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SECURITIES AND EXCHANGE COMMISSION


Washington D.C. 20549





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FORM 10-Q





(Mark One)


|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934.
|- |  | --------------------------------------------------------------------------------------------




For the quarterly period ended September 30, 2002.





OR





| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- |  | -----------------------------------------------------------------------------------------




For the transition period from
 to
.





Commission File Number 0-27570





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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.


(Exact name of registrant as specified in its charter)





North Carolina

56-1640186(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification
Number)





3151 South Seventeenth Street


Wilmington, North Carolina


(Address of principal executive offices)





28412


(Zip Code)





Registrants telephone number, including area code (910) 251-0081





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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. Yes  x  No  ̈





Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest
practicable date: 55,316,071 shares of common stock, par value $0.10 per share, as of November 1, 2002.





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INDEX





PagePart I.    FINANCIAL INFORMATIONItem 1.

Financial StatementsConsolidated Condensed Statements of Operations (unaudited) for the Three and Nine Months Ended September 30, 2001 and 2002

3Consolidated Condensed Balance Sheets as of December 31, 2001 and September 30, 2002 (unaudited)

4Consolidated Condensed Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2001 and 2002

5Notes to Consolidated Condensed Financial Statements

6Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

13Item 3.

Quantitative and Qualitative Disclosures about Market Risk

22Item 4.

Controls and Procedures

23Part II.    OTHER INFORMATIONItem 5.

Other Information

24Item 6.

Exhibits and Reports on Form 8-K

24Signatures

25Certifications

26




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##### Table of Contents




Part I.    FINANCIAL INFORMATION





Item 1.    Financial Statements





PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES





CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS


(unaudited)


(in thousands, except per share amounts)





Three Months Ended September
30,

Nine Months Ended September
30,2001

2002

2001

2002Development revenues

$
103,995

$
142,261

$
295,813

$
394,046Discovery sciences revenues


4,315


3,742


21,488


14,243Reimbursed out-of-pockets


7,452


11,281


20,719


31,144Net revenue


115,762


157,284


338,020


439,433Direct costsDevelopment


50,280


68,273


143,810


189,505Direct costsDiscovery sciences


2,105


1,936


9,388


6,197Reimbursable out-of-pocket expenses


7,452


11,281


20,719


31,144Research and development


1,372


2,959


3,191


7,282Selling, general and administrative expenses


32,800


38,925


93,355


112,215Depreciation


4,881


5,968


14,032


17,064Amortization


260


194


797


63099,150


129,536


285,292


364,037Operating income


16,612


27,748


52,728


75,396Interest income, net


1,193


352


4,093


1,842Impairment of investment











(32,006
)Other income, net


316


466


944


1,677Income before provision for income taxes


18,121


28,566


57,765


46,909Provision for income taxes


6,614


10,284


21,258


26,879Income before equity in net loss of investee


11,507


18,282


36,507


20,030Equity in net loss of investee, net of income taxes











105Net income

$
11,507

$
18,282

$
36,507

$
19,925Net income per share:Basic

$
0.22

$
0.33

$
0.71

$
0.37Diluted

$
0.22

$
0.33

$
0.70

$
0.36Weighted average number of common shares outstanding:Basic


51,891


55,233


51,556


54,510Dilutive effect of stock options


817


488


827


644Diluted


52,708


55,721


52,383


55,154





The accompanying notes are an integral part of these consolidated condensed
financial statements.




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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES





CONSOLIDATED CONDENSED BALANCE SHEETS


(in thousands)





December 31, 2001


September 30, 2002(unaudited)ASSETSCurrent assetsCash and cash equivalents

$
143,173


$
146,990Accounts receivable and unbilled services, net


140,744



188,304Investigator advances


6,008



6,282Prepaid expenses and other current assets


10,507



11,891Current maturities of notes receivable


500



500Deferred tax asset


9,273



9,815Total current assets


310,205



363,782Property, plant and equipment, net


85,690



105,745Goodwill, net


7,590



143,592Notes receivable, long-term portion


17,000



Investments


43,758



18,088Intangible assets


573



2,052Other assets, net


584



2,248Total assets

$
465,400


$
635,507LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable

$
8,210


$
9,350Payables to investigators


7,988



17,060Other accrued expenses


48,951



61,000Unearned income


82,336



103,985Accrued income taxes


8,688



12,313Current maturities of long-term debt


1,203



1,734Total current liabilities


157,376



205,442Long-term debt, less current maturities


1,871



6,953Deferred rent and other


3,518



3,192Total liabilities


162,765



215,587Shareholders equityCommon stock


5,193



5,529Paid-in capital


164,162



261,045Retained earnings


140,174



160,100Deferred compensation


(966
)


(458
)Accumulated other comprehensive loss


(5,928
)


(6,296
)Total shareholders equity


302,635



419,920Total liabilities and shareholders equity

$
465,400


$
635,507








The accompanying notes are an
integral part of these consolidated condensed financial statements.




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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES





CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS


(unaudited)


(in thousands)





Nine Months Ended September
30,2001


2002Cash flows from operating activities:Net income

$
36,507


$
19,925Adjustments to reconcile net income to net cash provided by operating activities:Impairment of investment






32,006Depreciation and amortization


14,828



17,694Stock compensation amortization


362



158Loss on disposition of property and equipment, net


66



75Provision for doubtful accounts


266



(361
)Gain on sale of investment






(173
)Equity in net loss of investee






119Deferred income taxes


(729
)


(2,458
)Change in operating assets and liabilities, net of affect of acquisitions


(1,284
)


(1,478
)Net cash provided by operating activities


50,016



65,507Cash flows from investing activities:Cash received from repayment of note receivable


500



17,000Purchases of property and equipment


(32,224
)


(26,580
)Proceeds from sale of property and equipment


177



100Purchases of investments






(8,642
)Net cash paid for acquisitions






(50,674
)Net cash used in investing activities


(31,547
)


(68,796
)Cash flows from financing activities:Principal repayments of long-term debt


(27
)


Repayment of capital leases obligation


(1,123
)


(2,280
)Proceeds from long-term debt






1,464Proceeds from exercise of stock options and employee stock purchase plan


13,503



5,878Net cash provided by financing activities


12,353



5,062Effect of exchange rate changes on cash


(776
)


2,044Net increase in cash and cash equivalents


30,046



3,817Cash and cash equivalents, beginning of the period


76,411



143,173Cash and cash equivalents, end of the period

$
106,457


$
146,990

















The accompanying notes are an integral part of these consolidated condensed financial statements.




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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES





NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


(unaudited)


(in thousands, except per share data)





1.    ACCOUNTING POLICIES





The significant accounting policies followed by Pharmaceutical Product Development, Inc. and its subsidiaries (collectively
PPD) for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. We prepared these unaudited consolidated condensed financial statements in accordance with Rule 10-01 of Regulation
S-X, and, in managements opinion, we have included all adjustments of a normal recurring nature necessary for a fair presentation. The accompanying consolidated condensed financial statements might not include all of the information and
footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto in PPDs Annual Report on Form 10-K for the year
ended December 31, 2001. The results of operations for the three-month and nine-month periods ended September 30, 2002 are not necessarily indicative of the results to be expected for the full year or any other period. We derived the amounts on the
December 31, 2001 consolidated condensed balance sheet from the audited financial statements included in PPDs Annual Report on Form 10-K for the year ended December 31, 2001.





Use of Estimates in the Preparation of Financial Statements





The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates.





Reclassifications





We have reclassified certain 2001 financial statement amounts to conform to the 2002 financial statement presentation.





Principles of consolidation





The accompanying unaudited consolidated condensed financial statements include the accounts and operations of PPD. We have eliminated all intercompany balances and transactions in consolidation.





Earnings per share





We compute basic net income per share information using the weighted average number of shares of common stock outstanding during the period. We compute diluted net income per common share using the weighted average number of
shares of common and dilutive potential common shares outstanding during the period.





Recent Accounting
Pronouncements





In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146,
Accounting for Costs Associated with Exit or Disposal Activities, or SFAS No. 146. SFAS No. 146 addresses accounting and reporting for costs associated with exit or disposal activities and supercedes Emerging Issues Task Force Issue No.
94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring). SFAS No. 146 requires that a liability for a cost associated with an exit or
disposal activity be recognized and measured initially at fair value when the liability is incurred. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. PPD does
not expect the adoption of this statement to have a material effect on its financial statements.




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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES





NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


(unaudited)


(in thousands, except per share data)





1.    ACCOUNTING POLICIES (continued)





In November 2001, the FASB issued Emerging Issues Task Force Rule No. 01-14, or EITF 01-14, Income Statement Characterization of Reimbursements Received for Out-of-Pocket Expenses Incurred. EITF 01-14 requires that in
cases where the contractor acts as a principal, reimbursements received for out-of-pocket expenses incurred be characterized as revenue and the associated costs included as operating expenses in the income statement. PPD implemented this rule as of
January 1, 2002 and, as required, has reclassified comparative financial information for 2001. The implementation of this rule resulted only in the gross-up of revenues and expenses and had no impact upon earnings. PPD pays, on behalf of its
customers, fees to investigators and test subjects, and other out-of-pocket costs, such as travel, printing, meetings, couriers, etc., for which PPD is reimbursed at cost, without mark-up or profit. PPD will continue to exclude from revenue and
expense in the income statement fees and associated reimbursements that we receive as an agent. During the three months ended September 30, 2001 and 2002, fees paid to investigators and other fees in which PPD acts as an agent and the associated
reimbursements were approximately $26.2 million and $39.3 million, respectively. During the nine months ended September 30, 2001 and 2002, fees paid to investigators and other fees in which PPD acts as an agent and the associated reimbursements were
approximately $98.4 million and $113.6 million, respectively.





In August 2001, the FASB issued Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, or SFAS No. 144, which supersedes SFAS No. 121 and portions of APB Opinion No. 30. SFAS No. 144 provides guidance on the recognition
and impairment of long-lived assets to be held and used, and for long-lived assets to be disposed. This statement also requires expected future operating losses from discontinued operations to be displayed in the period(s) in which the losses are
incurred, rather than as of the measurement date as previously required. PPD has adopted SFAS No. 144 as of January 1, 2002. The adoption of SFAS No. 144 did not have a material impact on PPDs consolidated financial statements.





2.    GOODWILL AND INTANGIBLE ASSETS





In July 2001, the FASB issued Statement of Financial Accounting Standards No. 141, Business Combinations, which eliminated the pooling of interests method of
accounting for all business combinations initiated after June 30, 2001 and addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. In July 2001, the FASB issued Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, or SFAS No. 142. PPD adopted SFAS No. 142 as of January 1, 2002. SFAS No. 142 addresses the financial accounting and reporting standards for the acquisition of
intangible assets outside of a business combination, and for goodwill and other intangible assets subsequent to their acquisition. This accounting standard requires that goodwill be separately disclosed from other intangible assets in the statement
of financial position, and no longer be amortized but tested for impairment on a periodic basis. The provisions of this accounting standard also require the completion of a transitional impairment test within six months of adoption. PPD has
completed the transitional impairment test and did not identify any impairments of goodwill. This test involved determining the fair market value of each of the reporting units with which the goodwill was associated and comparing the estimated fair
market value of each of the reporting units with its carrying amount. Additionally, SFAS No. 142 requires intangible assets that do not meet the criteria for recognition apart from goodwill to be reclassified. As a result of PPDs analysis, no
reclassifications to goodwill were required as of January 1, 2002.




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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES





NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


(unaudited)


(in thousands, except per share data)





2.    GOODWILL AND INTANGIBLE ASSETS (continued)





In accordance with SFAS No. 142, PPD discontinued the amortization of goodwill effective January 1, 2002. A reconciliation of previously reported net income and earnings per share to the amounts adjusted for the exclusion of
goodwill amortization follows:








Three Months Ended September 30,

Nine Months Ended September 30,2001

2002

2001

2002Reported net income

$
11,507

$
18,282

$
36,507

$
19,925Add: Goodwill amortization


144





443


Adjusted net income

$
11,651

$
18,282

$
36,950

$
19,925Reported basic income per share

$
0.22

$
0.33

$
0.71

$
0.37Add: Goodwill amortization








0.01


Adjusted basic income per share

$
0.22

$
0.33

$
0.72

$
0.37Reported diluted income per share

$
0.22

$
0.33

$
0.70

$
0.36Add: Goodwill amortization








0.01


Adjusted diluted income per share

$
0.22

$
0.33

$
0.71

$
0.36





Changes in the carrying amount of goodwill for the nine months
ended September 30, 2002, by operating segment, were as follows:





Development

Discovery

TotalBalance as of January 1, 2002

$
6,839

$
751

$
7,590Goodwill acquired during the period


113,883


19,716


133,599Translation adjustments


2,403





2,403Balance as of September 30, 2002

$
123,125

$
20,467

$
143,592








Information regarding
PPDs other intangible assets follows:





As of December 31, 2001

As of September 30, 2002Carrying Amount

Accumulated Amortization

Net

Carrying Amount

Accumulated Amortization

NetBacklog

$


$


$


$
2,100

$
536

$
1,564Patents


280


136


144


280


180


100License agreements


500


96


404


500


133


367Miscellaneous intangible assets


986


961


25


936


915


21Total

$
1,766

$
1,193

$
573

$
3,816

$
1,764

$
2,052





All intangible assets are amortized on a straight-line basis, based
on estimated useful lives of two years for backlog, five years for patents, ten years for license agreements and two to ten years for miscellaneous intangible assets. The weighted average amortization period for all intangibles is approximately 2.5
years.




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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES





NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


(unaudited)


(in thousands, except per share data)





2.         GOODWILL AND INTANGIBLE ASSETS (continued)





Amortization expense for the three months ended September 30, 2001 and 2002 was $260 and $194, respectively. Amortization expense for the nine months ended September 30,
2001 and 2002 was $797 and $630, respectively. Amortization expense includes goodwill amortization during 2001. Estimated amortization expense for the next five years is as follows:





2002

$
1,0482003


1,1452004


2152005


592006


50





3.         STOCK DIVIDEND





On April 16, 2001, the Board of Directors declared a one-for-one stock dividend. The record date for the
dividend was April 27, 2001, and the distribution date for the dividend was May 11, 2001. All share and per share amounts for all periods presented in the accompanying consolidated condensed financial statements have been restated to reflect the
effect of this stock dividend.





4.         ACQUISITIONS





In February 2002, PPD acquired 100% of the outstanding common stock of Medical Research Laboratories International, Inc. (MRL
U.S.) and Medical Research Laboratories International, BVBA (MRL Belgium), collectively, MRL. MRL is part of the Development segment of PPD. MRL U.S. operates a central laboratory in Highland Heights, Kentucky, near
Cincinnati, Ohio, and MRL Belgium operates a central laboratory in Brussels, Belgium. MRL provides highly standardized efficacy and safety testing services for pharmaceutical companies engaged in clinical drug development and is one of the largest
central laboratory providers for Phase I-IV global studies involving agents used in cholesterol, endocrine, metabolic and cardiovascular clinical research. The acquisition of MRL should enable PPD to expand the global development services that it
offers to its customers. The results of operations are included in PPDs condensed consolidated results of operations as of and since February 19, 2002, the effective date of the acquisition. PPD acquired MRL for total consideration of $113.1
million, including $39.0 million in cash, $73.5 million in PPDs common stock (approximately 2.6 million unregistered shares) and direct acquisition costs of $0.6 million for legal, appraisal and accounting fees.





In April 2002, PPD acquired Piedmont Research Center II, Inc, or PRC, a cancer research laboratory based in Morrisville, N.C. that
performs preclinical evaluations of anti-cancer therapies. The research facility serves national and international pharmaceutical and biotechnology companies. PRC is part of the Discovery segment of PPD. The acquisition of PRC should enable PPD to
add another dimension to its vertically integrated oncology program, spanning from early discovery through clinical development. PRC provides PPDs clients another method of cost-effective evaluation of drug candidates. The results of
operations are included in PPDs condensed consolidated results of operations as of and since April 1, 2002, the effective date of the acquisition.PPD acquired PRC for total consideration of $19.6 million, including $2.4 million in
cash, $17.1 million in PPDs common stock (0.5 million unregistered shares) and direct acquisition costs of $0.1 million for legal and accounting fees.




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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES





NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


(unaudited)


(in thousands, except per share data)





4.         ACQUISITIONS (continued)





In June 2002, PPD acquired Complete Software Solutions, Inc., or CSS, a technical consulting firm offering implementation, validation and training services as well as specialized software for pharmaceutical and biotechnology
industries. CSS is part of the Development segment of PPD. The acquisition of CSS should expand PPDs informatics range of services and international reach, as well as its client base. With the acquisition of CSS, PPD will be able to
offer a broader range of informatics solutions to a wider range of clients. The results of operations are included in PPDs condensed consolidated results of operations as of and since June 12, 2002, the effective date of the acquisition.PPD acquired CSS for total consideration of $16.8 million in cash.





In June 2002, PPD acquired ProPharma Pte
Ltd, an Asian-based clinical research organization with experience in managing pan-Asian clinical trials. ProPharma is part of the Development segment of PPD. The acquisition of ProPharma should enable PPD to expand its geographic reach and provide
its clients country-specific expertise with extensive networks for clinical trials in key markets in Asia. The results of operations are included in PPDs condensed consolidated results of operations as of and since June 27, 2002, the effective
date of the acquisition. PPD acquired ProPharma for total consideration of $3.0 million in cash. In addition, PPD agreed to pay up to $1.4 million as additional purchase price, depending upon the financial performance of ProPharma for a specified
period following the acquisition.





These acquisitions were accounted for using the purchase method. Accordingly,
the estimated fair value of assets acquired and liabilities assumed were included in PPDs condensed consolidated balance sheet as of the effective date of the acquisitions. There were no significant differences between the accounting policies
of PPD or any of the companies acquired in these acquisitions.





The total purchase price was allocated to the
estimated fair value of assets acquired and liabilities assumed as set forth in the following table:





MRL


PRC


CSS


ProPharma


TotalCondensed balance sheet:Current assets

$
16,249


$
825


$
957


$
1,023


$
19,054Property and equipment, net


8,457



822



34



116



9,429Current liabilities


(7,814
)


(1,245
)


(761
)


(252
)


(10,072
)Long-term capital lease obligation


(1,107
)


(457
)










(1,564
)Value of identifiable intangible assets:Backlog


2,100















2,100Goodwill


95,234



19,716



16,536



2,113



133,599Total

$
113,119


$
19,661


$
16,766


$
3,000


$
152,546





The purchase price allocations for the acquisitions are based on
preliminary estimates, using available information and making assumptions management believes are reasonable. Accordingly, purchase price allocations are subject to finalization within one year of the acquisition. Goodwill will be evaluated annually
as required by SFAS 142.





Goodwill related to MRL, PRC and ProPharma is not expected to be deductible for tax
purposes. Goodwill related to CSS is expected to be deductible for tax purposes.




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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES





NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


(unaudited)


(in thousands, except per share data)





4.         ACQUISITIONS (continued)





The unaudited pro forma results from operations for PPD assuming the acquisitions were consummated as of January 1, 2001 and 2002 were as follows:





Three Months Ended September 30,

Nine Months Ended September 30,2001

2002

2001

2002Total revenue

$
131,316

$
157,284

$
381,601

$
447,482Net income

$
14,061

$
18,282

$
43,382

$
19,401Income per share:Basic

$
0.26

$
0.33

$
0.79

$
0.36Diluted

$
0.25

$
0.33

$
0.78

$
0.35





The above amounts are based upon certain assumptions and estimates.
PPD believes these assumptions and estimates are reasonable and do not reflect any benefit from economies that might be achieved from combined operations. Pro forma adjustments were made to amortization, interest income and income tax totaling
$(2,027) and $0 for the three-month periods ended September 30, 2001 and 2002, respectively. Pro forma adjustments were made to amortization, interest income and income tax totaling $(5,682) and $52 for the nine-month periods ended September 30,
2001 and 2002, respectively. The pro forma financial information presented above is not necessarily indicative of either the results of operations that would have occurred had the acquisitions taken place at the beginning of the period indicated or
of future results of operations of the combined companies.





5.         COMPREHENSIVE
INCOME





PPDs total comprehensive income for the three-month periods ended September 30, 2001 and 2002
was $11,888 and $15,329, respectively, and for the nine-month periods ended September 30, 2001 and 2002 was $35,731 and $19,556, respectively. PPDs other comprehensive income consisted of a change in the cumulative translation adjustment for
the three-month periods ended September 30, 2001 and 2002 of $381 and $(866), respectively, and an unrealized loss on investment of $2,087 for the 2002 period. PPDs other comprehensive income consisted of a change in the cumulative translation
adjustment for the nine-month periods ended September 30, 2001 and 2002 of $(777) and $2,046, respectively, and an unrealized loss on investment of $2,415 for the 2002 period.





6.         ACCOUNTS RECEIVABLE AND UNBILLED SERVICES





Accounts receivable and unbilled services consisted of the following:





December 31, 2001


September 30, 2002(unaudited)Billed

$
99,877


$
115,917Unbilled


43,748



75,706Reserve for doubtful accounts


(2,881
)


(3,319
)$
140,744


$
188,304




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PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES





NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


(unaudited)


(in thousands, except per share data)





7.         INVESTMENTS





PPD assesses its investment portfolio on a quarterly basis to determine whether declines in the market value of these securities are other than temporary. This quarterly review includes an evaluation of, among other things, the
market condition of the overall industry, historical and projected financial performance, expected cash needs and recent funding events. As a result of managements quarterly evaluations, during the three months ended March 31, 2002, PPD
recorded a charge to earnings for an other than temporary decline in the fair market value of its investment in DNA Sciences of approximately $32.0 million. The investment in DNA Sciences was deemed to be impaired as a result of adverse events
experienced by DNA Sciences during the first quarter of 2002.





In April 2002, PPD purchased 1.0 million shares of
SurroMed, Inc. Series E preferred stock for $5.0 million, which represented a 2.7% ownership interest in SurroMed as of April 2002. SurroMed is a private company that has developed a proprietary technology for biological markers.





In April 2002, Apothogen, Inc., an equity method investment of PPD, was acquired by IntraBiotics Pharmaceuticals, Inc. As a
result of the acquisition, PPD received shares of IntraBiotics common stock representing less than 1% ownership interest of IntraBiotics outstanding common stock. In connection with the acquisition, the contracts and commitments between Apothogen
and its stockholders related to the initial investment were terminated. IntraBiotics rents facility space from PPD and PPD provides Intrabiotics with drug development services and specified administrative services.





In June 2002, PPD purchased approximately 0.7 million units of BioDelivery Sciences International, Inc. for $3.6 million. Each unit
consists of one share of common stock and one warrant for common stock. PPDs common stock in BioDelivery Sciences International represents a 9.9% ownership interest in BioDelivery Sciences Internationals outstanding common stock.
BioDelivery Sciences International is a publicly traded company that is developing and seeking to commercialize a drug delivery technology designed for a potentially broad base of pharmaceuticals, vaccines and over-the-counter drugs.





8.         BUSINESS SEGMENT DATA





Revenues by principal business segment are separately stated in the consolidated financial statements. PPD has changed its measurement of segment profitability from net
income to income (loss) from operations in order to more accurately reflect the information used by PPDs chief operating decision-maker. Income from operations and identifiable assets by principal business segment were as follows:





Three months Ended September 30,


Nine Months Ended September 30,2001


2002


2001

2002Income (loss) from operations:Development

$
17,248


$
30,890


$
48,057

$
80,444Discovery sciences


(636
)


(3,142
)


4,671


(5,048
)Total

$
16,612


$
27,748


$
52,728

$
75,396December 31, 2001


September 30, 2002Identifiable assets:Development (a)

$
451,031


$
597,672Discovery sciences


14,369



37,835Total

$
465,400


$
635,507


---

|(a) |  | The note receivable from the sale of the environmental sciences segment in 1999 is included in the Development segment in 2001. The note was paid in June 2002.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



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Item 2.
    Managements Discussion and Analysis of Financial Condition and Results of Operations





The following discussion and analysis is provided to increase understanding of, and should be read in conjunction with, the consolidated condensed financial statements and accompanying notes. In this
discussion, the words PPD, we, our and us refer to Pharmaceutical Product Development, Inc., together with its subsidiaries where appropriate.





Forward-looking Statements





This Form 10-Q
contains forward-looking statements within the meaning of the federal securities laws. These statements relate to future events or our future financial performance. Forward-looking statements include statements concerning plans, objectives, goals,
strategies, future events or performances, expectations, predictions, assumptions and other statements that are not statements of historical facts. In some cases, you can identify forward-looking statements by terminology such as might,
will, should, expect, plan, anticipate, believe, estimate, predict, intend, potential or continue, or the negative of
these terms, or other comparable terminology. These statements are only predictions. These statements rely on a number of assumptions and estimates which could be inaccurate and which are subject to risks and uncertainties. Actual events or results
might differ materially due to a number of factors, including those listed in Potential Volatility of Quarterly Operating Results and Stock Price. Although we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We generally undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or
other events occur in the future.





Company Overview





We are a leading global provider of drug discovery and development services to pharmaceutical and biotechnology companies. Our corporate mission is to help clients maximize
the return on their research and development investments. We offer therapeutic expertise, advanced technologies and extensive resources for both drug discovery and drug development.





We have been in the drug development business for more than 15 years. Our development services include preclinical programs through Phase 1 to Phase 4 clinical development.
In addition, we also offer post-market support services for drugs that have received approval for market use, such as product launch services, patient compliance programs, and medical communications programs for consumer and healthcare providers on
product use and adverse events. We have extensive clinical trial experience across a multitude of therapeutic areas that encompasses various geographical areas, including regional, national and global studies.





With more than 5,200 professionals in 24 countries around the world, we have provided services to 41 of the top 50 pharmaceutical
companies in the world as ranked by 2001 healthcare research and development spending, in addition to our work with leading biotechnology companies. We believe that we are one of the worlds largest providers of drug development services to
pharmaceutical and biotechnology companies in terms of 2001 annual net revenues generated from contract research organizations.





Building on our outsourcing relationship with pharmaceutical and biotechnology clients, we established our discovery services group in 1997. Through this group, we focus more on early stage research to help our customers address the
bottleneck at the beginning of the development process. This group focuses on functional genomics, which is the study of gene functions to identify drug targets within the body, as well as medicinal chemistry research and preclinical biology
services.





In addition, we developed an innovative risk-sharing research and development model to help
pharmaceutical and biotechnology clients develop compounds. Through these arrangements, we help our clients research and evaluate the development potential for early stage compounds, when their investment is significantly less than the amount at
risk at later development phases.





We believe that our integrated drug discovery and development services offer
our clients a way to identify and develop successful drugs more quickly and cost effectively. We also use our proprietary informatics technology to support our drug discovery and development services. In addition, because we are positioned globally,
we are able to accommodate the multinational drug discovery and development needs of our customers. As a result of




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having these core areas of expertise in discovery and development, we can provide integrated services across the entire drug development
spectrum, from target discovery to market and beyond. For more detailed information on PPD, see our Annual Report on Form 10-K for the year ended December 31, 2001.





Results of Operations





We recognize revenues from
fixed-price contracts on a percentage-of-completion basis in our Development Group. To measure the percentage of completion, PPD compares actual costs incurred to estimated total contract costs. We recognize revenues from time-and-materials
contracts as hours are incurred, multiplied by the billable rates for each contract in both our Development Group and Discovery Sciences Group. We also recognize revenues from unitized contracts as subjects or samples are tested, multiplied by the
price of each. In connection with the management of multi-site clinical trials, PPD pays on behalf of its customers fees to investigators and test subjects, and other out-of-pocket costs, such as travel, printing, meetings, couriers, etc., for which
we are reimbursed at cost. Effective January 1, 2002, in connection with the required implementation of EITF 01-14, amounts paid by us as a principal for out-of-pocket costs are now included in direct costs, while the reimbursements we receive as a
principal are reported as reimbursed out-of-pocket revenues in the income statement. We will continue to net revenue and expense in the income statement from fees and associated reimbursements that we receive as an agent. Most contracts are
terminable either immediately or after a specified period following notice by the client. These contracts typically require payment to PPD of expenses to wind down a study, payment to PPD of fees earned to date, and in some cases, a termination fee
or a payment to PPD of some portion of the fees or profit that could have been earned by PPD under the contract if it had not been terminated early.





Discovery Sciences Group revenues also include nonrefundable technology license fees and milestone payments. The non-refundable license fees are generally up-front payments for the initial license of
and access to our technology. For nonrefundable license fees received at the initiation of license agreements for which we have an ongoing research and development commitment, we defer these fees and recognize them ratably over the period of the
related research and development. For nonrefundable license fees received under license agreements where our continued performance of future research and development services is not required, we recognize revenue upon delivery of the technology. In
addition to license fees, our Discovery Sciences Group also generates revenue from time to time in the form of milestone payments. Milestone payments are only received and recognized as revenues if the specified milestone is achieved and accepted by
the customer and continued performance of future research and development services related to that milestone are not required. Although these payments are typically lower than up-front license fees, these payments can be significant because they are
triggered as a result of achieving specified scientific milestones. We receive milestone payments in connection with sublicensing of compounds and in association with our target validation work.





We record our recurring operating expenses among five categories:





| |  |  | direct costs;
| | - |  | -------------

| |  |  | research and development;
| | - |  | -------------------------

| |  |  | selling, general and administrative;
| | - |  | ------------------------------------

| |  |  | depreciation; and
| | - |  | -----------------

| |  |  | amortization.
| | - |  | -------------




Direct costs consist of appropriate amounts necessary to carry out the revenue and earnings process, and include direct labor and related benefit charges, other costs directly related to contracts, an allocation of facility and
information technology costs, and reimbursable out-of-pocket expenses. Direct costs, as a percentage of net revenues, tend to and are expected to fluctuate from one period to another as a result of changes in labor utilization and the mix of service
offerings involved in the hundreds of studies conducted during any period of time.





Research and development, or
R&D, expenses consist primarily of labor and related benefit charges associated with personnel performing internal research and development work, supplies associated with this work and an allocation of facility and information technology costs.





Selling, general and administrative, or SG&A, expenses consist primarily of administrative payroll and
related benefit charges, sales, advertising and promotional expenses, recruiting and relocation expenses, administrative travel, an allocation of facility and information technology costs and costs related to professionals working in an indirect
capacity.







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Depreciation expenses consist of depreciation costs recorded on a straight-line method, based on estimated useful lives
of 20 to 40 years for buildings, five to seven years for laboratory equipment, three to five years for computers and related equipment and seven to 10 years for furniture and equipment, except for our airplane, which we are depreciating over 30
years. Leasehold improvements are amortized over the shorter of the respective lives of the leases or the useful lives of the improvements. Property under capital leases is amortized over the life of the lease or the service life, whichever is
shorter.





Amortization expenses consist of amortization costs recorded on intangible assets on a straight-line
method over the life of the intangible assets. The excess of the purchase price of a business acquired over the fair value of net tangible assets, identifiable intangibles and acquired in-process research and development costs at the date of the
acquisition has been assigned to goodwill. Goodwill was being amortized over periods of 10 to 25 years prior to January 1, 2002. In July 2001, the FASB issued Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets, or SFAS No. 142. We adopted SFAS No. 142 as of January 1, 2002 and no longer amortize goodwill. We have analyzed goodwill for impairment at the reporting unit level during the first half of 2002 and, at a minimum, will analyze goodwill
on an annual basis going forward. Amortization expense related to goodwill for 2001 was $0.9 million.





General





In February 2002, PPD acquired 100% of the outstanding common stock of Medical Research Laboratories
International, Inc. (MRL U.S.) and Medical Research Laboratories International, BVBA (MRL Belgium), collectively, MRL. MRL is part of the Development segment of PPD. MRL U.S. operates a central laboratory near
Cincinnati, Ohio, and MRL Belgium operates a central laboratory in Brussels, Belgium. MRL provides highly standardized efficacy and safety testing services for pharmaceutical companies engaged in clinical drug development. PPD acquired MRL for total
consideration of $113.1 million, including $39.0 million in cash, $73.5 million in PPDs common stock (approximately 2.6 million unregistered shares) and direct acquisition costs of $0.6 million for legal, appraisal and accounting fees.





In April 2002, PPD acquired Piedmont Research Center II, Inc, or PRC, a cancer research laboratory based in
Morrisville, North Carolina that performs preclinical evaluations of anti-cancer therapies. The research facility serves national and international pharmaceutical and biotechnology companies. PRC is part of the Discovery segment of PPD. PPD acquired
PRC for total consideration of $19.6 million, including $2.4 million in cash, $17.1 million in PPDs common stock (0.5 million unregistered shares) and direct acquisition costs of $0.1 million for legal and accounting fees. In June 2002, PPD
acquired Complete Software Solutions, Inc., or CSS, a technical consulting firm offering a full range of implementation, validation and training services as well as specialized software for pharmaceutical and biotechnology industries. CSS is part of
the Development segment of PPD. PPD acquired CSS for total consideration of $16.8 million in cash.





In June 2002,
PPD acquired ProPharma Pte Ltd, an Asian-based clinical research organization with extensive experience in managing pan-Asian clinical trials. ProPharma is part of the Development segment of PPD. PPD acquired ProPharma for total consideration of
$3.0 million in cash. In addition, PPD agreed to pay up to $1.4 million as additional purchase price, depending upon the financial performance of ProPharma for a specified period following the acquisition.





These acquisitions were accounted for using the purchase method. Accordingly, the estimated fair value of assets acquired and liabilities
assumed were included in PPDs condensed consolidated balance sheet as of the effective date of the acquisitions. The results of operations are included in PPDs condensed consolidated results of operations as of and since the effective
dates of the acquisitions. There were no significant differences between the accounting policies of PPD or any of the companies acquired in these acquisitions. For further details regarding these acquisitions, see Note 4 to Consolidated Condensed
Financial Statements.





As recently announced, the milestone payment relating to the ongoing development of
dapoxetine will not be received in the fourth quarter of 2002. We had previously forecasted the dapoxetine milestone payment to be received in the fourth quarter based on the expected timing for the initiation of the Phase III study. We now
understand that this study will not be initiated in the fourth quarter due to the timing of completion of work being performed to support the Phase III program.







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Three Months Ended September 30, 2002 Versus Three Months Ended September 30, 2001





Net revenue, before reimbursed out-of-pockets for the third quarter of 2002, increased $37.7 million, or 34.8%, to $146.0
million from net revenue, before reimbursed out-of-pockets, of $108.3 million in the same period in 2001. The Development Groups operations accounted for 97.4% of net revenue for the third quarter of 2002. The Development Group generated net
revenue of $142.3 million, an increase of $38.3 million, or 36.8%, from the 2001 third quarter. The increase in the Development Group net revenue was primarily attributable to an increase in the size and number of contracts in the global contract
research organization, or CRO, Phase 2 through 4 division. In addition, acquisitions in the Development Group completed during 2002 contributed net revenue of $14.3 million for the three months ended September 30, 2002.





The Discovery Sciences Group generated net revenue of $3.7 million in the third quarter of 2002, a decrease of $0.6 million, or 13.3%,
from the third quarter of 2001. The decrease in the Discovery Sciences net revenue was primarily attributable to the loss of revenue from two contracts within our target validation group that were not renewed in 2002. The loss of revenue from these
two contracts was partially offset by the net revenue generated from PRC for the three months ended September 30, 2002.





Total direct costs, excluding reimbursable out-of-pocket expenses, increased 34.0% to $70.2 million in the third quarter of 2002 from $52.4 million in the third quarter of 2001 and decreased slightly as a percentage of net revenue to
48.1% for 2002 third quarter as compared to 48.4% in 2001 third quarter. Development direct costs increased to $68.3 million in the third quarter of 2002 as compared to $50.3 million in the third quarter of 2001. This increase resulted primarily
from increased personnel costs due to the increase in the size and number of contracts in the global CRO Phase 2 through 4 division and the direct costs associated with the acquisitions completed during 2002. Development Group direct costs decreased
as a percentage of related net revenue to 48.0% in the third quarter of 2002 from 48.3% in the third quarter of 2001. This decrease was principally due to the mix of levels of personnel involved in the contracts performed, variations in the
utilization of personnel and the mix of contracts being performed during each quarter. Discovery Sciences direct costs decreased to $1.9 million in the third quarter of 2002 as compared to $2.1 million in the third quarter of 2001. This decrease was
primarily attributable to direct costs related to revenue generated from two contracts within our target validation group that were not renewed in 2002. This decrease in direct costs was partially offset by the direct costs generated from PRC for
the three months ended September 30, 2002.





R&D expenses increased 115.7% to $3.0 million in the third quarter
of 2002 from $1.4 million in the third quarter of 2001. This increase was primarily attributable to an increase in spending on R&D in the Discovery Sciences Group to develop intellectual property. As of the end of the third quarter of 2002, the
Discovery Sciences Group had increased the number of employees working on internal R&D projects by 30% as compared to the end of the third quarter of 2001. Internal R&D spending continues to increase in both target validation and the
chemistry GGTase programs.





SG&A expenses increased 18.7% to $38.9 million in the third quarter of 2002 from
$32.8 million in the third quarter of 2001. The increase was primarily attributable to additional administrative personnel costs and an increase in training costs associated with new operational employees hired to support our expanding operations.
As a percentage of net revenue, excluding reimbursed out-of-pockets, SG&A expenses decreased to 26.7% in the third quarter of 2002 from 30.3% in the third quarter of 2001. This decrease is primarily attributable to the increase in revenue, and
to a smaller extent, to increased efficiencies as our operations expanded.





Depreciation expense increased $1.1
million, or 22.3%, to $6.0 million in the third quarter of 2002 from $4.9 million in the third quarter of 2001. The increase was related to the depreciation of the increased investment in property and equipment due primarily to our growth. Capital
expenditures were $7.9 million in the third quarter of 2002. Capital expenditures primarily included additional spending on the buildout of our bioanalytical lab in Virginia, document imaging software and additional spending in the Development Group
on information technology licenses and computer hardware for new employees.





Amortization expense decreased to
$0.19 million for the third quarter of 2002 from $0.26 million in the third quarter of 2001. During the third quarter of 2002, amortization of backlog associated with the acquisition of MRL accounted for $0.16 million of the amortization expense.
During the third quarter of 2001, amortization of goodwill accounted for $0.23 million of the amortization expense. We adopted SFAS No. 142 as of January 1, 2002 and no longer amortize goodwill in our financial statements. See
Managements Discussion and Analysis of




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Financial Condition and Results of Operations  Recently Issued Accounting Standards below for a more detailed explanation of SFAS
No. 142 .





Operating income increased $11.1 million to $27.7 million in the third quarter of 2002, as compared to
$16.6 million in the third quarter of 2002. As a percentage of net revenue, excluding reimbursed out-of-pockets, operating income increased to 19.0% of net revenue for the third quarter of 2002 from 15.3% of net revenue in the same period for 2001
period. This increase was primarily due to our revenue growth and our focus on controlling the increase in both direct and administrative costs.





Our provision for income taxes increased $3.7 million, or 55.5%, to $10.3 million in the third quarter of 2002, as compared to $6.6 million in the third quarter of 2001. Our effective income tax rate
remained relatively constant at 36.0% in the 2002 period as compared to 36.5% in the 2001 period.





Net income of
$18.3 million in the third quarter of 2002 represents an increase of $6.8 million from $11.5 million in net income in the third quarter of 2001. Net income per diluted share of $0.33 for the third quarter of 2002 represents a 50% increase from the
$0.22 in net income per diluted share in the third quarter of 2001.





Nine Months Ended September 30, 2002 Versus Nine Months Ended
September 30, 2001





Net revenue, before reimbursed out-of-pockets for the nine months ended September 30,
2002, increased $91.0 million, or 28.7%, to $408.3 million from net revenue, before reimbursed out-of-pockets, of $317.3 million for the corresponding 2001 period. The Development Groups operations accounted for 96.5% of net revenue for the
first nine months of 2002. The Development Group generated net revenue of $394.0 million, an increase of $98.2 million, or 33.2%, from the same period in 2001. The increase in the Development Group net revenue was primarily attributable to an
increase in the size and number of contracts in the global CRO Phase 2 through 4 division. In addition, acquisitions in the Development Group completed during 2002 contributed net revenue of $32.8 million for the nine months ended September 30,
2002.





The Discovery Sciences Group generated net revenue of $14.2 million in the first nine months of 2002, a
decrease of $7.2 million, or 33.7%, from the first nine months of 2001. The higher 2001 Discovery Sciences net revenue was primarily attributable to a milestone payment generated by the sublicensing of the compound dapoxetine to Alza Corporation in
the first quarter of 2001.





Total direct costs, excluding reimbursable out-of-pocket expenses, increased 27.7% to
$195.7 million for the nine months ended September 30, 2002 from $153.2 million for the corresponding 2001 period and decreased slightly as a percentage of net revenue to 47.9% for the nine month period ended September 30, 2002 from 48.3% for the
same period of 2001. Development direct costs increased to $189.5 million for the nine months ended September 30, 2002 as compared to $143.8 million for the nine months ended September 30, 2001. This increase resulted primarily from increased
personnel costs due to the increase in the size and number of contracts in the global CRO Phase 2 through 4 division and the direct costs associated with acquisitions completed during 2002. Development Group direct costs decreased as a percentage of
related net revenue to 48.1% from 48.6%. This decrease was principally due to the mix of levels of personnel involved in the contracts performed, variations in the utilization of personnel and the mix of contracts being performed during each period.
Discovery Sciences direct costs decreased to $6.2 million in the first nine months of 2002 as compared to $9.4 million in the corresponding 2001 period. The higher 2001 Discovery Sciences direct costs were primarily due to the costs associated with
sublicensing dapoxetine to Alza in the first quarter of 2001.





R&D expenses increased 128.2% to $7.3 million
in the nine months ended September 30, 2002 from $3.2 million in the first nine months of 2001. This increase was primarily attributable to an increase in spending on R&D in the Discovery Sciences Group to develop intellectual property. As of
the end of the third quarter of 2002, the Discovery Sciences Group had increased the number of employees working on internal R&D projects by 30% as compared to the end of the third quarter of 2001. Internal R&D spending continues to increase
in both target validation and the chemistry GGTase programs.





SG&A expenses increased 20.2% to $112.2 million
in the nine months ended September 30, 2002 from $93.4 million in the first nine months of 2001. The increase was primarily attributable to additional administrative personnel costs and an increase in recruiting and training costs associated with
new operational employees hired to support our expanding operations. As a percentage of net revenue, excluding reimbursed out-of-pockets, SG&A




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expenses decreased to 27.5% in 2002 from 29.4% in the same period last year. This decrease is primarily attributable to the increase in revenue,
and to a smaller extent, to increased efficiencies as our operations expand.





Depreciation expense increased $3.0
million, or 21.6%, to $17.1 million in the nine months ended September 30, 2002 from $14.0 million in the nine months ended September 30, 2001. The increase was related to the depreciation of the increased investment in property and equipment due
primarily to our growth. Capital expenditures were $26.6 million in the first nine months of 2002. The majority of our capital investment in the nine months ended September 30, 2002 was due to additional facility and equipment costs to increase
laboratory capacity, costs to enhance and expand our information technology capacity and computer software and hardware for new employees.





Amortization expense decreased to $0.63 million for the nine months ended September 30, 2002 from $0.80 million for the nine months ended September 30, 2001. During the nine months ended September 30, 2002, amortization of
backlog associated with the acquisition of MRL accounted for $0.54 million of the amortization expense. During the six months ended September 30, 2001, amortization of goodwill accounted for $0.70 million of the amortization expense. We adopted SFAS
No. 142 as of January 1, 2002 and no longer amortize goodwill in our financial statements. See Managements Discussion and Analysis of Financial Condition and Results of Operations  Recently Issued Accounting Standards below
for a more detailed discussion of SFAS 142.





Operating income increased $22.7 million to $75.4 million in the nine
months ended September 30, 2002, as compared to $52.7 million for the same period last year. As a percentage of net revenue, excluding reimbursed out-of-pockets, operating income increased to 18.5% of net revenue in the first nine months of 2002
from 16.6% in the same period in 2001. This increase was primarily due to our revenue growth and our focus on controlling the increase in both direct and administrative costs.





During the first quarter of 2002, we recorded an impairment of equity investment of $32.0 million to write- down the carrying value of our investment in DNA Sciences, Inc.
for an other than temporary decline in value. Our investment in DNA Sciences was deemed to be impaired as a result of adverse events experienced by DNA Sciences during the first quarter of 2002.





Our provision for income taxes increased $5.6 million, or 26.4%, to $26.9 million in the first nine months of 2002, as compared to $21.3 million in the corresponding
2001 period. We recorded a net tax benefit of $2.0 million and a valuation allowance of $10.7 million associated with the $32.0 million impairment of the DNA Sciences investment as a result of the uncertainty of the utilization of the deduction for
the impairment prior to the deductions expiration. Our effective income tax rate, excluding this $2.0 million tax benefit and the related impairment expense, remained constant at approximately 37.0%.





Net income of $19.9 million in the first nine months of 2002 represents a decrease of $16.6 million from $36.5 million in the same period
last year. Excluding the impairment of equity investment and the related tax benefit, net income increased $13.4 million to $49.9 million for the nine months ended September 30, 2002 as compared to $36.5 million for the corresponding period in 2001.
Net income per diluted share of $0.36 for the nine months ended September 30, 2002 represents a decrease from $0.70 in net income per diluted share in the same period in 2001. Excluding the impairment of equity investment and the related tax
benefit, net income per diluted share increased to $0.91 for the first nine months of 2002 as compared to $0.70 in the first nine months of 2001.





Liquidity and Capital Resources





As of September 30, 2002, we had $147.0 million of cash
and cash equivalents on hand. Our expected primary cash needs on both a short and long-term basis are for capital expenditures, expansion of services, possible acquisitions, geographic expansion, working capital and other general corporate purposes.
We have historically funded our operations and growth, including acquisitions, with cash flow from operations, borrowings and sales of our stock. We are exposed to changes in interest rates on cash equivalents and amounts outstanding under notes
payable, notes receivable and lines of credit. Our cash and cash equivalents are invested in financial instruments that are rated A or better by Standard & Poors or Moodys and earn interest at market rates.





For the nine months ended September 30, 2002, our operating activities provided $65.5 million in cash as compared to $50.0 million for the
same period last year. Net income of $19.9 million, impairment of equity investment of $32.0 million and depreciation and amortization of $17.7 million were partially offset by the net increase of $1.5 million in net assets and liabilities and the
$2.5 million decrease in deferred income taxes.




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For the nine months ended September 30, 2002, our investing activities used $68.8
million in cash. The net cash paid for acquisitions of $50.7 million, purchases of investments of $8.6 million and capital expenditures of $26.6 million were partially offset by $17.0 million received from the repayment of notes receivable.





For the nine months ended September 30, 2002, our financing activities provided $5.1 million in cash, as net
proceeds from stock option exercises and purchases under our employee stock purchase plan totaling $5.9 million and proceeds from long-term debt of $1.5 million were partially offset by $2.3 million in repayments of capital lease obligations.





Working capital as of September 30, 2002 was $158.3 million, compared to $152.8 million at December 31, 2001. The
increase in working capital was due primarily to the increase in accounts receivable and unbilled services, net, of $47.6 million which were partially offset by the increase in unearned income of $21.6 million, the increase in payables to
investigators of $9.1 million and the increase in other accrued expenses of $12.0. The number of days revenue outstanding in accounts receivable and unbilled services, net of unearned income, also known as DSO, were 36.3 and 42.5 days for the
quarters ended September 30, 2002 and December 31, 2001, respectively. This improvement is a result of a focused effort by management on improving the accounts receivable collection process along with certain improved temporary terms regarding
investigator fee down payments. We expect DSO in the future will fluctuate depending on the mix of contracts performed within a quarter and our success in collecting receivables.





In June 2002, we amended our revolving credit facility for $50.0 million from Wachovia Bank, N.A., formerly known as First Union National Bank. The purpose of the amendment
was to extend the expiration date. Indebtedness under the facility is unsecured and subject to traditional covenants relating to financial ratios. Borrowings under this credit facility are available to provide working capital and for general
corporate purposes. As of September 30, 2002, there was no amount outstanding under this credit facility. This credit facility is currently scheduled to expire in June 2003, at which time any outstanding balance will be due.





In July 2002, we entered into a new revolving credit facility for $50.0 million with Bank of America, N. A. Indebtedness under the
facility is unsecured and subject to traditional covenants relating to financial ratios. Borrowings under this credit facility are available to provide working capital and for general corporate purposes. As of September 30, 2002, there was no amount
outstanding under this credit facility. This credit facility is currently scheduled to expire in June 2003, at which time any outstanding balance would be due.





In April 2000, we made an investment in Spotlight Health, Inc., formerly known as ADoctorInYourHouse.com. In January 2001, we entered into an agreement with Spotlight Health and Wachovia Bank, N.A. to
guarantee a revolving $2.0 million line of credit provided to Spotlight Health by Wachovia. Indebtedness under the line is unsecured and subject to traditional covenants relating to financial ratios. As of September 30, 2002, Spotlight Health had
$2.0 million outstanding under this credit facility. This credit facility is currently scheduled to expire in December 2002, at which time any outstanding balance will be due. We review the financial statements of Spotlight Health on a quarterly
basis to determine if they have sufficient financial resources to continue operations. While we do not have current concerns regarding Spotlight Healths ability to repay this facility, should events and circumstances in the future change,
Spotlight Health may not be in the position to repay the facility and we can give no assurances that Wachovia will not attempt to collect on our guaranty of this facility.





We expect to continue expanding our operations through internal growth and strategic acquisitions. We expect these activities will be funded from existing cash, cash flow
from operations and borrowings under our existing or future credit facilities. We believe that these sources of liquidity will be sufficient to fund our operations for the foreseeable future, but offer no assurances. In particular, our sources of
liquidity could be affected by our dependence on a small number of industries and clients, compliance with regulations, international risks, personal injury, environmental or intellectual property claims, as well as other factors described in this
document under Potential Volatility of Quarterly Operating Results and Stock Price and Quantitative and Qualitative Disclosures about Market Risk. In addition, see Critical Accounting Policies and Estimates and
Factors that Might Affect our Business or Stock Price in our Annual Report on Form 10-K for the year ended December 31, 2001.





Critical Accounting Policies and Estimates





Effective January 1, 2002, we adopted SFAS 142,
which establishes new accounting and reporting requirements for goodwill and other intangible assets. We did not identify any impairments of goodwill during our




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transitional impairment test. This test involved the use of estimates related to the fair market value of the reporting unit with which the
goodwill was associated.Impairment adjustments recognized after adoption, if any, are required to be recognized as an operating expense.





There have been no material changes to our critical accounting policies and estimates since December 31, 2001. For detailed information on our critical accounting policies and estimates, see our Annual
Report on Form 10-K for the year ended December 31, 2001.





Recently Issued Accounting Standards





In July 2001, the FASB issued Statement of Financial Accounting Standards No. 141, Business Combinations, or SFAS No. 141. As
of July 1, 2001, PPD adopted SFAS No. 141, which requires that all business combinations initiated after June 30, 2001 be accounted for under the purchase method and that certain acquired intangible assets in a business combination be recognized as
assets apart from goodwill. As discussed previously, we have implemented and followed SFAS No. 141 for all acquisitions completed during 2002.





In July 2001, the FASB issued Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, or SFAS No. 142. PPD adopted SFAS No. 142 as of January 1, 2002.
SFAS No. 142 addresses the financial accounting and reporting standards for the acquisition of intangible assets outside of a business combination, and for goodwill and other intangible assets subsequent to their acquisition. This accounting
standard requires that goodwill be separately disclosed from other intangible assets in the statement of financial position, and no longer be amortized but tested for impairment on a periodic basis. The provisions of this accounting standard also
require the completion of a transitional impairment test within six months of adoption. PPD has completed the transitional impairment test and did not identify any impairments of goodwill. This test involved determining the fair market value of each
of the reporting units with which the goodwill was associated and comparing the estimated fair market value of each of the reporting units with its carrying amount. Additionally, SFAS No. 142 requires intangible assets that do not meet the criteria
for recognition apart from goodwill to be reclassified. As a result of PPDs analysis, no reclassifications to goodwill were required as of January 1, 2002.





In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, or SFAS No. 144, which supersedes SFAS
No. 121 and portions of APB Opinion No. 30. SFAS No. 144 provides guidance on the recognition and impairment of long-lived assets to be held and used, and for long-lived assets to be disposed. This statement also requires expected future operating
losses from discontinued operations to be displayed in the period(s) in which the losses are incurred, rather than as of the measurement date as previously required. PPD has adopted SFAS No. 144 as of January 1, 2002. The adoption of SFAS No. 144
did not have a material impact on PPDs consolidated financial statements.





In November 2001, the FASB issued
Emerging Issues Task Force Rule No. 01-14, or EITF 01-14, Income Statement Characterization of Reimbursements Received for Out-of-Pocket Expenses Incurred. EITF 01-14 requires that in cases where the contractor acts as a principal,
reimbursements received for out-of-pocket expenses incurred be characterized as revenue and the associated costs included as operating expenses in the income statement. PPD implemented this rule effective January 1, 2002 and, as required, has
reclassified comparative financial information for 2001. The implementation of this rule resulted only in the gross-up of revenues and expenses and had no impact upon earnings.





In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities, or SFAS No.
146. SFAS No. 146 addresses accounting and reporting for costs associated with exit or disposal activities and supercedes Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring). SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value when the
liability is incurred. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. PPD does not expect the adoption of this statement to have a material effect on its
financial statements.




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Taxes





Because we conduct operations on a global basis, our effective tax rate has and will continue to depend upon the geographic distribution of our pretax earnings among locations with varying tax rates.
Our profits are also impacted by changes in the tax rates of the various taxing jurisdictions. In particular, as the geographic mix of our pre-tax earnings among various tax jurisdictions changes, our effective tax rate might vary from period to
period.





Inflation





While most of our net revenues are earned under contracts, the long-term contracts, those in excess of one year, generally include an inflation or cost of living adjustment for the portion of the services to be performed
beyond one year from the contract date. As a result, we believe that the effects of inflation generally do not have a material adverse effect on our operations or financial condition.





Potential Volatility of Quarterly Operating Results and Stock Price





Our quarterly and annual operating results have fluctuated in the past, and we expect that they will continue to fluctuate in the future. Factors that could cause these fluctuations to occur include:





| | · |  | our dependence on a small number of industries and clients;
| | - |  | -----------------------------------------------------------

| | · |  | the timing of the initiation, progress or cancellation of significant projects;
| | - |  | -------------------------------------------------------------------------------

| | · |  | the mix of products and services sold in a particular period;
| | - |  | -------------------------------------------------------------

| | · |  | our need to recruit and retain experienced personnel;
| | - |  | -----------------------------------------------------

| | · |  | rapid technological change and the timing and amount of start-up costs incurred in connection with the introduction of new products and services;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------

| | · |  | intellectual property risks;
| | - |  | ----------------------------

| | · |  | the timing of our Discovery Sciences Group milestone payments or other revenue;
| | - |  | -------------------------------------------------------------------------------

| | · |  | the timing of the opening of new offices;
| | - |  | -----------------------------------------

| | · |  | the timing of other internal expansion costs;
| | - |  | ---------------------------------------------

| | · |  | the timing and amount of costs associated with integrating acquisitions; and
| | - |  | ----------------------------------------------------------------------------

| | · |  | exchange rate fluctuations between periods.
| | - |  | -------------------------------------------




Delays and terminations of trials are often the result of actions taken by our customers or regulatory authorities and are not typically controllable by us. Because a large percentage of our operating
costs are relatively fixed while revenue is subject to fluctuation, variations in the timing and progress of large contracts can materially affect our quarterly operating results. We believe that comparisons of our quarterly financial results are
not necessarily meaningful and should not be relied upon as an indication of future performance.





Fluctuations in
quarterly results or other factors beyond our control could affect the market price of our common stock. Such factors include changes in earnings estimates by analysts, market conditions in our industry, changes in pharmaceutical and biotechnology
industries, general economic conditions, and differences in assumptions used as compared to actual results. Any effect on our common stock could be unrelated to our longer-term operating performance.




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Item 3.    
Quantitative and Qualitative Disclosures about Market Risk





We are exposed to foreign
currency risk by virtue of our international operations. We conduct business in several foreign countries. Approximately 15.9% and 21.2% of our net revenues, less reimbursed out-of-pockets, for the three-month periods ended September 30, 2001 and
2002, respectively, were derived from operations outside the United States. Approximately 14.4% and 19.7% of our net revenues, less reimbursed out-of-pockets, for the nine-month periods ended September 30, 2001 and 2002, respectively, were derived
from operations outside the United States. Funds generated by each subsidiary are generally reinvested in the country where they are earned. We have not, to date, engaged in derivative or hedging activities related to our potential foreign exchange
exposures. Our operations in the United Kingdom generated approximately 48.8% of our net revenue, less reimbursed out-of-pockets, from international operations during the third quarter of 2002. Accordingly, we do have some exposure to adverse
movements in the pound sterling and other foreign currencies. The United Kingdom has traditionally had a relatively stable currency compared to our functional currency, the U.S. dollar. We anticipate that those conditions will continue for at least
the next 12 months, but cannot make any guarantees.





The vast majority of our contracts are entered into by our
United States or United Kingdom subsidiaries. The contracts entered into by the United States subsidiaries are almost always denominated in United States dollars. Contracts entered into by our United Kingdom subsidiaries are generally denominated in
pounds sterling, United States dollar or Euros. In most transactions involving multiple currencies, contractual provisions either limit or reduce the economic risk.





We do have some currency risk resulting from the passage of time between the invoicing of customers under contracts and the ultimate collection of customer payments against
those invoices. If a contract is denominated in a currency other than the subsidiarys local currency, we recognize a receivable at the time of invoicing for the local currency equivalent of the foreign currency invoice amount. Changes in
exchange rates from the time the invoice is prepared and payment from the customer is received will result in our receiving either more or less in local currency than the local currency equivalent of the invoice amount at the time the invoice was
prepared and the receivable established. We recognize this difference as a foreign currency transaction gain or loss, as applicable, and report it in other income, net.





Changes in exchange rates between the applicable foreign currency and the U.S. dollar will affect the translation of foreign subsidiaries financial results into U.S.
dollars for purposes of reporting our consolidated financial results. The process by which each foreign subsidiarys financial results are translated to U.S. dollars is as follows:





| | · |  | income statement accounts are translated at average exchange rates for the period;
| | - |  | ----------------------------------------------------------------------------------

| | · |  | balance sheet assets and liability accounts are translated at end of period exchange rates; and
| | - |  | -----------------------------------------------------------------------------------------------

| | · |  | equity accounts are translated at historical exchange rates.
| | - |  | ------------------------------------------------------------




Translation of the balance sheet in this manner affects the shareholders equity account, referred to as the cumulative translation adjustment account. This account
exists only in the foreign subsidiarys U.S. dollar balance sheet and is necessary to keep the foreign balance sheet, stated in U.S. dollars, in balance. Translation adjustments are reported with accumulated other comprehensive income (loss) as
a separate component of shareholders equity. To date, cumulative translation adjustments have not been material to our consolidated financial position. However, adjustments could in the future be material to our financial statements.





There are no material exchange controls currently in effect in any country in which we conduct operations on the
payment of dividends or otherwise restricting the transfer of funds outside these countries. Although we perform services for clients located in a number of foreign jurisdictions, we have not experienced any difficulties in receiving funds remitted
from foreign countries. However, if any of these jurisdictions imposed or modified existing exchange control restrictions, the restrictions could have an adverse effect on our financial condition.





We are exposed to changes in interest rates on our cash equivalents and amounts outstanding under notes payable and lines of credit. We
invest our cash and cash equivalents and short-term investments in financial instruments with interest rates based on financial market conditions. If interest rates were to change by 1% in the future, we do not expect this to have a material effect
on our financial statements.




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Item 4.
    Controls and Procedures





(a)    Evaluation of disclosure
controls and procedures.  The Companys Principal Executive Officer and Principal Financial Officer have reviewed and evaluated the effectiveness of the Companys disclosure controls and procedures (as defined in Exchange Act
Rules 240.13a-14(c) and 15d-14(c)) as of a date within ninety days before the filing date of this quarterly report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that the Companys
current disclosure controls and procedures are effective.





(b)    Changes in internal
controls.  There were no significant changes in the Companys internal controls or in other factors that could significantly affect these internal controls subsequent to the date of evaluation.




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Part II.    OTHER INFORMATION





Item 5.    
Other Information





In September 2002, the Finance & Audit Committee of PPDs
Board of Directors pre-approved Deloitte & Touche, L.L.P., the Companys independent auditors, providing tax and merger and acquisition due diligence services to PPD as PPD may request throughout the remainder of the 2002 calendar year.





Item 6.    
Exhibits and Reports on Form 8-K





(a)

Exhibits10.190

Amended and Restated Deferred Compensation Plan dated July 1, 2002.10.191

Second Amendment, dated October 1, 2002, to Lease Agreement dated June 26, 1998 between PPD Development, Inc. (formerly PPD Pharmaco, Inc.) and Duke Realty
Limited Partnership (formerly Weeks Realty, L.P.).10.192

Fifth Amendment, dated October 1, 2002, to Lease Agreement dated July 9, 1997 between PPD Development, Inc. and Duke Realty Limited Partnership (formerly
Weeks Realty, L.P.).10.193

Second Amendment, dated October 1, 2002, to Lease Agreement dated December 16, 1998 between PPD Development, Inc. and Duke Realty Limited Partnership
(formerly Weeks Realty, L.P.).10.194

First Amendment, dated June 1, 2002, to Employment Agreement dated May 1, 2002, between PPD Development, LP and W. Richard Staub.10.195

Termination Agreement dated August 23, 2002, between PPD Pharmaco, Inc. and Patrick C. OConnor.99.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002  Chief Executive
Officer99.2

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002  Chief Financial
Officer(b)

Reports on Form 8-KNo reports on Form 8-K were filed during the quarter ended September 30, 2002.







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SIGNATURES





In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. (Registrant)By:

/s/    Fredric N. EshelmanChief Executive Officer (Principal
Executive Officer)By:

/s/    Linda
BaddourChief Financial Officer (Principal
Financial and Accounting Officer)





Date:  November 13, 2002




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CERTIFICATION





I, Fredric N. Eshelman, certify that:





| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Pharmaceutical Product Development, Inc.;
| | -- |  | -----------------------------------------------------------------------------------------------




| | 2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this quarterly report;
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 4. |  | The issuers other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) for the issuer and have:
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | a. |  | designed such disclosure controls and procedures to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | b. |  | evaluated the effectiveness of the issuers disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly
report (the Evaluation Date); and
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | c. |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 5. |  | The issuer's other certifying officers and I have disclosed, based on our most recent evaluation, to the issuer's auditors and the audit committee of the board
of directors (or persons performing the equivalent function):
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | a. |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the issuers ability to record, process,
summarize and report financial data and have identified for the issuers auditors any material weaknesses in internal controls; and
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | b. |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the issuers internal controls; and
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------




| | 6. |  | The issuers other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Date:  November 13, 2002



By:

/s/    Fredric N. EshelmanChief Financial Officer (Principal Executive Officer)




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CERTIFICATION





I, Linda Baddour, certify that:





| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Pharmaceutical Product Development, Inc.;
| | -- |  | -----------------------------------------------------------------------------------------------




| | 2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this quarterly report;
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 4. |  | The issuers other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) for the issuer and have:
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | a. |  | designed such disclosure controls and procedures to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | b. |  | evaluated the effectiveness of the issuers disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly
report (the Evaluation Date); and
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | c. |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 5. |  | The issuers other certifying officers and I have disclosed, based on our most recent evaluation, to the issuers auditors and the audit committee of
the board of directors (or persons performing the equivalent function):
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | a. |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the issuers ability to record, process,
summarize and report financial data and have identified for the issuers auditors any material weaknesses in internal controls; and
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | b. |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the issuers internal controls; and
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------




| | 6. |  | The issuers other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Date:  November 13, 2002



By:

/s/    Linda BaddourChief Financial Officer (Principal Financial and Accounting Officer)







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