AMRI total revenue increases 15% to $68.2 million in second quarter 2014

Aug 5 2014

AMRI (NASDAQ: AMRI) today reported financial and operating results for the second quarter ended June 30, 2014.

Highlights:

• Second quarter contract revenue of $61.5 million, up 21% from 2013
• Second quarter adjusted diluted EPS of $0.22 vs. $0.11 in 2013
• Expanded second quarter contract margins to 27% from 16% in 2013
• Acquired Oso Biopharmaceuticals Manufacturing in July 2014, expanding contract manufacturing capabilities to include commercial scale, complex injectable drug product

Updated Financial Guidance 2014:

• Full year contract revenue guidance increased to between $275 and $283 million, an increase of 33% at the midpoint
• Royalty revenue guidance of $25 million
• Adjusted EBITDA between $59 and $63 million, up 24% at the midpoint
• Adjusted diluted EPS range between $0.87 and $0.92, compared to $0.70 in 2013, an increase of 28% at the midpoint, despite a $10 to $12 million decrease in estimated royalties from Allegra
• Operating cash flow of $27 to $30 million

Adjusted diluted EPS and adjusted EBITDA are non-GAAP measures, which exclude certain items detailed later in this press release under the heading "Non-GAAP Adjustment Items." Reconciliations of these non-GAAP measures to GAAP measures are included in Tables 1 and 2 at the end of this press release.

"We are very pleased with our results this quarter, highlighted by a 34% growth in our large scale manufacturing business and the addition of Cedarburg Pharmaceuticals," said William S. Marth, AMRI's president and chief executive officer. "Importantly, contract margins improved across our entire operations as a result of increased capacity utilization and the addition of the higher margin Cedarburg Pharmaceuticals business."

"We continue to see growth in our pipeline of discovery and development programs, notably the expansion of our innovative Insourcing chemistry program, together with the addition of new development and supply programs in our API and Drug Product divisions," continued Mr. Marth. "Based on anticipated continued growth of our business and the recent addition of OsoBio, we are raising our outlook for 2014 with contract revenue growth of 33% and adjusted diluted EPS growth of 29% at the midpoint."

Second Quarter 2014 Results

Total revenue for the second quarter of 2014 was $68.2 million, an increase of 15% compared to total revenue of $59.3 million reported in the second quarter of 2013.

Total contract revenue for the second quarter of 2014 was $61.5 million, an increase of 21% compared to contract revenue of $50.8 million reported in the second quarter of 2013. Contract margins were 26.7% for the second quarter of 2014, compared with 16.4% for the second quarter of 2013, driven by increased capacity utilization and the addition of Cedarburg Pharmaceuticals.

Royalty revenue in the second quarter of 2014 was $6.7 million, a decrease of 21% from $8.5 million in the second quarter of 2013. Royalty revenue for the second quarter of 2014 includes royalties from the Allegra® products as well as $2.5 million from the net sales of certain amphetamine salts sold by Actavis.

Net income under U.S. GAAP was $3.7 million, or $0.11 per diluted share, in the second quarter of 2014, compared to a U.S. GAAP net loss of $(2.5) million, or $(0.08) per basic and diluted share for the second quarter of 2013. Net income on an adjusted basis in the second quarter of 2014 was $7.1 million or $0.22 per diluted share, compared to adjusted net income of $3.6 million or $0.11 per diluted share. Net income on an adjusted basis excludes the following items that are included under U.S. GAAP: the impact of restructuring charges, executive transition costs, convertible debt interest and amortization charges, business acquisition costs, litigation settlement charges, write-offs of deferred financing costs, non-cash long-lived asset impairment charges, losses on disposals of assets related to restructuring activities, insurance demutualization gains, depreciation and amortization of purchase accounting adjustments, non-recurring income tax adjustments, and postretirement benefit plan settlement gains.

Year to Date

Total revenue for the six-month period ended June 30, 2014 was $127.5 million, an increase of 7% compared to total revenue of $118.7 million for the same period in 2013.

Total contract revenue for the first six months of 2014 was $112.5 million, an increase of 16% compared to contract revenue of $97.3 million for the same period in 2013.

Royalty revenue for the first six months of 2014 was $15.0 million, a decrease of 30% from $21.4 million in 2013. Royalty revenue for the six-month period ended June 30, 2014 includes royalties from the Allegra® products as well as $4.8 million from the net sales of certain amphetamine salts sold by Actavis.

Net income under U.S. GAAP for the first half of 2014 was $7.2 million, or $0.22 per diluted share, compared to U.S. GAAP net income of $3.8 million, or $0.12 per diluted share for the first half of 2013. Net income on an adjusted basis in the first half of 2014 was $12.2 million or $0.37 per diluted share, compared to adjusted net income of $10.6 million or $0.34 per share in 2013. For a reconciliation of U.S. GAAP net income (loss) and earnings (loss) per diluted share as reported to adjusted net income (loss) and earnings (loss) per diluted share for the 2014 and 2013 reporting periods, please see Table 1 at the end of this press release. During the second quarter of 2014 we identified certain tax liabilities that should have been recorded as tax expense in various immaterial amounts during the periods from 2007 through 2013. Financial results for the three and six months ended June 30, 2013 have been updated from previously reported amounts to reflect the immaterial prior period income tax adjustments.

Segment Results

Discovery Services and Development/Small Scale Manufacturing

Discovery Services and Development/Small Scale Manufacturing (DDS) contract revenue for the second quarter of 2014 was $19.5 million, consistent with the second quarter of 2013 as decreases in Discovery Services were offset by increases in Development/Small Scale Manufacturing. DDS contract margins were 19.1% for the second quarter of 2014, compared with 13.1% for the second quarter of 2013, driven by a stronger mix of business and the benefit of cost reduction initiatives in both Discovery Services and Development/ Small Scale Manufacturing.

DDS contract revenue for the first half of 2014 was $39.0 million, a decrease of 2% from the first half of 2013 as decreases in Discovery Services were largely offset by increases in Development/Small Scale Manufacturing. DDS contract margins were 17.8% for the first half of 2014, compared with 14.9% for the first half of 2013.

Large Scale Manufacturing
Large Scale Manufacturing (LSM) contract revenue for the second quarter of 2014 was $42.0 million, an increase of 34% from $31.3 million in 2013. LSM contract revenue for the second quarter of 2014 includes $5.5 million of revenues from the Cedarburg Pharmaceuticals business that was acquired in April 2014. LSM adjusted contract margins were 30.5% in the second quarter of 2014, compared with 18.4% for the second quarter of 2013, driven by increased capacity utilization and improved mix including the Cedarburg business.

LSM contract revenue for the first half of 2014 was $73.5 million, an increase of 27% from $57.7 million in 2013. LSM adjusted contract margins were 25.9% in the first half of 2014, compared with 19.2% for the first half of 2013.

Liquidity and Capital Resources

At June 30, 2014, AMRI had cash, cash equivalents and restricted cash of $136.9 million, compared to $171.0 million at March 31, 2014. The decrease in cash and cash equivalents for the quarter ended June 30, 2014 was primarily due to the use of $38.7 million to acquire Cedarburg Pharmaceuticals, $4.8 million in debt payments, and $3.5 million of capital expenditures, offset by cash flow from operations of $12.4 million. Total common shares outstanding, net of treasury shares, were 32,419,424 at June 30, 2014. Since the close of the second quarter we subsequently used $109.3 million of cash to acquire the Oso Biopharmaceuticals Manufacturing business.

SOURCE AMRI