<PAGE> 1
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1996
Commission file number 340-23520
QUINTILES TRANSNATIONAL CORP.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-1714315
- ---------------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4709 Creekstone Dr., Suite 300
Durham, NC 27703-8411
- ---------------------------------------- ---------------------------------
(Address of principal executive offices) (Zip Code)
(919) 941-2000
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the 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. X Yes No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
The number of shares of Common Stock, $.01 par value, outstanding as of
November 1, 1996, was 21,874,234.
1
<PAGE> 2
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
Index
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets -
September 30, 1996 and December 31, 1995 3
Condensed consolidated statements of
income - Three months ended
September 30, 1996 and 1995; nine months
ended September 30, 1996 and 1995 4
Condensed consolidated statements of
cash flows - Nine months ended
September 30, 1996 and 1995 5
Notes to condensed consolidated financial
statements - September 30, 1996 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II. Other Information 14
Signatures 16
Exhibit Index 17
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1996 1995
------------ -----------
(Unaudited) (Note 1)
(In thousands, except share data)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 60,289 $ 69,146
Accounts receivable and unbilled services 95,810 57,165
Investments 59,986 -
Other current assets 7,324 5,170
-------- --------
Total current assets 223,409 131,481
Property and equipment 95,318 74,381
Less accumulated depreciation 25,948 17,523
-------- --------
69,370 56,858
Non-current assets:
Investments 55,205 -
Intangible and other assets 52,133 32,951
-------- --------
Total non-current assets 107,338 32,951
-------- --------
Total assets $400,117 $221,290
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses 29,101 20,754
Line of credit and current portion of debt 1,722 398
Unearned income 23,971 16,083
Income taxes and other current liabilities 8,126 -
-------- --------
Total current liabilities 62,920 37,235
Long-term liabilities:
Long-term debt, less current portion 140,634 433
Long-term obligation 19,543 19,514
Deferred income taxes 2,628 5,569
-------- --------
162,805 25,516
-------- --------
Total liabilities 225,725 62,751
Shareholders' equity:
Common Stock, par value $.01 per share -
authorized 50,000,000 shares, issued and
outstanding 21,828,299 and 21,387,150 shares at
September 30, 1996 and December 31, 1995,
respectively 218 214
Additional paid-in capital and other
shareholders' equity 130,196 128,989
Retained earnings 43,978 29,336
-------- --------
Total shareholders' equity 174,392 158,539
-------- --------
Total liabilities and shareholders' equity $400,117 $221,290
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1996
----------------------------- -------------------------------
1996 1995 1996 1995
---------- --------- ---------- ----------
(In thousands, except per share data) (In thousands, except per share data)
<S> <C> <C> <C> <C>
Professional fee income $87,402 $59,577 $234,711 $164,287
Less reimbursed costs:
Investigator payments 11,879 11,423 31,860 38,577
Travel and other 7,053 6,014 16,609 15,310
-------- ------- -------- --------
Net revenue 68,470 42,140 186,242 110,400
Costs and expenses:
Direct costs 33,061 19,444 87,992 51,673
General and administrative expense 24,645 16,641 69,645 42,786
Depreciation and amortization 3,287 1,972 8,794 5,253
-------- ------- -------- --------
60,993 38,057 166,431 99,712
-------- ------- -------- --------
Income from operations 7,477 4,083 19,811 10,688
Other income, net 348 213 1,566 891
-------- ------- -------- --------
Income before income taxes 7,825 4,296 21,377 11,579
Income taxes 2,444 1,460 6,735 4,106
-------- ------- -------- --------
Net income $ 5,381 $ 2,836 $ 14,642 $ 7,473
======= ======= ======== ========
Net income per share $ 0.24 $ 0.14 $ 0.66 $ 0.39
======= ======= ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
------------------------------------
1996 1995
--------- --------
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 14,642 $ 7,473
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 8,794 5,253
Change in operating assets and liabilities (14,099) (13,808)
Other operating activities (609) (110)
--------- --------
Net cash provided (used) by operating activities 8,728 (1,192)
INVESTING ACTIVITIES
Proceeds from disposition of property and equipment 88 52
Acquisition of businesses, net of cash acquired (29,302) (13,977)
Acquisition of property and equipment (18,905) (13,081)
Purchase of investments (112,119) -
--------- --------
Net cash used in investing activities (160,238) (27,006)
FINANCING ACTIVITIES
Proceeds from borrowings and line of credit 141,395 15,651
Principal payments on borrowings and line of credit (452) (13,942)
Proceeds from issuance of common stock 1,857 555
Stock issuance costs (78) (59)
--------- --------
Net cash provided by financing activities 142,722 2,205
Effect of foreign currency exchange rate changes on cash (69) 36
--------- --------
Decrease in cash and cash equivalents (8,857) (25,957)
Cash and cash equivalents at beginning of period 69,146 39,353
--------- --------
Cash and cash equivalents at end of period $ 60,289 $ 13,396
========= ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 1996
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three and
nine month periods ended September 30, 1996 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1996. For
further information, refer to the consolidated financial statements and notes
thereto included in Quintiles Transnational Corp. and Subsidiaries Annual
Report on Form 10-K for the year ended December 31, 1995.
The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements.
On February 15, 1996, the Company acquired PMC Contract Research AB ("PMC"), a
clinical research company based in Uppsala, Sweden. The acquisition has been
accounted for as a pooling-of-interests, and as such, all condensed
consolidated financial data for periods subsequent to January 1, 1996 have been
restated to include the results of the pooled company. Due to the fact that
the financial data of the pooled company prior to January 1, 1996 would have no
material impact on the condensed consolidated financial data previously
reported by the Company, the condensed consolidated financial data presented
for periods prior to January 1, 1996 have not been restated.
Earnings per share is based on the weighted average number of shares of common
stock outstanding during each period. Weighted average shares outstanding for
the three and nine month periods ended September 30 were as follows:
<TABLE>
<CAPTION>
Weighted Average Shares Outstanding
1996 1995
---- ----
<S> <C> <C>
Three months ended September 30 22,268,625 19,709,420
Nine months ended September 30 22,279,207 19,316,234
</TABLE>
6
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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited) -- Continued
2. Significant Customer
One customer accounted for greater than 10% of consolidated net revenue for the
three and nine months ended September 30, 1996, as indicated below (in
thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, 1996 September 30, 1996
------------------ ------------------
<S> <C> <C>
Customer A $11,727 $30,052
</TABLE>
3. Acquisitions
On May 13, 1996, the Company acquired the operating assets of Lewin-VHI, Inc.,
a health care consulting company, for approximately $30 million in cash. The
acquired company, now called The Lewin Group, Inc. ("Lewin"), entered into
employment agreements with members of the former Lewin-VHI management group
("Lewin Management"). Also, the Company issued to the Lewin Management options
to purchase approximately 223,717 shares of the Company's common stock.
The acquisition was accounted for using the purchase method, with the assets
and liabilities of the acquired business recorded at their fair value at the
acquisition date. The excess of total acquisition cost over the fair value of
the net assets acquired was classified as goodwill and is being amortized on
the straight line basis over 35 years. The results of operations of the
acquired business are included in the accompanying condensed consolidated
statements of income as of the date of acquisition.
The following table presents the unaudited pro forma impact of the May 9, 1995
acquisition of Benefit International, a French company, and subsidiaries, and
the acquisition of Lewin, as if the acquisitions had been acquired at the
beginning of 1996 and 1995 (in thousands, except per share data):
<TABLE>
<CAPTION>
Nine months ended September 30
1996 1995
-------- ---------
<S> <C> <C>
Net revenue $193,470 $128,985
Net income 14,542 6,248
Net income per share $0.65 $0.32
</TABLE>
The unaudited pro forma results have been prepared for comparative purposes
only and do not purport to be indicative of the results that would have
actually been attained if the above businesses had been acquired at the
beginning of the years presented.
7
<PAGE> 8
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
4. Convertible Note Placement
On May 23, 1996, the Company completed a private placement of $143.75 million
of 4.25% Convertible Subordinated Notes (the "Notes") due May 31, 2000. The
offering was increased from the original $125.0 million offering due to the
exercise of an $18.75 million underwriters' over-allotment option. Net
proceeds to the Company amounted to approximately $139.6 million. The Notes
will be convertible into the Company's common stock, at the option of the
holder, at a conversion price of $82.75 per share, subject to adjustment under
certain circumstances, at any time after August 21, 1996. The Notes will be
redeemable, at the option of the Company, beginning May 31, 1999. Interest is
payable on the notes semi-annually on May 31 and November 30 each year,
beginning November 30, 1996.
5. Subsequent Events
On September 18, 1996, the Company announced the signing of a definitive merger
agreement pursuant to which BRI International, Inc. ("BRI"), a global research
organization based in Arlington, VA, will be merged with and into a
wholly-owned subsidiary of the Company and will be accounted for as a pooling-
of-interests. The definitive agreement calls for an exchange of 100% of BRI
stock for approximately 1.9 million shares of the Company's common stock.
Completion of the acquisition, subject to BRI shareholder approval and other
customary conditions, is expected in mid to late November 1996.
On October 7, 1996, the Company announced the signing of a definitive share
exchange agreement with Innovex Limited ("Innovex"), an international contract
pharmaceutical organization based in Marlow, United Kingdom, and the
shareholders of Innovex. The agreement calls for an exchange of all of Innovex
stock for approximately 10 million shares of the Company's common stock in a
pooling-of-interests transaction. At closing, the Company will also retire
approximately $60 million of existing Innovex obligations. Completion of the
acquisition, subject to the Company's shareholder approval of the issuance of
the shares and other customary conditions, is expected in late November 1996.
8
<PAGE> 9
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Three Months Ended September 30, 1996 and 1995
Professional fee income includes reimbursed costs which consist primarily of
payments to investigators, travel and certain other expenses that are billed to
clients at cost. Depending upon contract terms, investigator payments may be
administered by the Company or alternatively, may be paid directly from the
client to the investigators. Therefore, since reimbursed costs vary from
contract to contract and are not meaningful for analyzing trends in revenue,
they are included in professional fee income but excluded from net revenue.
Consistent with industry practice, the Company considers net revenue its
primary measure of revenue growth.
Net revenue increased 62.5% to $68.5 million for the third quarter of 1996, as
compared to $42.1 million for the third quarter of 1995. This growth can be
attributed to the increase in services rendered under existing contracts, the
initiation of services under contracts awarded subsequent to the second quarter
of 1995 and the Company's four acquisitions since May 9, 1995 which contributed
$11.8 million to the third quarter 1996 net revenue versus $2.2 million to the
third quarter 1995 net revenue. Also, net revenue from the Company's European
operations continue to grow, and this growth has been enhanced by the
operations of the Company's drug development facilities in Edinburgh, Scotland
and Strasbourg, France, which contributed $9.1 million to the third quarter
1996 net revenue versus $5.8 million to the third quarter 1995 net revenue.
Direct costs increased 70.0% to $33.1 million for the third quarter ended
September 30, 1996 from $19.4 million for the third quarter ended September 30,
1995 as a result of the increase in net revenue. These costs include
compensation and related fringe benefits for billable employees and any other
expenses directly related to contracts which are not included as reimbursed
costs. Direct costs, as a percentage of net revenue, increased to 48.3% for the
third quarter of 1996 versus 46.1% for the third quarter of 1995. This increase
is primarily the result of an increase in the amount of leave taken for vacation
and inclement weather and an increase in subcontractor expenses directly related
to contracts.
General and administrative expense increased 48.1% to $24.6 million from $16.6
million for the quarters ended September 30, 1996 and 1995, respectively. This
expense includes compensation and fringe benefits for administrative employees,
non-billable travel, professional services, advertising, computer expenses and
facility expenses. This increase is primarily the result of growth and
expansion, the initiation of new marketing campaigns, the increased commitment
to developing the Company's proprietary software systems and an increase in the
costs associated with personnel, facility management and outside services
brought on by the Company's growth. The general and administrative expense
decreased, as a percentage of net revenue, to 36.0% for the third quarter of
1996 from 39.5% for the third quarter of 1995.
9
<PAGE> 10
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
Depreciation and amortization increased to $3.3 million for the third quarter
of 1996 from $2.0 million for the third quarter of 1995. Income from
operations was 10.9% of net revenue for the third quarter of 1996 versus 9.7%
for the third quarter of 1995.
Other income increased to $348,000 for the third quarter of 1996 as compared to
$213,000 for the third quarter of 1995. This increase is primarily due to an
increase of approximately $114,000 in net interest income and an increase in
other income of approximately $21,000. Amortization of the issuance costs and
interest relating to the private placement of the Notes of approximately $1.8
million is included in determining net interest income.
Income taxes, as a percentage of income before income taxes, decreased to 31.2%
for the third quarter of 1996 versus 34.0% for the third quarter of 1995. This
decrease is primarily due to an increase in profits in locations with lower tax
rates and a tax benefit of approximately $300,000 from tax advantaged
investment instruments.
Net income increased 89.7% to $5.4 million for the third quarter of 1996 from
$2.8 million for the third quarter of 1995. As a percentage of net revenue,
net income increased to 7.9% of net revenue for the three months ended
September 30, 1996 from 6.7% of net revenue for the three months ended
September 30, 1995.
Nine Months Ended September 30, 1996 and 1995
Net revenue increased 68.7% to $186.2 million for the first nine months of
1996, as compared to $110.4 million for the first nine months of 1995. This
growth can be attributed to the increase in services rendered under existing
contracts, the initiation of services under contracts awarded subsequent to the
first nine months of 1995 and the Company's four acquisitions since May 9, 1995
which contributed $25.5 million to the first nine months of 1996 net revenue
versus $3.3 million to the first nine months of 1995 net revenue. The
Company's drug development facilities in Edinburgh, Scotland and Strasbourg,
France, which were purchased in March 1995 and January 1996, respectively,
contributed $27.5 million to net revenue for the first nine months of 1996
versus $12.4 million to the first nine months of 1995.
Direct costs increased 70.3% to $88.0 million for the nine months ended
September 30, 1996 from $51.7 million for the nine months ended September 30,
1995 as a result of the increase in net revenue. These costs include
compensation and related fringe benefits for billable employees and any other
expenses directly related to contracts which are not included as reimbursed
costs. Direct costs, as a percentage of net revenue, have increased slightly to
47.2% for the first nine months of 1996 versus 46.8% for the first nine months
of 1995.
General and administrative expense increased 62.8% to $69.6 million from $42.8
million for the nine months ended September 30, 1996 and 1995, respectively.
This expense includes compensation and fringe benefits for administrative
employees, non-billable travel, professional services, advertising, computer
expenses and facility expenses. This increase is primarily the result of
growth and expansion, the initiation of new marketing campaigns, the increased
commitment to developing
10
<PAGE> 11
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
the Company's proprietary software systems and an increase in the costs
associated with personnel, facility management and outside services brought on
by the Company's growth. The general and administrative expense decreased, as
a percentage of net revenue, to 37.4% for the first nine months of 1996 from
38.8% for the first nine months of 1995.
Depreciation and amortization increased to $8.8 million for the first nine
months of 1996 from $5.3 million for the first nine months of 1995. Income
from operations was 10.6% of net revenue for the first nine months of 1996
versus 9.7% for the first nine months of 1995.
Other income increased to $1.6 million for the first nine months of 1996 as
compared to $891,000 for the first nine months of 1995. This increase is
primarily due to increases in net interest income and other income of
approximately $598,000. Approximately $2.5 million of interest expense and
amortization of issuance costs relating to the private placement of the Notes
is included in determining net interest income.
Income taxes, as a percentage of income before income taxes, decreased to 31.5%
for the first nine months of 1996 versus 35.5% for the first nine months of
1995. This decrease is primarily due to an increase in profits in locations
with lower tax rates and a tax benefit of approximately $600,000 from tax
advantaged investment instruments.
Net income increased 95.9% to $14.6 million for the first nine months of 1996
from $7.5 million for the first nine months of 1995. As a percentage of net
revenue, net income increased to 7.9% of net revenue for the nine months ended
September 30, 1996 from 6.8% of net revenue for the nine months ended September
30, 1995.
Liquidity and Capital Resources
Cash flows from operations were $8.7 million for the nine months ended
September 30, 1996 versus ($1.2) million for the comparable period of 1995.
Investing activities, for the nine months ended September 30, 1996, consisted
primarily of capital asset purchases, investment purchases and the acquisition
of Lewin. These investing activities required an outlay of cash of $160.2
million for the first nine months of 1996 compared to an outlay of $27.0
million for investing activities during the same period in 1995.
As of September 30, 1996, total working capital was $160.5 million versus $94.2
million as of December 31, 1995. Net receivables from clients (accounts
receivable and unbilled services net of unearned income) increased to $71.8
million at September 30, 1996 as compared to $41.1 million at the end of 1995.
During 1995, the Company acquired a drug development facility in Edinburgh,
Scotland. Related to this acquisition, the Company entered into a purchase
commitment valued at approximately $20.0 million with payment due in December
1999.
11
<PAGE> 12
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
On May 23, 1996, the Company completed a private placement of $143.75 million
of 4.25% Convertible Subordinated Notes due May 31, 2000. Net proceeds to the
Company amounted to approximately $139.6 million.
The Company has an $8.0 million unsecured line of credit with a U.K. bank. At
September 30, 1996, the Company had $6.7 million in available credit under the
line of credit agreement. A $15.0 million unsecured line of credit with a U.S.
bank expired in accordance with its terms.
The Company's primary cash needs on both short-term and long-term bases are
for expansion of services, possible future acquisitions, working capital,
capital expenditures, geographic expansion, and other general corporate
purposes. Pending such uses, the Company is investing its excess cash balances
in investment grade, interest-bearing securities.
On October 7, 1996, the Company announced the signing of a definitive share
exchange agreement with Innovex and its shareholders. At closing, the Company
will also retire approximately $60 million of existing Innovex obligations.
The Company intends to retire the existing Innovex obligations from working
capital.
Based on its current operating plan, the Company believes that its available
cash and cash equivalents as of September 30, 1996, together with cash flow
from operations and borrowings under its line of credit agreement, will be
sufficient to meet its foreseeable cash needs, in connection with its current
operations.
Currently, the Company is evaluating a number of acquisition and expansion
possibilities. The Company may from time to time seek to obtain debt or equity
financing to facilitate possible acquisitions or expansion. Subject to market
conditions in early 1997, the Company may commence an equity offering of
secondary shares held by the former Innovex shareholders, and if such an
offering is commenced, the Company may offer primary shares to be offered by
the Company.
Recent Events
On September 18, 1996, the Company announced the signing of a definitive merger
agreement pursuant to which BRI International, Inc. ("BRI"), a global contract
research organization based in Arlington, VA, will be merged with and into a
wholly-owned subsidiary of the Company. The definitive agreement calls for an
exchange of 100% of BRI stock for approximately 1.9 million shares of the
Company's common stock. Completion of the acquisition, subject to BRI
shareholder approval and regulatory approval, is expected in mid to late
November 1996. The Company will also enter into employment agreements with
certain BRI employees. The transaction is expected to be accounted for as a
pooling-of-interests.
12
<PAGE> 13
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
On October 7,1996, the Company announced the signing of a definitive share
exchange agreement with Innovex Limited ("Innovex"), an international contract
pharmaceutical organization based in Marlow, United Kingdom, and the
shareholders of Innovex,. The agreement calls for an exchange of all of
Innovex stock for approximately 10 million shares of the Company's common stock
in a pooling-of-interests transaction. At closing, the Company will also
retire approximately $60 million of existing Innovex obligations. The Company
will also enter into employment agreements with certain Innovex employees.
Completion of the agreement, subject to the Company's shareholder approval of
the issuance of the shares and other customary conditions, is expected in late
November 1996.
Cautionary Statement for Forward-Looking Information
Management's Discussion and Analysis of Financial Condition and Results of
Operations set forth above contains certain "forward-looking" statements within
the meaning of the federal securities laws. In addition, the Company and its
representatives may make oral and other written forward-looking statements from
time to time. These statements involve a number of risks and uncertainties.
The Company cautions that such forward-looking statements are not guarantees
and that actual results could differ materially from those expressed or implied
in the forward-looking statements.
Important factors that could cause actual results to differ include, but are not
necessarily limited to, those discussed under the caption "Risk Factors" (which
are incorporated by reference) in the Company's Registration Statement on Form
S-4, as filed with the Securities and Exchange Commission on October 15, 1996,
as well as the following factors: whether the BRI and Innovex transactions
actually occur; the ability of the combined businesses to be integrated with
the Company's current operations; actual operating performance; the ability to
maintain large client contracts or enter into new contracts; the actual costs
of combining the businesses; market conditions relating to the common stock;
reforms in the healthcare industry; greater than anticipated competition;
possible loss of existing relationships and clients; and potential loss of
large contracts.
13
<PAGE> 14
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
PART II. Other Information
Item 1. Legal Proceedings -- Not applicable
Item 2. Changes in Securities -- Not applicable
Item 3. Defaults upon Senior Securities -- Not applicable
Item 4. Submission of Matters to a Vote of Security Holders -- Not
applicable
Item 5. Other Information
(a) On or about October 28, 1996, the Company's Board of
Directors mailed to Shareholders of Record at the
close of business on October 24, 1996, a proxy
statement and accompanying card in connection with
the solicitation of proxies for use at the Special
Meeting of Shareholders to be held on November 26,
1996 for the following purposes:
(1) To approve the issuance by the Company of the
number of shares (the "Exchange Shares") of
the common stock, par value $.01 per share,
of the Company ("Company Common Stock")
calculated pursuant to a Share Exchange
Agreement, dated as of October 4, 1996 ("the
Exchange Agreement"), by and among the
Company, Innovex Limited ("Innovex") and the
shareholders of Innovex ("the Innovex
Shareholders"), such number being
approximately 10 million shares. Shareholder
approval of the issuance of the Exchange
Shares is required to comply with the rules
of the Nasdaq Stock Market, on which the
Company Common Stock is quoted. If the
shareholders of the Company approve the
issuance of the Exchange Shares and if the
transactions under the Exchange Agreement are
consummated, Innovex will become a
wholly-owned subsidiary of the Company.
(2) To approve an amendment to the Company's
Amended and Restated Articles of
Incorporation to increase the number of
authorized shares of the Company Common Stock
from 50,000,000 to 200,000,000; and
(3) To transact such other business as may
properly come before the meeting or any
adjournment or postponement thereof.
14
<PAGE> 15
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
*2.1 Merger Agreement and Plan of Merger, dated as of September 16, 1996,
by among BRI International, Inc., BRI Acquisition Corp. and the
Company.
**2.2 Share Exchange Agreement, dated as of October 4, 1996, by and among
the Company, Innovex and the Shareholders of Innovex.
27.01 Financial Data Schedule (for SEC use only)
</TABLE>
__________________________
* Incorporated by reference to the Company's Registration Statement on
Form S-4, as filed with the Securities and Exchange Commission on
October 15, 1996.
** Incorporated by reference to the Company's Proxy Statement and form of
proxy, as filed with the Securities and Exchange Commission on
October 28, 1996.
(b) The Company did not file any reports on Form 8-K
during the three months ended September 30, 1996. On
October 11, 1996, the Company filed a report on Form
8-K, dated October 6, 1996, reporting the signing of
a definitive share exchange agreement with Innovex
Limited, an international contract pharmaceutical
organization based in Marlow, United Kingdom and the
shareholders of Innovex. Completion of the agreement
is subject to the Company's shareholder approval and
other customary conditions. The Company also filed
the Financial Statements of the Innovex Companies,
which comprise a combination of Innovex PLC and
Innovex Holdings Limited and its subsidiaries, as of
March 31, 1995 and 1996 and Report of Independent
Auditors. The Company also filed the Unaudited
ProForma Combined Condensed Financial Information for
the Registrant for the years ended December 31, 1995,
1994 and 1993 and the six months ended June 30, 1996
and 1995 reflecting the acquisitions of BRI
International, Inc. and Innovex Limited.
15
<PAGE> 16
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
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.
Quintiles Transnational Corp.
-------------------------------------------
Registrant
Date November 14, 1996 /s/ Dennis B. Gillings
--------------------- -------------------------------------------
Dennis B. Gillings, Chief Executive Officer
Date November 14, 1996 /s/ Rachel R. Selisker
--------------------- -------------------------------------------
Rachel R. Selisker, Chief Financial Officer
16
<PAGE> 17
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
*2.1 Merger Agreement and Plan of Merger, dated as of September 16, 1996,
by among BRI International, Inc., BRI Acquisition Corp. and the
Company.
**2.2 Share Exchange Agreement, dated as of October 4, 1996, by and among
the Company, Innovex and the Shareholders of Innovex.
27.01 Financial Data Schedule (for SEC use only)
</TABLE>
__________________________
* Incorporated by reference to the Company's Registration Statement on
Form S-4, as filed with the Securities and Exchange Commission on
October 15, 1996.
** Incorporated by reference to the Company's Proxy Statement and form of
proxy, as filed with the Securities and Exchange Commission on
October 28, 1996.
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF QUINTILES TRANSNATIONAL FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 60,289
<SECURITIES> 59,986
<RECEIVABLES> 95,810
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 223,409
<PP&E> 95,318
<DEPRECIATION> 25,948
<TOTAL-ASSETS> 400,117
<CURRENT-LIABILITIES> 62,920
<BONDS> 140,011
0
0
<COMMON> 218
<OTHER-SE> 174,174
<TOTAL-LIABILITY-AND-EQUITY> 400,117
<SALES> 0
<TOTAL-REVENUES> 186,242
<CGS> 0
<TOTAL-COSTS> 166,431
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,533
<INCOME-PRETAX> 21,377
<INCOME-TAX> 6,735
<INCOME-CONTINUING> 14,642
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,642
<EPS-PRIMARY> .66
<EPS-DILUTED> 0
</TABLE>
