RESTON, Va., Oct. 26 /PRNewswire-FirstCall/ -- PRA International , a leading global clinical research organization, today announced increases in service revenue and operating income for the third quarter ended September 30, 2005.
Third Quarter 2005 Highlights -- Service revenue increased 7.5% to $75.6 million -- Operating margin increased to 17.9% -- Net income increased 54.3% to a record $9.2 million, or $0.38 per diluted share -- New business awards totaled $103 million -- Backlog increased 31.4% to $494 million -- Reorganization to enhance flexibility and customer responsiveness -- Three executive promotions to continue growth -- Frank Hijek joins PRA as SVP of Business Development -- New Lenexa, Kansas facility on line; expansion underway -- Cell Therapeutics, Inc. (formerly NovusPharma SpA) arbitration resolved -- Raises 2005 EPS guidance from $1.20 - $1.24 to $1.32 - $1.36; revenue guidance revised down for 2005
“We continued to execute on our Project Assurance(SM) commitment during the third quarter, which translated into increased revenue and record net income in the third quarter,” said Pat Donnelly, PRA International president and chief executive officer. “The central tenet of Project Assurance is maximizing our opportunities for success at every customer touch point. Toward that end, we initiated an organizational realignment in order to better utilize our existing resources with that of our customers. Our overall goal in doing this is to obtain further alignment between our customers and the best people at PRA. We believe this will better enable our customers to take advantage of every capability and resource available to them as valued clients. What will not change as a result of this realignment is our growing position as the provider of choice for the highest quality services in the industry.
“To help us accomplish this objective, I am pleased to announce the promotions of three key executives who will be responsible for continuing to move PRA International forward. On the sales and marketing side, Bruce Teplitzky has been promoted to Executive Vice President of Business Development; not only will he continue to oversee our therapeutic business development efforts, but now all of our contracts and proposal efforts as well. We have promoted Monika Pietrek, M.D., to Executive Vice President of Global Scientific & Medical Affairs. Dr. Pietrek will now have the Global Product Development Services, Global Medical & Safety Affairs, and Global Regulatory Affairs business units of PRA reporting directly to her. On the operations side, Brian Mooney has been promoted to Senior Vice President of Project Management. Frank Hijek has also joined PRA as Senior Vice President of Business Development.”
Third Quarter and Nine Month Results
For the three month period ended September 30, 2005, PRA International’s service revenue totaled $75.6 million, an increase of 7.5 percent over $70.3 million in the third quarter of 2004. Service revenue excludes from total revenue the reimbursed out-of-pocket costs associated with client projects and programs. Reimbursement revenue totaled $7.6 million compared to $7.6 million in the third quarter of 2004. Income from operations in the third quarter totaled $13.5 million, a 22.7 percent increase from $11.0 million in the year-ago quarter. Third quarter 2005 operating margin, based on service revenue, was a record 17.9 percent compared to 15.6 percent in the 2004 third quarter. Net income totaled $9.2 million, or $0.38 per diluted share, compared to $6.0 million, or $0.29 per diluted share, in the third quarter of 2004. Earnings per diluted share figures are based on diluted shares outstanding of 24.5 million compared to 20.3 million in the third quarter of 2004.
For the nine month period ended September 30, 2005, service revenue totaled $225.2 million, an increase of 9.2 percent over $206.3 million in the first nine months of 2004. Reimbursement revenue totaled $24.6 million compared to $23.4 million in the first nine months of 2004. Income from operations in the 2005 period totaled $38.4 million compared to $26.4 million in the same period one year ago. The nine month period of 2004 included tender/option expenses totaling $6.0 million. Adjusting for the impact of these one-time expenses, income from operations in the first nine months of 2004 was $32.4 million.
Operating margin for the first nine months of 2005, based on service revenue, was 17.1 percent compared to 12.8 percent in the first nine months of 2004. Adjusting for the impact of tender/option expenses, operating margin for the first nine months of 2004 was 15.7 percent. Net income totaled $24.7 million, or $1.01 per diluted share, compared to $15.9 million, or $0.79 per diluted share, in the first nine months of 2004. Earnings per diluted share figures are based on diluted shares outstanding of 24.4 million compared to 19.9 million in the first nine months of 2004.
New business awards for the third quarter and first nine months of 2005 totaled $103.3 million and $317.4 million respectively, compared to $88.5 million and $263.8 million in the comparable periods in 2004, an increase of 17 percent and 20 percent respectively. Backlog at September 30, 2005 was approximately $494 million, a 31.4 percent increase, compared to $376 million one year ago. Net book to bill ratio for the third quarter was 1.21 compared to 1.06 in last year’s third quarter. Net book to bill ratio for the first nine months of 2005 was 1.19 versus 1.08 in the first nine months of 2004. PRA’s third quarter cash flow from operations was $2.0 million compared to cash flow from operations of $8.9 million in the year-ago quarter. Days sales outstanding, which includes accounts receivable and unbilled services less advanced billings, totaled 15 days compared to a negative seven days in the year-ago quarter. At September 30, 2005, PRA International had cash of $70.3 million and no significant long term debt.
Lenexa Facility Expansion
As previously announced, the Company opened its new 106,000 square foot facility in Lenexa, Kansas. The planned expansion of an additional 42,000 square feet at that location is underway, with an expected completion date of November 2005. This facility consolidates PRA staff that had been in four separate locations, and houses a significant amount of PRA’s data management and all of our document management services in one location.
Resolution of Cell Therapeutics, Inc. Arbitration
The Company also announced today that the Cell Therapeutics, Inc. (formerly NovusPharma SpA) arbitration has been resolved based on the final ruling of the International Chamber of Commerce, International Court of Arbitration. “We are pleased to have this behind us. While the ruling had awards being made to both parties, the ruling requires us to make a net payment to Cell Therapeutics of approximately $675,000, which was reflected in our third quarter results. This is substantially less than the total claim by them of approximately $28.7 million, and we consider the matter fully resolved,” said Donnelly.
Outlook
“The lengthening of the business conversion cycle we discussed last quarter continues to affect revenue recognition patterns and we experienced some delays in a handful of large contracts,” added Donnelly. “Customers want to ensure availability of PRA teams for their projects, so they make initial commitments to us, sometimes well before work begins. We at PRA will continue to manage this dynamic in order to make sure that our resource levels of professional staff are in line with the requirements of our customers and at the same time deliver above industry profitability.”
Guidance
Reflecting the factors cited by Donnelly, the Company today elected to revise upward its guidance for 2005 earnings per share from a previous range of $1.20-$1.24 to a new range of $1.32 - $1.36. The Company is also revising its 2005 revenue guidance downward, from $308 million to approximately $300 million for the year.
PRA International will hold a conference call today at 9:00 a.m. Eastern to provide supporting detail on third quarter results. The call will be available via live webcast at http://www.prainternational.com . Please go to the website at least 15 minutes early to register, download and install any necessary audio software. A replay of the call will remain available at the site for 45 days.
Cautionary Note Regarding Forward-Looking Statements
This news release contains forward-looking statements that are subject to risks and uncertainties relating to PRA International’s future financial and business performance, including estimates of net income and service revenue, as well as any other predictive statements dependent upon future events or conditions, or that include words such as “expect”, “anticipate”, “intend”, “plan”, “believe”, “seek”, “may”, “will”, “estimate” or similar expressions of futurity. You should not place undue reliance on any forward-looking statements, which represent the Company’s estimates only as of the date of this news release and are not intended to give any assurance as to actual future results. Factors that might cause future results to differ include: the success of the efficiencies of the Company’s new Lenexa facility; the success of the Company’s organizational realignment; ultimate resolution of the Cell Therapeutics arbitration; and general economic and business conditions. PRA International’s actual results could differ materially from those anticipated in these forward-looking statements. Although these statements are based upon assumptions the Company believes to be reasonable based upon available information, they are subject to risks and uncertainties that are described more fully in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our annual report on Form 10-K. This document can be accessed in the SEC’s EDGAR database found at http://www.sec.gov . Please note that PRA International assumes no obligation to update any of the forward-looking statements in this release, except as required by applicable securities laws.
About PRA International
PRA International is one of the world’s leading clinical development organizations, with approximately 2,500 employees working from offices in North America, Europe, South America, Africa, Australia and Asia. PRA, an ISO 9001:2000 registered company, delivers services to its clients through a unique approach called Project Assurance(SM), which represents the Company’s commitment to reliable service delivery, program-level therapeutic expertise, global access to knowledge, and involved senior management.
To learn more about PRA International, please visit http://www.prainternational.com or call our World Headquarters at +1 (703) 464-6300.
PRA International Consolidated Income Statements Three Months and Nine Months Ended September 30, 2005 and 2004 (Dollars, in thousands, except share and per share data) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2005 2004 2005 2004 Service revenue 75,567 70,311 225,191 206,271 Reimbursement revenue 7,602 7,550 24,585 23,443 Total revenue 83,169 77,861 249,776 229,714 Direct costs 34,537 32,814 103,973 98,889 Reimbursable out of pocket costs 7,602 7,550 24,585 23,443 Selling, general & admin 24,654 23,576 74,325 67,380 Tender/option expense -- 402 -- 5,987 Depreciation and amortization 2,856 2,355 8,479 7,050 Management fees -- 200 -- 600 Income from operations 13,520 10,964 38,414 26,365 Interest income (expense), net 248 (771) 879 (2,341) Other income (expense), net (292) (843) (786) 832 Income before tax 13,476 9,350 38,507 24,856 Provision for income taxes 4,267 3,383 13,785 8,998 Net income 9,209 5,967 24,722 15,858 Earnings per share Basic $0.41 $0.33 $1.10 $0.88 Diluted $0.38 $0.29 $1.01 $0.79 Number of shares Basic 22,548 18,114 22,436 17,944 Diluted 24,477 20,301 24,362 19,949 Reconciliation of adjusted income from operations Income from operations 13,520 10,964 38,414 26,365 Tender/option expense -- 402 -- 5,987 Adjusted income from operations (1) 13,520 11,366 38,414 32,352 Reconciliation of adjusted net income Net income 9,209 5,967 24,722 15,858 Tender/option expense (net of tax effect) -- 257 -- 3,613 Adjusted net income (1) 9,209 6,224 24,722 19,471 Adjusted net income per share (1) Basic $0.41 $0.34 $1.10 $1.08 Diluted $0.38 $0.31 $1.01 $0.97 (1) Amounts shown herein as “adjusted income from operations,” “adjusted net income,” and “adjusted income per share” exclude the effects of a one-time tender offer relating to our repurchase in 2004 of stock options and the payment of a special bonus to certain employee option holders. The tender offer and option repurchase costs, all of which were incurred in 2004 in connection with a one-time, special transaction, are not viewed by our management as indicative of the status of our ongoing operating performance. Each of adjusted income from operations, adjusted net income, and adjusted net income per share (i) are measures of our performance that are not required by or presented in accordance with GAAP; (ii) should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP; and (iii) should not be considered in isolation or as a substitute for analysis of our GAAP results. PRA International Summary Balance Sheet Data (Dollars, in thousands) (unaudited) September 30, December 31, September 30, 2005 2004 2004 Cash and marketable securities 70,320 90,388 28,638 Accounts receivable 43,965 59,384 58,417 Unbilled 41,809 29,993 40,102 Advanced billings 69,879 114,801 105,035 Working capital 35,366 11,478 (18,566) Total assets 320,652 337,344 282,988 Equity 179,865 150,379 75,148
PRA International
CONTACT: Matt Bond, Senior Vice President and CFO of PRA International,+1-703-464-6300; or General Info, Jeff Wilhoit, +1-312-640-6757, or AnalystContact, Kathy Waller, +1-312-640-6696, both of Financial Relations Board
Web site: http://www.prainternational.com/
