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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended June 30, 2006
 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 0-27058
 PAREXEL INTERNATIONAL CORPORATION
  MASSACHUSETTS
(State or other jurisdiction of 
incorporation or organization)
    
    04-2776269
(I.R.S. Employer
Identification Number)
 200 WEST STREET 
WALTHAM, MASSACHUSETTS
(Address of principal executive offices)
    
    02451
(Zip Code)
  SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
 
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 þ o
 þ
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DOCUMENTS INCORPORATED BY REFERENCE




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PAREXEL INTERNATIONAL CORPORATION
 FORM 10-K ANNUAL REPORT
 INDEX
 PAGEPART IItem 1.
    
    Business
    
    
    4Item 1A.
    
    Risk Factors
    
    
    15Item 1B.
    
    Unresolved Staff Comments
    
    
    23Item 2.
    
    Properties
    
    
    23Item 3.
    
    Legal Proceedings
    
    
    24Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    24PART IIItem 5.
    
    Market for Registrants Common Equity,
Related Stockholder Matters, and Issuer
Purchases of Equity Securities
    
    
    24Item 6.
    
    Selected Financial Data
    
    
    25Item 7.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    26Item 7A.
    
    Quantitative and Qualitative Disclosures
About Market Risk
    
    
    38Item 8.
    
    Financial Statements and Supplementary Data
    
    
    40Item 9.
    
    Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
    
    
    68Item 9A.
    
    Controls and Procedures
    
    
    68Item 9B.
    
    Other Information
    
    
    68PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    68Item 11.
    
    Executive Compensation
    
    
    68Item 12.
    
    Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters
    
    
    69Item 13.
    
    Certain Relationships and Related Transactions
    
    
    69PART IVItem 14.
    
    Principal Accountant Fees and Services
    
    
    69Item 15.
    
    Exhibits and Financial Statement Schedule
    
    
    69SIGNATURES
    
    
    
    
    70EX-10.7.1 2001 Stock Incentive Plan of the CompanyEX-10.7.2 Amendment No.1 to 2001 Stock Incentive Plan.EX-10.8 2005 Stock Incentive Plan of the CompanyEX-10.26 Change of Control/Severance AgreementEX-21.1 List of subsidiaries of the CompanyEX-23.1 Consent of Ernst & Young LLPEX-31.1 Section 302 Certification of C.E.O.EX-31.2 Section 302 Certification of C.F.O.EX-32.1 Section 906 Certification of C.E.O.EX-32.2 Section 906 Certification of C.F.O.




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PART I
  
 ITEM 1. BUSINESS
 GENERAL
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DESCRIPTION OF BUSINESS
  
    
    CRS constitutes the Companys core business and includes clinical trials management and
biostatistics, data management and clinical pharmacology, as well as related medical
advisory and investigator site services.
    
    PCMS provides technical expertise and advice in such areas as drug development,
regulatory affairs, and bio/pharmaceutical process and management consulting; and provides
a full spectrum of market development, product development, and targeted communications
services in support of product launch. PCMS consultants identify alternatives and propose
solutions to address clients product development, registration, and commercialization
issues. PCMS also provides health policy consulting and strategic reimbursement services.
    
    Perceptive provides information technology solutions designed to improve clients
product development processes. Perceptive offers a portfolio of products and services that
includes medical imaging services, IVRS, CTMS, web-based portals, systems integration, and
patient diary applications. On August 22, 2005, the Company acquired all of the equity
interests held by minority stockholders of Perceptive, and now owns all of the outstanding
capital stock of Perceptive. See Note 3 to the notes to the consolidated financial
statements included in Item 8 of this annual report.
  CLINICAL RESEARCH SERVICES
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
    
    CLINICAL PHARMACOLOGY (Phase I  IIa)
  
    
    PHASES II  IV
  Study Protocol Design  The protocol defines the medical issues the study seeks to examine and
the statistical tests that will be conducted. Accordingly, the protocol specifies the frequency
and type of laboratory and clinical measures that are to be tracked and analyzed, the number of
patients required to produce a statistically valid result, the period of time over which they
must be tracked and the frequency and dosage of drug administration. The studys success depends
on the protocols ability to predict correctly the requirements of the regulatory authorities.CRF Design Once the study protocol has been finalized, the CRF must be developed. The CRF is
the critical source document for collecting the necessary clinical data as dictated by the study
protocol. The CRF may change at different stages of a trial. CRFs for one patient in a given
study may consist of 100 or more pages.Site and Investigator Recruitment The product under investigation is administered to patients
by third-party physicians, serving as independent contractors, referred to as investigators, at
hospitals, clinics, or other locations, referred to as sites. Medical devices are implemented
or tested by investigators in similar settings. Potential investigators may be identified and
solicited by the product sponsor. A significant portion of a trials success depends on the
successful identification and recruitment of experienced investigators with an adequate base of
patients who satisfy the requirements of the study protocol. The Company has access to several
thousand investigators who have conducted clinical trials for the Company. The Company provides
additional services at the clinical investigator site to assist physicians and expedite the
clinical research process.
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Patient Enrollment The investigators, usually with the assistance of a clinical research
organization (CRO), find and enroll patients suitable for the study. The speed with which
trials can be completed is significantly affected by the rate at which patients are enrolled.
Prospective patients are required to review information about the drug and its possible side
effects, and sign an informed consent form to record their knowledge and acceptance of potential
side effects. Patients also undergo a medical examination to determine whether they meet the
requirements of the study protocol. Patients then receive the product and are examined by the
investigator as specified by the study protocol. Investigators are responsible for administering
the products to patients, as well as examining patients and conducting necessary tests.Study Monitoring and Data Collection As patients are examined and tests are conducted in
accordance with the study protocol, data are recorded on CRFs. CRFs are collected from study
sites by specially trained persons known as monitors. Monitors visit sites regularly to ensure
that the CRFs are completed correctly and to verify that the study has been conducted in
compliance with the protocol and GCP. The monitors send completed CRFs to the study
coordination site, where the CRFs are reviewed for consistency and accuracy before their data
are entered into an electronic database. The Company offers several electronic data capture
(EDC) technologies, which significantly enhance both the quality and timeliness of clinical
data collection while achieving significant efficiency savings. The Companys study monitoring
and data collection services are designed to comply with the FDAs adverse events reporting
guidelines.Data Management PAREXELs data management professionals provide a broad array of services to
support the accurate collection, organization, validation, and analysis of clinical data. For
instance, they assist in the design of CRFs and investigator training manuals to ensure that
data are collected in an organized and consistent format in compliance with the study protocol.
Databases are designed according to the analytical specifications of the project and the
particular needs of the client. Prior to data entry, PAREXEL personnel screen the data to detect
errors, omissions, and other deficiencies in completed CRFs. The use of scanning and imaging of
the CRFs and the use of EDC technologies to gather and report clinical data expedites data
exchange while minimizing data collection errors by permitting the verification of data
integrity in a more timely manner. After the data is entered, the data management team performs
an array of data abstraction, data review, medical coding, serious adverse event
reconciliations, loading of electronic data, such as laboratory data, database verification, and
editing and resolution of data problems. The data are then submitted to the sponsor in a
customized format prescribed by the sponsor.The CRS business segment has extensive experience throughout the world in the creation of
scientific databases for all phases of the drug development process, including the creation of
customized databases to meet client-specific formats, integrated databases to support new drug
application (NDA) and equivalent submissions and databases in strict accordance with FDA,
European, Asian and other regulatory specifications.Biostatistics and Programming PAREXELs biostatistics professionals assist clients with all
phases of drug development, including biostatistical consulting, database design, data analysis,
and statistical reporting. These professionals develop and review protocols, design appropriate
analysis plans, and design report formats to address the objectives of the study protocol as
well as the clients individual objectives. Working with programming staff, biostatisticians
perform appropriate analyses and produce tables, graphs, listings, and other applicable displays
of results according to an analysis plan. The CRS business segment biostatisticians may also
represent clients during panel hearings at the FDA.Report Writing A description of the study conducted, along with the statistical analysis
findings for data collected during the trial together with other clinical data are presented and
summarized in a final report generated for inclusion in a regulatory document.Medical Services  Throughout the course of a development program, PAREXELs physicians provide
a wide range of medical research and consulting services to improve the speed and quality of
clinical research and to monitor patient safety, including medical supervision of clinical
trials, medical monitoring of patient safety, review and reporting of adverse events, medical
writing, and strategy and product development.Project Management Throughout the entire spectrum of activities described above, CRS provides
project management services. These services entail providing overall leadership to the PAREXEL
project team, acting as the main client liaison, project planning, managing progress against
study goals and deliverables, budget management, progress and metrics reporting, and issue
resolution. These project management services are offered on all types of trials 
single-service, multi-service, or full-service.
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PAREXEL CONSULTING AND MARKETING SERVICES
  Drug Development Consulting (DDC)   DDC provides comprehensive drug development
and regulatory consulting services for pharmaceutical, biotechnology, and medical device
companies in major jurisdictions in the Americas, Europe, and Japan. These services include drug
development and regulatory strategy design, scientific and technical evaluation, writing and
review services, regulatory application preparation and review, regulatory training for client
personnel, and expert liaison with the FDA and other regulatory agencies.DDC works closely with clients to design drug development and regulatory strategies and
comprehensive registration programs. The Companys drug development and regulatory experts
review existing published literature and regulatory precedents, evaluate the scientific and
technical data of a product, assess the competitive and regulatory environment, identify
deficiencies, and define the steps necessary to obtain regulatory authority approvals in the
most expeditious manner. Through these services, the Company helps its clients obtain regulatory
approval for particular products or product lines in certain specific markets and participates
fully in the product development process.Strategic Compliance and Operational Performance
Excellence (SCOPE)   The SCOPE group offers
a range of specialized clinical development and manufacturing consulting services for clients in
the life sciences industry. SCOPEs services are designed to help pharmaceutical, biotech, and
medical device companies achieve regulatory compliance, product quality, and process excellence.
These services include clinical and manufacturing strategy design, metrics assessment and
development, risk management, GCP and good manufacturing practice (GMP) audits, processes
optimization, organizational alignment, training, and change management.SCOPE offers its clients experienced regulatory and industry professionalsformerly from the
FDA and/or biotech, pharmaceutical, and medical device companiestested methodologies, thought
leadership, and focused expertise.Medical Marketing Services (MMS) The MMS group assists clients in achieving optimal market
penetration for their products by providing customized, integrated, and expert pre-launch and
launch services in the U.S., Europe, and other areas of the world. MMSs experience indicates
that clients need assistance in creating awareness and understanding of their products in the
marketplace and in addressing rapid acceptance of their products by opinion leaders, physicians,
managed care organizations, and patient groups leading to accelerated product acceptance and
market penetration. MMS designs and implements integrated communication plans that include
market and opinion leader development, market preparation, and targeted communications support
for clients. An integrated communications plan can detail external and internal strategies,
including communications objectives, target audiences, communications priorities and timing, key
messages, key meetings and events, and target publications and media. Other services include
planning of meetings and exhibitions. Independent of the Companys promotional activities are
continuing medical education (CME) programs to help keep medical professionals apprised of
current medical developments.Health Policy & Strategic Reimbursement (HPSR) HPSR offers strategies for drug
manufacturers regarding reimbursement from insurance companies and managed care providers and
telecommunications and call center support for patient assistance programs.Barnett Educational Services (Barnett) Barnett offers a broad range of educational and
training services in the Clinical and GMP arena. Services range from live and webcast seminars
with well-known experts to customized on-site training at the clients sites.
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PERCEPTIVE INFORMATICS, INC.
  Medical Imaging Services Perceptives medical imaging services coordinate the use of a variety
of medical imaging modalities (e.g., radiographs, ultrasound, computed topography, and magnetic
resonance imaging) to evaluate product safety and efficacy.IVRS IVRS is a voice and web-based system being used to randomize patients and manage study
drug inventory. Perceptives IVRS service utilizes an Application Service Provider model under
which Perceptive designs, develops, deploys, hosts, and supports an application for each trial.
Participating investigators call a toll free number to enroll patients in a trial, and are able
to interact with the system in their native language. The system confirms enrollment and assigns
a drug kit for the patient. The system is also capable of monitoring drug inventory at
investigator sites and triggering drug shipments as needed.CTMS Perceptives Clinical Trial Management System solutions are software packages that assist
bio/pharmaceutical companies with the complex process of planning and managing clinical trials.
These software packages include IMPACT, INITIATOR, and INVESTIGATOR. IMPACT, Perceptives
flagship software product, is an enterprise-wide CTMS used to plan studies, track progress,
support monitoring activities, monitor costs, and track clinical supplies. The system is used
by approximately 32 bio/pharmaceutical companies and by approximately 25,000 users worldwide.
It is primarily used for Phase II, III and IV studies. INITIATOR is a separate software package
offered by Perceptive to assist in the management and conduct of Phase I trials. Perceptive
also offers INVESTIGATOR, an investigator database tool used to maintain up-to-date information
concerning investigators and their performance on prior trials. Sponsor companies use the tool
to help select investigators when initiating a new clinical trial.Web-Based Portal Perceptives web-based portal allows secure access to critical, real-time
information over the web. The portal supports clinical trials management, communications,
collaboration, and the viewing of metrics and clinical trial data.Integration Services Group Through its Integration Services Group, Perceptive provides
services in support of its software packages including implementation, deployment, validation,
hosting, and integration with other customer systems.Patient Diary Applications Perceptive also offers solutions for the electronic collection of
patient diary information, often referred to by the industry as ePRO for electronic Patient
Reported Outcomes. Perceptive offers clients solutions that include capturing data from
patients using handheld technology or over the telephone using Perceptives IVRS technology.
  INFORMATION SYSTEMS
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SALES AND MARKETING
     CLIENTS
  BACKLOG
   COMPETITION
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CRS
   
    
    previous experience with a client or in a specific therapeutic area;
    
    medical and scientific expertise in a specific therapeutic area;
    
    quality of services;
    
    breadth of services;
    
    the ability to organize and manage large-scale clinical trials on a global basis;
    
    the ability to manage large and complex medical databases;
    
    the ability to provide statistical and regulatory services;
    
    the ability to quickly recruit investigators and patients;
    
    the ability to integrate information technology with systems to improve the efficiency of clinical research;
    
    an international presence with strategically located facilities;
    
    financial strength and stability; and
    
    price.
  PCMS
    PERCEPTIVE
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INTELLECTUAL PROPERTY
  EMPLOYEES
   GOVERNMENT REGULATIONS
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REGULATION OF DRUGS AND BIOLOGICS
  Preclinical Research (approximately 1 to 3.5 years) In vitro (test tube) and animal studies
in accordance with GLP to establish the relative toxicity of the drug or biologic over a wide
range of doses and to detect any potential to cause a variety of adverse conditions and
diseases, including birth defects or cancer. If results warrant continuing development of the
drug or biologic, the results of the studies are submitted to the FDA by the manufacturer as
part of an Investigational New Drug Application (IND), which must be reviewed by the FDA
before proposed clinical testing can begin. An IND must include, among other things,
preclinical data, chemistry, manufacturing and control information, and an investigational plan,
and must be activated by the FDA before such trials may begin. There can be no assurance that
submission of an IND will result in the ability to commence clinical trials.
 Clinical Trials (approximately 3.5 to 6 years)
 
    
    Phase I consists of basic safety and pharmacology testing in approximately 20
to 80 human subjects, usually healthy volunteers, and includes studies to
determine metabolic and pharmacologic action of the product in humans, how the
drug or biologic works, how it is affected by other drugs, how it is tolerated
and absorbed, where it goes in the body, how long it remains active, and how it
is broken down and eliminated from the body.
    
    Phase II includes basic efficacy (effectiveness) and dose-range testing,
sometimes in 100 to 200 patients afflicted with a specific disease or condition
for which the product is intended for use, further safety testing, evaluation of
effectiveness, and determination of optimal dose levels, dose schedules, and
routes of administration. If Phase II studies yield satisfactory results and no
hold is placed on further studies by the FDA, Phase III studies can be commenced.
    
    Phase III includes larger scale, multi-center, comparative clinical trials
conducted with patients afflicted by a target disease in order to provide enough
data for a valid statistical test of safety and effectiveness required by the FDA
and others and to provide a basis for product labeling. When results from Phase
II or Phase III show special promise in the treatment of a serious condition for
which existing therapeutic options are nonexistent, limited, or of minimal value,
the FDA may allow the sponsor to make the new drug available to a larger number
of patients through the regulated mechanism of a Treatment Investigational New
Drug (TIND), which may span late Phase II, Phase III, and FDA review. Although
TINDs may enroll and collect a substantial amount of data from tens of thousands
of patients, they are not granted in all cases.
 The FDA receives reports on the progress of each phase of clinical testing and may require the
modification, suspension, or termination of clinical trials if, among other things, an
unreasonable risk is presented to patients or if the design of the trial is insufficient to meet
its stated objective.NDA or Biologic License Application (BLA) Preparation and Submission Upon completion of
Phase III trials, the sponsor assembles the statistically analyzed data from all phases of
development, along with the chemistry and manufacturing and pre-clinical data and the proposed
labeling, among other things, into a single large document, the NDA or BLA (in CTD format as of
July 1, 2003), which today comprises, on average, roughly 100,000 pages.
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FDA Review of NDA or BLA The FDA carefully scrutinizes data from all phases of development
(including a TIND) to confirm that the manufacturer has complied with regulations and that the
drug or biologic is safe and effective for the specific use (or indication) under study. The
FDA may refuse to accept the NDA or BLA for filing and substantive review if certain
administrative and content criteria are not satisfied and even after accepting the submission
for review, the FDA may also require additional testing or information before approval of an NDA
or BLA. The FDA must deny approval of an NDA or BLA if applicable regulatory requirements are
not ultimately satisfied.Post-Marketing Surveillance and Phase IV Studies Federal regulation requires the sponsor to
collect and periodically report to the FDA additional safety and efficacy data on the drug or
biologic for as long as the manufacturer markets the product (post-marketing surveillance). If
the product is marketed outside the U.S., these reports must include data from all countries in
which the product is sold. Additional studies (Phase IV) may be undertaken after initial
approval to find new uses for the product, to test new dosage formulations, or to confirm
selected non-clinical benefits, e.g., increased cost-effectiveness or improved quality of life.
Product approval may be withdrawn if compliance with regulatory standards is not maintained or
if problems occur following initial marketing. In addition, the FDA and other major regulatory
agencies are now asking sponsor companies to prepare risk management plans for approved and
marketed drugs and biologics, aimed at assessing areas of drug risk and plans for managing such
risks should they materialize.
 REGULATION OF MEDICAL DEVICES
    HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996
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POTENTIAL LIABILITY AND INSURANCE
     AVAILABLE INFORMATION
  
 ITEM 1A. RISK FACTORS
  THE LOSS, MODIFICATION, OR DELAY OF LARGE OR MULTIPLE CONTRACTS MAY NEGATIVELY IMPACT OUR FINANCIAL
PERFORMANCE
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
    
    merger or potential merger related activities;
    
    failure of products being tested to satisfy safety requirements;
    
    failure of products being tested to prove effective;
    
    products having unexpected or undesired clinical results;
    
    client decisions to forego a particular study, perhaps for economic reasons;
    
    insufficient patient enrollment in a study;
    
    insufficient investigator recruitment;
    
    production problems which cause shortages of the product;
    
    product withdrawal following market launch; and
    
    shut down of manufacturing facilities.
  WE FACE INTENSE COMPETITION IN MANY AREAS OF OUR BUSINESS; IF WE DO NOT COMPETE EFFECTIVELY, OUR
BUSINESS WILL BE HARMED
   THE FIXED RATE NATURE OF OUR CONTRACTS COULD HURT OUR OPERATING RESULTS
  IF GOVERNMENTAL REGULATION OF THE DRUG, MEDICAL DEVICE AND BIOTECHNOLOGY INDUSTRY CHANGES, THE NEED
FOR OUR SERVICES COULD DECREASE
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IF WE FAIL TO COMPLY WITH EXISTING REGULATIONS, OUR REPUTATION AND OPERATING RESULTS WOULD BE
HARMED
  WE MAY LOSE BUSINESS OPPORTUNITIES AS A RESULT OF HEALTH CARE REFORM AND THE EXPANSION OF
MANAGED-CARE ORGANIZATIONS
    IF WE DO NOT KEEP PACE WITH RAPID TECHNOLOGICAL CHANGES, OUR PRODUCTS AND SERVICES MAY BECOME LESS
COMPETITIVE OR OBSOLETE, ESPECIALLY IN OUR PERCEPTIVE BUSINESS
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BECAUSE WE DEPEND ON A SMALL NUMBER OF INDUSTRIES AND CLIENTS FOR ALL OF OUR BUSINESS, THE LOSS OF
BUSINESS FROM A SIGNIFICANT CLIENT COULD HARM OUR BUSINESS, REVENUE AND FINANCIAL CONDITION
  IF OUR PERCEPTIVE BUSINESS IS UNABLE TO MAINTAIN CONTINUOUS, EFFECTIVE, RELIABLE AND SECURE
OPERATION OF ITS COMPUTER HARDWARE, SOFTWARE AND INTERNET APPLICATIONS AND RELATED TOOLS AND
FUNCTIONS, ITS BUSINESS WILL BE HARMED
   IF WE ARE UNABLE TO ATTRACT SUITABLE WILLING VOLUNTEERS FOR THE CLINICAL TRIALS OF OUR CLIENTS, OUR
CRS BUSINESS MAY SUFFER
  IF WE CANNOT RETAIN OUR HIGHLY QUALIFIED MANAGEMENT AND TECHNICAL PERSONNEL, OUR BUSINESS WOULD BE
HARMED
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WE MAY HAVE SUBSTANTIAL EXPOSURE TO PAYMENT OF PERSONAL INJURY CLAIMS AND MAY NOT HAVE ADEQUATE
INSURANCE TO COVER SUCH CLAIMS
   
    
    we had to pay damages or incur defense costs in connection with a claim that is outside
the scope of an indemnity; or
    
    a client failed to indemnify us in accordance with the terms of an indemnity agreement
because it did not have the financial ability to fulfill its indemnification obligation or
for any other reason.
   OUR BUSINESS IS SUBJECT TO INTERNATIONAL ECONOMIC, POLITICAL, AND OTHER RISKS THAT COULD NEGATIVELY
AFFECT OUR RESULTS OF OPERATIONS OR FINANCIAL POSITION
  
    
    changes in a specific countrys or regions political or economic conditions, including Western Europe, in particular;
    
    potential negative consequences from changes in tax laws affecting our ability to repatriate profits;
    
    difficulty in staffing and managing widespread operations;
    
    unfavorable labor regulations applicable to its European or other international operations;
    
    changes in foreign currency exchange rates; and
    
    longer payment cycles of foreign customers and difficulty of collecting receivables in foreign jurisdictions.
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OUR OPERATING RESULTS HAVE FLUCTUATED BETWEEN QUARTERS AND YEARS AND MAY CONTINUE TO FLUCTUATE
IN THE FUTURE, WHICH COULD AFFECT THE PRICE OF OUR COMMON STOCK
  
    
    the level of new business authorizations in a particular quarter or year;
    
    the timing of the initiation, progress, or cancellation of significant projects;
    
    exchange rate fluctuations between quarters or years;
    
    restructuring charges;
    
    the mix of services offered in a particular quarter or year;
    
    the timing of the opening of new offices;
    
    costs and the related financial impact of acquisitions;
    
    the timing of internal expansion;
    
    the timing and amount of costs associated with integrating acquisitions;
    
    the timing and amount of startup costs incurred in connection with the introduction of
new products, services or subsidiaries; and
    
    the dollar amount of changes in contract scope finalized during a particular period.
    OUR REVENUE AND EARNINGS ARE EXPOSED TO EXCHANGE RATE FLUCTUATIONS
  
    
    Foreign Currency Translation Risk. The revenue and expenses of our foreign operations
are generally denominated in local currencies, primarily the British pound and the Euro,
and then are translated into U.S. dollars for financial reporting purposes. For the fiscal
year ended June 30, 2006, approximately 17.0% of total consolidated service revenue was
denominated in British pounds and approximately 37.0% of total consolidated service revenue
was denominated in Euros. For the fiscal year ended June 30, 2005, approximately 19.7% of
total consolidated service revenue was denominated in British pounds and approximately
34.2% of total consolidated service revenue was denominated in Euros. Accordingly, changes
in exchange rates between foreign currencies and the U.S. dollar will affect the
translation of foreign results into U.S. dollars for purposes of reporting our consolidated
results.
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
    
    Foreign Currency Transaction Risk. We may be subjected to foreign currency transaction
risk when our foreign subsidiaries enter into contracts or incur liabilities denominated in
a currency other than the foreign subsidiaries functional (local) currency. To the extent
we are unable to shift the effects of currency fluctuations to the clients, foreign
exchange fluctuations as a result of foreign currency exchange losses could have a material
adverse effect on our results of operations.
  OUR BUSINESS HAS EXPERIENCED SUBSTANTIAL EXPANSION IN THE PAST AND SUCH EXPANSION AND ANY FUTURE
EXPANSION COULD STRAIN OUR RESOURCES IF NOT PROPERLY MANAGED
  
    
    continue to improve operating, administrative, and information systems;
    
    accurately predict future personnel and resource needs to meet client contract commitments;
    
    track the progress of ongoing client projects; and
    
    attract and retain qualified management, sales, professional, scientific and technical operating personnel.
   
    
    assimilate differences in foreign business practices, exchange rates and regulatory requirements;
    
    operate amid political and economic instability;
    
    hire and retain qualified personnel; and
    
    overcome language, tariff and other barriers.
 WE MAY MAKE ACQUISITIONS IN THE FUTURE, WHICH MAY LEAD TO DISRUPTIONS TO OUR ONGOING BUSINESS
  
    
    assimilate the operations and services or products of the acquired company;
    
    integrate acquired personnel;
    
    retain and motivate key employees;
    
    retain customers;
    
    identify and manage risks facing the acquired company; and
    
    minimize the diversion of managements attention from other business concerns.
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OUR EFFECTIVE INCOME TAX RATE MAY FLUCTUATE FROM QUARTER-TO-QUARTER, WHICH MAY AFFECT EARNINGS AND
EARNINGS PER SHARE
  
    
    the requirement to exclude from our quarterly worldwide effective income tax
calculations losses in jurisdictions where no tax benefit can be recognized;
    
    actual and projected full year pretax income;
    
    changes in tax laws in the various taxing jurisdictions;
    
    audits by the taxing authorities; and
    
    the establishment of valuation allowances against deferred tax assets if it is
determined that it is more likely than not that future tax benefits will not be realized.
  OUR CORPORATE GOVERNANCE STRUCTURE, INCLUDING PROVISIONS OF OUR ARTICLES OF ORGANIZATION, AND
BY-LAWS, AND OUR SHAREHOLDER RIGHTS PLAN, AND MASSACHUSETTS LAW MAY DELAY OR PREVENT A CHANGE IN
CONTROL OR MANAGEMENT THAT STOCKHOLDERS MAY CONSIDER DESIRABLE
  
    
    we have divided our board of directors into three classes that serve staggered
three-year terms;
    
    we are subject to Section 8.06 of the Massachusetts Business Corporation Law which
provides that directors may only be removed by stockholders for cause, vacancies in our
board of directors may only be filled by a vote of our board of directors and the number of
directors may be fixed only by our board of directors;
    
    we are subject to Chapter 110F of the Massachusetts General Laws which limits our
ability to engage in business combinations with certain interested stockholders;
    
    our stockholders are limited in their ability to call or introduce proposals at
stockholder meetings; and
    
    our shareholder rights plan would cause a proposed acquirer of 20% or more of our
outstanding shares of common stock to suffer significant dilution.
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OUR STOCK PRICE HAS BEEN AND MAY IN THE FUTURE BE VOLATILE, WHICH COULD LEAD TO LOSSES BY INVESTORS
   
    
    operating results;
    
    earnings estimates by analysts;
    
    market conditions in the industry;
    
    prospects of health care reform;
    
    changes in government regulations;
    
    general economic conditions, and
    
    our effective income tax rate.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
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Facility
    
    Sq. Ft.
    
    Use of Facility
    
    Lease ExpirationHeadquarters in Waltham, MA
    
    
    116,000
    
    
    CRS, Perceptive, and Corporate
    
    
    2009Lowell, MA
    
    
    108,000
    
    
    PCMS, CRS, Perceptive, and General & Administrative (G&A)
    
    
    2011Uxbridge, UK
    
    
    75,000
    
    
    CRS, PCMS, and G&A
    
    
    2022Berlin, Germany
    
    
    247,000
    
    
    CRS, PCMS, Perceptive and G&A
    
    
    2016
  Total Sq. Ft.CRS
    
    
    599,000PCMS
    
    
    330,000Perceptive
    
    
    115,000General and Administrative
    
    
    230,000
  
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF
EQUITY SECURITIES
 MARKET INFORMATION AND HOLDERS
  2006
    
    2005High
    
    Low
    
    High
    
    LowFirst Quarter
    
    $
    20.62
    
    
    $
    18.85
    
    
    $
    20.43
    
    
    $
    18.10Second Quarter
    
    $
    22.00
    
    
    $
    18.85
    
    
    $
    21.37
    
    
    $
    17.71Third Quarter
    
    $
    27.59
    
    
    $
    19.21
    
    
    $
    25.04
    
    
    $
    19.02Fourth Quarter
    
    $
    30.83
    
    
    $
    23.55
    
    
    $
    24.44
    
    
    $
    17.12
  DIVIDENDS
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ISSUER PURCHASES OF EQUITY SECURITIES
  Total Number of
    
    Maximum ApproximateShares Purchased as
    
    Dollar Value of Shares thatTotal Number of
    
    
    
    
    
    Part of Publicly
    
    May Yet Be PurchasedShares
    
    Average Price
    
    Announced Plans
    
    Under the Plans or ProgramsPeriod
    
    Purchased
    
    Paid per Share
    
    or Programs
    
    (1)04/01/06 - 04/30/06
    
    
    
    
    
    
    
    
    
    
    
    
    
    $8.0 million05/01/06 - 05/31/06
    
    
    68,037
    
    
    $
    29.40
    
    
    
    68,037
    
    
    $6.0 million06/01/06 - 06/30/06
    
    
    
    
    
    
    
    
    
    
    
    
    
    $6.0 millionTotal
    
    
    68,037
    
    
    $
    29.40
    
    
    
    68,037
 
 (1)
    
    On September 9, 2004, the Companys Board of Directors approved a stock repurchase
program authorizing the purchase of up to $20.0 million of the Companys common stock to be
repurchased in the open market subject to market conditions, as announced on September 10,
2004. Unless terminated earlier by resolution of the Companys Board of Directors, the
Plan will expire when the entire amount authorized has been fully utilized.
 
 ITEM 6. SELECTED FINANCIAL DATA
  For the years ended June 30,(in thousands, except per share data and number of employees)2006
    
    2005
    
    2004
    
    2003
    
    2002OPERATIONSService revenue
    
    $
    614,947
    
    
    $
    544,726
    
    
    $
    540,983
    
    
    $
    518,936
    
    
    $
    451,461Income (loss) from operations
    
    $
    39,855
    (1)
    
    $
    (276
    )(2)
    
    $
    18,373
    (3)
    
    $
    17,228
    (4)
    
    $
    20,493Net income (loss)
    
    $
    23,544
    
    
    $
    (35,177
    )
    
    $
    13,791
    
    
    $
    10,662
    
    
    $
    13,235Basic earnings (loss) per share
    
    $
    0.89
    
    
    $
    (1.35
    )
    
    $
    0.53
    
    
    $
    0.42
    
    
    $
    0.53Diluted earnings (loss) per share
    
    $
    0.87
    
    
    $
    (1.35
    )
    
    $
    0.51
    
    
    $
    0.42
    
    
    $
    0.52FINANCIAL POSITIONCash, cash equivalents, and marketable securities
    
    $
    92,749
    
    
    $
    88,622
    
    
    $
    95,607
    
    
    $
    82,724
    
    
    $
    66,109Working capital
    
    $
    131,552
    
    
    $
    120,301
    
    
    $
    145,408
    
    
    $
    134,346
    
    
    $
    138,020Total assets
    
    $
    538,633
    
    
    $
    475,736
    
    
    $
    502,996
    
    
    $
    464,237
    
    
    $
    407,161Long-term debt
    
    $
    705
    
    
    $
    1,115
    
    
    $
    471
    
    
    $
    644
    
    
    $
    432Stockholders equity
    
    $
    248,763
    
    
    $
    205,571
    
    
    $
    246,760
    
    
    $
    227,100
    
    
    $
    200,077OTHER DATAPurchases of property and equipment
    
    $
    29,763
    
    
    $
    31,814
    
    
    $
    27,823
    
    
    $
    29,985
    
    
    $
    23,808Depreciation and amortization
    
    $
    26,035
    
    
    $
    29,618
    
    
    $
    25,762
    
    
    $
    20,656
    
    
    $
    17,893Number of employees
    
    
    5,600
    
    
    
    5,140
    
    
    
    4,875
    
    
    
    5,095
    
    
    
    4,930Weighted average shares used in
Computing:Basic earnings (loss) per share
    
    
    26,557
    
    
    
    26,065
    
    
    
    26,010
    
    
    
    25,371
    
    
    
    24,928Diluted earnings (loss) per share
    
    
    27,013
    
    
    
    26,065
    
    
    
    26,795
    
    
    
    25,683
    
    
    
    25,582
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(1)
    
    Income from operations for the year ended June 30, 2006 reflects $1.6 million of
compensation expense in conjunction with the acquisition of the Perceptive minority
interest as discussed in Note 3 to the consolidated financial statements included in Item 8
of this annual report. Additionally, the Company recorded a $2.6 million reduction to the
existing restructuring reserve as a result of execution of sub-lease agreements and changes
in assumptions of leased facilities, which was offset by $1.8 million in severance-related
restructuring expenses incurred during fiscal year 2006 in association with the fourth
quarter fiscal year 2005 restructuring plan. See Note 7 to the consolidated financial
statements included in Item 8 of this annual report for further detail.(2)
    
    Loss from operations for the year ended June 30, 2005 reflects $24.3 million in
restructuring charges recorded in the quarter ended June 30, 2005, consisting of $4.3
million for severance expense associated with the elimination of 123 managerial and staff
positions and $20.5 million related to eleven newly-abandoned leased facilities (or new
sections of previously partially abandoned facilities), partially offset by $(0.5) million
related to changes in assumptions for leased facilities which were abandoned in June 2001
and in March 2004. Additionally, the Company recorded in fiscal year 2005 $2.7 million of
impairment charges associated with abandoned leased facilities and other fixed assets, and
$0.5 million related to other special charges. See Note 7 to the consolidated financial
statements included in Item 8 of this annual report for further detail.(3)
    
    Income from operations for the year ended June 30, 2004 reflects $10.8 million in
restructuring charges recorded in the quarter ended March 31, 2004, consisting of $3.9
million for severance expense associated with the elimination of 157 managerial and staff
positions, $5.6 million related to seven newly-abandoned leased facilities, and $1.3
million related to changes in assumptions for leased facilities, which were abandoned in
June 2001. See Note 7 to the consolidated financial statements included in Item 8 of this
annual report for further detail.(4)
    
    Income from operations for the year ended June 30, 2003 reflects $9.4 million in
facilities-related restructuring charges related to changes in assumptions for leased
facilities, which were previously abandoned in June 2001. The changes in assumptions were
caused by the deterioration in the commercial real estate market. See Note 7 to the
consolidated financial statements included in Item 8 of this annual report for further
detail.
 
 ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 OVERVIEW
   
    
    CRS constitutes the Companys core business and includes clinical trials management and
biostatistics, data management and clinical pharmacology, as well as related medical
advisory and investigator site services.
    
    PCMS provides technical expertise and advice in such areas as drug development,
regulatory affairs, and bio/pharmaceutical process and management consulting; and provides
a full spectrum of market development, product development, and targeted communications
services in support of product launch. PCMS consultants identify alternatives and propose
solutions to address clients product development, registration, and commercialization
issues. PCMS also provides health policy consulting and strategic reimbursement services.
 -26-




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
    
    Perceptive provides information technology solutions designed to improve clients product
development processes. Perceptive offers a portfolio of products and services that includes
medical imaging services, IVRS, CTMS, web-based portals, systems integration, and patient
diary applications. On August 22, 2005, the Company acquired all of the equity interests
held by minority stockholders of Perceptive, and now owns all of the outstanding capital
stock of Perceptive. See Note 3 to the notes to the consolidated financial statements
included in Item 8 of this annual report.
     CRITICAL ACCOUNTING POLICIES AND ESTIMATES
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REVENUE RECOGNITION
  BILLED ACCOUNTS RECEIVABLE, UNBILLED ACCOUNTS RECEIVABLE AND DEFERRED REVENUE
  INCOME TAXES
    GOODWILL
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RESULTS OF OPERATIONS
 QUARTERLY OPERATING RESULTS (UNAUDITED)
  For the year ended June 30, 2006(in thousands, except per share data)First
    
    Second
    
    Third
    
    Fourth
    
    TotalQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    YearService revenue
    
    $
    138,380
    
    
    $
    149,762
    
    
    $
    157,320
    
    
    $
    169,485
    
    
    $
    614,947Income from operations
    
    
    5,015
    
    
    
    10,578
    
    
    
    11,192
    
    
    
    13,070
    
    
    
    39,855Net income
    
    
    3,318
    
    
    
    5,043
    
    
    
    6,754
    
    
    
    8,429
    
    
    
    23,544Diluted earnings per share
    
    $
    0.13
    
    
    $
    0.19
    
    
    $
    0.25
    
    
    $
    0.31
    
    
    $
    0.87
 For the year ended June 30, 2005(in thousands, except per share data)First
    
    Second
    
    Third
    
    Fourth
    
    TotalQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    YearService revenue
    
    $
    130,422
    
    
    $
    135,759
    
    
    $
    134,905
    
    
    $
    143,640
    
    
    $
    544,726Income (loss) from operations
    
    
    8,481
    
    
    
    7,511
    
    
    
    7,473
    
    
    
    (23,741
    )
    
    
    (276
    )Net income (loss)
    
    
    5,656
    
    
    
    6,066
    
    
    
    4,619
    
    
    
    (51,518
    )
    
    
    (35,177
    )Diluted earnings (loss) per share
    
    $
    0.21
    
    
    $
    0.23
    
    
    $
    0.17
    
    
    $
    (1.98
    )
    
    $
    (1.35
    )
 ACQUISITIONS AND IMPACT OF RESTRUCTURING AND OTHER CHARGES
 ACQUISITIONS
 Qdot
  Perceptive
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Synchron
  IMC
  3C
  FARMOVS
  RESTRUCTURING CHARGES
   -30-




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ANALYSIS BY SEGMENT
  2006 vs. 2005
    
    
    
    
    
    
    2005 vs. 2004Increase
    
    
    %
    
    
    
    
    
    
    Increase
    
    
    %($ IN THOUSANDS)
    
    2006
    
    
    2005
    
    
    (Decrease)
    
    
    Change
    
    
    2004
    
    
    (Decrease)
    
    
    ChangeService revenue:CRS
    
    $
    442,512
    
    
    $
    379,292
    
    
    $
    63,220
    
    
    
    16.7
    %
    
    $
    376,548
    
    
    $
    2,744
    
    
    
    0.7
    %PCMS
    
    
    117,129
    
    
    
    122,587
    
    
    
    (5,458
    )
    
    
    -4.5
    %
    
    
    128,462
    
    
    
    (5,875
    )
    
    
    -4.6
    %Perceptive
    
    
    55,306
    
    
    
    42,847
    
    
    
    12,459
    
    
    
    29.1
    %
    
    
    35,973
    
    
    
    6,874
    
    
    
    19.1
    %$
    614,947
    
    
    $
    544,726
    
    
    $
    70,221
    
    
    
    12.9
    %
    
    $
    540,983
    
    
    $
    3,743
    
    
    
    0.7
    %Direct costs:CRS
    
    $
    292,221
    
    
    $
    251,183
    
    
    $
    41,038
    
    
    
    16.3
    %
    
    $
    244,179
    
    
    $
    7,004
    
    
    
    2.9
    %PCMS
    
    
    81,549
    
    
    
    85,319
    
    
    
    (3,770
    )
    
    
    -4.4
    %
    
    
    93,778
    
    
    
    (8,459
    )
    
    
    -9.0
    %Perceptive
    
    
    32,471
    
    
    
    23,542
    
    
    
    8,929
    
    
    
    37.9
    %
    
    
    18,106
    
    
    
    5,436
    
    
    
    30.0
    %$
    406,241
    
    
    $
    360,044
    
    
    $
    46,197
    
    
    
    12.8
    %
    
    $
    356,063
    
    
    $
    3,981
    
    
    
    1.1
    %Gross profit:CRS
    
    $
    150,291
    
    
    $
    128,109
    
    
    $
    22,182
    
    
    
    17.3
    %
    
    $
    132,369
    
    
    $
    (4,260
    )
    
    
    -3.2
    %PCMS
    
    
    35,580
    
    
    
    37,268
    
    
    
    (1,688
    )
    
    
    -4.5
    %
    
    
    34,684
    
    
    
    2,584
    
    
    
    7.5
    %Perceptive
    
    
    22,835
    
    
    
    19,305
    
    
    
    3,530
    
    
    
    18.3
    %
    
    
    17,867
    
    
    
    1,438
    
    
    
    8.0
    %$
    208,706
    
    
    $
    184,682
    
    
    $
    24,024
    
    
    
    13.0
    %
    
    $
    184,920
    
    
    $
    (238
    )
    
    
    -0.1
    %
  FISCAL YEAR ENDED JUNE 30, 2006 COMPARED WITH THE FISCAL YEAR ENDED JUNE 30, 2005
  -31-




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FISCAL YEAR ENDED JUNE 30, 2005 COMPARED WITH THE FISCAL YEAR ENDED JUNE 30, 2004
     -33-




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LIQUIDITY AND CAPITAL RESOURCES
    -34-




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DAYS SALES OUTSTANDING
  CASH FLOWS
    LINES OF CREDIT
   -35-




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FINANCING NEEDS
     CONTRACTUAL OBLIGATIONS, CONTINGENT LIABILITIES AND GUARANTEES
  ($ IN THOUSANDS)
    
    Total
    
    
    Less than 1 year
    
    
    1  3 years
    
    
    3  5 years
    
    
    More than 5 yearsOperating leases
    
    $
    209,120
    
    
    $
    43,374
    
    
    $
    66,245
    
    
    $
    32,416
    
    
    $
    67,085Obligations under
capital leases
    
    
    1,275
    
    
    
    534
    
    
    
    730
    
    
    
    11
    
    
    
    Purchase obligations
    
    
    3,942
    
    
    
    2,037
    
    
    
    1,838
    
    
    
    67
    
    
    
    Total
    
    $
    214,337
    
    
    $
    45,945
    
    
    $
    68,813
    
    
    $
    32,494
    
    
    $
    67,085
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OFF-BALANCE SHEET ARRANGEMENTS
  FOREIGN CURRENCY EXCHANGE RATES
    INFLATION
  RELATED PARTY TRANSACTIONS
   -37-




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RECENTLY ISSUED ACCOUNTING STANDARDS
   
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 MARKET RISK
  FOREIGN CURRENCY EXCHANGE RATES
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INTEREST RATES
  -39-




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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 PAREXEL INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
 For the years ended June 30,2006
    
    
    2005
    
    
    2004Service revenue
    
    $
    614,947
    
    
    $
    544,726
    
    
    $
    540,983Reimbursement revenue
    
    
    145,007
    
    
    
    126,811
    
    
    
    111,387Total revenue
    
    
    759,954
    
    
    
    671,537
    
    
    
    652,370Costs and expenses:Direct costs
    
    
    406,241
    
    
    
    360,044
    
    
    
    356,063Reimbursable out-of-pocket expenses
    
    
    145,007
    
    
    
    126,811
    
    
    
    111,387Selling, general and administrative
    
    
    143,652
    
    
    
    131,025
    
    
    
    129,989Depreciation and amortization
    
    
    26,035
    
    
    
    29,618
    
    
    
    25,762Restructuring (benefit) charges
    
    
    (836
    )
    
    
    24,315
    
    
    
    10,796Total costs and expenses
    
    
    720,099
    
    
    
    671,813
    
    
    
    633,997Income (loss) from operations
    
    
    39,855
    
    
    
    (276
    )
    
    
    18,373Interest income
    
    
    9,354
    
    
    
    6,320
    
    
    
    5,550Interest expense
    
    
    (7,064
    )
    
    
    (4,508
    )
    
    
    (4,686
    )Other income (loss), net
    
    
    (371
    )
    
    
    (796
    )
    
    
    4,206Total other income
    
    
    1,919
    
    
    
    1,016
    
    
    
    5,070Income before provision for income taxes
and minority interest (benefit) expense
    
    
    41,774
    
    
    
    740
    
    
    
    23,443Provision for income taxes
    
    
    19,328
    
    
    
    35,566
    
    
    
    9,313Minority interest (benefit) expense, net of tax
    
    
    (1,098
    )
    
    
    351
    
    
    
    339Net income (loss)
    
    $
    23,544
    
    
    $
    (35,177
    )
    
    $
    13,791Earnings (loss) per share:Basic
    
    $
    0.89
    
    
    $
    (1.35
    )
    
    $
    0.53Diluted
    
    $
    0.87
    
    
    $
    (1.35
    )
    
    $
    0.51Weighted average shares:Basic
    
    
    26,557
    
    
    
    26,065
    
    
    
    26,010Diluted
    
    
    27,013
    
    
    
    26,065
    
    
    
    26,795
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PAREXEL INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
 As of June 30,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    82,749
    
    
    $
    84,622Marketable securities (Note 4)
    
    
    10,000
    
    
    
    4,000Billed and unbilled accounts receivable, net (Note 5)
    
    
    272,063
    
    
    
    217,887Prepaid expenses
    
    
    11,258
    
    
    
    12,086Deferred tax assets
    
    
    934
    
    
    
    18,811Income tax receivable
    
    
    
    
    
    
    3,605Other current assets
    
    
    8,074
    
    
    
    3,580Total current assets
    
    
    385,078
    
    
    
    344,591Property and equipment, net (Note 6)
    
    
    78,386
    
    
    
    71,865Goodwill (Note 2)
    
    
    50,112
    
    
    
    42,815Other intangible assets, net (Note 2)
    
    
    7,832
    
    
    
    9,228Non-current deferred tax assets
    
    
    10,495
    
    
    
    2,137Other assets
    
    
    6,730
    
    
    
    5,100Total assets
    
    $
    538,633
    
    
    $
    475,736LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Notes payable and current portion of long-term debt
    
    $
    498
    
    
    $
    507Accounts payable
    
    
    17,185
    
    
    
    14,424Deferred revenue
    
    
    139,836
    
    
    
    132,241Accrued expenses
    
    
    20,117
    
    
    
    13,858Accrued restructuring charges (Note 7)
    
    
    5,190
    
    
    
    13,231Accrued employee benefits and withholdings
    
    
    46,385
    
    
    
    28,747Current deferred tax liabilities
    
    
    12,645
    
    
    
    16,928Income tax payable
    
    
    7,498
    
    
    
    Other current liabilities
    
    
    4,172
    
    
    
    4,354Total current liabilities
    
    
    253,526
    
    
    
    224,290Long-term debt, net of current portion
    
    
    705
    
    
    
    1,115Non-current deferred tax liabilities
    
    
    16,780
    
    
    
    17,853Long-term accrued restructuring charges (Note 7)
    
    
    10,967
    
    
    
    17,773Other liabilities
    
    
    5,569
    
    
    
    5,188Total liabilities
    
    
    287,547
    
    
    
    266,219Commitments and contingencies (Note 15)Minority interest in subsidiary
    
    
    2,323
    
    
    
    3,946Stockholders equity:Preferred stock$.01 par value; shares authorized: 5,000,000;
Series A junior participating preferred stock - 50,000
shares designated, none issued and outstandingCommon stock$.01 par value; shares authorized: 50,000,000;
shares issued and outstanding: 26,920,119 and 26,153,334
at June 30, 2006 and 2005, respectively
    
    
    283
    
    
    
    275Additional paid-in capital
    
    
    177,309
    
    
    
    163,921Retained earnings
    
    
    65,275
    
    
    
    41,731Accumulated other comprehensive income (loss)
    
    
    5,896
    
    
    
    (356
    )Total stockholders equity
    
    
    248,763
    
    
    
    205,571Total liabilities and stockholders equity
    
    $
    538,633
    
    
    $
    475,736
  -41-




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##### Table of Contents



PAREXEL INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 Accum.OtherCommon Stock
    
    
    
    
    
    
    Retained
    
    
    Compre-
    
    
    Total
    
    
    Compre-Additional
    
    
    Treasury
    
    
    Earnings
    
    
    hensive
    
    
    Stock-
    
    
    hensiveNumber
    
    
    Par
    
    
    Paid-in
    
    
    Stock,
    
    
    (Accum.
    
    
    Income
    
    
    holders
    
    
    IncomeOf Shares
    
    
    Value
    
    
    Capital
    
    
    At Cost
    
    
    Deficit)
    
    
    (Loss)
    
    
    Equity
    
    
    (Loss)Balance at June 30, 2003
    
    
    25,822,055
    
    
    $
    267
    
    
    $
    174,734
    
    
    $
    (8,165
    )
    
    $
    63,117
    
    
    $
    (2,853
    )
    
    $
    227,100
    
    
    $
    20,112Shares issued under stock option/
employee stock purchase plans
    
    
    769,952
    
    
    
    8
    
    
    
    7,414
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,422Shares issued under subsidiary option plan
    
    
    
    
    
    
    
    
    
    
    64
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64Shares surrendered for the exercise of
stock options
    
    
    (25,714
    )
    
    
    
    
    
    
    450
    
    
    
    (450
    )
    
    
    
    
    
    
    
    
    
    
    Shares surrendered for the settlement of an
outstanding non-trade receivable
    
    
    (11,261
    )
    
    
    
    
    
    
    
    
    
    
    (177
    )
    
    
    
    
    
    
    
    
    
    
    (177
    )Shares repurchased in the open market
    
    
    (445,100
    )
    
    
    
    
    
    
    
    
    
    
    (8,056
    )
    
    
    
    
    
    
    
    
    
    
    (8,056
    )Adjustment to shares issued for acquisition
    
    
    (32,854
    )Re-designated shares to authorized but
not issued shares
    
    
    
    
    
    
    
    
    
    
    (8,792
    )
    
    
    8,792
    
    
    
    
    
    
    
    
    
    
    
    Income tax benefit from exercise
of stock options
    
    
    
    
    
    
    
    
    
    
    1,256
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,256Net unrealized loss on marketable
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98
    )
    
    
    (98
    )
    
    
    (98
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,458
    
    
    
    5,458
    
    
    
    5,458Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,791
    
    
    
    
    
    
    
    13,791
    
    
    
    13,791Balance at June 30, 2004
    
    
    26,077,078
    
    
    
    275
    
    
    
    175,126
    
    
    
    (8,056
    )
    
    
    76,908
    
    
    
    2,507
    
    
    
    246,760
    
    
    
    19,151Reclassification of treasury stock
    
    
    
    
    
    
    
    
    
    
    (8,056
    )
    
    
    8,056
    
    
    
    
    
    
    
    
    
    
    
    Shares repurchased in the open market
    
    
    (476,344
    )
    
    
    (5
    )
    
    
    (9,737
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,742
    )Shares issued under stock option/
employee stock purchase plans
    
    
    552,600
    
    
    
    5
    
    
    
    6,553
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,558Shares issued under subsidiary option plan
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35Net unrealized loss on marketable securities
and derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (356
    )
    
    
    (356
    )
    
    
    (356
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,507
    )
    
    
    (2,507
    )
    
    
    (2,507
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,177
    )
    
    
    
    
    
    
    (35,177
    )
    
    
    (35,177
    )Balance at June 30, 2005
    
    
    26,153,334
    
    
    
    275
    
    
    
    163,921
    
    
    
    
    
    
    
    41,731
    
    
    
    (356
    )
    
    
    205,571
    
    
    
    (38,040
    )Shares repurchased in the open market
    
    
    (344,570
    )
    
    
    (3
    )
    
    
    (7,997
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,000
    )Shares issued under stock option/
employee stock purchase plans
    
    
    1,111,355
    
    
    
    11
    
    
    
    16,943
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,954Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    4,442
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,442Net unrealized gain on marketable
securities and derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    712
    
    
    
    712
    
    
    
    712Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,540
    
    
    
    5,540
    
    
    
    5,540Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,544
    
    
    
    
    
    
    
    23,544
    
    
    
    23,544Balance at June 30, 2006
    
    
    26,920,119
    
    
    $
    283
    
    
    $
    177,309
    
    
    $
    
    
    
    $
    65,275
    
    
    $
    5,896
    
    
    $
    248,763
    
    
    $
    29,796
  -42-




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##### Table of Contents



PAREXEL INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the years ended June 30,2006
    
    
    2005
    
    
    2004Cash flow from operating activities:Net income (loss)
    
    $
    23,544
    
    
    $
    (35,177
    )
    
    $
    13,791Adjustments to reconcile net income (loss) to net cash provided
by operating activities:Minority interest (benefit) expense, net of tax
    
    
    (1,098
    )
    
    
    351
    
    
    
    339Depreciation and amortization
    
    
    26,035
    
    
    
    29,618
    
    
    
    25,762Stock-based compensation
    
    
    4,442
    
    
    
    
    
    
    
    Loss on disposal of assets
    
    
    156
    
    
    
    85
    
    
    
    157Deferred income taxes
    
    
    4,164
    
    
    
    29,607
    
    
    
    7,070Provision for losses on receivables, net
    
    
    1,098
    
    
    
    (1,844
    )
    
    
    (1,798
    )Changes in assets and liabilities, net of effects from acquisitions:Accounts receivable
    
    
    (54,111
    )
    
    
    6,215
    
    
    
    3,844Prepaid expenses and other current assets
    
    
    (3,545
    )
    
    
    (2,870
    )
    
    
    1,626Other assets
    
    
    (2,545
    )
    
    
    3,409
    
    
    
    (4,256
    )Accounts payable
    
    
    2,608
    
    
    
    (1,556
    )
    
    
    1,259Deferred revenue
    
    
    7,595
    
    
    
    (13,168
    )
    
    
    13,772Other current liabilities
    
    
    25,948
    
    
    
    7,186
    
    
    
    (18,954
    )Other liabilities
    
    
    (6,047
    )
    
    
    9,131
    
    
    
    7,561Net cash provided by operating activities
    
    
    28,244
    
    
    
    30,987
    
    
    
    50,173Cash flow from investing activities:Purchases of marketable securities
    
    
    (79,075
    )
    
    
    (60,300
    )
    
    
    (159,706
    )Proceeds from sale of marketable securities
    
    
    73,075
    
    
    
    91,221
    
    
    
    137,775Purchases of property and equipment
    
    
    (29,763
    )
    
    
    (31,814
    )
    
    
    (27,823
    )Acquisition of businesses
    
    
    (7,425
    )
    
    
    (1,461
    )
    
    
    (13,422
    )Proceeds from sale of assets
    
    
    121
    
    
    
    392
    
    
    
    143Net cash used in investing activities
    
    
    (43,067
    )
    
    
    (1,962
    )
    
    
    (63,033
    )Cash flow from financing activities:Proceeds from issuance of common stock
    
    
    16,954
    
    
    
    6,558
    
    
    
    7,422Payments to repurchase common stock
    
    
    (8,000
    )
    
    
    (9,742
    )
    
    
    (8,056
    )Borrowings (repayments) under lines of credit and long-term debt
    
    
    (916
    )
    
    
    369
    
    
    
    477Proceeds from issuance of subsidiarys common stock
    
    
    
    
    
    
    35
    
    
    
    64Net cash provided (used) by financing activities
    
    
    8,038
    
    
    
    (2,780
    )
    
    
    (93
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    4,912
    
    
    
    (2,309
    )
    
    
    3,905Net increase (decrease) in cash and cash equivalents
    
    
    (1,873
    )
    
    
    23,936
    
    
    
    (9,048
    )Cash and cash equivalents at beginning of year
    
    
    84,622
    
    
    
    60,686
    
    
    
    69,734Cash and cash equivalents at end of year
    
    $
    82,749
    
    
    $
    84,622
    
    
    $
    60,686
  -43-




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##### Table of Contents



PAREXEL INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
 For the years ended June 30,2006
    
    
    2005
    
    
    2004Supplemental disclosures of cash flow informationNet cash paid during the year for:Interest
    
    $
    7,064
    
    
    $
    4,508
    
    
    $
    4,585Income taxes, net of refunds
    
    $
    2,631
    
    
    $
    7,131
    
    
    $
    2,838Supplemental disclosures of investing activitiesFair value of assets acquired and goodwill
    
    $
    8,227
    
    
    $
    2,820
    
    
    $
    17,501Liabilities assumed
    
    
    (802
    )
    
    
    (1,359
    )
    
    
    (4,079
    )Cash paid for acquisitions
    
    $
    7,425
    
    
    $
    1,461
    
    
    $
    13,422Supplemental disclosures of non-cash financing activitiesIncome tax benefit from exercise of stock options
    
    $
    
    
    
    $
    
    
    
    $
    1,256
  -44-




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1. DESCRIPTION OF BUSINESS
  NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation and Principles of Consolidation
  Reclassifications
   Accounting Estimates
  Revenue Recognition
   -45-




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##### Table of Contents



Cash, Cash Equivalents and Marketable Securities
  Concentration of Credit Risk
  Provision for Losses on Receivables
  Property and Equipment
  Development of Software for Internal Use
  -46-




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##### Table of Contents



Research and Development Costs
  Advertising Costs
  Goodwill
   Carrying amount as of June 30, 2003
    
    $
    29,803Add: FW Pharma
    
    
    7033 Clinical Research
    
    
    8,056Effect of changes in rates used for translation and adjustments
    
    
    2,440Carrying amount as of June 30, 2004
    
    
    41,002Add: IMC
    
    
    1,951Final purchase accounting adjustments
    
    
    (635
    )Effect of changes in rates used for translation and adjustments
    
    
    497Carrying amount as of June 30, 2005
    
    
    42,815Add: Qdot
    
    
    2,773Perceptive
    
    
    3,080Synchron
    
    
    (40
    )IMC
    
    
    647Effect of changes in rates used for translation and adjustments
    
    
    837Carrying amount as of June 30, 2006
    
    $
    50,112
  ($ IN 000s)
    
    CRS
    
    PCMS
    
    PERCEPTIVE
    
    TOTALGoodwill
    
    $
    25,812
    
    
    $
    8,562
    
    
    $
    15,738
    
    
    $
    50,112
 -47-




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##### Table of Contents



Intangible Assets
   Carrying amount as of June 30, 2003
    
    $
    5,763Add: 3 Clinical Research
    
    
    5,805Amortization
    
    
    (1,412
    )Effect of changes in rates used for translation and adjustments
    
    
    480Carrying amount as of June 30, 2004
    
    
    10,636Add: IMC
    
    
    585Less: Amortization
    
    
    (1,828
    )Less: Effect of changes in rates used for translation and adjustments
    
    
    (165
    )Carrying amount as of June 30, 2005
    
    
    9,228Less: Amortization
    
    
    (1,564
    )Add: Effect of changes in rates used for translation and adjustments
    
    
    168Carrying amount as of June 30, 2006
    
    $
    7,832
  2007
    
    $
    1,6812008
    
    $
    1,5002009
    
    $
    1,2472010
    
    $
    9982011
    
    $
    659
 Investments
  Income Taxes
  -48-




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##### Table of Contents



Foreign Currency
  Earnings Per Share
  Stock-Based Compensation
      ($ in thousands, except per share data)
    
    2005
    
    
    2004Net income (loss), as reported
    
    $
    (35,177
    )
    
    $
    13,791Deduct total stock-based compensation, net of tax
    
    
    (3,211
    )
    
    
    (3,487
    )Pro forma net income (loss)
    
    $
    (38,388
    )
    
    $
    10,304Basic net income (loss) per share  as reported
    
    $
    (1.35
    )
    
    $
    0.53Basic net income (loss) per share  pro forma
    
    $
    (1.47
    )
    
    $
    0.40Diluted net income (loss) per share  as reported
    
    $
    (1.35
    )
    
    $
    0.51Diluted net income (loss) per share  pro forma
    
    $
    (1.47
    )
    
    $
    0.38
 -49-




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##### Table of Contents



Stock Options
   For the years ended June 30,2006
    
    2005
    
    2004Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Expected volatility
    
    
    40.4
    %
    
    
    39.0
    %
    
    
    55.0
    %Risk-free interest rate
    
    
    4.01
    %
    
    
    3.52
    %
    
    
    3.12
    %Expected terms in years
    
    
    4.77
    
    
    
    5.0
    
    
    
    5.0
  ($ in thousands, except per share data)
    
    For the years ended June 30,2006
    
    2005
    
    2004Weighted-average fair value of
options granted per share
    
    $
    8.27
    
    
    $
    8.26
    
    
    $
    7.51Intrinsic value of options exercised
    
    $
    8,208
    
    
    $
    3,065
    
    
    $
    3,773Cash received from options exercised
    
    $
    15,618
    
    
    $
    3,853
    
    
    $
    4,956Actual tax benefit realized for tax
deductions from options exercised
    
    $
    
    
    
    $
    
    
    
    $
    1,256
  Weighted-AverageNumber of
    
    ExerciseOptions
    
    PriceFY 2006Outstanding at beginning of period
    
    
    3,093,194
    
    
    $
    16.53Granted
    
    
    787,000
    
    
    $
    20.47Exercised
    
    
    (1,001,994
    )
    
    $
    15.59Canceled
    
    
    (445,455
    )
    
    $
    24.63Outstanding at end of period
    
    
    2,432,745
    
    
    $
    16.71Exercisable at end of period
    
    
    1,509,132
    
    
    $
    14.78FY 2005Outstanding at beginning of period
    
    
    3,245,425
    
    
    $
    15.70Granted
    
    
    343,000
    
    
    $
    20.28Exercised
    
    
    (343,348
    )
    
    $
    11.22Canceled
    
    
    (151,883
    )
    
    $
    18.65Outstanding at end of period
    
    
    3,093,194
    
    
    $
    16.53Exercisable at end of period
    
    
    2,552,441
    
    
    $
    16.66
 -50-




---



##### Table of Contents



Weighted-AverageNumber of
    
    ExerciseOptions
    
    PriceFY 2004Outstanding at beginning of period
    
    
    3,659,361
    
    
    $
    15.05Granted
    
    
    485,420
    
    
    $
    17.13Exercised
    
    
    (502,534
    )
    
    $
    9.86Canceled
    
    
    (396,822
    )
    
    $
    18.80Outstanding at end of period
    
    
    3,245,425
    
    
    $
    15.70Exercisable at end of period
    
    
    2,156,845
    
    
    $
    16.31
  Weighted-Weighted-
    
    Average
    
    AggregateAverage
    
    Remaining
    
    IntrinsicNumber of
    
    Exercise
    
    Contractual
    
    ValueOptions
    
    Price
    
    Life In Years
    
    (In Thousands)Outstanding at end of period
    
    
    2,432,745
    
    
    $
    16.71
    
    
    
    4.41
    
    
    $
    30,797Exercisable at end of period
    
    
    1,509,132
    
    
    $
    14.78
    
    
    
    2.94
    
    
    $
    22,015
 Restricted Stock
   Weighted-AverageGrant-DateShares
    
    Fair ValueOutstanding at beginning of period
    
    
    
    
    
    
    Granted
    
    
    509,000
    
    
    $
    13.79Vested
    
    
    (50,000
    )
    
    $
    12.62Forfeited
    
    
    (93,667
    )
    
    $
    12.62Outstanding at end of period, non-vested
    
    
    365,333
    
    
    $
    14.25
  -51-




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##### Table of Contents



Derivative Financial Instruments
   Recently Issued Accounting Standards
   NOTE 3. ACQUISITIONS
 Fiscal Year 2006
 Qdot
  -52-




---



##### Table of Contents



Perceptive
     Synchron
  Fiscal Year 2005
 IMC
  Fiscal Year 2004
 3C
  FARMOVS
  -53-




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##### Table of Contents



NOTE 4. MARKETABLE SECURITIES
   NOTE 5. BILLED AND UNBILLED ACCOUNTS RECEIVABLE
  ($ IN THOUSANDS)
    
    2006
    
    
    2005Billed
    
    $
    154,270
    
    
    $
    124,885Unbilled
    
    
    121,262
    
    
    
    95,373Provision for losses on receivables
    
    
    (3,469
    )
    
    
    (2,371
    )$
    272,063
    
    
    $
    217,887
 NOTE 6. PROPERTY AND EQUIPMENT
  ($ IN THOUSANDS)
    
    2006
    
    
    2005Owned assets:Computer and office equipment
    
    $
    78,423
    
    
    $
    75,458Computer software
    
    
    73,001
    
    
    
    61,253Leasehold improvements
    
    
    26,045
    
    
    
    24,408Furniture and fixtures
    
    
    17,612
    
    
    
    17,023Medical equipment
    
    
    15,476
    
    
    
    11,647Buildings
    
    
    4,649
    
    
    
    4,418Other
    
    
    2,695
    
    
    
    1,943217,901
    
    
    
    196,150Less: accumulated depreciation
    
    
    (140,523
    )
    
    
    (125,993
    )77,378
    
    
    
    70,157Assets held under capital lease:Computer software
    
    
    1,999
    
    
    
    2,128Less: accumulated amortization
    
    
    (991
    )
    
    
    (420
    )1,008
    
    
    
    1,708$
    78,386
    
    
    $
    71,865
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NOTE 7. RESTRUCTURING CHARGES
     Payments/Balance at
    
    
    Provisions/
    
    
    Foreign Currency
    
    
    Balance at($ IN THOUSANDS)
    
    June 30, 2005
    
    
    Adjustments
    
    
    Exchange
    
    
    June 30, 2006Employee severance costs
    
    $
    3,694
    
    
    $
    1,765
    
    
    $
    (4,725
    )
    
    $
    734Facilities-related charges
    
    
    27,310
    
    
    
    (2,601
    )
    
    
    (9,286
    )
    
    
    15,423$
    31,004
    
    
    $
    (836
    )
    
    $
    (14,011
    )
    
    $
    16,157
 Payments/Balance at
    
    
    Provisions/
    
    
    Foreign Currency
    
    
    Balance atJune 30, 2004
    
    
    Adjustments
    
    
    Exchange
    
    
    June 30, 2005Employee severance costs
    
    $
    1,503
    
    
    $
    4,300
    
    
    $
    (2,109
    )
    
    $
    3,694Facilities-related charges
    
    
    11,923
    
    
    
    20,015
    
    
    
    (4,628
    )
    
    
    27,310$
    13,426
    
    
    $
    24,315
    
    
    $
    (6,737
    )
    
    $
    31,004
 Payments/Balance at
    
    
    Provisions/
    
    
    Foreign Currency
    
    
    Balance atJune 30, 2003
    
    
    Adjustments
    
    
    Exchange
    
    
    June 30, 2004Employee severance costs
    
    $
    244
    
    
    $
    3,875
    
    
    $
    (2,616
    )
    
    $
    1,503Facilities-related charges
    
    
    8,506
    
    
    
    6,921
    
    
    
    (3,504
    )
    
    
    11,923$
    8,750
    
    
    $
    10,796
    
    
    $
    (6,120
    )
    
    $
    13,426
 -55-




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##### Table of Contents



NOTE 8. CREDIT ARRANGEMENTS
    NOTE 9. STOCKHOLDERS EQUITY
   2003 Preferred Stock Rights
  NOTE 10. EARNINGS PER SHARE
  -56-




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##### Table of Contents



Years ended June 30,($ IN THOUSANDS, EXCEPT PER SHARE DATA)
    
    2006
    
    
    2005
    
    
    2004Net income (loss) attributable to common shares
    
    $
    23,544
    
    
    $
    (35,177
    )
    
    $
    13,791Weighted average number of shares outstanding,
used in computing basic earnings per share
    
    
    26,557
    
    
    
    26,065
    
    
    
    26,010Dilutive
common stock equivalents
    
    
    456
    
    
    
    
    
    
    
    785Weighted average shares used in computing
diluted earnings per share
    
    
    27,013
    
    
    
    26,065
    
    
    
    26,795Basic earnings (loss) per share
    
    $
    0.89
    
    
    $
    (1.35
    )
    
    $
    0.53Diluted earnings (loss) per share
    
    $
    0.87
    
    
    $
    (1.35
    )
    
    $
    0.51
 NOTE 11. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
  Unrealized gain(loss) on availablefor sale securitiesForeign currency
    
    
    and derivative($ IN THOUSANDS)
    
    translation
    
    
    instruments
    
    
    TotalBalance as of June 30, 2003
    
    $
    (2,853
    )
    
    $
    
    
    
    $
    (2,853
    )Changes during the year
    
    
    5,458
    
    
    
    (98
    )
    
    
    5,360Balance as of June 30, 2004
    
    
    2,605
    
    
    
    (98
    )
    
    
    2,507Changes during the year
    
    
    (2,507
    )
    
    
    (356
    )
    
    
    (2,863
    )Balance as of June 30, 2005
    
    
    98
    
    
    
    (454
    )
    
    
    (356
    )Changes during the year
    
    
    5,540
    
    
    
    712
    
    
    
    6,252Balance as of June 30, 2006
    
    $
    5,638
    
    
    $
    258
    
    
    $
    5,896
 NOTE 12. STOCK AND EMPLOYEE BENEFIT PLANS
   -57-




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2005 Stock Incentive Plan
   2001 Stock Incentive Plan
  1998 Stock Plan
  1995 Stock Plan
  Employee Stock Purchase Plans
   Perceptive Stock Incentive Plan
  -58-




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401(k)
  NOTE 13. FINANCIAL INSTRUMENTS
    NOTE 14. INCOME TAXES
  ($ IN THOUSANDS)
    
    2006
    
    
    2005
    
    
    2004Domestic
    
    $
    (9,201
    )
    
    $
    (30,366
    )
    
    $
    (1,120
    )Foreign
    
    
    50,975
    
    
    
    31,106
    
    
    
    24,563$
    41,774
    
    
    $
    740
    
    
    $
    23,443
 -59-




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($ IN THOUSANDS)
    
    2006
    
    
    2005
    
    
    2004Current:Federal
    
    $
    1,345
    
    
    $
    (692
    )
    
    $
    (585
    )State
    
    
    732
    
    
    
    152
    
    
    
    531Foreign
    
    
    13,280
    
    
    
    10,342
    
    
    
    4,30315,357
    
    
    
    9,802
    
    
    
    4,249Deferred:Federal
    
    
    
    
    
    
    16,439
    
    
    
    (493
    )State
    
    
    
    
    
    
    3,570
    
    
    
    (43
    )Foreign
    
    
    3,971
    
    
    
    5,755
    
    
    
    5,6003,971
    
    
    
    25,764
    
    
    
    5,064$
    19,328
    
    
    $
    35,566
    
    
    $
    9,313
  ($ IN THOUSANDS)
    
    2006
    
    
    %
    
    
    2005
    
    
    %
    
    
    2004
    
    
    %Income tax expense computed at the federal
statutory rate
    
    $
    14,621
    
    
    
    35.0
    %
    
    $
    259
    
    
    
    35.0
    %
    
    $
    8,206
    
    
    
    35.0
    %State income taxes, net of federal benefit
    
    
    475
    
    
    
    1.1
    %
    
    
    99
    
    
    
    13.3
    %
    
    
    359
    
    
    
    1.5
    %Foreign rate differential
    
    
    (2,050
    )
    
    
    (4.9
    )%
    
    
    (2,298
    )
    
    
    -310.5
    %
    
    
    594
    
    
    
    2.5
    %Foreign permanent tax adjustments
    
    
    529
    
    
    
    1.3
    %
    
    
    (533
    )
    
    
    -72.0
    %
    
    
    (1,417
    )
    
    
    -6.0
    %U.S. permanent tax adjustments
    
    
    426
    
    
    
    1.0
    %
    
    
    188
    
    
    
    25.4
    %
    
    
    (56
    )
    
    
    -0.2
    %Change in valuation allowances
    
    
    3,582
    
    
    
    8.6
    %
    
    
    37,439
    
    
    
    5059.3
    %
    
    
    2,816
    
    
    
    12.0
    %Additions to reserves
    
    
    1,485
    
    
    
    3.6
    %
    
    
    185
    
    
    
    25.0
    %
    
    
    (1,317
    )
    
    
    -5.6
    %Other
    
    
    260
    
    
    
    0.6
    %
    
    
    227
    
    
    
    30.7
    %
    
    
    128
    
    
    
    0.5
    %$
    19,328
    
    
    
    46.3
    %
    
    $
    35,566
    
    
    
    4806.2
    %
    
    $
    9,313
    
    
    
    39.7
    %
  -60-




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($ IN THOUSANDS)
    
    2006
    
    
    2005Deferred tax assets:US loss carryforwards
    
    $
    11,341
    
    
    $
    8,637Foreign loss carryforwards
    
    
    13,028
    
    
    
    12,471Accrued expenses
    
    
    15,071
    
    
    
    36,571Deferred compensation
    
    
    1,736
    
    
    
    Provision for losses on receivables
    
    
    613
    
    
    
    238Deferred revenue
    
    
    13,577
    
    
    
    11,992Other
    
    
    131
    
    
    
    167Gross deferred tax assets
    
    
    55,497
    
    
    
    70,076Deferred tax asset valuation allowance
    
    
    (44,068
    )
    
    
    (49,128
    )Total deferred tax assets
    
    
    11,429
    
    
    
    20,948Deferred tax liabilities:Property and equipment
    
    
    (5,820
    )
    
    
    (10,709
    )Deferred contract profit
    
    
    (4,185
    )
    
    
    (8,127
    )Foreign intangible assets
    
    
    (1,445
    )
    
    
    (1,109
    )Foreign risk reserve
    
    
    (1,839
    )
    
    
    (1,818
    )Foreign work-in-process valuation
    
    
    (11,273
    )
    
    
    (2,772
    )UK group relief
    
    
    
    
    
    
    (2,946
    )Other
    
    
    (4,863
    )
    
    
    (7,300
    )Total deferred tax liabilities
    
    
    (29,425
    )
    
    
    (34,781
    )$
    (17,996
    )
    
    $
    (13,833
    )
  ($ IN THOUSANDS)
    
    2006
    
    
    2005Current deferred tax assets
    
    $
    934
    
    
    $
    18,811Non-current deferred tax assets
    
    
    10,495
    
    
    
    2,137Current deferred tax liabilities
    
    
    (12,645
    )
    
    
    (16,928
    )Non-current deferred tax liabilities
    
    
    (16,780
    )
    
    
    (17,853
    )$
    (17,996
    )
    
    $
    (13,833
    )
  -61-




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NOTE 15. COMMITMENTS, CONTINGENCIES AND GUARANTEES
 :
 ($ IN THOUSANDS)
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    TotalOperating and capital leases
    
    $
    43,908
    
    
    $
    36,904
    
    
    $
    30,071
    
    
    $
    17,869
    
    
    $
    14,558
    
    
    $
    67,085
    
    
    $
    210,395Less: sublease income
    
    
    (3,679
    )
    
    
    (3,225
    )
    
    
    (2,620
    )
    
    
    (464
    )
    
    
    
    
    
    
    
    
    
    
    (9,988
    )Total
    
    $
    40,229
    
    
    $
    33,679
    
    
    $
    27,451
    
    
    $
    17,405
    
    
    $
    14,558
    
    
    $
    67,085
    
    
    $
    200,407
     NOTE 16. RELATED PARTY TRANSACTIONS
    -62-




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NOTE 17. GEOGRAPHIC AND SEGMENT INFORMATION
  ($ IN THOUSANDS)
    
    2006
    
    
    2005
    
    
    2004Service revenue:United States
    
    $
    217,778
    
    
    $
    202,924
    
    
    $
    244,713Europe
    
    
    358,108
    
    
    
    313,114
    
    
    
    272,490Asia and Other
    
    
    39,061
    
    
    
    28,688
    
    
    
    23,780$
    614,947
    
    
    $
    544,726
    
    
    $
    540,983Income (loss) from operations:United States
    
    $
    (5,801
    )
    
    $
    (33,357
    )
    
    $
    (6,027
    )Europe
    
    
    45,613
    
    
    
    32,474
    
    
    
    23,364Asia and Other
    
    
    43
    
    
    
    607
    
    
    
    1,036$
    39,855
    
    
    $
    (276
    )
    
    $
    18,373Tangible Long-lived assets:United States
    
    $
    32,825
    
    
    $
    30,981
    
    
    $
    29,979Europe
    
    
    49,755
    
    
    
    43,522
    
    
    
    43,034Asia and Other
    
    
    2,536
    
    
    
    2,462
    
    
    
    2,703$
    85,116
    
    
    $
    76,965
    
    
    $
    75,716
   -63-




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($ IN THOUSANDS)
    
    CRS
    
    PCMS
    
    PERCEPTIVE
    
    TOTALService revenue:2006
    
    $
    442,512
    
    
    $
    117,129
    
    
    $
    55,306
    
    
    $
    614,9472005
    
    $
    379,292
    
    
    $
    122,587
    
    
    $
    42,847
    
    
    $
    544,7262004
    
    $
    376,548
    
    
    $
    128,462
    
    
    $
    35,973
    
    
    $
    540,983Gross profit on
service revenue:2006
    
    $
    150,291
    
    
    $
    35,580
    
    
    $
    22,835
    
    
    $
    208,7062005
    
    $
    128,109
    
    
    $
    37,268
    
    
    $
    19,305
    
    
    $
    184,6822004
    
    $
    132,369
    
    
    $
    34,684
    
    
    $
    17,867
    
    
    $
    184,920
 -64-




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##### Table of Contents



MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
  
    
    Pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the Company;
    
    Provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in
accordance with authorizations of management and directors of the Company; and
    
    Provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Companys assets that could have a material effect
on the financial statements.
     /s/ Josef H. von Rickenbach
    
    /s/ James F. Winschel, Jr.Josef H. von Rickenbach
Chairman of the Board and Chief Executive Officer
    
    James F. Winschel, Jr.
Senior Vice President and Chief Financial Officer
(principal financial officer)
 -65-




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
        
 -66-




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      .
   
 -67-




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
  Changes in Internal Control Over Financial Reporting
   
 ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  CODE OF ETHICS
 www.parexel.com
 
 ITEM 11. EXECUTIVE COMPENSATION
  -68-




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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  (1)
    
    FINANCIAL STATEMENTS
  FINANCIAL STATEMENTS
    
    FORM 10-K PAGESReport of Independent Registered Public Accounting
Firm for the years ended June 30, 2006, 2005 and 2004
    
    
    66-67Consolidated Statements of Operations for each of the
three years ended June 30, 2006, 2005 and 2004
    
    
    40Consolidated Balance Sheets at June 30, 2006 and 2005
    
    
    41Consolidated Statements of Stockholders Equity for
each of the three years ended June 30, 2006, 2005 and 2004
    
    
    42Consolidated Statements of Cash Flows for each of the
three years ended June 30, 2006, 2005 and 2004
    
    
    43-44Notes to Consolidated Financial Statements
    
    
    45-64
 (2)
    
    FINANCIAL STATEMENT SCHEDULES
  Schedule II  Valuation and Qualifying Accounts and Reserves
    
    
    74
  (3)
    
    EXHIBITS
  -69-




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SIGNATURES
  PAREXEL INTERNATIONAL CORPORATIONBy:
    /s/ Josef H. von Rickenbach
    
    Dated: September 8, 2006Josef H. von RickenbachChairman of the Board and Chief Executive Officer
  Signatures
    
    Title(s)
    
    Date/s/ Josef H. von Rickenbach

Josef H. von Rickenbach
    
    Chairman
of the Board and Chief
Executive Officer (principal executive
officer)
    
    September 8, 2006/s/ James F. Winschel, Jr.

James F. Winschel, Jr.
    
    Senior
Vice President and Chief
Financial Officer (principal financial and
accounting officer)
    
    September 8, 2006/s/ A. Dana Callow, Jr.

A. Dana Callow, Jr.
    
    Director
    
    September 8, 2006/s/ A. Joseph Eagle

A. Joseph Eagle
    
    Director
    
    September 8, 2006/s/ Patrick J. Fortune

Patrick J. Fortune
    
    Director
    
    September 8, 2006/s/ Richard L. Love

Richard L. Love
    
    Director
    
    September 8, 2006/s/ Serge Okun

Serge Okun
    
    Director
    
    September 8, 2006/s/ Ellen M. Zane

Ellen M. Zane
    
    Director
    
    September 8, 2006
 -70-




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EXHIBIT INDEX
 EXHIBIT NO.
    
    DESCRIPTION3.1
    
    Amended and Restated Articles of Organization of the Company, as amended (filed as Exhibit
4.1 to the Companys Registration Statement on Form S-8 (File No. 333-104968) and incorporated
herein by this reference).3.2
    
    Amended and Restated By-laws of the Company (filed as Exhibit 4.2 to the Companys
Registration Statement on Form S-8 (File No. 333-104968) and incorporated herein by this
reference).4.1
    
    Specimen certificate representing the Common Stock of the Company (filed as Exhibit 4.1 to the Companys
Registration Statement on Form S-1 (File
No. 33-97406) and incorporated herein by
this reference).4.2
    
    Rights Agreement dated March 27, 2003 between the Corporation and Equiserve Trust Company, N.A., as Rights
Agent, which includes as Exhibit A the Form
of Certificate of Vote of Series A Junior
Participating Preferred Stock, as Exhibit B
the Form of Rights Certificate and as
Exhibit C the Summary of Rights to Purchase
Common Stock (filed as Exhibit 4.1 to the
Companys Current Report on Form 8-K/A
dated March 31, 2003 and incorporated
herein by this reference).10.1*
    
    Form of Stock Option Agreement of the Company (filed as Exhibit 10.9 to the Companys
Registration Statement on Form S-1 (File No. 333-1188) and incorporated herein by reference).10.2*
    
    Form of Stock Option Agreement under the Companys Second Amended and Restated 1995 Stock
Plan (filed as Exhibit 99.1 to the Companys current Report on Form 8-K dated September 2,
2004 and incorporated herein by this reference).10.3*
    
    Form of Stock Option Agreement for Executive Officers under the Companys Second Amended and
Restated 1995 Stock Plan (filed as Exhibit 10.3 to the Companys Annual Report on Form 10-K
for the year ended June 30, 2004 and incorporated herein by this reference).10.4*
    
    Form of Stock Option Agreement under the Companys 2001 Stock Incentive Plan (filed as
Exhibit 10.4 to the Companys Annual Report on Form 10-K for the year ended June 30, 2004 and
incorporated herein by this reference).10.5*
    
    Second Amended and Restated 1995 Stock Plan of the Company (filed as Exhibit 10.9 to the
Companys Annual Report on Form 10-K for the year ended June 30, 1998 and incorporated herein
by this reference).10.6*
    
    1995 Non-Employee Director Stock Option Plan of the Company (filed as Exhibit 10.14 to the
Companys Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by
this reference).10.7.1*
    
    2001 Stock Incentive Plan of the Company (filed herewith).10.7.2*
    
    Amendment No. 1 to 2001 Stock Incentive Plan of the Company (filed herewith).10.8*
    
    2005 Stock Incentive Plan of the Company (filed herewith).10.9*
    
    Form of Restricted Stock Agreement for non-employee directors under the Companys 2005 Stock
Incentive Plan (filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the
quarter ended December 31, 2005 and incorporated herein by this reference).10.10*
    
    Form of Restricted Stock Agreement for executive officers under the Companys 2005 Stock
Incentive Plan (filed as Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for the
quarter ended December 31, 2005 and incorporated herein by this reference).10.11*
    
    Corporate Plan for Retirement of the Company (filed as Exhibit 10.16 to the Companys
Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this
reference).
 -71-




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EXHIBIT NO.
    
    DESCRIPTION10.12
    
    First Amendment dated as of January 3, 1992 to the Lease dated June 14, 1991 between 200
West Street Limited Partnership and the Company (filed as Exhibit 10.25 to the Companys
Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this
reference).10.13
    
    Second Amendment dated as of June 28, 1993 to the Lease dated June 14, 1991 between 200 West
Street Limited Partnership and the Company (filed as Exhibit 10.28 to the Companys
Registration Statement on Form S-1 (File No. 33-97406) and incorporated herein by this
reference).10.14*
    
    1998 Non-Qualified, Non-Officer Stock Option Plan, as amended (filed as Exhibit 10.16 to the
Companys Annual Report on Form 10-K for the year ended June 30, 1999 and incorporated herein
by this reference).10.15*
    
    Amended and Restated Employment Agreement dated December 6, 1999 between Josef H. von
Rickenbach and the Company (filed as Exhibit 10.1 to the Companys Quarterly Report on Form
10-Q for the quarter ended December 31, 1999 and incorporated herein by this reference).10.16
    
    Third Amendment to Lease dated November 17, 1998 between Boston Properties Limited
Partnership and the Company (filed as Exhibit 10.1 to the Companys Quarterly Report on Form
10-Q for the quarter ended December 31, 1998 and incorporated herein by this reference).10.17
    
    Lease dated November 17, 1998 between Boston Properties Limited Partnership and the Company
(filed as Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended
December 31, 1998 and incorporated herein by this reference).10.18
    
    Lease dated June 14, 1991 between 200 West Street Limited Partnership and the Company (filed
as Exhibit 10.19 to the Companys Annual Report on Form 10-K for the year ended June 30, 2000
and incorporated herein by this reference).10.19*
    
    Employment Agreement, dated February 21, 2005, between Ulf Schneider and PAREXEL GmbH (filed
as Exhibit 10.1 to the Companys Current Report on Form 8-K dated February 21, 2005
and incorporated herein by this reference).10.20
    
    Fourth Amendment dated August 28, 2000 to the lease dated November 17, 1998 between Boston
Properties Limited Partnership and the Company (filed as Exhibit 10.22 to the Companys Annual
Report on Form 10-K for the year ended June 30, 2000 and incorporated herein by this
reference).10.21.1*
    
    Change of Control/Severance Agreement, dated as of April 3, 2001, by and between the
Company and James F. Winschel, Jr. (filed as Exhibit 10.23 to the Companys Annual Report on
Form 10-K for the year ended June 30, 2001 and incorporated herein by this reference).10.21.2*
    
    Amendment No. 1 to Change of Control/Severance Agreement, dated as of February 7, 2006, by
and between the Company and James F. Winschel, Jr. (filed as Exhibit 10.5 to the Companys
Quarterly Report on Form 10-Q for the quarter ended December 31, 2005 and incorporated herein
by this reference).10.22.1*
    
    Change of Control/Severance Agreement, dated as of December 16, 2005, by and between the
Company and Mark A. Goldberg (filed as Exhibit 10.4 to the Companys Quarterly Report on Form
10-Q for the quarter ended December 31, 2005 and incorporated herein by this reference).10.22.2*
    
    Amendment No. 1 to Change of Control /Severance Agreement, dated as of February 7, 2006,
by and between the Company and Mark A. Goldberg (filed as Exhibit 10.6 to the Companys
Quarterly Report on Form 10-Q for the quarter ended December 31, 2005 and incorporated herein
by reference).10.23
    
    PAREXEL International Nonqualified Deferred Compensation Plan (filed as Exhibit 10.21 to the
Companys Annual Report on Form 10-K for the year ended June 30, 2002 and incorporated herein
by this reference).10.24
    
    ABN  AMRO Cash Pooling Agreement, dated as of September 14, 2001 (filed as Exhibit 10.21
to the Companys Annual Report on Form 10-K for the year ended June 30, 2003 and incorporated
herein by this reference ).
 -72-




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##### Table of Contents



EXHIBIT NO.
    
    DESCRIPTION10.25
    
    Lease dated April 10, 2002 between API (No. 23) Limited, Arlington Property Investments
Limited, PAREXEL International Limited and the Company (filed as Exhibit 10.22 to the
Companys Annual Report on Form 10-K for the year ended June 30, 2003 and incorporated herein
by this reference).10.26*
    
    Change of Control/Severance Agreement, dated as of July 6, 2006, by and between the Company
and Douglas A. Batt (filed herewith).21.1
    
    List of subsidiaries of the Company23.1
    
    Consent of Ernst & Young LLP31.1
    
    CEO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    CFO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    CEO certification pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    CFO certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    denotes management contract or any compensatory plan, contract or arrangement -73-




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##### Table of Contents



SCHEDULE II
 PAREXEL INTERNATIONAL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
 Balance at
    
    Charged to
    
    
    
    
    
    Balance atbeginning
    
    costs and
    
    Deductions
    
    end of($ IN THOUSANDS)
    
    of year
    
    expenses
    
    and write-offs
    
    yearProvision for losses on receivables:Year ended June 30, 2004
    
    $
    6,013
    
    
    $
    2,089
    
    
    $
    (3,887
    )
    
    $
    4,215Year ended June 30, 2005
    
    $
    4,215
    
    
    $
    926
    
    
    $
    (2,770
    )
    
    $
    2,371Year ended June 30, 2006
    
    $
    2,371
    
    
    $
    1,293
    
    
    $
    (195
    )
    
    $
    3,469
 -74-