<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 205498
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934. For the quarterly period ended
September 30, 1998
- ------------------
or
[ ] Transitional report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transitional period from ___________________ to ____________________
Commission file number 0-29100
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PREMIER RESEARCH WORLDWIDE, LTD.
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(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 22-3264604
- --------------------------------------------- -----------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
124 South 15th Street
Philadelphia, PA 19102
--------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
</TABLE>
215-972-0420
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and formal fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports, and (2) has been subject to such filing
requirements for the past 90 days. X Yes No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
The number of shares of Common Stock, $.01 par value, outstanding as of November
13, 1998, was 7,047,620.
<PAGE>
PREMIER RESEARCH WORLDWIDE, LTD. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheets--September 30, 1998 (unaudited) and
December 31, 1997 3
Condensed consolidated statements of operations (unaudited)--Three Months
And Nine Months Ended September 30, 1998 and 1997 4
Condensed consolidated statements of cash flows (unaudited)--Nine Months
Ended September 30, 1998 and 1997 5
Notes to condensed consolidated financial statements (unaudited) 6-7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 7-12
Part II. Other Information 13
Item 2. Changes in Securities and Use of Proceeds
Item 6. Exhibits and Reports on Form 8-K 14
a.) Exhibits
27 Financial Data Schedule
b.) Reports on Form 8-K
None
Signatures 15
</TABLE>
2
<PAGE>
PREMIER RESEARCH WORLDWIDE, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------ -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $10,840 $ 4,679
Short-term investments 7,622 17,084
Accounts receivable, net 8,274 5,169
Prepaid expenses and other 1,455 945
Deferred income taxes 91 91
------- -------
Total current assets 28,282 27,968
Property and equipment, net 2,880 1,986
Goodwill, net 2,162 2,538
Investments 1,000 --
Other assets 24 23
Deferred income taxes 3,969 4,259
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$38,317 $36,774
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,072 $ 1,745
Accrued expenses 1,425 1,214
Deferred revenues 4,906 3,348
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Total current liabilities 7,403 6,307
------- -------
Commitments and contingencies
Stockholders' equity:
Preferred stock-$10 par value, 500,000 shares authorized,
none issued and outstanding -- --
Common stock-$.01 par value, 15,000,000 shares authorized,
7,173,500 and 6,938,400 shares issued and outstanding 72 69
Additional paid-in capital 36,979 36,430
Treasury stock, 128,600 shares at cost (540) --
Accumulated deficit (5,597) (6,032)
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Total stockholders' equity 30,914 30,467
------- -------
$38,317 $36,774
======= =======
</TABLE>
The accompanying notes are an integral part of these statements
3
<PAGE>
PREMIER RESEARCH WORLDWIDE, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
1998 1997 1998 1997
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $ 9,855 $ 2,941 $27,443 $10,142
Less-Reimbursed costs (1,696) (291) (4,440) (583)
------- ------- ------- -------
Net revenues 8,159 2,650 23,003 9,559
------- ------- ------- -------
Costs and expenses:
Direct costs 3,360 1,599 9,677 4,668
Selling, general and administrative 4,251 2,396 12,182 6,956
Depreciation and amortization 416 154 1,146 440
------- ------- ------- -------
Total costs and expenses 8,027 4,149 23,005 12,064
------- ------- ------- -------
Income (loss) from operations 132 (1,499) (2) (2,505)
Other income, net 216 372 727 1,051
------- ------- ------- -------
Income (loss) before income taxes 348 (1,127) 725 (1,454)
Income tax provision (benefit) 138 (507) 290 (697)
------- ------- ------- -------
Net income (loss) $ 210 $ (620) $ 435 (757)
======= ======= ======= =======
Basic and diluted net income (loss) per share $ 0.03 $ (0.09) $ 0.06 $ (0.11)
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements
4
<PAGE>
PREMIER RESEARCH WORLDWIDE, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------
1998 1997
---- ----
(unaudited)
<S> <C> <C>
Operating activities:
Net income (loss) $ 435 $ (757)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 1,146 440
Deferred income taxes 290 (853)
Changes in assets and liabilities:
Accounts receivable (3,105) (225)
Prepaid expenses and other (510) (171)
Accounts payable (673) (273)
Accrued expenses 302 (38)
Payable to UM Holdings Ltd. for income taxes -- (485)
Deferred revenues 1,558 633
---------- ----------
Net cash used in operating activities (557) (1,729)
---------- ----------
Investing activities:
Purchases of property and equipment (1,756) (958)
DLB investment -- (1,000)
America's Doctor investment (1,000) --
Purchases of short-term investments -- (15,722)
Proceeds from sales of short-term investments 9,462 --
---------- ----------
Net cash provided by (used in) investing activities 6,706 (17,680)
---------- ----------
Financing activities:
Repurchase of common stock for treasury (540) --
Net proceeds from issuance of common stock -- 34,159
Net proceeds from exercise of stock options 552 --
---------- ----------
Net cash provided by financing activities 12 34,159
---------- ----------
Net increase in cash and cash equivalents 6,161 14,750
Cash and cash equivalents, beginning of period 4,679 1,498
---------- ----------
Cash and cash equivalents, end of period $ 10,840 $ 16,248
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements
5
<PAGE>
PREMIER RESEARCH WORLDWIDE, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for fair presentation have
been included. Operating results for the periods ended September 30, 1998, are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1998. Further information on potential factors that could
affect the Company's financial results can be found in the Company's on Form
10-K and 10-Q filed with the Securities and Exchange Commission.
Note 2. Net Income (Loss) per Share
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings per Share."
This statement established new standards for computing and presenting earnings
per share and requires the restatement of prior year amounts. The Company
adopted SFAS No. 128 effective December 31, 1997.
Basic net income (loss) per share was computed by dividing net income (loss) by
the weighted average number of shares of common stock outstanding during the
period. Diluted net income (loss) per share was computed by dividing net income
(loss) by the weighted average number of shares of common stock outstanding
during the period, adjusted for the dilutive effect of common stock equivalents,
if any, which consist of stock options, using the treasury stock method.
The table below sets forth the reconciliation of the numerators and denominators
of the basic and diluted net income (loss) per share computations. As required
by SFAS No. 128, all prior-period per share data has been restated to conform to
the provisions of this statement.
<TABLE>
<CAPTION>
Three Months Ended September 30,
- --------------------------------
Net Per
Income Share
1998 (Loss) Shares Amount
- ---- --------- --------- --------
<S> <C> <C> <C>
Basic.................................... $ 210,000 7,106,205 $ 0.03
Effect of dilutive shares................ -- 78,780 --
--------- --------- ---------
Diluted.................................. $ 210,000 7,184,989 $ 0.03
========= ========= =========
1997
- ----
Basic.................................... $(620,000) 6,938,000 $ (0.09)
Effect of dilutive shares................ -- -- --
--------- --------- ---------
Diluted.................................. $(620,000) 6,938,000 $ (0.09)
========= ========= =========
</TABLE>
Options to purchase 652,132 shares of common stock were outstanding at September
30, 1998 but were not included in the computation of diluted net income per
share for the three months ended September 30, 1998 because the option exercise
prices were greater than the average market price of the Company's common stock
during the period. Options to purchase 710,114 shares of common stock were
outstanding at September 30, 1997 but were not included in the computation of
diluted net loss per share for the three months ended September 30, 1997 because
their effect would be anti-dilutive.
6
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
- -------------------------------
Net Per
Income Share
1998 (Loss) Shares Amount
- ---- --------- --------- --------
<S> <C> <C> <C>
Basic.................................... $ 435,000 7,120,681 $ 0.06
Effect of dilutive shares................ -- 95,961 --
--------- --------- ---------
Diluted.................................. $ 435,000 7,216,642 $ 0.06
========= ========= =========
1997
- ----
Basic.................................... $(757,000) 6,632,000 $ (0.11)
Effect of dilutive shares................ -- -- --
--------- --------- ---------
Diluted.................................. $(757,000) 6,632,000 $ (0.11)
========= ========= =========
</TABLE>
Options to purchase 634,951 shares of common stock were outstanding at September
30, 1998 but were not included in the computation of diluted net income per
share for the nine months ended September 30, 1998 because the option exercise
prices were greater than the average market price of the Company's common stock
during the period. Options to purchase 710,114 shares of common stock were
outstanding at September 30, 1997 but were not included in the computation of
diluted net loss per share for the nine months ended September 30, 1997 because
their effect would be anti-dilutive.
Note 3. New Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
which is effective for financial statements issued for fiscal years beginning
after December 15, 1997. The Company's comprehensive income includes net income
and unrealized gains on short-term investments and losses from foreign currency
translation. These unrealized gains and losses were immaterial for the periods
ended September 30, 1998 and 1997.
In June 1997, the FASB issued SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information". This statement establishes additional
standards for segment reporting in the financial statements and is effective for
fiscal years beginning after December 15, 1997. Management is currently
evaluating the impact SFAS No. 131 will have on its financial reporting.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company is a clinical research organization (CRO) providing a broad range of
integrated products and services to facilitate and expedite the product
development and regulatory approval process on a global basis to its clients in
the pharmaceutical, biotechnology and medical device industries. The Company's
products and services include centralized Core Laboratory testing services and
Clinical Trial and Data Management products and services. Core Laboratory
includes US and International diagnostic services that consist primarily of ECG
reading and blood laboratory services. Clinical Trial and Data Management
products and services include worldwide clinical trial and data management
software, software maintenance and support, services for the design, performance
and management of a clinical trial, bio-statistical analysis, health care
economics and outcomes research and regulatory affairs services.
7
<PAGE>
The Company's Core Laboratory services are on a fee-for-service basis and
generally have terms from one month to two years. A portion of the Company's fee
typically is paid upon contract execution as a non-refundable up-front payment,
with the remaining amounts billed monthly. Clinical research service contracts
are generally fixed priced, with certain variable components, and range in
duration from a few months to two years. A portion of the Company's fee
typically is paid upon contract execution as a non-refundable up-front payment,
with the balance billed in accordance with the contract terms. The Company's
contracts generally may be terminated with or without cause on 30 to 90 days
notice. Clients terminate or delay contracts for a variety of reasons,
including, among others, the failure of the product(s) being tested to satisfy
safety or efficacy requirements; unexpected or undesired clinical results of the
product; the client's decision to forego a particular study; insufficient
patient enrollment or investigator recruitment; and production problems
resulting in shortages of required supplies.
Revenues from Core Laboratory service contracts generally are recognized on a
per procedure basis as the work is performed. Revenues from clinical research
service contracts generally are recognized on a percentage of completion basis,
as work is performed. The Company regularly subcontracts with third-party
investigators in connection with clinical trials and with other third-party
providers for specialized services. These and other reimbursable costs are paid
by the Company and reimbursed by clients and, in accordance with industry
practice, are included in revenues. Since reimbursed costs may vary
significantly from contract to contract and are not meaningful for analyzing
trends in revenues, they are included in gross revenues but excluded from net
revenues. Revenues from clinical trial software licenses are recognized upon
shipment of the software and related documentation and customer acceptance.
Revenues from software maintenance and continuing support contracts are
recognized on a straight-line basis over the period in which the software
maintenance and continuing support is provided. Revenues from consulting and
training services are recognized when the services are performed.
Consistent with industry practice, the Company considers net revenues its
primary measure of growth. The Company has had, and expects to continue to have,
certain clients, which will generate at least 10% of the Company's overall net
revenue. The Company believes that such concentration of business is not
uncommon in the clinical research industry.
Results of Operations
Three months ended September 30, 1998 compared to three months ended September
30, 1997
Net revenues for the three months ended September 30, 1998, increased $5,509,000
or 207.9% to $8,159,000 compared to $2,650,000 for the three months ended
September 30, 1997. Both the Core Laboratory and Clinical Trial and Data
Management products and services experienced strong net revenue performance
during the three months ended September 30, 1998. Core Laboratory net revenues
increased $770,000 or 49.0% to $2,343,000 for the three months ended September
30, 1998 compared to $1,573,000 for the same three months of 1997. The increase
in Core Laboratory net revenues was the result of increased contract signings
and recognition of part of the Company's backlog. Clinical Trial and Data
Management products and services increased $4,739,000 to $5,816,000 for the
three months ended September 30, 1998 compared to $1,077,000 for the three
months ended September 30, 1997. The increase in the Clinical Trial and Data
Management business was due to the impact of DLB Systems, acquired in the fourth
quarter of 1997, increased contract signings and the realization of part of the
Company's backlog. DLB Systems contributed $2,611,000 to the net revenues
increase in 1998. The overall increase in the Clinical Trial and Data Management
business more than offset the loss in revenues from the Company's Phase I Unit,
which was closed during the first quarter of 1998. The Phase I Unit recorded net
revenues of $321,000 for the three months ended September 30, 1997.
8
<PAGE>
Direct costs increased $1,761,000 or 110.1% to $3,360,000 for the three months
ended September 30, 1998 from $1,599,000 for the three months ended September
30, 1997. As a percentage of net revenues, direct costs were 41.2% for the three
months ended September 30, 1998 compared to 60.3% for the three months ended
September 30, 1997. The decrease in direct costs as a percentage of net revenue
was primarily due to the addition of DLB Systems, whose products and services
have lower direct costs as a percentage of net revenues, and overall expense
efficiencies as the result of increased revenues. Core Laboratory direct costs
increased $347,000 or 46.3% to $1,097,000 for the period ending June 30, 1998
compared to $750,000 for the 1997 period, and is solely due to the increase in
net revenues in the Core Laboratory operations. Direct costs for Clinical Trial
and Data Management products and services increased $1,414,000 or 166.5% to
$2,263,000 for the three months ended September 30, 1998 from $849,000 for the
same three months of 1997. DLB Systems, which is included in Clinical Trial and
Data Management, accounted for $758,000 of the year-to-year increase in direct
costs. The remainder of the increase is primarily due to higher costs associated
with increased net revenues. The increase in Clinical Trial and Data Management
direct costs were partially offset by reduced costs in the Company's Phase I
Unit, which was closed in the first quarter of 1998. Direct costs for the Phase
I Unit for the three months ended September 30, 1997 were $286,000.
Selling, general and administrative expenses increased $1,855,000 or 77.4% to
$4,251,000 for the three months ended September 30, 1998 from $2,396,000 for the
three months ended September 30, 1997. DLB Systems' selling, general and
administrative expenses were $979,000 for the three months ended September 30,
1998 and accounted for over half of the year-to-year increase. The balance of
the increase reflects general growth to support the Company's increased net
revenues and the impact of the Company's decision to build its international
Clinical Trial and Data management infrastructure, which accounted for $455,000
of the increase in selling, general and administrative expenses. For the three
months ended September 30, 1998, selling, general and administrative expenses
were 52.1% of net revenues compared to 90.4% of net revenues for the same three
months of 1997. The decrease in the percentage is primarily due to the Company's
increased net revenues as selling, general and administrative costs are
relatively fixed in nature.
Depreciation and amortization expense for the third quarter of 1998 were
$416,000 and increased $262,000 when compared to $154,000 incurred in the third
quarter of 1997. The increase is primarily due to the amortization of the DLB
Systems goodwill and increased depreciation expense resulting from additional
capital spending to support the growth in the business.
Other income decreased to $216,000 from $372,000 for the three months ended
September 30, 1998 and 1997, respectively. The decrease is due to lower cash and
short-term investment balances in 1998 as a result of the Company's purchase of
DLB Systems, the investment in America's Doctor and uses of cash to support
working capital and capital expenditure needs in 1998.
The Company's effective tax rate for the three months ended September 30, 1998
was 40.0% compared to an effective tax rate of 45.0% for the three months ended
September 30, 1997. The decline in the effective tax rate is due primarily to
interest income derived from investment in tax exempt securities.
The Company's effective tax rate continues to reflect the benefit of the loss
carry-forward generated from its international operations. However, in the event
that it becomes more likely than not that the Company's international operations
do not generate sufficient profits to utilize the international loss
carry-forward, the Company will need to provide a valuation allowance on its
defined tax asset and the Company's effective tax rate will be adversely and
materially affected. Management continues to monitor the progress of its
international operations and will provide a valuation allowance when and if it
is determined necessary.
9
<PAGE>
Nine months ended September 30, 1998 compared to nine months ended September 30,
1997
Net revenues for the nine months ended September 30, 1998 increased $13,444,000
or 140.6% to $23,003,000 for the nine months ended September 30, 1998 from
$9,559,000 for the nine months ended September 30, 1997. The Core Laboratory's
net revenues increased $1,605,000 or 30.3% to $6,906,000 for the nine months
ended September 30, 1998 from $5,301,000 for the nine months ended September 30,
1997. Core Laboratory net revenues for the nine months ended September 30, 1998
increased due to the recognition of $836,000 in net revenues for work completed
under a contract which was cancelled before completion, from increased contract
signings and recognition of part of the Company's backlog. Core Laboratory net
revenues for the nine months ended September 30, 1997 were favorably impacted by
the completion of several large ECG contracts in the first three months of 1997
with a lower level of new contracts initiated in the comparable 1998 period. Net
revenues from Clinical Trial and Data Management products and services increased
$11,839,000 or 278.0% to $16,097,000 for the nine months ended September 30,
1998 from $4,258,000 for the nine months ended September 30, 1997. The increase
was due primarily to the impact of DLB Systems, acquired in the fourth quarter
of 1997, which contributed $7,591,000 to the 1998 net revenues, increased
contract signings and the realization of part of the Company's increasing
backlog. The increase in the overall Clinical Trial and Data Management business
more than offset the loss in revenues from the Company's Phase I Unit, which was
closed during the first quarter of 1998. The Phase I Unit recorded net revenues
of $190,000 for the nine months ended September 30, 1998 compared to $1,617,000
of net revenues for the nine months ended September 30, 1997.
Direct costs for the nine months ended September 30, 1998 increased $5,009,000
or 107.3% to $9,677,000 from $4,668,000 for the nine months ended September 30,
1997. As a percentage of net revenues, direct costs were 42.1% for the nine
months ended September 30, 1998 compared to 48.8% for the nine months ended
September 30, 1997. The decrease in direct costs as a percentage of net revenues
was primarily due to the addition of DLB Systems, whose products and services
have lower direct costs as a percentage of net revenues, the recognition of
$836,000 in net revenues for work completed under a contract which was cancelled
and to the overall increase in net revenues. Core Laboratory direct costs
increased $660,000 or 30.0% to $2,861,000 for the nine months ended September
30, 1998 from $2,201,000 for the same nine months of 1997. Direct costs for
Clinical Trial and Data Management products and services increased $4,350,000 or
176.4% to $6,816,000 for the 1998 period compared to $2,467,000 for the 1997
period. DLB Systems' direct costs were $2,626,000 for the nine months ended
September 30, 1998 and account for 60.4% of the year-to-year increase. The
balance of the increase was due primarily to higher costs associated with the
net revenue growth, specifically in Clinical Trial Management. Partially
offsetting the year-to-year increase was lower direct costs in the Company's
Phase I Unit, which was closed during the first quarter of 1998. Direct costs in
the Phase I Unit were $65,000 for the first nine months of 1998 compared to
$1,137,000 for the same nine-month period of 1997.
Selling, general and administrative expenses increased $5,226,000 or 75.1% to
$12,182,000 during the nine months ended September 30, 1998 from $6,956,000 for
the nine months ended September 30, 1997. DLB Systems, acquired in the fourth
quarter of 1998, accounted for $3,045,000 or 58.3% of the year-to-year increase.
The balance of the increase reflects general growth to support the Company's
increased net revenues and the impact of the Company's decision to build its
international Clinical Trial and Data Management infrastructure, which accounted
for $1,197,000 of the increase in selling, general and administrative expenses.
For the nine months ended September 1998, selling, general and administrative
expenses were 53.0% of net revenues compared to 72.8% of net revenues for the
same nine months of 1997. The decrease in the percentage was primarily due to
the Company's increased net revenues as selling, general and administrative
costs are relatively fixed in nature.
Depreciation and amortization expense for the first nine months of 1998 was
$1,146,000 and increased $706,000 when compared to $440,000 incurred in the
first nine months of 1997. The increase is primarily due to the amortization of
the DLB Systems goodwill and increased depreciation expense resulting from
additional capital spending to support the growth in the business.
10
<PAGE>
Other income decreased to $727,000 from $1,051,000 for the nine months ended
September 30, 1998 and 1997, respectively. The decrease is due to lower cash and
short-term investment balances in 1998 as a result of the Company's purchase of
DLB Systems, the investment in America's Doctor and general uses of cash to
support working capital and capital expenditure needs in 1998.
The Company's effective tax rate for the nine months ended September 30, 1998
was 40.0% compared to an effective tax rate of 47.9% for the nine months ended
September 30, 1997. The decline in the effective tax rate is due primarily to
the interest income derived from tax exempt securities.
Liquidity and Capital Resources
For the nine months ended September 30, 1998, the Company used cash in
operations of $557,000 compared to $1,729,000 of cash used in operations for the
nine months ended September 30, 1997. The year-to-year change was primarily the
result of increased revenues in 1998 resulting in increased income before
depreciation and amortization and increased deferred revenues, partially offset
by higher accounts receivable.
At September 30, 1998, the Company had $10,840,000 of cash and cash equivalents
on hand and $7,622,000 invested in short-term marketable securities. For the
nine months ended September 30, 1998, the Company sold, upon maturity,
$9,462,000 of short-term investments and re-invested the proceeds in investments
with maturities of ninety days or less. The Company generally places its
investments in A1P1 rated commercial bonds and paper, municipal securities and
certificates of deposit with maturities of less than one year.
During the nine months ended September 30, 1998, the Company purchased
$1,756,000 of equipment compared to $958,000 during the nine months ended
September 30, 1997. The increase in equipment purchases reflects the additional
capital equipment needed to support the growth of the Company.
During the nine months ended September 30, 1998, the Company received $552,000
in cash from the exercise of 243,120 employee stock options.
The Company has renewed through June 30, 1999, its bank line of credit, that
provides for borrowings up to $3,000,000 at an interest rate of prime minus 35
basis points. The line of credit agreement includes certain covenants, the most
restrictive of which limit future indebtedness and require compliance with a
liabilities-to-tangible net worth ratio. To date, the Company has not borrowed
any amounts under its line of credit.
On July 2, 1998, the Company made an investment of $1,000,000 for a minority
equity position in America's Doctor, an internet company which will provide
real-time physician chat, referrals and health care events on America Online's
Health web site.
On July 20, 1998, the Company announced that its Board of Directors had
authorized the repurchase, over time, of up to 500,000 shares of the Company's
common stock at prices determined appropriate by the Company. As of September
30, 1998, the Company had repurchased 128,600 shares of its Common Stock at an
average price of $4.20. As of November 13, 1998, the Company has repurchased
169,900 shares of its Common Stock at an average price per share of $4.30.
The Company expects that existing cash and cash equivalents, short-term
investments, cash flows from operations and borrowings under its line of credit
will be sufficient to meet its foreseeable cash needs for at least the next
year. However, there may be acquisition and other growth opportunities that
require additional external financing and the Company may from time to time seek
to obtain additional funds from the public or private issuances of equity or
debt securities. There can be no assurance that such financings will be
available or available on terms acceptable to the Company.
11
<PAGE>
Year 2000
The Company is aware of the issues associated with the programming code in
existing computer systems as the Year 2000 approaches. The "Year 2000 problem"
is pervasive and complex as virtually every computer operation will be affected
in some way by the rollover of the two-digit year value to 00. The issue is
whether computer systems will properly recognize data sensitive information when
the year changes to 2000. Systems that do not properly recognize such
information could generate erroneous data or cause the system to fail. The
Company relies on its systems in operating and monitoring all aspects of its
business. The Company also relies on the external systems of its customers,
suppliers and other organizations with which it does business.
The Company is performing a comprehensive review to identify the systems
affected by the year 2000 issues. The Company is assessing its information
technology systems, business computing systems, technical infrastructure, as
well as embedded systems commonly found in the operations equipment.
Additionally, the Company has initiated formal communications with third party
vendors and customers to assess the Year 200 readiness of their systems. From
the assessment of the external and internal systems, the Company will refine and
implement the Year 2000 readiness plan.
To date, no material issues have been identified as they relate to the Company's
efforts to identify Year 2000 issues. The Company expects to complete its
assessment of the Year 2000 readiness by January 1, 1999. The implementation
phase of the Year 2000 readiness plan has begun on systems already evaluated and
should be completed by October 1, 1999.
With regard to risks to the Company, management believes the Year 2000 issue
will not pose significant operational problems. Additionally, the Company is in
the process of developing contingency plans for critical systems in the event
that one or more of those systems fail, despite the Year 2000 readiness process.
Despite the Company's efforts thus far to address Year 2000 compliance, the
Company cannot guarantee that all internal and external systems will be
compliant, or that its business will not be materially affected by such
non-compliance.
Inflation
The Company believes the effects of inflation generally do not have a material
adverse effect on its results of operations or financial condition.
Cautionary Statement for Forward-Looking Information
Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations set forth above may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements involve a number of risks and
uncertainties such as competitive factors, technology development, market demand
and the Company's ability to obtain new contracts and accurately estimate net
revenues due to variability in size, scope and duration of projects, and
internal issues of the sponsoring client. Further information on potential
factors that could affect the Company's financial results can be found in the
Company's S-1 Registration Statement and its Reports on Form 10-K and 10-Q filed
with the Securities and Exchange Commission.
12
<PAGE>
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(1) Effective Date of Securities Act Registration Statement: February 3, 1997
registration No.: 333-17001
(2) Offering Date: February 4, 1997
(3) Not Applicable
(4) (i) The offering terminated after all shares registered were sold
(ii) Managing Underwriters: Montgomery Securities
Furman Selz
Genesis Merchant Group
(iii) Class of Securities Registered Common Stock
(iv) Account of Company Account of Selling Shareholder
------------------ ------------------------------
Amount Registered 2,206,250 common stock 956,250 common stock
Aggregate price of
Amount Registered $37,506,250 $16,256,250
Amount Sold 2,206,250 956,250
Aggregate Offering
Price of Amount Sold $37,506,250 16,256,250
(v) Expenses of offering for account of the Company:
Underwriting Discount and Commission $2,625,437
Other expenses $671,755
Total Expenses $3,297,192
</TABLE>
(A) There were no direct or indirect payments to directors,
officers, general partners of the issuer or their associates;
to persons owning ten (10) percent or more of common stock of
the Company; or affiliates of the Company.
(B) All of the above payments were direct or indirect payments to
others not described in clause (A).
<TABLE>
<CAPTION>
<S> <C> <C>
(vi) Net Offering Proceeds to the Company: $34,209,058
(vii) Use of Proceeds as of September 30, 1998:
Net cash paid for business acquisition: 8,655,000
Net cash paid for minority equity investment 1,000,000
Purchase of Equipment: 3,265,000
Working Capital: 2,827,058
Temporary Investments (consisting of short-term,
Investment-grade securities): 7,622,000
All of the above payments were to others not described in item (v)
(A) above.
(viii) The use of proceeds is consistent with the Prospectus
</TABLE>
13
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
a.) Exhibits
27 Financial Data Schedule
b.) Reports on Form 8-K
None
14
<PAGE>
Signatures
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
PREMIER RESEARCH WORLDWIDE, LTD.
(Registrant)
Date: November 16, 1998 By: /s/ Joel Morganroth
-----------------------------
Joel Morganroth, MD
Chief Executive Officer
Date: November 16, 1998 By: /s/ Fred M. Powell
----------------------------
Fred M. Powell
Chief Financial Officer
(Principal Financial and
Accounting Officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 10,840
<SECURITIES> 7,622
<RECEIVABLES> 8,426
<ALLOWANCES> (152)
<INVENTORY> 0
<CURRENT-ASSETS> 28,282
<PP&E> 10,113
<DEPRECIATION> (7,233)
<TOTAL-ASSETS> 38,317
<CURRENT-LIABILITIES> 7,403
<BONDS> 0
0
0
<COMMON> 72
<OTHER-SE> 30,842
<TOTAL-LIABILITY-AND-EQUITY> 38,317
<SALES> 8,159
<TOTAL-REVENUES> 8,159
<CGS> 0
<TOTAL-COSTS> 8,027
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 348
<INCOME-TAX> 138
<INCOME-CONTINUING> 210
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 210
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
