Accounting Errors Cost Parexel in Fourth Quarter, Fiscal Year
Parexel’s fourth-quarter revenue and income took a significant hit due to accounting errors related to the August 2008 acquisition of clinical trials technology company Clinphone, according to the contract research organization’s (CRO’s) financial results released last night.
Parexel had been incorrectly recognizing revenue and direct cost amounts of certain Clinphone-related contracts, rather than deferring the costs as is required by accounting rules. To correct these errors, the company had to reduce its fourth quarter and fiscal year 2009 revenue by $4.1 million and its operating income by $3.9 million. According to Parexel, the accounting changes do not affect the company’s overall business or economics in terms of cash or cash flow.
Parexel’s fourth quarter service revenue fell to $247.4 million, compared with $272.2 million in the same period of 2008. Net income for the quarter was $6.3 million, or $0.11 per diluted share, compared with net income of $25 million, or $0.43 per diluted share, in 2008. Fiscal year 2009 service revenue was $1.1 billion compared with $964.3 million in fiscal year 2008. Net income for the year was $39.3 million, or $0.68 per diluted share, compared with net income of $64.6 million or $1.12 per diluted share, in 2008.
"In addition to the difficult accounting adjustments that we had to make in the fourth quarter in connection with the ClinPhone acquisition, service revenue was negatively impacted by headwinds emanating from the broader economic environment, including the year-over-year negative impact of foreign exchange,” said Parexel chairman and CEO Josef von Rickenbach in a statement. “However, cost controls and efficiency improvements enabled us to meet our earnings per share expectations, excluding the accounting changes previously explained.”