In the news release, "Covalent (Nasdaq: CVGR) Reports Results for
Third Quarter 2005," issued yesterday, Nov. 9, by The Ruth Group,
Inc. over PR Newswire, we are advised by a representative of the
company that the table "Covalent Group, Inc. Consolidated Condensed
Statements of Cash Flows," should be disregarded. A correct
Consolidated Condensed Statements of Cash Flows table will be
reissued at a later date. Complete, corrected release follows:
WAYNE, Pa., Nov. 10 /PRNewswire-FirstCall/ -- Covalent Group, Inc.
(NASDAQ:CVGR) today announced its financial results for the third
quarter ended September 30, 2005. Our financial, business and
strategic accomplishments for the third quarter of 2005 were as
follows: * An increase in net revenues of $800 thousand, or 45%,
compared to the prior year quarter; * Strong operating cash flow
that increased cash and cash equivalents to $7 million from $3.2
million at December 31, 2004; * Continued improvement in balance
sheet liquidity with no debt and minimal exposure to capital lease
commitments; * New business contracts for $6.8 million that
resulted from our recent programmatic successes in high profile
clinical trials in which we played a significant role; * An
increase in backlog of $8 million since December 31, 2004; * New
business opportunities that have been engendered by our recent
accomplishments in the design and management of clinical trials and
patient disease registries. Net revenue for the third quarter of
2005, excluding reimbursement revenue, increased 45% to $2.7
million as compared to $1.9 million for the comparable prior year
period. Net revenue for the three months ended September 30, 2004
was materially impacted by significant increases in the estimated
cost to complete for certain legacy studies without a corresponding
increase in contract value that had a negative impact on reported
revenues. These legacy studies were substantially complete as of
the end of 2004. Net expenses for the quarter ended September 30,
2005, excluding the reimbursement for out-of-pocket expenses, were
$3 million versus $4 million for the comparable prior year period,
a decrease of approximately $1 million. This decrease resulted
principally from a $1 million reduction in direct expenses
associated with decreased personnel costs related to lower clinical
trial activity due principally to headcount reductions and
decreased use of independent contractors. Net revenue for the nine
months ended September 30, 2005, excluding reimbursement revenue,
was $8.3 million versus $10.9 million for the comparable prior year
period. The decrease of $2.6 million in net revenue reflects a
decrease in the value and number of clinical trial studies being
managed by the Company during the first nine months of 2005
compared to the comparable prior year period when several large
legacy projects were winding down their development cycle combined
with lower than anticipated new business awards toward the end of
2004 and during 2005. Net expenses for the nine months ended
September 30, 2005, excluding the reimbursement for out-of-pocket
expenses, was $9.2 million versus $15 million for the comparable
prior year period, a decrease of $5.8 million. This decrease was
principally due to a $5 million reduction in direct expenses due to
decreased personnel costs related to lower clinical trial activity,
an $800 thousand reduction in SG&A due principally to a $400
thousand decrease in bad debt expense as well as a decline in
administrative personnel related to ongoing cost control
initiatives. Net loss for the third quarter of 2005 was $244
thousand, or ($0.02) per share, compared to a net loss of $1.4
million, or ($0.11) per share, for the comparable prior year
period. Net loss for the nine months ended September 30, 2005 was
$826 thousand, or ($0.06) per share, compared to a net loss of $2.9
million, or ($0.22) per share, for the comparable prior year
period. Cash and cash equivalents were $7 million as of September
30, 2005 compared with $3.2 million as of December 31, 2004, an
increase of $3.8 million. This increase resulted principally from
cash provided from operating activities in the amount of $3.9
million that included a one-time income tax refund of $1.1 million.
The amount of new business contracts for the third quarter that
were announced in early October 2005 was $6.8 million. This brought
our year-to-date new business awards to $16.6 million. Our backlog
was approximately $23 million as of September 30, 2005 compared to
approximately $15 million at December 31, 2004, an increase of $8
million. Sequentially, our backlog grew from $20 million at June
30, 2005, an increase of $3 million. Kenneth M. Borow, M.D.,
President and Chief Executive Officer, commented, "Our third
quarter financial results improved significantly compared to the
third quarter of 2004 with our business providing $3.9 million of
positive cash flow from operations. We had another successful third
quarter relative to new business signings. As a result, our backlog
grew in the third quarter on a sequential basis as well as from the
end of 2004. In addition, we are competing for multiple new
business contracts which we believe will help us significantly
improve our future operating results. We are especially pleased
that our programmatic successes over the past year have positioned
us to be highly competitive for the new business awards that we are
currently seeking. We expect to make additional new business
announcements during the fourth quarter of this year." Dr. Borow
continued, "In the past we have discussed our commitment to growing
our revenue base through mergers and acquisitions, new strategic
alliances and new business awards. We are actively seeking new
business opportunities in order to grow our revenues and leverage
our in-house resources to a fuller extent. Our actions are ongoing
and our growth in backlog and net revenues along with a return to
profitability is our goal. Strategically, our commitment to expand
the geographic reach of our Company and our ability to provide
additional services to our clients remains our top priority."
Covalent Group will hold a conference call on Friday, November 11
at 9:00 A.M. ET to discuss third quarter results. To participate in
the live call by telephone, please dial (877) 407-4018 from the
U.S., or for international callers, please dial (201) 689-8471.
Those interested in listening to the conference call live via the
Internet may do so by visiting the Company's Web site at
http://www.covalentgroup.com/. Please go to the Web site 15 minutes
prior to the scheduled start to register, download, and install any
necessary audio software. A webcast audio replay will be available
on the Company Web site for 31 days through Sunday, December 11,
2005. A telephone audio replay will also be available for 10 days
through Monday, November 21, 2005, by dialing (877) 660-6853 from
the U.S., or (201) 612-7415 for international callers, and entering
account number 3055 and conference ID number 174310 when prompted.
About Covalent Group Covalent Group is a clinical research
organization that is a leader in the design and management of
complex clinical trials for the pharmaceutical, biotechnology and
medical device industries. The Company's mission is to provide its
clients with high quality, full-service support for their clinical
trials. Covalent offers therapeutic expertise, experienced team
management and advanced technologies. The Company has clinical
trial experience across a wide variety of therapeutic areas such as
cardiovascular, endocrinology/metabolism, diabetes, vaccines,
biologics, gene therapy, immunology, neurology, infectious
diseases, gastroenterology, dermatology, hepatology, women's health
and respiratory medicine. Covalent believes that its leadership in
the design of complex clinical trials, its application of
innovative technologies, therapeutic expertise and commitment to
quality offer its clients a means to more quickly and cost
effectively develop products through the clinical trial process.
With its wholly-owned international subsidiary, Covalent Group,
Ltd., as well as its Strategic Partners operating in various
regions around the world, Covalent is able to meet the global drug
development needs of its clients. This press release contains
forward-looking statements identified by words such as "estimate,"
"project," "expect," "intend," "believe," "anticipate" and similar
expressions. Actual results might differ materially from those
projected in, expressed in or implied by the forward-looking
statements. Potential risks and uncertainties that could affect the
Company's future operating results, financial condition and stock
price include, without limitation: (i) our success in attracting
new business and retaining existing clients and projects; (ii) the
size, duration, and timing of clinical trials we are currently
managing may change unexpectedly; (iii) the termination, delay or
cancellation of clinical trials we are currently managing could
cause revenues to decline unexpectedly; (iv) the timing difference
between our receipt of contract milestone or scheduled payments and
our incurring costs to manage these trials; (v) outsourcing trends
in the pharmaceutical, biotechnology and medical device industries;
(vi) the ability to maintain profit margins in a very competitive
marketplace; (vii) our ability to attract and retain qualified
personnel; (viii) the sensitivity of our business to general
economic conditions; (ix) other economic, competitive, governmental
and technological factors affecting our operations, markets,
products, services and prices; (x) announced awards received from
existing and potential customers are not definitive until fully
negotiated contracts are executed by the parties; and (xi) our
backlog may not be indicative of future results and may not
generate the revenues expected. Additional information concerning
risk factors that might affect our business or stock price which
could cause actual results to materially differ from those in
forward-looking statements is contained in Covalent Group's SEC
filings, including its Annual Report on Form 10-K for the year
ended December 31, 2004 and other periodic reports under the
Securities Exchange Act of 1934, as amended, copies of which are
available upon request from Covalent Group's investor relations
department. Investor Relations Contact: Lawrence R. Hoffman, CPA,
Esq. CFO, Covalent Group, Inc. (610) 975-9533 Contact us on-line:
http://www.covalentgroup.com/ Covalent Group, Inc. Consolidated
Condensed Balance Sheets September 30, December 31, 2005 2004
Assets Current Assets Cash and cash equivalents $ 6,995,334 $
3,165,986 Restricted cash 687 145,612 Accounts receivable, less
allowance of $35,093 and $40,000 at September 30, 2005 and December
31, 2004, respectively 3,222,929 5,209,950 Prepaid expenses and
other 309,774 158,287 Prepaid taxes 18,448 1,132,315 Costs and
estimated earnings in excess of related billings on uncompleted
contracts 431,360 1,667,947 Total Current Assets 10,978,532
11,480,097 Property and Equipment, Net 975,369 1,321,139 Other
Assets 21,665 21,665 Total Assets $11,975,566 $12,822,901
Liabilities and Stockholders' Equity Current Liabilities Accounts
payable $ 646,414 $ 1,101,788 Accrued expenses 272,783 392,385
Obligations under capital leases 25,637 23,709 Billings in excess
of related costs and estimated earnings on uncompleted contracts
2,468,509 1,770,275 Customer advances 1,049,247 1,080,469 Total
Current Liabilities 4,462,590 4,368,626 Long Term Liabilities
Obligations under capital leases 43,833 63,309 Other liabilities
494,454 581,710 Total Long Term Liabilities 538,287 645,019 Total
Liabilities 5,000,877 5,013,645 Stockholders' Equity Common stock,
$.001 par value 25,000,000 shares authorized, 13,501,333 and
13,495,534 shares issued and outstanding respectively 13,502 13,496
Additional paid-in capital 12,028,457 12,017,822 Accumulated
deficit (4,759,285) (3,933,377) Accumulated other comprehensive
income 150,989 170,289 Less: 7,433,663 8,268,230 Treasury stock, at
cost, 152,932 shares (458,974) (458,974) Total Stockholders' Equity
6,974,689 7,809,256 Total Liabilities and Stockholders' Equity
$11,975,566 $12,822,901 Covalent Group, Inc. Consolidated Condensed
Statements of Operations Three months ended Nine months ended
September 30, September 30, 2005 2004 2005 2004 Net revenue
$2,713,702 $1,876,406 $8,255,610 $10,937,765 Reimbursement revenue
1,064,923 592,582 2,067,749 4,851,093 Total Revenue 3,778,625
2,468,988 10,323,359 15,788,858 Operating Expenses Direct 1,884,398
2,853,514 5,672,081 10,531,941 Reimbursement out- of-pocket
expenses 1,064,923 592,582 2,067,749 4,851,093 Selling, general and
administrative 997,677 1,004,396 3,096,970 3,874,888 Depreciation
and amortization 122,414 167,287 392,171 601,262 Total Operating
Expenses 4,069,412 4,617,779 11,228,971 19,859,184 Loss from
Operations (290,787) (2,148,791) (905,612) (4,070,326) Interest
Income 48,348 3,112 86,709 4,795 Interest Expense (1,924) (2,552)
(7,006) (8,036) Net Interest Income (Expense) 46,424 560 79,703
(3,241) Loss before Income Taxes (244,363) (2,148,231) (825,909)
(4,073,567) Income Tax Benefit - (704,917) - (1,210,628) Net Loss
$(244,363) $(1,443,314) $(825,909) $(2,862,939) Net Loss per Common
Share Basic $ (0.02) $ (0.11) $ (0.06) $ (0.22) Diluted $ (0.02) $
(0.11) $ (0.06) $ (0.22) Weighted Average Common and Common
Equivalent Shares Outstanding Basic 13,348,269 13,454,035
13,346,458 13,207,279 Diluted 13,348,269 13,454,035 13,346,458
13,207,279 PRNewswire -- Nov. 11 DATASOURCE: Covalent Group, Inc.
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