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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the period from July 1, 1995 to June 30, 1996
Commission File Number: 01-9723
PHARMACEUTICAL MARKETING SERVICES INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0335521
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
2394 East Camelback Road, Phoenix, Arizona 85016
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code:(602) 381 9800
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports 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. Yes [X]. No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the Common Stock of the registrant held by
non-affiliates as of September 20, 1996 was approximately $95 million.
As of September 20, 1996 there were 13,169,275 outstanding shares of the
registrant's Common Stock.
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DOCUMENTS INCORPORATED BY REFERENCE
The registrant's definitive proxy statement for its meeting of
stockholders in connection with its fiscal year ended June 30, 1996, which is to
be filed pursuant to Regulation 14A not later than October 30, 1996 is
incorporated by reference into Part III of this Form 10-K.
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PART I
ITEM 1. BUSINESS
INTRODUCTION
Pharmaceutical Marketing Services Inc., a Delaware corporation (the
"Company" or "PMSI"), provides a range of information services to pharmaceutical
and healthcare companies in the United States, Europe and Japan to enable them
to optimize their sales and marketing performance in a value driven environment.
Most of the Company's information services are generated from its own
proprietary databases containing unique prescription, managed care, healthcare
market and medical prescriber data.
In the third quarter, the Company decided that, following the conclusion
of a strategic assessment, it would develop its business as a focused
information services provider to the pharmaceutical and healthcare industries,
and that its communication businesses ("non-database segment") would be
divested. The operations being divested are shown in this annual report and the
Company's financial statements as "discontinued operations". PMSI also announced
its intention to sell its international medical publishing business in the
Netherlands, and the disposal of two database businesses that did not meet
performance expectations.
PMSI's principal executive offices are located at 2394 East Camelback
Road, Phoenix, Arizona 85016, and its telephone number is (602) 381-9800.
DATABASES AND SERVICES
PMSI provides a range of services that are either database services or
enhanced by the Company's proprietary databases. The services are comprised of
targeting information services, prescription database services with Source
Informatics Inc. ("Source"), and added value services, including marketing
research and consulting services, software and direct marketing services.
Proprietary Databases
A variety of proprietary databases provide the foundation of most of
PMSI's business. The Company's prescriber profile databases (the "Prescriber
Profile Databases") contain extensive information on individual prescribers,
including attitudes and prescribing behavior, collected from physicians through
self-administered surveys in seven countries. In addition, the Company jointly
exploits, through a long-term agreement, a database of prescription data (the
"Source Database") created and maintained by Source. This database contained
information relating to nearly 3 billion prescriptions dispensed by retail and
mail order pharmacies in the United States over the 24-month period ended June
30, 1996. Over 90% of the prescriptions in the Source Database are matched to
about 900,000 physicians and other prescribers writing them. Data for the Source
Database is collected from retail and mail order pharmacies in the United
States. PMSI has also agreed, in principle, subject to final approval by the
Board of Directors of both companies, to participate in the commercialization
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of similar databases being developed by Source in Europe. The Company also
maintains various other comprehensive databases including: healthcare
legislation and key influencers in the United States and the United Kingdom; a
managed care database, which details cost containment measures imposed by United
States managed care organizations ("MCOs") that influence or restrict
physicians' prescribing activities, and which also covers formularies,
administrators and the physicians affiliated with the MCOs; and databases of
pharmaceutical product prices and reimbursement in the United Kingdom.
The Company does not hold any identifiable individual patient data,
except with the patients' prior permission for follow-up research or disease
management purposes.
Targeting Information Services
Through the use of PMSI's targeting information services, a pharmaceutical
company is able to target its promotional programs to the optimal audience of
prescribers and other healthcare professionals who influence or, in some cases,
control prescribing decisions. The Company's targeting services include the
SCRIPTRAC service, which is generated from the Prescriber Profile Databases and
often delivered in a PC-software package. It enables pharmaceutical companies in
seven countries to identify prescribers who, because of therapeutic specialty,
practice demographics, or other factors, are the most likely to prescribe a
pharmaceutical company's product. The Company also licenses SCRIPTRAC to third
parties in countries where it does not intend to establish operations.
PMSI provides a range of services derived from its managed care database
including the INTEGRATED MANAGED CARE PROFILES service, which enables
pharmaceutical companies to identify, target and prioritize those MCOs that are
most relevant to their own specific pharmaceutical products. Additionally, the
Company has developed information services that identify the influences of
federal and state governments and national healthcare systems. Examples of these
services include STATELINE, a PC-based database product which provides
pharmaceutical companies with detailed information on the health policies of
each of the 50 states and the District of Columbia and on the government
officials involved in shaping those policies; and HIS, also a PC-based database
product which identifies the influencers, buyers, decision makers and
administrators in the United Kingdom's National Health Service.
The Company also provides a targeting information service to
over-the-counter ("OTC") pharmaceutical companies, the OTC PHYSICIAN DATABASE
SERVICE, which provides managers of OTC products with the ability to target
medical practitioners with a high potential for OTC sales through product
recommendation to patients. In addition, PMSI provides HEALTHCARE DIRECTORIES of
key administrators and managers within the U.K. healthcare environment;
forecasting and resource allocation software systems designed to help client
companies in efficient commercialization of their products; and DIRECT MARKETING
in the United States, where the Company holds one of the eleven franchises
currently in effect with the American Medical Association (the "AMA") permitting
PMSI access to the AMA's physician list.
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Prescription Database Services with Source
In the United States, PMSI, through an operating venture with Source,
offers a range of services generated from the Source Database, including the
SOURCE PRESCRIPTION DATABASE SERVICE, a comprehensive data service providing the
client with access to the database itself; SOURCE PRESCRIBER, which is an
enhanced targeting service providing physician specific prescribing information;
SOURCE PAYER PRESCRIBER, which provides in-depth information on the links
between physicians and their MCO affiliations; and SOURCE LAUNCHTRAC, which is
used by a pharmaceutical company during and after a new product launch to
identify those physicians who have prescribed the product. The Company has
agreed, in principle, subject to final approval by the Board of Directors of
both companies, to establish a similar venture with Source in Europe.
Added Value Services
The Company provides pharmaceutical companies internationally and in the
United States, the United Kingdom, Belgium and the Netherlands with a range of
added value and research services that are used (i) to study specific issues and
trends in the marketplace and the broader healthcare industry, (ii) to evaluate
the effectiveness of marketing programs and (iii) to analyze in depth particular
components of a product marketing program at any stage of its implementation,
and (iv) for consultancy on optimizing company strategy, marketing programs and
product commercialization through its established consulting teams in the United
States and Europe.
PMSI's marketing research audits are generated from databases containing
information collected by questionnaire, diary or personal interview, dispensed
prescriptions and secondary research. The results of the audits are delivered in
hard copy or through PC-based data delivery systems. Examples of the audits are
the SOURCE PRESCRIPTION AUDIT, which analyzes pharmaceutical product
consumption; PHYSICIAN DRUG AND DIAGNOSIS AUDIT, which analyzes the
pharmaceuticals prescribed by physicians relative to the associated diagnosis;
the PERSONAL SELLING AUDIT ("PSA"), which analyzes the effectiveness of the
client company's sales activities compared with those of its competitors; and
the HOSPITAL PERSONAL SELLING AUDIT, which complements the PSA by monitoring and
analyzing sales activity in the hospital environment.
The Company's research services include the MEDICAL ADVERTISING RECALL
SERVICE, which assesses the effectiveness of advertisements in conveying a
specific marketing message; STRATEGIC STUDIES, which report on key
pharmaceutical industry topics, such as pharmaceutical company image and sales
force structure and strategies; MEDICAL RESEARCH OMNIBUS, which is a monthly
omnibus survey of physicians based on personal interviews; and HEALTH RESEARCH
INNOVATIONS, a joint-venture with Collaborative Clinical Research, Inc., which
produces health economics and disease management research services to the U.S.
pharmaceutical and managed care industries; In addition, PMSI has a CONSUMER
RESEARCH capability to respond to the growing importance of consumer choice in
the healthcare process to assist pharmaceutical companies in determining
appropriate marketing strategies.
PMSI also develops and supplies other innovative services to healthcare
suppliers and providers, including the MEDIPHASE pharmacy dispensary management
software and drug reimbursement database service.
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MARKETING AND SALES
PMSI employs marketing, sales and client service professionals in each
country in which it operates. Many members of the Company's sales and marketing
staff have substantial pharmaceutical industry experience.
Sales to the healthcare industry accounted for substantially all of the
Company's revenue in fiscal 1996. Virtually every major pharmaceutical company
is a customer of the Company. For the year ended June 30, 1996, PMSI's ten
largest customers were responsible for 39% of its revenue, with no one customer
accounting for more than 10%. Although the Company's business is dependent upon
its relationships within the healthcare and pharmaceutical industries and the
prospects of those industries, the Company's business would not be materially
adversely affected by the loss of any single customer.
ACQUISITION STRATEGY
PMSI has been built through a series of strategic acquisitions that have
positioned the Company to provide focused information services to the
pharmaceutical and healthcare industries in major world markets. The Company
intends to use its existing resources, together with the proceeds from its
divestment program, to continue to acquire or enter into joint ventures with
businesses that complement the range of services the Company offers in each of
its markets. Possible candidates include marketing research companies, companies
with pharmaceutical, medical, outcomes or healthcare economic databases,
businesses with demonstrated ability to develop PC-based software that will add
value to PMSI data and other associated companies that would benefit from the
Company's capability in key world markets.
The Company, from time to time, evaluates possible acquisitions and
frequently has discussions with acquisition prospects.
Commitments from Acquisitions Prior to Fiscal 1996
Effective July 1, 1994, the Company acquired 80% of the common stock of
Mediphase Limited ("Mediphase"), a specialist software and information company
in the United Kingdom that has developed and markets retail pharmacy dispensary
management software. The Company has the right to acquire the remaining 20% of
the common stock between July 1997 and July 1999, based upon the number of
Mediphase systems installed at certain dates. The Company also has commitments
to contingent payments for CMA Medical Data Limited and Marketing Resources
International Limited based on operating profit generated by the respective
businesses in future years.
Acquisitions During Fiscal 1996
The Company made no significant acquisitions in fiscal 1996; however, the
Company sold its option to purchase two market research and physician targeting
businesses owned by Walsh International Inc. ("Walsh") and operated in markets
where the Company has no other activities. It also divested two database
businesses which did not meet performance expectations. The consideration, in
aggregate, was not material.
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LONG-TERM AGREEMENTS
In 1991, PMSI entered into two long-term licensing agreements with Walsh,
one of which was assigned in 1996 to Source, the prescription database business
which was spun-off from Walsh in April 1996.
ALPHA DATABASE LICENSE. Source Informatics America Ltd., a subsidiary of
Source, has granted the Company an exclusive license in the United States to use
the Alpha (Source) Database to provide targeting information with respect to the
prescribing behavior of individual prescribers. Due to the movement by clients
towards comprehensive database contracts in the United States, both parties
agreed, as of July 1994, to accelerate the transition, as provided for in the
license agreement, to allocate payments based on the Alpha Database costs for
data updating and maintenance according to the relative historical revenues
generated by Source and PMSI in using the database. Revenues from the
comprehensive database contracts are also allocated to both parties based
principally upon historical percentages of revenue derived from the Alpha
Database. License renewal terms provide the Company with the exclusive option to
maintain the license through 2011. Thereafter, the agreement will be renewed for
successive five-year terms unless terminated by either party. Source has agreed
that, for so long as the Alpha Database license agreement is in effect, it will
not engage in the business of providing physician targeting services.
The Company's ability to produce its SOURCE product line in the United
States is dependent upon its partner in the operating venture, Source. Source
was formed in April 1996 through a spin-off of Walsh's prescription database
business, immediately prior to the initial public offering of Walsh. Source
remains a privately held company with limited resources and, due to its
investment in database development in Europe, currently is not profitable. PMSI
has agreed, in principle, subject to final approval by the Board of Directors of
both companies, with Source to participate in the commercialization of the
databases being developed by Source in Europe. If Source were not able to fund
its part of the operating venture in the United States, PMSI has the right to an
escrowed copy of the Alpha Database and Source's extrapolation methodology. The
economic feasibility of the Company maintaining the Alpha Database on its own
would be dependent upon its ability to maintain the operating venture's current
revenue or generate substantial additional revenue from services derived from
the Alpha Database.
PHYSICIAN DATABASE LICENSE. In the United Kingdom, France, Germany, Spain,
the Netherlands and Belgium, Walsh has licensed to PMSI its Physician Database.
The Company may use such lists only for internal purposes and in connection with
the development and delivery of its SCRIPTRAC database. The initial term of the
license runs through 2001, and the license is renewable for two further
five-year periods, if not terminated by the Company six months prior to the
renewal date. Thereafter, the agreement is renewable for five-year terms unless
terminated by either party. The Company pays Walsh an annual royalty fee for
each physician supplied in the database.
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ANNUAL AGREEMENTS
The Company has entered into the following agreements with Walsh, or since
April 1996, Source, pursuant to which Source or Walsh provides certain
management, marketing and sales, personnel benefits and data processing
services, and subleases facilities, to the Company.
MANAGEMENT AND EXECUTIVE SERVICES AGREEMENT. Source provides certain
management services covering executive management, accounting, legal and other
services for and on behalf of the Company, principally in the United States,
where comprehensive database contracts have been negotiated, and in the United
Kingdom. In Germany and the Netherlands, PMSI provides specific management
services to Walsh. Under the agreement, the services will be provided for
various periods ranging to the end of calendar 1996 and are renewable
automatically for one-year periods in the absence of notice of termination by
any party. For the foreseeable future, certain management functions in the
Company continue to be performed by current members of the management of Source,
who continue to devote significant time to the affairs of Source. If the
services of any such executives were to be unavailable to PMSI for any reason,
it is likely that the cost to the Company of recruiting full-time management to
replace such Source executives would exceed the management costs to be borne by
PMSI under the management services agreement.
DATA PROCESSING AGREEMENT. The Company has contracted for Walsh or Source
to provide specific data processing and software support services to PMSI and
its customers in the United States and certain European countries. The agreement
is automatically renewed on an annual basis if not terminated by either party.
The fees payable by PMSI to Walsh or Source for such services are based either
on allocated costs or on competitive rates for comparable services from
alternative suppliers.
FACILITIES AGREEMENT. PMSI sublets from Source or Walsh fully furnished
office space in the United States and Belgium and Walsh sublets similar
facilities from the Company in the United States, the Netherlands and Germany.
The initial terms of the subleases each run through calendar 1996, unless an
earlier expiration date is provided in the relevant lease, and will be renewed
automatically in the absence of termination by either party. Each company pays
its pro rata share of the respective rental charges, based on space occupied.
HEALTH AND BENEFITS AGREEMENT. For certain operations in the United
States, Belgium and the United Kingdom, Walsh or Source provides the employees
of the Company with health insurance and other benefits comparable with those it
offers to its own employees. PMSI reimburses Walsh or Source for its share of
the actual costs of such benefits.
BACKLOG
As of June 30, 1996, in its continuing operations, the Company had
contracts running through 2000 of $77.4 million of which $43.1 million are for
contracts to be completed by June 30, 1997.
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COMPETITION
The Company's targeting information services in the United States, Japan,
and most European countries are well established, although their market position
may be affected in the future by competitors' efforts to create or acquire
enhanced databases or to develop and market new products. The Company has
competitors in physician targeting in virtually all markets, primarily from IMS,
a division of the Dun and Bradstreet Corporation, which competes in service and
price. Certain of the Company's marketing research audit services also compete
with those of IMS and local companies.
INDUSTRY REGULATION
The pharmaceutical industry is subject to extensive regulations in the
countries in which the Company operates. A number of governments have enacted
regulations limiting the prices pharmaceutical companies may charge for drugs.
While the Company believes that cost containment measures that may be adopted by
government agencies will cause pharmaceutical companies to seek more effective
means of marketing their products (which will benefit the Company in the medium
and long term), such governmental regulation has caused pharmaceutical companies
to revise or reduce their marketing programs. These cost containment measures,
together with pharmaceutical companies' desire to increase marketshare or
improve their research pipelines, have caused both vertical and horizontal
integration and several significant mergers.
In addition to pharmaceutical industry regulation, the Company is directly
subject to certain restrictions on the collection of data. There have been
legislative efforts in many countries to regulate the collection, use and
dissemination of certain personal information that may be deemed to be private;
for instance, the enactment of data privacy legislation by some of the countries
of the European Union. In the United States, certain states have enacted
legislation prohibiting the use of personally identifiable prescription drug
information without consent. Because the Company does not generally receive
information regarding the identity of patients, the Company believes that such
state legislation will have no material adverse effect on its business. There
can be no assurance that future legislation or regulations will not directly or
indirectly restrict the dissemination of information regarding physicians or
prescriptions. Such legislation, if enacted, could have a material adverse
effect on the operations of the Company.
The Market Research Code of Conduct, a pharmaceutical industry-promulgated
code of conduct to which the Company adheres, provides that the identity of the
individual researched may never be disclosed to the company sponsoring such
research without such individual's consent. PMSI supplies only aggregated
statistics to the sponsoring company when information is generated from market
research databases. As recommended by the board of directors of the
Pharmaceutical Manufacturer's Association, the PMSI databases do not contain
patient names, thus preserving confidentiality. Data provided at the physician
level is obtained from prescribing activity by product or therapy class over a
given period. Pharmaceutical companies receive information as to the projected
prescribing levels of particular physicians. The Company does not hold any
identifiable individual patient data, except on a temporary basis with the
patients' prior permission for follow-up research and disease management
purposes.
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EMPLOYEES
As of June 30, 1996, the Company's continuing operations had approximately
500 full-time employees. Of these employees, 290 are located in the United
States, with the remainder located in Europe and Japan. In the Netherlands,
France and Germany, PMSI has Workers Committees, which is a legal requirement in
those countries. There are no collective bargaining agreements in effect with
employees of the Company. The Company considers its relationships with its
employees to be good.
ITEM 2. PROPERTIES
PMSI leases or subleases space in various locations in the United States,
Europe and Japan. In those instances in which the Company is a sublessee, Walsh
or Source is the sublessor, and the subleases have terms extending through
calendar 1996, prior to renewal options. The Company's principal office
facilities in the United States are located in Phoenix, Arizona and Newtown,
Pennsylvania. The Company's usage of such facilities aggregate approximately
18,400 square feet for which the aggregate sublease rentals were $452,000 in
1996. In addition, the Company rents approximately 28,000 square feet of office
facilities in Newtown, Pennsylvania, for $448,000 per annum under a lease
expiring in 2000. The Company owns approximately 30,000 square feet of office
and warehouse facilities in the Netherlands with a recorded cost of
approximately $5.3 million.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any outstanding material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
None.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock has been included in the NASDAQ National Market
System under the symbol PMRX since December 23, 1991.
The reported high and low closing sales prices for the Company's Common
Stock as reported by NASDAQ for each full quarterly period within the two most
recent fiscal years were:
<TABLE>
<CAPTION>
Calendar Year Period High Low
-------------------- ---- ---
<S> <C> <C>
1994
Third Quarter 12 6 3/4
Fourth Quarter 12 3/4 7 3/4
1995
First Quarter 11 7 3/4
Second Quarter 9 7/8 7 25/32
Third Quarter 12 3/4 9
Fourth Quarter 16 1/4 10
1996
First Quarter 16 1/4 12
Second Quarter 13 1/2 9 3/8
</TABLE>
As of September 20, 1996, there were approximately 1,263 holders of record
of the Company's Common Stock.
The Company has never paid dividends to holders of its Common Stock. The
Company intends to retain all earnings to finance the operation and growth of
its business and does not anticipate paying cash dividends in the foreseeable
future.
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ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected financial data set forth below have been derived from the
audited consolidated financial statements of PMSI for the two years ended
December 31, 1991 and 1992, the six month transition period ended June 30, 1993
and the years ended June 30, 1994, 1995 and 1996. The selected financial data
for years ended June 30, 1994, 1995 and 1996 should be read in conjunction with
Management's Discussion and Analysis of Results of Operations and Financial
Condition and the historical consolidated financial statements, including the
notes thereto, included elsewhere in this Report.
The results of the non-database segment are presented as discontinued
operations for all periods.
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
December 31, June 30, Year Ended June 30,
--------------------- -------- ----------------------------------
1991 1992 1993 1994 1995 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue $ 46,676 $ 73,007 $ 34,654 $ 76,876 $ 89,893 $ 93,027
Production costs (26,097) (40,074) (19,674) (43,168) (49,991) (51,605)
Selling, general and administrative
expenses (15,129) (21,186) (10,790) (25,791) (29,773) (34,208)
Amortization of intangible assets (5,749) (2,430) (811) (1,541) (1,889) (2,012)
Impairment of long lived assets -- -- -- -- -- (2,368)
Restructuring costs -- -- -- (1,820) -- (2,314)
-------- -------- -------- -------- -------- --------
Operating income (loss) (299) 9,317 3,379 4,556 8,240 520
Interest and other income 25 910 1,683 2,805 2,940 2,503
Interest expense (2,802) (70) (1,818) (3,032) (2,915) (2,633)
-------- -------- -------- -------- -------- --------
Income (loss) from continuing
operations before income taxes (3,076) 10,157 3,244 4,329 8,265 390
Income tax provision (448) (3,859) (1,167) (1,662) (2,950) (1,156)
Minority interest -- -- -- -- (3) 57
-------- -------- -------- -------- -------- --------
Income (loss) from continuing operations ($ 3,524) $ 6,298 $ 2,077 $ 2,667 $ 5,312 ($ 709)
Discontinued operations:
Income (loss) from discontinued
operations, net 853 (170) 65 2,057 (131) (8,915)
-------- -------- -------- -------- -------- --------
Net income (loss) $ (2,671) $ 6,128 $ 2,142 $ 4,724 $ 5,181 $ (9,624)
======== ======== ======== ======== ======== ========
Net income (loss) per share:
Continuing operations ($ 0.29) $ 0.49 $ 0.16 $ 0.21 $ 0.41 ($ 0.05)
Discontinued operations, net 0.07 (0.01) -- 0.15 (0.01) (0.68)
-------- -------- -------- -------- -------- --------
Net income (loss) per share ($ 0.22) $ 0.48 $ 0.16 $ 0.36 $ 0.40 ($ 0.73)
======== ======== ======== ======== ======== ========
Common stock and in 1992, 1993,
1994 and 1995 common stock equivalents 12,005 12,876 13,157 13,297 13,053 13,124
</TABLE>
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<TABLE>
<CAPTION>
BALANCE SHEET DATA: At December 31, At June 30,
- ------------------- ------------------ --------------------------------------------
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Working capital(1) $20,805 $36,972 $ 74,428 $ 74,553 $ 72,901 $ 47,627
Total assets(2) 76,221 91,427 189,028 189,229 187,681 173,408
Long-term debt, excluding current portion -- -- 69,423 69,248 69,295 69,131
Stockholders' equity 48,867 62,277 64,398 73,525 86,697 72,954
</TABLE>
(1) As of June 30, 1995 and 1996, includes net current assets of discontinued
operations of $15,032 and $9,276, respectively.
(2) As of June 30, 1995 and 1996, includes total assets of discontinued
operations of $50,032 and $42,871, respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
This discussion is based on the activities of continuing operations
only.
OVERVIEW
The Company's strategy is to take advantage of its operating leverage and
grow the business by increasing the market penetration of existing products and
services, by developing products and services for different national markets,
and by creating new information services from data in the PMSI databases or from
linking such data with data from third parties to meet the evolving information
needs of the pharmaceutical and healthcare industries. Much of PMSI's business
is based upon proprietary databases, computer technology and product know-how,
assets that are generally difficult, time-consuming or costly for third parties
to duplicate.
Revenue
Revenue for the year ended June 30, 1996 was $93.0 million, an increase of
$3.1 million (4%) over revenue for the year ended June 30, 1995. Revenue growth
was achieved in the United States market research and database businesses,
Japan, the Scriptrac businesses in Europe and from acquisitions completed in
fiscal 1995. This was offset by a continued reduction in revenue from the United
States direct marketing business due to the phasing out of low margin programs
and the restructuring of the United Kingdom market research business.
Revenue for the year ended June 30, 1995 was $89.9 million, an increase of
$13.1 million (17%) over the revenue of $76.9 million for the year ended June
30, 1994. This increase was principally due to acquisitions, currency related
effects and growth of the existing businesses. Growth was experienced in
virtually all targeting businesses, services provided in Japan and the United
States market research and strategic studies businesses. The United States
direct marketing revenue decreased as low margin programs started to be phased
out.
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The Company obtained significant recurring revenues from the SOURCE,
SCRIPTRAC and Managed Care businesses.
Production Costs
PMSI's production costs include the costs of data collection, outside
supplies and services, internal computer costs and the costs attributable to
personnel involved in the production of the Company's products and services.
Production costs for the year ended June 30, 1996 were $51.6 million (55% of
revenue), compared to $50.0 million (56% of revenue) for the year ended June 30,
1995. The increase was primarily attributable to revenue growth, the effect of
acquisitions completed in late fiscal 1995, and the launch of Scriptrac in
Spain.
Production costs for the year ended June 30, 1995 were $50.0 million (56% of
revenue) compared to $43.2 million (56% of revenue) for the year ended June 30,
1994. The increase was primarily attributable to businesses acquired throughout
fiscal 1995 and the full year inclusion of the fiscal 1994 acquisitions, offset
by the decline in the United States direct marketing costs caused by the
decision to phase out the business. Currency related effects also contributed to
the year on year increase.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $4.4 million to
$34.2 million (37% of revenues) for the year ended June 30, 1996 as compared to
$29.8 million (33% of revenues) for the same period in 1995. The increase was
attributable to acquisitions completed in late fiscal 1995, increased focus on
new product development for which no revenue was currently generated and
increases in staff to support additional clients for existing services.
Selling, general and administrative expenses increased by $4.0 million to
$29.8 million for the year ended June 30, 1995 as compared to $25.8 million for
the same period in 1994. The increase was primarily attributable to businesses
acquired throughout fiscal 1995, increased staffing in Japan and the United
Kingdom to support development projects and the full year inclusion of the
fiscal 1994 acquisitions. Currency effects also contributed to the year on year
increase. In the United States and Germany, employment cost savings were
achieved as a result of the 1994 restructuring programs.
Amortization of Intangible Assets
Acquired databases, software and other purchased intangibles are valued at
their fair value at the date of acquisition and are amortized over periods of up
to five years. Goodwill is amortized over periods between 5 and 40 years. The
cost of updating and maintaining databases is expensed as incurred, as is the
cost of developing software for internal use.
In the Company's consolidated financial statements, amortization has been
recorded as follows (in thousands):
-14-
<PAGE> 15
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Databases $ 7 $ 46 $ 126
Software 248 248 247
Goodwill 1,286 1,595 1,639
------ ------ ------
Total: $1,541 $1,889 $2,012
====== ====== ======
</TABLE>
For the year ended June 30, 1996 compared to the same period in 1995,
database, software and goodwill amortization increased due to the inclusion for
the full year of acquisitions completed in 1995.
For the year ended June 30, 1995 compared to the same period in 1994,
database and software amortization increased due to the purchase of a new
database in fiscal 1995. Goodwill amortization increased in fiscal 1995 due to
acquisitions made during the year and the full year inclusion of Scriptrac in
Belgium and the Netherlands acquired during fiscal 1994.
Impairment of Long-Lived Assets and Restructuring Costs
Following the conclusion of a strategic assessment during the first half of
fiscal 1996, the Company made the decision to develop its business as a focused
information services provider to the pharmaceutical and healthcare industries.
In the third quarter, the Company recorded $2.4 million write-down in the value
of long lived assets, primarily goodwill and databases in accordance with FAS
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed of". In addition, the Company recorded $2.3 million of
restructuring costs. These charges to earnings, with a $0.24 per share after tax
effect, were primarily related to the disposal of two database businesses that
did not meet performance expectations. At June 30, 1996, accrued liabilities and
accounts payable included $0.9 million for restructuring liabilities. The
majority of these liabilities will be paid or settled in fiscal 1997 and 1998.
Following less than satisfactory performance in the second half of fiscal
1994, management commenced a review of certain of its operations. In the fourth
quarter, the Company recorded $1.8 million ($1.3 million after-tax, or
approximately $0.10 per share) in non-recurring restructuring costs to address
problems in certain of its operations, primarily in the United States and
Germany. Of the total charge, $1.4 million related to costs for the elimination
of approximately 35 positions in the United States and Germany, primarily
through severance programs. In addition, $0.4 million related to costs for the
elimination of certain non-core product lines. Net income for the 1994 fiscal
year, prior to the restructuring costs, was $6.1 million, or $0.46 per share.
Interest and Other Income/Interest Expense
PMSI invests its excess cash with major banks, and invests in cash
equivalents and marketable securities which are professionally managed.
-15-
<PAGE> 16
For the year ended June 30, 1996, the Company's net interest expense was
$0.1 million as compared to the interest income of under $0.1 million for the
same period in the preceding year. The increased cost was primarily attributable
to a decrease in funds invested.
For the year ended June 30, 1995 the Company recorded net interest income of
nearly $0.1 million as compared to an interest expense of $0.2 million for the
same period in the preceding year. The decrease in interest expense was
primarily attributable to higher interest rates earned on funds invested.
Income Tax Provision
The tax provisions of $1.7 million, $3.0 million and $1.2 million for the
years ended June 30, 1994, 1995 and 1996, respectively, reflect taxes payable in
respect of profitable foreign and domestic operations. At June 30, 1996, there
were foreign net operating loss carryforwards of approximately $11,160,000
million available to reduce future foreign income taxes payable.
Deferred tax assets recognized by the Company result from the anticipated
carryback of future tax deductions to offset income taxes previously provided
and the utilization of future tax deductions to reduce taxes payable on future
taxable income.
Discontinued Operations
The results of PMSI's non-database businesses which will be divested by the
Company are shown as "discontinued operations". Management believes that the
$5.7 million loss recorded in the third quarter of fiscal 1996 is sufficient to
complete the divestiture program without further impact on the Company's
financial results.
Currency Fluctuations
As an international company, PMSI is affected by fluctuations in foreign
currency exchange rates. Although most of the Company's services are priced in
the local currency of the business unit providing the service, the effects of
foreign currency fluctuations are mitigated by the fact that expenses of foreign
subsidiaries are incurred in the same currency as sales. The reported net income
of foreign subsidiaries will be affected by changes in the exchange rates of
foreign currencies against the United States dollar. The magnitude of the
effects on the Company of future exchange rate changes will be dependent upon
the relative contributions to the Company's results of its United States and
non-United States operations. The foreign currency risk applicable to the
Company's operations has not been hedged in the past, although the Company's
operations may engage in foreign currency hedging transactions in the future.
Quarterly Results
The production costs of the Company's pharmaceutical information services
(which are expensed as incurred) have a relatively high fixed direct cost
component because of the relatively constant cost of maintaining the databases
from which the services are derived. Once these fixed
-16-
<PAGE> 17
costs are covered, a higher gross margin is achieved on incremental revenues.
The Company's overall gross profit margin in any quarter and any improvement in
such margin over time will therefore be highly dependent on the relative gross
profit margins of the Company's various products and services that contribute to
revenue in such quarter and the relative revenue growth rates for such products
and services.
Historically, quarter to quarter comparisons of the Company's results of
operations have not necessarily been indicative of these trends, principally as
a result of: (i) the timing of the acquisitions made to create the PMSI
business; (ii) revenue reductions resulting from product changes or
discontinuations in the post-acquisition period; (iii) the cost of investing in
the turnaround or profit improvement of certain acquired businesses; and (iv)
the investment in new products and services.
Liquidity and Capital Resources
At June 30, 1996, the Company's cash and cash equivalents and marketable
securities totaled $47.4 million and its current ratio was 2.6:1. The current
ratio at June 30, 1995 was 3.4:1.
During the year ended June 30, 1996, cash and cash equivalents and
short-term marketable securities decreased due to the purchase of long-term
marketable securities, the exercise of stock warrants received from a joint
venture partner and capital expenditures amounting to $2.2 million, principally
for computing and office equipment. The Company anticipates that capital
expenditures in fiscal 1997 will be less than $3.0 million and will be funded
from internally generated funds.
During the year ended June 30, 1995 cash and cash equivalents and short-term
marketable securities decreased by $15.6 million, principally due to the
purchase of long-term marketable securities, acquisition payments, increases in
accounts receivable and financing developing operations.
The Company anticipates that existing cash, together with internally
generated funds and the funds from the divestment program, will provide the
Company with the resources that are needed to satisfy potential acquisitions and
the Company's working capital requirements in fiscal 1997 and subsequent years.
The timing and magnitude of future acquisitions will be the single most
important factor in determining the Company's long-term capital needs.
-17-
<PAGE> 18
New Accounting Standards
The Financial Accounting Standards Board ("FASB") issued SFAS No. 123
"Accounting for Stock-Based Compensation". The company will choose the
"disclosure only" alternative and is in the process of evaluating the impact
of the pro forma disclosures. The Company will adopt SFAS No. 123 effective
fiscal 1997.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Financial Statements and Supplementary Data listed in the
accompanying Index to Consolidated Financial Statements and Financial Statement
Schedules that appear elsewhere in this Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-18-
<PAGE> 19
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULE
PAGE
----
Report of Independent Accountants ....................................... F-1
Financial Statements:
Consolidated Balance Sheets as of June 30, 1995 and 1996 ............ F-2
Consolidated Statements of Operations for the Years Ended
June 30, 1994, 1995 and 1996 ......................................... F-3
Consolidated Statements of Stockholders' Equity
for the Years Ended June 30, 1994, 1995 and 1996 ..................... F-4
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1994, 1995 and 1996 ......................................... F-5
Notes to Consolidated Financial Statements ........................... F-7
Report of Independent Accountants on Financial
Statement Schedule ...................................................... S-1
Financial Statement Schedule:
Schedule II Valuation and Qualifying Accounts for the Years
Ended June 30, 1994, 1995 and 1996....................................... S-2
All financial statement schedules not mentioned above are omitted for the reason
that they are not required or are not applicable, or the information is included
in the Consolidated Financial Statements or the Notes thereto.
-19-
<PAGE> 20
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Pharmaceutical Marketing Services Inc.
We have audited the accompanying consolidated balance sheets of Pharmaceutical
Marketing Services Inc. and Subsidiaries as of June 30, 1995 and 1996 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended June 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Pharmaceutical
Marketing Services Inc. and Subsidiaries as of June 30, 1995 and 1996 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1996 in conformity with generally
accepted accounting principles.
As discussed in Note 16 to the consolidated financial statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of".
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
August 30, 1996
F-1
<PAGE> 21
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, 1995 JUNE 30, 1996
------------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 27,828 $ 12,669
Marketable securities 25,918 16,174
Accounts receivable, principally trade
(less allowance for doubtful accounts
of $415 and $400, respectively) 25,106 29,283
Work in process 2,504 2,986
Prepaid expenses and other current assets 7,202 7,398
Net current assets of discontinued operations 15,032 9,276
--------- ---------
Total current assets 103,590 77,786
Marketable securities 3,028 18,515
Property and equipment, net 8,938 9,004
Goodwill, net 30,358 25,895
Other assets, net 6,767 8,613
Net assets of discontinued operations 35,000 33,595
--------- ---------
Total assets $ 187,681 $ 173,408
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 312 $ 219
Accounts payable 5,755 4,411
Accrued liabilities
(including employee compensation and
benefits of $2,955 and $2,347, respectively) 15,644 11,489
Unearned income 8,978 14,040
--------- ---------
Total current liabilities 30,689 30,159
Long-term debt 69,295 69,131
Other liabilities 497 454
Minority interest 503 710
--------- ---------
Total liabilities 100,984 100,454
Commitments
Stockholders' equity
Common stock, $0.01 par value, 25,000,000
shares authorized and 13,085,275 and
13,169,275 shares, respectively, issued
and outstanding 131 132
Paid-in capital 86,176 86,923
Accumulated deficit (5,152) (14,776)
Cumulative translation adjustment 5,544 722
Unrealized loss on investments, net of
income tax benefits of $2 and $32,
respectively (2) (47)
--------- ---------
Total stockholders' equity 86,697 72,954
--------- ---------
Total liabilities and stockholders' equity $ 187,681 $ 173,408
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-2
<PAGE> 22
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except for per share data)
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Revenue $ 76,876 $ 89,893 $ 93,027
Production costs (43,168) (49,991) (51,605)
Selling, general and administrative expenses (25,791) (29,773) (34,208)
Amortization of intangible assets (1,541) (1,889) (2,012)
Impairment of long lived assets -- -- (2,368)
Restructuring costs (1,820) -- (2,314)
-------- -------- --------
Operating income 4,556 8,240 520
Interest and other income 2,805 2,940 2,503
Interest expense (3,032) (2,915) (2,633)
-------- -------- --------
Income from continuing operations
before income taxes 4,329 8,265 390
Income tax provision (1,662) (2,950) (1,156)
Minority interest -- (3) 57
-------- -------- --------
Income (loss) from continuing operations 2,667 5,312 (709)
Discontinued operations:
Income (loss) from discontinued operations, net 2,057 (131) (8,915)
-------- -------- --------
Net income (loss) $ 4,724 $ 5,181 $ (9,624)
======== ======== ========
Income (loss) per share:
Continuing operations $ 0.21 $ 0.41 $ (0.05)
Discontinued operations, net 0.15 (0.01) (0.68)
-------- -------- --------
Net income (loss) per share $ 0.36 $ 0.40 $ (0.73)
======== ======== ========
Common stock and in 1994 and 1995
common stock equivalents 13,297 13,053 13,124
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE> 23
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Unrealized
----------------- Cummulative Loss on
No. of Paid-in Accumulated Translation Marketable
Shares Amount Capital Deficit Adjustment Securities
------ ------ ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance June 30, 1993 12,618 $126 $80,408 $(15,057) $(1,079) --
Net income -- -- -- 4,724 -- --
Stock options exercised 13 -- 108 -- -- --
Shares issued for IMR
acquisition 179 2 2,532 -- -- --
Foreign currency translation -- -- -- -- 1,761 --
------ ---- ------- -------- ------- ----
Balance June 30, 1994 12,810 128 83,048 (10,333) 682 --
Net income -- -- -- 5,181 -- --
Stock options exercised 17 -- 340 -- -- --
Shares issued for IMR
acquisition 258 3 2,788 -- -- --
Adjustment to beginning balance
for change in accounting
principle net of income tax
benefit of $31 -- -- -- -- -- (48)
Change in unrealized loss net of
income tax provision of $29 -- -- -- -- -- 46
Foreign currency translation -- -- -- -- 4,862 --
------ ---- ------- -------- ------- ----
Balance June 30, 1995 13,085 131 86,176 (5,152) 5,544 (2)
Net loss -- -- -- (9,624) -- --
Stock options exercised 84 1 747 -- -- --
Change in unrealized loss on
investments, net of income tax
benefit of $30 -- -- -- -- -- (45)
Foreign currency translation -- -- -- -- (4,822) --
------ ---- ------- -------- ------- ----
Balance June 30, 1996 13,169 $132 $86,923 $(14,776) $ 722 $(47)
====== ==== ======= ======== ======= ====
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE> 24
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net income (loss) $ 4,724 $ 5,181 $ (9,624)
(Income) loss from discontinued operations (2,057) 131 8,915
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,378 2,989 3,354
Loss on disposal of fixed assets 52 6 18
Deferred taxes 894 (719) (789)
Minority interest share of net income (loss) -- 3 (57)
Restructuring costs 1,820 -- 2,314
Impairment of long lived assets -- -- 2,368
Change in operating assets and liabilities, net of
effect of acquisitions:
Accounts receivable 2,863 (1,352) (5,716)
Work-in-process (399) 554 (781)
Prepaid expenses and other assets 2,298 (262) (822)
Accounts payable and accrued liabilities 3,833 4,540 (6,221)
Unearned income (2,602) (127) 5,156
Other liabilities (6,041) 933 200
-------- -------- --------
Total adjustments 5,096 6,565 (976)
-------- -------- --------
Net cash provided by (used in) operating activities 7,763 11,877 (1,685)
-------- -------- --------
Cash flows provided by (used in) investing activities:
Capital expenditures (2,699) (5,279) (2,166)
Proceeds from sale of fixed assets -- 503 115
Sale (purchases) of marketable securities 1,037 (11,854) (5,743)
Acquisitions, net of cash acquired (195) (11,270) (624)
-------- -------- --------
Net cash used in investing activities (1,857) (27,900) (8,418)
-------- -------- --------
Cash flows provided by (used in) financing activities:
Net proceeds from options exercised 108 148 748
Repayments of long-term debt and capital
lease obligations (41) (22) (245)
-------- -------- --------
Net cash provided by financing activities 67 126 503
-------- -------- --------
Effect of discontinued operations (9,892) (10,510) (2,038)
Effect of exchange rate movements 599 1,984 (3,521)
-------- -------- --------
Net decrease in cash and cash equivalents (3,320) (24,423) (15,159)
Cash and cash equivalents at beginning of year 55,571 52,251 27,828
-------- -------- --------
Cash and cash equivalents at end of year $ 52,251 $ 27,828 $ 12,669
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE> 25
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(in thousands)
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1994 1995 1996
------- -------- ------
<S> <C> <C> <C>
Supplemental information:
- -------------------------
Cash paid (reclaimed) during the period for:
Interest $ 3,005 $ 2,825 $2,603
Income taxes $ (660) $ 1,875 $1,381
Supplemental disclosure of non-cash investing and
financing activities:
Fair value of assets acquired $ 7,540 $ 12,903
Cash consideration paid (195) (11,270)
Cash and stock consideration to be paid (6,355) (480)
------- --------
Liabilities assumed $ 990 $ 1,153
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE> 26
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY. Pharmaceutical Marketing Services Inc. ("PMSI" or the
"Company"), provides a range of information services to pharmaceutical and
healthcare companies in the United States, Europe and Japan to enable them
to optimize their sales and marketing performance in a value driven
environment. The services are comprised of targeting information services,
prescription database services with Source and added value services,
including marketing research and consulting services, software and direct
marketing services. Most of the Company's information services are
generated from its own proprietary databases containing unique
prescription, managed care, healthcare market and medical prescriber data.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION. The consolidated
financial statements comprise the accounts of Pharmaceutical Marketing
Services Inc. and its subsidiaries. The consolidated financial statements
have been restated for discontinued operations (see Note 18). The
accompanying notes present amounts related only to continuing operations.
All intercompany balances and transactions have been eliminated.
CASH AND CASH EQUIVALENTS. The Company considers highly liquid investments
with maturity dates of three months or less from the date of acquisition to
be cash equivalents.
MARKETABLE SECURITIES. The Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" (FAS 115), in fiscal 1995. In accordance with FAS
115, prior years' financial statements have not been restated to reflect
the change in accounting method. Upon adoption of FAS 115, the June 30,
1995 opening balance of stockholders' equity decreased by $48,000, net of
an income tax benefit of $31,000, to reflect the unrealized loss on
investments available-for-sale that were previously carried at amortized
cost.
Management determines the appropriate classification of its investments in
debt and equity securities at the time of purchase and reevaluates such
determination at each balance sheet date. Debt securities for which the
Company does not have the intent or ability to hold to maturity are
classified as available for sale, along with any investment in equity
securities. Securities available for sale are carried at fair value, as
determined by the quoted market value at the balance sheet date, with the
unrealized gains and losses, net of tax, reported in a separate component
of stockholders' equity. At June 30, 1996, the Company had no investments
that qualified as trading or held to maturity.
F-7
<PAGE> 27
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
WORK IN PROCESS. Work in process consists of unbilled costs incurred on
behalf of clients, principally outside vendor costs attributable to the
Company's products and services.
PROPERTY AND EQUIPMENT. Property and equipment are recorded at cost.
All maintenance and repairs are expensed as incurred.
Depreciation is provided using the straight line method. Furniture, office
equipment and computer equipment are depreciated over five years and
automobiles over four years. Leasehold improvements are amortized over the
shorter of their useful lives or the terms of the respective leases.
Buildings are depreciated over their estimated useful lives ranging from
twenty to thirty years.
On disposal, costs and accumulated depreciation are removed from the
balance sheet and gains (losses) are recognized in the statement of
operations.
GOODWILL. Under the purchase method of accounting, the excess of the
purchase price of businesses acquired over the fair value of tangible and
intangible assets at the dates of acquisition has been assigned to
goodwill. The net assets and results of operations of the acquisitions have
been included in the consolidated financial statements of PMSI from their
respective dates of purchase. Goodwill is amortized on a straight-line
basis over periods between five and forty years.
The Company assesses the recovery of its goodwill, on a subsidiary by
subsidiary basis, by determining whether amortization of goodwill can be
recovered through undiscounted net income, excluding goodwill amortization,
of the respective subsidiary. Impairment is measured based on projected
discounted net income, excluding goodwill amortization, using a discount
rate reflecting the Company's cost of funds.
DATABASES. Acquired databases have been valued at their estimated fair
values at the dates of acquisition. Databases are amortized using
straight-line and accelerated methods over periods of up to five years.
Costs associated with maintenance and updating of databases are expensed as
incurred.
SOFTWARE ACQUIRED. Computer software of businesses acquired is recorded at
its fair value at the date of acquisition. This software is amortized on a
straight-line basis over its useful life, which is estimated to be two to
five years.
F-8
<PAGE> 28
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
FOREIGN CURRENCY. The balance sheet and results of operations of PMSI's
subsidiaries that operate outside the United States are measured using
local currency as the functional currency.
Assets and liabilities have been translated into United States dollars at
the rates of exchange at the balance sheet date. Translation gains and
losses arising from the use of differing exchange rates from year to year
are included in the cumulative translation adjustment on the balance sheet.
Revenues and costs are translated into United States dollars at the average
rate during the period.
Transaction gains and losses are recognized in the statement of operations
as incurred. For the periods presented these amounts were not material.
REVENUE RECOGNITION. Revenue is recognized on delivery of a product or as
the service is rendered. Subscription-type revenue is recognized over the
life of the subscription. Prebillings for products that have not been
delivered or for services not yet rendered are classified as unearned
income until the earnings process is complete.
CONCENTRATION OF CREDIT RISK. Financial instruments that potentially
subject PMSI to concentrations of credit risk consist principally of cash
and cash equivalents, marketable securities and trade receivables. PMSI
invests its excess cash with major banks and cash equivalents and
marketable securities in a professionally managed fund. PMSI's customer
base principally comprises companies within the pharmaceutical industry.
Although the Company's receivables are concentrated in the pharmaceutical
industry, the concentration of credit risk is limited due to the credit
worthiness of the customers. PMSI does not require collateral from its
customers.
INCOME TAXES. Federal, foreign and state income taxes in the consolidated
financial statements have been computed on a stand-alone return basis
according to the fiscal and legal structure under which the various tax
paying entities operate. Deferred income taxes are recorded to reflect the
tax consequences on future years of differences between the tax basis of
assets and liabilities and financial reporting amounts at each year end.
EARNINGS PER SHARE. Earnings per share for the years ended June 30, 1994
and 1995 is computed based upon the weighted average number of shares
outstanding and common stock equivalents (stock options) using the treasury
stock method. For 1996, common stock equivalents have not been included as
they are anti-dilutive.
F-9
<PAGE> 29
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
ALLOCATION OF INTEREST TO DISCONTINUED OPERATIONS. Enterprise interest
is allocated to the discontinued operations in proportion to net assets
at the balance sheet date.
USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying value of certain of the
Company's financial instruments including cash and cash equivalents,
accounts receivable, accounts payable and other accrued liabilities
approximates fair value due to their short maturities. The fair value of
the Company's debentures is based on quoted market prices.
2. TRANSACTIONS WITH WALSH/SOURCE
Effective as of December 31, 1991, Walsh International Inc. ("Walsh")
transferred to PMSI all the assets and liabilities of the PMSI business in
exchange for shares of PMSI common stock. In connection with the transfer,
the Company and Walsh entered into two long-term license agreements
permitting the use by PMSI of certain Walsh proprietary databases. In
addition, PMSI and Walsh entered into further agreements, covering data
processing, administrative and management services and subleasing of
certain facilities for various periods of time, all subject to renewal
terms. During fiscal year 1996, Walsh spun-off its proprietary database
business as Source Informatics Inc. ("Source") and certain of these
agreements were assigned from Walsh to Source. The principal agreements and
terms are as follows:
ALPHA (PRESCRIPTION) DATABASE LICENSE AGREEMENT. Source has granted the
Company an exclusive license to use the databases for a period of five
years through December 1996, with an option to renew on December 31, 1996
for three additional 5-year periods. Thereafter, the agreement will be
automatically renewed for 5-year periods unless the Company or Source
terminates the agreement. The license fee amounts paid to Source in the
years ended June 30, 1994, 1995 and 1996 in respect of this agreement were
$1,685,000, $2,663,000, and $3,094,000 respectively.
F-10
<PAGE> 30
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
Due to the movement of clients towards comprehensive database
contracts in the United States, both parties agreed during fiscal 1995 to
accelerate the transition, as provided for in the license agreement, to
allocate payments based on the Alpha Database costs for data updating and
maintenance according to the relative historical revenues generated by
Source and PMSI in using the database. Revenues from the comprehensive
database contracts are also allocated to both parties based upon historical
percentages of revenue derived from the Alpha Database. These modifications
did not have a material financial impact on the results of operations of
PMSI during fiscal 1995. These amounts are included in production costs.
DATA PROCESSING AGREEMENT. The Company has contracted for Source to provide
specific data processing services and in the years ended June 30, 1994,
1995 and 1996 costs totaling $1,314,000, $1,883,000 and $3,353,000
respectively, were charged by Source. These amounts are included in
production costs.
FACILITIES AGREEMENT. PMSI sublets space from Source. The net cost to the
Company in the years ended June 30, 1994, 1995 and 1996 classified as
selling, general and administrative expenses, was $576,000, $259,000 and
$545,000 respectively.
MANAGEMENT AND EXECUTIVE SERVICES AGREEMENT. Source provided
administrative, management and executive services to PMSI which resulted in
a net cost to the Company of $1,186,000, $1,300,000 and $2,319,000 in the
years ended June 30, 1994, 1995 and 1996 respectively, these are included
in selling, general and administrative expenses.
At June 30, 1996, the Company had a net current receivable from Source of
$1,790,000, which is included in other current assets. At June 30, 1995,
the Company had a net current receivable from Walsh of $2,790,000. Source
held 1,201,144 shares or 9.1% of PMSI's Common Stock as of June 30, 1996.
These shares were transferred to Source in the "Spin-off" of the Source
businesses from Walsh.
F-11
<PAGE> 31
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
3. ACQUISITIONS
The consolidated financial statements comprise various business
operations and entities that have been acquired by PMSI. These acquisitions
have been accounted for as purchases. Accordingly, the acquired assets and
assumed liabilities have been recorded at their estimated fair value at the
dates of acquisition. The results of operations are included in the
consolidated financial statements from the respective dates of acquisition.
On January 1, 1994, PMSI acquired MediAlert Projekten B.V., a
Netherlands publishing company. The total consideration paid pursuant to
the acquisition was $416,000. which has been allocated to goodwill and is
being amortized over forty years. The MediAlert purchase agreement included
certain contingent earnout payments based upon 20% of the annual gross
margin during the period fiscal 1995 to 1997. The amount paid under this
agreement in fiscal 1996 was $159,000.
On April 1, 1994, PMSI acquired Walsh's Scriptrac operations in
Belgium and the Netherlands, the Scriptrac licenses for Spain and Italy,
and its pharmaceutical marketing research business in the Netherlands
(collectively known as "Scriptrac Europe"). The consideration paid pursuant
to the acquisition consisted of $6,355,000 in cash. The excess of the
purchase price over the fair value of the tangible and intangible assets of
Scriptrac Europe of approximately $6,330,000 at the date of acquisition has
been allocated to goodwill and is being amortized over forty years.
Presented below are summarized unaudited pro forma revenue, net income
and net income per share as if MediAlert and Scriptrac Europe had been
combined with PMSI throughout 1994, after giving effect to certain pro
forma adjustments, principally amortization of intangibles and other
incremental expenses that would have been incurred had they been acquired
at the beginning of 1994 (in thousands, except per share data).
<TABLE>
<CAPTION>
Unaudited
-------------
Year Ended
June 30, 1994
-------------
<S> <C>
Revenue $76,876
Net income 2,653
Net income per share 0.20
</TABLE>
F-12
<PAGE> 32
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
The pro forma data are not necessarily indicative of results that
would have occurred if the Company had acquired these businesses at the
beginning of fiscal 1994 or the future results of the Company.
On July 1, 1994, PMSI acquired 80% of the common stock of Mediphase
Limited, a specialist software and information company in the United
Kingdom. The consideration paid pursuant to the acquisition was $3,556,000.
The excess of the purchase price over the fair value of the net assets of
Mediphase of approximately $3,399,000 at the date of acquisition has been
allocated to goodwill and is being amortized over forty years. The Company
has an option to buy the remaining 20% of Mediphase Limited and have
transferred $1,023,000 to an escrow agent for this purpose. This balance is
included in cash and cash equivalents in these financial statements.
During fiscal 1995, PMSI acquired CMA Medical Data Ltd. ("CMA"), a
U.K. health service database publisher, 80% of Marketing Resources
International Limited, ("MRI"), a forecasting modeling software developer
in the U.K. and the health information services business of Definitive Data
Tactics Limited ("DDT"), the developer and marketer of a pharmaceutical
products sales database. The aggregate consideration for these businesses
was approximately $2,521,000. Approximately $2,041,000 was paid during
fiscal 1995 and the balance of $480,000 was paid in August 1995. The excess
of the purchase price over the fair value of the net assets of CMA, MRI and
DDT of approximately $2,134,000 at the date of acquisition has been
allocated to goodwill and is being amortized over twenty years. These
transactions, except for DDT, have contingent payments based on operating
profit generated by the businesses in future years. No payments have been
made to date under the contingent payment plans.
F-13
<PAGE> 33
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
Presented below are summarized unaudited pro forma revenue, net income and
net income per share as if Mediphase, CMA, MRI and DDT had been combined
with PMSI at the beginning of fiscal 1994, after giving effect to certain
pro forma adjustments, principally amortization of intangibles and other
incremental expenses that would have been incurred had they been acquired
at the beginning of fiscal 1994 (in thousands except per share data).
<TABLE>
<CAPTION>
Unaudited
---------
Year Ended Year Ended
June 30, 1994 June 30, 1995
------------- -------------
<S> <C> <C>
Revenue $78,834 $90,497
Net income 1,825 5,217
Net income per share 0.14 0.40
</TABLE>
The pro forma data are not necessarily indicative of results that
would have occurred if the Company had acquired those businesses at the
beginning of fiscal 1994 or the future results of the Company.
F-14
<PAGE> 34
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
4. MARKETABLE SECURITIES
Marketable securities consisted of the following as of June 30, 1995
and 1996 (in thousands):
<TABLE>
<CAPTION>
NAME OF ISSUER AMORTIZED FAIR VALUE UNREALIZED
AND TITLE OF COST OF AT BALANCE GAINS
EACH ISSUE EACH ISSUE SHEET DATE (LOSSES)
-------------- AT JUNE 30, AT JUNE 30, AT JUNE 30,
------------------ ------------------- -------------
1995 1996 1995 1996 1995 1996
------- ------- ------- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Corporate debt securities $27,689 $19,387 $27,679 $ 19,375 $(10) $(12)
Debt securities issued by the U.S.
Treasury and other U.S.
government corporations and
agencies 13,277 9,738 13,282 9,737 5 (1)
Debt securities issued by foreign
governments -- 7,807 -- 7,741 -- (66)
------- ------- ------- -------- ---- ----
$40,966 $36,932 $40,961 $ 36,853 $ (5) $(79)
======= ======= ======= ======== ==== ====
Maturities
Cash and cash equivalents $12,016 $ 2,165 $12,015 $ 2,164 $ (1) $ (1)
Short-term investments 25,905 16,219 25,918 16,174 13 (45)
Due after one year through three years 1,999 18,548 1,998 18,515 (1) (33)
Due after three years 1,046 -- 1,030 -- (16) --
------- ------- ------- -------- ---- ----
$40,966 $36,932 $40,961 $ 36,853 $ (5) $(79)
======= ======= ======= ======== ==== ====
</TABLE>
F-15
<PAGE> 35
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
5. PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1995 and 1996 comprised the
following (in thousands):
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Land and buildings including
leasehold improvements $ 5,834 $ 5,917
Furniture and office equipment 1,270 1,670
Computer equipment 3,797 3,967
Automobiles 82 103
-------- --------
10,983 11,657
Less accumulated depreciation
and amortization (2,045) (2,653)
-------- --------
$ 8,938 $ 9,004
======== ========
</TABLE>
Depreciation and amortization charged to operations for the years
ended June 30, 1994, 1995 and 1996 were $703,000, $1,098,000 and $1,342,000
respectively.
6. GOODWILL
Goodwill at June 30, 1995 and 1996 comprised the following (in
thousands):
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Goodwill on acquisition $ 36,733 $ 33,822
Accumulated amortization (6,375) (7,927)
-------- --------
$ 30,358 $ 25,895
======== ========
</TABLE>
In the years ended June 30, 1995 and 1996, pre-acquisition net
operating losses related to Scott-Levin and PMSI Belgium S.A. were utilized
to reduce taxes currently payable and decrease goodwill by $389,000 and
$1,181,000, respectively.
F-16
<PAGE> 36
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
7. OTHER ASSETS
Other assets at June 30, 1995 and 1996 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Software $ 4,701 $ 4,831
Acquired databases 21,539 21,539
-------- --------
26,240 26,370
Less accumulated amortization (25,199) (26,201)
-------- --------
1,041 169
Debenture financing costs 1,760(1) 1,531(1)
Deposits 1,780 1,115
Deferred taxes 1,150 2,555
Investments -- 1,736(2)
Deferred consideration
and other deferred charges -- 429
Notes receivable 1,036(3) 1,078(3)
-------- --------
$ 6,767 $ 8,613
======== ========
</TABLE>
(1) Debenture financing costs are being amortized over the life of the
debentures.
(2) Investments include the exercise of stock warrants of a joint venture
partner, carried at cost.
(3) Represents an interest free note receivable of $1,200,000 due from
Walsh in June 1999 relating to the Scriptrac acquisition (see Note 3).
The note receivable was recorded initially at its present value and as
a result of accretion, the balance at June 30, 1996 is $1,078,000
F-17
<PAGE> 37
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. LONG-TERM DEBT
Long-term debt at June 30, 1995 and 1996 consisted of the following
(in thousands):
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Debentures (1) $69,000 $69,000
Capital lease obligations 607 350
------- -------
69,607 69,350
Less current portion (312) (219)
------- -------
$69,295 $69,131
======= =======
</TABLE>
(1) On February 3, 1993 the Company completed an offering of an aggregate $69
million Convertible Subordinated Debentures due in 2003. The debentures,
issued at par, bear interest at 6 1/4% and are convertible into Common
Stock of the Company at a conversion price of $20 per share, subject to
adjustments in certain events. The current value of the debentures at
June 30, 1996, based on quoted market prices, was $51,750,000.
Annual maturities of long-term debt outstanding at June 30, 1996 are (in
thousands):
<TABLE>
<S> <C>
June 1997 $ 219
June 1998 131
June 1999 --
June 2000 --
June 2001 --
After 2001 69,000
-------
$69,350
=======
</TABLE>
F-18
<PAGE> 38
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. STOCK OPTIONS AND RESTRICTED STOCK PURCHASE PLAN
A Stock Option and Restricted Stock Purchase Plan (the "Plan")
was established on August 17, 1991 for employees, officers and directors
of the Company or any of its subsidiaries. The Plan provides for the
granting of "non-qualified stock options" and "incentive stock options"
to acquire Common Stock of PMSI and/or the granting of rights to purchase
Common Stock. The terms and conditions of individual option agreements
may vary, subject to the following guidelines: (i) the option price of
incentive stock options may not be less than market value on the date of
grant; the option price of non-qualified options may be less than market
value on the date of grant, (ii) the term of all incentive stock options
may not exceed ten years from the date of grant; the term of
non-qualified stock options may exceed ten years, and (iii) no options
may be granted after August 17, 2001.
A Non-Employee Directors' Stock Option Plan (the "Directors
Plan") was adopted on May 27, 1993. The Directors' Plan provides for the
granting of non-qualified stock options to purchase shares of the
Company's Common Stock. The terms and conditions of individual option
agreements may vary, subject to the following guidelines: (i) the option
exercise price will be equal to 100% of the fair market value of the
Common Stock on the date of grant, (ii) the term of the stock options may
not exceed ten years from the date of grant, (iii) in general, options
vest evenly over a period of five years from the date of issue (iv) the
total number of shares of Common Stock that may be subject to options
pursuant to the Directors' Plan is 120,000, subject to automatic
adjustments following certain events, and (v) no options may be granted
after May 27, 2003.
Additional information relating to the Plans is as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
---------- ---------- ----------
1994 1995 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at July 1, 1993,
1994 and 1995, respectively 1,384,300 1,564,100 1,786,400
Options granted 293,500 372,750 234,250
Options exercised (12,700) (17,600) (84,050)
Options lapsed (101,000) (132,850) (88,400)
- -------------------------------------------------------------------------------
Options outstanding at June 30 1,564,100 1,786,400 1,848,200
Options exercisable at June 30 516,600 769,225 980,700
- -------------------------------------------------------------------------------
Option prices per share
Granted $14-$16 $9-$10 $8-$14
Exercised $8 $8 $8-$10
Outstanding $8-$22 $8-$22 $8-$22
</TABLE>
F-19
<PAGE> 39
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. TAXES
The income tax provisions benefit for the years ended June 30,
1994, 1995 and 1996 are comprised as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
---------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
U.S. taxes currently payable $ (342) $(2,701) $(1,666)
Foreign taxes currently payable (426) (968) (279)
Deferred income taxes (894) 719 789
------- ------- -------
$(1,662) $(2,950) $(1,156)
======= ======= =======
</TABLE>
The domestic and foreign components of income from continuing
operations before income taxes were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
---------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Domestic $ 2,645 $ 4,736 $ 1,153
Foreign 1,684 3,529 (763)
------- ------- -------
$ 4,329 $ 8,265 $ 390
======= ======= =======
</TABLE>
F-20
<PAGE> 40
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The provision for income taxes differs from that computed using the
34% statutory federal income tax rate as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Provision based on federal statutory rate $(1,471) $(2,810) $ (133)
Goodwill and other non-deductible
items (328) (313) (304)
Foreign earnings and dividends
taxed at different rates (90) 1,270 (538)
State tax, net of Federal benefit (494) (253) (135)
Purchase accounting adjustments (280) (280) (1,182)
Valuation of temporary differences 247 147 848
All other, net 754 (711) 288
------- ------- -------
Provision for income taxes $(1,662) $(2,950) $(1,156)
======= ======= =======
</TABLE>
The tax effect of significant temporary differences representing
deferred tax assets and liabilities at June 30, 1995 and 1996 were as
follows (in thousands):
<TABLE>
<CAPTION>
CURRENT ASSETS (LIABILITIES): 1995 1996
------- -------
<S> <C> <C>
Accrued liabilities $ (384) $ 545
Foreign tax credits 251 53
Net operating losses -- 62
Prepaid assets 472 14
Bad debts 122 39
------- -------
461 713
Valuation allowance (297) --
------- -------
Net current assets 164 713
------- -------
NON-CURRENT ASSETS (LIABILITIES):
Fixed assets & intangibles (55) (316)
Net operating losses 3,361 3,983
Other liabilities 123 319
------- -------
3,429 3,986
Valuation allowance (2,279) (1,431)
------- -------
Net non-current assets (liabilities) 1,150 2,555
------- -------
Deferred taxes, net $ 1,314 $ 3,268
======= =======
</TABLE>
F-21
<PAGE> 41
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
As of June 30, 1996, there is available for foreign income tax
purposes net operating loss carryforwards of approximately $11,160,000
which expire as follows: 1996: $1,060,000, 1997: $1,606,000, 1998:
$794,000 and 1999: $481,000 and thereafter: $7,219,000.
The undistributed earnings of foreign subsidiary companies for
which deferred U.S. income taxes have not been provided at June 30, 1995
and June 30, 1996 because of permanent reinvestment of earnings in the
operations of those subsidiaries, amounted to $6,427,000 and $461,000,
respectively. On remittance, certain foreign countries impose withholding
taxes. The amount of withholding taxes that would be payable on
remittance of the entire amount of such undistributed earnings would
approximate $403,000 and $149,000 at June 30, 1995 and June 30, 1996,
respectively.
11. EMPLOYEE BENEFIT PLANS
Subsidiaries of PMSI in the United Kingdom, Holland, Japan and
the United States have defined contribution pension or profit sharing
plans covering substantially all their employees. The total costs
associated with these plans for the years ended June 30, 1994, 1995 and
1996 were $424,000, $618,000 and $729,000 respectively.
F-22
<PAGE> 42
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
12. LEASE OBLIGATIONS
Various PMSI subsidiaries lease certain property and equipment.
Obligations under long-term non-cancelable lease agreements
expiring at various dates have the following aggregate approximate annual
minimum rentals (in thousands):
<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
<S> <C> <C>
1997 $ 219 $1,072
1998 131 896
1999 -- 805
2000 -- 769
2001 -- 492
After 2001 -- 4,879
------ ------
Total minimum lease payments: 350 $8,913
======
Less: amount representing interest (36)
------
Present value of minimum lease payments 314
Current portion (219)
------
$ 95
======
</TABLE>
Operating lease rental expense for the years ended June 30, 1994,
1995 and 1996 was $2,107,000, $2,237,000 and $1,471,000, respectively.
Included in furniture, fixtures and equipment are assets subject
to capitalized leases with an original cost of $924,000 (1995:
$1,489,000) and accumulated amortization of $505,000 (1995: $602,000).
F-23
<PAGE> 43
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
13. GEOGRAPHIC DATA
The following table presents certain financial information by
geographic area (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
JUNE 30, 1996
OPERATING IDENTIFIABLE
REVENUES INCOME(LOSS) ASSETS
-------- ----------- ------------
<S> <C> <C> <C>
United States $ 41,421 $ 5,566 $ 28,023
Europe and Pacific 51,256 1,508 56,614
General corporate 350 (6,554) 45,900
-------- -------- --------
Total $ 93,027 $ 520 $130,537
======== ======== ========
FOR THE YEAR ENDED
JUNE 30, 1995
OPERATING IDENTIFIABLE
REVENUES INCOME(LOSS) ASSETS
-------- ----------- ------------
United States $ 42,308 $ 6,566 $ 28,463
Europe and Pacific 47,585 5,168 54,002
General corporate -- (3,494) 55,184
-------- -------- --------
Total $ 89,893 $ 8,240 $137,649
======== ======== ========
FOR THE YEAR ENDED
JUNE 30, 1994
OPERATING IDENTIFIABLE
REVENUES INCOME(LOSS) ASSETS
-------- ----------- ------------
United States $ 40,943 $ 3,491 $ 29,014
Europe and Pacific 35,933 2,707 34,724
General corporate -- (1,642) 63,802
-------- -------- --------
Total $ 76,876 $ 4,556 $127,540
======== ======== ========
</TABLE>
F-24
<PAGE> 44
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
14. SUPPLEMENTAL OPERATIONS STATEMENT DATA
Advertising costs are charged to costs and expensed as incurred
and for the years ended June 30, 1994, 1995 and 1996 amounted to
$1,257,000, $928,000 and $1,308,000, respectively.
15. RESTRUCTURING COSTS
During the third quarter of 1996, the Company recorded a $2.3
million restructuring charge for elimination of non-core product lines.
The charges relate primarily to write-off of inventory costs and contract
termination payments. The $2.3 million charge includes estimated cash
payments of $1.5 million and non-cash asset write-offs of $0.8 million.
The remaining balance of the restructuring liability as of June 30, 1996
was $0.9 million.
During the fourth quarter of 1994, the Company recorded a $1.8
million restructuring charge for the purpose of integrating and
consolidating various business functions. The restructuring charge
included $1.4 million related to severance costs with the remainder
related to inventory write-offs. Approximately $1.6 million of the
restructuring liabilities were paid or settled in 1995 with the remainder
paid or settled in 1996.
16. IMPAIRMENT OF LONG-LIVED ASSETS
During the third quarter, the Company adopted the provisions of
Statement of Financial Accounting Standard No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of" ("FAS 121"). The Company periodically reviews, for impairment, its
long-lived assets and identifiable intangible assets. Recoverability is
measured through undiscounted future cash flows expected to result from
the use of the asset and its eventual disposition. Impairment is measured
based on the present value of estimated expected future cash flows using
a discount rate reflecting the Company's cost of funds. The initial
application of this statement resulted in a charge of $2.4 million
related principally to the write-off of goodwill and capitalized database
costs for a database business being exited.
F-25
<PAGE> 45
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following tables show the unaudited quarterly financial information
for the year ended June 30, 1996 (in thousands except for per share
data).
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------
SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30
------------ ----------- -------- --------
<S> <C> <C> <C> <C>
Total revenues $ 20,709 $ 24,290 $ 23,126 $ 24,902
-------- -------- -------- --------
Gross profit 8,953 11,692 9,475 11,302
-------- -------- -------- --------
Income (loss) from continuing operations 118 2,379 (4,660) 1,454
Loss from discontinued operations, net (673) (1,080) (7,162) --
-------- -------- -------- --------
Net (loss) income $ (555) $ 1,299 $(11,822) $ 1,454
======== ======== ======== ========
Income (loss) per share from continuing
operations: $ 0.01 $ 0.18 $ (0.35) $ 0.11
Loss per share from discontinued
operations, net $ (0.05) $ (0.08) $ (0.54) $ -
-------- -------- -------- --------
Net (loss) income per share $ (0.04) $ 0.10 $ (0.89) $ 0.11
======== ======== ======== ========
</TABLE>
18. DISCONTINUED OPERATIONS
During the third quarter of 1996, the Company announced its
decision to develop its business as a focused information services
provider to the pharmaceutical and healthcare industries and that its
European and communication businesses would be divested. These
businesses, comprising the non-database segment of PMSI's operations,
are accounted for as discontinued operations and, accordingly, their
operations are segregated in the accompanying statements of operations.
F-26
<PAGE> 46
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Summary operating results of the discontinued operations for
the years ended June 30, 1994, 1995 and 1996 were as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
-----------------------------
1994 1995 1996
-----------------------------
<S> <C> <C> <C>
Results of discontinued operations:
Revenue $37,107 $39,865 $44,849
------- ------- -------
Income (loss) from operations:
Income (loss) before taxes 3,541 299 (2,288)
Income tax provision (1,484) (430) (917)
------- ------- -------
Income (loss) from discontinued
operations 2,057 (131) (3,205)
Loss on disposal of non-database
operations including $2,031 of
operating income during phase out
period net of income tax provision of
$1,236 -- -- (5,710)
------- ------- -------
Income (loss) from discontinued
operations, net $ 2,057 $ (131) $(8,915)
======= ======= =======
</TABLE>
In the fourth quarter, income from discontinued operations,
net of income taxes, was $1,183.
Management's estimates of the income or loss from operations
through the respective disposal dates and the proceeds from disposal of
the non-database segment remain consistent with those provided at the
measurement date. Although the Company's estimated net proceeds
expected to be generated from the sale of businesses held for sale are
supported by calculations prepared by management, based on information
primarily received from outside parties, it is reasonably possible that
qualified buyers may not pay the asking price. The sale of the
remaining businesses comprising the discontinued operations is expected
to be finalized by March 31, 1997.
F-27
<PAGE> 47
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors and Stockholders of
Pharmaceutical Marketing Services Inc.
Our report on the consolidated financial statements of Pharmaceutical Marketing
Services Inc. is included on Page F-1 of this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related financial
statement schedule listed in the index on Page 19 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
August 30, 1996
S-1
<PAGE> 48
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ------------------------ ------------- ---------- ----------- ----------
ADDITIONS
----------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COSTS AND END OF
DESCRIPTIONS PERIOD EXPENSES DEDUCTIONS PERIOD
- ------------------------ ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful
accounts
June 30, 1996 $ 415,000 207,000 (222,000) $ 400,000
June 30, 1995 $ 685,000 19,000 (289,000) $ 415,000
June 30, 1994 $ 160,000 562,000 (37,000) $ 685,000
Valuation allowance
for deferred tax assets
June 30, 1996 $2,576,000 -- (1,145,000) $1,431,000
June 30, 1995 $1,978,000 598,000 -- $2,576,000
June 30, 1994 $2,512,000 -- (534,000) $1,978,000
</TABLE>
S-2
<PAGE> 49
PART III
The information required by Part III of Form 10-K is incorporated by
reference from the Registrant's definitive Proxy Statement for its meeting of
stockholders in connection with its transition period, which is to be filed
pursuant to Regulation 14A not later than October 30, 1996.
Pursuant to General Instruction G(3) to the Annual Report on Form 10-K,
the information required by Part III of 10-K regarding executive officers of the
Company required by Item 401 of Regulation S-K is hereby incorporated by
reference from the Registrants' Definitive Proxy Statement for its annual
meeting of stockholders, which is to be filed pursuant to Registration 14A not
later than October 30, 1996.
PART IV
ITEM 10. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
(a)(1-2) Financial Statements and Financial Statement Schedule
See Index to Consolidated Financial Statements and Financial
Statement Schedule which appears on page 19 of this Annual Report.
EXHIBITS
Exhibit
Number
-------
2.1 Transfer and Exchange Agreement, dated as of October 11,
1991, between Walsh International Inc. and Pharmaceutical
Marketing Services Inc. (incorporated by reference to
Exhibit 2.1 to the Registrant's Registration Statement
Number 33-43226)
2.2 Merger Agreement and Plan of Reorganization, dated October
11, 1991, by and between Walsh International Inc.,
Pharmaceutical Marketing Services Inc. and SLA Acquisition
Corp., on the one hand, and Scott-Levin Associates, Inc.,
Joy Scott and Larry Levin, on the other (incorporated by
reference to Exhibit 2.2 to the Registrant's Registration
Statement Number 33-43226)
2.3 English translation of Agreement for the Sale and Purchase
of the Shares of IMR S.A. (translation for information
purposes only) (incorporated by reference to Exhibit 2.1
to the Registrant's Current Report on Form 8-K filed May
13, 1993)
<PAGE> 50
2.4 Contrat pour l'Achat et la Vente des Actions de la Societe
IMR S.A. (incorporated by reference to Exhibit 2.2 to the
Registrant's Current Report on Form 8-K filed May 13,
1993)
3.1 Certificate of Incorporation of Pharmaceutical Marketing
Services Inc. and Amendment thereto (incorporated by
reference to Exhibit 3.1 to the Registrant's Registration
Statement No. 33-43226)
3.2 By-laws of Pharmaceutical Marketing Services Inc.
(incorporated by reference to Exhibit 3.2 to the
Registrant's Registration Statement No. 33-43226)
4.1 Indenture, dated as of February 1, 1993, between
Pharmaceutical Marketing Services Inc., and Harris
Trust Company of New York, Trustee (incorporated by
reference to Exhibit 4.1 to the Registrant's Annual
Report on Form 10-K filed March 30, 1993)
10.1(a) (i) Purchase and Sale Agreement, dated as of April 1, 1994, by
and between Walsh Belgium N.V. and PMSI Belgium, S.A.
10.1(a)(ii) Purchase and Sale Agreement, dated as of April 1, 1994, by
and among Walsh Nederland B.V., Walsh Medical Data and
Research B.V. and PMSI Bugamor B.V.
*10.1(b) Amended and Restated Alpha Database License Agreement,
dated as of July 1, 1994 by and between Walsh America
Limited and Pharmaceutical Data Services, Inc., on the one
hand, and Pharmaceutical Marketing Services Inc., on the
other.
10.1(c) Physician Database License Agreement, dated as of December
2, 1991, by and between Walsh International Inc. and
Pharmaceutical Marketing Services Inc. (incorporated by
reference to Exhibit 10.1(c) to the Registrant's
Registration Statement No. 33-43226)
10.1(d) Management and Executive Services Agreement, dated as of
December 2, 1991, by and between Walsh International Inc.,
Pharminfo Advisors Limited and Informed Management
Limited, on the one hand, and Pharmaceutical Marketing
Services Inc., on the other (incorporated by reference to
Exhibit 10.1(d) to the Registrant's Registration Statement
No. 33-43226)
10.1(e) Data Processing Agreement, dated as of December 2, 1991,
by and between Walsh International Inc. and Pharmaceutical
Marketing Services Inc. (incorporated by reference to
Exhibit 10.1(e) to the Registrant's Registration Statement
No. 33-43226)
<PAGE> 51
10.1(f) Facilities Agreement, dated as of December 2, 1991, by and
between Walsh International Inc. and Pharmaceutical
Marketing Services Inc. (incorporated by reference to
Exhibit 10.1(f) to the Registrant's Registration Statement
No. 33-43226)
10.1(g) Collaborative Marketing Agreement, dated as of December 2,
1991, by and between Walsh America Limited and
Pharmaceutical Data Services, Inc., on the one hand, and
Pharmaceutical Marketing Services Inc. and American
Medical Census Corp., on the other (incorporated by
reference to Exhibit 10.1(g) to the Registrant's
Registration Statement No. 33-43226)
10.1(h) Health and Benefits Agreement, dated as of December 2,
1991, by and between Walsh International Inc. and
Pharmaceutical Marketing Services Inc. (incorporated by
reference to Exhibit 10.1(h) to the Registrant's
Registration Statement No. 33-43226)
*10.1(I) Mailing Services Agreement, dated as of December 2, 1991,
by and between Walsh International Inc. and Pharmaceutical
Marketing Services Inc. (incorporated by reference to
Exhibit 10.1(i) to the Registrant's Registration Statement
No. 33-43226)
10.1(j) English translation of Warranty Agreement (translation for
information purposes only) (incorporated by reference to
Exhibit 3.1 to the Registrant's Current Report on Form 8-K
filed May 13, 1993)
10.1(k) Contrat de Garantie (incorporated by reference to Exhibit
3.2 to the Registrant's Current Report on Form 8-K filed
May 13, 1993)
10.1(l) English translation of Agreement for the Supply of
Services (translation for information purposes only)
(incorporated by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K filed May 13,
1993)
10.1(m) Contrat de Prestations de Services (incorporated by
reference to Exhibit 4.2 to the Registrant's Current
Report on Form 8-K filed May 13, 1993)
10.1(n) English translation of Put Option (translation for
information purposes only) (incorporated by reference to
Exhibit 5.1 to the Registrant's Current Report on Form 8-K
filed May 13, 1993)
10.1(o) Promesse Unilaterale de Vente d'Actions (incorporated by
reference to Exhibit 5.2 to the Registrant's Current
Report on Form 8-K filed May 13, 1993)
10.1(p) English translation of Call Option (translation for
information purposes only) (incorporated by reference to
Exhibit 6.1 to the Registrant's Current Report on Form 8-K
filed May 13, 1993)
<PAGE> 52
10.2(a) Pharmaceutical Marketing Services Inc. and its
Subsidiaries Stock Option and Restricted Stock Purchase
Plan (incorporated by reference to Exhibit 10.2 to the
Registrant's Registration Statement No. 33-43226)
10.2(b) Pharmaceutical Marketing Services Inc. Non-Employee
Directors' Stock Option Plan (incorporated by reference to
Exhibit 4.3 to the Registrant's Registration Statement No.
33-66306)
11 Statement re Computation of Earnings (Loss) per Share
22.1 List of subsidiaries of Pharmaceutical Marketing Services
Inc. (incorporated by reference to Exhibit 22.1 to the
Registrant's Registration Statement No. 33-43226)
24.1 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule
* Certain portions of this Exhibit have been omitted pursuant to an order
of the Securities and Exchange Commission granting confidential
treatment.
(b) Reports on Form 8-K filed during the three months ended June 30,
1996.
<PAGE> 53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: September 27, 1996
PHARMACEUTICAL MARKETING SERVICES INC.
By /s/ Robert J. Frattaroli
---------------------------------------
Robert J. Frattaroli
President and Chief Operating Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes
Dennis M.J. Turner, Robert J. Frattaroli and Lyle R. Scritsmier, and each of
them, with full power of substitution and full power to act without the other,
his true and lawful attorney-in-fact and agent in his name, place and stead, to
execute in the name and on behalf of such person, individually and in each
capacity stated below, and to file any and all amendments to this report.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Handel E. Evans Director, Chairman of The Board September 27, 1996
- ----------------------------
Handel E. Evans
/s/ Dennis M.J. Turner Director, Chief Executive Officer September 27, 1996
- ----------------------------
Dennis M.J. Turner
/s/ Robert J. Frattaroli Director, President, Chief September 27, 1996
- ---------------------------- Operating Officer
Robert J. Frattaroli
/s/ Lyle R. Scritsmier Vice President, Chief Financial September 27, 1996
- ---------------------------- Officer, and Treasurer
Lyle R. Scritsmier
/s/ Patrick J. Welsh Director September 27, 1996
- ----------------------------
Patrick J. Welsh
/s/ Stuart Gold Director September 27, 1996
- ----------------------------
Stuart Gold
/s/ Frederick W. Kyle Director September 27, 1996
- ----------------------------
Frederick W. Kyle
/s Carolyne K. Davis Director September 27, 1996
- ----------------------------
Carolyne K. Davis
</TABLE>
<PAGE> 54
INDEX TO EXHIBITS
Exhibit Description
Number
2.1 Transfer and Exchange Agreement, dated as of October 11, 1991,
between Walsh International Inc. and Pharmaceutical Marketing
Services Inc. (incorporated by reference to Exhibit 2.1 to the
Registrant's Registration Statement Number 33-43226)
2.2 Merger Agreement and Plan of Reorganization, dated October 11,
1991, by and between Walsh International Inc., Pharmaceutical
Marketing Services Inc. and SLA Acquisition Corp., on the one
hand, and Scott-Levin Associates, Inc., Joy Scott and Larry
Levin, on the other (incorporated by reference to Exhibit 2.2
to the Registrant's Registration Statement Number 33-43226)
2.3 English translation of Agreement for the Sale and Purchase of
the Shares of IMR S.A. (translation for information purposes
only) (incorporated by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K filed May 13, 1993)
2.4 Contrat pour l'Achat et la Vente des Actions de la Societe IMR
S.A. (incorporated by reference to Exhibit 2.2 to the
Registrant's Current Report on Form 8-K filed May 13, 1993)
3.1 Certificate of Incorporation of Pharmaceutical Marketing
Services Inc. and Amendment thereto (incorporated by reference
to Exhibit 3.1 to the Registrant's Registration Statement No.
33-43226)
3.2 By-laws of Pharmaceutical Marketing Services Inc.
(incorporated by reference to Exhibit 3.2 to the Registrant's
Registration Statement No. 33-43226)
4.1 Indenture, dated as of February 1, 1993, between
Pharmaceutical Marketing Services Inc., and Harris Trust
Company of New York, Trustee
10.1(a)(i) Purchase and Sale Agreement, dated as of April 1, 1994, by and
between Walsh Belgium N.V. and PMSI Belgium, S.A.
<PAGE> 55
10.1(a)(ii) Purchase and Sale Agreement, dated as of April 1, 1994, by and
among Walsh Nederland B.V., Walsh Medical Data and Research
B.V. and PMSI Bugamor B.V.
*10.1(b) Amended and Restated Alpha Database License Agreement, dated
as of July 1, 1994 by and between Walsh America Limited and
Pharmaceutical Data Services, Inc., on the one hand, and
Pharmaceutical Marketing Services Inc., on the other.
10.1(c) Physician Database License Agreement, dated as of December 2,
1991, by and between Walsh International Inc. and
Pharmaceutical Marketing Services Inc. (incorporated by
reference to Exhibit 10.1(c) to the Registrant's Registration
Statement No. 33-43226)
10.1(d) Management and Executive Services Agreement, dated as of
December 2, 1991, by and between Walsh International Inc.,
Pharminfo Advisors Limited and Informed Management Limited, on
the one hand, and Pharmaceutical Marketing Services Inc., on
the other (incorporated by reference to Exhibit 10.1(d) to the
Registrant's Registration Statement No. 33-43226)
10.1(e) Data Processing Agreement, dated as of December 2, 1991, by
and between Walsh International Inc. and Pharmaceutical
Marketing Services Inc. (incorporated by reference to Exhibit
10.1(e) to the Registrant's Registration Statement No.
33-43226)
10.1(f) Facilities Agreement, dated as of December 2, 1991, by and
between Walsh International Inc. and Pharmaceutical Marketing
Services Inc. (incorporated by reference to Exhibit 10.1(f) to
the Registrant's Registration Statement No. 33-43226)
10.1(g) Collaborative Marketing Agreement, dated as of December 2,
1991, by and between Walsh America Limited and Pharmaceutical
Data Services, Inc., on the one hand, and Pharmaceutical
Marketing Services Inc. and American Medical Census Corp., on
the other (incorporated by reference to Exhibit 10.1(g) to the
Registrant's Registration Statement No. 33-43226)
10.1(h) Health and Benefits Agreement, dated as of December 2, 1991,
by and between Walsh International Inc. and Pharmaceutical
Marketing Services Inc. (incorporated by reference to Exhibit
10.1(h) to the Registrant's Registration Statement No.
33-43226)
<PAGE> 56
*10.1(i) Mailing Services Agreement, dated as of December 2, 1991, by
and between Walsh International Inc. and Pharmaceutical
Marketing Services Inc. (incorporated by reference to Exhibit
10.1(i) to the Registrant's Registration Statement No.
33-43226)
10.1(j) English translation of Warranty Agreement (translation for
information purposes only) (incorporated by reference to
Exhibit 3.1 to the Registrant's Current Report on Form 8-K
filed May 13, 1993)
10.1(k) Contrat de Garantie (incorporated by reference to Exhibit 3.2
to the Registrant's Current Report on Form 8-K filed May 13,
1993)
10.1(l) English translation of Agreement for the Supply of Services
(translation for information purposes only) (incorporated by
reference to Exhibit 4.1 to the Registrant's Current Report on
Form 8-K filed May 13, 1993)
10.1(m) Contrat de Prestations de Services (incorporated by reference
to Exhibit 4.2 to the Registrant's Current Report on Form 8-K
filed May 13, 1993)
10.1(n) English translation of Put Option (translation for information
purposes only) (incorporated by reference to Exhibit 5.1 to
the Registrant's Current Report on Form 8-K filed May 13,
1993)
10.1(o) Promesse Unilaterale de Vente d'Actions (incorporated by
reference to Exhibit 5.2 to the Registrant's Current Report on
Form 8-K filed May 13, 1993)
10.1(p) English translation of Call Option (translation for
information purposes only) (incorporated by reference to
Exhibit 6.1 to the Registrant's Current Report on Form 8-K
filed May 13, 1993)
10.2(a) Pharmaceutical Marketing Services Inc. and its Subsidiaries
Stock Option and Restricted Stock Purchase Plan (incorporated
by reference to Exhibit 10.2 to the Registrant's Registration
Statement No. 33-43226)
10.2(b) Pharmaceutical Marketing Services Inc. Non-Employee Directors'
Stock Option Plan (incorporated by reference to Exhibit 4.3 to
the Registrant's Registration Statement No. 33-66306)
11 Statement re Computation of Earnings (Loss) per Share
<PAGE> 57
22.1 List of subsidiaries of Pharmaceutical Marketing Services Inc.
(incorporated by reference to Exhibit 22.1 to the Registrant's
Registration Statement No. 33-43226)
24.1 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule
* Certain portions of this Exhibit have been omitted pursuant to an order of the
Securities and Exchange Commission granting confidential treatment.
<PAGE> 1
EXHIBIT 11
PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE
FOR THE YEARS ENDED JUNE 30, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Common shares outstanding 12,731,499 12,970,571 13,123,998
Assumed exercise of certain stock options 565,388 82,821 274,618
------------ ------------ ------------
13,296,887 13,053,392 13,398,616
============ ============ ============
Income (loss) from continuing operations (in thousands) $ 2,667 $ 5,312 $ (709)
Income (loss) from discontinued operations, net (in thousands) 2,057 (131) (8,915)
------------ ------------ ------------
Net income (loss) (in thousands) $ 4,724 $ 5,181 $ (9,624)
============ ============ ============
Primary income (loss) per share continuing $ 0.21 $ 0.41 $ (0.05)
Primary income (loss) per share discontinued 0.15 (0.01) (0.68)
------------ ------------ ------------
Net income (loss) per share $ 0.36 $ 0.40 $ (0.73)
============ ============ ============
FULLY DILUTED EARNINGS PER SHARE
Common shares outstanding 12,731,499 12,970,571 12,123,998
Assumed exercise of certain stock options 565,388 82,821 274,618
Assumed conversion of convertible debentures -- -- --
------------ ------------ ------------
13,296,887 13,053,392 12,398,616
============ ============ ============
Income (loss) from continuing operations (in thousands) $ 2,667 $ 5,312 $ (709)
Income (loss) from discontinued operations, net (in thousands) 2,057 (131) (8,915)
------------ ------------ ------------
Net income (loss) per share (in thousands) 4,724 5,181 (9,624)
Reduction in interest expense following conversion -- -- --
------------ ------------ ------------
Revised net income (loss) (in thousands) $ 4,724 $ 5,181 $ (9,624)
============ ============ ============
Fully diluted income (loss) per share continuing $ 0.21 $ 0.41 $ 0.05
Fully diluted income (loss) per share discontinued 0.15 (0.01) (0.68)
------------ ------------ ------------
Fully diluted income (loss) per share $ 0.36 (1) $ 0.40 (1) $ (0.73) (1)
============ ============ ============
</TABLE>
(1) Convertible debentures have not been assumed converted for the fully
diluted earnings per share as the effect would be anti-dilutive. Had the
convertible debentures been included, the number of shares would have been
increased by 3,450,000 in 1994, 1995 and 1996 to 16,746,887, 16,503,392 and
16,848,616 in 1994, 1995 and 1996, respectively.
As a result of reduced interest expense following conversion, the
increase to net income (or decrease to net loss) would have been
$2,005,000, $2,588,000 and $1,941,000 in 1994, 1995 and 1996, respectively.
These adjustments would have resulted in fully diluted income (loss) per
share of $0.40, $0.47 and $(0.46) in 1994, 1995 and 1996, respectively.
<PAGE> 1
Exhibit 24.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in (i) the Registration Statement
on Form S-8 (File No. 33-48364) and (ii) the Registration Statement on Form S-8
(File No. 33-66306) of our reports dated August 30, 1996, on our audits of the
consolidated financial statements and financial statement schedule of
Pharmaceutical Marketing Services Inc. and Subsidiaries as of June 30, 1995 and
1996, and for the years ended June 30, 1994, 1995 and 1996, which reports are
included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
September 24, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 12,669
<SECURITIES> 34,689
<RECEIVABLES> 29,683
<ALLOWANCES> 400
<INVENTORY> 2,986
<CURRENT-ASSETS> 77,786
<PP&E> 11,657
<DEPRECIATION> 2,653
<TOTAL-ASSETS> 173,408
<CURRENT-LIABILITIES> 30,159
<BONDS> 69,000
0
0
<COMMON> 132
<OTHER-SE> 72,822
<TOTAL-LIABILITY-AND-EQUITY> 173,408
<SALES> 0
<TOTAL-REVENUES> 93,027
<CGS> 0
<TOTAL-COSTS> 51,605
<OTHER-EXPENSES> 38,875
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> 2,142
<INCOME-PRETAX> 390
<INCOME-TAX> 1,156
<INCOME-CONTINUING> (709)
<DISCONTINUED> (8,915)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,624)
<EPS-PRIMARY> (0.73)
<EPS-DILUTED> (0.73)
</TABLE>
