Sfbc (NASDAQ:SFCC)
Historical Stock Chart
From Jul 2019 to Jul 2024
SFBC International, Inc. (NASDAQ:SFCC), a provider of
drug development services to branded pharmaceutical, biotechnology,
generic drug and medical device companies, today reported its
financial results for the second quarter ended June 30, 2006.
"The quarter's results demonstrate the continued progress we are
making in moving the organization forward and establishing a strong
foundation for further growth," commented Jeffrey P. McMullen,
president and chief executive officer of SFBC International. "The
continued strong performance of PharmaNet, our record backlog and our
solid cash position, combined with the anticipated performance in our
early stage business in the second half of 2006, give us confidence in
the future operations and liquidity for the organization. In addition,
the company has recently completed several important initiatives
including the recent positive meeting with the United States Senate
Finance Committee, the closing of our Florida operations, the
resolution of the land-lease litigation in Miami and the extension of
our debt covenants."
Mr. McMullen added, "For the remainder of 2006, we will continue
to strengthen the core business by establishing stronger and broader
client relationships, improving the level of business for our
continuing Early Clinical Development segment and further enhancing
our core capabilities to build on our strong reputation and advance
our position in the marketplace."
Due to the Company's decision to discontinue operations in
Florida, all financial results in this release reflect the Company's
continuing operations only, unless otherwise stated. All results for
2005 have been reclassified to reflect discontinued operations. In
addition, the Company intends to file a Form 12b-25, which will
provide an extension of the deadline for filing the Company's Form
10-Q to August 14, 2006, with the SEC.
Second Quarter Financial Results
Direct revenue for the second quarter of 2006 was approximately
$72.8 million, an increase of 18% compared to approximately $61.7
million for the second quarter of 2005. Total net revenue for the
second quarter of 2006 was approximately $96.6 million, which included
reimbursed out-of-pocket expenses of approximately $23.8 million, a
13% increase over approximately $85.7 million, which included
reimbursed out-of-pocket expenses of approximately $24.0 million, in
the second quarter of 2005.
The Company recorded pre-tax, non-cash impairment charges related
to the write-down of goodwill for the Company's Clinical Pharmacology
Services ("CPS") unit in the second quarter of 2006 of approximately
$7.9 million. While CPS contributed to earnings from operations for
the first half of 2006, the outlook for the remainder of the year is
significantly reduced because a large portion of CPS revenues were
related to projects being conducted at the Company's discontinued
operations. All financial results and comparisons in this release
include the impact of the impairment charges to be recognized for the
second quarter of 2006.
The net loss from continuing operations for the second quarter of
2006 was approximately $3.7 million compared to net earnings from
continuing operations of approximately $1.7 million for the second
quarter of 2005.
The loss from discontinued operations, net of income taxes, was
approximately $16.0 million for the second quarter of 2006 compared to
income from discontinued operations, net of income taxes, of
approximately $5.4 million in the prior year's second quarter.
Additional detail regarding the Company's discontinued operations is
disclosed on the Company's Form 8-K being filed simultaneously with
this press release.
Net loss for the second quarter of 2006 was approximately $19.7
million, or $1.09 per basic and fully diluted share, compared to net
earnings of $7.1 million, or $0.39 per basic share and $0.38 per fully
diluted share, in the second quarter of 2005. These second quarter
2006 results include the impairment charge of $7.9 million described
above, additional legal and other professional fees related to recent
events of approximately $1.1 million, a non-recurring, non-cash charge
of approximately $1.2 million related to the write-off of deferred
financing costs, and non-cash amortization of acquisition-related
intangible expenses of approximately $0.8 million. In addition, net
loss in the second quarter of 2006 includes non-cash stock option
expense of approximately $0.3 million in accordance with SFAS No.
123R, Share-Based Payment, which the Company adopted as of January
1, 2006. Non-cash stock option expense is not included in net earnings
for the second quarter of 2005. Because the Company had a loss for the
second quarter of 2006, 139,237 dilutive equivalents have been
excluded from the calculation of diluted earnings per common share,
since they were antidilutive.
Segment Performance
SFBC's Early-Phase Clinical Development and Laboratory Services
segment ("Early Clinical Development") primarily includes the areas of
Phase I clinical trials and support services, bioanalytical laboratory
services, and clinical laboratory services. SFBC's Late-Phase
Development Services segment ("Late Clinical Development") consists of
PharmaNet, which primarily conducts Phase II through IV clinical
trials, data management and biostatistics, medical and scientific
affairs, regulatory affairs and submissions, and provides software
tools and services for use in clinical trials.
For the financial results provided below for the Early Clinical
Development and Late Clinical Development segments, SFBC has excluded
an allocation of corporate expenses related to certain selling,
general and administrative ("S,G&A") expenses of $6.3 million for the
second quarter of 2006 and $3.0 million for the second quarter of
2005.
For the Early Clinical Development segment, SFBC recorded direct
revenue, which does not include reimbursed out-of-pocket expenses, of
approximately $23.5 million, or 32% of total direct revenue, in the
second quarter 2006 compared to approximately $22.5 million, or 37%,
in the second quarter 2005. The loss from continuing operations for
Early Clinical Development was approximately $8.1 million,
representing a (34.7)% operating margin on direct revenue and a
non-GAAP operating margin of (33.9)%, for the second quarter 2006
compared to earnings from continuing operations of approximately $3.0
million, representing a 13.1% operating margin on direct revenue and a
non-GAAP operating margin of 14.7%, for the second quarter 2005.
For the Late Clinical Development segment, SFBC recorded direct
revenue, which does not include reimbursed out-of-pocket expenses, of
approximately $49.4 million, or 68% of total direct revenue, in the
second quarter 2006 compared to approximately $39.1 million, or 63%,
in the first quarter 2005. Earnings from continuing operations for
Late Clinical Development were approximately $7.8 million,
representing a 15.8% operating margin on direct revenue and a non-GAAP
operating margin of 17.0%, for the second quarter 2006 compared to
approximately $4.0 million, representing a 10.2% operating margin on
direct revenue and a non-GAAP operating margin of 11.5%, for the
second quarter 2005.
At June 30, 2006, backlog for the Late Clinical Development
segment was approximately $322.7 million, which was an increase of
approximately 9%, from $295.1 million reported at March 31, 2006 and
an increase of approximately 5%, from $307.8 million reported at June
30, 2005. Total backlog for the Company was approximately $353.5
million at June 30, 2006. Backlog consists of anticipated direct
revenue from signed contracts and letters of intent that either have
not started or are in process and have not been completed.
SFBC has provided the following summary of Early Clinical
Development and Late Clinical Development segments, excluding the
allocation of corporate expenses related to S,G&A expenses of
$6,254,568 for the second quarter of 2006 and $2,952,946 for the
second quarter of 2005. For SFBC's Early Clinical Development and Late
Clinical Development segments, the non-GAAP operating income and
margins exclude the impact of amortization of intangibles.
-0-
*T
Early Clinical Development Summary
----------------------------------------------------------------------
Quarter ended June 30, Six Months ended June 30,
----------------------------------------------------------------------
2006 2005 2006 2005
----------------------------------------------------------------------
Direct Revenues $23,452,292 $22,512,528 $50,782,847 $46,043,090
----------------------------------------------------------------------
GAAP operating
(loss)/income ($8,132,752) $2,955,882 ($4,369,138) $6,302,712
----------------------------------------------------------------------
Amortization of
intangibles $182,431 $350,806 $421,113 $701,612
----------------------------------------------------------------------
Non-GAAP operating
(loss)/income ($7,950,321) $3,306,688 ($3,948,025) $7,004,324
----------------------------------------------------------------------
GAAP Operating
Margin (34.7)% 13.1% (8.6)% 13.7%
----------------------------------------------------------------------
Non-GAAP Operating
Margin (33.9)% 14.7% (7.8)% 15.2%
----------------------------------------------------------------------
*T
-0-
*T
Late Clinical Development Summary
----------------------------------------------------------------------
Quarter ended June 30, Six Months ended June 30,
----------------------------------------------------------------------
2006 2005 2006 2005
----------------------------------------------------------------------
Direct Revenues $49,385,083 $39,145,949 $96,478,522 $75,120,034
----------------------------------------------------------------------
GAAP operating
(loss)/income $7,821,640 $3,993,508 $15,434,509 $7,240,202
----------------------------------------------------------------------
Amortization of
intangibles $574,600 $510,255 $1,149,600 $1,335,907
----------------------------------------------------------------------
Non-GAAP operating
(loss)/income $8,396,240 $4,503,763 $16,584,109 $8,576,109
----------------------------------------------------------------------
GAAP Operating
Margin 15.8% 10.2% 16.0% 9.6%
----------------------------------------------------------------------
Non-GAAP Operating
Margin 17.0% 11.5% 17.2% 11.4%
----------------------------------------------------------------------
*T
Other Financial Information
Net days sales outstanding ("DSOs") for continuing operations,
which includes accounts receivable and unbilled services less current
and long-term advanced billings, was 14 days at June 30, 2006 compared
to 17 days at March 31, 2006 and 36 days at June 30, 2005.
SFBC reported an increase of approximately $21.4 million in cash,
cash equivalents, and investments in marketable securities in the
second quarter to approximately $60.3 million at June 30, 2006 from
approximately $38.8 million at December 31, 2005. Approximately $43.6
million of this amount would be subject to a repatriation tax of
approximately 35% if the Company had to transfer this cash from its
overseas accounts into its U.S. accounts. As of June 30, 2006, SFBC
had approximately $143.8 million in convertible notes outstanding and
$17.0 million drawn on its $45.0 million Senior Secured Credit
Facility ("Credit Facility"). To facilitate the filing of the
Company's Form 10-Q for the period ended June 30, 2006 within the
extended deadline of August 14, 2006, the Company has obtained waivers
through August 15, 2006 for all of the Company's defaults related to
covenants and certain other terms under its existing Credit Facility.
The Company is in discussions with its lenders to extend the waivers
or obtain new covenants to its existing Credit Facility.
SFBC's effective tax rate for continuing operations in the second
quarter of 2006 was 66.5% compared to 4.8% in the second quarter of
2005. The tax benefit in 2006 reflects significant losses at
subsidiaries in higher tax jurisdictions relative to income generated
at subsidiaries in tax jurisdictions that have lower tax rates.
At June 30, 2006, the Company held for sale two properties in
Florida. Assets not sold at June 30, 2006 have been measured at the
lower of carrying value or estimated fair value less costs of disposal
and have been classified as held for sale in the Company's unaudited
consolidated balance sheet. The carrying value of these two properties
is $3.3 million. The Company expects sales proceeds from these
divestitures to approximate $9.0 million - $12.0 million. The Company
previously disclosed additional detail regarding this matter in a
press release dated July 24, 2006.
Second Half of 2006 Guidance
SFBC is providing guidance for the second half of 2006 based upon
the Company's current business outlook. The Company anticipates its
direct revenue in the second half of 2006 will be approximately $134.0
million - $143.0 million. The Company expects that net earnings from
continuing operations before income taxes for the second half of 2006
will be approximately $1.6 million - $4.5 million. The allocation of
corporate expenses included in net earnings from continuing operations
before income taxes for the second half of 2006 is expected to be
approximately $12.0 million - $12.4 million, of which approximately
$3.4 million - $4.0 million is not anticipated to reoccur after 2006.
In addition, the expected net earnings from continuing operations
before income taxes for the second half of 2006 includes the impact of
approximately $1.51 million related to non-cash amortization expense
and stock option expense under SFAS 123R of approximately $0.25
million - $0.5 million.
The Company is also filing simultaneously with this press release
a Form 8-K with additional detail regarding the Company's estimated
future cash expenditures for discontinued operations. You are
encouraged to read that Form 8-K for additional information.
Conference Call and Webcast Information
SFBC plans to host a conference call and Webcast to review its
second quarter 2006 results at 8:30 a.m. Eastern Daylight Time on
Friday, August 4, 2006. To access the conference call, please dial the
following teleconference number 866-356-4441 (U.S.) or 617-597-5396
(International) and provide the passcode: SFBC International. To
listen to the simultaneous Webcast, please visit http://www.sfbci.com.
For those unable to access the live conference, there will be an
audio replay available from August 4, 2006 at approximately 11:00 a.m.
EDT through August 18, 2006 at 11:59 p.m. EDT. To listen to the audio
replay, please dial 888-286-8010 (U.S.) or 617-801-6888
(International) and use the following replay pin code: 46403677. A
replay of the live Webcast will also be available at
http://www.sfbci.com approximately two hours after the live call ends
through September 3, 2006 at 11:59 p.m. EDT.
About SFBC International, Inc.
SFBC International is an international drug development services
company offering a comprehensive range of clinical development,
clinical and bioanalytical laboratory, and consulting services to the
branded pharmaceutical, biotechnology, generic drug and medical device
industries. SFBC has more than 30 offices, facilities and laboratories
with more than 2,000 employees strategically located throughout the
world. For more information, visit the Company's Web site at
http://www.sfbci.com or http://www.pharmanet.com.
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures, which
exclude, among other items, amortization of acquisition-related
intangible assets, non-recurring charges related to financing, and
non-cash impairment charges. SFBC excludes these items from the
non-GAAP financial measures because they are outside of its operations
and are a useful indicator, which allows management to monitor SFBC's
underlying business performance. Non-GAAP results also allow investors
to compare the reported GAAP results and the non-GAAP First Call
consensus estimate and to compare the Company's operations against the
financial results of other companies in the industry. The non-GAAP
financial measures included in this press release should not be
considered superior to or a substitute for results of operations
prepared in accordance with GAAP. Reconciliations of the non-GAAP
financial measures used in this press release to the most directly
comparable GAAP financial measures are set forth in the text of, and
the accompanying tables to, this press release, and can also be found
on the Company's website at http://www.sfbci.com.
Forward-Looking Statements
Certain statements made in this press release are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995 (the "Act"). Additionally words such as "seek,"
"intend," "believe," "plan," "estimate," "expect," "anticipate" and
other similar expressions are forward-looking statements within the
meaning of the Act. Some or all of the results anticipated by these
forward-looking statements may not occur. Factors that could cause or
contribute to such differences include, but are not limited to, our
ability to leverage the strong reputation of PharmaNet, whether
adverse publicity relating to SFBC's discontinued Miami operations
causes clients to select competitors, not only for early stage branded
clinical trials but also for other aspects of SFBC's business; SFBC's
ability to resolve open issues relating to its Miami property
including whether it can successfully appeal and/or enjoin the
Miami-Dade County Unsafe Structures Board ruling and any related fines
or expenses if we are unsuccessful; the associated costs and expenses
with discontinuing the Company's operations in Miami and Ft. Myers,
including the potential costs of the demolition of the Miami facility;
the Company's ability to determine its impairment charges and costs of
discontinued operations; whether SFBC will achieve its estimated value
for its Miami property; whether SFBC will be able to obtain more
favorable zoning for its Miami property; SFBC's assessment of the
review by the United States Senate Finance Committee; developments
with respect to the SEC's inquiry and securities class action lawsuits
and derivative lawsuits; SFBC's assessment of its prior FDA
inspections; SFBC's ability to successfully achieve and manage the
technical requirements of specialized clinical trial services, while
complying with applicable rules and regulations; regulatory changes;
changes affecting the clinical research industry; a reduction of
outsourcing by pharmaceutical and biotechnology companies; SFBC's
ability to compete internationally in attracting clients in order to
develop additional business; SFBC's evaluation of its backlog and the
potential cancellation of contracts; SFBC's ability to retain and
recruit new employees; SFBC's clients' ability to provide the drugs
and medical devices used in its clinical trials; SFBC's future stock
price; SFBC's assessment of its effective tax rate; SFBC's financial
guidance; SFBC's ability to obtain additional waivers or amendments of
its Credit Facility; and the national and international economic
climate as it affects drug development operations. Further information
can be found in SFBC's risk factors contained in its Annual Report on
Form 10-K for the year ended December 31, 2005 and its most recent
Quarterly Report on Form 10-Q. SFBC does not undertake to update the
disclosures made herein, and you are urged to read our filings with
the Securities and Exchange Commission.
-0-
*T
SFBC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006
======================================================================
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 (1) 2006 2005 (1)
------------- ------------ ------------- -------------
(As revised) (As revised)
Net revenue
Direct revenue $72,837,375 $61,658,477 $147,261,369 $121,163,124
Reimbursed out-
of-pockets 23,806,956 24,025,879 52,883,741 43,487,687
-------------------------- ---------------------------
Total net
revenue 96,644,331 85,684,356 200,145,110 164,650,811
Costs and
expenses
Direct costs 44,785,489 35,830,735 90,114,151 71,990,647
Reimbursable
out-of-pocket
expenses 23,806,956 24,025,331 52,883,741 43,487,687
Selling,
general and
administrative
expenses 26,744,566 21,873,347 49,603,251 40,531,539
Impairment of
goodwill 7,873,000 - 7,873,000 -
Total costs
and
expenses 103,210,011 81,729,413 200,474,143 156,009,873
-------------------------- ---------------------------
Earnings
(loss) from
operations (6,565,680) 3,954,943 (329,033) 8,640,938
Other income
(expense)
Interest income 551,025 156,776 896,503 554,332
Interest
expense (2,979,861) (3,052,881) (4,756,102) (8,563,964)
Foreign
exchange
transaction
gain (loss),
net (1,828,243) 694,511 (2,354,811) 894,517
-------------------------- ---------------------------
Total other
income
(expense) (4,257,079) (2,201,594) (6,214,410) (7,115,115)
-------------------------- ---------------------------
Earnings
(loss)
before
income
taxes (10,822,759) 1,753,349 (6,543,443) 1,525,823
Income tax
expense
(benefit) (7,199,439) (84,484) (6,413,224) (73,521)
-------------------------- ---------------------------
Earnings
(loss)
before
minority
interest in
joint
venture (3,623,320) 1,837,833 (130,219) 1,599,344
Minority
interest in
joint venture 105,177 116,583 293,963 174,265
Net earnings
(loss) from
continuing
operations (3,728,497) 1,721,250 (424,182) 1,425,079
Net earnings
(loss) from
discontinued
operations, net
of income taxes (15,986,568) 5,396,924 (23,425,263) 10,717,999
-------------------------- ---------------------------
Net earnings
(loss) ($19,715,065) $7,118,174 ($23,849,445) $12,143,078
========================== ===========================
Shares used in
computing
earnings (loss)
per share:
Basic 18,150,267 18,333,992 18,049,464 17,065,846
Diluted 18,150,267 18,946,222 18,049,464 17,734,926
Basic earnings
(loss) per
common share
Continuing
operations ($0.21) $0.09 ($0.02) $0.08
Discontinued
operations ($0.88) $0.30 ($1.30) $0.63
Net earnings
(loss) ($1.09) $0.39 ($1.32) $0.71
Diluted earnings
(loss) per
common share
Continuing
operations ($0.21) $0.09 ($0.02) $0.08
Discontinued
operations ($0.88) $0.29 ($1.30) $0.60
Net earnings
(loss) ($1.09) $0.38 ($1.32) $0.68
(1) Results for the three- and six-month periods ended June 30, 2005
have been revised to reflect a reclassification as a result of the
Company's operations that were discontinued in the second quarter of
2006. Net earnings remain unchanged from the original presentation.
*T
-0-
*T
SFBC INTERNATIONAL, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED BALANCE SHEET INFORMATION
FOR THE PERIOD ENDED JUNE 30, 2006 AND DECEMBER 31, 2005
THE ALLOCATION OF ASSETS AND LIABILITIES BETWEEN CONTINUING AND
DISCONTINUED OPERATIONS IN THIS SELECTED BALANCE SHEET INFORMATION IS
PRELIMINARY AND MAY CHANGE UPON THE COMPANY'S FILING OF ITS FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2006.
(Unaudited) (As Revised)
June 30, December 31,
2006 2005
------------- -------------
ASSETS
Cash, equivalents and investments in
marketable securities from continuing
operations $59,590,608 $37,413,251
Cash, equivalents and investments in
marketable securities from discontinued
operations 665,955 1,421,451
------------- -------------
Total cash, equivalents, and investments in
marketable securities 60,256,563 38,834,702
Accounts receivable from continuing
operations 95,479,822 91,446,190
Accounts receivable from discontinued
operations 15,038,285 26,425,479
------------- -------------
Accounts receivable 110,518,107 117,871,669
Current assets from continuing operations 173,009,794 148,692,703
Current assets from discontinued operations 16,335,249 29,335,006
------------- -------------
Total current assets 189,345,043 178,027,709
Fixed assets from continuing operations 56,730,138 48,563,461
Fixed assets held available for sale from
discontinued operations 4,537,489 24,701,651
------------- -------------
Total fixed assets 61,267,627 73,265,112
Total assets from continuing operations 543,040,662 517,807,216
Total assets from discontinued operations 20,970,150 54,729,880
------------- -------------
Total assets 564,010,812 572,537,096
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities from continuing
operations 127,164,741 120,493,672
Current liabilities from discontinued
operations 10,264,329 5,940,389
------------- -------------
Total current liabilities 137,429,070 126,434,061
Total liabilities from continuing
operations 287,802,173 284,315,108
Total liabilities from discontinued
operations 10,264,329 5,940,389
------------- -------------
Total liabilities 298,066,502 290,255,497
Stockholders' equity 265,944,310 282,281,599
------------- -------------
Total liabilities and stockholders' equity $564,010,812 $572,537,096
============= =============
*T