Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | Apr. 22, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | PRA Health Sciences, Inc. | |
Entity Central Index Key | 1,613,859 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 60,555,119 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 97,644 | $ 121,065 |
Restricted cash | 5,432 | 5,060 |
Accounts receivable and unbilled services, net | 420,137 | 415,077 |
Other current assets | 35,833 | 32,574 |
Total current assets | 559,046 | 573,776 |
Fixed assets, net | 83,143 | 80,691 |
Goodwill | 1,010,819 | 1,014,798 |
Intangible assets, net | 526,180 | 533,938 |
Other assets | 26,523 | 25,540 |
Total assets | 2,205,711 | 2,228,743 |
Current liabilities: | ||
Accounts payable | 55,853 | 57,096 |
Accrued expenses and other current liabilities | 139,060 | 139,155 |
Advanced billings | 323,936 | 333,729 |
Total current liabilities | 518,849 | 529,980 |
Long-term debt, net | 880,583 | 889,514 |
Other long-term liabilities | 97,442 | 106,527 |
Total liabilities | $ 1,496,874 | $ 1,526,021 |
Commitments and contingencies (Note 12) | ||
Stockholders' equity: | ||
Common stock, $0.01 par value, 1,000,000,000 authorized shares at March 31, 2016 and December 31, 2015; 60,505,981 and 60,245,009 issued and outstanding at March 31, 2016 and December 31, 2015, respectively | $ 605 | $ 602 |
Additional paid-in capital | 856,710 | 828,347 |
Accumulated other comprehensive loss | (138,589) | (132,307) |
(Accumulated deficit) retained earnings | (9,889) | 6,080 |
Total stockholders' equity | 708,837 | 702,722 |
Total liabilities and stockholders' equity | $ 2,205,711 | $ 2,228,743 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2016 | Dec. 31, 2015 |
CONSOLIDATED BALANCE SHEETS | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 100,000,000 | 100,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 1,000,000,000 | 1,000,000,000 |
Common stock, shares issued | 60,505,981 | 60,245,009 |
Common stock, shares outstanding | 60,505,981 | 60,245,009 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Revenue: | ||
Service revenue | $ 372,320 | $ 331,968 |
Reimbursement revenue | 57,903 | 56,610 |
Total revenue | 430,223 | 388,578 |
Operating expenses: | ||
Direct costs | 243,487 | 218,961 |
Reimbursable out-of-pocket costs | 57,903 | 56,610 |
Selling, general and administrative | 63,990 | 60,835 |
Transaction-related costs | 28,916 | |
Depreciation and amortization | 16,953 | 19,235 |
Loss on disposal of fixed assets | 28 | |
Income from operations | 18,946 | 32,937 |
Interest expense, net | (15,366) | (15,393) |
Loss on extinguishment of debt | (21,485) | |
Foreign currency (losses) gains, net | (2,790) | 9,066 |
Other expense, net | (464) | |
(Loss) income before income taxes and equity in losses of unconsolidated joint ventures | (20,695) | 26,146 |
(Benefit from) provision for income taxes | (5,264) | 8,022 |
(Loss) income before equity in losses of unconsolidated joint ventures | (15,431) | 18,124 |
Equity in losses of unconsolidated joint ventures, net of tax | (538) | (937) |
Net (loss) income | $ (15,969) | $ 17,187 |
Net (loss) income per share attributable to common stockholders: | ||
Basic (in dollars per share) | $ (0.27) | $ 0.29 |
Diluted (in dollars per share) | $ (0.27) | $ 0.27 |
Weighted average common shares outstanding: | ||
Basic (in shares) | 60,199 | 59,815 |
Diluted (in shares) | 60,199 | 62,777 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE LOSS | ||
Net (loss) income | $ (15,969) | $ 17,187 |
Other comprehensive loss: | ||
Foreign currency translation adjustments | (5,539) | (40,357) |
Unrealized losses on derivative instruments, net of income tax expense (benefit) of $00 and ($700) | (1,642) | (6,238) |
Reclassification adjustments: | ||
Losses on derivatives included in net (loss) income, net of income taxes of $0 and $0 | 899 | 17 |
Comprehensive loss | $ (22,251) | $ (29,391) |
CONSOLIDATED STATEMENTS OF COM6
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE LOSS | ||
Unrealized (losses) gains on derivative instruments, tax | $ 0 | $ (700) |
Losses on derivatives included in net income (loss), tax | $ 0 | $ 0 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Cash flows from operating activities: | ||
Net (loss) income | $ (15,969) | $ 17,187 |
Adjustment to reconcile net (loss) income to net cash provided by operating activities: | ||
Depreciation and amortization | 16,953 | 19,235 |
Amortization of debt issuance costs and discount | 1,195 | 1,649 |
Amortization of terminated interest rate swaps | 899 | |
Stock-based compensation | 1,504 | 775 |
Non-cash transaction-related costs | 26,827 | |
Unrealized foreign currency losses (gains) | 3,888 | (11,375) |
Loss on extinguishment of debt | 3,661 | |
Deferred income taxes | (13,820) | (1,753) |
Other reconciling items | 567 | 2,538 |
Changes in operating assets and liabilities: | ||
Accounts receivable, unbilled services, and advance billings | (17,384) | (49,429) |
Other operating assets and liabilities | (5,617) | 24,579 |
Net cash provided by operating activities | 2,704 | 3,406 |
Cash flows from investing activities: | ||
Purchase of fixed assets | (8,138) | (7,610) |
Cash paid for interest on interest rate swap | (302) | |
Acquisition of Nextrials, Inc., net of cash acquired | (4,647) | |
Net cash used in investing activities | (13,087) | (7,610) |
Cash flows from financing activities: | ||
Proceeds from accounts receivable financing agreement | 120,000 | |
Repayment of senior notes | (133,559) | |
Repayment of term debt | (15,000) | |
Borrowings on line of credit | 110,000 | |
Repayments of line of credit | (110,000) | |
Payments for common stock issuance costs | (525) | |
Proceeds from stock options exercises | 40 | 14 |
Net cash used in financing activities | (13,519) | (15,511) |
Effects of foreign exchange changes on cash and cash equivalents | 481 | (1,474) |
Change in cash and cash equivalents | (23,421) | (21,189) |
Cash and cash equivalents, beginning of period | 121,065 | 85,192 |
Cash and cash equivalents, end of period | $ 97,644 | $ 64,003 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2016 | |
Basis of Presentation | |
Basis of Presentation | (1) Basis of Presentation Unaudited Interim Financial Information The interim consolidated condensed financial statements include the accounts of PRA Health Sciences, Inc. and its subsidiaries, or the Company. These financial statements are prepared in conformity with U.S. generally accepted accounting principles, or GAAP, and are unaudited. In the opinion of the Company’s management, all adjustments of a normal recurring nature necessary for a fair presentation have been reflected. Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been omitted. The accompanying interim consolidated condensed financial statements and related notes should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The preparation of the interim consolidated condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim consolidated condensed financial statements and the reported amounts of revenues and claims and expenses during the reporting period. Actual results could differ from those estimates. The Company The Company is a full-service global contract research organization providing a broad range of product development services for pharmaceutical and biotechnology companies around the world. The Company’s integrated services include data management, statistical analysis, clinical trial management, and regulatory and drug development consulting. Variable Interest Entities Financial Accounting Standards Board, or FASB, accounting guidance concerning variable interest entities, or VIE, addresses the consolidation of a business enterprise to which the usual condition of consolidation (ownership of a majority voting interest) does not apply. This guidance focuses on controlling financial interests that may be achieved through arrangements that do not involve voting interests. The guidance requires an assessment of who the primary beneficiary is and whether the primary beneficiary should consolidate the VIE. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the variable interest entity that most significantly impacts the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. Application of the VIE consolidation requirements may require the exercise of significant judgment by management. On March 22, 2016, the Company entered into a three-year accounts receivable financing agreement and related arrangements to securitize certain of its accounts receivable. Under the accounts receivable financing agreement, certain of the Company’s U.S. accounts receivable and unbilled services balances are sold by certain of its consolidated subsidiaries to another of its consolidated subsidiaries, a wholly-owned bankruptcy-remote special purpose entity, or SPE. The SPE in turn may borrow up to $140.0 million from a third party lender, secured by liens on the receivables and other assets of the SPE. The Company retains the servicing of the securitized accounts receivable portfolio and has a variable interest in the SPE by holding the residual equity. The Company determined that the SPE is a VIE and it is the primary beneficiary because (i) the Company’s servicing responsibilities for the securitized portfolio gives it the power to direct the activities that most significantly impact the performance of the VIE and (ii) its variable interest in the VIE gives it the obligation to absorb losses and the right to receive residual returns that could potentially be significant. As a result, the Company will consolidate the VIE within its financial statements. Refer to Note 8, Long-Term Debt , for additional information regarding the accounts receivable financing agreement. Recently Issued Accounting Pronouncements In May 2014, the FASB issued an Accounting Standards Update, or ASU, No. 2014-09, “Revenue from Contracts with Customers,” to clarify the principles of recognizing revenue and create common revenue recognition guidance between GAAP and International Financial Reporting Standards. ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that period. In March 2016, the FASB issued ASU No. 2016-08 which amends the guidance in ASU No. 2014-09 to clarify the implementation guidance on principal versus agent considerations (gross versus net revenue presentation). The Company is currently assessing the potential impact of ASU No. 2014-09 and 2016-08 on the Company’s consolidated condensed financial statements. In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which revises the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases with terms greater than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The provisions of ASU 2016-02 are effective for fiscal years beginning after December 15, 2018 and should be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. The Company is currently assessing the potential impact of ASU No. 2016-02 on the Company’s consolidated condensed financial statements. In March 2016, the FASB issued ASU No. 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This update includes provisions intended to simplify various aspects of accounting for share-based compensation. ASU No. 2016-09 will take effect for public companies for the annual periods beginning after December 15, 2016. The Company is currently assessing the potential impact of ASU No. 2016-09 on the Company’s consolidated condensed financial statements. Secondary Offering On March 2, 2016, KKR PRA Investors L.P., or KKR, and certain executive officers of the Company, sold 5,000,000 shares of the Company’s common stock as part of a secondary offering. The Company incurred professional fees in connection with the secondary offering of $0.7 million during the three months ended March 31, 2016, which are included in transaction-related costs in the accompanying consolidated condensed statement of operations. As of March 31, 2016, KKR owned approximately 58.0% of the outstanding common stock. |
Business Combinations
Business Combinations | 3 Months Ended |
Mar. 31, 2016 | |
Business Combinations | |
Business Combinations | (2) Business Combination On March 18, 2016, the Company acquired all of the outstanding shares of Nextrials, Inc., or Nextrials, a developer of web-based software which integrates electronic health records with clinical trials, for $4.7 million in cash and contingent consideration in the form of potential earn-out payments of up to $3.0 million. Earn-out payments totaling $2.0 million and $1.0 million are contingent upon the achievement of project milestones and certain external software sales targets, respectively, during the 30-month period following closing. The Company has recognized a liability of approximately $2.3 million as the estimated acquisition date fair value of the earn-out; this amount is included in other long-term liabilities in the consolidated condensed balance sheet. The fair value of the contingent consideration was based on significant inputs not observed in the market and thus represented a Level 3 measurement. Any change in the fair value of the contingent consideration subsequent to the acquisition date will be recognized in earnings in the period of the change. With this acquisition, the Company expects to enhance its ability to serve customers throughout the clinical research process with technologies that include improved efficiencies by reducing study durations and costs through integrated operational management. The acquisition of Nextrials was accounted for as a business combination and, accordingly, the assets acquired and the liabilities assumed have been recorded at their respective fair values as of the acquisition date. In connection with the acquisition, the Company recorded approximately $2.3 million of goodwill, which is not deductible for income tax purposes. The goodwill is attributable to the workforce of the acquired business and expected synergies with the Company’s existing information technology operations. Due to the timing of the acquisition, the valuation of net assets acquired has not been finalized and is expected to be completed by the end of September 2016, and in any case, no later than one year from the acquisition date in accordance with GAAP. The Company’s preliminary estimate of the purchase price allocation is as follows (in thousands): Purchase Weighted Price Amortization Allocation Period Cash and cash equivalents $ Accounts receivable Other current assets Property, plant and equipment Software intangible 5 years Accounts payable and accrued expenses ) Other long-term liabilities ) Estimated fair value of net assets acquired Purchase price, including contingent consideration Total goodwill $ Pro forma information is not provided as the acquisition did not have a material effect on the Company’s consolidated results. |
Joint Ventures
Joint Ventures | 3 Months Ended |
Mar. 31, 2016 | |
Joint Ventures | |
Joint Ventures | (3) Joint Ventures On December 4, 2015, the Company and WuXi AppTec (Shanghai) Co., Ltd. (“Wuxi”) signed a framework agreement to dissolve the WuXi PRA Clinical Research (Shanghai) Co., Ltd. joint venture. Under the new arrangement, the portion of the joint venture located in mainland China will become a wholly owned subsidiary of WuXi, and the portion of the joint venture located in Hong Kong will become a wholly owned subsidiary of PRA. In addition, PRA will retain its Strategic Solutions business in China and Hong Kong. The Company and WuXi will form a preferred provider relationship under which WuXi will provide full-service clinical trial services for global clinical trials subcontracted by PRA in China. The transaction is expected to close during the second quarter of 2016. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Measurements | |
Fair Value Measurements | (4) Fair Value Measurements The Company records certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy that prioritizes the inputs used to measure fair value is described below. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: · Level 1 — Quoted prices in active markets for identical assets or liabilities. · Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. · Level 3 — Unobservable inputs that are supported by little or no market activity. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. The carrying amount of financial instruments, including cash and cash equivalents, accounts receivable, unbilled services, accounts payable and advanced billings, approximate fair value due to the short maturities of these instruments . Recurring Fair Value Measurements The following table summarizes the fair value of the Company’s financial assets and liabilities that are measured on a recurring basis as of March 31, 2016 (in thousands): Level 1 Level 2 Level 3 Total Liabilities: Interest rate swap $ — $ $ — $ Contingent consideration — — Total $ — $ $ $ The interest rate swap is measured at fair value using a market approach valuation technique. The valuation is based on an estimate of net present value of the expected cash flows using relevant mid-market observable data inputs and based on the assumption of no unusual market conditions or forced liquidation. The Company values contingent consideration, related to business combinations, using a weighted probability of potential payment scenarios discounted at rates reflective of the weighted average cost of capital for the businesses acquired. Key assumptions used to estimate the fair value of contingent consideration include operational milestones and the probability of achieving the specific milestones. The following table summarizes the changes in Level 3 financial liabilities measured on a recurring basis for the three months ended March 31, 2016 (in thousands): Contingent Consideration - Accrued expenses and other long-term liabilities Balance at December 31, 2015 $ Initial estimate of Nextrials contingent consideration Balance at March 31, 2016 $ Non-recurring Fair Value Measurements Certain assets and liabilities are carried on the accompanying consolidated condensed balance sheets at cost and are not remeasured to fair value on a recurring basis. These assets include finite-lived intangible assets which are tested when a triggering event occurs and goodwill and identifiable indefinite-lived intangible assets which are tested for impairment annually on October 1 or when a triggering event occurs. As of March 31, 2016, assets carried on the balance sheet and not remeasured to fair value on a recurring basis totaling approximately $1,537.0 million were identified as Level 3. These assets are comprised of goodwill of $1,010.8 million and identifiable intangible assets, net of $526.2 million. |
Concentration of Credit Risk
Concentration of Credit Risk | 3 Months Ended |
Mar. 31, 2016 | |
Concentration of Credit Risk | |
Concentration of Credit Risk | (5) Concentration of Credit Risk Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, accounts receivable, and unbilled services. As of March 31, 2016, substantially all of the Company’s cash and cash equivalents were held in or invested with large financial institutions. Accounts receivable include amounts due from pharmaceutical and biotechnology companies. The Company establishes an allowance for potentially uncollectible receivables. In management’s opinion, there is no additional material credit risk beyond amounts provided for such losses. Service revenue from individual customers greater than 10% of consolidated service revenue in the respective periods was as follows: Three Months Ended March 31, 2016 2015 Customer A — % Accounts receivable and unbilled receivables from individual customers that were equal to or greater than 10% of consolidated accounts receivable and unbilled receivables at the respective dates were as follows: March 31, December 31, 2016 2015 Customer A — % Customer B % % |
Accounts Receivable and Unbille
Accounts Receivable and Unbilled Services | 3 Months Ended |
Mar. 31, 2016 | |
Accounts Receivable and Unbilled Services | |
Accounts Receivable and Unbilled Services | (6) Accounts Receivable and Unbilled Services Accounts receivable and unbilled services include service revenue, reimbursement revenue, and amounts associated with work performed by investigators. Accounts receivable and unbilled services were as follows (in thousands): March 31, December 31, 2016 2015 Accounts receivable $ $ Unbilled services Less allowance for doubtful accounts ) ) Total accounts receivable and unbilled services, net $ $ |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Mar. 31, 2016 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | (7) Goodwill and Intangible Assets Goodwill The changes in the carrying amount of goodwill are as follows (in thousands): Balance at December 31, 2015 $ Nextrials acquisition Currency translation ) Balance at March 31, 2016 $ There are no accumulated impairment charges as of March 31, 2016 and December 31, 2015. Intangible Assets Intangible assets consist of the following (in thousands): March 31, December 31, 2016 2015 Customer relationships $ $ Customer backlog Trade names (definite-lived) Patient list and other intangibles Non-competition agreements Total finite-lived intangible assets, gross Accumulated amortization ) ) Total finite-lived intangible assets, net Trade names (indefinite-lived) Total intangible assets, net $ $ Amortization expense was $11.3 million and $14.1 million for the three months ended March 31, 2016 and 2015, respectively. The estimated future amortization expense of finite-lived intangible assets is expected to be as follows (in thousands): 2016 (remaining) $ 2017 2018 2019 2020 2021 and thereafter Total $ The estimated fair value of the Early Development Services, or EDS, reporting unit closely approximated its carrying value when the Company performed its annual goodwill impairment test during the fourth quarter of 2014. The Company made operational improvements during 2015 in order to improve the profitability of the EDS reporting unit. As a result of these changes, EDS saw growth in both backlog and new business awards that contributed to its improved financial performance during the year and led the Company to update its forecast for future periods. The Company considered all of these factors when it performed its most recent goodwill impairment test during the fourth quarter of 2015 and it was concluded that the estimated fair value of the EDS reporting unit exceeded its carrying value by $48.9 million or 23%. Any negative changes in assumptions on revenue, new business awards, cancellations, or the Company’s ability to improve operations while maintaining a competitive cost structure could adversely affect the fair value of EDS and result in significant goodwill impairment charges in subsequent quarters during 2016. |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 31, 2016 | |
Long-Term Debt | |
Long-Term Debt | (8) Long-Term Debt Long-term debt consists of the following (in thousands): March 31, December 31, 2016 2015 Term loans, first lien $ $ Senior notes Accounts receivable financing agreement — Less debt issuances costs and discount ) ) Total long-term debt, net $ $ Principal payments on long-term debt are due as follows (in thousands): 2016 (remaining) $ — 2017 — 2018 — 2019 2020 2021 and thereafter Total $ Revolving Credit Facilities The Company’s revolving credit facilities provide for $125.0 million of potential borrowings and expire on September 23, 2018. The interest rate on the revolving credit facilities is based on LIBOR plus an applicable rate, based on the leverage ratio of the Company. The Company, at its discretion, may choose interest periods of 1, 2, 3 or 6 months. In addition, the Company is required to pay to the lenders a commitment fee of 0.5% quarterly for unused commitments on the revolver, subject to a step-down to 0.375% based upon achievement of a certain leverage ratio. At March 31, 2016 and December 31 , 2015, the Company had no outstanding borrowings under the revolving credit facilities. In addition, at March 31, 2016 and December 31 , 2015, the Company had $4.0 million and $4.4 million, respectively, in letters of credit outstanding, which are secured by the revolving credit facilities. Senior Notes On March 17, 2016, the Company repaid $133.6 million aggregate principal amount of its 9.5% senior notes due 2023, or Senior Notes, as part of a cash tender offer. In accordance with the guidance in FASB’s Accounting Standards Codification, or ASC, No. 470-50, “Debt—Modifications and Extinguishments,” the debt repayment was accounted for as a partial debt extinguishment. The repayment resulted in a $21.5 million loss on extinguishment of debt, which consists of a $17.4 million early tender premium, a $3.7 million write-off of unamortized debt issuance costs and $0.4 million of fees associated with the transaction. Accounts Receivable Financing Agreement In March 2016, the Company entered into a $140.0 million accounts receivable financing agreement, of which $120.0 million was outstanding as of March 31, 2016. The borrowings were used to repay amounts outstanding on the Company’s revolving credit facility that were used to fund the cash tender offer for the Senior Notes. Loans under the accounts receivable financing agreement accrue interest at either a reserve-adjusted LIBOR or a base rate, plus 1.6%. The Company may prepay loans upon one business day prior notice and may terminate the accounts receivable financing agreement with 15 days’ prior notice. As of March 31, 2016, the weighted average interest rate on the accounts receivable financing agreement was 2.03%. The accounts receivable financing agreement contains various customary representations and warranties and covenants, and default provisions which provide for the termination and acceleration of the commitments and loans under the agreement in circumstances including, but not limited to, failure to make payments when due, breach of representations, warranties or covenants, certain insolvency events or failure to maintain the security interest in the trade receivables, and defaults under other material indebtedness. The accounts receivable financing agreement terminates on March 22, 2019, unless terminated earlier pursuant to its terms. At March 31, 2016, there was $20.0 million of remaining capacity available under the accounts receivable financing agreement. Fair Value of Debt The estimated fair value of borrowings under credit facilities and long-term debt was $913.9 million and $924.9 million at March 31, 2016 and December 31, 2015, respectively. The fair value of the Senior Notes, which totaled $101.5 million and $246.2 million at March 31, 2016 and December 31, 2015, respectively, was determined based on Level 2 inputs using the market approach, which is primarily based on rates at which the debt is traded among financial institutions. The fair value of the term loans, borrowings under credit facilities, and accounts receivable financing agreement which totaled $812.4 million and $678.7 million at March 31, 2016 and December 31, 2015, respectively, was determined based on Level 3 inputs, which is primarily based on rates at which the debt is traded among financial institutions adjusted for the Company’s credit standing. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2016 | |
Stockholders' Equity | |
Stockholders' Equity | (9) Stockholders’ Equity Authorized Shares The Company is authorized to issue up to one billion shares of common stock, with a par value of $0.01. The Company is authorized to issue up to one hundred million shares of preferred stock, with a par value of $0.01. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2016 | |
Stock-Based Compensation | |
Stock-Based Compensation | (10) Stock-Based Compensation The Company granted 162,500 service-based options and 25,000 restricted stock awards, or RSAs, with a total grant date fair value of $2.2 million and $1.0 million, respectively, during the three months ended March 31, 2016. Aggregated information regarding the Company’s option plans is summarized below: Wtd. Average Remaining Intrinsic Wtd. Average Contractual Life Value Options Exercise Price (in years) (millions) Outstanding at December 31, 2015 $ $ Granted $ Exercised ) Expired/forfeited ) Outstanding at March 31, 2016 $ $ Exercisable at March 31, 2016 $ $ The Company’s RSAs and restricted stock units or, RSUs, collectively RSAs/RSUs, activity in 2016 is as follows: Awards Wtd. Average Grant-Date Fair Value Intrinsic Value (millions) Unvested at December 31, 2015 $ $ Granted Vested ) Unvested at March 31, 2016 $ $ Stock-based compensation expense related to employee stock options and RSAs/RSUs are summarized below (in thousands): Three Months Ended March 31, 2016 2015 Direct costs $ $ Selling, general and administrative Transaction-related costs — Total stock-based compensation expense $ $ In December 2013, the Company granted certain employees market-based options that vest only upon the achievement of a specified internal rate of return from a liquidity event (“2.0x Options”). At the time of grant, no compensation expense was recorded as the 2.0x Options vest upon a liquidity event, which is not considered probable until the date it occurs. On January 20, 2016, the Compensation Committee of the Board of Directors adopted a resolution to adjust the vesting criteria for all 2.0x Options granted and still outstanding on such date. Under the revised vesting criteria, the 2.0x Options vest upon the announcement of a secondary offering. This modification resulted in Type IV Improbable-to-Improbable modification. Since the secondary offering was deemed improbable due to the fact that it is outside of the Company’s control and cannot be considered probable until the date it occurs, no compensation expense was recognized on the January 20, 2016 modification date. On March 2, 2016, the Company announced a secondary offering of shares by KKR and certain management stockholders, and it became probable that the 2.0x Options would vest. In total, 835,551 2.0x Options held by current employees were modified. Primarily as a result of this modification, the Company incurred approximately $26.8 million of incremental compensation expense during the quarter, which is included in transaction-related costs in the accompanying consolidated condensed statement of operations. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2016 | |
Income Taxes | |
Income Taxes | (11) Income Taxes The Company’s effective income tax rate was 25.4% and 30.7% for the three months ended March 31, 2016 and 2015, respectively. The variation between the Company’s effective income tax rate and the U.S. statutory rate of 35% for the three months ended March 31, 2016 is primarily due to (i) income from foreign subsidiaries being taxed at rates lower than the U.S. statutory rate and (ii) the favorable impact of research and development tax credits. GAAP requires a two-step approach when evaluating uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence demonstrates that it is more likely than not that the position will be sustained upon audit, including resolution of any related appeals or litigation processes. The second step is to quantify the amount of tax benefit to recognize as the amount that is cumulatively more than 50% likely to be realized upon ultimate settlement with the taxing authorities. As of March 31, 2016, the Company’s liability for unrecognized tax benefits was $11.9 million. If any portion of this $11.9 million is recognized that impacts the effective tax rate, the Company will then include that portion in the computation of its effective tax rate. Although the ultimate timing of the resolution of audits is highly uncertain, the Company believes it is reasonably possible that approximately $0.9 million of gross unrecognized tax benefits will change in the next 12 months as a result of pending audit settlements or statute of limitations expirations. The Company files U.S. federal, U.S. state, and foreign tax returns. For U.S. federal purposes, the Company is generally no longer subject to tax examinations for years ended December 31, 2011 and prior. For U.S. state tax returns, the Company is generally no longer subject to tax examinations for years prior to 2011. For foreign purposes, the Company is generally no longer subject to examination for tax periods 2008 and prior. Certain carryforward tax attributes generated in prior years remain subject to examination and adjustment. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies | |
Commitments and Contingencies | (12) Commitments and Contingencies Legal Proceedings The Company is involved in legal proceedings from time to time in the ordinary course of its business, including employment claims and claims related to other business transactions. Although the outcome of such claims is uncertain, management believes that these legal proceedings will not have a material adverse effect on the financial condition or results of future operations of the Company. The Company is currently a party to litigation with the City of Sao Paulo, Brazil. The dispute relates to whether the export of services provided by the Company is subject to a local tax on services. The Company has not recorded a liability associated with the claim, which totaled $4.2 million at March 31, 2016, given that it is not deemed probable the Company will incur a loss related to this case. However, a deposit totaling $4.2 million has been made to the Brazilian court in order to annul the potential tax obligation and to avoid the accrual of additional interest and penalties. This balance is recorded in other assets on the consolidated condensed balance sheet. During June 2015, the Judiciary Court of Justice of the State of Sao Paulo ruled in the favor of the Company, however, the judgment was appealed by the City of Sao Paulo. The Company expects to recover the full amount of the deposit when the case is final. |
Derivatives
Derivatives | 3 Months Ended |
Mar. 31, 2016 | |
Derivatives | |
Derivatives | (13) Derivatives The Company is exposed to certain risks relating to our ongoing business operations. The primary risk that the Company seeks to manage by using derivative instruments is interest rate risk. Accordingly, the Company has instituted interest rate hedging programs that are accounted for in accordance with ASC 815, “Derivatives and Hedging.” The interest rate hedging program is a cash flow hedge program designed to minimize interest rate volatility. The Company swaps the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount, at specified intervals. The Company’s interest rate contracts are designated as hedging instruments. The following table presents the notional amounts and fair values (determined using level 2 inputs) of our derivatives as of March 31, 2016 and December 31, 2015 (in thousands): March 31, 2016 December 31, 2015 Balance Sheet Classification Notional amount Asset/ (Liability) Notional amount Asset/ (Liability) Derivatives in an asset position: Interest rate swap Other assets $ — $ — $ $ Derivatives in a liability position: Interest rate swap Other long-term liabilities ) — — The Company records the effective portion of any change in the fair value of derivatives designated as hedging instruments under ASC 815 to other accumulated comprehensive loss in our consolidated condensed balance sheet, net of deferred taxes, and will later reclassify into earnings when the hedged item affects earnings or is no longer expected to occur. Gains and losses from the ineffective portion of any hedge are recognized in earnings immediately. For other derivative contracts that do not qualify or no longer qualify for hedge accounting, changes in the fair value of the derivatives are recognized in earnings each period. The table below presents the effect of our derivatives on the consolidated condensed statements of operations and comprehensive loss for the three months ended March 31, 2016 and 2015 (in thousands): Three Months Ended March 31, Derivatives in Cash Flow Hedging Relationships (Interest Rate Contracts) 2016 2015 Amount of pre-tax loss recognized in other comprehensive loss on derivatives $ ) $ ) Amount of loss recognized in other expense, net on derivatives (ineffective portion) — ) Amount of loss recognized in other expense, net on derivatives (no longer qualify for hedge accounting) — ) Amount of loss reclassified from accumulated other comprehensive loss into interest expense, net on derivatives ) ) The Company expects that $5.3 million of unrealized losses will be reclassified out of accumulated other comprehensive loss and into interest expense, net over the next 12 months. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2016 | |
Related Party Transactions | |
Related Party Transactions | (14) Related Party Transactions At March 31, 2016 and December 31, 2015, KKR held $11.8 million and $14.7 million, respectively, in first lien term debt. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 3 Months Ended |
Mar. 31, 2016 | |
Accumulated Other Comprehensive Loss. | |
Accumulated Other Comprehensive Loss | (15) Accumulated Other Comprehensive Loss Below is a summary of the components of accumulated other comprehensive loss (in thousands): Foreign Currency Translation Derivative Instruments Total Balance at December 31, 2015 $ ) $ ) $ ) Other comprehensive loss before reclassifications, net of tax ) ) ) Reclassification adjustments, net of tax — Balance at March 31, 2016 $ ) $ ) $ ) |
Net (Loss) Income Per Share
Net (Loss) Income Per Share | 3 Months Ended |
Mar. 31, 2016 | |
Net (Loss) Income Per Share | |
Net Income (Loss) Per Share | (16) Net (Loss) Income Per Share Basic net (loss) income per share is calculated by dividing net (loss) income by the weighted average number of common shares outstanding for the applicable period. Diluted net (loss) income per share is calculated after adjusting the denominator of the basic net (loss) income per share calculation for the effect of all potentially dilutive common shares, which, in the Company’s case, includes shares issuable under the stock option and incentive award plan. The following table reconciles the basic to diluted weighted average shares outstanding (in thousands): Three Months Ended March 31, 2016 2015 Basic weighted average common shares outstanding Effect of dilutive stock options and RSAs/RSUs — Diluted weighted average common shares outstanding The following common stock equivalents were excluded from the (loss) earnings per share computation as their inclusion would have been anti-dilutive (in thousands): Three Months Ended March 31, 2016 2015 Weighted average number of stock options and RSAs/RSUs calculated using the treasury stock method that were excluded due to the exercise price exceeding the average market price of our common stock during the period Weighted average number of stock options and RSAs/RSUs calculated using the treasury stock method that were excluded due to the reporting of a net loss for the period — Total common stock equivalents excluded from diluted net (loss) income per share computation |
Business Combinations (Tables)
Business Combinations (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Nextrials, Inc | |
Business Combination | |
Schedule of purchase price allocation | The Company’s preliminary estimate of the purchase price allocation is as follows (in thousands): Purchase Weighted Price Amortization Allocation Period Cash and cash equivalents $ Accounts receivable Other current assets Property, plant and equipment Software intangible 5 years Accounts payable and accrued expenses ) Other long-term liabilities ) Estimated fair value of net assets acquired Purchase price, including contingent consideration Total goodwill $ |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Measurements | |
Summary of the fair value of financial assets and liabilities measured on a recurring basis | The following table summarizes the fair value of the Company’s financial assets and liabilities that are measured on a recurring basis as of March 31, 2016 (in thousands): Level 1 Level 2 Level 3 Total Liabilities: Interest rate swap $ — $ $ — $ Contingent consideration — — Total $ — $ $ $ |
Summary of the changes in Level 3 financial assets and liabilities measured on a recurring basis | The following table summarizes the changes in Level 3 financial liabilities measured on a recurring basis for the three months ended March 31, 2016 (in thousands): Contingent Consideration - Accrued expenses and other long-term liabilities Balance at December 31, 2015 $ Initial estimate of Nextrials contingent consideration Balance at March 31, 2016 $ |
Concentration of Credit Risk (T
Concentration of Credit Risk (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Service revenue | |
Concentration risk | |
Schedule of concentration of risk by risk factor | Three Months Ended March 31, 2016 2015 Customer A — % |
Accounts receivable and unbilled receivables | |
Concentration risk | |
Schedule of concentration of risk by risk factor | March 31, December 31, 2016 2015 Customer A — % Customer B % % |
Accounts Receivable and Unbil27
Accounts Receivable and Unbilled Services (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Accounts Receivable and Unbilled Services | |
Schedule of accounts receivable and unbilled services | Accounts receivable and unbilled services were as follows (in thousands): March 31, December 31, 2016 2015 Accounts receivable $ $ Unbilled services Less allowance for doubtful accounts ) ) Total accounts receivable and unbilled services, net $ $ |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Goodwill and Intangible Assets | |
Schedule of changes in the carrying amount of goodwill | The changes in the carrying amount of goodwill are as follows (in thousands): Balance at December 31, 2015 $ Nextrials acquisition Currency translation ) Balance at March 31, 2016 $ |
Schedule of intangible assets | Intangible assets consist of the following (in thousands): March 31, December 31, 2016 2015 Customer relationships $ $ Customer backlog Trade names (definite-lived) Patient list and other intangibles Non-competition agreements Total finite-lived intangible assets, gross Accumulated amortization ) ) Total finite-lived intangible assets, net Trade names (indefinite-lived) Total intangible assets, net $ $ |
Schedule of estimated future amortization expense | The estimated future amortization expense of finite-lived intangible assets is expected to be as follows (in thousands): 2016 (remaining) $ 2017 2018 2019 2020 2021 and thereafter Total $ |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Long-Term Debt | |
Schedule of long-term debt | Long-term debt consists of the following (in thousands): March 31, December 31, 2016 2015 Term loans, first lien $ $ Senior notes Accounts receivable financing agreement — Less debt issuances costs and discount ) ) Total long-term debt, net $ $ |
Schedule of principal payments on long-term debt due | Principal payments on long-term debt are due as follows (in thousands): 2016 (remaining) $ — 2017 — 2018 — 2019 2020 2021 and thereafter Total $ |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Stock-Based Compensation | |
Summary of stock option activity | Wtd. Average Remaining Intrinsic Wtd. Average Contractual Life Value Options Exercise Price (in years) (millions) Outstanding at December 31, 2015 $ $ Granted $ Exercised ) Expired/forfeited ) Outstanding at March 31, 2016 $ $ Exercisable at March 31, 2016 $ $ |
Schedule of RSA/RSU activity | Awards Wtd. Average Grant-Date Fair Value Intrinsic Value (millions) Unvested at December 31, 2015 $ $ Granted Vested ) Unvested at March 31, 2016 $ $ |
Schedule of stock-based compensation expense | Stock-based compensation expense related to employee stock options and RSAs/RSUs are summarized below (in thousands): Three Months Ended March 31, 2016 2015 Direct costs $ $ Selling, general and administrative Transaction-related costs — Total stock-based compensation expense $ $ |
Derivatives (Tables)
Derivatives (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Derivatives | |
Schedule of notional amounts and fair values (determined using level 2 inputs) of derivatives | The following table presents the notional amounts and fair values (determined using level 2 inputs) of our derivatives as of March 31, 2016 and December 31, 2015 (in thousands): March 31, 2016 December 31, 2015 Balance Sheet Classification Notional amount Asset/ (Liability) Notional amount Asset/ (Liability) Derivatives in an asset position: Interest rate swap Other assets $ — $ — $ $ Derivatives in a liability position: Interest rate swap Other long-term liabilities ) — — |
Schedule of the effect of derivatives on the condensed consolidated statements of operations and comprehensive (loss) income | The table below presents the effect of our derivatives on the consolidated condensed statements of operations and comprehensive loss for the three months ended March 31, 2016 and 2015 (in thousands): Three Months Ended March 31, Derivatives in Cash Flow Hedging Relationships (Interest Rate Contracts) 2016 2015 Amount of pre-tax loss recognized in other comprehensive loss on derivatives $ ) $ ) Amount of loss recognized in other expense, net on derivatives (ineffective portion) — ) Amount of loss recognized in other expense, net on derivatives (no longer qualify for hedge accounting) — ) Amount of loss reclassified from accumulated other comprehensive loss into interest expense, net on derivatives ) ) |
Accumulated Other Comprehensi32
Accumulated Other Comprehensive Loss (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Accumulated Other Comprehensive Loss. | |
Summary of components of accumulated other comprehensive loss | Below is a summary of the components of accumulated other comprehensive loss (in thousands): Foreign Currency Translation Derivative Instruments Total Balance at December 31, 2015 $ ) $ ) $ ) Other comprehensive loss before reclassifications, net of tax ) ) ) Reclassification adjustments, net of tax — Balance at March 31, 2016 $ ) $ ) $ ) |
Net (Loss) Income Per Share (Ta
Net (Loss) Income Per Share (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Net (Loss) Income Per Share | |
Schedule of weighted average basic and diluted common shares | The following table reconciles the basic to diluted weighted average shares outstanding (in thousands): Three Months Ended March 31, 2016 2015 Basic weighted average common shares outstanding Effect of dilutive stock options and RSAs/RSUs — Diluted weighted average common shares outstanding |
Schedule of common stock equivalents excluded from (loss) earnings per share computation | The following common stock equivalents were excluded from the (loss) earnings per share computation as their inclusion would have been anti-dilutive (in thousands): Three Months Ended March 31, 2016 2015 Weighted average number of stock options and RSAs/RSUs calculated using the treasury stock method that were excluded due to the exercise price exceeding the average market price of our common stock during the period Weighted average number of stock options and RSAs/RSUs calculated using the treasury stock method that were excluded due to the reporting of a net loss for the period — Total common stock equivalents excluded from diluted net (loss) income per share computation |
Basis of Presentation (Details)
Basis of Presentation (Details) - USD ($) $ in Millions | Mar. 22, 2016 | Mar. 02, 2016 | Mar. 31, 2016 |
Common stock | |||
Percentage of common stock owned by KKR | 58.00% | ||
Secondary Offering | Common stock | |||
Issuance of common stock (shares) | 5,000,000 | ||
Professional Fees | $ 0.7 | ||
Accounts Receivable Financing Agreement | |||
Term of accounts receivable financing agreement and related arrangements to securitize accounts receivable | 3 years | ||
Maximum borrowing capacity | $ 140 |
Business Combination (Details)
Business Combination (Details) - USD ($) $ in Thousands | Mar. 18, 2016 | Mar. 31, 2016 | Dec. 31, 2015 |
Preliminary estimate of purchase price allocation | |||
Total goodwill | $ 1,010,819 | $ 1,014,798 | |
Nextrials, Inc | |||
Business Combination | |||
Acquisition of Nextrials, Inc. | $ 4,700 | ||
Potential contingent earn-out payments | 3,000 | ||
Potential contingent earn-out payments based on milestones | 2,000 | ||
Potential contingent earn-out payments based on sales targets | $ 1,000 | ||
Earn-out period for contingent consideration | 30 months | ||
Goodwill not deductible for tax purposes | $ 2,300 | ||
Preliminary estimate of purchase price allocation | |||
Cash and cash equivalents | 94 | ||
Accounts receivable | 268 | ||
Other current assets | 96 | ||
Property, plant and equipment | 111 | ||
Accounts payable and accrued expenses | (1,385) | ||
Other long-term liabilities | (11) | ||
Estimated fair value of net assets acquired | 4,747 | ||
Purchase price, including contingent consideration | 7,023 | ||
Total goodwill | 2,276 | ||
Nextrials, Inc | Level 3 | |||
Business Combination | |||
Contingent liability recognized | 2,300 | ||
Software intangible | Nextrials, Inc | |||
Preliminary estimate of purchase price allocation | |||
Software intangible | $ 5,574 | ||
Weighted Amortization Period | 5 years |
Fair Value Measurements - Summa
Fair Value Measurements - Summary of Financial Assets and Liabilities Measured on a Recurring Basis (Details) - Recurring $ in Thousands | Mar. 31, 2016USD ($) |
Liabilities: | |
Total | $ 4,895 |
Interest rate swap | |
Liabilities: | |
Total | 1,614 |
Contingent consideration | |
Liabilities: | |
Total | 3,281 |
Level 2 | |
Liabilities: | |
Total | 1,614 |
Level 2 | Interest rate swap | |
Liabilities: | |
Total | 1,614 |
Level 3 | |
Liabilities: | |
Total | 3,281 |
Level 3 | Contingent consideration | |
Liabilities: | |
Total | $ 3,281 |
Fair Value Measurements - Level
Fair Value Measurements - Level 3 (Details) - Recurring - Level 3 - Contingent consideration - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Dec. 31, 2015 | |
Changes in the fair value of the Company's Level 3 financial liabilities | ||
Balance | $ 3,281 | $ 999 |
Nextrials, Inc | ||
Changes in the fair value of the Company's Level 3 financial liabilities | ||
Initial estimate of Nextrials contingent consideration | $ 2,282 |
Fair Value Measurements - Non-r
Fair Value Measurements - Non-recurring Fair Value Measurements (Details) - Nonrecurring - Level 3 $ in Millions | Mar. 31, 2016USD ($) |
Assets fair value measurements | |
Assets fair value | $ 1,537 |
Goodwill | 1,010.8 |
Identifiable intangible assets | $ 526.2 |
Concentration of Credit Risk (D
Concentration of Credit Risk (Details) - Customer Concentration Risk | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Service revenue | Customer A | |||
Concentration risk | |||
Concentration risk percentage | 11.40% | ||
Accounts receivable and unbilled receivables | Customer A | |||
Concentration risk | |||
Concentration risk percentage | 13.40% | ||
Accounts receivable and unbilled receivables | Customer B | |||
Concentration risk | |||
Concentration risk percentage | 11.00% | 10.10% |
Accounts Receivable and Unbil40
Accounts Receivable and Unbilled Services (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Accounts Receivable and Unbilled Services | ||
Accounts receivable | $ 287,964 | $ 290,963 |
Unbilled services | 134,485 | 126,755 |
Total accounts receivable, gross | 422,449 | 417,718 |
Less allowance for doubtful accounts | (2,312) | (2,641) |
Total accounts receivable and unbilled services, net | $ 420,137 | $ 415,077 |
Goodwill and Intangible Asset41
Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Changes in carrying amount of goodwill | |||
Balance at the beginning of the period | $ 1,014,798 | ||
Nextrials acquisition | 2,276 | ||
Currency translation | (6,255) | ||
Balance at the end of the period | 1,010,819 | ||
Intangible Assets | |||
Total finite-lived intangible assets, gross | 562,882 | $ 560,342 | |
Accumulated amortization | (154,712) | (144,414) | |
Total finite-lived intangible assets, net | 408,170 | 415,928 | |
Trade names (indefinite-lived) | 118,010 | 118,010 | |
Total intangible assets, net | 526,180 | 533,938 | |
Amortization expense | 11,300 | $ 14,100 | |
Estimated future amortization expense: | |||
2016 (remaining) | 34,682 | ||
2,017 | 36,692 | ||
2,018 | 32,369 | ||
2,019 | 26,926 | ||
2,020 | 25,639 | ||
2021 and thereafter | 251,862 | ||
Total finite-lived intangible assets, net | 408,170 | 415,928 | |
Goodwill Impairment Testing | |||
Accumulated impairment charges | 0 | 0 | |
Customer relationships | |||
Intangible Assets | |||
Total finite-lived intangible assets, gross | 378,988 | 380,721 | |
Customer backlog | |||
Intangible Assets | |||
Total finite-lived intangible assets, gross | 126,523 | 127,871 | |
Trade names (definite-lived) | |||
Intangible Assets | |||
Total finite-lived intangible assets, gross | 25,710 | 25,693 | |
Patient list and other intangibles | |||
Intangible Assets | |||
Total finite-lived intangible assets, gross | 28,974 | 23,400 | |
Non-competition agreements | |||
Intangible Assets | |||
Total finite-lived intangible assets, gross | 2,687 | $ 2,657 | |
Early Development Services | |||
Goodwill Impairment Testing | |||
Reporting Unit, Amount of Fair Value in Excess of Carrying Amount | $ 48,900 | ||
Reporting Unit, Percentage of Fair Value in Excess of Carrying Amount | 23.00% |
Long-Term Debt (Details)
Long-Term Debt (Details) - USD ($) $ in Thousands | Mar. 17, 2016 | Mar. 31, 2016 | Mar. 22, 2016 | Dec. 31, 2015 |
Long-term debt | ||||
Long-term Debt, Gross | $ 900,441 | $ 914,000 | ||
Less debt issuance costs and discount | (19,858) | (24,486) | ||
Total long-term debt, net | 880,583 | 889,514 | ||
Repayment of principal | 133,559 | |||
Loss on extinguishment of debt | 21,485 | |||
Estimated fair value of borrowings under credit facilities and long-term debt | 913,900 | 924,900 | ||
Principal payments on long-term debt | ||||
2,019 | 120,000 | |||
2,020 | 689,000 | |||
2021 and thereafter | 91,441 | |||
Level 3 | ||||
Long-term debt | ||||
Fair value of the term loans, borrowings under credit facilities, and accounts receivable financing agreement | 812,400 | 678,700 | ||
First lien term debt | ||||
Long-term debt | ||||
Long-term Debt, Gross | 689,000 | 689,000 | ||
Senior Notes | ||||
Long-term debt | ||||
Long-term Debt, Gross | 91,441 | 225,000 | ||
Repayment of principal | $ 133,600 | |||
Interest rate (as a percent) | 9.50% | |||
Loss on extinguishment of debt | $ 21,500 | |||
Prepayment penalty | 17,400 | |||
Write-off of unamortized debt issuance costs | 3,700 | |||
Debt Repayment Transaction Fees | $ 400 | |||
Senior Notes | Level 2 | ||||
Long-term debt | ||||
Fair value of Senior Notes | 101,500 | 246,200 | ||
Accounts Receivable Financing Agreement | ||||
Long-term debt | ||||
Long-term Debt, Gross | 120,000 | |||
Maximum borrowing capacity | $ 140,000 | |||
Outstanding borrowings | $ 120,000 | |||
Applicable margin on variable rate basis (as a percent) | 1.60% | |||
Notice Period for Terminating Loans Under Securitization | 15 days | |||
Weighted average interest rate (as a percent) | 2.03% | |||
Remaining borrowing capacity | $ 20,000 | |||
Revolving Credit Facility | ||||
Long-term debt | ||||
Maximum borrowing capacity | $ 125,000 | |||
Variable rate basis | LIBOR | |||
Interest period, option one | 1 month | |||
Interest period, option two | 2 months | |||
Interest period, option three | 3 months | |||
Interest period, option four | 6 months | |||
Commitment fee (as a percent) | 0.50% | |||
Step-down commitment fee based upon achievement of a certain leverage ratio (as a percent) | 0.375% | |||
Outstanding borrowings | $ 0 | 0 | ||
Outstanding letters of credit | $ 4,000 | $ 4,400 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - $ / shares | Mar. 31, 2016 | Dec. 31, 2015 |
Stockholders' Equity | ||
Common stock, shares authorized | 1,000,000,000 | 1,000,000,000 |
Par value of share (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 100,000,000 | 100,000,000 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock Options (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2015 | |
Restricted Stock Awards (RSAs) | ||
Stock-Based Compensation | ||
Restricted stock awards granted in period | 25,000 | |
Total grant date fair value of awards granted | $ 1 | |
Employee stock option | ||
Stock-Based Compensation | ||
Stock options granted (in shares) | 162,500 | |
Total grant date fair value of awards granted | $ 2.2 | |
Options | ||
Outstanding at beginning of period (in shares) | 6,839,129 | |
Granted (in shares) | 162,500 | |
Exercised (in shares) | (274,975) | |
Expired/forfeited (in shares) | (127,105) | |
Outstanding at end of period (in shares) | 6,599,549 | 6,839,129 |
Exercisable (in shares) | 3,475,120 | |
Weighted Average Exercise Price | ||
Outstanding at beginning of period (in dollars per share) | $ 11.39 | |
Granted (in dollars per share) | 40.53 | |
Exercised (in dollars per share) | 6.31 | |
Expired/forfeited (in dollars per share) | 11.73 | |
Outstanding at end of period (in dollars per share) | 12.31 | $ 11.39 |
Exercisable (in dollars per share) | $ 8.08 | |
Other disclosures: | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term | 6 years 9 months 18 days | 6 years 9 months 18 days |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term | 5 years 7 months 6 days | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value | $ 200.9 | $ 231.7 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value | $ 120.5 |
Stock-Based Compensation - Rest
Stock-Based Compensation - Restricted Stock Awards and Units (Details) - RSAs and RSUs - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |
Mar. 31, 2016 | Dec. 31, 2015 | |
Stock-Based Compensation | ||
Outstanding at beginning of period (in dollars per share) | 143,984 | |
Granted (in shares) | 25,000 | |
Vested | (1,812) | |
Outstanding at end of period (in dollars per share) | 167,172 | |
Weighted Average Grant-Date Fair Value | ||
Outstanding at beginning of period (in dollars per share) | $ 28.42 | |
Granted (in dollars per share) | 40.65 | |
Vested | 27.60 | |
Outstanding at end of period (in dollars per share) | $ 30.26 | |
Intrinsic Value | ||
Outstanding at end of period | $ 7.1 | $ 6.5 |
Stock-Based Compensation - St46
Stock-Based Compensation - Stock-Based Compensation Expense (Details) - USD ($) | Mar. 02, 2016 | Jan. 20, 2016 | Dec. 31, 2013 | Mar. 31, 2016 | Mar. 31, 2015 |
Stock options, RSAs and RSUs | |||||
Stock-based compensation | |||||
Compensation expense | $ 28,331,000 | $ 775,000 | |||
Stock options, RSAs and RSUs | Direct Costs | |||||
Stock-based compensation | |||||
Compensation expense | 428,000 | 175,000 | |||
Stock options, RSAs and RSUs | Selling, general, and administrative expenses | |||||
Stock-based compensation | |||||
Compensation expense | 1,076,000 | $ 600,000 | |||
Stock options, RSAs and RSUs | Transaction-Related Costs | |||||
Stock-based compensation | |||||
Compensation expense | $ 26,827,000 | ||||
2013 Plan | Employee stock option | Market-based options | |||||
Stock-based compensation | |||||
Compensation expense | $ 0 | $ 0 | |||
Number of stock options modified | 835,551 | ||||
Compensation expense associated with modification | $ 26,800,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Income Taxes | ||
Effective income tax rate (as a percent) | 25.40% | 30.70% |
U.S. statutory rate (as a percent) | 35.00% | |
Liability for unrecognized tax benefits | $ 11.9 | |
Amount of gross unrecognized tax benefits that will change in the next 12 months as a result of pending audit settlements or statute of limitations expirations | $ 0.9 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - Tax related claim on export of services provided $ in Millions | Mar. 31, 2016USD ($) |
Commitments and Contingencies | |
Amount of tax claimed to be due in litigation | $ 4.2 |
Other assets | |
Commitments and Contingencies | |
Deposit made to Brazilian court in tax litigation | $ 4.2 |
Derivatives - Hedging Instrumen
Derivatives - Hedging Instruments (Details) - Interest rate swap - Designated as hedging instruments - Level 2 - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Other assets | ||
Derivatives in an asset position: | ||
Notional amount | $ 250,000 | |
Asset | $ 28 | |
Other long-term liabilities | ||
Derivatives in a liability position: | ||
Notional amount | $ 250,000 | |
Liability | $ (1,614) |
Derivatives - Cash Flow Hedging
Derivatives - Cash Flow Hedging Instruments (Details) - Cash flow hedging - Interest rate contracts - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Effect of derivatives on the consolidated statements of operations and comprehensive income (loss) | ||
Amount of pre-tax loss recognized in other comprehensive loss on derivatives | $ (1,642) | $ (6,938) |
Amount of loss recognized in other expense, net on derivatives (ineffective portion) | (56) | |
Amount of loss recognized in other expense, net on derivatives (no longer qualify for hedge accounting) | (489) | |
Amount of loss reclassified from accumulated other comprehensive loss into interest expense, net on derivatives | (899) | $ (17) |
Unrealized losses expected to be reclassified out of accumulated other comprehensive (loss) income into interest expense over the next 12 months | $ 5,300 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Millions | Mar. 31, 2016 | Dec. 31, 2015 |
KKR | First lien term debt | ||
Related Party Transactions | ||
First lien term debt held by related parties | $ 11.8 | $ 14.7 |
Accumulated Other Comprehensi52
Accumulated Other Comprehensive Loss (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Summary of components of accumulated other comprehensive loss | |
Beginning balance | $ (132,307) |
End balance | (138,589) |
Foreign Currency Translation | |
Summary of components of accumulated other comprehensive loss | |
Beginning balance | (106,072) |
Other comprehensive loss before reclassifications, net of tax | (5,539) |
End balance | (111,611) |
Derivative Instruments | |
Summary of components of accumulated other comprehensive loss | |
Beginning balance | (26,235) |
Other comprehensive loss before reclassifications, net of tax | (1,642) |
Reclassification adjustments, net of tax | 899 |
End balance | (26,978) |
Accumulated Other Comprehensive Loss | |
Summary of components of accumulated other comprehensive loss | |
Beginning balance | (132,307) |
Other comprehensive loss before reclassifications, net of tax | (7,181) |
Reclassification adjustments, net of tax | 899 |
End balance | $ (138,589) |
Net (Loss) Income Per Share (De
Net (Loss) Income Per Share (Details) - shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Reconciliation of basic to diluted weighted average shares outstanding | ||
Basic weighted average common shares outstanding | 60,199 | 59,815 |
Effect of dilutive stock options and RSAs/RSUs | 2,962 | |
Diluted weighted average common shares outstanding | 60,199 | 62,777 |
Weighted average number of stock options and RSAs/RSUs calculated using the treasury stock method that were excluded due to the exercise price exceeding the average market price of our common stock during the period | 236 | 20 |
Weighted average number of stock options and RSAs/RSUs calculated using the treasury stock method that were excluded due to the reporting of a net loss for the period | 3,669 | |
Total common stock equivalents excluded from diluted net (loss) income per share computation | 3,905 | 20 |