Emergent BioSolutions Reports Fourth Quarter and Twelve Months 2014 Financial Results and Provides Update on 2015 Outlook
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Total revenue: Q4 2014 of
$148.0 million , up 51% from 2013; twelve months 2014 of$450.1 million , up 44% from 2013
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GAAP net income: Q4 2014 of
$30.1 million , up 98% from 2013; twelve months 2014 of$36.7 million , up 18% from 2013; on a diluted share basis, GAAP EPS for Q4 2014 was$0.66 per share and twelve months 2014 was$0.88 per share, up 61% and 4%, respectively, from 2013
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Adjusted net income: Q4 2014 of
$34.6 million , up 104% from 2013; twelve months 2014 of$54.2 million , up 44% from 2013; on a diluted share basis, Adjusted EPS for Q4 2014 was$0.75 per share and twelve months 2014 was$1.18 per share, up 64% and 15%, respectively, from 2013
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EBITDA: Q4 2014 of
$53.3 million , or$1.15 per diluted share, up 84% from 2013; twelve months 2014 of$92.2 million , or$2.01 per diluted share, up 46% from 2013
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Adjusted EBITDA: Q4 2014 of
$57.5 million , or$1.24 per diluted share, up 87% from 2013; twelve months 2014 of$105.9 million , or$2.31 per diluted share, up 50% from 2013
2015 FINANCIAL OUTLOOK
Ongoing Internal Manufacturing Investigation
Beginning on
2014 FINANCIAL PERFORMANCE
(I) Quarter Ended
Revenues
Product Sales
For Q4 2014, product sales were
|
(in millions) |
Three Months Ended December 31, |
||
| 2014 | 2013 | % Change | |
| Product Sales | |||
| BioThrax® | $87.9 | $81.4 | 8% |
| Other biodefense | 10.9 | 4.3 | 153% |
| Total Biodefense | $98.8 | $85.7 | 15% |
| Total Biosciences | 11.0 | NA | NA |
| Total Product Sales | $109.9 | $85.7 | 28% |
Contract Manufacturing
For Q4 2014, revenues from our contract manufacturing operations, which were acquired in Q1 2014, were
Contracts, Grants and Collaborations
For Q4 2014, contracts, grants and collaborations revenue was
Contracts, grants and collaborations revenue consist primarily of reimbursements paid by the US government for research and development expenditures for the company's biodefense programs. This revenue also includes license fees and collaboration-related revenues associated with development partnerships the company has established with third parties.
Operating Expenses
Cost of Product Sales and Contract Manufacturing
For Q4 2014, cost of product sales and contract manufacturing was
Research and Development
For Q4 2014, gross research and development (R&D) expenses were
Net R&D expenses, which are more representative of the company's actual out-of-pocket investment in product development, are calculated as gross research and development expenses less contracts, grants and collaboration revenues and the net loss attributable to non-controlling interest. For Q4 2014, net R&D expenses were
| (in millions) |
Three Months Ended December 31, |
||
| 2014 | 2013 | % Change | |
| Research and Development Expenses (Gross) | $39.0 | $30.0 | 30% |
| Adjustments: | |||
| Contracts, grants and collaborations revenues | 28.5 | 12.4 | 129% |
| Net loss attributable to non-controlling interest | -- | -- | NA |
| Net Research and Development Expenses | $10.5 | $17.6 | (40)% |
Selling, General and Administrative
For Q4 2014, selling, general and administrative expenses were
(II) Year Ended
Revenues
Product Sales
For the twelve months of 2014, product sales were
| (in millions) |
Twelve Months Ended December 31, |
||
| 2014 | 2013 | % Change | |
| Product Sales | |||
| BioThrax® | $245.9 | $246.7 | -- |
| Other biodefense | 32.3 | 11.2 | 188% |
| Total Biodefense | $278.2 | $257.9 | 8% |
| Total Biosciences | $30.1 | NA | NA |
| Total Product Sales | $308.3 | $257.9 | 20% |
Contract Manufacturing
For the twelve months of 2014, revenues from our contract manufacturing operations, which were acquired in Q1 2014, were
Contracts, Grants and Collaborations
For the twelve months of 2014, contracts, grants and collaborations revenue was
Operating Expenses
Cost of Product Sales and Contract Manufacturing
For the twelve months of 2014, cost of product sales and contract manufacturing was
Research and Development
For the twelve months of 2014, gross R&D expenses were
Net R&D expenses for the twelve months of 2014 were
|
(in millions) |
Twelve Months Ended December 31, |
||
| 2014 | 2013 | % Change | |
| Research and Development Expenses (Gross) | $150.8 | $119.9 | 26% |
| Adjustments: | |||
| Contracts, grants and collaboration revenues | 110.8 | 54.8 | 102% |
| Net loss attributable to non-controlling interest | -- | 0.9 | -- |
| Net Research and Development Expenses | $40.0 | $64.2 | (38)% |
Selling, General and Administrative
For the twelve months of 2014, selling, general and administrative expenses were
(III) Reconciliation of GAAP Net Income to Adjusted Net Income, EBITDA and Adjusted EBITDA
This press release contains three financial measures (Adjusted Net Income, EBITDA or earnings before interest, taxes, depreciation and amortization, and adjusted EBITDA) that are considered "non-GAAP" financial measures under applicable
The determination of the amounts that are excluded from these non-GAAP financial measures are a matter of management judgment and depend upon, among other factors, the nature of the underlying expense or income amounts. Because non-GAAP financial measures exclude the effect of items that will increase or decrease the company's reported results of operations, management strongly encourages investors to review the company's consolidated financial statements and publicly filed reports in their entirety.
The following table provides a reconciliation of GAAP Net Income to Adjusted Net Income for the three month periods as indicated.
| (in millions, except per share price) |
Three Months Ended December 31, |
||
| 2014 | 2013 | Source | |
| GAAP Net Income | $30.1 | $15.2 | NA |
| Adjustments: | |||
| Acquisition-related costs (transaction & integration) | 0.6 | 1.8 | SG&A |
| Non-cash amortization charges | 2.3 | 0.8 |
COGS, SG&A, Other Income |
| Impact of purchase accounting on inventory step-up | 1.0 | -- | COGS |
| Restructuring activities | 2.6 | -- | SG&A |
| Tax effect | (2.0) | (0.8) | NA |
| Total Adjustments | 4.5 | 1.8 | NA |
| Adjusted Net Income | $34.6 | $17.0 | NA |
| Adjusted Net Income Per Diluted Share | $0.75 | $0.45 | NA |
The following table provides a reconciliation of GAAP Net Income to Adjusted Net Income for the twelve month periods as indicated.
| (in millions, except per share price) |
Twelve Months Ended December 31, |
||
| 2014 | 2013 | Source | |
| GAAP Net Income | $36.7 | $31.1 | NA |
| Adjustments: | |||
| Acquisition-related costs (transaction & integration) | 8.1 | 4.6 | SG&A |
| Non-cash amortization charges | 9.5 | 2.0 |
COGS, SG&A, Other Income |
| Write-off of syndicated loans | 1.8 | -- | Other Income |
| Impact of purchase accounting on inventory step-up | 3.0 | -- | COGS |
| Restructuring activities | 2.6 | 2.8 | SG&A |
| Tax effect | (7.5) | (2.8) | NA |
| Total Adjustments | 17.5 | 6.6 | NA |
| Adjusted Net Income | $54.2 | $37.7 | NA |
| Adjusted Net Income Per Diluted Share | $1.18 | $1.03 | NA |
The following table provides a reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA for the three month periods as indicated.
| (in millions, except per share price) |
Three Months Ended December 31 |
|
| 2014 | 2013 | |
| GAAP Net Income | $30.1 | $15.2 |
| Adjustments: | ||
| + Depreciation & Amortization | 7.8 | 5.4 |
| + Provision For Income Taxes | 14.2 | 8.4 |
| -- Total Other (Income) Expense | (1.2) | -- |
| Total Adjustments | 23.2 | 13.8 |
| EBITDA | $53.3 | $29.0 |
| Additional Adjustments: | ||
| Acquisition-related costs (transaction & integration) | 0.6 | 1.8 |
| Impact of purchase accounting on inventory step-up | 1.0 | -- |
| Restructuring activities | 2.6 | -- |
| Total Additional Adjustments | 4.2 | 1.8 |
| Adjusted EBITDA | $57.5 | $30.8 |
The following table provides a reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA for the twelve month periods as indicated.
| (in millions, except per share price) |
Twelve Months Ended December 31 |
|
| 2014 | 2013 | |
| GAAP Net Income | $36.7 | $31.1 |
| Adjustments: | ||
| + Depreciation & Amortization | 31.0 | 19.0 |
| + Provision For Income Taxes | 16.3 | 13.1 |
| -- Total Other (Income) Expense | 8.2 | -- |
| Total Adjustments | 55.5 | 32.1 |
| EBITDA | $92.2 | $63.2 |
| Additional Adjustments: | ||
| Acquisition-related costs (transaction & integration) | 8.1 | 4.6 |
| Impact of purchase accounting on inventory step-up | 3.0 | ---- |
| Restructuring activities | 2.6 | 2.8 |
| Total Additional Adjustments | 13.7 | 7.4 |
| Adjusted EBITDA | $105.9 | $70.6 |
CONFERENCE CALL AND WEBCAST INFORMATION
Company management will host a conference call at
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Live Teleconference Information: Dial in number: 888-680-0878 International dial in: 617-213-4855 Passcode: 57020289 |
Live Webcast Information: Visit www.emergentbiosolutions.com and select the "Investors" section |
|
Webcast Archive: Visit www.emergentbiosolutions.com and select the "Investors" section Available through March 4, 2016 |
ABOUT
SAFE HARBOR STATEMENT
This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements, other than statements of historical fact, including our financial guidance, and any other statements containing the words "believes", "expects", "anticipates", "intends", "plans", "forecasts", "estimates" and similar expressions in conjunction with, among other things, discussions of financial performance or financial condition, growth strategy, product sales, manufacturing capabilities, including our current investigation involving our suppliers and contract manufacturers regarding a discovery of foreign particles in two lots of BioThrax, product development, regulatory approvals or expenditures are forward-looking statements. These forward-looking statements are based on our current intentions, beliefs and expectations regarding future events. We cannot guarantee that any forward-looking statement will be accurate. Investors should realize that if underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could differ materially from our expectations. Investors are, therefore, cautioned not to place undue reliance on any forward-looking statement. Any forward-looking statement speaks only as of the date of this press release, and, except as required by law, we do not undertake to update any forward-looking statement to reflect new information, events or circumstances.
There are a number of important factors that could cause the company's actual results to differ materially from those indicated by such forward-looking statements, including the potential outcome of our current investigation of foreign particles discovered in two lots of BioThrax; appropriations for BioThrax procurement; our ability to successfully integrate
FINANCIAL STATEMENTS FOLLOW
| Emergent BioSolutions Inc. and Subsidiaries | ||
| Consolidated Balance Sheets | ||
| (in thousands, except share and per share data) | ||
| December 31, 2014 | December 31, 2013 | |
| ASSETS | ||
| Current assets: | ||
| Cash and cash equivalents | $ 280,499 | $ 179,338 |
| Accounts receivable | 58,834 | 60,587 |
| Inventories | 65,674 | 14,643 |
| Deferred taxes, net | 1,710 | -- |
| Income tax receivable, net | 1,357 | 5,651 |
| Prepaid expenses and other current assets | 24,101 | 12,896 |
| Total current assets | 432,175 | 273,115 |
| Property, plant and equipment, net | 313,979 | 264,240 |
| In-process research and development | 77,800 | 41,800 |
| Intangible assets, net | 58,344 | 30,148 |
| Goodwill | 41,984 | 13,954 |
| Deferred tax assets - long-term, net | 12,764 | -- |
| Other assets | 8,216 | 3,373 |
| Total assets | $ 945,262 | $ 626,630 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current liabilities: | ||
| Accounts payable | $ 40,930 | $ 27,521 |
| Accrued expenses and other current liabilities | 6,274 | 1,252 |
| Accrued compensation | 31,654 | 24,615 |
| Contingent consideration, current portion | 6,487 | 1,341 |
| Provisions for chargebacks | 2,246 | -- |
| Deferred tax liability - current portion, net | -- | 88 |
| Deferred revenue, current portion | 5,345 | 1,834 |
| Total current liabilities | 92,936 | 56,651 |
| Contingent consideration, net of current portion | 41,170 | 15,278 |
| Long-term indebtedness | 251,000 | 62,000 |
| Deferred tax liability - long-term, net | -- | 1,419 |
| Deferred revenue, net of current portion | 5,713 | -- |
| Other liabilities | 1,242 | 2,117 |
| Total liabilities | 392,061 | 137,465 |
| Commitments and contingencies | ||
| Stockholders' equity: | ||
| Preferred stock, $0.001 par value; 15,000,000 shares authorized, 0 shares issued and outstanding at December 31, 2014 and 2013, respectively | -- | -- |
| Common stock, $0.001 par value; 100,000,000 shares authorized, 38,129,872 shares issued and 37,709,683, shares outstanding at December 31, 2014; 37,036,996 shares issued and 36,624,043, shares outstanding at December 31, 2013 | 38 | 37 |
| Treasury stock, at cost, 420,189 and 412,953 common shares at December 31, 2014 and 2013, respectively | (6,320) | (6,119) |
| Additional paid-in capital | 274,222 | 247,637 |
| Accumulated other comprehensive loss | (3,008) | (3,465) |
| Retained earnings | 288,269 | 251,528 |
| Total Emergent BioSolutions Inc. stockholders' equity | 553,201 | 489,618 |
| Noncontrolling interest in subsidiaries | -- | (453) |
| Total stockholders' equity | 553,201 | 489,165 |
| Total liabilities and stockholders' equity | $ 945,262 | $ 626,630 |
| Emergent BioSolutions Inc. and Subsidiaries | ||
| Consolidated Statements of Operations | ||
| (in thousands, except share and per share data) | ||
| Three Months Ended December 31, | ||
| 2014 | 2013 | |
| (Unaudited) | ||
| Revenues: | ||
| Product sales | $ 109,852 | $ 85,670 |
| Contract manufacturing | 9,598 | -- |
| Contracts, grants and collaborations | 28,525 | 12,437 |
| Total revenues | 147,975 | 98,107 |
| Operating expense: | ||
| Cost of product sales and contract manufacturing | 32,485 | 19,421 |
| Research and development | 38,965 | 29,994 |
| Selling, general and administrative | 31,905 | 25,399 |
| Income from operations | 44,620 | 23,293 |
| Other income (expense): | ||
| Interest income | 190 | 18 |
| Interest expense | (1,174) | -- |
| Other income (expense), net | 672 | 347 |
| Total other income (expense) | (312) | 365 |
| Income before provision for income taxes | 44,308 | 23,658 |
| Provision for income taxes | 14,192 | 8,441 |
| Net income | 30,116 | 15,217 |
| Net loss attributable to noncontrolling interest | -- | 5 |
| Net income attributable to Emergent BioSolutions Inc. | $ 30,116 | $ 15,222 |
| Income per share - basic | $ 0.80 | $ 0.42 |
| Income per share - diluted | $ 0.66 | $ 0.41 |
| Weighted-average number of shares - basic | 37,592,770 | 36,415,218 |
| Weighted-average number of shares - diluted | 46,391,351 | 37,474,410 |
| Emergent BioSolutions Inc. and Subsidiaries | |||
| Consolidated Statements of Operations | |||
| (in thousands, except share and per share data) | |||
| Year Ended December 31, | |||
| 2014 | 2013 | ||
| Revenues: | |||
| Product sales | $ 308,345 | $ 257,922 | |
| Contract manufacturing | 30,944 | -- | |
| Contracts, grants and collaborations | 110,849 | 54,823 | |
| Total revenues | 450,138 | 312,745 | |
| Operating expense: | |||
| Cost of product sales and contract manufacturing | 118,412 | 62,127 | |
| Research and development | 150,829 | 119,933 | |
| Selling, general and administrative | 122,841 | 87,883 | |
| Income from operations | 58,056 | 42,802 | |
| Other income (expense): | |||
| Interest income | 320 | 139 | |
| Interest expense | (8,240) | -- | |
| Other income (expense), net | 2,926 | 426 | |
| Total other income (expense) | (4,994) | 565 | |
| Income before provision for income taxes | 53,062 | 43,367 | |
| Provision for income taxes | 16,321 | 13,108 | |
| Net income | 36,741 | 30,259 | |
| Net loss attributable to noncontrolling interest | -- | 876 | |
| Net income attributable to Emergent BioSolutions Inc. | $ 36,741 | $ 31,135 | |
| Income per share - basic | $ 0.98 | $ 0.86 | |
| Income per share - diluted | $ 0.88 | $ 0.85 | |
| Weighted-average number of shares - basic | 37,344,891 | 36,201,283 | |
| Weighted-average number of shares - diluted | 45,802,807 | 36,747,556 | |
| Emergent BioSolutions Inc. and Subsidiaries | ||
| Consolidated Statements of Cash Flows | ||
| (in thousands) | ||
| Year Ended December 31, | ||
| 2014 | 2013 | |
| Cash flows from operating activities: | ||
| Net income | $ 36,741 | $ 30,259 |
| Adjustments to reconcile to net cash provided by (used in) operating activities: | ||
| Stock-based compensation expense | 12,829 | 11,238 |
| Depreciation and amortization | 32,453 | 18,958 |
| Deferred income taxes | 16,493 | 13,858 |
| Non-cash development expenses from joint venture | -- | (347) |
| Change in fair value of contingent consideration | 3,133 | 735 |
| Write off of debt issuance costs | 1,831 | -- |
| Impairment of long-lived assets | -- | 1,172 |
| Excess tax benefits from stock-based compensation | (5,987) | (3,099) |
| Other | 1,284 | 51 |
| Changes in operating assets and liabilities: | -- | -- |
| Accounts receivable | 21,405 | 35,456 |
| Inventories | 4,229 | 518 |
| Income taxes | (4,711) | (7,179) |
| Prepaid expenses and other assets | (8,472) | (6,226) |
| Accounts payable | (9,279) | (551) |
| Accrued expenses and other liabilities | 2,685 | 7 |
| Accrued compensation | 4,539 | 2,092 |
| Provision for chargebacks | 299 | -- |
| Deferred revenue | 2,846 | 26 |
| Net cash provided by operating activities | 112,318 | 96,968 |
| Cash flows from investing activities: | ||
| Purchases of property, plant and equipment | (30,673) | (42,021) |
| Acquisitions, net of acquired cash | (179,379) | (25,873) |
| Net cash used in investing activities | (210,052) | (67,894) |
| Cash flows from financing activities: | ||
| Proceeds from convertible debenture, net of bank fees | 241,588 | -- |
| Proceeds from long-term debt obligations | 1,000 | 62,000 |
| Issuance of common stock subject to exercise of stock options | 14,078 | 6,848 |
| Excess tax benefits from stock-based compensation | 5,987 | 3,099 |
| Principal payments on long-term indebtedness | (62,000) | (62,774) |
| Contingent obligation payments | (1,579) | (348) |
| Purchase of treasury stock | (200) | (213) |
| Net cash provided by financing activities | 198,874 | 8,612 |
| Effect of exchange rate changes on cash and cash equivalents | 21 | (14) |
| Net increase in cash and cash equivalents | 101,161 | 37,672 |
| Cash and cash equivalents at beginning of period | 179,338 | 141,666 |
| Cash and cash equivalents at end of period | $ 280,499 | $ 179,338 |
CONTACT: Investor Contact
Robert Burrows
Vice President, Investor Relations
(o) 240/631-3280; (m) 240/413-1917
burrowsr@ebsi.com
Media Contact
Tracey Schmitt
Vice President, Global Public Affairs, Corp. Resp.
(o) 240/631-3394
schmittt@ebsi.com
