Cambrex Corporation Annual Report 2010

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-Kx ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2010ORo TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission file number 1-10638CAMBREX CORPORATION(Exact name of registrant as specified in its Charter)Delaware22-2476135(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.) One Meadowlands Plaza, East Rutherford, New Jersey07073(Address of principal executive offices)(Zip Code)Registrant's telephone number, including area code: (201) 804-3000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, $.10 par valueNew York Stock ExchangeSecurities registered pursuant to Section 12 (g) of the Act: (None)Indicate by check mark whether the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o. No .Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o. No .Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes . No o.Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files). Yes o No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to thebest of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filer oAccelerated filer Non-accelerated filer o Smaller reporting company oIndicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o. No .The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $91,280,990 as ofJune 30, 2010.APPLICABLE ONLY TO CORPORATE REGISTRANTSAs of January 31, 2011, there were 29,477,530 shares outstanding of the registrant's Common Stock, $.10 par value.DOCUMENTS INCORPORATED BY REFERENCEPortions of the Registrant’s definitive Proxy Statement for the 2011 Annual Meeting are incorporated by reference into Part III of this Report. CAMBREX CORPORATION AND SUBSIDIARIESINDEX TO ANNUAL REPORT ONFORM 10-K FILED WITH THESECURITIES AND EXCHANGE COMMISSIONFor the Year Ended December 31, 2010ItemPART IPageNo. No. 1Business.31ARisk Factors.91BUnresolved Staff Comments.182Properties183Legal Proceedings.184[Removed and reserved.]18 PART II 5Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.196Selected Financial Data.217Management’s Discussion and Analysis of Financial Condition and Results of Operations237AQuantitative and Qualitative Disclosures about Market Risk.368Financial Statements and Supplementary Data.379Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.769AControls and Procedures.769BOther Information.77 PART III 10Directors, Executive Officers and Corporate Governance.7811Executive Compensation.7912Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.7913Certain Relationships and Related Transactions and Director Independence.7914Principal Accountant Fees and Services.79 PART IV 15Exhibits and Financial Statement Schedules.80____________(dollars in thousands, except share data) 2IndexForward-Looking StatementsThis document may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statementsregarding expected performance, especially expectations with respect to sales, research and development expenditures, earnings per share, capital expenditures,acquisitions, divestitures, collaborations, or other expansion opportunities. These statements may be identified by the fact that they use words such as“expects,” “anticipates,” “intends,” “estimates,” “believes” or similar expressions. Any forward-looking statements contained herein are based on currentplans and expectations and involve risks and uncertainties that could cause actual outcomes and results to differ materially from current expectations. Thefactors described in Item 1A of Part I of this Annual Report on Form 10-K captioned “Risk Factors,” or otherwise described in the Company’s filings with theSecurities and Exchange Commission, as well as any cautionary language in this Annual Report on Form 10-K, provide examples of such risks anduncertainties that may cause the Company’s actual results to differ materially from the expectations the Company describes in its forward-looking statements,including but not limited to, pharmaceutical outsourcing trends, competitive pricing or product developments, government legislation and regulations(particularly environmental issues), tax rate, interest rate, technology, manufacturing and legal issues, including the outcome of outstanding litigationdisclosed in the Company’s public filings, changes in foreign exchange rates, uncollectable receivables, loss on disposition of assets, cancellation or delays inrenewal of contracts, lack of suitable raw materials or packaging materials, and the Company’s ability to receive regulatory approvals for its products.The forward-looking statements are based on the beliefs and assumptions of Company management and the information available to Company management atthe time these disclosures were prepared. Although the Company believes the expectations reflected in these statements are reasonable, the Company cannotguarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, whichapply only as of the date of this Annual Report on Form 10-K. The Company undertakes no obligation to update these forward-looking statements, even if theCompany’s situation changes in the future.PART IItem 1 Business.GeneralCambrex Corporation (the "Company" or "Cambrex"), a Delaware corporation, began business in December 1981. Cambrex is a life sciences company thatprovides products and services that accelerate and improve the development and commercialization of new and generic therapeutics. The Company primarilysupplies its products and services worldwide to innovator and generic pharmaceutical companies. Cambrex has three operating segments, which aremanufacturing facilities that have been aggregated as one reportable segment. The Company's overall strategy is to: grow its portfolio of custom developmentprojects, especially those in the later stages of the clinical trial process, secure long-term supply agreements to produce active pharmaceutical ingredients(“APIs”) and intermediates for newly approved drug products; expand sales of products and projects based on its proprietary technologies; and partner withgeneric drug companies to grow the Company’s extensive portfolio of generic APIs. The Company’s recent acquisition of a 51% equity stake in ZenaraPharma (“Zenara”) also gives the Company additional capabilities in final dosage form products as well as establishing it as one of the leading globalsuppliers to the nicotine replacement therapy (“NRT”) market. The Company also seeks to demonstrate excellence in regulatory compliance, environmental,health and safety performance, and customer service.The Company uses a consistent business approach: ·Niche Market Focus: The Company participates in niche markets where significant technical expertise provides a competitive advantage andmarket differentiation.____________(dollars in thousands, except share data) 3Index ·Market Leadership: The Company secures leading market positions through excellent customer service, proprietary technologies, specializedcapabilities and an outstanding regulatory record and leverages these capabilities across the market segments in which it participates. ·New Products and Services: The Company continues to invest in research and product (“R&D”) development in order to introduce innovativeproducts and services to accelerate revenue growth, provide a competitive advantage and maintain its leading market positions. ·Operational Excellence: The Company maintains its commitment to continually improve productivity and customer service levels and maintainsexcellent quality and regulatory compliance systems. ·Acquisition and Licensing: The Company may drive growth in strategic business segments through the prudent acquisition of products, productlines, technologies and capabilities to enhance the Company's position in its niche markets.As part of the process of evaluating strategic alternatives to enhance shareholder value, the sale of two businesses was completed in October 2006 andthe sale of the businesses that comprised the Bioproducts and Biopharma segments was completed in February 2007, and where applicable, these businessesare being reported as discontinued operations in all periods presented.Market Overview and Growth DriversThe Company participates in markets that serve the healthcare industry. Customers include generic drug companies and companies that discover andcommercialize new small molecule human therapeutics using organic chemistry.The aging western population, continued investment in healthcare research and drug development, growth in the world’s developing markets, and the necessityto develop life saving therapeutics to address unmet needs drives business growth in life sciences companies. Aging "baby boomers" in the United States,Europe and Japan may provide an enormous healthcare opportunity. This group typically has more education, a higher socio-economic level and higherdemands for healthcare services than previous generations.Demand for Cambrex products and services is dependent upon some of its customers’ continuing access to financial resources to advance their R&D projectsfor therapeutic candidates from the laboratory to the clinic, and eventually, to the patient. Healthcare investment comes from a variety of sources. Largepharmaceutical and biotechnology companies spend billions on drug discovery and development. Macro-economic conditions can have an impact on theavailability of funding for the Company’s customers, especially those customers dependent upon venture capital and other private sources of funding.Once a drug is identified, companies develop a robust process for the manufacture of clinical and commercial quantities. Product testing, analytical methodsand quality processes are integrated into the manufacturing process. This is a critical step to getting a commercially viable drug to market. Cambrex excels inthe manufacture and testing of APIs and drug substances at laboratory, clinical and commercial scale and specializes in optimizing manufacturing processes.Demand for outsourced services from pharmaceutical companies continues to grow. Large pharmaceutical and biotechnology companies may outsource thedevelopment and manufacturing of a drug substance to manage multiple internal priorities, access new technologies or additional capacity, preserve neededcapital or ensure multiple sources of supply. Many emerging pharmaceutical and generic drug companies outsource all process development andmanufacturing and many larger pharmaceutical companies have publicly stated that they will increasingly outsource the manufacturing of drugproducts. Cambrex is particularly well positioned to assist drug companies with these much needed services for traditional APIs.____________(dollars in thousands, except share data) 4IndexNew drugs are typically patented. When the patent expires, the drug may be manufactured and marketed in its generic form. Growth in the generic drugmarket is driven by the continuing stream of drug patents that will expire in the future and favorable market forces that encourage the use of genericpharmaceuticals as a more cost effective health care alternative to higher-priced branded drugs. In the United States and many countries in Europe,governments and prescription benefit management companies provide incentives for generic substitution to reduce costs. Cambrex manufactures over 70generic APIs, typically in relatively small quantities for use in niche therapeutics.The market for human therapeutics is regulated by the Food and Drug Administration (“FDA”) in the United States and other regulatory agencies throughoutthe world. These agencies oversee and regulate the development, manufacturing and commercialization process for APIs and regulated intermediates. Excellentregulatory and quality systems are essential to serve the industry and serve as a barrier to entry for potential new competitors.Competitors from developing markets have increased their capabilities in drug substance manufacturing and finished dosage form drugs in recentyears. While overall global demand has been lifted by the rapid growth in certain developing markets, the presence of competitors within these markets, whohave lower cost structures, have resulted in downward pricing pressure throughout the pharmaceutical supply chain, and especially on generic APIs andcertain development services for clinical phase products. Pricing pressures, due to developing market competitors, on later stage clinical projects and supplyarrangements for patented products have been limited to date, although these pressures may increase as developing markets become more acceptable assuppliers to larger pharmaceutical companies. In November 2010, the Company acquired a 51% equity stake in Zenara for approximately $18,900. Zenarais a Hyderabad, India based pharmaceutical company focused on the formulation of final dosage form products. Cambrex also sources R&D services, rawmaterials and certain intermediates from Chinese and Indian providers and will continue to do so. The Company will also continue to assess additionalopportunities to invest in, or partner with, companies with capabilities in these geographies.Development of the BusinessThe discussion below provides insight into the general development of the Company’s business, including its material acquisitions and dispositions ofassets over the past five years.In February 2007, the Company completed the sale of the businesses that comprised the Bioproducts and Biopharma segments to Lonza for total cashconsideration of $463,914, including working capital adjustments. As a result of this transaction, these businesses are being reported as discontinuedoperations in all periods presented.In January 2008, the Company acquired AS ProSyntest, a privately held API research and development company located in Tallinn, Estonia. ProSyntest,renamed Cambrex Tallinn, has strengths in cost effective chemical route selection and sample generation, rapid scale up of products at kilo lab scale, as wellas chiral and organometallic chemistries.In March 2010, the Company completed the acquisition of IEP GmbH (“IEP”), a company in Wiesbaden, Germany that is a leader in the field of industrialbiocatalysis. IEP offers cost effective customized biocatalytic process development and sales of enzymes to the pharmaceutical industry and was acquired forapproximately $6,900 in cash.In November 2010, the Company acquired a 51% equity stake in Zenara for approximately $18,900. Zenara is a Hyderabad, India basedpharmaceutical company focused on the formulation of final dosage form products. Pursuant to the stock purchase agreement, Cambrex will acquire theremaining 49% in early 2016 at a value to be determined using a weighted combination of a multiple of 2015 earnings before interest, taxes, depreciation andamortization (“EBITDA”) and cumulative EBITDA for the years 2011 through 2015, adjusted for Zenara’s net debt or net cash position, as recorded underIndian GAAP. Cambrex accounts for its investment in Zenara using the equity method of accounting. See Notes 2, 4 and 8 for additional information.____________(dollars in thousands, except share data) 5IndexProductsThe Company uses its technical expertise in a wide range of chemical processes to meet the needs of its customers for high quality products and services forspecialized applications.The Company’s business is primarily comprised of the custom development and manufacture of pharmaceutical ingredients derived from organicchemistry. Products and services are supplied globally to innovative and generic drug companies. Products include APIs and pharmaceuticalintermediates. Services include custom development and current Good Manufacturing Practices (“cGMP”) manufacturing services. The Company’s recentacquisition of a 51% equity stake in Zenara also gives the Company additional capabilities in final dosage form products and establishes it as one of theleading global suppliers to the NRT market.The Company’s products and services are sold to a diverse group of several hundred customers, with one customer, Gyma Laboratories of America, Inc.(“Gyma”), a distributor representing multiple customers, accounting for 12.8% of 2010 sales. The Company’s products are sold through a combination ofdirect sales and independent agents. One product, a gastro-intestinal API sold to multiple customers, accounted for 13.7% of 2010 sales.This table summarizes gross sales by product groups: 2010 2009 2008 APIs and pharmaceutical intermediates $203,807 $212,644 $220,722 Other 22,629 23,633 28,896 Total $226,436 $236,277 $249,618 The following table shows gross sales to geographic area for the years ended December 31, 2010, 2009 and 2008: 2010 2009 2008 Europe $127,009 $136,534 $143,542 North America 78,497 80,830 86,631 Asia 12,554 10,495 11,440 Other 8,376 8,418 8,005 Total $226,436 $236,277 $249,618 Marketing and DistributionThe Company's products generally include higher value, low-to-medium volume niche products requiring significant technical expertise to develop andmanufacture. Marketing generally requires significant cooperative effort among a highly trained sales and marketing staff, a scientific staff that can assessthe technical fit and estimate manufacturing economics, manufacturing and engineering staff to scale up the chemical process and business unit managementto determine the strategic and operational fit. The process to take a client's project from the clinical trial stage to a commercial, approved therapeutic may takefrom two to ten years. The Company uses sales agents and independent distributors in those areas where they are deemed to be more effective or economicalthan direct sales efforts.____________(dollars in thousands, except share data) 6IndexRaw MaterialsThe Company uses a wide array of raw materials in its businesses. For its products, the Company generally will attempt to have a primary andsecondary supplier for its critical raw materials. Prices for these raw materials are generally stable, except for the petroleum-based solvents, where prices canvary with market conditions.Research and DevelopmentThe Company's R&D program is designed to increase the Company's competitiveness by improving its technology and developing processes for themanufacture of new products to meet customer requirements. The goals are to introduce innovative and proprietary products, improve manufacturingprocesses to reduce costs, improve quality and increase capacity to identify market opportunities that warrant significant technical expertise, and offer theprospects of a long-term, profitable business relationship. R&D activities are performed at all of the Company's manufacturing facilities in both the UnitedStates and Europe. Approximately 119 employees are at least partially involved in R&D activities worldwide.In December 2007 the Company consolidated its United States R&D activities and small scale API production into its facility in Charles City, Iowa. As aresult of the consolidation, the New Jersey R&D facility was closed as of December 31, 2008.The Company spent $10,305, $7,929 and $7,590 in 2010, 2009 and 2008, respectively, on R&D efforts.Patents and TrademarksThe Company has patent protection covering certain products, processes and services. In addition, the Company also relies on know-how and trade secrets(related to many of its manufacturing processes and techniques not generally known to other companies) for developing and maintaining its marketposition. The Company currently owns 15 issued patents and has 13 patent applications pending in the United States and owns 139 patents and has 96patent applications pending in foreign countries covering various technologies. The Company seeks to protect its proprietary technology and prepares newpatent applications as decisions are made to patent new inventions.The patent rights the Company considers most significant to its business are U.S. Patent Nos. 6,828,336 and 6,586,449 and 26 foreign counterparts whichare part of its APIs and pharmaceutical intermediates product group relating to its nicotine polacrilex resin products and methods of manufacturing, and expireon May 28, 2022.The Company's products and services are sold around the world under trademarks that are owned by the Company. These include PROFARMACO, whichis registered around the world as a word and design mark, and CAMOUFLAGE, which has been registered in Europe and the United States. Rights in thesetrademarks will exist at least as long as the Company or its majority owned subsidiaries continue to use each of these trademarks.The Company has entered into a worldwide perpetual license agreement with Celgene Corporation and Celgro Corporation which gives the Company theexclusive rights to certain intellectual property, including know-how and technology, relating to the development and manufacture of chirally pure bulkAPIs. This intellectual property is related to 5-MAT and amphetamine salts currently sold by the Company. Under the current terms of this agreement, theCompany pays no royalties or fees related to its use of this intellectual property.CompetitionThe Company has over 25 primary API and advanced intermediate competitors throughout Western Europe and the U.S. and many more competitors withinvarious segments of the markets the Company serves, including a growing number of competitors in Asia, Eastern Europe and other low-cost areas. TheCompany believes that low cost providers have had the impact of driving prices down for many products and services for which the Company competes toprovide, and the Company anticipates that it will face increased competition from these providers in the future. It is expected that regulatory compliance,product quality, pricing, and logistics will determine the extent of the long term impact of these competitors in the primary markets that the Companyserves. If the Company perceives significant competitive risk and a need for technical or financial commitment, it generally attempts to negotiate long termcontracts or guarantees from its customers.____________(dollars in thousands, except share data) 7IndexEnvironmental and Safety Regulations and ProceedingsGeneral: Certain products manufactured by the Company involve the use, storage and transportation of toxic and hazardous materials. The Company'soperations are subject to extensive laws and regulations relating to the storage, handling, emission, transportation and discharge of materials into theenvironment and the maintenance of safe working conditions. The Company maintains environmental and industrial safety, health compliance programs andtraining at its plants and believes that its manufacturing operations are in compliance with all applicable safety, health and environmental laws.Prevailing legislation tends to hold companies primarily responsible for the proper disposal of their waste even after transfer to third party waste disposalfacilities. Moreover, other future developments, such as increasingly strict environmental, safety and health laws and regulations, and enforcement policiesthereunder, could result in substantial costs and liabilities to the Company and could subject the Company's handling, manufacture, use, reuse, or disposalof substances or pollutants at its plants to more rigorous scrutiny than at present.Known environmental matters which may result in liabilities to the Company and the related estimates and accruals are summarized in Note 20.Present and Future Environmental Expenditures: The Company’s policy is to comply with all legal requirements of applicable environmental, health andsafety laws and regulations. The Company believes it is in compliance with such requirements and has adequate professional staff and systems in place toremain in compliance. In some cases, compliance can only be achieved by capital expenditures and the Company made capital expenditures of $2,321,$2,211 and $1,760 in 2010, 2009 and 2008, respectively, for environmental projects. As the environmental proceedings in which the Company is involvedprogress from the remedial investigation and feasibility study stage to implementation of remedial measures, related expenditures may increase. The Companyconsiders costs for environmental compliance to be a normal cost of doing business and includes such costs in pricing decisions.EmployeesAt December 31, 2010, the Company had 829 employees worldwide (604 of whom were from international operations) compared with 854 employees atDecember 31, 2009 and 856 at December 31, 2008.Non-U.S. production, administration, scientific and technical employees are represented by various local and national unions. The Company believes itslabor relations are satisfactory.SeasonalityThe Company experiences some seasonality primarily due to planned plant shutdowns by the Company and certain customers in the third quarter. Operatingresults for any quarter, however, are not necessarily indicative of results for any future period. In particular, as a result of various factors including, but notlimited to, acquisitions, plant shutdowns, and the timing of large contract revenue streams, the Company believes that period-to-period comparisons of itsoperating results should not be relied upon as an indication of future performance.Export and International SalesThe Company exports numerous products to various areas, principally Western Europe, Asia and Canada. Export sales from the Company’s domesticoperations in 2010, 2009 and 2008 amounted to $18,529, $25,768 and $24,602, respectively. Sales from international operations were $155,073,$151,759, and $167,911 in 2010, 2009 and 2008, respectively. Refer to Note 18.____________(dollars in thousands, except share data) 8IndexAvailable InformationThis annual report on Form 10-K, the Company’s quarterly reports on Form 10-Q, the Company’s current reports on Form 8-K, and amendments to thosereports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are made available free of charge on the Company’sInternet website www.cambrex.com as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The mostrecent certifications by the Company’s Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are filedas exhibits to this annual report on Form 10-K. The Company also files with the New York Stock Exchange the Annual Chief Executive Officer Certificationas required by Section 303A.12.(a) of the New York Stock Exchange Listed Company Manual.The following corporate governance documents are available free of charge on the Company’s website: the charters of its Audit, Regulatory Affairs,Compensation and Governance Committees, its Corporate Governance Guidelines, its Code of Business Conduct and Ethics and its Independence Standardsfor Directors. These corporate governance documents are also available in print to any stockholder requesting a copy from its corporate secretary at itsprincipal executive offices. Information contained on its website is not part of this report. The Company will also post on its website any amendments to orwaivers of its Code of Business Conduct and Ethics that relate to its Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer.Item1A.Risk Factors.Factors That May Affect Future ResultsThe following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. If any of the following risksoccur, the Company’s business, financial condition, operating results and cash flows could be materially adversely affected. The risks and uncertaintiesdescribed below are not the only ones the Company faces. Additionally, risks and uncertainties not presently known to the Company or that it currentlydeems immaterial also may impair its business, financial condition, operating results and cash flows in the future.Risks Relating to Cambrex’s BusinessCompanies may discontinue or decrease their usage of Cambrex’s services.The Company has observed increasing pressure on the part of its customers to reduce costs, including the use of its services and products, as a result ofmacro-economic trends and various market dynamics specifically affecting the pharmaceutical industry. These customers could discontinue or decrease theirusage of Cambrex’s services and products. New technologies, competition or a reduction in demand for Cambrex’s products could reduce sales.The markets for the Company’s products are competitive and price sensitive. The Company’s competitors may lower prices on products in the futureand the Company may, in certain cases, respond by lowering its prices. Conversely, failure to anticipate and respond to price competition may hurtCambrex’s market share. Some of the Company’s competitors also have significant financial, operational and sales and marketing resources which mayreduce the Company’s level of business. Companies may develop new technologies that would compete with the Company’s products or render its productsobsolete. Several of Cambrex’s customers, especially those that buy its generic APIs, have internal capabilities similar to Cambrex’s. In addition, demand forthe Company’s products may weaken due to a reduction in R&D budgets, loss of distributors or other factors.____________(dollars in thousands, except share data) 9IndexThe Company’s failure to obtain new contracts or renew existing contracts may adversely affect its business.Many of Cambrex’s contracts are short term in duration. As a result, the Company must continually replace its contracts with new contracts to sustain itsrevenue. In addition, certain of the Company’s long-term contracts may be cancelled or delayed by clients for any reason upon notice. Multiple cancellationsor non-renewals of significant contracts could materially impact the Company’s business.Failure to obtain products and raw materials from third-party manufacturers could affect Cambrex’s ability to manufacture anddeliver its products.The Company relies on third-party manufacturers to supply many of its raw materials and intermediates. In addition, the Company has a singlesource for supplies of some raw materials to its products. Manufacturing problems may occur with these and other outside sources. If such problems occur,the Company cannot ensure that it will be able to manufacture its products profitably or on time.Disruptions to the Company’s or its customers’ manufacturing operations could adversely affect its results.Due to heavy reliance on manufacturing and related operations to produce and distribute the products the Company sells, the Company could beadversely affected by disruptions to these operations or its customers’ operations. Any significant disruption to those operations for any reason, such as laborunrest, terrorism, power interruptions, fire, or other events beyond the Company’s control could adversely affect its sales and customer relationships. Whileinsurance coverage may reimburse the Company in part for profits lost from such disruptions, any sustained reduction in the Company’s ability to providethese products would negatively impact its sales growth expectations, cash flows and profitability.Failure to win early stage business opportunities can cause difficulty in winning future opportunities with that potential customer.Certain products the Company sells are incorporated into its customers’ drug manufacturing processes. In some cases, once a customer chooses aparticular product for use in a drug manufacturing process, it is unlikely that the customer will later switch to a competing alternative. In many cases, theregulatory approvals related to a drug product will specify the products qualified for use in its making. Obtaining the regulatory approvals needed for a changein the manufacturing process is time consuming, expensive and uncertain. Accordingly, if a customer does not select the Company’s products or services earlyin its manufacturing design phase for any number of reasons, the Company may lose the opportunity to participate in the customer’s manufacturing of suchproduct. Because the Company faces competition in this market from other companies, it is possible that its competitors could win significant early businesswith customers making it difficult for the Company to recover late-stage opportunities with higher volumes.Litigation may harm the Company or otherwise negatively impact its management and financial resources.Complex or extended litigation could cause the Company to incur large expenditures and distract its management. For example, lawsuits by employees,stockholders, counterparties to acquisition and divestiture contracts, collaborators, distributors, customers, or end-users of the Company’s products orservices could be very costly and substantially disrupt its business. Disputes from time to time with such companies or individuals are not uncommon, andthe Company cannot be assured that it will always be able to resolve such disputes out of court or on terms favorable to the Company.Refer to Note 20 for a discussion of the Company’s environmental and legal matters.____________(dollars in thousands, except share data) 10IndexIncidents related to hazardous materials could adversely affect the Company.Portions of the Company’s operations require the controlled use of hazardous materials. Although the Company is diligent in designing andimplementing safety procedures to comply with the standards prescribed by federal, state, local and foreign regulations, including the EuropeanCommission’s Registration, Evaluation and Authorization of Chemicals (“REACH”) regulation, the risk of accidental contamination of property or injury toindividuals from these materials cannot be completely eliminated. In the event of such an incident, the Company could be liable for any damages which couldadversely affect its business. Additionally, any incident could shut down the Company’s research and manufacturing facilities and operations.The Company generates waste that must be transported to approved storage, treatment and disposal facilities. The transportation and disposal of suchwaste are required to meet applicable state and federal statutes and regulations. The storage, treatment and disposal of such waste potentially exposes theCompany to environmental liability if, in the future, such transportation and disposal are deemed to have violated such statutes or regulations or if the storage,treatment and disposal facilities are inadequate and are proved to have damaged the environment.The Company is also party to several environmental remediation investigations and cleanups and, along with other companies, has been named apotentially responsible party (“PRP”) for certain waste disposal sites.Refer to Note 20 for a discussion of the Company’s environmental and legal matters.Potential product liability claims, errors and omissions claims in connection with services the Company performs and potential liabilityunder indemnification agreements between the Company and its officers and directors could adversely affect the Company.The Company manufactures products intended for use by the public. These activities could expose the Company to risk of liability for personalinjury or death to persons using such products. The Company seeks to reduce its potential liability through measures such as contractual indemnificationprovisions with customers (the scope of which may vary by customer, and the performances of which are not secured) and insurance maintained bycustomers. The Company could be materially and adversely affected if it were required to pay damages or incur defense costs in connection with a claim thatis outside the scope of the indemnification agreements, if the indemnity, although applicable, is not performed in accordance with its terms or if theCompany’s liability exceeds the amount of applicable insurance or indemnity. In addition, the Company could be held liable for errors and omissions inconnection with the services it performs. The Company currently maintains product liability and errors and omissions insurance with respect to theserisks. There can be no assurance, however, that the Company’s insurance coverage will be adequate or that insurance coverage will continue to be availableon terms acceptable to the Company.The Company also indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at theCompany’s request in such capacity. The maximum potential amount of future payments the Company could be required to make under theseindemnification agreements is unlimited; however, the Company has a director and officer insurance policy that covers a portion of any potentialexposure. The Company could be materially and adversely affected if it were required to pay damages or incur legal costs in connection with a claim above itsinsurance limits.While the Company has what it believes to be adequate insurance coverage, any claims beyond its insurance coverage may result insubstantial costs and a reduction in its available capital resources.The Company maintains property insurance policies covering physical damage to its equipment, facilities, buildings and inventory; employer’sliability insurance generally covering death or work injury of employees; product liability insurance covering product liability claims arising from the use,consumption or operation of its products; general liability insurance covering certain incidents to third parties that occur on or in the premises of theCompany; business interruption insurance, and directors and officers liability insurance, among others. The Company does not maintain key man lifeinsurance on any of its senior management or key personnel. The Company’s insurance coverage, however, may not be sufficient to cover any claim forproduct liability, damage to its fixed assets or injury to its employees.____________(dollars in thousands, except share data) 11IndexLoss of key personnel could hurt the Company.The Company depends on its ability to attract and retain qualified scientific and technical employees as well as a number of key executives. There canbe no assurance the Company will be able to retain key personnel, or to attract and retain additional qualified employees. The Company’s inability to attractand retain key personnel would have a material adverse effect on the Company’s business.The Company has made significant capital investments to its facilities to meet its potential future needs and, as a result, the Companydepends on the success of attracting new and retaining existing customers’ projects and their continued business.The Company has recently made substantial investments in all of its manufacturing facilities. With the completion of these new facilities, theCompany’s fixed costs have increased. If the Company is not able to utilize the facilities to capacity, its margins could be adversely affected.Global growth is subject to a number of economic risks.The tightening of credit in financial markets in recent years adversely affects the ability of the Company’s customers to obtain financing for significantpurchases and operations and could result in a decrease in or cancellation of orders for its products and services as well as impact the ability of theCompany’s customers to make payments. The Company believes that cash flows from operations, along with funds available from a revolving line of credit,will be adequate to meet the operational and debt servicing needs of the Company, but no assurances can be given that this will continue to be the case. Thereis a risk that the funds available to be drawn under the Company’s revolving line of credit may not be available in the event of the failure of one or moreparticipant banks. Strengthening of the rate of exchange for the U.S. dollar against certain major currencies such as the Euro, Swedish krona and othercurrencies may also adversely affects the Company’s results.If the Company acquires other companies, its business may be harmed by difficulties in integration and employee retention, unidentifiedliabilities of the acquired companies, or obligations incurred in connection with acquisition financings.All acquisitions involve known and unknown risks that could adversely affect the Company’s future revenues and operating results. For example: ·The Company may fail to successfully integrate its acquisitions in accordance with its business strategy. ·The initial rationale for the acquisition may not remain viable due to a variety of factors, including unforeseen regulatory changes and marketdynamics after the acquisition, and this may result in a significant delay and/or reduction in the profitability of the acquisition. ·Integration of acquisitions may divert management’s attention away from the Company’s primary product offerings, resulting in the loss of keycustomers and/or personnel, and may expose the Company to unanticipated liabilities. ·The Company may not be able to retain the skilled employees and experienced management that may be necessary to operate the businesses itacquires. If the Company cannot retain such personnel, it may not be able to locate or hire new skilled employees and experienced management toreplace them. ·Cambrex may purchase a company that has contingent liabilities that include, among others, known or unknown patent or product liability claims. ·The Company’s acquisition strategy may require it to obtain additional debt or equity financing, resulting in additional leverage, or increased debtobligations as compared to equity, and dilution of ownership. ·Cambrex may purchase companies located in jurisdictions where it does not have operations and as a result it may not be able to anticipate localregulations and the impact such regulations have on its business.____________(dollars in thousands, except share data) 12IndexIn addition, if the Company makes one or more significant acquisitions in which the consideration includes equity shares or other securities, equityinterests in Cambrex held by holders of the equity shares may be significantly diluted and may result in a dilution of earnings per equity share. If theCompany makes one or more significant acquisitions in which the consideration includes cash, it may be required to use a substantial portion of its availablecash or incur a significant amount of debt or otherwise arrange additional funds to complete the acquisition, which may result in reduced liquidity, a decreasein its net income and a consequential reduction in its earnings per equity share.There are risks associated with the Company’s recent acquisition of a 51% equity stake in Zenara including, but not limited to,Cambrex’s ability to achieve its goals established for that business and fund its obligation to purchase the remaining 49% in 2016. In November 2010, the Company purchased 51% of the equity in Zenara for approximately $18,900, and is required to purchase the remaining 49%in 2016 based upon a formula derived from Zenara’s future EBITDA. The Company may, at its option, purchase the remaining equity in cash or acombination of cash and up to 50% of the consideration in Cambrex stock. To the extent Zenara has significant EBITDA over the next five years, substantial consideration will be required to purchase the remaining 49%. Alarge cash payment could require borrowing under the Company’s credit facility and, since the Company’s credit facility will need to be refinanced prior to itsexpiration in April 2012, there is no guarantee that the Company’s future credit arrangements will facilitate the future purchase of the remaining 49% in 2016.Additionally, the uncertainty regarding the amount of consideration required for the 2016 buyout of the 49% may impact the Company’s future borrowingability, result in higher interest expense, or possibly result in difficulty securing any credit arrangements in the future. Additionally, issuance of any stock tosatisfy a portion of this obligation could have a dilutive effect on holders of Cambrex common stock. In the event that Cambrex is unable to compensate the49% equity holder for its shares in 2016, the 49% shareholder has certain rights, including the right to force a sale of Zenara to a third party to secure theirpayment.Zenara is currently not profitable, and there is no guarantee that it will be in the future. Should Zenara not meet its goals or continue to generate losses,it could negatively impact the Company’s consolidated results, cash flows and stock price.The Company has a significant amount of debt.The Company has a $200,000 revolving credit facility of which $115,900 was outstanding at December 31, 2010. This facility expires in April2012. If the Company is unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments on the credit facility, it willbe in default. This current debt arrangement requires the Company to comply with specified financial ratios. The Company’s ability to comply with theseratios may be affected by events beyond its control. Even if the Company is able to meet its debt service obligations, the amount of debt it has could adversely affect the Company by limiting its ability toobtain any necessary financing in the future for working capital, capital expenditures, debt service requirements, or other purposes. It also places theCompany at a disadvantage relative to its competitors who have lower levels of debt, while making it more vulnerable to a downturn in its business or theeconomy in general. It also requires the Company to use a substantial portion of its cash to pay principal and interest on its debt, instead of investing thosefunds in the business.The Company’s liquidity, business, financial condition, results of operations and cash flows could be materially and adversely affected ifthe financial institutions which hold its funds fail. The Company has significant funds held in bank deposits, money market funds and other accounts at certain financial institutions. A significantportion of the funds held in these accounts exceed insurable limits. If any of the financial institutions where the Company has deposited funds were to fail, theCompany may lose some or all of its deposited funds that exceed the insurance coverage limit. Such a loss would have a material and adverse effect on theCompany’s liquidity, business, financial condition, results of operations and cash flows.____________(dollars in thousands, except share data) 13IndexA payment failure by any large customer or multiple smaller customers could adversely affect the Company’s cash flows andprofitability.Historically, the Company has not experienced any significant bad debt or collection problems, but such problems may arise in the future. The failureof any of the Company’s customers to make timely payments could require the Company to write off accounts receivable or increase provisions made againstits accounts receivable, either of which could adversely affect the Company’s cash flows and profitability.The Company has significant inventories on hand.The Company maintains significant inventories and has an allowance for slow-moving and obsolete inventory. Any significant unanticipated changesin future product demand or market conditions, including the current uncertainty in the global market, could also have an impact on the value of inventoryand adversely impact the Company’s results of operations.International unrest or foreign currency fluctuations could adversely affect the Company’s results.The Company’s international revenues, which include revenues from its non-U.S. subsidiaries and export sales from the U.S., represent the majorityof its product revenues.There are a number of risks arising from the Company’s international business, including: ·the possibility that unfriendly nations or groups could boycott its products; ·general economic decline and/or political unrest in the markets in which it operates; ·potential increased costs associated with overlapping tax structures; ·more limited protection for intellectual property rights in some countries; ·unexpected changes in regulatory requirements; ·the difficulties of compliance with a wide variety of foreign laws and regulations; ·longer accounts receivable cycles in certain foreign countries; and ·import and export licensing requirements.In addition, a significant portion of the Company’s business is conducted in currencies other than the U.S. dollar, which is its reporting currency. TheCompany recognizes foreign currency gains or losses arising from its operations in the period incurred. As a result, currency fluctuations between the U.S.dollar and the currencies in which the Company does business have caused, and will continue to cause, foreign currency transaction gains and losses. TheCompany cannot predict the effects of exchange rate fluctuations upon its future operating results because of the number of currencies involved, the variabilityof currency exposures, and the potential volatility of currency exchange rates. The Company engages in limited foreign exchange hedging transactions tomitigate the impact of this volatility on its operations, but its strategies are short-term in nature and may not adequately protect its operating results from thefull effects of exchange rate fluctuations.Cambrex’s global operations expose the Company to additional risks that could have an adverse effect on its business, financial positionand results of operations.Cambrex’s operations extend to numerous countries outside of the U.S. including a 51% interest in Zenara located in Hyderabad, India. There aresignificant risks associated with the establishment of foreign operations, including, but not limited to: geopolitical risks, terrorism, foreign currency exchangerates and the impact of shifts in the U.S. and local economies on those rates, compliance with local laws and regulations, the protection of the Company’sintellectual property and that of its customers, the ability to integrate its corporate culture with local customs and cultures, and the ability to effectively andefficiently supply its international facilities with the required equipment and materials. If the Company is unable to effectively manage these risks, theselocations may not produce the revenues, earnings, or strategic benefits that it anticipates which could have a material adverse affect on the Company’sbusiness.____________(dollars in thousands, except share data) 14IndexFinally, the Company operates in certain jurisdictions that have experienced governmental corruption to some degree and, in some circumstances, anti-bribery laws may conflict with some local customs and practices. As a result of the Company’s policy to comply with the U.S. Foreign Corrupt Practices Actand similar anti-bribery laws, the Company may be at a competitive disadvantage to competitors that are not subject to, or do not comply with, such laws.Cambrex’s operating results may unexpectedly fluctuate in future periods.The Company’s revenue and operating results have fluctuated, and could continue to fluctuate, on a quarterly basis. The operating results for aparticular quarter may be lower than expected as a result of a number of factors, including, but not limited to, the timing of contracts; the delay or cancellationof a contract; the mix of services provided; seasonal slowdowns in different parts of the world; the timing of start-up expenses for new services and facilities;changes in government regulations; and unfavorable exchange rates with the U.S. dollar. Because a high percentage of the Company’s costs are relatively fixedin the short term, such as the cost of maintaining facilities and compensating employees, any one of these factors could have a significant impact on theCompany’s quarterly results. In some quarters, the Company’s revenue and operating results may fall below the expectations of securities analysts andinvestors due to any of the factors described above. If such event occurred, sales of common stock by existing holders would cause the trading price of theCompany’s common stock to decline, even if the decline in revenue did not have any long-term adverse implications for the Company’s business.The possibility the Company will be unable to protect its technologies could affect its ability to compete.The Company’s success depends to a significant degree upon its ability to develop proprietary products and technologies. However, the Companycannot be assured that patents will be granted on any of its patent applications. The Company also cannot be assured that the scope of any of its issuedpatents will be sufficiently broad to offer meaningful protection. The Company has patents issued in selected countries, therefore, third parties can make,use, and sell products covered by its patents in any country in which the Company does not have patent protection. In addition, issued patents or patents theCompany licenses could be successfully challenged, invalidated or circumvented so that its patent rights would not create an effective competitive barrier. TheCompany provides its customers the right to use its products under label licenses that are for research purposes only. These licenses could be contested, andthe Company cannot be assured that it would either be aware of an unauthorized use or be able to enforce the restrictions in a cost-effective manner.If a third party claimed an intellectual property right to technology the Company uses, it may need to discontinue an important product or product line,alter its products and processes, defend its right to use such technology in court or pay license fees. Although the Company may, under these circumstances,attempt to obtain a license to such intellectual property, it may not be able to do so on favorable terms, or at all. Additionally, if Cambrex’s products are foundto infringe on a third party’s intellectual property, the Company may be required to pay damages for past infringement, and lose the ability to sell certainproducts or receive licensing revenues.The Company also relies on trade secrets, unpatented proprietary know-how and continuing technological innovation that it seeks to protect, in part byconfidentiality agreements with licensees, suppliers, employees and consultants. It is possible that these agreements will be breached and the Company will nothave adequate remedies for any such breach. Disputes may arise concerning the ownership of intellectual property or the applicability of confidentialityagreements. Furthermore, Cambrex’s trade secrets and proprietary technology may otherwise become known or be independently developed by its competitorsor the Company may not be able to maintain the confidentiality of information relating to such products.____________(dollars in thousands, except share data) 15IndexThe Company could be subject to goodwill impairment charges in the future. Under U.S. GAAP, the Company is required to evaluate goodwill for impairment at least annually. If the Company determines that the fair value is less thanthe carrying value, an impairment loss will be recorded in the Company’s statement of operations. The determination of fair value is a highly subjectiveexercise and can produce significantly different results based on the assumptions used and methodologies employed. If the Company’s projected long-termsales growth rate, profit margins or terminal rate are considerably lower and/or the assumed weighted average cost of capital is considerably higher, futuretesting may indicate impairment and the Company would have to record a non-cash goodwill impairment loss in its statement of operations. Assessments by various tax authorities may be materially different than the Company has provided for and it may experience significantvolatility in its annual and quarterly effective tax rate.As a matter of course, the Company is regularly audited by federal, state, and foreign tax authorities. From time to time, these audits result in proposedassessments. In recent years, the Company utilized significant tax attributes in the form of foreign tax credits and U.S. net operating loss (“NOL”)carryforwards to reduce or eliminate potential tax expense related to the repatriation of funds into the U.S. resulting from the sale of the businesses thatcomprised the Bioproducts and Biopharma segments in 2007. While the Company believes that it has adequately provided for any taxes related to these items,and taxes related to all other aspects of its business, any such assessments or future settlements may be materially different than it has provided. The Company may pursue transactions that could cause it to experience significant charges to earnings that may adversely affect itsstock price and financial condition.The Company regularly reviews potential transactions related to technologies, products, product rights and businesses complementary to itsbusiness. These transactions could include mergers, acquisitions, divestitures, strategic alliances or licensing agreements. In the future, the Company maychoose to enter into these transactions at any time. As a result of acquiring businesses or entering into other significant transactions, the Company mayexperience significant charges to earnings for merger and related expenses. If the Company is not able to successfully integrate the acquired business to createthe advantages the acquisition was intended to create, it may affect the Company’s results of operations and the market price of its commonstock. Furthermore, if the Company is unable to improve the operating margins of acquired businesses or operate them profitably, it may be unable to achieveits growth strategy.Risks Related to Cambrex’s IndustryAny significant change in government regulation of the drug development process could have a material adverse effect on the Company.The manufacturing of pharmaceutical products is subject to extensive regulation by governmental authorities, including the FDA and comparableregulatory authorities in other countries. The Company’s business, as well as its customers’ business depends in part on strict government regulation of thedrug development process. Legislation may be introduced and enacted from time to time to modify regulations administered by the FDA and governing thedrug approval process. Any significant reduction in the scope of regulatory requirements or the introduction of simplified drug approval procedures couldhave a material adverse effect on the Company’s business.Failure to comply with cGMP and other government regulations or delays in obtaining regulatory approval could have a material adverseeffect on the Company.All facilities and manufacturing techniques used for manufacturing products for clinical use or for commercial sale in the U.S. must be operated inconformity with cGMP regulations as required by the FDA and other comparable regulatory authorities in other countries, and for certain products, the DrugEnforcement Agency. The Company’s facilities are subject to scheduled periodic regulatory and customer inspections to ensure compliance with cGMP andother requirements applicable to such products. A finding that the Company had materially violated these requirements could result in regulatory sanctionsincluding, but not limited to, the regulatory agencies, including the FDA, withholding approval of new drug applications or supplements and the denial ofentry into the U.S., or other countries, of products manufactured at non-compliant foreign facilities, the loss of a customer contract, the disqualification ofdata for client submissions to regulatory authorities and a mandated closing of the Company’s facilities. Any such violations would have a material adverseeffect on the Company’s business. Cambrex’s customers are typically subject to the same, or similar, regulations and any such violations or other actions byregulatory agencies, including, but not limited to, plant shutdowns or product recalls that eliminate or reduce the Company’s sale of its products or servicescould negatively impact the Company’s business. In addition, the submission of new products to regulatory authorities for approval by the Company or itscustomers does not guarantee the approval to market the product will be granted. Each authority may impose its own requirements and/or delay or refuse togrant approval to the Company or customer even when the product has already been approved in another country. 16IndexThe outsourcing trend in the preclinical and clinical stages of drug research and development may decrease, which could slow theCompany’s growth.The success of the Company’s business depends to a certain extent on the number of contracts and the size of the contracts that it may obtain frompharmaceutical companies. Over the past several years, the Company has benefited from increased levels of outsourcing by pharmaceutical companies of theirdrug R&D activities. A slowing of the outsourcing trend could result in a diminished growth rate in the Company’s sales and adversely affect its business,financial condition and results of operations.____________(dollars in thousands, except share data) 17IndexItem 1BUnresolved Staff Comments.None.Item 2 Properties.Set forth below is information relating to manufacturing facilities owned by the Company as of December 31, 2010:Location Acreage Operating Subsidiary Product Lines Manufactured Charles City, Iowa 57 acres Cambrex APIs, Pharmaceutical Intermediates, Imaging Charles City, Inc. Chemicals, Animal Health Products and Fine Custom Chemicals Karlskoga, Sweden 42 acres Cambrex APIs, Pharmaceutical Intermediates, Karlskoga AB Imaging Chemicals and Fine Custom Chemicals Paullo (Milan), Italy 13 acres Cambrex APIs and Pharmaceutical Intermediates Profarmaco Milano S.r.l. The Company leases 10,000 square feet in Tallinn, Estonia which has a lease term ending in May 2014 and leases 6,000 square feet in Wiesbaden,Germany which has a lease term ending in December 2015. The Company believes its operating facilities to be in good condition, well-maintained andadequate for its current needs.In December 2007 the Company consolidated its United States R&D activities and small scale API production into its facility in Charles City,Iowa. As a result of the consolidation, the Company’s New Jersey R&D facility was closed as of December 31, 2008. The lease expired in December 2010.Most of the Company's products and services are provided from multi-purpose facilities. Each product has a unique requirement for equipment, andoccupies such equipment for varying amounts of time. It is generally possible, with proper lead time and customer and regulatory approval (if required), totransfer the manufacturing of a particular product to another facility should capacity constraints dictate.Item 3Legal Proceedings.See "Environmental and Safety Regulations and Proceedings" under Item 1 and Note 20 with respect to various proceedings involving the Company inconnection with environmental matters. The Company is party to a number of other proceedings also discussed in Note 20.Item 4 [Removed and reserved.]____________(dollars in thousands, except share data) 18IndexPART IIItem 5Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.The Company’s common stock, $.10 par value is listed on the New York Stock Exchange (“NYSE”) under the symbol CBM. The following tablesets forth the closing high and low sales price of the common stock as reported on the NYSE: 2010 High Low First Quarter $6.01 $3.68 Second Quarter 4.79 3.15 Third Quarter 4.41 2.91 Fourth Quarter 6.07 4.02 2009 High Low First Quarter $5.24 $1.50 Second Quarter 4.48 2.27 Third Quarter 6.51 3.89 Fourth Quarter 7.17 5.17 As of February 4, 2011, the Company estimates that there were approximately 3,652 beneficial holders of the outstanding common stock of theCompany.The Company has not declared nor paid any cash dividends on its common stock in the last two years and presently intends to retain future earnings,if any, to fund the development and growth of its business. Therefore, the Company does not anticipate paying cash dividends in the foreseeable future.2010 Equity Compensation TableThe following table provides information as of December 31, 2010 with respect to shares of common stock that may be issued under the Company’s existingequity compensation plans. Column (a) Column (b) Column (c) Plan category Number ofsecurities to beissued upon exerciseof outstandingoptions, warrantsand rights Weighted averageexercise price ofoutstanding options,warrants and rights Number ofsecurities remainingfor future issuanceunder equitycompensation plans(excluding securitiesreflected in column(a)) Equity compensation plans approved by security holders 1,620,360 $7.43 153,502 Equity compensation plans not approved by security holders 233,433 $8.06 - Total 1,853,793 $7.51 153,502 The material features of the equity compensation plan under which equity securities are authorized for issuance that was adopted without stockholderapproval are described below:____________(dollars in thousands, except share data) 19Index2000 Employee Performance Stock Option PlanThe 2000 Employee Stock Option Plan (the “2000 Plan”) was used to fund awards for Non-Executive Employees of the Company. The 2000 Plan isadministered by the Compensation Committee of the Board of Directors, and that Committee may delegate responsibilities to others to assist in administeringthe 2000 Plan. The total number of shares of common stock which may be issued on exercise of stock options shall not exceed 500,000 shares, subject toadjustment in accordance with the Plan. No participant shall be granted options to purchase more than 100,000 shares of common stock in any twelve monthperiod. The options were priced at fair market value on the date of grant and expire up to 10 years after the date of grant. If the employment of a participantterminates, other than as a result of death, disability or retirement, all unexercised awards shall be cancelled. In the event of death, disability or retirement, theoptions will expire one year from the date of the event. As of December 31, 2010 there were no shares remaining for future issuance under this plan.Comparison of Five-Year Cumulative Total ReturnsThe comparative stock performance graph below compares the five-year cumulative total stockholder return (assuming reinvestment of dividends, if any)from investing $100 on December 31, 2005, to the close of the last trading day of 2010, in each of (i) our common stock, (ii) the S&P 500 Index and(iii) S&P 1500 Pharmaceuticals Index. The stock price performance reflected in the graph below is not necessarily indicative of future price performance. The Company’s commercial activities are focused on manufacturing and marketing to customers concentrated in the Life Sciences Industry (includingpharmaceutical chemicals and intermediates). Although the Company’s products are diverse, making it difficult to select a comparative peer group, theCompany believes that the S&P 1500 Pharmaceuticals Index is a reasonable, publicly available comparison group for the commercial activities on which itcurrently focuses. The S&P 1500 Pharmaceuticals Index is comprised of 18 pharmaceutical companies within the S&P 1500 Composite Index as ofDecember 31, 2010.____________(dollars in thousands, except share data) 20IndexItem 6Selected Financial Data.The following selected consolidated financial data of the Company for each of the five years in the period through December 31, 2010 are derived fromthe audited financial statements, including all adjustments necessary for discontinued operations presentation. The consolidated financial statements of theCompany as of December 31, 2010 and 2009 and for each of the years in the three year period ended December 31, 2010 and the reports of the independentregistered public accounting firm thereon are included elsewhere in this annual report. In October 2006, the Company sold two businesses and in February2007 the Company completed the sale of the businesses that comprised the Bioproducts and Biopharma segments (excluding certain liabilities). As a result,these businesses are being reported as discontinued operations for all periods presented. The data presented below should be read in conjunction with thefinancial statements of the Company and the notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations"included elsewhere herein. Years Ended December 31, 2010(1) 2009(2) 2008(3) 2007(4) 2006(5) INCOME DATA: Gross sales $226,436 $236,277 $249,618 $252,574 $236,659 Net revenues 226,992 234,550 249,228 252,505 235,073 Gross profit 66,866 70,278 73,743 91,232 83,858 Selling, general and administrative expenses 34,024 35,711 40,521 48,858 58,279 Research and development expenses 10,305 7,929 7,590 12,157 10,813 Restructuring expenses 1,293 - 4,695 6,073 - Strategic alternative costs - - 1,515 31,127 2,958 Merger and acquisition expenses 997 - - - - Operating profit/(loss) 20,247 26,638 19,422 (6,983) 11,808 Interest expense/(income), net 4,391 4,634 3,668 (485) 5,478 Other expenses/(income), net 596 (641) 754 725 (17)Equity in losses of partially-owned affiliate 286 - - - - Income/(loss) before income taxes 14,974 22,645 15,000 (7,223) 6,347 Provision for income taxes 5,665 12,253 7,071 6,288 14,513 Income/(loss) from continuing operations 9,309 10,392 7,929 (13,511) (8,166)Income/(loss) from discontinued operations, includinggains/(losses) from dispositions, net of tax 338 - - 222,759 (21,706)Income/(loss) before cumulative effect of a change inaccounting principle 9,647 10,392 7,929 209,248 (29,872)Cumulative effect of a change in accounting principle - - - - (228)Net income/(loss) 9,647 10,392 7,929 209,248 (30,100) EARNINGS PER SHARE DATA: Earnings/(loss) per common share (basic): Income/(loss) from continuing operations $0.32 $0.36 $0.27 $(0.47) $(0.30)Income/(loss) from discontinued operations, includinggains/(losses) from dispositions, net of tax $0.01 $- $- $7.77 $(0.81)Cumulative effect of a change in accounting principle $- $- $- $- $(0.01)Net income/(loss) $0.33 $0.36 $0.27 $7.30 $(1.12)Earnings/(loss) per common share (diluted): Income/(loss) from continuing operations $0.32 $0.36 $0.27 $(0.47) $(0.30)Income/(loss) from discontinued operations, includinggains/(losses) from dispositions, net of tax $0.01 $- $- $7.77 $(0.81)Cumulative effect of a change in accounting principle $- $- $- $- $(0.01)Net income/(loss) $0.33 $0.36 $0.27 $7.30 $(1.12)Weighted average shares outstanding: Basic 29,361 29,241 29,116 28,683 26,816 Diluted 29,468 29,267 29,161 28,683 26,816 DIVIDENDS PER COMMON SHARE $- $- $- $14.03 $0.12 ____________(dollars in thousands, except share data) 21Index Years Ended December 31, 2010(1) 2009(2) 2008(3) 2007(4) 2006(5) BALANCE SHEET DATA: (at end of period) Working capital $82,146 $94,362 $74,376 $69,148 $117,616 Total assets 351,751 351,515 341,072 373,462 606,376 Long-term debt 115,900 120,800 123,800 101,600 158,600 Total stockholders' equity 107,635 103,270 74,786 102,057 246,646 (1)Income from continuing operations includes pre-tax charges of $1,293 within operating expenses for certain one-time employee benefits relating to the planto optimize operations at a manufacturing site to meet industry requirements, $997 within operating expenses for merger and acquisition expenses and$509 within other expenses for currency losses pursuant to the purchase of Zenara. Income from discontinued operations includes a benefit of $1,652as a result of the expiration of a contingent liability and charges of $1,144 for environmental remediation, net of insurance proceeds, and $170 for aworker's compensation claim, all related to sites of divested businesses.(2)Net income includes tax expense of approximately $5,300 for an estimate of an international tax liability related to a 2003 transaction.(3)Net income includes pre-tax charges of $1,515 within operating expenses for costs related to strategic alternatives, $4,695 within operating expenses forrestructuring costs and $1,040 within operating expenses related to a former CEO's retirement.(4)Loss from continuing operations includes pre-tax charges of $31,127 within operating expenses for the costs related to strategic alternatives, $6,073within operating expenses for restructuring costs and $841 within interest expense for the write-off of unamortized debt costs. Income from discontinuedoperations includes the gain on sale of the businesses that comprised the Bioproducts and Biopharma business segments of $235,489, expense of$4,636 for the Rutherford litigation settlement and expense of $1,000 for an adjustment to an environmental reserve at a Rutherford Business site. (5)Loss from continuing operations includes pre-tax charges of $2,958 within operating expenses for external advisor costs related to divestitures, $5,272within interest expense due to the pre-payment of a portion of the Company’s long-term debt and tax expense of $1,696 related to prior years' returnsincluded in the provision for income taxes. Loss from discontinued operations includes the loss on the sale of two businesses of $23,244, $2,092 for agoodwill impairment charge and $1,475 for the write-down of an investment in equity securities.____________(dollars in thousands, except share data) 22IndexItem 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.Executive OverviewThe Company’s business consists of three manufacturing facilities and one R&D center. These facilities primarily manufacture pharmaceuticalintermediates, APIs and ingredients derived from organic chemistry. The Company also owns a 51% stake in Zenara Pharma (“Zenara”), a Hyderabad, Indiabased pharmaceutical company with final dosage form manufacturing capabilities, and IEP GmbH (“IEP”), a German-based business that designs andlicenses biocatalytic enzymes.The following significant events, which are explained in detail on the following pages, occurred during 2010: ●The Company acquired a 51% equity stake in Zenara for approximately $18,900 in November 2010. Zenara is a pharmaceutical company focusedon the formulation of final dosage form products. Cambrex accounts for its investment in Zenara using the equity method of accounting. ●In March 2010, the Company completed the acquisition of IEP, a leader in the field of industrial biocatalysis. IEP offers cost effective customizedbiocatalytic process development and sales of enzymes to the pharmaceutical industry and was acquired for approximately $6,900 in cash. ●During 2010, the Company finalized a plan to restructure its operations at a manufacturing site which resulted in a reduction in workforce of 32employees. The plan included certain one-time benefits for terminated employees, all of which will be paid in cash. Costs related to this transactionare recorded on the Company’s income statement under the caption “Restructuring expenses” and totaled $1,293 in 2010.Sales in 2010 decreased 4.2% to $226,436 from $236,277 in 2009. The impact from foreign currency exchange was negligible.The main drivers of the lower sales include declines in products utilizing the Company’s drug delivery technology due to a negotiated contract extensionresulting in lower volumes and pricing, two APIs manufactured under long-term supply agreements, one of which is a result of a supply chain disruption at acustomer’s facility that has since been resolved and the other due to lower demand by a customer, and lower custom development revenue. Sales of a feedadditive were also lower as a result of exiting the product line.The Company experienced higher generic API sales due to higher volumes partially offset by competitive pricing. Sales of controlled substances, whichthe Company defines as drugs falling under Schedule II of the U.S. Drug Enforcement Agency’s classification system, showed continued growth in 2010.Gross margins in 2010 decreased slightly to 29.5% from 29.7% in 2009. Excluding a 0.6% unfavorable impact from foreign currency, gross marginsincreased to 30.1% in 2010 versus 2009. Excluding the foreign currency impact, the higher margins are due primarily to favorable product mix, lowerproduction costs, insurance proceeds related to a business interruption claim (+0.7%) and fees related to the cancellation of a supply contract (+0.3%) partiallyoffset by lower pricing during 2010.One customer, Gyma, a distributor representing multiple customers, accounted for 12.8% of the Company’s 2010 sales.The Company recorded tax expense of $5,665 in 2010 compared to $12,253 in 2009. The tax provisions in 2010 and 2009 were affected by the non-recognition of tax benefits in the U.S. where losses are incurred and the Company records valuation allowances against the benefits. The 2009 tax provisionalso includes a charge of approximately $5,300 for an estimate of an international tax liability related to a 2003 transaction.The Company reported income from continuing operations of $9,309, or $0.32 per diluted share in 2010, compared to $10,392, or $0.36 per diluted share in2009.____________(dollars in thousands, except share data) 23IndexCritical Accounting PoliciesThe Company’s critical accounting policies are those that require the most subjective or complex judgments, often as a result of the need to make estimatesabout the effect of matters that are inherently uncertain. The Company bases its estimates on historical experience and on other assumptions that are deemedreasonable by management under each applicable circumstance. Actual results or amounts could differ from estimates and the differences could have amaterial impact on the consolidated financial statements. A discussion of the Company’s critical accounting policies, the underlying judgments anduncertainties affecting their application and the likelihood that materially different amounts would be reported under different conditions or using differentassumptions, is as follows:Revenue RecognitionRevenues are generally recognized when title to products and risk of loss are transferred to customers. Additional conditions for recognition of revenue are thatcollection of sales proceeds is reasonably assured and the Company has no further performance obligations.The Company has certain contracts that contain multiple deliverables. These deliverables often include process development services and commercialproduction and are divided into separate units of accounting if certain criteria are met, including whether the delivered element has stand-alone value to thecustomer and the arrangement includes a general right of return relative to the delivered item, and delivery or performance of the undelivered item(s) isconsidered probable and substantially in the control of the Company. The consideration the Company receives is allocated at the inception of the arrangementto all deliverables on the basis of their relative selling price (the relative selling price method). When applying the relative selling price method, the selling pricefor each deliverable is determined using vendor specific objective evidence (“VSOE”) of selling price, if it exists; otherwise, third party evidence (“TPE”) ofselling price is used. If neither VSOE nor TPE of selling price exists for a deliverable, the Company uses it best estimate of selling price for that deliverable.Once the accounting units are defined, applicable revenue recognition criteria are applied to each of the separate units. The above policy is in accordance withthe Emerging Issues Task Force guidance on “Revenue Arrangements with Multiple Deliverables.” The Company elected to early adopt the provisions of thisstandard, on a prospective basis, for revenue arrangements entered into our materially modified beginning January 1, 2010. The adoption of this standard didnot have a material impact on the Company’s financial position or results of operations. For contracts that contain milestone-based payments, the Company recognizes revenue using the proportional performance method based on the percentage ofcosts incurred relative to the total costs estimated to be incurred to complete the contract. Revenue recognition computed under this methodology is compared tothe amount of non-refundable cash payments received or contractually receivable at the reporting date and the lesser of the two amounts is recognized asrevenue at each reporting date. The proportional performance methodology applied by the Company for revenue recognition utilizes an input based measure,specifically labor costs, because the Company believes the use of an input measure is a better surrogate of proportional performance than an output basedmeasure, such as milestones. Amounts billed in advance are recorded as deferred revenue on the balance sheet. Since payments received are typically non-refundable, the termination of acontract by a customer prior to its completion could result in an immediate recognition of deferred revenue relating to payments already received but notpreviously recognized as revenue.Sales terms to certain customers include rebates if certain conditions are met. Additionally, sales are generally made with a limited right of return under certainconditions. The Company estimates these rebates and returns at the time of sale based on the terms of agreements with customers and historical experience andrecognizes revenue net of these estimated costs which are classified as allowances and rebates.The Company bills a portion of freight cost incurred on shipments to customers. Amounts billed to customers are recorded within net revenues. Freight costsare reflected in cost of goods sold.____________(dollars in thousands, except share data) 24IndexAsset Valuations and Review for Potential ImpairmentsThe review of long-lived assets, principally fixed assets and other amortizable intangibles, requires the Company to estimate the undiscounted future cashflows generated from these assets whenever events or changes in circumstances indicate that the carrying value may not be fully recoverable. If undiscountedcash flows are less than carrying value, the long-lived assets are written down to fair value.The review of the carrying value of goodwill and indefinite lived intangibles is conducted annually or whenever events or changes in circumstances indicatethat the carrying value may not be fully recoverable utilizing a two-step process. In the first step, the fair value of the reporting units is determined using adiscounted cash flow model and compared to the carrying value. If such analysis indicates that impairment may exist, the Company then estimates the fairvalue of the other assets and liabilities utilizing appraisals and discounted cash flow analyses to calculate an impairment charge.The determination of fair value is judgmental and involves the use of significant estimates and assumptions, including projected future cash flows primarilybased on operating plans, discount rates, determination of appropriate market comparables and perpetual growth rates. These estimates and assumptionscould have a significant impact on whether or not an impairment charge is recognized and the magnitude of any such charge. Environmental and Litigation ContingenciesThe Company periodically assesses the potential liabilities related to any lawsuits or claims brought against it. See Note 20 for a discussion of the Company’scurrent environmental and litigation matters, reserves recorded and its position with respect to any related uncertainties. While it is typically very difficult todetermine the timing and ultimate outcome of these actions, the Company uses its best judgment to determine if it is probable that the Company will incur anexpense related to a settlement for such matters and whether a reasonable estimation of such probable loss, if any, can be made. If probable and estimable, theCompany accrues for the costs of clean-up, settlements and legal fees. Given the inherent uncertainty related to the eventual outcome of litigation andenvironmental matters, it is possible that all or some of these matters may be resolved for amounts materially different from any provisions that the Companymay have made with respect to their resolution. Income TaxesThe Company applies an asset and liability approach to accounting for income taxes. Deferred tax assets and liabilities are recognized for the expected futuretax consequences of temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year inwhich the differences are expected to reverse. The recoverability of deferred tax assets is dependent upon the Company’s assessment that it is more likely thannot that sufficient future taxable income will be generated in the relevant tax jurisdictions to utilize the deferred tax assets. In the event the Company determinesthat future taxable income will not be sufficient to utilize the deferred tax assets, a valuation allowance is recorded. The Company’s valuation allowancesprimarily relate to foreign tax credits, alternative minimum tax credits, and other net deferred balances in the U.S., where profitability is uncertain, and NOLcarryforwards in foreign jurisdictions with little or no history of generating taxable income or where future profitability is uncertain.Employee Benefit PlansThe Company provides a range of benefits to certain employees and retired employees, including pensions, post employment benefits and health carebenefits. The Company records annual amounts relating to these plans based on calculations, which include various actuarial assumptions, includingdiscount rates, assumed rates of return, turnover rates, and health care cost trend rates. The Company reviews its actuarial assumptions on an annual basisand makes modifications to the assumptions based on current rates and trends when it is deemed appropriate to do so. The effect of the modifications isgenerally recorded and amortized over future periods. The Company believes that the assumptions utilized for recording obligations under its plans arereasonable.The discount rate used to measure pension liabilities and costs is selected by projecting cash flows associated with plan obligations which are matched to ayield curve of high quality bonds. The Company then selects the single rate that produces the same present value as if each cash flow were discounted by thecorresponding spot rate on the yield curve.____________(dollars in thousands, except share data) 25IndexResults of Operations2010 Compared to 2009Gross sales for 2010 decreased 4.2% to $226,436 from $236,277 in 2009. The impact of foreign currency exchange was negligible.The following table summarizes gross sales by product groups: 2010 2009 APIs and pharmaceutical intermediates $203,807 $212,644 Other 22,629 23,633 Total $226,436 $236,277 Sales of APIs and pharmaceutical intermediates in 2010 of $203,807 were $8,837 or 4.2% below the prior year. The main drivers of the lower salesinclude declines in products utilizing the Company’s drug delivery technology due to a negotiated contract extension resulting in lower volumes and pricing,two APIs manufactured under long-term supply agreements, one of which is a result of a supply chain disruption at a customer’s facility that has since beenresolved and the other due to lower demand by a customer, and lower custom development revenue. Increased demand for generic APIs and controlledsubstances exceeded price declines and positively impacted 2010 as compared to 2009.Other sales in 2010 of $22,629 were $1,004 or 4.2% below the prior year. The decrease in sales is due primarily to lower sales of a feed additive product linethat the Company previously exited partially offset by higher sales of specialty additives.Gross profit in 2010 was $66,866 compared to $70,278 in 2009. Gross margins in 2010 decreased slightly to 29.5% compared to 29.7% in2009. Excluding a 0.6% unfavorable impact from foreign currency, gross margins increased to 30.1%. Excluding the foreign currency impact, the highermargins are due primarily to favorable product mix, lower productions costs, insurance proceeds related to a business interruption claim (+0.7%) and feesrelated to the cancellation of a supply contract (+0.3%) partially offset by lower pricing during 2010.Selling, general and administrative expenses of $34,024 or 15.0% of gross sales in 2010 decreased from $35,711 or 15.1% in 2009. This decrease is dueprimarily to lower legal fees (approximately $1,600), insurance premiums (approximately $1,000) and bonus expense (approximately $800) partially offset bya one-time benefit from terminating the postretirement employee benefit plan in 2009 (approximately $1,200) and bad debt expense (approximately $600).Research and development expenses of $10,305 were 4.6% of gross sales in 2010, compared to $7,929 or 3.4% of gross sales in 2009. The increase isprimarily due to the March 2010 acquisition of IEP (approximately $1,550) and reduced utilization of certain R&D personnel on revenue-generating customdevelopment projects resulting in these costs being expensed rather than absorbed into cost of sales.During 2010, the Company finalized a plan to restructure its operations at a manufacturing site which resulted in a reduction in workforce of 32employees. The plan included certain one-time benefits for terminated employees, all of which will be paid in cash. Costs related to this transaction arerecorded on the Company’s income statement under the caption “Restructuring expenses” and totaled $1,293 in 2010.____________(dollars in thousands, except share data) 26IndexOperating profit was $20,247 in 2010 compared to $26,638 in 2009. The decrease is due to lower gross profit, higher R&D expense, restructuring costs andmerger and acquisition expenses partially offset by lower selling, general and administrative expenses discussed above. The 2010 results include restructuringcosts and merger and acquisition expenses of $1,293 and $997, respectively.Net interest expense was $4,391 in 2010 compared to $4,634 in 2009. This decrease is due primarily to lower average debt balances, lower interestrates and the Company’s interest rate swaps maturing in October 2010 partially offset by lower capitalized interest due to the completion of a large capitalproject in 2009. Average interest rates were 3.3% and 3.8% in 2010 and 2009, respectively. In November 2010, the Company acquired a 51% equity stake in Zenara for approximately $18,900. Zenara is a Hyderabad, India basedpharmaceutical company focused on the formulation of final dosage form products. Pursuant to the stock purchase agreement, Cambrex will acquire theremaining 49% in early 2016 at a value to be determined using a weighted combination of a multiple of 2015 EBITDA and cumulative EBITDA for the years2011 through 2015, adjusted for Zenara’s net debt or net cash position, as recorded under Indian GAAP. Cambrex accounts for its investment in Zenarausing the equity method of accounting. The impact of its ownership stake in Zenara was a loss of $286 in 2010 and is located within “Other expenses/(income)” as “Equity in losses ofpartially-owned affiliate” in the income statement.The Company recorded tax expense of $5,665 in 2010 compared to $12,253 in 2009. The tax expense for 2010 and 2009 includes a benefit of$1,799 and a charge of $103 for changes in valuation allowances, respectively, to offset expense and benefit generated from domestic income and losses, taxcredits, and losses in certain foreign jurisdictions. These valuation allowances result from the Company’s recent history of domestic and certain foreign lossesand its short-term projections for losses in the relative jurisdictions. Since 2003, the Company has maintained a full valuation allowance on the tax benefitsarising from domestic pre-tax losses. The Company will continue to record a full valuation allowance, primarily on its domestic net deferred tax assets and indefinite-lived intangibles, untilan appropriate level of domestic profitability is sustained or tax strategies can be developed that would enable the Company to conclude that it is more likelythan not that a portion of the domestic net deferred tax assets would be realized. If the Company continues to report pre-tax losses in the United States andcertain foreign jurisdictions, income tax benefits associated with those losses will not be recognized and, therefore, those losses would not be reduced by suchincome tax benefits. The carryforward periods for domestic federal foreign tax credits, research and experimentation tax credits and alternative minimum taxcredits are 10 years, 20 years and an indefinite period, respectively. As such, improvements in domestic pre-tax income in the future may result in these taxbenefits ultimately being realized. However, there is no assurance that such improvements will be achieved.In 2009, the Company’s Italian subsidiary was examined by the Italian tax authorities, who challenged the business purpose of the deductibility ofcertain intercompany transactions from 2003. In the fourth quarter of 2009, the tax authorities notified the Company that they disagreed with the Company’sresponses to their formal assessments. In the first quarter of 2010, the Company filed a response with the tax authorities and is prepared to litigate thematter. The Company has analyzed these issues in accordance with guidance on uncertain tax positions and believes its reserves are adequate.Income from continuing operations in 2010 was $9,309, or $0.32 per diluted share, versus $10,392, or $0.36 per diluted share in 2009.2009 Compared to 2008Gross sales for 2009 decreased 5.3% to $236,277 from $249,618 in 2008. Gross sales were unfavorably impacted in 2009 by 4.1% due to strength in theU.S. dollar primarily versus the Euro and Swedish krona.____________(dollars in thousands, except share data) 27IndexThe following table summarizes gross sales by product groups: 2009 2008 APIs and pharmaceutical intermediates $212,644 $220,722 Other 23,633 28,896 Total $236,277 $249,618 Sales of APIs and pharmaceutical intermediates in 2009 of $212,644 were $8,078 or 3.7% below the prior year. Excluding the unfavorable impact due toforeign exchange rates, sales were up 0.6%. Higher sales were driven by higher demand for drug delivery products, controlled substances and customdevelopment products. These increases were mostly offset by lower revenues for two products for which long-term contracts are in effect, and lower volumesand pricing of generic APIs.Other sales in 2009 of $23,633 were $5,263 or 18.2% below the prior year. Excluding the unfavorable impact due to foreign exchange, these sales were down14.9%. The decrease in sales is due primarily to lower sales of a feed additive product line that the Company previously exited and lower sales of specialtyadditives.Gross profit in 2009 was $70,278 compared to $73,743 in 2008. Gross margins in 2009 increased to 29.7% from 29.5% in 2008. Excluding a 1.6%favorable impact from foreign currency, gross margins decreased 1.4%. The lower margins are due primarily to lower pricing during 2009.Selling, general and administrative expenses of $35,711 or 15.1% of gross sales in 2009 decreased from $40,521 or 16.2% in 2008. This decrease is dueprimarily to a favorable impact from foreign currency (approximately $2,400), a benefit from terminating the postretirement employee benefit plan(approximately $1,200), higher 2008 expense related to the former CEO’s retirement (approximately $1,000) and lower insurance premiums, recruiting expenseand professional fees (approximately $1,600), partially offset by higher legal fees (approximately $1,200).Research and development expenses of $7,929 were 3.4% of gross sales in 2009, compared to $7,590 or 3.0% of gross sales in 2008. The increase isprimarily due to higher costs related to the development of new products and technology platforms. The impact of foreign currency reduced R&D expenses byapproximately $550.Restructuring expenses for 2008 were $4,695, consisting of rent and related costs at the New Jersey R&D facility and costs associated with therestructuring of the corporate office.Strategic alternative costs for 2008 were $1,515, consisting of costs associated with a project to streamline the Company’s legal entity structure,change-in-control benefits and costs associated with the modification of employee stock options due to the payment of the special dividend in connection withthe 2007 divestiture of the businesses that comprised the Bioproducts and Biopharma segments.Operating profit was $26,638 in 2009 compared to $19,422 in 2008. The increase is due to lower strategic alternative and restructuring costs andlower spending as discussed above, partially offset by lower gross profit. The 2008 results include strategic alternative and restructuring costs of $1,515 and$4,695, respectively.Net interest expense was $4,634 in 2009 compared to $3,668 in 2008. This increase is due primarily to lower capitalized interest of $1,355 due to thecompletion of a large capital project and lower interest income as a result of lower interest rates. The increase was partially offset by lower interest expense onthe Company’s debt as a result of lower average interest rates partially offset by higher average debt. The average interest rates were 3.8% and 4.9% in 2009and 2008, respectively.The Company recorded tax expense of $12,253 in 2009 compared to $7,071 in 2008. The tax expense for 2009 and 2008 includes a $103 and$5,537 valuation allowance, respectively, to offset benefits generated from domestic losses and tax credits, and losses in certain foreign jurisdictions. Thesevaluation allowances result from the Company’s recent history of domestic and certain foreign losses and its short-term projections for losses in the relativejurisdictions. Since 2003, the Company has maintained a full valuation allowance on the tax benefits arising from domestic pre-tax losses. ____________(dollars in thousands, except share data) 28IndexThe Company will continue to record a full valuation allowance, primarily on its domestic net deferred tax assets and indefinite lived intangibles, untilan appropriate level of domestic profitability is sustained or tax strategies can be developed that would enable the Company to conclude that it is more likelythan not that a portion of the domestic net deferred tax assets would be realized. If the Company continues to report pre-tax losses in the United States andcertain foreign jurisdictions, income tax benefits associated with those losses will not be recognized and, therefore, those losses would not be reduced by suchincome tax benefits. The carryforward periods for domestic federal foreign tax credits, NOLs, research and experimentation tax credits and alternativeminimum tax credits are 10 years, 20 years, 20 years and an indefinite period, respectively. As such, improvements in domestic pre-tax income in the futuremay result in these tax benefits ultimately being realized. However, there is no assurance that such improvements will be achieved.In 2009, the Company’s Italian subsidiary was examined by the Italian tax authorities, who challenged the business purpose of the deductibility ofcertain intercompany transactions from 2003. In the fourth quarter of 2009, the tax authorities notified the Company that they disagreed with the Company’sresponses to their formal assessments. In the first quarter of 2010, the Company filed an appeal to litigate the matter. The Company has analyzed these issuesin accordance with guidance on uncertain tax positions and believes its reserves are adequate, and intends to defend itself.Net income in 2009 was $10,392, or $0.36 per diluted share, versus $7,929, or $0.27 per diluted share in 2008.Liquidity and Capital ResourcesDuring 2010, cash and cash equivalents on hand decreased $22,751 to $29,614. This decrease is primarily a result of the IEP and Zenara acquisitionswhich reduced cash by $27,204. The year over year strength in the U.S. dollar unfavorably impacted the translated cash balances by $2,029. During 2010,cash flows from operations provided $23,284, compared to $34,392 in the same period a year ago. Cash flows from operations in 2010 compared to 2009were unfavorably impacted by the timing of sales at the end of each year with higher late-year sales in the fourth quarter of 2010 resulting in higher receivablebalances and increased inventory production partially offset by cash payments required in 2009 related to change-in-control and restructuringpayments. Cash flows used in financing activities in 2010 of $4,954 mainly reflect the pay down of debt.In April 2007, the Company entered into a $200,000 five-year Syndicated Senior Revolving Credit Facility (“Credit Facility”) which expires in April2012. The Company pays interest on this Credit Facility at LIBOR plus 1.25% - 2.00% based upon certain financial measurements. The Credit Facility alsoincludes financial covenants regarding interest coverage and leverage ratios. The Company was in compliance with all financial covenants at December 31,2010. The Credit Facility is collateralized by dividend and distribution rights associated with a pledge of a portion of stock that the Company owns in aforeign holding company. This foreign holding company owns a majority of the Company's non-U.S. operating subsidiaries. As of December 31, 2010, therewas $115,900 outstanding on this Credit Facility.The 2010 and 2009 weighted average interest rates for long-term bank debt were 3.3% and 3.8%, respectively. In November 2010, the Company purchased a 51% equity stake in Zenara for approximately $18,900 and is required to purchase the remaining 49%in 2016 based upon a formula derived from Zenara’s future EBITDA. The Company may, at its option, purchase the remaining equity in cash or acombination of cash and up to 50% of the consideration in Cambrex stock. ____________(dollars in thousands, except share data) 29Index To the extent that Zenara has significant EBITDA over the next five years, substantial consideration will be required to purchase the remaining 49%. Alarge cash payment could require borrowing under our Credit Facility and, because our Credit Facility will need to be refinanced prior to its expiration in April2012, there is no guarantee that the Company’s future credit arrangements will facilitate the future purchase of the remaining 49% in 2016. The uncertaintyregarding the amount of consideration required for the 2016 buyout of the 49% may impact our future borrowing ability, result in higher interest expense, orpossibly result in difficulty securing any credit arrangements in the future. Additionally, issuance of any stock to satisfy a portion of this obligation couldhave a dilutive effect on holders of our common stock. In the event that Cambrex is unable to compensate the 49% equity holder for its shares in 2016, the49% shareholder has certain rights, including the right to force a sale of Zenara to a third party to secure their payment. For 2011, capital expenditures are expected to be approximately $14,000 to $17,000.Contractual ObligationsAt December 31, 2010, the Company’s contractual obligations with initial or remaining terms in excess of one year were as follows: Total 2011 2012 2013 2014 2015 2016+ Long term debt $115,900 $- $115,900 $- $- $- $-Interest on debt 3,095 2,321 774 - - - -Operating leases 4,212 803 620 581 519 480 1,209Purchase obligations 6,794 5,574 698 522 - - -Contractual cashobligations $130,001 $8,698 $117,992 $1,103 $519 $480 $1,209In addition to the contractual obligations listed above, the Company expects to contribute approximately $5,250 in cash to its U.S. defined-benefit pensionplan in 2010. The Company believes it is possible that a similar amount of pension contributions could be required in 2012. For the unfunded SERP andinternational pension plans the Company expects to make benefit payments of approximately $1,400 in 2011 and similar amounts in 2012 through 2015. SeeNote 17 for details on the Company’s unfunded balance related to its pension plans. Also not included in the table above is $6,537 of uncertain tax positionsdue to uncertainties surrounding the timing of the obligation. See Note 10. The Company also may be required to make cash payments to remediate certainenvironmental sites at unknown future periods as discussed in Note 20.The Company anticipates that it will need to replace its expiring credit facility before April 2012. The terms and conditions, including the size, duration andcost of any new facility cannot be determined at this time. See Notes 11, 17, 19 and 20 for additional information regarding the Company’s pension plans,debt and other commitments.As disclosed above the Company has an obligation to purchase the remaining 49% of Zenara in 2016 at a price determined by future performance ofthat entity.The Company’s forecasted cash flow from future operations may be adversely affected by various factors including, but not limited to, declines incustomer demand, increased competition, the deterioration in general economic and business conditions, returns on assets within the Company’s domesticpension plans that are significantly below expected performance, as well as other factors. See the Risk Factors section of this document for further explanationof factors that may negatively impact the Company’s cash flows. Any change in the current status of these factors could adversely impact the Company'sability to fund operating cash flow requirements.____________(dollars in thousands, except share data) 30IndexMarket RisksCurrency Risk ManagementThe Company's primary market risk relates to exposure to foreign currency exchange rate fluctuations on transactions entered into by international operationswhich are primarily denominated in the U.S. dollar, Euro and Swedish krona. The Company currently uses foreign currency exchange forward contracts tomitigate the effect of short-term foreign exchange rate movements on the Company's local operating results. As a matter of policy, the Company does not hedgeto protect the translated results of foreign operations. The notional amount of these contracts as of December 31, 2010 was $19,094. Unrealized foreignexchange contract losses do not subject the Company's actual results to risk as gains or losses on these contracts are undertaken to offset gains or losses on thetransactions that are hedged. The foreign exchange contracts have varying maturities with none exceeding twelve months.With respect to the contracts outstanding at December 31, 2010, a 10% fluctuation of the local currency over a one-year period would cause $1,900 pre-taxearnings to be at risk. This is based on the notional amount of the contracts, adjusted for unrealized gains and losses, of $18,995. These calculations do notinclude the impact of exchange gains or losses on the underlying positions that would offset the gains and losses of the derivative instruments.Interest Rate ManagementThe Company previously employed a plan to mitigate interest rate risk by entering into interest rate swap agreements to convert floating rates to fixed interestrates. During 2010, the Company had three interest rate swaps in place with an aggregate notional value of $60,000, at an average fixed rate of 4.48%. Theseinterest rate swaps matured in October 2010. Interest expense related to these swaps totaled $2,080 for the year ended December 31, 2010. At December 31,2010, the Company did not have any interest rate swaps outstanding.ContingenciesThe Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary course of itsbusiness activities. The Company continually assesses all known facts and circumstances as they pertain to all legal and environmental matters andevaluates the need for reserves and disclosures as deemed necessary based on these facts and circumstances. These matters, either individually or in theaggregate, could have a material adverse effect on the Company's financial condition, operating results and cash flows in a future reporting period.EnvironmentalIn connection with laws and regulations pertaining to the protection of the environment, the Company and its subsidiaries are a party to several environmentalproceedings and remediation investigations and cleanups and, along with other companies, have been named a PRP for certain waste disposal sites("Superfund sites"). Additionally, the Company has retained the liability for certain environmental proceedings associated with discontinued operations.It is the Company’s policy to record appropriate liabilities for environmental matters where remedial efforts are probable and the costs can be reasonablyestimated. Such liabilities are based on the Company’s best estimate of the undiscounted future costs required to complete the remedial work. Each of thesematters is subject to various uncertainties, and it is possible that some of these matters will be decided unfavorably against the Company. The resolution ofsuch matters often spans several years and frequently involves regulatory oversight or adjudication. Additionally, many remediation requirements are notfixed and are likely to be affected by future technological, site, and regulatory developments. Consequently, the ultimate liability with respect to such matters,as well as the timing of cash disbursements cannot be determined with certainty.____________(dollars in thousands, except share data) 31IndexIn matters where the Company has been able to reasonably estimate its liability, the Company has accrued for the estimated costs associated with thestudy and remediation of sites not owned by the Company and the Company's current and former operating sites. These accruals were $7,017 and $6,163 atDecember 31, 2010 and 2009, respectively. The increase in the accrual includes adjustments to reserves of $1,375, of which $1,247 was included indiscontinued operations, and the impact of currency of $89 partially offset by payments of $610. The recorded liabilities are adjusted periodically asremediation efforts progress or as additional technical, regulatory or legal information becomes available. Based upon available information and analysis, theCompany's current accrual represents management's best estimate of the probable and estimable costs associated with environmental proceedings includingamounts for investigation fees where full remediation costs may not be estimable at the reporting date. Given the uncertainties regarding the status of laws,regulations, enforcement, policies, the impact of other PRPs, technology and information related to individual sites, the Company does not believe it is possibleto develop an estimate of the range of reasonably possible environmental loss in excess of its recorded liabilities.CasChemAs a result of the sale of the Bayonne, New Jersey facility, the Company became obligated to investigate site conditions and conduct required remediationunder the New Jersey Industrial Site Recovery Act. The Company submitted a sampling plan to the New Jersey Department of Environmental Protection(“NJDEP”) and is awaiting approval. The results of the completed and proposed sampling, and any additional sampling deemed necessary, will be used todevelop an estimate of the Company's future liability for remediation costs, if any.CosanIn response to the NJDEP, the Company completed its initial investigation and submitted the results of the investigation and a proposed remediation plan to theNJDEP for its Cosan Clifton, New Jersey site. The NJDEP subsequently rejected the remediation plan and requested additional investigative work at the siteand that work is on-going. The reserve was $1,094 at December 31, 2010 which was based on the initial remedial action plan. The results of the additionalinvestigative work may impact the remediation plan and costs.Additionally, the Company has recorded a liability of $895 for the Cosan Carlstadt, New Jersey site based on the investigations completed to date andthe proposed remediation plan submitted to the NJDEP for its approval. The NJDEP has subsequently required the Company to perform additionalinvestigative work prior to approval of the remediation plan. The results of this additional investigative work may impact the remediation plan andcosts. The NJDEP has advised the Company that the site will be placed in the NJDEP’s private oversight program. Under the program the Company will berequired to implement a remediation plan in 2012.Berry’s CreekThe Company received a notice from the United States Environmental Protection Agency (“USEPA”) that two former operating subsidiaries of theCompany are considered PRPs at the Berry’s Creek Superfund Site in New Jersey. The operating companies are among many other PRPs that were listed inthe notice. Pursuant to the notice, the PRPs have been asked to perform a remedial investigation and feasibility study of the Berry’s Creek Site. TheCompany has joined the group of PRPs and filed a response to the USEPA agreeing to jointly conduct or fund an appropriate remedial investigation andfeasibility study of the Berry’s Creek Site. The PRPs have engaged consultants to evaluate investigation and remedial alternatives and develop a method toallocate related costs among the PRPs. As of December 31, 2010, the Company’s reserve was $111 to cover the initial phase of investigation based on atentative agreement on the allocation of the site investigation costs among the PRPs. The investigation is ongoing and at this time it is too early to predict theextent of any additional liabilities.Maybrook and Harriman SitesThe Company’s Nepera, Inc. subsidiary (“Nepera”) is named a PRP of the Maybrook Site in Hamptonburgh, New York by the USEPA in connectionwith the discharge, under appropriate permits, of wastewater at that site prior to Cambrex's acquisition of Nepera in 1986. The USEPA also issued theCompany a Notice of Potential Liability and the Company signed a Consent Decree to complete the Record of Decision (“ROD”) and has provided the USEPAwith appropriate financial assurance to guarantee the obligation under the Consent Decree. The PRPs intend to begin to implement remedial action at this site in2011.____________(dollars in thousands, except share data) 32IndexNepera is also named a responsible party of its former Harriman, New York production facility by the New York State Department of EnvironmentalConservation. A final ROD was issued which describes the remediation plan for the site. Implementation of the ROD is on-going.As of December 31, 2010, the reserve recorded by the Company for Nepera was $2,050 and represents the Company’s best estimate to complete bothRODs.Scientific Chemical Processing (“SCP”) Superfund SiteNepera was named a PRP of the SCP Superfund site, located in Carlstadt, New Jersey, in the early 1980’s along with approximately 130 other PRPs. The siteis a former waste processing facility that accepted various waste for recovery and disposal including processing wastewater from Nepera. The PRPs are in theprocess of implementing a final remedy for soil and groundwater contamination at the site. The SCP Superfund site has also been identified as a PRP in theBerry’s Creek Superfund site (see previous discussion). For over a decade, the remediation has been funded by de minimus settlements and by the insurersof the SCP Superfund site’s owners and operators. However, due to an unexpected increase in remediation costs at the site and costs to contribute to theBerry’s Creek investigation, the PRP group has recently approved the assessment of an additional cash contribution by the PRP group. While the Companydisputes the methodology used by the PRP group to arrive at its allocation for the cash contribution, the Company has paid the initial funding request and hasestablished a reserve for the remaining allocation in the amount of $261.Solvent Recoveries Superfund SiteA subsidiary of the Company is one of approximately 1,300 PRPs at a Superfund site in Southington, Connecticut, once operated by Solvent Recoveries,Inc. The PRP group has completed a Remedial Investigation/Feasibility Study and the USEPA has proposed remediation of the site. In 2008, the Companyagreed to enter into a consent decree and settlement with the other PRPs and the USEPA whereby the Company agreed to pay a settlement amount of $353 withan initial payment of $106 and the remaining $247 to be paid in installments over time as the remediation proceeds. The Company has reserved for theunpaid portion of the settlement and has entered into a letter of credit to guarantee the payment obligation under the settlement.Newark Bay Complex LitigationCasChem and Cosan have been named as two of several hundred third-party defendants in a third-party complaint filed in February 2009, by Maxus EnergyCorporation (“Maxus”) and Tierra Solutions, Inc. (“Tierra”). The original plaintiffs include the NJDEP, the Commissioner of the NJDEP and theAdministrator of the New Jersey Spill Compensation Fund, which originally filed suit in 2005 against Maxus, Tierra and other defendants seeking recoveryof cleanup and removal costs for alleged discharges of dioxin and other hazardous substances into the Passaic River, Newark Bay, Hackensack River, ArthurKill, Kill Van Kull and adjacent waters (the “Newark Bay Complex”). Maxus and Tierra are now seeking contribution from third-party defendants,including subsidiaries of the Company, for cleanup and removal costs for which each may be held liable in the lawsuit. Maxus and Tierra also seek recoveryfor cleanup and removal costs that each has incurred or will incur relating to the Newark Bay Complex. The Company expects to vigorously defend againstthe lawsuit. At this time it is too early to predict whether the Company will have any liability in this matter.The Company is involved in other environmental matters where the range of liability is not reasonably estimable at this time and it is not determinable wheninformation will become available to provide a basis for adjusting or recording an accrual, should an accrual ultimately be required.____________(dollars in thousands, except share data) 33IndexLitigation and Other MattersLorazepam and ClorazepateIn 1998, the Company and a subsidiary were named as defendants along with Mylan Laboratories, Inc. (“Mylan”) and Gyma in a proceeding instituted bythe Federal Trade Commission in the United States District Court for the District of Columbia (the “District Court”). Suits were also commenced by severalState Attorneys’ General and class action complaints by private plaintiffs in various state courts. The suits alleged violations of the Federal TradeCommission Act arising from exclusive license agreements between the Company and Mylan covering two APIs (Lorazepam and Clorazepate).All cases have been resolved except for one brought by four health care insurers. In the remaining case the District Court entered judgment after trial in2008 against Mylan, Gyma and Cambrex in the amount of $8,355, payable jointly and severally, and also a punitive damage award against each defendantin the amount of $16,709. In addition, the District Court ruled that the defendants were subject to a total of approximately $7,000 in prejudgment interest. InJanuary 2011, the Court of Appeals ruled that certain plaintiffs did not have the diversity jurisdiction needed to bring an action in federal court and remandedthe case to the district court solely to determine which parties were properly before the court and to what extent the removal of certain parties from the case thatdo not meet jurisdictional requirements may affect damages. The Court of Appeals further declined to issue an opinion with respect to the merits of Mylan,Gyma and Cambrex’s objections to the jury’s damage award until such time as the jurisdiction issue is resolved by the district court. Cambrex paid $12,415 in exchange for a release from Mylan and full indemnity in 2003 against future costs or liabilities in related litigation broughtby purchasers, as well as potential future claims related to the ongoing matter. In the event of a final settlement or final judgment, Cambrex expects anypayment required by the Company to be made by Mylan under the indemnity described above.OtherThe Company has commitments incident to the ordinary course of business including corporate guarantees of certain subsidiary obligations to theCompany’s lenders related to financial assurance obligations under certain environmental laws for remediation; closure and third party liability requirementsof certain of its subsidiaries and a former operating location; contract provisions for indemnification protecting its customers and suppliers against third partyliability for the manufacture and sale of Company’s products that fail to meet product warranties and contract provisions for indemnification protectinglicensees against intellectual property infringement related to licensed Company technology or processes.Additionally, as permitted under Delaware law, the Company indemnifies its officers, directors and employees for certain events or occurrences while theofficer, director or employee is, or was, serving at the Company’s request in such capacity. The term of the indemnification period is for the officer's,director's or employee’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnificationagreements is unlimited; however, the Company has a director and officer insurance policy that covers a portion of any potential exposure. The Companycurrently believes the estimated fair value of its indemnification agreements is not material based on currently available information, and as such, theCompany had no liabilities recorded for these agreements as of December 31, 2010.Cambrex's subsidiaries are party to a number of other proceedings that are not considered material at this time. 34IndexImpact of Recent Accounting PronouncementsFair Value MeasurementsIn January 2010, the Financial Accounting Standards Board issued “Fair Value Measurements and Disclosures - Improving Disclosures about Fair ValueMeasurements.” This statement requires new disclosures and clarifies some existing disclosure requirements about fair value measurement. The amendmentsare effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, andsettlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15,2010, and for interim periods within those fiscal years. The effect of adopting this pronouncement will not have an impact on the Company’s financialposition or results of operations.Revenue Arrangements with Multiple DeliverablesIn September 2009, the Emerging Issues Task Force (“EITF”) issued “Revenue Arrangements with Multiple Deliverables.” This issue addresses how todetermine whether an arrangement involving multiple deliverables contains more than one unit of accounting, and how to allocate the consideration to each unitof accounting. This issue eliminates the use of the residual value method for determining allocation of arrangement consideration and allows the use of anentity's best estimate to determine the selling price if vendor specific objective evidence and third-party evidence cannot be determined. This issue also requiresadditional disclosure to provide both qualitative and quantitative information regarding the significant judgments made in applying this issue. In addition, foreach reporting period in the initial year of adoption, this issue requires disclosure of the amount of revenue recognized subject to the measurement requirementsof this issue and the amount of revenue that would have been recognized if the related transactions were subject to the measurement requirements of previousguidance. The Company elected to early adopt the provisions of this standard on a prospective basis, for revenue arrangements entered into or materiallymodified beginning January 1, 2010. The adoption of this standard did not have a material impact on the Company’s financial position or results ofoperations.Revenue Arrangements with Multiple DeliverablesIn April 2010, the EITF issued “Revenue Recognition – Milestone Method.” This issue provides guidance on defining a milestone and determining when it maybe appropriate to apply the milestone method of revenue recognition for research or development transactions. This issue is effective on a prospective basis formilestones achieved in fiscal years beginning after June 15, 2010. The Company is currently evaluating the potential impact of this issue.____________(dollars in thousands, except share data) 35IndexItem 7aQuantitative and Qualitative Disclosures about Market Risk.The information required in this section can be found in the “Market Risks” section of Item 7 on page 31 of this Form 10-K.____________(dollars in thousands, except share data) 36IndexItem 8Financial Statements and Supplementary Data.The following consolidated financial statements and selected quarterly financial data of the Company are filed under this item: Page Number (in this Report)Reports of Independent Registered Public Accounting Firm38Consolidated Balance Sheets as of December 31, 2010 and 200940Consolidated Income Statements for the Years Ended December 31, 2010, 2009 and 200841Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2010, 2009 and 200842Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 200843Notes to Consolidated Financial Statements44Selected Quarterly Financial and Supplementary Data (unaudited)75The financial statement schedules are filed pursuant to Item 15 of this report.____________(dollars in thousands, except share data) 37IndexReport of Independent Registered Public Accounting FirmTo the Board of Directors and Stockholders of Cambrex Corporation,We have audited the accompanying consolidated balance sheets of Cambrex Corporation as of December 31, 2010 and 2009 and the relatedconsolidated income statements, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2010. In connection withour audits of the financial statements, we have also audited the financial statement schedules listed in the accompanying index. These financial statements andschedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules basedon our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditalso includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedules. We believe thatour audits provide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CambrexCorporation at December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31,2010, in conformity with accounting principles generally accepted in the United States of America.Also, in our opinion, the financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole,present fairly, in all material respects, the information set forth therein.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), CambrexCorporation’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control – Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 11, 2011 expressed anunqualified opinion thereon./s/ BDO USA, LLPWoodbridge, NJFebruary 11, 2011 38IndexReport of Independent Registered Public Accounting FirmTo the Board of Directors and Shareholders of Cambrex Corporation,We have audited Cambrex Corporation’s internal control over financial reporting as of December 31, 2010, based on criteria established in InternalControl – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). CambrexCorporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanying “Item 9A, Management’s Report on Internal Control Over Financial Reporting.” Ourresponsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performingsuch other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internalcontrol over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately andfairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.In our opinion, Cambrex Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010,based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidatedbalance sheets of Cambrex Corporation as of December 31, 2010 and 2009, and the related consolidated statements of income, stockholders’ equity, and cashflows for each of the three years in the period ended December 31, 2010 and our report dated February 11, 2011 expressed an unqualified opinion thereon./s/ BDO USA LLPWoodbridge, NJFebruary 11, 2011 39IndexCAMBREX CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(dollars in thousands, except share data) December 31, 2010 2009 ASSETS Current assets: Cash and cash equivalents $29,614 $52,365 Trade receivables, less allowances of $1,083 and $627 at respective dates 39,025 32,025 Inventories, net 61,408 58,369 Prepaid expenses and other current assets 5,082 6,654 Total current assets 135,129 149,413 Property, plant and equipment, net 150,483 161,149 Goodwill 37,694 36,360 Intangible assets, net 4,687 - Investment in partially-owned affiliate 19,709 - Other non-current assets 4,049 4,593 Total assets $351,751 $351,515 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $19,480 $17,038 Accrued expense and other current liabilities 33,503 38,013 Total current liabilities 52,983 55,051 Long-term debt 115,900 120,800 Deferred income tax 17,893 17,305 Accrued pension and postretirement benefits 43,921 40,963 Other non-current liabilities 13,419 14,126 Total liabilities 244,116 248,245 Commitments and contingencies (see Notes 19 and 20) Stockholders' equity: Common Stock, $.10 par value; authorized 100,000,000 issued 31,409,638 and 31,408,778 shares at respectivedates 3,140 3,140 Additional paid-in capital 101,271 100,497 Retained earnings 31,992 22,345 Treasury stock, at cost, 1,978,533 and 2,121,372 shares at respective dates (16,876) (18,109)Accumulated other comprehensive loss (11,892) (4,603)Total stockholders' equity 107,635 103,270 Total liabilities and stockholders' equity $351,751 $351,515 See accompanying notes to consolidated financial statements. 40IndexCAMBREX CORPORATION AND SUBSIDIARIESCONSOLIDATED INCOME STATEMENTS(dollars in thousands, except share data) Years Ended December 31, 2010 2009 2008 Gross Sales $226,436 $236,277 $249,618 Commissions, allowances and rebates 1,545 1,402 2,099 Net sales 224,891 234,875 247,519 Other revenues 2,101 (325) 1,709 Net revenues 226,992 234,550 249,228 Cost of goods sold 160,126 164,272 175,485 Gross profit 66,866 70,278 73,743 Selling, general and administrative expenses 34,024 35,711 40,521 Research and development expenses 10,305 7,929 7,590 Restructuring expenses 1,293 - 4,695 Strategic alternative costs - - 1,515 Merger and acquisition expenses 997 - - Operating profit 20,247 26,638 19,422 Other expenses/(income) Interest expense, net 4,391 4,634 3,668 Other expenses/(income), net 596 (641) 754 Equity in losses of partially-owned affiliate 286 - - Income before income taxes 14,974 22,645 15,000 Provision for income taxes 5,665 12,253 7,071 Income from continuing operations 9,309 10,392 7,929 Income from discontinued operations, net of tax 338 - - Net income $9,647 $10,392 $7,929 Basic earnings per share Income from continuing operations $0.32 $0.36 $0.27 Income from discontinued operations, net of tax $0.01 $- $- Net income $0.33 $0.36 $0.27 Diluted earnings per share Income from continuing operations $0.32 $0.36 $0.27 Income from discontinued operations, net of tax $0.01 $- $- Net income $0.33 $0.36 $0.27 Weighted average shares outstanding: Basic weighted average shares outstanding 29,361 29,241 29,116 Effect of dilutive stock options and restricted stock 107 26 45 Diluted weighted average shares outstanding 29,468 29,267 29,161 See accompanying notes to consolidated financial statements. 41IndexCAMBREX CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(dollars in thousands, except share data) Common Stock SharesIssued ParValue($.10) AdditionalPaid-InCapital RetainedEarnings TreasuryStock Comprehensive(Loss)/Gain AccumulatedOtherComprehensiveLoss TotalStockholders'Equity Balance at December 31, 2007 31,399,700 $3,140 $98,793 $4,031 $(20,386) $16,479 $102,057 Comprehensive loss Net income 7,929 7,929 7,929 Other comprehensive loss Foreign currency translationadjustment (16,830) Unrealized losses onhedging contracts, net oftax of $322 (2,962) Pensions, net of tax of$145 (17,868) Other comprehensive loss (37,660) (37,660) (37,660)Total comprehensive loss $(29,731) Purchase of treasury stock (50) (50)Exercise of stock options 2,301 18 18 Deferred compensation 4,777 59 170 229 Vested restricted stock (1,252) 1,252 - Stock option modification 102 102 Stock option expense 582 582 Restricted stock expense 1,545 1,545 Performance stock expense 34 34 Balance at December 31, 2008 31,406,778 $3,140 $99,881 $11,960 $(19,014) $(21,181) $74,786 Comprehensive income Net income 10,392 10,392 10,392 Other comprehensiveincome Foreign currency translationadjustment 9,819 Unrealized gains onhedging contracts, net oftax of $304 2,450 Pensions, net of tax of $204 4,309 Other comprehensiveincome 16,578 16,578 16,578 Total comprehensive income $26,970 Adjustment to cash dividend on restrictedstock. (7) (7)Purchase of treasury stock (25) (25)Exercise of stock options 2,000 9 9 Deferred compensation (102) 264 162 Vested restricted stock (666) 666 - Stock option modification 94 94 Stock option expense 554 554 Restricted stock expense 658 658 Performance stock expense 69 69 Balance at December 31, 2009 31,408,778 $3,140 $100,497 $22,345 $(18,109) $(4,603) $103,270 Comprehensive income Net income 9,647 9,647 9,647 Other comprehensiveincome Foreign currency translationadjustment (7,417) Unrealized gains onhedging contracts, net oftax benefit of $114 1,741 Pensions, net of tax benefitof $1 (1,613) Other comprehensive loss (7,289) (7,289) (7,289)Total comprehensive income $2,358 Purchase of treasury stock (33) (33)Deferred compensation (96) 262 166 Vested restricted stock 860 (1,004) 1,004 - Stock option modification 52 52 Stock option expense 1,020 1,020 Restricted stock expense 645 645 Performance stock expense 157 157 Balance at December 31, 2010 31,409,638 $3,140 $101,271 $31,992 $(16,876) $(11,892) $107,635 See accompanying notes to consolidated financial statements. 42IndexCAMBREX CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(dollars in thousands) Years Ended December 31, 2010 2009 2008 Cash flows from operating activities: Net income $9,647 $10,392 $7,929 Adjustments to reconcile net income to cash flows: Depreciation and amortization 21,828 20,505 21,055 Increase in inventory reserve 1,719 4,196 2,916 Allowance for doubtful accounts 479 (191) 600 Stock based compensation included in net income 1,822 1,281 1,967 Deferred income tax provision (1,165) (287) (23)Strategic alternative and restructuring charges 870 - 2,987 Equity in losses of partially-owned affiliate 286 - - Stock option modification 52 94 102 Foreign tax reserve - 5,330 - Other 245 (259) 1,284 Changes in assets and liabilities: Trade receivables (7,148) 5,930 5,547 Inventories (4,925) 712 (8,612)Prepaid expenses and other current assets 1,357 2,083 7,264 Accounts payable and other current liabilities (938) (13,038) (36,509)Other non-current assets and liabilities (374) (2,356) (1,518)Discontinued operations: Adjustments to reconcile discontinued operations to cash flows (471) - - Net cash provided by operating activities 23,284 34,392 4,989 Cash flows from investing activities: Capital expenditures (12,637) (12,587) (29,378)Acquisition of business and equity investment, net of cash acquired (25,249) - (1,271)Capital invested in partially-owned affiliate (1,148) - - Other investing activities (18) 67 12 Net cash used in investing activities (39,052) (12,520) (30,637) Cash flows from financing activities: Dividends and return of capital - (889) - Long-term debt activity (including current portion): Borrowings 33,200 23,600 61,600 Repayments (38,100) (26,600) (39,458)Proceeds from stock options exercised - 9 18 Other financing activities (54) (48) (50)Net cash (used in)/provided by financing activities (4,954) (3,928) 22,110 Effect of exchange rate changes on cash and cash equivalents (2,029) 1,881 (2,410)Net (decrease)/increase in cash and cash equivalents (22,751) 19,825 (5,948)Cash and cash equivalents at beginning of year 52,365 32,540 38,488 Cash and cash equivalents at end of year $29,614 $52,365 $32,540 Supplemental disclosure: Interest paid, net of capitalized interest $4,328 $4,906 $4,126 Income taxes paid $5,398 $9,617 $10,342 See accompanying notes to consolidated financial statements. 43IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share data)(1)The CompanyCambrex Corporation and Subsidiaries (the “Company” or “Cambrex”) primarily provides products and services worldwide to pharmaceutical companiesand generic drug companies. The Company is dedicated to accelerating its customers' drug discovery, development and manufacturing processes for humantherapeutics. The Company’s products consist of active pharmaceutical ingredients (“APIs”) and pharmaceutical intermediates produced under Food andDrug Administration current Good Manufacturing Practices for use in the production of prescription and over-the-counter drug products and other fine customchemicals derived from organic chemistry. Cambrex has three operating segments, which are manufacturing facilities, that have been aggregated as onereportable segment.(2)Summary of Significant Accounting PoliciesPrinciples of ConsolidationThe consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Equity investments in which the Companyexercises significant influence but does not control, are accounted for using the equity method. The Company’s share of its equity method investees’ earningsor losses are included in “Other expenses/(income)” in the accompanying income statements. The Company eliminates its pro rata share of gross profit onsales to/from its equity method investees for assets still remaining in inventory at the end of the reporting period. All other significant inter-company balancesand transactions have been eliminated in consolidation.Cash EquivalentsTemporary cash investments with an original maturity of less than three months are considered cash equivalents. The carrying amounts approximate fairvalue.Allowance for Doubtful AccountsThe Company maintains allowances for doubtful accounts relating to estimated losses resulting from customers being unable to make requiredpayments. Allowances for doubtful accounts are based on historical experience and known factors regarding specific customers and the industries in whichthose customers operate. If the financial condition of the Company’s customers were to deteriorate, resulting in their ability to make payments being impaired,additional allowances would be required.Concentrations of credit riskFinancial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accountsreceivable. The Company maintains cash and cash equivalents with high quality financial institutions. Concentrations of credit risk with respect to accountsreceivable are limited due to the Company's large number of customers and their dispersion throughout the world. 44IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(2)Summary of Significant Accounting Policies (continued)Derivative InstrumentsDerivative financial instruments are used by the Company primarily for hedging purposes to mitigate a variety of working capital, investment and borrowingrisks. The Company primarily uses foreign currency forward contracts to minimize foreign currency exchange rate risk associated with foreign currencytransactions. Gains and losses on these hedging transactions are generally recorded in earnings in the same period as they are realized, which is usually thesame period as the settlement of the underlying transactions. The Company occasionally uses interest rate swap instruments only as hedges or as an integralpart of borrowing. As such, the differential to be paid or received in connection with these instruments is accrued and recognized in income as an adjustmentto interest expense.The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategiesfor undertaking various hedging relationships. All cash flow hedges are linked to transactions and the Company assesses effectiveness at inception and on aquarterly basis. If it is determined that a derivative instrument is not highly effective or the transaction is no longer deemed probable of occurring, theCompany discontinues hedge accounting and recognizes the ineffective portion in current period earnings.InventoriesInventories are stated at the lower of cost, determined on a first-in, first-out basis, or market. The determination of market value involves assessment ofnumerous factors, including costs to dispose of inventory and estimated selling prices. Reserves are recorded to reduce carrying value for inventorydetermined to be damaged, obsolete or otherwise unsaleable.Property, Plant and EquipmentProperty, plant and equipment is stated at cost, net of accumulated depreciation. Plant and equipment are depreciated on a straight-line basis over the estimateduseful lives for each applicable asset group as follows:Buildings and improvements 20 to 30 years, or term of lease if applicableMachinery and equipment 7 to 15 yearsFurniture and fixtures 5 to 7 yearsComputer hardware and software 3 to 7 yearsExpenditures for additions, major renewals or betterments are capitalized and expenditures for maintenance and repairs are charged to income as incurred.When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or lossis reflected in costs of goods sold or operating expenses. Interest is capitalized in connection with the construction and acquisition of assets that are capitalizedover longer periods of time for larger amounts. The capitalized interest is recorded as part of the cost of the asset to which it relates and is amortized over theasset’s estimated useful life. Total interest capitalized in connection with ongoing construction activities in 2010, 2009 and 2008 amounted to $41, $677 and$2,032, respectively. 45IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(2)Summary of Significant Accounting Policies (continued)Impairment of GoodwillThe Company reviews the carrying value of goodwill to determine whether impairment may exist on an annual basis or whenever it has reason to believegoodwill may not be recoverable. The annual impairment test of goodwill is performed during the fourth quarter of each fiscal year. The Company did nothave a goodwill impairment for any of the years presented.Goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment bycomparing the fair value of each reporting unit, determined using various valuation techniques, with the primary technique being a discounted cash flowanalysis, to its carrying value. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired andthe second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwillimpairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fairvalue of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fairvalue of that goodwill, an impairment loss is recognized in an amount equal to that excess.Impairment of Long-Lived AssetsThe Company assesses the impairment of its long-lived assets, including amortizable intangible assets, and property, plant and equipment, whenevereconomic events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. Long lived assets are considered to beimpaired when the sum of the undiscounted expected future operating cash flows is less than the carrying amounts of the related assets. If impaired, the assetsare written down to fair market value.Revenue RecognitionRevenues are generally recognized when title to products and risk of loss are transferred to customers. Additional conditions for recognition of revenue are thatcollection of sales proceeds is reasonably assured and the Company has no further performance obligations.The Company has certain contracts that contain multiple deliverables. These deliverables often include process development services and commercialproduction and are divided into separate units of accounting if certain criteria are met, including whether the delivered element has stand-alone value to thecustomer and the arrangement includes a general right of return relative to the delivered item, and delivery or performance of the undelivered item(s) isconsidered probable and substantially in the control of the Company. The consideration the Company receives is allocated at the inception of the arrangementto all deliverables on the basis of their relative selling price (the relative selling price method). When applying the relative selling price method, the selling pricefor each deliverable is determined using vendor specific objective evidence (“VSOE”) of selling price, if it exists; otherwise, third party evidence (“TPE”) ofselling price is used. If neither VSOE nor TPE of selling price exists for a deliverable, the Company uses it best estimate of selling price for that deliverable.Once the accounting units are defined, applicable revenue recognition criteria are applied to each of the separate units. The above policy is in accordance withthe Emerging Issues Task Force (“EITF”) guidance on “Revenue Arrangements with Multiple Deliverables.” The Company elected to early adopt theprovisions of this standard, on a prospective basis, for revenue arrangements entered into or materially modified beginning January 1, 2010. The adoption ofthis standard did not have a material impact on the Company’s financial position or results of operations. 46IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(2)Summary of Significant Accounting Policies (continued)For contracts that contain milestone-based payments, the Company recognizes revenue using the proportional performance method based on the percentage ofcosts incurred relative to the total costs estimated to be incurred to complete the contract. Revenue recognition computed under this methodology is compared tothe amount of non-refundable cash payments received or contractually receivable at the reporting date and the lesser of the two amounts is recognized asrevenue at each reporting date. The proportional performance methodology applied by the Company for revenue recognition utilizes an input based measure,specifically labor costs, because the Company believes the use of an input measure is a better surrogate of proportional performance than an output basedmeasure, such as milestones. Amounts billed in advance are recorded as deferred revenue on the balance sheet. Since payments received are typically but non-refundable, the termination ofa contract by a customer prior to its completion could result in an immediate recognition of deferred revenue relating to payments already received but notpreviously recognized as revenue.Sales terms to certain customers include rebates if certain conditions are met. Additionally, sales are generally made with a limited right of return under certainconditions. The Company estimates these rebates and returns at the time of sale based on the terms of agreements with customers and historical experience andrecognizes revenue net of these estimated costs which are classified as allowances and rebates.The Company bills a portion of freight cost incurred on shipments to customers. Amounts billed to customers are recorded within net revenues. Freight costsare reflected in cost of goods sold.Income TaxesThe Company and its eligible subsidiaries file a consolidated U.S. income tax return. Certain subsidiaries which are consolidated for financial reporting arenot eligible to be included in the consolidated U.S. income tax return. Cambrex has not provided U.S. federal income and withholding taxes on itsundistributed earnings from foreign operations as of December 31, 2010 because it intends to reinvest such earnings indefinitely outside of the UnitedStates. If Cambrex were to distribute these earnings, it is anticipated that foreign tax credits would be available under current law to significantly reduce oreliminate the resulting U.S. income tax liability. Determination of the amount of unrecognized deferred tax related to these earnings is not practical.Use of EstimatesThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period. Actual results could differ from those estimates.Environmental CostsThe Company is subject to extensive and changing federal, state, local and foreign environmental laws and regulations, and has made provisions for theestimated financial impact of environmental cleanup related costs. The Company’s policy is to accrue environmental cleanup related costs of a non-capitalnature, including estimated litigation costs, when those costs are believed to be probable and can be reasonably estimated. The quantification of environmentalexposures requires an assessment of many factors, including changing laws and regulations, advancements in environmental technologies, the quality ofinformation available related to specific sites, the assessment stage of each site investigation, preliminary findings and the length of time involved inremediation or settlement. Such accruals are adjusted as further information develops or circumstances change. For certain matters, the Company expects toshare costs with other parties. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed certain. 47IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(2)Summary of Significant Accounting Policies (continued) Foreign CurrencyThe functional currency of the Company's foreign subsidiaries is the applicable local currency. The translation of the applicable foreign currencies into U.S.dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts and cashflows using average rates of exchange prevailing during the year. Adjustments resulting from the translation of foreign currency financial statements areaccumulated in a separate component of stockholders' equity until the entity is sold or substantially liquidated. Gains or losses relating to transactions of along-term investment nature are accumulated in stockholders' equity. Gains or losses resulting from third-party foreign currency transactions are included inthe results of operations as a component of other revenues in the consolidated income statement. Foreign currency net transaction (losses)/gains were ($113),($1,006) and $1,183 in 2010, 2009 and 2008, respectively.Earnings per Common ShareAll diluted earnings per share are computed on the basis of the weighted average shares of common stock outstanding plus common equivalent shares arisingfrom the effect of dilutive stock options and restricted stock units, using the treasury stock method.For the years ended December 31, 2010, 2009 and 2008, shares of 1,866,270, 2,106,556, and 1,648,193, respectively, were not included in the calculationof diluted shares outstanding because the effect would be anti-dilutive.Comprehensive LossIncluded within accumulated other comprehensive loss for the Company are; foreign currency translation adjustments, changes in the fair value related toderivative instruments classified as cash flow hedges, net of related tax and changes in the pensions, net of tax. Total comprehensive loss for the years endedDecember 31, 2010 and 2009 are included in the statements of stockholders’ equity.The components of accumulated other comprehensive loss in stockholders’ equity are as follows: 2010 2009 Foreign currency translation $8,612 $16,029 Unrealized loss on hedging contracts, net of tax (65) (1,806)Pensions, net of tax (20,439) (18,826)Total $(11,892) $(4,603) 48IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(3)Impact of Recently Issued Accounting PronouncementsFair Value MeasurementsIn January 2010, the Financial Accounting Standards Board issued “Fair Value Measurements and Disclosures - Improving Disclosures about Fair ValueMeasurements.” This statement requires new disclosures and clarifies some existing disclosure requirements about fair value measurement. The amendmentsare effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, andsettlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15,2010, and for interim periods within those fiscal years. The effect of adopting this pronouncement will not have an impact on the Company’s financialposition or results of operations.Revenue Arrangements with Multiple DeliverablesIn September 2009, the EITF issued “Revenue Arrangements with Multiple Deliverables.” This issue addresses how to determine whether an arrangementinvolving multiple deliverables contains more than one unit of accounting, and how to allocate the consideration to each unit of accounting. This issueeliminates the use of the residual value method for determining allocation of arrangement consideration and allows the use of an entity's best estimate todetermine the selling price if vendor specific objective evidence and third-party evidence cannot be determined. This issue also requires additional disclosure toprovide both qualitative and quantitative information regarding the significant judgments made in applying this issue. In addition, for each reporting period inthe initial year of adoption, this issue requires disclosure of the amount of revenue recognized subject to the measurement requirements of this issue and theamount of revenue that would have been recognized if the related transactions were subject to the measurement requirements of previous guidance. TheCompany elected to early adopt the provisions of this standard, on a prospective basis, for revenue arrangements entered into or materially modified beginningJanuary 1, 2010. The adoption of this standard did not have a material impact on the Company’s financial position or results of operations.Revenue Recognition – Milestone MethodIn April 2010, the EITF issued “Revenue Recognition – Milestone Method.” This issue provides guidance on defining a milestone and determining when it maybe appropriate to apply the milestone method of revenue recognition for research or development transactions. This issue is effective on a prospective basis formilestones achieved in fiscal years beginning after June 15, 2010. The Company is currently evaluating the potential impact of this issue.(4) AcquisitionsIn March 2010, the Company completed the acquisition of IEP GmbH (“IEP”), a company in Wiesbaden, Germany that is a leader in the field of industrialbiocatalysis. IEP offers cost effective customized biocatalytic process development and sales of enzymes to the pharmaceutical industry and was acquired forapproximately $6,900 in cash. As a result of purchase accounting related to this acquisition the Company recorded approximately $3,500 to goodwill andapproximately $4,900 in amortizable intangible assets. 49IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (dollars in thousands, except share data)(4)Acquisitions (continued)In November 2010, the Company acquired a 51% equity stake in Zenara Pharma (“Zenara”) for approximately $18,900. Zenara is a Hyderabad, India basedpharmaceutical company focused on the formulation of final dosage form products. Pursuant to the stock purchase agreement, Cambrex will acquire theremaining 49% in early 2016 at a value to be determined using a weighted combination of a multiple of 2015 earnings before interest, taxes, depreciation andamortization (“EBITDA”) and cumulative EBITDA for the years 2011 through 2015, adjusted for Zenara’s net debt or net cash position, as recorded underIndian GAAP.Under current U.S. GAAP, the Company does not consolidate the results of Zenara as it does not meet the requirements of having control over the entity. Thecontractual arrangement includes substantial participating rights for the 49% interest holder. These rights were bargained for by the 49% interest holder toensure all significant transactions, as defined in the agreement, require a unanimous vote. Furthermore, the 49% minority owner will handle all dailyoperations of the business including all aspects of employee relations at the site. Therefore, the Company accounts for this investment under the equitymethod of accounting.Summary financial information for IEP and Zenara have not been provided as it is not significant to the consolidated financial statements of the Company.(5)Net InventoriesInventories are stated at the lower of cost, determined on a first-in, first-out basis, or market.Net inventories consist of the following: December 31, 2010 2009 Finished goods $27,823 $26,549 Work in process 17,852 18,361 Raw materials 12,183 9,887 Supplies 3,550 3,572 Total $61,408 $58,369 The components of inventory stated above are net of reserves of $12,310 and $11,947 as of December 31, 2010 and 2009, respectively. 50IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(6)Property, Plant and EquipmentProperty, plant and equipment consist of the following: December 31, 2010 2009 Land $4,178 $4,219 Buildings and improvements 90,165 90,072 Machinery and equipment 339,410 325,322 Furniture and fixtures 1,810 1,867 Construction in progress 6,432 10,999 Total 441,995 432,479 Accumulated depreciation (291,512) (271,330)Net $150,483 $161,149 Depreciation expense was $21,632, $20,501 and $21,051 for the years ended December 31, 2010, 2009 and 2008, respectively. Total capital expenditures in2010 were $12,637.(7)Goodwill and Intangible AssetsThe changes in the carrying amount of goodwill for the years ended December 31, 2010 and 2009 are as follows:Balance as of January 1, 2009 $35,374 Translation effect 986 Balance as of December 31, 2009 36,360 Acquisition of business 3,469 Translation effect (2,135)Balance as of December 31, 2010 $37,694 Acquired intangible assets, which are amortized, consist of the following: As of December 31, 2010 Amortization Period GrossCarryingAmount AccumulatedAmortization Net CarryingAmount Technology-based intangibles20 years $4,062 $(153) $3,909 Customer-related intangibles10 - 15 years 828 (50) 778 $4,890 $(203) $4,687 Amortization expense amounted to $196 for the year ended December 31, 2010 and was immaterial for the years ended December 31, 2009 and 2008.Amortization expense related to current intangible assets is expected to be approximately $260 in each of the next five years. 51IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (dollars in thousands, except share data)(8)Investment in Partially-Owned AffiliateIn November 2010, the Company purchased 51% of the equity in Zenara for approximately $18,900, and will purchase the remaining 49% in 2016 basedupon a formula derived from future EBITDA. Zenara is a Hyderabad, India based pharmaceutical company focused on the formulation of final dosage formproducts. The Company made an additional capital contribution to Zenara of approximately $1,100 during 2010.Under current U.S. GAAP, the Company does not consolidate the results of Zenara as it does not meet the requirements of having control over the entity. Thecontractual arrangement includes substantial participating rights for the 49% interest holder. These rights were bargained for by the 49% interest holder toensure all significant transactions, as defined in the agreement, require a unanimous vote. Furthermore, the 49% minority owner will handle all dailyoperations of the business including all aspects of employee relations at the site. Therefore, the Company accounts for this investment under the equity methodof accounting.The impact of its ownership stake in Zenara was a loss of $286 in 2010 and is located within “Other expenses/(income)” as “Equity in losses of partially-owned affiliate” in the income statement. As a result of the acquisition and identification of intangible assets, amortization expense is expected to be approximately $1,160 in 2011 related to Zenara.Summary financial information for Zenara has not been provided as it is not significant to the consolidated financial statements of the Company.(9)Accrued Expense and Other Current LiabilitiesThe components of accrued expenses and other current liabilities are as follows: December 31, 2010 2009 Salaries and employee benefits payable $15,559 $16,474 Taxes payable and related reserves 7,465 6,827 Deferred revenue 2,737 3,224 Restructuring and strategic alternatives 924 3,400 Other 6,818 8,088 Total $33,503 $38,013 (10)Income TaxesIncome/(loss) before income taxes consist of the following: December 31, 2010 2009 2008 Domestic $1,199 $(1,272) $(15,756)International 13,775 23,917 30,756 Total $14,974 $22,645 $15,000 52IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(10)Income Taxes (continued)The provision for income taxes consist of the following provisions/(benefits): December 31, 2010 2009 2008 Current: Federal $(3) $(240) $(897)State 55 86 120 International 6,778 12,694 7,871 6,830 12,540 7,094 Deferred: Federal $204 $204 $204 International (1,369) (491) (227) (1,165) (287) (23)Total $5,665 $12,253 $7,071 The provision for income taxes differs from the statutory federal income tax rate of 35% for 2010, 2009 and 2008 as follows: December 31, 2010 2009 2008 Income tax provision at U.S federal statutory rate $5,241 $7,926 $5,250 State and local taxes, net of federal income tax benefits 17 30 33 Effect of foreign income taxed at rates other than the U.S. federal statutory rate 610 (962) (2,744)Foreign income inclusions 13,869 - - Tax credits (12,447) (135) (788)Indefinite-lived intangibles 204 204 204 Adjustments for prior years' taxes (86) 5,006 (562)Net change in valuation allowance (1,799) 103 5,537 Other 56 81 141 Total $5,665 $12,253 $7,071 Foreign income inclusions represent distributions from foreign subsidiaries which gave rise to newly recognized foreign tax credits. The Companyutilized fully valued net operating losses ("NOLs") and foreign tax credits to completely offset any tax impact of the foreign inclusions. Adjustments for prioryear’s taxes in 2009 included tax expense of approximately $5,300, including interest and penalties of approximately $2,400, for an estimate of aninternational tax liability related to a 2003 transaction. 53IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(10) Income Taxes (continued)The components of deferred tax assets and liabilities as of December 31, 2010 and 2009 relate to temporary differences and carryforwards asfollows: December 31, 2010 2009 Current deferred tax assets: Inventory $2,569 $2,445 Legal and related reserves 512 856 Other 179 47 Current deferred tax assets 3,260 3,348 Valuation allowances (2,633) (3,038)Total current deferred tax assets $627 $310 Current deferred tax liabilities: Other $486 $163 Total current deferred tax liabilities $486 $163 December 31, 2010 2009 Non-current deferred tax assets: Foreign tax credit carryforwards $54,598 $54,869 Environmental 1,854 1,620 Net capital loss carryforwards (domestic) 15 - Net operating loss carryforwards (domestic) - 3,135 Net operating loss carryforwards (foreign) 1,544 201 Employee benefits 13,711 12,857 Restructuring 167 516 Research & experimentation tax credit carryforwards 1,214 1,019 Alternative minimum tax credit carryforwards 3,266 3,266 Property, plant and equipment 2,574 3,473 Other 2,526 3,515 Non-current deferred tax assets 81,469 84,471 Valuation allowances * (75,216) (77,330)Total non-current deferred tax assets 6,253 7,141 Non-current deferred tax liabilities: Property, plant and equipment 8,025 9,094 Intangibles 9,315 8,104 Indefinite-lived intangibles 2,144 1,940 Foreign tax allocation reserve 4,662 5,308 Total non-current deferred tax liabilities $24,146 $24,446 Total net non-current deferred tax liabilities $17,893 $17,305 *In addition to the effect of the domestic and foreign valuation allowances reflected in the current effective tax rate, the valuation allowance has changed due tocurrency translation adjustments. 54IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (dollars in thousands, except share data)(10)Income Taxes (continued)The Company establishes a valuation allowance against deferred tax assets when it is more likely than not that the Company will be unable to realize thosedeferred tax assets in the future. Based on the Company’s history of earnings it has established a valuation allowance of $76,265 against its net domesticdeferred tax assets, excluding deferred tax liabilities on indefinite-lived intangibles. With respect to the Company’s foreign deferred tax assets, the Companyrecorded a valuation allowance of $1,584 as of December 31, 2010.The Company expects to maintain a full valuation allowance against its net domestic deferred tax assets, subject to the consideration of all prudent and feasibletax planning strategies, until such time as the Company attains an appropriate level of future domestic profitability and the Company is able to conclude that itis more likely than not that its domestic deferred tax assets are realizable.The domestic valuation allowance for the years ended December 31, 2010, 2009 and 2008 decreased by $3,891, increased by $1,168 and increased by$15,095, respectively from the prior year. The 2010 decrease in the domestic valuation allowance was allocated as follows: The valuation allowance decreased$1,874 for domestic income and decreased by a net amount of $2,017 for deferred tax amounts and domestic gains and losses included in othercomprehensive loss. The 2009 increase in the domestic valuation allowance was allocated as follows: The valuation allowance increased $130 for domesticlosses and increased by a net amount of $1,038 for deferred tax amounts and domestic gains and losses included in other comprehensive income. The 2008increase in the domestic valuation allowance was allocated as follows: The valuation allowance increased $4,469 for domestic losses and increased by a netamount of $10,626 for deferred tax amounts and domestic gains and losses included in other comprehensive loss.The foreign valuation allowance for the years ended December 31, 2010, 2009 and 2008 increased by $1,372 and decreased by $30 and $707, respectivelyfrom the prior year. The 2010 increase in the foreign valuation allowance was allocated as follows: The valuation allowance increased $75 for foreign lossesand increased $1,297 for deferred tax amounts and currency translation adjustments included in other comprehensive loss. The 2009 decrease in the foreignvaluation allowance was allocated as follows: The valuation allowance decreased $27 for foreign income and decreased $3 for deferred tax amounts andcurrency translation adjustments included in other comprehensive income. The 2008 decrease in the foreign valuation allowance was $707 for foreign income.Under the tax laws of the various jurisdictions in which the Company operates, NOLs may be carried forward or back, subject to statutory limitations, toreduce taxable income in future or prior years. The domestic federal NOLs and the domestic state NOLS were fully utilized during 2010. The foreign NOLswere approximately $5,166, of which $3,852 are attributable to NOLs acquired during 2010. NOLs in most foreign jurisdictions will carry forwardindefinitely. As of December 31, 2010, $54,598 of domestic federal foreign tax credits, $1,214 of research & experimentation tax credits and $3,266 of alternativeminimum tax credits were available as credits against future U.S. income taxes. Under the U.S. Internal Revenue Code, these will expire in 2012 through2020, 2020 through 2030, and no expiration date, respectively. All domestic credits are offset by a full valuation allowance. 55IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(10)Income Taxes (continued)In 2010, the Company repatriated $31,306 of cash from its foreign subsidiaries to make foreign acquisitions and to reduce its credit and currencyexposure for cash held at foreign banks by utilizing the excess cash for debt reduction. The Company utilized fully valued NOLs and foreign tax credits tocompletely offset any tax impact of the foreign inclusions. At this time the Company intends to reinvest foreign earnings indefinitely outside of the U.S. andwould only consider further repatriations of cash from foreign subsidiaries if it could utilize fully valued domestic tax attributes to completely offset any taxexpense that would otherwise result. Therefore, the Company has not provided U.S. federal income and withholding taxes on its undistributed earnings fromforeign operations as of December 31, 2010. Determination of the amount of unrecognized deferred taxes related to these earnings is not practical because of thecomplexities of the hypothetical calculation. In addition, unrecognized foreign tax credits and fully valued foreign tax credit carryovers would be available tooffset any potential U.S. tax liability.The following table summarizes the activity related to the Company’s unrecognized tax benefits as of December 31, 2010, 2009 and 2008: 2010 2009 2008 Balance at January 1 $4,598 $1,697 $5,116 Gross increases related to current period tax positions 236 133 96 Gross (decreases)/increases related to prior period tax positions (303) 2,881 (2,896)Expiration for statute of limitations for the assessment of taxes (161) (193) (401)Foreign currency translation (285) 80 (218)Balance at December 31 $4,085 $4,598 $1,697 Of the total balance of unrecognized tax benefits at December 31, 2010, $3,658, if recognized, would affect the effective tax rate.In the next twelve months the Company does not expect to materially decrease its reserve for unrecognized tax benefits.Gross interest and penalties at December 31, 2010, 2009 and 2008 of $3,160, $2,795 and $333, respectively, related to the above unrecognized taxbenefits are not reflected in the table above. In 2010, 2009 and 2008, the Company accrued $343, $2,529 and $79, respectively, of interest and penalties inthe income statement. Consistent with prior periods, the Company recognizes interest and penalties within its income tax provision.In December 2010, the Company was notified by the IRS that the examination for tax year 2006 was closed with no significant changes to theCompany’s tax positions. Tax years 2007 and forward remain open to examination by the IRS. The Company is also subject to examinations in its non-U.S.jurisdictions for 2006 and later years.The Company is also subject to audits in various states for various years in which it has filed income tax returns. In June 2010, New York Statenotified the Company that it would commence an examination of the Company’s open tax years. The examination is in progress and to date no adjustmentshave been proposed.Previous state audits have resulted in immaterial adjustments. Open years for the majority of states where the Company files are 2006 and forward. 56IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(10)Income Taxes (continued)In 2009, the Company’s Italian subsidiary was examined by the Italian tax authorities, who challenged the business purpose of the deductibility ofcertain intercompany transactions from 2003. In the fourth quarter of 2009, the tax authorities notified the Company that they disagreed with the Company’sresponses to their formal assessments. In the first quarter of 2010, the Company filed an appeal to litigate the matter. The Company has analyzed these issuesin accordance with guidance on uncertain tax positions and believes its reserves are adequate, and intends to defend itself.(11)Long-term DebtIn April 2007, the Company entered into a $200,000 five-year Syndicated Senior Revolving Credit Facility (“Credit Facility”) which expires in April2012. The Company pays interest on this Credit Facility at LIBOR plus 1.25% - 2.00% based upon certain financial measurements. The Credit Facility alsoincludes financial covenants regarding interest coverage and leverage ratios. The Company was in compliance with all financial covenants at December 31,2010. The Credit Facility is collateralized by dividend and distribution rights associated with a pledge of a portion of stock that the Company owns in aforeign holding company. This foreign holding company owns a majority of the Company's non-U.S. operating subsidiaries. As of December 31, 2010, therewas $115,900 outstanding on the Credit Facility. The 2010 and 2009 weighted average interest rates for long-term bank debt were 3.3% and 3.8%,respectively.(12)Derivatives and Hedging ActivitiesThe Company operates internationally and is exposed to fluctuations in foreign exchange rates and interest rates in the normal course ofbusiness. These fluctuations can increase the costs of financing, investing and operating the business. The Company uses derivative financial instrumentsto reduce these exposures to market risks resulting from fluctuations in interest rates and foreign exchange rates.All financial instruments involve market and credit risks. The Company is exposed to credit losses in the event of nonperformance by thecounterparties to the contracts. While there can be no assurance, the Company does not anticipate non-performance by these counterparties. Foreign Currency Forward ContractsThe Company's policy is to enter into forward exchange contracts to hedge a portion of forecasted cash flows associated with foreign currencytransaction exposures which are accounted for as cash flow hedges, as deemed appropriate. This hedging strategy mitigates some of the impact of short-termforeign exchange rate movements on the Company's operating results primarily in Sweden and Italy. The Company's primary market risk relates to exposuresto foreign currency exchange rate fluctuations on transactions entered into by these international operations that are denominated primarily in U.S. dollars,Swedish krona, and euros. As a matter of policy, the Company does not hedge to protect the translated results of foreign operations.The Company's forward exchange contracts substantially offset gains and losses on the transactions being hedged. The forward exchange contractshave varying maturities with none exceeding twelve months. The Company makes net settlements for forward exchange contracts at maturity, based uponnegotiated rates at inception of the contracts.All forward contracts outstanding at December 31, 2010 have been designated as cash flow hedges and, accordingly, changes in the fair value of thesederivatives are not included in earnings but are included in accumulated other comprehensive (loss)/income (“AOCI”). Changes in the fair value of thederivative instruments reported in AOCI will be recorded into earnings as a component of product revenue or expense, as applicable, when the forecastedtransaction occurs. The ineffective portion of all hedges is recognized in current-period earnings and is immaterial to the Company's financial results. 57IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(12)Derivatives and Hedging Activities (continued)The notional amounts of foreign exchange forward contracts were $19,094 and $15,781 at December 31, 2010 and 2009, respectively.Included in AOCI is the fair value of the Company’s forward exchange contracts which is a loss of $101 and a gain of $310 as of December 31, 2010 and2009, respectively. These losses and gains are located under the captions “Accrued expenses and other current liabilities” and “Prepaid expenses and othercurrent assets” on the balance sheet as of December 31, 2010 and 2009, respectively.The Company recognized a pre-tax loss in other comprehensive loss from foreign exchange contracts of $411 in 2010. The Company reclassified apre-tax gain of $2,054 from AOCI into other revenue related to foreign exchange forward contracts in 2010. Assuming current market conditions continue, theentire amount recorded in AOCI related to foreign exchange forward contracts is expected to be recorded into other revenue within the next 12 months to reflectthe fixed prices obtained from the forward contracts.Interest Rate Swap AgreementsThe Company entered into interest rate swap agreements to reduce the impact of changes in interest rates on its floating rate debt. Swap agreementsare contracts to exchange floating rate for fixed interest payments periodically over the life of the agreements without the exchange of the underlying notionaldebt amounts.During 2010, the Company had interest rate swaps in place with an aggregate notional value of $60,000, at an average fixed rate of 4.48%, whichmatured in October 2010. The Company’s strategy had been to cover a portion of its outstanding bank debt with interest rate protection. At December 31,2010 the Company did not have any interest rate swaps outstanding. Interest expense under these agreements totaled $2,080 in 2010.The Company reclassified a pre-tax loss of $2,038 from AOCI into interest expense related to interest rate swaps in 2010.(13)Fair Value MeasurementsU.S. GAAP establishes a valuation hierarchy for disclosure of the inputs to the valuations used to measure fair value. This hierarchy prioritizes theinputs into three broad levels as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs arequoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, inputs other thanquoted prices that are observable for the asset or liability, including interest rates, yield curves and credit risks, or inputs that are derived principally from, orcorroborated by, observable market data through correlation; Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measureassets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that issignificant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs or minimize the use of unobservableinputs. 58IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(13) Fair Value Measurements (continued)The following tables provide the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2010 and 2009: Fair Value Measurements at December 31, 2010 using: Description Total Quoted Prices in ActiveMarkets for IdenticalAssets(Level 1) Signifcant OtherObservable Inputs(Level 2) Significant UnobservableInputs(Level 3) Foreign currency forwards, liabilities $(101) $- $(101) $- Interest rate swaps - - - - Total $(101) $- $(101) $- Fair Value Measurements at December 31, 2009 using: Description Total Quoted Prices in ActiveMarkets for IdenticalAssets(Level 1) Signifcant OtherObservable Inputs(Level 2) Significant UnobservableInputs(Level 3) Foreign currency forwards, assets $310 $- $310 $- Interest rate swaps (2,038) - (2,038) - Total $(1,728) $- $(1,728) $- The Company’s derivative assets and liabilities include foreign exchange forward contracts that are measured at fair value using observable market inputssuch as forward rates, the Company’s credit risk and its counterparties’ credit risks. Based on these inputs, the derivative assets and liabilities are classifiedwithin Level 2 of the valuation hierarchy. Based on the Company’s continued ability to enter into forward contracts, the Company considers the markets forits fair value instruments to be active.As of December 31, 2010, there had not been any significant impact to the fair value of the Company’s derivative liabilities due to its own creditrisk. Similarly, there had not been any significant adverse impact to the Company’s derivative assets based on the Company’s evaluation of itscounterparties’ credit risks.The Company’s financial instruments also include cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities. The carryingamount of these instruments approximates fair value because of their short-term nature. 59IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(14)Stockholders' EquityThe Company has two classes of common shares, Common Stock and Nonvoting Common Stock. Authorized shares of Common Stock were 100,000,000at December 31, 2010 and 2009. Authorized shares of Nonvoting Common Stock were 730,746 at December 31, 2010 and 2009. Nonvoting CommonStock with a par value of $0.10 has equal rights with Common Stock, with the exception of voting power. Nonvoting Common Stock is convertible, sharefor share, into Common Stock, subject to any legal requirements applicable to holders restricting the extent to which they may own voting stock. As ofDecember 31, 2010 and 2009, no shares of Nonvoting Common Stock were outstanding. The Company has authorized 5,000,000 shares of Series PreferredStock, par value $.10, issuable in series and with rights, powers and preferences as may be fixed by the Board of Directors. At December 31, 2010 and2009, there was no preferred stock outstanding.The Company held treasury shares of 1,978,533 and 2,121,372 at December 31, 2010 and 2009, respectively, which are primarily used for issuance toemployee compensation plans.At December 31, 2010 there were 153,502 authorized shares of Common Stock reserved for issuance through equity compensation plans.(15)Strategic Alternative and Restructuring ChargesStrategic Alternative CostsStrategic alternative costs include expenses that the Company incurred related to the decision to sell the businesses that comprised the Bioproductsand Biopharma segments in February 2007, costs associated with a project to streamline the Company’s legal entity structure and costs associated with the exitof a feed additives product line. These costs are not considered part of the restructuring program or a part of discontinued operations under current accountingguidance.Strategic alternative costs for 2008 were $1,515 consisting primarily of costs associated with the project to streamline the Company’s legal entitystructure, change-in-control benefits and costs associated with the modification of employee stock options due to the payment of the special dividend inconnection with the discussion above.Restructuring ExpensesCorporate Office RestructuringDuring 2007, the Company announced plans to eliminate certain employee positions at the corporate office upon completion of the sale of thebusinesses that comprised the Bioproducts and Biopharma segments. This plan included certain one-time benefits for terminated employees. Costs related tothese plans are recorded as "Restructuring expenses" in the income statement. The Company recognized expense of $805 in 2008 related to this plan.Consolidation of Domestic Research and Development ActivitiesIn December 2007, the Company consolidated its United States research and development (“R&D”) activities and small scale API production with itsfacility in Charles City, Iowa. The restructuring reserve at December 31, 2008 consisted of the remaining lease payments and related costs under theCompany’s current operating lease at the New Jersey R&D facility. The operating lease expired in December 2010. Costs related to this consolidation arerecorded as "Restructuring expenses" in the income statement. The Company recognized expense of $3,890 in 2008 related to this plan. 60IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(15)Strategic Alternative and Restructuring Charges (continued)Restructuring of a Manufacturing SiteDuring the third quarter 2010, the Company finalized a plan to restructure its operations at a manufacturing site, which resulted in a reduction inworkforce of 32 employees. The plan included certain one-time benefits for terminated employees, all of which will be paid in cash. Costs related to thistransaction are recorded as “Restructuring expenses” on the income statement. The Company recognized expense of $1,293 in 2010 related to this plan. Theelimination of these positions is expected to save the Company approximately $2,000 annually.The following table reflects the activity related to the restructuring reserves through December 31, 2010: December 31,2008 2009 Activity December 31,2009 2010 Activity December 31,2010 ReserveBalance Expense CashPayments ReserveBalance Expense CashPayments TranslationEffect ReserveBalance Corporate OfficeRestructuring Employee terminationcosts $462 $- $(462) $- $- $- $- $- Consolidation of Domestic R&D Activities: Lease payments andrelated costs 3,021 - (1,548) 1,473 - (1,473) - - Restructuring of aManufacturing Facility: One-time employeebenefits - - - - 1,293 (423) 54 924 $3,483 $- $(2,010) $1,473 $1,293 $(1,896) $54 $924 This reserve will be paid in full by December 31, 2011. Total restructuring expenses for 2010, 2009 and 2008 were $1,293, $0 and $4,695,respectively.(16)Stock Based CompensationThe Company recognizes compensation costs for stock option awards to employees based on their grant-date fair value. The value of each stockoption is estimated on the date of grant using the Black-Scholes option-pricing model. The weighted-average fair value per share for the stock options grantedto employees for the years ended December 31, 2010, 2009 and 2008 were $2.45, $3.31 and $1.72, respectively.The following assumptions were used in determining the fair value of stock options for grants issued in 2010, 2009 and 2008: 2010 2009 2008 Expected volatility66.48%-68.13% 48.10%-65.11% 33.30% - 38.78%Expected term4.75 years 4.75 years 4.75 yearsRisk-free interest rate1.25%-2.52% 2.38%-2.77% 2.77% - 3.08%The Company does not have any publicly traded stock options; therefore, expected volatilities are based on historical volatility of the Company’sstock. The risk-free interest rate is based on the yield of a zero-coupon U.S. Treasury bond whose maturity period approximates the option’s expectedterm. The expected term was utilized based on the “simplified” method for determining the expected term of stock options in Staff Accounting Bulletin(“SAB”) No. 107, “Share-Based Payment.” The Company also considered SAB No. 110 when determining the expected term of stock options. 61IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(16)Stock Based Compensation (continued)For 2010, 2009, and 2008, the Company recorded $1,072, $648 and $684, respectively, in selling, general and administrative expenses for stockoptions. As of December 31, 2010, the total compensation cost related to unvested stock option awards granted to employees but not yet recognized was$2,213. The cost will be amortized on a straight-line basis over the remaining weighted-average vesting period of 2.5 years.Cambrex senior executives, until 2010, participated in an executive incentive plan which rewarded achievement with restricted stock units. Awardswere made annually if certain targets were met and vested in one-third increments on the first, second and third annual anniversaries of the grant. On the thirdanniversary of the grant, restrictions on sale or transfer are removed and shares are issued to executives. In the event of termination of employment orretirement, the participant is entitled to the vested portion of the restricted stock units and forfeits the remaining amount; the three-year sale and transferrestriction remains in place. For certain employees with employment contracts, all shares vest upon certain events, including a change in control. In the eventof death or permanent disability, all shares vest and the deferred sales restriction lapses. These awards are classified as equity awards.For 2010, 2009, and 2008, the Company recorded $645, $658, and $1,351, respectively, in selling, general and administrative expenses forrestricted stock. As of December 31, 2010, the total compensation cost related to unvested restricted stock granted but not yet recognized was $353. The costwill be amortized on a straight-line basis over the remaining weighted-average vesting period of 1.8 years.In May 2008, the Company granted a target award of 43,000 performance shares, with a potential award of up to 86,000 shares to the currentCEO. These performance shares are dependent upon the Company’s performance measured against certain financial metrics over a three year periodbeginning July 1, 2008, as compared to an external peer group. The Company is currently recognizing expense related to 55,900 shares over the vestingperiod, based upon measurement against the financial metrics. For 2010, 2009 and 2008, the Company recorded $157, $69 and $34, respectively, inselling, general and administrative expense related to these performance shares. 62IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(16) Stock Based Compensation (continued)The following table is a summary of the Company’s stock option activity issued to employees and related information: Weighted Average Number ofShares Exercise Price OptionsExercisable Outstanding at December 31, 2008 1,590,869 $14.07 757,050 Granted 533,000 6.07 Exercised (2,000) 4.40 Forfeited or expired (101,500) 17.19 Outstanding at December 31, 2009 2,020,369 11.27 886,579 Granted 228,000 4.38 Exercised - Forfeited or expired (394,576) 24.97 Outstanding at December 31, 2010 1,853,793 7.51 Exercisable at December 31, 2010 $9.96 863,623 The aggregate intrinsic value for all stock options exercised for the years ended December 31, 2010, 2009 and 2008 was negligible. The aggregate intrinsicvalue for all stock options outstanding as of December 31, 2010 was $566. The aggregate intrinsic value for all stock options exercisable as of December 31,2010 was $189. 63IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(16)Stock Based Compensation (continued)A summary of the Company’s nonvested stock options and restricted stock as of December 31, 2010 and changes during the years ended December 31, 2010,2009 and 2008 are presented below: Nonvested Stock Options Nonvested Restricted Stock Number ofShares Weighted-AverageGrant-DateFair Value Number ofShares Weighted-AverageGrant-DateFair Value Nonvested at December 31, 2008 833,819 $2.19 143,327 $13.38 Granted 533,000 $3.31 36,918 $3.90 Vested during period (218,737) $2.44 (86,453) $11.31 Forfeited (14,292) $2.92 (3,106) $15.27 Nonvested at December 31, 2009 1,133,790 $2.67 90,686 $11.43 Granted 228,000 $2.45 125,428 $5.18 Vested during period (340,421) $2.77 (109,990) $9.32 Forfeited (31,199) $2.87 (800) $13.75 Nonvested at December 31, 2010 990,170 $2.57 105,324 $6.17 (17)Retirement Plans and Other Postretirement BenefitsDomestic Pension PlanThe Company maintains a defined-benefit pension plan (“Domestic Pension Plan”) for certain salaried and certain hourly employees. Benefits are based onsalary and years of service or negotiated benefits for employees covered by a collective bargaining agreement. The Company's policy is to fund pension coststo the full extent required by the Internal Revenue Code.The Company also has a Supplemental Executive Retirement Plan (“SERP”) for key executives. This plan is non-qualified and unfunded.In July 2008, the Board of Directors of the Company amended the SERP to allow for lump sum payments effective January 1, 2009. The lump sum value asof January 1, 2009 will be paid in 10 equal actuarial equivalent installments.International Pension PlansA foreign subsidiary of the Company maintains a pension plan (“International Pension Plan”) for its employees that conforms to the common practicein that country. Based on local laws and customs, this plan is unfunded. 64IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(17)Retirement Plans and Other Postretirement Benefits (continued)Other Postretirement BenefitsCambrex previously provided limited post-retirement health and life insurance benefits ("postretirement benefits") to all eligible retired employees. Certainsubsidiaries and all employees hired after December 31, 2002 (excluding those covered by collective bargaining) were not eligible for these benefits. EffectiveDecember 31, 2009, the Company terminated these postretirement benefits for all participants resulting in a benefit of approximately $1,200.Savings PlanCambrex makes available to all domestic employees a savings plan. Employee contributions are matched in part by Cambrex. The cost of this planamounted to $649, $631 and $592 in 2010, 2009 and 2008, respectively.OtherThe Company has a non-qualified Deferred Compensation Plan for Key Executives. Under this Plan, officers and key employees may elect to defer allor any portion of their pre-tax earnings or elect to defer receipt of the Company’s stock which would otherwise have been issued upon the exercise of theCompany’s options. Included within other liabilities at December 31, 2010 and 2009 there is $2,420 and $2,747, respectively, representing the Company’sobligation under the plan. The Company invests in certain mutual funds and as such, included within other assets at December 31, 2010 and 2009 is $2,420and $2,747, respectively, representing the fair value of these funds. The fair values of these mutual funds are based on quoted market prices in activemarkets (Level 1). The number of Cambrex shares held in trust under this plan as of December 31, 2010 and 2009 were 113,513 and 151,385, respectively,and are included as a reduction of equity. The value of the shares held in trust and the corresponding liability of $587 and $845 at December 31, 2010 and2009, respectively, have also been recorded in equity. The deferred compensation plan is not funded by the Company, but the Company has established adeferred compensation trust fund which holds the shares issued.The benefit obligations as of December 31, 2010 and 2009 are as follows: Pension Plans Domestic SERP International Postretirement Plans 2010 2009 2010 2009 2010 2009 2010 2009 Change in benefit obligation Benefit obligation, beginningof year $61,086 $58,529 $5,538 $5,784 $18,491 $16,634 $- $1,858 Service cost - - - - 577 533 - 26 Interest cost 3,519 3,427 200 279 857 747 - 110 Plan participants'contributions - - - - - - - 12 Actuarial loss/(gain) 4,955 1,869 121 275 91 (594) - (155)Benefits paid (3,292) (2,739) (720) (800) (532) (468) - (26)Unrecognized prior servicecosts - - - - 183 - - - Curtailments - - - - - - - (1,825)Currency Translation Affect - - - - 1,210 1,639 - - Benefit obligation, end of year $66,268 $61,086 $5,139 $5,538 $20,877 $18,491 $- $- 65IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(17)Retirement Plans and Other Postretirement Benefits (continued)The plan assets and funded status of the Domestic Pension Plan as of December 31, 2010 and 2009 are as follows: 2010 2009 Change in plan assets Fair value of plan assets, beginning of period $43,222 $37,311 Actual return on plan assets 5,684 7,489 Contributions 1,709 1,161 Benefits paid (3,292) (2,739)Fair value of plan assets, end of period $47,323 $43,222 Unfunded status (18,945) (17,864)Accrued benefit cost, end of period $(18,945) $(17,864)The unfunded status of the SERP was ($5,139) and ($5,538) as of December 31, 2010 and 2009, respectively. The unfunded status of the InternationalPension Plan was ($20,877) and ($18,491) as of December 31, 2010 and 2009, respectively.The amounts recognized in accumulated other comprehensive loss as of December 31, 2010 and 2009 consist of the following: Pension Plans Domestic SERP International 2010 2009 2010 2009 2010 2009 Actuarial loss $19,469 $17,450 $904 $815 $3,806 $3,812 Prior service cost 496 932 402 459 (45) (51) $19,965 $18,382 $1,306 $1,274 $3,761 $3,761 The components of net periodic benefit cost are as follows: Pension Plans Domestic SERP International Postretirement Plans 2010 2009 2008 2010 2009 2008 2010 2009 2008 2010 2009 2008 Components of netperiodic benefit cost Service cost $- $- $- $- $- $- $577 $533 $520 $- $26 $25 Interest cost 3,519 3,427 3,513 200 279 303 857 747 831 - 110 109 Expected return onplan assets (3,177) (2,924) (4,086) - - - - - - - - - Amortization of priorservice cost 436 625 532 57 57 - 176 (6) (7) - (156) (155)Recognized actuarialloss 429 355 - 33 - 5 102 130 125 - 52 56 Curtailments - - - - - - - - - - (1,178) - Net periodic benefitcost $1,207 $1,483 $(41) $290 $336 $308 $1,712 $1,404 $1,469 $- $(1,146) $35 66IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(17)Retirement Plans and Other Postretirement Benefits (continued)The estimated amounts that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2011 are as follows: Pension Plans Domestic SERP International Actuarial loss $458 $56 $108 Prior service cost/(benefit) 436 57 (7)Total $894 $113 $101 Major assumptions used in determining the benefit obligations are presented in the following table: 2010 2009 Discount rate: Domestic Pension Plan 5.35% 5.90%SERP 3.40% 4.15%International Pension Plan 4.70% 4.70% Rate of compensation increase: International Pension Plan 3.00% 3.00%Major assumptions used in determining the net benefit cost are presented in the following table: 2010 2009 2008 Discount rate: Domestic Pension Plan 5.90% 6.00% 6.25%SERP 4.15% 5.60% 6.00%International Pension Plan 4.70% 4.70% 4.40%Postretirement Plan N/A 6.00% 6.25% Expected return on plan assets: Domestic Pension Plan 7.50% 8.00% 8.00% Rate of compensation increase: International Pension Plan 3.00% 3.00% 3.00%In making its assumption for the long-term rate of return on plan assets, the Company has utilized historical rates earned on securities allocated consistentlywith its investments. The discount rate was selected by projecting cash flows associated with plan obligations, which were matched to a yield curve of highquality corporate bonds. The Company then selected the single rate that produced the same present value as if each cash flow were discounted by thecorresponding spot rate on the yield curve.The aggregate Accumulated Benefit Obligation (“ABO”) of $66,268 exceeds plan assets by $18,945 as of December 31, 2010 for the DomesticPension Plan. The aggregate ABO is $19,881 for the International Pension Plan as of December 31, 2010. The International Pension Plan is unfunded. 67IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(17) Retirement Plans and Other Postretirement Benefits (continued)The Company expects to contribute approximately $5,250 in cash to the Domestic Pension Plan in 2011. The Company does not expect to contribute cash toits International Pension Plan in 2011.The following benefit payments are expected to be paid out of the plans: Pension Plans Domestic SERP International 2011 $3,156 $720 $684 2012 $3,287 $720 $703 2013 $3,323 $720 $713 2014 $3,509 $720 $765 2015 $3,528 $720 $774 2016-2020 $18,880 $2,160 $4,582 The investment objective for the Domestic Pension Plan’s assets is to achieve long-term growth with exposure to risk at an appropriate level. The Companyinvests in a diversified asset mix consisting of equities (domestic and international) and taxable fixed income securities. Assets are managed to obtain thehighest total rate of return in keeping with a moderate level of risk. The target allocations for plan assets are 30% - 80% equity securities, 25% - 45% U.S.fixed income and 0% - 10% all other investments. Equity securities primarily include investments in large-cap and small-cap companies, mostly in the U.S.Fixed income securities include high quality corporate bonds and U.S. government securities. Other types of investments include real asset funds, consistingprimarily of investments in commodities, and Treasury Inflation-Protected Securities (“TIPS”).The fair values of the Company’s pension plan assets by asset category are as follows: Fair Value Measurements at December 31, 2010using: Asset Category Total Quoted Prices inActive Marketsfor IdenticalAssets(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) Equity securities: U.S. companies $16,609 $- $16,609 $- International companies 9,051 - 9,051 - U.S. fixed income 15,799 - 13,772 2,027 Commodities 3,608 - 3,608 - TIPS 2,256 - 2,256 - $47,323 $- $45,296 $2,027 68IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(17) Retirement Plans and Other Postretirement Benefits (continued) The following table sets forth a summary of the changes in the fair value of the Domestic Plan’s Level 3 assets, which are annuity contracts with aninsurance company, for the year ended December 31, 2010: GroupAnnuityContract Balance at December 31, 2009 $1,985 Actual return on plan assets: Relating to assets still held at the reporting date 100 Purchases, issuances, and settlements (58)Balance at December 31, 2010 $2,027 (18)Foreign Operations and SalesThe following summarized data represents the gross sales and long lived tangible assets for the Company’s domestic and foreign entities for 2010, 2009 and2008: Domestic Foreign Total 2010 Gross sales $71,363 $155,073 $226,436 Long-lived assets 36,691 156,173 192,864 2009 Gross sales $84,518 $151,759 $236,277 Long-lived assets 39,227 158,282 197,509 2008 Gross sales $81,707 $167,911 $249,618 Long-lived assets 42,621 154,257 196,878 Export sales, included in domestic gross sales, in 2010, 2009 and 2008 amounted to $18,529, $25,768, and $24,602, respectively.Sales to geographic area consist of the following: 2010 2009 2008 Europe $127,009 $136,534 $143,542 North America 78,497 80,830 86,631 Asia 12,554 10,495 11,440 Other 8,376 8,418 8,005 Total $226,436 $236,277 $249,618 69IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(18) Foreign Operations and Sales (continued)This table summarizes gross sales by product groups: 2010 2009 2008 APIs and pharmaceutical intermediates $203,807 $212,644 $220,722 Other 22,629 23,633 28,896 Total $226,436 $236,277 $249,618 One customer, Gyma Laboratories of America, Inc. ("Gyma"), a distributor representing multiple customers, accounted for 12.8%, 11.5% and11.8% of consolidated gross sales for 2010, 2009 and 2008, respectively. In addition, Warner Chilcott plc, with which a long-term sales contract is in effect,accounted for 10.0% of consolidated sales in 2008.(19)CommitmentsThe Company has operating leases expiring on various dates through the year 2019. The leases are primarily for the rental of office space, office andlaboratory equipment and vehicles. At December 31, 2010, future minimum commitments under non-cancelable operating lease arrangements were as follows:Year ended December 31: 2011 $803 2012 620 2013 581 2014 519 2015 480 2016 and thereafter 1,209 Total commitments $4,212 Total operating lease expense was $2,027, $1,978 and $2,270 for the years ended December 31, 2010, 2009 and 2008, respectively.The Company is party to several unconditional purchase obligations resulting from contracts that contain legally binding provisions with respect to quantities,pricing and timing of purchases. The Company’s purchase obligations mainly include commitments to purchase raw materials. At December 31, 2010,future commitments under these obligations were as follows:Year ended December 31: 2011 $5,574 2012 698 2013 522 2014 - 2015 - Total commitments $6,794 70IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(20)ContingenciesThe Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary course of itsbusiness activities. The Company continually assesses all known facts and circumstances as they pertain to all legal and environmental matters andevaluates the need for reserves and disclosures as deemed necessary based on these facts and circumstances. These matters, either individually or in theaggregate, could have a material adverse effect on the Company's financial condition, operating results and cash flows in a future reporting period.EnvironmentalIn connection with laws and regulations pertaining to the protection of the environment, the Company and its subsidiaries are a party to several environmentalproceedings and remediation investigations and cleanups and, along with other companies, have been named a potentially responsible party (“PRP”) for certainwaste disposal sites ("Superfund sites"). Additionally, the Company has retained the liability for certain environmental proceedings associated withdiscontinued operations.It is the Company’s policy to record appropriate liabilities for environmental matters where remedial efforts are probable and the costs can be reasonablyestimated. Such liabilities are based on the Company’s best estimate of the undiscounted future costs required to complete the remedial work. Each of thesematters is subject to various uncertainties, and it is possible that some of these matters will be decided unfavorably against the Company. The resolution ofsuch matters often spans several years and frequently involves regulatory oversight or adjudication. Additionally, many remediation requirements are notfixed and are likely to be affected by future technological, site, and regulatory developments. Consequently, the ultimate liability with respect to such matters,as well as the timing of cash disbursements cannot be determined with certainty.In matters where the Company has been able to reasonably estimate its liability, the Company has accrued for the estimated costs associated with thestudy and remediation of sites not owned by the Company and the Company's current and former operating sites. These accruals were $7,017 and $6,163 atDecember 31, 2010 and 2009, respectively. The increase in the accrual includes adjustments to reserves of $1,375, of which $1,247 was included indiscontinued operations, and the impact of currency of $89 partially offset by payments of $610. The recorded liabilities are adjusted periodically asremediation efforts progress or as additional technical, regulatory or legal information becomes available. Based upon available information and analysis, theCompany's current accrual represents management's best estimate of the probable and estimable costs associated with environmental proceedings includingamounts for investigation fees where full remediation costs may not be estimable at the reporting date. Given the uncertainties regarding the status of laws,regulations, enforcement, policies, the impact of other PRPs, technology and information related to individual sites, the Company does not believe it is possibleto develop an estimate of the range of reasonably possible environmental loss in excess of its recorded liabilities.CasChemAs a result of the sale of the Bayonne, New Jersey facility, the Company became obligated to investigate site conditions and conduct required remediationunder the New Jersey Industrial Site Recovery Act. The Company submitted a sampling plan to the New Jersey Department of Environmental Protection(“NJDEP”) and is awaiting approval. The results of the completed and proposed sampling, and any additional sampling deemed necessary, will be used todevelop an estimate of the Company's future liability for remediation costs, if any.CosanIn response to the NJDEP, the Company completed its initial investigation and submitted the results of the investigation and a proposed remediation plan to theNJDEP for its Cosan Clifton, New Jersey site. The NJDEP subsequently rejected the remediation plan and requested additional investigative work at the siteand that work is on-going. The reserve was $1,094 at December 31, 2010 which was based on the initial remedial action plan. The results of the additionalinvestigative work may impact the remediation plan and costs. 71IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(20) Contingencies (continued)Additionally, the Company has recorded a liability of $895 for the Cosan Carlstadt, New Jersey site based on the investigations completed to dateand the proposed remediation plan submitted to the NJDEP for their approval. The NJDEP has subsequently required the Company to perform additionalinvestigative work prior to approval of the remediation plan. The results of this additional investigative work may impact the remediation plan andcosts. The NJDEP has advised the Company that the site will be placed in the NJDEP’s private oversight program. Under the program the Company will berequired to implement a remediation plan in 2012.Berry’s CreekThe Company received a notice from the United States Environmental Protection Agency (“USEPA”) that two former operating subsidiaries of the Companyare considered PRPs at the Berry’s Creek Superfund Site in New Jersey. The operating companies are among many other PRPs that were listed in the notice. Pursuant to the notice, the PRPs have been asked to perform a remedial investigation and feasibility study of the Berry’s Creek Site. The Company has joinedthe group of PRPs and filed a response to the USEPA agreeing to jointly conduct or fund an appropriate remedial investigation and feasibility study of theBerry’s Creek Site. The PRPs have engaged consultants to evaluate investigation and remedial alternatives and develop a method to allocate related costsamong the PRPs. As of December 31, 2010, the Company’s reserve was $111 to cover the initial phase of investigation based on a tentative agreement on theallocation of the site investigation costs among the PRPs. The investigation is ongoing and at this time it is too early to predict the extent of any additionalliabilities.Maybrook and Harriman SitesThe Company’s Nepera, Inc. subsidiary (“Nepera”) is named a PRP of the Maybrook Site in Hamptonburgh, New York by the USEPA inconnection with the discharge, under appropriate permits, of wastewater at that site prior to Cambrex's acquisition of Nepera in 1986. The USEPA alsoissued the Company a Notice of Potential Liability and the Company signed a Consent Decree to complete the Record of Decision (“ROD”) and has providedthe USEPA with appropriate financial assurance to guarantee the obligation under the Consent Decree. The PRPs intend to begin to implement remedial actionat the site in 2011.Nepera is also named a responsible party of its former Harriman, New York production facility by the New York State Department ofEnvironmental Conservation. A final ROD was issued which describes the remediation plan for the site. Implementation of the ROD is on-going.As of December 31, 2010, the reserve recorded by the Company for Nepera was $2,050 and represents the Company’s best estimate to complete both RODs.Scientific Chemical Processing (“SCP”) Superfund SiteNepera was named a PRP of the SCP Superfund site, located in Carlstadt, New Jersey, in the early 1980’s along with approximately 130 other PRPs. The siteis a former waste processing facility that accepted various waste for recovery and disposal including processing wastewater from Nepera. The PRPs are in theprocess of implementing a final remedy for soil and groundwater contamination at the site. The SCP Superfund site has also been identified as a PRP in theBerry’s Creek Superfund site (see previous discussion). For over a decade, the remediation has been funded by de minimus settlements and by the insurersof the SCP Superfund site’s owners and operators. However, due to an unexpected increase in remediation costs at the site and costs to contribute to theBerry’s Creek investigation, the PRP group has recently approved the assessment of an additional cash contribution by the PRP group. While the Companydisputes the methodology used by the PRP group to arrive at its allocation for the cash contribution, the Company has paid the initial funding request and hasestablished a reserve for the remaining allocation in the amount of $261. 72IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(20)Contingencies (continued)Solvent Recoveries Superfund SiteA subsidiary of the Company is one of approximately 1,300 PRPs at a Superfund site in Southington, Connecticut, once operated by Solvent Recoveries,Inc. The PRP group has completed a Remedial Investigation/Feasibility Study and the USEPA has proposed remediation of the site. In 2008, the Companyagreed to enter into a consent decree and settlement with the other PRPs and the USEPA whereby the Company agreed to pay a settlement amount of $353 withan initial payment of $106 and the remaining $247 to be paid in installments over time as the remediation proceeds. The Company has reserved for theunpaid portion of the settlement and has entered into a letter of credit to guarantee the payment obligation under the settlement.Newark Bay Complex LitigationCasChem and Cosan have been named as two of several hundred third-party defendants in a third-party complaint filed in February 2009, by Maxus EnergyCorporation (“Maxus”) and Tierra Solutions, Inc. (“Tierra”). The original plaintiffs include the NJDEP, the Commissioner of the NJDEP and theAdministrator of the New Jersey Spill Compensation Fund, which originally filed suit in 2005 against Maxus, Tierra and other defendants seeking recoveryof cleanup and removal costs for alleged discharges of dioxin and other hazardous substances into the Passaic River, Newark Bay, Hackensack River, ArthurKill, Kill Van Kull and adjacent waters (the “Newark Bay Complex”). Maxus and Tierra are now seeking contribution from third-party defendants,including subsidiaries of the Company, for cleanup and removal costs for which each may be held liable in the lawsuit. Maxus and Tierra also seek recoveryfor cleanup and removal costs that each has incurred or will incur relating to the Newark Bay Complex. The Company expects to vigorously defend againstthe lawsuit. At this time it is too early to predict whether the Company will have any liability in this matter.The Company is involved in other environmental matters where the range of liability is not reasonably estimable at this time and it is not determinable wheninformation will become available to provide a basis for adjusting or recording an accrual, should an accrual ultimately be required.Litigation and Other MattersLorazepam and ClorazepateIn 1998, the Company and a subsidiary were named as defendants along with Mylan Laboratories, Inc. (“Mylan”) and Gyma in a proceeding instituted bythe Federal Trade Commission in the United States District Court for the District of Columbia (the “District Court”). Suits were also commenced by severalState Attorneys’ General and class action complaints by private plaintiffs in various state courts. The suits alleged violations of the Federal TradeCommission Act arising from exclusive license agreements between the Company and Mylan covering two APIs (Lorazepam and Clorazepate). 73IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)(dollars in thousands, except share data)(20) Contingencies (continued)All cases have been resolved except for one brought by four health care insurers. In the remaining case the District Court entered judgment after trialin 2008 against Mylan, Gyma and Cambrex in the amount of $8,355, payable jointly and severally, and also a punitive damage award against eachdefendant in the amount of $16,709. In addition, the District Court ruled that the defendants were subject to a total of approximately $7,000 in prejudgmentinterest. In January 2011, the Court of Appeals ruled that certain plaintiffs did not have the diversity jurisdiction needed to bring an action in federal courtand remanded the case to the district court solely to determine which parties were properly before the court and to what extent the removal of certain partiesfrom the case that do not meet jurisdictional requirements may affect damages. The Court of Appeals further declined to issue an opinion with respect to themerits of Mylan, Gyma and Cambrex’s objections to the jury’s damage award until such time as the jurisdiction issue is resolved by the district court.Cambrex paid $12,415 in exchange for a release from Mylan and full indemnity in 2003 against future costs or liabilities in related litigation broughtby purchasers, as well as potential future claims related to the ongoing matter. In the event of a final settlement or final judgment, Cambrex expects anypayment required by the Company to be made by Mylan under the indemnity described above.OtherThe Company has commitments incident to the ordinary course of business including corporate guarantees of certain subsidiary obligations to theCompany’s lenders related to financial assurance obligations under certain environmental laws for remediation; closure and third party liability requirementsof certain of its subsidiaries and a former operating location; contract provisions for indemnification protecting its customers and suppliers against third partyliability for the manufacture and sale of Company products that fail to meet product warranties and contract provisions for indemnification protectinglicensees against intellectual property infringement related to licensed Company technology or processes.Additionally, as permitted under Delaware law, the Company indemnifies its officers, directors and employees for certain events or occurrences while theofficer, director or employee is, or was, serving at the Company’s request in such capacity. The term of the indemnification period is for the officer's,director's or employee’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnificationagreements is unlimited; however, the Company has a director and officer insurance policy that covers a portion of any potential exposure. The Companycurrently believes the estimated fair value of its indemnification agreements is not material based on currently available information, and as such, theCompany had no liabilities recorded for these agreements as of December 31, 2010.Cambrex's subsidiaries are party to a number of other proceedings that are not considered material at this time.(21)Discontinued OperationsFor 2010, the Company recorded a benefit of $1,652 as a result of the expiration of a contingent liability, charges of $1,144 for environmental remediation,net of insurance proceeds, and $170 for a workers’ compensation claim, all related to sites of divested businesses, as discontinued operations. 74IndexCAMBREX CORPORATION AND SUBSIDIARIESSELECTED QUARTERLY FINANCIAL AND SUPPLEMENTARY DATA - UNAUDITED(in thousands, except per share data) 1st 2nd 3rd 4th Quarter Quarter (1) Quarter (2) Quarter (3) 2010 Gross sales $56,155 $57,403 $49,356 $63,522 Net revenues 56,093 58,217 47,774 64,908 Gross profit 14,493 17,933 14,110 20,330 Income/(loss) from continuing operations 1,683 3,666 (1,284) 5,244 Income/(loss) from discontinued operations - 1,105 (170) (597)Net income/(loss) 1,683 4,771 (1,454) 4,647 Earnings/(loss) per share of common stock:(5) Basic 0.06 0.16 (0.05) 0.16 Diluted 0.06 0.16 (0.05) 0.16 Average shares: Basic 29,315 29,333 29,373 29,420 Diluted 29,374 29,404 29,373 29,489 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter (4) 2009 Gross sales $60,000 $59,766 $57,802 $58,709 Net revenues 61,032 59,281 56,370 57,867 Gross profit 19,133 19,683 16,948 14,514 Net income/(loss) 4,738 5,459 2,963 (2,768) Earnings/(loss) per share of common stock:(5) Basic 0.16 0.19 0.10 (0.09)Diluted 0.16 0.19 0.10 (0.09)Average shares: Basic 29,200 29,222 29,253 29,286 Diluted 29,203 29,247 29,303 29,286 (1)Discontinued operations includes a benefit of $1,652 as a result of the expiration of a contingent liability and charges of $547 for environmentalremediation, both related to sites of divested businesses.(2)Income from continuing operations includes pre-tax charges of $1,187 within operating expenses for certain one-time employee benefits relating to the planto optimize operations at a manufacturing site, and $711 within operating expenses for merger and acquisition expenses. Discontinued operationsincludes a charge of $170 for a worker's compensation claim related to a site of a divested business.(3)Income from continuing operations includes pre-tax charges of $106 within operating expenses for certain one-time employee benefits relating to the plan tooptimize operations at a manufacturing site, $211 within operating expenses for merger and acquisition expenses and $509 within other expenses forcurrency losses pursuant to the purchase of Zenara. Discontinued operations include a charge of $597 for environmental remediation, net of insurance,related to sites of a divested business.(4)Net income includes tax expense of approximately $5,300 for an estimate of an international tax liability related to a 2003 transaction.(5)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 sumof the quarters may not necessarily equal the earnings per share amount for the year. 75IndexItem 9Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.None.Item 9AControls and Procedures.Conclusion Regarding the Effectiveness of Disclosure Controls and ProceduresThe Company maintains disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, asamended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in its reports filed or submitted under the Exchange Act isprocessed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated andcommunicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow fortimely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controlsand procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and managementis required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.As required by SEC Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with the participation of management, including theCompany’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls andprocedures as of the end of the period covered by this Annual Report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer haveconcluded that as of December 31, 2010, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in thereports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rulesand forms and (ii) accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allowtimely decisions regarding required disclosure.Management's Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule13a-15(f). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States, and include thosepolicies and procedures that: ·Pertain to the maintenance of records, that in reasonable detail, accurately and fairly represent the transactions and dispositions of the assetsof the Company, ·Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations ofmanagement and the Board of Directors of the Company, and ·Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assetsthat could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, wecarried out an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2010 based on the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Our management concluded thatbased on its assessment, our internal control over financial reporting was effective as of December 31, 2010. Effectiveness of our internal control overfinancial reporting as of December 31, 2010 has been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in their reportwhich appears elsewhere herein. 76IndexChanges in Internal Control over Financial ReportingThere were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange ActRules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internalcontrol over financial reporting.Item 9BOther Information.None. 77IndexPART IIIItem 10Directors, Executive Officers and Corporate Governance.Executive Officers of the RegistrantThe following table lists the officers of the Company:NameAgeOffice Steven M. Klosk*53President, Chief Executive Officer Shawn P. Cavanagh*..44Executive Vice President & Chief Operating Officer James G. Farrell44Vice President and Corporate Controller Paolo Russolo*66President, Cambrex Profarmaco Milano Gregory P. Sargen*45Executive Vice President & Chief Financial Officer F. Michael Zachara*47Vice President, General Counsel and Corporate Secretary*Executive OfficerThe Company's executive officers are elected by the Board of Directors and serve at the Board's discretion.Mr. Klosk joined Cambrex in October 1992 and has served as President and Chief Executive Officer since May 2008. He also became a member ofthe Board of Directors in May 2008. Mr. Klosk joined the Company as Vice President, Administration. He was appointed Executive Vice President,Administration in October 1996 and was promoted to the position of Executive Vice President, Administration and Chief Operating Officer for the CambrexPharma and Biopharmaceutical Business Unit in October 2003. In January 2005, Mr. Klosk assumed direct responsibility for the leadership of theBiopharmaceutical Business Unit as Chief Operating Officer. In August 2006, Mr. Klosk assumed the responsibility of the Pharma business as ExecutiveVice President and Chief Operating Officer – Biopharma & Pharma and in February 2007 was appointed to Executive Vice President, Chief Operating Officer& President, Pharmaceutical Products and Services. From 1988 until he joined Cambrex, Mr. Klosk was Vice President, Administration and CorporateSecretary for The Genlyte Group, Inc. From 1985 to 1988, he was Vice President, Administration for Lightolier, Inc., a subsidiary of The Genlyte Group,Inc.Mr. Cavanagh joined Cambrex in January 2011 and currently serves as Executive Vice President and Chief Operating Officer. From 2007 to 2009 Mr.Cavanagh was with Lonza, which purchased Cambrex Bioproducts, most recently as President of Lonza Bioscience. From 1999 to 2007, Mr. Cavanaghwas with Cambrex Bioproducts. While at Cambrex Bioproducts, Mr. Cavanaugh held several positions including President of Cambrex Bioproducts. Priorto joining Cambrex Bioproducts, Mr. Cavanagh held various management and engineering positions with FMC Corporation.Mr. Farrell joined Cambrex in September 2005 as Corporate Controller and has also served as Vice President since July 2007. In early 2008, Mr. Farrell wasemployed by PDI, Inc. as Vice President and Corporate Controller/Interim Chief Financial Officer. Mr. Farrell returned to Cambrex in late 2008. From 1994until 2005, he was with Ingersoll-Rand Company, most recently as Director, Accounting Policy, Procedures and External Reporting. Mr. Farrell was withErnst & Young from 1988 to 1994, most recently as Audit Manager.Dr. Russolo is President, Profarmaco Milano and joined the Company in 1994 with the acquisition of Profarmaco Nobel S.r.l. in Milan Italy, where he servedas Managing Director since 1982. Dr. Russolo joined Profarmaco Nobel S.r.l. in 1971. Upon the acquisition of Profarmaco Nobel S.r.l., Dr. Russolocontinued serving in the role of Managing Director until 2000, when he was appointed to President, Cambrex Profarmaco Business Unit. Upon the completionof the sale of the Landen facility Dr. Russolo assumed his current position. 78IndexMr. Sargen joined Cambrex in February 2003 and has served as Vice President and Chief Financial Officer since February 2007 and Executive Vice Presidentand Chief Financial Officer since January 2011. Mr. Sargen previously held the position of Vice President, Finance. Previously, he was with Exp@nets, Inc.from 1999 through 2002, serving in the roles of Executive Vice President, Finance/Chief Financial Officer and Vice President/Corporate Controller. From1996 to 1998, he was with Fisher Scientific International’s Chemical Manufacturing Division, serving in the roles of Vice President, Finance andController. Mr. Sargen has also held various positions in finance, accounting and audit with Merck & Company, Inc., Heat and Control, Inc., and Deloitte &Touche.Mr. Zachara joined Cambrex in June 2008 and has served as Vice President, General Counsel and Corporate Secretary since February 2009. Mr. Zacharaformerly held the position of Assistant General Counsel and Assistant Corporate Secretary. Previously, he was with Sun Chemical Corporation from 1997 to2008 as Senior Corporate Attorney, Assistant Secretary and Director of Real Estate. From 1994 to 1997, he was with Brown & Wood LLP, a New York firmas Associate, Real Estate/Environmental Department. Mr. Zachara has also held positions with Shanley & Fisher, P.C. and James C. Anderson Associates.The remaining information required by this item will be included in the 2011 Proxy Statement and is incorporated herein by reference.Item 11Executive Compensation.The remaining information required by this item will be included in the 2011 Proxy Statement and is incorporated herein by reference.Item 12Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.The remaining information required by this item will be included in the 2011 Proxy Statement and is incorporated herein by reference.Item 13Certain Relationships and Related Transactions and Director Independence.The remaining information required by this item will be included in the 2011 Proxy Statement and is incorporated herein by reference.Item 14Principal Accountant Fees and Services.The remaining information required by this item will be included in the 2011 Proxy Statement and is incorporated herein by reference. 79IndexPART IVItem 15 Exhibits and Financial Statement Schedules.(a) 1. The following consolidated financial statements of the Company are filed as part of this report: Page Number (in this report) Financial Statements: Reports of Independent Registered Public Accounting Firm38Consolidated Balance Sheets as of December 31, 2010 and 200940Consolidated Income Statements for the Years Ended December 31, 2010, 2009 and 200841Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2010, 2009 and 200842Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 200843Notes to Consolidated Financial Statements44Selected Quarterly Financial and Supplementary Data (unaudited)75(a) 2. (i) The following schedule to the consolidated financial statements of the Company as filed herein and the Report of Independent RegisteredPublic Accounting Firms are filed as part of this report. Page Number (in this report) Schedule II – Valuation and Qualifying Accounts81All other schedules are omitted because they are not applicable or not required or because the required information is included in the consolidated financialstatements of the Company or the notes thereto.(a) 3. The exhibits filed in this report are listed in the Exhibit Index on pages 83 - 86. 80IndexSCHEDULE IICAMBREX CORPORATIONVALUATION AND QUALIFYING ACCOUNTSFOR THE YEARS ENDED DECEMBER 31, 2010, 2009 and 2008(dollars in thousands)Column A Column B Column C Column D Column E Additions BalanceBeginning ofYear Charged/(Credited) toCost andExpenses Charged/(Credited) toOtherAccounts Deductions Balance Endof Year Description Year ended December 31, 2010: Doubtful trade receivables and returns and allowances $627 $478 $(22) $- $1,083 Deferred tax valuation allowance 80,368 (1,799) (720) - 77,849 Year ended December 31, 2009: Doubtful trade receivables and returns and allowances $1,105 $(191) $31 $318 $627 Deferred tax valuation allowance 79,230 103 1,035 - 80,368 Year ended December 31, 2008: Doubtful trade receivables and returns and allowances $560 $600 $(41) $14 $1,105 Deferred tax valuation allowance 64,842 3,762 10,626 - 79,230 81IndexSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized. CAMBREX CORPORATION By/s/ Gregory P. Sargen Gregory P. Sargen Executive Vice President and Chief FinancialOfficer Date: February 11, 2011 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities and on the dates indicated. Signature Title Date /s/STEVEN M. KLOSK President and Chief Executive Officer, ) Steven M. Klosk and Director /s/GREGORY P. SARGEN Executive Vice President and Chief Financial ) Gregory P. Sargen Officer (Principal Financial Officer and Accounting Officer) /s/JOHN R. MILLER* Chairman of the Board of Directors ) John R. Miller /s/DAVID R. BETHUNE * Director ) David R. Bethune /s/ROSINA B.DIXON* Director ) Rosina B. Dixon, M.D. /s/KATHRYN RUDIE HARRIGAN* Director ) Kathryn Rudie Harrigan, PhD /s/LEON J. HENDRIX, JR.* Director ) February 11, 2011 Leon J. Hendrix, Jr. /s/ILAN KAUFTHAL* Director ) Ilan Kaufthal /s/WILLIAM KORB* Director ) William Korb /s/PETER G. TOMBROS* Director ) Peter G. Tombros *By/s/ STEVEN M. KLOSK ) Steven M. Klosk Attorney-in-Fact 82IndexEXHIBIT INDEXExhibit No.Description 2.1--Agreement for the sale and purchase of the entire issued share capital in each of Zenara Pharma Limited and Zenara Pharma Private Limiteddated November 2, 2010, between Camzena Holdings Limited, NuLife (Cyprus) Limited, Ashok Srinivasan Narasimhan, Pradip KhodidasDhamecna, Cambrex Corporation, Zenara Pharma Limited and Zenara Pharma Private Limited.(BB). 2.2--Asset purchase agreement dated as of August 7, 2003 between Rutherford Acquisition Corporation and Cambrex Corporation and The Sellerslisted in the asset Purchase agreement.(W). 2.3--Stock Purchase Agreement dated October 23, 2006 between Lonza America Inc., Lonza Bioproducts AG, Lonza Sales AG, Lonza GroupLimited and Cambrex Corporation and Subsidiaries.(Q – Exhibit 10.1). 3.1--Restated Certificate of Incorporation of registrant, as amended.(M). 3.2--By Laws of registrant, as amended.(M). 4.1--Form of Certificate for shares of Common Stock of registrant.(A - Exhibit 4(a)). 10.1--2009 Long Term Incentive Plan (V – Exhibit 1). 10.2--Directors’ Compensation Program.(Y). 10.3--Performance Share Agreement by and between Steven M. Klosk and Cambrex Corporation. (Z). 10.4--F. Michael Zachara Offer Letter.(Z). 10.5--Performance Share Units Agreement by and between Steven M. Klosk and Cambrex Corporation.(AA). 10.6--Performance Share Units Agreement by and between Gregory P. Sargen and Cambrex Corporation.(AA). 10.7--Credit Agreement dated as of April 6, 2007 between Cambrex Corporation, the subsidiary borrowers party hereto, the subsidiary guarantorsparty hereto, the lenders party hereto and JP Morgan Chase Bank, N.A., as Administrative Agent.(S). 10.8--Settlement Agreement and Release and Environmental Escrow Agreement dated July 30, 2007 between Rutherford Chemicals LLC, VertellusSpecialties Holdings UK Ltd. (formerly Rutherford Chemicals UK Ltd.), Vertellus Specialties UK Ltd. (formerly Seal Sands ChemicalsLtd.), and Vertellus Specialties Holdings Corp. (formerly Rutherford Chemicals Holdings Corp.), and Cambrex Corporation, Nepera, Inc.,CasChem Inc., Zeeland Chemicals, Inc., Nepcam, Inc., and Cambrex Ltd.(X). 10.9--Shawn P. Cavanagh Offer Letter.(CC). 10.10--Supplemental Executive Retirement Plan Change of Control Amendment.(U). 10.11--Employment Agreement dated January 17, 2011 between the registrant and Shawn P. Cavanagh.(CC). 10.12--1994 Stock Option Plan.(C). 10.13--1996 Performance Stock Option Plan.(G). 10.14--1998 Performance Stock Option Plan.(H). 10.15--2000 Employee Performance Stock Option Plan.(H). 10.16--Cambrex Corporation Savings Plan.(B). 10.17--Cambrex Corporation Supplemental Retirement Plan.(D). 10.18--Employment Agreement dated February 6, 2007 between the registrant and Gregory P. Sargen.(T). 10.19--Deferred Compensation Plan of Cambrex Corporation (as amended and restated as of March 1, 2001).(N). 10.20--Employment Agreement dated February 6, 2007 between the registrant and Paolo Russolo.(T). 10.21--2001 Performance Stock Option Plan.(I). 10.22--2003 Performance Stock Option Plan.(I). 10.23--2004 Performance Incentive Plan.(J). 10.24--Directors’ Common Stock Fee Payment Plan.(J). 10.25--2004 Incentive Plan.(L). 10.26--Administrative Consent Order dated September 16, 1985 of the New Jersey Department of Environmental Protection to Cosan ChemicalCorporation.(A – Exhibit 10(q)). 83Index 10.27--Registration Rights Agreement dated as of June 5, 2006 between the registrant and American Stock Transfer and Trust Company.(F). 10.28--Agreement to Lift Sales Restrictions on Certain Vested Options.(O). 10.29--Agreement to Accelerate Vesting of Certain Options.(P). 16.1--PricewaterhouseCoopers LLP Letter.(R). 21--Subsidiaries of registrant.(E). 23--Consent of BDO USA, LLP to the incorporation by reference of its report herein in Registration Statement Nos. 333-166260, 333-57404, 333-22017, 33-21374, 33-81782, 333-113612, 333-113613, 333-129473 and 333-136529 on Form S-8 of the registrant.(E). 24--Powers of Attorney to sign this report.(E). 31.1--CEO Certification pursuant to Rule 13a – 14(a) and Rule 15d – 14(a) of the Securities Exchange Act, as amended.(E). 31.2--CFO Certification pursuant to Rule 13a – 14(a) and Rule 15d – 14(a) of the Securities Exchange Act, as amended.(E). 32--CEO and CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(K).___________________________See legend on following page 84IndexEXHIBIT 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. 33-81780) dated July 20, 1994.(C)Incorporated by reference to registrant's Registration Statement on Form S-8 (Registration No. 33-81782) dated July 20, 1994.(D)Incorporated by reference to the registrant's Annual Report on Form 10-K for 1994.(E)Filed herewith.(F)Incorporated by reference to the registrant’s Registration Statement on Form 8-A dated May 25, 2006.(G)Incorporated by reference to registrant’s Registration Statement on Form S-8 (Registration No. 333-22017) dated February 19, 1997.(H)Incorporated by reference to registrant’s Registration Statement on Form S-8 (Registration No. 333-57404) dated March 22, 2001.(I)Incorporated by reference to registrant’s Registration Statement on Form S-8 (Registration No. 333-113612) dated March 15, 2004.(J)Incorporated by reference to registrant’s Registration Statement on Form S-8 (Registration No. 333-113613) dated March 15, 2004.(K)Furnished herewith.(L)Incorporated by reference to registrant’s Registration Statement on Form S-8 (Registration No. 333-129473) dated November 4, 2005.(M)Incorporated by reference to registrant’s Quarterly Report on Form 10-Q for the period ending March 31, 2007.(N)Incorporated by reference to registrant’s Annual Report on Form 10-K for year end 2005 filed May 26, 2006.(O)Incorporated by reference to registrant’s Current Report on Form 8-K dated November 7, 2006.(P)Incorporated by reference to registrant’s Current Report on Form 8-K dated June 7, 2005.(Q)Incorporated by reference to registrant’s Current Report on Form 8-K filed October 24, 2006.(R)Incorporated by reference to registrant’s Current Report on Form 8-K filed March 21, 2007.(S)Incorporated by reference to registrant’s Current Report on Form 8-K filed April 11, 2007.(T)Incorporated by reference to registrant’s Annual Report on Form 10-K for year end 2006 filed on March 15, 2007.(U)Incorporated by reference to registrant’s Quarterly Report on Form 10-Q for the period ending June 30, 2008.(V)Incorporated by reference to registrant’s Definitive Proxy Statement for the 2009 Annual Meeting of Stockholders filed on March 20, 2009.(W)Incorporated by reference to the registrant’s Current Report on Form 8-K dated November 10, 2003. (X)Incorporated by reference to registrant’s Quarterly Report on Form 10-Q for the period ending September 30, 2007. (Y)Incorporated by reference to registrant's Annual Report on Form 10-K for year end 2009 filed on February 11, 2010.(Z)Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ending March 31, 2010.(AA)Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ending June 30, 2010. 85Index(BB)Incorporated by reference to the registrant’s Current Report on Form 8-K dated November 4, 2010.(CC)Incorporated by reference to the registrant’s Current Report on Form 8-K dated January 13, 2011. 86 CAMBREX CORPORATIONEXHIBIT 21Subsidiaries of RegistrantSubsidiaryIncorporated in: Cambrex Charles City, Inc.Iowa Cambrex Profarmaco Milano S.r.l.Italy Cambrex Karlskoga ABSweden AS Cambrex TallinnEstonia Cambrex IEP GmbHGermany CAMBREX CORPORATIONEXHIBIT 23Consent of Independent Registered Public Accounting FirmWe hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-166260, 333-57404, 333-22017, 33-21374, 33-81782, 333-113612, 333-113613, 333-129473 and 333-136529) of Cambrex Corporation of our reports dated February 11, 2011, relating to the consolidatedfinancial statements and schedule, and the effectiveness of Cambrex Corporation’s internal control over financial reporting, which appear in this AnnualReport on Form 10-K./s/ BDO USA, LLPWoodbridge, New JerseyFebruary 11, 2011 EXHIBIT 24POWER OF ATTORNEYKNOW ALL MEN BY THESE PRESENTS, that each officer and director of Cambrex Corporation, a Delaware corporation, whose signature appears belowconstitutes and appoints Steven M. Klosk and Gregory P. Sargen, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power ofsubstitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all Annual Reports on Form10-K which said Cambrex Corporation may be required to file pursuant to Section 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 other documents in connection therewith, with the Securities and ExchangeCommission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessaryto be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all thatsaid attorneys-in-fact and agents or their substitutes may lawfully do or cause to be done by virtue hereof.IN WITNESS WHEREOF each of the undersigned has executed this instrument as of the 11th day of February 2011./s/ Steven M. Klosk /s/ Gregory P. Sargen Steven M. Klosk Gregory P. Sargen President, Chief Executive Officer and Director Executive Vice President and Chief FinancialOfficer (Principal Financial Officer andAccounting Officer) /s/ John R. Miller /s/ Leon J. Hendrix, Jr. John R. Miller Leon J. Hendrix, Jr. Chairman of the Board of Directors Director /s/ David R. Bethune /s/ Ilan Kaufthal David R. Bethune Ilan Kaufthal Director Director /s/ Rosina B. Dixon /s/ William Korb Rosina B. Dixon, M.D. William Korb Director Director /s/ Roy W. Haley /s/ Peter G. Tombros Roy W. Haley Peter G. Tombros Director Director /s/ Kathryn Rudie Harrigan Kathryn Rudie Harrigan, PhD Director Exhibit 31.1Cambrex CorporationCertification Pursuant to Rule 13a – 14(a) and Rule 15d – 14(a)of the Securities Exchange Act, as AmendedI, Steven M. Klosk, certify that:1.I have reviewed this annual report on Form 10-K of Cambrex Corporation;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annualreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d-15(f)) for theregistrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likelyto adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: February 11, 2011 /s/ Steven M. Klosk Steven M. Klosk President and Chief Executive Officer Exhibit 31.2Cambrex CorporationCertification Pursuant to Rule 13a – 14(a) and Rule 15d – 14(a)of the Securities Exchange Act, as AmendedI, Gregory P. Sargen, certify that:1.I have reviewed this annual report on Form 10-K of Cambrex Corporation;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annualreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a - 15(f) and 15d-15(f))for theregistrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likelyto adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: February 11, 2011 /s/ Gregory P. Sargen Gregory P. Sargen Executive Vice President and Chief Financial Officer Exhibit 32CAMBREX CORPORATIONCertification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant toSection 906 of the Sarbanes-Oxley Act of 2002In connection with the Annual Report of Cambrex Corporation (the “Company”) on Form 10-K for the period ending December 31, 2010, as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his respective knowledge:1.The Report fully complies, in all material respects, with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 ; and2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Steven M. Klosk Steven M. Klosk President and Chief Executive Officer /s/ Gregory P. Sargen Gregory P. Sargen Executive Vice President and Chief Financial OfficerDated: February 11, 2011

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