<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
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 200
DURHAM, NC 27703-8411
(Address of principal executive offices, including zip code)
(919) 998-2000
(Registrant's telephone number, including area code)
N/A
(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
The number of shares of Common Stock, $.01 par value, outstanding as of
April 30, 2000 was 115,162,536.
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<PAGE> 2
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets -- March 31, 2000 and
December 31, 1999 3
Condensed consolidated statements of operations -- Three
months ended March 31, 2000 and 1999 4
Condensed consolidated statements of cash flows -- Three
months ended March 31, 2000 and 1999 5
Notes to condensed consolidated financial
statements -- March 31, 2000 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosure about Market Risk 18
Part II. Other Information
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults upon Senior Securities -- Not Applicable 18
Item 4. Submission of Matters to a Vote of Security Holders -- Not
Applicable 18
Item 5. Other Information -- Not Applicable 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 20
Exhibit Index 21
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
2000 1999
----------- -----------
(UNAUDITED) (NOTE 1)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 139,487 $ 191,653
Trade accounts receivable and unbilled services, net...... 417,364 377,278
Investments in debt securities............................ 32,801 32,476
Prepaid expenses.......................................... 42,653 37,216
Other current assets and receivables...................... 38,029 43,459
Net assets of discontinued operations..................... 133,645 122,981
---------- ----------
Total current assets............................... 803,979 805,063
Property and equipment...................................... 578,602 574,090
Less accumulated depreciation............................... (186,991) (174,406)
---------- ----------
391,611 399,684
Intangibles and other assets:
Goodwill, net............................................. 200,984 204,307
Other intangibles, net.................................... 3,002 4,639
Investments in debt securities............................ 78,009 76,902
Investments in marketable equity securities............... 61,050 45,237
Deferred income taxes..................................... 79,791 84,356
Deposits and other assets................................. 42,758 36,434
---------- ----------
465,594 451,875
---------- ----------
Total assets....................................... $1,661,184 $1,656,622
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Lines of credit........................................... $ 430 $ 12
Accounts payable and accrued expenses..................... 283,243 234,795
Credit arrangements, current.............................. 157,109 168,905
Unearned income........................................... 178,174 172,557
Income taxes and other current liabilities................ 10,853 36,578
---------- ----------
Total current liabilities.......................... 629,809 612,847
Long-term liabilities:
Credit arrangements, less current portion................. 8,598 8,589
Long-term obligations..................................... 14,300 7,290
Deferred income taxes and other liabilities............... 41,994 36,137
---------- ----------
64,892 52,016
---------- ----------
Total liabilities.................................. 694,701 664,863
Shareholders' equity:
Preferred stock, none issued and outstanding at March 31,
2000 and December 31, 1999 respectively................. -- --
Common stock and additional paid-in capital, 115,045,002
and 115,118,347 shares issued and outstanding at March
31, 2000 and December 31, 1999, respectively............ 786,830 788,247
Retained earnings......................................... 177,496 204,062
Accumulated other comprehensive income.................... 4,337 1,677
Other equity.............................................. (2,180) (2,227)
---------- ----------
Total shareholders' equity......................... 966,483 991,759
---------- ----------
Total liabilities and shareholders' equity......... $1,661,184 $1,656,622
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
statements.
3
<PAGE> 4
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
----------------------
2000 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net revenue................................................. $414,845 $359,705
Costs and expenses:
Direct.................................................... 255,476 193,906
General and administrative................................ 135,062 109,482
Depreciation and amortization............................. 23,122 17,800
Restructuring charge...................................... 58,592 --
-------- --------
472,252 321,188
-------- --------
(Loss) income from operations............................... (57,407) 38,517
Transaction costs........................................... -- (22,363)
Other income (expense)...................................... 1,948 432
-------- --------
Total other income (expense), net................. 1,948 (21,931)
-------- --------
(Loss) income from continuing operations before income
taxes..................................................... (55,459) 16,586
Income tax (benefit) expense................................ (18,300) 13,222
-------- --------
(Loss) income from continuing operations.................... (37,159) 3,364
Income from discontinued operation, net of income taxes..... 10,594 5,250
-------- --------
Net (loss) income........................................... $(26,565) $ 8,614
======== ========
Basic and diluted net (loss) income per share:
(Loss) income from continuing operations.................. $ (0.32) $ 0.03
Income from discontinued operation........................ 0.09 0.05
-------- --------
Basic and diluted net (loss) income per share............. $ (0.23) $ 0.08
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
statements.
4
<PAGE> 5
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
----------------------------
2000 1999
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) income........................................... $(26,565) $ 8,614
Income from discontinued operation, net of income taxes..... (10,594) (5,250)
-------- --------
(Loss) income from continuing operations.................... (37,159) 3,364
Adjustments to reconcile net (loss) income to net cash
(used) provided by operating activities:
Depreciation and amortization............................. 23,122 17,800
Non-recurring transaction costs........................... -- 22,363
Non-recurring restructuring charge........................ 50,874 --
(Benefit from) provision for deferred income tax
expense................................................ (328) 2,402
Change in operating assets and liabilities................ (59,621) (39,705)
Other..................................................... (97) 999
-------- --------
Net cash (used in) provided by operating activities......... (23,209) 7,223
INVESTING ACTIVITIES
Proceeds from disposition of property and equipment......... 1,731 1,024
Acquisition of property and equipment....................... (26,545) (56,130)
Cash acquired in stock transactions......................... -- 87,386
Payment of non-recurring transaction costs.................. -- (2,878)
Purchases of debt securities, net........................... (3,667) (12,753)
Purchases of equity investments............................. (1,760) --
Other....................................................... 217 (234)
-------- --------
Net cash (used in) provided by investing activities......... (30,024) 16,415
FINANCING ACTIVITIES
Increase in lines of credit, net............................ 237 5,021
Principal payments on credit arrangements, net.............. (5,678) (4,027)
Issuance of common stock, net............................... 4,891 3,416
Repurchase of common stock.................................. (6,517) --
Dividend from discontinued operation........................ 9,515 9,882
Dividend paid by pooled entity.............................. -- (1,411)
Other....................................................... -- (28)
-------- --------
Net cash provided by financing activities................... 2,448 12,853
Effect of foreign currency exchange rate changes on cash.... (1,381) (2,296)
-------- --------
(Decrease) increase in cash and cash equivalents............ (52,166) 34,195
Cash and cash equivalents at beginning of period............ 191,653 128,621
-------- --------
Cash and cash equivalents at end of period.................. $139,487 $162,816
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
statements.
5
<PAGE> 6
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
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 adjustments) considered necessary for a fair presentation
have been included. Operating results for the three month period ended March 31,
2000 are not necessarily indicative of the results that may be expected for the
year ended December 31, 2000. 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, 1999 of Quintiles Transnational Corp. (the
"Company").
The balance sheet at December 31, 1999 has been derived from the audited
consolidated financial statements of the Company. The financial statements do
not include all of the information and notes required by generally accepted
accounting principles for complete financial statements.
2. STOCK REPURCHASE
On February 3, 2000, the Board of Directors authorized the Company to repurchase
up to $200 million of the Company's Common Stock. During the first quarter of
2000, the Company repurchased 478,000 shares of its common stock for an
aggregate price of approximately $8.5 million.
3. SIGNIFICANT CUSTOMERS
No one customer accounted for greater than 10% of consolidated net revenue for
the three months ended March 31, 2000. One customer accounted for 11.7% of
consolidated net revenue for the three months ended March 31, 1999. These
revenues were earned by the Company's product development and commercialization
segments.
4. DISCONTINUED OPERATION
On January 24, 2000, the Company announced a definitive agreement to sell ENVOY
Corporation ("ENVOY") to Healtheon/WebMD Corp. ENVOY has been treated as a
discontinued operation. The accompanying consolidated financial statements
reflect the operating results and balance sheet items of ENVOY separately. The
results of the discontinued operation do not reflect any interest expense,
management fee or transaction costs allocated by the Company.
The following is a summary of income from operations of ENVOY (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
------------------
2000 1999
------- -------
<S> <C> <C>
Net revenue................................................. $59,407 $53,609
======= =======
Income before income taxes.................................. $16,559 $11,524
Income taxes................................................ 5,965 6,274
------- -------
Net income.................................................. $10,594 $ 5,250
======= =======
</TABLE>
6
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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
The assets and liabilities of ENVOY have been classified in the accompanying
consolidated balance sheets as net assets of discontinued operation. The
following is a summary of these net assets of discontinued operation (in
thousands):
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000 AS OF DECEMBER 31, 1999
-------------------- -----------------------
<S> <C> <C>
Current assets......................................... $ 89,317 $ 70,006
Other assets........................................... 82,470 88,794
Current liabilities.................................... (36,787) (33,977)
Long-term liabilities.................................. (1,355) (1,842)
-------- --------
Net assets of discontinued operation......... $133,645 $122,981
======== ========
</TABLE>
5. SEGMENTS
The following table presents the Company's operations by reportable segment. The
Company is managed through three reportable segments, namely, the product
development service group, the commercialization service group and the
QUINTERNET(TM) informatics service group. Management has distinguished these
segments based on the normal operations of the Company. The product development
group is primarily responsible for all phases of clinical research and outcomes
research consulting. The commercialization group is primarily responsible for
sales force deployment and strategic marketing services. The QUINTERNET(TM)
informatics group is primarily responsible for providing market research
solutions and strategic analysis to support healthcare decisions. In the first
quarter of fiscal 2000 there were reclassifications between segments due to
management changes of certain business units. These changes are reflected in
both the 2000 and 1999 periods shown below. The Company does not include net
revenue and expenses relating to the Internet initiative (approximately $445,000
and $3.2 million, respectively, for the three months ended March 31, 2000),
non-recurring costs, interest income (expense) and income tax expense (benefit)
in segment profitability. Overhead costs are allocated based upon management's
best estimate of efforts expended in managing the segments. There are not any
significant intersegment revenues.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-------------------
2000 1999
-------- --------
<S> <C> <C>
Net revenue:
Product development....................................... $200,496 $202,390
Commercialization......................................... 200,356 150,010
QUINTERNET(TM) informatics................................ 13,548 7,305
-------- --------
$414,400 $359,705
======== ========
Income from operations:
Product development....................................... $ (9,245) $ 25,303
Commercialization......................................... 15,669 13,816
QUINTERNET(TM) informatics................................ (2,495) (602)
-------- --------
$ 3,929 $ 38,517
======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000 AS OF DECEMBER 31, 1999
-------------------- -----------------------
<S> <C> <C>
Total assets:
Product development.................................. $ 857,801 $ 887,804
Commercialization.................................... 380,561 339,408
QUINTERNET(TM) informatics........................... 289,177 306,429
Net assets of discontinued operation................. 133,645 122,981
---------- ----------
$1,661,184 $1,656,622
========== ==========
</TABLE>
7
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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
6. NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net income
per share (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
--------------------
2000 1999
-------- --------
<S> <C> <C>
Net (loss) income:
(Loss) income from continuing operations.................. $(37,159) $ 3,364
Income from discontinued operation, net of income taxes... 10,594 5,250
-------- --------
Net (loss) income......................................... $(26,565) $ 8,614
======== ========
Weighted average shares:
Basic weighted average shares............................. 115,392 109,341
Effect of dilutive securities:
Stock options.......................................... -- 2,702
-------- --------
Diluted weighted average shares........................... 115,392 112,043
======== ========
Basic and diluted net (loss) income per share:
(Loss) income from continuing operations.................. $ (0.32) $ 0.03
Income from discontinued operation........................ 0.09 0.05
-------- --------
Basic and diluted net (loss) income per share............. $ (0.23) $ 0.08
======== ========
</TABLE>
Options to purchase approximately 16.9 million shares of common stock were
outstanding during the three months ended March 31, 2000, but were not included
in the computation of diluted net loss per share because the effect would be
antidilutive.
The conversion of the Company's 4.25% Convertible Subordinated Notes into
approximately 3.5 million shares of common stock was not included in the
computation of diluted net loss per share because the effect would be
antidilutive.
7. COMPREHENSIVE INCOME
The following table represents the Company's comprehensive loss for the three
months ended March 31, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
------------------
2000 1999
-------- -------
<S> <C> <C>
Net (loss) income........................................... $(26,565) $ 8,614
Other comprehensive loss:
Unrealized gain (loss) on marketable securities, net of
tax.................................................... 10,107 (232)
Foreign currency adjustment............................... (7,447) (9,112)
-------- -------
Comprehensive loss.......................................... $(23,905) $ (730)
======== =======
</TABLE>
8. RESTRUCTURING CHARGE
In January 2000, the Company announced the adoption of a restructuring plan. In
connection with this plan, the Company recognized a restructuring charge of
$58.6 million. The restructuring charge consists of $33.2 million related to
severance payments, $11.3 million related to asset impairment write-offs and
$14.0 million of exit costs. As a part of this plan, 770 positions worldwide
will be eliminated. As of March 31, 2000, all affected individuals have been
notified. Although positions eliminated were across all functions, most of the
eliminated positions were in the product development service group.
8
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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
As of March 31, 2000, the following amounts were recorded (in thousands):
<TABLE>
<CAPTION>
ACTIVITY THREE MONTHS ENDED
MARCH 31, 2000
------------------------------- BALANCE AT
ACCRUALS WRITE-OFFS/PAYMENTS MARCH 31, 2000
-------- ------------------- --------------
<S> <C> <C> <C>
Severance and related costs....................... $33,228 $ (6,071) $27,157
Asset impairment write-offs....................... 11,315 (11,315) --
Exit costs........................................ 14,049 (1,707) 12,342
------- -------- -------
$58,592 $(19,093) $39,499
======= ======== =======
</TABLE>
The above provisions and related restructuring reserves are estimates based on
the Company's judgment at this time. Adjustments to the restructuring provisions
may be necessary in the future based on further development of restructuring
related costs.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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 and Risk Factors,
contains 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 judgement 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.
We caution you that any such forward looking statements are further qualified by
important factors that could cause our actual operating results to differ
materially from those in the forward looking statements, including without
limitation, our ability to efficiently distribute backlog among therapeutic
business units and match demand to resources, actual operating performance, the
actual savings and operating improvements resulting from the restructuring, the
ability to maintain large client contracts or to enter into new contracts,
changes in trends in the pharmaceutical industry, the ability to create data
products from data licensed to us, the ability to operate successfully in new
lines of business, the ability of the recently combined businesses to be
integrated with our current operations and, with respect to our proposed
transaction with Healtheon/WebMD, actual completion of the transaction,
including obtaining the requisite regulatory approval, and risks associated with
Healtheon/WebMD's business as set forth in its filings with the Securities and
Exchange Commission. See "Risk Factors" below for additional factors that could
cause actual results to differ.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2000 and 1999
Net revenue for the first quarter of 2000 was $414.8 million, an increase of
$55.1 million or 15.3% over the first quarter of 1999 net revenue of $359.7
million. Factors contributing to the growth included an increase of contract
service offerings, the provision of increased services rendered under existing
contracts, the initiation of services under contracts awarded subsequent to the
first quarter of 1999 and the Company's acquisitions accounted for under
purchase accounting completed subsequent to the first quarter of 1999 which
contributed approximately $9.1 million of net revenue for the first quarter of
2000. Approximately $445,000 of net revenue for the quarter ended March 31, 2000
relates to the Internet initiative and is not included in our segment
information. Net revenue for the product development group decreased .9% to
$200.5 million for the first quarter of 2000 as compared to $202.4 million for
the first quarter of 1999. This decrease was a result of several factors,
including early termination and delays of clinical trials, less than expected
new business and utilization rates that were lower than historical levels. Net
revenue for the commercialization group increased
9
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QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
33.6% to $200.4 million for the first quarter of 2000 as compared to $150.0
million for the first quarter of 1999. The net revenue for the first quarter of
2000 for the commercialization group included approximately $2.2 million of net
revenue from an acquisition accounted for as a purchase that was completed
subsequent to the first quarter of 1999. Net revenue for the QUINTERNET(TM)
informatics group increased 85.5% to $13.5 million for the first quarter of 2000
as compared to $7.3 million for the first quarter of 1999. The net revenue for
the first quarter of 2000 for the QUINTERNET(TM) informatics group included
approximately $6.8 million of net revenue from an acquisition accounted for as a
purchase that was completed subsequent to the first quarter of 1999.
Direct costs, which include compensation and related fringe benefits for
billable employees, and other expenses directly related to contracts, were
$255.5 million or 61.6% of net revenue for the first quarter of 2000 versus
$193.9 million or 53.9% of net revenue for the first quarter of 1999. The
increase in direct costs as a percentage of net revenue was primarily
attributable to a decrease in the utilization rates during the first quarter of
2000, as discussed above.
General and administrative expenses, which include compensation and fringe
benefits for administrative employees, non-billable travel, professional
services, advertising, computer and facility expenses, were $135.1 million or
32.6% of net revenue for the first quarter of 2000 versus $109.5 million or
30.4% of net revenue for the first quarter of 1999. Also included in general and
administrative expenses for the quarter ended March 31, 1999 were $2.6 million
of incremental costs related to our Year 2000 Program. Excluding these
incremental costs, general and administrative expenses increased $28.2 million
primarily due to an increase in personnel, facilities and locations.
Depreciation and amortization were $23.1 million or 5.6% of net revenue for the
first quarter of 2000 versus $17.8 million or 4.9% of net revenue for the first
quarter of 1999. Amortization expense increased $1.6 million due to the goodwill
amortization resulting from the Company's 1999 acquisitions accounted for under
purchase accounting. The remaining $3.7 million increase is primarily due to the
increase in the capitalized asset base of the Company.
In January 2000, we announced the adoption of a restructuring plan. In
connection with this plan, we recognized a restructuring charge of $58.6 million
during the quarter ended March 31, 2000. The restructuring charge consists of
$33.2 million related to severance payments, $11.3 million related to asset
impairment write-offs and $14.0 million of exit costs. As a part of this plan,
770 positions worldwide will be eliminated. Most of the eliminated positions
were in the product development service group. We are targeting the
restructuring to result in annualized cost savings of approximately $40.0
million to $50.0 million. We believe the benefits of the restructuring will
begin to pay off in the second half of 2000.
Loss from operations was $57.4 million or (13.8%) of net revenue for the first
quarter of 2000 versus income from operations of $38.5 million or 10.7% of net
revenue for the first quarter of 1999. Excluding the restructuring charge of
$58.6 million and the loss of $2.7 million for the Internet initiative, income
from operations was $3.9 million or .9% of net revenue for the first quarter of
2000. We do not include net revenue and expenses relating to the Internet
initiative and restructuring charges in income (loss) from operations of our
three segments. Loss from operations for the product development group was $9.2
million or (4.6%) of net revenue for the first quarter of 2000 versus income
from operations of $25.3 million or 12.5% of net revenue for the first quarter
of 1999. This decrease results from the early termination and delays of clinical
programs, adjustments for concessions made in existing programs, less than
expected new business, lower utilization rates as discussed above and higher
operating costs in our laboratory services group. Income from operations for the
commercialization group increased to $15.7 million or 7.8% of net revenue for
the first quarter of 2000 from $13.8 million or 9.2% of net revenue for the
first quarter of 1999. Loss from operations for the QUINTERNET(TM) informatics
group increased to $2.5 million or (18.4%) of net revenue for the first quarter
of 2000 from $602,000 or (8.2%) of net revenue for the first quarter of 1999.
10
<PAGE> 11
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
Other income was $1.9 million for the first quarter of 2000 versus other expense
of $21.9 million for the first quarter of 1999. Excluding transaction costs,
other income was $432,000 for the first quarter of 1999. The $1.5 million
fluctuation was primarily due to an increase in net interest income.
The effective income tax rate for the first quarter of 2000 was 33.0% versus a
79.7% effective income tax rate for the first quarter of 1999. Excluding the
transaction costs which are not generally deductible for income tax purposes,
the effective income tax rate for the first quarter of 1999 was 33.9%. Since we
conduct operations on a global basis, our effective income tax rate may vary.
LIQUIDITY AND CAPITAL RESOURCES
Cash outflows from operations were $23.2 million for the three months ended
March 31, 2000 versus cash inflows of $7.2 million for the comparable period of
1999. Investing activities, for the three months ended March 31, 2000, consisted
primarily of capital asset purchases and investment security purchases. Capital
asset purchases required an outlay of cash of $26.5 million for the three months
ended March 31, 2000 compared to an outlay of $56.1 million for the same period
in 1999. Capital asset expenditures for the three months ended March 31, 1999
included approximately $35 million in connection with the acquisition of the
Hoechst Marion Roussel's Drug Innovation and Approval Facility. The remainder of
the purchase price, approximately $58 million, is expected to be paid in the
first half of 2000 when the acquisition of the physical facility is completed.
Total working capital, excluding net assets of discontinued operation, was $40.5
million as of March 31, 2000 versus $69.2 million as of December 31, 1999. Net
receivables from customers (trade accounts receivable and unbilled services, net
of unearned income) were $239.2 million at March 31, 2000 as compared to $204.7
million at December 31, 1999. As of March 31, 2000, trade accounts receivable
were $241.7 million versus $220.3 million at December 31, 1999. Unbilled
services were $175.6 million at March 31, 2000 versus $157.0 million at December
31, 1999, offset by unearned income balances of $178.2 million and $172.6
million, respectively. The number of days revenue outstanding in trade accounts
receivable and unbilled services, net of unearned income, were 47 days at March
31, 2000, as compared to 38 days at December 31, 1999.
On January 24, 2000, we announced a definitive agreement to sell ENVOY to
Healtheon/WebMD Corp. Prior to the sale, ENVOY will transfer its informatics
subsidiary, Synergy Health Care, Inc., to us. We will receive $400 million in
cash and 35 million shares of Healtheon/WebMD common stock in exchange for our
entire interest in ENVOY and a warrant to acquire 10 million shares of our
common stock at $40 per share, exercisable for four years. Closing is expected
to occur during the second quarter of 2000.
We have available to us a L10.0 million (approximately $15.9 million) unsecured
line of credit with a U.K. bank. We also have available to us a L1.5 million
(approximately $2.4 million) general banking facility with the same U.K. bank.
At March 31, 2000, we did not have any outstanding balances on these facilities.
Our $143.75 million of 4.25% Convertible Subordinated Notes mature on May 31,
2000. The conversion ratio of the Notes is 24.1692, or $41.37 per share.
We have a $150 million senior unsecured credit facility with a U.S. bank. At
March 31, 2000, the Company had $150 million available under this credit
facility. Based upon our current financing plan, we believe the $150 million
facility would be available to retire our credit arrangements and obligations,
if necessary.
Based on our current operating plan, we believe that our available cash and cash
equivalents and investments in marketable securities, together with future cash
flows from operations and borrowings under our line of credit agreements will be
sufficient to meet our foreseeable cash needs in connection with our operations.
As part of our business strategy, we review many acquisition candidates in the
ordinary course of business, and in addition to acquisitions already made, we
are continually evaluating new acquisition and expansion possibilities. We may
from time to time seek to obtain debt or equity financing in our ordinary course
of business or to facilitate possible acquisitions or expansion.
11
<PAGE> 12
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
RISK FACTORS
In addition to the other information provided in our reports, you should
consider the following factors carefully in evaluating our business and us.
Additional risks and uncertainties not presently known to us, that we currently
deem immaterial or that are similar to those faced by other companies in our
industry or business in general, such as competitive conditions, may also impair
our business operations. If any of the following risks occur, our business,
financial condition, or results of operations could be materially adversely
affected.
Changes in Outsourcing Trends in the Pharmaceutical and Biotechnology Industries
Could Adversely Affect Our Operating Results and Growth Rate
Economic factors and industry trends that affect our primary customers,
pharmaceutical and biotechnology companies, also affect our business. For
example, the practice of many companies in these industries has been to hire
outside organizations like us to conduct large clinical research and sales and
marketing projects. This practice has grown substantially over the past decade,
and we have benefited from this trend. Some industry commentators believe that
the rate of growth of outsourcing has slowed. If these industries reduce their
tendency to outsource those projects, our operations, financial condition and
growth rate could be materially and adversely affected. Recently, we also
believe we have been negatively impacted by pending mergers and other factors in
the pharmaceutical industry, which appear to have slowed decision making by our
customers and delayed certain trials. A continuation of these trends would have
an ongoing adverse effect on our business. In addition, numerous governments
have undertaken efforts to control growing healthcare costs through legislation,
regulation and voluntary agreements with medical care providers and
pharmaceutical companies. If future regulatory cost containment efforts limit
the profits which can be derived on new drugs, our customers may reduce their
research and development spending which could reduce the business they outsource
to us. We cannot predict the likelihood of any of these events or the effects
they would have on our business, results of operations or financial condition.
If Companies We Acquire Do Not Perform as Expected or if We Are Unable to Make
Strategic Acquisitions, Our Business Could Be Adversely Affected
A key element of our growth strategy has depended on our ability to complete
acquisitions that complement or expand our business and successfully integrate
the acquired companies into our operations. In the past, some of our
acquisitions performed below our expectations in the short term, but we
experienced no impact to our expectations for our overall results, due in part
to the size of such acquisitions and the performance of other areas of our
business. In the future, if we are unable to operate the business of an acquired
company so that its results meet our expectations, those results could have a
negative impact on our results as a whole. The risk that our results may be
affected if we are unable to successfully operate the businesses we acquire may
increase in proportion with (1) the size of the businesses we acquire, (2) the
lines of business we acquire and (3) the number of acquisitions we complete in
any given time period. In addition, in recent months our acquisition activity
has slowed, and we have not completed an acquisition since August 1999. As a
result, we currently are not growing from acquisitions. If we do not acquire
other companies, our overall growth, when compared to historical levels, will be
adversely affected.
In 1999, we completed nine acquisitions, including PMSI and ENVOY, the largest
acquisitions we have completed to date. We are continually evaluating and
competing for new acquisition opportunities. Other risk factors we face as a
result of our acquisition strategy include the following:
- our ability to achieve anticipated synergies from combined operations;
- our ability to integrate the operations and personnel of acquired
companies, especially those in lines of business that differ from our
current lines of business;
- the ability of acquired companies to meet anticipated net revenue and net
income targets;
- potential loss of the acquired companies' key employees;
12
<PAGE> 13
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
- our ability to efficiently operate and expand the acquired companies'
lines of business that differ from our current lines of business;
- the possibility that we may be adversely affected by risk factors present
at the acquired companies;
- potential losses resulting from undiscovered liabilities of acquired
companies that are not covered by the indemnification we may obtain from
the sellers;
- risks of assimilating differences in foreign business practices and
overcoming language barriers (for acquisitions of foreign companies); and
- risks experienced by companies in general that are involved in
acquisitions.
If We Are Unable to Successfully Develop and Market Potential New Services, Our
Growth Could Be Adversely Affected
Another key element of our growth strategy is the successful development and
marketing of new services that complement or expand our existing business. If we
are unable to succeed in (1) developing new services and (2) attracting a
customer base for those newly developed services, we will not be able to
implement this element of our growth strategy, and our future business, results
of operations and financial condition could be adversely affected.
For example, we are expanding our pharmaceutical and healthcare information and
market research services. These services involve analyzing healthcare
information to study aspects of current healthcare products and procedures for
use in developing new products and services or in analyzing sales and marketing
of existing products. In addition to the other difficulties associated with the
development of any new service, our ability to develop these services may be
limited further by contractual provisions limiting our use of the healthcare
information or the legal rights of others that may prevent or impair our use of
the healthcare information. Due to these and other limitations, we cannot assure
you that we will be able to develop this type of service successfully. Our
inability to develop new products or services or any delay in development may
adversely affect our ability to maintain our rate of growth in the future.
The Potential Loss or Delay of Our Large Contracts Could Adversely Affect Our
Results
Many of our contract research customers can terminate our contracts upon 15-90
days' notice. In the event of termination, our contracts often provide for fees
for winding down the project, but these fees may not be sufficient for us to
maintain our margins, and termination may result in lower resource utilization
rates. Thus, the loss or delay of a large contract or the loss or delay of
multiple contracts could adversely affect our net revenue and profitability. We
believe that this risk has potentially greater effect as we pursue larger
outsourcing arrangements with global pharmaceutical companies, which may
encompass global clinical trials at a number of sites and cross many service
lines. Also, recently we have observed that customers may be more willing to
delay, cancel or reduce contracts more rapidly than in the past. If this becomes
a trend, it could become more difficult for us to balance our resources with
demands for our services and our financial results could be adversely affected.
The Proposed Sale of ENVOY May Fail to Close or Be Delayed
The proposed sale of ENVOY to Healtheon/WebMD is important to our strategic plan
and, if the transaction fails to close or the closing is delayed, we may not be
able to execute strategies that are critical to our continued growth as planned,
if at all. For example, we have agreed to form a strategic alliance with
Healtheon/WebMD designed to enable us to develop and market web-based products
and services relating to our informatics strategy, and Healtheon/WebMD has
agreed to give us access to data that is important to our informatics business.
Healtheon/WebMD's obligation to perform under these arrangements is contingent
upon closing of the ENVOY transaction. As a result, if the transaction does not
close, we would not be able to take advantage of the benefits of the proposed
alliance as planned, and we would need to seek other
13
<PAGE> 14
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
partnerships or develop such capabilities internally. These consequences may
substantially delay our ability to execute our Internet strategy relating to our
product development and commercialization service groups and increase our costs.
The sale of ENVOY is subject to regulatory approval and other conditions that
are beyond our control.
Our Backlog May Not Be Indicative of Future Results
We report backlog based on anticipated net revenue from uncompleted projects
that a customer has authorized. We cannot assure you that the backlog we have
reported will be indicative of our future results. A number of factors may
affect our backlog, including:
- the variable size and duration of projects (some are performed over
several years);
- the loss or delay of projects; and
- a change in the scope of work during the course of a project.
Also, if customers delay projects, the projects will remain in backlog, but will
not generate revenue at the rate originally expected. Accordingly, historical
indications of the relationship of backlog to revenues are not indicative of the
future relationship.
If We Lose the Services of Dennis Gillings or Other Key Personnel, Our Business
Could Be Adversely Affected
Our success substantially depends on the performance, contributions and
expertise of our senior management team, led by Dennis B. Gillings, Ph.D., our
Chairman of the Board of Directors and Chief Executive Officer. We maintain key
man life insurance on Dr. Gillings in the amount of $3 million. Our performance
also depends on our ability to attract and retain qualified management and
professional, scientific and technical operating staff, as well as our ability
to recruit qualified representatives for our contract sales services. The
departure of Dr. Gillings, or any key executive, or our inability to continue to
attract and retain qualified personnel could have a material adverse effect on
our business, results of operations or financial condition.
Our Product Development Services Create a Risk of Liability from Clinical Trial
Participants and the Parties with Whom We Contract
We contract with drug companies to perform a wide range of services to assist
them in bringing new drugs to market. Our services include supervising clinical
trials, data and laboratory analysis, patient recruitment and other services.
The process of bringing a new drug to market is time-consuming and expensive. If
we do not perform our services to contractual or regulatory standards, the
clinical trial process could be adversely affected. Additionally, if clinical
trial services such as laboratory analysis do not conform to contractual or
regulatory standards, trial participants could be affected. These events would
create a risk of liability to us from the drug companies with whom we contract
or the study participants.
We also contract with physicians to serve as investigators in conducting
clinical trials. Such testing creates risk of liability for personal injury to
or death of volunteers, particularly to volunteers with life-threatening
illnesses, resulting from adverse reactions to the drugs administered during
testing. It is possible third parties could claim that we should be held liable
for losses arising from any professional malpractice of the investigators with
whom we contract or in the event of personal injury to or death of persons
participating in clinical trials. We do not believe we are legally accountable
for the medical care rendered by third party investigators, and we would
vigorously defend any such claims. Nonetheless, it is possible we could be found
liable for those types of losses.
In addition to supervising tests or performing laboratory analysis, we also own
a number of labs where Phase I clinical trials are conducted. Phase I clinical
trials involve testing a new drug on a limited number of healthy individuals,
typically 20 to 80 persons, to determine the drug's basic safety. We also could
be liable for the
14
<PAGE> 15
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
general risks associated with ownership of such a facility. These risks include,
but are not limited to, adverse events resulting from the administration of
drugs to clinical trial participants or the professional malpractice of Phase I
medical care providers.
We also could be held liable for errors or omissions in connection with our
services. For example, we could be held liable for errors or omissions or breach
of contract if one of our laboratories inaccurately reports or fails to report
lab results or if our informatics products violate rights of third parties. We
maintain insurance to cover ordinary risks but any insurance might not be
adequate, and it would not cover the risk of a customer deciding not to do
business with us as a result of poor performance.
Relaxation of Government Regulation Could Decrease the Need for the Services We
Provide
Governmental agencies throughout the world, but particularly in the United
States, highly regulate the drug development/approval process. A large part of
our business involves helping pharmaceutical and biotechnology companies through
the regulatory drug approval process. Any relaxation in regulatory approval
standards could eliminate or substantially reduce the need for our services,
and, as a result, our business, results of operations and financial condition
could be materially adversely affected. Potential regulatory changes under
consideration in the United States and elsewhere include mandatory substitution
of generic drugs for patented drugs, relaxation in the scope of regulatory
requirements or the introduction of simplified drug approval procedures. These
and other changes in regulation could have an impact on the business
opportunities available to us.
Failure to Comply with Existing Regulations Could Result in a Loss of Revenue
Any failure on our part to comply with applicable regulations could result in
the termination of ongoing clinical research or sales and marketing projects or
the disqualification of data for submission to regulatory authorities, either of
which could have a material adverse effect on us. For example, if we were to
fail to verify that informed consent is obtained from patient participants in
connection with a particular clinical trial, the data collected from that trial
could be disqualified, and we could be required to redo the trial under the
terms of our contract at no further cost to our customer, but at substantial
cost to us.
Proposed Regulations May Increase the Cost of Our Business or Limit Our Service
Offerings
The confidentiality of patient-specific information and the circumstances under
which such patient-specific records may be released for inclusion in our
databases or used in other aspects of our business are subject to substantial
government regulation. Additional legislation governing the possession, use and
dissemination of medical record information and other personal health
information has been proposed at both the state and federal levels. This
legislation may (1) require us to implement security measures that may require
substantial expenditures or (2) limit our ability to offer some of our products
and services. These and other changes in regulation could limit our ability to
offer some of our products or have an impact on the business opportunities
available to us.
Industry Regulation May Restrict Our Ability to Analyze and Disseminate
Pharmaceutical and Healthcare Data
We are directly subject to certain restrictions on the collection and use of
data. Laws relating to the collection and use of data are evolving, as are
contractual rights. We cannot assure you that contractual restrictions imposed
by our customers, legislation or regulations will not, now or in the future,
directly or indirectly restrict the analysis or dissemination of the type of
information we gather and therefore materially adversely affect our operations.
15
<PAGE> 16
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
Our Services Are Subject to Evolving Industry Standards and Rapid Technological
Changes
The markets for our services, particularly our QUINTERNET(TM) informatics
services, which include our data analysis services, are characterized by rapidly
changing technology, evolving industry standards and frequent introduction of
new and enhanced services. To succeed, we must continue to:
- enhance our existing services;
- introduce new services on a timely and cost-effective basis to meet
evolving customer requirements;
- achieve market acceptance for new services; and
- respond to emerging industry standards and other technological changes.
Exchange Rate Fluctuations May Affect Our Results of Operations and Financial
Condition
We derive a large portion of our net revenue from international operations; for
example, we derived approximately 45.8% of our 1999 net revenue from outside the
United States. Our financial statements are denominated in U.S. dollars; thus,
factors associated with international operations, including changes in foreign
currency exchange rates and any trends associated with the transition to the
euro, could significantly affect our results of operations and financial
condition. Exchange rate fluctuations between local currencies and the U.S.
dollar create risk in several ways, including:
- Foreign Currency Translation Risk. The revenue and expenses of our
foreign operations are generally denominated in local currencies.
- Foreign Currency Transaction Risk. Our service contracts may be
denominated in a currency other than the currency in which we incur
expenses related to such contracts.
We try to limit these risks through exchange rate fluctuation provisions stated
in our service contracts, or we may hedge our transaction risk with foreign
currency exchange contracts or options. Despite these efforts, we may still
experience fluctuations in financial results from our operations outside the
United States, and we cannot assure you that we will be able to favorably reduce
our currency transaction risk associated with our service contracts.
We May Be Adversely Affected by Customer Concentration
We have one customer that accounted for 11% of our revenues for the year ended
December 31, 1999. These revenues resulted from services provided by our product
development and commercialization service groups. If this or any future customer
of similar size decreases or terminates its relationship with us, our business,
results of operations or financial condition could be materially adversely
affected.
New Healthcare Legislation or Regulation Could Restrict Our Informatics Business
The Department of Health and Human Services published proposed regulations
setting privacy standards to protect health information that is transmitted
electronically in the Federal Register on November 3, 1999. The comment period
for these proposed rules ended February 17, 2000. We understand generally that
final regulations will be issued no earlier than 60 days after the end of the
comment period, however, HHS has indicated that a significant delay is likely
which will add additional months to the expected date of the final rules. While
the proposed rules, if promulgated without modification, likely would not
restrict us from de-identifying individual health information and providing such
de-identified, aggregated data to our Synergy subsidiary for purposes of
analysis, the proposed rule may be changed in response to comments and further
modification and could be preempted by legislation. Such legislative or
regulatory changes could occur as early as this year and their impact cannot be
predicted. If legislation or a more restrictive regulation is adopted, it could
inhibit third party processors in using, transmitting or disclosing health data
(even if they have been de-identified) for purposes other than facilitating
payment or performing other clearinghouse functions which
16
<PAGE> 17
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
would restrict our ability to obtain data for use in our informatics services.
In addition, it could require us to establish uniform specifications for
obtaining de-identified data, so that de-identified data obtained from different
sources could be aggregated. Third party processors, under the proposed rules,
or modified rules, also may require us to provide indemnity from claims against
them arising from our use of data, even in de-identified form. While the impact
of developments in legislation, regulations or the demands of third party
processors is difficult to predict, each could materially adversely affect our
informatics business.
RISKS ASSOCIATED WITH DISCONTINUED OPERATION -- THE ENVOY EDI BUSINESS
Until the proposed sale of our ENVOY subsidiary closes, we will continue to
operate ENVOY's EDI business and will continue to be subject to the following
additional risks associated with ENVOY's EDI business.
EDI Services Are Subject to Evolving Industry Standards and Rapid Technological
Changes
The current industry standard EDI platform for processing transactions could be
replaced or supplemented by an Internet platform to handle these transactions.
Some of ENVOY's competitors in the EDI business are beginning to implement such
a platform. If others succeed in implementing an Internet platform and are able
to gain market acceptance of that platform, whether or not we develop and
execute an Internet platform, ENVOY's EDI business could be materially adversely
affected.
We Rely on Specific Data Centers for ENVOY's EDI Business
ENVOY's EDI business relies on a host computer system to perform real-time EDI
transaction processing. This host computer system is contained in a single data
facility. The host computer system does not have a remote backup data center.
Although the host computer system is insured, if there is a fire or other
disaster at the data facility, ENVOY's EDI business could be materially
adversely affected.
ENVOY's EDI business also relies on a data center operated by a third party to
perform many of ENVOY's other healthcare EDI transaction processing services.
The facility is located in Tampa, Florida and is operated by GTE Data Services
Incorporated, with whom ENVOY has contracted for such processing services.
ENVOY's EDI business relies primarily on this facility to process batch claims
and other medical EDI transaction sets. ENVOY's contract with GTE requires GTE
to maintain continuous processing capability and a "hot site" disaster recovery
system. This contract expires in December 2003. If the GTE facility's services
are disrupted or delayed, ENVOY's EDI business could be materially adversely
affected.
We Cannot Predict the Need for Independent Healthcare EDI Processing
ENVOY's EDI business strategy anticipates that providers of healthcare services
and payors will increase their use of electronic processing of healthcare
transactions in the future. The development of the business of electronically
transmitting healthcare transactions is affected, and somewhat hindered, by the
complex nature and types of transactions that must be processed. Furthermore,
while the wide variety of processing forms used by different payors has fostered
the need for healthcare EDI and transaction processing clearinghouses such as
ENVOY to date, if such forms become standardized, through consolidation of
payors or otherwise, then the need for independent third party healthcare EDI
processing could become less prevalent. We cannot assure you that the electronic
processing of healthcare transactions will increase or that ENVOY's EDI business
will grow.
Direct Links May Bypass Need for ENVOY's EDI Services
Some third party payors provide electronic data transmission systems to
healthcare providers, thereby directly linking the payor to the provider. These
direct links bypass third party processors like us. An increase in the use of
direct links between payors and providers would materially adversely affect
ENVOY's EDI business.
17
<PAGE> 18
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
Increased Competition in the Healthcare EDI Business Could Adversely Impact Our
Results
Increased competition in the healthcare EDI and transaction processing business
could force ENVOY to reduce, or even eliminate, per transaction fees, which
could adversely affect our results of operations. EDI services face different
types of competition, any or all of which could affect ENVOY's EDI business.
Some of ENVOY's competitors are similarly specialized, such as its former
regional partners that have direct provider relationships, and others are
involved in more highly developed areas of the business. In addition, some
vendors of provider information management systems include or may include, in
their offered products, their own electronic transaction processing systems. If
electronic transaction processing becomes the standard method of processing
healthcare claims and information, other companies with significant capital
resources could enter the industry.
Unauthorized Access to Data Centers Could Adversely Affect ENVOY's EDI Business
Unauthorized access to ENVOY's EDI data centers and misappropriation of our
proprietary information could have a material adverse effect on ENVOY's EDI
business and financial results. While we believe our current security measures
and the security measures used by third parties for which we process or transmit
healthcare information are adequate, such unauthorized access or
misappropriation could occur.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company did not have any material changes in market risk from December 31,
1999.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company previously reported certain legal proceedings in its Form 10-K for
the fiscal year ended December 31, 1999. There were no material developments in
such matters since that report.
ITEM 2. CHANGES IN SECURITIES
During the three months ended March 31, 2000, options to purchase 21,700 shares
of Common Stock were exercised at an average exercise price of $2.5693 per share
in reliance on Rule 701 under the Securities Act of 1933. Such options were
issued by the Company prior to becoming subject to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended, pursuant to its
Non-qualified Employee Incentive Stock Option Plan.
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
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
2.01(1) Agreement and Plan of Merger dated as of January 22, 2000,
among Quintiles Transnational Corp., Healtheon/WebMD
Corporation, Pine Merger Corp., ENVOY Corporation, and
QFinance, Inc.
27.01 Financial Data Schedule for the Three Months Ended March 31,
2000 (for SEC use only)
</TABLE>
- ---------------
(1) Incorporated by reference from Exhibit 2.01 to the Company's Current Report
on Form 8-K, dated January 25, 2000
18
<PAGE> 19
QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
(b) During the three months ended March 31, 2000, the Company filed three
reports on Form 8-K.
The Company filed a Form 8-K, dated January 25, 2000, including its press
release announcing the definitive agreement for Healtheon/WebMD Corporation to
acquire its electronic data interchange unit, ENVOY Corporation and attaching
the agreement as an exhibit.
The Company filed a Form 8-K, dated January 26, 2000, including its press
release announcing the Company's earnings information for the period ended
December 31, 1999.
The Company filed a Form 8-K, dated March 9, 2000, including its press release
announcing that its Internet initiative has begun and the restructuring is
nearing completion.
No other reports on Form 8-K were filed during the three months ended March 31,
2000.
19
<PAGE> 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.
Quintiles Transnational Corp.
Registrant
Date May 15, 2000 /s/ Dennis B. Gillings
--------------------------------------
Dennis B. Gillings,
Chief Executive Officer
Date May 15, 2000 /s/ James L. Bierman
--------------------------------------
James L. Bierman,
Chief Financial Officer
20
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
2.01(1) Agreement and Plan of Merger dated as of January 22, 2000,
among Quintiles Transnational Corp., Healtheon/WebMD
Corporation, Pine Merger Corp., ENVOY Corporation, and
QFinance, Inc.
27.01 Financial Data Schedule for the Three Months Ended March 31,
2000 (for SEC use only)
</TABLE>
- ---------------
(1) Incorporated by reference from Exhibit 2.01 to the Company's Current Report
on Form 8-K, dated January 25, 2000
21
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 139,487
<SECURITIES> 32,801
<RECEIVABLES> 417,364
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 803,979
<PP&E> 578,602
<DEPRECIATION> 186,991
<TOTAL-ASSETS> 1,661,184
<CURRENT-LIABILITIES> 629,809
<BONDS> 22,898
0
0
<COMMON> 1,150
<OTHER-SE> 995,333
<TOTAL-LIABILITY-AND-EQUITY> 1,661,184
<SALES> 0
<TOTAL-REVENUES> 414,845
<CGS> 0
<TOTAL-COSTS> 472,252
<OTHER-EXPENSES> (4,174)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,226
<INCOME-PRETAX> (55,459)
<INCOME-TAX> (18,300)
<INCOME-CONTINUING> (37,159)
<DISCONTINUED> 10,594
<EXTRAORDINARY> 0
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</TABLE>
