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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the Quarterly Period Ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from ________ to ________
Commission File Number: 0-27058
PAREXEL International Corporation
(Exact name of registrant as specified in its charter)
Massachusetts 04-2776269
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
195 West Street, Waltham, MA 02154
(Address of principal executive offices) (Zip code)
(617) 487-9900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. _X_ Yes ___ No
Indicate the number of shares outstanding of each of the issues classes of
common stock, as of the latest practicable date.
As of May 8, 1997, there were 19,834,256 shares of
PAREXEL International Corporation common stock outstanding.
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PAREXEL INTERNATIONAL CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheet -- March 31, 1997 and
June 30, 1996 2
Condensed consolidated statement of operations -- Three months
ended March 31, 1997 and 1996; nine months ended March 31, 1997
and 1996 3
Condensed consolidated statement of cash flows -- Nine months ended
March 31, 1997 and 1996 4
Notes to condensed consolidated financial statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Risk Factors 12
Part II. Other Information
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 19
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
PAREXEL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1996 1997
-------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents:
Unrestricted $ 16,243 $ 61,124
Restricted 858 1,260
Marketable securities 29,319 32,096
Accounts receivable, net 39,277 59,256
Other current assets 6,905 8,269
-------- --------
Total current assets 92,602 162,005
Property and equipment, net 8,193 20,893
Other assets 1,606 2,114
-------- --------
$102,401 $185,012
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 762 $ 527
Accounts payable 7,003 6,007
Advance billings 20,008 30,450
Other current liabilities 11,401 15,569
-------- --------
Total current liabilities 39,174 52,553
Long-term debt 360 113
Other liabilities 1,655 1,608
-------- --------
Total liabilities 41,189 54,274
-------- --------
Stockholders' equity:
Common stock - $.01 par value; shares
authorized: 50,000,000 at June 30, 1996,
100,000,000 at March 31, 1997; shares
issued: 15,654,220 at June 30, 1996,
19,789,835 at March 31, 1997; shares
outstanding: 15,624,808 at June 30, 1996,
19,760,423 at March 31, 1997 157 198
Additional paid-in capital and other
stockholders' equity 66,254 127,238
Retained earnings (accumulated deficit) (5,199) 3,302
-------- --------
Total stockholders' equity 61,212 130,738
-------- --------
$102,401 $185,012
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
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PAREXEL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------- -------------------
1996 1997 1996 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue $ 32,369 $ 55,235 $ 84,797 $146,588
Reimbursed costs (9,862) (12,974) (23,701) (34,128)
-------- -------- -------- --------
Net revenue 22,507 42,261 61,096 112,460
-------- -------- -------- --------
Costs and expenses:
Direct costs 15,154 28,736 42,027 76,915
Selling, general and
administrative 5,001 8,558 13,079 22,859
Depreciation and amortization 616 1,311 1,649 3,199
-------- -------- -------- --------
20,771 38,605 56,755 102,973
-------- -------- -------- --------
Income from operations 1,736 3,656 4,341 9,487
Other income, net 422 1,191 642 1,980
-------- -------- -------- --------
Income before provision for income
taxes 2,158 4,847 4,983 11,467
Provision for income taxes 861 1,730 1,988 4,141
-------- -------- -------- --------
Net income $ 1,297 $ 3,117 $ 2,995 $ 7,326
======== ======== ======== ========
Net income per share $ 0.09 $ 0.15 $ 0.24 $ 0.40
======== ======== ======== ========
Weighted average common and common
equivalent shares outstanding 14,902 20,198 12,543 18,484
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
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PAREXEL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
--------------------
1996 1997
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,995 $ 7,326
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,649 3,199
Change in operating assets and liabilities,
net of effects from acquisitions 627 (6,851)
Other operating activities (110) --
--------- --------
Net cash provided by operating activities 5,161 3,674
--------- --------
Cash flows from investing activities:
Purchase of marketable securities (146,600) (77,268)
Proceeds from sale of marketable securities 103,519 74,436
Cash related to acquisition activities -- 781
Purchase of property and equipment (2,161) (13,522)
--------- --------
Net cash used by investing activities (45,242) (15,573)
--------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock 37,179 60,858
Proceeds from issuance of preferred stock 1,769 --
Cash received from stock subscriptions 157 --
Dividends paid (940) --
Repayments of long-term debt (665) (3,192)
--------- --------
Net cash provided by financing activities 37,500 57,666
--------- --------
Effect of exchange rate changes on unrestricted cash
and cash equivalents (68) (886)
--------- --------
Net increase (decrease) in unrestricted cash
and cash equivalents (2,649) 44,881
Unrestricted cash and cash equivalents at beginning
of period 5,315 16,243
--------- --------
Unrestricted cash and cash equivalents at end of period $ 2,666 $ 61,124
========= ========
</TABLE>
See notes to condensed consolidated financial statements.
4
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PAREXEL INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 -- Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the three months and the nine months
ended March 31, 1997 are not necessarily indicative of the results that may be
expected for the fiscal year ended June 30, 1997. For further information, refer
to the consolidated financial statements and notes thereto included in PAREXEL
International Corporation's (the "Company") Annual Report on Form 10-K for the
fiscal year ended June 30, 1996.
The balance sheet at June 30, 1996 has been derived from the audited financial
statements at that date but does not include all of the information and notes
required by generally accepted accounting principles for complete financial
statements.
The Company's stock is currently quoted on the Nasdaq National Market under the
symbol "PRXL".
Note 2 -- Acquisitions
In February 1997, the Company acquired, in separate transactions, Rescon, Inc.
("Rescon"), a medical marketing consulting business located in the Washington,
D.C. area, and Sheffield Statistical Services, Ltd. and a subsidiary
("S-Cubed"), a full service CRO in the United Kingdom which specializes in
biostatistical analysis. The Company issued a total of approximately 210,000
shares of common stock in exchange for outstanding shares of Rescon and S-Cubed.
Both of these transactions are being accounted for as poolings of interest. The
aggregate historical results of operations and financial position of Rescon and
S-Cubed are not material to the Company's consolidated financial statements.
Therefore, prior period amounts have not been restated and results of operations
have been included since the date of acquisition.
Note 3 -- Common Stock
Earnings per share calculations for the three months ended March 31, 1997 are
based on 19,695,752 weighted average common shares outstanding, plus 502,124
common share equivalents attributable to common stock options. Earnings per
share calculations for the nine months ended March 31, 1997
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are based on 17,985,379 weighted average common shares outstanding, plus 499,015
common share equivalents attributable to common stock options. See Exhibit 11
for further information on the computation of earnings per common and common
equivalent share.
All share and per share data have been restated to reflect the two-for-one stock
split, in the form of a 100% stock dividend, effected in February 1997.
Note 4 -- Recently Issued Accounting Standard
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share" ("FAS 128"). This Statement establishes and simplifies
standards for computing and presenting earnings per share. FAS 128 will be
effective for the Company's third quarter of fiscal 1998, and requires the
restatement of all previously reported earnings per share data presented. Early
adoption of this Statement is not permitted. FAS 128 replaces primary and fully
diluted earnings per share with basic and diluted earnings per share. The
Company expects that basic and diluted earnings per share amounts will not be
materially different from the Company's respective primary and fully diluted
earnings per share amounts.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information set forth and discussed below for the three months and nine
months ended March 31, 1997, is derived from the Condensed Consolidated
Financial Statements included herein. The financial information set forth and
discussed below is unaudited but, in the opinion of management, reflects all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of such information. The Company's results of operations for a
particular quarter may not be indicative of results expected during subsequent
fiscal quarters or for the entire year.
OVERVIEW
The Company provides a full spectrum of clinical trials research and development
services on a contract basis to the pharmaceutical and biotechnology industries.
These services are provided to clients on a global basis and include: (1)
designing, initiating and monitoring clinical trials; (2) managing and analyzing
clinical data; and (3) industry consulting services including regulatory
affairs, medical writing, performance improvement, training and health
economics.
The Company's contracts are typically fixed price, multi-year contracts that
require a portion of the fee to be paid at the time the contract is entered
into, with the balance of the fee paid in installments during the contract's
duration. Net revenue from contracts is generally recognized on a percentage of
completion basis as work is performed.
As is customary in the industry, the Company routinely subcontracts with third
party investigators in connection with clinical trials and other third party
service providers for laboratory analysis and other specialized services. These
and other reimbursable costs are paid by the client and, in accordance with
industry practice, are included in revenue. Reimbursed costs vary from contract
to contract. Accordingly, the Company views net revenue, which consists of
revenue less reimbursed costs, as its primary measure of revenue growth.
Direct costs consist of compensation and related fringe benefits for
project-related employees, other project-related costs not reimbursed and
allocated facilities and information systems costs. Selling, general and
administrative expenses consist of compensation and related fringe benefits for
selling and administrative employees, professional services and advertising
costs, as well as allocated costs related to facilities and information systems.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996
Net revenue increased by $19.8 million, or 87.8%, from $22.5 million for the
three months ended March 31, 1996 to $42.3 million for the three months ended
March 31, 1997. This increase was primarily due to net revenue increases of
$13.5 million and $5.6 million from North American and European operations,
respectively. This net revenue growth was primarily attributable to an increase
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in the volume of clinical research projects serviced by the Company and, to a
lesser extent, the Company's six acquisitions since June 1996. Excluding the six
acquisitions, the Company's net revenue for the three months ended March 31,
1997 increased by $15.7 million, or 69.6%, from the comparable prior year
period, primarily in the areas of clinical monitoring services and data
management and biostatistical analysis. There can be no assurance that the
Company can sustain this rate of increase in net revenue from continuing
operations in future periods. See "Risk Factors."
Direct costs increased by $13.6 million, or 89.6%, from $15.2 million for the
three months ended March 31, 1996 to $28.7 million for the three months ended
March 31, 1997. This increase in direct costs was due to the increase in the
number of project-related personnel, hiring, facilities and information system
costs necessary to support the increased level of operations. Direct costs as a
percentage of net revenue remained essentially unchanged increasing from 67.3%
for the three months ended March 31, 1996 to 68.0% for the three months ended
March 31, 1997.
Selling, general and administrative expenses increased by $3.6 million, or
71.1%, from $5.0 million for the three months ended March 31, 1996 to $8.6
million for the three months ended March 31, 1997. This increase was primarily
due to increased administrative personnel, hiring and facilities costs,
necessary to accommodate the Company's growth. Selling, general and
administrative expenses as a percentage of net revenue decreased from 22.2% for
the three months ended March 31, 1996 to 20.3% for the three months ended March
31, 1997 primarily due to leveraging of infrastructure over an expanding revenue
base.
Depreciation and amortization expense increased by $695,000, or 112.8%, from
$616,000 for the three months ended March 31, 1996 to $1.3 million for the three
months ended March 31, 1997. The increase is primarily due to increased capital
spending on computer equipment and facilities to support the increase in
project-related personnel.
Income from operations for the three months ended March 31, 1997 increased by
$1.9 million, or 110.6%, from $1.7 million for the three months ended March 31,
1996 to $3.7 million for the three months ended March 31, 1997.
Other income, net increased by $769,000 from $422,000 for the three months ended
March 31, 1996 to $1.2 million for the three months ended March 31, 1997. This
increase resulted from higher average balances of cash, cash equivalents and
marketable securities due primarily to proceeds from the Company's public
offerings in March and December 1996.
The Company's effective income tax rate was 35.7% for the three months ended
March 31, 1997, compared to 39.9% for the three months ended March 31, 1996.
This decrease was due to changes in the mix of taxable income from the different
jurisdictions in which the Company operates and the impact of tax-exempt
interest income on securities held by the Company.
8
<PAGE> 10
Nine Months Ended March 31, 1997 Compared to Nine Months Ended March 31, 1996
Net revenue increased by $51.4 million, or 84.1%, from $61.1 million for the
nine months ended March 31, 1996 to $112.4 million for the nine months ended
March 31, 1997. This increase was primarily due to net revenue increases of
$35.4 million and $14.5 million from North American and European operations,
respectively. This net revenue growth was primarily attributable to an increase
in the volume of clinical research projects serviced by the Company and, to a
lesser extent, the Company's six acquisitions since June 1996. Excluding the six
acquisitions, the Company's net revenue for the nine months ended March 31, 1997
increased by $42.0 million, or 68.7%, from the comparable prior year period,
primarily in the areas of clinical monitoring services and data management and
biostatistical analysis. There can be no assurance that the Company can sustain
this rate of increase in net revenue from continuing operations in future
periods. See "Risk Factors."
Direct costs increased by $34.9 million, or 83.0%, from $42.0 million for the
nine months ended March 31, 1996 to $76.9 million for the nine months ended
March 31, 1997. This increase in direct costs was due to the increase in the
number of project-related personnel, hiring, facilities and information system
costs necessary to support the increased level of operations. Direct costs as a
percentage of net revenue remained essentially unchanged decreasing slightly
from 68.8% for the nine months ended March 31, 1996 to 68.4% for the nine months
ended March 31, 1997.
Selling, general and administrative expenses increased by $9.8 million, or
74.8%, from $13.1 million for the nine months ended March 31, 1996 to $22.9
million for the nine months ended March 31, 1997. This increase was primarily
due to increased administrative personnel, hiring and facilities costs,
necessary to accommodate the Company's growth. Selling, general and
administrative expenses as a percentage of net revenue decreased from 21.4% for
the nine months ended March 31, 1996 to 20.3% for the nine months ended March
31, 1997 primarily due to leveraging of infrastructure over an expanding revenue
base.
Depreciation and amortization expense increased by $1.6 million, or 94.0%, from
$1.6 million for the nine months ended March 31, 1996 to $3.2 million for the
nine months ended March 31, 1997. The increase is primarily due to increased
capital spending on computer equipment and facilities to support the increase in
project-related personnel.
Income from operations for the nine months ended March 31, 1997 increased by
$5.1 million, or 118.5%, from $4.3 million for the nine months ended March 31,
1996 to $9.5 million for the nine months ended March 31, 1997.
Other income, net increased by $1.3 million from $642,000 for the nine months
ended March 31, 1996 to $2.0 million for the nine months ended March 31, 1997.
This increase resulted from higher average balances of cash, cash equivalents
and marketable securities due primarily to proceeds from the Company's public
offerings in March and December 1996.
The Company's effective income tax rate was 36.1% for the nine months ended
March 31, 1997, compared to 39.9% for the nine months ended March 31, 1996. This
decrease was due to changes in
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the mix of taxable income from the different jurisdictions in which the Company
operates and the impact of tax-exempt interest income on securities held by the
Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company's clinical research and development contracts are generally fixed
price, with some variable components, and range in duration from a few months to
several years. The cash flows from contracts typically consist of a down payment
required to be paid at the time the contract is entered into and the balance in
installments over the contract's duration, in some cases on a milestone
achievement basis. Revenue from the contracts is generally recognized on a
percentage of completion basis as work is performed. Accordingly, cash receipts
do not necessarily correspond to costs incurred and revenue recognized on
contracts. The Company's cash flow is influenced by changes in the levels of
billed and unbilled receivables and advance billings. As a result, the number of
days revenue outstanding in accounts receivable, net of advance billings and the
related dollar values of these accounts, can vary due to the achievement of
contractual milestones and the timing and size of cash receipts. The number of
days revenue outstanding, net of advance billings, was 47 days at March 31, 1997
and at June 30, 1996. Accounts receivable, net of the allowance for doubtful
accounts, increased from $39.3 million at June 30, 1996 to $59.3 million at
March 31, 1997. Advance billings increased from $20.0 million at June 30, 1996
to $30.5 million at March 31, 1997 due to accounts billed to clients in advance
of revenue earned.
Unrestricted cash and cash equivalents increased by $44.9 million during the
nine months ended March 31, 1997 as a result of $57.7 million and $3.7 million
in cash provided by financing and operating activities, respectively, partially
offset by $15.6 million in cash used by investing activities, and an $886,000
unfavorable effect of exchange rate changes.
Net cash provided by operating activities resulted from net income, excluding
non-cash expenses, of $10.5 million and increases in advance billings and other
current liabilities of $10.3 million and $3.6 million, respectively, partially
offset by increases in billed and unbilled receivables and other current assets
of $17.0 million and $804,000, respectively, and a decrease in accounts payable
of $2.1 million.
Investing activities consisted primarily of capital expenditures of $13.5
million related to facility expansion and investments in information technology,
and net purchases of marketable securities.
Financing activities consisted primarily of net proceeds of $57.2 million from
the Company's December 1996 follow-on public offering, slightly offset by
repayments of long-term debt of $3.2 million. Debt repayments included $2.3
million to retire third-party debt assumed during the August 1996 acquisition of
S&FA.
The Company has domestic and foreign line of credit arrangements with banks
totaling approximately $7.5 million and a capital lease line of credit with a
U.S. bank for $2.4 million. At March 31, 1997 the Company had approximately $9.4
million in available credit under these arrangements.
The Company's primary cash needs on both a short-term and long-term basis are
for the payment of salaries and fringe benefits, hiring and recruiting expenses,
business development costs, capital
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expenditures and facility-related expenses. The Company believes that its
existing capital resources, together with cash flows from operations and
borrowing capacity under its existing lines of credit, will be sufficient to
meet its foreseeable cash needs. In the future, the Company will continue to
consider acquiring businesses to enhance its service offerings, therapeutic base
and global presence. Any such acquisitions may require additional external
financings and the Company may from time to time seek to obtain funds from
public or private issuances of equity or debt securities. There can be no
assurance that such financings will be available on terms acceptable to the
Company.
The foregoing statements include forward-looking statements which involve risks
and uncertainties. The Company's actual experience may differ materially from
that discussed above. Factors that might cause such a difference include, but
are not limited to, those discussed in "Risk Factors" as well as future events
that have the effect of reducing the Company's available cash balances, such as
unexpected operating losses or capital expenditures or cash expenditures related
to possible future acquisitions.
RECENTLY ISSUED ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share" ("FAS 128"). This Statement establishes and simplifies
standards for computing and presenting earnings per share. FAS 128 will be
effective for the Company's third quarter of fiscal 1998, and requires the
restatement of all previously reported earnings per share data presented. Early
adoption of this Statement is not permitted. FAS 128 replaces primary and fully
diluted earnings per share with basic and diluted earnings per share. The
Company expects that basic and diluted earnings per share amounts will not be
materially different from the Company's respective primary and fully diluted
earnings per share amounts.
11
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RISK FACTORS
In addition to the other information in this report, the following risk factors
should be considered carefully in evaluating the company and its business.
Information provided by the Company from time to time may contain certain
"forward-looking" information, as that term is defined by (i) the Private
Securities Litigation Reform Act of 1995 (the "Act") and (ii) in releases made
by the Securities and Exchange Commission (the "SEC"). These risk factors are
being provided pursuant to the provisions of the Act and with the intention of
obtaining the benefits of the "safe harbor" provisions of the Act.
LOSS OR DELAY OF LARGE CONTRACTS. Most of the Company's contracts are terminable
upon 60 to 90 days' notice by the client. Clients terminate or delay contracts
for a variety of reasons, including among others the failure of products being
tested to satisfy safety requirements, unexpected or undesired clinical results
of the product, the client's decision to forego a particular study, insufficient
patient enrollment or investigator recruitment or production problems resulting
in shortages of the drug. In addition, the Company believes that several
factors, including the potential adverse impact of health care reform, have
caused pharmaceutical companies to apply more stringent criteria to the decision
to proceed with clinical trials and therefore may result in a greater
willingness of these companies to cancel contracts with CROs. The loss or delay
of a large contract or the loss or delay of multiple contacts could have a
material adverse effect on the financial performance of the Company.
VARIABILITY OF QUARTERLY OPERATING RESULTS. The Company's quarterly operating
results have been subject to variation, and will continue to be subject to
variation, depending upon factors such as the initiation and progress of
significant projects, acquisitions, exchange rate fluctuations, the mix of
services offered, the opening of new offices, and the startup costs incurred in
connection with the introduction of new products and services. In addition,
during the third quarters of fiscal 1993 and 1995, the Company's results of
operations were affected by a non-cash restructuring charge and a non-cash
write-down due to the impairment of long-lived assets, respectively. Because a
high percentage of the Company's operating costs is relatively fixed, variations
in the initiation, completion, delay or loss of contracts, or in the progress of
clinical trials can cause material adverse variations in quarterly operating
results.
DEPENDENCE ON CERTAIN INDUSTRIES AND CLIENTS. The Company's revenues are highly
dependent on research and development expenditures by the pharmaceutical and
biotechnology industries. The Company's operations could be materially and
adversely affected by general economic downturns in its clients' industries, the
impact of the current trend toward consolidation in these industries or any
decrease in research and development expenditures. Furthermore, the Company has
benefited to date from the increasing tendency of pharmaceutical and
biotechnology companies to outsource large clinical research projects. A
reversal or slowing of this trend would have a material adverse effect on the
Company.
The Company believes that concentrations of business in the CRO industry are not
uncommon. The Company has experienced such concentration in the past and may
experience such concentration in future years. No client accounted for 10% or
more of consolidated net revenue in fiscal 1996,
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however, one client accounted for 10.3% and 10.0% of consolidated net revenue
for the three months and the nine months ended March 31, 1997, respectively, and
a second client accounted for 11.5% of consolidated net revenue for the three
months ended March 31, 1997. In fiscal 1996 and the nine months ended March 31,
1997, the Company's top five clients accounted for 32.0% and 41.0%,
respectively, of the Company's consolidated net revenue. The loss of business
from a significant client could have a material adverse effect on the Company.
MANAGEMENT OF BUSINESS EXPANSION; NEED FOR IMPROVED SYSTEMS; ASSIMILATION OF
FOREIGN OPERATIONS. The Company's business and operations have experienced
substantial expansion over the past 10 years. The Company believes that such
expansion places a strain on operational, human and financial resources. In
order to manage such expansion, the Company must continue to improve its
operating, administrative and information systems, accurately predict its future
personnel and resource needs to meet client contract commitments, track the
progress of ongoing client projects and attract and retain qualified management,
professional, scientific and technical operating personnel. Expansion of foreign
operations also may involve the additional risks of assimilating differences in
foreign business practices, hiring and retaining qualified personnel, and
overcoming language barriers. In the event that the operation of an acquired
business does not live up to expectations, the Company may be required to
restructure the acquired business or write-off the value of some or all of the
assets of the acquired business. In fiscal 1993 and 1995, the Company's results
of operations were materially and adversely affected by write-offs associated
with the Company's acquired German operations. Failure by the Company to meet
the demands of and to manage expansion of its business and operations could have
a material adverse effect on the Company's business.
RISKS ASSOCIATED WITH ACQUISITIONS. The Company has made a number of
acquisitions, including six since June 1, 1996, and will continue to review
future acquisition opportunities. No assurances can be given that acquisition
candidates will continue to be available on terms and conditions acceptable to
the Company. Acquisitions involve numerous risks, including, among other things,
difficulties and expenses incurred in connection with the acquisitions and the
subsequent assimilation of the operations and services or products of the
acquired companies, the difficulty of operating new (albeit related) businesses,
the diversion of management's attention from other business concerns and the
potential loss of key employees of the acquired company. Acquisitions of foreign
companies also may involve the additional risks of assimilating differences in
foreign business practices and overcoming language barriers. In the event that
the operations of an acquired business do not live up to expectations, the
Company may be required to restructure the acquired business or write-off the
value of some or all of the assets of the acquired business. In fiscal 1993 and
1995, the Company's results of operations were materially and adversely affected
by write-offs associated with the Company's acquired German operations. There
can be no assurance that any acquisition will be successfully integrated into
the Company's operations.
DEPENDENCE ON GOVERNMENT REGULATION. The Company's business depends on the
comprehensive government regulation of the drug development process. In the
United States, the general trend has been in the direction of continued or
increased regulation, although the FDA recently announced regulatory changes
intended to streamline the approval process for biotechnology products by
applying the same standards as are in effect for conventional drugs. In Europe,
the general trend has been toward coordination of common standards for clinical
testing of new drugs, leading to changes
13
<PAGE> 15
in the various requirements currently imposed by each country. Changes in
regulation, including a relaxation in regulatory requirements or the
introduction of simplified drug approval procedures, as well as anticipated
regulation, could materially and adversely affect the demand for the services
offered by the Company. In addition, failure on the part of the Company to
comply with applicable regulations could result in the termination of ongoing
research or the disqualification of data, either of which could have a material
adverse effect on the Company.
COMPETITION; CRO INDUSTRY CONSOLIDATION. The Company primarily competes against
in-house departments of pharmaceutical companies, full service CROs and, to a
lesser extent, universities and teaching hospitals. Some of these competitors
have substantially greater capital, technical and other resources than the
Company. CROs generally compete on the basis of previous experience, medical and
scientific expertise in specific therapeutic areas, the quality of contract
research, the ability to organize and manage large-scale trials on a global
basis, the ability to manage large and complex medical databases, the ability to
provide statistical and regulatory services, the ability to recruit
investigators, the ability to integrate information technology with systems to
improve the efficiency of contract research, an international presence with
strategically located facilities, financial viability and price. There can be no
assurance that the Company will be able to compete favorably in these areas.
The CRO industry is highly fragmented, with participants ranging from several
hundred small, limited-service providers to several large, full-service CROs
with global operations. The trend toward CRO industry consolidation has resulted
in heightened competition among the larger CROs for clients and acquisition
candidates. In addition, consolidation within the pharmaceutical industry as
well as a trend by pharmaceutical companies of outsourcing among fewer CROs has
led to heightened competition for CRO contracts.
VOLATILITY OF STOCK PRICE. The market price of the Company's Common Stock is
subject to wide fluctuations in response to quarter-to-quarter variations in
operating results, changes in earnings estimates by analysts, market conditions
in the industry, prospects of health care reform, changes in government
regulation and general economic conditions. In addition, the stock market has
from time to time experienced significant price and volume fluctuations that
have been unrelated to the operating performance of particular companies. These
market fluctuations may adversely affect the market price of the Company's
Common Stock. Because the Company's Common Stock currently trades at a
relatively high price-earnings multiple, due in part to analysts' expectations
of continued earnings growth, even a relatively small shortfall in earnings
from, or a change in, analysts' expectations may cause an immediate and
substantial decline in the Company's stock price. Investors in the Company's
Common Stock must be willing to bear the risk of such fluctuations in earnings
and stock price.
POTENTIAL ADVERSE IMPACT OF HEALTH CARE REFORM. Numerous governments have
undertaken efforts to control growing health care costs through legislation,
regulation and voluntary agreements with medical care providers and
pharmaceutical companies. In the last several years, several comprehensive
health care reform proposals were introduced in the U.S. Congress. The intent of
the proposals was generally, to expand health care coverage for the uninsured
and reduce the growth of total health care expenditures. While none of the
proposals was adopted, health care reform may
14
<PAGE> 16
adversely affect research and development expenditures by pharmaceutical and
biotechnology companies, resulting in a decrease of the business opportunities
available to the Company. Management is unable to predict the likelihood of
health care reform proposals being enacted into law or the effect such law would
have on the Company.
Many European governments have also reviewed or undertaken health care reform.
For example, German health care reform legislation, which was implemented on
January 1, 1993, contributed to an estimated 15% decline in German
pharmaceutical industry sales in calendar 1993 and led several clients to cancel
contracts with the Company. Subsequent to these events, in the third quarter of
fiscal 1993, the Company restructured its German operations and incurred a
restructuring charge of approximately $3.3 million. In addition, in the third
quarter of fiscal 1995, the Company's results of operations were affected by a
non-cash write-down due to the impairment of long-lived assets of PAREXEL GmbH,
the Company's German subsidiary, of approximately $11.3 million. The Company
cannot predict the impact that any pending or future health care reform
proposals may have on the Company's business in Europe.
DEPENDENCE ON PERSONNEL. The Company relies on a number of key executives,
including Josef H. von Rickenbach, its President, Chief Executive Officer and
Chairman, upon whom the Company maintains key man life insurance. Although the
Company has entered into agreements containing non-competition restrictions with
its senior officers, the Company does not have employment agreements with most
of these persons and the loss of the services of any of the Company's key
executives could have a material adverse effect on the Company. The Company's
performance also depends on its ability to attract and retain qualified
professional, scientific and technical operating staff. The level of competition
among employers for skilled personnel, particularly whose with M.D., Ph.D. or
equivalent degrees, is high. There can be no assurance the Company will be able
to continue to attract and retain qualified staff. In addition, the cost of
recruiting skilled personnel has increased and there can be no assurance that
such costs will not continue to rise.
POTENTIAL LIABILITY; POSSIBLE INSUFFICIENCY OF INSURANCE. Clinical research
services involve the testing of new drugs on human volunteers pursuant to a
study protocol. Such testing involves a risk of liability for personal injury or
death to patients due to, among other reasons, possible unforeseen adverse side
effects or improper administration of the new drug. Many of these patients are
already seriously ill and are at risk of further illness or death. The Company
could be materially and adversely affected if it were required to pay damages or
incur defense costs in connection with a claim that is outside the scope of an
indemnity or insurance coverage, or if the indemnity, although applicable, is
not performed in accordance with its terms or if the Company's liability exceeds
the amount of applicable insurance. In addition, there can be no assurance that
such insurance will continue to be available on terms acceptable to the Company.
ADVERSE EFFECT OF EXCHANGE RATE FLUCTUATIONS. Approximately 38.4% and 35.3% of
the Company's net revenue for fiscal 1996 and the nine months ended March 31,
1997, respectively, were derived from the Company's operations outside of North
America. Since the revenue and expenses of the Company's foreign operations are
generally denominated in local currencies, exchange rate fluctuations between
local currencies and the United States dollar will subject the Company to
currency translation risk with respect to the results of its foreign operations.
To the extent the
15
<PAGE> 17
Company is unable to shift to its clients the effects of currency fluctuations,
these fluctuations could have a material adverse effect on the Company's results
of operations. The Company does not currently hedge against the risk of exchange
rate fluctuations.
ANTI-TAKEOVER PROVISIONS; POSSIBLE ISSUANCE OF PREFERRED STOCK. The Company's
Restated Articles of Organization and Restated By-Laws contain provisions that
may make it more difficult for a third party to acquire, or may discourage a
third party from acquiring, the Company. These provisions could limit the price
that certain investors might be willing to pay in the future for shares of the
Company's Common Stock. In addition, shares of the Company's Preferred Stock may
be issued in the future without further stockholder approval and upon such terms
and condition, and having such rights, privileges and preferences, as the Board
of Directors may determine. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of any holders of
Preferred Stock that may be issued in the future. The issuance of Preferred
Stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could adversely affect the market
price of the Common Stock and could have the effect of making it more difficult
for a third party to acquire, or discouraging a third party from acquiring, a
majority of the outstanding voting stock of the Company. The Company has no
present plans to issue any shares of Preferred Stock.
16
<PAGE> 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As previously disclosed, the Company is a defendant in a proceeding initiated
by a former shareholder of a business which was subsequently acquired by the
Company; this proceeding is captioned Dennis J. Tallon v. Frederic Harwood,
Samuel T. Barnett, Barnett Associates, Inc., and PAREXEL International
Corporation, 92-3496. The proceeding was filed on March 3, 1992 in the Court of
Common Pleas, Delaware County, Pennsylvania. On May 8, 1997, the trial court
granted the Company's motion for summary judgment and dismissed the Plaintiff's
action in its entirety. In his Complaint, the Plaintiff, whose shares were
acquired by the other two shareholders of the acquired business approximately
three months prior to the acquisition of the business by the Company, is seeking
unspecified monetary damages based on a claim that his shares were purchased at
an unfairly low price. The Company has been informed that the Plaintiff intends
to pursue an appeal of the trial court's order. The Company believes that
resolution of this matter will not have a material adverse effect on the
financial position, results of operations or business of the Company.
Item 2. Changes in Securities
(a) Not applicable
(b) Not applicable
(c) On February 28, 1997, the Company acquired all of the outstanding
capital stock of Rescon, Inc., a Virginia corporation ("Rescon").
As part of the transaction, the former stockholder of Rescon
received a total of 139,493 shares of the Company's Common Stock
(the "Shares") in exchange for all of the outstanding shares of
Rescon. The Shares were issued in reliance upon an exemption from
the registration provisions of the Securities Act of 1933, as
amended (the "Act"), set forth in Section 4(2) thereof. In
connection with this issuance, the Rescon stockholder made certain
representations to the Company as to its investment intent and
possessed a sufficient level of sophistication and access to
information. The Shares issued were subject to restrictions on
transfer absent registration under the Act or an exemption
therefrom.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1--Agreement dated June 30, 1993 between Prof. Dr. med.
Werner M. Herrmann and PAREXEL GmbH Independent Pharmaceutical
Research Organization, as amended.
17
<PAGE> 19
Exhibit 10.2--Letter Agreement dated May 12, 1997 between Prof.
Dr. med. Werner M. Herrmann and the Company.
Exhibit 11--Statement re Computation of Earnings Per Common and
Common Equivalent Share
Exhibit 27--Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated January 28,
1997 reporting financial results for the three months ended
December 31, 1996 and announcing a two-for-one stock split.
The Company filed a Current Report on Form 8-K dated March 3, 1997
reporting recent acquisitions by the Company and sales of equity
securities pursuant to Regulation S.
18
<PAGE> 20
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, on this 8th day of May, 1997.
PAREXEL International Corporation
By: /s/ Josef H. von Rickenbach
--------------------------------------------------
Josef H. von Rickenbach
President, Chief Executive Officer and Chairman
By: /s/ William T. Sobo, Jr.
--------------------------------------------------
William T. Sobo, Jr.
Senior Vice President, Chief Financial Officer
19
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE
- ----------- ----
<S> <C> <C>
10.1 Agreement dated June 30, 1993 between Prof. Dr. med.
Werner M. Herrmann and PAREXEL GmbH Independent
Pharmaceutical Research Organization, as amended. 21
10.2 Letter Agreement dated May 12, 1997 between Prof. Dr. med.
Werner M. Herrmann and the Company 27
11 Computation of Earnings Per Common and Common
Equivalent Share 29
27 Financial Data Schedule 30
</TABLE>
20
<PAGE> 1
EXHIBIT 10.1
Vertrag uber die Friei Mitarbeit
zwischen
AFB-PAREXEL GmbH
Independent Pharmaceutical Research Organization
Europa-Center (Eingang Breitscheidplatz), 10789 Berlin
- nachstehend "AFB-PAREXEL" genannt -
und
Herrn Dr. med. Werner M. Herrmann,
Facharzt fur Klinische Pharmakologie,
Universitatsprofessor fur Klinische Psychophysiologie, FUB,
Visiting Professor of Psychiatry and Member of the Voluntary
Faculty, State University of New York at Stony Brook (SUNY at
Stony Brook, New York, USA,
12278 Berlin, Alt Marienfelde 14
- nachstehend "Vertragspartner" genannt -
Section 1
Aufgaben- und Dienststellung
(1) Dem Vertragspartner ist als Freier Mitarbeiter die
wissenschaftliche Geschaftsfuhrung der Gesellschaft AFB-PEREXEL
GmbH ubertragen. Er ist verpflichtet, seine Aufgaben im einzelnen
mit dem Mitgeschaftsfuhrer der AFB-PAREXEL und Prasidenten der
Mehrheitsgesellschaft PAREXEL GmbH und PAREXEL International
Corporation (President and CEO) abzustimmen.
(2) Der Vertragspartner verpflichtet sich, sich in seinem
Aufgabengebiet weiterzubilden und sich jederzeit uber
einschlagige Veranderungen zu informieren.
(3) Der Vertragspartner ist Mitglied des Board of Directors der
PAREXEL International Corporation Boston, USA, und verpflichtet
sich, diese Tatigkeit nach bestem Wissen und Gewissen
auszufuhren.
(4) Der Vertragspartner ist CSO (Chief Scientific Officer) der
PAREXEL International Corporation, Boston, Diese Tatigkeit wird
in einem gesonderten Vertrag geregelt.
(5) Die Aufgaben und Verantwortlichkeiten werden im einzelnen durch
die Satzung der Gesellschaft und durch Gesellschafterbeschlusse
der Gesellschaft geregelt.
Section 2
Vergutung
(1) Der Vertragspartner erhalt fur seine Tatigkeit ein Honorar in
Hohe von DM 383, -- (dreihundertdreiundachtzig Deutsche Mark) pro
Stunde. Es gilt als vereinbart, dass er fur AFB-PAREXEL 360
Stunden pro Jahr tatig ist.
21
<PAGE> 2
(2) Dieses Honorar ist jeweils am Monatsende nach Rech-nungstellung
zu zahlen zuzuglich der jeweils gultigen Mehrwetsteuer, sofern
die Tatigkeit mehrwertsteuer-pflichtig ist. Die Zahlung erfolgt
auf ein Konto, das der Vertragspartner jeweils nennen muss.
(3) Steuern und Sozialversicherungsbeitrage sind von dem
Vertragspartner selbst abzufuhren.
(4) Der Vertragspartner sich im ausreichenden Ma(beta)e zu
versichern. Dies gilt insbesondere fur eine Krankenversicherung.
(5) AFB-PAREXEL bestatigt die betriebliche Pensionszusage, die
zwischen dem Vertragspartner und der GFA-Gesellschaft fur
Arzneimittelprufung mbH am 21.12.1981 geschlossen wurde
(Nachtrage 1 und 2 zum Geschaftsfuhrervertrag/Anlagen 1 und 2).
Sie ubernimmt die Kosten der beiden
Barmenia-Lebens-/Pensionsversicherungsvertrage.
(6) Zur Sicherung der Pensionszusage im Falle der Insolvenz bleibt
die am 11.11.1987 zwischen dem Vertragspartner und der AFB
Arzneimittelforschung GmbH in Berlin geschlossene
Verpfandungsvereinbarung bestehen als Ruckdeckungsversicherung
fur die Pensionszusage vom 1. April 1991 bis 30. Juni 1996
(Anlage 3).
(7) Der Vertragspartner nimmt am Erfolg von PAREXEL teil. Er erhalt
20% Bonus auf seine Jahresbezuge, wenn das Er-gebnis (operating
income) von PEREXEL erfullt ist. Die Staffelung folgt den Regeln
des MISC (Management Incentive Compensation Plan) von PAREXEL.
Section 3
Vertragsdauer
(1) Der Vertrag beginnt am 1. Juli 1993 und endet am 30. Juni 1996.
Danach verlangert er sich von Jahr zu Jahr bis er von einem der
beiden Vertragspartner gekundigt wird. Die Kundigungsfrist
betragt 12 Monate. Das Recht zu ausserordentlicher Kundigung
wegen Vertragsverletzung bleibt hiervon unberuhrt.
(2) Der Vertrag endet automatisch, wenn das 65. Lebensjahr des
Vertragspartners beendet ist.
Section 4
Reisekosten
(1) AFB-PAREXEL erstattet die anfallenden Reisekosten entsprechend
der gultigen Reisekostenordnung.
Section 5
Dienstwagen
(1) Die AFB stellt dem Vertragspartner einen Dienstwagen etwa vom Typ
Ford Scorpio fur Dienstfahrten zur Verfugung. Der Dienstwagen
wird dem Vertragspartner ebenfalls zu 10% fur private Nutzung
uberlassen.
Section 6
Arbeitszeit, Arbeitsort
(1) Der Vertragspartner ist in der Bestimmung seiner Arbeitszeit
frei.
(2) Der Vertragspartner ist bei der Wahl seiner Arbeitsmittel frei.
22
<PAGE> 3
(3) Zu fur die Tatigkeit notwendigen Treffen und Tagungen hat der
Vertragspartner nach den Erfordernissen in Dienstraumen der
AFB-PAREXEL anwesend zu sein.
Section 7
Wettbewerbsverbot
(1) Der Vertragspartner verpflichtet sich, wahrend der Vertragsdauer
keinen Beratungsvertrag mit einem Unternehmen abzuschlie(beta)en,
das mit AFB-PAREXEL oder einer der mit ihr verbundenen Firmen
sowie der Mehrheitsgesellschaft PAREXEL und einem ihr verbundenen
Unternehmen direkt oder indirekt in Konkurrenz steht.
(2) Verletzt der Vertragspartner dieses Wettbewerbsverbot, ist er zu
Schadenersatz verpflichtet.
(3) Eine Befreiung vom Wettbewerbsverbot bedarf in jedem Einzelfall
der schriftlichen Zustimmung von AFB-PAREXEL.
(4) AFB-PAREXEL berucksichtigt die Verpflichtungen, die dem
Vertragspartner aus seiner Teilzeittatigkeit als C 3-Professor
fur Klinische Psychophysiologie an der Freien Universitat Berlin
entstehen.
Section 8
Geheimhaltung
(1) Beide Vertragspartner sind sich daruber im klaren, da(beta)das
Aufgabengebiet zum Teil streng vertrauliche Informationen
beinhaltet, die einer besonderen Geheimhaltung bedurfen. Der
Vertragspartner erklart sich zu dieser besonderen Geheimhaltung
bereit.
(2) Der Vertragspartner wird samtliche Informationen, die er im
Rahmen seiner Tatigkeit fur AFB-PAREXEL oder fur die mit ihr
verbundenen Unternehmen erhalt, streng vertraulich behandeln und
Dritten auch nach Ablauf diese Vertrages nicht zuganglich machen.
Das Vertraulichkeitsgebot sowie die Geheimhaltungspflicht
beziehen sich auch auf die Erledigung von Arbeiten sowie die
Aufbewahrung von Unterlagen.
(3) Verletzt der Vertragspartner die Geheimhaltungspflicht oder das
Vertraulichkeitsgebot, ist er zu Schadenersatz verpflichtet.
Section 9
Aufbewahrung und Ruckgabe von Unterlagen
(1) Der Vertragspartner verpflichtet sich, alle ihm zur Verfugung
gestellten Geschafts- und Betriebsunterlagen
ordnungsgemass aufzubewahren, insbesondere dafur zu sorgen,
dass Dritte nicht Einsicht nehmen konnen. Die zur Verfugung
gestellten Unterlagen sind nach Ablauf des Vertragsverhaltnisses
unverzuglich unaufgefordert der Firma zuruckzugeben.
(2) Dieselbe Augbewahrungs- und Herausgabepflicht gilt fur samtliche
Schriftstucke, die Angelegenheiten der Firma betreffen (wie
Aufzeichnungen, Entwurfe etc.) und sich im Besitz des
Vertragspartners befinden.
(3) Der Vertragspartner ist nicht berechtigt, an solchen Unterlagen
ein Zuruckbehaltungsrecht auszuuben.
Section 10
Schriftform
(1) Mundliche Nebenabreden sind unwirksam.
(2) Anderungen dieses Vertrages bedurfen zu ihrer Wirksamkeit der
Schriftform.
23
<PAGE> 4
Section 11
Schlussbestimmung
(1) Sollten sich einzelne Bestandteile dieses Vertrages ganz oder
teilweise als unwirksam erweisen, so wird dennoch die Wirksamkeit
des Vertrages im ubrigen nicht beruhrt. Die Vertragsparteien
werden anstelle der unwirksamen Vertragsbestimmungen gultige
vereinbaren, die dem Zwecke dieses Vertrages entsprechen.
(2) Auf dieses Vertragsverhaltnis findet das Recht der Bundesrepublik
Deutschland Anwendung, sofern nichts anderes ausdrucklich
vereinbart ist. Fur Streitigkeiten aus bzw. uber diesen Vertrag
gilt die Zustandigkeit des Landgerichtes Berlin als vereinbart.
Berlin, den
AFB-PAREXEL GmbH Vertragspartner
/s/ Josef von Rickenbach /s/ W.M. Herrmann
- ---------------------------- ---------------------------------
Josef von Rickenbach Prof. Dr. W.M. Herrmann
Anlagen
1. Nachtrag 1 zum Geschaftsfuhrervertrag vom 21.12.1981
2. Nachtrag 2 zum Geschaftsfuhrervertrag vom 21.12.1981
3. Verpfandungsvereinbarung vom 11.11.1987
24
<PAGE> 5
ANDERUNGVERTRAG
zum Vertrag uber die Freie Mitarbeit
zwischen
PAREXEL GMBH
Independent Pharmaceutical Research Organization
Klinikum Westend, Haus 18
Spandauer Damm 130
14050 Berlin
vertreten durch ihre alleinige Gesellschafterin
PAREXEL Unternehmensbeteiligung GmbH
- - nachstehend "PAREXEL" genannt -
und
HERRN PROF. DR. MED. WERNER M. HERRMANN
Alt-Marienfelde 14
12278 Berlin
- - nachstehend Vertragspartner genannt -
Die Vertragspartner sind sich daruber einig, da(beta)die Kundigung der PAREXEL
vom 27.6.96 des Vertrages uber die Freie Mitarbeit vom 30.6.93 keine
Rechtswirkung entfaltet und der Vertrag unter den gleichen Bedingungen mit
folgenden Anderungen, die zum 1.7.97 wirksam werden, uber den 30.6.97 hinaus
fortgefuhrt werden soll:
SECTION 1 AUFGABEN UND DIENSTSTELLUNG
(3) Der Vertragspartner ist zum Mitglied des Board of Directors der PAREXEL
International Corporation ("PAREXEL International") gewahlt. Die
Amtsperiode endet im November 1999. Der Vertragspartner wird seine damit
verbundenen Verpflichtungen solange nachkommen bis ein Nachfolger wirksam
gewahlt und im Amt ist oder bis er seinen Rucktritt erklart hat oder bis er
abgesetzt worden ist. Der Vertragspartner verpflichtet sich, diese
Tatigkeit nach bestem Wissen und Gewissen auszufuhren.
(6) Der Vertragspartner ist Senior Vice President of PAREXEL International.
(7) Der Vertragspartner ist Worldwide Head of Phase I Operations of PAREXEL
International.
SECTION 2 VERGUTUNG
(1) Der Vertragspartner erhalt eine Vergutung von DM 300,-- (Dreihundert) pro
Stunde. Die Vergutung wird einmal jahrlich bis Ablauf der ersten drei Monate
des Geschaftsjahres von den Gesellschaftern uberpruft. Es gilt als
vereinbart, dass er fur PAREXEL 360 Stunden tatig ist.
(7) Der Vertragspartner nimmt am Erfolg von PAREXEL teil. Der variable
Gehaltsanteil (Bonus) gemass des
25
<PAGE> 6
MICP-Programmes betragt 30 % der Jahresvergutung. Nahere Kriterien werden
noch gesondert festgelegt und gelten bis zur Vereinbarung neuer Ziele
weiter.
Section 3 Vertragsdauer
Der Vertrag wird bis zum 30. Juni 2001 verlangert. Der Vertrag endet zu diesem
Zeitpunkt ohne dass es einer Kundigung bedarf. Eine vorzeitige Kundigung des
Vertrages ist ausgeschlossen. Das Recht zu ausserordentlicher Kundigung aus
wichtigem Grund bleibt hiervon unberuhrt.
Berlin, den 5.3.1997
PAREXEL Vertragspartner
/s/ Josef von Rickenbach /s/ Prof. Dr. med. Werner M. Herrmann
- ---------------------------- -----------------------------------------
Josef von Rickenbach Prof. Dr. med. Werner M. Herrmann
26
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
between
PAREXEL INTERNATIONAL CORPORATION
(hereinafter referred to as the "Company")
195 West Street
Waltham, Massachusetts 02154
and
PROFESSOR DR. MED. W.M. HERRMANN
(hereinafter referred to as the "Manager")
Section 1
APPOINTMENT AND MANAGEMENT AUTHORIZATION
1. Effective July 1, 1997, the Manager is appointed Senior Vice
President, Clinical Pharmacology of the Company. As such, he will
report directly to the CEO of the Company and will have the job
responsibilities defined in a separate document.
2. The Manager shall dedicate his entire business efforts to the
Company and its subsidiaries and will execute and be bound by the
Company's Key Employee Confidentiality and Non-Competition
Agreement (the "Key Employee Agreement"). The Key Employee
Agreement is incorporated herein by reference.
3. The parties acknowledge the employment agreement between the
Manager and PAREXEL GmbH Independent Pharmaceutical Research
Organization.
Section 2
COMPENSATION
1. The Manager will receive a monthly gross salary of $5,800.00
payable at the end of each calendar month. Such salary covers any
overtime work performed by the Manager.
2. The Manager will be eligible to receive an incentive bonus of up
to 30% of his salary in accordance with the provisions of the
Company's Management Incentive Plan.
Section 3
DURATION OF THE CONTRACT, TERMINATION
1. The term of this agreement is from July 1, 1997 through June 30,
2001, provided that the Company may terminate this agreement at
any time without prior notice for cause, or in the event of a
breach of this Agreement or the Key Employee Agreement by the
Manager.
27
<PAGE> 2
Section 4
MISCELLANEOUS
1. Modifications of and supplements to this contract need to be in
writing.
2. If a provision of this contract is or legally becomes invalid,
the validity of the remaining provisions shall not thereby be
affected. The contracting parties are obligated to replace the
invalid provision by a legally valid provision which achieves, or
virtually achieves, the purpose of the invalid provision.
3. This agreement is governed under the laws of the Commonwealth of
Massachusetts.
PAREXEL INTERNATIONAL CORPORATION
By: /s/ Josef H. von Rickenbach
------------------------------------
Josef H. von Rickenbach
Chairman, CEO
/s/ Prof. Dr. med. W.M. Herrmann
------------------------------------
Prof. Dr. med. W.M. Herrmann
May 12, 1997
------------
Date
28
<PAGE> 1
EXHIBIT 11
PAREXEL INTERNATIONAL CORPORATION
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
---------------------- ----------------------
March 31, March 31,
---------------------- ----------------------
1996 1997 1996 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income attributable to common shares $ 1,297 $ 3,117 $ 2,995 $ 7,326
======= ======= ======= =======
Weighted average common shares outstanding
a. Shares attributable to common stock
outstanding 14,301 19,696 12,067 17,985
b. Shares attributable to common stock options
and preferred stock warrants pursuant to
APB 15, paragraph 38(b) 601 502 476 499
------- ------- ------- -------
Weighted average common shares outstanding 14,902 20,198 12,543 18,484
======= ======= ======= =======
Net income per share $ 0.09 $ 0.15 $ 0.24 $ 0.40
======= ======= ======= =======
</TABLE>
29
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 62,384
<SECURITIES> 32,096
<RECEIVABLES> 62,044
<ALLOWANCES> 2,788
<INVENTORY> 0
<CURRENT-ASSETS> 162,005
<PP&E> 33,631
<DEPRECIATION> 12,738
<TOTAL-ASSETS> 185,012
<CURRENT-LIABILITIES> 52,553
<BONDS> 0
0
0
<COMMON> 198
<OTHER-SE> 130,540
<TOTAL-LIABILITY-AND-EQUITY> 185,012
<SALES> 0
<TOTAL-REVENUES> 112,460
<CGS> 0
<TOTAL-COSTS> 76,915
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 702
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<INCOME-TAX> 4,141
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<NET-INCOME> 7,326
<EPS-PRIMARY> 0.40
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</TABLE>
