-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BXBdi5rx0Os97QoxwIZEUe3HofZBPm2HtbMq6ZsCEkh5mNGCKr2WM0IBr+MBdSy+ Bgki1dvgVxHWahhJpyPuPA== /in/edgar/work/20000811/0000928385-00-002190/0000928385-00-002190.txt : 20000921 0000928385-00-002190.hdr.sgml : 20000921 ACCESSION NUMBER: 0000928385-00-002190 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VENTIV HEALTH INC CENTRAL INDEX KEY: 0001089473 STANDARD INDUSTRIAL CLASSIFICATION: [8742 ] IRS NUMBER: 522181734 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-30318 FILM NUMBER: 693643 BUSINESS ADDRESS: STREET 1: 200 COTTONTAIL LANE STREET 2: VANTAGE COURT NORTH CITY: SOMERSET STATE: NJ ZIP: 08873 MAIL ADDRESS: STREET 1: 200 COTTONTAIL LANE STREET 2: VANTAGE COURT NORTH CITY: SOMERSET STATE: NJ ZIP: 08873 FORMER COMPANY: FORMER CONFORMED NAME: SNYDER HEALTHCARE SERVICES INC DATE OF NAME CHANGE: 19990624 10-Q 1 0001.txt FORM 10-Q - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- Form 10-Q ---------------- [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2000 or [_] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period From ________________ to ________________ Commission file number 0-30318 ---------------- VENTIV HEALTH, INC. (Exact name of registrant as specified in its charter) Delaware 52-2181734 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.)
1114 Avenue of the Americas, New York, New York 10036 (Address of principal executive office and zip code) (212) 768-8000 (Registrant's telephone number, including area code) ---------------- Indicate by check mark whether registrant (1) has filed all reports required 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 [_] *Based upon satisfaction of the conditions set forth in Staff Legal Bulletin No. 4 Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, par value $0.001, 22,840,915 shares outstanding as of July 31, 2000 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- VENTIV HEALTH, INC. FORM 10-Q INDEX
Page ---- PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Condensed Consolidated Balance Sheets as of June 30, 2000 (unaudited) and December 31, 1999.................................................... 1 Condensed Consolidated Statements of Earnings for the three- and six- month periods ended June 30, 2000 and 1999 (unaudited)............... 2 Condensed Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2000 and 1999 (unaudited)................................... 3 Notes to Condensed Consolidated Financial Statements.................. 4-6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................... 7-11 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk........ 14 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings................................................. 15 ITEM 4. Submission of Matters to a Vote of Security Holders............... 15 ITEM 5. Other Information................................................. 15 ITEM 6. Exhibits and Reports on Form 8-K.................................. 15 SIGNATURES................................................................. 16
PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements VENTIV HEALTH, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
June 30, December 31, -------- ------------ 2000 1999 ---- ---- (unaudited) ASSETS Current assets: Cash and equivalents................................. $ 35,394 $ 37,627 Marketable securities................................ -- 1,898 Accounts receivable, net of allowances for doubtful accounts of $2,228 and $2,517 at June 30, 2000 and December 31, 1999, respectively... 51,348 51,158 Unbilled services.................................... 23,716 13,430 Other current assets................................. 12,326 7,568 -------- -------- Total current assets............................... 122,784 111,681 Property and equipment, net........................... 15,764 14,742 Goodwill and other intangible assets, net............. 92,675 95,816 Deferred tax asset.................................... 9,231 9,732 Investments and other noncurrent assets............... 3,101 1,293 -------- -------- Total assets....................................... $243,555 $233,264 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Lines of credit...................................... $ 9,000 $ 36 Current maturities of long-term debt................. 55 55 Accrued payroll...................................... 18,606 18,082 Accounts payable..................................... 8,021 8,801 Accrued expenses..................................... 27,495 26,971 Client advances...................................... 5,850 4,346 Unearned revenue..................................... 23,254 28,060 -------- -------- Total current liabilities.......................... 92,281 86,351 Long-term debt........................................ 14,345 1,155 Other liabilities..................................... 5 5 Commitments and contingencies......................... -- -- Stockholders' Equity: Preferred stock, $.001 par value, 10,000,000 shares authorized, none issued and outstanding at June 30, 2000, and December 31, 1999.......................... -- -- Common stock, $.001 par value, 50,000,000 shares authorized; 22,886,800 shares and 25,231,215 shares issued and outstanding at June 30, 2000 and December 31, 1999, respectively...................... 23 25 Additional paid-in-capital............................ 157,530 176,495 Deferred compensation................................. (3,574) (4,219) Treasury stock, at cost, 494,000 shares at December 31, 1999.................................... -- (4,307) Accumulated other comprehensive losses................ (4,093) (2,401) Retained deficit...................................... (12,962) (19,840) -------- -------- Total stockholders' equity......................... 136,924 145,753 -------- -------- Total liabilities and stockholders' equity......... $243,555 $233,264 ======== ========
See accompanying notes to condensed consolidated financial statements. 1 VENTIV HEALTH, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (in thousands, except per share amounts)
For the Six For the Three Months Months -------------------- ----------- Ended June 30, Ended June 30, -------------- -------------- 2000 1999 2000 1999 ---------- ---------- -------- -------- (unaudited) Revenues........................... $ 98,984 $ 94,320 $197,901 $181,259 Operating expenses: Costs of services................ 80,136 70,863 161,375 138,144 Selling, general and administrative expenses......... 11,913 10,546 24,796 20,468 Non-recurring costs.............. -- 117 -- 1,693 ---------- ---------- -------- -------- Operating income................... 6,935 12,794 11,730 20,954 Interest expense................... (582) (82) (1,051) (123) Investment income.................. 467 95 785 373 ---------- ---------- -------- -------- Earnings before income taxes....... 6,820 12,807 11,464 21,204 Provision for income taxes......... (2,728) (5,255) (4,586) (8,563) ---------- ---------- -------- -------- Net earnings..................... $ 4,092 $ 7,552 $ 6,878 $ 12,641 ========== ========== ======== ======== Earnings per share (see Note 4): Basic............................ $ 0.18 $ 0.32 $ 0.30 $ 0.53 ========== ========== ======== ======== Diluted.......................... $ 0.18 $ 0.32 $ 0.30 $ 0.53 ========== ========== ======== ========
See accompanying notes to condensed consolidated financial statements. 2 VENTIV HEALTH, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
For the Six Months ----------- Ended June 30, -------------- 2000 1999 ---- ---- (unaudited) Cash flows from operating activities: Net earnings.............................................. $ 6,878 $ 12,641 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization............................ 4,790 3,789 Deferred taxes........................................... (279) 737 Loss on disposal of assets............................... 477 196 Non-cash expense for restricted stock vesting............ 545 -- Changes in assets and liabilities: Accounts receivable, net................................. (190) (11,014) Unbilled services........................................ (10,286) (10,620) Deposits and other noncurrent assets..................... 192 3,339 Accrued payroll, accounts payable and accrued expenses... 264 (10,453) Client advances.......................................... 1,504 1,011 Unearned revenue......................................... (4,806) (1,130) Other.................................................... (4,001) 754 -------- -------- Net cash used in operating activities..................... (4,912) (10,750) -------- -------- Cash flows from investing activities: Cash on hand at acquired businesses...................... -- 2,917 Purchase of subsidiaries................................. -- (1,135) Investment in Rxcentric.com, Inc......................... (2,000) -- Purchase of license agreements........................... -- (151) Proceeds from sale of fixed assets....................... 94 -- Proceeds from sale of marketable securities.............. 1,903 -- Purchase of property and equipment....................... (3,969) (4,775) -------- -------- Net cash used in investing activities..................... (3,972) (3,144) -------- -------- Cash flows from financing activities: Net borrowings (repayment) of debt....................... 22,154 (1,761) Purchases of treasury shares............................. (15,500) -- Investments and advances from Snyder..................... -- 11,227 Proceeds from the exercise of stock options.............. 747 -- -------- -------- Net cash provided by financing activities................. 7,401 9,466 -------- -------- Effect of exchange rate changes on cash and equivalents.... (750) 111 -------- -------- Net decrease in cash and equivalents....................... (2,233) (4,317) Cash and equivalents, beginning of period.................. 37,627 25,664 -------- -------- Cash and equivalents, end of period........................ $ 35,394 $ 21,347 ======== ======== Supplemental disclosures of cash flow information: Cash paid for interest................................... $ 524 $ 211 Cash paid for income taxes............................... 1,769 6,141 Supplemental disclosures of non-cash activities: Businesses acquired with Snyder stock.................... $ -- $ 16,336
See accompanying notes to condensed consolidated financial statements. 3 VENTIV HEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Organization, Business and Basis of Presentation: Organization Snyder Communications, Inc. ("Snyder"), a Delaware corporation, completed an initial public offering of its common stock on September 24, 1996. Snyder created the business currently conducted by the registrant, Ventiv Health, Inc. ("Ventiv"), in 1997 as a result of a merger transaction with a U.S. provider of pharmaceutical sales and marketing services. After forming its pharmaceutical sales and marketing services business segment in 1997, Snyder completed a series of acquisitions that expanded the magnitude, scope of services and geographic presence of this business. On June 22, 1999, the Board of Directors of Snyder approved a plan to effect the distribution (the "Distribution") of Snyder's healthcare marketing assets of its healthcare marketing services business in the third quarter of 1999 to a newly formed subsidiary, Ventiv Health, Inc. Snyder consummated the Distribution on September 27, 1999 through a special dividend of one share of common stock of Ventiv Health, Inc. for every three shares of Snyder common stock. As a result of the Distribution, Ventiv became an independent, publicly traded corporation [NASDAQ: VTIV]. Business Ventiv Health, Inc. is a unique sales and marketing partner providing innovative strategic and tactical solutions globally for the pharmaceutical and life sciences industry. The Company offers a broad range of integrated sales and marketing services including: specially designed strategic marketing plans, educational programs targeted to physicians, sales execution, and consulting and analytics. Clients include many of the leading pharmaceutical and life sciences companies, including: Aventis, Bausch & Lomb, Baxter, Bayer, Bristol-Myers Squibb, Eli Lilly, Endo Pharmaceuticals, Glaxo Wellcome, Johnson & Johnson, Merck, Novartis, Pfizer and Pharmacia. Ventiv Health operates across the United States, France, Germany, United Kingdom, Austria and Hungary. Basis of Presentation The operations of Ventiv Health, Inc. consist principally of the healthcare sales, healthcare market research and strategic planning, and healthcare educational communications services formerly conducted by the healthcare marketing services segment of Snyder. The unaudited condensed consolidated financial statements present the financial position, results of operations and cash flows of Snyder's healthcare marketing services business, referred to herein as "Ventiv", "Ventiv Health" or the "Company", as if it were operated as a stand-alone entity apart from Snyder for all periods prior to the Distribution. Snyder's historical basis in the assets and liabilities contributed to Ventiv in the Distribution has been carried over and appropriately reflected in these condensed consolidated financial statements. All expenses reflected in the condensed consolidated financial statements for periods prior to the Distribution are costs specifically identified to the Company. It is not practicable to estimate costs that would have been incurred by the Company if it had been operated on a stand-alone basis prior to the Distribution. The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the interim rules and regulations of the Securities and Exchange Commission. As a result, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles ("GAAP") have been omitted. The Company believes that the disclosures made are adequate to make the information presented not misleading. The condensed consolidated financial statements 4 VENTIV HEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) reflect all adjustments (consisting of only normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of the Company as of June 30, 2000. Operating results for the three-month period ended June 30, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999, filed with the Securities and Exchange Commission on March 30, 2000. 2. Strategic Business Alliances and Related Transactions On March 10, 2000, Ventiv entered into an exclusive strategic alliance with Rxcentric.com, Inc. (Rxcentric), a privately-held New York, NY based company which provides physicians with rapid access to comprehensive drug and pharmaceutical-related information via the Internet. Pursuant to a multi-year agreement, the companies will share in the revenues generated from this alliance, subject to significant revenue and physician recruitment milestones. In connection with this strategic alliance, Ventiv has invested $2 million in Rxcentric in exchange for a minority equity position in the firm, which is being accounted for under the cost method. Following this transaction, the company announced the formation of a new operating unit, eVentiv, which will focus on the development of Internet-based solutions that complement Ventiv's existing sales, communications and strategic consulting businesses, enhancing the Company's ability to provide superior outsourced marketing and sales solutions. Specifically, eVentiv will focus on the design and development of solutions oriented toward physician interaction (a primary objective of the alliance with Rxcentric), patient interaction and value-added information for pharmaceutical clients. Ventiv does not expect eVentiv or business generated through the alliance with Rxcentric to materially affect results of operations for the year ending December 31, 2000. 3. Share Repurchase Program: On March 15, 2000, the Board of Directors authorized the repurchase of an additional $12.5 million of the Company's stock, bringing the total authorized to $37.5 million. The Company has repurchased approximately 1.5 million and 2.1 million shares for approximately $15.5 million and $19.8 million (including applicable fees and broker commissions) for the six months ending June 30, 2000 and for the repurchase program to date, respectively. 4. Earnings Per Share: The Company has applied Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128") to all periods presented in these financial statements. SFAS No. 128 requires disclosure of basic and diluted earnings per share ("EPS"). Basic EPS is computed by dividing reported earnings available to common stockholders by the weighted average number of shares outstanding without consideration of common stock equivalents or other potentially dilutive securities. Diluted EPS gives effect to common stock equivalents and other potentially dilutive securities outstanding during the period. For periods prior to the Distribution, basic and diluted EPS was calculated on a pro forma basis using the number of shares of Ventiv common stock that were issued upon the Distribution. For periods ending subsequent to the date of the Distribution, the number of shares used to calculate net earnings per share was based on the actual number of shares of Ventiv common stock and common stock equivalents outstanding. Basic and diluted EPS are the same from the date of the earliest period presented through the date of the Distribution, as there were no Ventiv employee stock options or restricted shares granted until the date of the Distribution. 5 VENTIV HEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The following table presents a reconciliation of the numerators and denominators of basic and diluted EPS for the six and three month periods ended June 30, 2000 and pro forma basic and diluted EPS for the six and three month periods ended June 30, 1999:
Six Months Three Months Ended Ended June 30, 2000 June 30, 2000 ------------------ ------------- 2000 1999 2000 1999 ---- ---- ---- ---- (in thousands except per share data) Basic EPS Computation Net earnings............................. $ 4,092 $ 7,552 $ 6,878 $12,641 Weighted average common shares outstanding............................. 22,549 23,715 22,753 23,715 Basic EPS................................ $ 0.18 $ 0.32 $ 0.30 $ 0.53 ========= ========= ======= ======= Diluted EPS Computation Net earnings............................. $ 4,092 $ 7,552 $ 6,878 $12,641 Adjustments to net earnings.............. -- -- -- -- --------- --------- ------- ------- Net earnings, as adjusted................ $ 4,092 $ 7,552 $ 6,878 $12,641 Diluted common shares outstanding: Weighted average common shares outstanding........................... 22,549 23,715 22,753 23,715 Employee Stock Options................. 407 -- 359 -- Restricted Stock Awards................ 188 -- 175 -- --------- --------- ------- ------- Total diluted common shares outstanding........................... 23,144 23,715 23,287 23,715 ========= ========= ======= ======= Diluted EPS............................ $ 0.18 $ 0.32 $ 0.30 $ 0.53 ========= ========= ======= =======
5. Significant Clients: During the six months ended June 30, 2000 and 1999, a single client, Bristol-Myers Squibb, Inc., accounted for approximately 25% and 10% of the Company's total revenue, respectively. The Company expects that this client will continue to provide a portion of the Company's revenue similar to that contributed in the six-month period ended June 30, 2000 for the remainder of the year. 6. Comprehensive Income: SFAS No. 130, "Reporting Comprehensive Income", was adopted during 1998. This statement establishes standards for reporting comprehensive income in financial statements. Comprehensive income reports the effect on net income of transactions that are related to equity of the Company, but that have not been transacted directly with the Company's shareholders. This statement only modifies disclosures, including financial statement disclosures, and does not result in other changes to the results or financial position of the Company.
Six Months Three Months Ended Ended June 30, 2000 June 30, 2000 ------------------ ------------- 2000 1999 2000 1999 ---- ---- ---- ---- (in thousands) Net earnings............................ $ 4,092 $ 7,552 $ 6,878 $12,641 Other comprehensive earnings (losses), net of tax: Foreign currency translation adjustment........................... (440) 66 (1,692) (1,158) Unrealized gain on marketable securities........................... 5 -- -- -- --------- --------- ------- ------- Comprehensive earnings.................. $ 3,657 $ 7,618 $ 5,186 $11,483 ========= ========= ======= =======
6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations On September 27, 1999, Ventiv Health, Inc. ("Ventiv") was spun off from Snyder Communications, Inc. ("Snyder") in the form of a tax-free dividend to Snyder stockholders (the "Distribution"). Ventiv is now an independent publicly traded company [NASDAQ: VTIV]. This Management's Discussion and Analysis of Financial Condition and Results of Operations covers periods prior to the Distribution, during which the operations of Ventiv were part of Snyder. The following information should be read in conjunction with the consolidated financial statements, accompanying notes and other financial information included in this Quarterly Report on Form 10-Q and in the Company's most recent Annual Report on Form 10-K for the year ended December 31, 1999. Private Securities Litigation Reform Act of 1995--A Caution Concerning Forward-Looking Statements Any statement made in this Form 10-Q that deals with information that is not historical, such as statements concerning our anticipated financial results, are forward-looking statements. We wish to caution readers not to place undo reliance on any of these forward-looking statements, which speak only as of the date made. Forward-looking statements are subject to the occurrence of many events outside our control and to various risk factors that could cause results to differ materially from those expressed in our periodic reports and registration statements filed with the Securities and Exchange Commission, our press releases or other public communications. Overview Ventiv Health, Inc. is a unique sales and marketing partner providing innovative strategic and tactical solutions globally for the pharmaceutical and life sciences industry. The Company offers a broad range of integrated sales and marketing services including: specially designed strategic marketing plans, educational programs targeted to physicians, sales execution, and consulting and analytics. Clients include many of the leading pharmaceutical and life sciences companies, including: Aventis, Bausch & Lomb, Baxter, Bayer, Bristol-Myers Squibb, Eli Lilly, Endo Pharmaceuticals, Glaxo Wellcome, Johnson & Johnson, Merck, Novartis, Pfizer and Pharmacia. Ventiv Health operates across the United States, France, Germany, United Kingdom, Austria and Hungary. Ventiv's services are designed to develop, execute and monitor strategic marketing plans for pharmaceutical and other life sciences products and to conduct educational research and communication services for the medical community. Snyder created the business currently conducted by Ventiv in January 1997 in a merger transaction with a U.S. provider of pharmaceutical sales and marketing services. After forming its pharmaceutical sales and marketing service business segment in 1997, Snyder completed a series of acquisitions that expanded both the magnitude, scope of services and geographic presence of the pharmaceutical sales and marketing business, creating the business conducted by Ventiv today. We plan to focus on internal growth for the foreseeable future as our primary means of expansion, although we will consider attractive acquisition opportunities as they arise. We expect that the complementary services, which Ventiv is able to offer to its customers as a result of the acquisitions described above, will increase our opportunities and strengthen our client relationships. We strive to integrate our service capabilities to provide a coordinated spectrum of healthcare marketing and sales services. Ventiv's Health Products Research group designs and monitors product launches and on going market and sales strategies with its proprietary programs to maximize resource utilization and return on investment for pharmaceutical and other life sciences companies. Ventiv Health Communications provides educational and promotional programs to physicians and other healthcare professionals. Ventiv Health Worldwide Sales designs and executes outsourced sales programs for pharmaceutical and other life sciences products. Most of Ventiv's largest clients utilize the services of more than one of our operating groups. 7 Strategic Business Alliances and Related Transactions On March 10, 2000, Ventiv entered into an exclusive strategic alliance with Rxcentric.com, Inc. (Rxcentric), a privately-held New York, NY based company which provides physicians with rapid access to comprehensive drug and pharmaceutical-related information via the Internet. Pursuant to a multi-year agreement, the companies will share in the revenues generated from this alliance, subject to significant revenue and physician recruitment milestones. In connection with this strategic alliance, Ventiv has invested $2 million in Rxcentric in exchange for a minority equity position in the firm, which is being accounted for under the cost method. Following this transaction, the Company announced the formation of a new operating unit, eVentiv, which will focus on the development of Internet-based solutions that complement Ventiv's existing sales, communications and strategic consulting businesses, enhancing the Company's ability to provide superior outsourced marketing and sales solutions. Specifically, eVentiv will focus on the design and development of solutions oriented toward physician interaction (a primary objective of the alliance with Rxcentric), patient interaction and value-added information for pharmaceutical clients. Ventiv does not expect eVentiv or business generated through the alliance with Rxcentric to materially affect results of operations for the year ending December 31, 2000. 8 Results of Operations The following sets forth, for the periods indicated, certain components of Ventiv's income statement data, including such data as a percentage of revenues. Acquisition and related costs are considered to be non-recurring by Ventiv because Ventiv's current operations are not expected to incur such costs in future periods.
Three months ended ($'s in 000's) --------------------------------- June 30, --------------------------------- 2000 1999 --------------- --------------- Revenue................................... $ 98,984 100.0 % $ 94,320 100.0 % Cost of services.......................... 80,136 81.0 % 70,863 75.1 % Selling, general and administrative expenses................................. 11,913 12.0 % 10,546 11.2 % Non-recurring expenses.................... -- 0.0 % 117 0.1 % -------- ----- -------- ----- Total costs............................ 92,049 93.0 % 81,526 86.4 % -------- ----- -------- ----- Income from operations.................... 6,935 7.0 % 12,794 13.6 % Interest expense.......................... (582) (0.6)% (82) (0.1)% Interest income........................... 467 0.5 % 95 0.1 % -------- ----- -------- ----- Earnings before income taxes.............. 6,820 6.9 % 12,807 13.6 % Provision for income taxes................ (2,728) (2.8)% (5,255) (5.6)% -------- ----- -------- ----- Net income................................ $ 4,092 4.1 % $ 7,552 8.0 % ======== ===== ======== ===== Six months ended --------------------------------- June 30, --------------------------------- 2000 1999 --------------- --------------- Revenue................................... $197,901 100.0 % $181,259 100.0 % Cost of services.......................... 161,375 81.5 % 138,144 76.2 % Selling, general and administrative expenses................................. 24,796 12.5 % 20,468 11.3 % Non-recurring expenses.................... -- 0.0 % 1,693 0.9 % -------- ----- -------- ----- Total costs............................ 186,171 94.1 % 160,305 88.4 % -------- ----- -------- ----- Income from operations.................... 11,730 5.9 % 20,954 11.6 % Interest expense.......................... (1,051) (0.5)% (123) (0.1)% Interest income........................... 785 0.4 % 373 0.2 % -------- ----- -------- ----- Earnings before income taxes.............. 11,464 5.8 % 21,204 11.7 % Provision for income taxes................ (4,586) (2.3)% (8,563) (4.7)% -------- ----- -------- ----- Net income................................ $ 6,878 3.5 % $ 12,641 7.0 % ======== ===== ======== =====
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999 Revenues: Revenues increased by approximately $4.7 million, or 5.0%, to $99.0 million in the three month period ended June 30, 2000, from $94.3 million in the three months ended June 30, 1999. Revenues in our U.S. Sales group were $55.8 million, an increase of 69.3% over last year's total, and accounted for 56.4% of total Ventiv revenues for the three months ended June 30, 2000. This growth primarily resulted from new contracts and expansions of existing business relationships with Bristol-Myers Squibb, Johnson & Johnson and Novartis. The U.S. Sales' revenues and operating income for the three months ended June 30, 2000 included approximately $0.4 million of incentive fee settlements. Agreement on the final amount of these settlements was reached following the review and analysis of related product sales data for the three months ended June 30, 2000. 9 The Company's European Sales business generated revenues of $23.5 million, a decrease of 35.6% from the second quarter of 1999. Revenues generated by the European businesses represented 23.7% of total revenues for the fiscal quarter ended June 30, 2000. The decline in revenue was a result of a combination of factors including the integration of the Ventiv businesses from separate companies into one consolidated enity, the closure of syndicated sales forces (primarily in the U.K.) and, to a lesser extent, the impact of foreign exchange rates. Ventiv Health Communications' revenues represented 14.2% of second quarter revenues. Revenues for the group were approximately $14.1 million for the three months ended June 30, 2000, which represents a decrease of $4.6 million from the $18.7 million recorded in the second quarter of 1999. This decrease in revenue was primarily the result of a change in business focus toward live events and away from print media coupled with a change in client mix. Health Products Research generated 5.6% of total revenues, and $5.6 million and $6.1 million in the three-month periods ended June 30, 2000 and 1999, respectively. Revenues decreased $0.5 million or 9.2%, from the second quarter in 1999, primarily as a result of pharmaceutical industry consolidation, partially offset by the continuation of the Research group's growth as it expands its client base. Cost of Services: Costs of services increased by approximately $9.3 million, or 13.1%, to $80.1 million this fiscal quarter from $70.9 million in the three-month period ending June 30, 1999, primarily to the increase in revenue for the period. Cost of services increased as a percentage of revenue to 81.0% from 75.1% in the three -month periods ending June 30, 2000 and 1999, respectively. Cost of services increased as a percentage of revenue primarily due to: the effect of revenue reductions in the European contract sales business (this was only partially offset by corresponding costs of services reductions as the predominant components of such costs are personnel related); lower margins at Ventiv Health Communications (resulting from the shift in business focus to lower margin live events); and to a lesser extent, lower margins at Health Products Research and as a result of increasing costs of infrastructure necessary to support the service operations. These effects were partially offset by improved margins from the US Contract Sales business. We believe that actions taken this year and late in 1999, including the reduction of syndicated sales force capacity will result in lower costs of services as a percentage of revenue in future periods. Selling, General and Administrative Expenses: Selling, general and administrative expenses increased by approximately $1.4 million, or 13.0%, to $11.9 million from $10.5 million in the three-month periods ending June 30, 2000 and 1999, respectively. Selling, general and administrative expenses as a percentage of revenue increased to 12.0% from 11.2%. These increases were largely due to additional ongoing overhead costs incurred in connection with the formation of Ventiv's independent management and administrative infrastructure following the Distribution. Non-recurring Costs: Non-recurring costs recorded in the three-month period ended June 30, 1999 included charges of $0.1 million related to the consolidation and integration of certain of Ventiv's acquired operations within Ventiv Health U.S. Sales. Interest Expense: Ventiv recorded $0.6 million of interest expense in the three months ended June 30, 2000, a notable increase over the relatively immaterial amount recorded in the comparable prior year period. Interest expense increased as a direct result of net borrowings drawn against the Company's revolving line of credit, in support of operations, investing activities and in connection with the Company's share repurchase program (see "Liquidity and Capital Resources"). Investment Income: Ventiv recorded approximately $0.5 million and $0.1 million of investment income in the three months ended June 30, 2000 and 1999, respectively. Variations in future investment income will result from differences in average amounts of cash and cash equivalents available for investment and the prevailing short-term interest rates during these periods. 10 Provision for Income Taxes: Ventiv recorded provisions for income taxes using average effective tax rates of 40.0% and 41.0% for the three-month periods ended June 30, 2000 and 1999, respectively. Ventiv's current effective tax rate reflects the full impact of non-deductible goodwill amortization associated with prior acquisitions and was based on current internal earnings projections for the year ending December 31, 2000 by tax jurisdiction. Net Earnings and Earnings Per Share ("EPS"): Ventiv's net earnings decreased by $3.5 million to $4.1 million, as compared with $7.6 million, in the three months ended June 30, 2000 and 1999, respectively. Higher costs of services, increased SG&A associated with the establishment of an independent corporate infrastructure and, to a lesser extent, higher interest expense associated with the utilization of the Company's line of credit all contributed to the decrease in net earnings, as more fully explained above. The effects of these factors were partially offset by the lack of non-recurring costs this fiscal quarter. Shares used in computing basic and diluted EPS decreased by approximately 1.2 million and 0.6 million shares, respectively, due to the impact of the Company's share repurchase program. The impact of share repurchases on shares used in computing diluted EPS was offset in part by the inclusion of common stock equivalents relating to employee stock options and restricted stock awards. These items were not included in pro forma diluted EPS for the three months ended June 30, 1999, as they were not issued until the date of the Distribution (see Part I.--Item 1.--Notes to Condensed Consolidated Financial Statements--Note 3 "Share Repurchase Program" and Note 4 "Earnings per Share"). Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999 Revenues: Revenues increased by approximately $16.6 million, or 9.2%, to $197.9 million in the six-month period ended June 30, 2000, from $181.3 million in the six-month period ended June 30, 1999. Revenues in our U.S. Sales group were $109.5 million, an increase of 73.8% over last year's total, and accounted for 55.3% of total Ventiv revenues for the six months ended June 30, 2000. This growth primarily resulted from new contracts and expansions of existing business relationships with Bristol-Myers Squibb, Forest Labs, Johnson & Johnson and Novartis. The U.S. Sales' revenues and operating income for the six months ended June 30, 2000 included approximately $2.2 million of incentive fee settlements relating to 1999 and $0.4 million relating to 2000. Agreement on the final amount of these settlements was reached following the review and analysis of related product sales data for the year ended December 31, 1999 and the six months ended June 30, 2000, respectively. The Company's European Sales business generated revenues of $47.3 million, a decrease of 35.9% from 1999. Revenues generated by the European businesses represented 23.9% of total revenues for the six-month period ended June 30, 2000. The decline in revenue was a result of a combination of factors including the integration of the Ventiv businesses from separate companies into one consolidated entity, the closure of syndicated sales forces (primarily in the U.K.) and, to a lesser extent, the impact of foreign exchange rates. Ventiv Health Communications' revenues represented 14.7% of total revenues. Revenues for the group were approximately $29.0 million for the six months ended June 30, 2000, which represents a decrease of $4.6 million from the $33.6 million recorded in 1999. This decrease in revenue was primarily the result of a change in business focus toward live events and away from print media coupled with a change in client mix. Health Products Research generated 6.1% of total revenues, and $12.0 million and $10.9 million in the six-month periods ended June 30, 2000 and 1999, respectively. Revenues decreased $1.1 million or 10.1%, from 1999, primarily as a result of pharmaceutical industry consolidation, partially offset by the continuation of the Research group's growth as it expands its client base. Costs of Services: Costs of services increased by approximately $23.2 million, or 16.8%, to $161.4 million for the six-month period ended June 30, 2000 from $138.1 million in the six-month period ending June 30, 1999, 11 primarily to the increase in revenue for the period. Cost of services increased as a percentage of revenue to 81.5% from 76.1% in the six-month periods ending June 30, 2000 and 1999, respectively. Cost of services increased as a percentage of revenue primarily due to the following: 1) the effect of revenue reductions in the European contract sales business (this was only partially offset by corresponding costs of services reductions as the predominant components of such costs are personnel related); 2) lower margins at Ventiv Health Communications (resulting from the shift in business focus to lower margin live events); and 3) to a lesser extent, lower margins at Health Products Research and as a result of increasing costs of infrastructure necessary to support the service operations. In addition, the costs of services for the six months ended were adversely impacted in 2000 by approximately $2 million of one-time charges, which were recorded as part of ongoing operations. These charges consisted primarily of costs associated with a reduction in syndicated sales force capacity in the U.K.-based contract sales basis and efforts to reduce headcount and other fixed costs in Ventiv Health Communications. These effects were partially offset by improved margins from the US Contract Sales business. We believe that actions taken this year and late in 1999, including the reduction of syndicated sales force capacity will result in lower costs of services as a percentage of revenue in future periods. Selling General and Administrative Expenses: Selling general and administrative expenses increased by approximately $4.3 million, or 21.1%, to $24.8 million from $20.5 million in the six-month periods ended June 30, 2000 and 1999, respectively. Selling, general, and administrative expenses as a percentage of revenues increased to 12.5% from 11.3%. These increases were due largely to additional ongoing overhead costs incurred in connection with the formation of Ventiv's independent management and administrative infrastructure following the Distribution. Non-recurring Costs: Non-recurring costs recorded in the six-month period ended June 30,1999 included charges of $1.7 million related to the consolidation and integration of certain of Ventiv's acquired operations within US Contract Sales, Ventiv Health Communications and the Company's U.K.- based Sales business. Interest Expense: Ventiv recorded $1.1 million of interest expense in the six months ended June 30, 2000, a notable increase over the $0.1 million recorded in 1999. Interest expense increased as a direct result of net borrowings drawn against the Company's revolving line of credit, in support of operations, investing activities and in connection with the Company's share repurchase program (see "Liquidity and Capital Resources"). Investment Income: Ventiv recorded approximately $0.8 million and $0.4 million of investment income in the six months ended June 30, 2000 and 1999, respectively. Variations in future investment income will result from differences in average amounts of cash and cash equivalents available for investment and the prevailing short-term interest rates during these periods. Provision for Income Taxes: Ventiv recorded provisions for income taxes using average effective tax rates of 40.0% and 40.4% for the six-month periods ended June 30, 2000 and 1999, respectively. Ventiv's current effective tax rate reflects the full impact of non-deductible goodwill amortization associated with prior acquisitions and was based on current internal earnings projections for the year ending December 31, 2000 by tax jurisdiction. Net Earnings and Earnings Per Share ("EPS"): Ventiv's net earnings decreased by $5.8 million to $6.9 million, as compared with $12.6 million, in the six- month periods ended June 30, 2000 and 1999, respectively. Higher costs of services, increased SG&A associated with the establishment of an independent corporate infrastructure and, to a lesser extent, higher interest expense associated with the utilization of the Company's line of credit all contributed to the decrease in net earnings, as more fully explained above. The effects of these factors were partially offset by the lack of non- recurring costs this fiscal quarter. Shares used in computing basic and diluted EPS decreased by approximately 1.0 million and 0.4 million shares, respectively, due to the impact of the Company's share repurchase program. The impact of share repurchases on shares used in computing diluted EPS was offset in part by the inclusion of common stock equivalents relating to employee stock options and restricted stock awards. These items were not included in pro 12 forma diluted EPS for the six months ended June 30, 1999, as they were not issued until the date of the Distribution (see Part I.--Item 1.--Notes to Condensed Consolidated Financial Statements--Note 3 "Share Repurchase Program" and Note 4 "Earnings Per Share"). Liquidity and Capital Resources At June 30, 2000, Ventiv had $35.4 million of cash and cash equivalents, a decrease of $2.2 million from December 31, 1999. For the six-month periods ending June 30, 2000 compared to June 30, 1999, cash used in operations decreased by $5.8 million and cash used in investing activities increased by $0.8 million. These uses of cash were offset by cash provided by financing activities of $7.4 million, partially offset by a slightly higher unfavorable effect of changes in foreign exchange rates. Cash used by operations was $4.9 million in 2000 compared to $10.8 million in 1999. This reduction in the use of cash was due to lower working capital levels, primarily lower accounts receivable, partially offset by lower net income. Cash used by investing activities was $4.0 million and $3.1 million through June 30, 2000 and 1999, respectively. Cash expenditures in 2000 relate to the investment made in RxCentric and capital expenditures. In 1999, investing activities included $2.9 million of cash acquired through the purchase of a subsidiary. Cash from financing activities was $7.4 million and $9.5 million for the six months ended June 30, 2000 and 1999, respectively. During 2000, the Company has net borrowings under the line of credit of $23.0 million (of which $14.0 million has been classified as non-current) and repaid $1.2 million of the previously outstanding under a foreign line of credit. In addition, under the stock repurchase plan, the Company has acquired and retired approximately 1.5 million shares of common stock for approximately $15.5 million (including applicable fees and brokers' commissions). On December 1, 1999, we entered into a $50 million unsecured revolving credit facility, expiring with a term of four years. Borrowings may be used for general corporate purposes, acquisitions and the repurchase of up to $37.5 million of Ventiv Health, Inc. common stock. Interest on amounts borrowed under the credit facility is based on the London Interbank Offered Rate ("LIBOR") or the lending bank's base rate of interest. Availability under this credit facility is subject to our compliance with various financial ratios, operating covenants and other customary conditions. At June 30, 2000, the Company was in compliance with these financial covenants. We believe our cash and equivalents, as well as cash provided by operations, will be sufficient to fund our current operations and planned capital expenditures over the next 12 months and for the foreseeable future. We plan to focus on internal growth in the near term as the primary means of our expansion, although we will consider attractive acquisition opportunities as they arise. Cash provided from operations may not be sufficient to fund internal growth initiatives which we may pursue. If we pursue significant internal growth initiatives or if we acquire additional businesses in transactions that include any cash payment as part of the purchase price, both in the short-term and the long-term, we will first use excess cash available from operations and then pursue additional debt or equity financing as sources of cash necessary to complete any acquisitions. In addition to borrowing under our line of credit, we could pursue additional debt or equity transactions to finance acquisitions, depending on market conditions. We can not assure you that we will be successful in raising the cash required to complete all acquisition opportunities which we may wish to pursue in the future. We are subject to the impact of foreign currency fluctuations, specifically that of the British pound, German mark and French franc. To date, changes in the exchange rates of the British pound, German mark and French franc have not had a material impact on our liquidity or results of operations. We continually evaluate our exposure to exchange rate risk but do not currently hedge such risk. We do not expect the introduction of the Euro to have a material impact on our operations or cash flows in the near term. We will continue to evaluate the impact of the introduction of the Euro as we continue to expand our services in Europe. 13 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to market risk from changes in market interest rates and foreign currency exchange rates. We are subject to interest rate risk on our debt for changes in the LIBOR rates, and we are also subject to foreign currency exchange rate risk with respect to our international operations. We do not currently engage in hedging or other market risk management tools. Long-term Debt Exposure As of June 30, 2000, the Company has drawn $23 million against its $50 million unsecured revolving credit facility. Based upon the amount outstanding, if the LIBOR rate were to increase by 1%, Ventiv would incur an additional $0.2 million of interest expense on an annual basis. Foreign Currency Exchange Rate Exposure Fluctuations in foreign currency exchange rates affect the reported amounts of our assets, liabilities and operations. For purposes of quantifying the risk associated with fluctuations in the foreign exchange rate, we assumed a hypothetical 10% detrimental change in the exchange rates on our assets, liabilities and revenue denominated in foreign currencies. A 10% fluctuation was assumed for all exchange rates at June 30, 2000. The Company's material exposures to foreign exchange rate fluctuations relate to the French Franc, the British Pound, and the German Mark. Approximately 46%, 27% and 27% of the Company's foreign-sourced revenues for the six-month period ended June 30, 2000 were generated by operating units based in France, the United Kingdom and Germany, respectively. The table below presents the hypothetical impact of an assumed 10% unfavorable change in all exchange rates to which we are exposed on total assets, liabilities and revenues.
Balance 10% Decrease in at Value of Local June 30, Currencies to 2000 US Dollar -------- --------------- Total Assets...................................... $243,555 $237,268 Total Liabilities................................. 106,631 99,046 Revenues.......................................... 197,901 193,068
14 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings The Company is subject to various proceedings arising in the normal course of business, none of which individually or in the aggregate, is expected to have a material adverse effect on the Company's financial condition results of operations or liquidity. ITEM 4. Submission of Matters to a Vote of Security Holders On May 31, 2000, Ventiv Health Inc. held an Annual Meeting of Stockholders to vote on the following proposals: (i) To elect eight (8) directors to the Board of Directors for a term of one year, expiring at the 2001 Annual Meeting; (ii) To approve the stock incentive plan; and (iii) To ratify the appointment of Arthur Andersen LLP as the Company's independent auditors for 2000. With respect to the aforementioned matters, votes were tabulated and the stockholders of the Company approved the proposals as follows:
For Against Withheld ---------- --------- -------- Proposal (i) Daniel M. Snyder................................. 18,687,692 -- 612,212 Michele D. Snyder................................ 18,687,692 -- 612,212 Eran Broshy...................................... 18,687,754 -- 612,150 Mortimer B. Zuckerman............................ 18,687,754 -- 612,150 Fred Drasner..................................... 18,687,721 -- 612,183 A. Clayton Perfall............................... 18,687,754 -- 612,150 Donald Conklin................................... 18,687,754 -- 612,150 John R. Harris................................... 18,687,721 -- 612,183 Proposal (ii) 9,390,204 7,151,476 22,334 Proposal (iii) 19,288,862 6,003 5,039
ITEM 5. Other Information Not applicable. ITEM 6. Exhibits and Reports on Form 8-K (a)Exhibits 27.1 Financial Data Schedule
(b)Reports on Form 8-K None 15 SIGNATURES Pursuant to the requirements 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. VENTIV HEALTH, INC. /s/ Gregory S. Patrick Date: August 4, 2000 By:______________________________ Gregory S. Patrick Chief Financial Officer (Principal Financial Officer) /s/ Joseph S. Durko By:______________________________ Joseph S. Durko Vice President and Controller (Principal Accounting Officer) 16 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 1,000 6-MOS 6-MOS DEC-31-2000 DEC-31-1999 JAN-01-2000 JAN-01-1999 JUN-30-2000 JUN-30-1999 35,394 37,627 0 1,898 53,576 53,675 (2,228) (2,517) 0 0 122,784 111,681 24,090 21,546 (8,326) (6,804) 243,555 233,264 92,281 86,351 14,345 1,155 0 0 0 0 23 25 136,901 145,728 243,555 233,264 197,901 181,259 197,901 181,259 161,375 138,144 186,171 160,305 (785) (373) 0 0 (1,051) (123) 11,464 21,204 (4,586) (8,563) 6,878 12,641 0 0 0 0 0 0 6,878 12,641 0.30 0.53 0.30 0.53
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