UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2001
Commission File Number: 0-27058
PAREXEL INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its Charter)
MASSACHUSETTS 04-2776269
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
195 WEST STREET
WALTHAM, MASSACHUSETTS 02451
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (781) 487-9900
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of May 9, 2001, there were
24,626,476 shares of PAREXEL International Corporation common stock outstanding,
excluding 861,000 shares in treasury.
PAREXEL INTERNATIONAL CORPORATION
INDEX
Page
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PART I. FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets - March 31, 2001 and 3
June 30, 2000
Condensed Consolidated Statements of Operations - Three 4
months ended March 31, 2001 and 2000; Nine months ended
March 31, 2001 and 2000
Condensed Consolidated Statements of Cash Flows - Nine 5
months ended March 31, 2001 and 2000
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition 10
and Results of Operations
Item 3 Quantitative and Qualitative Disclosure About Market Risk 15
Risk Factors 15
PART II. OTHER INFORMATION
Item 1 Legal Proceedings 21
Item 6 Exhibits and Reports on Form 8-K 21
SIGNATURES 22
2
PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
PAREXEL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share data)
MARCH 31, JUNE 30,
2001 2000
-------------------- -----------------
(RESTATED)
ASSETS
Current assets:
Cash and cash equivalents $ 44,344 $ 53,508
Marketable securities 20,266 37,022
Accounts receivable, net 211,303 162,105
Prepaid expenses 11,472 10,186
Other current assets 17,298 17,244
-------------------- -----------------
Total current assets 304,683 280,065
Property and equipment, net 39,678 43,829
Other assets 30,647 28,046
-------------------- -----------------
Total assets $375,008 $351,940
==================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt $ 246 $ 269
Accounts payable 27,169 19,587
Advance billings 100,507 86,223
Other current liabilities 51,508 50,306
-------------------- -----------------
Total current liabilities 179,430 156,385
Minority interest in subsidiary 2,468 -
Other liabilities 10,143 9,422
-------------------- -----------------
Total liabilities 192,041 165,807
-------------------- -----------------
Stockholders' equity:
Preferred stock - $0.01 par value; shares
authorized: 5,000,000; none issued and outstanding - -
Common stock - $0.01 par value; shares authorized:
50,000,000; shares issued:25,486,476 and 25,399,570 at
March 31, 2001 and June 30, 2000, respectively; shares
outstanding:24,625,476 and 24,719,158 at March 31, 2001
and June 30, 2000, respectively 255 254
Additional paid-in capital 162,841 162,057
Retained earnings 42,800 40,173
Treasury stock, at cost (8,165) (6,424)
Accumulated other comprehensive income (14,764) (9,927)
-------------------- -----------------
Total stockholders' equity 182,967 186,133
-------------------- -----------------
Total Liabilities and Stockholders' Equity $375,008 $351,940
==================== =================
See notes to condensed consolidated financial statements.
3
PAREXEL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
FOR THE THREE MONTHS ENDED MARCH 31, FOR THE NINE MONTHS ENDED MARCH 31,
------------------------------------- -------------------------------------
2001 2000 2001 2000
----------------- --------------- ----------------- ----------------
(RESTATED) (RESTATED) (RESTATED)
Net revenue $98,322 $ 97,253 $280,861 $286,978
----------------- --------------- ----------------- ----------------
Costs and expenses:
Direct costs 72,602 67,110 204,725 196,033
Selling, general and administrative 20,106 20,117 61,415 58,994
Depreciation 4,676 5,517 15,142 15,311
Amortization 254 238 582 695
Restructuring and other charges - 13,400 (768) 13,088
----------------- --------------- ----------------- ----------------
97,638 106,382 281,096 284,121
----------------- --------------- ----------------- ----------------
Income (loss) from operations 684 (9,129) (235) 2,857
Other income, net 2,455 1,114 5,335 3,362
----------------- --------------- ----------------- ----------------
Income (loss) before provision (benefit) for
income tax 3,139 (8,015) 5,100 6,219
----------------- --------------- ----------------- ----------------
Provision (benefit) for income taxes 1,240 (2,105) 2,345 3,194
----------------- --------------- ----------------- ----------------
Net income (loss) $ 1,899 $ (5,910) $ 2,755 $ 3,025
================= =============== ================= ================
Earnings (loss) per share:
Basic $ 0.08 $ (0.24) $ 0.11 $ 0.12
Diluted $ 0.08 $ (0.24) $ 0.11 $ 0.12
Shares used in computing earnings per
share:
Basic 24,610 24,883 24,709 24,977
Diluted 25,247 24,883 24,990 25,081
See notes to condensed consolidated financial statements.
4
PAREXEL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
For the nine months ended March 31,
----------------------------------------
2001 2000
----------------- ------------------
(RESTATED) (RESTATED)
Cash flows from operating activities:
Net income $ 2,755 $ 3,025
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 15,724 16,006
Changes in operating assets/liabilities (27,489) 20,452
- -------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities (9,010) 39,483
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (52,866) (68,397)
Proceeds from sale of marketable securities 69,584 59,636
Acquisition of business (2,994) (3,000)
Purchase of property and equipment (11,901) (11,808)
Other investing activities 167 235
- -------------------------------------------------------------------------------------------------------------------
Net cash provided (used) in investing activities 1,990 (23,334)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 803 2,175
Repurchase of common stock (1,759) (4,941)
Repayments on credit arrangements (96) (716)
Proceeds from issuance of subsidiary's common stock 387 -
- -------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (665) (3,482)
- -------------------------------------------------------------------------------------------------------------------
Elimination of net cash activities of subsidiary for change in fiscal year (126) -
- -------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (1,353) (4,745)
- -------------------------------------------------------------------------------------------------------------------
Net change in cash for the period (9,164) 7,922
Cash and cash equivalents at beginning of period 53,508 62,005
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 44,344 $ 69,927
===================================================================================================================
See notes to condensed consolidated financial statements.
5
PAREXEL INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - RESTATEMENT OF FINANCIAL STATEMENTS
Subsequent to the issuance of the June 30, 2000 financial statements, PAREXEL
International Corporation (the "Company") determined that at June 30, 2000, its
intercompany accounts did not fully eliminate in consolidation. The unreconciled
difference, amounting to $7.6 million, was originally classified as a reduction
to advance billings on the consolidated balance sheet. Based on subsequent
analysis, the Company determined the appropriate accounts to which the
difference previously included in advance billings should have been recorded.
Accordingly, the financial statements for the year ended June 30, 2000 have been
restated to reflect these changes. The restatement resulted in a decrease of
$4.1 million to the June 30, 2000 working capital principally related to
currency translation adjustments which increased the previously reported balance
for advance billings and correspondingly decreased stockholders' equity. In
addition, total assets at June 30, 2000 increased by $1.0 million due primarily
to adjustments to unbilled and trade receivables for the same reason.
As part of the adjustments described above, the Company also identified certain
charges that should have been made to its consolidated statement of income for
the fiscal year ended June 30, 2000 of $1.6 million on a pre-tax basis,
resulting in a $1.1 million reduction to net income for the year.
The restated numbers, from the first quarter of fiscal 2001, are properly
reflected in the financial statements for the nine months ended March 31, 2001.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of the
Company have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions of Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and notes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (primarily consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the
three and nine months ended March 31, 2001, are not necessarily indicative of
the results that may be expected for other quarters or the entire fiscal year.
Certain prior year balances have been reclassified in order to conform to
current year presentation. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K/A for the year ended June 30, 2000.
6
NOTE 3 -- EARNINGS PER SHARE
The following table outlines the basic and diluted earnings per common share
computations (in thousands, except per share data):
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
MARCH 31, MARCH 31,
2001 2000 2001 2000
------------ --------------- --------------- ---------------
(RESTATED) (RESTATED) (RESTATED)
Net income attributable to common shares $ 1,899 ($5,910) $ 2,755 $ 3,025
============ =============== =============== ===============
BASIC EARNINGS PER COMMON SHARE COMPUTATION:
Weighted average common shares outstanding 24,610 24,883 24,709 24,977
============ =============== =============== ===============
Basic earnings per common share $ 0.08 ($0.24) $ 0.11 $ 0.12
============ =============== =============== ===============
DILUTED EARNINGS PER COMMON SHARE COMPUTATION:
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 24,610 24,883 24,709 24,977
Shares attributable to common stock options 637 - 281 104
------------ --------------- --------------- ---------------
25,247 24,883 24,990 25,081
============ =============== =============== ===============
Diluted earnings per common share $ 0.08 ($0.24) $ 0.11 $ 0.12
============ =============== =============== ===============
The effect of options outstanding for the three months ended March 31, 2000 is
not included in the calculation of diluted net earnings per share because their
effect on loss from operations would have been antidilutive.
7
NOTE 4 - COMPREHENSIVE INCOME
Comprehensive income has been calculated by the Company in accordance with FASB
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." Comprehensive income (loss), which is comprised
primarily of net income (loss) and foreign currency translation adjustments,
totaled ($1.9) million and ($7.9) million for the three months ended March 31,
2001 and 2000, respectively, and ($2.1) million and ($1.9) million for the nine
months ended March 31, 2001 and 2000, respectively.
NOTE 5 - SEGMENT INFORMATION
The Company is managed through four reportable segments, namely, Clinical
Research Services, PAREXEL Consulting Group, Medical Marketing Services, and
Perceptive Informatics, Inc. Clinical Research Services constitutes the
Company's core business and includes clinical trials management, biostatistics
and data management, as well as related medical advisory and investigator site
services. PAREXEL Consulting Group provides technical expertise in such
disciplines as clinical pharmacology, regulatory affairs, industry training,
publishing, and management consulting. These consultants identify options and
propose solutions to address clients' product development, registration, and
commercialization issues. Medical Marketing Services provides a full spectrum
of market development, product development, and targeted communications services
in support of product launch. Perceptive Informatics, Inc. provides a variety of
web-based portal solutions designed to accelerate and enhance the clinical
development and product launch processes, as well as a range of voice and data
systems. It also offers an industry-leading medical imaging service supporting
the use of advanced imaging techniques in clinical development.
The Company evaluates its segment performance and allocates resources based on
revenue and gross profit (net revenue less direct costs), while other operating
costs are evaluated on a geographical basis. Accordingly, the Company does not
include selling, general and administrative expenses; depreciation and
amortization expense; restructuring and other charges; interest income
(expense); other income (expense); and income tax expense in segment
profitability.
For the three months ended March 31, For the nine months ended March 31,
- -----------------------------------------------------------------------------------------------------------------------------------
($ in thousands) 2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
(Restated) (Restated) (Restated)
Net revenue:
Clinical Research Services $60,524 $67,766 $174,510 $202,329
PAREXEL Consulting Group 21,225 17,477 57,589 49,676
Medical Marketing Services 13,396 12,010 40,512 34,973
Perceptive Informatics, Inc. 3,177 - 8,250 -
--------------- --------------- --------------- ----------------
$98,322 $97,253 $280,861 $286,978
=============== =============== =============== ================
Gross profit:
Clinical Research Services $18,467 $22,478 $ 54,827 $ 69,817
PAREXEL Consulting Group 4,355 4,173 11,044 11,372
Medical Marketing Services 4,113 3,492 13,025 9,756
Perceptive Informatics, Inc. * (1,215) - (2,760) -
--------------- --------------- --------------- ----------------
$25,720 $30,143 $ 76,136 $ 90,945
=============== =============== =============== ================
* The Company began reporting Perceptive Informatics, Inc.as a fourth business
segment in the first quarter of fiscal 2001. Perceptive Informatics, Inc was
reported as part of Clinical Research Services in fiscal 2000.
8
NOTE 6 - ACQUISITION
Effective September 1, 2000, the Company acquired a majority interest in
FARMOVS, a clinical pharmacology research business and bioanalytical laboratory
located in Bloemfontein, South Africa for approximately $3.0 million. In
connection with this transaction, the Company recorded approximately $2.0
million related to the excess cost over the fair value of the interest in the
net assets acquired. This goodwill is being amortized using a straight-line
method over 15 years.
NOTE 7 - RESTRUCTURING AND OTHER CHARGES
During the year ended June 30, 2000, the Company recorded restructuring and
other charges of $13.1 million. These charges included $7.2 million for employee
severance costs related to the Company's decision to eliminate approximately 475
managerial and staff positions in order to reduce personnel costs as a result of
a material dollar volume of contract cancellations. The charges also included
$4.3 million for lease termination costs related to continued efforts to
consolidate certain facilities and reduce excess space in certain locations, in
addition to a benefit derived from a change in the Company's original estimate
of when certain facilities would be sublet. The remaining charges, totaling $1.6
million, primarily related to the write-off of certain intangible assets and
other investments, which were not expected to produce future value. The Company
is planning on taking a restructuring charge during the fourth quarter of this
fiscal year as part of its on-going effort to reduce its cost structure.
Although details have not been finalized, the charge is expected to be in the
range of $2 to $4 million.
Current quarter activity against the restructuring and other charges accrual
(which is included in "Other current liabilities" in the Condensed Consolidated
Balance Sheet) was as follows (in thousands):
Balance as of 3rd Quarter Balance as of
December 31, Payments March 31, 2001
2000
Employee severance costs $ 706 $ (289) $ 417
Facilities and other charges 4,140 (1,355) 2,785
----------------- ----------------- -----------------
$4,846 $(1,644) $3,202
================= ================= =================
NOTE 8 - STOCK REPURCHASE PROGRAM
In September 1999, the Board of Directors approved a stock repurchase program
authorizing the purchase of up to $20 million of the Company's common stock.
Repurchases made in the open market are subject to market conditions. During
the three months ended March 31, 2001, the Company did not repurchase any of the
Company's common stock.
9
NOTE 9 - RECENTLY ISSUED ACCOUNTING STANDARD
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin 101, "Revenue Recognition" ("SAB 101"). SAB 101 summarizes certain of
the SEC staff's views in applying generally accepted accounting principles to
selected revenue recognition issues in financial statements. SAB 101, which was
delayed by the issuance of SAB 101A on March 27, 2000 and SAB 101B on June 26,
2000, has to be implemented by the Company by the fourth quarter of fiscal 2001.
SAB 101 has been adopted by the Company. The adoption of SAB 101 did not have a
significant impact on the Company's revenue recognition policies.
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.
The statements included in this quarterly report on Form 10-Q, including
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", may contain "forward-looking statements", within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including statements regarding the adequacy of the
Company's existing capital resources and future cash flows from operations, and
statements regarding expected financial results, future growth and customer
demand. For this purpose, any statements that are not statements of historical
fact may be deemed forward-looking statements. Without limiting the foregoing,
the words "believes," "anticipates," "plans," "expects," "intends", "appears",
"will" and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the
Company's actual operating performance, actual expense savings and other
operating improvements resulting from recent restructurings, and actual future
results may differ significantly from the results indicated by the forward-
looking statements. Important factors that might cause such a difference
include, but are not limited to, risks associated with: the cancellation,
revision, or delay of contracts, including those contracts in backlog; the
Company's dependence on certain industries and clients; the Company's ability to
manage growth and its ability to attract and retain employees; the Company's
ability to complete additional acquisitions and to integrate newly acquired
businesses or enter into new lines of business; government regulation of certain
industries and clients; competition and consolidation within the pharmaceutical
industry; the potential for significant liability to clients and third parties;
the potential adverse impact of health care reform; and the effects of exchange
rate fluctuations. These factors and others are discussed under "RISK FACTORS"
below. In addition, the forward-looking statements included in this quarterly
report represent the Company's estimates as of the date of this quarterly
report. While the Company may elect to update these forward-looking statements
at some point in the future, the Company specifically disclaim any obligation to
do so. These forward-looking statements should not be relied upon as
representing the Company's estimates or views as of any date subsequent to the
date of this quarterly report.
OVERVIEW
The Company is a leading clinical research, medical marketing and consulting
services organization providing a broad spectrum of services from first-in-human
clinical studies through product launch to the
10
pharmaceutical, biotechnology and medical device industries around the world.
The Company's primary objective is to help its clients rapidly obtain the
necessary regulatory approvals for their products and market those products
successfully. The Company provides the following services to its clients:
clinical trials management; data management; biostatistical analysis; medical
marketing; clinical pharmacology; regulatory and medical consulting; performance
improvement; industry training and publishing, web-based portal solutions and
voice and data systems; and other drug development consulting services.
The Company is managed through four reportable segments, namely, Clinical
Research Services ("CRS"), PAREXEL Consulting Group ("PCG"), Medical Marketing
Services ("MMS"), and Perceptive Informatics, Inc. ("Perceptive"). CRS
constitutes the Company's core business and includes clinical trials management,
biostatistics and data management, as well as related medical advisory and
investigator site services. PCG provides technical expertise in such disciplines
as clinical pharmacology, regulatory affairs, industry training, publishing, and
management consulting. These consultants identify options and propose solutions
to address clients' product development, registration, and commercialization
issues. MMS provides a full spectrum of market development, product development,
and targeted communications services in support of product launch. Perceptive
provides a variety of web-based portal solutions designed to accelerate and
enhance the clinical development and product launch processes, as well as a
range of voice and data systems. It also offers a medical imaging service
supporting the use of advanced imaging techniques in clinical development.
The Company's clinical research and development contracts are generally fixed
price, with some variable components, and range in duration from a few months to
several years. Cash flows from 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 contracts is generally recognized on a percentage of
completion basis as work is performed. As a result, cash receipts do not
necessarily correspond to costs incurred and revenue recognized on contracts.
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, among
others: merger or potential merger related activities involving the client, the
failure of products being tested to satisfy safety requirements, 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 production problems resulting in shortages of the product.
As is customary in the industry, the Company routinely subcontracts with
independent physician investigators in connection with clinical trials and other
third party service providers for laboratory analysis and other specialized
services. These fees are not reflected in net revenues or expenses since such
fees are granted by customers on a "pass through basis," without risk or reward
to the Company.
Direct costs primarily consist of compensation and related fringe benefits for
project-related employees, other project-related costs not reimbursed and
allocated facilities and information systems costs. Selling, general and
administrative expenses primarily consist of compensation and related fringe
benefits for selling and administrative employees, professional services and
advertising costs, as well as allocated costs related to facilities and
information systems.
The Company's stock is quoted on the Nasdaq Stock Market under the symbol
"PRXL."
11
RESULTS OF OPERATIONS
Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000:
Net revenue increased by $1.1 million, or 1.1%, to $98.3 million for the three
months ended March 31, 2001 from $97.3 million for the same period one year ago.
On a segment basis, CRS decreased by $7.2 million, or 10.7%, to $60.5 million
due primarily to fewer contracts being serviced and the decision to break out
Perceptive Informatics, Inc. as a separate reportable segment during fiscal year
2001. Perceptive was included in CRS revenue in the same period last fiscal
year. PCG revenue increased by $3.7 million, or 21.4%, to $21.2 million due
primarily to internal growth and incremental revenue resulting from the
acquisition of a majority interest in FARMOVS during the first quarter. FARMOVS
is a clinical pharmacology research business and bioanalytical laboratory
located in South Africa. MMS revenue increased by $1.4 million, or 11.5%, to
$13.4 million due primarily to ongoing growth in international strategic
marketing. The Company began reporting Perceptive as a fourth business segment
in the first quarter of fiscal 2001. Net revenue for Perceptive was $3.2
million for the three months ended March 31, 2001, but was included as part of
CRS in the prior year quarter, and therefore, no comparable net revenue amounts
are available for Perceptive for the three months period ended in 2000.
Direct costs increased by $5.5 million, or 8.2%, to $72.6 million for the three
months ended March 31, 2001 from $67.1 million for the same period in 2000. On
a segment basis, CRS direct costs decreased by $3.2 million, or 7.1%, to $42.1
million due primarily to fewer contracts being serviced and Perceptive's direct
costs being reported as part of CRS in the same period last fiscal year. PCG
direct costs increased by $3.6 million, or 26.8%, to $16.9 million due primarily
to costs associated with increased revenue and incremental costs associated with
the FARMOVS acquisition. MMS direct costs increased by $765 thousand, or 9.0%,
to $9.3 million due primarily to labor and related costs associated with
increased revenue. Perceptive direct costs for the three months ended March 31,
2001 were $4.4 million. Direct costs as a percentage of net revenue increased
to 73.8% for the three months ended March 31, 2001 compared with 69% for the
comparable prior year period.
Selling, general and administrative expenses remained at $20.1 million for the
three months ended March 31, 2001 as compared to the same period in 2000.
Selling, general and administrative expenses as a percentage of net revenue
decreased to 20.4% for the three months ended March 31, 2001 from 20.7% for the
same period one year ago.
Depreciation and amortization expense decreased 14.3% to $4.9 million for the
three months ended March 31, 2001 from $5.8 million for the same period in 2000
due primarily to additional prior year depreciation recorded due to the downward
adjustment of the estimated useful life of leasehold improvements related to
certain facilities which the Company consolidated and abandoned. Depreciation
and amortization expense as a percentage of net revenues decreased to 5.0% for
the three months ended March 31, 2001 from 5.9% for the same period one year
ago.
Income from operations increased $9.8 million to $700 thousand for the three
months ended March 31, 2001 from a $9.1 million loss for the same period in
2000. Income from operations increased as a percentage of net revenue to 0.7%
for the three months ended March 31, 2001 from a negative 9.4% for the same
period in 2000.
Other income, net, totaled $2.5 million for the three months ended March 31,
2001 compared with $1.1 million for the comparable prior year period, an
increase of $1.4 million. The increase was primarily driven by a $1.4 million
increase in foreign exchange gains.
12
The Company had an effective income tax rate of 39.5 % for the three months
ended March 31, 2001 compared to a 26.3% tax benefit for the same period in
2000. The increase was due to having no current year counterpart to last year's
$13.4 million restructuring charge taken in 2000 and changes in the mix of
taxable income from the different jurisdictions where the Company operates.
Nine Months Ended March 31, 2001 Compared to Nine Months Ended March 31, 2000:
Net revenue decreased by $6.1 million, or 2.1%, to $280.9 million for the nine
months ended March 31, 2001 from $287 million for the comparable nine month
period in 2000. CRS revenue decreased by $27.8 million, or 13.7%, to $174.5
million due primarily to the inclusion of Perceptive revenue in the same period
in 2000 and the impact of contract cancellations. PCG revenue increased by $7.9
million, or 15.9%, to $57.6 million due primarily to incremental revenue
resulting from the FARMOVS acquisition, and internal growth, which contributed
$2.1 million of the total increase. MMS revenue increased by $5.5 million, or
15.8%, to $40.5 million due primarily to ongoing growth in international
strategic marketing. The Company began reporting Perceptive as a fourth
business segment in the first quarter of fiscal 2001. Net revenue for
Perceptive was $8.3 million for the nine months ended March, 2001, but was
included as part of CRS in the same period in 2000 and, therefore, no comparable
net revenue amounts are available for Perceptive for the same nine month period
in 2000.
Direct costs increased by $8.7 million, or 4.4%, to $204.7 million for the nine
months ended March 31, 2001 from $196 million for the same nine month period one
year ago. On a segment basis, CRS direct costs decreased $12.8 million, or
9.7%, from $132.5 million due primarily to lower labor and related costs
associated with lower revenue and Perceptive's direct costs being reported as
part of CRS in the same period last fiscal year. PCG direct costs increased
$8.2 million, or 21.5%, to $46.5 million. MMS direct costs increased $2.3
million, or 9.0%, to $27.5 million. The increase in direct costs for PCG and
MMS were due primarily to increased labor and related costs associated with
increased revenue. Perceptive direct costs for the nine months ended March 31,
2001 were $11.0 million. Total Company direct costs as a percentage of net
revenue were 72.9% for the nine months ended March 31, 2001, as compared to
68.3% for the comparable prior year period.
Selling, general and administrative expenses increased by $2.4 million, or 4.1%,
to $61.4 million for the nine months ended March 31, 2001 from $59.0 million for
the same nine month period in 2000. The increase was due primarily to staffing,
training, retention, and facility related expenses. Selling, general and
administrative expenses as a percentage of net revenue increased to 21.9% for
the nine months ended March 31, 2001 from 20.6% for the same nine month period
last fiscal year.
Depreciation and amortization expense decreased by $300 thousand, or 1.8%, to
$15.7 million for the nine months ended March 31, 2001 from $16.0 million for
the same nine month period in 2000. The decrease was due primarily to the
Company's downward adjustment of the estimated useful life of assets related to
certain facilities, which the Company abandoned in fiscal 2000. Depreciation
and amortization expense as a percentage of net revenue remained at 5.6% for the
nine months ended March 31, 2001 as compared to the same period in 2000.
Loss from operations was $235 thousand for the nine months ended March 31, 2001,
a change of $3.1 million from the $2.9 million profit for the same nine-month
period in 2000. Operating income as a percentage of net revenues was a negative
0.1% for the nine months ended March 31, 2001 compared with a positive 1.0% in
the comparable period one year ago.
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Other income, net increased $1.9 million, or 58.7%, to $5.3 million for the nine
months ended March 31, 2001 from $3.4 million in the same nine month period in
2000. The increase was due primarily to higher foreign exchange gains.
The Company had an effective tax rate of 46.0% for the nine months ended March
31, 2001 compared to 51.4% for the same nine months period in 2000. The
decrease was due to changes in the mix of taxable income from the different
jurisdictions where the Company operates and the impact of having no counterpart
to the prior year's restructuring charge.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations and growth,
including acquisition costs, with cash flow from operations and proceeds from
the sale of equity securities. Investing activities primarily reflect capital
expenditures for information systems enhancements and leasehold improvements.
The Company's clinical research and development contracts are generally fixed
price, with some variable components, and range in duration from a few months to
several years. Cash flow from contracts typically consists of down payments
required to be paid at the time contracts are signed with balances due in
installments over the duration of the contracts, usually on a milestone
achievement basis. Revenue from contracts is generally recognized on a
percentage of completion basis as work is performed. As a result, cash receipts
do not necessarily correspond to costs incurred and revenue recognized on
contracts. The Company's operating cash flow is influenced by changes in the
levels of billed and unbilled receivables and advance billings. These account
balances and the number of days revenue outstanding in accounts receivable, net
of advance billings, can vary based upon contractual milestones and the timing
and size of cash receipts. The number of days revenue outstanding in accounts
receivable, net of advance billings, increased to 72 days at March 31, 2001
compared to 55 days at June 30, 2000. The increase was due primarily to
substantial amounts of catch-up billing issued in February and March of 2001
following very high employee turnover in the Company's North American billing
operation during the fourth quarter of the calendar year 2000. The Company
anticipates days sale outstanding (DSO) will go back down to the historical 45
to 65 day range once amounts related to catch-up billing are collected.
In September 1999 the Board of Directors authorized the repurchase of up to $20
million of the Company's common stock. As of March 31, 2001, a total of 861,000
shares at a total cost of $8.2 million had been repurchased. For the nine month
period ended March 31, 2001, a total of 210,000 shares at a total cost of $1.8
million had been repurchased.
The Company's cash and cash equivalents were $44.3 million at March 31, 2001, a
decrease of $9.2 million from $53.5 million at June 30, 2000.
Net cash used by operating activities for the nine months ended March 31, 2001
of $9.0 million reflected a $49.2 million increase in accounts receivable
partially offset by net income of $2.8 million, depreciation and amortization of
$15.7 million, and the net impact of a $20.7 million change in other operating
assets and liabilities.
Net cash provided by investing activities for the nine months ended March 31,
2001 of $2.0 million consisted primarily of $17.0 million of net proceeds from
sale of marketable securities, offset by $12.0 million used for capital
expenditures and $3.0 million used for a business acquisition .
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Net cash used in financing activities for the nine months ended March 31, 2001
of $700 thousand resulted from $1.9 million used to repurchase common stock of
the Company and repayment on credit arrangements, offset by $1.2 million
provided by proceeds from the issuance of common stock under the Company's
employee stock purchase plan and the issuance of a subsidiary's common stock.
The Company has foreign lines of credit with banks totaling approximately $14.7
million. At March 31, 2001 the Company had approximately $12.9 million in
available credit under these arrangements.
The Company is planning on taking a restructuring charge during the fourth
quarter of this fiscal year as part of its on-going effort to reduce its cost
structure. Although details have not been finalized, the charge is expected to
be in the range of $2 to $4 million.
The Company's primary cash needs are for payment of salaries and fringe
benefits, hiring and recruiting expenses, business development costs,
acquisition-related costs, capital expenditures and facility-related expenses.
The Company believes that its existing capital resources, together with cash
flows from operations and borrowing capacity under its existing lines of credit,
will be sufficient to meet its foreseeable cash needs. In the future, the
Company will continue to consider acquiring businesses to enhance its service
offerings, therapeutic base, and/or global presence. Any such acquisitions may
require additional external financing and the Company may from time to time seek
to obtain funds from public or private issuance of equity or debt securities.
There can be no assurance that such financing will be available on terms
acceptable to the Company.
RECENTLY ISSUED ACCOUNTING STANDARD
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin 101, "Revenue Recognition" ("SAB 101"). SAB 101 summarizes certain of
the SEC staff's views in applying generally accepted accounting principles to
selected revenue recognition issues in financial statements. SAB 101, which was
delayed by the issuance of SAB 101A on March 27, 2000 and SAB 101B on June 26,
2000, has to be implemented by the Company by the fourth quarter of fiscal 2001.
SAB 101 has been adopted by the Company. The adoption of SAB 101 did not have a
significant impact on the Company's revenue recognition policies.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market risk is the potential loss arising from adverse changes in the market
rates and prices, such as foreign currency rates, interest rates, and other
relevant market rate or price changes. In the ordinary course of business, the
Company is exposed to various market risks, including changes in foreign
currency exchange rates and interest rates, and the Company regularly evaluates
its exposure to such changes. The Company's overall risk management strategy
seeks to balance the magnitude of the exposure and the costs and availability of
appropriate financial instruments. The Company occasionally purchases
securities with seven-day put options that allow the Company to sell the
underlying securities in seven days at par value. The Company uses these
derivative financial instruments on a limited basis to shorten contractual
maturity dates, thereby managing interest rate risk.
RISK FACTORS
In addition to other information in this report, the following risk factors
should be considered carefully in evaluating the Company and its business,
including forward-looking statements made in the section of
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this report entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and other forward-looking statements that
the Company may make from time to time.
THE LOSS, MODIFICATION, OR DELAY OF LARGE CONTRACTS MAY NEGATIVELY IMPACT THE
COMPANY'S FINANCIAL PERFORMANCE
Generally, the Company's clients can terminate their contracts with the Company
upon thirty to sixty days' notice or can delay execution of services. Clients
terminate or delay their contracts for a variety of reasons, including, but not
limited to:
. merger or potential merger related activities;
. failure of products being tested to satisfy safety requirements;
. products having unexpected or undesired clinical results;
. the client decides to forego a particular study, perhaps for economic
reasons;
. not enough patients enroll in the study;
. not enough investigators are recruited; or
. production problems cause shortages of the product
In addition, the Company believes that pharmaceutical companies may proceed with
fewer clinical trials if they are trying to reduce costs as a result of
budgetary limits or changing priorities. These factors may cause pharmaceutical
companies to cancel contracts with contract research organizations. The loss or
delay of a large contract or the loss or delay of multiple contracts could have
a material adverse effect on the Company's financial performance. Refer to Note
7 - Restructuring and Other Charges.
THE COMPANY'S OPERATING RESULTS HAVE FLUCTUATED BETWEEN QUARTERS AND YEARS AND
MAY CONTINUE TO FLUCTUATE IN THE FUTURE
The Company's quarterly and annual operating results have varied, and will
continue to vary. 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;
. the mix of services offered in a particular quarter or year;
. the timing of the opening of new offices;
. the timing of other internal expansion costs;
. the timing and amount of costs associated with integrating acquisitions; and
. the timing and amount of startup costs incurred in connection with the
introduction of new products, services or subsidiaries.
A high percentage of the Company's operating costs are fixed. Therefore, the
timing of the completion, delay or loss of contracts, or in the progress of
client projects, can cause the Company's operating results to vary substantially
between reporting periods.
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THE COMPANY DEPENDS ON A SMALL NUMBER OF INDUSTRIES AND CLIENTS FOR ALL OF ITS
BUSINESS
The Company depends on research and development expenditures by pharmaceutical
and biotechnology companies to sustain a large part of its business. The
Company's operations could be materially and adversely affected if:
. its clients' businesses experience financial problems or are affected by a
general economic downturn;
. consolidation in the pharmaceutical or biotechnology industries leads to a
smaller client base for the Company; or
. its clients reduce their research and development expenditures.
Furthermore, the Company has benefited in the past from the tendency of
pharmaceutical companies to outsource large clinical research projects. If this
tendency slows or reverses, the Company's operations would be materially and
adversely affected. In the third quarter of fiscal 2001, the Company's five
largest clients accounted for 47% of its consolidated net revenue, and one
client accounted for 16% of consolidated revenue. In the third quarter of fiscal
2000, the Company's five largest clients accounted for 47% of its consolidated
net revenue, and one client accounted for 21% of consolidated net revenue. The
Company could suffer a material adverse effect if it lost or experienced a
material reduction in the business of a significant client.
THE COMPANY'S BUSINESS HAS EXPERIENCED SUBSTANTIAL EXPANSION IN THE PAST AND THE
COMPANY MUST PROPERLY MANAGE THAT EXPANSION
The Company's business has expanded substantially in the past. Rapid expansion
could strain the Company's operational, human and financial resources. In order
to manage expansion, the Company must:
. continue to improve its operating, administrative and information
systems;
. accurately predict its future personnel and resource needs to meet client
contract commitments;
. track the progress of ongoing client projects; and
. attract and retain qualified management, sales, professional, scientific and
technical operating personnel.
The Company will face additional risks in expanding its foreign operations.
Specifically, the Company may find it difficult to:
. assimilate differences in foreign business practices, exchange rates and
regulatory requirements;
. operate amid political and economic instability;
. hire and retain qualified personnel; and
. overcome language, tariff and other barriers.
If an acquired business does not meet the Company's performance expectations,
the Company may have to restructure the acquired business or write-off the value
of some or all of the assets of the acquired business. If the Company fails to
properly manage its expansion, the Company could experience a material adverse
effect.
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THE COMPANY MAY NOT BE ABLE TO MAKE STRATEGIC ACQUISITIONS IN THE FUTURE
The Company's growth depends in part on its ability to make strategic
acquisitions. The Company has made a number of acquisitions and will continue to
review future acquisition opportunities. The Company may not be able to acquire
companies on acceptable terms and conditions. Additionally, the Company faces
several obstacles in connection with the acquisitions it consummates, including:
. difficulties and expenses associated with assimilation of the operations and
services or products of the acquired companies;
. management's attention will necessarily be diverted from other business
concerns; and
. the loss of some or all of the key employees of the acquired company.
In the event that the operations of an acquired business do not meet the
Company's performance expectations, the Company may have to restructure the
acquired business or write-off the value of some or all of the assets of the
acquired business. The Company may also experience difficulty integrating
acquired companies into its operations.
THE COMPANY RELIES ON HIGHLY QUALIFIED MANAGEMENT AND TECHNICAL PERSONNEL WHO
MAY NOT REMAIN WITH THE COMPANY
The Company relies on a number of key executives, including Josef H. von
Rickenbach, its Chairman and Chief Executive Officer. The Company does not have
employment agreements with most of its senior officers and if any of these key
executives leave the Company, it could have a material adverse effect on the
Company. In addition, in order to compete effectively, the Company must attract
and maintain qualified sales, professional, scientific and technical operating
personnel. Competition for these skilled personnel, particularly those with a
medical degree, a Ph.D. or equivalent degrees is intense. The Company may not be
successful in attracting or retaining key personnel.
THE COMPANY MAY NOT HAVE ADEQUATE INSURANCE AND MAY HAVE SUBSTANTIAL EXPOSURE TO
PAYMENT OF PERSONAL INJURY CLAIMS
Clinical research services primarily involve the testing of experimental drugs
on consenting human volunteers pursuant to a study protocol. Such services
involve a risk of liability for personal injury or death to patients who
participate in the study or who use a drug approved by regulatory authorities
after the clinical research has concluded, due to, among other reasons, possible
unforeseen adverse side effects or improper administration of the new drug by
physicians. In certain cases, these patients are already seriously ill and are
at risk of further illness or death. The Company's financial stability could be
materially and adversely affected if the Company had to pay damages or incur
defense costs in connection with a claim that is outside the scope of an
indemnity or insurance coverage. The Company's financial stability could also be
materially and adversely affected in cases where the indemnity, although
applicable, is not performed in accordance with its terms. Additionally, the
Company could be adversely and materially affected if its liability exceeds the
amount of its insurance. The Company may not be able to continue to secure
insurance on acceptable terms.
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THE COMPANY'S STOCK PRICE IS VOLATILE AND COULD DECLINE
The market price of the Company's common stock has fluctuated widely in the past
and may continue to do so in the future in response to quarter-to-quarter
variations in:
. operating results;
. earnings estimates by analysts;
. market conditions in the industry;
. prospects of health care reform;
. changes in government regulations; and
. general economic conditions.
In addition, the stock market has from time to time experienced significant
price and volume fluctuations that are not related to the operating performance
of particular companies. These market fluctuations may adversely affect the
market price of the Company's common stock. Since the Company's common stock has
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. Investors in the
Company's common stock must be willing to bear the risk of such fluctuations in
earnings and stock price.
THE COMPANY'S BUSINESS DEPENDS ON CONTINUED COMPREHENSIVE GOVERNMENTAL
REGULATION OF THE DRUG DEVELOPMENT PROCESS
In the United States, governmental regulation of the drug development process
has become more complicated and more extensive. However, the FDA announced
regulatory changes intended to streamline the approval process for biotechnology
products by applying the same standards for approval of biotechnology products
as are in effect for conventional drugs. In Europe, governmental authorities are
coordinating common standards for clinical testing of new drugs, leading to
changes in the various requirements currently imposed by each country. In the
past, Japan legislated good clinical practices and legitimatized the use of
contract research organizations. The Company's business could be materially and
adversely affected by relaxed government regulatory requirements or simplified
drug approval procedures, since such actions eliminate much of the demand for
the Company's services. In addition, if the Company was unable to comply with
any applicable regulation, the relevant governmental agencies could terminate
the Company's ongoing research or disqualify its research data.
THE COMPANY FACES INTENSE COMPETITION
The Company primarily competes against in-house departments of drug companies,
other full service contract research organizations, and to a lesser extent,
universities, teaching hospitals and other site organizations. Some of these
competitors have greater capital, technical and other resources than the
Company. Contract research organizations generally compete on the basis of:
. previous experience;
. medical and scientific expertise in specific therapeutic areas;
. the quality of services;
. the ability to organize and manage large-scale trials on a global basis;
. the ability to manage large and complex medical databases;
. the ability to provide statistical and regulatory services;
. the ability to recruit investigators and patients;
. the ability to integrate information technology with systems to improve the
efficiency of contract research;
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. an international presence with strategically located facilities;
. financial strength and stability; and
. price.
The contract research organization industry is fragmented, with several hundred
small, limited-service providers and several large, full-service contract
research organizations with global operations. The Company competes against
large contract research organizations, including Quintiles Transnational
Corporation, Covance Inc., and Pharmaceutical Product Development, Inc., for
both clients and acquisition candidates. In addition, the Company competes for
research contracts arising out of the consolidation within the drug industry and
the growing tendency of drug companies to outsource to a small number of
preferred contract research organizations.
THE COMPANY MAY LOSE BUSINESS OPPORTUNITIES AS A RESULT OF HEALTH CARE REFORM
Numerous governments have undertaken efforts to control growing health care
costs through legislation, regulation and voluntary agreements with medical care
providers and drug companies. In the recent past, the U.S. Congress has
entertained several comprehensive health care reform proposals. The proposals
were generally intended to expand health care coverage for the uninsured and
reduce the growth of total health care expenditures. While the U.S. Congress did
not adopt any comprehensive reform proposals, members of Congress may raise
similar proposals in the future. If any of these proposals are approved by the
U.S. Congress, pharmaceutical and biotechnology companies may react by spending
less on research and development. If this were to occur, the Company would have
fewer business opportunities. The Company is unable to predict the likelihood
that health care reform proposals will be enacted into law or the effect such
laws would have on the Company's business.
Many governments outside the U.S. have also reviewed or undertaken health care
reform. The Company cannot predict the impact that any pending or future foreign
health care reform proposals may have on its business in other countries.
THE COMPANY IS SUBJECT TO CURRENCY TRANSLATION RISKS
The Company derived approximately 42% of its net revenue for the three months
ended March 31, 2001 from operations outside of North America, compared with 39%
for the same period in the prior fiscal year. Since the Company's revenues and
expenses from foreign operations are usually denominated in local currencies,
the Company is subject to exchange rate fluctuations between local currencies
and the United States dollar. To the extent that the Company cannot shift this
currency translation risk to other parties, the Company's operating results
could be materially and adversely affected. The Company does not generally hedge
against the risk of exchange rate fluctuations.
THE COMPANY'S DEVELOPMENT OF ITS PERCEPTIVE INFORMATICS BUSINESS MAY NEGATIVELY
IMPACT RESULTS IN THE SHORT TERM
The Company is currently making investments in its technology subsidiary,
Perceptive Informatics, Inc., but does not expect such subsidiary to become
profitable in the immediate future. The Company may need to make additional
investments in this subsidiary in the future in order to achieve its objectives.
The profitability of this subsidiary depends, in part, on customer acceptance
and use of its products and services and its ability to compete against rival
products and services. There can be no assurance that
20
this subsidiary will be profitable in the future or that any revenues resulting
from it will be sufficient to offset the Company's investments in this division.
THE COMPANY FACES THE RISKS OF LIABILITY, INCREASED COSTS OR LIMITATION OF
SERVICE OFFERINGS AS A RESULT OF PROPOSED AND FINAL LAWS AND REGULATIONS
The confidentiality and release of patient-specific information are subject
to government regulation. Additional legislation governing the possession, use
and dissemination of medical record information and other personal health
information has been proposed or adopted at both the state and federal levels.
Proposed and final federal regulations governing patient-specific information
may require the Company to implement new security measures that may result in
substantial expenditures or limit its ability to offer some of its products and
services. Additionally, states may adopt health information legislation or
regulations that contain privacy and security provisions that are more
burdensome than the proposed federal regulations. There is also a risk of civil
or criminal liability if the Company is found to be responsible for any
violations of applicable laws, regulations or duties relating to the use,
privacy or security of health information.
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On or about June 8, 2000, a complaint was filed in the United States District
Court for the Southern District of New York against the Company and four of its
directors by two arbitrageurs, Elliott Associates, L.P. and Westgate
International L.P. The complaint alleged violations of Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5, Section 20(a) of the Exchange
Act and asserted state law claims for fraud and negligent misrepresentation. On
November 28, 2000, the United States District Court for the Southern District of
New York granted the Company's Motion to Dismiss all counts of the complaint.
The time period to appeal this decision has expired. The decision of the United
States District Court dismissing all claims did not bar the arbitrageurs from
re-filing state law claims against the Company in a state forum. On or about
April 23, 2001, a complaint was filed by the arbitrageurs, Elliott Associates,
L.P. and Elliott International, L.P. f/k/a Westgate International, L.P., in the
Supreme Court of the State of New York in connection with the same matter
alleging claims of common law fraud under the laws of New York against the
Company and seeking monetary damages. The Company intends to vigorously defend
the state court matter.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company did not file any Current Reports on Form 8-K with the Securities and
Exchange Commission during the quarter ended March 31, 2001.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on this ____ day of May 2001.
PAREXEL International Corporation
Date: May 15, 2001 By: /s/ Josef H. von Rickenbach
-----------------------------------------
Josef H. von Rickenbach
Chairman of the Board and Chief Executive
Officer
Date: May 15, 2001 By: /s/ James F. Winschel, Jr.
-----------------------------------------
James F. Winschel, Jr.
Senior Vice President and Chief Financial
Officer
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