<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, 1997
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Commission file number 340-23520
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QUINTILES TRANSNATIONAL CORP.
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(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 October
31, 1997 was 36,739,543.
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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
Index
Page
----
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets -
September 30, 1997 and December 31, 1996 3
Condensed consolidated statements of income -
Three months ended September 30, 1997 and 1996;
nine months ended September 30, 1997 and 1996 4
Condensed consolidated statements of
cash flows - Nine months ended
September 30, 1997 and 1996 5
Notes to condensed consolidated financial
statements - September 30, 1997 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosure About
Market Risk 13
Part II. Other Information 14
Signatures 16
Exhibit Index 17
2
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PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1997 1996
------------ -----------
(Unaudited) (Note 1)
(In thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 75,186 $ 68,730
Accounts receivable and unbilled services 212,289 183,288
Investments 36,223 37,623
Other 29,903 12,868
--------- ---------
Total current assets 353,601 302,509
Property and equipment 236,059 180,523
Less accumulated depreciation 71,483 55,289
--------- ---------
164,576 125,234
Non-current assets:
Investments 57,455 25,083
Intangibles 74,921 68,595
Deferred income taxes 62,460 --
Deposits and other 13,489 11,156
--------- ---------
Total non-current assets 208,325 104,834
--------- ---------
Total assets $ 726,502 $ 532,577
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses 91,321 90,466
Credit arrangements, current 15,176 22,761
Unearned income 88,060 78,962
Income taxes and other 17,969 11,010
--------- ---------
Total current liabilities 212,526 203,199
Long-term liabilities:
Credit arrangements, less current portion 151,266 146,927
Long-term obligation 20,818 21,823
Deferred income taxes and other 3,797 10,083
--------- ---------
175,881 178,833
--------- ---------
Total liabilities 388,407 382,032
Shareholders' equity:
Common stock and additional paid-in capital,
36,688,029 and 34,188,610 shares
issued and outstanding at September 30, 1997 and
December 31, 1996, respectively 302,639 139,710
Retained earnings 44,284 11,513
Other equity (8,828) (678)
--------- ---------
Total shareholders' equity 338,095 150,545
--------- ---------
Total liabilities and shareholders' equity $ 726,502 $ 532,577
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1997 1996 1997 1996
--------- --------- --------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net revenue $ 206,697 $ 141,916 $ 580,762 $ 387,057
Costs and expenses:
Direct 109,174 71,380 301,863 193,979
General and administrative 65,471 49,284 189,954 135,024
Depreciation and amortization 9,558 6,592 26,409 17,813
Non-recurring:
Restructuring -- -- -- 2,373
Special pension contribution -- -- -- 2,329
--------- --------- --------- ---------
Total costs and expenses 184,203 127,256 518,226 351,518
--------- --------- --------- ---------
Income from operations 22,494 14,660 62,536 35,539
Other expense, net (829) (1,029) (1,885) (1,557)
--------- --------- --------- ---------
Income before income taxes 21,665 13,631 60,651 33,982
Income taxes 7,458 4,500 22,102 11,764
--------- --------- --------- ---------
Net income 14,207 9,131 38,549 22,218
Non-equity dividend -- (569) -- (1,307)
--------- --------- --------- ---------
Net income available for common
shareholders $ 14,207 $ 8,562 $ 38,549 $ 20,911
========= ========= ========= =========
Net income per share $ 0.38 $ 0.24 $ 1.05 $ 0.60
========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
1997 1996
--------- ---------
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 38,549 $ 22,218
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 26,409 17,812
Change in operating assets and liabilities (30,855) (9,315)
Other (374) (102)
Change in fiscal year of pooled entity (581) (9,378)
--------- ---------
Net cash provided by operating activities 33,148 21,235
INVESTING ACTIVITIES
Proceeds from disposition of property and equipment 2,659 869
Acquisition of businesses, net of cash acquired (3,445) (36,286)
Acquisition of property and equipment (59,320) (25,105)
Security investments, net (31,000) (112,119)
Payment of non-recurring transaction costs (5,648) --
Change in fiscal year of pooled entity (17) 2,606
--------- ---------
Net cash used in investing activities (96,771) (170,035)
FINANCING ACTIVITIES
Proceeds from borrowings and line of credit 6,021 141,548
Principal payments on credit arrangements (28,493) (7,850)
Issuance of debt for capitalization of pooled entity -- 45,197
Recapitalization of pooled entity -- (29,230)
Proceeds from issuance of common stock 100,958 1,970
Stock issuance costs (5,269) (78)
Purchase of treasury stock 0 (37)
Non-equity dividend (1,633) (80)
Other -- --
Change in fiscal year of pooled entity 57 1,398
--------- ---------
Net cash provided by financing activities 71,641 152,838
Effect of foreign currency exchange rate changes on cash (1,562) 3
--------- ---------
Increase in cash and cash equivalents 6,456 4,041
Cash and cash equivalents at beginning of period 68,730 86,390
--------- ---------
Cash and cash equivalents at end of period $ 75,186 $ 90,431
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
5
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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 1997
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, 1997 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1997. For further information, refer to
the consolidated financial statements and notes thereto included in the Annual
Report on Form 10-K for the year ended December 31, 1996 of Quintiles
Transnational Corp. (the "Company") and the supplemental financial statements
and notes therein included in the Company's Current Report on Form 8-K dated
October 17, 1997.
The balance sheet at December 31, 1996 has been derived from the audited
financial statements of the Company. The balance sheet does not include all of
the information and notes required by generally accepted accounting principles
for complete financial statements.
Net income 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:
Weighted Average Shares Outstanding
1997 1996
---- ----
Three months ended September 30 37,342,793 35,065,435
Nine months ended September 30 36,815,892 34,961,632
2. Mergers
On August 29, 1997, the Company acquired Rapid Deployment Services and its
affiliated companies ("RDS"), South Africa's leading contract sales
organization, in exchange for 60,834 shares of the Company's Common Stock. The
acquisition has been accounted for as a pooling of interests, and as such, all
condensed consolidated financial data for periods subsequent to January 1,1997
have been restated to include the results of RDS. Since the financial data of
RDS prior to January 1, 1997 have no material impact on the consolidated
financial data previously reported by the Company, the consolidated financial
data presented for periods prior to January 1, 1997 have not been restated to
include the historical financial data of RDS.
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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited) -- Continued
On August 29, 1997, the Company acquired Clindepharm, International (Pty)
Limited ("Clindepharm") in exchange for 238,983 shares of the Company's Common
Stock. The acquisition has been accounted for as a pooling of interests, and as
such, all historical financial data have been restated to include the historical
financial data of Clindepharm since its inception in 1996.
On August 29, 1997, the Company acquired 100% of the capital stock of
Intelligent Imaging, Inc. ("Intelligent Imaging") in exchange for 85,940 shares
of the Company's Common Stock. The transaction has been accounted for as a
pooling of interests, and as such, all condensed consolidated financial data for
periods subsequent to January 1, 1997 have been restated to include the results
of Intelligent Imaging. Since the financial data of Intelligent Imaging prior to
January 1, 1997 have no material effect on the consolidated financial data
previously reported by the Company, the consolidated financial data presented
for the periods prior to January 1, 1997 have not been restated to include the
historical financial data of Intelligent Imaging.
On July 2, 1997, the Company acquired CerebroVascular Advances, Inc. ("CVA"), a
contract research organization based in San Antonio, Texas that is a leader in
stroke clinical trials. The Company exchanged 233,968 shares of its Common Stock
for all of CVA's outstanding shares of capital stock and exchanged options
exercisable for 17,019 shares of the Company's Common Stock. The acquisition was
accounted for as a pooling of interests, and accordingly, the Company has
restated all historical financial data to include the historical financial data
of CVA.
On June 11, 1997, the Company acquired Action International Marketing Services
Limited and its subsidiaries including Medical Actions Communications Limited
(collectively "MAC"), a leading international strategic medical communications
consultancy. The Company acquired all of the stock of MAC for 565,697 shares of
the Company's Common Stock. The Company also granted stock options for 62,850
shares of the Company's Common Stock. The acquisition has been accounted for as
a pooling of interests, and as such, all historical financial data have been
restated to include the historical financial data of MAC.
On June 2, 1997, the Company acquired Butler Communications Inc. ("Butler") and
its affiliated companies, including Butler Clinical Recruitment, Inc., which
specialize in communication programs to accelerate the recruitment of patients
for clinical trials. The Company acquired the Butler businesses in exchange for
214,305 shares of the Company's Common Stock. In addition, the Company assumed
approximately $2.8 million in existing Butler debt. 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, 1997 have been restated to
include the results of Butler. Since the financial data of Butler prior to
January 1, 1997 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, 1997 have not been restated to
include the historical financial data of Butler.
7
<PAGE> 8
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited) -- Continued
Reconciliation of results of operations previously reported by the separate
entities prior to the mergers and as restated for the combined company follows
(in thousands, except per share data):
<TABLE>
<CAPTION>
For the three months ended
September 30, 1996: Company MAC CVA Clindepharm Consolidated
------- --- --- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net revenue $137,498 $2,604 $ 990 $ 824 $141,916
Net income available to
common shareholders 7,831 312 203 216 8,562
Net income per share $0.23 $0.24
For the nine months ended
September 30, 1996:
Net revenue $375,506 $7,021 $3,267 $1,263 $387,057
Net income available to
common shareholders 19,151 532 896 332 20,911
Net income per share $0.56 $0.60
</TABLE>
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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited) -- Continued
3. Shareholders' Equity
On March 12, 1997, the Company closed a public offering of 5,520,000 shares
of Common Stock at a price to the public of $62.875 per share. Of the
5,520,000 shares sold, 1,415,000 shares were sold by the Company. Net
proceeds to the Company, which exclude underwriting discounts and offering
expenses, amounted to approximately $84.6 million.
4. Income Taxes
In the first quarter of 1997, the Company recorded an estimate of the
deferred tax asset related to tax basis goodwill created by the Innovex
acquisition, which is amortizable for U.S. tax purposes starting January 1,
1997. The gross amount of this deferred tax asset is estimated to be $99.5
million, for which a valuation allowance of $36.8 million was recorded to
reflect possible limitations in the use of these tax benefits. A
corresponding $62.7 million increase in additional paid in capital was
recorded in accordance with generally accepted accounting principles.
5. Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings per Share" ("FASB 128"), which is required to
be adopted in December 1997. Upon adoption, the Company will be required to
change its method of computing, presenting and disclosing earnings per
share information, as well as, restating all prior periods presented. Under
the new requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded. The impact is expected
to result in an increase in primary earnings per share for the three and
nine months ended September 30, 1997 and 1996. Under FASB 128, the primary
earnings per share would have been $0.39 and $0.26 for the three months
ended September 30, 1997 and 1996, respectively and $1.07 and $0.62 for the
nine months ended September 30, 1997 and 1996, respectively. The impact of
FASB 128 on the calculation of fully diluted earnings per share for these
periods is not expected to be material.
In June 1997, FASB issued Statement No. 130, "Reporting Comprehensive
Income" which is effective for fiscal years beginning after December 15,
1997. The Statement establishes standards for reporting and display of
comprehensive income and its components in financial statements. The
Company will adopt Statement No. 130 in the first quarter of 1998 and will
provide the financial statements disclosures as required by the Statement.
The application of the new rules will not have an impact on the Company's
financial position or results from operations.
9
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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited) -- Continued
In June 1997, FASB issued Statement No. 131, "Disclosures about Segments of
an Enterprise and Related Information" which is effective for fiscal years
beginning after December 15, 1997. The Statement changes the way public
companies report segment information in annual financial statements and
also requires those companies to report selected segment information in
interim financial statements to shareholders. The statement also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. The Company will adopt Statement No.
131 in 1998 resulting in additional segment disclosures as required by the
Statement. The application of the new rules will not have an impact on the
Company's financial position or results from operations.
6. Subsequent Event
Subsequent to the end of the Company's fiscal third quarter, the Company's
Board of Directors authorized a two-for-one split of the Company's
Common Stock to be effected in the form of a 100% stock dividend. As a
result of the split, one additional share of the Company's Common Stock
will be issued for each share outstanding. The record date is November 10,
1997 and the payment date will be December 1, 1997. Par value will remain
at $.01 per share. Stock issued pursuant to stock option agreements, and
all other agreements payable in the Company's Common Stock, will be
adjusted to reflect the split. Pro forma earnings per share, giving
retroactive effect to the two-for-one split are presented below for the
three and nine months ended September 30, 1997 and 1996, respectively.
Proforma Earnings Per Share
---------------------------
Three Months Ended:
September 30, 1997 $0.19
September 30, 1996 $0.12
Nine Months Ended:
September 30, 1997 $0.52
September 30, 1996 $0.30
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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, 1997 and 1996
Net revenue increased 45.6% to $206.7 million for the third quarter of 1997, as
compared to $141.9 million for the third quarter of 1996. In general, growth
occurred across each of the Company's three geographic regions. Factors
contributing to this growth include the provision of increased services rendered
under existing contracts and the initiation of services under contracts awarded
subsequent to the third quarter of 1996.
Direct costs, which include compensation and related fringe benefits for
billable employees and any other expenses directly related to contracts,
increased 52.9% to $109.2 million for the quarter ended September 30, 1997 from
$71.4 million for the quarter ended September 30, 1996. Direct costs, as a
percentage of net revenue, were 52.8% for the third quarter of 1997 versus 50.3%
for the third quarter of 1996. The increase is primarily due to direct costs for
sales and marketing services as a percentage of net revenue being higher than
direct costs for the contract research services as a percentage of net revenue.
The sales and marketing services represent a larger proportion of the total net
revenues for the three months ended September 30, 1997 as compared to the three
months ended September 30, 1996.
General and administrative expense, which includes compensation and fringe
benefits for administrative employees, non-billable travel, professional
services, advertising, computer and facility expenses, increased 32.8% to $65.5
million from $49.3 million for the quarters ended September 30, 1997 and 1996,
respectively. General and administrative expense, as a percentage of net revenue
was 31.7% for the third quarter of 1997 versus 34.7% for the third quarter of
1996. The decrease is primarily due to a proportionately greater increase in
sales and marketing services during the third quarter of 1997 as compared to the
third quarter of 1996. Generally, lower overheads are associated with sales and
marketing services.
Depreciation and amortization increased to $9.6 million for the third quarter of
1997 from $6.6 million for the third quarter of 1996.
Income from operations was $22.5 million or 10.9% of net revenue for the third
quarter of 1997 versus $14.7 million or 10.3% of net revenue for the third
quarter of 1996.
Other expense decreased 19.4% to $829,000 for the third quarter of 1997 from
$1.0 million for the third quarter of 1996. Net interest income was $295,000 for
the quarter ended September 30, 1997 versus net interest expense of $1.0 million
for the quarter ended September 30, 1996. The fluctuation of net interest is due
to a decrease in interest expense of approximately $706,000 and an increase in
interest income of approximately $597,000. Offsetting these amounts were
approximately $1.2 million in acquisition costs in the third quarter of 1997
which are non-deductible for tax purposes.
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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
Income taxes, as a percentage of income before income taxes, increased to 34.4%
for the third quarter of 1997 versus 33.0% for the third quarter of 1996. This
increase is primarily due to an increase in profits in locations with higher tax
rates and the non-deductible acquisition costs that were incurred during the
third quarter of 1997.
Net income available to common shareholders increased to $14.2 million for the
third quarter of 1997 from $8.6 million for the third quarter of 1996.
Nine Months Ended September 30, 1997 and 1996
Net revenue increased 50.0% to $580.8 million for the nine months of 1997, as
compared to $387.1 million for the first nine months of 1996. In general, growth
occurred across each of the Company's three geographic regions. Factors
contributing to this growth include the provision of increased services rendered
under existing contracts and the initiation of services under contracts awarded
subsequent to the first nine months of 1996.
Direct costs, which include compensation and related fringe benefits for
billable employees and any other expenses directly related to contracts,
increased 55.6% to $301.9 million for the nine months ended September 30, 1997
from $194.0 million for the nine months ended September 30, 1996. Direct costs,
as a percentage of net revenue, were 52.0% for the first nine months of 1997
versus 50.1% for the nine months of 1996. This increase is primarily due to
direct costs for sales and marketing services as a percentage of net revenue
being higher than direct costs for contract research services as a percentage of
net revenue. The sales and marketing services represent a larger proportion of
the total net revenues for the nine months ended September 30, 1997 as compared
to the nine months ended September 30, 1996.
General and administrative expense, which includes compensation and fringe
benefits for administrative employees, non-billable travel, professional
services, advertising, computer and facility expenses, increased 40.7% to $190.0
million from $135.0 million for the nine months ended September 30, 1997 and
1996, respectively. General and administrative expense, as a percentage of net
revenue, decreased to 32.7% for the first nine months of 1997 from 34.9% for the
first nine months of 1996. The decrease is primarily due to a proportionately
greater increase in sales and marketing services during the first nine months of
1997 as compared to the first nine months of 1996. Generally, lower overheads
are associated with sales and marketing services..
Depreciation and amortization increased to $26.4 million for the first nine
months of 1997 from $17.8 million for the first nine months of 1996.
Income from operations was $62.5 million or 10.8% of net revenue for the first
nine months of 1997 versus $35.5 million or 9.2% of net revenue for the third
quarter of 1996. Excluding non-recurring costs, income from operations was $40.2
million or 10.4% of net revenue for the first nine months of 1996. During the
first nine months of 1996, two non-recurring charges were recognized: a $2.4
million expense for an Innovex Limited internal reorganization and a related
$2.3 million special pension contribution.
12
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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
Other expense was $1.9 million for the first nine months of 1997 as compared to
$1.6 million for the first nine months of 1996. The net increase is primarily
due to $2.2 million of acquisition costs incurred in the first nine months of
1997 as compared to $30,000 in the first nine months of 1996 both of which are
non-deductible for tax purposes. Offsetting these amounts is a decrease of
approximately $1.5 million of net interest expense.
Income taxes, as a percentage of income before income taxes, increased to 36.4%
for the first nine months of 1997 versus 34.6% for the first nine months of
1996. This increase is primarily due to an increase in profits in locations with
higher tax rates and the non-deductible acquisition costs that were incurred
during the third quarter of 1997.
Net income available to common shareholders increased to $38.5 million for the
first nine months of 1997 from $20.9 million for the first nine months of 1996.
Excluding non-recurring costs, net income available to common shareholders was
$24.5 million for the first nine months of 1996.
Liquidity and Capital Resources
Cash inflows from operations were $33.1 million for the nine months ended
September 30, 1997 versus $21.2 million for the comparable period of 1996.
Investing activities, for the nine months ended September 30, 1997, consisted
primarily of capital asset purchases, acquisitions, investment security
purchases and maturities and payment of non-recurring transaction costs accrued
in 1996. These investing activities required an outlay of cash of $96.8 million
for the first nine months of 1997 compared to an outlay of $170.0 million for
investing activities during the same period in 1996.
As of September 30, 1997, total working capital was $141.1 million versus $99.3
million as of December 31, 1996. Net receivables from clients (accounts
receivable and unbilled services net of unearned income) increased to $124.2
million at September 30, 1997 as compared to $104.3 million at the end of 1996.
On March 12, 1997, the Company closed a public offering of 5,520,000 shares of
its Common Stock at a price to the public of $62.875 per share. Of the 5,520,000
shares sold, 1,415,000 shares were sold by the Company and 4,105,000 shares were
sold by selling shareholders. Net proceeds to the Company amounted to
approximately $84.6 million.
The Company has a (pound)15.0 million (approximately $24.1 million) unsecured
line of credit with a U.K. bank and a (pound)5.0 million (approximately $8.0
million) secured overdraft facility with a second U.K. bank. At September 30,
1997, the Company had (pound)19.4 million (approximately $31.1 million)
available under these arrangements.
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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
The Company's primary cash needs on both a short-term basis and a long-term
basis are for working capital, geographic expansion, addition of new services,
potential acquisitions, general corporate purposes and capital expenditures.
Based on its current operating plan, the Company believes that its available
cash and cash equivalents as of September 30, 1997, together with cash flow from
operations and borrowings under its line of credit agreements, will be
sufficient to meet its foreseeable cash needs.
As part of its business strategy, the Company reviews many acquisition
candidates in the ordinary course of business, and in addition to acquisitions
already made, the Company continually is evaluating new acquisition and
expansion possibilities. The Company may from time to time seek to obtain debt
or equity financing to facilitate possible acquisitions or expansion.
Cautionary Statement for Forward-Looking Information
Information set forth in this Form 10-Q including Management's Discussion and
Analysis of Financial Condition and Results of Operations contain various
"forward looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Act of 1934, which statements
represent the Company's judgment concerning the future and are subject to risks
and uncertainties that could cause the Company's actual operating results and
financial position to differ materially. Such forward looking statements can be
identified by the use of forward looking terminology such as "may," "will,"
"expect," "anticipate," "estimate," "believe," or "continue," or the negative
thereof or other variations thereof or comparable terminology.
The Company cautions that any such forward looking statements are further
qualified by important factors that could cause the Company's actual operating
results to differ materially from those in the forward looking statements,
including without limitation, the Company's dependence on certain industries and
clients, management of its growth, risks associated with acquisitions, risks
relating to contract sales services, competition within the industry, the loss
or delay of large contracts, dependence on personnel and government regulation
and other Risk Factors described in Exhibit 99.01 filed with this report (and
incorporated herein by reference).
Item 3. Quantitative and Qualitative Disclosure About Market Risk--
Not Applicable
14
<PAGE> 15
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
PART II. Other Information
Item 1. Legal Proceedings -- Not applicable
Item 2. Changes in Securities
On August 29, 1997, the Company issued 85,940 shares of its
Common Stock to the shareholders of Intelligent Imaging in
exchange for all of the outstanding capital stock of Intelligent
Imaging in reliance upon a claim of exemption pursuant to Section
4(2) of the Securities Act of 1933, as amended, based on
representations made by the Intelligent Imaging shareholders in
the Share Exchange Agreement dated as of August 28, 1997 by and
among the Company, Quintiles Technologies, Inc., the shareholders
of Intelligent Imaging and Intelligent Imaging.
On August 29, 1997, the Company completed the acquisitions of
Clindepharm and RDS. The Company issued 238,983 shares of its
Common Stock, par value $.01, to the former shareholders of
Clindepharm in exchange for all of the issued shares of
Clindepharm. Of the shares of the Company's Common Stock issued,
71,696 shares were issued in reliance on Regulation S and 167,287
shares were issued in reliance on a claim of exemption from the
registration provisions of the Securities Act, pursuant to Section
4(2) thereof, each based on representations made by the
shareholders of Clindepharm in the related share exchange
agreement. The Company issued 60,834 shares of its Common Stock to
the former shareholders of RDS in exchange for all of the issued
shares of RDS, 18,250 shares of which were issued in reliance on
Regulation S and 42,584 shares of which were issued in reliance on
a claim of exemption from the registration provisions of the
Securities Act pursuant to Section 4(2) thereof, each based on
representations made by the shareholders of RDS in the related
share exchange agreement. The Company's issuances of unregistered
shares of its Common Stock in each transaction were previously
reported in the Company's Current Report on Form 8-K dated
October 17, 1997.
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 - Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Description
------- -----------
10.01 (1) Letter Agreement dated August 11, 1997 between
Barrie S. Haigh and Quintiles
27.01 Financial Data Schedule
99.01 (2) Risk Factors
- -----------------
(1) Exhibit 4.08 to the Company's Registration Statement on Form S-3
(Registration No. 333-38181), as filed with the Securities and Exchange
Commission October 17, 1997 and incorporated herein by reference.
(2) Exhibit 99.01 to the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission on March 25, 1997 and incorporated
herein by reference.
(b) The Company filed one report on Form 8-K, dated August 29, 1997, during
the three months ended September 30, 1997. On the report on Form 8-K,
dated August 29, 1997, the Company reported the sales of equity
securities pursuant to Regulation S in connection with the acquisitions
of Clindepharm International (Pty) Limited and Professional
Pharmaceutical Marketing Services (Pty) Limited (described herein as
"RDS") . No other reports on Form 8-K were filed during the
three months ended September 30, 1997. Subsequently, the Company filed
one report on Form 8-K, dated October 17, 1997. On the report on Form
8-K, dated October 17, 1997, the Company filed certain of its restated
historical financial statements for the three year period ended
December 31, 1996 and the three and six month periods ended June 30,
1997 and 1996. No other reports on Form 8-K have been filed prior to
the filing of this report.
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 12, 1997 /s/ Dennis B. Gillings
----------------- -------------------------------------------
Dennis B. Gillings, Chief Executive Officer
Date November 12, 1997 /s/ Rachel R. Selisker
----------------- -------------------------------------------
Rachel R. Selisker, Chief Financial Officer
16
<PAGE> 17
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Description
------- -----------
10.01 (1) Letter Agreement dated August 11, 1997 between
Barrie S. Haigh and Quintiles
27.01 Financial Data Schedule
99.01 (2) Risk Factors
- -----------------
(1) Exhibit 4.08 to the Company's Registration Statement on Form S-3
(Registration No. 333-38181), as filed with the Securities and Exchange
Commission October 17, 1997 and incorporated herein by reference.
(2) Exhibit 99.01 to the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission on March 25, 1997 and incorporated
herein by reference.
17
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