Parexel International has updated its forward-looking guidance for the fourth quarter of Fiscal Year 2015 (ending June 30) and for the full Fiscal Year 2015. The company expects to restructure the company, cutting 850 positions.
Josef H. von Rickenbach, Parexel’s chairman and CEO, said, “In conjunction with our new guidance, we are raising our long-term adjusted operating margin target from 12%-14% of service revenue to 13%-15% of service revenue. We are accelerating a number of our ongoing improvement plans, and as a result of these efforts, plan to restructure certain activities.”
The company plans to record pre-tax charges in the range of $35 to $45 million in conjunction with restructuring activities it is undertaking. The restructuring activities are company-wide, and are designed to improve the productivity and efficiency of the company, to simplify the organization and to streamline decision-making, thereby enhancing client engagement. Parexel expects to record a pre-tax charge in the fourth quarter in the range of $20 to $30 million, with the remainder of the charge to be incurred over the course of Fiscal Year 2016. The company anticipates completing restructuring activities by June 30, 2016.
The charge will include approximately $30 to $40 million in employee separation benefits related to the elimination of up to 850 positions, with the remainder of the charge related to other one-time costs. The company expects that approximately $33 to $43 million of these charges will result in future cash expenditures. The impact of the restructuring charge on Q4 and full year FY 2015 guidance is expected to be approximately $0.27 per diluted share when taking the mid-point of the range.
Parexel expects to achieve annual pre-tax savings as a result of this charge of between $20 to $30 million over the course of Fiscal Year 2016 (which equates to an estimated benefit of between $0.25 to $0.37 per diluted share), and expects to achieve annual pre-tax savings of approximately $50 to $60 million once the program is fully completed.
Headquartered near Boston, Mass., Parexel operates in 80 locations in 51 countries around the world, and had approximately 17,440 employees in the third quarter.