FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A - 16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 29, 2004
ICON PLC
(Registrant's name)
0-29714
(Commission file number)
South County Business Park, Leopardstown, Dublin 18, Ireland.
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Yes___X___ No_______
Indicate by check mark whether the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1):
Yes______ No___X___
Indicate by check mark whether the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(7):
Yes______ No___X___
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes_______ No___X___
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):82 N/A
ICON PLC
QUARTERLY PERIOD ENDED FEBRUARY 29, 2004
CONTENTS PAGE
General.................................................................. 1
Condensed Consolidated Balance Sheets as at
February 29, 2004 and May 31, 2003....................................... 2
Condensed Consolidated Statements of Operations for the
three and nine months ended February 29, 2004 and 2003................... 3
Condensed Consolidated Statements of Cash Flows for the
nine months ended February 29, 2004 and 2003............................. 4
Condensed Consolidated Statements of Shareholders' Equity
and Comprehensive Income................................................. 5
Notes to the Condensed Consolidated Financial
Statements............................................................... 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................... 12
Signature Page........................................................... 21
ICON PLC
GENERAL
As used herein, "ICON", the "Company" and "we" refer to ICON plc and its
consolidated subsidiaries, unless the context requires otherwise.
BUSINESS
We are a contract research organization, or "CRO", providing clinical research
and development services on a global basis to the pharmaceutical and
biotechnology industries. Our focus is on supporting the conduct of clinical
trials. We have historically done so by providing such services as Phase I - IV
clinical trials management, study design, laboratory services and drug
development support. We believe that we are one of a select group of CROs with
the capability and expertise to conduct clinical trials in most major
therapeutic areas on a global basis. We have approximately 2,450 employees and
operations in 33 locations in 20 countries. For the nine months ended February
29, 2004, we derived approximately 63.1%, 33.4%, and 3.5% of our net revenue in
the United States, Europe and Rest of World, respectively.
Headquartered in Dublin, Ireland, we began operations in 1990 and have expanded
our business through internal growth and strategic acquisitions.
1
ICON PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
AS AT FEBRUARY 29, 2004 AND MAY 31, 2003
(UNAUDITED) (AUDITED)
FEBRUARY 29, 2004 MAY 31, 2003
(IN THOUSANDS)
ASSETS
Current Assets:
Cash and cash equivalents....................................................... $67,114 $18,311
Accounts receivable............................................................. 73,888 74,645
Unbilled revenue................................................................ 56,340 44,783
Other receivables............................................................... 7,915 4,385
Deferred taxes.................................................................. 32 32
Prepayments and other current assets............................................ 9,487 8,326
------------- -------------
Total current assets............................................................ 214,776 150,482
Other Assets:
Property, plant and equipment, net.............................................. 43,182 39,503
Goodwill........................................................................ 62,158 45,029
------------- -------------
Total Assets.......................................................................... $320,116 $235,014
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable................................................................ $ 9,338 $11,092
Payments on account............................................................. 59,979 45,763
Other liabilities............................................................... 30,660 28,289
Taxes payable................................................................... 10,281 4,385
Bank creditlines and loan facilities............................................ - 7,126
------------- -------------
Total current liabilities...................................................... 110,258 96,655
Other Liabilities:
Long term government grants..................................................... 1,177 1,140
Deferred consideration - loan notes............................................. 1,403 -
Other liabilities............................................................... 242 309
Shareholders' Equity:
Ordinary Shares, par value 6 euro cents per share; 20,000,000 shares
authorized, 13,637,996 shares issued and outstanding at February 29, 2004
and
11,841,557 shares issued and outstanding at May 31, 2003 966 841
Additional paid-in capital...................................................... 109,017 61,164
Accumulated other comprehensive income.......................................... 11,415 7,787
Merger reserve.................................................................. 47 47
Retained earnings............................................................... 85,591 67,071
------------- -------------
Total Shareholders' Equity............................................................ 207,036 136,910
------------- -------------
Total Liabilities and Shareholders' Equity............................................ $320,116 $235,014
============= =============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
ICON PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED FEBRUARY 29, 2004 AND FEBRUARY 28, 2003
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY FEBRUARY FEBRUARY FEBRUARY
29 28 29 28
2004 2003 2004 2003
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
Revenue:
Gross revenue....................................... ....... $112,831 $79,205 $332,181 $236,270
Subcontractor costs........................................ (35,969) (19,894) (113,177) (76,565)
------------ ------------- ------------ --------------
Net revenue................................................ 76,862 59,311 219,004 159,705
Costs and expenses:
Direct costs............................................... 42,502 33,366 120,271 87,507
Selling, general and administrative expense................ 22,708 17,890 65,774 49,481
Depreciation .............................................. 2,894 1,869 8,215 5,017
------------ ------------- ------------ -------------
Total costs and expenses................................... 68,104 53,125 194,260 142,005
------------ ------------- ------------ --------------
Income from operations........................................ 8,758 6,186 24,744 17,700
Interest income............................................... 163 178 333 594
Interest expense.............................................. (88) (58) (136) (215)
----------- -------------- ------------ -------------
Income before provision for income taxes...................... 8,833 6,306 24,941 18,079
Provision for income taxes.................................... (2,182) (1,709) (6,421) (5,090)
------------ ------------- ------------ -------------
Net income.................................................... $6,651 $4,597 $18,520 $12,989
============ ============= ============ ==============
Net income per Ordinary Share:
Basic...................................................... $0.49 $0.39 $1.45 $1.10
============ ============= ============= =============
Diluted................................................... $0.47 $0.38 $1.39 $1.07
============ ============= ============ ==============
Weighted average number of Ordinary Shares outstanding:
Basic.................................................... 13,622,514 11,818,704 12,797,089 11,804,576
============ ============= ============== =============
Diluted.................................................. 14,070,194 12,220,266 13,288,688 12,169,875
============ ============= ============= ==============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
ICON PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED FEBRUARY 29, 2004 AND FEBRUARY 28, 2003
(UNAUDITED)
NINE MONTHS ENDED
FEBRUARY 29 FEBRUARY 28
2004 2003
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $18,520 $12,989
Adjustments to reconcile net income to net cash provided by operating
activities:............................................
Loss on disposal of fixed assets....................... - 5
Depreciation........................................... 8,215 5,017
Amortization of grants................................. (26) (20)
Changes in assets and liabilities:
Decrease in accounts receivable........................ 4,710 4,395
Increase in unbilled revenue........................... (11,803) (22,704)
Decrease/ (increase) in other receivables.............. 2,184 (2,044)
Increase in prepayments and other current assets....... (743) (2,752)
Increase in payments on account........................ 12,236 17,762
Decrease in other liabilities.......................... (3,710) (185)
Increase in taxes payable.............................. 5,673 3,887
(Decrease)/ increase in accounts payable............... (4,445) 213
--------------- ---------------
Net cash provided by operating activities................. 30,811 16,563
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets............................... (9,697) (11,157)
Sale of short term investments......................... - 23,190
Purchase of short term investments..................... - (4,639)
Purchase of subsidiary................................. (11,180) (35,721)
Cash acquired with subsidiary ......................... 891 1,910
Payments in respect of prior period acquisitions (1,588) (3,078)
--------------- ---------------
Net cash used in investing activities..................... (21,574) (29,495)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of bank overdraft............................... (7,126) (1,941)
Proceeds from issuance of share capital................... 45,705 -
Proceeds from exercise of share options................... 3,696 441
Share issuance costs...................................... (1,178) -
Repayment of other liabilities............................ (162) (136)
--------------- ---------------
Net cash provided by/ (used in) by financing activities... 40,935 (1,636)
Effect of exchange rate movements on cash................. (1,369) 139
--------------- ---------------
NET INCREASE/ (DECREASE) IN CASH AND CASH EQUIVALENTS..... 48,803 (14,429)
Cash and cash equivalents at beginning of period.......... 18,311 36,291
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................ $67,114 $21,862
=============== ===============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
ICON PLC
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
EQUITY AND COMPREHENSIVE INCOME
(UNAUDITED)
ACCUMULATED
ADDITIONAL OTHER
PAID-IN COMPREHENSIVE RETAINED MERGER
SHARES AMOUNT CAPITAL INCOME EARNINGS RESERVE TOTAL
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
BALANCE AT MAY 31, 2003............ 11,841,557 $841 $61,164 $7,787 $67,071 $47 $136,910
Comprehensive Income:
Net income....................... - - - - 18,520 - 18,520
Currency translation adjustment.. - - - 3,628 - - 3,628
-----------
Total comprehensive income....... 22,148
Exercise of Share Options........ 296,439 21 3,675 - - - 3,696
Shares issued.................... 1,500,000 104 45,601 - - - 45,705
Share Issue costs................ - - (1,423) - - - (1,423)
_________ ____ ______ _______ ______ ______ ______
BALANCE AT FEBRUARY 29, 2004 13,637,996 $966 $109,017 $11,415 $85,591 $47 $207,036
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
ICON PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FEBRUARY 29, 2004
1. BASIS OF PRESENTATION
These condensed consolidated financial statements, which have been prepared in
accordance with United States generally accepted accounting principles ("US
GAAP"), have not been audited. The condensed consolidated financial statements
reflect all adjustments, which are, in the opinion of management, necessary to
present a fair statement of the operating results and financial position for the
periods presented. The preparation of the condensed consolidated financial
statements in conformity with US GAAP requires management to make estimates and
assumptions that affect reported amounts and disclosures in the condensed
consolidated financial statements. Actual results could differ from those
estimates. There has been no significant change in ICON plc's accounting
policies from those outlined in ICON's annual report on Form 20-F for the year
ended May 31, 2003, except as described below.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with the United States generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). The condensed
consolidated financial statements should be read in conjunction with the
accounting policies and notes to the consolidated financial statements included
in ICON's 2003 annual report on Form 20-F. Operating results for the nine months
ended February 29, 2004 are not necessarily indicative of the results that may
be expected for the fiscal year ending May 31, 2004.
2. ACQUISITIONS
Acquisition of Globomax
On September 9, 2003, the Company acquired 100% of the outstanding shares of
Globomax LLC, based in Maryland, USA, for an initial cash consideration of
U.S.$10.9 million, excluding costs of acquisition. Earn-out provisions have been
built into the acquisition contract requiring the potential payment of
additional deferred consideration up to a maximum of U.S.$4.0 million depending
on the performance of Globomax over the period from date of acquisition to May
31, 2006. Such potential additional consideration will be accounted for as
goodwill. The total amount of goodwill is expected to be tax deductible.
The acquisition of Globomax has been accounted for as a purchase in accordance
with SFAS No. 141, "Business Combinations". The following table summarises the
fair values of the assets acquired and the liabilities assumed at the date of
acquisition.
AT SEPTEMBER 9,
2003
(IN THOUSANDS)
Property, Plant and Equipment 370
Goodwill 13,134
Cash 891
Other Current Assets 3,306
Current liabilities (6,376)
----------------------------------------------------------------
----------------------------------------------------------------
Purchase Price $11,325
----------------------------------------------------------------
The results of Globomax have been included in the consolidated financial
statements from September 9, 2003.
6
Prior Period Acquisitions
On July 25, 2003, August 20, 2003, August 29, 2003 and September 11, 2003,
additional cash payments totaling U.S.$110,897 were made to the former
shareholders of Barton & Polansky Associates, Inc. ("BPA") and Managed Clinical
Solutions, Inc. ("MCS"), as part of the working capital provisions in the
applicable acquisition contract. We acquired BPA and MCS on October 9, 2002.
On May 31, 2003, an amount of Stg(pound)1.225 million (U.S.$2.0 million) was
accrued in relation to the Medeval Group Limited ("Medeval") acquisition, a
company we acquired on January 24, 2003, as the first earn-out target identified
in the acquisition contract was reached on this date. It was provided in the
applicable acquisition agreement that the form of the earn-out would consist of
cash payable to one specific named selling shareholder, with the balance due to
the other selling shareholders being in the form of guaranteed loan notes. These
guaranteed loan notes have a repayment date of 3 years from the date of issue
but are exercisable six months from that date. On September 30, 2003,
Stg(pound)0.472 million (U.S.$0.8 million) was paid in cash to the specific
named selling shareholder. On the same date, Stg(pound)0.753 million (U.S.$1.403
million) of guaranteed loan notes were issued to the remaining selling
shareholders and are included in Deferred consideration - loan notes.
On October 2, 2003, a cash payment of U.S.$421,000 was made to the former
shareholders of UCT (U.S.) Inc.as part of the earn-out provisions in the
contract. This represents the final payment due to the former shareholders of
UCT under the acquisition contract.
On December 30, 2003, a cash payment of Stg(pound)100,000 (U.S.$176,897) was
made to the former shareholders of YRCR Limited. This represents the final
payment due to the former shareholders of YRCR under the acquisition contract.
The pro forma effect of the BPA, MCS, Medeval and Globomax acquisitions if
completed on June 1, 2002 would have resulted in net revenue, net income and
earnings per share for the three and nine months ended February 29, 2004 and
February 28, 2003 as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY 29 FEBRUARY 28 FEBRUARY 29 FEBRUARY 28
2004 2003 2004 2003
(IN THOUSANDS) (IN THOUSANDS)
Net Revenue $76,862 $64,882 $222,030 $185,835
Net Income $6,651 $5,180 $18,696 $14,811
Basic Earnings per Share $0.49 $0.44 $1.46 $1.25
Diluted Earnings Per Share $0.47 $0.42 $1.41 $1.22
In August 2002, a $900,000 distribution was made to the former shareholders of
BPA and MCS, which was recorded as other expenses. In July 2001 and 2002,
dividends were paid to the former shareholders of Medeval of Stg(pound)25,679
(U.S.$36,148) and Stg(pound)109,700 (U.S.$168,134) respectively which were also
recorded as other expenses. These payments are included in the pro forma
results.
An effective tax rate of 35.0% was imputed on the profits before tax of Globomax
LLC for the periods prior to acquisition.
3. GOODWILL
NINE MONTHS ENDED YEAR ENDED
FEBRUARY 29 MAY 31
2004 2003
(IN THOUSANDS) (IN THOUSANDS)
Opening Balance $45,029 $10,093
Arising during the year 13,134 32,302
Arising on earn-out (current and prior year 709 2,003
acquisitions)
Exchange Movement 3,286 631
------------------------------------------------------------------------------------------------------------
Closing Balance $62,158 $45,029
============================================================================================================
7
4. NET INCOME PER ORDINARY SHARE
Basic net income per Ordinary Share has been computed by dividing net income
available to ordinary shareholders by the weighted average number of Ordinary
Shares outstanding during the period. Diluted net income per Ordinary Share is
computed by adjusting the weighted average number of Ordinary Shares outstanding
during the period for all potentially dilutive Ordinary Shares outstanding
during the period and adjusting net income for any changes in income or loss
that would result from the conversion of such potential Ordinary Shares.
There is no difference in net income used for basic and diluted net income per
Ordinary Share. The reconciliation of the number of shares used in the
computation of basic and diluted net income per Ordinary Share is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY FEBRUARY FEBRUARY FEBRUARY
29 28 29 28
2004 2003 2004 2003
Weighted average number of Ordinary Shares outstanding for
basic net income per Ordinary Share 13,622,514 11,818,704 12,797,089 11,804,576
Effect of dilutive share options outstanding 447,680 401,562 491,599 365,299
------------------ -------------- ------------- --------------
Weighted average number of Ordinary Shares for diluted net
income per Ordinary Share 14,070,194 12,220,266 13,288,688 12,169,875
================== ============== ============= ==============
5. BUSINESS SEGMENT INFORMATION
The Company's areas of operation outside of Ireland principally include the
United States, United Kingdom, Germany, France, The Netherlands, Latvia, Israel,
Sweden, Australia, Argentina, Japan, Singapore, South Africa, Canada and India.
Segment information for the three and nine month periods ended February 29, 2004
and February 28, 2003 are as follows:
a) The distribution of net revenue by geographical area was as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY FEBRUARY FEBRUARY FEBRUARY
29 28 29 28
2004 2003 2004 2003
(IN THOUSANDS) (IN THOUSANDS)
Ireland* $9,366 $6,118 $27,523 $18,419
Rest of Europe 18,171 8,865 45,633 23,795
U.S. 46,660 42,860 138,232 113,439
Rest of the World 2,665 1,468 7,616 4,052
-----------------------------------------------------------------------------------------------------------------
Total $76,862 $59,311 $219,004 $159,705
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
* All sales shown for Ireland are export sales.
8
b) The distribution of net revenue by business segment was as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY FEBRUARY FEBRUARY FEBRUARY
29 28 29 28
2004 2003 2004 2003
(IN THOUSANDS) (IN THOUSANDS)
Central laboratory $7,212 $6,185 $19,549 $19,402
Clinical research 69,650 53,126 199,455 140,303
----------------------------------------------------------------------------------------------------------------------------
Total $76,862 $59,311 $219,004 $159,705
----------------------------------------------------------------------------------------------------------------------------
c) The distribution of income from operations by geographical area was as
follows:
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY FEBRUARY FEBRUARY FEBRUARY
29 28 29 28
2004 2003 2004 2003
(IN THOUSANDS) (IN THOUSANDS)
Ireland $3,454 $1,230 $8,390 $2,129
Rest of Europe 2,150 9 3,886 1,325
U.S. 2,572 4,893 11,299 13,813
Rest of the World 582 54 1,169 433
----------------------------------------------------------------------------------------------------------------------------
Total $8,758 $6,186 $24,744 $17,700
----------------------------------------------------------------------------------------------------------------------------
d) The distribution of income from operations by business segment was as
follows:
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY FEBRUARY FEBRUARY FEBRUARY
29 28 29 28
2004 2003 2004 2003
(IN THOUSANDS) (IN THOUSANDS)
Central laboratory $(483) $(451) $(2,796) $259
Clinical research 9,241 6,637 27,540 17,441
----------------------------------------------------------------------------------------------------------------------------
Total $8,758 $6,186 $24,744 $17,700
----------------------------------------------------------------------------------------------------------------------------
e) The distribution of property, plant and equipment, net, by geographical area
was as follows:
FEBRUARY 29, MAY 31,
2004 2003
(IN THOUSANDS)
Ireland $18,315 $17,003
Rest of Europe 7,179 6,316
U.S. 16,635 15,066
Rest of the World 1,053 1,118
--------------------------------------------------------------------
Total $43,182 $39,503
--------------------------------------------------------------------
9
f) The distribution of property, plant and equipment, net, by business segment
was as follows:
FEBRUARY 29, MAY 31,
2004 2003
(IN THOUSANDS)
Central laboratory $3,994 $3,560
Clinical research 39,188 35,943
------------------------------------------------------------------------
Total $43,182 $39,503
------------------------------------------------------------------------
g) The distribution of depreciation by geographical area was as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY FEBRUARY FEBRUARY FEBRUARY
29 28 29 28
2004 2003 2004 2003
(IN THOUSANDS) (IN THOUSANDS)
Ireland $965 $605 $2,691 $1,599
Rest of Europe 476 290 1,320 719
U.S. 1,367 902 3,948 2,512
Rest of the World 86 72 256 187
--------------------------------------------------------------------------------------------------------- ------------------
Total $2,894 $1,869 $8,215 $5,017
--------------------------------------------------------------------------------------------------------- ------------------
h) The distribution of depreciation by business segment was as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY FEBRUARY FEBRUARY FEBRUARY
29 28 29 28
2004 2003 2004 2003
(IN THOUSANDS) (IN THOUSANDS)
Central laboratory $239 $160 $766 $490
Clinical research 2,655 1,709 7,449 4,527
----------------------------------------------------------------------------------------------------------------------------
Total $2,894 $1,869 $8,215 $5,017
----------------------------------------------------------------------------------------------------------------------------
i) The distribution of total assets by geographical area was as follows:
FEBRUARY 29, MAY 31,
2004 2003
(IN THOUSANDS)
Ireland $88,059 $59,838
Rest of Europe 89,533 60,982
U.S. 139,505 110,602
Rest of the World 3,019 3,592
-----------------------------------------------------------------
Total $320,116 $235,014
-----------------------------------------------------------------
10
j) The distribution of total assets by business segment was as follows:
FEBRUARY 29, MAY 31,
2004 2003
(IN THOUSANDS)
Central laboratory $20,185 $19,175
Clinical research 299,931 215,839
------------------------------------------------------------------
Total $320,116 $235,014
------------------------------------------------------------------
11
ICON PLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following discussion and analysis should be read in conjunction with the
unaudited Consolidated Financial Statements and accompanying notes included
elsewhere herein and the Consolidated Financial Statements and related notes
thereto included in our Annual Report on Form 20-F for the fiscal year ended May
31, 2003. The Consolidated Financial Statements have been prepared in accordance
with accounting principles generally accepted in the United States.
OVERVIEW
We are a contract research organization, or "CRO", providing clinical research
and development services on a global basis to the pharmaceutical and
biotechnology industries. Our focus is on supporting the conduct of clinical
trials. We have historically done so by providing such services as Phase I - IV
clinical trials management, study design, laboratory services and drug
development support. We believe that we are one of a select group of CROs with
the capability and expertise to conduct clinical trials in most major
therapeutic areas on a global basis. We have approximately 2,450 employees and
operations in 33 locations in 20 countries. Our main operations are in the
United States and Europe. For the nine months ended February 29, 2004, we
derived approximately 63.1%, 33.4%, and 3.5% of our net revenue in the United
States, Europe and Rest of World, respectively.
We earn revenues by providing a number of different services to our clients.
These services include clinical trials management, biometric activities,
consulting and laboratory services. We recognize biometric, consulting and
laboratory revenues on a fee-for-service basis. Our laboratory service contracts
are multiple element arrangements, with laboratory kits and laboratory testing
representing the contractual elements. We determine the fair values for these
elements, each of which can be sold separately, based on objective and reliable
evidence of their respective fair values. Our laboratory contracts entitle us to
receive non-refundable set up fees and we allocate such fees as additional
consideration to the contractual elements based on the proportionate fair values
of the elements. We recognize revenues for the elements on the basis of the
number of deliverable units completed in a period.
We recognize clinical trials revenue on the basis of the relationship between
time incurred and the total estimated duration of the contract as this
represents the most accurate pattern over which our contractual obligations are
fulfilled. We invoice our customers upon achievement of specified contractual
milestones. This mechanism, which allows us to receive payment from our
customers throughout the duration of the contract, is not reflective of revenue
earned. We recognize revenues over the period from the awarding of the
customer's contract to study completion and acceptance. This requires us to
estimate total expected revenue, time inputs, contract costs, profitability and
expected duration of the clinical trial. These estimates are reviewed
periodically and, if any of these estimates change or actual results differ from
expected results, then an adjustment is recorded in the period in which they
become readily estimable.
As is customary in the CRO industry, we subcontract with third party
investigators in connection with clinical trials. All subcontractor costs, and
certain other costs where reimbursed by clients, are, in accordance with
industry practice, deducted from gross revenue to arrive at net revenue. As no
profit is earned on these costs, which vary from contract to contract, we view
net revenue as our primary measure of revenue growth.
Direct costs consist primarily of compensation and associated fringe benefits
for project-related employees and other direct project driven costs. Selling,
general and administrative expenses consist of compensation and related fringe
benefits for selling and administrative employees, professional services,
advertising costs and all costs related to facilities and information systems.
As the nature of our business involves the management of projects having a
typical duration of one to three years, the commencement, completion,
curtailment or early termination of projects in a fiscal year can have a
material impact on revenues earned with the relevant clients in such years. In
addition, as we typically work with some, but not all, divisions of a client,
fluctuations in the number and status of available projects within such
divisions can also have a material impact on revenues earned from such clients
from year to year.
Although domiciled in Ireland, we report our results in U.S. dollars. As a
consequence, the results of our non-United States based operations, when
translated into U.S. dollars, could be materially affected by fluctuations in
exchange rates between the U.S. dollar and the currency of those operations.
12
In addition to translation exposures, we are also subject to transaction
exposures because the currency in which contracts are priced can be different
from the currencies in which costs relating to those contracts are incurred. We
have twelve operations trading in U.S. dollars, four trading in Euros, three in
pounds Sterling, and one each in Australian Dollars, Singapore Dollars, Yen,
Israeli New Shekels, Latvian Lats, Swedish Krona, Argentine Peso, South African
Rand, Indian Rupee, Russian Rouble, Hungarian Forint, Canadian dollar and
Chinese Yuan Renminbi. Our operations in the United States are not materially
exposed to such currency differences as the majority of our revenues and costs
are in U.S. dollars. However, outside the United States the multinational nature
of our activities means that contracts are usually priced in a single currency,
most often pounds Sterling, U.S. dollars or Euros, while costs arise in a number
of currencies, depending, among other things, on which of our offices provide
staff for the contract, and the location of investigator sites. Although many
such contracts benefit from some degree of natural hedging due to the matching
of contract revenues and costs in the same currency, where costs are incurred in
currencies other than those in which contracts are priced, fluctuations in the
relative value of those currencies could have a material effect on our results
of operations. We regularly review our currency exposures and hedge a portion of
these, using forward exchange contracts, where natural hedges do not cover them.
The introduction of the Euro on January 1, 1999, also reduced our exposures as
four of our offices, and many of the countries where we are carrying out
projects are within the Euro zone.
We have received capital and revenue grants from Enterprise Ireland, an Irish
government agency. We record capital grants as deferred income, which are
credited to income on a basis consistent with the depreciation of the relevant
asset. Grants relating to operating expenditures are credited to income in the
period in which the related expenditure is charged. The capital grant agreements
provide that in certain circumstances the grants received may be refundable in
full. These circumstances include sale of the related asset, liquidation of the
Company or failing to comply in other respects with the grant agreements. The
operating expenditure grant agreements provide for repayment in the event of
downsizing of the Company calculated by reference to any reduction in employee
numbers. We have not recognized any loss contingency having assessed as remote
the likelihood of these events arising. Up to February 29, 2004, we have
received $1,557,014 and $1,896,249 under the capital grants and operating
grants, respectively. Pursuant to the terms of the grant agreements we are
restricted from distributing some of these amounts by way of dividend or
otherwise.
As we conduct operations on a global basis, our effective tax rate has depended
and will depend on the geographic distribution of our revenue and earnings among
locations with varying tax rates. Our results of operations therefore may be
affected by changes in the tax rates of the various jurisdictions. In
particular, as the geographic mix of our results of operations among various tax
jurisdictions changes, our effective tax rate may vary significantly from period
to period.
RESULTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 29, 2004 COMPARED WITH THREE MONTHS ENDED FEBRUARY
28, 2003
The following table sets forth for the periods indicated certain financial data
as a percentage of net revenue and the percentage change in these items compared
to the prior comparable period. The trends illustrated in the following table
may not be indicative of future results.
THREE MONTHS ENDED
FEBRUARY 29, FEBRUARY 28, 2003
2004 2003 TO 2004
PERCENTAGE
PERCENTAGE OF NET REVENUE INCREASE
Net revenue............................ 100.0% 100.0% 29.6%
Costs and expenses:
Direct costs........................... 55.3% 56.3% 27.4%
Selling, general and administrative.... 29.5% 30.2% 26.9%
Depreciation and amortization.......... 3.8% 3.1% 54.8%
Income from operations................. 11.4% 10.4% 41.6%
Net revenue increased by $17.6 million or 29.6%, from $59.3 million to $76.9
million. This improvement arose through a combination of increased business from
existing clients, business won from new clients and revenues from acquisitions
not included in the comparative period. The additional revenues from these
acquisitions (Medeval & Globomax) amounted to $4.5 million for the three months
ended February 29, 2004. Including the impact of acquisitions, revenues in the
United States and Europe/Rest of World grew
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8.9% and 83.6% respectively. For the three months ended February 29, 2004, net
revenue for our central laboratory business grew by 16.6% from $6.2 million to
$7.2 million while our clinical research segment grew by 31.1% from $53.1
million to $69.7 million over the comparable period. The growth in net revenue
is due to the expansion of our services to both existing and new clients,
increased use of outsourcing by the Pharmaceutical and Biotechnology industries,
an underlying increase in Research and Development spending and consolidation in
the CRO industry.
Direct costs increased by $9.1 million, or 27.4%, from $33.4 million to $42.5
million, primarily due to increased staff numbers needed to support increased
project related activity and increased direct costs arising from the
acquisitions amounting to $2.5 million. Direct costs, as a percentage of net
revenue decreased from 56.3% in the three months to February 28, 2003 to 55.3%
for the quarter ended February 29, 2004, or 55.5% when the effects of
acquisitions have been excluded.
Selling, general and administrative expense increased by $4.8 million, or 26.9%,
from $17.9 million to $22.7 million. The increase in costs is due to the
continued expansion of our operations and additional selling, general and
administrative costs from acquisitions of $2.7 million not included in the
comparative period. As a percentage of net revenue, selling, general and
administrative expenses, decreased from 30.2% in the three months to February
28, 2003, to 29.5% for the quarter ended February 29, 2004 or 27.7% when the
effects of acquisitions have been excluded.
Depreciation increased by $1.0 million, or 54.8%, from $1.9 million to $2.9
million. This increase is due to the continued investment in facilities and
information technology to support the growth in activity and in providing for
future capacity and increased cost arising from acquisitions of $0.1 million in
the current quarter. As a percentage of net revenue, depreciation and
amortization increased from 3.1% of net revenues in the three months to February
28, 2003, to 3.8% for the three months ended February 29, 2004. Excluding the
effects of acquisitions, it was 3.8%.
Income from operations increased by $2.6 million, or 41.6%, from $6.2 million to
$8.8 million, including acquisitions. This improvement is due to increased
levels of activity carried out across the Company together with the acquisition
of Medeval and Globomax. As a percentage of net revenue, including the effect of
acquisitions, income from operations increased from 10.4% in the three months to
February 28, 2003, to 11.4% for the quarter ended February 29, 2004. For the
quarter, income from operations, as a percentage of net revenue, for the central
laboratory was (6.7%) from (7.3%) in the same quarter in fiscal 2003. The
central laboratory constitutes approximately 9% of our business. Operating
margins for our clinical research segment increased from 12.5% in the three
months ended February 28, 2003, to 13.3% for the three months ended February 29,
2004.
Net interest income for the three months ended February 29, 2004, was $0.75
million compared to $0.12 million for the equivalent period last year. Net cash
invested increased from $11.2 million at May 31, 2003, to $67.1 million at
February 29, 2004, due principally to the net proceeds of $44.3 million raised
in our secondary offering in August 2003. Lower interest rates for the third
quarter when compared to the same period last year, contributed to the lower
returns on our investments.
Our effective tax rate for the three months ended February 29, 2004 was 24.7%
compared to 27.1% for the comparable period last year. The decrease in the
effective rate was due to a change in the geographic distribution of pre-tax
earnings.
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NINE MONTHS ENDED FEBRUARY 29, 2004 COMPARED WITH NINE MONTHS ENDED FEBRUARY 28,
2003
The following table sets forth for the periods indicated certain financial data
as a percentage of net revenue and the percentage change in these items compared
to the prior comparable period. The trends illustrated in the following table
may not be indicative of future results.
NINE MONTHS ENDED
FEBRUARY 29, FEBRUARY 28, 2004 TO 2003
2004 2003
PERCENTAGE
PERCENTAGE OF NET REVENUE INCREASE
Net revenue............................ 100.0% 100.0% 37.1%
Costs and expenses:
Direct costs........................... 54.9% 54.8% 37.4%
Selling, general and administrative.... 30.0% 31.0% 32.9%
Depreciation and amortization.......... 3.8% 3.1% 63.7%
Income from operations................. 11.3% 11.1% 39.8%
Net revenue increased by $59.3 million or 37.1%, from $159.7 million to $219.0
million. This improvement arose through a combination of increased business from
existing clients, business won from new clients and revenues from acquisitions
not included in the comparative period. The additional revenues from these
acquisitions (BPA, MCS, Medeval & Globomax) amounted to $21.0 million for the
nine months ended February 29, 2004. Including the impact of acquisitions,
revenues in the United States and Europe /Rest of World grew 21.9% and 74.6%
respectively. For the nine months ended February 29, 2004, net revenue for our
central laboratory business increased by 0.8% from $19.4 million to $19.5
million while our clinical research segment grew by 42.2% from $140.3 million to
$199.5 million over the comparable period. The growth in net revenue is due to
the expansion of our services to both existing and new clients, increased use of
outsourcing by the Pharmaceutical and Biotechnology industries, an underlying
increase in Research and Development spending and consolidation in the CRO
industry.
Direct costs increased by $32.8 million, or 37.4%, from $87.5 million to $120.3
million, primarily due to increased staff numbers needed to support increased
project related activity and increased direct costs arising from the
acquisitions amounting to $11.9 million. Direct costs, as a percentage of net
revenue increased from 54.8% in the nine months to February 28, 2003 to 54.9%
for the nine months ended February 29, 2004. Excluding the effects of
acquisitions it was 55.3%.
Selling, general and administrative expense increased by $16.3 million, or
32.9%, from $49.5 million to $65.8 million. The increase in costs is due to the
continued expansion of our operations and additional selling, general and
administrative costs from acquisitions of $7.7 million not included in the
comparative period. As a percentage of net revenue, selling, general and
administrative expenses, decreased from 31.0% in the nine months to February 28,
2003, to 30.0% for the nine months ended February 29, 2004 or 27.7% when the
effects of acquisitions have been excluded.
Depreciation expense increased by $3.2 million, or 63.7%, from $5.0 million to
$8.2 million over the same period last year. This increase is due to the
continued investment in facilities and information technology to support the
growth in activity and in providing for future capacity and increased cost
arising from acquisitions of $0.5 million not included in the comparative
period. As a percentage of net revenue, depreciation and amortization increased
from 3.1% of net revenues in the nine months to February 28, 2003, to 3.8% for
the nine months ended February 29, 2004, or 3.8% when the effects of
acquisitions have been excluded.
Income from operations increased by $7.0 million or 39.8%, from $17.7 million to
$24.7 million, including acquisitions. This improvement is due to increased
levels of activity carried out across the Company together with the acquisition
of BPA, MCS, Medeval and Globomax. As a percentage of net revenue, including the
effect of acquisitions, income from operations increased to 11.3% from 11.1% in
the comparative period. For the nine months, income from operations, as a
percentage of net revenue, for the central laboratory was (14.3%) from 1.3% in
the same period in fiscal 2003. This fall was due to a lower than anticipated
level of processing activity in fiscal 2004 compared to last year. The central
laboratory constitutes approximately 9% of our business. Operating margins for
our clinical research segment increased from 12.4% in the nine months ended
February 28, 2003, to 13.8% for the nine months ended February 29, 2004.
15
Net interest income for the nine months ended February 29, 2004, was $196,485
compared to $379,623 for the equivalent period last year. Net cash invested
increased from $11.2 million at May 31, 2003, to $67.1 million at February 29,
2004, due principally to the net proceeds of $44.3 million raised in our
secondary offering in August 2003. Lower interest rates for the first nine
months when compared to the same period last year contributed to the lower
returns on our investments.
Our effective tax rate for the nine months ended February 29, 2004 was 25.7%
compared to 28.2% for the comparable period last year. The decrease in the
effective rate was due to a change in the geographic distribution of pre-tax
earnings and the impact of acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
The CRO industry generally is not capital intensive. Since our inception, we
have financed our operations and growth primarily with cash flows from
operations, net proceeds of $49.1 million raised in our initial public offering
in May 1998 and net proceeds of $44.3 million, raised in our secondary offering
in August 2003. Our principal cash needs are payment of salaries, office rents,
travel expenditures and payments to subcontractors. The aggregate amount of
employee compensation, excluding stock compensation expense, paid by us and our
subsidiaries in the nine months ended February 28, 2003 and February 29, 2004,
amounted to $96.0 million and $128.7 million, respectively. Investing activities
primarily reflect capital expenditures for facilities and for information
systems enhancements, the sale and purchase of short-term investments and
acquisitions.
Our clinical research and development contracts are generally fixed price with
some variable components and range in duration from a few months to several
years. Revenue from contracts is generally recognized as income on a percentage
of completion basis as the work is performed. The cash flow from contracts
typically consists of a down payment of between 10% and 20% paid at the time the
contract is entered into, with the balance paid in instalments over the
contract's duration, in some cases on the achievement of certain milestones.
Accordingly, cash receipts do not necessarily correspond to costs incurred and
revenue recognized on contracts.
As of February 29, 2004, our working capital amounted to $104.5 million,
compared to $53.8 million at May 31, 2003, principally due to the receipt of net
proceeds of the secondary offering of $44.3 million. The other significant
influence on our operating cash flow is revenue outstanding, which comprises
accounts receivable and unbilled revenue, less payments on account. The dollar
values of these amounts and the related days revenue outstanding can vary due to
the achievement of contractual milestones, including contract signing, and the
timing of cash receipts. The number of days revenue outstanding, decreased from
64 days at May 31, 2003 to 57 days at February 29, 2004.
Net cash provided by operating activities was $30.8 million in the nine months
ended February 29, 2004, compared to $16.6 million in the nine months ended
February 28, 2003.
Net cash used in investing activities was $21.6 million in the nine months ended
February 29, 2004, compared to $29.5 million in the nine months ended February
28, 2003.
Net cash provided by financing activities was $40.9 million in the nine months
ended February 29, 2004, compared with $1.6 million used in financing activities
in the nine months ended February 28, 2003. The main reason for this increase is
the receipt of the net proceeds of $44.3 million, following the sale of
1,500,000 American Depositary Shares in August 2003 by the Company.
As a result of these cash flows, cash and cash equivalents increased by $48.8
million in the nine months ended February 29, 2004, compared to a decrease of
$14.4 million in the nine months ended February 28, 2003.
On July 3, 2003, ICON entered into a facility agreement (the "Facility
Agreement") for the provision of a term loan facility of U.S.$40 million,
multi-currency overdraft facility of $5 million; and revolving credit facility
of $15 million (the "Facilities") with The Governor and Company of the Bank of
Ireland and Ulster Bank Ireland Limited (the "Banks"). The obligations of the
borrowers under the Facilities are secured by certain composite guarantees and
indemnities and pledges in favour of each of the banks. This facility bears
interest at an annual rate equal to the Banks Prime Rate plus three quarters of
one percent. ICON is entitled to make borrowings under a term loan facility of
$40 million and a multi currency overdraft facility of $5 million. As at
February 29, 2004, the full amount of these facilities were available to be
drawn down. ICON Clinical Research, Inc. (a subsidiary of ICON plc) is entitled
to make borrowings under a revolving credit facility of $15 million. As at
February 29, 2004, the full amount of this facility was available to be drawn
down.
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On November 17, 1998, we entered into an overdraft facility (the "A.I.B.
facility") for (euro)2,539,000 ($3,157,247) with Allied Irish Banks plc
("A.I.B."). This facility bore an annual interest rate equal to A.I.B. Bank's
Prime Rate plus one-quarter of one percent. The full sum of the unpaid principal
and interest was repayable on demand. This facility was terminated on July 3,
2003.
On July 29, 2002, we entered into an additional A.I.B. facility for
STG(pound)50,000 ($93,144) This facility bore interest at an annual rate equal
to A.I.B. Bank's Prime Rate plus two percent. The full sum of the unpaid
principal and interest was repayable on demand. This facility was terminated on
July 3, 2003.
Our U.S. subsidiary, ICON Clinical Research, Inc. (the "Borrower"), had a $12
million secured line of credit (the "PNC Facility") with PNC Bank N.A.
("P.N.C."). The PNC Facility bore interest at an annual rate equal to PNC's
Prime Rate less three-quarters of one percent. The full sum of the unpaid
principal and interest was payable on demand. The PNC Facility was secured by a
first priority security interest in certain assets of the Borrower. This
facility was terminated on July 3, 2003.
We have entered into an overdraft agreement with A.I.B., whereby we guaranteed
any overdrafts of our subsidiaries, ICON Clinical Research GmbH and ICON
Clinical Research Israel Ltd., up to an amount (euro)112,484 ($139,874) and
$250,000 (ILS 1,122,687), respectively. As at February 29, 2004, the full German
and Israeli facilities were available to be drawn down.
We expect to spend approximately $16.0 million in the next twelve months on
further investments in information technology, the expansion of existing
facilities and the addition of new offices, and expect an increased level of
spending in subsequent years. We believe that we will be able to fund our
additional foreseeable cash needs for the next twelve months from cash flow from
operations and existing cash balances. In the future, we will consider acquiring
further businesses to enhance our service offerings and global presence. Any
such acquisitions may require additional external financing and we may from time
to time seek to obtain funds from public or private issues of equity or debt
securities. There can be no assurance that such financing will be available on
terms acceptable to us.
INFLATION
We believe the effects of inflation generally do not have a material adverse
impact on our operations or financial conditions.
NEW ACCOUNTING PRONOUNCEMENTS
In November 2001, the Emerging Issues Task Force, or EITF, released EITF Issue
01-14, "Income Statement Characterization of Reimbursements Received for `Out of
Pocket' Expenses Incurred", requiring companies to report reimbursed costs as
part of gross revenues. Reimbursed costs include such items as payments to
investigators and travel costs for our clinical research staff. The Company does
not generally earn a profit on these costs. The Company has always included such
reimbursed costs within the measure of gross revenues and adoption of EITF Issue
01-14 had no effect on the reported results.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections".
SFAS No. 145 provides for the rescission of several previously issued accounting
standards, new accounting guidance of the accounting for certain lease
modifications and various technical corrections that are not substantive in
nature to existing pronouncements. SFAS No. 145 will be adopted beginning June
1, 2003, except for the provisions relating to the amendment of SFAS No. 13,
which have been adopted for the transactions occurring subsequent to May 15,
2002. Adoption of SFAS No. 145 did not have a material impact on the Company's
results of operations and financial position.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" ("SFAS No. 146"). SFAS 146 addresses financial
accounting reporting for costs associated with exit or disposal activities and
nullifies EITF Issue 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit and Activity". SFAS 146 requires
that a liability for costs associated with an exit or disposal activity be
recognized and measured initially at fair value only when the liability is
incurred. SFAS No. 146 is effective for exit or disposal activities that are
initiated after December 31, 2002. SFAS No. 146 did not have a material impact
on our results of operations and financial postion.
In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others ("FIN 45"), This interpretation addresses the disclosure
to be made by a
17
guarantor in its financial statements about its obligation under guarantees. FIN
45 also requires the guarantor to recognize a liability for the non-contingent
component of the guarantee, that is the obligation to stand ready to perform in
the event that specified triggering events or conditions occur. The initial
measurement of this liability is the fair value of the guarantee at inception.
The disclosure requirements in this Interpretation are effective for financial
statements of interim and annual periods ending after December 15, 2002. The
recognition and measurement provisions are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002, irrespective of the
guarantors fiscal year-end. Adoption of FIN 45 did not have a significant effect
on the Company's financial position or results of operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock Based
Compensation - Transition and Disclosure - an amendment of FASB statement No.
123" ("SFAS 148"). SFAS 148 provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, this statement amends the disclosure
requirements of SFAS 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. The
transition provisions of SFAS 148 are effective for fiscal years ending after
December 15, 2002. The enhanced disclosure requirements are included in the
financial statements. The Company has decided to continue to account for stock
options in accordance with the provisions of APB No. 25.
In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of
Variable Interest Entities ("FIN 46"), which interprets Accounting Research
Bulletin ("ARB") No. 51, Consolidated Financial Statements. FIN 46 clarifies the
application of ARB No. 51 with respect to the consolidation of certain entities
(variable interest entities - "VIE's") to which the usual condition for
consolidation described in ARB No. 51 does not apply because the controlling
financial interest in VIE's may be achieved through arrangements that do not
involve voting interests. In addition, FIN 46 requires the primary beneficiary
of VIE's and the holder of a significant variable interest in VIE's to disclose
certain information relating to their involvement with the VIE's. The provisions
of FIN 46 apply immediately to VIE's created after January 31, 2003, and to
VIE's in which an enterprise obtains an interest after that date. FIN 46 applies
in the first fiscal year beginning after June 15, 2003, to VIE's in which an
enterprise holds a variable interest that it acquired before February 1, 2003.
The Company did not create or obtain an interest in a VIE after January 31, 2003
and does not expect the impact of fully adopting FIN 46 to have a significant
impact on our financial statements.
On April 30, 2003, the FASB issued FASB Statement No. 149, Amendment of
Statement 133 on Derivative Instruments and Hedging Activities, which amends
FASB Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities, to address (1) decisions reached by the Derivatives Implementation
Group, (2) developments in other Board projects that address financial
instruments, and (3) implementation issues related to the definition of a
derivative. Statement 149 has multiple effective date provisions depending on
the nature of the amendment to Statement 133. Under SFAS No. 133, the Company's
foreign exchange contracts do not qualify for hedge accounting treatment. The
Company does not expect the impact of adopting Statement 149 to have a
significant impact on our financial statements.
On May 15, 2003, the FASB issued FASB Statement No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity. This
Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). Many of
those instruments were previously classified as equity. This Statement is
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003, except for mandatorily redeemable financial
instruments of non-public entities. It is to be implemented by reporting the
cumulative effect of a change in an accounting principle for financial
instruments created before the issuance date of the Statement and still existing
at the beginning of the interim period of adoption. Restatement is not
permitted. The adoption of Statement 150 did not have a significant impact on
our financial statements.
The Emerging Issues Task Force (EITF) has reached a final consensus on EITF
Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. This Issue
addresses certain aspects of the accounting by a vendor for arrangements under
which it will perform multiple revenue-generating activities, specifically how
to determine whether an arrangement involving multiple deliverables contains
more than one unit of accounting. The Issue also addresses how arrangement
consideration should be measured and allocated to the separate units of
accounting in the arrangement. The guidance in this Issue is effective for
revenue arrangements entered into in fiscal periods beginning after June 15,
2003, with a possible alternative means of adoption by applying the new rules to
existing contracts and recording the effect of adoption as a cumulative effect
of a change in accounting principle. The Company have adopted EITF Issue No.
00-21 on June 1, 2003 and it did not have a significant impact on the financial
statements.
18
In December 2003, the FASB issued SFAS Statement No. 132 (revised), "Employers'
Disclosures about Pensions and Other Postretirement Benefits" ("SFAS No.132
(revised)"). SFAS No. 132 (revised) will revise employers' disclosures about
pension plans and other postretirement benefit plans. It does not change the
measurement or recognition of those plans. SFAS No.132 (revised) will retain and
revise the disclosure requirements contained in the original SFAS No.132. It
also requires additional disclosures about the assets, obligations, cash flows,
and net periodic benefit costs of denied benefit pension plans and other
postretirement benefit plans. The company will present the disclosures required
by this statement in its annual report for the year ended May 31, 2003.
19
LEGAL PROCEEDINGS
We are not party to any litigation or other legal proceedings that we believe
could reasonably be expected to have a material adverse effect on our business,
results of operations and financial condition.
20
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.
ICON PLC
March 26, 2004
/s/ Sean Leech
--------------------------- ----------------------------
Date Sean Leech
Chief Financial Officer
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