-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IM2QyNwq0WYI13SwRtS7BjZT5tLfq1v3+xQkazOwkGtoCHKmWuRdRG3Yldxlm9bK eTngX8GRrXjcCM847bWI6A== 0000950144-00-006703.txt : 20000516 0000950144-00-006703.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950144-00-006703 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUINTILES TRANSNATIONAL CORP CENTRAL INDEX KEY: 0000919623 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 561714315 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23520 FILM NUMBER: 631661 BUSINESS ADDRESS: STREET 1: 4709 CREEKSTONE DR STREET 2: RIVERBIRCH BLDG STE 200 CITY: DURHAM STATE: NC ZIP: 27703-8411 BUSINESS PHONE: 9199982000 MAIL ADDRESS: STREET 1: 4709 CREEKSTONE DR STREET 2: STE 300 CITY: DURHAM STATE: NC ZIP: 27703-8411 10-Q 1 QUINTILES TRANSNATIONAL CORP. 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 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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES INDEX
PAGE ---- 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
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31 DECEMBER 31 2000 1999 ----------- ----------- (UNAUDITED) (NOTE 1) (IN THOUSANDS) 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 ========== ==========
The accompanying notes are an integral part of these consolidated condensed statements. 3 4 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31 ---------------------- 2000 1999 -------- -------- (IN THOUSANDS) 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 ======== ========
The accompanying notes are an integral part of these consolidated condensed statements. 4 5 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31 ---------------------------- 2000 1999 ---------- ---------- (IN THOUSANDS) 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 ======== ========
The accompanying notes are an integral part of these consolidated condensed statements. 5 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):
THREE MONTHS ENDED MARCH 31 ------------------ 2000 1999 ------- ------- 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 ======= =======
6 7 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):
AS OF MARCH 31, 2000 AS OF DECEMBER 31, 1999 -------------------- ----------------------- 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 ======== ========
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.
THREE MONTHS ENDED MARCH 31 ------------------- 2000 1999 -------- -------- 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 ======== ========
AS OF MARCH 31, 2000 AS OF DECEMBER 31, 1999 -------------------- ----------------------- 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 ========== ==========
7 8 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):
THREE MONTHS ENDED MARCH 31 -------------------- 2000 1999 -------- -------- 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 ======== ========
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):
THREE MONTHS ENDED MARCH 31 ------------------ 2000 1999 -------- ------- 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) ======== =======
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 9 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES As of March 31, 2000, the following amounts were recorded (in thousands):
ACTIVITY THREE MONTHS ENDED MARCH 31, 2000 ------------------------------- BALANCE AT ACCRUALS WRITE-OFFS/PAYMENTS MARCH 31, 2000 -------- ------------------- -------------- 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 ======= ======== =======
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 10 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 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 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 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 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 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 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 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 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
EXHIBIT DESCRIPTION - ------- ----------- 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)
- --------------- (1) Incorporated by reference from Exhibit 2.01 to the Company's Current Report on Form 8-K, dated January 25, 2000 18 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 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 21 EXHIBIT INDEX
EXHIBIT DESCRIPTION - ------- ----------- 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)
- --------------- (1) Incorporated by reference from Exhibit 2.01 to the Company's Current Report on Form 8-K, dated January 25, 2000 21 EX-27.01 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 139,487 32,801 417,364 0 0 803,979 578,602 186,991 1,661,184 629,809 22,898 0 0 1,150 995,333 1,661,184 0 414,845 0 472,252 (4,174) 0 2,226 (55,459) (18,300) (37,159) 10,594 0 0 (26,565) (0.23) (0.23)
-----END PRIVACY-ENHANCED MESSAGE-----