##### 



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 March 31, 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(State or Other Jurisdiction of 
Incorporation)
    
    54-2040171(I.R.S. Employer
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




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##### 



INDEX
 PagePart I Financial InformationItem 1.       Financial StatementsConsolidated Condensed Balance Sheets as of December 31, 2006 and March 31, 2007 (unaudited)
    
    
    3Consolidated
Condensed Statements of Operations for the Three Months Ended March 31, 2006 and 2007 (unaudited)
    
    
    4Consolidated
Condensed Statement of Changes in Stockholders Equity and Other
Comprehensive Income as of March 31, 2007 (unaudited)
    
    
    5Consolidated
Condensed Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2006 and 2007
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2.       Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3.       Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4.       Controls and Procedures
    
    
    24Part II Other InformationItem 1.       Legal Proceedings
    
    
    24Item 6.       Exhibits
    
    
    25
 2




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##### 



PART I FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS
 PRA INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except per share amounts)
 December 31,
    
    
    March 31,2006
    
    
    2007(unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    44,490
    
    
    $
    41,496Accounts receivable and unbilled services, net
    
    
    106,298
    
    
    
    94,693Prepaid expenses and other current assets
    
    
    21,050
    
    
    
    24,375Deferred tax assets
    
    
    191
    
    
    
    1,082Total current assets
    
    
    172,029
    
    
    
    161,646Fixed assets, net
    
    
    33,663
    
    
    
    33,622Goodwill
    
    
    210,761
    
    
    
    212,401Other intangibles, net of accumulated
amortization of $8,446 and $9,388 as of
December 31, 2006 and March 31, 2007,
respectively
    
    
    33,493
    
    
    
    32,869Deferred tax assets
    
    
    2,183
    
    
    
    2,479Other assets
    
    
    2,126
    
    
    
    2,049Total assets
    
    $
    454,255
    
    
    $
    445,066LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    16,892
    
    
    $
    15,036Accrued expenses
    
    
    31,276
    
    
    
    36,625Income taxes payable
    
    
    10,724
    
    
    
    9,066Advance billings
    
    
    101,618
    
    
    
    106,627Deferred tax liability
    
    
    3,491
    
    
    
    3,491Capital leases, current portion
    
    
    131
    
    
    
    39Total current liabilities
    
    
    164,132
    
    
    
    170,884Deferred tax liability
    
    
    7,571
    
    
    
    8,108Other liabilities
    
    
    7,137
    
    
    
    6,126Debt
    
    
    24,000
    
    
    
    Capital leases
    
    
    47
    
    
    
    39Total liabilities
    
    
    202,887
    
    
    
    185,157Stockholders equityCommon stock $0.01 par value; 36,000,000
shares authorized as of December 31, 2006 and
March 31, 2007; 24,242,772 and 24,405,836
shares issued and outstanding as of December
31, 2006 and March 31, 2007, respectively
    
    
    243
    
    
    
    244Treasury stock
    
    
    (108
    )
    
    
    (159
    )Additional paid-in capital  common stock
    
    
    156,779
    
    
    
    160,519Accumulated other comprehensive income
    
    
    12,732
    
    
    
    14,575Retained earnings
    
    
    81,722
    
    
    
    84,730Total stockholders equity
    
    
    251,368
    
    
    
    259,909Total liabilities and stockholders equity
    
    $
    454,255
    
    
    $
    445,066
  3




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##### 



PRA INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)
 Three Months EndedMarch 31,2006
    
    
    2007RevenueService revenue
    
    $
    69,204
    
    
    $
    85,052Reimbursement revenue
    
    
    7,352
    
    
    
    11,158Total revenue
    
    
    76,556
    
    
    
    96,210Operating expensesDirect costs
    
    
    35,175
    
    
    
    46,680Reimbursable out-of-pocket costs
    
    
    7,352
    
    
    
    11,158Selling, general, and administrative
    
    
    23,025
    
    
    
    30,266Depreciation and amortization
    
    
    2,426
    
    
    
    3,727Income from operations
    
    
    8,578
    
    
    
    4,379Interest expense
    
    
    (122
    )
    
    
    (620
    )Interest income
    
    
    456
    
    
    
    422Other income (expense), net
    
    
    31
    
    
    
    (55
    )Income before income taxes
    
    
    8,943
    
    
    
    4,126Provision for income taxes
    
    
    2,837
    
    
    
    1,118Net income
    
    $
    6,106
    
    
    $
    3,008Net income per shareBasic
    
    $
    0.27
    
    
    $
    0.12Diluted
    
    $
    0.25
    
    
    $
    0.12Weighted average number of common shares outstandingBasic
    
    
    22,966
    
    
    
    24,353Diluted
    
    
    24,209
    
    
    
    25,206
  4




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##### 



CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY AND COMPREHENSIVE INCOME
(unaudited)
(in thousands, except share amounts)
 AdditionalPaid-In
    
    
    Accumulated
    
    
    RetainedCapital 
    
    
    Other
    
    
    Earnings/Common Stock
    
    
    Treasury Stock
    
    
    Common
    
    
    Comprehensive
    
    
    (Accumulated
    
    
    
    
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Stock
    
    
    Income/(Loss)
    
    
    Deficit)
    
    
    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
    
    
    163,064
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1,940
    
    
    
    
    
    
    
    
    
    
    
    1,941Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    2,500
    
    
    
    (51
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,269
    
    
    
    
    
    
    
    
    
    
    
    1,269Stock option tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    531
    
    
    
    
    
    
    
    
    
    
    
    531Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,008
    
    
    
    3,008
    
    
    $
    3,008Other comprehensive incomeForeign currency translation adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,789
    
    
    
    
    
    
    
    1,789
    
    
    
    1,789Change in fair value of hedging instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    54
    
    
    
    54Balance as of March 31, 2007 (unaudited)
    
    
    24,405,836
    
    
    $
    244
    
    
    
    17,216
    
    
    $
    (159
    )
    
    $
    160,519
    
    
    $
    14,575
    
    
    $
    84,730
    
    
    $
    259,909
    
    
    $
    4,851
  5




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##### 



PRA INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
 Three Months EndedMarch 31,2006
    
    
    2007Cash flow from operating activitiesNet income
    
    $
    6,106
    
    
    $
    3,008Adjustments to reconcile net income to net cash provided
by (used in) operating activities:Depreciation and amortization
    
    
    2,426
    
    
    
    3,727Stock-based compensation
    
    
    1,100
    
    
    
    1,269Provision for doubtful receivables
    
    
    3
    
    
    
    1Loss on disposal of fixed assets
    
    
    
    
    
    
    185Provision (benefit) for deferred income taxes
    
    
    378
    
    
    
    (629
    )Excess tax benefits from share-based compensation
    
    
    (708
    )
    
    
    (377
    )Changes in assets and liabilities:Accounts receivable and unbilled services
    
    
    (14,707
    )
    
    
    12,020Prepaid expenses and other assets
    
    
    (501
    )
    
    
    (221
    )Accounts payable and accrued expenses
    
    
    (11,090
    )
    
    
    2,188Income taxes
    
    
    1,372
    
    
    
    (4,018
    )Advance billings
    
    
    3,999
    
    
    
    4,504Net cash (used in) provided by operating activities
    
    
    (11,622
    )
    
    
    21,657Cash flow from investing activitiesPurchase of fixed assets
    
    
    (1,478
    )
    
    
    (2,747
    )Disposal of fixed assets
    
    
    23
    
    
    
    5Net cash used in investing activities
    
    
    (1,455
    )
    
    
    (2,742
    )Cash flow from financing activitiesRepayment of debt
    
    
    
    
    
    
    (24,000
    )Repayment of capital leases
    
    
    (24
    )
    
    
    (103
    )Purchase of treasury stock
    
    
    
    
    
    
    (51
    )Proceeds from stock option exercises
    
    
    1,354
    
    
    
    1,942Stock option excess tax benefit
    
    
    708
    
    
    
    377Net cash provided by (used in) financing activities
    
    
    2,038
    
    
    
    (21,835
    )Effect of exchange rate on cash and cash equivalents
    
    
    68
    
    
    
    (74
    )Decrease in cash and cash equivalents
    
    
    (10,971
    )
    
    
    (2,994
    )Cash and cash equivalents at beginning of period
    
    
    73,640
    
    
    
    44,490Cash and cash equivalents at end of period
    
    $
    62,669
    
    
    $
    41,496Supplemental disclosure of cash flow informationCash paid for taxes
    
    $
    947
    
    
    $
    5,745Cash paid for interest
    
    $
    11
    
    
    $
    515
  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




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##### 



PRA INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 Advance Billings
  Revenue Recognition
    Reimbursement Revenue and Reimbursable Out-of-Pocket Costs
   Significant Customers
   8




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##### 



PRA INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 Concentration of Credit Risk 
  December 31,
    
    March 31,2006
    
    2007Customer A
    
    
    16.2
    %
    
    
    20.8
    %
  Foreign Currency Translation
  Comprehensive Income (Loss)
  Income Taxes
  Stock-Based Compensation
  9




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##### 



PRA INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 Stock Options
   For the three months endedMarch 31,2006
    
    2007Dividend yield
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    49.0
    %
    
    
    42.6
    %Risk-free interest rate
    
    
    4.5
    %
    
    
    4.7
    %Expected terms in years
    
    
    5.0
    
    
    
    4.75
  For the three months endedMarch 31,($ in thousands, except per share data)
    
    2006
    
    2007Weighted-average fair value of options granted per share
    
    $
    12.53
    
    
    $
    10.07Intrinsic value of options exercised
    
    $
    3,175
    
    
    $
    1,918Cash received from options exercised
    
    $
    1,354
    
    
    $
    1,942Actual tax benefit realized for tax deductions from option
exercises
    
    $
    708
    
    
    $
    531
  Wtd.
    
    Weighted averageaverage
    
    remaining
    
    AggregateOptions
    
    exercise
    
    contractual
    
    intrinsic(000)
    
    price
    
    life
    
    value (millions)Outstanding December 31, 2006
    
    
    3,130,190
    
    
    $
    15.93Granted
    
    
    77,500
    
    
    
    23.42Exercised
    
    
    (163,064
    )
    
    
    11.91Expired/forfeited
    
    
    (83,500
    )
    
    
    22.79Outstanding March 31, 2007
    
    
    2,961,126
    
    
    $
    16.16
    
    
    
    5.4
    
    
    $
    22Exercisable at March 31, 2007
    
    
    1,597,367
    
    
    $
    9.63
    
    
    
    5.0
    
    
    $
    20
  10




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##### 



PRA INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 Net income per share
    Quarter EndedMarch 31,2006
    
    
    2007Numerator:Net income for basic and diluted EPS
    
    $
    6,106
    
    
    $
    3,008Denominator:Weighted average shares for basic EPS
    
    
    22,966
    
    
    
    24,353Effect of dilutive stock options
    
    
    1,243
    
    
    
    853Weighted average shares for diluted EPS
    
    
    24,209
    
    
    
    25,206Basic earnings per share
    
    $
    0.27
    
    
    $
    0.12Diluted earnings per share
    
    $
    0.25
    
    
    $
    0.12
  Recent Accounting Pronouncements
 Accounting
for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109, Accounting for
Income Taxes
  11




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##### 



PRA INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (3) Accounts receivable and unbilled services
  December 31,
    
    
    March 31,2006
    
    
    2007Accounts receivable
    
    $
    68,491
    
    
    $
    60,597Unbilled services
    
    
    42,795
    
    
    
    39,061111,286
    
    
    
    99,658Less: Allowance for doubtful accounts
    
    
    (4,988
    )
    
    
    (4,965
    )$
    106,298
    
    
    $
    94,693
 (4) Goodwill and Other Intangibles
  Carrying amount as of December 31, 2006
    
    $
    210,761Foreign currency exchange rate changes
    
    
    1,640Carrying amount as of March 31, 2007
    
    $
    212,401
  WeightedAverage
    
    
    As of December 31, 2006
    
    
    As of March 31, 2007Amortization
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    NetPeriod
    
    
    Carrying
    
    
    Accumulated
    
    
    Net Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying(in Years)
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountNon-compete and other agreements
    
    
    2
    
    
    $
    3,088
    
    
    $
    2,779
    
    
    $
    309
    
    
    $
    3,100
    
    
    $
    2,925
    
    
    $
    175Customer relationships
    
    
    10
    
    
    
    18,908
    
    
    
    5,193
    
    
    
    13,715
    
    
    
    19,200
    
    
    
    5,989
    
    
    
    13,211Trade names
    
    Indefinite
    
    
    
    19,943
    
    
    
    474
    
    
    
    19,469
    
    
    
    19,957
    
    
    
    474
    
    
    
    19,483$
    41,939
    
    
    $
    8,446
    
    
    $
    33,493
    
    
    $
    42,257
    
    
    $
    9,388
    
    
    $
    32,869
  (in thousands)2007 (remaining 9 months)
    
    $
    2,5862008
    
    
    2,4542009
    
    
    1,6192010
    
    
    1,6192011
    
    
    1,3442012 and thereafter
    
    
    3,764$
    13,386
 (5) Accounting for Derivative Instruments and Hedging Activities
  12




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##### 



PRA INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
   (6) Commitments and Contingencies
 Legal Proceedings
  (7) Related-Party Transactions
  (8) Segment Reporting  Operations by Geographic Area
  Three Months EndedMarch 31,2006
    
    
    2007Service revenueUnited States
    
    $
    39,453
    
    
    $
    38,379Canada
    
    
    8,851
    
    
    
    7,284Europe
    
    
    19,181
    
    
    
    35,909Other
    
    
    1,719
    
    
    
    3,480$
    69,204
    
    
    $
    85,052
 December 31,
    
    
    March 31,2006
    
    
    2007Long-lived assetsUnited States
    
    $
    19,376
    
    
    $
    19,041Canada
    
    
    866
    
    
    
    946Europe
    
    
    16,589
    
    
    
    16,990Other
    
    
    1,141
    
    
    
    1,173$
    37,972
    
    
    $
    38,150
 (9) Restructuring
  13




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##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
        14




---



##### 



Announced Restructuring
  Service Revenue
   Reimbursement Revenue and Reimbursable Out-of-Pocket Costs
  Direct Costs
   Selling, General, and Administrative Expenses
  15




---



##### 



Depreciation and Amortization
  Income Taxes
   Exchange Rate Fluctuations
  March 31,
    
    December 31,
    
    March 31,2006
    
    2006
    
    2007U.S. Dollars per:Euro
    
    
    1.21
    
    
    
    1.26
    
    
    
    1.32Pound Sterling
    
    
    1.76
    
    
    
    1.85
    
    
    
    1.96Canadian Dollar
    
    
    0.87
    
    
    
    0.88
    
    
    
    0.86
 Results of Operations
   Three Months EndedYear Ended December 31,
    
    March 31,2004
    
    2005
    
    2006
    
    2006
    
    2007Service revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Direct costs
    
    
    48.3
    
    
    
    46.3
    
    
    
    50.9
    
    
    
    50.8
    
    
    
    54.9Selling, general, and administrative
    
    
    32.5
    
    
    
    32.5
    
    
    
    34.0
    
    
    
    33.3
    
    
    
    35.6Depreciation and amortization
    
    
    3.5
    
    
    
    3.8
    
    
    
    4.2
    
    
    
    3.5
    
    
    
    4.4Management fee
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Option repurchase
    
    
    1.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vested option bonus
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income from operations
    
    
    13.1
    
    
    
    17.4
    
    
    
    10.9
    
    
    
    12.4
    
    
    
    5.1Interest expense
    
    
    (1.4
    )
    
    
    (0.2
    )
    
    
    (0.5
    )
    
    
    (0.2
    )
    
    
    (0.7
    )Interest income
    
    
    0.1
    
    
    
    0.6
    
    
    
    0.6
    
    
    
    0.7
    
    
    
    0.5Other income (expenses), net
    
    
    0.0
    
    
    
    (0.4
    )
    
    
    0.1
    
    
    
    0.0
    
    
    
    (0.1
    )Income before income taxes
    
    
    11.8
    
    
    
    17.4
    
    
    
    11.1
    
    
    
    12.9
    
    
    
    4.8Provision for income taxes
    
    
    4.3
    
    
    
    6.4
    
    
    
    2.2
    
    
    
    4.1
    
    
    
    1.3Net income
    
    
    7.5
    %
    
    
    10.9
    %
    
    
    8.9
    %
    
    
    8.8
    %
    
    
    3.5
    %
 16




---



##### 



Selected Consolidated Financial Data
  Three Months EndedYear Ended December 31,
    
    
    March 31,2004
    
    
    2005
    
    
    2006
    
    
    2006
    
    
    2007(unaudited)
    
    
    (unaudited)RevenueService revenue
    
    $
    277,479
    
    
    $
    294,739
    
    
    $
    303,207
    
    
    $
    69,204
    
    
    $
    85,052Reimbursement revenue
    
    
    30,165
    
    
    
    31,505
    
    
    
    34,959
    
    
    
    7,352
    
    
    
    11,158Total revenue
    
    $
    307,644
    
    
    $
    326,244
    
    
    $
    338,166
    
    
    $
    76,556
    
    
    $
    96,210Operating expensesDirect costs
    
    
    134,067
    
    
    
    136,572
    
    
    
    154,416
    
    
    
    35,175
    
    
    
    46,680Reimbursable out-of-pocket costs
    
    
    30,165
    
    
    
    31,505
    
    
    
    34,959
    
    
    
    7,352
    
    
    
    11,158Selling, general, and administrative
    
    
    90,139
    
    
    
    95,827
    
    
    
    103,031
    
    
    
    23,025
    
    
    
    30,266Depreciation and amortization
    
    
    9,691
    
    
    
    11,156
    
    
    
    12,587
    
    
    
    2,426
    
    
    
    3,727Management fee
    
    
    704
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Option repurchase(1)
    
    
    3,713
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vested option bonus(1)
    
    
    2,738
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income from operations
    
    
    36,427
    
    
    
    51,184
    
    
    
    33,173
    
    
    
    8,578
    
    
    
    4,379Interest income (expense), net
    
    
    (3,643
    )
    
    
    1,181
    
    
    
    104
    
    
    
    334
    
    
    
    (198
    )Other income (expenses), net
    
    
    (38
    )
    
    
    (1,137
    )
    
    
    220
    
    
    
    31
    
    
    
    (55
    )Income before income taxes
    
    
    32,746
    
    
    
    51,228
    
    
    
    33,497
    
    
    
    8,943
    
    
    
    4,126Provision for income taxes
    
    
    11,997
    
    
    
    19,005
    
    
    
    6,652
    
    
    
    2,837
    
    
    
    1,118Net income
    
    $
    20,749
    
    
    $
    32,223
    
    
    $
    26,845
    
    
    $
    6,106
    
    
    $
    3,008Net income per shareBasic
    
    $
    1.13
    
    
    $
    1.43
    
    
    $
    1.14
    
    
    $
    0.27
    
    
    $
    0.12Diluted
    
    $
    1.02
    
    
    $
    1.32
    
    
    $
    1.08
    
    
    $
    0.25
    
    
    $
    0.12Shares used to compute net income
per share:Basic
    
    
    18,442,313
    
    
    
    22,527,108
    
    
    
    23,509,725
    
    
    
    22,966,440
    
    
    
    24,352,512Diluted
    
    
    20,329,852
    
    
    
    24,389,592
    
    
    
    24,749,664
    
    
    
    24,209,012
    
    
    
    25,205,634Other Financial Data:Net cash provided by (used in)
operating activities
    
    $
    71,636
    
    
    $
    1,509
    
    
    $
    37,519
    
    
    $
    (11,622
    )
    
    $
    21,657Net cash provided by (used in)
investing activities
    
    
    (32,350
    )
    
    
    4,016
    
    
    
    (102,790
    )
    
    
    (1,455
    )
    
    
    (2,742
    )Net cash provided by (used in)
financing activities
    
    
    (6,430
    )
    
    
    2,455
    
    
    
    30,848
    
    
    
    2,038
    
    
    
    (21,835
    )Non-GAAP Data:Adjusted EBITDA(2)
    
    $
    52,531
    
    
    $
    61,203
    
    
    $
    45,980
    
    
    $
    11,035
    
    
    $
    8,051Adjusted EBITDA as a % of service
revenue
    
    
    18.9
    %
    
    
    20.8
    %
    
    
    15.2
    %
    
    
    15.9
    %
    
    
    9.5
    %EBITDA(2)
    
    $
    46,080
    
    
    $
    61,203
    
    
    $
    45,980
    
    
    $
    11,035
    
    
    $
    8,051EBITDA as a % of service revenue
    
    
    16.6
    %
    
    
    20.8
    %
    
    
    15.2
    %
    
    
    15.9
    %
    
    
    9.5
    %
 As atAs at December 31,
    
    March 31,2004
    
    2005
    
    2006
    
    2006
    
    2007(unaudited)
    
    (unaudited)Consolidated Balance Sheet Data:Cash and cash equivalents
    
    $
    65,888
    
    
    $
    73,640
    
    
    $
    44,490
    
    
    $
    62,669
    
    
    $
    41,496Marketable securities
    
    
    24,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Working capital (deficit)
    
    
    11,478
    
    
    
    41,760
    
    
    
    7,897
    
    
    
    51,193
    
    
    
    (9,238
    )Total assets
    
    
    337,344
    
    
    
    329,364
    
    
    
    454,255
    
    
    
    332,501
    
    
    
    445,066Long-term debt and capital leases, less current maturities
    
    
    75
    
    
    
    9
    
    
    
    24,047
    
    
    
    7
    
    
    
    39Stockholders equity
    
    
    150,379
    
    
    
    188,866
    
    
    
    251,368
    
    
    
    198,230
    
    
    
    259,909
 
 (1)
    
    Includes a $3.7 million charge for the repurchase of options, predominantly from former
employees, and a $2.7 million ($2.3 million through September 30, 2004) 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. 17




---



##### 



(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. Three Months EndedYear Ended December 31,
    
    
    March 31,2004
    
    
    2005
    
    
    2006
    
    
    2006
    
    
    2007(unaudited)
    
    
    (unaudited)Adjusted EBITDA
    
    $
    52,531
    
    
    $
    61,203
    
    
    $
    45,980
    
    
    $
    11,035
    
    
    $
    8,051Option repurchase
    
    
    (3,713
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vested option bonus
    
    
    (2,738
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    EBITDA
    
    
    46,080
    
    
    
    61,203
    
    
    
    45,980
    
    
    
    11,035
    
    
    
    8,051Depreciation and amortization
    
    
    (9,691
    )
    
    
    (11,156
    )
    
    
    (12,587
    )
    
    
    (2,426
    )
    
    
    (3,727
    )Interest expense, net
    
    
    (3,643
    )
    
    
    1,181
    
    
    
    104
    
    
    
    334
    
    
    
    (198
    )Provision for income taxes
    
    
    (11,997
    )
    
    
    (19,005
    )
    
    
    (6,652
    )
    
    
    (2,837
    )
    
    
    (1,118
    )Net income
    
    
    20,749
    
    
    
    32,223
    
    
    
    26,845
    
    
    
    6,106
    
    
    
    3,008Depreciation and amortization
    
    
    9,691
    
    
    
    11,156
    
    
    
    12,587
    
    
    
    2,426
    
    
    
    3,727Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    4,455
    
    
    
    1,100
    
    
    
    1,269Provision for doubtful receivables
    
    
    1,914
    
    
    
    (123
    )
    
    
    1,023
    
    
    
    3
    
    
    
    1Excess tax benefits from share-based compensation
    
    
    
    
    
    
    2,986
    
    
    
    (2,625
    )
    
    
    (708
    )
    
    
    (377
    )Provision for deferred income taxes
    
    
    2,606
    
    
    
    2,354
    
    
    
    (666
    )
    
    
    378
    
    
    
    (629
    )Loss on disposal of fixed assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    185Debt issuance costs write-off
    
    
    1,241
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Changes in assets and liabilities:Accounts receivable and unbilled services
    
    
    15,373
    
    
    
    (3,057
    )
    
    
    (14,805
    )
    
    
    (14,707
    )
    
    
    12,020Prepaid expenses and other assets
    
    
    1,226
    
    
    
    (2,465
    )
    
    
    (10,410
    )
    
    
    (501
    )
    
    
    (221
    )Accounts payable and accrued expenses
    
    
    7,793
    
    
    
    11,022
    
    
    
    (22,941
    )
    
    
    (11,090
    )
    
    
    2,188Income taxes
    
    
    12,150
    
    
    
    (3,677
    )
    
    
    8,647
    
    
    
    1,372
    
    
    
    (4,018
    )Advance billings
    
    
    (1,107
    )
    
    
    (48,910
    )
    
    
    35.409
    
    
    
    3,999
    
    
    
    4,504Net cash provided by (used in) operating activities
    
    $
    71,636
    
    
    $
    1,509
    
    
    $
    37,519
    
    
    $
    (11,622
    )
    
    $
    21,657
 Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006
    18




---



##### 



Liquidity and Capital Resources
       19




---



##### 



Preferred Shares
 Non-GAAP Financial Measures
      Critical Accounting Policies and Estimates
  20




---



##### 



Revenue Recognition
  Allowance for Doubtful Accounts
  Tax Valuation Allowance
   Stock-Based Compensation
  21




---



##### 



Long-Lived Assets, Goodwill and Indefinite-Lived Intangible Assets
    Inflation
  Potential Liability and Insurance
  Special Note Regarding Risks and Forward-Looking Statements
  22




---



##### 



ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
  Foreign Exchange Risk and Foreign Currency Hedges
     23




---



##### 



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
  24




---



##### 



ITEM 6. EXHIBITS
 Exhibits
 ExhibitNumber
    
    Description of Exhibit3.3
    (1)
    
    Certificate of Designations of Series A Junior Participating Preferred
Stock, as filed with the Secretary of Delaware on March 26, 20074.6
    (1)
    
    Rights Agreement, dated as of March 23, 2007, between PRA International
and American Stock Transfer & Trust Company as Rights Agent21.1
    (2)
    
    Subsidiaries of PRA International.31.1
    (2)
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(a).31.2
    (2)
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(a).32.1
    (3)
    
    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
    (3)
    
    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)
    
    Incorporated by reference to Form 8-K filed on March 23, 2007 (File No. 000-51029)(2)
    
    Filed herewith.(3)
    
    Furnished herewith. 25




---



##### 



SIGNATURES
  PRA INTERNATIONALBy:
    
    /s/ Terrance J. BiekerName:
    
    Terrance J. BiekerTitle:
    
    Chief Executive OfficerBy:
    
    /s/ J. Matthew BondName:
    
    J. Matthew BondTitle:
    
    Chief Financial Officer
  26




---



##### 



Exhibit Index
 Exhibit No
    
    Description of Exhibit21.1
    
    Subsidiaries of PRA International31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 27