Quintiles Transnational (QTRN) 8-K Completion of Acquisition or Disposition of Assets

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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): September 30, 2005

QUINTILES TRANSNATIONAL CORP.

(Exact name of registrant as specified in its charter)

North Carolina	333-113805	56-1714315
(State or other jurisdiction of	(Commission File	(I.R.S. Employer
incorporation)	Number)	Identification Number)

4709 Creekstone Drive, 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)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.01. Completion of Acquisition or Disposition of Assets.

On September 30, 2005, Quintiles Transnational Corp. (the “Company”) completed the previously announced sale of its Early Development and Packaging business (the “EDP Business”) to Aptuit, Inc. pursuant to a purchase agreement among the Company, its subsidiaries Quintiles, Inc., Quintiles Limited and Quintiles East Asia Private Limited (“Quintiles Asia” and together with the Company, Quintiles, Inc. and Quintiles Limited, the “Sellers”), Early Development and Packaging Services USA, L.L.C. (the “U.S. Company”), Early Development and Packaging Services (UK) Limited (the “U.K. Company”), Quintiles Clinical Supplies Americas, Inc. (“Quintiles Supplies”) and Aptuit, Inc. (“Aptuit”), as amended (the “Purchase Agreement”). Under the Purchase Agreement, Aptuit acquired all of the membership interests and stock of the U.S. Company and the U.K. Company, respectively, as well as the employees, assets and operations of Quintiles Asia related to the EDP Business, which are principally located in Singapore, for a cash payment of approximately $125 million, subject to a post-closing working capital adjustment. Aptuit also assumed certain liabilities relating to the EDP Business.

A copy of the September 30, 2005 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 transaction contemplated by the 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 Exhibits 2.01, 2.02 and 2.03 to this Current Report on Form 8-K. The Purchase Agreement includes representations and warranties that the parties have made to each other as a matter of negotiation and risk allocation. These representations and warranties were made only as of the date of the Purchase Agreement and as of the closing of the transaction and are qualified by information in confidential disclosure schedules that the parties have exchanged in connection with its execution. These provisions are not intended to be relied on by third parties, including investors, other than as an indication of how the parties to the Purchase Agreement allocated risk among themselves. Accordingly, investors should not rely on the representations and warranties as characterizations of the actual state of facts at the time they were made or otherwise.

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Item 9.01 Financial Statements and Exhibits.

(b) Pro forma financial information

The following unaudited pro forma condensed consolidated financial information is derived by the application of the pro forma adjustments to the historical financial statements of the Company at and as of June 30, 2005, for the year ended December 31, 2004, and the periods from September 26, 2003 through December 31, 2003 and January 1, 2003 through September 25, 2003 and the year ended December 31, 2002. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2005 was prepared as if the sale of the EDP Business had occurred on that date. The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2005, the year ended December 31, 2004, the periods from September 26, 2003 through December 31, 2003 and January 1, 2003 through September 25, 2003, and the year ended December 31, 2002 give effect to the EDP Business as a discontinued operation. 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 EDP Business 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 United States Securities and Exchange Commission.

The EDP Business has been accounted for as 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 Balance Sheet
As of June 30, 2005 (Successor)
(Stated in thousands)

	As			Pro forma
	Reported			Adjustments					Pro forma
Assets:
Current assets:
Cash and cash equivalents	$	298,258			125,000		(a	)	$	423,258
Trade accounts receivable and unbilled services, net		348,352			(40,253	)	(b	)		308,099
Investments in debt securities		588			—					588
Prepaid expenses		24,087			(1,398	)	(b	)		22,689
Other current assets and receivables		58,768			(2,623	)	(b	)		56,145
Total current assets		730,053			80,726					810,779
Property and equipment		296,520			(125,434	)	(b	)		171,086
Less accumulated depreciation		(86,893	)		25,371		(b	)		(61,522	)
		209,627			(100,063	)				109,564
Intangibles and other assets:
Investments in debt securities		12,279			—					12,279
Investments in marketable equity securities		33,014			—					33,014
Investments in non-marketable equity securities and loans		55,985			—					55,985
Investments in unconsolidated affiliates		120,065			—					120,065
Commercial rights and royalties		128,565			—					128,565
Accounts receivable — unbilled		53,434			—					53,434
Goodwill		115,001			(6,296	)	(c	)		108,705
Other identifiable intangibles, net		244,892			(3,538	)	(b	)		241,354
Deferred income taxes		29,082			1,819		(b	)		30,901
Deposits and other assets		40,619			(594	)	(b	)		40,025
		832,936			(8,609	)				824,327
Total assets	$	1,772,616		$	(27,946	)			$	1,744,670
Liabilities and Shareholders’ Equity:
Current liabilities:
Accounts payable and accrued expenses	$	319,276			(12,809	)	(b	)	$	310,467
					6,700		(d	)
					(2,700	)	(e	)
Credit arrangements		19,323			—					19,323
Unearned income		202,560			(13,025	)	(b	)		189,535
Other current liabilities and income taxes		14,296			(1,517	)	(f	)		12,779
Total current liabilities		555,455			(23,351	)				532,104
Long-term liabilities:
Credit arrangements, less current portion		619,260			—					619,260
Deferred income taxes		8,785			—					8,785
Minority interest		37,940			—					37,940
Other liabilities		31,905			(1,170	)	(b	)		30,735
		697,890			(1,170	)				696,720
		1,253,345			(24,521	)				1,228,824
Shareholders’ equity:
Common stock and additional paid in capital, 125,000,000 shares issued and outstanding as of June 30, 2005		522,300			—					522,300
Accumulated deficit		(31,203	)		(3,425	)	(g	)		(34,628	)
Accumulated other comprehensive income		28,174			—					28,174
		519,271			(3,425	)				515,846
Total liabilities and shareholders’ equity	$	1,772,616		$	(27,946	)			$	1,744,670

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Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 2005 (Successor)
(Stated in thousands)

(a)	To record receipt of consideration from Aptuit.
(b)	To record the removal of the assets and liabilities of the EDP Business sold.
(c)	To remove estimated goodwill allocated to the EDP Business disposed of based on the fair value of the net assets disposed of as a percentage of the estimated fair value of the Product Development Group.
(d)	The purchase agreement contains certain adjustment provisions which may require the Company to reimburse a portion of the proceeds to Aptuit. The working capital adjustment, if any, will be determined as of September 30, 2005. The Company estimates the transaction costs and purchase price adjustments to be approximately $6.7 million.
(e)	To reduce the accrued pension liability resulting from the curtailment of the pension plan.
(f)	To record estimated income tax benefit on the estimated loss on disposition in the United States based on an estimated income tax rate of 38.5%. The estimated gain in the United Kingdom is not taxable; therefore, no estimated income tax expense has been recorded.
(g)	To record estimated loss on disposition:

Cash received	$	125,000
Less net assets sold		(119,646	)
Less estimated transaction costs and purchase price adjustments		(6,700	)
Less goodwill allocated to business disposed of		(6,296	)
Add estimated pension plan curtailment gain		2,700
Pro forma loss before income taxes		(4,942	)
Less estimated income tax benefit		(1,517	)
Pro forma loss	$	(3,425	)

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Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the six months ended June 30, 2005 (Successor)
(Stated in thousands)

				Less:
	As			EDP
	Reported			(a)			Pro forma
Net revenues	$	1,029,803		$	86,372		$	943,431
Reimbursed service costs		241,983			5,721			236,262
Gross revenues		1,271,786			92,093			1,179,693
Costs, expenses and other:
Costs of revenues		905,606			61,641			843,965
Selling, general and administrative		322,437			27,737			294,700
Interest (income) expense, net		29,614			—			29,614
Other expense (income), net		2,888			225			2,663
Restructuring		19,679			472			19,207
Impairments		72,467			65,834			6,633
Transaction expense, net		(2,666	)		—			(2,666	)
		1,350,025			155,909			1,194,116
(Loss) income from continuing operations before income taxes		(78,239	)		(63,816	)		(14,423	)
Income tax (benefit) expense		(56,016	)		(26,643	)		(29,373	)
(Loss) income before equity in (losses) earnings of unconsolidated affiliates and minority interests		(22,223	)		(37,173	)		14,950
Equity in (losses) earnings of unconsolidated affiliates and other		(528	)		—			(528	)
Minority interests		(2,068	)		—			(2,068	)
(Loss) income from continuing operations	$	(24,819	)	$	(37,173	)	$	12,354

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

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Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended December 31, 2004 (Successor)
(Stated in thousands)

				Less:
	As			EDP
	Reported			(a)			Pro forma
Net revenues	$	1,782,254		$	166,185		$	1,616 069
Reimbursed service costs		364,080			12,803			351,277
Gross revenues		2,146,334			178,988			1,967,346
Costs, expenses and other:
Costs of revenues		1,547,444			126,908			1,420,536
Selling, general and administrative		637,115			54,871			582,244
Interest income		(11,324	)		—			(11,324	)
Interest expense		69,902			—			69,902
Other expense (income), net		(1,079	)		3,622			(4,701	)
Restructuring		6,577			768			5,809
Gain on sale of portion of an investment in a subsidiary		(24,688	)		—			(24,688	)
Non-operating gain on change of interest transaction		(10,030	)		—			(10,030	)
		2,213,917			186,169			2,027,748
(Loss) income before income taxes		(67,583	)		(7,181	)		(60,402	)
Income tax (benefit) expense		(6,599	)		(4,560	)		(2,039	)
(Loss) income before equity in (losses) earnings of unconsolidated affiliates and minority interests		(60,984	)		(2,621	)		(58,363	)
Equity in (losses) earnings of unconsolidated affiliates		(149	)		—			(149	)
Minority interests		(1,866	)		—			(1,866	)
(Loss) income from continuing operations	$	(62,999	)	$	(2,621	)	$	(60,378	)

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

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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)

				Less:
	As			EDP
	Reported			(a)			Pro forma
Net revenues	$	431,626		$	40,343		$	391,283
Reimbursed service costs		96,255			1,295			94,960
Gross revenues		527,881			41,638			486,243
Costs, expenses and other:
Costs of revenues		362,012			27,629			334,383
Selling, general and administrative		154,688			13,565			141,123
Interest income		(4,761	)		—			(4,761	)
Interest expense		20,651			—			20,651
Other expense (income), net		(2,403	)		73			(2,476	)
		530,187			41,267			488,920
(Loss) income before income taxes		(2,306	)		371			(2,677	)
Income tax expense (benefit)		9,810			(434	)		10,244
(Loss) income before equity in (losses) earnings of unconsolidated affiliates and minority interests		(12,116	)		805			(12,921	)
Equity in earnings (losses) of unconsolidated affiliates		13			—			13
Minority interests		(123	)		—			(123	)
(Loss) income from continuing operations	$	(12,226	)	$	805		$	(13,031	)

(a) To reclassify the results of operations for the EDP Business 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)

				Less:
	As			EDP
	Reported			(a)			Pro forma
Net revenues	$	1,196,247		$	112,119		$	1,084,128
Reimbursed service costs		268,683			1,987			266,696
Gross revenues		1,464,930			114,106			1,350,824
Costs, expenses and other:
Costs of revenues		969,474			73,270			896,204
Selling, general and administrative		397,318			37,327			359,991
Interest income		(12,112	)		—			(12,112	)
Interest expense		1,738			4			1,734
Other expense (income), net		(5,391	)		50			(5,441	)
Transaction and restructuring		54,148			707			53,441
		1,405,175			111,358			1,293,817
Income (loss) before income taxes		59,755			2,748			57,007
Income tax expense (benefit)		27,224			(1,026	)		28,250
Income (loss) before equity in (losses) earnings of unconsolidated affiliates and minority interests		32,531			3,774			28,757
Equity in (losses) earnings of unconsolidated affiliates		(8	)		—			(8	)
Minority interests		12			—			12
Income (loss) from continuing operations	$	32,535		$	3,774		$	28,761

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

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

				Less:
	As			EDP
	Reported			(a)			Pro forma
Net revenues	$	1,570,383		$	149,796		$	1,420,587
Reimbursed service costs		399,650			4,634			395,016
Gross revenues		1,970,033			154,430			1,815,603
Costs, expenses and other:
Costs of revenues		1,345,498			96,827			1,248,671
Selling, general and administrative		508,103			44,218			463,885
Interest income		(16,734	)		—			(16,734	)
Interest expense		2,551			6			2,545
Other expense (income), net		4,486			(2	)		4,488
Transaction and restructuring		3,359			186			3,173
		1,847,263			141,235			1,706,028
Income (loss) before income taxes		122,770			13,195			109,575
Income tax expense (benefit)		40,979			3,336			37,643
Income (loss) before equity in (losses) earnings of unconsolidated affiliates and minority interests		81,791			9,859			71,932
Equity in (losses) earnings of unconsolidated affiliates		(526	)		—			(526	)
Minority interests		(43	)		—			(43	)
Income (loss) from continuing operations	$	81,222		$	9,859		$	71,363

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

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(c) Exhibits

Exhibit No.	Description of Exhibit
2.01	Purchase Agreement, dated July 18, 2005, by and among Quintiles Transnational Corp., Quintiles, Inc., Quintiles Limited, Quintiles East Asia Private Limited, Early Development and Packaging Services USA, L.L.C., Early Development and Packaging Services (UK) Limited, Quintiles Clinical Supplies Americas, Inc. and Aptuit, Inc. (incorporated by reference herein from Exhibit 2.01 to the Current Report on Form 8-K of Quintiles Transnational Corp., dated July 18, 2005, as filed with the Securities and Exchange Commission)
2.02	Amendment No. 1, dated August 25, 2005, to Purchase Agreement, dated July 18, 2005, by and among Quintiles Transnational Corp., Quintiles, Inc., Quintiles Limited, Quintiles East Asia Private Limited, Early Development and Packaging Services USA, L.L.C., Early Development and Packaging Services (UK) Limited, Quintiles Clinical Supplies Americas, Inc. and Aptuit, Inc.
2.03	Amendment No. 2, dated September 30, 2005, to Purchase Agreement, dated July 18, 2005, by and among Quintiles Transnational Corp., Quintiles, Inc., Quintiles Limited, Quintiles East Asia Private Limited, Early Development and Packaging Services USA, L.L.C., Early Development and Packaging Services (UK) Limited, Quintiles Clinical Supplies Americas, Inc. and Aptuit, Inc.
99.01	Press release, dated September 30, 2005, 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 S. Russell
	John S. Russell
	Executive Vice President

Dated: October 6, 2005

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EXHIBIT INDEX

Exhibit No.	Description of Exhibit
2.01	Purchase Agreement, dated July 18, 2005, by and among Quintiles Transnational Corp., Quintiles, Inc., Quintiles Limited, Quintiles East Asia Private Limited, Early Development and Packaging Services USA, L.L.C., Early Development and Packaging Services (UK) Limited, Quintiles Clinical Supplies Americas, Inc. and Aptuit, Inc. (incorporated herein by reference from Exhibit 2.01 to the Current Report on Form 8-K of Quintiles Transnational Corp., dated July 18, 2005, as filed with the Securities and Exchange Commission)
2.02	Amendment No. 1, dated August 25, 2005, to Purchase Agreement, dated July 18, 2005, by and among Quintiles Transnational Corp., Quintiles, Inc., Quintiles Limited, Quintiles East Asia Private Limited, Early Development and Packaging Services USA, L.L.C., Early Development and Packaging Services (UK) Limited, Quintiles Clinical Supplies Americas, Inc. and Aptuit, Inc.
2.03	Amendment No. 2, dated September 30, 2005, to Purchase Agreement, dated July 18, 2005, by and among Quintiles Transnational Corp., Quintiles, Inc., Quintiles Limited, Quintiles East Asia Private Limited, Early Development and Packaging Services USA, L.L.C., Early Development and Packaging Services (UK) Limited, Quintiles Clinical Supplies Americas, Inc. and Aptuit, Inc.
99.01	Press release, dated September 30, 2005, of Quintiles Transnational Corp.

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