Cambrex Corporation

 ----------------------------------------------------------------------------------------------------------------------------------------------------------------                                 UNITED STATES                       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, 2001                                        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. EMPLOYERINCORPORATION OR ORGANIZATION)         IDENTIFICATION NO.)    ONE MEADOWLANDS PLAZA,                    07073 EAST RUTHERFORD, NEW JERSEY                (ZIP CODE)    (ADDRESS OF PRINCIPAL       EXECUTIVE OFFICES)        REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201)-804-3000          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:      TITLE OF EACH CLASS        NAME OF EACH EXCHANGE ON WHICH REGISTERED     -------------------        -----------------------------------------                                      COMMON STOCK, $.10 PAR VALUE            NEW YORK 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 $1,002,102,147 as of February 28, 2002.the registrant was approximately $1,002,102,147 as of February 28, 2002.                     APPLICABLE ONLY TO CORPORATE REGISTRANTS      As of February 28, 2002, there were 25,922,455 shares outstanding of theregistrant's Common Stock, $.10 par value.                       DOCUMENTS INCORPORATED BY REFERENCE      Portions of the registrant's definitive Proxy Statement for the 2002 AnnualMeeting are incorporated by reference into Part III of this report.----------------------------------------------------------------------------------------------------------------------------------------------------------------                                      PART I ITEM 1  BUSINESS. GENERAL      Cambrex Corporation (the "Company" or "Cambrex"), a Delaware corporation,began business in December 1981. The Company primarily provides products andservices worldwide to the life sciences industry. Cambrex operates in foursegments, Human Health, Biosciences, Animal Health/Agriculture, and Specialtyand Fine Chemicals. Each of these segments includes various product categories.The Company has continued to evolve into a life science based organizationthrough acquisitions and internal investments. The Human Health, Biosciences,and Animal Health/Agriculture segments facilitate all the ongoing analysis ofthe business in the area of life sciences. Currently, the Company's overallstrategy for these segments is to focus on niche markets that have globalopportunities, build on strong customer relations to enhance our new productspipeline, and support state-of-the-art technology, while being a leader inenvironmental, health and safety performance.      Within each of the segments, the Company uses a consistent businessapproach:         1. Focus on niche products requiring significant technical expertise.         2. Be a leading supplier of core products, for which price competition           is not the primary market determinant.         3. Review products on a continuing basis and eliminate those not meeting           operating profit goals and replace those products with ones           generating higher returns.      Important objectives of the Company are to expand its operations throughinternal growth and make strategic acquisitions of product lines, technology andcompanies that increase its position in niche markets.      The Company announced in late November 2001 a plan to realign itsbusinesses in recognition of the Company's strategic emphasis on the growingopportunities in the life sciences industry. Effective January 1, 2002, theoperating units that primarily produce specialty and fine chemicals and animalhealth and agriculture products were combined under a new subsidiary, RutherfordChemicals, Inc. Rutherford Chemicals, Inc. will include CasChem, Inc., Bayonne,New Jersey; Cosan Chemical Corporation, Carlstadt, New Jersey; Heico Chemicals,Inc., Delaware Water Gap, Pennsylvania; Nepera, Inc., Harriman, New York;Zeeland Chemicals, Inc., Zeeland, Michigan; and Seal Sands Chemicals Ltd.,Teeside, United Kingdom.      On October 3, 1997, the Company completed the acquisition of all of theoutstanding common stock of BioWhittaker, Inc. ("BioWhittaker") forapproximately $133,500. BioWhittaker, which is located on 116 acres inWalkersville, Maryland, develops, produces and sells cell culture and endotoxindetection products to the biotechnology and pharmaceutical industries forresearch and for the commercial manufacture of biopharmaceutical products. OnMay 12, 1998, Cambrex purchased the assets of the biopharmaceuticalmanufacturing and distribution business of Boehringer Ingelheim BioproductPartnership. The assets acquired included a state-of-the-art cell culture andmedia manufacturing facility in Verviers, Belgium, and inventory for certaincell culture, endotoxin detection and molecular biology products.      On January 9, 1998, the Company completed the acquisition of the chiralintermediates business of Celgene Corporation for approximately $11,328 plusfuture royalties of up to $7,500 based upon sales. The product line producescompounds that are important in the production of modern active pharmaceuticalingredients.      On January 4, 1999, the Company acquired Poietic Technologies, Inc., aleading supplier of normal human cells of hematopoietic origin. Terms of thetransaction were $2,500 in cash and future consideration based on theperformance of the business. ---------------(dollars in thousands, except share data)                                        1      On March 12, 1999, the Company completed the purchase of IrotecLaboratories, Ltd., a manufacturer of active pharmaceutical ingredients locatedin Cork, Ireland. Cambrex paid approximately $37,560 for the business, whichincluded a new $15,000 cGMP (current good manufacturing practices)pharmaceutical manufacturing plant that came on line in the third quarter of1999.      On July 12, 1999, the Company acquired BioWhittaker Molecular Applications,Inc. (formerly the BioProducts division of the FMC Corporation) forapproximately $38,000. The business, which serves the life sciences industry, isthe world's largest manufacturer of electrophoresis media based on the naturalpolymer agarose. Electrophoresis media products are used to separate and analyzeproteins and sequence DNA, work critical to the development and manufacture ofnew biopharmaceuticals. High purity agarose is also used to make chromatographymedia for large-scale separation and purification of biologicals, important inpharmaceutical applications. The transaction, structured as a purchase ofassets, includes two operating facilities located in Rockland, Maine andCopenhagen, Denmark, and a number of U.S. and foreign patents associated withthe business.      On March 2, 2000, the Company completed the acquisition of Conti BC NV, amanufacturer and supplier of pharmaceutical intermediates and activepharmaceutical ingredients, located in Landen, Belgium. The Company paidapproximately $6,200 in cash and assumed debt for the business. At the time ofthe transaction, goodwill was recorded at $451 and is being amortized over 20years.      On July 24, 2000, the Company completed the acquisition of Lumitech, LTD,an emerging company based in Nottingham, United Kingdom, which provides productsand services used in the high throughput screening market for drug discovery.The Company paid approximately $4,700 in cash at closing, the majority of whichwas recorded as patents and other intangibles, with additional futureperformance-based payments of up to $16,000 due over the next five years. Theacquired patents and other intangibles are being amortized over 15-20 years.      On August 29, 2000, Cambrex Corporation announced that its CasChem, Inc.subsidiary had licensed the castor oil based ester products business fromArizona Chemical, Jacksonville, FL through a perpetual licensing agreement forapproximately $4.5 million. The agreement provided CasChem with processtechnologies, customer lists, and supply of raw materials. The ester productsare used in personal care and coatings applications. The license cost isincluded in intangible assets and is being amortized over 10 years. As part ofthe transaction, CasChem has also entered into a five-year supply agreement withArizona Chemical to manufacture a line of tall oil based products used in thelubricant and lithographic ink markets.      On June 1, 2001, Cambrex Corporation completed its acquisition of the BioScience Contract Production Corporation ("Bio Science") biopharmaceuticalmanufacturing business in Baltimore, Maryland. The business involves the cGMPmanufacture of purified bulk biologics and pharmaceutical ingredients. The totalpurchase price was approximately $120 million in cash, which was funded by anexisting line of credit facility. Additional purchase price payments of up to$25 million may be made depending on future business performance over the nextfour years. Assets acquired and liabilities assumed have been recorded at theirestimated fair values and are subject to adjustment when additional informationconcerning asset and liability valuations is finalized. At the time of thetransaction, goodwill was recorded at approximately $122 million, includingincremental deal costs, and is being amortized over 20 years.      On October 30, 2001, Cambrex Corporation completed the acquisition ofMarathon Biopharmaceuticals ("Marathon"), located in Hopkinton, Massachusetts,for approximately $26 million in cash through a share purchase of CoPharma Inc.Marathon is a full-service cGMP manufacturer of biopharmaceutical ingredientsand purified bulk biologics for pre-clinical evaluation, clinical trials andcommercial scale quantities. This acquisition strengthens Cambrex's existingcapabilities for producing pre-clinical, clinical and commercial quantities ofbulk biologics. Assets acquired and liabilities assumed have been recorded attheir estimated fair values and are subject to adjustment when additionalinformation concerning assets and liability valuation is finalized. At the timeof the transaction goodwill was recorded at approximately $16.3 million.Subsequent to the acquisition, the acquired company's formal name was changed toCambrex Bio Science MA, Inc.---------------(dollars in thousands, except share data)                                        2 PRODUCTS      The Company uses its technical expertise in a wide range of chemical andbiological processes to meet the needs of its customers for high qualityproducts and services for specialized applications. The following table setsforth for the periods indicated information concerning gross sales from theCompany's four segments:                                                          YEARS ENDED DECEMBER 31,                                                     --------------------------------                                                     2001(3)     2000(2)     1999(1)                                                     --------    --------    --------                                                                                    Human Health.......................................  $242,995    $233,886    $225,660Biosciences........................................   124,973      96,232      83,887Animal Health/Agriculture..........................    54,840      56,220      55,695Specialty and Fine Chemicals.......................    76,386     106,206     119,318                                                     --------    --------    --------  Gross Sales......................................  $499,194    $492,544    $484,560                                                     ========    ========    ======== ---------------(1) Sales from Irotec Laboratories, acquired in March 1999, and BioWhittaker    Molecular Applications, acquired in July 1999, are included from the dates    of acquisition. (2) Sales from Conti BC NV acquired in March 2000, Lumitech Limited acquired    July 2000, and the Arizona Chemical product lines licensed in August 2000,    are included from dates of acquisition. (3) Sales from Bio Science acquired in June 2001, and Marathon, acquired in    October 2001, are included from dates of acquisition.      Human Health:  The Human Health Segment is classified into seven principalproduct groups: (1) Active Pharmaceutical Ingredients, (2) PharmaceuticalIntermediates, (3) Imaging Chemicals, (4) Personal Care Ingredients, (5)Biomedical Urethanes, (6) Catalysts, and (7) Other. These products are sold to adiverse group of more than 1,100 customers, with one customer, a distributorrepresenting multiple customers, accounting for 14.8% of 2001 sales in thissegment. Many of these products are also sold through agents.      This table summarizes the gross sales for this product segment.                                                                         $         %                                               2001        2000      CHANGE     CHANGE                                             --------    --------    -------    ------                                                                                        Active Pharmaceutical Ingredients..........  $174,483    $171,174    $ 3,309       2%Pharmaceutical Intermediates...............    30,542      29,527      1,015       3Personal Care Ingredients..................    21,011      15,512      5,499      35Imaging Chemicals..........................     8,478       7,842        636       8Biomedical Urethanes.......................     2,491       2,784       (293)    (11)Catalysts..................................     5,553       7,035     (1,482)    (21)Other......................................       437          12        425     N/A                                             --------    --------    -------          Total Human Health...............  $242,995    $233,886    $ 9,109       4%                                             ========    ========    =======     ===      Human Health sales of $242,995 increased $9,109 (4%) despite theunfavorable effects of foreign currency which reduced sales by 2.2%.      Active Pharmaceutical Ingredients are manufactured under FDA regulation foruse as the active ingredients in prescription and over-the-counter drugs. ActivePharmaceutical Ingredients includes active ingredients used in products forgastro-intestinal, cardiovascular, endocrine, central nervous system,respiratory, diuretics, anti-infective, anti-inflammatory, immunology andvarious other uses. Active Pharmaceutical Ingredients sales of $174,483 were$3,309 (2%) above the prior year due primarily to increased demand and timing ofshipments for cardiovascular, central nervous system and gastrointestinalactives. Also contributing were new product introductions used in treatments forinsomnia and prostate cancer. Partly offsetting these ---------------(dollars in thousands, except share data)                                        3 increases were lower sales of a generic used in the treatment of ulcerativecolitis, and a cardiovascular supplement, due to competitive pricing pressures.The Diltiazem price decrease was offset by lower manufacturing cost reflecting achange in chemical processing. In addition, sales of a urinary incontinenceactive were lower due to a customer decision to bring manufacturing in-house.      Pharmaceutical Intermediates sales of $30,542 were $1,015 (3%) above 2000primarily due to higher sales of an intermediate used in a therapeutic drug fortreatment of end-stage kidney disease and a new antiviral product currently inclinical trials. These increases were partly offset by lower sales of anintermediate used in an antihistamine, due to customer production and inventoryissues and a cough suppressant ingredient, due to foreign competition.      Personal Care Ingredients sales of $21,011 were $5,499 (35%) above 2000 dueto the full year impact of the August 2000 Arizona product line licenseagreement.      Catalysts sales were lower by $1,482 (21%) due to reduced demand of achemical resolving agent.      Other product category changes from prior year were not significant.      Biosciences:  This segment consists of cell culture products (includingliving cell cultures, cell culture media and cell culture media supplements),endotoxin detection products, electrophoresis and chromatography products, andcontract biopharmaceutical manufacturing for the biotechnology andpharmaceutical industries. The Company manufactures more than 1,800 productswhich are sold to more than 14,000 customers worldwide with no one customeraccounting for more than 10% of sales in this category.      This table summarizes the gross sales for this product segment:                                                                         $         %                                                2001       2000      CHANGE     CHANGE                                              --------    -------    -------    ------                                                                                        Cells and Media.............................  $ 54,708    $50,590    $ 4,118       8%Endotoxin Detection.........................    23,786     21,391      2,395      11Contract Biopharmaceutical Manufacturing....    22,461         --     22,461     N/AElectrophoresis, Chromatography & Other.....    24,018     24,251       (233)     (1)                                              --------    -------    -------          Total Biosciences.................  $124,973    $96,232    $28,741      30%                                              ========    =======    =======     ===      Gross sales of $124,973 were $28,741 (30%) above 2000 due to the impact ofcontract biopharmaceutical manufacturing acquisitions and increased shipments ofcell culture and endotoxin detection products. The acquisitions in the contractbioprocessing area include the results of Bio Science, acquired in July 2001 andMarathon, acquired in October 2001.      Animal Health/Agriculture:  This segment consists of three product groups:(1) Vitamin B-3 used in feed additives and for veterinary products, (2) AnimalHealth products used in disease prevention and (3) Agricultural Intermediatesused in crop protection. These products are sold to approximately 200 customers.Three customers accounted for 25.9%, 26.2% and 22.7% of 2001 sales in thissegment.      This table summarizes the gross sales for this product segment:                                                                         $         %                                                2001       2000      CHANGE     CHANGE                                               -------    -------    -------    ------                                                                                        Vitamin B-3..................................  $ 6,629    $ 6,910    $  (281)     (4)%Animal Health................................   14,220     16,140     (1,920)    (12)Agricultural Intermediates...................   33,991     33,170        821       2                                               -------    -------    -------          Total Animal Health/Agriculture....  $54,840    $56,220    $(1,380)     (2)%                                               =======    =======    =======     ===      Animal Health sales of $14,220 were $1,920 (12%) below 2000 due toinventory adjustments made by a major feed additive customer. ---------------(dollars in thousands, except share data)                                        4      Agricultural Intermediate sales of $33,991 were up $821 (2%) due toincreased requirements in crop protection and the timing of significant customercampaigns.      Specialty and Fine Chemicals:  This segment consists of two product groups:(1) Performance Enhancing Chemicals and (2) Polymer Systems. PerformanceEnhancing Chemicals are complex chemicals designed to impart special propertieswhen small quantities are included in the formulation of specific products.These chemicals, which include over 100 products, are used in photography,pigments, polymers, fuel/oil addition, catalysts and other specialty additives.Polymer Systems are monomers or two component polymer systems for use in smallvolume, high performance applications. These polymers include applications usedin coatings, telecommunications, electronics and engineering plastics. Theseproducts are sold to approximately 1,100 customers with no one customeraccounting for over 10% of 2001 sales.      This table summarizes the gross sales for this product category:                                                                        $          %                                              2001        2000       CHANGE     CHANGE                                             -------    --------    --------    ------                                                                                          Performance Enhancing Chemicals..........  $48,518    $ 67,004    $(18,486)    (28)%  Polymer Systems..........................   27,868      39,202     (11,334)    (29)                                             -------    --------    --------          Total Specialty and Fine            Chemicals......................  $76,386    $106,206    $(29,820)    (28)%                                             =======    ========    ========     ===      Performance Enhancing Chemicals sales of $48,518 were $18,486 (28%) below2000 levels. Key decreases were in sales of photographic products due to lowerdemand and pigment industry products due to the elimination of certain lowermargin products.      Polymer Systems sales of $27,868 were down $11,334 (29%) due primarily tolower sales of encapsulants and other telecommunication products, coatingadditives (primarily castor oil derivatives) and plastics additives. The polymerbusiness has been impacted greatly by an overall economic slowdown in theseindustries. MARKETING AND DISTRIBUTION      The Company's Human Health segment generally includes high value,low-medium volume products requiring significant technical expertise for theirdevelopment and manufacture. Marketing generally requires significantcooperative effort among a small highly trained sales and marketing staff, atechnical staff who can assess the technical fit and estimate manufacturingeconomics, and the business unit management to determine the strategic andbusiness fit. Such a process may take from two to five years before a commercialproduct is fully established. Sales of established products may be handled byagents in those areas where direct sales efforts are not economical.      For the Biosciences segment, the Company markets and sells its products inthe United States and Europe principally through its own direct sales force. TheCompany directly serves the European markets through its wholly-ownedsubsidiaries, BioWhittaker UK LTD, located outside London, and BioWhittaker,Europe located in Belgium, and BioWhittaker Molecular Applications located inDenmark. The remaining international markets are served principally through anextensive network of independent distributors. The Company is currentlyimplementing e-commerce software to market and sell these products.      For the Specialty and Fine Chemicals segment and some AnimalHealth/Agriculture segment products, marketing and distribution is more typicalof specialty chemical companies, with products being sold to customers frominventory in volumes ranging from rail cars to five gallon containers. Sales maybe handled by Company salespeople, distributors or agents, as appropriate. ---------------(dollars in thousands, except share data)                                        5 RAW MATERIALS      The Company uses a wide array of raw materials in the conduct of itsbusinesses. The Company's specialty chemical facility in Bayonne, New Jersey,uses significant amounts of castor oil and compounds derived from petroleumfeedstocks in manufacturing a limited number of its products. The Companybelieves it is one of the largest purchasers of castor oil in the United States,and has the ability to take delivery and store a large quantity of castor oil.Castor oil is used primarily in the manufacture of the Company's polymer systemsfor coatings, telecommunication, and electronic applications. Castor oil, whichis not produced in the United States, is an agricultural product, the marketprice of which is affected by natural factors relating to the castor bean cropfrom which the oil is produced. Castor oil is produced commercially in a fewforeign countries, with India currently being the largest exporter. The Companyhas been generally able to obtain adequate supplies of castor oil at acceptableprices in the past and expects to be able to continue to do so in the future.      Pyridine, which accounted for approximately 5%, 5% and 6% of gross revenuesin 2001, 2000 and 1999, respectively, is produced by the Company by a processinvolving the high temperature reaction of acetaldehyde, formalin and ammonia.Acetaldehyde is available from a limited number of suppliers in North America.The Company uses one primary supplier in the U.S. at competitive prices. Theaverage price of acetaldehyde increased approximately 2.0% during 2001 afterincreasing 32.0% in 2000. While formaldehyde is available from multiple sources,a majority is obtained from a local supplier in the U.S. at competitive prices.The average price of formaldehyde in 2001 increased approximately 16% from 2000after increasing 18% in 2000 from 1999. The Company obtains acetaldehyde andformalin pursuant to long-term supply contracts under which the price for theraw material adjusts to market conditions.      For its biosciences products, the Company buys materials from manysuppliers and is generally not dependent on any one supplier or group ofsuppliers. Nonetheless, although there is a well-established market for rawfetal bovine serum, its price and supply are cyclical and fluctuate. The Companyalso is dependent on one company for the raw materials used to make Agaroseproducts (used by BioWhittaker Molecular Applications in electrophoeresis mediaproducts). A long term contract is in effect for this supply.      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 introduce innovative products, improve manufacturing processes toreduce costs, improve quality and increase capacity, and to identify marketopportunities which warrant a significant technical effort, and offer theprospects of a long-term, profitable business relationship. Research anddevelopment activities are performed at most of the Company's manufacturingfacilities in both the United States and Europe. Approximately 337 employees areinvolved directly in research and development activities worldwide.      At the end of 2000, the Company completed its initial investment in theCambrex Center of Technical Excellence, a new research and developmentorganization. The 42,000 square foot site is located in The Technology Centre ofNew Jersey in North Brunswick. The new facility helps to place the Company in aunique position to be a full-service resource for pharmaceutical andbiotechnology companies throughout the drug development cycle.      The Company spent approximately $19,619, $14,267 and $14,255 in 2001, 2000and 1999, respectively, on research and development efforts. ---------------(dollars in thousands, except share data)                                        6 PATENTS AND TRADEMARKS      The Company has patent protection in some of its product areas. However,the Company relies primarily on know-how in many of its manufacturing processesand techniques not generally known to other life sciences companies fordeveloping and maintaining its market position.      The Company currently owns approximately 160 United States patents whichhave various expiration dates beginning in 2002 through 2019 and which coverselected items in each of the Company's major product areas. The Company alsoowns the foreign equivalent of many of its United States patents. In addition,the Company has applied for patents for various concepts and is in the processof preparing patent applications for other concepts. In conjunction with theacquisition of BioWhittaker, the Company acquired patent and other proprietaryrights, which are material to the endotoxin detection products.      The Company has trademarks registered in the United States and a number ofother countries for use in connection with the Company's products and business.The Company believes that many of its trademarks are generally recognized in itsindustry. Such trademarks include Naturechem(R), Bufferite(R), Poietics(TM),Clonetics(TM), Auto-LAL(TM), SeaPlaque(TM), IsoGel(R), NuSieve(R), Reliant(TM),Long Ranger(R), Singel(R), Latitude(R) and PAGEr(TM).      The Company requires employees to sign confidentiality and non-competeagreements where appropriate. COMPETITION      Because of the nature of the Company's products in its Human Health segmentand its strategic approach, it is not possible to identify a group of directcompetitors. Where competition exists, it is typically specific to a certainproduct, or is focused early in the process, when an initial market position isbeing established. If the Company perceives significant competitive risk and aneed for large technical or financial commitment, it generally negotiateslong-term contracts or capital guarantees from its targeted customer beforeproceeding.      In the Biosciences segment, no one company is known to compete with theCompany in all of its product groups, but in each group competition is offeredby a number of companies, including, in some cases, firms substantially largerand with greater financial resources than the Company. The markets in which theCompany competes are generally concentrated and are highly competitive, withcompetition centering on product specifications and performance, quality, depthof product line, price, technical support, timely product development and speedof delivery.      Competition for the Company's Specialty and Fine Chemicals and AnimalHealth/Agriculture segments is more typical of chemical markets. Competitionexists from other producers of the Company's products and from other productsthat may offer equivalent properties. Competition in these areas is generallybased on product performance, customer service, product quality and pricing. ENVIRONMENTAL AND SAFETY REGULATIONS AND PROCEEDINGS      General:  Certain products manufactured by the Company involve the use,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 conducts detailed environmental due diligence on allacquisitions. The Company's acquisitions were made with consideration of anyknown environmental conditions. Also, as with other companies engaged in thechemical business, risks of substantial costs and liabilities are inherent incertain ---------------(dollars in thousands, except share data)                                        7 plant operations and certain products produced at the Company's plants.Additionally, prevailing legislation tends to hold chemical companies primarilyresponsible for the proper disposal of their chemical wastes even aftertransferal 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.      Known environmental matters which may result in liabilities to the Companyand the related estimates and accruals are summarized in Note #23 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. The Company believes it is in general compliancewith such requirements and has adequate professional staff and systems in placeto remain in compliance. In some cases, compliance can only be achieved bycapital expenditures, and the Company made capital expenditures of approximately$3,900 in 2001, $5,300 in 2000, and $5,600 in 1999 for environmental projects.The Company anticipates that capital requirements will increase in subsequentyears as a result of the Clean Air Act Amendments and other pendingenvironmental laws. Additionally, as the environmental proceedings in which theCompany is involved progress from the remedial investigation and feasibilitystudy stage to implementation of remedial measures, related expenditures willmost likely increase. The Company considers costs for environmental complianceto be a normal cost of doing business, and includes such costs in pricingdecisions. EMPLOYEES      At December 31, 2001 the Company had 2,079 employees worldwide (817 of whomwere from international operations) compared with 1,852 employees at December31, 2000 and 1,860 at December 31, 1999.      All hourly plant employees at the Bayonne, New Jersey facility arerepresented by Local 2-406 of the Paper, Allied and Chemical WorkersInternational Union under a contract ex ring September 17, 2003; the hourlyplant employees at the Carlstadt, New Jersey plant are represented by Local 76Bof the Amalgamated Industrial Union of Jamaica, New York under a contract exring November 30, 2003; and the hourly plant employees at the Harriman, New Yorkfacility are represented by Local 810 of the International Brotherhood ofTeamsters under a contract expiring June 30, 2004. Nordic, Profarmaco, Conti andIrotec production, administration, scientific and technical employees arerepresented by various local and national unions. The Company believes its laborrelations are satisfactory. SEASONALITY      Like many other businesses in the life sciences and specialty and finechemicals industries, the Company experiences some seasonality primarily due toplanned plant shutdowns by the Company and certain customers in the thirdquarter. 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. ---------------(dollars in thousands, except share data)                                        8 EXPORT AND INTERNATIONAL SALES      The Company exports numerous products to various areas, principally WesternEurope, Asia and Latin America. Export sales from the Company's domesticoperations in 2001, 2000 and 1999 amounted to $45,041, $50,910 and $40,610,respectively. Sales from international operations were $232,921 in 2001,$230,476 in 2000, and $218,389 in 1999. Refer to Note #21 to the CambrexCorporation and Subsidiaries Consolidated Financial Statements. ITEM 2  PROPERTIES.      Set forth below is information relating to the Company's manufacturingfacilities:                                     OPERATINGLOCATION                 ACREAGE    SUBSIDIARY            PRODUCT LINES MANUFACTURED--------                 -------    ----------            --------------------------                                                        Bayonne, NJ               8 acres    CasChem     Personal Care Ingredients; Biomedical                                                 Urethanes; Performance Enhancers; Polymer                                                 SystemsCarlstadt, NJ             3 acres     Cosan      Performance Enhancing Chemicals; Polymer                                                 SystemsHarriman, NY             29 acres     Nepera     Personal Care Ingredients; Vitamin B-3;                                                 Agricultural Intermediates; Performance                                                 Enhancing ChemicalsDelaware Water Gap, PA   12 acres    CasChem     Performance Enhancing Chemicals; Polymer                                   d/b/a Heico   SystemsCharles City, IA         57 acres    Salsbury    Active Pharmaceutical Ingredients;                                                 Pharmaceutical Intermediates; Imaging                                                 Chemicals; Animal Health Products                                                 Performance Enhancing ChemicalsZeeland, MI              14 acres    Zeeland     Personal Care Ingredients; Catalysts;                                                 Performance Enhancing ChemicalsMiddlesbrough, England   12 acres   Seal Sands   Pharmaceutical Intermediates; Personal Care                                                 Ingredients; Catalysts; Agricultural                                                 Intermediates; Performance Enhancing                                                 Chemicals; Polymer SystemsKarlskoga, Sweden        42 acres     Nordic     Active Pharmaceutical Ingredients;                                                 Pharmaceutical Intermediates; Imaging                                                 Chemicals; Personal Care Ingredients;                                                 Catalysts; Agricultural Intermediates;                                                 Performance Enhancing ChemicalsPaullo (Milan), Italy    13 acres   Profarmaco   Active Pharmaceutical IngredientsWalkersville, MD        116 acres  BioWhittaker  Cells and Media; Endotoxin DetectionVerviers, Belgium         9 acres  BioWhittaker  Cells and Media                                      EuropeCork, Ireland            21 acres     Irotec     Active Pharmaceutical Ingredients;                                                 Pharmaceutical IntermediatesRockland, ME             93 acres      BMA       Electrophoresis and ChromatographyCopenhagen, Denmark        Leased      BMA       Electrophoresis and ChromatographyLanden, Belgium          40 acres     Conti      Active Pharmaceutical IngredientsNottingham, England        Leased    Lumitech    BioAssay Products; Reagent KitsBaltimore, MD              Leased  Cambrex Bio   Contract Biopharmaceuticals                                     ScienceHopkinton, MA              Leased  Cambrex Bio   Contract Biopharmaceuticals                                    Science MA ---------------(dollars in thousands, except share data)                                        9      The Company owns all the above facilities and properties, with theexception of the leased facilities in Nottingham, England, Copenhagen, Denmark,Baltimore, Maryland and Hopkinton, Massachusetts. The Company also leases 31,000square feet in North Brunswick, New Jersey for its Center of TechnicalExcellence, which has a 10 year term ending March 27, 2010. In addition, theCompany owns a four acre site and buildings in North Haven, CT and thirty-oneacres of undeveloped land adjacent to the North Haven facility, one hundred andthree acres of undeveloped land adjacent to the Harriman facility, sixty-sixacres of undeveloped land adjacent to the Zeeland facility and eighty-one acresin Walkersville, Maryland. The Company believes its facilities to be in goodcondition, well-maintained and adequate for its current needs.      Most of the Company's products are manufactured in multi-purposefacilities. Each product has a unique requirement for equipment, and occupiessuch equipment for varying amounts of time. This, combined with the variationsin demand for individual products, makes it difficult to estimate actual overallcapacity subject to regulatory approval. It is generally possible, with properlead time, to transfer the manufacturing of a particular product to anotherfacility should capacity constraints dictate. However, the Company's pyridineand arsenical feed additive product groups are each manufactured at a singlefacility, and production of such products would not be transferable to anotherexisting Cambrex 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 1 andNote #23 to the Cambrex Corporation and Subsidiaries Consolidated FinancialStatements with respect to various proceedings involving the Company inconnection with environmental matters. The Company is party to a number of otherproceedings also discussed in Note #23. Management is of the opinion that whilethe ultimate liability resulting from those proceedings, as well asenvironmental matters, may have a material effect upon the results of operationsin any given year, they will not have a material adverse effect upon theCompany's liquidity nor its financial position. ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.      None                                         10 ITEM 10  EXECUTIVE OFFICERS OF THE REGISTRANT.      The following table lists the executive officers of the Company: NAME                                        AGE                          OFFICE----                                        ---                          ------                                                        James A. Mack.............................  64    Chairman of the Board and Chief Executive OfficerClaes Glassell............................  50    President and Chief Operating OfficerSteven M. Klosk...........................  44    Executive Vice President, AdministrationSalvatore J. Guccione.....................  39    Senior Vice President and Chief Financial OfficerPeter E. Thauer...........................  62    Senior Vice President, Law & Environment General                                                    Counsel & Corporate SecretaryJohn Antonelli, Jr........................  46    Vice President, TreasurerThomas N. Bird............................  57    Vice President, Corporate DevelopmentRonnie D. Carroll, PhD....................  61    Vice President and Chief Technology Officer,                                                    Pharmaceutical TechnologyRobert J. Congiusti.......................  48    Vice President, Information TechnologyJohn P. Hopkins...........................  41    Vice President, FinanceDaniel R. Marshak, PhD....................  44    Vice President and Chief Technology Officer,                                                    BiotechnologyCyril C. Baldwin, Jr......................  74    Chairman Emeritus      The Company's executive officers are elected by the Board of Directors andserve at the Board's discretion.      Mr. Mack was elected Chairman of the Board of Directors on October 28,1999. He also retains his position as Chief Executive Officer. Mr. Mack has beenChief Executive Officer since Mr. Baldwin's retirement on April 1, 1995. Mr.Mack was appointed President and Chief Operating Officer and a director of theCompany in February 1990. For five years prior thereto he was Vice President incharge of the worldwide Performance Chemicals businesses of Olin Corporation, amanufacturer of chemical products, metal products, and ammunition anddefense-related products. Mr. Mack was Executive Vice President of OakiteProducts, Inc. from 1982 to 1984. Prior to joining Oakite, he held variouspositions with The Sherwin-Williams Company, most recently as President andGeneral Manager of the Chemicals Division from 1977 to 1981. Mr. Mack is a pastChairman 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. Glassell was appointed President and Chief Operating Officer, and waselected as a director in July 2001. Previously, he had been Executive VicePresident and Chief Operating Officer since July 2000. From July 1998 to July2000 Mr. Glassell held the position of President, Pharmaceutical Group. Mr.Glassell was appointed President, International in November 1997. Mr. Glassellwas appointed Vice President of Cambrex in November 1994. After extensivemanagement experience at Nordic and Profarmaco, he joined Cambrex as a result ofthe 1994 acquisition of Nordic and Profarmaco. In 1989, he joined Nordic asPresident and CEO for Nordic's Chemistry Business. From 1986 to 1989, he workedfor the agricultural division of Berol Europe Ltd.      Mr. Klosk was appointed Executive Vice President, Administration in October1996. 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. ---------------(dollars in thousands, except share data)                                        11      Mr. Guccione was appointed Senior Vice President in January 2001 and ChiefFinancial Officer in April 2001. Previously, he held the position of Senior VicePresident, Corporate Development since January 2001. Mr. Guccione joined theCompany in December 1995 as Vice President, Corporate Development. Prior tojoining the Company, from 1993 to 1995, he held the position of Vice Presidentand General Manager of the International Specialty Products (ISP) Personal CareDivision. He also served as Director of Corporate Development for ISP, and hadother various positions in Corporate Development at ISP from 1987-1993.      Mr. Thauer was appointed Senior Vice President, Law & Environment inJanuary 2001. Mr. Thauer was previously appointed Vice President, Law &Environment in December 1992, and General Counsel and Corporate Secretary inAugust 1989. From 1987 until he joined Cambrex, he was Counsel to the businessand finance group of the firm of Crummy, Del Deo, Dolan, Griffinger andVecchione. From 1971 to 1987, Mr. Thauer had held various positions with AvonProducts, Inc., including U. S. Legal Department Head and Corporate AssistantSecretary.      Mr. Antonelli was appointed Vice President and Treasurer in April 1999. Hisprior position was Treasurer which he held since April 1998. He joined theCompany in June 1995 as Director of Taxes. Prior to joining the Company, Mr.Antonelli was Corporate Tax Manager at InterMetro Industries, a worldwidemanufacturer and distributor of storage and shelving systems. Mr. Antonelli is aCertified Public Accountant who has worked for PriceWaterhouse, KPMG and ParenteRandolph.      Mr. Bird was appointed Vice President, Corporate Development in January2002. Since January 2001, he held the position of Vice President, BusinessDevelopment, Life Sciences. Prior to that, Mr. Bird served as President,Biosciences Group since July 1998. Mr. Bird joined the Company in June 1997, asPresident of Nepera, Inc. He was previously President of the consulting firm ofBavier, Bulgar and Goodyear since 1994. Prior to that, Mr. Bird maintainedvarious vice presidential positions with Commercial Intertech Corporation intheir Fluid Purification Group.      Dr. Carroll was appointed Vice President and Chief Technology Officer,Pharmaceutical Technology in January 2002. He joined the Company in September1997 as Vice President, Technology. Mr. Carroll had been with Bristol-MyersSquibb for 14 years, most recently as Vice President, Chemical Development forBristol-Myers Squibb Technical Operations. Prior to working for Bristol-MyersSquibb, Dr. Carroll was with Pfizer, Inc. in Groton, CT.      Mr. Congiusti was appointed Vice President, Information Technology inNovember 1998. Mr. Congiusti joined the Company in September 1994 as Director,Information Services. Prior to joining the Company, from 1984 to 1994, he heldvarious senior information systems management positions at InternationalSpecialty Products and American Cyanamid Company.      Mr. Hopkins was appointed Vice President, Finance in April 2001. He joinedthe Company in January 1999 as Vice President and Controller. Prior to joiningthe Company, from 1988 to 1998, he held various senior financial positions withARCO Chemical Company, a manufacturer and marketer of specialty chemicals andchemical intermediates. Mr. Hopkins is a Certified Public Accountant and was anAudit Manager for Coopers & Lybrand prior to joining ARCO Chemical.      Dr. Marshak was appointed to the position of Vice President and ChiefTechnology Officer, Biotechnology in January 2002. He joined the Company inAugust 2000 as Vice President, Research and Development, BioSciences Group.Prior to joining Cambrex, Dr. Marshak held various Research and Developmentpositions with Osiris Therapeutics, Inc. from 1999 to 2000, most recently asExecutive Scientific Advisor. From 1986 to 1994 he was a Senior StaffInvestigator with Cold Spring Harbor Laboratory.      Mr. Baldwin was named Chairman Emeritus on October 28, 1999. Mr. Baldwinwas Chairman of the Board from July 1991 to October 28, 1999, and a Director ofthe Company since it began business in December 1981. On January 26, 1995, Mr.Baldwin announced his retirement, effective April 1, 1995, as Chief ExecutiveOfficer of the Company, a position he also held since December 1981. Mr. Baldwinretired as---------------(dollars in thousands, except share data)                                        12 an employee of the Company effective April 30, 1995. He is a member of theEnvironmental and Governance Committees of the Company's Board of Directors, andhe is a director of Church & Dwight Co., Inc. and Congoleum Corporation.                                     PART II ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.      Effective March 5, 1998 the Company's Common Stock, $.10 par value, waslisted on the New York Stock Exchange (NYSE), continuing under the symbol CBM.From November 15, 1990 to March 5, 1998, the Company's Common Stock had beentraded on the American Stock Exchange (AMEX). The following table sets forth theclosing high and low sales price of the Common Stock as reported on the NYSE: 2001                                                          HIGH      LOW----                                                         ------    ------                                                                             First Quarter..............................................  $48.11    $39.38Second Quarter.............................................   56.99     40.28Third Quarter..............................................   53.52     33.53Fourth Quarter.............................................   43.60     33.47 2000                                                          HIGH      LOW----                                                         ------    ------                                                                             First Quarter..............................................  $43.50    $31.81Second Quarter.............................................   45.02     37.88Third Quarter..............................................   49.44     31.50Fourth Quarter.............................................   47.94     33.19      As of February 28, 2002, the Company estimates that there wereapproximately 5,800 beneficial holders of the outstanding Common Stock of theCompany.      The quarterly dividend on common stock was $0.03 for 2001 and 2000. 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, 2001 are derived fromthe audited financial statements. The consolidated financial statements of theCompany as of December 31, 2001 and December 31, 2000 and for each of the yearsin the three year period ended December 31, 2001 and the report of independentaccountants thereon are included elsewhere in this annual report. The datapresented below should be read in conjunction with the financial statements ofthe Company and the notes thereto and "Management's Discussion and Analysis ofFinancial Condition and Results of Operations" included elsewhere herein. ---------------(dollars in thousands, except share data)                                        13                                                               YEARS ENDED DECEMBER 31,                                              --------------------------------------------------------                                              2001(1)    2000(2)    1999(3)     1998(4)     1997(5)(6)                                              --------   --------   --------   ----------   ----------                                                       (IN THOUSANDS, EXCEPT PER-SHARE DATA)                                                                                                     INCOME DATA:Gross sales.................................  $499,194   $492,544   $484,560    $441,683     $380,083Net revenues................................   498,855    492,095    488,489     464,143      381,700Gross profit................................   179,335    177,495    167,163     163,417      113,962Selling, general and administrative.........    89,987     82,204     77,729      76,594       52,688Research and development....................    19,619     14,267     14,255      13,956       10,600Restructuring and other charges (see Note  17).......................................    18,649         --         --          --           --Vitamin B-3 provision (see Note 23).........     4,400         --      6,000          --           --Non-recurring in-process R&D charge.........        --         --         --          --       14,000Operating profit............................    46,680     81,024     69,179      72,867       36,674Interest expense, net.......................    10,567     11,487      9,723      10,227        5,330Other (income) expense, net.................      (277)      (329)       555         945       (1,263)Income before taxes.........................    36,390     69,866     58,901      61,695       32,607Net income..................................    26,565     49,605     38,132      39,102       17,776EARNINGS PER SHARE DATA:Earnings per common share and common share  equivalents:  Basic.....................................  $   1.04   $   1.98   $   1.55    $   1.62     $   0.75  Diluted...................................  $   1.00   $   1.90   $   1.49    $   1.54     $   0.73Weighted average shares outstanding:  Basic.....................................    25,648     25,015     24,572      24,194       23,627  Diluted...................................    26,495     26,157     25,613      25,412       24,419DIVIDENDS PER COMMON SHARE..................  $   0.12   $   0.12   $   0.12    $   0.11     $   0.10BALANCE SHEET DATA: (AT END OF PERIOD)  Working capital...........................  $173,597   $143,948   $163,165    $156,297     $116,743  Total assets..............................   818,067    681,100    673,647     617,054      552,426  Long-term obligations.....................   312,524    168,591    225,922     191,372      194,325  Total stockholders' equity................   359,180    337,621    295,365     277,260      225,954 ---------------(1) Includes the results of Bio Science from the date of acquisition effective    June 2001, the results of Marathon from the date of acquisition effective    October 2001. (2) Includes the results of Conti BC NV from the date of acquisition effective    March 2000, the results of Lumitech Limited from the date of acquisition    effective July 24, 2000 and the results of the Arizona Chemical products    from the date of license effective August 2000. (3) Includes the results of Irotec Laboratories, Ltd. from the date of    acquisition effective March 1999 and the results of BioWhittaker Molecular    Applications, Inc. from the date of acquisition effective July 1999. (4) Includes royalty income of $19,298 in net revenues related to a technology    license agreement with Mylan Laboratories for the use of intellectual    property. (5) Includes the results of BioWhittaker, Inc. from the date of acquisition    effective October 1997. (6) Includes a $14,000 non-recurring charge for in-process research and    development associated with the acquisition of BioWhittaker. ---------------(dollars in thousands, except share data)                                        14 ITEM 7  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS. CRITICAL ACCOUNTING POLICIES      Our critical accounting policies are those which we believe require themost subjective or complex judgments; often as a result of the need to makeestimates about the effect of matters that are inherently uncertain. The Companybases its estimates on historical experience and on other various assumptionsthat are deemed reasonable by management under each applicable circumstance. Adiscussion of our critical accounting policies, the underlying judgments anduncertainties affecting their application and the likelihood that materiallydifferent amounts would be reported under different conditions or usingdifferent assumptions, is as follows:   Asset Valuations and Review For Potential Impairments      Our review of our long-lived assets, principally fixed assets, goodwill andother intangibles requires us to initially estimate the undiscounted future cashflow of these assets, whenever events or changes in circumstances indicate thatthe carrying amount of these assets may not be fully recoverable. If suchanalysis indicates that a possible impairment may exist, as described in Note 2to the accompanying financial statements, we are required to then estimate thefair value of the asset, determined by third party and internal appraisals andvaluations, as deemed appropriate, or estimated discounted future cash flows,which includes making estimates of the timing of the future cashflows, discountrates and reflecting varying degrees of perceived risk. The determination offair value includes numerous uncertainties, such as the impact of competition onfuture sales and margin, operating, selling and administrative costs, interestand discount rates, technological changes, consumer demand and governmentalregulations. We believe that we have made reasonable estimates and judgments indetermining whether our long-lived assets and goodwill have been impaired,however, if there is a material change in the assumptions used in ourdetermination of fair values or if there is a material change in economicconditions or circumstances influencing fair value, we could be required torecognize certain impairment charges in the future.   Environmental and Litigation Contingencies      We periodically assess the potential liabilities related to any lawsuits orclaims brought against us. See Note 23 in the accompanying financial statementsfor a discussion of our current environmental and litigation matters, reservesrecorded and our position with respect to any related uncertainties. While it istypically very difficult to determine the timing and ultimate outcome of theseactions, we use our best judgment to determine if it is probable that we willincur an expense related to a settlement for such matters and whether areasonable estimation of such probable loss, if any, can be made. Given theinherent uncertainty related to the eventual outcome of litigation andenvironmental matters, it is possible that all or some of these matters may beresolved for amounts materially different from any provisions that we may havemade with respect to their resolution.   Allowance For Doubtful Accounts and Inventory Obsolescence Reserves      The Company maintains allowances for doubtful accounts for estimated lossesresulting from the inability of its customers to make required payments. If thefinancial condition of customers were to deteriorate, this may result in animpairment of their ability to make payments to the Company, and additionalallowances may be required.      The Company establishes reserves for its inventories to recognize estimatedobsolescence and unusable items on a continual basis. Market conditionssurrounding products are also considered periodically to determine if there areany net realizable valuation matters which would require a write down of anyrelated inventories. If market or technological conditions change, it may resultin additional inventory reserves and write downs deemed necessary by management. ---------------(dollars in thousands, except share data)                                        15 RESULTS OF OPERATIONS      The following table sets forth, for the periods indicated, certain itemsfrom the selected consolidated financial information as a percentage of grosssales.                                                               YEARS ENDED DECEMBER 31,                                                              ------------------------                                                              2001     2000      1999                                                              -----    -----    ------                                                                                       Gross sales.................................................   100%     100%    100.0%Net revenues................................................  99.9     99.9     100.8Gross profit................................................  35.9     36.0      34.5Selling, general and administrative.........................  18.0     16.7      16.1Research and development....................................   3.9      2.9       2.9Vitamin B-3 accrual.........................................    .9       --       1.2Operating profit............................................   9.4     16.5      14.3Interest expense............................................   2.3      2.3       2.0Net income..................................................   5.3     10.1       7.9      The following tables show the gross sales of the Company's four segments,in dollars and as a percentage of the Company's total gross sales for the yearsended December 31, 2001, 2000 and 1999, as well as the gross profit by productsegment for 2001 and 2000.                                                                  YEARS ENDED DECEMBER 31,                                                             --------------------------------                                                               2001        2000        1999                                                             --------    --------    --------                                                                                            GROSS SALES  Human Health.............................................  $242,995    $233,886    $225,660  Biosciences..............................................   124,973      96,232      83,887  Animal Health/Agriculture................................    54,840      56,220      55,695  Animal Health/Agriculture................................    54,840      56,220      55,695  Specialty and Fine Chemicals.............................    76,386     106,206     119,318                                                             --------    --------    --------Total Gross Sales..........................................  $499,194    $492,544    $484,560                                                             ========    ========    ========Total Net Revenues.........................................  $498,855    $492,095    $488,489                                                             ========    ========    ========Total Gross Profit.........................................  $179,335    $177,495    $167,163                                                             ========    ========    ========                                                                YEARS ENDED DECEMBER 31,                                                              --------------------------                                                               2001      2000      1999                                                              ------    ------    ------                                                                                         GROSS SALES DISTRIBUTION  Human Health..............................................   48.7%     47.5%     46.6%  Biosciences...............................................   25.0%     19.5%     17.3%  Animal Health/Agriculture.................................   11.0%     11.4%     11.5%  Specialty and Fine Chemicals..............................   15.3%     21.6%     24.6%                                                              -----     -----     -----Total Gross Sales Distribution..............................  100.0%    100.0%    100.0%                                                              =====     =====     ===== ---------------(dollars in thousands, except share data)                                        16             2001-2000 GROSS SALES & GROSS PROFIT BY PRODUCT SEGMENT                                                      2001                             2000                                        ------------------------------   ------------------------------                                         GROSS      GROSS      GROSS      GROSS      GROSS      GROSS                                         SALES      PROFIT    PROFIT %    SALES      PROFIT    PROFIT %                                        --------   --------   --------   --------   --------   --------                                                                                                         Human Health..........................  $242,995   $ 93,515     38.5%    $233,886   $ 91,145     39.0%Biosciences...........................   124,973     63,193     50.6%      96,232     50,815     52.8%Animal Health/Agriculture.............    54,840      6,681     12.2%      56,220      9,829     17.5%Specialty and Fine Chemicals..........    76,386     15,946     20.9%     106,206     25,706     24.2%                                        --------   --------              --------   --------          Total.......................  $499,194   $179,335     35.9%    $492,544   $177,495     36.0%                                        ========   ========              ========   ========   2001 COMPARED TO 2000      Gross sales in 2001 increased 1.3% to $499,194 from $492,544 in 2000. Salesin the Human Health (up 3.9%) and Biosciences (up 29.9%) increased compared to2000 and more than offset the decreases in Animal Health/Agriculture (down 2.5%)and Specialty and Fine Chemicals segments (down 28.1%).      The effect of foreign currency exchange rates on gross sales for the yearhad a negative impact on sales of 1.4% or $7,107 compared to 2000. Gross saleswould have been $506,301 using 2000 exchange rates compared to 2000 sales of$492,544.      The unfavorable effects of foreign currencies are attributable primarily toexchange rate fluctuations in the Italian Lira, Swedish Krona, Pounds Sterlingand Irish Punt against the U.S. dollar in 2001.      The Human Health Segment gross sales of $242,995 were $9,109 (3.9%) above2000 due primarily to higher sales of generics used in cardiovascular, centralnervous systems and gastrointestinal preparations and new product introductions,including an intermediate used in a product to treat end-stage kidney diseaseand actives used in insomnia and prostate cancer treatment products. Theseincreases were partly offset by the unfavorable impact of foreign currencieswhich reduced sales by 2.2% or $5.4 million, and lower sales of a cardiovascularsupplement, due to a price decrease. This price decrease was offset by lowermanufacturing cost reflecting a change in chemical processing. In addition,lower sales were experienced in a generic used in the treatment of ulcertativecolitis due to competitive pricing pressure and in a gastrointestinal active dueto a customer decision to bring manufacturing in-house.      The BioSciences Segment gross sales of $124,973 were $28,741 (29.9%) above2000 primarily due to the acquisition of Bio Science in June 2001, and Marathonin October 2001, as well as increased shipments of cell culture, includingliquid media, flex pack and powder formulations. In addition, endotoxindetection sales increased due to more focused marketing and production efforts.      The Animal Health/Agriculture Segment gross sales of $54,840 were $1,380(2.5%) below 2000. This decrease was mainly due to lower sales of Animal Healthand certain crop protection products; primarily 3-Nitro, 2-Cyanopyridine andpyridine derivatives.      The Specialty and Fine Chemicals Segment gross sales of $76,386 were$29,820 (28.1%) below 2000 due to lower sales in telecommunications, coatings,performance enhancing products and weak photographic demand. Reduced sales intelecommunications and coating products have been influenced by a generaleconomic slowdown in those industries. In addition, lower sales of apolycarbonate additive were due to a customer decision to move productionin-house.      Export sales from U.S. businesses of $45,041 in 2001 compared to $50,910 in2000. International sales from European operations totaled $232,921 in 2001compared to $230,476 in 2000.      Total gross profit of $179,335 was $1,840 above 2000 due to increased grossprofit in the Bioscience Segment, due to higher volume in the base businesses,and the impact of two contract biopharmaceutical manufacturing acquisitionscompleted during the year. The Human Health Segment also benefited from ---------------(dollars in thousands, except share data)                                        17 increased volume, as well as favorable product mix. These increases resulteddespite special charges for inventory write-offs recorded in the fourth quarter2001 of $2 million in the Bioscience Segment and $2.5 million in the HumanHealth Segment for discontinued products manufactured at Rutherford Chemicalfacilities (See Note 17). The Bioscience segment inventory write-off was relatedto excess and obsolete inventories. The higher gross profits in the Life ScienceSegments were partly offset by lower gross profits and margins in the Specialtyand Fine Chemical and Animal Health/Agricultural Segments, both of which wereprimarily impacted by lower volumes. In addition, the Animal Health/AgriculturalSegment was impacted by increased raw material and energy costs during the year.The overall gross margin of 35.9%, including the fourth quarter inventory writedowns of $4.5 million, was approximately flat compared to the prior year.      Selling, general and administrative expenses as a percentage of gross saleswere 18.0% in 2001 versus 16.7% for 2000. Administration costs increased due tothe added costs and higher amortization expense associated with the June 2001Bio Science Contract Production Corporation acquisition, the full year impact ofthe August 2000 Arizona product line license and October 2001 Marathonacquisition, as well as additional sales and marketing costs in the BioscienceSegment. In addition, the Company experienced higher insurance premiums during2001 compared to 2000.      In the fourth quarter, as a result of the Company's previously announcedbusiness restructuring which created Rutherford Chemicals, Inc., together withan impairment charge within those businesses, the Company incurred Restructuringand Other charges of $18.6 million, comprised of asset write-downs of $17.2million and severance costs of $1.4 million (See Note 17).      The Company increased its provision for potential settlements and legalcosts related to Vitamin B-3 litigation by $4.4 million.      Research and development expenses of $19,619 were 3.9% of gross sales in2001, and were above 2000 levels by $5.4 million or 1% of gross sales. Thisincrease was associated with the strengthening of the R&D group in theBiosciences Segment and costs associated with the expansion of the CambrexCenter of Technical Excellence.      The operating profit in 2001 was $46,680, a decrease of 42.4% (8.5%excluding the effect of the Restructuring and other charges, inventory writedowns and the Vitamin B-3 accrual) compared to 2000. This decrease, excludingthe special charges, primarily reflects weakness in the gross margin and profitin the non-life science businesses, higher Research and Development spending andamortization costs associated with acquisitions. This decrease is partly offsetby the higher gross profit in the Life Science businesses.      Net interest expense of $10,567 in 2001 reflected a decrease of $920 from2000 reflecting lower average interest rates, partly offset by a higher averagedebt balance due to financing of acquisitions and lower interest income in 2001due to a temporary cash buildup in 2000. The average interest rate was 5.2% in2001 versus 6.7% in 2000.      The provision for income taxes in 2001 resulted in an effective rate of 27%versus 29% in 2000. The decrease in the tax rate was due to the favorableoutcome of tax audits and R&D tax credit programs. In addition, the Companycontinues to benefit from international tax treaties and foreign income taxed ata lower overall effective tax rate as compared to the U.S. statutory rate.      The Company's net income in 2001 decreased to $26,565 (which includes$20,057 after-tax impact of restructuring, Vitamin B-3 provision and othercharges) compared with net income of $49,605 in 2000.   2000 COMPARED TO 1999      Gross sales in 2000 increased 1.6% to $492,544 from $484,560 in 1999. Salesin the Human Health (up 3.6%), Biosciences (up 14.7%), and AnimalHealth/Agriculture (up 1%) segments increased compared to 1999 and more thanoffset the decrease in the Specialty and Fine Chemicals Segment (down 11%). ---------------(dollars in thousands, except share data)                                        18      The effect of foreign currency exchange rates on gross sales for the yearresulted in a negative impact on sales of 3.4% or $16,658 compared to 1999.Gross sales would have been $509,202 using 1999 exchange rates compared to 1999sales of $484,560.      The unfavorable effects of foreign currencies are attributable primarily tosignificant exchange rate fluctuations in the Italian Lira, Swedish Krona, PoundSterling and Irish Punt against the U.S. dollar in 2000.      The Human Health Segment gross sales of $233,886 were $8,226 (3.6%) above1999 due primarily to sales generated by the acquisition of Irotec in Ireland inMarch 1999 and Conti in Belgium in March 2000, new U.S. business related to acardiovascular reformulation, as well as other new products, and increased salesof a cough suppressant ingredient. These increases were partially offset bylower sales of gastro-intestinal products and the unfavorable impact of foreigncurrency which reduced segment sales 5.0%. The Company also eliminated certainlower margin x-ray products which were under pricing pressure.      The BioSciences Segment gross sales of $96,232 were $12,345 (14.7%) above1999 primarily due to the acquisition of BioWhittaker Molecular Applications,Inc. (formerly the BioProducts business of FMC Corporation) in July 1999, aswell as increased shipments of cell culture and electrophoresis products. Thesegment sales were lower as a result of decreased emphasis on serum andallergy/diagnostic sales coupled with supply issues for LAL (endotoxindetection) and certain cell products.      The Animal Health/Agriculture Segment gross sales of $56,220 were $525 (1%)above 1999. This increase was mainly due to increased sales of agriculturalintermediates; primarily 2-Cyanopyridine and pyridine derivatives. Animal Healthproducts were also above 1999 due to increased shipments of a poultry feedadditive. These increases were partially offset by lower Vitamin B-3 sales dueto reduced shipments to the animal feed markets and lower prices compared to1999.      The Specialty and Fine Chemicals Segment gross sales of $106,206 were$13,112 (11%) below 1999 due to lower specialty additive revenues used inplastic resins and fuel oil, castor oil based products sold to the commoditymarkets, and encapsulants used in telecommunications.      Export sales from U.S. businesses of $50,910 in 2000 compared to $40,610 in1999. International sales from European operations totaled $230,476 in 2000compared to $218,389 in 1999.      Total gross profit of $177,495 was $10,332 above 1999 due to the improvedgross margin on the Human Health Segment sales due primarily to increasedvolume, favorable product mix and lower spending, the Biosciences Segments'operating efficiencies and full year impact of the second quarter 1999acquisition of BioWhittaker Molecular Applications. These increases werepartially offset by declines in the Animal health/ Agriculture Segment, due toplant operational problems, higher raw material and energy costs, and theSpecialty and Fine Chemicals segment due primarily to lower plant volume. Thegross margin for 2000 was 36.0% versus 34.5% in 1999.      Selling, general and administrative expenses as a percentage of gross saleswere 16.7% in 2000 versus 16.1% for 1999. Administration costs increased due tothe acquisitions of Biowhittaker Molecular Applications in July 1999, Conti inMarch 2000 and Irotec in March 1999, and the shutdown of The Humphrey ChemicalCompany, Inc. These increases were partially offset by the continued benefitfrom the consolidation of administrative functions in the Specialty and FineChemical, and Animal Health/Agriculture businesses, as well as a first quarterinsurance recovery related to previously incurred environmental expenses.      Research and development expenses of $14,267 were 2.9% of gross sales in2000, and were at the same levels as 1999.      The operating profit in 2000 was $81,024, an increase of 17.1% (7.7%excluding the effect of Vitamin B-3 accrual) compared to 1999. This increase isdue to the increased sales and improved gross margin. ---------------(dollars in thousands, except share data)                                        19      Net interest expense of $11,487 in 2000 reflected an increase of $1,764from 1999 as a result of the additional financing for acquisitions and increasedinterest rates. The average interest rate was 6.7% in 2000 versus 6.1% in 1999.      The provision for income taxes in 2000 resulted in an effective rate of 29%versus 32% (excluding the effect of the $6,000 Vitamin B-3 accrual in 1999). Thedecrease in the tax rate was due to the favorable outcome of tax audits, R&D taxcredit programs and reconciliation of actual tax filings with previous accruals.In addition, the Company continues to benefit from international tax treatiesand foreign income taxed at a lower overall effective tax rate as compared tothe U.S. statutory rate.      The Company's net income in 2000 increased to $49,605 compared with netincome of $44,132 in 1999 (excluding the impact of the $6,000 Vitamin B-3accrual in 1999). LIQUIDITY AND CAPITAL RESOURCES      Net cash flow from operations was $55,186 for the year ended December 31,2001 compared with $86,672 in 2000. The decrease in cash flow is primarily dueto a decrease in accounts payable and accrued liabilities and higher prepaidexpenses, partially offset by lower inventory purchases and lower accountsreceivable. The decrease in accounts payable and accrued expenses reflectsVitamin B-3 payments, lower inventory purchases, as well as the timing ofvarious liability payments. Cash flows used in investing activities includedcapital expenditures of $42,948, and the acquisitions of Bio Science ContractProduction Corporation and Marathon Biopharmaceuticals for $146,640. Cash flowsprovided from financing activities of $137,102 included net borrowings of debtof $133,007, payments of $3,075 in dividends and the purchase of treasury stockof $3,901 partially offset by $11,016 in proceeds from the exercise of stockoptions.      Capital expenditures were $42,948 in 2001, $39,456 in 2000 and $30,529 in1999. In 2001, part of the funds were used for a water treatment plant atProfarmaco Srl in Italy, a laboratory upgrade at the Nordic Synthesis ABfacility in Sweden, operating and financial systems upgrades at the BioWhittakerfacility in Maryland and a number of miscellaneous plant upgrades throughout theCompany.      On November 29, 2001, the Company obtained new credit facilities from agroup of banks led by JPMorganChase as lead arranger and administrative agent.The credit facilities provide for an aggregate amount of $430 million,consisting of a 364-day renewable, senior revolving credit facility for$161,250, and a 5-year senior revolving credit facility in the amount of$268,750. The 5-year agreement will expire in November 2006. The new agreementsrenew and extend the approximately $300 million of existing bank debt which wasscheduled to mature in September 2002.      This Agreement permits the Company to choose between various interest rateoptions and to specify the portion of the borrowing to be covered by specificinterest rate options. Under the Agreement, the interest rate options availableto the Company are: (a) U.S. Prime rate or (b) LIBOR plus an applicable margin(ranging from .575% - 1.25%) or (c) Money Market Rate plus an applicable margin(ranging from .575% - 1.25%). The applicable margin is based upon the ratio ofconsolidated funded indebtedness to consolidated EBITDA of the Company.Additionally, the Company pays a commitment fee of between .15% to .30% on theentire portion of the Agreement. The 2001 and 2000 average interest rates were5.2% and 6.7%, respectively.      In June 2001 the Company borrowed approximately $120 million to finance theacquisition of the Bio Science Contract Production Corporation ("Bio Science")manufacturing business in Baltimore, Maryland. The Company also borrowedapproximately $17 million to finance the acquisition of CoPharma, Inc.("Marathon") located in Hopkinton, Massachusetts in October 2001.      The undrawn borrowing availability under the Agreement as of December 31,2001 was $131,650. There was $298,350 outstanding as of December 31, 2001. ---------------(dollars in thousands, except share data)                                        20      At December 31, 2001 our contractual obligations with initial or remainingterms in excess of one year were as follows:                                                                                 2006 AND                            TOTAL       2002      2003      2004      2005     THEREAFTER                           --------    ------    ------    ------    ------    ----------                                                                                         Long Term Debt...........  $312,529    $2,205    $2,215    $2,239    $1,750     $304,120Operating Leases.........    18,201     3,504     3,258     3,087     2,800        5,552                           --------    ------    ------    ------    ------     --------Contractual CashContractual Cash  Obligations............  $330,730    $5,709    $5,473    $5,326    $4,550     $309,672                           ========    ======    ======    ======    ======     ========      See Notes 11 and 22 in the accompanying financial statements for additionalinformation regarding our debt and other commitments.      Management believes that existing sources of capital, together with cashflows from operations, will be sufficient to meet foreseeable cash flowrequirements. A key to our access to liquidity is the maintenance of our stronglong-term credit ratings and ability to meet debt covenants to maintain certainlevels of net worth, an interest coverage ratio and leverage ratios. The companymet all bank covenants during 2001 and does not anticipate any covenantcompliance issues in the coming year. Management also believes that the companywill maintain its strong long-term credit ratings. Any events which change thestatus of our ability to meet debt covenants or maintain our credit ratingscould adversely impact our ability to fund operations.      Our forecasted cash flow from future operations may be adversely affectedby various factors including, but not limited to, declines in customer demand,increased competition, the deterioration in general economic and businessconditions, as well as other factors. Any change in the current status of thesefactors could adversely impact the Company's ability to fund operating cash flowrequirements. FINANCIAL INSTRUMENTS      The Company is exposed to market risks arising from adverse changes ininterest rates and foreign currency exchange rates. In the normal course ofbusiness, the Company uses a variety of techniques and instruments, includingderivatives, as part of its overall risk management strategy.   Currency Risk Management      The Company's primary market risk relates to exposure to foreign currencyexchange rate fluctuations on transactions entered into by internationaloperations which are primarily denominated in the U.S. dollar, Euro currency,and British pound sterling. The Company currently uses foreign currency exchangeforward contracts to mitigate the effect of short-term foreign exchange ratemovements on the Company's operating results. The net notional amount of thesecontracts at December 31, 2001, excluding $3,282 of inter-company contracts, was$40,009, which the Company estimates to be approximately 67% of the non-localcurrency exposure during the period. Unrealized foreign exchange contract lossesdo not subject the Company's actual results to risk as gains or losses on thesecontracts generally offset gains or losses on the transactions that are hedged.      Given the unlikely scenario that the operating companies' non-localcurrency collections match their forecast, and that all exchange rates move 10%against their local currencies, no more than $2,002 of pre-tax profits for atwelve-month period would be at risk. This is based on a non-hedged risk of$20,020. This residual risk allows for an over-forecasting margin of error andprevents over hedging of actual operating risk. As of December 31, 2001, thecombined non-local currency forecasted net collections amounted to $92,692.Offsetting this exposure are the expected $28,484 U.S. dollar inter-companypayments from the combined European sites. The remaining $64,208 forecastedexposure was partially hedged ($44,188) with major banks to reduce thenon-hedged risk to $20,020. ---------------(dollars in thousands, except share data)                                        21   Interest Rate Management      Each of the interest rate options in the Revolving Credit Agreementincludes floating rates. This arrangement has the advantage of making lowerinterest rates available in a declining market. However, it also exposes thecompany to any upward swings in interest rates. For example, based on thecompany's current net debt outstanding, an annual interest rate increase of 100basis points would increase interest expense and thus decrease the company'safter-tax profitability by $1,892.      The Company has employed a plan to control interest rate risk. To limit therisk of interest rates rising above a tolerable level, the Company would pay apremium now in order to obtain a fixed interest rate at a predetermined cost inthe future. That premium, or Swap, stabilizes interest costs by convertingfloating or variable rates to fixed rates through a contract with a financialinstitution. We monitor the Company's debt position and market trends to protectit from any unforeseen shifts in interest rates.      As of December 31, 2001, the Company had ten interest rate Swaps in placewith an aggregate notional value of $100,000, at an average rate of 5.39%, andwith varying maturity dates through the year 2005. The Company's strategy hasbeen to cover approximately 40% of outstanding bank debt with interest rateprotection. At December 31, 2001, the coverage is approximately 34% as theCompany is considering several fixed rate financial transactions which wouldincrease the proportional amount of fixed rate debt. ENVIRONMENTAL      In connection with laws and regulations pertaining to the protection of theenvironment, the Company is a party to several environmental remediationinvestigations and cleanups and, along with other companies, has been named a"potentially responsible party" for certain waste disposal sites (Superfundsites). Each of these matters is subject to various uncertainties, and it ispossible that some of these matters will be decided unfavorably against theCompany. The Company had accruals, included in current accrued liabilities andother non-current liabilities, of $1,400 and $2,300 at December 31, 2001 and2000, respectively, for costs associated with the study and remediation ofSuperfund sites and the Company's current and former operating sites for mattersthat are probable and reasonably estimable. Based on currently availableinformation and analysis, the Company's accrual represents management's bestestimate of what it believes are the reasonably possible and estimatedenvironmental cleanup related costs of a non-capital nature. During the pastthree-year period, cash payments for environmental cleanup related matters were$0, $0 and $200 for 2001, 2000 and 1999, respectively. There were no provisionsfor environmental contingencies during the past three-year period. The Companyreduced reserves by approximately $900 and $1,100 during 2001 and 2000,respectively, as a result of revised estimates. In addition, the Company settledcertain environmental claims involving the Cosan Chemical Corporation (asubsidiary) with insurance companies for $1,812 in 2000 and $1,150 in 1999.After reviewing information currently available, management believes any amountspaid in excess of the accrued liabilities will not have a material effect on itsfinancial position or results of operations. However, these matters, if resolvedin a manner different from those assumed in the current estimates could have amaterial adverse effect on financial condition, operating results and cash flowswhen resolved in a future reporting period. LITIGATION      The Company and its subsidiary Profarmaco S.r.l. ("Profarmaco") were namedas defendants in a proceeding instituted by the Federal Trade Commission ("FTC")on December 21, 1998, in the United States District Court for the District ofColumbia. The complaint alleges that exclusive license agreements whichProfarmaco entered into with Mylan Laboratories, Inc. ("Mylan") covering thedrug master files for (and therefore the right to buy and use) two activepharmaceutical ingredients ("APIs"), lorazepam and clorazepate, were part of aneffort on Mylan's part to restrict competition in the supply of lorazepam andclorazepate and to increase the price charged for these products when Mylan soldthem as generic pharmaceuticals. The complaint further alleges that theseagreements violate the Federal Trade Commission ---------------(dollars in thousands, except share data)                                        22 Act, and that Mylan, Cambrex, Profarmaco, and Gyma Laboratories of America,Inc., Profarmaco's distributor in the United States, engaged in an unlawfulrestraint of trade and cons red to monopolize and attempted to monopolize themarkets for the generic pharmaceuticals incorporating the A s. A lawsuit makingsimilar allegations against the Company and Profarmaco, and seeking injunctiverelief and treble damages, has been filed by the Attorneys General of 31 statesin the United States District Court for the District of Columbia on behalf ofthose states and persons in those states who were purchasers of the genericpharmaceuticals.      The Company and Profarmaco have also been named in purported class actioncomplaints brought by private plaintiffs in various state courts on behalf ofpurchasers of lorazepam and clorazepate in generic form, making allegationsessentially similar to those raised in the FTC's complaint and seeking variousforms of relief including treble damages.      On February 9, 2001, a federal court in Washington, DC entered an Order andStipulated Permanent Injunction as part of a settlement of the FTC and AttorneysGeneral's suits. Under these settlement documents Mylan agreed to pay over $140million on its own behalf and on behalf of most of the other defendant companiesincluding Cambrex and Profarmaco. In the Order and Injunction, the settlingdefendants also agreed to monitor certain future conduct.      The Company strongly believes that its licensing arrangements with Mylanwere made in accordance with regulatory requirements and will vigorously defendthe various other lawsuits and class actions. The private litigation continues.However, the Company and Mylan terminated the exclusive license to the drugmaster files as of December 31, 1998. In entering these licensing arrangements,the Company elected not to raise the price of its products and had no control orinfluence over the pricing of its final generic product. Mylan had been fullycovering the costs for the defense and indemnity of Cambrex and Profarmaco undercertain obligations set forth in the license agreements. Cambrex agreed to coverseparate legal defense costs incurred for Cambrex and Profarmaco on a goingforward basis beginning August 1, 2000. These costs have not been and are notexpected to be significant.      On May 14, 1998, the Company's Nepera subsidiary, a manufacturer and sellerof niacinamide (Vitamin B-3), received a Federal Grand Jury subpoena for theproduction of documents relating to the pricing and possible customer allocationwith regard to that product. The Company understands that the subpoena wasissued as part of the Federal Government's ongoing anti-trust investigation intovarious business practices in the vitamin industry generally. In the fourthquarter of 1999, the Company reached a settlement with the Government concerningNepera's alleged role in Vitamin B-3 violations from 1992 to 1995. On October13, 2000, the Government settlement was finalized with Nepera entering into avoluntary plea agreement with the Department of Justice. Under this agreement,Nepera entered a plea of guilty to one count of price fixing and marketallocation of Vitamin B-3 from 1992 to 1995 in violation of section one of theSherman Act and has agreed to pay a fine of $4.0 million. Under the pleaagreement, Nepera was on probation for a one-year period which has ex red. Thefine was paid in February 2001. Nepera has been named as a defendant, along withseveral other companies, in a number of private civil actions brought on behalfof alleged purchasers of Vitamin B-3.      An accrual of $6.0 million was recorded in the fourth quarter 1999 to coverthe anticipated government settlement, related litigation, and legal expenses.Based on recent discussions with various plaintiffs counsel, as well as currentestimates of expenditures for legal fees, an additional accrual of $4.4 millionwas established in the fourth quarter of 2001. As a result, the balance of thisaccrual as of December 31, 2001 was approximately $4.4 million. This accrual hasbeen recorded in Accounts Payable and Accrued Liabilities.      While it is not possible to predict with certainty the outcome of the abovelitigation matters and various other lawsuits, it is the opinion of managementthat the ultimate resolution of these proceedings should not have a materialadverse effect on the Company's results of operations, cash flows and financialposition. These matters, if resolved in an unfavorable manner, could have amaterial effect on the operating results and cash flows when resolved in afuture reporting period.---------------(dollars in thousands, except share data)                                        23 IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS      In June 1998, the Financial Accounting Standards Board (FASB) issuedStatement of Financial Accounting Standard No. 133 "Accounting for DerivativeInstruments and Hedging Activities" (SFAS 133). SFAS 133 was originallyeffective for all fiscal quarters of all fiscal years beginning after June 15,1999. In June 1999, the Financial Accounting Standards Board issued Statement ofFinancial Accounting Standard No. 137 "Accounting for Derivative Instruments andHedging Activities -- Deferral of the Effective Date of FASB Statement No. 133"(SFAS 137). SFAS 137 defers the effective date of FASB 133 for all fiscalquarters of all fiscal years beginning after June 15, 2000 (January 1, 2001 forthe Company). In addition, Statement of Financial Accounting Standard No. 138"Accounting for Certain Derivative Instruments and Certain Hedging Activities"was issued in June 2000 which amended certain accounting and reporting standardsof SFAS 133. SFAS 133, as amended, requires that all derivative instruments berecorded on the balance sheet at their fair value. Changes in the fair value ofderivatives are recorded each period in current earnings or other comprehensiveincome, depending on whether a derivative is designated as part of a hedgetransaction and, if it is, the type of hedge transaction. Changes in the fairvalue of the derivative instruments reported in other comprehensive income willbe reclassified as earnings in the period in which earnings are impacted by thevariability of the cash flows of the hedged item. The Company adopted thisstatement effective January 1, 2001. Adoption of this statement resulted in anafter-tax reduction of other comprehensive income of $86.      In July 2001, the Financial Accounting Standards Board issued Statements ofFinancial Accounting Standards No. 141 "Business Combinations" (SFAS 141) and142 "Goodwill and Other Intangible Assets" (SFAS 142).      SFAS 141 addresses the accounting and reporting requirements for businesscombinations. This Statement requires that all business combinations beaccounted for under the purchase method, as well as some additional disclosures.SFAS 141 is effective for all business combinations completed after June 30,2001. Adoption of this Statement had no impact on the Company's results.      SFAS 142 addresses the accounting and reporting for goodwill and otherintangible assets. The Statement adopts a more aggregate view of goodwill andbases the accounting for goodwill on the units of the combined entity into whichan acquired entity is integrated. Goodwill and intangible assets with indefiniteuseful lives will not be amortized but rather will be tested for impairment atleast annually. Identifiable intangible assets that have finite lives willcontinue to be amortized over their remaining useful lives. SFAS 142 iseffective on January 1, 2002; however, goodwill and intangibles acquired afterJune 30, 2001 are subject immediately to the provisions of this Statement. Theimpact of this statement did not have a material impact on 2001 results.      The Company will adopt the provisions of SFAS 142 in its first quarterended March 31, 2002. The Company is in the process of preparing for itsadoption of SFAS 142 and is making the determinations as to what its reportingunits are and what amounts of goodwill, intangible assets, other assets, andliabilities should be allocated to those reporting units. The Company will alsoevaluate the useful lives assigned to its intangible assets. SFAS 142 requiresthat goodwill be tested annually for impairment using a two-step process. Thefirst step is to identify any potential impairment and, in transition, this stepmust be measured as of the beginning of the fiscal year. However, a company hassix months from the date of adoption to complete the first step. The Companyexpects to complete that first step of the goodwill impairment test during thefirst quarter of 2002. The second step of the goodwill impairment test measuresthe amount of the impairment loss (measured as of the beginning of the year ofadoption), if any, and must be completed by the end of the Company's fiscalyear. Intangible assets deemed to have an indefinite life will be tested forimpairment using a one-step process which compares the fair value to thecarrying amount of the asset as of the beginning of the fiscal year, andpursuant to the requirements of SFAS 142 will be completed during the firstquarter of 2002.      While the Company is currently finalizing the impact that adoption willhave on its 2002 annual results, management believes that there will be nosubstantial adjustments in the valuation of its goodwill and other---------------(dollars in thousands, except share data)                                        24 indefinite lived intangible assets. The net reduction in amortization expense isexpected to be approximately $13.0 million (before income taxes), or $9.0million after taxes, versus 2001 amortization of $14.0 million. Only certainportions of the Company's amortization are deductible for tax purposes.      In August, 2001, the FASB issued Statement of Financial Accounting StandardNo. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS144). SFAS 144 primarily addresses the financial accounting and reporting forthe impairment or disposal of long-lived assets. SFAS is effective on January 1,2002. Adoption of this Statement is not expected to impact the Company'sresults. FORWARD-LOOKING STATEMENTS      This document contains forward-looking statements. Investors should beaware of factors that could cause Cambrex actual results to vary materially fromthose projected in the forward-looking statements. These factors include, butare not limited to, global economic trends; competitive pricing or productdevelopment activities; markets, alliances, and geographic expansions developingdifferently than anticipated; government legislation and/or regulation(particularly on environmental issues); and technology, manufacturing and legalissues. 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...........................         26Consolidated Balance Sheets as of December 31, 2001 and  2000......................................................         27Consolidated Income Statements for the Years Ended December  31, 2001, 2000 and 1999...................................         28Consolidated Statements of Stockholders' Equity for the  Years Ended December 31, 2001, 2000 and 1999..............         29Consolidated Statements of Cash Flows for the Years Ended  December 31, 2001, 2000 and 1999..........................         30Notes to Consolidated Financial Statements..................         31Consolidated Quarterly Financial Data (unaudited) for the  Years Ended December 31, 2001 and 2000....................         58      The consolidated financial statements and financial statement schedule arefiled pursuant to Item 14 of this report. ---------------(dollars in thousands, except share data)(dollars in thousands, except share data)                                        25                        REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders  of Cambrex Corporation:      In our opinion, the accompanying consolidated balance sheets and therelated consolidated statements of income, stockholders' equity and cash flowspresent fairly, in all material respects, the financial position of CambrexCorporation and its subsidiaries at December 31, 2001 and 2000, and the resultsof their operations and their cash flows for each of the three years in theperiod ended December 31, 2001, in conformity with accounting principlesgenerally accepted in the United States of America. These financial statementsare the responsibility of the Company's management; our responsibility is toexpress an opinion on these financial statements based on our audits. Weconducted our audits of these statements in accordance with auditing standardsgenerally accepted in the United States of America, which require that we planand perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimatesmade by management, and evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP Florham Park, New JerseyJanuary 18, 2002                                         26                       CAMBREX CORPORATION AND SUBSIDIARIES                           CONSOLIDATED BALANCE SHEETS                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)                                                                   DECEMBER 31,                                                              --------------------                                                                2001        2000                                                              --------    --------                                                                                ASSETSCurrent assets:  Cash and cash equivalents.................................  $ 23,696    $ 21,721  Trade receivables, less allowances of $1,270 and $1,354 at     respective dates.......................................    74,093      76,394  Inventories, net..........................................   107,746     107,616  Deferred tax assets.......................................    18,599      14,743  Prepaid expenses and other current assets.................    19,526      12,380                                                              --------    --------          Total current assets..............................   243,660     232,854Property, plant and equipment, net..........................   287,605     287,338Intangible assets, net......................................   269,011     149,199Other assets................................................    17,791      11,709                                                              --------    --------          Total assets......................................  $818,067    $681,100                                                              ========    ========LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:  Accounts payable and accrued liabilities..................  $ 66,233    $ 78,198  Income taxes payable......................................     1,263       9,224  Short-term debt and current portion of long-term debt.....     2,567       1,484                                                              --------    --------Total current liabilities...................................    70,063      88,906Long-term debt..............................................   312,524     168,591Deferred tax liabilities....................................    48,570      61,531Other noncurrent liabilities................................    27,730      24,451                                                              --------    --------          Total liabilities.................................   458,887     343,479Commitments and contingenciesStockholders' equity:  Common Stock, $.10 par value; issued 28,007,825 and     27,433,170 shares at respective dates..................     2,823       2,769  Additional paid-in capital................................   197,748     181,698  Retained earnings.........................................   237,759     214,269  Treasury stock, at cost; 2,234,421 and 2,193,945 shares at     respective dates.......................................   (16,911)    (13,010)  Accumulated other comprehensive income/(loss).............   (62,239)    (48,105)                                                              --------    --------          Total stockholders' equity........................   359,180     337,621                                                              --------    --------          Total liabilities and stockholders' equity........  $818,067    $681,100                                                              ========    ========           See accompanying notes to consolidated financial statements.                                        27                       CAMBREX CORPORATION AND SUBSIDIARIES                          CONSOLIDATED INCOME STATEMENTS                     (IN THOUSANDS, EXCEPT PER-SHARE DATA)                                                                  YEARS ENDED DECEMBER 31,                                                             --------------------------------                                                               2001        2000        1999                                                             --------    --------    --------                                                                                            Gross sales................................................  $499,194    $492,544    $484,560Net revenues...............................................   498,855     492,095     488,489  Cost of goods sold.......................................   319,520     314,600     321,326                                                             --------    --------    --------Gross profit...............................................   179,335     177,495     167,163  Selling, general and administrative......................    89,987      82,204      77,729  Research and development.................................    19,619      14,267      14,255  Restructuring and other charges..........................    18,649          --          --  Vitamin B-3 provision....................................     4,400          --       6,000                                                             --------    --------    --------Operating profit...........................................    46,680      81,024      69,179Other (income) expenses  Interest income..........................................      (967)     (2,217)     (2,286)  Interest expense.........................................    11,534      13,704      12,009  Other -- net.............................................      (277)       (329)        555                                                             --------    --------    --------Income before income taxes.................................    36,390      69,866      58,901Provision for income taxes.................................     9,825      20,261      20,769                                                             --------    --------    --------Net income.................................................  $ 26,565    $ 49,605    $ 38,132                                                             ========    ========    ========Earnings per share of common stock and common stock  equivalents:  Basic....................................................  $   1.04    $   1.98    $   1.55  Diluted..................................................  $   1.00    $   1.90    $   1.49Weighted average shares outstanding:  Basic....................................................    25,648      25,015      24,572  Diluted..................................................    26,495      26,157      25,613           See accompanying notes to consolidated financial statements.                                        28                       CAMBREX CORPORATION AND SUBSIDIARIES                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)                                              COMMON STOCK                                                            ACCUMULATED                                         ----------------------   ADDITIONAL                                             OTHER                                           SHARES     PAR VALUE    PAID-IN     RETAINED   TREASURY   COMPREHENSIVE   COMPREHENSIVE                                           ISSUED      ($.10)      CAPITAL     EARNINGS    STOCK     INCOME/(LOSS)   INCOME/(LOSS)                                         ----------   ---------   ----------   --------   --------   -------------   -------------                                                                                                                                BALANCE AT DECEMBER 31, 1998...........  26,573,324    $2,655      $163,525    $132,471   $ (9,841)                    $(11,550)  Comprehensive income/(loss)    Net Income.........................                                          38,132                $ 38,132    Other comprehensive      income/(loss)....................      Foreign currency translation        adjustments....................                                                                 (19,889)      Minimum pension liability        adjustment.....................                                                                     366                                                                                                       --------    Other comprehensive      income/(loss)....................                                                                 (19,523)        (19,523)                                                                                                       --------  Comprehensive income/(loss)..........                                                                $ 18,609                                                                                                       ========    Cash dividends at $0.12 per      share............................                                          (2,948)    Exercise of stock options..........     146,600        12         2,134                   (447)    Tax benefit of stock options      exercised........................                                 548    Shares issued to Board of      Directors........................                                  81                    116                                         ----------    ------      --------    --------   --------                     --------BALANCE AT DECEMBER 31, 1999...........  26,719,924    $2,667      $166,288    $167,655   $(10,172)                    $(31,073)  Comprehensive income/(loss)    Net Income.........................                                          49,605                $ 49,605    Other comprehensive income/loss....      Foreign currency translation        adjustments....................                                                                 (17,511)      Minimum pension liability        adjustment.....................                                                                     479                                                                                                       --------    Other comprehensive      income/(loss)....................                                                                 (17,032)        (17,032)                                                                                                       --------  Comprehensive income/(loss)..........                                                                $ 32,573                                                                                                       ========    Cash dividends at $0.12 per      share............................                                          (2,991)    Exercise of stock options..........     713,246       102        11,150                 (2,838)    Tax benefit of stock options      exercised........................                               4,260                                         ----------    ------      --------    --------   --------                     --------BALANCE AT DECEMBER 31, 2000...........  27,433,170    $2,769      $181,698    $214,269   $(13,010)                    $(48,105)  Comprehensive income/(loss)    Net Income.........................                                          26,565                $ 26,565    Other comprehensive      income/(loss)....................      Foreign currency translation        adjustments....................                                                                 (11,104)      Unrealized losses on hedging        Contracts, net of tax..........                                                                  (1,770)      Minimum pension liability        adjustment.....................                                                                  (1,260)                                                                                                       --------    Other comprehensive      income/(loss)....................                                                                 (14,134)        (14,134)                                                                                                       --------  Comprehensive income.................                                                                $ 12,431                                                                                                       ========    Cash dividends at $0.12 per      share............................                                          (3,075)    Exercise of stock options..........     574,655        54        11,016                 (3,901)    Tax benefit of stock options      exercised........................                               5,034                                         ----------    ------      --------    --------   --------                     --------BALANCE AT DECEMBER 31, 2001...........  28,007,825    $2,823      $197,748    $237,759   $(16,911)                    $(62,239)                                         ==========    ======      ========    ========   ========                     ========                                               TOTAL                                         STOCKHOLDERS'                                            EQUITY                                         -------------                                              BALANCE AT DECEMBER 31, 1998...........    $277,260  Comprehensive income/(loss)    Net Income.........................      38,132    Other comprehensive      income/(loss)....................      Foreign currency translation        adjustments....................      Minimum pension liability        adjustment.....................    Other comprehensive      income/(loss)....................     (19,523)  Comprehensive income/(loss)..........    Cash dividends at $0.12 per      share............................      (2,948)    Exercise of stock options..........       1,699    Tax benefit of stock options      exercised........................         548    Shares issued to Board of      Directors........................         197                                           --------BALANCE AT DECEMBER 31, 1999...........    $295,365  Comprehensive income/(loss)    Net Income.........................      49,605    Other comprehensive income/loss....      Foreign currency translation        adjustments....................      Minimum pension liability        adjustment.....................    Other comprehensive      income/(loss)....................     (17,032)  Comprehensive income/(loss)..........    Cash dividends at $0.12 per      share............................      (2,991)    Exercise of stock options..........       8,414    Tax benefit of stock options      exercised........................       4,260                                           --------BALANCE AT DECEMBER 31, 2000...........    $337,621  Comprehensive income/(loss)    Net Income.........................      26,565    Other comprehensive      income/(loss)....................      Foreign currency translation        adjustments....................      Unrealized losses on hedging        Contracts, net of tax..........      Minimum pension liability        adjustment.....................    Other comprehensive      income/(loss)....................     (14,134)  Comprehensive income.................    Cash dividends at $0.12 per      share............................      (3,075)    Exercise of stock options..........       7,169    Tax benefit of stock options      exercised........................       5,034                                           --------BALANCE AT DECEMBER 31, 2001...........    $359,180                                           ========           See accompanying notes to consolidated financial statements.                                        29                       CAMBREX CORPORATION AND SUBSIDIARIES                      CONSOLIDATED STATEMENTS OF CASH FLOWS                             (DOLLARS IN THOUSANDS)                                                                   YEARS ENDED DECEMBER 31,                                                              ---------------------------------                                                                2001        2000        1999                                                              ---------   ---------   ---------                                                                                             Cash flows from operations:  Net income................................................  $  26,565   $  49,605   $  38,132  Depreciation and amortization.............................     50,797      42,094      42,328  Vitamin B-3 provision.....................................      4,400          --       6,000  Special Charges...........................................     23,076  Reimbursement/reversal of environmental contingencies.....       (850)     (2,912)     (2,350)  Provision for inventories.................................      3,332       2,599       4,486  Deferred income tax provision.............................    (16,817)     (5,981)       (181)  Changes in assets and liabilities (net of assets and     liabilities acquired):     Receivables............................................      1,229      (5,260)     (8,881)     Inventories............................................     (9,148)    (17,263)      8,893     Prepaid expenses and other current assets..............     (6,566)      2,112        (149)     Accounts payable and accrued liabilities...............    (26,478)     13,364      (6,036)     Income taxes payable...................................      6,415      13,873       2,366     Other non-current assets and liabilities...............       (769)     (3,559)      3,403                                                              ---------   ---------   ---------     Net cash provided from operations......................     55,186      88,672      88,011                                                              ---------   ---------   ---------Cash flows from investing activities:  Capital expenditures......................................    (42,948)    (39,456)    (30,529)  Acquisition of businesses (net of cash acquired)..........   (146,640)    (12,488)    (75,336)  Other investing activities................................        390         111        (841)                                                              ---------   ---------   ---------     Net cash (used in) investing activities................   (189,198)    (51,833)   (106,706)                                                              ---------   ---------   ---------Cash flows from financing activities:  Dividends.................................................     (3,075)     (2,991)     (2,946)  Net increase (decrease) in short-term debt................      1,174      (3,754)      1,761  Long-term debt activity (including current portion):     Borrowings.............................................    284,232      45,800      52,500     Repayments.............................................   (152,399)   (100,947)    (24,291)  Proceeds from the issuance of common stock................     11,016      11,150       2,775  Purchase of treasury stock................................     (3,901)     (2,838)       (331)  Other.....................................................         55         280         366                                                              ---------   ---------   ---------     Net cash provided from financing activities............    137,102     (53,300)     29,834                                                              ---------   ---------   ---------Effect of exchange rate changes on cash.....................     (1,115)     (1,614)    (19,870)                                                              ---------   ---------   ---------Net increase (decrease) in cash and cash equivalents........      1,975     (18,075)     (8,731)Cash and cash equivalents at beginning of year..............     21,721      39,796      48,527Cash and cash equivalents at beginning of year..............     21,721      39,796      48,527                                                              ---------   ---------   ---------Cash and cash equivalents at end of year....................  $  23,696   $  21,721   $  39,796                                                              =========   =========   =========Supplemental disclosure:  Interest paid (net of capitalized interest)...............  $  13,119   $  14,909   $  11,105  Income taxes paid.........................................  $  24,919   $  16,578   $  20,277Noncash transactions:  Additional minimum pension liability eliminated from     stockholders' equity...................................  $  (1,644)  $    (479)  $    (366)  Tax benefit on stock options exercised....................  $   5,034   $   4,260   $     548  Liabilities assumed in connection with acquisition........  $  18,970   $  10,454   $   5,436           See accompanying notes to consolidated financial statements.                                        30                       CAMBREX CORPORATION AND SUBSIDIARIES                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (1) THE COMPANY      Cambrex Corporation and Subsidiaries (the "Company" or "Cambrex") primarilyprovides products and services worldwide to the lifesciences industry. TheCompany operates in four segments, Human Health, Biosciences, AnimalHealth/Agriculture, and Specialty and Fine Chemicals. (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 inter-company balances andtransactions have been eliminated in consolidation.   Cash Equivalents      Temporary cash investments with an original maturity of less than threemonths and virtually no risk of loss in value are considered cash equivalents.   Derivative Instruments      Derivative financial instruments are used by the Company primarily forhedging purposes to mitigate a variety of working capital, investment andborrowing risks. The use and mix of hedging instruments can vary depending onbusiness and economic conditions and management's risk assessments. The Companyuses a variety of strategies, including foreign currency forward contracts andtransaction hedging, to minimize or eliminate foreign currency exchange raterisk associated with substantially all of its foreign currency transactions.Gains and losses on these hedging transaction are generally recorded in earningsin the same period as they are realized, which is usually the same period as thesettlement of the underlying transactions. The Company uses interest ratederivative instruments only as hedges or as an integral part of borrowings. Assuch, the differential to be paid or received in connection with theseinstruments is accrued and recognized in income as an adjustment to interestexpense.   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 yearsMachinery and equipment...............................  5 to 10 yearsFurniture 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. Interest is capitalized inconnection with the construction and acquisition of assets. The capitalizedinterest is recorded as part of the cost of the asset to which it relates and isamortized over the asset's estimated useful life. Total interest capitalized inconnection with ongoing construction activities in 2001, 2000 and 1999 amountedto $1,482, $1,307 and $1,670, respectively.                                         31                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (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 yearsProduct technology......................  5 to 17 yearsNon-compete agreements..................  5 yearsTrademarks and other....................  1 to 40 years      The Company continually evaluates the reasonableness of its amortization ofintangibles. If it becomes probable that expected future undiscounted cash flowsassociated with intangible assets are less than their carrying value, the assetsare written down to their fair value.   Impairment of Long-Lived Assets      The Company assesses the impairment of its long-lived assets, includingintangible assets, and property, plant and equipment, whenever economic eventsor changes in circumstances indicate that the carrying amounts of the assets maynot recoverable. Long lived assets are considered to be impaired when the sum ofthe undiscounted expected future operating cash flows is less than the carryingamounts of the related assets.   Revenue Recognition      Revenues are recognized when products are shipped and title has passed tothe customer. Royalties are recognized as earned in accordance with royaltyagreements. The majority of the agreements call for royalties to be earned basedon a percentage of sales of the licensee.   Income Taxes      Deferred income taxes reflect the differences between assets andliabilities recognized for financial reporting purposes and amounts recognizedfor tax purposes. Deferred taxes are based on tax laws currently enacted.       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 a repatriation of a portion of accumulated foreignearnings and consider applicable foreign tax credits. The repatriation ofdividends in a prior year occurred due to an expected tax law change, and thereis no plan to repatriate dividends in the future. Cambrex has adopted a policyto indefinitely reinvest the unremitted earnings of certain non-U.S.subsidiaries, and as such, separate provisions for income taxes have beendetermined for these entities and U.S. taxes have not been provided on theirunremitted earnings. At December 31, 2001, 2000 and 1999, the cumulative amountof unremitted earnings of non-U.S. subsidiaries was $23,842, $0, and $49,427,respectively.   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                                         32                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)reported amounts of revenues and expenses during the reporting period. Actualresults could differ from those estimates.   Environmental Costs      In the ordinary course of business, like most other industrial companies,the Company is subject to extensive and changing federal, state, local andforeign environmental laws and regulations, and has made provisions for theestimated financial impact of environmental cleanup related costs. The Company'spolicy is to accrue environmental cleanup related costs of a non-capital naturewhen those costs are believed to be probable and can be reasonably estimated.The quantification of environmental exposures requires an assessment of manyfactors, including changing laws and regulations, advancements in environmentaltechnologies, the quality of information available related to specific sites,the assessment stage of each site investigation, preliminary findings and thelength of time involved in remediation or settlement. Such accruals are adjustedas further information develops or circumstances change. For certain matters,the Company expects to share costs with other parties. Costs of futureexpenditures for environmental remediation obligations are not discounted totheir present value. Recoveries of environmental remediation costs from otherparties are recorded as assets when their receipt is deemed certain.   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 relating totransactions of a long-term investment nature are accumulated in stockholders'equity. Gains or losses resulting from foreign currency transactions areincluded in the results of operations as a component of other revenues in 2001,2000 and 1999. Foreign currency net transaction (losses) gains were ($2,051),($1,157) and $83 in 2001, 2000 and 1999, respectively.   Earnings Per Common Share      All diluted earnings per share are computed on the basis of the weightedaverage shares of common stock outstanding plus common equivalent shares arisingfrom the effect of dilutive stock options, using the treasury stock method.      Earnings per share calculations are as follows:                                                             FOR THE YEARS ENDED,                                                        -----------------------------                                                         2001       2000       1999                                                        -------    -------    -------                                                                                     Numerator:Income available to common stockholders...............  $26,565    $49,605    $38,132Denominator:Basic weighted average shares outstanding.............   25,648     25,015     24,572Effect of dilutive stock options......................      847      1,142      1,041                                                        -------    -------    -------Diluted weighted average shares outstanding...........   26,495     26,157     25,613Basic earnings per share..............................  $  1.04    $  1.98    $  1.55Diluted earnings per share............................  $  1.00    $  1.90    $  1.49                                         33                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)  Freight Billing and Costs      The Company bills a substantial portion of freight cost incurred onshipments to customers. Freight costs are reflected in cost of goods sold andamounts billed to customers are recorded within net revenues. These amounts arenot material to the Company's operating results.   Reclassification      Certain reclassifications have been made to prior year disclosures toconform with current year presentation. (3) ACQUISITIONS      On October 30, 2001, Cambrex Corporation completed the acquisition ofMarathon Biopharmaceuticals ("Marathon"), located in Hopkinton, Massachusetts,for approximately $26 million in cash through a share purchase of CoPharma Inc.Marathon is a full-service cGMP manufacturer of biopharmaceutical ingredientsand purified bulk biologics for pre-clinical evaluation, clinical trials andcommercial scale quantities. This acquisition strengthens Cambrex's existingcapabilities for producing pre-clinical, clinical and commercial quantities ofbulk biologics. Assets acquired and liabilities assumed have been recorded attheir fair estimated fair values and are subject to adjustment when additionalinformation concerning assets and liability valuation is finalized. At the timeof the transaction, pending receipt of asset and liability appraisals, goodwillwas recorded at approximately $16.3 million. Assets acquired include $6.7million of fixed assets, $0.7 million in inventories, $5.7 million deferred taxassets and approximately $3.4 million in accounts payable and accruedliabilities. The goodwill associated with this transaction is not deductible fortax purposes. Subsequent to the acquisition, the company's formal name waschanged to Cambrex Bio Science MA.      On June 1, 2001, Cambrex Corporation completed its acquisition of the BioScience Contract Production Corporation ("Bio Science") biopharmaceuticalmanufacturing business in Baltimore, Maryland. The business involves the cGMPmanufacture of purified bulk biologics and pharmaceutical ingredients. The totalpurchase price was approximately $120 million in cash, which was funded by anexisting line of credit facility. Additional purchase price payments of up to$25 million may be made depending on future business performance over the nextfour years. Assets acquired and liabilities assumed have been recorded at theirestimated fair values and are subject to adjustment when additional informationconcerning asset and liability valuations is finalized. At the time of thetransaction, goodwill was recorded at approximately $122 million, includingincremental deal costs, and is being amortized over 20 years.      On March 2, 2000, the Company completed the acquisition of Conti BC NV, amanufacturer and supplier of pharmaceutical intermediates and activepharmaceutical ingredients, located in Landen, Belgium. The Company paidapproximately $6,200 in cash and assumed debt for the business. At the time ofthe transaction, goodwill was recorded at $451 and is being amortized over 20years.      On July 24, 2000, the Company completed the acquisition of Lumitech,Limited, an emerging company based in Nottingham, United Kingdom, which providesproducts and services used in the high throughput screening market for drugdiscovery. The Company paid approximately $4,700 in cash at closing, themajority of which was recorded as patents and other intangibles, with additionalfuture performance-based payments of up to $16,000 due over the next five years.No additional performance-based payments have been made to date. The acquiredpatents and other intangibles are being amortized over 15-20 years.      On August 29, 2000, Cambrex Corporation announced that its CasChem, Inc.subsidiary had licensed the castor oil based ester products business fromArizona Chemical, Jacksonville, FL through a perpetual                                         34                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (3) ACQUISITIONS -- (CONTINUED)licensing agreement for approximately $4.5 million. The agreement providesCasChem with process technologies, customer lists, and supply of raw materials.The ester products are used in personal care and coatings applications. Thelicense cost is included in intangible assets at December 31, 2000 and is beingamortized over 10 years. As part of the transaction, CasChem entered into afive-year supply agreement with Arizona Chemical to manufacture a line of talloil based products used in the lubricant and lithographic ink markets.      On January 4, 1999, the Company acquired Poietic Technologies, Inc.("Poietics"), a leading supplier of normal human cells of hematopoietic origin.The Company paid $2,500 cash and may pay future consideration based on theperformance of the business. No additional payments have been made to date.      On March 12, 1999, Cambrex completed the acquisition of Irotec LaboratoriesLtd. ("Irotec"), a supplier of active pharmaceutical ingredients (APIs) locatedin Cork, Ireland. Cambrex paid approximately $37,560 for the business, net ofcash acquired. The excess of the purchase price over the fair value of the netassets acquired was approximately $9,330 and was recorded as goodwill and isbeing amortized over 20 years using the straight-line method.      On July 12, 1999, Cambrex completed the acquisition of FMC Corporation'sBioProducts business, which operates as BioWhittaker Molecular Applications,Inc. ("BMA"). The business, which serves the life sciences industry, is theworld's largest manufacturer of electrophoresis media based on the polymeragarose. The transaction includes two operating facilities in Rockland, Maineand Copenhagen, Denmark. Cambrex paid approximately $38,000 for the business.The excess of the purchase price over the fair value of the net assets acquiredwas approximately $25,420 and was recorded as goodwill and is being amortizedover 20 years using the straight-line method.      On January 9, 1998, Chiragene, a newly formed subsidiary of CambrexCorporation, acquired substantially all of the assets of the chiral intermediatebusiness of Celgene Corporation for approximately $11,328. The purchaseagreement included an upfront payment of $7,500 paid at closing plus futureroyalties based upon sales. While the present value of the potential futureroyalties was $7,500 based upon a formula disclosed in the purchase agreement,the amount included in the purchase allocation was $3,750 which represents theminimum guaranteed royalty payouts. Purchase price in excess of the fair valueof the net assets was approximately $5,000 and was recorded as goodwill and isbeing amortized over 15 years.      On May 12, 1998, Cambrex completed the acquisition of certain assets of thebiopharmaceutical manufacturing and distribution business of BoerhingerIngelheim Bioproduct Partnership (BIBP) for $3,871, including acquisition costof $621. The assets acquired included a state-of-the-art cell culture and mediamanufacturing facility in Verviers, Belgium, and inventory for certain cellculture, endotoxin detection and molecular biology products. The company nowoperates as BioWhittaker Europe SPRL.      On September 30, 1997, the Company acquired approximately 93% of theoutstanding common stock of BioWhittaker for approximately $116,000. Theremaining 7% of the outstanding common stock was subsequently acquired onOctober 3, 1997 for an additional $10,000. The acquisition price wasapproximately $133,500. The excess of the purchase price over the fair value ofthe net assets acquired was approximately $40,000 and was recorded as goodwilland is being amortized over 20 years using the straight-line method. Theallocation to in-process research and development of $14,000 represents thevalue of BioWhittaker's research and development efforts which had not reachedcommercial viability with no alternative future use and were, therefore,immediately expensed.      The above acquisitions have been accounted for under the purchase method ofaccounting and accordingly the results of operations of the acquisitions areincluded in the accompanying consolidated                                         35                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (3) ACQUISITIONS -- (CONTINUED)financial statements from the date of acquisition. Assets acquired andliabilities assessed have been recorded at their fair values. (4) IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS      In July, 2001 the Financial Accounting Standards Board (FASB) issuedStatements of Financial Accounting Standards No.'s 141 "Business Combinations"(SFAS 141) and 142 "Goodwill and Other Intangible Assets" (SFAS 142).      SFAS 141 addresses the accounting and reporting requirements for businesscombinations. This Statement requires that all business combinations beaccounted for under the purchase method, as well as some additional disclosures.SFAS 141 is effective for all business combinations completed after June 30,2001. Adoption of this Statement had no impact on the Company's results.      SFAS 142 addressed the accounting and reporting for goodwill and otherintangible assets. The Statement adopts a more aggregate view of goodwill andbases the accounting for goodwill on the units of the combined entity into whichan acquired entity is integrated. Goodwill and intangible assets with indefiniteuseful lives will not be amortized but rather will be tested for impairment atleast annually. Identifiable intangible assets that have finite lives willcontinue to be amortized over their remaining useful lives. SFAS 142 will beeffective on January 1, 2002; however, goodwill and intangibles acquired afterJune 30, 2001 will be subject immediately to the provisions of this Statement.The impact of this statement will not have a material impact on 2001 results.      The Company will adopt the provisions of SFAS 142 in its first quarterended 3/31/2002. The Company is in the process of preparing for its adoption ofSFAS 142 and is making the determinations as to what its reporting units are andwhat amounts of goodwill, intangible assets, other assets, and liabilitiesshould be allocated to those reporting units. The Company will also evaluate theuseful lives assigned to its intangible assets. SFAS 142 requires that goodwillbe tested annually for impairment using a two-step process. The first step is toidentify any potential impairment and, in transition, this step must be measuredas of the beginning of the fiscal year. However, a company has six months fromthe date of adoption to complete the first step. The Company expects to completethat first step of the goodwill impairment test during the first quarter of2002. The second step of the goodwill impairment test measures the amount of theimpairment loss (measured as of the beginning of the year of adoption), if any,and must be completed by the end of the Company's fiscal year. Intangible assetsdeemed to have an indefinite life will be tested for impairment using a one-stepprocess which compares the fair value to the carrying amount of the asset as ofthe beginning of the fiscal year, and pursuant to the requirements of SFAS 142will be completed during the first quarter of 2002.      While the Company is currently evaluating the final impact that theadoption will have on its 2002 annual results, management believes that therewill be no substantial adjustments in the valuation of its goodwill and otherindefinite lived intangible assets. The net reduction in amortization expensesis expected to be approximately $13.0 million (before income taxes), versus 2001amortization of $14.0 million. Only certain portions of the Company'samortization are deductible for tax purposes.      In August, 2001, the FASB issued Statement of Financial Accounting StandardNo. 144, "Accounting for the impairment or Disposal of Long-Lived Assets" (SFAS144). SFAS 144 primarily addresses the financial accounting and reporting forthe impairment or disposal of long-lived assets. SFAS will be effective onJanuary 1, 2001. Adoption of this Statement will have no impact on the Company'sresults.                                         36                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (5) NET INVENTORIES      Net inventories consist of the following:                                                              DECEMBER 31,                                                         --------------------                                                           2001        2000                                                         --------    --------                                                                           Finished goods.........................................  $ 48,184    $ 44,437Work in process........................................    27,093      33,601Raw materials..........................................    28,777      25,156Supplies...............................................     3,692       4,422                                                         --------    --------          Total........................................  $107,746    $107,616                                                         ========    ======== (6) PROPERTY, PLANT AND EQUIPMENT      Property, plant and equipment consists of the following:                                                             DECEMBER 31,                                                       ----------------------                                                         2001         2000                                                       ---------    ---------                                                                          Land.................................................  $  19,567    $  19,691Buildings and improvements...........................    118,205       93,660Machinery and equipment..............................    341,562      334,308Furniture and fixtures...............................     13,067       11,637Construction in progress.............................     52,747       48,456                                                       ---------    ---------          Total......................................    545,148      507,752Accumulated depreciation.............................   (257,543)    (220,414)                                                       ---------    ---------  Net................................................  $ 287,605    $ 287,338                                                       =========    =========      Depreciation expense amounted to $36,766, $31,939 and $33,118 for the yearsended December 31, 2001, 2000 and 1999, respectively. (7) INTANGIBLE ASSETS      Intangible assets consist of the following:                                                              DECEMBER 31,                                                         --------------------                                                           2001        2000                                                         --------    --------                                                                           Goodwill...............................................  $260,677    $126,170Other..................................................    77,691      77,397                                                         --------    --------          Total........................................   338,368     203,567Accumulated amortization...............................   (69,357)    (54,368)                                                         --------    --------     Net...............................................  $269,011    $149,199                                                         ========    ========      Amortization expense amounted to $14,031, $10,155 and $9,210 for the yearsended December 31, 2001, 2000 and 1999, respectively.                                         37                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (8) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES      The components of accounts payable and accrued liabilities are as follows:                                                               DECEMBER 31,                                                           ------------------                                                            2001       2000                                                           -------    -------                                                                            Accounts payable.........................................  $49,093    $53,892Salaries, employee benefits payable and other............   12,793     19,005Vitamin B-3 provision....................................    4,347      5,301                                                           -------    -------          Total..........................................  $66,233    $78,198                                                           =======    ======= (9) INCOME TAXES      Income (loss) before taxes consisted of the following:                                                   YEARS ENDED DECEMBER 31,                                                -----------------------------                                                 2001       2000       1999                                                -------    -------    -------                                                                             Domestic......................................  $(7,399)   $13,892    $32,912International.................................   43,789     55,974     25,989                                                -------    -------    -------          Total...............................  $36,390    $69,866    $58,901                                                =======    =======    =======      The provision for income taxes consists of the following expenses(benefits):                                                           YEARS ENDED DECEMBER 31,                                                       ------------------------------                                                         2001       2000       1999                                                       --------    -------    -------                                                                                     Current:  Federal............................................  $  6,052    $ 8,359    $11,587  State..............................................       643        336        178  International......................................    19,947     17,547      9,185                                                       --------    -------    -------                                                         26,642     26,242     20,950                                                       --------    -------    -------Deferred:  Federal............................................   (15,471)    (6,959)       765  State..............................................        --         --         61  International......................................    (1,346)       978     (1,007)                                                       --------    -------    -------                                                        (16,817)    (5,981)      (181)                                                       --------    -------    -------          Total......................................  $  9,825    $20,261    $20,769                                                       ========    =======    =======                                         38                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (9) INCOME TAXES -- (CONTINUED)     The provision for income taxes differs from the statutory Federal incometax rate of 35% for 2001, 2000 and 1999 as follows:                                                           YEARS ENDED DECEMBER 31,                                                          YEARS ENDED DECEMBER 31,                                                        -----------------------------                                                         2001       2000       1999                                                        -------    -------    -------                                                                                     Income tax at Federal statutory rate..................  $12,737    $24,453    $20,615State and local taxes, net of Federal income tax  benefits............................................      419        218        239Difference between Federal statutory rate and  statutory rates non-U.S. income.....................      424     (1,233)       940Reversal of valuation allowance for international NOL  carryforward........................................       --         --     (2,414)Research and experimentation credits..................   (1,345)    (1,458)      (255)Non-taxable international income accrual..............   (2,692)    (2,653)    (2,275)Foreign Tax Credits...................................     (454)    (2,884)       (97)Non-deductible provision for Vitamin B-3..............      155        (78)     2,014Other.................................................      581      3,896      2,002                                                        -------    -------    -------                                                        $ 9,825    $20,261    $20,769                                                        =======    =======    =======      The components of deferred tax assets and liabilities as of December 31,2001 and 2000 relate to temporary differences and carryforwards as follows:                                                               DECEMBER 31,                                                           ------------------                                                            2001       2000                                                           -------    -------                                                                            Deferred tax assets:  Acquisition reserves...................................  $    --    $   636  Environmental..........................................      497        846  Net operating loss carryforwards.......................    2,430      2,732  Inventory..............................................    1,941      1,883  Employee benefits......................................    4,715      3,730  Restructuring..........................................    9,885         --  Receivables............................................      240        187  Capital Assets/Alternative minimum tax credits.........    2,095      2,042  Other..................................................    1,681      5,376                                                           -------    -------  Net current deferred tax assets........................   23,484     17,432  Valuation allowances...................................   (4,885)    (2,689)                                                           -------    -------          Total net deferred tax assets..................  $18,599    $14,743                                                           =======    =======Deferred tax liabilities:  Depreciation...........................................  $26,924    $33,416  Intangibles............................................   12,628     11,777  Italian Intangibles....................................    1,259      2,653  Acquisition Reserve....................................    3,727      5,477  Other..................................................    4,032      8,208                                                           -------    -------          Total net non-current deferred tax            liabilities..................................  $48,570    $61,531                                                           =======    =======                                         39                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (9) INCOME TAXES -- (CONTINUED)     Included within the change in the cumulative translation adjustment for theyear ended December 31, 2001 is $443 related to the translation of deferred taxassets and liabilities of international operations.      Under the tax laws of the various countries in which the Company operates,net operating losses (NOLs) may be carried forward, subject to statutorylimitations, to reduce taxable income in future years. The tax effect of suchNOL carryforwards aggregated approximately $2,430 and $2,732 at December 31,2001 and 2000. The change in valuation allowance for the years ended December31, 2001 and 2000 was $2,196 and $2,689, respectively. A valuation allowance hasbeen established since management believes that it is not more likely than notthat the full amount of deferred tax assets will be realized.      During 1998, the Company made an election which allowed the Italiansubsidiary to deduct for tax purposes previously non-deductible intangibleassets. The result of this election was a charge to 1998 earnings of $3,420 thatresulted in net favorable tax benefits of $1,326, $1,928, and $1,493 for 2001,2000 and 1999, respectively, plus $1,259 projected for future years. (10) SHORT-TERM DEBT      The Company has lines of credit in Italy with local banks (the "Facility").The Facility is short-term and provides three types of financing with thefollowing limits: Overdraft Protection of $2,000, Export Financing of $4,000 andAdvances on Uncleared Deposits of $900. The Overdraft Protection and ExportFinancing facilities bear interest at varying rates when utilized, however,Advances on Uncleared Deposits bear no interest.      Short-term debt at December 31, 2001 and 2000 consists of the following:                                                                DECEMBER 31,                                                              ---------------                                                               2001     2000                                                              ------   ------                                                                             Export financing facility...................................  $2,073   $  724Other, including current portion of long-term debt..........     494      760                                                              ------   ------                                                              $2,567   $1,484                                                              ======   ======      The 2001 and 2000 average interest rates were 3.9% and 6.9%, respectively. (11) LONG-TERM DEBT      Long-term debt consists of the following:                                                              DECEMBER 31,                                                          -------------------                                                            2001       2000                                                          --------   --------                                                                           Bank credit facilities(a)...............................  $298,350   $164,500Capitalized leases(b)...................................    14,161      4,041Notes payable...........................................        18        487                                                          --------   --------          Subtotal......................................   312,529    169,028Less: current portion...................................        (5)      (437)                                                          --------   --------          Total.........................................  $312,524   $168,591                                                          ========   ======== (a) On November 29, 2001, the Company obtained new credit facilities from a(a) On November 29, 2001, the Company obtained new credit facilities from agroup of banks led by JPMorganChase as lead arranger and administrative agent.The credit facilities provide for an aggregate amount of $430 million,consisting of a 364-day renewable, senior revolving credit facility for$161,250, and a                                        40                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (11) LONG-TERM DEBT -- (CONTINUED)5-year senior revolving credit facility in the amount of $268,750. The 5-yearagreement will expire in November 2006. The new agreements renew and extend theapproximately $300 million of existing bank debt which was scheduled to maturein September 2002. The Agreement permits the Company to choose between variousinterest rate options and to specify the portion of the borrowing to be coveredby specific interest rate options. Under the Agreement, the interest rateoptions available to the Company are: (1) U.S. Prime rate or (2) LIBOR plus theapplicable margin (ranging from .575% to 1.25%) or (3) Money Market Rate plusthe applicable margin (ranging from .575% to 1.25%). The applicable margin isadjusted based upon the ratio of consolidated Funded Indebtedness toconsolidated EBITDA of the Company. Additionally, the Company pays a commitmentfee of between .15% to .30% on the entire portion of the Agreement. The 2001 and2000 average interest rates were 5.2% and 6.7%, respectively. The credit facilities are primarily used to finance the Company's acquisitionactivities. The undrawn borrowing availability under the agreement as ofDecember 31, 2001 was $131,650. The Agreement is subject to financial covenants requiring the Company tomaintain certain levels of net worth, an interest coverage ratio and leverageratios, as well as a limitation on indebtedness. The Company met all of the bankcovenants during 2001. (b) The Company assumed six capital leases as part of the acquisition of Irotecin 1999 of $5,436. These leases are for various plant and equipment expiring in2006 to be repaid in 28 equal quarterly installments. There is $2,934outstanding at December 31, 2001. The Company also assumed three capital leasesas part of the acquisition of Bio Science Contract Production Corp. in June,2001 of $12,100. The leases are for buildings and improvements and phonesystems. There is $11,227 outstanding at December 31, 2001. The Company assumed a note payable as part of the acquisition of BioWhittaker in1997 of $1,253. The note, bearing interest at 8%, was payable in annualinstallments of $340 and was fully paid off in 2001. There was $289 outstandingas of December 31, 2000. Aggregate maturities of long-term debt are as follows:                                                                    2002........................................................  $  2,2052003........................................................     2,2152004........................................................     2,2392005........................................................     1,7502006........................................................   299,767Thereafter..................................................     4,353                                                              --------          Total.............................................  $312,529                                                              ======== (12) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS      The Company uses derivative financial instruments to reduce exposures tomarket risks resulting from fluctuations in interest rates and foreign exchangerates. The Company does not enter into financial instruments for trading orspeculative purposes. The Company is exposed to credit loss in the event ofnonperformance by the other parties to the interest rate swap, forward exchangeor put and call contracts. However, the Company does not anticipatenon-performance by the counterparties.      Effective January 1, 2001, the Company adopted (SFAS 133) Statement ofFinancial Accounting Standard No. 133 "Accounting for Derivative Instruments andHedging Activities," which establishes accounting and reporting standards forderivative financial instruments. The Company's policy is to enter into forwardexchange contracts and/or currency options to hedge foreign currencytransactions. This hedging                                         41                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (12) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)strategy mitigates the impact of short-term foreign exchange rate movements onthe Company's operating results primarily in the United Kingdom, Sweden andItaly. The Company's primary market risk relates to exposures to foreigncurrency exchange rate fluctuations on transactions entered into by theseinternational operations which are denominated primarily in U.S. dollars,Swedish Krona, Euros, and British pound sterling. As a matter of policy, theCompany does not hedge to protect the translated results of foreign operations.The Company's forward exchange contracts substantially offset gains and losseson the transactions being hedged. The forward exchange contracts have varyingmaturities with none exceeding twelve months. The Company makes net settlementsfor forward exchange contracts at maturity, based upon negotiated rates atinception of the contracts. The Company also enters into interest rate swapagreements to reduce the impact of changes in interest rates on its floatingrate debt. The swap agreements are contracts to exchange floating rate for fixedinterest payments periodically over the life of the agreements without theexchange of the underlying notional debt amounts.      All forward and swap contracts outstanding at January 1 and December 31,2001 have been designated as cash flow hedges and accordingly, changes in thefair value of derivatives are recorded each period in other comprehensiveincome. Changes in the fair value of the derivative instruments reported inother comprehensive income will be reclassified as earnings in the period inwhich earnings are impacted by the variability of the cash flows of the hedgeditem. The ineffective portion of all hedges are recognized in current-periodearnings and is immaterial to the Company's financial results. Adoption of thisstatement resulted in an after-tax reduction of other comprehensive income of$86. The unrealized net loss recorded in comprehensive income at December 31,2001 was $1,770. This amount will be reclassified into earnings as theunderlying forecasted transactions occur. All transition amounts and the balanceof unrealized losses included in comprehensive income at December 31, 2001 willbe recognized in earnings over the next twelve months. The net loss recognizedin earnings related to foreign currency forward contracts during the twelvemonths ended December 31, 2001 was $3,144. The net loss on interest rate swapcontracts recognized in interest expense was $1,186 for the twelve months endedDecember 31, 2001.   Interest Rate Swap Agreements      The notional amounts provide an indication of the extent of the Company'sinvolvement in such agreements but do not represent its exposure to market risk.The following table shows the notional amounts outstanding, maturity dates, andthe weighted average receive and pay rates of interest rate swap agreements asof December 31, 2001.                                                                WEIGHTED AVG. RATENOTIONAL                                         MATURITY      -------------------AMOUNTS                                            DATE         PAY       RECEIVE--------                                         --------      -----      --------                                                                                 $10,000........................................    2002        5.86%        2.13%$10,000........................................    2005        4.66%        1.90%$10,000........................................    2003        5.77%        1.90%$10,000........................................    2002        5.77%        2.31%$ 5,000........................................    2002        6.98%        2.16%$ 5,000........................................    2004        3.83%        2.43%$10,000........................................    2003        6.65%        2.16%$20,000........................................    2005        4.98%        1.98%$10,000........................................    2005        4.73%        1.93%$10,000........................................    2002        5.15%        1.90%                                         42                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (12) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)     Interest expense under these agreements, and the respective debtinstruments that they hedge, are recorded at the net effective interest rate ofthe hedged transactions. The fair value of these agreements were based on quotedmarket prices and was ($2,185) at December 31, 2001.   Foreign Exchange Instruments      The table below reflects the notional and fair value amounts of foreignexchange contracts at December 31, 2001 and 2000.                                                            2001                 2000                                                    -------------------   ----------------                                                    NOTIONAL   NOTIONAL     FAIR     FAIR                                                    AMOUNTS    AMOUNTS     VALUE     VALUE                                                    --------   --------   --------   -----                                                                                             Forward exchange contracts........................  $40,009     $(238)    $41,495    $(375)      The carrying amount reported in the consolidated balance sheets for cashand cash equivalents, accounts receivable, accounts payable and short-term debtapproximates fair value because of the immediate or short-term maturity of thesefinancial instruments. The carrying amount reported for long-term debtapproximates fair value because approximately 60% of the underlying debt is atvariable rates and reprices quarterly. The remaining amount of long-term debthas fixed rates through interest swap contracts. (13) STOCKHOLDERS' EQUITY      The Company has two classes of common shares designated Common Stock andNonvoting Common Stock. Authorized shares of Common Stock were 100,000,000 and60,000,000 at December 31, 2001 and 2000 respectively. Authorized shares ofNonvoting Common Stock were 730,746 at December 31, 2001 and 2000.      At December 31, 2001, authorized shares of Common Stock were reserved forissuance as follows:                                                                  Stock option plans........................................  3,832,027Cambrex savings plan......................................    169,544                                                            ---------          Total shares....................................  4,001,571                                                            =========      Nonvoting Common Stock with a par value of $.10, has equal rights withCommon Stock, with the exception of voting power. Nonvoting Common Stock isconvertible, share for share, into Common Stock, subject to any legalrequirements applicable to holders restricting the extent to which they may ownvoting stock. As of December 31, 2001 and 2000, no shares of Nonvoting CommonStock were outstanding.      The Company held treasury stock of 2,234,421 and 2,193,945 shares atDecember 31, 2001 and 2000, respectively, and are used for issuance to theCambrex Savings Plan.      The Company has authorized 5,000,000 shares of Series Preferred Stock, parvalue $.10, issuable in series and with rights, powers and preferences as may befixed by the Board of Directors. At December 31, 2001 and 2000, there was nopreferred stock outstanding. (14) STOCK OPTIONS      The Company has seven stock-based compensation plans currently in effect.The 1992 Stock Option Plan ("1992 Plan") provides for the granting to keyemployees both non-qualified stock options and incentive stock options. The 1993Senior Executive Stock Option Plan ("1993 Plan") provides for the grant ofnon-qualified and incentive stock options (ISO) intended to qualify asadditional incentives to the Company's Senior Executive Officers. The 1994 StockOption Plan ("1994 Plan") provides for the granting to key employees                                         43                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (14) STOCK OPTIONS -- (CONTINUED)both non-qualified and ISO. The 1994 Plan also provides for the granting ofnon-qualified stock options to non-employee directors. The 1996 PerformanceStock Option Plan ("1996" Plan) provides for the granting of non-qualified andISO intended to qualify as additional incentives to management and other keyemployees. The 1996 Plan also provides for the granting of non-qualified stockoptions and ISO to non-employee directors. Options granted under the 1996 and1998 plans vest and become exercisable nine years after date of grant, subjectto acceleration if the publicly traded price of the Company's common stockequals or exceeds levels determined by the Committee within certain time periodsor in the event of a change in control.      On April 23, 1998, the Company's stockholders approved The 1998 PerformanceStock Option Plan ("1998 Plan"), which provides for the granting ofnon-qualified options and ISO intended to qualify as additional incentives todirectors and key employees. Options granted under the 1998 Plan vest and becomeexercisable nine years after the date of grant, subject to acceleration if thepublicly traded price of the Company's Common Stock equals or exceeds levelsdetermined by the Committee within certain time periods or in the event of achange in control. Options shall have a term of no more than ten years from thedate of grant.      On April 27, 2000, the Company's Board of Directors approved The 2000Employee Performance Stock Option Plan ("2000 Plan"), which provides for thegranting of non-qualified options and ISO intended to qualify as additionalincentives to non-executive employees. Options granted under the 2000 Plan vestand become exercisable nine years after the date of grant, subject toacceleration if the publicly traded price of the Company's Common Stock equalsor exceeds levels determined by the Committee within certain time periods or inthe event of a change in control. Options shall have a term of no more than tenyears from the date of grant. In addition, stock option awards may betransferred to a member of the Participant's immediate family or to a trust orsimilar vehicle for the benefit of such transferee.      On April 26, 2001, the Company's Board of Directors approved The 2001Performance Stock Option Plan ("2001 Plan"), which provides for the granting ofoptions intended to qualify as additional incentives to directors and keyemployees. Options granted under the 2001 Plan shall vest and become exercisablenine years after the date of grant, subject to acceleration if the publiclytraded price of the Company's Common Stock equals or exceeds levels determinedby the Committee within certain time periods or in the event of a change incontrol. Options shall have a term of no more than ten years from the date ofgrant. In addition, stock option awards may be transferred to a member of theParticipant's immediate family or to a trust or similar vehicle for the benefitof such transferee.      The Company applies the provisions of APB Opinion No. 25 and relatedInterpretations in accounting for its stock-based compensation plans. Statementof Financial Accounting Standards No. 123 "Accounting for Stock-BasedCompensation" (SFAS 123) establishes financial accounting and reportingstandards for stock-based employee compensation plans. The Company has adoptedthe disclosure only provisions available under SFAS 123. Accordingly, nocompensation cost has been recognized for stock option plans under SFAS 123.      Had compensation cost for the Company's grants for stock-based compensationplans been determined based on the fair value at the grant dates for awardsunder these plans consistent with SFAS 123, the                                         44                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (14) STOCK OPTIONS -- (CONTINUED)Company's net income, and net income per common share for 2001, 2000 and 1999would approximate the pro forma amounts below:                                                              2001      2000      1999                                                            -------   -------   -------                                                                                       Net income -- as reported.................................  $26,565   $49,605   $38,132                                                            =======   =======   =======Net income -- pro forma...................................  $17,318   $40,736   $34,357                                                            =======   =======   =======Diluted earnings per share -- as reported.................  $  1.00   $  1.90   $  1.49                                                            =======   =======   =======Diluted earnings per share -- pro forma...................  $  0.65   $  1.56   $  1.34                                                            =======   =======   =======      The pro forma compensation expense of $9,247, $8,869, and $3,775 for 2001,2000 and 1999, respectively, was calculated based on the fair value of eachoption primarily using the Black-Scholes option-pricing model fornon-performance options and a path dependent model for performance options, withthe following assumptions for 2001, 2000 and 1999, respectively: (i) averagedividend yield of 0.30%, 0.52% and 0.56% (ii) expected volatility of 30.28%,28.8% and 24.1%, (iii) risk-free interest rate ranging from 3.86% to 5.13%,5.31% to 6.69%, and 5.32% to 5.42% and (iv) expected life of 4-5 years.      As of December 31, 2001, 5,544,473 options had been exercised. Shares ofCommon Stock subject to outstanding options under the stock option plans were asfollows:                                                   OPTIONS OUTSTANDING                         ---------------------------------------------------------------------   OPTIONS EXERCISABLE                                                                           WEIGHTED AVERAGE      --------------------                                                                        ----------------------               WEIGHTED                                                          OPTION         REMAINING                           AVERAGE                          AUTHORIZED                     PRICE PER      CONTRACTUAL   EXERCISE    NUMBER     EXERCISE                         FOR ISSUANCE   OUTSTANDING       SHARE $       LIFE (YRS)    PRICE $    OF SHARES   PRICE $                         ------------   -----------   ---------------   -----------   --------   ---------   --------                                                                                                                        1983 Plan..............     648,0001987 Plan..............     600,0001989 Plan..............   1,200,0001992 Plan..............     300,000         10,500         8.063           2.88         8.06        10,500     8.061993 Plan..............     900,000         89,000     6.625 - 8.063       1.83         7.01        89,000     7.011994 Plan..............     300,000         26,800     6.625 - 7.438       2.15         7.16        26,800     7.16                                             9,000        11.438           3.33        11.44         9,000    11.441996 Plan..............   3,000,000        705,250    12.375 - 17.500      4.38        13.57       705,250    13.57                                           215,301    21.938 - 29.375      6.48        26.37       215,301    26.37                                           623,750    30.938 - 53.520      6.23        42.86       246,913    41.941998 Plan..............   1,180,000        721,349    22.063 - 27.563      6.78        22.84       721,349    22.84                                           159,039    34.750 - 53.520      8.75        42.03        53,843    24.172000 Plan..............     500,000        510,084    34.750 - 53.520      7.53        42.93       139,621    42.342001 Plan..............     750,000         76,194    42.870 - 53.520      9.46        46.17        30,762    42.87                          ---------      ---------                                               ---------          Total            Shares.....   9,378,000      3,146,267    6.625 - 53.520                   29.10     2,248,339    23.38                          =========      =========                                               =========                                         45                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (14) STOCK OPTIONS -- (CONTINUED)     Information regarding the Company's stock option plans is summarized below:                                                                       WEIGHTED AVERAGE                                                                  ------------------------                                                      NUMBER OF   EXERCISE   FAIR VALUE $      OPTIONS                                                       SHARES     PRICE $    AT GRANT DATE   EXERCISABLE                                                      ---------   --------   -------------   -----------                                                                                                     Outstanding at December 31, 1998....................  3,254,850    17.30                      2,141,800  Granted...........................................    187,549    26.81          9.31  Exercised.........................................   (146,600)    9.22  Cancelled.........................................    (78,750)   27.11                                                      ---------Outstanding at December 31, 1999....................  3,217,049    18.05                      1,757,900  Granted...........................................  1,182,182    41.99         16.88  Exercised.........................................   (713,246)   15.81  Cancelled.........................................   (124,750)   25.42                                                      ---------Outstanding at December 31, 2000....................  3,561,235    26.18                      2,466,080  Granted...........................................    240,144    45.64         17.28  Exercised.........................................   (628,577)   18.72  Cancelled.........................................    (26,535)   30.62                                                      ---------Outstanding at December 31, 2001....................  3,146,267    29.10                      2,248,352                                                      ========= (15) RETIREMENT PLANS   Domestic Pension Plans      The Company maintains two U.S. defined-benefit pension plans which coversubstantially all eligible employees: (1) the Nepera Hourly Pension Plan (the"Nepera Plan") which covers the union employees at the Harriman, New York plant,and (2) the Cambrex Pension Plan (the "Cambrex Plan") which covers all othereligible 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 balanced mutualfund investments.      The Company has a Supplemental Executive Retirement Plan for keyexecutives.      The net periodic pension expense for both 2001 and 2000 is based on atwelve month period and on valuations of the plans as of January 1. However, thereconciliation of funded status is determined as of the September 30 measurementdate.                                         46                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (15) RETIREMENT PLANS -- (CONTINUED)     The funded status of these plans, incorporating fourth quartercontributions, as of September 30, 2001 and 2000 is as follows:                                                                 2001       2000                                                              --------    -------                                                                                CHANGE IN BENEFIT OBLIGATIONBenefit obligation at beginning of year.....................  $ 33,493    $32,354Service cost................................................     1,895      2,190Interest cost...............................................     2,616      2,432Amendments..................................................        62         --Actuarial loss (gain).......................................       666     (2,118)Benefits paid...............................................    (1,544)    (1,365)                                                              --------    -------Benefit obligation at end of year...........................    37,188     33,493CHANGE IN PLAN ASSETSFair value of plan assets at beginning of year..............    29,903     28,699Actual return on plan assets................................    (3,686)     2,319Contributions...............................................     1,549        250Benefits paid...............................................    (1,544)    (1,365)                                                              --------    -------Fair value of plan assets at end of year....................    26,222     29,903                                                              --------    -------Funded status...............................................   (10,966)    (3,590)Unrecognized prior service cost.............................     1,159      1,145Unrecognized net (gain)loss.................................     3,847     (3,292)Additional minimum liability................................    (2,787)    (1,397)                                                              --------    -------Prepaid (accrued) benefit at September 30,..................    (8,747)    (7,134)4th quarter contributions...................................       316         --                                                              --------    -------Prepaid (accrued) benefit cost at December 31,..............  $ (8,431)   $(7,134)                                                              ========    =======      The components of net periodic pension cost is as follows:                                                          2001       2000       1999                                                        -------    -------    -------                                                        -------    -------    -------                                                                                     COMPONENTS OF NET PERIODIC BENEFIT COSTService Cost..........................................  $ 1,895    $ 2,190    $ 2,378Interest Cost.........................................    2,616      2,432      2,253Expected return on plan assets........................   (2,492)    (2,392)    (2,171)Amortization of prior service cost....................       49         49         47Recognized actuarial (gain) loss......................      (31)        61        261                                                        -------    -------    -------Net periodic benefit cost.............................  $ 2,037    $ 2,340    $ 2,768                                                        =======    =======    =======WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31,Discount rate.........................................     7.50%      8.00%      7.75%Expected return on plan assets........................     8.50%      8.00%      8.50%Rate of compensation increase.........................     5.00%      5.00%      5.00%      The aggregate ABO (Accumulated Benefit Obligation) exceeds plan assets by$8,737 in 2001 for all domestic plans.                                         47                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (15) RETIREMENT PLANS -- (CONTINUED)  International Pension Plans      Certain foreign subsidiaries of the Company maintain pension plans fortheir employees which conform to the common practice in their respectivecountries. The funded status of these plans, incorporating fourth quartercontributions, as of December 31, 2001 and 2000 is as follows:                                                                2001       2000                                                              -------    -------                                                                               CHANGE IN BENEFIT OBLIGATIONBenefit obligation at beginning of year.....................  $13,098    $12,062Service cost................................................      755        643Interest cost...............................................      706        673Plan participants' contribution.............................     (118)       (58)Actuarial loss (gain).......................................     (163)     1,002Benefits paid...............................................      (55)      (207)Foreign exchange............................................     (911)    (1,017)                                                              -------    -------Benefit obligation at end of year...........................   13,312     13,098                                                              -------    -------CHANGE IN PLAN ASSETSFair value of plan assets at beginning of year..............    7,072      6,961Actual return on plan assets................................     (846)        62Company contribution........................................      456        437Plan participant contribution...............................      183        161Benefits paid...............................................      (55)      (207)Foreign exchange............................................     (263)      (342)                                                              -------    -------Fair value of plan assets at end of year....................    6,547      7,072                                                              -------    -------Funded status...............................................   (6,765)    (6,030)Unrecognized actuarial loss.................................    1,698      1,274Unrecognized prior service cost.............................       40         42Unrecognized net gain.......................................     (424)    (1,055)Foreign exchange............................................      (18)       (16)                                                              -------    -------Prepaid (accrued) benefit...................................  $(5,469)   $(5,785)                                                              =======    =======      The components of the net periodic pension cost is as follows:                                                              2001     2000     1999                                                             -----    -----    -----                                                                                      COMPONENTS OF NET PERIODIC BENEFIT COSTService Cost...............................................  $ 755    $ 643    $ 702Interest Cost..............................................    705      673      611Expected return on plan assets.............................   (584)    (557)    (459)Amortization of excess plan net............................    (25)     (28)     (31)Amortization of prior service cost.........................     --       (5)     (12)                                                             -----    -----    -----Net periodic benefit cost..................................  $ 851    $ 726    $ 811                                                             =====    =====    =====                                         48                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (15) RETIREMENT PLANS -- (CONTINUED)                                             2001             2000             1999                                        -------------    -------------    -------------                                                                                 WEIGHTED-AVERAGE ASSUMPTIONS AS OF  DECEMBER 31,Discount rate.........................  5.50% - 6.25%    5.50% - 6.25%    5.75% - 6.50%Expected return on plan assets........  7.50% - 9.00%    7.50% - 9.00%        9.00%Rate of compensation increase.........  3.00% - 4.25%    3.00% - 4.25%    3.00% - 4.50%      The aggregate ABO for international plans exceeds plan assets by $5,357 in2001.      The Company's net pension costs for U.S. and foreign plans included inoperating results amounted to $2,888, $3,066 and $3,579 in 2001, 2000 and 1999,respectively.      BioWhittaker had a noncontributory defined contribution target plan for itseligible employees. Under BioWhittaker's target plan, all domestic employeesover 21 years of age who have completed one year of service with the Companyparticipate. The target plan was 100% Company-funded, with annual contributionsby the Company based on the employee's targeted benefit, determined by suchfactors as salary and expected years of service to age 65. Effective May, 1999,BioWhittaker no longer has a separate plan and is covered by the Cambrex plan.Total target plan expenses amounted to $171 in 1999.   Savings Plan      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 $936, $1,393and $1,391 in 2001, 2000 and 1999, respectively.   Other      The Company has a non-qualified Compensation Plan for Key Executives ("theDeferred Plan"). Under the Deferred Plan, officers and key employees may electto defer all or any portion of their pre-tax annual bonus and/or annual basesalary. Included within other liabilities at December 31, 2001 and 2000 there is$1,979 and $2,030, respectively, representing the Company's obligation under theplan. To assist in the funding of this obligation, the Company invests incertain mutual funds and as such, included within other assets at December 31,2001 and 2000 is $1,979 and $2,030 respectively, representing the fair value ofthese funds. During 1995, the Board amended the Deferred Plan to permit officersand key employees to elect to defer receipt of Company stock which wouldotherwise have been issued upon the exercise of Company options. Total sharesheld in trust as of December 31, 2001 and 2000 are 255,235 and 267,559,respectively, and are included as a reduction of equity at cost. The value ofthe shares held in trust and the corresponding liability of $1,369 at December31, 2001 have been recorded in equity. The Deferred Plan is not funded by theCompany, but the Company has established a Deferred Compensation Trust Fundwhich holds the shares issued. (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.                                         49                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (16) OTHER POSTRETIREMENT BENEFITS -- (CONTINUED)     The Company elected to amortize the transition obligation of $1,853 overtwenty years. The net effect upon 2001, 2000 and 1999 pretax operating results,including the amortization of the transition obligation, resulted in a cost of$308, $325, and $323, respectively.      The periodic postretirement benefit cost includes the following components:                                                                  DECEMBER 31,                                                              ------------------                                                               2001       2000                                                              -------    -------                                                                               CHANGE IN BENEFIT OBLIGATIONAccumulated benefit obligation at beginning of year.........  $ 2,210    $ 2,372Service cost................................................       58         54Interest cost...............................................      169        178Actuarial gain..............................................     (302)      (394)                                                              -------    -------Accumulated benefit obligation at end of year...............  $ 2,135    $ 2,210                                                              =======    =======Unrecognized net loss (gain)................................  $   519    $   414Unrecognized translation obligation.........................   (1,018)    (1,112)                                                              -------    -------Accrued benefit cost at end of year.........................  $ 1,636    $ 1,512                                                              =======    =======                                                                YEARS ENDED DECEMBER 31,                                                              --------------------------                                                               2001      2000      1999                                                               2001      2000      1999                                                              ------    ------    ------                                                                                         COMPONENTS OF NET PERIODIC BENEFIT COSTService cost of benefits earned.............................   $ 58      $ 54      $ 63Interest cost...............................................    169       178       167Amortization of transition obligation.......................     81        93        93                                                               ----      ----      ----Total periodic postretirement benefit cost..................   $308      $325      $323                                                               ====      ====      ====      The discount rate used to determine the accumulated postretirement benefitobligation was 7.50% and 8.00% in 2001 and 2000, respectively. The assumedhealth care cost trend rate used to determine the accumulated postretirementbenefit obligation is 7% in 2001 (8% in 2000), declining ratably to 6.5% in 2002and thereafter. A one-percentage-point increase in the assumed health care costtrend rate would increase the accumulated postretirement benefit obligation by$52 and would increase the sum of interest and service cost by $8. Aone-percentage-point decrease would lower the accumulated postretirement benefitobligation by $58 and would raise the sum of interest and service cost by $9.      The cost of all health and life insurance benefits is recognized asincurred and was approximately $3,912, $3,716, $3,312 in 2001, 2000 and 1999,respectively. The cost of providing these benefits for the 207, 241 and 259retirees in 2001, 2000 and 1999, respectively, is not separable from the cost ofproviding benefits for the 1,262, 1,018, and 1,052 active U.S. employees in2001, 2000 and 1999, respectively. (17) RESTRUCTURING AND OTHER CHARGES      On November 30, 2001, the Company announced a plan to realign itsbusinesses which included the creation of Rutherford Chemicals, Inc., inrecognition of the Company's strategy to focus on the Life Sciences businesses.In addition, on November 30, 2001 the Company announced its commitment to arestructuring and cost savings program which includes impaired assets,severance, and other costs related to the realignment                                         50                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (17) RESTRUCTURING AND OTHER CHARGES -- (CONTINUED)of the businesses. The restructuring and cost savings program was largelyexecuted in the fourth quarter of 2001, with the remaining actions to becompleted by the end of 2002.      In the fourth quarter, Cambrex recorded special pre-tax charges of $23.1million, the majority of which were non-cash items. As a result of the Company'spreviously announced business restructuring which created Rutherford Chemicals,Inc., together with an impairment charge within those businesses, the Companyincurred $18.6 million of charges to operating expense, composed of assetwrite-downs of $17.2 million and severance costs of $1.4 million. The Companyalso incurred $4.5 million of inventory write-downs charged to cost of sales,consisting of $2.5 million associated with discontinued products manufactured atRutherford Chemical facilities and a separate $2 million Biosciences inventorycharge.      The asset write-downs consisted primarily of fixed asset write-offs andimpairments. A $10.0 million impairment charge was recorded on certain assets atone of the Company's domestic chemical sites, based on the estimated fair valueof the assets determined by discounting the expected future cash flows. A $1.6million impairment was also recorded related to an unused chemical facility torecognize its estimated current fair value. In addition, a $5.6 million chargewas recorded to write-off fixed assets related to discontinued product lines atanother of the Company's domestic chemical sites.       Severance charges, which apply largely to the Company's various chemicalsites, relate to involuntary terminations of approximately 62 employees. Allaffected employees received notification in the fourth quarter 2001. As ofDecember 31, 2001 all but one employee has been terminated.      The following table displays the activity related to the restructuring andother charges through December 31, 2001:                                                                             DECEMBER 31, 2001                                        TOTAL      NON-CASH       CASH           RESERVE                                       CHARGES    WRITE-OFFS    PAYMENTS         BALANCE                                       -------    ----------    --------    -----------------                                                                                    Restructuring and other charges:Fixed asset impairments..............   $11.6       $(11.6)       $ --            $ --Fixed asset write-offs...............     5.6         (5.6)         --              --Employee severance...................     1.4           --         (.5)             .9                                        -----       ------        ----            ----Total restructuring and other  charges............................    18.6        (17.2)        (.5)             .9Inventory write-offs.................     4.5         (4.5)         --              --                                        -----       ------        ----            ----Total................................   $23.1       $(21.7)       $(.5)           $ .9                                        =====       ======        ====            ==== (18) INSURANCE CLAIM      The Company experienced mechanical problems with a reactor located in oneof the Company's chemical facilities in both August and December 2000 whichresulted in extended plant downtime and interruption in product supply.Consequently, sales and production of certain products were curtailed throughout2001. Interim inspection and mechanical repairs were made to the reactor and thereactor operated at reduced capacity for most of 2001. A replacement reactor wasinstalled in the fourth quarter 2001. The Company has incurred costs associatedwith the reactor replacement and plant downtime that are in the process of beingreviewed by insurance carriers. The Company currently estimates that the totalamount of the claim will be approximately $13.0 million. The Company hasreceived progress payments on the claim and, although the claim is not yet fullyresolved, it is management's opinion, based upon a letter received documentingthe review performed and opinion of an independent insurance expert, that allcosts incurred will                                         51                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (18) INSURANCE CLAIM -- (CONTINUED)be covered under the Company's insurance policies. As such, a receivable, whichis reflected in Other Current Assets, has been recorded in the amount of thecosts incurred to date, subject to deductible levels. However, in the unlikelyevent that certain costs are deemed to be non-recoverable, the effect on theincome statement, balance sheet and statement of cash flows would not bematerial. (19) OTHER INCOME AND EXPENSE      The Other-net component of Other (income) expense was $(277), $(329) and$555 for 2001, 2000 and 1999, respectively. 2001 consisted primarily of gains ona marketable security, classified as trading, royalty and miscellaneous incomepartly offset by asset write-offs. Included in 2000 were gains on foreignexchange and miscellaneous non-recurring lab services. Included in 1999 arevarious costs associated with loss on sale of assets and other miscellaneousexpenses. (20) SEGMENT INFORMATION      The Company is involved principally in the manufacturing and marketing ofproducts which include: Human Health, which include Active PharmaceuticalIngredients produced under Food and Drug Administration (FDA) regulation for usein prescription drug products, Pharmaceutical Intermediates produced in currentGood Manufacturing Practices (cGMP) facilities for use in the production ofpharmaceuticals and over-the-counter drug products, Imaging Chemicals used inx-ray media, Personal Care Ingredients used in cosmetics and for thepharmaceutical market, and Nutraceuticals used in health products; Biosciences,consisting of cell culture and endotoxin detection products; AnimalHealth/Agriculture products including Vitamin B-3 used in feed additives,Agricultural Intermediates used in crop protection, and Animal Health productsused as feed additives; and the Specialty and Fine Chemical segment whichincludes Performance Enhancing Chemicals used in photography, pigments,specialty polymers, fuel/oil additives, catalysts, and other specialtyadditives, and Polymer Systems products used in coatings, telecommunications,electronics and engineering plastics. Many of the Company's subsidiaries operatein more than one of these segments. The key exceptions are BioWhittaker, BMA,Bio Science and Marathon, which solely comprise the biosciences segment. TheCompany has provided financial information in order to show Gross Sales andGross Profit by segment. All other financial information is available only forthe Biosciences Segment and for all other segments combined. The Companyallocates Corporate expenses and interest to each of its subsidiaries. Theinterest allocation is based on 12% of subsidiary working capital and 9% of netproperty, plant and equipment. No customer accounts for more than 10% ofconsolidated revenues.      The Company announced in late November 2001 a plan to realign itsbusinesses in recognition of the Company's strategic emphasis on the growingopportunities in the life sciences industry. Effective January 1, 2002, theoperating units that primarily produce specialty and fine chemicals, and animalhealth and agriculture products were combined under a new subsidiary, RutherfordChemicals, Inc. The chemical company will include CasChem, Inc., Bayonne, NewJersey; Cosan Chemical Corporation, Carlstadt, New Jersey; Heico Chemicals,Inc., Delaware Water Gap, Pennsylvania; Nepera, Inc., Harriman, New York;Zeeland Chemicals, Inc., Zeeland, Michigan; and Seal Sands Chemicals Ltd.,Teeside, United Kingdom.      With this realignment, the Company plans to report four operating segmentsgoing forward in 2002: Human Health, Biosciences, Rutherford Chemical and AllOther.                                         52                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (20) SEGMENT INFORMATION -- (CONTINUED)     The following is a summary of business segment information:                                                        2001        2000        1999                                                     --------    --------    --------                                                                                    GROSS SALES:Human Health.......................................  $242,995    $233,886    $225,660Biosciences........................................   124,973      96,232      83,887Animal Health/Agriculture..........................    54,840      56,220      55,695Specialty and Fine Chemicals.......................    76,386     106,206     119,318                                                     --------    --------    --------                                                     $499,194    $492,544    $484,560                                                     ========    ========    ========                                                        2001        2000        1999                                                     --------    --------    --------                                                                                    GROSS PRODUCT SALES DETAIL FOR EACH SEGMENTHuman Health:  Active Pharmaceutical............................  $174,483    $171,174    $161,282  Pharmaceutical Intermediates.....................    30,542      29,527      25,995  Personal Care Ingredients........................    21,011      15,512      14,706  Imaging Chemicals................................     8,478       7,842      13,568  Biomedical Urethanes.............................     2,491       2,784       3,050  Catalysts........................................     5,553       7,035       6,950  Neutraceuticals..................................       437          12         109                                                     --------    --------    --------          Total Human Health.......................  $242,995    $233,886    $225,660                                                     ========    ========    ========Biosciences:Cells and Media....................................  $ 54,708    $ 50,590    $ 47,434Endotoxin Detection................................    23,786      21,391      21,864Electrophoresis, Chromatography & Other............    46,479      24,251      14,589                                                     --------    --------    --------          Total Biosciences........................  $124,973    $ 96,232    $ 83,887                                                     ========    ========    ========Animal Health/Agriculture:  Vitamin B-3......................................  $  6,629    $  6,910    $  9,155  Animal Health....................................    14,220      16,140      15,013  Agricultural Intermediates.......................    33,991      33,170      31,527                                                     --------    --------    --------          Total Animal Health/Agriculture..........  $ 54,840    $ 56,220    $ 55,695                                                     ========    ========    ========Specialty and Fine Chemicals:  Performance Enhancing Chemicals..................  $ 48,518    $ 67,004    $ 76,441  Polymer Systems..................................    27,868      39,202      42,877                                                     --------    --------    --------          Total Specialty and Fine Chemicals.......  $ 76,386    $106,206    $119,318                                                     ========    ========    ========                                         53                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (20) SEGMENT INFORMATION -- (CONTINUED)                                                        2001        2000        1999                                                     --------    --------    --------                                                                                    GROSS PROFIT:Human Health.......................................  $ 93,515    $ 91,145    $ 83,603Biosciences........................................    63,193      50,815      42,088Animal Health/Agriculture..........................     6,681       9,829      12,045Specialty and Fine Chemicals.......................    15,946      25,706      29,427                                                     --------    --------    --------                                                     $179,335    $177,495    $167,163                                                     ========    ========    ========                                                        2001        2000        1999                                                     --------    --------    --------                                                                                    NET INCOME:Biosciences........................................  $  6,852    $  5,122    $  3,150Human Health, Animal Health/Agriculture & Specialty  and Fine Chemicals...............................    19,713      44,483      34,982  and Fine Chemicals...............................    19,713      44,483      34,982                                                     --------    --------    --------                                                     $ 26,565    $ 49,605    $ 38,132                                                     ========    ========    ========                                                        2001        2000        1999                                                     --------    --------    --------                                                                                    TOTAL ASSETSBiosciences........................................  $356,450    $190,770    $186,405Human Health, Animal Health/Agriculture & Specialty  and Fine Chemicals...............................   461,617     490,330     487,242                                                     --------    --------    --------                                                     $818,067    $681,100    $673,647                                                     ========    ========    ========                                                          2001       2000       1999                                                        -------    -------    -------                                                                                     CAPITAL SPENDINGBiosciences...........................................  $ 6,448    $ 4,007    $ 1,829Human Health, Animal Health/Agriculture & Specialty  and Fine Chemicals..................................   36,500     35,449     28,700                                                        -------    -------    -------                                                        $42,948    $39,456    $30,529                                                        =======    =======    =======                                                          2001       2000       1999                                                        -------    -------    -------                                                                                     DEPRECIATIONBiosciences...........................................  $ 4,154    $ 3,817    $ 2,897Human Health, Animal Health/Agriculture & Specialty  and Fine Chemicals..................................   32,612     28,122     30,221                                                        -------    -------    -------                                                        $36,766    $31,939    $33,118                                                        =======    =======    =======                                                          2001       2000       1999                                                        -------    -------    -------                                                                                     AMORTIZATIONBiosciences...........................................  $ 9,611    $ 6,586    $ 5,017Human Health, Animal Health/Agriculture & Specialty  and Fine Chemicals..................................    4,420      3,569      4,193                                                        -------    -------    -------                                                        $14,031    $10,155    $ 9,210                                                        =======    =======    =======                                         54                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (21) FOREIGN OPERATIONS AND EXPORT SALES      Summarized data for the Company's operations for 2001, 2000 and 1999 are asfollows:                                                      DOMESTIC    EUROPEAN     TOTAL                                                     --------    --------    --------                                                                                    2001Gross sales........................................  $266,273    $232,921    $499,194Long-lived identifiable assets.....................   406,300     150,316     556,6162000Gross sales........................................  $262,068    $230,476    $492,544Long-lived identifiable assets.....................   272,529     164,008     436,5371999Gross sales........................................  $266,171    $218,389    $484,560Long-lived identifiable assets.....................   268,669     160,801     429,470      Export sales, included in domestic gross sales, in 2001, 2000 and 1999amounted to $45,041, $50,910, and $40,610, respectively. No country, in any ofthe given years, represents more than 10% of these export sales. (22) COMMITMENTS      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, 2001, future minimum commitments under non-cancelable operatinglease arrangements were as follows:                                                                   Year ended December 31:  2002.....................................................  $ 3,504  2003.....................................................    3,258  2004.....................................................    3,087  2005.....................................................    2,800  2006 and thereafter......................................    5,552                                                             -------          Total commitments................................  $18,201                                                             =======      Total operating lease expense was $3,618, $2,545 and $2,225 for the yearsended December 31, 2001, 2000 and 1999, respectively.      On August 11, 1999, the Company completed a marketing, development andmedia supply agreement with Osiris Therapeutics, Inc. allowing the Company'sBioWhittaker subsidiary to manufacture and market adult stem cell products forthe life science research market through an exclusive worldwide license fromOsiris. In addition, BioWhittaker became the exclusive supplier of culture mediato Osiris for the production of human adult stem cells in therapeuticapplications. Cambrex also purchased $5,000 of Osiris Common Stock and hasagreed to purchase an additional $2,000 of Common Stock coincident with anOsiris initial public offering. The $5,000 paid for Osiris Common Stock isincluded in Other Non-current Assets. (23) CONTINGENCIES      The Company is subject to various investigations, claims and legalproceedings covering a wide range of matters that arise in the ordinary courseof its business activities.                                         55                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (23) CONTINGENCIES -- (CONTINUED)  Environmental      In connection with laws and regulations pertaining to the protection of theenvironment, the Company is a party to several environmental remediationinvestigations and cleanups and, along with other companies, has been named a"potentially responsible party" for certain waste disposal sites (Superfundsites). Each of these matters is subject to various uncertainties, and it ispossible that some of these matters will be decided unfavorably against theCompany. The Company had accruals, included in current accrued liabilities andother non-current liabilities, of $1,400 and $2,300 at December 31, 2001 and2000, respectively, for costs associated with the study and remediation ofSuperfund sites and the Company's current and former operating sites for mattersthat are probable and reasonably estimable. Based on currently availableinformation and analysis, the Company's accrual represents management's bestestimate of what it believes are the reasonably possible and estimatedenvironmental cleanup related costs of a non-capital nature. During the pastthree-year period, cash payments for environmental cleanup related matters were$0, $0 and $200 for 2001, 2000 and 1999, respectively. There were no provisionsfor environmental contingencies during the past three-year period. The Companyreversed reserves by approximately $900, and $1,100 during 2001 and 2000,respectively, as a result of revised estimates. In addition, the Company settledcertain environmental claims involving the Cosan Chemical Corporation (asubsidiary) with insurance companies for $1,812 in 2000 and $1,150 in 1999,respectively. After reviewing information currently available, managementbelieves any amounts paid in excess of the accrued liabilities will not have amaterial effect on its financial position or results of operations. However,these matters, if resolved in a manner different from those assumed in thecurrent estimates could have a material adverse effect on financial condition,operating results and cash flows when resolved in a future reporting period.   Litigation      The Company and its subsidiary Profarmaco S.r.l. ("Profarmaco") were namedas defendants in a proceeding instituted by the Federal Trade Commission ("FTC")on December 21, 1998, in the United States District Court for the District ofColumbia. The complaint alleges that exclusive license agreements whichProfarmaco entered into with Mylan Laboratories, Inc. ("Mylan") covering thedrug master files for (and therefore the right to buy and use) two activepharmaceutical ingredients ("APIs"), lorazepam and clorazepate, were part of aneffort on Mylan's part to restrict competition in the supply of lorazepam andclorazepate and to increase the price charged for these products when Mylan soldthem as generic pharmaceuticals. The complaint further alleges that theseagreements violate the Federal Trade Commission Act, and that Mylan, Cambrex,Profarmaco, and Gyma Laboratories of America, Inc., Profarmaco's distributor inthe United States, engaged in an unlawful restraint of trade and conspired tomonopolize and attempted to monopolize the markets for the genericpharmaceuticals incorporating the APIs. A lawsuit making similar allegationsagainst the Company and Profarmaco, and seeking injunctive relief and trebledamages, has been filed by the Attorneys General of 31 states in the UnitedStates District Court for the District of Columbia on behalf of those states andpersons in those states who were purchasers of the generic pharmaceuticals.      The Company and Profarmaco have also been named in purported class actioncomplaints brought by private plaintiffs in various state courts on behalf ofpurchasers of lorazepam and clorazepate in generic form, making allegationsessentially similar to those raised in the FTC's complaint and seeking variousforms of relief including treble damages.      On February 9, 2001, a federal court in Washington, DC entered an Order andStipulated Permanent Injunction as part of a settlement of the FTC and AttorneysGeneral's suits. Under these settlement documents Mylan has agreed to pay over$140 million on its own behalf and on behalf of most of the other                                        56                      CAMBREX CORPORATION AND SUBSIDIARIES            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (23) CONTINGENCIES -- (CONTINUED)defendant companies including Cambrex and Profarmaco. In the Order andInjunction, the settling defendants also agreed to monitor certain futureconduct.      The Company strongly believes that its licensing arrangements with Mylanare in accordance with regulatory requirements and will vigorously defend thevarious other lawsuits and class actions. The private litigation continues.However, the Company and Mylan have terminated the exclusive licenses to thedrug master files as of December 31, 1998. In entering these licensingarrangements, the Company elected not to raise the price of its products and hadno control or influence over the pricing of its final generic product. Mylan hadbeen fully covering the costs for the defense and indemnity of Cambrex andProfarmaco under certain obligations set forth in the license agreements.Cambrex agreed to cover separate legal defense costs incurred for Cambrex andProfarmaco on a going forward basis beginning August 1, 2000. These costs havenot been and are not expected to be significant.      On May 14, 1998, the Company's Nepera subsidiary, a manufacturer and sellerof niacinamide (Vitamin B-3), received a Federal Grand Jury subpoena for theproduction of documents relating to the pricing and possible customer allocationwith regard to that product. The Company understands that the subpoena wasissued as part of the Federal Government's ongoing anti-trust investigation intovarious business practices in the vitamin industry generally. In the fourthquarter of 1999, the Company reached a settlement with the Government concerningNepera's alleged role in Vitamin B-3 violations from 1992 to 1995. On October13, 2000, the Government settlement was finalized with Nepera entering into avoluntary plea agreement with the Department of Justice. Under this agreement,Nepera has entered a plea of guilty to one count of price fixing and marketallocation of Vitamin B-3 from 1992 to 1995 in violation of section one of theSherman Act and has agreed to pay a fine of $4.0 million. Under the pleaagreement, Nepera was placed on probation for a period of one year which hasended. The fine was paid in February 2001. Nepera has been named as a defendant,along with several other companies, in a number of private civil actions broughton behalf of alleged purchasers of Vitamin B-3.      An accrual of $6.0 million was recorded in the fourth quarter 1999 to coverthe anticipated government settlements, related litigation, and legal expenses.Based on recent discussions with various plaintiffs counsel, as well as currentestimates of expenditures for legal fees, an additional accrual of $4.4 millionwas established in the fourth quarter of 2001. As a result, the balance of thisaccrual as of December 31, 2001 was approximately $4.4 million. This accrual hasbeen recorded in Accounts Payable and Accrued Liabilities.      While it is not possible to predict with certainty the outcome of the abovelitigation matters and various other lawsuits, it is the opinion of managementthat the ultimate resolution of these proceedings should not have a materialadverse effect on the Company's results of operations, cash flows and financialposition. These matters, if resolved in an unfavorable manner, could have amaterial effect on the operating results and cash flows when resolved in afuture reporting period.                                         57                               CAMBREX CORPORATION                        SELECTED QUARTERLY FINANCIAL DATA                     (IN THOUSANDS, EXCEPT PER SHARE DATA)                                     1ST            2ND            3RD             4TH                                  QUARTER        QUARTER        QUARTER         QUARTER          YEAR                                -----------    -----------    -----------    --------------    --------                                (UNAUDITED)    (UNAUDITED)    (UNAUDITED)    (UNAUDITED)(2)                                                                                                        2001Gross sales...................   $131,185       $122,561       $117,588         $127,860       $499,194Net revenues..................    131,277        122,038        117,514          128,026        498,855Gross profit..................     50,316         47,719         40,709           40,591        179,335Net income....................     14,392         14,854          8,101          (10,782)        26,565Earnings per share:(1)  Basic.......................   $   0.57       $   0.58       $   0.31         $  (0.42)      $   1.04  Diluted.....................   $   0.55       $   0.56       $   0.30         $  (0.42)      $   1.00Average shares:  Basic.......................     25,411         25,658         25,754           25,774         25,648  Diluted.....................     26,291         26,668         26,613           26,460         26,4952000Gross sales...................   $128,986       $127,472       $115,742         $120,344       $492,544Net revenues..................    129,538        126,949        115,962          119,646        492,095Gross profit..................     46,149         48,746         41,368           41,232        177,495Net income....................     12,312         14,206         11,251           11,836         49,605Earnings per share:(1)  Basic.......................   $   0.50       $   0.57       $   0.45         $   0.47       $   1.98  Diluted.....................   $   0.48       $   0.55       $   0.43         $   0.45       $   1.90Average shares:  Basic.......................     24,706         24,883         25,082           25,213         25,015  Diluted.....................     25,852         26,037         26,216           26,086         26,157 --------------- (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. (2) The fourth quarter 2001 includes special charges of $27.5 million ($20.1    million after tax), comprised of restructuring and asset write-downs of    $18.6 million charged to operating expenses, $4.5 million of inventory    write-downs charged to cost of sales, and $4.4 million for a Vitamin B-3    provision.                                         58                                     PART III ITEM 9  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL 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," "Related Party Transactions" and"Executive Compensation" in the registrant's definitive proxy statement for theAnnual Meeting of Stockholders, to be held April 25, 2002, which meetinginvolves the election of directors, which definitive proxy statement is beingfiled with the Securities and Exchange Commission pursuant to Regulation 14A.      In addition, information concerning the registrant's executive officers hasbeen included in Part I 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 Accounts..............................         26Consolidated Balance Sheets as of December 31, 2001, and  2000......................................................         27Consolidated Income Statements for the Years Ended December  31, 2001, 2000 and 1999...................................         28Consolidated Statement of Stockholders' Equity for the Years  Ended December 31, 2001, 2000 and 1999....................         29Consolidated Statements of Cash Flows for the Years Ended  December 31, 2001, 2000 and 1999..........................         30Notes to Consolidated Financial Statements..................         31Consolidated Quarterly Financial Data (unaudited) for the  Years Ended December 31, 2001 and 2000....................         58      (a) 2. (i) The following schedule to the consolidated financial statementsof the Company as filed herein and the Report of Independent Accountants onFinancial Statement Schedule are filed as part of this report.                                                                 PAGE NUMBER                                                              (IN THIS REPORT)                                                              ----------------                                                                   Report of Independent Accountants on Financial Statement  Schedule..................................................         60Schedule II -- Valuation and Qualifying Accounts............         61      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 onpages 64-66      The registrant agrees, upon request of the Securities and ExchangeCommission, to file as an exhibit each instrument defining the rights of holdersof long-term debt of the registrant and its consolidated subsidiaries which hasnot been filed for the reason that the total amount of securities authorizedthereunder does not exceed 10% of the total assets of the registrant and itssubsidiaries on a consolidated basis.      (b) Reports on Form 8-K      The registrant filed the following reports on Form 8-K during the lastquarter of the year ended December 31, 2001:      On December 4, 2001, the registrant filed a report on Form 8-K regardingthe Company's plan to realign its businesses in recognition of the strategicemphasis on the life sciences industry.      On December 4, 2001, the registrant filed a report on Form 8-K regardingits new credit facilities.                                         59                       REPORT OF INDEPENDENT ACCOUNTANTS ON                           FINANCIAL STATEMENT SCHEDULE To the Board of Directorsof Cambrex Corporation:      Our audits of the consolidated financial statements referred to in ourreport dated January 18, 2002 appearing in the 2001 Annual Report toShareholders of Cambrex Corporation and its subsidiaries on Form 10-K of CambrexCorporation and its subsidiaries also included an audit of the financialstatement schedule listed in Item 14(a) (2) of this Form 10-K. In our opinion,this financial statement schedule presents fairly, in all material respects, theinformation set forth therein when read in conjunction with the relatedconsolidated financial statements. PRICEWATERHOUSECOOPERS LLP Florham Park, New JerseyJanuary 18, 2002                                         60                                                                      SCHEDULE II                               CAMBREX CORPORATION                        VALUATION AND QUALIFYING ACCOUNTS              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999                             (DOLLARS IN THOUSANDS)                                        COLUMN A      COLUMN B      COLUMN C      COLUMN D                                       ---------    ----------    ----------    ----------    COLUMN E                                                           ADDITIONS                                                    ------------------------                                        BALANCE     CHARGED TO    CHARGED TO                                       BEGINNING     COST AND       OTHER                      END OFCLASSIFICATION                          OF YEAR      EXPENSES      ACCOUNTS     DEDUCTIONS      YEAR--------------                         ---------    ----------    ----------    ----------    --------                                                                                                       Year Ended December 31,2001:  Doubtful trade receivables and     returns and allowances..........   $ 1,354       $  110       $     --       $  194      $ 1,270  Inventory and obsolescence     provisions......................    17,393        3,332             --        1,658       19,067Year Ended December 31, 2000:  Doubtful trade receivables and     returns and allowances..........   $   799       $  805       $     --       $  250      $ 1,354  Inventory and obsolescence     provisions......................    18,654        2,599             --        3,860       17,393Year Ended December 31, 1999:  Doubtful trade receivables and     returns and allowances..........   $ 1,550       $ (347)      $     26(2)    $  430      $   799  Inventory and obsolescence     provisions......................    17,156        4,486          1,221(1)     4,209       18,654 ---------------(1) Reserve of Irotec acquired March, 1999. (2) Reserve of BMA acquired July, 1999.                                         61                                    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/      JAMES A. MACK                                            ------------------------------------                                                       James A. Mack                                             Chairman of the Board of Directors                                                    Date: March 21, 2002      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/ JAMES A. MACK                  Chairman of the Board of             )------------------------------------------------    Directors                 James A. Mack                /s/ CLAES GLASSELL                 President and Chief Operating        )------------------------------------------------    Officer                 Claes Glassell            /s/ SALVATORE J. GUCCIONE              Senior Vice President                )------------------------------------------------    Chief Financial Officer             Salvatore J. Guccione            /s/ CYRIL C. BALDWIN, JR.*             Director                             )------------------------------------------------             Cyril C. Baldwin, Jr.            /s/ ROSINA B. DIXON, M.D.*             Director                             )------------------------------------------------             Rosina B. Dixon, M.D.            /s/ GEORGE J. W. GOODMAN*              Director                             )------------------------------------------------              George J. W. Goodman                /s/ ROY W. HALEY*                  Director                             )------------------------------------------------                  Roy W. Haley         /s/ KATHRYN RUDIE HARRIGAN, PHD*          Director                             )------------------------------------------------          Kathryn Rudie Harrigan, PhD            /s/ LEON J. HENDRIX, JR.*              Director                             )March 21, 2002------------------------------------------------              Leon J. Hendrix, Jr.                /s/ ILAN KAUFTHAL*                 Director                             )------------------------------------------------                 Ilan Kaufthal                                         62                    SIGNATURE                                    TITLE                       DATE                   ---------                                    -----                       ----                                                                                                            /s/ WILLIAM KORB*                  Director                             )------------------------------------------------                  William Korb                /s/ ROBERT LEBUHN*                 Director                             )------------------------------------------------                 Robert LeBuhn               /s/ JOHN R. MILLER*                 Director                             )------------------------------------------------                 John R. Miller              /s/ PETER G. TOMBROS*                Director                             )------------------------------------------------                Peter G. Tombros *By /s/  JAMES A. MACK    --------------------------          James A. Mack         Attorney-in-Fact                                         63                                  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).  4.4      --  Loan Agreement dated September 16, 1997 by and among the               registrant, Chase Manhattan Bank as Administrative Agent and               The First National Bank of Chicago as Documentation Agent.               The bank group includes 13 domestic banks and 7               international banks.(Q).  4.5      --  Loan agreements dated November 28, 2001 by and among the               registrant, JPMorganChase Bank as administrative agent,               JPMorgan Securities Inc. as advisor, lead arranger and               bookrunner and Bank of America N.A., The Bank of New York               and Fleet National Bank as co-syndication agents.(R). 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.l.(K). 10.7      --  Stock purchase agreement dated as of October 3, 1997 between               BioWhittaker and the registrant.(Q). 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). 10.17     --  1996 Performance Stock Option Plan.(N). 10.18     --  1998 Performance Stock Option Plan.(S). 10.19     --  2000 Performance Option Plan.(S). 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. ---------------See legend on following page.                                         64                                  EXHIBIT INDEX EXHIBIT  NO.                                  DESCRIPTION-------                                -----------                     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).(P).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).10.29      --  Consulting Agreement between the registrant and James A.               Mack.(L).10.30.1    --  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).10.42      --  Registration Rights Agreement dated as of June 5, 1996               between the registrant and American Stock Transfer and Trust               Company.(O) -- Exhibit 1.10.50      --  Manufacturing Agreement dated as of July 1, 1991 between the               registrant and A.L. Laboratories, Inc.(G).21         --  Subsidiaries of registrant.(M).23         --  Consent of PricewaterhouseCoopers LLP to the incorporation               by reference of its report herein in Registration Statement               Nos. 333-57404, 333-22017, 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). ---------------See legend on following page.                                         65                                  EXHIBIT INDEX           (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.(N)  Incorporated by reference to registrant's Registration     Statement on Form S-8 (Registration No. 333-22017) dated     February 19, 1997.(O)  Incorporated by reference to the registrant's Current Report     on Form 8-A dated June 12, 1996.(P)  Incorporated by reference to the registrant's Annual Report     on Form 10-K for 1995.(Q)  Incorporated by reference to the registrant's Current Report     on Form 8-K dated October 8, 1997.(R)  Incorporated by reference to the registrant's Current Report     on Form 8-K dated December 4, 2001.(S)  Incorporated by reference to registrant's Registration     Statement on Form S-8 (Registration No. 333-57404) dated     March 22, 2001.                                         66                               CAMBREX CORPORATION                           ANNUAL REPORT ON FORM 10-K                                  EXHIBIT 10.21                           REVISED SCHEDULE OF PARTIESNAME                     TITLE                                          DATE OF AGREEMENT----                     -----                                          -----------------                                                                              James A. Mack            Chairman of the Board and                           02/01/90                         Chief Executive OfficerClaes Glassell           President, and Chief                                10/12/94                         Operating OfficerSteven M. Klosk          Executive Vice President,                           10/21/92                         AdministrationPeter E. Thauer          Senior Vice President, Law and Environment,         08/28/89                         General Counsel and Corporate SecretarySalvatore J. Guccione    Senior Vice President,                              12/14/95                         Chief Financial OfficerThomas N. Bird           Vice President, Business Development                07/23/99                         Life Sciences                               CAMBREX CORPORATION                                   EXHIBIT 21                           SUBSIDIARIES OF REGISTRANTSubsidiary                                                 Incorporated in:----------                                                 ----------------                                                                CasChem, Inc.                                              DelawareCosan Chemical Corp.                                       New JerseyNepera, Inc.                                               New YorkChiragene, Inc.                                            DelawareSalsbury Chemicals, Inc.                                   IowaZeeland Chemicals, Inc.                                    MichiganBioWhittaker, Inc.                                         DelawareSeal Sands Chemicals Limited                               EnglandProfarmaco S.r.l.                                          ItalyNordic Synthesis AB                                        SwedenBioWhittaker Europe s.p.r.l.                               BelgiumBioWhittaker Molecular Applications, Inc.                  DelawareBioWhittaker Molecular Applications Aps                    DenmarkIrotec Laboratories, Ltd.                                  IrelandConti BC NV                                                BelgiumLumitech Limited                                           EnglandCambrex Bio Science, Inc.                                  DelawareCambrex Bio Science MA, Inc.                               Delaware                               CAMBREX CORPORATION                                   EXHIBIT 23                       CONSENT OF INDEPENDENT ACCOUNTANTSWe hereby consent to the incorporation by reference in the RegistrationStatements on Form S-8 (File Nos. 333-57404, 333-22017, 33-21374, 33-37791,33-81780, and 33-81782) of Cambrex Corporation of our report dated January 18,2002 relating to the financial statements and financial statement schedule,which appear in this Form 10-K.                                       PRICEWATERHOUSECOOPERS  LLPFlorham Park, New JerseyMarch 21, 2002                                   EXHIBIT 24                                POWER OF ATTORNEY            KNOW ALL MEN BY THESE PRESENTS, that each officer and director ofCambrex Corporation, a Delaware corporation, whose signature appears belowconstitutes and appoints Claes Glassell, James A. Mack, and Salvatore J.Guccione, and each of them, his true and lawful attorneys-in-fact and agents,with full power of substitution and resubstitution, for him and in his name,place and stead, in any and all capacities, to sign any and all Annual Reportson Form 10-K which said Cambrex Corporation may be required to file pursuant toSection 13 or 15(d) of the Securities Exchange Act of 1934 and any and allamendments thereto and to file the same, with all exhibits thereto, and otherdocuments in connection therewith, with the Securities and Exchange Commission,granting unto said attorneys-in-fact and agents full power and authority to doand perform each and every act and thing requisite and necessary to be done inand about the premises, as fully to all intents and purposes as he might orcould do in person, hereby ratifying and confirming all that saidattorneys-in-fact and agents or their substitutes may lawfully do or cause to bedone by virtue hereof.            IN WITNESS WHEREOF each of the undersigned has executed thisinstrument as of the 15th day of March 2002./s/ James A. Mack.                        /s/ Kathryn Rudie Harrigan, PhD----------------------------------        --------------------------------------James A. Mack                             Kathryn Rudie Harrigan, PhDChief Executive Officer                   DirectorChairman of the Board/s/ Claes Glassell                        /s/ Leon J. Hendrix, Jr.----------------------------------        --------------------------------------Claes Glassell                            Leon J. Hendrix, Jr.President, Chief Operating Officer        Director/s/ Salvatore J. Guccione                 /s/ Ilan Kaufthal----------------------------------        --------------------------------------Salvatore J. Guccione                     Ilan KaufthalSenior Vice President - Finance           Directorand Chief Financial Officer(Principal Financial Officer and          /s/ William KorbAccounting Officer)                       --------------------------------------                                          William Korb                                          Director/s/ Rosina B. Dixon                       /s/ Robert LeBuhn----------------------------------        --------------------------------------Rosina B. Dixon, M.D.                     Robert LeBuhnDirector                                  Director/s/ George J.W. Goodman                   /s/ John R. Miller----------------------------------        --------------------------------------George J.W. Goodman                       John R. MillerDirector                                  Director/s/ Roy W. Haley                          /s/ Cyril C. Baldwin, Jr.----------------------------------        --------------------------------------Roy W. Haley                              Cyril C. BaldwinDirector                                  Chairman Emeritus                                          /s/ Peter G. Tombros                                          --------------------------------------                                          Peter G. Tombros                                          Director