PRINCETON, N.J., Feb. 25 /PRNewswire-FirstCall/ -- PharmaNet
Development Group, Inc. (the "Company") (NASDAQ:PDGI), a leading
provider of clinical development services, today reported
preliminary net income for the fourth quarter ended December 31,
2008, of $1.6 million, or $0.08 per diluted share, compared to net
income from continuing operations of $3.8 million, or $0.20 per
diluted share, in the fourth quarter 2007. All financial data
provided in this press release is subject to recording a fourth
quarter non-cash impairment charge related to goodwill and
indefinite-lived assets which is the result of the decline in the
Company's market capitalization during the fourth quarter 2008. The
Company is working with its valuation consultant and is in the
process of completing its annual goodwill, indefinite-lived and
long-lived asset impairment assessments, in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 142,
Goodwill and Other Intangible Assets, and SFAS No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets. The
anticipated fourth quarter 2008 impairment charge is not indicative
of the Company's performance or its ability to continue to run its
operations, and will not have any impact on the Company's future
cash flows from operating activities. Until the final determination
is made, the financial information contained in this press release,
without taking into account the fourth quarter 2008 non-cash
impairment charge, is not presented in accordance with US generally
accepted accounting principles (GAAP). We will disclose the amount
of the fourth quarter 2008 impairment charge and any related tax
impact once we have completed the assessment process and file our
annual report on Form 10-K with the Securities and Exchange
Commission (the "SEC")on or before March 16, 2009. Direct revenue
in the fourth quarter 2008, decreased 7.9 percent to $85.0 million,
compared to $92.3 million in the fourth quarter 2007, due primarily
to lower early stage revenue partially offset by higher late stage
revenue. Foreign currency exchange translation unfavorably impacted
direct revenue in the fourth quarter 2008 by approximately $4.8
million primarily due to the strengthening of the US dollar
relative to the Euro, Swiss Franc and Canadian Dollar. Operating
margin was 3.6 percent in the fourth quarter 2008, compared to 3.2
percent in the fourth quarter 2007. Foreign currency exchange
translation favorably impacted operating margin by approximately
$2.3 million in the fourth quarter 2008. Direct revenue for the
full year 2008, decreased 1.3 percent to $357.7 million, compared
to $362.5 million in 2007, due primarily to lower late stage
revenue partially offset by higher early stage revenue. Foreign
currency exchange translation unfavorably impacted direct revenue
by approximately $6.3 million during 2008. Approximately 39.4
percent of direct revenue was generated in the US and 60.6 percent
in Canada, Europe and Asia. Operating margin for the full year
2008, was negative 57.7 percent compared to 5.9 percent in 2007,
primarily due to the previously disclosed $210.6 million non-cash
impairment charge related to goodwill and indefinite-lived assets
recorded in the third quarter 2008, which resulted from the decline
in the Company's market capitalization. Foreign currency exchange
translation favorably impacted operating margin by approximately
$3.7 million during 2008. Cash and cash equivalents were $63.8
million at December 31, 2008, compared to $63.3 million at
September 30, 2008 and $77.5 million at December 31, 2007. Net cash
provided by operating activities was $2.6 million in the fourth
quarter 2008, compared to net cash provided by operating activities
from continuing operations of $15.7 million in the fourth quarter
2007. Net cash used in operating activities was $10.4 million
during 2008, compared to net cash provided by operating activities
from continuing operations of $44.5 million during 2007. The
Company's backlog was $507.7 million at December 31, 2008, compared
to $521.6 million at September 30, 2008, and $457.4 million at
December 31, 2007. The Company's quarter-to-date book-to-bill ratio
was 0.8x at December 31, 2008, compared to a book-to-bill ratio of
0.4x at September 30, 2008. The year-to-date book-to-bill ratio at
December 31, 2008 was 1.1x. Early stage segment For the early stage
segment, direct revenue decreased 21.9 percent to $31.0 million in
the fourth quarter 2008, compared to $39.8 million in the fourth
quarter 2007, primarily due to lower volume and pricing in the
laboratories and the clinics. Foreign currency exchange translation
unfavorably impacted early stage direct revenue by approximately
$5.3 million in the fourth quarter 2008. Early stage segment
operating margin decreased to 3.3 percent in the fourth quarter
2008, compared to 12.0 percent in the fourth quarter 2007,
primarily due to lower volume throughput. Backlog for the early
stage segment was $54.1 million at December 31, 2008, compared to
$55.3 million at September 30, 2008. New business authorizations
were $38.6 million, cancellations were $3.5 million and the impact
of foreign currency exchange on backlog was unfavorable by
approximately $5.3 million in the fourth quarter 2008, compared to
the prior quarter. Early stage quarter-to-date book-to-bill ratio
was 1.0x at December 31, 2008, compared to a book-to-bill ratio of
0.5x at September 30, 2008. The early stage year-to-date
book-to-bill ratio was 0.9x at December 31, 2008. Late stage
segment For the late stage segment, direct revenue increased 2.7
percent to $53.9 million in the fourth quarter 2008, compared to
$52.5 million in the fourth quarter 2007. Foreign currency exchange
translation favorably impacted late stage direct revenue by
approximately $0.6 million in the fourth quarter 2008. Late stage
segment operating margin was 18.7 percent in the fourth quarter
2008, compared to 11.5 percent in the fourth quarter 2007. Foreign
currency exchange translation favorably impacted late stage
operating margin by approximately by $2.3 million in the fourth
quarter 2008. Backlog for the late stage segment was $453.6
million, compared to $466.3 million at September 30, 2008. New
business authorizations were $58.9 million, cancellations were
$11.9 million and the impact of foreign currency exchange on
backlog was unfavorable by approximately $5.8 million in the fourth
quarter 2008, compared to the prior quarter. Late stage
quarter-to-date book-to-bill ratio was 0.8x at December 31, 2008,
compared to a book-to-bill ratio of 0.2x at September 30, 2008.
Late stage year-to-date book-to-bill ratio was 1.3x at December 31,
2008. Corporate financial summary Corporate selling, general and
administrative expenses were $8.1 million in the fourth quarter
2008, compared to $7.9 million in the fourth quarter 2007,
primarily due to $1.8 million of increased professional fees for
the strategic alternative process related to the exchange offer in
the fourth quarter of 2008. Fourth quarter 2008 non-cash
share-based compensation expense was $0.2 million and other
non-cash compensation was $1.7 million, compared to $0.2 million
and $1.3 million, respectively, in the fourth quarter 2007. Capital
expenditures decreased to $0.5 million in the fourth quarter 2008
compared to $3.5 million in the fourth quarter 2007 primarily due
to the timing of expenditures for capital projects. Depreciation
expense was $3.5 million and amortization expense related to
intangible assets was $0.7 million in the fourth quarter 2008,
compared to depreciation expense of $3.7 million and amortization
expense of $0.7 million in the fourth quarter 2007. Net days sales
outstanding were 47 days at December 31, 2008, compared to 46 days
at September 30, 2008. The Company recorded a tax benefit of $0.1
million in the fourth quarter 2008, compared to a tax benefit of
$1.1 million in the fourth quarter 2007. About PharmaNet
Development Group, Inc. PharmaNet Development Group, Inc.,
("PharmaNet") a global drug development services company, provides
a comprehensive range of services to the pharmaceutical,
biotechnology, generic drug, and medical device industries. The
Company offers clinical-development solutions including early and
late stage consulting services, Phase I clinical studies and
bioanalytical analyses, and Phase II, III and IV clinical
development programs. With approximately 2,400 employees and 42
facilities throughout the world, PharmaNet is a recognized leader
in outsourced clinical development. PharmaNet has announced that it
has entered into an Agreement and Plan of Merger, dated as of
February 3, 2009, with affiliates of JLL Partners, Inc., pursuant
to which such affiliates of JLL Partners, Inc. have commenced a
tender offer to purchase all of the outstanding shares of
PharmaNet. For more information, please visit our website at
http://www.pharmanet.com/. Important Information About the Tender
Offer This announcement and the description contained herein are
for informational purposes only and are not an offer to purchase or
a solicitation of an offer to sell securities of PharmaNet. PDGI
Acquisition Corp., a Delaware corporation ("Purchaser"), JLL
PharmaNet Holdings, LLC, a Delaware limited liability company and
Purchaser's sole stockholder, JLL Partners Fund V, L.P., a Delaware
limited partnership, and JLL Partners Fund VI, L.P., a Delaware
limited partnership have filed with the SEC a tender offer
statement on Schedule TO, as amended, containing an offer to
purchase, forms of letters of transmittal and other documents
relating to the offer. PharmaNet has filed with the SEC a
solicitation/recommendation statement on Schedule 14D-9, as
amended, with respect to the offer. If required, PharmaNet will
file a proxy statement or information statement with the SEC in
connection with the merger, the second step of the transaction, at
a later date. Such documents, if available, were mailed to
stockholders of record and were also distributed to beneficial
owners of common stock of PharmaNet. The solicitation of offers to
buy common stock of PharmaNet is only being made pursuant to the
offer to purchase, the letter of transmittal and related documents.
Stockholders are advised to read the offer to purchase and the
letter of transmittal, the solicitation/recommendation statement,
the proxy statement, the information statement and all related
documents if and when available, as they contain or will contain
important information about the tender offer and proposed merger.
In addition, copies of the solicitation/recommendation statement,
the proxy statement and other filings containing information about
PharmaNet Development Group, Inc., the tender offer and the merger
may be obtained, if and when available, without charge, from the
SEC's website at http://www.sec.gov/ or by contacting the
Information Agent for the offer, Innisfree M&A Incorporated,
the Information Agent, toll-free at (888) 750-5834. Forward-Looking
Statements Certain statements made in this press release are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Act") and are
subject to a variety of risks and uncertainties. Additionally,
words such as "seek," "intend," "believe," "plan," "estimate,"
"expect," "anticipate" and other similar expressions are
forward-looking statements within the meaning of the Act. Such
forward-looking statements include PharmaNet Development Group,
Inc.'s decision to enter into an agreement to be acquired by JLL,
the ability of PharmaNet Development Group, Inc. and JLL to
complete the transaction contemplated by the merger agreement,
including the parties' ability to satisfy the conditions set forth
in the merger agreement, and the possibility of any termination of
the merger agreement. The forward-looking statements contained in
this press release are based on our current expectations, and those
made at other times will be based on our expectations when the
statements are made. Some or all of the results anticipated by
these forward-looking statements may not occur. Factors that could
cause or contribute to such differences include, but are not
limited to, the expected timetable for completing the proposed
transaction, the risk and uncertainty in connection with a
strategic alternative process, not having sufficient funds to pay
the principal due upon conversion of the outstanding notes or to
repurchase our outstanding notes, which we may be required to do
beginning in August 2009, the impact of the current economic
environment, the impact of our indebtedness on our financial
condition or results of operations and the terms of our outstanding
indebtedness limiting our activities, the impact of the
investigation by the SEC, our limited insurance coverage in
connection with the settled securities class action lawsuit,
limited additional coverage for the recently settled derivative
actions and associated future legal fees, the potential liability
related to the recently filed securities class action lawsuit, the
impact of ongoing tax audits, our ability to generate new client
contracts and maintain our existing clients' contracts, our
evaluation of our backlog and the potential cancellation of
contracts, the possibility we under-price our contracts or overrun
cost estimates and the effect on our financial results by failure
to receive approval for change orders and by delays in documenting
change orders, our ability to implement our business strategy,
international economic, political and other risks that could
negatively affect our results of operations or financial position,
changes in outsourcing trends and regulatory requirements affecting
the branded pharmaceutical, biotechnology, generic drug and medical
device industries, the reduction of expenditures by branded
pharmaceutical, biotechnology, generic drug or medical device
companies, actions or inspections by regulatory authorities and the
impact on our clients' decisions to not award future contracts to
us or to cancel existing contracts, the impact of healthcare
reform, the fact that one or a limited number of clients may
account for a large percentage of our revenues, the incurrence of
significant taxes to repatriate funds, the fluctuation of our
operating results from period to period, our assessment of our
goodwill valuation, the impact of foreign currency fluctuations,
tax law changes in Canada or in other foreign jurisdictions,
investigations by governmental authorities regarding our
inter-company transfer pricing policies or changes to their laws in
a manner that could increase our effective tax rate or otherwise
harm our business, our lack of the resources needed to compete
effectively with larger competitors, our ability to continue to
develop new assay methods for our analytical applications, or if
our current assay methods are incorrect, our ability to compete
with other entities offering bioanalytical laboratory services, our
potential liability when conducting clinical trials, our handling
and disposal of medical wastes, failure to comply with applicable
governmental regulations, the loss of services of our key personnel
and our ability to attract qualified staff, the continued
effectiveness and availability of our information technology
infrastructure, losses related to our self-insurance of our
employees' healthcare costs in the United States, our ability to
attract suitable investigators and volunteers for our clinical
trials, the material weaknesses relating to our internal controls,
and risks and uncertainties associated with discontinued
operations. Further information can be found in the Company's risk
factors contained in its Annual Report on Form 10-K for the year
ended December 31, 2007, and most recent filings. The Company does
not undertake to update the disclosures made herein, and you are
urged to read our filings with the SEC. PharmaNet Development
Group, Inc. and Subsidiaries Statements of Operations For the Three
Months Ended December 31, 2008 and 2007 In thousands, except per
share data % of Direct % of Direct 2008 Revenue 2007 Revenue
(Preliminary) NET REVENUE: Direct revenue $84,964 100.0% $92,285
100.0% Reimbursed out-of-pocket expenses 29,888 35.2% 36,835 39.9%
TOTAL NET REVENUE 114,852 135.2% 129,120 139.9% COSTS AND EXPENSES:
Direct costs 52,527 61.8% 55,920 60.6% Reimbursable out-of-pocket
expenses 29,888 35.2% 36,835 39.9% Selling, general and
administrative expenses 29,378 34.6% 33,442 36.2% TOTAL COSTS AND
EXPENSES 111,793 131.6% 126,197 136.7% EARNINGS FROM CONTINUING
OPERATIONS 3,059 3.6% 2,923 3.2% OTHER INCOME (EXPENSE): Interest
income 198 0.2% 593 0.6% Interest expense (1,486) (1.7%) (1,385)
(1.5%) Foreign currency exchange transaction (loss) gain, net (259)
(0.3%) 1,202 1.3% Other income (expense) 127 0.1% (294) (0.3%)
TOTAL OTHER INCOME (EXPENSE), NET (1,420) (1.7%) 116 0.1% EARNINGS
FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 1,639 1.9% 3,039
3.3% Income tax benefit (138) (0.2%) (1,126) (1.2%) EARNINGS FROM
CONTINUING OPERATIONS BEFORE MINORITY INTEREST IN JOINT VENTURE
1,777 2.1% 4,165 4.5% Minority interest in joint venture 142 0.2%
364 0.4% NET EARNINGS FROM CONTINUING OPERATIONS 1,635 1.9% 3,801
4.1% Earnings from discontinued operations, net of tax - - 209 0.2%
NET EARNINGS $1,635 1.9% $4,010 4.3% BASIC EARNINGS PER SHARE:
Continuing operations $0.08 $0.20 Discontinued operations $- $0.01
Net earnings $0.08 $0.21 DILUTED EARNINGS PER SHARE: Continuing
operations $0.08 $0.20 Discontinued operations $- $0.01 Net
earnings $0.08 $0.21 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 19,520 18,926 Diluted 19,570 19,222 PharmaNet Development
Group, Inc. and Subsidiaries Statements of Operations For the
Twelve Months Ended December 31, 2008 and 2007 In thousands, except
per share data % of Direct % of Direct 2008 Revenue 2007 Revenue
(Preliminary) NET REVENUE: Direct revenue $357,746 100.0% $362,471
100.0% Reimbursed out-of-pocket expenses 93,707 26.2% 107,786 29.7%
TOTAL NET REVENUE 451,453 126.2% 470,257 129.7% COSTS AND EXPENSES:
- Direct costs 231,488 64.7% 216,173 59.6% Reimbursable
out-of-pocket expenses 93,707 26.2% 107,786 29.7% Selling, general
and administrative expenses 121,884 34.1% 114,411 31.6% Impairment
of goodwill and indefinite-lived assets 210,649 58.9% - - Provision
for settlement of litigation - - 10,400 2.9% TOTAL COSTS AND
EXPENSES 657,728 183.9% 448,770 123.8% (LOSS) EARNINGS FROM
OPERATIONS (206,275) (57.7%) 21,487 5.9% OTHER INCOME (EXPENSE):
Interest income 1,494 0.4% 2,128 0.6% Interest expense (6,069)
(1.7%) (6,332) (1.7%) Foreign currency exchange transaction loss,
net (848) (0.2%) (2,138) (0.6%) Other income 277 0.1% 178 - TOTAL
OTHER EXPENSE, NET (5,146) (1.4%) (6,164) (1.7%) (LOSS) EARNINGS
FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (211,421) (59.1%)
15,323 4.2% Income tax expense 2,233 0.6% 2,340 0.6% (LOSS)
EARNINGS FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST IN
JOINT VENTURE (213,654) (59.7%) 12,983 3.6% Minority interest in
joint venture 1,728 0.5% 905 0.2% NET (LOSS) EARNINGS FROM
CONTINUING OPERATIONS (215,382) (60.2%) 12,078 3.3% Earnings from
discontinued operations, net of tax - - 838 0.2% NET (LOSS)
EARNINGS $(215,382) (60.2%) $12,916 3.6% BASIC (LOSS) EARNINGS PER
SHARE: Continuing operations $(11.11) $0.64 Discontinued operations
$- $0.05 Net (loss) earnings $(11.11) $0.69 DILUTED (LOSS) EARNINGS
PER SHARE: Continuing operations $(11.11) $0.63 Discontinued
operations $- $0.05 Net (loss) earnings $(11.11) $0.68 WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING: Basic 19,380 18,790 Diluted
19,380 19,048 PHARMANET DEVELOPMENT GROUP, INC. AND SUBSIDIARIES
Summary of Operations of Early and Late Stage Development Segments
- Preliminary For the Three and Twelve Months Ended December 31,
2008 and 2007 In thousands Three Months Ended Twelve Months Ended %
% EARLY STAGE varia- varia- DEVELOPMENT 2008 2007 tion 2008 2007
tion Direct revenue $31,039 $39,758 (21.9%) $154,298 $137,818 12.0%
Operating earnings 1,036 4,769 (78.3%) 16,343 22,260 (26.6%)
Operating margin 3.3% 12.0% 10.6% 16.2% % % LATE STAGE varia-
varia- DEVELOPMENT 2008 2007 tion 2008 2007 tion Direct revenue
$53,925 $52,527 2.7% $203,448 $224,653 (9.4%) Operating earnings
(loss) 10,088 6,059 66.5% (198,094) 34,092 (681.1%) Operating
margin 18.7% 11.5% (97.4%) 15.2% PHARMANET DEVELOPMENT GROUP, INC.
AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2008 and
2007 In thousands, except per share data 2008 2007 (Preliminary)
ASSETS Current assets: Cash and cash equivalents $63,812 $77,548
Investment in marketable securities - 2,650 Accounts receivable,
net 125,357 132,550 Income taxes receivable 4,391 1,855 Deferred
income taxes 201 298 Prepaid expenses 9,537 6,589 Other current
assets 6,687 5,274 Assets from discontinued operations - 5,199
Total current assets 209,985 231,963 Property and equipment, net
56,338 67,506 Goodwill 62,614 266,973 Other intangible assets, net
17,477 26,442 Deferred income taxes 11,080 14,111 Other assets, net
4,906 7,840 Total assets $362,400 $614,835 LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $9,070
$13,843 Accrued liabilities 33,013 47,978 Client advances, current
portion 60,551 79,312 Income taxes payable 2,656 - Capital lease
obligations and notes payable, current portion 2,589 3,562 2.25%
Convertible senior notes payable 143,750 - Deferred income taxes 28
31 Other current liabilities - 154 Liabilities from discontinued
operations - 1,770 Total current liabilities 251,657 146,650 Client
advances 5,966 2,602 Deferred income taxes 6,984 8,518 Capital
lease obligations and notes payable 2,868 5,634 2.25% Convertible
senior notes payable - 143,750 Other non-current liabilities 17,246
15,590 Minority interest in joint venture 1,581 2,722 Commitments
and contingencies Temporary equity: Sale of unregistered common
stock, subject to rescission 1,092 2,058 Stockholders' equity:
Preferred stock. $0.10 par value, 5,000 shares authorized, none
issued - - Common stock, $0.001 par value, 40,000 shares
authorized, 19,585 shares and 19,017 shares issued and outstanding
in 2008 and 2007, respectively 20 19 Additional paid-in capital
259,019 244,017 Retained earnings (192,766) 22,616 Accumulated
other comprehensive income 8,733 20,659 Total stockholders' equity
$75,006 $287,311 Total liabilities and stockholders' equity
$362,400 $614,835 PHARMANET DEVELOPMENT GROUP, INC. AND
SUBSIDIARIES Consolidated Statements of Cash Flows For the Twelve
Months Ended December 31, 2008 and 2007 In thousands 2008 2007
(Preliminary) Cash flows from operating activities: Net (loss)
earnings $(215,382) $12,916 Earnings from discontinued operations -
(838) Adjustments to reconcile net (loss) earnings to net cash
(used in) provided by operating activities: Depreciation and
amortization 17,461 15,477 Amortization of deferred debt issuance
costs 1,732 1,578 Impairment of goodwill and indefinite-lived
assets 210,649 - Provision for settlement of litigation - 10,400
Loss on disposal of property and equipment 401 381 Minority
interest (1,115) 905 Provision for doubtful accounts 1,977 587
Share-based compensation expense 6,095 5,119 Changes in assets and
liabilities: Accounts receivable 3,358 (15,927) Income taxes
receivable (1,676) (1,141) Prepaid expenses and other current
assets (6,148) (1,085) Other assets 338 (749) Accounts payable
(7,783) (3,555) Accrued liabilities (9,627) 9,986 Client advances
(15,279) 9,812 Income taxes payable 2,628 - Other current
liabilities (154) 154 Deferred income taxes (1,334) (2,453) Other
non-current liabilities 3,498 2,963 Total adjustments 205,021
32,452 Net cash (used in) provided by operating activities -
continuing operations (10,361) 44,530 Net cash used in operating
activities - discontinued operations - (792) Net cash (used in)
provided by operating activities (10,361) 43,738 Cash flows from
investing activities: Purchase of property and equipment (6,775)
(15,014) Proceeds from the disposal of property and equipment 3 28
Purchase of intangible assets (105) - Net change in investment in
marketable securities 2,650 7,378 Net cash used in investing
activities - continuing operations (4,227) (7,608) Net cash
provided by investing activities - discontinued operations - 1,182
Net cash used in investing activities (4,227) (6,426) Cash flows
from financing activities: Borrowings on line of credit - 10,000
Payments on line of credit - (19,400) Payments on capital lease
obligations and notes payable (2,621) (4,063) Net proceeds from
stock issued under option plans, ESPP and restricted stock awards
2,849 2,358 Proceeds from sale of unregistered common stock,
subject to rescission 1,092 2,058 Net cash provided by (used in)
financing activities 1,320 (9,047) Net effect of exchange rate
changes on cash and cash equivalents (468) 3,952 Net (decrease)
increase in cash and cash equivalents (13,736) 32,217 Cash and cash
equivalents at beginning of period 77,548 45,331 Cash and cash
equivalents at end of period $63,812 $77,548 Contact: Anne-Marie
Hess Phone: (609) 951-6842 E-mail: DATASOURCE: PharmaNet
Development Group, Inc. CONTACT: Anne-Marie Hess, +1-609-951-6842,
Web Site: http://www.pharmanet.com/
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