<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>5
<FILENAME>dex992.txt
<DESCRIPTION>PRO FORMA COMBINED FINANCIAL STATEMENTS
<TEXT>
<PAGE>
Exhibit 99.2
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENT INFORMATION
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Balance Sheet and the Unaudited
Pro Forma Combined Statement of Operations, collectively, the "Pro Forma
Financial Statements", were prepared by Pharmaceutical Product Development, Inc.
(PPD) to give effect to the acquisition of all of the capital stock of Medical
Research Laboratories International, Inc. and Medical Research Laboratories
International, BVBA (collectively, "MRL"). On January 28, 2002, PPD executed
definitive agreements for the acquisition of MRL. The transaction was completed
on February 19, 2002 and is to be accounted for under the purchase method of
accounting.
Under the terms of the agreements PPD paid $39,000,000 cash and 2,560,410
shares of PPD common stock valued at $73,500,000 to acquire all of the
outstanding shares of MRL. The final allocation of the purchase price may
ultimately differ based on the final valuation of the intangible assets and the
finalization of the closing balance sheet. The estimated allocation of the
purchase price is as follows:
--------------------------------------------------------------------------------
(in thousands)
--------------------------------------------------------------------------------
Cash paid $39,000
--------------------------------------------------------------------------------
Value of stock consideration 73,500
--------------------------------------------------------------------------------
Acquisition costs 619
--------------------------------------------------------------------------------
Total $113,119
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Allocation of purchase price
--------------------------------------------------------------------------------
Fair value of assets acquired less liabilities
assumed $15,883
--------------------------------------------------------------------------------
Value of identifiable intangible assets:
--------------------------------------------------------------------------------
Backlog 2,100
--------------------------------------------------------------------------------
Goodwill 95,136
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Total $113,119
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The Company will amortize the backlog over a period of two years. In
accordance with the provisions of the Financial Accounting Standards Board's
("FASB") Statement of Financial Accounting Standard ("SFAS") No. 142, "Goodwill
and Other Intangibles", goodwill will not be amortized. The goodwill will be
tested annually as required by SFAS No 142.
The financial information of PPD and MRL have been combined as if the
acquisition occurred as of January 1, 2001 for purposes of the pro forma
combined statement of operations. For purposes of the pro forma combined balance
sheet, the financial information of PPD and MRL have been combined as if the
acquisition occurred at December 31, 2001. There are no differences between
PPD's and MRL's accounting policies that are expected to have a material impact
on the Pro Forma Financial Statements.
<PAGE>
The Pro Forma Financial Statements do not purport to present the combined
financial position or results of operations if the combination had occurred at
the beginning of the period or to project the combined financial position or
results of operations for any future date or period.
The Pro Forma Financial Statements should be read in conjunction with the
historical consolidated financial statements, including the notes thereto, of
Pharmaceutical Product Development, Inc. which are included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2001, and the audited
combined financial statements of Medical Research Laboratories International,
Inc. and Medical Research Laboratories International BVBA, which are included
elsewhere in this document.
The Pro Forma Financial Statements are presented utilizing the purchase
method of accounting, whereby the fair value of the identified tangible and
intangible assets acquired and the fair value of the liabilities assumed have
been recorded. The purchase price in excess of the net assets acquired as of
December 31, 2001 of $88.9 million has been reflected in the Pro Forma Combined
Balance Sheet. Based on the estimated closing balance sheet and fair value
adjustments as of February 19, 2002 the estimated goodwill will be approximately
$95.1 million. The difference in the estimated goodwill as of December 31, 2001
and February 19, 2002 results from the decrease in the net assets acquired
during that period. The pro forma adjustments are described in the notes
following the combined pro forma financial statement information. The combined
pro forma results of operations presented herein are not necessarily indicative
of the future results of operations.
2
<PAGE>
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2001
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
As Reported Pro Forma
--------------------------- ----------------------------------
Assets PPD MRL Adjustments Notes Combined
<S> <C> <C> <C> <C> <C>
Current assets
Cash and cash equivalents $ 143,173 $ 14,436 $ (39,000) (a)
(619) (b) $ 117,990
Accounts receivable and unbilled services, net 140,744 8,404 - 149,148
Investigator advances 6,008 - - 6,008
Prepaid expenses and other current assets 10,507 393 - 10,900
Current maturities of note receivable 500 - - 500
Deferred tax asset 9,273 - - 9,273
--------- --------- --------- ---------
Total current assets 310,205 23,233 (39,619) 293,819
Property and equipment, net 85,690 5,945 2,735 (c) 94,370
Goodwill, net 7,590 - 88,932 (d)
619 (b) 97,141
Notes receivable, long-term portion 17,000 - - 17,000
Investments 43,758 - - 43,758
Other assets 1,157 - 2,100 (e) 3,257
--------- --------- --------- ---------
Total assets $ 465,400 $ 29,178 $ 54,767 $ 549,345
========= ========= ========= =========
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 8,210 $ 1,536 $ - $ 9,746
Payables to investigators 7,988 - - 7,988
Other accrued expenses 48,951 1,049 - 50,000
Unearned income 82,336 948 - 83,284
Accrued income taxes 8,688 1,144 - 9,832
Current maturities of long-term debt and
capital lease obligations 1,203 1,671 - 2,874
--------- --------- --------- ---------
Total current liabilities 157,376 6,348 - 163,724
Long-term debt and capital lease obligations,
less current maturities 1,871 4,097 5,968
Deferred rent and other 3,518 - - 3,518
--------- --------- ---------- ---------
Total liabilities 162,765 10,445 - 173,210
Shareholders' equity
Common stock 5,193 6,445 (6,445) (f)
256 (g) 5,449
Paid-in capital 164,162 - 73,244 (g) 237,406
Retained earnings 140,174 12,433 (12,433) (f) 140,174
Deferred compensation (966) - - (966)
Accumulated other comprehensive loss (5,928) (145) 145 (f) (5,928)
--------- --------- --------- ---------
Total shareholders' equity 302,635 18,733 54,767 376,135
--------- --------- --------- ---------
Total liabilities and shareholders' equity $ 465,400 $ 29,178 $ 54,767 $ 549,345
========= ========= ========= =========
</TABLE>
See accompanying pro forma notes.
3
<PAGE>
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
As Reported Pro Forma
--------------------------- ----------------------------------
PPD MRL Adjustments Notes Combined
<S> <C> <C> <C> <C> <C>
Development revenues $ 403,701 $ 38,007 $ - $ 441,708
Discovery sciences revenues 27,840 - - 27,840
--------- --------- --------- ---------
Net revenue 431,541 38,007 - 469,548
--------- --------- --------- ---------
Direct costs - Development 196,078 22,281 - 218,359
Direct costs - Discovery sciences 11,794 - - 11,794
Research and development expenses 4,422 - - 4,422
Selling, general and administrative expenses 126,391 4,581 - 130,972
Depreciation and amortization 20,264 947 1,454 (h) 22,665
--------- --------- --------- ---------
358,949 27,809 1,454 388,212
--------- --------- --------- ---------
Operating income 72,592 10,198 (1,454) 81,336
Interest:
Income 5,480 370 (1,268) (i) 4,582
Expense (535) (253) - (788)
---------- ---------- --------- ----------
Interest income, net 4,945 117 (1,268) 3,794
Other income, net 469 449 - 918
Income before provision
for income taxes 78,006 10,764 (2,722) 86,048
Provision for income taxes 28,747 589 2,375 (j) 31,711
--------- --------- --------- ---------
Income before equity in net loss of investee 49,259 10,175 (5,097) 54,337
Equity in net loss of investee, net of income taxes 92 - - 92
--------- --------- --------- ---------
Net income $ 49,167 $ 10,175 $ (5,097) $ 54,245
========= ========= ========== =========
Net income per common share:
Basic $ 0.95 $ 1.00
========= =========
Diluted $ 0.94 $ 0.99
========= =========
Weighted average number of common shares outstanding:
Basic 51,689 2,560 (k) 54,249
Dilutive effect of stock options 805 - 805
--------- --------- ---------
Diluted 52,494 2,560 55,054
========= ========= =========
</TABLE>
See accompanying pro forma notes.
4
<PAGE>
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
CLASSIFICATION DIFFERENCES:
The Unaudited Pro Forma Combined Balance Sheet and Statements of Operations
include certain reclassifications of the MRL balances to reflect the
presentation used by PPD as follows:
1) Prepaid expenses and Other current assets for MRL were combined into
Prepaid expenses and other current assets in the Unaudited Pro Forma
Combined Balance Sheet.
2) Accrued compensated absences for MRL was reclassified to Other accrued
expenses in the Unaudited Pro Forma Combined Balance Sheet.
3) Current portion of lease obligation, Current portion of construction
loan and Related party loan for MRL were reclassified to Current
maturities of long-term debt and capital lease obligations in the
Unaudited Pro Forma Combined Balance Sheet.
4) Construction loan, non-current and Lease obligation, non-current were
combined into Long-term debt and capital lease obligations, less
current maturities in the Unaudited Pro Forma Combined Balance Sheet.
5) Foreign currency exchange gain for MRL was reclassified to Other
income, net in the Unaudited Pro Forma Combined Income Statement.
PRO FORMA COMBINED BALANCE SHEET:
a. Adjustment to reflect the cash payment of $39,000,000 for the acquisition.
b. Adjustment to reflect $619,000 of estimated acquisition costs in connection
with the MRL acquisition.
c. Adjustment to reflect property and equipment at preliminary estimated fair
value.
d. Adjustment to reflect goodwill resulting from the MRL acquisition.
e. Adjustment to reflect the preliminary estimated fair value of backlog
acquired in connection with the MRL acquisition.
f. Adjustment to eliminate common stock, paid-in capital and accumulated other
comprehensive loss of MRL.
g. Adjustment to record the issuance of 2,560,410 common shares of the Company
at par value and the resulting increase in paid-in capital in connection
with the acquisition.
PRO FORMA COMBINED STATEMENT OF OPERATIONS:
h. Adjustment to reflect the amortization of intangible assets over estimated
useful lives and additional depreciation on increased value of fixed assets
due to recording purchased assets at estimated fair value.
i. Adjustment to reflect the reduction in interest income resulting from the
cash paid of $39,000,000 in connection with the acquisition.
j. Adjustment to reflect the estimated income tax provision for the MRL
operations subsequent to the elimination of MRL's Subchapter S income tax
status based on the Company's historical tax rate.
k. Adjustment to reflect the issuance of 2,560,410 shares of PPD's common
stock in connection with the acquisition as outstanding as of January 1,
2001.
5
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