<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
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 Identification
incorporation or organization) Number)
195 WEST STREET
WALTHAM, MASSACHUSETTS 02451
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (781) 487-9900
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of May 11, 2000, there were
25,349,158 shares of PAREXEL International Corporation common stock outstanding,
excluding 487,000 shares in treasury.
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PAREXEL INTERNATIONAL CORPORATION
INDEX
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets - March 31, 2000
and June 30, 1999 3
Condensed Consolidated Statements of Operations -
Three months ended March 31, 2000 and 1999; Nine
months ended March 31, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows - Nine
months ended March 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3 Quantitative and Qualitative Disclosure About Market Risk 16
Risk Factors 17
PART II. OTHER INFORMATION
Item 1 Legal Proceedings 22
Item 6 Exhibits and Reports on Form 8-K 22
SIGNATURES 23
EXHIBIT INDEX 24
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
PAREXEL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
2000 1999
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 79,047 $ 62,005
Marketable securities 36,397 27,952
Accounts receivable, net 149,363 150,520
Prepaid expenses 7,400 7,917
Other current assets 17,886 16,432
--------- ---------
Total current assets 290,093 264,826
Property and equipment, net 42,894 47,065
Other assets 21,784 21,674
--------- ---------
$ 354,771 $ 333,565
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Credit arrangements $ 296 $ 1,057
Accounts payable 20,006 14,698
Advance billings 82,167 69,776
Other current liabilities 52,193 46,538
--------- ---------
Total current liabilities 154,662 132,069
Other liabilities 9,265 9,464
--------- ---------
Total liabilities 163,927 141,533
--------- ---------
Stockholders' equity:
Preferred stock - $0.01 par value; shares
authorized: 5,000,000; none issued and outstanding - -
Common stock - $0.01 par value; shares authorized:
50,000,000; shares issued: 25,378,570 and 25,132,461 at
March 31, 2000 and June 30, 1999, respectively; shares
outstanding: 24,891,570 and 25,103,049 at March 31, 2000
and June 30, 1999, respectively 254 251
Additional paid-in capital 161,764 159,592
Retained earnings 39,840 35,785
Treasury stock, at cost (4,959) (17)
Accumulated other comprehensive income (6,055) (3,579)
--------- ---------
Total stockholders' equity 190,844 192,032
--------- ---------
$ 354,771 $ 333,565
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
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PAREXEL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
MARCH 31, MARCH 31,
--------- ---------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenue $ 97,253 $ 90,032 $ 286,978 $ 260,722
--------- --------- --------- ---------
Costs and expenses:
Direct costs 67,110 59,424 196,033 172,051
Selling, general and administrative 20,117 18,398 58,566 52,792
Depreciation and amortization 5,755 4,507 16,006 13,222
Restructuring and other charges 13,400 - 13,088 -
--------- --------- --------- ---------
106,382 82,329 283,693 238,065
--------- --------- --------- ---------
Income (loss) from operations (9,129) 7,703 3,285 22,657
Other income, net 1,780 1,044 4,402 2,384
--------- --------- --------- ---------
Income (loss) before provision (benefit) (7,349) 8,747 7,687 25,041
for income taxes
Provision (benefit) for income taxes (1,901) 3,062 3,632 8,710
--------- --------- --------- ---------
Net income (loss) ($ 5,448) $ 5,685 $ 4,055 $ 16,331
========= ========= ========= =========
Earnings (loss) per share:
Basic ($ 0.22) $ 0.23 $ 0.16 $ 0.66
Diluted ($ 0.22) $ 0.23 $ 0.16 $ 0.65
Shares used in computing earnings per share:
Basic 24,883 24,834 24,977 24,777
Diluted 24,883 25,064 25,081 25,105
</TABLE>
See notes to condensed consolidated financial statements.
4
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PAREXEL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
MARCH 31,
---------
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,055 $ 16,331
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 16,006 13,222
Changes in operating assets and liabilities, net of effects of acquisition 23,938 (7,358)
-------- --------
Net cash provided by operating activities 43,999 22,195
-------- --------
Cash flows from investing activities:
Purchase of marketable securities (68,397) (68,840)
Proceeds from sale of marketable securities 59,636 65,026
Other investing activities 235 -
Acquisition of business (3,000) 633
Purchase of property and equipment (11,808) (13,431)
-------- --------
Net cash used in investing activities (23,334) (16,612)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock 2,175 3,858
Repurchase of common stock (4,941) -
Repayments on credit arrangements (716) (1,386)
-------- --------
Net cash (used in) provided by financing activities (3,482) 2,472
-------- --------
Effect of exchange rate changes on cash and cash equivalents (141) (1,836)
-------- --------
Net increase in cash and cash equivalents 17,042 6,219
Cash and cash equivalents at beginning of period 62,005 39,941
-------- --------
Cash and cash equivalents at end of period $ 79,047 $ 46,160
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
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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 of
PAREXEL International Corporation (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions of 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 (primarily consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the three and nine months ended March 31, 2000,
are not necessarily indicative of the results that may be expected for other
quarters or the entire fiscal year. Certain prior year balances have been
reclassified in order to conform to current year presentation. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
June 30, 1999.
NOTE 2 -- EARNINGS (LOSS) PER SHARE
The following table outlines the basic and diluted earnings (loss) per common
share computations (in thousands, except per share data):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED MARCH 31, ENDED MARCH 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) attributable to common shares ($5,448) $5,685 $4,055 $16,331
======= ====== ====== =======
BASIC EARNINGS (LOSS) PER COMMON SHARE COMPUTATION:
Weighted average common shares outstanding 24,883 24,834 24,977 24,777
======= ====== ====== =======
Basic earnings (loss) per common share ($ 0.22) $ 0.23 $ 0.16 $ 0.66
======= ====== ====== =======
DILUTED EARNINGS (LOSS) PER COMMON SHARE COMPUTATION:
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 24,883 24,834 24,977 24,777
Shares attributable to common stock options -- 230 104 328
======= ====== ====== =======
24,883 25,064 25,081 25,105
======= ====== ====== =======
Diluted earnings (loss) per common share ($ 0.22) $ 0.23 $ 0.16 $ 0.65
======= ====== ====== =======
</TABLE>
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NOTE 3 - COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) has been calculated by the Company in accordance
with FASB Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income." Comprehensive income (loss), which is
comprised of net income (loss) and foreign currency translation adjustments,
totaled $(6.8) million and $4.5 million for the three months ended March 31,
2000 and 1999, respectively, and $1.6 million and $14.0 for the nine months
ended March 31, 2000 and 1999, respectively.
NOTE 4 - SEGMENT INFORMATION
The Company is managed through three reportable segments, namely, the Contract
Research Services group, the Consulting Group and the Medical Marketing Group.
The Contract Research Services group constitutes the Company's core business and
includes clinical trials management, biostatistics and data management, as well
as related medical advisory, information technology, and investigator site
services. PAREXEL's Consulting Group provides technical expertise in such
disciplines as clinical pharmacology, regulatory affairs, industry training,
publishing, and management consulting. These consultants identify options and
propose solutions to address clients' product development, registration, and
commercialization issues. The Medical Marketing Services group provides a full
spectrum of market development, product development, and targeted communications
services in support of product launch.
The Company evaluates its segment performance and allocates resources based on
revenue and gross profit (net revenue less direct costs), while other operating
costs are evaluated on a geographical basis. Accordingly, the Company does not
include selling, general and administrative expenses, depreciation and
amortization expense, restructuring and other charges, interest income
(expense), other income (expense), and income tax expense in segment
profitability.
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS ENDED MARCH 31, MONTHS ENDED MARCH 31,
---------------------- ----------------------
($ in thousands) 2000 1999 2000 1999
---------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET REVENUE:
CONTRACT RESEARCH SERVICES $ 67,766 $ 60,899 $202,329 $174,801
CONSULTING GROUP 17,477 14,710 49,676 42,344
MEDICAL MARKETING SERVICES 12,010 14,423 34,973 43,577
-------- -------- -------- --------
$ 97,253 $ 90,032 $286,978 $260,722
======== ======== ======== ========
GROSS PROFIT:
CONTRACT RESEARCH SERVICES $ 22,478 $ 22,745 $ 69,817 $ 64,480
CONSULTING GROUP 4,173 3,933 11,372 12,426
MEDICAL MARKETING SERVICES 3,492 3,930 9,756 11,765
-------- -------- -------- --------
$ 30,143 $ 30,608 $ 90,945 $ 88,671
======== ======== ======== ========
</TABLE>
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NOTE 5 - ACQUISITION
On September 1, 1999, the Company acquired CEMAF S.A., a leading Phase I
clinical research and bioanalytical laboratory located in Poitiers, France. The
Company acquired the business and related facilities for an initial cash payment
of approximately $3.0 million in a transaction accounted for as a purchase
business combination. The purchase agreement also provides for the payment of an
additional $3.0 million in May 2000 to purchase certain buildings contingent
upon certain events. In accordance with the terms of the asset purchase
agreement, the Company is contingently obligated to pay up to an additional $4
million in contingent purchase price if CEMAF achieves certain established
earnings targets for the three years ending June 30, 2002. In connection with
recording the assets and liabilities acquired, the Company recorded a charge of
approximately $2.4 million related to the excess cost over the fair value of the
net assets acquired. Pro forma results of operations of the Company, assuming
this acquisition was recorded at the beginning of each period presented, would
not be materially different from actual results presented.
NOTE 6 - RESTRUCTURING AND OTHER CHARGES
During the three months ended March 31, 2000, the Company recorded
restructuring and other charges of $13.4 million. These charges include $7.2
million of employee severance costs related to the Company's decision to
eliminate approximately 475 managerial and staff positions in order to reduce
personnel costs as a result of a material dollar volume of contract
cancellations. The charges also include $4.6 million for lease termination
costs related to continued efforts to consolidate certain facilities and reduce
excess space in certain locations in addition to changes in the Company's
original estimate of when certain facilities would be sublet. The remaining
charges, totaling $1.6 million, primarily relate to the write-off of certain
intangible assets and other investments which will not produce future value. In
addition, the Company is actively reviewing plans to further consolidate
facilities to gain further cost savings. As these plans are finalized, the
Company plans to take an additional facilities related charge of between $5 and
$10 million sometime before the end of calendar year 2000. Overall, the Company
anticipates these restructuring and other charges will result in aggregate cost
saving of $15 to $20 million in fiscal 2001.
During the three months ended June 30, 1999, the Company recorded a $2.8 million
charge in connection with the centralization of certain facilities. The charge
consisted of future noncancellable lease payments partially offset by estimated
sublease income. During the three months ended September 30, 1999, the Company
recorded a benefit against the accrual balance of $312,000 attributed to the
favorable impact of a lease buyout agreement not previously anticipated.
Current year activity against the restructuring and other charges accrual (which
is included in "Other current liabilities" in the Condensed Consolidated Balance
Sheet) has been as follows (in thousands):
<TABLE>
<CAPTION>
Balance Net Balance
June 30, 1999 Provisions Charges March 31, 2000
------------- ---------- ------- --------------
<S> <C> <C> <C> <C>
Employee severance costs -- $ 7,157 $ 350 $ 6,807
Facility related charges $ 2,557 4,317 1,443 5,431
Other Charges -- 1,614 1,088 526
======= ======= ======= =======
Total $ 2,557 $13,088 $ 2,881 $12,764
======= ======= ======= =======
</TABLE>
As of March 31, 2000, approximately 50% of the planned positions had been
eliminated, with the remainder scheduled to occur through the second quarter of
fiscal year 2001.
8
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NOTE 7 - STOCK REPURCHASE PROGRAM
In September 1999, the Board of Directors approved a stock repurchase program
authorizing the purchase of up to $20 million of the Company's common stock. The
repurchases are made in the open market subject to market conditions. The
Company acquired 127,000 shares at a total cost of $1.2 million during the three
months ended March 31, 2000 and 487,000 shares at a cost of $4.9 million since
the inception of the program.
NOTE 8 - RECENTLY ISSUED ACCOUNTING STANDARD
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 summarizes the Staff's view in applying generally accepted
accounting principles to selected revenue recognition issues. The application of
the guidance in SAB 101 will be required in the Company's second quarter of the
fiscal year 2001. The effects of applying this guidance will be reported as a
cumulative effect adjustment resulting from a change in accounting principle.
The Company does not expect the application to have a material effect on their
financial statements, however the final evaluation of SAB 101 is not yet
complete.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The financial information discussed below 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 (primarily 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.
The statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations include forward-looking statements that
involve risks and uncertainties. Such forward-looking statements include those
related to the adequacy of the Company's existing capital resources and future
cash flows from operations and the Company's desire to continue to expand
through acquisitions. The forward-looking statements contained in this section
include, but are not limited to, any statements containing the words "expects,"
"anticipates," "estimates," "believes," "may," "will," "should" and similar
expressions, and the negatives thereof. The Company's actual experience may
differ materially from the Company's expectation as discussed in the
forward-looking statement. Important factors that could cause such a difference
include, but are not limited to, the Company's ability to efficiently execute
the realignment of the CRS business; the loss or cancellation of, or
delay of work under, one or more large contracts; the adequacy and effectiveness
of the Company's sales force in winning new business; the ability to attract,
train and retain qualified employees; the Company's ability to manage adequately
its continued expansion; the potential for significant liability to clients and
third parties; the Company's ability to complete additional acquisitions and to
integrate newly acquired businesses; and future events that have the effect of
reducing the Company's available cash balances such as unexpected operating
losses, capital expenditures or cash expenditures related to possible future
acquisitions; and those discussed under "RISK FACTORS" below.
OVERVIEW
The Company is a leading contract research, medical marketing and consulting
services organization providing a broad spectrum of services from first-in-human
clinical studies through product launch to the pharmaceutical, biotechnology and
medical device industries around the world. The Company's primary objective is
to help its clients rapidly obtain the necessary regulatory approvals for their
products and market those products successfully. The Company provides the
following services to its clients:
- - clinical trials management;
- - data management;
- - biostatistical analysis;
- - medical marketing;
- - clinical pharmacology;
- - regulatory and medical consulting;
- - performance improvement;
- - industry training and publishing; and
- - other drug development consulting services.
10
<PAGE> 11
The Company is managed through three reportable segments, namely, the Contract
Research Services group, the Consulting Group and the Medical Marketing Services
group. The Contract Research Services group constitutes the Company's core
business and includes clinical trials management, biostatistics and data
management, as well as related medical advisory, information technology, and
investigator site services. PAREXEL's Consulting Group provides technical
expertise in such disciplines as clinical pharmacology, regulatory affairs,
industry training, publishing, and management consulting. These consultants
identify options and propose solutions to address clients' product development,
registration, and commercialization issues. The Medical Marketing Services group
provides a full spectrum of market development, product development, and
targeted communications services in support of product launch.
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. The contracts may contain provisions for
renegotiation of cost overruns arising from changes in the scope of work.
Renegotiated amounts are included in net revenues when earned and realization is
assured.
Generally, the Company's clients can terminate their contracts with the Company
upon thirty to sixty days' notice or can delay execution of services. 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.
During the nine months ended March 31, 2000 the Company experienced contract
cancellations of $140 million, including $36 million related to the Novartis
contracts discussed below, compared to contract cancellations of $41 million for
the same nine month period last year.
In March 2000, the Company announced that Novartis, a key customer, had reduced
the amount of work being outsourced to PAREXEL's Contract Research Services
group due to Novartis' reprioritization of its research pipeline. As a result,
Contract Research Services revenue was impacted by approximately $1 to $2
million in the third quarter of fiscal 2000 and will be impacted by
approximately $9 million in the fourth quarter of fiscal 2000, and by $40 to $45
million in fiscal 2001.
The Company recorded a restructuring charge of $13.4 million in the third
quarter of fiscal 2000 to reduce employee costs and facility expenses to match
the reduced contract revenue volume. See further discussion of this charge under
"RESTRUCTURING AND OTHER CHARGES" below.
As is customary in the industry, the Company routinely subcontracts with
independent physician investigators in connection with clinical trials and other
third party service providers for laboratory analysis and other specialized
services. These fees are not reflected in net revenues or expenses since such
fees are paid by customers on a "pass through basis," without risk or reward to
the Company.
Direct costs primarily 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 primarily consist of compensation and related fringe
benefits for
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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, 2000 Compared to Three Months Ended March 31, 1999
Net revenue increased by $7.2 million, or 8.0%, to $97.3 million for the three
months ended March 31, 2000 from $90.0 million for the same period one year ago.
Contract Research Service revenue increased by $6.9 million, or 11.3%, to $67.8
million primarily due to an increase in the number of contracts being serviced
by the Company, offset partially by the impact of reduced contract revenue from
Novartis. The Consulting Group revenue increased by $2.8 million, or 18.8%, to
$17.5 million primarily due to the addition of $2.5 million of incremental
revenue resulting from the acquisitions of Groupe PharMedicom S.
A.("PharMedicom") (in March 1999) and CEMAF (in September 1999). Medical
Marketing Services revenue declined by $2.4 million, or 16.7%, to $12.0 million
primarily due to the wind-down of a significant project at the end of fiscal
1999. The total Company increase in net revenue, excluding the incremental
revenue associated with the acquisitions of PharMedicom and CEMAF, was $4.7
million, or 5.3%. There can be no assurance that the Company can sustain this
rate of increase in total Company net revenue from continuing operations in
future periods. See "Risk Factors."
Direct costs increased by $7.7 million, or 12.9%, to $67.1 million for the three
months ended March 31, 2000 from $59.4 million for the same period one year ago.
The increase is primarily related to the 8.0% increase in net revenues which
necessitated increases in hiring and personnel costs, along with facilities and
information system costs necessary to support the increased level of operations.
Direct costs as a percentage of net revenue increased to 69.0% for the three
months ended March 31, 2000 from 66.0% for the same period last year. This
increase is primarily due to Contract Research Services which was impacted by
the reduction of Novartis contract volume and the initiative to realign
management and operations along client lines, and to the Consulting Group as
part of the Company's geographic expansion efforts.
Selling, general and administrative expenses increased by $1.7 million, or 9.3%,
to $20.1 million for the three months ended March 31, 2000 from $18.4 million
for the same period one year ago. The increase is due to increased personnel,
hiring expenses, and facilities costs necessary to accommodate the Company's
growth. Selling, general and administrative expenses as a percentage of net
revenue increased to 20.7% for the three months ended March 31, 2000 from 20.4%
for the same period one year ago.
Depreciation and amortization expense increased by $1.2 million, or 27.7%, to
$5.8 million for the three months ended March 31, 2000 from $4.5 million for the
same period one year ago. This increase was primarily due to an increase in
capital spending on information systems technology, facility improvements and
furnishings to support the increased level of operations. The Company also
adjusted downward the estimated useful life of leasehold improvements related to
certain facilities which it plans to consolidate and abandon, resulting in
additional depreciation expense of $0.5 million. Depreciation and amortization
expense as a percentage of net revenues increased to 5.9% for the three months
ended March 31, 2000 from 5.0% for the same period last fiscal year.
The Company incurred an operating loss of $9.1 million for the three months
ended March 31, 2000 versus income from operations of $7.7 million for the same
period last year. Excluding restructuring and other charges of $13.4 million
recorded during the quarter (see RESTRUCTURING AND OTHER CHARGES below) and the
aforementioned additional depreciation expense of $0.5 million related to the
Company's
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decision to abandon certain facilities, operating income would have been $4.8
million for the three months ended March 31, 2000.
Income from operations, excluding restructuring and other charges and the
additional depreciation expense, decreased as a percentage of net revenue to
4.9% for the three months ended March 31, 2000 from 8.6% for the same period
last year.
Other income, net was $1.8 million for the quarter, an increase of $0.7 million
over the same period last year. The increase was primarily due to interest
income based on higher average balances of cash and marketable securities and to
foreign exchange gains.
The Company had an effective income tax rate of 40.1% for the three months ended
March 31, 2000 based on pre-tax results excluding the impact of restructuring
and other charges and the additional depreciation expense, compared to 35.0% for
the same period last fiscal year. The increase is attributed to an unfavorable
change in the geographic mix of taxable income to tax jurisdictions with less
favorable tax rates and some foreign losses where the Company can not record a
tax benefit.
Nine months Ended March 31, 2000 Compared to Nine months Ended March 31, 1999
Net revenues increased by $26.3 million, or 10.1%, to $287.0 million for the
nine months ended March 31, 2000 compared to $260.7 million from the same period
last year. Contract Research Services revenue increased by $27.5 million, or
15.7%, to $202.3 million due primarily to an increase in the number of contracts
being serviced by the Company. The Consulting Group revenue increased by $7.3
million, or 17.3%, to $49.7 million primarily due to the addition of $7.1
million of incremental revenue resulting from the acquisitions of PharMedicom
(in March 1999) and CEMAF (in September 1999). Medical Marketing Services
revenue decreased by $8.6 million, or 19.7%, to $35.0 million primarily due to
the wind down of a significant project at the end of fiscal 1999. The total
company increase in net revenue, excluding the incremental revenue associated
with the acquisitions of PharMedicom and CEMAF, was $19.2 million, or 7.4%.
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 $24.0 million, or 13.9%, to $196.0 million for the
nine months ended March 31, 2000 compared to $172.1 million for the same nine
month period last year. The increase in direct costs is primarily due to the
10.1% increase in net revenues which necessitated increases in hiring and
personnel costs, along with facilities and information system costs necessary to
support operations. Direct costs as a percentage of net revenue increased to
68.3% for the nine months ended March 31, 2000 from 66.0% for the same period
last year. The increase is primarily due to Contract Research Services which was
impacted by the reduction of Novartis contract volume and the initiative to
realign management and operations along client lines and to the Consulting Group
as part of the Company's geographic expansion efforts.
Selling, general and administrative expenses increased by $5.8 million, or
10.9%, to $58.6 million for the nine months ended March 31, 2000 versus $52.8
million for the same period last year. The increase is due to increased
personnel, hiring expenses, and facilities costs necessary to accommodate the
Company's growth. Selling, general and administrative as a percentage of net
revenue increased slightly to 20.4% for the nine months ended March 31, 2000
compared to 20.2% for the same period last year.
Depreciation and amortization expense increased by $2.8 million, or 21.1%, to
$16.0 million for the nine months ended March 31, 2000 from $13.2 million for
the same period last year. This increase is primarily due to an increase in
capital spending on information technology, facility improvements and
13
<PAGE> 14
furnishings necessary to support the increased level of operations, and due to
an increase in goodwill amortization due to the PharMedicom and CEMAF
acquisitions. The Company also adjusted downward the estimated useful life of
leasehold improvements related to certain facilities it plans to abandon
resulting in additional depreciation expense of $0.5 million. Depreciation and
amortization expense as a percentage of net revenue increased to 5.6% for the
nine months ended March 31, 2000 from 5.1% for the same period last fiscal year.
Income from operations for the nine months ended March 31, 2000 was $3.3
million, including restructuring and other charges of $13.1 million (see
RESTRUCTURING AND OTHER CHARGES below) and the aforementioned additional
depreciation expense of $0.5 million related to the Company's decision to
consolidate and abandon certain facilities. Excluding the restructuring and
other charges and the additional depreciation expense, income from operations
was $17.2 million, or 6.0% of net revenues, compared to $22.7 million, or 8.7%
of net revenues, for the same period last year.
Other income, net was $4.4 million for the nine months ended March 31, 2000,
compared to $2.4 million for the same period last year. The increase is
attributed to higher interest income due to higher average balances of cash and
marketable securities, a non-recurring $0.6 million pre-tax gain on the sale of
a minority interest held by the Company and foreign exchange gains.
The Company had an effective tax rate of 37.8% for the nine months ended March
31, 2000 based on pre-tax results excluding the impact of restructuring and
other charges and additional depreciation expense related to the Company's
decision to abandon certain facilities. This compares to an effective tax rate
of 34.8% for the nine months ended March 31, 1999. The increase relates to an
unfavorable change in the geographic mix of taxable income to tax jurisdictions
with less favorable tax rates and some foreign losses where the Company can not
record a tax benefit.
RESTRUCTURING AND OTHER CHARGES
During the three months ended March 31, 2000, the Company recorded restructuring
and other charges of $13.4 million. These charges include $7.2 million of
employee severance costs related to the Company's decision to eliminate
approximately 475 managerial and staff positions in order to reduce personnel
costs as a result of a material dollar volume of contract cancellations. The
charges also include $4.6 million for lease termination costs related to
continued efforts to consolidate certain facilities and reduce excess space in
certain locations in addition to changes in the Company's original estimate of
when certain facilities would be sublet. the remaining charges, totaling $1.6
million, primarily relate to the write-off of certain intangible assets and
other investments which will not produce future value. In addition, the Company
is actively reviewing plans to further consolidate facilities to gain further
cost savings. As these plans are finalized, the Company plans to take an
additional facilities related charge of between $5 and $10 million sometime
before the end of calendar year 2000. Overall, the Company anticipates these
restructuring and other charges will result in aggregate cost saving of $15 to
$20 million in fiscal 2001.
During the fourth quarter of fiscal 1999, the Company recorded a $2.8 million
charge in connection with the centralization of certain facilities. The charge
consisted of future noncancellable lease payments partially offset by estimated
sublease income. During the three months ended September 30, 1999, the Company
recorded a benefit against the accrual balance of $312,000 attributed to the
favorable impact of a lease buyout agreement not previously anticipated.
14
<PAGE> 15
Current year activity against the restructuring and other charges accrual has
been as follows (in thousands):
<TABLE>
<CAPTION>
Balance Net Balance
June 30, 1999 Provisions Charges March 31, 2000
------------- ---------- ------- --------------
<S> <C> <C> <C> <C>
Employee severance costs - $ 7,157 $ 350 $ 6,807
Facility related charges $ 2,557 4,317 1,443 5,431
Other Charges - 1,614 1,088 526
------- ------- ------- -------
Total $ 2,557 $13,088 $ 2,881 $12,764
======= ======= ======= =======
</TABLE>
As of March 31, 2000, approximately 50% of the planned positions had been
eliminated, with the remainder scheduled to occur through the second quarter of
fiscal year 2001.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations and growth,
including acquisition costs, with cash flows from operations and the proceeds
from the sale of equity securities. Investing activities primarily reflect
capital expenditures for information systems enhancements and leasehold
improvements.
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 at the time the contract is entered into and the balance in
installments over the contract's duration, usually on a milestone achievement
basis. Revenue from the contracts is generally recognized on a percentage of
completion basis as work is performed. As a result, cash receipts do not
necessarily correspond to costs incurred and revenue recognized on contracts.
The Company's operating cash flow is influenced by changes in the levels of
billed and unbilled receivables and advance billings. These account balances and
the number of days revenue outstanding in accounts receivable, net of advance
billings, can vary based on contractual milestones and the timing and size of
cash receipts. The number of days revenue outstanding in accounts receivable,
net of advance billings, decreased to 47 days at March 31, 2000 compared to 60
days at June 30, 1999. The decrease is attributed to a mix of current projects
with more favorable billable milestones and to management's efforts to improve
cash flow.
In September 1999 the Board of Directors authorized the repurchase of up to $20
million of the Company's common stock. As of March 31, 2000 a total of 487,000
shares at a total cost of $4.9 million had been repurchased.
The Company's cash and cash equivalents were $79.0 million at March 31, 2000, an
increase of $17.0 million from $62.0 million at June 30, 1999, despite the
common stock repurchases.
15
<PAGE> 16
Net cash provided by operating activities of $44.0 million for the nine months
ended March 31, 2000 resulted primarily from net income excluding depreciation
and amortization of $20.1 million, a decrease of $13.8 million in accounts
receivable net of advanced billings and an increase in the accrual for
restructuring and other charges of $10.2 million.
Net cash used for investing activities of $23.3 million for the nine months
ended March 31, 2000 consisted primarily of capital expenditures of $11.8
million, net purchases of marketable securities of $8.8 million and a $3.0
million cash payment related to a business acquisition.
Financing activities for the nine months ended March 31, 2000 consisted
primarily of net proceeds from the issuance of common stock of $2.2 million
which was more than offset by repurchases of the Company's common stock of $4.9
million and repayment under credit arrangements of $0.7 million.
The Company has domestic and foreign line of credit arrangements with banks
totaling approximately $14.3 million. At March 31, 2000 the Company had
approximately $14.0 in available credit under these arrangements.
The Company's primary cash needs are for the payment of salaries and fringe
benefits, hiring and recruiting expenses, business development costs,
acquisition-related costs, capital expenditures and facility-related expenses,
and restructuring related costs. 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 financing and the Company may
from time to time seek to obtain funds from public or private issuance of equity
or debt securities. There can be no assurance that such financing will be
available on terms acceptable to the Company.
RECENTLY ISSUED ACCOUNTING STANDARD
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". SAB 101 summarizes the staff's view in applying generally accepted
accounting principles to selected revenue recognition issues. The application of
the guidance in SAB 101 will be required in the Company's second quarter of the
fiscal year 2001. The effects of applying this guidance will be reported as a
cumulative effect adjustment resulting from a change in accounting principle.
The Company does not expect the application to have a material effect on their
financial statements, however the final evaluation of SAB 101 is not yet
complete.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market risk is the potential loss arising from adverse changes in the market
rates and prices, such as foreign currency rates, interest rates, and other
relevant market rate or price changes. In the ordinary course of business, the
Company is exposed to various market risks, including changes in foreign
currency exchange rates and interest rates, and the Company regularly evaluates
its exposure to such changes. The Company's overall risk management strategy
seeks to balance the magnitude of the exposure and the costs and availability of
appropriate financial instruments. The Company occasionally purchases securities
with seven-day put options that allow the Company to sell the underlying
securities in seven days at par value. The Company uses these derivative
financial instruments on a limited basis to shorten contractual maturity dates,
thereby managing interest rate risk. The Company does not hold derivative
instruments for trading purposes.
16
<PAGE> 17
RISK FACTORS
In addition to other information in this report, the following risk factors
should be considered carefully in evaluating the Company and its business,
including forward-looking statements made in the section of this report entitled
Management's Discussion and Analysis of Financial Condition and Results of
Operations and other forward-looking statements that the Company may make from
time to time.
THE LOSS, MODIFICATION, OR DELAY OF LARGE CONTRACTS MAY NEGATIVELY IMPACT THE
COMPANY'S FINANCIAL PERFORMANCE
Generally, the Company's clients can terminate their contracts with the Company
upon sixty days' notice or can delay execution of services. Clients terminate or
delay their contracts for a variety of reasons, including:
- - products being tested fail to satisfy safety requirements;
- - products have unexpected or undesired clinical results;
- - the client decides to forego a particular study;
- - not enough patients enroll in the study;
- - not enough investigators are recruited; or
- - production or formulation problems cause shortages of the drug.
In addition, the Company believes that drug companies may proceed with fewer
clinical trials if they are trying to reduce costs. These factors may cause drug
companies to cancel or delay contracts with contract research organizations at a
higher rate than in the past. The loss or delay of a large contract or the loss
or delay of multiple contracts could have a material adverse effect on the
Company's financial performance.
In March 2000, PAREXEL announced that Novartis, a key customer, had reduced the
amount of work being outsourced to PAREXEL. As a result, Contract Research
Services revenue was impacted by $1 to $2 million in the third quarter of fiscal
year 2000 and will be impacted by approximately $9.0 million in the following
quarter and by $40 to $45 million in fiscal year 2001.
THE COMPANY'S OPERATING RESULTS HAVE FLUCTUATED BETWEEN QUARTERS AND YEARS AND
MAY CONTINUE TO FLUCTUATE IN THE FUTURE
The Company's quarterly operating results have varied, and will continue to
vary. Factors that affect these variations include:
- - the level of new business authorizations in a particular quarter or year;
- - the timing of the initiation, progress, delay or cancellation of
significant projects;
- - exchange rate fluctuations between quarters or years;
- - the mix of services offered in a particular quarter or year;
- - the timing of the opening of new offices;
- - the timing of other internal expansion costs;
- - the timing and amount of costs associated with integrating acquisitions;
and
- - the timing and amount of startup costs incurred in connection with the
introduction of new products and services.
17
<PAGE> 18
A high percentage of the Company's operating costs are fixed. Therefore, the
timing of the completion, delay or loss of contracts, or in the progress of
client projects, can cause the Company's operating results to vary substantially
between reporting periods.
THE COMPANY DEPENDS ON A SMALL NUMBER OF INDUSTRIES AND CLIENTS FOR ALL OF ITS
BUSINESS
The Company primarily depends on research and development expenditures by
pharmaceutical and biotechnology companies. The Company's operations could be
materially and adversely affected if:
- - its clients' businesses experience financial problems or are affected by a
general economic downturn;
- - consolidation in the drug or biotechnology industries leads to a smaller
client base for the Company; or
- - its clients reduce their research and development expenditures.
Furthermore, the Company has benefited to date from the increasing tendency of
pharmaceutical companies to out-source large clinical research projects. If this
trend slows or reverses, the Company's operations would be materially and
adversely affected. In fiscal 1999, the Company's five largest clients accounted
for 44% of its consolidated net revenue, and one client accounted for 20% of net
consolidated revenue. For the nine months ended March 31, 2000, the Company's
five largest clients accounted for 47% of its consolidated net revenue, and one
client accounted for 23% of consolidated net revenue. The Company could suffer a
material adverse effect if it were to lose the business of a significant client.
THE COMPANY'S BUSINESS HAS EXPANDED RAPIDLY AND THE COMPANY MUST PROPERLY MANAGE
THAT EXPANSION
The Company's business has expanded substantially, particularly over the past
few years. This may strain the Company's operational, human and financial
resources. In order to manage 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, sales, professional, scientific
and technical operating personnel.
In addition, the Company recently realigned its Contract Research Services
business into discrete operating units. If the Company cannot execute the
realignment of the contract research services business efficiently, the Company
could experience a material adverse effect.
The Company will face additional risks in expanding its foreign operations.
Specifically, the Company may find it difficult to:
- - assimilate differences in foreign business practices;
- - hire and retain qualified personnel; and
- - overcome language barriers.
18
<PAGE> 19
If an acquired business does not meet the Company's performance expectations,
the Company may have to restructure the acquired business or write-off the value
of some or all of the assets of the acquired business. If the Company fails to
properly manage its expansion, the Company could experience a material adverse
effect.
THE COMPANY MAY NOT BE ABLE TO MAKE STRATEGIC ACQUISITIONS IN THE FUTURE
The Company relies on its ability to make strategic acquisitions to sustain its
growth. The Company has made a number of acquisitions and will continue to
review future acquisition opportunities. The Company may not be able to acquire
companies on terms and conditions acceptable to the Company. In addition, the
Company faces several obstacles in connection with the acquisitions it
consummates, including:
- The Company may encounter difficulties and will encounter expenses in
connection with the acquisitions and the subsequent assimilation of
the operations and services or products of the acquired companies;
- The Company's management will necessarily divert attention from other
business concerns; and
- The Company could lose some or all of the key employees of the
acquired company.
The Company may also face additional risks when acquiring foreign companies,
such as adapting to different business practices and overcoming language
barriers. In the event that the operations of an acquired business do not meet
the Company's performance expectations, the Company may have to restructure the
acquired business or write-off the value of some or all of the assets of the
acquired business. The Company may experience difficulty integrating acquired
companies into its operations.
THE COMPANY RELIES ON HIGHLY QUALIFIED MANAGEMENT AND TECHNICAL PERSONNEL WHO
MAY NOT REMAIN WITH THE COMPANY
The Company relies on a number of key executives, including Josef H. von
Rickenbach, its President, Chief Executive Officer and Chairman. The Company
maintains key man life insurance on Mr. von Rickenbach. The Company has entered
into agreements containing non-competition restrictions with its senior
officers. However, the Company does not have employment agreements with most of
its senior officers and if any of these key executives leave the company, it
could have a material adverse effect on the Company. In addition, in order to
compete effectively, the Company must attract and maintain qualified sales,
professional, scientific and technical operating personnel. Competition for
these skilled personnel, particularly those with a medical degree, a Ph.D. or
equivalent degrees is intense. The Company may not be successful in attracting
or retaining key personnel.
THE COMPANY MAY NOT HAVE ADEQUATE INSURANCE AND MAY HAVE SUBSTANTIAL EXPOSURE TO
PAYMENT OF PERSONAL INJURY CLAIMS
Clinical research services primarily involve the testing of experimental drugs
on consenting human volunteers pursuant to a study protocol. Such services
involve a risk of liability for personal injury or death to patients who
participate in the study or who use a drug approved by regulatory authorities
after the clinical research has concluded, due to, among other reasons, possible
unforeseen adverse side effects or improper administration of the new drug by
physicians. In certain cases, these patients are already seriously ill and are
at risk of further illness or death. The Company's financial stability could be
19
<PAGE> 20
materially and adversely affected if the Company had to pay damages or incur
defense costs in connection with a claim that is outside the scope of an
indemnity or insurance coverage. The Company's financial stability could also be
materially and adversely affected in cases where the indemnity, although
applicable, is not honored in accordance with its terms. In addition, the
Company could be adversely and materially affected if its liability exceeds the
amount of its insurance. The Company may not be able to continue to secure
insurance on acceptable terms.
THE COMPANY'S STOCK PRICE IS VOLATILE AND COULD DECLINE
The market price of the Company's common stock has fluctuated widely in the past
and may continue to do so in the future in response to quarter-to-quarter
variations in:
- operating results;
- 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 are not related to the operating performance
of particular companies. These market fluctuations may adversely affect the
market price of the Company's common stock. Since the Company's common stock has
historically traded at a relatively high price-earnings multiple, due in part to
analysts' expectations of continued earnings growth, the price of the stock
could quickly and substantially decline as a result of even a relatively small
shortfall in earnings or a change in analysts' expectations. Investors in the
Company's common stock must be willing to bear the risk of such fluctuations in
earnings and stock price.
THE COMPANY'S BUSINESS DEPENDS ON CONTINUED COMPREHENSIVE GOVERNMENTAL
REGULATION OF THE DRUG DEVELOPMENT PROCESS
In the United States, governmental regulation of the drug development process
has become more extensive. In Europe, governmental authorities are coordinating
common standards for clinical testing of new drugs, leading to changes in the
various requirements currently imposed by each country. In April 1997, Japan
legislated good clinical practices and legitimatized the use of contract
research organizations. The Company's business could be materially and adversely
affected if governments relaxed their regulatory requirements or simplified
their drug approval procedures, since such actions would eliminate much of the
demand for the Company's services. In addition, if the Company was unable to
comply with any applicable regulation, the relevant governmental agencies could
terminate the Company's ongoing research or disqualify research data.
THE COMPANY FACES INTENSE COMPETITION
The Company primarily competes against in-house departments of drug companies,
full service contract research organizations, and to a lesser extent,
universities, teaching hospitals and other site organizations. Some of these
competitors have greater capital, technical and other resources than the
Company. Contract research organizations generally compete on the basis of:
- previous experience;
20
<PAGE> 21
- medical and scientific expertise in specific therapeutic areas;
- the quality of services;
- 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 and patients;
- the ability to integrate information technology with systems to
improve the efficiency of contract research;
- an international presence with strategically located facilities;
- financial strength and stability; and
- price.
The contract research organizations industry is fragmented, with several hundred
small, limited-service providers and several large, full-service contract
research organizations with global operations. The Company competes against
large contract research organizations, including Quintiles Transnational
Corporation, Covance Inc., and Pharmaceutical Product Development, Inc., for
both clients and acquisition candidates. In addition, the Company competes for
contract research organizations contracts as a result of the consolidation
within the drug industry and the growing tendency of drug companies to outsource
to a small number of preferred contract research organizations.
THE COMPANY MAY LOSE BUSINESS OPPORTUNITIES AS A RESULT 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 drug companies. In the last few years, the U.S. Congress has
entertained several comprehensive health care reform proposals. The proposals
were generally intended to expand health care coverage for the uninsured and
reduce the growth of total health care expenditures. While the U.S. Congress did
not adopt any of the proposals, members of Congress may raise similar proposals
in the future. If any of these proposals are approved by the U.S. Congress, drug
and biotechnology companies may react by spending less on research and
development. If this were to occur, the Company would have fewer business
opportunities. The Company is unable to predict the likelihood that health care
reform proposals will be enacted into law or the effect such laws would have on
the Company's business.
Many governments outside the U.S. have also reviewed or undertaken health care
reform. The Company cannot predict the impact that any pending or future foreign
health care reform proposals may have on its business in other countries.
THE COMPANY IS SUBJECT TO CURRENCY TRANSLATION RISKS
The Company derived approximately 43% of its net revenue for fiscal 1999 from
operations outside of North America. For the nine months ended March 31, 2000,
the Company also derived approximately 43% of its net revenue from operations
outside of North America. The Company's revenues and expenses from foreign
operations are usually denominated in local currencies. The Company is therefore
subject to exchange rate fluctuations between local currencies and the United
States dollar. To the extent that the Company cannot shift this currency
translation risk to other parties, the Company's operating results could be
materially and adversely affected. The Company does not currently hedge against
the risk of exchange rate fluctuations.
21
<PAGE> 22
THIRD PARTY MAY HAVE DIFFICULTY ACQUIRING THE COMPANY
Certain provisions of the Company's Restated Articles of Organization, as
amended, and Restated By-Laws contain provisions that 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, the Board of Directors of the Company may issue preferred stock in the
future without further stockholder approval. The Board of Directors of the
Company would determine the terms and conditions, as well as the rights,
privileges and preferences of such preferred stock. The holders of common stock
would be subject to, and may be adversely affected by, the rights of any holders
of preferred stock that the Board of Directors of the Company may issue. The
Company benefits from its Board of Directors' ability to issue the preferred
stock by affording the Company desirable flexibility in connection with possible
acquisitions and other corporate purposes. However, the Company's Board of
Directors' ability to issue the preferred stock could also 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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company has been named as one of many defendants in approximately
20 actions pending in the courts of two states related to a drug for
which the Company provided clinical research services. These actions
were brought by individual plaintiffs and not as class actions. The
Company has provided notice of these matters to its insurance carrier
and has submitted requests for indemnification to the companies for
whom the Company provided clinical research services pursuant to the
Company's contracts with such companies.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
The Company filed a Current Report on Form 8-K dated January 25, 2000
reporting financial results for the three months ended December 31,
1999.
The Company filed a Current Report on Form 8-K dated March 9, 2000
discussing a reduction in the amount of work being outsourced from a
key client.
22
<PAGE> 23
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 12th day of May 2000.
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
23
<PAGE> 24
EXHIBIT NO. DESCRIPTION
- ----------- -----------
27 Financial Data Schedule
24
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<S> <C>
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0
0
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