<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 June 30, 1999
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
-------
PREMIER RESEARCH WORLDWIDE, LTD.
--------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-3264604
- --------------------------------- -----------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
30 South 17th Street
Philadelphia, PA 19103
- --------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
215-972-0420
--------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(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 August
13, 1999, was 7,136,730.
<PAGE>
PREMIER RESEARCH WORLDWIDE, LTD. AND SUBSIDIARIES
INDEX
-----
<TABLE>
<CAPTION>
Page
Part I. Financial Information
<S> <C> <C> <C>
Item 1. Financial Statements
Condensed consolidated balance sheets--June 30, 1999 (unaudited) and
December 31, 1998 3
Condensed consolidated statements of operations (unaudited)--Three Months
And Six Months Ended June 30, 1999 and 1998 4
Condensed consolidated statements of cash flows (unaudited)--Six Months
Ended June 30, 1999 and 1998 5
Notes to condensed consolidated financial statements (unaudited) 6-8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 9-13
Item 3 Qualitative and Quantitative Disclosure about Market Risk 13
Part II. Other Information
Item 2 Changes in Securities and Use of Proceeds 14
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
a.) Exhibits
27 Financial Data Schedule
b.) Reports on Form 8-K
None
Signatures 16
</TABLE>
2
<PAGE>
PREMIER RESEARCH WORLDWIDE, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,604 $ 10,822
Short-term investments 5,381 5,668
Accounts receivable, net 14,621 10,423
Prepaid expenses and other 1,283 2,176
Deferred income taxes 159 159
-------- --------
Total current assets 29,048 29,248
Property and equipment, net 4,374 4,110
Goodwill, net 2,002 2,160
Other assets 1,023 1,023
Deferred income taxes 3,033 3,631
-------- --------
$ 39,480 $ 40,172
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,024 $ 2,519
Accrued expenses 1,479 1,156
Deferred revenues 3,969 5,556
-------- --------
Total current liabilities 7,472 9,231
-------- --------
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,
7,292,520 and 7,217,520 shares issued 73 72
Additional paid-in capital 37,230 37,061
Treasury stock, 177,800 shares at cost (779) (779)
Accumulated deficit (4,516) (5,413)
-------- --------
Total stockholders' equity 32,008 30,941
-------- --------
$ 39,480 $ 40,172
======== ========
</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 share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- --------------------------
1999 1998 1999 1998
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $ 13,893 $ 9,575 $ 26,180 $ 17,588
Less-Reimbursed costs (2,885) (1,504) (5,663) (2,744)
-------- -------- -------- --------
Net revenues 11,008 8,071 20,517 14,844
-------- -------- -------- --------
Costs and expenses:
Direct costs 4,841 3,559 9,548 6,317
Selling, general and administrative 4,947 4,106 8,687 7,931
Depreciation and amortization 560 387 1,073 730
-------- -------- -------- --------
Total costs and expenses 10,348 8,052 19,308 14,978
-------- -------- -------- --------
Income (loss) from operations 660 19 1,209 (134)
Other income, net 138 249 286 511
-------- -------- -------- --------
Income before income taxes 798 268 1,495 377
Income tax provision 319 108 598 152
-------- -------- -------- --------
Net income $ 479 $ 160 $ 897 $ 225
======== ======== ======== ========
Basic and diluted net income per share $ 0.07 $ 0.02 $ 0.13 $ 0.03
======== ======== ======== ========
</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>
Six Months Ended June 30,
1999 1998
---- ----
(unaudited)
<S> <C> <C>
Operating activities:
Net income $ 897 $ 225
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,073 730
Provision for losses on accounts receivable 101 --
Deferred income taxes 598 152
Changes in assets and liabilities:
Accounts receivable (4,299) (3,490)
Prepaid expenses and other 893 (984)
Accounts payable (495) (429)
Accrued expenses 323 (82)
Deferred revenues (1,587) 1,054
-------- --------
Net cash used in operating activities (2,496) (2,824)
-------- --------
Investing activities:
Purchases of property and equipment (1,179) (1,186)
Proceeds from sales of short-term investments 287 8,839
-------- --------
Net cash provided by (used in) investing activities (892) 7,653
-------- --------
Financing activities:
Net proceeds from exercise of stock options 170 534
-------- --------
Net increase (decrease) in cash and cash equivalents (3,218) 5,363
Cash and cash equivalents, beginning of period 10,822 4,679
-------- --------
Cash and cash equivalents, end of period $ 7,604 $ 10,042
======== ========
</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 June 30, 1999, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999. 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 Forms 10-K and 10-Q filed with the Securities and
Exchange Commission.
Note 2. Net Income per Share
The Company follows SFAS No. 128 "Earnings per Share". This statement requires
the presentation of basic and diluted earnings per share. Basic net income per
share is computed by dividing net income by the weighted average number of
shares of common stock outstanding during the year. Diluted net income per share
is computed by dividing net income by the weighted average number of shares of
common stock outstanding during the year, adjusted for the dilutive effect of
common stock equivalents, which consist primarily 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 per share computations.
Three Months Ended June 30,
Per
Net Share
1999 Income Shares Amount
- ---------------------------- ------ ------ ------
Basic ................... $ 479,000 7,110,000 $ 0.07
Effect of dilutive shares -- 88,000 --
--------- --------- --------
Diluted ................. $ 479,000 7,198,000 $ 0.07
========= ========= ========
1998
- ----------------------------
Basic ................... $ 160,000 7,174,000 $ 0.02
Effect of dilutive shares -- 100,000 --
--------- --------- --------
Diluted ................. $ 160,000 7,274,000 $ 0.02
========= ========= ========
Options to purchase 289,160 and 621,414 shares of common stock were outstanding
at June 30, 1999 and 1998, respectively, but were not included in the
computation of diluted net income per share for the three months ended June 30,
1999 and 1998 because the option exercise prices were greater than the average
market price of the Company's common stock during the period.
6
<PAGE>
Six Months Ended June 30,
- -------------------------
Per
Net Share
1999 Income Shares Amount
- -------------------------- -------- ------ ------
Basic ................... $ 897,000 7,080,000 $ 0.13
Effect of dilutive shares -- 98,000 --
--------- --------- --------
Diluted ................. $ 897,000 7,178,000 $ 0.13
========= ========= ========
1998
- --------------------------
Basic ................... $ 225,000 7,128,000 $ 0.03
Effect of dilutive shares -- 150,000 --
--------- --------- --------
Diluted ................. $ 225,000 7,278,000 $ 0.03
========= ========= ========
Options to purchase 239,148 and 571,414 shares of common stock were outstanding
at June 30, 1999 and 1998, respectively, but were not included in the
computation of diluted net income per share for the six months ended June 30,
1999 and 1998 because the option exercise prices were greater than the average
market price of the Company's common stock during the period.
Note 3. Comprehensive Income
The Company follows SFAS No. 130, "Reporting Comprehensive Income." The
Company's comprehensive income includes net income and unrealized gains and
losses from foreign currency translation and short-term investments. These
unrealized gains and losses were immaterial as of June 30, 1999 and 1998.
Note 4 Operating Segments
In June 1997, SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information," was issued, effective for fiscal years ending after
December 15, 1998. The Company adopted this statement for the year ended
December 31, 1998. The Company's reportable segments are strategic business
units that offer different products and services to a common client base. The
segments are managed separately because each business requires different
technology.
The Company's products and services are provided through two business segments,
both in the United States and internationally: Clinical Operations, which
includes centralized diagnostic testing services, clinical trial management
services and clinical data management services; and Technology Operations, which
includes clinical trial and data management software, support and consulting
services. The Company's discontinued Phase I Clinical Research Unit and Clinical
Laboratory operations and income and expense not allocated to reportable
segments are reported as Other.
The Company evaluates performance based on the net revenues and operating
earnings performance of the respective business segments.
7
<PAGE>
Segment information is as follows:
<TABLE>
<CAPTION>
Three months ended June 30,1999
-----------------------------------------------------------------
Clinical
Operations Technology Other Total
---------- ---------- ----- -----
<S> <C> <C> <C> <C>
Net revenues from external customers $ 8,966,000 $1,867,000 $ 175,000 $11,008,000
Income from operations 751,000 157,000 (248,000) 660,000
Identifiable assets 17,761,000 4,036,000 17,683,000 39,480,000
Three months ended June 30, 1998
-----------------------------------------------------------------
Clinical
Operations Technology Other Total
---------- ---------- ----- -----
Net revenues from external customers $ 4,801,000 $2,467,000 $ 803,000 $ 8,071,000
Income (loss) from operations (466,000) 124,000 361,000 19,000
Identifiable assets 10,643,000 3,822,000 23,520,000 37,985,000
Six months ended June 30,1999
-----------------------------------------------------------------
Clinical
Operations Technology Other Total
---------- ---------- ----- -----
Net revenues from external customers $16,140,000 $3,885,000 $ 492,000 $20,517,000
Income (loss) from operations 1,072,000 440,000 (303,000) 1,209,000
Identifiable assets 17,761,000 4,036,000 17,683,000 39,480,000
Six months ended June 30, 1998
-----------------------------------------------------------------
Clinical
Operations Technology Other Total
---------- ---------- ----- -----
Net revenues from external customers $ 8,808,000 $4,981,000 $ 1,055,000 $14,844,000
Income (loss) from operations (910,000) 683,000 93,000 (134,000)
Identifiable assets 10,643,000 3,822,000 23,520,000 37,985,000
</TABLE>
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company is a clinical research organization providing a broad range of
integrated product development services on a global basis to its clients in the
pharmaceutical, biotechnology and medical device industries. The Company's
products and services are provided, both in the United States and
internationally, through two business segments: Clinical Operations, which
includes centralized diagnostic testing services, clinical trial management
services and clinical data management services; and Technology Operations, which
includes the development, marketing and support of clinical trial and data
management software, support and consulting services. The Company had operated a
Phase I Clinical Research Unit, which was closed in the first quarter of 1998.
The Company's centralized diagnostic testing services are on a
fee-for-service basis and contracts generally have terms of one month to two
years. A portion of the Company's fee frequently is paid upon contract execution
as a non-refundable up-front payment, with the remaining amounts billed monthly.
Clinical trial and data management services are generally fixed priced
contracts, with certain variable components, and range in duration from a few
months to two years. A portion of the Company's fee frequently 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 clinical trial software and services are derived
primarily from software license fees, software maintenance and support and
consulting services.
Revenues from centralized diagnostic testing services are recognized as
the services are performed. Revenues from clinical trial and data management
services are generally 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 technology software licenses are recognized upon shipment
of the software and related documentation when collectibility is deemed probable
and the license fee is deemed fixed and determinable. 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, generally twelve months. Revenues from consulting and training
services are recognized when the services are performed.
Results of Operations
Three months ended June 30, 1999 compared to three months ended June 30, 1999
Net revenues for the three months ended June 30, 1999, increased $2,937,000 or
36.4% to $11,008,000 compared to $8,071,000 for the three months ended June 30,
1998.
The Company experienced a strong increase in net revenues in its Clinical
Operations, which increased $ 4,165,000 or 86.8% to $8,966,000 for the period
ended June 30, 1999 compared to $4,801,000 for the same period in 1998. The
increase in net revenues was the result of the Company's strong performance in
centralized diagnostic testing services which increased $1,348,000 or 68.6% to
$3,313,000 in the 1999 period from $1,965,000 in the 1998 period. In addition,
the Company's clinical trial and data management services net revenues increased
$2,817,000 or 99.3% to $5,653,000 for the three months ended June 30, 1999 from
$2,836,000 for the three months ended June 30, 1998. Overall, the increase in
net revenues for Clinical Operations resulted from revenues recognized from the
Company's contract backlog and new clinical contracts signed during the three
months ended June 30, 1999.
9
<PAGE>
The Company has decided to phase out its clinical laboratory operations, which
primarily provides blood sample testing in conjunction with clinical trials.
Contractual client obligations for these services will be met through
subcontracting agreements with comparable laboratories, beginning in the third
quarter of 1999. During the three months ended June 30, 1999, net revenues from
clinical laboratory operations were $175,000 compared to $742,000 for the three
months ended June 30, 1998.
Net revenues for Technology Operations declined $600,000 or 24.3% to $1,867,000
for the three months ended June 30, 1999 from $2,467,000 for the three months
ended June 30, 1998. The decline in net revenues was due to timing of new
software and related consulting contracts, which is common place in the software
market. These timing related issues resulted in the recognition of revenues from
significant new software licenses and consulting contracts during the second
quarter of 1998 with comparable revenues not recognized in the second quarter of
1999.
During the second quarter of 1998, the Company recorded net revenues of $61,000
from its Phase I unit, which was closed during the first quarter of 1998.
Direct costs for the three months ended June 30, 1999 increased $1,282,000 or
36.0% to $4,841,000 from $3,559,000 for the three months ended June 30, 1999.
The increase in direct costs is due to increased staffing and subcontracting
costs to support client contract requirements and to accommodate projected
future net revenues. Direct costs, as a percentage of net revenues, for the
three months ended June 30, 1999 and 1998 remained constant at 44.0% of net
revenues.
Selling, general and administrative expenses increased $841,000 or 20.5% to
$4,947,000 for the three months ended June 30, 1999 from $4,106,000 for the
three months ended June 30, 1998. The increase in selling, general and
administrative expenses is due to increased personnel and personnel related
costs and other expenses incurred in the three months ended June 30, 1999
including $250,000 of closedown costs for the clinical laboratory. As a
percentage of net revenues, selling, general and administrative expenses were
44.9% for the second quarter of 1999 compared to 50.9% for the second quarter of
1998. The decline in the percentage was due primarily to increasing net
revenues.
Depreciation and amortization expense increased to $560,000 in the second
quarter of 1999 from $387,000 in the comparable 1998 quarter. The increase was
due to increased depreciation expense resulting from additional capital spending
to support the growth in net revenues.
Other income, which consists primarily of interest earned on the Company's cash,
cash equivalents and short-term investments, decreased to $138,000 from $249,000
for the three months ended June 30, 1999 and 1998, respectively. The decrease is
due to lower cash and short-term investment balances in 1999 as a result of the
Company's use of cash to support working capital and capital expenditure needs
in 1999.
The Company's effective tax rate was 40.0% for both the three months ended June
30, 1999 and 1998.
Six months ended June 30, 1999 compared to six months ended June 30, 1998
Net revenues for the six months ended June 30, 1999, increased $5,673,000 or
38.2% to $20,517,000 compared to $14,844,000 for the six months ended June 30,
1998.
The Company continued to experience a strong increase in net revenues in its
Clinical Operations, which increased $7,332,000 or 83.2% to $16,140,000 for the
period ended June 30, 1999 compared to $8,808,000 for the same period in 1998.
The increase in net revenues was the result of the Company's strong performance
in centralized diagnostic testing services which increased $2,848,000 or 78.2%
to $6,490,000 in the 1999 period from $3,642,000 in the 1998 period. In
addition, the Company's clinical trial and data management services net revenues
increased $4,484,000 or 86.8% to $9,650,000 for the six months ended June 30,
1999 from $5,166,000 for the six months ended June 30, 1998. Overall, the
increase in net revenues for Clinical Operations resulted from revenues
recognized from the Company's contract backlog and new clinical contracts signed
during the six months ended June 30, 1999.
The Company has decided to phase out its clinical laboratory operations, which
primarily provides blood sample testing in conjunction with clinical trials.
Contractual client obligations for these services will be met through
subcontracting agreements with comparable laboratories, beginning in the third
quarter of 1999. During the six months ended June 30, 1999, net revenues from
clinical laboratory operations were $492,000 compared to $921,000 for the three
months ended June 30, 1998.
10
<PAGE>
Net revenues for Technology Operations declined $1,096,000 or 22.0% to
$3,885,000 for the six months ended June 30, 1999 from $4,981,000 for the six
months ended June 30, 1998. The decline in net revenues was due to timing of new
software and related consulting contracts, which is common place in the software
market. These timing related issues resulted in the recognition of revenues from
significant new software licenses and consulting contracts during the first six
months of 1998 with comparable revenues not recognized in the first six months
of 1999.
During the six months ended June 30, 1998, the Company recorded net revenues of
$134,000 from its Phase I unit, which was closed during the first quarter of
1998.
Direct costs for the six months ended June 30, 1999 increased $3,231,000 or
51.1% to $9,548,000 from $6,317,000 for the six months ended June 30, 1999. The
increase in direct costs is due to increased staffing and subcontracting costs
to support client contract requirements and to accommodate projected future net
revenues. Direct costs, as a percentage of net revenues, for the six months
ended June 30, 1999 were 46.5% compared to 42.6% for the same period in 1998.
The increase in direct costs as a percentage of net revenues is due to the
increase in staff and subcontracting costs and to the mix of revenues as
Clinical Operations net revenues have a higher direct cost ratio than Technology
Operations net revenues.
Selling, general and administrative expenses increased $756,000 or 9.5% to
$8,687,000 for the six months ended June 30, 1999 from $7,931,000 for the six
months ended June 30, 1998. The increase in selling, general and administrative
expenses is due to increased personnel related and other expenses incurred in
the six months ended June 30, 1999 including $250,000 of closedown costs for the
clinical laboratory. As a percentage of net revenues, selling, general and
administrative expenses were 42.3% for the six months ended June 30, 1999
compared to 53.4% for the six months ended June 30, 1998. The decline in the
percentage was due primarily to increasing net revenues.
Depreciation and amortization expense increased to $1,073,000 for the six months
ended June 30, 1999 from $730,000 in the comparable 1998 period. The increase
was due to increased depreciation expense resulting from additional capital
spending to support the growth in net revenues.
Other income, which consists primarily of interest earned on the Company's cash,
cash equivalents and short-term investments, decreased to $286,000 from $511,000
for the six months ended June 30, 1999 and 1998, respectively. The decrease is
due to lower cash and short-term investment balances in 1999 as a result of the
Company's use of cash to support working capital and capital expenditure needs
in 1999.
The Company's effective tax rate was 40.0% for both the six months ended June
30, 1999 and 1998.
Liquidity and Capital Resources
For the six months ended June 30, 1999, the Company used cash in operations of
$2,496,000 compared to $2,824,000 of cash used in operations for the six months
ended June 30, 1998. The year-to-year change was primarily the result of
increased income before depreciation and amortization, lower prepaid expenses
and increased accrued expenses, which were partially offset by higher accounts
receivable and lower deferred revenues.
At June 30, 1999, the Company had $7,604,000 of cash and cash equivalents on
hand and $5,381,000 invested in short-term securities. For the six months ended
June 30, 1999, the Company sold, upon maturity, $287,000 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 six months ended June 30, 1999, the Company purchased $1,179,000 of
equipment compared to $1,186,000 during the six months ended June 30, 1998.
During the six months ended June 30, 1999, the Company received $170,000 in cash
from the exercise of 75,000 employee stock options.
11
<PAGE>
On March 22, 1999, the Company announced that it had entered into a two-year,
$4.6 million consulting contract with AmericasDoctor.com, Inc. Under the terms
of the contract, the Company will provide consulting services to enhance this
internet company's capability to effectively support patient identification,
recruitment and referral to clinical investigational sites for both Premier
Research and other companies in the pharmaceutical, biotechnology and medical
device industries. The Company's consulting fees will be paid in eight equal
quarterly installments through December 2000. Through the first six months of
1999, the Company recognized $1,150,000 in net revenues under this agreement.
The Company has a line of credit with a bank through June 30, 2000, 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.
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.
Year 2000
The Company is aware of the issues and problems associated with the Year 2000
date change. The Company has been addressing company-wide data processing and
infrastructure issues since 1995. Premier Research has undertaken a Year 2000
Compliance Plan that will be completed by September 1, 1999. In addition, the
Company had all clinical systems Year 2000 compliant by July 31, 1999. The
purpose of this plan is to assure that Premier Research, as a corporate entity,
has assessed and taken appropriate actions necessary to become compliant with
any issues regarding Year 2000 requirements. The problems surrounding Year 2000
compliance are of extreme concern to the Company, since Premier Research is a
clinical research organization providing diagnostic testing and clinical
research services to the pharmaceutical industry, as well as a developer of
clinical database management software. The Company produces and delivers
information that is date sensitive, especially in deriving date and time
calculations; Premier Research currently can provide to its clients, date
formats that contain century markers or 4-digit year fields for any of its
clinical and diagnostic information.
The Company's strategy to address Year 2000 compliance is to replace potentially
non-compliant software and hardware with new compliant systems or updated Year
2000 compliant versions. The inventory and assessment phases of the Year 2000
plan have primarily been completed for its hardware and software systems. The
Company has begun its remediation phase of the plan through the replacement and
updating of systems.
As of today all of the Company's information technology infrastructure has been
assessed. Those that have shown not to be in compliance are currently being
evaluated and renovated for compliance. If a system can not be made compliant to
the requirements, the system will be replaced with one that is compliant. All
systems are anticipated to be compliant by September 30, 1999.
The Company is also assessing its facilities worldwide that it leases or owns,
and plans to complete its deployment of applicable contingency plans by
September 30, 1999.
The Company is also assessing and surveying its suppliers of third party
products and services. Based upon information received from such parties, the
Company believes that most of its suppliers are developing, assessing and
remediating any issues associated with their Year 2000 plans. The Company cannot
at this time fully assess the status of its suppliers until they have completed
their own efforts. It will review the readiness of the suppliers on an on-going
basis throughout the remainder of the year and will implement specific actions
to rectify potential problems in its supply chain.
As with any other company in its industry or any business in general, the
Company is exposed to risks associated with failures in the private and public
sector to become Year 2000 compliant. These risks include the possibility that
public infrastructure systems, such as electricity, water, natural gas or
telecommunications may fail in this country and other countries in the world
that the Company does business. In addition, there are those risks that the
internal systems of the Company's suppliers, service providers and customers
will fail. The Company also relies considerably on travel and could be adversely
affected, if air and train travel is disrupted by issues related to the Year
2000.
12
<PAGE>
The Company also relies heavily on the healthcare industry. This industry and
its related clinical investigational sites may not have focused their efforts on
the Year 2000 issue to the same degree. Thus the Company has an increased risk
that its investigational sites, necessary for the conduct of clinical trials,
will be unable to provide timely answers and data that it needs to perform
services on time to its contractual clients. Also, the failure of the Company's
customers to address the Year 2000 issue could negatively impact on their
ability to use the Company's services. While contingency plans will be developed
to address these risks, the Company cannot assure that those plans will
sufficiently protect the Company from the effects of those risks. Any
disruptions from the realization of any of these risks could adversely affect
the Company's ability to perform its services.
The Company estimates that the costs associated with its Year 2000 program will
be approximately $ 0.5 million, including costs already incurred. Total Year
2000 costs of approximately $0.3 million have been incurred by the Company
through June 30, 1999. The estimates of cost, timing and impact of addressing
the Year 2000 issue are based on numerous assumptions of future events,
including the continued availability of certain resources, the ability of the
Company to meet its deadlines and the cooperation of third parties. However,
there can be no guarantee that the assumptions will be correct and that these
estimates will be achieved. Actual results could differ significantly from those
expected by the Company.
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.
Item 3. Qualitative and Quantitative Disclosures About Market Risk
The Company's primary financial market risks include fluctuations in interest
rates and currency exchange rates.
There have been no significant changes since December 31, 1998.
13
<PAGE>
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds
(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
<TABLE>
<CAPTION>
<S> <C> <C>
(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 $698,813
Total Expenses $3,324,250
(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).
(vi) Net Offering Proceeds to the Company: $34,182,000
(vii) Use of Proceeds as of June 30, 1999:
Net cash paid for business acquisition: 8,655,000
Net cash paid for minority equity investment 1,000,000
Purchase of Equipment: 6,038,000
Working Capital: 5,504,000
Temporary Investments (consisting of short-term,
Investment-grade securities): 5,381,000
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>
14
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on May 25, 1999. Matters
submitted to the Shareholders for vote were the election of three directors to
each serve a three-year term until 2002, approval of an amendment to the
Company's 1996 Stock Option Plan to (a) reserve an additional 600,000 shares of
Common Stock for issuance thereunder and (b) provide for fixed initial and
annual grants of stock options to the Company's outside directors, and the
ratification of the appointment of Arthur Andersen LLP as the Company's
independent auditors for the year ending December 31, 1999 .
At the meeting, the shareholders elected Arthur W. Hicks, Jr. and Jerry D. Lee
to the Board of Directors with 5,876,291 votes for the election or 82.6% of the
7,114,720 shares outstanding and elibible to vote with 647,250 shares withheld
and Joel Morganroth, MD with 6,516,091 votes for election or 91.6% respectively
of the 7,114,720 shares outstanding and eligible to vote with 7,450 shares
withheld. With their election, they join Joan Carter, John Aglialoro, Charles L.
Jacobson, MD, Arthur Hull Hayes, Jr., MD, Philip J. Whitcome, Ph.D., and Connie
Woodburn as Directors of the Company.
The shareholders approved the amendments to the Company's 1996 Stock Option plan
with 4,469,465 shares voted for approval or 62.8% of the 7,114,720 shares
outstanding and eligible to vote with 104,562 shares voted against the amendment
and 12,600 shares abstaining or representing broker non-votes.
In addition, the Shareholders ratified the appointment of Arthur Andersen LLP as
the Company's independent auditors for 1999 with 6,514,041 shares voting for
ratification or 91.6% of the 7,114,720 shares outstanding and eligible to vote
with 2,150 votes against ratification and 7,350 shares abstaining.
Item 6. Exhibits and Reports on Form 8-K
a.) Exhibits
27 Financial Data Schedule
b.) Reports on Form 8-K
None
15
<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: August 16, 1999 By: /s/ Joel Morganroth
-----------------------------------
Joel Morganroth, MD
Chief
Executive Officer
Date: August 16, 1999 By: /s/ John R. Bauer
--------------------------
John R. Bauer
Chief Financial Officer
(Principal Financial and Accounting
Officer)
16
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