Parexel International 10Q 2008 Q1 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2007


o		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: 000-21244

PAREXEL INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its Charter)


Massachusetts		04-2776269
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

200 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. Yesþ Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filerþ Accelerated Filero Non-Accelerated Filero

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of November 1, 2007, there were 27,791,145 shares of common stock outstanding.

PAREXEL INTERNATIONAL CORPORATION

INDEX


	Page
Part I. Financial Information

Item 1 Financial Statements

Condensed Consolidated Balance Sheets (Unaudited) –September 30, 2007 and June 30, 2007		3

Condensed Consolidated Statements of Operations (Unaudited) – Three Months Ended September 30, 2007 and 2006		4

Condensed Consolidated Statements of Cash Flows (Unaudited) – Three Months Ended September 30, 2007 and 2006		5

Notes to Condensed Consolidated Financial Statements		6

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations		12

Item 3 Quantitative and Qualitative Disclosure About Market Risk		21

Item 4 Controls and Procedures		22

Part II. Other Information

Item 1A Risk Factors		22

Item 6 Exhibits		31

Signatures		32
EX-10.1 Amended and Restated Credit Agreement, dated as of September 18, 2007
EX-10.2 Employment Agreement, dated August 2, 2004
EX-31.1 Principal executive officer certification pursuant to Section 302
EX-31.2 Principal financial officer certification pursuant to Section 302
EX-32.1 Principal executive officer certification pursuant to Section 906
EX-32.2 Principal financial officer certification pursuant to Section 906

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PAREXEL INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share data)


	September 30,		June 30,
	2007		2007
ASSETS
Current assets:
Cash and cash equivalents	$	50,436	$	96,677
Billed and unbilled accounts receivable, net		354,380		325,021
Prepaid expenses		15,168		15,484
Deferred tax assets		5,076		4,984
Other current assets		13,344		10,974

Total current assets		438,404		453,140
Property and equipment, net		111,836		97,233
Goodwill		134,064		90,766
Other intangible assets, net		41,235		27,361
Non-current deferred tax assets		1,149		1,145
Other assets		8,972		10,368

Total assets	$	735,660	$	680,013


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and current portion of long-term debt	$	55,463	$	30,463
Accounts payable		14,787		12,942
Deferred revenue		173,972		170,718
Accrued expenses		25,820		20,431
Accrued restructuring charges		4,023		4,337
Accrued employee benefits and withholdings		54,055		55,296
Current deferred tax liabilities		16,903		16,889
Income tax payable		12,733		12,109
Other current liabilities		4,690		11,209

Total current liabilities		362,446		334,394
Long-term debt, net of current portion		253		277
Non-current deferred tax liabilities		12,217		12,183
Long-term accrued restructuring charges		5,125		5,970
Other liabilities		10,178		8,247

Total liabilities		390,219		361,071

Minority interest in subsidiary		2,353		2,326
Stockholders’ equity:
Preferred stock — $.01 par value; shares authorized: 5,000,000; Series A junior participating preferred; Series A junior participating preferred stock - 50,000 shares designated, none issued and outstanding		—		—
Common stock —$.01 par value; shares authorized: 75,000,000; shares issued and outstanding: 27,683,931 at September 30, 2007 and 27,565,633 at June 30, 2007		289		289
Additional paid-in capital		194,731		191,835
Retained earnings		115,126		102,564
Accumulated other comprehensive income		32,942		21,928

Total stockholders’ equity		343,088		316,616

Total liabilities and stockholders’ equity	$	735,660	$	680,013

See notes to condensed consolidated financial statements.

PAREXEL INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)


	Three Months Ended
	September 30, 2007			September 30, 2006
Service revenue	$	208,125		$	165,057
Reimbursement revenue		43,907			38,450

Total revenue		252,032			203,507

Costs and expenses:
Direct costs		136,062			108,488
Reimbursable out-of-pocket expenses		43,907			38,450
Selling, general and administrative		47,140			38,772
Depreciation		7,496			6,143
Amortization		899			407
Restructuring benefit		—			(74	)


Income from operations		16,528			11,321

Other income (expense)		(426	)		483


Income before income taxes		16,102			11,804

Provision for income taxes		2,237			4,816
Effective tax rate		13.9	%		40.8	%

Minority interest expense (income)		(20	)		11


Net income	$	13,885		$	6,977


Earnings per common share:
Basic	$	0.50		$	0.26
Diluted	$	0.49		$	0.25

Shares used in computing earnings per common share:
Basic		27,621			27,052
Diluted		28,541			27,930

See notes to condensed consolidated financial statements.

PAREXEL INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Three Months Ended
	September 30,			September 30,
	2007			2006
Cash flow from operating activities:
Net income	$	13,885		$	6,977
Adjustments to reconcile net income to net cash used in operating activities:
Minority interest expense (income), net of tax		(20	)		11
Depreciation and amortization		8,395			6,550
Stock-based compensation		1,152			1,468
Changes in operating assets and liabilities	��	(40,351	)		(22,887	)

Net cash used in operating activities		(16,939	)		(7,881	)


Cash flow from investing activities:
Purchases of marketable securities		(30,400	)		(32,575	)
Proceeds from sale of marketable securities		30,400			42,575
Purchases of property and equipment		(13,036	)		(8,578	)
Acquisition of businesses		(51,270	)		(39	)
Proceeds from sale of assets		16			71

Net cash (used in) provided by investing activities		(64,290	)		1,454


Cash flow from financing activities:
Proceeds from issuance of common stock		1,745			3,421
Borrowings under lines of credit and long-term debt		24,976			4,919

Net cash provided by financing activities		26,721			8,340


Effect of exchange rate changes on cash and cash equivalents		8,267			(445	)


Net (decrease) increase in cash and cash equivalents		(46,241	)		1,468
Cash and cash equivalents at beginning of period		96,677			82,749


Cash and cash equivalents at end of period	$	50,436		$	84,217


Supplemental disclosures of cash flow information

Net cash paid during the period for:
Interest	$	4,855		$	1,761
Income taxes, net of refunds	$	5,990		$	203

Supplemental disclosures of investing activities

Fair value of assets acquired and goodwill	$	63,085		$	39
Liabilities assumed		(11,815	)		—

Cash paid for acquisitions	$	51,270		$	39

See notes to condensed consolidated financial statements.

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 (“PAREXEL” or “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 months ended September 30, 2007 are not necessarily indicative of the results that may be expected for other quarters or the entire fiscal year. 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, 2007 (the “2007 10-K”).

Effective with the September 30, 2007 reporting period, certain direct costs were moved to selling, general and administrative to ensure consistency among all business segments. Additionally, the Company has reclassified its geographic breakout of revenue to better delineate the geographies in which it operates. These changes had no impact on total revenue, total expenses, operating income, net income, earnings per share or the balance sheet. Prior year numbers have been reclassified to reflect the fiscal year 2008 presentation.

NOTE 2 — EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares plus the dilutive effect of outstanding stock options and shares issuable under the Company’s employee stock purchase plan. Outstanding options to purchase approximately 14,100 and 49,000 shares of common stock were excluded from the calculation of diluted earnings per share for the three months ended September 30, 2007 and 2006, respectively, because they were anti-dilutive.

The following table outlines the basic and diluted earnings per common share computations:


	For the three months ended
	September 30,		September
(in thousands, except per share data)	2007		30, 2006
Net income	$	13,885	$	6,977


Weighted average number of shares outstanding used in computing basic earnings per share		27,621		27,052

Dilutive common stock equivalents		920		878


Weighted average number of shares outstanding used in computing diluted earnings per share		28,541		27,930


Basic earnings per share	$	0.50	$	0.26
Diluted earnings per share	$	0.49	$	0.25

NOTE 3 – COMPREHENSIVE INCOME

Comprehensive income has been calculated by the Company in accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 130, “Reporting Comprehensive Income.” Comprehensive income for the three months ended September 30, 2007 and 2006 was as follows:


	For the three months ended
	September 30,			September 30,
($ in thousands)	2007			2006
Net income	$	13,885		$	6,977
Foreign currency translation		11,399			(313	)
Unrealized losses on available for sale securities and derivative instruments		(385	)		(79	)

Comprehensive income	$	24,899		$	6,585

NOTE 4 — ACQUISITIONS

On September 26, 2007, PAREXEL completed the acquisition of Taiwan-based APEX International Clinical Research Co., Ltd. (“APEX”). The acquisition strengthens PAREXEL’s global capabilities, providing clients with a wide range of clinical research service offerings throughout the Asia-Pacific region, including mainland China, Hong Kong, India, Taiwan, Singapore, Indonesia, South Korea, Malaysia, Thailand, the Philippines, New Zealand, and Australia.

PAREXEL initiated a Tender Offer on June 29, 2007 to purchase all of the issued and outstanding shares of common stock of APEX. On September 7, 2007, the Tender Offer closed and PAREXEL acquired 20.3 million shares of common stock of APEX, representing 93.9% of APEX’s total issued and outstanding shares. Pursuant to the terms of the Tender Offer, the Company paid New Taiwan Dollars (NT) of $82.94 or U.S. Dollars (USD) of approximately $2.51 for each APEX share of common stock tendered, for a total purchase price of approximately NT $1.7 billion, which equates to USD of approximately $50.9 million.

The acquisition has been accounted for using the purchase method in accordance with SFAS No. 141, “Business Combinations,” and accordingly, the results of operations of APEX have been included in the accompanying Consolidated Statements of Income as of the date of the acquisition.

The total purchase price has been allocated to the tangible and intangible assets and liabilities acquired based on fair value, with any excess recorded as goodwill. These estimates of fair value and the purchase price allocation are preliminary, as intangible valuations will be finalized in the latter part of fiscal year 2008.

The components of the purchase price allocation are as follows (in thousands):


Purchase Price:
Cash paid, net of cash acquired	$	49,593
Transaction costs		1,677

Total	$	51,270


Allocations:
Accounts receivable	$	4,066
Other current assets		860
Property and equipment, net		6,295
Goodwill		37,264
Other intangible assets, net		14,600

Total assets acquired		63,085

Accounts payable		750
Current liabilities		7,542
Deferred revenues		3,523

Total liabilities assumed	$	11,815


Net assets acquired	$	51,270

The following table presents the details of the intangible assets acquired in the APEX transaction as of September 30, 2007 (in thousands):


	Weighted
	Average			Accumulated
Intangible Asset	Useful Life	Cost		Amortization		Net
Customer relationships	15 years	$	8,700		32	$	8,668
Non-compete agreements	2 years		1,500		42		1,458
Backlog	3.33 years		4,400		67		4,333

Total intangible assets		$	14,600		141	$	14,459

The estimated amortization expense of intangible assets acquired in the APEX transaction for the current fiscal year, including amounts amortized to date, and in future years will be recorded on the Consolidated Statements of Income as follows (in thousands):


Fiscal Year	Amortization
2008	$	2,651
2009		2,651
2010		1,901
2011		1,016
2012		580

The following (unaudited) pro forma consolidated results of operations have been prepared as if the acquisition of APEX had occurred on July 1, 2006, the beginning of PAREXEL’s fiscal year 2007 (in thousands, except per share data):


	For the three months ended September 30, 2007
	PRXL		APEX		Total
Service revenue	$	208,125	$	3,692	$	211,817
Net income (loss)*	$	13,885	$	46	$	13,931

Basic EPS*	$	0.50	$	0.00	$	0.50
Diluted EPS*	$	0.49	$	0.00	$	0.49


	For the three months ended September 30, 2006
	PRXL		APEX			Total
Service revenue	$	165,057	$	3,054		$	168,111
Net income (loss)*	$	6,977	$	(234	)	$	6,743

Basic EPS*	$	0.26		($0.01	)	$	0.25
Diluted EPS*	$	0.25		($0.01	)	$	0.24


*		Inclusive of interest income that would have been lost on the cash paid at an annual interest rate of 4.0% and inclusive of amortization expenses that would have been incurred in connection with customer relationships, non-compete agreements, and backlog.

NOTE 5 – STOCK-BASED COMPENSATION

Effective July 1, 2005, the Company adopted SFAS No. 123(R) “Share-Based Payment” under the modified prospective method as described in SFAS No. 123(R). Under this transition method, compensation expense recognized in the three months ended September 30, 2007 and 2006 includes compensation expense for all stock-based payments granted during the quarter and for all stock-based payments granted prior to, but not yet vested, as of July 1, 2005, based on the grant date fair value estimated in accordance with the original provision of SFAS No. 123. For the three months ended September 30, 2007, the amount of compensation expense recognized was $1.2 million,

of which $0.3 million was recorded in direct costs and $0.9 million was recorded in selling, general and administrative expense in the Condensed Consolidated Statement of Operations. For the three months ended September 30, 2006, the amount of compensation expense recognized was $1.5 million, of which $0.2 million was recorded in direct costs and $1.3 million was recorded in selling, general and administrative expense in the Condensed Consolidated Statement of Operations. There were no significant stock option or restricted stock grants during the three-month period ended September 30, 2007.

NOTE 6 – SEGMENT INFORMATION

The Company is managed through three business segments, namely, Clinical Research Services (“CRS”), PAREXEL Consulting and MedCom Services (“PCMS”), and Perceptive Informatics, Inc. (“Perceptive”). CRS constitutes the Company’s core business and includes clinical trials management and biostatistics, data management and clinical pharmacology, as well as related medical advisory and investigator site services. PCMS provides technical expertise and advice in such areas as drug development, regulatory affairs, and bio/pharmaceutical process and management consulting; and provides a full spectrum of market development, product development, and targeted communications services in support of product launch. PCMS consultants identify alternatives and propose solutions to address clients’ product development, registration, and commercialization issues. PCMS also provides health policy consulting and strategic reimbursement services. Perceptive provides information technology solutions designed to improve clients’ product development processes. Perceptive offers a portfolio of products and services that includes medical imaging services, interactive voice response systems (“IVRS”), clinical trials management systems (“CTMS”), web-based portals, systems integration, and patient diary applications.

The Company evaluates its segment performance and allocates resources based on service revenue and gross profit (service revenue less direct costs), and allocates and evaluates other operating costs on a geographic basis. Accordingly, the Company does not include selling, general, and administrative expenses, depreciation and amortization expense, other income (expense), and income tax expense in segment profitability. The Company attributes revenue to individual countries based upon the number of hours of services performed in the respective countries and inter-segment transactions are not included in service revenue. Furthermore, PAREXEL has a global infrastructure supporting its business segments, and therefore, assets are not identified by reportable segment.


	For the three months ended
	September 30,		September 30,
($ in thousands)	2007		2006 (a)
Service revenue:
Clinical Research Services	$	159,329	$	120,236
PAREXEL Consulting and MedCom Services		30,520		29,310
Perceptive Informatics, Inc.		18,276		15,511

	$	208,125	$	165,057

Direct Costs
Clinical Research Services	$	104,167	$	78,937
PAREXEL Consulting and MedCom Services		20,939		20,157
Perceptive Informatics, Inc.		10,956		9,394

	$	136,062	$	108,488

Gross profit on service revenue:
Clinical Research Services	$	55,162	$	41,299
PAREXEL Consulting and MedCom Services		9,581		9,153
Perceptive Informatics, Inc.		7,320		6,117

	$	72,063	$	56,569


(a)		Certain direct costs for the fiscal year 2007 have been reclassified to reflect fiscal year 2008 presentation. Approximately $0.7 million of direct costs have been reclassified to selling, general and administrative costs.

NOTE 7 – RESTRUCTURING CHARGES

Current activity charged against the restructuring accrual in the three months ended September 30, 2007 (which is included in “Current Liabilities — Accrued Restructuring Charges” and “Long-term Accrued Restructuring Charges” in the Condensed Consolidated Balance Sheet) was as follows:


	Balance at		Payments/Foreign			Balance at
($ in thousands)	June 30, 2007		Currency Exchange			September 30, 2007
Employee severance costs	$	223	$	(102	)	$	121
Facilities-related charges		10,084		(1,057	)		9,027

	$	10,307	$	(1,159	)	$	9,148

NOTE 8– STOCKHOLDERS’ EQUITY

On September 9, 2004, the Board of Directors approved a stock repurchase program authorizing the purchase of up to $20.0 million of the Company’s common stock to be repurchased in the open market subject to market conditions. Unless terminated earlier by resolution of the Company’s Board of Directors, the Plan will expire when the entire amount authorized has been fully utilized. Through September 30, 2007, the Company had acquired 620,414 shares at a total cost of $14.0 million under this program. There were no purchases in the three months ended September 30, 2007.

NOTE 9 – RECENTLY ISSUED ACCOUNTING STANDARDS

In February 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 creates a “fair value option” under which an entity may elect to record certain financial assets or liabilities at fair value upon their initial recognition. Subsequent changes in fair value would be recognized in earnings as those changes occur. The election of the fair value option would be made on a contract-by-contract basis and would need to be supported by concurrent documentation or a preexisting documented policy. SFAS 159 requires an entity to separately disclose the fair value of these items on the balance sheet or in the footnotes to the financial statements and to provide information that would allow the financial statement user to understand the impact on earnings from changes in the fair value. SFAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007 and will be in effect for PAREXEL beginning on July 1, 2008. The Company is currently evaluating the potential impact that the adoption of SFAS 159 will have on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 provides guidance for using fair value to measure assets and liabilities. The standard also responds to investors’ requests for more information about (1) the extent to which companies measure assets and liabilities at fair value, (2) the information used to measure fair value, and (3) the effect that fair-value measurements have on earnings. SFAS 157 will apply whenever another standard requires (or permits) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value to any new circumstances. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years and will be in effect for PAREXEL beginning on July 1, 2008. The Company is currently evaluating the potential impact that the adoption of SFAS 157 will have on its consolidated financial statements.

NOTE 10 – INCOME TAXES

Effective July 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes a new methodology by which a company must identify, recognize, measure and disclose in its financial statements the effects of any uncertain tax return reporting positions that a company has taken or expects to take. FIN 48 requires financial statement reporting of the expected future tax consequences of uncertain tax return reporting positions on the presumption that all relevant tax authorities possess full knowledge of those tax reporting positions, as well as all of the pertinent facts and circumstances. In addition, FIN 48 mandates expanded financial statement disclosure about uncertainty in income tax reporting positions.

As a result of the implementation of FIN 48, the Company recognized an increase in its liability for unrecognized tax benefits of $1.3 million resulting from the change of interpretation relating to the recognition of penalties. The increase was reflected as a reduction to retained earnings.

Upon adoption of FIN 48, the Company had $55.9 million of gross unrecognized tax benefits, all of which would impact the effective tax rate if recognized. As of September 30, 2007, the Company had $57.4 million of gross unrecognized tax benefits that, if recognized, would impact the effective tax rate. The $1.5 million increase in gross unrecognized tax benefits results from positions taken, or expected to be taken, on tax returns relating to the year ending June 30, 2008.

As of September 30, 2007, the Company anticipates that the liability for unrecognized tax benefits for uncertain tax positions could change by up to $2.5 million in the next twelve months, as a result of the expiration of the statute of limitations in certain foreign jurisdictions.

The Company’s historical practice has been, and continues to be, to recognize interest and penalties related to income tax matters in income tax expense. As of July 1, 2007, $3.0 million of interest and penalties were included in the Company’s liability for unrecognized tax benefits. Income tax expense recorded through September 30, 2007 includes approximately $0.4 million of interest and penalties.

The Company is subject to U.S. federal income tax, as well as income tax in multiple state, local and foreign jurisdictions. All material U.S. state, local and federal income tax matters through 1998 have been concluded. Substantially all material foreign income tax matters have been concluded for all years through 1996.

For the three months ended September 30, 2007 and 2006, the Company had an effective income tax rate of 13.9% and 40.8%, respectively. The favorable decrease in the tax rate was primarily attributable to a reduction in deferred tax liabilities. This reduction was related in part to a decrease in German tax rates.

NOTE 11 — COMMITMENTS, CONTINGENCIES AND GUARANTEES

In connection with the Integrated Marketing Concepts (“IMC”) acquisition during fiscal year 2005, as discussed in Note 3 to the Consolidated Financial Statements included in Item 8 of the Company’s 2007 10-K, the Company agreed to make additional payments of up to $2.9 million in contingent purchase price if IMC achieves certain established financial targets through March 31, 2008. As of September 30, 2007, the Company had paid $0.6 million in earn-out payments under the terms of the IMC acquisition.

In connection with the Qdot acquisition, as discussed in Note 3 to the Consolidated Financial Statements included in Item 8 of the Company’s 2007 10-K, the Company agreed to make maximum additional payments of approximately $3.0 million in contingent purchase price if Qdot achieves certain established financial targets through June 30, 2008. In September 2006, the Company paid $0.8 million in contingent earn-out payments. In December 2006, as a result of management responsibility changes, the Company reached an agreement with Qdot to amend the earn-out agreement to pay a fixed additional amount of approximately $2.1 million ($0.9 million was paid in January 2007, with the remaining $1.2 million to be paid by December 31, 2007).

On September 18, 2007, the Company and PAREXEL International Holding B.V., a wholly-owned subsidiary of the Company, entered into an amended and restated $100 million unsecured senior revolving credit facility (the “Credit Agreement”) with a group of lenders (including JPMorgan Chase Bank, N.A. as lender and administrative agent). The balance outstanding under this Credit Agreement was $55 million at September 30, 2007 at an interest rate of 6.125%, as determined based on LIBOR plus a margin. Additionally, the Company has letter-of-credit agreements with various banks totaling approximately $6.9 million guaranteeing performance under various operating leases and vendor agreements.

As of September 30, 2007, the Company had approximately $30.1 million in purchase obligations with various vendors for the purchase of computer software and other services.

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) considered 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.

Effective with the September 30, 2007 reporting period, certain direct costs were moved to selling, general and administrative to ensure consistency among all business segments. Additionally, the Company has reclassified its geographic breakout of revenue to better delineate the geographies in which it operates. These changes had no impact on total revenue, total expenses, operating income, net income or the balance sheet. Prior year numbers have been reclassified to reflect the fiscal year 2008 presentation.

This quarterly report on Form 10-Q includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. For this purpose, any statements contained in this report regarding the Company’s strategy, future operations, financial position, future revenue, projected costs, prospects, plans and objectives of management, other than statements of historical facts, are forward-looking statements. The words “anticipates”, “believes”, “estimates”, “expects”, “intends”, “may”, “plans”, “projects”, “will”, “would”, “targets”, and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. The Company cannot guarantee that they actually will achieve the plans, intentions or expectations expressed or implied in its forward-looking statements. There are a number of important factors that could cause actual results, levels of activity, performance or events to differ materially from those expressed or implied in the forward-looking statements the Company makes. These important factors are described under “Critical Accounting Policies and Estimates” and under “Risk Factors” set forth in Item 1A below. Although the Company may elect to update forward-looking statements in the future, it specifically disclaims any obligation to do so, even if its estimates change, and readers should not rely on those forward-looking statements as representing the Company’s views as of any date subsequent to the date of this quarterly report.

OVERVIEW

The Company is a leading bio/pharmaceutical services company, providing a broad range of expertise in clinical research, medical marketing, consulting and informatics and advanced technology products and services to the worldwide pharmaceutical, biotechnology, and medical device industries. The Company’s primary objective is to provide solutions for managing the bio/pharmaceutical product lifecycle with the goal of reducing the time, risk and cost associated with the development and commercialization of new therapies. Since its founding in 1983, PAREXEL has developed significant expertise in processes and technologies supporting this strategy. The Company’s product and service offerings include: clinical trials management, data management, biostatistical analysis, medical marketing, clinical pharmacology, patient recruitment, regulatory and product development consulting, health policy and reimbursement, performance improvement, industry training and publishing, medical imaging services, IVRS, CTMS, web-based portals, systems integration, patient diary applications, and other drug development consulting services. The Company believes that its comprehensive services, depth of therapeutic area expertise, global footprint and related access to patients, and sophisticated information technology, and experience in global drug development and product launch services represent key competitive strengths.

The Company is managed through three business segments, namely, CRS, PCMS and Perceptive.

	•		CRS constitutes the Company’s core business and includes clinical trials management and biostatistics, data management and clinical pharmacology, as well as related medical advisory and investigator site services.

	•		PCMS provides technical expertise and advice in such areas as drug development, regulatory affairs, and bio/pharmaceutical process and management consulting; and provides a full spectrum of market development, product development, and targeted communications services in support of product launch. PCMS consultants identify alternatives and propose solutions to address clients’ product development, registration, and commercialization issues. PCMS also provides health policy consulting and strategic reimbursement services.

	•		Perceptive provides information technology solutions designed to improve clients’ product development processes. Perceptive offers a portfolio of products and services that includes medical imaging services, IVRS, CTMS, web-based portals, systems integration, and patient diary applications.

The Company conducts a significant portion of its operations in foreign countries. Approximately 65.1% of the Company’s consolidated service revenue for the three months ended September 30, 2007 and 64.2% of the Company’s consolidated service revenue for the three months ended September 30, 2006, were from non-U.S. operations. Because the Company’s financial statements are denominated in U.S. dollars, changes in foreign currency exchange rates can have a significant effect on its operating results. For the three months ended September 30, 2007, 11.9% of total consolidated service revenue was denominated in British pounds and approximately 39.0% of total consolidated service revenue was denominated in Euros. For the three months ended September 30, 2006, 16.0% of total consolidated service revenue was denominated in British pounds and approximately 36.3% of total consolidated service revenue was denominated in Euros.

Approximately 90% of the Company’s contracts are fixed rate, with some variable components, and range in duration from a few months to several years. Cash flows from these contracts typically consist of a down payment required to be paid at the time of contract execution with the balance due in installments over the contract’s duration, usually on a milestone achievement basis. Revenue from these contracts is generally recognized as work is performed. As a result, cash receipts do not necessarily correspond to costs incurred and revenue recognized on contracts.

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 may terminate or delay contracts for a variety of reasons, including: merger or potential merger-related activities involving the client, the failure of products being tested to satisfy safety requirements or efficacy criteria, unexpected or undesired clinical results of the product, client cost reductions as a result of budgetary limits or changing priorities, the client’s decision to forego a particular study, insufficient patient enrollment or investigator recruitment, or clinical drug manufacturing problems resulting in shortages of the product.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of the Company’s financial condition and results of operations are based on the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and other financial information. On an ongoing basis, the Company evaluates its estimates and judgments. The Company bases its estimates on historical experience and on various other factors that it believes to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

The Company regards an accounting estimate underlying its financial statements as a “critical accounting estimate” if the nature of the estimate or assumption is material due to level of subjectivity and judgment involved or the susceptibility of such matter to change and if the impact of the estimate or assumption on financial condition or operating performance is material. The Company believes that the following accounting policies are most critical to aid in fully understanding and evaluating its reported financial results:

REVENUE RECOGNITION

Service revenue on fixed-price contracts is recognized as services are performed. The Company measures progress for fixed-price contracts using the concept of proportional performance based upon a unit-based output method. Changes in the scope of work generally result in a renegotiation of contract pricing terms. Renegotiated amounts are not included in net revenues until earned and realization is assured. Costs are not deferred in anticipation of contracts being awarded, but instead are expensed as incurred. Historically, there have not been any significant variations between contract estimates and the actual cost incurred that were not recovered from clients.

BILLED ACCOUNTS RECEIVABLE, UNBILLED ACCOUNTS RECEIVABLE AND DEFERRED REVENUE

Billed accounts receivable represent amounts for which invoices have been sent to clients. Unbilled accounts receivable represent amounts recognized as revenue for which invoices have not yet been sent to clients. Deferred revenue represents amounts billed or payments received for which revenue has not yet been earned. The Company maintains a provision for losses on receivables based on historical collectability and specific identification of potential problem accounts. In the event the Company is unable to collect portions of its outstanding billed or unbilled receivables, there may be a material impact to the Company’s consolidated results of operations and financial position.

INCOME TAXES

The Company’s global provision for corporate income taxes is determined in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes”, which requires that deferred tax assets and liabilities be recognized for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. A valuation allowance is established if it is more likely than not that future tax benefits from the deferred tax assets will not be realized. Income tax expense is based on the distribution of profit before tax among the various taxing jurisdictions in which the Company operates, adjusted as required by the tax laws of each taxing jurisdiction. Changes in the distribution of profits and losses among taxing jurisdictions may have a significant impact on the Company’s effective tax rate.

Effective July 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes a new methodology by which a company must identify, recognize, measure and disclose in its financial statements the effects of any uncertain tax return reporting positions that a company has taken or expects to take. FIN 48 requires financial statement reporting of the expected future tax consequences of uncertain tax return reporting positions on the presumption that all relevant tax authorities possess full knowledge of those tax reporting positions, as well as all of the pertinent facts and circumstances. In addition, FIN 48 mandates expanded financial statement disclosure about uncertainty in income tax reporting positions.

Interim tax provision calculations are prepared during the year based on estimates. Differences between these interim estimates and the final results for the year could materially impact the Company’s effective tax rate and its consolidated results of operations and financial position. The Company is required under Financial Interpretation No. 18, “Accounting for Income Taxes in Interim Periods – an Interpretation of APB Opinion No. 28” to exclude from its quarterly worldwide effective income tax rate calculation losses in jurisdictions where no tax benefit can be recognized. As a result, the Company’s effective tax rate may fluctuate significantly on a quarterly basis.

The Company is subject to ongoing audits by federal, state and foreign tax authorities that may result in proposed assessments. The Company’s estimate for the potential outcome for any uncertain tax issue is based on judgment. The Company believes it has adequately provided for any uncertain tax positions in accordance with FIN 48. However, future results may include favorable or unfavorable adjustments to the Company’s estimated tax liabilities in the period assessments are made or resolved or when statutes of limitation on potential assessments expire.

GOODWILL

Goodwill represents the excess of the cost of an acquired business over the fair value of the related net assets at the date of acquisition. Under SFAS No. 142, “Goodwill and Other Intangible Assets”, goodwill is subject to annual impairment testing or more frequent testing if an event occurs or circumstances change that would more likely than not reduce the carrying value of the reporting unit below its fair value. The Company has assessed the impairment of goodwill under SFAS No. 142 in fiscal years 2007 and 2006. The impairment testing involves determining the fair market value of each of the reporting units with which the goodwill was associated and comparing that value with the reporting unit’s carrying value. Based on this assessment, there was no impairment identified at June 30, 2007 or 2006. Any future impairment of goodwill could have a material impact to the Company’s financial position or its results of operations.

RESULTS OF OPERATIONS

ANALYSIS BY SEGMENT

The Company evaluates its segment performance and allocates resources based on service revenue and gross profit (service revenue less direct costs), while other operating costs are allocated and evaluated on a geographic basis. Accordingly, the Company does not include the impact of selling, general, and administrative expenses, depreciation and amortization expense, other income (expense), and income tax expense in segment profitability. The Company attributes revenue to individual countries based upon the number of hours of services performed in the respective countries and inter-segment transactions are not included in service revenue. Furthermore, PAREXEL has a global infrastructure supporting its business segments and therefore, assets are not identified by reportable segment. Service revenue, direct costs and gross profit on service revenue for the three months ended September 30, 2007 and 2006 were as follows:


	For the three months ended
	September 30,		September 30,
($ in thousands)	2007		2006		Increase		%
Service revenue:
Clinical Research Services	$	159,329	$	120,236	$	39,093		32.5	%
PAREXEL Consulting and MedCom Services		30,520		29,310		1,210		4.1	%
Perceptive Informatics, Inc.		18,276		15,511		2,765		17.8	%

	$	208,125	$	165,057	$	43,068		26.1	%

Direct Costs
Clinical Research Services	$	104,167	$	78,937	$	25,230		32.0	%
PAREXEL Consulting and MedCom Services		20,939		20,157		782		3.9	%
Perceptive Informatics, Inc.		10,956		9,394		1,562		16.6	%

	$	136,062	$	108,488	$	27,574		25.4	%

Gross profit on service revenue:
Clinical Research Services	$	55,162	$	41,299	$	13,863		33.6	%
PAREXEL Consulting and MedCom Services		9,581		9,153		428		4.7	%
Perceptive Informatics, Inc.		7,320		6,117		1,203		19.7	%

	$	72,063	$	56,569	$	15,494		27.4	%

THREE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 2006:

Service revenue increased $43.0 million, or 26.1%, to $208.1 million for the three months ended September 30, 2007 from $165.1 million for the same period in 2006. On a geographic basis, service revenues for the three months ended September 30, 2007 were distributed as follows: The Americas - $80.0 million; Europe, Middle East & Africa — $112.8 million, and Asia/Pacific — $15.3 million. For the three months ended September 30, 2006, service revenue was distributed as follows: The Americas - - $64.7 million; Europe, Middle East & Africa — $92.6 million, and Asia/Pacific — $7.8 million.

On a segment basis, CRS service revenue increased by $39.1 million, or 32.5%, to $159.3 million in the three months ended September 30, 2007 from $120.2 million in the three months ended September 30, 2006. Of the total $39.1 million increase, $9.9 million was attributed to acquisitions, $5.6 million was the result of foreign currency fluctuations, and the remaining $23.6 million was driven by organic growth across all phases of the business.

PCMS service revenue increased by $1.2 million, or 4.1%, to $30.5 million in the three months ended September 30, 2007 from $29.3 million in the three months ended September 30, 2006. Of the total $1.2 million increase, $0.5 million was attributed to foreign currency fluctuations, with the remaining $0.7 million increase resulting from growth in the consulting business.

Perceptive service revenue increased by $2.8 million, or 17.8%, to $18.3 million for the three months ended September 30, 2007 from $15.5 million in the three months ended September 30, 2006. The increase was attributable to growth in all operating units.

Reimbursement revenue consists of reimbursable out-of-pocket expenses incurred on behalf of and reimbursable by clients. Reimbursement revenue does not yield any gross profit to the Company, nor does it have an impact on net income.

Direct costs increased by $27.6 million, or 25.4%, to $136.1 million for the three months ended September 30, 2007 from $108.5 million in the three months ended September 30, 2006. This increase was due primarily to increases in the CRS segment.

On a segment basis, CRS direct costs increased by $25.3 million, or 32.0%, to $104.2 million for the three months ended September 30, 2007 from $78.9 million in the three months ended September 30, 2006. Acquisitions accounted for approximately $7.0 million of the increase. The remaining $18.3 million increase in direct costs was primarily due to higher labor and related costs incurred to support higher revenue levels. As a percentage of service revenue, CRS direct costs remained relatively flat at 65.4% for the three months ended September 30, 2007 compared with 65.7% for the three months ended September 30, 2006.

PCMS direct costs increased by $0.7 million, or 3.9%, to $20.9 million in the three months ended September 30, 2007 from $20.2 million in the three months ended September 30, 2006. The year-over-year increase in PCMS direct costs was primarily due to higher labor costs associated with higher business volume and foreign currency fluctuations. As a percentage of service revenue, PCMS direct costs remained relatively flat at 68.6% for the three months ended September 30, 2007 and 68.8% for the three months ended September 30, 2006.

Perceptive direct costs increased $1.6 million, or 16.6%, to $11.0 million in the three months ended September 30, 2007 from $9.4 million in the three months ended September 30, 2006. The increase in direct costs was primarily due to higher labor costs associated with increased staffing needs to support business growth. As a percentage of service revenue, Perceptive’s direct costs decreased slightly to 59.9% in the three months ended September 30, 2007 from 60.6% in the three months ended September 30, 2006.

Selling, general and administrative (“SG&A”) expenses increased by $8.4 million, or 21.6% to $47.1 million in the three-month period ended September 30, 2007 from $38.8 million in the three months ended September 30, 2006. The total $8.4 million increase consisted of $2.2 million of incremental costs related to acquisitions, $2.7 million in increased information systems support, $1.1 million in one-time charges related to office closures and down-sizing, $1.0 million in higher selling and promotion costs, $1.0 million related to foreign exchange fluctuations, and $0.4 million in other expenses. As a percentage of service revenue, SG&A decreased by 0.9 points to 22.6% in the three months ended September 30, 2007 from 23.5% in the three months ended September 30, 2006 mainly because of substantial leverage associated with strong revenue growth.

Depreciation and amortization (“D&A”) expense was $8.4 and $6.6 million for the three months ended September 30, 2007 and 2006, respectively. The $1.8 million increase was due primarily to the CCT acquisition. As a percentage of service revenue, D&A remained flat at 4.0% in the three months ended September 30, 2007 and 2006.

The Company reported other expense of $0.4 million for the three months ended September 30, 2007 compared to other income of $0.5 million for the three months ended September 30, 2006. This unfavorable swing of $0.9 million was due to a $1.0 million increase in foreign exchange losses and a $0.8 million increase in interest expense, offset by a $0.9 increase in other income due to a gain from the sale of a long-term investment.

The Company had an effective income tax rate of 13.9% for the three months ended September 30, 2007 and 40.8% for the three months ended September 30, 2006. The favorable decrease in the tax rate was primarily attributable to a reduction in deferred tax liabilities. This reduction was related in part to a decrease in German tax rates.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has financed its operations and growth, including acquisitions, with cash flow from operations and proceeds from the sale of equity securities. Investing activities primarily reflect acquisition costs and capital expenditures for information systems enhancements and leasehold improvements.

DAYS SALES OUTSTANDING

The Company’s operating cash flow is heavily influenced by changes in the levels of billed and unbilled receivables and deferred revenue. These account balances as well as days sales outstanding (“DSO”) in accounts receivable, net of deferred revenue, can vary based on contractual milestones and the timing and size of cash receipts. DSO was 57 days at September 30, 2007, 49 days at June 30, 2007, and 55 days at September 30, 2006. The increase in DSO was caused by reductions in advance payments and slower cash collections during the quarter. Accounts receivable, net of the provision for losses on receivables was $354.4 million ($205.0 million in billed accounts receivable and $149.4 million in unbilled accounts receivable) at September 30, 2007 and $325.0 million ($189.8 million in billed accounts receivable and $135.2 million in unbilled accounts receivable) at June 30, 2007. Deferred revenue was $174.0 million at September 30, 2007 and $170.7 million at June 30, 2007. DSO is calculated by adding the end-of-period balances for billed and unbilled account receivables, net of deferred revenue and the provision for losses on receivables, then dividing the resulting amount by the sum of total revenue plus investigator fees billed for the most recent quarter, and multiplying the resulting fraction by the number of days in the quarter.

CASH FLOWS

Net cash used in operating activities for the three months ended September 30, 2007 totaled $16.9 million and was attributable to a $25.3 million increase in accounts receivable (net of allowance for doubtful accounts and deferred revenue), a $9.6 million decrease in other current liabilities, mainly related to the payment of management bonuses, and a $4.8 million increase in other assets offset by $13.9 million of net income, $8.4 million related to non-cash charges for depreciation and amortization expense and $1.2 million in stock-based compensation expense.

Net cash used in operating activities for the three months ended September 30, 2006 totaled $7.9 million and was attributable to an $8.8 million decrease in accounts payable, a $7.9 million decrease in other current and non-current liabilities, and a $6.9 million increase in accounts receivable (net of allowance for doubtful accounts and deferred revenue), offset by $7.0 million of net income, $6.6 million related to non-cash charges for depreciation and amortization expense, $1.5 million in stock-based compensation expense, and a $0.6 million decrease in prepaid expenses and other assets.

Net cash used in investing activities for the three months ended September 30, 2007 totaled $64.3 million and consisted of $51.3 million for the acquisition of APEX and $13.0 million of capital expenditures (primarily leasehold improvements related to the expansion of the Company’s Phase I units, as well as computer software and hardware).

Net cash provided by investing activities for the three months ended September 30, 2006 totaled $1.5 million and consisted of $10.0 million of net proceeds from the sales of marketable securities offset principally by $8.6 million used for capital expenditures (primarily analytical equipment and computer software and hardware).

Net cash provided by financing activities for the three months ended September 30, 2007 totaled $26.7 million, and consisted of $25 million of net borrowings under a line of credit and $1.7 million in proceeds related to the issuance of common stock in conjunction with the Company’s stock option plan. The increase in net borrowings was needed to fund the increase in DSO and the payment of annual bonuses.

Net cash provided by financing activities for the three months ended September 30, 2006 totaled $8.3 million, and consisted of $4.9 million in borrowing under a line of credit and $3.4 million from proceeds related to the issuance of common stock in conjunction with the Company’s stock option plan.

LINES OF CREDIT

On September 18, 2007, the Company and PAREXEL International Holding B.V., a wholly owned subsidiary of the Company, entered into an amended and restated $100 million unsecured senior revolving credit facility (the “Credit Agreement”) with a group of lenders (including JPMorgan Chase Bank, N.A., as lender and administrative agent) (“Bank”). The Credit Agreement matures on January 12, 2012. The Credit Agreement provides for borrowings in U.S. dollars and selected foreign currencies at rates, as elected by the Company, determined with reference to LIBOR or EURIBOR, in each case plus an applicable margin, or at an alternative base rate. The Credit Agreement is guaranteed by certain of the Company’s subsidiaries. PAREXEL International Holding B.V. is not liable for the indebtedness of the Company under the Credit Agreement. A portion of the loan amount is available for swingline loans of up to $20 million to be made by JPMorgan Chase Bank, N.A. The Company has an option to request an increase to the maximum amount that may be borrowed under the Credit Agreement by $50 million. The Company is subject to certain financial covenants under this facility. The balance outstanding under this Credit Agreement was $55 million at September 30, 2007 at an interest rate of 6.125%, as determined based on LIBOR plus a margin. The remaining $45 million is available and subject to the annual commitment fee (Unused Fees) on the unused commitment amount ranging from 0.125% to 0.300% based on the total leverage ratio.

The Company has a line of credit with ABN AMRO Bank, NV in the amount of Euro 12.0 million. This line of credit is not collateralized, is payable on demand, and bears interest at a rate ranging between 5% and 7%. The line of credit may be revoked or canceled by the bank at any time at its discretion. The Company primarily entered into this line of credit to facilitate business transactions with the bank. At September 30, 2007, the Company had approximately Euro 12.0 million available under this line of credit.

The Company has other foreign lines of credit with banks totaling approximately $2.0 million. These lines of credit are used as overdraft protection and bear interest at rates ranging from 6% to 8%. The lines of credit are payable on demand and are supported by PAREXEL International Corporation. At September 30, 2007, the Company had approximately $2.0 million available under these arrangements.

The Company has a cash pooling arrangement with ABN AMRO Bank. Pooling occurs when debit balances are offset against credit balances and the net position is used as a basis by the bank for calculating interest. Each legal entity owned by the Company and party to this arrangement remains the owner of either a credit or debit balance. Therefore, interest income is earned in legal entities with credit balances, while interest expense is charged to legal entities with debit balances. Based on the pool’s overall balance, the Bank then (1) recalculates the overall interest to be charged or earned, (2) compares this amount with the sum of previously charged/earned interest amounts per account and (3) additionally pays/charges the difference. Interest income and interest expense are included in “other income (expense), net” in the Company’s Condensed Consolidated Statements of Operations.

FINANCING NEEDS

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. The Company’s principal source of cash is from contracts with clients. If the Company were unable to generate new contracts with existing and new clients or if the level of contract cancellations increased, the Company’s revenue and cash flow would be adversely affected (see “Item 1A — Risk Factors” for further detail). Absent a material adverse change in the level of the Company’s new business bookings or contract cancellations, PAREXEL believes that its existing capital resources together with cash flow from operations and borrowing capacity under existing lines of credit will be sufficient to meet its foreseeable cash needs over the next twelve months and on a longer term basis.

In the future, the Company expects to continue to acquire businesses to enhance its service and product offerings, expand its therapeutic expertise, and/or increase its 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 issuances of equity or debt securities. The Company may be unable to secure such financing on terms acceptable to the Company.

The Company expects capital expenditures to total approximately $40.0 million in fiscal year 2008. As of September 30, 2007, the Company had spent approximately $13.0 million primarily for leasehold improvements related to the expansion of the Company’s Phase I units, as well as for computer software and hardware. The Company expects to spend an additional $27.0 million primarily for computer software and hardware during the remainder of the fiscal year.

On September 9, 2004, the Board of Directors approved a stock repurchase program authorizing the purchase of up to $20.0 million of the Company’s common stock to be repurchased in the open market subject to market conditions. As of September 30, 2007, the Company had acquired 620,414 shares at a total cost of $14.0 million under this program. There were no repurchases made during the three months ended September 30, 2007.

COMMITMENTS, CONTINGENCIES AND GUARANTEES

In connection with the Qdot acquisition, as discussed in Note 3 to the Consolidated Financial Statements included in Item 8 of the Company’s 2007 10-K, the Company agreed to make maximum additional payments of approximately $3.0 million in contingent purchase price if Qdot achieves certain established financial targets through June 30, 2008. In September 2006, the Company paid $0.8 million in contingent earn-out payments. In December 2006, as a result of management responsibility changes, the Company reached an agreement with Qdot to amend the earn-out agreement to pay a fixed additional approximate amount of $2.1 million ($0.9 million was paid in January 2007, with the remaining $1.2 million to be paid by December 31, 2007).

The Company has letter-of-credit agreements with banks totaling approximately $6.9 million guaranteeing performance under various operating leases and vendor agreements. In addition, the Company has an unsecured senior revolving credit facility for $100 million with a group of lenders (including and managed by JPMorgan Chase Bank, N.A.) that is guaranteed by certain of the Company’s subsidiaries.

As of September 30, 2007, the Company had approximately $30.1 million in purchase obligations with various vendors for the purchase of computer software and other services.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to the Company’s investors.

INFLATION

The Company believes the effects of inflation generally do not have a material adverse impact on its operations or financial condition.

RECENTLY ISSUED ACCOUNTING STANDARDS

In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FASB Statement No. 115”. SFAS 159 creates a “fair value option” under which an entity may elect to record certain financial assets or liabilities at fair value upon their initial recognition. Subsequent changes in fair value would be recognized in earnings as those changes occur. The election of the fair value option would be made on a contract-by-contract basis and would need to be supported by concurrent documentation or a preexisting documented policy. SFAS 159 requires an entity to separately disclose the fair value of these items on the balance sheet or in the footnotes to the financial statements and to provide information that would allow the financial statement user to understand the impact on earnings from changes in the fair value. SFAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007 and will be in effect for PAREXEL beginning on July 1, 2008. The Company is currently evaluating the potential impact that the adoption of SFAS 159 will have on its consolidated financial statements.

In September 2006, the FASB issued SFAS 157, “Fair Value Measurements”. SFAS 157 provides guidance for using fair value to measure assets and liabilities. The standard also responds to investors’ requests for more information about (1) the extent to which companies measure assets and liabilities at fair value, (2) the information used to measure fair value, and (3) the effect that fair-value measurements have on earnings. SFAS 157 will apply whenever another standard requires (or permits) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value to any new circumstances. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years and will be in effect for PAREXEL beginning on July 1, 2008. The Company is currently evaluating the potential impact that the adoption of SFAS 157 will have on its consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

MARKET RISK

Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency rates, interest rates, and other relevant market rates or price changes. In the ordinary course of business, the Company is exposed to market risk resulting from changes in foreign currency exchange 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.

FOREIGN CURRENCY EXCHANGE RATES

The Company derived approximately 65.1% of its consolidated service revenue for the three-month period ended September 30, 2007 from operations outside of the U.S., of which 11.9% was denominated in British pounds and approximately 39.0% was denominated in Euros. The Company derived approximately 64.2% of its consolidated service revenue for the three months ended September 30, 2006 from operations outside of the U.S., of which 16.0% was denominated in British pounds and approximately 36.3% was denominated in Euros. The Company does not have significant operations in countries in which the economy is considered to be highly inflationary. The Company’s financial statements are denominated in U.S. dollars. Accordingly, changes in exchange rates between foreign currencies and the U.S. dollar will affect the translation of financial results into U.S. dollars for purposes of reporting the Company’s consolidated financial results.

The Company may be subjected to foreign currency transaction risk when the Company’s foreign subsidiaries enter into contracts or incur liabilities denominated in a currency other than the foreign subsidiary’s functional (local) currency. To the extent that the Company is unable to include provisions in its contracts to mitigate exposure to foreign currency fluctuations, currency exchange losses could have a material effect on the Company’s results of operations. The Company has a derivative hedging policy to hedge certain foreign denominated accounts receivable and intercompany payables. Under this policy, derivatives are accounted for in accordance with SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”). The notional contract amount of these outstanding foreign currency exchange contracts totaled approximately $93.1 million at September 30, 2007.

Occasionally, the Company enters into other foreign currency exchange contracts to offset the impact of currency fluctuations. These foreign currency exchange contracts are entered into as economic hedges, but are not designated as hedges for accounting purposes as defined under SFAS 133. The notional contract amount of these outstanding foreign currency exchange contracts was approximately $76.7 million at September 30, 2007. The Company does not expect gains or losses on these contracts to have a material impact on its financial results. The potential change in the fair value of these foreign currency exchange contracts that would result from a hypothetical change of 10% in exchange rates would be approximately $7.3 million. During the three-month period ended September 30, 2007, the Company recorded foreign exchange losses of $1.3 million and during the three-month period ended September 30, 2006, the Company recorded foreign-exchange losses of $0.4 million. The Company acknowledges its exposure to additional foreign exchange risk as it relates to assets and liabilities that are not part of the economic hedge program, but quantification of this risk is very difficult to assess at any given point in time.

INTEREST RATE

The Company’s exposure to interest rate changes is currently minimal because the level of long-term debt and marketable securities the Company has are minimal. Long-term debt was approximately $0.3 million on September 30, 2007 and on June 30, 2007.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Company’s chief executive officer and chief financial officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2007. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of the Company’s disclosure controls and procedures as of September 30, 2007, the Company’s chief executive officer and chief financial officer concluded that, as of such date, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

No change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended September 30, 2007 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

In addition to other information in this report, the following risk factors should be considered carefully in evaluating our Company and our business. These risk factors could cause actual results to differ from those indicated by forward-looking statements made in this report, including 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 we may make from time to time. If any of the following risks occur, our business, financial condition, or results of operations would likely suffer.

THE LOSS, MODIFICATION, OR DELAY OF LARGE OR MULTIPLE CONTRACTS MAY NEGATIVELY IMPACT OUR FINANCIAL PERFORMANCE

Our clients generally can terminate their contracts with us upon 30 to 60 days notice or can delay the execution of services. The loss or delay of a large contract or the loss or delay of multiple contracts could adversely affect our operating results, possibly materially. We have in the past experienced contract cancellations, which have adversely affected our operating results, including cancellations of a Phase III contract during the first quarter of fiscal year 2008 and a Phase III contract during the second quarter of fiscal year 2007.

Clients terminate or delay their contracts for a variety of reasons, including:

	-		merger or potential merger related activities involving the client;

	-		failure of products being tested to satisfy safety requirements;

	-		failure of products being tested to satisfy efficacy criteria;

	-		products having unexpected or undesired clinical results;

	-		client cost reductions as a result of budgetary limit or changing priorities;

	-		client decisions to forego a particular study, perhaps for economic reasons;

	-		insufficient patient enrollment in a study;

	-		insufficient investigator recruitment;

	-		clinical drug manufacturing problems resulting in shortages of the product;

	-		product withdrawal following market launch; and

	-		shut down of manufacturing facilities.

WE FACE INTENSE COMPETITION IN MANY AREAS OF OUR BUSINESS; IF WE DO NOT COMPETE EFFECTIVELY, OUR BUSINESS WILL BE HARMED

The bio/pharmaceutical services industry is highly competitive and we face numerous competitors in many areas of our business. If we fail to compete effectively, we may lose clients, which would cause our business to suffer.

We primarily compete against in-house departments of pharmaceutical companies, other full service clinical research organizations, or CROs, small specialty CROs, and to a lesser extent, universities, teaching hospitals, and other site organizations. Some of the larger CROs against which we compete include Quintiles Transnational Corporation, Covance, Inc. and Pharmaceutical Product Development Inc. In addition, our PCMS business competes with a large and fragmented group of specialty service providers, including advertising/promotional companies, major consulting firms with pharmaceutical industry groups and smaller companies with pharmaceutical industry focus. Perceptive competes primarily with CROs, information technology companies and other software companies. Some of these competitors, including the in-house departments of pharmaceutical companies, have greater capital, technical and other resources than us. In addition, our competitors that are smaller specialized companies may compete effectively against us because of their concentrated size and focus.

THE FIXED RATE NATURE OF OUR CONTRACTS COULD HURT OUR OPERATING RESULTS

Approximately 90% of our contracts are fixed rate. If we fail to adequately price our contracts or if we experience significant cost overruns, our gross margins on the contracts would be reduced and we could lose money on contracts. In the past, we have had to commit unanticipated resources to complete projects, resulting in lower gross margins on those projects. We might experience similar situations in the future.

IF GOVERNMENTAL REGULATION OF THE DRUG, MEDICAL DEVICE AND BIOTECHNOLOGY INDUSTRY CHANGES, THE NEED FOR OUR SERVICES COULD DECREASE

Governmental regulation of the drug, medical device and biotechnology product development process is complicated, extensive, and demanding. A large part of our business involves assisting pharmaceutical and biotechnology companies through the regulatory approval process. Changes in regulations, that, for example, streamline procedures or relax approval standards, could eliminate or reduce the need for our services. If companies regulated by the FDA or similar foreign regulatory authorities needed fewer of our services, we would have fewer business opportunities and our revenues would decrease, possibly materially.

In the United States, the FDA and the Congress have attempted to streamline the regulatory process by providing for industry user fees that fund the hiring of additional reviewers and better management of the regulatory review process. In Europe, governmental authorities have approved common standards for clinical testing of new drugs throughout the European Union by adopting standards for GCP and by making the clinical trial application and approval process more uniform across member states. The FDA has had GCP in place as a regulatory standard and requirement for new drug approval for many years and Japan adopted GCP in 1998.

The U.S., Europe and Japan have also collaborated for 15 years on the ICH, the purpose of which is to eliminate duplicative or conflicting regulations in the three regions. The ICH partners have agreed upon a common format (the Common Technical Document) for new drug marketing applications that reduces the need to tailor the format to each region. Such efforts and similar efforts in the future that streamline the regulatory process may reduce the demand for our services.

Parts of our PCMS business advises clients on how to satisfy regulatory standards for manufacturing and clinical processes and on other matters related to the enforcement of government regulations by the FDA and other regulatory bodies. Any reduction in levels of review of manufacturing or clinical processes or levels of regulatory enforcement, generally, would result in fewer business opportunities for our business in this area.

IF WE FAIL TO COMPLY WITH EXISTING REGULATIONS, OUR REPUTATION AND OPERATING RESULTS WOULD BE HARMED

Our business is subject to numerous governmental regulations, primarily relating to worldwide pharmaceutical product development and regulatory approval and the conduct of clinical trials. If we fail to comply with these governmental regulations, it could result in the termination of our ongoing research, development or sales and marketing projects, or the disqualification of data for submission to regulatory authorities. We also could be barred from providing clinical trial services in the future or could be subjected to fines. Any of these consequences would harm our reputation, our prospects for future work and our operating results. In addition, we may have to repeat research or redo trials. If we are required to repeat research or redo trials, we may be contractually required to do so at no further cost to our clients, but at substantial cost to us.

WE MAY LOSE BUSINESS OPPORTUNITIES AS A RESULT OF HEALTH CARE REFORM AND THE EXPANSION OF MANAGED-CARE ORGANIZATIONS

Numerous governments, including the U.S. government and governments outside of the U.S. have undertaken efforts to control growing health care costs through legislation, regulation and voluntary agreements with medical care providers and drug companies. If these efforts are successful, drug, medical device and biotechnology companies may react by spending less on research and development. If this were to occur, we would have fewer business opportunities and our revenues could decrease, possibly materially. In addition, new laws or regulations may create a risk of liability, increase our costs or limit our service offerings.

In addition to health care reform proposals, the expansion of managed-care organizations in the health care market and managed-care organizations’ efforts to cut costs by limiting expenditures on pharmaceuticals and medical devices could result in pharmaceutical, biotechnology and medical device companies spending less on research and development. If this were to occur, we would have fewer business opportunities and our revenues could decrease, possibly materially.

BECAUSE WE DEPEND ON A SMALL NUMBER OF INDUSTRIES AND CLIENTS FOR ALL OF OUR BUSINESS, THE LOSS OF BUSINESS FROM A SIGNIFICANT CLIENT COULD HARM OUR BUSINESS, REVENUE AND FINANCIAL CONDITION

The loss of, or a material reduction in the business of, a significant client could cause a substantial decrease in our revenue and adversely affect our business and financial condition, possibly materially. In fiscal year 2007, our five largest clients accounted for approximately 28% of our consolidated service revenue. In fiscal year 2006, our five largest clients accounted for approximately 25% of our consolidated service revenue. In fiscal years 2007, 2006 and 2005, no single client accounted for 10% or more of consolidated service revenue. We expect that a small number of clients will continue to represent a significant part of our consolidated revenue. Our contracts with these clients generally can be terminated on short notice. We have in the past experienced contract cancellations with significant clients.

IF WE DO NOT KEEP PACE WITH RAPID TECHNOLOGICAL CHANGES, OUR PRODUCTS AND SERVICES MAY BECOME LESS COMPETITIVE OR OBSOLETE, ESPECIALLY IN OUR PERCEPTIVE BUSINESS

The biotechnology, pharmaceutical and medical device industries generally, and clinical research specifically, are subject to increasingly rapid technological changes. Our competitors or others might develop technologies, products or services that are more effective or commercially attractive than our current or future technologies, products or services, or render our technologies, products or services less competitive or obsolete. If competitors introduce superior technologies, products or services and we cannot make enhancements to our technologies, products and services necessary to remain competitive, our competitive position would be harmed. If we are unable to compete successfully, we may lose clients or be unable to attract new clients, which could lead to a decrease in our revenue.

IF OUR PERCEPTIVE BUSINESS IS UNABLE TO MAINTAIN CONTINUOUS, EFFECTIVE, RELIABLE AND SECURE OPERATION OF ITS COMPUTER HARDWARE, SOFTWARE AND INTERNET APPLICATIONS AND RELATED TOOLS AND FUNCTIONS, ITS BUSINESS WILL BE HARMED

Our Perceptive Informatics business involves collecting, managing, manipulating and analyzing large amounts of data, and communicating data via the Internet. In our Perceptive Informatics business, we depend on the continuous, effective, reliable and secure operation of computer hardware, software, networks, telecommunication networks, Internet servers and related infrastructure. If the hardware or software malfunctions or access to data by internal research personnel or customers through the Internet is interrupted, our Perceptive Informatics business could suffer. In addition, any sustained disruption in Internet access provided by third parties could adversely impact our Perceptive Informatics business.

Although the computer and communications hardware used in our Perceptive Informatics business is protected through physical and software safeguards, it is still vulnerable to fire, storm, flood, power loss, earthquakes, telecommunications failures, physical or software break-ins, and similar events. In addition, the Perceptive Informatics software products are complex and sophisticated, and could contain data, design or software errors that could be difficult to detect and correct. If Perceptive fails to maintain and further develop the necessary computer capacity and data to support the needs of our Perceptive Informatics customers, it could result in a loss of or a delay in revenue and market acceptance.

IF WE CANNOT RETAIN OUR HIGHLY QUALIFIED MANAGEMENT AND TECHNICAL PERSONNEL, OUR BUSINESS WOULD BE HARMED

We rely on the expertise of our Chairman and Chief Executive Officer, Josef H. von Rickenbach, and it would be difficult and expensive to find a qualified replacement with the level of specialized knowledge of our products and services and the bio/pharmaceutical services industry. We are a party to an employment agreement with Mr. von Rickenbach, which may be terminated by us or Mr. von Rickenbach upon notice to the other party.

In addition, in order to compete effectively, we 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. We may not be successful in attracting or retaining key personnel.

WE MAY HAVE SUBSTANTIAL EXPOSURE TO PAYMENT OF PERSONAL INJURY CLAIMS AND MAY NOT HAVE ADEQUATE INSURANCE TO COVER SUCH CLAIMS

Our CRS business primarily involves the testing of experimental drugs and medical devices on consenting human volunteers pursuant to a study protocol. Clinical research involves a risk of liability for personal injury or death to patients who participate in the study or who use a product 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 drug or device by physicians. In some cases, these patients are already seriously ill and are at risk of further illness or death.

In order to mitigate the risk of liability, we seek to include indemnity provisions in our CRS contracts with clients and with investigators. However, we are not able to include indemnity provisions in all of our contracts. In addition, even if we are able to include an indemnity provision in our contracts, the indemnity provisions would not cover our exposure if:

	-		we had to pay damages or incur defense costs in connection with a claim that is outside the scope of an indemnity; or

	-		a client failed to indemnify us in accordance with the terms of an indemnity agreement because it did not have the financial ability to fulfill its indemnification obligation or for any other reason.

We also carry insurance to cover our risk of liability. However, our insurance is subject to deductibles and coverage limits and may not be adequate to cover claims. In addition, liability coverage is expensive. In the future, we may not be able to maintain or obtain liability insurance on reasonable terms, at a reasonable cost, or in sufficient amounts to protect us against losses due to claims.

In March 2006, we conducted a Phase I clinical trial on behalf of TeGenero AG, a German pharmaceutical company. During the trial, six participants experienced adverse reactions to the TeGenero compound being tested. Through September 30, 2007, we have recorded approximately $1.8 million in legal fees and other incremental costs in connection with the incident. To date, none of the participants in the clinical trial have filed suit against us. We carry insurance to cover risks such as this, but our insurance is subject to deductibles and coverage limits and may not be adequate to cover claims against us. While we believe that TeGenero is responsible to indemnify us with respect to claims related to this matter, TeGenero filed for insolvency in July 2006, which likely will limit any recovery by us from them. In addition, while TeGenero carried insurance with respect to this type of matter, this insurance also is subject to deductibles and coverage limits.

OUR BUSINESS IS SUBJECT TO INTERNATIONAL ECONOMIC, POLITICAL, AND OTHER RISKS THAT COULD NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS OR FINANCIAL POSITION

We provide most of our services on a worldwide basis. Our service revenue from non-U.S. operations represented approximately 65.1% of total consolidated service revenue for the three months ended September 30, 2007 and approximately 64.2% of total consolidated service revenue for the three months ended September 30, 2006. More specifically, our service revenue from operations in Europe, Middle East and Africa represented 54.2% of total consolidated service revenue for the three months ended September 30, 2007 and 56.1% of total consolidated service revenue for the three months ended September 30, 2006. Our service revenue from operations in the Asia/Pacific region represented 7.3% of total consolidated service revenue for the three months ended September 30, 2007 and 4.7% of total consolidated service revenue for the three months ended September 30, 2006. Accordingly, our business is subject to risks associated with doing business internationally, including:

	-		changes in a specific country’s or region’s political or economic conditions, including Western Europe, in particular;

	-		potential negative consequences from changes in tax laws affecting our ability to repatriate profits;

	-		difficulty in staffing and managing widespread operations;

	-		unfavorable labor regulations applicable to our European or other international operations;

	-		changes in foreign currency exchange rates; and

	-		longer payment cycles of foreign customers and difficulty of collecting receivables in foreign jurisdictions.

OUR REVENUE AND EARNINGS ARE EXPOSED TO EXCHANGE RATE FLUCTUATIONS

Our service revenue from non-U.S. operations represented approximately 65.1% of total consolidated service revenue for the three months ended September 30, 2007 and approximately 64.2% of total consolidated service revenue for the three months ended September 30, 2006. Our financial statements are denominated in U.S. dollars. As a result, changes in foreign currency exchange rates could have and have had a significant effect on our operating results. For example, as a result of year-over-year foreign currency fluctuation, service revenue for the three months ended September 30, 2007 was positively impacted by approximately $6.6 million as compared to the three months ended September 30, 2006. Exchange rate fluctuations between local currencies and the U.S. dollar create risk in several ways, including:

	-		Foreign Currency Translation Risk. The revenue and expenses of our foreign operations are generally denominated in local currencies, primarily the British pound and the Euro, and then are translated into U.S. dollars for financial reporting purposes. For the three months ended September 30, 2007, 11.9% of total consolidated service revenue was denominated in British pounds and approximately 39.0% of total consolidated service revenue was denominated in Euros. For the three months ended September 30, 2006, 16.0% of total consolidated service revenue was denominated in British pounds and approximately 36.3% of total consolidated service revenue was denominated in Euros. Accordingly, changes in exchange rates between foreign currencies and the U.S. dollar will affect the translation of foreign results into U.S. dollars for purposes of reporting our consolidated results.

	-		Foreign Currency Transaction Risk. We may be subjected to foreign currency transaction risk when our foreign subsidiaries enter into contracts or incur liabilities denominated in a currency other than the foreign subsidiaries functional (local) currency. To the extent we are unable to shift the effects of currency fluctuations to the clients, foreign exchange fluctuations as a result of foreign currency exchange losses could have a material adverse effect on our results of operations.

Although we try to limit these risks through exchange rate fluctuation provisions stated in our service contracts, or by hedging transaction risk with foreign currency exchange contracts, we may still experience fluctuations in financial results from our operations outside of the U.S., and may not be able to favorably reduce the currency transaction risk associated with our service contracts.

OUR OPERATING RESULTS HAVE FLUCTUATED BETWEEN QUARTERS AND YEARS AND MAY CONTINUE TO FLUCTUATE IN THE FUTURE, WHICH COULD AFFECT THE PRICE OF OUR COMMON STOCK

Our quarterly and annual operating results have varied and will continue to vary in the future as a result of a variety of factors. For example, our income from operations totaled $11.3 million for the fiscal quarter ended September 30, 2006, $13.9 million for the fiscal quarter ended December 31, 2006, $15.5 million for the fiscal quarter ended March 31, 2007, $16.9 million for the fiscal quarter ended June 30, 2007, and $16.5 million for the fiscal quarter ended September 30, 2007. Factors that cause these variations include:

	-		the level of new business authorizations in a particular quarter or year;

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

	-		exchange rate fluctuations between quarters or years;

	-		restructuring charges;

	-		seasonality;

	-		the mix of services offered in a particular quarter or year;

	-		the timing of the opening of new offices;

	-		timing, costs and the related financial impact of acquisitions;

	-		the timing of internal expansion;

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

	-		the timing and amount of startup costs incurred in connection with the introduction of new products, services or subsidiaries; and

	-		the dollar amount of changes in contract scope finalized during a particular period.

Many of these factors, such as the timing of cancellations of significant projects and exchange rate fluctuations between quarters or years, are beyond our control.

Approximately 60-65% of our operating costs are fixed in the short term with a significant portion of those costs related to personnel. Total personnel costs are estimated to have accounted for approximately 80% of our total operating costs in fiscal year 2007. As a result, the effect on our revenues of the timing of the completion, delay or loss of contracts, or the progress of client projects, could cause our operating results to vary substantially between reporting periods.

If our operating results do not match the expectations of securities analysts and investors, the trading price of our common stock will likely decrease.

OUR EFFECTIVE INCOME TAX RATE MAY FLUCTUATE FROM QUARTER-TO-QUARTER, WHICH MAY AFFECT EARNINGS AND EARNINGS PER SHARE

Our quarterly effective income tax rate is influenced by our projected profitability in the various taxing jurisdictions in which we operate. Changes in the distribution of profits and losses among taxing jurisdictions may have a significant impact on our effective income tax rate, which in turn could have a material adverse effect on our net income and earnings per share. Factors that affect the effective income tax rate include, but are not limited to:

	-		the requirement to exclude from our quarterly worldwide effective income tax calculations losses in jurisdictions where no tax benefit can be recognized;

	-		actual and projected full year pretax income;

	-		changes in tax laws in various taxing jurisdictions;

	-		audits by taxing authorities; and

	-		the establishment of valuation allowances against deferred tax assets if it is determined that it is more likely than not that future tax benefits will not be realized.

Fluctuations in our effective income tax rate could cause fluctuations in our earnings and earnings per share, which can affect our stock price.

OUR BUSINESS HAS EXPERIENCED SUBSTANTIAL EXPANSION IN THE PAST AND SUCH EXPANSION AND ANY FUTURE EXPANSION COULD STRAIN OUR RESOURCES IF NOT PROPERLY MANAGED

We have expanded our business substantially in the past. Future rapid expansion could strain our operational, human and financial resources. In order to manage expansion, we must:

	-		continue to improve operating, administrative, and information systems;

	-		accurately predict 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.

If we do not take these actions and are not able to manage the expanded business, the expanded business may be less successful than anticipated, and we may be required to allocate additional resources to the expanded business, which we would have otherwise allocated to another part of our business.

We may face additional risks in expanding our foreign operations. Specifically, we may find it difficult to:

	-		assimilate differences in foreign business practices, exchange rates and regulatory requirements;

	-		operate amid political and economic instability;

	-		hire and retain qualified personnel; and

	-		overcome language, tariff and other barriers.

WE MAY MAKE ACQUISITIONS IN THE FUTURE, WHICH MAY LEAD TO DISRUPTIONS TO OUR ONGOING BUSINESS

We have made a number of acquisitions and will continue to review new acquisition opportunities. If we are unable to successfully integrate an acquired company, the acquisition could lead to disruptions to our business. The success of an acquisition will depend upon, among other things, our ability to:

	-		assimilate the operations and services or products of the acquired company;

	-		integrate acquired personnel;

	-		retain and motivate key employees;

	-		retain customers;

	-		identify and manage risks facing the acquired company; and

	-		minimize the diversion of management’s attention from other business concerns.

Acquisitions of foreign companies may also involve additional risks, including assimilating differences in foreign business practices and overcoming language and cultural barriers.

In the event that the operations of an acquired business do not meet our performance expectations, we may have to restructure the acquired business or write-off the value of some or all of the assets of the acquired business.

OUR CORPORATE GOVERNANCE STRUCTURE, INCLUDING PROVISIONS OF OUR ARTICLES OF ORGANIZATION, BY-LAWS, SHAREHOLDER RIGHTS PLAN, AS WELL AS MASSACHUSETTS LAW, MAY DELAY OR PREVENT A CHANGE IN CONTROL OR MANAGEMENT THAT STOCKHOLDERS MAY CONSIDER DESIRABLE

Provisions of our articles of organization, by-laws and our shareholder rights plan, as well as provisions of Massachusetts law, may enable our management to resist acquisition of us by a third party, or may discourage a third party from acquiring us. These provisions include the following:

	-		we have divided our board of directors into three classes that serve staggered three-year terms;

	-		we are subject to Section 8.06 of the Massachusetts Business Corporation Law which provides that directors may only be removed by stockholders for cause, vacancies in our board of directors may only be filled by a vote of our board of directors and the number of directors may be fixed only by our board of directors;

	-		we are subject to Chapter 110F of the Massachusetts General Laws which limits our ability to engage in business combinations with certain interested stockholders;

	-		our stockholders are limited in their ability to call or introduce proposals at stockholder meetings; and

	-		our shareholder rights plan would cause a proposed acquirer of 20% or more of our outstanding shares of common stock to suffer significant dilution.

These provisions could have the effect of delaying, deferring, or preventing a change in control of us or a change in our management that stockholders may consider favorable or beneficial. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors and take other corporate actions. These provisions could also limit the price that investors might be willing to pay in the future for shares of our stock.

In addition, our board of directors may issue preferred stock in the future without stockholder approval. If our board of directors issues preferred stock, the holders of common stock would be subordinate to the rights of the holders of preferred stock. Our board of directors’ ability to issue the preferred stock could make it more difficult for a third party to acquire, or discourage a third party from acquiring, a majority of our stock.

OUR STOCK PRICE HAS BEEN AND MAY IN THE FUTURE BE VOLATILE, WHICH COULD LEAD TO LOSSES BY INVESTORS

The market price of our common stock has fluctuated widely in the past and may continue to do so in the future. On November 1, 2007, the closing sale price of our common stock on the Nasdaq Global Select Market was $44.40 per share. During the period from July 1, 2005 to October 25, 2007, our common stock traded at prices ranging from a high of $47.67 per share to a low of $18.85 per share. Investors in our common stock must be willing to bear the risk of such fluctuations in stock price and the risk that the value of an investment in our stock could decline.

Our stock price can be affected by quarter-to-quarter variations in a number of factors including, but not limited to:

	-		operating results;

	-		earnings estimates by analysts;

	-		market conditions in the industry;

	-		prospects of health care reform;

	-		changes in government regulations;

	-		general economic conditions, and

	-		our effective income tax rate.

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 our common stock. Since our common stock has traded in the past at a relatively high price-earnings multiple, due in part to analysts’ expectations of earnings growth, the price of the stock could quickly and substantially decline as a result of even a relatively small shortfall in earnings from, or a change in, analysts’ expectations.

ITEM 6. EXHIBITS

See the Exhibit Index on the page immediately preceding the exhibits for a list of exhibits filed as part of this quarterly report, which Exhibit Index is incorporated by this reference.

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.


		PAREXEL International Corporation

Date: November 7, 2007		By: /s/ Josef H. von Rickenbach

		Josef H. von Rickenbach
		Chairman of the Board and Chief Executive Officer

Date: November 7, 2007		By: /s/ James F. Winschel, Jr.

		James F. Winschel, Jr.
		Senior Vice President and Chief Financial Officer

EXHIBIT INDEX


Exhibit Number		Description

	10.1	Amended and Restated Credit Agreement, dated as of September 18, 2007, between and among the Company and PAREXEL International Holding B.V., as Borrowers, certain subsidiaries of the Borrowers, the Lenders party thereto, JPMorgan Chase Bank, National Association, as Administrative Agent, J.P. Morgan Europe Limited, as London Agent, J.P. Morgan Securities Inc., as Sole Bookrunner and Sole Lead Arranger, ABN Amro Bank N.V., as Syndication Agent and Wachovia Bank, N.A., as Documentation Agent.

	10.2	Employment Agreement, dated August 2, 2004, by and between the Company and Kurt A. Brykman.

	31.1	Principal executive officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	31.2	Principal financial officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	32.1	Principal executive officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	32.2	Principal financial officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. freshman Avg

Parexel International (PRXL) Inactive 10-Q2008 Q1 Quarterly report

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