PRA Health Sciences Inc Annual Report 2016

Plain-text annual report

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549FORM 10‑K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2016 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: 001‑36732PRA Health Sciences, Inc.(Exact name of registrant as specified in its charter) Delaware46‑3640387(State or other jurisdiction of(I.R.S. Employerincorporation or organization)Identification No.) 4130 ParkLake Avenue, Suite 400, Raleigh, NC 27612(Address of principal executive offices) (Zip Code) (919) 786‑8200Registrant’s telephone number, including area codeSecurities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, par value $0.01 per share Nasdaq Global Select Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well‑known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ 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 1934during 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 requirementsfor the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File requiredto be submitted and posted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K (§229.405 of this chapter) is not contained herein, andwill not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K orany amendment to this Form 10‑K. ☒ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer or a smaller reporting company. See thedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b‑2 of the Exchange Act. Large accelerated filer ☒Accelerated filer ☐Non-accelerated filer ☐Smaler reporting company ☐ (Do not check if asmaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Act). Yes ☐ No ☒ The aggregate market value of the voting and non‑voting common equity held by non‑affiliates of the registrant, based upon the closing sale price asreported on the Nasdaq Global Select Market on June 30, 2016, the last business day of the registrant’s most recently completed second fiscal quarter, wasapproximately $1.3 billion. For purposes of this computation, shares of the registrant’s common stock held by each executive officer, director, and each personknown to the registrant to own 10% or more of the outstanding voting power have been excluded in that such persons are affiliates. Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date. Class Number of Shares OutstandingCommon Stock $0.01 par value 61,655,141 shares outstanding as of February 17, 2017 DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission relating to the 2017 Annual Meeting ofStockholders are incorporated herein by reference into Part III of this Annual Report on Form 10‑K to the extent stated herein. Such Proxy Statement will be filedwith the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates. Table of ContentsPRA HEALTH SCIENCES, INC.ANNUAL REPORT ON FORM 10‑KFOR FISCAL YEAR ENDED DECEMBER 31, 2016TABLE OF CONTENTS Item Number Page No. PART I 1. Business2 1A. Risk Factors17 1B. Unresolved Staff Comments37 2. Properties37 3. Legal Proceedings37 4. Mine Safety Disclosures37 PART II 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities38 6. Selected Financial Data39 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations41 7A. Quantitative and Qualitative Disclosures About Market Risk61 8. Financial Statements and Supplementary Data63 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure108 9A. Controls and Procedures108 9B. Other Information108 PART III 10. Directors, Executive Officers and Corporate Governance109 11. Executive Compensation109 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters109 13. Certain Relationships and Related Transactions, and Director Independence109 14. Principal Accountant Fees and Services109 PART IV 15. Exhibits, Financial Statement Schedules109 16. Form 10-K Summary109 Signatures110 Exhibit Index111 i Table of ContentsFORWARD‑LOOKING STATEMENTS This Annual Report on Form 10‑K contains forward‑looking statements within the meaning of Section 27A of theSecurities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, asamended, or the Exchange Act. Such forward‑looking statements reflect, among other things, our current expectations andanticipated results of operations, all of which are subject to known and unknown risks, uncertainties and other factors thatmay cause our actual results, performance or achievements, market trends, or industry results to differ materially from thoseexpressed or implied by such forward‑looking statements. Therefore, any statements contained herein that are not statementsof historical fact may be forward‑looking statements and should be evaluated as such. Without limiting the foregoing, thewords “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “should,” “targets,” “will” andthe negative thereof and similar words and expressions are intended to identify forward‑looking statements. Theseforward‑looking statements are subject to a number of risks, uncertainties and assumptions, including those described in“Risk Factors” in Part I, Item 1A of this report. Unless legally required, we assume no obligation to update any suchforward‑looking information to reflect actual results or changes in the factors affecting such forward‑looking information. Website and Social Media Disclosure We use our website (www.prahs.com) and our corporate Twitter account (@PRAHSciences) as channels ofdistribution of company information. The information we post through these channels may be deemed material. Accordingly,investors should monitor these channels, in addition to following our press releases, Securities and Exchange Commission, orSEC, filings and public conference calls and webcasts. The contents of our website and social media channels are not,however, a part of this report.1 Table of Contents Part I Item 1. Business Overview We are one of the world’s leading global contract research organizations, or CROs, by revenue, providingoutsourced clinical development services to the biotechnology and pharmaceutical industries. We believe we are one of aselect group of CROs with the expertise and capability to conduct clinical trials across all major therapeutic areas on a globalbasis. We have therapeutic expertise in areas that are among the largest in pharmaceutical development, including oncology,central nervous system, inflammation and infectious diseases. We believe we provide our clients with one of the mostflexible clinical development service offerings, which includes both traditional, project‑based Phase I through Phase IVservices as well as embedded and functional outsourcing services. We believe we further differentiate ourselves from ourcompetitors through our investments in medical informatics and clinical technologies designed to enhance efficiencies,improve study predictability and provide better transparency for our clients throughout their clinical development processes. We are one of the largest CROs in the world by revenue, focused on executing clinical trials on a global basis. Ourglobal clinical development platform includes approximately 70 offices across North America, Europe, Asia, Latin America,South Africa, Australia and the Middle East and over 13,000 employees worldwide. Since 2000, we have participated inapproximately 3,500 clinical trials worldwide, we have worked on marketed drugs across several therapeutic areas andconducted the pivotal or supportive trials that led to U.S. Food and Drug Administration, or FDA, or international regulatoryapproval of more than 70 drugs. We believe we are a leader in the transformation of the CRO engagement model via our flexible clinicaldevelopment service offerings, which include embedded and functional outsourcing services in addition to traditional,project‑based clinical trial services. In September 2013, we completed the acquisition of ReSearch Pharmaceutical Services,or RPS, a global CRO providing clinical development services primarily to large pharmaceutical companies, which providesa highly complementary fit with our historical focus on biotechnology and small‑ to mid‑sized pharmaceutical companies.RPS, now known as our Strategic Solutions offerings, provides Embedded Solutions™ and functional outsourcing services inwhich our teams are fully integrated within the client’s internal clinical development operations and are responsible formanaging functions across the entire breadth of the client’s drug development pipeline. We believe that our StrategicSolutions offerings represent an innovative alternative to the traditional, project‑based approach and allow our clients tomaintain greater control over their clinical development processes. Our flexible clinical development service offeringsexpand our addressable market beyond the traditional outsourced clinical development market to include the clinicaldevelopment spending that biopharmaceutical companies historically have retained in‑house. Over the past 30 years, we have developed strong client relationships and have performed services for more than 300biotechnology and pharmaceutical clients. In the year ended December 31, 2016, we derived 14% of our service revenuefrom small‑ to mid‑sized pharmaceutical companies, 19% of our service revenue from large biotechnology companies and15% of our service revenue from all other biotechnology companies. We believe that we have built a reputation as a strategicpartner of choice for biotechnology and small‑ to mid‑sized pharmaceutical companies as a result of our competitivelydifferentiated platform and our long‑term track record of serving these companies. We expect to benefit from growth inclinical development investment from these customers given the favorable capital raising environment in recent years. Ouracquisition of RPS significantly expanded our relationships with large pharmaceutical companies, which represented 52% ofour service revenue for the year ended December 31, 2016 and includes all of the top 15 largest pharmaceutical companies.We believe we are well positioned to broaden our relationships and pursue strategic alliances with these large pharmaceuticalcompanies due to our global presence, broad therapeutic expertise and flexible clinical development service offerings. CRO Industry CROs provide drug development services, regulatory and scientific support, and infrastructure and staffing supportto provide their clients with the flexibility to supplement their in‑house capabilities or to provide a fully outsourcedsolution. The CRO industry has grown from providing limited clinical trial services in the 1970s to a full service industrycharacterized by broad relationships with clients and by service offerings that encompass the entire drug2 Table of Contentsdevelopment process. Today, CROs provide a comprehensive range of clinical services, including protocol design andmanagement and monitoring of Phase I through Phase IV clinical trials, data management, laboratory testing, medical andsafety reviews and statistical analysis. In addition, CROs provide services that generate high quality and timely data insupport of applications for regulatory approval of new drugs or reformulations of existing drugs as well as new and existingmarketing claims. CROs leverage selected information technologies and procedures to efficiently capture, manage andanalyze the large streams of data generated during a clinical trial. Drug development processes Discovering and developing new drugs is an expensive and time‑consuming process and is highly regulated andmonitored through approval processes that vary by region. Before a new prescription drug reaches commercialization, it mustundergo extensive pre‑clinical and clinical testing and regulatory review, to verify that the drug is safe and effective. A drug is first tested in pre‑clinical studies, which can take several years to complete. When a new molecule issynthesized or discovered, it is tested for therapeutic value using various animal and tissue models. If the drug warrantsfurther development, additional studies are completed and an investigational new drug application, or IND, is submitted tothe FDA. Once the IND becomes effective, the drug may proceed to the human clinical trial phase which generally consists ofthe following interrelated phases, which may overlap: Stages of Clinical Development Market trends Industry Standard Research, or ISR, a market research firm, estimated in its “2016 CRO Market Size Projections2015-2020” report, or ISR 2016 Market Report, that the size of the worldwide CRO market was approximately $28 billion in2015 and will grow at a 7% CAGR to $38 billion in 2020. This growth will be driven by an increase in the amount ofresearch and development expenditure and levels of clinical development outsourcing by biopharmaceutical companies. Increased R&D spending ISR estimates in the ISR 2016 Market Report that R&D expenditures by biopharmaceutical companies wereapproximately $263 billion in 2015 and will grow approximately 3% per year through 2020. Of this amount, approximately$108 billion was spent on development, including $77 billion on Phase I through IV clinical development. Growth drivers ofR&D spending among biopharmaceutical companies include the need to replenish lost3 Table of Contentsrevenues resulting from the patent expirations of a large number of high‑profile drugs in recent years and, a robust capitalraising environment among biotechnology companies. ·Patent Expirations—Since 2012 a significant bolus of branded drugs have lost patent protection whichrepresents in aggregate an estimated $84 billion in revenue. This surge of patent expirations has resulted in theneed for biopharmaceutical companies to increase their R&D expenditures to eventually fill this revenue voidwith new drug approvals. ·Biotechnology Capital Raising—According to BioWorld, over $23.8 billion has been raised by biotechnologycompanies for the year to date period ending on September 18, 2014. We believe these biotechnologycompanies primarily use the capital to fund clinical trials, and due to the general lack of existing infrastructure,these trials are often contracted to CROs. We expect the favorable capital raising environment will continue tobe a source of strong growth for R&D spending. The expected increase in R&D expenditures is supported by the recent increase in IND submissions, which will leadto higher clinical development spending as these compounds move through the drug development process. In 2013, the FDAreceived approximately 7,000 IND submissions, a 17% increase from the approximately 6,000 IND submissions in 2007. Higher outsourcing penetration ISR estimates in the ISR 2016 Market Report that approximately 38% of Phase I through IV of clinical developmentspend is outsourced to CROs, and the levels of penetration are expected to increase to approximately 44% by 2020. Webelieve this increase in outsourcing is due to several factors, including the need to maximize R&D productively, theincreasing burden of clinical trial complexity, the desire to pursue simultaneous registration in multiple countries, and stronggrowth in Phase II through Phase IV trials. ·Maximizing Productivity and Reducing Cost—Productivity within the biopharmaceutical industry hasdeclined over the past several years and the cost of developing a new drug, which is now estimated to be$1.4 billion per drug, has significantly increased. The combined impact of declining R&D productivity andincreased development costs has translated into significant pressure on margins and short‑term earnings forbiopharmaceutical companies. We believe that the need for these companies to maximize productivity andlower costs will lead them to increasingly partner with CROs that can improve efficiency, and increaseflexibility and speed across their clinical operations. ·Increasing Clinical Trial Complexity—Over the last decade, the burden of clinical trial complexity has beenincreasingly difficult to manage due to requirements from regulatory authorities worldwide for greater amountsof clinical trial and safety data to support the approval of new drugs, and requirements for adherence toincreasingly complex and diverse regulations and guidelines. In an effort to minimize potential risks, theseregulatory agencies also typically require a greater amount of post‑approval information and monitoring ofdrugs on the market. To balance the conflicting demands of a growing market with the need to control R&Dexpenses, biopharmaceutical companies partner with CROs that can provide services designed to generate highquality and timely data in support of regulatory approvals of new drugs or the reformulations of existing drugsas well as support of post‑approval regulatory requirements. ·Simultaneous Multi‑Country Registration—Given their desire to maximize efficiency and global marketpenetration to achieve higher potential returns on their R&D expenditures, biopharmaceutical companies areincreasingly pursuing simultaneous, rather than sequential, regulatory new drug submissions and approvals inmultiple countries. However, most biotechnology and small‑ to mid‑sized pharmaceutical companies do notpossess the capability or capacity to simultaneously conduct large‑scale clinical trials in more than one country.In addition, establishing and maintaining internal global infrastructure to pursue multiple regulatory approvalsin different therapeutic categories and jurisdictions can be costly. ·Growth in Phase II through Phase IV Trials—Biopharmaceutical companies are also devoting an increasingamount of resources to Phase II through IV trials. According to clinicaltrials.gov, there were approximately8,300 Phase II through IV trials submitted in 2016, an increase of 11% when compared with the4 Table of Contentsapproximately 7,500 that were submitted in 2011. Complex late‑stage trials, especially those in which sponsorsseek to recruit patients with specific conditions on a global basis, are ideally suited for outsourcing to the selectgroup of global CROs with expertise to execute these studies and access to industry leading investigators andtrial sites globally. We believe the increase in the quantity and complexity of clinical trials exceeds thecapacity and expertise of many biopharmaceutical companies, and is causing them to increasingly seekoutsourced solutions. Our History and Corporate Information PRA Health Sciences, Inc. was incorporated in Delaware in June 2013 under the name Pinnacle Holdco Parent, Inc.On December 19, 2013, Pinnacle Holdco Parent, Inc. changed its name to PRA Global Holdings, Inc. and on July 10, 2014,PRA Global Holdings, Inc. changed its name to PRA Health Sciences, Inc. Our wholly‑owned subsidiary, PRA Holdings, Inc.,or PRA Holdings, was incorporated in Delaware in July 2007 and its predecessors date back to 1982. Our qualified andexperienced clinical and scientific staff has been delivering clinical drug development services to our clients for more than30 years and our service offerings now encompass the spectrum of the clinical drug development process. We are a subsidiary of KKR PRA Investors L.P., a Delaware limited partnership controlled by KKR, or KKR PRAInvestors. Our Competitive Strengths Global CRO platform We are one of the largest CROs in the world by revenue focused on executing clinical trials on a global basis. Ourglobal clinical development platform includes approximately 70 offices across North America, Europe, Asia, Latin America,South Africa, Australia and the Middle East and over 13,000 employees worldwide. We are dedicated to the seamlessexecution of integrated clinical trials on multiple continents concurrently. We believe our global presence and scale areimportant differentiators as biopharmaceutical companies are increasingly focused on greater patient access for increasinglycomplex clinical trials and gaining regulatory approval for new products in multiple jurisdictions simultaneously. Broad and flexible service offering We believe that we are one of a select group of CROs capable of providing both traditional, project‑based CROservices as well as embedded and functional outsourcing services. Our broad and flexible service offering allows us to meetthe clinical research needs of a wide range of clients, from small biotechnology companies to large pharmaceuticalcompanies. Through more than 30 years of experience, we have developed significant expertise executing complex drugdevelopment projects that span Phase I through Phase IV clinical trials. Our Product Registration offerings consist primarilyof traditional, project‑based CRO services, where we have gained the reputation as a strategic partner of choice tobiotechnology and pharmaceutical companies. Our Strategic Solutions offerings primarily cater to the needs of largepharmaceutical companies that seek to maintain greater control over their clinical trial processes. Therapeutic expertise in large segments of drug development Our therapeutic expertise encompasses areas that are among the largest in pharmaceutical development, includingoncology, central nervous system, inflammation and infectious diseases. We have participated in more than 2,100 clinicaltrials in these key areas since 2005, accounting for a substantial majority of our total clinical trials during this period. Weemploy drug development experts with extensive experience across numerous therapeutic areas in preparing developmentplans, establishing study and protocol designs, identifying investigative sites and patients and submitting regulatory filings.Our staff is highly experienced and includes approximately 620 Ph.Ds, 600 medical doctors and 250 doctors of pharmacyworldwide. Innovative approach to clinical trials using medical informatics We are committed to being an industry leader in developing global, scalable and sustainable solutions for ourclients. We aim to continuously improve our systems and processes by investing in medical informatics, technology,5 Table of Contentsanalytics and IT infrastructure. Our information delivery system enables rapid, web‑based delivery of clinical trial data toclients and project teams. We believe our proprietary analysis and application of this data are key differentiators and allow usto identify more productive investigative sites and speed up overall patient enrollment, thereby decreasing drugdevelopment timelines. We have invested in and acquired large databases of aggregated patient medical data, which we referto as medical informatics, to better understand patient distribution and location. Specifically, we have acquired data sourcesthat give us significant amounts of information about patient populations within the United States to enhance enrollment,including medical claims data, hospital master charge data, pharmacy data, laboratory data and payor data. Capitalizing onour investments in medical informatics, we have the capability to identify potential patient populations by location,diagnostic code, treating physician, medications, date diagnosed, last treatment and other relevant metrics. Our medicalinformatics suite includes physician, hospital and pharmacy databases that cover more than 280 million patient lives andapproximately 10 billion patient and pharmacy claims in the United States. Diversified and attractive client base Over the past 30 years, we have performed services for more than 300 biotechnology and pharmaceutical clients. Webelieve we are one of a select group of global, large scale CROs with a long‑term track record serving biotechnology andsmall‑ to mid‑sized pharmaceutical companies, and we believe that these companies represent an attractive growthopportunity. In the year ended December 31, 2016, we derived 14% of our service revenue from small‑ to mid‑sizedpharmaceutical companies, 19% of our service revenue from large biotechnology companies and 15% of our service revenuefrom all other biotechnology companies. Going forward, we believe that we will benefit from growth in clinical developmentinvestment from these customers that has resulted from the active capital raising environment over the past several years. Inaddition, our acquisition of RPS significantly expanded our relationships and positioned us to pursue strategic alliances withlarge pharmaceutical companies, which currently include all of the top 15 largest pharmaceutical companies. Our clientrelationships are also broad and diversified, and in the year ended December 31, 2016 our top 10 clients represented 66% ofservice revenue, with our largest client representing approximately 11% of service revenue and our largest single studyaccounting for approximately 4% of our service revenue. Innovative management team We are led by a dedicated and experienced executive management team that has an average of 20 years ofexperience across the global clinical research, pharmaceutical and life sciences industries. This team has been responsible forbuilding our global platform, successfully integrating our acquisitions, developing our advanced IT‑enabled infrastructureand realizing our significant growth in revenue and earnings over the past five years. Our Growth Strategy Leverage our strong market position within the biotechnology and small‑ to mid‑sized pharmaceutical market We believe our long‑term track record serving biotechnology and small‑ to mid‑sized pharmaceutical companies hasresulted in our earning a reputation as a strategic partner of choice for these companies. We believe that biotechnology andsmall‑ to mid‑sized pharmaceutical companies rely on full service CROs to deliver fast, effective and thorough supportthroughout the clinical development and regulatory processes, as these companies generally lack a global clinicaldevelopment infrastructure. We intend to leverage our strong relationships with biotechnology and small‑ to mid‑sizedpharmaceutical companies to capture additional business from these companies. In particular we believe the CRO strategicalliances that have become prevalent with large pharmaceutical companies over the past several years will increasingly beutilized by biotechnology and small‑ to mid‑sized pharmaceutical companies. We believe we are well positioned to takeadvantage of these opportunities given the depth of our relationships and our proven track record serving these customers. Build deeper and broader relationships with large pharmaceutical companies Large pharmaceutical companies have increasingly focused on partnering with multi‑national CROs that offer awide array of global therapeutic and service capabilities. We have invested significantly in our global scale andinfrastructure over the past several years to enhance our status as a service provider for these companies. Our acquisition ofRPS significantly increased the depth of our relationships with large pharmaceutical companies. We intend to expand6 Table of Contentsour relationships beyond the Embedded Solutions provided through our Strategic Solutions offering to include traditional,project‑based clinical trial services. Expand our leading therapeutic expertise in existing and new areas We believe that our therapeutic expertise in all clinical phases of drug development is critical to the proper designand management of clinical trials and we intend to continue to capitalize on our strong market positions in several largetherapeutic categories. We have established, and will continue to refine, our scientific and therapeutic business developmentinitiatives, which link our organization to key clinical opinion leaders and medical informatics data to more effectivelyleverage therapeutic expertise throughout our client engagement. Specifically, we believe that oncology, central nervoussystem, inflammation and infectious diseases, which together represent the majority of all drug candidates currently inclinical development by biotechnology and pharmaceutical companies, will be significant drivers of our growth. In the areaof oncology, we believe that the growth of targeted therapies, companion diagnostics and personalized medicine willcontinue to drive drug development. With the aging demographics we believe we will see significant growth in the area ofdementia and Alzheimer’s research and drug development, which is complemented by our specialty and focus in neurology.Additionally, we believe that development of niche therapeutic drugs (orphan drugs) will see considerable growth movingforward and we have a dedicated staff focused on the design and conduct of trials for these drugs. Continue to realize financial synergies and strategic benefits from recent acquisitions We believe we will continue to realize financial synergies and strategic benefits from the acquisitions we havecompleted over the past three years, resulting in additional revenue growth and margin improvements. We have substantiallycompleted the operational integration of these acquisitions, and are in the process of executing our strategy to eliminateredundancies in corporate and overhead functions and achieve cost efficiencies resulting from the scale of the combinedbusiness. We believe that our strategic acquisitions are complementary to our customer base and expect to generateincremental revenue growth by cross‑selling our full set of services to our existing and new customers, thereby expanding thescope of our customer relationships and generating additional revenue. Pursue selective and complementary acquisition strategy We are a selectively acquisitive company, focused on growing our core service offerings, therapeutic capabilitiesand geographic reach into areas of high market growth. We have acquired 18 companies since 1997 and have establishedprograms to help us identify acquisition targets and integrate them successfully. Our acquisition strategy is driven by ourcomprehensive commitment to serve client needs and we are continuously assessing the market for potential opportunities. Service Offerings We perform a broad array of services across the spectrum of clinical development programs, from the filing of INDsand similar regulatory applications to conducting all phases of clinical trials. Our core service offerings include: ·Product Registration, which includes Phase IIb through III product registration trials and Phase IV trials,inclusive of post‑marketing commitments and registries; ·Strategic Solutions, which provides Embedded Solutions and functional outsourcing services, in which ourteams are fully integrated within the client’s internal clinical development operations and responsible formanaging functions across the entire breadth of the client’s drug development pipeline; and ·Early Development Services, which includes Phase I through Phase IIa clinical trials and bioanalyticallaboratory services. We provide many back office services to clients as well, including processing the payments to investigators andvolunteers. We also collaborate with third‑party vendors for services such as imaging, central lab and patient recruitmentservices. 7 Table of ContentsProduct Registration Product Registration encompasses the design, management and implementation of study protocols for Phase IIthrough Phase III clinical trials, which are the critical building blocks of product development programs, as well as Phase IV,or post‑approval, clinical trials. We have extensive resources and expertise to design and conduct studies on a global basis,develop integrated global product databases, collect and analyze trial data and prepare and submit regulatory submissions inthe United States, Europe and other jurisdictions. A typical full‑scale program or project may involve the followingcomponents: ·clinical program development, review and consultation and lifecycle management planning; ·design of the clinical protocol and electronic case report forms, or CRFs; ·feasibility studies for investigator interest and patient access and availability; ·patient recruitment and retention services; ·project management; ·investigator and site analysis for selection and qualification; ·investigator handbook and meetings; ·investigational site support and clinical monitoring; ·data management; ·patient medical and safety management; ·analysis and reporting; ·medical and scientific publications; and ·preparation of regulatory filings. As described below, we offer a suite of product registration service offerings to our clients to address the severalcomponents involved in conducting a full‑scale program or project. Clinical Trial Management—Our clinical trial management services, used by biotechnology and pharmaceuticalclients, may be performed exclusively by us or in collaboration with the client’s internal staff or other CROs. With our broadclinical trial management capabilities, we conduct single site studies, multi‑site U.S. and international studies and globalstudies on multiple continents. Through our electronic trial master file, we can create, collect, store, edit and retrieve anyelectronic document in any of our office locations worldwide, enabling our global project teams to work together efficientlyregardless of where they are physically located and allowing seamless transfer of work to a more efficient locale. Project Management—Our project management group manages the development process, setting specific targetsand utilizing various metrics to ensure that a project moves forward in the right trajectory, resources are used optimally andclient satisfaction is met. This group also oversees the implementation of a work breakdown structure, communication plan,and a risk and contingency program for each study. We believe that the management structure of our service delivery modelsets us apart in the industry. Each individual project is assigned a director of project delivery and key strategic accounts arealso assigned a general partner. As a member of the senior management team, the general partner works with the director ofproject delivery, the project management group and client representatives to ensure the highest level of client satisfaction.With more than 330 project directors and project managers, we match our project management personnel to projects based onexperience and study specific parameters. 8 Table of ContentsRegulatory Affairs—Our team of global regulatory professionals has extensive experience working withbiotechnology and pharmaceutical companies and regulatory authorities worldwide. Our regulatory affairs group iscomprised of an internal network of local regulatory experts who are native speakers in countries across North America, LatinAmerica, Western and Eastern Europe, Africa and Asia Pacific. Regulatory team members and local regulatory experts act asclients’ representatives for submissions and direct communications with regulatory authorities in all regions. The group’sregulatory expertise enables rapid study start‑up and facilitates competitive product development plans and effectivesubmission strategies. Therapeutic Expertise—Our therapeutic expertise group provides scientific and medical expertise and patientaccess and retention services worldwide across a broad range of therapeutic areas. Our broad experience throughout varioustherapeutic areas allows us to offer a more complete global service offering to our clients. Our diverse therapeutic expertisegroup leverages best‑in‑class data assets to assist our clients with the design and implementation of entire clinicaldevelopment programs and our current and potential clients increasingly seek partners who can provide these capabilities.We provide clients with therapeutic expertise in the design and implementation of high‑quality product developmentprograms and help them achieve key development milestones in a cost and time effective manner. Our therapeutic expertiseis used by both emerging biotechnology companies that lack clinical development infrastructure and pharmaceuticalcompanies that have limited internal medical resources or are exploring new therapeutic areas. Clinical Operations—Our clinical operations group provides clients with a full set of study site management andmonitoring services in over 90 countries worldwide, through our highly experienced team of clinical research associates andspecialists. This experience includes knowledge of local regulations, medical practices, safety and individual therapeuticareas. We provide our clients with fully trained and locally based clinical teams led by experienced clinical team managersthat initiate site start‑up, monitor activities and review data. Based in the Americas, Europe, Asia Pacific and Africa, theseteams work from a strategic foundation that combines reliance on proven, consistent processes with the flexibility to adaptinnovative ideas and technologies. Given our expertise executing clinical trials around the world we are positioned to meetour clients’ diverse needs and expectations. Our study start‑up services group, a unit within clinical operations, manages thekey components of rapid site activation and investigational site set‑up for clinical trials by utilizing our global and regionspecific expertise. Data and Programming Services—Our global data and programming services group offers an innovative suite oftechnologies that gather and organize clinical trial data. We employ industry leading electronic data capture technologiesand innovative delivery systems to produce high quality and standardized data and reports. We focus on evaluating a client’sneeds, presenting optimal solutions for each trial and implementing the chosen solution effectively during project execution.To support these goals, we have built a group of technological experts in drug research that has a strong foundation in datamanagement fundamentals and core programming abilities. Safety and Risk Management—Our dedicated safety and risk management group helps clients design, implementand operationalize the proper safety procedures from development through to post‑marketing, allowing for clear assessmentand the communication of patient safety profiles. We have centralized drug safety centers in Mannheim, Germany; Swansea,United Kingdom; Charlottesville, Virginia, United States (with a satellite center in Lenexa, Kansas); Sao Paulo, Brazil; andSingapore. Centers are staffed with experienced drug safety associates. These associates are responsible for integrating aneffective risk minimization strategy for a drug product and generating useable information through ongoing risk evaluation.Our safety and risk management team provides risk mitigation strategies for our clients at all stages of the drug developmentcycle along with core signal detection capabilities. Biostatistics and Medical Writing—Our global biostatistics and medical writing operations integrate ourbiostatistics, medical writing, pharmacokinetics and regulatory publishing groups. With a staff of industry experienced andtherapeutically trained biostatisticians and medical writers, we offer clients expertise in statistical analysis, data pooling andregulatory reporting. This global team provides specialist consulting expertise and support to clients from the first stage ofprotocol design through post‑marketing surveillance and Phase IV studies. For publishing, we use a specialized electronicsystem that enables us to seamlessly assemble, manage and publish complex documents in compliance with applicableregulatory guidelines. Quality Assurance Services—Our global quality assurance group is staffed by a team of experienced professionals inthe Americas, Europe and Asia Pacific. Our quality assurance department is entirely separate from and independent of thepersonnel engaged in the direction and conduct of clinical trials. The objective of the quality9 Table of Contentsassurance group is the global promotion of ongoing quality awareness and continuous improvement of our processes. Thisgroup serves these efforts by performing audits on the processes and systems used in the management of clinical trials toensure compliance with study protocol and applicable regulatory requirements. This group has performed audits for a widerange of medical indications and in all phases of clinical trials across the globe. Late Phase Services—Our global late phase services group supports global and regional post‑approval trials withmanagement locations centralized in Pennsylvania, Germany and Singapore. Our experienced late‑phase services team assistsclients with the post‑marketing process by helping identify trends and signals in large populations as well as planning andconducting safety surveillance studies, large‑sample trials, registries, restricted access programs, risk management programs,diagnostic trials and biomarker research. The team consists of industry leading strategic experts, operational specialists andepidemiologists who work with clients to identify post‑marketing research objectives and goals and translate them intocomprehensive study designs. Strategic Solutions Our Strategic Solutions offerings enable biotechnology and pharmaceutical companies to execute theirinternally‑managed development portfolio with greater flexibility and to leverage their existing infrastructure to minimizeredundancy. These offerings provide a broad spectrum of solutions that allow for the efficient management and execution ofcritical clinical development functions for pharmaceutical clients. These services are embedded or integrated within theclient’s internal clinical development operations to support the entire breadth of the client’s drug development pipeline. Byembedding our employees within our clients’ infrastructure, we create a strategic and interdependent relationship that allowsus to anticipate our clients’ clinical trial demands and efficiently deploy our skilled clinical professionals to meet our clients’needs. Clinical functions supported by this service offering include study start‑up activities, site monitoring, studymanagement, data management, biostatistics, regulatory and product safety. We focus our solutions primarily on our clients’Phase II through Phase IV development programs. While traditional, project‑based CRO offerings target the outsourcedcomponent of biopharmaceutical industry spending, our Strategic Solutions offerings address the total Phase II through IVdevelopment market. We pioneered the embedded services model described below, and have extensive experience helpingcustomers re‑align their operating model to more efficiently manage their development portfolio with greater flexibility andcontrol. Our Strategic Solutions offerings include: Embedded Solutions—We believe we are the only company in the industry to offer a strategically scalable,fully‑embedded clinical development solution. Our Embedded Solutions model is designed to merge clinical operationsexpertise, management, infrastructure and support to create a flexible and integrated operating model. The goal of ourEmbedded Solutions model is to enable our client’s internally‑managed development processes to be executed with greaterflexibility. These solutions can be further enhanced by leveraging our systems and technology as required. In our EmbeddedSolutions model, we typically work with our partners to assist in redesigning existing systems and processes to drive greaterefficiency, speed and quality and to implement innovative approaches and enhanced technology. We employ a strong jointgovernance structure and robust metrics to measure and ensure strong quality, cycle time, productivity and service‑levelperformance. Functional Services Provider Solutions—Our functional services provider offering provides dedicated capacitymanagement within a single operating platform and within one function or across multiple functions and geographies. Whilethe customer provides direction and functional management, we provide resources and line management, training andsupport. We also utilize business level metrics to help ensure that staff are deployed with the relevant experience and areproducing consistent, repeatable results. Staff Augmentation Solutions—Our staff augmentation solutions offering provides customers with the ability toaddress their dynamic staffing needs by supplying access to resources qualified to meet their clinical development needs.This allows clients to maintain flexibility while also reducing fixed costs. In order to rapidly attract and recruit qualifiedemployees for these situations, we have assembled what we believe is the largest team in the industry focused on personnelrecruitment. These individual professionals are hired as our employees and managed by our teams, minimizingco‑employment related issues. The customer has the ability to define the resources required according to the therapeutic‑ anddisease‑specific experience required. These resources can be on site at the customer’s facility, at our offices, or regionallybased. 10 Table of ContentsCustom‑Built Development Solutions—Our custom‑built development solutions are designed to offer people,process, systems and development expertise that enable the efficient internal development of a company’s product portfoliowith greater control and flexibility, accelerated development timelines and substantially reduced costs. With the client’s coreleadership in control, we help to build the development team our clients need, while enabling them to maintain theflexibility to be nimble during the development lifecycle. Commercialization Services—Through our commercialization services offering, we assist our clients in addressingthe challenge of commercializing products. We do this by deploying professionals who are knowledgeable in launchpreparation and product lifecycle management. We assist customers in managing the product lifecycle by working with themto create concise messaging, engage thought leadership and health care providers, generate consumer enthusiasm for theproduct, and prepare for post‑marketing commitments. Our commercialization services offering utilizes our flexible servicemodel and, as such, can be delivered as an Embedded Solution, through our functional service provider model, or throughstaff augmentation. Early Development Services Our Early Development Services business unit, or EDS, offers a full range of services for Phase I and Phase IIa studiesas well as bioanalytical analysis. We have conducted studies for major pharmaceutical companies in Europe, the UnitedStates and Japan, as well as for many smaller and emerging biotechnology companies. We have also built direct relationshipswith a large base of available subjects, including healthy volunteers and patient populations with specific medicalconditions. Our December 2013 acquisition of CRI Holding Company, LLC, or CRI Lifetree, significantly expanded our Phase Ito Phase II services. CRI Lifetree is a specialized CRO focused on the conduct and design of early stage patient populationstudies, and is therapeutically focused in human abuse liability, or HAL, addiction, pain, psychiatric, neurological, pediatricand infectious disease services. CRI Lifetree is one of the largest providers of patient population for Phase I and confinedPhase II to Phase III services in the United States, and is one of only a few CROs in the world which has the ability to designand conduct HAL studies, a regulatory‑required study for central nervous system compounds. We believe this acquisitionenables us to provide our clients with a full range of Phase I to Phase II clinical research services in specialized patientpopulations for both inpatient and outpatient settings. EDS also supports a variety of additional services, ranging from protocol development to data management andpharmacy services, including manufacturing of investigational medicinal products. Our state‑of‑the‑art laboratories providepharmacokinetics, the branch of pharmacology concerned with the movement of drugs within the body, andpharmacodynamics, the branch of pharmacology concerned with the effects of drugs and the mechanism of their actionanalyses, including biomarkers, as needed. Our safety laboratory supports our own clinics and also acts as a central lab formedium sized Phase II trials. We also provide clinical study reports, statistical analysis, medical writing and regulatorysupport. We focus on high‑end Phase I studies and specialize in more complex types of studies in which safety, intelligentdesign, and a wide range of pharmacodynamics assessments are critical factors. We believe our Phase I team is a leader in newdevelopments such as microdosing studies, pain models, HAL studies and multi‑purpose protocols with adaptive designs. Wehave developed extensive methodologies enabling us to conduct studies with pharmacokinetics and/or pharmacodynamicsobjectives. We have more than 1,000 early development specialists working in seven clinical pharmacology units locatedacross four different countries, including the United States, the Netherlands and countries in Central and Eastern Europe. Weare equipped with the technologies and infrastructure for high‑quality, efficient studies on a wide range of drugs andindications. Over the past five years we have conducted more than 700 high‑level, complex early development clinical trialsand more than 200 bioanalytical studies per year over the previous five years. Phase I through IIa Studies—For in‑house Phase I studies, we offer approximately 450 beds worldwide andaccommodate volunteers in our state‑of‑the‑art clinical pharmacology units, some of which are hospital based. At thesecenters, volunteers are under constant medical supervision by a team of highly experienced medical professionals. We havean active pool of more than 100,000 study participants (both healthy volunteers and various specific patient populations). 11 Table of ContentsIn addition to in‑house studies, we use an innovative “unit‑on‑demand” business model that brings a Phase I centerto patients. This model establishes a Phase I study environment in central medical facilities that specialize in the treatment ofthe target patient population. Physicians can recruit high volumes of patients using extensive networks of referringspecialists and general practitioners. The studies occur in single center and multi‑national settings. We have also built anextensive patient network and database in areas including depression, schizophrenia, diabetes and hepatitis C. In addition toconducting Phase I and IIa studies in subjects, these sites act as investigative sites in Phase IIb and III trials. We also offer full pharmacy capabilities and we operate a manufacturing site that complies with applicable currentGood Manufacturing Practice regulations and is designed for fast and flexible manufacturing of small batches ofinvestigational medicinal product for studies. In addition, dedicated data management professionals who can process clinicaldata into specific deliverables are integrated in each clinical pharmacology unit. Since a large proportion of drug compounds do not succeed in Phase I, we utilize IND trials that include“microdose” or “low‑dose” studies to screen multiple candidates at an early stage and minimize the number of failing clinicalproduct candidates. We have been closely involved in the field of microdose studies over the past ten years and haveconducted more than 30 microdose studies. Bioanalytical Laboratory—We offer clients two state‑of‑the‑art bioanalytical laboratories located in Assen, theNetherlands, and Lenexa, Kansas, United States. These bioanalytical laboratories have been harmonized with respect tostandard operating procedures, work instructions and equipment. This provides a high level of consistency, continuity andefficiency. It also provides our clients with the ability to run studies in either laboratory, depending on the requirements ofthe study, and ensures that they will receive the same high level of service. Both bioanalytical laboratories are located withinclose proximity to their respective Phase I clinical pharmacology unit, ensuring rapid sample processing for critical doseescalation decision making involving pharmacokinetic assays. Both facilities include laboratories for mass spectrometry andultra‑ performance liquid chromatography, typically applied to small molecule analysis. For large molecules, such asbiologicals and biomarkers, our laboratories operate a wide variety of specialized assays, including ligand binding assayswith a variety of detection methodologies and immunogenicity. In our fully licensed isotope laboratory, bioanalyticalsupport is provided for mass balance and microdosing studies. The laboratories, combined with expert and highly educatedstaff, provide a full range of analytical services throughout the development process. Clients and Suppliers We serve a wide range of client types, including biotechnology and pharmaceutical companies. We have developednumerous strategic relationships in the last five years. In the year ended December 31, 2016, we derived 52% of our servicerevenue from large pharmaceutical companies, 14% of our service revenue from small‑ to mid‑sized pharmaceuticalcompanies, 19% of our service revenue from large biotechnology companies and 15% of our service revenue from all otherbiotechnology companies. In 2016 and 2015, our top five clients represented approximately 45% and 41% of servicerevenue, respectively; this revenue was derived from a combination of fixed‑fee contracts, fee‑for‑service contracts and timeand materials contracts. Two of our clients accounted for 11.0% and 10.4% of service revenue during the year endedDecember 31, 2016, respectively. One client accounted for 10.7% of service revenue during the year endedDecember 31, 2015. No individual project accounted for 10% or more of service revenue for the years endedDecember 31, 2016 and 2015. We utilize a number of suppliers in our business, including central laboratory services, drug storage and shipping,foreign language translation services and information technology. In 2016, our largest individual supplier was paid$11.9 million. In addition, our top 10 suppliers together received payments during 2016 of approximately $72.4 million. Webelieve that we will continue to be able to meet our current and future supply needs. Sales and Marketing We have a proven sales team with the ability to build relationships with new clients and to grow within existingclients. Critical to our sales process is the involvement of our operations and global scientific and medical affairs teams whocontribute their knowledge to project implementation strategies presented in client proposals. These teams also work closelywith the sales team to build long‑term relationships with biotechnology and pharmaceutical companies. Our therapeuticexpertise team supports the sales effort by developing robust service offerings in its core therapeutic12 Table of Contentsareas, which link our organization to key clinical opinion leaders, global investigator networks and best‑in‑class vendors. Werely heavily on our past project performance, qualified teams, medical informatics data and therapeutic expertise in winningnew business. Our approach to proposal development, led by seasoned proposal developers in conjunction with insight from ourdrug development experts, allows us to submit proposals that address client requirements in a creative and tailored manner.Proposal teams conduct research on competing drugs and conduct feasibility studies among potential investigators to assesstheir interest and patient availability for proposals and presentations. Our proprietary, automated estimation system allowsfor rapid and accurate creation of project budgets, which forms the initial basis for business management of budgetssubsequent to award of the study. Refer to Note 20 to our audited consolidated financial statements included elsewhere in this Annual Report on Form10-K for further details regarding our foreign and domestic operations in 2016, 2015 and 2014. For a discussion of risksassociated with our foreign operations, see “Item 1A. Risk Factors.” Competition We compete primarily with other full‑service CROs and in‑house research and development departments ofpharmaceutical and established biotech companies. Our principal traditional CRO competitors are ICON plc, INC ResearchHoldings, Inc., inVentiv Health Inc., Laboratory Corporation of America Holdings, PAREXEL International Corporation,Pharmaceutical Product Development LLC, and Quintiles IMS Holdings Inc. CROs compete on the basis of a number of factors, including reliability, past performance, expertise and experiencein specific therapeutic areas, scope of service offerings, strengths in various geographic markets, technological capabilities,ability to manage large scale global clinical trials, and price. The CRO industry remains highly fragmented, with several hundred smaller, limited service providers and a smallnumber of full‑service companies with global capabilities. We believe there are significant barriers to becoming a globalprovider offering a broad range of services and products. These barriers include: ·the cost and experience necessary to develop broad therapeutic expertise; ·the ability to manage large, complex international clinical programs; ·the ability to deliver high‑quality services consistently for large drug development projects; ·the experience to prepare regulatory submissions on a global basis; and ·the infrastructure and knowledge to respond to the global needs of clients. Backlog Our studies and projects are performed over varying durations, ranging from several months to several years.Backlog represents anticipated service revenue from contracted new business awards that either have not started or are inprocess but have not been completed. Cancelled contracts and scope reductions are removed from backlog as they occur. Ourbacklog at December 31, 2016, 2015 and 2014 was approximately $2.9 billion, $2.4 billion and $2.1 billion, respectively.Cancellations totaled $290.6 million, $231.0 million and $251.7 million for the years ended December 31, 2016, 2015 and2014, respectively. We believe our backlog as of any date is not necessarily a meaningful indicator of our future results for a variety ofreasons. First, studies vary in duration. For instance, some studies that are included in our backlog may be completed in2017, while others may be completed in later years. Second, the scope of studies may change, which may either increase ordecrease the amount of backlog. Third, studies may be terminated or delayed at any time by the client or regulatoryauthorities. Delayed contracts remain in our backlog until a determination of whether to continue, modify or cancel the studyis made. 13 Table of ContentsWe had $2,076.5 million, $1,696.6 million, and $1,493.7 million in net new business awards in the years endedDecember 31, 2016, 2015, and 2014, respectively. Net new business represents gross new business awards less cancellationsfor the period. For more details regarding risks related to our backlog, see “Risk Factors—Our backlog may not convert to servicerevenue at the historical conversion rate.” Intellectual Property We have a pending patent application for our “Early Warning System” a solution for automated identification andqualification of risk to the deliverables in complex projects such as clinical trials. We also maintain and protect trade secrets,know‑how and other proprietary information regarding many of our business processes and related systems. We also holdvarious federal trademark registrations and pending applications, including PRA Health Sciences (design) PRA (including adesign), PRA International and Predictivv (including design). Government Regulation In the United States, the FDA governs the conduct of clinical trials of drug products in human subjects, the form andcontent of regulatory applications, including, but not limited to, IND applications for human clinical testing and thedevelopment, approval, manufacture, safety, labeling, storage, record keeping, and marketing of drug products. The FDA hassimilar authority and similar requirements with respect to the clinical testing of biological products and medical devices. Inthe European Union, or EU, similar laws and regulations apply which may vary slightly from one member state to anotherand are enforced by the European Medicines Agency or respective national member states’ authorities, depending on thecase. Governmental regulation directly affects our business. Increased regulation leads to more complex clinical trials andan increase in potential business for us. Conversely, a relaxation in the scope of regulatory requirements, such as theintroduction of simplified marketing applications for pharmaceutical and biological products, could decrease the businessopportunities available to us. We must perform our clinical drug and biologic services in compliance with applicable laws, rules and regulations,including “Good Clinical Practices,” or GCP, which govern, among other things, the design, conduct, performance,monitoring, auditing, recording, analysis, and reporting of clinical trials. Before a human clinical trial may begin, themanufacturer or sponsor of the clinical product candidate must file an IND with the FDA, which contains, among otherthings, the results of preclinical tests, manufacturer information, and other analytical data. A separate submission to anexisting IND must also be made for each successive clinical trial conducted during product development. Each clinical trialmust be conducted in accordance with an effective IND. In addition, under GCP, each human clinical trial we conduct issubject to the oversight of an independent institutional review board, or IRB, which is an independent committee that has theregulatory authority to review, approve and monitor a clinical trial for which the IRB has responsibility. The FDA, the IRB,or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the studysubjects are being exposed to an unacceptable health risk. In the EU, we must perform our clinical drug services incompliance with essentially similar laws and regulations. In order to comply with GCP and other regulations, we must, among other things: ·comply with specific requirements governing the selection of qualified investigators; ·obtain specific written commitments from the investigators; ·obtain IRB review and approval of the clinical trial; ·verify that appropriate patient informed consent is obtained before the patient participates in a clinical trial; ·ensure adverse drug reactions resulting from the administration of a drug or biologic during a clinical trial aremedically evaluated and reported in a timely manner; ·monitor the validity and accuracy of data;14 ®®Table of Contents ·verify drug or biologic accountability; ·instruct investigators and study staff to maintain records and reports; and ·permit appropriate governmental authorities access to data for review. We must also maintain reports in compliance with applicable regulatory requirements for each study for auditing bythe client and the FDA or similar regulatory authorities. A failure to comply with applicable regulations relating to the conduct of clinical trials or the preparation ofmarketing applications could lead to a variety of sanctions. For example, violations of GCP could result, depending on thenature of the violation and the type of product involved, in the issuance of a warning letter, suspension or termination of aclinical study, refusal of the FDA to approve clinical trial or marketing applications or withdrawal of such applications,injunction, seizure of investigational products, civil penalties, criminal prosecutions, or debarment from assisting in thesubmission of new drug applications. We monitor our clinical trials to test for compliance with applicable laws and regulations in the United States andthe non‑U.S. jurisdictions in which we operate. We have adopted standard operating procedures that are designed to satisfyregulatory requirements and serve as a mechanism for controlling and enhancing the quality of our clinical trials. In theUnited States, our procedures were developed to ensure compliance with GCP and associated guidelines. Within Europe, allwork is carried out in accordance with the European Community Note for Guidance (CPMP/ICH/135/95). In order tofacilitate global clinical trials, we have implemented common standard operating procedures across our regions to assureconsistency whenever feasible. The Standards for Privacy of Individually Identifiable Health Information, or the Privacy Rule, and the SecurityRule, issued under the Health Insurance Portability and Accountability Act of 1996, as amended by the Health InformationTechnology for Economic and Clinical Health, or HITECH, Act of 2009, collectively HIPAA, as well as applicable stateprivacy and security laws and regulations restrict the use and disclosure of certain protected health information, or PHI, andestablishes national standards to protect individuals’ electronic PHI that is created, received, used or maintained by certainentities. Under the Privacy Rule, “covered entities” may not use or disclose PHI without the authorization of the individualwho is the subject of the PHI, unless such use or disclosure is specifically permitted by the Privacy Rule or required by law. We are not a covered entity under HIPAA. However, in connection with our clinical development activities, we doreceive PHI from covered entities subject to HIPAA. In order for those covered entities to disclose PHI to us, the coveredentity must obtain an authorization from the research subject that meets the Privacy Rule requirements, or make suchdisclosure pursuant to an exception to the Privacy Rule’s authorization requirement. We are both directly and indirectlyaffected by the privacy provisions surrounding individual authorizations because many investigators with whom we areinvolved in clinical trials are directly subject to them as a HIPAA “covered entity” and because we obtain identifiable healthinformation from third parties that are subject to such regulations. Because of recent amendments to the HIPAA data securityand privacy rules that were promulgated on January 25, 2013, some of which went into effect on March 26, 2013, there aresome instances where we may be a HIPAA “business associate” of a “covered entity,” meaning that we may be directly liablefor any breaches in protected health information and other HIPAA violations. As part of our research activities, we requirecovered entities that perform research activities on our behalf to comply with HIPAA, including the Privacy Rule’sauthorization requirement, and applicable state privacy and security laws and regulations. In Europe, EC Directive 95/46, or the Directive, is intended to protect the personal data of individuals by, amongother things, imposing restrictions on the manner in which personal data can be collected, transferred, processed, anddisclosed and the purposes for which personal data can be used. National laws and regulations implementing the Directive ordealing with personal data include provisions which, in certain EU Member States, are more stringent than the Directive’smandates and/or cover areas that do not fall within the scope of the Directive. While we strive to comply with all privacylaws potentially applicable to our operations in Europe, we cannot guarantee that our business complies with all of theselaws, which vary in scope and complexity in the multiple jurisdictions in which we operate. 15 Table of ContentsWe maintain a registration with the Drug Enforcement Administration, or DEA, that enables us to use controlledsubstances in connection with our research services. Controlled substances are those drugs and drug products that appear onone of five schedules promulgated and administered by DEA under the Controlled Substances Act. This act governs, amongother things, the distribution, recordkeeping, handling, security, and disposal of controlled substances. Our DEA registrationauthorizes us to receive, conduct testing on, and distribute controlled substances in Schedules II through V. A failure tocomply with the DEA’s regulations governing these activities could lead to a variety of sanctions, including the revocationor the denial of a renewal of our DEA registration, injunctions, or civil or criminal penalties. Environmental Regulation and Liability We are subject to various laws and regulations relating to the protection of the environment and human health andsafety in the countries in which we do business, including laws and regulations governing the management and disposal ofhazardous substances and wastes, the cleanup of contaminated sites and the maintenance of a safe workplace. Our operationsinclude the use, generation, and disposal of hazardous materials and medical wastes. We may, in the future, incur liabilityunder environmental statutes and regulations for contamination of sites we own or operate (including contamination causedby prior owners or operators of such sites), the off‑site disposal of hazardous substances and for personal injuries or propertydamage arising from exposure to hazardous materials from our operations. We believe that we have been and are insubstantial compliance with all applicable environmental laws and regulations and that we currently have no liabilitiesunder such environmental requirements that could reasonably be expected to materially harm our business, results ofoperations or financial condition. Liability and Insurance We may be liable to our clients for any failure to conduct their studies properly according to the agreed‑uponprotocol and contract. If we fail to conduct a study properly in accordance with the agreed‑upon procedures, we may have torepeat a study or a particular portion of the services at our expense, reimburse the client for the cost of the services and/or payadditional damages. At our clinical pharmacology units we study the effects of drugs on healthy volunteers. In addition, in our clinicalbusiness we, on behalf of our clients, contract with physicians who render professional services, including the administrationof the substance being tested, to participants in clinical trials, many of whom are seriously ill and are at great risk of furtherillness or death as a result of factors other than their participation in a trial. As a result, we could be held liable for bodilyinjury, death, pain and suffering, loss of consortium, or other personal injury claims and medical expenses arising from aclinical trial. In addition, we sometimes engage the services of vendors necessary for the conduct of a clinical trial, such aslaboratories or medical diagnostic specialists. Because these vendors are engaged as subcontractors, we are responsible fortheir performance and may be held liable for damages if the subcontractors fail to perform in the manner specified in theircontract. To reduce our potential liability, and as a requirement of the GCP regulations, informed consent is required fromeach volunteer and patient. In addition, our clients provide us with contractual indemnification for all of our service relatedcontracts. These indemnities generally do not, however, protect us against certain of our own actions such as those involvingnegligence or misconduct. Our business, financial condition and operating results could be harmed if we were required to paydamages or incur defense costs in connection with a claim that is not indemnified, that is outside the scope of an indemnityor where the indemnity, although applicable, is not honored in accordance with its terms. We maintain errors, omissions, and professional liability insurance in amounts we believe to be appropriate. Thisinsurance provides coverage for vicarious liability due to negligence of the investigators who contract with us, as well asclaims by our clients that a clinical trial was compromised due to an error or omission by us. If our insurance coverage is notadequate, or if insurance coverage does not continue to be available on terms acceptable to us, our business, financialcondition, and operating results could be materially harmed. Employees As of December 31, 2016, we had over 13,000 employees, of which approximately 46% were in the United States,approximately 32% were in Europe, approximately 3% were in Canada, and approximately 19% were in Africa, LatinAmerica, and Asia Pacific. Some of our employees located outside of the United States are represented by workers16 Table of Contentscouncil or labor unions. We believe that our employee relations are satisfactory. Approximately 40% of employees hold aMaster’s level degree or higher. We have approximately 1,600 employees that hold a Ph.D, M.D. or other doctorate leveldegrees. Available Information We are subject to the informational requirements of the Exchange Act and, in accordance therewith, file reports,including annual, quarterly and current reports, proxy statements and other information with the Securities and ExchangeCommission, or the SEC. Copies of our annual reports on Form 10‑K, quarterly reports on Form 10‑Q, current reports onForm 8‑K and our Proxy Statements for our annual meetings of stockholders, and any amendments to those reports, as well asSection 16 reports filed by our insiders, are available free of charge on our website as soon as reasonably practicable after wefile the reports with, or furnish the reports to the SEC. Our website address is http://www.prahs.com, and our investor relationswebsite is located at investor.prahs.com. Information on our website is not incorporated by reference herein. Our SEC filingsare also available for reading and copying at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1‑800‑SEC‑0330. Inaddition, the SEC maintains an Internet site (http://www.sec.gov) containing reports, proxy and information statements, andother information regarding issuers that file electronically with the SEC. Item 1A. Risk Factors You should consider carefully the risks and uncertainties described below together with the other informationincluded in this Annual Report on Form 10‑K, including our consolidated financial statements and related notes thereto.The occurrence of any of the following risks may materially and adversely affect our business, financial condition, results ofoperations and future prospects, which could in turn materially affect the price of our common stock. The potential loss, delay or non‑renewal of our contracts, or the non‑payment by our clients for services that we haveperformed, could adversely affect our results. We routinely experience termination, cancellation and non‑renewals of contracts by our clients in the ordinarycourse of business, and the number of cancellations can vary significantly from year to year. Most of our clients for traditional, project‑based clinical trial services can terminate our contracts without causeupon 30 to 60 days’ notice. For example, our cancellation percentage for traditional, project‑based Phase I through IV trialswas 18% for the years ended December 31, 2016 and 2015. Our traditional, project‑based clients may delay, terminate orreduce the scope of our contracts for a variety of reasons beyond our control, including but not limited to: ·decisions to forego or terminate a particular clinical trial; ·lack of available financing, budgetary limits or changing priorities; ·actions by regulatory authorities; ·production problems resulting in shortages of the drug being tested; ·failure of the drug being tested to satisfy safety requirements or efficacy criteria; ·unexpected or undesired clinical results; ·insufficient patient enrollment in a trial; ·insufficient investigator recruitment; ·decisions to downsize product development portfolios; ·dissatisfaction with our performance, including the quality of data provided and our ability to meet agreed uponschedules; 17 Table of Contents·shift of business to another CRO or internal resources; ·product withdrawal following market launch; or ·shut down of our clients’ manufacturing facilities. In addition, our clients for our Strategic Solutions offerings may elect not to renew our contracts for a variety ofreasons beyond our control, including in the event that we are unable to provide staff sufficient in number or experience asrequired for a project. In the event of termination, our contracts often provide for fees for winding down the study, but these fees may notbe sufficient for us to maintain our profit margins, and termination or non‑renewal may result in lower resource utilizationrates, including with respect to personnel who we are not able to place on another client engagement. Clinical trials can be costly and a material portion of our revenue is derived from emerging biotechnology and smallto mid‑sized pharmaceutical companies, which may have limited access to capital. In addition, we provide services to suchcompanies before they pay us for some of our services. There is a risk that we may initiate a clinical trial for a client, and theclient subsequently becomes unwilling or unable to fund the completion of the trial. In such a situation, notwithstanding theclient’s ability or willingness to pay for or otherwise facilitate the completion of the trial, we may be legally or ethicallybound to complete or wind down the trial at our own expense. Because the contracts included in our backlog can generally be terminated without cause, we do not believe that ourbacklog as of any date is necessarily a meaningful predictor of future results. In addition, we may not realize the full benefitsof our backlog of contractually committed services if our clients cancel, delay or reduce their commitments under ourcontracts with them. Thus, the loss or delay of a large contract or the loss or delay of multiple contracts could adversely affectour service revenue and profitability. In addition, the terminability of our contracts puts increased pressure on our qualitycontrol efforts, since not only can our contracts be terminated by clients as a result of poor performance, but any suchtermination may also affect our ability to obtain future contracts from the client involved and others. We believe the risk ofloss or delay of multiple contracts is even greater in those cases where we are party to broader partnering arrangements withglobal biopharmaceutical companies. We bear financial risk if we underprice our fixed‑fee contracts or overrun cost estimates, and our financial results can alsobe adversely affected by failure to receive approval for change orders or delays in documenting change orders. Most of our traditional, project‑based Phase I through IV contracts are fixed‑fee contracts. We bear the financial riskif we initially underprice our contracts or otherwise overrun our cost estimates. In addition, contracts with our clients aresubject to change orders, which we commonly experience and which occur when the scope of work we perform needs to bemodified from that originally contemplated by our contract with the client. Modifications can occur, for example, when thereis a change in a key trial assumption or parameter, a significant change in timing or a change in staffing needs. Furthermore,if we are not successful in converting out‑of‑scope work into change orders under our current contracts, we bear the cost ofthe additional work. Such underpricing, significant cost overruns or delay in documentation of change orders could have amaterial adverse effect on our business, results of operations, financial condition or cash flows. Our backlog may not convert to service revenue at the historical conversion rate. Backlog represents anticipated service revenue from contracted new business awards that either have not started orare in process but have not been completed and was $2.9 billion, $2.4 billion, and $2.1 billion at December 31, 2016, 2015,and 2014, respectively. Our revenue conversion rate is based on a financial and operational analysis performed by our projectmanagement teams and represents the level of effort expected to be expended at a specific point in time. Once work beginson a project, revenue is recognized over the duration of the project. Projects may be terminated or delayed by the client ordelayed by regulatory authorities for reasons beyond our control. To the extent projects are delayed, the timing of ourrevenue could be affected. In the event that a client cancels a contract, we generally would be entitled to receive payment forall services performed up to the cancellation date and subsequent client authorized services related to terminating thecanceled project. Generally, however, we have no contractual right to the full amount of the revenue reflected in our backlogin the event of a contract cancellation. The duration of the projects included in18 Table of Contentsour backlog, and the related revenue recognition, range from a few months to many years. Our backlog may not be indicativeof our future results, and we may not realize all the anticipated future revenue reflected in our backlog. A number of factorsmay affect the realization of our revenue from backlog, including: ·the size, complexity and duration of the projects; ·the cancellation or delay of projects; and ·change in the scope of work during the course of a project. Fluctuations in our reported backlog levels also result from the fact that we may receive a small number of relativelylarge orders in any given reporting period that may be included in our backlog. Because of these large orders, our backlog inthat reporting period may reach levels that may not be sustained in subsequent reporting periods. As we increasingly compete for and enter into large contracts that are more global in nature, there can be noassurance about the rate at which our backlog will convert into revenue. A decrease in this conversion rate would mean thatthe rate of revenue recognized on contracts may be slower than what we have experienced in the past, which could impactour service revenue and results of operations on a quarterly and annual basis. The revenue recognition on larger, more globalprojects could be slower than on smaller, less global projects for a variety of reasons, including but not limited to, anextended period of negotiation between the time the project is awarded to us and the actual execution of the contract, as wellas an increased timeframe for obtaining the necessary regulatory approvals. Additionally, delayed projects will remain inbacklog and will not generate revenue at the rate originally expected. Thus, the relationship of backlog to realized revenuesis indirect and may vary over time. Our operating margins and profitability will be adversely affected if we are unable to either achieve efficiencies in ouroperating expenses or grow revenues at a rate faster than expenses. We operate in a highly competitive environment and experience competitive pricing pressure. To achieve ouroperating margins over the last three years, we have implemented initiatives to control the rate of growth of our operatingexpenses. We will continue to utilize these initiatives in the future with a view to offsetting these pricing pressures; however,we cannot be certain that we will be able to achieve the efficiency gains necessary to maintain or grow our operating marginsor that the magnitude of our growth in service revenue will be faster than the growth in our operating costs. If we are unableto grow our service revenue at a faster rate than our operating costs, our operating margins will be adversely affected. Ourinitiatives and any future cost initiatives may also adversely affect us, as they may decrease employee morale or make it moredifficult for us to meet operational requirements. If we are unable to attract suitable investigators and patients for our clinical trials, our clinical development business maysuffer. The recruitment of investigators and patients for clinical trials is essential to our business. Patients typically includepeople from the communities in which the clinical trials are conducted. Our clinical development business could beadversely affected if we are unable to attract suitable and willing investigators or patients for clinical trials on a consistentbasis. For example, if we are unable to engage investigators to conduct clinical trials as planned or enroll sufficient patientsin clinical trials, we may need to expend additional funds to obtain access to resources or else be compelled to delay ormodify the clinical trial plans, which may result in additional costs to us. These considerations might result in our beingunable to successfully achieve our projected development timelines, or potentially even lead us to consider the terminationof ongoing clinical trials or development of a product. Our embedded and functional outsourcing solutions could subject us to significant employment liability. With our embedded and functional outsourcing services, we place employees at the physical workplaces of ourclients. The risks of this activity include claims of errors and omissions, misuse or misappropriation of client proprietaryinformation, theft of client property and torts or other claims under employment liability, co‑employment liability or jointemployment liability. We have policies and guidelines in place to reduce our exposure to such risks, but if we fail to followthese policies and guidelines we may suffer reputational damage, loss of client relationships and business, and monetarydamages. 19 Table of ContentsIf we lose the services of key personnel or are unable to recruit experienced personnel, our business could be adverselyaffected. Our success substantially depends on the collective performance, contributions and expertise of our seniormanagement team and other key personnel including qualified management, professional, scientific and technical operatingstaff and qualified sales representatives for our contract sales services. There is significant competition for qualifiedpersonnel in the biopharmaceutical services industry, particularly those with higher educational degrees, such as a medicaldegree, a Ph.D or an equivalent degree. The departure of any key executive, the payment of increased compensation to attractand retain qualified personnel, or our inability to continue to identify, attract and retain qualified personnel or replace anydeparted personnel in a timely fashion, may impact our ability to grow our business and compete effectively in our industryand may negatively affect our ability to meet financial and operational goals. Our effective income tax rate may fluctuate, which may adversely affect our operations, earnings and earnings per share. Our effective income tax rate is influenced by our projected profitability in the various taxing jurisdictions in whichwe operate. The global nature of our business increases our tax risks. In addition, as a result of increased funding needs bygovernments resulting from fiscal stimulus measures, revenue authorities in many of the jurisdictions in which we operate areknown to have become more active in their tax collection activities. Changes in the distribution of profits and losses amongtaxing jurisdictions may have a significant impact on our effective income tax rate, which in turn could have an adverseeffect on our net income and earnings per share. The application of tax laws in various taxing jurisdictions, including theUnited States, is subject to interpretation, and tax authorities in various jurisdictions may have diverging and sometimesconflicting interpretations of the application of tax laws. Changes in tax laws or tax rulings, such as tax reform proposalscurrently under consideration in the United States or other tax jurisdictions in which we operate, could materially impact oureffective tax rate. Factors that may affect our effective income tax rate include, but are not limited to: ·the requirement to exclude from our quarterly worldwide effective income tax calculations losses injurisdictions where no income tax benefit can be recognized; ·actual and projected full year pre‑tax income, including differences between actual and anticipated incomebefore taxes in various jurisdictions; ·changes in tax laws, or in the interpretation or application of tax laws, in various taxing jurisdictions; ·audits or other challenges by taxing authorities; and ·the establishment of valuation allowances against a portion or all of certain deferred income tax assets if wedetermined that it is more likely than not that future income tax benefits will not be realized. These changes may cause fluctuations in our effective income tax rate that could adversely affect our results ofoperations and cause fluctuations in our earnings and earnings per share. Our business depends on the continued effectiveness and availability of our information systems, including the informationsystems we use to provide our services to our clients, and failures of these systems may materially limit our operations. Due to the global nature of our business and our reliance on information systems to provide our services, we intendto increase our use of web‑enabled and other integrated information systems in delivering our services. We also provideaccess to similar information systems to certain of our clients in connection with the services we provide them. As the breadthand complexity of our information systems continue to grow, we will increasingly be exposed to the risks inherent in thedevelopment, integration and ongoing operation of evolving information systems, including: ·disruption, impairment or failure of data centers, telecommunications facilities or other key infrastructureplatforms; 20 Table of Contents·security breaches of, cyberattacks on and other failures or malfunctions in our critical application systems ortheir associated hardware; and ·excessive costs, excessive delays or other deficiencies in systems development and deployment. The materialization of any of these risks may impede the processing of data, the delivery of databases and services,and the day‑to‑day management of our business and could result in the corruption, loss or unauthorized disclosure ofproprietary, confidential or other data. While we have disaster recovery plans in place, they might not adequately protect usin the event of a system failure. Despite any precautions we take, damage from fire, floods, hurricanes, power loss,telecommunications failures, computer viruses, information system security breaches and similar events at our variouscomputer facilities could result in interruptions in the flow of data to our servers and from our servers to our clients.Corruption or loss of data may result in the need to repeat a trial at no cost to the client, but at significant cost to us, or resultin the termination of a contract or damage to our reputation. Additionally, significant delays in system enhancements orinadequate performance of new or upgraded systems once completed could damage our reputation and harm our business.Finally, long‑term disruptions in the infrastructure caused by events such as natural disasters, the outbreak of war, theescalation of hostilities and acts of terrorism, particularly involving cities in which we have offices, could adversely affectour business. Although we carry property and business interruption insurance, our coverage might not be adequate tocompensate us for all losses that may occur. Unauthorized disclosure of sensitive or confidential data, whether through system failure or employee negligence,fraud or misappropriation, could damage our reputation and cause us to lose clients. Similarly, unauthorized access to orthrough our information systems or those we develop for our clients, whether by our employees or third parties, including acyber‑attack by computer programmers and hackers who may develop and deploy viruses, worms or other malicious softwareprograms could result in negative publicity, significant remediation costs, legal liability and damage to our reputation andcould have a material adverse effect on our results of operations. In addition, our liability insurance might not be sufficient intype or amount to adequately cover us against claims related to security breaches, cyber‑attacks and other related breaches.To date, cyber security attacks directed at us have not had a material impact on our financial results. Due to the evolvingnature of security threats, however, the impact of any future incidents cannot be predicted. Upgrading the information systems that support our operating processes and evolving the technology platform for ourservices pose risks to our business. Continued efficient operation of our business requires that we implement standardized global business processesand evolve our information systems to enable this implementation. We have continued to undertake significant programs tooptimize business processes with respect to our services. Our inability to effectively manage the implementation and adapt tonew processes designed into these new or upgraded systems in a timely and cost‑effective manner may result in disruption toour business and negatively affect our operations. We have entered into agreements with certain vendors to provide systems development and integration services thatdevelop or license to us the IT platform for programs to optimize our business processes. If such vendors fail to perform asrequired or if there are substantial delays in developing, implementing and updating the IT platform, our client delivery maybe impaired, and we may have to make substantial further investments, internally or with third parties, to achieve ourobjectives. Additionally, our progress may be limited by parties with existing or claimed patents who seek to enjoin us fromusing preferred technology or seek license payments from us. Meeting our objectives is dependent on a number of factors which may not take place as we anticipate, includingobtaining adequate technology enabled services, creating IT‑enabled services that our clients will find desirable andimplementing our business model with respect to these services. Also, increased IT‑related expenditures may negativelyimpact our profitability. Our operations might be affected by the occurrence of a natural disaster or other catastrophic event. We depend on our clients, investigators, laboratories and other facilities for the continued operation of our business.Although we have contingency plans in place for natural disasters or other catastrophic events, these events, includingterrorist attacks, pandemic flu, hurricanes and ice storms, could nevertheless disrupt our operations or those of our clients,investigators and collaboration partners, which could also affect us. In particular, our headquarters are in21 Table of ContentsRaleigh, North Carolina where hurricanes might occur. Even though we carry business interruption insurance policies andtypically have provisions in our contracts that protect us in certain events, we might suffer losses as a result of businessinterruptions that exceed the coverage available under our insurance policies or for which we do not have coverage. Anynatural disaster or catastrophic event affecting us or our clients, investigators or collaboration partners could have asignificant negative impact on our operations and financial performance. We may be adversely affected by client concentration or concentration in therapeutic classes in which we conduct clinicaltrials. We derive the majority of our revenues from a limited number of large clients. In 2016 and 2015, we derived 45%and 41%, respectively, of our service revenue from our top five clients. In addition, almost 46% of our backlog, as ofDecember 31, 2016, is concentrated among five clients. If any large client decreases or terminates its relationship with us, ourbusiness, results of operations or financial condition could be materially adversely affected. Additionally, we conduct multiple clinical trials for different clients in single therapeutic classes, particularly in theareas of oncology and central nervous system. Conducting multiple clinical trials for different clients in a single therapeuticclass involving drugs with the same or similar chemical action has in the past, and may in the future, adversely affect ourbusiness if some or all of the trials are canceled because of new scientific information or regulatory judgments that affect thedrugs as a class or if industry consolidation results in the rationalization of drug development pipelines. Our business is subject to international economic, political and other risks that could negatively affect our results ofoperations and financial condition. We have significant operations in non‑U.S. countries that may require complex arrangements to deliver services onglobal contracts for our clients. Additionally, we have established operations in locations remote from our most developedbusiness centers. As a result, we are subject to heightened risks inherent in conducting business internationally, including thefollowing: ·conducting a single trial across multiple countries is complex, and issues in one country, such as a failure tocomply with local regulations or restrictions, may affect the progress of the trial in the other countries, forexample, by limiting the amount of data necessary for a trial to proceed, resulting in delays or potentialcancellation of contracts, which in turn may result in loss of revenue; ·non‑U.S. countries could enact legislation or impose regulations or other restrictions, including unfavorablelabor regulations or tax policies, which could have an adverse effect on our ability to conduct business in orexpatriate profits from those countries; ·tax rates in certain non‑U.S. countries may exceed those in the United States and non‑U.S. earnings may besubject to withholding requirements or the imposition of tariffs, exchange controls or other restrictions,including restrictions on repatriation; ·certain non‑U.S. countries are expanding or may expand their regulatory framework with respect to patientinformed consent, protection and compensation in clinical trials, which could delay or inhibit our ability toconduct trials in such jurisdictions or which could materially increase the risks associated with performing trialsin such jurisdictions; ·the regulatory or judicial authorities of non‑U.S. countries may not enforce legal rights and recognize businessprocedures in a manner to which we are accustomed or would reasonably expect; ·we may have difficulty complying with a variety of laws and regulations in non‑U.S. countries, some of whichmay conflict with laws in the United States; ·changes in political and economic conditions may lead to changes in the business environment in which weoperate, as well as changes in non‑U.S. currency exchange rates; 22 Table of Contents·clients in non‑U.S. jurisdictions may have longer payment cycles, and it may be more difficult to collectreceivables in non‑U.S. jurisdictions; and ·natural disasters, pandemics or international conflict, including terrorist acts, could interrupt our services,endanger our personnel or cause project delays or loss of trial materials or results. These risks and uncertainties could negatively impact our ability to, among other things, perform large, globalprojects for our clients. Furthermore, our ability to deal with these issues could be affected by applicable U.S. laws and theneed to protect our assets. In addition, we may be more susceptible to these risks as we enter and continue to target growth inemerging countries and regions, including India, China, Eastern Europe and Latin America, which may be subject to arelatively higher risk of political instability, economic volatility, crime, corruption and social and ethnic unrest, all of whichare exacerbated in many cases by a lack of an independent and experienced judiciary and uncertainties in how local law isapplied and enforced. The materialization of any such risks could have an adverse impact on our financial condition andresults of operations. Due to the global nature of our business, we may be exposed to liabilities under the Foreign Corrupt Practices Act andvarious non‑U.S. anti‑corruption laws, and any allegation or determination that we violated these laws could have amaterial adverse effect on our business. We are required to comply with the U.S. Foreign Corrupt Practices Act, or the FCPA, and other U.S. and non‑U.S.anti‑corruption laws, which prohibit companies from engaging in bribery, including corruptly or improperly offering,promising, or providing money or anything else of value to non‑U.S. officials and certain other recipients. In addition, theFCPA imposes certain books, records, and accounting control obligations on public companies and other issuers. We operatein parts of the world in which corruption can be common and compliance with anti‑bribery laws may conflict with localcustoms and practices. Our global operations face the risk of unauthorized payments or offers being made by employees,consultants, sales agents, and other business partners outside of our control or without our authorization. It is our policy toimplement safeguards to prohibit these practices by our employees and business partners with respect to our operations.However, irrespective of these safeguards, or as a result of monitoring compliance with such safeguards, it is possible that weor certain other parties may discover or receive information at some point that certain employees, consultants, sales agents, orother business partners may have engaged in corrupt conduct for which we might be held responsible. Violations of theFCPA or other non‑U.S. anti‑corruption laws may result in restatements of, or irregularities in, our financial statements as wellas severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business,operating results and financial condition. In some cases, companies that violate the FCPA may be debarred by the U.S.government and/or lose their U.S. export privileges. Changes in anti‑corruption laws or enforcement priorities could alsoresult in increased compliance requirements and related costs which could adversely affect our business, financial conditionand results of operations. In addition, the U.S. or other governments may seek to hold us liable for successor liability FCPAviolations or violations of other anti‑corruption laws committed by companies in which we invest or that we acquired or willacquire. If we are unable to successfully develop and market new services or enter new markets, our growth, results of operations orfinancial condition could be adversely affected. A key element of our growth strategy is the successful development and marketing of new services and entering newmarkets that complement or expand our existing business. As we develop new services or enter new markets, includingservices targeted at participants in the broader healthcare industry, we may not have or adequately build the competenciesnecessary to perform such services satisfactorily, may not receive market acceptance for such services or may face increasedcompetition. If we are unable to succeed in developing new services, entering new markets or attracting a client base for ournew services or in new markets, we will be unable to implement this element of our growth strategy, and our future business,reputation, results of operations and financial condition could be adversely affected. If we fail to perform our services in accordance with contractual requirements, government regulations and ethicalconsiderations, we could be subject to significant costs or liability and our reputation could be adversely affected. We contract with biotechnology and pharmaceutical companies to perform a wide range of services to assist them inbringing new drugs to market. Our services include monitoring clinical trials, data and laboratory analysis, electronic datacapture, patient recruitment and other related services. Such services are complex and subject to23 Table of Contentscontractual requirements, government regulations, and ethical considerations. For example, we are subject to regulation bythe FDA and comparable non‑U.S. regulatory authorities relating to our activities in conducting pre‑clinical and clinicaltrials. The clinical trial process must be conducted in accordance with regulations promulgated by the FDA under the FederalFood, Drug and Cosmetic Act, which requires the drug to be tested and studied in certain ways. In the United States, beforehuman clinical testing may begin, a manufacturer must file an IND with the FDA. Further, an IRB for each medical centerproposing to participate in the clinical trial must review and approve the protocol for the clinical trial before the medicalcenter’s investigators participate. Once initiated, clinical trials must be conducted pursuant to and in accordance with theapplicable IND, the requirements of the relevant IRBs, and GCP regulations. Similarly, before clinical trials begin, a drug istested in pre‑clinical studies that are expected to comply with Good Laboratory Practice requirements. We are also subject toregulation by the DEA which regulates the distribution, recordkeeping, handling, security, and disposal of controlledsubstances. If we fail to perform our services in accordance with these requirements, regulatory authorities may take actionagainst us. Such actions may include injunctions or failure to grant marketing approval of products, imposition of clinicalholds or delays, suspension or withdrawal of approvals, rejection of data collected in our studies, license revocation, productseizures or recalls, operational restrictions, civil or criminal penalties or prosecutions, damages or fines. Clients may alsobring claims against us for breach of our contractual obligations and patients in the clinical trials and patients taking drugsapproved on the basis of those trials may bring personal injury claims against us. Any such action could have a materialadverse effect on our results of operations, financial condition and reputation. Such consequences could arise if, among other things, the following occur: Improper performance of our services. The performance of clinical development services is complex andtime‑consuming. For example, we may make mistakes in conducting a clinical trial that could negatively impact or obviatethe usefulness of the trial or cause the results of the trial to be reported improperly. If the trial results are compromised, wecould be subject to significant costs or liability, which could have an adverse impact on our ability to perform our servicesand our reputation would be harmed. As examples: ·non‑compliance generally could result in the termination of ongoing clinical trials or the disqualification ofdata for submission to regulatory authorities; ·compromise of data from a particular trial, such as failure to verify that adequate informed consent was obtainedfrom patients, could require us to repeat the trial under the terms of our contract at no further cost to our client,but at a potentially substantial cost to us; and ·breach of a contractual term could result in liability for damages or termination of the contract. Large clinical trials can cost tens of millions of dollars, and while we endeavor to contractually limit our exposure tosuch risks, improper performance of our services could have a material adverse effect on our financial condition, damage ourreputation and result in the cancellation of current contracts by the affected client or other current clients or failure to obtainfuture contracts from the affected client or other current or potential clients. Investigation of clients. From time to time, one or more of our clients are investigated by regulatory authorities orenforcement agencies with respect to regulatory compliance of their clinical trials, programs or the marketing and sale oftheir drugs. In these situations, we have often provided services to our clients with respect to the clinical trials, programs oractivities being investigated, and we are called upon to respond to requests for information by the authorities and agencies.There is a risk that either our clients or regulatory authorities could claim that we performed our services improperly or thatwe are responsible for clinical trial or program compliance. If our clients or regulatory authorities make such claims againstus and prove them, we could be subject to damages, fines or penalties. In addition, negative publicity regarding regulatorycompliance of our clients’ clinical trials, programs or drugs could have an adverse effect on our business and reputation. If we fail to comply with federal, state, and non‑U.S. healthcare laws, including fraud and abuse laws, we could facesubstantial penalties and our business, results of operations, financial condition and prospects could be adversely affected. Even though we do not order healthcare services or bill directly to Medicare, Medicaid or other third‑party payors,certain federal and state healthcare laws and regulations pertaining to fraud and abuse are and will be applicable24 Table of Contentsto our business. We could be subject to healthcare fraud and abuse laws of both the federal government and the states inwhich we conduct our business. Because of the breadth of these laws and the narrowness of available statutory and regulatoryexceptions, it is possible that some of our business activities could be subject to challenge under one or more of such laws. Ifwe or our operations are found to be in violation of any of the laws described above or any other governmental regulationsthat apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, imprisonment and thecurtailment or restructuring of our operations, any of which could materially adversely affect our ability to operate ourbusiness and our financial results. Our services could subject us to potential liability that may adversely affect our results of operations and financialcondition. Our business involves the testing of new drugs on patients in clinical trials. Our involvement in the clinical trial anddevelopment process creates a risk of liability for personal injury to or death of patients, particularly those withlife‑threatening illnesses, resulting from adverse reactions to the drugs administered during testing or after regulatoryapproval. For example, we may be sued in the future by individuals alleging personal injury due to their participation inclinical trials and seeking damages from us under a variety of legal theories. If we are required to pay damages or incurdefense costs in connection with any personal injury claim that is outside the scope of indemnification agreements we havewith our clients, if any indemnification agreement is not performed in accordance with its terms or if our liability exceeds theamount of any applicable indemnification limits or available insurance coverage, our financial condition, results ofoperations and reputation could be materially and adversely affected. We might also not be able to obtain adequateinsurance or indemnification for these types of risks at reasonable rates in the future. We also contract with physicians to serve as investigators in conducting clinical trials. Investigators are typicallylocated at hospitals, clinics or other sites and supervise the administration of the investigational drug to patients during thecourse of a clinical trial. If the investigators commit errors or make omissions during a clinical trial that result in harm to trialpatients or after a clinical trial to a patient using the drug after it has received regulatory approval, claims for personal injuryor products liability damages may result. Additionally, if the investigators engage in fraudulent or negligent behavior, trialdata may be compromised, which may require us to repeat the clinical trial or subject us to liability or regulatory action. Wedo not believe we are legally responsible for the medical care rendered by such third‑party investigators, and we wouldvigorously defend any claims brought against us. However, it is possible we could be found liable for claims with respect tothe actions of third‑party investigators. Some of our services involve direct interaction with clinical trial patients and operation of Phase I and IIa clinicalfacilities, which could create potential liability that may adversely affect our results of operations and financial condition. We operate facilities where Phase I to IIa clinical trials are conducted, which ordinarily involve testing aninvestigational drug on a limited number of individuals to evaluate its safety, determine a safe dosage range and identify sideeffects. Failure to operate such a facility in accordance with applicable regulations could result in disruptions to ouroperations. Additionally, we face risks associated with adverse events resulting from the administration of such drugs and theprofessional malpractice of medical care providers. We also directly employ nurses and other trained employees who assist inimplementing the testing involved in our clinical trials, such as drawing blood from subjects. Any professional malpracticeor negligence by such investigators, nurses or other employees could potentially result in liability to us in the event ofpersonal injury to or death of a subject in clinical trials. This liability, particularly if it were to exceed the limits of anyindemnification agreements and insurance coverage we may have, may adversely affect our financial condition, results ofoperations and reputation. Our insurance may not cover all of our indemnification obligations and other liabilities associated with our operations. We maintain insurance designed to provide coverage for ordinary risks associated with our operations and ourordinary indemnification obligations. The coverage provided by such insurance may not be adequate for all claims we maymake or may be contested by our insurance carriers. If our insurance is not adequate or available to pay liabilities associatedwith our operations, or if we are unable to purchase adequate insurance at reasonable rates in the future, our profitability maybe adversely impacted. 25 Table of ContentsWe do not currently maintain key person life insurance policies on any of our employees. If any of our keyemployees were to join a competitor or to form a competing company, some of our clients might choose to use the services ofthat competitor or new company instead of our own. Furthermore, clients or other companies seeking to develop in‑housecapabilities may hire some of our senior management or key employees. We cannot assure you that a court would enforce thenon‑competition provisions in our employment agreements. Exchange rate fluctuations may affect our results of operations and financial condition. During 2016, approximately 17% of our service revenue and 37% of our expenses were denominated in currenciesother than the U.S. dollar, particularly the Euro and the Pound Sterling. Because a portion of our service revenue andexpenses are denominated in currencies other than the U.S. dollar and our financial statements are reported in U.S. dollars,changes in non‑U.S. currency exchange rates could significantly affect our results of operations and financial condition. The revenue and expenses of our non‑U.S. operations are generally denominated in local currencies and translatedinto U.S. dollars for financial reporting purposes. Accordingly, exchange rate fluctuations will affect the translation ofnon‑U.S. results into U.S. dollars for purposes of reporting our consolidated results. We are subject to non‑U.S. currency transaction risk for fluctuations in exchange rates during the period of timebetween the consummation and cash settlement of a transaction. We earn revenue from our service contracts over a period ofseveral months and, in some cases, over several years. Accordingly, exchange rate fluctuations during this period may affectour profitability with respect to such contracts. We may limit these risks through exchange rate fluctuation provisions stated in our service contracts, or we mayhedge our transaction risk with non‑U.S. currency exchange contracts or options. We have not, however, hedged any of ournon‑U.S. currency transaction risk, and we may experience fluctuations in financial results from our operations outside theUnited States and non‑U.S. currency transaction risk associated with our service contracts. If we do not keep pace with rapid technological changes, our services may become less competitive or obsolete. The biopharmaceutical industry generally, and drug development and clinical research more specifically, aresubject to rapid technological changes. Our current competitors or other businesses might develop technologies or servicesthat are more effective or commercially attractive than, or render obsolete, our current or future technologies and services. Ifour competitors introduce superior technologies or services and if we cannot make enhancements to remain competitive, ourcompetitive position would be harmed. If we are unable to compete successfully, we may lose clients or be unable to attractnew clients, which could lead to a decrease in our revenue and financial condition. Our relationships with existing or potential clients who are in competition with each other may adversely impact thedegree to which other clients or potential clients use our services, which may adversely affect our results of operations. The biopharmaceutical industry is highly competitive, with companies each seeking to persuade payors, providersand patients that their drug therapies are more cost‑effective than competing therapies marketed or being developed bycompeting firms. In addition to the adverse competitive interests that biopharmaceutical companies have with each other,these companies also have adverse interests with respect to drug selection and reimbursement with other participants in thehealthcare industry, including payors and providers. Biopharmaceutical companies also compete to be first to the marketwith new drug therapies. We regularly provide services to biopharmaceutical companies who compete with each other, andwe sometimes provide services to such clients regarding competing drugs in development. Our existing or futurerelationships with our biopharmaceutical clients have in the past and may continue to deter other biopharmaceutical clientsfrom using our services or in certain instances has resulted in our clients seeking to place limits on our ability to serve theircompetitors and other industry participants. In addition, our further expansion into the broader healthcare market mayadversely impact our relationships with biopharmaceutical clients, and such clients may elect not to use our services, reducethe scope of services that we provide to them or seek to place restrictions on our ability to serve clients in the broaderhealthcare market with interests that are adverse to theirs. Any loss of clients or reductions in the level of revenues from aclient could have a material adverse effect on our results of operations, business and prospects. 26 Table of ContentsIf we are unable to manage our joint ventures and identify, acquire and integrate future acquisitions and joint ventureswith our existing business, services and technologies, our business, results of operations and financial condition could beadversely impacted. We have historically grown our business both organically and through acquisitions, and we anticipate that a portionof our future growth may come from acquiring existing businesses, services or technologies and entering into strategicalliances and joint ventures. The success of any acquisition will depend upon, among other things, our ability to effectivelyintegrate acquired personnel, operations, products and technologies into our business, to obtain regulatory approvals, and toretain the key personnel and clients of our acquired businesses. Failure to successfully integrate any acquired business mayresult in reduced levels of revenue, earnings or operating efficiency than might have been achieved if we had not acquiredsuch businesses. In addition, any future acquisitions could result in the incurrence of additional debt and related interestexpense, contingent liabilities and amortization expenses related to intangible assets, which could have a material adverseeffect on our business, financial condition, operating results and cash flow. The success of any joint venture will involve, among other things, learning about new markets and regulations,ensuring quality controls are adequate and not inadvertently creating competitors. In addition, we may be unable to identifysuitable acquisition opportunities, properly evaluate the price of such acquisitions or obtain any necessary financing oncommercially acceptable terms. We may also spend time and money investigating and negotiating with potential acquisition targets and strategicalliance partners but not complete the transaction. Acquisitions involve other risks, including, among others, the assumptionof additional liabilities and expenses, difficulties and expenses in connection with integrating the acquired companies andachieving the expected benefits, issuances of potentially dilutive securities or debt, loss of key employees of the acquiredcompanies, transaction costs, diversion of management’s attention from other business concerns and, with respect to theacquisition of non‑U.S. companies, the inability to overcome differences in non‑U.S. business practices, language andcustoms. Our failure to identify potential acquisitions, complete targeted acquisitions and integrate completed acquisitionsor identify and manage strategic alliances or joint ventures could have a material adverse effect on our business, financialcondition and results of operations. We have a significant amount of goodwill and intangible assets on our balance sheet, and our results of operations may beadversely affected if we fail to realize the full value of our goodwill and intangible assets. Our balance sheet reflects goodwill and intangibles assets of $972.0 million and $474.0 million, respectively, as ofDecember 31, 2016. Collectively, goodwill and intangibles assets represented 66% of our total assets as ofDecember 31, 2016. In accordance with generally accepted accounting principles, or GAAP, goodwill and indefinite-livedintangible assets are not amortized, but are subject to a periodic impairment evaluation. We assess the realizability of ourindefinite-lived intangible assets and goodwill annually and conduct an interim evaluation whenever events or changes incircumstances, such as operating losses or a significant decline in earnings associated with the acquired business or asset,indicate that these assets may be impaired. In addition, we review long‑lived assets for impairment whenever events orchanges in circumstances indicate that the carrying amount of the assets might not be recoverable. If indicators of impairmentare present, we evaluate the carrying value in relation to estimates of future undiscounted cash flows. Our ability to realizethe value of the goodwill and intangible assets will depend on the future cash flows of the businesses we have acquired,which in turn depend in part on how well we have integrated these businesses into our own business. The carrying amount ofthe goodwill could be impaired if there is a downturn in our business or our industry or other factors that affect the fair valueof our business, in which case a charge to earnings would become necessary. If we are not able to realize the value of thegoodwill and intangible assets, we may be required to incur material charges relating to the impairment of those assets. Suchimpairment charges could materially and adversely affect our operating results and financial condition. See Note 2 to ourconsolidated financial statements included elsewhere in this Annual Report on Form 10‑K for a further discussion of ourgoodwill and intangible asset impairment testing. Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited. Under Sections 382 and 383 of the U.S. Internal Revenue Code, if a corporation undergoes an “ownership change”(generally defined as a greater than 50 percentage point change, by value, in the aggregate stock ownership of certainstockholders over a three‑year period), the corporation’s ability to use its pre‑change net operating loss carryforwards tooffset its future taxable income and other pre‑change tax attributes may be limited. We have experienced at least oneownership change in the past. We may experience additional ownership changes in the future. In27 Table of Contentsaddition, future changes in our stock ownership (including future sales by KKR) could result in additional ownershipchanges. Any such ownership changes could limit our ability to use our net operating loss carryforwards to offset any futuretaxable income and other tax attributes. State and non‑U.S. tax laws may also impose limitations on our ability to utilize netoperating loss carryforwards and other tax attributes. Our business could be harmed if we are unable to manage our growth effectively. We believe that sustained growth places a strain on operational, human and financial resources. To manage ourgrowth, we must continue to improve our operating and administrative systems and to attract and retain qualifiedmanagement, professional, scientific and technical operating personnel. We believe that maintaining and enhancing both oursystems and personnel at reasonable cost are instrumental to our success. We cannot assure you that we will be able toenhance our current technology or obtain new technology that will enable our systems to keep pace with developments andthe sophisticated needs of our clients. The nature and pace of our growth introduces risks associated with quality control andclient dissatisfaction due to delays in performance or other problems. In addition, non‑U.S. operations involve the additionalrisks of assimilating differences in non‑U.S. business practices, hiring and retaining qualified personnel and overcominglanguage barriers. Failure to manage growth effectively could have an adverse effect on our business. Our operations involve the use and disposal of hazardous substances and waste which can give rise to liability that couldadversely impact our financial condition. We conduct activities that have involved, and may continue to involve, the controlled use of hazardous materialsand the creation of hazardous substances, including medical waste and other highly regulated substances. Although webelieve that our safety procedures for handling the disposal of such materials generally comply with the standards prescribedby non‑U.S., state and federal laws and regulations, our operations nevertheless pose the risk of accidental contamination orinjury caused by the release of these materials and/or the creation of hazardous substances, including medical waste andother highly regulated substances. In the event of such an accident, we could be held liable for damages and cleanup costswhich, to the extent not covered by existing insurance or indemnification, could harm our business. In addition, otheradverse effects could result from such liability, including reputational damage resulting in the loss of additional businessfrom certain clients. We rely on third parties for important products and services. We depend on certain third parties to provide us with products and services critical to our business. Such servicesinclude, among others, suppliers of drugs for patients participating in trials, suppliers of kits for use in our laboratories,suppliers of reagents for use in our testing equipment and providers of maintenance services for our equipment. The failure ofany of these third parties to adequately provide the required products or services, or to do so in compliance with applicableregulatory requirements, could have a material adverse effect on our business. We have only a limited ability to protect our intellectual property rights, and these rights are important to our success. Our success depends, in part, upon our ability to develop, use and protect our proprietary methodologies, analytics,systems, technologies and other intellectual property. Existing laws of the various countries in which we provide services orsolutions offer only limited protection of our intellectual property rights, and the protection in some countries may be verylimited. We rely upon a combination of trade secrets, confidentiality policies, nondisclosure, invention assignment and othercontractual arrangements, and copyright, trademark and trade secret laws, to protect our intellectual property rights. Theselaws are subject to change at any time and certain agreements may not be fully enforceable, which could further restrict ourability to protect our innovations. Our intellectual property rights may not prevent competitors from independentlydeveloping services similar to or duplicative of ours. Further, the steps we take in this regard might not be adequate toprevent or deter infringement or other misappropriation of our intellectual property by competitors, former employees orother third parties, and we might not be able to detect unauthorized use of, or take appropriate and timely steps to enforce,our intellectual property rights. Enforcing our rights might also require considerable time, money and oversight, and we maynot be successful in enforcing our rights. Depending on the circumstances, we might need to grant a specific client greater rights in intellectual propertydeveloped in connection with a contract than we otherwise generally do. In certain situations, we might forego all rights tothe use of intellectual property we create, which would limit our ability to reuse that intellectual property for other28 Table of Contentsclients. Any limitation on our ability to provide a service or solution could cause us to lose revenue generating opportunitiesand require us to incur additional expenses to develop or license new or modified solutions for future projects. Our business has experienced substantial expansion and contraction in the past and we might not properly manage anyexpansion or contraction in the future. Rapid expansion or contraction, both of which we have experienced, could strain our operational, human andfinancial resources and facilities. If we fail to properly manage any changes, our expenses might grow more than revenue andour results of operations and financial condition might be negatively affected. In order to manage expansion or contraction,we must, among other things, do the following: ·continue to improve our operating, administrative and information systems; ·accurately predict our future personnel, resource and facility needs to meet our commitments; ·track the progress of ongoing projects; and ·attract and retain qualified management, sales, professional, scientific and technical operating personnel. In addition, we have numerous business groups, subsidiaries and divisions. If we cannot properly manage thesegroups, subsidiaries or divisions, it will disrupt our operations. We also face additional risks in expanding our non‑U.S.operations. Specifically, we might find it difficult to: ·assimilate differences in non‑U.S. business practices and regulations; ·properly integrate systems and operating procedures; ·hire and retain qualified personnel; and ·overcome language and cultural barriers. The biopharmaceutical services industry is fragmented and highly competitive. The biopharmaceutical services industry is fragmented and highly competitive and if we do not competesuccessfully, our business will suffer. We often compete for business with other biopharmaceutical services companies,universities, niche providers and discovery and development departments within our clients, some of which are largebiopharmaceutical services companies in their own right with greater resources than ours. As part of our business model, wehave formed preferred vendor relationships. These relationships generally are not contractual and are subject to change atany time. As a result of these relationships, we may find reduced access to certain potential clients due to preferred vendorarrangements with other competitors. There are few barriers to entry for smaller specialized companies considering enteringthe industry. Because of their size and focus, these companies might compete effectively against larger companies like us,which could have a material adverse impact on our business. Additionally, the industry is highly fragmented, with numeroussmaller specialized companies and a handful of full‑service companies with global capabilities similar to ours. Increasedcompetition has led to price and other forms of competition, such as acceptance of less favorable contract terms that couldadversely affect our operating results. As a result of competitive pressures, in recent years our industry has experiencedconsolidation. This trend is likely to produce more competition from the resulting larger companies for both clients andacquisition candidates. Outsourcing trends in the biopharmaceutical industry and changes in aggregate spending and R&D budgets couldadversely affect our operating results and growth rate. We provide services to the biopharmaceutical industry and our revenues depend on the outsourcing trends and R&Dexpenditures in the industry. Economic factors and industry trends that affect biopharmaceutical companies affect ourbusiness. Biopharmaceutical companies continue to seek long‑term strategic collaborations with global CROs with favorablepricing terms. Competition for these collaborations is intense and we may decide to forego an opportunity or we may not beselected, in which case a competitor may enter into the collaboration and our business with the client, if29 Table of Contentsany, may be limited. In addition, if the biopharmaceutical industry reduces its outsourcing of clinical trials or suchoutsourcing fails to grow at projected rates, our operations and financial condition could be materially and adverselyaffected. We may also be negatively affected by consolidation and other factors in the biopharmaceutical industry, whichmay slow decision making by our clients or result in the delay or cancellation of clinical trials. All of these events couldadversely affect our business, results of operations or financial condition. Consolidation in the biopharmaceutical industry could lead to a reduction in our revenues. Several large biopharmaceutical companies have completed mergers and acquisitions that will consolidate theoutsourcing trends and R&D expenditures into fewer companies. As a result of the RPS Acquisition and the expansion of ourrelationship with large pharmaceutical companies, pharmaceutical companies have become an increasing portion of ourcustomer base. The pharmaceutical industry is currently undergoing a period of increased merger activity. As a result of thisand future consolidations, our client diversity may decrease and our business may be adversely affected. We may be affected by healthcare reform and potential additional reforms. Numerous government bodies are considering or have adopted various healthcare reforms and may undertake, or arein the process of undertaking, efforts to control growing healthcare costs through legislation, regulation and voluntaryagreements with medical care providers and biopharmaceutical companies. By way of example, in March 2010, the PatientProtection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, theAffordable Care Act, was signed into law, which, among other things, expanded, over time, health insurance coverage,imposed health industry cost containment measures, enhanced remedies against healthcare fraud and abuse, added newtransparency requirements for healthcare and health insurance industries, imposed new taxes and fees on pharmaceutical andmedical device manufacturers and imposed additional health policy reforms, any of which may significantly impact thebiopharmaceutical industry, including many of our customers. We are uncertain as to the effects of these recent reforms onour business and are unable to predict what legislative proposals, if any, will be adopted in the future. If regulatory costcontainment efforts limit the profitability of new drugs, our clients may reduce their R&D spending, which could reduce thebusiness they outsource to us. Similarly, if regulatory requirements are relaxed or simplified drug approval procedures areadopted, the demand for our services could decrease. Government bodies may also adopt healthcare legislation or regulations that are more burdensome than existingregulations. For example, product safety concerns and recommendations by the Drug Safety Oversight Board could changethe regulatory environment for drug products, and new or heightened regulatory requirements may increase our expenses orlimit our ability to offer some of our services. Additionally, new or heightened regulatory requirements may have a negativeimpact on the ability of our clients to conduct industry sponsored clinical trials, which could reduce the need for ourservices. Furthermore, a relaxation of the scope of regulatory requirements, such as the introduction of simplified marketingapplications for pharmaceuticals and biologics, could decrease the business opportunities available to us. Actions by regulatory authorities or clients to limit the scope of or withdraw an approved drug from the market couldresult in a loss of revenue. Government regulators have the authority, after approving a drug, to limit its indication for use by requiringadditional labeled warnings or to withdraw the drug’s approval for its approved indication based on safety concerns.Similarly, clients may act to voluntarily limit the availability of approved drugs or withdraw them from the market after webegin our work. If we are providing services to clients for drugs that are limited or withdrawn, we may be required to narrowthe scope of or terminate our services with respect to such drugs, which would prevent us from earning the full amount ofservice revenue anticipated under the related service contracts. Current and proposed laws and regulations regarding the protection of personal data could result in increased risks ofliability or increased cost to us or could limit our service offerings. The confidentiality, collection, use and disclosure of personal data, including clinical trial patient‑specificinformation, are subject to governmental regulation generally in the country in which the personal data was collected orused. For example, U.S. federal regulations under HIPAA generally require individuals’ written authorization, in addition toany required informed consent, before protected health information may be used for research and such regulations specifystandards for de‑identifications and for limited data sets. We may also be subject to applicable state30 Table of Contentsprivacy and security laws and regulations in states in which we operate. We are both directly and indirectly affected by theprivacy provisions surrounding individual authorizations because many investigators with whom we are involved in clinicaltrials are directly subject to them as a HIPAA “covered entity” and because we obtain identifiable health information fromthird parties that are subject to such regulations. Because of recent amendments to the HIPAA data security and privacy rulesthat were promulgated on January 25, 2013, some of which went into effect on March 26, 2013, there are some instanceswhere we may be a HIPAA “business associate” of a “covered entity,” meaning that we may be directly liable for anybreaches in protected health information and other HIPAA violations. These amendments may subject us to HIPAA’senforcement scheme, which, as amended, can result in up to $1.5 million in annual civil penalties for each HIPAA violation. In the EU and other jurisdictions, personal data includes any information that relates to an identified or identifiablenatural person with health information carrying additional obligations, including obtaining the explicit consent from theindividual for collection, use or disclosure of the information. In addition, we are subject to laws and regulations with respectto cross‑border transfers of such data out of certain jurisdictions in which we operate, including the EU. If we are unable totransfer data between and among countries and regions in which we operate, it could affect the manner in which we provideour services or adversely affect our financial results. The United States, the EU and its member states, and other countrieswhere we have operations, such as Japan, continue to issue new privacy and data protection rules and regulations that relateto personal data and health information. Failure to comply with these data protection and privacy regulations and rules invarious jurisdictions, or to resolve any serious privacy or security complaints, could subject us to regulatory sanctions,criminal prosecution or civil liability. Federal, state and non‑U.S. governments may propose or have adopted additionallegislation governing the collection, possession, use or dissemination of personal data, such as personal health information,and personal financial data as well as security breach notification rules for loss or theft of such data. Additional legislation orregulation of this type might, among other things, require us to implement new security measures and processes or bringwithin the legislation or regulation de‑identified health or other personal data, each of which may require substantialexpenditures or limit our ability to offer some of our services. Additionally, if we violate applicable laws, regulations orduties relating to the use, privacy or security of personal data, we could be subject to civil liability or criminal prosecution,be forced to alter our business practices and suffer reputational harm. In the next few years, the European data protectionframework may be revised as a generally applicable data regulation. The text has not yet been finalized, but it contains newprovisions specifically directed at the processing of health information, sanctions of up to 2% of worldwide gross revenueand extra‑territoriality measures intended to bring non‑EU companies under the proposed regulation. The biopharmaceutical industry has a history of patent and other intellectual property litigation, and we might be involvedin costly intellectual property lawsuits. The biopharmaceutical industry has a history of intellectual property litigation, and these lawsuits will likelycontinue in the future. Accordingly, we may face patent infringement suits by companies that have patents for similarbusiness processes or other suits alleging infringement of their intellectual property rights. Legal proceedings relating tointellectual property could be expensive, take significant time and divert management’s attention from other businessconcerns, regardless of the outcome of the litigation. If we do not prevail in an infringement lawsuit brought against us, wemight have to pay substantial damages, and we could be required to stop the infringing activity or obtain a license to usetechnology on unfavorable terms. Circumstances beyond our control could cause the CRO industry to suffer reputational or other harm that could result inan industry‑wide reduction in demand for CRO services, which could harm our business. Demand for our services may be affected by perceptions of our clients regarding the CRO industry as a whole. Forexample, other CROs could engage in conduct that could render our clients less willing to do business with us or any CRO.Although to date no event has occurred causing material industry‑wide reputational harm, one or more CROs could engagein or fail to detect malfeasance, such as inadequately monitoring sites, producing inaccurate databases or analysis, falsifyingpatient records, and performing incomplete lab work, or take other actions that would reduce the confidence of our clients inthe CRO industry. As a result, the willingness of biopharmaceutical companies to outsource R&D services to CROs coulddiminish and our business could thus be harmed materially by events outside our control. 31 Table of ContentsOur substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our debtobligations and may otherwise restrict our activities. As of December 31, 2016, we had total indebtedness of $836.4 million, including $91.4 million principal amount of9.5% senior notes due 2023, or Senior Notes, $120.0 million principal amount of variable rate accounts receivable financingagreement due 2019 and $625.0 million principal amount of variable rate first lien term loan due 2021, or 2016 First LienTerm Loan. We had no outstanding borrowings under our revolving line of credit, or the 2016 Revolver. The 2016 First LienTerm Loan and 2016 Revolver are collectively known as the 2016 Credit Facilities. Specifically, our high level of debt could have important consequences to the holders of the Senior Notes,including: ·making it more difficult for us to satisfy our obligations with respect to the Senior Notes and our other debt; ·limiting our ability to obtain additional financing to fund future working capital, capital expenditures,investments or acquisitions or other general corporate requirements; ·requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of otherpurposes, thereby reducing the amount of cash flow available for working capital, capital expenditures,investments or acquisitions and other general corporate purposes; ·increasing our vulnerability to adverse changes in general economic, industry and competitive conditions; ·exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under the2016 Credit Facilities and accounts receivable financing agreement, are at variable rates of interest; ·limiting our flexibility in planning for and reacting to changes in the industry in which we compete; ·placing us at a disadvantage compared to other, less leveraged competitors; and ·increasing our cost of borrowing. Despite our level of indebtedness, we may incur more debt and undertake additional obligations. Incurring such debt orundertaking such additional obligations could further exacerbate the risks to our financial condition. Although the credit agreement governing the 2016 Credit Facilities and the indenture governing the Senior Notescontain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualificationsand exceptions and the indebtedness incurred in compliance with these restrictions could increase. To the extent new debt isadded to our current debt levels, the risks to our financial condition would increase. While the credit agreement governing the 2016 Credit Facilities and the indenture governing the Senior Notes alsocontain restrictions on our ability to make loans and investments, these restrictions are subject to a number of qualificationsand exceptions, and the investments incurred in compliance with these restrictions could be substantial. If we do not comply with the covenants in our financing agreements, we may not have the funds necessary to pay all of ourindebtedness that could become due. The credit agreement governing the 2016 Credit Facilities, the accounts receivable financing agreement, and theindenture governing the Senior Notes require us to comply with certain covenants. In particular, our credit agreement andindenture prohibit us from incurring any additional indebtedness, except in specified circumstances, or amending the termsof agreements relating to certain existing junior indebtedness, if any, in a manner materially adverse to the lenders under ourcredit agreement and holders of our Senior Notes, without their respective approval. Further, our credit agreement, theaccounts receivable financing agreement and indenture contain customary covenants, including covenants that restrict ourability to acquire and dispose of assets, engage in mergers or reorganizations, pay dividends or make investments. Aviolation of any of these covenants could cause an event of default under our financing agreements. 32 Table of ContentsIf we default on our financing agreements as a result of our failure to pay principal or interest when due, our materialbreach of any representation, warranty or covenant, or any other reason, all outstanding amounts could become immediatelydue and payable. In such case, we may not have sufficient funds to repay all the outstanding amounts. In addition, or in thealternative, the lenders under our financing agreements could exercise their rights under the security documents entered intoin connection with these agreements. If any of the holders of our indebtedness accelerate the repayment of such indebtedness,there can be no assurance that we will have sufficient assets to repay our indebtedness. If we were unable to repay thoseamounts, the holders of our secured indebtedness could proceed against the collateral granted to them to secure thatindebtedness. Any acceleration of amounts due or the substantial exercise by the lenders of their rights under the securitydocuments would likely have a material adverse effect on us. We may not be able to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions tosatisfy our obligations under our indebtedness that may not be successful. Our ability to satisfy our debt obligations will depend upon, among other things: ·our future financial and operating performance, which will be affected by prevailing economic conditions andfinancial, business, regulatory and other factors, many of which are beyond our control; and ·the future availability of borrowings under our 2016 Credit Facilities, which depends on, among other things,our complying with the covenants in those facilities. It cannot be assured that our business will generate sufficient cash flow from operations, or that future borrowingswill be available to us under our 2016 Credit Facilities or otherwise, in an amount sufficient to fund our liquidity needs. If our cash flows and capital resources are insufficient to service our indebtedness, we may be forced to reduce ordelay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness. These alternativemeasures may not be successful and may not permit us to meet our scheduled debt service obligations. Our ability torestructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time.Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants,which could further restrict our business operations. In addition, the terms of existing or future debt agreements, may restrictus from adopting some of these alternatives. In the absence of such operating results and resources, we could face substantialliquidity problems and might be required to dispose of material assets or operations to meet our debt service and otherobligations. We may not be able to consummate those dispositions for fair market value or at all and any proceeds that wecould realize from any such dispositions may not be adequate to meet our debt service obligations then due. Interest rate fluctuations may affect our results of operations and financial condition. Because a portion of our debt is variable‑rate debt, fluctuations in interest rates could have a material effect on ourbusiness. We currently utilize derivative financial instruments such as interest rate swaps to hedge our exposure to interestrate fluctuations, but such instruments may not be effective in reducing our exposure to interest fluctuations, and we maydiscontinuing utilizing them at any time. As a result, we may incur higher interest costs if interest rates increase. These higherinterest costs could have a material adverse impact on our financial condition and the levels of cash we maintain for workingcapital. The parties to the Stockholders Agreement have significant influence over us, including control over decisions that requirethe approval of our stockholders, which could limit your ability to influence the outcome of matters submitted tostockholders for a vote. KKR owned approximately 37% of our outstanding common stock as of December 31, 2016. As a result, it has theability to exert a significant amount of influence over our management and over corporate actions requiring stockholderapproval, irrespective of how our other stockholders may vote, including: ·the election and removal of directors and the size of our board of directors; ·any amendment of our articles of incorporation or bylaws; or 33 Table of Contents·the approval of mergers and other significant corporate transactions, including a sale of substantially all of ourassets. Although we are no longer a "controlled company" within the meaning of the NASDAQ rules, we are relying onexemptions from certain corporate governance requirements during transition periods of up to one year. We are no longer a "controlled company" within the meaning of the NASDAQ listing rules. Consequently, as of May 6, 2016,the NASDAQ requires that: ·we appoint at least a majority of independent directors to our compensation committee within 90 days and havea fully independent compensation committee within one year; and ·we appoint a majority of independent directors to our Board within one year. We intend to utilize the transition periods described above to achieve full compliance with these NASDAQrequirements. As a result, at this time we have a majority of independent directors, but our compensation committee does notconsist entirely of independent directors. Accordingly, our stockholders do not, and during these transition periods will not,have the same protections afforded to stockholders of companies that are subject to all of the corporate governancerequirements of the NASDAQ. In addition, if we are unable to comply with the heightened corporate governancerequirements prior to the prescribed NASDAQ deadlines, we may incur penalties or our shares could be delisted. Provisions of our corporate governance documents and Delaware law could make any change in our board of directors orin control of our company more difficult. Our amended and restated certificate of incorporation and our amended and restated bylaws and Delaware lawcontain provisions, such as provisions authorizing, without a vote of stockholders, the issuance of one or more series ofpreferred stock, that could make it difficult or expensive for a third party to pursue a tender offer, change in control ortakeover attempt that is opposed by our management and board of directors even if such a transaction would be beneficial toour stockholders. We also have a staggered board of directors that could make it more difficult for stockholders to change thecomposition of our board of directors in any one year. These anti‑takeover provisions could substantially impede the abilityof public stockholders to change our management or board of directors. Our operating results and share price may be volatile, which could cause the fair value of our stockholders’ investments todecline. Securities markets worldwide have experienced, and are likely to continue to experience, significant price andvolume fluctuations. This market volatility, as well as general economic, market or political conditions, could subject themarket price of our shares to wide price fluctuations regardless of our operating performance. Our operating results and thetrading price of our shares may fluctuate in response to various factors, including: ·market conditions in the broader stock market; ·actual or anticipated fluctuations in our quarterly financial and operating results; ·introduction of new products or services by us or our competitors; ·the public’s reaction to our press releases, our other public announcements and our filings with the SEC; ·changes in, or failure to meet, earnings estimates or recommendations by research analysts who track ourcommon stock or the stock of other companies in our industries; ·strategic actions by us, our customers or our competitors, such as acquisitions or restructurings; ·changes in accounting standards, policies, guidance, interpretations or principles; 34 Table of Contents·issuance of new or changed securities analysts’ reports or recommendations or termination of coverage of ourcommon stock by securities analysts; ·sales, or anticipated sales, of large blocks of our stock; ·the granting or exercise of employee stock options; ·volume of trading in our common stock; ·additions or departures of key personnel; ·regulatory or political developments; ·litigation and governmental investigations; ·changing economic conditions; ·defaults on our indebtedness; and ·exchange rate fluctuations. These and other factors, many of which are beyond our control, may cause our operating results and the market priceand demand for our shares to fluctuate substantially. While we believe that operating results for any particular quarter are notnecessarily a meaningful indication of future results, fluctuations in our quarterly operating results could limit or preventinvestors from readily selling their shares and may otherwise negatively affect the market price and liquidity of our shares. Inaddition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes institutedsecurities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuitagainst us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention ofour management from our business, which could significantly harm our profitability and reputation. A significant portion of our total outstanding shares may be sold into the market in the near future. This could cause themarket price of our common stock to drop significantly, even if our business is doing well. Sales of a substantial number of shares of our common stock into the public market could occur at any time. Wehave 61,597,705 outstanding shares of common stock as of December 31, 2016. Certain of our stockholders have demandregistration rights and “piggyback” registration rights with respect to future registered offerings of our common stock. KKRand other stockholders, who collectively own 36.9% of our common stock, may sell shares of our common stock. These sales,or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market priceof our common stock. We also registered all shares of common stock that we may issue under our equity compensation plansand they can be freely sold in the public market upon issuance, subject to restrictions on transfer contained in managementstockholders agreements entered into between certain recipients of equity compensation and KKR. As restrictions on transferend, the market price of our stock could decline if the holders of currently restricted shares sell them or are perceived by themarket as intending to sell them. Because we have no current plans to pay regular cash dividends on our common stock, you may not receive any return oninvestment unless you sell your common stock for a price greater than that which you paid for it. Although we have previously declared dividends to our stockholders, we do not anticipate paying any regular cashdividends on our common stock. Any decision to declare and pay dividends in the future will be made at the discretion ofour board of directors and will depend on, among other things, our results of operations, financial condition, cashrequirements, contractual restrictions and other factors that our board of directors may deem relevant. In addition, our abilityto pay dividends is, and may be, limited by covenants of existing and any future outstanding indebtedness we or oursubsidiaries incur, including under our existing credit facilities. Therefore, any return on investment in our common stock issolely dependent upon the appreciation of the price of our common stock on the open market, which may not occur. SeePart II, Item 5. “Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities—Dividend Policy” for more detail.35 Table of Contents Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the SarbanesOxley Act could have a material adverse effect on our business and share price. The Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, requires, among other things, that wemaintain effective internal controls for financial reporting and disclosure controls and procedures. Under Section 404 of theSarbanes-Oxley Act, we are required to furnish a report by management on, among other things, the effectiveness of ourinternal control over financial reporting. This assessment must include disclosure of any material weaknesses identified bymanagement in our internal control over financial reporting. A material weakness is a control deficiency, or combination ofcontrol deficiencies, in internal control over financial reporting that results in more than a reasonable possibility that amaterial misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.Section 404 of the Sarbanes-Oxley Act also generally requires an attestation from our independent registered publicaccounting firm on the effectiveness of our internal control over financial reporting. Our compliance with Section 404 requires that we compile the system and process documentation necessary toperform an appropriate evaluation. During the evaluation and testing process, if we identify one or more material weaknessesin its internal control over financial reporting, we will be unable to assert that our internal control over financial reporting iseffective. We cannot assure that there will not be material weaknesses or significant deficiencies in our internal control overfinancial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit ourability to accurately report our financial condition, results of operations or cash flows. If we are unable to conclude that itsinternal control over financial reporting is effective, or if our independent registered public accounting firm determines thatwe have a material weakness or significant deficiency in our internal control over financial reporting once that firm begin itsreviews, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of ourcommon stock could decline, and we could be subject to sanctions or investigations by NASDAQ, the Securities andExchange Commission or other regulatory authorities. Failure to remedy any material weakness in our internal control overfinancial reporting, or to implement or maintain other effective control systems required of public companies, could alsorestrict our future access to the capital markets. We are incurring significant costs as a result of operating as a public company, and our management is devotingsubstantial time to new compliance initiatives. As a publicly traded company, we are incurring significant legal, accounting and other expenses to comply withlaws, regulations and standards relating to corporate governance and public disclosure, including the Dodd‑Frank Wall StreetReform and Consumer Protection Act and the rules and regulations promulgated and to be promulgated thereunder, as well asunder the Sarbanes-Oxley Act, and the rules and regulations of the SEC, and the NASDAQ. In addition these compliancerequirements are making some activities more difficult, time‑consuming or costly. For example, the Exchange Act requiresus, among other things, to file annual, quarterly and current reports with respect to our business and operating results, and toprovide an annual assessment of the effectiveness of our internal control over financial reporting. In order to maintain andimprove the effectiveness of our disclosure controls and procedures and internal controls over financial reporting as requiredby the Exchange Act, significant resources and management oversight are required. Being a public company and being subject to new rules and regulations makes it more expensive for us to obtaindirector and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher coststo obtain coverage. These factors may therefore strain our resources, divert management’s attention and affect our ability toattract and retain qualified members of our board of directors. Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divertmanagement’s attention from implementing our growth strategy, which could prevent us from improving our business, resultsof operations and financial condition. We have made, and will continue to make, changes to our internal controls andprocedures for financial reporting and accounting systems to meet our reporting obligations as a publicly traded company. Ifwe are not able to implement or maintain the necessary procedures and processes, we may be unable to report our financialinformation on a timely basis and thereby could subject us to adverse regulatory consequences, including sanctions by theSEC or violations of applicable stock exchange listing rules, and could result in a breach of covenants under the agreementsgoverning any of our financing agreements. There could also be a negative reaction in the financial markets due to a loss ofinvestor confidence in us and the reliability of our financial statements. 36 Table of Contents Item 1B. Unresolved Staff Comments None. Item 2. Properties We lease a facility for our corporate headquarters in Raleigh, North Carolina. We also lease other offices in NorthAmerica, Europe, Africa, Latin America, Australia and Asia. In 2016, our total rental expense for our facilities and offices wasapproximately $31.9 million. We do not own any real estate. We believe that our properties, taken as a whole, are in goodoperating condition and are suitable for our business operations. Item 3. Legal Proceedings We are currently involved, as we are from time to time, in legal proceedings that arise in the ordinary course of ourbusiness. We believe that we have adequately accrued for these liabilities and that there is no other litigation pending thatcould materially harm our results of operations and financial condition. See Note 13 to our consolidated financial statementsincluded elsewhere in this Annual Report on Form 10‑K for a further discussion of our current legal proceedings. Item 4. Mine Safety Disclosures Not applicable.37 Table of Contents PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock trades on the NASDAQ under the symbol “PRAH.” The following table sets forth the high andlow sales prices per share of our common stock as reported by the NASDAQ for the periods indicated. High Low Fiscal Year 2016 Fourth Quarter $60.96 $50.87 Third Quarter $56.77 $39.25 Second Quarter $51.35 $39.52 First Quarter $47.84 $35.60 High Low Fiscal Year 2015 Fourth Quarter $50.25 $33.00 Third Quarter $46.35 $33.74 Second Quarter $37.41 $26.91 First Quarter $31.99 $22.40 Holders of Record On February 17, 2017, we had approximately 44 common stockholders of record. This number does not includebeneficial owners for whom shares are held by nominees in street name. Dividend Policy We have not paid any cash dividends during the two most recent fiscal years. We also have no current plans to payany cash dividends on our common stock for the foreseeable future and instead intend to retain earnings, if any, for futureoperations, expansion and debt repayment. Any decision to declare and pay dividends in the future will be made at thediscretion of our board of directors and will depend on, among other things, our results of operations, cash requirements,financial condition, contractual restrictions and other factors that our board of directors may deem relevant. In addition, ourability to pay dividends is limited by covenants in the credit agreement governing our 2016 Credit Facilities and in theindenture governing our Senior Notes. See Part II, Item 7 “Management’s Discussion and Analysis of Financial Conditionand Results of Operation—Liquidity and Capital Resources—2016 Credit Facilities” and “—Senior Notes” for restrictionson our ability to pay dividends. Recent Sales of Unregistered Securities There were no unregistered sales of equity securities in 2016. Purchases of Equity Securities by the Issuer None. Stock Performance Graph This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporatedby reference into any filing of PRA Health Sciences, Inc. The following graph shows a comparison from November 13, 2014 (the date our common stock commenced tradingon the NASDAQ) through December 31, 2016 of the cumulative total return for our common stock, the Nasdaq CompositeIndex and the Nasdaq Health Care Index. The graph assumes that $100 was invested at the market close on November 13, 2014 in the common stock of PRAHealth Sciences, Inc., the Nasdaq Composite Index and the Nasdaq Health Care Index, and assumes reinvestments38 Table of Contentsof dividends, if any. The stock price performance of the following graph is not necessarily indicative of future stock priceperformance. Item 6. Selected Financial Data The following tables set forth, for the periods and at the dates indicated, our selected historical consolidatedfinancial data. We have derived the selected consolidated financial data for the years ended December 31, 2014, 2015 and2016, and as of December 31, 2015 and 2016, from our audited consolidated financial statements appearing elsewhere in thisAnnual Report on Form 10‑K. We have derived the selected consolidated financial data for the year ended December 31,2012, the period from January 1 through September 22, 2013, the period from September 23 through December 31, 2013, andas of December 31, 2012, 2013 and 2014 from our consolidated financial statements not appearing elsewhere in this AnnualReport on Form 10‑K. Our historical results are not necessarily indicative of the results we may achieve in any future period. The accompanying consolidated statements of operations, cash flows and stockholders’ equity are presented for twoperiods: Predecessor and Successor, which relate to the period preceding the Company’s acquisition by KKR, or KKRTransaction, and the period succeeding the KKR Transaction, respectively. The Company refers to the operations of PRAHealth Sciences, Inc. and subsidiaries for both the Predecessor and Successor periods. Historical results are not necessarily indicative of the results to be expected in the future. You should read the following information together with the more detailed information contained in“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidatedfinancial statements and the accompanying notes appearing elsewhere in this Annual Report on Form 10‑K. 39 Table of Contents Predecessor Successor December 31, January 1, 2013 - September 23, 2013 - December 31, December 31, December 31, (in thousands, except per share data) 2012 September 22, 2013 December 31, 2013 2014 2015 2016Consolidated statement of operations data: Revenue: Service revenue $597,072 $508,539 $324,362 $1,266,596 $1,375,847 $1,580,023Reimbursement revenue 102,664 103,531 54,854 192,990 238,036 231,688Total revenue 699,736 612,070 379,216 1,459,586 1,613,883 1,811,711Operating expenses: Direct costs 358,572 304,102 222,776 859,218 886,528 1,032,688Reimbursable out-of-pocket costs 102,664 103,531 54,854 192,990 238,036 231,688Selling, general and administrative 160,643 142,880 69,730 253,970 246,417 269,893Transaction-related costs — 47,486 29,180 — — 44,834Depreciation and amortization 30,687 25,144 25,333 96,564 77,952 69,506Loss on disposal of fixed assets 1,560 225 — 5 652 753Income (loss) from operations 45,610 (11,298) (22,657) 56,839 164,298 162,349Interest expense, net (32,823) (32,719) (23,703) (81,939) (61,747) (54,913)Loss on modification or extinguishment of debt (9,683) (21,678) (7,211) (25,036) — (38,178)Foreign currency (losses) gains, net (7,841) (3,641) (4,117) 10,538 14,048 24,029Other income (expense), net 183 (530) 1,180 (2,254) (1,434) 607(Loss) income before income taxes and equity in (losses) gains ofunconsolidated joint ventures (4,554) (69,866) (56,508) (41,852) 115,165 93,894(Benefit from) provision for income taxes (1,847) (22,079) (17,186) (8,154) 30,004 28,494(Loss) income before equity in (losses) gains of unconsolidated jointventures (2,707) (47,787) (39,322) (33,698) 85,161 65,400Equity in (losses) gains of unconsolidated joint ventures, net of tax — (603) (621) (2,044) (3,396) 2,775Net (loss) income $(2,707) $(48,390) $(39,943) $(35,742) $81,765 $68,175Net (loss) income per share: Basic $(0.07) $(1.22) $(1.02) $(0.83) $1.36 $1.12Diluted $(0.07) $(1.22) $(1.02) $(0.83) $1.29 $1.06Cash dividends declared per common stockholders: $2.31 $2.83 $ — $ — $ — $ —Weighted average common shares outstanding: Basic 39,641 39,643 39,337 42,897 59,965 60,759Diluted 39,641 39,643 39,337 42,897 63,207 64,452Cash flow data: Net cash provided by (used in) operating activities $99,259 $54,044 $(25,666) $34,034 $152,428 $160,047Net cash used in investing activities (18,058) (54,753) (1,008,419) (11,472) (71,686) (34,614)Net cash (used in) provided by financing activities (42,157) (42,065) 1,115,041 (5,956) (42,444) (101,595)Other financial data: Backlog (at period end) $1,382,826 $ — $1,939,666 $2,141,112 $2,440,123 2,934,823Net new business 653,529 462,046 312,298 1,493,652 1,696,635 2,076,484 Predecessor Successor As of As of As of As of December 31, As of December 31, December 31, December 31, December 31, 2012 2013 2014 2015 2016Consolidated balance sheet data Cash and cash equivalents $109,211 $72,155 $85,192 $121,065 $144,623Accounts receivable and unbilled services, net 184,891 294,984 338,781 415,077 439,053Working capital 18,317 (11,270) 22,367 43,796 60,538Total assets 982,525 2,357,673 2,214,484 2,228,743 2,190,391Total long-term debt, net 451,076 1,208,751 924,444 889,514 797,052Total liabilities 806,568 1,890,338 1,537,669 1,526,021 1,461,139Total stockholders' equity 175,957 467,335 676,815 702,722 729,252Total liabilities and stockholders' equity 982,525 2,357,673 2,214,484 2,228,743 2,190,391(1)Because of the KKR Transaction, our capital structure for periods before and after the KKR Transaction are notcomparable and therefore we are adjusting the number of shares to reflect the stock split only for the successor periods.See Note 1 to our consolidated financial statements included elsewhere in this Annual Report on Form 10‑K for a furtherdiscussion of our reverse stock split. (2)Our backlog consists of anticipated service revenue from new business awards that either have not started or are but havenot been completed. Backlog varies from period to period depending upon new business awards and contract increases,cancellations and the amount of service revenue recognized under existing contracts. (3)For our Strategic Solutions offering, the value of new business awards is the anticipated service revenue to berecognized in the corresponding quarter of the next fiscal year. For the remainder of our business, net new business is thevalue of services awarded during the period from projects under signed contracts, letters of intent and, in some cases,pre‑contract commitments that are supported by written communications, adjusted for contracts that were modified orcanceled during the period. For the fiscal year 2013, net new business excludes the RPS Acquisition. (4)In 2015 we early adopted ASU No. 2015-03 and ASU No. 2015-15. The balance sheet data for 2014, 2013, and 2012 hasbeen restated to reflect the presentation of debt issuance costs as a reduction of long-term debt. (5)In 2016, we early adopted ASU No. 2016-15 and ASU No. 2016-18. The consolidated statement of cash flows data forthe years ended December 31, 2015 and 2014, and the period from January 1 through September 22, 2013, and theperiod from September 23 through December 31, 2013 has been restated to reflect the adoption of the new standards. 40 (1)(5)(5)(5)(2)(3) (4) (4) (4) (4)Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operationstogether with our “Selected Financial Data” and the consolidated financial statements and the related notes includedelsewhere in “Financial Statements and Supplementary Data.” Some of the information contained in this discussion andanalysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for ourbusiness, includes forward‑looking statements that involve risks and uncertainties. You should read the “Risk Factors”section of this Annual Report on Form 10‑K for a discussion of important factors that could cause actual results to differmaterially from the results described in or implied by the forward‑looking statements contained in the following discussionand analysis. Overview We are one of the world’s leading global CROs, by revenue, providing outsourced clinical development services tothe biotechnology and pharmaceutical industries. We believe we are one of a select group of CROs with the expertise andcapability to conduct clinical trials across major therapeutic areas on a global basis. Our therapeutic expertise includes areasthat are among the largest in pharmaceutical development, and we focus in particular on oncology, central nervous systeminflammation, respiratory, cardiometabolic and infectious diseases. We believe that we further differentiate ourselves fromour competitors through our investments in medical informatics and clinical technologies designed to enhance efficiencies,improve study predictability and provide better transparency for our clients throughout their clinical development processes. Contracts define the relationships with our clients and establish the way we earn revenue. Three types ofrelationships are most common: a fixed‑price contract, a time and materials contract and fee‑for‑service arrangements. Incases where the contracts are fixed price, we may bear the cost of overruns for the contracted scope, or we may benefit if thecosts are lower than we anticipated for the contracted scope. In cases where our contracts are fee‑for‑service, the contractscontain an overall budget for contracted resources. If actual resources used are lower than anticipated, the client generallykeeps the savings and we may be responsible for covering the cost of the unused resource if we are unable to redeploy theresource. For time and material contracts, we bill the client only for the actual hours we spend to complete the contractedscope based upon stated hourly rates by position. The duration of our contracts range from a few months to several years.Revenue for services is recognized only after persuasive evidence of an arrangement exists, the sales price is determinable,services have been rendered, and collectability is reasonably assured. Once these criteria have been met, we recognizerevenue for the services provided on fixed‑fee contracts based on the proportional performance methodology, whichdetermines the proportion of outputs or performance obligations which have been completed or delivered compared to thetotal contractual outputs for performance obligations. To measure performance, we compare the contract costs incurred toestimated total contract costs through completion. As part of the client proposal and contract negotiation process, wedevelop a detailed project budget for the direct costs based on the scope of the work, the complexity of the study, thegeographical location involved and our historical experience. We then establish the individual contract pricing based on ourinternal pricing guidelines, discount agreements, if any, and negotiations with the client. The estimated total contract costsare reviewed and revised periodically throughout the lives of the contracts, with adjustments to revenue resulting from suchrevisions being recorded on a cumulative basis in the period in which the revisions are first identified. Our costs consist ofexpenses necessary to carry out the clinical development project undertaken by us on behalf of the client. These costsprimarily include the expense of obtaining appropriately qualified labor to administer the project, which we refer to as directcost headcount. Other costs we incur are attributable to the expense of operating our business generally, such as leases andmaintenance of information technology and equipment. Revenue from time and materials contracts is recognized as hours areincurred. Revenues and the related costs of fee‑for‑service contracts are recognized in the period in which services areperformed. How We Assess the Performance of Our Business In addition to our GAAP financial measures, we review various financial and operational metrics, including, newbusiness awards, cancellations, and backlog. Many of our current contracts include clinical trials covering multiplegeographic locations. We utilize the same management systems and reporting tools to monitor and manage these activitieson the same basis worldwide. For this reason, we consider our operations to be a single business segment, and we present ourresults of operations as a single reportable segment. 41 Table of ContentsOur gross new business awards for the years ended December 31, 2016, 2015 and 2014 were $2,367.1 million,$1,927.6 million and $1,745.4 million, respectively. New business awards arise when a client selects us to execute its trialand is documented by written or electronic correspondence or for our Strategic Solutions offering when the amount ofrevenue expected to be recognized is measurable. The number of new business awards can vary significantly from year toyear, and awards can have terms ranging from several months to several years. For our Strategic Solutions offering, the valueof a new business award is the anticipated service revenue to be recognized in the corresponding quarter of the next fiscalyear. For the remainder of our business, the value of a new award is the anticipated service revenue over the life of thecontract, which does not include reimbursement activity or investigator fees. In the normal course of business, we experience contract cancellations, which are reflected as cancellations when theclient provides us with written or electronic correspondence that the work should cease. During the years endedDecember 31, 2016, 2015 and 2014 we had $290.6 million, $231.0 million, and $251.7 million, respectively, ofcancellations for which we received correspondence from the client. The number of cancellations can vary significantly fromyear to year. The value of the cancellation is the remaining amount of unrecognized service revenue, less the estimated effortto transition the work back to the client. Our backlog consists of anticipated service revenue from new business awards that either have not started or are inprocess but have not been completed. Backlog varies from period to period depending upon new business awards andcontract modifications, cancellations, and the amount of service revenue recognized under existing contracts. Our backlog atDecember 31, 2016, 2015 and 2014 was $2.9 billion, $2.4 billion, and $2.1 billion, respectively. Industry Trends ISR estimated in its ISR 2016 Market Report that the size of the worldwide CRO market was approximately$28 billion in 2015 and will grow at a 7% CAGR to $38 billion over the next five years. This growth will be driven by anincrease in the amount of research and development expenditures and higher levels of clinical development outsourcing bybiopharmaceutical companies. Acquisition of PRA by Kohlberg Kravis Roberts & Co. L.P. On September 23, 2013, we were acquired by affiliates of KKR for $1.4 billion pursuant to a plan of merger by andamong the Company, merger sub and Genstar, or Merger. Upon completion of the KKR Transaction, merger sub was mergedwith and into PRA Holdings, Inc., Predecessor Company, which became a subsidiary of Pinnacle Holdco Parent, Inc., orParent. On December 19, 2013, Pinnacle Holdco Parent, Inc. changed its name to PRA Global Holdings, Inc. and on July 10,2014, PRA Global Holdings, Inc. changed its name to PRA Health Sciences, Inc. Business Combinations We have completed a number of acquisitions during 2015 and 2016 to enhance our capabilities and serviceofferings in certain areas. On June 8, 2015, we purchased the assets of Value Health Solutions Inc., or VHS, a software development firm, for$0.5 million in cash and 47,598 unregistered shares of our common stock with a fair market value of $1.6 million; anadditional $0.4 million of common stock will be issued in June 2017, less amounts reimbursable to us for anyindemnification obligations of the seller. The asset purchase agreement also includes contingent consideration in the form ofpotential earn-out payments of up to $16.0 million. On March 18, 2016, we acquired all of the outstanding shares of Nextrials, Inc., or Nextrials, a developer of web-based software which integrates electronic health records with clinical trials, for $4.8 million in cash and contingentconsideration in the form of potential earn-out payments of up to $3.0 million. On May 6, 2016, as part of the dissolution of the WuXiPRA Clinical Research (Shanghai) Co., Ltd. joint venture, orWuXiPRA, we acquired WuXiPRA’s Hong Kong operations for $0.3 million. The results of operations of acquired businesses have been included since the date of acquisition. 42 Table of ContentsSee Note 4 to our audited consolidated financial statements found elsewhere in this Annual Report on Form 10-K foradditional information with respect to the acquisitions. Joint Ventures On May 6, 2016, we and WuXi AppTec (Shanghai) Co., Ltd., or WuXi, finalized an agreement to dissolve theWuXiPRA joint venture. Under the agreement, we sold our 49% portion of the joint venture located in mainland China for$4.0 million, which subsequently became a wholly owned subsidiary of WuXi. The portion of the joint venture located inHong Kong became our wholly owned subsidiary and was acquired for $0.3 million. As a result of the transaction, werecognized a $3.3 million gain on the sale, which is recorded in the equity in gains (losses) of unconsolidated joint venturesin the accompanying consolidated statement of operations. During April 2015, prior to the dissolution of the WuXiPRA joint venture, we made a $3.0 million contribution toWuXiPRA, along with WuXi, to fund the joint venture’s working capital needs. Our interest in WuXiPRA remained at 49%after the capital contribution. We recorded reductions to the investment balance of $0.7 million (excluding the gain on thesale), $2.9 million, and $2.1 million during the years ended December 31, 2016, 2015, and 2014, respectively, for our equityin the venture’s net loss for the periods, which are recorded in the equity in gains (losses) of unconsolidated joint ventures,net of tax in our consolidated statement of operations. The investment was adjusted for our equity in the venture’s netincome (loss), cash contributions, distributions, and other adjustments required by the equity method of accounting. Ourinvestment in WuXiPRA totaled $1.1 million as of December 31, 2015. We entered into a joint venture agreement with A2 Healthcare Corporation (formerly part of Asklep, Inc.). The jointventure provides research and development outsourcing solutions in Japan to the biopharmaceutical and medical deviceindustries. This joint venture is based in Tokyo, Japan and is owned by us (49%) and Asklep (51%). On October 17, 2014, thejoint venture changed its name from RPS Asklep, Inc. to A2PRA Corporation, or A2PRA. We recorded a $0.1 million increaseto the investment balance during the year ended December 31, 2016. There was no change in the investment balance for theyear ended December 31, 2015 and we recorded a $0.1 million reduction to the investment balance during the year endedDecember 31, 2014, for our equity in the venture’s net income (loss) for the period, which is recorded in the equity in gains(losses) of unconsolidated joint venture, net of tax in our consolidated statement of operations. The investment will beadjusted for our equity in the venture’s net income (loss), cash contributions, distributions, and other adjustments required bythe equity method of accounting. Our investment in A2PRA totaled $0.3 million and $0.2 million at December 31, 2016 and2015, respectively. In August 2015, we entered into a joint venture, along with an affiliate of KKR. The joint venture was dissolved inDecember 2015. The purpose of the joint venture included, among other things, the evaluation of investments or acquisitionsto enhance our strategic objectives. The joint venture was jointly owned by us (11%) and KKR (89%). We contributed $20.0million to the joint venture in August 2015 and received $19.5 million in December 2015 when the joint venture wasdissolved. We recorded the $0.5 million reduction to the investment balance in equity in gains (losses) of unconsolidatedjoint ventures, net of tax in the consolidated statement of operations. The investment in the joint venture was adjusted for ourequity in the venture’s net income (loss), cash contributions, distributions, and other adjustments required by the equitymethod of accounting. Sources of Revenue Total revenues are comprised of service revenue and reimbursement revenue, each of which is described below. Service Revenue We generally enter into contracts with customers to provide services with payments based on either fixed‑fee, timeand materials, or fee‑for‑service arrangements. Revenue for services is recognized only after persuasive evidence of anarrangement exists, the sales price is determinable, services have been rendered, and collectability is reasonably assured. Once these criteria have been met, we recognize revenue for the services provided on fixed‑fee contracts based onthe proportional performance methodology, which determines the proportion of outputs or performance obligations whichhave been completed or delivered compared to the total contractual outputs for performance obligations. To measureperformance, we compare the contract costs incurred to estimated total contract costs through completion. As43 Table of Contentspart of the client proposal and contract negotiation process, we develop a detailed project budget for the direct costs basedon the scope of the work, the complexity of the study, the geographical location involved and our historical experience. Wethen establish the individual contract pricing based on our internal pricing guidelines, discount agreements, if any, andnegotiations with the client. The estimated total contract costs are reviewed and revised periodically throughout the lives ofthe contracts, with adjustments to revenue resulting from such revisions being recorded on a cumulative basis in the period inwhich the revisions are first identified. Revenue from time and materials contracts is recognized as hours are incurred.Billable hours typically fluctuate during the terms of individual contracts, as services we provide generally increase at thebeginning of a study and decrease toward the end of a study. Revenues and the related costs of fee‑for‑service contracts arerecognized in the period in which services are performed. A majority of our contracts undergo modifications over the contract period and our contracts provide for thesemodifications. During the modification process, we recognize revenue to the extent we incur costs, provided clientacceptance and payment is deemed reasonably assured. We often offer volume discounts to our large customers based on annual volume thresholds. We record an estimateof the annual volume rebate as a reduction of revenue throughout the period based on the estimated total rebate to be earnedfor the period. Most of our contracts can be terminated by the client either immediately or after a specified period, typically 30 to60 days, following notice. In the case of early termination, these typically contracts require payment to us of fees earned todate, the fees, and in some cases, a termination fee or some portion of the fees or profit that we could have earned under thecontract if it had not been terminated early. Based on ethical, regulatory, and health considerations, this wind‑down activitymay continue for several quarters or years. Therefore, revenue recognized prior to cancellation generally does not require asignificant adjustment upon cancellation. Increases in the estimated total direct costs to complete a contract without a corresponding proportional increase tothe total contract price result in a cumulative adjustment to the amount of revenue recognized in the period the change inestimate is determined. Our service revenue was $1,580.0 million, $1,375.8 million, and $1,266.6 million for the years endedDecember 31, 2016, 2015 and 2014, respectively. Changes in service revenue from period to period are driven primarily bychanges in backlog at the beginning of a period, as well as new business awards during such period. Additionally, servicerevenue and billable hours will generally be impacted by the mix of studies that are active during a period, as differentstudies have different staffing requirements, as well as the life cycles of projects that are active during a period. Our service revenues are derived from a wide range of client types. During the year ended December 31, 2016, wederived 52% of our service revenue from large pharmaceutical companies, 14% of our service revenue from small‑ tomid‑sized pharmaceutical companies, 19% of our service revenue from large biotechnology companies and 15% of ourservice revenue from all other biotechnology companies. For the years ended December 31, 2016, 2015, and 2014, our topfive clients represented approximately 45%, 41%, and 38%, respectively, of service revenue; this revenue was derived from acombination of fixed‑fee contracts, fee‑for‑service contracts and time and materials contracts. Two of our clients accountedfor 11.0% and 10.4% of service revenue during the year ended December 31, 2016, respectively. One client accounted for10.7% of service revenue during the year ended December 31, 2015. No client accounted for 10% or more of service revenuefor the year ended December 31, 2014. No individual project accounted for 10% or more of service revenue for the yearsended December 31, 2016, 2015 and 2014. Reimbursement Revenue and Reimbursable Out‑of‑Pocket Costs We incur out‑of‑pocket costs, which are reimbursable by our customers. We include these out‑of‑pocket costs asreimbursement revenue and reimbursable out‑of‑pocket expenses in our consolidated statement of operations. As is customary in our industry, we also routinely enter into separate agreements on behalf of our clients withindependent physician investigators in connection with clinical trials. We also receive funds from our clients for investigatorfees, which are netted against the related costs, since such fees are the obligation of our clients, without risk or reward to us.We are not obligated either to perform the service or to pay the investigator in the event of default by the client. In addition,we do not pay the independent physician investigator until funds are received from the client. Accordingly, unlikereimbursable out‑of‑pocket costs, we do not recognize these investigator fees in revenue.44 Table of Contents Reimbursement costs and investigator fees are not included in our backlog because they are pass‑through costs toour clients. We believe that the fluctuations in reimbursement costs and reimbursement revenue from period to period are notmeaningful to our underlying performance. Costs and Expenses Our costs and expenses are comprised primarily of our direct costs, selling, general and administrative costs,depreciation and amortization and income taxes. In addition, we incur reimbursable out‑of‑pocket expenses; however, asnoted above, our reimbursable out‑of‑pocket expenses are directly offset by our reimbursement revenue. Since reimbursementrevenue is offset by our out‑of‑pocket reimbursable expenses, we monitor and measure costs as a percentage of servicerevenue rather than total revenue as we believe this is a more meaningful comparison and better reflects the operations of ourbusiness. Direct Costs Our direct costs consist primarily of labor‑related charges. They include elements such as salaries, benefits andincentive compensation for our employees. In addition, we utilize staffing agencies to procure primarily part time individualsto perform work on our contracts. Labor-related charges as a percentage of our total direct costs were 96.6%, 95.7%, and94.8% for the years ended December 31, 2016, 2015 and 2014, respectively. The cost of labor procured through staffingagencies is included in these percentages and represents 5.1%, 4.1%, and 5.1% of total direct costs for the years endedDecember 31, 2016, 2015 and 2014, respectively. Our remaining direct costs are items such as travel, meals, postage andfreight, patient costs, medical waste and supplies. The total of all these items as a percentage of total direct cost was 3.4%,4.3%, and 5.2% for the year ended December 31, 2016, 2015 and 2014, respectively. Historically, direct costs have increased with an increase in service revenues. The future relationship between directcosts and service revenues may vary from historical relationships. Direct costs as a percentage of service revenues were65.4%, 64.4%, and 67.8% during the years ended December 31, 2016, 2015, and 2014, respectively. Several factors willcause direct costs to decrease as a percentage of service revenues. Deployment of our billable staff in an optimally efficientmanner has the most impact on our ratio of direct cost to service revenue. The most effective deployment of our staff is whenthey are fully engaged in billable work and are accomplishing contract related activities at a rate that meets or exceedsbudgeted targets. We also seek to optimize our efficiency by performing work using the employee with the lowest cost.Generally, the following factors may cause direct costs to increase as a percentage of service revenues: our staff are not fullydeployed, as is the case when there are unforeseen cancellations or delays, or when our staff are accomplishing tasks at levelsof effort that exceed budget, such as rework; as well as pricing pressure from increased competition. Selling, General and Administrative Expenses Selling, general and administrative expenses consist of administration payroll and benefits, marketing expenditures,and overhead costs such as information technology and facilities costs. These expenses also include central overhead coststhat are not directly attributable to our operating business and include certain costs related to insurance, professional fees andproperty. Loss on Modification or Extinguishment of Debt Loss on extinguishment of debt for the year ended December 31, 2016 was associated with our cash tender offer onour 9.5% senior notes due 2023, or Senior Notes, and the refinancing of our variable rate first lien term loan due 2020, or2013 First Lien Term Loan, and revolving line of credit, or 2013 Revolver, collectively known as the 2013 Credit Facilities.Loss on extinguishment of debt for the year ended December 31, 2014 consists of previously capitalized unamortized debtfinancing costs that were expensed as a result of the repricing and the debt repayment in conjunction with our initial publicoffering, or IPO. 45 Table of ContentsTransaction‑Related Costs Transaction-related costs consist of expenses incurred with our secondary offerings, the closing of our accountsreceivable financing agreement, transaction-related stock-based compensation awards and our refinancing of the 2013 CreditFacilities. Depreciation and Amortization Depreciation represents the depreciation charged on our fixed assets. The charge is recorded on a straight‑linemethod, based on estimated useful lives of three to seven years for computer hardware and software and five to seven yearsfor furniture and equipment. Leasehold improvements are depreciated over the lesser of the life of the lease term or the usefullife of the improvements. Amortization expense consists of amortization recorded on acquisition‑related intangible assets.Customer relationships, backlog and finite‑lived trade names are amortized on an accelerated basis, which coincides with theperiod of economic benefit we expect to receive. All other finite‑lived intangibles are amortized on a straight‑line basis. Inaccordance with GAAP, we do not amortize goodwill and indefinite‑lived intangible assets. Income Taxes Because we conduct operations on a global basis, our effective tax rate has and will continue to depend upon thegeographic distribution of our pre‑tax earnings among several different taxing jurisdictions. Our effective tax rate can alsovary based on changes in the tax rates of the different jurisdictions. Our effective tax rate is also impacted by tax credits andthe establishment or release of deferred tax asset valuation allowances and tax reserves, as well as significant non‑deductibleitems such as portions of transaction‑related costs. Foreign subsidiaries are taxed separately in their respective jurisdictions. We have foreign net operating losscarryforwards in some jurisdictions. The carryforward periods for these losses vary from five years to an indefinitecarryforward period depending on the jurisdiction. Our ability to offset future taxable income with the net operating losscarryforwards may be limited in certain instances, including changes in ownership. Exchange Rate Fluctuations The majority of our foreign operations transact in the Euro or British Pound. As a result, our revenue and expensesare subject to exchange rate fluctuations with respect to these currencies. We have translated these currencies into U.S.dollars using the following average exchange rates: Years Ended December 31, 2016 2015 2014 U.S. Dollars per: Euro 1.11 1.11 1.33 British Pound 1.35 1.53 1.65 46 Table of ContentsResults of Operations Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015 Years Ended December 31, (in thousands) 2016 2015 Revenue Service revenue $1,580,023 $1,375,847 Reimbursement revenue 231,688 238,036 Total revenue 1,811,711 1,613,883 Operating expenses Direct costs 1,032,688 886,528 Reimbursable out-of-pocket costs 231,688 238,036 Selling, general and administrative 269,893 246,417 Transaction-related costs 44,834 — Depreciation and amortization 69,506 77,952 Loss on disposal of fixed assets 753 652 Income from operations 162,349 164,298 Interest expense, net (54,913) (61,747) Loss on modification or extinguishment of debt (38,178) — Foreign currency gains, net 24,029 14,048 Other income (expense), net 607 (1,434) Income before income taxes and equity in gains (losses) of unconsolidated jointventures 93,894 115,165 Provision for income taxes 28,494 30,004 Income before equity in gains (losses) of unconsolidated joint ventures 65,400 85,161 Equity in gains (losses) of unconsolidated joint ventures, net of tax 2,775 (3,396) Net income $68,175 $81,765 Service revenue increased by $204.2 million, or 14.8%, from $1,375.8 million during the year endedDecember 31, 2015 to $1,580.0 million during the year ended December 31, 2016. Service revenue for the year endedDecember 31, 2016 benefited from an increase in billable hours and an increase in the effective rate of the hours billed on ourstudies, offset by an unfavorable impact of $5.3 million from foreign currency exchange rate fluctuations. The growth inservice revenue and the increase in billable hours were due largely to the increase in our backlog as we entered the year, thetype of services we are providing on our active studies, which was driven by the life cycles of projects that were active duringthe period, the growth in new business awards as a result of higher demand for our services across the industries we serve, andmore effective sales efforts and the growth in the overall CRO market. New business awards arise when a client selects us toexecute its trial. The number of awards can vary significantly from period to period and our studies have terms ranging fromseveral months to several years. The increase in our effective rate of the hours billed on our studies is attributable to thecontract pricing terms on our current mix of active studies and the mix of clients and the services that we provide to thoseclients. Direct costs increased by $146.2 million, or 16.5%, from $886.5 million during the year ended December 31, 2015to $1,032.7 million during the year ended December 31, 2016. The increase in direct costs was primarily due to an increase inlabor-related costs of $170.6 million, as we continued to hire billable staff to support our current projects and as we hiredadditional staff in anticipation of our growing portfolio of studies, offset by a favorable impact of $21.3 million from foreigncurrency exchange rate fluctuations. Direct costs as a percentage of service revenue increased from 64.4% during the yearended December 31, 2015 to 65.4% during the year ended December 31, 2016. This increase in direct costs as a percentage ofservice revenue is primarily due to the $8.3 million impact of research and development credits, or R&D Credits, recordedduring the year ended December 31, 2015 that related to prior years. The R&D Credits are the result of a comprehensiveanalysis we have been performing across the organization to determine whether expenditures incurred qualify as research anddevelopment as defined by the respective jurisdiction. Selling, general and administrative expenses increased by $23.5 million, or 9.5%, from $246.4 million during theyear ended December 31, 2015 to $269.9 million during the year ended December 31, 2016. Selling, general andadministrative expenses as a percentage of service revenue decreased from 17.9% during the year ended December 31, 2015to 17.1% during the year ended December 31, 2016. This decrease in selling, general and47 Table of Contentsadministrative expenses as a percentage of service revenue is primarily related to our continued efforts to effectively manageour selling and administrative functions as we continue to grow. During the year ended December 31, 2016, we incurred transaction-related expenses of $44.8 million. The costsconsist of $10.1 million of stock-based compensation expense associated with the release of the transfer restrictions on aportion of shares issuable upon exercise of vested service-based options in connection with the announcement of our March,May, and November 2016 secondary offerings. The costs also include $32.0 million of stock-based compensation expenserelated to the vesting and release of the transfer restrictions of certain performance-based stock options. In addition, weincurred $2.7 million of third-party fees associated with the secondary offerings and the closing of our accounts receivablefinancing agreement. There were no transaction-related expenses incurred for the year ended December 31, 2015. Depreciation and amortization expense decreased by $8.4 million, or 10.8%, from $78.0 million during the yearended December 31, 2015 to $69.5 million during the year ended December 31, 2016. Depreciation and amortizationexpense as a percentage of service revenue was 5.7% during the year ended December 31, 2015 and 4.4% during the yearended December 31, 2016. The decrease in depreciation and amortization expense as a percentage of service revenue isprimarily due the continued decline in amortization of our acquired intangibles, which are amortized on an accelerated basis. Interest expense, net decreased by $6.8 million from $61.7 million during the year ended December 31, 2015 to$54.9 million during the year ended December 31, 2016. The cash tender on our Senior Notes during 2016, as well as a 0.8%decrease in the weighted average interest rate on our outstanding debt as compared to the year ended December 31, 2015,resulted in a $9.7 million reduction in interest expense. Additionally, interest expense decreased $1.6 million due to loweramortization of debt issuance costs, which was offset by an increase of $4.7 million related to the amortization of ourterminated interest rate swaps and interest expense on our current interest rate swap. Losses on modification or extinguishment of debt were $38.2 million during the year ended December 31, 2016 andthere were no losses on modification of debt during the year ended December 31, 2015. The $38.2 million loss onextinguishment of debt incurred during the year ended December 31, 2016 was associated with our cash tender offer on ourSenior Notes and our refinancing of the 2013 Credit Facilities. The loss of $21.5 million due to our cash tender offerconsisted of a $17.4 million early tender premium, a $3.7 million write-off of unamortized debt issuance cost and $0.4million of fees associated with the transaction. The refinancing of our 2013 Credit Facilities resulted in a $16.7 million losson extinguishment of debt, which consisted of the write-off of $15.8 million write-off of unamortized debt issuance costs and$0.9 million of fees associated with the transaction. Foreign currency gains, net increased by $10.0 million from $14.0 million during the year endedDecember 31, 2015 to $24.0 million during the year ended December 31, 2016. The foreign currency gains and losses are dueto fluctuations in the U.S. dollar, gains or losses that arise in connection with the revaluation of short-term inter-companybalances between our domestic and international subsidiaries, and gains or losses from foreign currency transactions, such asthose resulting from the settlement of third-party accounts receivables and payables denominated in a currency other than thelocal currency of the entity making the payment. During the year ended December 31, 2016, the foreign currency gains wereprimarily a result of the weakening of the British Pound against the U.S. dollar by 16.7% following the decision by voters inthe United Kingdom, to approve a referendum to exit the European Union, commonly referred to as Brexit, in June 2016.During the year ended December 31, 2015, foreign currency gains were primarily due to the devaluation of the Canadiandollar, Euro and British Pound against the U.S. dollar by 16.1%, 10.1% and 4.6%, respectively. Provision for income taxes decreased by $1.5 million from $30.0 million during the year ended December 31, 2015to $28.5 million during the year ended December 31, 2016. Our effective tax rate was 30.3% and 26.1% during the yearsended December 31, 2016 and December 31, 2015, respectively. The change in the effective tax rate was primarilyattributable to a decrease in global pre-tax income related to an increase in the overall U.S. loss, the impact of that loss on thevaluation allowance and the increase of foreign earnings that are taxed currently in the U.S. 48 Table of ContentsYear Ended December 31, 2015 Compared to the Year Ended December 31, 2014 Years Ended December 31, (in thousands) 2015 2014 Revenue Service revenue $1,375,847 $1,266,596 Reimbursement revenue 238,036 192,990 Total revenue 1,613,883 1,459,586 Operating expenses Direct costs 886,528 859,218 Reimbursable out-of-pocket costs 238,036 192,990 Selling, general and administrative 246,417 253,970 Depreciation and amortization 77,952 96,564 Loss on disposal of fixed assets 652 5 Income from operations 164,298 56,839 Interest expense, net (61,747) (81,939) Loss on modification or extinguishment of debt — (25,036) Foreign currency gains, net 14,048 10,538 Other expense, net (1,434) (2,254) Income (loss) before income taxes and equity in losses of unconsolidated jointventures 115,165 (41,852) Provision for (benefit from) income taxes 30,004 (8,154) Income (loss) before equity in losses of unconsolidated joint ventures 85,161 (33,698) Equity in losses of unconsolidated joint ventures, net of tax (3,396) (2,044) Net income (loss) $81,765 $(35,742) Service revenue increased by $109.3 million, or 8.6%, from $1,266.6 million during the year ended December 31,2014 to $1,375.8 million during the year ended December 31, 2015. Service revenue for the year ended December 31, 2015benefited from an increase in billable hours and the effective rate of the hours billed on our studies, offset by an unfavorableimpact of $45.4 million from foreign currency exchange rate fluctuations. The growth in service revenue and the increase inbillable hours were due largely to the increase in our backlog as we entered the year, the type of services we are providing onour active studies, which was driven by the life cycles of projects that were active during the period, the growth in newbusiness awards as a result of higher demand for our services across the industries we serve, and more effective sales effortsand the growth in the overall CRO market. New business awards arise when a client selects us to execute its trial. The numberof awards can vary significantly from period to period and our studies have terms ranging from several months to severalyears. The increase in our effective rate of the hours billed on our studies is attributable to the contract pricing terms on ourcurrent mix of active studies and the mix of clients and the services that we provide to those clients. Direct costs increased by $27.3 million, or 3.2%, from $859.2 million during the year ended December 31, 2014 to$886.5 million during the year ended December 31, 2015. The increase in direct costs was primarily due to an increase insalaries and related benefits of $104.3 million, as we continued to hire billable staff to support our current projects and as wehired additional staff in anticipation of our growing portfolio of studies, offset by an $8.3 million benefit due to the favorableimpact of the R&D Credits recorded in the current period that relate to prior tax years and a favorable impact of $64.2 millionfrom foreign currency exchange rate fluctuations. The R&D Credits are the result of a comprehensive analysis we have beenperforming across the organization to determine whether expenditures incurred qualify as research and development asdefined by the respective jurisdiction. Direct costs as a percentage of service revenue decreased from 67.8% during the yearended December 31, 2014 to 64.4% during the year ended December 31, 2015. This decrease in direct costs as a percentageof service revenue is primarily due to the favorable impact from foreign currency exchange rate fluctuations and the impactof the R&D Credits. Selling, general and administrative expenses decreased by $7.6 million, or 3.0%, from $254.0 million during theyear ended December 31, 2014 to $246.4 million during the year ended December 31, 2015. Selling, general andadministrative expenses as a percentage of service revenue decreased from 20.1% during the year ended December 31, 2014to 17.9% during the year ended December 31, 2015. This decrease in selling, general and administrative expenses as apercentage of service revenue is primarily related to our continued ability to effectively manage our selling and49 Table of Contentsadministrative functions and a termination fee of $11.9 million we paid KKR in connection with the completion of the IPOduring the year ended December 31, 2014. Depreciation and amortization expense decreased by $18.6 million, or 19.3%, from $96.6 million during the yearended December 31, 2014 to $78.0 million during the year ended December 31, 2015. Depreciation and amortizationexpense as a percentage of service revenue was 7.6% during the year ended December 31, 2014 and 5.7% during the yearended December 31, 2015. The decrease in depreciation and amortization expense as a percentage of service revenue isprimarily due the continued decline in amortization of our acquired intangibles, which are amortized on an accelerated basis. Interest expense, net decreased by $20.2 million from $81.9 million during the year ended December 31, 2014 to$61.7 million during the year ended December 31, 2015. This decrease in interest expense is related to the paydowns to our2013 First Lien Term Loan and Senior Notes made using proceeds from our IPO in November 2014 and repayments made toour 2013 First Lien Term Loan during 2015. Losses on modification or extinguishment of debt were $25.0 million during the year ended December 31, 2014 andthere were no losses on modification of debt during the year ended December 31, 2015. The $25.0 million loss onmodification or extinguishment of debt incurred in the year ended December 31, 2014 was due to a $1.4 million loss onmodification debt as a result of our repricing transaction which took place on March 24, 2014, and a $23.7 million loss onmodification debt due to a $14.3 million prepayment penalty and $9.4 million of unamortized debt costs being written off asa result of our repayment which took place on November 18, 2014 in conjunction with our IPO. Foreign currency gains, net increased by $3.5 million from $10.5 million during the year ended December 31, 2014to $14.0 million during the year ended December 31, 2015. The foreign currency gains and losses are due to fluctuations inthe U.S. dollar, gains or losses that arise in connection with the revaluation of short-term inter-company balances between ourdomestic and international subsidiaries, and gains or losses from foreign currency transactions, such as those resulting fromthe settlement of third-party accounts receivables and payables denominated in a currency other than the local currency ofthe entity making the payment. During the year ended December 31, 2015, foreign currency gains were primarily due to thedevaluation of the Canadian dollar, Euro and British Pound against the U.S. dollar by 16.1%, 10.1% and 4.6%, respectively.During the year ended December 31, 2014 foreign currency gains were primarily due to the devaluation of the Euro,Canadian dollar and British Pound against the U.S. dollar by 11.8%, 8.1% and 5.7%, respectively. Provisions for (benefit from) income taxes increased by $38.2 million from a benefit of $8.2 million during the yearended December 31, 2014 to an income tax provision of $30.0 million during the year ended December 31, 2015. Oureffective tax rate was 26.1% during the year ended December 31, 2015 and was a benefit rate of 19.5% for the year endedDecember 31, 2014. The change in the effective tax rate was primarily attributable to fact that the Company was in an overallpre-tax income position for the year ended December 31, 2015 as compared to an overall pre-tax loss for the year-endedDecember 31, 2014. Seasonality Although our business is not generally seasonal, we typically experience a slight decrease in our revenue growthrate during the fourth quarter due to holiday vacations and a similar decrease in new business awards in the first quarter dueto our clients’ budgetary cycles and vacations during the year‑end holiday period. Liquidity and Capital Resources We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financingactivities. Our principal source of liquidity is operating cash flows. As of December 31, 2016, we had approximately$144.6 million of cash and cash equivalents of which $54.3 million was held by our foreign subsidiaries. Our expectedprimary cash needs on both a short and long‑term basis are for capital expenditures, expansion of services, geographicexpansion, debt repayments, and other general corporate purposes. We have historically funded our operations and growth,including acquisitions, with cash flow from operations, borrowings, and issuances of equity securities. We expect to continueexpanding our operations through internal growth and strategic acquisitions and investments. We expect these activities willbe funded from existing cash, cash flow from operations and, if necessary or appropriate, borrowings under our existing orfuture credit facilities. Our sources of liquidity could be affected by our dependence on50 Table of Contentsa small number of industries and clients, compliance with regulations, international risks, and personal injury, environmentalor other material litigation claims. Cash Collections Cash collections from accounts receivable were $2,074.1 million during the year ended December 31, 2016,including $248.2 million of funds received from customers to pay independent physician investigators, or investigators, ascompared to $1,831.1 million during the year ended December 31, 2015, including $231.4 million of funds received fromcustomers to pay investigators, $1,654.2 million during the year ended December 31, 2014, including $248.2 million offunds received from customers to pay investigators. The increase in cash collections is related to our increase in revenue,driven by an increase in new business awards and backlog. Discussion of Cash Flows Cash Flow from Operating Activities Cash provided by operating activities increased by $7.6 million during the year ended December 31, 2016 ascompared to 2015. The increase in operating cash flow reflects increased cash flows from our operating performance and areduction in interest payments, which was partially offset by an increase in cash outflows primarily from working capital. Thechanges in working capital were driven by a $2.1 million decrease in accounts payable and accrued expenses during the yearended December 31, 2016 as compared to $21.3 million increase during the year ended December 31, 2015 and isattributable to the timing and payment of invoices. This is partially offset by a $9.1 million improvement in cash outflowsfrom our accounts receivable, unbilled services, and advanced billings accounts, driven by a slower rate of increase in ourdays sales outstanding during the year ended December 31, 2016. Cash provided by operating activities increased by $118.4 million during the year ended December 31, 2015 ascompared to 2014. The increase in operating cash flow reflects an increase in net income, a reduction in interest payments, aswell as reduction in cash outflows from working capital. Interest payments decreased by $26.1 million, primarily due to thedebt payments made in conjunction with the IPO during November 2014. Additionally, net income for the year endedDecember 31, 2014 included a $11.9 million fee paid to terminate our monitoring agreement with KKR. DSO contributed toa $31.3 million improvement in cash flow from operations and reflects a slower rate of increase in our DSO in 2015 ascompared to 2014. DSO can shift significantly at each reporting period depending on the timing of cash receipts undercontractual payment terms relative to the recognition of revenue over a project lifecycle. Cash Flow from Investing Activities Net cash used in investing activities decreased by $37.1 million during the year ended December 31, 2016 ascompared to 2015. The decrease in the cash outflows was primarily due to the $32.9 million payment for the termination ofour interest rate swaps during 2015 and a $7.2 million change in cash flows related to our unconsolidated joint ventures.During the year ended December 31, 2015, we made $23.0 million in capital contributions to our unconsolidated jointventures and received $19.5 million from the dissolution of our joint venture with KKR, and during the year ended December31, 2016, we received $3.7 million from the sale of our ownership stake in our WuXiPRA joint venture. Net cash used in investing activities increased by $60.2 million during the year ended December 31, 2015 ascompared to 2014. The increase in the cash outflows was due, in part, to a $32.9 million payment for the termination of ourinterest rate swaps during 2015. Cash flows relating to working capital adjustments associated with our recent acquisitionscontributed to an additional $17.5 million of the change. A $5.5 million increase in fixed asset purchases during 2015,primarily related to our new bioanalytical laboratory in the Netherlands and the capitalized software costs for our Predictivvplatform, also contributed to the change. Cash Flow from Financing Activities Net cash used in financing activities during the year ended December 31, 2016 was $101.6 million compared to$42.4 million for the same period of 2015. During the year ended December 31, 2016, we entered into an accounts receivablefinancing agreement and received proceeds of $120.0 million which was used to repay $133.6 million aggregate principal onour Senior Notes, as part of a cash tender offer. In addition, we voluntarily repaid $689.0 million51 Table of Contentsin principal balance on the 2013 First Lien Term Loan and received $625.0 million in proceeds from the 2016 First LienTerm Loan. During 2016, we also paid $25.5 million in debt extinguishment and debt issuance costs. For the year endedDecember 31, 2015, we voluntarily repaid $40.0 million on our 2013 First Lien Term Loan. Net cash used in financing activities during the year ended December 31, 2015 was $42.4 million compared to $6.0million of net cash used in financing activities for the same period of 2014. During 2015, we voluntarily repaid $40.0 millionon our 2013 First Lien Term Loan. During 2014, we received $328.0 million of net proceeds from the issuance of 19,523,255shares of common stock in connection with our IPO, we repaid $308.8 million of previously existing bank and subordinateddebt and paid $14.3 million in debt prepayment and debt extinguishment costs. Indebtedness On March 17, 2016, we repaid $133.6 million aggregate principal on our Senior Notes, as part of a cash tender offer.In accordance with the guidance in ASC 470-50 the debt repayment was accounted for as a partial debt extinguishment. Therepayment resulted in a $17.4 million early tender premium, a $3.7 million write-off of unamortized debt issuance costs and$0.4 million of fees associated with the transaction, which are included in loss on modification or extinguishment of debt inthe consolidated statement of operations. On March 22, 2016, we entered into a $140.0 million accounts receivable financing agreement, of which $120.0million was outstanding as of December 31, 2016. The borrowings were used to repay amounts outstanding on theCompany’s revolving credit facility that were used to fund the cash tender offer for the Senior Notes. On December 6, 2016, we refinanced our 2013 Credit Facilities to obtain a lower interest rate. We entered into a newcredit agreement with a syndicate of banks for an aggregate principal amount of $625.0 million of first lien term debt, or2016 First Lien Term Debt, and a $125.0 million revolving line of credit, or 2016 Revolver, or collectively known as the2016 Credit Facilities. The proceeds from the 2016 Credit Facilities were used to repay the 2013 First Lien Term Loanprincipal balance of $614.0 million and approximately $8.0 million in related fees and expenses. 2016 Credit Facilities Wells Fargo Bank, National Association acted as the lead arranger and bookrunner for the 2016 Credit Facilities. The 2016 Credit Facilities provide senior secured financing of up to $750.0 million, consisting of: ·the 2016 First Lien Term Loan in an aggregate principal amount of up to $625.0 million; and ·the 2016 Revolver in an aggregate principal amount of up to $125.0 million. The borrower of the 2016 First Lien Term Loan and the 2016 Revolver is Pharmaceutical Research Associates, Inc.,a wholly-owned subsidiary of PRA Health Sciences, Inc. The 2016 Revolver includes borrowing capacity available for lettersof credit up to $25.0 million and for up to $20.0 million of borrowings on same‑day notice, referred to as swingline loans. The 2016 Credit Facilities provides that we have the right at any time to request incremental term loans and/orrevolving commitments in an aggregate principal amount of up to (a) $275.0 million, plus (b) all voluntary prepayments andcorresponding voluntary commitment reductions of the Senior Secured Credit Facilities, other than from proceeds of long-term indebtedness, prior to the date of any such incurrence, plus (c) an additional amount which, after giving effect to theincurrence of such amount, we would not exceed a consolidated net first lien secured leverage to consolidated EBITDA ratioof 3.0 to 1.0 pro forma for such incremental facilities, minus (d) the sum of (i) the aggregate principal amount of new termloan commitments and new revolving credit commitments incurred and (ii) the aggregate principal amount of certain otherindebtedness incurred. The lenders under these facilities are not under any obligation to provide any such incrementalcommitments or loans, and any such addition of or increase in commitments or loans is subject to certain customaryconditions precedent. 52 Table of ContentsInterest Rate and Fees Borrowings under the 2016 First Lien Term Loan and the 2016 Revolver bear interest at a rate equal to, at ouroption, either (a) London Interbank Offered Rate, or LIBOR, for the relevant interest period, plus an applicable margin;provided that solely with respect to the 2016 First Lien Term Loan LIBOR shall be deemed to be no less than 0.00% perannum or (b) an adjusted base rate, or the ABR rate, plus an applicable margin. The applicable margin on our 2016 First Lien Term Loan is based on our ratio of total debt to EBITDA ratio per thetable below: Level to EBITDARatio Rate Fees PricingLevel Total indebtednessto EBITDA Ratio Letter ofCreditFees ABR MarginRate Adjusted LIBORMargin Rate CommitmentFeesI > 3.75x 2.25% 1.25% 2.25% 0.40%II < 3.75x but > 3.00x 2.00% 1.00% 2.00% 0.35%III < 3.00x but > 2.25x 1.75% 0.75% 1.75% 0.30%IV < 2.25x but > 1.50x 1.50% 0.50% 1.50% 0.25%V < 1.50x 1.25% 0.25% 1.25% 0.20% In addition to paying interest on outstanding principal under the 2016 Credit Revolver, the Company is required topay a commitment fee to the lenders under the 2016 Revolver in respect of the unutilized commitments thereunder. Thecommitment fee rate will be based on the ratio of total indebtedness to EBITDA on a given date. We are also required to paycustomary letter of credit fees. Prepayments The 2016 Credit Facilities require us to prepay outstanding term loans, subject to certain exceptions, with: ·100% of the net cash proceeds of the incurrence or issuance of certain debt; and ·100% of the net cash proceeds of $5.0 million of certain non-ordinary course asset sales and casualty andcondemnation events, subject to reinvestment rights and certain other exceptions. The foregoing mandatory prepayments will be applied first to accrued interest and fees and second, to the scheduledinstallments of principal of the 2016 Credit Facilities in direct order of maturity. We may voluntarily repay outstanding loans under the 2016 Credit Facilities at any time without premium orpenalty, subject to reimbursements of the lenders’ redeployment costs actually incurred in the case of a prepayment ofLIBOR borrowings other than on the last day of the relevant interest period. Amortization and Final Maturity The 2016 First Lien Term Loan has scheduled fixed quarterly principal payments as follows: ·1.25% by quarterly term loan amortization payments, or $7.8 million per quarter, to be made commencingMarch 31, 2017 and made on or prior to December 31, 2017;·1.88% by quarterly term loan amortization payments, or $11.7 million per quarter, to be made on or after March31, 2018, but on or prior to December 31, 2019;·2.50% by quarterly term loan amortization payments, or $15.6 million per quarter, to be made on or after March31, 2020, but on or prior to December 31, 2020;·3.13% by quarterly term loan amortization payments, or $19.5 million per quarter, to be made on or after March31, 2021, but prior to September 30, 2021; and·60.63% (or if less, the remaining principal amount of the term loan) on December 06, 2021. Principal amounts outstanding under the 2016 Revolver are due and payable in full at maturity, on or aboutDecember 6, 2021. 53 Table of ContentsGuarantee and Security All obligations of the borrower under the 2016 Credit Facilities are unconditionally guaranteed by us and all ourmaterial, wholly‑owned U.S. restricted subsidiaries, with customary exceptions including where providing such guarantees isnot permitted by law, regulation or contract or would result in material adverse tax consequences. All obligations of the borrower under the 2016 Credit Facilities, and the guarantees of such obligations, are secured,subject to permitted liens and other exceptions, by substantially all of the assets of the borrower and each guarantor,including but not limited to: (i) a perfected pledge of all of the capital stock issued by the borrower and each guarantor and(ii) perfected security interests in substantially all other tangible and intangible assets of the borrower and the guarantors(subject to certain exceptions and exclusions). Certain Covenants and Events of Default The 2016 Credit Facilities contain a number of covenants that, among other things, restrict, subject to certainexceptions, our ability to: ·create any liens; ·make investments and acquisitions; ·incur or guarantee additional indebtedness; ·enter into mergers or consolidations and other fundamental changes; ·conduct sales and other dispositions of property or assets; ·enter into sale-leaseback transactions or hedge agreements; ·prepay subordinated debt; ·pay dividends or make other payments in respect of capital stock; · change the line of business; ·enter into transactions with affiliates; ·enter into burdensome agreements with negative pledge clauses and clauses restriction; and ·subsidiary distributions. Our 2016 Credit Facilities contain customary events of default (subject to exceptions, thresholds and grace periods),including, without limitation: (i) nonpayment of principal or interest; (ii) failure to perform or observe covenants;(iii) inaccuracy or breaches of representations and warranties; (iv) cross‑defaults with certain other indebtedness; (v) certainbankruptcy related events; (vi) impairment of certain security interests in collateral, guarantees or invalidity orunenforceability of certain 2016 Credit Facilities documents; (vii) monetary judgment defaults; (viii) certain ERISA matters;and (ix) certain change of control events. In addition, the 2016 Revolver requires us to maintain a consolidated total debt to consolidated EBITDA ratio of4.25 to 1.0 and consolidated EBITDA to fixed charges no less than 3.0 to 1.0 for any four consecutive fiscal quarters forwhich financial statements have been provided to the administrative agent as required by the Senior Secured CreditAgreement. The 2016 Credit Facilities also contain certain customary affirmative covenants and events of default, including achange of control. 54 Table of ContentsSenior Notes PRA Holdings has $91.4 million aggregate principal amount of 9.5% senior notes outstanding, which mature onOctober 1, 2023, pursuant to the indenture. Interest on the notes is payable on April 1 and October 1 of each year. Redemption On or prior to October 1, 2018, we may redeem the Senior Notes, in whole or in part, at a redemption price equal to100% of the principal amount plus accrued and unpaid interest to the redemption date plus a make‑whole premium as setforth in the indenture governing the Senior Notes. After October 1, 2018, we may redeem the Senior Notes, in whole or in part, at redemption prices specified in theindenture governing the Senior Notes. See Note 9 to our consolidated financial statements included elsewhere in this Annual Report on Form 10‑K forfurther information on the range of prepayments premiums. Change of Control Upon the occurrence of a change of control, which is defined in the indenture, each holder of the notes has the rightto require PRA Holdings to repurchase some or all of such holder’s notes at a purchase price in cash equal to 101% of theprincipal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date. Covenants The indenture contains covenants limiting, among other things, PRA Health Sciences’ ability and the ability of itsrestricted subsidiaries to (subject to certain exceptions): ·incur additional debt or issue certain preferred shares; ·pay dividends on or make other distributions in respect of capital stock, purchase or redeem equity interests ofthe issuer, prepay or repurchase subordinated indebtedness, make certain investments; ·sell or transfer certain assets; ·create liens on certain assets to secure debt; ·consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; ·enter into certain transactions with affiliates; and ·designate subsidiaries as unrestricted subsidiaries. Events of Default The indenture also provides for events of default which, if any of them occurs, would permit or require the principalof and accrued interest on the notes to become or to be declared due and payable, including without limitation:(i) nonpayment of principal or interest; (ii) failure to perform or observe covenants; (iii) cross‑defaults with certain otherindebtedness; (iv) certain bankruptcy related events; (v) impairment of certain security interests in collateral, guarantees orinvalidity or unenforceability of certain Senior Secured Credit Facility documents; and (vi) monetary judgment defaults. Accounts Receivable Financing Agreement We entered into an accounts receivable financing agreement with PNC Bank, National Association, asadministrative agent and lender on March 22, 2016. 55 Table of ContentsWe may borrow up to $140.0 million from PNC, secured by liens on our accounts receivables and other assets. Weare liable for customary representations, warranties, covenants and indemnities. In addition, we have guaranteed theperformance of the obligations and will guarantee the obligations of any additional servicer that may become party to theaccounts receiveable financing agreement. As of December 31, 2016, the outstanding balance was $120.0 million. The accounts receivable financing agreement terminates on March 22, 2019, unless terminated earlier pursuant to itsterm. Interest Rate and Fees Loans under the accounts receivable financing agreement will accrue interest at either a reserve-adjusted LIBOR or abase rate, plus 1.60%. As of December 31, 2016, the weighted average interest rate on the accounts receivable financingagreement was 2.31%. We may prepay loans upon one business day prior notice and may terminate the accounts receivablefinancing agreement with 15 days’ prior notice. Covenants and Events of Default The accounts receivable financing agreement contains various customary representations and warranties andcovenants, and default provisions which provide for the termination and acceleration of the commitments and loans underthe accounts receivable financing agreement in circumstances including, but not limited to, failure to make payments whendue, breach of representations, warranties or covenants, certain insolvency events or failure to maintain the security interestin the trade receivables, and defaults under other material indebtedness. Contractual Obligations and Commercial Commitments The following table summarizes our future minimum payments for all contractual obligations and commercialcommitments for years subsequent to the year ended December 31, 2016: Payments Due by Period Less than 1 More than 5 year 1 - 3 years 3 - 5 years years Total (in thousands) Principal payments on long-term debt (1) $31,250 $213,750 $500,000 $91,441 $836,441 Interest payments on long-term debt (1) 30,257 63,539 53,289 15,203 162,288 Service purchase commitments (2) 13,848 10,108 2,486 6 26,448 Operating leases 37,975 61,064 51,915 117,083 268,037 Less: sublease income (539) (593) (540) (308) (1,980) Uncertain income tax positions (3) 3,725 — — — 3,725 Customer dispute settlement (4) 1,500 — — — 1,500 Total $118,016 $347,868 $607,150 $223,425 $1,296,459 (1)Principal payments are based on the terms contained in our credit agreements. Interest payments are based on the interestrate in effect on December 31, 2016. (2)Service purchase commitments are defined as agreements to purchase goods or services that are enforceable and legallybinding and that specify all significant terms, including fixed or minimum quantities to be purchased. (3)As of December 31, 2016, our liability related to uncertain income tax positions was approximately $12.4 million, ofwhich $8.7 million has not been included in the above table as we are unable to predict when these liabilities will bepaid due to the uncertainties in timing of the settlement of the income tax positions. (4)On May 5, 2014, we reached a settlement in the amount of $9.0 million related to a customer dispute. We paid $4.5million, $1.5 million and $1.5 million related to this dispute in 2014, 2015 and 2016, respectively. The remaining $1.5million is payable on December 31, 2017. 56 Table of ContentsOff‑Balance Sheet Arrangements We have no off‑balance sheet arrangements. The term “off‑balance sheet arrangement” generally means anytransaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which wehave any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingentinterest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support forsuch assets. Recent Accounting Pronouncements For information on new accounting pronouncements and the impact, if any, on our financial position or results ofoperations, see Note 2 to our audited consolidated financial statements found elsewhere in this Annual Report on Form 10-K. Critical Accounting Policies and Estimates In preparing our financial statements in conformity with GAAP, management is required to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our actualresults could differ from those estimates. We believe that the following are some of the more critical judgment areas in theapplication of our accounting policies that affect our financial condition and results of operations. We have discussed theapplication of these critical accounting policies with our board of directors. Revenue Recognition The majority of our service revenue is recorded regionally on a proportional performance basis. Revenue for serviceis recognized only after persuasive evidence of an arrangement exists, the sales price is determinable and collectability isreasonably assured. To measure performance, we compare contract costs incurred to estimated total contract costs throughcompletion. We believe this is the best indicator of the performance of the contract obligations because the costs relate to theamount of labor hours incurred to perform the service. Direct costs are primarily comprised of labor‑related charges associatedwith the delivery of services. Each month we accumulate costs on each project and compare them to the total currentestimated costs to determine the proportional performance. We then multiply the proportion completed by the contract valueto determine the amount of revenue that can be recognized. Each month we review the total current estimated costs on eachproject to determine if these estimates are still accurate and, if necessary, we adjust the total estimated costs for each project.During our monthly contract review process, we review each contract’s performance to date, current cost trends, andcircumstances specific to each study. The original or current cost estimates are reviewed and if necessary the estimates areadjusted and refined to reflect any changes in the anticipated performance under the study. In the normal course of business,we conduct this review each month in all service delivery locations. As the work progresses, original estimates might bedeemed incorrect due to, among other things, revisions in the scope of work or patient enrollment rate, and a contractmodification might be negotiated with the customer to cover additional costs. If not, we bear the risk of costs exceeding ouroriginal estimates. Management assumes that actual costs incurred to date under the contract are a valid basis for estimatingfuture costs. Should management’s assumption of future cost trends fluctuate significantly, future margins could be reduced.In the past, we have had to commit unanticipated resources to complete projects, resulting in lower margins on those projects.Should our actual costs exceed our estimates on fixed price contracts, future margins could be reduced, absent our ability tonegotiate a contract modification. We accumulate information on each project to refine our bidding process. Historically, themajority of our estimates and assumptions have been materially correct, but these estimates might not continue to be accuratein the future. Allowance for Doubtful Accounts Included in “Accounts receivable and unbilled services, net” on our consolidated balance sheets is an allowance fordoubtful accounts. Generally, before we do business with a new client, we perform a credit check, as our allowance fordoubtful accounts requires that we make an accurate assessment of our customers’ creditworthiness. Approximately 15% ofour client base is small- to mid-sized biotech companies, creating a heightened risk related to the creditworthiness for aportion of our client base. We manage and assess our exposure to bad debt on each of our contracts. We age our billedaccounts receivable and assess exposure by client type, by aged category, and by specific57 Table of Contentsidentification. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.Historically, we have not had any write‑offs in excess of our allowance. If, at December 31, 2016, our aged accountsreceivable balance greater than 90 days were to increase by 10% (for the U.S. operations), no material adjustments to baddebt expense would be required. Income Taxes Changes in judgment as to recognition or measurement of tax positions can materially affect the estimate of oureffective tax rate and, consequently, our operating results. We consider many factors when evaluating and estimating our taxpositions and tax benefits, which may require periodic adjustments and may not accurately anticipate actual outcomes. We have to use estimates and judgments in calculating certain tax liabilities and determining the recoverability ofcertain deferred tax assets, which arise from net operating losses, tax credit carry forwards and temporary differences betweenthe tax and financial statement recognition of revenue and expense. We are also required to reduce our deferred tax assets bya valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of therecorded deferred tax assets will not be realized in future periods. In evaluating our ability to recover our deferred tax assets, in full or in part, we consider all available positive andnegative evidence, including our past operating results, the existence of cumulative losses in the most recent fiscal years andour forecast of future taxable income on a jurisdiction‑by‑jurisdiction basis. In determining future taxable income,assumptions include the amount of state, federal and international pretax operating income, international transfer pricingpolicies, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. Theseassumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans andestimates we use to manage the underlying businesses. Based on our analysis of the above factors, we determined that avaluation allowance of $21.7 million was required as of December 31, 2016 relating to the U.S. net deferred tax asset, statenet operating loss carryforwards, foreign net operating loss carryforwards and state tax credit carryforwards. Changes in ourassumptions could result in an adjustment to the valuation allowance, up or down, in the future. In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complextax regulations in a multitude of jurisdictions. We determine our liability for uncertain tax positions globally under theprovisions in Financial Accounting Standards Board’s, or FASB, Accounting Standards Codification, or ASC, 740, IncomeTaxes. As of December 31, 2016, we had recorded a liability for uncertain tax positions of $12.4 million. If events occur suchthat payment of these amounts ultimately proves to be unnecessary, the reversal of liabilities would result in tax benefitsbeing recognized in the period when we determine the liabilities are no longer necessary. If our calculation of liabilityrelated to uncertain tax positions proves to be more or less than the ultimate assessment, a tax expense or benefit to expense,respectively, would result. The total liability reversal that could affect the tax rate is $7.6 million. Stock‑Based Compensation In accordance with the ASC 718, Stock Compensation, as modified and supplemented, we estimate the value ofemployee stock options on the date of grant using either the Black‑Scholes model for all options with a service condition ora lattice model for options with market and performance conditions. The determination of fair value of stock‑based paymentawards on the date of grant using an option‑pricing model is affected by the stock price of similar entities as well asassumptions regarding a number of highly complex and subjective variables. These variables include the expected stockprice volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. TheBlack‑Scholes and lattice models require extensive actual employee exercise behavior data and the use of a number ofcomplex assumptions including expected volatility, risk‑free interest rate, expected dividends, and expected life. Indeveloping our assumption, we take into account the following: ·We use the historical volatilities of a selected peer group as we do not have sufficient history to estimate thevolatility of our common share price. We calculate expected volatility based on reported data for selectedreasonably similar publicly traded companies for which the historical information is available. For the purposeof identifying peer companies, we consider characteristics such as industry, length of trading history, similarvesting terms and in‑the‑money option status. We plan to continue to use the guideline peer58 Table of Contentsgroup volatility information until the historical volatility of our common shares is relevant to measure expectedvolatility for future award grants. ·The risk‑free interest rate assumption is based upon observed interest rates appropriate for the term of ouremployee stock options. ·The dividend yield assumption is based on the history and expectation of dividend payouts. ·For those options valued using the Black-Scholes model, the expected life is based upon the guidance providedby the FASB. For those options with a market condition valued under the lattice model, the expected life variesdepending on the target stock price that triggers vesting. ·As stock‑based compensation expense recognized in the consolidated statement of operations is based onawards ultimately expected to vest, it has been reduced for estimated forfeitures. We estimate forfeitures basedon our company experience. Current accounting guidance requires forfeitures to be estimated at the time ofgrant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Due to the absence of an active market for our common stock prior to our IPO, the fair value of our common stock onthe date of the grant was determined in good faith by our Board of Directors with the assistance of management, based on anumber of factors consistent with the methodologies outlined in the American Institute of Certified Public AccountantsPractice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Subsequent to the IPO, thefair value of our common stock is based upon the market price of our common stock on the date of the grant as listed on theNASDAQ. Long‑Lived Assets, Goodwill and Indefinite‑Lived Intangible Assets As a result of our acquisitions we have recorded goodwill and other identifiable finite and indefinite‑lived acquiredintangibles. The identification and valuation of these intangible assets at the time of acquisition require significantmanagement judgment and estimates. We review long‑lived asset groups for impairment whenever events or changes in circumstances indicate that thecarrying amount of the asset group might not be recoverable. If indicators of impairment are present, we evaluate the carryingvalue of property and equipment in relation to estimates of future undiscounted cash flows. As a result of our acquisitions wehave recorded goodwill and other identifiable finite and indefinite‑lived acquired intangibles. The identification andvaluation of these intangible assets at the time of acquisition require significant management judgment and estimates. Inconnection with the acquisition of PRA by KKR on September 23, 2013, the purchases of ClinStar on February 28, 2013,RPS on September 23, 2013, CRI Lifetree on December 2, 2013, VHS on June 8, 2015, and Nextrials on March 18, 2016,valuations were completed, and value was assigned to identifiable finite‑lived and indefinite‑lived intangible assets andgoodwill, based on the purchase price of the transactions. We test goodwill for impairment on at least an annual basis by comparing the carrying value to the estimated fairvalue of our reporting units. On October 1, 2016, we reviewed goodwill for impairment and our analysis indicated that thefair value of goodwill exceeded the carrying value and, therefore, no impairment exists. When evaluating for impairment, wemay first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit or indefinite-lived intangible asset is impaired. If we do not perform a qualitative assessment, or if it determines that it is not more likelythan not that the fair value of the reporting unit or indefinite-lived intangible asset exceeds its carrying amount, we willcalculate the estimated fair value of the reporting unit’s or indefinite-lived intangible asset. Our decision to perform aqualitative impairment assessment for an individual reporting unit in a given year is influenced by a number of factors,inclusive of the size of the reporting unit's goodwill, the significance of the excess of the reporting unit's estimated fair valueover carrying value at the last quantitative assessment date, the amount of time in between quantitative fair valueassessments and the date of acquisition. During 2016, as part of our annual impairment analysis, we performed the qualitativeassessment for approximately $850.0 million, or 87.5%, of our total goodwill balance of $972.0 million, which resides in ourPR and SS reporting units, and for our indefinite-lived trade name intangible asset. 59 Table of ContentsIf we do not perform a qualitative assessment, goodwill impairment is determined by comparing the fair value ofeach reporting unit, determined using various valuation techniques, with the primary technique being a discounted cash flowanalysis, to its carrying value. This process is inherently subjective and dependent upon the estimates and assumptions wemake. In determining the expected future cash flows of our company, we assume that we will continue to enter into newcontracts, execute the work on these contracts profitably, collect receivables from customers, and thus generate positive cashflows. In addition, our analysis could be impacted by future adverse change such as future declines in our operating results, afurther significant slowdown in the worldwide economy or pharmaceutical and biotechnology industry or failure to meet theperformance projections included in our forecast. The estimated fair value of the EDS reporting unit closely approximated its carrying value when we performed itsannual goodwill impairment test during the fourth quarter of 2014. We made operational improvements during 2015 and2016 in order to improve the profitability of the EDS reporting unit. As a result of these changes, EDS saw growth in bothbacklog and new business awards that contributed to its improved financial performance during the year and led to usupdating its forecast for future periods. We considered all of these factors when we performed our most recent goodwillimpairment test during the fourth quarter of 2016 and it was concluded that the estimated fair value of the EDS reporting unitexceeded its carrying value by approximately $70.0 million or 33%. Any negative changes in assumptions on revenue, newbusiness awards, cancellations, or our ability to improve operations while maintaining a competitive cost structure couldadversely affect the fair value of EDS and result in significant goodwill impairment charges in 2017 or later. Fair Value Measurements We record certain assets and liabilities at fair value. Fair value is defined as a price that would be received to sell anasset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderlytransaction between market participants at the measurement date. A three‑level hierarchy that prioritizes the inputs used tomeasure fair value is further described in Note 2 to our audited consolidated financial statements included elsewhere in thisAnnual Report on Form 10‑K. Fair Value Measurements on a Recurring Basis At December 31, 2016 and 2015, we used Level 3 inputs to measure liabilities totaling $2.8 million and$1.0 million, respectively. The liability at December 31, 2016 relates to contingent consideration issued in connection withour acquisition of VHS and Nextrials. The liability at December 31, 2015 related to contingent consideration issued inconnection with our acquisition of VHS. All derivatives are measured at fair value and recognized as either assets or liabilities on the consolidated balancesheets. The fair value of our interest rate swaps, measured using Level 2 inputs, was a liability of $0.6 million and an asset of$0.1 million at December 31, 2016 and 2015, respectively. No other liabilities or assets are remeasured at fair value. Inflation Our long‑term contracts, those in excess of one year, generally include an inflation or cost of living adjustment forthe portion of the services to be performed beyond one year from the contract date. As a result, we expect that inflationgenerally will not have a material adverse effect on our operations or financial condition. Historically our projection ofinflation contained within our contracts has not significantly impacted our operating income. Should inflation be in excessof the estimates within our contracts our operating margins would be negatively impacted if we were unable to negotiatecontract modifications with our clients. Potential Liability and Insurance Our clients provide us with contractual indemnification for all of our service related contracts. In addition, weattempt to manage our risk of liability for personal injury or death to patients from administration of products under studythrough measures such as stringent operating procedures and insurance. We monitor our clinical trials in a manner designedto ensure compliance with government regulations and guidelines. We have adopted global standard operating proceduresintended to satisfy regulatory requirements in the United States and in many foreign countries that serve as a tool forcontrolling and enhancing the quality of our clinical trials. We currently maintain professional liability insurance60 Table of Contentscoverage with limits we believe are adequate and appropriate. If our insurance coverage is not adequate to cover actualclaims, or if insurance coverage does not continue to be available on terms acceptable to us, our business, financialcondition, and operating results could be materially harmed. Historically we have experienced infrequent and immaterialclaims. Should a material claim arise that exceeds our insurance coverage levels, there would be a dollar for dollar impact tooperating income for the amount in excess of our insurance coverage. Dividend History We have not declared or paid dividends during 2016, 2015 and 2014. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currencyexchange rates, interest rates and other relevant market rate or price changes. In the ordinary course of business, we areexposed to various market risks, including changes in foreign currency exchange rates and interest rates, and we regularlyevaluate our exposure to such changes. Our overall risk management strategy seeks to balance the magnitude of the exposureand the cost and availability of appropriate financial instruments. Interest Rate Risk We are subject to market risk associated with changes in interest rates. Our 2016 Credit Facilities is subject tointerest rates based on LIBOR, subject to a 0.00% LIBOR floor, plus an applicable margin ranging from 1.25% to 2.25%, orABR rates, ranging from 0.25% to 1.25%. At December 31, 2016, we had $625.0 million outstanding under our 2016 FirstLien Term Loan and no outstanding balance under our 2016 Revolver subject to these variable interest rates. In conjunctionwith the closing of the 2016 Credit Facilities in December 2016, our 2015 Swap was amended to modify the rate, repricingdates and embedded floor, or the Modified 2015 Swap. The Company re-designated the modify swap against refinanced debtunder the 2016 Credit Facilities. The Modified 2015 Swap will mature on September 6, 2018. The interest rate swap is usedto hedge the Company’s variable rate on our 2016 Credit Facilities. Our accounts receivable financing agreement is subjectto interest rates based on LIBOR, or a base rate, plus 1.60%. At December 31, 2016, we had $120.0 million outstanding underour accounts receiveable financing agreement. Once the interest rate swap is effective, each quarter percentage point increaseor decrease in the variable rate would result in our interest expense changing by approximately $1.2 million per year underour unhedged variable rate debt. Foreign Exchange Risk Since we operate on a global basis, we are exposed to various foreign currency risks. First, our consolidated financialstatements are denominated in U.S. dollars, but a significant portion of our revenue is generated in the local currency of ourforeign subsidiaries. Accordingly, changes in exchange rates between the applicable foreign currency and the U.S. dollar willaffect the translation of each foreign subsidiary’s financial results into U.S. dollars for purposes of reporting consolidatedfinancial results. A hypothetical change of 10% in average exchange rates used to translate all foreign currencies to U.S.dollars would have impacted income (loss) before income taxes and equity in gains (losses) of unconsolidated joint venturesby approximately $9.0 million for the year ended December 31, 2016. The process by which each foreign subsidiary’sfinancial results are translated into U.S. dollars is as follows: income statement accounts are translated at average exchangerates for the period; balance sheet asset and liability accounts are translated at end of period exchange rates; and equityaccounts are translated at historical exchange rates. Translation of the balance sheet in this manner affects the stockholders’equity account, referred to as the cumulative translation adjustment account. This account exists only in the foreignsubsidiary’s U.S. dollar balance sheet and is necessary to keep the foreign balance sheet stated in U.S. dollars in balance.Accumulated currency translation adjustments recorded as a separate component of stockholders’ equity were $(201.1)million and $(106.1) million at December 31, 2016 and 2015, respectively. We do not have significant operations incountries in which the economy is considered to be highly‑inflationary. In addition, two specific risks arise from the nature of the contracts we enter into with our clients, which from time totime are denominated in currencies different than the particular subsidiary’s local currency. These risks are generallyapplicable only to a portion of the contracts executed by our foreign subsidiaries providing clinical services. The first riskoccurs as revenue recognized for services rendered is denominated in a currency different from the currency in which thesubsidiary’s expenses are incurred. As a result, the subsidiary’s earnings can be affected by fluctuations in exchange rates.61 Table of Contents The second risk results from the passage of time between the invoicing of clients under these contracts and theultimate collection of client payments against such invoices. Because the contract is denominated in a currency other thanthe subsidiary’s local currency, we recognize a receivable at the time of invoicing for the local currency equivalent of theforeign currency invoice amount. Changes in exchange rates from the time the invoice is prepared until payment from theclient is received will result in our receiving either more or less in local currency than the local currency equivalent of theinvoice amount at the time the invoice was prepared and the receivable established. This difference is recognized by us as aforeign currency transaction gain or loss, as applicable, and is reported in other expense or income in our consolidatedstatements of operations. Historically, fluctuations in exchange rates from those in effect at the time contracts were executedhave not had a material effect on our consolidated financial results.62 Table of Contents Item 8. Financial Statements and Supplementary Data Management’s Report on Internal Control Over Financial Reporting Management of PRA Health Sciences, Inc. (the “Company”) is responsible for establishing and maintainingadequate internal control over financial reporting. Internal control over financial reporting is designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements forexternal reporting purposes in accordance with accounting principles generally accepted in the United States of America.Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of recordsthat, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company,(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financialstatements in accordance with accounting principles generally accepted in the United States of America, and that receiptsand expenditures are being made only in accordance with authorizations of our management and directors, and (3) providereasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of theCompany’s assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatementsin the consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject tothe risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate. Management assessed the effectiveness of the Company’s internal control over financial reporting as ofDecember 31, 2016. In making these assessments, management used the framework established by the Committee ofSponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Basedon management’s assessment and the criteria in the COSO framework, management has concluded that the Company’sinternal control over financial reporting as of December 31, 2016 was effective. The Company’s independent registered public accounting firm has issued a report on the Company’s internalcontrol over financial reporting. This report appears on page 65 in this Annual Report on Form 10-K. /s/ Colin Shannon /s/ Linda Baddour Colin Shannon Linda BaddourPresident, Chief Executive Officer and Chairman of theBoard of Directors Executive Vice President and Chief Financial Officer(Principal Executive Officer) (Principal Financial Officer)63 Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders ofPRA Health Sciences, Inc.Raleigh, North Carolina We have audited the accompanying consolidated balance sheets of PRA Health Sciences, Inc. and subsidiaries (the"Company") as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive (loss)income, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2016.These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinionon the financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial positionof PRA Health Sciences, Inc. and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and theircash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principlesgenerally accepted in the United States of America. As discussed in Note 2 to the financial statements, the Company retrospectively adopted ASU No. 2016-15,“Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” and ASU No. 2016-18,“Statement of Cash Flows (Topic 230): Restricted Cash.” We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board(United States), the Company's internal control over financial reporting as of December 31, 2016, based on the criteriaestablished in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of theTreadway Commission and our report dated February 23, 2017 expressed an unqualified opinion on the Company'sinternal control over financial reporting. /s/ Deloitte & Touche LLP Raleigh, North CarolinaFebruary 23, 201764 Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders ofPRA Health Sciences, Inc.Raleigh, North Carolina We have audited the internal control over financial reporting of PRA Health Sciences, Inc. and subsidiaries (the"Company") as of December 31, 2016, based on criteria established in Internal Control — Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management isresponsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanying “Management's Report on Internal Control OverFinancial Reporting.” Our responsibility is to express an opinion on the Company's internal control over financial reportingbased on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whethereffective internal control over financial reporting was maintained in all material respects. Our audit included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing andevaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such otherprocedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for ouropinion. A company's internal control over financial reporting is a process designed by, or under the supervision of, thecompany's principal executive and principal financial officers, or persons performing similar functions, and effected by thecompany's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles. A company's internal control over financial reporting includes those policies and procedures that (1)pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositionsof the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts andexpenditures of the company are being made only in accordance with authorizations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, ordisposition of the company's assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the possibility ofcollusion or improper management override of controls, material misstatements due to error or fraud may not be prevented ordetected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to futureperiods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate. In our opinion, the Company maintained, in all material respects, effective internal control over financial reportingas of December 31, 2016, based on the criteria established in Internal Control — Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board(United States), the consolidated financial statements as of and for the year ended December 31, 2016 of the Company, andour report dated February 23, 2017 expressed an unqualified opinion on those financial statements and included anexplanatory paragraph regarding the Company’s retrospective adoption of ASU No. 2016-15, “Statement of Cash Flows(Topic 230): Classification of Certain Cash Receipts and Cash Payments” and ASU No. 2016-18, “Statement of Cash Flows(Topic 230): Restricted Cash.” /s/ Deloitte & Touche LLP Raleigh, North CarolinaFebruary 23, 201765 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(in thousands, except share amounts) December 31, 2016 2015 ASSETS Current assets: Cash and cash equivalents $144,623 $121,065 Restricted cash 4,715 5,060 Accounts receivable and unbilled services, net 439,053 415,077 Prepaid expenses and other current assets 35,367 30,175 Income taxes receivable 979 2,399 Total current assets 624,737 573,776 Fixed assets, net 87,577 80,691 Goodwill 971,980 1,014,798 Intangible assets, net 473,976 533,938 Deferred tax assets 6,568 3,069 Investment in unconsolidated joint ventures 284 1,288 Deferred financing fees 1,762 2,490 Other assets 23,507 18,693 Total assets $2,190,391 $2,228,743 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $31,250 $ — Accounts payable 51,335 57,096 Accrued expenses and other current liabilities 123,589 119,893 Income taxes payable 25,524 19,262 Advanced billings 332,501 333,729 Total current liabilities 564,199 529,980 Deferred tax liabilities 73,703 81,691 Long-term debt, net 797,052 889,514 Other long-term liabilities 26,185 24,836 Total liabilities 1,461,139 1,526,021 Commitments and contingencies (Note 13) Stockholders' equity: Preferred stock, $0.01 par value; 100,000,000 shares authorized, 0 shares issued andoutstanding at December 31, 2016 and 2015, respectively — — Common stock, $0.01 par value, 1,000,000,000 authorized shares at December 31, 2016 andDecember 31, 2015; 61,597,705 and 60,245,009 issued and outstanding at December 31,2016 and December 31, 2015, respectively 616 602 Additional paid-in capital 879,067 828,347 Accumulated other comprehensive loss (224,686) (132,307) Retained earnings 74,255 6,080 Total stockholders' equity 729,252 702,722 Total liabilities and stockholders' equity $2,190,391 $2,228,743 The accompanying notes are an integral part of the consolidated financial statements.66 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share amounts) Years Ended December 31, 2016 2015 2014 Revenue: Service revenue $1,580,023 $1,375,847 $1,266,596 Reimbursement revenue 231,688 238,036 192,990 Total revenue 1,811,711 1,613,883 1,459,586 Operating expenses: Direct costs 1,032,688 886,528 859,218 Reimbursable out-of-pocket costs 231,688 238,036 192,990 Selling, general and administrative 269,893 246,417 253,970 Transaction-related costs 44,834 — — Depreciation and amortization 69,506 77,952 96,564 Loss on disposal of fixed assets 753 652 5 Income from operations 162,349 164,298 56,839 Interest expense, net (54,913) (61,747) (81,939) Loss on modification or extinguishment of debt (38,178) — (25,036) Foreign currency gains, net 24,029 14,048 10,538 Other income (expense), net 607 (1,434) (2,254) Income (loss) before income taxes and equity in gains (losses) ofunconsolidated joint ventures 93,894 115,165 (41,852) Provision for (benefit from) income taxes 28,494 30,004 (8,154) Income (loss) before equity in gains (losses) of unconsolidated jointventures 65,400 85,161 (33,698) Equity in gains (losses) of unconsolidated joint ventures, net of tax 2,775 (3,396) (2,044) Net income (loss) $68,175 $81,765 $(35,742) Net income (loss) per share attributable to common stockholders: Basic $1.12 $1.36 $(0.83) Diluted $1.06 $1.29 $(0.83) Weighted average common shares outstanding: Basic 60,759 59,965 42,897 Diluted 64,452 63,207 42,897 The accompanying notes are an integral part of the consolidated financial statements.67 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME(in thousands) Years Ended December 31, 2016 2015 2014 Net income (loss) $68,175 $81,765 $(35,742) Other comprehensive loss: Foreign currency translation adjustments (95,019) (52,433) (68,700) Unrealized losses on derivative instruments, net of income taxes of $(622),$(578), and $(3,298) (978) (11,273) (17,681) Reclassification adjustments: Losses on derivatives included in net income (loss), net of income taxes,$2,303, $0, and $0 3,618 908 3 Comprehensive (loss) income $(24,204) $18,967 $(122,120) The accompanying notes are an integral part of the consolidated financial statements.68 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY(in thousands) Accumulated Other Retained Additional Comprehensive Earnings Common Stock Paid-in (Loss) Income (Accumulated Shares Amount Capital (Note 16) Deficit) Total Balance at December 31, 2013 40,268 $403 $490,006 $16,869 $(39,943) $467,335 Exercise of common stock options 11 — 33 — — 33 Issuance of common stock 19,535 195 351,326 — — 351,521 Common stock issuance costs — — (23,421) — — (23,421) Stock-based compensation — — 3,467 — — 3,467 Net loss — — — — (35,742) (35,742) Other comprehensive loss, net of tax — — — (86,378) — (86,378) Balance at December 31, 2014 59,814 598 821,411 (69,509) (75,685) 676,815 Exercise of common stock options 257 3 78 — — 81 Issuance of common stock 174 1 1,582 — — 1,583 Stock-based compensation — — 5,276 — — 5,276 Net income — — — — 81,765 81,765 Other comprehensive loss, net of tax — — — (62,798) — (62,798) Balance at December 31, 2015 60,245 602 828,347 (132,307) 6,080 702,722 Exercise of common stock options 1,303 13 642 — — 655 Stock-based compensation 50 1 49,232 — — 49,233 Income tax benefit from stock-based awardactivities — — 846 — — 846 Net income — — — — 68,175 68,175 Other comprehensive loss, net of tax — — — (92,379) — (92,379) Balance at December 31, 2016 61,598 $616 $879,067 $(224,686) $74,255 $729,252 The accompanying notes are an integral part of the consolidated financial statements.69 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Years Ended December 31, 2016 2015 2014 Cash flows from operating activities: Net income (loss) $68,175 $81,765 $(35,742) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 69,506 77,952 96,564 Amortization of debt issuance costs and discount 4,433 5,983 5,737 Amortization of terminated interest rate swaps 4,961 731 — Stock-based compensation expense 7,067 5,276 3,467 Non-cash transaction related costs 42,166 — — Unrealized foreign currency gains (24,499) (16,464) (12,222) Loss on modification or extinguishment of debt 38,178 — 25,036 Loss on disposal of fixed assets 753 652 5 Change in acquisition-related contingent consideration (527) 89 504 Equity in (gains) losses of unconsolidated joint ventures (2,775) 3,396 2,044 Unrealized loss on derivatives 47 1,787 1,731 Other reconciling items (652) 443 978 Excess tax benefit from stock-based compensation (846) — — Deferred income taxes (10,469) (3,219) (31,968) Changes in operating assets and liabilities: Accounts receivable and unbilled services (31,313) (83,211) (32,781) Prepaid expenses and other assets (10,071) (11,675) (10,944) Accounts payable and other liabilities (1,474) 36,135 19,727 Income taxes 7,308 9,958 15,634 Advanced billings 79 42,830 (13,736) Net cash provided by operating activities 160,047 152,428 34,034 Cash flows from investing activities: Purchase of fixed assets (33,143) (32,814) (27,323) Cash paid for interest on interest rate swap (913) (302) — Cash paid to terminate interest rate swaps — (32,907) — Acquisition of Nextrials, Inc., net of cash acquired (4,268) — — Acquisition of Value Health Solutions, Inc., net of cash acquired — (543) — Proceeds from RPS Parent Holding Corp. working capital settlement — — 15,000 Proceeds from CRI Holding Company, LLC working capital settlement — — 851 Payment of ClinStar, LLC working capital settlement — (1,693) — Distributions from unconsolidated joint ventures 3,700 19,529 Contributions to unconsolidated joint ventures — (23,000) — Proceeds from the sale of fixed assets 10 44 — Net cash used in investing activities (34,614) (71,686) (11,472) Cash flows from financing activities: Proceeds from issuance of long-term debt 625,000 — — Proceeds from accounts receivable financing agreement 120,000 — — Repayment of long-term debt (822,559) (40,000) (308,775) Borrowings on line of credit 110,000 90,000 105,000 Repayments of line of credit (110,000) (90,000) (115,000) Payment of debt prepayment and debt extinguishment costs (17,824) — (14,250) Payment for debt issuance costs (7,713) — — Proceeds from common stock issued, net of underwriters discount — — 333,950 Payment of common stock issuance costs — (525) (5,325) Excess tax benefit from stock-based compensation 846 — — Proceeds from stock option exercises 655 81 33 Payment of acquisition-related contingent consideration — (2,000) (1,589) Net cash used in financing activities (101,595) (42,444) (5,956) Effects of foreign exchange changes on cash, cash equivalents, and restricted cash (625) (3,702) (5,992) Change in cash, cash equivalents, and restricted cash 23,213 34,596 10,614 Cash, cash equivalents, and restricted cash, beginning of period 126,125 91,529 80,915 Cash, cash equivalents, and restricted cash, end of period $149,338 $126,125 $91,529 The accompanying notes are an integral part of the consolidated financial statements. 70 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2016 (1) Basis of Presentation Description of Business PRA Health Sciences, Inc. and its subsidiaries (collectively, the Company) is a full‑service global contract researchorganization providing a broad range of product development services for pharmaceutical and biotechnology companiesaround the world. The Company’s integrated services include data management, statistical analysis, clinical trialmanagement, and regulatory and drug development consulting. Organization and Initial Public Offering, or IPO On November 13, 2014, the Company’s common stock began trading on the NASDAQ Global Select Market underthe symbol “PRAH,” at a price to the public of $18.00 per share. The Company issued and sold 19,523,255 shares of commonstock, including 2,546,511 common shares issued pursuant to the full exercise of the underwriters’ option to purchaseadditional shares. The offering raised net proceeds of approximately $328.0 million after deducting underwriting discountsand commissions and offering expenses. On September 23, 2013, all of the outstanding stock of PRA Holdings, Inc., or the Predecessor Company, wasacquired by affiliates of Kohlberg Kravis Roberts & Co. L.P., or KKR, pursuant to a plan of merger by and among PinnacleHoldco Parent, Inc., or Parent, Pinnacle Merger Sub, Inc., or merger sub, and Genstar Capital Partners V, L.P., or Genstar. Uponcompletion of the merger, or the Merger, the merger sub was folded into the Predecessor Company, which became asubsidiary of the Parent. On December 19, 2013, Pinnacle Holdco Parent, Inc. changed its name to PRA Global Holdings, Inc.and on July 10, 2014, PRA Global Holdings, Inc. changed its name to PRA Health Sciences, Inc. Basis of Presentation Our consolidated financial statements have been prepared in accordance with generally accepted accountingprinciples in the United States, or GAAP, and include our accounts and the accounts of our subsidiaries. Reverse Stock Split On September 29, 2014, the Board of Directors of the Company approved, and made legally effective, a 2.34539 to1 reverse stock split of the Company’s common stock. All shares, stock options and per share information presented in theconsolidated financial statements have been adjusted to reflect the reverse stock split on a retroactive basis for all Successorperiods presented. There was no change in number of authorized shares or the par value of the Company’s common stock. Secondary Offerings During 2016, KKR and certain executive officers of the Company sold a total of 17,500,000 shares of theCompany’s common stock as part of three seperate secondary offerings, or the Secondary Offerings. The Company incurredprofessional fees in connection with the Secondary Offerings of $1.3 million during year ended December 31, 2016. The feesare included in transaction-related costs in the accompanying consolidated statement of operations. As of December31, 2016, KKR owned 36.9% of the Company’s outstanding common stock. (2) Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts and results of operations of the Company. Allintercompany balances and transactions have been eliminated. 71 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 Variable Interest Entities Financial Accounting Standards Board’s, or FASB, accounting guidance concerning variable interest entities, orVIE, addresses the consolidation of business enterprise to which the usual condition of consolidation (ownership of amajority voting interest) does not apply. This guidance focuses on controlling financial interests that may be achievedthrough arrangements that do not involve voting interests. The guidance requires an assessment of who the primarybeneficiary is and whether the primary beneficiary should consolidate the VIE. The primary beneficiary is identified as thevariable interest holder that has both the power to direct the activities of the variable interest entity that most significantlyimpacts the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entitythat could potentially be significant to the variable interest entity. Application of the VIE consolidation requirements mayrequire the exercise of significant judgment by management. Accounts Receiveable Financing Agreement On March 22, 2016, the Company entered into a three-year accounts receivable financing agreement and relatedarrangements to securitize certain of its accounts receivable. Under the accounts receivable financing agreement, certain ofthe Company’s U.S. accounts receivable and unbilled services balances are sold by certain of its consolidated subsidiaries toanother of its consolidated subsidiaries, a wholly-owned bankruptcy-remote special purpose entity, or SPE. The SPE in turnmay borrow up to $140.0 million from a third party lender, secured by liens on the receivables and other assets of the SPE. The Company retains the servicing of the securitized accounts receivable portfolio and has a variable interest in theSPE by holding the residual equity. The Company determined that the SPE is a VIE and it is the primary beneficiary because(i) the Company’s servicing responsibilities for the securitized portfolio gives it the power to direct the activities that mostsignificantly impact the performance of the VIE and (ii) its variable interest in the VIE gives it the obligation to absorb lossesand the right to receive residual returns that could potentially be significant. As a result, the Company has consolidated theVIE within its financial statements. Refer to Note 9, Current Borrowings and Long-Term Debt, for additional information regarding the accountsreceivable financing agreement. CNS Research Institute, Inc. In order to comply with laws in New Jersey and Pennsylvania prohibiting the corporate practice of medicine, theCompany has management contracts for medical services with a professional corporation, CNS Research Institute, Inc., orCNS, for physician investigators working in New Jersey and Pennsylvania. CNS is owned by an employee of the Company.The management contracts expire on January 30, 2025. The Company pays CNS a management fee equal to the salary, bonus and benefits for the physicians. The Companymanages all aspects of CNS’ operations including providing administrative support and making all significant operationaldecisions. Additionally, CNS cannot provide services to any other party without the prior written approval of the Company. After evaluating all of the factors noted above, it was concluded that CNS should be included in the Company’sconsolidated financial statements as it is a variable interest entity and the Company is the primary beneficiary. The Companypaid CNS $0.8 million, $0.7 million and $0.9 million during the years ended December 31, 2016, 2015 and 2014,respectively, as compensation under the management contract, which was eliminated in consolidation. CNS had no netincome for the years ended December 31, 2016, 2015 and 2014. 72 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 Risks and Other Factors The Company’s revenues are dependent on research and development expenditures of the pharmaceutical andbiotechnology industries. Any significant reduction in research and development expenditures by the pharmaceutical andbiotechnology industries could have a material adverse effect on the Company and its results of operations. Clients of the Company generally may terminate contracts without cause upon 30 to 60 days’ notice. While theCompany generally negotiates deposit payments and early termination fees up front, such terminations could significantlyimpact the future level of staff utilization and have a material adverse effect on the Company and the results of futureoperations. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the financial statements and the reported amounts of revenues and expenses during the reporting period. In particular,the Company’s primary method of revenue recognition requires estimates of costs to be incurred to fulfill existing long‑termcontract obligations. Actual results could differ from those estimates. Estimates are also used when accounting for certainitems such as allowance for doubtful accounts, depreciation and amortization, asset impairment, certain acquisition‑relatedassets and liabilities, income taxes, fair market value determinations, and contingencies. Reportable Segments The Company is solely focused on the execution of clinical trials on a global basis. The Company has consideredwhether the delivery of the different types of capabilities in various stages of clinical development constitute separateproducts or lines of service in accordance with ASC 280, “Segment Reporting,” or ASC 280, and has concluded that there aresubstantial similarities and overlaps in the capabilities delivered at each stage of clinical development, with the primarydifferences between the Early Development Services, or EDS, compared to the Product Registration, or PR, and StrategicSolutions, or SS, relating to the points during the life cycle of a clinical trial at which such capabilities are delivered. Afterreview and analysis of the operating characteristics of each service offering and using the aggregation characteristics underASC 280, the Company has concluded that the services provided are similar across most characteristics. The Company's operations consist of one reportable segment, which represents management's view of theCompany's operations based on its management and internal reporting structure. The Company considered the guidance inASC 350, “Intangibles—Goodwill and Other,” which notes that a reporting unit is an operating segment or one level belowan operating segment. PR, EDS, and SS are the business units that are one level below the Company’s sole operating segmentand the Company determined that they meet the definition of “components,” as discrete financial information exists and thisinformation is regularly reviewed by segment management. Business Combinations Business combinations are accounted for using the acquisition method and, accordingly, the identifiable assetsacquired, the liabilities assumed, and any non‑controlling interest in the acquiree are recorded at their estimated fair valueson the date of the acquisition. Goodwill represents the excess of the purchase price over the estimated fair value of the netassets acquired, including the amount assigned to identifiable intangible assets. Contingent Liabilities The Company provides for contingent liabilities when (1) it is probable that an asset has been impaired or a liabilityhas been incurred at the date of the consolidated financial statements and (2) the amount of the loss can be73 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 reasonably estimated. Disclosure in the notes to the consolidated financial statements is required for loss contingencies thatdo not meet both these conditions if there is a reasonable possibility that a loss may have been incurred. The Companyexpenses as incurred the costs of defending legal claims against the Company. Cash Equivalents The Company considers all highly‑liquid investments purchased with an original maturity of three months or less tobe cash equivalents. As of December 31, 2016 and 2015, substantially all of the Company’s cash and cash equivalents wereheld in or invested with large financial institutions. Certain bank deposits may at times be in excess of the Federal DepositInsurance Corporation insurance limits. Restricted cash The Company receives cash advances from its customers to be used for the payment of investigator costs and otherpass‑through expenses. The terms of certain customer contracts require that such advances be maintained in separate escrowaccounts; these accounts are not commingled with the Company’s cash and cash equivalents and are presented separately inthe consolidated balance sheets as restricted cash. Additionally, as part of the acquisition of Nextrials, Inc., or Nextrials, the Company was required to transfer $0.5million to an escrow account held by a subsidiary. As of December 31, 2016, the balance of the cash held in escrow was $0.5million. These funds are expected to be distributed in 2017. Also, as part of the acquisition of ClinStar, LLC, or ClinStar, the Company was required to transfer $1.0 million toan escrow account held by a subsidiary. The funds were used to pay deferred compensation to certain former ClinStaremployees. During the year ended December 31, 2014, the Company distributed all of the remaining funds held in the escrowaccount. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within theconsolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows: December 31, 2016 2015 2014Cash and cash equivalents $144,623 $121,065 $85,192Restricted cash 4,715 5,060 6,337Total cash, cash equivalents, and restricted cash $149,338 $126,125 $91,529 Accounts Receivable and Unbilled Services Accounts receivable represent amounts for which invoices have been sent to clients based upon contract terms.Unbilled services represent amounts earned for services that have been rendered but for which clients have not been billedand include reimbursement revenue. Unbilled services are generally billable upon submission of appropriate billinginformation, achievement of contract milestones or contract completion. Allowances for Doubtful Accounts The Company maintains an allowance for estimated losses resulting from the inability of its customers to makerequired payments. The Company performs credit reviews of each customer, monitors collections and payments from ourcustomers, and determines the allowance based upon historical experience and specific customer collection issues. TheCompany ages billed accounts receivable and assesses exposure by customer type, by aged category, and by specificidentification. After all attempts to collect a receivable have failed, the receivable is written off against the allowance or, tothe extent unreserved, to bad debt expense.74 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 Advanced Billings Advanced billings represent amounts associated with services, reimbursement revenue and investigator fees thathave been received but have not yet been earned or paid. Fixed Assets Fixed assets and software purchased or developed for internal use are recorded at cost and are depreciated on astraight‑line basis over the following estimated useful lives: Furniture, fixtures and equipment 5-7 years Computer hardware and software 3-7 years Leasehold improvements Lesser of the life of the lease or useful life of the improvements Internal Use Software The Company accounts for internal use software in accordance with the provisions of accounting standards, whichrequire certain direct costs and interest costs incurred during the application stage of development to be capitalized andamortized over the useful life of the software. Derivative Financial Instruments All derivatives are measured at fair value and recognized as either assets or liabilities on the consolidated balancesheets. Derivatives that are not determined to be effective hedges are adjusted to fair value with a corresponding effect onearnings. Changes in the fair value of derivatives that are designated and determined to be effective as part of a hedgetransaction have no immediate effect on earnings and depending on the type of hedge, are recorded either as part of othercomprehensive loss and will be included in earnings in the period in which earnings are affected by the hedged item, or areincluded in earnings as an offset to the earnings impact of the hedged item. Any ineffective portion of hedges is reported inearnings as it occurs. The Company utilizes interest rate swap and cap agreements, or interest rate contracts, to managechanges in market conditions related to debt obligations. Amounts previously recorded in accumulated other comprehensiveloss related to these interest rate swaps will be reclassified into earnings over the term of the previously hedged borrowingusing the swaplet method. The Company has elected the accounting policy that cash flows associated with interest ratederivative contracts are classified as cash flows from investing activities. Fair Value Measurements The Company records certain assets and liabilities at fair value. Fair value is defined as the price that would bereceived to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability inan orderly transaction between market participants at the measurement date. A three‑level fair value hierarchy that prioritizesthe inputs used to measure fair value is described below. This hierarchy requires entities to maximize the use of observableinputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: ·Level 1—Quoted prices in active markets for identical assets or liabilities. ·Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similarassets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets thatare not active; or other inputs that are observable or can be corroborated by observable market data. 75 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 ·Level 3—Unobservable inputs that are supported by little or no market activity. This includes certain pricingmodels, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. The carrying amount of financial instruments, including cash and cash equivalents, accounts receivable, unbilledservices, accounts payable and advanced billings, approximate fair value due to the short maturities of these instruments. Recurring Fair Value Measurements The following table summarizes the fair value of the Company’s financial assets and liabilities that are measured ona recurring basis as of December 31, 2016 (in thousands): Level 1 Level 2 Level 3 Total Liabilities: Interest rate swap $ — $590 $ — $590 Contingent consideration — — 2,754 2,754 Total $ — $590 $2,754 $3,344 The following table summarizes the fair value of the Company’s financial assets and liabilities that are measured ona recurring basis as of December 31, 2015 (in thousands): Level 1 Level 2 Level 3 Total Assets: Interest rate swap $ — $28 $ — $28 Total $ — $28 $ — $28 Liabilities: Contingent consideration $ — $ — $999 $999 Total $ — $ — $999 $999 The Company values contingent consideration, related to business combinations, using a weighted probability ofpotential payment scenarios discounted at rates reflective of the weighted average cost of capital for the businesses acquired.Key assumptions used to estimate the fair value of contingent consideration include revenue and operating forecasts and theprobability of achieving the specific targets. Interest rate swaps and caps are measured at fair value using a market approachvaluation technique. The valuation is based on an estimate of net present value of the expected cash flows using relevantmid‑market observable data inputs and based on the assumption of no unusual market conditions or forced liquidation. 76 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 The following table summarizes the changes in Level 3 financial liabilities measured on a recurring basis (inthousands): Contingent Consideration - Accrued expenses and Other long-term liabilities Balance at December 31, 2014 $1,911 Revaluations included in earnings 89 Payments on ClinStar contingent consideration (2,000) Initial estimate of VHS contingent consideration 999 Balance at December 31, 2015 $999 Initial estimate of Nextrials contingent consideration 2,282 Revaluations included in earnings (527) Balance at December 31, 2016 $2,754 Non‑recurring Fair Value Measurements Certain assets and liabilities are carried on the accompanying consolidated balance sheets at cost and are notremeasured to fair value on a recurring basis. These assets include finite‑lived intangible assets which are tested when atriggering event occurs and goodwill and identifiable indefinite‑lived intangible assets which are tested for impairmentannually on October 1 or when a triggering event occurs. As of December 31, 2016, assets carried on the balance sheet and not remeasured to fair value on a recurring basistotaling approximately $1,446.0 million were identified as Level 3. These assets are comprised of goodwill of $972.0 millionand identifiable intangible assets, net of $474.0 million. Refer to Note 9, Current Borrowings and Long-Term Debt, for additional information regarding the fair value oflong-term debt balances. Impairment of Long‑Lived Assets The Company reviews the recoverability of its long‑lived asset groups, including furniture and equipment,computer hardware and software, leasehold improvements, and other finite‑lived intangibles, when events or changes incircumstances occur that indicate the carrying value of the asset group may not be recoverable. The assessment of possibleimpairment is based on the Company’s ability to recover the carrying value of the asset group from the expected futurepre‑tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than thecarrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carryingvalue. The Company’s primary measure of fair value is based on discounted cash flows. The measurement of impairmentrequires the Company to make estimates of these cash flows related to long‑lived assets, as well as other fair valuedeterminations. Goodwill and Other Intangibles Goodwill and indefinite‑lived intangible assets are tested for impairment annually or more frequently if an event orcircumstance indicates that an impairment loss may have been incurred. Separate intangible assets that have finite usefullives are amortized over their estimated useful lives or over the period in which economic benefit is received. The Company’sprimary finite lived intangibles are customer relationships and customer backlog, which are amortized on an acceleratedbasis, which coincides with the period of economic benefit received by the Company. The Company reviews the carrying value of goodwill to determine whether impairment may exist on an annual basisor whenever it has reason to believe goodwill may not be recoverable. The annual impairment test of goodwill is77 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 performed during the fourth quarter of each fiscal year. The Company did not have an impairment for any of the yearspresented. When evaluating for impairment, the Company may first perform a qualitative assessment to determine whether it ismore likely than not that a reporting unit or indefinite-lived intangible asset is impaired. If the Company does not perform aqualitative assessment, or if it determines that it is not more likely than not that the fair value of the reporting unit orindefinite-lived intangible asset exceeds its carrying amount, the Company will calculate the estimated fair value of thereporting unit or indefinite-lived intangible asset. The Company’s decision to perform a qualitative impairment assessmentfor an individual reporting unit in a given year is influenced by a number of factors, inclusive of the size of the reportingunit's goodwill, the significance of the excess of the reporting unit's estimated fair value over carrying value at the lastquantitative assessment date, the amount of time in between quantitative fair value assessments and the date of acquisition.During 2016, as part of the Company’s annual impairment analysis, the Company performed the qualitative assessment forapproximately $850.0 million, or 87.5%, of its total goodwill balance of $972.0 million, which resides in its PR and SSreporting units, and for its indefinite-lived trade name intangible asset. If the Company does not perform a qualitative assessment, goodwill impairment is determined by the Companyusing a two‑step process. The first step of the goodwill impairment test is used to identify potential impairment by comparingthe fair value of each reporting unit, determined using various valuation techniques, with the primary technique being adiscounted cash flow analysis, to its carrying value. If the fair value of a reporting unit exceeds its carrying amount, goodwillof the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carryingamount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure theamount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of thereporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwillexceeds the implied fair value of that goodwill, an impairment loss is recognized. The estimated fair value of the EDS reporting unit closely approximated its carrying value when the Companyperformed its annual goodwill impairment test during the fourth quarter of 2014. The Company made operationalimprovements during 2015 and 2016 in order to improve the profitability of the EDS reporting unit. As a result of thesechanges, EDS saw growth in both backlog and new business awards that contributed to its improved financial performanceduring the year and led to the Company to update its forecast for future periods. The Company considered all of these factorswhen it performed its most recent goodwill impairment test during the fourth quarter of 2016 and it was concluded that theestimated fair value of the EDS reporting unit exceeded its carrying value by approximately $70.0 million or 33%. Anynegative changes in assumptions on revenue, new business awards, cancellations, or the Company’s ability to improveoperations while maintaining a competitive cost structure could adversely affect the fair value of EDS and result insignificant goodwill impairment charges in 2017 or later. Revenue Recognition The Company generally enters into contracts with customers to provide services with payments based on eitherfixed‑fee, time and materials, or fee‑for‑service arrangements. Revenue for services is recognized only after persuasiveevidence of an arrangement exists, the sales price is determinable, services have been rendered, and collectability isreasonably assured. Once these criteria have been met, the Company recognizes revenue for the services provided on fixed‑fee contractsbased on the proportional performance methodology, which determines the proportion of outputs or performance obligationswhich have been completed or delivered compared to the total contractual outputs for performance obligations. To measureperformance, the Company compares the contract costs incurred to estimated total contract costs through completion. As partof the client proposal and contract negotiation process, the Company develops a detailed project budget for the direct costsbased on the scope of the work, the complexity of the study, the geographical location involved and the Company’shistorical experience. The Company then establishes the individual contract pricing based on the Company’s internalpricing guidelines, discount agreements, if any, and negotiations with78 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 the client. The estimated total contract costs are reviewed and revised periodically throughout the lives of the contracts, withadjustments to revenue resulting from such revisions being recorded on a cumulative basis in the period in which therevisions are first identified. Contract costs consist primarily of direct labor and other project‑related costs. Revenue fromtime and materials contracts is recognized as hours are incurred. Revenues and the related costs of fee‑for‑service contractsare recognized in the period in which services are performed. A majority of the Company’s contracts undergo modifications over the contract period and the Company’s contractsprovide for these modifications. During the modification process, the Company recognizes revenue to the extent it incurscosts, provided client acceptance and payment is deemed reasonably assured. The Company often offers volume discounts to certain of its large customers based on annual volume thresholds.The Company records an estimate of the annual volume rebate as a reduction of revenue throughout the period based on theestimated total rebate to be earned for the period. Most of the Company’s contracts can be terminated by the client either immediately or after a specified periodfollowing notice. These contracts require the client to pay the Company the fees earned through the termination date, the feesand expenses to wind down the study, and, in some cases, a termination fee or some portion of the fees or profit that theCompany could have earned under the contract if it had not been terminated early. Therefore, revenue recognized prior tocancellation generally does not require a significant adjustment upon cancellation. Reimbursement Revenue and Reimbursable Out‑of‑Pocket Costs The Company incurs out‑of‑pocket costs, in excess of contract amounts, which are reimbursable by its customers.The Company includes out‑of‑pocket costs both as reimbursement revenue and as reimbursable out‑of‑pocket costs in theconsolidated statements of operations. As is customary in the industry, the Company routinely enters into separate agreements on behalf of its clients withindependent physician investigators in connection with clinical trials. The funds received for investigator fees are nettedagainst the related cost because such fees are the obligation of the Company’s clients, without risk or reward to the Company.The Company is not obligated either to perform the service or to pay the investigator in the event of default by the client. Inaddition, the Company does not pay the independent physician investigator until funds are received from the client. Totalpayments to investigators were $249.6 million, $208.0 million, and $211.5 million for the years ended December 31, 2016,2015, and 2014, respectively. Concentration of Credit Risk Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents,accounts receivable, and unbilled services. As of December 31, 2016, substantially all of the Company’s cash and cashequivalents were held in or invested with large financial institutions. Accounts receivable include amounts due frompharmaceutical and biotechnology companies. The Company establishes an allowance for potentially uncollectiblereceivables. In management’s opinion, there is no additional material credit risk beyond amounts provided for such losses. Service revenue from individual customers greater than 10% of consolidated service revenue in the respectiveperiods was as follows: Years Ended December 31, 2016 2015 2014 Customer A 11.0% — — Customer B 10.4% 10.7% — 79 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 Accounts receivable and unbilled receivables from individual customers that were equal to or greater than 10% ofconsolidated accounts receivable and unbilled receivables at the respective dates were as follows: December 31, 2016 2015 Customer A 12.0% — Customer B — 13.4% Customer C — 10.1% Foreign Currency The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars at exchange rates ineffect as of the end of the period. Equity activities are translated at the spot rate effective at the date of the transaction.Revenue and expense accounts and cash flows of these operations are translated at average exchange rates prevailing duringthe period the transactions occurred. Translation gains and losses are included as an adjustment to the accumulated othercomprehensive loss account in stockholders’ equity. Translation gains and losses from foreign currency transactions, such as those resulting from the settlement andrevaluation of foreign receivables and payables, are included in the determination of net income (loss). These amounts areincluded in foreign currency gains, net in the consolidated statement of operations. In addition, gains or losses related to theCompany’s intercompany loans payable and receivable denominated in a foreign currency other than the subsidiary’sfunctional currency that are deemed to be of a long‑term investment nature are remeasured to cumulative translation andrecorded in accumulated other comprehensive loss in the consolidated balance sheets. Income Taxes The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred taxassets and liabilities are recognized for the estimated future tax consequences attributable to differences between thefinancial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets arerecognized for future deductible temporary differences, along with net operating loss carryforwards and credit carryforwards,if it is more likely than not that the tax benefits will be realized. To the extent a deferred tax asset cannot be recognized underthe preceding criteria, a valuation allowance is established to reduce the deferred tax asset to the amount that is more likelythan not to be realized. Deferred tax liabilities are recognized for future taxable temporary differences. Deferred tax assets andliabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to berecovered or settled. There are inherent uncertainties related to the interpretation of tax regulations in the jurisdictions in which theCompany transacts business. The judgments and estimates made at a point in time may change based on the outcome of taxaudits, as well as changes to, or further interpretations of, regulations. Income tax expense is adjusted in the period in whichthese events occur, and these adjustments are included in the Company’s consolidated statement of operations. If suchchanges take place, there is a risk that the Company’s effective tax rate may increase or decrease in any period. A companymust recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will besustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognizedin the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percentlikelihood of being realized upon ultimate resolution. Stock‑Based Compensation The primary type of stock‑based compensation utilized by the Company is stock options. Stock options are awardswhich allow the employee to purchase shares of the Company’s stock at a fixed price. The Company measures compensationcost at the grant date, based on fair value of the award, and recognizes it as expense over the employees’ requisite serviceperiod.80 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 The fair value of each option issued during these periods was estimated on the date of grant using the Black‑Scholesoption pricing model for service condition awards and a lattice model for market and performance condition awards with thefollowing weighted average assumptions: Years Ended December 31, 2016 2015 2014 Risk-free interest rate 1.5% 1.7% 2.0% Expected life, in years 6.3 6.3 6.5 Dividend yield N/A N/A N/A Volatility 31.2% 34.4% 39.5% The risk‑free interest rate is based on the United States Treasury yield curve in effect at the time of the grant. Theexpected life represents the period of time the grants are expected to be outstanding. The Company uses the historicalvolatilities of a selected peer group as it does not have sufficient history to estimate the volatility of its common share price.The Company calculates expected volatility based on reported data for selected reasonably similar publicly tradedcompanies for which the historical information is available. For the purpose of identifying peer companies, the Companyconsiders characteristics such as industry, length of trading history, similar vesting terms and in‑the‑money option status. Due to the absence of an active market for the Company’s common shares prior to the Company’s IPO, the fair valueof our common shares for purposes of determining the exercise price for award grants was determined in good faith by theCompany’s Board of Directors, with the assistance and upon the recommendation of management based on a number ofmarket factors, including: the common shares underlying the award involved illiquid securities in a private company; resultsof operations and financial position; and the market performance of publicly traded companies compared to the Company. The Company accounts for its stock‑based compensation for restricted share awards and restricted share units, orcollectively, RSAs/RSUs, based on the closing market price of the Company’s common stock on the trading day immediatelyprior to the grant date. Net Income (Loss) Per Share The calculation of net income (loss) per share, or EPS, is based on the weighted average number of common sharesor common stock equivalents outstanding during the applicable period. The dilutive effect of common stock equivalents isexcluded from basic earnings per share and is included in the calculation of diluted earnings per share, unless the effect ofinclusion would be anti‑dilutive. Debt Issuance Costs Debt issuance costs relating to the Company’s long‑term debt are recorded as a direct reduction of long-term debt;these costs are deferred and amortized to interest expense using the effective interest method, over the respective terms of therelated debt. Debt issuance costs relating to the Company’s revolving credit facilities are recorded as an asset; these costs aredeferred and amortized to interest expense using the straight‑line method. Compensated Absences The Company accrues for the costs of compensated absences to the extent that the employee’s right to receivepayment relates to service already rendered, the obligation vests or accumulates, payment is probable and the amount can bereasonably estimated. The Company’s policies related to compensated absences vary by jurisdiction and obligations arerecorded net of estimated forfeiture due to turnover when reasonably predictable. 81 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 Operating Leases The Company records rent expense for operating leases, some of which have escalating rent over the term of thelease, on a straight‑line basis over the initial effective lease term. The Company begins depreciation on the date of initialpossession, which is generally when the Company enters the space and begins to make improvements in preparation for itsintended use. Some of the Company’s facility leases provide for concessions by the landlords, including payments forleasehold improvements considered tenant assets, free rent periods, and other lease inducements. The Company reflects theseconcessions as deferred rent in the accompanying consolidated financial statements. The Company accounts for thedifference between rent expense and rent paid as deferred rent. For tenant allowances for improvements considered to betenant assets, rent holidays and other lease incentives, the Company records a deferred rent liability at the inception of thelease term and amortizes the deferred rent over the term of the lease as a reduction to rent expense. For tenant allowancesconsidered to be property owner assets, the payment is treated as a reimbursement for the cost of the lessor asset. Recently Implemented Accounting Standards In August 2016, the FASB issued Accounting Standard Update, or ASU, No. 2016-15, “Statement of Cash FlowsClassification of Certain Cash Receipts and Cash Payments,” which clarifies existing guidance related to accounting for cashreceipts and cash payments and classification on the statement of cash flows. In November 2016, the FASB issued ASU No.2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which requires restricted cash be included with cash andcash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cashflows. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017,with early adoption permitted. The guidance for both standards requires application using a retrospective transition method. The Company early adopted both ASUs in the accompanying consolidated financial statements. As a result of theretrospective application of ASU 2016-15, $14.3 million of payments of debt prepayment and debt extinguishment costsoriginally recorded as operating cash outflows were reclassified to financing outflows in the consolidated statement of cashflows for the year ended December 31, 2014. The retrospective application of ASU 2016-18 resulted in restricted cash beingreclassified as a component of cash, cash equivalents, and restricted cash in the consolidated statement of cash flows for allperiods presented. In August 2014, the FASB issued ASU No. 2014‑15, “Presentation of Financial Statements—Going Concern.” ThisASU clarifies management’s responsibility to evaluate whether there is a substantial doubt about the entity’s ability tocontinue as a going concern and provides guidance for related footnote disclosures. This ASU became effective beginning in2016. The adoption of this ASU did not impact the Company’s consolidated financial statements. Recently Issued Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers.” The new revenuestandard establishes a single revenue recognition model for recognizing contracts from customers. Under the new standard,revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount thatreflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, thestandard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contractswith customers. The FASB has recently issued several amendments to the standard, including clarification on principalversus agent considerations, identifying performance obligations, and accounting for licenses of intellectual property. The new standard is effective for annual reporting periods beginning after December 15, 2017, including interimperiods within that reporting period. The standard permits the use of either the retrospective or modified retrospective(cumulative effect) transition method. 82 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 The Company plans to adopt the new revenue guidance as of January 1, 2018 and is currently evaluating thetransition methods and the potential impact to the Company’s consolidated financial statements. The Company hasestablished an implementation team that consists of both internal resources and external advisors to assist with the adoptionof the new standard. The evaluation and implementation process is ongoing and is expected to continue through 2017 as theCompany performs an analysis on the contract portfolio to identify potential differences from its current accounting policies,and as it reviews the business processes, systems and controls required to support recognition and disclosure under the newstandard. In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which revises the accounting related to lesseeaccounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for allleases with terms greater than 12 months. Leases will be classified as either finance or operating, with classification affectingthe pattern of expense recognition in the income statement. The provisions of ASU No. 2016-02 are effective for fiscal yearsbeginning after December 15, 2018 and should be applied through a modified retrospective transition approach for leasesexisting at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Earlyadoption is permitted. The Company is currently assessing the potential impact of ASU No. 2016-02 on the Company’sconsolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, “Compensation-Stock Compensation (Topic 718):Improvements to Employee Share-Based Payment Accounting.” This update includes provisions intended to simplifyvarious aspects of accounting for share-based compensation. In addition, ASU No. 2016-09 will take effect for publiccompanies for the annual periods beginning after December 15, 2016. The Company will adopt this ASU beginning with thefirst quarter of 2017. The adoption of this ASU will have the following effects on the consolidated financial statements: Income taxes - The new guidance requires excess tax benefits and tax deficiencies to be recorded as income taxbenefit or expense in the statement of operations. The Company will apply the modified retrospective adoptionapproach beginning in 2017 and expects to record a cumulative-effect adjustment to retained earnings and reduceits deferred tax liabilities by $12.6 million with an offsetting increase to the valuation allowance of $12.6 million.As such, it is expected that the net impact to retained earnings will be zero. The Company continuously evaluates itsneed for a valuation allowance on its net deferred tax assets based upon the weight of available evidence. If theCompany is able to support the recognition of certain net deferred tax assets in the future, it is noted that anadditional tax benefit from the release of this additional valuation could occur in the future. This adjustment relatesto tax assets that had previously arisen from tax deductions for equity compensation expenses that were greater thanthe compensation recognized for financial reporting. Forfeitures – The standard provides an accounting policy election to account for forfeitures as they occur. TheCompany plans to make this accounting policy election and does not expect the modified retrospective adoptionfor this component of the standard to have a material impact on its financial statements. Statements of Cash Flows - Cash flows related to excess tax benefits will no longer be separately classified as afinancing activity apart from other income tax cash flows. The Company will adopt this component of the standardon a prospective basis. Earnings Per Share - The Company uses the treasury stock method to compute diluted earnings per share, unless theeffect would be anti-dilutive. Under this method, the Company will no longer be required to estimate the tax rateand apply it to the dilutive share calculation for determining the dilutive earnings per share. (3) Joint Ventures On May 6, 2016, the Company and WuXi AppTec (Shanghai) Co., Ltd., or WuXi, finalized an agreement to dissolvethe WuXiPRA joint venture. Under the agreement, the Company sold its 49% portion of the joint venture located inmainland China for $4.0 million, which subsequently became a wholly owned subsidiary of WuXi. The83 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 portion of the joint venture located in Hong Kong became a wholly owned subsidiary of the Company and was acquired for$0.3 million. As a result of the transaction, the Company recognized a $3.3 million gain on the sale, which is recorded in theequity in gains (losses) of unconsolidated joint ventures in the accompanying consolidated statement of operations. During April 2015, prior to the dissolution of the WuXiPRA joint venture, both the Company and WuXi made a$3.0 million contribution to WuXiPRA to fund the joint venture’s working capital needs. The Company’s interest inWuXiPRA remained at 49% after the capital contribution. The Company recorded reductions to the investment balance of$0.7 million (excluding the gain on the sale), $2.9 million, and $2.1 million during the years ended December 31, 2016,2015, and 2014, respectively, for our equity in the venture’s net loss for the period, which is recorded in the equity in gains(losses) of unconsolidated joint ventures, net of tax in our consolidated statement of operations. The investment was adjustedfor our equity in the venture’s net income (loss), cash contributions, distributions, and other adjustments required by theequity method of accounting. The investment in WuXiPRA totaled $1.1 million as of December 31, 2015. The Company entered into a joint venture agreement with A2 Healthcare Corporation (formerly part of Asklep, Inc.).The joint venture provides research and development outsourcing solutions in Japan to the biopharmaceutical and medicaldevice industries. This joint venture is based in Tokyo, Japan and is owned by the Company (49%) and Asklep (51%). OnOctober 17, 2014, the joint venture changed its name from RPS Asklep, Inc. to A2PRA Corporation, or A2PRA. TheCompany recorded changes to the investment balance totaling $0.1 million, $0.0 million, and $(0.1) million during the yearsended December 31, 2016, 2015, and 2014, respectively, for the Company’s equity in the venture’s net income (loss) for theperiod, which is recorded in the equity in gains (losses) of unconsolidated joint venture, net of tax in our consolidatedstatement of operations. The investment will be adjusted for the Company’s equity in the venture’s net income (loss), cashcontributions, distributions, and other adjustments required by the equity method of accounting. The investment in A2PRAtotaled $0.3 million and $0.2 million at December 31, 2016 and 2015, respectively. In August 2015, the Company and an affiliate of KKR entered into a joint venture. The joint venture was dissolvedin December 2015. The purpose of the joint venture included, among other things, the evaluation of investments oracquisitions to enhance the strategic objectives of the Company. The joint venture was jointly owned by the Company(11%) and KKR (89%). The Company contributed $20.0 million to the joint venture in August 2015 and received $19.5million in December 2015 when the joint venture was dissolved. The Company recorded the $0.5 million reduction to theinvestment balance in equity in gains (losses) of unconsolidated joint ventures, net of tax in the consolidated statement ofoperations. The investment in the joint venture was adjusted for the Company’s equity in the venture’s net income (loss),cash contributions, distributions, and other adjustments required by the equity method of accounting. (4) Business Combinations Acquisition of VHS On June 8, 2015, the Company purchased the assets of Value Health Solutions Inc., or VHS, a software developmentfirm, for $0.5 million in cash and 47,598 unregistered shares of the Company’s common stock with a fair market value of $1.6million; an additional $0.4 million of common stock will be issued in June 2017, less amounts reimbursable to the Companyfor any indemnification obligations of the seller. The asset purchase agreement also includes contingent consideration in theform of potential earn-out payments of up to $16.0 million. Earn-out payments totaling $1.0 million and $15.0 million arecontingent upon the achievement of project milestones and certain external software sales targets, respectively, during the48-month period following closing. The Company has recognized a liability of approximately $1.0 million as the estimatedacquisition date fair value of the earn-out; this amount is included in the accrued expenses and other current liabilities in theconsolidated balance sheet. The fair value of the contingent consideration was based on significant inputs not observed inthe market and thus represented a Level 3 measurement. Any change in the fair value of the contingent considerationsubsequent to the acquisition date will be84 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 recognized in earnings in the period of the change. With this acquisition, the Company expects to enhance its ability to servecustomers throughout the clinical research process with technologies that include improved efficiencies by reducing studydurations and costs through integrated operational management. The acquisition of VHS was accounted for as a business combination and, accordingly, the assets acquired and theliabilities assumed have been recorded at their respective fair values as of the acquisition date. In connection with theacquisition, the Company recorded approximately $1.0 million of goodwill, which is deductible for income tax purposes.The goodwill is attributable to the workforce of the acquired business and expected synergies with the Company’s existinginformation technology operations. The Company’s purchase price allocation is as follows (in thousands): Purchase Weighted Price Amortization Allocation Period Software intangible $2,500 5 years Property, plant and equipment 43 Estimated fair value of net assets acquired 2,543 Purchase price, including contingent consideration 3,499 Total goodwill $956 Pro forma information is not provided as the acquisition did not have a material effect on the Company’sconsolidated results. Acquisition of Nextrials On March 18, 2016, the Company acquired all of the outstanding shares of Nextrials, Inc., or Nextrials, a developerof web-based software which integrates electronic health records with clinical trials, for $4.8 million in cash and contingentconsideration in the form of potential earn-out payments of up to $3.0 million. Earn-out payments totaling $2.0 million and$1.0 million are contingent upon the achievement of project milestones and certain external software sales targets,respectively, during the 30-month period following closing. The Company recognized a liability of approximately $2.3million as the estimated acquisition date fair value of the earn-out; the fair value was based on significant inputs notobserved in the market and thus represented a Level 3 measurement. Changes in the fair value of the earn-out subsequent tothe acquisition date were recognized in earnings in the period of the change. The fair value of the contingent considerationdecreased by $0.5 million during the year ended December 31, 2016. As of December 31, 2016, the earn-out liability totaled$1.8 million; $0.7 million of the balance is included in accrued expenses and other current liabilities and the remaining $1.1million is included in other long-term liabilities in the consolidated balance sheet. With this acquisition, the Companyexpects to enhance its ability to serve customers throughout the clinical research process with technologies that includeimproved efficiencies by reducing study durations and costs through integrated operational management. The acquisition of Nextrials was accounted for as a business combination and, accordingly, the assets acquired andthe liabilities assumed have been recorded at their respective fair values as of the acquisition date. In connection with theacquisition, the Company recorded approximately $4.3 million of goodwill, which is not deductible for income tax purposes.The goodwill is attributable to the workforce of the acquired business and expected synergies with the Company’s existinginformation technology operations. 85 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 The Company’s purchase price allocation is as follows (in thousands): Purchase Weighted Price Amortization Allocation Period Cash and cash equivalents $94 Accounts receivable 211 Other current assets 96 Property, plant and equipment 111 Software intangible 5,574 5 years Accounts payable and accrued expenses (1,585) Other long-term liabilities (1,663) Estimated fair value of net assets acquired 2,838 Purchase price, including contingent consideration 7,145 Total goodwill $4,307 Since the acquisition date, goodwill increased by $2.0 million, primarily as a result of adjustments to the acquiredincome tax balances. Pro forma information is not provided as the acquisition did not have a material effect on theCompany’s consolidated results. Acquisition of WuXiPRA’s Hong Kong Operations As noted in Note 3, the Company acquired WuXiPRA’s Hong Kong operations for $0.3 million when the jointventure was dissolved on May 6, 2016. The acquisition was accounted for as a business combination and, accordingly, theassets acquired and the liabilities assumed have been recorded at their respective fair values as of the acquisition date. Inconnection with the acquisition, the Company recorded approximately $0.6 million of goodwill, which is attributable to theworkforce of the acquired business. Pro forma information is not provided as the acquisition did not have a material effect onthe Company’s consolidated results. (5) Accounts Receivable and Unbilled Services Accounts receivable and unbilled services include service revenue, reimbursement revenue, and amounts associatedwith work performed by investigators. Accounts receivable and unbilled services were (in thousands): December 31, 2016 2015 Accounts receivable $284,647 $290,963 Unbilled services 155,609 126,755 440,256 417,718 Less allowance for doubtful accounts (1,203) (2,641) Total accounts receivable and unbilled services, net $439,053 $415,077 A rollforward of the allowance for doubtful accounts is as follows (in thousands): Years Ended December 31, 2016 2015 2014 Beginning balance $2,641 $1,819 $129 Charged (credited) to income from operations (652) 443 976 Write-offs, recoveries and the effects of foreign currency exchange (786) 379 714 Ending balance $1,203 $2,641 $1,819 86 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 (6) Fixed Assets The carrying amount of fixed assets is as follows (in thousands): December 31, 2016 2015 Leasehold improvements $25,083 $20,606 Computer hardware and software 92,095 79,853 Furniture and equipment 33,751 27,208 150,929 127,667 Accumulated depreciation (63,352) (46,976) Total fixed assets, net $87,577 $80,691 All fixed assets are included as collateral for the payment and performance in full of the term loans pledged by theCompany and its subsidiaries. Depreciation expense was $24.1 million, $21.2 million, and $22.2 million for the years ended December 31, 2016,2015 and 2014, respectively. (7) Goodwill and Intangible Assets Goodwill The changes in the carrying amount of goodwill are as follows (in thousands): Balance December 31, 2014 $1,033,999 Acquisition of VHS 956 Currency translation (20,157) Balance December 31, 2015 $1,014,798 Acquisition of Nextrials 4,307 Acquisition of the WuXiPRA joint venture’s Hong Kong operations 570 Currency translation (47,695) Balance December 31, 2016 $971,980 There are no accumulated impairment charges as of December 31, 2016 and 2015. 87 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 Intangible Assets Intangible assets consist of the following (in thousands): December 31, 2016 2015 Customer relationships $360,328 $380,721 Customer backlog 119,223 127,871 Trade names (finite-lived) 25,740 25,693 Patient list and other intangibles 28,974 23,400 Non-competition agreements 2,737 2,657 Total finite-lived intangible assets, gross 537,002 560,342 Accumulated amortization (181,036) (144,414) Total finite-lived intangible assets, net 355,966 415,928 Trade names (indefinite-lived) 118,010 118,010 Total intangible assets, net $473,976 $533,938 The Company conducts its annual impairment test of indefinite‑lived intangibles during the fourth quarter of thefiscal year. For the periods ended December 31, 2016, 2015, and 2014, the Company concluded that the fair value ofindefinite‑lived intangibles exceeded the carrying value and, therefore, no impairment exists. Amortization expense was$45.4 million, $56.7 million and $74.4 million for the years ended December 31, 2016, 2015 and 2014, respectively. Estimated amortization expense related to finite‑lived intangible assets for the next five years and thereafter is asfollows (in thousands): 2017 $35,221 2018 31,118 2019 25,859 2020 24,612 2021 22,507 2022 and thereafter 216,649 Total $355,966 (8) Accrued Expenses and Other Current Liabilities Accrued expenses consisted of the following (in thousands): December 31, 2016 2015 Compensation, including bonuses, fringe benefits and payroll taxes $86,160 $77,650 Other 33,813 36,093 Interest 3,616 6,150 Total accrued expenses and other liabilities $123,589 $119,893 88 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 (9) Current Borrowings and Long‑Term Debt Long‑term debt consists of the following (in thousands): December 31, 2016 2015 Term loans, first lien $625,000 $689,000 Senior notes 91,441 225,000 Accounts receivable financing agreement 120,000 — 836,441 914,000 Less debt issuance costs and discount (8,139) (24,486) 828,302 889,514 Less current portion (31,250) — Total long-term debt, net $797,052 $889,514 Principal payments on long‑term debt are due as follows (in thousands): Current maturities of long-term debt: 2017 $31,250 2018 46,875 2019 166,875 2020 62,500 2021 437,500 2022 and thereafter 91,441 Total $836,441 2016 Credit Facilities On December 6, 2016, the Company through its wholly-owned subsidiary, Pharmaceutical Research Associates, Inc.,entered into new senior secured credit facilities, or the 2016 Credit Facilities, totaling $750.0 million. The 2016 CreditFacilities are comprised of a $625.0 million first lien term loan due 2021, or 2016 First Lien Term Loan, and a five-year$125.0 million revolving line of credit, or 2016 Revolver. The proceeds from the 2016 Credit Facilities were used to repay the then outstanding 2013 First Lien Term Loan(defined below). In accordance with the guidance in ASC 470‑50, “Debt—Modifications and Extinguishments,” the debtrepayment was accounted for as a partial debt extinguishment. The repayment resulted in a $16.7 million loss onextinguishment of debt, consisting of $15.8 million write-off of unamortized debt issuance costs and $0.9 million of feesassociated with the transaction, which is included in loss on modification or extinguishment of debt in the consolidatedstatement of operations for the year ended December 31, 2016. As collateral for borrowings under the 2016 Credit Facilities, the Company granted a pledge on primarily all of itsassets, and the stock of wholly‑owned U.S. restricted subsidiaries. The Company was subject to certain financial covenants,which require the Company to maintain certain debt‑to‑EBITDA and interest expense-to-EBITDA ratios. The 2016 CreditFacilities also contain covenants that, among other things, restrict the Company’s ability to incur create any liens, makeinvestments and acquisitions, incur or guarantee additional indebtness, enter into mergers or consolidations and otherfundamental changes, conduct sales and other dispositions of property or assets, enter into sale-leaseback transactions orhedge agreements, prepay subordinated debt, pay dividends or make other payments in respect of capital stock, change theline of business, enter into transactions with affiliates, enter into burdensome agreements with negative pledge clauses andclauses restriction, and make subsidiary distributions. After giving effect to the applicable restrictions on the payment ofdividends under the 2016 Credit Facilities, subject to compliance with applicable law, as of December 31, 2016, all amountsin retained earnings were free of restriction and were available for the payment of dividends. The Company does not expectto pay dividends in the foreseeable future. The Company does not expect these covenants to89 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 restrict its liquidity, financial condition or access to capital resources in the foreseeable future. The 2016 Credit Facilitiesalso contains customary representations, warranties, affirmative covenants, and events of default. 2016 First Lien Term Loan The 2016 First Lien Term Loan is a floating rate term loan with scheduled, fixed quarterly principal payments asfollows: ·1.25% by quarterly term loan amortization payments, or $7.8 million per quarter, to be made commencingMarch 31, 2017 and made on or prior to December 31, 2017;·1.88% by quarterly term loan amortization payments, or $11.7 million per quarter, to be made on or after March31, 2018, but on or prior to December 31, 2019;·2.50% by quarterly term loan amortization payments, or $15.6 million per quarter, to be made on or after March31, 2020, but on or prior to December 31, 2020;·3.13% by quarterly term loan amortization payments, or $19.5 million per quarter, to be made on or after March31, 2021, but prior to September 30, 2021; and·60.63% (or if less, the remaining principal amount of the term loan) on December 06, 2021. The variable interest rate is a rate equal to the London Interbank Offered Rate, or LIBOR, or the adjusted base rate,or ABR rate, at the election of the Company, plus a margin based on the ratio of total indebtedness to EBITDA and rangesfrom 1.25% to 2.25%, in the case of LIBOR rate loans, and 0.25% to 1.25%, in the case of ABR rate loans. The Company hasthe option of 1, 2, 3 or 6 month base interest rates. As of December 31, 2016, the weighted average interest rate on the firstlien term loan was 2.70%. There are no prepayment penalties. 2016 Revolver The Company’s 2016 Revolver provides for $125.0 million of potential borrowings and expires on December 6,2021. The interest rate on the 2016 Revolver is based on the LIBOR with a 0% LIBOR floor or ABR rate, at the election ofthe Company, plus an applicable margin, based on the leverage ratio of the Company. The Company, at its discretion, mayelect interest periods of 1, 2, 3 or 6 months. In addition, the Company was required to pay to the lenders a commitment fee of0.3% quarterly for unused commitments on the revolver from December 6, 2016 to December 31, 2016. Following December31, 2016, the commitment fee will range from 0.2% to 0.4% based on the Company’s debt-to-EBITDA ratio. At December 31,2016, the Company had no outstanding borrowings under the 2016 Revolver. In addition, at December 31, 2016, theCompany had $7.0 million in letters of credit outstanding, which are secured by the 2016 Revolver. 2013 Credit Facilities In September 2013, the Company entered into a senior secured credit facilities, or the 2013 Credit Facilities, for anaggregate principal amount of $825.0 million of first lien term loan, or 2013 First Lien Term Loan, and a $125.0 millionrevolving line of credit, or 2013 Revolver. In September 2013, the Company also issued $375.0 million in senior notes, orSenior Notes. The proceeds from the 2013 Credit Facilities and the Senior Notes issuances were used in conjunction with theacquisition by KKR, to fund the acquisition of RPS, repay existing debt, and pay for fees and expenses related to theaforementioned events. The Company paid an $8.3 million debt discount in connection with the 2013 First Lien Term Loan. On December 2, 2013, the Company borrowed $65.0 million under the first lien term loan facility of the 2013 CreditFacilities, or the Incremental Term Loan Borrowing. The proceeds were used to fund the acquisition of CRI Lifetree. Inaccordance with the guidance in ASC 470‑50, “Debt—Modifications and Extinguishments,” the Incremental Term LoanBorrowing was accounted for as a debt modification. 90 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 On March 24, 2014, the Company completed a repricing transaction, or the Repricing, associated with the 2013First Lien Term Loan that reduced the applicable margin from 4.0% to 3.5%. As part of the repricing, eight previous lendersdid not consent to the repricing terms; therefore the non‑consenting lenders were replaced by new lenders. In accordance withthe guidance in ASC 470‑50, “Debt—Modifications and Extinguishments,” the Repricing was accounted for as a partial debtextinguishment based on non‑consenting lenders no longer having a holding interest. As a result of the partial debtextinguishment, the Company recognized a loss of extinguishment of debt totaling $1.3 million, which was recorded duringthe year ended December 31, 2014. The Company incurred $0.1 million in expenses for the repricing transaction, which wereexpensed during the year ended December 31, 2014. As collateral for borrowings under the 2013 Credit Facilities, the Company granted a pledge on primarily all of itsassets, and the stock of designated subsidiaries. The Company was subject to certain financial covenants, which require theCompany to maintain certain debt‑to‑EBITDA ratios. The 2013 Credit Facilities also contains covenants that, among otherthings, restrict the Company’s ability to incur additional indebtedness, grant liens, make investments, loans, guarantees oradvances, make restricted junior payments, including dividends, redemptions of capital stock and voluntary prepayments orrepurchase of certain other indebtedness, engage in mergers, acquisitions or sales of assets, enter into sale and leasebacktransactions or engage in certain transactions with affiliates and otherwise restrict certain corporate activities. After givingeffect to the applicable restrictions on the payment of dividends under the 2013 Credit Facilities, subject to compliance withapplicable law, as of December 31, 2015, there was approximately $3.0 million free of restriction, which was available for thepayment of dividends. The 2013 Credit Facilities also contained customary representations, warranties, affirmativecovenants, and events of default. 2013 First Lien Term Loan The 2013 First Lien Term Loan was a floating rate term loan with scheduled, fixed quarterly principal payments of0.25% of the original principal balance through September 2020. The voluntary prepayments made during 2014, usingproceeds from the IPO, fully satisfied all required quarterly principal payments through maturity. The variable interest ratewas based on the LIBOR, with a 1.0% LIBOR floor, plus an applicable margin of 3.5%. The applicable margin was dependentupon the Company’s debt to consolidated EBITDA ratio as defined in the 2013 Credit Facilities. The 2013 Credit Facilitiesrequired us to prepay outstanding term loans, subject to certain exceptions, with 50% of our annual Excess Cash Flow, whichpercentage would be reduced to 25% if PRA achieves a debt‑to‑EBITDA ratio of less than or equal to 3.75 to 1.0, but greaterthan 3.25 to 1.0 on the date of prepayment for the most recent test period and no prepayment would be required if PRAachieves a debt‑to‑EBITDA ratio of less than or equal to 3.25 to 1.0 on the date of prepayment for the most recent test period,commencing in 2014. The Company had the option of 1, 2, 3 or 6 month base interest rates. As of December 31, 2015, the weightedaverage interest rate on the first lien term loan was 4.5%. There were no prepayment penalties. On November 18, 2014, the Company repaid $152.1 million in principal using proceeds from the Company’s IPO.In accordance with the guidance in ASC 470‑50, “Debt—Modifications and Extinguishments,” the debt repayment wasaccounted for as a partial debt extinguishment. The repayment resulted in the write‑off of $4.8 million in unamortized debtissuance costs which is included in loss on modification or extinguishment of debt in the consolidated statement ofoperations during the year ended December 31, 2014. 2013 Revolver The Company’s 2013 Revolver provided for $125.0 million of potential borrowings and would have expired onSeptember 23, 2018. The interest rate on the 2013 Revolver was based on the LIBOR plus an applicable rate, based on theleverage ratio of the Company. The Company, at its discretion, may have chosen interest periods of 1, 2, 3 or 6 months. Inaddition, the Company was required to pay to the lenders a commitment fee of 0.5% quarterly for unused commitments onthe revolver, subject to a step‑down to 0.375% based upon achievement of a certain leverage ratio. At December 31, 2015,the Company had no outstanding borrowings under the 2013 Revolver. In addition, at December 31, 2015, the Company had$4.4 million in letters of credit outstanding, which were secured by the 2013 Revolver.91 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 Senior Notes In September 2013, the Company issued $375.0 million of Senior Notes. The Senior Notes do not require principalpayments and mature on October 1, 2023. The Senior Notes bear interest at a rate of 9.50% per year payable on April 1, andOctober 1 of each year, beginning April 1, 2014. The Company may redeem the Senior Notes, in whole or in part, at any time prior to October 1, 2018 subject to aprepayment premium calculated in accordance with the Senior Notes indenture. From October 1, 2018 through October 1,2019, the prepayment premium is 4.75% declining ratably to 0% beginning on October 1, 2021. In the event of a change incontrol, the Company may be required to offer to repurchase the Senior Notes at a price equal to the outstanding principalbalance and a 1% prepayment premium plus accrued and unpaid interest. The Senior Notes include covenants which place limitations on incurring additional indebtedness, selling certainassets, and making certain distributions. The Senior Notes agreement contains certain provisions that restrict the payment of dividends from the Company’ssubsidiaries to the parent company. As a result, there are no material balances present within the parent company that areavailable for the payment of dividends as the parent company did not have any net income during 2016 that was free ofrestrictions. The Company does not expect to pay dividends in the foreseeable future. On November 18, 2014, the Company repaid $150.0 million in principal and a $14.3 million prepayment penaltyusing proceeds from the Company’s IPO. In accordance with the guidance in ASC 470‑50, the debt repayment was accountedfor as a partial debt extinguishment. The repayment also resulted in the write‑off of $4.6 million in unamortized debtissuance costs, which is included in loss on modification or extinguishment of debt in the consolidated statement ofoperations during the year ended December 31, 2014. On March 17, 2016, the Company repurchased $133.6 million aggregate principal amount of its Senior Notes as partof a cash tender offer. In accordance with the guidance in ASC 470-50, the debt repurchase was accounted for as a partial debtextinguishment. The repurchase resulted in a $21.5 million loss on extinguishment of debt, which consists of a $17.4 millionearly tender premium, a $3.7 million write-off of unamortized debt issuance cost and $0.4 million of fees associated with thetransaction which is included in loss on modification or extinguishment of debt in the consolidated statement of operationsduring the year ended December 31, 2016. Accounts Receivable Financing Agreement In March 2016, the Company entered into a $140.0 million accounts receivable financing agreement, of which$120.0 million was outstanding as of December 31, 2016. The borrowings were used to repay amounts outstanding on theCompany’s revolving credit facility that were used to fund the cash tender offer for the Senior Notes. Loans under the accounts receivable financing agreement accrue interest at either a reserve-adjusted LIBOR or abase rate, plus 1.6%. The Company may prepay loans upon one business day prior notice and may terminate the accountsreceivable financing agreement with 15 days’ prior notice. As of December 31, 2016, the weighted average interest rate onthe accounts receivable financing agreement was 2.31%. The accounts receivable financing agreement contains various customary representations and warranties andcovenants, and default provisions which provide for the termination and acceleration of the commitments and loans underthe agreement in circumstances including, but not limited to, failure to make payments when due, breach of representations,warranties or covenants, certain insolvency events or failure to maintain the security interest in the trade receivables, anddefaults under other material indebtedness. 92 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 The accounts receivable financing agreement terminates on March 22, 2019, unless terminated earlier pursuant to itsterms. At December 31, 2016, there was $20.0 million of remaining capacity available under the accounts receivablefinancing agreement. Fair Value of Debt The estimated fair value of the Company’s debt was $844.2 million and $924.9 million at December 31, 2016 and2015, respectively. The fair value of the Senior Notes, which totaled $99.2 million and $246.2 million at December 31, 2016and 2015, respectively, was determined based on Level 2 inputs using the market approach, which is primarily based on ratesat which the debt is traded among financial institutions. The fair value of the term loans, borrowings under credit facilities,and accounts receivable financing agreement which totaled $745.0 million and $678.7 million at December 31, 2016 and2015, respectively, was determined based on Level 3 inputs, which is primarily based on rates at which the debt is tradedamong financial institutions adjusted for the Company’s credit standing. (10) Stockholders’ Equity Authorized Shares The Company is authorized to issue up to one billion shares of common stock, with a par value of $0.01. TheCompany is authorized to issue up to one hundred million shares of preferred stock, with a par value of $0.01. (11) Stock‑Based Compensation On September 23, 2013 and in connection with the acquisition of the Company by KKR, the Board of Directorsapproved the formation of the 2013 Stock Incentive Plan for Key Employees of Pinnacle Holdco Parent, Inc. and itssubsidiaries, or the Plan. The Plan allowed for the issuance of stock options and other stock‑based awards as permitted byapplicable laws. The number of shares available for grant under the Plan is 12.5% of the outstanding shares at closing on afully diluted basis. The Company rolled over 2,052,909 stock options under the Plan; this amount is comprised of 2,016,581and 36,328 options rolled over by employees of the Predecessor Company and RPS, respectively. The fair value of theoptions that were rolled over equaled the fair value of the options in the Predecessor Company and, therefore, there was noadditional stock‑based compensation expense recorded. All stock options granted under the Plan are subject to transfer restrictions of the stock option’s underlying sharesonce vested and exercised. This lack of marketability was included as a discount, calculated using the Finnerty Model, whendetermining the grant date value of these options. In conjunction with the Secondary Offerings, the transfer restrictions on aportion of such shares issuable upon exercise of vested options granted under the Plan were released. The release of thetransfer restrictions is considered a modification under ASC 718, “Stock Compensation.” As a result of these modifications,the Company incurred approximately $10.1 million of incremental compensation expense associated with service-basedoptions during the year ended December 31, 2016, which is included in transaction-related costs in the accompanyingconsolidated statement of operations. On November 23, 2014 and in connection with the Company’s IPO, the Board of Directors approved the formationof the 2014 Omnibus Plan for Key Employees, or the 2014 Omnibus Plan. The 2014 Omnibus Plan allows for the issuance ofstock options, stock appreciation rights, restricted shares and restricted stock units, other stock‑based awards, andperformance compensation awards as permitted by applicable laws. The number of shares available for grant under the 2014Omnibus Plan is 3,200,000. Generally, the Company grants stock options with exercise prices greater than or equal to the fair market value ofthe Company’s common stock on the date of grant. The stock option compensation cost calculated under the fair valueapproach is recognized on a pro‑rata basis over the vesting period of the stock options (usually five years under the Plan andfour years under the 2014 Omnibus Plan). Most stock option grants are subject to graded vesting as services are rendered andhave a contractual life of ten years.93 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 In December 2013, the Company granted certain employees market-based options under the Plan that vest onlyupon the achievement of a specified internal rate of return from a liquidity event (“2.0x Options” and “2.5x Options”). At thetime of grant, no compensation expense was recorded as the 2.0x Options and 2.5x Options vest upon a liquidity event,which is not considered probable until the date it occurs. On January 20, 2016, the Compensation Committee of the Board ofDirectors adopted a resolution to adjust the vesting criteria for all 2.0x Options granted and still outstanding on such date.Under the revised vesting criteria, the 2.0x Options vest upon the announcement of a secondary offering. The Company didnot record compensation expense on the January 20, 2016 modification date as the Company determined the modificationresulted in Type IV Improbable-to-Improbable modification as the secondary offering was deemed improbable since theevent was outside of the Company’s control and could not be considered probable until the date it occured. On March 2,2016, the Company announced a secondary offering of shares by KKR and certain management stockholders, and it becameprobable that the 2.0x Options would vest. Due to the modification of the terms of the 2.0x Options, the Company calculatedthe fair value of these options using the Black‑Scholes option pricing model with the following assumptions: expected life of2.92 years; risk-free rate of 1.04%; volatility of 45%; dividend yield of 0%; and a Finnerty discount of approximately 16%.In total, 835,551 2.0x Options held by current employees were modified. As a result of this modification, and themodifications associated with the transfer restrictions releases noted above, the Company incurred approximately $25.7million of incremental compensation expense associated with the 2.0x Options during the year ended December 31, 2016,which is included in transaction-related costs in the accompanying consolidated statement of operations. On November 16, 2016, the 2.5x Options vested upon the achievement of a specified internal rate of return andmultiple on invested capital in connection with the closing of a secondary offering of shares by KKR. In total, 809,755 2.5xOptions held by current employees vested. The Company incurred approximately $6.4 million of incremental compensationexpense associated with the vesting and transfer restriction release of the 2.5x Options during the year ended December 31,2016, which is included in transaction-related costs in the accompanying consolidated statement of operations. As of December 31, 2016, there was $16.2 million of unrecognized compensation cost related to unvested stock-based compensation, which is expected to be recognized over a weighted average period of 2 years. The total fair value ofoptions vested during the years ended December 31, 2016, 2015 and 2014 was $27.3 million, $3.1 million and $2.8 million,respectively. Aggregated information regarding the Company’s option plans is summarized below: Wtd. Average Wtd. Average Remaining Intrinsic Value Options Exercise Price Contractual Life (in millions) Outstanding at December 31, 2015 6,839,129 $11.39 6.8 $231.7 Granted 489,000 46.10 Exercised (1,492,797) 6.77 Expired/forfeited (327,985) 17.23 Outstanding at December 31, 2016 5,507,347 $15.38 6.7 $218.9 Exercisable at December 31, 2016 3,622,518 $10.40 6.0 $162.0 The weighted‑average fair value of service‑based options granted was $15.57, $10.87 and $6.71 during the yearsended December 31, 2016, 2015 and 2014, respectively. 94 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 Selected information regarding the Company’s stock options as of December 31, 2016 is as follows: Options Outstanding Options Exercisable Wtd Average Wtd. Average Number of Remaining Life Wtd. Average Number of Remaining Life Wtd. Average Exercise Price Options (in Years) Exercise Price Options (in Years) Exercise Price $2.94 871,026 2.8 $2.94 871,026 2.8 $2.94 $11.73 3,420,136 7.0 $11.73 2,541,911 7.0 $11.73 $16.42 144,060 7.5 $16.42 73,706 7.3 $16.42 $25.35 - 54.69 1,072,125 8.7 $36.97 135,875 7.6 $30.01 Restricted Stock Awards and Units The Company’s RSAs/RSUs will settle in shares of the Company’s common stock on the applicable vesting date.RSAs/RSUs granted to employees vest 100% on the third anniversary of the date of grant. RSAs/RSUs granted to our non-employee directors vest 50% on the first anniversary of the date of grant and 50% on the second anniversary of the date ofgrant. Activity related to the Company’s RSAs/RSUs in 2016 is as follows: Wtd. Average Intrinsic Grant-Date Value Awards Fair Value (millions) Unvested at December 31, 2015 143,984 $28.42 $6.5 Granted 50,487 43.85 Vested (5,881) 25.51 Unvested at December 31, 2016 188,590 $32.63 $10.4 Stock‑based compensation expense related to employee stock options and RSAs/RSUs is summarized below (inthousands): Years Ended December 31, 2016 2015 2014Direct costs $1,813 $1,218 $752Selling, general and administrative 5,254 4,058 2,715Transaction-related costs 42,166 — —Total stock-based compensation expense $49,233 $5,276 $3,467 (12) Income Taxes The components of income (loss) before income taxes and equity in gains (losses) of unconsolidated joint venturesare as follows (in thousands): Years Ended December 31, 2016 2015 2014 Domestic $(61,226) $(23,400) $(92,040) Foreign 155,120 138,565 50,188 $93,894 $115,165 $(41,852) 95 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 The components of the provision for (benefit from) income taxes were as follows (in thousands): Years Ended December 31, 2016 2015 2014 Current: Federal $151 $1,132 $ — State 1,842 1,507 (617) Foreign 36,970 30,584 24,431 Total current income tax expense 38,963 33,223 23,814 Deferred: Federal (2,230) (1,349) (22,002) State (451) 1,564 (1,867) Foreign (7,788) (3,434) (8,099) Total deferred income tax benefit (10,469) (3,219) (31,968) Total income tax expense (benefit) $28,494 $30,004 $(8,154) Income taxes computed at the statutory U.S. federal income tax rate of 35.0% are reconciled to the benefit fromincome taxes as follows: Years Ended December 31, 2016 2015 2014 Statutory federal income tax rate 35.0% 35.0% 35.0% State income taxes, net of federal benefit 0.3% 2.0% 5.5% Tax on foreign earnings: Foreign rate differential (17.7%) (13.6%) 4.3% Foreign earnings taxed in the U.S. 17.5% 7.3% (10.9%) Non-U.S. research and development credits (3.9%) (4.4%) 3.8% Stock-based compensation 1.9% 0.2% (0.8%) Change in liability for uncertain tax positions — (0.6%) (14.6%) Nondeductible expenses 0.1% 0.3% (2.0%) Other (2.9%) (0.1%) (0.8%) Effective income tax rate 30.3% 26.1% 19.5% 96 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 Components of the deferred tax assets and liabilities were as follows (in thousands): December 31, 2016 2015 Net operating loss carryforwards $29,470 $48,689 Accruals and reserves 12,986 13,002 Equity based compensation 17,392 8,418 Prepaid expenses and other 25,232 18,311 Deferred and unbilled revenue 25,718 29,560 Tax credits 5,295 3,680 116,093 121,660 Valuation allowance (21,689) (23,205) Deferred tax assets 94,404 98,455 Identified intangibles (148,576) (164,645) Depreciable, amortizable and other property (12,963) (12,432) Deferred tax liabilities (161,539) (177,077) Total deferred tax liability $(67,135) $(78,622) Long-term deferred tax asset $6,568 $3,069 Long-term deferred tax liability $(73,703) $(81,691) The Company’s foreign subsidiaries are taxed separately in their respective jurisdictions. As of December 31, 2016,the Company has cumulative foreign net operating loss carryforwards of approximately $9.7 million. In addition, theCompany has federal net operating loss carryforwards of approximately $70.9 million and state net operating losscarryforwards of approximately $279.4 million. The carryforward periods for the Company’s net operating losses vary from five years to an indefinite number ofyears depending on the jurisdiction. The Company’s ability to offset future taxable income with net operating losscarryforwards may be limited in certain instances, including changes in ownership. The Company also has federal and state income tax credit carryforwards available to potentially offset future federaland state income tax of $3.1 million and $1.6 million, respectively. The federal credits are indefinitely-lived. The statecredits begin expiring in 2022. The Company has provided a partial valuation allowance against the benefits of these credits. In determining the extent to which a valuation allowance for deferred tax assets is required, the Company evaluatesall available evidence including projections of future taxable income, carry back opportunities, reversal of certain deferredtax liabilities, and other tax‑planning strategies. The valuation allowance at December 31, 2016 relates to the U.S. net federaldeferred tax asset (including the federal net operating loss), certain foreign net operating losses, state net operating losses andstate tax credit carryforwards. Based upon the available evidence, the Company has concluded that it is not more likely thannot that a certain portion of these net deferred tax assets will be realized as of December 31, 2016. If the Company determinesat some point in the future that utilization of these deferred tax assets becomes more likely than not, the Company willreduce the valuation allowance accordingly at that time. 97 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 A reconciliation of the beginning and ending amount of gross unrecognized income tax benefits is presented below(in thousands): Years Ended December 31, 2016 2015 2014 Beginning balance $11,729 $16,207 $11,284 Additions based on tax positions related to current year 1,196 1,333 5,221 Additions for income tax positions of prior years 542 95 1,559 Impact of changes in exchange rates (127) (594) (1,005) Settlements with tax authorities (559) — — Reductions for income tax positions for prior years (349) (4,308) (452) Reductions due to lapse of applicable statute of limitations — (1,004) (400) Ending balance $12,432 $11,729 $16,207 As of December 31, 2016, 2015, and 2014, the total gross unrecognized tax benefits were $12.4 million,$11.7 million, and $16.2 million, respectively. As of December 31, 2016, the total amount of gross unrecognized tax benefitswhich, if recognized, would impact the Company’s effective tax rate is $7.6 million. The Company anticipates changes intotal unrecognized tax benefits due to the expiration of statute of limitations within the next 12 months and an income taxaudit resolution. Specifically, adjustments related to transfer pricing and foreign tax exposures are expected to be resolved invarious jurisdictions. A reasonable estimate of the change in the total gross unrecognized tax benefit expected to berecognized as a result is $3.7 million as of the balance sheet date. The Company’s policy for recording interest and penalties associated with uncertain tax positions is to record suchitems as a component of income tax expense. The Company recorded an increase of $0.1 million, a decrease of $0.1 million,and an increase of $0.1 million during the years ended December 31, 2016, 2015 and 2014, respectively. As of December 31,2016, the Company has a total of $2.4 million recognized on uncertain tax positions. To the extent interest and penalties arenot incurred with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction in incometax expense. The Company has analyzed filing positions in all of the significant federal, state and foreign jurisdictions where theCompany is required to file income tax returns. The only periods subject to examination by the major tax jurisdictions wherethe Company does business are the 2008 through 2015 tax years. The Company has concluded that a portion of the undistributed earnings of its foreign subsidiaries related to certainpreviously taxed income is not indefinitely reinvested. With respect to the previously taxed income, as of December 31,2016 and December 31, 2015, there is no liability recorded for the effect of repatriating those foreign earnings due to themovement in foreign exchange rates which would cause a foreign exchange loss if the previously taxed income weredistributed. As of December 31, 2015 the Company recorded a deferred tax liability in the amount of $0.3 million on Russianearnings of $3.4 for which there was not an indefinite reinvestment assertion. The Company has since concluded that thisportion of Russian earnings is indefinitely reinvested and has removed the prior year deferred tax liability in the amount of$0.3 million as of December 31, 2016. For the remaining undistributed earnings of $256.6 million, $236.7 million, and$186.1 million as of December 31, 2016, 2015, and 2014, respectively, the Company has concluded that these earningswould be permanently reinvested in the local jurisdictions and not repatriated to the United States. Accordingly, theCompany has not provided for U.S. federal and foreign withholding taxes on those undistributed earnings of its foreignsubsidiaries. It is not practicable to estimate the amount that might be payable if some or all of such earnings were to beremitted. The amount of the tax liability that would result from a repatriation is impracticable to calculate given theuncertainty as to which repatriation structure would be used should the Company change its assertion and repatriate foreignearnings. Furthermore, given the uncertainty as to the repatriation structure, the Company cannot analyze the availabilityand amount of foreign tax credits that might be available. These earnings will provide the Company with the opportunity tocontinue to expand the Company’s global footprint and fund the working capital needs of the Company’s foreign locationsfor future growth. 98 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 A rollforward of the deferred tax asset valuation allowance accounts is as follows (in thousands): Years Ended December 31, 2016 2015 2014Beginning balance $23,205 $16,142 $6,120Additions - purchase accounting — — 1,069Additions - other comprehensive income — 3,892 5,165Additions - charged to expense 3,421 3,770 8,476Deductions - charged to expense (including translation adjustments) (4,937) (599) (4,688)Ending balance $21,689 $23,205 $16,142 The valuation allowance is primarily related to U.S. federal loss carryforwards, state loss carryforwards, state creditcarryforwards, and loss carryforwards in various foreign jurisdictions. (13) Commitments and Contingencies Operating Leases The Company leases office space under operating lease agreements expiring at various times through 2030. TheCompany has sublease agreements for certain facilities to reduce rent expense and accommodate expansion needs. Thesubleases expire at various times through 2022. The Company also leases certain office equipment under the terms ofoperating leases expiring at various times through 2021. Rent expense under operating leases, net of sublease rental income, was $31.9 million, $30.1 million and $33.4million for the years ended December 31, 2016, 2015 and 2014, respectively. Future minimum lease commitments on non‑cancelable operating leases are as follows (in thousands): Year Ending December 31, Leases SubleaseRentalIncome Net Total 2017 $37,975 $(539) $37,436 2018 32,450 (323) 32,127 2019 28,614 (270) 28,344 2020 26,845 (270) 26,575 2021 25,070 (270) 24,800 2022 and thereafter 117,083 (308) 116,775 Total $268,037 $(1,980) $266,057 Employment Agreements The Company has entered into employment and non‑compete agreements with certain management employees. Inthe event of termination of employment for certain instances, employees will receive severance payments for base salary andbenefits for a specified period (six months for vice presidents, nine months for senior vice presidents and twelve months forexecutive vice presidents, the president and chief executive officer). Each employment agreement also contains provisionsthat restrict the employee’s ability to compete directly with the Company for a comparable period after employmentterminates. In addition, stock option grant agreements for these employees provide the Company with the right to repurchasefrom the employee, or the employee with the right to sell to the Company, stock owned by the employee in certain limitedinstances of termination. 99 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 Legal Proceedings The Company is involved in legal proceedings from time to time in the ordinary course of its business, includingemployment claims and claims related to other business transactions. Although the outcome of such claims is uncertain,management believes that these legal proceedings will not have a material adverse effect on the financial condition or resultsof future operations of the Company. The Company is currently a party to litigation with the City of Sao Paulo, Brazil. The dispute relates to whether theexport of services provided by the Company is subject to a local tax on services. The Company has not recorded a liabilityassociated with the claim, which totaled $4.9 million at December 31, 2016, given that it is not deemed probable theCompany will incur a loss related to this case. However, a deposit totaling $4.9 million has been made to the Brazilian courtin order to annul the potential tax obligation and to avoid the accrual of additional interest and penalties. This balance isrecorded in other assets on the consolidated balance sheet. During June 2015, the Judiciary Court of Justice of the State ofSao Paulo ruled in the favor of the Company, however, the judgment was appealed by the City of Sao Paulo. The Companyexpects to recover the full amount of the deposit when the case is settled. Insurance The Company currently maintains insurance for risks associated with the operation of its business, provision ofprofessional services, and ownership of property. These policies provide coverage for a variety of potential losses, including,without limitation, loss or damage to property, bodily injury, general commercial liability, professional errors and omissions,and medical malpractice. The Company’s retentions and deductibles associated with these insurance policies range up to a maximum of $0.5million. Employee Health Insurance The Company is self‑insured for health insurance for employees within the United States. The Company maintainsstop‑loss insurance on a “claims made” basis for expenses in excess of $0.3 million per member per year. As ofDecember 31, 2016 and 2015, the Company maintained a reserve of approximately $4.1 million and $3.6 million,respectively, included in accrued expense and other current liabilities on the consolidated balance sheets, to cover openclaims and estimated claims incurred but not reported. (14) Employee Benefit Plans Defined contribution or profit sharing style plans are offered in Australia, Belgium, Germany, Hong Kong, India,Israel, the Netherlands, New Zealand, the Philippines, South Africa, Spain, Sweden, Thailand, and the United Kingdom. Insome cases these plans are required by local laws or regulations. The Company maintains a 401(k) Plan in the United States, which covers substantially all employees of its U.S.subsidiaries. The Company matches 50% of each participant's voluntary contributions after six months of employment,subject to a maximum contribution of 6% of the participant's compensation. The employer contributions to the 401(k) Planwere approximately $9.9 million, $6.6 million and $4.4 million for the years ended December 31, 2016, 2015 and 2014,respectively. (15) Derivatives The Company is exposed to certain risks relating to our ongoing business operations. The primary risk that theCompany seeks to manage by using derivative instruments is interest rate risk. Accordingly, the Company has institutedinterest rate hedging programs that are accounted for in accordance with ASC 815, “Derivatives and Hedging.” The interestrate hedging program is a cash flow hedge program designed to minimize interest rate volatility. The Company100 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 swaps the difference between fixed and variable interest amounts calculated by reference to an agreed‑upon notionalprincipal amount, at specified intervals. The Company also employed an interest rate cap that would have compensated theCompany if variable interest rates had risen above a pre‑determined rate. The Company’s interest rate contracts aredesignated as hedging instruments. On October 2, 2013, the Company entered into interest rate swap agreements with an aggregate notional principalamount of $620.0 million, or the 2013 Swaps. The interest rate swaps were set to begin on September 23, 2015. The interestrate swaps were to be used to hedge the Company’s variable rate debt. The interest rate swaps had maturity dates rangingfrom one to five years. During the third quarter of 2015, the Company paid $32.9 million to terminate the 2013 Swaps.Amounts previously recorded in accumulated other comprehensive loss related to these interest rate swaps, totaling $29.6million, are being reclassified into earnings over the term of the previously hedged borrowing using the swaplet method. Forthe terminated swaps, the Company reclassified $4.7 million and $0.7 million previously recorded in accumulated othercomprehensive loss into interest expense during the years ended December 31, 2016 and 2015, respectively. In addition, on October 2, 2013 the Company also entered into an interest rate cap with an aggregate notionalprincipal amount of $800.0 million. The interest rate cap began on September 23, 2014. The interest rate cap was used tohedge the variable rate of the Company’s 2013 First Lien Term Loan to the extent that the LIBOR exceeded 4.00%. Duringthe third quarter of 2015, the Company’s interest rate cap with a notional principal amount of $800.0 million expired. Subsequent to the termination of all existing interest rate swaps, the Company entered into a new interest rate swapagreement with a notional principal amount of $250.0 million and a fixed three month LIBOR rate of 1.48%, or the 2015Swap. The interest rate swap began on September 23, 2015 and will mature on September 23, 2018. The interest rate swap isbeing used to hedge the Company’s variable rate debt. In conjunction with the closing of the 2016 Credit Facilities in December 2016, the 2015 Swap was amended tomodify the fixed rate, repricing dates and embedded floor, or the Modified 2015 Swap. The Company re-designated theModified 2015 Swap against the refinanced debt under the 2016 Credit Facilities. As a result of the re-designation, allamounts previously recorded in accumulated other comprehensive loss related to the 2015 Swap, totaling $0.8 million, werefrozen and will be amortized into earnings over the term of the previously hedged borrowing using the swaplet method. Theclosing of the 2016 Credit Facilities did not impact the amortization of the losses frozen in accumulated othercomprehensive loss associated with the 2013 Swaps. The following table presents the notional amounts and fair values (determined using level 2 inputs) of theCompany’s derivatives as of December 31, 2016 and 2015 (in thousands): Balance Sheet December 31, 2016 December 31, 2015 Classification Notional amount Asset/(Liability) Notional amount Asset/(Liability) Derivatives in an asset position: Other assets$ —$ — $250,000 $28 Derivatives in a liability position: Other long-term liabilities 250,000 (590) — — The Company records the effective portion of any change in the fair value of derivatives designated as hedginginstruments under ASC 815 to other accumulated comprehensive loss in the consolidated balance sheets, net of deferredtaxes, and will later reclassify into earnings when the hedged item affects earnings or is no longer expected to occur. Gainsand losses from the ineffective portion of any hedge are recognized in earnings immediately. For other derivative contractsthat do not qualify or no longer qualify for hedge accounting, changes in the fair value of the derivatives are recognized inearnings each period. 101 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 During 2014, due to the debt repayments made in conjunction with the Company’s IPO and related changes toforecasted voluntary debt repayments in future periods, the Company determined interest rate swaps with a notional principalamount of $47.5 million no longer qualified for hedge accounting and interest rate swaps with a notional principal amount of$297.5 million experienced ineffectiveness. During 2015, the Company further revised its forecasted voluntary debtrepayments in future periods; as a result of the change in expected future cash flows, an interest rate swap with a notionalprincipal amount of $17.5 million experienced ineffectiveness. This also caused interest rate swaps with a notional principalamount of $40.0 million, which experienced ineffectiveness during 2014, to no longer qualify for hedge accounting. All ofabovementioned interest rate swaps were terminated during the third quarter of 2015. The table below presents the effect of our derivatives on the consolidated statements of operations andcomprehensive (loss) income (in thousands): Years Ended December 31, Derivatives in Cash Flow Hedging Relationships (Interest Rate Contracts) 2016 2015 2014 Amount of pretax loss recognized in other comprehensive income (loss)on derivatives $(1,600) $(11,851) $(20,976) Amount of loss recognized in other income (expense), net on derivatives(ineffective portion) 1 (444) (1,275) Amount of loss recognized in other income (expense), net on derivatives(no longer qualify for hedge accounting) — (1,137) (453) Amount of loss reclassified from accumulated other comprehensive lossinto interest expense, net on derivatives (5,921) (908) (3) The Company expects that $6.9 million of unrealized losses will be reclassified out of accumulated othercomprehensive loss and into interest expense, net over the next 12 months.102 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 (16) Accumulated Other Comprehensive (Loss) Income Below is a summary of the components of accumulated other comprehensive (loss) income (in thousand): Foreign Currency Derivative Translation Instruments Total Balance at December 31, 2013 $15,061 $1,808 $16,869 Other comprehensive loss before reclassifications, net of tax (68,700) (17,681) (86,381) Reclassification adjustments, net of tax — 3 3 Balance at December 31, 2014 (53,639) (15,870) (69,509) Other comprehensive loss before reclassifications, net of tax (52,433) (11,273) (63,706) Reclassification adjustments, net of tax — 908 908 Balance at December 31, 2015 (106,072) (26,235) (132,307) Other comprehensive loss before reclassifications, net of tax (95,019) (978) (95,997) Reclassification adjustments, net of tax — 3,618 3,618 Balance at December 31, 2016 $(201,091) $(23,595) $(224,686) Foreign Currency Translation The change in the foreign currency translation adjustment during the year ended December 31, 2016 was primarilydue to the movements in the British Pound, or GBP, Euro, or EUR, Canadian dollar, or CAD, and Russian Ruble, or RUB,exchange rates against the U.S. dollar, or USD. The USD strengthened by 16.7% and 3.6% versus the GBP and EUR,respectively, during the year ended December 31, 2016, and the USD depreciated by 3.1% and 19.5% against the CAD andRUB, respectively, during the same period. The movement in the GBP and EUR represented $90.2 million and $8.4 million,respectively, of the $95.0 million loss recorded to accumulated other comprehensive loss during the year ended December31, 2016. The overall change was partially offset by gains in the CAD and RUB, representing $1.1 million and $4.0 millionof the adjustment, respectively. The change in the foreign currency translation adjustment during the year ended December 31, 2015 was primarilydue to the movements in the GBP, EUR, and CAD exchange rates against the USD. The USD strengthened by 4.6%, 10.1%,and 16.1% against the GBP, EUR, and CAD, respectively. The movement of the GBP, EUR, and CAD represented $25.8million, $16.4 million, and $7.1 million, respectively, of the $52.4 million loss recorded to accumulated othercomprehensive loss during the year ended December 31, 2015. The change in the foreign currency translation adjustment during the year ended December 31, 2014 was primarilydue to the movements in the GBP and EUR exchange rates against the USD. The USD strengthened by 5.7% and 11.8%against the GBP and EUR, respectively. The movement of the GBP and EUR represented $32.3 million and $20.6 million,respectively, of the $68.7 million loss recorded to accumulated other comprehensive loss during the year ended December31, 2014. Derivative Instruments See Note 15 for further information on changes to accumulated other comprehensive income related to thederivative instruments. (17) Net Income (Loss) Per Share Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average number ofcommon shares outstanding for the applicable period. Diluted net income (loss) per share is calculated after adjusting thedenominator of the basic net income (loss) per share calculation for the effect of all potentially dilutive common shares,which in the Company’s case, includes shares issuable under the stock option and incentive award plan.103 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 The following table reconciles the basic to diluted weighted average shares outstanding (in thousands): Years Ended December 31, 2016 2015 2014 Basic weighted average common shares outstanding 60,759 59,965 42,897 Effect of dilutive stock options and RSAs 3,693 3,242 — Diluted weighted average common shares outstanding 64,452 63,207 42,897 Anti-dilutive shares 305 115 1,223 The anti‑dilutive shares disclosed above were calculated using the treasury stock method. The treasury stockmethod calculates dilution assuming the exercise of all in-the-money options and vesting of RSAs/RSUs, reduced by therepurchase of shares with the proceeds from the assumed exercises, and unrecognized compensation expense for outstandingawards. As the Company was in a net loss position during the year ended December 31, 2014, all options and RSAsoutstanding (as disclosed in Note 11) would be anti‑dilutive. (18) Related Party Transactions KKR, a significant stockholder of the Company, was a participant in the syndicate of lenders that providedfinancing under the 2013 Credit Facilities. KKR contributed $28.0 million of the $887.8 million of 2013 First Lien TermLoan issued under the 2013 Credit Facilities, which makes up approximately 3% of the 2013 First Lien Term Loan. Based onthe limited contribution of KKR in the 2013 Credit Facilities, the Company represents that the 2013 Credit Facilities wasarranged at an arm’s length basis. KKR and UBS were the underwriters of the Incremental Term Loan Borrowing for$32.5 million each. At December 31, 2015, KKR held $14.7 million in 2013 First Lien Term Loan. The 2013 Credit Facilitieswas extinguished in December 2016. For further discussion of the 2013 Credit Facilities transaction and extinguishment, seeNote 9. In connection with the Merger, the Company entered into a monitoring agreement with KKR pursuant to whichKKR provided management services to the Company and its affiliates. The monitoring agreement provided a termination feebased on the net present value of future payment obligations under the monitoring agreement, under certain circumstances inwhich the monitoring agreement was terminated by us. In connection with the IPO, the Company paid a termination fee of$11.9 million during the year ended December 31, 2014, and therefore, no management fees to KKR were incurredsubsequent to the IPO. Prior to the termination of the monitoring agreement, the Company paid management fees of$1.6 million for the year ended December 31, 2014. Also, in connection with the IPO, the Company paid an underwritingdiscount and commission of $4.0 million to affiliates of KKR. The Company also entered into a joint venture with an affiliate of KKR during 2015. The joint venture wasdissolved during the same year. For further discussion on the related party transaction, refer to Note 3. 104 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 (19) Supplemental Cash Flow Information The following table presents the Company’s supplemental cash flow information (in thousands): Years Ended December 31, 2016 2015 2014 Cash paid during the period for: Income taxes, net of refunds$27,644 $17,148 $6,778 Interest 48,156 54,632 80,699 Non-cash investing and financing activities: Issuance of common stock for the acquisition of Value Health Solutions, Inc. — 1,582 — IPO cost incurred but not paid — — 525 Accrued fixed assets purchases 2,644 2,733 1,644 Cashless exercises of stock options 9,456 1,672 — (20) Operations by Geographic Area The table below presents certain enterprise‑wide information about the Company’s operations by geographic areafor the years ended December 31, 2016, 2015 and 2014. The Company attributes revenues to geographical locations basedupon where the services are performed. The Company’s operations within each geographical region are further broken down to show each country whichaccounts for 10% or more of the totals (in thousands): Years Ended December 31, 2016 2015 2014 Service revenue: Americas: United States $1,063,625 $898,637 $822,220 Other 33,320 32,802 28,925 Americas 1,096,945 931,439 851,145 Europe, Africa, and Asia-Pacific United Kingdom 394,363 364,476 313,535 Netherlands 68,118 57,739 67,208 Other 20,597 22,193 34,708 Europe, Africa, and Asia-Pacific 483,078 444,408 415,451 Total service revenue 1,580,023 1,375,847 1,266,596 Reimbursement revenues 231,688 238,036 192,990 Total revenue $1,811,711 $1,613,883 $1,459,586 105 Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 December 31, 2016 2015 Long-lived assets: Americas: United States $60,462 $54,058 Other 802 889 Americas 61,264 54,947 Europe, Africa, and Asia-Pacific United Kingdom 3,569 4,773 Netherlands 13,313 10,850 Other 9,431 10,121 Europe, Africa, and Asia-Pacific 26,313 25,744 Total long-lived assets $87,577 $80,691 (21) Quarterly Financial Data (unaudited) The following table summarizes the Company’s unaudited quarterly results of operations (in thousands, except pershare data: 2016 First Quarter Second Quarter Third Quarter Fourth Quarter Service revenue $372,320 $394,249 $399,841 $413,613 Reimbursement revenue 57,903 61,598 53,414 58,773 Total revenue 430,223 455,847 453,255 472,386 Income from operations 18,946 50,348 54,814 38,241 (Benefit from) provision for income taxes (5,264) 12,312 10,821 10,625 (Losses) income before equity in (losses) gains ofunconsolidated joint ventures (15,431) 35,423 31,416 13,992 Equity in (losses) gains of unconsolidated joint ventures (538) 3,247 33 33 Net (loss) income (15,969) 38,670 31,449 14,025 Comprehensive (loss) income $(22,251) $567 $21,982 $(24,502) Basic (losses) earnings per share $(0.27) $0.64 $0.52 $0.23 Diluted (losses) earnings per share $(0.27) $0.60 $0.49 $0.22 2015 First Quarter Second Quarter Third Quarter Fourth Quarter Service revenue $331,968 $336,518 $345,096 $362,265 Reimbursement revenue 56,610 56,330 58,414 66,682 Total revenue 388,578 392,848 403,510 428,947 Income from operations 32,937 38,321 49,179 43,861 Provision for income taxes 8,022 5,623 10,696 5,663 Income before equity in (losses) gains of unconsolidatedjoint ventures 18,124 13,220 25,978 27,839 Equity in (losses) gains of unconsolidated joint ventures (937) (805) (2,319) 665 Net income 17,187 12,415 23,659 28,504 Comprehensive (loss) income $(29,391) $44,470 $(4,086) $7,974 Basic earnings per share $0.29 $0.21 $0.39 $0.47 Diluted earnings per share $0.27 $0.20 $0.37 $0.45 106 (1)(2)(3)(3)(3)(3)Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)DECEMBER 31, 2016 (1)Transaction-related costs for the three months ended March 31, 2016, June 30, 2016 and December 31, 2016 were $28.9million, $2.9 million and $13.0 million, respectively. There were no transaction-related costs for the three months endedSeptember 30, 2016. Transaction-related costs primarily relate to costs incurred in connection with the March, May andNovember 2016 secondary offerings and receivables financing agreement. These costs include $42.1 million of non-cash stock-based compensation expense and $2.7 million of third-party fees. (2)During the three months ended March 31, 2016 and December 31, 2016, the Company recorded a loss onextinguishment of debt of $21.5 million and $16.7 million, respectively. The loss on extinguishment of debt recordedduring the three months ended March 31, 2016 related to the cash tender offer on the Company’s Senior Notes. The losson extinguishment of debt recorded during the three months ended December 31, 2016 related to the refinancing of theCompany’s 2013 Credit Facilities. Refer to Note 9, Current Borrowings and Long-Term Debt, for additional informationregarding the cash tender on the Senior Notes and the 2013 Credit Facilities refinancing. (3)The sum of the quarterly per share amounts may not equal per share amounts reported for year‑to‑date periods. This isdue to changes in the number of weighted average shares outstanding and the effects of rounding for each period. 107 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures As of December 31, 2016, we carried out an evaluation under the supervision and with the participation of ourmanagement, including our principal executive officer and principal financial officer, of the effectiveness of the design andoperation of our disclosure controls and procedures. Regulations under the Exchange Act require public companies,including us, to maintain “disclosure controls and procedures,” which are defined in Rule 13a‑15(e) and Rule 15d‑15(e) ofthe Exchange Act to mean a company’s controls and other procedures that provide reasonable assurance that informationrequired to be disclosed in reports that it files or submits under the Exchange Act is recorded, processed, summarized, andreported within the time periods specified in the SEC’s rules and forms and that such information is accumulated andcommunicated to management, including our principal executive officer and principal financial officer, or personsperforming similar functions, as appropriate to allow timely decisions regarding required disclosures. There are inherentlimitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human errorand the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls andprocedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, ourprincipal executive officer and principal financial officer concluded that our disclosure controls and procedures wereeffective as of the end of the period covered by this report to accomplish their objectives at a reasonable assurance level. Management’s Report on Internal Control over Financial Reporting Our management’s report on internal control over financial reporting is set forth in Part II, Item 8 of this AnnualReport on Form 10-K and is incorporated herein by reference. Changes in Internal Control over Financial Reporting There has been no change in our internal control over financial reporting during the quarter ended December 31,2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information Annual Meeting Date The Board of Directors of the Company has fixed the date of the 2017 Annual Meeting of Stockholders for June 1,2017.108 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this item will be included in our definitive proxy statement (or the “2017 ProxyStatement”) to be filed with the SEC within 120 days of the end of our fiscal year covered by this Annual Report and isincorporated herein by reference. Item 11. Executive Compensation The information required by this item will be included in our 2017 Proxy Statement to be filed with the SEC within120 days of the end of our fiscal year covered by this Annual Report and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item will be included in our 2017 Proxy Statement to be filed with the SEC within120 days of the end of our fiscal year covered by this Annual Report and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item will be included in our 2017 Proxy Statement to be filed with the SEC within120 days of the end of our fiscal year covered by this Annual Report and is incorporated herein by reference. Item 14. Principal Accountant Fees and Services The information required by this item will be included in our 2017 Proxy Statement to be filed with the SEC within120 days of the end of our fiscal year covered by this Annual Report and is incorporated herein by reference. PART IV Item 15. Exhibits, Financial Statement Schedules (1)Financial Statements The following financial statements and supplementary data are included in Item 8 of this annual report: PageReports of Independent Registered Public Accounting Firm 64Consolidated Balance Sheets 66Consolidated Statements of Operations 67Consolidated Statements of Comprehensive (Loss) Income 68Consolidated Statements of Changes in Stockholders’ Equity 69Consolidated Statements of Cash Flows 70Notes to Consolidated Financial Statements 71 (2)Financial Statement Schedules The information required to be submitted in the Financial Statement Schedules for PRA Health Sciences, Inc. andsubsidiaries has either been shown in the financial statements or notes, or is not applicable or required under Regulation S‑X;therefore, those schedules have been omitted. (3)Exhibits The exhibits listed in the accompanying Exhibit Index following the signature page are filed or furnished as a partof this report and are incorporated herein by reference. Item 16. Form 10-K Summary None.109 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf on February 23, 2017 by the undersigned, thereunto duly authorized. PRA Health Sciences, Inc. By:/s/ Linda Baddour Name:Linda Baddour Title:Executive Vice President and Chief FinancialOfficer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the followingpersons on behalf of the registrant and in the capacities indicated on February 23, 2017. Signature Capacity /s/ Colin ShannonColin Shannon President, Chief Executive Officer and Chairman of theBoard of Directors (Principal Executive Officer) /s/ Linda BaddourLinda Baddour Executive Vice President and Chief Financial Officer(Principal Financial and Accounting Officer) /s/ Jeffrey T. BarberJeffrey T. Barber Director /s/ Max C. LinMax C. Lin Director /s/ James C. MomtazeeJames C. Momtazee Director /s/ Ali J. SatvatAli J. Satvat Director /s/ Matthew P. YoungMatthew P. Young Director /s/ LINDA S GRAISLinda S. Grais Director 110 Table of Contents EXHIBIT INDEX Exhibit Number Description of Exhibit3.1 Amended and Restated Certificate of Incorporation of PRA Health Sciences, Inc. (incorporated by reference toExhibit 3.1 to the Registrant’s Current Report on Form 8‑K filed on November 18, 2014 (No. 001‑36732))3.2 Amended and Restated Bylaws of PRA Health Sciences, Inc. (incorporated by reference to Exhibit 3.2 to theRegistrant’s Current Report on Form 8‑K filed on November 18, 2014 (No. 001‑36732))4.1 Stockholders Agreement, dated as of November 18, 2014, among PRA Health Sciences, Inc. and the otherparties named thereto (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8‑Kfiled on November 18, 2014 (No. 001‑36732))4.2 Sale Participation Agreement of KKR PRA Investors L.P., dated September 23, 2013 (incorporated by referenceto Exhibit 4.3 to the Registrant’s Registration Statement on Form S‑1 (No. 333‑198644))10.1** 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report onForm 8‑K filed on November 18, 2014 (No. 001‑36732))10.2** PRA Global Holdings, Inc. 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to theRegistrant’s Registration Statement on Form S‑1 (No. 333‑198644))10.3** PRA Holdings, Inc. 2007 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’sRegistration Statement on Form S‑1 (No. 333‑198644))10.4** PRA International 2004 Incentive Award Plan (incorporated by reference to Exhibit 10.4 to the Registrant’sRegistration Statement on Form S‑1 (No. 333‑198644))10.5** PRA Holdings, Inc. 2001 Stock Option Plan (incorporated by reference to Exhibit 10.5 to the Registrant’sRegistration Statement on Form S‑1 (No. 333‑198644))10.6** Form of Stock Option Agreement (incorporated by reference to Exhibit 10.6 to the Registrant’s RegistrationStatement on Form S‑1 (No. 333‑198644))10.7** Form of Rollover Option Agreement (incorporated by reference to Exhibit 10.7 to the Registrant’s RegistrationStatement on Form S‑1 (No. 333‑198644))10.8** Amended and Restated Employment Agreement, effective as of January 1, 2010, by and between PRAInternational and Colin Shannon, as amended (incorporated by reference to Exhibit 10.8 to the Registrant’sRegistration Statement on Form S‑1 (No. 333‑198644))10.9** Employment Agreement, effective July 1, 2014, between PRA Global Holdings, Inc., PRA International andColin Shannon (incorporated by reference to Exhibit 10.9 to the Registrant’s Registration Statement onForm S‑1 (No. 333‑198644))10.10** Executive Employment Agreement, effective July 1, 2015, between PRA Health Sciences, Inc. and LindaBaddour (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed onJuly 6, 2015 (No. 001‑36732))10.11** Employment and Non‑Competition Agreement, effective as of March 1, 2009, by and between PharmaceuticalResearch Associates, Inc. and David W. Dockhorn (incorporated by reference to Exhibit 10.11 to theRegistrant’s Registration Statement on Form S‑1 (No. 333‑198644))10.12 Senior Secured Credit Agreement, dated as of September 23, 2013, by and among PRA Holdings, Inc., UBS AG,Stamford Branch, as administrative agent, and other agents and lenders party thereto (incorporated by referenceto Exhibit 10.12 to the Registrant’s Registration Statement on Form S‑1 (No. 333‑198644))10.13 Amendment No. 1 to the Senior Secured Credit Agreement, dated as of March 14, 2014, by and among PRAHoldings, Inc., UBS AG, Stamford Branch, as administrative agent, and other agents and lenders party thereto(incorporated by reference to Exhibit 10.13 to the Registrant’s Registration Statement on Form S‑1(No. 333‑198644))10.14 Security Agreement, dated as of September 23, 2013, by and among PRA Holdings, Inc., UBS AG, StamfordBranch, as administrative agent, and other agents and lenders party thereto (incorporated by reference toExhibit 10.14 to the Registrant’s Registration Statement on Form S‑1 (No. 333‑198644))10.15 Guarantee Agreement, dated as of September 23, 2013, by and among PRA Holdings, Inc., UBS AG, StamfordBranch, as administrative agent, and other agents and lenders party thereto (incorporated by reference toExhibit 10.15 to the Registrant’s Registration Statement on Form S‑1 (No. 333‑198644))10.16 Indenture, dated as of September 23, 2013, among Pinnacle Merger Sub, Inc., as Issuer, the Guarantors namedtherein and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 10.16 tothe Registrant’s Registration Statement on Form S‑1 (No. 333‑198644))10.17 Registration Rights Agreement among KKR PRA Investors L.P., KKR PRA Investors GP LLC and PRA HealthSciences, Inc. (f/k/a Pinnacle Holdco Parent, Inc.) (incorporated by reference to Exhibit 10.17 to theRegistrant’s Registration Statement on Form S‑1 (No. 333‑198644))111 Table of Contents10.18 Monitoring Agreement of PRA Health Sciences, Inc. (f/k/a) Pinnacle Holdco Parent, Inc., dated September 23,2013 (incorporated by reference to Exhibit 10.18 to the Registrant’s Registration Statement on Form S‑1(No. 333‑198644))10.19 Indemnification Agreement among KKR PRA Investors L.P., KKR PRA Investors GP LLC, PRA HealthSciences, Inc. (f/k/a Pinnacle Holdco Parent, Inc.), PRA Holdings, Inc. and Kohlberg Kravis Roberts & Co. L.P.dated September 23, 2013 (incorporated by reference to Exhibit 10.19 to the Registrant’s RegistrationStatement on Form S‑1 (No. 333‑198644))10.20 Transaction Fee Agreement between PRA Health Sciences, Inc. (f/k/a Pinnacle Holdco Parent, Inc.) andKohlberg Kravis Roberts & Co. L.P. dated September 23, 2013 (incorporated by reference to Exhibit 10.20 tothe Registrant’s Registration Statement on Form S‑1 (No. 333‑198644))10.21 Stockholders Agreement, dated as of November 18, 2014, among PRA Health Sciences, Inc. and the otherparties named thereto (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8‑K(No. 001‑36732))10.22** Form of Non‑Qualified Stock Option Agreement under the PRA Holdings, Inc. 2007 Equity Incentive Plan(incorporated by reference to Exhibit 10.22 to the Registrant’s Registration Statement on Form S‑1(No. 333‑198644))10.23** Form of Non‑Qualified Stock Option Agreement (Time‑Based Vesting) under the PRA Holdings, Inc. 2007Equity Incentive Plan (incorporated by reference to Exhibit 10.23 to the Registrant’s Registration Statement onForm S‑1 (No. 333‑198644))10.24** Form of Non‑Qualified Stock Option Agreement (Performance‑Based Vesting) under the PRA Holdings, Inc.2007 Equity Incentive Plan (incorporated by reference to Exhibit 10.24 to the Registrant’s RegistrationStatement on Form S‑1 (No. 333‑198644))10.25** Form of Option Agreement of PRA International (incorporated by reference to Exhibit 10.25 to the Registrant’sRegistration Statement on Form S‑1 (No. 333‑198644))10.26** Amendment to Employment Agreement effective July 1, 2014, dated as of September 22, 2014, between PRAHealth Sciences, Inc., PRA International, and Colin Shannon (incorporated by reference to Exhibit 10.26 to theRegistrant’s Registration Statement on Form S‑1 (No. 333‑198644))10.27** Form of Restricted Stock Grant Notice under the PRA Health Sciences, Inc. 2014 Omnibus Incentive Plan(incorporated by reference to Exhibit 10.27 to the Registrant’s Registration Statement on Form S‑1(No. 333‑198644))10.28 Receivables Financing Agreement, dated as of March 22, 2016, by and among PRA Holdings, Inc., PNC Bank,National Association, as administrative agent, and other agents and lenders party thereto (incorporated byreference to Exhibit 10.1 to the Registrant’s Current Report on Form 8‑K filed on March 25, 2016(No. 001‑36732))10.29 Purchase and Sale Agreement, dated as of March 22, 2016, by and among PRA Holdings, Inc., PNC Bank,National Association, as administrative agent, and other agents and lenders party thereto (incorporated byreference to Exhibit 10.2 to the Registrant’s Current Report on Form 8‑K filed on March 25, 2016(No. 001‑36732))10.30 Credit Agreement, dated as of December 6, 2016, by and among Pharmaceutical Research Associates, Inc.,Wells Fargo Bank, National Association, as administrative agent, and other agents and lenders party thereto(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8‑K filed on December 7,2016 (No. 001‑36732))10.31 Security Agreement, dated as of December 6, 2016, by and among Pharmaceutical Research Associates, Inc.,Wells Fargo Bank, National Association, as administrative agent, and other agents and lenders party thereto(incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8‑K filed on December 7,2016 (No. 001‑36732))10.32 Guarantee Agreement, dated as of December 6, 2016, by and among Pharmaceutical Research Associates, Inc.,Wells Fargo Bank, National Association, as administrative agent, and other agents and lenders party thereto(incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8‑K filed on December 7,2016 (No. 001‑36732))21.1* Subsidiaries of the Registrant23.1* Consent of Deloitte & Touche LLP31.1* Certification of the Chief Executive Officer pursuant to Rule 13a‑14(a) or 15d‑14(a) of the Securities ExchangeAct of 1934, as adopted pursuant to Section 302 of the Sarbanes‑Oxley Act of 200231.2* Certification of the Chief Financial Officer pursuant to Rule 13a‑14(a) or 15d‑14(a) of the Securities ExchangeAct of 1934, as adopted pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002112 Table of Contents32.1* Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes‑Oxley Act of 200232.2* Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes‑Oxley Act of 2002101* The following financial information from PRA Health Sciences, Inc.’s Annual Report on Form 10-K for the yearended December 31, 2016 formatted in XBRL: (i) Consolidated Balance Sheets as of December 31, 2016 andDecember 31, 2015, (ii) Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and2014, (iii) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2016,2015 and 2014, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and2014, and (v) Notes to Consolidated Financial Statements* Filed herewith. ** This document has been identified as a management contract or compensatory plan or arrangement. 113Exhibit 21.1 Jurisdiction of Organization Entity NameArgentina Pharmaceutical Research Associates Ltda Suc. ArgentinaArgentina RPS Research S.A.Australia Pharmaceutical Research Associates Pty LimitedAustralia RPS Australia Pty LtdAustria RPS Research Austria GmbHBelarus IOOO IMP-Logistics BelBelgium Pharmaceutical Research Associates Belgium BVBABelgium RPS Research Belgium BVBABermuda RPS Bermuda, Ltd.Brazil Pharmaceutical Research Associates Ltda.Brazil RPS do Brasil Serviços de Pesquisas LTDA.British Virgin Islands RPS China Inc.Bulgaria Pharmaceutical Research Associates Bulgaria EOODBulgaria RPS Bulgaria EOODCanada 3065613 Nova Scotia CompanyCanada Pharmaceutical Research Associates Inc.Canada (Québec) Services de Recherche Pharmaceutique Inc.Chile Pharmaceutical Research Associates Chile SpAChile RPS Chile LTDA.China PRA China (Shanghai) Co., Ltd.China RPS (Beijing) Inc.China (branch office of RPS Beijing) RPS (Beijing), Inc., Shanghai BranchColombia Pharmaceutical Research Associates Colombia SASColombia RPS Colombia LTDA.Costa Rica Research Pharmaceutical Services Costa Rica, LTDA.Croatia Pharm Research Associates d.o.o. Ltd. for clinical trialsCroatia Research Pharmaceutical Services Hrvatska d.o.o. ulikvidacijiCzech Republic Pharmaceutical Research Associates CZ, s.r.o.Czech Republic RPS Czech Republic s.r.o.Denmark Pharmaceutical Research Associates Denmark ApSDenmark RPS Denmark ApSEgypt RPS Egypt (Limited Liability Company)Estonia Pharmaceutical Research Associates Baltics OÜEstonia RPS Estonia OÜFinland Pharmaceutical Research Associates Finland OyFinland RPS Finland OyFrance Pharmaceutical Research Associates SarlFrance ReSearch Pharmaceutical Services France S.A.S.France RPS Research France S.A.S.Georgia Pharmaceutical Research Associates Georgia LLCGermany Pharmaceutical Research Associates GmbH1 Jurisdiction of Organization Entity NameGermany Pharmacon Research Gesellschaft fur ArzneimittelforschungmbHGermany RPS Germany GmbHGermany RPS Research Germany GmbHGreece Pharmaceutical Research Associates Greece A.E.Greece RPS Pharmaceutical Hellas EPEGuatemala RPS Guatemala, S.A.Hong Kong PRA Health Sciences (Hong Kong) LimitedHong Kong RPS Hong Kong LimitedHungary Pharmaceutical Research Associates, Hungary Research andDevelopment Ltd.Hungary RPS Hungary Kft.Iceland RPS Iceland ehf.India Kinship Technologies Private LimitedIndia Pharmaceutical Research Associates India Private LimitedIndia PRA Pharmaceutical India Private LimitedIndia RPS Research India Private LimitedIreland Research Pharmaceutical Services (Outsourcing Ireland)LimitedIsrael Pharmaceutical Research Associates Israel Ltd.Israel RPS Research Israel Ltd. “(in liquidation)”Italy Pharmaceutical Research Associates Italy S.r.l.Italy (branch of PRA Germany) Pharmaceutical Research Associates GmbH sede secondariaItaly RPS Research Italy S.r.l.Japan K.K. RPS JapanJapan A2PRA CorporationLatvia RPS Latvia SIALithuania UAB RPS LithuaniaMalaysia RPS Malaysia Sdn. Bhd.Mexico Pharmaceutical Research Associates Mexico S. de R.L. de C.V.México RPS Research México, S. de R.L. de C.V.México RPS Research Servicios, S. de R.L. de C.V.The Netherlands Pharmaceutical Research Associates C.V.The Netherlands Pharmaceutical Research Associates Group B.V.The Netherlands Pharmaceutical Research Associates Holdings B.V.The Netherlands Pharmaceutical Research Associates Metaholdings B.V.The Netherlands PRA International B.V.The Netherlands PRA International Operations B.V.The Netherlands ReSearch Pharmaceutical Services Netherlands B.V.The Netherlands ReSearch Pharmaceutical Services Netherlands C.V.New Zealand Pharmaceutical Research Associates New Zealand LimitedNew Zealand RPS New Zealand Limited2 Jurisdiction of Organization Entity NameNorway RPS Research Norway ASPanama RPS Panama Inc.Peru Pharmaceutical Research Associates Peru Sociedad AnonimaCerrada (aka PRA Peru SAC)Perú RPS Perú S.A.C.Philippines RPS Research Philippines, Inc.Poland Pharmaceutical Research Associates Sp. z o.o.Poland RPS Polska sp. z o.o.Portugal PRA International Portugal, Unipessoal Lda.Portugal RPSP - Research Pharmaceutical Services Portugal,Unipessoal LDAPuerto Rico Research Pharmaceutical Services Puerto Rico, Inc.Romania Pharmaceutical Research Associates Romania SrlRomania RPS Romania S.R.L.Russia ZAO IMP LogisticsRussia LLC RPS ResearchSerbia Pharmaceutical Research Associates doo Belgrade, DragiseBasovana 10/1Serbia Research Pharmaceutical Services d.o.o. Beograd-Stari gradu likvidacijiSingapore Pharmaceutical Research Associates Singapore Pte. Ltd.Singapore RPS Research Singapore Pte. Ltd.Slovakia Pharmaceutical Research Associates SK s.r.o.Slovakia RPS Slovakia s.r.o.South Africa PRA Pharmaceutical SA (Proprietary) LimitedSouth Africa RPS Research South Africa (Proprietary) LimitedSouth Korea RPS Research Inc.South Korea Pharmaceutical Research Associates Korea LimitedSpain Pharmaceutical Research Associates Espana, S.A.U.Spain RPS ReSearch Ibérica, S.L.Spain RPS Spain S.L.Sweden PRA International Sweden ABSweden RPS Sweden ABSwitzerland PRA Switzerland AGSwitzerland RPS ReSearch Switzerland GmbHTaiwan Pharmaceutical Research Associates Taiwan, Inc.Taiwan RPS Taiwan Ltd.Thailand RPS Research (Thailand) Co., Ltd.Turkey PRA Clinical Research & Development Turkey AETurkey RPS Klinik Araştırma Organizasyon Limited ŞirketiUkraine Pharmaceutical Research Associates Ukraine, LLCUkraine OOO IMP-Logistics UkraineUkraine RPS Ukraine, LLCUnited Kingdom IMP Logistics UK Limited3 Jurisdiction of Organization Entity NameUnited Kingdom Pharm Research Associates (UK) LimitedUnited Kingdom Pharm Research Associates Russia LimitedUnited Kingdom Sterling Synergy Systems LimitedUnited Kingdom RPS Research UK LimitedUnited States (California) ClinStar LLCUnited States (California) Nextrials, Inc.United States (California) Pharmaceutical Research Associates CIS, LLCUnited States (California) Pharmaceutical Research Associates Eastern Europe, LLCUnited States (Delaware) CRI NewCo, Inc.United States (Delaware) CRI Worldwide, LLCUnited States (Delaware) International Medical Technical Consultants, LLCUnited States (Delaware) PRA Early Development Research, Inc.United States (Delaware) PRA Health Sciences, Inc.United States (Delaware) PRA Holdings, Inc.United States (Delaware) PRA Health Holdco, Inc.United States (Delaware) PRA Receivables, LLCUnited States (Delaware) PRA International, LLCUnited States (Delaware) Sunset Hills, LLCUnited States (Delaware) ReSearch Pharmaceutical Services, Inc.United States (Delaware) ReSearch Pharmaceutical Services, LLCUnited States (Delaware) Roy RPS Holdings LLCUnited States (Delaware) RPS Parent Holding LLCUnited States (Delaware) RPS Global Holdings, LLCUnited States (New Jersey) CRI International, LLCUnited States (Utah) Lifetree Clinical Research, LCUnited States (Virginia) Pharmaceutical Research Associates, Inc.Uruguay RPS Global S.A.Uruguay RPS Latin America S.A 4EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in Registration Statements No. 333-200160 on Form S-8 and No. 333-209883on Form S-3 of our reports dated February 23, 2017, relating to the consolidated financial statements of PRA Health Sciences,Inc. and subsidiaries (the “Company”) (which report expresses an unqualified opinion and includes an explanatory paragraphrelating to the Company’s retrospective adoption of new accounting standards related to the statements of cash flows), andthe effectiveness of the Company's internal control over financial reporting, appearing in this Annual Report on Form 10-Kof PRA Health Sciences, Inc. for the year ended December 31, 2016. /s/ Deloitte & Touche LLP Raleigh, North CarolinaFebruary 23, 2017 EXHIBIT 31.1 I, Colin Shannon, certify that: 1.I have reviewed this Annual Report on Form 10‑K for the year ended December 31, 2016 of PRA HealthSciences, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control overfinancial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and proceduresto be designed under our supervision, to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; b.Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles; c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the endof the period covered by this report based on such evaluation; and d.Disclosed in this report any change in the registrant’s internal control over financial reporting thatoccurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in thecase of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board ofdirectors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant’s ability to record,process, summarize and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal control over financial reporting. Date: February 23, 2017 /s/ Colin Shannon Colin Shannon President, Chief Executive Officer and Chairman of the Boardof Directors (Principal Executive Officer) EXHIBIT 31.2 I, Linda Baddour, certify that: 1.I have reviewed this Annual Report on Form 10‑K for the year ended December 31, 2016 of PRA HealthSciences, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control overfinancial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and proceduresto be designed under our supervision, to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; b.Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles; c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the endof the period covered by this report based on such evaluation; and d.Disclosed in this report any change in the registrant’s internal control over financial reporting thatoccurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in thecase of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board ofdirectors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant’s ability to record,process, summarize and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal control over financial reporting. Date: February 23, 2017 /s/ Linda Baddour Linda Baddour Executive Vice President and Chief Financial Officer (Principal Financial Officer) EXHIBIT 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TO SECTION 906OF THE SARBANES‑OXLEY ACT OF 2002In connection with the Annual Report of PRA Health Sciences, Inc. (the “Company”) on Form 10‑K for the yearended December 31, 2016 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, ColinShannon, President, Chief Executive Officer and Chairman of the Board of Directors of the Company, do hereby certify,pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002, that:·The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of1934; and·The information contained in the Report fairly presents, in all material respects, the financial condition andresults of operations of the Company for the periods presented therein.Date: February 23, 2017By: /s/ Colin Shannon Colin Shannon President, Chief Executive Officer and Chairman ofthe Board of Directors (Principal Executive Officer) EXHIBIT 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TO SECTION 906OF THE SARBANES‑OXLEY ACT OF 2002In connection with the Annual Report of PRA Health Sciences, Inc. (the “Company”) on Form 10‑K for the yearended December 31, 2016 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, LindaBaddour, Executive Vice President and Chief Financial Officer of the Company, do hereby certify, pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002, that:·The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of1934; and·The information contained in the Report fairly presents, in all material respects, the financial condition andresults of operations of the Company for the periods presented therein.Date: February 23, 2017By: /s/ Linda Baddour Linda Baddour Executive Vice President and Chief FinancialOfficer (Principal Financial Officer)

Continue reading text version or see original annual report in PDF format above