Cambrex Corporation
Annual Report 2016

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2016 OR[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to __________Commission file Number 1-10638 CAMBREX CORPORATION(Exact name of registrant as specified in its charter) Delaware 22-2476135(State or other jurisdiction of incorporation or organization) (I.R.S. EmployerIdentification 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 Exchange Securities 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 of1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to suchfiling requirements 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 (§ 232.405 of this chapter) during the preceding 12 months (or for suchshorter period that the registrant was required 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 (§ 229.405 of this chapter) is not contained herein,and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III ofthis Form 10-K or any amendment to this 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.See the 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 Exchange Act). Yes ☐ No ☒ The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $1,640,718,651as of June 30, 2016. As of January 26, 2017, there were 32,346,686 shares outstanding of the registrant's Common Stock, $.10 par value. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant’s definitive Proxy Statement for the 2017 Annual Meeting are incorporated by reference into Part III of this Report.   CAMBREX CORPORATION AND SUBSIDIARIES INDEX TO ANNUAL REPORT ON FORM 10-K For the Year Ended December 31, 2016 ItemPART IPageNo. No. 1Business41ARisk Factors91BUnresolved Staff Comments192Properties203Legal Proceedings204Mine Safety Disclosures20 PART II 5Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 216Selected Financial Data237Management’s Discussion and Analysis of Financial Condition and Results of Operations247AQuantitative and Qualitative Disclosures about Market Risk368Financial Statements and Supplementary Data369Changes in and Disagreements With Accountants on Accounting and Financial Disclosure769AControls and Procedures769BOther Information77 PART III 10Directors, Executive Officers and Corporate Governance7811Executive Compensation7912Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 7913Certain Relationships and Related Transactions, and Director Independence7914Principal Accountant Fees and Services79 PART IV 15Exhibits and Financial Statement Schedules80 2 Forward-Looking Statements This 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 beadequate to meet the operational and debt servicing needs of the Company, as well as other statements relating to expectations with respect to sales, thetiming of orders, research and development expenditures, earnings per share, capital expenditures, the outcome of pending litigation (includingenvironmental proceedings and remediation investigations) and related estimates of potential liability, acquisitions, divestitures, collaborations or otherexpansion opportunities. These statements 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 andexpectations and involve risks and uncertainties that could cause actual outcomes and results to differ materially from current expectations. The factorsdescribed in Item 1A of Part I of this Annual Report on Form 10-K , captioned “Risk Factors,” or otherwise described in the Company’s filings with theSecurities and Exchange Commission, provide examples of such risks and uncertainties that may cause the Company’s actual results to differ materiallyfrom the expectations the Company describes in its forward-looking statements, including, but not limited to, pharmaceutical outsourcing trends,competitive pricing or product developments, government legislation and regulations (particularly environmental issues), tax rates, interest rates,technology, manufacturing and legal issues, including the outcome of outstanding litigation, changes in foreign exchange rates, uncollectiblereceivables, the timing of orders, loss on disposition of assets, cancellation or delays in renewal of contracts, lack of suitable raw materials or packagingmaterials, the Company’s ability to receive regulatory approvals for its products and continued demand in the U.S. for late stage clinical products or thesuccessful 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, levelsof activity, performance, achievements or other forward-looking statements. The information contained in this Annual Report on Form 10-K is providedby the Company as of the date hereof, and, unless required by law, the Company does not undertake and specifically disclaims any obligation to updatethese forward-looking statements contained in this Annual Report on Form 10-K as a result of new information, future events or otherwise. (dollars in thousands, except per share data) 3 PART I Item 1Business. General Cambrex Corporation (the "Company" or "Cambrex"), a Delaware corporation, began business in December 1981. Cambrex is a life sciencescompany that provides products and services that accelerate and improve the development and commercialization of new and generic therapeutics. TheCompany primarily supplies its products and services worldwide to innovator and generic pharmaceutical companies. The Company's overall strategy isto: grow its portfolio of custom development projects, especially those in the later stages of the clinical trial process; secure long-term supply agreementsto produce active pharmaceutical ingredients (“APIs”) and intermediates for newly approved drug products; expand sales of products and projects basedon its proprietary technologies; partner with generic drug companies to grow the Company’s extensive portfolio of generic APIs; and develop, or co-develop with partners, a portfolio of niche generic drug products in finished dosage form. The Company also seeks to demonstrate excellence inregulatory compliance, environmental, health and safety, and customer service. Cambrex has four operating segments, which are manufacturing facilitiesthat have been aggregated as one reportable segment. The Company uses a consistent business approach: ●Niche Market Focus: The Company participates in niche markets where significant technical expertise provides a competitive advantage andmarket differentiation. ●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 new generic andcontrolled substance APIs, a portfolio of niche generic drug products in finished dosage form, and optimize manufacturing processes toaccelerate 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. ●Investment in Manufacturing Capacity: The Company commits significant capital to improving and expanding its manufacturing facilities tomeet the ongoing growth in pharmaceutical outsourcing. Market Overview and Growth Drivers The Company participates in markets that serve the healthcare industry. Customers include generic drug companies and companies that discoverand commercialize small molecule human therapeutics using organic chemistry. (dollars in thousands, except per share data) 4 The aging western population, continued investment in healthcare research and drug development, growth in the world’s developing markets, andthe necessity to develop therapeutics to address unmet needs drives business growth in life sciences companies. Aging "baby boomers" in the UnitedStates, Europe and Japan may provide an enormous healthcare opportunity. This group typically has more education, a higher socio-economic level andhigher demands 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 theirR&D projects for therapeutic candidates from the laboratory to the clinic, and eventually, to the patient. Healthcare investment comes from a variety ofsources. Large pharmaceutical and biotechnology companies spend billions annually on drug discovery and development and billions more are spent bynumerous 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 substancesat laboratory, clinical and commercial scale and specializes in scaling up and optimizing manufacturing processes. Demand for outsourced services from pharmaceutical companies continues to grow. Large pharmaceutical companies outsource a portion of thedevelopment and manufacturing of intermediates and APIs 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 larger pharmaceutical companies typically outsource development and manufacturing. 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-upand operation of pharmaceutical manufacturing processes, Cambrex is particularly well positioned to assist drug companies with these much neededservices for APIs. New 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 approximately 100generic APIs, typically in relatively small quantities for use in niche therapeutics. The Company also continuously maintains a portfolio of APIs indevelopment for eventual commercial sale to generic drug companies upon future patent expiration. The Company recently began developing a portfolio of finished dosage form generic drug products and expects to eventually file AbbreviatedNew Drug Applications (“ANDAs”) in the U.S. and may make equivalent filings in other countries to market these products. Cambrex will work withformulation development, manufacturing and marketing partners and may fund all or a portion of the expenses necessary to bring these products tomarket. Given expected development and approval times, the Company does not expect to realize revenues from this initiative until 2019 at the earliest,although this could be sooner if the Company acquires products already being sold commercially. 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. Continuous significant investment in facilities, people and training, along with excellent regulatory and quality systems andextensive experience in pharmaceutical fine chemical scale-up and manufacturing are essential to serve the industry and serve as a barrier to entry forpotential new competitors. (dollars in thousands, except per share data) 5 Competitors from developing markets continually increase their capabilities in drug substance manufacturing and finished dosage form drugs.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 and competition in general, have resulted in downward pricing pressure throughout the pharmaceutical supply chain, andespecially on generic APIs and early stage development services for clinical phase products. Pricing pressures due to developing market competitors forlater stage clinical projects and supply arrangements for patented products has been limited to date, although these pressures may increase as competitorsin developing markets improve their quality, regulatory and manufacturing systems to become more acceptable as suppliers to larger pharmaceuticalcompanies. Cambrex regularly sources R&D services, raw materials and certain intermediates from developing market companies. Development of the Business In October 2016, Cambrex purchased 100% of PharmaCore, Inc. a privately-held company located in High Point, NC for $24,275, net of cash. Thetransaction was structured as a stock purchase. PharmaCore, which has been renamed Cambrex High Point, Inc. (“CHP”), specializes in developing,manufacturing and scaling up small molecule APIs for projects in early clinical phases. With the acquisition of CHP, Cambrex enhances its capabilitiesand expertise to efficiently develop early clinical phase products and new technologies, and increases the number of potential late stage and commercialproducts that could be manufactured at Cambrex’s larger manufacturing sites. In the fourth quarter of 2015, Cambrex management, with Board authority, committed to a plan to sell Zenara. The immaterial assets and liabilitiesof Zenara are included in “Prepaid expenses and other current assets” and “Accrued expenses and other current liabilities” on the Company’s balancesheet for 2016 and 2015. An arrangement for the sale of Zenara, whereby the Company transferred the assets and liabilities of Zenara to the purchaser, wascompleted in January 2017. Refer to Notes 8 and 23 to the Company’s consolidated financial statements for further explanation of the sale of Zenara. Products The 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 intermediatesand, to a lesser extent, other fine chemicals. The Company’s products and services are sold to a diverse group of several hundred customers, with one customer, Gilead Sciences, Inc.,accounting for 36.9%, 34.5% and 24.0% of 2016, 2015, and 2014 consolidated sales, respectively. The Company’s products are sold through acombination of direct sales and independent agents. One API, an antiviral product, represented 31.6%, 32.1% and 22.9% of 2016, 2015 and 2014consolidated sales, respectively. The following table shows gross sales by geographic area: 2016 2015 2014 Europe $321,525 $280,593 $232,894 North America 138,328 127,024 117,477 Asia 17,996 14,024 12,865 Other 13,689 12,215 10,914 Total $491,538 $433,856 $374,150 (dollars in thousands, except per share data) 6 Marketing and Distribution Marketing 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 managementto determine the strategic and operational fit. The process to take a client's project from the clinical trial stage to a commercial, approved therapeutic maytake from two to ten years. The Company uses sales agents in those areas where they are deemed to be more effective or economical than direct salesefforts, primarily to access generic API customers in markets outside the U.S. and Western Europe. Raw Materials The 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 certainother commodity materials, where prices can vary with market conditions. Research and Development The Company's R&D program is designed to increase the Company's competitiveness by improving its technology and developing processes forthe manufacture of new products to meet customer requirements. The goals are to grow our portfolio of generic APIs, establish a portfolio of finisheddosage form generic drug products, introduce innovative and proprietary products, improve manufacturing processes to reduce costs, improve quality andincrease our capabilities to compete for business requiring significant technical expertise. R&D activities are performed at all of the Company'smanufacturing facilities. As of December 31, 2016, 174 employees were at least partially involved in R&D activities worldwide. The Company spent $14,292, $12,540 and $13,075 in 2016, 2015 and 2014, 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 itsmarket position. The Company currently owns 22 issued patents and has 3 patent applications pending in the United States and owns over 180 patentsand has over 100 patent applications pending in foreign countries covering various technologies. The Company seeks to protect its proprietarytechnology and prepares new patent applications as it develops new inventions. The Company's products and services are sold around the world under trademarks that are owned by the Company. This includes Profarmaco,which is registered 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 ownedsubsidiaries continue to use the trademark. The Company has entered into a worldwide perpetual license agreement with Celgene Corporation and Celgro Corporation that gives theCompany the exclusive rights to certain intellectual property, including know-how and technology, relating to the development and manufacture ofchirally pure bulk APIs. This intellectual property is related to amphetamine salts currently sold by the Company. Under the terms of this agreement, theCompany pays no royalties or fees related to its use of this intellectual property. (dollars in thousands, except per share data) 7 Competition The Company has numerous primary API and advanced intermediate competitors throughout Western Europe and the United States and manymore competitors within various product categories the Company serves, including numerous 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 ongoing 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 Proceedings Certain products manufactured by the Company involve the use, storage and transportation of toxic and hazardous materials. The Company'soperations are subject to extensive laws and regulations relating to the storage, handling, emission, transportation and discharge of materials into theenvironment and the maintenance of safe working conditions. The Company maintains environmental and industrial safety and health complianceprograms and training at its plants and believes that its manufacturing operations are in compliance with all applicable safety, health and environmentallaws. Prevailing legislation tends to hold companies primarily responsible for the proper disposal of its waste even after transfer to third party wastedisposal facilities. Other future developments, such as increasingly strict environmental, safety and health laws and regulations, and enforcement policies,could result in substantial costs and liabilities to the Company and could subject the Company's handling, manufacture, use, reuse or disposal ofsubstances or pollutants 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 21 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 $6,081, $2,739 and $3,733 in 2016, 2015 and2014, respectively, for environmental, safety and health compliance projects. As the environmental proceedings in which the Company is involvedprogress from the remedial investigation and feasibility study stage to implementation of remedial measures, related capital and other expenditures mayincrease. The Company considers costs for environmental compliance to be a normal cost of doing business and includes such costs in pricing decisions. Employees At December 31, 2016, the Company had 1,295 employees worldwide (853 of whom were from international operations) compared with 1,228employees at December 31, 2015 and 1,117 at December 31, 2014. Non-U.S. production, administration, scientific and technical employees are represented by various local and national unions. The Companybelieves its labor relations are satisfactory. Seasonality The 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 factorsincluding, but not limited to, acquisitions, plant shutdowns, and the timing of large contract revenue streams, the Company believes that period-to-periodcomparisons of its operating results should not be relied upon as an indication of future performance. (dollars in thousands, except per share data) 8 Export and International Sales Export sales from the Company’s domestic operations in 2016, 2015 and 2014 amounted to $182,215, $159,048 and $101,101, respectively. Salesfrom international operations were $220,765, $196,710 and $187,415 in 2016, 2015 and 2014, respectively. Refer to Note 19 to the Company’sconsolidated financial statements. Additional Information Cambrex Corporation was incorporated as a Delaware corporation in 1981. The Company’s principal office is located at One Meadowlands Plaza,East Rutherford, 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, andamendments to those 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’swebsite www.cambrex.com as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The SEC maintainsan internet site, www.sec.gov, containing reports, proxy and information statements, and other information regarding issuers that file electronically withthe SEC. The most recent certifications by 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 this Annual Report on Form 10-K. The Company also files with the New York Stock Exchange (“NYSE”) theAnnual Chief Executive Officer Certification as required 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, RegulatoryAffairs, Compensation and Governance Committees, Corporate Governance Guidelines, Code of Business Conduct and Ethics and IndependenceStandards for Directors. These corporate governance documents are also available in print to any stockholder requesting a copy from the corporatesecretary at the principal executive offices. Information contained on the website is not part of this report. The Company will also post on its website anyamendments to or waivers of its Code of Business Conduct and Ethics that relate to its Chief Executive Officer, Chief Financial Officer and PrincipalAccounting Officer. Item 1ARisk Factors. Factors That May Affect Future Results The 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 itsbusiness, financial condition, operating results and cash flows in the future. Certain 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. Sales to a relatively small number of customers have historically accounted for a significant percentage of the Company’s business. For example,one customer accounted for 36.9% of 2016 consolidated sales. Should this, or any other significant customer renegotiate on terms more favorable to them,or discontinue or significantly decrease their usage of the Company’s products, the loss could have a material adverse effect on the Company’s financialposition, results of operations and cash flows. The Company’s customers routinely attempt to reduce costs, including the costs of the Company’s products, as a result of macro-economic trendsand various market dynamics specifically affecting the pharmaceuticals industry. Moreover, pricing for pharmaceutical products has come underincreasing scrutiny by governments, legislative bodies and enforcement agencies. Such pricing pressures, if passed on to the Company, could have amaterial adverse effect on the Company’s financial position, results of operations and cash flows. (dollars in thousands, except per share data) 9 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 productsin the future and the Company may, in certain cases, respond by lowering its prices. Conversely, failure to anticipate and respond to price competitionmay adversely impact the Company’s market share. In general, innovator pharmaceutical companies expect price declines over time and especially uponcontract renewals. These price declines could have a significant negative impact on future profits. Competitors may develop new technologies orproducts, negatively impacting the Company. Several of the Company’s customers, especially those that buy its generic APIs and larger pharmaceuticalcompanies that primarily sell patented products, have internal capabilities similar to the Company’s. If one or more of these customers replace theCompany’s products with their own internal capabilities, demand for the Company’s products may decrease. In addition, demand for the Company’sproducts may weaken due to a reduction in R&D budgets, loss of distributors or other factors. A reduction in demand for the Company’s products couldimpair profit margins and may have a material adverse effect on the Company’s financial position, results of operations and cash flow. 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 Company primarily supplies its products and services worldwide to innovator and generic pharmaceutical companies. As a result, the successof the Company depends, in part, on the demand for such pharmaceutical companies’ finished drug product. Any decrease in the number of suchcompanies’ clinical-phase projects could result in a decrease in the number and size of the Company’s supply contracts and have an adverse effect on itsfinancial condition and results of operation. The Company’s success also depends on the continued reliance by such pharmaceutical companies on third-party manufactures for APIs and intermediates used in their drug products. To the extent the Company’s customers, particularly large pharmaceuticalcompanies with established manufacturing expertise, shift to direct manufacturing for certain APIs and intermediates used in their drug products, theCompany’s sales could be materially adversely affected. The Company’s failure to obtain new customer contracts or renew existing contracts may adversely affect its business. The Company seeks to continually renew existing customer contracts and win new contracts, which subjects the Company to potentiallysignificant pricing pressures. While the Company’s preferred practice is to renegotiate new or extended agreements prior to expiration, in the event theCompany is unable to replace these contracts timely or at all, or is forced to accept terms, including pricing terms, less favorable to the Company, theCompany’s business, results of operations and financial condition could be materially adversely affected. In addition, certain of the Company’s long-term contracts may be cancelled or delayed by customers for any reason upon notice. Multiple cancellations of significant contracts could have amaterially adverse effect on the Company’s business. (dollars in thousands, except per share data) 10 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, which in some instances are supplied froma single source. Prolonged disruptions in the supply of any of the Company’s key raw materials, difficulty implementing replacement materials or newsources of supply, or a significant increase in the prices of raw materials could have a material adverse effect on the Company’s operating results, financialcondition or cash flows. In particular, manufacturing problems may occur with these suppliers, and if a supplier provides the Company raw materials orother supplies that are deficient or defective or if a supplier fails to provide the Company with such materials or supplies in a timely manner, theCompany may have limited ability to find appropriate substitutes or otherwise meet required specifications and deadlines. Moreover, the Company couldexperience inventory shortages if it is required to use an alternative supplier on short notice, which also could lead to raw materials being purchased onless favorable terms than the Company has with its regular suppliers. If such problems occur, the Company may not be able to manufacture its productsprofitably or on time, which could harm the Company’s reputation and have a material adverse effect on the Company’s business. Failure to obtain sufficient quota from the Drug Enforcement Administration ("DEA") or an inability to renew other licenses, certificateapprovals, or permits necessary for the Company’s operations could affect the Company’s ability to manufacture and deliver certain products. The Company’s operations are subject to various licenses, certificates, approvals and permits in domestic and foreign jurisdictions. There is noassurance that the Company will be able to renew all licenses, certificates, approvals, and permits upon their expiration or that it will satisfy newrequirements for such licenses, certificates, approvals, and permits in the future. Any such event may have an adverse effect on the Company’s business. In particular, the starting materials used in several of the Company's products and many of the Company's finished products are controlledsubstances and are regulated by the DEA. Consequently, their manufacture, shipment (including import and export), storage, sale and use are subject to ahigh degree of regulation. The DEA limits the manufacturing and distribution of certain starting materials and APIs manufactured by the Company andthe Company must regularly apply for quota to obtain and manufacture these substances. As a result of these limitations, the Company may not be able tomeet commercial demand for these substances, which could harm its relationship with customers and its reputation. In addition, if the Company’s DEAregistration were revoked or suspended, the Company could no longer lawfully possess, manufacture or distribute controlled substances, which couldhave 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 products from the market that eliminates or reduces the Company’s and its customer’ssales of products could negatively impact the Company’s business and reputation. In addition, a number of factors could cause production interruptionsat the Company’s facilities, including equipment malfunctions, disruptions in the supply chain, facility contamination, labor problems, raw materialshortages, natural disasters, disruption in utility services, fire, terrorist activities, human error or disruptions in the operations of the Company’s suppliers.Any significant disruption to those operations for these or any other reasons could adversely affect the Company’s sales and customer relationships. Anysustained reduction in the Company’s ability to provide products would negatively impact its sales growth expectations, cash flows and profitability. (dollars in thousands, except per share data) 11 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 alsobe adverse publicity associated with litigation that could decrease customer acceptance of the Company’s products, regardless of whether the allegationsare valid or whether the Company is ultimately found liable. Disputes from time to time with such companies or individuals are not uncommon, and theCompany cannot provide assurance that it will always be able to resolve such disputes on terms favorable to the Company. As a result, litigation mayadversely affect its business, financial condition and results of operations. In addition, certain contracts with our suppliers and customers containprovisions whereby the Company indemnifies, subject to certain limitations, its counterparty for damages suffered as a result of claims related to use ofthe Company’s products or facilities and other matters. Claims made under these provisions could be expensive to litigate and could result in significantpayments. Refer to Note 21 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 caused by these materials, cannot be completely eliminated. In the event of accidental contamination of property or injury to individualscaused by these materials, the Company could be liable for damages and/or be forced to shut down its operations, which could have a materially adverseeffect on its business and results of operations. The Company generates waste that must be transported to approved storage, treatment and disposal facilities. The transportation and disposal ofsuch waste 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. For example, the Company is currently aparty to several environmental remediation investigations and activities and, along with other companies, has been named a potentially responsible party(“PRP”) for certain waste disposal sites. Despite its efforts to comply with applicable environmental laws, the Company may face significant remediationliabilities and additional legal proceedings concerning environmental 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 remediationrequirements are fluid and are likely to be affected by future technological, site and regulatory developments. Each of these matters is subject to variousuncertainties, and it 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 withthe study or remediation of applicable sites not owned by the Company and the Company's current and former operating sites. Reserves are adjustedperiodically as remediation efforts progress or as additional technical, regulatory or legal information become available. In some jurisdictionsenvironmental, health and safety regulations are still early in their development, and the Company cannot determine how these laws will be implementedand the impact of such regulation on the Company. Given the uncertainties regarding the status of laws, regulations, enforcement, policies, the impact ofother PRPs, technology and information related to individual sites, the Company does not believe it is possible to currently develop an estimate of therange of reasonably possible environmental losses in excess of its reserves. Refer to Note 21 to the Company’s consolidated financial statements for a discussion of the Company’s environmental and legal matters. (dollars in thousands, except per share data) 12 Potential product liability claims, errors and omissions claims in connection with services the Company performs and potential liabilityunder indemnification agreements between the Company and its officers and directors could adversely affect the Company. The Company manufactures products intended for use by the public. These activities could expose the Company to risk of liability for personalinjury or death to persons using such products. The Company seeks to reduce its potential liability through measures such as contractual indemnificationprovisions with customers (the scope of which may vary by customer, and the performances of which are not secured) and insurance maintained by thecustomer and its customers. The Company could be materially and adversely affected if it were required to pay damages or incur defense costs inconnection with a claim that is outside the scope of the indemnification agreements, if the indemnity, although applicable, is not performed inaccordance with its terms or if the Company’s liability exceeds the amount of applicable insurance or indemnity. In addition, the Company could be heldliable for errors and omissions in connection with the services it performs. The Company currently maintains product liability and errors and omissionsinsurance with respect to these risks. There can be no assurance, however, that the Company’s insurance coverage will be adequate or that insurancecoverage will continue to be available on terms acceptable to the Company. 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 such 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 causean adverse effect on the Company’s business, financial condition and results from operations. Generally, the Company would be at risk for the loss ofinventory that is not within customer specifications. These amounts could be significant. In addition, in the future the Company may not be able toobtain adequate insurance coverage or the Company may be required to pay higher premiums and accept higher deductibles in order to secure adequateinsurance 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 that the Company will be able to retainkey personnel, or to attract and retain additional qualified employees. The Company does not maintain key-man or similar policies covering any of itssenior management or key personnel. The Company’s inability to attract and retain key personnel would have a material adverse effect on the Company’sbusiness. (dollars in thousands, except per share data) 13 The Company has made and continues to make significant capital investments in its facilities to meet its potential future needs and, as a result,the Company depends on the success of attracting new and retaining existing customers’ business. The Company has made and continues to make substantial investments in all of its manufacturing facilities. As a result, the Company’s fixed costshave increased. If the Company is not able to utilize the facilities to capacity, its margins could be adversely affected. The Company continues to expand its large-scale manufacturing capacity to support expected growth in the business. There can be no assurancethat sales volumes will be sufficient to ensure the economical operation of this expanded capacity, in which case, the Company’s results of operationscould be adversely affected. Disruption or instability in global markets could have a material adverse effect on the Company’s business, financial condition and results ofoperations. The U.S. and global capital markets have experienced periods of disruption during which general economic conditions have deteriorated withadverse consequences for the broader financial and credit markets and during which the availability of debt and equity capital for the market as a wholewas reduced significantly. Any future reduction in the availability of debt or equity capital could adversely affect the ability of the Company’s customersto obtain financing for product development and could result in a decrease in, or cancellation of, orders for the Company’s products as well as impact theability of the Company’s customers to make payments. While the Company believes that cash flows from operations and funds available under itsrevolving credit facility will be adequate to meet the operational and debt servicing needs of the Company, such disruptions could impact the Company’scash flows and the availability of funds under its revolving credit facility, if, for instance, one or more of the participant banks were to fail, in which casethe Company’s business may be materially adversely affected. 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. In the course of the Company’s business, the Company selectively pursues complementary acquisitions, such as the acquisition of PharmaCore,Inc. in October 2016, that involve known and unknown risks that could adversely affect the Company’s future revenues and operating results. Forexample: ●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 managementto replace 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, potentially resulting in a high level of debtobligations or significant dilution of ownership, or both. ●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. (dollars in thousands, except per share data) 14 Any indemnities or warranties obtained in connection with such acquisitions may not fully cover the actual liabilities the Company incurs due tolimitations 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 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 equity financings, equity interests in the Company 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, whichmay result in reduced liquidity, a decrease in its net income and a consequential reduction in its earnings per share. 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 withEuropean Union banks up to the equivalent of $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 unanticipatedchanges in future product demand or market conditions, including obsolescence or the uncertainty in the global market, could also have an impact on thevalue of inventory 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 majorityof its 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 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; (dollars in thousands, except per share data) 15 ●general economic decline or political unrest in the markets in which it operates; ●geopolitical risks, terrorism, or acts of war or hostility; ●compliance with local laws and regulations including laws restricting the inflow of capital or cash and unexpected changes in regulatoryrequirements; ●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 that 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, it may not produce the revenues, earnings, or strategic benefits that it anticipates whichcould have a material adverse effect on the Company’s business. As a result of the Company’s substantial international operations, a significant portion of the Company’s business is conducted in currencies otherthan the U.S. dollar, which is its reporting currency. The Company recognizes foreign currency gains or losses arising from its operations in the periodincurred. As a result, currency fluctuations between the U.S. dollar and the currencies in which the Company does business, primarily the euro and theSwedish krona, have caused, and will continue to cause, foreign currency transaction gains and losses. The Company cannot predict the effects ofexchange rate fluctuations upon its future operating results because of the number of currencies involved, the variability of currency exposures, and thepotential volatility of currency exchange rates. The Company periodically engages in foreign exchange transactions to mitigate the impact of thisvolatility on its operations, but its strategies are short-term in nature and may not adequately protect its operating results from the full effects of exchangerate fluctuations. Certain jurisdictions have experienced governmental corruption to some degree and, in some circumstances, anti-bribery laws may conflict withsome local customs and practices. As a result of the Company’s policy to comply with the U.S. Foreign Corrupt Practices Act and similar anti-briberylaws, the Company may be at a competitive disadvantage to competitors that are not subject to, or do not comply with, such laws. Furthermore, whileemployees and agents must comply with these laws, the Company cannot be certain that internal policies and procedures will always prevent violationsof these laws, despite a commitment to legal compliance and corporate ethics. Violations or mere allegations of such violations could have a materialadverse 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 orlower than expected as a result of a number of factors, including, but not limited to, the timing of contracts; the delay, cancellation or acceleration of acontract; seasonal slowdowns in different parts of the world; the timing of accounts receivable collections; pension contributions; changes in governmentregulations; and changes in exchange rates against the U.S. dollar. Because a high percentage of the Company’s costs are relatively fixed in the shortterm, such as the cost of maintaining facilities and compensating employees, any one of these factors could have a significant impact on the Company’squarterly results. In some quarters, the Company’s revenue and operating results may be significantly lower than or higher than the expectations ofsecurities analysts and investors due to any of the factors described above. Because of these fluctuations, results for any one quarter are not necessarilyindicative of the results that may be achieved for any other quarter or for the full fiscal year. (dollars in thousands, except per share data) 16 The 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 cannotbe assured that patents will be granted on any of its patent applications. The Company also cannot be assured that the scope of any of its issued patentswill be sufficiently broad to offer meaningful protection. The Company has patents issued in selected countries; therefore, third parties can make, use, andsell products covered by its patents in any country in which the Company does not have patent protection. In addition, the Company may be involved inpatent litigation in the future. Issued patents or patents the Company licenses could be successfully challenged, invalidated or circumvented so that itspatent rights would not create an effective competitive barrier. Although the Company intends to defend the validity of owned patents and use allappropriate methods to prevent their infringement, such efforts are expensive and time consuming, with no assurance of success. The ability to enforcepatents depends on the laws of individual countries and each country’s practices regarding enforcement of intellectual property rights. The Companyprovides its customers the right to use its products under label licenses that are for research purposes only. These licenses could be contested, and theCompany cannot be assured that it would either be aware of an unauthorized use or be able to enforce the restrictions in a cost-effective manner. If a third party makes a claim to an intellectual property right to technology the Company uses, the Company may need to discontinue animportant product or product line, alter its products and processes, defend its right to use such technology in court or pay license fees. Although theCompany may, under these circumstances, attempt to obtain a license to such intellectual property, it may not be able to do so on favorable terms, or atall. Additionally, if the Company’s products are found to infringe on a third party’s intellectual property, the Company may be required to pay damagesfor past infringement, and lose 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, inpart by confidentiality agreements with licensees, suppliers, employees and consultants. It is possible that these agreements will be breached and theCompany will not have adequate remedies for any such breach. Disputes may arise concerning the ownership of intellectual property or the applicabilityof confidentiality agreements. Furthermore, the Company’s trade secrets and proprietary technology may otherwise become known or be independentlydeveloped by 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, theCompany depends on information technology infrastructure to effectively manage its business data, supply chain, logistics, accounting, and otherbusiness processes and electronic communications between employees, customers and suppliers. Ineffective allocation and management of the resourcesnecessary to build and sustain an appropriate technology infrastructure could adversely affect the Company’s business. In addition, security breaches orsystem failures of this infrastructure can create system disruptions, shutdowns, or unauthorized disclosure of confidential information. Inability to preventsuch 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 global enterprise resource planning system. The Company is engaged in a multi-year implementation of a 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, the Company mayexperience significant delays, increased costs and other difficulties. Any significant disruption or deficiency in the design and implementation of the ERPcould adversely affect the Company’s ability to process orders, ship product, send invoices and track payments, fulfill contractual obligations orotherwise operate its business. Any issues with implementation could also cause the Company to fail to timely or accurately report its financial results.While the Company has invested significant resources in planning and project management, significant implementation issues may arise. (dollars in thousands, except per share data) 17 The 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 isless than the carrying value, an impairment loss will be recorded in the Company’s statement of operations. The determination of fair value is a highlysubjective exercise and can produce significantly different results based on the assumptions used and methodologies employed. If the Company’sprojected long-term sales growth rate, profit margins or terminal rate are considerably lower or the assumed weighted average cost of capital isconsiderably higher, future testing may indicate impairment and the Company would have to record a non-cash goodwill impairment loss in its statementof 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 inproposed assessments. In recent years, the Company utilized significant tax attributes such as domestic federal foreign tax credits to reduce U.S. cashtaxes. While the Company believes that it has adequately provided for any taxes related to these items, and taxes related to all other aspects of itsbusiness, any such assessments or future settlements may be materially different than it has provided. Refer to Note 11 to the Company’s consolidatedfinancial statements for a discussion 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 changein tax 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. Additionally, the Company hasdomestic federal deferred tax assets of approximately $13,000 which were recorded at the U.S. tax rate of 35%. If the U.S. were to enact a lower corporatetax rate as part of corporate tax reform, the revaluation of these deferred tax assets could result in a significant non-cash charge. Low investment performance by the Company’s defined benefit pension plan assets or other events including changes in regulations oractuarial assumptions may increase the Company’s pension expense, and may require the Company to fund a larger portion of its pensionobligations, thus diverting funds from other potential uses. The Company sponsors a defined benefit pension plan, frozen in 2007, that covers certain eligible employees. The Company’s pension expenseand required contributions to the pension plan are directly affected by changes in interest rates, the value of plan assets, the projected rate of return onplan assets, the actual rate of return on plan assets, and the actuarial assumptions used to measure the defined benefit pension plan obligations. If planassets perform below the assumed rate of return used to determine pension expense, future pension expense will increase. The proportion of pension assetsto liabilities, which is called the funded status, determines the level of contribution to the plan that is required by law. Changes in the plan’s funded statusrelated to the value of assets or liabilities could increase the amount required to be funded. The Company cannot predict whether changing market oreconomic conditions, regulatory changes or other factors will further increase the Company’s pension funding obligations, diverting funds from otherpotential uses. (dollars in thousands, except per share data) 18 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. Any modifications to these regulations could have a materialadverse effect on the Company’s business. If regulations become more stringent, the Company may be unable to obtain requisite regulatory approvals ona timely basis for marketing and production of products. Conversely, any significant reduction in the scope of regulatory requirements or the introductionof simplified drug approval procedures could reduce barriers to entry and increase competition for the Company’s products. Healthcare legislative reform measures could have a material adverse effect on the Company. The continuing increase in expenditures for healthcare has been the subject of considerable government attention almost everywhere the Companydoes business. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education ReconciliationAct of 2010, or together, the Affordable Care Act, was passed in the United States, which substantially changed the way healthcare is financed by bothgovernmental and private insurers, significantly impacting the U.S. pharmaceutical industry. There have been judicial and congressional challenges tocertain aspects of the Affordable Care Act, and the Company expects there will be additional challenges and amendments in the future, particularly inlight of the change in administration following the 2016 U.S. presidential election. In addition, there has been heightened governmental scrutiny in theUnited States recently over the manner in which drug manufacturers set prices for their marketed products. As a result, the Company expects thathealthcare reform measures that may be adopted in the future may result in more rigorous coverage criteria and lower reimbursement. Such costcontainment measures in the United States, or similar measures in the other countries in which the Company does business, could place additionaldownward pressure on the prices that the Company receives for its products and adversely affect the Company’s ability to sell its products. Failure to comply with current Good Manufacturing Practices (“cGMP”) and other government regulations, as well as delays in obtainingregulatory approval 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, theDEA. The Company’s facilities are subject to periodic regulatory and customer inspections to ensure compliance with cGMP and other requirementsapplicable to such products. A finding that the Company has materially violated these requirements could result in regulatory sanctions including, butnot limited to, the regulatory agencies withholding approval of new drug applications or supplements and the denial of product entry into the U.S., orother countries, of products manufactured at non-compliant facilities, the loss of a customer contract, the disqualification of data for client submissions toregulatory authorities and a mandated closing of the Company’s facilities. Any such violations would have a material adverse effect on the Company’sbusiness. The Company’s customers are typically subject to the same, or similar regulations and any such violations or other actions by regulatoryagencies, including, but not limited to, plant shutdowns or product recalls that eliminate or reduce the Company’s sale of its products or services couldnegatively impact the Company’s business. In addition, the submission of new products to regulatory authorities for approval by the Company or itscustomers does not guarantee that approval to market the product will be granted. Each authority may impose its own requirements or delay or refuse togrant approval to the Company or customer even when the product has already been approved in another country. Products that have already beenapproved can be removed from the market by regulatory agencies for numerous reasons. Item 1B Unresolved Staff Comments. None. (dollars in thousands, except per share data) 19 Item 2Properties. Set forth below is information relating to manufacturing facilities owned by the Company as of December 31, 2016: Operating LocationAcreageSubsidiaryPrimary Product Lines ManufacturedCharles 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. Item 3Legal Proceedings. See "Environmental and Safety Regulations and Proceedings" under Item 1 and Note 21 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 otherproceedings also discussed in Note 21 to the Company’s consolidated financial statements. Item 4Mine Safety Disclosures. None. (dollars in thousands, except per share data) 20 PART II Item 5Market for 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 andlow sales price of the common stock as reported on the NYSE: 2016 High Low First Quarter $44.57 $31.12 Second Quarter 52.90 42.55 Third Quarter 58.85 42.83 Fourth Quarter 54.85 38.85 2015 High Low First Quarter $39.63 $21.34 Second Quarter 46.24 35.71 Third Quarter 53.82 39.57 Fourth Quarter 53.63 40.38 As of January 24, 2017, there were approximately 21,599 beneficial holders of the outstanding common stock of the Company. The Company does not anticipate paying cash dividends in the foreseeable future. There were no cash dividends paid on our common stock duringthe past three fiscal years. 2016 Equity Compensation Table The following table provides information as of December 31, 2016 with respect to shares of common stock that may be issued under theCompany’s existing equity compensation plans. Column (a) Column (b) Column (c)Plan categoryNumber of securities tobe issued upon exerciseof outstanding options,warrants and rights Weighted averageexercise price ofoutstandingoptions, warrantsand rights Number of securitiesremaining for futureissuance under equitycompensation plans(excluding securitiesreflected in column (a)) Equity compensation plans approved by securityholders1,519,338 $25.22 1,366,025 (dollars in thousands, except per share data) 21 Comparison of Five-Year Cumulative Total Returns The comparative stock performance graph below compares the five-year cumulative total stockholder return (assuming reinvestment of dividends,if any) from investing $100 on December 31, 2011, to the close of the last trading day of 2016, in each of (i) Cambrex common stock, (ii) the S&P 500Index and (iii) an index of the Company’s peer group. The stock price performance reflected in the graph below is not necessarily indicative of futureprice performance. The Company’s commercial activities are focused on manufacturing and marketing to customers concentrated in the Life Sciences Industry(including pharmaceutical chemicals and intermediates). Although the Company’s products are diverse, the Company believes that an index of its peergroup based on its GICS code is a reasonable comparison group for the commercial activities on which it currently focuses. The peer group is for S&PGICS code 352030, Life Sciences Tools & Services, and is comprised of 48 companies as of December 31, 2016. (dollars in thousands, except per share data) 22 Item 6Selected Financial Data. The following selected consolidated financial data of the Company for each of the five years in the period through December 31, 2016 are derivedfrom the audited financial statements. The consolidated financial statements of the Company as of December 31, 2016 and 2015 and for each of the yearsin the three year period ended December 31, 2016 and the reports of the independent registered public accounting firm are included elsewhere in thisannual report. The data presented below should be read in conjunction with the financial statements of the Company, the notes to the financial statementsand "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere. Years Ended December 31, 2016 2015 2014 2013 2012 INCOME DATA: Gross sales $491,538 $433,856 $374,150 $317,212 $277,931 Net revenues 490,644 433,326 374,613 318,176 276,501 Gross profit 204,225 176,965 123,798 102,904 90,487 Selling, general and administrative expenses 60,422 57,867 52,489 47,568 45,248 Research and development expenses 14,292 12,540 13,075 10,387 9,544 Restructuring expenses 1,158 15,573 - - - Loss on voluntary pension settlement - - 7,170 - - Gain on sale of asset - - (1,234) (4,680) - Operating profit 128,353 90,985 52,298 49,629 35,695 Interest expense, net 717 1,699 2,174 2,242 2,439 Equity in losses of partially-owned affiliates - - 4,623 2,262 1,766 Other expenses/(income), net 97 (279) (5) 118 122 Income before income taxes 127,539 89,565 45,506 45,007 31,368 Provision/(benefit) for income taxes 40,214 32,389 (12,627) 14,732 (31,861)Income from continuing operations 87,325 57,176 58,133 30,275 63,229 (Loss)/income from discontinued operations, net of tax (5,647) 41 (830) (4,360) (926)Net income 81,678 57,217 57,303 25,915 62,303 EARNINGS PER SHARE DATA: Earnings/(loss) per common share (basic): Income from continuing operations $2.72 $1.82 $1.89 $1.00 $2.13 (Loss)/income from discontinued operations, net of tax $(0.17) $0.00 $(0.03) $(0.14) $(0.03)Net income $2.55 $1.82 $1.86 $0.86 $2.10 Earnings/(loss) per common share (diluted): Income from continuing operations $2.65 $1.76 $1.84 $0.98 $2.09 (Loss)/income from discontinued operations, net of tax $(0.17) $0.00 $(0.03) $(0.14) $(0.03)Net income $2.48 $1.76 $1.81 $0.84 $2.06 Weighted average shares outstanding (in thousands): Basic 32,086 31,420 30,763 30,150 29,703 Diluted 32,969 32,555 31,643 30,901 30,314 BALANCE SHEET DATA: (at end of period) Working capital $227,193 $129,477 $125,172 $102,513 $60,018 Total assets 611,865 505,539 486,587 458,037 385,731 Long-term debt - - 60,000 79,250 64,000 Total stockholders' equity 405,427 310,835 251,226 210,220 163,297 (dollars in thousands, except per share data) 23(1)(2)(3)(4)(5) (1)Income from continuing operations includes restructuring expenses of $1,158 related to the decision to sell the finished dosage form facility inHyderabad, India. Loss from discontinued operations includes pre-tax expense of $8,777, reduced by a tax benefit of $3,130, for environmentalremediation related to sites of divested businesses. (2)Income from continuing operations includes restructuring expenses of $15,573 and a tax benefit of $1,464 related to the decision to sell the finisheddosage form facility in Hyderabad, India. Income from discontinued operations includes pre-tax income of $63, reduced by tax expense of $22, forenvironmental reimbursements related to sites of divested businesses. (3)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 relatedto a voluntary 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 therelease of a valuation allowance and a benefit of $3,948 for the settlement of tax disputes. Loss from discontinued operations includes pre-taxcharges of $1,277, reduced for a tax benefit of $447, for environmental remediation related to sites of divested businesses. (4)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. (5) Income from continuing operations includes the release of a valuation allowance on domestic deferred tax assets of $36,287 and the impact ondeferred taxes of a statutory rate change of $1,328. Loss from discontinued operations includes pre-tax charges of $1,425, reduced for a tax benefitof $499, for environmental remediation related to sites of divested businesses. Item 7Management's Discussion and Analysis of Financial Condition and Results of Operations. Executive Overview The Company’s business primarily consists of four manufacturing facilities. These facilities mainly manufacture APIs, pharmaceuticalintermediates and, to a lesser extent, other fine chemicals. The following significant events, which are explained in detail on the following pages, occurred during 2016: ●Gross sales in 2016 increased 13.3% to $491,538 from $433,856 in 2015. The impact from foreign currency exchange was negligible. ●Operating profit increased 41.1% to $128,353 from $90,985 in 2015. Excluding Zenara related restructuring charges in 2016 and 2015,operating profit increased 21.5%. ●The 2016 net cash balance was $74,141, an improvement of $60,167, compared to $13,974 in 2015. ●The Company purchased 100% of PharmaCore, Inc. (“CHP”) a privately-held company located in High Point, NC for $24,275, net of cash. ●Restructuring charges of $1,158 related to classifying Zenara as held for sale. Gross sales in 2016 of $491,538 were $57,682 or 13.3% higher than 2015. The impact of foreign currency was negligible. The increase is a result ofhigher volumes (17.5%) partially offset by lower pricing (4.2%). The volume increase was primarily due to higher sales of certain branded APIs,controlled substances and clinical phase products. The price decline was due to a combination of tiered pricing arrangements where unit prices decline asvolumes increase, contractual agreements and negotiated market based price adjustments for certain products. The acquisition of CHP contributed $4,648to gross sales. (dollars in thousands, except per share data) 24 Gross margins increased to 41.5% in 2016 compared to 40.8% in 2015. Current year gross margins included a 0.6% favorable impact from foreigncurrency versus 2015. Margins were positively impacted by higher production volumes that drove plant efficiencies and favorable product mix. Theseimpacts were partially offset by lower pricing. The Company reported income from continuing operations of $87,325, or $2.65 per diluted share in 2016, compared to $57,176 or $1.76 perdiluted share in 2015. Excluding restructuring charges of $15,573 and a related tax benefit of $1,464 (discussed below), income from continuingoperations was $71,285 in 2015. Critical Accounting Estimates The 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 assumptionsthat are deemed reasonable by management under each applicable circumstance. Actual results or amounts could differ from estimates and the differencescould have a material impact on the consolidated financial statements. A discussion of the Company’s critical accounting policies, the underlyingjudgments and uncertainties affecting their application and the likelihood that materially different amounts would be reported under different conditionsor using different assumptions, is as follows: Revenue Recognition Revenues 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 or advance payments on the balance sheet. Since payments received are sometimesnon-refundable, the termination of a contract by a customer prior to its completion could result in an immediate recognition of deferred revenue relatingto payments already received 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 andhistorical experience and estimated orders. The Company recognizes revenue net of these estimated costs which are classified as allowances andrebates. 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 Impairments The review of long-lived assets, principally fixed assets and other amortizable intangibles, requires the Company to estimate the undiscountedfuture cash flows generated from these assets whenever events or changes in circumstances indicate that the carrying value may not be fully recoverable.If undiscounted cash flows are less than the carrying value, the long-lived assets are written down to fair value. The review of the carrying value of goodwill is conducted annually or whenever events or changes in circumstances indicate that the carryingvalue may not be fully recoverable. The Company first performs a qualitative assessment to test goodwill for impairment. If, after performing thequalitative assessment, the Company concludes that it is more likely than not that the fair value of the reporting units is less than its carrying value, thetwo-step process would be utilized. In the first step, the fair value of the reporting units is determined using a discounted cash flow model and comparedto the carrying value. If such analysis indicates that impairment may exist, the Company then estimates the fair value of the other assets and liabilitiesutilizing appraisals and discounted cash flow analyses to calculate an impairment charge. (dollars in thousands, except per share data) 25 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 Taxes The Company applies the asset and liability method to accounting for income taxes. Deferred tax assets and liabilities are recognized for theexpected future tax consequences of temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities, andnet operating loss (“NOL”) and tax credit carryovers, on a taxing jurisdiction basis using enacted tax rates in effect for the year in which the differencesare expected to reverse or the NOLs or tax credit carryforwards are expected to be realized. The recoverability of deferred tax assets is dependent upon theCompany’s assessment that it is more likely than not, considering both positive and negative evidence, that sufficient future taxable income of theappropriate type and in the appropriate taxable years will be generated in the relevant tax jurisdictions to utilize the deferred tax assets. This assessmenttakes into account the nature, frequency, and severity of any financial reporting losses, sources of future taxable income, and available prudent andfeasible tax planning strategies. If, based on the weight of available evidence, it is more likely than not the deferred tax assets will not be realized, theCompany records a valuation allowance against all or a portion of the deferred tax assets to adjust the balance to the amount considered more likely thannot to be realized. The Company has provided a valuation allowance against state NOLs, state tax credits, state deferred tax assets and foreign NOLs. It is possible thatchanges in the assessment could result in the release of valuation allowance attributable to these items in the future, or the establishment of a valuationallowance against certain deferred tax assets for which the Company has no current reserves. The Company’s accounting for deferred taxes representsmanagement’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. The Company accounts for uncertain tax positions by applying the more likely than not threshold to recognition and de-recognition. Tax benefitsfrom uncertain tax positions are recognized if it is more likely than not that the tax position will be sustained upon examination by taxing authoritieswith full knowledge of all relevant information, based on the technical merits of the position. The calculation of uncertain tax positions involvessignificant judgment in applying complex tax laws, and resolution of these matters in a manner inconsistent with management’s expectations could havea material impact on the Company’s financial condition and results of operations. Environmental and Litigation Contingencies The Company periodically assesses the potential liabilities related to any lawsuits or claims brought against it. See Note 21 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 usesits best 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,settlements and legal fees. Given the inherent uncertainty related to the eventual outcome of litigation and environmental matters, it is possible that all orsome of these matters may be resolved for amounts materially different from any provisions that the Company may have made with respect to theirresolution from time to time. (dollars in thousands, except per share data) 26 Employee Benefit Plans The Company provides a range of benefits to certain employees and retired employees, including pension benefits under a plan that was frozen in2007. The Company records annual amounts relating to these plans based on calculations, which include various actuarial assumptions, includingdiscount rates, assumed rates of return and turnover rates. The Company reviews its actuarial assumptions on an annual basis and makes modifications tothe assumptions based on current rates and trends when it is deemed appropriate to do so. The effect of the modifications is generally recorded andamortized over future periods. The Company believes that the assumptions utilized for recording obligations under its plans are reasonable. The discount rate used to measure pension liabilities and costs is selected by projecting cash flows associated with plan obligations which arematched to 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 werediscounted by the corresponding spot rate on the yield curve. Results of Operations 2016 Compared to 2015 Gross sales in 2016 of $491,538 were $57,682 or 13.3% higher than 2015. The impact of foreign currency was negligible. The increase is a result ofhigher volumes (17.5%) partially offset by lower pricing (4.2%). The volume increase was primarily due to higher sales of certain branded APIs,controlled substances and clinical phase products. The price decline was due to a combination of tiered pricing arrangements where unit prices decline asvolumes increase, contractual agreements and negotiated market based price adjustments for certain products. The acquisition of CHP contributed $4,648to gross sales. The Company’s products and services are sold to a diverse group of several hundred customers, with one customer accounting for 36.9% and34.5% of 2016 and 2015 consolidated sales, respectively. The Company’s products are sold through a combination of direct sales and independentagents. One API, an antiviral product, represented 31.6% and 32.1% of 2016 and 2015 consolidated sales, respectively. Gross profit in 2016 was $204,225 compared to $176,965 in 2015. Gross margins increased to 41.5% in 2016 compared to 40.8% in 2015. The2016 gross margins included a 0.6% favorable impact from foreign currency versus 2015. Margins were positively impacted by higher productionvolumes that drove plant efficiencies and favorable product mix. These impacts were partially offset by lower pricing. Selling, general and administrative (“SG&A”) expenses were $60,422, or 12.3% of gross sales in 2016, compared to $57,867, or 13.3%, in 2015.The increase in administrative expenses is mainly due to higher performance share expense (approximately $1,200), the addition of CHP (approximately$1,200) and higher personnel costs (approximately $1,000). Sales and marketing expenses were also higher (approximately $1,100) mainly as a result ofadding additional sales associates and the Cambrex rebranding. Higher costs were partially offset by lower recruiting/relocation expenses (approximately$1,500). Research and development (“R&D) expenses were $14,292, or 2.9% of gross sales in 2016, compared to $12,540, or 2.9%, of gross sales in 2015.The increase is primarily due to higher personnel expenses (approximately $2,000). Restructuring expenses relate to the decision to sell Zenara, which was classified as held for sale at December 31, 2015. Charges include the writeoff of goodwill and an amortizable intangible asset as well as adjusting Zenara’s assets and liabilities to reflect fair value. These charges totaled $1,158 in2016 and $15,573 in 2015, the majority of which are non-cash expenses. See Notes 8 and 23 to the Company’s consolidated financial statements for anexplanation of the sale of Zenara. (dollars in thousands, except per share data) 27 Operating profit was $128,353 in 2016 compared to $90,985 in 2015. The increase in operating profit is primarily due to higher gross profit andlower restructuring expenses partially offset by higher SG&A and R&D expenses. Net interest expense was $717 in 2016 compared to $1,699 in 2015. The decrease in net interest expense is the result of paying off the Company’sdebt in early 2016. The average interest rate on debt was 1.9% in 2016 versus 2.3% in 2015. The Company recorded tax expense of $40,214 in 2016, resulting in an effective tax rate of 31.5%, compared to $32,389 and 36.2% in 2015.Excluding the effects of the Zenara restructuring charges of $15,573 and the related tax benefit of $1,464, the effective tax rate was 32.2% in 2015. Income from continuing operations in 2016 was $87,325 or $2.65 per diluted share, versus $57,176, or $1.76 per diluted share in 2015. 2015 Compared to 2014 Gross sales in 2015 of $433,856 were $59,706 or 16.0% higher than 2014. Excluding unfavorable foreign currency, sales increased 21.4% as aresult of higher volumes. The volume increase was primarily due to higher sales of certain branded APIs, generic APIs and controlled substances. The Company’s products and services are sold to a diverse group of several hundred customers, with one customer accounting for 34.5% and24.0% of 2015 and 2014 consolidated sales, respectively. The Company’s products are sold through a combination of direct sales and independentagents. One API, an antiviral product, represented 32.1% and 22.9% of 2015 and 2014 consolidated sales, respectively. Gross profit in 2015 was $176,965 compared to $123,798 in 2014. Gross margins increased to 40.8% in 2015 compared to 33.1% in 2014. The2015 gross margins included a 2.6% favorable impact from foreign currency versus 2014. Margins were positively impacted by plant efficienciesprimarily driven by higher production volumes and favorable product mix. Selling, general and administrative expenses were $57,867, or 13.3% of gross sales in 2015, compared to $52,489, or 14.0%, in 2014. The increasein administrative expenses is mainly due to higher personnel costs (approximately $5,000), costs related to the implementation of a new ERP system(approximately $1,000), pension (approximately $700), recruiting (approximately $400) and medical expenses (approximately $300). Sales andmarketing expenses were also higher (approximately $2,200) mainly as a result of adding additional sales associates. Higher costs were partially offset byfavorable foreign currency (approximately $5,100). Research and development expenses were $12,540, or 2.9% of gross sales in 2015, compared to $13,075, or 3.5%, of gross sales in 2014. Thedecrease is primarily due to favorable foreign currency (approximately $1,300) partially offset by costs to develop new generic drug products(approximately $800). Restructuring expenses relate to the decision to sell Zenara, which is classified as held for sale at December 31, 2015. Charges include the write offof goodwill and an amortizable intangible asset as well as adjusting Zenara’s assets and liabilities to reflect fair value. These charges totaled $15,573, themajority of which are non-cash expenses. Operating profit was $90,985 in 2015 compared to $52,298 in 2014. The increase in operating profit is primarily due to higher gross profitpartially offset by higher operating expenses. (dollars in thousands, except per share data) 28 Net interest expense was $1,699 in 2015 compared to $2,174 in 2014. The decrease in net interest expense is attributed to higher capitalizedinterest as a result of large capital projects under construction in 2015, and a decrease in average borrowing and interest rates. The average interest rate ondebt was 2.3% in 2015 versus 2.4% in 2014. The Company recorded tax expense of $32,389 in 2015, resulting in an effective tax rate of 36.2%, compared to a benefit of $12,627 in 2014.Excluding the effects of the Zenara restructuring charges of $15,573 and the related tax benefit of $1,464, the effective tax rate was 32.2% in 2015.Excluding the effects of a benefit of $26,902 for domestic valuation allowance reversals, a benefit of $3,948 for tax audit settlements, a gain of $1,234 onthe sale of land and related tax expense of $387, a loss of $7,170 on voluntary pension settlement, and a loss of $4,122 on the acquisition of Zenarashares, the effective tax rate was 32.1% in 2014. During the fourth quarter of 2014, the Company entered into a final settlement with a tax authority, without any admission of fault or breach oflaws, in order to avoid further litigation concerning intercompany transactions from 2003. The settlement required the Company to pay $1,487 in tax andinterest during the fourth quarter of 2014 in full satisfaction of all liabilities for this matter, and in response the tax authority withdrew all pendinglitigation and renounced any outstanding claims. The settlement did not impose any penalties on the Company. Therefore, in the fourth quarter of 2014the Company decreased its remaining reserve for unrecognized tax benefits for this matter by $4,137. Income from continuing operations in 2015 was $57,176 or $1.76 per diluted share, versus $58,133, or $1.84 per diluted share in 2014. Incomefrom continuing operations in 2014 includes a tax benefit of $26,902, or $0.85 per diluted share, resulting from the release of a valuation allowance ondeferred tax assets. Liquidity and Capital Resources During 2016, cash flows from operations provided $123,278, compared to $83,606 in the same period a year ago. The increase in cash flows fromoperations in 2016 compared to 2015 was largely due to higher net income after adjusting for non-cash items as well as an advance payment of $39,000,partially offset by increased inventory levels to support sales growth in 2017 and higher accounts receivable. Cash flows used in investing activities in 2016 of $73,976 reflects cash flows related to capital expenditures of $49,714 and the acquisition of CHPfor $24,275. Capital expenditures in 2016 and 2015 primarily expanded the Company’s manufacturing capacity to support expected growth. Cash flows used in financing activities in 2016 of $17,296 mainly reflects the pay down of the Company’s debt partially offset by proceeds fromstock options exercised. Net cash increased $60,167 during 2016 to a net cash balance of $74,141. In May 2016, the Company entered into a $500,000 five-year Syndicated Senior Revolving Credit Facility (“Credit Facility”) which expires inMay 2021. The Company pays interest on this Credit Facility at LIBOR plus 1.25% - 2.00% 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 covenantsat December 31, 2016. The 2016 and 2015 weighted average interest rates for long-term bank debt were 1.9% and 2.3%, respectively. For 2017, capital expenditures are expected to be approximately $70,000 to $75,000. (dollars in thousands, except per share data) 29 Contractual Obligations At December 31, 2016, the Company’s contractual obligations with initial or remaining terms in excess of one year were as follows: Total 2017 2018 2019 2020 2021 2022+ Operating leases $6,757 $2,269 $1,191 $779 $578 $575 $1,365 Purchase obligations 5,831 5,831 - - - - - Contractual cash obligations $12,588 $8,100 $1,191 $779 $578 $575 $1,365 In addition to the contractual obligations listed above, the Company expects to contribute $1,585 in cash to its U.S. defined-benefit pension planin 2017. It is possible that higher pension contributions could be required in 2018 and beyond. For the unfunded SERP, the Company expects to makeannual benefit payments of approximately $600 in 2017 and 2018. For the unfunded international pension plan, the Company expects to make annualbenefit payments of approximately $700 in 2017 and 2018, and approximately $800 for 2019 through 2021. See Note 18 to the Company’s consolidatedfinancial statements for details on the Company’s unfunded balance related to its pension plans. Also not included in the table above is $2,233 ofuncertain tax positions due to uncertainties surrounding the timing of the obligation. See Note 11 to the Company’s consolidated financial statements fordetails on the Company’s tax positions. The Company may be required to make cash payments to remediate certain environmental sites at unknownfuture periods as discussed in Note 21 to the Company’s consolidated financial statements. See Notes 12, 18, 20 and 21 to the Company’s consolidated financial statements for additional information regarding the Company’s debt, pensionplans, and other commitments. The Company’s forecasted cash flow from future operations may be adversely affected by various factors including, but not limited to, declines incustomer demand, increased competition, the deterioration in general economic and business conditions, 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 ofthese factors could adversely impact the Company's ability to fund operating cash flow requirements. Market Risks Currency Risk Management The 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 forwardcontracts to mitigate the effect of short-term foreign exchange rate movements on the Company's operating results. The notional amount of the contractsoutstanding as of December 31, 2016 was $20,896. The foreign exchange contracts have varying maturities with none exceeding twelve months. With respect to the contracts outstanding at December 31, 2016, a 10% fluctuation of the local currency over a one-year period would causeapproximately $2,102 pre-tax earnings to be at risk. These calculations do not include the impact of exchange gains or losses on the underlying positionsthat would offset the gains and losses of the derivative instrument. (dollars in thousands, except per share data) 30 Interest Rate Management The Company employed a plan to mitigate interest rate risk by entering into an interest rate swap agreement. A 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. Theinterest rate swap had a notional value of $60,000, at a fixed rate of 0.92%, which expired in September 2015. The Company’s strategy was to cover aportion of outstanding bank debt with interest rate protection. Contingencies The Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary courseof its business activities. The Company continually assesses known facts and circumstances as they pertain to applicable legal and environmental mattersand evaluates the need for reserves and disclosures as deemed necessary based on these facts and circumstances. These matters, either individually or inthe aggregate, could result in actual costs that are significantly higher than the Company’s current assessment and could have a material adverse effect onthe Company's operating results and cash flows in future reporting periods. Based upon past experience, the Company believes that paymentssignificantly in excess of current reserves, if required, would be made over an extended number of years. Environmental In 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”) forcertain waste disposal sites ("Superfund sites"). All of the liabilities currently recorded on the Company’s balance sheet for environmental proceedings areassociated 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 the recorded liabilities or potential future liabilities and the Company expects the net cash impactrelated to the contingencies described below to be reduced by the applicable income tax rate. 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. Eachof these matters is subject to various uncertainties, and it is possible that some of these matters will be decided against the Company. The resolution ofsuch matters often spans several years and frequently involves regulatory oversight or adjudication. Additionally, many remediation requirements arefluid and are likely to be affected by future technological, site and regulatory developments. It is not possible at this time for the Company to determinefully the effect of all asserted and unasserted claims on its consolidated financial condition, results of operations or liquidity; however, to the extentpossible, where asserted and unasserted claims can be estimated and where such claims are considered probable, the Company would record a liability.Consequently, the ultimate 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. At December 31, 2016, these reserves were$16,703, of which $15,441 is included in “Other non-current liabilities” on the Company’s balance sheet. At December 31, 2015, the reserves were$8,329, of which $7,498 is included in “Other non-current liabilities” on the Company’s balance sheet. The increase in the reserves includes adjustmentsto reserves of $9,994, partially offset by payments of $1,620. The reserves are adjusted periodically as remediation efforts progress or as additionaltechnical, regulatory or legal information becomes available. Given the uncertainties regarding the outcome of investigative and study activities, thestatus of laws, regulations, enforcement, policies, the impact of other PRPs, technology and information related to individual sites, the Company does notbelieve it is possible to currently develop an estimate of the range of reasonably possible environmental loss in excess of its reserves. (dollars in thousands, except per share data) 31 Bayonne As 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 pursuantto the New Jersey Department of Environmental Protection’s (“NJDEP”) private oversight program. The results of the completed sampling, and anyadditional sampling deemed necessary, will be used to develop an estimate of the Company's future liability for remediation costs. New remedialrequirements were identified during 2016, and site investigation continues. As of December 31, 2016, the Company’s reserve was $502. Clifton and Carlstadt The Company has implemented a sampling and pilot program in Clifton and Carlstadt, New Jersey pursuant to the NJDEP private oversightprogram. The results of the sampling and pilot program to date have been used to develop an estimate of the Company's future liability for remediationcosts, and the Company continues to move forward with the projects at each site in accordance with the established schedules and work plans. As ofDecember 31, 2016, the Company’s reserve was $2,024. Berry’s Creek The 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 tothe notice, the PRPs have been asked to perform a remedial investigation (“RI”) and feasibility study (“FS”) of the Berry’s Creek site. The Company hasjoined the group of PRPs and entered into an Administrative Settlement Agreement (“Agreement”) and Order on Consent with the USEPA agreeing tojointly conduct or fund an appropriate remedial investigation and feasibility study of the Berry’s Creek site with the other PRPs in the Agreement. ThePRPs have engaged consultants to perform the work specified in the Agreement and develop a method to allocate related costs among the PRPs. In June 2016, the PRPs received a request from USEPA to amend the RI/FS Work Plan to accommodate a phased, iterative approach to the Berry’sCreek remediation. USEPA requested an initial interim remedy that focuses on a portion of the site, namely, sediments in Upper and Middle Berry’s Creekand the marsh in Upper Peach Island Creek. Any subsequent remedial action will occur after the implementation and performance monitoring of thisinterim remedy and the extent of future action is expected to be at least partially determined by the outcome of this initial phase. The scope of remedial activities in the initial interim remedy is currently being developed and based upon preliminary cost estimates, theCompany recorded a pretax expense of $7,517 ($4,886 after tax), net of assumed insurance coverage, in the third and fourth quarters of 2016. Theestimated costs for the initial interim remedy will be further developed over the next several months and the Company’s accrual may change based uponthe final remedy selected and revisions to cost estimates. At this time it is not known when the costs for the complete remediation plan will be estimable,and as such, no accrual beyond the initial interim remedy has been recorded. The Company’s share has been preliminarily estimated by the PRP group at2.4%. While the Company will defend its position that its share should be reduced from the current level, its share could be increased or decreaseddepending on the outcome of the final allocation process that will take place in future periods. While any resolution of this matter is not expected to materially impact the Company’s operations or financial position, it could be material to thefinancial statements in the period recorded. (dollars in thousands, except per share data) 32 In July 2014, the Company received a notice from the U.S. Department of the Interior, U.S. Fish & Wildlife Service, regarding the Company’spotential liability for natural resource damages at the Berry’s Creek site and inviting the Company to participate in a cooperative assessment of naturalresource damages. Most members of the Berry’s Creek PRP group received such notice letters, and the PRP Group coordinated a joint response, which wasto decline participation in a cooperative assessment at this time, given existing investigation work at the site. The cost of any future assessment and theultimate scope of natural resource damage liability are not yet known. Maybrook Site A 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. In 2016, the Company reserved $370 foradditional USEPA oversight expenses. As of December 31, 2016, the Company’s reserve was $692 to cover long-term ground water monitoring andrelated costs. Harriman Site Subsidiaries 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 Record of Decision (“ROD”) 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“Consent Decree”). In December 2013, the Company, Pfizer and the NYSDEC entered into a federal court stipulation, which the court subsequentlyendorsed as a court order, resolving certain disputes with the NYSDEC about the scope of the obligations under the Consent Decree and the 1997 ROD,and requiring the Company and Pfizer to carry out an environmental investigation and study of certain areas of the Harriman Site. Site clean-up work under the 1997 ROD, the Consent Decree and the 2013 stipulation is ongoing and is being jointly performed by Pfizer and theCompany, with NYSDEC oversight. Since 2014, Pfizer and the Company have performed supplemental remedial investigation measures requested by theNYSDEC, and the findings have been submitted to NYSDEC in various reports, including a study evaluating the feasibility of certain remedialalternatives in August 2016. By letter dated January 5, 2017, NYSDEC disapproved such feasibility study report and requested certain revisions to thereport. The Company and Pfizer intend to make a timely response to the disapproval. As it is too soon to determine whether these reports and remedialplans, when finalized, will result in any significant changes to the Company’s responsibilities, no change to the reserve has been made. ELT Harriman,LLC ("ELT"), the current owner of the Harriman site, is conducting other investigation and remediation activities under a separate NYSDEC directive. No final remedy for the site has been determined, which will follow further discussions with the NYSDEC. The Company estimates the range for itsshare of the liability at the site to be between $2,000 and $7,000. As of December 31, 2016, the Company’s reserve was $3,515. At this time, the Companyis unable 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 hasfiled such claims in an arbitration proceeding against ELT and the immediately preceding owner, Vertellus Specialties Holdings (“Vertellus”). ELT hasfiled counterclaims, and has threatened to file additional counterclaims, for contractual indemnification and for breach of the settlement agreementagainst the Company. Currently, the arbitration proceeding is stayed indefinitely. In May 2016, some but not all of the Vertellus entities who are partiesto the Company’s 2007 settlement agreement filed for restructuring under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Courtfor the District of Delaware. The Company has filed several claims as creditors in the bankruptcy proceeding and will continue to monitor the bankruptcyproceeding. (dollars in thousands, except per share data) 33 Scientific Chemical Processing (“SCP”) Superfund Site A subsidiary of Cambrex was named a PRP of the SCP Superfund site, located in Carlstadt, New Jersey, along with approximately 130 other PRPs.The site is a former waste processing facility that accepted various waste for recovery and disposal including processing wastewater from this subsidiary.The PRPs 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 CreekSuperfund site (see previous discussion). While the Company continues to dispute the methodology used by the PRP group to arrive at its interimallocation for cash contributions, the Company paid the funding requests in 2010 and 2014-2015. A final allocation of SCP Site costs (excluding Berry’sCreek costs) is expected to be finalized in 2017. As of December 31, 2016, the Company’s reserve was $883, of which approximately $565 is expected tobe covered by insurance. Newark Bay Complex The USEPA and a private party group are evaluating remediation plans for the Passaic River, Newark Bay, Hackensack River, Arthur Kill, Kill VanKull and adjacent waters (the “Newark Bay Complex”). Although the Company is not involved in the USEPA action, it continues to monitordevelopments related to the site due to its past involvement in a previously settled state action relating to the Newark Bay Complex. The USEPA hasfinalized its decision on a cleanup plan for 8.3 miles of the lower Passaic River, and has estimated the cost of this plan at $1.38 billion. Due to theuncertainty of the future scope and timing of any possible claims against the Company, no liability has been recorded. The Company is involved in other related and unrelated environmental matters where the range of liability is not reasonably estimable at this timeand it is not foreseeable when information will become available to provide a basis for adjusting or recording a reserve, should a reserve ultimately berequired. Litigation and Other Matters Lorazepam and Clorazepate In 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 “DistrictCourt”). Suits were also commenced by several State Attorneys General and class action complaints by private plaintiffs in various state courts. The suitsalleged violations of the Federal Trade Commission Act arising from exclusive license agreements between the Company and Mylan covering two APIs(Lorazepam and Clorazepate). All cases have been resolved except for one brought by four health care insurers. In the remaining case, the District Court entered judgment aftertrial in 2008 against Mylan, Gyma and Cambrex in the total amount of $19,200, payable jointly and severally, and also a punitive damage award againsteach defendant 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 in prejudgment interest. The case is currently pending before the District Court following a January 2011 remand by the Court of Appeals. In July2014, the District Court dismissed certain customers for which the plaintiffs were unable to establish jurisdiction and consequently, the plaintiffscurrently have a motion 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 litigationbrought by the purchasers of Lorazepam and Clorazepate, as well as potential future claims related to the ongoing matter. In the event of a finalsettlement or final judgment, Cambrex expects any payment required by the Company to be made by Mylan under the indemnity described above. (dollars in thousands, except per share data) 34 Other The 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 liabilityrequirements of certain of its subsidiaries and a former operating location; contract provisions for indemnification protecting its customers and suppliersagainst third party liability for the manufacture and sale of Company products that fail to meet product warranties and contract provisions forindemnification protecting licensees 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 occurrenceswhile the officer, director or employee is, or was, serving at the Company’s request in such capacity. The term of the indemnification period is for theofficer's, director's or employee’s lifetime. The maximum potential amount of future payments the Company could be required to make under theseindemnification agreements is unlimited; however, the Company has a director and officer insurance policy that covers a portion of any potentialexposure. The Company currently believes the estimated fair value of its indemnification agreements is not material based on currently availableinformation, and as such, the Company had no liabilities recorded for these agreements as of December 31, 2016. The Company's subsidiaries are party to a number of other proceedings that are not considered material at this time. Impact of Recent Accounting Pronouncements Please refer to Note 3 to the Company’s consolidated financial statements for a discussion on recently issued accounting pronouncements. (dollars in thousands, except per share data) 35 Item 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 30 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: Page Number(in this Report)Reports of Independent Registered Public Accounting Firm37Consolidated Balance Sheets as of December 31, 2016 and 201539Consolidated Income Statements for the Years Ended December 31, 2016, 2015 and 201440Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2016, 2015 and 201441Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2016, 2015 and 201442Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015 and 201443Notes to Consolidated Financial Statements44Selected Quarterly Financial and Supplementary Data (unaudited)75 The financial statement schedules are filed pursuant to Item 15 of this report. 36 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Cambrex Corporation, We have audited the accompanying consolidated balance sheets of Cambrex Corporation as of December 31, 2016 and 2015 and the relatedconsolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December31, 2016. In connection with our audits of the financial statements, we have also audited the financial statement schedule listed in the accompanyingindex. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on thesefinancial statements and schedule 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. Anaudit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedules.We believe that our 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, 2016 and 2015, and the results of its operations and its cash flows for each of the three years in the period ended December31, 2016, 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,presents fairly, in all material respects, the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), CambrexCorporation’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control – Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 3, 2017 expressed anunqualified opinion thereon. /s/ BDO USA, LLP Woodbridge, NJFebruary 3, 2017 37 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Cambrex Corporation, We have audited Cambrex Corporation’s internal control over financial reporting as of December 31, 2016, based on criteria established inInternal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria).Cambrex Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Management’s Report on Internal Control OverFinancial Reporting.” Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintainedin all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a materialweakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also includedperforming such 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 recordedas necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expendituresof the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a materialeffect 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 thedegree of 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 31,2016, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidatedbalance sheets of Cambrex Corporation as of December 31, 2016 and 2015, 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, 2016 and our report dated February 3, 2017 expressedan unqualified opinion thereon. /s/ BDO USA LLP Woodbridge, NJFebruary 3, 2017 38 CAMBREX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS(dollars in thousands, except per share data) December 31, 2016 2015 ASSETS Current assets: Cash and cash equivalents $74,141 $43,974 Trade receivables, less allowances of $341 and $304 at respective dates 110,622 90,920 Other receivables 6,748 7,278 Inventories, net 123,184 109,920 Prepaid expenses and other current assets 7,960 7,187 Total current assets 322,655 259,279 Property, plant and equipment, net 217,092 186,487 Goodwill 40,323 32,063 Intangible assets, net 14,800 6,691 Deferred income taxes 13,061 19,259 Other non-current assets 3,934 1,760 Total assets $611,865 $505,539 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $42,873 $39,257 Deferred revenue and advance payments 7,506 16,298 Taxes payable 9,469 8,471 Accrued expenses and other current liabilities 35,614 35,776 Short-term debt - 30,000 Total current liabilities 95,462 129,802 Advance payments 39,000 - Deferred income taxes 6,921 7,735 Accrued pension benefits 43,109 42,661 Other non-current liabilities 21,946 14,506 Total liabilities 206,438 194,704 Commitments and contingencies (see Notes 20 and 21) Stockholders' equity: Common Stock, $.10 par value; authorized 100,000,000 issued 33,927,595 and 33,528,915 shares atrespective dates 3,393 3,353 Additional paid-in capital 153,681 131,980 Retained earnings 327,376 245,698 Treasury stock, at cost, 1,583,909 and 1,729,727 shares at respective dates (13,503) (14,747)Accumulated other comprehensive loss (65,520) (55,449)Total stockholders' equity 405,427 310,835 Total liabilities and stockholders' equity $611,865 $505,539 See accompanying notes to consolidated financial statements. 39 CAMBREX CORPORATION AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS(dollars in thousands, except per share data) Years Ended December 31, 2016 2015 2014 Gross Sales $491,538 $433,856 $374,150 Commissions, allowances and rebates 2,369 1,949 2,306 Net sales 489,169 431,907 371,844 Other revenue, net 1,475 1,419 2,769 Net revenues 490,644 433,326 374,613 Cost of goods sold 286,419 256,361 250,815 Gross profit 204,225 176,965 123,798 Selling, general and administrative expenses 60,422 57,867 52,489 Research and development expenses 14,292 12,540 13,075 Restructuring expenses 1,158 15,573 - Operating expenses 75,872 85,980 65,564 Loss on voluntary pension settlement - - 7,170 Gain on sale of asset - - (1,234) Operating profit 128,353 90,985 52,298 Other expenses/(income) Interest expense, net 717 1,699 2,174 Equity in losses of partially-owned affiliates - - 4,623 Other expenses/(income), net 97 (279) (5)Income before income taxes 127,539 89,565 45,506 Provision/(benefit) for income taxes 40,214 32,389 (12,627)Income from continuing operations 87,325 57,176 58,133 (Loss)/income from discontinued operations, net of tax (5,647) 41 (830)Net income $81,678 $57,217 $57,303 Basic earnings per share Income from continuing operations $2.72 $1.82 $1.89 (Loss)/income from discontinued operations, net of tax $(0.17) $0.00 $(0.03)Net income $2.55 $1.82 $1.86 Diluted earnings per share Income from continuing operations $2.65 $1.76 $1.84 (Loss)/income from discontinued operations, net of tax $(0.17) $0.00 $(0.03)Net income $2.48 $1.76 $1.81 Weighted average shares outstanding: Basic weighted average shares outstanding 32,086 31,420 30,763 Effect of dilutive stock based compensation 883 1,135 880 Diluted weighted average shares outstanding 32,969 32,555 31,643 See accompanying notes to consolidated financial statements. 40 CAMBREX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(dollars in thousands) Years Ended December 31, 2016 2015 2014 Net income $81,678 $57,217 $57,303 Foreign currency translation adjustments: Foreign currency translation adjustments during the period (8,481) (16,424) (25,800)Reclassification adjustments for losses included in net income 71 1,954 4,400 Interest rate swap agreement: Unrealized net losses - (30) (152)Reclassification adjustments for losses included in net income - 333 465 Income taxes - (110) (109) Pension plans: Actuarial (loss)/gain Actuarial (loss)/gain arising during the period (3,192) 3,970 (18,338)Amortization to net income of net actuarial loss 1,152 1,295 802 Prior service cost Amortization to net income of net prior service cost 52 52 50 Lump-sum pension payout - - 7,170 Income taxes 327 (1,508) 5,493 Comprehensive income $71,607 $46,749 $31,284 See accompanying notes to consolidated financial statements. 41 CAMBREX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(dollars in thousands, except per share data) Common Stock SharesIssued Par Value($.10) AdditionalPaid-InCapital RetainedEarnings TreasuryStock AccumulatedOtherComprehensiveLoss TotalStockholders'Equity 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 loss (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 Excess tax benefits 517 517 Balance at December 31, 2014 32,836,930 $3,284 $119,265 $188,481 $(14,823) $(44,981) $251,226 Net income 57,217 57,217 Other comprehensive loss (10,468) (10,468)Exercise of stock options 691,985 69 5,747 5,816 Vested restricted stock (76) 76 - Stock option expense 2,975 2,975 Restricted stock expense 353 353 Performance stock expense 2,271 2,271 Excess tax benefits 1,445 1,445 Balance at December 31, 2015 33,528,915 $3,353 $131,980 $245,698 $(14,747) $(55,449) $310,835 Net income 81,678 81,678 Other comprehensive loss (10,071) (10,071)Exercise of stock options 398,680 40 4,901 4,941 Vested restricted stock (92) 92 - Vested performance shares (1,152) 1,152 - Stock option expense 3,816 3,816 Restricted stock expense 489 489 Performance stock expense 3,461 3,461 Excess tax benefits 10,278 10,278 Balance at December 31, 2016 33,927,595 $3,393 $153,681 $327,376 $(13,503) $(65,520) $405,427 See accompanying notes to consolidated financial statements. 42 CAMBREX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS(dollars in thousands) Years Ended December 31, 2016 2015 2014 Cash flows from operating activities: Net income $81,678 $57,217 $57,303 Adjustments to reconcile net income to cash flows: Depreciation and amortization 24,665 22,061 23,826 Non-cash deferred revenue (25,822) (12,372) (17,873)Restructuring expenses 1,138 15,573 - Loss on voluntary pension settlement - - 7,170 Increase in inventory reserve 7,885 3,119 5,343 (Gain)/loss on sale of assets (33) 120 (1,099)Stock based compensation 7,766 5,599 5,002 Deferred income tax provision 8,556 19,736 (16,025)Equity in losses of partially-owned affiliates - - 4,623 Other 193 (261) 584 Changes in assets and liabilities: Trade receivables (5,120) (14,378) (8,955)Inventories (23,679) (32,721) (9,062)Prepaid expenses and other current assets (729) 4,268 (5,766)Accounts payable and other current liabilities 1,778 10,334 12,369 Deferred revenue and advance payments 41,962 12,178 11,773 Other non-current assets and liabilities (3,961) (5,331) (2,387)Discontinued operations: Non-current liabilities 7,517 - - Net cash used in discontinued operations (516) (1,536) (1,858)Net cash provided by operating activities 123,278 83,606 64,968 Cash flows from investing activities: Capital expenditures (49,714) (62,491) (23,323)Proceeds from sale of assets 13 2,308 2,355 Advances to partially-owned affiliates - - (1,404)Acquisition of business and equity investment, net of cash acquired (24,275) - (2,426)Other - (56) - Net cash used in investing activities (73,976) (60,239) (24,798) Cash flows from financing activities: Long-term debt activity (including current portion): Borrowings - - 25,750 Repayments (30,000) (30,000) (45,000)Proceeds from stock options exercised 4,941 5,816 4,203 Debt issuance costs (2,515) - - Excess tax benefits 10,278 1,445 522 Net cash used in financing activities (17,296) (22,739) (14,525) Effect of exchange rate changes on cash and cash equivalents (1,839) (2,172) (2,872)Net increase/(decrease) in cash and cash equivalents 30,167 (1,544) 22,773 Cash and cash equivalents at beginning of year 43,974 45,518 22,745 Cash and cash equivalents at end of year $74,141 $43,974 $45,518 Supplemental disclosure: Interest paid, net of capitalized interest $425 $1,340 $2,068 Income taxes paid, net of refunds received $18,210 $5,731 $6,725 See accompanying notes to consolidated financial statements. 43 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (1)The Company Cambrex 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 manufacturingprocesses for human therapeutics. The Company’s products consist of active pharmaceutical ingredients (“APIs”) and pharmaceutical intermediatesproduced under Food and Drug Administration current Good Manufacturing Practices for use in the production of prescription and over-the-counter drugproducts. Cambrex has four operating segments, which are manufacturing facilities that have been aggregated as one reportable segment. (2)Summary of Significant Accounting Policies Principles of Consolidation The 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. Certain reclassifications have been made toprior year amounts to conform to current year presentation and recent accounting pronouncements. All other significant intercompany balances andtransactions have been eliminated in consolidation. Cash Equivalents Temporary cash investments with an original maturity of less than three months are considered cash equivalents. The carrying amountsapproximate fair value. Allowance for Doubtful Accounts The 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 inwhich those customers operate. If the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make payments,additional allowances would be required. Concentrations of credit risk Financial 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 up to the equivalent of $10,000.The Company routinely monitors the risks associated with these institutions and diversifies its exposure by maintaining smaller balances with multiplefinancial institutions. Concentrations of credit risk with respect to accounts receivable are limited due to the Company's large number of customers andtheir dispersion throughout the world. At December 31, 2016 and 2015, the Company had receivables with one customer totaling nearly 43% and 51%,respectively, of overall accounts receivables. The Company does not consider this customer to pose any significant credit risk. Derivative Instruments Derivative financial instruments are periodically used by the Company primarily to mitigate a variety of working capital, investment andborrowing risks. The Company primarily uses foreign currency forward contracts to minimize foreign currency exchange rate risk associated with foreigncurrency transactions. Changes in the fair value on these forward contracts are recognized in earnings. The Company uses interest rate swap instrumentsonly as hedges. As such, the differential to be paid or received in connection with these instruments is accrued and recognized in income as an adjustmentto interest expense. 44 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (2)Summary of Significant Accounting Policies (continued) None of the foreign currency forward contracts entered into during 2016 and 2015 were designated for hedge accounting treatment. Inventories Inventories are stated at the lower of cost, determined on a first-in, first-out basis, or market. The determination of market value involves anassessment of numerous factors, including estimated selling prices. Reserves are recorded to reduce the carrying value for inventory determined to bedamaged, obsolete or otherwise unsaleable. Property, Plant and Equipment Property, plant and equipment is stated at cost, net of accumulated depreciation. Plant and equipment are depreciated on a straight-line basis overthe estimated useful lives for each applicable asset group as follows: Buildings and improvements (in years) 20to30or term of lease if applicable Machinery and equipment (in years) 7to15 Furniture and fixtures (in years) 5to7 Computer hardware and software (in years) 3to7 Expenditures 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 resultinggain or loss is reflected in cost of goods sold or operating expenses. Interest is capitalized in connection with the construction and acquisition of assetsthat are capitalized 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 andis amortized over the asset’s estimated useful life. Total interest capitalized in connection with ongoing construction activities was $575 in 2016, $534 in2015, and $128 in 2014. Impairment of Goodwill The 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 Companyrecorded a non-cash impairment charge at its Zenara facility for the year ended December 31, 2015. Refer to Note 8 to the Company’s consolidatedfinancial statements for additional information on this impairment. For the years ended December 31, 2016 and 2014, the Company did not have animpairment. The Company first performs a qualitative assessment to test goodwill for impairment. If, after performing the qualitative assessment, the Companyconcludes that it is more likely than not that the fair value of the reporting units is less than its carrying value, the two-step process would be utilized. Thefirst step of the goodwill impairment test is to identify potential impairment by comparing the fair value of each reporting unit, determined using variousvaluation techniques, with the primary technique being a discounted cash flow analysis, to its carrying value. If the fair value of a reporting unit exceedsits carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carryingamount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of the impairmentloss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount ofthat goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized. 45 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (2)Summary of Significant Accounting Policies (continued) Based upon the Company’s most recent analysis the fair value of the reporting units substantially exceeded their carrying values, except for therecent acquisition of PharmaCore. As PharmaCore was recently acquired, goodwill represents estimated fair value. Impairment of Long-Lived Assets The Company assesses the impairment of its long-lived assets, including amortizable intangible assets, and property, plant and equipment,whenever economic events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. Long lived assets areconsidered to be impaired when the sum of the undiscounted expected future operating cash flows is less than the carrying amounts of the related assets. Ifimpaired, the assets are written down to fair market value. The Company recorded a non-cash impairment charge on long-lived assets at Zenara for the year ended December 31, 2015. Refer to Note 8 to theCompany’s consolidated financial statements for additional information on this impairment. Revenue Recognition Revenues 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 and advance payments on the balance sheet. Since payments received are sometimesnon-refundable, the termination of a contract by a customer prior to its completion could result in an immediate recognition of deferred revenue relatingto payments already received 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 andhistorical experience and estimated orders. The Company 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. Income Taxes The Company and its eligible subsidiaries file a consolidated U.S. income tax return. Foreign subsidiaries are consolidated for financial reportingbut are 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.when repatriated and such U.S. tax may be reduced or eliminated by federal foreign tax credits based on the foreign income and withholding taxes paid oraccrued by the foreign subsidiary. Due in part to a continuing desire to limit credit and currency exposure for cash 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 foreign subsidiaries will be repatriated to the U.S. inthe future. Accordingly, the Company provides deferred taxes on certain undistributed foreign earnings. Subject to limitations, U.S. income tax on suchforeign earnings, when actually repatriated, may be reduced or eliminated by unrecognized foreign tax credits that may be generated in connection withthe repatriation or by existing foreign tax credit carryforwards or other tax attributes. 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. 46 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (2)Summary of Significant Accounting Policies (continued) Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include the valuation ofinventory, accounts receivable, asset impairments, stock based compensation and deferred tax assets. Actual results could differ from those estimates. Environmental Costs The Company is subject to extensive and changing federal, state, local and foreign environmental laws and regulations, and has made provisionsfor the estimated financial impact of environmental activities. The Company’s policy is to accrue environmental related costs of a non-capital nature,including estimated litigation costs, when those costs are believed to be probable and can be reasonably estimated. The quantification of environmentalexposures requires an assessment of many factors, including changing laws and regulations, advancements in environmental technologies, the quality ofinformation available related to specific sites, the assessment stage of each site investigation, preliminary findings and the length of time involved inremediation or settlement. Such accruals are adjusted as further information develops or circumstances change. For certain matters, the Company expectsto share costs with other parties. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemedcertain. Foreign Currency The 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 expenseaccounts and cash flows using average rates of exchange prevailing during the year. Adjustments resulting from the translation of foreign currencyfinancial statements are accumulated in stockholders' equity until the entity is sold or substantially liquidated. Gains or losses relating to transactions of along-term investment nature are also accumulated in stockholders' equity. Gains or losses resulting from third-party foreign currency transactions areincluded in the income statement as a component of other revenues, net in the consolidated income statement. Foreign currency net gains/(losses) were$306, ($605) and $186 in 2016, 2015 and 2014, respectively. Earnings per Common Share All diluted earnings per share are computed on the basis of the weighted average shares of common stock outstanding plus common equivalentshares arising 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, 2016, 2015 and 2014, shares of 558,499, 342,961 and 940,038, respectively, were not included in thecalculation of diluted shares outstanding because the effect would be anti-dilutive. 47 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (2)Summary of Significant Accounting Policies (continued) Comprehensive Income Included within accumulated other comprehensive income (“AOCI”) for the Company are foreign currency translation adjustments, changes in thefair value related to the interest rate swap classified as cash flow hedges, net of related tax, and changes in the pensions, net of tax. Total comprehensiveincome/loss for the years ended December 31, 2016 and 2015 are included in the Statements of Comprehensive Income. Reclassification Certain reclassifications have been made to prior year amounts to conform with current year presentation. (3)Impact of Recently Issued Accounting Pronouncements Business Combinations – Clarifying the Definition of a Business In January 2017, the FASB issued ASU 2017-01 which clarifies the definition of a business to assist entities with evaluating whether transactionsshould be accounted for as acquisitions or disposals of assets or businesses. The standard introduces a screen for determining when assets acquired are nota business and clarifies that a business must include, at a minimum, an input and a substantive process that contribute to an output to be considered abusiness. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. TheCompany does not expect this new guidance to have a material impact on its consolidated financial statements. Statement of Cash Flows – Restricted Cash In November 2016, the FASB issued ASU 2016-18 which clarifies the presentation requirements of restricted cash within the statement of cashflows. The changes in restricted cash and restricted cash equivalents during the period should be included in the beginning and ending cash and cashequivalents balance reconciliation on the statement of cash flows. When cash, cash equivalents, restricted cash or restricted cash equivalents are presentedin more than one line item within the statement of financial position, an entity shall calculate a total cash amount in a narrative or tabular format thatagrees to the amount shown on the statement of cash flows. Details on the nature and amounts of restricted cash should also be disclosed. This standard iseffective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The Company does not expect thisnew guidance to have a material impact on its consolidated financial statements. Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments In August 2016, the FASB issued ASU 2016-15 which provides guidance on the presentation and classification in the statement of cash flows forspecific cash receipt and payment transactions, including debt prepayment or extinguishment costs, contingent consideration payments made after abusiness combination, proceeds from the settlement of insurance claims and corporate-owned life insurance policies, and distributions received fromequity method investees. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reportingperiod. The Company does not expect this new guidance to have a material impact on its consolidated financial statements. 48 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (3)Impact of Recently Issued Accounting Pronouncements (continued) Simplification of Employee Share-Based Payment Accounting In March 2016, the FASB issued ASU 2016-09 which simplifies several aspects of the accounting for employee share-based payment transactions,including the accounting for income taxes, forfeitures and classification in the statement of cash flows. This standard is effective for fiscal yearsbeginning after December 15, 2016, including interim periods within that reporting period. The new standard requires recording an asset for excess taxbenefits that had not previously been recognized. The Company has no remaining unrecognized excess tax benefits at December 31, 2016. All excess taxbenefits and deficiencies in future periods will be recorded as part of the current period tax provision within the Income Statement. This will result inincreased volatility in the Company’s effective tax rate. No other provisions of the new standard will have a significant impact on the consolidatedfinancial statements. Leases In February 2016, the FASB issued ASU 2016-02 which requires lessees to recognize right of use assets and lease liabilities on the balance sheet forall leases except short-term leases. On the income statement, leases will be classified as operating or finance leases. This standard is effective for fiscalyears beginning after December 15, 2018, including interim periods within that reporting period. At this time, the Company has no financing leases andonly a limited number of operating leases. The result of adoption will be an increase to assets and liabilities by the same amount for the identifiedoperating leases. This adjustment will not be material to the Company, assuming there is not an increase in lease activity. Revenue from Contracts with Customers In May 2014, the FASB issued ASU 2014-09 that introduces a new five-step revenue recognition model in which an entity should recognizerevenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to beentitled in exchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing,and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts withcustomers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. Numerous updates wereissued in 2016 that provide clarification on a number of specific issues as well as requiring additional disclosures. The new standard is effective for fiscalyears beginning after December 15, 2017, including interim periods within that reporting period. While the Company has not yet completed its finalreview of the impact of the new standard, the Company does not currently anticipate a material impact on its revenue recognition practices. The Companyis still evaluating disclosure requirements under the new standard. We will continue to evaluate the standard as well as additional changes, modificationsor interpretations which may impact our current conclusions. The Company expects to adopt the new standard using the modified retrospective method. Simplifying the Measurement of Inventory In July 2015, the FASB issued ASU 2015-11 which requires that inventory be measured at the lower of cost and net realizable value, whicheliminates the other two options that currently exist for market, replacement cost and net realizable value less an approximately normal profit margin.This standard is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. The Company doesnot expect this new guidance to have a material impact on its consolidated financial statements. 49 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (4)Acquisitions In October 2016, Cambrex purchased 100% of PharmaCore, Inc. a privately-held company located in High Point, NC for $24,275, net of cash. Thetransaction was structured as a stock purchase. PharmaCore, which has been renamed Cambrex High Point, Inc. (“CHP”), specializes in developing,manufacturing and scaling up small molecule APIs for projects in early clinical phases. With the acquisition of CHP, Cambrex enhances its capabilitiesand expertise to efficiently develop early clinical phase products and new technologies, and increases the number of potential late stage and commercialproducts that could be manufactured at Cambrex’s larger manufacturing sites. The preliminary allocation of the purchase price of the acquired assets and liabilities was performed on the basis of their respective fair values. TheCompany utilized a third party to assist in establishing the fair values of the assets acquired and liabilities assumed. This process resulted in goodwill of$9,046, fixed assets of $8,422 and identifiable intangible assets of $6,900 as well as smaller adjustments to certain working capital accounts. TheCompany also recorded deferred tax assets primarily related to NOLs for approximately $4,000 and deferred tax liabilities for approximately $4,400. Thedeferred tax assets and liabilities were recorded on a provisional basis and will be adjusted in subsequent periods when all applicable tax returns havebeen completed. All acquisition costs have been expensed and totaled approximately $640 as well as approximately $200 of severance cost, all of which has beenrecorded to “Selling, general and administrative expenses” on the Company’s income statement. The Company recorded gross sales of $4,648 and afterpurchase price adjustments and severance, operating profit was not material. Proforma disclosures have not been provided due to the immateriality of thisacquisition. (5)Net Inventories Inventories are stated at the lower of cost, determined on a first-in, first-out basis, or market. Net inventories consist of the following: December 31, 2016 2015 Finished goods $29,117 $32,550 Work in process 54,463 41,358 Raw materials 33,841 30,830 Supplies 5,763 5,182 Total $123,184 $109,920 The components of inventory stated above are net of reserves of $12,423 and $12,337 as of December 31, 2016 and 2015, respectively. 50 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (6)Property, Plant and Equipment Property, plant and equipment consist of the following: December 31, 2016 2015 Land $4,268 $4,122 Buildings and improvements 131,794 106,983 Machinery and equipment 377,990 358,540 Furniture and fixtures 1,995 1,734 Construction in progress 24,102 39,813 Total 540,149 511,192 Accumulated depreciation (323,057) (324,705)Net $217,092 $186,487 Depreciation expense was $23,654, $21,196 and $23,296 for the years ended December 31, 2016, 2015 and 2014, respectively. Total capitalexpenditures in 2016 and 2015 were $51,604 and $57,400, respectively. For the year ended December 31, 2014, the Company recorded a gain on the sale of land of $1,234. (7)Goodwill and Intangible Assets The changes in the carrying amount of goodwill for the years ended December 31, 2016 and 2015 are as follows: Balance as of December 31, 2014 $43,912 Impairment charge (see Note 8) (8,542)Translation effect (3,307)Balance as of December 31, 2015 $32,063 Acquisition of business (see Note 4) 9,046 Translation effect (786)Balance as of December 31, 2016 $40,323 Acquired intangible assets, which are amortized, consist of the following: As of December 31, 2016 AmortizationPeriod (years) Gross CarryingAmount AccumulatedAmortization Net CarryingAmount Internal-use software3-7 $6,444 $(829) $5,615 Technology-based intangibles 20 3,204 (1,082) 2,122 Customer-related intangibles10-15 7,522 (459) 7,063 $17,170 $(2,370) $14,800 51 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (7)Goodwill and Intangible Assets (continued) As of December 31, 2015 AmortizationPeriod (years) Gross CarryingAmount AccumulatedAmortization Net CarryingAmount Internal-use software3-7 $4,147 $(204) $3,943 Technology-based intangibles 20 3,310 (952) 2,358 Customer-related intangibles10-15 642 (252) 390 $8,099 $(1,408) $6,691 The change in the gross carrying amount in 2016 is mainly due to the recognition of customer-related intangibles of $6,900 due to the acquisitionof PharmaCore in the fourth quarter of 2016, the implementation of a new enterprise resource planning (“ERP”) system, and the impact of foreigncurrency translation. The change in the gross carrying amount in 2015 is mainly due to an impairment charge related to Zenara of $3,625 classified astechnology-based intangibles and the impact of foreign currency translation. Beginning in 2014, the Company began implementing a new ERP system, as such, $2,297 and $2,639 has been capitalized and classified asinternal-use software during the years ended December 31, 2016 and 2015, respectively. Amortization expense amounted to $1,011, $865, and $530 for the years ended December 31, 2016, 2015 and 2014, respectively. Amortization expense related to current intangible assets is expected to be approximately $1,839 for 2017, $1,894 for 2018 and 2019, $1,883 for2020, and $1,874 for 2021. (8)Restructuring Charges In late October 2015, the Board of Directors of the Company recommended that management evaluate strategic alternatives for Zenara Pharma dueto a change in focus on higher growth initiatives as well as to reduce attention required by senior management to operate Zenara. The Companydetermined that the sale of Zenara was the best option for its shareholders. As such, Cambrex management, with Board authority, committed to a plan tosell Zenara. The immaterial assets and liabilities of Zenara are included in “Prepaid expenses and other current assets” and “Accrued expenses and othercurrent liabilities” on the Company’s balance sheet for all periods presented. A long-lived asset classified as held for sale must be measured at the lower of its carrying amount or fair value less cost to sell. Prior to thismeasurement the Company assessed Zenara’s assets and liabilities as well as performed a goodwill and long-lived asset impairment assessment. Theseassessments were based on level 3 inputs and resulted in writing off all of Zenara’s goodwill of $8,542 and an amortizable intangible asset of $3,625which are included in restructuring expenses on the 2015 income statement. The Company then compared the carrying amounts of the assets held for saleto their fair values. Accordingly, the Company recorded a charge of $1,269 in 2015 for the difference between the net carrying value of these assets andthe estimated fair value less cost to sell. Fair value less cost to sell was determined using the most current sales information available. All the charges mentioned above, as well as a portion of certain retention bonuses, resulted in restructuring expenses of $15,573, which areincluded in “Restructuring expenses” on the Company’s consolidated income statement for the year ended December 31, 2015. 52 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (8)Restructuring Charges (continued) For the year ended December 31, 2016, the Company recorded $1,158 as “Restructuring expenses” on the Company’s consolidated incomestatement related to the write down of Zenara to reflect a reduction in the sale price. The Company expects a sale to be completed during 2017. Refer to Note 23 to the Company’s consolidated financial statements for furtherexplanation. (9)Partially-Owned Affiliates In May 2014, the Company negotiated an accelerated purchase of Zenara for the remaining 49% for $2,680. As a result, the Company recorded anexpense of $4,400 during 2014 representing the release of foreign currency translation adjustments previously recorded in other comprehensive incomethat were 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. (10)Accrued Expenses and Other Current Liabilities The components of accrued expenses and other current liabilities are as follows: December 31, 2016 2015 Salaries and employee benefits payable $26,313 $26,850 Other 9,301 8,926 Total $35,614 $35,776 (11)Income Taxes Income before income taxes consists of the following: December 31, 2016 2015 2014 Domestic $91,597 $71,323 $37,211 International 35,942 18,242 8,295 Total $127,539 $89,565 $45,506 53 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (11)Income Taxes (continued) The provision for income taxes consist of the following provisions/(benefits): December 31, 2016 2015 2014 Current: Federal $21,167 $2,577 $2,572 International 10,491 10,076 512 Total Current 31,658 12,653 3,084 Deferred: Federal $8,350 $22,005 $(14,965)International 206 (2,269) (746)Total Deferred 8,556 19,736 (15,711)Total Income Tax Expense/ (Benefit) $40,214 $32,389 $(12,627) The provision/(benefit) for income taxes differs from the statutory federal income tax rate of 35% for 2016, 2015 and 2014 as follows: December 31, 2016 2015 2014 Income tax provision at U.S federal statutory rate $44,638 $31,347 $15,927 State and local taxes, net of federal income tax benefit (2,310) (2,450) (1,516)Effect of foreign income taxed at rates other than the U.S. federal statutoryrate (1,154) 989 751 Foreign income inclusions - 5,017 2,742 Tax credits (200) (4,685) (2,692)Tax audit settlements - - (3,948)Net change in valuation allowance 1,673 3,134 (25,169)Domestic production deduction (2,327) (1,958) (1,488)Permanent items and other (106) 995 2,766 Total $40,214 $32,389 $(12,627) Foreign income inclusions represent distributions from foreign subsidiaries which give rise to newly recognized federal foreign tax credits. Taxaudit settlements in 2014 included the final settlement of the European tax dispute concerning 2003 transactions. Net change in the valuation allowancein 2014 included the benefit of $26,902 for the remaining release of the domestic federal valuation allowance attributable to foreign tax credits, offset by$1,516 for domestic state items and $217 for foreign deferred taxes subject to valuation allowances. 54 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (11)Income Taxes (continued) The components of deferred tax assets and liabilities as of December 31, 2016 and 2015 relate to temporary differences and carryforwards asfollows: December 31, 2016 2015 Deferred tax assets: Inventory $2,769 $3,032 Foreign tax credit carryforwards - 3,990 Environmental 5,776 2,795 Net operating loss carryforwards 13,272 7,930 Employee benefits 16,155 14,978 Alternative minimum tax credit carryforwards - 1,306 Property, plant and equipment 4,448 4,188 Other 7,352 6,234 Total gross deferred tax assets 49,772 44,453 Valuation allowance (11,459) (9,863)Total deferred tax assets $38,313 $34,590 Deferred tax liabilities: Property, plant and equipment (17,709) (11,472)Intangibles and other (10,583) (8,192)Unremitted foreign earnings (635) (208)Foreign tax allocation reserve (2,471) (2,071)Other (775) (1,123)Total deferred tax liabilities $(32,173) $(23,066)Net deferred tax assets $6,140 $11,524 Classified as follows in the consolidated balance sheet: Non-current deferred tax asset 13,061 19,259 Non-current deferred tax liability (6,921) (7,735)Total $6,140 $11,524 During 2014, the Company received updated customer projections that impacted current and future years’ U.S. taxable income in amounts andtype that supported full utilization of existing federal foreign tax credit carryforwards. As a result, the Company released $26,902 of valuation allowanceagainst these foreign tax credits. The Company expects to maintain a domestic valuation allowance against state NOLs, state tax credits and state deferredtax assets due to restrictive rules regarding realization. The Company expects to maintain a valuation allowance against certain foreign deferred taxassets, primarily NOL carryforwards, until such time as the Company attains an appropriate level of future profitability in the appropriate jurisdictions andis able to conclude that it is more likely than not that its foreign deferred tax assets are realizable. 55 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (11)Income Taxes (continued) The domestic valuation allowance for the years ended December 31, 2016, 2015 and 2014 increased $2,294, increased $2,450 and decreased$25,386, respectively. The 2016 and 2015 increases in the domestic valuation allowance are due to domestic state items. The 2014 decrease in thedomestic valuation allowance was allocated as follows: the valuation allowance decreased $26,902 for the release of valuation allowance due to domesticprofitability and increased $1,516 due to domestic state items. The foreign valuation allowance for the years ended December 31, 2016, 2015 and 2014 decreased $698, decreased $1,531, and increased $1,923,respectively. The 2016 decrease in the foreign valuation allowance was allocated as follows: the valuation allowance decreased $621 for foreign incomeand decreased $77 for deferred tax amounts and currency translation adjustments included in other comprehensive income (“OCI”). The 2015 decrease inthe foreign valuation allowance was allocated as follows: the valuation allowance increased $684 for foreign income and decreased $2,215 for deferredtax amounts, the reclass of Zenara valuation allowance for assets held for sale into other current liabilities, and currency translation adjustments includedin OCI. 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. Under the tax laws of the various jurisdictions in which the Company operates, NOLs may be carried forward or back, subject to statutorylimitations, to reduce taxable income in future or prior years. Domestic federal NOLs acquired in the PharmaCore stock acquisition are approximately$11,300 and will expire in 2021 through 2035. These NOLs can be utilized against U.S. consolidated taxable income, subject to annual limitations due tothe ownership change. A full valuation allowance has been recorded against domestic state NOLs totaling approximately $98,200 which will expire in2018 through 2036. A full valuation allowance has been recorded against foreign NOLs totaling approximately $2,431 which in most foreignjurisdictions will carry forward indefinitely. As of December 31, 2016, all remaining domestic federal foreign tax credits and alternative minimum tax credits have been utilized againstcurrent U.S. income taxes on worldwide income. In 2015 and 2014, the Company repatriated $9,850 and $5,442, 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. Due in part to a continuingdesire to limit credit and currency exposure related to cash held in foreign currencies or in non-U.S. banks, the Company determined that it is likely that aportion of the undistributed earnings of its foreign subsidiaries will be repatriated to the U.S. in the future. Accordingly, the Company has provided adeferred tax liability of $635 on certain undistributed foreign earnings as of December 31, 2016. Subject to limitations, U.S. income tax on such foreignearnings, when actually repatriated, may be reduced or eliminated by unrecognized foreign tax credits that may be generated in connection with therepatriation or by existing foreign tax credit carryforwards or other tax attributes. 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. 56 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (11)Income Taxes (continued) The following table summarizes the activity related to the Company’s unrecognized tax benefits as of December 31, 2016, 2015 and 2014: 2016 2015 2014 Balance at January 1 $1,492 $1,643 $3,922 Gross increases related to current period tax positions 687 281 275 Gross decreases related to prior period tax positions (84) (52) (1,149)Expirations of statute of limitations for the assessment of taxes (257) (241) (106)Settlements - - (1,113)Foreign currency translation (60) (139) (186)Balance at December 31 $1,778 $1,492 $1,643 Of the total balance of unrecognized tax benefits at December 31, 2016, $1,778, if recognized, would affect the effective tax rate. Gross interest and penalties at December 31, 2016, 2015, and 2014 of $455, $475, and $489, respectively, related to the above unrecognized taxbenefits are not reflected in the table above. In 2016, 2015, and 2014, the Company accrued $63, $58, and $337, 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 2012 and forward in the U.S. are open to examination by the IRS. The Company is also subject to examinations in its material non-U.S.jurisdictions for 2010 and later years. The Company is also subject to audits in various states for various years in which it has filed income tax returns. Previous state audits haveresulted in immaterial adjustments. In the majority of states where the Company files, the Company is subject to examination for tax years 2012 andforward. During the fourth quarter of 2014, the Company entered into a final settlement with a tax authority, without any admission of fault or breach oflaws, in order to avoid further litigation concerning intercompany transactions from 2003. The settlement required the Company to pay $1,487 in tax andinterest during the fourth quarter of 2014 in full satisfaction of all liabilities for this matter, and in response the tax authority withdrew all pendinglitigation and renounced any outstanding claims. The settlement did not impose any penalties on the Company. Therefore, in the fourth quarter of 2014the Company decreased its remaining reserve for unrecognized tax benefits for this matter by $4,137. (12)Short-term and Long-term Debt In May 2016, the Company entered into a $500,000 five-year Syndicated Senior Revolving Credit Facility (“Credit Facility”) which expires inMay 2021. The Company pays interest on this Credit Facility at LIBOR plus 1.25% - 2.00% 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 covenantsat December 31, 2016. As of December 31, 2015, there was $30,000 outstanding on the Company’s former credit facility which was classified as short-term debt in 2015 and fully repaid in the first quarter of 2016. The 2016 and 2015 weighted average interest rate for long-term bank debt was 1.9% and2.3%, respectively. 57 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (13)Derivatives and Hedging Activities The Company operates internationally and is exposed to fluctuations in foreign exchange rates and interest rates in the normal course of business.The Company, from time to time, uses derivatives to reduce exposure to market risks resulting from fluctuations in interest rates and foreign exchangerates. 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 Contracts The Company periodically enters into foreign currency forward contracts to protect against currency fluctuations of forecasted cash flows andexisting balance sheet exposures at its foreign operations, as deemed appropriate. The Company may or may not elect to designate certain forwardcontracts for hedge accounting 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. None of the foreign currency forward contracts entered into during 2016 or 2015 were designated for hedge accounting treatment. The notionalamounts of the Company’s outstanding foreign exchange forward contracts were $20,896, $9,322 and $3,632 at December 31, 2016, 2015 and 2014,respectively. The Company does not hold or purchase any foreign currency forward contracts for trading or speculative purposes and no contractual termis greater than twelve months. The fair value of the Company’s foreign exchange forward contracts outstanding was a gain of $125 at December 31, 2016 and immaterial atDecember 31, 2015. This gain is reflected in the Company’s balance sheet under the caption “Prepaid expenses and other current assets.” Interest Rate Swap The Company entered into an interest rate swap in March 2012 to reduce the impact of changes in interest rates on its floating rate debt. This swapexpired in September 2015. The swap was a contract to exchange floating rate for fixed interest payments periodically over the life of the agreementwithout the exchange of the underlying notional debt amount. The swap contract was designated as a cash flow hedge and, accordingly, changes in the fair value of this derivative were not recorded in earningsbut were recorded each period in AOCI and reclassified into earnings as interest expense in the same period during which the hedged transaction affectedearnings. The ineffective portion of the hedge was recognized in earnings and was immaterial to the Company's financial results. The interest rate swap had a notional value of $60,000, at a fixed rate of 0.92%. The fair value of this swap was based on quoted market prices andwas in a loss position of $304 at December 31, 2014. This loss was reflected in the Company’s balance sheet under the caption “Accrued expenses andother current liabilities.” Refer to Note 14 to the Company’s consolidated financial statements for the summary table containing the fair value of the Company’s financialinstruments. 58 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (14)Fair Value Measurements U.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 inputsare quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, inputs otherthan quoted prices that are observable for the asset or liability, including interest rates, yield curves and credit risks, or inputs that are derived principallyfrom, or corroborated by, observable market data through correlation; Level 3 inputs are unobservable inputs based on the Company’s assumptions usedto measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest levelinput that is significant to the fair value measurement. The following table provides the assets and liabilities carried at fair value, measured on a recurring basis, as of December 31, 2016. The amountswere immaterial at December 31, 2015. Fair Value Measurements at December 31, 2016 using: Description Total Level 1 Level 2 Level 3 Foreign currency forwards, assets $125 $- $125 $- Total $125 $- $125 $- The Company’s foreign currency forward contracts are measured at fair value using observable market inputs such as forward rates, theCompany’s credit risk and its counterparties’ credit risks. Based on the Company’s continued ability to enter into forward contracts, the Companyconsiders the markets for its fair value instruments to be active. Based on these inputs, the Company’s 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 fairvalue because the debt is based on current rates at which the Company could borrow funds with similar maturities. Refer to Note 13 to the Company’s consolidated financial statements for further disclosures on the Company’s financial instruments. (15)Stockholders' Equity The Company has two classes of common shares, Common Stock and Nonvoting Common Stock. Authorized shares of Common Stock were100,000,000 at December 31, 2016 and 2015. Authorized shares of Nonvoting Common Stock were 730,746 at December 31, 2016 and 2015. 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 ownvoting stock. As of December 31, 2016 and 2015, no shares of Nonvoting Common Stock were outstanding. The Company has authorized 5,000,000shares of Series Preferred Stock, par value $0.10, issuable in series and with rights, powers and preferences as may be fixed by the Board of Directors. AtDecember 31, 2016 and 2015, there was no preferred stock outstanding. 59 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (15)Stockholders' Equity (continued) The Company held treasury shares of 1,583,909 and 1,729,727 at December 31, 2016 and 2015, respectively, which are primarily used for issuanceto employee compensation plans. At December 31, 2016, there were 1,366,025 authorized shares of Common Stock reserved for issuance through equity compensation plans. (16)Accumulated Other Comprehensive Loss The following tables provide the changes in AOCI by component, net of tax, for the years ended December 31, 2016 and 2015: ForeignCurrencyTranslationAdjustments PensionPlans Total Balance as of December 31, 2015 $(25,880) $(29,569) $(55,449)Other comprehensive loss before reclassifications (8,481) (2,468) (10,949)Amounts reclassified from accumulated other comprehensive loss 71 807 878 Net current-period other comprehensive loss (8,410) (1,661) (10,071)Balance as of December 31, 2016 $(34,290) $(31,230) $(65,520) ForeignCurrencyTranslationAdjustments InterestRate Swap Pension Plans Total Balance as of December 31, 2014 $(11,410) $(193) $(33,378) $(44,981) Other comprehensive (loss)/income before reclassifications (16,424) (23) 2,893 (13,554)Amounts reclassified from accumulated other comprehensive loss 1,954 216 916 3,086 Net current-period other comprehensive (loss)/income (14,470) 193 3,809 (10,468)Balance as of December 31, 2015 $(25,880) $- $(29,569) $(55,449) 60 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (16)Accumulated Other Comprehensive Loss (continued) The following tables provide the reclassifications out of AOCI by component for the years ended December 31, 2016 and 2015: Details about AOCI Components AmountReclassifiedfrom AOCI forthe year endedDecember 31, 2016 AmountReclassifiedfrom AOCI forthe year endedDecember 31, 2015 Amortization of defined benefit pension items: Actuarial losses $(1,152) $(1,295)Prior service costs (52) (52)Total before tax (1,204) (1,347)Tax benefit 397 431 Net of tax $(807) $(916) Foreign currency translation adjustment: Release of currency translation adjustment $(71) $(1,954)Net of tax $(71) $(1,954) Losses on cash flow hedge: Interest rate swap $- $(333)Tax benefit - 117 Net of tax $- $(216) Total reclassification for the period $(878) $(3,086) The Company recognizes net periodic pension cost, which includes amortization of actuarial losses and gains, and prior service costs in bothselling, general and administrative expenses and cost of goods sold in its income statement depending on the functional area of the underlyingemployees included in the plan. The release of currency translation adjustments generated from Zenara’s balance sheet are reflected in the Company’sincome statement as restructuring expenses. The interest rate swap is reflected in the Company’s income statement as interest expense. (17)Stock Based Compensation The 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, 2016, 2015 and 2014 were $15.17, $15.29 and $7.15, respectively. 61 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (17)Stock Based Compensation (continued) The following assumptions were used in determining the fair value of stock options for grants issued in 2016, 2015 and 2014: 2016 2015 2014 Expected volatility 42.09%-46.49% 41.84%-58.25% 35.14%-46.32% Expected term (in years) 0.99-6.80 1.25-6.83 1.75-4.75 Risk-free interest rate 0.54%-1.63% 0.24%-1.93% 0.43%-1.50% The Company does not have any publicly traded stock options; therefore, expected volatilities are based on historical volatility of the Company’sstock. The risk-free interest rate is based on the yield of a zero-coupon U.S. Treasury bond whose maturity period approximates the option’s expectedterm. The expected life assumption represents the weighted-average period of time that newly granted stock-based awards are expected to remainoutstanding. The expected life is estimated by analyzing three components of historical grants with the same vesting schedules: (i) observed post-vestingforfeiture, (ii) observed exercise behavior, and (iii) expected exercise behavior. The expected time to early exercise is calculated by assuming that theoptions outstanding as of the valuation date will be exercised at the midpoint between the final vest date and the expiration date. If a grant is alreadyfully vested, it is assumed the outstanding options exercise at the midpoint between the valuation date and the expiration date. The three components arethen option-weighted to estimate expected life. The Company stratifies its employees as Board of Directors, Named Executives and all other employees,each group with its own exercise behavior and thus, expected life. For 2016, 2015, and 2014, the Company recorded $3,816, $2,975 and $2,491, respectively, in selling, general and administrative expenses forstock options. As of December 31, 2016, the total compensation cost related to unvested stock option awards granted to employees but not yetrecognized was $9,356. The cost will be amortized on a straight-line basis over the remaining weighted-average vesting period of 2.6 years. The following table is a summary of the Company’s stock option activity issued to employees and related information: Weighted Average Number ofShares ExercisePrice OptionsExercisable Outstanding at December 31, 2015 1,631,913 $19.17 709,255 Granted 299,230 40.95 Exercised (398,680) 12.39 Forfeited or expired (13,125) 21.85 Outstanding at December 31, 2016 1,519,338 25.22 Exercisable at December 31, 2016 701,797 $17.72 The aggregate intrinsic value for all stock options exercised for the years ended December 31, 2016, 2015 and 2014 was $14,832, $24,432 and$8,910, respectively. The aggregate intrinsic values for all stock options outstanding and exercisable as of December 31, 2016 were $43,653 and$25,427, respectively. 62 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (17) Stock Based Compensation (continued) A summary of the Company’s nonvested stock options, restricted stock and performance shares activity is presented below: Nonvested Stock Options Nonvested Restricted Stock Nonvested Performance Shares Number ofShares Weighted-AverageGrant-Date FairValue Number ofShares Weighted-AverageGrant-Date FairValue Number ofShares Weighted-AverageGrant-Date FairValue Nonvested at December 31, 2015 922,658 $10.35 178 $46.91 350,000 $21.29 Granted 299,230 15.17 10,900 45.02 116,750 39.50 Vested during period (391,223) 9.57 (10,818) 45.15 (150,000) 16.91 Forfeited (13,125) 9.32 - - - - Nonvested at December 31, 2016 817,540 $12.50 260 $41.05 316,750 $30.08 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 2016, 2015 and 2014, the Company recorded $489, $353 and $395, respectively, in selling, general and administrative expenses for restrictedstock units. As of December 31, 2016, total compensation cost related to unvested restricted stock not yet recognized was $7. The cost will be amortizedon a straight-line basis over the remaining weighted-average vesting period of 0.3 years. 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 growthas compared to the net revenue and EBITDA growth of the members of a specified peer group of companies over a three year period. The peer groupconsists of publicly-traded life sciences companies competing in the same industry as the Company. For 2016, 2015 and 2014, the Company recorded$3,461, $2,271 and $2,116, respectively, in selling, general and administrative expenses related to these PS awards. As of December 31, 2016, totalcompensation cost related to unvested performance shares not yet recognized was $5,439. The cost will be amortized on a straight-line basis over theremaining weighted-average vesting period of 1.5 years. 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 net revenue and EBITDA growth of the members of a specified peer group of companies over a three year period.The peer group consists of publicly-traded life sciences companies competing in the same industry as the Company. As of December 31, 2016 and 2015,there were no PSU awards outstanding. For 2014, the Company recorded $445 in selling, general and administrative expenses for PSU awards. 63 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (18)Retirement Plans Domestic Pension Plan The Company maintains a defined-benefit pension plan (“Domestic Pension Plan”) for certain salaried and certain hourly employees. It is theCompany’s policy to contribute to the domestic pension plan to ensure adequate funds are available in the plan to make benefit payments to planparticipants and beneficiaries when required. The Company also has a Supplemental Executive Retirement Plan (“SERP”) for key executives. This plan isnon-qualified and unfunded. Benefits accruing under both plans were frozen in 2007. In July 2008, the Board of Directors of the Company amended theSERP 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 equivalentinstallments through 2018. In 2014, the Company announced a program to offer a one-time option to elect to receive a voluntary lump-sum pension payout to certain formeremployees with deferred vested balances in the Company’s U.S. pension plan. As part of this voluntary lump-sum program, the Company settled $17,381of pension obligations for the U.S. plan with an equal amount paid from plan assets. As a result, the Company recorded settlement losses of $7,170reflecting 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 inaccumulated other comprehensive loss. International Pension Plans A foreign subsidiary of the Company maintains a pension plan (“International Pension Plan”) for its employees that conforms to the commonpractice in that country. Based on local laws and customs, this plan is unfunded. Savings Plan Cambrex makes available to all domestic employees a savings plan. Employee contributions are matched in part by Cambrex. The cost of this planamounted to $1,294, $1,081 and $941 in 2016, 2015 and 2014, respectively. The benefit obligations as of December 31, 2016 and 2015 are as follows: Pension Plans Domestic SERP International 2016 2015 2016 2015 2016 2015 Change in benefit obligation Benefit obligation, beginning of year $58,556 $64,825 $1,800 $2,389 $22,748 $26,700 Service cost - - - - 742 778 Interest cost 2,390 2,430 18 24 740 589 Actuarial loss/(gain) 427 (5,263) - (4) 3,255 (2,397)Benefits paid (3,655) (3,436) (609) (609) (700) (697)Currency translation effect - - - - (1,783) (2,225)Benefit obligation, end of year $57,718 $58,556 $1,209 $1,800 $25,002 $22,748 64 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (18)Retirement Plans (continued) The plan assets and funded status of the Domestic Pension Plan as of December 31, 2016 and 2015 are as follows: 2016 2015 Change in plan assets Fair value of plan assets, beginning of period $39,135 $41,665 Actual return on plan assets 2,910 (806)Contributions 1,134 1,712 Benefits paid (3,655) (3,436)Fair value of plan assets, end of period $39,524 $39,135 Unfunded status (18,194) (19,421)Accrued benefit cost, end of period $(18,194) $(19,421) The unfunded status of the SERP was $1,209 and $1,800 as of December 31, 2016 and 2015, respectively. The unfunded status of the InternationalPension Plan was $25,002 and $22,748 as of December 31, 2016 and 2015, respectively. The amounts recognized in AOCI as of December 31, 2016 and 2015 consist of the following: Pension Plans Domestic SERP International 2016 2015 2016 2015 2016 2015 Actuarial loss $23,034 $23,644 $362 $544 $9,720 $6,887 Prior service cost/(benefit) - - 57 115 (7) (12)Total $23,034 $23,644 $419 $659 $9,713 $6,875 The components of net periodic benefit cost are as follows: Pension Plans Domestic SERP International 2016 2015 2014 2016 2015 2014 2016 2015 2014 Components of net periodicbenefit cost Service cost $- $- $- $- $- $- $742 $778 $674 Interest cost 2,390 2,430 3,310 18 24 33 740 589 884 Expected return on planassets (2,649) (2,870) (4,153) - - - - - - Amortization of priorservice cost/(benefit) - - - 57 57 57 (5) (5) (7)Recognized actuarialloss 776 811 522 182 154 131 194 330 149 Settlement loss - - 7,170 - - - - - - Net periodic benefit cost $517 $371 $6,849 $257 $235 $221 $1,671 $1,692 $1,700 65 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (18)Retirement Plans (continued) The estimated amounts that will be amortized from AOCI into net periodic benefit cost in 2017 are as follows: Pension Plans Domestic SERP International Actuarial loss $798 $241 $340 Prior service cost/(benefit) - 57 (5)Total $798 $298 $335 Major assumptions used in determining the benefit obligations are presented in the following table: 2016 2015 Discount rate: Domestic Pension Plan 3.95% 4.20%SERP 1.55% 1.55%International Pension Plan 2.80% 3.35% Rate of compensation increase: International Pension Plan 2.65% 2.55% Major assumptions used in determining the net benefit cost are presented in the following table: 2016 2015 2014 Discount rate: Domestic Pension Plan 4.20% 3.85% 4.80%SERP 1.55% 1.35% 1.40%International Pension Plan 3.35% 2.40% 3.70% Expected return on plan assets: Domestic Pension Plan 7.00% 7.00% 7.25% Rate of compensation increase: International Pension Plan 2.55% 2.20% 2.20% 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 werediscounted by the corresponding spot rate on the yield curve. The aggregate Accumulated Benefit Obligation (“ABO”) of $57,718 exceeds plan assets by $18,194 as of December 31, 2016 for the DomesticPension Plan. The aggregate ABO is $24,134 for the International Pension Plan as of December 31, 2016. The International Pension Plan is unfunded. 66 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (18)Retirement Plans (continued) The Company expects to contribute approximately $1,585 in cash to the Domestic Pension Plan in 2017. The Company does not expect tocontribute cash to its International Pension Plan in 2017. The following benefit payments are expected to be paid out of the plans: Pension Plans Domestic SERP International 2017 $3,344 $609 $686 2018 $3,335 $609 $740 2019 $3,404 $- $783 2020 $3,464 $- $780 2021 $3,505 $- $767 2022-2026 $17,445 $- $4,765 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.fixed income securities including high quality corporate bonds, and U.S. government securities. Other types of investments include real asset funds,consisting primarily of investments in commodities, and Treasury Inflation-Protected Securities (“TIPS”). The fair values of the Company’s pension plan assets by asset category are as follows: Fair Value Measurements at December 31, 2016 using: Asset Category Total (Level 1) (Level 2) (Level 3) Equity securities: U.S. companies $15,567 $- $15,567 $- International companies 8,647 - 8,647 - U.S. fixed income 13,432 - 11,234 2,198 Commodities 1,878 - 1,878 - $39,524 $- $37,326 $2,198 Fair Value Measurements at December 31, 2015 using: Asset Category Total (Level 1) (Level 2) (Level 3) Equity securities: U.S. companies $13,547 $- $13,547 $- International companies 7,377 - 7,377 - U.S. fixed income 13,375 - 11,207 2,168 Commodities 2,962 - 2,962 - TIPS 1,874 - 1,874 - $39,135 $- $36,967 $2,168 67 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (18)Retirement Plans (continued) The following table sets forth a summary of the changes in the fair value of the Domestic Plan’s Level 3 assets, which are annuity contracts with aninsurance company, for the year ended December 31, 2016: GroupAnnuityContract Balance at December 31, 2015 $2,168 Net investment gain 30 Balance at December 31, 2016 $2,198 (19)Foreign Operations and Sales The following summarized data represents the gross sales and long lived assets for the Company’s domestic and foreign entities for 2016, 2015 and2014: Domestic Foreign Total 2016 Gross sales $270,773 $220,765 $491,538 Long-lived assets 136,692 135,523 272,215 2015 Gross sales $237,146 $196,710 $433,856 Long-lived assets 93,142 132,099 225,241 2014 Gross sales $186,735 $187,415 $374,150 Long-lived assets 64,995 151,386 216,381 Export sales, included in domestic gross sales, in 2016, 2015 and 2014 amounted to $182,215, $159,048 and $101,101, respectively. Sales to geographic areas consist of the following: 2016 2015 2014 Europe $321,525 $280,593 $232,894 North America 138,328 127,024 117,477 Asia 17,996 14,024 12,865 Other 13,689 12,215 10,914 Total $491,538 $433,856 $374,150 One customer accounted for 36.9%, 34.5% and 24.0% of 2016, 2015 and 2014 consolidated gross sales, respectively. 68 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (20)Commitments The Company has operating leases expiring on various dates through the year 2024. The leases are primarily for the rental of office space. AtDecember 31, 2016, future minimum commitments under non-cancelable operating lease arrangements were as follows: Year ended December 31: 2017 $2,269 2018 1,191 2019 779 2020 578 2021 575 2022 and thereafter 1,365 Total commitments $6,757 Total operating lease expense was $2,044, $1,048 and $1,113, for the years ended December 31, 2016, 2015 and 2014, respectively. The Company is party to several unconditional purchase obligations resulting from contracts that contain legally binding provisions with respectto quantities, pricing and timing of purchases. The Company’s purchase obligations mainly include commitments to purchase utilities. At December 31,2016, future commitments under these obligations were as follows: Year ended December 31: 2017 $5,831 2018 - 2019 - 2020 - 2021 - Total commitments $5,831 (21)Contingencies The Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary courseof its business activities. The Company continually assesses known facts and circumstances as they pertain to applicable legal and environmental mattersand evaluates the need for reserves and disclosures as deemed necessary based on these facts and circumstances. These matters, either individually or inthe aggregate, could result in actual costs that are significantly higher than the Company’s current assessment and could have a material adverse effect onthe Company's operating results and cash flows in future reporting periods. Based upon past experience, the Company believes that paymentssignificantly in excess of current reserves, if required, would be made over an extended number of years. Environmental In 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”) forcertain waste disposal sites ("Superfund sites"). All of the liabilities currently recorded on the Company’s balance sheet for environmental proceedings areassociated 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 the recorded liabilities or potential future liabilities and the Company expects the net cash impactrelated to the contingencies described below to be reduced by the applicable income tax rate. 69 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (21)Contingencies (continued) 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. Eachof these matters is subject to various uncertainties, and it is possible that some of these matters will be decided against the Company. The resolution ofsuch matters often spans several years and frequently involves regulatory oversight or adjudication. Additionally, many remediation requirements arefluid and are likely to be affected by future technological, site and regulatory developments. It is not possible at this time for the Company to determinefully the effect of all asserted and unasserted claims on its consolidated financial condition, results of operations or liquidity; however, to the extentpossible, where asserted and unasserted claims can be estimated and where such claims are considered probable, the Company would record a liability.Consequently, the ultimate 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. At December 31, 2016, these reserves were$16,703, of which $15,441 is included in “Other non-current liabilities” on the Company’s balance sheet. At December 31, 2015, the reserves were$8,329, of which $7,498 is included in “Other non-current liabilities” on the Company’s balance sheet. The increase in the reserves includes adjustmentsto reserves of $9,994, partially offset by payments of $1,620. The reserves are adjusted periodically as remediation efforts progress or as additionaltechnical, regulatory or legal information becomes available. Given the uncertainties regarding the outcome of investigative and study activities, thestatus of laws, regulations, enforcement, policies, the impact of other PRPs, technology and information related to individual sites, the Company does notbelieve it is possible to currently develop an estimate of the range of reasonably possible environmental loss in excess of its reserves. Bayonne As 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 pursuantto the New Jersey Department of Environmental Protection’s (“NJDEP”) private oversight program. The results of the completed sampling, and anyadditional sampling deemed necessary, will be used to develop an estimate of the Company's future liability for remediation costs. New remedialrequirements were identified during 2016, and site investigation continues. As of December 31, 2016, the Company’s reserve was $502. Clifton and Carlstadt The Company has implemented a sampling and pilot program in Clifton and Carlstadt, New Jersey pursuant to the NJDEP private oversightprogram. The results of the sampling and pilot program to date have been used to develop an estimate of the Company's future liability for remediationcosts, and the Company continues to move forward with the projects at each site in accordance with the established schedules and work plans. As ofDecember 31, 2016, the Company’s reserve was $2,024. 70 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (21)Contingencies (continued) Berry’s Creek The 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 tothe notice, the PRPs have been asked to perform a remedial investigation (“RI”) and feasibility study (“FS”) of the Berry’s Creek site. The Company hasjoined the group of PRPs and entered into an Administrative Settlement Agreement (“Agreement”) and Order on Consent with the USEPA agreeing tojointly conduct or fund an appropriate remedial investigation and feasibility study of the Berry’s Creek site with the other PRPs in the Agreement. ThePRPs have engaged consultants to perform the work specified in the Agreement and develop a method to allocate related costs among the PRPs. In June 2016, the PRPs received a request from USEPA to amend the RI/FS Work Plan to accommodate a phased, iterative approach to the Berry’sCreek remediation. USEPA requested an initial interim remedy that focuses on a portion of the site, namely, sediments in Upper and Middle Berry’s Creekand the marsh in Upper Peach Island Creek. Any subsequent remedial action will occur after the implementation and performance monitoring of thisinterim remedy and the extent of future action is expected to be at least partially determined by the outcome of this initial phase. The scope of remedial activities in the initial interim remedy is currently being developed and based upon preliminary cost estimates, theCompany recorded a pretax expense of $7,517 ($4,886 after tax), net of assumed insurance coverage, in the third and fourth quarters of 2016. Theestimated costs for the initial interim remedy will be further developed over the next several months and the Company’s accrual may change based uponthe final remedy selected and revisions to cost estimates. At this time it is not known when the costs for the complete remediation plan will be estimable,and as such, no accrual beyond the initial interim remedy has been recorded. The Company’s share has been preliminarily estimated by the PRP group at2.4%. While the Company will defend its position that its share should be reduced from the current level, its share could be increased or decreaseddepending on the outcome of the final allocation process that will take place in future periods. While any resolution of this matter is not expected to materially impact the Company’s operations or financial position, it could be material to thefinancial statements in the period recorded. In July 2014, the Company received a notice from the U.S. Department of the Interior, U.S. Fish & Wildlife Service, regarding the Company’spotential liability for natural resource damages at the Berry’s Creek site and inviting the Company to participate in a cooperative assessment of naturalresource damages. Most members of the Berry’s Creek PRP group received such notice letters, and the PRP Group coordinated a joint response, which wasto decline participation in a cooperative assessment at this time, given existing investigation work at the site. The cost of any future assessment and theultimate scope of natural resource damage liability are not yet known. Maybrook Site A 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. In 2016, the Company reserved $370 foradditional USEPA oversight expenses. As of December 31, 2016, the Company’s reserve was $692 to cover long-term ground water monitoring andrelated costs. 71 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (21)Contingencies (continued) Harriman Site Subsidiaries 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 Record of Decision (“ROD”) 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“Consent Decree”). In December 2013, the Company, Pfizer and the NYSDEC entered into a federal court stipulation, which the court subsequentlyendorsed as a court order, resolving certain disputes with the NYSDEC about the scope of the obligations under the Consent Decree and the 1997 ROD,and requiring the Company and Pfizer to carry out an environmental investigation and study of certain areas of the Harriman Site. Site clean-up work under the 1997 ROD, the Consent Decree and the 2013 stipulation is ongoing and is being jointly performed by Pfizer and theCompany, with NYSDEC oversight. Since 2014, Pfizer and the Company have performed supplemental remedial investigation measures requested by theNYSDEC, and the findings have been submitted to NYSDEC in various reports, including a study evaluating the feasibility of certain remedialalternatives in August 2016. By letter dated January 5, 2017, NYSDEC disapproved such feasibility study report and requested certain revisions to thereport. The Company and Pfizer intend to make a timely response to the disapproval. As it is too soon to determine whether these reports and remedialplans, when finalized, will result in any significant changes to the Company’s responsibilities, no change to the reserve has been made. ELT Harriman,LLC ("ELT"), the current owner of the Harriman site, is conducting other investigation and remediation activities under a separate NYSDEC directive. No final remedy for the site has been determined, which will follow further discussions with the NYSDEC. The Company estimates the range for itsshare of the liability at the site to be between $2,000 and $7,000. As of December 31, 2016, the Company’s reserve was $3,515. At this time, the Companyis unable 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 hasfiled such claims in an arbitration proceeding against ELT and the immediately preceding owner, Vertellus Specialties Holdings (“Vertellus”). ELT hasfiled counterclaims, and has threatened to file additional counterclaims, for contractual indemnification and for breach of the settlement agreementagainst the Company. Currently, the arbitration proceeding is stayed indefinitely. In May 2016, some but not all of the Vertellus entities who are partiesto the Company’s 2007 settlement agreement filed for restructuring under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Courtfor the District of Delaware. The Company has filed several claims as creditors in the bankruptcy proceeding and will continue to monitor the bankruptcyproceeding. Scientific Chemical Processing (“SCP”) Superfund Site A subsidiary of Cambrex was named a PRP of the SCP Superfund site, located in Carlstadt, New Jersey, along with approximately 130 other PRPs.The site is a former waste processing facility that accepted various waste for recovery and disposal including processing wastewater from this subsidiary.The PRPs 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 CreekSuperfund site (see previous discussion). While the Company continues to dispute the methodology used by the PRP group to arrive at its interimallocation for cash contributions, the Company paid the funding requests in 2010 and 2014-2015. A final allocation of SCP Site costs (excluding Berry’sCreek costs) is expected to be finalized in 2017. As of December 31, 2016, the Company’s reserve was $883, of which approximately $565 is expected tobe covered by insurance. 72 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (21)Contingencies (continued) Newark Bay Complex The USEPA and a private party group are evaluating remediation plans for the Passaic River, Newark Bay, Hackensack River, Arthur Kill, Kill VanKull and adjacent waters (the “Newark Bay Complex”). Although the Company is not involved in the USEPA action, it continues to monitordevelopments related to the site due to its past involvement in a previously settled state action relating to the Newark Bay Complex. The USEPA hasfinalized its decision on a cleanup plan for 8.3 miles of the lower Passaic River, and has estimated the cost of this plan at $1.38 billion. Due to theuncertainty of the future scope and timing of any possible claims against the Company, no liability has been recorded. The Company is involved in other related and unrelated environmental matters where the range of liability is not reasonably estimable at this timeand it is not foreseeable when information will become available to provide a basis for adjusting or recording a reserve, should a reserve ultimately berequired. Litigation and Other Matters Lorazepam and Clorazepate In 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 “DistrictCourt”). Suits were also commenced by several State Attorneys General and class action complaints by private plaintiffs in various state courts. The suitsalleged violations of the Federal Trade Commission Act arising from exclusive license agreements between the Company and Mylan covering two APIs(Lorazepam and Clorazepate). All cases have been resolved except for one brought by four health care insurers. In the remaining case, the District Court entered judgment aftertrial in 2008 against Mylan, Gyma and Cambrex in the total amount of $19,200, payable jointly and severally, and also a punitive damage award againsteach defendant 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 in prejudgment interest. The case is currently pending before the District Court following a January 2011 remand by the Court of Appeals. In July2014, the District Court dismissed certain customers for which the plaintiffs were unable to establish jurisdiction and consequently, the plaintiffscurrently have a motion 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 litigationbrought by the purchasers of Lorazepam and Clorazepate, as well as potential future claims related to the ongoing matter. In the event of a finalsettlement or final judgment, Cambrex expects any payment required by the Company to be made by Mylan under the indemnity described above. Other The 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 liabilityrequirements of certain of its subsidiaries and a former operating location; contract provisions for indemnification protecting its customers and suppliersagainst third party liability for the manufacture and sale of Company products that fail to meet product warranties and contract provisions forindemnification protecting licensees against intellectual property infringement related to licensed Company technology or processes. 73 CAMBREX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except share and per share data) (21)Contingencies (continued) Additionally, as permitted under Delaware law, the Company indemnifies its officers, directors and employees for certain events or occurrenceswhile the officer, director or employee is, or was, serving at the Company’s request in such capacity. The term of the indemnification period is for theofficer's, director's or employee’s lifetime. The maximum potential amount of future payments the Company could be required to make under theseindemnification agreements is unlimited; however, the Company has a director and officer insurance policy that covers a portion of any potentialexposure. The Company currently believes the estimated fair value of its indemnification agreements is not material based on currently availableinformation, and as such, the Company had no liabilities recorded for these agreements as of December 31, 2016. The Company's subsidiaries are party to a number of other proceedings that are not considered material at this time. (22)Discontinued Operations For all periods presented, financial results for discontinued operations relate to environmental investigation and remediation expenses for divestedsites. For the years ended 2016, 2015, and 2014, the Company recorded $5,647 as losses, $41 as income, and $830 as losses, respectively, fromdiscontinued operations, net of tax. As of December 31, 2016 and 2015, liabilities recorded on the Company’s balance sheet relating to discontinuedoperations were $16,703 and $8,209, respectively. At this time, we cannot reasonably estimate the period of time during which the involvement isexpected to continue. Net cash used in discontinued operations was $516, $1,536, and $1,858 for 2016, 2015, and 2014, respectively. Refer to Note 21 tothe Company’s consolidated financial statements for further disclosures on the Company’s environmental contingencies. The following table is a reconciliation of the pre-tax (loss)/income from discontinued operations to the net (loss)/income from discontinuedoperations, as presented on the income statement: 2016 2015 2014 Pre-tax (loss)/income from discontinued operations $(8,777) $63 $(1,277)Income tax benefit/(expense) 3,130 (22) 447 (Loss)/income from discontinued operations, net of tax $(5,647) $41 $(830) (23)Subsequent Event On January 30, 2017, the Company transferred the assets and liabilities of Zenara to the buyer for consideration of $3,000. The sales agreementgives the buyer complete control of the daily operations of Zenara. The closing will be completed upon approval by Indian regulatory authorities whichcould take several months. 74 CAMBREX CORPORATION AND SUBSIDIARIES SELECTED QUARTERLY FINANCIAL AND SUPPLEMENTARY DATA - UNAUDITED(in thousands, except per share data) 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter 2016 Gross sales $93,935 $119,054 $99,867 $178,682 Net revenues 94,741 118,638 99,399 177,866 Gross profit 38,899 48,557 37,602 79,167 Income from continuing operations (1) 14,845 20,810 13,721 37,949 Loss from discontinued operations (3) (263) (316) (4,503) (565)Net income 14,582 20,494 9,218 37,384 Earnings per share of common stock: (4) Basic 0.46 0.64 0.29 1.16 Diluted 0.44 0.62 0.28 1.13 Average shares: Basic 31,886 32,063 32,149 32,240 Diluted 32,771 32,926 32,999 33,107 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter 2015 Gross sales $78,184 $106,379 $92,350 $156,943 Net revenues 77,525 106,635 92,979 156,187 Gross profit 29,079 45,945 35,680 66,261 Income from continuing operations (2) 8,368 19,450 11,876 17,482 (Loss)/income from discontinued operations (3) (375) 213 (129) 332 Net income 7,993 19,663 11,747 17,814 Earnings per share of common stock: (4) Basic 0.26 0.63 0.37 0.56 Diluted 0.25 0.61 0.36 0.54 Average shares: Basic 31,198 31,344 31,471 31,661 Diluted 32,158 32,440 32,593 32,784 (1)Income from continuing operations for the first, second, third, and fourth quarters includes $290 of expense, $154 of expense, a $47 benefit and $761of expense, respectively, for restructuring related to the decision to sell our finished dosage form facility in Hyderabad, India. (2)Income from continuing operations in the fourth quarter includes restructuring expenses of $15,573 and a tax benefit of $1,464 related to thedecision to sell our finished dosage form facility in Hyderabad, India. (3)Discontinued operations include charges and reimbursements for environmental remediation related to sites of divested businesses. (4)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. 75 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. Item 9A Controls and Procedures. Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures The Company maintains disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of1934 (“Exchange Act”) that are designed to ensure that information required to be disclosed in its reports filed or submitted under the Exchange Act isprocessed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulatedand communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, toallow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes thatany controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired controlobjectives, and management 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’sdisclosure controls and procedures as of the end of the period covered by this Annual Report. Based on this evaluation, the Chief Executive Officer andChief Financial Officer have concluded that as of December 31, 2016, the disclosure controls and procedures are effective to ensure that informationrequired to be disclosed by the Company in the reports filed or submitted under the Exchange Act are (i) recorded, processed, summarized and reported,within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to management, including the Chief ExecutiveOfficer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management's Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange ActRule 13a-15(f). 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 accounting principles generally accepted in the UnitedStates, and include those policies and procedures that: ●Pertain to the maintenance of records, that in reasonable detail, accurately and fairly represent the transactions and dispositions of theassets of 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 thedegree of compliance with the policies or procedures may deteriorate. 76 Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, wecarried out an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2016 based on the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Our management, includingthe Chief Executive Officer and Chief Financial Officer, concluded that based on its assessment, the Company’s internal control over financial reportingwas effective as of December 31, 2016. Effectiveness of our internal control over financial reporting as of December 31, 2016 has been audited by BDOUSA, LLP, an independent registered public accounting firm, as stated in their report which appears elsewhere herein. Changes in Internal Control over Financial Reporting There 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 materiallyaffect, our internal control over financial reporting. Item 9B Other Information. None. 77 PART III Item 10 Directors, Executive Officers and Corporate Governance. Executive Officers of the Registrant The following table lists the officers of the Company: NameAgeOffice Steven M. Klosk (i) (ii)59President, Chief Executive Officer Shawn P. Cavanagh (i) (ii)50Executive Vice President and Chief Operating Officer James G. Farrell (ii)50Vice President and Corporate Controller Samantha M. Hanley (i) (ii)39Vice President, General Counsel, and Secretary Gregory P. Sargen (i) (ii)51Executive Vice President, Corporate Development and Strategy Tom G. Vadaketh (i) (ii)54Executive Vice President and Chief Financial Officer (i) Executive Officer (ii) Corporate Officer 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 ofthe Board of Directors in May 2008. Mr. Klosk joined the Company as Vice President, Administration. He was appointed Executive Vice President,Administration in October 1996 and was promoted to the position of Executive Vice President, Administration and Chief Operating Officer for theCambrex Pharma and Biopharmaceutical Business Unit in October 2003. In January 2005, Mr. Klosk assumed direct responsibility for the leadership ofthe Biopharmaceutical Business Unit as Chief Operating Officer. In August 2006, Mr. Klosk assumed the responsibility of the Pharma business asExecutive Vice President and Chief Operating Officer – Biopharma & Pharma and in February 2007 was appointed to Executive Vice President, ChiefOperating Officer and President, Pharmaceutical Products and Services. From 1988 until he joined Cambrex, Mr. Klosk was Vice President,Administration and Corporate Secretary for The Genlyte Group, Inc. From 1985 to 1988, he was Vice President, Administration for Lightolier, Inc., asubsidiary of The Genlyte Group, Inc. Mr. Klosk currently serves on the Board of Directors of Caladrius Biosciences, Inc., a publicly traded cell therapycompany. Mr. Cavanagh joined Cambrex in January 2011 and has served as Executive Vice President and Chief Operating Officer since he joined Cambrex.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 increasingresponsibility including President of Cambrex Bioproducts. Prior to joining Cambrex Bioproducts, Mr. Cavanagh held various management andengineering positions with FMC Corporation. 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. 78 Ms. Hanley joined Cambrex in April 2009 and has served as Vice President, General Counsel and Corporate Secretary since February 2015. Shepreviously served as Assistant General Counsel and Assistant Corporate Secretary, from January 2013 until February 2015. Ms. Hanley previously heldthe position of Senior Intellectual Property/Corporate Counsel and Assistant Secretary. Prior to joining Cambrex, Ms. Hanley worked at AlpharmaPharmaceuticals as Director of Intellectual Property and was an Associate with Lerner, David, Littenberg, Krumholtz & Mentlik, LLP, an intellectualproperty law firm. Mr. Sargen joined Cambrex in February 2003 and currently serves as Executive Vice President, Corporate Development and Strategy since January2017. He previously served as Executive Vice President and Chief Financial Officer from January 2011 to January 2017, and Vice President and ChiefFinancial Officer since February 2007. Mr. Sargen previously held the position of Vice President, Finance. Previously, he was with Exp@nets, Inc. from1999 through 2002, serving in the roles of Executive Vice President, Finance/Chief Financial Officer and Vice President/Corporate Controller. From 1996to 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. Mr. Vadaketh joined Cambrex in January 2017 as Executive Vice President and Chief Financial Officer. Most recently Mr. Vadaketh was the ChiefFinancial Officer of the Crosby Group, and prior to that, he spent nine years in a variety of increasingly senior financial positions at Tyco International. Inhis last role at Tyco, he served as Vice President, Finance, Corporate Financial Planning & Analysis and Chief Financial Officer of Global Products. Priorto his time at Tyco, Mr. Vadaketh spent 15 years in a variety of senior financial roles at Procter & Gamble. The remaining information required by this item will be included in the 2017 Proxy Statement and is incorporated herein by reference. Item 11 Executive Compensation. The remaining information required by this item will be included in the 2017 Proxy Statement and is incorporated herein by reference. Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The remaining information required by this item will be included in the 2017 Proxy Statement and is incorporated herein by reference. Item 13 Certain Relationships and Related Transactions and Director Independence. The remaining information required by this item will be included in the 2017 Proxy Statement and is incorporated herein by reference. Item 14 Principal Accountant Fees and Services. The remaining information required by this item will be included in the 2017 Proxy Statement and is incorporated herein by reference. 79 PART IV Item 15 Exhibits and Financial Statement Schedules. (a) 1. The following consolidated financial statements of the Company are filed as part of this report: Page Number(in this report)Financial Statements: Reports of Independent Registered Public Accounting Firm37Consolidated Balance Sheets as of December 31, 2016 and 201539Consolidated Income Statements for the Years Ended December 31, 2016, 2015 and 201440Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2016, 2015 and 201441Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2016, 2015 and 201442Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015 and 201443Notes to Consolidated Financial Statements44Selected Quarterly Financial and Supplementary Data (unaudited)75 2. (i) The following schedule to the consolidated financial statements of the Company as filed herein and the Report of IndependentRegistered Public Accounting Firms are filed as part of this report. Page Number(in this report) Schedule II – Valuation and Qualifying Accounts81 All other schedules are omitted because they are not applicable or not required or because the required information is included in theconsolidated financial statements of the Company or the notes thereto. 3. The exhibits filed in this report are listed in the Exhibit Index on pages 83-85. 80 SCHEDULE IICAMBREX CORPORATION VALUATION AND QUALIFYING ACCOUNTSFOR THE YEARS ENDED DECEMBER 31, 2016, 2015 and 2014(dollars in thousands) Column A Column B Column C Column D Column E Additions Charged/ Charged/ Balance (Credited) to (Credited) to Balance Beginning Cost and Other End of of Year Expenses Accounts Deductions Year Description Year ended December 31, 2016: Doubtful trade receivables and returns and allowances $304 $61 $(24) $- $341 Deferred tax valuation allowance 9,863 1,673 (77) - 11,459 Year ended December 31, 2015: Doubtful trade receivables and returns and allowances $346 $(11) $(31) $- $304 Deferred tax valuation allowance 8,944 3,134 (2,215) - 9,863 Year ended December 31, 2014: Doubtful trade receivables and returns and allowances $1,058 $61 $(130) $643 $346 Deferred tax valuation allowance 32,407 (25,169) 1,706 - 8,944 81 SIGNATURES Pursuant 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/ Tom G. Vadaketh Tom G. Vadaketh Executive Vice President and Chief Financial Officer Date: February 3, 2017 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Signature Title Date /s/STEVEN M. KLOSK President and Chief Executive Officer, February 3, 2017 Steven M. Klosk and Director /s/TOM G. VADAKETH Executive Vice President and Chief Financial February 3, 2017 Tom G. Vadaketh Officer (Principal Financial Officer and Accounting Officer) /s/SHLOMO YANAI Chairman of the Board of Directors February 3, 2017 Shlomo Yanai /s/ROSINA B. DIXON Director February 3, 2017 Rosina B. Dixon, M.D. /s/CLAES GLASSELL Director February 3, 2017 Claes Glassell /s/LOUIS J. GRABOWSKY Director February 3, 2017 Louis J. Grabowsky /s/BERNHARD HAMPL, PhD Director February 3, 2017 Bernhard Hampl, PhD /s/KATHRYN RUDIE HARRIGAN Director February 3, 2017 Kathryn Rudie Harrigan, PhD /s/LEON J. HENDRIX, JR. Director February 3, 2017 Leon J. Hendrix, Jr. /s/ILAN KAUFTHAL Director February 3, 2017 Ilan Kaufthal /s/PETER G. TOMBROS Director February 3, 2017 Peter G. Tombros 82 EXHIBIT INDEX Exhibit No. Description 3.1--Restated Certificate of Incorporation of Cambrex Corporation.(O). 3.2--By Laws of Cambrex Corporation, as amended.(U). 4.1--Form of Certificate for shares of Common Stock of Cambrex Corporation.(C - Exhibit 4(a)). 4.2--2009 Long-Term Incentive Plan (as amended and restated April 29, 2015).(T) 10.1--Form of Non-Employee Directors Stock Option Agreement.(F). 10.2--Form of Performance Share Agreement.(R). 10.3--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.(J). 10.4--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.(L). 10.5--Shawn P. Cavanagh Offer of Employment Letter.(M). 10.6--Employment Agreement dated January 17, 2011 between Cambrex Corporation and Shawn P. Cavanagh.(M). 10.7 --Cambrex Corporation Savings Plan.(D). 10.8 --Cambrex Corporation Supplemental Retirement Plan.(E). 10.9--Employment Agreement dated February 6, 2007 between Cambrex Corporation and Gregory P. Sargen.(K). 10.10 --2001 Performance Stock Option Plan.(G). 10.11 --2003 Performance Stock Option Plan.(G). 10.12--2004 Performance Incentive Plan.(H). 10.13--2004 Incentive Plan.(I). 10.14 --Administrative Consent Order of the New Jersey Department of Environmental Protection to Cosan Chemical Corporation, datedSeptember 16, 1985.(C – Exhibit 10(Q)). 10.15--Form of Stock Option Agreement.(S). 10.16--Form of Performance Share Unit Agreement.(Q). 10.17--Executive Cash Incentive Plan.(P). 10.18--2012 Equity Incentive Plan for Non-Employee Directors.(P). 10.19--Gregory P. Sargen Offer of Employment Letter.(V). 10.20--Tom Vadaketh Offer of Employment Letter.(A). 10.21--Employment Agreement dated January 20, 2017 between Cambrex Corporation and Tom Vadaketh.(A). 21--Subsidiaries of registrant.(A). 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, 333-181053 and 333-190305 onForm S-8 of the registrant.(A). 31.1--CEO Certification pursuant to Rule 13a – 14(a) and Rule 15d – 14(a) of the Securities Exchange Act, as amended.(A). 31.2--CFO Certification pursuant to Rule 13a – 14(a) and Rule 15d – 14(a) of the Securities Exchange Act, as amended.(A). 83 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.(B). 101.INS--XBRL Instance Document.(A)(N). 101.SCH--XBRL Taxonomy Extension Schema.(A)(N). 101.CAL--XBRL Taxonomy Extension Calculation Linkbase.(A)(N). 101.DEF--XBRL Taxonomy Extension Definition Linkbase.(A)(N). 101.LAB--XBRL Taxonomy Extension Label Linkbase.(A)(N). 101.PRE--XBRL Taxonomy Extension Presentation Linkbase.(A)(N). See legend on following page 84 EXHIBIT INDEX (A)Filed herewith. (B)Furnished herewith. (C)Incorporated by reference to the indicated Exhibit to registrant's Registration Statement on Form S-1 (Registration No. 33-16419). (D)Incorporated by reference to registrant's Registration Statement on Form S-8 (Registration No. 33-81780) dated July 20, 1994. (E)Incorporated by reference to the registrant's Annual Report on Form 10-K for year end 1994 filed on March 24, 1995. (F)Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ending March 31, 2013 filed on May 3, 2013. (G)Incorporated by reference to registrant’s Registration Statement on Form S-8 (Registration No. 333-113612) dated March 15, 2004. (H)Incorporated by reference to registrant’s Registration Statement on Form S-8 (Registration No. 333-113613) dated March 15, 2004. (I)Incorporated by reference to registrant’s Registration Statement on Form S-8 (Registration No. 333-129473) dated November 4, 2005. (J)Incorporated by reference to registrant’s Quarterly Report on Form 10-Q for the period ending September 30, 2011 filed on November 4, 2011. (K)Incorporated by reference to registrant’s Annual Report on Form 10-K for year end 2006 filed on March 15, 2007. (L)Incorporated by reference to registrant’s Quarterly Report on Form 10-Q for the period ending September 30, 2007 filed on November 2, 2007. (M)Incorporated by reference to the registrant’s Current Report on Form 8-K dated January 13, 2011. (N)Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated BalanceSheets as of December 31, 2016 and 2015, (ii) Consolidated Income Statements for the years ended December 31, 2016, 2015 and 2014,(iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015 and 2014, (iv) Consolidated Statements ofStockholders’ Equity for the years ended December 31, 2016, 2015 and 2014, (v) Consolidated Statement of Cash Flows for the years endedDecember 31, 2016, 2015 and 2014, and (vi) Notes to Consolidated Financial Statements. (O)Incorporated by reference to the registrant’s Current Report on Form 8-K dated April 30, 2012. (P)Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ending March 31, 2012 filed May 4, 2012. (Q)Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ending June 30, 2012 filed August 2, 2012. (R)Incorporated by reference to the registrant’s Annual Report on Form 10-K for year end 2012 filed on February 7, 2013. (S)Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ending June 30, 2013 filed August 1, 2013. (T)Incorporated by reference to the registrant’s Registration Statement on Form S-8 (Registration No. 333-206045) dated August 3, 2015. (U)Incorporated by reference to the registrant’s Current Report on Form 8-K dated January 28, 2016. (V)Incorporated by reference to the registrant’s Annual Report on Form 10-K for year end 2015 filed on February 9, 2016. 85 Exhibit 10.20 December 30, 2016 Mr. Tom Vadaketh2124 E 23 StreetTulsa, OK 74114 Dear Tom, The Cambrex management team enjoyed meeting with you throughout the interview process and I am delighted to extend an offer of employment to youto join Cambrex as Executive Vice President & Chief Financial Officer. You will report to me and receive an annual base salary of $400,000 per year. You will also receive a one-time sign-on bonus of $50,000 payable on the one month anniversary of your start date. In the event of voluntary terminationor involuntary termination for Cause within a 12 month period of your start date, the Company will seek repayment of the entire sign-on bonus amount. Additionally, you will participate in the Company’s Executive Incentive Plan ("EIP"), the elements of which are determined by the Board of Directorsannually. As such, you will be eligible for a bonus award of 60% of your base salary for achievement at target performance, with up to 40% forachievement at minimum performance and up to 200% for achievement of maximum performance. Please note that performance below minimum targetsresults in no bonus award. Bonus awards are subject to the approval of the Compensation Committee and are paid entirely in cash and distributed shortlyafter the finalization of the prior year’s financial results. The structure of the Executive Incentive Plan ("EIP"), including the metrics, percentage of basesalary, and form of the award among other factors, is reviewed and approved by the Compensation Committee at the beginning of each year and is subjectto change from year to year. Cambrex employees must be actively employed on the date the bonus awards are paid in order to receive the bonus award. Upon commencement of your employment, we expect that you will enter into an Employment Agreement (the “Agreement”) with Cambrex Corporation,which will be provided to you separately and which shall become effective only in the event of a Change in Control as defined in the Agreement. Shouldyour employment with Cambrex be involuntarily terminated for reasons other than for Cause (see the definition of “Cause” in the Agreement) without theAgreement becoming effective, you will be entitled, upon execution of an appropriate separation agreement, to receive a severance payment equal toyour regular base salary for up to 12 months from your date of separation or until you find equivalent employment, if earlier. The Cambrex Board of Directors has approved a new hire stock option grant equivalent to $800,000. The actual number of stock options will bedetermined by the Black Scholes value using the average of the high and low prices of Cambrex stock on your first day of employment as the exerciseprice. The stock options vest and are exercisable 25% per year over 4 years. Incentive based compensation will be subject to the Company’s claw backpolicy as required by the Dodd-Frank Act. This new hire stock option grant does not establish an annual entitlement for stock options. Each year, theCambrex Board of Directors determines the breadth and depth of participation in the stock option program.  Mr. Tom VadakethDecember 30, 2016Page 2 With regard to relocation, the Company will reimburse you for your reasonable (i) closing costs associated with the sale of your home in Tulsa, includingthe real estate commission, title search, etc., and (ii) costs in connection with one instance of moving household goods. The reimbursement amount willbe grossed-up for tax purposes. Conditions of relocation reimbursement: you must remain employed with the Company in a full-time capacity for a minimum of 24 consecutive monthsafter relocation. In the event of voluntary termination or involuntary termination for Cause, relocation expenses reimbursed to employee by the Companyunder this policy must be repaid to the Company immediately upon status change according to the following schedule: Length of Service From Effective Date of Employment Reimbursement% Due Cambrex for All Relocation Within 12 months100%Within 18 months75%Within 24 months50% You will be eligible to participate in our Basic Life Insurance, Supplemental Life Insurance, Accidental Death and Dismemberment, ComprehensiveHealth, Flexible Spending, and Long Term Disability plans, commencing on the first day of active employment. Additionally, you will be eligible toparticipate in the Cambrex Savings Plan/401(k) commencing on the first of the month following 30 days of active service. Cambrex will match the first6% of your contributions (100% on the first 3% and 50% on the next 3%) that you contribute to the Savings Plan. The Company match vests 20% oneach anniversary of hire date and is fully vested after five years. You will be eligible for four (4) weeks of vacation. In addition, Cambrex employees enjoy 12 holidays per year. Commencement of work with Cambrex Corporation is contingent upon proof of eligibility of U.S. employment, a background check, completion of a pre-employment physical examination relating to the essential functions of the job and a drug screen, and the execution of a Confidentiality Agreement.Further, this offer and any commencement of employment is conditioned upon Cambrex’s satisfaction, in its sole discretion, that there are no restrictivecovenants or legal actions which may preclude your ability to join or continue to work at Cambrex. I look forward to you joining Cambrex. Please feel free to call me should you have any questions or if we can assist you in any way. Sincerely, Steven M. KloskPresident and Chief Executive Officer  Mr. Tom VadakethDecember 30, 2016Page 3 Please indicate your acceptance of this arrangement by signing below and returning one copy of this letter to us. If you want to scan and returnelectronically (please also return one original copy), please email it to me at steve.klosk@cambrex.com with a copy to samantha.hanley@cambrex.com. /s/ Tom Vadaketh 1/20/2017 Tom Vadaketh Expected Start Date Exhibit 10.21 EMPLOYMENT AGREEMENT THIS AGREEMENT made by and between CAMBREX CORPORATION, a Delaware corporation (the "Company"), and Tom Vadaketh, (the"Employee"), as of the 20th day of January, 2017. WHEREAS, the Employee presently is a key management employee of the Company, namely its Executive Vice President & Chief Financial Officer;and WHEREAS, the Board of Directors of the Company (the "Board"), on the advice of its Compensation Committee, has determined that it is in the bestinterests of the Company and its stockholders to assure that the Company will have the continued dedication of the Employee, notwithstanding thepossibility, threat, or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish theinevitable distraction of the Employee by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control, toencourage the Employee's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control whichprovides the Employee with individual financial security and which are competitive with those of other corporations. In order to accomplish theseobjectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall be the first date during the "Change of Control Period" (as defined in Section 1(b)) on which a Change of Control occurs.Anything in this Agreement to the contrary notwithstanding, if the Employee's employment with the Company is terminated prior to the date on which aChange of Control occurs, and it is reasonably demonstrated that such termination (1) was at the request of a third party who has taken steps reasonablycalculated to effect a Change of Control or (2) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of thisAgreement the "Effective Date" shall mean the date immediately prior to the date of such termination. (b) The "Change of Control Period" is the period commencing on the date hereof and ending on the second anniversary of such date; provided,however, that commencing on the date one year after the date hereof, and on each successive anniversary thereof (each such anniversary being hereinafterreferred to as a "Renewal Date"), the Change of control Period shall be automatically extended so as to end on the third anniversary of such Renewal Dateunless at least sixty (60) days prior to such Renewal date the Company shall give notice that the Change of Control Period shall not be so extended, inwhich event the then current Change of Control Period shall not be extended and shall end on the then applicable ending date.  2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean: (a) the acquisition (other than from the Company) by any person, entity or "group" (within the meaning of Section 13 (d)(3) or 14(d)(2) of theSecurities Exchange Act of 1934 (the "Exchange Act") but excluding for this purpose the Company or its subsidiaries or any employee benefit plan of theCompany or its subsidiaries which acquires beneficial ownership of voting securities of the Company) of "beneficial ownership" (within the meaning ofRule 13d-3 promulgated under the Exchange Act) of fifteen percent (15%) or more of either the then outstanding shares of common stock or thecombined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors; or (b) individuals who, as of the date hereof, constitute the Board (as of the date hereof the "Incumbent Board") cease for any reason to constitute at leasta majority of the Board; provided that any person becoming a member of the Board subsequent to the date hereof whose election or nomination forelection by the Company's stockholders (other than an election or nomination of an individual whose initial assumption of office is in connection with anactual or threatened election contest relating to the election of the directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14Apromulgated under the Exchange Act) was approved by a vote of at least a majority of thedirectors then comprising the Incumbent Board shall be, for purposes of this Agreement, considered a member of the Incumbent Board; or (c) approval by the stockholders of the Company of either a reorganization, or merger, or consolidation, with respect to which persons who were thestockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than fiftypercent (50%) of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated entity's thenoutstanding voting securities, or a liquidation or dissolution of the Company, or the sale of all or substantially all of the assets of the Company; or (d) the sale or disposition by the Company of all or substantially all of the assets of the Company; or (e) any other event or series of events or which, notwithstanding any of the foregoing provisions of this Section 2 to the contrary, is determined by amajority of the Incumbent Board to constitute a Change of Control for the purposes of this Agreement. 3. Employment Period. The Company hereby agrees to employ the Employee, and the Employee hereby agrees to remain in the employ of theCompany, for the period (the "Employment Period") commencing on the Effective Date and ending on the second anniversary of such date; provided,however, that if a Change of Control actually occurs but the Employee's employment is terminated by the Company other than for Cause (as defined inSection 5(b) hereof) prior to the occurrence of such Change of Control but within twelve (12) months after  (a) the commencement of a tender offer for at least 15% of the Company's common stock by any person (other than the Company, one of itssubsidiaries or any employee benefit plan sponsored or maintained by the Company or one of its subsidiaries) that has not been withdrawn on or beforethe date of such termination; (b) the commencement of a proxy contest intended to remove control of the Company's business from the Incumbent Board that has not beenabandoned on or before the date of such termination; or (c) the execution of a definitive agreement to merge or otherwise consolidate the Company with or into another corporation or to sell a substantialportion of the Company's assets (in each case, other than a transaction involving only the Company and one or more corporations or other entitiesdirectly or indirectly owned and controlled by the Company) that is still binding on the parties thereto at the date of such termination; the Effective Dateof this Agreement shall be deemed to be the day immediately prior to the date of such termination and the date of such termination shall be deemed to bethe Employee's Date of Termination (as defined in Section 5(e) hereof) for the purposes of this Agreement. 4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Employee's position shall be at least commensurate in all substantial respects with the Employee'sposition with the Company and its subsidiaries during the ninety-day period immediately preceding the Effective Date and (B) the Employee's servicesshall be performed at the location where the Employee was employed immediately preceding the Effective Date or any office or location less than fifty(50) miles from such location. (ii) During the Employment Period, the Employee agrees to devote reasonable attention and time during normal business hours to the business andaffairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Employee hereunder, to use the Employee'sreasonable best efforts to perform faithfully and efficiently such responsibilities. It is expressly understood and agreed that to the extent that any outsideactivities have been conducted by the Employee prior to the Effective Date, the continued conduct of such activities subsequent to the Effective Dateshall not thereafter be deemed to interfere with the performance of the Employee's responsibilities to the Company.  (b) Compensation. (i) Base Salary. During the Employment Period, the Employee shall receive a base salary ("Base Salary") at a monthly rate at least equal to thehighest monthly base salary paid or payable to the Employee by the Company and its subsidiaries during the twelve-month period immediatelypreceding the month in which the Effective Date occurs. During the Employment Period, the Base Salary shall be reviewed at least annually and shall beincreased at any time and from time to time as shall be substantially consistent with increases in base salary awarded in the ordinary course of business toother key employees of the Company and its subsidiaries. Any increase in Base Salary shall not serve to limit or reduce any other obligation to theEmployee under this Agreement. (ii) Annual Bonus. In addition to Base Salary, the Employee shall be eligible (but not entitled) to receive, for each fiscal year during theEmployment Period, an annual bonus (an "Annual Bonus") (pursuant to any regular incentive bonus plan maintained by the Company) in cash, restrictedstock, restricted stock units or other forms of remuneration on the same basis as with respect to the fiscal year immediately preceding the fiscal year inwhich the Effective Date occurs. 5. Termination. (a) Death or Disability. This Agreement shall terminate automatically upon the Employee's death. If the Company determines in good faith that theDisability of the Employee has occurred (pursuant to the definition of "Disability" set forth below), it may give to the Employee written notice of itsintention to terminate the Employee's employment. In such event, the Employee's employment with the Company shall terminate effective on thethirtieth (30th) day after receipt of such notice by the Employee (the "Disability Effective Date"), provided that, within the thirty (30) days after suchreceipt, the Employee shall not have returned to full-time performance of the Employee's duties. For purposes of this Agreement, "Disability" meansdisability which, at least twenty-six (26) weeks after its commencement, is determined to be total and permanent by a physician selected by the Companyor its insurers and acceptable to the Employee or the Employee's legal representative (such agreement as to acceptability not to be withheldunreasonably). (b) Cause. The Company may terminate the Employee's employment for "Cause" or other than for Cause. For purposes of this Agreement, "Cause"shall constitute either (i) personal dishonesty or breach of fiduciary duty involving personal profit; (ii) the commission of a criminal act related to theperformance of duties, or the furnishing of proprietary confidential information about the Company to a competitor, or potential competitor or third partywhose interests are adverse to those of the Company; (iii) habitual intoxication by alcohol or drugs during work hours; or (iv) conviction of a felony.  (c) Good Reason. The Employee's employment may be terminated by the Employee for Good Reason or other than for Good Reason. For purposesof this Agreement, "Good Reason" means: (i) relocation of the principal place at which the Employee's duties are to be performed to a location more than fifty (50) miles from the principalplace where the Employee's duties were performed during the ninety-day period immediately preceding the Effective Date; (ii) a substantial reduction in the Base Salary, or in the benefits or perquisites provided the Employee from those which pertained during the 90-day period immediately preceding the Effective Date; (iii) a substantial reduction in the Employee's, responsibilities, authorities or functions from those which pertained during the 90-day periodimmediately preceding the Effective Date; (iv) a substantial adverse change in the Employee's work conditions from those which pertained during the 90-day period immediatelypreceding the Effective Date; and (v) any failure by the Company to comply with and satisfy Section II(c) of this Agreement. (d) Notice of Termination. Any termination by the Company for Cause or other than for Cause or by the Employee for Good Reason or other thanGood Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. Forpurposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreementrelied upon (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee's employment underthe provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the terminationdate (which date shall be not more than fifteen (15) days after the giving of such notice). The failure by the Employee to set forth in the Notice ofTermination any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Employee hereunder or precludethe Employee from asserting such fact or circumstance in enforcing his rights hereunder. (e) Date of Termination. "Date of Termination" means the date of receipt of the Notice of Termination or any later date specified therein, as the casemay be; provided, however, that (i) if the Employee's employment is terminated by the Company other than Cause or Disability, the Date of Terminationshall be the date on which the Company notifies the Employee of such termination and (ii) if the Employee's employment is terminated by reason ofdeath or Disability, the Date of Termination shall be the date of death of the Employee or the Disability Effective Date, as the case may be.  6. Obligation of the Company upon Termination. (a) Death. If the Employee's employment is terminated by reason of the Employee's death, this Agreement shall terminate without further obligationsto the Employee's legal representatives under this Agreement, other than those obligations accrued or earned and vested (if applicable) by the Employeeas of the Date of Termination, including, for this purpose (i) the Employee's full Base Salary through the Date of Termination at the rate in effect on theDate of Termination or, if higher, at the highest rate in effect at any time from the ninety-day period preceding the Effective Date through the Date ofTermination (the "Highest Base Salary"), (ii) the product of the Annual Bonus paid to the Employee for the last full fiscal year and a fraction, thenumerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is three hundred sixty-five (365) and (iii) any compensation previously deferred by the Employee (together with accrued interest thereon, if any) and not yet paid by theCompany and any accrued vacation pay not yet paid by the Company (such amounts specified in clauses (i), (ii) and (iii) are hereinafter referred to as"Accrued Obligations"). All such Accrued Obligations shall be paid to the Employee's estate or beneficiary, as applicable, in a lump sum in cash withinthirty (30) days of the Date of Termination. Anything in this Agreement to the contrary notwithstanding, the Employee's family shall be entitled toreceive benefits at least equal to the most favorable benefits provided by the Company and any of its subsidiaries under such plans, programs, practicesand policies relating to family death benefits, if any, in accordance with the most favorable plans, programs, practices and policies of the company and itssubsidiaries in effect at any time during the ninety-day period immediately preceding the Effective Date or, if more favorable to the Employee and/or theEmployee's family, as in effect on the date of the Employee's death with respect to other key employees of the Company and its subsidiaries and theirfamilies. (b) Disability. If the Employee's employment is terminated by reason of the Employee's Disability, this Agreement shall terminate without furtherobligations to the Employee; other than those obligations accrued or earned and vested (if applicable) by the Employee as of the Date of Termination,including for this purpose, all Accrued Obligations. All such Accrued Obligations shall be paid to the Employee in a lump sum in cash within thirty (30)days of the Date of Termination. Anything in this Agreement to the contrary notwithstanding, the Employee shall be entitled after the Disability EffectiveDate to receive disability and other benefits at least equal to the most favorable of those provided by the Company and its subsidiaries to disabledemployees and/or their families in accordance with such plans, programs, practices and policies of the Company and its subsidiaries in effect at any timeduring the ninety-day period immediately preceding the Effective Date or, if more favorable to the Employee and/or the Employee's family, as in effect atany time thereafter with respect to other key employees of the Company and its subsidiaries and their families.  (c) Cause; Other than for Good Reason. If the Employee's employment shall be terminated for Cause, this Agreement shall terminate without furtherobligations to the Employee other than the obligation to pay to the Employee the Highest Base Salary through the Date of Termination plus the amountof any compensation previously deferred by the Employee (together with accrued interest thereon, if any). If the Employee terminates employment otherthan for Good Reason, this Agreement shall terminate without further obligations to the Employee, other than those obligations accrued or earned andvested (if applicable) by the Employee through the Date of Termination, including for this purpose, all Accrued Obligations. All such AccruedObligations shall be paid to the Employee in a lump sum in cash within thirty (30) days of the Date of Termination. (d) Good Reason; Other than for Cause or Disability. If, during the Employment Period, the Company shall terminate the Employee's employmentother than for Cause, Disability, or death or if the Employee shall terminate his employment for Good Reason: (i) the Company shall pay to the Employee in a lump sum in cash within thirty (30) days after the Date of Termination the aggregate of thefollowing amounts: A. to the extent not theretofore paid, the Employee's Highest Base Salary through the Date of Termination; and B. the product of (x) the highest Annual Bonus earned by the Employee during the two fiscal years immediately preceding the Date ofTermination, or, if higher, the Employee's Target Bonus after the date of this Agreement until an Annual Bonus has actually been earned and (y) afraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is threehundred sixty-five (365); and C. the product of (x) a fraction, the numerator of which is twenty-four (24) minus the number of whole months the Employee has been employedby the Company following the first anniversary of the Effective Date and the denominator of which is twelve (12) and (y) the annualized Highest BaseSalary; and D. the product of (x) fraction, the numerator of which is twenty-four (24) minus the number of whole months the Employee has been employedby the Company following the first anniversary of the Effective Date and the denominator of which is twelve (12) and (y) the highest Annual Bonusearned by the Employee during two fiscal years immediately preceding the Date of Termination, provided that Employee's Annual Bonus under thisSection after the date of this Agreement shall be his Target Bonus until an Annual Bonus has actually been earned; and E. in the case of compensation previously deferred by the Employee, all amounts previously deferred (together with accrued interest thereon, ifany) and not yet paid by the Company, and any accrued vacation pay not yet paid by the Company; and  F. for the remainder of the Employment Period, or such longer period as any plan, program, practice or policy may provide, the Company shallcontinue benefits to the Employee and/or the Employee's family at least equal to those which would have been provided to them as if the Employee'semployment had not been terminated, in accordance with the most favorable employee benefit plans of the Company and its subsidiaries (includinghealth insurance and life insurance) during the ninety-day period immediately preceding the Effective Date or, if more favorable to the Employee, as ineffect at any time thereafter with respect to other key employees and their families; and (ii) all outstanding equity awards shall immediately vest and, as applicable, become exercisable. 7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Employee's continuing or future participation in any benefit, bonus,incentive or other plans, programs, policies or practices, provided by the Company or any of its subsidiaries and for which the Employee may qualify, norshall anything herein limit or otherwise affect such rights as the Employee may have under any stock option or other agreements with the Company orany of its subsidiaries. Amounts which are vested benefits or which the Employee is otherwise entitled to receive under any plan, policy, practice orprogram of the Company or any of its subsidiaries at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy,practice or program provided, however, that in the event the terms of any such plan, policy, practice or program concerning the payment of benefitsthereunder shall conflict with any provision of this Agreement, the terms of this Agreement shall take precedence but only if and to the extent thepayment would not adversely affect the tax exempt status (if applicable) of any such plan, policy, practice or program and only if the Employee agrees inwriting that such payment shall be in lieu of any corresponding payment from such plan, policy, practice or program. 8. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereundershall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Employeeor others. In no event shall the Employee be obligated to seek other employment or take any other action by way of mitigation of the amounts payable tothe Employee under any of the provisions of this Agreement. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenseswhich the Employee may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company or others of the validity orenforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by theEmployee about the amount of any payment pursuant to Section 9 of this Agreement), plus in each case interest at the applicable Federal rate provided forin Section 7872(f)(2) of the Internal Revenue Code of 1986, as amended (the "Code").  9. Limitations on Payments to Employee. (a) Notwithstanding any contrary provisions in any plan, program or policy of the Company or in this Agreement, if it is determined that anypayment or benefit provided to or for the benefit of Employee whether paid or payable or distributed or distributable pursuant to the terms of thisAgreement or otherwise ("Payments") would be subject to the excise tax imposed by the Code section 4999 ("Excise Tax"), the Company shall reduceEmployee's Payments to the extent necessary so that no portion thereof shall be subject to the Excise Tax. (b) The Company shall defend, indemnify and hold harmless Employee from any claims or liabilities resulting from or relating to itsdeterminations under Section 9(a). 10. Non-competition. As a condition to receiving any benefits pursuant to this Agreement, the Employee agrees that during his period of employmentand through the first anniversary of his Date of Termination, the Employee shall not engage in or become associated with any Competitive Activity. Forpurposes of this Section 10, a "Competitive Activity" shall mean any business or other endeavor that engages in any country in which the Company or itsAffiliates have business operations in a business that directly or indirectly competes with all or any substantial part of any of the business in which theCompany or its Affiliates is engaged at the time of the Employee's Date of Termination. The Employee shall be considered to have become "engaged" or"associated" with a Competitive Activity if he becomes involved as an owner, employee, officer, director, independent contractor, agent, partner, advisor,lender, or in any other capacity calling for the rendition of the Employee's personal services, either alone or with any individual, partnership, corporationor other organization that is engaged in a Competitive Activity and his involvement relates in any respect to the Competitive Activity of such entity;provided, however, that the Employee shall not be prohibited from owning less than two percent of any publicly traded corporation, whether or not suchcorporation is in competition with the Company. If, at any time, the provisions of this Section 10 shall be determined to be invalid or unenforceable, byreason of being vague or unreasonable as to area, duration or scope of activity, this Section 10 shall be considered divisible and shall become and beimmediately amended to only such area, duration and scope of activity as shall be determined to be reasonable and enforceable by the court or other bodyhaving jurisdiction over the matter; and the Employee agrees that this Section 10 as so amended shall be valid and binding as though any invalid orunenforceable provision had not been included herein. 11. Confidential Information. The Employee shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information,knowledge or data relating to the Company or any of its subsidiaries, and their respective businesses, which shall have been obtained by the Employeeduring the Employee's employment by the Company or any of its subsidiaries and which shall not be or become public knowledge (other than by acts bythe Employee or his representatives in violation of this Agreement). After termination of the Employee's employment with the Company, the Employeeshall not, without the prior written consent of the Company, communicate or divulge any such information, knowledge or data to anyone other than theCompany and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring orwithholding any amounts otherwise payable to the Employee under this Agreement.  12. Successors. (a) This Agreement is personal to the Employee and without the prior written consent of the Company shall not be assignable by the Employeeotherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Employee's legalrepresentatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantiallyall of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent thatthe Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company ashereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation oflaw, or otherwise. 13. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles ofconflict of laws. The captions of this Agreement are not part of the provisions hereof an shall have no force or effect. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered orcertified mail, return receipt requested, postage prepaid, addressed as follows: If to the Employee: Mr. Tom Vadaketh _______________________ _______________________ If to the Company: Cambrex Corporation One Meadowlands Plaza East Rutherford, N.J. 07073 Attention: General Counsel  or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effectivewhen actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision ofthis Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to bewithheld pursuant to any applicable law or regulation. (e) The Employee's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision orany other provision thereof. (f) This Agreement contains the entire understanding of the Company and the Employee with respect to the subject matter hereof. Thisagreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legalrepresentatives. (g) The Employee and the Company acknowledge that the employment of the Employee by the Company or any of its subsidiaries prior to theEffective Date is "at will", and, prior to the Effective Date, may be terminated by either the Employee or the employer at any time. Upon a termination ofthe Employee's employment or upon the Employee's ceasing to be an officer of the Company, in each case, prior to the Effective Date, there shall be nofurther rights under this Agreement. (h) The Employee acknowledges that any payment made pursuant to this agreement may be subject to the Company’s claw back policyadopted pursuant to the Dodd-Frank Act.  14. Section 409A. Notwithstanding anything in this Agreement to the contrary, to the extent the Employee would otherwise be entitled to a paymentduring the six months beginning on the Date of Termination that would be subject to the additional tax imposed under Section 409A of the Code, (i) thepayment will not be made to the Employee and instead will be made, at the election of the Company, either to a trust in compliance with Rev. Proc. 92-64or an escrow account established to fund such payments (provided that such funds shall be at all times subject to the creditors of the Company and itsaffiliates) and (ii) the payment, together with interest thereon at the rate of "prime" plus 1%, will be paid to the Employee on the earlier of the six-monthanniversary of Date of Termination or the Employee's death or disability (within the meaning of Section 409A of the Code). Similarly, to the extent theEmployee would otherwise be entitled to any benefit (other than a cash payment) during the six months beginning on the Date of Termination that wouldbe subject to the additional tax under Section 409A of the Code, the benefit will be delayed and will begin being provided (together, if applicable, withan adjustment to compensate the Employee for the delay, with such adjustment to be determined in the Company's reasonable good faith discretion) onthe earlier of the six-month anniversary of the Date of Termination or the Employee's death or disability (within the meaning of Section 409A of theCode). The Company will establish the trust or escrow account, as applicable, no later than ten days following the Employee's Date of Termination. It isthe intention of the parties that the payments and benefits to which the Employee could become entitled in connection with termination of employmentunder this Agreement comply with Section 409A of the Code. In the event that the parties determine that any such benefit or right does not so comply,they will negotiate reasonably and in good faith to amend the terms of this Agreement such that it complies (in a manner that attempts to minimize theeconomic impact of such amendment on the Employee and the Company). IN WITNESS WHEREOF, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its nameon its behalf, and the Employee has hereunto set his hand, all as of the day and year first above written. CAMBREX CORPORATION By: /s/ Samantha Hanley /s/ Tom Vadaketh Tom Vadaketh CAMBREX CORPORATION EXHIBIT 21 Subsidiaries of Registrant SubsidiaryIncorporated 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 High Point, Inc.DelawareCAMBREX CORPORATION EXHIBIT 23 Consent of Independent Registered Public Accounting Firm We 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 ourreports dated February 3, 2017, relating to the consolidated financial statements and schedule, and the effectiveness of Cambrex Corporation’s internalcontrol over financial reporting, which appear in this Annual Report on Form 10-K. /s/ BDO USA, LLPWoodbridge, New JerseyFebruary 3, 2017 Exhibit 31.1 Cambrex CorporationCertification Pursuant to Rule 13a – 14(a) and Rule 15d – 14(a)of the Securities Exchange Act, as Amended I, 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 respectsthe financial 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) and15d-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,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, 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 mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially 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, tothe registrant’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 arereasonably likely 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 internalcontrol over financial reporting. Date: February 3, 2017 /s/ Steven M. Klosk Steven M. Klosk President and Chief Executive Officer Exhibit 31.2 Cambrex CorporationCertification Pursuant to Rule 13a – 14(a) and Rule 15d – 14(a)of the Securities Exchange Act, as Amended I, Tom G. Vadaketh, 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 respectsthe financial 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) and15d-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,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, 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 mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially 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, tothe registrant’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 arereasonably likely 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 internalcontrol over financial reporting. Date: February 3, 2017 /s/ Tom G. Vadaketh Tom G. Vadaketh 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 2002 In connection with the Annual Report of Cambrex Corporation (the “Company”) on Form 10-K for the period ending December 31, 2016, 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; and 2.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/ Tom G. Vadaketh Tom G. Vadaketh Executive Vice President and Chief Financial Officer Dated: February 3, 2017 

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