Albany Molecular Research
ALBANY MOLECULAR RESEARCH INC (Form: 8-K, Received: 05/10/2017 06:05:59)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): May 9, 2017

 

ALBANY MOLECULAR RESEARCH, INC.
(Exact Name of Registrant as Specified in Charter)

 

Delaware 001-35622 14-1742717

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

 

26 Corporate Circle, Albany, NY 12212
(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (518) 512-2000

 

 

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below) :

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

Item 2.02 Results of Operations and Financial Conditions

 

On May 9, 2017, Albany Molecular Research, Inc. (the “Company”) issued a press release announcing its financial results for the first quarter ended March 31, 2017. That release referred to certain attached financial highlights for the first quarter ended March 31, 2017. The full text of the press release, including the financial tables referred to within the release, which were posted on the Company’s internet website, is furnished in Exhibit 99.1 hereto and is incorporated by reference herein.

 

 

Item 9.01 Financial Statement and Exhibits

 

(d) Exhibits

 

99.1 Press release and financial tables dated May 9, 2017, issued by Albany Molecular Research, Inc.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: May 9, 2017 ALBANY MOLECULAR RESEARCH, INC.
     
     
  By: /s/ Felicia Ladin  
    Senior Vice President, Chief Financial Officer and Treasurer
       

 

 

 

 

 

Exhibit 99.1

 

AMRI Announces First Quarter 2017 Results

 

Albany, NY (May 9, 2017) – AMRI (NASDAQ: AMRI) today reported financial and operating results for the first quarter ended March 31, 2017 and provided an update to its outlook for 2017.

 

Highlights:

 

· First quarter total revenue of $163.8 million, up 55% from 2016

 

· First quarter basic and diluted EPS $(0.25); non-GAAP diluted EPS of $0.13

 

· First quarter net loss of $(10.7) million; non-GAAP net income of $5.7 million

 

· First quarter adjusted EBITDA of $ 24.0 million, up 83% from 2016

 

· Company confirms 2017 financial guidance

 

Non-GAAP net income, non-GAAP diluted EPS and adjusted EBITDA are non-GAAP financial measures. For a discussion of these measures and reconciliations to U.S. GAAP measures, see “Non-GAAP Financial Measures” and Tables 1, 2 and 3.

 

“We delivered an excellent first quarter, driven by 56 percent growth in contract revenue, 7 percent on an organic basis, including double digit organic growth in our Discovery, Development and Analytical Services (DDS) and Active Pharmaceutical Ingredient (API) businesses,” said William S. Marth, AMRI’s president and chief executive officer. “GAAP income from operations increased $6 million, a 150% increase quarter over quarter, and adjusted EBITDA increased $11 million, an 83% increase quarter over quarter, illustrating strong and efficient execution and leverage across our operations. We are confident that these trends will continue through the year and are maintaining our outlook for 2017, which includes 28% growth of contract revenue, 7% growth of organic contract revenue, and double digit earnings growth at the midpoint.”

 

First Quarter 2017 Results

 

Total revenue for the first quarter of 2017 was $163.8 million, an increase of 55%, compared to total revenue of $105.6 million reported in the first quarter of 2016.

 

Total contract revenue for the first quarter of 2017 was $160.2 million, an increase of 56% compared to contract revenue of $102.8 million reported in the first quarter of 2016, and organic contract revenue increased 7%.

 

Contract gross margin was 23% for the first quarter of 2017, consistent with contract gross margin for the first quarter of 2016. Non-GAAP contract gross margin was 27% in the first quarter of 2017, consistent with the first quarter of 2016 and reflects increased gross margin within our Drug Product (DP) business, offset by the addition of Euticals’ Fine Chemicals (FC) and API businesses.

 

Recurring royalty revenue in the first quarter of 2017 was $3.6 million, an increase of 31% from $2.7 million in the first quarter of 2016 due primarily to the addition of royalties resulting from our collaboration partner’s sales of nitroprusside.

 

 

 

 

Selling, general and administrative (SG&A) expense in the first quarter of 2017 was $33.4 million, up 36% from $24.6 million in the first quarter of 2016. Non-GAAP SG&A expense in the first quarter of 2017 was $27.0 million, up 47% from $18.4 million in the first quarter of 2016, due largely to additional SG&A from the Euticals’ acquisition and investments we have made in key support functions.

 

Net loss was $(10.7) million, or $(0.25) per basic and diluted share, in the first quarter of 2017, compared to $(10.1) million, or $(0.29) per basic and diluted share for the first quarter of 2016. Non-GAAP net income in the first quarter was $5.7 million, or $0.13 per diluted share, compared to $2.4 million, or $0.07 per diluted share, for the first quarter of 2016.

 

Adjusted EBITDA in the first quarter of 2017 was $24.0 million, an increase of $11.0 million or 83%, compared to the first quarter of 2016.

 

At March 31, 2017, AMRI had cash and cash equivalents of $35.2 million, compared to $52.0 million at December 31, 2016. During the first quarter of 2017, we used cash of $6.4 million in operating activities primarily due to the timing of payments attributable to severance, employee compensation and benefits and payments to vendors that were primarily incurred and accrued as of December 31, 2016, as well as payments associated with increased inventory levels during the period. These outflows were partially offset by collections from customers during the period. We used cash of $4.1 million in investing activities, primarily attributable to $3.9 million of capital expenditures, and we used cash of $7.2 million in financing activities, primarily related to the principal payments of long-term debt of $4.0 million and net repayments on short-term borrowings of $2.0 million.

 

 

 

 

Segment Results

 

Active Pharmaceutical Ingredients (API)

 

    Three Months Ended  
    March 31,  
(Unaudited; dollars in thousands)   2017     2016  
             
API Contract Revenue (1)   $ 103,364     $ 54,369  
API Royalty Revenue     2,765       2,741  
API Total Revenue   $ 106,129     $ 57,110  
                 
Cost of Contract Revenue (2)   $ 79,881     $ 40,666  
                 
Contract Gross Profit   $ 23,483     $ 13,703  
Contract Gross Margin     22.7 %     25.2 %
                 
Non-GAAP Contract Gross Profit (3)   $ 28,334     $ 17,239  
Non-GAAP Contract Gross Margin (3)     27.4 %     31.7 %
                 
Gross Profit (4)   $ 26,248     $ 16,444  
Gross Margin (4)     24.7 %     28.8 %
                 
Non-GAAP Gross Profit (3) (4)   $ 31,099     $ 19,980  
Non-GAAP Gross Margin (3) (4)     29.3 %     35.0 %

 

(1) To conform to current year presentation, contract revenue for the three months ended March 31, 2016 in the amount of $333 related to medium-scale activities in our Wisconsin facility has been reclassified from API to DDS.

 

(2) To better align with underlying activities and to conform to current year presentation , cost of contract revenue for the three months ended March 31, 2016 in the amount of $142 previously classified as DDS has been reclassified to API.

 

(3) Refer to Table 1 included in this release for the reconciliation of U.S. GAAP to non-GAAP measures.

 

(4) Includes royalties

 

API contract revenue for the first quarter of 2017 increased 90% compared to the first quarter of 2016, due to $43.4 million of incremental revenue from our Euticals’ API business and organic growth.

 

API contract gross margin for the first quarter of 2017 decreased 3 percentage points compared to the first quarter of 2016, primarily due to gross margins attributable to Euticals as compared to our legacy API business. API non-GAAP contract gross margin for the first quarter of 2017 decreased 4 percentage points from the first quarter of 2016 also as a result of lower margins of Euticals’ API business as compared to our legacy API business.

 

 

 

 

Discovery, Development and Analytical Services (DDS)

 

    Three Months Ended  
    March 31,  
(Unaudited; dollars in thousands)   2017     2016  
             
DDS Contract Revenue (1)   $ 29,167     $ 23,536  
Cost of Contract Revenue (2)     20,974       17,261  
Contract Gross Profit   $ 8,193     $ 6,275  
Contract Gross Margin     28.1 %     26.7 %
                 
Non-GAAP Contract Gross Profit (3)   $ 8,627     $ 6,688  
Non-GAAP Contract Gross Margin (3)     29.6 %     28.4 %

 

(1) To conform to current year presentation, contract revenue for the three months ended March 31, 2016 in the amount of $333 related to medium-scale actvities in our Wisconsin facility has been reclassified from API to DDS.

 

(2) To better align with underlying activities and to conform to current year presentation, cost of contract revenue for the three months ended March 31, 2016 in the amount of $249 previously classified as DDS has been reclassified to API ($142) and DP ($108).

 

(3) Refer to Table 1 included in this release for the reconciliation of U.S. GAAP to non-GAAP measures.

 

DDS contract revenue for the first quarter of 2017 increased 24% compared to the first quarter of 2016, due primarily to strong growth in Discovery and Chemical Development. DDS contract gross margin increased 1 percentage point in the first quarter of 2017 as compared to the first quarter of 2016. DDS non-GAAP contract gross margin increased 1 percentage point to 30% in the first quarter of 2017, driven by higher discovery services and chemical development margins.

 

 

 

 

Drug Product (DP)

 

    Three Months Ended  
    March 31,  
(Unaudited; dollars in thousands)   2017     2016  
             
DP Contract Revenue   $ 22,534     $ 24,933  
DP Royalty Revenue     832       -  
DP Total Revenue   $ 23,366     $ 24,933  
                 
Cost of Contract Revenue (1)   $ 17,322     $ 21,436  
                 
Contract Gross Profit   $ 5,212     $ 3,497  
Contract Gross Margin     23.1 %     14.0 %
                 
Non-GAAP Contract Gross Profit (2)   $ 5,545     $ 3,837  
Non-GAAP Contract Gross Margin (2)     24.6 %     15.4 %
                 
Gross Profit (3)   $ 6,044     $ 3,497  
Gross Margin (3)     25.9 %     14.0 %
                 
Non-GAAP Gross Profit (2) (3)   $ 6,377     $ 3,837  
Non-GAAP Gross Margin (2) (3)     27.3 %     15.4 %

 

(1) To better align with underlying activities and to conform to current year presentation, cost of contract revenue for the three months ended March 31, 2016 in the amount of $108 previously classified as DDS has been reclassified to DP.

 

(2) Refer to Table 1 included in this release for the reconciliation of U.S. GAAP to non-GAAP measures.

 

(3) Includes royalties when applicable

 

DP contract revenue for the first quarter of 2017 decreased 10% compared to the first quarter of 2016, primarily due to timing of shipments and planned site maintenance activities, partially offset by higher collaboration arrangement revenue. DP contract gross margin and non-GAAP contract gross margin for the first quarter 2017 both increased 9 percentage points compared to the first quarter of 2016, primarily driven by the strong operational performance at the Albuquerque, NM facility.

 

DP royalty revenue in the first quarter of 2017, reflects the addition of royalties resulting from our collaboration partner’s sales of nitroprusside, which began in the fourth quarter of 2016.

 

 

 

 

Fine Chemicals (FC)

 

    Three Months Ended  
    March 31,  
(Unaudited; dollars in thousands)   2017     2016  
             
FC Contract Revenue   $ 5,160     $ -  
Cost of Contract Revenue     4,601       -  
Contract Gross Profit   $ 559     $ -  
Contract Gross Margin     10.8 %     -  
                 
Non-GAAP Contract Gross Profit  (1)   $ 746       -  
Non-GAAP Contract Gross Margin (1)     14.5 %     -  

 

(1) Refer to Table 1 included in this release for the reconciliation of U.S. GAAP to non-GAAP measures.

 

FC is a new reporting segment for AMRI resulting from the acquisition of Euticals in July 2016. Consequently, there are no comparable amounts for the first quarter of 2016.

 

Financial Outlook

 

AMRI’s guidance takes into account a number of factors, including expected financial results for 2017, anticipated tax rates, foreign currency fluctuations and shares outstanding.

 

AMRI’s estimates for full year 2017 are consistent with estimates previously provided on February 21, 2017:

 

 

 

 

2017 Guidance

 

Total Revenue   $710 to $740 million
Add: Negative effect of foreign exchange   (1%)
Revenue growth, reported at the mid point   28%
Less: Contributions from acquisitions (1)   (15% to 16%)
Revenue growth, organic (2)   7%
DDS Contract revenue growth, organic   12%
API Contract revenue growth, organic   8%
DP Contract revenue growth, organic   8%
FC Contract revenue growth, organic   (28%)
GAAP contract margin   26%
Non-GAAP contract margin (3)   ~29%
GAAP R&D expense, as a percent of revenue   2%
Non-GAAP R&D expense, as a percent of revenue   2%
GAAP SG&A, as a percent of revenue   18%
Non-GAAP SG&A, as a percent of revenue (3)   15%
GAAP Net loss   ($12) to ($7) million
Non-GAAP Net income (3)   $47 to $52 million
Adjusted EBITDA (3)   $135 to $145 million
Adjusted EBITDA, as a percent of revenue (3)   19% to 20%
GAAP diluted EPS   ($0.28) to ($0.16)
Non-GAAP diluted EPS (3) (4)   $1.08 to $1.20
Capital expenditures   $35 to $40 million

 

Footnotes to Guidance Table

 

(1) Reflects the acquisition of Euticals which was completed in July 2016.

 

(2) Organic revenue growth is defined as reported revenue growth adjusted for acquisitions (Euticals) and foreign currency translation.

 

(3) Refer to Table 4 included in this release for reconciliation of forward-looking non-GAAP financial measures to forward looking GAAP financial measures.

 

(4) Assumes tax rate of approximately 28% and 44 million shares outstanding.

 

 

 

 

First Quarter Results Conference Call

 

AMRI  will host a conference call and webcast today at  8:30 a.m. ET  to discuss first quarter 2017 results, as well as guidance for 2017.  The conference call can be accessed by dialing (866) 208-5728 (domestic calls) or (224) 633-1279 (international calls) at 8:20 a.m. ET and entering passcode 7657377. The webcast and supplementing slides can be accessed on the company’s website at www.amriglobal.com .

 

A replay of the conference call can be accessed for 24 hours at (855) 859-2056 (domestic calls) or (404) 537-3406 (international calls) and entering passcode 75749093. Replays of the webcast can also be accessed for up to 90 days after the call via the investor area of the company’s website at http://ir.amriglobal.com .

 

About AMRI

 

Albany Molecular Research Inc.  (AMRI) is a global contract research and manufacturing organization that has been working with the Life Sciences industry to improve patient outcomes and the quality of life for more than two decades. With locations in  North America , Europe and  Asia , our key business segments include Discovery and Development Services (DDS), Active Pharmaceutical Ingredients (API), Drug Product (DP), and Fine Chemicals (FC). For more information about AMRI, please visit our website at www.amriglobal.com or follow us on Twitter (@amriglobal).

 

 

 

 

Forward-looking Statements

 

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, all of the estimates under “Financial Outlook” and statements regarding, among other things, the performance of the Company’s previously acquired businesses, the strength of the Company’s commercial operations and prospects, projections regarding future revenues and financial performance, and the Company’s momentum and long-term growth. The words “outlook”, “guidance”, “anticipates”, “believes”, “expects”, “may”, “plans”, “predicts”, “will”, “potential”, “goal” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Readers should not place undue reliance on these forward-looking statements. The Company’s actual results may differ materially from such forward-looking statements as a result of numerous factors, some of which the Company may not be able to predict and may not be within the Company’s control. Factors that could cause such differences include, but are not limited to, changes in customers’ spending and demand and the trends in pharmaceutical and biotechnology companies’ outsourcing of manufacturing services and research and development; the Company’s ability to provide quality and timely services and to compete with other companies providing similar services; the Company’s ability to comply with strict regulatory requirements; the Company’s ability to successfully integrate past and future acquisitions and to realize the expected benefits of each; disruptions in the Company’s ability to source raw materials; a change in the Company’s relationships with its largest customers; the Company’s ability to service its indebtedness; the Company’s ability to protect its technology and proprietary information and the confidential information of its customers; the Company’s ability to develop products of commercial value under its collaboration arrangements; the risk of patent infringement and other litigation; as well as those risks discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the Securities and Exchange Commission (SEC) on March 16, 2017, subsequent Quarterly Reports filed with the SEC and the Company’s other SEC filings. The financial guidance offered by senior management with respect to 2017 represents a point-in-time estimate and is based on information as of the date of this press release. Senior management has made numerous assumptions in providing this guidance which, while believed to be reasonable, may not prove to be accurate. Numerous factors, including those noted above, may cause actual results to differ materially from the guidance provided. The Company expressly disclaims any current intention or obligation to update the guidance provided or any other forward-looking statement in this press release to reflect future events or changes in facts assumed for purposes of providing this guidance or otherwise affecting the forward-looking statements contained in this press release.

 

Non-GAAP Financial Measures

 

To supplement our financial results prepared in accordance with U.S. GAAP, we have presented non-GAAP measures of contract gross profit, contract gross margin, gross profit, gross margin, SG&A, net income, and earnings per diluted share, adjusted to exclude certain charges (and gains when applicable) that relate to specific events or transactions, such as impairment charges, restructuring charges, executive transition costs, business acquisition costs, realized and unrealized gains and losses on foreign currency transactions related to business acquisitions, and ERP implementation costs. Management typically excludes these amounts when evaluating our operating performance and believes that the resulting non-GAAP measures provide investors with a consistent basis for comparison across periods and, therefore, are useful to investors in assessing our operating performance.

 

Our U.S. GAAP measures are also adjusted to exclude certain non-cash charges (and gains when applicable) such as non-cash debt interest and amortization charges, share-based compensation expense, acquisition accounting inventory adjustments, and acquisition accounting depreciation and amortization for the periods presented for 2017 and 2016. Management typically excludes the amounts described above when evaluating our operating performance and believes that the resulting non-GAAP measures are useful to investors in assessing our operating performance.

 

 

 

 

We have also presented the non-GAAP measure of adjusted EBITDA, which in addition to the items excluded above, further excludes the impact of interest income and expense, depreciation and amortization expense, and income tax expense or benefit.

 

We believe presentation of our non-GAAP measures enhances an overall understanding of our historical financial performance because we believe these measures are an indication of the performance of our base business. Management uses these non-GAAP measures as a basis for evaluating our financial performance as well as for budgeting and forecasting of future periods. For these reasons, we believe they can be useful to investors. The presentation of this additional information should not be considered in isolation or as a substitute for the related GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP financial measures are set forth in Tables 1-3.

 

A reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures has been included in Table 4.

 

A reconciliation of organic revenue financial measures to the most directly comparable GAAP financial measures has been included in Table 5.

 

Contacts:

 

Investors

Patty Eisenhaur

AMRI Investor Relations

patty.eisenhaur@amriglobal.com

518-512-2936

 

Media

Gina Rothe
AMRI Communications
gina.rothe@amriglobal.com

518-512-2512
 

Carolyn Hawley

Canale Communications

Carolyn@canalecomm.com

619-849-5382

 

 

 

 

Albany Molecular Research, Inc.

Selected Condensed Consolidated Balance Sheet Data

(unaudited)

 

    March 31,     December 31,  
(Dollars in thousands)   2017     2016  
             
Cash and cash equivalents   $ 35,193     $ 52,000  
Restricted cash   $ 243     $ 236  
Accounts receivable, net   $ 139,705     $ 144,795  
Royalty income receivable   $ 5,236     $ 3,486  
Inventory   $ 174,043     $ 167,111  
Total current assets   $ 385,150     $ 392,911  
Property and equipment, net   $ 360,282     $ 364,806  
Total assets   $ 1,163,529     $ 1,209,648  
                 
Total current liabilities   $ 167,012     $ 175,518  
Long-term debt, excluding current installments, net of unamortized discount   $ 607,246     $ 604,476  
Total liabilities   $ 866,730     $ 910,666  
Total stockholders’ equity   $ 296,799     $ 298,982  
Total liabilities and stockholders’ equity   $ 1,163,529     $ 1,209,648  

 

 

 

 

Albany Molecular Research, Inc.

Condensed Consolidated Statements of Operations (unaudited)

 

    Three Months Ended  
    March 31,  
(Dollars in thousands, except for per share data)   2017     2016  
             
Contract revenue   $ 160,225     $ 102,838  
Recurring royalties     3,597       2,741  
Total revenue     163,822       105,579  
                 
Cost of contract revenue     122,778       79,363  
Research and development     3,374       3,168  
Selling, general and administrative     33,430       24,600  
Restructuring and other charges     2,159       2,600  
Total operating expenses     161,741       109,731  
                 
Income (loss) from operations     2,081       (4,152 )
                 
Interest expense, net     (12,830 )     (7,136 )
Other expense, net     (793 )     (997 )
                 
Loss before income taxes     (11,542 )     (12,285 )
                 
Income tax benefit     (850 )     (2,218 )
                 
Net loss   $ (10,692 )   $ (10,067 )
                 
Basic and diluted loss per share   $ (0.25 )   $ (0.29 )
                 
Weighted avg. BASIC shares outstanding     42,385       34,718  
                 
Weighted avg. DILUTED shares outstanding     43,349       35,702  

 

 

 

 

Table 1: Reconciliation of three months ended March 31, 2017 and 2016 contract gross profit and contract gross margin to the non-GAAP financial measures of contract gross profit and non-GAAP contract gross margin.

 

Non-GAAP Measures   Three Months Ended  
(Dollars in thousands)   March 31,  
    2017     2016  
             
Consolidated Contract Revenue, as reported   $ 160,225     $ 102,838  
Consolidated Cost of Contract Revenue, as reported     122,778       79,363  
Consolidated Contract Gross Profit, as reported     37,447       23,475  
                 
add: Share-based compensation expense     319       279  
add:  Acquisition accounting inventory adjustments     -       3,310  
add:  Acquisition accounting depreciation and amortization     5,486       700  
Non-GAAP Consolidated Contract Gross Profit   $ 43,252     $ 27,764  
Consolidated Contract Gross Margin, as reported     23.4 %     22.8 %
Non-GAAP Consolidated Contract Gross Margin     27.0 %     27.0 %
                 
DDS Segment Contract Revenue, as reported   $ 29,167     $ 23,536  
DDS Segment Cost of Contract Revenue, as reported     20,974       17,261  
DDS Segment Contract Gross Profit, as reported     8,193       6,275  
                 
add:  Share-based compensation expense     135       134  
add:  Acquisition accounting depreciation     299       279  
Non-GAAP DDS Segment Contract Gross Profit   $ 8,627     $ 6,688  
DDS Segment Contract Gross Margin, as reported     28.1 %     26.7 %
Non-GAAP DDS Segment Contract Gross Margin     29.6 %     28.4 %
                 
API Segment Contract Revenue, as reported   $ 103,364     $ 54,369  
API Segment Cost of Contract Revenue, as reported     79,881       40,666  
API Segment Contract Gross Profit, as reported     23,483       13,703  
                 
add:  Share-based compensation expense     113       91  
add:  Acquisition accounting inventory adjustments     -       3,310  
add: Acquisition accounting depreciation and amortization     4,738       135  
Non-GAAP API Segment Contract Gross Profit   $ 28,334     $ 17,239  
API Segment Contract Gross Margin, as reported     22.7 %     25.2 %
Non-GAAP API Segment Contract Gross Margin     27.4 %     31.7 %
                 
DP Segment Contract Revenue, as reported   $ 22,534     $ 24,933  
DP Segment Cost of Contract Revenue, as reported     17,322       21,436  
DP Segment Contract Gross Profit, as reported     5,212       3,497  
                 
add:  Share-based compensation expense     71       54  
add:  Acquisition accounting depreciation and amortization     262       286  
Non-GAAP DP Segment Contract Gross Profit   $ 5,545     $ 3,837  
DP Segment Contract Gross Margin, as reported     23.1 %     14.0 %
Non-GAAP DP Segment Contract Gross Margin     24.6 %     15.4 %
                 
FC Segment Contract Revenue, as reported   $ 5,160     $ -  
FC Segment Cost of Contract Revenue, as reported     4,601       -  
FC Segment Contract Gross Profit, as reported     559       -  
                 
add:  Acquisition accounting depreciation and amortization     187       -  
Non-GAAP FC Segment Contract Gross Profit   $ 746     $ -  
FC Segment Contract Gross Margin, as reported     10.8 %     -  
Non-GAAP FC Segment Contract Gross Margin     14.5 %     -  

 

 

 

 

Table 2: Reconciliation of select financial measures to non-GAAP financial measures for the three months ended March 31, 2017 and 2016:

 

Table 2: Reconciliation of non-GAAP measures for the three months ended March 31, 2017 and 2016

 

(Dollars in thousands, except for per share data)

 

    Three Months Ended  
    March 31,  
    2017     2016  
             
Consolidated net loss, as reported     (10,692 )     (10,067 )
Acquisition accounting depreciation and amortization     8,588       2,268  
Non-cash interest and amortization charges     5,063       2,772  
Income tax effects of Non-GAAP adjustments     (2,974 )     (3,447 )
Share-based compensation expense     2,355       2,140  
Restructuring and other charges     2,159       1,458  
Non-recurring professional fees     840       -  
Business acquisition costs     264       2,174  
ERP implementation costs     141       623  
Acquisition accounting inventory adjustments     -       3,310  
Acquisition accounting depreciation adjustments in restructuring     -       1,142  
Non-GAAP net income   $ 5,744     $ 2,373  
                 
Consolidated Basic loss per share, as reported   $ (0.25 )   $ (0.29 )
Effects of Non-GAAP adjustments     0.39       0.36  
Non-GAAP Basic earnings per share   $ 0.14     $ 0.07  
                 
Consolidated Diluted loss per share, as reported   $ (0.25 )   $ (0.29 )
Effects of Non-GAAP adjustments     0.38       0.36  
Non-GAAP Diluted earnings per share   $ 0.13     $ 0.07  
                 
Consolidated Cost of Contract Revenue, as reported   $ 122,778     $ 79,363  
Acquisition accounting depreciation and amortization     (5,486 )     (700 )
Share-based compensation expense     (319 )     (279 )
Acquisition accounting inventory adjustments     -       (3,310 )
Non-GAAP Cost of Contract Revenue   $ 116,973     $ 75,074  
                 
Consolidated Selling, general and administrative, as reported   $ 33,430     $ 24,600  
Acquisition accounting depreciation and amortization     (3,102 )     (1,568 )
Share-based compensation expense     (2,036 )     (1,861 )
Non-recurring professional fees     (840 )     -  
Business acquisition costs     (264 )     (2,174 )
ERP implementation costs     (141 )     (623 )
Non-GAAP Selling, general and administrative   $ 27,047     $ 18,374  
                 
Consolidated Interest expense, as reported   $ 12,830     $ 7,136  
Non-cash interest and amortization charges     (5,063 )     (1,142 )
Non-GAAP Interest expense   $ 7,767     $ 5,994  

 

Table 3: Reconciliation of the three months ended March 31, 2017 and 2016 net loss to the non-GAAP financial measure of adjusted EBITDA:

 

    Three Months Ended  
    March 31,  
    2017     2016  
Net loss, as reported   $ (10,692 )   $ (10,067 )
Depreciation and amortization     16,857       8,524  
Interest expense, net     12,830       7,136  
Income tax benefit     (850 )     (2,218 )
EBITDA     18,145       3,375  
Share-based compensation expense     2,355       2,140  
Restructuring and other charges     2,159       1,458  
Non-recurring professional fees     887       -  
Business acquisition costs     264       2,174  
ERP Implementation costs     141       623  
Acquisition accounting inventory adjustments     -       3,310  
Adjusted EBITDA   $ 23,951     $ 13,080  
                 
Adjusted EBITDA Margin:                
Adjusted EBITDA as a percent of total revenue     15 %     12 %

 

 

 

 

Table 4: Reconciliation of forward-looking GAAP financial measures to forward looking non-GAAP financial measures:

 

When planning, forecasting and analyzing future periods, the Company does so primarily on a non-GAAP basis without preparing a GAAP analysis as that would require estimates for various reconciling items that would be difficult to predict with reasonable accuracy.  For example, it is difficult for the Company to anticipate the need for, or magnitude of, any presently unforeseen one-time restructuring expense or business acquisition costs.  As a result, the Company has prepared the below reconciliation using estimates of reconciling items that are currently expected to be excluded from the non-GAAP financial measures in future periods.  The Company is unable to include all reconciling items at this time without unreasonable effort due to the unavailability of the information needed to calculate reconciling items and due to variability, complexity and limited visibility to events or conditions in future periods.

 

Reconciliation of GAAP net loss and GAAP diluted loss per share to non-GAAP net income and non-GAAP diluted earnings per share (Dollars in millions, except per share amounts)

 

    Low     High  
GAAP net loss   $ (12 )   $ (7 )
Reconciling items (a)   $ 59     $ 59  
Non-GAAP net income   $ 47     $ 52  
                 
GAAP diluted loss per share   $ (0.28 )   $ (0.16 )
Non-GAAP diluted earnings per share   $ 1.08     $ 1.20  

 

(a) Reconciling items primarily include restructuring costs, acquisition accounting depreciation and amortization, share-based compensation, non-cash debt interest and amortization charges and the tax effect for such items.

 

Reconciliation of GAAP net loss to Adjusted EBITDA (Dollars in millions)

 

    Low     High  
GAAP net loss   $ (12 )   $ (7 )
Income tax (benefit) expense   $ 12     $ 13  
Interest expense, net   $ 48     $ 48  
Depreciation and amortization   $ 62     $ 66  
EBITDA   $ 110     $ 121  
Reconciling items (b)   $ 24     $ 24  
Adjusted EBITDA   $ 135     $ 145  

 

(b) Reconciling items primarily include restructuring costs, share-based compensation charges and the tax effect of all non-gaap reconciling items.

 

Reconciliation of GAAP contract gross margin to non-GAAP contract gross margin

 

GAAP contract gross margin     26 %
Add: acquisition accounting depreciation and share-based compensation     3 %
Non-GAAP contract gross margin     29 %

 

Reconciliation of GAAP SG&A as a percentage of contract revenue to non-GAAP SG&A as a percentage of contract revenue

 

GAAP Selling, General and Administrative Expense     18 %
Reconciling items (c)     (3 )%
Non-GAAP Selling, General, and Administrative Expense     15 %

 

(c) Reconciling items primarily include acquisition accounting depreciation and amortization and share-based compensation.

 

Table 5: Reconciliation of non-GAAP organic revenue for the three months ended March 31, 2017 and 2016:

 

    Three Months Ended  
    March 31,  
    2017     2016  
             
Consolidated Contract Revenue, as reported   $ 160,225     $ 102,838  
Less: Euticals contract revenue     (49,976 )     -  
Non-GAAP: Organic Consolidated Contract Revenue   $ 110,249     $ 102,838  
Non-GAAP: Organic Consolidated Contract Revenue Growth     7 %        
                 
                 
API Contract Revenue, as reported   $ 103,363     $ 54,369  
Less: Euticals API contract revenue     (43,412 )     -  
Non-GAAP: Organic API Contract Revenue   $ 59,951     $ 54,369  
Non-GAAP: Organic API Contract Revenue Growth     10 %        
                 
                 
DDS Contract Revenue, as reported   $ 29,166     $ 23,536  
Less: Euticals DDS contract revenue     (1,404 )     -  
Non-GAAP: Organic DDS Contract Revenue   $ 27,762     $ 23,536  
Non-GAAP: Organic DDS Contract Revenue Growth     18 %