x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock, par value $0.01 per share
|
PPD
|
The NASDAQ Stock Market LLC
(Nasdaq Global Select Market)
|
Large accelerated filer
|
o
|
Accelerated filer
|
o
|
Non-accelerated filer
|
x
|
Smaller reporting company
|
o
|
|
|
Emerging growth company
|
o
|
Class
|
|
Number of Shares Outstanding
|
Common Stock $0.01 par value
|
|
348,584,371 shares outstanding as of April 30, 2020
|
•
|
the magnitude, continued duration, geographic reach and ongoing impact on the global economy and capital and credit markets of the COVID-19 pandemic;
|
•
|
the current and uncertain future impact from the COVID-19 pandemic on our business, growth, reputation, prospects, financial condition, results of operations (including components of our financial results), cash flows and liquidity;
|
•
|
the fragmented and highly competitive nature of the drug development services industry;
|
•
|
changes in trends in the biopharmaceutical industry, including decreases in research and development spending and outsourcing;
|
•
|
our ability to keep pace with rapid technological changes that could make our services less competitive or obsolete;
|
•
|
the United States and international healthcare industry is subject to political, economic and/or regulatory influences and changes, such as healthcare reform, all of which could adversely affect both our customers’ and our businesses;
|
•
|
any failure of our backlog to accurately predict or convert into future revenue;
|
•
|
the fact that our customers can terminate, delay or reduce the scope of our contracts with them upon short notice or with no notice;
|
•
|
the impact of industry, customer and therapeutic area concentration;
|
•
|
our ability to accurately price our contracts and manage our costs associated with performance of such contracts;
|
•
|
any failures in our information and communication systems, including cybersecurity breaches, impacting us or our customers, clinical trial participants or employees;
|
•
|
any failure to perform services in accordance with contractual requirements, regulatory standards and ethical standards;
|
•
|
our ability to recruit, retain and motivate key personnel, including the loss of any key executive who becomes seriously ill with COVID-19;
|
•
|
our ability to attract suitable investigators or enroll a sufficient number of patients for our customers’ clinical trials;
|
•
|
any failure by us to comply with numerous privacy laws;
|
•
|
our dependence on third parties for critical goods and support services, including a significant impact from the COVID-19 pandemic on our suppliers;
|
•
|
our dependence on our technology network, and the impact from upgrades to the network;
|
•
|
any violation of laws, including laws governing the conduct of clinical trials or other biopharmaceutical research, and anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the United Kingdom Bribery Act of 2010;
|
•
|
competition between our existing and potential customers and the potential negative impact on our business;
|
•
|
our management of business restructuring transactions and the integration of acquisitions;
|
•
|
risks related to the drug development services industry that could result in potential liability that could affect our business, reputation and financial condition;
|
•
|
any failure of our insurance to cover the potential liabilities, including indemnification obligations, associated with the operation of our business and provision of services;
|
•
|
our use of biological and hazardous materials, which could violate law or cause injury or death, resulting in liability;
|
•
|
disruptions to our operations by the occurrence of a natural disaster, pandemic (such as the COVID-19 pandemic), or other catastrophic events;
|
•
|
international or U.S. economic, currency, political and other risks, such as those from the COVID-19 pandemic;
|
•
|
economic conditions and regulatory changes relating to the United Kingdom’s exit from the European Union;
|
•
|
any inability to adequately protect our intellectual property or the security of our systems and the data stored therein;
|
•
|
consolidation amongst our customers, and the potential for rationalization of the combined drug development pipeline, resulting in fewer products in clinical development;
|
•
|
any patent or other intellectual property litigation we might be involved in;
|
•
|
changes in tax laws, such as U.S. tax reform, or interpretations of existing tax laws;
|
•
|
our investments in third parties, which are illiquid and subject to loss;
|
•
|
the substantial value of our goodwill and intangible assets, which we might not fully realize, resulting in impairment losses;
|
•
|
difficult and volatile conditions in the capital and credit markets and in the overall economy, including those caused by the COVID-19 pandemic;
|
•
|
risks related to our indebtedness;
|
•
|
risks related to ownership of our common stock;
|
•
|
the significant influence certain stockholders have over us; and
|
•
|
other factors beyond our control.
|
Item
|
|
Page
|
|
|
|
|
PART I - FINANCIAL INFORMATION
|
|
1.
|
||
|
||
|
|
|
|
||
|
||
|
|
|
|
||
|
|
|
|
||
|
||
2.
|
||
3.
|
||
4.
|
||
|
|
|
|
PART II - OTHER INFORMATION
|
|
1.
|
||
1A.
|
||
2.
|
||
3.
|
||
4.
|
||
5.
|
||
6.
|
||
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Revenue
|
$
|
1,072,462
|
|
|
$
|
963,738
|
|
|
|
|
|
||||
Operating costs and expenses:
|
|
|
|
||||
Direct costs, exclusive of depreciation and amortization
|
414,439
|
|
|
367,202
|
|
||
Reimbursed costs
|
250,850
|
|
|
225,019
|
|
||
Selling, general and administrative expenses
|
247,776
|
|
|
218,380
|
|
||
Depreciation and amortization
|
66,315
|
|
|
65,418
|
|
||
Total operating costs and expenses
|
979,380
|
|
|
876,019
|
|
||
Income from operations
|
93,082
|
|
|
87,719
|
|
||
Interest expense, net of interest income of $1,270 and $1,492 for the
|
|
|
|
||||
three months ended March 31, 2020 and 2019, respectively
|
(64,710
|
)
|
|
(66,523
|
)
|
||
Loss on extinguishment of debt
|
(50,065
|
)
|
|
—
|
|
||
Loss on investments
|
(26,872
|
)
|
|
(14,100
|
)
|
||
Other income (expense), net
|
29,294
|
|
|
(24,301
|
)
|
||
Loss before benefit from income taxes
|
(19,271
|
)
|
|
(17,205
|
)
|
||
Benefit from income taxes
|
(7,717
|
)
|
|
(3,299
|
)
|
||
Loss before equity in losses of unconsolidated affiliates
|
(11,554
|
)
|
|
(13,906
|
)
|
||
Equity in losses of unconsolidated affiliates, net of income taxes
|
(1,566
|
)
|
|
(328
|
)
|
||
Net loss
|
(13,120
|
)
|
|
(14,234
|
)
|
||
Net income attributable to noncontrolling interest
|
(2,718
|
)
|
|
(861
|
)
|
||
Net loss attributable to PPD, Inc.
|
(15,838
|
)
|
|
(15,095
|
)
|
||
Recapitalization investment portfolio consideration
|
20,062
|
|
|
10,628
|
|
||
Net income (loss) attributable to common stockholders of PPD, Inc.
|
$
|
4,224
|
|
|
$
|
(4,467
|
)
|
|
|
|
|
||||
Income (loss) per share attributable to common stockholders of PPD, Inc.:
|
|
|
|
||||
Basic
|
$
|
0.01
|
|
|
$
|
(0.02
|
)
|
Diluted
|
$
|
0.01
|
|
|
$
|
(0.02
|
)
|
Weighted-average common shares outstanding:
|
|
|
|
||||
Basic
|
318,221
|
|
|
279,086
|
|
||
Diluted
|
322,424
|
|
|
279,086
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Net loss
|
$
|
(13,120
|
)
|
|
$
|
(14,234
|
)
|
|
|
|
|
||||
Other comprehensive (loss) income, net of tax expense (benefit):
|
|
|
|
||||
Foreign currency translation adjustments
|
(87,953
|
)
|
|
52,537
|
|
||
Defined benefit pension plan adjustments, net of income taxes of
|
|
|
|
||||
$30 and $36 for the three months ended March 31, 2020 and 2019, respectively
|
110
|
|
|
145
|
|
||
Derivative instruments adjustments, net of income taxes of $(25,109) and $(562)
|
|
|
|
||||
for the three months ended March 31, 2020 and 2019, respectively
|
(77,705
|
)
|
|
(2,410
|
)
|
||
Other comprehensive (loss) income
|
(165,548
|
)
|
|
50,272
|
|
||
Comprehensive (loss) income
|
(178,668
|
)
|
|
36,038
|
|
||
Comprehensive income attributable to noncontrolling interest
|
(2,705
|
)
|
|
(911
|
)
|
||
Comprehensive (loss) income attributable to PPD, Inc.
|
(181,373
|
)
|
|
35,127
|
|
||
Recapitalization investment portfolio consideration
|
20,062
|
|
|
10,628
|
|
||
Comprehensive (loss) income attributable to common stockholders of PPD, Inc.
|
$
|
(161,311
|
)
|
|
$
|
45,755
|
|
Assets
|
|||||||
|
March 31, 2020
|
|
December 31, 2019
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
738,364
|
|
|
$
|
345,187
|
|
Accounts receivable and unbilled services, net
|
1,352,232
|
|
|
1,326,614
|
|
||
Income taxes receivable
|
18,498
|
|
|
27,437
|
|
||
Prepaid expenses and other current assets
|
115,845
|
|
|
119,776
|
|
||
Total current assets
|
2,224,939
|
|
|
1,819,014
|
|
||
|
|
|
|
||||
Property and equipment, net
|
455,439
|
|
|
458,845
|
|
||
Investments in unconsolidated affiliates
|
31,953
|
|
|
34,028
|
|
||
Investments
|
223,668
|
|
|
250,348
|
|
||
Goodwill, net
|
1,723,334
|
|
|
1,764,104
|
|
||
Intangible assets, net
|
835,284
|
|
|
892,091
|
|
||
Other assets
|
148,676
|
|
|
156,220
|
|
||
Operating lease right-of-use assets
|
171,495
|
|
|
181,596
|
|
||
Total assets
|
$
|
5,814,788
|
|
|
$
|
5,556,246
|
|
Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Deficit
|
|||||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
116,568
|
|
|
$
|
130,060
|
|
Accrued expenses:
|
|
|
|
||||
Payables to investigators
|
324,053
|
|
|
322,231
|
|
||
Accrued employee compensation
|
246,993
|
|
|
263,834
|
|
||
Accrued interest
|
12,365
|
|
|
44,527
|
|
||
Other accrued expenses
|
163,197
|
|
|
138,632
|
|
||
Income taxes payable
|
9,295
|
|
|
15,161
|
|
||
Unearned revenue
|
1,057,988
|
|
|
1,110,872
|
|
||
Current portion of operating lease liabilities
|
46,265
|
|
|
45,962
|
|
||
Current portion of long-term debt and finance lease obligations
|
35,894
|
|
|
35,794
|
|
||
Total current liabilities
|
2,012,618
|
|
|
2,107,073
|
|
||
|
|
|
|
||||
Accrued income taxes
|
16,909
|
|
|
38,465
|
|
||
Deferred tax liabilities
|
82,946
|
|
|
92,225
|
|
||
Recapitalization investment portfolio liability
|
171,616
|
|
|
191,678
|
|
||
Long-term operating lease liabilities, less current portion
|
143,962
|
|
|
153,766
|
|
||
Long-term debt and finance lease obligations, less current portion
|
4,336,826
|
|
|
5,608,134
|
|
||
Other liabilities
|
97,068
|
|
|
33,017
|
|
||
Total liabilities
|
6,861,945
|
|
|
8,224,358
|
|
||
Commitments and contingencies (Note 9)
|
|
|
|
||||
Redeemable noncontrolling interest
|
32,741
|
|
|
30,036
|
|
||
Stockholders’ deficit:
|
|
|
|
||||
Preferred stock - $0.01 par value; 100,000 shares authorized as of March 31, 2020
|
|
|
|
||||
None issued and outstanding as of March 31, 2020
|
—
|
|
|
—
|
|
||
Common stock - $0.01 par value; 2,000,000 and 2,080,000 shares authorized as of
|
|
|
|
||||
March 31, 2020 and December 31, 2019, respectively;
|
|
|
|
||||
349,310 shares issued and 348,584 shares outstanding as of March 31, 2020, and
|
|
|
|
||||
280,127 shares issued and 279,426 shares outstanding as of December 31, 2019
|
3,493
|
|
|
2,801
|
|
||
Treasury stock, at cost, 726 shares and 701 shares as of March 31, 2020 and
|
|
|
|
||||
December 31, 2019, respectively
|
(13,268
|
)
|
|
(12,707
|
)
|
||
Additional paid-in-capital
|
1,782,232
|
|
|
1,983
|
|
||
Accumulated deficit
|
(2,387,903
|
)
|
|
(2,391,321
|
)
|
||
Accumulated other comprehensive loss
|
(464,452
|
)
|
|
(298,904
|
)
|
||
Total stockholders’ deficit
|
(1,079,898
|
)
|
|
(2,698,148
|
)
|
||
Total liabilities, redeemable noncontrolling interest and stockholders’ deficit
|
$
|
5,814,788
|
|
|
$
|
5,556,246
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(13,120
|
)
|
|
$
|
(14,234
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
66,315
|
|
|
65,418
|
|
||
Stock-based compensation expense
|
5,272
|
|
|
3,734
|
|
||
Non-cash operating lease expense
|
9,819
|
|
|
10,400
|
|
||
Amortization of debt issuance costs, modification costs and debt discounts
|
3,857
|
|
|
2,575
|
|
||
Non-cash losses (gains) on interest rate swaps
|
5,965
|
|
|
(2,410
|
)
|
||
Loss on investments
|
26,872
|
|
|
14,100
|
|
||
Deferred income tax expense
|
8,790
|
|
|
3,342
|
|
||
Loss on extinguishment of debt
|
50,065
|
|
|
—
|
|
||
Amortization of costs to obtain a contract
|
1,561
|
|
|
2,874
|
|
||
Other
|
1,456
|
|
|
(970
|
)
|
||
Change in operating assets and liabilities, net of effect of business acquired:
|
|
|
|
||||
Accounts receivable and unbilled services, net
|
(61,700
|
)
|
|
(1,736
|
)
|
||
Prepaid expenses and other current assets
|
22,135
|
|
|
9,028
|
|
||
Other assets
|
(9,546
|
)
|
|
(12,840
|
)
|
||
Income taxes, net
|
(18,767
|
)
|
|
(12,543
|
)
|
||
Accounts payable, accrued expenses and other liabilities
|
(48,119
|
)
|
|
(73,888
|
)
|
||
Operating lease liabilities
|
(9,868
|
)
|
|
(9,208
|
)
|
||
Unearned revenue
|
(21,614
|
)
|
|
29,953
|
|
||
Net cash provided by operating activities
|
19,373
|
|
|
13,595
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(42,768
|
)
|
|
(24,761
|
)
|
||
Acquisition of business, net of cash and cash equivalents acquired
|
—
|
|
|
(5,731
|
)
|
||
Capital contributions paid for investments, net of distributions received
|
(452
|
)
|
|
(898
|
)
|
||
Investments in unconsolidated affiliates
|
—
|
|
|
(20,000
|
)
|
||
Net cash used in investing activities
|
(43,220
|
)
|
|
(51,390
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Purchase of treasury stock
|
(865
|
)
|
|
(303
|
)
|
||
Proceeds from exercise of stock options
|
2,709
|
|
|
2,889
|
|
||
Borrowing on Revolving Credit Facility
|
150,000
|
|
|
—
|
|
||
Redemption of HoldCo Notes
|
(1,464,500
|
)
|
|
—
|
|
||
Payments on long-term debt and finance leases
|
(10,427
|
)
|
|
(8,590
|
)
|
||
Net proceeds from initial public offering
|
1,774,941
|
|
|
—
|
|
||
Net cash provided by (used in) financing activities
|
451,858
|
|
|
(6,004
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(34,834
|
)
|
|
27,844
|
|
||
Net increase (decrease) in cash and cash equivalents
|
393,177
|
|
|
(15,955
|
)
|
||
Cash and cash equivalents, beginning of the period
|
345,187
|
|
|
553,066
|
|
||
Cash and cash equivalents, end of the period
|
$
|
738,364
|
|
|
$
|
537,111
|
|
|
|
|
|
|
PPD, Inc. Stockholders’ Deficit
|
||||||||||||||||||||||||||||||
|
|
|
|
|
Common Stock
|
|
Treasury Stock
|
|
|
|
|
|
|
||||||||||||||||||||||
|
|
Redeemable Noncontrolling Interest
|
|
|
Shares
|
|
Amount
|
|
Paid-in-Capital
|
|
Shares
|
|
Amount
|
|
Accumulated Other Comprehensive Loss
|
|
Accumulated Deficit
|
|
Total Stockholders' Deficit
|
||||||||||||||||
Balance, December 31, 2018
|
|
$
|
24,892
|
|
|
|
279,545
|
|
|
$
|
2,795
|
|
|
$
|
41,685
|
|
|
515
|
|
|
$
|
(8,933
|
)
|
|
$
|
(312,891
|
)
|
|
$
|
(1,245,077
|
)
|
|
$
|
(1,522,421
|
)
|
Net income (loss)
|
|
861
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,095
|
)
|
|
(15,095
|
)
|
|||||||
Other comprehensive income
|
|
50
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50,272
|
|
|
—
|
|
|
50,272
|
|
|||||||
Vesting of restricted stock
|
|
—
|
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Issuance of common stock for stock option exercises
|
|
—
|
|
|
|
192
|
|
|
2
|
|
|
2,887
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,889
|
|
|||||||
Stock-based compensation expense
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
3,734
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,734
|
|
|||||||
Recapitalization investment portfolio consideration
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,628
|
|
|
10,628
|
|
|||||||
Balance, March 31, 2019
|
|
$
|
25,803
|
|
|
|
279,739
|
|
|
$
|
2,797
|
|
|
$
|
48,306
|
|
|
515
|
|
|
$
|
(8,933
|
)
|
|
$
|
(262,619
|
)
|
|
$
|
(1,249,544
|
)
|
|
$
|
(1,469,993
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Balance, December 31, 2019
|
|
$
|
30,036
|
|
|
|
280,127
|
|
|
$
|
2,801
|
|
|
$
|
1,983
|
|
|
701
|
|
|
$
|
(12,707
|
)
|
|
$
|
(298,904
|
)
|
|
$
|
(2,391,321
|
)
|
|
$
|
(2,698,148
|
)
|
Net income (loss)
|
|
2,718
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,838
|
)
|
|
(15,838
|
)
|
|||||||
Other comprehensive loss
|
|
(13
|
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(165,548
|
)
|
|
—
|
|
|
(165,548
|
)
|
|||||||
Vesting of restricted stock
|
|
—
|
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Issuance of common stock for stock option exercises
|
|
—
|
|
|
|
180
|
|
|
2
|
|
|
2,707
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,709
|
|
|||||||
Repurchases of common stock
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|
(561
|
)
|
|
—
|
|
|
—
|
|
|
(561
|
)
|
|||||||
Stock-based compensation expense
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
5,272
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,272
|
|
|||||||
Recapitalization investment portfolio consideration
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,062
|
|
|
20,062
|
|
|||||||
Issuance of common stock for initial public offering
|
|
—
|
|
|
|
69,000
|
|
|
690
|
|
|
1,772,270
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,772,960
|
|
|||||||
Other
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(806
|
)
|
|
(806
|
)
|
|||||||
Balance, March 31, 2020
|
|
$
|
32,741
|
|
|
|
349,310
|
|
|
$
|
3,493
|
|
|
$
|
1,782,232
|
|
|
726
|
|
|
$
|
(13,268
|
)
|
|
$
|
(464,452
|
)
|
|
$
|
(2,387,903
|
)
|
|
$
|
(1,079,898
|
)
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Accounts receivable
|
$
|
731,428
|
|
|
$
|
726,111
|
|
Unbilled services
|
630,370
|
|
|
609,674
|
|
||
Total accounts receivable and unbilled services
|
1,361,798
|
|
|
1,335,785
|
|
||
Allowance for doubtful accounts
|
(9,566
|
)
|
|
(9,171
|
)
|
||
Total accounts receivable and unbilled services, net
|
$
|
1,352,232
|
|
|
$
|
1,326,614
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Unearned revenue
|
|
$
|
1,057,988
|
|
|
$
|
1,110,872
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||
Shares authorized
|
2,000,000
|
|
|
2,080,000
|
|
Shares issued
|
349,310
|
|
|
280,127
|
|
|
|
|
|
||
Shares outstanding:
|
|
|
|
||
Voting
|
348,584
|
|
|
276,052
|
|
Non-voting
|
—
|
|
|
3,374
|
|
Total shares outstanding
|
348,584
|
|
|
279,426
|
|
|
|
Acquired Intangible Assets
|
|
Weighted-Average Amortization Period (in years)
|
||
Customer relationships
|
|
$
|
2,000
|
|
|
15
|
Know-how/processes
|
|
1,800
|
|
|
8
|
|
Investigator network
|
|
1,900
|
|
|
8
|
|
Trade names
|
|
1,400
|
|
|
10
|
|
Total
|
|
$
|
7,100
|
|
|
10
|
Purchase price
|
$
|
48,635
|
|
|
|
||
Identifiable assets acquired:
|
|
||
Cash and cash equivalents
|
$
|
6,003
|
|
Accounts receivable and unbilled services
|
23,143
|
|
|
Prepaid expenses and other current assets
|
2,556
|
|
|
Property and equipment
|
19,273
|
|
|
Intangible assets
|
7,100
|
|
|
Other assets
|
6,046
|
|
|
Operating lease right-of-use assets
|
1,609
|
|
|
Total identifiable assets acquired
|
65,730
|
|
|
Liabilities assumed:
|
|
||
Accounts payable
|
(2,117
|
)
|
|
Other accrued expenses
|
(4,026
|
)
|
|
Unearned revenue
|
(7,210
|
)
|
|
Long-term debt and finance lease obligations
|
(38
|
)
|
|
Deferred tax liabilities
|
(4,677
|
)
|
|
Other liabilities
|
(331
|
)
|
|
Operating lease liabilities
|
(1,609
|
)
|
|
Total liabilities assumed
|
(20,008
|
)
|
|
Separately identifiable net assets acquired
|
45,722
|
|
|
Goodwill
|
2,913
|
|
|
Total net assets
|
$
|
48,635
|
|
|
|
Acquired Intangible Assets
|
|
Weighted-Average Amortization Period (in years)
|
||
Customer relationships
|
|
$
|
7,500
|
|
|
13
|
Trade names
|
|
900
|
|
|
10
|
|
Technology/intellectual property
|
|
5,100
|
|
|
8
|
|
Total
|
|
$
|
13,500
|
|
|
11
|
|
Total
|
|
Clinical Development Services
|
|
Laboratory Services
|
||||||
Balance at December 31, 2019:
|
|
|
|
|
|
||||||
Goodwill
|
$
|
1,890,815
|
|
|
$
|
1,664,201
|
|
|
$
|
226,614
|
|
Accumulated impairment losses
|
(126,711
|
)
|
|
(99,432
|
)
|
|
(27,279
|
)
|
|||
Goodwill, net
|
1,764,104
|
|
|
1,564,769
|
|
|
199,335
|
|
|||
Activity:
|
|
|
|
|
|
||||||
Translation adjustments
|
(42,618
|
)
|
|
(42,618
|
)
|
|
—
|
|
|||
Measurement period adjustments for prior acquisition
|
1,848
|
|
|
1,848
|
|
|
—
|
|
|||
Balance at March 31, 2020:
|
|
|
|
|
|
||||||
Goodwill
|
1,850,045
|
|
|
1,623,431
|
|
|
226,614
|
|
|||
Accumulated impairment losses
|
(126,711
|
)
|
|
(99,432
|
)
|
|
(27,279
|
)
|
|||
Goodwill, net
|
$
|
1,723,334
|
|
|
$
|
1,523,999
|
|
|
$
|
199,335
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||||||||||
|
|
Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
|
Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
||||||||||||
Customer relationships
|
|
$
|
869,063
|
|
|
$
|
(421,703
|
)
|
|
$
|
447,360
|
|
|
$
|
884,788
|
|
|
$
|
(415,427
|
)
|
|
$
|
469,361
|
|
Trade names
|
|
365,372
|
|
|
(140,952
|
)
|
|
224,420
|
|
|
372,210
|
|
|
(139,141
|
)
|
|
233,069
|
|
||||||
Backlog
|
|
173,785
|
|
|
(172,288
|
)
|
|
1,497
|
|
|
177,599
|
|
|
(175,571
|
)
|
|
2,028
|
|
||||||
Investigator/payer network
|
|
228,360
|
|
|
(185,111
|
)
|
|
43,249
|
|
|
236,082
|
|
|
(185,478
|
)
|
|
50,604
|
|
||||||
Technology/intellectual property
|
|
8,600
|
|
|
(3,553
|
)
|
|
5,047
|
|
|
8,600
|
|
|
(3,319
|
)
|
|
5,281
|
|
||||||
Know-how/processes
|
|
575,597
|
|
|
(461,886
|
)
|
|
113,711
|
|
|
586,971
|
|
|
(455,223
|
)
|
|
131,748
|
|
||||||
Total
|
|
$
|
2,220,777
|
|
|
$
|
(1,385,493
|
)
|
|
$
|
835,284
|
|
|
$
|
2,266,250
|
|
|
$
|
(1,374,159
|
)
|
|
$
|
892,091
|
|
|
Maturity Date
|
|
Effective Rate
|
|
Stated Rate
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Term Loan
|
August 2022
|
|
3.71%
|
|
3.50%
|
|
$
|
3,088,323
|
|
|
$
|
3,096,429
|
|
OpCo Notes
|
August 2023
|
|
6.61%
|
|
6.38%
|
|
1,125,000
|
|
|
1,125,000
|
|
||
Initial HoldCo Notes(1)
|
—
|
|
8.92%
|
|
7.63%
|
|
—
|
|
|
550,000
|
|
||
Additional HoldCo Notes(1)
|
—
|
|
8.90%
|
|
7.75%
|
|
—
|
|
|
900,000
|
|
||
Revolving Credit Facility
|
May 2022
|
|
3.96%
|
|
3.96%
|
|
150,000
|
|
|
—
|
|
||
Other debt
|
April 2025
|
|
1.14%
|
|
1.14%
|
|
3,843
|
|
|
5,707
|
|
||
Finance lease obligations
|
Various
|
|
Various
|
|
Various
|
|
28,197
|
|
|
28,726
|
|
||
|
|
|
|
|
|
|
4,395,363
|
|
|
5,705,862
|
|
||
Unamortized debt discount
|
|
(6,051
|
)
|
|
(13,956
|
)
|
|||||||
Unamortized debt issuance costs
|
|
(16,592
|
)
|
|
(47,978
|
)
|
|||||||
Current portion of long-term debt and finance lease obligations
|
|
(35,894
|
)
|
|
(35,794
|
)
|
|||||||
Long-term debt and finance lease obligations, less current portion
|
|
$
|
4,336,826
|
|
|
$
|
5,608,134
|
|
Year
|
|
Amount
|
||
2020 (remaining nine months)
|
|
$
|
26,713
|
|
2021
|
|
36,573
|
|
|
2022
|
|
3,185,423
|
|
|
2023
|
|
1,128,559
|
|
|
2024
|
|
3,449
|
|
|
2025
|
|
7,366
|
|
|
Thereafter
|
|
7,280
|
|
|
Total
|
|
$
|
4,395,363
|
|
Swap #
|
|
Terms
|
|
Notional Amount
|
|
Fixed Interest Rate
|
|
Maturity Date
|
||
1
|
|
Variable to fixed
|
|
$
|
1,500,000
|
|
|
1.19%
|
|
March 31, 2025
|
2
|
|
Variable to fixed
|
|
1,500,000
|
|
|
1.22%
|
|
March 31, 2025
|
|
3
|
|
Variable to fixed
|
|
500,000
|
|
|
1.17%
|
|
March 31, 2025
|
|
4
|
|
Fixed to variable
|
|
500,000
|
|
|
0.52%
|
|
March 31, 2025
|
|
|
Pre-Tax Loss Recognized in AOCL
|
||||||
Derivatives in Cash Flow Hedging Relationships
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
Interest rate swaps
|
|
$
|
(106,390
|
)
|
|
$
|
—
|
|
|
|
|
Pre-Tax Gain (Loss) Reclassified from AOCL into Statements of Operations
|
||||||
|
Location of Gain (Loss) Reclassified from AOCL into Statements of Operations
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||||
Interest rate swaps
|
Interest expense, net
|
|
$
|
3,051
|
|
|
$
|
2,972
|
|
Interest rate swaps
|
Other income (expense), net
|
|
(6,627
|
)
|
|
—
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||
|
Balance sheet location
|
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
||||||||
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
Other accrued expenses
|
|
$
|
—
|
|
|
$
|
24,445
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest rate swaps
|
Other liabilities
|
|
—
|
|
|
67,632
|
|
|
—
|
|
|
—
|
|
||||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
Prepaid expenses and other current assets
|
|
593
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Interest rate swaps
|
Other accrued expenses
|
|
—
|
|
|
3,886
|
|
|
—
|
|
|
—
|
|
||||
Interest rate swaps
|
Other liabilities
|
|
—
|
|
|
12,704
|
|
|
—
|
|
|
—
|
|
||||
|
|
|
$
|
593
|
|
|
$
|
108,667
|
|
|
$
|
—
|
|
|
$
|
—
|
|
•
|
Level 1 - Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company can access at the measurement date.
|
•
|
Level 2 - Observable inputs other than quoted prices in Level 1, including (i) quoted prices for similar assets and liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in markets that are not active and (iii) observable inputs for the assets or liabilities other than quoted market prices.
|
•
|
Level 3 - Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. This includes assets and liabilities determined using pricing models, discounted cash flow methodologies or similar techniques reflecting the Company’s own assumptions.
|
As of March 31, 2020
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Investments
|
$
|
2,086
|
|
|
$
|
—
|
|
|
$
|
221,582
|
|
|
$
|
223,668
|
|
Derivative instruments
|
—
|
|
|
593
|
|
|
—
|
|
|
593
|
|
||||
Total assets
|
$
|
2,086
|
|
|
$
|
593
|
|
|
$
|
221,582
|
|
|
$
|
224,261
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Contingent consideration
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,134
|
|
|
$
|
8,134
|
|
Derivative instruments
|
—
|
|
|
108,667
|
|
|
—
|
|
|
108,667
|
|
||||
Recapitalization investment portfolio liability
|
—
|
|
|
—
|
|
|
171,616
|
|
|
171,616
|
|
||||
Total liabilities
|
$
|
—
|
|
|
$
|
108,667
|
|
|
$
|
179,750
|
|
|
$
|
288,417
|
|
As of December 31, 2019
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Investments
|
$
|
1,895
|
|
|
$
|
—
|
|
|
$
|
248,453
|
|
|
$
|
250,348
|
|
Total assets
|
$
|
1,895
|
|
|
$
|
—
|
|
|
$
|
248,453
|
|
|
$
|
250,348
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Contingent consideration
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,489
|
|
|
$
|
9,489
|
|
Recapitalization investment portfolio liability
|
—
|
|
|
—
|
|
|
191,678
|
|
|
191,678
|
|
||||
Total liabilities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
201,167
|
|
|
$
|
201,167
|
|
|
|
Quantitative Information About Level 3 Fair Value Measurements for March 31, 2020
|
||||||
Description
|
|
Fair Value
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Range of Rates
|
Fair value option investments
|
|
$216,204
|
|
Market evaluation/pricing models
|
|
Discount for lack of marketability
|
|
12.5% - 32.5%
|
|
|
|
|
Recent acquisition transactions
|
|
Discount for lack of control
|
|
20.0% - 35.0%
|
|
|
|
|
|
|
|
|
|
|
|
Quantitative Information About Level 3 Fair Value Measurements for December 31, 2019
|
||||||
Description
|
|
Fair Value
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Range of Rates
|
Fair value option investments
|
|
$243,067
|
|
Market evaluation/pricing models
|
|
Discount for lack of marketability
|
|
10.0% - 30.0%
|
|
|
|
|
Recent acquisition transactions
|
|
Discount for lack of control
|
|
20.0% - 35.0%
|
|
2020
|
|
2019
|
||||
Balance as of January 1,
|
$
|
248,453
|
|
|
$
|
256,124
|
|
Recognized fair value loss
|
(27,323
|
)
|
|
(9,509
|
)
|
||
Cash distributions received
|
(93
|
)
|
|
(101
|
)
|
||
Capital contributions paid
|
545
|
|
|
999
|
|
||
Balance as of March 31,
|
$
|
221,582
|
|
|
$
|
247,513
|
|
|
2020
|
|
2019
|
||||
Balance as of January 1,
|
$
|
191,678
|
|
|
$
|
198,524
|
|
Recapitalization investment portfolio consideration change in value
|
(20,062
|
)
|
|
(10,628
|
)
|
||
Balance as of March 31,
|
$
|
171,616
|
|
|
$
|
187,896
|
|
|
2020
|
|
2019
|
||||
Balance as of January 1,
|
$
|
9,489
|
|
|
$
|
—
|
|
Change in contingent consideration fair value
|
(1,355
|
)
|
|
—
|
|
||
Balance as of March 31,
|
$
|
8,134
|
|
|
$
|
—
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||
|
Carrying Amount
|
|
Estimated Fair Value
|
|
Carrying Amount
|
|
Estimated Fair Value
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
738,364
|
|
|
$
|
738,364
|
|
|
$
|
345,187
|
|
|
$
|
345,187
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Term Loan and Revolving Credit Facility
|
3,238,323
|
|
|
2,824,735
|
|
|
3,096,429
|
|
|
3,111,911
|
|
||||
OpCo Notes
|
1,125,000
|
|
|
1,151,066
|
|
|
1,125,000
|
|
|
1,164,566
|
|
||||
Initial HoldCo Notes
|
—
|
|
|
—
|
|
|
550,000
|
|
|
559,873
|
|
||||
Additional HoldCo Notes
|
—
|
|
|
—
|
|
|
900,000
|
|
|
915,120
|
|
||||
Other debt
|
3,843
|
|
|
3,843
|
|
|
5,707
|
|
|
5,707
|
|
|
Foreign
Currency Translation |
|
Derivative
Instruments |
|
Pension Plan |
|
Accumulated Other Comprehensive Loss
|
||||||||
Balance as of December 31, 2019
|
$
|
(306,452
|
)
|
|
$
|
8,566
|
|
|
$
|
(1,018
|
)
|
|
$
|
(298,904
|
)
|
OCL before reclassifications
|
(87,953
|
)
|
|
(80,408
|
)
|
|
(22
|
)
|
|
(168,383
|
)
|
||||
Amounts reclassified from AOCL or AOCI
|
—
|
|
|
2,703
|
|
|
132
|
|
|
2,835
|
|
||||
Net (OCL) or OCI
|
(87,953
|
)
|
|
(77,705
|
)
|
|
110
|
|
|
(165,548
|
)
|
||||
Balance as of March 31, 2020
|
$
|
(394,405
|
)
|
|
$
|
(69,139
|
)
|
|
$
|
(908
|
)
|
|
$
|
(464,452
|
)
|
|
Foreign
Currency Translation |
|
Derivative
Instruments |
|
Pension Plan |
|
Accumulated Other Comprehensive Loss
|
||||||||
Balance as of December 31, 2018
|
$
|
(331,276
|
)
|
|
$
|
18,089
|
|
|
$
|
296
|
|
|
$
|
(312,891
|
)
|
OCI before reclassifications
|
52,537
|
|
|
—
|
|
|
26
|
|
|
52,563
|
|
||||
Amounts reclassified from AOCL or AOCI
|
—
|
|
|
(2,410
|
)
|
|
119
|
|
|
(2,291
|
)
|
||||
Net OCI or (OCL)
|
52,537
|
|
|
(2,410
|
)
|
|
145
|
|
|
50,272
|
|
||||
Balance as of March 31, 2019
|
$
|
(278,739
|
)
|
|
$
|
15,679
|
|
|
$
|
441
|
|
|
$
|
(262,619
|
)
|
|
Three Months Ended March 31,
|
|
||||||
Details about AOCI or AOCL Components
|
2020
|
|
2019
|
Affected line item in statements of operations
|
||||
Losses (gains) on derivative instruments:
|
|
|
|
|
||||
Interest rate swaps
|
$
|
3,051
|
|
|
$
|
2,972
|
|
Interest expense, net
|
Interest rate swaps
|
(6,627
|
)
|
|
—
|
|
Other income (expense), net
|
||
Income tax benefit (expense)
|
873
|
|
|
(562
|
)
|
Benefit from income taxes
|
||
Total net of income tax
|
$
|
(2,703
|
)
|
|
$
|
2,410
|
|
|
|
|
|
|
|
||||
Defined benefit pension plan:
|
|
|
|
|
||||
Amortization of actuarial loss
|
$
|
(162
|
)
|
|
$
|
(155
|
)
|
Other income (expense), net
|
Income tax benefit
|
30
|
|
|
36
|
|
Benefit from income taxes
|
||
Total net of income tax
|
$
|
(132
|
)
|
|
$
|
(119
|
)
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Numerator:
|
|
|
|
||||
Net loss
|
$
|
(13,120
|
)
|
|
$
|
(14,234
|
)
|
Net income attributable to noncontrolling interest
|
(2,718
|
)
|
|
(861
|
)
|
||
Recapitalization investment portfolio consideration
|
20,062
|
|
|
10,628
|
|
||
Net income (loss) attributable to common stockholders of PPD, Inc.
|
$
|
4,224
|
|
|
$
|
(4,467
|
)
|
Denominator:
|
|
|
|
||||
Basic weighted-average common shares outstanding
|
318,221
|
|
|
279,086
|
|
||
Effect of dilutive stock options and restricted stock
|
4,203
|
|
|
—
|
|
||
Diluted weighted-average common shares outstanding
|
322,424
|
|
|
279,086
|
|
||
Earnings/(loss) per share:
|
|
|
|
||||
Basic
|
$
|
0.01
|
|
|
$
|
(0.02
|
)
|
Diluted
|
$
|
0.01
|
|
|
$
|
(0.02
|
)
|
|
Three Months Ended March 31,
|
||||
|
2020
|
|
2019
|
||
Anti-dilutive stock options and restricted stock
|
—
|
|
|
488
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Segment revenue:
|
|
|
|
||||
Clinical Development Services
|
$
|
870,886
|
|
|
$
|
809,364
|
|
Laboratory Services
|
201,576
|
|
|
154,374
|
|
||
Total segment revenue
|
1,072,462
|
|
|
963,738
|
|
||
Segment direct costs:
|
|
|
|
||||
Clinical Development Services
|
309,078
|
|
|
290,619
|
|
||
Laboratory Services
|
87,051
|
|
|
72,260
|
|
||
Total segment direct costs
|
396,129
|
|
|
362,879
|
|
||
Segment reimbursed costs:
|
|
|
|
||||
Clinical Development Services
|
223,529
|
|
|
209,880
|
|
||
Laboratory Services
|
27,321
|
|
|
15,139
|
|
||
Total segment reimbursed costs
|
250,850
|
|
|
225,019
|
|
||
Segment SG&A expenses:
|
|
|
|
||||
Clinical Development Services
|
141,832
|
|
|
128,894
|
|
||
Laboratory Services
|
21,783
|
|
|
18,999
|
|
||
Total segment SG&A expenses
|
163,615
|
|
|
147,893
|
|
||
Segment operating income:
|
|
|
|
||||
Clinical Development Services
|
196,447
|
|
|
179,971
|
|
||
Laboratory Services
|
65,421
|
|
|
47,976
|
|
||
Total segment operating income
|
261,868
|
|
|
227,947
|
|
||
|
|
|
|
||||
Operating costs and expenses not allocated to segments:
|
|
|
|
||||
Direct costs
|
18,310
|
|
|
4,323
|
|
||
SG&A expenses
|
84,161
|
|
|
70,487
|
|
||
Depreciation and amortization
|
66,315
|
|
|
65,418
|
|
||
Income from operations
|
$
|
93,082
|
|
|
$
|
87,719
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Revenue:
|
|
|
|
||||
North America(1)
|
$
|
558,239
|
|
|
$
|
499,917
|
|
Latin America
|
44,910
|
|
|
38,965
|
|
||
Europe, Middle East and Africa(2)
|
354,451
|
|
|
325,831
|
|
||
Asia-Pacific
|
114,862
|
|
|
99,025
|
|
||
Revenue
|
$
|
1,072,462
|
|
|
$
|
963,738
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Other income (expense), net:
|
|
|
|
||||
Foreign currency gains (losses), net
|
$
|
37,652
|
|
|
$
|
(24,869
|
)
|
Interest rate swap losses
|
(8,338
|
)
|
|
—
|
|
||
Other income
|
165
|
|
|
1,346
|
|
||
Other expense
|
(185
|
)
|
|
(778
|
)
|
||
Total other income (expense), net
|
$
|
29,294
|
|
|
$
|
(24,301
|
)
|
(dollars in millions)
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|||||||
Net authorizations (for the three months ended March 31)
|
|
$
|
1,063.6
|
|
|
$
|
977.8
|
|
|
$
|
85.8
|
|
|
8.8
|
%
|
Backlog (as of March 31)
|
|
7,312.2
|
|
|
6,536.0
|
|
|
776.2
|
|
|
11.9
|
|
|||
Backlog conversion (for the three months ended March 31)
|
|
11.6
|
%
|
|
12.0
|
%
|
|
|
|
|
(0.4
|
)
|
|||
Net book-to-bill (for the three months ended March 31)
|
|
1.30x
|
|
|
1.29x
|
|
|
|
|
|
|
|
(dollars in millions)
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|||||||
Net authorizations (for the three months ended March 31)
|
|
$
|
1,063.6
|
|
|
$
|
977.8
|
|
|
$
|
85.8
|
|
|
8.8
|
%
|
Backlog (as of March 31)
|
|
7,574.8
|
|
|
6,733.2
|
|
|
841.6
|
|
|
12.5
|
|
|||
Backlog conversion (for the three months ended March 31)
|
|
11.1
|
%
|
|
11.3
|
%
|
|
|
|
|
(0.2
|
)
|
|||
Net book-to-bill (for the three months ended March 31)
|
|
1.31x
|
|
|
1.34x
|
|
|
|
|
|
|
|
(dollars in millions)
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|||||||
Net authorizations (for the three months ended March 31)
|
|
$
|
1,417.2
|
|
|
$
|
1,277.0
|
|
|
$
|
140.2
|
|
|
11.0
|
%
|
Backlog (as of March 31)
|
|
10,620.1
|
|
|
9,499.0
|
|
|
1,121.1
|
|
|
11.8
|
|
|||
Backlog conversion (for the three months ended March 31)
|
|
10.4
|
%
|
|
10.5
|
%
|
|
|
|
|
(0.1
|
)
|
|||
Net book-to-bill (for the three months ended March 31)
|
|
1.32x
|
|
|
1.33x
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|||||||
|
|
Three Months Ended March 31,
|
Change
|
||||||||||||
(dollars in thousands)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|||||||
Revenue
|
|
$
|
1,072,462
|
|
|
$
|
963,738
|
|
|
$
|
108,724
|
|
|
11.3
|
%
|
Direct Costs
|
|
|
|
|
|
|
|
|
|||||||
|
|
Three Months Ended March 31,
|
Change
|
||||||||||||
(dollars in thousands)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|||||||
Direct costs, exclusive of depreciation and amortization
|
|
$
|
414,439
|
|
|
$
|
367,202
|
|
|
$
|
47,237
|
|
|
12.9
|
%
|
% of revenue
|
|
38.6
|
%
|
|
38.1
|
%
|
|
|
|
|
Reimbursed Costs
|
|
|
|
|
|
|
|
|
|||||||
|
|
Three Months Ended March 31,
|
|
Change
|
|||||||||||
(dollars in thousands)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|||||||
Reimbursed costs
|
|
$
|
250,850
|
|
|
$
|
225,019
|
|
|
$
|
25,831
|
|
|
11.5
|
%
|
% of revenue
|
|
23.4
|
%
|
|
23.3
|
%
|
|
|
|
|
Selling, General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|||||||
|
|
Three Months Ended March 31,
|
|
Change
|
|||||||||||
(dollars in thousands)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|||||||
Selling, general and administrative expenses
|
|
$
|
247,776
|
|
|
$
|
218,380
|
|
|
$
|
29,396
|
|
|
13.5
|
%
|
% of revenue
|
|
23.1
|
%
|
|
22.7
|
%
|
|
|
|
|
Interest Expense, Net
|
|
Three Months Ended March 31,
|
||||||
(dollars in thousands)
|
|
2020
|
|
2019
|
||||
Interest expense, net
|
|
$
|
64,710
|
|
|
$
|
66,523
|
|
Loss on Extinguishment of Debt
|
|
Three Months Ended March 31,
|
||||||
(dollars in thousands)
|
|
2020
|
|
2019
|
||||
Loss on extinguishment of debt
|
|
$
|
(50,065
|
)
|
|
$
|
—
|
|
Loss on Investments
|
|
Three Months Ended March 31,
|
||||||
(dollars in thousands)
|
|
2020
|
|
2019
|
||||
Loss on investments
|
|
$
|
(26,872
|
)
|
|
$
|
(14,100
|
)
|
Other Income (Expense), Net
|
|
Three Months Ended March 31,
|
||||||
(dollars in thousands)
|
|
2020
|
|
2019
|
||||
Other income (expense), net
|
|
$
|
29,294
|
|
|
$
|
(24,301
|
)
|
Benefit from Income Taxes
|
|
Three Months Ended March 31,
|
||||||
(dollars in thousands)
|
|
2020
|
|
2019
|
||||
Benefit from income taxes
|
|
$
|
(7,717
|
)
|
|
$
|
(3,299
|
)
|
Effective income tax rate
|
|
40.0
|
%
|
|
19.2
|
%
|
|
|
Three Months Ended March 31,
|
|
Change
|
|||||||||||
(dollars in thousands)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|||||||
Segment revenue
|
|
$
|
870,886
|
|
|
$
|
809,364
|
|
|
$
|
61,522
|
|
|
7.6
|
%
|
Segment direct costs
|
|
309,078
|
|
|
290,619
|
|
|
18,459
|
|
|
6.4
|
|
|||
Segment reimbursed costs
|
|
223,529
|
|
|
209,880
|
|
|
13,649
|
|
|
6.5
|
|
|||
Segment SG&A expenses
|
|
141,832
|
|
|
128,894
|
|
|
12,938
|
|
|
10.0
|
|
|||
Segment operating income
|
|
$
|
196,447
|
|
|
$
|
179,971
|
|
|
$
|
16,476
|
|
|
9.2
|
|
|
|
Three Months Ended March 31,
|
|
Change
|
|||||||||||
(dollars in thousands)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|||||||
Segment revenue
|
|
$
|
201,576
|
|
|
$
|
154,374
|
|
|
$
|
47,202
|
|
|
30.6
|
%
|
Segment direct costs
|
|
87,051
|
|
|
72,260
|
|
|
14,791
|
|
|
20.5
|
|
|||
Segment reimbursed costs
|
|
27,321
|
|
|
15,139
|
|
|
12,182
|
|
|
80.5
|
|
|||
Segment SG&A expenses
|
|
21,783
|
|
|
18,999
|
|
|
2,784
|
|
|
14.7
|
|
|||
Segment operating income
|
|
$
|
65,421
|
|
|
$
|
47,976
|
|
|
$
|
17,445
|
|
|
36.4
|
|
(dollars in thousands)
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Cash and cash equivalents:
|
|
|
|
|
||||
Cash held in the United States
|
|
$
|
461,457
|
|
|
$
|
135,917
|
|
Cash held in foreign locations
|
|
276,907
|
|
|
209,270
|
|
||
Total
|
|
$
|
738,364
|
|
|
$
|
345,187
|
|
Revolving Credit Facility availability (net of letters of credit)
|
|
$
|
148,370
|
|
|
$
|
298,370
|
|
Cash flows from operating activities
|
|
Three Months Ended March 31,
|
||||||
(dollars in thousands)
|
|
2020
|
|
2019
|
||||
Net cash provided by operating activities
|
|
$
|
19,373
|
|
|
$
|
13,595
|
|
Cash flows from investing activities
|
|
Three Months Ended March 31,
|
||||||
(dollars in thousands)
|
|
2020
|
|
2019
|
||||
Net cash used in investing activities
|
|
$
|
(43,220
|
)
|
|
$
|
(51,390
|
)
|
Cash flows from financing activities
|
|
Three Months Ended March 31,
|
||||||
(dollars in thousands)
|
|
2020
|
|
2019
|
||||
Net cash provided by (used in) financing activities
|
|
$
|
451,858
|
|
|
$
|
(6,004
|
)
|
(dollars in thousands)
|
|
2020 (remaining nine months)
|
|
2021-2022
|
|
2023-2024
|
|
2025-Thereafter
|
|
Total
|
||||||||||
Long-term debt, including interest(1)
|
|
$
|
145,441
|
|
|
$
|
3,540,829
|
|
|
$
|
1,178,919
|
|
|
$
|
3,886
|
|
|
$
|
4,869,075
|
|
(1)
|
We may be required to make mandatory prepayments of principal on the term loan outstanding under our senior secured credit facilities in future years based on our cash flows in those years. Future interest expense on our indebtedness is calculated assuming a blended rate of 4.3%. The table above assumes that the amounts will remain outstanding until maturity, with minimum payments occurring as currently scheduled and no future borrowings, and does not include the impact of our interest rate swaps entered into during the first quarter of 2020.
|
Date
|
Title
|
Effective Date
|
August 2018
|
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
|
Adopted January 1, 2020
|
•
|
conducting a clinical trial in multiple countries is complex, and issues in one country can affect the progress of the trial in other countries and result in delays or cancellation of contracts, including delays and other issues caused by the COVID-19 pandemic;
|
•
|
the United States or foreign countries could enact legislation or impose regulations, including unfavorable labor regulations, tax policies or economic sanctions, that could have an adverse effect on our ability to conduct business in or expatriate profits from the countries in which we operate;
|
•
|
the complexities of operating within multiple tax jurisdictions, including potentially negative consequences from changes in tax laws or from current and future tax examinations;
|
•
|
foreign countries are expanding or might expand their regulatory framework with respect to patient informed consent or other aspects of the conduct of clinical trials, which could delay or inhibit our ability to conduct trials in such countries, including changes that may be enacted or result from the COVID-19 pandemic;
|
•
|
the regulatory or judicial authorities of foreign countries might not enforce legal rights and recognize business procedures in a manner to which we are accustomed or would reasonably expect;
|
•
|
changes in political and economic conditions might lead to changes in the business environment in which we operate, such as the current changes caused by the COVID-19 pandemic, including those to protect the general population and patient safety in clinical trials;
|
•
|
changes in foreign currency exchange rates, including the impact of contractual provisions that shift the risk of unfavorable movement in certain exchange rates to us;
|
•
|
potential violations of existing or newly enacted laws may cause difficulties in staffing and managing international operations;
|
•
|
customers in foreign countries may have longer payment cycles, and it may be more difficult to collect receivables in those countries;
|
•
|
political unrest could interrupt our services, endanger our personnel or cause project delays or loss of clinical trial material or results; and
|
•
|
any failure by us to comply with foreign regulations or restrictions or become aware of and acknowledge changes in foreign regulations or restrictions, which could result in the delay of a clinical trial, including changes in foreign regulations or restrictions due to the COVID-19 pandemic.
|
•
|
as a result of the COVID-19 pandemic, customers may delay or cancel clinical trials (i) to protect patient safety, (ii) as a result of government restrictions, (iii) to limit impacts on healthcare systems and (iv) due to concerns regarding the ability of hospitals and other clinical trial sites to conduct clinical trials safely, efficiently and effectively;
|
•
|
if a significant percentage of our workforce is unable to work, including because of illness, or travel or government restrictions in connection with the COVID-19 pandemic, our operations may be negatively impacted;
|
•
|
as a result of the COVID-19 pandemic, we have temporarily shutdown our Phase I clinics. Depending on the future duration, severity and impacts of the COVID-19 pandemic, we may have to extend the shutdown of our Phase I clinics and also shutdown one or more of our laboratories, other clinics or offices due to patient safety, government restrictions, illness or other impacts in connection with the COVID-19 pandemic;
|
•
|
market conditions, including those caused by the COVID-19 pandemic, could result in our key customers experiencing financial difficulties and/or electing to limit spending or delay payment of invoices, or become unable to pay invoices, which in turn could result in decreased revenues, cash flows and earnings for us;
|
•
|
under difficult market conditions there can be no assurance that borrowings under our senior secured credit facilities would be available or sufficient, and in such a case, we might not be able to successfully obtain additional financing or refinancing of our senior secured credit facilities or other debt on reasonable terms and within a reasonable time period acceptable to us, or at all, and such could also impact our hedge accounting on our variable rate debt; and
|
•
|
in order to respond to market conditions, we may need to seek waivers of various provisions in the credit agreement governing our senior secured credit facilities, and we might not be able to obtain such waivers on reasonable terms, if at all.
|
|
|
|
|
|
|
Incorporated by Reference
|
|||
Exhibit Number
|
|
Exhibit Description
|
|
Filed Herewith
|
|
Form
|
File No.
|
Exhibit
|
Filing Date
|
3.1
|
|
|
-
|
|
8-K
|
001-39212
|
3.1
|
2/10/2020
|
|
3.2
|
|
|
-
|
|
8-K
|
001-39212
|
3.2
|
2/10/2020
|
|
10.1
|
|
|
-
|
|
8-K
|
001-39212
|
10.1
|
2/10/2020
|
|
10.2
|
|
|
-
|
|
S-1/A
|
333-235860
|
10.16
|
1/16/2020
|
10.3
|
|
|
-
|
|
S-1/A
|
333-235860
|
10.38
|
1/27/2020
|
|
10.4
|
|
|
-
|
|
S-1/A
|
333-235860
|
10.39
|
1/27/2020
|
|
10.5
|
|
|
-
|
|
S-1/A
|
333-235860
|
10.40
|
1/27/2020
|
|
10.6
|
|
|
-
|
|
S-1/A
|
333-235860
|
10.41
|
1/27/2020
|
|
10.7
|
|
|
-
|
|
S-1/A
|
333-235860
|
10.42
|
1/27/2020
|
|
31.1
|
|
|
X
|
|
-
|
-
|
-
|
-
|
|
31.2
|
|
|
X
|
|
-
|
-
|
-
|
-
|
|
32.1
|
|
|
X
|
|
-
|
-
|
-
|
-
|
|
32.2
|
|
|
X
|
|
-
|
-
|
-
|
-
|
|
101.INS
|
|
XBRL Instance Document
|
|
X
|
|
-
|
-
|
-
|
-
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
X
|
|
-
|
-
|
-
|
-
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
X
|
|
-
|
-
|
-
|
-
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
X
|
|
-
|
-
|
-
|
-
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
X
|
|
-
|
-
|
-
|
-
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
X
|
|
-
|
-
|
-
|
-
|
PPD, Inc.
|
|
|
|
By:
|
/s/ Christopher G. Scully
|
Name:
|
Christopher G. Scully
|
Title:
|
Executive Vice President and Chief Financial Officer
(On behalf of the Registrant and as Principal Financial Officer)
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of PPD, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
c.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
|
|
|
Date:
|
May 7, 2020
|
|
By:
|
/s/ David Simmons
|
|
|
|
|
David Simmons
|
|
|
|
|
Chairman and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of PPD, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
c.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
|
|
|
Date:
|
May 7, 2020
|
|
By:
|
/s/ Christopher G. Scully
|
|
|
|
|
Christopher G. Scully
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
|
|
|
Date:
|
May 7, 2020
|
|
By:
|
/s/ David Simmons
|
|
|
|
|
David Simmons
|
|
|
|
|
Chairman and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
|
|
|
Date:
|
May 7, 2020
|
|
By:
|
/s/ Christopher G. Scully
|
|
|
|
|
Christopher G. Scully
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|