PAREXEL Reports Second Quarter Fiscal Year 2010 Financial Results

- Service revenue of $284.7 million

- GAAP diluted earnings per share of $0.06; non-GAAP earnings per share excluding restructuring of $0.26

- Backlog of $2.31 billion and net book-to-bill of 1.41

Jan 25, 2010, 16:55 ET from PAREXEL International Corporation

BOSTON, Jan. 25 /PRNewswire-FirstCall/ -- PAREXEL International Corporation (Nasdaq: PRXL) today announced its financial results for the second quarter ended December 31, 2009.

For the three months ended December 31, 2009, PAREXEL's consolidated service revenue increased 3.2% to $284.7 million compared with $275.8 million in the prior year period.  Excluding the positive impact of foreign exchange of $14.0 million dollars in the quarter, revenue decreased approximately 2% from the prior year.  Operating income as reported under Generally Accepted Accounting Principles (GAAP) totaled $18.7 million, or 6.6% of consolidated service revenue in the second quarter of Fiscal Year 2010, as compared with $7.7 million, or 2.8% of consolidated service revenue in the same period one year ago.  Excluding the impact of restructuring related items in the quarter, as detailed below and in the attached financial tables, operating income was $26.9 million, or 9.5% of consolidated service revenue, in the second quarter of Fiscal Year 2010.  This contrasts with non-GAAP operating income of $22.7 million, or 8.2% of consolidated service revenue, in the comparable quarter of the prior year (adjusted prior period numbers do not include the impact from a client's default on a contract).  GAAP net income for the quarter totaled $3.5 million, or $0.06 per diluted share, compared with net income of $5.2 million, or $0.09 per diluted share, for the quarter ended December 31, 2008.  On a non-GAAP basis, excluding certain items in both periods that are detailed in the attached financial tables, net income for the second quarter was $15.1 million, or $0.26 per diluted share, as compared with net income of $13.1 million or $0.23 per share in the prior year period.

During the December 2009 quarter, the Company incurred net restructuring and related charges of $14.3 million, including costs for severance and the abandonment of facilities, as well as a $6.1 million charge for the impairment of an investment, partly offset by a recovery related to a prior charge.  The impairment charge was a non-cash, non-tax deductible amount which caused the total impact of the charges to be $0.20 cents per diluted share rather than the previously-estimated $0.15 cents per diluted share.

On a segment basis, consolidated service revenue for the second quarter of Fiscal Year 2010 was $221.6 million in Clinical Research Services (CRS), $29.7 million in PAREXEL Consulting and Medical Communications Services (PCMS), and $33.4 million in Perceptive Informatics, Inc.

For the six months ended December 31, 2009, consolidated service revenue was $544.5 million versus $538.9 million in the prior year period, an increase of 1.0%.  GAAP operating income for the current six-month period was $37.2 million, or 6.8% of service revenue, compared with GAAP operating income of $29.7 million, or 5.5% of service revenue in the prior year period.  Net income on a GAAP basis for the six months ended December 31, 2009 was $15.9 million, or $0.27 per diluted share, compared with GAAP net income of $18.8 million, or $0.32 per diluted share, in the prior year period. On a non-GAAP basis, excluding certain items in both periods that are detailed in the attached financial tables, operating income for the six months ended December 31, 2009 was $45.4 million, or 8.3% of consolidated service revenue, compared with $44.7 million, or 8.3% of consolidated service revenue in the comparable six-month period of the prior year.  On a non-GAAP basis, excluding items in both periods that are detailed in the attached financial tables, net income for the six months ended December 31, 2009 was $27.6 million, or $0.47 per diluted share, as compared with net income of $26.7 million or $0.46 per share in the prior year period.

PAREXEL's backlog was approximately $2.31 billion at the end of the December quarter, an increase of 15.1% year-over-year.  The reported backlog included gross new business wins of $501.7 million, cancellations of $98.9 million, and a positive impact from foreign exchange rates of $33.9 million.  The net book-to-bill ratio was 1.41 in the quarter (defined as gross new business less cancellations divided by service revenue).  

Mr. Josef H. von Rickenbach, PAREXEL's Chairman and Chief Executive Officer stated, "Our results for the December quarter capped a solid and positive finish to a challenging year.  A strong performance on the new business front drove substantive backlog gains, with increases across all three reporting segments.  We also continued to improve operating margins, and expect further margin expansion in the coming quarters, as the benefits of restructuring activities and other productivity and efficiency initiatives begin to take hold."

Mr. von Rickenbach continued, "We believe that our achievements on the new business front clearly derive from the successful execution of our strategy, which is to serve our clients as a leading expertise-based global provider of clinical development services and technologies.  Market demand has been picking up across all geographies in the Late Phase portion of our Clinical Research Services business, as well as in our Perceptive Informatics segment.  These demand trends should continue to drive further revenue growth and profitability improvement.  Going forward, we anticipate that a number of broad industry dynamics will benefit PAREXEL, including the completion of several large pharmaceutical company mergers, increased partnering activities and outsourcing penetration rates, a return of funding to mid and small biopharma clients, and the heightened focus of our clients on moving promising compounds through the later stages of the development process."

The Company issued forward-looking guidance for the third quarter of Fiscal Year 2010 (ending March 31, 2010), for Fiscal Year 2010 and for Calendar Year 2010 using recent exchange rates.  Adjusted diluted earnings per share guidance numbers exclude restructuring and related charges.  The Company expects to record an additional $14 million in restructuring charges during the third quarter of Fiscal Year 2010, equating to approximately $0.14 per diluted share.  For the third quarter, the Company anticipates reporting consolidated service revenue in the range of $288 to $293 million, GAAP earnings per diluted share in the range of $0.11 to $0.14, and adjusted earnings per share of $0.25 to $0.28.  For Fiscal Year 2010, consolidated service revenue is expected to be in the range of $1.125 to $1.145 billion, GAAP earnings per diluted share to be in the range of $0.66 to $0.72, and adjusted diluted earnings per share to be in the range of $1.00 to $1.06.  (Previously issued guidance for Fiscal Year 2010 was for service revenue of $1.115 to $1.145 billion, GAAP diluted earnings per share of $0.60 to $0.70, and adjusted earnings per diluted share of $0.90 to $1.00).  For Calendar Year 2010, consolidated service revenue is expected to be in the range of $1.175 to $1.215 billion, GAAP earnings per diluted share are projected to be in the range of $0.91 to $1.05, and adjusted earnings per share are projected to be in the range of $1.05 to $1.19.  (Previously issued guidance for Calendar Year 2010 was for service revenue of $1.170 to $1.215 billion, GAAP earnings per diluted share of $0.85 to $1.00, and adjusted earnings per diluted share of $1.00 to $1.15).

In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), the Company uses certain non-GAAP financial measures.  The Company believes that presenting the non-GAAP financial measures contained in this press release assists investors and others in gaining a better understanding of its core operating results and future prospects, especially when comparing such results to previous periods or forecasted guidance, because such measures exclude items that are outside of the Company's normal operations and/or, in certain cases, are difficult to forecast accurately for future periods.  Management uses non-GAAP financial measures, in addition to the measures prepared in accordance with GAAP, as the basis for measuring the Company's core operating performance and comparing such performance to that of prior periods and to the performance of its competitors for the same reasons stated above.  Such measures are also used by management in its financial and operating decision-making.  Non-GAAP financial measures are not meant to be considered superior to or a substitute for the Company's results of operations prepared in accordance with GAAP.

A conference call to discuss PAREXEL's second quarter earnings, business, and financial outlook will begin at 10:00 a.m. ET on Tuesday, January 26, 2010 and will be broadcast live over the internet via webcast.  The webcast may be accessed in the "Webcasts" portion of the Investor Relations section of the Company's website at www.parexel.com.  Users should follow the instructions provided to assure that the necessary audio applications are downloaded and installed.  A replay of this webcast will be archived on the website approximately two hours after the call and will continue to be accessible for approximately one year following the live event.  To participate via telephone, dial +1 706-758-4950 and ask to join the PAREXEL quarterly conference call.

Certain trended financial information may be found in the Investor Relations section of the Company's website under the "Additional Financials" section.  

About the Company

PAREXEL International Corporation is a leading global bio/pharmaceutical services organization, providing a broad range of knowledge-based contract research, medical communications and consulting services to the worldwide pharmaceutical, biotechnology and medical device industries. Committed to providing solutions that expedite time-to-market and peak-market penetration, PAREXEL has developed significant expertise across the development and commercialization continuum, from drug development and regulatory consulting to clinical pharmacology, clinical trials management, medical education and reimbursement. Perceptive Informatics, Inc., a subsidiary of PAREXEL, provides advanced technology solutions, including medical imaging, to facilitate the clinical development process. Headquartered near Boston, Massachusetts, PAREXEL operates in 71 locations throughout 50 countries around the world, and has approximately 9,200 employees. For more information about PAREXEL International visit www.PAREXEL.com.

This release contains "forward-looking" statements regarding future results and events, including, without limitation, statements regarding expected financial results, future growth and customer demand, such as the guidance provided by the Company with respect to the third quarter of Fiscal Year 2010, Fiscal Year 2010, and Calendar Year 2010.  For this purpose, any statements contained herein 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," "estimates," "projects," "will," "would," "could," "targets," and similar expressions are also intended to identify forward-looking statements.  The forward-looking statements in this release involve a number of risks and uncertainties.  The Company's actual future results may differ significantly from the results discussed in the forward-looking statements contained in this release.  Important factors that might cause such a difference include, but are not limited to, risks associated with: actual operating performance; actual expense savings and other operating improvements resulting from recent and anticipated restructurings, including the anticipated restructuring charge of approximately $30 million over the second and third quarters of Fiscal Year 2010; the loss, modification, or delay of contracts which would, among other things, adversely impact the Company's recognition of revenue included in backlog; the Company's dependence on certain industries and clients; the Company's ability to win new business, manage growth and costs, and 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; the impact on the Company's business of government regulation of the drug, medical device and biotechnology industry; consolidation within the pharmaceutical industry and competition within the biopharmaceutical services 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 and other international economic, political, and other risks.  Such factors and others are discussed more fully in the section entitled "Risk Factors" of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 as filed with the SEC on November 6, 2009 which "Risk Factors" discussion is incorporated by reference in this press release.  The forward-looking statements included in this press release represent the Company's estimates as of the date of this release.  The Company specifically disclaims any obligation to update these forward-looking statements in the future.  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 press release.


CONTACTS:

James Winschel, Senior Vice President and Chief Financial Officer


Jill Baker, Vice President of Investor Relations


+1-781-434-4118




PAREXEL International Corporation

Consolidated Condensed Statement of Operations

Unaudited
































Three Months Ended


Three Months Ended

(in thousands, except per share data)


December 31, 2009


December 31, 2008




As Reported


Adjustments


Non-GAAP


As Reported


Adjustments


Non-GAAP















Service revenue



$             284,731 




$              284,731 


$               275,846   




$               275,846   

Reimbursement revenue



53,249   




53,249   


48,155   




48,155   

 Total revenue



337,980   




337,980   


324,001   




324,001   















Costs and expenses:














Direct costs



178,237   




178,237   


177,295   




177,295   

Reimbursable out-of-pocket expenses


53,249   




53,249   


48,155   




48,155   

Selling, general and administrative  



64,498   




64,498   


62,062   




62,062   

Depreciation



13,151   


(514)  

(a)

12,637   


11,305   




11,305   

Amortization



2,447   




2,447   


2,474   




2,474   

Other (benefit) charge



(1,144)  


1,144   

(b)

-   


15,000   


(15,000)  

(b)

-   

Restructuring expense



8,831   


(8,831)  

(a)

-   


-   




-   

  Total costs and expenses



319,269   


(8,201)  


311,068   


316,291   


(15,000)  


301,291   















Income from operations



18,711   


8,201   


26,912   


7,710   


15,000   


22,710   















Other (expense) income



(9,944)  


6,142   

(c)

(3,802)  


2,642   




2,642   















Income before income taxes



8,767   


14,343   


23,110   


10,352   


15,000   


25,352   















Provision for income taxes



5,317   


2,667   

(d)

7,984   


5,144   


7,080   


12,224   

Effective tax rate



60.6%




34.5%


49.7%




48.2%















Net income



$                   3,450   


$                 11,676   


$                 15,126   


$                   5,208   


$                   7,920   


$                 13,128   















Earnings per common share:














 Basic



$                     0.06   




$                     0.26   


$                     0.09   




$                     0.23   

 Diluted



$                     0.06   




$                     0.26   


$                     0.09   




$                     0.23   















Shares used in computing earnings per common share:













 Basic



57,933   




57,933   


57,634   




57,634   

 Diluted



58,073   




58,073   


57,634   




57,634   















(a) Restructuring charges pursuant to plans announced or implemented in Q2 FY10 include $0.5 million of accelerated depreciation on abandoned facilities, $5.2 million of facility-related costs and $3.6 million in severance costs.

(b) Release of $1.1 million in certain reserves related to the $15 million wind-down costs and bad debt expense established in Q2 FY09 for a client contract default.

(c) Investment impairment charge.

(d) Tax benefit associated with items a-c.


















Balance Sheet Information

Preliminary














Dec. 31,


June 30,


Dec. 31,










2009


2009


2008









Billed accounts receivable, net

$               250,378 


$               251,174 


$               259,065 









Unbilled accounts receivable, net

248,778 


230,146 


202,019 









Deferred revenue

(287,930)


(266,453)


(238,370)









Net receivables

$               211,226 


$               214,867 


$               222,714 























Cash and marketable securities

$               118,847 


$                 96,352 


$                 63,678 









Working capital

$               198,461 


$               191,705 


$               143,788 









Total assets

$            1,246,994 


$            1,224,461 


$            1,123,131 









Short-term borrowings

$                 32,077 


$                 32,090 


$                 50,424 









Long-term debt

$               220,330 


$               247,083 


$               226,871 









Stockholders' equity

$               441,229 


$               414,745 


$               373,546 












PAREXEL International Corporation

Consolidated Condensed Statement of Operations

Unaudited


























Six Months Ended


Six Months Ended

(in thousands, except per share data)

December 31, 2009


December 31, 2008


As Reported


Adjustments


Non-GAAP


As Reported


Adjustments


Non-GAAP













Service revenue

$               544,494   




$               544,494   


$               538,892   




$               538,892   

Reimbursement revenue

101,024   




101,024   


104,661   




104,661   

 Total revenue

645,518   




645,518   


643,553   




643,553   













Costs and expenses:












Direct costs

345,066   




345,066   


348,659   




348,659   

Reimbursable out-of-pocket expenses

101,024   




101,024   


104,661   




104,661   

Selling, general and administrative  

124,851   




124,851   


119,787   




119,787   

Depreciation

24,720   


(514)  

(a)

24,206   


21,234   




21,234   

Amortization

4,983   




4,983   


4,509   




4,509   

Other (benefit) charge

(1,144)  


1,144   

(b)

-   


15,000   


(15,000)  

(b)

-   

Restructuring expense

8,831   


(8,831)  

(a)

-   


-   




-   

  Total costs and expenses

608,331   


(8,201)  


600,130   


613,850   


(15,000)  


598,850   













Income from operations

37,187   


8,201   


45,388   


29,703   


15,000   


44,703   













Other (expense) income

(10,724)  


6,142   

(c)

(4,582)  


1,964   




1,964   













Income before income taxes

26,463   


14,343   


40,806   


31,667   


15,000   


46,667   













Provision for income taxes

10,572   


2,667   

(d)

13,239   


12,840   


7,080   


19,920   

Effective tax rate

40.0%




32.4%


40.5%




42.7%













Net income

$                 15,891   


$                 11,676   


$                 27,567   


$                 18,827   


$                   7,920   


$                 26,747   













Earnings per common share:












 Basic

$                     0.27   




$                     0.48   


$                     0.33   




$                     0.46   

 Diluted

$                     0.27   




$                     0.47   


$                     0.32   




$                     0.46   













Shares used in computing earnings per common share:












 Basic

57,874   




57,874   


57,552   




57,552   

 Diluted

58,104   




58,104   


58,171   




58,171   













(a) Restructuring charges pursuant to plans announced or implemented in Q2 FY10 include $0.5 million of accelerated depreciation on abandoned facilities, $5.2 million of facility-related costs and $3.6 million in severance costs.

(b) Release of $1.1 million in certain reserves related to the $15 million wind-down costs and bad debt expense established in Q2 FY09 for a client contract default.

(c) Investment impairment charge.

(d) Tax benefit associated with items a-c.




PAREXEL International Corporation

Segment Information

Unaudited













Three Months Ended


Three Months Ended

(in thousands)


December 31, 2009


December 31, 2008






Clinical Research Services (CRS)










Service revenue


$                          221,570   


$                          200,934   

% of total service revenue


77.8%


72.8%

Gross profit


$                            82,419   


$                            70,207   

Gross margin % of service revenue


37.2%


34.9%






PAREXEL Consulting & Medical Communications





 Services (PCMS)










Service revenue


$                            29,731   


$                            31,931   

% of total service revenue


10.4%


11.6%

Gross profit


$                            10,749   


$                            11,164   

Gross margin % of service revenue


36.2%


35.0%











Perceptive Informatics, Inc. (PII)










Service revenue


$                            33,430   


$                            42,981   

% of total service revenue


11.8%


15.6%

Gross profit


$                            13,326   


$                            17,180   

Gross margin % of service revenue


39.9%


40.0%











Total service revenue


$                          284,731   


$                          275,846   

Total gross profit


$                          106,494   


$                            98,551   

Gross margin % of service revenue


37.4%


35.7%











Revenue by Geography










The Americas


$                          108,913   


$                          121,560   

Europe, Middle East & Africa


142,459   


131,533   

Asia/Pacific


33,359   


22,753   

Total service revenue


$                          284,731   


$                          275,846   











Quarterly Supplemental Financial Data










Total revenue


$                          337,980   


$                          324,001   

Investigator fees


50,672   


48,739   

Gross revenue


$                          388,652   


$                          372,740   






Days sales outstanding


50   


55   






Capital expenditures


14,454   


21,388   




PAREXEL International Corporation

Segment Information

Unaudited













Six Months Ended


Six Months Ended

(in thousands)


December 31, 2009


December 31, 2008






Clinical Research Services (CRS)










Service revenue


$                   423,894   


$                        403,757   

% of total service revenue


77.9%


74.9%

Gross profit


$                   155,461   


$                        141,128   

Gross margin % of service revenue


36.7%


35.0%






PAREXEL Consulting & Medical Communications





 Services (PCMS)










Service revenue


$                     58,552   


$                       62,042   

% of total service revenue


10.8%


11.5%

Gross profit


$                    21,139   


$                       21,112   

Gross margin % of service revenue


36.1%


34.0%











Perceptive Informatics, Inc. (PII)










Service revenue


$                    62,048   


$                        73,093   

% of total service revenue


11.3%


13.6%

Gross profit


$                    22,828   


$                        27,993   

Gross margin % of service revenue


36.8%


38.3%











Total service revenue


$                  544,494   


$                    538,892   

Total gross profit


$                  199,428   


$                    190,233   

Gross margin % of service revenue


36.6%


35.3%











Revenue by Geography










The Americas


$                   210,514   


$                    223,891   

Europe, Middle East & Africa


271,999   


271,920   

Asia/Pacific


61,981   


43,081   

Total service revenue


$                  544,494   


$                    538,892   



SOURCE PAREXEL International Corporation



RELATED LINKS

http://www.parexel.com