Cambrex Corporation
Annual Report 2014

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10‑K☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2014OR☐ 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) Delaware 22‑2476135(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) One Meadowlands Plaza, East Rutherford, New Jersey 07073(Address of principal executive offices) (Zip Code)Registrant's telephone number, including area code: (201) 804‑3000 Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredCommon Stock, $.10 par value New 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 ☒. 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 ☐. 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 ☐. 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 ☒. No ☐. Indicate 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 ☐Accelerated filer ☒Non-accelerated filer ☐ Smaller reporting company ☐ Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐. No ☒. The aggregate market value of the voting and non-voting common equity held by non‑affiliates of the registrant was approximately $620,956,613 as ofJune 30, 2014. As of January 30, 2015, there were 31,098,306 shares outstanding of the registrant's Common Stock, $.10 par value.DOCUMENTS INCORPORATED BY REFERENCEPortions of the Registrant’s definitive Proxy Statement for the 2015 Annual Meeting are incorporated by reference into Part III of this Report. CAMBREX CORPORATION AND SUBSIDIARIESINDEX TO ANNUAL REPORT ON FORM 10-KFor the Year Ended December 31, 2014 ItemNo. PART IPageNo. 1Business31ARisk Factors81BUnresolved Staff Comments182Properties183Legal Proceedings194Mine Safety Disclosures19 PART II 5Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities196Selected Financial Data227Management’s Discussion and Analysis of Financial Condition and Results of Operations237AQuantitative and Qualitative Disclosures about Market Risk368Financial Statements and Supplementary Data369Changes in and Disagreements With Accountants on Accounting and Financial Disclosure779AControls and Procedures779BOther Information78 PART III 10Directors, Executive Officers and Corporate Governance7911Executive Compensation8012Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters8013Certain Relationships and Related Transactions, and Director Independence8014Principal Accountant Fees and Services80 PART IV 15Exhibits and Financial Statement Schedules81 2IndexForward-Looking StatementsThis document contains and incorporates by reference forward-looking statements including statements regarding expected performance, including,but not limited to, the Company’s belief that cash flows from operations, along with funds available from the revolving line of credit, will be adequate tomeet the operational and debt servicing needs of the Company, as well as other statements relating to expectations with respect to sales, the timing of orders,research and development expenditures, earnings per share, capital expenditures, the outcome of pending litigation (including environmental proceedingsand remediation investigations) and related estimates of potential liability, acquisitions, divestitures, collaborations or other expansion opportunities. Thesestatements may be identified by the fact that they use words such as “may,” “will,” “could,” “should,” “would,” “expect,” “anticipate,” “intend,” “estimate,”“believe” or similar expressions. Any forward-looking statements contained herein are based on current plans and expectations and involve risks anduncertainties that could cause actual outcomes and results to differ materially from current expectations. The factors described in Item 1A of Part I of thisAnnual Report on Form 10-K, captioned “Risk Factors,” or otherwise described in the Company’s filings with the Securities and Exchange Commission,provide examples of such risks and uncertainties that may cause the Company’s actual results to differ materially from the expectations the Companydescribes 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 rates, interest rates, technology, manufacturing and legal issues, including theoutcome of outstanding litigation, changes in foreign exchange rates, uncollectible receivables, the timing of orders, loss on disposition of assets,cancellation or delays in renewal of contracts, lack of suitable raw materials or packaging materials, the Company’s ability to receive regulatory approvals forits products and continued demand in the U.S. for late stage clinical products or the successful outcome of the Company’s investment in new products.The forward-looking statements are based on the beliefs and assumptions of Company management and the information available to Companymanagement as of the date of this report. The Company cautions investors not to place significant reliance on expectations regarding future results, levels ofactivity, performance, achievements or other forward-looking statements. The information contained in this Annual Report on Form 10-K is provided by theCompany as of the date hereof, and, unless required by law, the Company does not undertake and specifically disclaims any obligation to update theseforward-looking statements contained in this Annual Report on Form 10-K as a result of new information, future events or otherwise.PART IItem 1Business.GeneralCambrex Corporation (the "Company" or "Cambrex"), a Delaware corporation, began business in December 1981. Cambrex is a life sciences companythat provides products and services that accelerate and improve the development and commercialization of new and generic therapeutics. The Companyprimarily supplies its products and services worldwide to innovator and generic pharmaceutical companies. The Company's overall strategy is to: grow itsportfolio of custom development projects, especially those in the later stages of the clinical trial process; secure long-term supply agreements to produceactive pharmaceutical ingredients (“APIs”) and intermediates for newly approved drug products; expand sales of products and projects based on itsproprietary technologies; and partner with generic drug companies to grow the Company’s extensive portfolio of generic APIs. The Company’s acquisitionof Zenara Pharma Private Limited (“Zenara”) also gives the Company the additional capability of producing final dosage form products. The Company alsoseeks to demonstrate excellence in regulatory compliance, environmental, health and safety, and customer service. Cambrex has three operating segments,which are manufacturing facilities that have been aggregated as one reportable segment. Zenara, the fourth facility, is not material. (dollars in thousands, except per share data) 3IndexThe 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.·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 development (“R&D”) in order to introduce innovative productsand 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 andmaintains excellent quality and regulatory compliance systems.·Acquisition and Licensing: The Company may drive growth in strategic business segments through the prudent acquisition of businesses,products, product lines, technologies and capabilities to enhance the Company's position in its niche markets.Market Overview and Growth Drivers The Company participates in markets that serve the healthcare industry. Customers include generic drug companies and companies that discover andcommercialize 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 thenecessity to develop 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&Dprojects for therapeutic candidates from the laboratory to the clinic, and eventually, to the patient. Healthcare investment comes from a variety of sources. Large pharmaceutical and biotechnology companies spend billions on drug discovery and development and the Company believes billions more are spentby numerous smaller emerging pharmaceutical companies. Macro-economic conditions can have an impact on the availability of funding for the Company’scustomers, especially many of the smaller companies that are often dependent upon venture capital and other private sources of funding. Cambrex assists companies in developing robust processes for the manufacture of clinical and commercial quantities. Product testing, analyticalmethods and quality processes are integrated into the manufacturing process. Cambrex excels in the manufacture and testing of APIs and drug substances atlaboratory, 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 mayoutsource the development and manufacturing of a drug substance to manage multiple internal priorities, access new technologies or additional capacity,preserve needed capital or ensure multiple sources of supply. Many emerging pharmaceutical and generic drug companies outsource all processdevelopment and manufacturing, and many larger pharmaceutical companies have outsourced the manufacturing of drug products. With large plants andproduct development resources in both Europe and the U.S., and large teams of professionals with substantial experience in the development, scale-up andoperation of pharmaceutical manufacturing processes, Cambrex is particularly well positioned to assist drug companies with these much needed services forAPIs. (dollars in thousands, except per share data) 4IndexNew drugs are typically patented. When the patent expires, the drug may be manufactured and marketed in its generic form. Growth in the genericdrug market 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 alternative to higher-priced branded drugs. In the United States, and many countries in Europe, governments andprescription benefit management companies provide incentives for generic substitution to reduce costs. Cambrex manufactures over 80 generic 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 similar regulatoryagencies throughout the world. These agencies oversee and regulate the development, manufacturing and commercialization processes for APIs andregulated intermediates. Excellent regulatory and quality systems as well as extensive experience in pharmaceutical fine chemical scale-up andmanufacturing 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 has been limited to date, although these pressures may increase as developing markets become more acceptable assuppliers to larger pharmaceutical companies. Cambrex regularly sources R&D services, raw materials and certain intermediates from developing marketcompanies.Development of the BusinessThe discussion below provides insight into the general development of the Company’s business, including recent acquisitions.In November 2010, the Company acquired a 51% equity stake in Zenara, a Hyderabad, India based pharmaceutical company focused on theformulation of final dosage form products. In May 2014, the Company purchased the remaining 49% interest in Zenara. The Company negotiated anaccelerated purchase of the business, which was contractually required to be completed in 2016 at a price that would have been determined by the financialperformance of the Zenara business. The purchase price negotiated for the 49% was $2,680. Management believed it was economically beneficial to takecontrol of the business to accelerate the execution of the Company’s strategy for the business. Previously, Cambrex accounted for its investment in Zenarausing the equity method of accounting. Zenara’s results from the purchase date through December 31, 2014 are reflected in the consolidated financialstatements of the Company and were not material. See Notes 2, 4 and 8 to the Company’s consolidated financial statements for additional information.ProductsThe Company uses its technical expertise in a wide range of chemical processes to meet the needs of its customers for high quality products andservices for specialized 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 innovator and generic drug companies. Products include APIs, pharmaceutical intermediates and,to a lesser extent, other fine chemicals. The Company’s acquisition of Zenara also gives the Company the additional capability of producing final dosageform products. (dollars in thousands, except per share data) 5IndexThe Company’s products and services are sold to a diverse group of several hundred customers, with one customer, Gilead Sciences, Inc., accountingfor 24.0% of 2014 consolidated sales and 18.3% of 2013 consolidated sales. The Company’s products are sold through a combination of direct sales andindependent agents. One API, an antiviral product, represented 22.9% of 2014 consolidated sales. In 2013, two APIs, one an antiviral, and the other agastrointestinal product that is sold to multiple customers, represented 18.3% and 10.0%, respectively, of consolidated sales.The following table shows gross sales by geographic area: 2014 2013 2012 Europe $232,894 $210,463 $150,678 North America 117,477 86,974 105,439 Asia 12,865 13,800 12,827 Other 10,914 5,975 8,987 Total $374,150 $317,212 $277,931 Marketing and DistributionMarketing generally requires significant cooperative effort among a highly trained sales and marketing staff, a scientific staff that can assess thetechnical fit and estimate manufacturing economics, manufacturing and engineering staff to scale up the chemical process and business unit management todetermine 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.Raw 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 and certain othercommodity materials, where prices can vary 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 the United States,Europe and India. Approximately 160 employees are at least partially involved in R&D activities worldwide.The Company spent $13,075, $10,387 and $9,544 in 2014, 2013 and 2012, respectively, on R&D efforts.Patents and Trademarks The Company has patent protection covering certain products, processes and services. In addition, the Company also relies on know-how and tradesecrets (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 14 issued patents and has 24 patent applications pending in the United States and owns 161 patents and has 109patent applications pending in foreign countries covering various technologies. The Company seeks to protect its proprietary technology and prepares newpatent applications as it develops new inventions. (dollars in thousands, except per share data) 6IndexThe 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 counterpartswhich relate to its nicotine polacrilex resin products and methods of manufacturing, and expire on May 28, 2022.The Company's products and services are sold around the world under trademarks that are owned by the Company. This includes Profarmaco, which isregistered around the world as a word and design mark. Rights in this trademark will exist at least as long as the Company or its majority owned subsidiariescontinue to use the trademark.The Company has entered into a worldwide perpetual license agreement with Celgene Corporation and Celgro Corporation that gives the Companythe exclusive 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 amphetamine salts currently sold by the Company. Under the terms of this agreement, the Company pays noroyalties or fees related to its use of this intellectual property.CompetitionThe Company has numerous primary API and advanced intermediate competitors throughout Western Europe and the United States and many morecompetitors within various product categories the Company serves, including a growing number of competitors in Asia, Eastern Europe and other low-costareas. The Company believes that low cost providers have had the impact of driving prices down for many products and services for which the Companycompetes to provide, especially within the generic API market, and the Company anticipates that it will face increased competition from these providers inthe future. It is expected that regulatory compliance, product quality, pricing, and logistics will determine the extent of the long term impact of thesecompetitors in the primary markets that the Company serves. If the Company perceives significant competitive risk and a need for technical or financialcommitment, it generally attempts to negotiate long term contracts or guarantees from its customers.Environmental and Safety Regulations and ProceedingsCertain 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 and health compliance programsand training 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 its waste even after transfer to third party waste disposalfacilities. Other future developments, such as increasingly strict environmental, safety and health laws and regulations, and enforcement policies, couldresult in substantial costs and liabilities to the Company and could subject the Company's handling, manufacture, use, reuse or disposal of substances orpollutants at its plants to more rigorous scrutiny than at present.Known environmental matters that may result in liabilities to the Company and the related estimates and accruals are summarized in Note 20 to theCompany’s consolidated financial statements.The Company’s policy is to comply with all legal requirements of applicable environmental, health and safety laws and regulations. The Companybelieves it is in compliance with such requirements and has adequate professional staff and systems in place to remain in compliance. In some cases,compliance can only be achieved by capital expenditures, and the Company made capital expenditures of $3,733, $3,554 and $3,757 in 2014, 2013 and2012, respectively, for environmental projects. As the environmental proceedings in which the Company is involved progress from the remedialinvestigation and feasibility study stage to implementation of remedial measures, related capital and other expenditures may increase. The Companyconsiders costs for environmental compliance to be a normal cost of doing business and includes such costs in pricing decisions. (dollars in thousands, except per share data) 7IndexEmployeesAt December 31, 2014, the Company had 1,117 employees worldwide (803 of whom were from international operations) compared with 936employees at December 31, 2013 and 891 at December 31, 2012.Non-U.S. production, administration, scientific and technical employees are represented by various local and national unions. The Company believesits labor relations are satisfactory.SeasonalityThe Company experiences some seasonality primarily due to planned plant shutdowns by the Company and certain customers in the third quarter. Operating results for any quarter, however, are not necessarily indicative of results for any future period. In particular, as a result of various factors including,but not limited to, acquisitions, plant shutdowns, and the timing of large contract revenue streams, the Company believes that period-to-period comparisonsof its operating results should not be relied upon as an indication of future performance.Export and International SalesExport sales from the Company’s domestic operations in 2014, 2013 and 2012 amounted to $101,101, $86,850 and $32,872, respectively. Sales frominternational operations were $187,415, $164,010, and $168,202 in 2014, 2013 and 2012, respectively. Refer to Note 18 to the Company’s consolidatedfinancial statements.Additional InformationCambrex Corporation was incorporated as a Delaware corporation in 1981. The Company’s principal office is located at One Meadowlands Plaza, EastRutherford, NJ 07073 and its telephone number is (201) 804-3000.This 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 tothose reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are made available free of charge on the Company’s websitewww.cambrex.com as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The most recent certificationsby the Company’s Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are filed as exhibits to thisAnnual Report on Form 10-K. The Company also files with the New York Stock Exchange (“NYSE”) the Annual Chief Executive Officer Certification asrequired by Section 303A.12.(a) of the NYSE 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, Corporate Governance Guidelines, Code of Business Conduct and Ethics and Independence Standards forDirectors. These corporate governance documents are also available in print to any stockholder requesting a copy from the corporate secretary at theprincipal executive offices. Information contained on the 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.Item 1ARisk 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, including thecautionary note under the heading “Forward-Looking Statements.” If any of the following risks manifests, the Company’s business, financial condition,operating results, cash flows and reputation could be materially adversely affected. The risks and uncertainties described below are not the only ones theCompany faces. Additionally, risks and uncertainties not presently known to the Company or that it currently deems immaterial may also impair its business,financial condition, operating results and cash flows in the future. (dollars in thousands, except per share data) 8IndexCertain of the Company’s customers and suppliers comprise a significant percentage of the Company’s business and the loss of one or more ofthese customers or suppliers could have a material adverse effect on the Company’s financial position, results of operations and cash flows. Should any significant customer renegotiate on terms more favorable to them, or discontinue or decrease their usage of the Company’s products, theloss could have a material adverse effect on the Company’s financial position, results of operations and cash flow. The Company’s customers routinelyattempt to reduce costs, including the costs of the Company’s products, as a result of macro-economic trends and various market dynamics specificallyaffecting the pharmaceuticals industry.New technologies, competition or a reduction in demand for the Company’s products could reduce sales.The markets for the Company’s products are competitive and price sensitive. The Company has numerous primary API and advanced intermediatecompetitors throughout Western Europe and the United States and many more competitors within various segments of the markets the Company serves,including a growing number of competitors in Asia, Eastern Europe and other low-cost areas. The Company’s competitors may lower prices on products inthe future and the Company may, in certain cases, respond by lowering its prices. Conversely, failure to anticipate and respond to price competition mayadversely impact the Company’s market share. Competitors may develop new technologies or products, negatively impacting the Company. Several of theCompany’s customers, especially those that buy its generic APIs and larger pharmaceutical companies that primarily sell patented products, have internalcapabilities similar to the Company’s. If one or more of these customers replace the Company’s products with their own internal capabilities, demand for theCompany’s products may decrease. In addition, demand for the Company’s products may weaken due to a reduction in R&D budgets, loss of distributors orother factors. A reduction in demand for the Company’s products could impair profit margins and may have a material adverse effect on the Company’sfinancial position, results of operations and cash flow.The Company’s failure to obtain new contracts or renew existing contracts may adversely affect its business.The Company must continually renew existing contracts and win new contracts, which subjects the Company to potentially significant pricingpressures. In the event the Company is unable to replace these contracts timely or at all, or is forced to accept terms, including pricing terms, less favorable tothe Company, the Company’s revenue may not be able to be sustained or may decline. In addition, certain of the Company’s long-term contracts may becancelled or delayed by clients for any reason upon notice. Multiple cancellations, non-renewals, or renewals on less favorable terms to the Company ofsignificant contracts could materially impact the Company’s business. While the Company intends to seek to renegotiate new or extended agreements priorto expiration, if these contracts cannot be renewed or extended on terms acceptable to the Company or at all, the Company’s business, results of operationsand financial condition could be materially adversely affected.Failure to obtain raw materials from third-party manufacturers could affect the Company’s ability to manufacture and deliver its products.The Company relies on third-party manufacturers to supply many of its raw materials and intermediates. In addition, the Company has a single sourcefor supplies of some raw materials to its products. Manufacturing problems may occur with these and other outside sources. Prolonged disruptions in thesupply of any of the Company’s key raw materials, difficulty implementing replacement materials or new sources of supply, or a significant increase in theprices of raw materials could have a material adverse effect on the Company’s operating results, financial condition or cash flows. If a supplier provides theCompany raw materials or other supplies that are deficient or defective or if a supplier fails to provide the Company such materials or supplies in a timelymanner, the Company may have limited ability to find appropriate substitutes or otherwise meet required specifications and deadlines. Moreover, theCompany could experience inventory shortages if it is required to use an alternative supplier on short notice, which also could lead to raw materials beingpurchased on less favorable terms than the Company has with its regular suppliers. If such problems occur, the Company may not be able to manufacture itsproducts profitably or on time, which could harm the Company’s reputation and have a material adverse effect on the Company’s business. (dollars in thousands, except per share data) 9IndexFailure to obtain sufficient quota from the Drug Enforcement Administration ("DEA") could affect the Company’s ability to manufacture anddeliver its products.The starting materials used in several of the Company's products and many of the Company's finished products are controlled substances and areregulated by the DEA. Consequently, their manufacture, shipment (including import and export), storage, sale and use are subject to a high degree ofregulation. In particular, the DEA limits the manufacturing and distribution of the starting materials and APIs manufactured by the Company and it mustregularly apply for quota to obtain and manufacture these substances. As a result of these limitations, the Company may not be able to meet commercialdemand for these substances, which could harm its relationship with customers and its reputation. If the Company’s DEA registration were revoked orsuspended, or if any of the Company’s quota applications were rejected, the Company could no longer lawfully possess, manufacture or distribute controlledsubstances, which could have a material adverse effect on the Company’s business.Disruptions to the Company’s or its customers’ manufacturing operations or supply chain 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. The Company and its suppliers and customers operate in a highlyregulated industry. Any violation of applicable regulations, failure to meet applicable manufacturing standards, or other actions by regulatory agencies,including, but not limited to, plant shutdowns or the removal of a product from the market that eliminate or reduce the Company’s and its customer’s sales ofproducts could negatively impact the Company’s business and reputation. In addition, a number of factors could cause production interruptions at theCompany’s facilities, including equipment malfunctions, disruptions in the supply chain, facility contamination, labor problems, raw material shortages,natural disasters, disruption in utility services, fire, terrorist activities, human error or disruptions in the operations of the Company’s suppliers. Anysignificant disruption to those operations for these or any other reasons could adversely affect the Company’s sales and customer relationships. Any sustainedreduction in the Company’s ability to provide products would negatively impact its sales growth expectations, cash flows and profitability.Litigation may harm the Company or otherwise negatively impact its management and financial resources.The Company’s business is subject to the risk of litigation by employees, customers, consumers, suppliers, stockholders or others through privateactions, class actions, administrative proceedings, regulatory actions or other litigation. The outcome of litigation, particularly class action lawsuits andregulatory actions, is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and themagnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. Complex or extended litigation could causethe Company to incur large expenditures and distract its management. The cost to defend current and future litigation may be significant. There may also beadverse publicity associated with litigation that could decrease customer acceptance of the Company’s products, regardless of whether the allegations arevalid or whether the Company is ultimately found liable. Disputes from time to time with such companies or individuals are not uncommon, and theCompany cannot be assured that it will always be able to resolve such disputes on terms favorable to the Company. As a result, litigation may adverselyaffect its business, financial condition and results of operations. In addition, certain contracts with our suppliers and customers contain provisions wherebythe Company indemnifies, subject to certain limitations, the counterparty for damages suffered as a result of claims related to use of the Company’s productsor facilities and other matters. Claims made under these provisions could be expensive to litigate and could result in significant payments. (dollars in thousands, except per share data) 10IndexRefer to Note 20 to the Company’s consolidated financial statements for a discussion of the Company’s environmental and legal matters.Incidents 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 designs and implements safetyprocedures to comply with the standards prescribed by federal, state, and local regulations, the risk of accidental contamination of property, or injury toindividuals from these materials, cannot be completely eliminated. In the event of accidental contamination of property or injury to individuals caused bythese materials, the Company could be liable for damages which could adversely affect its business. Additionally, any incident could shut down theCompany’s operations, which could have a material adverse effect on the business and results of operations of the Company.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 handling of such waste potentially exposes the Company toenvironmental liability if, in the future, it is determined that the violation of statutes or regulations occurred.The Company is also a party to several environmental remediation investigations and activities and, along with other companies, has been named apotentially responsible party (“PRP”) for certain waste disposal sites. The Company’s estimated reserve for environmental remediation is based oninformation currently available to it and may be subject to material adjustment in future periods as new facts or circumstances may indicate. Moreover,despite its efforts to comply with environmental laws, the Company may face significant remediation liabilities and additional legal proceedings concerningenvironmental matters, which could have a material adverse effect on the Company’s business.It is the Company’s policy to record appropriate liabilities for environmental matters where remedial efforts are probable and the costs can bereasonably estimated. Such liabilities are based on the Company’s best estimate of the undiscounted future costs required to complete the remedial work. Environmental matters often span several years and frequently involve regulatory oversight or adjudication. Additionally, many remediation requirementsare fluid and are likely to be affected by future technological, site and regulatory developments. Each of these matters is subject to various uncertainties, andit is possible that some of these liabilities will be materially higher than the Company has estimated.In matters where the Company has been able to reasonably estimate its liability, the Company has accrued for the estimated costs associated with thestudy or remediation of applicable sites not owned by the Company and the Company's current and former operating sites. Reserves are adjusted periodicallyas remediation efforts progress or as additional technical, regulatory or legal information become available. In some jurisdictions in which the Companyoperates, such as Hyderabad, India, environmental, health and safety regulations are still early in their development, and the Company cannot determine howthese laws will be implemented and the impact of such regulation on the Company. 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 possible tocurrently develop an estimate of the range of reasonably possible environmental losses in excess of its reserves.Refer to Note 20 to the Company’s consolidated financial statements 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 liability underindemnification 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 personal injuryor 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 these risks. There can be no assurance, however, that the Company’s insurance coverage will be adequate or that insurance coverage will continue to be available onterms acceptable to the Company. (dollars in thousands, except per share data) 11Index The Company also indemnifies its officers and directors for certain events or occurrences while the officer or director was serving at the Company’srequest in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnificationagreements is unlimited. Although the Company has a director and officer insurance policy that covers a portion of any potential exposure, the Companycould be materially adversely affected if it were required to pay damages or incur legal costs in connection with a claim above its insurance limits.Any claims beyond the Company’s insurance coverage limits, or that are otherwise not covered by the Company’s insurance, may result insubstantial costs and a reduction in its available capital resources.The Company maintains property insurance, employer’s liability insurance, product liability insurance, general liability insurance, businessinterruption insurance, and directors and officers liability insurance, among others. Although the Company maintains what it believes to be adequateinsurance coverage, potential claims may exceed the amount of insurance coverage or may be excluded under the terms of the policy, which could cause anadverse effect on the Company’s business, financial condition and results from operations. Generally, the Company would be at risk for the loss of inventorythat is not within customer specifications. These amounts could be significant. In addition, in the future the Company may not be able to obtain adequateinsurance coverage or the Company may be required to pay higher premiums and accept higher deductibles in order to secure adequate insurance coverage.The Company depends on key personnel and the loss of key personnel could harm the Company’s business and results of operations.The Company depends on its ability to attract and retain qualified scientific and technical employees as well as a number of key executives. Theseemployees may voluntarily terminate their employment with the Company at any time. There can be no assurance the Company will be able to retain keypersonnel, or to attract and retain additional qualified employees. The Company does not maintain key-man or similar policies covering any of its seniormanagement or key personnel. The Company’s inability to attract and 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 Company depends onthe success of attracting new and retaining existing customers’ projects and their continued business.The Company has made substantial investments in all of its manufacturing facilities. With the completion of these facilities, the Company’s fixedcosts have increased. If the Company is not able to utilize the facilities to capacity, its margins could be adversely affected.The Company expanded its large-scale manufacturing capacity to support expected growth in the business. There can be no assurance that salesvolumes will be sufficient to ensure the economical operation of this expanded capacity, in which case, the Company’s results of operations could beadversely affected. (dollars in thousands, except per share data) 12IndexGlobal growth is subject to a number of economic risks.A reduction in the availability of debt or equity capital could adversely affect the ability of the Company’s customers to obtain financing for productdevelopment and could result in a decrease in or cancellation of orders for the Company’s products as well as impact the ability of the Company’s customersto make payments. The Company believes that cash flows from operations, along with funds available from a revolving line of credit, will be adequate tomeet the operational and debt servicing needs of the Company, but if this does not continue to be the case the Company’s business may be materiallyadversely affected. There is 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 thefailure of one or more participant banks. Significant movements in the rate of exchange between the U.S. dollar and certain currencies, primarily the euro andSwedish krona, may also adversely affect the Company’s results.If the Company acquires other businesses, it may be harmed by difficulties in integration and employee retention, unidentified liabilities of theacquired businesses, or obligations incurred in connection with financing the acquisition.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 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 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. ·The Company may purchase a business that has contingent liabilities that include, among others, known or unknown environmental, patent orproduct 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. ·The Company may purchase businesses located in jurisdictions where it does not have operations and as a result it may not be able to anticipatelocal regulations and the impact such regulations have on its business.Any indemnities or warranties obtained in connection with such acquisitions may not fully cover the ultimate actual liabilities the Company incursdue to limitations in scope, amount or duration, financial limitations of the indemnitor or warrantor or other reasons.As a result of acquiring businesses or entering into other significant transactions, the Company may experience significant charges to earnings formerger and related expenses. If the Company is not able to successfully integrate the acquired business, it may affect the Company’s results of operations andthe market price of its common stock. Furthermore, if the Company is unable to improve the operating margins of acquired businesses or operate themprofitably, it may be unable to achieve its growth strategy. In addition, if the Company makes one or more significant acquisitions in which the consideration includes equity shares or other securities oradditional capital is raised through one or more equity financings, equity interests in Cambrex may be significantly diluted and may result in a dilution ofearnings per share. If the Company makes one or more significant acquisitions in which the consideration includes cash, it may be required to use asubstantial portion of its available cash or incur a significant amount of debt or otherwise arrange additional funds to complete the acquisition, which mayresult in reduced liquidity, a decrease in its net income and a consequential reduction in its earnings per share. (dollars in thousands, except per share data) 13Index The Company has a significant amount of debt.The Company has a $250,000 revolving credit facility of which $60,000 was outstanding at December 31, 2014. This facility expires in November2016. 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 abilityto obtain any necessary financing in the future for working capital, capital expenditures, debt service requirements, or other purposes. It also may place theCompany at a disadvantage relative to its competitors who may have lower levels of debt, while making it more vulnerable to a downturn in its business orthe economy in general. It may also require the Company to use a substantial portion of its cash to pay principal and interest on its debt.The Company’s liquidity, business, financial condition, results of operations and cash flows could be materially and adversely affected if thefinancial 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. In the normal course of business, the Company maintains cash balances with EuropeanUnion banks ranging from the equivalent of $1,000 - $10,000. The Company routinely monitors the risks associated with these institutions and diversifies itsexposure by maintaining smaller balances with multiple financial institutions. If any of the financial institutions where the Company has deposited fundswere to fail, the Company may lose some or all of its deposited funds. Such a loss could have a material adverse effect on the Company’s liquidity, business,financial condition, results of operations and cash flows.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 obsolescence or the uncertainty in the global market, could also have an impact on the value ofinventory and 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 majority ofits product revenues. The Company’s operations extend to numerous countries outside of the U.S.There are a number of significant risks arising from the Company’s international business and the establishment of foreign operations, including:·the possibility that nations or groups could boycott its products;·inflation, foreign currency exchange rates and the impact of shifts in the U.S. and local economies on those rates;·general economic decline or political unrest in the markets in which it operates;·geopolitical risks, terrorism, or acts of war or hostility; (dollars in thousands, except per share data) 14Index ·compliance with local laws and regulations including laws restricting the inflow of capital or cash and unexpected changes in regulatoryrequirements; ·the difficulties and expenses of compliance with a wide variety of foreign laws and regulations; ·longer accounts receivable cycles in certain foreign countries; ·import and export licensing requirements; ·government sanctions may reduce or eliminate the Company’s ability to sell its products in certain countries; and ·the protection of the Company’s intellectual property and that of its customers. If the Company is unable to effectively manage these risks, these locations may not produce the revenues, earnings, or strategic benefits that itanticipates which could have a material adverse effect on the Company’s business.A significant portion of the Company’s business is conducted in currencies other than the U.S. dollar, which is its reporting currency. The Companyrecognizes foreign currency gains or losses arising from its operations in the period incurred. As a result, currency fluctuations between the U.S. dollar andthe currencies in which the Company does business have caused, and will continue to cause, foreign currency transaction gains and losses. The Companycannot predict the effects of exchange rate fluctuations upon its future operating results because of the number of currencies involved, the variability ofcurrency exposures, and the potential volatility of currency exchange rates. The Company periodically engages in limited foreign exchange hedgingtransactions to mitigate the impact of this volatility on its operations, but its strategies are short-term in nature and may not adequately protect its operatingresults from the full effects of exchange rate fluctuations.Finally, 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 PracticesAct and similar anti-bribery laws, the Company may be at a competitive disadvantage to competitors that are not subject to, or do not comply with, suchlaws. Furthermore, while employees and agents must comply with these laws, the Company cannot be certain that internal policies and procedures willalways prevent violations of these laws, despite a commitment to legal compliance and corporate ethics. Violations or mere allegations of such violationscould have a material adverse effect on the Company’s business and reputation.The Company’s operating results may unexpectedly fluctuate in future periods.The Company’s revenue and operating results can fluctuate on a quarterly basis. The operating results for a particular quarter may be higher or lowerthan expected as a result of a number of factors, including, but not limited to, the timing of contracts; the delay, cancellation or acceleration of a contract;seasonal slowdowns in different parts of the world; the timing of accounts receivable collections; pension contributions; changes in government regulations;and changes in exchange rates with the U.S. dollar. Because a high percentage of the Company’s costs are relatively fixed in the short term, such as the costof maintaining facilities and compensating employees, any one of these factors could have a significant impact on the Company’s quarterly results. In somequarters, the Company’s revenue and operating results may be significantly lower than or higher than the expectations of securities analysts and investorsdue to any of the factors described above. (dollars in thousands, except per share data) 15IndexThe possibility the Company will be unable to protect its technologies could affect its ability to compete.The Company’s success depends to some degree upon its ability to develop proprietary products and technologies. However, the Company cannot beassured that patents will be granted on any of its patent applications. The Company also cannot be assured that the scope of any of its issued patents will besufficiently broad to offer meaningful protection. The Company has patents issued in selected countries; therefore, third parties can make, use, and sellproducts covered by its patents in any country in which the Company does not have patent protection. In addition, the Company may be involved in patentlitigation in the future. Issued patents or patents the Company licenses could be successfully challenged, invalidated or circumvented so that its patent rightswould not create an effective competitive barrier. Although the Company intends to defend the validity of owned patents and use all appropriate methods toprevent their infringement, such efforts are expensive and time consuming, with no assurance of success. The ability to enforce patents depends on the lawsof individual countries and each country’s practices regarding enforcement of intellectual property rights. The Company provides its customers the right touse its products under label licenses that are for research purposes only. These licenses could be contested, and the Company cannot be assured that it wouldeither 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, the Company may need to discontinue an important product orproduct line, alter its products and processes, defend its right to use such technology in court or pay license fees. Although the Company may, under thesecircumstances, 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 theCompany’s products are found to infringe on a third party’s intellectual property, the Company may be required to pay damages for past infringement, andlose the ability to sell certain products 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 partby confidentiality agreements with licensees, suppliers, employees and consultants. It is possible that these agreements will be breached and the Companywill not have adequate remedies for any such breach. Disputes may arise concerning the ownership of intellectual property or the applicability ofconfidentiality agreements. Furthermore, Cambrex’s trade secrets and proprietary technology may otherwise become known or be independently developedby its competitors or the Company may not be able to maintain the confidentiality of information relating to such products.Information technology systems could fail to perform adequately or the Company may fail to adequately protect such systems against datacorruption, cyber-based attacks, or network security breaches.The Company utilizes information technology networks and systems to process, transmit, and store electronic information. In particular, the Companydepends on information technology infrastructure to effectively manage its business data, supply chain, logistics, accounting, and other business processesand electronic communications between employees, customers and suppliers. Ineffective allocation and management of the resources necessary to build andsustain an appropriate technology infrastructure could adversely affect the Company’s business. In addition, security breaches or system failures of thisinfrastructure can create system disruptions, shutdowns, or unauthorized disclosure of confidential information. Inability to prevent such breaches or failures,could disrupt the Company’s operations or cause financial damage or loss because of lost or misappropriated information.The Company may experience difficulties implementing its new global enterprise resource planning system.The Company is engaged in a multi-year implementation of a new global enterprise resource planning system (“ERP”). The ERP is designed toaccurately maintain the Company’s books and records and provide information important to the operation of the business to the Company’s managementteam. The Company’s ERP will continue to require significant investment of human and financial resources. In implementing the ERP, we may experiencesignificant delays, increased costs and other difficulties. Any significant disruption or deficiency in the design and implementation of the ERP couldadversely affect the Company’s ability to process orders, ship product, send invoices and track payments, fulfill contractual obligations or otherwise operateits business. While the Company has invested significant resources in planning and project management, significant implementation issues may arise. (dollars in thousands, except per share data) 16IndexThe Company could be subject to 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 lessthan the 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 or the assumed weighted average cost of capital is considerably higher, future testingmay 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 such as domestic federal foreign tax credits to reduce U.S. cash taxes. While theCompany believes that it has adequately provided for any taxes related to these items, and taxes related to all other aspects of its business, any suchassessments or future settlements may be materially different than it has provided. Refer to Note 10 to the Company’s consolidated financial statements for adiscussion of the Company’s income taxes.The Company has deferred tax assets that it may not be able to use under certain circumstances.If the Company is unable to generate future taxable income of sufficient amounts and type in certain jurisdictions, or if there is a significant change intax rates or the time period within which taxable income is recognized, the Company could be required to increase its valuation allowances against itsdeferred tax assets resulting in an increase in its recorded tax expense and a potential adverse impact on future results.Low investment performance by the Company’s defined benefit pension plan assets or other events including changes in regulations or actuarialassumptions may increase the Company’s pension expense, and may require the Company to fund a larger portion of its pension obligations, thusdiverting funds from other potential uses.The Company sponsors a defined benefit pension plan that covers certain eligible employees. The Company’s pension expense and requiredcontributions to the pension plan are directly affected by changes in interest rates, the value of plan assets, the projected rate of return on plan assets, theactual rate of return on plan assets, and the actuarial assumptions used to measure the defined benefit pension plan obligations. If plan assets perform belowthe assumed rate of return used to determine pension expense, future pension expense will increase. The proportion of pension assets to liabilities, which iscalled the funded status, determines the level of contribution to the plan that is required by law. Changes in the plan’s funded status related to the value ofassets or liabilities could increase the amount required to be funded. The Company cannot predict whether changing market or economic conditions,regulatory changes or other factors will further increase the Company’s pension funding obligations, diverting funds from other potential uses. Any 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, the EuropeanMedicines Agency and comparable regulatory authorities in other countries. The process of obtaining regulatory approval to produce and marketpharmaceutical products is rigorous, time-consuming, costly, and often unpredictable. The Company’s business, as well as its customers’ business depends inpart on strict government regulation of the drug development process. Legislation may be introduced and enacted to modify regulations administered by theregulatory authorities and governing the drug approval process. The Company may be unable to obtain requisite regulatory approvals on a timely basis formarketing and production of products. Conversely, any significant reduction in the scope of regulatory requirements or the introduction of simplified drugapproval procedures could reduce barriers to entry, increase competition, and have a material adverse effect on the Company’s business. (dollars in thousands, except per share data) 17LocationAcreageOperatingSubsidiaryPrimary Product Lines Manufactured Charles City, Iowa57 acresCambrexAPIs and Pharmaceutical Intermediates Charles City, Inc. Karlskoga, Sweden42 acresCambrexAPIs and Pharmaceutical Intermediates Karlskoga AB Paullo (Milan), Italy12 acresCambrexAPIs and Pharmaceutical Intermediates Profarmaco Milano S.r.l. Hyderabad, India 2 acresZenara Pharma Private LimitedFinal Dosage Form ProductsIndexFailure to comply with current Good Manufacturing Practices (“cGMP”) and other government regulations or delays in obtaining regulatoryapproval by the Company or its customers could have a material adverse effect 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 DEA. The Company’s facilities are subject to scheduled periodic regulatory and customer inspections to ensure compliance with cGMP and other requirementsapplicable to such products. A finding that the Company had materially violated these requirements could result in regulatory sanctions including, but notlimited to, the regulatory agencies withholding approval of new drug applications or supplements and the denial of entry into the U.S., or other countries, ofproducts manufactured at non-compliant facilities, the loss of a customer contract, the disqualification of data for client submissions to regulatory authoritiesand a mandated closing of the Company’s facilities. Any such violations would have a material adverse effect on the Company’s business. The Company’scustomers are typically subject to the same, or similar regulations and any such violations or other actions by regulatory agencies, including, but not limitedto, plant shutdowns or product recalls that eliminate or reduce the Company’s sale of its products or services could negatively impact the Company’sbusiness. In addition, the submission of new products to regulatory authorities for approval by the Company or its customers does not guarantee the approvalto market the product will be granted. Each authority may impose its own requirements or delay or refuse to grant approval to the Company or customer evenwhen the product has already been approved in another country. Regulatory authorities have required, and may require in the future, that certain scientificdata requirements be performed on the Company’s products and this may require additional testing. Responding to such requirements may cause delays in orthe cessation of the sales of one or more products which would adversely affect profitability. The Company can provide no assurance that any testingapprovals or registration will be granted on a timely basis, if at all, or that the Company’s resources will be adequate to meet the costs of regulatorycompliance or that the economic benefit of complying with the requirement will exceed costs.The overall level of late-stage clinical phase projects could decline and the outsourcing trends may decline, either of which could slow theCompany’s growth.The success of the Company’s business depends to a certain extent on the number of clinical phase contracts and the size of the contracts that it mayobtain from pharmaceutical companies. A decline in the level of clinical phase projects or a slowing of the outsourcing trend could result in a diminishedgrowth rate in the Company’s sales and adversely affect its business, financial condition and results of operations. Item 1BUnresolved Staff Comments.None.Item 2Properties.Set forth below is information relating to manufacturing facilities owned by the Company as of December 31, 2014: (dollars in thousands, except per share data) 182014 High Low First Quarter $22.18 $16.25 Second Quarter 22.14 17.55 Third Quarter 22.67 18.68 Fourth Quarter 24.12 16.33 2013 High Low First Quarter $12.79 $11.27 Second Quarter 14.76 11.78 Third Quarter 15.55 12.76 Fourth Quarter 19.50 13.16 IndexThe Company leases 10,000 square feet in Tallinn, Estonia which has a lease term ending in April 2024 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.The Company’s corporate headquarters are located in East Rutherford, N.J.Item 3 Legal Proceedings.See "Environmental and Safety Regulations and Proceedings" under Item 1 and Note 20 to the Company’s consolidated financial statements withrespect to various proceedings involving the Company in connection with environmental matters. The Company is party to a number of other proceedingsalso discussed in Note 20 to the Company’s consolidated financial statements.Item 4Mine Safety Disclosures.None.PART IIItem 5Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.The Company’s common stock, $0.10 par value, is listed on the NYSE under the symbol CBM. The following table sets forth the closing high and lowsales price of the common stock as reported on the NYSE: As of January 30, 2015, the Company estimates that there were approximately 6,915 beneficial holders of the outstanding common stock of theCompany.The Company does not anticipate paying cash dividends in the foreseeable future. (dollars in thousands, except per share data) 19Index2014 Equity Compensation TableThe following table provides information as of December 31, 2014 with respect to shares of common stock that may be issued under the Company’sexisting equity compensation plans. Column (a) Column (b) Column (c) Plan category Number of securities tobe issued upon exerciseof outstanding options,warrants and rights Weighted averageexercise price ofoutstandingoptions, warrantsand rights Number of securities remaining for futureissuance under equitycompensation plans(excluding securitiesreflected in column (a)) Equity compensation plans approved by security holders 2,026,172 $12.24 640,331 Equity compensation plans not approved by security holders 44,500 $4.57 - Total 2,070,672 640,331 The material features of the equity compensation plan under which equity securities are authorized for issuance that was adopted without stockholderapproval are described below:2000 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 2000 Plan. No participant shall be granted options to purchase more than 100,000 shares of common stock in any twelvemonth period. 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 aparticipant terminates, other than as a result of death, disability or retirement, all unexercised awards shall be cancelled. In the event of death, disability orretirement, the options will expire one year from the date of the event. As of December 31, 2014 there were no shares remaining for future issuance under thisplan. (dollars in thousands, except per share data) 20IndexComparison of Five-Year Cumulative Total ReturnsThe comparative stock performance graph below compares the five-year cumulative total stockholder return (assuming reinvestment of dividends, ifany) from investing $100 on December 31, 2009, to the close of the last trading day of 2014, in each of (i) Cambrex common stock, (ii) the S&P 500 Indexand (iii) an index of the Company’s peer group. The stock price performance reflected in the graph below is not necessarily indicative of future priceperformance. 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, the Company believes that an index of its peer group based onits GICS code is a reasonable comparison group for the commercial activities on which it currently focuses. The peer group is for S&P GICS code 352030,Life Sciences Tools & Services, and is comprised of 54 companies as of December 31, 2014. (dollars in thousands, except per share data) 21IndexItem 6Selected Financial Data.The following selected consolidated financial data of the Company for each of the five years in the period through December 31, 2014 are derivedfrom the audited financial statements. The consolidated financial statements of the Company as of December 31, 2014 and 2013 and for each of the years inthe three year period ended December 31, 2014 and the reports of the independent registered public accounting firm are included elsewhere in this annualreport. The data presented below should be read in conjunction with the financial statements of the Company, the notes to the financial statements and"Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere. Years Ended December 31, 2014(1) 2013(2) 2012(3) 2011(4) 2010(5) INCOME DATA: Gross sales $374,150 $317,212 $277,931 $254,475 $226,436 Net revenues 374,613 318,176 276,501 255,653 226,992 Gross profit 123,798 102,904 90,487 74,084 66,866 Selling, general and administrative expenses 52,489 47,568 45,248 39,227 34,024 Research and development expenses 13,075 10,387 9,544 11,037 10,305 Restructuring expenses - - - - 1,293 Merger and acquisition expenses - - - - 997 Loss on voluntary pension settlement 7,170 - - - - Gain on sale of asset (1,234) (4,680) - - - Operating profit 52,298 49,629 35,695 23,820 20,247 Interest expense, net 2,174 2,242 2,439 2,373 4,391 Equity in losses of partially-owned affiliates 4,623 2,262 1,766 1,621 286 Other (income)/expenses, net (5) 118 122 (111) 596 Income before income taxes 45,506 45,007 31,368 19,937 14,974 (Benefit)/provision for income taxes (12,627) 14,732 (31,861) 6,202 5,665 Income from continuing operations 58,133 30,275 63,229 13,735 9,309 (Loss)/income from discontinued operations, net of tax (830) (4,360) (926) (2,767) 338 Net income 57,303 25,915 62,303 10,968 9,647 EARNINGS PER SHARE DATA: Earnings/(loss) per common share (basic): Income from continuing operations $1.89 $1.00 $2.13 $0.46 $0.32 (Loss)/income from discontinued operations, net of tax $(0.03) $(0.14) $(0.03) $(0.09) $0.01 Net income $1.86 $0.86 $2.10 $0.37 $0.33 Earnings/(loss) per common share (diluted): Income from continuing operations $1.84 $0.98 $2.09 $0.46 $0.32 (Loss)/income from discontinued operations, net of tax $(0.03) $(0.14) $(0.03) $(0.09) $0.01 Net income $1.81 $0.84 $2.06 $0.37 $0.33 Weighted average shares outstanding (in thousands): Basic 30,763 30,150 29,703 29,468 29,361 Diluted 31,643 30,901 30,314 29,564 29,468 BALANCE SHEET DATA: (at end of period) Working capital $128,791 $105,289 $61,487 $77,476 $82,146 Total assets 487,072 458,037 385,731 342,831 351,751 Long-term debt 60,000 79,250 64,000 98,000 115,900 Total stockholders' equity 251,226 210,220 163,297 100,341 107,635 (dollars in thousands, except per share data) 22Index(1)Income from continuing operations includes a pre-tax gain on the sale of land of $1,234 reduced for tax expense of $387, a charge of $7,170 related to avoluntary lump sum pension settlement, a loss of $4,122 related to the purchase of the remaining shares in Zenara, a benefit of $26,902 for the release ofa valuation allowance and a benefit of $3,948 for the settlement of tax disputes. Loss from discontinued operations includes pre-tax charges of $1,277,reduced for a tax benefit of $447, for environmental remediation related to sites of divested businesses. (2)Income from continuing operations includes a pre-tax gain on the sale of an office building of $4,680 reduced for tax expense of $1,470, and a taxbenefit related to changes in tax laws of $1,155. Loss from discontinued operations includes pre-tax charges of $6,708, reduced for a tax benefit of$2,348, for environmental remediation related to sites of divested businesses. (3)Income from continuing operations includes the release of a valuation allowance on domestic deferred tax assets of $36,287 and the impact on deferredtaxes of a statutory rate change of $1,328. Loss from discontinued operations includes pre-tax charges of $1,425, reduced for a tax benefit of $499, forenvironmental remediation related to sites of divested businesses. (4)Loss from discontinued operations includes pre-tax charges of $2,851 for environmental remediation, net of insurance proceeds, related to sites ofdivested businesses. (5)Income from continuing operations includes pre-tax charges of $1,293 for certain one-time employee benefits relating to the plan to optimize operationsat a manufacturing site to meet industry requirements, $997 for merger and acquisition expenses and $509 for currency losses pursuant to the purchase ofZenara. Income from discontinued operations includes a benefit of $1,652 as a result of the expiration of a contingent liability, charges of $1,144 forenvironmental remediation, net of insurance proceeds, and $170 for a worker's compensation claim, all related to sites of divested businesses. Item 7Management's Discussion and Analysis of Financial Condition and Results of Operations.Executive OverviewThe Company’s business primarily consists of three manufacturing facilities. These facilities mainly manufacture APIs, pharmaceutical intermediatesand, to a lesser extent, other fine chemicals. The Company also owns Zenara, a pharmaceutical company with final dosage form manufacturing capabilitiesbased in India and is not material to the financial results at this time.The following significant events, which are explained in detail on the following pages, occurred during 2014:·Gross sales in 2014 increased 17.9% to $374,150 from $317,212 in 2013. Foreign currency exchange unfavorably impacted sales 1.5%.·Operating profit increased 5.4% to $52,298 from 2013. Excluding certain one-time events, operating profit increased 29.6%.·Debt, net of cash, decreased $42,023 to $14,482 during 2014.·A charge of $7,170 was recorded within operating profit for a voluntary lump sum pension settlement.·A charge of $4,122 related to the acquisition of the remaining interest in Zenara.·A gain of $1,234 was recorded within operating profit for the sale of land.·A tax benefit of $26,902 was recorded for the release of a valuation allowance.·A tax benefit of $3,948 was recorded for the settlement of tax disputes. (dollars in thousands, except per share data) 23IndexGross sales in 2014 of $374,150 were $56,938 or 17.9% higher than 2013. Excluding foreign currency, sales increased 19.4% as a result of highervolumes (+19.7%) partially offset by slightly lower pricing (-0.3%). The volume increase was primarily due to higher sales of certain branded APIs, controlledsubstances and generic APIs. Also contributing to the increase in sales is the inclusion of Zenara’s results in the Company’s consolidated financialstatements subsequent to the purchase of the remaining shares in Zenara during the second quarter of 2014. Zenara’s sales were $4,225 subsequent to thepurchase.Gross margins of 33.1% in 2014 were higher compared to 32.4% in 2013. 2014 gross margins included a 0.6% favorable impact from foreign currencyversus 2013. Excluding the foreign currency impact, gross margins were relatively flat. Margins were positively impacted by favorable product mix andplant efficiencies mostly offset by higher production costs and lower pricing.The Company reported income from continuing operations of $58,133, or $1.84 per diluted share in 2014, compared to $30,275 or $0.98 per dilutedshare in 2013.Critical Accounting EstimatesThe Company’s critical accounting estimates are those that require the most subjective or complex judgments, often as a result of the need to makeestimates about the effect of matters that are inherently uncertain. The Company bases its estimates on historical experience and on other assumptions thatare deemed reasonable by management under each applicable circumstance. Actual results or amounts could differ from estimates and the differences couldhave a material 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 ofrevenue are that collection of sales proceeds is reasonably assured and the Company has no further performance obligations.Amounts billed in advance are recorded as deferred revenue on the balance sheet. Since payments received are sometimes non-refundable, thetermination of a contract by a customer prior to its completion could result in an immediate recognition of deferred revenue relating to payments alreadyreceived but not previously 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 returnunder certain conditions. The Company estimates these rebates and returns at the time of sale based on the terms of agreements with customers and historicalexperience and recognizes 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 costs are reflected in cost of goods sold.Asset 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 futurecash flows generated from these assets whenever events or changes in circumstances indicate that the carrying value may not be fully recoverable. Ifundiscounted cash flows are less than the carrying value, the long-lived assets are written down to fair value. (dollars in thousands, except per share data) 24IndexThe review of the carrying value of goodwill and indefinite lived intangibles is conducted annually or whenever events or changes in circumstancesindicate that 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 determinedusing a discounted cash flow model and compared to the carrying value. If such analysis indicates that impairment may exist, the Company then estimatesthe fair value of the other assets and liabilities utilizing appraisals and discounted cash flow analyses to calculate an impairment charge.The Company has investments in partially-owned affiliates. It does not separately test an investee’s underlying assets for impairment but willrecognize its share of any impairment charge recorded by an investee in earnings and consider the effect of the impairment on its investment. A series ofoperating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred that is other than temporary. A loss invalue of an investment that is other than a temporary decline would be recognized as an impairment if the fair value of that investment is less than its carryingamount.The determination of fair value is judgmental and involves the use of significant estimates and assumptions, including projected future cash flowsprimarily based on operating plans, discount rates, determination of appropriate market comparables and perpetual growth rates. These estimates andassumptions could have a significant impact on whether or not an impairment charge is recognized and the magnitude of any such charge. Income TaxesThe Company applies an asset and liability approach to accounting for income taxes. Deferred tax assets and liabilities are recognized for theexpected future tax consequences of temporary differences between the financial statement and tax basis of assets and liabilities, and tax credit carryforwards,on a taxing jurisdiction basis using enacted tax rates in effect for the year in which the differences are expected to reverse or the tax credit carryforwards areexpected to be realized. The recoverability of deferred tax assets is dependent upon the Company’s assessment that it is more likely than not that sufficientfuture taxable income of the appropriate type and in the appropriate taxable years will be generated in the relevant tax jurisdictions to utilize the deferred taxassets. When the Company determines that future taxable income will not be sufficient to utilize the deferred tax assets, a valuation allowance is recorded. After release of a portion of the Company’s domestic valuation allowance in 2012 and 2014, the remaining domestic valuation allowance primarily relates tocertain state deferred tax balances. The Company’s foreign valuation allowances primarily relate to net operating loss (“NOL”) carryforwards in foreignjurisdictions with little or no history of generating taxable income or where future profitability is uncertain. The Company’s accounting for deferred taxesrepresents management’s best estimate of those future events. Changes in current estimates, due to unanticipated events, could have a material impact on theCompany’s financial condition and results of operations.Assumptions and Approach Used in Assessing the Need for a Valuation AllowanceThe Company considers both positive and negative evidence related to the likelihood of realization of deferred tax assets. If, based on the weight ofavailable evidence, it is more likely than not the deferred tax assets will not be realized, the Company records a valuation allowance against all or a portionof the deferred tax assets to adjust the balance to the amount considered more likely than not to be realized. The weight given to the positive and negativeevidence is commensurate with the extent to which the evidence may be objectively verified.This assessment, which is completed on a taxing jurisdiction basis, takes into account a number of types of evidence, including the following:·Nature, frequency, and severity of current and cumulative financial reporting losses. A pattern of objectively-measured cumulative pre-tax losses over athree-year period is heavily weighted as a source of negative evidence. The Company also considers the strength and trend of earnings, as well as otherrelevant factors. In certain circumstances, historical information may not be as relevant due to changes in the Company’s business operations;·Sources of future taxable income. Future reversals of existing temporary differences are heavily-weighted sources of objectively verifiable evidence.Projections of future taxable income exclusive of reversing temporary differences are a source of positive evidence only when the projections arecombined with a history of recent profits and can be reasonably estimated; and (dollars in thousands, except per share data) 25Index·Tax planning strategies. Prudent and feasible tax planning strategies that would be implemented to maximize utilization of expiring tax creditcarryforwards are evaluated as a source of additional positive evidence.Valuation Allowance AssessmentIn 2003, the Company’s assessment of the need for a valuation allowance against domestic deferred tax assets considered current and past performance,cumulative losses in recent years from domestic operations, and a shift in the geographic mix of forecasted income. Considering the pattern of then-recentdomestic losses, the Company gave significant weight to projections showing future domestic losses for purposes of assessing the need for a valuationallowance. This assessment resulted in a determination that it was more likely than not that domestic deferred tax assets would not be realized, and as such, avaluation allowance against net domestic deferred tax assets was recorded.A sustained period of domestic profitability along with expectations of future domestic profitability of sufficient amounts and character was requiredbefore the Company changed its judgment regarding the need for a full valuation allowance against net domestic deferred tax assets. During 2012, theCompany concluded that its three-year cumulative domestic profitability through the end of 2012 and expectations of future domestic profitability warrantedthe reversal of all of the domestic valuation allowance attributable to net federal temporary differences, alternative minimum tax credits, and research andexperimentation tax credits. Additionally, the Company released a portion of the domestic valuation allowance attributable to federal foreign tax credits. These valuation allowance releases resulted in a tax benefit to continuing operations of $36,287 in 2012.Throughout 2014, the Company received updated customer projections that impacted current and future years’ income in amounts and type thatsupport full utilization of the federal foreign tax credits. Accordingly, the Company released the remaining domestic valuation allowance attributable tothese foreign tax credits. These valuation allowance releases resulted in a tax benefit to continuing operations of $26,902 in 2014. The Company continuesto provide a valuation allowance against a portion of foreign NOL carryovers and state items. It is possible that changes in the amount or type of futureincome could result in the release of additional valuation allowance attributable to these items in the future, or the establishment of a reserve against certaindeferred tax assets for which the Company has no current reserves.Environmental and Litigation ContingenciesThe Company periodically assesses the potential liabilities related to any lawsuits or claims brought against it. See Note 20 to the Company’sconsolidated financial statements for a discussion of the Company’s current environmental and litigation matters, reserves recorded and its position withrespect to any related uncertainties. While it is typically very difficult to determine the timing and ultimate outcome of these actions, the Company uses itsbest judgment to determine if it is probable that the Company will incur an expense related to a settlement for such matters and whether a reasonableestimation of such probable loss, if any, can be made. If probable and estimable, the Company accrues for the costs of investigation, remediation, settlementsand legal fees. Given the inherent uncertainty related to the eventual outcome of litigation and environmental matters, it is possible that all or some of thesematters may be resolved for amounts materially different from any provisions that the Company may have made with respect to their resolution from time totime.Employee Benefit PlansThe Company provides a range of benefits to certain employees and retired employees, including pension benefits. The Company records annualamounts relating to these plans based on calculations, which include various actuarial assumptions, including discount rates, assumed rates of return andturnover rates. The Company reviews its actuarial assumptions on an annual basis and makes modifications to the assumptions based on current rates andtrends when it is deemed appropriate to do so. The effect of the modifications is generally recorded and amortized over future periods. The Companybelieves that the assumptions utilized for recording obligations under its plans are reasonable. (dollars in thousands, except per share data) 26IndexThe discount rate used to measure pension liabilities and costs is selected by projecting cash flows associated with plan obligations which are matchedto a yield curve of high quality bonds. The Company then selects the single rate that produces the same present value as if each cash flow were discountedby the corresponding spot rate on the yield curve.Results of Operations2014 Compared to 2013Gross sales in 2014 of $374,150 were $56,938 or 17.9% higher than 2013. Excluding foreign currency, sales increased 19.4% as a result of highervolumes (+19.7%) partially offset by slightly lower pricing (-0.3%). The volume increase was primarily due to higher sales of certain branded APIs, controlledsubstances and generic APIs. Also contributing to the increase in sales is the inclusion of Zenara’s results in the Company’s consolidated financialstatements subsequent to the purchase of the remaining shares in Zenara during the second quarter of 2014. Zenara’s sales were $4,225 subsequent to thepurchase.The Company’s products and services are sold to a diverse group of several hundred customers, with one customer accounting for 24.0% and 18.3% of2014 and 2013 consolidated sales, respectively, and another customer accounting for 12.5% of 2012 consolidated sales. The Company’s products are soldthrough a combination of direct sales and independent agents. One API, an antiviral product, represented 22.9% of 2014 consolidated sales.Gross profit in 2014 was $123,798 compared to $102,904 in 2013. Gross margins of 33.1% in 2014 were higher compared to 32.4% in 2013. 2014gross margins included a 0.6% favorable impact from foreign currency versus 2013. Excluding the foreign currency impact, gross margins were relativelyflat. Margins were positively impacted by favorable product mix and plant efficiencies mostly offset by higher production costs and lower pricing. 2014margins also benefited from the receipt of $1,900 from a business interruption insurance claim that covered 2014 and part of 2013.Selling, general and administrative expenses of $52,489, or 14.0% of gross sales, in 2014 compared to $47,568, or 15.0%, in 2013. The increase inadministrative expenses is mainly due to higher personnel (approximately $1,400) and medical expenses (approximately $700) as well as higher spending oncosts related to completing the transaction to purchase the remaining shares in Zenara (approximately $500) and expenses related to due diligence on variousacquisition opportunities (approximately $1,200). Sales and marketing expenses were also higher as a result of adding additional sales associates(approximately $1,400).Research and development expenses of $13,075 were 3.5% of gross sales in 2014, compared to $10,387 or 3.3% of gross sales in 2013. The increase isprimarily due to increased headcount (approximately $1,800) and costs to develop a new generic drug product.In the third quarter of 2014, the Company announced a program to offer a one-time option to elect to receive a voluntary lump-sum pension payout tocertain former employees with deferred vested balances in the Company’s U.S. pension plan. As part of this voluntary lump-sum program, the Companysettled $17,381 of pension obligations for the U.S. plan with an equal amount paid from plan assets. As a result, the Company recorded settlement losses of$7,170 reflecting the accelerated recognition of unamortized losses in the U.S. pension plan proportionate to the obligation that was settled. The loss onvoluntary pension settlement is reflected as a separate line in the consolidated income statement with a corresponding balance sheet reduction in“Accumulated other comprehensive loss.”Operating profit was $52,298 in 2014 compared to $49,629 in 2013. The increase in operating profit is primarily due to higher gross profit and a gainon the sale of land of $1,234 partially offset by the pension settlement charge discussed above, higher operating expenses and a benefit related to a gain onsale of an office building of $4,680 in 2013. (dollars in thousands, except per share data) 27IndexNet interest expense was $2,174 in 2014 compared to $2,242 in 2013. The decrease in net interest expense is attributed to a decrease in averageborrowing partially offset by lower interest income and lower capitalized interest as a result of fewer large capital projects under construction in 2014. Theaverage interest rate on debt was 2.4% in 2014 versus 2.3% in 2013.Equity in losses of partially-owned affiliates was $4,623 and $2,262 in 2014 and 2013, respectively, primarily representing Zenara’s results. TheCompany’s portion of Zenara’s loss, prior to the purchase of the remaining shares in May 2014, was $458 and $1,956 for 2014 and 2013, respectively. Theseamounts include amortization expense of $333 and $882 for 2014 and 2013, respectively. In addition, 2014 includes a loss of $4,122 related to the purchaseof the remaining shares in Zenara.The Company recorded a tax benefit of $12,627 in 2014 compared to expense of $14,732 in 2013. The tax benefit for 2014 includes a benefit of$26,902 for a reversal of domestic valuation allowances. The reversal of the valuation allowance in 2014 resulted from the Company’s assessment ofrealizability of domestic federal foreign tax credit carryforwards due to expected future U.S. taxable income in amounts and type that support utilization ofthese credits. Excluding the effects of the valuation allowance reversal, tax audit settlements, the loss on voluntary pension settlement, the sale of the land,and the Zenara loss, the effective tax rate was 32.1% in 2014 compared to 32.7% in 2013. The lower effective tax rate in 2014 was mostly due to differencesin the geographical mix of income.In 2009, a subsidiary of the Company was examined by a European tax authority, which challenged the business purpose of the deductibility ofcertain intercompany transactions from 2003 and issued formal assessments against the subsidiary. The Company had several favorable rulings in the courtson this matter, although the rulings were appealed by the tax authority. At the same time, considering the hazards of litigation, the Company pursuedsettlement negotiations. During the fourth quarter of 2014, the Company entered into a final settlement with the tax authority in order to avoid furtherlitigation, without any admission of fault or breach of law. The settlement required the Company to pay $1,487 in tax and interest during the fourth quarterof 2014 in full satisfaction of all liabilities for this matter, and in response the tax authority withdrew all pending litigation and renounced any outstandingclaims. The settlement did not impose any penalties on the Company. Therefore, in the fourth quarter of 2014 the Company decreased its remaining reservefor unrecognized tax benefits for this matter by $4,137.Income from continuing operations in 2014 was $58,133 or $1.84 per diluted share, versus $30,275, or $0.98 per diluted share in 2013. Income fromcontinuing operations in 2014 includes a tax benefit of $26,902, or $0.85 per diluted share, resulting from the release of a valuation allowance on deferredtax assets.2013 Compared to 2012Gross sales in 2013 of $317,212 were $39,281 or 14.1% higher than 2012. Excluding foreign currency, sales increased 12.8% as a result of highervolumes (+11.5%) and higher pricing (+1.3%). The volume increase was primarily due to higher sales of a recently approved branded API. Partially offsettingthis increase was lower volumes of generic APIs, controlled substances, branded APIs and products utilizing the Company’s drug delivery technology.The Company’s products and services are sold to a diverse group of several hundred customers, with one customer accounting for 18.3% of 2013consolidated sales. The Company’s products are sold through a combination of direct sales and independent agents. Two APIs, one an antiviral, and theother a gastrointestinal product that is sold to multiple customers, represented 18.3% and 10.0% of 2013 consolidated sales, respectively.Gross profit in 2013 was $102,904 compared to $90,487 in 2012. Gross margins were 32.4% in 2013 compared to 32.6% in 2012. Gross margins in2013 included a 0.3% unfavorable impact from foreign currency versus 2012. Gross margins were positively impacted by higher pricing offset byunfavorable product mix.Selling, general and administrative expenses of $47,568, or 15.0% of gross sales, in 2013 compared to $45,248, or 16.3%, in 2012. This increase isprimarily related to higher stock-based compensation expense as a result of the Company’s performance compared to a peer group and the Company’s higherstock price (approximately $1,400) and an unfavorable impact from foreign exchange (approximately $800). Sales and marketing expenses were flat yearover year. (dollars in thousands, except per share data) 28IndexResearch and development expenses of $10,387 were 3.3% of gross sales in 2013, compared to $9,544 or 3.4% of gross sales in 2012. The increase isprimarily due to increased headcount (approximately $1,000) and an unfavorable impact from foreign exchange (approximately $300). Higher absorption ofR&D expenses into inventory and cost of goods sold as a result of increased revenue generating custom development activity (approximately $500) partiallyoffset these increases.Operating profit was $49,629 in 2013 compared to $35,695 in 2012. The increase is due to higher gross profit and a $4,680 gain on sale of an officebuilding partially offset by higher operating expenses discussed above.Net interest expense was $2,242 in 2013 compared to $2,439 in 2012. The decrease in net interest expense is attributed to higher capitalized interestas a result of multiple large capital projects under construction during 2013. This decrease was partially offset by higher average debt and higher interest ratesin 2013. The average interest rate on debt was 2.3% in 2013 versus 2.2% in 2012.In November 2010, the Company acquired a 51% equity stake in Zenara, a pharmaceutical company focused on the formulation of final dosage formproducts based in India. Cambrex accounts for its investment in Zenara using the equity method of accounting. The impact of its ownership stake in Zenarawas a loss of $1,956 and $1,976 in 2013 and 2012, respectively, and is located within “Other expenses/(income)” as “Equity in losses of partially-ownedaffiliates” in the Company’s income statement. These amounts include amortization expense of $882 and $965 in 2013 and 2012, respectively anddepreciation expense of $130 and $132 in 2013 and 2012, respectively. Equity in losses of partially-owned affiliates also includes a loss of $311 and a gainof $210 in 2013 and 2012, respectively, related to an investment in a European joint venture.The Company recorded tax expense of $14,732 in 2013 compared to a benefit of $31,861 in 2012. The tax benefit for 2012 includes a benefit of$36,287 for a reversal of domestic valuation allowances. Additionally, 2013 and 2012 include benefits of $95 and $8,818, respectively, for changes invaluation allowances to offset expense and benefit generated from domestic income, tax credits, and losses in certain foreign jurisdictions. The reversal ofthe valuation allowance in 2012 resulted from the Company’s assessment of realizability of domestic deferred tax assets and tax credit carryforwards due toexpected future profitability in the U.S., among other factors. Since 2003, the Company had maintained a full valuation allowance on the tax benefits arisingfrom domestic pre-tax losses, U.S. tax credits and net deferred tax balances. Excluding the effect of the valuation allowance reversal and the effect ofremeasuring certain foreign deferred tax liabilities due to a change in enacted tax rates in 2012, the effective tax rate was 32.7% in 2013 compared to 18.3%in 2012. The lower effective tax rate in 2012 was mostly due to domestic tax expense on U.S. income in 2012 being offset by utilization of fully valueddomestic tax attributes, prior to release of the domestic valuation allowance.In 2009, a subsidiary of the Company was examined by a European tax authority, which challenged the business purpose of the deductibility ofcertain intercompany transactions from 2003 and issued formal assessments against the subsidiary. In 2010, the Company filed to litigate the matter. Thefirst court date, which pertained to the smaller of the assessments, was held in 2011, after which the court issued its ruling in favor of the Company. The taxauthorities appealed this ruling and the appeals court again ruled in the Company’s favor in 2012. In 2013, the court issued additional rulings in favor of theCompany.Income from continuing operations in 2013 was $30,275 or $0.98 per diluted share, versus $63,229, or $2.09 per diluted share in 2012. Income fromcontinuing operations in 2012 includes a tax benefit of $36,287, or $1.20 per diluted share, resulting from the release of a valuation allowance on deferredtax assets. (dollars in thousands, except per share data) 29IndexLiquidity and Capital ResourcesDuring 2014, cash flows from operations provided $64,968, compared to $36,874 in the same period a year ago. The increase in cash flows fromoperations in 2014 compared to 2013 was largely due to collections of accounts receivable as a result of large shipments in the fourth quarter of 2013,changes in inventory levels and higher net income. Cash flows used in investing activities in 2014 of $24,798 mainly reflects cash flows related to capitalexpenditures of $23,323. Cash flows used in financing activities in 2014 of $14,525 mainly reflects the pay down of the Company’s debt partially offset byproceeds from stock options exercised. Debt, net of cash, decreased $42,023 during 2014.In November 2011, the Company entered into a $250,000 five-year Syndicated Senior Revolving Credit Facility (“Credit Facility”) which expires inNovember 2016. The Company pays interest on this Credit Facility at LIBOR plus 1.75% - 2.50% based upon certain financial measurements. The CreditFacility also includes financial covenants regarding interest coverage and leverage ratios. The Company was in compliance with all financial covenants atDecember 31, 2014.In March 2012, the Company entered into an interest rate swap with a notional value of $60,000, at a fixed rate of 0.92%, maturing in September2015. The Company’s strategy has been to cover a portion of its outstanding floating rate debt with fixed interest rate protection. At December 31, 2014 theCompany had floating rate debt of $60,000, which was fixed by the interest rate swap.The 2014 and 2013 weighted average interest rates for long-term bank debt were 2.4% and 2.3%, respectively.For 2015, capital expenditures are expected to be approximately $80,000 to $85,000.Contractual ObligationsAt December 31, 2014, the Company’s contractual obligations with initial or remaining terms in excess of one year were as follows: Total 2015 2016 2017 2018 2019 2020+ Long term debt $60,000 $- $60,000 $- $- $- $- Interest on debt 2,206 1,352 854 - - - - Operating leases 3,193 1,194 600 588 528 193 90 Purchase obligations 7,588 7,588 - - - - - Contractual cashobligations $72,987 $10,134 $61,454 $588 $528 $193 $90 In addition to the contractual obligations listed above, the Company expects to contribute approximately $1,900 in cash to its U.S. defined-benefitpension plan in 2015. It is possible that higher pension contributions could be required in 2016 and beyond. For the unfunded SERP and internationalpension plans, the Company expects to make benefit payments of approximately $1,300 in 2015 and similar amounts in 2016 through 2018. See Note 17 tothe Company’s consolidated financial statements for details on the Company’s unfunded balance related to its pension plans. Also not included in the tableabove is $2,132 of uncertain tax positions due to uncertainties surrounding the timing of the obligation. See Note 10 to the Company’s consolidatedfinancial statements. The Company may be required to make cash payments to remediate certain environmental sites at unknown future periods as discussedin Note 20 to the Company’s consolidated financial statements.See Notes 11, 17, 19 and 20 to the Company’s consolidated financial statements for additional information regarding the Company’s pension plans,debt and other commitments. (dollars in thousands, except per share data) 30IndexThe 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, interest rates, returns on assets within theCompany’s domestic pension plan that are significantly below expected performance, tax audit payments, as well as other factors. See the Risk Factorssection of this document for further explanation of factors that may negatively impact the Company’s cash flows. Any change in the current status of thesefactors could adversely impact the Company's ability to fund operating cash flow requirements.Market RisksCurrency Risk ManagementThe Company's primary market risk relates to exposure to foreign currency exchange rate fluctuations on transactions entered into by internationaloperations which are primarily denominated in the U.S. dollar, euro and Swedish krona. The Company may use foreign currency exchange forward contractsto mitigate the effect of short-term foreign exchange rate movements on the Company's 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, 2014 was $3,632. The foreign exchangecontracts have varying maturities with none exceeding twelve months.With respect to the contracts outstanding at December 31, 2014, a 10% fluctuation of the local currency over a one-year period would causeapproximately $350 pre-tax earnings to be at risk. These calculations do not include the impact of exchange gains or losses on the underlying positions thatwould offset the gains and losses of the derivative instrument.Interest Rate ManagementThe Company has employed a plan to mitigate interest rate risk by entering into an interest rate swap agreement. The swap is a contract to exchangefloating rate for fixed interest payments periodically over the life of the agreement without the exchange of the underlying notional debt amount. As ofDecember 31, 2014, the Company had an interest rate swap in place with a notional value of $60,000, at a fixed rate of 0.92% and a maturity date ofSeptember 2015. The Company’s strategy has been to cover a portion of outstanding bank debt with interest rate protection. At December 31, 2014, thecoverage was 100% of the Company’s variable interest rate debt. Since all outstanding debt is at a fixed rate, there would be no impact to the Company’searnings and cash flows given a change in market interest rates.ContingenciesThe Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary course ofits business activities. The Company continually assesses known facts and circumstances as they pertain to applicable 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 result in actual costs that are significantly higher than the Company’s current assessment and could have a material adverse effect on theCompany's operating results and cash flows in future reporting periods. While these matters could have a material adverse effect on the Company’s financialcondition, based upon past experience, the Company believes that payments significantly in excess of current reserves, if required, would be made over anextended number of years.EnvironmentalIn connection with laws and regulations pertaining to the protection of the environment, the Company and its subsidiaries are a party to severalenvironmental proceedings and remediation activities and along with other companies, have been named a potentially responsible party (“PRP”) for certainwaste disposal sites ("Superfund sites"). Substantially all of the liabilities currently recorded on the Company’s balance sheet for environmental proceedingsare associated with discontinued operations. The Company had insurance policies in place at certain of the discontinued operations for certain years that theCompany believes should cover some portion of currently recorded liabilities or potential future liabilities. (dollars in thousands, except per share data)31IndexIt is the Company’s policy to record appropriate liabilities for environmental matters where remedial efforts are probable and the costs can bereasonably estimated. Such liabilities are based on the Company’s estimate of the undiscounted future costs required to complete the remedial work. Each ofthese matters is subject to various uncertainties, and it is possible that some of these matters will be decided against the Company. The resolution of suchmatters often spans several years and frequently involves regulatory oversight or adjudication. Additionally, many remediation requirements are fluid andare likely to be affected by future technological, site and regulatory developments. It is not possible at this time for the Company to determine fully theeffect of all asserted and unasserted claims on its consolidated financial condition, results of operations or liquidity; however, to the extent possible, whereasserted and unasserted claims can be estimated and where such claims are considered probable, the Company would record a liability. Consequently, theultimate liability with respect to such matters, as well as the timing of cash disbursements, is uncertain.In matters where the Company is able to reasonably estimate the probable and estimable costs associated with environmental proceedings, theCompany accrues for the estimated costs associated with the study and remediation of applicable sites. These reserves were $9,595 and $10,881 at December31, 2014 and 2013, respectively. The decrease in the reserve includes payments of $2,269 and the impact of currency translation of $226 partially offset byadjustments to reserves of $1,209. The reserves are adjusted periodically as remediation efforts progress or as additional technical, regulatory or legalinformation becomes available. Given the uncertainties regarding the outcome of investigative and study activities, 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 possible tocurrently develop an estimate of the range of reasonably possible environmental loss in excess of its reserves.CasChemAs a result of the sale of a Bayonne, New Jersey facility, the Company became obligated to investigate site conditions and conduct requiredremediation under the New Jersey Industrial Site Recovery Act. The Company intends to continue implementing a sampling plan at the property pursuant tothe New Jersey Department of Environmental Protection’s (“NJDEP”) private oversight program. The results of the completed sampling, and any additionalsampling deemed necessary, will be used to develop an estimate of the Company's future liability for remediation costs. As of December 31, 2014, theCompany’s reserve for the investigation of site conditions was $193.CosanThe Company has implemented a sampling and pilot program in Clifton, New Jersey pursuant to the NJDEP private oversight program. The results ofthe sampling and pilot program to date have been used to develop an estimate of the Company's future liability for remediation costs. As of December 31,2014, the Company’s reserve was $1,191.Additionally, the Company has implemented a sampling and pilot program in Carlstadt, New Jersey pursuant to the NJDEP private oversight program. The results of the sampling and pilot program to date have been used to develop an estimate of the Company's future liability for remediation costs. As ofDecember 31, 2014, the Company’s reserve was $1,063. (dollars in thousands, except per share data) 32IndexBerry’s CreekThe Company received a notice from the United States Environmental Protection Agency (“USEPA”) that two subsidiaries of the Company areconsidered PRPs at the Berry’s Creek Study Area in New Jersey. These subsidiaries are among many other PRPs that were listed in the notice. Pursuant to thenotice, the PRPs have been asked to perform a remedial investigation and feasibility study of the Berry’s Creek site. The Company has joined the group ofPRPs and entered into an Administrative Settlement Agreement (“Agreement”) and Order on Consent with the USEPA agreeing to jointly conduct or fund anappropriate remedial investigation and feasibility study of the Berry’s Creek site with the other PRPs in the Agreement. The PRPs have engaged consultantsto perform the work specified in the Agreement and develop a method to allocate related costs among the PRPs. As of December 31, 2014, the Company’sreserve was $388 to cover the current phase of investigation based on a tentative agreement on the allocation of the site investigation costs among the PRPs. Due to the very preliminary and uncertain nature of any estimates related to the method and costs of any remediation solution, the number of eventual PRPs,and their respective proportion of remediation costs, the Company’s liability cannot be reasonably estimated at this time; as such, no accrual is recorded forthese potential future costs. The impact of the resolution of this matter on the Company’s results of operations in any future reporting period is not known.In July 2014, the Company received a notice from the U.S. Department of the Interior, U.S. Fish & Wildlife Service, regarding the Company’s potentialliability for natural resource damages at the Berry’s Creek site and inviting the Company to participate in a cooperative assessment of natural resourcedamages. All members of the Berry’s Creek PRP group are receiving such notice letters, and any response from the Company will be coordinated with thePRP Group. The substance of any response from the Company, the cost of any assessment, and the ultimate scope of natural resource damage liability are notyet known.Maybrook SiteA subsidiary of Cambrex is named a PRP of a site in Hamptonburgh, New York by the USEPA in connection with the discharge, under appropriatepermits, of wastewater at that site prior to Cambrex's acquisition in 1986. The PRPs implemented soil remediation which was completed in 2012 pendingapproval by the USEPA. The PRPs will continue implementing the ground water remediation at the site. As of December 31, 2014, the Company’s reservewas $322 to cover remaining ground water remediation and long-term monitoring.Harriman SiteSubsidiaries of Cambrex and Pfizer are named as responsible parties for the Company’s former Harriman, New York production facility by the NewYork State Department of Environmental Conservation (“NYSDEC”). A final ROD (“Record of Decision”) describing the Harriman site remediationresponsibilities for Pfizer and the Company was issued in 1997 (the "1997 ROD") and incorporated into a federal court Consent Decree in 1998 (the “ConsentDecree”). Site clean-up work under the 1997 ROD is ongoing and is being jointly performed by Pfizer and the Company, with NYSDEC oversight. ELTHarriman, LLC ("ELT"), the current owner of the Harriman site, is conducting other investigation and remediation activities under a separate NYSDECdirective.In October 2013, the NYSDEC sent the Company, Pfizer, ELT and the immediately preceding owner Vertellus Specialties Holdings (“Vertellus”) anenforcement letter demanding that the Company and Pfizer submit a work plan for the further study and remediation of certain areas of the Harriman site,including the evaluation of certain remedies that the Company has contended are not required by the 1997 ROD. In December 2013, the Company, Pfizerand the NYSDEC entered into a federal court stipulation, which the court subsequently endorsed as a court order, withdrawing the October 2013 enforcementletter as it relates to the Company and Pfizer, and resolving certain disputes about the scope of their obligations under the Consent Decree and the 1997ROD. Pursuant to the court order, the Company and Pfizer are required to carry out an environmental investigation and study of certain areas of the HarrimanSite.No final remedy for the site has been determined, which will follow further discussions with the NYSDEC. The Company estimated the range for itsshare of the liability at the site to be between $2,000 and $7,000. As of December 31, 2014, the Company’s reserve was $3,615. At this time, the Company isunable to provide an estimate of the ultimate investigative and remedial costs to the Company for any final remedy selected by the NYSDEC. The Company intends to enforce all of its contractual rights to recover costs and for indemnification under a 2007 settlement agreement, and has filedsuch claims in an arbitration proceeding against ELT and Vertellus. ELT has filed counterclaims, and has threatened to file additional counterclaims, forcontractual indemnification and for breach of the settlement agreement against the Company. Currently, the arbitration proceeding is stayed indefinitely. (dollars in thousands, except per share data) 33IndexScientific Chemical Processing (“SCP”) Superfund SiteA subsidiary of Cambrex was named a PRP of the SCP Superfund site, located in Carlstadt, New Jersey, along with approximately 130 other PRPs. Thesite is a former waste processing facility that accepted various waste for recovery and disposal including processing wastewater from this subsidiary. ThePRPs are in the process of implementing a final remedy at the site. The SCP Superfund site has also been identified as a PRP in the Berry’s Creek Superfundsite (see previous discussion). For over a decade, the remediation has been funded by de minimus settlements and by the insurers of the SCP Superfund site’sowners and operators. However, due to an unexpected increase in remediation costs at the site and costs related to SCP’s involvement in the Berry’s Creekinvestigation, the PRP group approved the assessment of an additional cash contribution by the PRP group. While the Company continues to dispute themethodology used by the PRP group to arrive at its allocation for the cash contribution, the Company has paid the recent funding requests in 2010 and2014. The next funding request is expected in 2015. A final allocation of SCP Site costs is expected to be developed concurrent with the final allocationprocess for Berry’s Creek Study Area starting in 2015. As of December 31, 2014, the Company’s reserve was $1,039, of which approximately $737 isexpected to be covered by insurance.Newark Bay ComplexTwo subsidiaries of the Company were named along with several hundred third-party defendants in a third-party complaint filed in February 2009, byMaxus Energy Corporation (“Maxus”) and Tierra Solutions, Inc. (“Tierra”) relating to a N.J. state action concerning the Passaic River, Newark Bay,Hackensack River, Arthur Kill, Kill Van Kull and adjacent waters (the “Newark Bay Complex”). The Company settled this case which resolved certain NewJersey state based claims related to the Newark Bay Complex. The settlement will require Maxus and Tierra to re-file any further claims against the Companyin federal court. In preparation for any such federal or similar claims, the Company is currently monitoring developments regarding the Newark BayComplex. Due to the uncertainty of the future scope and timing of any such claims, the Company’s liability cannot be reasonably estimated at this time, andas such, no accrual is recorded for these potential future costs.The Company is involved in other related and unrelated environmental matters where the range of liability is not reasonably estimable at this time andit is not foreseeable when information will become available to provide a basis for adjusting or recording a reserve, should a reserve 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 Laboratories, Inc.(“Gyma”) in a proceeding instituted by the Federal Trade Commission in the United States District Court for the District of Columbia (the “District Court”).Suits were also commenced by several State Attorneys General and class action complaints by private plaintiffs in various state courts. The suits allegedviolations of the Federal Trade Commission Act arising from exclusive license agreements between the Company and Mylan covering two APIs (Lorazepamand 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 trialin 2008 against Mylan, Gyma and Cambrex in the total amount of $19,200, payable jointly and severally, and also a punitive damage award against eachdefendant in the amount of $16,709. In addition, at the time, the District Court ruled that the defendants were subject to a total of approximately $7,500 inprejudgment interest. The case is currently pending before the District Court following a January 2011 remand by the Court of Appeals. In July 2014, theDistrict Court dismissed certain customers for which the plaintiffs were unable to establish jurisdiction and consequently, the plaintiffs currently have amotion pending before the District Court to reduce the damages award by a total of $9,600. (dollars in thousands, except per share data) 34IndexIn 2003, Cambrex paid $12,415 to Mylan in exchange for a release and full indemnity against future costs or liabilities in related litigation brought bythe purchasers of Lorazepam and Clorazepate, as well as potential future claims related to the ongoing matter. Mylan has submitted a surety bondunderwritten by a third-party insurance company in the amount of $66,632. 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 whilethe officer, 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, 2014.Cambrex's subsidiaries are party to a number of other proceedings that are not considered material at this time.Impact of Recent Accounting PronouncementsRevenue from Contracts with CustomersIn May 2014, the FASB issued ASU 2014-09 that introduces a new five-step revenue recognition model in which an entity should recognize revenueto depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled inexchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertaintyof revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers,significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This standard is effective for fiscal yearsbeginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the new guidance todetermine the impact, if any, it will have on its consolidated financial statements.Reporting Discontinued Operations and Disclosures of Disposals of Components of an EntityIn April 2014, the FASB issued ASU 2014-08, which includes amendments that change the requirements for reporting discontinued operations andrequire additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations - that is, amajor effect on the organization's operations and financial results should be presented as discontinued operations. Additionally, the ASU requires expandeddisclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income and expensesof discontinued operations. This update is effective in the first quarter of 2015. This pronouncement will not have an impact on the Company’s financialposition or results of operations. (dollars in thousands, except per share data) 35 Page Number(in this Report) Reports of Independent Registered Public Accounting Firm37Consolidated Balance Sheets as of December 31, 2014 and 201339Consolidated Income Statements for the Years Ended December 31, 2014, 2013 and 201240Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2014, 2013 and 201241Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2014, 2013 and 201242Consolidated Statements of Cash Flows for the Years Ended December 31, 2014, 2013 and 201243Notes to Consolidated Financial Statements44Selected Quarterly Financial and Supplementary Data (unaudited)76IndexItem 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.Item 8Financial Statements and Supplementary Data.The following consolidated financial statements and selected quarterly financial data of the Company are filed under this item:The financial statement schedules are filed pursuant to Item 15 of this report. 36IndexReport 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, 2014 and 2013 and the relatedconsolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31,2014. In connection with our audits of the financial statements, we have also audited the financial statement schedule listed in the accompanying index. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements based on 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 schedule. 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, 2014 and 2013, and the results of its operations and its cash flows for each of the three years in the period ended December 31,2014, in conformity with accounting principles generally accepted in the United States of America.Also, in our opinion, the financial statement schedule, 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), Cambrex Corporation’sinternal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework (2013) issued bythe Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 6, 2015 expressed an unqualified opinionthereon. /s/ BDO USA, LLPWoodbridge, NJFebruary 6, 2015 37IndexReport 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, 2014, based on criteria established in InternalControl – Integrated Framework (2013) 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 standards requirethat 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’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial 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 degreeof compliance 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, 2014,based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balancesheets of Cambrex Corporation as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, stockholders’equity, and cash flows for each of the three years in the period ended December 31, 2014 and our report dated February 6, 2015 expressed an unqualifiedopinion thereon./s/ BDO USA LLPWoodbridge, NJFebruary 6, 2015 38IndexCAMBREX CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(dollars in thousands, except per share data) December 31, 2014 2013 ASSETS Current assets: Cash and cash equivalents $45,518 $22,745 Trade receivables, less allowances of $346 and $1,058 at respective dates 77,124 71,276 Other receivables 10,610 12,943 Inventories, net 85,630 89,965 Prepaid expenses and other current assets 8,688 5,631 Total current assets 227,570 202,560 Property, plant and equipment, net 163,567 171,966 Goodwill 43,912 38,670 Intangible assets, net 8,902 4,011 Investments in and advances to partially-owned affiliates 665 13,364 Deferred income taxes 38,424 19,799 Other non-current assets 4,032 7,667 Total assets $487,072 $458,037 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $43,670 $29,052 Deferred revenue 14,095 20,121 Accrued expenses and other current liabilities 41,014 48,098 Total current liabilities 98,779 97,271 Long-term debt 60,000 79,250 Deferred income taxes 10,545 12,835 Accrued pension benefits 50,949 40,123 Other non-current liabilities 15,573 18,338 Total liabilities 235,846 247,817 Commitments and contingencies (see Notes 19 and 20) Stockholders' equity: Common Stock, $.10 par value; authorized 100,000,000 issued 32,836,930 and 32,240,795 shares at respective dates 3,284 3,223 Additional paid-in capital 119,265 109,765 Retained earnings 188,481 131,178 Treasury stock, at cost, 1,738,624 and 1,757,530 shares at respective dates (14,823) (14,984)Accumulated other comprehensive loss (44,981) (18,962)Total stockholders' equity 251,226 210,220 Total liabilities and stockholders' equity $487,072 $458,037 See accompanying notes to consolidated financial statements. 39IndexCAMBREX CORPORATION AND SUBSIDIARIESCONSOLIDATED INCOME STATEMENTS(dollars in thousands, except per share data) Years Ended December 31, 2014 2013 2012 Gross Sales $374,150 $317,212 $277,931 Commissions, allowances and rebates 2,306 1,351 2,503 Net sales 371,844 315,861 275,428 Other revenues 2,769 2,315 1,073 Net revenues 374,613 318,176 276,501 Cost of goods sold 250,815 215,272 186,014 Gross profit 123,798 102,904 90,487 Selling, general and administrative expenses 52,489 47,568 45,248 Research and development expenses 13,075 10,387 9,544 Operating expenses 65,564 57,955 54,792 Loss on voluntary pension settlement 7,170 - - Gain on sale of asset (1,234) (4,680) - Operating profit 52,298 49,629 35,695 Other expenses/(income) Interest expense, net 2,174 2,242 2,439 Equity in losses of partially-owned affiliates 4,623 2,262 1,766 Other (income)/expenses, net (5) 118 122 Income before income taxes 45,506 45,007 31,368 (Benefit)/provision for income taxes (12,627) 14,732 (31,861)Income from continuing operations 58,133 30,275 63,229 Loss from discontinued operations, net of tax (830) (4,360) (926)Net income $57,303 $25,915 $62,303 Basic earnings per share Income from continuing operations $1.89 $1.00 $2.13 Loss from discontinued operations, net of tax $(0.03) $(0.14) $(0.03)Net income $1.86 $0.86 $2.10 Diluted earnings per share Income from continuing operations $1.84 $0.98 $2.09 Loss from discontinued operations, net of tax $(0.03) $(0.14) $(0.03)Net income $1.81 $0.84 $2.06 Weighted average shares outstanding: Basic weighted average shares outstanding 30,763 30,150 29,703 Effect of dilutive stock based compensation 880 751 611 Diluted weighted average shares outstanding 31,643 30,901 30,314 See accompanying notes to consolidated financial statements. 40IndexCAMBREX CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(dollars in thousands) Years Ended December 31, 2014 2013 2012 Net income $57,303 $25,915 $62,303 Foreign currency translation adjustments: Unrealized net change arising during the period (21,400) 4,813 4,066 Foreign currency forward contracts: Unrealized net loss - - (51)Reclassification adjustments for gains included in net income - - (329)Income taxes - - 110 Interest rate swap agreement: Unrealized net losses (152) (130) (1,253)Reclassification adjustments for losses included in net income 465 444 323 Income taxes (109) (110) 326 Pension plans: Actuarial (loss)/gain Actuarial (loss)/gain arising during the period (18,338) 13,651 (4,413)Amortization to net income of net actuarial loss 802 1,339 1,140 Prior service cost Amortization to net income of net prior service cost 50 50 110 Lump-sum pension payout 7,170 - - Income taxes 5,493 (4,928) (2,533)Comprehensive income $31,284 $41,044 $59,799 See accompanying notes to consolidated financial statements. 41IndexCAMBREX CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(dollars in thousands, except per share data) Common Stock Shares Issued Par Value($.10) AdditionalPaid-InCapital RetainedEarnings TreasuryStock AccumulatedOtherComprehensiveLoss TotalStockholders'Equity Balance at December 31, 2011 31,441,138 $3,143 $101,646 $42,960 $(15,821) $(31,587) $100,341 Net income 62,303 62,303 Other comprehensive loss (2,504) (2,504)Exercise of stock options 263,092 26 1,329 1,355 Vested restricted stock (604) 604 - Stock option expense 1,303 1,303 Restricted stock expense 446 446 Performance stock expense 53 53 Balance at December 31, 2012 31,704,230 $3,169 $104,173 $105,263 $(15,217) $(34,091) $163,297 Net income 25,915 25,915 Other comprehensive income. 15,129 15,129 Exercise of stock options 536,565 54 3,170 3,224 Vested restricted stock (534) 534 - Stock option expense 1,994 1,994 Restricted stock expense 427 427 Performance stock expense 404 404 Share based compensation tax windfall 131 131 Repurchase of shares (301) (301)Balance at December 31, 2013 32,240,795 $3,223 $109,765 $131,178 $(14,984) $(18,962) $210,220 Net income 57,303 57,303 Other comprehensive income (26,019) (26,019)Exercise of stock options 596,135 61 4,142 4,203 Vested restricted stock (161) 161 - Stock option expense 2,491 2,491 Restricted stock expense 395 395 Performance stock expense 2,116 2,116 Share based compensation tax windfall 517 517 Balance at December 31, 2014 32,836,930 $3,284 $119,265 $188,481 $(14,823) $(44,981) $251,226 See accompanying notes to consolidated financial statements. 42IndexCAMBREX CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(dollars in thousands) Years Ended December 31, 2014 2013 2012 Cash flows from operating activities: Net income $57,303 $25,915 $62,303 Adjustments to reconcile net income to cash flows: Depreciation and amortization 23,826 22,473 21,775 Non-cash deferred revenue (17,873) (10,093) (238) Loss on voluntary pension settlement7,170--Increase in inventory reserve 5,343 2,329 2,790 Gain on sale of assets (1,099) (4,281) (5)Allowance for doubtful accounts 61 433 193 Stock based compensation 5,002 2,825 1,802 Deferred income tax provision (16,025) 5,902 (40,712)Equity in losses of partially-owned affiliates 4,623 2,262 1,766 Other 523 348 348 Changes in assets and liabilities: Trade receivables (8,955) (27,707) (6,310)Inventories (9,062) (19,328) (10,295)Prepaid expenses and other current assets (5,766) (2,651) (188)Accounts payable and other current liabilities 12,369 10,107 3,134 Deferred revenue 11,773 18,644 10,748 Other non-current assets and liabilities (2,387) 11,229 182 Discontinued operations: Net cash used in discontinued operations (1,858) (1,533) (3,747)Net cash provided by operating activities 64,968 36,874 43,546 Cash flows from investing activities: Capital expenditures (23,323) (57,320) (18,156)Proceeds from sale of assets 2,355 2,378 16 Advances to partially-owned affiliates (1,404) (1,655) (2,047)Acquisition of business and equity investment, net of cash acquired (2,426) - - Other - - 5 Net cash used in investing activities (24,798) (56,597) (20,182) Cash flows from financing activities: Long-term debt activity (including current portion): Borrowings 25,750 70,950 5,500 Repayments (45,000) (55,700) (39,500)Proceeds from stock options exercised 4,203 3,224 1,355 Other 522 (301) (22)Net cash (used in)/provided by financing activities (14,525) 18,173 (32,667) Effect of exchange rate changes on cash and cash equivalents (2,872) 744 933 Net increase/(decrease) in cash and cash equivalents 22,773 (806) (8,370)Cash and cash equivalents at beginning of year 22,745 23,551 31,921 Cash and cash equivalents at end of year $45,518 $22,745 $23,551 Supplemental disclosure: Interest paid, net of capitalized interest $2,068 $2,325 $2,556 Income taxes paid, net of refunds received $6,725 $7,211 $5,068 See accompanying notes to consolidated financial statements. 43IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(1)The CompanyCambrex Corporation and Subsidiaries (the “Company” or “Cambrex”) primarily provides products and services worldwide to pharmaceuticalcompanies and generic drug companies. The Company is dedicated to accelerating its customers’ drug discovery, development and manufacturing processesfor human therapeutics. The Company’s products consist of active pharmaceutical ingredients (“APIs”) and pharmaceutical intermediates produced underFood and Drug Administration current Good Manufacturing Practices for use in the production of prescription and over-the-counter drug products. Cambrexhas three operating segments, which are manufacturing facilities that have been aggregated as one reportable segment. A fourth facility is immaterial.(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 theCompany exercises significant influence but does not control, are accounted for using the equity method. The Company’s share of its equity methodinvestees’ earnings or losses are included in “Other expenses/(income)” in the income statements. The Company eliminates its pro rata share of gross profit onsales with its equity method investees for assets still remaining in inventory at the end of the reporting period. All other significant intercompany 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 approximatefair value.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 inability to make payments, additionalallowances 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 andaccounts receivable. In the normal course of business, the Company maintains cash balances with European Union banks ranging from the equivalent of$1,000 - $10,000. The Company routinely monitors the risks associated with these institutions and diversifies its exposure by maintaining smaller balanceswith multiple financial institutions. Concentrations of credit risk with respect to accounts receivable are limited due to the Company's large number ofcustomers and their dispersion throughout the world. At December 31, 2014 and 2013, the Company had receivables with one customer totaling nearly 38%of overall accounts receivables. The Company does not consider this customer to pose any significant credit risk.Derivative InstrumentsDerivative financial instruments are periodically used by the Company primarily 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. Changes in the fair value on these forward contracts are recognized in earnings. The Company uses interest rate swap instruments only ashedges. As such, the differential to be paid or received in connection with these instruments is accrued and recognized in income as an adjustment to interestexpense. 44IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(2)Summary of Significant Accounting Policies (continued) None of the foreign currency forward contracts entered into during 2014 were designated for hedge accounting treatment. There were no foreigncurrency forward contracts entered into or outstanding in 2013.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 estimated selling prices. Reserves are recorded to reduce the carrying value for inventory determined to be damaged, obsolete orotherwise 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 theestimated useful lives for each applicable asset group as follows:Buildings and improvements20 to 30 years, or term of lease if applicableMachinery and equipment7 to 15 yearsFurniture and fixtures5 to 7 yearsComputer hardware and software3 to 7 yearsExpenditures for additions, major renewals or betterments are capitalized and expenditures for maintenance and repairs are charged to income asincurred.When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gainor loss is reflected in costs of goods sold or operating expenses. Interest is capitalized in connection with the construction and acquisition of assets that arecapitalized over 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 isamortized over the asset’s estimated useful life. Total interest capitalized in connection with ongoing construction activities was $128 in 2014, $298 in2013 and negligible in 2012.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 tobelieve goodwill may not be recoverable. The annual impairment test of goodwill is performed during the fourth quarter of each fiscal year. The Companydid not have an impairment for any of the years presented.Goodwill impairment is determined by the Company using a two-step process. The first step of the goodwill impairment test is used to identifypotential impairment by comparing the fair value of each reporting unit, determined using various valuation techniques, with the primary technique being adiscounted cash flow analysis, to its carrying value. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit isconsidered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, thesecond step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment testcompares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’sgoodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized. 45IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(2)Summary of Significant Accounting Policies (continued)Based upon the Company’s most recent analysis, with the exception of Zenara, the fair value of all other reporting units substantially exceeded theircarrying values. Zenara, which was acquired during 2014, has an estimated fair value that closely approximates the carrying value. The goodwill of Zenarawas $9,715. The Zenara business, based in India, has been in operation for a relatively short period of time compared to Cambrex’s other businesses, andcompetes with other low cost providers globally. Cambrex’s current assumptions and those used at acquisition include adding a significant amount of newand profitable customers by utilizing Cambrex’s global sales force as well as making operational improvements to the business. The business has fewcustomers and is expected to operate at or slightly below breakeven in 2015. Any negative changes in assumptions on new customers, volumes, orCambrex’s ability to improve operations while maintaining a competitive cost structure could adversely affect the fair value of Zenara and result insignificant goodwill or other long-lived asset impairment charges in 2015 or later.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.The Company has investments in partially-owned affiliates. It does not separately test an investee’s underlying assets for impairments but willrecognize its share of any impairment charge recorded by an investee in earnings and consider the effect of the impairment on its investment. A series ofoperating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred that is other than temporary. A loss invalue of an investment that is other than a temporary decline would be recognized as an impairment if the fair value of that investment is less than its carryingamount.Revenue RecognitionRevenues are generally recognized when title to products and risk of loss are transferred to customers. Additional conditions for recognition ofrevenue are that collection of sales proceeds is reasonably assured and the Company has no further performance obligations.Amounts billed in advance are recorded as deferred revenue on the balance sheet. Since payments received are sometimes non-refundable, thetermination of a contract by a customer prior to its completion could result in an immediate recognition of deferred revenue relating to payments alreadyreceived but not previously 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 returnunder certain conditions. The Company estimates these rebates and returns at the time of sale based on the terms of agreements with customers and historicalexperience and recognizes 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 costs are reflected in cost of goods sold. 46IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(2)Summary of Significant Accounting Policies (continued)Income TaxesThe Company and its eligible subsidiaries file a consolidated U.S. income tax return. Foreign subsidiaries are consolidated for financial reporting butare not eligible to be included in the consolidated U.S. income tax return, however the earnings of foreign subsidiaries are generally taxed by the U.S. whenrepatriated and such U.S. tax may be reduced or eliminated by federal foreign tax credits based on the foreign income and withholding taxes paid or accruedby the foreign subsidiary. Historically, the Company intended to reinvest foreign earnings indefinitely outside of the U.S. and only considered repatriatingexcess cash from foreign subsidiaries if it could utilize fully valued domestic tax attributes to completely offset any tax expense that would otherwise result. Unrecognized foreign tax credits and fully valued foreign tax credit carryovers were available to offset any potential U.S. tax liability. Therefore, theCompany had not provided U.S. federal income taxes or foreign withholding taxes on its undistributed earnings from foreign operations prior to 2012. During the fourth quarter of 2012, the Company completed a detailed forecast of foreign source income by jurisdiction as part of the ongoing process toevaluate its valuation allowance against deferred tax assets. As part of this process, as well as a continuing desire to limit its credit and currency exposure forcash held in foreign currencies or in non-U.S. banks, the Company determined that it is likely that a portion of the undistributed earnings of its foreignsubsidiaries will be repatriated to the U.S. in the future. Accordingly, in 2012 the Company changed its indefinite reinvestment assertion and now providesdeferred taxes on certain undistributed foreign earnings. Subject to limitations, U.S. income tax on such foreign earnings, when actually repatriated, may bereduced or eliminated by unrecognized foreign tax credits that may be generated in connection with the repatriation or by existing foreign tax creditcarryforwards or other tax attributes for which valuation allowance was released. The Company monitors available evidence and its plans for foreignearnings and expects to continue to provide deferred taxes based on the tax liability that would be due upon repatriation of amounts not consideredpermanently reinvested.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 forthe estimated financial impact of environmental activities. The Company’s policy is to accrue environmental related costs of a non-capital nature, includingestimated litigation costs, when those costs are believed to be probable and can be reasonably estimated. The quantification of environmental exposuresrequires an assessment of many factors, including changing laws and regulations, advancements in environmental technologies, the quality of informationavailable related to specific sites, the assessment stage of each site investigation, preliminary findings and the length of time involved in remediation orsettlement. Such accruals are adjusted as further information develops or circumstances change. For certain matters, the Company expects to share costs withother parties. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed certain. 47 2014 2013 Foreign currency translation $(11,410) $9,990 Unrealized loss on hedging contracts, net of tax (193) (396)Pensions, net of tax (33,378) (28,556)Total $(44,981) $(18,962)IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per 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 currenciesinto 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 accountsand cash flows using average rates of exchange prevailing during the year. Adjustments resulting from the translation of foreign currency financialstatements are accumulated in stockholders' equity until the entity is sold or substantially liquidated. Gains or losses relating to transactions of a long-terminvestment nature are also accumulated in stockholders' equity. Gains or losses resulting from third-party foreign currency transactions are included in theincome statement as a component of other revenues in the consolidated income statement. Foreign currency net transaction gains/(losses) were $186, ($133)and ($274) in 2014, 2013 and 2012, 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 sharesarising from the effect of dilutive stock options, equity-settled performance shares and restricted stock units, using the treasury stock method.For the years ended December 31, 2014, 2013 and 2012, shares of 940,038, 916,350, and 580,745, respectively, were not included in the calculation ofdiluted shares outstanding because the effect would be anti-dilutive.Comprehensive IncomeIncluded within accumulated other comprehensive income for the Company are foreign currency translation adjustments, changes in the fair valuerelated to derivative instruments classified as cash flow hedges, net of related tax, and changes in the pensions, net of tax. Total comprehensive income/lossfor the years ended December 31, 2014 and 2013 are included in the Statements of Comprehensive Income.The components of accumulated other comprehensive loss in stockholders’ equity are as follows:(3)Impact of Recently Issued Accounting PronouncementsRevenue from Contracts with CustomersIn May 2014, the FASB issued ASU 2014-09 that introduces a new five-step revenue recognition model in which an entity should recognize revenueto depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled inexchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertaintyof revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers,significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This standard is effective for fiscal yearsbeginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the new guidance todetermine the impact, if any, it will have on its consolidated financial statements. 48 December 31, 2014 2013 Finished goods $24,200 $29,797 Work in process 27,640 31,990 Raw materials 28,558 22,580 Supplies 5,232 5,598 Total $85,630 $89,965 IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(3)Impact of Recently Issued Accounting Pronouncements (continued) Reporting Discontinued Operations and Disclosures of Disposals of Components of an EntityIn April 2014, the FASB issued ASU 2014-08, which includes amendments that change the requirements for reporting discontinued operations andrequire additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations - that is, amajor effect on the organization's operations and financial results should be presented as discontinued operations. Additionally, the ASU requires expandeddisclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income and expensesof discontinued operations. This update is effective in the first quarter of 2015. This pronouncement will not have an impact on the Company’s financialposition or results of operations.(4)AcquisitionsIn May 2014, the Company purchased the remaining 49% interest in the stock of Zenara. The Company negotiated an accelerated purchase of thebusiness, which was contractually required to be completed in 2016 at a price that would have been determined by the financial performance of the Zenarabusiness. The purchase price negotiated for the 49% was $2,680. Management believed it was economically beneficial to take control of the business toaccelerate the execution of the Company’s strategy for the business. The Company recorded $655 for the identifiable net liabilities of Zenara at fair marketvalue, intangible assets of $4,900, a deferred tax liability related to the intangible asset of $1,666 and goodwill of $9,715. The Company incurredacquisition related costs of $460 for the year ended December 31, 2014. These costs were expensed and included in “Selling, general and administrativeexpenses” in the Company’s income statement. Proforma financial information is not required as this acquisition is not material. Refer to Note 8 for furtherdisclosure.(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:The components of inventory stated above are net of reserves of $12,878 and $11,496 as of December 31, 2014 and 2013, respectively. 49 December 31, 2014 2013 Land $4,117 $4,312 Buildings and improvements 103,083 108,460 Machinery and equipment 365,623 398,490 Furniture and fixtures 1,821 1,884 Construction in progress 20,085 16,808 Total 494,729 529,954 Accumulated depreciation (331,162) (357,988)Net $163,567 $171,966 Balance as of December 31, 2012 $37,312 Translation effect 1,358 Balance as of December 31, 2013 38,670 Acquisition of business 9,715 Translation effect (4,473)Balance as of December 31, 2014 $43,912 IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data) (6)Property, Plant and EquipmentProperty, plant and equipment consist of the following:Depreciation expense was $23,296, $22,218 and $21,528 for the years ended December 31, 2014, 2013 and 2012, respectively. Total capitalexpenditures in 2014 and 2013 were $29,898 and $41,600, respectively.(7)Goodwill and Intangible AssetsThe changes in the carrying amount of goodwill for the years ended December 31, 2014 and 2013 are as follows:Acquired intangible assets, which are amortized, consist of the following: As of December 31, 2014 AmortizationPeriod Gross CarryingAmount AccumulatedAmortization Net CarryingAmount Technology-based intangibles10 - 20 years $8,228 $(1,141) $7,087 Internal-use software7 years 1,332 - 1,332 Customer-related intangibles10 - 15 years 716 (233) 483 $10,276 $(1,374) $8,902 50IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(7)Goodwill and Intangible Assets (continued) As of December 31, 2013 AmortizationPeriod Gross CarryingAmount AccumulatedAmortization Net CarryingAmount Technology-based intangibles20 years $4,192 $(786) $3,406 Customer-related intangibles10 - 15 years 814 (209) 605 $5,006 $(995) $4,011 The change in the gross carrying amount is related to the acquisition of the remaining 49% of Zenara and the impact of foreign currency translation. The acquisition resulted in the recognition of technology- based intangibles of $4,900 in the second quarter of 2014. During 2014, the Company beganimplementing a new enterprise resource planning system, as such, $1,332 has been capitalized and classified as internal-use software.Amortization expense amounted to $530, $255 and $247 for the years ended December 31, 2014, 2013 and 2012, respectively.Amortization expense related to current intangible assets is expected to be approximately $757 for 2015 and $884 for each of the next four years.(8)Partially-Owned AffiliatesIn May 2014, the Company negotiated an accelerated purchase of Zenara, which was contractually required to be completed in 2016 at a price thatwould have been determined by the financial performance of the business. The purchase price negotiated for the remaining 49% was $2,680. Managementbelieved it was economically beneficial to take control of the business to accelerate the execution of the Company’s strategy for the business. The Companyincurred acquisition related costs of $460 for the year ended December 31, 2014.The Company was required to perform a fair market value assessment immediately before acquisition of its existing 51% ownership interest. Thisresulted in the recognition of a gain of $278 using a discounted cash flow model with inputs developed by Company management. The Company alsorecorded an expense of $4,400 representing the release of foreign currency translation adjustments previously recorded in “Other comprehensive income”that are now required to be recorded to the income statement as a result of the removal of the investment in partially-owned affiliate due to the fullconsolidation of Zenara as of the acquisition date. The net amount of these items totaled a loss of $4,122 and is recorded in “Equity in losses of partially-owned affiliates” on the Company’s income statement.The Company recorded a loss of $458 related to Zenara and reflects activity through the date the remaining 49% was purchased. This amount includesamortization expense of $333. The impact of its partial ownership stake in Zenara was a loss of $1,956 and $1,976 in 2013 and 2012, respectively, and islocated within “Other expenses/(income)” as “Equity in losses of partially-owned affiliates” on the Company’s income statement. These amounts includeamortization expense of $882 and $965 in 2013 and 2012, respectively, and depreciation expense of $130 and $132 in 2013 and 2012, respectively. During2014 the Company advanced $1,282 to Zenara through the purchase date. The Company advanced $1,514 and $1,594 to Zenara in 2013 and 2012,respectively. 51 December 31, 2014 2013 Salaries and employee benefits payable $26,893 $26,211 Taxes payable and related reserves 5,420 10,168 Other 8,701 11,719 Total $41,014 $48,098 December 31, 2014 2013 2012 Domestic $37,211 $23,068 $13,525 International 8,295 21,939 17,843 Total $45,506 $45,007 $31,368 IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(8)Partially-Owned Affiliates (continued)The Company’s financial statements reflect its share of Zenara’s results through the date the Company purchased the remaining 49% interest at whichtime Zenara became a wholly-owned subsidiary of the Company and included in the consolidated financial statements. Partially-owned affiliates alsoincludes two smaller joint ventures located in Europe and Brazil. Investments in and advances to partially-owned affiliates were not material to theCompany’s consolidated financial statements as of December 31, 2014.(9)Accrued Expense and Other Current LiabilitiesThe components of accrued expenses and other current liabilities are as follows:(10)Income TaxesIncome before income taxes consists of the following: 52 December 31, 2014 2013 2012 Income tax provision at U.S federal statutory rate $15,927 $15,752 $10,979 Effect of foreign income taxed at rates other than the U.S. federal statutory rate 751 242 (451)Foreign income inclusions 2,742 - 4,563 Tax credits (2,692) (250) (177)Changes in tax laws - (1,155) (1,329)Tax audit settlements (3,948) - - Net change in valuation allowance (26,543) (97) (45,105)Permanent items and other 1,136 240 (341)Total $(12,627) $14,732 $(31,861)IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(10)Income Taxes (continued)The provision for income taxes consist of the following provisions/(benefits): December 31, 2014 2013 2012 Current: Federal $2,572 $630 $(177)State - 15 4 International 512 5,980 8,525 3,084 6,625 8,352 Deferred: Federal $(14,965) $7,014 $(36,287)International (746) 1,093 (3,926) (15,711) 8,107 (40,213)Total $(12,627) $14,732 $(31,861)The (benefit)/provision for income taxes differs from the statutory federal income tax rate of 35% for 2014, 2013 and 2012 as follows:Foreign income inclusions represent distributions from foreign subsidiaries which give rise to newly recognized foreign tax credits. In 2012, theCompany utilized fully valued foreign tax credits, alternative minimum tax credits, and research and experimentation tax credits, prior to the release of thedomestic valuation allowance, to completely offset any tax impact of the foreign income inclusions. Tax audit settlements in 2014 include the finalsettlement of the European tax dispute that arose in 2009. Net change in the valuation allowance in 2014 includes the benefit of $26,902 for the remainingrelease of the domestic valuation allowance attributable to foreign tax credits, offset by $142 for state deferred taxes and $217 for foreign deferred taxessubject to valuation allowances. Net change in the valuation allowance in 2012 includes the benefit of $36,287 for the partial release of the domesticvaluation allowance, the reduction in the domestic valuation allowance, prior to the release, for the utilization of fully valued tax credits to offset U.S.income tax and deferred tax amounts of $8,660, and the reduction in the foreign valuation allowance of $158. 53IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(10)Income Taxes (continued)The components of deferred tax assets and liabilities as of December 31, 2014 and 2013 relate to temporary differences and carryforwards as follows: December 31, 2014 2013 Deferred tax assets: Inventory $3,313 $2,510 Foreign tax credit carryforwards 19,925 31,463 Environmental 2,993 2,995 Net operating loss carryforwards (foreign) 3,381 944 Employee benefits 18,879 12,841 Research & experimentation tax credit carryforwards 480 1,900 Alternative minimum tax credit carryforwards 2,773 2,773 Property, plant and equipment 3,898 3,843 Other 5,605 4,037 Total gross deferred tax assets 61,247 63,306 Valuation allowance (5,053) (29,890)Total deferred tax assets $56,194 $33,416 Deferred tax liabilities: Property, plant and equipment (9,649) (9,059)Intangibles and other (10,487) (9,856)Unremitted foreign earnings (726) (568)Foreign tax allocation reserve (1,856) (2,006)Other (1,978) (2,187)Total deferred tax liabilities $(24,696) $(23,676)Net deferred tax asset $31,498 $9,740 Classified as follows in the consolidated balance sheet: Current deferred tax asset (included in other current assets) 3,808 2,874 Non-current deferred tax asset 38,424 19,799 Current deferred tax liability (included in other current liabilities) (189) (98)Non-current deferred tax liability (10,545) (12,835) $31,498 $9,740 The Company establishes a valuation allowance against deferred tax assets when it is more likely than not that the Company will be unable to realizethose deferred tax assets in the future. In 2003, the Company’s assessment of the need for a valuation allowance against domestic deferred tax assetsconsidered current and past performance, cumulative losses in recent years from domestic operations, and a shift in the geographic mix of forecasted income. Considering the pattern of then-recent domestic losses, the Company gave significant weight to projections showing future domestic losses for purposes ofassessing the need for a valuation allowance. This assessment resulted in a determination that it was more likely than not that domestic deferred tax assetswould not be realized, and as such, a valuation allowance against net domestic deferred tax assets was recorded. 54IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(10)Income Taxes (continued)A sustained period of domestic profitability along with expectations of future domestic profitability of sufficient amounts and character was requiredbefore the Company concluded that it was more likely than not that the domestic deferred tax assets would be realized, and as such, that there was no longerthe need for a full valuation allowance against net domestic deferred tax assets. During 2012, the Company concluded that its three-year cumulative domesticprofitability through the end of 2012 and expectations of future domestic profitability warranted the reversal of all of the domestic valuation allowanceattributable to net federal temporary differences, alternative minimum tax credits, and research and experimentation tax credits. Additionally, the Companyreleased a portion of the domestic valuation allowance attributable to federal foreign tax credits. These valuation allowance releases resulted in a tax benefitto continuing operations of $36,287 in 2012.During 2014, the Company received updated customer projections that impact current and future years’ U.S. taxable income in amounts and type thatsupport the utilization of federal foreign tax credits. For the first nine months of 2014, the expected impact in the current year and future years of theseupdated projections resulted in the Company releasing $15,183 of valuation allowance against foreign tax credits. Additional updates of customerprojections received by the Company during the fourth quarter of 2014 resulted in the release of the remaining valuation allowance against foreign taxcredits of $11,719. The Company currently expects to maintain a domestic valuation allowance against state tax credits and deferred tax assets due torestrictive rules regarding realization. The Company expects to maintain a valuation allowance against certain foreign tax assets, primarily NOLcarryforwards, until such time as the Company attains an appropriate level of future profitability in the appropriate jurisdictions and is able to conclude thatit is more likely than not that its foreign deferred tax assets are realizable.The domestic valuation allowance for the years ended December 31, 2014, 2013 and 2012 decreased $26,760, $3 and $47,490, respectively. The 2014decrease in the domestic valuation allowance was allocated as follows: the valuation allowance decreased $26,902 for the release of valuation allowance dueto domestic profitability and increased $142 due to domestic state items. The 2013 decrease in the domestic valuation allowance is due to domestic stateitems. The 2012 decrease in the domestic valuation allowance was allocated as follows: the valuation allowance decreased $36,287 for the release ofvaluation allowance due to domestic profitability, decreased by a net amount of $8,660 for domestic income and deferred tax amounts in continuingoperations prior to the release of valuation allowance in the fourth quarter of 2012, and decreased by a net amount of $2,543 for domestic gains and lossesincluded in OCI and discontinued operations.The foreign valuation allowance for the years ended December 31, 2014, 2013 and 2012 increased $1,923, decreased $48, and decreased $140,respectively. The 2014 increase in the foreign valuation allowance was allocated as follows: the valuation allowance increased $217 for foreign income andincreased $1,706 for deferred tax amounts and currency translation adjustments included in OCI. The 2013 decrease in the foreign valuation allowance wasallocated as follows: the valuation allowance decreased $94 for foreign income and increased $46 for deferred tax amounts and currency translationadjustments included in OCI. The 2012 decrease in the foreign valuation allowance was allocated as follows: the valuation allowance decreased $158 forforeign income and increased $18 for deferred tax amounts and currency translation adjustments included in OCI.Under the tax laws of the various jurisdictions in which the Company operates, NOLs may be carried forward or back, subject to statutory limitations,to reduce taxable income in future or prior years. Foreign NOLs are approximately $11,323, of which $8,778 are attributable to NOLs acquired during 2014.NOLs in most foreign jurisdictions will carry forward indefinitely.As of December 31, 2014, $19,925 of domestic federal foreign tax credits, $480 of research and experimentation tax credits and $2,773 of alternativeminimum tax credits are available as credits against future U.S. income taxes on worldwide income, subject to certain limitations. Under U.S. tax laws, thesewill expire in 2015 through 2018, 2033 through 2034, and the alternative minimum tax credit carryforwards have no expiration date, respectively. 55IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(10)Income Taxes (continued) In 2014 and 2012, the Company repatriated $5,442 and $8,953, respectively, of cash from its foreign subsidiaries in order to reduce its credit andcurrency exposure for cash held in foreign currencies or in non-U.S. banks and utilized the excess cash for debt reduction. The Company utilized fullyvalued domestic tax credits in 2012 to completely offset any tax impact of the foreign income inclusion. Historically, the Company intended to reinvestforeign earnings indefinitely outside of the U.S. and only considered repatriating excess cash from foreign subsidiaries if it could utilize fully valueddomestic tax attributes to completely offset any tax expense that would otherwise result. Unrecognized foreign tax credits and fully valued foreign tax creditcarryovers had been available to offset any potential U.S. tax liability. Therefore, the Company had not provided U.S. federal or state income taxes or foreignwithholding taxes on its undistributed earnings from foreign operations prior to 2012. During the fourth quarter of 2012 the Company completed a detailedforecast of foreign source income by jurisdiction as part of the ongoing process to evaluate its valuation allowance against deferred tax assets. As part of thisprocess, as well as a continuing desire to limit its credit and currency exposure related to cash held in foreign currencies or in non-U.S. banks, the Companydetermined that it is likely that a portion of the undistributed earnings of its foreign subsidiaries will be repatriated to the U.S. in the future. Accordingly, in2012 the Company changed its indefinite reinvestment assertion. The Company has provided a deferred tax liability of $726 on certain undistributedforeign earnings as of December 31, 2014. Subject to limitations, U.S. income tax on such foreign earnings, when actually repatriated, may be reduced oreliminated by unrecognized foreign tax credits that may be generated in connection with the repatriation or by existing foreign tax credit carryforwards orother tax attributes for which a valuation allowance was released in 2012 and 2014. The Company monitors available evidence and its plans for foreignearnings and expects to continue to provide deferred taxes based on the tax liability that would be due upon repatriation of amounts not consideredpermanently reinvested.The following table summarizes the activity related to the Company’s unrecognized tax benefits as of December 31, 2014, 2013 and 2012: 2014 2013 2012 Balance at January 1 $3,922 $3,967 $4,328 Gross increases related to current period tax positions 275 257 348 Gross decreases related to prior period tax positions (1,149) (427) (483)Expirations of statute of limitations for the assessment of taxes (106) (37) (113)Settlements (1,113) - (175)Foreign currency translation (186) 162 62 Balance at December 31 $1,643 $3,922 $3,967 Of the total balance of unrecognized tax benefits at December 31, 2014, $1,643, if recognized, would affect the effective tax rate.Gross interest and penalties at December 31, 2014, 2013 and 2012 of $489, $5,005 and $4,511, respectively, related to the above unrecognized taxbenefits are not reflected in the table above. In 2014, 2013 and 2012, the Company accrued $337, $219 and $985, respectively, of interest and penalties inthe income statement. Consistent with prior periods, the Company recognizes interest and penalties within its income tax provision.Tax years 2011 and forward in the U.S. are open to examination by the IRS. The Company is also subject to examinations in its non-U.S. jurisdictionsfor 2009 and later years. 56IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(10)Income Taxes (continued)The Company is also subject to audits in various states for various years in which it has filed income tax returns. Previous state audits have resulted inimmaterial adjustments. In the majority of states where the Company files, the Company is subject to examination for tax years 2010 and forward.In 2009, a subsidiary of the Company was examined by a European tax authority, which challenged the business purpose of the deductibility ofcertain intercompany transactions from 2003 and issued formal assessments against the subsidiary. The Company had several favorable rulings in the courtson this matter, although the rulings were appealed by the tax authority. At the same time, considering the hazards of litigation, the Company pursuedsettlement negotiations. During the fourth quarter of 2014, the Company entered into a final settlement with the tax authority in order to avoid furtherlitigation, without any admission of fault or breach of law. The settlement required the Company to pay $1,487 in tax and interest during the fourth quarterof 2014 in full satisfaction of all liabilities for this matter, and in response the tax authority withdrew all pending litigation and renounced any outstandingclaims. The settlement did not impose any penalties on the Company. Therefore, in the fourth quarter of 2014, the Company decreased its remaining reservefor unrecognized tax benefits for this matter by $4,137.In the next twelve months, the Company may increase its reserve for unrecognized tax benefits for intercompany transactions and acquired taxattributes by approximately $250. This could affect the effective tax rate.(11)Long‑term DebtIn November 2011, the Company entered into a $250,000 five-year Syndicated Senior Revolving Credit Facility (“Credit Facility”) which expires inNovember 2016. The Company pays interest on this Credit Facility at LIBOR plus 1.50% - 2.10% based upon certain financial measurements. The CreditFacility also includes financial covenants regarding interest coverage and leverage ratios. The Company was in compliance with all financial covenants atDecember 31, 2014. As of December 31, 2014, there was $60,000 outstanding on the Credit Facility. As of December 31, 2013, there was $79,250outstanding on the Credit Facility. The 2014 and 2013 weighted average interest rate for long-term bank debt was 2.4% and 2.3%, 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 of business. TheCompany, from time to time, uses derivatives to reduce exposure 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 non-performance 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 periodically enters into foreign currency forward contracts to protect against currency fluctuations of forecasted cash flows and existingbalance sheet exposures at its foreign operations, as deemed appropriate. The Company may or may not elect to designate certain forward contracts for hedgeaccounting treatment.For derivatives that are not designated for hedge accounting treatment, changes in the fair value are immediately recognized in earnings. Thistreatment has the potential to increase volatility of the Company’s earnings. 57IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(12)Derivatives and Hedging Activities (continued)None of the foreign currency forward contracts entered into during 2014 were designated for hedge accounting treatment. The notional amounts of theCompany’s foreign exchange forward contracts were $3,632 at December 31, 2014. There were no foreign currency forward contracts outstanding atDecember 31, 2013 and 2012. The Company does not hold or purchase any foreign currency forward contracts for trading or speculative purposes and nocontractual term is greater than twelve months.The fair value of the Company’s foreign exchange forward contracts was a loss of $102 at December 31, 2014 and is recorded in “Accrued expensesand other current liabilities” and “Other revenue.” Interest Rate SwapThe Company entered into an interest rate swap in March 2012 to reduce the impact of changes in interest rates on its floating rate debt throughSeptember 2015. The swap is a contract to exchange floating rate for fixed interest payments periodically over the life of the agreement without theexchange of the underlying notional debt amount.The swap contract outstanding at December 31, 2014 has been designated as a cash flow hedge and, accordingly, changes in the fair value of thisderivative are not recorded in earnings but are recorded each period in AOCI and reclassified into earnings as interest expense in the same period duringwhich the hedged transaction affects earnings. The ineffective portion of all hedges is recognized in earnings and has been immaterial to the Company'sfinancial results.As of December 31, 2014, the interest rate swap had a notional value of $60,000, at a fixed rate of 0.92%. The fair value of this swap is based onquoted market prices and was in a loss position of $304, $616 and $930 at December 31, 2014, 2013 and 2012, respectively. This loss is reflected in theCompany’s balance sheet under the caption “Accrued expenses and other current liabilities.”Assuming current market conditions continue, the entire loss will be reclassed out of AOCI into earnings within the next twelve months.Refer to Note 13 to the Company’s consolidated financial statements for the summary table containing the fair value of the Company’s financialinstruments.(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. 58IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per 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, 2014 and 2013: Fair Value Measurements at December 31, 2014 using: Description Total Level 1 Level 2 Level 3 Foreign currency forwards, liabilities $(102) $- $(102) $- Interest rate swap, liabilities (304) - (304) - Total $(406) $- $(406) $- Fair Value Measurements at December 31, 2013 using: Description Total (Level 1) (Level 2) (Level 3) Interest rate swap, liabilities $(616) $- $(616) $- Total $(616) $- $(616) $- The fair value of the interest rate swap is estimated based on the present value of the difference between expected cash flows calculated at thecontracted interest rate and the expected cash flows at current market interest rates using observable benchmarks for the LIBOR forward rates at the end of theperiod. The Company’s credit risk and its counterparties’ credit risks are also evaluated to estimate fair value.The Company’s foreign currency forward contracts are measured at fair value using observable market inputs such as forward rates, the Company’scredit risk and its counterparties’ credit risks. Based on the Company’s continued ability to enter into forward contracts, the Company considers the marketsfor its fair value instruments to be active.Based on these inputs, the Company’s interest rate swap and foreign currency forward contracts are classified within Level 2 of the valuation hierarchy.The Company’s financial instruments also include cash and cash equivalents, accounts receivables and accounts payables. The carrying amount ofthese instruments approximates fair value because of their short-term nature. The carrying amount of the Company’s long-term debt approximates fair valuebecause the debt is based on current rates at which the Company could borrow funds with similar maturities.Refer to Note 12 to the Company’s consolidated financial statements for further disclosures on the Company’s financial instruments.(14)Stockholders' EquityThe Company has two classes of common shares, Common Stock and Nonvoting Common Stock. Authorized shares of Common Stock were100,000,000 at December 31, 2014 and 2013. Authorized shares of Nonvoting Common Stock were 730,746 at December 31, 2014 and 2013. NonvotingCommon Stock with a par value of $0.10 has equal rights with Common Stock, with the exception of voting power. Nonvoting Common Stock isconvertible, share for share, into Common Stock, subject to any legal requirements applicable to holders restricting the extent to which they may own votingstock. As of December 31, 2014 and 2013, no shares of Nonvoting Common Stock were outstanding. The Company has authorized 5,000,000 shares ofSeries Preferred Stock, par value $0.10, issuable in series and with rights, powers and preferences as may be fixed by the Board of Directors. At December 31,2014 and 2013, there was no preferred stock outstanding. 59IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(14)Stockholders' Equity (continued)The Company held treasury shares of 1,738,624 and 1,757,530 at December 31, 2014 and 2013, respectively, which are primarily used for issuance toemployee compensation plans.At December 31, 2014 there were 640,331 authorized shares of Common Stock reserved for issuance through equity compensation plans.(15)Accumulated Other Comprehensive LossThe following tables provide the changes in AOCI by component, net of tax, for the years ended December 31, 2014 and 2013: ForeignCurrencyTranslationAdjustments Interest RateSwap PensionPlans Total Balance as of December 31, 2013 $9,990 $(396) $(28,556) $(18,962) Other comprehensive loss before reclassifications (25,800) (99) (12,566) (38,465)Amounts reclassified from accumulated other comprehensive loss 4,400 302 7,744 12,446 Net current-period other comprehensive (loss)/income (21,400) 203 (4,822) (26,019)Balance as of December 31, 2014 $(11,410) $(193) $(33,378) $(44,981) ForeignCurrencyTranslationAdjustments Interest RateSwap PensionPlans Total Balance as of December 31, 2012 $5,177 $(600) $(38,668) $(34,091) Other comprehensive income/(loss) before reclassifications 4,813 (85) 9,173 13,901 Amounts reclassified from accumulated other comprehensive loss - 289 939 1,228 Net current-period other comprehensive income 4,813 204 10,112 15,129 Balance as of December 31, 2013 $9,990 $(396) $(28,556) $(18,962) 60IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(15)Accumulated Other Comprehensive Loss (continued)The following tables provide the reclassifications out of AOCI by component for the years ended December 31, 2014 and 2013:Details about AOCI Components Amount Reclassifiedfrom AOCIfor the year endedDecember 31, 2014 Affected Line Item in the Consolidated Income StatementLosses on cash flow hedge: Interest rate swap $(465)Interest expense, net 163 Tax benefit $(302)Net of tax Amortization of defined benefit pension items: Loss on voluntary settlement $(7,170)Loss on voluntary pension settlementActuarial losses (756)Selling, general and administrative expensesActuarial losses (46)Cost of goods soldPrior service costs (52)Selling, general and administrative expenses (8,024)Total before tax 280 Tax benefit $(7,744)Net of tax Foreign currency translation adjustment: Release of currency translation adjustment $(4,400)Equity in losses of partially-owned affiliates - Tax benefit $(4,400)Net of tax Total reclassification for the period $(12,446) Details about AOCI Components Amount Reclassifiedfrom AOCIfor the year endedDecember 31, 2013 Affected Line Item in the Consolidated Income StatementLosses on cash flow hedge: Interest rate swap $(444)Interest expense, net 155 Tax benefit $(289)Net of tax Amortization of defined benefit pension items: Actuarial losses $(1,223)Selling, general and administrative expensesActuarial losses (116)Cost of goods soldPrior service costs (50)Selling, general and administrative expenses (1,389)Total before tax 450 Tax benefit $(939)Net of tax Total reclassification for the period $(1,228) 61IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(16)Stock Based CompensationThe Company recognizes compensation cost for stock options awarded 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 optionsgranted to employees for the years ended December 31, 2014, 2013 and 2012 were $7.15, $7.97 and $7.14, respectively.The following assumptions were used in determining the fair value of stock options for grants issued in 2014, 2013 and 2012: 2014 2013 2012 Expected volatility35.14%-46.32% 44.17%-71.58% 71.84%Expected term1.75-4.75 years 1.25-4.75 years 4.75 yearsRisk-free interest rate0.43%-1.50% 0.12%-1.37% 0.66%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 expected term. The expected term was utilized based on the “simplified” method for determining the expected term of stock options.For 2014, 2013, and 2012, the Company recorded $2,491, $1,994 and $1,303, respectively, in selling, general and administrative expenses for stockoptions. As of December 31, 2014, the total compensation cost related to unvested stock option awards granted to employees but not yet recognized was$7,197. The cost will be amortized on a straight-line basis over the remaining weighted-average vesting period of 2.8 years.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, 2013 2,229,969 $9.39 1,149,069 Granted 479,788 18.12 Exercised (596,135) 7.05 Forfeited or expired (42,950) 10.12 Outstanding at December 31, 2014 2,070,672 12.08 Exercisable at December 31, 2014 971,797 $8.71 The aggregate intrinsic value for all stock options exercised for the years ended December 31, 2014, 2013 and 2012 was $8,910, $5,017 and $1,658,respectively. The aggregate intrinsic values for all stock options outstanding and exercisable as of December 31, 2014 were $19,766 and $12,546,respectively. 62IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(16)Stock Based Compensation (continued)A summary of the Company’s nonvested stock options and restricted stock activity is presented below: Nonvested Stock Options Nonvested Restricted Stock Number ofShares Weighted-Average Grant-Date Fair Value Number ofShares Weighted-Average Grant-Date Fair Value Nonvested at December 31, 2013 1,080,900 $6.50 - $- Granted 479,788 7.15 18,906 20.90 Vested during period (431,413) 5.60 (18,906) 20.90 Forfeited (30,400) 6.44 - - Nonvested at December 31, 2014 1,098,875 $7.14 - $- Members of the Cambrex Board of Directors currently participate in an incentive plan which rewards service with restricted stock units. Awards aremade annually and vest over six months. On the six month anniversary of the grant, restrictions on sale or transfer are removed and shares are issued to theDirectors. These awards are classified as equity awards.For 2014, 2013, and 2012, the Company recorded $395, $427, and $446, respectively, in selling, general and administrative expenses for restrictedstock units. As of December 31, 2014, all restricted stock unit grants were fully vested.The Company granted equity-settled performance shares (“PSs”) to certain executives. PS awards provide the recipient the right to receive a certainnumber of shares of the Company’s common stock in the future, which depends on the Company’s level of achievement of revenue and EBITDA growth ascompared to the revenue and EBITDA growth of the members of a specified peer group of companies over a three year period. The peer group consists ofpublicly-traded life sciences companies competing in the same industry as the Company. For 2014, 2013 and 2012, the Company recorded $2,116, $404 and$53, respectively, in selling, general and administrative expense related to these PS awards.The Company granted cash-settled performance share units (“PSUs”) to certain executives. PSU awards provide the recipient the right to receive thecash value of a certain number of shares of the Company’s common stock in the future, which depends on the Company’s level of achievement of revenueand EBITDA growth as compared to the revenue and EBITDA growth of the members of a specified peer group of companies typically over a three yearperiod. The peer group consists of publicly-traded life sciences companies competing in the same industry as the Company. For 2014, 2013 and 2012, theCompany recorded $445, $2,620 and $1,529, respectively, in selling, general and administrative expenses for PSU awards. The decrease is primarily theresult of the Company’s performance compared to the peer group partially offset by the Company’s higher share price. 63IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(17)Retirement PlansDomestic Pension PlanThe Company maintains a defined-benefit pension plan (“Domestic Pension Plan”) for certain salaried and certain hourly employees. The Companyalso has a Supplemental Executive Retirement Plan (“SERP”) for key executives. This plan is non-qualified and unfunded. Benefits accruing under bothplans were frozen in 2007. 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 as of January 1, 2009 will be paid in 10 equal actuarial equivalent installments through 2018. It is the Company’s policy tocontribute to the domestic pension plan to ensure adequate funds are available in the plan to make benefit payments to plan participants and beneficiarieswhen required.In the third quarter of 2014, the Company announced a program to offer a one-time option to elect to receive a voluntary lump-sum pension payout tocertain former employees with deferred vested balances in the Company’s U.S. pension plan. As part of this voluntary lump-sum program, the Companysettled $17,381 of pension obligations for the U.S. plan with an equal amount paid from plan assets. As a result, the Company recorded settlement losses of$7,170 reflecting the accelerated recognition of unamortized losses in the U.S. pension plan proportionate to the obligation that was settled. The loss onvoluntary pension settlement is reflected as a separate line in the consolidated income statement with a corresponding balance sheet reduction in“Accumulated other comprehensive loss.”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.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 $941, $731 and $733 in 2014, 2013 and 2012, respectively.OtherThe Company has a non-qualified Deferred Compensation Plan for Key Executives (“The Plan”). Under this Plan, officers and key employees mayelect to defer all or any portion of their pre-tax earnings or elect to defer receipt of the Company’s stock which would otherwise have been issued upon theexercise of the Company’s options. Included within other liabilities at December 31, 2014 and 2013 is $932 and $1,049, respectively, representing theCompany’s obligation under the plan. The Company invests in certain mutual funds and as such, included within other assets at December 31, 2014 and2013 is $932 and $1,049, respectively, representing the fair value of these funds. The fair values of these mutual funds are based on quoted market prices inactive markets (Level 1). The number of Cambrex shares held in trust under this plan as of December 31, 2014 and 2013 were 49,121, and are included as areduction of equity. The value of the shares held in trust and the corresponding liability of $1,062 and $876 at December 31, 2014 and 2013, respectively,have also been recorded in equity. The Plan is not funded by the Company, but the Company has established a Deferred Compensation Trust Fund whichholds the shares issued. Effective December 2011, the Board of Directors suspended employee contributions to this Plan. 64IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(17)Retirement Plans (continued)The benefit obligations as of December 31, 2014 and 2013 are as follows: Pension Plans Domestic SERP International 2014 2013 2014 2013 2014 2013 Change in benefit obligation Benefit obligation, beginning of year $70,709 $79,958 $3,086 $3,690 $25,627 $27,033 Service cost - - - - 674 743 Interest cost 3,310 3,057 33 41 884 658 Actuarial loss/(gain) 11,813 (8,269) 2 (9) 5,319 (2,314)Benefits paid (3,160) (4,037) (732) (636) (763) (808)Currency translation affect - - - - (5,041) 315 Settlements (17,847) - - - - - Benefit obligation, end of year $64,825 $70,709 $2,389 $3,086 $26,700 $25,627 The plan assets and funded status of the Domestic Pension Plan as of December 31, 2014 and 2013 are as follows: 2014 2013 Change in plan assets Fair value of plan assets, beginning of period $57,743 $53,900 Actual return on plan assets 2,605 6,894 Contributions 2,324 986 Benefits paid (3,160) (4,037)Settlements (17,847) - Fair value of plan assets, end of period $41,665 $57,743 Unfunded status (23,160) (12,966)Accrued benefit cost, end of period $(23,160) $(12,966) The unfunded status of the SERP was ($2,389) and ($3,086) as of December 31, 2014 and 2013, respectively. The unfunded status of the InternationalPension Plan was ($26,700) and ($25,627) as of December 31, 2014 and 2013, respectively.The amounts recognized in AOCI as of December 31, 2014 and 2013 consist of the following: Pension Plans Domestic SERP International 2014 2013 2014 2013 2014 2013 Actuarial loss $26,042 $20,373 $702 $830 $9,597 $4,765 Prior service cost/(benefit) - - 172 230 (17) (24)Total $26,042 $20,373 $874 $1,060 $9,580 $4,741 65IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(17)Retirement Plans (continued)The components of net periodic benefit cost are as follows: Pension Plans Domestic SERP International 2014 2013 2012 2014 2013 2012 2014 2013 2012 Components of net periodicbenefit cost Service cost $- $- $- $- $- $- $674 $743 $660 Interest cost 3,310 3,057 3,284 33 41 85 884 658 795 Expected return on planassets (4,153) (3,826) (3,674) - - - - - - Amortization of priorservice cost/(benefit) - - 60 57 57 57 (7) (7) (7)Recognized actuarial loss 522 937 864 131 118 76 149 284 200 Settlement loss 7,170 - - - - - - - - Net periodic benefit cost $6,849 $168 $534 $221 $216 $218 $1,700 $1,678 $1,648 The estimated amounts that will be amortized from AOCI into net periodic benefit cost in 2015 are as follows: Pension Plans Domestic SERP International Actuarial loss $811 $154 $359 Prior service cost/(benefit) - 57 (6)Total $811 $211 $353 Major assumptions used in determining the benefit obligations are presented in the following table: 2014 2013 Discount rate: Domestic Pension Plan3.85% 4.80%SERP1.35% 1.40%International Pension Plan2.40% 3.70% Rate of compensation increase: International Pension Plan2.20% 2.50% 66IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(17)Retirement Plans (continued)Major assumptions used in determining the net benefit cost are presented in the following table: 2014 2013 2012 Discount rate: Domestic Pension Plan 4.80% 3.90% 4.45%SERP 1.40% 1.35% 2.40%International Pension Plan 3.70% 3.40% 3.40% Expected return on plan assets: Domestic Pension Plan 7.25% 7.25% 7.50% Rate of compensation increase: International Pension Plan 2.20% 2.50% 2.40%In making its assumption for the long-term rate of return on plan assets, the Company has utilized historical rates earned on securities allocatedconsistently with its investments. The discount rate was selected by projecting cash flows associated with plan obligations, which were matched to a yieldcurve of high quality corporate bonds. The Company then selected the single rate that produced the same present value as if each cash flow were discountedby the corresponding spot rate on the yield curve.The aggregate Accumulated Benefit Obligation (“ABO”) of $64,825 exceeds plan assets by $23,160 as of December 31, 2014 for the DomesticPension Plan. The aggregate ABO is $25,459 for the International Pension Plan as of December 31, 2014. The International Pension Plan is unfunded.The Company expects to contribute approximately $1,900 in cash to the Domestic Pension Plan in 2015. The Company does not expect to contributecash to its International Pension Plan in 2015.The following benefit payments are expected to be paid out of the plans: Pension Plans Domestic SERP International 2015 $3,429 $609 $689 2016 $3,401 $609 $699 2017 $3,470 $609 $709 2018 $3,400 $609 $767 2019 $3,482 $- $824 2020-2024 $18,054 $- $4,865 The investment objective for the Domestic Pension Plan’s assets is to achieve long-term growth with exposure to risk at an appropriate level. TheCompany invests in a diversified asset mix consisting of equities (domestic and international) and taxable fixed income securities. Assets are managed toobtain the highest 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 5% - 15% all other investments. Equity securities primarily include investments in large-cap and small-cap companies, U.S. fixedincome securities including 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”). 67 GroupAnnuityContract Balance at December 31, 2013 $2,076 Net investment gain 53 Balance at December 31, 2014 $2,129 IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(17)Retirement Plans (continued) The fair values of the Company’s pension plan assets by asset category are as follows: Fair Value Measurements at December 31, 2014 using: Asset Category Total (Level 1) (Level 2) (Level 3) Equity securities: U.S. companies $14,513 $- $14,513 $- International companies 7,900 - 7,900 - U.S. fixed income 14,093 - 11,964 2,129 Commodities 3,161 - 3,161 - TIPS 1,998 - 1,998 - $41,665 $- $39,536 $2,129 Fair Value Measurements at December 31, 2013 using: Asset Category Total (Level 1) (Level 2) (Level 3) Equity securities: U.S. companies $20,633 $- $20,633 $- International companies 11,157 - 11,157 - U.S. fixed income 18,736 - 16,660 2,076 Commodities 4,436 - 4,436 - TIPS 2,781 - 2,781 - $57,743 $- $55,667 $2,076 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, 2014: 68 Domestic Foreign Total 2014 Gross sales $186,735 $187,415 $374,150 Long-lived assets 64,995 151,386 216,381 2013 Gross sales $153,202 $164,010 $317,212 Long-lived assets 59,496 155,151 214,647 2012 Gross sales $109,729 $168,202 $277,931 Long-lived assets 44,085 149,133 193,218 2014 2013 2012 Europe $232,894 $210,463 $150,678 North America 117,477 86,974 105,439 Asia 12,865 13,800 12,827 Other 10,914 5,975 8,987 Total $374,150 $317,212 $277,931 Year ended December 31: 2015 $1,194 2016 600 2017 588 2018 528 2019 193 2020 and thereafter 90 Total commitments $3,193 IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(18)Foreign Operations and SalesThe following summarized data represents the gross sales and long lived assets for the Company’s domestic and foreign entities for 2014, 2013 and2012: Export sales, included in domestic gross sales, in 2014, 2013 and 2012 amounted to $101,101, $86,850, and $32,872, respectively.Sales to geographic area consist of the following: One customer accounted for 24.0% and 18.3% of 2014 and 2013 consolidated gross sales, respectively, and another customer accounted for 12.5% of2012 consolidated gross sales.(19)CommitmentsThe Company has operating leases expiring on various dates through the year 2020. The leases are primarily for the rental of office space, office andlaboratory equipment and vehicles. At December 31, 2014, future minimum commitments under non-cancelable operating lease arrangements were asfollows: 69IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(19)Commitments (continued)Total operating lease expense was $1,113, $1,090 and $815 for the years ended December 31, 2014, 2013 and 2012, respectively.The Company is party to several unconditional purchase obligations resulting from contracts that contain legally binding provisions with respect toquantities, pricing and timing of purchases. The Company’s purchase obligations mainly include commitments to purchase utilities. At December 31, 2014,future commitments under these obligations were $7,588 in 2015 and none thereafter.(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 known facts and circumstances as they pertain to applicable 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 result in actual costs that are significantly higher than the Company’s current assessment and could have a material adverse effect on theCompany's operating results and cash flows in future reporting periods. While these matters could have a material adverse effect on the Company’s financialcondition, based upon past experience, the Company believes that payments significantly in excess of current reserves, if required, would be made over anextended number of years.EnvironmentalIn connection with laws and regulations pertaining to the protection of the environment, the Company and its subsidiaries are a party to severalenvironmental proceedings and remediation activities and along with other companies, have been named a potentially responsible party (“PRP”) for certainwaste disposal sites ("Superfund sites"). Substantially all of the liabilities currently recorded on the Company’s balance sheet for environmental proceedingsare associated with discontinued operations. The Company had insurance policies in place at certain of the discontinued operations for certain years that theCompany believes should cover some portion of currently recorded liabilities or potential future liabilities.It is the Company’s policy to record appropriate liabilities for environmental matters where remedial efforts are probable and the costs can bereasonably estimated. Such liabilities are based on the Company’s estimate of the undiscounted future costs required to complete the remedial work. Each ofthese matters is subject to various uncertainties, and it is possible that some of these matters will be decided against the Company. The resolution of suchmatters often spans several years and frequently involves regulatory oversight or adjudication. Additionally, many remediation requirements are fluid andare likely to be affected by future technological, site and regulatory developments. It is not possible at this time for the Company to determine fully theeffect of all asserted and unasserted claims on its consolidated financial condition, results of operations or liquidity; however, to the extent possible, whereasserted and unasserted claims can be estimated and where such claims are considered probable, the Company would record a liability. Consequently, theultimate liability with respect to such matters, as well as the timing of cash disbursements, is uncertain. 70IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(20)Contingencies (continued) In matters where the Company is able to reasonably estimate the probable and estimable costs associated with environmental proceedings, theCompany accrues for the estimated costs associated with the study and remediation of applicable sites. These reserves were $9,595 and $10,881 at December31, 2014 and 2013, respectively. The decrease in the reserve includes payments of $2,269 and the impact of currency translation of $226 partially offset byadjustments to reserves of $1,209. The reserves are adjusted periodically as remediation efforts progress or as additional technical, regulatory or legalinformation becomes available. Given the uncertainties regarding the outcome of investigative and study activities, 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 possible tocurrently develop an estimate of the range of reasonably possible environmental loss in excess of its reserves.CasChemAs a result of the sale of a Bayonne, New Jersey facility, the Company became obligated to investigate site conditions and conduct requiredremediation under the New Jersey Industrial Site Recovery Act. The Company intends to continue implementing a sampling plan at the property pursuant tothe New Jersey Department of Environmental Protection’s (“NJDEP”) private oversight program. The results of the completed sampling, and any additionalsampling deemed necessary, will be used to develop an estimate of the Company's future liability for remediation costs. As of December 31, 2014, theCompany’s reserve for the investigation of site conditions was $193.CosanThe Company has implemented a sampling and pilot program in Clifton, New Jersey pursuant to the NJDEP private oversight program. The results ofthe sampling and pilot program to date have been used to develop an estimate of the Company's future liability for remediation costs. As of December 31,2014, the Company’s reserve was $1,191.Additionally, the Company has implemented a sampling and pilot program in Carlstadt, New Jersey pursuant to the NJDEP private oversight program. The results of the sampling and pilot program to date have been used to develop an estimate of the Company's future liability for remediation costs. As ofDecember 31, 2014, the Company’s reserve was $1,063.Berry’s CreekThe Company received a notice from the United States Environmental Protection Agency (“USEPA”) that two subsidiaries of the Company areconsidered PRPs at the Berry’s Creek Study Area in New Jersey. These subsidiaries are among many other PRPs that were listed in the notice. Pursuant to thenotice, the PRPs have been asked to perform a remedial investigation and feasibility study of the Berry’s Creek site. The Company has joined the group ofPRPs and entered into an Administrative Settlement Agreement (“Agreement”) and Order on Consent with the USEPA agreeing to jointly conduct or fund anappropriate remedial investigation and feasibility study of the Berry’s Creek site with the other PRPs in the Agreement. The PRPs have engaged consultantsto perform the work specified in the Agreement and develop a method to allocate related costs among the PRPs. As of December 31, 2014, the Company’sreserve was $388 to cover the current phase of investigation based on a tentative agreement on the allocation of the site investigation costs among the PRPs. Due to the very preliminary and uncertain nature of any estimates related to the method and costs of any remediation solution, the number of eventual PRPs,and their respective proportion of remediation costs, the Company’s liability cannot be reasonably estimated at this time; as such, no accrual is recorded forthese potential future costs. The impact of the resolution of this matter on the Company’s results of operations in any future reporting period is not known. 71IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(20)Contingencies (continued)In July 2014, the Company received a notice from the U.S. Department of the Interior, U.S. Fish & Wildlife Service, regarding the Company’s potentialliability for natural resource damages at the Berry’s Creek site and inviting the Company to participate in a cooperative assessment of natural resourcedamages. All members of the Berry’s Creek PRP group are receiving such notice letters, and any response from the Company will be coordinated with thePRP Group. The substance of any response from the Company, the cost of any assessment, and the ultimate scope of natural resource damage liability are notyet known.Maybrook SiteA subsidiary of Cambrex is named a PRP of a site in Hamptonburgh, New York by the USEPA in connection with the discharge, under appropriatepermits, of wastewater at that site prior to Cambrex's acquisition in 1986. The PRPs implemented soil remediation which was completed in 2012 pendingapproval by the USEPA. The PRPs will continue implementing the ground water remediation at the site. As of December 31, 2014, the Company’s reservewas $322 to cover remaining ground water remediation and long-term monitoring.Harriman SiteSubsidiaries of Cambrex and Pfizer are named as responsible parties for the Company’s former Harriman, New York production facility by the NewYork State Department of Environmental Conservation (“NYSDEC”). A final ROD (“Record of Decision”) describing the Harriman site remediationresponsibilities for Pfizer and the Company was issued in 1997 (the "1997 ROD") and incorporated into a federal court Consent Decree in 1998 (the “ConsentDecree”). Site clean-up work under the 1997 ROD is ongoing and is being jointly performed by Pfizer and the Company, with NYSDEC oversight. ELTHarriman, LLC ("ELT"), the current owner of the Harriman site, is conducting other investigation and remediation activities under a separate NYSDECdirective.In October 2013, the NYSDEC sent the Company, Pfizer, ELT and the immediately preceding owner Vertellus Specialties Holdings (“Vertellus”) anenforcement letter demanding that the Company and Pfizer submit a work plan for the further study and remediation of certain areas of the Harriman site,including the evaluation of certain remedies that the Company has contended are not required by the 1997 ROD. In December 2013, the Company, Pfizerand the NYSDEC entered into a federal court stipulation, which the court subsequently endorsed as a court order, withdrawing the October 2013 enforcementletter as it relates to the Company and Pfizer, and resolving certain disputes about the scope of their obligations under the Consent Decree and the 1997ROD. Pursuant to the court order, the Company and Pfizer are required to carry out an environmental investigation and study of certain areas of the HarrimanSite.No final remedy for the site has been determined, which will follow further discussions with the NYSDEC. The Company estimated the range for itsshare of the liability at the site to be between $2,000 and $7,000. As of December 31, 2014, the Company’s reserve was $3,615. At this time, the Company isunable to provide an estimate of the ultimate investigative and remedial costs to the Company for any final remedy selected by the NYSDEC. 72IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(20)Contingencies (continued)The Company intends to enforce all of its contractual rights to recover costs and for indemnification under a 2007 settlement agreement, and has filedsuch claims in an arbitration proceeding against ELT and Vertellus. ELT has filed counterclaims, and has threatened to file additional counterclaims, forcontractual indemnification and for breach of the settlement agreement against the Company. Currently, the arbitration proceeding is stayed indefinitely.Scientific Chemical Processing (“SCP”) Superfund SiteA subsidiary of Cambrex was named a PRP of the SCP Superfund site, located in Carlstadt, New Jersey, along with approximately 130 other PRPs. Thesite is a former waste processing facility that accepted various waste for recovery and disposal including processing wastewater from this subsidiary. ThePRPs are in the process of implementing a final remedy at the site. The SCP Superfund site has also been identified as a PRP in the Berry’s Creek Superfundsite (see previous discussion). For over a decade, the remediation has been funded by de minimus settlements and by the insurers of the SCP Superfund site’sowners and operators. However, due to an unexpected increase in remediation costs at the site and costs related to SCP’s involvement in the Berry’s Creekinvestigation, the PRP group approved the assessment of an additional cash contribution by the PRP group. While the Company continues to dispute themethodology used by the PRP group to arrive at its allocation for the cash contribution, the Company has paid the recent funding requests in 2010 and2014. The next funding request is expected in 2015. A final allocation of SCP Site costs is expected to be developed concurrent with the final allocationprocess for Berry’s Creek Study Area starting in 2015. As of December 31, 2014, the Company’s reserve was $1,039, of which approximately $737 isexpected to be covered by insurance.Newark Bay ComplexTwo subsidiaries of the Company were named along with several hundred third-party defendants in a third-party complaint filed in February 2009, byMaxus Energy Corporation (“Maxus”) and Tierra Solutions, Inc. (“Tierra”) relating to a N.J. state action concerning the Passaic River, Newark Bay,Hackensack River, Arthur Kill, Kill Van Kull and adjacent waters (the “Newark Bay Complex”). The Company settled this case which resolved certain NewJersey state based claims related to the Newark Bay Complex. The settlement will require Maxus and Tierra to re-file any further claims against the Companyin federal court. In preparation for any such federal or similar claims, the Company is currently monitoring developments regarding the Newark BayComplex. Due to the uncertainty of the future scope and timing of any such claims, the Company’s liability cannot be reasonably estimated at this time, andas such, no accrual is recorded for these potential future costs.The Company is involved in other related and unrelated environmental matters where the range of liability is not reasonably estimable at this time andit is not foreseeable when information will become available to provide a basis for adjusting or recording a reserve, should a reserve 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 Laboratories, Inc.(“Gyma”) in a proceeding instituted by the Federal Trade Commission in the United States District Court for the District of Columbia (the “District Court”).Suits were also commenced by several State Attorneys General and class action complaints by private plaintiffs in various state courts. The suits allegedviolations of the Federal Trade Commission Act arising from exclusive license agreements between the Company and Mylan covering two APIs (Lorazepamand Clorazepate). 73IndexCAMBREX CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per 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 total amount of $19,200, payable jointly and severally, and also a punitive damage award against eachdefendant in the amount of $16,709. In addition, at the time, the District Court ruled that the defendants were subject to a total of approximately $7,500 inprejudgment interest. The case is currently pending before the District Court following a January 2011 remand by the Court of Appeals. In July 2014, theDistrict Court dismissed certain customers for which the plaintiffs were unable to establish jurisdiction and consequently, the plaintiffs currently have amotion pending before the District Court to reduce the damages award by a total of $9,600.In 2003, Cambrex paid $12,415 to Mylan in exchange for a release and full indemnity against future costs or liabilities in related litigation brought bythe purchasers of Lorazepam and Clorazepate, as well as potential future claims related to the ongoing matter. Mylan has submitted a surety bondunderwritten by a third-party insurance company in the amount of $66,632. 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 whilethe officer, 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, 2014.Cambrex's subsidiaries are party to a number of other proceedings that are not considered material at this time.(21)Discontinued OperationsFor 2014, the Company recorded pre-tax charges of $1,277, reduced by a tax benefit of $447, for environmental remediation related to sites of divestedbusinesses as discontinued operations. For 2013, the Company recorded pre-tax charges of $6,708, reduced by a tax benefit of $2,348, for environmentalremediation related to sites of divested businesses as discontinued operations. For 2012, the Company recorded pre-tax charges of $1,425, reduced by a taxbenefit of $499, for environmental remediation related to sites of divested businesses as discontinued operations. 74IndexCAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share data)(22)Gain on Sale of AssetFor the year ended December 31, 2014, the Company recorded a gain on the sale of land of $1,234. For the year ended December 31, 2013, theCompany recorded a gain on the sale of an office building of $4,680. The carrying values of the building and land were not material. 75IndexCAMBREX CORPORATION AND SUBSIDIARIESSELECTED QUARTERLY FINANCIAL AND SUPPLEMENTARY DATA - UNAUDITED(in thousands, except share and per share data) 1stQuarter (1) 2ndQuarter (2) 3rdQuarter (3) 4thQuarter (4) 2014 Gross sales $66,192 $97,972 $81,145 $128,841 Net revenues 66,105 97,893 81,300 129,315 Gross profit 16,578 33,415 28,406 45,399 Income from continuing operations 1,166 19,827 8,882 28,258 Loss from discontinued operations (6) (184) (160) (113) (373)Net income 982 19,667 8,769 27,885 Earnings per share of common stock: (7) Basic 0.03 0.64 0.28 0.90 Diluted 0.03 0.63 0.28 0.88 Average shares: Basic 30,546 30,647 30,801 31,053 Diluted 31,408 31,428 31,599 31,803 1stQuarter (5) 2ndQuarter 3rdQuarter 4thQuarter 2013 Gross sales $74,581 $61,628 $77,992 $103,011 Net revenues 74,885 62,803 77,452 103,036 Gross profit 24,749 19,251 24,966 33,938 Income from continuing operations 11,425 3,136 6,274 9,440 Loss from discontinued operations (6) (257) (862) (2,700) (541)Net income 11,168 2,274 3,574 8,899 Earnings per share of common stock: (7) Basic 0.37 0.07 0.12 0.29 Diluted 0.36 0.07 0.12 0.29 Average shares: Basic 29,970 30,089 30,184 30,353 Diluted 30,788 30,956 31,052 31,166 (1)Income from continuing operations includes the reversal of a valuation allowance on deferred tax assets of $198.(2)Income from continuing operations includes the reversal of a valuation allowance on deferred tax assets of $14,161 and a loss of $4,122 related to thepurchase of the remaining shares in Zenara.(3)Income from continuing operations includes the reversal of a valuation allowance on deferred tax assets of $824.(4)Income from continuing operations includes a gain on sale of land of $1,234 and a corresponding tax expense of $387, a benefit of $11,719 for thereversal of a valuation allowance on deferred tax assets, a benefit of $3,948 for favorable audit settlements, and expense of $7,170 related to a voluntarylump sum pension settlement.(5)Income from continuing operations includes a gain on sale of an office building of $4,680 and a corresponding tax expense of $1,470 and a benefit of$1,155 due to changes in tax laws.(6)Discontinued operations include charges for environmental remediation related to sites of divested businesses.(7)Earnings per share calculations for each of the quarters are based on the weighted average number of shares outstanding for each period. As such, thesum of the quarters may not necessarily equal the earnings per share amount for the year. 76IndexItem 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(“Exchange Act”) that are designed to ensure that information required to be disclosed in its reports filed or submitted under the Exchange Act is processed,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, andmanagement is 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 the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosurecontrols and procedures as of the end of the period covered by this Annual Report. Based on this evaluation, our Chief Executive Officer and Chief FinancialOfficer have concluded that as of December 31, 2014, our disclosure controls and procedures are effective to ensure that information required to be disclosedby us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in theSEC’s rules and forms and (ii) accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, asappropriate to allow timely 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 andthe preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States, and includethose policies 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’sassets 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 degreeof compliance with the policies or procedures may deteriorate. 77IndexUnder 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, 2014 based on the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Our management concludedthat based on its assessment, our internal control over financial reporting was effective as of December 31, 2014. Effectiveness of our internal control overfinancial reporting as of December 31, 2014 has been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in their reportwhich appears elsewhere herein.Changes 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) ofExchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect,our internal control over financial reporting.Item 9BOther Information.None. 78NameAgeOffice Steven M. Klosk (i) (ii)57President, Chief Executive Officer Shawn P. Cavanagh (i) (ii)..48Executive Vice President and Chief Operating Officer James G. Farrell (ii)48Vice President and Corporate Controller William M. Haskel (i) (ii)53Senior Vice President, General Counsel, CorporateSecretary and Chief Compliance Officer Aldo G. Magnini (i)61Managing Director, Cambrex Profarmaco Milano Gregory P. Sargen (i) (ii)49Executive Vice President and Chief Financial Officer(i) Executive Officer(ii) Corporate OfficerIndexPART IIIItem 10Directors, Executive Officers and Corporate Governance.Executive Officers of the RegistrantThe following table lists the officers of the Company: The Company's corporate officers are appointed 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 of theBoard 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 Officerand 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. Klosk currently serves on the Board of Directors of NeoStem, Inc., a publicly traded cell therapy company.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 employed with Lonza, which purchased Cambrex Bioproducts, most recently as President of Lonza Bioscience. From 1999 to 2007, Mr.Cavanagh worked for Cambrex Bioproducts. While at Cambrex Bioproducts, Mr. Cavanaugh held several positions of increasing responsibility includingPresident of Cambrex Bioproducts. Prior to joining Cambrex Bioproducts, Mr. Cavanagh held various management and engineering positions with FMCCorporation.Mr. Farrell joined Cambrex in September 2005 as Corporate Controller. He has served as Vice President and Corporate Controller since July 2007,except for a portion of 2008 when Mr. Farrell was employed by PDI, Inc. as Vice President and Corporate Controller/Interim Chief Financial Officer. From1994 until 2005, he was with Ingersoll-Rand Company, most recently as Director, Accounting Policy, Procedures and External Reporting. Mr. Farrell waswith Ernst & Young from 1988 to 1994, most recently as Audit Manager. 79IndexMr. Haskel joined Cambrex in June 2011 and currently serves as Senior Vice President, General Counsel, Corporate Secretary and Chief ComplianceOfficer. Prior to joining Cambrex, Mr. Haskel was employed by Wyeth from 1992 until 2010, serving a variety of roles including Vice President andAssociate General Counsel-Corporate, Vice President of Global Administration, and Assistant Vice President working with the Chairman and CEO andserving as Secretary to the Management Committee. Prior to 1992, Mr. Haskel was a corporate associate at Hale and Dorr (now WilmerHale).Dr. Magnini joined Cambrex Profarmaco Milano S.r.l. (“CPM”) in 1996 as Commercial Director, Marketing and Sales; in 2005, he became ManagingDirector and in January 2014 assumed full responsibility of CPM. Prior to joining CPM, Dr. Magnini held various senior management roles in otherpharmaceutical companies and from 2003 to 2004 served as Managing Director of Clariant Pharma, an Italian API manufacturer.Mr. Sargen joined Cambrex in February 2003 and has served as Vice President and Chief Financial Officer since February 2007 and Executive VicePresident and Chief Financial Officer since January 2011. Mr. Sargen previously held the position of Vice President, Finance. Previously, he was withExp@nets, Inc. from 1999 through 2002, serving in the roles of Executive Vice President, Finance/Chief Financial Officer and Vice President/CorporateController. From 1996 to 1998, he was with Fisher Scientific International’s Chemical Manufacturing Division, serving in the roles of Vice President,Finance and Controller. Mr. Sargen has also held various positions in finance, accounting and audit with Merck & Company, Inc., Heat and Control, Inc.,and Deloitte & Touche.The remaining information required by this item will be included in the 2015 Proxy Statement and is incorporated herein by reference.Item 11Executive Compensation.The remaining information required by this item will be included in the 2015 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 2015 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 2015 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 2015 Proxy Statement and is incorporated herein by reference. 80 Page Number(in this report)Financial Statements: Reports of Independent Registered Public Accounting Firm37Consolidated Balance Sheets as of December 31, 2014 and 201339Consolidated Income Statements for the Years Ended December 31, 2014, 2013 and 201240Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2014, 2013 and 201241Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2014, 2013 and 201242Consolidated Statements of Cash Flows for the Years Ended December 31, 2014, 2013 and 201243Notes to Consolidated Financial Statements44Selected Quarterly Financial and Supplementary Data (unaudited)76 Page Number(in this report) Schedule II – Valuation and Qualifying Accounts82IndexPART IVItem 15Exhibits and Financial Statement Schedules.(a)1.The following consolidated financial statements of the Company are filed as part of this report: 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.All other schedules are omitted because they are not applicable or not required or because the required information is included in the consolidatedfinancial statements of the Company or the notes thereto.3. The exhibits filed in this report are listed in the Exhibit Index on pages 84-87. 81IndexSCHEDULE II CAMBREX CORPORATIONVALUATION AND QUALIFYING ACCOUNTSFOR THE YEARS ENDED DECEMBER 31, 2014, 2013 and 2012(dollars in thousands)Column A Column B Column C Column D Column E Additions BalanceBeginningof Year Charged/(Credited) toCost andExpenses Charged/(Credited) toOtherAccounts Deductions BalanceEnd ofYear Description Year ended December 31, 2014: Doubtful trade receivables and returns and allowances $1,058 $61 $(130) $643 $346 Deferred tax valuation allowance 29,890 (26,543) 1,706 - 5,053 Year ended December 31, 2013: Doubtful trade receivables and returns and allowances $652 $433 $27 $54 $1,058 Deferred tax valuation allowance 29,941 (97) 46 - 29,890 Year ended December 31, 2012: Doubtful trade receivables and returns and allowances $450 $193 $12 $3 $652 Deferred tax valuation allowance 77,571 (45,105) (2,525) - 29,941 82IndexSIGNATURESPursuant 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 itsbehalf by the undersigned, thereunto duly authorized. CAMBREX CORPORATION By/s/ Gregory P. Sargen Gregory P. Sargen Executive Vice President and Chief Financial Officer Date: February 6, 2015Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrantand in the capacities and on the dates indicated. Signature Title Date /s/ STEVEN M. KLOSK President and Chief Executive Officer, February 6, 2015Steven M. Klosk and Director /s/GREGORY P. SARGENExecutive Vice President and Chief FinancialFebruary 6, 2015 Gregory P. SargenOfficer (Principal Financial Officer and Accounting Officer)/s/SHLOMO YANAI Shlomo YanaiChairman of the Board of DirectorsFebruary 6, 2015 /s/ROSINA B.DIXONDirectorFebruary 6, 2015 Rosina B. Dixon, M.D /s/KATHRYN RUDIE HARRIGAN DirectorFebruary 6, 2015 Kathryn Rudie Harrigan, PhD /s/LEON J. HENDRIX, JR.DirectorFebruary 6, 2015 Leon J. Hendrix, Jr. /s/ILAN KAUFTHALDirectorFebruary 6, 2015 Ilan Kaufthal /s/WILLIAM KORBDirectorFebruary 6, 2015 William Korb /s/PETER G. TOMBROSDirectorFebruary 6, 2015 Peter G. Tombros /s/JAMES F. WINSCHEL, JRDirectorFebruary 6, 2015 James F. Winschel, Jr. 83IndexEXHIBIT INDEX Exhibit 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 PrivateLimited dated November 2, 2010, between Camzena Holdings Limited, NuLife (Cyprus) Limited, Ashok Srinivasan Narasimhan, PradipKhodidas Dhamecna, Cambrex Corporation, Zenara Pharma Limited and Zenara Pharma Private Limited.(W). 2.2--Asset purchase agreement dated as of August 7, 2003 between Rutherford Acquisition Corporation and Cambrex Corporation and TheSellers listed in the asset Purchase agreement.(U). 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.(P – Exhibit 10.1). 3.1--Restated Certificate of Incorporation of Registrant, as amended.(AA). 3.2--By Laws of registrant, as amended.(AA). 4.1--Form of Certificate for shares of Common Stock of registrant.(A ‑ Exhibit 4(a)). 10.1--2009 Long-Term Incentive Plan (as amended and restated as of April 25, 2013).(F). 10.2--Directors’ Compensation Program.(Q). 10.3--Form of Non-Employee Directors Stock Option Agreement.(F). 10.4--William H. Haskel Offer of Employment Letter dated June 3, 2011.(Z). 10.5--Form of Performance Share Agreement.(DD). 10.7--Credit Agreement dated November 2, 2011 between Cambrex Corporation, the subsidiary borrowers party hereto, the subsidiaryguarantors party hereto, the lenders party hereto and JP Morgan Chase Bank, N.A., as Administrative Agent.(R). 10.8--Settlement Agreement and Release and Environmental Escrow Agreement dated July 30, 2007 between Rutherford Chemicals LLC,Vertellus Specialties Holdings UK Ltd. (formerly Rutherford Chemicals UK Ltd.), Vertellus Specialties UK Ltd. (formerly Seal SandsChemicals Ltd.), 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.(V). 10.9--Shawn P. Cavanagh Offer of Employment Letter.(X). 10.10--Supplemental Executive Retirement Plan Change of Control Amendment.(T). 10.11--Employment Agreement dated January 17, 2011 between the registrant and Shawn P. Cavanagh.(X). 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.(S). 10.19--Deferred Compensation Plan of Cambrex Corporation (as amended and restated as of March 1, 2001).(M). 10.20--Employment Agreement dated February 6, 2007 between the registrant and Paolo Russolo.(S). 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). 84Index 10.26--Administrative Consent Order dated September 16, 1985 of the New Jersey Department of Environmental Protection to Cosan ChemicalCorporation.(A – Exhibit 10(Q)). 10.28--Agreement to Lift Sales Restrictions on Certain Vested Options.(N). 10.29--Agreement to Accelerate Vesting of Certain Options.(O). 10.30--Form of Stock Option Agreement.(EE). 10.31--Form of Performance Share Unit Agreement.(CC). 10.32--Employment Agreement with William M. Haskel.(Z). 10.33--Executive Cash Incentive Plan.(BB). 10.34--2012 Equity Incentive Plan for Non-Employee Directors.(BB). 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, 333-136529, 333-174124 and 333-181053 on Form S-8 ofthe registrant.(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). 101.INS--XBRL Instance Document.(E)(Y). 101.SCH--XBRL Taxonomy Extension Schema.(E)(Y). 101.CAL--XBRL Taxonomy Extension Calculation Linkbase.(E)(Y). 101.DEF--XBRL Taxonomy Extension Definition Linkbase.(E)(Y). 101.LAB--XBRL Taxonomy Extension Label Linkbase.(E)(Y). 101.PRE--XBRL Taxonomy Extension Presentation Linkbase.(E)(Y). See legend on following page 85IndexEXHIBIT 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 Quarterly Report on Form 10-Q for the period ending March 31, 2013. (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 Annual Report on Form 10-K for year end 2005 filed May 26, 2006. (N)Incorporated by reference to registrant’s Current Report on Form 8-K dated November 7, 2006. (O)Incorporated by reference to registrant’s Current Report on Form 8-K dated June 7, 2005. (P)Incorporated by reference to registrant’s Current Report on Form 8-K filed October 24, 2006. (Q)Incorporated by reference to registrant’s Annual Report on Form 10-K filed February 11, 2010. (R)Incorporated by reference to registrant’s Quarterly Report on Form 10-Q for the period ending September 30, 2011. (S)Incorporated by reference to registrant’s Annual Report on Form 10-K for year end 2006 filed on March 15, 2007. (T)Incorporated by reference to registrant’s Quarterly Report on Form 10-Q for the period ending June 30, 2008. (U)Incorporated by reference to the registrant’s Current Report on Form 8-K dated November 10, 2003. (V)Incorporated by reference to registrant’s Quarterly Report on Form 10-Q for the period ending September 30, 2007. (W)Incorporated by reference to the registrant’s Current Report on Form 8-K dated November 4, 2010. (X)Incorporated by reference to the registrant’s Current Report on Form 8-K dated January 13, 2011. 86Index(Y)Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated BalanceSheets as of December 31, 2013 and 2012, (ii) Consolidated Income Statements for the years ended December 31, 2013, 2012 and 2011, (iii)Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011, (iv) Consolidated Statements ofStockholders’ Equity for the years ended December 31, 2013, 2012 and 2011, (v) Consolidated Statement of Cash Flows for the years ended December31, 2013, 2012 and 2011, and (vi) Notes to Consolidated Financial Statements. (Z)Incorporated by reference to the registrant’s Current Report on Form 8-K dated June 24, 2011. (AA)Incorporated by reference to the registrant’s Current Report on Form 8-K dated April 30, 2012. (BB)Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ending March 31, 2012. (CC)Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ending June 30, 2012. (DD)Incorporated by reference to the registrant’s Annual Report on Form 10-K for year end 2012 filed on February 7, 2013. (EE)Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ending June 30, 2013. 87 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 Zenara Pharma Private LimitedIndia  CAMBREX CORPORATIONEXHIBIT 23 Consent 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, 333-136529, 333-174124, 333-181053 and 333-190305) of Cambrex Corporation of our reportsdated February 6, 2015, relating to the consolidated financial statements and schedule, and the effectiveness of Cambrex Corporation’s internal control overfinancial reporting, which appear in this Annual Report on Form 10-K./s/ BDO USA, LLPWoodbridge, New JerseyFebruary 6, 2015 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 thisannual report; 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 inExchange Act 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 the registrant 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance 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 theeffectiveness of 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 recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and 5.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 reasonablylikely to 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 controlover financial reporting.Date: February 6, 2015 /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 thisannual report; 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 inExchange Act 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 the registrant 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance 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 theeffectiveness of 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 recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and 5.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 reasonablylikely to 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 controlover financial reporting.Date: February 6, 2015 /s/ Gregory P. Sargen Gregory P. Sargen Executive Vice President and Chief Financial Officer Exhibit 32 CAMBREX 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, 2014, 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 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 Officer Dated: February 6, 2015 

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