##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from        to
 Commission File Number:
 PRA INTERNATIONAL
 (Exact name of Registrant as Specified in Its Charter)
 Delaware
    
    54-2040171(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation)
    
    Identification No.)
 12120 Sunset Hills Road
Suite 600
Reston, Virginia 20190  (Address of principal executive offices)
 (703) 464-6300  (Registrants telephone number, including area code)
 
 þ o
  o þ o
 o þ




---



##### 



INDEX
 PagePart I Financial InformationItem 1. Financial Statements
    
    3Consolidated Condensed Balance Sheets as of December 31, 2006 and June 30, 2007 (unaudited)
    
    3Consolidated Condensed Statements of Operations (unaudited) for the Three and Six Months
Ended June 30, 2006 and 2007
    
    4Consolidated Condensed Statement of Changes in Stockholders Equity and Other
Comprehensive Income (unaudited) for the Six Months Ended June 30, 2007
    
    5Consolidated Condensed Statements of Cash Flows (unaudited) for the Six Months Ended June
30, 2006 and 2007
    
    6Notes to Consolidated Condensed Financial Statements
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    27Item 4. Controls and Procedures
    
    28Part II Other InformationItem 1. Legal Proceedings
    
    28Item 4. Submission of Matters to a Vote of Security Holders
    
    28Item 6. Exhibits
    
    29
 2




---



##### 



PART I FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS
 PRA INTERNATIONAL AND SUBSIDIARIES
 CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except per share amounts)
 December 31,
    
    
    June 30,2006
    
    
    2007(Unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    44,490
    
    
    $
    38,134Accounts receivable and unbilled services, net
    
    
    106,298
    
    
    
    107,340Prepaid expenses and other current assets
    
    
    21,050
    
    
    
    27,368Deferred tax assets
    
    
    191
    
    
    
    2,145Total current assets
    
    
    172,029
    
    
    
    174,987Fixed assets, net
    
    
    33,663
    
    
    
    33,703Goodwill
    
    
    210,761
    
    
    
    214,747Other intangibles, net of accumulated amortization of $8,446 and $10,353 as of
December 31, 2006 and June 30, 2007, respectively
    
    
    33,493
    
    
    
    32,071Deferred tax assets
    
    
    2,183
    
    
    
    2,082Other assets
    
    
    2,126
    
    
    
    1,343Total assets
    
    $
    454,255
    
    
    $
    458,933LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    16,892
    
    
    $
    21,713Accrued expenses and other current liabilities
    
    
    31,276
    
    
    
    38,384Income taxes payable
    
    
    10,724
    
    
    
    7,084Advance billings
    
    
    101,618
    
    
    
    107,800Deferred tax liability
    
    
    3,491
    
    
    
    3,414Capital leases, current portion
    
    
    131
    
    
    
    33Total current liabilities
    
    
    164,132
    
    
    
    178,428Deferred tax liability
    
    
    7,571
    
    
    
    8,123Other liabilities
    
    
    7,137
    
    
    
    5,892Debt
    
    
    24,000
    
    
    
    Capital leases
    
    
    47
    
    
    
    43Total liabilities
    
    
    202,887
    
    
    
    192,486Commitments and ContingenciesStockholders equityPreferred Shares; 250,000 shares authorized and 0 shares issued as of June 30, 2007
    
    
    
    
    
    
    Common stock $0.01 par value; 36,000,000 shares authorized as of December 31, 2006
and June 30, 2007; 24,242,772 and 24,556,616 shares issued and 24,228,056 and
24,540,968 shares outstanding as of December 31, 2006 and June 30, 2007,
respectively
    
    
    243
    
    
    
    246Treasury stock
    
    
    (108
    )
    
    
    (154
    )Additional paid-in capital
    
    
    156,779
    
    
    
    163,813Accumulated other comprehensive income
    
    
    12,732
    
    
    
    17,119Retained earnings
    
    
    81,722
    
    
    
    85,423Total stockholders equity
    
    
    251,368
    
    
    
    266,447Total liabilities and stockholders equity
    
    $
    454,255
    
    
    $
    458,933
  3




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##### 



PRA INTERNATIONAL AND SUBSIDIARIES
 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007RevenueService revenue
    
    $
    70,089
    
    
    $
    90,174
    
    
    $
    139,293
    
    
    $
    175,226Reimbursement revenue
    
    
    9,357
    
    
    
    13,336
    
    
    
    16,709
    
    
    
    24,494Total revenue
    
    
    79,446
    
    
    
    103,510
    
    
    
    156,002
    
    
    
    199,720Operating expensesDirect costs
    
    
    36,566
    
    
    
    49,852
    
    
    
    71,741
    
    
    
    96,532Reimbursable out-of-pocket costs
    
    
    9,357
    
    
    
    13,336
    
    
    
    16,709
    
    
    
    24,494Selling, general, and administrative
    
    
    23,847
    
    
    
    36,101
    
    
    
    46,872
    
    
    
    66,367Depreciation and amortization
    
    
    2,651
    
    
    
    3,847
    
    
    
    5,077
    
    
    
    7,574Income from operations
    
    
    7,025
    
    
    
    374
    
    
    
    15,603
    
    
    
    4,753Interest expense
    
    
    (172
    )
    
    
    (145
    )
    
    
    (294
    )
    
    
    (764
    )Interest income
    
    
    575
    
    
    
    233
    
    
    
    1,031
    
    
    
    654Other expense
    
    
    (485
    )
    
    
    (337
    )
    
    
    (454
    )
    
    
    (392
    )Income before income taxes
    
    
    6,943
    
    
    
    125
    
    
    
    15,886
    
    
    
    4,251Provision for income taxes
    
    
    108
    
    
    
    (568
    )
    
    
    2,945
    
    
    
    550Net income
    
    $
    6,835
    
    
    $
    693
    
    
    $
    12,941
    
    
    $
    3,701Net income per shareBasic
    
    $
    0.30
    
    
    $
    0.03
    
    
    $
    0.56
    
    
    $
    0.15Diluted
    
    $
    0.28
    
    
    $
    0.03
    
    
    $
    0.53
    
    
    $
    0.15Weighted average number of common shares outstandingBasic
    
    
    23,162
    
    
    
    24,437
    
    
    
    23,065
    
    
    
    24,395Diluted
    
    
    24,578
    
    
    
    25,261
    
    
    
    24,488
    
    
    
    25,372
  4




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##### 



CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY AND OTHER COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
 AdditionalPaid-in
    
    
    AccumulatedCapital
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Treasury Stock
    
    
    Common
    
    
    Comprehensive
    
    
    Retained
    
    
    
    
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Stock
    
    
    Income
    
    
    Earnings
    
    
    Total
    
    
    IncomeBalance as of
December 31, 2006
    
    
    24,242,772
    
    
    $
    243
    
    
    
    14,716
    
    
    $
    (108
    )
    
    $
    156,779
    
    
    $
    12,732
    
    
    $
    81,722
    
    
    $
    251,368Exercise of common stock
options
    
    
    313,844
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3,337
    
    
    
    
    
    
    
    
    
    
    
    3,340Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    3,000
    
    
    
    (63
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63
    )Shares issued from the
manager stock purchase
plan
    
    
    
    
    
    
    
    
    
    
    (2,068
    )
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17Stock-based compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,814
    
    
    
    
    
    
    
    
    
    
    
    2,814Stock option tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    883
    
    
    
    
    
    
    
    
    
    
    
    883Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,701
    
    
    
    3,701
    
    
    $
    3,701Other comprehensive incomeForeign currency
translation adjustment,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,187
    
    
    
    
    
    
    
    4,187
    
    
    
    4,187Change in fair value of
hedging instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200
    
    
    
    
    
    
    
    200
    
    
    
    200Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,088Balance as of June 30,
2007 (unaudited)
    
    
    24,556,616
    
    
    $
    246
    
    
    
    15,648
    
    
    $
    (154
    )
    
    $
    163,813
    
    
    $
    17,119
    
    
    $
    85,423
    
    
    $
    266,447
  5




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##### 



PRA INTERNATIONAL AND SUBSIDIARIES
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 Six Months EndedJune 30,2006
    
    
    2007Cash flow from operating activitiesNet income
    
    $
    12,941
    
    
    $
    3,701Adjustments to reconcile net income to net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    5,077
    
    
    
    7,574Stock-based compensation
    
    
    1,932
    
    
    
    2,814Provision (benefit) for doubtful receivables
    
    
    (6
    )
    
    
    1Deferred income tax benefit
    
    
    (2,889
    )
    
    
    (1,199
    )Loss on disposal of fixed assets
    
    
    
    
    
    
    696Excess tax benefits from share-based compensation
    
    
    (1,490
    )
    
    
    (1,126
    )Changes in assets and liabilities, net of acquisition:Accounts receivable and unbilled services
    
    
    (2,830
    )
    
    
    92Prepaid expenses and other assets
    
    
    (2,312
    )
    
    
    (5,011
    )Accounts payable and accrued expenses
    
    
    (15,060
    )
    
    
    9,821Income taxes
    
    
    3,238
    
    
    
    (3,018
    )Advance billings
    
    
    12,665
    
    
    
    4,687Net cash provided by operating activities
    
    
    11,266
    
    
    
    19,032Cash flow from investing activitiesPurchase of fixed assets
    
    
    (2,976
    )
    
    
    (6,055
    )Disposal of fixed assets
    
    
    89
    
    
    
    65Cash paid for acquisitions, net of cash acquired
    
    
    (404
    )
    
    
    Net cash used in investing activities
    
    
    (3,291
    )
    
    
    (5,990
    )Cash flow from financing activitiesRepayment of debt
    
    
    
    
    
    
    (24,000
    )Repayment of capital leases
    
    
    (42
    )
    
    
    (107
    )Purchase of treasury stock
    
    
    
    
    
    
    (63
    )Excess tax benefits from share-based compensation
    
    
    1,490
    
    
    
    1,126Proceeds from stock option exercises
    
    
    1,981
    
    
    
    3,340Net cash provided by (used in ) financing activities
    
    
    3,429
    
    
    
    (19,704
    )Effect of exchange rate on cash and cash equivalents
    
    
    1,022
    
    
    
    306Increase (decrease) in cash and cash equivalents
    
    
    12,426
    
    
    
    (6,356
    )Cash and cash equivalents at beginning of period
    
    
    73,640
    
    
    
    44,490Cash and cash equivalents at end of period
    
    $
    86,066
    
    
    $
    38,134Supplemental disclosure of cash flow informationCash paid for taxes
    
    $
    2,823
    
    
    $
    7,167Cash paid for interest
    
    $
    74
    
    
    $
    559
  6




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##### 



PRA INTERNATIONAL AND SUBSIDIARIES
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (1) Basis of Preparation
  (2) Significant Accounting Policies
 Principles of Consolidation
  Use of Estimates
  Unbilled Services
  Fair Value of Financial Instruments
  Goodwill and Other Intangibles
  7




---



##### 



Advance Billings
  Revenue Recognition
    Reimbursement Revenue and Reimbursable Out-of-Pocket Costs
   Significant Customers
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2006
    
    2007
    
    2006
    
    2007Customer B
    
    
    11
    %
    
    
    *
    
    
    
    10
    %
    
    
    *Customer D
    
    
    12
    %
    
    
    11
    %
    
    
    10
    %
    
    
    *
 
 *
    
    Less than 10% of consolidated service revenues in the respective period.  8




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##### 



Concentration of Credit Risk 
  December 31,
    
    June 30,2006
    
    2007Customer A
    
    
    16
    %
    
    
    22
    %
  Foreign Currency Translation
  Comprehensive Income
  Income Taxes
  Stock-Based Compensation
   9




---



##### 



Stock Options
   For the SixMonths EndedJune 30,2006
    
    2007Dividend yield
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    48.81
    %
    
    
    35.18
    %Risk-free interest rate
    
    
    4.49
    %
    
    
    4.66
    %Expected terms in years
    
    
    4.75
    
    
    
    4.65
  For the SixMonths EndedJune 30,2006
    
    2007($ In thousands, except per share data)Weighted-average fair value of options granted per share
    
    $
    14.05
    
    
    $
    8.80Intrinsic value of options exercised
    
    $
    4,417
    
    
    $
    4,203Cash received from options exercised
    
    $
    1,981
    
    
    $
    3,340Actual tax benefit realized for tax deductions from option exercises
    
    $
    1,490
    
    
    $
    883
  Weighted AverageRemaining
    
    AggregateWtd. Average
    
    Contractual
    
    IntrinsicOptions
    
    Exercise Price
    
    Life
    
    Value(Millions)Outstanding December 31, 2006
    
    
    3,130,190
    
    
    $
    15.93Granted
    
    
    1,105,000
    
    
    
    23.33Exercised
    
    
    (313,844
    )
    
    
    10.64Expired/forfeited
    
    
    (182,530
    )
    
    
    23.62Outstanding June 30, 2007
    
    
    3,738,816
    
    
    $
    18.19
    
    
    
    5.6
    
    
    $
    28Exercisable at June 30, 2007
    
    
    1,476,933
    
    
    $
    9.81
    
    
    
    4.8
    
    
    $
    23
  10




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##### 



Net income per share
    Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Numerator:Net income for basic and diluted EPS
    
    $
    6,835
    
    
    $
    693
    
    
    $
    12,941
    
    
    $
    3,701Denominator:Weighted average shares for basic EPS
    
    
    23,162
    
    
    
    24,437
    
    
    
    23,065
    
    
    
    24,395Effect of dilutive stock options
    
    
    1,416
    
    
    
    824
    
    
    
    1,423
    
    
    
    977Weighted average shares for diluted EPS
    
    
    24,578
    
    
    
    25,261
    
    
    
    24,488
    
    
    
    25,372Basic earnings per share
    
    $
    0.30
    
    
    $
    0.03
    
    
    $
    0.56
    
    
    $
    0.15Diluted earnings per share
    
    $
    0.28
    
    
    $
    0.03
    
    
    $
    0.53
    
    
    $
    0.15
  Recent Accounting Pronouncements
 Accounting for
Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109, Accounting for Income
Taxes
   11




---



##### 



Out-of-Period Adjustment
  (3) Accounts receivable and unbilled services
  December 31,
    
    
    June 30,2006
    
    
    2007Accounts receivable
    
    $
    68,491
    
    
    $
    75,810Unbilled services
    
    
    42,795
    
    
    
    35,665111,286
    
    
    
    111,475Less: Allowance for doubtful accounts
    
    
    (4,988
    )
    
    
    (4,135
    )$
    106,298
    
    
    $
    107,340
 (4) Goodwill and Other Intangibles
  Carrying amount as of December 31, 2006
    
    $
    210,761Acquisitions
    
    
    Foreign currency exchange rate changes
    
    
    3,986Carrying amount as of June 30, 2007
    
    $
    214,747
  As of December 31,
    
    
    As of June 30,Weighted
    
    
    2006
    
    
    2007Average
    
    
    Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetAmortization
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingPeriod
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    Amount(In Years)Non-compete and other agreements
    
    
    2
    
    
    $
    3,088
    
    
    $
    2,779
    
    
    $
    309
    
    
    $
    3,118
    
    
    $
    3,074
    
    
    $
    44Customer relationships
    
    
    10
    
    
    
    18,908
    
    
    
    5,193
    
    
    
    13,715
    
    
    
    19,337
    
    
    
    6,805
    
    
    
    12,532Trade names
    
    Indefinite
    
    
    19,943
    
    
    
    474
    
    
    
    19,469
    
    
    
    19,969
    
    
    
    474
    
    
    
    19,495$
    41,939
    
    
    $
    8,446
    
    
    $
    33,493
    
    
    $
    42,424
    
    
    $
    10,353
    
    
    $
    32,071
 12




---



##### 



(In thousands)2007 (remaining 6 months)
    
    $
    1,6852008
    
    
    2,4732009
    
    
    1,6282010
    
    
    1,6282011
    
    
    1,3532012 and thereafter
    
    
    3,809$
    12,576
 (5) Accounting for Derivative Instruments and Hedging Activities
    13




---



##### 



(6) Commitments and Contingencies
 Legal Proceedings
  (7) Related-Party Transactions
  (8) Segment Reporting  Operations by Geographic Area
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Service revenueUnited States
    
    $
    38,386
    
    
    $
    42,643
    
    
    $
    77,839
    
    
    $
    81,022Canada
    
    
    6,892
    
    
    
    6,094
    
    
    
    15,743
    
    
    
    13,378Europe
    
    
    22,721
    
    
    
    37,834
    
    
    
    41,902
    
    
    
    73,742Other
    
    
    2,090
    
    
    
    3,603
    
    
    
    3,809
    
    
    
    7,084$
    70,089
    
    
    $
    90,174
    
    
    $
    139,293
    
    
    $
    175,226
 December 31,
    
    
    June 30,2006
    
    
    2007Long-lived assetsUnited States
    
    $
    19,376
    
    
    $
    18,109Canada
    
    
    866
    
    
    
    1,445Europe
    
    
    16,589
    
    
    
    16,486Other
    
    
    1,141
    
    
    
    1,088$
    37,972
    
    
    $
    37,128
 (9) Restructuring
  14




---



##### 



Severance andExecutiveReal Estate Costs
    
    
    Separation costs
    
    
    Other costs
    
    
    TotalBalance at December 31, 2006
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0Costs incurred and charged to expense
    
    
    5,364
    
    
    
    1,981
    
    
    
    218
    
    
    
    7,563Costs paid
    
    
    (3,761
    )
    
    
    (1,325
    )
    
    
    (88
    )
    
    
    (5,174
    )Balance at June 30, 2007
    
    $
    1,603
    
    
    $
    656
    
    
    $
    130
    
    
    $
    2,389
 (10) Subsequent Event
  15




---



##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
        16




---



##### 



Announced Restructuring
  Subsequent Event
  Service Revenue
     Reimbursement Revenue and Reimbursable Out-of-Pocket Costs
  17




---



##### 



Direct Costs
    Selling, General, and Administrative Expenses
  Depreciation and Amortization
  Income Taxes
   18




---



##### 



Exchange Rate Fluctuations
  June 30,
    
    December 31,
    
    June 30,2006
    
    2006
    
    2007U.S. Dollars per:Euro
    
    
    1.24
    
    
    
    1.26
    
    
    
    1.34Pound Sterling
    
    
    1.80
    
    
    
    1.85
    
    
    
    1.98Canadian Dollar
    
    
    0.88
    
    
    
    0.88
    
    
    
    0.89
 Results of Operations
   Six MonthsEndedYear Ended December 31,
    
    June 30,2004
    
    2005
    
    2006
    
    2006
    
    2007Service revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Direct costs
    
    
    48.3
    
    
    
    46.3
    
    
    
    50.9
    
    
    
    51.5
    
    
    
    55.1Selling, general, and administrative
    
    
    32.5
    
    
    
    32.5
    
    
    
    34.0
    
    
    
    33.6
    
    
    
    37.9Depreciation and amortization
    
    
    3.5
    
    
    
    3.8
    
    
    
    4.2
    
    
    
    3.6
    
    
    
    4.3Management fee
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Option repurchase
    
    
    1.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vested option bonus
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income from operations
    
    
    13.1
    
    
    
    17.4
    
    
    
    10.9
    
    
    
    11.2
    
    
    
    2.7Interest expense
    
    
    (1.4
    )
    
    
    (0.2
    )
    
    
    (0.5
    )
    
    
    (0.2
    )
    
    
    (0.4
    )Interest income
    
    
    0.1
    
    
    
    0.6
    
    
    
    0.6
    
    
    
    0.7
    
    
    
    0.4Other income (expenses), net
    
    
    0.0
    
    
    
    (0.4
    )
    
    
    0.1
    
    
    
    (0.3
    )
    
    
    (0.2
    )Income before income taxes
    
    
    11.8
    
    
    
    17.4
    
    
    
    11.1
    
    
    
    11.4
    
    
    
    2.4Provision for income taxes
    
    
    4.3
    
    
    
    6.4
    
    
    
    2.2
    
    
    
    2.1
    
    
    
    0.3Net income
    
    
    7.5
    %
    
    
    10.9
    %
    
    
    8.9
    %
    
    
    9.3
    %
    
    
    2.1
    %
 19




---



##### 



Selected Consolidated Financial Data
  Six Months EndedYear Ended December 31,
    
    
    June 30,2004
    
    
    2005
    
    
    2006
    
    
    2006
    
    
    2007(Unaudited)
    
    
    (Unaudited)RevenueService revenue
    
    $
    277,479
    
    
    $
    294,739
    
    
    $
    303,207
    
    
    $
    139,293
    
    
    $
    175,226Reimbursement revenue
    
    
    30,165
    
    
    
    31,505
    
    
    
    34,959
    
    
    
    16,709
    
    
    
    24,494Total revenue
    
    $
    307,644
    
    
    $
    326,244
    
    
    $
    338,166
    
    
    $
    156,002
    
    
    $
    199,720Operating expensesDirect costs
    
    
    134,067
    
    
    
    136,572
    
    
    
    154,416
    
    
    
    71,741
    
    
    
    96,532Reimbursable out-of-pocket costs
    
    
    30,165
    
    
    
    31,505
    
    
    
    34,959
    
    
    
    16,709
    
    
    
    24,494Selling, general, and administrative
    
    
    90,139
    
    
    
    95,827
    
    
    
    103,031
    
    
    
    46,872
    
    
    
    66,367Depreciation and amortization
    
    
    9,691
    
    
    
    11,156
    
    
    
    12,587
    
    
    
    5,077
    
    
    
    7,574Management fee
    
    
    704
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Option repurchase(1)
    
    
    3,713
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vested option bonus(1)
    
    
    2,738
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income from operations
    
    
    36,427
    
    
    
    51,184
    
    
    
    33,173
    
    
    
    15,603
    
    
    
    4,753Interest income (expense), net
    
    
    (3,643
    )
    
    
    1,181
    
    
    
    104
    
    
    
    737
    
    
    
    (110
    )Other income (expenses), net
    
    
    (38
    )
    
    
    (1,137
    )
    
    
    220
    
    
    
    (454
    )
    
    
    (392
    )Income before income taxes
    
    
    32,746
    
    
    
    51,228
    
    
    
    33,497
    
    
    
    15,886
    
    
    
    4,251Provision for income taxes
    
    
    11,997
    
    
    
    19,005
    
    
    
    6,652
    
    
    
    2,945
    
    
    
    550Net income
    
    $
    20,749
    
    
    $
    32,223
    
    
    $
    26,845
    
    
    $
    12,941
    
    
    $
    3,701Net income per shareBasic
    
    $
    1.13
    
    
    $
    1.43
    
    
    $
    1.14
    
    
    $
    0.56
    
    
    $
    0.15Diluted
    
    $
    1.02
    
    
    $
    1.32
    
    
    $
    1.08
    
    
    $
    0.53
    
    
    $
    0.15Shares used to compute net income per
share:Basic
    
    
    18,442,313
    
    
    
    22,527,108
    
    
    
    23,509,725
    
    
    
    23,064,785
    
    
    
    24,395,364Diluted
    
    
    20,329,852
    
    
    
    24,389,592
    
    
    
    24,749,664
    
    
    
    24,487,591
    
    
    
    25,371,504Other Financial Data:Net cash provided by operating activities
    
    $
    71,636
    
    
    $
    1,509
    
    
    $
    37,519
    
    
    $
    11,266
    
    
    $
    19,032Net cash provided by (used in) investing
activities
    
    
    (32,350
    )
    
    
    4,016
    
    
    
    (102,790
    )
    
    
    (3,291
    )
    
    
    (5,990
    )Net cash provided by (used in) financing
activities
    
    
    (6,430
    )
    
    
    2,455
    
    
    
    30,848
    
    
    
    3,429
    
    
    
    (19,704
    )Non-GAAP Data:Adjusted EBITDA(2)
    
    $
    52,531
    
    
    $
    61,203
    
    
    $
    45,980
    
    
    $
    20,226
    
    
    $
    11,935Adjusted EBITDA as a % of service revenue
    
    
    18.9
    %
    
    
    20.8
    %
    
    
    15.2
    %
    
    
    14.5
    %
    
    
    6.8
    %EBITDA(2)
    
    $
    46,080
    
    
    $
    61,203
    
    
    $
    45,980
    
    
    $
    20,226
    
    
    $
    11,935EBITDA as a % of service revenue
    
    
    16.6
    %
    
    
    20.8
    %
    
    
    15.2
    %
    
    
    14.5
    %
    
    
    6.8
    %Consolidated Balance Sheet Data:Cash and cash equivalents
    
    $
    65,888
    
    
    $
    73,640
    
    
    $
    44,490
    
    
    $
    86,066
    
    
    $
    38,134Marketable securities
    
    
    24,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Working capital (deficit)
    
    
    11,478
    
    
    
    41,760
    
    
    
    7,897
    
    
    
    62,376
    
    
    
    (3,441
    )Total assets
    
    
    337,344
    
    
    
    329,364
    
    
    
    454,255
    
    
    
    352,895
    
    
    
    458,993Long-term debt and capital leases, less
current maturities
    
    
    75
    
    
    
    9
    
    
    
    24,047
    
    
    
    7
    
    
    
    43Stockholders equity
    
    
    150,379
    
    
    
    188,866
    
    
    
    251,368
    
    
    
    209,883
    
    
    
    266,447
 
 (1)
    
    Includes a $3.7 million charge for the repurchase of options,
predominantly from former employees, and a $2.7 million charge for a
per-vested-option bonus paid to all employee option holders, both of
which were executed in connection with the culmination of the January
2004 tender process.(2)
    
    Adjusted EBITDA and EBITDA are not substitutes for operating income,
net income, or cash flow from operating activities as determined in
accordance with GAAP as measures of performance or liquidity. See
Managements Discussion and Analysis of Financial Condition and
Results of Operations  Non-GAAP Financial Measures. For each of the
periods indicated, the following table sets forth a reconciliation of
EBITDA and Adjusted EBITDA to net cash provided by (used in) operating
activities and to net income. 20




---



##### 



Six Months EndedYear Ended December 31,
    
    
    June 30,2004
    
    
    2005
    
    
    2006
    
    
    2006
    
    
    2007(Unaudited)
    
    
    (Unaudited)Adjusted EBITDA
    
    $
    52,531
    
    
    $
    61,203
    
    
    $
    45,980
    
    
    $
    20,226
    
    
    $
    11,935Option repurchase
    
    
    (3,713
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vested option bonus
    
    
    (2,738
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    EBITDA
    
    
    46,080
    
    
    
    61,203
    
    
    
    45,980
    
    
    
    20,226
    
    
    
    11,935Depreciation and amortization
    
    
    (9,691
    )
    
    
    (11,156
    )
    
    
    (12,587
    )
    
    
    (5,077
    )
    
    
    (7,574
    )Interest expense, net
    
    
    (3,643
    )
    
    
    1,181
    
    
    
    104
    
    
    
    737
    
    
    
    (110
    )Provision for income taxes
    
    
    (11,997
    )
    
    
    (19,005
    )
    
    
    (6,652
    )
    
    
    (2,945
    )
    
    
    (550
    )Net income
    
    
    20,749
    
    
    
    32,223
    
    
    
    26,845
    
    
    
    12,941
    
    
    
    3,701Depreciation and amortization
    
    
    9,691
    
    
    
    11,156
    
    
    
    12,587
    
    
    
    5,077
    
    
    
    7,574Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    4,455
    
    
    
    1,932
    
    
    
    2,814Provision for doubtful receivables
    
    
    1,914
    
    
    
    (123
    )
    
    
    1,023
    
    
    
    (6
    )
    
    
    1Excess tax benefits from share-based compensation
    
    
    
    
    
    
    2,986
    
    
    
    (2,625
    )
    
    
    (1,490
    )
    
    
    (1,126
    )Provision for deferred income taxes
    
    
    2,606
    
    
    
    2,354
    
    
    
    (666
    )
    
    
    (2,889
    )
    
    
    (1,199
    )Loss on disposal of fixed assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    696Debt issuance costs write off
    
    
    1,241
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Changes in assets and liabilities:Accounts receivable and unbilled services
    
    
    15,373
    
    
    
    (3,057
    )
    
    
    (14,805
    )
    
    
    (2,830
    )
    
    
    92Prepaid expenses and other assets
    
    
    1,226
    
    
    
    (2,465
    )
    
    
    (10,410
    )
    
    
    (2,312
    )
    
    
    (5,011
    )Accounts payable and accrued expenses
    
    
    7,793
    
    
    
    11,022
    
    
    
    (22,941
    )
    
    
    (15,060
    )
    
    
    9,821Income taxes
    
    
    12,150
    
    
    
    (3,677
    )
    
    
    8,647
    
    
    
    3,238
    
    
    
    (3,018
    )Advance billings
    
    
    (1,107
    )
    
    
    (48,910
    )
    
    
    35,409
    
    
    
    12,665
    
    
    
    4,687Net cash provided by operating activities
    
    $
    71,636
    
    
    $
    1,509
    
    
    $
    37,519
    
    
    $
    11,266
    
    
    $
    19,032
 Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006
     21




---



##### 



Six months Ended June 30, 2007 Compared to Six months Ended June 30, 2006
       22




---



##### 



Liquidity and Capital Resources
         23




---



##### 



Non-GAAP Financial Measures
      Critical Accounting Policies and Estimates
  24




---



##### 



Revenue Recognition
  Allowance for Doubtful Accounts
  Tax Valuation Allowance
   Stock-Based Compensation
  25




---



##### 



Long-Lived Assets and Goodwill and Indefinite-lived Intangible Assets
    Inflation
  26




---



##### 



Potential Liability and Insurance
  Special Note Regarding Risks and Forward-Looking Statements
  ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
  Foreign Exchange Risk and Foreign Currency Hedges
    27




---



##### 



ITEM 4  CONTROLS AND PROCEDURES
 Effectiveness of Our Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  PART II OTHER INFORMATION
 ITEM 1. LEGAL PROCEEDINGS
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   28




---



##### 



ITEM 6. EXHIBITS
 ExhibitNumber
    
    Description of Exhibit21.1 (1)
    
    Subsidiaries of PRA International.31.1 (1)
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(a).31.2 (1)
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(a).32.1 (2)
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002  Chief Executive Officer.32.2 (2)
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002  Chief Financial Officer.
 
 (1)
    
    Filed herewith.(2)
    
    Furnished herewith. 29




---



##### 



SIGNATURES
  PRA INTERNATIONALBy:
    /s/  Terrance J. BiekerName:
    Terrance J. BiekerTitle:
    Chief Executive Officer By:
    /s/  Linda BaddourName:
    Linda BaddourTitle:
    Chief Financial Officer  30