##### 



United States
Securities and Exchange Commission
 Washington, D.C. 20549
 Form 10-Q
 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For
the Quarterly Period Ended
June 30,
2005
 Commission
file number
333-113805
 QUINTILES TRANSNATIONAL CORP.
 
  North Carolina
    
    56-1714315(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer Identification No.)4709 Creekstone Dr., Suite 200Durham, NC
    
    27703-8411(Address of principal executive offices)
    
    (Zip Code)
 (Registrants telephone number, including area code)
 N/A
 þ o
 o þ
  
 *
    
    The registrant has filed all reports required by Section 15(d) of the Exchange Act in the
past 12 months, but the registrant is a voluntary filer and is not subject to the requirements
of Section 15(d).




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##### 



PagePart I.
    
    Financial InformationItem 1.
    
    Financial Statements (unaudited)Condensed consolidated balance sheets -
June 30, 2005 and December 31, 2004
    
    
    3Condensed consolidated statements of
operations  Three months ended June 30,
2005 and 2004; Six months ended
June 30, 2005 and 2004
    
    
    4Condensed consolidated statements of
cash flows  Six months ended June 30,
2005 and 2004
    
    
    5Notes to condensed consolidated financial
statements  June 30, 2005
    
    
    6Item 2.
    
    Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    41Item 3.
    
    Quantitative and Qualitative Disclosure About Market Risk
    
    
    82Item 4.
    
    Controls and Procedures
    
    
    83Part II.
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    83Item 2.
    
    Unregistered Sales of Equity Securities and
Use of Proceeds  Not Applicable
    
    
    86Item 3.
    
    Defaults Upon Senior Securities  Not Applicable
    
    
    86Item 4.
    
    Submission of Matters to a Vote of Security Holders -
Not Applicable
    
    
    86Item 5.
    
    Other Information  Not Applicable
    
    
    86Item 6.
    
    Exhibits
    
    
    86Signatures
    
    
    87Exhibit Index
    
    
    88
  2




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##### 



Part I. Financial Information
 
 Item 1. Financial Statements
 Quintiles Transnational Corp. and Subsidiaries
 
 Condensed Consolidated Balance Sheets
  June 30,
    
    December 31,2005
    
    2004(unaudited)
    
    (Note 1)AssetsCurrent assets:Cash and cash equivalents
    
    $
    298,258
    
    
    $
    535,680Trade accounts receivable and unbilled services, net
    
    
    348,352
    
    
    
    300,407Investments in debt securities
    
    
    588
    
    
    
    569Prepaid expenses
    
    
    24,087
    
    
    
    20,424Other current assets and receivables
    
    
    58,768
    
    
    
    58,254Total current assets
    
    
    730,053
    
    
    
    915,334Property and equipment
    
    
    296,520
    
    
    
    359,073Less accumulated depreciation
    
    
    (86,893
    )
    
    
    (67,928
    )209,627
    
    
    
    291,145Intangibles and other assets:Investments in debt securities
    
    
    12,279
    
    
    
    11,552Investments in marketable equity securities
    
    
    33,014
    
    
    
    24,425Investments in non-marketable equity securities and
loans
    
    
    55,985
    
    
    
    56,441Investments in unconsolidated affiliates
    
    
    120,065
    
    
    
    120,984Commercial rights and royalties
    
    
    128,565
    
    
    
    138,543Accounts receivable  unbilled
    
    
    53,434
    
    
    
    46,669Goodwill
    
    
    115,001
    
    
    
    116,013Other identifiable intangibles, net
    
    
    244,892
    
    
    
    274,457Deferred income taxes
    
    
    29,082
    
    
    
    2,877Deposits and other assets
    
    
    40,619
    
    
    
    49,522832,936
    
    
    
    841,483Total assets
    
    $
    1,772,616
    
    
    $
    2,047,962Liabilities and Shareholders EquityCurrent liabilities:Accounts payable and accrued expenses
    
    $
    319,276
    
    
    $
    347,667Credit arrangements
    
    
    19,323
    
    
    
    20,319Unearned income
    
    
    202,560
    
    
    
    199,450Other current liabilities and income taxes
    
    
    14,296
    
    
    
    32,347Total current liabilities
    
    
    555,455
    
    
    
    599,783Long-term liabilities:Credit arrangements, less current portion
    
    
    619,260
    
    
    
    774,562Deferred income taxes
    
    
    8,785
    
    
    
    45,833Minority interest
    
    
    37,940
    
    
    
    38,550Other liabilities
    
    
    31,905
    
    
    
    21,143697,890
    
    
    
    880,088Total liabilities
    
    
    1,253,345
    
    
    
    1,479,871Shareholders equity:Common stock and additional paid-in capital,
125,000,000 shares issued and outstanding at
June 30, 2005 and December 31, 2004
    
    
    522,300
    
    
    
    521,979Accumulated deficit
    
    
    (31,203
    )
    
    
    (6,384
    )Accumulated other comprehensive income
    
    
    28,174
    
    
    
    52,496Total shareholders equity
    
    
    519,271
    
    
    
    568,091Total liabilities and shareholders equity
    
    $
    1,772,616
    
    
    $
    2,047,962
  3




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##### 



Quintiles Transnational Corp. and Subsidiaries
 
 Condensed Consolidated Statements of Operations
   Three months
    
    Three months
    
    Six months
    
    Six monthsended
    
    ended
    
    ended
    
    endedJune 30, 2005
    
    June 30, 2004
    
    June 30, 2005
    
    June 30, 2004Net revenues
    
    $
    537,447
    
    
    $
    425,766
    
    
    $
    1,029,803
    
    
    $
    848,960Add: reimbursed service costs
    
    
    131,298
    
    
    
    82,306
    
    
    
    241,983
    
    
    
    164,765Gross revenues
    
    
    668,745
    
    
    
    508,072
    
    
    
    1,271,786
    
    
    
    1,013,725Costs, expenses and other:Costs of revenues
    
    
    468,973
    
    
    
    372,062
    
    
    
    905,606
    
    
    
    728,664Selling, general and administrative
    
    
    167,959
    
    
    
    159,027
    
    
    
    322,437
    
    
    
    314,688Interest expense (income), net
    
    
    12,175
    
    
    
    14,576
    
    
    
    29,614
    
    
    
    29,195Other expense (income), net
    
    
    2,764
    
    
    
    318
    
    
    
    2,888
    
    
    
    (2,873
    )Restructuring
    
    
    10,676
    
    
    
    
    
    
    
    19,679
    
    
    
    Impairments
    
    
    72,033
    
    
    
    881
    
    
    
    72,467
    
    
    
    881Transaction expense, net
    
    
    
    
    
    
    
    
    
    
    (2,666
    )
    
    
    Gain on sale of portion of an
investment in a subsidiary
    
    
    
    
    
    
    (24,688
    )
    
    
    
    
    
    
    (24,688
    )Non-operating gain on change of
interest transaction
    
    
    
    
    
    
    (10,030
    )
    
    
    
    
    
    
    (10,030
    )734,580
    
    
    
    512,146
    
    
    
    1,350,025
    
    
    
    1,035,837Loss before income taxes
    
    
    (65,835
    )
    
    
    (4,074
    )
    
    
    (78,239
    )
    
    
    (22,112
    )Income tax (benefit) expense
(includes $31,521 of income tax
benefit related to American Jobs
Creation Act of 2004 for the six
months ended June 30, 2005)
    
    
    (22,996
    )
    
    
    14,133
    
    
    
    (56,016
    )
    
    
    13,408Loss before minority interests and
equity in (losses) earnings of
unconsolidated affiliates
    
    
    (42,839
    )
    
    
    (18,207
    )
    
    
    (22,223
    )
    
    
    (35,520
    )Equity in (losses) earnings of
unconsolidated affiliates
    
    
    (329
    )
    
    
    45
    
    
    
    (528
    )
    
    
    (23
    )Minority interests
    
    
    (995
    )
    
    
    (246
    )
    
    
    (2,068
    )
    
    
    (433
    )Loss from continuing operations
    
    
    (44,163
    )
    
    
    (18,408
    )
    
    
    (24,819
    )
    
    
    (35,976
    )Income from discontinued operation
    
    
    
    
    
    
    8,280
    
    
    
    
    
    
    
    10,141Net loss
    
    $
    (44,163
    )
    
    $
    (10,128
    )
    
    $
    (24,819
    )
    
    $
    (25,835
    )
  4




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##### 



Quintiles Transnational Corp. and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows
   Six months ended
    
    Six months endedJune 30, 2005
    
    June 30, 2004Operating activitiesNet loss
    
    $
    (24,819
    )
    
    $
    (25,835
    )Income from discontinued operation
    
    
    
    
    
    
    (10,141
    )Loss from continuing operations
    
    
    (24,819
    )
    
    
    (35,976
    )Adjustments to reconcile loss from continuing operations
to net cash provided by(used in) operating activities:Depreciation and amortization
    
    
    62,172
    
    
    
    66,882Amortization of debt issuance costs
    
    
    5,007
    
    
    
    1,661Amortization of commercial rights and royalties assets
    
    
    10,922
    
    
    
    4,317Restructuring charge accrual
    
    
    19,679
    
    
    
    Restructuring charge payments
    
    
    (15,707
    )
    
    
    (3,244
    )Impairment of long-lived assets
    
    
    72,467
    
    
    
    881Loss from sales and impairments of investments, net
    
    
    2,841
    
    
    
    3,795Loss on disposals of property and equipment, net
    
    
    519
    
    
    
    454Gain from sale of certain assets
    
    
    
    
    
    
    (5,114
    )Gain from sale of a portion of an investment in a subsidiary
    
    
    
    
    
    
    (24,688
    )Non-operating gain on change of interest transaction
    
    
    
    
    
    
    (10,030
    )(Benefit from) provision for deferred income tax expense
    
    
    (39,901
    )
    
    
    5,270Change in accounts receivable, unbilled services and unearned income
    
    
    (53,033
    )
    
    
    (63,397
    )Change in other operating assets and liabilities
    
    
    (33,704
    )
    
    
    (11,504
    )Other
    
    
    769
    
    
    
    Net cash provided by (used in) operating activities
    
    
    7,212
    
    
    
    (70,693
    )Investing activitiesAcquisition of property and equipment
    
    
    (25,980
    )
    
    
    (24,583
    )Payment of transaction costs in Transaction
    
    
    (2,849
    )
    
    
    (7,039
    )Acquisition of businesses, net of cash acquired
    
    
    (3,073
    )
    
    
    (252
    )Acquisition of commercial rights and royalties
    
    
    (20,944
    )
    
    
    (3,000
    )Proceeds from sale of certain assets
    
    
    
    
    
    
    9,068Proceeds from sale of minority interest in subsidiary
    
    
    
    
    
    
    35,976Proceeds from disposition of property and equipment
    
    
    3,621
    
    
    
    3,495Purchases of debt securities, net
    
    
    (732
    )
    
    
    (407
    )Purchases of equity securities and other investments
    
    
    (12,204
    )
    
    
    (7,736
    )Proceeds from sale of equity securities and other investments
    
    
    3,001
    
    
    
    27,930Other
    
    
    (141
    )
    
    
    250Net cash (used in) provided by investing activities
    
    
    (59,301
    )
    
    
    33,702Financing activitiesDebt issuance costs paid
    
    
    (2,792
    )
    
    
    Principal payments on credit arrangements
    
    
    (160,834
    )
    
    
    (9,432
    )Intercompany with parent companies
    
    
    (822
    )
    
    
    (707
    )Dividend from discontinued operation
    
    
    
    
    
    
    7,929Proceeds from change in interest transaction
    
    
    
    
    
    
    41,773Net cash (used in) provided by financing activities
    
    
    (164,448
    )
    
    
    39,563Effect of foreign currency exchange rate changes on cash
    
    
    (20,885
    )
    
    
    (926
    )(Decrease) increase in cash and cash equivalents
    
    
    (237,422
    )
    
    
    1,646Cash and cash equivalents at beginning of period
    
    
    535,680
    
    
    
    373,622Cash and cash equivalents at end of period
    
    $
    298,258
    
    
    $
    375,268
  5




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##### 



Quintiles Transnational Corp. and Subsidiaries
 
            6




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##### 



Quintiles Transnational Corp. and Subsidiaries
    June 30,
    
    December 31,2005
    
    2004Commercial rights and royalties
    
    $
    128,565
    
    
    $
    138,543Accounts receivable-unbilled
    
    
    53,434
    
    
    
    46,669Other long-term liabilities
    
    
    12,212
    
    
    
    
  TM TM
  7




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##### 



Quintiles Transnational Corp. and Subsidiaries
   8




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##### 



Quintiles Transnational Corp. and Subsidiaries
    9




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##### 



Quintiles Transnational Corp. and Subsidiaries
 Ô Ô Ô Ô TM Ô Ô TM
 Ô Ô â Ô TM
 10




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##### 



Quintiles Transnational Corp. and Subsidiaries
 TM TM TM TM TM
  11




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##### 



Quintiles Transnational Corp. and Subsidiaries
    12




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##### 



Quintiles Transnational Corp. and Subsidiaries
    13




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##### 



Quintiles Transnational Corp. and Subsidiaries
   July 1, 2005throughDecember 31,2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    TotalService commitments
    
    $
    66,916
    
    
    $
    121,559
    
    
    $
    108,899
    
    
    $
    89,640
    
    
    $
    68,307
    
    
    $
    455,321$
    66,916
    
    
    $
    121,559
    
    
    $
    108,899
    
    
    $
    89,640
    
    
    $
    68,307
    
    
    $
    455,321
   Fair MarketCost Basis
    
    ValueTotal Marketable Equity Securities
    
    $
    30,865
    
    
    $
    33,014
    Remaining FundingCompany
    
    Cost Basis
    
    CommitmentVenture capital funds
    
    $
    34,773
    
    
    $
    10,543Equity investments (twelve companies)
    
    
    12,853
    
    
    
    2,158Loans (three companies)
    
    
    8,359
    
    
    
    Total non-marketable equity securities
and loans
    
    $
    55,985
    
    
    $
    12,701
 14




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##### 



Quintiles Transnational Corp. and Subsidiaries
  2005
    
    2006
    
    TotalVenture capital funds
    
    $
    4,100
    
    
    $
    6,443
    
    
    $
    10,543Equity investments
    
    
    2,158
    
    
    
    
    
    
    
    2,158Total remaining funding commitments
    
    $
    6,258
    
    
    $
    6,443
    
    
    $
    12,701
      15




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##### 



Quintiles Transnational Corp. and Subsidiaries
     16




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##### 



Quintiles Transnational Corp. and Subsidiaries
    As of June 30, 2005
    
    As of December 31, 2004Gross
    
    Accumulated
    
    Net
    
    Gross
    
    Accumulated
    
    NetAmount
    
    Amortization
    
    Amount
    
    Amount
    
    Amortization
    
    AmountIdentifiable intangible assets:Commercial rights and royalties,
licenses and customer
relationships
    
    $
    125,148
    
    
    $
    65,511
    
    
    $
    59,637
    
    
    $
    125,802
    
    
    $
    46,847
    
    
    $
    78,955Trademarks, trade names and other
    
    
    175,885
    
    
    
    23,827
    
    
    
    152,058
    
    
    
    169,496
    
    
    
    18,967
    
    
    
    150,529Software and related assets
    
    
    70,095
    
    
    
    36,898
    
    
    
    33,197
    
    
    
    73,051
    
    
    
    28,078
    
    
    
    44,973Total identifiable intangible assets
    
    $
    371,128
    
    
    $
    126,236
    
    
    $
    244,892
    
    
    $
    368,349
    
    
    $
    93,892
    
    
    $
    274,457
  Product
    
    Commercial
    
    PharmaBioDevelopment
    
    Services
    
    Development
    
    ConsolidatedBalance as of December 31, 2004
    
    $
    70,943
    
    
    $
    43,657
    
    
    $
    1,413
    
    
    $
    116,013Impact of foreign currency
fluctuations
    
    
    (978
    )
    
    
    (34
    )
    
    
    
    
    
    
    (1,012
    )Balance as of June 30, 2005
    
    $
    69,965
    
    
    $
    43,623
    
    
    $
    1,413
    
    
    $
    115,001
   Three months
    
    Three months
    
    Six months
    
    Six monthsended June 30,
    
    ended June 30,
    
    ended June 30,
    
    ended June 30,2005
    
    2004
    
    2005
    
    2004Marketable equity and
derivative securities:Gross realized gains
    
    $
    
    
    
    $
    2,533
    
    
    $
    1,194
    
    
    $
    7,389Gross realized losses
    
    
    (455
    )
    
    
    (340
    )
    
    
    (1,043
    )
    
    
    (822
    )Impairment losses
    
    
    (449
    )
    
    
    (10,157
    )
    
    
    (1,322
    )
    
    
    (10,157
    )Non-marketable equity
securities and loans:Gross realized gains
    
    
    21
    
    
    
    
    
    
    
    21
    
    
    
    Impairment losses
    
    
    
    
    
    
    (51
    )
    
    
    (1,691
    )
    
    
    (205
    )Total investment revenues
    
    $
    (883
    )
    
    $
    (8,015
    )
    
    $
    (2,841
    )
    
    $
    (3,795
    )
 17




---



##### 



Quintiles Transnational Corp. and Subsidiaries
    Facility
    
    Interest Rates$75.0 million
    
    Either at LIBOR (3.49% at June 30, 2005) plus
2.50% or ABR (6.25% at June 30, 2005) plus
1.50%£1.5 million (approximately
$2.7 million) general
banking facility with a
United Kingdom bank used
for the issuance of
guarantees
    
    1% per annum for each guarantee issued
   As of
    
    As ofJune 30, 2005
    
    December 31, 200410% Senior Subordinated Notes due 2013
    
    $
    450,000
    
    
    $
    450,000Senior Term
B Loan (Either at LIBOR (3.49% at June 30, 2005) plus 1.75%
or ABR (6.25% at June 30, 2005) plus 0.75%)
    
    
    154,575
    
    
    
    306,125Missouri tax incentive bonds due October 2009 (6.7% annual interest rate)
    
    
    2,977
    
    
    
    3,256Other notes payable
    
    
    3,004
    
    
    
    4,160610,556
    
    
    
    763,541Capital leases
    
    
    28,027
    
    
    
    31,340Total credit arrangements
    
    $
    638,583
    
    
    $
    794,881
 18




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##### 



Quintiles Transnational Corp. and Subsidiaries
  July 1, 2005 through December 31, 2005
    
    $
    2,6362006
    
    
    5,0052007
    
    
    4,1732008
    
    
    3,9022009
    
    
    144,5762010
    
    
    117Thereafter
    
    
    450,147$
    610,556
        19




---



##### 



Quintiles Transnational Corp. and Subsidiaries
      20




---



##### 



Quintiles Transnational Corp. and Subsidiaries
       Severance and related costs
    
    Exit costsBalance at
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    
    
    
    
    
    
    
    Foreign
    
    Balance atDecember 31,
    
    
    
    
    
    
    
    
    
    Currency
    
    
    
    
    
    
    
    
    
    Currency
    
    June 30,2004
    
    Accrual
    
    Payments
    
    Translation
    
    Accrual
    

Payments
    
    Translation
    
    20052005 Plans
    
    $
    
    
    
    $
    9,145
    
    
    $
    (6,967
    )
    
    $
    (90
    )
    
    $
    9,343
    
    
    $
    (2,384
    )
    
    $
    (114
    )
    
    $
    8,9332004 Plans
    
    
    5,225
    
    
    
    918
    
    
    
    (5,351
    )
    
    
    (102
    )
    
    
    273
    
    
    
    (107
    )
    
    
    (15
    )
    
    
    8412003 Plans
    
    
    826
    
    
    
    
    
    
    
    (319
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5072002 Plans
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    52001 Plans
    
    
    4,556
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (559
    )
    
    
    
    
    
    
    3,9972000 Plans
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23
    )
    
    
    
    
    
    
    9$
    10,646
    
    
    $
    10,063
    
    
    $
    (12,637
    )
    
    $
    (192
    )
    
    $
    9,616
    
    
    $
    (3,075
    )
    
    $
    (129
    )
    
    $
    14,292
 21




---



##### 



Quintiles Transnational Corp. and Subsidiaries
      22




---



##### 



Quintiles Transnational Corp. and Subsidiaries
    23




---



##### 



Quintiles Transnational Corp. and Subsidiaries
    Three months
    
    Three months
    
    Six months
    
    Six monthsended
    
    ended
    
    ended
    
    endedJune 30,
    
    June 30,
    
    June 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net loss
    
    $
    (44,163
    )
    
    $
    (10,128
    )
    
    $
    (24,819
    )
    
    $
    (25,835
    )Other comprehensive loss:Unrealized gains (losses) on marketable securities arising
during the period, net of income taxes of $1.9 million and
($1.6) million for the three months ended June 30, 2005 and
2004, respectively, and ($347,000) and ($235,000) for the
six months ended June 30, 2005 and 2004, respectively
    
    
    3,534
    
    
    
    (2,898
    )
    
    
    (726
    )
    
    
    (515
    )Unrealized (losses) gains on derivative instruments, net of
income taxes of ($17,000) and $523,000 for the three months
ended June 30, 2005 and 2004, respectively, and ($88,000)
and $378,000 for the six months ended June 30, 2005 and
2004, respectively
    
    
    (133
    )
    
    
    972
    
    
    
    (329
    )
    
    
    703Reclassification adjustment for gains (losses), net of
income taxes of $1.8 million for the three months ended
June 30, 2004, and ($9,000) and $1.1 million for the six
months ended June 30, 2005 and 2004, respectively, included
in net income (loss)
    
    
    
    
    
    
    3,434
    
    
    
    (16
    )
    
    
    2,001Foreign currency adjustment
    
    
    (10,203
    )
    
    
    463
    
    
    
    (24,017
    )
    
    
    (1,755
    )Other comprehensive income (loss) to non-controlling interest
    
    
    272
    
    
    
    (42
    )
    
    
    768
    
    
    
    (49
    )Comprehensive loss
    
    $
    (50,693
    )
    
    $
    (8,199
    )
    
    $
    (49,139
    )
    
    $
    (25,450
    )
 24




---



##### 



Quintiles Transnational Corp. and Subsidiaries
    Product
    
    Commercial
    
    PharmaBioDevelopment
    
    Services
    
    Development
    
    Eliminations
    
    ConsolidatedService revenues:External
    
    $
    330,204
    
    
    $
    169,668
    
    
    $
    
    
    
    $
    
    
    
    $
    499,872Intersegment
    
    
    1,721
    
    
    
    23,612
    
    
    
    
    
    
    
    (25,333
    )
    
    
    Total net services
    
    
    331,925
    
    
    
    193,280
    
    
    
    
    
    
    
    (25,333
    )
    
    
    499,872Commercial rights and
royalties
    
    
    
    
    
    
    
    
    
    
    38,458
    
    
    
    
    
    
    
    38,458Investment
    
    
    
    
    
    
    
    
    
    
    (883
    )
    
    
    
    
    
    
    (883
    )Total net revenues
    
    
    331,925
    
    
    
    193,280
    
    
    
    37,575
    
    
    
    (25,333
    )
    
    
    537,447Reimbursed service costs
    
    
    114,149
    
    
    
    17,980
    
    
    
    
    
    
    
    (831
    )
    
    
    131,298Gross revenues
    
    $
    446,074
    
    
    $
    211,260
    
    
    $
    37,575
    
    
    $
    (26,164
    )
    
    $
    668,745Contribution
    
    $
    164,757
    
    
    $
    78,158
    
    
    $
    (13,954
    )
    
    $
    
    
    
    $
    228,961
 25




---



##### 



Quintiles Transnational Corp. and Subsidiaries
  Product
    
    Commercial
    
    PharmaBioDevelopment
    
    Services
    
    Development
    
    Eliminations
    
    ConsolidatedService revenues:External
    
    $
    268,363
    
    
    $
    150,263
    
    
    $
    
    
    
    $
    
    
    
    $
    418,626Intersegment
    
    
    
    
    
    
    8,596
    
    
    
    
    
    
    
    (8,596
    )
    
    
    Total net services
    
    
    268,363
    
    
    
    158,859
    
    
    
    
    
    
    
    (8,596
    )
    
    
    418,626Commercial rights and
royalties
    
    
    
    
    
    
    
    
    
    
    15,155
    
    
    
    
    
    
    
    15,155Investment
    
    
    
    
    
    
    
    
    
    
    (8,015
    )
    
    
    
    
    
    
    (8,015
    )Total net revenues
    
    
    268,363
    
    
    
    158,859
    
    
    
    7,140
    
    
    
    (8,596
    )
    
    
    425,766Reimbursed service costs
    
    
    67,863
    
    
    
    14,488
    
    
    
    
    
    
    
    (45
    )
    
    
    82,306Gross revenues
    
    $
    336,226
    
    
    $
    173,347
    
    
    $
    7,140
    
    
    $
    (8,641
    )
    
    $
    508,072Contribution
    
    $
    128,353
    
    
    $
    61,310
    
    
    $
    (21,497
    )
    
    $
    
    
    
    $
    168,166
  Product
    
    Commercial
    
    PharmaBioDevelopment
    
    Services
    
    Development
    
    Eliminations
    
    ConsolidatedService revenues:External
    
    $
    639,065
    
    
    $
    328,877
    
    
    $
    
    
    
    $
    
    
    
    $
    967,942Intersegment
    
    
    3,138
    
    
    
    48,506
    
    
    
    
    
    
    
    (51,644
    )
    
    
    Total net services
    
    
    642,203
    
    
    
    377,383
    
    
    
    
    
    
    
    (51,644
    )
    
    
    967,942Commercial rights and
royalties
    
    
    
    
    
    
    
    
    
    
    64,702
    
    
    
    
    
    
    
    64,702Investment
    
    
    
    
    
    
    
    
    
    
    (2,841
    )
    
    
    
    
    
    
    (2,841
    )Total net revenues
    
    
    642,203
    
    
    
    377,383
    
    
    
    61,861
    
    
    
    (51,644
    )
    
    
    1,029,803Reimbursed service costs
    
    
    210,704
    
    
    
    32,438
    
    
    
    
    
    
    
    (1,159
    )
    
    
    241,983Gross revenues
    
    $
    852,907
    
    
    $
    409,821
    
    
    $
    61,861
    
    
    $
    (52,803
    )
    
    $
    1,271,786Contribution
    
    $
    314,403
    
    
    $
    145,758
    
    
    $
    (36,043
    )
    
    $
    
    
    
    $
    424,118
  Product
    
    Commercial
    
    PharmaBioDevelopment
    
    Services
    
    Development
    
    Eliminations
    
    ConsolidatedService revenues:External
    
    $
    531,047
    
    
    $
    290,967
    
    
    $
    
    
    
    $
    
    
    
    $
    822,014Intersegment
    
    
    
    
    
    
    14,879
    
    
    
    
    
    
    
    (14,879
    )
    
    
    Total net services
    
    
    531,047
    
    
    
    305,846
    
    
    
    
    
    
    
    (14,879
    )
    
    
    822,014Commercial rights and
royalties
    
    
    
    
    
    
    
    
    
    
    30,741
    
    
    
    
    
    
    
    30,741Investment
    
    
    
    
    
    
    
    
    
    
    (3,795
    )
    
    
    
    
    
    
    (3,795
    )Total net revenues
    
    
    531,047
    
    
    
    305,846
    
    
    
    26,946
    
    
    
    (14,879
    )
    
    
    848,960Reimbursed service costs
    
    
    135,724
    
    
    
    29,415
    
    
    
    
    
    
    
    (374
    )
    
    
    164,765Gross revenues
    
    $
    666,771
    
    
    $
    335,261
    
    
    $
    26,946
    
    
    $
    (15,253
    )
    
    $
    1,013,725Contribution
    
    $
    256,415
    
    
    $
    115,865
    
    
    $
    (22,156
    )
    
    $
    
    
    
    $
    350,124
 26




---



##### 



Quintiles Transnational Corp. and Subsidiaries
 Three months
    
    Three months
    
    Six months
    
    Six monthsended
    
    ended
    
    ended
    
    endedJune 30, 2005
    
    June 30, 2004
    
    June 30, 2005
    
    June 30, 2004Depreciation and amortization expense:Product Development
    
    $
    20,405
    
    
    $
    21,182
    
    
    $
    40,476
    
    
    $
    42,772Commercial Services
    
    
    7,611
    
    
    
    7,823
    
    
    
    15,144
    
    
    
    16,007PharmaBio Development (included in
contribution)
    
    
    3,556
    
    
    
    1,015
    
    
    
    4,233
    
    
    
    1,819Corporate
    
    
    1,173
    
    
    
    3,151
    
    
    
    2,318
    
    
    
    6,284Total depreciation and amortization expense
    
    $
    32,745
    
    
    $
    33,171
    
    
    $
    62,171
    
    
    $
    66,882
 27




---



##### 



Quintiles Transnational Corp. and Subsidiaries
     Three months ended June 30, 2005
 Quintiles
    
    
    
    
    
    SubsidiaryTransnational
    
    Subsidiary
    
    Non-Corp.
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    TotalNet revenues
    
    $
    
    
    
    $
    194,273
    
    
    $
    347,470
    
    
    $
    (4,296
    )
    
    $
    537,447Add reimbursed service costs
    
    
    
    
    
    
    61,532
    
    
    
    69,766
    
    
    
    
    
    
    
    131,298Gross revenues
    
    
    
    
    
    
    255,805
    
    
    
    417,236
    
    
    
    (4,296
    )
    
    
    668,745Costs, expenses and other:Costs of revenues
    
    
    3,097
    
    
    
    199,005
    
    
    
    270,675
    
    
    
    (3,804
    )
    
    
    468,973Selling, general and administrative
    
    
    22,470
    
    
    
    43,555
    
    
    
    102,426
    
    
    
    (492
    )
    
    
    167,959Interest (income) expense, net
    
    
    13,158
    
    
    
    (7,070
    )
    
    
    6,087
    
    
    
    
    
    
    
    12,175Other (income) expense, net
    
    
    (15,008
    )
    
    
    12,842
    
    
    
    4,930
    
    
    
    
    
    
    
    2,764Restructuring
    
    
    258
    
    
    
    6,574
    
    
    
    3,844
    
    
    
    
    
    
    
    10,676Impairments
    
    
    
    
    
    
    58,813
    
    
    
    13,220
    
    
    
    
    
    
    
    72,03323,975
    
    
    
    313,719
    
    
    
    401,182
    
    
    
    (4,296
    )
    
    
    734,580(Loss) income before income taxes
    
    
    (23,975
    )
    
    
    (57,914
    )
    
    
    16,054
    
    
    
    
    
    
    
    (65,835
    )Income tax (benefit) expense
    
    
    (8,218
    )
    
    
    (20,029
    )
    
    
    5,251
    
    
    
    
    
    
    
    (22,996
    )(Loss) income before minority
interests and equity in (losses)
earnings of unconsolidated affiliates
    
    
    (15,757
    )
    
    
    (37,885
    )
    
    
    10,803
    
    
    
    
    
    
    
    (42,839
    )Minority interests and equity in
(losses) earnings of unconsolidated
affiliates
    
    
    
    
    
    
    (329
    )
    
    
    (229
    )
    
    
    (766
    )
    
    
    (1,324
    )Subsidiary
(loss) income
    
    
    (28,406
    )
    
    
    (9,334
    )
    
    
    (353
    )
    
    
    38,093
    
    
    
    Net (loss) income
    
    $
    (44,163
    )
    
    $
    (47,548
    )
    
    $
    10,221
    
    
    $
    37,327
    
    
    $
    (44,163
    )
 28




---



##### 



Quintiles Transnational Corp. and Subsidiaries
 Three months ended June 30, 2004
 Quintiles
    
    
    
    
    
    SubsidiaryTransnational
    
    Subsidiary
    
    Non-Corp.
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    TotalNet revenues
    
    $
    37
    
    
    $
    146,496
    
    
    $
    279,846
    
    
    $
    (613
    )
    
    $
    425,766Add reimbursed service costs
    
    
    
    
    
    
    37,872
    
    
    
    44,434
    
    
    
    
    
    
    
    82,306Gross revenues
    
    
    37
    
    
    
    184,368
    
    
    
    324,280
    
    
    
    (613
    )
    
    
    508,072Costs, expenses and other:Costs of revenues
    
    
    4,739
    
    
    
    152,548
    
    
    
    214,775
    
    
    
    
    
    
    
    372,062Selling, general and administrative
    
    
    17,371
    
    
    
    48,426
    
    
    
    93,843
    
    
    
    (613
    )
    
    
    159,027Interest (income) expense, net
    
    
    15,477
    
    
    
    (6,568
    )
    
    
    5,667
    
    
    
    
    
    
    
    14,576Other (income) expense, net
    
    
    (15,568
    )
    
    
    12,749
    
    
    
    3,137
    
    
    
    
    
    
    
    318Gain on sale of portion of an investment in a subsidiary
    
    
    (24,688
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,688
    )Impairments
    
    
    
    
    
    
    881
    
    
    
    
    
    
    
    
    
    
    
    881Non-operating gain on change of interest transaction
    
    
    (10,030
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,030
    )(12,699
    )
    
    
    208,036
    
    
    
    317,422
    
    
    
    (613
    )
    
    
    512,146Income (loss) before income taxes
    
    
    12,736
    
    
    
    (23,668
    )
    
    
    6,858
    
    
    
    
    
    
    
    (4,074
    )Income tax expense (benefit)
    
    
    17,530
    
    
    
    (7,613
    )
    
    
    4,216
    
    
    
    
    
    
    
    14,133(Loss) income before minority interests and equity in
(losses) earnings of unconsolidated affiliates
    
    
    (4,794
    )
    
    
    (16,055
    )
    
    
    2,642
    
    
    
    
    
    
    
    (18,207
    )Minority
interests and equity in earnings (losses) of
unconsolidated affiliates
    
    
    
    
    
    
    45
    
    
    
    (246
    )
    
    
    
    
    
    
    (201
    )Subsidiary
(loss) income
    
    
    (5,334
    )
    
    
    (1,988
    )
    
    
    861
    
    
    
    6,461
    
    
    
    (Loss) income from continuing operations
    
    
    (10,128
    )
    
    
    (17,998
    )
    
    
    3,257
    
    
    
    6,461
    
    
    
    (18,408
    )Income from discontinued operation
    
    
    
    
    
    
    526
    
    
    
    7,754
    
    
    
    
    
    
    
    8,280Net (loss) income
    
    $
    (10,128
    )
    
    $
    (17,472
    )
    
    $
    11,011
    
    
    $
    6,461
    
    
    $
    (10,128
    )
 29




---



##### 



Quintiles Transnational Corp. and Subsidiaries
 Six months ended June 30, 2005
 Quintiles
    
    
    
    
    
    SubsidiaryTransnational
    
    Subsidiary
    
    Non-Corp.
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    TotalNet revenues
    
    $
    
    
    
    $
    364,740
    
    
    $
    669,631
    
    
    $
    (4,568
    )
    
    $
    1,029,803Add reimbursed service costs
    
    
    
    
    
    
    111,258
    
    
    
    130,725
    
    
    
    
    
    
    
    241,983Gross revenues
    
    
    
    
    
    
    475,998
    
    
    
    800,356
    
    
    
    (4,568
    )
    
    
    1,271,786Costs, expenses and other:Costs of revenues
    
    
    6,292
    
    
    
    378,705
    
    
    
    524,413
    
    
    
    (3,804
    )
    
    
    905,606Selling, general and administrative
    
    
    37,594
    
    
    
    84,668
    
    
    
    200,939
    
    
    
    (764
    )
    
    
    322,437Interest (income) expense, net
    
    
    32,882
    
    
    
    (15,025
    )
    
    
    11,757
    
    
    
    
    
    
    
    29,614Other (income) expense, net
    
    
    (28,258
    )
    
    
    23,792
    
    
    
    7,354
    
    
    
    
    
    
    
    2,888Restructuring
    
    
    352
    
    
    
    8,988
    
    
    
    10,339
    
    
    
    
    
    
    
    19,679Impairments and transaction
    
    
    (2,666
    )
    
    
    58,877
    
    
    
    13,590
    
    
    
    
    
    
    
    69,80146,196
    
    
    
    540,005
    
    
    
    768,392
    
    
    
    (4,568
    )
    
    
    1,350,025(Loss) income before income taxes
    
    
    (46,196
    )
    
    
    (64,007
    )
    
    
    31,964
    
    
    
    
    
    
    
    (78,239
    )Income tax (benefit) expense
    
    
    (43,727
    )
    
    
    (25,758
    )
    
    
    13,469
    
    
    
    
    
    
    
    (56,016
    )(Loss) income before minority
interests and equity in (losses)
earnings of unconsolidated affiliates
    
    
    (2,469
    )
    
    
    (38,249
    )
    
    
    18,495
    
    
    
    
    
    
    
    (22,223
    )Minority interests and equity in
(losses) earnings of unconsolidated
affiliates
    
    
    
    
    
    
    (528
    )
    
    
    (430
    )
    
    
    (1,638
    )
    
    
    (2,596
    )Subsidiary
(loss) income
    
    
    (22,350
    )
    
    
    (15,293
    )
    
    
    (743
    )
    
    
    38,386
    
    
    
    Net (loss) income
    
    $
    (24,819
    )
    
    $
    (54,070
    )
    
    $
    17,322
    
    
    $
    36,748
    
    
    $
    (24,819
    )
 30




---



##### 



Quintiles Transnational Corp. and Subsidiaries
 Six months ended June 30, 2004
 Quintiles
    
    
    
    
    
    SubsidiaryTransnational
    
    Subsidiary
    
    Non-Corp.
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    TotalNet revenues
    
    $
    (15
    )
    
    $
    292,348
    
    
    $
    557,240
    
    
    $
    (613
    )
    
    $
    848,960Add reimbursed service costs
    
    
    
    
    
    
    77,837
    
    
    
    86,928
    
    
    
    
    
    
    
    164,765Gross revenues
    
    
    (15
    )
    
    
    370,185
    
    
    
    644,168
    
    
    
    (613
    )
    
    
    1,013,725Costs, expenses and other:Costs of revenues
    
    
    10,609
    
    
    
    292,304
    
    
    
    425,751
    
    
    
    
    
    
    
    728,664Selling, general and administrative
    
    
    36,467
    
    
    
    89,327
    
    
    
    189,507
    
    
    
    (613
    )
    
    
    314,688Interest (income) expense, net
    
    
    31,066
    
    
    
    (13,355
    )
    
    
    11,484
    
    
    
    
    
    
    
    29,195Other (income) expense, net
    
    
    (35,032
    )
    
    
    24,802
    
    
    
    7,357
    
    
    
    
    
    
    
    (2,873
    )Impairments
    
    
    
    
    
    
    881
    
    
    
    
    
    
    
    
    
    
    
    881Gain on sale of portion of an investment in a subsidiary
    
    
    (24,688
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,688
    )Non-operating gain on change of interest transaction
    
    
    (10,030
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,030
    )8,392
    
    
    
    393,959
    
    
    
    634,099
    
    
    
    (613
    )
    
    
    1,035,837(Loss) income before income taxes
    
    
    (8,407
    )
    
    
    (23,774
    )
    
    
    10,069
    
    
    
    
    
    
    
    (22,112
    )Income tax
expense (benefit)
    
    
    14,784
    
    
    
    (10,976
    )
    
    
    9,600
    
    
    
    
    
    
    
    13,408(Loss) income before minority interests and equity in
(losses) earnings of unconsolidated affiliates
    
    
    (23,191
    )
    
    
    (12,798
    )
    
    
    469
    
    
    
    
    
    
    
    (35,520
    )Minority interests and equity in (losses) earnings of
unconsolidated affiliates
    
    
    
    
    
    
    (23
    )
    
    
    (433
    )
    
    
    
    
    
    
    (456
    )Subsidiary
(loss) income
    
    
    (2,644
    )
    
    
    (11,413
    )
    
    
    1,658
    
    
    
    12,399
    
    
    
    (Loss) income from continuing operations
    
    
    (25,835
    )
    
    
    (24,234
    )
    
    
    1,694
    
    
    
    12,399
    
    
    
    (35,976
    )Income from discontinued operation
    
    
    
    
    
    
    945
    
    
    
    9,196
    
    
    
    
    
    
    
    10,141Net (loss) income
    
    $
    (25,835
    )
    
    $
    (23,289
    )
    
    $
    10,890
    
    
    $
    12,399
    
    
    $
    (25,835
    )
  31




---



##### 



Quintiles Transnational Corp. and Subsidiaries
 As of June 30, 2005
 Quintiles
    
    
    
    
    
    SubsidiaryTransnational
    
    Subsidiary
    
    Non-Corp.
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    TotalAssetsCurrent assets:Cash and cash equivalents
    
    $
    8,357
    
    
    $
    43,777
    
    
    $
    246,124
    
    
    $
    
    
    
    $
    298,258Trade accounts receivable and unbilled
services, net
    
    
    
    
    
    
    149,357
    
    
    
    198,995
    
    
    
    
    
    
    
    348,352Other current assets
    
    
    8,072
    
    
    
    19,519
    
    
    
    55,852
    
    
    
    
    
    
    
    83,443Total current assets
    
    
    16,429
    
    
    
    212,653
    
    
    
    500,971
    
    
    
    
    
    
    
    730,053Property and equipment, net
    
    
    1,276
    
    
    
    62,840
    
    
    
    145,511
    
    
    
    
    
    
    
    209,627Intangibles and other assets:Investments
    
    
    24,779
    
    
    
    376,440
    
    
    
    2,123
    
    
    
    
    
    
    
    403,342Goodwill and other identifiable intangibles, net
    
    
    1,404
    
    
    
    155,386
    
    
    
    203,103
    
    
    
    
    
    
    
    359,893Deposits and other assets
    
    
    18,194
    
    
    
    31,587
    
    
    
    19,920
    
    
    
    
    
    
    
    69,701Investments in subsidiaries
    
    
    1,491,817
    
    
    
    (235,761
    )
    
    
    75,937
    
    
    
    (1,331,993
    )
    
    
    Total intangibles and other assets
    
    
    1,536,194
    
    
    
    327,652
    
    
    
    301,083
    
    
    
    (1,331,993
    )
    
    
    832,936Total assets
    
    $
    1,553,899
    
    
    $
    603,145
    
    
    $
    947,565
    
    
    $
    (1,331,993
    )
    
    $
    1,772,616Liabilities and Shareholders EquityCurrent liabilities:Accounts payable and accrued expenses
    
    $
    26,097
    
    
    $
    76,627
    
    
    $
    216,552
    
    
    $
    
    
    
    $
    319,276Credit arrangements
    
    
    3,100
    
    
    
    677
    
    
    
    15,546
    
    
    
    
    
    
    
    19,323Unearned income
    
    
    
    
    
    
    68,516
    
    
    
    134,044
    
    
    
    
    
    
    
    202,560Other current liabilities
    
    
    38,234
    
    
    
    (20,273
    )
    
    
    (3,665
    )
    
    
    
    
    
    
    14,296Total current liabilities
    
    
    67,431
    
    
    
    125,547
    
    
    
    362,477
    
    
    
    
    
    
    
    555,455Long-term liabilities:Credit arrangements, less current portion
    
    
    601,475
    
    
    
    2,596
    
    
    
    15,189
    
    
    
    
    
    
    
    619,260Minority interest
    
    
    
    
    
    
    
    
    
    
    26,225
    
    
    
    11,715
    
    
    
    37,940Other liabilities
    
    
    18,908
    
    
    
    (6,448
    )
    
    
    28,230
    
    
    
    
    
    
    
    40,690Net intercompany payables
    
    
    346,814
    
    
    
    (853,586
    )
    
    
    506,772
    
    
    
    
    
    
    
    Total long-term liabilities
    
    
    967,197
    
    
    
    (857,438
    )
    
    
    576,416
    
    
    
    11,715
    
    
    
    697,890Total liabilities
    
    
    1,034,628
    
    
    
    (731,891
    )
    
    
    938,893
    
    
    
    11,715
    
    
    
    1,253,345Total shareholders equity
    
    
    519,271
    
    
    
    1,335,036
    
    
    
    8,672
    
    
    
    (1,343,708
    )
    
    
    519,271Total liabilities and shareholders equity
    
    $
    1,553,899
    
    
    $
    603,145
    
    
    $
    947,565
    
    
    $
    (1,331,993
    )
    
    $
    1,772,616
 32




---



##### 



Quintiles Transnational Corp. and Subsidiaries
 As of December 31, 2004
 Quintiles
    
    
    
    
    
    SubsidiaryTransnational
    
    Subsidiary
    
    Non-Corp.
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    TotalAssetsCurrent assets:Cash and cash equivalents
    
    $
    17,581
    
    
    $
    155,142
    
    
    $
    362,957
    
    
    $
    
    
    
    $
    535,680Trade accounts receivable and unbilled
services, net
    
    
    
    
    
    
    122,567
    
    
    
    177,840
    
    
    
    
    
    
    
    300,407Other current assets
    
    
    10,688
    
    
    
    19,160
    
    
    
    49,399
    
    
    
    
    
    
    
    79,247Total current assets
    
    
    28,269
    
    
    
    296,869
    
    
    
    590,196
    
    
    
    
    
    
    
    915,334Property and equipment, net
    
    
    1,680
    
    
    
    115,776
    
    
    
    173,689
    
    
    
    
    
    
    
    291,145Intangibles and other assets:Investments
    
    
    22,219
    
    
    
    375,121
    
    
    
    1,274
    
    
    
    
    
    
    
    398,614Goodwill and other identifiable intangibles, net
    
    
    2,980
    
    
    
    174,383
    
    
    
    213,107
    
    
    
    
    
    
    
    390,470Deposits and other assets
    
    
    24,200
    
    
    
    11,022
    
    
    
    17,177
    
    
    
    
    
    
    
    52,399Investments in subsidiaries
    
    
    1,654,469
    
    
    
    (247,132
    )
    
    
    75,217
    
    
    
    (1,482,554
    )
    
    
    Total intangibles and other assets
    
    
    1,703,868
    
    
    
    313,394
    
    
    
    306,775
    
    
    
    (1,482,554
    )
    
    
    841,483Total assets
    
    $
    1,733,817
    
    
    $
    726,039
    
    
    $
    1,070,660
    
    
    $
    (1,482,554
    )
    
    $
    2,047,962Liabilities and Shareholders EquityCurrent liabilities:Accounts payable and accrued expenses
    
    $
    32,834
    
    
    $
    96,508
    
    
    $
    218,325
    
    
    $
    
    
    
    $
    347,667Credit arrangements
    
    
    3,100
    
    
    
    669
    
    
    
    16,550
    
    
    
    
    
    
    
    20,319Unearned income
    
    
    
    
    
    
    73,036
    
    
    
    126,414
    
    
    
    
    
    
    
    199,450Other current liabilities
    
    
    32,768
    
    
    
    6,243
    
    
    
    (6,664
    )
    
    
    
    
    
    
    32,347Total current liabilities
    
    
    68,702
    
    
    
    176,456
    
    
    
    354,625
    
    
    
    
    
    
    
    599,783Long-term liabilities:Credit arrangements, less current portion
    
    
    753,024
    
    
    
    2,932
    
    
    
    18,606
    
    
    
    
    
    
    
    774,562Minority interest
    
    
    
    
    
    
    
    
    
    
    27,705
    
    
    
    10,845
    
    
    
    38,550Other liabilities
    
    
    61,535
    
    
    
    (23,706
    )
    
    
    29,147
    
    
    
    
    
    
    
    66,976Net intercompany payables
    
    
    282,465
    
    
    
    (818,801
    )
    
    
    536,336
    
    
    
    
    
    
    
    Total long-term liabilities
    
    
    1,097,024
    
    
    
    (839,575
    )
    
    
    611,794
    
    
    
    10,845
    
    
    
    880,088Total liabilities
    
    
    1,165,726
    
    
    
    (663,119
    )
    
    
    966,419
    
    
    
    10,845
    
    
    
    1,479,871Total shareholders equity
    
    
    568,091
    
    
    
    1,389,158
    
    
    
    104,241
    
    
    
    (1,493,399
    )
    
    
    568,091Total liabilities and shareholders equity
    
    $
    1,733,817
    
    
    $
    726,039
    
    
    $
    1,070,660
    
    
    $
    (1,482,554
    )
    
    $
    2,047,962
 33




---



##### 



Quintiles Transnational Corp. and Subsidiaries
  Six months ended June 30, 2005
 Quintiles
    
    
    
    
    
    SubsidiaryTransnational
    
    Subsidiary
    
    Non-Corp.
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    TotalOperating activitiesNet (loss) income
    
    $
    (24,819
    )
    
    $
    (54,070
    )
    
    $
    17,322
    
    
    $
    36,748
    
    
    $
    (24,819
    )Adjustments
to reconcile net (loss) income to net cash provided by (used
in) operating activities:Depreciation and amortization
    
    
    2,268
    
    
    
    28,577
    
    
    
    31,327
    
    
    
    
    
    
    
    62,172Amortization of debt issuance costs
    
    
    4,931
    
    
    
    76
    
    
    
    
    
    
    
    
    
    
    
    5,007Amortization of commercial rights and royalties assets
    
    
    
    
    
    
    10,922
    
    
    
    
    
    
    
    
    
    
    
    10,922Restructuring charge (payments) accrual, net
    
    
    82
    
    
    
    4,040
    
    
    
    (150
    )
    
    
    
    
    
    
    3,972Impairment of long-lived assets
    
    
    
    
    
    
    58,877
    
    
    
    13,590
    
    
    
    
    
    
    
    72,467Loss from sales and impairments of investments, net
    
    
    
    
    
    
    2,841
    
    
    
    
    
    
    
    
    
    
    
    2,841Loss on disposals of property and equipment, net
    
    
    
    
    
    
    206
    
    
    
    313
    
    
    
    
    
    
    
    519(Benefit from) provision for deferred income tax expense
    
    
    (38,916
    )
    
    
    (987
    )
    
    
    2
    
    
    
    
    
    
    
    (39,901
    )Change in accounts receivable, unbilled services and
unearned income
    
    
    3,214
    
    
    
    (30,811
    )
    
    
    (25,436
    )
    
    
    
    
    
    
    (53,033
    )Change in other operating assets and liabilities
    
    
    (19,133
    )
    
    
    (24,636
    )
    
    
    8,427
    
    
    
    1,638
    
    
    
    (33,704
    )Investment in subsidiaries and intercompany
    
    
    222,839
    
    
    
    (65,981
    )
    
    
    (118,472
    )
    
    
    (38,386
    )
    
    
    Other
    
    
    320
    
    
    
    528
    
    
    
    (79
    )
    
    
    
    
    
    
    769Net cash
provided by (used in) operating activities
    
    
    150,786
    
    
    
    (70,418
    )
    
    
    (73,156
    )
    
    
    
    
    
    
    7,212Investing activitiesAcquisition of property and equipment
    
    
    (309
    )
    
    
    (13,104
    )
    
    
    (12,567
    )
    
    
    
    
    
    
    (25,980
    )Payment of transaction costs in Transaction
    
    
    (2,849
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,849
    )Acquisition of businesses, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (3,073
    )
    
    
    
    
    
    
    (3,073
    )Acquisition of commercial rights and royalties
    
    
    
    
    
    
    (20,944
    )
    
    
    
    
    
    
    
    
    
    
    (20,944
    )Proceeds from disposition of property and equipment
    
    
    50
    
    
    
    648
    
    
    
    2,923
    
    
    
    
    
    
    
    3,621Proceeds from (purchases of) debt securities, net
    
    
    (1,077
    )
    
    
    280
    
    
    
    65
    
    
    
    
    
    
    
    (732
    )Purchases of equity securities and other investments
    
    
    (700
    )
    
    
    (10,370
    )
    
    
    (1,134
    )
    
    
    
    
    
    
    (12,204
    )Proceeds from sale of equity securities and other investments
    
    
    39
    
    
    
    2,875
    
    
    
    87
    
    
    
    
    
    
    
    3,001Other
    
    
    
    
    
    
    
    
    
    
    (141
    )
    
    
    
    
    
    
    (141
    )Net cash used in investing activities
    
    
    (4,846
    )
    
    
    (40,615
    )
    
    
    (13,840
    )
    
    
    
    
    
    
    (59,301
    )Financing activitiesPrincipal payments on credit arrangements, net
    
    
    (154,342
    )
    
    
    (328
    )
    
    
    (8,956
    )
    
    
    
    
    
    
    (163,626
    )Intercompany with parent companies
    
    
    (822
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (822
    )Net cash used in financing activities
    
    
    (155,164
    )
    
    
    (328
    )
    
    
    (8,956
    )
    
    
    
    
    
    
    (164,448
    )Effect of foreign currency exchange rate changes on cash
    
    
    
    
    
    
    (4
    )
    
    
    (20,881
    )
    
    
    
    
    
    
    (20,885
    )Decrease in cash and cash equivalents
    
    
    (9,224
    )
    
    
    (111,365
    )
    
    
    (116,833
    )
    
    
    
    
    
    
    (237,422
    )Cash and cash equivalents at beginning of period
    
    
    17,581
    
    
    
    155,142
    
    
    
    362,957
    
    
    
    
    
    
    
    535,680Cash and cash equivalents at end of period
    
    $
    8,357
    
    
    $
    43,777
    
    
    $
    246,124
    
    
    $
    
    
    
    $
    298,258
 34




---



##### 



Quintiles Transnational Corp. and Subsidiaries
 Six months ended June 30, 2004
 Quintiles
    
    
    
    
    
    SubsidiaryTransnational
    
    Subsidiary
    
    Non-Corp.
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    TotalOperating activitiesNet (loss) income
    
    $
    (25,835
    )
    
    $
    (23,289
    )
    
    $
    10,890
    
    
    $
    12,399
    
    
    $
    (25,835
    )Income from discontinued operation
    
    
    
    
    
    
    (945
    )
    
    
    (9,196
    )
    
    
    
    
    
    
    (10,141
    )(Loss) income from continuing operations
    
    
    (25,835
    )
    
    
    (24,234
    )
    
    
    1,694
    
    
    
    12,399
    
    
    
    (35,976
    )Adjustments to reconcile (loss) income from continuing
operations to net cash provided by (used in) operating
activities:Depreciation and amortization
    
    
    6,074
    
    
    
    31,006
    
    
    
    29,802
    
    
    
    
    
    
    
    66,882Amortization of debt issuance costs
    
    
    1,636
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    1,661Amortization of commercial rights and royalties assets
    
    
    
    
    
    
    4,317
    
    
    
    
    
    
    
    
    
    
    
    4,317Restructuring charge (payments) accrual, net
    
    
    (8
    )
    
    
    (1,769
    )
    
    
    (1,467
    )
    
    
    
    
    
    
    (3,244
    )Impairment of long-lived assets
    
    
    
    
    
    
    881
    
    
    
    
    
    
    
    
    
    
    
    881Loss from sales and impairments of investments, net
    
    
    2,962
    
    
    
    467
    
    
    
    366
    
    
    
    
    
    
    
    3,795Loss (gain) on disposals of property and equipment, net
    
    
    
    
    
    
    463
    
    
    
    (9
    )
    
    
    
    
    
    
    454Gain from sale of certain assets
    
    
    (4,660
    )
    
    
    
    
    
    
    (454
    )
    
    
    
    
    
    
    (5,114
    )Gain from sale of a portion of an investment in a subsidiary
    
    
    (24,688
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,688
    )Non-operating gain on change of interest transaction
    
    
    (10,030
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,030
    )Provision for (benefit from) deferred income tax expense
    
    
    5,325
    
    
    
    (1,096
    )
    
    
    1,041
    
    
    
    
    
    
    
    5,270Change in accounts receivable, unbilled services and unearned
income
    
    
    651
    
    
    
    (56,284
    )
    
    
    (7,764
    )
    
    
    
    
    
    
    (63,397
    )Change in other operating assets and liabilities
    
    
    2,829
    
    
    
    (4,537
    )
    
    
    (9,796
    )
    
    
    
    
    
    
    (11,504
    )Investment in subsidiaries and intercompany
    
    
    60,300
    
    
    
    (70,052
    )
    
    
    22,151
    
    
    
    (12,399
    )
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    )Net cash provided by (used in) operating activities
    
    
    14,556
    
    
    
    (120,813
    )
    
    
    35,564
    
    
    
    
    
    
    
    (70,693
    )Investing activitiesAcquisition of property and equipment
    
    
    (221
    )
    
    
    (9,204
    )
    
    
    (15,158
    )
    
    
    
    
    
    
    (24,583
    )Payment of transaction costs in Transaction
    
    
    (7,039
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,039
    )Acquisition of businesses, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (252
    )
    
    
    
    
    
    
    (252
    )Acquisition of commercial rights and royalties
    
    
    
    
    
    
    (3,000
    )
    
    
    
    
    
    
    
    
    
    
    (3,000
    )Proceeds from sale of certain assets
    
    
    
    
    
    
    
    
    
    
    9,068
    
    
    
    
    
    
    
    9,068Proceeds from sale of a portion of an investment in a subsidiary
    
    
    35,976
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,976Proceeds from disposition of property and equipment
    
    
    258
    
    
    
    980
    
    
    
    2,257
    
    
    
    
    
    
    
    3,495Proceeds from (purchases of) debt securities, net
    
    
    (669
    )
    
    
    262
    
    
    
    
    
    
    
    
    
    
    
    (407
    )Purchases of equity securities and other investments
    
    
    (332
    )
    
    
    (7,403
    )
    
    
    (1
    )
    
    
    
    
    
    
    (7,736
    )Proceeds from sale of equity securities and other investments
    
    
    
    
    
    
    27,930
    
    
    
    
    
    
    
    
    
    
    
    27,930Other
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250Net cash provided by (used in) investing activities
    
    
    28,223
    
    
    
    9,565
    
    
    
    (4,086
    )
    
    
    
    
    
    
    33,702Financing activitiesPrincipal payments on credit arrangements, net
    
    
    (1,774
    )
    
    
    (420
    )
    
    
    (7,238
    )
    
    
    
    
    
    
    (9,432
    )Dividend from discontinued operation
    
    
    7,929
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,929Intercompany
with parent companies
    
    
    (707
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (707
    )Proceeds from change in interest transaction
    
    
    
    
    
    
    
    
    
    
    41,773
    
    
    
    
    
    
    
    41,773Net cash provided by (used in) financing activities
    
    
    5,448
    
    
    
    (420
    )
    
    
    34,535
    
    
    
    
    
    
    
    39,563Effect of foreign currency exchange rate changes on cash
    
    
    
    
    
    
    3
    
    
    
    (929
    )
    
    
    
    
    
    
    (926
    )Increase (decrease) in cash and cash equivalents
    
    
    48,227
    
    
    
    (111,665
    )
    
    
    65,084
    
    
    
    
    
    
    
    1,646Cash and cash equivalents at beginning of period
    
    
    (7,138
    )
    
    
    188,430
    
    
    
    192,330
    
    
    
    
    
    
    
    373,622Cash and cash equivalents at end of period
    
    $
    41,089
    
    
    $
    76,765
    
    
    $
    257,414
    
    
    $
    
    
    
    $
    375,268
 35




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Quintiles Transnational Corp. and Subsidiaries
    36




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##### 



Quintiles Transnational Corp. and Subsidiaries
    37




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##### 



Quintiles Transnational Corp. and Subsidiaries
     38




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##### 



Quintiles Transnational Corp. and Subsidiaries
   39




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##### 



Quintiles Transnational Corp. and Subsidiaries
   As of
    
    As ofJune 30, 2005
    
    December 31, 2004Current assets
    
    $
    53,406
    
    
    $
    47,040Property and equipment, net
    
    
    101,961
    
    
    
    171,505Intangible assets
    
    
    1,500
    
    
    
    1,900Current liabilities
    
    $
    36,003
    
    
    $
    28,264
  40




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##### 



Quintiles Transnational Corp. and Subsidiaries
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Cautionary Statement for Forward Looking Information
   41




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##### 



Quintiles Transnational Corp. and Subsidiaries
 Overview
   42




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##### 



Quintiles Transnational Corp. and Subsidiaries
 Results of Operations
 Three Months Ended June 30, 2005 and 2004
 Gross Revenues.
 Three months ended June 30,2005
    
    2004Service revenues  external
    
    $
    631,170
    
    
    $
    500,932Less: reimbursed service costs
    
    
    131,298
    
    
    
    82,306Net service revenues  external
    
    
    499,872
    
    
    
    418,626Net service revenues  intersegment
    
    
    25,333
    
    
    
    8,596Net service revenues  combined
    
    
    525,205
    
    
    
    427,222Commercial rights and royalties
    
    
    38,458
    
    
    
    15,155Investments
    
    
    (883
    )
    
    
    (8,015
    )Eliminations: service revenues  intersegment
    
    
    (25,333
    )
    
    
    (8,596
    )Total net revenues
    
    $
    537,447
    
    
    $
    425,766Reimbursed service costs
    
    
    131,298
    
    
    
    82,306Gross revenues
    
    $
    668,745
    
    
    $
    508,072
 
    
    Service Revenues  External.Service revenues  external were $631.2 million
for the second quarter of 2005 compared to $500.9 million for the second quarter of
2004. Service revenues  external less reimbursed service costs, or net service
revenues  external, for the second quarter of 2005 were $499.9 million, an increase of
$81.2 million or 19.4% over net service revenues  external of $418.6 million for the
second quarter of 2004. Net service revenues  external for the second quarter of 2005
were positively impacted by approximately $11.9 million due to the effect of the
weakening of the United States dollar relative to the euro, the British pound, the
South African rand and the Japanese yen. Our Commercial Services and Product
Development Groups experienced growth in the second quarter of 2005 compared to the
second quarter of 2004. Our Product Development Group experienced growth in both our
clinical development services, or CDS, and early development and laboratory services,
or EDLS. The growth in EDLS primarily consisted of Phase I and central laboratory
services. Net service revenues  external increased in the Asia Pacific region $16.2
million or 21.1% to $92.9 million for the second quarter of 2005 from the second
quarter of 2004 including a positive impact of approximately $2.9 million due to the
effect of foreign currency fluctuations. Our Commercial Services Group experienced
strong growth in the Asia Pacific region with revenues increasing $11.3 million or
29.3% to $50.1 million in the second quarter of 2005 compared to the second quarter of
2004. Net service revenues  external increased $49.2 million or 27.3% to $229.2
million for the second quarter of 2005 from the second quarter of 2004 in the Europe
region including a positive impact of approximately $8.3 million due to the effect of
foreign currency fluctuations. We experienced growth from both CDS and EDLS along with
an improvement in the business conditions for our Commercial Services Group in Europe.
Net service revenues  external increased in the Americas region $15.9 million or 9.8%
to $177.8 million for the second quarter of 2005 from the second quarter of 2004
including a positive impact of approximately $657,000 due to the effect of foreign
 43




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Quintiles Transnational Corp. and Subsidiaries
 currency fluctuations. The growth in the Americas region is primarily from our Product
Development Group, including growth from both our CDS and EDLS businesses.
    
    Net Service Revenues  Intersegment.Net service revenues  intersegment represents
the revenues from services provided by our service segments, primarily commercial
services, to our PharmaBio Development Group under risk-based arrangements in which we
provide services to customers in exchange for royalties. Net service revenues -
intersegment increased to $25.3 million for the second quarter of 2005 versus $8.6
million for the second quarter of 2004 as a result of the incremental services provided
under our Cymbalta contract and our February 2004 contract with a large pharmaceutical
customer.
    
    Net Service Revenues  Combined.Net service revenues  combined for the second
quarter of 2005 were $525.2 million versus $427.2 million for the second quarter of 2004
for the reasons stated above.
    
    Commercial Rights and Royalties Revenues.Commercial rights and royalties revenues,
which include product revenues, royalties and commissions, for the second quarter of
2005 were $38.5 million, an increase of $23.3 million as compared to the second quarter
2004 commercial rights and royalties revenues of $15.2 million. Commercial rights and
royalties revenues were positively impacted by approximately $560,000 due to
the effect of foreign currency fluctuations primarily related to the weakening of the United
States dollar relative to the euro. Commercial rights and royalties revenues were
reduced by approximately $6.3 million for the second quarter of 2005 for the
amortization of the payments we made to our customers versus $1.5 million for the second
quarter of 2004. These payments are considered incentives and are amortized against
revenues over the service period of the contract. The increase in commercial rights and
royalties revenues is due to (1) our contract for CymbaltaTM, which
contributed $13.0 million of revenues in the second quarter of 2005; (2) our February
2004 contract with a large pharmaceutical customer which contributed $9.8 million of
revenues in the second quarter of 2005 primarily as a result of the milestone payment
received during the second quarter of 2005; (3) our contract with Cell Therapeutics,
Inc., or Cell Therapeutics, which contributed $1.3 million in the second quarter of
2005; and (4) an increase of approximately $357,000 in the revenues from miscellaneous
contracts and activities. These increases were partially offset by a decrease in
revenues from our contracts with Columbia Labs, Inc., or Columbia, to $343,000 in the
second quarter of 2005 as compared to $1.6 million in the second quarter of 2004.
Commercial rights and royalties revenues for the second quarter of 2005 were
attributable to the following: (1) approximately 33.7% to our CymbaltaTM
contract, (2) approximately 27.1% to our contracts with two large pharmaceutical
customers in Europe, (3) approximately 25.6% to our February 2004 contract with a large
pharmaceutical customer, (4) approximately 9.2% related to miscellaneous contracts and
activities, (5) approximately 3.5% related to our contract with Cell Therapeutics and
(6) approximately 0.9% to our contracts with Columbia.
 44




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##### 



Quintiles Transnational Corp. and Subsidiaries
 
    
    Investment Revenues.Investment revenues related to our PharmaBio Development
Groups financing arrangements, which include gains and losses from the sale of equity
securities and impairments from other-than-temporary declines in the fair values of our
direct and indirect investments, for the second quarter of 2005 were a loss of $883,000
versus a loss of $8.0 million for the second quarter of 2004. Investment revenues for
the second quarter of 2005 included $455,000 of net losses on marketable securities
versus net gains of $2.2 million for the second quarter of 2004. In addition, during
the second quarter of 2005 and 2004, we recognized $449,000 and $10.2 million,
respectively, of impairment losses on investments whose decline in fair value was
considered to be other than temporary.
 Costs of Revenues.
 Three months ended June 30,2005
    
    2004Reimbursed service costs
    
    $
    131,298
    
    
    $
    82,306Service costs
    
    
    282,290
    
    
    
    237,559Commercial rights and royalties costs
    
    
    51,529
    
    
    
    28,637Depreciation and amortization
    
    
    29,189
    
    
    
    32,156Eliminations  intersegment costs
    
    
    (25,333
    )
    
    
    (8,596
    )$
    468,973
    
    
    $
    372,062
 
    
    Reimbursed Service Costs.Reimbursed service costs were $131.3 million and
$82.3 million for the second quarter of 2005 and 2004, respectively.
    
    Service Costs.Service costs, which include compensation and benefits for billable
employees, and certain other expenses directly related to service contracts, were
$282.3 million or 53.7% of net service revenues  combined for the second quarter of
2005 versus $237.6 million or 55.6% of net service revenues  combined for the second
quarter of 2004. Compensation and related expenses increased approximately $40.2
million primarily as a result of salary and wage increases including an increase in our
number of billable employees. Other expenses directly related to our service contracts
increased approximately $4.5 million. Service costs were negatively impacted by
approximately $6.3 million from the effect of foreign currency fluctuations.
 45




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##### 



Quintiles Transnational Corp. and Subsidiaries
 
    
    Commercial Rights and Royalties Costs.Commercial rights and royalties costs, which
include compensation and related benefits for employees, amortization of commercial
rights, infrastructure costs of the PharmaBio Development Group and other expenses
directly related to commercial rights and royalties, were $51.5 million for the second
quarter of 2005 versus $28.6 million for the second quarter of 2004. The increase in
commercial rights and royalties costs is primarily due to (1) an increase in costs
related to our Cymbalta contract of approximately $13.4 million to $18.1 million in
the second quarter of 2005, (2) an increase in costs related to our February 2004
contract with a large pharmaceutical customer of approximately $2.0 million to $8.7
million in the second quarter of 2005, (3) an increase in the amortization of
commercial rights of approximately $2.5 million primarily due to an impairment on an
intangible asset related to one of the contracts with a large pharmaceutical customer
in Europe and (4) costs of approximately $1.5 million related to our co-promotion
agreement with Yamanouchi Pharma Limited, or Yamanouchi.
    
    Depreciation and Amortization.Depreciation and amortization, which include
depreciation of our property and equipment and amortization of our definite-lived
intangible assets except commercial rights, decreased to $29.2 million for the second
quarter of 2005 versus $32.2 million for the second quarter of 2004. Amortization
expense decreased approximately $2.1 million as a result of a decrease in intangible
assets which are being amortized over their finite lives. We have approximately $109.7
million of intangible assets which have an indefinite life and therefore are not being
amortized. Depreciation expense decreased approximately $877,000.
    
    Eliminations  Intersegment Costs.Eliminations represent the services provided by
our service segments, primarily commercial services, to our PharmaBio Development Group
under risk-based arrangements in which we provide services to customers in exchange for
royalties. Eliminations increased to $25.3 million for the second quarter of 2005
versus $8.6 million for the second quarter of 2004 primarily as a result of the
incremental services provided under our Cymbalta contract and our February 2004
contract with a large pharmaceutical customer.
 Selling, general and administrative expenses.
 46




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##### 



Quintiles Transnational Corp. and Subsidiaries
      47




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##### 



Quintiles Transnational Corp. and Subsidiaries
     48




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##### 



Quintiles Transnational Corp. and Subsidiaries
       49




---



##### 



Quintiles Transnational Corp. and Subsidiaries
   Total Net Revenues
    
    Contribution% of Net
    
    
    
    
    
    % of Net2005
    
    2004
    
    Growth %
    
    2005
    
    Revenues
    
    2004
    
    RevenuesProduct Development
    
    $
    331.9
    
    
    $
    268.4
    
    
    
    23.7
    %
    
    $
    164.8
    
    
    
    49.6
    %
    
    $
    128.4
    
    
    
    47.8
    %Commercial Services
    
    
    193.3
    
    
    
    158.9
    
    
    
    21.7
    
    
    
    78.2
    
    
    
    40.4
    
    
    
    61.3
    
    
    
    38.6PharmaBio
Development
    
    
    37.6
    
    
    
    7.1
    
    
    
    426.3
    
    
    
    (14.0
    )
    
    
    (37.1
    )
    
    
    (21.5
    )
    
    
    (301.1
    )Eliminations
    
    
    (25.3
    )
    
    
    (8.6
    )
    
    
    (194.7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    537.4
    
    
    $
    425.8
    
    
    
    26.2
    %
    
    $
    229.0
    
    
    
    42.6
    %
    
    $
    168.2
    
    
    
    39.5
    %
 Product Development Group.
  50




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##### 



Quintiles Transnational Corp. and Subsidiaries
 Commercial Services Group. TM
  PharmaBio Development Group. TM
  51




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##### 



Quintiles Transnational Corp. and Subsidiaries
 Six Months Ended June 30, 2005 and 2004
 Gross Revenues.
 Six months ended June 30,2005
    
    2004Service revenues  external
    
    $
    1,209,925
    
    
    $
    986,779Less: reimbursed service costs
    
    
    241,983
    
    
    
    164,765Net service revenues  external
    
    
    967,942
    
    
    
    822,014Net service revenues  intersegment
    
    
    51,644
    
    
    
    14,879Net service revenues  combined
    
    
    1,019,586
    
    
    
    836,893Commercial rights and royalties
    
    
    64,702
    
    
    
    30,741Investments
    
    
    (2,841
    )
    
    
    (3,795
    )Eliminations:
service revenues 
intersegment
    
    
    (51,644
    )
    
    
    (14,879
    )Total net revenues
    
    $
    1,029,803
    
    
    $
    848,960Reimbursed service costs
    
    
    241,983
    
    
    
    164,765Gross revenues
    
    $
    1,271,786
    
    
    $
    1,013,725
 
    
    Service Revenues  External.Service revenues  external were $1.21 billion
for the first six months of 2005 compared to $986.8 million for the first six months of
2004. Net service revenues  external for the first six months of 2005 were $967.9
million, an increase of $145.9 million or 17.8% over net service revenues  external of
$822.0 million for the first six months of 2004. Net service revenues  external for
the first six months of 2005 were positively impacted by approximately $24.0 million
due to the effect of the weakening of the United States dollar relative to the euro,
the British pound, the South African rand and the Japanese yen. Our Commercial
Services and Product Development Groups experienced growth. Our Product Development
Group experienced growth in both CDS and EDLS. The growth in EDLS primarily consisted
of Phase I and central laboratory services. Net service revenues  external increased
in the Asia Pacific region $27.2 million or 17.7% to $181.3 million for the first six
months of 2005 from the first six months of 2004 including a positive impact of
approximately $6.4 million due to the effect of foreign currency fluctuations. Our
Commercial Services Group experienced strong growth in the Asia Pacific region. Net
service revenues  external increased $81.0 million or 22.6% to $439.0 million for the
first six months of 2005 from the first six months of 2004 in the Europe region
including a positive impact of approximately $16.7 million due to the effect of foreign
currency fluctuations. We experienced growth from our CDS and EDLS businesses, along
with an improvement in the business conditions for our Commercial Services Group in
Europe. Net service revenues  external increased in the Americas region $37.7 million
or 12.2% to $347.7 million for the first six months of 2005 from the first six months
of 2004 including a positive impact of approximately $859,000 due to the effect of
foreign currency fluctuations. The increase in the Americas region is primarily from
our Product Development Group, including growth from both our CDS and EDLS businesses.
    
    Net Service Revenues  Intersegment.Net service revenues  intersegment increased
to $51.6 million for the first six months of 2005 versus $14.9 million for the first six
months of 2004 as a result of the incremental services provided under our Cymbalta
contract and our February 2004 contract with a large pharmaceutical customer.
 52




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##### 



Quintiles Transnational Corp. and Subsidiaries
 
    
    Net Service Revenues  Combined.Net service revenues  combined for the first six
months of 2005 were $1.02 billion versus $836.9 million for the first six months of 2004
for the reasons stated above.
    
    Commercial Rights and Royalties Revenues.Commercial rights and royalties revenues
for the first six months of 2005 were $64.7 million, an increase of $34.0 million as
compared to the first six months of 2004 commercial rights and royalties revenues of
$30.7 million. Commercial rights and royalties revenues were positively impacted by
approximately $1.4 million due to the effect of foreign currency fluctuations related to
the weakening of the United States dollar relative to the euro. Commercial rights and
royalties revenues were reduced by approximately $10.9 million for the first six months
of 2005 for the amortization of the payments we made to our customers versus $4.3
million for the first six months of 2004. These payments are considered incentives and
are amortized against revenues over the service period of the contract. The increase in
commercial rights and royalties revenues is due to (1) our contract for
CymbaltaTM, which contributed $22.8 million of revenues in the first six
months of 2005; (2) our February 2004 contract with a large pharmaceutical customer,
which contributed $11.5 million of revenues in the first six months of 2005; (3) a
slight increase in the revenues under our contracts in Europe with two large
pharmaceutical customers to $20.8 million in the first six months of 2005 as compared to
$20.4 million in the first six months of 2004; (4) our contract with Cell Therapeutics,
which contributed $2.2 million in the first six months of 2005; and (5) an increase of
approximately $943,000 in the revenues from miscellaneous contracts and activities.
These increases were partially offset by a decrease in revenues from our contracts with
Columbia to $854,000 in the first six months of 2005 as compared to $4.8 million in the
first six months of 2004. Commercial rights and royalties revenues for the first six
months of 2005 were attributable to the following: (1) approximately 35.2% to our
CymbaltaTM contract, (2) approximately 32.2% to our contracts with two large
pharmaceutical customers in Europe, (3) approximately 17.7% to our February 2004
contract with a large pharmaceutical customer, (4) approximately 10.1% related to
miscellaneous contracts and activities, (5) approximately 3.5% related to our contract
with Cell Therapeutics and (6) approximately 1.3% to our contracts with Columbia.
    
    Investment Revenues.Investment revenues related to our PharmaBio Development
Groups financing arrangements for the first six months of 2005 were a loss of $2.8
million versus a loss of $3.8 million for the first six months of 2004. Investment
revenues for the first six months of 2005 included $151,000 of net gains on marketable
securities versus $6.6 million for the first six months of 2004. In addition, during
the first six months of 2005 and 2004, we recognized $3.0 million and $10.4 million,
respectively, of impairment losses on investments whose decline in fair value was
considered to be other than temporary.
 53




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##### 



Quintiles Transnational Corp. and Subsidiaries
 Costs of Revenues.
 Six months ended June 30,2005
    
    2004Reimbursed service costs
    
    $
    241,983
    
    
    $
    164,765Service costs
    
    
    559,425
    
    
    
    464,613Commercial rights and royalties costs
    
    
    97,904
    
    
    
    49,102Depreciation and amortization
    
    
    57,938
    
    
    
    65,063Eliminations  intersegment costs
    
    
    (51,644
    )
    
    
    (14,879
    )$
    905,606
    
    
    $
    728,664
 
    
    Reimbursed Service Costs.Reimbursed service costs were $242.0 million and
$164.8 million for the first six months of 2005 and 2004, respectively.
    
    Service Costs.Service costs were $559.4 million or 54.9% of net service revenues -
combined for the first six months of 2005 versus $464.6 million or 55.5% of net service
revenues  combined for the first six months of 2004. Compensation and related
expenses increased approximately $74.4 million primarily as a result of salary and wage
increases including an increase in our number of billable employees. Other expenses
directly related to our service contracts increased approximately $20.4 million.
Service costs were negatively impacted by approximately $12.7 million from the effect
of foreign currency fluctuations.
    
    Commercial Rights and Royalties Costs.Commercial rights and royalties costs were
$97.9 million for the first six months of 2005 versus $49.1 million for the first six
months of 2004. The increase in commercial rights and royalties costs is primarily due
to (1) an increase in costs related to our Cymbalta contract of approximately $29.5
million to $36.2 million in the first six months of 2005 and (2) an increase in costs
related to our February 2004 contract with a large pharmaceutical customer of
approximately $6.2 million to $13.7 million in the first six months of 2005.
    
    Depreciation and Amortization.Depreciation and amortization decreased to $57.9
million for the first six months of 2005 versus $65.1 million for the first six months
of 2004. Amortization expense decreased approximately $4.4 million as a result of a
decrease in intangible assets which are being amortized over their finite lives. We
have approximately $109.7 million of intangible assets which have an indefinite life
and therefore are not being amortized. Depreciation expense decreased approximately
$2.7 million.
    
    Eliminations  Intersegment Costs.Eliminations increased to $51.6 million for the
first six months of 2005 versus $14.9 million for the first six months of 2004
primarily as a result of the incremental services provided under our Cymbalta contract
and our February 2004 contract with a large pharmaceutical customer.
 54




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##### 



Quintiles Transnational Corp. and Subsidiaries
 Selling, general and administrative expenses.
    55




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##### 



Quintiles Transnational Corp. and Subsidiaries
       56




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##### 



Quintiles Transnational Corp. and Subsidiaries
    57




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##### 



Quintiles Transnational Corp. and Subsidiaries
        Total Net Revenues
    
    Contribution% of Net
    
    
    
    
    
    % of Net2005
    
    2004
    
    Growth %
    
    2005
    
    Revenues
    
    2004
    
    RevenuesProduct Development
    
    $
    642.2
    
    
    $
    531.0
    
    
    
    20.9
    %
    
    $
    314.4
    
    
    
    49.0
    %
    
    $
    256.4
    
    
    
    48.3
    %Commercial Services
    
    
    377.4
    
    
    
    305.8
    
    
    
    23.4
    
    
    
    145.8
    
    
    
    38.6
    
    
    
    115.9
    
    
    
    37.9PharmaBio
Development
    
    
    61.9
    
    
    
    26.9
    
    
    
    129.6
    
    
    
    (36.0
    )
    
    
    (58.3
    )
    
    
    (22.2
    )
    
    
    (82.2
    )Eliminations
    
    
    (51.6
    )
    
    
    (14.9
    )
    
    
    (247.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,029.8
    
    
    $
    849.0
    
    
    
    21.3
    %
    
    $
    424.1
    
    
    
    41.2
    %
    
    $
    350.1
    
    
    
    41.2
    %
 58




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##### 



Quintiles Transnational Corp. and Subsidiaries
 Product Development Group.
  Commercial Services Group. TM
  PharmaBio Development Group. TM
  59




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##### 



Quintiles Transnational Corp. and Subsidiaries
  EBITDA.
 Three months
    
    Three months
    
    Six months
    
    Six monthsended
    
    ended
    
    ended
    
    endedJune 30, 2005
    
    June 30, 2004
    
    June 30, 2005
    
    June 30, 2004Consolidated:Net revenues
    
    $
    537.4
    
    
    $
    425.8
    
    
    $
    1,029.8
    
    
    $
    849.0Reimbursed service costs
    
    
    131.3
    
    
    
    82.3
    
    
    
    242.0
    
    
    
    164.8Gross revenues
    
    
    668.7
    
    
    
    508.1
    
    
    
    1,271.8
    
    
    
    1,013.7Costs of revenues
    
    
    (469.0
    )
    
    
    (372.1
    )
    
    
    (905.6
    )
    
    
    (728.7
    )Selling, general and administrative expenses
    
    
    (168.0
    )
    
    
    (159.0
    )
    
    
    (322.4
    )
    
    
    (314.7
    )Other (expense) income, net
    
    
    (2.8
    )
    
    
    (0.3
    )
    
    
    (2.9
    )
    
    
    2.9Restructuring
    
    
    (10.7
    )
    
    
    
    
    
    
    (19.7
    )
    
    
    Impairments
    
    
    (72.0
    )
    
    
    (0.9
    )
    
    
    (72.5
    )
    
    
    (0.9
    )Transaction expenses, net
    
    
    
    
    
    
    
    
    
    
    2.7
    
    
    
    Gain on sale of portion of an investment in a
subsidiary
    
    
    
    
    
    
    24.7
    
    
    
    
    
    
    
    24.7Non-operating gain on change of interest transaction
    
    
    
    
    
    
    10.0
    
    
    
    
    
    
    
    10.0Depreciation and amortization
    
    
    32.7
    
    
    
    33.2
    
    
    
    62.2
    
    
    
    66.9Equity in (losses) earnings of unconsolidated
affiliates
    
    
    (0.3
    )
    
    
    0.0
    
    
    
    (0.5
    )
    
    
    (0.0
    )Minority interests
    
    
    (1.0
    )
    
    
    (0.2
    )
    
    
    (2.1
    )
    
    
    (0.4
    )Income from discontinued operation
    
    
    
    
    
    
    8.3
    
    
    
    
    
    
    
    10.1EBITDA
    
    $
    (22.2
    )
    
    $
    51.8
    
    
    $
    11.0
    
    
    $
    83.7Depreciation and amortization
    
    
    (32.7
    )
    
    
    (33.2
    )
    
    
    (62.2
    )
    
    
    (66.9
    )Interest expense, net
    
    
    (12.2
    )
    
    
    (14.6
    )
    
    
    (29.6
    )
    
    
    (29.2
    )Income tax
benefit (expense)
    
    
    23.0
    
    
    
    (14.1
    )
    
    
    56.0
    
    
    
    (13.4
    )Net loss
    
    $
    (44.2
    )
    
    $
    (10.1
    )
    
    $
    (24.8
    )
    
    $
    (25.8
    )
  60




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##### 



Quintiles Transnational Corp. and Subsidiaries
    61




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##### 



Quintiles Transnational Corp. and Subsidiaries
 Liquidity and Capital Resources
   June 30, 2005
    
    December 31, 2004Trade service accounts receivable, net
    
    $
    176,939
    
    
    $
    151,981Unbilled services
    
    
    160,494
    
    
    
    138,347Unearned income
    
    
    (204,798
    )
    
    
    (202,148
    )Net service receivables outstanding
    
    $
    132,635
    
    
    $
    88,180Number of days of service revenues
outstanding
    
    
    19
    
    
    
    14
   TM
   62




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##### 



Quintiles Transnational Corp. and Subsidiaries
        63




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##### 



Quintiles Transnational Corp. and Subsidiaries
   July 1, 2005throughDecember 31,2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    2010
    
    Thereafter
    
    TotalLong-term debt
    
    $
    29,400
    
    
    $
    58,287
    
    
    $
    57,228
    
    
    $
    56,762
    
    
    $
    195,305
    
    
    $
    45,125
    
    
    $
    577,662
    
    
    $
    1,019,769Obligations held under
capital leases
    
    
    7,499
    
    
    
    15,896
    
    
    
    4,762
    
    
    
    692
    
    
    
    417
    
    
    
    195
    
    
    
    49
    
    
    
    29,510Operating leases
    
    
    33,061
    
    
    
    51,703
    
    
    
    33,909
    
    
    
    20,707
    
    
    
    11,796
    
    
    
    5,417
    
    
    
    35,824
    
    
    
    192,417Service
agreements
    
    
    13,726
    
    
    
    1,806
    
    
    
    42
    
    
    
    41
    
    
    
    3
    
    
    
    1
    
    
    
    
    
    
    
    15,619Management fee agreement
    
    
    1,875
    
    
    
    3,750
    
    
    
    3,750
    
    
    
    3,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,125PharmaBio funding
commitments in various
commercial rights and
royalties:Service commitments
    
    
    66,916
    
    
    
    121,559
    
    
    
    108,899
    
    
    
    89,640
    
    
    
    68,307
    
    
    
    
    
    
    
    
    
    
    
    455,321PharmaBio funding
commitments to purchase
non-marketable equity
securities and loans:Venture capital funds
    
    
    4,100
    
    
    
    6,443
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,543Equity investments
    
    
    2,158
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,158Total
    
    $
    158,735
    
    
    $
    259,444
    
    
    $
    208,590
    
    
    $
    171,592
    
    
    $
    275,828
    
    
    $
    50,738
    
    
    $
    613,535
    
    
    $
    1,738,462
    64




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##### 



Quintiles Transnational Corp. and Subsidiaries
  Recently Issued Accounting Standards
   65




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##### 



Quintiles Transnational Corp. and Subsidiaries
    66




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##### 



Quintiles Transnational Corp. and Subsidiaries
     
    
    the variable size and duration of projects,
    
    the loss or delay of projects, and
    
    a change in the scope of work during the course of a project.
   67




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##### 



Quintiles Transnational Corp. and Subsidiaries
   Our substantial debt could adversely affect our financial condition and prevent us from fulfilling
our obligations under our senior subordinated notes.
   
    
    increase our vulnerability to adverse general economic and industry conditions;
 
    
    require us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby
reducing the availability of our cash flows to fund working capital, investments, capital expenditures, research and
development efforts and other general corporate purposes;
 
    
    limit our ability to make required payments under our existing contractual commitments;
 
    
    limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
 
    
    place us at a competitive disadvantage compared to our competitors that have less debt;
 
    
    increase our exposure to rising interest rates because a portion of our borrowings is at variable interest rates; and
 
    
    limit our ability to borrow additional funds on terms that are satisfactory to us or at all.
 The indenture governing the senior subordinated notes and the senior secured credit facility
contain covenants that limit our flexibility and prevent us from taking certain actions.
  68




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##### 



Quintiles Transnational Corp. and Subsidiaries
 
    
    incur additional debt;
 
    
    pay dividends on, redeem or repurchase capital stock;
 
    
    issue capital stock of restricted subsidiaries;
 
    
    make certain investments;
 
    
    enter into certain types of transactions with affiliates;
 
    
    engage in unrelated businesses;
 
    
    create liens; and
 
    
    sell certain assets or merge with or into other companies.
  We are subject to additional risks and restrictions as a result of Intermediate Holdings issuance
of discount notes.
  69




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##### 



Quintiles Transnational Corp. and Subsidiaries
  Despite our level of indebtedness, we and our parent companies are able to incur more debt and
undertake additional obligations. Incurring such debt or undertaking such obligations could further
exacerbate the risks to our financial condition.
   70




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##### 



Quintiles Transnational Corp. and Subsidiaries
 Mitsuis ownership interest in our Japanese subsidiary could give rise to Mitsuis right to acquire
our entire interest in our Japanese subsidiary or to require us to buy out Mitsuis interest.
  Changes in aggregate spending, research and development budgets and outsourcing trends in the
pharmaceutical and biotechnology industries could adversely affect our operating results and growth
rate.
  If we are unable to successfully develop and market potential new services, our growth could be
adversely affected.
  71




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##### 



Quintiles Transnational Corp. and Subsidiaries
 Operation of our information systems and evolution of the technology platform for our services pose
risks to our business.
  
    
    invasion, disruption, impairment or failure of data centers, telecommunications
facilities, or other key infrastructure platforms,
    
    failure or malfunction of or attacks on critical application systems or the hardware
they run on, or
    
    excessive costs, excessive delays or other deficiencies in systems development and
deployment.
  We may not be able to derive the benefits we hope to achieve from Verispan, our joint venture with
McKesson.
  72




---



##### 



Quintiles Transnational Corp. and Subsidiaries
 
    
    its ability to obtain continuous access to de-identified healthcare data from third parties in sufficient quantities to
support its informatics products;
 
    
    its ability to process and use the volume of data received from a variety of data providers;
 
    
    its ability to attract customers, besides us and McKesson, to purchase its products and services;
 
    
    the risk of changes in healthcare information privacy laws and regulations that could create a risk of liability,
increase the cost of Verispans business or limit its service offerings; and
 
    
    the risk that industry regulation may restrict Verispans ability to analyze and disseminate pharmaceutical and
healthcare data.
   The potential loss or delay of our large contracts could adversely affect our results.
  Investments in our customers business or products and our related commercial rights strategies
could have a negative impact on our financial performance.
  73




---



##### 



Quintiles Transnational Corp. and Subsidiaries
  Our rights to market and sell certain pharmaceutical products expose us to product risks typically
associated with pharmaceutical companies.
   74




---



##### 



Quintiles Transnational Corp. and Subsidiaries
 If we lose the services of key personnel, our business could be adversely affected.
  Our insurance may not cover all of our indemnification obligations and other liabilities associated
with our operations.
     75




---



##### 



Quintiles Transnational Corp. and Subsidiaries
  We may be exposed to additional income tax liabilities.
  Changes in government regulation could decrease the need for the services we provide.
  Actions by government regulators or customers to limit the scope of prescription or withdraw
approved products from the market could result in a loss of revenue.
  76




---



##### 



Quintiles Transnational Corp. and Subsidiaries
 Failure to comply with existing regulations could result in a loss of revenue.
  Our product development services could result in potential liability to us.
    77




---



##### 



Quintiles Transnational Corp. and Subsidiaries
     Our commercialization services could result in potential liability to us.
  78




---



##### 



Quintiles Transnational Corp. and Subsidiaries
 Exchange rate fluctuations may affect our results of operations and financial condition.
  
    
    Foreign Currency Translation Risk. The revenue and expenses of
our foreign operations are generally denominated in local
currencies.
 
    
    Foreign Currency Transaction Risk. Our service contracts may be
denominated in a currency other than the currency in which we
incur expenses related to such contracts.
  We face other risks in connection with our international operations.
  
    
    foreign countries could enact legislation or impose regulations or other restrictions
which have an adverse effect on our ability to conduct business in that country;
    
    the regulatory or judicial authorities of foreign countries may not enforce legal rights
and recognize business procedures in a manner to which we are accustomed or would
reasonably expect;
    
    political changes and economic crises may lead to changes in the business environment in
which we operate; and
    
    natural disasters or international conflict, including terrorist acts, could interrupt
our services, endangering our personnel, causing project delays or loss of study material
or results, with a significant negative impact on our financial condition and results of
operations.
 79




---



##### 



Quintiles Transnational Corp. and Subsidiaries
 New and proposed laws and regulations regarding confidentiality of patients information could
result in increased risks of liability or increased cost to us or could limit our service
offerings.
  We may be adversely affected by customer or therapeutic concentration.
   80




---



##### 



Quintiles Transnational Corp. and Subsidiaries
 If we are unable to submit electronic records to the FDA according to FDA regulations, our ability
to perform services for our customers which meet applicable regulatory requirements could be
adversely affected.
  The proposed sale of our EDP business may fail to close, which could result in additional expense
to us.
  81




---



##### 



Quintiles Transnational Corp. and Subsidiaries
 Compliance with changing regulation of corporate governance and public disclosure may result in
additional risks and expenses.
  
 Item 3. Quantitative and Qualitative Disclosure about Market Risk
  82




---



##### 



Quintiles Transnational Corp. and Subsidiaries
 
 Item 4. Controls and Procedures
  
 Part II Other Information
 
 Item 1. Legal Proceedings
  83




---



##### 



Quintiles Transnational Corp. and Subsidiaries
   84




---



##### 



Quintiles Transnational Corp. and Subsidiaries
   85




---



##### 



Quintiles Transnational Corp. and Subsidiaries
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
 Item 3. Defaults upon Senior Securities
 
 Item 4. Submission of Matters to a Vote of Security Holders
 
 Item 5. Other Information
 
 Item 6. Exhibits
 Exhibit No.
    
    Description2.01
    
    Purchase Agreement, dated July 18, 2005, by and among Aptuit, Inc., Quintiles
Transnational Corp., Quintiles, Inc., Quintiles Limited, Quintiles East Asia Private
Limited, Early Development and Packaging Services USA, L.L.C., Early Development and
Packaging Services (UK) Limited, and Quintiles Clinical Supplies Americas, Inc.
(incorporated herein by reference to Exhibit 2.01 to our Current Report on Form 8-K
dated July 18, 2005, as filed with the Securities and Exchange Commission on July 22,
2005).31.01
    
    Certification Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of The Sarbanes-Oxley Act of 2002.31.02
    
    Certification Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of The Sarbanes-Oxley Act of 2002.
 86




---



##### 



Quintiles Transnational Corp. and Subsidiaries
 
 SIGNATURES
   
  Date August 12, 2005
    /s/ Dennis B. GillingsDennis B. Gillings, Executive Chairmanand Chief Executive Officer Date August 12, 2005
    /s/ John D. RatliffJohn D. Ratliff, Executive Vice Presidentand Chief Financial Officer 87




---



##### 



Quintiles Transnational Corp. and Subsidiaries
 
  Exhibit
    
    Description2.01
    
    Purchase Agreement, dated July 18, 2005, by and among Aptuit, Inc., Quintiles Transnational
Corp., Quintiles, Inc., Quintiles Limited, Quintiles East Asia Private Limited, Early
Development and Packaging Services USA, L.L.C., Early Development and Packaging Services (UK)
Limited and Quintiles Clinical Supplies Americas, Inc. (incorporated herein by reference to
Exhibit 2.01 to our Current Report on Form 8-K dated July 18, 2005, as filed with the
Securities and Exchange Commission on July 22, 2005).31.01
    
    Certification Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
The Sarbanes-Oxley Act of 2002.31.02
    
    Certification Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
The Sarbanes-Oxley Act of 2002.
 88