VENTIV HEALTH INC - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934

For the quarterly period ended September 30, 2004

[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934

For the Transition Period From ___________ to ___________

Commission file number 0-30318

VENTIV HEALTH, INC.

(Exact name of registrant as specified in its charter)

(State or other jurisdiction (IRS Employer

of incorporation or organization) Identification No.)

Somerset, New Jersey 08873

(Address of principal executive office and zip code)

(Registrant's telephone number, including area code)

Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock, par value $0.001, 25,267,558 shares outstanding as of November 1, 2004

VENTIV HEALTH, INC.

INDEX TO QUARTERLY REPORT ON

	Page
PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2004
and December 31, 2003 (unaudited)	1

Condensed Consolidated Statements of Operations for the three and nine-months
ended September 30, 2004 and 2003 (unaudited)	2

Condensed Consolidated Statements of Cash Flows for the nine-months
ended September 30, 2004 and 2003 (unaudited)	3

Notes to Condensed Consolidated Financial Statements (unaudited)	4 - 11

ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations	12 - 20

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	21

ITEM 4. Controls and Procedures	21

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings	22

ITEM 6. Exhibits and Reports on Form 8-K	22

SIGNATURES	23

EXHIBITS	24 - 27

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

VENTIV HEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

	September 30,	December 31,
	2004	2003

ASSETS
Current assets:
Cash and equivalents	$87,779	$54,970
Restricted cash	5,187	1,672
Accounts receivable, net of allowances for doubtful accounts of $1,637
and $2,019 at September 30, 2004 and December 31, 2003, respectively	43,658	41,836
Unbilled services	23,692	21,347
Prepaid expenses and other current assets	2,587	1,146
Current deferred tax assets	1,660	1,660
Total current assets	164,563	122,631
Property and equipment, net	32,171	31,457
Goodwill	26,641	20,638
Other intangibles, net	2,587	85
Deferred tax assets	5,073	5,438
Other assets	976	459
Total assets	$232,011	$180,708

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligations	$10,302	$8,100
Accrued payroll, accounts payable and accrued expenses	45,609	32,105
Current income tax liabilities	17,139	9,165
Client advances and unearned revenue	8,589	4,859
Total current liabilities	81,639	54,229
Capital lease obligations	19,540	18,488
Other non-current liabilities	384	266
Total liabilities	101,563	72,983

Commitments and contingencies

Stockholders' Equity:
Preferred stock, $.001 par value, 10,000,000 shares authorized, none issued
and outstanding at September 30, 2004 and December 31, 2003	--	--
Common stock, $.001 par value, 50,000,000 shares authorized; 23,929,978 and
23,094,503 shares issued and outstanding at September 30, 2004 and
December 31, 2003, respectively	24	23
Additional paid-in-capital	165,008	159,359
Deferred compensation	(50)	(85)
Accumulated other comprehensive earnings	119	103
Accumulated deficit	(34,653)	(51,675)
Total stockholders' equity	130,448	107,725
Total liabilities and stockholders' equity	$232,011	$180,708

The accompanying notes are an integral part of these condensed consolidated financial statements

VENTIV HEALTH, INC.

CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	For the Three Months		For the Nine Months
	Ended September 30,		Ended September 30,
	2004	2003	2004	2003
Revenues	$88,853	$59,291	$234,735	$149,183
Operating expenses:
Cost of services	72,022	47,968	188,629	123,808
Selling, general and administrative expenses	8,604	6,516	22,174	17,750
Restructuring	--	--	(264)	--
Gain on sale of real estate	--	--	--	(392)
Total operating expenses	80,626	54,484	210,539	141,166

Operating earnings	8,227	4,807	24,196	8,017
Interest expense	(226)	(127)	(607)	(373)
Interest income	203	94	428	319
Earnings from continuing operations before income taxes	8,204	4,774	24,017	7,963
Income tax provision	3,117	1,814	9,126	3,026
Earnings from continuing operations	5,087	2,960	14,891	4,937

Net earnings (losses) from discontinued operations:
Losses from discontinued operations, net of taxes	--	(525)	--	(4,154)
Gains (losses) on disposals of discontinued operations, net of taxes	223	(5,553)	2,131	(6,906)
Net earnings (losses) from discontinued operations	223	(6,078)	2,131	(11,060)

Net earnings (losses)	$5,310	$(3,118)	$17,022	$(6,123)

Earnings (losses) per share:
Continuing operations:
Basic	$0.21	$0.13	$0.63	$0.22
Diluted	$0.20	$0.12	$0.59	$0.21
Discontinued operations:
Basic	$0.01	$(0.27)	$0.09	$(0.49)
Diluted	$0.01	$(0.26)	$0.09	$(0.48)
Net earnings (losses):
Basic	$0.22	$(0.14)	$0.72	$(0.27)
Diluted	$0.21	$(0.14)	$0.68	$(0.27)
Weighted average number of common shares outstanding:
Basic	23,851	22,880	23,520	22,886
Diluted	25,500	23,910	25,056	23,634

The accompanying notes are an integral part of these condensed consolidated financial statements

VENTIV HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Nine Months Ended September 30,
	2004	2003
Cash flows from operating activities:
Net earnings (losses)	$17,022	$(6,123)
Adjustments to reconcile net earnings (losses) to net cash provided by operating activities:
(Earnings) losses from discontinued operations	(2,131)	11,060
Depreciation	11,250	6,654
Amortization	80	14
Deferred Taxes	365	--
Gain on sale of real estate	--	(392)
Stock compensation expense	67	397
Executive share surrender	--	(185)
Changes in assets and liabilities, net of effects from discontinued operations:
Restricted cash	(2,515)	(53)
Accounts receivable, net	166	(4,695)
Unbilled services	(1,175)	(411)
Prepaid expenses and other current assets	(1,433)	(194)
Accrued payroll, accounts payable and accrued expenses	11,625	3,662
Current income tax liabilities	7,974	3,207
Client advances and unearned revenue	3,706	1,219
Other	(160)	522
Net cash provided by operating activities	44,841	14,682

Cash flows from investing activities:
Cash paid for acquisition of Franklin Group, Inc. and Lincoln, Ltd., Inc.	(6,667)	--
Initial acquisition costs relating to Smith Hanley Holding Corp. and its subsidiaries	(265)	--
Proceeds from disposals of discontinued operations	2,097	1,202
Proceeds from sale of real estate	--