiction to be invalidor unenforceable, the remaining provisions or portions of this Agreement shallbe unaffected thereby and shall remain in full force and effect to the fullestextent permitted by law. 3 Section 9. ENTIRE AGREEMENT. This Agreement contains all theunderstandings and representations between the parties hereto pertaining to thesubject matter hereof and supersedes all undertakings and agreements, whetheroral or in writing, if there be any, previously entered into by them withrespect thereto. Section 10. AMENDMENTS. No provision of this Agreement may be amendedor waived unless such amendment or waiver is agreed to in writing by theparties hereto. Except as otherwise specifically provided in this Agreement,no waiver by any party hereto of any breach of any condition or provision ofthis Agreement shall be deemed a waiver of a similar or dissimilar condition orprovision at the same or any prior or subsequent time. Section 11. APPLICABLE LAW. This Agreement shall be governed in allrespects, whether as to validity, construction, capacity, performance orotherwise, by the laws of the State of New Jersey. Section 12. HEADINGS. The Section headings used in this Agreement areincluded solely for convenience and shall not affect, or be used in connectionwith, the interpretation of this Agreement. Section 13. COUNTERPARTS. This Agreement may be executed incounterparts, each of which shall be deemed an original and which togethershall constitute a single instrument. IN WITNESS WHEREOF, the Company has caused these presents to be signed by its duly authorized corporate officers and its corporate seal to be hereunto affixed, and the Employee has hereunto affixed his hand and seal, the day and year first above written.ATTEST: CAMBREX CORPORATION __________________________________ BY:______________________________ JAMES A. MACK President & Chief Operating Officer Witness:__________________________________ _________________________________ CYRIL C. BALDWIN, JR. Employee 1 CAMBREX CORPORATION EXHIBIT 10.31 ADDITIONAL RETIREMENT PAYMENT AGREEMENT THIS AGREEMENT, made as of the 26th day of January, 1995 by andbetween CAMBREX CORPORATION, a Delaware corporation, having its principaloffices located at One Meadowlands Plaza, East Rutherford, New Jersey 07073(hereinafter referred to as the "Company"), and JAMES A. MACK, residing at 51Bermuda Road, Westport, CT 06880 (hereinafter referred to as the "Employee"). W I T N E S S E T H: WHEREAS, the Employee has or will provide services to the Company fora period of years both as an employee and as a consultant thereafter; and WHEREAS, Employee and the Company wish to provide for supplementalretirement payments to be made to Employee commencing on the date when he is nolonger able to provide services to the Company; NOW, THEREFORE, in consideration of the premises and the mutualcovenants and agreements hereinafter set forth, the Company and Employee herebyagree as follows: Section 1. ADDITIONAL RETIREMENT BENEFITS. Commencing at the time whenthe Employee receives no further compensation as an employee or fees as aconsultant, and Employee has retiree status, the Company hereby agrees to pay toEmployee, in addition to any other payment based on retirement which may be dueto Employee, an additional retirement benefit, the amount of One HundredThousand Dollars ($100,000.) per year (prorated for portions of a year andpayable on the last day of each quarter) as an additional retirement benefit,during the remainder of Employee's lifetime. Section 2. PAYMENT OF ADDITIONAL BENEFITS. Amounts payable to Employeeunder this agreement shall be payable to Employee only during his lifetime,without any right of survivorship, and shall be subject to the applicablereductions that are similar to those applicable to the benefits payable to suchParticipant under the Company's Retirement Plan. 2 Section 3. NO RIGHTS TO SPECIFIC ASSETS. Additional benefits payableunder this agreement shall be paid directly from the general assets of theCompany. Nothing contained in this agreement and no action taken pursuant heretoshall create or be construed to create a trust or separate fund of any kind or afiduciary relationship between the Company and the Employee or any other person.TO THE EXTENT THAT EMPLOYEE ACQUIRES A RIGHT TO RECEIVE PAYMENTS UNDER THISAGREEMENT SUCH RIGHT SHALL BE NO GREATER THAN THE RIGHT OF AN UNSECURED GENERALCREDITOR. Notwithstanding the forgoing, the Company may establish a grantortrust or purchase securities to assist it in meeting its obligations hereunder;provided, however, that in no event shall Employee have any interest in suchtrust or property other than as an unsecured general creditor. Section 4. INTERESTS NOT TRANSFERRABLE. No additional benefits payableunder this Agreement shall be subject in any manner to alienation, sale,transfer, assignment, pledge, attachment or other legal process, or encumbranceof any kind. Any attempt to alienate, sell, transfer, assign, pledge orotherwise encumber any such benefits, whether currently or thereafter payable,shall be void. No additional payment shall, in any manner, be liable for orsubject to the debts or liabilities of any person entitled to such benefits. IfEmployee shall attempt to, or shall alienate, sell, transfer, assign, pledge orotherwise encumber his additional benefits hereunder, or if by reason of hisbankruptcy or other event happening at any time, such benefits would devolveupon any other person or would not be enjoyed by Employee, then the Company may,in its discretion, terminate the interest of Employee in any such benefits andhold or apply them to the benefit of the Employee, in such manner as the Companymay deem proper. Section 5. FACILITY OF PAYMENT. Any amounts payable hereunder toEmployee who is under legal disability, may be paid to the legal representativeof Employee. Section 6. SUCCESSORS. This agreement is binding upon the Company andwill inure to the benefit of any successor of the Company whether by purchase,merger, consolidation or otherwise. Section 7. NOTICES. Any and all notices, designations, consents,offers, acceptances or any other communication provided for herein shall besufficient if given in writing by registered or certified mail, return receiptrequested, to the party to whom such notice is directed at the party's addressfirst above written. Section 8. SEVERABILITY. If any provision or portion of this Agreementshall be determined by a court of competent jurisdiction to be invalid orunenforceable, the remaining provisions or portions of this Agreement shall beunaffected thereby and shall remain in full force and effect to the fullestextent permitted by law. 3 Section 9. ENTIRE AGREEMENT. This Agreement contains all theunderstandings and representations between the parties hereto pertaining to thesubject matter hereof and supersedes all undertakings and agreements, whetheroral or in writing, if there be any, previously entered into by them withrespect thereto. Section 10. AMENDMENTS. No provision of this Agreement may beamended or waived unless such amendment or waiver is agreed to in writing bythe parties hereto. Except as otherwise specifically provided in thisAgreement, no waiver by any party hereto of any breach of any condition orprovision of this Agreement shall be deemed a waiver of a similar or dissimilarcondition or provision at the same or any prior or subsequent time. Section 11. APPLICABLE LAW. This Agreement shall be governed in allrespects, whether as to validity, construction, capacity, performance orotherwise, by the laws of the State of New Jersey. Section 12. HEADINGS. The Section headings used in this Agreementare included solely for convenience and shall not affect, or be used inconnection with, the interpretation of this Agreement. Section 13. COUNTERPARTS. This Agreement may be executed incounterparts, each of which shall be deemed an original and which togethershall constitute a single instrument. IN WITNESS WHEREOF, the Company has caused these presents tobe signed by its duly authorized corporate officers and its corporate seal tobe hereunto affixed, and the Employee has hereunto affixed his hand and seal,the day and year first above written.ATTEST: CAMBREX CORPORATION_______________________________ BY:______________________________ C.C.BALDWIN, JR. Chairman of the BoardWitness:_______________________________ _________________________________ JAMES A. MACK Employee 1 EXHIBIT 11 CAMBREX CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS, EXCEPT PER-SHARE DATA) YEARS ENDED DECEMBER 31, ---------------------------------------------------- 1994 1993 1992 1991(1) 1990(1) -------- ------- ------- ------- ------- Income applicable to common shares: Primary earnings....................... $ 11,126 $ 8,641 $ 6,230 $ 31 $(5,075) Add: Interest reduction attributable to assumed conversion of convertible subordinated notes (Net of taxes) Notes issued June 11, 1985........... -- 71 136 -- -- Notes issued October 3, 1985......... -- 43 81 -- -- -------- ------- ------- ------- ------- Fully diluted earnings (loss)..... $ 11,126 $ 8,755 $ 6,447 $ 31 $(5,075) ======= ====== ====== ====== =======Weighted average number of common shares and common share equivalents outstanding during the year: Common stock........................... 5,250 4,961 4,753 4,655 4,705 Nonvoting Common stock................. -- -- -- -- 113 Stock options.......................... 424 321 135 49 -- -------- ------- ------- ------- ------- Shares outstanding -- primary.......... 5,674 5,282 4,888 4,704 4,818 Notes issued June 11, 1985................ -- 122 198 -- -- Notes issued October 3, 1985.............. -- 73 120 -- -- Additional stock options.................. 25 7 36 34 -- -------- ------- ------- ------- ------- Shares outstanding -- fully diluted.... 5,699 5,484 5,242 4,738 4,818 ======= ====== ====== ====== ======= Fully diluted earnings (loss) per common share(2)...................... $ 1.95 $ 1.60 $ 1.23 $ 0.01 $ (1.05) ======= ====== ====== ====== ======= ---------------(1) The convertible subordinated notes and the related interest, net of income taxes, had an anti-dilutive effect on earnings per share for the years ended December 31, 1991 and 1990 and are, therefore, excluded from the computation. (2) This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%. 54 1 EXHIBIT 21 CAMBREX CORPORATION SUBSIDIARIES OF REGISTRANT SUBSIDIARY INCORPORATED IN: --------------------------------------------------------------- ---------------- CasChem, Inc. ................................................. Delaware Cosan Chemical Corp. .......................................... New Jersey Nepera, Inc. .................................................. New York The Humphrey Chemical Co., Inc. ............................... Delaware Salsbury Chemicals, Inc. ...................................... Iowa Zeeland Chemicals, Inc. ....................................... Michigan Seal Sands Chemicals Limited................................... England Profarmaco Nobel S.r.1. ....................................... Italy Nobel Chemicals AB............................................. Sweden 55 1 EXHIBIT 23 CAMBREX CORPORATION ACCOUNTANTS' CONSENT Cambrex Corporation: We consent to the incorporation by reference in the registration statementof Cambrex Corporation on Form S-8 (File Nos. 33-21374, 33-37791, 33-81780 and33-81782) of our report dated January 19, 1995, on our audits of theconsolidated financial statements and financial statement schedules of CambrexCorporation as of December 31, 1994 and 1993, and for each of the three years inthe period ended December 31, 1994, which report is included in this AnnualReport on Form 10-K. COOPERS & LYBRAND, L.L.P. Parsippany, New JerseyMarch 21, 1995 56 1 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each officer and director of CambrexCorporation, a Delaware corporation, whose signature appears below constitutesand appoints Cyril C. Baldwin, Jr., James A. Mack, and Peter Tracey, and each ofthem, his true and lawful attorneys-in-fact and agents, with full power ofsubstitution and resubstitution, for him and in his name, place and stead, inany and all capacities, to sign any and all Annual Reports on Form 10-K whichsaid Cambrex Corporation may be required to file pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934 and any and all amendments thereto and tofile the same, with all exhibits thereto, and other documents in connectiontherewith, with the Securities and Exchange Commission, granting unto saidattorneys-in-fact and agents full power and authority to do and perform each andevery act and thing requisite and necessary to be done in and about thepremises, as fully to all intents and purposes as he might or could do inperson, hereby ratifying and confirming all that said attorneys-in-fact andagents or their substitutes may lawfully do or cause to be done by virtuehereof. IN WITNESS WHEREOF each of the undersigned has executed this instrument asof the 26th day of January 1995. /s/ Cyril C. Baldwin, Jr. /s/ Ilan Kaufthal--------------------------------------------- ---------------------------------------------Cyril C. Baldwin, Jr. Ilan KaufthalChairman of the Board and Director Chief Executive Officer(Principal Executive Officer) /s/ Peter Tracey /s/ Robert W. Lear--------------------------------------------- ---------------------------------------------Peter Tracey Robert W. LearVice President Director(Principal Financial and Accounting Officer)/s/ Francis X. Dwyer /s/ Robert LeBuhn--------------------------------------------- ---------------------------------------------Francis X. Dwyer Robert LeBuhnDirector Director/s/ Kathryn Rudie Harrigan, PhD /s/ James A. Mack--------------------------------------------- ---------------------------------------------Kathryn Rudie Harrigan, PhD James A. MackDirector Director /s/ George J.W. Goodman /s/ Arthur I. Mendolia--------------------------------------------- ---------------------------------------------George J.W. Goodman Arthur I. MendoliaDirector Director /s/ Dean P. Phypers --------------------------------------------- Dean P. Phypers Director 57

5 1,000 YEAR DEC-31-1994 DEC-31-1994 9,087 0 49,030 1,288 61,979 130,698 241,842 69,560 360,477 110,773 115,975 607 0 0 101,359 360,477 241,634 241,634 183,753 183,753 0 0 4,676 16,892 5,766 11,126 0 0 0 11,126 1.96 1.95

Continue reading text version or see original annual report in PDF format above

Cambrex Corporation Annual Report 1994

Plain-text annual report

Cambrex Corporation
Annual Report 1994