0001564590-21-021455.txt : 20210429 0001564590-21-021455.hdr.sgml : 20210429 20210428174254 ACCESSION NUMBER: 0001564590-21-021455 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 86 CONFORMED PERIOD OF REPORT: 20210331 FILED AS OF DATE: 20210429 DATE AS OF CHANGE: 20210428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Syneos Health, Inc. CENTRAL INDEX KEY: 0001610950 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 273403111 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36730 FILM NUMBER: 21865871 BUSINESS ADDRESS: STREET 1: 1030 SYNC STREET CITY: MORRISVILLE STATE: NC ZIP: 27560 BUSINESS PHONE: 919-876-9300 MAIL ADDRESS: STREET 1: 1030 SYNC STREET CITY: MORRISVILLE STATE: NC ZIP: 27560 FORMER COMPANY: FORMER CONFORMED NAME: INC Research Holdings, Inc. DATE OF NAME CHANGE: 20140616 10-Q 1 synh-10q_20210331.htm 10-Q synh-10q_20210331.htm
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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: 001-36730

 

SYNEOS HEALTH, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

27-3403111

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

1030 Sync Street, Morrisville, North Carolina 27560-5468

(Address of principal executive offices and Zip Code)

(919876-9300

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.01 par value per share

SYNH

The Nasdaq Stock Market LLC

 

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 Exchange Act). Yes    No  

As of April 26, 2021, there were approximately 104,292,460 shares of the registrant’s common stock outstanding.

 

 


Table of Contents

 

 

SYNEOS HEALTH, INC.

FORM 10-Q

TABLE OF CONTENTS

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

Page

 

 

 

Item 1.

Financial Statements

3

 

 

 

 

Condensed Consolidated Statements of Income for the three months ended March 31, 2021 and 2020 (unaudited)

3

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2021 and 2020 (unaudited)

4

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 (unaudited)

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (unaudited)

6

 

 

 

 

Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2021 and 2020 (unaudited)

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

38

 

 

 

Item 4.

Controls and Procedures

38

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

38

 

 

 

Item 1A.

Risk Factors

38

 

 

 

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

38

 

 

 

Item 5.

Other Information

39

 

 

 

Item 6.

Exhibits

40

 

 

 

 

Signature

41

 

 

2


Table of Contents

 

 

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.

 

SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

 

 

(in thousands, except per share data)

 

Revenue

 

$

1,208,745

 

 

$

1,163,355

 

 

 

 

 

 

 

 

 

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

Direct costs (exclusive of depreciation and amortization)

 

 

945,250

 

 

 

924,014

 

Selling, general, and administrative expenses

 

 

137,314

 

 

 

125,547

 

Restructuring and other costs

 

 

7,228

 

 

 

8,720

 

Depreciation

 

 

18,447

 

 

 

17,225

 

Amortization

 

 

39,491

 

 

 

38,882

 

Total operating expenses

 

 

1,147,730

 

 

 

1,114,388

 

Income from operations

 

 

61,015

 

 

 

48,967

 

 

 

 

 

 

 

 

 

 

Total other expense, net:

 

 

 

 

 

 

 

 

Interest income

 

 

(71

)

 

 

(336

)

Interest expense

 

 

23,328

 

 

 

26,458

 

Loss on extinguishment of debt

 

 

603

 

 

 

 

Other income, net

 

 

(9,856

)

 

 

(18,930

)

Total other expense, net

 

 

14,004

 

 

 

7,192

 

Income before provision for income taxes

 

 

47,011

 

 

 

41,775

 

Income tax expense

 

 

8,287

 

 

 

8,201

 

Net income

 

$

38,724

 

 

$

33,574

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.37

 

 

$

0.32

 

Diluted

 

$

0.37

 

 

$

0.32

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

104,274

 

 

 

104,265

 

Diluted

 

 

105,457

 

 

 

105,642

 

 

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

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SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

 

 

(in thousands)

 

Net income

 

$

38,724

 

 

$

33,574

 

Unrealized gain (loss) on derivative instruments, net of income tax expense (benefit) of $2,013 and $(6,639), respectively

 

 

5,937

 

 

 

(10,730

)

Foreign currency translation adjustments, net of income tax benefit of $708 and $0, respectively

 

 

(4,310

)

 

 

(48,788

)

Comprehensive income (loss)

 

$

40,351

 

 

$

(25,944

)

 

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

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SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

March 31, 2021

 

 

December 31, 2020

 

 

 

(in thousands, except par value)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash, cash equivalents, and restricted cash

 

$

264,689

 

 

$

272,173

 

Accounts receivable and unbilled services, net

 

 

1,299,168

 

 

 

1,344,781

 

Prepaid expenses and other current assets

 

 

110,521

 

 

 

121,058

 

Total current assets

 

 

1,674,378

 

 

 

1,738,012

 

Property and equipment, net

 

 

202,618

 

 

 

216,200

 

Operating lease right-of-use assets

 

 

215,048

 

 

 

223,285

 

Goodwill

 

 

4,780,179

 

 

 

4,776,178

 

Intangible assets, net

 

 

896,386

 

 

 

933,525

 

Deferred income tax assets

 

 

34,964

 

 

 

35,059

 

Other long-term assets

 

 

151,076

 

 

 

141,047

 

Total assets

 

$

7,954,649

 

 

$

8,063,306

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

113,881

 

 

$

113,684

 

Accrued expenses

 

 

587,757

 

 

 

611,042

 

Deferred revenue

 

 

773,025

 

 

 

793,068

 

Current portion of operating lease obligations

 

 

40,759

 

 

 

42,082

 

Current portion of finance lease obligations

 

 

16,863

 

 

 

17,455

 

Total current liabilities

 

 

1,532,285

 

 

 

1,577,331

 

Long-term debt

 

 

2,862,574

 

 

 

2,902,054

 

Operating lease long-term obligations

 

 

213,662

 

 

 

221,760

 

Finance lease long-term obligations

 

 

27,768

 

 

 

31,522

 

Deferred income tax liabilities

 

 

17,043

 

 

 

20,216

 

Other long-term liabilities

 

 

64,440

 

 

 

68,311

 

Total liabilities

 

 

4,717,772

 

 

 

4,821,194

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value; 30,000 shares authorized, 0 shares issued and outstanding at March 31, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $0.01 par value; 600,000 shares authorized, 104,226 and 103,935 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

 

 

1,042

 

 

 

1,039

 

Additional paid-in capital

 

 

3,440,840

 

 

 

3,461,747

 

Accumulated other comprehensive loss, net of taxes

 

 

(39,174

)

 

 

(40,801

)

Accumulated deficit

 

 

(165,831

)

 

 

(179,873

)

Total shareholders’ equity

 

 

3,236,877

 

 

 

3,242,112

 

Total liabilities and shareholders’ equity

 

$

7,954,649

 

 

$

8,063,306

 

 

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

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SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

 

 

(in thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

38,724

 

 

$

33,574

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

57,938

 

 

 

56,107

 

Share-based compensation

 

 

17,353

 

 

 

15,998

 

(Recovery from) provision for doubtful accounts

 

 

(187

)

 

 

271

 

(Benefit from) provision for deferred income taxes

 

 

(4,653

)

 

 

8,159

 

Foreign currency transaction gains

 

 

(9,522

)

 

 

(15,019

)

Fair value adjustment of contingent obligations

 

 

(597

)

 

 

(4,095

)

Loss on extinguishment of debt

 

 

603

 

 

 

 

Other non-cash items

 

 

953

 

 

 

1,104

 

Changes in operating assets and liabilities, net of effect of business combinations:

 

 

 

 

 

 

 

 

Accounts receivable, unbilled services, and deferred revenue

 

 

30,997

 

 

 

(53,078

)

Accounts payable and accrued expenses

 

 

518

 

 

 

(66,426

)

Other assets and liabilities

 

 

(5,039

)

 

 

(15,202

)

Net cash provided by (used in) operating activities

 

 

127,088

 

 

 

(38,607

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Payments related to acquisition of business, net of cash acquired

 

 

(9,982

)

 

 

 

Purchases of property and equipment

 

 

(11,173

)

 

 

(11,870

)

Proceeds from (investments in) unconsolidated affiliates

 

 

1,374

 

 

 

(6,750

)

Net cash used in investing activities

 

 

(19,781

)

 

 

(18,620

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payments of debt financing costs

 

 

(49

)

 

 

 

Repayments of long-term debt

 

 

(105,856

)

 

 

 

Proceeds from accounts receivable financing agreement

 

 

65,000

 

 

 

6,600

 

Repayments of accounts receivable financing agreement

 

 

 

 

 

(6,600

)

Proceeds from revolving line of credit

 

 

 

 

 

300,000

 

Payments of contingent consideration related to business combinations

 

 

(6,196

)

 

 

(26,592

)

Payments of finance leases

 

 

(4,269

)

 

 

(4,674

)

Payments for repurchases of common stock

 

 

(44,505

)

 

 

(32,029

)

Proceeds from exercises of stock options

 

 

10,804

 

 

 

12,358

 

Payments related to tax withholdings for share-based compensation

 

 

(26,295

)

 

 

(19,145

)

Net cash (used in) provided by financing activities

 

 

(111,366

)

 

 

229,918

 

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

 

(3,425

)

 

 

(420

)

Net change in cash, cash equivalents, and restricted cash

 

 

(7,484

)

 

 

172,271

 

Cash, cash equivalents, and restricted cash - beginning of period

 

 

272,173

 

 

 

163,689

 

Cash, cash equivalents, and restricted cash - end of period

 

$

264,689

 

 

$

335,960

 

 

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

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Table of Contents

 

SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

 

 

(in thousands)

 

Shareholders’ equity, beginning balance

 

$

3,242,112

 

 

$

3,029,654

 

Impact from adoption of ASU 2016-13

 

 

 

 

 

(2,771

)

Shareholders’ equity, adjusted beginning balance

 

 

3,242,112

 

 

 

3,026,883

 

 

 

 

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

 

 

Beginning balance

 

 

1,039

 

 

 

1,039

 

Repurchases of common stock

 

 

(6

)

 

 

(6

)

Issuances of common stock

 

 

9

 

 

 

9

 

Ending balance

 

 

1,042

 

 

 

1,042

 

 

 

 

 

 

 

 

 

 

Additional paid-in capital:

 

 

 

 

 

 

 

 

Beginning balance

 

 

3,461,747

 

 

 

3,441,471

 

Repurchases of common stock

 

 

(19,817

)

 

 

(19,734

)

Issuances of common stock

 

 

(18,443

)

 

 

(6,995

)

Share-based compensation

 

 

17,353

 

 

 

15,998

 

Ending balance

 

 

3,440,840

 

 

 

3,430,740

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive loss:

 

 

 

 

 

 

 

 

Beginning balance

 

 

(40,801

)

 

 

(71,593

)

Unrealized gain (loss) on derivative instruments, net of taxes

 

 

5,937

 

 

 

(10,730

)

Foreign currency translation adjustment, net of taxes

 

 

(4,310

)

 

 

(48,788

)

Ending balance

 

 

(39,174

)

 

 

(131,111

)

 

 

 

 

 

 

 

 

 

Accumulated deficit:

 

 

 

 

 

 

 

 

Beginning balance

 

 

(179,873

)

 

 

(341,263

)

Impact from adoption of ASU 2016-13

 

 

 

 

 

(2,771

)

Adjusted beginning balance

 

 

(179,873

)

 

 

(344,034

)

Repurchases of common stock

 

 

(24,682

)

 

 

(12,289

)

Net income

 

 

38,724

 

 

 

33,574

 

Ending balance

 

 

(165,831

)

 

 

(322,749

)

 

 

 

 

 

 

 

 

 

Shareholders’ equity, ending balance

 

$

3,236,877

 

 

$

2,977,922

 

 

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

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Table of Contents

 

SYNEOS HEALTH, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. Basis of Presentation and Changes in Significant Accounting Policies

Nature of Operations

Syneos Health, Inc. (the “Company”) is a global provider of end-to-end biopharmaceutical outsourcing solutions. The Company operates under two reportable segments, Clinical Solutions and Commercial Solutions, and derives its revenue through a suite of services designed to enhance its customers’ ability to successfully develop, launch, and market their products. The Company offers its solutions on both a standalone and integrated basis with biopharmaceutical development and commercialization services ranging from Phase I to IV clinical trial services to services associated with the commercialization of biopharmaceutical products. The Company’s customers include small, mid-sized, and large companies in the pharmaceutical, biotechnology, and medical device industries.

Unaudited Interim Financial Information

The Company prepared the accompanying unaudited condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. The significant accounting policies followed by the Company for interim financial reporting are consistent with the accounting policies followed for annual financial reporting.

The unaudited condensed consolidated financial statements, in management’s opinion, include all adjustments of a normal recurring nature necessary for a fair presentation. 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 Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission on February 18, 2021. 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 year ending December 31, 2021 or any other future period. The unaudited condensed consolidated balance sheet at December 31, 2020 is derived from the amounts in the audited consolidated balance sheet included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Reclassification

Certain previously reported amounts have been reclassified to conform to the current year presentation.

COVID-19 Pandemic

On March 11, 2020, the World Health Organization designated the outbreak of the novel strain of coronavirus that causes the disease known as COVID-19 as a global pandemic. Governments and businesses around the world have taken unprecedented actions to mitigate the spread of COVID-19, including, but not limited to, shelter-in-place orders, quarantines, significant restrictions on travel, social distancing practices as well as restrictions that prohibit many employees from going to work in person. As a result, the Company experienced significant impacts to its business and results of operations from COVID-19 during 2020 and for the three months ended March 31, 2021. While certain governments have eased restrictions, the pandemic continues to be disruptive to the Company’s business. The pandemic and associated economic impacts are expected to continue to significantly impact the Company’s future financial condition, results of operations, and cash flows.

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Table of Contents

 

2. Financial Statement Details

Cash, Cash Equivalents, and Restricted Cash

Certain of the Company’s subsidiaries participate in a notional cash pooling arrangement to manage global liquidity requirements. As part of a master netting arrangement, the participants combine their cash balances in pooling accounts at the same financial institution with the ability to offset bank overdrafts of one participant against positive cash account balances held by another participant. Under the terms of the master netting arrangement, the financial institution has the right, ability, and intent to offset a positive balance in one account against an overdrawn amount in another account. Amounts in each of the accounts are unencumbered and unrestricted with respect to use. As such, the net cash balance related to this pooling arrangement is included in cash, cash equivalents, and restricted cash in the unaudited condensed consolidated balance sheets.

The Company’s net cash pool position consisted of the following (in thousands):

 

 

March 31, 2021

 

 

December 31, 2020

 

Gross cash position

 

$

193,053

 

 

$

220,261

 

Less: cash borrowings

 

 

(178,715

)

 

 

(204,647

)

Net cash position

 

$

14,338

 

 

$

15,614

 

Accounts Receivable and Unbilled Services, net

Accounts receivable and unbilled services (including contract assets), net of allowance for doubtful accounts, consisted of the following (in thousands):

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Accounts receivable billed

 

$

705,783

 

 

$

774,605

 

Accounts receivable unbilled

 

 

228,798

 

 

 

211,285

 

Contract assets

 

 

372,266

 

 

 

366,506

 

Less: Allowance for doubtful accounts

 

 

(7,679

)

 

 

(7,615

)

Accounts receivable and unbilled services, net

 

$

1,299,168

 

 

$

1,344,781

 

Accounts Receivable Factoring Arrangement

The Company has an accounts receivable factoring agreement to sell certain eligible unsecured trade accounts receivable, without recourse, to an unrelated third-party financial institution for cash. For the three months ended March 31, 2021 and 2020, the Company factored $30.1 million and $36.2 million, respectively, of trade accounts receivable on a non-recourse basis and received $30.0 million and $36.0 million, respectively, in cash proceeds from the sale. The fees associated with these transactions were insignificant.

Goodwill

The changes in the carrying amount of goodwill by segment for the three months ended March 31, 2021 were as follows (in thousands):

 

 

 

Clinical

Solutions (a)

 

 

Commercial

Solutions (b)

 

 

Total

 

Balance as of December 31, 2020

 

$

3,216,335

 

 

$

1,559,843

 

 

$

4,776,178

 

Business combinations (c)

 

 

2,479

 

 

 

 

 

 

2,479

 

Impact of foreign currency translation and other (d)

 

 

49,079

 

 

 

(47,557

)

 

 

1,522

 

Balance as of March 31, 2021

 

$

3,267,893

 

 

$

1,512,286

 

 

$

4,780,179

 

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(a) Accumulated impairment losses of $8.1 million associated with the Clinical Solutions segment were recorded prior to 2016 and related to the former Phase I Services segment, now a component of the Clinical Solutions segment. No impairment of goodwill was recorded for the three months ended March 31, 2021.

(b) Accumulated impairment losses of $8.0 million associated with the Commercial Solutions segment were recorded prior to 2015 and related to the former Global Consulting segment, now a component of the Commercial Solutions segment. No impairment of goodwill was recorded for the three months ended March 31, 2021.

(c) Amount represents measurement period adjustments to goodwill recognized in connection with the 2020 acquisitions of SHCR Holdings Corporation (“Synteract”) and Illingworth Research Group™ (“Illingworth Research”) within the Clinical Solutions segment.

(d) Includes $44.2 million reallocation of goodwill from the Commercial Solutions segment to the Clinical Solutions segment to reflect the transfer of the Kinapse Regulatory and Operations Consulting service lines to align with management reporting in 2021.

Accumulated Other Comprehensive Loss, Net of Taxes

Accumulated other comprehensive loss, net of taxes, consisted of the following (in thousands):

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Beginning balance

 

$

(40,801

)

 

$

(71,593

)

 

 

 

 

 

 

 

 

 

Foreign currency translation:

 

 

 

 

 

 

 

 

Beginning balance

 

 

(22,040

)

 

 

(56,757

)

Other comprehensive loss before reclassifications

 

 

(4,310

)

 

 

(48,788

)

Ending balance

 

 

(26,350

)

 

 

(105,545

)

 

 

 

 

 

 

 

 

 

Derivative instruments:

 

 

 

 

 

 

 

 

Beginning balance

 

 

(18,761

)

 

 

(14,836

)

Other comprehensive income (loss) before reclassifications

 

 

772

 

 

 

(12,510

)

Reclassification adjustments

 

 

5,165

 

 

 

1,780

 

Ending balance

 

 

(12,824

)

 

 

(25,566

)

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive loss, net of taxes

 

$

(39,174

)

 

$

(131,111

)

Changes in accumulated other comprehensive loss consisted of the following (in thousands):

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Foreign currency translation adjustments:

 

 

 

 

 

 

 

 

Foreign currency translation adjustment, before taxes

 

$

(5,018

)

 

$

(48,788

)

Income tax benefit

 

 

(708

)

 

 

 

Foreign currency translation adjustments, net of taxes

 

 

(4,310

)

 

 

(48,788

)

Unrealized loss on derivative instruments:

 

 

 

 

 

 

 

 

Unrealized gain (loss) during period, before taxes

 

 

1,034

 

 

 

(19,783

)

Income tax expense (benefit)

 

 

262

 

 

 

(7,273

)

Unrealized gain (loss) during period, net of taxes

 

 

772

 

 

 

(12,510

)

Reclassification adjustment, before taxes

 

 

6,916

 

 

 

2,414

 

Income tax expense

 

 

1,751

 

 

 

634

 

Reclassification adjustment, net of taxes

 

 

5,165

 

 

 

1,780

 

Total unrealized gain (loss) on derivative instruments, net of taxes

 

 

5,937

 

 

 

(10,730

)

Total other comprehensive income (loss), net of taxes

 

$

1,627

 

 

$

(59,518

)

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Table of Contents

 

 

Other Income, Net

Other income, net consisted of the following (in thousands):

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Net realized foreign currency loss (gain)

 

$

1,192

 

 

$

(5,096

)

Net unrealized foreign currency gain

 

 

(9,522

)

 

 

(15,019

)

Other, net

 

 

(1,526

)

 

 

1,185

 

Total other income, net

 

$

(9,856

)

 

$

(18,930

)

 

3. Business Combinations

Synteract Acquisition

On December 9, 2020, the Company completed the acquisition of Synteract, effected through the purchase of 100% of the outstanding shares of Synteract for approximately $385.5 million in cash (net of approximately $28.0 million of cash acquired), which includes payment of $1.0 million during the three months ended March 31, 2021. Synteract is a contract research organization focused on the emerging biopharmaceutical industry, strengthening the Company’s position in the small to mid-sized category. The Company recognized $357.1 million of goodwill and $56.4 million of intangible assets, including acquired backlog and trade name, as a result of the acquisition. The purchase price has been allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based upon their fair values. The excess of the purchase price over the tangible and intangible assets acquired and liabilities assumed has been recorded as goodwill. Goodwill is attributable to the acquired workforce as well as future synergies and is not deductible for income tax purposes. The operating results from the acquisition of Synteract have been included in the Company’s Clinical Solutions segment from the date of acquisition.

 

Illingworth Research Group Acquisition

On December 17, 2020, the Company completed the acquisition of Illingworth Research, a leading provider of clinical research home health services, adding new scale and capabilities to the Company’s clinical trial solutions. The total purchase consideration was $80.9 million (net of cash acquired of $1.1 million), which includes payments of $9.0 million during the three months ended March 31, 2021. The Company recognized $64.0 million of goodwill and $21.5 million of intangible assets, principally customer relationships, as a result of the acquisition. The purchase price has been allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based upon their fair values. The excess of the purchase price over the tangible and intangible assets acquired and liabilities assumed has been recorded as goodwill. Goodwill is attributable to the acquired workforce as well as future synergies and is not deductible for income tax purposes. The operating results from the acquisition of Illingworth Research have been included in the Company’s Clinical Solutions segment from the date of acquisition.

The Company’s assessment of fair value and the purchase price allocation related to these 2020 acquisitions is preliminary and further adjustments may be necessary as additional information related to the fair values of assets acquired and liabilities assumed is assessed during the measurement period (up to one year from the respective acquisition dates).

Pro forma information for these acquisitions is not presented as the operations of the acquired businesses, individually and in the aggregate, are not significant to the overall operations of the Company.

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Table of Contents

 

4. Long-Term Debt Obligations

The Company’s debt obligations consisted of the following (in thousands):

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Secured Debt

 

 

 

 

 

 

 

 

Term Loan A - tranche one due March 2024

 

$

173,852

 

 

$

183,715

 

Term Loan A - tranche two due August 2024

 

 

1,242,140

 

 

 

1,273,991