RNS Number:5509Q
Research Pharmaceutical SRV, Inc
20 March 2008
20 March 2008
ReSearch Pharmaceutical Services, Inc.
Unaudited Quarterly Report for the Fourth Quarter and Year Ended December 31,
2007
ReSearch Pharmaceutical Services, Inc. ("RPS"), a leading provider of integrated
clinical development outsourcing solutions to the bio-pharmaceutical industry,
is pleased to announce its results for the fourth quarter and year ended
December 31, 2007. These statements include comparative results for ReSearch
Pharmaceutical Services, Inc. which merged with Cross Shore Acquisition
Corporation ("Cross Shore") on August 30, 2007. The combined company now
operates under the name ReSearch Pharmaceutical Services, Inc.
Financial highlights for the three months ended December 31, 2007
* A 44% increase in service revenue to $34.7 million compared to $24.1 million
for the three months ended December 31, 2006.
* A 68% increase in Adjusted EBITDA (EBITDA before non-recurring expenses) to
$2.2 million compared to $1.3 million for the three months ended December 31,
2006. As a percentage of service revenues, Adjusted EBITDA grew from 5.6% for
the three months ended December 31, 2006 to 6.5% for the three months ended
December 31, 2007.
* Net loss of $4.2 million compared to net income of $0.7 million for the
three months ended December 31, 2006. Net loss for 2007 includes expenses of
$1.4 million which are expected to be non-recurring and the reversal of a
tax benefit of $3.2 million.
- Non-recurring expenses of $1.4 million are comprised of $0.8 million in
professional fees related to the RPS SEC Form 10 registration and $0.6
million in consulting fees related to the search for acquisition candidates.
- Provision for income taxes of $4.7 million including the reversal of a tax
benefit of $3.2 million.
* As at December 31, 2007, RPS had approximately $11.1 million in cash plus $15
million of unused bank line availability.
Operational highlights for the three months ended December 31, 2007
* The fourth quarter of 2007 results demonstrate the continuing growth of RPS
reflecting new business awards and growth within existing client contracts.
* On October 5, 2007, RPS announced the repurchase, at the then closing market
price of $4.85 per share, of 750,000 shares from Pangaea One Acquisition
Holdings I LLC.
* On December 14, 2007, RPS filed a Form 10 registration in the U.S., commencing
the process of registration with the SEC as required under the terms of the
original IPO on AIM of Cross Shore in April 2006. The registration became
effective on February 12, 2008. As part of the Company's continuing efforts to
enhance shareholder value, the Company is considering listing its shares on an
additional exchange.
Financial highlights for the year ended December 31, 2007
* A 43% increase in service revenue to $120.5 million compared to $84.4 million
for the year ended December 31, 2006.
* An 86% increase in Adjusted EBITDA to $7.4 million compared to $4.0 million
for the year ended December 31, 2006. As a percentage of service revenue,
Adjusted EBITDA grew from 4.7% in 2006 to 6.2 % in 2007.
* Net loss of $2.4 million compared with net income of $1.8 million for the year
ended December 31, 2006. Net loss for 2007 includes expenses of $1.4 million
which are expected to be non-recurring and a non cash interest charge of $4.7
million.
- Expenses of $1.4 million are expected to be non-recurring. These expenses
are comprised of $0.8 million in professional fees related to RPS' SEC Form
10 registration and $0.6 million in consulting fees related to the search
for acquisition candidates.
- Non cash interest charge relating to put warrant liability of $4.7 million.
A description of each non-GAAP financial measure and the related reconciliation
to the comparable GAAP measure are located at the end of this press release.
Commenting on the fourth quarter results, Daniel M. Perlman, Chairman and CEO of
RPS, said:
"In an industry that continues to look for solutions to reduce costs while
improving the quality and the speed of drug development, our strong growth in
revenues and adjusted EBITDA in 2007 shows a quantitative measure of the
acceptance of RPS' unique model as the "next generation in the evolution of
CROs." We are very pleased with both the financial growth RPS has demonstrated
as well as the continued program penetration into many different sponsor
companies."
For further information please contact:
ReSearch Pharmaceutical Services, Inc. +1 215 540 0700
Dan Perlman, CEO
Steven Bell, Chief Financial Officer
Nominated Adviser and UK Broker:
Arbuthnot Securities Limited
James Steel / Richard Tulloch +44 20 7012 2000
ReSearch Pharmaceutical Services, Inc.
Unaudited Quarterly Report to December 30, 2007
Background on RPS
ReSearch Pharmaceutical Services, Inc. ("RPS" or the "Company") was incorporated
in Delaware on January 30, 2006 as Cross Shore Acquisition Corporation ("Cross
Shore"), a blank check company formed to serve as a vehicle for the acquisition
of a then unidentified operating business engaged in the delivery of business
services to consumers and companies in the United States. On April 24, 2006
Cross Shore consummated its initial public offering on the Alternative
Investment Market ("AIM") of the London Stock Exchange, and on April 26, 2007,
entered into an Agreement and Plan of Merger (the "Merger Agreement") with
ReSearch Pharmaceutical Services, Inc. ("Old RPS"). Upon the completion of the
merger with Old RPS on August 30, 2007, the combined company changed its name to
ReSearch Pharmaceutical Services, Inc. Prior to the merger with Old RPS, Cross
Shore had no operating business other than searching for an acquisition target.
Headquartered in Ft. Washington, Pennsylvania, with subsidiary offices across
Latin America, RPS is a leading provider of integrated clinical development
outsourcing solutions to the bio-pharmaceutical industry. RPS provides services
in connection with the design, initiation and management of clinical trials
programs that are required to obtain regulatory approval to market
bio-pharmaceutical products. RPS introduced the Pharmaceutical Resource
Organization ("PRO") model to address the challenges facing the drug development
industry, which continues to grow rapidly but is facing increasing pressures to
control costs and improve effectiveness. The PRO model combines the expertise of
a clinical research organization ("CRO") with the industry's largest resourcing
engines enabling RPS to provide a unique service offering that addresses the
challenges and meets the needs of the expanding, global clinical drug
development market.
Comments regarding the three months ended December 31, 2007
During the three months ended December 31, 2007, the Company prepared and filed
a Form 10 in the U.S., commencing the process of registration as a reporting
company with the SEC as required under the terms of Cross Shore's original IPO
on AIM in April 2006. Related to this filing, the Company incurred approximately
$0.8 million in professional fees. Additionally, during the three months ended
December 31, 2007 the Company entered into a consulting agreement with Cartesian
Capital Group, LLC ("Cartesian"), an affiliate of Pangaea One Acquisition
Holdings I, LLC which holds approximately 31.3% of the Company's common stock.
Cartesian is a private equity firm based in New York that manages alternative
investments worldwide, with a special focus on the world's emerging markets.
Under the terms of the agreement, Cartesian provided consulting services to the
Company in connection with the identification and evaluation of numerous
potential acquisition targets outside of the United States, with an emphasis on
opportunities in Asia and greater Europe. The term of the agreement expired on
December 31, 2007 and in consideration for providing the services, RPS paid
Cartesian $0.6 million. The Company considers the cost of both of these
activities to be one-time non-recurring costs and have excluded these costs in
providing financial highlights for the periods discussed.
During the three months ended December 31, 2007, the Company recorded an income
tax provision of $4.7 million. For the preceding nine month period, the Company
had recorded a tax benefit of $3.2 million primarily related to the loss and tax
benefit generated from the recording of a non-cash interest charge of $4.7
million to mark the Company's put warrant liability to its market value during
the period. The tax provision for the 2007 fiscal year of $1.5 million includes
the tax effect of this $4.7 million non-cash interest charge.
Operating review of the year ended December 31, 2007 compared to year ended
December 31, 2006
* Revenues. Service revenues increased 42.7% to $120.5 million for 2007 from
$84.4 million for 2006 as the Company generated additional business from
existing and new customers. The majority of the increase is related to
significant new contracts awarded during 2007 and the continued build from
existing contracts with several pharmaceutical companies in our Clinical
Master Services Provider (CMSP) programs. CMSP revenue for the year ended
December 31, 2007 grew 181.1% over the comparable prior period, and accounted
for 53.2% of our total service revenue for the year ended December 31, 2007.
Reimbursement revenues and offsetting reimbursable out-of-pocket costs
fluctuate from period to period due primarily to the level of pass-through
expenses in a particular period. Reimbursement revenues and reimbursable
out-of-pocket costs increased 35.5% to $13.9 million in 2007 from $10.3
million in 2006. The increase is due primarily to an increase in the number
of programs for which the Company is providing its various services.
* Direct Costs. Direct costs increased 42.8% to $87.7 million or 72.8% of
service revenues for 2007 as compared to $61.4 million or 72.7% of service
revenues for 2006. The increase in direct costs is directly correlated with
the increase in revenues as described above. The primary costs included in
direct costs are operational staff payroll and related taxes and benefits.
* Selling, general and administrative expenses, Selling, general and
administrative expenses ("SG&A") increased 40.5% to $26.8 million for 2007
from $19.1 million for 2006 to support the increase in revenues. The primary
reason for the increase in SG&A costs was an increase in the number of
corporate personnel, which resulted in increases in employee-related costs
such as new salaries, as well as increases in salaries for existing employees,
bonuses, commissions, health benefits and payroll taxes to $16.2 million for
the year ended December 31, 2007 as compared to $13.0 million for the year
ended December 31, 2006. Although the total increased during the periods, as a
percentage of service revenues, SG&A expenses decreased to 22.2% for 2007 as
compared to 22.6% for 2006. The decrease is attributable to the Company's
ability to leverage fixed infrastructure costs and contain semi-variable
overhead costs at a slower rate of growth than revenues.
* Depreciation and amortization expense. Depreciation and amortization expense
increased 26.9% to $1.1 million for 2007 as compared to $0.9 million for 2006
due primarily to an increase in the depreciable asset base.
* Income (loss) from operations. Income from operations increased to $4.9
million for 2007 as compared to income from operations of $3.1 million for
2006. The increase is attributable to growth in revenues in excess of the
corresponding growth in direct costs and SG&A costs as described above.
* Interest expense. Interest expense for 2007 increased to $6.0 million from
interest expense of $1.2 million for 2006. The majority of the change in
interest expense relates to a non-cash charge of $4.7 million recorded during
the year ended December 31, 2007, to mark the Company's put warrant liability
to its market value during the period. The put warrants were exchanged for a
combination of common stock and cash on August 30, 2007 in connection with the
reverse merger of Cross Shore Acquisition Corporation.
* Interest income. Interest income increased to $240,000 during the year ended
December 31, 2007 due to the level of investable cash on hand subsequent to
the Company's August 30, 2007 merger with Old RPS.
* Provision for income taxes. The provision for income taxes for 2007 increased
to $1.5 million versus an insignificant provision for 2006. During 2006, the
Company utilized net operating loss carryforwards to offset the majority of
its taxable income, and therefore the Company's effective tax rate was
minimal. No significant net operating loss carryforwards remain to offset 2007
taxable income. The Company's effective tax rate for 2007 is significant as
the $4.7 million interest charge recorded related to the put warrant liability
discussed above is non-deductible for income tax purposes.
* Net income (loss). As a result of the factors discussed above, net loss for
2007 increased to $2.4 million or ($0.19) per share, basic and diluted, from
net income for 2006 of $1.8 million or $0.24 per basic share and $0.12 per
diluted share.
Balance Sheet and Cash Flow
The Company maintains a working capital line of credit with a bank, with a
maximum potential borrowing capacity of $15.0 million. At December 31, 2007,
there were no outstanding borrowings under this facility.
During the year ended December 31, 2007, our operating activities provided cash
of $1.6 million, an increase of $5.4 million over the outflow for the
corresponding amount for the year ended December 31, 2006. The increase is
attributable to an increase in operating income excluding the non-cash interest
charge of $4.7 million recorded during the year to mark the Company's put
warrant liability to its market value during the period and positive changes in
our operating assets and liabilities, primarily a result of increases in accrued
expenses, deferred revenues, and customer deposits during the period. Accounts
receivable, net of allowance increased $10.0 million, or 45.2%, to $32.1 million
at December 31, 2007 from $22.1 million at December 31, 2006 primarily related
to the increase in revenues during the period. Additionally, in 2007 the Company
received a long-term customer deposit of $4.5 million which had a positive
impact on cash flows from operations.
Cash used in investing activities for the year ended December 31, 2007 totaled
$2.1 million, consisting primarily of the purchase of property and equipment.
Cash provided by financing activities for the year ended December 31, 2007
totaled $11.3 million consisting primarily of inflows relating to the $51.4
million of net cash proceeds received in connection with our merger. This cash
provided by financing activities was offset by paying down the Company's working
capital line of credit of $9.0 million, distributions to the Company's
stockholders of $20 million in connection with the Cross Shore merger, payment
of $2.6 million of accrued dividends on the Company's preferred stock prior to
the merger with Cross Shore, as well as the payoff of a note payable totaling
$4.5 million during the period. As of December 31, 2007, the Company has no
outstanding debt balances, other than capital lease obligations.
Dividends
The Company does not currently intend to pay cash dividends on its common stock
or warrants in the foreseeable future, but rather to reinvest earnings in the
business.
Supplemental non-GAAP financial information
EBITDA is defined as net income (loss) before interest expense, income taxes and
depreciation and amortization. Adjusted EBITDA is defined as net income (loss)
before interest expense, income taxes and depreciation and amortization, and
non-recurring expenses. The Company believes that net income is the most
directly comparable GAAP measurement to EBITDA and Adjusted EBITDA. EBITDA and
Adjusted EBITDA are presented because the Company believes they are useful to
investors as widely accepted financial indicators of a company's ability to
service and/or incur indebtedness and because such disclosure provides investors
with additional criteria used by the Company to evaluate our operating
performance and the performance bonuses of certain of our employees. EBITDA and
Adjusted EBITDA are not defined under GAAP, should not be considered in
isolation or as a substitute for a measure of our liquidity or performance
prepared in accordance with GAAP and are not indicative of income from
operations as determined under GAAP. EBITDA and Adjusted EBITDA and other
non-GAAP financial measures have limitations which should be considered before
using these measures to evaluate the Company's liquidity or financial
performance. EBITDA and Adjusted EBITDA do not include interest expense, income
tax expense or depreciation and amortization expense, which may be necessary in
evaluating the Company's operating results and liquidity requirements or those
of businesses we may acquire. The Company's management compensates for these
limitations by using EBITDA and Adjusted EBITDA as a supplement to GAAP results
to provide a more comprehensive understanding of the factors and trends
affecting our business or any business we may acquire. Our computation of EBITDA
and Adjusted EBITDA may not be comparable to other similarly titled measures
provided by other companies, because not all companies calculate this measure in
the same fashion.
The following table and related notes reconciles net income (loss) to EBITDA and
then EBITDA to Adjusted EBITDA:
(in thousands)
-------------------------------------------
Three months ended Year ended
December 31, December 31,
2007 2006 2007 2006
------- ------- ------- -------
Reconciliation of net income (loss) to adjusted EBITDA:
Net income (loss) $(4,240) $705 $(2,415) $1,792
Provision for income taxes 4,748 18 1,508 45
Interest (income) expense, net (86) 343 5,786 1,245
Depreciation and amortization 426 273 1,144 901
------- ------- ------- -------
EBITDA 848 1,339 6,023 3,983
Non-recurring expenses (a) 1,397 - 1,397 -
------- ------- ------- -------
Adjusted EBITDA $2,245 $1,339 $7,420 $3,983
======= ======= ======= =======
(a) The Company incurred non-recurring expenses in the fourth quarter of $1.4
million comprised of $0.8 million in professional fees related to the SEC Form
10 registration and $0.6 million in consulting fees related to the search for
potential acquisition candidates. The Company does not believe that these
expenses are reasonably likely to recur within the next two years.
Other Matters
* On December 14, 2007, RPS filed in the U.S. a registration statement on Form
10, which commenced the registration of the Company with the Securities
and Exchange Commission (SEC), as required under the terms of the Investor
Rights Agreement entered into in connection with Cross Shore's original IPO
on AIM in April 2006. The registration became effective on February 12,
2008. As part of the Company's continuing efforts to enhance shareholder
value, the Company is considering listing its shares on an additional
exchange. The Company expects to file its SEC Form 10-K for the year ended
December 31, 2007 on March 20, 2008. A copy of the Form 10-K will be sent to
shareholders and made available on the Company's website, www.rpsweb.com.
* On December 6, 2007 the Company granted options to purchase 750,000 shares of
common stock to an executive and to executive board members at an exercise
price of $5.05 per share.
Daniel M. Perlman, Chairman and CEO
March 20, 2007
Financial Data
ReSearch Pharmaceutical Services, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands)
---------------------------------------------
Three months ended Year ended
December 31, December 31,
2007 2006 2007 2006
------- ------- -------- -------
Service revenue $34,675 $24,067 $120,459 $84,418
Reimbursement revenue 3,679 3,106 13,924 10,273
------- ------- -------- -------
Total revenue 38,354 27,173 134,383 94,691
Direct costs 25,359 17,610 87,650 61,365
Reimbursable out-of-pocket costs 3,679 3,106 13,924 10,273
Selling, general and
administrative expenses 8,468 5,118 26,786 19,070
Depreciation and amortization 426 273 1,144 901
------- ------- ------- -------
Income from operations 422 1,066 4,879 3,082
Interest (income) expense, net (86) 343 5,786 1,245
------- ------- ------- -------
Net income (loss) before provision
for income taxes 508 723 (907) 1,837
Provision (benefit) for
income taxes 4,748 18 1,508 45
------- ------- ------- -------
Net income $(4,240) $705 $(2,415) $1,792
======= ======= ======= =======
Net income (loss) per
common share:
Basic $(0.13) $0.11 $(0.19) $0.24
Diluted $(0.13) $0.05 $(0.19) $0.12
Weighted average number of common shares outstanding:
Basic 32,223,952 5,501,674 14,572,881 5,501,674
Diluted 32,223,952 15,484,733 14,572,881 15,483,591
ReSearch Pharmaceutical Services, Inc. and Subsidiaries
Consolidated Balance Sheets
in thousands
----------------------------
December 31, December 31,
2007 2006
------------ ------------
Assets
Current assets
Cash and cash equivalents $11,060 $197
Restricted cash 1,322 1,468
Accounts receivable, net of allowance 32,118 22,113
Prepaid expenses and other current assets 1,672 641
------- -------
Total current assets 46,172 24,419
Intangible assets, net 276 612
Property and equipment, net 3,343 830
Other assets 253 263
Deferred tax asset 375 -
------- -------
Total assets $50,419 $26,124
======= =======
Liabilities and Stockholders' equity (deficit)
Current liabilities
Accounts payable $1,443 $1,375
Accrued expenses 6,490 2,925
Customer deposits 1,322 1,468
Deferred revenue 5,026 3,037
Lines of credit - 8,991
Current portion of capital lease obligations 536 21
------- -------
Total current liabilities 14,817 17,817
Customer deposits 4,500 -
Note payable - 4,165
Put warrant liability - 490
Other liabilities 259 -
Capital lease obligations, less current portion 414 -
------- -------
Total liabilities 19,990 22,472
Redeemable convertible preferred stock - 8,002
Stockholders' equity (deficit)
Common stock 3 1
Less treasury shares - (1,188)
Additional paid-in-capital 36,079 118
Accumulated other comprehensive income 50 6
Accumulated deficit (5,703) (3,287)
------- -------
Total stockholders' equity (deficit) 30,429 (4,350)
------- -------
Total liabilities, preferred stock, and
stockholders' equity (deficit) $50,419 $26,124
======= =======
ReSearch Pharmaceutical Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
-----------------------
Year ended
December 31,
2007 2006
-------- --------
Net income (loss) $(2,415) $1,792
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation 807 565
Amortization of intangible assets 336 336
Amortization of debt discount 335 185
Interest charge related to put warrant liability 4,724 31
Stock based compensation 212 30
Deferred tax benefit (409) -
Changes in operating assets and liabilities:
Accounts receivable (10,004) (8,325)
Prepaid expenses and other current assets (696) (169)
Other assets 9 (120)
Accounts payable 68 524
Accrued expenses 2,044 959
Customer deposits 4,354 125
Deferred revenue 1,989 296
Other liabilities 259 -
------- -------
Net cash provided by (used in) operating activities 1,613 (3,771)
Investing activities
Change in restricted cash 146 (125)
Purchase of property and equipment (2,198) (647)
------- -------
Net cash (used in) provided by investing activities (2,052) (772)
Financing activities
Net borrowings (repayments) on lines of credit (8,991) 4,152
Principal payments on capital lease obligations (194) (52)
Proceeds from stockholder notes receivable - 94
Repurchase of shares from stockholders (3,811) -
Customer deposit - -
Merger consideration, net of fees 51,375 -
Distribution to stockholders (20,000) -
Payment of preferrred stock dividends (2,627) -
Proceeds from exercise of options 6 -
Pament of note payable (4,500) -
------- -------
Net cash (used in) provided by financing activities 11,258 4,194
Effect of exchange rates on cash 44 6
------- -------
Net change in cash 10,863 (343)
Cash, beginning of period 197 540
------- -------
Cash, end of period $11,060 $197
======= =======
NOTES
The results contained herein reflect the operations of ReSearch Pharmaceutical
Services, Inc. only and do not contain any operating results for Cross Shore.
Comparative results for 2006 reflect the results of Old RPS prior to its merger
with Cross Shore.
The functional currency of RPS is US dollars because that is the currency of the
primary economic environment in which the company operates. These financial
statements are presented in US dollars.
The financial statements are presented in conformity with accounting principles
generally accepted in the United States and have been prepared using the same
accounting policies as set forth in the financial statements for the year ended
December 31, 2007 which will be included in the Company's Annual Report on Form
10-K to be filed with the SEC.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release contains "forward-looking statements" that are made pursuant
to the safe harbor provisions of the U.S. Private Securities Litigation Reform
Act of 1995. Forward-looking statements can be identified by words such as
"anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects"
and similar references to future periods, or by the inclusion of forecasts or
projections. Forward-looking statements are based on the Company's current
expectations and assumptions regarding its business, financial condition, the
economy and other future conditions. Because forward-looking statements relate
to the future, by their nature, they are subject to inherent uncertainties,
risks and changes in circumstances that are difficult to predict, including
those described under the heading "Risk Factors" in the Company's Form 10 filed
with the SEC on February 13, 2008. The Company's actual results may differ
materially from those contemplated by the forward-looking statements. The
Company cautions you therefore that you should not rely on any of these
forward-looking statements as statements of historical fact or as guarantees or
assurances of future performance. Important factors that could cause actual
results to differ materially from those in the forward-looking statements
include regional, national or global political, economic, business, competitive,
market and regulatory conditions including: our ability to identify liabilities
associated with the Company; our ability to manage pricing and operational
risks; our ability to manage foreign operations; changes in technology; and our
ability to acquire or renew contracts. Any forward-looking statement made in
this document speaks only as of the date on which it is made. Factors or events
that could cause the Company's actual results to differ may emerge from time to
time, and it is not possible for the Company to predict all of them. The Company
undertakes no obligation to publicly update any forward-looking statement,
whether as a result of new information, future developments or otherwise, unless
otherwise required to do so by the AIM Rules.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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