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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 26, 2000
QUINTILES TRANSNATIONAL CORP.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 340-23520 56-1714315
(State or other jurisdiction (Commission File No.) I.R.S. Employer
of incorporation) Identification Number
4709 CREEKSTONE DRIVE, RIVERBIRCH BUILDING, SUITE 200,
DURHAM, NORTH CAROLINA 27703-8411
(Address of principal executive offices)
(919) 998-2000
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On January 26, 2000, Quintiles Transnational Corp. issued a press release
regarding its financial results for the period ended December 31, 1999. A copy
of the press release is attached hereto as Exhibit 99.01 and incorporated herein
by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
( c) Exhibits.
Exhibit Number Description of Exhibit
- -------------- ----------------------
99.01 Press Release dated January 26, 2000
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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 hereunto duly authorized.
QUINTILES TRANSNATIONAL CORP.
By: /s/ Rachel R. Selisker
-------------------------------
Rachel R. Selisker
Dated: January 26, 2000
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EXHIBIT INDEX
Exhibit Number Description of Exhibit
- -------------- ----------------------
99.01 Press Release, dated January 26, 2000
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FOR IMMEDIATE RELEASE WWW.QUINTILES.COM
CONTACT: Pat Grebe, Media Relations ([email protected])
(919) 998 2031
Greg Connors, Investor Relations ([email protected])
(919) 998 2009
QUINTILES REPORTS NET REVENUE OF $499 MILLION FOR 4TH QUARTER 1999,
INCLUDING RESULTS FROM ENVOY, A 29% INCREASE FROM 1998
o CORRESPONDING NET REVENUE FOR THE YEAR WAS $1.83 BILLION, A 30% INCREASE OVER
NET REVENUE OF $1.4 BILLION FOR 1998
o EXPECTS TO TAKE $55 MILLION RESTRUCTURING CHARGE AS PART OF PROGRAM TO
IMPROVE EFFICIENCY, WITH RESULTING COST-SAVINGS TARGETED TO BE $40 MILLION
TO $50 MILLION ANNUALLY
RESEARCH TRIANGLE PARK, N.C. - January 26, 2000 - Quintiles Transnational Corp.
(Nasdaq: QTRN) today announced record financial results for the quarter and year
ended December 31, 1999. Net revenue for the fourth quarter 1999, including
results from ENVOY Corporation, increased 29% to $499.4 million, from $386.2
million for the fourth quarter 1998. Net income grew 10% to $34.5 million versus
$31.3 million for the 1998 fourth quarter, excluding transaction costs incurred
in 1998 and 1999, and excluding amortization of certain acquired intangible
asset costs incurred in 1998. Excluding these costs, diluted earnings per share
grew 6% to $0.30 compared to $0.28 for the fourth quarter 1998. Including these
costs, net income grew 38% to $34.3 million versus $25 million for the 1998
fourth quarter; and diluted earnings per share grew 32% to $0.30 compared to
$0.22 for the fourth quarter 1998. Fourth quarter 1998 results were restated for
acquisitions completed during 1999 that were accounted for as poolings of
interests.
Net revenue for the year, including ENVOY, was $1.83 billion, a 30% increase
over net revenue of $1.4 billion for 1998. Net income grew 24% to $139.3 million
from $112.3 million for 1998, excluding transaction costs incurred in 1998 and
1999, and excluding amortization of certain acquired intangible asset costs
incurred in 1998. Excluding these costs, diluted earnings per share grew 19% to
$1.20 compared to $1.01 for 1998. Including these costs, net income grew 23% to
$109.3 million from $88.6 million for 1998; and diluted earnings per share grew
18% to $0.94 compared to $0.80 for 1998. The 1998 results were restated for
acquisitions completed during 1999 that were accounted for as poolings of
interests.
On Monday, Quintiles announced a definitive agreement to sell its ENVOY
subsidiary to Healtheon/WebMD for $400 million cash and 35 million shares of
Healtheon/WebMD stock, as well as agreements regarding Quintiles' ownership of
data rights and Internet development. The sale of ENVOY to Healtheon/WebMD is
expected to be completed in first or second quarter of this year.
Treating ENVOY as a discontinued operation in future Securities and Exchange
Commission
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filings will modify the financial discussion in the preceding paragraphs and an
illustration of these modifications is attached in tables two and three.
"We are pleased to have met analysts' consensus expectations for the fourth
quarter and by our strong revenue growth of 30% for the year," said Dennis
Gillings, Ph.D., Chairman and Chief Executive Officer of Quintiles Transnational
Corp. "In order to improve margins and prepare ourselves for opportunities in
the years ahead, we are restructuring our operations. We've not had to make a
restructuring decision like this before. It was a very difficult decision to
make, but we felt this was the time to align our people skills with our expected
future customer demands and our newly launched Internet strategy.
"Overall, 1999 was both a difficult year and a year in which we have gained the
high ground. We believe our Internet strategy, upon closing of the
Healtheon/WebMD transaction, will catapult us into Web-based leadership in the
pharma industry through our planned joint development project. Our EDI
(electronic data interchange) business has moved to a large balance sheet
investment, also in Healtheon/WebMD, and received solid Wall Street approval
upon announcement. Our informatics business should be turbocharged by our data
agreements upon closing. Our fourth quarter revenue growth was higher than
recent market expectations, but we disappointed on third quarter 1999 earnings.
We anticipate the restructuring we are announcing will help earnings during the
next two and one-half years, by which time we expect our Internet initiative to
be kicking in, which is designed to move profitability higher in drug
development and commercialization services. Our newly formed business groups,
Early Development and Integrated Strategic Solutions, are targeting a large
pipeline of pharma products and a unique market opportunity to integrate health
economics, consulting, marketing studies and communications services. Moreover,
completion of the Healtheon/WebMD transaction should enable us to participate in
the Direct-to-Consumer business to enhance our pharma commercialization
services. The perfect 1999 would have been to report earnings upside as well as
all these strategic opportunities, but still we believe we enter year 2000 a
much stronger company with cutting edge growth potential in the Internet era."
As part of this restructuring, Quintiles expects to take a one-time
restructuring charge of approximately $55 million in first quarter 2000. The
restructuring charge consists primarily of severance and lease termination costs
related to the consolidation of offices. Quintiles' work force, which is
expected to be about 19,000 after the close of the ENVOY transaction, will be
reduced by approximately 800 positions globally, with most of those reductions
in the Product Development service group. This restructuring is targeted to
result in annualized cost savings of $40 million to $50 million, of which $30
million to $35 million are targeted to be realized in 2000. Affected employees
will receive benefit packages and severance packages based on length of
employment, as well as outplacement services.
"We're taking steps to streamline by consolidating operations and giving our
customers better and faster service," Gillings said. "For example, we are
implementing a `shared services' environment whereby our finance, human
resources and information technology services will be
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consolidated worldwide. We also are taking a more centralized approach to the
Product Development group's clinical data management, regulatory and drug
safety, and business development functions.
"In addition to the restructuring, we plan to maximize the opportunities created
by our strategic alliance with Healtheon/WebMD, which we announced on Monday, to
develop and market a new generation of Web-based products and services designed
to bring Internet speed and efficiency to the drug development and marketing
process."
Commenting on prospects for 2000, Gillings said: "At year end our backlog of
signed and won business was $2.2 billion as a result of $961 million in net new
business wins in the second half of 1999. This made our backlog 17% higher than
it was at the end of 1998. You may recall that new business wins in the second
half of 1998 were extremely strong. Based on our current backlog, we are
targeting 20% to 25% earnings growth for the year, and we expect that growth in
the second half will exceed growth in the first half."
Quintiles Transnational Corp. improves healthcare by bringing new medicines to
patients faster and providing knowledge-rich medical and drug data to advance
the quality and cost effectiveness of healthcare. Quintiles is the global market
leader in helping pharmaceutical, biotechnology and medical device companies
market and sell their products; and we provide insightful market research
solutions and strategic analyses to support healthcare decisions. Headquartered
near Research Triangle Park, North Carolina, Quintiles employs a global
workforce operating from offices in 31 countries. Quintiles Transnational is a
member of the S&P 500, Fortune 1000 and Nasdaq 100. For more information visit
www.quintiles.com.
Information in this press release contains "forward-looking statements" about a
number of matters, including the planned restructuring, the Healtheon/WebMD
transaction, our Internet strategy, and targeted financial results during
various periods in 2000. These statements involve risks and uncertainties that
could cause actual results to differ materially, 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, 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 Quintiles' current operations and, with respect
to our proposed transaction with Healtheon/WebMD, actual completion of the
transaction, risks associated with Healtheon/WebMD's business as set forth in
its filings with the Securities and Exchange Commission, and final accounting
treatment, which is subject to regulatory review. Additional factors that could
cause actual results to differ materially are discussed in the company's recent
filings with the Securities and Exchange Commission, including but not limited
to its S-3 and S-4 Registration Statements, its Annual Report on Form 10-K, its
Form 8-Ks, and its other periodic reports, including Form 10-Qs.
# # #
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TABLE I
PROFORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME**
ENVOY INCLUDED IN CONTINUING OPERATIONS***
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31 Twelve Months Ended December 31
1999 1998* 1999* 1998*
-------- -------- ---------- ----------
In thousands, except per share data
<S> <C> <C> <C> <C>
Net revenue 499,441 386,179 1,826,995 1,403,719
Costs and expenses:
Direct 270,732 200,356 955,104 725,279
General and administrative 158,275 117,880 572,634 434,394
Depreciation and amortization 26,451 19,274 97,807 72,476
-------- -------- ---------- ----------
Total costs and expenses 455,458 337,510 1,625,545 1,232,149
-------- -------- ---------- ----------
Income from operations 43,983 48,669 201,450 171,570
Total other income (expense) 3,490 (138) 5,941 (861)
-------- -------- ---------- ----------
Income before income taxes 47,473 48,531 207,391 170,709
Income taxes 12,941 17,185 68,057 58,405
-------- -------- ---------- ----------
Net income $ 34,532 $ 31,346 $ 139,334 $ 112,304
======== ======== ========== ==========
Basic net income per share: $ 0.30 $ 0.30 $ 1.23 $ 1.07
Diluted net income per share: $ 0.30 $ 0.28 $ 1.20 $ 1.01
======== ======== ========== ==========
Shares used in computing net income per share
Basic 115,103 105,632 113,525 104,799
Diluted 116,195 111,491 115,687 110,879
</TABLE>
* Restated to include ENVOY, Niehaus & Botha, SMG and Minerva which were
acquired in 1999 in transactions accounted for as poolings of interests.
** Excludes transactions costs. Also excludes amortization of certain
acquired intangible assets of $3.7 million and $20.3 million for the twelve
months ended December 31, 1999 and 1998, respectively. As of March 31,
1999, these certain acquired intangible assets were fully amortized.
*** In light of the impending sale of ENVOY, Quintiles' treatment of its
acquisition of ENVOY as a pooling of interests is subject to regulatory
review.
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TABLE 2
PROFORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME**
ENVOY AS DISCONTINUED OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31 Twelve Months Ended December 31
1999 1998* 1999* 1998*
-------- -------- ---------- ----------
In thousands, except per share data
<S> <C> <C> <C> <C>
Net revenue 442,609 335,725 1,607,087 1,221,776
Costs and expenses:
Direct 252,693 176,409 883,274 640,764
General and administrative 139,864 107,518 505,166 394,432
Depreciation and amortization 22,666 15,376 82,292 57,191
-------- -------- ---------- ----------
Total costs and expenses 415,223 299,303 1,470,732 1,092,387
-------- -------- ---------- ----------
Income from operations 27,386 36,422 136,355 129,389
Total other income (expense) 3,522 (258) 5,877 (347)
-------- -------- ---------- ----------
Income before income taxes 30,908 36,164 142,232 129,042
Income taxes 6,529 10,357 42,742 39,924
-------- -------- ---------- ----------
Income from continuing operations 24,379 25,807 99,490 89,118
Income from operations of ENVOY, net of taxes*** 10,153 5,539 39,844 23,186
-------- -------- ---------- ----------
Net income $ 34,532 $ 31,346 $ 139,334 $ 112,304
======== ========= ========== ==========
Basic net income per share:
Income from continuing operations $ 0.21 $ 0.24 $ 0.88 $ 0.85
Income from operations of ENVOY $ 0.09 $ 0.05 $ 0.35 $ 0.22
-------- -------- ---------- ----------
Basic net income per share $ 0.30 $ 0.30 $ 1.23 $ 1.07
======== ========= ========== ==========
Diluted net income per share:
Income from continuing operations $ 0.21 $ 0.23 $ 0.86 $ 0.80
Income from operations of ENVOY $ 0.09 $ 0.05 $ 0.34 $ 0.21
-------- --------- ---------- ----------
Diluted net income per share $ 0.30 $ 0.28 $ 1.20 $ 1.01
======== ========= ========== ==========
Shares used in computing net income per share
Basic 115,103 105,632 113,525 104,799
Diluted 116,195 111,491 115,687 110,879
</TABLE>
* Restated to include Niehaus & Botha, SMG and Minerva which were acquired in
1999 in transactions accounted for as poolings of interests.
** Excludes transactions costs. Also excludes amortization of certain acquired
intangible assets of $3.7 million and $20.3 million for the twelve months
ended December 31, 1999 and 1998, respectively. As of March 31, 1999, these
certain acquired intangible assets were fully amortized.
*** In light of the impending sale of ENVOY, Quintiles' treatment of its
acquisition of ENVOY as a pooling of interests is subject to regulatory
review.
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TABLE 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
ENVOY AS DISCONTINUED OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31 Twelve Months Ended December 31
1999 1998* 1999* 1998*
-------- -------- ---------- ----------
In thousands, except per share data
<S> <C> <C> <C> <C>
Net revenue 442,609 335,725 1,607,087 1,221,776
Costs and expenses:
Direct 252,693 176,409 883,274 640,764
General and administrative 139,864 107,518 505,166 394,432
Depreciation and amortization 22,666 15,376 82,292 57,191
-------- -------- ---------- ----------
Total costs and expenses 415,223 299,303 1,470,732 1,092,387
-------- -------- ---------- ----------
Income from operations 27,386 36,422 136,355 129,389
Transaction costs (214) (1,329) (26,322) (3,475)
Other income (expense) 3,522 (258) 5,877 (347)
-------- -------- ---------- ----------
Total other income (expense) 3,308 (1,587) (20,445) (3,822)
-------- -------- ---------- ----------
Income before income taxes 30,694 34,835 115,910 125,567
Income taxes 6,529 10,357 42,742 39,924
-------- -------- ---------- ----------
Income from continuing operations 24,165 24,478 73,168 85,643
Income from operations of ENVOY, net of taxes** 10,153 474 36,123 2,926
-------- -------- ---------- ----------
Net income $ 34,318 $ 24,952 $ 109,291 $ 88,569
======== ======== ========== ==========
Basic net income per share:
Income from continuing operations $ 0.21 $ 0.23 $ 0.64 $ 0.82
Income from operations of ENVOY $ 0.09 $ 0.00 $ 0.32 $ 0.03
-------- -------- ---------- ----------
Basic net income per share $ 0.30 $ 0.24 $ 0.96 $ 0.85
======== ======== ========== ==========
Diluted net income per share:
Income from continuing operations $ 0.21 $ 0.22 $ 0.63 $ 0.77
Income from operations of ENVOY $ 0.09 $ 0.00 $ 0.31 $ 0.03
-------- -------- ---------- ----------
Diluted net income per share $ 0.30 $ 0.22 $ 0.94 $ 0.80
======== ======== ========== ==========
Shares used in computing net income per share
Basic 115,103 105,632 113,525 104,799
Diluted 116,195 111,491 115,687 110,879
</TABLE>
* Restated to include Niehaus & Botha, SMG and Minerva which were acquired in
1999 in transactions accounted for as poolings of interests.
** In light of the impending sale of ENVOY, Quintiles' treatment of its
acquisition of ENVOY as a pooling of interests is subject to regulatory
review.
