RESEARCH TRIANGLE PARK, N.C., Aug. 12 /PRNewswire/ -- Quintiles Transnational Corp. today announced financial results for the quarter ended June 30, 2005. Net revenue for second quarter 2005 was $537.4 million, an increase of 26% from net revenue of $425.8 million for second quarter 2004. Contribution from Quintiles’ Product Development and Commercial Services groups totaled $243.0 million in second quarter 2005, up 28% from $189.7 million for second quarter 2004.
Net loss for second quarter 2005 was $44.2 million, after $72.0 million in non-cash impairment charges and $10.7 million of charges relating to the company’s previously announced restructuring program, compared to a net loss of $10.1 million in second quarter 2004. The 2005 impairment charges primarily relate to Quintiles’ pending sale, as previously announced, of its Preclinical Services, Pharmaceutical Sciences and Clinical Trial Supplies businesses to Aptuit Inc. for approximately $125 million. An agreement has been reached and the transaction is expected to close in third quarter 2005. The net loss in second quarter 2004 included gains of $34.7 million when Mitsui & Co., Ltd., (Mitsui) became a 20% shareholder in Quintiles Transnational Japan K.K. (Quintiles Japan) in June 2004.
Excluding the restructuring and impairment charges, second quarter 2005 earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $60.5 million. Second quarter 2004 EBITDA was $17.9 million, excluding the impairment charges and the gains of $34.7 million related to Mitsui’s investment in Quintiles Japan. Including the restructuring and impairment charges, second quarter 2005 EBITDA was a loss of $22.2 million. Second quarter 2004 EBITDA was $51.8 million, including the impairment charges and Mitsui gains. See Schedule 3 for a reconciliation of the above amounts to net loss. A reconciliation of EBITDA to net loss is also included in the company’s form 10-Q on file with the Securities and Exchange Commission.
For the first half of 2005, net new business totaled approximately $1.1 billion versus $954.5 million for the same period in 2004. Total backlog as of June 30, 2005, was approximately $2.8 billion, compared with approximately $2.2 billion at June 30, 2004.
“These strong results illustrate our success in advancing Quintiles’ strategic priorities -- understanding customer needs, improving processes, making our organizational structure more efficient, and empowering employees,” said Quintiles Transnational Chairman and Chief Executive Officer Dennis Gillings, CBE. “The Aptuit agreement is a winning strategic move for Quintiles. By working with Aptuit to address customers’ early development services needs, Quintiles can focus more resources on our core clinical development and commercial services.
“I’d like to congratulate our employees for their hard work and focus in helping Quintiles and our customers succeed.”
Quintiles Transnational Executive Vice President and Chief Financial Officer John Ratliff said: “We achieved 26% net revenue growth and ended the quarter with a record reported backlog of $2.8 billion. Our SG&A (sales, general and administrative) expenses declined to 31% of net revenue from 37% year-over-year. We continue to hire billable staff as our project workload grows while we reduce non-billable positions.
“All of our efforts have contributed to substantially improved operating profits in our contract research and contract sales services groups and our PharmaBio Development strategic investment group. Our business model is working and I’m very pleased with our solid second quarter performance.”
As of June 30, 2005, Quintiles had cash and cash equivalents of $298.3 million. As of June 30, 2005, Quintiles had 17,736 full-time equivalent employees versus 16,660 on the same date in 2004.
As part of Quintiles’ normal closing process for second quarter 2005, the company determined that assets of its Early Development and Packaging (EDP) business, composed of the company’s Preclinical, Pharmaceutical Sciences and Clinical Trials Supplies businesses, were impaired. The determination of the impairment in June 2005 resulted from the increased probability of selling the assets of the EDP business prior to the end of the assets’ estimated useful life. As a result, the company recognized a $65.8 million impairment on the EDP long-lived assets during second quarter 2005.
Quintiles Transnational’s second quarter 2005 financial briefing will be held at 1:00 p.m. EDT on Friday, Aug. 12, and will be broadcast live over the Web. The webcast or replay, which will be available through 5:00 p.m. EDT Friday, Sept. 2, can be accessed at http://www.quintiles.com/corporate_info/broadcast_center.
Quintiles helps improve healthcare worldwide by providing a broad range of professional services, information and partnering solutions to the pharmaceutical, biotechnology and healthcare industries. Headquartered near Research Triangle Park, North Carolina, Quintiles has offices in 50 countries and is the world’s leading pharmaceutical services organization. For more information visit the company’s Web site at http://www.quintiles.com.
The schedules attached to this release are an integral part of this release. Information in this press release contains “forward looking statements” about Quintiles. These statements involve risks and uncertainties that could cause actual results to differ materially, including, without limitation, the ability to maintain large customer contracts or to enter into new contracts, changes in trends in the pharmaceutical industry, the risk that the market for our products and services will not grow as we expect, the risk that our PharmaBio transactions will not generate revenue or profit at the rate or levels we anticipate or that royalty revenues under the PharmaBio agreements may not be adequate to offset Quintiles’ upfront and ongoing expenses in providing sales and marketing services or in making milestone and marketing payments, our ability to fulfill our obligations under our financing arrangements and the potential impact on our operations, our ability to efficiently distribute backlog among project management groups and match demand to resources, actual operating performance, variation in the actual savings and operating improvements resulting from previous restructurings, the ability to operate successfully in new lines of business, and the possibility that the sale of the EDP business may be delayed or fail to close. Additional factors that could cause actual results to differ materially are discussed in the company’s recent filings with the Securities and Exchange Commission, including but not limited to its Annual Report on Form 10-K, its Form 8-Ks, and its other periodic reports, including Form 10-Qs.
Schedule 1 of 3 Condensed Consolidated Statements of Income (Unaudited) Three Three Six Six months months months months ended ended ended ended June 30, June 30, June 30, June 30, 2005 2004 2005 2004 In thousands Net revenues $537,447 $425,766 $1,029,803 $848,960 Add: reimbursed service costs 131,298 82,306 241,983 164,765 Gross revenues 668,745 508,072 1,271,786 1,013,725 Costs, expenses and other: Costs of revenues 468,973 372,062 905,606 728,664 Selling, general and administrative 167,959 159,027 322,437 314,688 Interest expense (income), net 12,175 14,576 29,614 29,195 Other expense (income), net 2,764 318 2,888 (2,873) Restructuring 10,676 - 19,679 - Impairments 72,033 881 72,467 881 Transaction expense, net - - (2,666) - Gain on sale of portion of an investment in a subsidiary - (24,688) - (24,688) Non-operating gain on change of interest transaction - (10,030) - (10,030) 734,580 512,146 1,350,025 1,035,837 Loss before income taxes (65,835) (4,074) (78,239) (22,112) Income tax (benefit) expense (includes $31,521 of income tax benefit related to American Jobs Creation Act of 2004 for the six months ended June 30, 2005 (22,996) 14,133 (56,016) 13,408 Loss before minority interests and equity in (losses) earnings of unconsolidated affiliates (42,839) (18,207) (22,223) (35,520) Equity in (losses) earnings of unconsolidated affiliates (329) 45 (528) (23) Minority interests (995) (246) (2,068) (433) Loss from continuing operations (44,163) (18,408) (24,819) (35,976) Income from discontinued operation - 8,280 - 10,141 Net loss $(44,163) $(10,128) $(24,819) $(25,835) Consolidated Balance Sheet Data (Unaudited) June 30, December 31, 2005 2004 In millions Cash, cash equivalents and debt investments $311 $548 Investments in marketable equity securities 33 24 Investments in non-marketable equity securities and loans 56 56 Investments in unconsolidated affiliates 120 121 Working capital 175 316 Total assets 1,773 2,048 Debt including current portion 639 795 Shareholders’ equity 519 568 Schedule 2 of 3 Segment Information (Unaudited) Three Three Six Six months months months months ended ended ended ended June 30, June 30, June 30, June 30, 2005 2004 2005 2004 In thousands Service revenues: Product development $331,925 $268,363 $642,203 $531,047 Commercial services 193,280 158,859 377,383 305,846 Eliminations (25,333) (8,596) (51,644) (14,879) Total net service revenues 499,872 418,626 967,942 822,014 PharmaBio Development Commercial rights and royalties 38,458 15,155 64,702 30,741 Investment (883) (8,015) (2,841) (3,795) Total PharmaBio Development 37,575 7,140 61,861 26,946 Total net revenues 537,447 425,766 1,029,803 848,960 Reimbursed service costs 131,298 82,306 241,983 164,765 Gross revenues $668,745 $508,072 $1,271,786 $1,013,725 Contribution (revenues less cost of revenues excluding depreciation and amortization expense except as noted below): Product development $164,757 $128,353 $314,403 $256,415 Commercial services 78,158 61,310 145,758 115,865 PharmaBio Development (includes amortization and depreciation expense noted below) (13,954) (21,497) (36,043) (22,156) Total contribution $228,961 $168,166 $424,118 $350,124 Depreciation and amortization expense (excluded from contribution except as noted below): Product development $20,405 $21,182 $40,476 $42,772 Commercial services 7,611 7,823 15,144 16,007 PharmaBio Development (included in contribution) 3,556 1,015 4,233 1,819 Corporate 1,173 3,151 2,318 6,284 Total depreciation and amortization expense $32,745 $33,171 $62,171 $66,882 Schedule 3 of 3 EBITDA Reconciliation (Unaudited) Three Three Six Six months months months months ended ended ended ended June 30, June 30, June 30, June 30, 2005 2004 2005 2004 In millions Net revenues $537.4 $425.8 $1,029.8 $849.0 Add: reimbursed service costs 131.3 82.3 242.0 164.8 Gross revenues 668.7 508.1 1,271.8 1,013.7 Costs, expenses and other: Costs of revenues (469.0) (372.1) (905.6) (728.7) Selling, general and administrative (168.0) (159.0) (322.4) (314.7) Other (expense) income, net (2.8) (0.3) (2.9) 2.9 Transaction expense, net 0.0 0.0 2.7 0.0 Depreciation and amortization 32.7 33.2 62.2 66.9 Equity in earnings (losses) of unconsolidated affiliates (0.3) 0.0 (0.5) (0.0) Minority interests (1.0) (0.2) (2.1) (0.4) Income from discontinued operation 0.0 8.3 0.0 10.1 EBITDA, excluding impairments, restructuring charges and Mitsui gains 60.5 17.9 103.1 49.8 Impairments (72.0) (0.9) (72.5) (0.9) Restructuring (10.7) 0.0 (19.7) 0.0 Gain on sale of portion of an investment in a subsidiary 0.0 24.7 0.0 24.7 Non-operating gain on change of interest transaction 0.0 10.0 0.0 10.0 EBITDA (22.2) 51.8 11.0 83.7 Depreciation and amortization (32.7) (33.2) (62.2) (66.9) Interest expense, net (12.2) (14.6) (29.6) (29.2) Income tax benefit (expense) 23.0 (14.1) 56.0 (13.4) Net loss $(44.2) $(10.1) $(24.8) $(25.8)
Quintiles Transnational Corp.
CONTACT: Pat Grebe, Media Relations, media.info@quintiles.com, or GregConnors, Investor Relations, invest@quintiles.com, of QuintilesTransnational Corp., +1-919-998-2000
