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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                For the transition period from        to    
Commission file number: 001-39212
PPD, Inc.
(Exact name of registrant as specified in its charter)
Delaware
45-3806427
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
929 North Front Street, Wilmington, North Carolina 28401
(Address of Principal Executive Offices) (Zip Code)
910-251-0081
Registrant's telephone number, including area code
————————————————
                Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per sharePPD
The NASDAQ Stock Market LLC
(Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ☒   No  ☐ 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   ☒   No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer  
Smaller reporting company
Emerging growth company
                
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes     No  ☒ 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
ClassNumber of Shares Outstanding
Common Stock $0.01 par value
350,976,576 shares outstanding as of April 26, 2021



When we use the terms “PPD,” the “Company,” “we,” “us” or “our” in this Quarterly Report on Form 10-Q, we mean PPD, Inc. and its subsidiaries on a consolidated basis, unless the context indicates otherwise.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements reflect our current views with respect to, among other things, the following: our proposed merger with Thermo Fisher Scientific Inc. (“Thermo Fisher”), our current expectations and anticipated results of operations, our financial performance, the impact from the novel coronavirus disease (“COVID-19”) pandemic, the continued reliance of the biopharmaceutical industry on outsourcing to contract research organizations, the continued growth in research and development spending in the biopharmaceutical industry, estimated growth rates in addressable markets, and our ability to effectively recruit, train, develop and retain talented individuals. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, market trends, or industry results to differ materially from those expressed or implied by such forward-looking statements. Therefore, any statements contained herein that are not statements of historical fact may be forward-looking statements and should be evaluated as such.
These statements often include words such as “anticipate,” “expect,” “suggest,” “plan,” “believe,” “intend,” “project,” “forecast,” “estimates,” “targets,” “projections,” “should,” “could,” “would,” “may,” “might,” “will,” and other similar expressions. We base these forward-looking statements on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances at this time, including the impact from the COVID-19 pandemic. As you read this Quarterly Report on Form 10-Q, you should understand that these statements are not guarantees of performance or results. The forward-looking statements contained herein are subject to and involve risks, uncertainties and assumptions and you should not place undue reliance on these forward-looking statements. Although we believe that these forward-looking statements are based on reasonable assumptions at the time they are made, actual results might differ materially from those expressed in the forward-looking statements. In evaluating forward-looking statements, current and prospective shareholders should specifically consider various factors, including the risks listed below and those outlined under Part II, Item 1A, “Risk Factors,” included elsewhere is this Quarterly Report on Form 10-Q, as well as Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2020, as such factors may be further updated from time to time in our periodic filings with the Securities and Exchange Commission.
Some of the factors, risks and uncertainties that might materially affect the forward-looking statements contained herein and may make an investment in our securities speculative or risky include, but are not limited to, the following:
uncertainties associated with the proposed merger with Thermo Fisher;
the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement;
the inability to complete the proposed merger due to the failure to satisfy conditions to completion of the proposed merger, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the proposed merger;
risks related to disruption of management’s attention from our ongoing business operations due to the proposed merger;
the effect of the announcement of the proposed merger on our relationships with our customers, operating results and business generally;
the risk that the proposed merger will not be consummated in a timely manner;
the costs of the proposed merger if the proposed merger is not consummated;
restrictions imposed on our business during the pendency of the proposed merger;
potential litigation instituted against us or our directors challenging the proposed merger;
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;
consolidation amongst our customers, and the potential for rationalization of the combined drug development pipeline, resulting in fewer products in clinical development;
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;
our dependence on our technology network, and the impact from upgrades to the network;
2


any failure to perform services in accordance with contractual requirements, regulatory standards and ethical standards;
our ability to access clinical research sites, attract suitable investigators or enroll a sufficient number of patients (including as a result of the COVID-19 pandemic) for our customers’ clinical trials;
any failure by us to comply with numerous privacy laws;
our ability to keep pace with rapid technological changes that could make our services less competitive or obsolete;
our ability to recruit, retain and motivate key personnel, including the loss of any key executive who becomes seriously ill with COVID-19;
our dependence on third parties for critical goods and support services, including a significant impact from the COVID-19 pandemic on our suppliers;
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 and medical device 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 and changes to our insurance coverage;
our use of biological and hazardous materials, which could violate law or cause injury or death, resulting in liability;
international or U.S. economic, currency, political and other risks, such as those from the COVID-19 pandemic;
disruptions to our operations by the occurrence of a natural disaster, pandemic (such as the COVID-19 pandemic), or other catastrophic events;
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;
changes in tax laws, such as U.S. tax reform, or interpretations of existing tax laws;
economic conditions, import/export implications 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;
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;
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;
the potential adverse effect that the political, economic and/or regulatory influences and changes impacting the United States and international healthcare industry could have on both our customers’ and our businesses, including as a result of healthcare reform;
any patent or other intellectual property litigation we might be involved in;
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.
These cautionary statements should not be construed by you to be exhaustive and are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
3


PPD, INC.
FORM 10-Q
TABLE OF CONTENTS

ItemPage
PART I - FINANCIAL INFORMATION
1.
2.
3.
4.
PART II - OTHER INFORMATION
1.
1A.
6.

4


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
PPD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
Three Months Ended March 31,
20212020
Revenue$1,378,380 $1,072,462 
Operating costs and expenses:
Direct costs, exclusive of depreciation and amortization477,624 414,439 
Reimbursed costs380,837 250,850 
Selling, general and administrative expenses293,936 247,776 
Depreciation and amortization73,143 66,315 
Long-lived asset impairment1,584  
Total operating costs and expenses1,227,124 979,380 
Income from operations151,256 93,082 
Interest expense, net of interest income of $465 and $1,270 for the three
months ended March 31, 2021 and 2020, respectively(47,212)(64,710)
Loss on extinguishment of debt(10,677)(50,065)
Loss on investments(37,229)(26,872)
Other income, net9,004 29,294 
Income (loss) before provision for (benefit from) income taxes65,142 (19,271)
Provision for (benefit from) income taxes15,053 (7,717)
Income (loss) before equity in losses of unconsolidated affiliates50,089 (11,554)
Equity in losses of unconsolidated affiliates, net of income taxes(2,753)(1,566)
Net income (loss)47,336 (13,120)
Net income attributable to noncontrolling interest (1,455)(2,718)
Net income (loss) attributable to PPD, Inc.45,881 (15,838)
Recapitalization investment portfolio consideration28,612 20,062 
Net income attributable to common stockholders of PPD, Inc.$74,493 $4,224 
Earnings per share attributable to common stockholders of PPD, Inc.:
Basic$0.21 $0.01 
Diluted$0.21 $0.01 
Weighted-average common shares outstanding:
Basic350,431 318,221 
Diluted357,662 322,424 






The accompanying notes are an integral part of these condensed consolidated financial statements.
5


PPD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
(in thousands)
Three Months Ended March 31,
20212020
Net income (loss)$47,336 $(13,120)
Other comprehensive income (loss), net of tax expense (benefit):
Foreign currency translation (19,849)(87,953)
Defined benefit plan, net of income taxes of $44 and $30 for the
three months ended March 31, 2021 and 2020, respectively 183 110 
Derivative instruments, net of income taxes of $12,109 and $(25,109) for the
three months ended March 31, 2021 and 2020, respectively36,881 (77,705)
Other comprehensive income (loss)17,215 (165,548)
Comprehensive income (loss)64,551 (178,668)
Comprehensive loss (income) attributable to noncontrolling interest558 (2,705)
Comprehensive income (loss) attributable to PPD, Inc.65,109 (181,373)
Recapitalization investment portfolio consideration28,612 20,062 
Comprehensive income (loss) attributable to common stockholders of PPD, Inc.$93,721 $(161,311)































The accompanying notes are an integral part of these condensed consolidated financial statements.
6


PPD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except par value)
March 31, 2021December 31, 2020
Assets
Current assets:
Cash and cash equivalents$826,425 $767,999 
Accounts receivable and unbilled services, net1,835,088 1,609,718 
Income taxes receivable24,782 22,386 
Prepaid expenses and other current assets155,039 146,100 
Total current assets2,841,334 2,546,203 
Property and equipment, net502,852 496,474 
Investments in unconsolidated affiliates39,524 43,178 
Investments229,884 265,894 
Goodwill, net1,813,840 1,820,208 
Intangible assets, net707,623 748,404 
Other assets175,087 201,643 
Operating lease right-of-use assets157,854 171,839 
Total assets$6,467,998 $6,293,843 
Liabilities, Redeemable Noncontrolling Interest and Stockholders Deficit
Current liabilities:
Accounts payable$171,079 $176,341 
Accrued expenses:
Payables to investigators465,861 404,654 
Accrued employee compensation260,037 331,156 
Other accrued expenses221,693 195,779 
Income taxes payable28,786 21,206 
Unearned revenue1,224,256 1,060,544 
Current portion of operating lease liabilities47,907 51,643 
Current portion of long-term debt and finance lease obligations35,000 36,238 
Total current liabilities2,454,619 2,277,561 
Accrued income taxes21,693 18,658 
Deferred tax liabilities50,816 54,535 
Recapitalization investment portfolio liability163,311 191,923 
Long-term operating lease liabilities, less current portion126,860 137,657 
Long-term debt and finance lease obligations, less current portion4,212,710 4,226,192 
Other liabilities43,734 98,908 
Total liabilities7,073,743 7,005,434 
Commitments and contingencies (Note 7)
Redeemable noncontrolling interest34,371 34,929 
Stockholders’ deficit:
Preferred stock - $0.01 par value; 100,000 shares authorized
None issued and outstanding   
Common stock - $0.01 par value; 2,000,000 shares authorized
351,609 shares issued and 350,935 shares outstanding as of March 31, 2021 and
350,858 shares issued and 350,132 shares outstanding as of December 31, 2020
3,516 3,509 
Treasury stock, at cost, 674 and 726 shares as of March 31, 2021 and
December 31, 2020, respectively
(12,461)(13,268)
Additional paid-in-capital1,833,774 1,819,892 
Accumulated deficit(2,197,315)(2,271,808)
Accumulated other comprehensive loss(267,630)(284,845)
Total stockholders’ deficit(640,116)(746,520)
Total liabilities, redeemable noncontrolling interest and stockholders’ deficit$6,467,998 $6,293,843 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7


PPD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Three Months Ended 
March 31,
20212020
Cash flows from operating activities:
Net income (loss)$47,336 $(13,120)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization73,143 66,315 
Long-lived asset impairment1,584  
Stock-based compensation expense7,500 5,272 
Operating lease right-of-use asset expense12,174 9,819 
Loss on investments37,229 26,872 
Deferred income tax (benefit) expense(12,201)8,790 
Loss on extinguishment of debt10,677 50,065 
Other7,965 12,839 
Change in operating assets and liabilities:
Accounts receivable and unbilled services, net(230,883)(61,700)
Prepaid expenses and other current assets(5,508)22,135 
Other assets16,475 (9,546)
Income taxes, net8,533 (18,767)
Accounts payable, accrued expenses and other liabilities28,069 (48,119)
Operating lease liabilities(12,742)(9,868)
Unearned revenue158,802 (21,614)
Net cash provided by operating activities148,153 19,373 
Cash flows from investing activities:
Purchases of property and equipment(26,811)(42,768)
Capital contributions paid for investments(1,219)(452)
Net cash used in investing activities(28,030)(43,220)
Cash flows from financing activities:
Proceeds from New Term Loan3,034,750  
Redemption of 2015 Term Loan(3,064,006) 
Borrowing on revolving credit facility 150,000 
Redemption of HoldCo Notes (1,464,500)
Payments on long-term debt and finance leases(999)(10,427)
Payment of debt issuance costs(23,018) 
Net proceeds from initial public offering 1,774,941 
Recapitalization investment portfolio distribution(12,819) 
Proceeds from exercise of stock options9,311 2,709 
Payments related to tax withholdings for stock-based compensation(2,199) 
Purchase of treasury stock (865)
Net cash (used in) provided by financing activities(58,980)451,858 
Effect of exchange rate changes on cash and cash equivalents(2,717)(34,834)
Net increase in cash and cash equivalents58,426 393,177 
Cash and cash equivalents, beginning of the period767,999 345,187 
Cash and cash equivalents, end of the period$826,425 $738,364 



The accompanying notes are an integral part of these condensed consolidated financial statements.
8


PPD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT AND REDEEMABLE NONCONTROLLING INTEREST
(unaudited)
(in thousands)
PPD, Inc. Stockholders’ Deficit
Common StockTreasury Stock
Redeemable Noncontrolling InterestSharesAmountPaid-in-CapitalSharesAmountAccumulated Other Comprehensive LossAccumulated Deficit
Total Stockholders’ Deficit
Balance, December 31, 2020$34,929 350,858 $3,509 $1,819,892 726 $(13,268)$(284,845)$(2,271,808)$(746,520)
Net income 1,455 — — — — — — 45,881 45,881 
Other comprehensive (loss) income(2,013)— — — — — 17,215 — 17,215 
Issuance of common stock— 751 7 6,382 (52)807 — — 7,196 
Stock-based compensation expense— — — 7,500 — — — — 7,500 
Recapitalization investment portfolio consideration— — — — — — — 28,612 28,612 
Balance, March 31, 2021$34,371 351,609 $3,516 $1,833,774 674 $(12,461)$(267,630)$(2,197,315)$(640,116)
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)
Issuance of common stock— 69,183 692 1,774,977 — — — — 1,775,669 
Repurchases of common stock— — — — 25 (561)— — (561)
Stock-based compensation expense— — — 5,272 — — — — 5,272 
Recapitalization investment portfolio consideration— — — — — — — 20,062 20,062 
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)










The accompanying notes are an integral part of these condensed consolidated financial statements.
9


PPD, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.    Basis of Presentation
Description of Business
PPD, Inc. (together with its subsidiaries “PPD” or the “Company”) is a holding company incorporated in Delaware. References to the “Company” throughout these condensed consolidated financial statements refer to PPD, Inc. and its consolidated subsidiaries, unless the context indicates otherwise. The Company is a leading provider of drug development services to the biopharmaceutical industry, focused on helping the Company’s customers bring their medicines and other treatments to patients around the world. The Company has been in the drug development services business for 35 years, providing a comprehensive suite of clinical development and laboratory services to pharmaceutical, biotechnology, medical device, government organizations and other industry participants. The Company has deep experience across a broad range of rapidly growing areas of drug development and engages with customers through a variety of commercial models, including both full-service and functional service partnerships and other offerings tailored to address the specific needs of the Company’s customers. The Company has two reportable segments, Clinical Development Services (“Clinical Development Services”) and Laboratory Services (“Laboratory Services”).
Unaudited Interim Financial Information and the Use of Estimates
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial reporting. The significant accounting policies followed by the Company for interim financial reporting are consistent with the accounting policies it follows for annual financial reporting and are disclosed in Note 1, “Basis of Presentation and Summary of Significant Accounting Policies,” of the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”). There have been no significant changes to the Company’s significant accounting policies during the first three months of 2021.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company monitors estimates and assumptions on a continuous basis and updates these estimates and assumptions as facts and circumstances change and new information is obtained, including facts and circumstances related to the novel coronavirus disease (“COVID-19”) pandemic. Actual results could differ from those estimates and assumptions due to, among other things, the impacts caused by the COVID-19 pandemic.
In the opinion of the Company’s management, these condensed consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full twelve-month period ending December 31, 2021 or any other future period. Therefore, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the 2020 Form 10-K. The information as of December 31, 2020 in the Company’s condensed consolidated balance sheet included herein is derived from the Company’s audited consolidated financial statements included in the 2020 Form 10-K.
2.    Revenue
Performance Obligations
Revenue recognized from performance obligations partially satisfied in prior periods was $32.1 million and $23.6 million for the three months ended March 31, 2021 and 2020, respectively. These cumulative catch-up adjustments primarily relate to contract modifications executed in the relevant period, which resulted in changes to the transaction price, and to a lesser extent, changes in transaction price related to variable consideration and changes in estimates such as estimated total costs.
As of March 31, 2021, the aggregate amounts of transaction price allocated to unsatisfied performance obligations with an original contract term of greater than one year was $8.2 billion. The Company expects to recognize 36% to 42% of the transaction price allocated to unsatisfied performance obligations over the next 12 months as services are rendered, with the remainder recognized thereafter during the remaining contract term. The Company does not include the value of the transaction price allocated to unsatisfied performance obligations for contracts that have an original contract term of less than one year, for contracts which are determined to be short-term based on certain termination for convenience provisions or where the right to invoice practical expedient has been applied.
10


Accounts Receivable and Unbilled Services, net and Unearned Revenue
The Company’s accounts receivable and unbilled services, net, consisted of the following amounts on the dates set forth below:
(in thousands)March 31, 2021December 31, 2020
Accounts receivable$907,648 $735,568 
Unbilled services935,399 882,078 
Total accounts receivable and unbilled services1,843,047 1,617,646 
Allowance for doubtful accounts(7,959)(7,928)
Total accounts receivable and unbilled services, net$1,835,088 $1,609,718 
The Company’s unearned revenue consisted of the following amounts on the dates set forth below:
(in thousands)March 31, 2021December 31, 2020
Unearned revenue$1,224,256 $1,060,544 
As of March 31, 2021 and December 31, 2020, contract assets of $180.4 million and $171.2 million, respectively, were included in unbilled services. The changes in the Company’s contract assets and unearned revenue resulted from the timing difference between the Company’s satisfaction of performance obligations under its contracts, achievement of billing milestones and customer payments. Additionally, during the three months ended March 31, 2021 and 2020, the Company recognized revenue of $480.6 million and $478.6 million, respectively, from the balance of unearned revenue outstanding as of the beginning of each respective year. Impairments of accounts receivable, unbilled services and contract assets were insignificant during the three months ended March 31, 2021 and 2020.
Customer Concentration
Concentrations of credit risk with respect to accounts receivable and unbilled services, net, are limited due to the Company’s large number of customers. As of March 31, 2021, no one customer accounted for greater than 10% of accounts receivable and unbilled services, net. As of December 31, 2020, one customer accounted for approximately 12% of accounts receivable and unbilled services, net. No one customer accounted for greater than 10% of revenues for the three months ended March 31, 2021 or 2020.
3.    Goodwill and Intangible Assets, Net
Goodwill, Net
The changes in the carrying amount of goodwill by segment consisted of the following on the dates set forth below:
(in thousands)TotalClinical Development ServicesLaboratory Services
Balance at December 31, 2020:
Goodwill$1,946,919 $1,720,305 $226,614 
Accumulated impairment losses(126,711)(99,432)(27,279)
Goodwill, net1,820,208 1,620,873 199,335 
Activity:
Translation adjustments(6,368)(6,368) 
Balance at March 31, 2021:
Goodwill 1,940,551 1,713,937 226,614 
Accumulated impairment losses(126,711)(99,432)(27,279)
Goodwill, net$1,813,840 $1,614,505 $199,335 
11


Intangible Assets, Net
The Company’s definite-lived intangible assets were composed of the following on the dates set forth below:
March 31, 2021December 31, 2020
(in thousands)Carrying AmountAccumulated AmortizationNetCarrying AmountAccumulated AmortizationNet
Customer relationships$899,315 $(490,603)$408,712 $902,302 $(479,341)$422,961 
Trade names377,571 (162,983)214,588 378,764 (159,131)219,633 
Backlog181,077 (180,823)254 181,762 (181,196)566 
Investigator/payer network242,505 (221,205)21,300 245,683 (217,963)27,720 
Technology/intellectual property8,600 (4,491)4,109 8,600 (4,256)4,344 
Know-how/processes597,426 (538,766)58,660 598,922 (525,742)73,180 
Total$2,306,494 $(1,598,871)$707,623 $2,316,033 $(1,567,629)$748,404 
Amortization expense was $38.6 million and $39.7 million for the three months ended March 31, 2021 and 2020, respectively.
4.    Long-term Debt and Finance Lease Obligations
Long-term debt and finance lease obligations consisted of the following as set forth on the dates below:
(dollars in thousands)Maturity DateEffective RateStated RateMarch 31, 2021December 31, 2020
New Term LoanJanuary 20282.94%2.75%$3,050,000 $ 
2025 NotesJune 20254.97%4.63%500,000 500,000 
2028 NotesJune 20285.24%5.00%700,000 700,000 
2015 Term Loan (1)
August 20223.71%3.50% 3,064,006 
Finance lease obligationsVariousVariousVarious51,368 25,734 
4,301,368 4,289,740 
Unamortized debt discount (14,814)(4,198)
Unamortized debt issuance costs(38,844)(23,112)
Current portion of long-term debt and finance lease obligations(35,000)(36,238)
Long-term debt and finance lease obligations, less current portion$4,212,710 $4,226,192 
(1) Maturity date, effective rate and stated rate are as of December 31, 2020 for the extinguished term loan.
Extinguished 2015 Credit Agreement
On August 18, 2015, Jaguar Holding Company II and Pharmaceutical Product Development, LLC entered into a credit agreement (the “2015 Credit Agreement”), as amended, consisting of a $2.575 billion senior secured term loan (the “2015 Term Loan”) issued at 99.5% of face value, or a discount of 0.5%, and a $300.0 million senior secured revolving credit facility (the “2015 Revolving Credit Facility”). In May and November of 2016, the Company amended the 2015 Credit Agreement to increase the borrowings of the 2015 Term Loan by $660.0 million in total. Borrowings under the 2015 Term Loan bore interest at a variable rate based on the London Inter-bank Offered Rate (“LIBOR”) for a specific interest period plus an applicable margin, subject to a Eurocurrency rate floor of 1.00%. The 2015 Term Loan was scheduled to mature on August 18, 2022 and the 2015 Revolving Credit Facility was scheduled to mature on May 15, 2022.
On January 13, 2021, the Company extinguished the 2015 Term Loan in accordance with the provisions governing the 2015 Credit Agreement for $3,064.0 million with the proceeds received from the Company’s New Term Loan (as defined below), together with cash on hand. At the same time, the Company also extinguished its then existing 2015 Revolving Credit Facility. The total loss on extinguishment of debt associated with the extinguishments of the 2015 Term Loan and the 2015 Revolving Credit Facility was $10.7 million. As a result, the obligations of the Company under the 2015 Credit Agreement were discharged on that date.
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New Credit Agreement
On January 13, 2021, the Company and its indirect wholly-owned subsidiary, PPD Development, L.P. (the “Co-Borrower”) entered into and closed a new (i) $3,050.0 million aggregate principal amount senior secured first-lien term loan facility (the “New Term Loan”) issued at 99.5% of face value, or a discount of 0.5%, maturing in January 2028 and (ii) $600.0 million committed principal amount senior secured first-lien revolving credit facility (the “New Revolving Credit Facility” and, together with the New Term Loan, the “Bank Facilities”) maturing in January 2026 under the credit agreement dated as of January 13, 2021 (the “New Credit Agreement”). Debt issuance costs of $23.0 million, consisting primarily of arrangement fees and professional fees, were deferred in connection with the New Term Loan. Additionally, debt issuance costs of $1.1 million related to professional fees were deferred in connection with the New Revolving Credit Facility.
The proceeds from borrowings under the New Term Loan, together with cash on hand, were used to (i) refinance in full the principal amount outstanding and accrued and unpaid interest, fees and other amounts then due and owing under the 2015 Term Loan and (ii) pay fees and expenses relating to the New Credit Agreement.
Borrowings under the New Term Loan bear interest, initially, at a rate equal to, at the option of the Company, either (a) Adjusted LIBOR (as defined in the New Credit Agreement) plus a margin of 2.25% with an “Adjusted LIBOR floor” of 0.50% or (b) Base Rate (as defined in the New Credit Agreement) plus a margin of 1.25%, with a “Base Rate floor” of 1.50%. Loans under the New Revolving Credit Facility bear interest, initially, at a rate equal to, at the option of the Company either (a) Adjusted LIBOR plus a margin of 2.00% with an “Adjusted LIBOR floor” of 0.00% or (b) Base Rate plus a margin of 1.00% with a “Base Rate floor” of 1.00%. Pricing on each of the Bank Facilities includes a 25 basis point step-down to the respective interest rate margins upon the achievement and maintenance of a total net leverage ratio of 3.75:1.00 or lower or upon the public announcement that the Company’s corporate credit rating from each of Moody’s and S&P is equal to or better than Ba2 or BB, respectively. Interest on the New Term Loan was based on Adjusted LIBOR as of March 31, 2021.
In addition to paying interest on outstanding principal under the New Term Loan and New Revolving Credit Facility, the Company is required to pay a commitment fee, payable quarterly in arrears, of 0.50% per annum on the average daily unused portion of the New Revolving Credit Facility, with step-downs to (i) 0.375% and (ii) 0.25% per annum on such portion upon achievement of a total net leverage ratio equal to or less than (i) 4.75x and (ii) 3.75x, respectively, and an additional 0.125% per annum upon the public announcement that the Company’s corporate credit rating from each of Moody’s and S&P is equal to or better than Ba2 or BB, respectively. The commitment fee shall, however, in no event be less than 0.25% per annum. The commitment fee will initially be set at 0.375% per annum until the date the Company delivers the applicable financial statements for the quarter ending June 30, 2021. The borrowers must also pay customary letter of credit fees.
The borrowers are required, subject to certain exceptions, to pay outstanding loans under the New Term Loan, (i) commencing with the fiscal year ending December 31, 2022, with 50% of excess cash flow, with step-downs upon achievement of certain first lien net leverage ratios, (ii) with 100% of the net cash proceeds of all non-ordinary course asset sales by the Company and its restricted subsidiaries, with step-downs upon achievement of certain first lien net leverage ratios and subject to the Company’s reinvestment right and (iii) with 100% of the net cash proceeds of issuances of debt obligations of the Company and its restricted subsidiaries, other than permitted debt. The borrowers may also voluntarily repay outstanding loans under the New Term Loan and the New Revolving Credit Facility at any time without premium or penalty, except in connection with, or resulting in, any repricing event. In addition, the borrowers may elect to permanently terminate or reduce all or a portion of the revolving credit commitments and the letter of credit sub-limit under the New Revolving Credit Facility at any time without premium or penalty.
The borrowers are required to repay installments on the New Term Loan in quarterly principal amounts equal to 0.25% of the original principal amount of the New Term Loan borrowed on the closing date on the last business day of each June, September, December and March of each year, with the balance payable on January 13, 2028. The entire principal amount of revolving loans outstanding (if any) under the New Revolving Credit Facility are due and payable in full at maturity on January 13, 2026, on which day the revolving credit commitments thereunder will terminate.
All obligations under the New Credit Agreement are unconditionally guaranteed on a senior basis by, subject to certain exceptions, each existing and subsequently acquired or organized wholly owned restricted subsidiary of the Company organized in the United States and certain other non-U.S. subsidiaries. The obligations of the borrowers under the New Credit Agreement and the guarantees are secured, subject to certain exceptions and excluded assets, by (i) the equity securities of the Co-Borrower and each guarantor, and of each direct, restricted subsidiary of the Company, the Co-Borrower and of each subsidiary guarantor and (ii) security interests in, and mortgages on, substantially all personal property and material owned real property of the Company and each subsidiary guarantor.
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The New Credit Agreement includes negative covenants limiting the ability of the Company and its restricted subsidiaries to incur indebtedness and liens, sell assets and make restricted payments, including dividends and investments, subject to certain exceptions. In addition, the New Credit Agreement also contains other customary affirmative and negative covenants and customary events of default (with customary grace periods, as applicable). Additionally, certain negative covenants are subject to customary investment grade fall-away provisions if the Company has a public corporate credit/family ratings that is investment grade from Moody’s and S&P (so long as there is no ongoing event of default) and will be reinstated if the ratings condition is no longer met. If an event of default occurs the administrative agent shall, at the request of, or may, with the consent of the required lenders, (i) terminate lenders’ commitments under the New Credit Agreement, (ii) declare any outstanding loans under the New Credit Agreement to be immediately due and payable, (iii) require that the Company cash collateralize the letters of credit (“L/C”) obligations and (iv) exercise on behalf of itself, the L/C issuers and the lenders all rights and remedies available to it, the L/C issuers and the lenders under the loan documents or applicable law.
From time to time, the Company is required to have L/C issued on its behalf to provide credit support for guarantees, contractual commitments and insurance policies. As of March 31, 2021 and December 31, 2020, the Company had L/C outstanding with an aggregate value of $1.6 million, which reduced available borrowings under the New Revolving Credit Facility and 2015 Revolving Credit Facility by such amount. As of March 31, 2021, the Company had available credit under the New Revolving Credit Facility of $598.4 million. The Company did not have any borrowings outstanding under the New Revolving Credit Facility as of or at any time during the three-month period ended March 31, 2021.
Debt Covenants and Default Provisions
Other than the customary covenants and default provisions related to the New Credit Agreement, there were no changes to the debt covenants or default provisions related to the Company’s other outstanding debt or other obligations during the first three months of 2021. The Company was in compliance with all covenants for all long-term debt arrangements as of March 31, 2021 and December 31, 2020. For additional information on the Company’s debt arrangements, debt covenants and default provisions, see Note 9, “Long-term Debt and Finance Lease Obligations,” of the Company’s audited consolidated financial statements included in the 2020 Form 10-K.
New Finance Lease Agreement
In January 2021, the Company entered into a new lease agreement for its existing laboratory facilities in Virginia. The new lease agreement replaced the prior operating lease agreements for certain existing facilities, consolidated multiple operating leases into one new lease agreement and extended the term of the lease for the facilities. The new finance lease totaling $26.3 million was recorded as a component of property and equipment, net, and current and long-term debt and finance lease obligations on the condensed consolidated balance sheets.
Scheduled Maturities of Long-term Debt and Finance Lease Obligations
As of March 31, 2021, the scheduled maturities of long-term debt and settlement of finance lease obligations for the remainder of 2021, each of the next five years and thereafter were as follows (in thousands):
YearAmount
2021 (remaining nine months)$26,236 
202234,339 
202334,417 
202434,332 
2025534,421 
202634,835 
Thereafter3,602,788 
Total $4,301,368 
5.    Income Taxes
The Company’s effective income tax rate was 23.1% and 40.0% for the three months ended March 31, 2021 and 2020, respectively. The Company’s provision for income taxes for the three months ended March 31, 2021 was primarily due to the estimated tax effect on the Company’s pre-tax income. The Company’s benefit from income taxes for the three months ended March 31, 2020 was primarily due to the estimated tax effect on the Company’s pre-tax loss and the impact of certain favorable discrete items, partially offset by the tax impact of certain non-deductible compensation costs.
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As of March 31, 2021 and December 31, 2020, the Company’s total unrecognized tax benefits were $23.9 million and $21.3 million, respectively. Included in the balance of unrecognized tax benefits as of March 31, 2021 and December 31, 2020, were $17.3 million and $14.9 million, respectively, net of the federal benefit for state taxes that, if recognized, would reduce the Company’s effective tax rate. In addition, the Company believes that it is reasonably possible that the total amount of unrecognized tax benefits could decrease by up to $3.4 million within the next 12 months due to the filing of amended returns, settlement of audits and the expiration of the statutes of limitations.
The Company has analyzed its filing positions in all significant federal, state and foreign jurisdictions where it is required to file income tax returns, as well as open tax years in these jurisdictions. The significant jurisdictions with periods subject to examination where the Company does business are the 2017 through 2020 tax years for the United States and the United Kingdom. Various U.S., foreign and state income tax returns are under examination by taxing authorities. The Company does not believe that the outcome of any examination will have a material impact on its results of operations, financial condition and/or cash flows.
6.    Derivative Instruments and Hedging Activities
The Company had variable rate borrowings under its 2015 Term Loan and now has variable rate borrowings under its New Term Loan, and as a result, was and is exposed to interest rate fluctuations on these borrowings. From time to time, the Company enters into interest rate swaps to mitigate the risk in fluctuations in interest rates. For hedges that qualify, the Company accounts for these interest rate swaps as qualifying cash flow hedges because their purpose is to hedge the Company’s exposure to increases in interest rates on its variable rate borrowings and as the interest rate swaps effectively convert variable rate borrowings to fixed rate borrowings based on the fixed interest rate for the interest rate swaps plus the applicable margin on the 2015 Term Loan or New Term Loan, as applicable. For those designated interest rate swaps accounted for as cash flow hedges, the Company recognizes in accumulated other comprehensive loss (“AOCL”) or accumulated other comprehensive income (“AOCI”), net of tax, any changes in the fair value, representing unrealized gains or losses, of its interest rate swaps. The Company assesses effectiveness at inception and on an ongoing quarterly basis. The Company may also enter into interest rate swap agreements that are not designated as cash flow hedges for accounting purposes. Changes in the fair value of interest rate swaps not designated as cash flow hedges are reported in the statements of operations as part of other income, net. The Company does not use derivative financial instruments for speculative or trading purposes and does not offset the fair value amounts of its derivatives. Current market conditions, including dislocation in the financial markets and volatility in interest rates, may affect the performance of the Company’s hedging relationships for cash flow hedges, which could cause the hedges to no longer be effective.

The following table summarizes the material terms of the interest rate swaps outstanding as of March 31, 2021 (dollars in thousands):
Swap #TermsNotional AmountFixed Interest RateMaturity DateDesignated/Undesignated
1Variable to fixed$1,500,000 1.19%March 31, 2025Designated
2Variable to fixed1,428,000 1.22%March 31, 2025Designated
3Variable to fixed72,000 1.22%March 31, 2025Undesignated
4Variable to fixed500,000 1.17%March 31, 2025Undesignated
5Fixed to variable500,000 0.52%March 31, 2025Undesignated
During the three months ended March 31, 2021 and 2020, the Company recorded a gain of $1.0 million and a loss of $1.7 million, respectively, in other income, net, from the settlement and change in the fair value of the undesignated interest rate swaps. The Company expects to reclassify current unrealized losses of $32.3 million within the next 12 months from AOCL to interest expense, net, on the condensed consolidated statements of operations as interest payments are made on the New Term Loan.
The Company recognized the following amounts of pre-tax gain (loss) as a component of other comprehensive income (“OCI”) or other comprehensive loss (“OCL”) during the three months ended March 31, 2021 and 2020:
(in thousands)Pre-Tax Gain (Loss) Recognized in OCI or OCL
Derivatives in Cash Flow Hedging RelationshipsThree Months Ended March 31,
20212020
Interest rate swaps$40,866 $(106,390)
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The following table provides the location of the pre-tax (loss) gain reclassified from AOCL into the condensed consolidated statements of operations for the periods indicated below:
Pre-Tax (Loss) Gain Reclassified from AOCL into Statements of Operations
(in thousands)Location of (Loss) Gain Reclassified from AOCL into Statements of OperationsThree Months Ended March 31,
20212020
Interest rate swapsInterest expense, net$(8,124)$3,051 
Interest rate swapsOther income, net (6,627)
The fair value of derivative instruments consisted of the following balances as set forth on the dates below:
March 31, 2021December 31, 2020
(in thousands)Balance sheet locationAssetsLiabilitiesAssetsLiabilities
Derivatives designated as hedging instruments:
Interest rate swapsOther accrued expenses$ $31,212 $ $32,188 
Interest rate swapsOther liabilities 23,899  74,286 
Derivatives not designated as hedging instruments:
Interest rate swapsPrepaid expenses and other current assets1,869  1,901  
Interest rate swapsOther assets  1,667  
Interest rate swapsOther accrued expenses 5,928  5,184 
Interest rate swapsOther liabilities 10,030  11,893 
$1,869 $71,069 $3,568 $123,551 
The Company considers the fair value of the interest rate swap assets and liabilities to be a Level 2 classification within the fair value hierarchy. See Note 8, “Fair Value Measurements,” for additional information.
7.    Commitments and Contingencies
The Company records liabilities for pending and threatened litigation matters when an adverse outcome is probable and the amount of the potential liability can be reasonably estimated. The Company reviews claims and legal proceedings on a continuous basis and records or adjusts liabilities recorded for such matters based on updated facts and circumstances including settlements or offers to settle, judicial rulings, advice of counsel or other information pertinent to a particular matter. Legal costs associated with contingencies are charged to expense as incurred.
In the ordinary course of business, the Company periodically becomes involved in a variety of pending and threatened proceedings and claims, including investigations, disputes, litigations and regulatory matters. These actions may be threatened or commenced by various parties, including customers, current or former employees, vendors, government agencies, including tax authorities, or others. Based on the latest information available, the Company does not expect that any pending or threatened proceeding, claim or investigation, dispute, litigation or regulatory matter, either individually or in the aggregate, will have a material adverse effect on the business, financial position, results of operations and/or cash flows of the Company.
8.    Fair Value Measurements
The Company records certain assets and liabilities at fair value on a recurring and nonrecurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability, or the exit price, in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a fair value hierarchy that gives highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest level to unobservable inputs. The inputs used to measure fair value are classified into the following fair value hierarchy:
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.
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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.
Recurring Fair Value Measurements
The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands):
As of March 31, 2021Level 1Level 2Level 3Total
Assets
Investments$1,191 $ $228,693 $229,884 
Derivative instruments 1,869  1,869 
Total assets$1,191 $1,869 $228,693 $231,753 
Liabilities
Derivative instruments$ $71,069 $ $71,069 
Recapitalization investment portfolio liability  163,311 163,311 
Total liabilities$ $71,069 $163,311 $234,380 
As of December 31, 2020Level 1Level 2Level 3Total
Assets
Investments$1,307 $ $264,587 $265,894 
Derivative instruments 3,568  3,568 
Total assets$1,307 $3,568 $264,587 $269,462 
Liabilities
Derivative Instruments$ $123,551 $ $123,551 
Recapitalization investment portfolio liability  204,742 204,742 
Total liabilities$ $123,551 $204,742 $328,293 
Fair Value Investments
The following table summarizes the Company’s quantitative information about the fair value measurements of Auven Therapeutics Holdings, L.P. (“Auven”) and venBio Global Strategic Fund, L.P. on the dates set forth below (dollars in thousands):
Quantitative Information About Level 3 Fair Value Measurements for March 31, 2021
DescriptionFair ValueValuation TechniqueUnobservable InputRange of Rates
Fair value option investments$215,865Market evaluation/pricing modelsDiscount for lack of marketability
20.0% - 32.5%
Recent acquisition transactionsDiscount for lack of control
20.0% - 35.0%
Quantitative Information About Level 3 Fair Value Measurements for December 31, 2020
DescriptionFair ValueValuation TechniqueUnobservable Input