PRA Health Sciences, Inc. (“PRA” or the “Company”) (NASDAQ:PRAH)
today reported financial results for the quarter ended December 31,
2016.
For the three months ended December 31, 2016, service revenue
was $413.6 million, which represents growth of 14.2%, or $51.3
million, compared to the fourth quarter of 2015 at actual foreign
exchange rates. On a constant currency basis, service revenue grew
$52.9 million, an increase of 14.6% compared to the fourth quarter
of 2015.
Net new business for the quarter ended December 31, 2016 was
$587.3 million, representing a net book-to-bill ratio of 1.42 for
the period. This net new business contributed to an ending backlog
of $2.9 billion at December 31, 2016.
“We are pleased to have delivered another quarter with
double-digit revenue, earnings and net new business growth
year-over-year,” said Colin Shannon, PRA’s Chief Executive Officer.
“We are well-positioned to deliver at least mid-teens growth during
the coming year, as evidenced by our record level of new business
awards and backlog. We continue to stay focused on our key
strategic objectives, our client deliverables and developing our
people, and we look forward to delivering strong results in
2017.”
Direct costs were $274.4 million during the three months ended
December 31, 2016 compared to $234.9 million for the fourth quarter
of 2015. Direct costs were 66.3% of service revenue during the
fourth quarter of 2016 compared to 64.8% of service revenue during
the fourth quarter of 2015. The increase in direct costs as a
percentage of service revenue is due to the continued hiring of
billable staff to support our current projects and the hiring of
additional staff to ensure appropriate staffing levels to support
our future growth.
Selling, general and administrative expenses were $70.2 million
during the three months ended December 31, 2016 compared to $63.6
million for the fourth quarter of 2015. Selling, general and
administrative costs were 17.0% of service revenue during the
fourth quarter of 2016 compared to 17.6% of service revenue during
the fourth quarter of 2015. The decrease in selling, general and
administrative expenses as a percentage of revenue is attributable
to our ability to continue to effectively manage our sales and
administrative functions as the Company continues to grow.
For the three months ended December 31, 2016, we incurred
transaction-related expenses of $13.0 million. The costs consist of
$12.7 million of one-time stock-based compensation expense related
to the release of transfer restrictions on vested options and the
vesting of certain performance-based stock options in connection
with the November secondary offering. In addition, we incurred $0.3
million of third-party fees associated with the secondary
offering.
During the fourth quarter of 2016, we also incurred a loss on
extinguishment of debt of $16.7 million. This loss is associated
with our refinancing on our first lien term debt, which included
the write-off of $15.8 million of unamortized debt issuance costs
and $0.9 million of other costs associated with the
transaction.
GAAP net income was $14.0 million for the three months ended
December 31, 2016, or $0.22 per share on a diluted basis, compared
to GAAP net income of $28.5 million for the three months ended
December 31, 2015, or $0.45 per share on a diluted basis. Our GAAP
net income for the three months ended December 31, 2016 included
transaction-related expenses and the loss on extinguishment
discussed above.
EBITDA was $54.3 million for the three months ended December 31,
2016, representing a decrease of 22.0% compared to the fourth
quarter of 2015. Adjusted EBITDA was $73.9 million for the three
months ended December 31, 2016, representing growth of 8.8%
compared to the fourth quarter of 2015.
Adjusted Net Income was $45.9 million for the three months ended
December 31, 2016, representing 22.3% growth compared to the fourth
quarter of 2015. Adjusted Net Income per diluted share was $0.71
for the three months ended December 31, 2016, representing 20.3%
growth compared to the fourth quarter of 2015.
A reconciliation of our non-GAAP measures, including EBITDA,
Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share
and our 2017 guidance, to the corresponding GAAP measures is
included in this press release.
Full Year 2016
For the twelve months ended December 31, 2016, service revenue
was $1,580.0 million, which represents growth of 14.8%, or $204.2
million, compared to the twelve months ended December 31, 2015 at
actual foreign exchange rates. On a constant currency basis,
service revenue grew $209.5 million, representing growth of 15.2%
compared to the twelve months ended December 31, 2015.
GAAP income from operations was $162.3 million, GAAP net income
was $68.2 million and GAAP net income per diluted share was $1.06
for the twelve months ended December 31, 2016.
Adjusted Net Income was $162.3 million for the twelve months
ended December 31, 2016, an improvement of 28.6% compared to the
same period in 2015. Adjusted Net Income per diluted share
was $2.52 for the twelve months ended December 31, 2016, up 26.0%
compared to the same period in 2015.
Q1 2017 and Full Year 2017 Guidance
For Full Year 2017, the Company expects to achieve service
revenues between $1.795 billion and $1.835 billion, representing
constant currency growth of 14% to 16%, GAAP net income per diluted
share between $2.46 and $2.56 per share, representing growth of
132% to 142%, Adjusted Net Income per diluted share between $3.08
and $3.18 per share, representing growth of 22% to 26%, and annual
effective income tax rate estimates at approximately 27%.
For Q1 2017, the Company expects to achieve service revenues
between $415 million and $425 million, representing constant
currency growth of 11% to 14%, GAAP net income per diluted share
between $0.41 and $0.46 per share, Adjusted Net Income per diluted
share between $0.57 and $0.62 per share, and annual effective
income tax rate estimates at approximately 27%.
All financial guidance assumes a EURO rate of 1.11 and a GBP
rate of 1.35. All other foreign currency exchange rates are as of
January 31, 2017.
Conference Call Details
PRA will host a conference call at 9:00 a.m. ET on February 23,
2017, to discuss the contents of this release and other relevant
topics. To participate, please dial (877) 930-8062 within the
United States or (253) 336-7647 outside the United States
approximately 10 minutes before the scheduled start of the call.
The conference ID for the call is 66572766. The conference call
will also be accessible, live via audio broadcast, on the Investor
Relations section of the PRA website at www.prahs.com/investors. A
replay of the conference call will be available online at
www.prahs.com/investors. In addition, an audio replay of the call
will be available for one week following the call and can be
accessed by dialing (855) 859-2056 within the United States or
(404) 537-3406 outside the United States. The replay ID is
66572766.
About PRA Health Sciences
PRA (NASDAQ:PRAH) is one of the world’s leading global contract
research organizations, or CROs, by revenue, providing outsourced
clinical development services to the biotechnology and
pharmaceutical industries. PRA’s global clinical development
platform includes approximately 70 offices across North America,
Europe, Asia, Latin America, South Africa, Australia and the Middle
East and over 13,000 employees worldwide. Since 2000, PRA has
performed approximately 3,500 clinical trials worldwide. In
addition, PRA has participated in the pivotal or supportive trials
that led to U.S. Food and Drug Administration or international
regulatory approval of more than 70 drugs.
PRA has therapeutic expertise in areas that are among the
largest in pharmaceutical development, including oncology, central
nervous system, inflammation and infectious diseases. PRA believes
that it provides its clients with one of the most flexible clinical
development service offerings, which includes both traditional,
project-based Phase I through Phase IV services, as well as
embedded and functional outsourcing services. The Company has
invested in medical informatics and clinical technologies designed
to enhance efficiencies, improve study predictability and provide
better transparency to clients throughout their clinical
development processes. To learn more about PRA, please visit
www.prahs.com.
Internet Posting of Information: The Company routinely posts
information that may be important to investors in the ‘Investor
Relations’ section of the Company’s website at www.prahs.com. The
Company encourages investors and potential investors to consult the
Company’s website regularly for important information about the
Company.
Forward-Looking Statements
This press release contains forward-looking statements that
reflect, among other things, the Company’s current expectations and
anticipated results of operations, all of which are subject to
known and unknown risks, uncertainties and other factors that may
cause actual results, performance or achievements, market trends or
industry results to differ materially from those expressed or
implied by such forward-looking statements. For this purpose, any
statements contained herein that are not statements of historical
fact may constitute forward-looking statements. Without limiting
the foregoing, words such as “anticipates,” “believes,”
“estimates,” “expects,” “guidance,” “intends,” “may,” “plans,”
“projects,” “should,” “targets,” “will” and the negative thereof
and similar words and expressions are intended to identify
forward-looking statements. Actual results may differ materially
from the Company’s expectations due to a number of factors,
including that most of the Company’s contracts may be terminated on
short notice and that the Company may be unable to maintain large
customer contracts or to enter into new contracts; the historical
indications of the relationship of backlog to revenues may not be
indicative of their future relationship; the market for the
Company’s services may not grow as the Company expects; the Company
may under price contracts or overrun its cost estimates, and if the
Company is unable to achieve operating efficiencies or grow
revenues faster than expenses, operating margins will be adversely
affected; the Company may be unable to maintain information systems
or effectively update them; customer or therapeutic concentration
could harm the Company’s business; the Company’s business is
subject to risks associated with international operations,
including economic, political and other risks; the Company is also
subject to a number of additional risks associated with its
business outside the United States, including foreign currency
exchange fluctuations and restrictive regulations, as well as the
risks and uncertainties associated with the United Kingdom’s
expected withdrawal from the European Union; government regulators
or customers may limit the scope of prescription or withdraw
products from the market, and government regulators may impose new
regulations affecting the Company’s business; the Company may be
unable to successfully develop and market new services or enter new
markets; the Company’s failure to perform services in accordance
with contractual requirements, regulatory standards and ethical
considerations may subject it to significant costs or liability,
damage its reputation and cause it to lose existing business or not
receive new business; the Company’s services are related to
treatment of human patients, and it could face liability if a
patient is harmed; the Company has substantial indebtedness and may
incur additional indebtedness in the future, which could adversely
affect the Company’s financial condition; and other factors that
are set forth in the Company’s filings with the Securities and
Exchange Commission, including our most recent Annual Report on
Form 10-K filed with the SEC on February 25, 2016. The Company
undertakes no obligation to update any forward-looking statement
after the date of this release, whether as a result of new
information, future developments or otherwise, except as may be
required by applicable law.
Use of Non-GAAP Financial Measures
This press release includes EBITDA, Adjusted EBITDA, Adjusted
Net Income and Adjusted Net Income per share, each of which are
financial measures not prepared in accordance with accounting
principles generally accepted in the United States (“GAAP”).
Management believes that these measures provide useful supplemental
information to management and investors regarding our operating
results as they exclude certain items whose fluctuation from
period- to period do not necessarily correspond to changes in the
operating results of our business. As a result, management and our
board of directors regularly use EBITDA and Adjusted EBITDA as a
tool in evaluating our operating and financial performance and in
establishing discretionary annual bonuses. Adjusted EBITDA is also
the basis for covenant compliance EBITDA, which is used in certain
covenants in the credit agreement governing our senior secured
credit facilities and the indenture governing the senior notes. In
addition, management believes that EBITDA, Adjusted EBITDA and
Adjusted Net Income (including diluted adjusted net income per
share) facilitate comparisons of our operating results with those
of other companies by backing out of GAAP net income items relating
to variations in capital structures (affecting interest expense),
taxation, and the age and book depreciation of facilities and
equipment (affecting relative depreciation expense), which may vary
for different companies for reasons unrelated to operating
performance. We believe that EBITDA, Adjusted EBITDA and Adjusted
Net Income (including diluted adjusted net income per share) are
frequently used by securities analysts, investors, and other
interested parties in the evaluation of issuers, many of which also
present EBITDA, Adjusted EBITDA and Adjusted Net Income (including
diluted adjusted net income per share) when reporting their results
in an effort to facilitate an understanding of their operating
results.
These non-GAAP financial measures have limitations as analytical
tools, and you should not consider these measures in isolation, or
as a substitute for analysis of our results as reported under GAAP.
Additionally, because not all companies use identical calculations,
these presentations of EBITDA, Adjusted EBITDA and Adjusted Net
Income (including diluted adjusted net income per share) may not be
comparable to similarly titled measures of other companies.
EBITDA represents net income before interest, taxes,
depreciation and amortization. Adjusted EBITDA and Adjusted Net
Income (including diluted adjusted net income per share) represent
EBITDA and net income (including diluted net income per share),
respectively, adjusted to exclude stock-based compensation
expense, loss (gain) on disposal of fixed assets, loss on
modification or extinguishment of debt, foreign currency losses and
gains, other (expense) income, equity in (gains) losses of
unconsolidated joint ventures, transaction-related cost,
acquisition-related costs, severance costs and restructuring
charges, prior year foreign research and development credits, lease
termination costs, non-cash rent adjustments and other
charges. Adjusted Net Income is also adjusted to exclude
amortization of intangible assets, amortization of terminated
interest rate swaps, and amortization of deferred financing costs.
EBITDA, Adjusted EBITDA and Adjusted Net Income are not
measurements of our financial performance under GAAP and should not
be considered as alternatives to net income or other performance
measures derived in accordance with GAAP or as alternatives to cash
flow from operating activities as measures of our liquidity.
EBITDA, Adjusted EBITDA and Adjusted Net Income have limitations as
analytical tools, and you should not consider such measures either
in isolation or as substitutes for analyzing our results as
reported under GAAP.
Some of these limitations are:
- EBITDA and Adjusted EBITDA do not reflect changes in, or cash
requirements for, our working capital needs;
- EBITDA and Adjusted EBITDA do not reflect our interest expense,
or the cash requirements necessary to service interest or principal
payments, on our debt;
- EBITDA and Adjusted EBITDA do not reflect our tax expense or
the cash requirements to pay our taxes;
- EBITDA and Adjusted EBITDA do not reflect historical capital
expenditures or future requirements for capital expenditures or
contractual commitments;
- although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced in the future, and EBITDA and Adjusted EBITDA do not
reflect any cash requirements for such replacements; and
- other companies in our industry may calculate EBITDA and
Adjusted EBITDA differently, limiting their usefulness as
comparative measures.
Because of these limitations, EBITDA and Adjusted EBITDA should
not be considered as discretionary cash available to us to reinvest
in the growth of our business or as a measure of cash that will be
available to us to meet our obligations.
Constant Currency
Constant currency comparisons are based on translating local
currency amounts in the current year period at actual foreign
exchange rates for the prior year. The Company routinely evaluates
its financial performance on a constant currency basis in order to
facilitate period- to- period comparisons without regard to the
impact of changing foreign currency exchange rates.
|
PRA HEALTH SCIENCES, INC. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF
OPERATIONS |
(in thousands, except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31, |
|
Year Ended
December 31, |
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
Revenue: |
|
(Unaudited) |
|
|
|
|
|
|
Service
revenue |
|
$ |
413,613 |
|
|
$ |
362,265 |
|
|
$ |
1,580,023 |
|
|
$ |
1,375,847 |
|
Reimbursement revenue |
|
|
58,773 |
|
|
|
66,682 |
|
|
|
231,688 |
|
|
|
238,036 |
|
Total
revenue |
|
|
472,386 |
|
|
|
428,947 |
|
|
|
1,811,711 |
|
|
|
1,613,883 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
Direct
costs |
|
|
274,355 |
|
|
|
234,882 |
|
|
|
1,032,688 |
|
|
|
886,528 |
|
Reimbursable out-of-pocket costs |
|
|
58,773 |
|
|
|
66,682 |
|
|
|
231,688 |
|
|
|
238,036 |
|
Selling,
general and administrative |
|
|
70,245 |
|
|
|
63,586 |
|
|
|
269,893 |
|
|
|
246,417 |
|
Transaction-related costs |
|
|
13,049 |
|
|
|
— |
|
|
|
44,834 |
|
|
|
— |
|
Depreciation and amortization |
|
|
17,260 |
|
|
|
19,735 |
|
|
|
69,506 |
|
|
|
77,952 |
|
Loss on
disposal of fixed assets |
|
|
463 |
|
|
|
201 |
|
|
|
753 |
|
|
|
652 |
|
Income
from operations |
|
|
38,241 |
|
|
|
43,861 |
|
|
|
162,349 |
|
|
|
164,298 |
|
Interest expense,
net |
|
|
(12,388 |
) |
|
|
(15,683 |
) |
|
|
(54,913 |
) |
|
|
(61,747 |
) |
Loss on extinguishment
of debt |
|
|
(16,693 |
) |
|
|
— |
|
|
|
(38,178 |
) |
|
|
— |
|
Foreign currency gains,
net |
|
|
14,765 |
|
|
|
5,251 |
|
|
|
24,029 |
|
|
|
14,048 |
|
Other income (expense),
net |
|
|
692 |
|
|
|
73 |
|
|
|
607 |
|
|
|
(1,434 |
) |
Income before income
taxes and equity in gains (losses) of unconsolidated joint ventures
|
|
|
24,617 |
|
|
|
33,502 |
|
|
|
93,894 |
|
|
|
115,165 |
|
Provision for income
taxes |
|
|
10,625 |
|
|
|
5,663 |
|
|
|
28,494 |
|
|
|
30,004 |
|
Income before equity in
gains (losses) of unconsolidated joint ventures |
|
|
13,992 |
|
|
|
27,839 |
|
|
|
65,400 |
|
|
|
85,161 |
|
Equity in gains
(losses) of unconsolidated joint ventures, net of tax |
|
|
33 |
|
|
|
665 |
|
|
|
2,775 |
|
|
|
(3,396 |
) |
Net income |
|
$ |
14,025 |
|
|
$ |
28,504 |
|
|
$ |
68,175 |
|
|
$ |
81,765 |
|
Net income per share
attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.23 |
|
|
$ |
0.47 |
|
|
$ |
1.12 |
|
|
$ |
1.36 |
|
Diluted |
|
$ |
0.22 |
|
|
$ |
0.45 |
|
|
$ |
1.06 |
|
|
$ |
1.29 |
|
Weighted average common
shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
61,294 |
|
|
|
60,108 |
|
|
|
60,759 |
|
|
|
59,965 |
|
Diluted |
|
|
65,001 |
|
|
|
63,581 |
|
|
|
64,452 |
|
|
|
63,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRA HEALTH SCIENCES, INC. AND
SUBSIDIARIES |
|
CONSOLIDATED BALANCE SHEETS |
|
(in thousands, except share
amounts) |
|
|
|
|
|
December 31, |
|
|
|
2016 |
|
|
2015 |
|
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
144,623 |
|
|
$ |
121,065 |
|
|
Restricted cash |
|
|
4,715 |
|
|
|
5,060 |
|
|
Accounts
receivable and unbilled services, net |
|
|
439,053 |
|
|
|
415,077 |
|
|
Prepaid
expenses and other current assets |
|
|
35,367 |
|
|
|
30,175 |
|
|
Income
taxes receivable |
|
|
979 |
|
|
|
2,399 |
|
|
Total
current assets |
|
|
624,737 |
|
|
|
573,776 |
|
|
Fixed assets, net |
|
|
87,577 |
|
|
|
80,691 |
|
|
Goodwill |
|
|
971,980 |
|
|
|
1,014,798 |
|
|
Intangible assets,
net |
|
|
473,976 |
|
|
|
533,938 |
|
|
Deferred tax
assets |
|
|
6,568 |
|
|
|
3,069 |
|
|
Investment in
unconsolidated joint ventures |
|
|
284 |
|
|
|
1,288 |
|
|
Deferred financing
fees |
|
|
1,762 |
|
|
|
2,490 |
|
|
Other assets |
|
|
23,507 |
|
|
|
18,693 |
|
|
Total
assets |
|
$ |
2,190,391 |
|
|
$ |
2,228,743 |
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
Current
portion of long-term debt |
|
$ |
31,250 |
|
|
$ |
— |
|
|
Accounts
payable |
|
|
51,335 |
|
|
|
57,096 |
|
|
Accrued
expenses and other current liabilities |
|
|
123,589 |
|
|
|
119,893 |
|
|
Income
taxes payable |
|
|
25,524 |
|
|
|
19,262 |
|
|
Advanced
billings |
|
|
332,501 |
|
|
|
333,729 |
|
|
Total
current liabilities |
|
|
564,199 |
|
|
|
529,980 |
|
|
Deferred tax
liabilities |
|
|
73,703 |
|
|
|
81,691 |
|
|
Long-term debt,
net |
|
|
797,052 |
|
|
|
889,514 |
|
|
Other long-term
liabilities |
|
|
26,185 |
|
|
|
24,836 |
|
|
Total
liabilities |
|
|
1,461,139 |
|
|
|
1,526,021 |
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
Stockholders'
equity: |
|
|
|
|
|
|
|
Preferred stock, $0.01
par value; 100,000,000 shares authorized, 0 shares issued and
outstanding at December 31, 2016 and 2015, respectively |
|
|
— |
|
|
|
— |
|
|
Common stock, $0.01 par
value, 1,000,000,000 authorized shares at December 31, 2016 and
December 31, 2015; 61,597,705 and 60,245,009 issued and outstanding
at December 31, 2016 and December 31, 2015, respectively |
|
|
616 |
|
|
|
602 |
|
|
Additional paid-in
capital |
|
|
879,067 |
|
|
|
828,347 |
|
|
Accumulated other
comprehensive loss |
|
|
(224,686 |
) |
|
|
(132,307 |
) |
|
Retained earnings |
|
|
74,255 |
|
|
|
6,080 |
|
|
Total
stockholders' equity |
|
|
729,252 |
|
|
|
702,722 |
|
|
Total
liabilities and stockholders' equity |
|
$ |
2,190,391 |
|
|
$ |
2,228,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRA HEALTH SCIENCES, INC. AND
SUBSIDIARIES |
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
(in thousands) |
|
|
|
|
|
Years Ended December 31, |
|
|
|
2016 |
|
|
2015 |
|
|
Cash flows from
operating activities: |
|
|
|
|
|
|
|
Net
income |
|
$ |
68,175 |
|
|
$ |
81,765 |
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
69,506 |
|
|
|
77,952 |
|
|
Amortization of debt issuance costs and discount |
|
|
4,433 |
|
|
|
5,983 |
|
|
Amortization of terminated interest rate swaps |
|
|
4,961 |
|
|
|
731 |
|
|
Stock-based compensation expense |
|
|
7,067 |
|
|
|
5,276 |
|
|
Non-cash
transaction related costs |
|
|
42,166 |
|
|
|
— |
|
|
Unrealized foreign currency gains |
|
|
(24,499 |
) |
|
|
(16,464 |
) |
|
Loss on
modification or extinguishment of debt |
|
|
38,178 |
|
|
|
— |
|
|
Loss on
disposal of fixed assets |
|
|
753 |
|
|
|
652 |
|
|
Change in
acquisition-related contingent consideration |
|
|
(527 |
) |
|
|
89 |
|
|
Equity in
(gains) losses of unconsolidated joint ventures |
|
|
(2,775 |
) |
|
|
3,396 |
|
|
Unrealized loss on derivatives |
|
|
47 |
|
|
|
1,787 |
|
|
Other
reconciling items |
|
|
(652 |
) |
|
|
443 |
|
|
Excess
tax benefit from stock-based compensation |
|
|
(846 |
) |
|
|
— |
|
|
Deferred
income taxes |
|
|
(10,469 |
) |
|
|
(3,219 |
) |
|
Changes
in operating assets and liabilities: |
|
|
|
|
|
|
|
Accounts
receivable and unbilled services |
|
|
(31,313 |
) |
|
|
(83,211 |
) |
|
Prepaid
expenses and other assets |
|
|
(10,071 |
) |
|
|
(11,675 |
) |
|
Accounts
payable and other liabilities |
|
|
(1,474 |
) |
|
|
36,135 |
|
|
Income
taxes |
|
|
7,308 |
|
|
|
9,958 |
|
|
Advanced
billings |
|
|
79 |
|
|
|
42,830 |
|
|
Net cash
provided by operating activities |
|
|
160,047 |
|
|
|
152,428 |
|
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
Purchase
of fixed assets |
|
|
(33,143 |
) |
|
|
(32,814 |
) |
|
Cash paid
for interest on interest rate swap |
|
|
(913 |
) |
|
|
(302 |
) |
|
Cash paid
to terminate interest rate swaps |
|
|
— |
|
|
|
(32,907 |
) |
|
Acquisition of Nextrials, Inc., net of cash acquired |
|
|
(4,268 |
) |
|
|
— |
|
|
Acquisition of Value Health Solutions, Inc., net of cash
acquired |
|
|
— |
|
|
|
(543 |
) |
|
Payment
of ClinStar, LLC working capital settlement |
|
|
— |
|
|
|
(1,693 |
) |
|
Distributions from unconsolidated joint ventures |
|
|
3,700 |
|
|
|
19,529 |
|
|
Contributions to unconsolidated joint ventures |
|
|
— |
|
|
|
(23,000 |
) |
|
Proceeds
from the sale of fixed assets |
|
|
10 |
|
|
|
44 |
|
|
Net cash
used in investing activities |
|
|
(34,614 |
) |
|
|
(71,686 |
) |
|
Cash flows from
financing activities: |
|
|
|
|
|
|
|
Proceeds
from issuance of long-term debt |
|
|
625,000 |
|
|
|
— |
|
|
Proceeds
from accounts receivable financing agreement |
|
|
120,000 |
|
|
|
— |
|
|
Repayment
of long-term debt |
|
|
(822,559 |
) |
|
|
(40,000 |
) |
|
Borrowings on line of credit |
|
|
110,000 |
|
|
|
90,000 |
|
|
Repayments of line of credit |
|
|
(110,000 |
) |
|
|
(90,000 |
) |
|
Payment
of debt prepayment and debt extinguishment costs |
|
|
(17,824 |
) |
|
|
— |
|
|
Payment
for debt issuance costs |
|
|
(7,713 |
) |
|
|
— |
|
|
Payment
of common stock issuance costs |
|
|
— |
|
|
|
(525 |
) |
|
Excess
tax benefit from stock-based compensation |
|
|
846 |
|
|
|
— |
|
|
Proceeds
from stock option exercises |
|
|
655 |
|
|
|
81 |
|
|
Payment
of acquisition-related contingent consideration |
|
|
— |
|
|
|
(2,000 |
) |
|
Net cash
used in financing activities |
|
|
(101,595 |
) |
|
|
(42,444 |
) |
|
Effects of foreign
exchange changes on cash, cash equivalents, and restricted cash
|
|
|
(625 |
) |
|
|
(3,702 |
) |
|
Change in cash, cash
equivalents, and restricted cash |
|
|
23,213 |
|
|
|
34,596 |
|
|
Cash, cash equivalents,
and restricted cash, beginning of period |
|
|
126,125 |
|
|
|
91,529 |
|
|
Cash, cash equivalents,
and restricted cash, end of period |
|
$ |
149,338 |
|
|
$ |
126,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRA HEALTH SCIENCES, INC. AND
SUBSIDIARIES |
|
RECONCILIATION OF NON-GAAP
MEASURES |
|
(in thousands, except per share
amounts) |
|
(unaudited) |
|
|
|
|
|
Three Months Ended
December 31, |
|
Year Ended
December 31, |
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
Net
income |
|
$ |
14,025 |
|
|
$ |
28,504 |
|
|
$ |
68,175 |
|
|
$ |
81,765 |
|
|
Depreciation and
amortization |
|
|
17,260 |
|
|
|
19,735 |
|
|
|
69,506 |
|
|
|
77,952 |
|
|
Interest expense,
net |
|
|
12,388 |
|
|
|
15,683 |
|
|
|
54,913 |
|
|
|
61,747 |
|
|
Provision for income
taxes |
|
|
10,625 |
|
|
|
5,663 |
|
|
|
28,494 |
|
|
|
30,004 |
|
|
EBITDA |
|
|
54,298 |
|
|
|
69,585 |
|
|
|
221,088 |
|
|
|
251,468 |
|
|
Stock-based
compensation expense (a) |
|
|
2,127 |
|
|
|
1,642 |
|
|
|
7,067 |
|
|
|
5,276 |
|
|
Loss on disposal of
fixed assets, net (b) |
|
|
463 |
|
|
|
201 |
|
|
|
753 |
|
|
|
652 |
|
|
Loss on extinguishment
of debt (c) |
|
|
16,693 |
|
|
|
— |
|
|
|
38,178 |
|
|
|
— |
|
|
Foreign currency gains,
net (d) |
|
|
(14,765 |
) |
|
|
(5,251 |
) |
|
|
(24,029 |
) |
|
|
(14,048 |
) |
|
Other non-operating
(income) expense, net (e) |
|
|
(692 |
) |
|
|
(73 |
) |
|
|
(607 |
) |
|
|
1,434 |
|
|
Equity in (gains)
losses of unconsolidated joint ventures, net of tax |
|
|
(33 |
) |
|
|
(665 |
) |
|
|
(2,775 |
) |
|
|
3,396 |
|
|
Foreign research and
development credits (f) |
|
|
(197 |
) |
|
|
150 |
|
|
|
(197 |
) |
|
|
(8,346 |
) |
|
Transaction-related
costs (g) |
|
|
13,049 |
|
|
|
— |
|
|
|
44,834 |
|
|
|
— |
|
|
Acquisition-related
costs (h) |
|
|
2,192 |
|
|
|
49 |
|
|
|
2,434 |
|
|
|
233 |
|
|
Lease termination
expense (i) |
|
|
33 |
|
|
|
354 |
|
|
|
(415 |
) |
|
|
3,270 |
|
|
Severance and
restructuring charges (j) |
|
|
— |
|
|
|
(220 |
) |
|
|
33 |
|
|
|
1,569 |
|
|
Non-cash rent
adjustment (k) |
|
|
746 |
|
|
|
1,419 |
|
|
|
2,923 |
|
|
|
4,273 |
|
|
Other charges (l) |
|
|
— |
|
|
|
743 |
|
|
|
— |
|
|
|
2,416 |
|
|
Adjusted
EBITDA |
|
$ |
73,914 |
|
|
$ |
67,934 |
|
|
$ |
289,287 |
|
|
$ |
251,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
|
14,025 |
|
|
|
28,504 |
|
|
|
68,175 |
|
|
|
81,765 |
|
|
Amortization of
intangible assets |
|
|
11,113 |
|
|
|
14,179 |
|
|
|
45,368 |
|
|
|
56,751 |
|
|
Amortization of
deferred financing costs |
|
|
919 |
|
|
|
1,161 |
|
|
|
4,433 |
|
|
|
5,983 |
|
|
Amortization of
terminated interest rate swaps |
|
|
1,627 |
|
|
|
731 |
|
|
|
4,961 |
|
|
|
731 |
|
|
Stock-based
compensation expense (a) |
|
|
2,127 |
|
|
|
1,642 |
|
|
|
7,067 |
|
|
|
5,276 |
|
|
Loss on disposal of
fixed assets, net (b) |
|
|
463 |
|
|
|
201 |
|
|
|
753 |
|
|
|
652 |
|
|
Loss on extinguishment
of debt (c) |
|
|
16,693 |
|
|
|
— |
|
|
|
38,178 |
|
|
|
— |
|
|
Foreign currency gains,
net (d) |
|
|
(14,765 |
) |
|
|
(5,251 |
) |
|
|
(24,029 |
) |
|
|
(14,048 |
) |
|
Other non-operating
(income) expense, net (e) |
|
|
(692 |
) |
|
|
(73 |
) |
|
|
(607 |
) |
|
|
1,434 |
|
|
Equity in (gains)
losses of unconsolidated joint ventures, net of tax |
|
|
(33 |
) |
|
|
(665 |
) |
|
|
(2,775 |
) |
|
|
3,396 |
|
|
Foreign research and
development credits (f) |
|
|
(197 |
) |
|
|
150 |
|
|
|
(197 |
) |
|
|
(8,346 |
) |
|
Transaction-related
costs (g) |
|
|
13,049 |
|
|
|
— |
|
|
|
44,834 |
|
|
|
— |
|
|
Acquisition-related
costs (h) |
|
|
2,192 |
|
|
|
49 |
|
|
|
2,434 |
|
|
|
233 |
|
|
Lease termination
expense (i) |
|
|
33 |
|
|
|
354 |
|
|
|
(415 |
) |
|
|
3,270 |
|
|
Severance and
restructuring charges (j) |
|
|
— |
|
|
|
(220 |
) |
|
|
33 |
|
|
|
1,569 |
|
|
Non-cash rent
adjustment (k) |
|
|
746 |
|
|
|
1,419 |
|
|
|
2,923 |
|
|
|
4,273 |
|
|
Other charges (l) |
|
|
— |
|
|
|
743 |
|
|
|
— |
|
|
|
2,416 |
|
|
Total adjustments |
|
|
33,275 |
|
|
|
14,420 |
|
|
|
122,961 |
|
|
|
63,590 |
|
|
Tax effect of total
adjustments (m) |
|
|
(1,420 |
) |
|
|
(5,406 |
) |
|
|
(28,829 |
) |
|
|
(19,097 |
) |
|
Adjusted net
income |
|
$ |
45,880 |
|
|
$ |
37,518 |
|
|
$ |
162,307 |
|
|
$ |
126,258 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average common shares outstanding |
|
|
65,001 |
|
|
|
63,581 |
|
|
|
64,452 |
|
|
|
63,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income per
diluted share |
|
$ |
0.71 |
|
|
$ |
0.59 |
|
|
$ |
2.52 |
|
|
$ |
2.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRA HEALTH SCIENCES, INC. AND
SUBSIDIARIES |
|
RECONCILIATION OF GAAP TO NON-GAAP
GUIDANCE |
|
(in millions, except per share
amounts) |
|
(unaudited) |
|
|
|
|
|
FY 2017 |
|
|
|
Adjusted net income |
|
Adjusted Diluted Earnings Per
Share |
|
|
|
Low |
|
High |
|
Low |
|
High |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income and
net income per diluted share |
|
$ |
162.0 |
|
|
$ |
168.0 |
|
|
$ |
2.46 |
|
|
$ |
2.56 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
36.0 |
|
|
|
36.0 |
|
|
|
0.55 |
|
|
|
0.55 |
|
|
Amortization of deferred financing costs |
|
|
2.0 |
|
|
|
2.0 |
|
|
|
0.03 |
|
|
|
0.03 |
|
|
Amortization of terminated interest rate swaps |
|
|
6.0 |
|
|
|
6.0 |
|
|
|
0.09 |
|
|
|
0.09 |
|
|
Stock-based compensation expense (a) |
|
|
8.0 |
|
|
|
8.0 |
|
|
|
0.12 |
|
|
|
0.12 |
|
|
Non-cash
rent adjustment (k) |
|
|
4.0 |
|
|
|
4.0 |
|
|
|
0.06 |
|
|
|
0.06 |
|
|
Total
adjustments |
|
|
56.0 |
|
|
|
56.0 |
|
|
|
0.85 |
|
|
|
0.85 |
|
|
Tax
effect of total adjustments (m) |
|
|
(15.0 |
) |
|
|
(15.0 |
) |
|
|
(0.23 |
) |
|
|
(0.23 |
) |
|
Adjusted net
income and adjusted net income per diluted share
|
|
$ |
203.0 |
|
|
$ |
209.0 |
|
|
$ |
3.08 |
|
|
$ |
3.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2017 |
|
|
Adjusted net income |
|
Adjusted Diluted Earnings Per
Share |
|
|
Low |
|
High |
|
Low |
|
High |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income and
net income per diluted share |
|
$ |
27.0 |
|
|
$ |
30.0 |
|
|
$ |
0.41 |
|
|
$ |
0.46 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
9.0 |
|
|
|
9.0 |
|
|
|
0.14 |
|
|
|
0.14 |
|
Amortization of deferred financing costs |
|
|
0.5 |
|
|
|
0.5 |
|
|
|
0.01 |
|
|
|
0.01 |
|
Amortization of terminated interest rate swaps |
|
|
1.5 |
|
|
|
1.5 |
|
|
|
0.02 |
|
|
|
0.02 |
|
Stock-based compensation expense (a) |
|
|
2.0 |
|
|
|
2.0 |
|
|
|
0.03 |
|
|
|
0.03 |
|
Non-cash
rent adjustment (k) |
|
|
1.0 |
|
|
|
1.0 |
|
|
|
0.02 |
|
|
|
0.02 |
|
Total
adjustments |
|
|
14.0 |
|
|
|
14.0 |
|
|
|
0.22 |
|
|
|
0.22 |
|
Tax
effect of total adjustments (m) |
|
|
(4.0 |
) |
|
|
(4.0 |
) |
|
|
(0.06 |
) |
|
|
(0.06 |
) |
Adjusted net
income and adjusted net income per diluted share
|
|
$ |
37.0 |
|
|
$ |
40.0 |
|
|
$ |
0.57 |
|
|
$ |
0.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Stock-based compensation expense represents the amount of
recurring non-cash expense related to the Company’s equity
compensation programs, excluding transaction-related stock-based
compensation discussed in footnote (g).(b) Loss on disposal of
fixed assets represents the costs incurred in connection with the
sale or disposition of fixed assets, primarily IT equipment and
furniture and fixtures. We exclude these losses from Adjusted
EBITDA and Adjusted Net Income because they result from investing
decisions rather than from decisions made related to our ongoing
operations.(c) Loss on extinguishment of debt relates to costs
incurred in connection with changes to our long-term debt. We
exclude these losses from Adjusted EBITDA and Adjusted Net Income
because they result from financing decisions rather than from
decisions made related to our ongoing operations.(d) Foreign
currency (gains) losses, net primarily relates to gains or losses
that arise in connection with the revaluation of short-term
inter-company balances between our domestic and international
subsidiaries. In addition, this amount includes gains or losses
from foreign currency transactions, such as those resulting from
the settlement of third-party accounts receivable and payables
denominated in a currency other than the local currency of the
entity making the payment. We exclude these gains and losses from
Adjusted EBITDA and Adjusted Net Income because they result from
financing decisions rather than from decisions made related to our
ongoing operations and because fluctuations from period- to- period
do not necessarily correspond to changes in our operating
results.(e) Other non-operating (income) expense, net represents
income and expense that are non-operating and whose fluctuations
from period- to -period do not necessarily correspond to changes in
our operating results.(f) The foreign research and development
credits are the result of a comprehensive analysis we have been
performing across the organization to determine whether
expenditures incurred qualify as research and development as
defined by the respective jurisdiction. The amounts recorded
in this line item represent amounts recorded in the current period
that related to a prior period.(g) Transaction-related costs
primarily relate to costs incurred in connection with the March,
May and November 2016 secondary offerings and receivables financing
agreement. These costs include $32.0 million of non-cash
stock-based compensation expense related to the vesting and release
of the transfer restrictions of certain performance-based stock
options and $10.1 million of stock-based compensation expense
associated with the release of the transfer restrictions on a
portion of service-based vested options in connection with the
announcement of our March, May and November 2016 secondary
offerings. In addition, we incurred $2.7 million of third-party
fees associated with the secondary offerings and the closing of our
accounts receivable financing agreement.(h) Acquisition-related
costs primarily relate to costs incurred in connection with
purchase of the assets of Value Health Solutions, Inc., the
acquisition of Nextrials, Inc., and the integration cost for the
Takeda joint venture, as well as costs related to other potential
acquisitions to enhance our strategic objectives.(i) Lease
termination expenses represent charges incurred in connection with
the termination of leases at locations that are no longer being
used by the Company.(j) Severance and restructuring charges
represent amounts incurred in connection with the elimination of
redundant positions within the organization, including positions
eliminated in connection with the KKR Transaction and the
acquisitions of ClinStar, RPS and CRI Lifetree.(k) We have
escalating leases that require the amortization of rent expense on
a straight-line basis over the life of the lease. The non-cash rent
adjustment represents the difference between rent expense recorded
in the consolidated statement of operations and the amount of cash
actually paid.(l) Represents charges incurred that are not
considered part of our core operating results.(m) Represents the
tax effect of the total adjustments at our estimated effective tax
rate.
Contacts:
Helen O’Donnell
Solebury Communications Group
Managing Director
203.726.1372
InvestorRelations@PRAHS.com or
hodonnell@soleburyir.com
Christine Rogers
PRA Health Sciences, Inc.
Director, Public Relations
919.786.8463
rogerschristine@prahs.com
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