Cambrex Corporation Annual Report 1995

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, 1995 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 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 $336,539,000 as of February 29, 1996. APPLICABLE ONLY TO CORPORATE REGISTRANTS As of February 29, 1996, there were 7,690,229 shares outstanding of theregistrant's Common Stock, $.10 par value.registrant's Common Stock, $.10 par value. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's definitive Proxy Statement for the 1996 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: pharmaceutical bulk actives;pharmaceutical intermediates; organic intermediates; performance enhancers; andpolymer systems. Currently the Company's overall strategy for these categoriesis to focus on niche markets that have global opportunities, build on strongcustomer relations to fill our new products' pipeline, and support the capitaland state-of-the-art technology, while being leaders in environmental, healthand safety performance. 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 $130,000. The business consists of Nobel Chemicals AB (now NordicSynthesis AB) in Karlskoga, Sweden, Profarmaco Nobel S.r.1. in Milan, Italy andsales companies in Germany, England and the United States. Nobel/Profarmacomanufactures fine chemical intermediates and bulk active ingredients forpharmaceutical 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 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 - ---------------(Dollars in thousands, except share data) 1 3 treatment, health care, and plastics industries. On May 27, 1994, the Companypurchased the Topanol product line from Zeneca Limited to complement the SealSands operation for $4,600. On March 12, 1993, the Company purchased substantially all of the assets ofViscosity Oil's fiber optic gel business for $5,886. PRODUCTS During 1995, the Company changed the classifications used to analyzeindividual product lines by establishing the following five product categories:Pharmaceutical bulk actives, Pharmaceutical intermediates, Organicintermediates, Performance enhancers and Polymer systems. Accordingly, the 1994and 1993 gross revenues have been reclassified to conform to the 1995presentation. The following table sets forth for the periods indicated informationconcerning gross revenues from these five product categories: YEARS ENDED DECEMBER 31, ---------------------------------- 1995 1994(1) 1993(2) -------- -------- -------- Pharmaceutical bulk actives........................ $ 96,827 $ 23,774 $ 9,818 Pharmaceutical intermediates....................... 69,097 48,861 42,151 Organic intermediates.............................. 77,792 64,472 56,261 Performance enhancers.............................. 69,973 59,210 49,379 Polymer systems.................................... 54,381 53,366 45,699 -------- -------- -------- Gross revenues..................................... $368,070 $249,683 $203,308 ======== ======== ======== - ---------------(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 sales in all product categories through these acquisitions. (2) Revenues from Viscosity Oil's fiber optic gel business, acquired in March 1993, are included from the date of acquisition. The Company expanded sales in its polymer systems product category through this acquisition. The Company manufactures and markets a broad line of specialty chemicals.It uses its technical expertise in a wide range of chemical processes to meetthe needs of its customers for high quality products for specializedthe needs of its customers for high quality products for specializedapplications. These applications include: pharmaceutical bulk actives producedunder Food and Drug Administration (FDA) regulation for use in prescription andover-the-counter drug products; pharmaceutical intermediates produced in currentGood Manufacturing Practices (cGMP) facilities for use in the production ofpharmaceuticals, cosmetics, food additives and other healthcare products;organic intermediates used in the production of herbicides, insecticides, feedadditives, pigments, and other complex organic molecules; performance enhancerswhich are complex chemicals designed to impart special properties when smallquantities are included in the formulation of specific products; and polymersystems which are monomers or two component polymer systems for use in smallvolume high performance applications. Pharmaceutical bulk actives. Pharmaceutical products are classified intonine therapeutic product categories. Cambrex uses six of these principal productgroups: (1) gastro-intestinal preparations, (2) cardiovascular, (3) endocrine,(4) central nervous system, (5) anti-inflammatory, and (6) other actives,including anti-infective, respiratory products, immunology, diuretics and otherpreparations. These products are sold to a diverse group of more than 400customers. Many of these products are also sold through agents. Products in this category are manufactured under FDA registration for useas the active ingredients in prescription and over-the-counter drugs. - ---------------(Dollars in thousands, except share data) 2 4 This table summarizes the gross revenues for this product category: 1995 1994 CHANGE ------- ------- ------- Gastro-intestinal..................................... $31,928 $14,033 $17,895 Cardiovascular........................................ 20,229 2,171 18,058 Endocrine............................................. 8,919 1,227 7,692 Central Nervous System................................ 8,903 1,009 7,894 Anti-inflammatory..................................... 8,343 1,844 6,499 Other Actives......................................... 18,505 3,490 15,015 ------- ------- ------- $96,827 $23,774 $73,053 ======= ======= ======= The total percentage increase in gross revenues of this category was 307%;individual percentage increases of the principal product groups are notpresented as they are not considered to be meaningful. The acquisition of the Nobel/Profarmaco business in the fourth quarter of1994 brought to Cambrex many new pharmaceutical products and markets andaccounted for $72,869 of this increase. Increases in the existing businessincluded products used in anti-inflammatory applications which includedmagnesium salicylate, the active ingredient in back-ache formulas. Pharmaceutical intermediates. This category consists of four productgroups: (1) intermediates used in the manufacture of vitamins and otherhealthcare products, (2) x-ray contrast media intermediates, (3) intermediatesfor the cosmetic industry, and (4) other pharmaceutical intermediates. Theseproducts are sold to approximately 700 customers, with two customers accountingfor 18% and 13% of 1995 revenues in this category. These products are mainlyproduced in cGMP facilities. This table summarizes the gross revenues for this product category: % 1995 1994 CHANGE CHANGE ------- ------- ------- ------ Health....................................... $20,003 $19,831 $ 172 1% X-Ray Media.................................. 18,372 5,334 13,038 244 Cosmetics.................................... 6,411 9,378 (2,967) (32) Other Pharmaceutical Intermediates........... 24,311 14,318 9,993 70 ------- ------- ------- ---- $69,097 $48,861 $20,236 41% ======= ======= ======= ==== The Nobel/Profarmaco acquisition accounted for $17,270 of the increase over1994. The X-Ray media business included $1,339 in growth from domesticallyproduced 5 NIPA compounds (5-nitroisopthalic acid). The health productsmaintained 1994 sales level even though we discontinued certain product lines(citrates and hydrogels). The cosmetics business reduction was due to the saleof the Wickhen product line in the fourth quarter 1994. The other pharmaceuticalintermediates increased due to sales of the two products (CHEA and PMPA) used inthe formulation of dextromethorphan, an over-the counter cough suppressant($4,951 increase), and mandelic acid ($1,702 increase). Organic intermediates. This category consists of three product groups: (1)feed additives (2) intermediates used for crop protection chemicals, and (3)pigment intermediates. These products are sold to approximately 200 customers.Two customers accounted for 24% and 18% of 1995 revenues in this category. - ---------------(Dollars in thousands, except share data) 3 5 This table summarizes the gross revenues for this product category: % 1995 1994 CHANGE CHANGE ------- ------- ------- ------ Feed additives............................... $37,387 $36,755 $ 632 2% Crop Protection.............................. 30,454 25,285 5,169 20 Pigment Intermediates........................ 9,951 2,432 7,519 309 ------- ------- ------- ---- $77,792 $64,472 $13,320 21% ======= ======= ======= ==== Organic intermediates were $13,320 above 1994. Feed additives were higherthan 1994 due in part to improved pricing of feed grade Vitamin B3. Sales oforgano-arsenical feed additives, the largest product in feed additives, remainedat 1994 levels. Increases occurred in pyridine derivatives used in themanufacture of herbicides, which are applied as weed control, rice herbicides,wheat fungicides and as a cotton growth regulator. Sales of pyridine, thelargest product in crop protection, remained at 1994 levels. Pigmentintermediates are Nobel products. These intermediates are used in variousindustrial products including inks, dyes and color additives. Performance enhancers: These products are complex chemicals designed toimpart special properties, such as flame retardancy or rapid curing, when smallquantities are included in the formulation of specific products. This categoryconsists of five product groups: (1) specialty additives, (2) catalysts, (3)polymers, (4) photographic chemicals, and (5) additives for the fuel/oilindustry. These products are sold to approximately 1,300 customers. This table summarizes the gross revenues for this product category: % 1995 1994 CHANGE CHANGE ------- ------- ------- ------ Specialty Additives.......................... $18,241 $14,263 $ 3,978 28% Catalysts.................................... 16,985 13,857 3,128 23 Polymers..................................... 15,722 12,934 2,788 22 Photographic................................. 10,166 10,293 (127) 1 Fuel/Oil..................................... 8,859 7,863 996 13 ------- ------- ------- ---- $69,973 $59,210 $10,763 18% ======= ======= ======= ==== This category includes increases of $4,579 from a full year of the Nobeloperations and $6,184 from the other businesses. Key increases were in polymerproducts including a crosslinking agent to improve the performance ofpolycarbonate resins, a dye receptor in acrylic fibers for textiles, and ananti-oxidant used in plastics. The catalyst growth was in products used asreducing agents in pharmaceutical synthesis and phase transfer agents to promotechemical reactions. Specialty additives includes increases in castor oil basedproducts. Polymer systems: The products in this category are monomers or twocomponent polymer systems for use in small volume, high performanceapplications. This category consists of four product groups: (1)telecommunications and electronics industries, (2) coatings, (3) highperformance engineering plastics, and (4) biomedical. These systems are sold toan estimated 400 customers. - ---------------(Dollars in thousands, except share data) 4 6 This table summarizes the gross revenues for this product category: % 1995 1994 CHANGE CHANGE ------- ------- ------- ------ Telecommunications........................... $23,710 $25,030 $(1,320) (5)% Coatings..................................... 17,574 18,231 (657) (4) Engineering plastics......................... 8,093 5,123 2,970 58 Biomedical................................... 5,004 4,982 22 - ------- ------- ------- ---- $54,381 $53,366 $ 1,015 2% ======= ======= ======= ==== Polymer systems were $1,015 above 1994. This was due to growth in a productused in high performance polysulfone engineering plastics for electronic andindustrial applications, such as computer and television screens, and automobileparts. Lower encapsulants sales to the telecommunications industry was due togood weather and declining applications as domestic customers replace coppercable lines with fiber optics. MARKETING AND DISTRIBUTION The Company's pharmaceutical bulk actives and pharmaceutical intermediatesare generally high value, low volume products requiring significant technicalefforts for the development and manufacture. Marketing generally requiressignificant cooperative effort between a small highly trained marketing staff, atechnical staff who can assess the technical fit and estimate manufacturingtechnical staff who can assess the technical fit and estimate manufacturingeconomics, and the business management to determine the strategic and businessfit. Such a process may take from two to five years before a commercial productis fully established. Because of this long lead time and the complexity of thetechnical efforts, these are usually long-term relationships with majorcorporations who become significant customers. Sales of established products maybe handled by agents in those areas where direct sales efforts are uneconomic. 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 a wide array of raw materials in the conduct of itsbusinesses. The Company uses significant amounts of castor oil and compoundsderived from petroleum feedstocks in manufacturing a limited number of itsproducts. The Company believes it is one of the largest purchasers of castor oil inthe United States, and has the ability to take delivery and store a largequantity of castor oil on site. Castor oil is used primarily in the manufactureof the Company's polymer systems for coatings and telecommunicationapplications. Under advantageous market conditions, the Company sells thiscommodity in bulk quantities as simple castor oil derivatives. Castor oil, which is not produced in the United States, is an agriculturalproduct, the market price of which is affected by natural factors relating tothe castor bean crop from which the oil is produced. Castor oil is producedcommercially in a few foreign countries, with India currently being the largestexporter. The Company has been able to obtain adequate supplies of castor oilgenerally at acceptable prices in the past and expects to be able to do so inthe future. Pyridine, which accounted for 8%, 13% and 13% of gross revenues in 1995,1994 and 1993, respectively, is produced by the Company by a process involvingthe high temperature reaction of acetaldehyde, formalin and ammonia.Acetaldehyde is available from two suppliers in North America. The price ofacetaldehyde increased approximately 15% during 1995. Formalin's feedstock ismethanol, which is also used by the petro-chemical industry in the manufactureof methyl-tert-butyl-ether (MTBE). The production of and demand for MTBE hasincreased rapidly in connection with its use as a gasoline additive. Thisincreased demand has - ---------------(Dollars in thousands, except share data) 5 7 triggered an unfavorable effect on methanol pricing, which in turn has causedthe price of formalin to increase by approximately 50% in 1994 and an additional23% in 1995. The pricing of formalin was back down to near normal levels by theend of 1995. Ammonia is widely available, however, due to the increase inmethanol, the cost of ammonia increased in 1995 by 25%. 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 difficulty passing onthese increases to its customers, particularly if the increases are precipitousrather than general. The other key raw materials used by the Company are advanced organicintermediates and generally have been in adequate supply from multiplesuppliers. 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. Thegoals are to improve the Company's manufacturing processes so as to reducecosts, improve quality and increase capacity; and to identify marketopportunities which warrant a significant technical effort, and offer theprospects of a longterm, profitable business relationship. Research anddevelopment activities are carried on at most of the Company's manufacturingfacilities in both the United States and Europe. Eighty-five employees areinvolved directly in research and development activities. In November 1995, theCompany formed a strategic alliance with Oxford Asymmetry, Ltd. (located nearOxford in the United Kingdom). The Company will commercialize technologies andproducts developed by Oxford Asymmetry, and provide financial support for theirresearch and development group. The Company will provide Oxford Asymmetry with$1,000 per year. The Company spent approximately $7,500, $5,700 and $5,800 in 1995, 1994 and1993, respectively, on research and development. 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 68 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 pharmaceutical bulkactives and pharmaceutical intermediates categories and its strategic approach,it is not possible to identify a group of direct competitors. Where competitionexists, it is typically specific to a certain product, or is focused early inthe process, when an initial market position is being established. If theCompany perceives significant competitive risk and a need for large technical orfinancial commitment, it generally negotiates long-term contracts or capitalguarantees from its targeted customer before proceeding. - ---------------(Dollars in thousands, except share data) 6 8 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 Company maintainsenvironmental and industrial safety and health compliance programs at itsplants, and believes that its manufacturing operations are in general compliancewith 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 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 1995 or 1994. Known environmental matters which may result in liabilities to the Companyand the related estimates and accruals are summarized in Note #20 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 $4,000 in 1995, $2,500 in 1994 and $1,700 in 1993 forenvironmental projects. The Company anticipates that capital requirements willincrease in subsequent years as a result of the Clean Air Act Amendments andother pending environmental laws. Additionally, as the environmental proceedingsin which 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. - ---------------(Dollars in thousands, except share data) 7 9 EMPLOYEES At December 31, 1995 the Company had 1,336 employees (598 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, 1998. Nobel and Profarmaco production,administration, scientific and technical employees are represented by variouslocal and national unions. The contracts with these unions expire at varioustimes through December 31, 1998. The Company believes its labor relations aresatisfactory. 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 from the domestic sites in 1995,1994 and 1993 amounted to $50,608, $44,135 and $37,296, respectively. Sales frominternational operations were $144,883 in 1995 and $34,803 in 1994, due toacquisition activity in 1994. Refer to Note #18 to the Cambrex Corporation andSubsidiaries Consolidated Financial Statements. Set forth below is information relating to the Company's manufacturingfacilities: OPERATING LOCATION ACREAGE SUBSIDIARY PRODUCT LINES MANUFACTURED- ----------------------- --------- ----------- ----------------------------------------------- Bayonne, NJ 8 acres CasChem Pharmaceutical intermediates; Performance enhancers; Polymer systemsCarlstadt, NJ 3 acres Cosan Performance enhancers; Polymer systemsHarriman, NY 29 acres Nepera Pharmaceutical intermediates; Organic intermediates; Performance enhancersDelaware Water Gap, PA 12 acres Heico Pharmaceutical bulk actives; Pharmaceutical intermediates; Performance enhancers; Polymer systemsNorth Haven, CT 4 acres Humphrey Pharmaceutical intermediates; Performance enhancersCharles City, IA 57 acres Salsbury Pharmaceutical bulk actives; Pharmaceutical intermediates; Organic intermediates; Performance enhancersZeeland, MI 14 acres Zeeland Pharmaceutical intermediates; Performance enhancersMiddlesbrough, England 12 acres Seal Sands Pharmaceutical bulk actives; Pharmaceutical intermediates; Performance enhancers; Polymer systemsKarlskoga, Sweden 42 acres Nordic Pharmaceutical bulk actives; Pharmaceutical Synthesis intermediates; Organic intermediates; Performance enhancersPaullo (Milan), Italy 13 acres Profarmaco Pharmaceutical bulk actives - ---------------(Dollars in thousands, except share data) 8 10 The Company owns all the above facilities and properties, with theexception of the twelve acre tract it leases in Middlesbrough, England. Inaddition, the Company owns thirty-one acres of undeveloped land adjacent to theNorth Haven facility, one hundred and three acres of undeveloped land adjacentto the Harriman facility and sixty-six acres of undeveloped land adjacent to theZeeland facility. The Company believes its facilities to be in good condition,well maintained and adequate for its current needs. Most of the Company's products are manufactured in multipurpose facilities.Each product has a unique requirement for equipment, and occupies such equipmentfor varying amounts of time. This, combined with the variations in demand forindividual products, makes it difficult to estimate actual overall capacitysubject to regulatory approval. It is generally possible to transfer manufactureof a particular product to another facility should capacity constraints dictate.However, the Company's pyridine and arsenical feed additive product groups areeach manufactured at a single facility, and production of such products wouldnot be transferrable to another site. The Company plans to continue to expand capacity to meet growing needs byprocess improvements and construction of new facilities where needed. 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)- --------------------------------------------- --- ---------------------------------- James A. Mack................................ 58 President and Chief Executive OfficerPeter Tracey................................. 54 Executive Vice President, Finance, Chief Financial OfficerPeter E. Thauer.............................. 56 Vice President, Law & Environment, General Counsel & Corporate SecretarySteven M. Klosk.............................. 38 Vice President, AdministrationBurton M. Rein............................... 57 Senior Vice President of Cambrex and General Manager of Heico Chemicals, Inc. and The Humphrey Chemical Company, Inc.Albert L. Eilender........................... 52 Executive Vice PresidentSalvatore J. Guccione........................ 33 Vice President, Corporate DevelopmentRichard J. Seidel............................ 54 President and Chief Operating Officer of Nepera, Inc.Russell C. Smith............................. 54 Vice President and General Manager of Salsbury Chemicals, Inc. - ---------------(Dollars in thousands, except share data) 9 11 NAME AGE OFFICE(1)- --------------------------------------------- --- ---------------------------------- Robert M. Parlman............................ 45 Vice President and General Manager of Zeeland Chemicals, Inc.John V. Van Hulle............................ 38 President of CasChem, Inc. and Cosan Chemical CorporationClaes Glassell............................... 44 Vice President of Cambrex Managing Director of Cambrex LimitedCyril C. Baldwin, Jr......................... 68 Chairman of the Board - ---------------(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. Mack has been Chief Executive Officer since Mr. Baldwin's retirement onApril 1, 1995. Mr. Mack was appointed President and Chief Operating Officer anda director of the Company in February 1990. For five years prior thereto he wasVice President in charge of the worldwide Performance Chemicals businesses ofOlin Corporation, a manufacturer of chemical products, metal products, andammunition and defense-related products. Mr. Mack was Executive Vice Presidentof Oakite Products, Inc. from 1982 to 1984. Prior to joining Oakite, he heldvarious positions with The Sherwin-Williams Company, most recently as Presidentand General Manager of the Chemicals Division from 1977 to 1981. Mr. Mack is apast Chairman of the Board of Governors of the Synthetic Organic ChemicalManufacturing Association and is a member of the Board of Trustees of theMichigan Tech Alumni Fund. 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 December 1992,and General Counsel and Corporate Secretary in August 1989. From 1987 until hejoined Cambrex, he was Counsel to the business and finance group of the firm ofCrummy, Del Deo, Dolan, Griffinger and Vecchione. From 1971 to 1987, Mr. Thauerhad held various positions with Avon Products, Inc., including U. S. LegalDepartment Head and Corporate Assistant Secretary. Mr. Klosk joined the Company in October 1992 as Vice President,Administration. From February 1988 until he joined Cambrex, he was VicePresident, Administration and Corporate Secretary for the Genlyte Group, Inc., alighting fixture manufacturer. From 1985 to January 1988, he was Vice President,Administration for Lightolier, Inc., a subsidiary of the Genlyte Group, Inc. Dr. Rein was appointed Senior Vice President in April 1993. On October 1,1995, he was also appointed General Manager of Heico Chemicals, Inc. and TheHumphrey Chemical Company. He joined the Company in May 1991 as President ofCambrex Fine Chemicals Group. For more than five years prior thereto, he wasDirector of Commercial Planning for W. R. Grace & Company. Mr. Eilender was appointed 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 - ---------------(Dollars in thousands, except share data) 10 12 President. He was President of Cosan from October 1986 until July 1989, at whichtime he was appointed to the additional position of President of CasChem, Inc. Mr. Guccione joined the Company in December 1995 as Vice President,Corporate Development. Prior to joining the Company, from 1993 to 1995, he heldthe position of Vice President and General Manager of the InternationalSpecialty Products (ISP) Personal Care Division. He also served as Director ofCorporate Development for International Specialty Products. Mr. Seidel joined the Company in November 1995 as President and ChiefOperating Officer of Nepera, Inc. He was most recently Vice President/GeneralManager for the Petreco Division of Petrolite Corporation. Prior to this, heserved in various management positions at Petrolite and Gulf Oil Corporation. Mr. Smith was appointed Vice President, General Manager of SalsburyChemicals, Inc. upon its acquisition by the Company in July 1991. Prior to theacquisition, Mr. Smith had many years of service with Solvay Animal Health,Inc., starting in 1968 as Chemical Engineer through his appointment as Director,Chemical Operations in 1982. Dr. Parlman joined the Company as Vice President and General Manager ofZeeland Chemicals, Inc. in March 1994. Prior to such time, he was Vice Presidentand General Manager of the Tretolite Division of Petrolite. Dr. Parlman hasextensive experience in market development and research and development. Mr. Van Hulle was appointed President of CasChem, Inc. and Cosan ChemicalCorporation in December 1994. He joined CasChem in July 1994 as Executive VicePresident. For more than five years prior thereto he was General Manager of theFine 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 Cambrex Limited, the newlyacquired Nobel/Profarmaco business, he is responsible for Cambrex's Europeanoperations. After extensive management experience at Nobel/Profarmaco, he joinedCambrex as a result of the Nobel/Profarmaco Acquisition. In 1989, he joinedNobel as President and CEO for Nobel's Chemistry Business. From 1986 to 1989, heworked for the agricultural division of Berol Europe Ltd. Mr. Baldwin has been Chairman of the Board since July 1991, and a directorof the Company since it began business in December 1981. On January 26, 1995,Mr. Baldwin announced his retirement, effective April 1, 1995, as ChiefExecutive Officer of the Company, a position he also held since December 1981.Mr. Baldwin retired as an employee of the Company effective April 30, 1995. Heis a member of the Environmental and Governance Committees of the Company'sBoard of Directors, and he is a director of Church & Dwight Co., Inc. andCongoleum Corporation. - ---------------(Dollars in thousands, except share data) 11 13 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 closing high and low sales prices of the CommonStock as reported on AMEX: HIGH LOW --- --- 1995 First Quarter................................................... $31 $26 5/8 Second Quarter.................................................. 35 3/8 31 1/8 Third Quarter................................................... 43 1/4 34 Fourth Quarter.................................................. 42 1/2 36 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 (b) As of March 15, 1996, the Company estimates that there wereapproximately 1,419 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. - ---------------(Dollars in thousands, except share data) 12 14 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, 1995 are derived fromaudited financial statements. The consolidated financial statements of theCompany as of December 31, 1995 and December 31, 1994 and for each of the yearsin the three year period ended December 31, 1995 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, ------------------------------------------------------------ 1995 1994(1) 1993(2) 1992(3) 1991(4) -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER-SHARE DATA) INCOME DATA: Net revenues...................... $357,176 $241,634 $197,203 $179,452 $144,500 Gross profit...................... 99,780 57,881 51,778 46,036 26,326 Selling, general and administrative................. 47,751 31,216 29,286 28,201 22,743 Research and development.......... 7,526 5,689 5,843 4,046 3,279 Operating profit (loss)........... 44,503 20,976 16,649 13,789 304 Interest expense, net............. 10,508 4,581 2,771 2,437 2,532 Other (income) expense, net....... 2,779 (497) 446 1,054 (2,280) Income (loss) before taxes........ 31,216 16,892 13,412 10,298 52 Net income (loss)................. 19,670 11,126 8,641 6,230 31EARNINGS PER SHARE DATA: Earnings (loss) per common share and common share equivalents: Primary........................ $ 2.93 $ 1.96 $ 1.64 $ 1.27 $ 0.01 Fully diluted.................. $ 2.92 $ 1.95 $ 1.60 $ 1.23 $ 0.01 Weighted average shares outstanding: Primary........................ 6,702 5,674 5,282 4,888 4,704 Fully diluted.................. 6,736 5,699 5,484 5,242 4,738DIVIDENDS PER COMMON SHARE.......... $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20BALANCE SHEET DATA: (at end of period) Working capital................... $ 69,865 $ 19,925 $ 38,497 $ 35,852 $ 31,359 Total assets...................... 402,553 360,477 166,845 148,406 111,603 Long-term obligations............. 99,643 115,975 36,261 39,808 19,021 Total stockholders' equity........ 189,484 101,966 87,569 75,177 68,717 - ---------------(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 Chemicals, Inc. from March 31, 1992, the date of acquisition, through December 31, 1992. (4) Includes the results of Salsbury Chemicals, Inc. from July 1, 1991, the date of acquisition, through December 31, 1991. - ---------------(Dollars in thousands, except share data) 13 15 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 consolidated financial information as a percentage of netrevenues. YEARS ENDED DECEMBER 31, ------------------------- 1995 1994 1993 ----- ----- ----- Net revenues................................................ 100.0% 100.0% 100.0% Gross profit................................................ 27.9 24.0 26.3 Selling, general and administrative......................... 13.3 12.9 14.9 Research and development.................................... 2.1 2.4 3.0 Operating profit............................................ 12.5 8.7 8.4 Interest expense............................................ 2.9 1.9 1.4 Other (income) expense, net................................. 0.8 (0.2) 0.2 Net income.................................................. 5.5 4.6 4.4 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, in dollars and as apercentage of the Company's total gross revenues, and the gross profit byproduct category for 1995. YEARS ENDED DECEMBER 31, ---------------------------------- 1995 1994 1993 -------- -------- -------- (IN THOUSANDS) GROSS REVENUES Pharmaceutical bulk actives........................ $ 96,827 $ 23,774 $ 9,818 Pharmaceutical intermediates....................... 69,097 48,861 42,151 Organic intermediates.............................. 77,792 64,472 56,261 Performance enhancers.............................. 69,973 59,210 49,379 Polymer systems.................................... 54,381 53,366 45,699 -------- -------- -------- Total gross revenues..................... $368,070 $249,683 $203,308 ======== ======== ======== Total net revenues....................... $357,176 $241,634 $197,203 ======== ======== ======== Total gross profit....................... $ 99,780 $ 57,881 $ 51,778 ======== ======== ======== YEARS ENDED DECEMBER 31, ------------------------- 1995 1994 1993 ----- ----- ----- GROSS REVENUES DISTRIBUTION Pharmaceutical bulk actives................................. 26.3% 9.5% 4.8% Pharmaceutical intermediates................................ 18.8 19.6 20.7 Organic intermediates....................................... 21.1 25.8 27.7 Performance enhancers....................................... 19.0 23.7 24.3 Polymer systems............................................. 14.8 21.4 22.5 ----- ----- ----- 100.0% 100.0% 100.0% ===== ===== ===== - ---------------(Dollars in thousands, except share data) 14 16 1995 GROSS SALES & GROSS PROFIT BY PRODUCT CATEGORY GROSS GROSS GROSS SALES PROFIT $ PROFIT % -------- -------- -------- Pharmaceutical bulk actives........................... $ 96,827 $ 33,627 34.7% Pharmaceutical intermediates.......................... 69,097 16,817 24.3 Organic intermediates................................. 77,792 16,098 20.7 Performance enhancers................................. 69,973 20,256 28.9 Polymer systems....................................... 54,381 12,982 23.9 -------- ------- ---- $368,070 $ 99,780 27.1% ======== ======= ==== 1995 COMPARED TO 1994 Gross sales in 1995 increased $118,387 (48%) over 1994. Increases occurredin all phases of the business with key increases in pharmaceutical bulk activeswhich added $73,053 and pharmaceutical intermediates $20,236. PHARMACEUTICAL BULK ACTIVES of $96,827 were $73,053 above 1994.Nobel/Profarmaco increased $72,869. The sales of Magnesium Salicyliate (theactive ingredient in backache formulas) accounted for the rest of the increase$416. Gastro-intestinal bulk actives were $31,928. This category is mainlySulfasalazine/Mesalamine, made in bulk in the U.S. and at Nobel, which are usedto treat ulcerative colitis. Cardiovascular bulk actives were $20,229. The key products in this totalincluded Diltiazem Hcl, Isosorbide-5-mononitrate, Sotalol Hcl and AcebutololHcl. Endocrine bulk actives were $8,919 and included two key items -- Glipizideand Clormadinone. Central nervous system bulk actives were $8,903 and included Bromazepam andLorazepam among 20 products. Anti-inflammatory bulk actives were $8,343 and include among 15 products,Ketoprofen, Magensium Salicyliate (for backache formulas) and Pranoprofen. Other bulk actives were $18,505 and included items for respiratory system,diuretics, anti-infective, immunology and various other uses. All had highersales than 1994 due to the Nobel/Profarmaco acquisition. PHARMACEUTICAL INTERMEDIATES of $69,097 were $20,236 above 1994 (41%).Nobel/Profarmaco increased $17,270 and excluding the Nobel/Profarmaco increase:Health decreased $1,661; Cosmetic decreased $2,967; X-Ray Media increased$1,339; and Other Pharmaceutical Intermediates increased $6,255. Health products of $20,003 increased $172 with Nobel increasing $1,833 andall Other Business decreasing $1,661 due to two discontinued product lines(Citrates $913 and Hydrogels $1,922) partially offset by higher Pyridine salesof $939. X-Ray Media products, which include 5 NIPA compounds of $18,372, increased$13,038 with Nobel increasing $11,699 and all other businesses increasing$1,339. Cosmetic products of $6,411 decreased $2,967 from 1994 due to sale of theWickhen product line in 1994 ($2,700 in reduced sales). Other Pharmaceutical Intermediates of $24,311 increased $9,993 with Nobelincreasing $3,738 and all the other businesses increasing $6,255. This increasewas due to sales of the two intermediates used in the formulation ofdextromethorphan, an over-the-counter cough suppressant ($4,951 increase), andMandelic Acid ($1,702 increase). - ---------------(Dollars in thousands, except share data) 15 17 ORGANIC INTERMEDIATES of $77,792 were $13,320 above 1994 (21%). Nobelincreased $9,515 in this category. Excluding the effect of Nobel, cropprotection intermediates increased $3,104 and feed additives increased $701. Thepigment intermediates were all Nobel business. Feed additives of $37,387 increased $632 due in part to improved pricing offeed grade Vitamin B3. Sales of organo-arsenical feed additives, the largestproduct in feed additives, remained at 1994 levels. Crop protection intermediates of $30,454 increased $5,169 from 1994. Theincrease was due to greater off-take of pyridine derivatives used in themanufacture of herbicides. Pyridine which is the largest product in cropprotection was at the 1994 level. Pigments intermediates of $9,951 increased $7,519 from 1994 due to the fullyear effect of the Nobel acquisition. These intermediates are used in variousindustrial products including inks, dyes and color additives. PERFORMANCE ENHANCERS of $69,973 were $10,763 above 1994 (18%). Nobelincreased $4,579. Excluding the Nobel increase: photographic products decreased$127 from 1994 levels; catalysts increased $965; specialty additives increased$1,618; fuel/oil products increased $996; and polymer products increased $2,732. Specialty additives of $18,241 increased $3,978 from 1994. This includesNobel's sales increase of $2,360. Other increases include castor oil basedproducts. Catalysts products of $16,985 increased $3,128 from 1994. This increaseincludes Nobel's added sales of $2,163 and increases in various other catalystsof $965. Polymer products of $15,722 increased $2,788 over 1994. The key increaseswere products used as a crosslinking agent to improve the performance ofpolycarbonate resins, as a dye receptor in acrylic fibers for textiles, and ananti-oxidant used in plastics. Photographic products of $10,166 decreased $127 from 1994 mainly due toreduced sales of a polymer used in instant film, due to a customer continuing toreduce inventory levels in 1995. (Refer to the 1994 Form 10-K). Fuel/oil products of $8,859 increased $996 over 1994. Key increase was invarious alkenyl succinic anhydrides (ASA's) used in rust inhibitors, and fueland oil detergents. POLYMER systems of $54,381 were $1,013 above 1994. Engineering plasticsincreased $2,970 from 1994 and helped to offset reductions in coatings of $657and telecommunications of $1,320. Biomedicals of $5,004 were at the same levelas 1994. Telecommunications of $23,710 decreased $1,320 from 1994 due to reducedencapsulant sales. This reduction was the result of good weather, and decliningapplications, as domestic customers replace cable lines with fiber optics. Coatings of $17,574 decreased $657 from 1994 due to reduced sales to paintmanufacturers. Engineering plastics of $8,093 increased $2,970 from 1994. This increasewas due to the growing demand for a product used in high performance polysulfoneengineering plastics in electronic and industrial applications, such as computerand television screens, and automobile parts. Export sales from U.S. businesses increased to $50,608 from $44,135 in1994. International sales, comprised of all sales from our acquired operationsin Europe, totaled $144,883 as compared with $34,803 in 1994. Total gross profit of $99,780 increased by $41,899, or 72.4%, from 1994.This was due to the increased sales and higher gross margin percentage whichincreased to 27.9% from 24.0% in 1994. The gross margin increase was due to animproved product mix of sales, reduced cost for major raw materials whichaffected the 1994 margin, and price increases gained in 1995. - ---------------(Dollars in thousands, except share data) 16 18 Selling, general and administrative expenses as a percentage of netrevenues was 13.4% in 1995, up from 12.9% in 1994. The 1995 expense of $47,751was $16,535 (53.0%) above 1994. The increased operating expenses of acquisitionsmade in 1994 accounted for most of the increase. Other increases included bonusaccruals of $1,400. 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. There were no provisionsmade in 1995 or 1994. A discussion of such matters is included in the footnotesto the financial statements. Research and development expenses were 2.1% of net revenues in 1995, andrepresented a 0.3% decrease from 1994. Research and development spendingincreased to $7,526 from $5,689 in 1994. The 1994 acquisitions accounted for allof this increase. The operating profit in 1995 increased 112% to $44,503 from $20,976 in1994. The increased operating profits were due to the full year effect of 1994acquisitions and to increased gross margins. Net interest expense of $10,508 in 1995 reflected an increase of $5,927from 1994. The increase was due to $138,000 in financing activities necessaryfor the acquisitions of Seal Sands and Nobel/Profarmaco. Additionally, theinterest rate in 1995 was 7.7% compared to 6.2% in 1994. Other expense in 1995 was $2,779 compared with other income of $497 in1994. The difference included 1995 currency losses at Nobel and Profarmaco, aswell as the writedowns of the carrying value of equipment no longer in use. The provision for income taxes for 1995 resulted in an effective rate of37.0% versus 34.1% in 1994. The rate increased due to the mix of income betweeninternational and domestic subsidiaries. The Company's net income increased 76.8% to $19,670 compared with a netincome of $11,126 in 1994. 1994 COMPARED TO 1993 Net revenues in 1994 increased $44,431 (23%) due to the Seal Sandsacquisition and the Nobel/Profarmaco acquisition, and to increased sales ofanimal feed additives (in organic intermediates). The table below shows thecontribution of the acquisitions to the product categories and the changes inthe continuing business. YEARS ENDED DECEMBER 31, ---------------------------------------------- ACQUIRED BASE BUSINESSES BUSINESS 1994 1994(1) 1994 1993 -------- ---------- -------- -------- Pharmaceutical bulk actives............... $ 23,774 $ 12,219 $ 11,555 $ 9,818 Pharmaceutical intermediates.............. 48,861 4,418 44,443 42,151 Organic intermediates..................... 64,472 2,720 61,752 56,261 Performance enhancers..................... 59,210 10,330 48,880 49,379 Polymer systems........................... 53,366 5,116 48,250 45,699 -------- ------- -------- -------- Gross revenues.................. $249,683 $ 34,803 $214,880 $203,308 ======== ======= ======== ======== - ---------------(1) Includes Seal Sands, Nobel and Profarmaco acquisitions. PHARMACEUTICAL BULK ACTIVES' revenues of $23,774 increased $13,956 (142%).The increase included $11,874 from the Nobel/Profarmaco acquisition and fromincreased sales from a generic drug for ulcerative colitis, which recovered fromdepressed levels in 1993. - ---------------(Dollars in thousands, except share data) 17 19 The Nobel/Profarmaco acquisition increased the pharmaceutical bulk activescategory and includes products for cardiovascular, gastro-intestinal, centralnervous system and other actives for the anti-infective, respiratory, endocrine,anti-inflammatory, immunology, and other bulk actives markets. Gastro-intestinal bulk actives increased $6,753 (93%) over 1993 to $14,033.Profarmaco sales were $3,700, and the increase of $3,000 from the base businesswas from the sales of a generic drug for ulcerative colitis. PHARMACEUTICAL INTERMEDIATES' revenues of $48,861 increased $6,710 (16%)over 1993. The increase included Nobel/Profarmaco sales of $4,360 and increasesin the other pharmaceutical intermediates, primarily intermediates used in coughsuppressants. Sales of health intermediates represented $19,831, or 41%, of thiscategory's 1994 gross revenues and were $1,629 lower than 1993. The maindecrease of $1,800 in sales was due to the end of a contract to make citrates atthe Company's Zeeland, Michigan facility. Reduced shipments of Vitamin B3 due toprice competition and reduced sales of pyridine based products due to reducedpricing and lower sales volume to a key customer, were offset by higher sales ofa starch modifier. Sales of cosmetic intermediates represented $9,378, or 19%, of thiscategory's 1994 gross revenues and were $338 higher than 1993. In the fourthquarter of 1994, the Wickhen line of cosmetic products was sold. Sales of x-ray media represented $5,334, or 11%, of this category's 1994gross revenues and were $1,286 above 1993. This increase is due to theacquisition of Nobel in 1994. Sales of other pharmaceutical intermediates represented $14,318, or 29%, ofthis category's 1994 gross revenues and were $6,715 higher than 1993. The keyincrease of existing business was due to growth in two intermediates fordextromethorphan, 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. ORGANIC INTERMEDIATES' revenues of $64,472 increased $8,211 (15%). Thisincrease included $2,430 of new products from Nobel and $5,780 of increases fromthe Company's existing feed additive business. The sales of animal feed additives were $36,755, or 57%, of this category's1994 revenues, up $6,171 from 1993. Sales of organo-arsenical feed additivesused to control disease and to enhance chicken growth and improve feedperformance, 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 ALPHARMA under a long-termcontract. Sales of feed grade Vitamin B3 increased due to the installation ofnew packaging facilities late in 1993 which allowed penetration of non-U.S.markets. Shipments of Vitamin B3 intermediates to India and the Asia/Pacificarea also increased. While volume increased, the feed grade Vitamin B3 marketexperienced lower prices due to competitive pricing, adversely affecting marginson these products. Prices were increased in the fourth quarter 1994 and areanticipated to increase in the first quarter 1995, although no assurances can begiven that such price increases will occur. Sales of crop protection intermediates used in the manufacture ofherbicides and insecticides amounted to $25,285, or 39.2% of this category's1994 gross revenues and remained at the 1993 sales level. Sales of pyridine, thelargest item in this group, were up 12% from 1993. The largest pyridine customeris Zeneca, Inc. who uses it in herbicide manufacture. The Company producesanother major pyridine compound and is the exclusive supplier of this product toDow Elanco who uses it in production of a different herbicide. Sales of thiscompound decreased 21% in 1994 due to the customer reducing inventory levelsafter very high customer production in 1993. Sales of other pyridine derivativesin this category increased $756 from 1993 due to competitive pressures. Pigment intermediates represented $2,432, or 4%, of this category's 1994revenues. These products are all produced by Nobel. - ---------------(Dollars in thousands, except share data) 18 20 PERFORMANCE ENHANCERS' revenues of $59,210 increased $9,831 (20%). Thisincrease included $9,627 in sales from the Seal Sands acquisition. Sales of specialty additives represented $14,263, or 24%, of thiscategory's 1994 revenues and were $492 lower than 1993. This was due to areduction in castor based products. Sales of catalyst products represented $13,857, or 23%, of this category's1994 revenues and were $1,670 higher than 1993. The increase is primarilyattributable to tin based catalysts used in various industrial applications. Sales of polymer products represented $12,934, or 22%, of this category's1994 revenues and were $8,812 higher than 1993. This increase includes $7,112 insales attributable to the Seal Sands acquisition. In existing operations,increases occurred in an application for a product used as a dye receptor inacrylic yarns. Sales of photographic chemical products were $10,293, or 17%, of thiscategory's 1994 revenues, $1,234 lower than 1993. The decrease was in sales of apolymer used in instant film, due to our customer reaching their desiredinventory levels. Sales of products to the fuel/oil industries represented $7,863, or 13%, ofthis category's 1994 revenues and were $1,075 higher than 1993. POLYMER SYSTEMS' revenues of $53,368 increased $7,669 (17%). This increaseincluded $5,118 in sales from the Seal Sands acquisition of a product used inthe manufacture of high performance plastics and represented 34% of their 1994sales. Telecommunications products represented $25,030, or (47%), of thiscategory's sales, and was on the same level as 1993. Higher product sales to theelectronics industry was offset by lower sales of encapsulants. Coatings products represented $18,231, or (34%), of this category's sales,and was $1,650 higher than 1993. This increase was mainly due to a 14% growth incastor based products used in coatings for the housing and automotiveindustries. Engineering plastics represented $5,123, or (10%), of this category'ssales, and included $5,100 in sales from our Seal Sands facility for a productused in high performance plastics. Biomedical products represented $4,984, or (9%), of this category's sales,and was $993 higher than 1993, due to increased foreign market share. Export sales increased by $6,839, or 18.3%, to $44,135. Exports were 17.7%of gross revenues in 1994 versus 18.3% in 1993. International sales, comprisedof all sales from our acquired operations in Europe, totaled $34,803. Total gross profit of $57,881 increased by $6,103, or 11.8%, from 1993. Theincreased gross profit was principally due to the Nobel/Profarmaco and SealSands acquisitions, and to sales increases in health and pharmaceuticals andagricultural intermediates and additives. The gross profit as a percent of netrevenues declined from 26.3% in 1993 to 24.0% in 1994. Without the acquisitionof Nobel/Profarmaco, the gross profit percent would have been 23.0% in 1994.Loss of margin was principally due to sales price decreases and raw materialprice increases in the pyridine and related businesses, and higher manufacturingcosts 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 $31,216was $1,930 (6.6%) above 1993. The increased operating expenses of the newacquisitions were mostly offset by reduced spending, including staff reductions,reduced legal costs, and lower environmental 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 for - ---------------(Dollars in thousands, except share data) 19 21 environmental contingencies as circumstances warrant. No additionalenvironmental provision was recorded in 1994. The 1993 provision was $1,029. Adiscussion 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 of legal expensesspent in 1993 and 1994, pursuing this recovery. Research and development expenses of $5,689 were 2.4% of net revenues in1994, 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 from $16,649 in1993. The increased operating profits were due to the acquisition ofNobel/Profarmaco; and to cost reductions in selling, general and administration,and in research and development. Net interest expense of $4,581 in 1994 reflected an increase of $1,810 from1993. The increase was due to $138,000 in financing activities necessary for theacquisitions of Seal Sands and Nobel/Profarmaco and higher interest rates. Other income in 1994 was $497 compared with other expense of $446 in 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 Company's net income increased 28.8% to $11,126 compared with a netincome of $8,641 in 1993. 1993 COMPARED TO 1992 Net revenues in 1993 increased $17,751 (10%) over 1992 as a result ofincluding a full year of sales by Zeeland Chemicals, Inc. ("Zeeland"), theincreased polymer business was due to the acquisition of a fiber optic gelbusiness, increased pharmaceutical intermediates, and increased performanceenhancers. The pharmaceutical bulk actives declined in 1993. PHARMACEUTICAL BULK ACTIVES' revenues of $9,818 decreased $2,621 (21%) from1992. This decrease was due to the unusually high 1992 sales caused by adisruption in the supply chain that resulted in distributors building excessiveinventories. Sales were below normal levels in 1993 due to this inventorycorrection. Partially offsetting this decline were increased sales of other bulkactives involved with anti-inflammatories. PHARMACEUTICAL INTERMEDIATES' revenues of $42,151 increased $4,564 (12%).This was primarily attributable to increased health, x-ray media and anintermediate used in cough suppressants. Sales of health intermediates represented $21,460, or 51%, of thiscategory's 1993 gross revenues and were $2,582 higher than 1992. This category'sperformance was affected by increases in the shipments of Vitamin B3 to the U.S.market. Sales of cosmetics intermediates represented $9,040, or 21%, of thiscategory's 1993 gross revenues and were $1,091 lower than 1992. Sales of castoroil based personal care products totaled $8,500 in 1993 and were $1,100 lowerthan the prior year. Sales of x-ray media intermediates represented $4,048, or 10%, of thiscategory's 1993 gross revenues and were $1,554 higher than 1992 due to productsassociated with the Zeeland acquisition and growth in x-ray contrast compoundsthat are less toxic. Sales of other active intermediates represented $7,603, or 18%, of thiscategory's 1993 gross revenues and were $1,419 higher than 1992. The increasewas due to expanded sales of an intermediate used in the formulation ofdextromethorphan, an over-the-counter cough suppressant. - ---------------(Dollars in thousands, except share data) 20 22 ORGANIC INTERMEDIATES' revenues of $56,261 increased $687 (1%). Thisincrease was due to higher sales of organo-arsenical feed additives to thepoultry industry and to increased shipments of a pyridine compound to a majorherbicide producer. This category was negatively affected by the end of acontract for a herbicide intermediate in the fourth quarter 1992, and a decreasein export sales of pyridine derivatives. The sales of feed additives amounted to $30,584, or 54%, of this category's1993 gross revenues and were up 6% from 1992. Sales of organo-arsenical feedadditives increased 30% over the prior year due to a competitor stoppingproduction, increased dosages by poultry producers, and increased poultryproduction in the U.S. The sales of products used for crop protection amounted to $25,677, or 46%,of this category's 1993 gross revenues and were down 4% from 1992. Sales ofpyridine, the largest item in this group, were at the same level as 1992. Thelargest pyridine customer is Zeneca, Inc. who uses it in the manufacture ofherbicides. The Company produces another major pyridine compound and is theexclusive supplier of this product to Dow Elanco who used it in production of aherbicide. Sales of this compound increased substantially in 1993 due to Dowresuming normal ordering patterns after reducing their inventories in 1992.Sales of other pyridine derivatives in this category decreased from 1992 due tohigh inventory positions in the Asia-Pacific region and reduced use of a wheatfungicide in Europe. PERFORMANCE ENHANCERS' revenues of $49,379 increased $7,797 (19%). Thisincrease was primarily due to photographic chemicals, catalysts and fuel/oilperformance products. Sales of specialty additives represented $14,755, or 30%, of thiscategory's 1993 gross revenues and were $335 higher than the prior year. Thiswas primarily due to increased sales of various castor based products. Sales of catalysts represented $12,187, or 25%, of this category's 1993gross revenues and were $1,307 higher than 1992. The increase is primarilyattributable to a variety of products associated with the Zeeland acquisition. Sales of photographic chemicals represented $11,527, or 23%, of thiscategory's 1993 gross revenues and were $4,331 higher than 1992. The increase isdue to a substantial increase in production of a photochemical used as a polymerin instamatic film. Sales of products to the fuel/oil industries represented $6,788, or 14%, ofthis category's 1993 gross revenues and were $1,527 higher than 1992. Thisincrease was due to expanded sales of alkanes which are specialty parafins usedas calibrating agents for certain diesel fuels and alkenyl succinic anhydrides(ASA's) used as lubricant additives. Sales of polymer products represented $4,122, or 8%, of this category's1993 gross revenues and were $297 higher than 1992 primarily due to increasedsales of a chemical used as a dye receptor in acrylic fibers for textiles and tosales of a product used as a cross linker for strengthening plastics. POLYMER SYSTEMS' revenues of $45,699 increased $8,002 (21%). This was dueto increases in fiber optic cable gels and encapsulants to thetelecommunications industry. Sales of telecommunications products represented $28,126, or 55%, of thiscategory's 1993 gross revenues and were $10,252 higher than 1992 due to theacquisition of a complimentary fiber optic gel business in March 1993 whichcontributed $8,900 in increased revenues. The encapsulant sales were 8% above1992 primarily due to penetration of international markets. Sales of products to the coatings industry represented $16,581, or 36%, ofthis category;s 1993 gross revenues and were $2,332 lower than the prior yeardue to a tolling agreement for paint additives and corrosion inhibitors thatended in May 1993. Sales of biomedical products represented $3,991, or 9%, of this category's1993 gross revenues and were at the same level of sales as 1992. - ---------------(Dollars in thousands, except share data) 21 23 Export and international sales decreased by $7,200, or 16.2%. Exports were18.3% of gross revenues in 1993 versus 24.1% in 1992 due to lower export salescaused by poor economic conditions in Europe and payment problems in theAsia-Pacific region. Total gross profit of $51,778 increased by $5,742, or 12.5%, from 1992. Thegross profit as a percent of net revenues improved from 25.7% in 1992 to 26.3%in 1993. The increased gross profit was due to an improvement in sales mix andthe continued effort to improve manufacturing costs and production processes. 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 $29,286was $1,085 (3.8%) above 1992, due to the full year effect of the Zeelandacquisition and the costs of establishing a sales office in Hong Kong. Bonuspayments to employees declined by 40% to $1,700 in 1993 based on a formula usingyear-to-year changes in net income and return on investment achieved. 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 was recorded in 1993 attributable to activity in a number of pendingenvironmental matters; $1,747 was recorded in 1992. Research and development expenses of $5,843 were 3.0% of net revenues in1993, and represented a 44.4% increase over 1992. The increase of $1,797 in 1993was largely due to the commitment to develop new products and processes toensure future growth in profitability. This commitment will continue in thefuture. The operating profit in 1993 increased 20.7% to $16,649 from $13,789 in1992. The increased operating profits were due to increased sales and grossmargin, partially offset by the increases in research and development spending. Net interest expense of $2,771 in 1993 reflected an increase of $334 from1992. The increase was due to higher borrowings in order to finance acquisitionactivity and the capital program. Other expense in 1993 was $466 compared with other expense of $1,054 in1992. The decrease was due to a 1992 provision of $553 for the write-off of areceivable. 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 compared with a netincome of $6,230 in 1992. LIQUIDITY AND CAPITAL RESOURCES Net cash flow from operations was $44,564 for December 31, 1995 comparedwith $27,429 in 1994. The increase in cash flow is primarily due to increasedearnings and additional depreciation. Capital expenditures were $46,398 in 1995, $20,825 in 1994, and $15,535 in1993. The largest expenditures were for (1) a facility at the Salsbury site inCharles City, Iowa, to increase production levels for several products and (2)increased production capacity at Nobel Chemicals AB (now Nordic Synthesis AB) inSweden. On September 21, 1994, the Company entered into a new $225,000 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 bridge loan, due October 11, 1995; (ii) a $75,000 term loan, withmandatory $1,000 quarterly payments until September 20, 1997 and mandatoryquarterly payments of $3,938 for each quarter thereafter until September 30,2001; and (iii) a $100,000 revolving credit facility, due October 11, 1997. Therevolving credit facility will be extended for successive two-year periodssubsequent to October 11, 1997 unless either the Company or the Banks elect notto so extend the facility. - ---------------(Dollars in thousands, except share data) 22 24 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 contains various restrictive covenants, whichrequire the Company to maintain a minimum consolidated net worth level, certainfinancial ratios and deferred pledge of assets, as defined. The Company hasentered into interest rate swap agreements to reduce the impact of changes ininterest rates on its floating rate long-term obligations. As of December 31,1995, the Company had outstanding four interest rate swap agreements, having atotal notional amount of $40,000. Those agreements effectively change theCompany's interest rate exposure from variable rate to fixed percentage. On October 11, 1994, the Company borrowed $32,200 and L4,265 under theCredit Agreement to repay all of its obligations under the Old Credit Agreement,and the Old Credit Agreement was terminated. On October 12, 1994, the Companyborrowed $126,000 under the Credit Agreement, including all of the $50,000bridge loan facility and all of the $75,000 seven-year term loan, to finance theacquisition of Nobel/Profarmaco. On October 31, 1994, the Company borrowed$4,150 under the Credit Agreement to retire a variable rate IndustrialDevelopment Revenue Bond relating to its manufacturing facility in Zeeland,Michigan. On July 24, 1995, the Company raised $62,572 in a public offering, whichwas used to pay down outstanding debt ($50,000 short-term bridge loan, $12,572long-term). The Company has undrawn borrowing capacity of approximately $66,798 underthe Credit Agreement as of December 31, 1995, which can be used for generalcorporate purposes. Management is of the opinion that these amounts, togetherwith other available sources of capital, are adequate for meeting the Company'sfinancing and capital requirements. During 1995, the Company paid cash dividends of $0.20 per share. The Company buys materials and sells products in a variety of currencies invarious parts of the world. Its results, are, therefore, impacted by changes inthe relative value of currencies in which it deals. Prior to the acquisition ofNobel/Profarmaco, this risk was not considered to be significant and the Companyhad no program to mitigate foreign currency risk. During 1995, the Company established a foreign currency risk managementpolicy. The Company used foreign currency forward exchange contracts to reducethe effect of short-term foreign exchange rate movements on the Company'soperating results. The notional amount of these contracts is $38,940 which theCompany estimates to be approximately 70% of the foreign currency exposureduring the period covered resulting in a deferred currency gain of $671 atDecember 31, 1995. 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 fine, which was paid in January 1995. As arelated liability had been previously established, the resolution of this matterhad no effect upon the results of operations in 1994 or 1995. 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 #20 to the financial statements andincorporated herein by reference. - ---------------(Dollars in thousands, except share data) 23 25 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. 119 "Disclosure aboutFinancial Instruments and Fair Value of Financial Instruments" requiresdisclosure about amounts, nature and terms of derivative financial instrumentsheld or issued. As of December 31, 1995, the Company has entered into variousforeign currency forward exchange contracts in an effort to mitigate theexposures inherent in operating businesses in various foreign currencies.Description of the derivatives used and the associated fair values are presentedin Note 12 to the financial statements and incorporated herein by reference. Statement of Financial Accounting Standard No. 121 "Accounting for theImpairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"requires that long-lived assets and certain identifiable intangibles to be heldand used by an entity be reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable. The Company is required to adopt this standard in 1996. The Companyanticipates that the adoption of this standard will not have a material impacton its results of operations. Statement of Financial Accounting Standard No. 123 "Accounting for StockBased Compensation" establishes financial accounting and reporting standards forstock-based employee compensation plans. The Company is currently evaluating theimpact of this pronouncement. 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) ---------------- Report of Independent Accountants............................................. 25Consolidated Balance Sheets as of December 31, 1995 and 1994.................. 26Consolidated Income Statements for the Years Ended December 31, 1995, 1994 and 1993.................................................................... 27Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1995, 1994 and 1993..................................................... 28Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993............................................................... 29Notes to Consolidated Financial Statements.................................... 30Consolidated Quarterly Financial Data (unaudited) for the Years Ended December 31, 1995 and 1994........................................................... 51 The financial statements and schedules are filed pursuant to Item 14 ofthis report. - ---------------(Dollars in thousands, except share data) 24 26 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, 1995 and 1994, 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, 1995, 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, 1995 and 1994, and theconsolidated results of their operations and their cash flows for each of thethree years in the period ended December 31, 1995, 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. COOPERS & LYBRAND L.L.P. Parsippany, New JerseyJanuary 19, 1996 25 27 CAMBREX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) DECEMBER 31, --------------------- 1995 1994 -------- -------- ASSETSCurrent assets: Cash and cash equivalents............................................ $ 4,841 $ 9,087 Receivables: Trade accounts, less allowance for doubtful accounts of $1,261 and $1,288 at respective dates....................................... 52,342 47,742 Other............................................................. 5,995 5,112 -------- -------- 58,337 52,854 Inventories.......................................................... 71,234 61,979 Deferred tax assets.................................................. 4,544 1,089 Other current assets................................................. 5,178 5,689 -------- -------- Total current assets......................................... 144,134 130,698Property, plant and equipment, net..................................... 205,683 172,282Intangible assets, net................................................. 51,665 56,991Other assets........................................................... 1,071 506 -------- -------- -------- -------- Total assets................................................. $402,553 $360,477 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable and accrued liabilities............................. $ 62,444 $ 48,402 Income taxes payable................................................. 3,012 5,982 Short-term debt...................................................... 4,705 52,368 Current portion of long-term debt.................................... 4,108 4,021 -------- -------- Total current liabilities.................................... 74,269 110,773Long-term debt......................................................... 99,643 115,975Deferred tax liabilities............................................... 19,400 14,258Other noncurrent liabilities........................................... 19,757 17,505 -------- -------- Total liabilities............................................ 213,069 258,511Commitments and contingenciesStockholders' equity: Common Stock, $.10 par value; issued 8,195,831 and 6,078,781 shares at respective dates............................................... 818 607 Additional paid-in capital........................................... 142,453 73,673 Retained earnings.................................................... 54,316 35,935 Additional minimum pension liability................................. (750) Treasury stock, at cost; 715,447 and 756,806 shares at respective dates............................................................. (9,160) (9,690) Cumulative translation adjustment.................................... 1,807 1,441 -------- -------- Total stockholders' equity................................... 189,484 101,966 -------- -------- Total liabilities and stockholders' equity................... $402,553 $360,477 ======== ======== See accompanying notes to consolidated financial statements. 26 28 CAMBREX CORPORATION AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (IN THOUSANDS, EXCEPT PER-SHARE DATA) YEARS ENDED DECEMBER 31, ---------------------------------- 1995 1994 1993 -------- -------- -------- Net revenues............................................... $357,176 $241,634 $197,203Operating expenses: Cost of goods sold.................................... 257,396 183,753 145,425 Selling, general and administrative................... 47,751 31,216 29,286 Research and development.............................. 7,526 5,689 5,843 -------- -------- -------- Total operating expenses......................... 312,673 220,658 180,554 -------- -------- --------Operating profit........................................... 44,503 20,976 16,649Other (income) expenses Interest income....................................... (638) (95) (41) Interest expense...................................... 11,146 4,676 2,812 Other -- net.......................................... 2,779 (497) 466 -------- -------- --------Income before income taxes................................. 31,216 16,892 13,412Provision for income taxes................................. 11,546 5,766 4,771 -------- -------- --------Net income................................................. $ 19,670 $ 11,126 $ 8,641 ======== ======== ========Earnings per share of common stock and common stock equivalents: Primary............................................... $ 2.93 $ 1.96 $ 1.64 Fully diluted......................................... $ 2.92 $ 1.95 1.60Weighted average shares outstanding: Primary............................................... 6,702 5,674 5,282 Fully diluted......................................... 6,736 5,699 5,484 See accompanying notes to consolidated financial statements. 27 29 CAMBREX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) NONVOTING COMMON STOCK COMMON ADDITIONAL --------------------- STOCK MINIMUM CUMULATIVE TOTAL SHARES PAR VALUE (PAR PAID-IN RETAINED PENSION TREASURY TRANSLATION STOCKHOLDERS' ISSUED ($.10) $.10) CAPITAL EARNINGS LIABILITY STOCK ADJUSTMENT EQUITY --------- --------- --------- -------- -------- ---------- -------- ---------- ------------- 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 Reversal of 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 Net income........ 19,670 19,670 Cash dividends at $0.20 per share........... (1,289 ) (1,289) Exercise of stock options......... 392,050 39 2,755 2,794 Tax benefit of stock options exercised....... 2,721 2,721 Shares issued in public offering........ 1,725,000 172 62,400 62,572 Additional minimum pension liability....... (750) (750) Shares issued under savings plan............ 904 530 1,434 Adjustment for foreign currency translation..... 366 366 -- ---------- ---- ------- ------- ------- ------- ------ --------Balance at December 31, 1995.......... 8,195,831 $ 818 $-- $142,453 $54,316 $ (750) $ (9,160) $ 1,807 $ 189,484 ========== ==== == ======= ======= ======= ======= ====== ======== See accompanying notes to consolidated financial statements. 28 30 CAMBREX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) YEARS ENDED DECEMBER 31, ----------------------------------- 1995 1994 1993 -------- --------- -------- Cash flows from operations: Net income.............................................. $ 19,670 $ 11,126 $ 8,641 Depreciation and amortization........................... 24,961 15,937 11,779 Provision for inventories............................... 3,052 Provision for environmental contingencies............... 1,029 Deferred income taxes................................... 751 3,183 1,112 Loss on disposal of property, plant and equipment....... 1,562 Changes in assets and liabilities: Receivables.......................................... (4,296) (3,349) (228) Inventories.......................................... (9,952) (1,212) (3,709) Other current assets................................. (1,409) (44) (684) Accounts payable and accrued liabilities............. 8,013 3,625 1,016 Income taxes payable................................. 958 (1,852) 57 Other noncurrent assets and liabilities.............. 1,254 15 (2,623) -------- --------- -------- Net cash provided from operations.................... 44,564 27,429 16,390 -------- --------- --------Cash flows from investing activities: Capital expenditures.................................... (46,398) (20,825) (15,535) Acquisition of businesses............................... (131,697) (5,886) Other investing activities.............................. (2,038) Proceeds from sale of product lines..................... 2,152 -------- --------- -------- Net cash (used in) investing activities.............. (48,436) (150,370) (21,421) -------- --------- --------Cash flows from financing activities: Dividends............................................... (1,289) (1,050) (984) Net (decrease) increase in short-term debt.............. (47,663) 50,784 Long-term debt activity (including current portion): Borrowings........................................... 73,884 134,679 42,111 Repayments........................................... (90,257) (56,244) (38,274) Proceeds from the issuance of common stock.............. 65,367 401 339 Proceeds from the sale of treasury stock................ 1,434 1,449 1,436 -------- --------- -------- Net cash provided from financing activities.......... 1,476 130,019 4,628 -------- --------- --------Effect of exchange rate changes on cash................... (1,850) 1,848 -------- --------- --------Net (decrease) increase in cash........................... (4,246) 8,926 (403)Cash at beginning of year................................. 9,087 161 564 -------- --------- --------Cash at end of year....................................... $ 4,841 $ 9,087 $ 161 ======== ========= ========Supplemental disclosure: Interest paid........................................... $ 12,254 $ 4,996 $ 2,810 Income taxes paid....................................... $ 5,321 $ 4,854 $ 4,126Noncash transactions: Conversion of subordinated notes to common stock........ $ 3,990 Additional minimum pension liability charged to (eliminated from) stockholders' equity............... $ 750 $ (3,030) $ 1,030 See accompanying notes to consolidated financial statements. 29 31 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 which potentially subject the Company toconcentrations of credit risk consist principally of cash equivalents, tradereceivables,and foreign currency forward exchange contracts. The Company places its cash equivalents with financial institutions andlimits the amount of credit exposure to any one financial institution.Concentrations of credit risk with respect to trade receivables are limited dueto the large numbers of customers comprising the Company's customer base, andtheir dispersion across different business and geographic areas. No customerrepresents more than 10% of sales nor receivables. Gains and losses on foreign currency forward exchange contracts of existingassets or liabilities, or hedges of firm commitments are deferred and arerecognized in income as part of the related transactions. 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 connection with ongoing construction activities in 1995 and 1994 amounted to$749 and $461, respectively. 30 32 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) 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 Product technology.............. 5 to 17 years Non-compete agreements.......... 5 years Trademarks and other............ 1 to 40 years At each balance sheet date, the Company evaluates the realizability ofintangibles based upon expectations of nondiscounted cash flows and operatingincome for each subsidiary having material intangible balances. Income Taxes The provision for income taxes is based upon income recognized forfinancial statement purposes and includes the effect of deferred taxes. Thesedeferrals are the result of transactions which are recognized in differentperiods for financial and income tax reporting. The Company and its eligible subsidiaries file a consolidated U.S. incometax return. Certain subsidiaries which are consolidated for financial reportingare not eligible to be included in the consolidated U.S. income tax return. U.S.income taxes are provided on planned repatriation of a portion of foreignearnings and applicable foreign tax credits. Cambrex also intends toindefinitely reinvest the unremitted earnings of certain non-U.S. subsidiaries,and as such separate provisions for income taxes have been determined for theseentities. Use of Estimates The preparation of financial statements in conformity with generallyaccepted accounting principles requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period. Actual results could differ from those estimates. 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. 31 33 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) Earnings Per Common Share Earnings per share of common stock for 1995, 1994 and 1993 are computed onthe basis of the weighted average shares of common stock outstanding plus commonequivalent shares arising from the effect of dilutive stock options, using thetreasury stock method. Fully diluted earnings per share for 1993 also assumesconversion of the outstanding convertible subordinated notes and the eliminationof the related interest expense, net of tax. Under the assumption that the July24, 1995 public offering of 1,725,000 shares, the proceeds of which were used toreduce the Company's outstanding debt, had occurred on January 1, 1995, the proforma earnings per share would have been $2.79. (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 $130,000. The business consists of Nobel Chemicals AB (now NordicSynthesis AB) in Karlskoga, Sweden, Profarmaco Nobel S.r.1. in Milan, Italy andsales companies in Germany, England and the United States. Nobel/Profarmacomanufactures fine chemical intermediates and bulk active ingredients forpharmaceutical products. The transaction was accounted for as a purchase and wasfinanced with the Company's credit agreement, and resulted in goodwill of$46,757 which is being amortized on a straight line basis over 15 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 $3,744 forTopanol which are being amortized on a straight line basis over 10 years and 4years, respectively. (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) 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. The pro forma financial informationis not necessarily indicative of results of operations that would have occurredhad the combinations been in effect at the beginning of the periods nor offuture results of operations of the combined companies. YEARS ENDED DECEMBER 31, --------------------- 1994 1993 -------- -------- Net revenues................................................... $328,538 $295,704 Net income..................................................... 13,990 7,469 Earnings per share Primary...................................................... 2.47 1.41 Fully diluted................................................ 2.45 1.36 32 34 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (3) ACQUISITIONS AND DIVESTITURES -- (CONTINUED) Assets acquired and liabilities assumed are as follows: 1994 -------- Cash........................................................... $ 6,305 Receivables.................................................... 20,638 Inventories.................................................... 28,791 Deferred tax assets............................................ 3,449 Other current assets........................................... 3,574 Property, plant and equipment.................................. 78,267 Goodwill....................................................... 52,382 Accounts payable and accrued liabilities....................... (30,315) Income taxes payable........................................... (4,551) Deferred tax liabilities....................................... (8,274) Other non-current liabilities.................................. (9,166) -------- $141,100 ======== 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. (d) In 1994, the Company sold three small businesses: Wickhen cosmeticesters, black and white photographic chemicals and the Hydrogels business for atotal of $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. 121 "Accounting for theImpairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"requires that long-lived assets and certain identifiable intangibles to be heldand used by an entity be reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable. The Company is required to adopt this standard in 1996. The Companyanticipates that the adoption will not have a material impact on the result ofoperations. Statement of Financial Accounting Standard No. 123 "Accounting for StockBased Compensation" establishes financial accounting and reporting standards forstock-based employee compensation plans. The Company is required to adopt thisstandard in 1996. The Company is currently evaluating the impact of thispronouncement. 33 35 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (5) INVENTORIES Inventories consist of the following: DECEMBER 31, ------------------- 1995 1994 ------- ------- Finished goods................................................... $30,409 $31,473 Work in process.................................................. 19,093 14,029 Raw materials.................................................... 15,931 13,574 Supplies......................................................... 5,801 2,903 ------- ------- Total.................................................. $71,234 $61,979 ======= ======= (6) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following: DECEMBER 31, --------------------- 1995 1994 -------- -------- Land........................................................... $ 7,956 $ 7,937 Buildings and improvements..................................... 50,127 42,261 Machinery and equipment........................................ 200,218 162,383 Furniture and fixtures......................................... 5,846 5,752 Construction in progress....................................... 29,283 23,509 -------- -------- Total................................................ 293,430 241,842 Accumulated depreciation....................................... (87,747) (69,560) -------- -------- Net.................................................. $205,683 $172,282 ======== ======== Depreciation expense amounted to $19,493, $13,983 and $10,735 for the yearsended December 31, 1995, 1994 and 1993, respectively. (7) INTANGIBLE ASSETS Components of intangible assets are as follows: DECEMBER 31, --------------------- 1995 1994 -------- -------- Goodwill....................................................... $ 54,947 $ 55,450 Other.......................................................... 14,457 13,626 -------- -------- Total................................................ 69,404 69,076 Accumulated amortization....................................... (17,739) (12,085) -------- -------- Net.................................................. $ 51,665 $ 56,991 ======== ======== 34 36 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (8) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES The components of accounts payable and accrued liabilities are as follows: DECEMBER 31, ------------------- 1995 1994 ------- ------- Accounts payable................................................. $29,901 $31,047 Salaries, wages and employee benefits payable.................... 17,661 8,113 Other accrued liabilities........................................ 14,882 9,242 ------- ------- Total.................................................. $62,444 $48,402 Total.................................................. $62,444 $48,402 ======= ======= (9) INCOME TAXES Income before taxes consisted of the following: YEARS ENDED DECEMBER 31, ------------------------------- 1995 1994 1993 ------- ------- ------- Domestic.............................................. $22,543 $15,571 $13,412 Foreign............................................... 8,673 1,321 -- ------- ------- ------- Total....................................... $31,216 $16,892 $13,412 ======= ======= ======= The provision for income taxes consists of the following expenses(benefits): YEARS ENDED DECEMBER 31, ------------------------------ 1995 1994 1993 ------- ------- ------ Current: Federal.............................................. $ 5,951 $ 3,142 $3,216 State................................................ 460 529 443 Foreign.............................................. 4,384 (1,088) -- ------- ------- ------ 10,795 2,583 3,659 ------- ------- ------ Deferred: Federal.............................................. 1,008 1,537 974 State................................................ (22) 328 138 Foreign.............................................. (235) 1,318 -- ------- ------- ------ 751 3,183 1,112 ------- ------- ------ Total........................................ $11,546 $ 5,766 $4,771 ======= ======= ====== 35 37 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (9) INCOME TAXES -- (CONTINUED) The significant components of the deferred tax expense (benefit) arepresented in the schedule below. The components of the deferred tax expense(benefit) were computed in accordance with the provisions of SFAS 109. YEARS ENDED DECEMBER 31, ---------------------------- 1995 1994 1993 ------ ------ ------ Depreciation..................................................... $1,477 $2,558 $2,047Environmental reserves........................................... 156 (290) (453)Self insurance................................................... (338) (83) (79)Inventory capitalization......................................... (468) 153 (123)Alternative minimum tax credits.................................. 625 538 (727)Intangibles...................................................... (828) -- 111Other............................................................ 127 307 336 ------ ------ ------ $ 751 $3,183 $1,112 ====== ====== ====== The provision for income taxes differs from the statutory Federal incometax rate of 35% for 1995 and 34% for 1994 and 1993 as follows: YEARS ENDED DECEMBER 31, ----------------------------- 1995 1994 1993 ------- ------ ------ Income tax at Federal statutory rate............................ $10,926 $5,743 $4,560State and local taxes (benefits), net of Federal income tax benefits...................................................... 285 566 383Difference between Federal statutory rate and statutory rates on foreign income................................................ 656 (350)Other........................................................... (321) (193) (172) ------- ------ ------Provision for income taxes...................................... $11,546 $5,766 $4,771 ======= ====== ====== 36 38 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 31,1995 and 1994 relate to temporary differences and carryforwards as follows: DECEMBER 31, ------------------- 1995 1994 ------- ------- Deferred tax assets: Acquisition reserves........................................... $ 2,274 $ -- Inventory...................................................... 1,784 1,103 Prepaid pension expense........................................ (547) (495) Other.......................................................... 1,033 481 ------- ------- Total net current deferred tax assets.................. $ 4,544 $ 1,089 ======= ======= Deferred tax liabilities: Depreciation................................................... $24,085 $19,715 Environmental expenses......................................... (3,054) (3,510) Loss carryforwards............................................. (1,051) (3,329) Alternative minimum tax credits................................ (921) (1,546) Research and development credits............................... (12) (560) Intangibles.................................................... (707) 122 Other.......................................................... 9 1,037 ------- ------- Net non-current deferred tax liabilities.................... 18,349 11,929 Valuation allowances........................................... 1,051 2,329 ------- ------- Total net deferred tax liabilities..................... $19,400 $14,258 ======= ======= 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 $1,051 and $3,329 at December 31, 1995 and 1994,the majority of which are available on an indefinite carryforward basis.However, valuation reserves have been established to reflect uncertaintiesassociated with the realizability of such future benefits. Alternative minimumtax credits totaling $921 are available to offset future Federal income taxes onan indefinite carryforward basis. Presently, the Company's Federal income tax returns for the years 1988through 1993 are under audit. Management believes that the resolution of thoseaudits will not have a significant effect upon results of operations in anyfuture year. (10) SHORT-TERM DEBT On September 21, 1994, the Company entered into a new Loan Agreement (the"Credit Agreement"). The Credit Agreement provided for a bridge loan in theaggregate principal amount of $50,000 due October 11, 1995. On July 24, 1995,the full $50,000 was paid out of proceeds from a secondary stock offering byCambrex. See Long-term Debt (Note #11a) regarding details of the CreditAgreement. On October 12, 1994, Cambrex acquired Profarmaco S.r.1. which hadpre-existing lines of credit in Italy with six local banks (the "Facility"). TheFacility is short-term and provides three types of financing with the followinglimits: Overdraft Protection of $3,000 (Lire 5 billion), Export Financing of$5,000 (Lire 8.5 billion) and Advances on Uncleared Deposits of $5,000 (Lire 7.5billion). Advances on Uncleared Deposits (Ricevute Bancarie) bears no interest. 37 39 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (10) SHORT-TERM DEBT -- (CONTINUED) Short-term debt at December 31, 1995 and 1994 consists of the following: DECEMBER 31, ------------------- 1995 1994 ------- -------- One year term loan................................................ $ -- $ 50,000 Export financing facility......................................... 3,645 2,368 Overdraft protection.............................................. 1,060 -- ------ ------- Total................................................... $ 4,705 $ 52,368 ====== ======= (11) LONG-TERM DEBT Long-term debt consists of the following: DECEMBER 31, ---------------------- 1995 1994 --------- --------- Bank credit facilities(a)...................................... $ 102,500 $ 118,648 Capitalized leases............................................. 25 57 Notes payable(b)............................................... 1,226 1,291 -------- -------- Subtotal............................................. 103,751 119,996 Less: current portion(c)....................................... 4,108 4,021 Less: current portion(c)....................................... 4,108 4,021 -------- -------- Total................................................ $ 99,643 $ 115,975 ======== ======== (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 replaced 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 #10), the Credit Agreement provides for a seven year termloan in the aggregate principal amount of $75,000 (payable $1,000 per quarterfor twelve quarters and $3,938 for the remaining quarters beginning December1994), and a revolving credit facility in the aggregate principal amount of$100,000 due October 11, 1997 (evergreen renewal; automatic two year extensionsif non-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 1995 and 1994 average interest rates were 7.7%and 6.2%, respectively. The Credit Agreement contains various restrictive covenants, which requirethe Company to maintain a minimum consolidated net worth level, certainfinancial ratios and deferred pledge of assets, as defined. If these covenantsare not 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. 38 40 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (11) LONG-TERM DEBT -- (CONTINUED) 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. On July 24, 1995, the Company raised $62,572 in a public offering which wasused to pay down outstanding short-term debt of $50,000 and outstandinglong-term debt of $12,572. (b) As part of the October 12, 1994 acquisition of Nobel/Profarmaco, theCompany assumed a government loan made to Profarmaco S.r.1. to financetechnological innovations. The loan of $1,291, bearing interest at 9.21%, isamortized over ten annual payments starting July 26, 1995 and ending July 26,2004. (c) Aggregate maturities of long-term debt are as follows: 1996.............................................. $ 4,108 1997.............................................. 39,551 1998.............................................. 15,862 1999.............................................. 15,872 2000.............................................. 15,884 Thereafter........................................ 12,474 -------- Total........................................ $ 103,751 ======== (12) DERIVATIVE FINANCIAL INSTRUMENTS The Company uses derivative financial instruments to reduce exposures tomarket risks resulting from fluctuations in interest rates and foreign exchange.The Company does not enter into financial instruments for trading or speculativepurposes. Interest Rate Swap Agreements The following table illustrates the notional amounts outstanding, maturitydates, and the weighted average receive and pay rates of interest rate swapagreements. (Notional amounts provide an indication of the extent of theCompany's involvement in such agreements but do not represent its exposure tomarket risk). AS OF DECEMBER 31, 1995 ----------------------------------------- WEIGHTED AVG. RATE NOTIONAL MATURITY --------------- AMOUNTS DATE RECEIVE PAY -------- -------- ------- --- Interest rate swaps.............................. $ 30,000 1998 6.1% 6.0% Interest rate swaps.............................. $ 10,000 1999 5.6% 6.0% Interest expense under these agreements, and the respective debtinstruments that they hedge, are recorded at the net effective interest rate ofthe hedged transactions. The Company is exposed to credit loss in the event ofnonperformance by the other parties to the interest rate swap agreements.However, the Company does not anticipate nonperformance by the counterparties. Forward Exchange Contracts The Company's policy is to enter into forward exchange contracts to hedgeforeign currency transactions on a continuing basis. This hedging minimizes theimpact of short-term foreign exchange rate movements on the Company's operatingresults. The Company's foreign exchange contracts do not subject the Company'sresults of operations to risk due to exchange rate movements because gains andlosses on these contracts 39 41 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (12) DERIVATIVE FINANCIAL INSTRUMENTS -- (CONTINUED)generally offset gains and losses on the transactions being hedged. As a matterof policy, the Company does not hedge to protect the translated results offoreign operations. The forward exchange contracts have varying maturities withnone exceeding twelve months. The Company makes net settlements for foreigncontracts at maturity, based upon negotiated rates at inception of thecontracts. 1995 ----------------------------- UNREALIZED NOTIONAL ---------------- AMOUNTS GAINS LOSSES -------- ----- ------ Forward exchange contracts................................. $ 38,940 $ 750 $ 79 (13) 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, 1995 and 1994. Authorized shares of Nonvoting Common Stock were730,746 at December 31, 1995 and 1994. At December 31, 1995, authorized shares of Common Stock were reserved forissuance as follows: Stock option plans................................. 625,950 Cambrex savings plan............................... 41,037 ------- Total shares............................. 666,987 ======= On July 24, 1995, the Company completed a public offering of 1,725,000shares of newly issued common stock at a price of $38.75 per share. The totalproceeds to the Company, net of underwriting discounts, commissions, and otherrelated fees, amounted to $62,572. Proceeds were used to reduce outstanding debtexisting under the Company's bank Credit Agreement. 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 715,447 and 756,806 shares of treasurystock at December 31, 1995 and 1994, 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, 1995 and 1994, there wasno preferred stock outstanding. (14) 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 40 42 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (14) STOCK OPTIONS -- (CONTINUED)to key employees both non-qualified stock options and incentive stock options.On April 28, 1994, the Company's stockholders approved the 1993 Senior ExecutiveStock Option Plan ("1993 Plan"), which provides for the grant of optionsintended to qualify as additional incentives to the Company's Senior ExecutiveOfficers. On April 28, 1994, the Company's stockholders also approved the 1994Stock Option Plan ("1994 Plan"), which provides for the granting to keyemployees both non-qualified and incentive stock options. The 1994 Plan alsoprovides for the granting of non-qualified stock options to non-employeedirectors. Subject to stockholder approval on April 25, 1996, the Company willestablish the 1996 Performance Stock Option Plan ("1996 Plan"), which willprovide for the granting of options intended to qualify as additional incentivesto management and other key employees of Cambrex. The 1996 Plan will alsoprovide for the granting of non-qualified stock options to non-employeedirectors. As of December 31, 1995, 690,050 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 5,550 1987 Plan.............................................. 200,000 7,400 1989 Plan.............................................. 400,000 140,000 1992 Plan.............................................. 100,000 92,850 1993 Plan.............................................. 300,000 300,000 1994 Plan.............................................. 100,000 75,750 --------- ------- Total shares................................. 1,316,000 621,550 ========= ======= 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, 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 Granted............................................ 40,250 26.875 - 41.125 Exercised.......................................... (392,050) 4.750 - 22.375 Cancelled.......................................... (1,000) 22.375 ---------Outstanding at December 31, 1995..................... 621,550 4.750 - 41.125 596,550 ========= (15) 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 the 41 43 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (15) RETIREMENT PLANS -- (CONTINUED)Harriman, 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 service. TheCompany's policy is to fund pension costs currently to the extent deductible forincome tax purposes. Pension plan assets consist primarily of equity and fixedincome securities. The expense for both 1995 and 1994 are based on a twelve month period andon valuations of the plans as of January 1. However, the reconciliation offunded status is determined as of the September 30 measurement date. 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. The funded status of theseplans as of September 30, 1995 and 1994 is as follows: SEPTEMBER 30, 1995 SEPTEMBER 30, 1994 -------------------------- ------------------ OVERFUNDED UNDERFUNDED OVERFUNDED ---------- ----------- ------------------ Actuarial present value of benefit obligations: Vested benefits................................... $(13,714) $(3,884) $(14,096) Non-vested benefits............................... (1,263) (270) (1,271) -------- ------- -------- Accumulated benefit obligation.................... (14,977) (4,154) (15,367) Additional benefits based on estimated future salary levels.................................. (1,214) -- (939) -------- ------- --------Projected benefit obligation for service rendered through December 31, 1995 and 1994................ (16,191) (4,154) (16,306)Plan assets at fair market value.................... 16,159 3,842 18,224 -------- ------- --------(PBO in excess of Plan assets)/ Plan assets in excess of PBO...................... (32) (312) 1,918Unrecognized net transition (asset)................. (199) (300)Unrecognized prior service cost..................... 219 (448) (270)Other -- unrecognized net loss on past experience... 648 1,198 184Additional minimum liability........................ -- (750) -- -------- ------- --------Prepaid (accrued) pension cost as of September 30, 1995 and 1994..................................... 636 (312) 1,5324th quarter contributions........................... 370 103 -- -------- ------- --------Prepaid (accrued) pension cost as of December 31, 1995 and 1994..................................... $ 1,006 $ (209) $ 1,532 ======== ======= ======== Assumptions used to develop the U.S. 1995 and 1994 net periodic pensionexpense and the September 30, 1995 and 1994 actuarial present value of projectedbenefit obligations: JANUARY 1, 1995 JANUARY 1, 1994 -------------------------- --------------- OVERFUNDED UNDERFUNDED OVERFUNDED ---------- ----------- --------------- PENSION EXPENSEWeighted-average discount rate........................ 8.5% 8.5% 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% N/A 5.0% 42 44 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (15) RETIREMENT PLANS -- (CONTINUED) SEPTEMBER 30, 1995 SEPTEMBER 30, 1994 -------------------------- ------------------ OVERFUNDED UNDERFUNDED OVERFUNDED ---------- ----------- ------------------ ACTUARIAL PRESENT VALUE OF PROJECTED BENEFIT OBLIGATIONSWeighted-average discount rate...................... 7.5% 7.5% 8.5%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% N/A 5.0% 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, 1995 and 1994 is as follows: DECEMBER 31, 1995 DECEMBER 31, 1994 ----------------- ----------------- UNDERFUNDED UNDERFUNDED ----------------- ----------------- Actuarial present value of benefit obligations: Vested benefits.......................................... $(5,670) $(3,879) ------- ------- Accumulated benefit obligation........................... (5,670) (3,879) Additional benefits based on estimated future salary levels................................................ (506) (1,179) ------- -------Projected benefit obligation for service rendered through December 31, 1995 and 1994............................... (6,176) (5,058)Plan assets at fair market value........................... 1,138 848 ------- -------Funded status.............................................. (5,038) (4,210)Unrecognized net transition (asset)........................ (428) (420)Unrecognized prior service cost............................ 57Other unrecognized net (gain) on past experience........... (761) (776) ------- -------Accrued pension liability.................................. $(6,170) $(5,406) ======= ======= Assumptions used to develop the 1995 and 1994 actuarial present value ofprojected benefit obligations for the Company's foreign pension plans: DECEMBER 31, 1994 DECEMBER 31, 1995 ----------------- ----------------- ACTUARIAL PRESENT VALUE OF PROJECTED BENEFIT OBLIGATIONSWeighted-average discount rate............................... 9.0% to 9.5% 9.0% to 9.5%Expected long-term rate of return on assets.................. 10.0% 10.0%Rate of increase in future compensation levels............... 5.0% to 7.0% 5.0% to 7.0% 43 45 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (15) RETIREMENT PLANS -- (CONTINUED) The Company's net pension costs included in operating results amounted to$1,209, $1,157 and $713 in 1995, 1994 and 1993, respectively, and were comprisedof the following: YEARS ENDED DECEMBER 31, ------------------------------- 1995 1994 1993 ------- ------- ------- Service cost.......................................... $ 1,106 $ 1,242 $ 843 Interest cost on projected benefit obligation......... 1,898 1,757 1,299 Return on plan assets................................. (2,887) 370 (2,131) Amortization of excess plan net assets at adoption of SFAS 87............................................. (137) (101) (93) Amortization of unrecognized prior service cost....... (40) Amortization of unrecognized net (gain) loss.......... (9) Other items -- deferred investment gain (loss)........ 1,278 (2,111) 795 ------- ------- ------- Net pension cost............................ $ 1,209 $ 1,157 $ 713 ======= ======= ======= 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 $575 and $512 is included in the1995 and 1994 net periodic pension expense, respectively. Cambrex makes available to all employees a savings plan as permitted underSections 401(k) and 401(a) of the Internal Revenue Code. Employee contributionsare matched in part by Cambrex. The cost of this plan amounted to $1,452,$1,449, and $1,436 in 1995, 1994 and 1993, respectively. In addition to the above plans, Cambrex also established a SupplementalExecutive Retirement Plan in 1994. The net periodic pension cost for 1995 and1994 amounted to $104 and $104, respectively. (16) 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 1995 and 1994 pretax operating results, including the amortizationof the transition obligation, resulted in a cost of $306 and $312, 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. 44 46 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (16) OTHER POSTRETIREMENT BENEFITS -- (CONTINUED) The periodic postretirement benefit cost includes the following components: YEARS ENDED DECEMBER 31, ------------------- 1995 1994 ------- ------- Service cost of benefits earned.................................. $ 57 $ 68 Interest cost on accumulated postretirement benefit obligation... 159 151 Amortization of transition obligation............................ 90 93 ------- ------- Total periodic postretirement benefit cost..................... $ 306 $ 312 ======= ======= Accumulated postretirement benefit obligation: 1995 1994 ------- ------- Retirees......................................................... $ 808 $ 957 Fully eligible plan participants................................. 654 283 Other active plan participants................................... 623 631 ------- ------- Total obligation................................................. 2,085 1,871 Unrecognized net loss............................................ 131 248 Unrecognized transition obligation............................... (1,575) (1,669) ------- ------- Accrued postretirement benefit cost recognized in the balance sheet.......................................................... $ 641 $ 450 ======= ======= The discount rate used to determine the accumulated postretirement benefitobligation was 7.5% and 8.5% in 1995 and 1994, respectively. The assumed healthcare cost trend rate used to determine the accumulated postretirement benefitobligation was initially 16%, declining ratably to 6.5% in 2002 and thereafter.A one-percentage-point increase in the assumed health care cost trend rate wouldhave no effect upon the accumulated postretirement benefit obligation. The cost of all health and life insurance benefits is recognized asincurred and was approximately $3,825, $3,994 and $3,797 in 1995, 1994 and 1993,respectively. The cost of providing these benefits for the 190, 199 and 181retirees in 1995, 1994 and 1993, respectively, is not separable from the cost ofproviding benefits for the 695, 732, and 791 active U.S. employees. (17) OTHER INCOME AND EXPENSE Other expense in 1995 was $2,779 including $1,400 in currency losses atNobel and Profarmaco, and $865 for the write-off of equipment used for aspecific product, which is no longer manufactured. Other income in 1994 was $497 including $380 in currency gains atProfarmaco. There were no individually significant components in other income in1993. (18) 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 operate as subsidiaries of Cambrex Ltd.,England, which was organized in 1987. 45 47 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (18) FOREIGN OPERATIONS AND EXPORT SALES -- (CONTINUED) Summarized data for the Company's operations for 1995 and 1994 are asfollows: DOMESTIC EUROPEAN TOTAL -------- -------- -------- 1995 Gross revenues..................................... $223,187 $144,883 $368,070 Operating profit................................... 19,763 24,740 44,503 Net income......................................... 17,324 2,346 19,670 Identifiable assets................................ 176,839 225,714 402,553 1994 Gross revenues..................................... $214,880 $ 34,803 $249,683 Operating profit................................... 17,334 3,642 20,976 Net income......................................... 10,514 612 11,126 Identifiable assets................................ 167,725 192,752 360,477 Export sales, included in domestic gross revenues, in 1995, 1994 and 1993amounted to $50,608, $44,135 and $37,296, respectively. No country, in any ofthe given years, represents more than 10% of these export revenues. (19) COMMITMENTS The Company currently has no significant capital lease obligations. The Company has operating leases expiring on various dates through the year2012. The leases are primarily for office and laboratory equipment and vehicles.At December 31, 1995, future minimum commitments under operating leasearrangements were as follows: Year ended December 31: 1996............................................. $ 1,933 1997............................................. 1,500 1998............................................. 1,203 1999............................................. 624 2000 and thereafter.............................. 11,579 ------- Net commitments.................................... $16,839 ======= Total operating lease expense was $2,284, $1,958 and $872 for the yearsended December 31, 1995, 1994 and 1993, respectively. The Company had two letters of credit outstanding aggregating $702 as ofDecember 31, 1995. These letters of credit were issued in connection withvarious administrative or environmental activities. (20) 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 often spans several years and frequently involvesregulatory oversight and/or adjudication. Additionally, many remediationrequirements 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 of cashdisbursements cannot be determined with certainty. However, management is of the 46 48 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (20) CONTINGENCIES -- (CONTINUED)opinion that while the ultimate liability resulting from these matters may havea material effect upon the results of operations in any given year, they willnot have a material adverse effect upon the Company's liquidity nor itsfinancial 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, ------------------- 1995 1994 ------- ------- Estimated range of the Company's share of costs associated with estimable matters: Minimum..................................................... $ 8,697 $ 9,542 ======= ======= Maximum..................................................... $19,528 $18,032 ======= ======= Accrual and related activity: Balance, beginning of year..................................... $10,211 $ 9,058 Additions: Accruals established in connection with acquisition activity.................................................. 200 1,510 Deductions for expenditures.................................... (1,011) (357) ------- ------- Balance, end of year........................................... $ 9,400 $10,211 ======= ======= Classification of year end accrual: Current........................................................ $ 700 $ 2,610 Non-current.................................................... 8,700 7,601 ------- ------- $ 9,400 $10,211 ======= ======= During 1993, income statement charges for additions to the accrual forenvironmental contingencies aggregated $1,029. 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 Protection Agency(EPA) in connection with the disposition, under appropriate permits, ofwastewater at that site prior to Cambrex's acquisition of Nepera in 1986. TheHamptonburgh site is on the EPA's National Priorities List for remedial work andclean-up. However, to date the EPA has entrusted the management of theremediation effort to the New York State Department of EnvironmentalConservation (DEC). Although the periods of ownership of the site and the extentof its use for wastewater disposal are well established, the PRP's have not beenable to agree upon an allocation method for future remediation costs. However, aprior owner has participated with Nepera in the performance of the activitiesdescribed 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 47 49 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (20) CONTINGENCIES -- (CONTINUED)the estimated liability for this matter previously included in the accrual forenvironmental contingencies. This estimate considered the probability of costsharing 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. During 1995, the draft RI/FS was finalized and filed with the DEC. Whilesimilar to the 1994 draft, this final RI/FS delineated eight remediationalternatives which Nepera utilized to update the estimated liability for thismatter. Settlement discussions with one former owner continued. 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. During 1995, the draft RI/FS was finalized and filed with the DEC. Whilesimilar to the 1994 draft, this final RI/FS delineated eight remediationalternatives which Nepera utilized to update the estimated liability for thismatter. Settlement discussions with another former owner have continued. c) 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) in order to consummate the sale ofthe controlling interest in Cosan to the Company. Through that action, Cosanbecame required to determine whether its facility located in Carlstadt, NewJersey 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. 48 50 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (20) CONTINGENCIES -- (CONTINUED) d) In 1992, Cambrex acquired substantially all of the assets of the finechemicals business of Hexcel Fine Chemicals, now known as Zeeland Chemicals,Inc. In connection with that transaction, an accrual of $3,300 was establishedfor environmental conditions existing as of the date of the acquisition. e) 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. During 1995, the PRP group commenced a Focused Feasilibity Study (FFS) ofsoil contamination of a portion of the site as requested by the EPA. Except forthe commencement of the FFS, which is in progress, no other significantdevelopments occurred with respect to this matter. f) Cosan was named in 1991 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. g) 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. h) 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. 49 51 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (20) CONTINGENCIES -- (CONTINUED) i) 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 "e"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, approximately $1,050 wasdesignated to be expended by the trust for past expenditures. The remainingbalance, approximately $1,400, will be available for future expenditures and hasbeen considered in the determination of the accrual for environmentalcontingencies at December 31, 1995. 50 52 CAMBREX CORPORATION SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) 1ST 2ND 3RD 4TH 1995 QUARTER QUARTER QUARTER QUARTER YEAR- -------------------------------------- ----------- ----------- ----------- ----------- ------------ Net revenues.......................... $93,389 $88,215 $87,385 $88,187 $357,176Gross profit.......................... 24,485 25,081 25,048 25,166 99,780Net income............................ 4,394 5,107 5,006 5,163 19,670Earnings per share:(1) Primary............................. $ 0.76 $ 0.87 $ 0.68 $ 0.66 $ 2.93 Fully diluted....................... $ 0.75 $ 0.87 $ 0.68 $ 0.66 $ 2.92Average shares: Primary............................. 5,792 5,863 7,344 7,800 6,702 Fully diluted....................... 5,839 5,865 7,345 7,816 6,7361994- ----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 - ---------------(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. 51 53 PART III ITEM 9 ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. 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 1996 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." 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) ---------------- Report of Independent Accountants.............................................. 25Consolidated Balance Sheets as of December 31, 1995 and 1994................... 26Consolidated Income Statements for the Years Ended December 31, 1995, 1994 and 1993......................................................................... 27Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1995, 1994 and 1993...................................................... 28Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993................................................................ 29Notes to Consolidated Financial Statements..................................... 30Consolidated Quarterly Financial Data (unaudited) for the Years Ended December 31, 1995 and 1994............................................................ 51 (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).............................. 25Schedule II -- Valuation and Qualifying Accounts............................... 53 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. (a) 3. The exhibits filed in this report are listed in the Exhibit Index onpage 55. 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 no reports on Form 8-K during the last quarter of theyear ended December 31, 1995. 52 54 SCHEDULE II CAMBREX CORPORATION VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (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, 1995: Doubtful trade receivables and returns and allowances........... $1,288 $ 547 $ -- $ 574 $1,261 Inventory and obsolescence losses... 5,578 3,052 -- 266 8,364Year 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 1,517 - ---------------(1) Reserve of Nobel/Profarmaco and Seal Sands, acquired during 1994. 53 55 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 of Directors Date: March 22, 1996 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 of March 22, 1996- ---------------------------------------- DirectorsCyril C. Baldwin, Jr./s/ PETER TRACEY Executive Vice March 22, 1996- ---------------------------------------- President-Finance, PrincipalPeter Tracey Financial Officer and Principal Accounting Officer/s/ ROSINA B.DIXON, M.D.* Director March 22, 1996- ----------------------------------------Rosina B. Dixon, M.D./s/ FRANCIS X. DWYER* Director March 22, 1996- ----------------------------------------Francis X. Dwyer/s/ GEORGE J. W. GOODMAN* Director March 22, 1996- ----------------------------------------George J. W. Goodman/s/ KATHRYN RUDIE HARRIGAN, PHD* Director March 22, 1996- ----------------------------------------Kathryn Rudie Harrigan, PhD/s/ LEON J. HENDRIX, JR.* Director March 22, 1996- ----------------------------------------Leon J. Hendrix, Jr./s/ ILAN KAUFTHAL* Director March 22, 1996- ----------------------------------------Ilan Kaufthal/s/ ROBERT LEBUHN* Director March 22, 1996- ----------------------------------------Robert LeBuhn/s/ JAMES A. MACK* Director March 22, 1996- ----------------------------------------James A. Mack/s/ DEAN P. PHYPERS* Director March 22, 1996- ----------------------------------------Dean P. Phypers*By /s/ CYRIL C. BALDWIN, JR. ------------------------------------ Cyril C. Baldwin, Jr. Attorney-in-Fact 54 56 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). (M). 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 -- Amendment to Deferred Compensation Plan of Cambrex Corporation (Exhibit 10.24 hereto). (M). 10.26 -- Cambrex Earnings Improvement Plan. (L). 10.27 -- Consulting Agreement dated December 15, 1994 between the registrant and Arthur I. Mendolia. (L). 10.28 -- Consulting Agreement dated December 15, 1995 between the registrant and Cyril C. Baldwin, Jr. (L).- ---------------See legend on following page. 55 57 EXHIBIT NO. DESCRIPTION- ----------- ------------------------------------------------------------------------------ 10.29 -- Consulting Agreement between the registrant and James A. Mack. (L). 10.30 -- Additional Retirement Payment Agreement dated December 15, 1994 between the registrant and Arthur I. Mendolia. (L). 10.31 -- Additional Retirement Payment Agreement dated December 15, 1994 between the registrant and Cyril C. Baldwin, Jr. (L). 10.32 -- 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. (M). 21 -- Subsidiaries of registrant. (M). 23 -- Consent of Coopers & Lybrand L.L.P. 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. (M). 24 -- Powers of Attorney to sign this report. (M). - --------------- (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) Incorporated by reference to the registrant's Annual Report on Form 10-K for 1994. (M) Filed herewith. 56 1 EXHIBIT 10.21 CAMBREX CORPORATION REVISED SCHEDULE OF PARTIES DATE OF NAME TITLE AGREEMENT- ---------------------- --------------------------------- --------- James A. Mack President and Chief 02/01/90 Executive OfficerPeter Tracey Executive Vice President 11/05/90 and Chief Financial OfficerAlbert L. Eilender Executive Vice President 02/15/89Burton M. Rein Senior Vice President 05/31/91Steven M. Klosk Vice President of Administration 10/21/92Peter E. Thauer Vice President, General 08/28/89 Counsel and SecretarySalvatore J. Guccione Vice President of 12/14/95 Corporate Development 1 EXHIBIT 10.25 DEFERRED COMPENSATION PLAN OF CAMBREX CORPORATION (AS AMENDED AND RESTATED AS OF DECEMBER 1, 1995)1. Eligibility Each officer or other key employee (a "Key Employee") whoparticipates in the annual management incentive compensation plan maintained byCambrex Corporation (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 VicePresident of Administration may impose such terms, conditions or limitations onthe participation of any Key Employee or any class of Key Employees that hedeems necessary or appropriate for the proper administration of the Plan. TheVice President of Administration shall provide a copy of the Plan to each KeyEmployee together with a form of letter which may be used by the Key Employee tonotify the Corporation of his election to participate in the Plan.2. Participation a. Bonus Deferral Election. On or before December 31st of anycalendar year, a Key Employee may elect to defer receipt of all or any part ofany annual bonus payable in United States currency for services performed duringsuch year which, but for such election, is expected to be paid to him in thenext following calendar year. b. Salary Deferral Election. On or before December 31st of anycalendar year, a Key Employee may elect to defer receipt of all or any part ofthat portion of his annual base salary payable in United States currency in thefollowing calendar year which exceeds the sum of (i) the Social Security wagebase with respect to old age, survivor and disability income taxes in effect forsuch following calendar year and (ii) $10,000. Notwithstanding the foregoing, aKey Employee who (x) receives an annual base salary in United States currency inexcess of the sum of (i) and (ii) above and (v) is not subject to withholdingfor old age survivor and disability employment taxes under U.S. law may elect 2 - 2 -to defer receipt of all or a portion of his annual base salary for the followingcalendar year which is payable in United States currency. c. Stock Option Deferral Election. With the approval of theVice President of Administration, a Key Employee may elect, on or beforeDecember 31st of any calendar year, to defer receipt of all or a portion of theCorporation's common stock ("Common Stock") which would otherwise be issued uponexercise in the following calendar year of a stock option under a Corporatestock option plan, provided that in each case such election must be made (i)within 30 days of the effective date of this subsection, or (ii) more than sixmonths prior to the date on which the Common Stock is to be issued. d. Form and Duration of Deferral Election. An election todefer bonus, salary or Common Stock issued upon an option exercise shall be madeby written notice filed on a designated form with the Vice President ofAdministration. The minimum dollar amount that each Key Employee may defer underthe Plan for each year shall be (i) with respect to annual bonuses, Ten ThousandDollars ($10,000); (ii) with respect to base salary, Ten Thousand Dollars($10,000); and (iii) with respect Common Stock, One Hundred Thousand Dollars($100,000) at closing market price on the date of deferral, provided that ineach case the Vice President of Administration may determine a greater or lesserminimum deferral amount. Except with respect to elections to defer receipt ofCommon Stock, any such election shall continue in effect with respect to cashcompensation payable for subsequent calendar years unless and until the KeyEmployee revokes or modifies such election by written notice on a designatedform filed with the Vice President 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 Vice President of Administration. e. Renewal. A Key Employee who has revoked an election toparticipate in the Plan may file a new election to defer compensation payable inthe calendar year following the year in which such election is filed. 3 - 3 -3. Key Employee's Account a. Establishment of Account. The Corporation shall maintain aseparate memorandum account (the "Account") for each Key Employee who haselected to participate in the Plan, and shall make additions to and subtractionsfrom 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. A Key Employee electing to defer the receipt of Common Stock pursuantto Section 2(c), will be deemed to have invested in a stock unit fund (the"Stock Unit Fund") and such Key Employee's Account will be credited, as of thedate of exercise of the stock option, with a hypothetical number of units("Stock Units") equal to the number of shares of Common Stock which wouldotherwise have been issued upon exercise of the stock option if such deferralelection had not been made. c. Designation of Phantom Investment Funds. The BenefitsAdministration Committee shall select one or more mutual funds or otherinvestment vehicles in addition to the Stock Unit Fund, (the "Phantom Funds")which shall be used to determine the hypothetical investment experience of eachKey Employee's Account under the Plan; provided, however, that unless theBenefits Administration Committee otherwise determines the Phantom Funds shallbe the investment funds available to employees as investment options from timeto time under 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 Vice President of Administration thePhantom Fund or Funds that shall determine the investment experience withrespect to such Key Employee's Account; provided, however, that the VicePresident of Administration may require that the 4 - 4 -Key Employee's Account be credited or debited as though such Account wereinvested in the same Phantom Funds, and in the same percentages, as such KeyEmployee's account balance is invested from time to time under the Savings Plan.The Vice President of Administration may, in his discretion, (i) establishminimum amounts (in terms of dollar amounts or a percentage of a Key Employee'sAccount), which may be allocated to any Phantom Fund, (ii) preclude any KeyEmployee who is an executive officer of the Company from designating any PhantomFund which invests primarily in securities issued by the Company, (iii)establish rules regarding the time at which any such election (or any change insuch election permitted under Section 3(e) shall become effective, (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 Vice President of Administration, and (v)establish rules regarding elections to transfer from the Stock Unit Fund. If aKey Employee fails to make a valid election with respect to any portion of hisAccount (or if any such election ceases to be effective for any reason), suchKey Employee shall be deemed to have elected to have his entire Account deemedinvested in the Phantom Fund which the Vice President of Administrationdetermines generally to have the least risk of loss of principal. e. Change in Designation of Phantom Fund. Effective as of thefirst business day of the calendar quarter commencing more than ten (10)business days after the proper form is filed with the Vice President ofAdministration (or such other time as the Vice President of Administration shallpermit), a Key Employee may change the Phantom Funds designated with respect toall or any portion of his Account. Any such change shall comply with all rulesapplicable with respect to any initial designation of such Phantom Funds.Notwithstanding the foregoing, unless otherwise approved by the Vice Presidentof Administration, a Key Employee will be permitted only four (4) transfers fromhis or her Stock Unit Fund to another Phantom Fund in any calendar year, and theminimum value of such transfer shall be One Hundred Thousand Dollars ($100,000). 5 - 5 - f. Crediting of Phantom Investment Experience. (i) As of thelast day of each calendar quarter (or such other time as the Vice President ofAdministration shall establish from time to time), each Key Employee's Accountshall be credited or debited, as the case may be, with an amount equal to thenet investment gain or loss which such Key Employee would have realized had heactually invested in each Phantom Fund an amount equal to the portion of hisAccount designated as deemed invested in such Phantom Fund during that calendarquarter (or such other period as may have been established by the Vice Presidentof Administration). (ii) Whenever a dividend is declared with respect to the Common Stock, a Key Employee's Account shall also be credited as of the payment date with a number of additional Stock Units computed as follows: (x) the number of Stock Units in the Key Employee's Account multiplied by any dividend payable in cash or property other than Common Stock declared by the Corporation on a share of Common Stock, divided by the closing market price of the Common Stock on the related dividend record date and/or (y) the number of Stock Units in the Key Employee's Account multiplied by any stock dividend declared by the Corporation on a share of Common Stock, provided that the Vice President of Administration may determine another method of crediting dividends to a Key Employee's Account. (iii) In the event of any change in the Common Stock by reason of any merger, consolidation, reorganization, recapitalization, stock split, combination or exchange of shares, or any other similar change affecting the Common Stock, other than a stock dividend as provided above, the number of Stock Units credited to a Key Employee's Account shall be appropriately adjusted in such manner as determined by the Vice President of Administration. g. Valuation of Stock Units on Transfer. In the event a KeyEmployee elects to transfer all or a portion of his or her Stock Unit Fund toanother Phantom Fund as provided in Section 3(e), the amount transferred shallbe determined by multiplying the 6 - 6 -number of Stock Units subject to the election by the fair market value of theCommon Stock as determined in accordance with procedures established by the VicePresident of Administration reduced by any expenses directly related to thetransfer. h. No Actual Investment. Notwithstanding anything else in thisSection 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(h)shall be deemed to preclude the company form 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 Vice President of Administration a written election (a "DistributionElection") with respect to the timing and manner of distribution of theaggregate cash amount, if any, as well as any Stock Units credited to hisAccount at any time. A Key Employee may elect to receive a distribution from hisAccount in one lump-sum payment, or in such number of annual installments (notto exceed ten) as the Key Employee may designate. Subject to such limitations asthe Vice President of Administration shall impose, a Key Employee may also electto receive all or a portion of the aggregate amount credited to his Account asof the first day of any calendar year while he is an employee. If a distributionelection is not made or if such election does not apply to the entire balance insuch Account, the balance in the Key Employee's Account shall be distributed ina single lump-sum payment as soon as administratively possible after the firstbusiness day of the calendar year immediately following the year of separationfrom employment. In the case of any distribution being made in annualinstallments, each installment after the first installment shall be paid as soonas administratively possible after the first business day of each calendar year 7 - 7 -following 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, atany time during active employment, elect to change the time at whichdistributions from his Account will commence; provided, however, that unless theVice President of Administration shall otherwise determine, no such electionshall be effective unless at least one full calendar year elapses between (i)the date as 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 Key Employee receives anydistribution from his Account while still eligible to make deferrals hereunder,the Vice President of Administration may suspend the Key Employee's right todefer additional amounts Account during such calendar year in accordance withSection 2. 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 cash balanceand/or the number of Stock Units credited to such Account on the date of suchpayment and (ii) a fraction, the numerator of which is one (1) and thedenominator of which is the total number of installments remaining to be paid atthat time, provided that if the Key Employee elects to receive installments ofStock Units, and the value of the Stock Units remaining at the time ofdistribution of any installment is One Hundred Thousand Dollars ($100,000) orless, the entire balance of Stock Units remaining shall be distributed as suchinstallment. d. Form of Distribution. Distribution of any amount creditedto a Key Employee's Account on a cash basis shall be made in cash. Distributionsof Stock Units in such Key Employee's Account shall be made in whole shares ofCommon Stock; fractional shares shall be paid in an amount equal to the numberof fractional shares multiplied by the fair market value of the Common Stock asdetermined in accordance with procedures 8 - 8 -established by the Vice President of Administration reduced by the amount of anyexpense directly related to such distribution. e. Change of Control. Notwithstanding the foregoing, upon aChange of Control (as defined below), a Key Employee's Account shall immediatelybe distributed to a Key Employee in a lump sum distribution within ten (10) daysfollowing the occurrence of such Change of Control (as defined below) unless allthe Trustees then serving unanimously determine that such acceleration ofdistributions should not occur. A "Change of Control" for purposes of this Planshall mean: (i) the acquisition (other than from the Corporation) by any person, entity or "group" (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act") but excluding for this purpose the Corporation or its subsidiaries or any employee benefit plan of the Corporation or its subsidiaries which acquires beneficial ownership of voting securities of the Corporation) of "beneficial ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of Twenty Percent (20%) of more of the then outstanding shares of common stock or the combined voting power of the Corporation's then outstanding voting securities entitled to vote generally in the election of directors; or (ii) individuals who, as of the date hereof, constitute the Board (as of the date hereof the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided that any person becoming a member of the Board subsequent to the date hereof whose election or nomination for election by the Corporation's stockholders (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Corporation, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) was approved by a vote of at least a majority of the directors then comprising 9 - 9 -the Incumbent Board shall be, for purposes of this provision, considered amember of the Incumbent Board; or (iii) approval by the stockholders of the Corporation of either a reorganization, or merger, or consolidation, with respect to which persons who were the shareholders of the Corporation immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than fifty percent (50%) of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated entity's then outstanding voting securities, or a liquidation or dissolution of the Corporation, or the sale of all or substantially all of the assets of the Corporation; or (iv) any other event or series of events which, notwithstanding any of the foregoing provisions of this Section 4(e) to the contrary, is determined by a majority of the Incumbent Board to constitute a Change of Control for the purposes of this Plan.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 payment as ofthe first business day of the first calendar month commencing after the date ofthe Key Employee's death or as soon, thereafter, or administratively 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 any time,and from time to time, any 10 - 10 -such designation may be changed or canceled by the Key Employee without theconsent of any beneficiary. Any such designation, change or cancellation must bemade by written notice filed with the Vice President of Administration. If a KeyEmployee designates more than one beneficiary, any payments to suchbeneficiaries made pursuant to Section 5 shall be made in equal shares unlessthe Key Employee has designated otherwise, in which case the payments shall bemade in the shares designated by the Key Employee. If no beneficiary has beennamed by a Key Employee, payment shall be made to the Key Employee's spouse or,if the Key Employee has no spouse at the time of his death, to the KeyEmployee's estate. 7. Amendment and Termination. The Benefits Administration Committee may, at any time, amendor terminate the Plan; provided no such amendment or termination shall impairthe rights of a Key Employee with respect to amounts then credited to hisAccount 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 foregoing, theCorporation may establish a grantor trust or purchase securities to assist it inmeeting its obligations hereunder; provided, however, that in no event shall anyKey Employee have any interest in such trust or property other than as anunsecured general creditor. 11 - 11 - b. Non-alienation. The right of a Key Employee to receive adistribution of the value of such Key Employee's Account payable pursuant to thePlan 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 right to continue in the employof 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 dateof such demand in an amount equal to the greater of (i) the amount of earningscredited to the Key Employee's Account hereunder or (ii) 10% per annumcompounded semi-annually. 1 EXHIBIT 11 CAMBREX CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS, EXCEPT PER-SHARE DATA) YEARS ENDED DECEMBER 31, ----------------------------------------------------- 1995 1994 1993 1992 1991(1) -------- -------- ------- ------- ------- Income applicable to common shares: Primary earnings...................... $ 19,670 $ 11,126 $ 8,641 $ 6,230 $ 31 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).... $ 19,670 11,126 $ 8,755 $ 6,447 $ 31 ======= ======= ====== ====== ======Weighted average number of common shares and common share equivalents outstanding during the year: Common stock.......................... 6,360 5,250 4,961 4,753 4,655 Nonvoting Common stock................ -- -- -- -- -- Stock options......................... 342 424 321 135 49 ------- ------- ------ ------ ------ Shares outstanding -- primary......... 6,702 5,674 5,282 4,888 4,704 Notes issued June 11, 1985............... -- -- 122 198 -- Notes issued October 3, 1985............. -- -- 73 120 -- Additional stock options................. 34 25 7 36 34 ------- ------- ------ ------ ------ Shares outstanding -- fully diluted... 6,736 5,699 5,484 5,242 4,738 ======= ======= ====== ====== ====== Fully diluted earnings (loss) per common share(2)..................... $ 2.92 $ 1.95 $ 1.60 $ 1.23 $ 0.01 ======= ======= ====== ====== ====== - ---------------(1) The convertible subordinated notes and the related interest, net of income taxes, had an anti-dilutive effect on earnings per share for the year ended December 31, 1991 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%. 2 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 Nordic Synthesis AB............................................ Sweden 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, 1996, on our audits of theconsolidated financial statements and financial statement schedules of CambrexCorporation as of December 31, 1995 and 1994, and for each of the three years inthe period ended December 31, 1995, which report is included in this AnnualReport on Form 10-K. COOPERS & LYBRAND L.L.P. Parsippany, New JerseyMarch 22, 1996 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 25th day of January 1996. /s/ CYRIL C. BALDWIN, JR. /s/ JAMES A. MACK- ------------------------------------ ------------------------------------Cyril C. Baldwin, Jr. James A. MackChairman of the Board of Directors President, Chief Executive Officer Director/s/ PETER TRACEY /s/ LEON J. HENDRIX, JR.- ------------------------------------ ------------------------------------Peter Tracey Leon J. Hendrix, Jr.Executive Vice President-Finance Directorand Chief Financial Officer/s/ ROSINA B. DIXON, M.D. /s/ ILAN KAUFTHAL- ------------------------------------ ------------------------------------Rosina B. Dixon, M.D. Ilan KaufthalDirector Director/s/ FRANCIS X. DWYER /s/ ROBERT LEBUHN- ------------------------------------ ------------------------------------Francis X. Dwyer Robert LeBuhnDirector Director/s/ GEORGE J.W. GOODMAN /s/ DEAN P. PHYPERS- ------------------------------------ ------------------------------------George J.W. Goodman Dean P. PhypersDirector Director/s/ KATHRYN RUDIE HARRIGAN, PHD- ------------------------------------Kathryn Rudie Harrigan, PhDDirector

5 YEAR DEC-31-1995 DEC-31-1995 4,841 0 53,603 1,261 71,234 144,134 293,430 87,747 402,553 74,269 99,643 818 0 0 188,666 402,553 357,176 357,176 257,396 257,396 0 0 11,146 31,216 11,546 19,670 0 0 0 19,670 2.93 2.92

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Cambrex Corporation Annual Report 1995

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Cambrex Corporation
Annual Report 1995