PAREXEL REPORTS THIRD QUARTER FINANCIAL RESULTS
BOSTON, MA, April 26, 2000 — PAREXEL International Corporation (Nasdaq: PRXL) today announced its financial results for the third quarter ended March 31, 2000.
For the three months ended March 31, 2000, PAREXEL¡¦s consolidated net revenue increased 8.1% to $97.3 million, from $90.0 million in the prior year quarter. On a pro forma basis, excluding the effect of restructuring and other charges, income from operations was $4.8 million versus $7.7 million in the prior year quarter. Pro forma net income for the quarter was $3.9 million, or $0.16 per diluted share, compared with net income of $5.7 million, or $0.23 per diluted share for the quarter ended March 31, 1999.
For the nine months ended March 31, 2000, consolidated net revenue of $287.0 million grew 10.1% over the prior year period net revenue of $260.7 million. Pro forma income from operations for the nine months ended March 31, 2000, was $17.2 million versus $22.7 million in the prior year period. Pro forma net income for the nine months was $13.4 million versus $16.3 million in the prior year period.
On a segment basis, revenues for the third quarter were $67.8 million in Clinical Research Services, $17.5 million in the Consulting Group, and $12.0 million in Medical Marketing Services.
At the beginning of March, PAREXEL announced that it would record a charge related to restructuring. During the quarter ended March 31, 2000 PAREXEL recorded restructuring and other charges totaling approximately $13.4 million on a pre-tax basis, and consisting primarily of employee severance and lease termination costs. The Company also incurred increased depreciation expense of $.5 million related to changes in the estimated useful lives of leasehold improvements on abandoned leased facilities. It is anticipated that an additional facilities restructuring charge of approximately $5 million to $10 million will be recorded prior to calendar year-end as plans related to certain facilities are finalized.
The Company also issued forward-looking guidance regarding revenues and pro forma earnings per share (not taking into account any extraordinary charges) for the remainder of fiscal 2000 and fiscal 2001 in its entirety. For the fourth quarter of fiscal 2000, the Company anticipates revenues to be in the range of $90 to $93 million, and earnings per share to be in the Third Quarter Earnings Release range of $0.07 to $0.09. For fiscal 2001 PAREXEL anticipates revenues to be in the range of $380 to $395 million, and earnings per share to be in the range of $0.50 to $0.60.
In commenting on the quarter and the Company¡¦s future outlook, Mr. Josef von Rickenbach, PAREXEL¡¦s Chairman and Chief Executive Officer stated, ¡§As a result of major contract cancellations which we previously announced, we took the difficult but essential step this quarter of restructuring our operations to better match our revised revenue expectations. We anticipate that the restructuring and other charges which were taken in the third quarter, and the charges that will be taken later in the calendar year, will help us to achieve an aggregate cost savings of approximately $15 million to $20 million by the end of fiscal 2001. However, irrespective of these savings, and due to the excessively high level of contract cancellations and delays that we continue to see, we feel that it is necessary to revise our forward-looking earnings expectations at this point in time. We do continue to believe that the fundamentals of the clinical research, consulting, and medical marketing businesses remain sound, and that once the pharmaceutical merger activity and political environment normalize, the business climate for our services will stabilize and improve.¡¨
Mr. von Rickenbach continued, ¡§As we announced yesterday, we have made a change to the management of our Medical Marketing Services unit, and have named Andrew Smith as President of the unit. Mr. Smith succeeds A. Joseph Eagle, who has decided to leave PAREXEL, after successfully running the business unit for two years. Mr. Eagle will continue to serve on the PAREXEL Board of Directors. Mr. Smith has more than twenty-five years of experience in the global pharmaceutical industry, having worked for several blue-chip pharmaceutical companies. His experience will be invaluable to us as this business unit continues to grow and evolve."
The Company also reported that it would realign the Advanced Technology and Informatics (ATI) e-businesses into a stand alone strategic business unit. ATI is currently a division of Clinical Research Services (CRS). The change will become effective at the beginning of fiscal 2001. Mr. Josef von Rickenbach stated, ¡§ATI is the home of PAREXEL¡¦s e-businesses, including the ParXnet family of products and eMD, electronic Medical Diagnostics. We believe that moving ATI to a stand-alone Strategic Business Unit will provide it with the entrepreneurial climate necessary for the development and start-up of new products and services. It will also enhance our ability to track its financial and market performance. In addition, the results of the CRS unit will more purely reflect the operations of that business.¡¨
Other highlights of the quarter ended March 31, 2000, included:
- Progress with the Company¡¦s share repurchase program resulting in a total of 487,000 shares repurchased from October, when the program commenced, through the end of March, at a total expenditure of $4.9 million.
- The launch of Pharmacovigilance & Post-Approval Services, a new offering of the Clinical Research Services division. The services are designed to provide clients with an improved ability to monitor and assess the safety of their marketed products, as required by regulatory authorities. PAREXEL offers a complete outsourcing solution in this area, ranging from expert consultation to the full management and evaluation of safety reports.
- The signing of a collaborative research agreement with Central Sheffield University Hospitals NHS Trust, a research and teaching institution located in the United Kingdom. The agreement reflects PAREXEL¡¦s strategy of forging relationships with leading academic medical centers to strengthen and expand its clinical research and development capabilities around the world.
- The initial rollout of a new Company-wide branding initiative to emphasize PAREXEL¡¦s strengths in the drug development area and to build a strong brand identity for PAREXEL. An advertising campaign began appearing in the key trade publications in mid-February and uses the Company¡¦s new tag line "Clinically Thinking"TM.
This release may contain "forward-looking" statements regarding future results and events, including statements regarding expected financial results, future growth and customer demand. 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: the cancellation or delay of contracts; 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; 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 more fully in the section entitled "Risk Factors" of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1999.
PAREXEL is one of the largest contract pharmaceutical outsourcing organizations in the world, providing a broad range of knowledge-based contract research, medical marketing and consulting services to the worldwide pharmaceutical, biotechnology and medical device industries. With a commitment to providing solutions that accelerate time-to-market and peak market penetration, PAREXEL has developed significant expertise in clinical trials management, data management, biostatistical analysis, medical marketing, clinical pharmacology, regulatory and medical consulting, industry training and publishing and other drug development consulting services. The Company¡¦s integrated services, therapeutic area depth and sophisticated information technology, along with its experience in global drug development and product launch services, represent key competitive strengths. Headquartered near Boston, MA, PAREXEL operates in 43 locations throughout 29 countries around the world, and has approximately 4,275 employees.