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8-K - 8-K - PRA Health Sciences, Inc.a15-21918_18k.htm
EX-99.2 - EX-99.2 - PRA Health Sciences, Inc.a15-21918_1ex99d2.htm

Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE

 

PRA Health Sciences, Inc. Reports Third Quarter 2015 Results and Provides Updated 2015 Guidance

 

·                  $345.1 million of service revenue in the third quarter; 12% constant currency growth compared to the third quarter of 2014

 

·                  $66.6 million of Adjusted EBITDA in the third quarter; 42% growth compared to the third quarter of 2014

 

·                  Third quarter Adjusted Net Income per share increased 53% to $0.52 per share and Adjusted Net Income increased 134% to $33.2 million compared to the third quarter of 2014

 

·                  Third quarter GAAP Net Income was $23.7 million or $0.37 per diluted share

 

·                  Updated Guidance for 2015 diluted Adjusted Net Income per share raised to $1.89-$1.92 from $1.75-$1.85

 

RALEIGH, N.C., November 2, 2015 — PRA Health Sciences, Inc. (“PRA” or the “Company”) (NASDAQ: PRAH) today reported financial results for the quarter ended September 30, 2015.

 

For the three months ended September 30, 2015, service revenue was $345.1 million, which represents growth of approximately 8%, or $25.0 million, compared to the third quarter of 2014 at actual foreign exchange rates. On a constant currency basis, service revenue grew $36.7 million, an increase of 12% compared to the third quarter of 2014.

 

Net new business for the quarter ended September 30, 2015 was $431.4 million, representing a book-to-bill ratio of 1.25 for the period. This net new business contributed to an ending backlog of $2.3 billion at September 30, 2015.

 

“We are delighted to have delivered another quarter with strong results on many fronts,” said Colin Shannon, PRA’s Chief Executive Officer. “Our key financial metrics have continued to improve, as evidenced by our new business wins, our revenue growth and our expanding margins.  Our strong financial performance is a reflection of the exceptional service we provide to our customers, and the continued efforts of our employees.  The strength in our results enables us to continue to focus on our key strategic objectives going into 2016, and we look forward to continuing to deliver strong results.”

 



 

Third Quarter 2015 Financial Highlights

 

Direct costs were $212.8 million during the three months ended September 30, 2015 compared to $215.7 million for the third quarter of 2014.  Direct costs were 61.7% of service revenue during the third quarter of 2015 compared to 67.4% of service revenue during the third quarter of 2014. The decrease in direct costs as a percentage of service revenue is primarily related to the favorable impact from foreign currency exchange rate fluctuations and the favorable impact of recording research and development credits, or R&D Credits, in the current period that related to prior years. The R&D 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.  Adjusting for the impact of the R&D Credits, direct costs were 64.1% of service revenue during the third quarter of 2015 compared to 67.4% of service revenue during the third quarter of 2014.

 

Selling, general and administrative expenses were $63.1 million during the three months ended September 30, 2015 compared to $63.4 million for the third quarter of 2014. Selling, general and administrative costs were 18.3% of service revenue during the third quarter of 2015 compared to 19.8% of service revenue during the third quarter of 2014. The decrease in selling, general and administrative expenses is primarily related to our continued ability to effectively manage our sales and administrative functions.

 

Reported EBITDA on a GAAP basis was $69.4 million, representing an increase of 36% compared to the third quarter of 2014. Adjusted EBITDA was $66.6 million for the three months ended September 30, 2015, representing growth of 42% compared to the third quarter of 2014.

 

Reported GAAP net income was $23.7 million for the three months ended September 30, 2015, or $0.37 per share on a diluted basis.

 

Adjusted Net Income was $33.2 million for the three months ended September 30, 2015, representing growth of 134% compared to the third quarter of 2014. Adjusted Net Income per share was $0.52 for the three months ended September 30, 2015, an increase of 53% compared to the third quarter of 2014.

 

Reconciliations of our non-GAAP measures, including Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share, to the corresponding GAAP measures are attached to this press release.

 

Nine Months Ended September 30, 2015 Financial Highlights

 

For the nine months ended September 30, 2015, service revenue was $1,013.6 million, which represents growth of 8%, or $70.7 million, as compared to the nine months ended September 30, 2014 at actual foreign exchange rates.  On a constant currency basis, service revenue grew $105.9 million, representing growth of 11% compared to the nine months ended September 30, 2014.

 



 

Reported GAAP income from operations was $120.4 million, reported GAAP net income was $53.3 million and reported GAAP diluted net income per share was $0.84 for the nine months ended September 30, 2015.

 

Adjusted Net Income was $88.7 million for the nine months ended September 30, 2015, an improvement of 141% compared to the same period in 2014. Adjusted Net Income per share was $1.41 for the nine months ended September 30, 2015, up 58% compared to the same period in 2014.

 

Revised 2015 Guidance

 

For 2015, the Company is updating its guidance given the continued strength in the underlying business. As a result, the Company is increasing its guidance for service revenue to between $1.365 billion and $1.370 billion from between $1.34 billion and $1.39 billion. The Company is also increasing its guidance for diluted GAAP net income per share to between $1.00 and $1.05 per share, compared to $0.80 to $0.90 per share previously.  In addition, management is increasing its guidance for Adjusted Net Income per share to $1.89 to $1.92 per share compared to previous guidance of $1.75 to $1.85 per share. We are maintaining our estimated effective income tax rate of approximately 30%.  This guidance assumes foreign exchange rates as of October 15, 2015.

 

Conference Call Details

 

PRA will host a conference call at 9:00 a.m. ET tomorrow, November 3, to discuss the contents of this release and other relevant topics. To participate, please dial (877) 930-8062 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 63585117.  The conference call will also be accessible, live via audio broadcast, on the Investors 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 will be available for one week 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 63585117.

 

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 more than 70 offices across North America, Europe, Asia, Latin America, South Africa, Australia and the Middle East and approximately 11,000 employees worldwide. Since 2000, PRA has performed approximately 2,300 clinical trials worldwide and has worked on more than 100 marketed drugs across several therapeutic areas. 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 50 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 ‘Investors’ 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.

 

Contacts:

 

Linda Baddour

Chief Financial Officer

Mike Bonello

Corporate Controller

919.786.8270

InvestorRelations@PRAHS.com

 

Westwicke Partners

Robert H. Uhl

Managing Director

858.356.5932

robert.uhl@westwicke.com

 

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; 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 March 3, 2015. 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 Adjusted EBITDA, Adjusted Gross Profit, Adjusted Income from Operations, 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 are more indicative of 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, Adjusted Gross Profit, Adjusted Income from Operations 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, Adjusted Gross Profit, Adjusted Income from Operations 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, Adjusted Gross Profit, Adjusted Income from Operations 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, Adjusted Gross Profit, Adjusted Income from Operations 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 (loss) 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 management fees, stock-based compensation expense, loss on disposal of fixed assets, loss on modification or extinguishment of debt, foreign currency losses and gains, other (expense) income, equity in losses of unconsolidated joint ventures, transaction and acquisition-related costs, relocation costs, severance costs and restructuring charges, foreign research and development credits, non-cash rent adjustments and other one-time charges. Adjusted Net Income is also adjusted to exclude amortization of intangible assets and amortization of deferred financing costs. Adjusted Gross Profit is adjusted to exclude stock-based compensation expense included in direct costs and foreign research and development credits.  Adjusted Income from Operations is adjusted to exclude management fees, stock-based compensation expense, loss on disposal of fixed assets, transaction and acquisition-related costs, relocation costs, severance costs and restructuring charges, foreign research and development credits, non-cash rent adjustments, other one-time charges and amortization of intangible assets. EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income (loss) or other performance measures derived in accordance with GAAP or as alternatives to cash flow from operating activities as measures of our liquidity. EBITDA and Adjusted EBITDA 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.

 



 

PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

Revenue:

 

 

 

 

 

 

 

 

 

Service revenue

 

$

345,096

 

$

320,063

 

$

1,013,582

 

$

942,837

 

Reimbursement revenue

 

58,414

 

57,274

 

171,354

 

146,786

 

Total revenue

 

403,510

 

377,337

 

1,184,936

 

1,089,623

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Direct costs

 

212,808

 

215,746

 

651,646

 

644,275

 

Reimbursable out-of-pocket costs

 

58,414

 

57,274

 

171,354

 

146,786

 

Selling, general and administrative

 

63,091

 

63,432

 

182,831

 

180,281

 

Depreciation and amortization

 

19,762

 

23,903

 

58,217

 

73,140

 

Loss on disposal of fixed assets

 

256

 

8

 

451

 

9

 

Income from operations

 

49,179

 

16,974

 

120,437

 

45,132

 

Interest expense, net

 

(15,255

)

(21,026

)

(46,064

)

(63,610

)

Loss on modification of debt

 

 

 

 

(1,384

)

Foreign currency gains, net

 

3,697

 

10,658

 

8,797

 

1,559

 

Other expense, net

 

(947

)

(58

)

(1,507

)

(230

)

Income (loss) before income taxes and equity in losses of unconsolidated joint ventures

 

36,674

 

6,548

 

81,663

 

(18,533

)

Provision for (benefit from) income taxes

 

10,696

 

4,899

 

24,341

 

(6,619

)

Income (loss) before equity in losses of unconsolidated joint ventures

 

25,978

 

1,649

 

57,322

 

(11,914

)

Equity in losses of unconsolidated joint ventures, net of tax

 

(2,319

)

(474

)

(4,061

)

(1,008

)

Net income (loss)

 

$

23,659

 

$

1,175

 

$

53,261

 

$

(12,922

)

Net income (loss) per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.39

 

$

0.03

 

$

0.89

 

$

(0.32

)

Diluted

 

$

0.37

 

$

0.03

 

$

0.84

 

$

(0.32

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

60,050

 

40,284

 

59,917

 

40,273

 

Diluted

 

63,504

 

42,072

 

63,082

 

40,273

 

 



 

PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands, except share amounts)

(unaudited)

 

 

 

September 30,

 

December 31,

 

 

 

2015

 

2014

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

48,438

 

$

85,192

 

Restricted cash

 

5,482

 

6,337

 

Accounts receivable and unbilled services, net

 

400,453

 

338,781

 

Other current assets

 

84,948

 

58,413

 

Total current assets

 

539,321

 

488,723

 

Fixed assets, net

 

79,609

 

72,933

 

Goodwill

 

1,023,361

 

1,033,999

 

Intangible assets, net

 

553,029

 

600,910

 

Other assets

 

46,232

 

42,012

 

Total assets

 

$

2,241,552

 

$

2,238,577

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current portion of borrowings under credit facilities

 

$

20,000

 

$

 

Accounts payable

 

55,263

 

39,100

 

Accrued expenses and other current liabilities

 

145,977

 

131,135

 

Advance billings

 

291,588

 

296,121

 

Total current liabilities

 

512,828

 

466,356

 

Long-term debt, net

 

909,427

 

948,537

 

Other long-term liabilities

 

126,246

 

146,869

 

Total liabilities

 

1,548,501

 

1,561,762

 

Stockholders’ equity:

 

 

 

 

 

Common stock, $0.01 par value, 1,000,000,000 authorized shares at September 30, 2015 and December 31, 2014; 60,203,935 and 59,814,444 issued and outstanding at September 30, 2015 and December 31, 2014, respectively

 

602

 

598

 

Additional paid-in-capital

 

826,650

 

821,411

 

Accumulated other comprehensive loss

 

(111,777

)

(69,509

)

Accumulated deficit

 

(22,424

)

(75,685

)

Total stockholders’ equity

 

693,051

 

676,815

 

Total liabilities and stockholders’ equity

 

$

2,241,552

 

$

2,238,577

 

 



 

PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2015

 

2014

 

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

 

$

53,261

 

$

(12,922

)

Adjustment to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

58,217

 

73,140

 

Amortization of debt issuance costs

 

4,822

 

4,378

 

Stock-based compensation

 

3,634

 

2,729

 

Unrealized foreign currency gains

 

(11,749

)

(1,716

)

Loss on modification of debt

 

 

1,384

 

Equity in losses of unconsolidated joint ventures, net of tax

 

4,061

 

1,008

 

Unrealized loss on derivatives

 

1,785

 

 

Deferred income taxes

 

(2,213

)

(19,122

)

Other reconciling items

 

981

 

677

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable, unbilled services and advanced billings

 

(66,640

)

(76,629

)

Other operating assets and liabilities

 

26,043

 

28,532

 

Net cash provided by operating activities

 

72,202

 

1,459

 

Cash flows from investing activities:

 

 

 

 

 

Purchase of fixed assets

 

(26,035

)

(18,992

)

Proceeds from RPS working capital settlement

 

 

15,000

 

Proceeds from CRI working capital settlement

 

 

851

 

Cash paid to terminate interest rate swaps

 

(32,907

)

 

Investment in unconsolidated joint ventures

 

(23,000

)

 

Acquisition of Value Health Solutions Inc.

 

(543

)

 

Proceeds from the sale of fixed assets

 

44

 

 

Payment of ClinStar, LLC working capital settlement

 

(1,693

)

 

Payment of amounts held in escrow

 

 

(787

)

Net cash used in investing activities

 

(84,134

)

(3,928

)

Cash flows from financing activities:

 

 

 

 

 

Repayment of long-term debt

 

(40,000

)

(6,675

)

Borrowings on line of credit

 

65,000

 

65,000

 

Repayments on line of credit

 

(45,000

)

(75,000

)

Proceeds from stock option exercises

 

27

 

33

 

Proceeds from common stock issued

 

 

102

 

Payment of acquisition-related contingent consideration

 

(2,000

)

(1,589

)

Payments for common stock issuance costs

 

(525

)

 

Net cash used in financing activities

 

(22,498

)

(18,129

)

Effects of foreign exchange changes on cash and cash equivalents

 

(2,324

)

(2,303

)

Change in cash and cash equivalents

 

(36,754

)

(22,901

)

Cash and cash equivalents, beginning of period

 

85,192

 

72,155

 

Cash and cash equivalents, end of period

 

$

48,438

 

$

49,254

 

 



 

PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP MEASURES

(in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

23,659

 

$

1,175

 

$

53,261

 

$

(12,922

)

Depreciation and amortization

 

19,762

 

23,903

 

58,217

 

73,140

 

Interest expense, net

 

15,255

 

21,026

 

46,064

 

63,610

 

Provision for (benefit from) income taxes

 

10,696

 

4,899

 

24,341

 

(6,619

)

EBITDA

 

69,372

 

51,003

 

181,883

 

117,209

 

Management fees (a)

 

 

526

 

 

1,576

 

Stock-based compensation expense (b)

 

1,614

 

969

 

3,634

 

2,729

 

Loss on disposal of fixed assets, net (c)

 

256

 

8

 

451

 

9

 

Loss on modification of debt (d)

 

 

 

 

1,384

 

Foreign currency gains, net (e)

 

(3,697

)

(10,658

)

(8,797

)

(1,559

)

Other expense, net (f)

 

947

 

58

 

1,507

 

230

 

Equity in losses of unconsolidated joint ventures, net of tax

 

2,319

 

474

 

4,061

 

1,008

 

Foreign research and development credits (g)

 

(8,496

)

 

(8,496

)

 

Transaction and acquisition related costs (h)

 

(33

)

4,096

 

184

 

6,267

 

Lease termination expense (i)

 

318

 

 

2,916

 

 

Severance and restructuring charges (j)

 

1,635

 

17

 

1,789

 

2,004

 

Non-cash rent adjustment (k)

 

1,286

 

478

 

2,854

 

1,279

 

Other one-time charges (l)

 

1,077

 

46

 

1,673

 

77

 

Adjusted EBITDA

 

$

66,598

 

$

47,017

 

$

183,659

 

$

132,213

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

23,659

 

$

1,175

 

$

53,261

 

$

(12,922

)

Amortization of intangible assets

 

14,330

 

17,915

 

42,572

 

56,345

 

Amortization of deferred financing costs

 

1,536

 

1,485

 

4,822

 

4,378

 

Management fees (a)

 

 

526

 

 

1,576

 

Stock-based compensation expense (b)

 

1,614

 

969

 

3,634

 

2,729

 

Loss on disposal of fixed assets, net (c)

 

256

 

8

 

451

 

9

 

Loss on modification of debt (d)

 

 

 

 

1,384

 

Foreign currency gains, net (e)

 

(3,697

)

(10,658

)

(8,797

)

(1,559

)

Other expense, net (f)

 

947

 

58

 

1,507

 

230

 

Equity in losses of unconsolidated joint ventures, net of tax

 

2,319

 

474

 

4,061

 

1,008

 

Foreign research and development credits (g)

 

(8,496

)

 

(8,496

)

 

Transaction and acquisition-related costs (h)

 

(33

)

4,096

 

184

 

6,267

 

Lease termination expense (i)

 

318

 

 

2,916

 

 

Severance and restructuring charges (j)

 

1,635

 

17

 

1,789

 

2,004

 

Non-cash rent adjustment (k)

 

1,286

 

478

 

2,854

 

1,279

 

Other one-time charges (l)

 

1,077

 

46

 

1,673

 

77

 

Total adjustments

 

13,092

 

15,414

 

49,170

 

75,727

 

Tax effect of total adjustments (m)

 

(3,538

)

(2,408

)

(13,691

)

(26,020

)

Adjusted net income

 

$

33,213

 

$

14,181

 

$

88,740

 

$

36,785

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 

63,504

 

42,072

 

63,082

 

41,129

 

Adjusted net income per diluted share

 

$

0.52

 

$

0.34

 

$

1.41

 

$

0.89

 

 



 

PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP MEASURES, CONTINUED

(in thousands, except per share data)

(unaudited)

 

 

 

Three

 

 

 

Three

 

Nine

 

 

 

Nine

 

 

 

Months

 

 

 

Months

 

Months

 

 

 

Months

 

 

 

Ended

 

 

 

Ended

 

Ended

 

 

 

Ended

 

 

 

September 30,

 

 

 

September 30,

 

September 30,

 

 

 

September 30,

 

 

 

2015

 

 

 

2015

 

2015

 

 

 

2015

 

 

 

As Reported

 

Adjustments

 

As Adjusted

 

As Reported

 

Adjustments

 

As Adjusted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenue

 

$

345,096

 

$

 

$

345,096

 

$

1,013,582

 

$

 

$

1,013,582

 

Reimbursement revenue

 

58,414

 

 

58,414

 

171,354

 

 

171,354

 

Total revenue

 

403,510

 

 

403,510

 

1,184,936

 

 

1,184,936

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct costs

 

212,808

 

8,111

 

220,919

 

651,646

 

7,684

 

659,330

 

Reimbursable out-of-pocket costs

 

58,414

 

 

58,414

 

171,354

 

 

171,354

 

Selling, general and administrative

 

63,091

 

(5,512

)

57,579

 

182,831

 

(12,238

)

170,593

 

Depreciation and amortization

 

19,762

 

(14,330

)

5,432

 

58,217

 

(42,572

)

15,645

 

Loss on disposal of fixed assets

 

256

 

(256

)

 

451

 

(451

)

 

Income from operations

 

49,179

 

11,987

 

61,166

 

120,437

 

47,577

 

168,014

 

Interest expense, net

 

(15,255

)

1,536

 

(13,719

)

(46,064

)

4,822

 

(41,242

)

Foreign currency gains, net

 

3,697

 

(3,697

)

 

8,797

 

(8,797

)

 

Other expense, net

 

(947

)

947

 

 

(1,507

)

1,507

 

 

Income before income taxes and equity in losses of unconsolidated joint ventures

 

36,674

 

10,773

 

47,447

 

81,663

 

45,109

 

126,772

 

Provision for income taxes

 

10,696

 

3,538

 

14,234

 

24,341

 

13,691

 

38,032

 

Income before equity in losses of unconsolidated joint ventures

 

25,978

 

7,235

 

33,213

 

57,322

 

31,418

 

88,740

 

Equity in losses of unconsolidated joint ventures, net of tax

 

(2,319

)

2,319

 

 

(4,061

)

4,061

 

 

Net income

 

$

23,659

 

$

9,554

 

$

33,213

 

$

53,261

 

$

35,479

 

$

88,740

 

Net income per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

0.37

 

 

 

$

0.52

 

$

0.84

 

 

 

$

1.41

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

63,504

 

 

 

63,504

 

63,082

 

 

 

63,082

 

 



 


(a)         We have historically paid management fees to affiliates of our investors. These fees terminated upon completion of the IPO.

(b)         Stock-based compensation expense represents the amount of non-cash expense related to the Company’s equity compensation programs.

(c)          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.

(d)         Loss on modification 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.

(e)          Foreign currency (losses) gains, 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.

(f)          Other (expense) income, 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.

(g)        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.

(h)       Transaction and acquisition-related costs primarily relate to costs incurred in connection with due diligence performed in connection with contemplated acquisitions; the closing of the acquisition of PRA by KKR (“KKR Transaction”), the PRA acquisition of RPS Parent Holding Corp. (“RPS”), the PRA acquisition of CRI Holding Company, LLC (“CRI LifeTree”) and the PRA acquisition of ClinStar, LLC (“ClinStar”); and the integration of ClinStar, RPS and CRI LifeTree acquisitions. The integration costs primarily consist of professional fees, rebranding costs, the elimination of redundant facilities and any other costs incurred directly related to the integration of these acquisitions.

(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.

 

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