WILMINGTON, N.C., July 17 /PRNewswire-FirstCall/ -- PPD, Inc. today reported its financial and operating results for the second quarter ended June 30, 2006.
PPD recorded net revenue of $309.0 million for the second quarter of 2006, an increase of 26.0 percent over net revenue of $245.1 million for the second quarter of 2005. Net revenue for the second quarter 2006 included reimbursed out-of-pocket expenses of $25.5 million, compared to $16.6 million for the same period in 2005.
Income from operations for the second quarter 2006 was $49.0 million, an increase of 68.4 percent over income from operations of $29.1 million for the same period in 2005. Second quarter 2006 income from operations included $4.9 million of stock compensation expense. Operating income for the second quarter 2005 also has been adjusted to include $4.4 million of stock compensation expense pursuant to the modified retrospective application method provided for in Statement of Financial Accounting Standard No. 123(R), “Share-Based Payments,” to allow a more accurate period-to-period comparison. Research and development expense for the second quarter 2006 was $1.3 million, compared to $11.4 million for the same period last year. This decline in R&D expense was primarily related to the July 2005 transfer of PPD’s development and commercialization rights and obligations to the dipeptidyl peptidase IV (DPP4) inhibitor program to Takeda San Diego, Inc.
Second quarter 2006 earnings per diluted share were $0.31, compared to $0.18 for the second quarter of 2005. Earnings per diluted share for second quarter 2006 include stock compensation expense, net of tax, of $0.028 per diluted share. Second quarter 2005 earnings per diluted share have been adjusted to include stock compensation expense of $0.025 per diluted share, net of tax, and to reflect the two-for-one stock split completed on February 28, 2006.
The effective tax rate for the second quarter 2006 was 32.0 percent, compared to 35.0 percent for the same period last year. The lower tax rate for the second quarter of 2006 was attributable to the recognition of tax benefits pursuant to a statutory North Carolina economic development tax credit program and resolution of certain contingent income tax liabilities.
Segment Performance
Development segment net revenue for the second quarter of 2006, which does not include reimbursed out-of-pocket expenses, was $278.9 million, an increase of 24.0 percent over the same period in 2005. Development segment income from operations for the second quarter 2006 was $49.7 million, compared to $41.2 million for the same period in 2005.
Discovery sciences segment net revenue, which does not include reimbursed out-of-pocket expenses, was $4.6 million for the second quarter of 2006, compared to $3.6 million in the same period last year. Discovery sciences segment second quarter 2006 loss from operations was $0.63 million, compared to a loss from operations of $12.1 million for the second quarter 2005, driven by the spending on the DPP4 program that was assumed by Takeda in July 2005.
Other Financial Information
Gross new business authorizations for the second quarter of 2006 totaled $475.9 million. The second quarter 2006 cancellation rate was 14.2 percent. Year-to-date net days sales outstanding at June 30, 2006 were 40 days. Second quarter 2006 cash flow from operations was a record $68.9 million. At June 30, 2006, PPD had $380.2 million in cash, cash equivalents and short-term investments and $40.0 million in debt, primarily related to the ongoing construction of the new corporate headquarters building in Wilmington, North Carolina.
“We believe our second quarter operating results demonstrate continued strength in the market as well as PPD’s ability to perform well across the continuum of global drug development markets and service segments,” stated Fred Eshelman, chief executive officer of PPD. “On top of net revenue growth of 24 percent, excluding reimbursables, and record operating cash flow, PPD grew its book of net new business 34.5 percent year-over-year for the quarter, resulting in a net book-to-bill ratio of 1.44 and backlog of more than $2.0 billion. With the continued progress of the Phase III development program for the Takeda DPP4 compound, we remain confident in our ability to drive value through our integrated platform of drug discovery and development services.”
PPD will conduct a live conference call and audio Webcast tomorrow, July 18, 2006, at 9 a.m. ET to discuss its second quarter 2006 results. A Q&A session will follow. To access the Webcast, please visit http://www.ppdi.com and follow the instructions under the Investor Presentations/Webcasts link or the Corporate News section of the Web page. A replay of the Webcast will be available shortly after the call. If you have difficulty accessing the Webcast via the Internet, PPD has established a direct dial number, +888 214 0355, for telephone access.
PPD is a leading global contract research organization providing discovery, development and post-approval services as well as compound partnering programs. Our clients and partners include pharmaceutical, biotechnology, medical device, academic and government organizations. With offices in 27 countries and more than 8,700 professionals worldwide, PPD applies innovative technologies, therapeutic expertise and a commitment to quality to help its clients and partners maximize returns on their R&D investments and accelerate the delivery of safe and effective therapeutics to patients. For more information, visit our Web site at http://www.ppdi.com.
Except for historical information, all of the statements, expectations and assumptions contained in this news release are forward-looking statements that involve a number of risks and uncertainties. Although PPD attempts to be accurate in making these forward-looking statements, it is possible that future circumstances might differ from the assumptions on which such statements are based. In addition, other important factors which could cause results to differ materially include the following: continued success in sales growth; loss of large contracts; increased cancellation rates; economic conditions and outsourcing trends in the pharmaceutical, biotechnology, medical device, academic and government industry segments; competition within the outsourcing industry; risks associated with acquisitions and investments, such as impairments; risks associated with and dependence on collaborative relationships; risks associated with the development and commercialization of drugs, including obtaining regulatory approval; rapid technological advances that make our products and services less competitive; the ability to attract and retain key personnel; risks that we may not continue our dividend policy; and the other risk factors set forth from time to time in the SEC filings for PPD, copies of which are available free of charge upon request from the PPD investor relations department.
Contacts: Linda Baddour +910 772 6999 linda.baddour@wilm.ppdi.com Steve Smith +910 772 7585 stephen.smith@wilm.ppdi.com PPD, Inc. Statement of Operations Data (in thousands, except per share amounts) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 Net revenue: Development $278,890 $224,862 $536,639 $437,783 Discovery Sciences 4,550 3,636 23,499 16,496 Reimbursed out-of-pockets 25,513 16,644 48,184 34,917 Total net revenue 308,953 245,142 608,322 489,196 Direct costs: Development 140,022 114,153 268,439 223,981 Discovery Sciences 2,069 2,107 4,477 4,034 Reimbursable out-of-pocket expenses 25,513 16,644 48,184 34,917 Total direct costs 167,604 132,904 321,100 262,932 Research and development 1,261 11,445 1,942 20,266 Selling, general and administrative 79,274 61,749 151,231 119,632 Depreciation 11,286 9,512 22,309 17,871 Amortization 124 279 397 567 Loss on disposal of assets 375 145 1,386 250 Gain on exchange of assets - - - (5,144) Income from operations 49,029 29,108 109,957 72,822 Other income, net 4,521 2,892 7,480 4,072 Income before income taxes 53,550 32,000 117,437 76,894 Income tax expense 17,136 11,201 39,177 23,214 Net income $36,414 $20,799 $78,260 $53,680 Net income per share: Basic $0.31 $0.18 $0.67 $0.47 Diluted $0.31 $0.18 $0.66 $0.47 Weighted average number of shares outstanding: Basic 116,618 114,118 116,426 113,818 Diluted 118,418 115,794 118,216 115,438 PPD, Inc. Balance Sheet Data (in thousands) (unaudited) June 30, December 31, 2006 2005 Cash, cash equivalents and short-term investments $380,225 $319,820 Accounts receivable and unbilled services, net $341,223 $303,386 Working capital $397,475 $327,638 Total assets $1,320,674 $1,159,600 Unearned income $157,114 $162,662 Long-term debt, including current portion $40,040 $24,302 Shareholders’ equity $850,167 $750,676
PPD, Inc.
CONTACT: Linda Baddour, +1-910-772-6999, or linda.baddour@wilm.ppdi.com,or Steve Smith, +1-910-772-7585, or stephen.smith@wilm.ppdi.com, both ofPPD, Inc.
Web site: http://www.ppdi.com/
