Exhibit 99.1
Quintiles Reports Second Quarter 2013 Results and Full Year 2013 Guidance
- Net new business wins of $1.0 billion, up 13% compared to second quarter 2012; Backlog of $9.0 billion at the end of second quarter 2013
- Second quarter diluted adjusted EPS of $0.50 and adjusted net income of $62.9 million, up 6.4% and 12.6%, respectively, compared to second quarter 2012
- Second quarter GAAP reported diluted EPS of $0.30 and GAAP reported net income of $38.5 million, declined 25.0% and 18.4%, respectively, compared to second quarter 2012
- Full year 2013 adjusted diluted EPS guidance of $1.95 - $2.05
RESEARCH TRIANGLE PARK, N.C.--(BUSINESS WIRE)--August 1, 2013--Quintiles Transnational Holdings Inc. (“Quintiles” or the “Company”) (NYSE: Q) today reported its financial results for the quarter ended June 30, 2013.
For the three months ended June 30, 2013, the growth in service revenues excluding the impact of foreign currency fluctuations (“constant currency revenue growth”) was 2.2%, or $21.1 million compared to the same period last year. At actual foreign exchange rates, service revenues of $944.2 million were nearly unchanged compared to the same period last year due to an unfavorable foreign currency impact of 2.3%, or $21.8 million. Constant currency revenue growth was primarily from volume related increases in the Product Development segment compared to the same period in 2012.
Adjusted income from operations was $124.1 million in the second quarter of 2013 representing growth of 8.4% and 100 basis points of margin expansion compared to the same period last year. Adjusted net income was $62.9 million in the second quarter of 2013 representing growth of 12.6% compared to the same period last year. Diluted adjusted earnings per share was $0.50 in the quarter ended June 30, 2013 representing growth of 6.4% compared to the same period last year. Reported GAAP income from operations was $94.9 million, reported GAAP net income was $38.5 million and reported GAAP diluted earnings per share was $0.30 for the three months ended June 30, 2013. Reconciliations of the non-GAAP measures adjusted income from operations, adjusted net income and diluted adjusted earnings per share to the corresponding GAAP measures are attached to this press release.
Net new business grew 13% and 16% in the three and six months ended June 30, 2013 to $1.0 billion and $2.3 billion, respectively compared to the same periods last year. The second quarter of 2013 was the fourth sequential quarter of $1.0 billion or more in net new business which has contributed to an ending backlog at June 30, 2013 of $9.0 billion. The book-to-bill ratio, which represents net new business divided by service revenues during the respective period, was 1.07 for the second quarter and 1.21 for the six month period ending June 30, 2013.
“Quintiles delivered solid results overall with continued strength in new business wins,” said Tom Pike, Quintiles’ chief executive officer. “We have maintained the momentum following our initial public offering in May, which we believe demonstrates the confidence our customers have in us as well as the depth and diversity of our customer base. I am also pleased to report double-digit adjusted net income growth and improved margins on a year-to-date basis despite the negative impact on revenues that resulted from unfavorable foreign exchange rates.”
“We continue to focus on growth areas that further differentiate us by deepening our scientific, therapeutic and data expertise as well as developing new capabilities. In doing so, we believe that we can improve the probability of development and commercial success for customers ultimately leading to shareholder success.”
Product Development’s constant currency revenue growth was 5.8%, or $40.4 million during the second quarter of 2013 compared to the same period last year. At actual foreign exchange rates, Product Development’s service revenues grew 4.6% compared to the same period last year to $724.2 million. The constant currency revenue growth resulted from a volume related increase in clinical services partially offset by a decline in consulting services. Product Development’s income from operations margin was 18.8% for the second quarter representing an expansion of 160 basis points compared to the same period last year of which 100 basis points was from contribution margin expansion and 60 basis points from a reduction in selling general and administrative expenses as a percentage of service revenues.
On a constant currency basis, Integrated Healthcare Services’ service revenues declined 7.6%, or $19.3 million during the second quarter of 2013 compared to the same period last year primarily due to lower net new business, negative scope modifications and cancellations, and the impact of the conclusion of a major contract during 2012. At actual foreign exchange rates, Integrated Healthcare Services’ service revenues declined 13.0%, or $32.8 million, compared to the same period last year to $220.0 million of which $13.5 million or 5.3% was due to unfavorable foreign currency fluctuations. Integrated Healthcare Services’ income from operations margin was 5.7% for the second quarter, 230 basis points less than the same period last year, but 290 basis points higher than the first quarter of 2013.
General corporate and unallocated expenses were $50.9 million during the second quarter compared to $26.2 million for the same period last year. This increase was primarily due to $26.5 million of fees paid in connection with the termination or amendment of agreements with certain shareholders.
The GAAP effective income tax rate was 18.9% for the second quarter of 2013 compared to 37.1% for the same period in 2012. The effective income tax rates for the three and six month periods ended June 30, 2013 were positively impacted by the Company asserting in the second quarter of 2013 that the undistributed earnings of most of the Company’s foreign subsidiaries are indefinitely reinvested outside of the United States.
For the six months ended June 30, 2013, the Company’s constant currency service revenue growth was 4.2%, or $77.2 million as compared to the same period in 2012. At actual foreign exchange rates, the Company’s service revenues of $1.9 billion grew 2.1% compared to the same period in 2012 which included an unfavorable foreign currency impact of 2.1% or $38.4 million. Adjusted income from operations for the six months ended June 30, 2013 was $242.5 million representing growth of 9.8% and 90 basis points of margin expansion compared to the same period last year. Adjusted net income was $120.5 million for the six months ended June 30, 2013 representing growth of 11.6% compared to the same period last year. Diluted adjusted earnings per share was $0.98 for the six months ended June 30, 2013 representing year on year growth of 6.5% compared to the same period last year. Reported GAAP income from operations was $210.1 million, reported GAAP net income was $86.8 million and reported GAAP diluted earnings per share was $0.71 for the six months ended June 30, 2013.
Recent Events
On May 9, 2013, the Company’s common stock began trading on the New York Stock Exchange under the symbol “Q.” On May 14, 2013, the Company completed an initial public offering (“IPO”) of its common stock at a price to the public of $40.00 per share. The Company issued and sold 13,125,000 shares of common stock in the IPO. The selling shareholders offered and sold 14,111,841 shares of common stock in the IPO, including 3,552,631 shares that were offered and sold by the selling shareholders pursuant to the full exercise of the underwriters’ option to purchase additional shares. The IPO raised proceeds for the Company of approximately $489.9 million, after deducting underwriting discounts, commissions, and related expenses. The Company did not receive any of the proceeds from the sale of the shares sold by the selling shareholders.
The Company used the net proceeds from the IPO as follows: (i) approximately $308.9 million to pay all amounts outstanding under the $300.0 million term loan including accrued interest and related fees and expenses, (ii) approximately $50.0 million to repay indebtedness under the Company’s senior secured credit facilities, and (iii) $25.0 million to pay a one-time fee to terminate a management agreement with affiliates of certain shareholders. The Company incurred a loss on debt extinguishment in the second quarter of 2013 of $16.5 million dollars in connection with the prepayment of the outstanding debt.
Financial Guidance
For 2013, the Company expects to achieve service revenues between $3.76 billion and $3.81 billion which represents a constant currency growth range of 3.8% to 5.2%. The Company also expects diluted adjusted earnings per share between $1.95 and $2.05 per share representing growth of 10.2% to 15.5%, diluted GAAP earnings per share between $1.63 and $1.73 per share, and an annual effective income tax rate estimated in the range of 30% to 32%. This financial guidance is based on the actual results for the first half of 2013 combined with the expected results for the second half of 2013, assuming that June foreign currency exchange rates stay in effect for the remainder of the year.
Webcast & Conference Call Details
Quintiles will host a conference call at 8:00 a.m. EDT today to discuss its second quarter 2013 financial results. To participate, please dial +1 (855) 484-7367 or +1 (631) 259-7541 outside the United States, approximately 15 minutes before the scheduled start of the call. The conference call will also be accessible, live via webcast, on the Investors section of the Quintiles website at www.quintiles.com. An archived replay of the conference call will be available online at www.quintiles.com after 1:00 p.m. EDT on August 1, 2013.
About Quintiles
Quintiles is the world’s largest provider of biopharmaceutical development and commercial outsourcing services with a network of approximately 27,000 employees conducting business in approximately 100 countries. We have helped develop or commercialize all of the top-50 best-selling drugs on the market. Quintiles applies the breadth and depth of the company service offerings along with extensive therapeutic, scientific and analytics expertise to help our customers navigate an increasingly complex healthcare environment as they seek to improve efficiency and effectiveness in the delivery of better healthcare outcomes. To learn more about Quintiles, please visit www.quintiles.com
Forward-Looking Statements
This press release contains forward-looking statements that reflect, among other things, the Company’s current expectations and anticipated results of operations, all of which are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements, market trends or industry results to differ materially from those expressed or implied by such forward-looking statements. For this purpose, any statements contained herein that are not statements of historical fact may constitute forward-looking statements. Without limiting the foregoing, words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “should,” “targets,” “will” and the negative thereof and similar words and expressions are intended to identify forward-looking statements. Actual results may differ materially from the Company’s expectations due to a number of factors, including that most of the Company’s contracts may be terminated on short notice, and that the Company may be unable to maintain large customer contracts or to enter into new contracts; the historical indications of the relationship of backlog to revenues may not be indicative of their future relationship; the market for the Company’s services may not grow as the Company expects; the Company may under price contracts or overrun its cost estimates, and if the Company is unable to achieve operating efficiencies or grow revenues faster than expenses, operating margins will be adversely affected; the Company may be unable to maintain information systems or effectively update them; customer or therapeutic concentration could harm the Company’s business; the Company’s business is subject to risks associated with international operations, including economic, political and other risks; government regulators or customers may limit the scope of prescription or withdraw products from the market, and government regulators may impose new regulations affecting the Company’s business; the Company may be unable to successfully develop and market new services or enter new markets; the Company’s failure to perform services in accordance with contractual requirements, regulatory standards and ethical considerations may subject it to significant costs or liability, damage its reputation and cause it to lose existing business or not receive new business; the Company’s services are related to treatment of human patients, and it could face liability if a patient is harmed; the Company has substantial indebtedness and may incur additional indebtedness in the future, which could adversely affect the Company’s financial condition; and other factors that are set forth in the Company's filings with the Securities and Exchange Commission (“SEC”), including the final prospectus dated May 8, 2013 relating to the Company’s initial public offering or the quarterly reports on Form 10-Q. The Company undertakes no obligation to update any forward-looking statement after the date of this release, whether as a result of new information, future developments or otherwise, except as may be required by applicable law.
Use of Non-GAAP Financial Measures
This press release includes adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted net income per share, each of which is a financial measure not prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). Management believes that these non-GAAP measures provide useful supplemental information to management and investors regarding the underlying performance of the Company’s business operations and are more indicative of core operating results as they exclude certain items whose fluctuations from period-to-period do not necessarily correspond to changes in the core operations of the business. These non-GAAP measures are performance measures only and are not measures of the Company’s cash flows or liquidity, nor are they alternatives for measures of financial performance prepared in accordance with GAAP and may be different from similarly titled non-GAAP measures used by other companies. Investors and potential investors are encouraged to review the reconciliations of the non-GAAP financial measures to their most directly comparable GAAP measures attached to this press release.
Internet Posting of Information: The Company routinely posts information that may be important to investors in the 'Investors' section of the Company's website at www.Quintiles.com. The Company encourages investors and potential investors to consult the Company’s website regularly for important information about the Company.
QUINTILES TRANSNATIONAL HOLDINGS INC. AND SUBSIDIARIES | ||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||
(unaudited) | ||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||
| Service revenues | $ | 944,238 | $ | 944,914 | $ | 1,871,673 | $ | 1,832,949 | ||||||||||
| Reimbursed expenses | 351,442 | 285,853 | 652,848 | 554,402 | ||||||||||||||
| Total revenues | 1,295,680 | 1,230,767 | 2,524,521 | 2,387,351 | ||||||||||||||
| Costs, expenses and other: | ||||||||||||||||||
| Costs of revenue, service costs | 617,666 | 628,222 | 1,228,775 | 1,218,785 | ||||||||||||||
| Costs of revenue, reimbursed expenses | 351,442 | 285,853 | 652,848 | 554,402 | ||||||||||||||
| Selling, general and administrative | 228,838 | 203,544 | 428,140 | 409,339 | ||||||||||||||
| Restructuring costs | 2,837 | 12,263 | 4,696 | 11,953 | ||||||||||||||
| Income from operations | 94,897 | 100,885 | 210,062 | 192,872 | ||||||||||||||
| Interest income | (785 | ) | (322 | ) | (1,237 | ) | (747 | ) | ||||||||||
| Interest expense | 31,884 | 33,130 | 67,926 | 62,475 | ||||||||||||||
| Loss on extinguishment of debt | 16,543 | — | 16,543 | — | ||||||||||||||
| Other expense (income), net | 536 | (6,159 | ) | (1,846 | ) | (8,578 | ) | |||||||||||
Income before income taxes and equity in earnings (losses) of unconsolidated affiliates | 46,719 | 74,236 | 128,676 | 139,722 | ||||||||||||||
| Income tax expense | 8,830 | 27,558 | 40,948 | 51,809 | ||||||||||||||
Income before equity in earnings (losses) of unconsolidated affiliates | 37,889 | 46,678 | 87,728 | 87,913 | ||||||||||||||
Equity in earnings (losses) of unconsolidated affiliates | 464 | 334 | (1,219 | ) | 1,907 | |||||||||||||
| Net income | 38,353 | 47,012 | 86,509 | 89,820 | ||||||||||||||
| Net loss attributable to noncontrolling interests | 164 | 189 | 317 | 654 | ||||||||||||||
Net income attributable to Quintiles Transnational Holdings Inc. | $ | 38,517 | $ | 47,201 | $ | 86,826 | $ | 90,474 | ||||||||||
| Earnings per share attributable to common shareholders: | ||||||||||||||||||
| Basic | $ | 0.31 | $ | 0.41 | $ | 0.73 | $ | 0.78 | ||||||||||
| Diluted | $ | 0.30 | $ | 0.40 | $ | 0.71 | $ | 0.77 | ||||||||||
| Weighted average common shares outstanding: | ||||||||||||||||||
| Basic | 122,709 | 115,670 | 119,239 | 115,739 | ||||||||||||||
| Diluted | 126,578 | 117,706 | 122,659 | 117,606 | ||||||||||||||
QUINTILES TRANSNATIONAL HOLDINGS INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| June 30, 2013 | December 31, 2012 | |||||||
| (unaudited) | ||||||||
| (in thousands, except per share data) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 585,722 | $ | 567,728 | ||||
| Restricted cash | 2,321 | 2,822 | ||||||
| Trade accounts receivable and unbilled services, net | 867,211 | 745,373 | ||||||
| Prepaid expenses | 48,599 | 33,354 | ||||||
| Deferred income taxes | 65,416 | 69,038 | ||||||
| Income taxes receivable | 26,504 | 17,597 | ||||||
| Other current assets and receivables | 78,087 | 74,082 | ||||||
| Total current assets | 1,673,860 | 1,509,994 | ||||||
| Property and equipment, net | 196,749 | 193,999 | ||||||
| Investments in debt, equity and other securities | 35,943 | 35,951 | ||||||
| Investments in and advances to unconsolidated affiliates | 22,179 | 19,148 | ||||||
| Goodwill | 295,260 | 302,429 | ||||||
| Other identifiable intangibles, net | 271,733 | 272,813 | ||||||
| Deferred income taxes | 41,141 | 37,313 | ||||||
| Deposits and other assets | 111,302 | 127,506 | ||||||
| Total assets | $ | 2,648,167 | $ | 2,499,153 | ||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 708,583 | $ | 751,798 | ||||
| Unearned income | 459,569 | 456,587 | ||||||
| Income taxes payable | 27,604 | 9,639 | ||||||
| Current portion of long-term debt and obligations held under capital leases | 141 | 55,710 | ||||||
| Other current liabilities | 42,830 | 44,230 | ||||||
| Total current liabilities | 1,238,727 | 1,317,964 | ||||||
| Long-term debt and obligations held under capital leases, less current portion | 2,045,142 | 2,366,268 | ||||||
| Deferred income taxes | 8,362 | 11,616 | ||||||
| Other liabilities | 153,824 | 162,349 | ||||||
| Total liabilities | 3,446,055 | 3,858,197 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders’ deficit: | ||||||||
Common stock and additional paid-in capital, 300,000 and 150,000 shares authorized at June 30, | ||||||||
2013 and December 31, 2012, respectively, $0.01 par value, 128,921 and 115,764 shares | ||||||||
issued and outstanding at June 30, 2013 and December 31, 2012, respectively | 505,074 | 4,554 | ||||||
| Accumulated deficit | (1,284,946 | ) | (1,371,772 | ) | ||||
| Accumulated other comprehensive income | (18,186 | ) | 7,695 | |||||
| Deficit attributable to Quintiles Transnational Holdings Inc.’s shareholders | (798,058 | ) | (1,359,523 | ) | ||||
| Equity attributable to noncontrolling interests | 170 | 479 | ||||||
| Total shareholders’ deficit | (797,888 | ) | (1,359,044 | ) | ||||
| Total liabilities and shareholders’ deficit | $ | 2,648,167 | $ | 2,499,153 | ||||
QUINTILES TRANSNATIONAL HOLDINGS INC. AND SUBSIDIARIES | ||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
(unaudited) | ||||||||||
| Six Months Ended June 30, | ||||||||||
| 2013 | 2012 | |||||||||
| (in thousands) | ||||||||||
| Operating activities: | ||||||||||
| Net income | $ | 86,509 | $ | 89,820 | ||||||
| Adjustments to reconcile net income to cash provided by operating activities: | ||||||||||
| Depreciation and amortization | 49,626 | 46,990 | ||||||||
| Amortization of debt issuance costs and discount | 15,258 | 3,586 | ||||||||
| Share-based compensation | 11,091 | 10,469 | ||||||||
| Gain on disposals of property and equipment, net | (558 | ) | (867 | ) | ||||||
| Loss (earnings) from unconsolidated affiliates | 1,326 | (1,838 | ) | |||||||
| (Benefit from) provision for deferred income taxes | (12,041 | ) | 7,885 | |||||||
| Excess income tax benefits on stock option exercises | (409 | ) | (380 | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||||
| Change in accounts receivable, unbilled services and unearned income | (127,238 | ) | (38,944 | ) | ||||||
| Change in other operating assets and liabilities | (18,180 | ) | (29,390 | ) | ||||||
| Net cash provided by operating activities | 5,384 | 87,331 | ||||||||
| Investing activities: | ||||||||||
| Acquisition of property, equipment and software | (64,276 | ) | (33,928 | ) | ||||||
| Acquisition of businesses, net of cash acquired | — | (3,940 | ) | |||||||
| Proceeds from disposition of property and equipment | 1,032 | 1,501 | ||||||||
| Purchases of equity securities and other investments | — | (13,204 | ) | |||||||
| Investments in and advances to unconsolidated affiliates, net of payments received | (4,668 | ) | (11,859 | ) | ||||||
| Other | 513 | (1,528 | ) | |||||||
| Net cash used in investing activities | (67,399 | ) | (62,958 | ) | ||||||
| Financing activities: | ||||||||||
| Proceeds from issuance of debt, net of costs | — | 287,790 | ||||||||
| Repayment of debt and principal payments on capital lease obligations | (384,825 | ) | (11,512 | ) | ||||||
| Issuance of common stock, net of costs | 489,941 | 1,000 | ||||||||
| Exercise of stock options | 253 | 296 | ||||||||
| Repurchase of common stock | — | (10,466 | ) | |||||||
| Excess income tax benefits on stock option exercises | 409 | 380 | ||||||||
| Dividends paid to common shareholders | — | (326,148 | ) | |||||||
| Net cash provided by (used in) financing activities | 105,778 | (58,660 | ) | |||||||
| Effect of foreign currency exchange rate changes on cash | (25,769 | ) | (5,770 | ) | ||||||
| Increase (decrease) in cash and cash equivalents | 17,994 | (40,057 | ) | |||||||
| Cash and cash equivalents at beginning of period | 567,728 | 516,299 | ||||||||
| Cash and cash equivalents at end of period | $ | 585,722 | $ | 476,242 | ||||||
QUINTILES TRANSNATIONAL HOLDINGS INC. AND SUBSIDIARIES | ||||||||||||||||||
CONDENSED CONSOLIDATED SEGMENT OPERATIONS | ||||||||||||||||||
(unaudited) | ||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||||
| (in thousands) | ||||||||||||||||||
| Service revenues | ||||||||||||||||||
| Product Development | $ | 724,170 | $ | 692,123 | $ | 1,430,477 | $ | 1,348,485 | ||||||||||
| Integrated Healthcare Services | 220,068 | 252,791 | 441,196 | 484,464 | ||||||||||||||
| Total service revenues | 944,238 | 944,914 | 1,871,673 | 1,832,949 | ||||||||||||||
| Costs of revenue, service costs | ||||||||||||||||||
| Product Development | 441,895 | 428,936 | 870,902 | 833,246 | ||||||||||||||
| Integrated Healthcare Services | 175,771 | 199,286 | 357,873 | 385,539 | ||||||||||||||
| Total costs of revenue, service costs | 617,666 | 628,222 | 1,228,775 | 1,218,785 | ||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||||
| Product Development | 146,182 | 144,043 | 290,807 | 284,070 | ||||||||||||||
| Integrated Healthcare Services | 31,790 | 33,266 | 64,571 | 64,369 | ||||||||||||||
| General corporate and unallocated expenses | 50,866 | 26,235 | 72,762 | 60,900 | ||||||||||||||
| Total selling, general and administrative expenses | 228,838 | 203,544 | 428,140 | 409,339 | ||||||||||||||
| Income from operations | ||||||||||||||||||
| Product Development | 136,093 | 119,144 | 268,768 | 231,169 | ||||||||||||||
| Integrated Healthcare Services | 12,507 | 20,239 | 18,752 | 34,556 | ||||||||||||||
| General corporate and unallocated expenses | (50,866 | ) | (26,235 | ) | (72,762 | ) | (60,900 | ) | ||||||||||
| Restructuring costs | (2,837 | ) | (12,263 | ) | (4,696 | ) | (11,953 | ) | ||||||||||
Total income from operations | $ | 94,897 | $ | 100,885 | $ | 210,062 | $ | 192,872 | ||||||||||
QUINTILES TRANSNATIONAL HOLDINGS INC. AND SUBSIDIARIES | ||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP MEASURES | ||||||||||||||||||
(unaudited) | ||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||
Adjusted EBITDA | ||||||||||||||||||
| Net income, as reported | $ | 38,353 | $ | 47,012 | $ | 86,509 | $ | 89,820 | ||||||||||
| Interest expense, net | 31,099 | 32,808 | 66,689 | 61,728 | ||||||||||||||
| Income tax expense | 8,830 | 27,558 | 40,948 | 51,809 | ||||||||||||||
| Depreciation and amortization | 24,986 | 23,719 | 49,626 | 46,990 | ||||||||||||||
| Restructuring costs | 2,837 | 12,263 | 4,696 | 11,953 | ||||||||||||||
| Incremental share-based compensation expense (1) | — | — | — | 4,459 | ||||||||||||||
| Bonus paid to certain holders of stock options | — | — | — | 8,912 | ||||||||||||||
| Management fees (2) | 26,360 | 1,334 | 27,694 | 2,640 | ||||||||||||||
| Loss on extinguishment of debt | 16,543 | — | 16,543 | — | ||||||||||||||
| Other expense (income), net | 536 | (6,159 | ) | (1,846 | ) | (8,578 | ) | |||||||||||
| Equity in (earnings) losses from unconsolidated affiliates | (464 | ) | (334 | ) | 1,219 | (1,907 | ) | |||||||||||
| Adjusted EBITDA | $ | 149,080 | $ | 138,201 | $ | 292,078 | $ | 267,826 | ||||||||||
Adjusted Income from Operations | ||||||||||||||||||
| Income from operations, as reported | $ | 94,897 | $ | 100,885 | $ | 210,062 | $ | 192,872 | ||||||||||
| Restructuring costs | 2,837 | 12,263 | 4,696 | 11,953 | ||||||||||||||
| Incremental share-based compensation expense (1) | — | — | — | 4,459 | ||||||||||||||
| Bonus paid to certain holders of stock options | — | — | — | 8,912 | ||||||||||||||
| Management fees (2) | 26,360 | 1,334 | 27,694 | 2,640 | ||||||||||||||
| Adjusted income from operations | $ | 124,094 | $ | 114,482 | $ | 242,452 | $ | 220,836 | ||||||||||
Adjusted Net Income | ||||||||||||||||||
| Net income, as reported | $ | 38,353 | $ | 47,012 | $ | 86,509 | $ | 89,820 | ||||||||||
| Net loss attributable to noncontrolling interests | 164 | 189 | 317 | 654 | ||||||||||||||
| Restructuring costs | 2,837 | 12,263 | 4,696 | 11,953 | ||||||||||||||
| Incremental share-based compensation expense (1) | — | — | — | 4,459 | ||||||||||||||
| Bonus paid to certain holders of stock options | — | — | — | 8,912 | ||||||||||||||
| Management fees (2) | 26,360 | 1,334 | 27,694 | 2,640 | ||||||||||||||
| Loss on extinguishment of debt | 16,543 | — | 16,543 | — | ||||||||||||||
| Tax effect of adjustments (3) | (17,088 | ) | (4,928 | ) | (18,271 | ) | (10,467 | ) | ||||||||||
| Other income tax adjustments (4) | (4,244 | ) | — | 3,057 | — | |||||||||||||
| Adjusted net income | $ | 62,925 | $ | 55,870 | $ | 120,545 | $ | 107,971 | ||||||||||
| Diluted weighted average common shares outstanding | 126,578 | 117,706 | 122,659 | 117,606 | ||||||||||||||
| Diluted adjusted earnings per share | $ | 0.50 | $ | 0.47 | $ | 0.98 | $ | 0.92 | ||||||||||
QUINTILES TRANSNATIONAL HOLDINGS INC. AND SUBSIDIARIES | |||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Continued) | |||||||||||||||
(unaudited) | |||||||||||||||
Three Months Ended | Six Months Ended June 30, 2013 | ||||||||||||||
| March 31, 2013 | June 30, 2013 | ||||||||||||||
| (in thousands, except per share data) | |||||||||||||||
Adjusted Net Income | |||||||||||||||
| Net income, as reported | $ | 48,156 | $ | 38,353 | $ | 86,509 | |||||||||
| Net loss attributable to noncontrolling interests | 153 | 164 | 317 | ||||||||||||
| Restructuring costs | 1,859 | 2,837 | 4,696 | ||||||||||||
| Management fees (2) | 1,334 | 26,360 | 27,694 | ||||||||||||
| Loss on extinguishment of debt | — | 16,543 | 16,543 | ||||||||||||
| Tax effect of adjustments (3) | (1,183 | ) | (17,088 | ) | (18,271 | ) | |||||||||
| Other income tax adjustments (4) | 7,301 | (4,244 | ) | 3,057 | |||||||||||
| Adjusted net income | $ | 57,620 | $ | 62,925 | $ | 120,545 | |||||||||
| Diluted weighted average common shares outstanding | 118,740 | 126,578 | 122,659 | ||||||||||||
| Diluted adjusted earnings per share | $ | 0.49 | $ | 0.50 | $ | 0.98 | |||||||||
(1) Incremental expense incurred for repricings of share-based awards. The amount represents only the incremental amount of share-based compensation expense incurred in the quarter that the repricing occurred.
(2) Management fees were previously paid to affiliates of certain of the Company’s shareholders pursuant to a management agreement. Both the three and six month periods ended June 30, 2013 include a $25.0 million fee paid in connection with the termination of the management agreement.
(3) The tax effect of adjustments was based on the respective transactions income tax rate, which was 38.5%, with the exception of restructuring costs which were tax effected at 26.4% in the 2013 periods and 36.0% in the 2012 periods.
(4) Other income tax adjustments remove the impact of certain discrete adjustments on the Company’s income tax expense in both the three and six month periods in 2013. The Company’s effective income tax rate in the 2013 periods was impacted by the Company’s change in assertion regarding the undistributed earnings of most of the Company’s foreign subsidiaries, which are now considered to be indefinitely reinvested outside of the United States. As a result of the assertion change, in the second quarter of 2013, we recorded an $8.1 million discrete income tax benefit to reverse the deferred income tax liability previously recorded on undistributed foreign earnings. In addition, the estimated annual effective income tax rate for 2013 decreased due to the indefinitely reinvested assertion which resulted in a $7.3 million one-time income tax benefit for the three months ended June 2013 to adjust income taxes recorded on the first quarter earnings to the new estimated annual effective income tax rate. Finally, in the second quarter of 2013, the Company settled certain intercompany notes that had previously been considered long term investments, which resulted in an $11.2 million discrete income tax expense. Below is a summary of other income tax adjustments:
Three Months Ended | Six Months Ended June 30, 2013 | |||||||||||||
March 31, 2013 | June 30, 2013 | |||||||||||||
| (in thousands) | ||||||||||||||
| Change to indefinitely reinvested assertion: | ||||||||||||||
| Impact of change on effective income tax rate | $ | (7,301 | ) | $ | 7,301 | $ | — | |||||||
| Impact of reversal of deferred income tax liability | — | 8,123 | 8,123 | |||||||||||
| Total from change in assertion | (7,301 | ) | 15,424 | 8,123 | ||||||||||
| Impact from intercompany notes settlements | — | (11,180 | ) | (11,180 | ) | |||||||||
| Total other income tax adjustments | $ | (7,301 | ) | $ | 4,244 | $ | (3,057 | ) | ||||||
QUINTILES TRANSNATIONAL HOLDINGS INC. AND SUBSIDIARIES | ||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Continued) | ||||||||||||||||||
(unaudited) | ||||||||||||||||||
Reconciliation of GAAP to Non-GAAP Full Year 2013 Guidance | ||||||||||||||||||
| Adjusted Net Income and Diluted Adjusted Earnings Per Share | Adjusted Net Income | Diluted Adjusted Earnings Per Share | ||||||||||||||||
| (in millions, except per share data) | ||||||||||||||||||
| Low | High | Low | High | |||||||||||||||
| Net income and diluted earnings per share | $ | 208 | – | $ | 220 | $ | 1.63 | – | $ | 1.73 | ||||||||
| Restructuring costs | 15 | – | 15 | 0.12 | – | 0.12 | ||||||||||||
| Management fees | 28 | – | 28 | 0.22 | – | 0.22 | ||||||||||||
| Loss on extinguishment of debt | 17 | – | 17 | 0.13 | – | 0.13 | ||||||||||||
| Tax effect of adjustments | (21 | ) | – | (21 | ) | (0.17 | ) | – | (0.17 | ) | ||||||||
| Other income tax adjustments | 3 | – | 3 | 0.02 | – | 0.02 | ||||||||||||
| Adjusted net income and diluted adjusted earnings per share | $ | 250 | – | $ | 262 | $ | 1.95 | – | $ | 2.05 | ||||||||
(1) The tax effect of adjustments is based on the respective transaction’s income tax rate, which is 38.5% with the exception of restructuring costs which are tax effected at approximately 30%.
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