Edgar Filing: QIAGEN NV

For the quarterly period ended March 31, 2006

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2006

QIAGEN N.V.

Spoorstraat 50

5911 KJ Venlo

The Netherlands

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F

Form 20-F x Form 40-F ¨

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934

Yes ¨ No x

QIAGEN N.V.

Form 6-K

TABLE OF CONTENTS


Financial Information

Consolidated Financial Statements

Condensed Consolidated Balance Sheets (unaudited) as of March 31, 2006 and December 31, 2005		3

Condensed Consolidated Statements of Income (unaudited) for the three months ended March 31, 2006 and 2005		5

Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2006 and 2005		6

Notes to Condensed Consolidated Financial Statements (unaudited)		8

Operating and Financial Review and Prospects		21

Quantitative and Qualitative Disclosures About Market Risk		27

Signatures		33

QIAGEN N.V.

CONDENSED CONSOLIDATED BALANCE SHEETS


	March 31, 2006		December 31, 2005
	(unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	197,738,000	$	191,700,000
Marketable securities		15,000,000		15,000,000
Notes receivable		4,553,000		4,283,000
Accounts receivable, net of allowance for doubtful accounts of $3,867,000 and $2,388,000 in 2006 and 2005, respectively		70,740,000		63,538,000
Income taxes receivable		4,296,000		4,161,000
Inventories		54,527,000		53,653,000
Deferred income taxes		9,901,000		11,617,000
Prepaid expenses and other		25,974,000		26,305,000

Total current assets		382,729,000		370,257,000

Long-Term Assets:
Property, plant and equipment, net		200,211,000		195,199,000
Goodwill		100,743,000		93,914,000
Intangible assets, net		84,414,000		74,566,000
Deferred income taxes		6,403,000		6,346,000
Other assets		25,408,000		25,016,000

Total long-term assets		417,179,000		395,041,000

Total assets	$	799,908,000	$	765,298,000

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

QIAGEN N.V.

CONDENSED CONSOLIDATED BALANCE SHEETS


	March 31, 2006		December 31, 2005
	(unaudited)
Liabilities and Shareholders’ Equity
Current Liabilities:
Short-term loans	$	3,118,000	$	—
Current portion of long-term debt		6,069,000		5,921,000
Current portion of capital lease obligations		723,000		995,000
Accounts payable		16,639,000		15,934,000
Accrued and other liabilities		49,597,000		52,707,000
Income taxes payable		15,144,000		14,935,000
Deferred income taxes		1,315,000		1,179,000

Total current liabilities		92,605,000		91,671,000

Long-Term Liabilities:
Long-term debt, net of current portion		192,486,000		191,447,000
Capital lease obligations, net of current portion		11,483,000		11,101,000
Deferred income taxes		19,131,000		17,570,000
Other		3,538,000		3,052,000

Total long-term liabilities		226,638,000		223,170,000

Commitments and Contingencies
Shareholders’ Equity:
Common shares, .01 EUR par value:
Authorized—260,000,000 shares
Issued and outstanding— 149,275,369 shares in 2006 and 148,455,864 shares in 2005		1,523,000		1,513,000
Additional paid-in capital		165,207,000		157,796,000
Retained earnings		291,780,000		274,200,000
Accumulated other comprehensive income		22,155,000		16,948,000

Total shareholders’ equity		480,665,000		450,457,000

Total liabilities and shareholders’ equity	$	799,908,000	$	765,298,000

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

QIAGEN N.V.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)


	Three Months Ended March 31,
	2006			2005
Net sales	$	108,715,000		$	95,025,000
Cost of sales		32,884,000			30,603,000
Cost of sales—acquisition related		461,000			—

Gross profit		75,370,000			64,422,000

Operating Expenses:
Research and development		10,188,000			9,516,000
Sales and marketing		26,419,000			22,265,000
General and administrative		11,529,000			10,672,000
Purchased in-process research and development		200,000			—
Acquisition, integration and related costs		284,000			—
Acquisition related intangible amortization		1,505,000			576,000

Total operating expenses		50,125,000			43,029,000

Income from operations		25,245,000			21,393,000

Other Income (Expense):
Interest income		2,010,000			1,873,000
Interest expense		(1,458,000	)		(1,477,000	)
Research and development grants		77,000			208,000
Gain (loss) from equity method investees		326,000			(493,000	)
Gain on foreign currency transactions		283,000			7,000
Other miscellaneous income, net		95,000			182,000

Total other income		1,333,000			300,000

Income before provision for income taxes		26,578,000			21,693,000
Provision for income taxes		8,998,000			7,745,000

Net income	$	17,580,000		$	13,948,000

Basic and diluted net income per common share	$	0.12		$	0.09

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

QIAGEN N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Three Months Ended March 31,
	2006			2005
Cash Flows from Operating Activities:
Net income	$	17,580,000		$	13,948,000
Adjustments to reconcile net income to net cash provided by operating activities, net of effects of businesses acquired:
Depreciation and amortization		6,720,000			6,018,000
Provision for losses on accounts receivable		14,000			5,000
Deferred income taxes		2,066,000			3,165,000
Share-based compensation expense		84,000			—
Purchased in-process research and development		200,000			—
Non-cash acquisition costs		461,000			—
Loss on disposition of property and equipment		—			54,000
Net realized loss on marketable securities		—			125,000
(Gain) loss on equity method investees		(326,000	)		493,000
Incremental tax benefit from exercise of non-qualified stock options		(2,214,000	)		1,206,000
Gain on dissolution of subsidiary		—			(123,000	)
Decrease (increase) in:
Notes receivable		(256,000	)		(211,000	)
Accounts receivable		(3,074,000	)		683,000
Inventories		(42,000	)		3,813,000
Income tax receivable		(159,000	)		—
Prepaid expenses and other		820,000			596,000
Other assets		106,000			279,000
Increase (decrease) in:
Accounts payable		405,000			(4,364,000	)
Accrued liabilities		(2,832,000	)		(4,987,000	)
Income taxes payable		2,063,000			100,000
Other		712,000			(83,000	)

Net cash provided by operating activities		22,328,000			20,717,000

Cash Flows from Investing Activities:
Purchases of land, property and equipment		(4,563,000	)		(2,926,000	)
Proceeds from sale of property		158,000			27,000
Purchase of investments		—			(2,121,000	)
Proceeds from sales of marketable securities		—			7,562,000
Purchases of marketable securities		—			(12,309,000	)
Purchase of intangibles		(1,671,000	)		(382,000	)
Cash paid for acquisitions, net of cash acquired		(17,096,000	)		—
Other		121,000			—

Net cash used in investing activities		(23,051,000	)		(10,149,000	)

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

QIAGEN N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(continued)


	Three Months Ended March 31,
	2006			2005
Cash Flows from Financing Activities:
Principal payments on capital leases		(187,000	)		(288,000	)
Proceeds from subscription receivable		233,000			226,000
Issuance of common shares in connection with stock option exercises		4,890,000			3,533,000
Incremental tax benefits from exercise of non-qualified stock options		2,214,000			—

Net cash provided by financing activities		7,150,000			3,471,000

Effect of exchange rate changes on cash and cash equivalents		(389,000	)		(100,000	)
Net increase in cash and cash equivalents		6,038,000			13,939,000
Cash and cash equivalents, beginning of period		191,700,000			196,375,000

Cash and cash equivalents, end of period	$	197,738,000		$	210,314,000


Supplemental Cash Flow Disclosures:
Cash paid for interest	$	2,234,000		$	2,034,000
Cash paid for income taxes	$	7,339,000		$	2,918,000
Equipment purchased through capital lease	$	45,000		$	—

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

QIAGEN N.V.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation

The condensed consolidated financial statements include the accounts of QIAGEN N.V. (the Company), a company incorporated in The Netherlands, and its wholly owned subsidiaries that are not considered variable interest entities. All significant intercompany accounts and transactions have been eliminated. All amounts are presented in U.S. dollars, unless otherwise indicated. Investments in companies where the Company exercises significant influence over the operations, and where the Company is not the primary beneficiary, are accounted for using the equity method. All other investments are accounted for under the cost method.

In the opinion of management and subject to the year-end audit, the accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the Securities and Exchange Commission rules and regulations. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary for a fair presentation have been included.

The results of operations for the interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2005.

Reclassifications

Certain reclassifications of prior amounts have been made to conform with the current year presentation.

2. Accounting Pronouncements

In February 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 155, “Accounting for Certain Hybrid Financial Instruments,” (SFAS 155) which amends Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” (SFAS 133) and Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” (SFAS 140). SFAS 155 simplifies the accounting for certain derivatives embedded in other financial instruments by allowing them to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host) if the holder elects to account for the whole instrument on a fair value basis. SFAS 155 also clarifies and amends certain other provisions of SFAS 133 and SFAS 140. SFAS 155 is effective for all financial instruments acquired, issued or subject to a remeasurement event occurring in fiscal year beginning after September 15, 2006. Earlier adoption is permitted, provided the Company has not yet issued financial statements, including for interim periods, for that fiscal year. The Company does not believe that the adoption of this standard will have a material impact on its consolidated financial condition, consolidated results of operations or cash flows.

In May 2005, the FASB issued Statement No. 154, “Accounting Changes and Error Corrections”. This new standard replaces APB Opinion No. 20, “Accounting Changes”, and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements”. Among other changes, Statement 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. Statement 154 also provides that (1) a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a “restatement.” The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The Company adopted this statement on January 1, 2006 without a material effect.

3. Share-Based Compensation

During 2005, the Company adopted the QIAGEN N.V. Amended and Restated 2005 Stock Plan (the Plan). The Plan allows for the granting of stock rights, incentive stock options, as well as for non-qualified options, stock grants and stock based awards, generally with terms of up to 10 years, subject to earlier termination in certain situations. Generally, the options granted prior to October 2004 vested over a three-year period. During 2004 and 2005 the Company accelerated the vesting of certain options. The vesting and exercisability of certain stock rights will be accelerated in the event of a Change of Control, as defined in the Plan. To date all grants have been at the market value on the grant date or at a premium above the closing market price on the grant date. The Company has approximately 18.4 million shares of common stock reserved and available for issuance under this plan at March 31, 2006.

Prior to January 1, 2006, the Company accounted for its equity-based compensation plans under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (Opinion 25), and related Interpretations, as permitted by FASB Statement No. 123, “Accounting for Stock-Based Compensation” (SFAS No. 123). Effective January 1, 2006, the Company adopted the provisions of FASB Statement No. 123 (revised 2004), “Share-Based Payment”, (SFAS 123(R)) and SEC Staff Accounting Bulletin No. 107, “Share-Based Payment”, (SAB 107), using the modified prospective transition method. Under the modified prospective transition method, compensation cost recognized in 2006 includes compensation cost for all share-based payments granted prior to but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123 and compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). Results for prior periods have not been restated.

The Company utilizes the Black-Scholes-Merton valuation model for estimating the fair value of its stock options granted. Option valuation models, including Black-Scholes-Merton, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant date fair value of an award. These assumptions include the risk-free rate of interest, expected dividend yield, expected volatility, and the expected life of the award.

Risk-Free Interest Rate – This is the average U.S. Treasury rate (having a term that most closely resembles the expected life of the option) at the date the option was granted.

Dividend Yield – The Company has never declared or paid dividends on its common stock and does not anticipate paying any dividends in the foreseeable future.

Expected Volatility – Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. As there were no option grants during the first quarter of 2006, beginning in the second quarter of 2006 the Company intends to use a combination of the historical volatility of its stock price and the implied volatility of market-traded options of the Company’s stock to estimate the expected volatility assumption input to the Black-Scholes model in accordance with SFAS 123R and SAB 107. In prior periods, the Company relied solely on the historical volatility of its stock price for its volatility assumption input to the Black-Scholes model. The Company’s decision to use a combination of historical and implied volatility is based upon the availability of actively traded options of its stock and its assessment that such a combination is more representative of future expected stock price trends. Since 2001, the Company’s annual volatility has ranged from 75 percent in 2001 to 26 percent in 2005 with an average of 57 percent during the five year period.

Expected Life of the Option – This is the period of time that the options granted are expected to remain outstanding. The Company will use SAB 107’s simplified method for estimating the expected term of share-based awards granted in 2006.

Forfeiture Rate – This is the estimated percentage of options granted that are expected to be forfeited or cancelled on an annual basis before becoming fully vested. The Company estimated the forfeiture rate based on historical forfeiture experience. For the three month period ended March 31, 2006, the forfeiture rate was 9 percent.

No stock options or other share awards were granted during the three month period ended March 31, 2006. Following are the weighted-average assumptions used in valuing the stock options granted to employees during the three month period ended March 31, 2005:


	2005
Stock price volatility	52	%
Risk-free interest rate	4.02	%
Expected life (in years)	4
Dividend rate	0	%
Forfeiture rate	0	%

A summary of the status of the Company’s employee stock options as of March 31, 2006 and changes during the three months then ended is presented below:


All Employee Options	Number of Shares		Weighted Average Exercise Price		Weighted Average Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2006	13,585,295		$	12.732
Granted	—			—
Exercised	(819,505	)	$	5.865
Forfeited and cancelled	(131,913	)	$	13.440

Outstanding at March 31, 2006	12,633,877		$	13.142	6.61	$	48,874,400

Exercisable at March 31, 2006	12,536,346		$	13.188	6.60	$	48,053,146

Vested and expected to vest at March 31, 2006	12,671,273		$	13.143

The weighted-average grant-date fair value of options granted during the three months ended March 31, 2005 was $5.456. For the three months ended March 31, 2006 and 2005, options to purchase 819,505 and 572,501 shares, respectively, were exercised. The total intrinsic value of options exercised during the three months ended March 31, 2006 and 2005 was $6.5 million and $3.5 million, respectively.

As a result of adopting SFAS 123R on January 1, 2006, the Company’s income before income taxes and net income for the three-month period ended March 31, 2006, is approximately $84,000 and $55,000 lower, respectively, than if it had continued to account for share-based compensation under Opinion 25. Basic and diluted earnings per share for the three-month period ended March 31, 2006 would have not been impacted if the Company had not adopted SFAS 123R. The Company anticipates that the adoption will have a greater impact in future periods.

The following table illustrates the effect on net income and net income per share if the Company had applied the fair value recognition provisions of SFAS 123(R) to equity-based compensation for the three months ended March 31, 2005.


	Three months ended March 31, 2005
Net income, as reported	$	13,948,000
Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of related tax effects		(1,699,000	)

Pro forma net income	$	12,249,000

Earnings per share:
Basic and Diluted– as reported	$	0.09
Basic and Diluted– pro forma	$	0.08

The unrecognized share based compensation expense related to employee stock option awards is approximately $130,000 and will be recognized over a weighted average period of approximately 0.33 years.

Prior to the adoption of Statement 123(R), the Company presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in the Consolidated Statement of Cash Flows. Statement 123(R) requires the cash flows resulting from the tax benefits generated from tax deductions in excess of the compensation costs recognized for those options (excess tax benefits) to be classified as financing cash flows.

4. Net Income Per Common Share

Net income per common share for the three months ended March 31, 2006 and 2005 are based on the weighted average number of common shares outstanding and the dilutive effect of stock options outstanding.

The following schedule summarizes the information used to compute net income per common share:


	Three Months Ended March 31,
	2006	2005
Weighted average number of common shares used to compute basic net income per common share	148,892,000	147,329,000
Dilutive effect of warrants	686,000	—
Dilutive effect of stock options	2,700,000	1,726,000

Weighted average number of common shares used to compute diluted net income per common share	152,278,000	149,055,000

Outstanding stock options having no dilutive effect, not included in above calculation	3,573,000	5,287,000

Outstanding warrants having no dilutive effect, not included in above calculation	11,175,000	11,862,000

5. Acquisitions

artus Gesellschaft für molekularbiologische Diagnostik und Entwicklung mbH

In May 2005, the Company acquired all of the outstanding capital stock of artus Gesellschaft für molekularbiologische Diagnostik und Entwicklung mbH (artus), an established leader in PCR-based molecular diagnostic tests for pathogenenic, genotyping and pharmacogenomic testing. artus’ unique portfolio spans over 60 assays including 30 CE marked assays for detection of a variety of viral and bacterial pathogens such as SARS, Herpes simplex virus -1/-2, Epstein-Barr-Virus (EBV), West Nile Virus, Malaria, Salmonella and Avian Flu. The portfolio also includes select assays for genotyping and veterinary medicine and a strong pipeline of complete panels for certain disease profiles. artus maintains a very active network of relationships with academic and industrial partners to identify and develop test opportunities. The Company believes that this acquisition is an excellent fit in its strategy to increase the Company’s value as a partner to the molecular diagnostics industry. In addition to its leading position in preanalytical sample preparation in molecular diagnostics, the Company is now able to offer optimized and synchronized combinations of preanalytical sample preparation and diagnostic assay solutions to its partners in molecular diagnostics. By providing the opportunity for partners in molecular diagnostics to expand their portfolio by adding artus’ validated assays, the Company intends to further contribute to accelerating the growth of molecular diagnostics by broadening the menu of tests available on today’s diagnostic platforms.

The purchase price, including direct acquisition costs and adjusted as per the terms of the share purchase agreement, paid by the Company was approximately EUR 26.4 million (approximately $32.6 million at May 31, 2005) in cash. A total of EUR 9.3 million (approximately $11.5 million at May 31, 2005), of which EUR 2.7 million was considered as purchase price, was paid into escrow and will be released subject to certain milestones being met. In connection with the acquisition, the Company expensed costs of approximately $2.0 million, which includes $1.8 million related to the impairment of existing fixed and other assets as a result of the acquisition.

Using the results of an independent appraisal, the purchase price of $32.6 million has been allocated as follows: $21.1 million was allocated to purchased intangibles, to be amortized over 13 years, $3.4 million to customer relationships, to be amortized over 10 years, and $23.8 million to goodwill. In addition, the Company acquired tangible net assets of $5.7 million, assumed debt of $16.3 million and recorded a long-term deferred tax liability related to the acquired intangibles of $5.8 million. $714,000 was expensed for purchased in-process research and development. None of the goodwill is deductible for tax purposes. The results of artus operations prior to the date of acquisition were not significant. The results of operations of artus are included in the consolidated results for the Company from the date of acquisition.

Other Acquisitions

During the first quarter of 2006, the Company completed two other acquisitions, including the acquisition of Shenzhen PG Biotech Co. Ltd, located in China, and the acquisition of the artus business of Diatech s.r.l., located in Jesi, Italy, which were not significant to the overall consolidated financial statements. The aggregate purchase price of the 2006 acquisitions was $18.2 million. Using the results of independent and internally prepared appraisals, the purchase prices totaling $18.2 million have been allocated as follows: $9.8 million to purchased intangibles, to be amortized over lives up to 10 years, $5.5 million to goodwill, none of which is deductible for tax purposes, $6.9 million to tangible net assets, $3.1 million of assumed debt and $200,000 was expensed for purchased in-process research and development. Additionally the company recorded a deferred tax liability on the acquired intangibles of $1.1 million. The allocation of one of the acquisitions reflects the Company’s estimates of the purchase price allocation and will be revised at a later date. The results of operations of the acquired companies are included in the consolidated results for the Company from the date of acquisition.

During 2005, the Company completed five other acquisitions which were not significant to the overall consolidated financial statements. The aggregate purchase price of the 2005 acquisitions was $43.1 million. Pursuant to the purchase agreements, the Company could be required to make additional contingent cash payments totaling $27.2 million through 2009. Any contingent payments made will be accounted for as additions to the purchase price. Using the results of independent appraisals, the purchase prices totaling $43.1 million have been allocated as follows: $21.9 million was allocated to purchased intangibles, to be amortized over lives up to 14 years, and $18.8 million to goodwill, $12.4 of which is deductible for tax purposes. In addition, the Company acquired tangible net assets of $3.3 million and expensed $2.5 million for purchased in-process research and development. During the first quarter 2006, the preliminary purchase price allocation of one of the acquisitions was finalized resulting in a reduction to goodwill of $1.4 million. The results of operations of the acquired companies are included in the consolidated results for the Company from the date of acquisition.

As a result of the Company’s planned integration of one of the businesses acquired in 2005, including the closure of an acquired facility as approved by the Supervisory Board, certain employees of the acquired company were terminated and relocation to the Company’s other sites was offered to the remaining employees. Activity for accrued restructuring and relocation costs for the three months ended March 31, 2006 is as follows:


	Accrual Balance 12/31/2005		Unused Amounts Reversed to Goodwill			Amounts Paid in Cash or Settled			Accrual Balance 3/31/2006
Severance and employee related	$	1,011,000	$	(335,000	)	$	(459,000	)	$	217,000
Lease and related costs		2,480,000		(1,068,000	)		—			1,412,000

	$	3,491,000	$	(1,403,000	)	$	(459,000	)	$	1,629,000

Pro Forma Results

The following unaudited pro forma information assumes that the above acquisitions occurred at the beginning of the periods presented. For the three months ended March 31, 2006 and 2005, pro forma net sales would have been $108.7 million and $102.4 million, pro forma net income would have been $18.2 million and $11.9 million, pro forma basic and diluted net income per common share would have been $0.12 and $0.08, respectively. The pro forma data excludes the 2006 acquisition related costs including a $461,000 charge to cost of sales related to inventory and a $200,000 charge for purchased in-process research and development. These unaudited pro forma results are intended for informational purposes only and are not necessarily indicative of the results of operations that would have occurred had the acquisitions been in effect at the beginning of the periods presented, or of future results of the combined operations.

6. Variable Interest Entities

Financial Accounting Standards Board (FASB) revised Interpretation No. 46 (FIN 46R), “Consolidation of Variable Interest Entities” requires a company to consolidate a variable interest entity if it is designated as the primary beneficiary of that entity even if the company does not have a majority of voting interests. A variable interest entity is generally defined as an entity with insufficient equity to finance its activities or where the owners of the entity lack the risk and rewards of ownership.

The Company has a 50% interest in a joint venture company, PreAnalytiX GmbH, for which neither joint venture partner is the primary beneficiary within the provisions of FIN 46. Thus, the Company accounts for this investment under the equity method. QIAGEN AG has been a 50% joint venture partner in PreAnalytiX since November 1999, when the joint venture was formed. PreAnalytiX was formed to develop, manufacture and market integrated systems for the collection, stabilization and purification of nucleic acids for molecular diagnostic testing. At present, the Company’s maximum exposure to loss as a result of its involvement with PreAnalytiX is limited to the Company’s share of losses from the equity method investment itself. The joint venture entity reported net profit for the period ended March 31, 2006.

The Company has a 100% interest in QIAGEN Finance (Luxembourg) S.A. (QIAGEN Finance), a company established for the purpose of issuing 2004 convertible debt. During the first quarter of 2006, the Company established QIAGEN Euro Finance (Luxembourg) S.A. (Euro Finance) for the purpose of issuing the Company’s 2006 convertible debt. In August 2004, the Company issued $150.0 million of 1.5% Senior Convertible Notes due in 2024 through QIAGEN Finance. In May 2006 the Company announced the offering of $300.0 million 3.25% Senior Convertible Notes due in 2026 through Euro Finance. The proceeds of the 2004 Notes were, and the proceeds of the 2006 Notes will be, loaned to subsidiaries within the consolidated QIAGEN N.V. group. QIAGEN N.V. has guaranteed all of these Notes, and has agreements with each of QIAGEN Finance and Euro Finance to issue common shares to the investors in the event of conversion of any of the Notes. According to the provisions of FIN 46R, QIAGEN Finance and Euro Finance are variable interest entities for which the Company is not the primary beneficiary, thus neither is consolidated. Accordingly, the 2004 convertible debt is not (and the 2006 convertible debt, when issued will not be) included in the consolidated statements of QIAGEN N.V., though QIAGEN N.V. does report the full obligation of the debt through its liabilities to QIAGEN Finance and Euro Finance. QIAGEN N.V. accounts for its investment in QIAGEN Finance and Euro Finance as an equity investment pursuant to APB No. 18, and accordingly records 100% of the profit or loss of QIAGEN Finance and Euro Finance in the gain or loss from equity method investees. At present, the Company’s maximum exposure to loss as a result of its involvement with QIAGEN Finance and Euro Finance is limited to the Company’s share of losses from the equity method investment itself.

7. Derivatives and Hedging

The Company accounts for its derivative instruments in accordance with SFAS No. 133 and related guidance which require that an entity recognize all derivatives as either assets or liabilities in the balance sheet, measure those instruments at fair value and recognize the change in fair value in earnings in the period of change unless the derivative qualifies as an effective hedge that offsets certain exposures.

During 2004 and 2005, the Company entered into forward and swap arrangements which qualify for hedge accounting as cash flow hedges of foreign currency denominated intercompany loans. The contracts mature on various dates through July 2011. The gain or loss on the change in the fair values of the derivatives are included in earnings to the extent they offset the earnings impact of changes in the fair values of the hedged obligations. Any difference is deferred in accumulated comprehensive income, a component of shareholders’ equity. These contracts effectively fix the exchange rate at which the intercompany loans will be settled, so that gains or losses on the forward contracts offset the losses or gains from changes in the value of the underlying intercompany loans. The Company has determined that no ineffectiveness exists related to these derivatives.

In the ordinary course of business, the Company purchases foreign currency exchange options to manage potential losses from foreign currency exposures. These options give the Company the right, but not the obligation, to purchase foreign currencies in exchange for U.S. dollars at predetermined exchange rates. The principal objective of such options is to minimize the risks and/or costs associated with global financial and operating activities. The Company does not utilize derivative or other financial instruments for trading or other speculative purposes. Gains or losses from changes in the fair market values are included in other miscellaneous income (expense), net.

8. Debt

The Company has five separate lines of credit amounting to approximately $10.4 million with variable interest rates, none of which was utilized at March 31, 2006.

In connection with the first quarter 2006 acquisition of PG Biotech, the Company acquired approximately $3.1 million in short-term debt. The debt was due and paid in April 2006.

At March 31, 2006, long-term debt totaled approximately $198.6 million, of which $6.1 million was current and includes a note payable of EUR 5.0 million (approximately $6.1 million) which is due in June 2008, and a note payable of EUR 35.0 million (approximately $42.5 million at March 31, 2006) which is due in annual installments through June 2011. These notes bear interest at a variable rate at EURIBOR plus 0.75%. The loan agreements contain certain financial and non-financial covenants, including but not limited to restrictions on the encumbrance of land, restrictions on the transfer of any patents to third parties and the maintenance of certain financial ratios. The Company was in compliance with these covenants at March 31, 2006.

In August 2004, the Company completed the sale of $150.0 million principal amount of 1.50% convertible unsubordinated notes due 2024, through its unconsolidated subsidiary QIAGEN Finance. The net proceeds of the 2004 Notes were loaned by QIAGEN Finance to consolidated subsidiaries in the U.S. and Switzerland. At March 31, 2006, $150.0 million is included in long-term debt for the amount of Note proceeds payable to QIAGEN Finance. These long-term notes payable to QIAGEN Finance have an effective fixed interest rate of 1.95% and are due in August 2011. Interest on the Notes is payable semi-annually in February and August. The Notes were issued at 100% of principal value, and are convertible into 11.9 million shares of common stock at the option of the holder upon the occurrence of certain events at a price of $12.6449 per share, subject to adjustment. QIAGEN N.V. has an agreement with QIAGEN Finance to issue shares to the investors in the event of conversion. This subscription right, along with the related receivable, is recorded at fair value in the equity of QIAGEN N.V. as paid-in capital. The Notes may be redeemed, in whole or in part, at QIAGEN’s option on or after August 18, 2011, at 100% of the principal amount provided the actual trading price of the Company’s common stock exceeds 120% of the conversion price for twenty consecutive trading days. In addition, the holders of the Notes may require QIAGEN to repurchase all or a portion of the outstanding Notes for 100% of the principal amount, plus accrued interest, on August 18, 2011, 2014 and 2019.

In May 2006, the Company announced the offering of $300 million of 3.25% Senior Convertible Notes due in 2026 through a new unconsolidated subsidiary QIAGEN Euro Finance (Luxembourg) S.A. as discussed more fully in footnote 16.

9. Inventories

The components of inventories consist of the following as of March 31, 2006 (unaudited) and December 31, 2005:


	2006		2005
Raw materials	$	18,330,000	$	18,200,000
Work in process		20,364,000		18,064,000
Finished goods		15,833,000		17,389,000

Total inventories	$	54,527,000	$	53,653,000

10. Intangible Assets

The following sets forth the intangible assets by major asset class as of March 31, 2006 and December 31, 2005:


	2006					2005
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Amortized Intangible Assets:
Patent and license rights	$	30,713,000	$	(8,608,000	)	$	30,025,000	$	(8,488,000	)
Developed technology		53,750,000		(5,936,000	)		48,128,000		(4,862,000	)
Customer Base and Trademarks		15,282,000		(787,000	)		10,226,000		(463,000	)

	$	99,745,000	$	(15,331,000	)	$	88,379,000	$	(13,813,000	)

Unamortized Intangible Assets:
Goodwill	$	100,743,000				$	93,914,000

The changes in the carrying amount of goodwill for the three months ended March 31, 2006 relate primarily to acquisitions and foreign currency translation.

Amortization expense on intangible assets totaled approximately $2.0 million for the three month period ended March 31, 2006. Amortization of intangibles for the next five years is expected to be approximately:


2007	$	8,760,000
2008	$	8,644,000
2009	$	8,263,000
2010	$	7,655,000
2011	$	7,536,000

11. Provision for Income Taxes

The provision for income taxes for the three month periods ended March 31, 2006 and 2005 is based upon the estimated annual effective rate. Fluctuations in the distribution of pre-tax income among the Company’s operating subsidiaries can lead to fluctuations of the effective tax rate in the consolidated financial statements. In the first quarter of 2006, the tax rate was 34% compared to the first quarter 2005 effective rate of 36% due to such fluctuations. The Company’s operating subsidiaries are exposed to effective tax rates ranging from zero up to approximately 43%.

12. Shareholders’ Equity

The following tables detail the changes in shareholders’ equity from December 31, 2005 to March 31, 2006 and from December 31, 2004 to March 31, 2005, respectively:


				Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income			Total
	Common Shares
	Shares	Amount
BALANCE AT DECEMBER 31, 2005	148,455,864	$	1,513,000	$	157,796,000	$	274,200,000	$	16,948,000		$	450,457,000

Net income	—		—		—		17,580,000		—			17,580,000
Proceeds from subscription receivable	—		—		233,000		—		—			233,000
Unrealized loss, net on marketable securities	—		—		—		—		(3,000	)		(3,000	)
Unrealized gain, net on forward contracts	—		—		—		—		248,000			248,000
Translation adjustment	—		—		—		—		4,962,000			4,962,000
Issuance of common shares in connection with stock option exercises	819,505		10,000		4,880,000		—		—			4,890,000
Share-based compensation	—		—		84,000		—		—			84,000
Incremental tax benefit from exercise of non-qualified stock options	—		—		2,214,000		—		—			2,214,000

BALANCE AT MARCH 31, 2006	149,275,369	$	1,523,000	$	165,207,000	$	291,780,000	$	22,155,000		$	480,665,000


				Additional Paid-In Capital				Accumulated Other Comprehensive Income
	Common Shares					Retained Earnings
	Shares	Amount				Retained Earnings					Total
BALANCE AT DECEMBER 31, 2004	147,020,207	$	1,495,000	$	146,231,000	$	211,975,000	$	40,675,000		$	400,376,000

Net income	—		—		—		13,948,000		—			13,948,000
Proceeds from subscription receivable	—		—		225,000		—		—			225,000
Unrealized loss, net on marketable securities	—		—		—		—		(45,000	)		(45,000	)
Realized loss, net on marketable securities	—		—		—		—		125,000			125,000
Unrealized loss, net on forward contracts	—		—		—		—		(638,000	)		(638,000	)
Translation adjustment	—		—		—		—		(8,201,000	)		(8,201,000	)
Issuance of common shares in connection with stock option exercises	572,501		8,000		3,526,000		—		—			3,534,000
Incremental tax benefit in connection with exercise of non-qualified stock options	—		—		1,206,000		—		—			1,206,000

BALANCE AT MARCH 31, 2005	147,592,708	$	1,503,000	$	151,188,000	$	225,923,000	$	31,916,000		$	410,530,000

13. Comprehensive Income

The components of comprehensive income for the three month periods ended March 31, 2006 and 2005 are as follows:


	Three Months Ended March 31,
	2006			2005
Net income	$	17,580,000		$	13,948,000
Net unrealized (loss) on marketable securities		(3,000	)		(45,000	)
Net realized loss on marketable securities		—			125,000
Net unrealized gain (loss) on forward contracts		248,000			(638,000	)
Foreign currency translation gain (loss) adjustments		4,962,000			(8,201,000	)

Comprehensive income	$	22,787,000		$	5,189,000

The following table is a summary of the components of accumulated other comprehensive income as of March 31, 2006 and December 31, 2005:


	2006			2005
Net unrealized gain on marketable securities	$	2,965,000		$	2,969,000
Net unrealized loss on forward contracts, net of tax of $804,000 and $902,000 in 2006 and 2005, respectively		(1,623,000	)		(1,872,000	)
Foreign currency translation adjustments		20,813,000			15,851,000

Accumulated other comprehensive income	$	22,155,000		$	16,948,000

14. Commitments and Contingencies

Contingent Consideration Commitments

Pursuant to the purchase agreements for certain acquisitions, as discussed more fully in Note 5, the Company could be required to make additional contingent cash payments totaling up to $26.6 million based on the achievement of certain revenue and operating results milestones as follows: $7.0 million in 2006, $9.6 million in 2007, $5.0 million in 2008, and $4.0 million payable in any 12 month period from now until 2010 if revenues exceed a certain amount and $1.0 million payable upon the grant of certain patent rights. Any contingent payments made will be accounted for as additions to the purchase price.

Commitments

From time to time the Company may be party to legal proceedings incidental to its business. As of March 31, 2006, certain claims, suits or complaints arising out of the normal course of business have been filed or were pending against the Company. Although it is not possible to predict the outcome of such litigation, based on the facts known to the Company and after consultation with legal counsel, management believes that such litigation will not have a material adverse effect on its financial position or results of operations.

In the ordinary course of business, the Company warrants to customers that its products are free of defect and will conform to published specifications. Generally, the applicable product warranty period is one year from the date of delivery of the product to the customer or of site acceptance, if required. Additionally, the Company typically provides limited warranties with respect to its services. From time to time, the Company also makes other warranties to customers, including warranties that its products are manufactured in accordance with applicable laws and not in violation of third party rights. The Company provides for estimated warranty costs at the time of the product sale. The Company believes its warranty reserve as of March 31, 2006 appropriately reflects the estimated cost of such warranty obligations.

15. Segment and Related Information

Summarized financial information concerning the Company’s reportable segments is shown in the following tables:


	Three Months Ended March 31,
Net Sales	2006			2005
Germany	$	51,083,000		$	42,092,000
United States		72,304,000			63,195,000
Switzerland		7,556,000			8,212,000
Japan		10,210,000			10,807,000
United Kingdom		8,426,000			9,016,000
Norway		—			22,000
Other Countries		23,352,000			15,961,000
The Netherlands		138,000			416,000

Subtotal		173,069,000			149,721,000
Intersegment Elimination		(64,354,000	)		(54,696,000	)

Total	$	108,715,000		$	95,025,000

Net sales are attributed to countries based on the location of the Company’s subsidiary generating the sale. QIAGEN operates manufacturing facilities in Germany, Switzerland, China and the United States that supply products to other countries. The sales from these manufacturing operations to other countries are included in the Net Sales of the countries in which the manufacturing locations are based. The intercompany portions of such net sales of a reportable segment are excluded through the intersegment elimination to derive consolidated net sales.


	Three Months Ended March 31,
Intersegment Sales	2006			2005
Germany	$	(29,895,000	)	$	(25,038,000	)
United States		(28,854,000	)		(24,058,000	)
Switzerland		(5,070,000	)		(5,580,000	)
Other Countries		(535,000	)		(20,000	)

Total	$	(64,354,000	)	$	(54,696,000	)

All intersegment sales are accounted for by a formula based on local list prices and are eliminated in consolidation.


	Three Months Ended March 31,
Operating Income (Loss)	2006			2005
Germany	$	12,276,000		$	4,397,000
United States		10,584,000			11,424,000
Switzerland		(572,000	)		(671,000	)
Japan		2,500,000			2,627,000
United Kingdom		1,889,000			1,755,000
Norway		(447,000	)		(602,000	)
Other Countries		3,813,000			3,473,000
The Netherlands		(803,000	)		(562,000	)

Subtotal		29,240,000			21,841,000
Intersegment Elimination		(3,996,000	)		(448,000	)

Total	$	25,244,000		$	21,393,000

The Netherlands operating loss primarily resulted from general and administrative expenses. The intersegment elimination represents the elimination of intercompany profit.


Assets	March 31, 2006			December 31, 2005
Germany	$	359,949,000		$	360,803,000
United States		313,942,000			264,198,000
Switzerland		80,804,000			77,916,000
Japan		19,801,000			22,784,000
United Kingdom		15,661,000			12,697,000
Norway		33,606,000			32,498,000
Other Countries		87,246,000			58,853,000
The Netherlands		277,913,000			254,493,000

Subtotal		1,188,922,000			1,084,242,000
Intersegment Elimination		(389,014,000	)		(318,944,000	)

Total	$	799,908,000		$	765,298,000

Assets of the Netherlands include cash and cash equivalents, investments, prepaid assets and certain intangibles. The intersegment elimination represents primarily intercompany investments and advances.

16. Subsequent Events

In May 2006, the Company announced that it entered into a definitive merger agreement to purchase all outstanding shares of Gentra Systems Inc. (Gentra) based in Minneapolis, Minnesota. Gentra is a privately held leading developer, manufacturer and supplier of non-solid phase nucleic acid purification products, providing both consumables and automated platforms. The transaction is subject to approval of Gentra’s shareholders and other customary closing conditions and is expected to close at end of the second quarter 2006. Under the terms of the merger agreement, QIAGEN will acquire 100% of the outstanding shares of Gentra for approximately $38.0 million in cash.

During April 2006 the Company’s Supervisory Board approved the plans to relocate various activities in its Norwegian facility to the Company’s European Headquarter in Hilden, Germany. The closure and relocation is intended to be completed in the second quarter of 2006 and is expected to result in an increase in future profitability.

In May 2006, the Company announced the offering of $300.0 million principal amount of 3.25% Senior Convertible Notes due 2026, through an unconsolidated subsidiary QIAGEN Euro Finance (Luxembourg) S.A. (Euro Finance). The net proceeds of these Notes will be loaned by Euro Finance to consolidated subsidiaries of the Company. Interest on these Notes will be payable semi-annually in May and November. These Notes will be issued at 100% of principal value, and will be convertible into 15.0 million shares of common stock at the option of the holder upon the occurrence of certain events at a price of $20.00 per share, subject to adjustment. These Notes cannot be called for the first 7 years and are callable thereafter subject to a provisional call trigger of 130% of the conversion price. In addition, the holders of these Notes may require QIAGEN to repurchase all or a portion of the outstanding Notes for 100% of the principal amount, plus accrued interest, in May 2013, 2017 and 2022. The settlement date of these Notes is expected to be on or about May 16, 2006.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Note regarding Forward-Looking Statements and Risk Factors

Our future operating results may be affected by various risk factors, many of which are beyond our control. Certain of the statements included in this Annual Report and the documents incorporated herein by reference may be forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, including statements regarding potential future net sales, gross profit, net income and liquidity. These statements can be identified by the use of forward-looking terminology such as “may,” “will,” “could,” “expect,” “anticipate,” “estimate,” “continue” or other similar words. Reference is made in particular to the description of our plans and objectives for future operations, assumptions underlying such plans and objectives, and other forward-looking statements. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. We caution investors that there can be no assurance that actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors. As a result, our future development efforts involve a high degree of risk. When considering forward-looking statements, you should keep in mind that the risk factors could cause our actual results to differ significantly from those contained in any forward-looking statement.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 3 under the heading “Risk Factors” in our Annual Report on Form 20-F for the year ended December 31, 2005, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 20-F are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Results of Operations

Overview

We believe that we are the leading provider of innovative technologies and products for preanalytical sample preparation and molecular diagnostics solutions, based on the nature of our products and technologies and on our United States and European market shares as supported by independent market studies. We have developed a comprehensive portfolio of more than 500 proprietary, consumable products and automated solutions for sample collection, and nucleic acid and protein handling, separation, and purification. We also supply diagnostic kits, tests, and assays for human and veterinary molecular diagnostics. Our products are sold to academic research markets, and to leading pharmaceutical and biotechnology companies as well as to diagnostics laboratories. We also provide purification and testing solutions to applied testing markets such as forensics, animal and food testing, and pharmaceutical process control. We employ more than 1,600 people worldwide. We sell our products through a dedicated sales force and a global network of distributors in more than 40 countries.

We segment our business based on the geographic locations of our subsidiaries. Our reportable segments include Germany, the United States, Switzerland, Japan, the United Kingdom, Norway and other countries, consisting of subsidiaries in Canada, France, Australia, Italy, Austria, China, Sweden (which services Sweden, Norway, Finland and Denmark), Malaysia and The Netherlands (which services Belgium, The Netherlands and Luxembourg). Our principal research, production and manufacturing facilities are located in Germany, the United States, Switzerland, and China. Our holding company is located in The Netherlands. Reportable segments derive revenues from our entire product and service offering. Our Luxembourg subsidiaries, QIAGEN Finance and Euro Finance, which were established as the financing vehicle for the issuance of convertible debt, are not consolidated.

During the third quarter of 2005 we opened a subsidiary in Malaysia. And during the second quarter 2005 we opened a sales subsidiary in Sweden to serve the Scandinavian region. During April 2006 our Supervisory Board approved the plans to relocate various activities in our Norwegian facility to our European Headquarter in Hilden, Germany. The closure and relocation is intended to be completed in the second quarter of 2006 and is expected to result in an increase in future profitability.

In recent years we have made a number of strategic acquisitions expanding and focusing our technology and product offerings. These transactions include:

•

During the first quarter of 2006, we completed two acquisitions. PG Biotech Co. Ltd. (PG Biotech) is a leading developer, manufacturer and supplier of polymerase chain reaction (PCR)-based molecular diagnostic kits in China. The acquisition will expand QIAGEN’s position as a leading provider of molecular diagnostics solutions to OEM partners and customers in the rapidly growing Asian markets. We also acquired certain assets and operations from Diatech s.r.l., Jesi, Italy, which relates to the distribution of products produced by artus, which we acquired in 2005, in Italy.

•

At the end of the fourth quarter of 2005, we completed the acquisition of Eppendorf AG’s reagent business which includes the Eppendorf “5-Prime” nucleic acid sample preparation and PCR reagent product lines and related intellectual property. The acquisition adds to our area of focus, represents an attractive addition to our portfolio of pre-analytical and nucleic acid amplification consumables and adds a very promising pipeline of proprietary technologies for nucleic acid handling, separation, purification and amplification.

•

During the third quarter of 2005, we completed three acquisitions. Through our new wholly owned subsidiary Tiangen Biotech Beijing Co. Ltd. (Tiangen) we acquired substantially all assets of Tianwei Times, located in Beijing, China, which is a leading developer, manufacturer and supplier of nucleic acid sample preparation consumables in China. This acquisition expands QIAGEN’s position as the leading supplier for products and technologies for pre-analytical sample preparation in the rapidly growing market in China. In August we acquired the business of LumiCyte, Inc., which has developed and recently initiated marketing of the first products based on its proprietary STS- (Surface Tension Segmented) Biochip sample preparation solution for MALDI (Matrix-Assisted Laser Desorption/Ionization)-Mass Spectrometry (MS), and SuNyx GmbH which has developed and recently initiated marketing of its proprietary platforms for sample preparation of peptide and protein samples for analysis on Liquid Chromatography (LC)-MALDI Mass Spectrometry.

•

During the second quarter of 2005, we completed the acquisition of two companies. We acquired artus Gesellschaft für molekularbiologische Diagnostik und Entwicklung mbH (artus), subsequently renamed QIAGEN Hamburg GmbH, which is located in Hamburg, Germany, and is an established leader in PCR-based molecular diagnostic tests for pathogene testing. We also acquired Nextal Biotechnology, Inc. (Nextal), subsequently renamed QIAGEN Canada, Inc., which is located in Canada and is a fast-growing provider of proprietary sample preparation tools which make protein crystallization more accessible.

•

Additionally during the second quarter of 2005 we acquired the world-wide, exclusive rights and licenses to manufacture and market the complete portfolio of RNAture’s nucleic acid isolation products from Hitachi Chemical Research Center, Inc. In combination with our consumable and automation technologies, the RNAture solutions have the potential to provide a new dimension of value to our customers in high-throughput gene expression analysis and siRNA in research and drug development.

On a consolidated basis, operating income increased to $25.2 million from $21.4 million in the three-month period ended March 31, 2006 compared with the same period in 2005. Our financial results include the contributions of our recent acquisitions, as well as the costs related to the acquisitions and integrations, including charges for purchased in-process research and development. Our results also reflect the benefits of our restructuring efforts, which have contributed to improved profitability as we continue to manage our operating costs.

The following tables set forth summaries of operating income by segment for the three months ended March 31. More complete tables can be found in Note 15 in the accompanying financial statements.


	Three Months Ended March 31,
Operating Income (Loss)	2006			2005
Germany	$	12,276,000		$	4,397,000
United States		10,584,000			11,424,000
Switzerland		(572,000	)		(671,000	)
All other segments		6,952,000			6,691,000

Subtotal		29,240,000			21,841,000
Intersegment Elimination		(3,996,000	)		(448,000	)

Total	$	25,244,000		$	21,393,000

In Germany, operating income was higher in the first quarter of 2006 compared to the first quarter of 2005 primarily due to the acquisition of QIAGEN Hamburg GmbH in the second quarter of 2005.

In the first quarter 2006, operating income in the United States decreased compared to 2005. In the three months ended March 31, 2006, the United States experienced an increase in consumable sales, however, operating expenses in the United States were also higher as a result of the acquisition of 5-Prime in December 2005.

The operating loss in Switzerland was lower due to a decrease in research and development expense in 2006 as compared to 2005.

As a result of adopting SFAS No. 123R on January 1, 2006, our income before income taxes and net income for the three-month period ended March 31, 2006, is approximately $84,000 and $55,000 lower, respectively, than if we had continued to account for share-based compensation under Opinion 25. Basic and diluted earnings per share for the three-month period ended March 31, 2006 would have not been impacted if we had not adopted SFAS No. 123R. In October 2004 and December 2005, we modified the terms of certain outstanding and unvested stock options whose exercise prices were greater than our closing price on the modification dates and certain in-the-money options. The acceleration of the in-the-money options did not result in compensation expense as, after applying an estimate for the termination of services, in-the-money options had a de minimis intrinsic value. These modifications served to immediately vest approximately 2.0 million unvested stock options. The accelerated options were given a sales restriction, such that any shares held through the exercise of an accelerated option could not be sold, prior to the original vesting date. The accelerations have enabled us to avoid recording approximately $2.8 million, after tax, of share-based expense that would have been required to be recognized under SFAS No. 123R. While there were no stock options or other share awards granted during the three month period ended March 31, 2006, we anticipate that the adoption will have a greater impact on operating and net income in future periods. In future periods, we expect to grant stock options and make awards of restricted stock units.

First Quarter Ended March 31, 2006 compared to 2005

Net Sales

In the first quarter of 2006, net sales increased 14% to $108.7 million compared to $95.0 million in the first quarter of 2005. Net sales in the United States increased to $43.4 million in 2006 from $39.1 million in the same period in 2005, and net sales outside the United States increased to $65.3 million in 2006 from $55.9 million in 2005.

The increase in sales was primarily the result of an increase in our consumables products sales which experienced a growth rate of 16% in 2006 as compared to 2005. The increase in consumable sales includes organic growth (9%) and sales from our recently acquired subsidiaries (7%). During the first quarter of 2006, sales from our instrumentation products increased 1% compared to the same period in 2005. Sales of our other offerings, primarily services, which represented 1% of our 2006 net sales, decreased 15% in 2006 as compared to 2005.

We regularly introduce new products in order to extend the life of our existing product lines as well as to address new market opportunities. During the first quarter of 2006, we introduced more than 15 new products in preanalytical sample management, assay technologies and molecular diagnostic assays.

A significant portion of our revenues is denominated in European Union euros. Changes in exchange rates can affect the growth rate of net sales. For the quarter ended March 31, 2006 compared to the same period in 2005, using identical foreign exchange rates for both periods, net sales would have increased approximately 20% as compared to the reported increase of 14% for the three-month period ended March 31, 2006. See “Currency Fluctuations.”

Gross Profit

Gross profit was $75.4 million or 69% of net sales in the quarter ended March 31, 2006 as compared to $64.4 million or 68% of net sales for the same period in 2005. For the year ended December 31, 2005, gross profit was 69% as a percentage of net sales. The absolute dollar increase is attributable to the increase in net sales along with the currency impact of the euro. In connection with the acquisitions in 2006, we expensed $461,000 of inventory to cost of sales which will be replaced with products integrating newly acquired technologies.

Research and Development

Research and development expenses increased 7% to $10.2 million (9% of net sales) in the first quarter of 2006 compared with $9.5 million (10% of net sales) in the same period of 2005. Using identical foreign exchange rates for both quarters, research and development expenses increased approximately 15%. Our recent acquisitions of new technologies, notably those acquired via the acquisitions of artus and 5-Prime, have resulted in an increase in our research and development costs. As we continue to expand our research activities and product development capabilities, additional expense will be incurred related to research and development facility costs and the employees engaged in our research and development efforts. We have a strong commitment to research and development and anticipate that absolute research and development expenses may increase significantly.

Sales and Marketing

Sales and marketing expenses increased 19% to $26.4 million (24% of net sales) in the first quarter of 2006 from $22.3 million (23% of net sales) in the same period of 2005. Using identical foreign exchange rates in each quarter, sales and marketing expenses increased 24%. Sales and marketing costs are primarily associated with personnel, commissions, advertising, trade shows, publications, freight and logistics expenses and other promotional expenses. The increase in sales and marketing expenses in 2006 includes expenses related to our newly acquired subsidiaries, QIAGEN Hamburg and PG Biotech, along with our new sales subsidiaries in Sweden. We anticipate that sales and marketing costs will increase along with new product introductions and continued growth in sales of our products.

General and Administrative

General and administrative expenses increased 8% to $11.5 million (11% of net sales) in the first quarter of 2006 from $10.7 million (11% of net sales) in the same period of 2005. Using identical foreign exchange rates for both quarters, general and administrative expenses increased approximately 13%. General and administrative expenses primarily represent the costs required to support our administrative infrastructure which, except for the period following our restructuring, have continued to expand along with our growth. The increase in general and administrative expenses in 2006 includes expenses related to our newly acquired subsidiaries, namely QIAGEN Hamburg, Nextal, 5-Prime and PG Biotech.

Acquisition, Integration and Related Costs

In connection with acquisitions in the first quarter of 2006, we recorded a charge of $200,000 for purchased in-process research and development. Costs related to the acquisitions of 2006 included $461,000 related to inventory which needed to be replaced with products suitable to the newly acquired technologies, and costs related to the integration of $284,000.

Other Income (Expense)

Other income was $1.3 million in the first quarter of 2006 compared to other income of $300,000 in the first quarter of 2005. This increase in expense was mainly due to higher interest income, gain from equity method investees, and gain on foreign currency transactions, partially offset by lower research and development grant income.

For the quarter ended March 31, 2006, interest income increased to $2.0 million from $1.9 million in the same period of 2005. Interest income is derived mainly from interest bearing cash accounts and investments, primarily auction rate securities. The increase in interest income in 2006 over 2005 was the result of an increase in amounts invested during the year and an increase in interest rates. As of March 31, 2006, we had a total of approximately $15.0 million invested in such securities. The weighted average interest rates on the marketable securities portfolio was 4.36% in the first quarter of 2006, compared to 2.9% in the first quarter of 2005.

Interest expense remained unchanged at $1.5 million in the first quarter of 2006 and 2005. Interest costs relate primarily to our long-term borrowings of the proceeds from the convertible debt offering along with the long-term debt related to our facility construction.

In the three months ended March 31, 2006, research and development grant income from European as well as German state and federal government grants decreased to $77,000 from $208,000 in the same period of 2005. We conduct significant research and development activities in Germany, and expect to continue to apply for such research and development grants in the future.

In the three-month period ended March 31, 2006, we recorded a net gain from an equity method investees of $326,000 compared to a net loss of $493,000 in the same period of 2005. The gain/loss primarily represents our share of profits/losses from our equity investment in PreAnalytiX. As previously disclosed, we intend to continue to make strategic investments in complementary businesses as the opportunities arise. Accordingly, we may record losses on equity investments based on our ownership interest in such companies.

We recorded a gain from foreign currency transactions of $283,000 in the first quarter of 2006 as compared to a gain of $7,000 in the first quarter of 2005. The gain from foreign currency transactions reflects net effects from conducting business in currencies other than the U.S. dollar. QIAGEN N.V.’s functional currency is the U.S. dollar and our subsidiaries’ functional currencies are the European Union euro, the British pound, the Swiss franc, the Norwegian and Swedish krones, the U.S. dollar, the Australian dollar, the Canadian dollar, the Chinese yuan, the Malaysian ringgit, and the Japanese yen. See “Currency Fluctuations”.

Provision for Income Taxes

Our effective tax rate decreased to 34% in the first quarter of 2006 compared to 36% in the first quarter of 2005. Our operating subsidiaries are exposed to effective tax rates ranging from approximately 0% to approximately 43%. Fluctuations in the distribution of pre-tax income among these entities can lead to fluctuations of the effective tax rate in our consolidated financial statements.

Liquidity and Capital Resources

To date, we have funded our business primarily through internally generated funds, debt and the private and public sales of equity. Our primary use of cash has been to support continuing operations and our capital expenditure requirements including acquisitions. As of March 31, 2006 and December 31, 2005, we had cash and cash equivalents of $197.7 million and $191.7 million, respectively, and investments in current marketable securities of $15.0 million in both periods. Cash and cash equivalents are primarily held in U.S. dollars, other than those cash balances maintained in the local currencies of our subsidiaries to meet local working capital needs. At March 31, 2006, cash and cash equivalents had increased by $6.0 million over March 31, 2005 primarily due to cash provided by operating activities of $22.3 million and financing activities of $7.2 million, offset by cash used in investing activities of $23.1 million. Marketable securities consist of auction rate securities. As of March 31, 2006 and December 31, 2005, we had working capital of $290.1 million and $278.6 million, respectively.

Operating Activities. For the periods ended March 31, 2006 and 2005, we generated net cash from operating activities of $22.3 million and $20.7 million, respectively. Cash provided by operating activities increased in 2006 compared to 2005 primarily due to increases in net income and decreases in deferred taxes, accrued liabilities and inventories. Since we rely heavily on cash generated from operating activities to fund our business, a decrease in demand for our products or significant technological advances of competitors would have a negative impact on our liquidity.

Investing Activities. Approximately $23.1 million of cash was used in investing activities during the period ended March 31, 2006, compared to $10.1 million for the period ended March 31, 2005. Investing activities during the first quarter of 2006 consisted principally of purchases of property and equipment and cash paid for acquisitions and the purchase of intangible assets.

Financing Activities. Financing activities provided $7.2 million in cash for the three months ended March 31, 2006, compared to a use of $3.5 million for the three months ended March 31, 2005. Cash provided during the period was primarily due to the issuance of common shares as a result of stock option exercises, tax benefits from stock based compensation and proceeds received in connection with an agreement to issue shares to QIAGEN Finance, partially offset by capital lease payments.

We have credit lines totaling $10.4 million at variable interest rates none of which was utilized as of March 31, 2006. We also have capital lease obligations, including interest, in the amount of $12.2 million, and carry $198.6 million of long-term debt that consists of four notes payable.

Two of the notes payable are the long-term borrowings of the proceeds from our issuance of $150.0 million senior unsubordinated convertible notes, with a 1.5% coupon due in 2024 through QIAGEN Finance (Luxembourg) S.A., which was established for this purpose. The net proceeds of the convertible debt were loaned by QIAGEN Finance to our consolidated U.S. and Swiss subsidiaries. The long-term notes payable to QIAGEN Finance have an effective rate of 1.95% and are due in August 2011. The convertible notes issued by QIAGEN Finance are convertible into shares of our common stock at a conversion price of $12.6449 subject to adjustment. We also have a note payable of EUR 35.0 million, (approximately $42.5 million at March 31, 2006) which bears interest at a variable interest rate of EURIBOR plus 0.75% is due in annual payments of EUR 5.0 million through June 2011 and a note payable of EUR 5.0 million (approximately $6.1 million at March 31, 2006) which is due in June 2008. In connection with the first quarter 2006 acquisition of PG Biotech, we acquired approximately $3.1 million in short-term debt. The debt was due and paid in April 2006.

In May 2006, we announced the offering of $300.0 million principal amount of 3.25% senior convertible notes due 2026, through an unconsolidated subsidiary QIAGEN Euro Finance (Luxembourg) S.A. (Euro Finance). The net proceeds of these Notes will be loaned by Euro Finance to consolidated subsidiaries. Interest on these Notes will be payable semi-annually in May and November. These Notes will be issued at 100% of principal value, and will be convertible into 15.0 million shares of common stock at the option of the holder upon the occurrence of certain events at a price of $20.00 per share, subject to adjustment. These Notes cannot be called for the first 7 years and are callable thereafter subject to a provisional call trigger of 130% of the conversion price. In addition, the holders of these Notes may require QIAGEN to repurchase all or a portion of the outstanding Notes for 100% of the principal amount, plus accrued interest, in May 2013, 2017 and 2022.

We believe that funds from operations, existing cash and cash equivalents, together with the proceeds from our public and private sales of equity and convertible notes, and availability of financing facilities as needed, will be sufficient to fund our planned operations and expansion during the coming year.

Quantitative and Qualitative Disclosures About Market Risk

Our market risk relates primarily to interest rate exposures on cash, marketable securities and borrowings and foreign currency exposures on intercompany transactions. The overall objective of our risk management is to reduce the potential negative earnings effects from changes in interest and foreign exchange rates. Exposures are managed through operational methods and financial instruments. We do not use financial instruments for trading or other speculative purposes.

Interest Rate Risk

Interest income earned on our investment portfolio is affected by changes in the relative levels of market interest rates. For the quarter ended March 31, 2006, the weighted average interest rate on our marketable securities portfolio was 4.36%.

Borrowings against lines of credit are at variable interest rates. At March 31, 2006, and December 31, 2005, we did not have any amounts outstanding under our lines of credit. A hypothetical adverse 10% movement in market interest rates would not have materially impacted our financial statements.

At March 31, 2006 we had $198.6 million in long-term debt, of which $48.6 million was at a variable rate. A hypothetical adverse 10% movement in market interest rates would decrease 2006 quarter-to-date earnings by approximately $25,000, based on the quarter-end interest rate, a loan balance consistent with that at quarter-end and a constant foreign exchange rate.

Currency Fluctuations

We operate on an international basis. A significant portion of our revenues and expenses are earned and incurred in currencies other than the U.S. dollar. The euro is the most significant such currency, with others including the British pound, Japanese yen, Swiss franc, Norwegian and Swedish krones, Chinese yuan and Canadian and Australian dollars. Fluctuations in the value of the currencies in which we conduct our business relative to the U.S. dollar have caused and will continue to cause U.S. dollar translations of such currencies to vary from one period to another. Due to the number of currencies involved, the constantly changing currency exposures, and the potential substantial volatility of currency exchange rates, we cannot predict the effect of exchange rate fluctuations upon future operating results. However, because we have substantial expenses as well as revenues in each of our principal functional currencies, the exposure of our financial results to currency fluctuations is reduced. In general terms, appreciation of the U.S. dollar against our other foreign currencies, such as the euro, will decrease reported net sales. However, this impact normally will be at least partially offset in the results of operations by gains or losses from foreign currency transactions.

Currency Hedging

In the ordinary course of business, we purchase instruments with which we intend to hedge foreign currency fluctuations with the principal objective of minimizing the risks and/or costs associated with global financial and operating activities. Generally, we hedge a majority of the anticipated cash flow that we expect to exchange into other currencies, subject to our short-term financing needs. We do not utilize financial instruments for trading or other speculative purposes.

At March 31, 2006, these foreign currency instruments consisted of options, which give us the right, but not the obligation, to purchase foreign currencies in exchange for U.S. dollars at predetermined exchange rates. These options are marked to market through our statements of income and are not designated as effective hedges according to the provisions of SFAS 133. At March 31, 2006, we held one foreign currency exchange option totaling $500,000. The option had a notional exchange rate of USD/EUR 1.220 and expired the end of April 2006.

We have entered into forward arrangements which qualify for hedge accounting as cash flow hedges of foreign currency denominated liabilities. At March 31, 2006, these forward contracts included two contracts totaling $44.0 million which mature in July 2011, and one contract of Canadian $8.0 million which matures in February 2007, as a hedge to currency risk on intercompany loans. The gain or loss on the change in the fair values of the derivatives are included in earnings to the extent they offset the earnings impact of changes in the fair values of the hedged obligations. Any difference is deferred in accumulated comprehensive income, a component of shareholders’ equity. These contracts effectively fix the exchange rate at which the intercompany loans will be settled in, so that gains or losses on the forward contracts offset the losses or gains from changes in the value of the underlying intercompany loans.

Foreign Currency Exchange Rate Risk

We have significant production and manufacturing facilities located in Germany and Switzerland, and intercompany sales of inventory expose us to foreign currency exchange rate risk. Intercompany sales of inventory are generally denominated in the local currency of the subsidiary purchasing the inventory in order to centralize foreign currency risk with the manufacturing subsidiary. Payment for intercompany purchases of inventory is required within 30 days from invoice date. The delay between the date the manufacturing subsidiaries record revenue and the date when the payment is received from the purchasing subsidiaries exposes us to foreign exchange risk. The exposure results primarily from those transactions between the manufacturing subsidiaries and the U.S.

The foreign currency exchange rate risk is partially offset by transactions of the manufacturing subsidiary denominated in U.S. dollars. Hedging instruments include foreign currency put options that are purchased to protect the majority of the existing and/or anticipated receivables resulting from intercompany sales from the manufacturing subsidiary to the U.S. These options give us the right, but not the obligation, to purchase foreign currencies in exchange for U.S. dollars at predetermined exchange rates. Management does not believe that our exposure to foreign currency exchange rate risk is material.

Application of Critical Accounting Policies

The preparation of our financial statements in accordance with accounting principles generally accepted in the United States requires management to make assumptions that affect the reported amounts of assets, liabilities and disclosure of contingencies as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Critical accounting policies are those that require the most complex or subjective judgments often as a result of the need to make estimates about the effects of matters that are inherently uncertain. Thus, to the extent that actual events differ from management’s estimates and assumptions, there could be a material impact to the financial statements. In applying our critical accounting policies, at times we used accounting estimates that either required us to make assumptions about matters that were highly uncertain at the time the estimate was made or it is reasonably likely that changes in the accounting estimate may occur from period to period that would have a material impact on the presentation of our results of operations, financial position or cash flows. Our critical accounting policies are those related to revenue recognition, accounts receivable, investments, goodwill and other intangibles, and income taxes. We reviewed the development, selection, and disclosure of our critical accounting policies and estimates with the Audit Committee of our Supervisory Board.

Revenue Recognition. We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements” (SAB 104). SAB 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed and determinable; and (4) collectibility is reasonably assured. Determination of criteria (3) and (4) could require management’s judgments regarding the fixed nature of the fee charged for services rendered and products delivered and the collectibility of those fees. Should changes in conditions cause management to determine that these criteria are not met for certain future transactions, revenue recognized for any reporting period could be adversely affected.

Accounts Receivable. Our accounts receivable are unsecured, and we are at risk to the extent such amounts become uncollectible. We continually monitor accounts receivable balances, and provide for an allowance for doubtful accounts at the time collection may become questionable based on payment history or age of the receivable. Since a significant portion of our customers are funded through academic or government funding arrangements, past history may not be representative of the future. As a result, we may have write-offs of accounts receivable in excess of previously estimated amounts or may in certain periods increase or decrease the allowance based on management’s current estimates.

Investments. We have equity investments accounted for under the cost method. We periodically review the carrying value of these investments for permanent impairment, considering factors such as the most recent stock transactions, book values from the most recent financial statements, and forecasts and expectations of the investee. Estimating the fair value of these non-marketable equity investments in life science companies is inherently subjective, and if actual events differ from management’s assumptions, it could require a write-down of the investment that could materially impact our financial position and results of operations.

In addition, generally accepted accounting principles require different methods of accounting for an investment depending on the level of control that we exert. Assessing the level of control involves subjective judgments. If management’s assumptions with respect to control differ in future periods and we therefore have to account for these investments under a method other than the cost method, it could have a material impact to our financial statements.

Goodwill and Other Intangible Assets. We account for acquisitions under the purchase method of accounting, typically resulting in goodwill. Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets”, requires us to assess goodwill for impairment at least annually in the absence of an indicator of possible impairment and immediately upon an indicator of possible impairment. The statement requires estimates of the fair value of our reporting units. If we determine that the fair values are less than the carrying amount of goodwill recorded, we must recognize an impairment in our financial statements. Due to the numerous variables associated with our judgments and assumptions relating to the valuation of the reporting units and the effects of changes in circumstances affecting these valuations, both the precision and reliability of the resulting estimates are subject to uncertainty, and as additional information becomes known, we may change our estimate.

Share-Based Compensation. Our stock plan, the QIAGEN N.V. Amended and Restated 2005 Stock Plan (the Plan), the allows for the granting of stock rights, incentive stock options, as well as for non-qualified options, stock grants and stock based awards. Effective January 1, 2006, we adopted the provisions of FASB Statement No. 123 (revised 2004), “Share-Based Payment”, (SFAS 123(R)) and SEC Staff Accounting Bulletin No. 107, “Share-Based Payment”, (SAB 107), using the modified prospective transition method. Under the modified prospective transition method, compensation cost recognized in 2006 includes compensation cost for all equity-based payments granted prior to but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123 and compensation cost for all equity-based payments granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). Refer to “Overview” above and Footnote 3 in the accompanying financial statements for further discussion of our adoption of SFAS 123R.

We use the Black-Scholes-Merton valuation model for estimating the fair value of our stock option grants. Option valuation models, including Black-Scholes-Merton, require the input of highly subjective assumptions, including the risk-free rate of interest, expected dividend yield, expected volatility, and the expected life of the award. While there were no stock options or other share awards granted during the three month period ended March 31, 2006, we anticipate that the adoption will have a greater impact in future periods and changes in the assumptions used can materially affect the grant date fair value of an award.

Income Taxes. The calculation of our tax provision is complex due to the international operations and multiple taxing jurisdictions in which we operate. We have significant deferred tax assets due to net operating losses (NOL) the utilization of which is not assured and is dependent on generating sufficient taxable income in the future. Although Management believes it is more likely than not that we will generate sufficient taxable income to utilize all NOL carryforwards, evaluating the NOL’s related to our newer subsidiaries requires us to make estimates that we believe are reasonable, but may also be highly uncertain given that we do not have direct experience with such subsidiaries or their products and thus the estimates also may be subject to significant changes from period to period as we gain that experience. To the extent that our estimates of future taxable income are insufficient to utilize all available NOL’s, a valuation allowance will be recorded in the provision for income taxes in the period the determination is made, and the deferred tax assets will be reduced by this amount, which could be material. In the event that actual circumstances differ from management’s estimates, or to the extent that these estimates are adjusted in the future, any changes to the valuation allowance could materially impact our financial position and results of operations.

The above listing is not intended to be a comprehensive list of all our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles in the United States, with limited or no need for management’s judgment. There are also areas in which management’s judgment in selecting available alternatives may or may not produce a materially different result. See our audited consolidated financial statements and notes thereto in our December 31, 2005 Form 20-F which contains a description of accounting policies and other disclosures required by generally accepted accounting principles in the United States.

Authoritative Pronouncements

In February 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 155, “Accounting for Certain Hybrid Financial Instruments,” (SFAS 155) which amends Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” (SFAS 133) and Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” (SFAS 140). SFAS 155 simplifies the accounting for certain derivatives embedded in other financial instruments by allowing them to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host) if the holder elects to account for the whole instrument on a fair value basis. SFAS 155 also clarifies and amends certain other provisions of SFAS 133 and SFAS 140. SFAS 155 is effective for all financial instruments acquired, issued or subject to a remeasurement event occurring in fiscal year beginning after September 15, 2006. Earlier adoption is permitted provided the financial statements have not yet been issued, including for interim periods, for that fiscal year. We do not believe that the adoption of this statement will have a material impact on its financial condition, consolidated results of operations or cash flows.

In May 2005, the Financial Accounting Standards Board (FASB) issued Statement No. 154, “Accounting Changes and Error Corrections”. This new standard replaces APB Opinion No. 20, “Accounting Changes”, and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements”. Among other changes, Statement 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. Statement 154 also provides that (1) a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a “restatement.” The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. We adopted this statement on January 1, 2006 without a material effect on the financial statements.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS 123R), which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation”. SFAS 123R supersedes Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends SFAS 95, “Statement of Cash Flows.” Generally, the approach in SFAS 123R is similar to the approach described in SFAS 123. However, SFAS 123R requires entities to measure the cost of employee services received in exchange for an award of equity instruments, including grants of employee stock options, based on the grant-date fair value of the award. That cost will be recognized in the income statement over the period during which an employee is required to provide service in exchange for the award (often the vesting period). Pro forma disclosure is no longer an alternative. SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as was permitted under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS 123R, using the modified-prospective-transition method.

Supplemental Information as Required by the German Declaration on Corporate Governance

At March 31, 2006 we had 1,641 employees. There have been no changes to the Supervisory or Managing Boards described in our Annual Report for the year ended December 31, 2005 reported on Form 20-F. The table below lists separately for each member of our Managing and Supervisory Boards, the number of Company shares held directly in the name of each board member, and rights for such shares held by each board member as of March 31, 2006. This table does not reflect shares beneficially owned but indirectly held by the board members. Total ownership information, including all shares beneficially owned by each board member as of February 3, 2006, can be found in our December 31, 2005 annual report filed on Form 20-F.


Supervisory Board:	Options to Purchase Common Shares	Shares Held Directly
Dr. Metin Colpan	1,740,547	—

Dr. Heinrich Hornef	82,667	—

Erik Hornnaess	122,300	10,000

Professor Dr. Manfred Karobath	96,000	—

Prof. Dr. Detlev H. Riesner	252,969	—

Jochen Walter	82,667	30,000

Dr. Franz A. Wirtz	134,000	200,000

Managing Board:
Peer M. Schatz	2,429,876	—

Roland Sackers	425,925	—

Dr. Joachim Schorr	287,887	—

Bernd Uder	217,921	—

SIGNATURES

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

QIAGEN N.V.

By:

/s/ Roland Sackers

Roland Sackers

Chief Financial Officer

Date: May 15, 2006

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