-- Second quarter 2008 sales increased 5.0% (-2.6% excluding foreigncurrency) compared to second quarter 2007.
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-- Adjusted EBITDA was $12.4 million for the second quarter of 2008 versus$15.2 million last year.
-- Company maintains sales and profit guidance for the full year. SeeGuidance and Other Matter sections.
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-- High potency laboratories commissioned in Iowa and key expansionprojects in Italy and Sweden remain on schedule.
Basis of Reporting
As previously reported, Cambrex sold its Bioproducts and Biopharmabusinesses (the "Bio Businesses") to Lonza for $463.9 million in February2007. Discontinued Operations in the 2007 financial statements include theresults of operations of the Bio Businesses through the date of sale as wellas the corresponding gain on sale.
The Company has provided a reconciliation from adjusted amounts to GAAPamounts at the end of this press release. Management believes that theadjusted amounts provide a more meaningful representation of the Company'soperating results for the periods presented due to the magnitude and nature ofcertain expenses recorded.
Second Quarter 2008 Operating Results -- Continuing Operations
Second quarter 2008 sales of $66.2 million were 5.0% higher than sales inthe second quarter 2007, and 2.6% lower excluding the effect of foreigncurrency. Comparing the current quarter to the same quarter last year,excluding the currency impact, Cambrex experienced lower sales of genericactive pharmaceutical ingredients ("APIs") partially offset by higher custommanufacturing revenues, including higher revenues from controlled substances.Custom development revenues were flat compared to the prior year.
Second quarter 2008 Gross Margin decreased to 29.9% of sales from 37.9%during the second quarter 2007, with foreign currency negatively impactinggross margin by 1.2%. Unfavorable product mix, lower pricing on our largestAPI, and higher costs associated with the validation of the new API finishingfacility at the Milan, Italy site during the second quarter of 2008 were themain drivers of the lower margins.
Operating Profit was $5.6 million in the second quarter 2008 compared to$4.0 million for the second quarter 2007. Adjusted Operating Profit was $7.1million, or 10.7% of sales, compared to $10.4 million, or 16.5% of sales forthe second quarter last year. Adjusted EBITDA was $12.4 million, or 18.7% ofsales, compared to $15.2 million, or 24.1% of sales last year. The decreasesin both Adjusted Operating Profit and Adjusted EBITDA were driven primarily bylower gross profits described above, partially offset by lower corporateheadquarters expenses due to a restructuring in 2007.
Steven M. Klosk, President and Chief Executive Officer, said, "The trendsin our underlying markets remain favorable. Sales of controlled substances,one of our key growth initiatives, were stronger during the quarter and are upabout $5 million year to date versus the prior year. Our custom developmentpipeline of new clinical projects was very active during the quarter as weresponded to a significant number of customer requests for proposals. Ourportfolio of late stage Phase III projects remains promising for driving salesgrowth in 2009 and beyond."
Mr. Klosk added, "New laboratories in our Iowa facility were commissionedduring the second quarter to support growing demand for highly potentcompounds. The new state-of-the-art finishing facility in Italy is undergoingits validation process, which should be fully completed by the end of 2008,and we expect our new mid-scale API manufacturing facility at our Swedishoperation to be on line in early 2009."
Mr. Klosk concluded, "Despite these positive developments,
