Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Aug. 03, 2017 | |
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 | Jun. 30, 2017 | |
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 | 62,651,610 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 |
CONSOLIDATED CONDENSED BALANCE
CONSOLIDATED CONDENSED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 113,400 | $ 144,623 |
Restricted cash | 1,578 | 4,715 |
Accounts receivable and unbilled services, net | 607,322 | 439,053 |
Other current assets | 42,807 | 36,346 |
Total current assets | 765,107 | 624,737 |
Fixed assets, net | 103,322 | 87,577 |
Goodwill | 1,025,198 | 971,980 |
Intangible assets, net | 480,228 | 473,976 |
Other assets | 35,802 | 32,121 |
Total assets | 2,409,657 | 2,190,391 |
Current liabilities: | ||
Current portion of long-term debt | 39,063 | 31,250 |
Accounts payable | 69,899 | 51,335 |
Accrued expenses and other current liabilities | 168,358 | 149,113 |
Advanced billings | 375,866 | 332,501 |
Total current liabilities | 653,186 | 564,199 |
Long-term debt, net | 794,401 | 797,052 |
Other long-term liabilities | 113,887 | 99,888 |
Total liabilities | 1,561,474 | 1,461,139 |
Commitments and contingencies (Note 11) | ||
Stockholders' equity: | ||
Preferred stock, $0.01 par value, 100,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively | ||
Common stock, $0.01 par value, 1,000,000,000 authorized shares at June 30, 2017 and December 31, 2016; 62,628,862 and 61,597,705 issued and outstanding at June 30, 2017 and December 31, 2016, respectively | 626 | 616 |
Additional paid-in capital | 886,104 | 879,067 |
Accumulated other comprehensive loss | (173,062) | (224,686) |
Retained earnings | 129,025 | 74,255 |
Equity attributable to PRA Health Sciences, Inc. stockholders | 842,693 | 729,252 |
Noncontrolling interest | 5,490 | |
Total stockholders' equity | 848,183 | 729,252 |
Total liabilities and stockholders' equity | $ 2,409,657 | $ 2,190,391 |
CONSOLIDATED CONDENSED BALANCE3
CONSOLIDATED CONDENSED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2017 | Dec. 31, 2016 |
CONSOLIDATED CONDENSED 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 | 62,628,862 | 61,597,705 |
Common stock, shares outstanding | 62,628,862 | 61,597,705 |
CONSOLIDATED CONDENSED STATEMEN
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Revenue: | ||||
Service revenue | $ 457,942 | $ 394,249 | $ 885,022 | $ 766,569 |
Reimbursement revenue | 75,782 | 61,598 | 136,462 | 119,501 |
Total revenue | 533,724 | 455,847 | 1,021,484 | 886,070 |
Operating expenses: | ||||
Direct costs | 300,611 | 254,936 | 588,123 | 498,423 |
Reimbursable out-of-pocket costs | 75,782 | 61,598 | 136,462 | 119,501 |
Selling, general and administrative | 76,195 | 68,468 | 150,463 | 132,458 |
Transaction-related costs | 2,869 | 31,785 | ||
Depreciation and amortization | 16,101 | 17,585 | 31,293 | 34,538 |
Loss on disposal of fixed assets, net | 150 | 43 | 232 | 71 |
Income from operations | 64,885 | 50,348 | 114,911 | 69,294 |
Interest expense, net | (10,004) | (13,380) | (19,531) | (28,746) |
Loss on extinguishment of debt | (21,485) | |||
Foreign currency (losses) gains, net | (14,956) | 10,872 | (22,210) | 8,082 |
Other expense, net | (100) | (105) | (280) | (105) |
Income before income taxes and equity in income of unconsolidated joint ventures | 39,825 | 47,735 | 72,890 | 27,040 |
Provision for income taxes | 10,193 | 12,312 | 18,076 | 7,048 |
Income before equity in income of unconsolidated joint ventures | 29,632 | 35,423 | 54,814 | 19,992 |
Equity in income of unconsolidated joint ventures, net of tax | 26 | 3,247 | 68 | 2,709 |
Net income | 29,658 | 38,670 | 54,882 | 22,701 |
Net income attributable to noncontrolling interest | (112) | (112) | ||
Net income attributable to PRA Health Sciences, Inc. | $ 29,546 | $ 38,670 | $ 54,770 | $ 22,701 |
Net income per share attributable to common stockholders: | ||||
Basic (in dollars per share) | $ 0.47 | $ 0.64 | $ 0.88 | $ 0.38 |
Diluted (in dollars per share) | $ 0.45 | $ 0.60 | $ 0.84 | $ 0.35 |
Weighted average common shares outstanding: | ||||
Basic (in shares) | 62,232 | 60,597 | 61,908 | 60,398 |
Diluted (in shares) | 65,727 | 64,410 | 65,586 | 64,139 |
CONSOLIDATED CONDENSED STATEME5
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||
Net income | $ 29,658 | $ 38,670 | $ 54,882 | $ 22,701 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustments | 32,754 | (38,798) | 48,213 | (44,337) |
Unrealized losses on derivative instruments, net of income tax of $0, $0, $0 and $0 | (245) | (428) | (67) | (2,070) |
Reclassification adjustments: | ||||
Losses on derivatives included in net income, net of income taxes of $0, $0, $0, and $0 | 1,725 | 1,123 | 3,416 | 2,022 |
Comprehensive income (loss) | 63,892 | 567 | 106,444 | (21,684) |
Comprehensive income attributable to noncontrolling interest | (50) | (50) | ||
Comprehensive income (loss) attributable to PRA Health Sciences, Inc. | $ 63,842 | $ 567 | $ 106,394 | $ (21,684) |
CONSOLIDATED CONDENSED STATEME6
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||
Unrealized losses on derivative instruments, tax | $ 0 | $ 0 | $ 0 | $ 0 |
Losses on derivatives included in net income, tax | $ 0 | $ 0 | $ 0 | $ 0 |
CONSOLIDATED CONDENSED STATEME7
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash flows from operating activities: | ||
Net income | $ 54,882 | $ 22,701 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 31,293 | 34,538 |
Amortization of debt issuance costs and discount | 964 | 2,343 |
Amortization of terminated interest rate swaps | 3,178 | 2,022 |
Stock-based compensation | 4,236 | 3,274 |
Non-cash transaction-related costs | 29,421 | |
Unrealized foreign currency losses (gains) | 21,920 | (8,851) |
Loss on extinguishment of debt | 21,485 | |
Deferred income taxes | (1,290) | (9,696) |
Equity in income of unconsolidated joint ventures | (68) | (2,709) |
Other reconciling items | 1,072 | 121 |
Changes in operating assets and liabilities: | ||
Accounts receivable, unbilled services, and advance billings | (121,265) | (47,447) |
Other operating assets and liabilities | 21,015 | (23,150) |
Net cash provided by operating activities | 15,937 | 24,052 |
Cash flows from investing activities: | ||
Purchase of fixed assets | (21,979) | (17,546) |
Cash paid for interest on interest rate swap | (591) | (607) |
Proceeds from the sale of WuXiPRA | 3,700 | |
Proceeds from the sale of fixed assets | 49 | |
Acquisition of Parallel 6, Inc., net of cash acquired | (39,484) | |
Acquisition of Takeda PRA Development Center KK, net of cash acquired | 2,680 | |
Acquisition of Takeda Pharmaceutical Data Services, Inc., net of cash acquired | 437 | |
Acquisition of Nextrials, Inc., net of cash acquired | (4,147) | |
Net cash used in investing activities | (58,888) | (18,600) |
Cash flows from financing activities: | ||
Borrowings on accounts receivable financing agreement | 20,000 | 120,000 |
Repayment of long-term debt | (15,625) | (133,559) |
Borrowings on line of credit | 30,000 | 110,000 |
Repayments of line of credit | (30,000) | (110,000) |
Payment of debt prepayment and debt extinguishment costs | (17,824) | |
Proceeds from stock option exercises | 2,810 | 366 |
Payment of acquisition-related contingent consideration | (400) | |
Net cash provided by (used in) financing activities | 6,785 | (31,017) |
Effects of foreign exchange changes on cash, cash equivalents, and restricted cash | 1,806 | 358 |
Change in cash, cash equivalents, and restricted cash | (34,360) | (25,207) |
Cash, cash equivalents, and restricted cash, beginning of period | 149,338 | 126,125 |
Cash, cash equivalents, and restricted cash, end of period | $ 114,978 | $ 100,918 |
Basis of Presentation
Basis of Presentation | 6 Months Ended |
Jun. 30, 2017 | |
Basis of Presentation | |
Basis of Presentation | PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (1) Basis of Presentation The Company PRA Health Sciences, Inc. and its subsidiaries, or 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. Unaudited Interim Financial Information The interim consolidated condensed financial statements include the accounts of the Company and variable interest entities where the Company is the primary beneficiary. 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, 2016. 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. Variable Interest Entities A variable interest entity (“VIE”) is an entity in which a controlling financial interest may be achieved through arrangements that do not involve voting interests. A VIE is required to be consolidated by its primary beneficiary, which is the entity that possesses the power to direct the activities of the VIE that most significantly impact the VIEs economic performance and has the obligation to absorb losses or the right to receive benefits from the VIE that are significant to the entity. The Company consolidates VIEs when it is the primary beneficiary of the VIE, including joint ventures determined to be VIEs. For consolidated VIEs in which the Company owns less than 100% of the ownership interest or is exposed to less than 100% of the VIE’s economic performance, the outside stockholders' interests are shown as noncontrolling interests. Recently Implemented Accounting Pronouncements In March 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or 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. In addition, ASU No. 2016-09 went into effect for public companies for annual periods beginning after December 15, 2016. The Company adopted this ASU beginning with the first quarter of 2017. The adoption of this ASU had the following effects on the consolidated condensed financial statements: Income taxes - The standard requires excess tax benefits and tax deficiencies to be recorded as income tax benefit or expense in the statement of operations. The Company applied the modified retrospective adoption approach beginning in 2017 and recorded a cumulative-effect adjustment to retained earnings and reduced its deferred tax liabilities by $12.7 million with an offsetting increase to the valuation allowance of $12.7 million. As such, the net impact to retained earnings was zero. The Company continuously evaluates its need for a valuation allowance on its net deferred tax assets based upon the weight of available evidence. If the Company is able to support the recognition of certain net deferred tax assets in the future, it is noted that an additional tax benefit from the release of this additional valuation could occur at that time. This adjustment relates to tax assets that had previously arisen from tax deductions for equity compensation expenses that were greater than the compensation recognized for financial reporting. Forfeitures – The standard provides an accounting policy election to account for forfeitures as they occur. The Company made this accounting policy election and the modified retrospective adoption for this component of the standard did not have a material impact on its financial statements. Statements of Cash Flows - Cash flows related to excess tax benefits are no longer separately classified as a financing activity apart from other income tax cash flows. The Company adopted this component of the standard on a prospective basis. Earnings Per Share - The Company uses the treasury stock method to compute diluted earnings per share, unless the effect would be anti-dilutive. Under this method, the Company is no longer required to estimate the tax rate and apply it to the dilutive share calculation for determining the dilutive earnings per share. The Company adopted this component of the standard on a prospective basis. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows Classification of Certain Cash Receipts and Cash Payments,” which clarifies existing guidance related to accounting for cash receipts and cash payments and classification on the statement of cash flows. In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which requires restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. The guidance for both standards requires application using a retrospective transition method. The Company early adopted both ASUs during the fourth quarter of 2016. As a result of the retrospective application of ASU No. 2016-15, $17.8 million of payments of debt prepayment and debt extinguishment costs originally recorded as operating cash outflows were reclassified to financing outflows in the consolidated condensed statement of cash flows for the six months ended June 30, 2016. The retrospective application of ASU No. 2016-18 resulted in restricted cash being reclassified as a component of cash, cash equivalents, and restricted cash in the consolidated condensed statement of cash flows for all periods presented. Recently Issued Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers.” The new revenue standard establishes a single revenue recognition model for recognizing contracts from customers. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB has issued several amendments to the standard, including clarification on principal versus agent considerations, identifying performance obligations, and accounting for licenses of intellectual property. The new standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The standard permits the use of either the retrospective or modified retrospective (cumulative effect) transition method. The Company plans to adopt the new revenue guidance as of January 1, 2018 and is evaluating the transition methods and the potential impact to its consolidated financial statements. The Company’s implementation team consists of both internal resources and external advisors to assist with the adoption of the new standard. The Company completed its preliminary review of a representative sample of contracts from its contract portfolio and is continuing to evaluate key qualitative judgments associated with the adoption of the new revenue standard, including the number of performance obligations. The implementation process is expected to continue throughout 2017 as the Company evaluates the number of performance obligations, identifies potential differences from its current accounting policies, and implements business processes, systems and controls required to support recognition and disclosure under the new standard. 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 statement of operations. The provisions of ASU No. 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 January 2017, the FASB issued ASU No. 2017-01, “Business Combinations: Clarifying the Definition of a business,” which clarifies that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, it should be treated as an acquisition or disposal of an asset. The amendments to ASU No. 2017-01 are effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The adoption of ASU No. 2017-01 is not expected to have a material impact on our consolidated condensed financial statements. In January 2017, the FASB issued ASU No. 2017-04, “ Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment,” in order to simplify the subsequent measurement of goodwill by eliminating the Step 2 goodwill impairment test. Under the amendments in this ASU, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity will then recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments to ASU No. 2017-04 are effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The adoption of ASU No. 2017-04 is not expected to have a material impact on our consolidated condensed financial statements. In May 2017, the FASB issued ASU No. 2017-09, “Compensation-Stock Compensation: Scope of Modification Accounting,” which provides guidance about what changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC Topic 718, “Stock Compensation.” The amendments to ASU No. 2017-09 are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The adoption of ASU No. 2017-09 is not expected to have a material impact on our consolidated condensed financial statements. Restricted cash The Company receives cash advances from its customers to be used for the payment of investigator fees and other pass‑through expenses. The terms of certain customer contracts require that such advances be maintained in separate escrow accounts; these accounts are not commingled with the Company’s cash and cash equivalents and are presented separately in the consolidated condensed balance sheets as restricted cash. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated condensed balance sheets that sum to the total of the same amounts shown in the consolidated condensed statements of cash flows: June 30, December 31, 2017 2016 2016 2015 Cash and cash equivalents $ $ $ $ Restricted cash Total cash, cash equivalents, and restricted cash $ $ $ $ |
Business Combination
Business Combination | 6 Months Ended |
Jun. 30, 2017 | |
Business Combination | |
Business Combination | (2) Business Combinations Takeda Transactions On June 1, 2017, the Company acquired all of the outstanding shares of Takeda Pharmaceutical Data Services, Inc., or TDS, from Takeda Pharmaceutical Company Ltd., or Takeda, for $0.1 million in cash. The Company recorded approximately $0.4 million of goodwill, which is not deductible for income tax purposes. Pro forma results of operations and a complete purchase price allocation have not been presented because the results of this acquisition did not have a material effect on the Company's consolidated results. On June 1, 2017, the Company and Takeda also closed on a joint venture transaction that enables the Company to provide clinical trial delivery and pharmacovigilance services as a strategic partner of Takeda in Japan. The joint venture transaction was effected through the creation of a new legal entity, Takeda PRA Development Center KK, or TDC joint venture. The Company paid $5.4 million for a 50% equity interest in the TDC joint venture, which represents 50% of the fair value of the net assets and workforce that Takeda contributed to the joint venture. The joint venture provides services including clinical trial monitoring, project management, regulatory strategy and submissions, data management, biostatistics, drug safety reporting, and medical monitoring. The Company is required to buy-out Takeda’s 50% interest in the TDC joint venture in two years. The Company also has an early buy-out option of Takeda’s 50% interest in December 2018 if both parties agree. The Company determined that the TDC joint venture is a VIE in which the Company is the primary beneficiary. Accordingly, the Company accounted for the $5.4 million contribution to the TDC joint venture as a business combination and consolidated the VIE in its financial statements with a noncontrolling interest for the 50% portion owned by Takeda. The assets acquired and the liabilities assumed have been recorded at their respective estimated fair values as of June 1, 2017. The Company recorded approximately $2.7 million of goodwill, which is not deductible for income tax purposes. The goodwill is primarily attributable to assembled workforce. The Company incurred $0.6 million in acquisition related costs that are included in selling, general and administrative expenses in the consolidated condensed statement of operations. Due to the timing of the transaction, the valuation of net assets acquired has not been finalized and is expected to be completed by the end of December 2017, and in any case, no later than one year from the transaction closing date in accordance with GAAP. The Company’s preliminary estimate of the fair value of the net assets acquired as part of the TDC joint venture transaction at the closing date of the business combination is as follows (in thousands): Purchase Price Allocation Cash and cash equivalents $ 8,120 Other current assets 1,671 Other non-current assets 1,742 Accounts payable and accrued expenses (2,380) Other long-term liabilities (943) Estimated fair value of net assets acquired 8,210 PRA purchase price 5,440 Fair value of Takeda's noncontrolling interest 5,440 Total goodwill $ 2,670 The Company has not disclosed post-acquisition or pro-forma revenue and earnings attributable to the TDC joint venture as they did not have a material effect on the Company’s consolidated results. Acquisition of Parallel 6, Inc. On May 10, 2017, the Company acquired all of the outstanding equity interest of Parallel 6, Inc., or Parallel 6, a developer of technologies for improving patient enrollment, engagement, and management of clinical trials , for $39.7 million in cash and contingent consideration in the form of a potential earn-out payment of up to $10.0 million. The earn-out payment is contingent upon the achievement of certain external software sales targets during the 18-month period following closing. The Company recognized a liability of approximately $8.4 million representing the estimated fair value of the earn-out on the acquisition date, which is included in other long-term liabilities in the consolidated condensed balance sheet as of June 30, 2017. The fair value 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 any such change. With this acquisition, the Company expects to enhance its ability to serve customers throughout the clinical research process with technologies that provide improved efficiencies by reducing study durations and costs through integrated operational management. The acquisition of Parallel 6 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 $33.6 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. The Company incurred $1.3 million in acquisition related costs that are included in selling, general and administrative expenses in the consolidated condensed statement of 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 December 2017, 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 $ 240 Accounts receivable 1,445 Other current assets 26 Software intangible 15,500 5 years Other intangibles 920 5 years Accounts payable and accrued expenses (746) Deferred revenue (302) Other long-term liabilities (2,665) Estimated fair value of net assets acquired 14,418 Purchase price, including contingent consideration 48,042 Total goodwill $ 33,624 The Company has not disclosed post-acquisition or pro-forma revenue and earnings attributable to Parallel 6 as they did not have a material effect on the Company’s consolidated results. Acquisition of Nextrials 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 $4.8 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 recognized a liability of approximately $2.3 million as the estimated acquisition date fair value of the earn-out; the fair value was based on significant inputs not observed in the market and thus represented a Level 3 measurement. Changes in the fair value of the contingent consideration subsequent to the acquisition date are recognized in earnings in the period of the change. The fair value of the contingent consideration increased by $0.1 million for the six months ended June 30, 2017. The Company made a payment of $0.4 million on the contingent consideration during the six months ended June 30, 2017. As of June 30, 2017, the earn-out liability totaled $1.4 million; which is included in accrued expenses and other current liabilities in the consolidated condensed balance sheet. 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 $4.3 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. The Company’s purchase price allocation is as follows (in thousands): Purchase Weighted Price Amortization Allocation Period Cash and cash equivalents $ 94 Accounts receivable 211 Other current assets 96 Property, plant and equipment 111 Software intangible 5,574 5 years Accounts payable and accrued expenses (1,585) Other long-term liabilities (1,663) Estimated fair value of net assets acquired 2,838 Purchase price, including contingent consideration and net of working capital settlement 7,145 Total goodwill $ 4,307 The Company has not disclosed fiscal year 2016 or pro-forma revenue and earnings attributable to Nextrials as they did not have a material effect on the Company’s consolidated results. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value Measurements | |
Fair Value Measurements | (3) 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 June 30, 2017 (in thousands): Level 1 Level 2 Level 3 Total Assets: Marketable securities $ 350 $ — $ — $ 350 Total $ 350 $ — $ — $ 350 Liabilities: Interest rate swap $ — $ 118 $ — $ 118 Contingent consideration — — 10,779 10,779 Total $ — $ 118 $ 10,779 $ 10,897 The Company's marketable securities are included in other current assets in the consolidated condensed balance sheet. These marketable securities are recorded at fair value using quoted prices in an active market. 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 six months ended June 30, 2017 (in thousands): Contingent Consideration - Accrued expenses and other long-term liabilities Balance at December 31, 2016 $ 2,754 Initial estimate of Parallel 6 contingent consideration 8,350 Payments on Nextrials contingent consideration (400) Revaluations included in earnings 75 Balance at June 30, 2017 $ 10,779 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 June 30, 2017, assets carried on the balance sheet and not remeasured to fair value on a recurring basis totaling approximately $1,505.4 million were identified as Level 3. T hese assets are comprised of goodwill of $1,025.2 million and identifiable intangible assets, net of $480.2 million. Refer to Note 7, Long-Term Debt, for additional information regarding the fair value of long-term debt balances. |
Concentration of Credit Risk
Concentration of Credit Risk | 6 Months Ended |
Jun. 30, 2017 | |
Concentration of Credit Risk | |
Concentration of Credit Risk | (4) 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 June 30, 2017, 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 June 30, Six Months Ended June 30, 2017 2016 2017 2016 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: June 30, December 31, 2017 2016 Customer A |
Accounts Receivable and Unbille
Accounts Receivable and Unbilled Services | 6 Months Ended |
Jun. 30, 2017 | |
Accounts Receivable and Unbilled Services | |
Accounts Receivable and Unbilled Services | (5) 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): June 30, December 31, 2017 2016 Accounts receivable $ 446,402 $ 284,647 Unbilled services 162,354 155,609 608,756 440,256 Less allowance for doubtful accounts (1,434) (1,203) Total accounts receivable and unbilled services, net $ 607,322 $ 439,053 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 6 Months Ended |
Jun. 30, 2017 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | (6) Goodwill and Intangible Assets Goodwill The changes in the carrying amount of goodwill are as follows (in thousands): Balance at December 31, 2016 $ 971,980 Acquisition of Parallel 6 33,624 Acquisition of TDC joint venture 2,670 Acquisition of TDS 391 Currency translation 16,533 Balance at June 30, 2017 $ 1,025,198 There are no accumulated impairment charges as of June 30, 2017 and December 31, 2016. Intangible Assets Intangible assets consist of the following (in thousands): June 30, December 31, 2017 2016 Customer relationships $ 369,297 $ 360,328 Customer backlog 121,841 119,223 Trade names (definite-lived) 26,550 25,740 Patient list and other intangibles 44,474 28,974 Non-competition agreements 2,753 2,737 Total finite-lived intangible assets, gross 564,915 537,002 Accumulated amortization (202,697) (181,036) Total finite-lived intangible assets, net 362,218 355,966 Trade names (indefinite-lived) 118,010 118,010 Total intangible assets, net $ 480,228 $ 473,976 Amortization expe nse was $9.3 million and $18.2 milli on for the three and six months ended June 30, 2017, respectively, and $11.7 million and $23.0 million for the three and six months ended June 30, 2016, respectively. The estimated future amortization expense of finite-lived intangible assets is expected to be as follows (in thousands): 2017 (remaining) $ 19,565 2018 34,953 2019 29,636 2020 28,376 2021 26,255 2022 and thereafter 223,433 Total $ 362,218 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 and 2016 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 both years 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 2016 and it was concluded that the estimated fair value of the EDS reporting unit exceeded its carrying value by approximately $70.0 million, or 33%. 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 2017 or later. |
Long-Term Debt
Long-Term Debt | 6 Months Ended |
Jun. 30, 2017 | |
Long-Term Debt | |
Long-Term Debt | (7) Long-Term Debt Long-term debt consists of the following (in thousands): June 30, December 31, 2017 2016 Term loans, first lien $ 609,375 $ 625,000 Senior notes 91,441 91,441 Accounts receivable financing agreement 140,000 120,000 840,816 836,441 Less debt issuance costs and discount (7,352) (8,139) 833,464 828,302 Less current portion (39,063) (31,250) Total long-term debt, net $ 794,401 $ 797,052 Principal payments on long-term debt are due as follows (in thousands): 2017 (remaining) $ 15,625 2018 46,875 2019 186,875 2020 62,500 2021 437,500 2022 and thereafter 91,441 Total $ 840,816 2016 Credit Facilities As collateral for borrowings under the senior secured credit facilities, or 2016 Credit Facilities, the Company granted a pledge on primarily all of its assets, and the stock of wholly‑owned U.S. restricted subsidiaries. The Company is subject to certain financial covenants, which require the Company to maintain certain debt‑to‑EBITDA and interest expense-to-EBITDA ratios. The 2016 Credit Facilities also contain covenants that, among other things, restrict the Company’s ability to create any liens, make investments and acquisitions, incur or guarantee additional indebtedness, enter into mergers or consolidations and other fundamental changes, conduct sales and other dispositions of property or assets, enter into sale-leaseback transactions or hedge agreements, prepay subordinated debt, pay dividends or make other payments in respect of capital stock, change the line of business, enter into transactions with affiliates, enter into burdensome agreements with negative pledge clauses and clauses restriction, and make subsidiary distributions. After giving effect to the applicable restrictions on the payment of dividends under the 2016 Credit Facilities, subject to compliance with applicable law, as of June 30, 2017 and December 31, 2016, all amounts in retained earnings were free of restriction and were available for the payment of dividends. The Company does not expect to pay dividends in the foreseeable future. The Company does not expect these covenants to restrict its liquidity, financial condition or access to capital resources in the foreseeable future. The 2016 Credit Facilities also contains customary representations, warranties, affirmative covenants, and events of default. For the six months ended June 30, 2017, the weighted average interest rate on the first lien term loan was 2.97%. Revolving Credit Facilities The Company’s revolving credit facilities provide for $125.0 million of potential borrowings and expire on December 6, 2021. The interest rate on the revolving credit facilities is based on the LIBOR with a 0% LIBOR floor or ABR rate, at the election of the Company, plus an applicable margin, based on the leverage ratio of the Company. The Company, at its discretion, may elect interest periods of 1, 2, 3 or 6 months. The Company is required to pay to the lenders a commitment fee ranging from 0.2% to 0.4% based on the Company’s debt-to-EBITDA ratio. At June 30, 2017 and December 31, 2016, the Company had no outstanding borrowings under the revolving credit facilities. In addition, at June 30, 2017 and December 31, 2016, the Company had $3.9 million and $7.0 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 the FASB’s Accounting Standards Codification, or ASC, 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 for the six months ended June 30, 2016. The Senior Notes agreement contains certain provisions that restrict the payment of dividends from the Company’s subsidiaries to the parent company. As a result, there are no material balances present within the parent company that are available for the payment of dividends as the parent company did not have any net income during 2016 or the six months ended June 30, 2017, that was free of restrictions. The Company does not expect to pay dividends in the foreseeable future. Accounts Receivable Financing Agreement In March 2016, the Company entered into a $140.0 million accounts receivable financing agreement, of which $140.0 million and $120.0 million was outstanding as of June 30, 2017 and December 31, 2016, respectively. 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. For the six months ended June 30, 2017, the weighted average interest rate on the accounts receivable financing agreement was 2.76%. 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 December 31, 2016, there was $20.0 million of remaining capacity available under the accounts receivable financing agreement. At June 30, 2017, there was no remaining capacity available under the accounts receivable financing agreement. Fair Value of Debt The estimated fair value of the Company’s debt was $850.7 million and $844.2 million at June 30, 2017 and December 31, 2016, respectively. The fair value of the Senior Notes, which totaled $101.3 million and $99.2 million at June 30, 2017 and December 31, 2016, 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 $749.4 million and $745.0 million at June 30, 2017 and December 31, 2016, 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 | 6 Months Ended |
Jun. 30, 2017 | |
Stockholders' Equity | |
Stockholders' Equity | (8) 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. Noncontrolling Interest Below is a summary of noncontrolling interest for the six months ended June 30 (in thousands): 2017 2016 Balance as of January 1 $ — $ — Investment by noncontrolling interest 5,440 — Comprehensive income (loss) Net income 112 — Foreign currency adjustments, net of income tax (62) — Balance as of June 30 $ 5,490 $ — |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jun. 30, 2017 | |
Stock-Based Compensation | |
Stock-Based Compensation | (9) Stock-Based Compensation The Company granted 106,000 service-based options and 101,500 restricted stock awards and units, or RSAs/RSUs , with a total grant date fair value of $2.2 million and $6.0 million, respectively, during the six months ended June 30, 2017. Aggregated information regarding the Company’s option plans is summarized below: Wtd. Average Remaining Wtd. Average Contractual Life Intrinsic Value Options Exercise Price (in years) (millions) Outstanding at December 31, 2016 5,507,347 $ 15.38 6.7 $ 218.9 Granted 106,000 61.97 Exercised (1,048,615) 9.19 Expired or forfeited (64,875) 22.80 Outstanding at June 30, 2017 4,499,857 $ 17.81 6.7 $ 257.4 Exercisable at June 30, 2017 2,791,531 $ 12.73 6.3 $ 173.9 The Company’s RSAs/RSUs activity in 2017 is as follows: Wtd. Average Grant-Date Intrinsic Value Awards Fair Value (millions) Unvested at December 31, 2016 188,590 $ 32.63 $ 10.4 Granted 101,500 59.59 Forfeited (2,000) 58.95 Vested (5,805) 38.53 Unvested at June 30, 2017 282,285 $ 42.02 $ 21.2 Stock-based compensation expense related to employee stock options and RSAs/RSUs is summarized below (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Direct costs $ 705 $ 453 $ 1,252 $ 881 Selling, general and administrative 1,602 1,317 2,984 2,393 Transaction-related costs — 2,594 — 29,421 Total stock-based compensation expense $ 2,307 $ 4,364 $ 4,236 $ 32,695 All stock options granted under the 2013 Stock Incentive Plan for Key Employees of PRA Health Sciences, Inc. and its Subsidiaries, or the Plan, are subject to transfer restrictions of the stock option's underlying shares once vested and exercised. This lack of marketability was included as a discount when calculating the grant date value of these options. In conjunction with the March and May 2016 secondary offerings, the transfer restrictions on a portion of such shares issuable upon exercise of vested options granted under the Plan were released. The release of the transfer restrictions is considered a modification under ASC Topic 718, “Stock Compensation.” As a result of these modifications, the Company incurred approximately $1.9 million and $4.9 million of incremental compensation expense associated with service-based options during the three and six months ended June 30, 2016, which is included in transaction-related costs in the accompanying consolidated condensed statement of operations. In December 2013, the Company granted certain employees market-based options under the Plan 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. As a result of this modification, and the modification associated with the transfer restrictions releases noted above, the Company incurred approximately $0.7 million and $24.5 million of incremental compensation expense associated with the 2.0x Options during the three and six months ended June 30, 2016, which is included in transaction-related costs in the accompanying consolidated condensed statement of operations. Employee Stock Purchase Plan In April 2017, the Board of Directors approved the PRA Health Sciences, Inc. 2017 Employee Stock Purchase Plan (“ESPP”) which was approved by the Company’s shareholders on June 1, 2017. The ESPP allows eligible employees to authorize payroll deductions of up to 10% of their base salary or wages to be applied toward the purchase of shares of the Company’s common stock on the last trading day of the offering period. Participating employees will purchase shares of the Company's common stock at a discount of up to 15% on the lesser of the closing price of the Company's common stock on the NASDAQ Global Select Market (i) on the first trading day of the offering period or (ii) the last day of any offering period. Offering periods under the ESPP will generally be in six month increments, commencing on January 1 and July 1 of each calendar year with the compensation committee having the right to establish different offering periods. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2017 | |
Income Taxes | |
Income Taxes | (10) Income Taxes The Company’s effective income tax rate was 24.8% and 26.1% for the six months ended June 30, 2017 and 2016, respectively. The variation between the Company’s effective income tax rate and the U.S. statutory rate of 35% for the six months ended June 30, 2017 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 June 30, 2017, the Company’s liability for unrecognized tax benefits was $12.7 million. If any portion of this $12.7 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 $4.3 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, 2012 and prior. For U.S. state tax returns, the Company is generally no longer subject to tax examinations for years prior to 2012. For foreign purposes, the Company is generally no longer subject to examination for tax periods 2009 and prior. Certain carryforward tax attributes generated in prior years remain subject to examination and adjustment. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies | |
Commitments and Contingencies | (11) 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 $5.1 million at June 30, 2017, given that it is not deemed probable the Company will incur a loss related to this case. However, a deposit totaling $5.1 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. In 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 settled. |
Derivatives
Derivatives | 6 Months Ended |
Jun. 30, 2017 | |
Derivatives | |
Derivatives | (12) Derivatives The Company is exposed to certain risks relating to its 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 the Company’s derivatives as of June 30, 2017 and December 31, 2016 (in thousands): June 30, 2017 December 31, 2016 Balance Sheet Classification Notional Asset/ Notional Asset/ Derivatives in a liability position: Interest rate swap Other long-term liabilities 250,000 (118) 250,000 (590) 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 income (loss) for the three and six months ended June 30, 2017 and 2016 (in thousands): Three Months Ended June 30, Six Months Ended June 30, Derivatives in Cash Flow Hedging Relationships (Interest Rate Contracts) 2017 2016 2017 2016 Amount of pre-tax gain (loss) recognized in other comprehensive income (loss) on derivatives $ (245) $ (428) $ (67) $ (2,070) Amount of loss recognized in other income (expense), net on derivatives (ineffective portion) — — (1) — Amount of loss reclassified from accumulated other comprehensive loss into interest expense, net on derivatives (1,725) (1,123) (3,416) (2,022) The Company expects that $6.7 million of unrealized losses will be reclassified out of accumulated other comprehensive loss and into interest expense, net over the next 12 months. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 6 Months Ended |
Jun. 30, 2017 | |
Accumulated Other Comprehensive Loss | |
Accumulated Other Comprehensive Loss | (13) Accumulated Other Comprehensive Loss Below is a summary of the components of accumulated other comprehensive loss (in thousands): Foreign Derivative Total Balance at December 31, 2016 $ (201,091) $ (23,595) $ (224,686) Other comprehensive income before reclassifications, net of tax 48,275 (67) 48,208 Reclassification adjustments, net of tax — 3,416 3,416 Balance at June 30, 2017 $ (152,816) $ (20,246) $ (173,062) The change in our foreign currency translation adjustment was due primarily to the movements in the British Pound and Euro exchange rates against the U.S. dollar. The U.S. dollar weakened by 5.3% and 8.4% versus the British Pound and Euro, respectively, between December 31, 2016 and June 30, 2017. The movement in the British Pound and Euro represented $26.0 million and $18.5 million, respectively, out of the $48.3 million foreign currency translation adjustment during the six months ended June 30, 2017. The remaining foreign currency translation adjustment is primarily attributable to the U.S. dollar’s depreciation against other major world-wide currencies, including the Canadian dollar and the Russian ruble. |
Net Income Per Share
Net Income Per Share | 6 Months Ended |
Jun. 30, 2017 | |
Net Income Per Share | |
Net Income Per Share | (14) Net Income Per Share Basic net income per share is calculated by dividing net income by the weighted average number of common shares outstanding for the applicable period. Diluted net income per share is calculated after adjusting the denominator of the basic net 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 June 30, Six Months Ended June 30, 2017 2016 2017 2016 Basic weighted average common shares outstanding 62,232 60,597 61,908 60,398 Effect of dilutive stock options and RSAs/RSUs 3,495 3,813 3,678 3,741 Diluted weighted average common shares outstanding 65,727 64,410 65,586 64,139 Anti-dilutive shares 141 347 195 291 The anti-dilutive shares disclosed above were calculated using the treasury stock method. The treasury stock method calculates dilution assuming the exercise of all in-the-money options and vesting of RSAs/RSUs, reduced by the repurchase of shares with the proceeds from the assumed exercises, and unrecognized compensation expense for outstanding awards. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2017 | |
Subsequent Events | |
Subsequent Events (Unaudited) | (15) Subsequent Events On August 3, 2017, the Company entered into an Agreement and Plan of Merger related to the Company’s acquisition of Symphony Health Solutions Corporation and its subsidiary, collectively Symphony Health, for $530.0 million in cash plus a potential earn-out based on a multiple of future earnings. Symphony Health provides data and analytics, from predictive market analysis to patient influence, physician prescribing, pharmacy fulfillment, payer reimbursement, and sales compensation, to help professionals understand the full market lifecycle of products offered for sale by companies in the pharmaceutical industry. The acquisition is expected to close in the third quarter of 2017 and is subject to customary closing conditions, including regulatory approval. The Company plans to fund the acquisition with incremental borrowings under its term loan agreement . |
Basis of Presentation (Tables)
Basis of Presentation (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Basis of Presentation | |
Schedule of cash, cash equivalents, and restricted cash | June 30, December 31, 2017 2016 2016 2015 Cash and cash equivalents $ $ $ $ Restricted cash Total cash, cash equivalents, and restricted cash $ $ $ $ |
Business Combination (Tables)
Business Combination (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
TDC joint venture | |
Business Combination | |
Schedule of purchase price allocation | The Company’s preliminary estimate of the fair value of the net assets acquired as part of the TDC joint venture transaction at the closing date of the business combination is as follows (in thousands): Purchase Price Allocation Cash and cash equivalents $ 8,120 Other current assets 1,671 Other non-current assets 1,742 Accounts payable and accrued expenses (2,380) Other long-term liabilities (943) Estimated fair value of net assets acquired 8,210 PRA purchase price 5,440 Fair value of Takeda's noncontrolling interest 5,440 Total goodwill $ 2,670 |
Parallel 6 | |
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 $ 240 Accounts receivable 1,445 Other current assets 26 Software intangible 15,500 5 years Other intangibles 920 5 years Accounts payable and accrued expenses (746) Deferred revenue (302) Other long-term liabilities (2,665) Estimated fair value of net assets acquired 14,418 Purchase price, including contingent consideration 48,042 Total goodwill $ 33,624 |
Nextrials | |
Business Combination | |
Schedule of purchase price allocation | The Company’s purchase price allocation is as follows (in thousands): Purchase Weighted Price Amortization Allocation Period Cash and cash equivalents $ 94 Accounts receivable 211 Other current assets 96 Property, plant and equipment 111 Software intangible 5,574 5 years Accounts payable and accrued expenses (1,585) Other long-term liabilities (1,663) Estimated fair value of net assets acquired 2,838 Purchase price, including contingent consideration and net of working capital settlement 7,145 Total goodwill $ 4,307 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
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 June 30, 2017 (in thousands): Level 1 Level 2 Level 3 Total Assets: Marketable securities $ 350 $ — $ — $ 350 Total $ 350 $ — $ — $ 350 Liabilities: Interest rate swap $ — $ 118 $ — $ 118 Contingent consideration — — 10,779 10,779 Total $ — $ 118 $ 10,779 $ 10,897 |
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 six months ended June 30, 2017 (in thousands): Contingent Consideration - Accrued expenses and other long-term liabilities Balance at December 31, 2016 $ 2,754 Initial estimate of Parallel 6 contingent consideration 8,350 Payments on Nextrials contingent consideration (400) Revaluations included in earnings 75 Balance at June 30, 2017 $ 10,779 |
Concentration of Credit Risk (T
Concentration of Credit Risk (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Service revenue | |
Concentration risk | |
Schedule of concentration of risk by risk factor | Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Customer A |
Accounts receivable and unbilled receivables | |
Concentration risk | |
Schedule of concentration of risk by risk factor | June 30, December 31, 2017 2016 Customer A |
Accounts Receivable and Unbil27
Accounts Receivable and Unbilled Services (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Accounts Receivable and Unbilled Services | |
Schedule of accounts receivable and unbilled services | Accounts receivable and unbilled services were as follows (in thousands): June 30, December 31, 2017 2016 Accounts receivable $ 446,402 $ 284,647 Unbilled services 162,354 155,609 608,756 440,256 Less allowance for doubtful accounts (1,434) (1,203) Total accounts receivable and unbilled services, net $ 607,322 $ 439,053 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
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, 2016 $ 971,980 Acquisition of Parallel 6 33,624 Acquisition of TDC joint venture 2,670 Acquisition of TDS 391 Currency translation 16,533 Balance at June 30, 2017 $ 1,025,198 |
Schedule of intangible assets | Intangible assets consist of the following (in thousands): June 30, December 31, 2017 2016 Customer relationships $ 369,297 $ 360,328 Customer backlog 121,841 119,223 Trade names (definite-lived) 26,550 25,740 Patient list and other intangibles 44,474 28,974 Non-competition agreements 2,753 2,737 Total finite-lived intangible assets, gross 564,915 537,002 Accumulated amortization (202,697) (181,036) Total finite-lived intangible assets, net 362,218 355,966 Trade names (indefinite-lived) 118,010 118,010 Total intangible assets, net $ 480,228 $ 473,976 |
Schedule of estimated future amortization expense | The estimated future amortization expense of finite-lived intangible assets is expected to be as follows (in thousands): 2017 (remaining) $ 19,565 2018 34,953 2019 29,636 2020 28,376 2021 26,255 2022 and thereafter 223,433 Total $ 362,218 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Long-Term Debt | |
Schedule of long-term debt | Long-term debt consists of the following (in thousands): June 30, December 31, 2017 2016 Term loans, first lien $ 609,375 $ 625,000 Senior notes 91,441 91,441 Accounts receivable financing agreement 140,000 120,000 840,816 836,441 Less debt issuance costs and discount (7,352) (8,139) 833,464 828,302 Less current portion (39,063) (31,250) Total long-term debt, net $ 794,401 $ 797,052 |
Schedule of principal payments on long-term debt due | Principal payments on long-term debt are due as follows (in thousands): 2017 (remaining) $ 15,625 2018 46,875 2019 186,875 2020 62,500 2021 437,500 2022 and thereafter 91,441 Total $ 840,816 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Stockholders' Equity | |
Summary of noncontrolling interest | Below is a summary of noncontrolling interest for the six months ended June 30 (in thousands): 2017 2016 Balance as of January 1 $ — $ — Investment by noncontrolling interest 5,440 — Comprehensive income (loss) Net income 112 — Foreign currency adjustments, net of income tax (62) — Balance as of June 30 $ 5,490 $ — |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Stock-Based Compensation | |
Summary of stock option activity | Wtd. Average Remaining Wtd. Average Contractual Life Intrinsic Value Options Exercise Price (in years) (millions) Outstanding at December 31, 2016 5,507,347 $ 15.38 6.7 $ 218.9 Granted 106,000 61.97 Exercised (1,048,615) 9.19 Expired or forfeited (64,875) 22.80 Outstanding at June 30, 2017 4,499,857 $ 17.81 6.7 $ 257.4 Exercisable at June 30, 2017 2,791,531 $ 12.73 6.3 $ 173.9 |
Schedule of RSA/RSU activity | Wtd. Average Grant-Date Intrinsic Value Awards Fair Value (millions) Unvested at December 31, 2016 188,590 $ 32.63 $ 10.4 Granted 101,500 59.59 Forfeited (2,000) 58.95 Vested (5,805) 38.53 Unvested at June 30, 2017 282,285 $ 42.02 $ 21.2 |
Schedule of stock-based compensation expense | Stock-based compensation expense related to employee stock options and RSAs/RSUs is summarized below (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Direct costs $ 705 $ 453 $ 1,252 $ 881 Selling, general and administrative 1,602 1,317 2,984 2,393 Transaction-related costs — 2,594 — 29,421 Total stock-based compensation expense $ 2,307 $ 4,364 $ 4,236 $ 32,695 |
Derivatives (Tables)
Derivatives (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
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 the Company’s derivatives as of June 30, 2017 and December 31, 2016 (in thousands): June 30, 2017 December 31, 2016 Balance Sheet Classification Notional Asset/ Notional Asset/ Derivatives in a liability position: Interest rate swap Other long-term liabilities 250,000 (118) 250,000 (590) |
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 income (loss) for the three and six months ended June 30, 2017 and 2016 (in thousands): Three Months Ended June 30, Six Months Ended June 30, Derivatives in Cash Flow Hedging Relationships (Interest Rate Contracts) 2017 2016 2017 2016 Amount of pre-tax gain (loss) recognized in other comprehensive income (loss) on derivatives $ (245) $ (428) $ (67) $ (2,070) Amount of loss recognized in other income (expense), net on derivatives (ineffective portion) — — (1) — Amount of loss reclassified from accumulated other comprehensive loss into interest expense, net on derivatives (1,725) (1,123) (3,416) (2,022) |
Accumulated Other Comprehensi33
Accumulated Other Comprehensive Loss (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
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 Derivative Total Balance at December 31, 2016 $ (201,091) $ (23,595) $ (224,686) Other comprehensive income before reclassifications, net of tax 48,275 (67) 48,208 Reclassification adjustments, net of tax — 3,416 3,416 Balance at June 30, 2017 $ (152,816) $ (20,246) $ (173,062) |
Net Income Per Share (Tables)
Net Income Per Share (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Net 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 June 30, Six Months Ended June 30, 2017 2016 2017 2016 Basic weighted average common shares outstanding 62,232 60,597 61,908 60,398 Effect of dilutive stock options and RSAs/RSUs 3,495 3,813 3,678 3,741 Diluted weighted average common shares outstanding 65,727 64,410 65,586 64,139 Anti-dilutive shares 141 347 195 291 |
Basis of Presentation - Recentl
Basis of Presentation - Recently Implemented Accounting Pronouncements (Details) - USD ($) $ in Thousands | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jan. 01, 2017 | Dec. 31, 2016 | |
Recently Implemented Accounting Pronouncements | ||||
Retained earnings | $ 129,025 | $ 74,255 | ||
Operating cash flows | 15,937 | $ 24,052 | ||
Financing cash flows | $ 6,785 | (31,017) | ||
Accounting Standards Update 2016-09 | ||||
Recently Implemented Accounting Pronouncements | ||||
Retained earnings | $ 0 | |||
Scenario, Adjustment | Accounting Standards Update 2016-09 | ||||
Recently Implemented Accounting Pronouncements | ||||
Deferred tax liabilities | (12,700) | |||
Valuation allowance | $ 12,700 | |||
New Accounting Pronouncement, Early Adoption, Effect | Accounting Standards Update 2016-15 | ||||
Recently Implemented Accounting Pronouncements | ||||
Operating cash flows | 17,800 | |||
Financing cash flows | $ (17,800) |
Basis of Presentation - Restric
Basis of Presentation - Restricted Cash (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2016 | Dec. 31, 2015 |
Cash, cash equivalents, and restricted cash | ||||
Cash and cash equivalents | $ 113,400 | $ 144,623 | $ 95,903 | $ 121,065 |
Restricted cash | 1,578 | 4,715 | 5,015 | 5,060 |
Total cash, cash equivalents, and restricted cash | $ 114,978 | $ 149,338 | $ 100,918 | $ 126,125 |
Business Combination (Details)
Business Combination (Details) - USD ($) $ in Thousands | Jun. 01, 2017 | May 10, 2017 | Mar. 18, 2016 | Jun. 30, 2017 | Dec. 31, 2016 |
Purchase price allocation | |||||
Total goodwill | $ 1,025,198 | $ 971,980 | |||
TDS | |||||
Business Combination | |||||
Cash paid | $ 100 | ||||
Goodwill not deductible for tax purposes | 400 | ||||
TDC joint venture | |||||
Business Combination | |||||
Cash paid | $ 5,400 | ||||
Equity interest percentage in VIE | 50.00% | ||||
Period after which buy-out of the noncontrolling interest of the Variable Interest Entity (VIE) is required | 2 years | ||||
Goodwill not deductible for tax purposes | $ 2,700 | ||||
Purchase price allocation | |||||
Cash and cash equivalents | 8,120 | ||||
Other current assets | 1,671 | ||||
Other non-current assets | 1,742 | ||||
Accounts payable and accrued expenses | (2,380) | ||||
Other long-term liabilities | (943) | ||||
Estimated fair value of net assets acquired | 8,210 | ||||
Purchase price | 5,440 | ||||
Fair value of Takeda's noncontrolling interest | 5,440 | ||||
Total goodwill | 2,670 | ||||
TDC joint venture | Selling, general, and administrative expenses | |||||
Business Combination | |||||
Acquisition-related costs | $ 600 | ||||
TDC joint venture | Maximum | |||||
Business Combination | |||||
Period to complete the final valuation of net assets acquired | 1 year | ||||
Parallel 6 | |||||
Business Combination | |||||
Cash paid | $ 39,700 | ||||
Goodwill not deductible for tax purposes | 33,600 | ||||
Purchase price allocation | |||||
Cash and cash equivalents | 240 | ||||
Accounts receivable | 1,445 | ||||
Other current assets | 26 | ||||
Accounts payable and accrued expenses | (746) | ||||
Deferred revenue | (302) | ||||
Other long-term liabilities | (2,665) | ||||
Estimated fair value of net assets acquired | 14,418 | ||||
Purchase price | 48,042 | ||||
Total goodwill | 33,624 | ||||
Parallel 6 | Selling, general, and administrative expenses | |||||
Business Combination | |||||
Acquisition-related costs | $ 1,300 | ||||
Parallel 6 | Maximum | |||||
Business Combination | |||||
Period to complete the final valuation of net assets acquired | 1 year | ||||
Parallel 6 | Level 3 | Other long-term liabilities | |||||
Business Combination | |||||
Contingent liability recognized | 8,400 | ||||
Parallel 6 | Software intangible | |||||
Purchase price allocation | |||||
Intangible assets | $ 15,500 | ||||
Weighted amortization period | 5 years | ||||
Parallel 6 | Other intangible assets | |||||
Purchase price allocation | |||||
Intangible assets | $ 920 | ||||
Weighted amortization period | 5 years | ||||
Nextrials | |||||
Business Combination | |||||
Cash paid | $ 4,800 | ||||
Goodwill not deductible for tax purposes | 4,300 | ||||
Purchase price allocation | |||||
Cash and cash equivalents | 94 | ||||
Accounts receivable | 211 | ||||
Other current assets | 96 | ||||
Property, plant and equipment | 111 | ||||
Accounts payable and accrued expenses | (1,585) | ||||
Other long-term liabilities | (1,663) | ||||
Estimated fair value of net assets acquired | 2,838 | ||||
Purchase price | 7,145 | ||||
Total goodwill | 4,307 | ||||
Nextrials | Software intangible | |||||
Purchase price allocation | |||||
Intangible assets | $ 5,574 | ||||
Weighted amortization period | 5 years | ||||
Takeda | TDC joint venture | |||||
Business Combination | |||||
Noncontrolling interest ownership percentage | 50.00% | ||||
Contingent Earn-out Payments | Nextrials | |||||
Business Combination | |||||
Potential contingent earn-out payments | $ 3,000 | ||||
Earn-out period for contingent consideration | 30 months | ||||
Increase in fair value of contingent consideration | 100 | ||||
Payment of contingent consideration | 400 | ||||
Contingent Earn-out Payments | Nextrials | Accrued expenses and other current liabilities | |||||
Business Combination | |||||
Contingent liability, current | $ 1,400 | ||||
Contingent Earn-out Payments | Nextrials | Level 3 | |||||
Business Combination | |||||
Contingent liability recognized | $ 2,300 | ||||
Contingent Earn-out Payments - Milestones | Nextrials | |||||
Business Combination | |||||
Potential contingent earn-out payments | 2,000 | ||||
Contingent Earn-out Payments - Sales Targets | Parallel 6 | |||||
Business Combination | |||||
Potential contingent earn-out payments | $ 10,000 | ||||
Earn-out period for contingent consideration | 18 months | ||||
Contingent Earn-out Payments - Sales Targets | Nextrials | |||||
Business Combination | |||||
Potential contingent earn-out payments | $ 1,000 |
Fair Value Measurements - Summa
Fair Value Measurements - Summary of Financial Assets and Liabilities Measured on a Recurring Basis (Details) - Recurring $ in Thousands | Jun. 30, 2017USD ($) |
Assets: | |
Assets fair value | $ 350 |
Liabilities: | |
Liabilities fair value | 10,897 |
Interest rate swaps | |
Liabilities: | |
Liabilities fair value | 118 |
Contingent consideration | |
Liabilities: | |
Liabilities fair value | 10,779 |
Marketable securities | |
Assets: | |
Assets fair value | 350 |
Level 1 | |
Assets: | |
Assets fair value | 350 |
Level 1 | Marketable securities | |
Assets: | |
Assets fair value | 350 |
Level 2 | |
Liabilities: | |
Liabilities fair value | 118 |
Level 2 | Interest rate swaps | |
Liabilities: | |
Liabilities fair value | 118 |
Level 3 | |
Liabilities: | |
Liabilities fair value | 10,779 |
Level 3 | Contingent consideration | |
Liabilities: | |
Liabilities fair value | $ 10,779 |
Fair Value Measurements - Level
Fair Value Measurements - Level 3 (Details) - Recurring - Level 3 - Contingent consideration $ in Thousands | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Changes in the fair value of the Company's Level 3 financial liabilities | |
Beginning balance | $ 2,754 |
Revaluations included in earnings | 75 |
Ending balance | 10,779 |
Parallel 6 | |
Changes in the fair value of the Company's Level 3 financial liabilities | |
Initial estimate of contingent consideration | 8,350 |
Nextrials | |
Changes in the fair value of the Company's Level 3 financial liabilities | |
Payments on contingent consideration | $ (400) |
Fair Value Measurements - Non-r
Fair Value Measurements - Non-recurring Fair Value Measurements (Details) - Nonrecurring - Level 3 $ in Millions | Jun. 30, 2017USD ($) |
Assets fair value measurements | |
Assets fair value | $ 1,505.4 |
Goodwill | 1,025.2 |
Identifiable intangible assets | $ 480.2 |
Concentration of Credit Risk (D
Concentration of Credit Risk (Details) - Customer Concentration Risk - Customer A | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Service revenue | |||||
Concentration risk | |||||
Concentration risk percentage | 10.60% | 11.00% | 10.90% | 10.30% | |
Accounts receivable and unbilled receivables | |||||
Concentration risk | |||||
Concentration risk percentage | 14.30% | 12.00% |
Accounts Receivable and Unbil42
Accounts Receivable and Unbilled Services (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Accounts Receivable and Unbilled Services | ||
Accounts receivable | $ 446,402 | $ 284,647 |
Unbilled services | 162,354 | 155,609 |
Total accounts receivable, gross | 608,756 | 440,256 |
Less allowance for doubtful accounts | (1,434) | (1,203) |
Total accounts receivable and unbilled services, net | $ 607,322 | $ 439,053 |
Goodwill and Intangible Asset43
Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Changes in carrying amount of goodwill | |||||
Balance at the beginning of the period | $ 971,980 | ||||
Currency translation | 16,533 | ||||
Balance at the end of the period | $ 1,025,198 | 1,025,198 | |||
Accumulated impairment charges | 0 | 0 | $ 0 | ||
Intangible Assets | |||||
Total finite-lived intangible assets, gross | 564,915 | 564,915 | 537,002 | ||
Accumulated amortization | (202,697) | (202,697) | (181,036) | ||
Total finite-lived intangible assets, net | 362,218 | 362,218 | 355,966 | ||
Trade names (indefinite-lived) | 118,010 | 118,010 | 118,010 | ||
Total intangible assets, net | 480,228 | 480,228 | 473,976 | ||
Amortization expense | 9,300 | $ 11,700 | 18,200 | $ 23,000 | |
Estimated future amortization expense: | |||||
2017 (remaining) | 19,565 | 19,565 | |||
2,018 | 34,953 | 34,953 | |||
2,019 | 29,636 | 29,636 | |||
2,020 | 28,376 | 28,376 | |||
2,021 | 26,255 | 26,255 | |||
2022 and thereafter | 223,433 | 223,433 | |||
Total finite-lived intangible assets, net | 362,218 | 362,218 | 355,966 | ||
Customer relationships | |||||
Intangible Assets | |||||
Total finite-lived intangible assets, gross | 369,297 | 369,297 | 360,328 | ||
Customer backlog | |||||
Intangible Assets | |||||
Total finite-lived intangible assets, gross | 121,841 | 121,841 | 119,223 | ||
Trade names (definite-lived) | |||||
Intangible Assets | |||||
Total finite-lived intangible assets, gross | 26,550 | 26,550 | 25,740 | ||
Patient list and other intangibles | |||||
Intangible Assets | |||||
Total finite-lived intangible assets, gross | 44,474 | 44,474 | 28,974 | ||
Non-competition agreements | |||||
Intangible Assets | |||||
Total finite-lived intangible assets, gross | $ 2,753 | 2,753 | 2,737 | ||
EDS | |||||
Goodwill Impairment Testing | |||||
Fair value of reporting unit in excess of carrying amount | $ 70,000 | ||||
Percent of fair value of reporting unit in excess of carrying amount | 33.00% | ||||
Parallel 6 | |||||
Changes in carrying amount of goodwill | |||||
Acquisition | 33,624 | ||||
TDC joint venture | |||||
Changes in carrying amount of goodwill | |||||
Acquisition | 2,670 | ||||
TDS | |||||
Changes in carrying amount of goodwill | |||||
Acquisition | $ 391 |
Long-Term Debt - Summary (Detai
Long-Term Debt - Summary (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Long-term debt | ||
Long-term debt, gross | $ 840,816 | $ 836,441 |
Less debt issuance costs and discount | (7,352) | (8,139) |
Total | 833,464 | 828,302 |
Less current portion | (39,063) | (31,250) |
Total long-term debt, net | 794,401 | 797,052 |
First Lien Term Loan | ||
Long-term debt | ||
Long-term debt, gross | 609,375 | 625,000 |
Senior Notes | ||
Long-term debt | ||
Long-term debt, gross | 91,441 | 91,441 |
Accounts Receivable Financing Agreement | ||
Long-term debt | ||
Long-term debt, gross | $ 140,000 | $ 120,000 |
Long-Term Debt - Future Princip
Long-Term Debt - Future Principal Payments (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Principal payments on long-term debt | ||
2017 (remaining) | $ 15,625 | |
2,018 | 46,875 | |
2,019 | 186,875 | |
2,020 | 62,500 | |
2,021 | 437,500 | |
2022 and thereafter | 91,441 | |
Total | $ 840,816 | $ 836,441 |
Long-Term Debt - Credit Facilit
Long-Term Debt - Credit Facilities (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2016 | |
First Lien Term Loan | ||
Long-term debt | ||
Weighted average interest rate (as a percent) | 2.97% | |
2016 Credit Facilities | Revolving Credit Facility | ||
Long-term debt | ||
Maximum borrowing capacity | $ 125 | |
Interest period, option one | 1 month | |
Interest period, option two | 2 months | |
Interest period, option three | 3 months | |
Interest period, option four | 6 months | |
Outstanding borrowings | $ 0 | $ 0 |
Outstanding letters of credit | $ 3.9 | $ 7 |
2016 Credit Facilities | Revolving Credit Facility | Minimum | ||
Long-term debt | ||
Commitment fee (as a percent) | 0.20% | |
2016 Credit Facilities | Revolving Credit Facility | Maximum | ||
Long-term debt | ||
Commitment fee (as a percent) | 0.40% | |
2016 Credit Facilities | Revolving Credit Facility | LIBOR | ||
Long-term debt | ||
Variable rate basis | LIBOR | |
2016 Credit Facilities | Revolving Credit Facility | LIBOR | Minimum | ||
Long-term debt | ||
Variable base rate minimum floor (as a percent) | 0.00% | |
2016 Credit Facilities | Revolving Credit Facility | ABR | ||
Long-term debt | ||
Variable rate basis | ABR |
Long-Term Debt - Senior Notes a
Long-Term Debt - Senior Notes and AR Financing Agreement (Details) - USD ($) $ in Thousands | Mar. 17, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | Mar. 31, 2016 |
Long-term debt | |||||
Loss on extinguishment of debt | $ 21,485 | ||||
Fair Value of Debt | |||||
Estimated fair value of long-term debt | $ 850,700 | $ 844,200 | |||
Senior Notes | |||||
Long-term debt | |||||
Interest rate (as a percent) | 9.50% | ||||
Repayment of principal | $ 133,600 | ||||
Prepayment penalty | 17,400 | ||||
Write-off of unamortized debt issuance costs | 3,700 | ||||
Fees associated with extinguishment of debt | 400 | ||||
Loss on extinguishment of debt | $ 21,500 | ||||
Accounts Receivable Financing Agreement | |||||
Long-term debt | |||||
Maximum borrowing capacity | $ 140,000 | ||||
Outstanding borrowings | $ 140,000 | 120,000 | |||
Notice period for prepayment of loans | 1 day | ||||
Notice period required for termination of agreement | 15 days | ||||
Weighted average interest rate (as a percent) | 2.76% | ||||
Remaining borrowing capacity | $ 0 | 20,000 | |||
LIBOR | Accounts Receivable Financing Agreement | |||||
Long-term debt | |||||
Variable rate basis | LIBOR | ||||
Applicable margin on variable rate basis (as a percent) | 1.60% | ||||
ABR | Accounts Receivable Financing Agreement | |||||
Long-term debt | |||||
Variable rate basis | base rate | ||||
Applicable margin on variable rate basis (as a percent) | 1.60% | ||||
Level 2 | Senior Notes | |||||
Fair Value of Debt | |||||
Fair value of Senior Notes | $ 101,300 | 99,200 | |||
Level 3 | |||||
Fair Value of Debt | |||||
Fair value of the term loans, borrowings under credit facilities, and accounts receivable financing agreement | $ 749,400 | $ 745,000 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - $ / shares | Jun. 30, 2017 | Dec. 31, 2016 |
Stockholders' Equity | ||
Common stock, shares authorized | 1,000,000,000 | 1,000,000,000 |
Common stock, par value (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 |
Stockholders' Equity - Noncontr
Stockholders' Equity - Noncontrolling Interest (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2017 | Jun. 30, 2017 | |
Summary of noncontrolling interest | ||
Investment by noncontrolling interest | $ 5,440 | |
Comprehensive income (loss) | ||
Net income | $ 112 | 112 |
Foreign currency adjustments, net of income tax | (62) | |
Balance at end of period | $ 5,490 | $ 5,490 |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock Options (Details) - USD ($) $ / shares in Units, $ in Millions | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017 | Dec. 31, 2016 | |
Restricted Stock Awards (RSAs) | ||
Stock-Based Compensation | ||
Restricted stock awards granted in period | 101,500 | |
Total grant date fair value of awards granted | $ 6 | |
Employee stock options | ||
Options | ||
Outstanding at beginning of period (in shares) | 5,507,347 | |
Granted (in shares) | 106,000 | |
Exercised (in shares) | (1,048,615) | |
Expired or forfeited (in shares) | (64,875) | |
Outstanding at end of period (in shares) | 4,499,857 | 5,507,347 |
Exercisable (in shares) | 2,791,531 | |
Weighted Average Exercise Price | ||
Outstanding at beginning of period (in dollars per share) | $ 15.38 | |
Granted (in dollars per share) | 61.97 | |
Exercised (in dollars per share) | 9.19 | |
Expired or forfeited (in dollars per share) | 22.80 | |
Outstanding at end of period (in dollars per share) | 17.81 | $ 15.38 |
Exercisable (in dollars per share) | $ 12.73 | |
Other disclosures: | ||
Weighted average remaining contractual life, Outstanding | 6 years 8 months 12 days | 6 years 8 months 12 days |
Weighted average remaining contractual life, Exercisable | 6 years 3 months 18 days | |
Intrinsic value, Outstanding | $ 257.4 | $ 218.9 |
Intrinsic value, Exercisable | 173.9 | |
Service-based options | Employee stock options | ||
Stock-Based Compensation | ||
Total grant date fair value of awards granted | $ 2.2 | |
Options | ||
Granted (in shares) | 106,000 |
Stock-Based Compensation - Rest
Stock-Based Compensation - Restricted Stock Awards and Units (Details) - RSAs and RSUs - USD ($) $ / shares in Units, $ in Millions | 6 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2016 | |
Stock-Based Compensation | ||
Outstanding at beginning of period (in shares) | 188,590 | |
Granted (in shares) | 101,500 | |
Forfeited (in shares) | (2,000) | |
Vested (in shares) | (5,805) | |
Outstanding at end of period (in shares) | 282,285 | |
Weighted Average Grant-Date Fair Value | ||
Outstanding at beginning of period (in dollars per share) | $ 32.63 | |
Granted (in dollars per share) | 59.59 | |
Forfeited (in dollars per share) | 58.95 | |
Vested (in dollars per share) | 38.53 | |
Outstanding at end of period (in dollars per share) | $ 42.02 | |
Intrinsic Value | ||
Outstanding at end of period | $ 21.2 | $ 10.4 |
Stock-Based Compensation - St52
Stock-Based Compensation - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands | Mar. 02, 2016 | Jan. 20, 2016 | Dec. 31, 2013 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 |
Stock options, RSAs and RSUs | |||||||
Stock-based compensation | |||||||
Compensation expense | $ 2,307 | $ 4,364 | $ 4,236 | $ 32,695 | |||
Stock options, RSAs and RSUs | Direct costs | |||||||
Stock-based compensation | |||||||
Compensation expense | 705 | 453 | 1,252 | 881 | |||
Stock options, RSAs and RSUs | Selling, general, and administrative expenses | |||||||
Stock-based compensation | |||||||
Compensation expense | $ 1,602 | 1,317 | $ 2,984 | 2,393 | |||
Stock options, RSAs and RSUs | Transaction-related costs | |||||||
Stock-based compensation | |||||||
Compensation expense | 2,594 | 29,421 | |||||
2013 Plan | Stock options, RSAs and RSUs | Transaction-related costs | |||||||
Stock-based compensation | |||||||
Compensation expense | 1,900 | 4,900 | |||||
2013 Plan | Employee stock options | 2.0x Options | |||||||
Stock-based compensation | |||||||
Compensation expense | $ 0 | $ 0 | |||||
Number of stock options modified | 835,551 | ||||||
2013 Plan | Employee stock options | 2.0x Options | Transaction-related costs | |||||||
Stock-based compensation | |||||||
Incremental compensation expense | $ 700 | $ 24,500 |
Stock-Based Compensation - Empl
Stock-Based Compensation - Employee Stock Purchase Plan (Details) - 2017 Employee Stock Purchase Plan | 6 Months Ended |
Jun. 30, 2017 | |
Employee Stock Purchase Plan | |
Offering period increments under the ESPP | 6 months |
Maximum | |
Employee Stock Purchase Plan | |
Payroll deduction, as a percentage of base wages, an employee may authorize to be applied toward the purchase of common stock under the ESPP | 10.00% |
Percentage of discount on the purchase price of common stock during the offering period under the ESPP | 15.00% |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Income Taxes | ||
Effective income tax rate (as a percent) | 24.80% | 26.10% |
U.S. statutory rate (as a percent) | 35.00% | |
Liability for unrecognized tax benefits | $ 12.7 | |
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 | $ 4.3 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - Tax related claim on export of services provided $ in Millions | Jun. 30, 2017USD ($) |
Commitments and Contingencies | |
Amount of tax claimed to be due in litigation | $ 5.1 |
Other assets | |
Commitments and Contingencies | |
Deposit made to Brazilian court in tax litigation | $ 5.1 |
Derivatives - Hedging Instrumen
Derivatives - Hedging Instruments (Details) - Interest rate swaps - Designated as hedging instruments - Level 2 - Other long-term liabilities - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Derivatives in a liability position: | ||
Notional amount | $ 250,000 | $ 250,000 |
Liability | $ (118) | $ (590) |
Derivatives - Cash Flow Hedging
Derivatives - Cash Flow Hedging Instruments (Details) - Cash flow hedging - Interest rate contracts - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Effect of derivatives on the consolidated statements of operations and comprehensive income (loss) | ||||
Amount of pre-tax gain (loss) recognized in other comprehensive income (loss) on derivatives | $ (245) | $ (428) | $ (67) | $ (2,070) |
Amount of loss recognized in other income (expense), net on derivatives (ineffective portion) | (1) | |||
Amount of loss reclassified from accumulated other comprehensive loss into interest expense, net on derivatives | $ (1,725) | $ (1,123) | (3,416) | $ (2,022) |
Unrealized losses expected to be reclassified out of accumulated other comprehensive loss into interest expense over the next 12 months | $ 6,700 |
Accumulated Other Comprehensi58
Accumulated Other Comprehensive Loss - Components (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Summary of components of accumulated other comprehensive loss | |
Beginning balance | $ (224,686) |
End balance | (173,062) |
Foreign Currency Translation | |
Summary of components of accumulated other comprehensive loss | |
Beginning balance | (201,091) |
Other comprehensive income before reclassifications, net of tax | 48,275 |
End balance | (152,816) |
Foreign Currency Translation | British Pound (GBP) | |
Summary of components of accumulated other comprehensive loss | |
Other comprehensive income before reclassifications, net of tax | $ 26,000 |
Change in valuation of U.S. Dollar during the period (as a percent) | (5.30%) |
Foreign Currency Translation | Euro (EUR) | |
Summary of components of accumulated other comprehensive loss | |
Other comprehensive income before reclassifications, net of tax | $ 18,500 |
Change in valuation of U.S. Dollar during the period (as a percent) | (8.40%) |
Derivative Instruments | |
Summary of components of accumulated other comprehensive loss | |
Beginning balance | $ (23,595) |
Other comprehensive income before reclassifications, net of tax | (67) |
Reclassification adjustments, net of tax | 3,416 |
End balance | (20,246) |
Accumulated Other Comprehensive (Loss) Income | |
Summary of components of accumulated other comprehensive loss | |
Beginning balance | (224,686) |
Other comprehensive income before reclassifications, net of tax | 48,208 |
Reclassification adjustments, net of tax | 3,416 |
End balance | $ (173,062) |
Net Income Per Share (Details)
Net Income Per Share (Details) - shares shares in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Reconciliation of basic to diluted weighted average shares outstanding | ||||
Basic weighted average common shares outstanding | 62,232 | 60,597 | 61,908 | 60,398 |
Effect of dilutive stock options and RSAs/RSUs | 3,495 | 3,813 | 3,678 | 3,741 |
Diluted weighted average common shares outstanding | 65,727 | 64,410 | 65,586 | 64,139 |
Anti-dilutive shares | 141 | 347 | 195 | 291 |
Subsequent Events (Details)
Subsequent Events (Details) $ in Millions | Aug. 03, 2017USD ($) |
Symphony Health | Subsequent event | |
Business Combination | |
Cash consideration | $ 530 |