The financial information discussed below is derived from the Condensed Consolidated Financial Statements included in this quarterly report on Form 10-Q. The financial information set forth and discussed below is unaudited but, in the opinion of management, includes all adjustments (primarily consisting of normal recurring adjustments) considered necessary for a fair presentation of such information. Our results of operations for a particular quarter may not be indicative of results expected during subsequent fiscal quarters or for the entire fiscal year.

This quarterly report on Form 10-Q includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Section 27A of the Securities Act of 1933, as amended. For this purpose, any statements contained in this report regarding our strategy, future operations, financial position, future revenue, projected costs, prospects, plans and objectives of management, other than statements of historical facts, are forward-looking statements. The words "anticipates," "believes," "estimates," "expects," "appears," "intends," "may," "plans," "projects," "would," "could," "should," "targets," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We cannot guarantee that we actually will achieve the plans, intentions or expectations expressed or implied in our forward-looking statements. There are a number of important factors that could cause actual results, levels of activity, performance or events to differ materially from those expressed or implied in the forward-looking statements we make. These important factors are described under the heading "Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2012, filed with the Securities and Exchange Commission on August 27, 2012 (the "2012 10-K"), and under "Risk Factors" set forth in Part II, Item 1A below. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed herein may not occur and our actual performance and results may vary from those anticipated or otherwise suggested by such statements. You are cautioned not to place undue reliance on these forward-looking statements. Although we may elect to update forward-looking statements in the future, we specifically disclaim any obligation to do so, even if our estimates change, and you should not rely on those forward-looking statements as representing our views as of any date subsequent to the date of this quarterly report.

OVERVIEW
We are a leading biopharmaceutical services company, providing a broad range of expertise in clinical research, clinical logistics, medical communications, consulting, commercialization and advanced technology products and services to the worldwide pharmaceutical, biotechnology, and medical device industries. Our primary objective is to provide quality solutions for managing the biopharmaceutical product lifecycle with the goal of reducing the time, risk, and cost associated with the development and commercialization of new therapies. Since our incorporation in 1983, we have developed significant expertise in processes and technologies supporting this strategy. Our product and service offerings include: clinical trials management, observational studies and patient/disease registries, data management, biostatistical analysis, epidemiology, health economics / outcomes research, pharmacovigilance, medical communications, clinical pharmacology, patient recruitment, clinical supply and drug logistics, post-marketing surveillance, regulatory and product development and commercialization consulting, health policy and reimbursement consulting, performance improvement, medical imaging services, ClinPhone® randomization and trial supply management services ("RTSM"), DataLabs® electronic data capture ("EDC"), IMPACT® clinical trials management systems ("CTMS"), web-based portals, systems integration, patient diary applications, and other product development services. We believe that our comprehensive services, depth of therapeutic area expertise, global footprint and related access to patients, and sophisticated information technology, along with our experience in global drug development and product launch services, represent key competitive strengths.
We have three reporting segments: Clinical Research Services ("CRS"), PAREXEL Consulting and Medical Communications Services ("PCMS"), and Perceptive Informatics ("Perceptive").
• CRS constitutes our core business and includes all phases of clinical research from Early Phase (encompassing the early stages of clinical testing that range from first-in-man through proof-of-concept studies) to Phase II-III and Phase IV, which we call Peri-Approval Clinical Excellence ("PACE"). Our services include clinical trials management and biostatistics, data management and clinical pharmacology, as well as related medical advisory, patient recruitment, clinical supply and drug logistics, pharmacovigilance, and investigator site services. We have aggregated Early Phase with Phase II-III/PACE due to economic similarities in these operating segments.

• PCMS provides technical expertise and advice in such areas as drug development, regulatory affairs, product pricing and reimbursement, commercialization and strategic compliance. It also provides a full spectrum of market development, product development, and targeted communications services in support of product launch. Our PCMS consultants identify alternatives and propose solutions to address client issues associated with product development, registration, and commercialization.

• Perceptive provides information technology solutions designed to help improve clients' product development and regulatory submission processes. Perceptive offers a portfolio of products and services that includes medical imaging services, ClinPhone® RTSM, IMPACT® CTMS, DataLabs® EDC, web-based portals, systems integration, electronic patient reported outcomes ("ePRO") and Liquent InSight® Regulatory Information Management (RIM) platform. These services are often bundled together and integrated with other applications to provide an eClinical solution for our clients.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
This discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and other financial information. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience and on various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.
BUSINESS COMBINATIONS
Business combinations are accounted for under the acquisition method of accounting. Allocating the purchase price requires us to estimate the fair value of various assets acquired and liabilities assumed. Management is responsible for determining the appropriate valuation model and estimated fair values, and in doing so, considers a number of factors, including information provided by an outside valuation advisor. We primarily establish fair value using the income approach based upon a discounted cash flow model. The income approach requires the use of many assumptions and estimates including future revenues and expenses, as well as discount factors and income tax rates.
For further information on our other critical accounting policies, please refer to the consolidated financial statements and footnotes thereto included in the 2012 10-K.

RESULTS OF OPERATIONS
ANALYSIS BY SEGMENT
We evaluate our segment performance and allocate resources based on service revenue and gross profit (service revenue less direct costs), while other operating costs are allocated and evaluated on a geographic basis. Accordingly, we do not include the impact of selling, general, and administrative expenses, depreciation and amortization expense, other charges, interest income (expense), miscellaneous income (expense), and income tax expense (benefit) in segment profitability. We attribute revenue to individual countries based upon external and internal contractual arrangements. Inter-segment transactions are not included in service revenue. Furthermore, we have a global infrastructure supporting our business segments, and therefore, we do not identify assets by reportable segment. Service revenue, direct costs and gross profit on service revenue for the three and six months ended December 31, 2012 and 2011 were as follows:

(in thousands)                             Three Months Ended
                                December 31, 2012       December 31, 2011       Increase $       Increase %
Service revenue
CRS                           $           320,580     $           247,871     $     72,709           29.3 %
PCMS                                       49,274                  38,455           10,819           28.1 %
Perceptive                                 52,214                  46,844            5,370           11.5 %
Total service revenue         $           422,068     $           333,170     $     88,898           26.7 %
Direct costs
CRS                           $           242,415     $           177,841     $     64,574           36.3 %
PCMS                                       28,454                  22,584            5,870           26.0 %
Perceptive                                 30,456                  27,674            2,782           10.1 %
Total direct costs            $           301,325     $           228,099     $     73,226           32.1 %
Gross profit
CRS                           $            78,165     $            70,030     $      8,135           11.6 %
PCMS                                       20,820                  15,871            4,949           31.2 %
Perceptive                                 21,758                  19,170            2,588           13.5 %
Total gross profit            $           120,743     $           105,071     $     15,672           14.9 %


(in thousands)                              Six Months Ended
                                December 31, 2012       December 31, 2011       Increase $       Increase %
Service revenue
CRS                           $           617,747     $           483,280     $    134,467           27.8 %
PCMS                                       97,625                  74,103           23,522           31.7 %
Perceptive                                101,449                  90,522           10,927           12.1 %
Total service revenue         $           816,821     $           647,905     $    168,916           26.1 %
Direct costs
CRS                           $           462,581     $           350,591     $    111,990           31.9 %
PCMS                                         58,139                43,562           14,577           33.5 %
Perceptive                                   60,009                56,120            3,889            6.9 %
Total direct costs            $           580,729     $           450,273     $    130,456           29.0 %
Gross profit
CRS                           $           155,166     $           132,689     $     22,477           16.9 %
PCMS                                         39,486                30,541            8,945           29.3 %
Perceptive                                   41,440                34,402            7,038           20.5 %
Total gross profit            $           236,092     $           197,632     $     38,460           19.5 %

Three Months Ended December 31, 2012 Compared With Three Months Ended
December 31, 2011:
Revenue
Service revenue increased by $88.9 million, or 26.7%, to $422.1 million for the
three months ended December 31, 2012 from $333.2 million for the same period in
2011. On a geographic basis, service revenue was distributed as follows (in
millions):
                                            Three Months Ended                  Three Months Ended
                                             December 31, 2012                   December 31, 2011
Region                                Service Revenue      % of Total     Service Revenue      % of Total
The Americas                         $     210.1               49.8 %    $     138.2               41.5 %
Europe, Middle East & Africa         $     150.1               35.6 %    $     144.8               43.5 %
Asia/Pacific                         $      61.9               14.6 %    $      50.2               15.0 %

For the three months ended December 31, 2012 compared with the same period in 2011, service revenue in the Americas increased by $71.9 million, or 52.0%; Europe, Middle East & Africa service revenue increased by $5.3 million, or 3.7%; and Asia/Pacific service revenue increased by $11.7 million, or 23.3%. Revenue growth in all regions was attributable to higher demand for services in all of our reporting segments and the impact of our strategic partnership wins. The higher levels of service revenue growth in the Americas region was due to increased activity in the Phase II-III/PACE portion of the CRS business. On a segment basis, CRS service revenue increased by $72.7 million, or 29.3%, to $320.6 million for the three months ended December 31, 2012 from $247.9 million for the three months ended December 31, 2011. The increase was primarily attributable to a $67.5 million increase in Phase II-III/PACE business and a $5.2 million increase in our Early Phase business; offset in part by a $2.4 million negative impact from foreign currency exchange rate movements. The service revenue increase in the Phase II-III/PACE business was due to our success in winning new business awards and the continued positive impact of strategic partnerships as backlog is converted into revenue through the efforts of a larger employee base. The increase in Early Phase was due to improvements in our win rate among small clients combined with success in winning additional strategic partner relationships.
PCMS service revenue increased by $10.8 million, or 28.1%, to $49.3 million for the three months ended December 31, 2012 from $38.5 million for the same period in 2011. Higher service revenue was due to the increase in consulting services associated with growth in start-up Phase II-III activities and increased strategic compliance work. Medical communications business demand did not increase compared with the same period in 2011.
Perceptive service revenue increased by $5.4 million, or 11.5%, to $52.2 million for the three months ended December 31, 2012 from $46.8 million for the three months ended December 31, 2011. The continued growth in Perceptive service revenue was due to higher demand for technology usage in clinical trials. Service revenue for the quarter ended December 31, 2012 also benefited from increased services provided to some of our strategic partners and $0.4 million of revenue from the operations of Liquent, Inc. ("Liquent") from the acquisition date of December 21, 2012.
Reimbursement revenue consists of reimbursable out-of-pocket expenses incurred on behalf of and reimbursable by clients. Reimbursement revenue does not yield any gross profit to us, nor does it have an impact on our net income. Direct Costs
Direct costs increased by $73.2 million, or 32.1%, to $301.3 million for the three months ended December 31, 2012 from $228.1 million for the three months ended December 31, 2011. As a percentage of total service revenue, direct costs increased to 71.4% from 68.5% for the respective periods.
On a segment basis, CRS direct costs increased by $64.6 million, or 36.3%, to $242.4 million for the three months ended December 31, 2012 from $177.8 million for the three months ended December 31, 2011. This increase resulted primarily from higher levels of clinical trial activity and increased labor costs associated with headcount growth and higher overall compensation levels. Increased labor costs included both upward pressure on rates in certain markets due to labor shortages, which requires the use of contracted staff. As a percentage of CRS service revenue, CRS direct costs increased to 75.6% for the three months ended December 31, 2012 from 71.7% for the same period in 2011 due primarily to an increase in the number of contracted staff used in response to recent new business wins.
PCMS direct costs increased by $5.9 million, or 26.0%, to $28.5 million for the three months ended December 31, 2012 from $22.6 million for the three months ended December 31, 2011. This increase was primarily due to increased headcount and labor costs in our consulting business due to increased demand for these services. This increase was offset in part by a $1.2 million decline in medical communications due to lower demand. As a percentage of PCMS service revenue, PCMS direct costs decreased to 57.7% from 58.7% for the respective periods as a result of improved cost management within medical communications.

Perceptive direct costs increased by $2.8 million, or 10.1%, to $30.5 million for the three months ended December 31, 2012 from $27.7 million for the three months ended December 31, 2011 due primarily to an increase in labor costs and medical imaging "read" expenses associated with higher volume. As a percentage of Perceptive service revenue, Perceptive direct costs decreased to 58.3% for the three months ended December 31, 2012 from 59.1% for the the same period in 2011. This decrease was due to the impact of shifting resources to low cost countries and better revenue mix.
Selling, General and Administrative
Selling, general and administrative ("SG&A") expense increased to $71.9 million for the three months ended December 31, 2012 from $64.4 million for the three months ended December 31, 2011. This $7.5 million increase was due primarily to a $6.0 million increase in payroll-related costs associated with overall compensation increases, including the cost of additional staff needed to support business growth. As a percentage of service revenue, SG&A expense decreased to 17.0% of service revenue for the three months ended December 31, 2012 compared with 19.3% of service revenue for the three months ended December 31, 2011. This decrease was due to leveraging of our revenue growth, effective cost management, and the benefits of past restructuring activities. Depreciation and Amortization
Depreciation and amortization expense increased by $0.6 million, or 3.2%, to $17.5 million for the three months ended December 31, 2012 from $17.0 million for the three months ended December 31, 2011. As a percentage of service revenue, depreciation and amortization expense was 4.1% for the three months ended December 31, 2012 versus 5.1% for the same period in 2011. This decreased percentage of depreciation and amortization expense was mainly due to revenue growth.
Restructuring Charge
Our restructuring plans, which were ongoing for the quarter ended December 31, 2011, were substantially completed by the third quarter of our Fiscal Year 2012. During the three months ended December 31, 2012, we recorded a $0.1 million benefit in restructuring charges for adjustments to facility-related charges under our previously announced restructuring plans. Income from Operations
Income from operations increased to $31.4 million for the three months ended December 31, 2012 from $22.6 million for the same period in 2011. Income from operations as a percentage of service revenue, or operating margin, increased to 7.4% from 6.8% for the respective periods. This increase in operating margin was due primarily to better management of our SG&A expenses during the quarter and lower restructuring charges.
Other Expense
We recorded net other expense of $0.2 million for the three months ended December 31, 2012 compared with $3.8 million for the three months ended December 31, 2011. The $3.6 million reduction in net other expense was primarily due to a $3.9 million increase in miscellaneous income, mainly as a result of $1.1 million in foreign currency exchange gains recorded for the three months ended December 31, 2012 compared with $1.9 million of foreign currency exchange losses recorded for the three months ended December 31, 2011. The increase in miscellaneous income was partly offset by higher interest expense, net due to a $0.6 million decrease in interest income earned on our cash and marketable securities for the three months ended December 31, 2012 compared with the three months ended December 31, 2011 as a result of lower interest rates. Taxes
For the three months ended December 31, 2012 and 2011, we had effective income tax rates of 31.7% and 31.2%, respectively. The tax rate for the three months ended December 31, 2012 benefited from a release of reserves for interest and penalties following the expiration of statutes in a European legal entity and the favorable effect of statutory rates applicable to income earned outside the United States on the projected annual effective tax rate, net of an increase in valuation allowances associated with net operating losses in Europe. The tax rate for the three months ended December 31, 2011 reflects a favorable distribution of taxable income among lower tax rate foreign jurisdictions and the United States.

Six Months Ended December 31, 2012 Compared With Six Months Ended December 31, 2011:
Revenue
Service revenue increased by $168.9 million, or 26.1%, to $816.8 million for the six months ended December 31, 2012 from $647.9 million for the same period in 2011. On a geographic basis, service revenue was distributed as follows (in millions):

                                             Six Months Ended                    Six Months Ended
                                             December 31, 2012                   December 31, 2011
Region                                Service Revenue      % of Total     Service Revenue      % of Total
The Americas                         $       407.5             49.9 %    $       278.3             43.0 %
Europe, Middle East & Africa         $       288.4             35.3 %    $       268.0             41.4 %
Asia/Pacific                         $       120.9             14.8 %    $       101.6             15.6 %

For the six months ended December 31, 2012 compared with the same period in 2011, service revenue in the Americas increased by $129.2 million, or 46.4%; Europe, Middle East & Africa service revenue increased by $20.4 million, or 7.6%; and Asia/Pacific service revenue increased by $19.3 million, or 19.0%. Revenue growth in all regions was attributable to higher demand for services in all of our reporting segments and the impact of our strategic partnership wins. The higher levels of revenue growth in the Americas region was due to increased activity in the Phase II-III/PACE portion of the CRS business.
On a segment basis, CRS service revenue increased by $134.5 million, or 27.8%, to $617.7 million for the six months ended December 31, 2012 from $483.3 million for the same period in 2011. The increase was primarily attributable to a $125.7 million increase in Phase II-III/PACE business and a $8.8 million increase in our Early Phase business; partly offset by a $7.8 million negative impact from foreign currency exchange rate movements. The increase in revenue in our Phase II-III/PACE business was due to our success in winning new business awards and the continued positive impact of strategic partnerships as backlog is converted into revenue through the efforts of a larger employee base. The revenue increase in our Early Phase business was due to improvements in our win rate among small clients combined with success in winning additional strategic partner relationships.
PCMS service revenue increased by $23.5 million, or 31.7%, to $97.6 million for the six months ended December 31, 2012 from $74.1 million for the same period in 2011. Higher service revenue was due primarily to a $24.5 million increase in consulting services associated with growth in start-up Phase II-III activities and increased strategic compliance work. These increases were partly offset by a $1.4 million decrease in our medical communications business due to lower demand.
Perceptive service revenue increased by $10.9 million, or 12.1%, to $101.4 million for the six months ended December 31, 2012 from $90.5 million for the same period in 2011. The continued growth in Perceptive service revenue was due to higher demand for technology usage in clinical trials. Service revenue increased across all departments, but was partially offset by a $1.4 million negative impact of foreign currency exchange rate movements. Service revenue for the quarter ended December 31, 2012 also benefited from increased services provided to some of our strategic partners and $0.4 million in revenue from the operations of Liquent from the acquisition date of December 21, 2012. Reimbursement revenue consists of reimbursable out-of-pocket expenses incurred on behalf of and reimbursable by clients. Reimbursement revenue does not yield any gross profit to us, nor does it have an impact on net income. Direct Costs
Direct costs increased by $130.5 million, or 29.0%, to $580.7 million for the six months ended December 31, 2012 from $450.3 million for the same period in 2011. As a percentage of total service revenue, direct costs increased to 71.1% from 69.5% for the respective periods.
On a segment basis, CRS direct costs increased by $112.0 million, or 31.9%, to $462.6 million for the six months ended December 31, 2012 from $350.6 million for the same period in 2011. This increase resulted primarily from higher levels of clinical trial activity and increased labor costs, associated, in part, with headcount growth in CRS. Increased labor costs include both upward pressure on rates in certain markets due to labor shortages. As a percentage of CRS service revenue, CRS direct costs increased to 74.9% from 72.5% for the respective periods due primarily to an increase in the number of contracted staff used in response to recent new business wins.
PCMS direct costs increased by $14.6 million, or 33.5%, to $58.1 million for the six months ended December 31, 2012 from $43.6 million for the same period in 2011. This increase was primarily due to increased headcount and labor costs in our consulting business due to increased demand for services. The increase was offset in part by a $2.0 million decline in the medical communications business due to lower demand. As a percentage of PCMS service revenue, PCMS direct costs increased to 59.6% from 58.8% for the respective periods as a result of higher labor costs associated with consulting services and short-term investments directed at better positioning the business for continued growth.

Perceptive direct costs increased by $3.9 million, or 6.9%, to $60.0 million for the six months ended December 31, 2012 from $56.1 million for the same period in 2011 due primarily to an increase in labor costs and medical imaging "read" expenses associated with higher volume. As a percentage of Perceptive service revenue, Perceptive direct costs decreased to 59.2% from 62.0% for the . . .