Quintiles Transnational (QTRN) 8-K Acquisition or disposition of assets

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):      August 10, 2004

QUINTILES TRANSNATIONAL CORP.

(Exact name of registrant as specified in its charter)

North Carolina	000-23520	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)

Item 2. Acquisition or Disposition of Assets

     On August 10, 2004, Quintiles Transnational Corp. (the “Company”) completed its previously announced sale of certain assets relating to its specialty dermatology products company, Bioglan Pharmaceuticals Company (such assets collectively referred to as the “Bioglan assets”), to BDY Acquisition Corp., a wholly-owned subsidiary of Bradley Pharmaceuticals, Inc. (“Bradley”). Bradley acquired the Bioglan assets for approximately $188.3 million in cash, including approximately $5.4 million of direct costs for transferred inventory. The terms of the asset purchase agreement relating to the transaction were established through arms’ length negotiation between the Company and Bradley.

     A copy of the August 10, 2004 press release announcing the completion of the transaction is attached hereto as Exhibit 99.01 and incorporated herein by reference. The description contained in the press release of the transactions contemplated by the asset purchase agreement does not purport to be complete and is qualified in its entirety by reference to the agreement, as amended, which is filed as Exhibit 2.01 to this Current Report on Form 8-K.

Item 7. Financial Statements and Exhibits

(b) Pro Forma Financial Information

The following unaudited pro forma condensed consolidated financial information is derived by the application of pro forma adjustments to the historical financial statements of the Company at and as of June 30, 2004 and for the periods from January 1, 2003 through September 25, 2003 and September 26, 2003 through December 31, 2003 and the year ended December 31, 2002. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2004 was prepared as if the sale of the Bioglan assets had occurred on that date. The unaudited pro forma condensed consolidated statements of operations for the periods from January 1, 2003 through September 25, 2003 and September 26, 2003 through December 31, 2003 and the year ended December 31, 2002 give effect to the Bioglan operations as a discontinued operation. The condensed consolidated statement of operations for the six months ended June 30, 2004 as included in the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2004, as filed with the Securities and Exchange Commission (the “SEC”) on August 13, 2004, includes the effects of the Bioglan operations as a discontinued operation and, therefore, is not presented herein. The Company’s results of operations for the year ended December 31, 2001, as filed with the SEC on March 1, 2004, on its Annual Report on Form 10-K for the year ended December 31, 2003, did not include the Bioglan operations and, therefore, is not presented herein. The pro forma adjustments are based upon available information, preliminary estimates and certain assumptions that the Company believes to be reasonable, but which are subject to change and are described in the accompanying notes. The pro forma statements should not be considered indicative of actual balance sheet data that would have been achieved had the sale of the Bioglan assets been consummated on the dates indicated and do not purport to indicate the balance sheet data as of any future date. The unaudited pro forma financial information should be read in conjunction with the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and notes included in the Company’s filings with the SEC.

The Bioglan assets have been accounted for as a discontinued operation in conformity with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

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Unaudited Pro forma Condensed Consolidated Balance Sheet
As of June 30, 2004 (Successor)
(Stated in thousands)

	As			Pro forma
	Reported			Adjustments			Pro forma
Assets
Current Assets:
Cash and cash equivalents	$	375,268		$	188,300	(a)	$	563,568
Trade accounts receivable and unbilled services, net		292,893			0			292,893
Investment in debt securities		629			0			629
Prepaid expenses		25,415			0			25,415
Other current assets and receivables		55,818			0			55,818
Assets of discontinued operation		88,459			(88,459	)(b)		0
Total current assets		838,482			99,841			938,323
Property and equipment		320,947			0			320,947
Less accumulated depreciation		(39,940	)		0			(39,940	)
		281,007			0			281,007
Intangibles and other assets:
Investments in debt securities		10,942			0			10,942
Investments in marketable equity securities		34,392			0			34,392
Investments in non-marketable equity securities and loans		53,021			0			53,021
Investments in unconsolidated affiliates		121,125			0			121,125
Commercial rights and royalties		8,211			0			8,211
Accounts receivable — unbilled		45,181			0			45,181
Advances to customer		70,000			0			70,000
Goodwill		170,771			(1,233	)(c)		169,538
Other identifiable intangibles, net		302,549			0			302,549
Deferred income taxes		4,246			0			4,246
Deposits and other assets		50,384			0			50,384
		870,822			(1,233	)		869,589
Total assets	$	1,990,311		$	98,608		$	2,088,919
Liabilities and Shareholders’ Equity:
Current liabilities:
Accounts payable and accrued expenses	$	312,927		$	17,600	(d)	$	330,527
Credit arrangements		20,822			0			20,822
Unearned income		187,204			0			187,204
Income taxes payable		23,335			31,278	(e)		54,613
Other current liabilities		2,545			0			2,545
Liabilities of discontinued operation		7,125			(7,125	)(b)		0
Total current liabilities		553,958			41,753			595,711
Long-term liabilities:
Credit arrangements, less current portion		772,404			0			772,404
Deferred income taxes		95,987			0			95,987
Minority interest		36,310			0			36,310
Other liabilities		21,918			0			21,918
		926,619			0			926,619
		1,480,577			41,753			1,522,330
Shareholders’ Equity:
Common stock and additional paid in capital, 125,000,000 shares issued and outstanding at June 30, 2004		521,725			0			521,725
(Accumulated deficit) retained earnings		(33,176	)		56,855	(f)		23,679
Accumulated other comprehensive income		21,185			0			21,185
		509,734			56,855			566,589
Total liabilities and shareholders’ equity	$	1,990,311		$	98,608		$	2,088,919

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Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 2004
Stated in thousands of dollars

(a) To record receipt of consideration from Bradley.

(b) To record the removal of the assets and liabilities of the discontinued operation sold.

(c) To remove estimated goodwill allocated to the Bioglan assets disposed of based on the fair value of the net assets disposed of as a percentage of the estimated fair value of the PharmaBio Development Group.

(d) The sales agreement contains certain adjustment provisions which may require the Company to reimburse a portion of the proceeds to Bradley. The Company estimates the transaction costs and purchase price adjustments, which include estimated (1) fees for investment banking, accounting, legal and licensing, (2) severance payments and retention bonuses and (3) purchase price adjustments, to total approximately $17,600.

(e) To record estimated income taxes payable on estimated gain on disposition based on an estimated income tax rate for the sale of 35.5%.

(f) To record estimated gain on disposition:

Cash received	$	188,300
Less net assets sold		81,334
Less estimated transaction costs and purchase price adjustments		17,600
Less goodwill allocated to business sold		1,233
Pro forma gain before income taxes		88,133
Less estimated income taxes		31,278
Pro forma gain	$	56,855

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Unaudited Pro forma Condensed Consolidated Statement of Operations
For the period from September 26, 2003 through December 31, 2003 (Successor)
(Stated in thousands)

	As			Less:
	Reported			Bioglan (a)			Pro forma
Gross revenues	$	547,165		$	(19,284	)	$	527,881
Costs, expenses and other:
Costs of revenues		375,598			(13,586	)		362,012
General and administrative		154,688			0			154,688
Interest income		(4,761	)		0			(4,761	)
Interest expense		20,651			0			20,651
Other expense (income), net		(2,406	)		3			(2,403	)
Transaction and restructuring		0			0			0
		543,770			(13,583	)		530,187
Income (loss) from continuing operations before income taxes		3,395			(5,701	)		(2,306	)
Income tax expense (benefit)		10,712			(902	)		9,810
(Loss) income before equity in (losses) earnings of unconsolidated affiliates and other		(7,317	)		(4,799	)		(12,116	)
Equity in (losses) earnings of unconsolidated affiliates		(110	)		0			(110	)
(Loss) income from continuing operations	$	(7,427	)	$	(4,799	)	$	(12,226	)

(a) To reclassify the results of operations for Bioglan as a discontinued operation.

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Unaudited Pro forma Condensed Consolidated Statement of Operations
For the period from January 1, 2003 through September 25, 2003 (Predecessor)
(Stated in thousands)

	As			Less:
	Reported			Bioglan (a)			Pro forma
Gross revenues	$	1,498,822		$	(33,892	)	$	1,464,930
Costs, expenses and other:
Costs of revenues		997,822			(28,348	)		969,474
General and administrative		397,318			0			397,318
Interest income		(12,112	)		0			(12,112	)
Interest expense		1,738			0			1,738
Other expense (income), net		(5,433	)		42			(5,391	)
Transaction and restructuring		54,148			0			54,148
		1,433,481			(28,306	)		1,405,175
Income (loss) from continuing operations before income taxes		65,341			(5,586	)		59,755
Income tax expense (benefit)		28,184			(960	)		27,224
(Loss) income before equity in (losses) earnings of unconsolidated affiliates and other		37,157			(4,626	)		32,531
Equity in (losses) earnings of unconsolidated affiliates		4			0			4
(Loss) income from continuing operations	$	37,161		$	(4,626	)	$	32,535

(a) To reclassify the results of operations for Bioglan as a discontinued operation.

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Unaudited Pro forma Condensed Consolidated Statement of Operations
For the year ended December 31, 2002
(Stated in thousands)

	As			Less:
	Reported			Bioglan (a)			Pro forma
Gross revenues	$	1,992,409		$	(22,377	)	$	1,970,032
Costs, expenses and other:
Costs of revenues		1,367,711			(22,215	)		1,345,496
General and administrative		508,103			0			508,103
Interest income		(16,739	)		5			(16,734	)
Interest expense		2,551			0			2,551
Other expense (income), net		3,764			721			4,485
Transaction and restructuring		3,359			0			3,359
		1,868,749			(21,489	)		1,847,260
Income (loss) from continuing operations before income taxes		123,660			(888	)		122,772
Income tax expense (benefit)		41,427			(447	)		40,980
(Loss) income before equity in (losses) earnings of unconsolidated affiliates and other		82,233			(441	)		81,792
Equity in (losses) earnings of unconsolidated affiliates		(569	)		0			(569	)
(Loss) income from continuing operations	$	81,664		$	(441	)	$	81,223

(a) To reclassify the results of operations for Bioglan as a discontinued operation.

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(c) Exhibits

Exhibit Number	Description of Exhibit
2.01	Asset Purchase Agreement, dated June 8, 2004, by and among Quintiles Transnational Corp., Quintiles Bermuda Ltd., Quintiles Ireland Limited, Bioglan Pharmaceuticals Company and Bradley Pharmaceuticals, Inc., as amended August 10, 2004
99.01	Press Release, dated August 10, 2004, of Quintiles Transnational Corp.

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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/ John D. Ratliff
Dated: August 20, 2004

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EXHIBIT INDEX

Exhibit Number	Description of Exhibit
2.01	Asset Purchase Agreement, dated June 8, 2004, by and among Quintiles Transnational Corp., Quintiles Bermuda Ltd., Quintiles Ireland Limited, Bioglan Pharmaceuticals Company and Bradley Pharmaceuticals, Inc., as amended August 10, 2004
99.01	Press Release, dated August 10, 2004, of Quintiles Transnational Corp.

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