RNS Number:9931J
Research Pharmaceutical SRV, Inc
14 December 2007
ReSearch Pharmaceutical Services, Inc.
Unaudited Quarterly Report to September 30, 2007
ReSearch Pharmaceutical Services, Inc., a leading provider of integrated
clinical development outsourcing solutions to the bio-pharmaceutical industry,
is pleased to announce its 3rd quarter results for the nine month period ended
September 30, 2007. These statements include comparative results for ReSearch
Pharmaceutical Services, Inc. ("RPS") which merged with Cross Shore Acquisition
Corporation ("Cross Shore") on August 30, 2007.
In addition, RPS announces that it has today filed a Form 10 in the US,
starting the process of registration with the SEC as required under the terms
of the original IPO on AIM of Cross Shore in April 2006. A copy of the Form 10
is available at:
http://www.rpsweb.com/inv_rel_11.htm
Financial highlights for the three months to September 30, 2007
* Net revenues for the 3rd quarter of 2007 of $30.9 million grew $9.0
million or 41% as compared to the same period in 2006
* EBITDA for the 3rd quarter of 2007 of $1.6 million grew $0.6 million or
66% as compared to the same period in 2006. As a percentage of net revenues,
EBITDA grew from 4.5% in 2006 to 5.3% in 2007
* Net income before provision for income taxes for the 3rd quarter of 2007
of $17,000 compared with net income before provision for income taxes of
$0.4 million for the same period in 2006
* Non-cash interest charge related to put warrant liability of $0.9 million
was recorded in the 3rd quarter, as a result of the merger there will be no
future charges related to the put warrant liability
* Net loss for the 3rd quarter of 2007 of $22,000 compared with net income
of $0.4 million for the same period in 2006
* As at September 30, 2007 the Company had approximately $21.3 million in
cash plus $15 million of unused bank line availability
Operational highlights for the three months to 30 September 2007
* The third quarter of 2007 results demonstrate the continuing growth of
the Company reflecting the addition of new business awards as well as growth
within existing client contracts
* On August 30, 2007, Cross Shore Acquisition Corporation (Cross Shore)
completed its reverse takeover of ReSearch Pharmaceutical Services, Inc.
Effective with the completion of this transaction, Cross Shore Acquisition
Corporation changed its name to ReSearch Pharmaceutical Services, Inc.
* On October 5, 2007, RPS announced the repurchase, at the then closing
market price of $4.85 per share, of 750,000 shares from Pangaea one
Acquisition Holdings I LLC
Financial highlights for the nine months to 30 September 2007
* Net revenues for the first nine months of 2007 of $85.8 million grew
$25.4 million or 42% as compared to the same period in 2006
* EBITDA for the first nine months of 2007 of $5.2 million grew $2.5
million or 96% as compared to the same period in 2006. As a percentage of
net revenues, EBITDA grew from 4.4% in 2006 to 6.0% in 2007
* Income from operations for the first nine months of 2007 of $4.5 million,
growing 121% from $2.0 million in the same period in 2006
* Non cash interest charge relating to put warrant liability of $4.7 million
* Net income for the first nine months of 2007 of $1.8 million compared
with net income of $1.1 million for the same period in 2006
Commenting on the third quarter results, Daniel M. Perlman, Chairman and CEO of
RPS said:
"We are very pleased with our results for the 3rd quarter of 2007 and for the
first nine months of the year. Our business continues to show good growth as
client companies recognize that the RPS model of providing innovative,
integrated clinical development solutions that leverage the existing
infrastructure and investments of bio/pharmaceutical companies provides the
opportunity to significantly reduce overall costs while improving the quality
and speed of drug development."
For further information please contact:
ReSearch Pharmaceutical Services, Inc. +1 215 540 0700
Dan Perlman, CEO
Steven Bell, Chief Financial Officer
Nominated Adviser and UK Broker:
Arbuthnot Securities Limited
James Steel/Guy Blakeney +44 20 7012 2100
ReSearch Pharmaceutical Services, Inc.
Unaudited Quarterly Report to September 30, 2007
Background on RPS
RPS was incorporated in Delaware on January 30, 2006 as Cross Shore Acquisition
Corporation ("Cross Shore"), a blank check company formed to serve as a vehicle
for the acquisition of a then unidentified operating business engaged in the
delivery of business services to consumers and companies in the United States.
On April 24, 2006 Cross Shore consummated its initial public offering on the
Alternative Investment Market ("AIM") of the London Stock Exchange, and on
April 26, 2007, entered into an Agreement and Plan of Merger (the "Merger
Agreement") with ReSearch Pharmaceutical Services, Inc. ("Old RPS"). Upon the
completion of the merger with Old RPS on August 30, 2007, Cross Shore changed
its name to ReSearch Pharmaceutical Services, Inc. Prior to the merger with
Old RPS, Cross Shore had no operating business other than searching for an
acquisition target.
Headquartered in Ft. Washington, Pennsylvania, with subsidiary offices across
Latin America, RPS is a leading provider of integrated clinical development
outsourcing solutions to the bio-pharmaceutical industry. RPS provides services
in connection with the design, initiation and management of clinical trials
programs that are required to obtain regulatory approval to market
bio-pharmaceutical products. RPS introduced the Pharmaceutical Resource
Organization ("PRO") model to address the challenges facing the drug
development industry, which continues to grow rapidly but is facing increasing
pressures to control costs and improve effectiveness. The PRO model combines
the expertise of a clinical research organization ("CRO") with the
capabilities of a specialty staffing organization enabling RPS to provide a
unique service offering that addresses the challenges and meets the needs of
the expanding, global clinical drug development market.
Comments regarding the three months ended 30 September 2007
During the nine months ended September 30, 2007, the Company recorded a
non-cash interest charge of $4.7 million to mark the Company's put warrant
liability to its market value during the period. The put warrants were then
exchanged for a combination of common stock and cash on August 30, 2007 in
connection with the reverse merger of Cross Shore Acquisition Corporation. The
portion of such charge reflected in the financial statements presented herein
for the three months ended September 30, 2007 is $906,000. The remainder of
this charge of $3.8 million has been applied to the six month period ended June
30, 2007. The financials statements for the period June 30, 2007 as previously
reported did not reflect this charge. The net effect to these statements had
the charge been recorded would have been to increase net income by $400,000 as
a result of the interest charge and tax benefit associated with this charge.
Operating review of the nine months ended 30 September 2007 compared to nine
months ended 30 September 2006
Revenues: Service revenues increased 42% to $85.8 million for the nine months
ended September 30, 2007 from $60.4 million for the nine months ended September
30, 2006 as the Company generated additional business from existing and new
customers. Specifically, the majority of the increase is related to significant
new contracts awarded during 2007 from several pharmaceutical companies for
Clinical Master Service Provider ("CMSP") programs.
Reimbursement revenues and offsetting reimbursable out-of-pocket costs
fluctuate from period to period due primarily to the level of pass-through
expenses in a particular period. Reimbursable out-of-pocket costs increased 43%
to $10.2 million during the nine months ended September 30, 2007 from $7.2
million during the nine months ended September 30, 2006. The increase is due
primarily to an increase in the number of studies for which the Company is
providing its various services.
Direct Costs: Direct costs increased 42% to $62.3 million or 72.6% of service
revenues for the nine months ended September 30, 2007 as compared to $43.8
million or 72.5% of service revenues for the nine months ended September 30,
2006. The increase in direct costs is directly correlated with the increase in
revenues as described above. The primary cost included in direct costs is
operational staff payroll and related taxes and benefits.
Selling, general and administrative expenses: Selling, general and
administrative expenses ("SG&A") increased 31% to $18.3 million for the nine
months ended September 30, 2007 from $14.0 million for the nine months ended
September 30, 2006 to support the increase in revenues. Primary reasons for the
increase in SG&A costs included increases in the number of corporate personnel,
as well as increases in employee-related costs such as increased salaries,
bonuses and commissions. Although the total SG&A expense increased during the
periods, as a percentage of service revenues, SG&A expenses decreased to 21.4%
for 2007 as compared to 23.1% for 2006. The decrease is attributable to the
Company's ability to leverage fixed infrastructure costs and contain
semi-variable overhead costs at a slower rate than the growth in revenues.
Depreciation and amortization expense: Depreciation and amortization expense
increased 15% to $718,000 for the nine months ended September 30, 2007 as
compared to $627,000 for the nine months ended September 30, 2006. The increase
is due primarily to an increase in the depreciable asset base.
Income from operations: Income from operations increased 121% to $4.5 million
for the nine months ended September 30, 2007 as compared to $2.0 million for
the nine months ended September 30, 2006. The increase is attributable to
growth in revenues in excess of the corresponding growth in direct costs and
SG&A costs as described above.
Interest expense: Interest expense for the nine months ended September 30, 2007
increased to $6.0 million from $902,000 for the nine months ended September 30,
2006. The majority of the increase in interest expense relates to a non-cash
charge of $4.7 million recorded during the nine months ended September 30,
2007, to mark the Company's put warrant liability to its market value during
the period. The put warrants were then exchanged for a combination of common
stock and cash on August 30, 2007 in connection with the reverse merger of
Cross Shore Acquisition Corporation. In addition, interest expense also
increased during the period as a result of additional interest charges related
to higher average outstanding loan balances necessary to support revenue growth
as well as higher average interest rates.
Interest income: Interest income increased to $108,000 during the nine months
ended September 30, 2007 due to the level of investable cash on hand subsequent
to our August 30, 2007 merger with Old RPS.
Provision (benefit) for income taxes: The provision for income taxes decreased
to a benefit of $3.2 million during the nine months ended September 30, 2007
from a provision of $28,000 during the nine months ended September 30, 2006. In
2006, the Company utilized net operating loss carry forwards to offset the
majority of its taxable income, and therefore, the Company's effective tax rate
was minimal. No significant net operating loss carry-forwards remain to offset
2007 taxable income. The Company's effective tax rate for 2007 is significant
as the $4.7 million interest charge recorded related to the put warrant
liability discussed above is non-deductible for income tax purposes.
Accordingly, the income tax benefit recorded during the nine months ended
September 30, 2007 is reflective of this significant effective tax rate. The
Company expects the income tax benefit to reverse during the fourth quarter
of 2007.
Net income (loss): Net income for the nine months ended September 30, 2007
increased to $1.8 million or $0.17 per basic share and $0.09 per diluted share
from net income of $1.1 million or $0.13 per basic share and $0.07 per diluted
share for the nine months ended September 30, 2006. The increase in net income
is due to the factors discussed above.
Balance Sheet and Cash Flow
The Company maintains a working capital line of credit with a bank, with a
maximum potential borrowing capacity of $15.0 million. At September 30, 2007,
there were no outstanding borrowings under this facility.
During the nine months ended September 30, 2007, our operating activities
provided cash of $2.8 million, an increase of $3.4 million over the outflow for
the corresponding amount for the nine months ended September 30, 2006. The
increase is attributable to an increase in operating income and positive
changes in our operating assets and liabilities, primarily a result of
increases in accrued expenses, deferred revenues, and customer deposits during
the period.
Cash used in investing activities for the nine months ended September 30, 2007
totaled $1.3 million, consisting primarily of the purchase of property and
equipment.
Cash provided by financing activities for the nine months ended September 30,
2007 totaled $19.5 million. This net cash provided by financing activities
consisted primarily of inflows relating to the $51.4 million of net cash
proceeds received in connection with our merger. This cash provided by
financing activities was offset by paying down the Company's working capital
line of credit of $9.0 million, distributions to the Company's stockholders
of $20 million in connection with the Cross Shore merger, payment of $2.6
million of accrued dividends on the Company's preferred stock prior to the
merger with Cross Shore, as well as the payoff of a note payable totaling
$4.5 million during the period. As of September 30, 2007, the Company has no
outstanding debt balances, other than capital lease obligations.
Consulting agreement
In November 2007, the Company entered into a consulting agreement with a
shareholder to assist the Company in identifying potential acquisition
candidates. The consulting agreement which expires in December 2007, requires
payment to the shareholder totaling $600,000 for such services.
Registration with SEC
RPS has today filed in the US a registration statement on Form 10, which
commences the registration of the Company with the Securities and Exchange
Commission, as required under the terms of the Investor Rights Agreement
entered into in connection with the original IPO on AIM of Cross Shore in
April 2006. Under the terms of the Investor Rights Agreement, RPS must use
commercially reasonable efforts to file Form 10 with the SEC within 120 days
of the consummation of the merger with Cross Shore.
Further details relating to RPS, its operations and its accounting and
operating policies, are set out in the Form 10 document, copies of which are
available from the Company during normal working hours or can be downloaded
from the Company's website at www.rpsweb.com.
Daniel M. Perlman, Chairman and CEO
14, December, 2007
ReSearch Pharmaceutical Services, Inc. and Subsidiaries
Consolidated Statements of Operations
(unaudited) (unaudited) (audited)
3 months ended 9 months ended Yr ended
September 30 September 30 December 31
2007 2006 2007 2006
$'000 $'000 $'000 $'000 $'000
Service revenue 30,931 21,904 85,785 60,350 84,418
Reimbursement revenue 3,307 2,853 10,245 7,168 10,273
------ ------ ------ ------ ------
Total revenue 34,238 24,757 96,030 67,518 94,691
Direct costs 22,634 15,977 62,291 43,755 61,365
Reimbursable out-of-
pocket costs 3,307 2,853 10,245 7,168 10,273
Selling, general and
administrative expenses 6,668 4,945 18,319 13,951 19,070
Depreciation and amortization 310 213 718 627 901
------ ------ ------ ------ ------
Income from operations 1,319 769 4,457 2,017 3,082
Interest (income) expense,net 1,302 320 5,872 902 1,245
------ ------ ------ ------ ------
Net income (loss) before
provision for income Taxes 17 449 (1,415) 1,115 1,837
Provision (benefit) for
income taxes 39 11 (3,240) 28 45
------ ------ ------ ------ ------
Net income (22) 438 1,825 1 ,087 1,792
====== ====== ====== ====== ======
Net income (loss) per
common share:
Basic 0.17 0.13 0.24
Diluted 0.09 0.07 0.01
Weighted average number of
common shares outstanding:
Basic 8,621,880 5,501,764 5,501,674
Diluted 19,316,161 15,485,383 15,483,591
ReSearch Pharmaceutical Services, Inc. and Subsidiaries
Consolidated Balance Sheet
(unaudited) (audited)
September 30, 2007 December 31, 2006
$'000 $'000
Assets
Current Assets
Cash 21,268 197
Restricted cash 1,421 1,468
Accounts receivable, net of allowance 24,328 22,113
Prepaid expenses and other current assets 1,368 641
Income tax recoverable 3,936 -
-------- --------
Total current assets 52,321 24,419
Intangible assets, net 360 612
Property and equipment, net 2,704 830
Other assets 219 263
Deferred tax asset 430 -
-------- --------
Total assets 56,034 26,124
======== ========
Liabilities and Stockholders' equity
(deficit)
Current liabilities
Accounts payable 379 1,375
Accrued expenses 6,032 2,925
Customer deposits 1,421 1,468
Deferred revenue 4,365 3,037
Lines of credit - 8,991
Current position of capital lease
obligations 440 21
-------- --------
Total current liabilities 12,637 17,817
Customer deposits 4,500 -
Note payable - 4,165
Put warrant liability - 490
Other liabilities 266 -
Capital lease obligations, less current
portion 502 -
-------- --------
Total liabilities 17,905 22,472
Redeemable convertible preferred stock - 8,002
Stockholders' equity (deficit)
Common stock 3 1
Less treasury shares - (1,188)
Additional paid-in-capital 39,545 118
Accumulated other comprehensive income 43 6
Accumulated deficit (1,462) (3,287)
--------- ---------
Total shareholders' equity (deficit) 38,129 (4,350)
--------- ---------
Total liabilities, preferred stock and
stockholders' equity (deficit) 56,034 26,124
-------- ---------
ReSearch Pharmaceutical Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited) (unaudited)
Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
$'000 $'000 $'000 $'000
Net income (22) 438 1,825 1,087
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation 226 128 465 375
Amortization of intangible assets 84 84 252 252
Amortization of debt discount 242 46 335 139
Interest charge related to put warrant
liability 906 - 4,724 23
Stock based compensation 18 7 53 22
Deferred tax benefit (157) - (157) -
Changes in operating assets and
liabilities:
Accounts receivable (383) (573) (2,215) (4,674)
Income taxes receivable (656) - (3,936) -
Prepaid expenses and other current
assets 108 71 (726) (316)
Other assets 8 - 44 -
Accounts payable (180) (211) (996) (69)
Accrued expenses 1,350 685 1,613 1,213
Customer deposits (675) - (47) 523
Deferred revenue 276 (233) 1,329 885
Other liabilities (24) 70 266 -
------- ------- ------- ------
Net cash provided by (used in)
operating activities 1,121 512 2,829 (540)
Investing activities
Change in restricted cash (576) (236) 47 (523)
Purchase of property and equipment (327) (131) (1,337) (565)
------- ------- ------- ------
Net cash (used in) provided by
investing activities (903) (367) (1,290) (1,088)
Financing activities
Net borrowings (repayments) on lines of
credit (7,769) (98) (8,991) 1,294
Principal payments on capital lease
obligations (70) (15) (82) (45)
Proceeds from stockholder notes
receivable - 6 - 94
Purchase of treasury shares (173) - (173) -
Customer deposit 4,500 - 4,500 -
Merger consideration, net of fees 51,363 - 51,363 -
Distribution to stockholders (20,000) - (20,000) -
Payment of preferred stock dividends (2,627) - (2,627) -
Proceeds from exercise options 6 - 6 -
Payment of note payable (4,500) - (4,500) -
-------- ------- -------- -------
Net cash (used in) provided by
financing activities 20,730 (107) 19,496 1,343
Effect of exchange rates on cash - - 36 -
-------- ------- -------- -------
Net change in cash 20,948 38 21,071 (285)
Cash, beginning of period 320 217 197 540
-------- ------- -------- -------
Cash, end of period 21,268 255 21,268 255
-------- ------- -------- -------
NOTES
The results contained herein reflect the operations of ReSearch Pharmaceutical
Services, Inc. only and do not contain any operating results for Cross Shore.
Comparative results for 2006 reflect the results of Old RPS prior to its merger
with Cross Shore.
The functional currency of RPS is US dollars because that is the currency of
the primary economic environment in which the company operates. These financial
statements are presented in US dollars.
The financial statements are presented in conformity with accounting principles
generally accepted in the United States and have been prepared using the same
accounting policies as set forth in the financial statements for the year ended
December 31, 2006.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This document contains "forward-looking statements" within the meaning of the
U.S. Private Securities Litigation Reform Act of 1995. Forward-looking
statements can be identified by words such as "anticipates", "intends",
"plans", "seeks", "believes", "estimates", "expects" and similar references to
future periods, or by the inclusion of forecasts or projections.
Forward-looking statements are based on the Company's current expectations and
assumptions regarding its business, financial condition, the economy and other
future conditions. Because forward-looking statements relate to the future, by
their nature, they are subject to inherent uncertainties, risks and changes in
circumstances that are difficult to predict. The Company's actual results may
differ materially from those contemplated by the forward-looking statements.
The Company cautions you therefore that you should not rely on any of these
forward-looking statements as statements of historical fact or as guarantees or
assurances of future performance. Important factors that could cause actual
results to differ materially from those in the forward-looking statements
include regional, national or global political, economic, business,
competitive, market and regulatory conditions including: our ability to
identify liabilities associated with RPS; our ability to manage pricing and
operational risks; our ability to manage foreign operations; changes in
technology; and our ability to acquire or renew contracts. Any forward-looking
statement made in this document speaks only as of the date on which it is made.
Factors or events that could cause the Company's actual results to differ may
emerge from time to time, and it is not possible for the Company to predict
all of them. The Company undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information, future
developments or otherwise, unless otherwise required to do so by the AIM Rules.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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