PharmaNet Development Group, Inc. (NASDAQ: PDGI) (the �Company�), a
leading provider of global drug development services, previously
disclosed that, effective January 1, 2007, it would begin to report
the financial results for PharmaNet Specialized Pharmaceutical
Services, Inc. (SPS) in the late stage segment. Prior to 2007, the
financial results for SPS were reported in the early stage segment.
2006 quarterly GAAP and adjusted (non-GAAP) financial results for
SPS are in the attached unaudited financial tables to provide
stockholders the ability to adjust their financial models
accordingly. A reconciliation of quarterly GAAP results to adjusted
(non-GAAP) results can be found in the unaudited financial tables
included in this press release. A further explanation of the
reasoning behind the use of non-GAAP financial results can be found
below. Non-GAAP Financial Measures This press release contains
certain non-GAAP financial measures, which exclude, among other
items, an impairment to goodwill, a non-recurring charge related to
financing, amortization of acquisition-related intangible assets
and non-cash compensation expense related to restricted stock and
RSUs issued to employees and directors of the Company. Share-based
compensation is an important part of our employees� compensation
and impacts their performance. PDGI considers these non-GAAP
financial measures to be useful metrics because management and
investors can compare the Company�s recurring operating results and
make more meaningful comparisons between PDGI�s recurring operating
results and those of other companies. In addition, management can
use this important tool for financial and operational decision
making and for evaluating recurring operating results over
different periods of time. There are a number of limitations
related to the use of non-GAAP operating income versus operating
income calculated in accordance with GAAP. Non-GAAP operating
income excludes certain costs, including share-based compensation
and amortization related to acquisitions that are recurring and
have been and will continue to be for the foreseeable future a
significant recurring expense in PDGI�s business. The components of
the costs that we exclude from our calculation of non-GAAP
operating income may differ from the components that our peer
companies exclude when they report their results of operations. The
Company compensates for these limitations by providing specific
information regarding the GAAP amounts excluded from non-GAAP
operating income and evaluating non-GAAP operating income together
with operating income calculated in accordance with GAAP. Non-GAAP
results also allow investors to compare the reported GAAP results
and the non-GAAP First Call consensus estimate and to compare the
Company�s operations against the financial results of other
companies in the industry. The non-GAAP financial measures included
in this press release should not be considered superior to or a
substitute for results of operations prepared in accordance with
GAAP. Reconciliations of the non-GAAP financial measures used in
this press release to the most directly comparable GAAP financial
measures are set forth in the text of, and the accompanying
unaudited tables, to this press release, and can also be found on
the Company�s website. About PharmaNet Development Group, Inc.
PharmaNet Development Group, 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 2,300
employees and more than 40 facilities throughout the world,
PharmaNet is a recognized leader in outsourced clinical
development. For more information, please visit www.pharmanet.com.
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").
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. 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, industry trends
and information; the Company's ability to determine its impairment
charges and costs of discontinued operations; whether the Company
will achieve its estimated value relating to the sale of the land
(and any other asset) previously used in discontinued operations;
developments with respect to the SEC's inquiry and securities class
action lawsuits and derivative lawsuits; the Company�s ability to
successfully achieve and manage the technical requirements of
specialized clinical trial services, while complying with
applicable rules and regulations; regulatory changes; changes
affecting the clinical research industry; a reduction of
outsourcing by pharmaceutical and biotechnology companies; the
Company�s ability to compete internationally in attracting clients
in order to develop additional business; the Company�s evaluation
of its backlog and the potential cancellation of contracts; its
ability to retain and recruit new employees; its clients' ability
to provide the drugs and medical devices used in its clinical
trials; the Company�s future stock price; the Company�s assessment
of its effective tax rate and tax allowance; the Company�s
financial guidance; the Company�s future effective tax rate; the
Company�s anticipated capital expenditures; the Company�s costs
associated with compliance of Section 404 of the Sarbanes-Oxley
Act; the impact on the Company of foreign currency transaction
costs and the effectiveness of any hedging strategies it
implements; and the national and international economic climate as
it affects drug development 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, 2006 and its most
recent Quarterly Report on Form 10-Q. The Company does not
undertake to update the disclosures made herein, and you are urged
to read our filings with the Securities and Exchange Commission. �
PhamaNet Specialized Pharmaceutical Services Excerpted Financial
Information For Each Quarter Ended During 2006 � March 31, June 30,
September 30, December 31, 2006 2006 2006 2006 � Direct Revenue $
1,264,508� $ 1,311,163� $ 798,047� $ 328,584� � Costs and Expenses
Direct Costs 334,025� 469,401� 281,315� 302,687� Selling, General
and Administrative Expenses (1) 363,333� 454,050� 398,617� 481,441�
Impairment of Goodwill � -� � 7,873,000� � -� � -� Total Costs and
Expenses 697,358� 8,796,451� 679,932� 784,128� � � � � � � GAAP
Earnings (Loss) from Continuing Operations before Income Taxes $
567,150� $ (7,485,288) $ 118,115� $ (455,544) � GAAP Operating
Margin 44.9% -570.9% 14.8% -138.6% � Add: Impairment of Goodwill �
-� $ 7,873,000� � -� � -� � � � � � � Non-GAAP Earnings (Loss) from
Continuing Operations before Income Taxes $ 567,150� $ 387,712� $
118,115� $ (455,544) � Non-GAAP Operating Margin 44.9% 29.6% 14.8%
-138.6% � � (1) SPS recorded $-0- expense related to amortization
of intangible assets expense during 2006. � PharmaNet Development
Group, Inc. and Subsidiaries Reconciliation of GAAP Net Earnings
(Loss) for Continuing Operations to Non GAAP Net Earnings from
Continuing Operations For Each Quarter Ended During 2006 � � March
31, June 30, September 30, December 31, 2006 2006 (1) 2006 2006 �
GAAP Net Earnings (Loss) from Continuing Operations $ 3,304,315� $
(3,728,498) $ 2,979,540� $ 3,496,846� � Add: Impairment of Goodwill
-� 7,873,000� -� -� � Add: Non-Recurring Charge Related to
Financing -� 1,214,306� -� -� � Add: Non-Cash Compensation from the
Adoption of SFAS 123R 524,296� 285,156� 149,063� 149,061� � Add:
Non-Cash Amortization of Intangible Assets 801,993� 768,720�
703,646� 708,517� � � � � Subtotal � 4,630,604� � 6,412,684� �
3,832,249� � 4,354,424� � Less: Tax Effect of Non-GAAP Adjustments
243,672� 3,840,787� 122,790� 221,955� � Add: Tax Valuation
Allowance -� -� -� 2,629,968� � � � � Non-GAAP Net Earnings �
4,386,932� � 2,571,897� � 3,709,459� � 6,762,437� � Non-GAAP
Diluted Net Earnings Per Share $ 0.24� $ 0.14� $ 0.20� $ 0.36� � �
Number of Shares Used in Computing Diluted Non-GAAP Earnings Per
Share 18,316,002� 18,150,267� 18,473,375� 18,653,190� � (1) Diluted
earnings per share is computed by increasing the denominator to
include the number of additional common shares that would have been
outstanding if the dilutive potential common shares had been
issued. Due to the GAAP loss reported in the second quarter 2006,
139,237 dilutive equivalents have been excluded from the
calculation of diluted earnings per common share for the three
month period ended June 30, 2006, since they were anti-dilutive.
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