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MarketScreener Homepage  >  Equities  >  Nasdaq  >  PPD, Inc.    PPD

PPD, INC.

(PPD)
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PPD : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

10/28/2020 | 03:06pm EST
You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with our condensed consolidated
financial statements and the related notes thereto included elsewhere in this
Quarterly Report on Form 10-Q and with our audited consolidated financial
statements and related notes thereto included in our Annual Report on Form 10-K
for the year ended December 31, 2019, as superseded by, and solely to the extent
set forth in, our first Current Report on Form 8-K filed on May 21, 2020 (the
"May 2020 Form 8-K"). This discussion may contain forward-looking statements
based upon current expectations that involve risks and uncertainties. Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of various factors, including the impact from the
COVID-19 pandemic and other factors set forth in other sections of this
Quarterly Report on Form 10-Q, as well as the risk factors set forth in our
Annual Report on Form 10-K for the year ended December 31, 2019. For important
information regarding these forward-looking statements, please see "Special Note
Regarding Forward-Looking Statements."
Company Overview
We are a leading provider of drug development services to the biopharmaceutical
industry, focused on helping our customers bring their new medicines to patients
around the world. We have been in the drug development business for more than 30
years, providing a comprehensive suite of clinical development and laboratory
services to pharmaceutical, biotechnology, medical device, government
organizations and other industry participants. We have deep experience across a
broad range of rapidly growing areas of drug development and engage 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 our customers. Our company is currently organized and managed
around two reportable segments, Clinical Development Services and Laboratory
Services. See Part I, Item 1, "Business," in our Annual Report on Form 10-K for
the year ended December 31, 2019, as superseded by, and only to the extent set
forth in our May 2020 Form 8-K, for additional information on our Clinical
Development Services and Laboratory Services segments.
Our purpose and mission are to improve health by helping our customers deliver
life-changing therapies. We pursue our purpose and mission through our clinical
development and laboratory services and our strategy to bend the cost and time
curve of drug development and optimize value for our customers. Our customers
benefit from accelerated time to market because it results in lengthened periods
of market exclusivity, and our real-world evidence solutions support the
superior efficacy and value of their novel therapies. We believe our medical,
scientific and drug development expertise, along with our innovative
technologies and knowledge of global regulatory requirements, help our customers
accelerate the development of safe and effective therapeutics and maximize
returns on their research and development ("R&D") investments.
Initial Public Offering
On February 6, 2020, our common stock began trading on The Nasdaq Global Select
Market under the symbol "PPD". On February 10, 2020, we completed our initial
public offering ("IPO") of our common stock at a price to the public of $27.00
per share. We issued and sold 69.0 million shares of common stock in the IPO,
including 9.0 million shares of common stock issued pursuant to the full
exercise of the underwriters' option to purchase additional shares. We raised
net proceeds of $1,773.0 million through the IPO, after deducting underwriting
discounts and other offering expenses totaling $90.0 million.
We used a portion of the net proceeds from the IPO to (i) redeem $550.0 million
in aggregate principal amount of unsecured 7.625%/8.375% Senior PIK Toggle Notes
(the "Initial HoldCo Notes"), plus accrued and unpaid interest thereon and $5.5
million of redemption premium and (ii) redeem $900.0 million in aggregate
principal amount of unsecured 7.75%/8.50% Senior PIK Toggle Notes (the
"Additional HoldCo Notes" and, together with the Initial HoldCo Notes, the
"HoldCo Notes"), plus accrued and unpaid interest thereon and $9.0 million of
redemption premium. The redemption of the HoldCo Notes resulted in a total loss
on extinguishment of debt of $50.1 million.
Issuance of New Notes and Redemption of OpCo Notes
On June 5, 2020, we issued $1,200.0 million of unsecured senior notes consisting
of (i) $500.0 million aggregate principal amount of 4.625% senior notes due 2025
(the "2025 Notes") and (ii) $700.0 million aggregate principal amount of 5.0%
senior notes due 2028 (the "2028 Notes" and, together with the 2025 Notes, the
"New Notes"). We used the proceeds from the issuance of the New Notes to redeem
$1,125.0 million in aggregate principal amount of unsecured 6.375% senior notes
(the "OpCo Notes"), plus accrued and unpaid interest thereon and a $35.9 million
redemption premium. The redemption of the OpCo Notes resulted in a total loss on
extinguishment of debt of $43.5 million.




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Secondary Public Offering
In September 2020, we completed an underwritten secondary public offering of
43.7 million shares of common stock, including 5.7 million shares of common
stock pursuant to the full exercise of the underwriters' option to purchase
additional shares, sold primarily by our private equity sponsors (the "Selling
Stockholders"). We did not offer any common stock in this transaction and did
not receive any proceeds from the sale of the shares of common stock by the
Selling Stockholders. We incurred costs of $1.9 million in relation to the
secondary public offering for the three and nine months ended September 30,
2020.
COVID-19 Pandemic
In March 2020, the World Health Organization declared COVID-19 a global pandemic
that has resulted in travel and business disruption and volatile conditions in
the capital and credit markets and overall economy. Globally, governments have
implemented travel bans, stay at home or total lock-down mandates and other
social distancing measures to combat the spread of COVID-19. In response to the
global pandemic, we have created a pandemic response committee of company
leaders, including our chief medical officer, to help manage our response to the
pandemic focused on (i) the health and safety of our employees and patients and
(ii) business continuity, preserving the integrity of the work we do for our
customers, including support for vaccines and anti-viral therapies for COVID-19.
To implement social distancing measures and maximize work productivity, we have
enacted several measures, including limiting personnel in our facilities, with
remote-capable employees throughout our company working remotely, and introduced
COVID-19 testing for employees in critical patient facing roles. We have also
significantly limited domestic and international travel of our employees.
To date, the COVID-19 pandemic has impacted our business across both our
Clinical Development Services and Laboratory Services segments. The impacts
include the ability of our employees to visit hospitals and other clinical
research sites to conduct monitoring and other critical site visits and patient
recruitment and enrollment activities as part of services offered within our
Clinical Development Services segment, as well as a temporary shutdown of our
Phase I clinics beginning in March 2020. Furthermore, we have had customers
delay new studies and/or pause ongoing studies or certain activities thereof,
such as patient recruitment, patient enrollment, site visits and site
monitoring, impacting our Clinical Development Services segment. Additionally,
at the onset of the pandemic, our Laboratory Services segment experienced
limited reductions in central lab services due to delays in clinical trial
activity that impacted sample volumes.
Beginning in the second quarter of 2020, as travel restrictions were lifted and
phased reopenings began in jurisdictions in which we operate, we reopened a
limited number of our offices and also allowed business-critical travel to
occur, including employee visits to hospitals and other clinical research sites,
as well as the activation of new sites. We also began a phased reopening of all
of our Phase I clinics, with such phased reopenings resulting in reduced
domiciling of patients for clinical trials as compared to pre-pandemic levels.
Due to safety measures we implemented shortly following the onset of the
COVID-19 pandemic, our laboratory facilities have continued to operate at near
full capacity during the pandemic. While we saw improvements over the course of
the second and third quarters of 2020 in relation to fewer customers delaying
new or ongoing studies, steady improvements in site-based activities and the
return of pre-pandemic testing volumes at our central labs, these delays have
impacted and will continue to impact the timing and extent to which backlog has
and will convert to revenue.
In response to the COVID-19 pandemic, we have taken measures to mitigate the
impact of the aforementioned factors across both of our segments. Such
mitigation activities include, but are not limited to, (i) winning new awards
for services to help our customers treat or combat the spread of COVID-19 with
anti-viral therapies and vaccines, which includes more than 125 COVID-19 related
awards as of September 30, 2020 across both of our segments, (ii) the continued
adoption of digital and virtual strategies and (iii) cost reduction strategies,
including reducing travel and related expenses, limiting increases in employee
headcount in certain non-billable areas, voluntary and limited temporary
involuntary employee furloughs and reduced working hours. We may also implement
other cost mitigation or reduction measures in the future depending on the
progression of the COVID-19 pandemic and the resulting impacts to our business.
We do not yet know nor can we predict the full extent of the impact the COVID-19
pandemic will have on our business, financial condition, results of operations
or the global economy as a whole, as the ultimate impact of the pandemic is
highly uncertain and subject to change. While the COVID-19 pandemic has impacted
our business and results of operations, we have been able to partially offset
the financial impact due to the mitigation activities discussed above. However,
the operational and financial impacts from COVID-19 could significantly increase
in the future due to the magnitude, continued duration, geographic reach,
ongoing impact on the global economy and capital and credit markets, and current
travel and other restrictions relating to the pandemic. In addition, we might
not be able to mitigate future impacts as we have done to date.


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Furthermore, federal, state and local governments have implemented, and may
implement in the future, economic and other stimulus measures to support
individuals and businesses impacted by the COVID-19 pandemic, and while we have
utilized such measures where applicable, there can be no assurance that such
measures will benefit us or otherwise offset any or all of the financial impacts
from the COVID-19 pandemic. To date, such measures have not been material to our
results of operations.
If the pandemic continues for an extended period or worsens, such as a second
global wave, governments' actions to contain the spread of COVID-19 are
ineffective and/or there is a significant delay in the development or
distribution of an effective vaccine, these factors could result in a material
negative impact on our business, growth, reputation, prospects, financial
condition, results of operations (including components of our financial
results), cash flows and liquidity. Such impacts could include, but are not
limited to, additional customer delays or cancellations of awarded services,
reductions in R&D drug development pipelines which could result in lower growth
to our industry, additional costs related to restructuring activities, non-cash
impairments of goodwill and other long-lived assets, decreases in the value of
our investments, loss of hedge accounting and restrictions on our ability to
obtain additional financing, if needed, or refinancing of our senior secured
credit facilities.
We are closely monitoring the changing landscape with respect to the COVID-19
pandemic and taking actions to manage our business and support our employees,
patients and customers. We will continue to evaluate the nature and extent of
the impact to our business, results of operations, financial condition and
liquidity. For further discussion of the risks related to our business and the
COVID-19 pandemic, see Part II, Item 1A, "Risk Factors," included elsewhere in
this Quarterly Report on Form 10-Q.
Sources of Revenue
Revenue is comprised of direct, third-party pass-through and out-of-pocket
revenue from providing services to our customers. Direct revenue represents
revenue associated with the direct services provided under our contracts.
Third-party pass-through and out-of-pocket revenue (collectively, "indirect
revenue") represents the reimbursement by customers of third-party pass-through
and out-of-pocket costs incurred by us under our contracts.
We record the reimbursement of indirect revenue and the related costs incurred
as revenue and reimbursed costs on the condensed consolidated statements of
operations. These reimbursed costs are included as revenue as we (i) are the
principal in the relationship, (ii) are primarily responsible for the services
provided by third parties and (iii) significantly integrate the services of the
third parties with our own services in delivering a combined output to the
customer.
We assess our revenue based on our primary business segments, Clinical
Development Services and Laboratory Services. Our Clinical Development Services
segment represented 81.8% and 82.6% of revenue for the three months ended
September 30, 2020 and 2019, respectively, and 81.2% and 83.4% of revenue for
the nine months ended September 30, 2020 and 2019, respectively, with the
remainder generated from our Laboratory Services segment.
We have a diverse customer mix, with no one customer accounting for more than
10% of our revenue for the three and nine months ended September 30, 2020 and
2019. Our top 10 customers accounted for approximately 55.6% and 46.0% of our
revenue for the three months ended September 30, 2020 and 2019, respectively,
and 52.3% and 45.2% for the nine months ended September 30, 2020 and 2019,
respectively. Based on the diversity of our customer base, we do not believe we
have significant customer concentration risk. We do not have any significant
product revenues.
Operating Costs and Expenses
Our operating costs and expenses primarily consist of direct costs, reimbursed
costs, selling, general and administrative ("SG&A") expenses and depreciation
and amortization.
Direct Costs
Direct costs represent costs for providing services to customers. Direct costs
primarily include labor-related costs, such as compensation and benefits for
employees providing services, an allocation of facility and information
technology costs, supply costs, costs for certain media-related services for
patient recruitment, stock-based compensation expense, other overhead costs and
offsetting R&D incentive credits. Direct costs typically increase or decrease
with changes in revenue and may fluctuate significantly from period to period as
a percentage of revenue due to staff labor utilization, project labor mix, the
type of services, changes to the timing of work performed and project
inefficiencies, among other factors.


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Reimbursed Costs
Reimbursed costs include third-party pass-through and out-of-pocket costs which
are generally reimbursable by our customers at cost. Third-party pass-through
and out-of-pocket costs include, but are not limited to, payments to
investigators, payments for the use of third-party technology, shipping costs
and travel costs related to the performance of services, among others.
Third-party pass-through and out-of-pocket costs are incurred across both of our
reportable segments.
Because services associated with reimbursed costs are generally provided by us
without profit or mark-up and fluctuate from period to period without being
important to our underlying performance over the full term of a contract, these
costs do not have a significant impact on our income from operations. While
fluctuations from period to period are not meaningful over the full term of a
contract, actual and estimated reimbursed costs can impact revenue recognized,
consolidated income from operations and segment operating income throughout the
duration of a contract.
Selling, General and Administrative Expenses
SG&A expenses represent costs of business development, administrative and
support functions. SG&A expenses primarily include compensation and benefits for
employees, costs related to employees performing administrative tasks,
stock-based compensation expense, sales, marketing and promotional expenses,
employee recruiting and relocation expenses, employee training costs, travel
costs, an allocation of facility and information technology costs and other
overhead costs.
Depreciation and Amortization
Depreciation and amortization represents the costs charged for our property and
equipment and intangible assets. We record depreciation and amortization on
property and equipment using the straight-line method, based on the estimated
useful lives of the respective assets. We depreciate leasehold improvements over
the shorter of the lease term or the estimated useful lives of the improvements.
We amortize software developed or obtained for internal use over the estimated
useful life of the software or term of the licensing agreement. Amortization
expense primarily comes from acquired definite-lived intangible assets. We
amortize definite-lived intangible assets using either the straight-line method
or sum-of-the-years digits method over the estimated useful lives of the assets.
How We Assess the Performance of Our Business
We manage and assess our business based on segment performance and allocate
resources utilizing segment revenues and segment operating income. We also
assess the performance of our reported consolidated business using a number of
metrics including backlog and net authorizations. Historically, we have assessed
backlog and net authorizations on a basis which excluded indirect revenues and
the impact of Accounting Standards Codification ("ASC") Topic 606, Revenue from
Contracts with Customers ("ASC 606") on direct revenue ("Historical Basis").
Starting in the first quarter of 2020, we also began to assess backlog and net
authorizations on an ASC 606 total direct and indirect revenue basis ("ASC 606
Basis"). Our discussion of backlog and net authorizations below is applicable to
both of the aforementioned backlog and net authorization metrics.
Our backlog represents anticipated revenue for work not yet completed or
performed (i) under signed contracts, letters of intent and, in some cases,
awards that are supported by other forms of written communication and (ii) where
there is sufficient or reasonable certainty about the customer's ability and
intent to fund and commence the services within six months. Backlog and backlog
conversion (defined as quarterly revenue for the period divided by opening
backlog for that period) vary from period to period depending upon new
authorizations, contract modifications, cancellations and the amount of revenue
recognized under existing contracts. We adjust backlog for foreign currency
fluctuations and exclude from backlog revenue that has been recognized as
revenue in our statements of operations.
Although an increase in backlog will generally result in an increase in future
revenue to be recognized over time (depending on future contract modifications,
contract cancellations and other adjustments), an increase in backlog at a
particular point in time does not necessarily correspond to an increase in
revenue during a particular period. The timing and extent to which backlog will
result in revenue depends on many factors, including the timing of commencement
of work, the rate at which we perform services, scope changes, cancellations,
delays, receipt of regulatory approvals and the nature, duration, size,
complexity and phase of the studies. Our contracts generally have terms ranging
from several months to several years. In addition, delayed projects remain in
backlog unless they are canceled.





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As noted elsewhere in this Quarterly Report on Form 10-Q, due to the COVID-19
pandemic, we have had customers delay new studies and/or pause ongoing studies
or certain activities thereof, such as patient recruitment, patient enrollment,
site visits and site monitoring. These delays have impacted and will continue to
impact the timing and extent to which backlog has and will convert to revenue.
We have not adjusted backlog to remove the backlog associated with these studies
as our customers for these studies have not canceled or notified us of their
intent to cancel these studies and because we cannot estimate the length of
delay. As a result of these and other factors, our backlog might not be a
reliable indicator of future revenue and we might not realize all or any part of
the revenue from the authorizations in backlog as of any point in time. Once
work begins, we recognize revenue over the life of the contract as we perform
services under such contract. We have included new business awards associated
with COVID-19 in our net authorizations and backlog.
We add new authorizations to backlog based on the aforementioned criteria for
backlog. Net authorizations represent new business awards, net of award or
contract modifications, contract cancellations, foreign currency fluctuations
and other adjustments. New authorizations vary from period to period depending
on numerous factors, including customer authorization volume, sales performance
and overall health of the biopharmaceutical industry, among others. New
authorizations have varied and will continue to vary significantly from quarter
to quarter and from year to year. In addition to net authorizations, we also
assess net book-to-bill, which represents the amount of net authorizations for
the period divided by revenue recognized in that period.
Net Authorizations and Backlog
The following table provides selected information related to our backlog and net
authorizations as of and for the three months ended September 30:
                            Historical Basis             ASC 606 Basis
(dollars in millions)      2020          2019         2020          2019
Net authorizations      $ 1,200.3$  900.2$ 1,764.5$ 1,158.7
Backlog                   7,890.4      6,805.7      11,720.1       9,896.6
Backlog conversion           11.8 %       11.8 %        11.0 %        10.5 %
Net book-to-bill            1.35x        1.14x         1.43x         1.13x


The increase in net authorizations and backlog in 2020 for the metrics above as
compared to the same period in the prior year was primarily due to a higher
number of, and win rate on, competitive decisions (which represents the total
dollar amount of new business on which we bid), new business awards related to
the COVID-19 pandemic and favorable net foreign currency fluctuations, partially
offset by higher cancellations.
Acquisitions
On September 3, 2019, we acquired 100% of the issued and outstanding equity of
Synarc, Inc. ("Synarc"), the global site network of Bioclinica, Inc., expanding
our global footprint into China and Latin America and expanding our central
nervous system offering in the United States. Additionally, on July 1, 2019, we
acquired 100% of the issued and outstanding equity of Medimix International
("Medimix"), a global technology company that provides real-world evidence
insights and information to the pharmaceutical, diagnostic and medical device
industries. See Note 4, "Business Combinations," to our condensed consolidated
financial statements included elsewhere in this Quarterly Report on Form 10-Q
for additional information.
Incremental Public Company Expenses
As a new public company, we have and will incur additional expenses on an
ongoing basis that we did not incur as a private company. Those costs include
additional director and officer liability insurance expenses, as well as
third-party and internal resources related to accounting, auditing,
Sarbanes-Oxley Act compliance, legal, investor and public relations expenses and
additional stock-based compensation expense as we align our long-term incentive
plan with other comparable public company plans. These costs are expected to
generally be SG&A expenses.





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Results of Operations
We have included the results of operations of acquired companies in our
condensed consolidated results of operations from the date of their respective
acquisitions, which impacts the comparability of our results of operations when
comparing results for the three and nine months ended September 30, 2020 to the
three and nine months ended September 30, 2019. We have noted in the discussion
below, to the extent meaningful and quantifiable, the impact on the
comparability of our condensed consolidated results of operations to prior year
results due to the inclusion of acquired companies when comparing the three and
nine months ended September 30, 2020 to the three and nine months ended
September 30, 2019.
During the first quarter of 2020, our Chief Operating Decision Maker began
assessing performance and making resource allocation decisions based on total
segment revenue, including direct and indirect revenue, and segment operating
income, including reimbursed costs. Previously, certain revenue amounts were not
allocated to segments, whereas following the change, all revenue and reimbursed
costs are allocated to the respective segment. As a result, we have updated our
segment presentation and all prior period information has been recast to reflect
the change in the measurement of segment performance measures.
Three Months Ended September 30, 2020 versus Three Months Ended September 30,
2019
Consolidated Results of Operations
Revenue                        Three Months Ended September 30,
(dollars in thousands)               2020                    2019             Change
Revenue                  $       1,233,802$ 1,023,864$ 209,938    20.5 %


Revenue increased $209.9 million, or 20.5%, to $1,233.8 million for the three
months ended September 30, 2020 as compared to the same period in 2019. Revenue
increased (i) 19.4% from organic volume growth across our business due to higher
opening backlog at the beginning of the period as compared to the prior year and
overall growth in new business awards during 2020, including awards and
associated revenue for COVID-19 work, (ii) 0.4% from inorganic growth due to our
acquisition of Synarc and (iii) 0.7% from the favorable impact from foreign
currency exchange rates.
Direct Costs                                Three Months Ended September 30,
(dollars in thousands)                          2020                 2019                  Change
Direct costs, exclusive of
depreciation and amortization            $       433,422       $      
369,476     $  63,946       17.3 %
% of revenue                                        35.1 %                36.1 %


Direct costs increased $63.9 million to $433.4 million for the three months
ended September 30, 2020 as compared to the same period in 2019. The increase in
direct costs was primarily due to (i) a $54.4 million increase from growth in
employee headcount to support current growth in revenue as well as compensation
increases, (ii) a $9.0 million increase in laboratory supply costs from the
growth in revenue, (iii) a $4.3 million increase from the acquisition of Synarc
and (iv) a 0.3% increase from the unfavorable impact from foreign currency
exchange rates. The increase in direct costs was partially offset by a reduction
in certain project delivery costs. As a percentage of revenue, direct costs
decreased to 35.1% for the three months ended September 30, 2020 as compared to
36.1% in the same period in 2019 primarily due to the factors identified above.
Reimbursed Costs            Three Months Ended September 30,
(dollars in thousands)          2020                 2019                Change
Reimbursed costs         $       335,866$       241,804$ 94,062    38.9 %
% of revenue                        27.2 %                23.6 %



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Reimbursed costs increased $94.1 million to $335.9 million for the three months
ended September 30, 2020 as compared to the same period in 2019. Reimbursed
costs increased primarily due to the increase in revenue, including growth
related to certain awards of work for COVID-19 which have significant reimbursed
costs and a 1.5% increase from the unfavorable impact of foreign currency
exchange rates. The increase in reimbursed costs was also impacted by the
general timing of costs incurred across our portfolio of work, which will vary
over the course of clinical trials due to (i) the timing of the work performed,
(ii) scope changes and (iii) the complexity and phase of the study, among other
factors. As a percentage of revenue, reimbursed costs increased to 27.2% for the
three months ended September 30, 2020 as compared to 23.6% in the same period in
2019 primarily due to the factors identified above.
Selling,
General and Administrative Expenses        Three Months Ended September 30,
(dollars in thousands)                         2020                 2019                 Change
Selling, general and administrative
expenses                                $       249,320$       226,996$ 22,324        9.8 %
% of revenue                                       20.2 %                22.2 %


SG&A expenses increased $22.3 million to $249.3 million for the three months
ended September 30, 2020 as compared to the same period in 2019. The increase in
SG&A expenses was primarily due to (i) a $19.7 million increase from growth in
employee headcount to support current growth in revenue as well as compensation
increases, (ii) a $2.1 million increase from the acquisition of Synarc and (iii)
a 0.4% increase from the unfavorable impact from foreign currency exchange
rates. The increase in SG&A expenses was partially offset by lower travel and
associated expenses as a result of COVID-19 related cost reduction measures. As
a percentage of revenue, SG&A expenses decreased to 20.2% for the three months
ended September 30, 2020 as compared to 22.2% in the same period in 2019
primarily due to the factors identified above as well as our efforts to
effectively leverage our SG&A function.
Interest Expense, Net          Three Months Ended September 30,
(in thousands)                         2020                     2019
Interest expense, net   $          49,882                     $ 85,754


Interest expense, net, was $49.9 million for the three months ended
September 30, 2020 as compared to $85.8 million in the same period in 2019. The
decrease in interest expense was primarily related to the redemption of our
HoldCo Notes, the lower interest rate on our New Notes as compared to the
redeemed OpCo Notes and a decrease in the interest rate on our term loan under
our senior secured credit facilities, partially offset by the impact from
unfavorable interest rate swaps.
Loss on Investments      Three Months Ended September 30,
(in thousands)               2020                 2019

Loss on investments $ (53,100 )$ (15,106 )



Loss on investments was $53.1 million for the three months ended September 30,
2020 as compared to a loss of $15.1 million in the same period in 2019. The
losses for both periods were primarily a result of changes in the fair values of
the net asset values of our investments, partially offset by changes to the
discounts on certain investments during the current year and prior year. The
decrease in net asset value for the three months ended September 30, 2020
reflects primarily a decrease in the trading stock price of one of the
underlying investments of a limited partnership during the quarter.
The gains or losses from our investments will likely continue to fluctuate from
period to period primarily based on the changes in fair value of the underlying
investments of the limited partnerships, including the volatility of trading
stock prices of any underlying publicly traded investments within the
partnerships, and changes in the discounts applied to such investments for our
lack of control and lack of marketability, where applicable.
Other (Expense) Income, Net      Three Months Ended September 30,
(in thousands)                        2020                 2019
Other (expense) income, net   $         (17,153 )     $       9,157



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Other expense, net, was $17.2 million for the three months ended September 30,
2020 as compared to other income, net, of $9.2 million in the same period in
2019. Foreign exchange rate movement resulted in transaction and re-measurement
losses of $17.5 million for the three months ended September 30, 2020 and
transaction and re-measurement gains of $10.7 million in the same period in
2019.
Provision for Income Taxes      Three Months Ended September 30,
(dollars in thousands)              2020                 2019
Provision for income taxes   $        11,169$       9,044
Effective income tax rate               50.0 %              33.5 %


Our provision for income taxes was $11.2 million, resulting in an effective
income tax rate of 50.0%, for the three months ended September 30, 2020 as
compared to a provision of $9.0 million, or an effective income tax rate of
33.5%, in the same period in 2019. Our provision for income taxes for the three
months ended September 30, 2020 was primarily due to the estimated tax on our
distribution of pre-tax income among our domestic and foreign jurisdictions and
the impacts of a tax rate change in the United Kingdom. Our provision for income
taxes for the three months ended September 30, 2019 was primarily due to the
estimated tax effect on our pre-tax income.
Segment Results of Operations
Clinical Development Services and Laboratory Services segment revenue, segment
direct costs, segment reimbursed costs, segment SG&A expenses and segment
operating income for the three months ended September 30, 2020 and 2019 are
detailed below.
Clinical Development Services
                                      Three Months Ended September 30,
(dollars in thousands)                    2020                  2019                  Change
Segment revenue                   $         1,008,639     $      846,068$  162,571        19.2 %
Segment direct costs                          330,281            287,538         42,743        14.9
Segment reimbursed costs                      309,117            220,873         88,244        40.0
Segment SG&A expenses                         137,984            130,576          7,408         5.7
Segment operating income          $           231,257     $      207,081$   24,176        11.7


Segment Revenue
Clinical Development Services' revenue was $1,008.6 million for the three months
ended September 30, 2020, an increase of $162.6 million as compared to the same
period in 2019. Revenue increased (i) 18.0% from organic volume primarily from
our Phase II-IV clinical trial management services as a result of higher opening
backlog at the beginning of the period as compared to the prior year and overall
growth in new business awards during 2020, including awards and associated
revenue for COVID-19 work, (ii) 0.7% from the favorable impact from foreign
currency exchange rates and (iii) 0.5% from inorganic growth due to the
acquisition of Synarc. The higher opening backlog was primarily due to increased
net authorizations for our Phase II-IV clinical trial management services in
2020 as compared to 2019.
Segment Direct Costs
Clinical Development Services' direct costs were $330.3 million for the three
months ended September 30, 2020, an increase of $42.7 million as compared to the
same period in 2019. The increase in direct costs was primarily due to (i) a
$42.9 million increase from growth in employee headcount to support current
growth in revenue as well as compensation increases, (ii) a $4.3 million
increase from the acquisition of Synarc and (iii) a 0.2% increase from the
unfavorable impact from foreign currency exchange rates. The increase in direct
costs was partially offset by a reduction in certain project delivery costs.

                                       38
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Segment Reimbursed Costs
Clinical Development Services' reimbursed costs were $309.1 million for the
three months ended September 30, 2020, an increase of $88.2 million as compared
to the same period in 2019. Reimbursed costs increased primarily due to the
increase in revenue, including growth related to certain awards of work for
COVID-19 which have significant reimbursed costs and a 1.5% increase from the
unfavorable impact from foreign currency exchange rates. The increase in
reimbursed costs was also impacted by the general timing of costs incurred
across our portfolio of work, which will vary over the course of clinical trials
due to (i) the timing of the work performed, (ii) scope changes and (iii) the
complexity and phase of the study, among other factors.
Segment SG&A Expenses
Clinical Development Services' SG&A expenses were $138.0 million for the three
months ended September 30, 2020, an increase of $7.4 million as compared to the
same period in 2019. The increase in SG&A expenses was primarily due to (i)
compensation increases, (ii) the impact of the acquisition of Synarc and (iii) a
0.5% increase from the unfavorable impact from foreign currency exchange rates.
The increase in SG&A expenses was partially offset by lower travel and
associated expenses as a result of COVID-19 related cost reduction measures.
Laboratory Services
                                  Three Months Ended September 30,
(dollars in thousands)                   2020                     2019            Change
Segment revenue            $         225,163                   $ 177,796$ 47,367    26.6 %
Segment direct costs                 102,355                      79,445      22,910    28.8
Segment reimbursed costs              26,749                      20,931       5,818    27.8
Segment SG&A expenses                 23,283                      19,648       3,635    18.5
Segment operating income   $          72,776                   $  57,772$ 15,004    26.0


Segment Revenue
Laboratory Services' revenue was $225.2 million for the three months ended
September 30, 2020, an increase of $47.4 million as compared to the same period
in 2019. Revenue increased from organic volume growth across the majority of our
laboratory services in part due to higher opening backlog at the beginning of
the period as compared to the prior year and overall growth in new business
awards during 2020, including awards and associated revenue for COVID-19 work.
The higher opening backlog was primarily due to increased net authorizations
across all of our lab businesses in 2020 as compared to 2019.
Segment Direct Costs
Laboratory Services' direct costs were $102.4 million for the three months ended
September 30, 2020, an increase of $22.9 million as compared to the same period
in 2019. The increase in direct costs was primarily due to (i) a $13.4 million
increase from growth in employee headcount to support current growth in revenue
as well as compensation increases and (ii) a $9.0 million increase in laboratory
supply costs associated with the growth in revenue.
Segment Reimbursed Costs
Laboratory Services' reimbursed costs were $26.7 million for the three months
ended September 30, 2020, an increase of $5.8 million as compared to the same
period in 2019. Reimbursed costs increased primarily due to the increase in
revenue, as well as higher shipping costs and the general timing of costs
incurred across our portfolio of work.
Segment SG&A Expenses
Laboratory Services' SG&A expenses were $23.3 million for the three months ended
September 30, 2020, an increase of $3.6 million as compared to the same period
in 2019. The increase in SG&A expenses was primarily due to a $3.6 million
increase from growth in employee headcount to support current growth in revenue
as well as compensation increases.

                                       39
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Nine Months Ended September 30, 2020 versus Nine Months Ended September 30, 2019
Consolidated Results of Operations
Revenue                        Nine Months Ended September 30,
(dollars in thousands)               2020                   2019             Change
Revenue                  $       3,317,182$ 2,984,133$ 333,049    11.2 %


Revenue increased $333.0 million, or 11.2%, to $3,317.2 million for the nine
months ended September 30, 2020 as compared to the same period in 2019. Revenue
increased 10.3% from organic volume growth across our business due to higher
opening backlog at the beginning of the year as compared to the prior year and
overall growth in new business awards during 2020, including awards and
associated revenue for COVID-19 work. Additionally, revenue increased 1.0% from
inorganic growth primarily due to our acquisitions of Synarc and Medimix (the
"2019 Acquisitions").
Direct Costs                                Nine Months Ended September 30,
(dollars in thousands)                          2020                 2019                Change
Direct costs, exclusive of
depreciation and amortization            $      1,222,700$  1,112,181$  110,519        9.9 %
% of revenue                                         36.9 %             37.3 %


Direct costs increased $110.5 million to $1,222.7 million for the nine months
ended September 30, 2020 as compared to the same period in 2019. The increase in
direct costs was due to (i) a $98.1 million increase from growth in employee
headcount to support current growth in revenue as well as compensation
increases, (ii) an $8.5 million increase in compensation costs related to the
acceleration of remaining expenses under the terminated cash-based long-term
incentive plan ("LTIP"), (iii) a $21.5 million increase from the impact of the
2019 Acquisitions and (iv) a $17.9 million increase in laboratory supply costs
from the growth in revenue. The increase in direct costs was partially offset by
(i) a decrease in certain project delivery costs, including media-related costs
for patient recruitment services, (ii) the impacts of limited voluntary and
involuntary temporary furloughs of certain employees as a result of COVID-19
related cost reduction measures and (iii) a 0.8% decrease from the favorable
impact from foreign currency exchange rates. As a percentage of revenue, direct
costs decreased to 36.9% for the nine months ended September 30, 2020 as
compared to 37.3% in the same period in 2019 primarily due to the factors
identified above.
Reimbursed Costs            Nine Months Ended
                               September 30,
(dollars in thousands)      2020          2019             Change
Reimbursed costs         $ 810,523$ 688,696$ 121,827    17.7 %
% of revenue                  24.4 %        23.1 %


Reimbursed costs increased $121.8 million to $810.5 million for the nine months
ended September 30, 2020 as compared to the same period in 2019. Reimbursed
costs increased primarily due to the increase in revenue, including growth
related to certain awards of work for COVID-19 which have significant reimbursed
costs. The increase in reimbursed costs was also impacted by the general timing
of costs incurred across our portfolio of work, which will vary over the course
of clinical trials due to (i) the timing of the work performed, (ii) scope
changes and (iii) the complexity and phase of the study, among other factors.
The increase in reimbursed costs was partially offset by a 0.4% decrease from
the favorable impact from foreign currency exchange rates. As a percentage of
revenue, reimbursed costs increased to 24.4% for the nine months ended
September 30, 2020 as compared to 23.1% in the same period in 2019 primarily due
to the factors identified above.
Selling, General and Administrative Expenses      Nine Months Ended
                                                     September 30,
(dollars in thousands)                            2020          2019        

Change

Selling, general and administrative expenses   $ 734,712$ 681,431$ 53,281    7.8 %
% of revenue                                        22.1 %        22.8 %



                                       40
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SG&A expenses increased $53.3 million to $734.7 million for the nine months
ended September 30, 2020 as compared to the same period in 2019. The increase in
SG&A expenses was primarily due to (i) a $51.0 million increase from growth in
employee headcount to support current growth in revenue as well as compensation
increases, (ii) a $10.5 million increase from the impact of the 2019
Acquisitions, (iii) an $8.1 million increase in technology costs related to
software licensing and cloud services and (iv) a $3.0 million increase in
compensation costs related to the acceleration of remaining expense under the
terminated cash-based LTIP. The increase in SG&A expenses was partially offset
by lower travel and associated expenses as a result of COVID-19 related cost
reduction measures and a 0.6% decrease from the favorable impact from foreign
currency exchange rates. As a percentage of revenue, SG&A expenses decreased to
22.1% for the nine months ended September 30, 2020 as compared to 22.8% in the
same period in 2019 primarily due to the factors identified above as well as our
efforts to effectively leverage our SG&A function.
Interest Expense, Net      Nine Months Ended
                              September 30,
(in thousands)             2020          2019

Interest expense, net $ 165,995$ 229,147



Interest expense, net, was $166.0 million for the nine months ended
September 30, 2020 as compared to $229.1 million in the same period in 2019. The
decrease in interest expense was primarily related to the redemption of our
HoldCo Notes, the lower interest rate on our New Notes as compared to the
redeemed OpCo Notes and a decrease in the interest rate on our term loan under
our senior secured credit facilities, partially offset by the impact from
unfavorable interest rate swaps.
Loss on Extinguishment of Debt       Nine Months Ended
                                        September 30,
(in thousands)                         2020           2019

Loss on extinguishment of debt $ (93,534 ) $ -



Loss on extinguishment of debt was $93.5 million for the nine months ended
September 30, 2020. The loss resulted from the early extinguishment of our
HoldCo and OpCo Notes and consisted of redemption premiums of $50.4 million and
the write off of our unamortized debt discount and deferred debt issuance costs
of $43.1 million. There was no loss on extinguishment of debt for the nine
months ended September 30, 2019.
Gain (Loss) on Investments      Nine Months Ended
                                   September 30,
(in thousands)                  2020         2019
Gain (loss) on investments   $  16,649$ (22,716 )


Gain on investments was $16.6 million for the nine months ended September 30,
2020 as compared to a loss of $22.7 million in the same period in 2019. The gain
and loss for the current year and prior year, respectively, was primarily a
result of changes in the fair values of the net asset values of our investments,
partially offset by changes to the discounts on certain investments for the
current year and prior year.
The gains or losses from our investments will likely continue to fluctuate from
period to period primarily based on the changes in fair value of the underlying
investments of the limited partnerships, including the volatility of stock
prices of any underlying publicly traded investments within the partnerships,
and changes in the discounts applied to such investments for our lack of control
and lack of marketability, where applicable.
Other Expense, Net      Nine Months Ended
                           September 30,
(in thousands)          2020          2019
Other expense, net   $ (14,097 )$ (3,158 )


Other expense, net, was $14.1 million for the nine months ended September 30,
2020 as compared to other expense, net, of $3.2 million in the same period in
2019. Foreign exchange rate movement resulted in transaction and re-measurement
losses of $3.1 million for the nine months ended September 30, 2020 and
transaction and re-measurement losses of $1.4 million in the same period in
2019. Undesignated interest rate swap activity resulted in losses of $11.4
million for the nine months ended September 30, 2020 and no losses or gains for
the nine months ended September 30, 2019.

                                       41
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Provision for Income Taxes      Nine Months Ended
                                   September 30,
(dollars in thousands)          2020          2019
Provision for income taxes   $  20,682$ 12,387
Effective income tax rate         24.5 %       25.3 %


Our provision for income taxes was $20.7 million, resulting in an effective
income tax rate of 24.5%, for the nine months ended September 30, 2020 as
compared to a provision of $12.4 million, or an effective income tax rate of
25.3%, in the same period in 2019. Our provision for income taxes for the nine
months ended September 30, 2020 was primarily due to the estimated tax effect on
our pre-tax income. Our provision for income taxes for the nine months ended
September 30, 2019 was primarily due to the estimated tax effect on our pre-tax
income.
Segment Results of Operations
Clinical Development Services and Laboratory Services segment revenue, segment
direct costs, segment reimbursed costs, segment SG&A expenses and segment
operating income for the nine months ended September 30, 2020 and 2019 are
detailed below.
Clinical Development Services
                               Nine Months Ended
                                  September 30,
(dollars in thousands)         2020           2019             Change
Segment revenue            $ 2,694,775$ 2,488,773$ 206,002     8.3 %
Segment direct costs           922,737        871,753       50,984     5.8
Segment reimbursed costs       730,872        633,466       97,406    15.4
Segment SG&A expenses          415,334        391,551       23,783     6.1
Segment operating income   $   625,832$   592,003$  33,829     5.7


Segment Revenue
Clinical Development Services' revenue was $2,694.8 million for the nine months
ended September 30, 2020, an increase of $206.0 million as compared to the same
period in 2019. Revenue increased 7.3% from organic volume growth primarily from
our Phase II-IV clinical trial management services as a result of higher opening
backlog at the beginning of the year as compared to the prior year and overall
growth in new business awards during 2020, including awards and associated
revenue for COVID-19 work and 1.2% from inorganic growth due to the 2019
Acquisitions. The increase in revenue was partially offset by a 0.2% decrease
from the unfavorable impact from foreign currency exchange rates. The higher
opening backlog was primarily due to increased net authorizations for our Phase
II-IV clinical trial management services in 2019.
Segment Direct Costs
Clinical Development Services' direct costs were $922.7 million for the nine
months ended September 30, 2020, an increase of $51.0 million as compared to the
same period in 2019. The increase in direct costs was primarily due to a
$59.1 million increase from growth in employee headcount to support current
growth in revenue as well as compensation increases and a $21.5 million increase
from the impact of the 2019 Acquisitions. The increase in direct costs was
partially offset by (i) a decrease in certain project delivery costs, including
media-related costs for patient recruitment services, (ii) the impacts of
limited voluntary and involuntary temporary furloughs of certain employees as a
result of COVID-19 related cost reduction measures and (iii) a 1.0% decrease
from the favorable impact from foreign currency exchange rates.
Segment Reimbursed Costs
Clinical Development Services' reimbursed costs were $730.9 million for the nine
months ended September 30, 2020, an increase of $97.4 million as compared to the
same period in 2019. Reimbursed costs increased primarily due to the increase in
revenue, including growth related to certain awards of work for COVID-19 which
have significant reimbursed costs. The increase in reimbursed costs was also
impacted by the general timing of costs incurred across our portfolio of work,
which will vary over the course of clinical trials due to (i) the timing of the
work performed, (ii) scope changes and (iii) the complexity and phase of the
study, among other factors. The increase in reimbursed costs was partially
offset by a 0.4% decrease from the favorable impact from foreign currency
exchange rates.

                                       42
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Segment SG&A Expenses
Clinical Development Services' SG&A expenses were $415.3 million for the nine
months ended September 30, 2020, an increase of $23.8 million as compared to the
same period in 2019. The increase in SG&A expenses was primarily due to a
$25.0 million increase from growth in employee headcount to support current
growth in revenue as well as compensation increases and a $10.5 million increase
from the impact of the 2019 Acquisitions. The increase in SG&A expenses was
partially offset by lower travel and associated expenses as a result of COVID-19
related cost reduction measures and a 0.8% decrease from the favorable impact
from foreign currency exchange rates.
Laboratory Services
                              Nine Months Ended
                                 September 30,
(dollars in thousands)        2020          2019            Change
Segment revenue            $  622,407$ 495,360$ 127,047    25.6 %
Segment direct costs          279,154      227,171       51,983    22.9
Segment reimbursed costs       79,651       55,230       24,421    44.2
Segment SG&A expenses          66,929       58,551        8,378    14.3
Segment operating income   $  196,673$ 154,408$  42,265    27.4


Segment Revenue
Laboratory Services' revenue was $622.4 million for the nine months ended
September 30, 2020, an increase of $127.0 million as compared to the same period
in 2019. Revenue increased from organic volume growth across all our laboratory
services in part due to higher opening backlog at the beginning of the year as
compared to the prior year and overall growth in new business awards during
2020, including awards and associated revenue for COVID-19 work. The higher
opening backlog was primarily due to increased net authorizations across all of
our labs businesses in 2019.
Segment Direct Costs
Laboratory Services' direct costs were $279.2 million for the nine months ended
September 30, 2020, an increase of $52.0 million as compared to the same period
in 2019. The increase in direct costs was primarily due to a $32.8 million
increase from growth in employee headcount to support current growth in revenue
as well as compensation increases and a $17.9 million increase in laboratory
supply costs associated with the growth in revenue.
Segment Reimbursed Costs
Laboratory Services' reimbursed costs were $79.7 million for the nine months
ended September 30, 2020, an increase of $24.4 million as compared to the same
period in 2019. Reimbursed costs increased primarily due to the increase in
revenue, as well as higher shipping costs and the general timing of costs
incurred across our portfolio of work.
Segment SG&A Expenses
Laboratory Services' SG&A expenses were $66.9 million for the nine months ended
September 30, 2020, an increase of $8.4 million as compared to the same period
in 2019. The increase in SG&A expenses was primarily due to a $9.2 million
increase from growth in employee headcount to support current growth in revenue
as well as compensation increases.

                                       43
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Liquidity and Capital Resources
Overview
We assess our liquidity in terms of our ability to generate adequate amounts of
cash to meet current and future needs. We have historically funded our
operations with cash flows from operations and used long-term debt and cash on
hand to fund acquisitions and make special cash dividends or distributions to
our stockholders. Our expected primary cash uses on a short-term and long-term
basis are for repayment of debt, interest payments, working capital, capital
expenditures, geographic or service offering expansion, acquisitions,
investments and other general corporate purposes. We do not expect to declare
any dividends on our common stock in the foreseeable future. We hold our cash
balances in the United States and numerous locations throughout the rest of the
world.
While we have not seen a significant impact to our liquidity and capital
resources as a result of the COVID-19 pandemic to date, we continue to monitor
and assess the impact and have already taken certain measures to preserve those
resources. For example, in June 2020, we issued $1,200.0 million of New Notes,
and used the proceeds to redeem our previously outstanding OpCo Notes. We expect
this transaction to lower our interest expense and cash paid for interest in the
future. Additionally, in March 2020, we borrowed $150.0 million under our
revolving credit facility as a precautionary measure in order to further
strengthen our cash position and to preserve financial flexibility due to the
uncertainty in the global markets as a result of the COVID-19 pandemic. In June
2020, we repaid the $150.0 million borrowed under the revolving credit facility,
using cash on hand. In addition, we may implement future measures to preserve or
increase cash on-hand and create financial flexibility. For example, we may look
to obtain additional financing or engage in refinancing our variable rate
long-term debt outstanding under our senior secured credit facilities. However,
due to the ongoing impact of the COVID-19 pandemic on the capital and credit
markets, we might not be able to successfully obtain additional financing or
refinancing of our senior secured credit facilities on reasonable terms and
within a reasonable time period acceptable to us, or at all.
The following table presents key measures of our liquidity on the dates set
forth below:
(in thousands)                                       September 30, 2020       December 31, 2019
Cash and cash equivalents:
Cash held in the United States                     $            523,257     $           135,917
Cash held in foreign locations                                  279,833                 209,270
Total                                              $            803,090     $           345,187

Revolving Credit Facility availability (net of
letters of credit)                                 $            298,370     $           298,370


As a result of our recapitalization in 2017, we incurred certain future
obligations associated with potential additional recapitalization consideration.
We do not expect the payment of the recapitalization investment portfolio
liability to impact our future liquidity or capital resources as the right for
the pre-closing holders to receive any such payment depends upon receipt of
future cash proceeds from the applicable portion of the investment portfolio. We
have classified in long-term liabilities the portion of the investment portfolio
we estimate to be payable beyond the next 12 months, net of taxes and other
expenses, to the pre-closing holders. Future payments will be required to be
made, if and when, cash proceeds are received and are payable under the
recapitalization transaction merger agreement. During the three and nine months
ended September 30, 2020 and 2019, we did not make any cash distributions
related to the recapitalization investment portfolio liability. The Company
expects to make a cash distribution related to the recapitalization investment
portfolio liability of approximately $14.9 million during the fourth quarter of
2020. The expected cash distribution has been recorded as a component of other
accrued expenses on the condensed consolidated balance sheet included elsewhere
in this Quarterly Report on Form 10-Q. See Note 2, "Recapitalization
Transaction," of our audited consolidated financial statements included in our
May 2020 Form 8-K for additional information.
We expect to continue funding our operations from existing cash, cash flows from
operations and, if necessary or appropriate, borrowings under our revolving
credit facility, which is currently undrawn. We believe that these sources of
liquidity will be sufficient to fund our operations and service our debt and
interest for the foreseeable future, as well as address impacts from the
COVID-19 pandemic. From time to time, we evaluate potential acquisitions,
investments and other growth and strategic opportunities that might require use
of existing cash, borrowings under our revolving credit facility or additional
long-term financing. We may seek to take advantage of market opportunities to
refinance existing variable rate debt instruments with new debt instruments at
interest rates, maturities and terms we deem attractive. We may also, from time
to time at our sole discretion, purchase, redeem or retire our existing debt
instruments, through tender offers, in privately negotiated or open market
transactions, or otherwise.

                                       44

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While we believe we have sufficient liquidity to fund our operations for the
foreseeable future, our sources of liquidity could be affected by factors
described above related to the COVID-19 pandemic and in Part II, Item 1A, "Risk
Factors," included elsewhere in this Quarterly Report on Form 10-Q, as well as
factors described under "Indemnification and Insurance," within Part I, Item 1,
"Business," Part I, Item 1A, "Risk Factors," within Part II, Item 7,
"Contractual Obligations and Commercial Commitments," "Critical Accounting
Policies and Estimates" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and Part II, Item 7A, "Quantitative and
Qualitative Disclosures about Market Risk," of our Annual Report on Form 10-K
for the year ended December 31, 2019, as superseded by, and solely to the extent
set forth in, our May 2020 Form 8-K.
Indebtedness
On June 5, 2020, Jaguar Holding Company II and PPD Development, L.P.
(collectively, the "Issuers"), issued in a private placement the 2025 Notes and
2028 Notes. The 2025 Notes mature on June 15, 2025, and the 2028 Notes mature on
June 15, 2028. Interest on the New Notes is payable semi-annually on June 15 and
December 15 of each year. The Issuers can redeem the New Notes, at their option,
in whole at any time or in part from time to time, upon notice, at the various
redemption prices (expressed as a percentage of principal amount) or a
"make-whole" premium, plus accrued and unpaid interest, if any, to the
redemption date. The New Notes do not have registration rights. See Note 6,
"Long-term Debt and Finance Lease Obligations," to our condensed consolidated
financial statements included elsewhere in this Quarterly Report on Form 10-Q
for additional information on the New Notes.
As of September 30, 2020 and December 31, 2019, we had total long-term debt and
finance lease obligations outstanding of approximately $4,298.7 million and
$5,705.9 million, respectively. Other than the customary covenants and default
provisions related to the issuance of the New Notes, there were no changes to
the debt covenants or default provisions related to our outstanding debt under
the credit agreement governing our senior secured credit facilities (the "Credit
Agreement") or other obligations during the first nine months of 2020. In June
2020, we repaid in full the outstanding balance of our revolving credit facility
and therefore we were not subject to a net secured leverage ratio test, as
defined in the Credit Agreement, as of September 30, 2020. We were in compliance
with all covenants for all long-term debt arrangements as of September 30, 2020
and December 31, 2019. See Note 6, "Long-term Debt and Finance Lease
Obligations," to our condensed consolidated financial statements included
elsewhere in this Quarterly Report on Form 10-Q for additional information on
our long-term debt and finance lease obligations.

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