PRA Health Sciences Inc
Annual Report 2017

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10‑K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to .Commission file number: 001‑36732 PRA 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 code Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredCommon Stock, par value $0.01 per share Nasdaq Global Select MarketSecurities 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 1934 during the preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit andpost 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, and will not be contained, tothe best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any 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, smaller reporting company, or an emerging growthcompany. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b‑2 of the Exchange Act.Large accelerated filer ☒Accelerated filer ☐Non-accelerated filer ☐Smaller reporting company ☐Emerging growth company ☐ (Do not check if asmaller reporting company) If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Act). Yes ☐ No ☒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 as reported on the NasdaqGlobal Select Market on June 30, 2017, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $3.0 billion. For purposes of thiscomputation, shares of the registrant’s common stock held by each executive officer, director, and each person known to the registrant to own 10% or more of the outstanding votingpower 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 63,790,933 shares outstanding as of February 16, 2018DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission relating to the 2018 Annual Meeting of Stockholders areincorporated herein by reference into Part III of this Annual Report on Form 10‑K to the extent stated herein. Such Proxy Statement will be filed with the Securities and ExchangeCommission 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, 2017TABLE OF CONTENTS ItemNumber Page No. PART I 1.Business21A.Risk Factors171B.Unresolved Staff Comments342.Properties343.Legal Proceedings344.Mine Safety Disclosures34 PART II 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities356.Selected Financial Data367.Management’s Discussion and Analysis of Financial Condition and Results of Operations437A.Quantitative and Qualitative Disclosures About Market Risk578.Financial Statements and Supplementary Data599.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure1079A.Controls and Procedures1079B.Other Information107 PART III 10.Directors, Executive Officers and Corporate Governance10711.Executive Compensation10712.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters10713.Certain Relationships and Related Transactions, and Director Independence10814.Principal Accountant Fees and Services108 PART IV 15.Exhibits, Financial Statement Schedules10816.Form 10-K Summary108 Signatures111 Exhibit Index109 iTable of ContentsFORWARD‑LOOKING STATEMENTS This Annual Report on Form 10‑K contains forward‑looking statements within the meaning of Section 27A of the Securities Act of 1933, asamended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Such forward‑looking statementsreflect, among other things, our current expectations and anticipated results of operations, all of which are subject to known and unknown risks, uncertaintiesand other factors that may cause our actual results, performance or achievements, market trends, or industry results to differ materially from those expressed orimplied by such forward‑looking statements. Therefore, any statements contained herein that are not statements of historical fact may be forward‑lookingstatements and should be evaluated as such. Without limiting the foregoing, the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,”“plans,” “projects,” “should,” “targets,” “will” and the negative thereof and similar words and expressions are intended to identify forward‑lookingstatements. These forward‑looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” inPart I, Item 1A of this report. Unless legally required, we assume no obligation to update any such forward‑looking information to reflect actual results orchanges in the factors affecting such forward‑looking information. Website and Social Media Disclosure We use our website (www.prahs.com) as a channel of distribution of company information. The information we post through this channel may bedeemed material. Accordingly, investors should monitor this channel, in addition to following our press releases, Securities and Exchange Commission, orSEC, filings and public conference calls and webcasts. The contents of our website are not, however, a part of this report.1Table of ContentsPart I Item 1. Business Overview We are one of the world’s leading global contract research organizations, or CROs, by revenue, providing outsourced clinical development servicesto the biotechnology and pharmaceutical industries. We believe we are one of a select group of CROs with the expertise and capability to conduct clinicaltrials across all major therapeutic areas on a global basis. 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 most flexible clinicaldevelopment service offerings, which includes both traditional, project‑based Phase I through Phase IV services as well as embedded and functionaloutsourcing services. We believe we further differentiate ourselves from our competitors through our investments in medical informatics and clinicaltechnologies designed to enhance efficiencies, improve study predictability and provide better transparency for our clients throughout their clinicaldevelopment processes. We are one of the largest CROs in the world by revenue, focused on executing clinical trials on a global basis. Our global clinical developmentplatform includes approximately 70 offices across North America, Europe, Asia, Latin America, South Africa, Australia and the Middle East and over 15,800employees worldwide. Since 2000, we have participated in approximately 3,700 clinical trials worldwide, we have worked on marketed drugs across severaltherapeutic areas and conducted the pivotal or supportive trials that led to U.S. Food and Drug Administration, or FDA, or international regulatory approvalof more than 75 drugs. We believe we are a leader in the transformation of the CRO engagement model via our flexible clinical development service offerings, whichinclude embedded and functional outsourcing services in addition to traditional, project‑based clinical trial services. Our Strategic Solutions offeringsprovide Embedded Solutions™ and functional outsourcing services in which our teams are fully integrated within the client’s internal clinical developmentoperations and are responsible for managing 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 to maintain greater control over theirclinical development processes. Our flexible clinical development service offerings expand our addressable market beyond the traditional outsourcedclinical development market to include the clinical development spending that biopharmaceutical companies historically have retained in‑house.In September 2017, we completed the acquisition of Symphony Health Solutions Corporation, or Symphony Health, a provider of data and analyticsto help professionals understand the full market lifecycle of products offered for sale by companies in the pharmaceutical industry. With this acquisition, weexpect to enhance our ability to serve customers throughout the clinical research and commercial development process with technologies that provide dataand analytics. Over the past 30 years, we have developed strong client relationships and have performed services for more than 300 biotechnology andpharmaceutical clients. In the year ended December 31, 2017, we derived 53% of our service revenue from large pharmaceutical companies, 16% from small‑to mid‑sized pharmaceutical companies, 16% of our service revenue from large biotechnology companies, 14% of our service revenue from all otherbiotechnology companies and 1% of our service revenue from non-pharmaceutical companies. Our Strategic Solutions offerings have significantly expandedour relationships with large pharmaceutical companies in recent years, which has allowed us to pursue strategic alliances with these companies due to ourglobal presence, broad therapeutic expertise and flexible clinical development service offerings. Additionally, we believe that we have built a reputation as astrategic partner of choice for biotechnology and small‑ to mid‑sized pharmaceutical companies as a result of our competitively differentiated platform andour long‑term track record of serving these companies. We expect to benefit from growth in clinical development investment from these customers given thefavorable capital raising environment in recent years. 2Table of ContentsCRO Industry CROs provide drug development services, regulatory and scientific support, and infrastructure and staffing support to provide their clients with theflexibility to supplement their in‑house capabilities or to provide a fully outsourced solution. The CRO industry has grown from providing limited clinicaltrial services in the 1970s to a full service industry characterized by broad relationships with clients and by service offerings that encompass the entire drugdevelopment process. Today, CROs provide a comprehensive range of clinical services, including protocol design and management and monitoring ofPhase I through Phase IV clinical trials, data management, laboratory testing, medical and safety reviews and statistical analysis. In addition, CROs provideservices that generate high quality and timely data in support of applications for regulatory approval of new drugs or reformulations of existing drugs as wellas new and existing marketing claims. CROs leverage selected information technologies and procedures to efficiently capture, manage and analyze the largestreams 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 and monitored through approvalprocesses that vary by region. Before a new prescription drug reaches commercialization, it must undergo extensive pre‑clinical and clinical testing andregulatory 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 is synthesized or discovered, it is testedfor therapeutic value using various animal and tissue models. If the drug warrants further development, additional studies are completed and aninvestigational new drug application, or IND, is submitted to the FDA. Once the IND becomes effective, the drug may proceed to the human clinical trialphase which generally consists of the following interrelated phases, which may overlap: Stages of Clinical Development Market trends Industry Standard Research, or ISR, a market research firm, estimated in its “2017 CRO Market Size Projections 2016-2021” report, or ISR 2017Market Report, that the size of the worldwide CRO market was approximately $32 billion in 2016 and will grow at a 7% CAGR to $44 billion in 2021. Thisgrowth will be driven by an increase in the amount of research and development expenditure and levels of clinical development outsourcing bybiopharmaceutical companies. 3Table of ContentsIncreased R&D spending ISR estimates in the ISR 2017 Market Report that R&D expenditures by biopharmaceutical companies were approximately $283 billion in 2016 andwill grow approximately 3% per year through 2020. Of this amount, approximately $117 billion was spent on development, including $83 billion on Phase Ithrough IV clinical development. Growth drivers of R&D spending among biopharmaceutical companies include the need to replenish lost revenuesresulting from the patent expirations of a large number of high‑profile drugs in recent years which has resulted in the need for biopharmaceutical companiesto increase their R&D expenditures to eventually fill this revenue void with new drug approvals, and a robust capital raising environment amongbiotechnology companies. We believe biotechnology companies primarily use the capital to fund clinical trials, and due to the general lack of existinginfrastructure, these trials are often contracted to CROs. We expect the favorable capital raising environment will continue to be a source of strong growth forR&D spending.Higher outsourcing penetration ISR estimates in the ISR 2017 Market Report that approximately 37% of Phase I through IV of clinical development spend is outsourced to CROs,and the levels of penetration are expected to increase to approximately 45% by 2021. We believe this increase in outsourcing is due to several factors,including the need to maximize R&D productively, the increasing burden of clinical trial complexity, and the desire to pursue simultaneous registration inmultiple countries. •Maximizing Productivity and Reducing Cost—Productivity within the biopharmaceutical industry has declined over the past several years andthe cost of developing a new drug, which is now estimated to be $1.4 billion per drug, has significantly increased. The combined impact ofdeclining R&D productivity and increased 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 and lower costs will lead them toincreasingly partner with CROs that can improve efficiency, and increase flexibility and speed across their clinical operations. •Increasing Clinical Trial Complexity—Over the last decade, the burden of clinical trial complexity has been increasingly difficult to manage dueto requirements from regulatory authorities worldwide for greater amounts of clinical trial and safety data to support the approval of new drugs,and requirements for adherence to increasingly 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 of drugs on the market. To balance theconflicting demands of a growing market with the need to control R&D expenses, biopharmaceutical companies partner with CROs that canprovide services designed to generate high quality and timely data in support of regulatory approvals of new drugs or the reformulations ofexisting drugs as well as support of post‑approval regulatory requirements. •Simultaneous Multi‑Country Registration—Given their desire to maximize efficiency and global market penetration to achieve higher potentialreturns on their R&D expenditures, biopharmaceutical companies are increasingly pursuing simultaneous, rather than sequential, regulatory newdrug submissions and approvals in multiple 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 andmaintaining internal global infrastructure to pursue multiple regulatory approvals in different therapeutic categories and jurisdictions can becostly. 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, PinnacleHoldco Parent, Inc. changed its name to PRA Global Holdings, Inc. and on July 10, 2014, PRA Global Holdings, Inc. changed its name to PRA HealthSciences, Inc. Our wholly‑owned subsidiary, PRA Holdings, Inc., or PRA Holdings, was incorporated in Delaware in July 2007 and its predecessors date backto 1982. Our qualified and experienced 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. See Note 4 to our audited consolidated financialstatements found elsewhere in this Annual Report on Form 10-K for additional information with respect to our recent acquisitions. We are a subsidiary of KKR PRA Investors L.P., a Delaware limited partnership controlled by Kohlberg Kravis Roberts & Co. L.P., or KKR. 4Table of ContentsOur 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. Our global clinical developmentplatform includes approximately 70 offices across North America, Europe, Asia, Latin America, South Africa, Australia and the Middle East and over 15,800employees worldwide. We are dedicated to the seamless execution of integrated clinical trials on multiple continents concurrently. We believe our globalpresence and scale are important differentiators as biopharmaceutical companies are increasingly focused on greater patient access for increasingly complexclinical 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 CRO services as well as embedded andfunctional outsourcing services. Our broad and flexible service offering allows us to meet the clinical research needs of a wide range of clients, from smallbiotechnology companies to large pharmaceutical companies. Through more than 30 years of experience, we have developed significant expertise executingcomplex drug development projects that span Phase I through Phase IV clinical trials. Our Product Registration offerings consist primarily of traditional,project‑based CRO services, where we have gained the reputation as a strategic partner of choice to biotechnology and pharmaceutical companies. OurStrategic Solutions offerings primarily cater to the needs of large pharmaceutical companies that seek to maintain greater control over their clinical trialprocesses. Therapeutic expertise in large segments of drug development Our therapeutic expertise encompasses areas that are among the largest in pharmaceutical development, including oncology, central nervous system,inflammation and infectious diseases. We have participated in more than 2,200 clinical trials in these key areas since 2005, accounting for a substantialmajority of our total clinical trials during this period. We employ drug development experts with extensive experience across numerous therapeutic areas inpreparing development plans, establishing study and protocol designs, identifying investigative sites and patients and submitting regulatory filings. Our staffis highly experienced and includes approximately 750 Ph.Ds, 650 medical doctors and 275 doctors of pharmacy worldwide. Innovative approach to clinical trials using medical informatics We are committed to being an industry leader in developing global, scalable and sustainable solutions for our clients. We aim to continuouslyimprove our systems and processes by investing in medical informatics, technology, analytics and IT infrastructure. Our information delivery system enablesrapid, web‑based delivery of clinical trial data to clients and project teams. We believe our proprietary analysis and application of this data are keydifferentiators and allow us to identify more productive investigative sites and speed up overall patient enrollment, thereby decreasing drug developmenttimelines. We have invested in and acquired large databases of aggregated patient medical data, which we refer to as medical informatics, to better understandpatient distribution and location. Specifically, we have acquired data sources that give us significant amounts of information about patient populationswithin the United States to enhance enrollment, including medical claims data, hospital master charge data, pharmacy data, laboratory data and payor data.Capitalizing on our 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 medical informatics suite includes physician, hospital andpharmacy databases that cover more than 280 million patient lives and approximately 10 billion patient and pharmacy claims in the United States.Leading enabler of integrated health data and analyticsThe acquisition of Symphony Health supports our commitment to enhancing the future of clinical development with best-in-class technologysolutions which enable deep, data-driven insights to optimize global clinical studies and drug commercialization. Diversified and attractive client base Over the past 30 years, we have developed strong client relationships and have performed services for more than 300 biotechnology andpharmaceutical clients. In the year ended December 31, 2017, we derived 53% of our service revenue from large pharmaceutical companies, 16% from small‑to mid‑sized pharmaceutical companies, 16% of our service revenue from large biotechnology companies, 14% of our service revenue from all otherbiotechnology companies and 1% of our service5Table of Contentsrevenue from non-pharmaceutical companies. Our Strategic Solutions offerings have significantly expanded our relationships with large pharmaceuticalcompanies in recent years, which has allowed us to pursue strategic alliances with these companies due to our global presence, broad therapeutic expertiseand flexible clinical development service offerings. Additionally, we believe that we have built a reputation as a strategic partner of choice for biotechnologyand small‑ to mid‑sized pharmaceutical companies as a result of our competitively differentiated platform and our long‑term track record of serving thesecompanies. We expect to benefit from growth in clinical development investment from these customers given the favorable capital raising environment inrecent years. Our client relationships are also broad and diversified, and in the year ended December 31, 2017 our top 10 clients represented 62% of servicerevenue, with our largest client representing approximately 10% of service revenue and our largest single study accounting for approximately 4% of ourservice revenue. Innovative management team We are led by a dedicated and experienced executive management team with an average of over 20 years of experience across the global clinicalresearch, pharmaceutical and life sciences industries. This team has been responsible for building our global platform, successfully integrating ouracquisitions, developing our advanced IT‑enabled infrastructure and 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 has resulted in our earning areputation as a strategic partner of choice for these companies. We believe that biotechnology and small‑ to mid‑sized pharmaceutical companies rely on fullservice CROs to deliver fast, effective and thorough support throughout the clinical development and regulatory processes, as these companies generally lacka global clinical development infrastructure. We intend to leverage our strong relationships with biotechnology and small‑ to mid‑sized pharmaceuticalcompanies to capture additional business from these companies. In particular we believe the CRO strategic alliances that have become prevalent with largepharmaceutical companies over the past several years will increasingly be utilized by biotechnology and small‑ to mid‑sized pharmaceutical companies. Webelieve we are well-positioned to take advantage of these opportunities given the depth of our relationships and our proven track record serving thesecustomers. Build deeper and broader relationships with large pharmaceutical companies Large pharmaceutical companies have increasingly focused on partnering with multi‑national CROs that offer a wide array of global therapeutic andservice capabilities. We have invested significantly in our global scale and infrastructure over the past several years to enhance our status as a serviceprovider for these companies. Our acquisition of RPS significantly increased the depth of our relationships with large pharmaceutical companies. We intendto expand our relationships beyond the Embedded Solutions provided through our Strategic Solutions offering to include traditional, project‑based clinicaltrial 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 design and management of clinical trialsand we intend to continue to capitalize on our strong market positions in several large therapeutic categories. We have established, and will continue torefine, our scientific and therapeutic business development initiatives, which link our organization to key clinical opinion leaders and medical informaticsdata to more effectively leverage therapeutic expertise throughout our client engagement. Specifically, we believe that oncology, central nervous system,inflammation and infectious diseases, which together represent the majority of all drug candidates currently in clinical development by biotechnology andpharmaceutical companies, will be significant drivers of our growth. In the area of oncology, we believe that the growth of targeted therapies, companiondiagnostics and personalized medicine will continue to drive drug development. With the aging demographics we believe we will see significant growth inthe area of dementia and Alzheimer’s research and drug development, which is complemented by our specialty and focus in neurology. Additionally, webelieve that development of niche therapeutic drugs (orphan drugs) will see considerable growth moving forward and we have a dedicated staff focused onthe design and conduct of trials for these drugs. 6Table of ContentsContinue to enhance our tech-enabled CRO engagement modelThe acquisition of Symphony Health has provided us with rich data insights that will allow us to customize our clinical studies to be as unique asthe patients who they are designed around. By creatively harnessing the power of our technology and data assets, we are redefining the clinical developmentprocess for a more patient-centric future.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 have completed over the past four years,resulting in additional revenue growth and margin improvements. We believe that our strategic acquisitions are complementary to our customer base andexpect to generate incremental revenue growth by cross‑selling our full set of services to our existing and new customers, thereby expanding the scope of ourcustomer 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 capabilities and geographic reach into areas ofhigh market growth. We have acquired 21 companies since 1997 and have established programs to help us identify acquisition targets and integrate themsuccessfully. Our acquisition strategy is driven by our comprehensive commitment to serve client needs and we are continuously assessing the market forpotential opportunities. Service Offerings Following the acquisition of Symphony Health, we now have two reportable segments: Clinical Research and Data Solutions. Our Clinical Researchsegment encompasses a broad array of services across the spectrum of clinical development programs. Our Data Solutions provides data, analytics,technology, and consulting solutions to the life sciences market. The offerings of our two segments complement each other and can provide enhanced valueto our clients when delivered together, with each driving demand for the other.For financial information regarding our segments, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results ofOperations—Segment Results of Operations" and Note 21 to our audited consolidated financial statements included elsewhere in this Annual Report on Form10-K.Clinical ResearchWe perform a broad array of services across the spectrum of clinical development programs, from the filing of INDs and similar regulatoryapplications 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 commitmentsand registries;•Strategic Solutions, which provides Embedded Solutions and functional outsourcing services, in which our teams are fully integrated within theclient’s internal clinical development operations and responsible for managing functions across the entire breadth of the client’s drugdevelopment pipeline; and•Early Development Services, which includes Phase I through Phase IIa clinical trials and bioanalytical laboratory services. We provide many back office services to clients as well, including processing the payments to investigators and volunteers. We also collaboratewith third‑party vendors for services such as imaging, central lab and patient recruitment services.Product Registration Product Registration encompasses the design, management and implementation of study protocols for Phase II through 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 resourcesand expertise to design and conduct studies on a global basis, develop integrated global product databases, collect and analyze trial data and prepare andsubmit regulatory submissions in the United States, Europe and other jurisdictions.7Table of ContentsA typical full‑scale program or project may involve the following components:•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 several components involved in conductinga full‑scale program or project. Clinical Trial Management—Our clinical trial management services, used by biotechnology and pharmaceutical clients, may be performedexclusively by us or in collaboration with the client’s internal staff or other CROs. With our broad clinical trial management capabilities, we conduct singlesite studies, multi‑site U.S. and international studies and global studies on multiple continents. Through our electronic trial master file, we can create, collect,store, edit and retrieve any electronic 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 targets and utilizing various metrics toensure that a project moves forward in the right trajectory, resources are used optimally and client satisfaction is met. This group also oversees theimplementation of a work breakdown structure, communication plan, and a risk and contingency program for each study. We believe that the managementstructure of our service delivery model sets us apart in the industry. Each individual project is assigned a director of project delivery and key strategicaccounts are also assigned a general partner. As a member of the senior management team, the general partner works with the director of project delivery, theproject management group and client representatives to ensure the highest level of client satisfaction. With more than 370 project directors and projectmanagers, we match our project management personnel to projects based on experience and study specific parameters.Regulatory Affairs—Our team of global regulatory professionals has extensive experience working with biotechnology and pharmaceuticalcompanies and regulatory authorities worldwide. Our regulatory affairs group is comprised of an internal network of local regulatory experts who are nativespeakers in countries across North America, Latin America, Western and Eastern Europe, Africa and Asia Pacific. Regulatory team members and localregulatory experts act as clients’ representatives for submissions and direct communications with regulatory authorities in all regions. The group’s regulatoryexpertise enables rapid study start‑up and facilitates competitive product development plans and effective submission strategies. Therapeutic Expertise—Our therapeutic expertise group provides scientific and medical expertise and patient access and retention servicesworldwide across a broad range of therapeutic areas. Our broad experience throughout various therapeutic areas allows us to offer a more complete globalservice offering to our clients. Our diverse therapeutic expertise8Table of Contentsgroup leverages best‑in‑class data assets to assist our clients with the design and implementation of entire clinical development programs and our current andpotential clients increasingly seek partners who can provide these capabilities. We provide clients with therapeutic expertise in the design andimplementation of high‑quality product development programs and help them achieve key development milestones in a cost and time effective manner. Ourtherapeutic expertise is used by both emerging biotechnology companies that lack clinical development infrastructure and pharmaceutical companies thathave 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 and monitoring services inapproximately 90 countries worldwide, through our highly experienced team of clinical research associates and specialists. This experience includesknowledge of local regulations, medical practices, safety and individual therapeutic areas. We provide our clients with fully trained and locally basedclinical teams led by experienced clinical team managers that initiate site start‑up, monitor activities and review data. Based in the Americas, Europe, AsiaPacific and Africa, these teams 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 meet our clients’ diverse needs andexpectations. Our study start‑up services group, a unit within clinical operations, manages the key components of rapid site activation and investigationalsite set‑up for clinical trials by utilizing our global and region specific expertise. Data and Programming Services—Our global data and programming services group offers an innovative suite of technologies that gather andorganize clinical trial data. We employ industry leading electronic data capture technologies and innovative delivery systems to produce high quality andstandardized data and reports. We focus on evaluating a client’s needs, presenting optimal solutions for each trial and implementing the chosen solutioneffectively during project execution. To support these goals, we have built a group of technological experts in drug research that has a strong foundation indata management fundamentals and core programming abilities. Safety and Risk Management—Our dedicated safety and risk management group helps clients design, implement and operationalize the propersafety procedures from development through to post‑marketing, allowing for clear assessment and the communication of patient safety profiles. We havecentralized drug safety centers in Mannheim, Germany; Swansea, United Kingdom; Charlottesville, Virginia, United States (with a satellite center in Lenexa,Kansas); Sao Paulo, Brazil; and Singapore. 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 managementteam provides risk mitigation strategies for our clients at all stages of the drug development cycle along with core signal detection capabilities. Biostatistics and Medical Writing—Our global biostatistics and medical writing operations integrate our biostatistics, medical writing,pharmacokinetics and regulatory publishing groups. With a staff of industry experienced and therapeutically trained biostatisticians and medical writers, weoffer clients expertise in statistical analysis, data pooling and regulatory reporting. This global team provides specialist consulting expertise and support toclients from the first stage of protocol 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 applicable regulatory guidelines. Quality Assurance Services—Our global quality assurance group is staffed by a team of experienced professionals in the Americas, Europe and AsiaPacific. Our quality assurance department is entirely separate from and independent of the personnel engaged in the direction and conduct of clinical trials.The objective of the quality assurance group is the global promotion of ongoing quality awareness and continuous improvement of our processes. This groupserves these efforts by performing audits on the processes and systems used in the management of clinical trials to ensure compliance with study protocol andapplicable regulatory requirements. This group has performed audits for a wide range of medical indications and in all phases of clinical trials across theglobe. Late Phase Services—Our global late phase services group supports global and regional post‑approval trials with management locations centralizedin Pennsylvania, Germany and Singapore. Our experienced late‑phase services team assists clients with the post‑marketing process by helping identify trendsand signals in large populations as well as planning and conducting safety surveillance studies, large‑sample trials, registries, restricted access programs, riskmanagement 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 into comprehensive study designs. 9Table of ContentsStrategic Solutions Our Strategic Solutions offerings enable biotechnology and pharmaceutical companies to execute their internally‑managed development portfoliowith greater flexibility and to leverage their existing infrastructure to minimize redundancy. These offerings provide a broad spectrum of solutions that allowfor the efficient management and execution of critical clinical development functions for pharmaceutical clients. These services are embedded or integratedwithin the client’s internal clinical development operations to support the entire breadth of the client’s drug development pipeline. By embedding ouremployees within our clients’ infrastructure, we create a strategic and interdependent relationship that allows us to anticipate our clients’ clinical trialdemands and efficiently deploy our skilled clinical professionals to meet our clients’ needs. Clinical functions supported by this service offering includestudy start‑up activities, site monitoring, study management, data management, biostatistics, regulatory and product safety. We focus our solutions primarilyon our clients’ Phase II through Phase IV development programs. While traditional, project‑based CRO offerings target the outsourced component ofbiopharmaceutical industry spending, our Strategic Solutions offerings address the total Phase II through IV development market. We pioneered theembedded services model described below, and have extensive experience helping customers re‑align their operating model to more efficiently manage theirdevelopment portfolio with greater flexibility and control. 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 developmentsolution. Our Embedded Solutions model is designed to merge clinical operations expertise, management, infrastructure and support to create a flexible andintegrated operating model. The goal of our Embedded Solutions model is to enable our client’s internally‑managed development processes to be executedwith greater flexibility. These solutions can be further enhanced by leveraging our systems and technology as required. In our Embedded Solutions model,we typically work with our partners to assist in redesigning existing systems and processes to drive greater efficiency, speed and quality and to implementinnovative approaches and enhanced technology. We employ a strong joint governance structure and robust metrics to measure and ensure strong quality,cycle time, productivity and service‑level performance. Functional Services Provider Solutions—Our functional services provider offering provides dedicated capacity management within a singleoperating platform and within one function or across multiple functions and geographies. While the customer provides direction and functional management,we provide resources and line management, training and support. We also utilize business level metrics to help ensure that staff are deployed with therelevant experience and are producing consistent, repeatable results. Staff Augmentation Solutions—Our staff augmentation solutions offering provides customers with the ability to address their dynamic staffingneeds by supplying access to resources qualified to meet their clinical development needs. This allows clients to maintain flexibility while also reducingfixed costs. In order to rapidly attract and recruit qualified employees for these situations, we have assembled what we believe is the largest team in theindustry focused on personnel recruitment. These individual professionals are hired as our employees and managed by our teams, minimizing co‑employmentrelated issues. The customer has the ability to define the resources required according to the therapeutic‑ and disease‑specific experience required. Theseresources can be on site at the customer’s facility, at our offices, or regionally based.Custom‑Built Development Solutions—Our custom‑built development solutions are designed to offer people, process, systems and developmentexpertise that enable the efficient internal development of a company’s product portfolio with greater control and flexibility, accelerated developmenttimelines and substantially reduced costs. With the client’s core leadership in control, we help to build the development team our clients need, whileenabling them to maintain the flexibility to be nimble during the development lifecycle. Commercialization Services—Through our commercialization services offering, we assist our clients in addressing the challenge of commercializingproducts. We do this by deploying professionals who are knowledgeable in launch preparation and product lifecycle management. We assist customers inmanaging the product lifecycle by working with them to create concise messaging, engage thought leadership and health care providers, generate consumerenthusiasm for the product, and prepare for post‑marketing commitments. Our commercialization services offering utilizes our flexible service model and, assuch, can be delivered as an Embedded Solution, through our functional service provider model, or through staff augmentation. Early Development Services Our Early Development Services business unit, or EDS, offers a full range of services for Phase I and Phase IIa studies as well as bioanalyticalanalysis. We have conducted studies for major pharmaceutical companies in Europe, the United States10Table of Contentsand Japan, as well as for many smaller and emerging biotechnology companies. We have also built direct relationships with a large base of available subjects,including healthy volunteers and patient populations with specific medical conditions. Acquisitions in recent years have allowed us to significantly expand our Phase I to Phase II services. This includes offerings focused on the conductand design of early stage patient population studies, and therapeutically focused in human abuse liability, or HAL, addiction, pain, psychiatric, neurological,pediatric and infectious disease services. We are one of the largest providers of patient population for Phase I and confined Phase II to Phase III services in theUnited States, and are one of only a few CROs in the world which has the ability to design and conduct HAL studies, a regulatory‑required study for centralnervous system compounds. We believe this enables us to provide our clients with a full range of Phase I to Phase II clinical research services in specializedpatient populations for both inpatient and outpatient settings. EDS also supports a variety of additional services, ranging from protocol development to data management and pharmacy services, includingmanufacturing of investigational medicinal products. Our state‑of‑the‑art laboratories provide pharmacokinetics, the branch of pharmacology concerned withthe movement of drugs within the body, and pharmacodynamics, the branch of pharmacology concerned with the effects of drugs and the mechanism of theiraction analyses, including biomarkers, as needed. Our safety laboratory supports our own clinics and also acts as a central lab for medium sized Phase II trials.We also provide clinical study reports, statistical analysis, medical writing and regulatory support. We focus on high‑end Phase I studies and specialize in more complex types of studies in which safety, intelligent design, and a wide range ofpharmacodynamics assessments are critical factors. We believe our Phase I team is a leader in new developments such as microdosing studies, pain models,HAL studies and multi‑purpose protocols with adaptive designs. We have developed extensive methodologies enabling us to conduct studies withpharmacokinetics and/or pharmacodynamics objectives. We have more than 1,000 early development specialists working in seven clinical pharmacology units located across four different countries,including the United States, the Netherlands and countries in Central and Eastern Europe. We are equipped with the technologies and infrastructure forhigh‑quality, efficient studies on a wide range of drugs and indications. Over the past five years we have conducted more than 700 high‑level, complex earlydevelopment clinical trials and 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 and accommodate volunteers in ourstate‑of‑the‑art clinical pharmacology units, some of which are hospital based. At these centers, volunteers are under constant medical supervision by a teamof highly experienced medical professionals. We have an active pool of more than 100,000 study participants (both healthy volunteers and various specificpatient populations).In addition to in‑house studies, we use an innovative “unit‑on‑demand” business model that brings a Phase I center to patients. This modelestablishes a Phase I study environment in central medical facilities that specialize in the treatment of the target patient population. Physicians can recruithigh volumes of patients using extensive networks of referring specialists and general practitioners. The studies occur in single center and multi‑nationalsettings. We have also built an extensive 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 current Good Manufacturing Practiceregulations and is designed for fast and flexible manufacturing of small batches of investigational medicinal product for studies. In addition, dedicated datamanagement professionals who can process clinical data 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 screenmultiple candidates at an early stage and minimize the number of failing clinical product candidates. We have been closely involved in the field ofmicrodose studies over the past ten years and have conducted more than 30 microdose studies. Bioanalytical Laboratory—We offer clients two state‑of‑the‑art bioanalytical laboratories located in Assen, the Netherlands, and Lenexa, Kansas,United States. These bioanalytical laboratories have been harmonized with respect to standard operating procedures, work instructions and equipment. Thisprovides a high level of consistency, continuity and efficiency. It also provides our clients with the ability to run studies in either laboratory, depending onthe requirements of the study, and ensures that they will receive the same high level of service. Both bioanalytical laboratories are located within closeproximity to their respective Phase I clinical pharmacology unit, ensuring rapid sample processing for critical dose escalation decision making involvingpharmacokinetic assays. Both facilities include laboratories for mass spectrometry and ultra‑11Table of Contentsperformance liquid chromatography, typically applied to small molecule analysis. For large molecules, such as biologicals and biomarkers, our laboratoriesoperate a wide variety of specialized assays, including ligand binding assays with a variety of detection methodologies and immunogenicity. In our fullylicensed isotope laboratory, bioanalytical support is provided for mass balance and microdosing studies. The laboratories, combined with expert and highlyeducated staff, provide a full range of analytical services throughout the development process.Data SolutionsOur Data Solutions segment provides data, analytics, technology, and consulting solutions to the life sciences market. We have proprietary sourcesof data about pharmaceutical transactions that we purchase from pharmaceutical retailers, prescribers, payers and institutional users. The data is anonymizedand includes details on the patient, the location where they purchased the drug or therapy, and the payer. The details on the patient, although anonymous, aretracked in such a way as to allow analysis of therapies and purchasing over a long term. They also include demographic data such as age, gender, race anddiagnoses. The data is refreshed monthly.The core service offerings of our Data Solutions segment include:Market Intelligence ServicesTargeting and Compensation - Prescription and drug sales data services used primarily to compensate sales representatives. This data includesdispensed prescription data, non-retail pharmacy drug purchasing data and healthcare demographic and affiliations data.Pharmaceutical Audit Suite - National-level prescription and sales data services used primarily for market research. Data subscriptions include allproducts and therapeutic areas and is primarily accessed on-line through our business intelligence tool.Consulting & ServicesBrand Analytics - Anonymized patient-level data sets and services that enable a variety of commercial analytics, including patient compliance,persistency, product switching, share and counts, and diagnosis. The most significant offering is PatientSource, a comprehensive patient-level data set,providing a detailed view of patient treatment activity in a client-defined disease category. PatientSource includes data regarding prescribers, patients andpayer dynamics.Managed Markets - Suite of prescription claims-based data products and analytic tools that leverage our exclusive claims lifecycle data tounderstand managed markets influence on product demand.Commercial Effectiveness - Commercial effectiveness is a professional services unit providing offerings that enable clients to optimize promotionspend and activities. Offerings include digital promotional measurement, advanced targeting, patient journey, and market landscape.Scientific Studies/Clinical Hubs - Our Scientific Studies/Clinical Hubs unit provides services that include clinically-oriented data hubs and healtheconomics studies to pharmaceutical companies' medical affairs or health economics divisions. Our team provides real world evidence data to support theassessment of the clinical effectiveness of drugs.Apps & TechnologyHealth Data Services - Health Data Services provides technology-enabled products and services that allow clients to effectively access and analyzeSymphony Health and integrated third-party data.Clients and Suppliers We serve a wide range of client types, including biotechnology and pharmaceutical companies. We have developed numerous strategicrelationships in the last five years. In the year ended December 31, 2017, we derived 53% of our service revenue from large pharmaceutical companies, 16%of our service revenue from small‑ to mid‑sized pharmaceutical companies, 16% of our service revenue from large biotechnology companies, 14% of ourservice revenue from all other biotechnology companies and 1% of our service revenue from non-pharmaceutical companies. In 2017 and 2016, our top fiveclients represented approximately 42% and 45% of service revenue, respectively; this revenue was derived from a combination12Table of Contentsof fixed‑fee contracts, fee‑for‑service contracts and time and materials contracts. One of our clients accounted for 10.3% of service revenue during the yearended December 31, 2017. Two of our clients accounted for 11.0% and 10.4% of service revenue during the year ended December 31, 2016. No individualproject accounted for 10% or more of service revenue for the years ended December 31, 2017 and 2016. We utilize a number of suppliers in our business, including central laboratory services, drug storage and shipping, foreign language translationservices and information technology. In 2017, our largest individual supplier was paid $16.7 million. In addition, our top 10 suppliers together receivedpayments during 2017 of approximately $112.0 million. We believe 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 existing clients. Critical to our sales processis the involvement of our operations and global scientific and medical affairs teams who contribute their knowledge to project implementation strategiespresented in client proposals. These teams also work closely with the sales team to build long‑term relationships with biotechnology and pharmaceuticalcompanies. Our therapeutic expertise team supports the sales effort by developing robust service offerings in its core therapeutic areas, which link ourorganization to key clinical opinion leaders, global investigator networks and best‑in‑class vendors. We rely heavily on our past project performance,qualified teams, medical informatics data and therapeutic expertise in winning new business. Our approach to proposal development, led by seasoned proposal developers in conjunction with insight from our drug development experts, allowsus to submit proposals that address client requirements in a creative and tailored manner. Proposal teams conduct research on competing drugs and conductfeasibility studies among potential investigators to assess their interest and patient availability for proposals and presentations. Our proprietary, automatedestimation system allows for rapid and accurate creation of project budgets, which forms the initial basis for business management of budgets subsequent toaward of the study. Competition Our Clinical Research business competes 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 Research Holdings, Inc. (now known asSyneos Health, Inc.), Laboratory Corporation of America Holdings, PAREXEL International Corporation, Pharmaceutical Product Development LLC, andIQVIA Inc. CROs compete on the basis of a number of factors, including reliability, past performance, expertise and experience in 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 small number of full‑service companieswith global capabilities. We believe there are significant barriers to becoming a global provider offering a broad range of services and products. Thesebarriers 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. Our Data Solutions business competes with a diverse set of businesses. We generally compete with other information, analytics, technology, servicesand consulting companies, as well as with government agencies, private payers and other healthcare companies that provide their data directly to others. Ourofferings compete with a number of firms, including IQVIA Inc., OptumHealth, Cognizant Technology Solutions, and ZS Associates.Backlog Our studies and projects are performed over varying durations, ranging from several months to several years. Backlog represents anticipated servicerevenue from contracted new business awards that either have not started or are in process but13Table of Contentshave not been completed for our Clinical Research segment. Canceled contracts and scope reductions are removed from backlog as they occur. Our backlogat December 31, 2017, 2016 and 2015 was approximately $3.5 billion, $2.9 billion and $2.4 billion, respectively. Cancellations totaled $366.0 million,$290.6 million and $231.0 million for the years ended December 31, 2017, 2016 and 2015, respectively. We believe our backlog as of any date is not necessarily a meaningful indicator of our future results for a variety of reasons. First, studies vary induration. For instance, some studies that are included in our backlog may be completed in 2018, while others may be completed in later years. Second, thescope of studies may change, which may either increase or decrease the amount of backlog. Third, studies may be terminated or delayed at any time by theclient or regulatory authorities. Delayed contracts remain in our backlog until a determination of whether to continue, modify or cancel the study is made.We had $2,413.7 million, $2,076.5 million and $1,696.6 million in net new business awards for our Clinical Research segment in the years endedDecember 31, 2017, 2016, and 2015, respectively. Net new business represents gross new business awards less cancellations for the period.We exclude our Data Solutions segment from backlog and new business awards due to the short term nature of its contracts.For more details regarding risks related to our backlog, see “Risk Factors—Our backlog may not convert to service revenue at the historicalconversion rate.” Intellectual Property We develop and use proprietary methodologies, analytics, systems, technologies and other intellectual property throughout our business, includinga number of patents as well as other proprietary information regarding our methodologies, technologies, systems and analytics. We also hold various federaltrademark registrations and pending applications in the United States and other jurisdictions, including PRA Health Sciences, Nextrials, Parallel 6, andSymphony Health. Government Regulation In the United States, the FDA governs the conduct of clinical trials of drug products in human subjects, the form and content of regulatoryapplications, including, but not limited to, IND applications for human clinical testing and the development, approval, manufacture, safety, labeling, storage,record keeping, and marketing of drug products. The FDA has similar authority and similar requirements with respect to the clinical testing of biologicalproducts and medical devices. In the 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 the case. Governmental regulation directly affects our business. Increased regulation leads to more complex clinical trials and an increase in potentialbusiness for us. Conversely, a relaxation in the scope of regulatory requirements, such as the introduction of simplified marketing applications forpharmaceutical and biological products, could decrease the business opportunities available to us. We must perform our clinical drug and biologic services in compliance with applicable laws, rules and regulations, including “Good ClinicalPractices,” or GCP, which govern, among other things, the design, conduct, performance, monitoring, auditing, recording, analysis, and reporting of clinicaltrials. Before a human clinical trial may begin, the manufacturer or sponsor of the clinical product candidate must file an IND with the FDA, which contains,among other things, the results of preclinical tests, manufacturer information, and other analytical data. A separate submission to an existing IND must also bemade for each successive clinical trial conducted during product development. Each clinical trial must be conducted in accordance with an effective IND. Inaddition, under GCP, each human clinical trial we conduct is subject to the oversight of an independent institutional review board, or IRB, which is anindependent committee that has the regulatory authority to review, approve and monitor a clinical trial for which the IRB has responsibility. The FDA, theIRB, or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the study subjects are being exposed toan unacceptable health risk. In the EU, we must perform our clinical drug services in compliance 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;14Table of Contents•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 are medically evaluated and reported ina timely manner;•monitor the validity and accuracy of data;•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 by the client and the FDA orsimilar regulatory authorities. A failure to comply with applicable regulations relating to the conduct of clinical trials or the preparation of marketing applications could lead to avariety of sanctions. For example, violations of GCP could result, depending on the nature of the violation and the type of product involved, in the issuanceof a warning letter, suspension or termination of a clinical study, refusal of the FDA to approve clinical trial or marketing applications or withdrawal of suchapplications, injunction, seizure of investigational products, civil penalties, criminal prosecutions, or debarment from assisting in the submission of new drugapplications. We monitor our clinical trials to test for compliance with applicable laws and regulations in the United States and the non‑U.S. jurisdictions inwhich we operate. We have adopted standard operating procedures that are designed to satisfy regulatory requirements and serve as a mechanism forcontrolling and enhancing the quality of our clinical trials. In the United States, our procedures were developed to ensure compliance with GCP andassociated guidelines. Within Europe, all work is carried out in accordance with the European Community Note for Guidance (CPMP/ICH/135/95). In orderto facilitate global clinical trials, we have implemented common standard operating procedures across our regions to assure consistency whenever feasible. The Standards for Privacy of Individually Identifiable Health Information, or the Privacy Rule, and the Security Rule, issued under the HealthInsurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health, or HITECH, Actof 2009, collectively HIPAA, as well as applicable state privacy and security laws and regulations restrict the use and disclosure of certain protected healthinformation, or PHI, and establishes national standards to protect individuals’ electronic PHI that is created, received, used or maintained by certain entities.Under the Privacy Rule, “covered entities” may not use or disclose PHI without the authorization of the individual who is the subject of the PHI, unless suchuse 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 do receive PHI from covered entitiessubject to HIPAA. In order for those covered entities to disclose PHI to us, the covered entity must obtain an authorization from the research subject thatmeets the Privacy Rule requirements, or make such disclosure pursuant to an exception to the Privacy Rule’s authorization requirement. We are both directlyand indirectly affected by the privacy 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 from third parties that are subject tosuch regulations. Because of amendments to the HIPAA data security and privacy rules, there are some instances where we may be a HIPAA “businessassociate” of a “covered entity,” meaning that we may be directly liable for any breaches in protected health information and other HIPAA violations. As partof our research activities, we require covered 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, the upcoming European Union General Data Protection Regulation (EU GDPR) replaces the current European Union Data PrivacyDirective (Directive). The EU GDPR requires organizations working with the personal data of EU citizens to have established processes related to itscollection and use. Organizations must have objective evidence of compliance (Principle of Accountability) with the EU GDPR. The penalties for non-compliance are significant, including up to four percent of an organization's global annual revenue. Enforcement of this regulation is unknown as the EUGDPR is not implemented until May 25, 2018. There are also administrative penalties where transfers of personal data may be stopped. As PRA is a globalorganization, such a disruption in data transfers could pose significant operational challenges.15Table of ContentsWe maintain a registration with the Drug Enforcement Administration, or DEA, that enables us to use controlled substances in connection with ourresearch services. Controlled substances are those drugs and drug products that appear on one of five schedules promulgated and administered by DEA underthe Controlled Substances Act. This act governs, among other things, the distribution, recordkeeping, handling, security, and disposal of controlledsubstances. Our DEA registration authorizes 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 revocation or the denial of a renewal of ourDEA 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 and safety in the countries in whichwe do business, including laws and regulations governing the management and disposal of hazardous substances and wastes, the cleanup of contaminatedsites and the maintenance of a safe workplace. Our operations include the use, generation, and disposal of hazardous materials and medical wastes. We may,in the future, incur liability under environmental statutes and regulations for contamination of sites we own or operate (including contamination caused byprior owners or operators of such sites), the off‑site disposal of hazardous substances and for personal injuries or property damage arising from exposure tohazardous materials from our operations. We believe that we have been and are in substantial compliance with all applicable environmental laws andregulations and that we currently have no liabilities under such environmental requirements that could reasonably be expected to materially harm ourbusiness, results of operations 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‑upon protocol and contract. If we fail toconduct a study properly in accordance with the agreed‑upon procedures, we may have to repeat a study or a particular portion of the services at our expense,reimburse the client for the cost of the services and/or pay additional damages. At our clinical pharmacology units we study the effects of drugs on healthy volunteers. In addition, in our clinical business we, on behalf of ourclients, contract with physicians who render professional services, including the administration of the substance being tested, to participants in clinical trials,many of whom are seriously ill and are at great risk of further illness or death as a result of factors other than their participation in a trial. As a result, we couldbe held liable for bodily injury, death, pain and suffering, loss of consortium, or other personal injury claims and medical expenses arising from a clinicaltrial. In addition, we sometimes engage the services of vendors necessary for the conduct of a clinical trial, such as laboratories or medical diagnosticspecialists. Because these vendors are engaged as subcontractors, we are responsible for their performance and may be held liable for damages if thesubcontractors fail to perform in the manner specified in their contract. To reduce our potential liability, and as a requirement of the GCP regulations, informed consent is required from each volunteer and patient. Inaddition, our clients provide us with contractual indemnification for all of our service related contracts. These indemnities generally do not, however, protectus against certain of our own actions such as those involving negligence or misconduct. Our business, financial condition and operating results could beharmed if we were required to pay damages 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. This insurance provides coverage forvicarious liability due to negligence of the investigators who contract with us, as well as claims by our clients that a clinical trial was compromised due to anerror or omission by us. If our insurance coverage is not adequate, or if insurance coverage does not continue to be available on terms acceptable to us, ourbusiness, financial condition, and operating results could be materially harmed. Employees As of December 31, 2017, we had over 15,800 employees, of which approximately 44% were in the United States, approximately 34% were inEurope, approximately 3% were in Canada, and approximately 19% were in Africa, Latin America, and Asia Pacific. Some of our employees located outsideof the United States are represented by workers council or labor unions. We believe that our employee relations are satisfactory. Approximately 40% ofemployees hold a Master’s level degree or higher. We have approximately 1,800 employees that hold a Ph.D, M.D. or other doctorate level degrees. 16Table of ContentsAvailable Information We are subject to the informational requirements of the Exchange Act and, in accordance therewith, file reports, including annual, quarterly andcurrent reports, proxy statements and other information with the Securities and Exchange Commission, or the SEC. Copies of our annual reports onForm 10‑K, quarterly reports on Form 10‑Q, current reports on Form 8‑K and our Proxy Statements for our annual meetings of stockholders, and anyamendments to those reports, as well as Section 16 reports filed by our insiders, are available free of charge on our website as soon as reasonably practicableafter we file the reports with, or furnish the reports to the SEC. Our website address is http://www.prahs.com, and our investor relations website is located atinvestor.prahs.com. Information on our website is not incorporated by reference herein. Our SEC filings are also available for reading and copying at theSEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained bycalling the SEC at 1‑800‑SEC‑0330. In addition, the SEC maintains an Internet site (http://www.sec.gov) containing reports, proxy and informationstatements, and other 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 information included in this Annual Report onForm 10‑K, including our consolidated financial statements and related notes thereto. The occurrence of any of the following risks may materially andadversely affect our business, financial condition, results of operations and future prospects, which could in turn materially affect the price of our commonstock. The potential loss, delay or non‑renewal of our contracts, or the non‑payment by our clients for services that we have performed, could adversely affect ourresults. We routinely experience termination, cancellation and non‑renewals of contracts by our clients in the ordinary course of business, and the number ofcancellations can vary significantly from year to year. Most of our clients for traditional, project‑based clinical trial services can terminate our contracts without cause upon 30 to 60 days’ notice. Forexample, our cancellation percentage for traditional, project‑based Phase I through IV trials was 18% for the years ended December 31, 2017 and 2016. Ourtraditional, project‑based clients may delay, terminate or reduce the scope of our contracts for a variety of reasons beyond our control, including but notlimited 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 upon schedules;•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 of reasons beyond our control,including in the event that we are unable to provide staff sufficient in number or experience as required for a project. 17Table of ContentsIn the event of termination, our contracts often provide for fees for winding down the study, but these fees may not be sufficient for us to maintainour profit margins, and termination or non‑renewal may result in lower resource utilization rates, including with respect to personnel who we are not able toplace on another client engagement. Clinical trials can be costly and a material portion of our revenue is derived from emerging biotechnology and small to mid‑sized pharmaceuticalcompanies, which may have limited access to capital. In addition, we provide services to such companies before they pay us for some of our services. There isa risk that we may initiate a clinical trial for a client, and the client subsequently becomes unwilling or unable to fund the completion of the trial. In such asituation, notwithstanding the client’s ability or willingness to pay for or otherwise facilitate the completion of the trial, we may be legally or ethically boundto 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 our backlog as of any date isnecessarily a meaningful predictor of future results. In addition, we may not realize the full benefits of our backlog of contractually committed services if ourclients cancel, delay or reduce their commitments under our contracts with them. Thus, the loss or delay of a large contract or the loss or delay of multiplecontracts could adversely affect our 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 such termination may also affect our abilityto obtain future contracts from the client involved and others. We believe the risk of loss or delay of multiple contracts is even greater in those cases where weare party to broader partnering arrangements with global biopharmaceutical companies. We bear financial risk if we underprice our fixed‑fee contracts or overrun cost estimates, and our financial results can also be adversely affected by failureto 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 risk if we initially underprice ourcontracts or otherwise overrun our cost estimates. In addition, contracts with our clients are subject to change orders, which we commonly experience andwhich occur when the scope of work we perform needs to be modified from that originally contemplated by our contract with the client. Modifications canoccur, for example, when there is a change in a key trial assumption or parameter, a significant change in timing or a change in staffing needs. Furthermore, ifwe are not successful in converting out‑of‑scope work into change orders under our current contracts, we bear the cost of the additional work. Suchunderpricing, significant cost overruns or delay in documentation of change orders could have a material 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 or are in process but have not beencompleted and was $3.5 billion, $2.9 billion, and $2.4 billion at December 31, 2017, 2016, and 2015, respectively. Our revenue conversion rate is based on afinancial and operational analysis performed by our project management teams and represents the level of effort expected to be expended at a specific pointin time. Once work begins on a project, revenue is recognized over the duration of the project. Projects may be terminated or delayed by the client or delayedby regulatory authorities for reasons beyond our control. To the extent projects are delayed, the timing of our revenue could be affected. In the event that aclient cancels a contract, we generally would be entitled to receive payment for all services performed up to the cancellation date and subsequent clientauthorized services related to terminating the canceled project. Generally, however, we have no contractual right to the full amount of the revenue reflectedin our backlog in the event of a contract cancellation. The duration of the projects included in our backlog, and the related revenue recognition, range from afew months to many years. Our backlog may not be indicative of our future results, and we may not realize all the anticipated future revenue reflected in ourbacklog. A number of factors may 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 relatively large orders in any givenreporting period that may be included in our backlog. Because of these large orders, our backlog in that reporting period may reach levels that may not besustained in subsequent reporting periods. As we increasingly compete for and enter into large contracts that are more global in nature, there can be no assurance about the rate at which ourbacklog will convert into revenue. A decrease in this conversion rate would mean that the rate of revenue recognized on contracts may be slower than whatwe have experienced in the past, which could impact our service18Table of Contentsrevenue and results of operations on a quarterly and annual basis. The revenue recognition on larger, more global projects could be slower than on smaller,less global projects for a variety of reasons, including but not limited to, an extended period of negotiation between the time the project is awarded to us andthe actual execution of the contract, as well as an increased timeframe for obtaining the necessary regulatory approvals. Additionally, delayed projects willremain in backlog and will not generate revenue at the rate originally expected. Thus, the relationship of backlog to realized revenues is indirect and mayvary over time. Our operating margins and profitability will be adversely affected if we are unable to either achieve efficiencies in our operating expenses or growrevenues at a rate faster than expenses. We operate in a highly competitive environment and experience competitive pricing pressure. To achieve our operating margins over the last threeyears, we have implemented initiatives to control the rate of growth of our operating expenses. We will continue to utilize these initiatives in the future witha 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 growour operating margins or that the magnitude of our growth in service revenue will be faster than the growth in our operating costs. If we are unable to growour service revenue at a faster rate than our operating costs, our operating margins will be adversely affected. Our initiatives and any future cost initiativesmay also adversely affect us, as they may decrease employee morale or make it more difficult for us to meet operational requirements. If we are unable to attract suitable investigators and patients for our clinical trials, our clinical development business may suffer. The recruitment of investigators and patients for clinical trials is essential to our business. Patients typically include people from the communities inwhich the clinical trials are conducted. Our clinical development business could be adversely affected if we are unable to attract suitable and willinginvestigators or patients for clinical trials on a consistent basis. For example, if we are unable to engage investigators to conduct clinical trials as planned orenroll sufficient patients in clinical trials, we may need to expend additional funds to obtain access to resources or else be compelled to delay or modify theclinical trial plans, which may result in additional costs to us. These considerations might result in our being unable to successfully achieve our projecteddevelopment timelines, or potentially even lead us to consider the termination of 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 our clients. The risks of this activityinclude claims of errors and omissions, misuse or misappropriation of client proprietary information, theft of client property and torts or other claims underemployment liability, co‑employment liability or joint employment liability. We have policies and guidelines in place to reduce our exposure to such risks,but if we fail to follow these policies and guidelines we may suffer reputational damage, loss of client relationships and business, and monetary damages.If we lose the services of key personnel or are unable to recruit experienced personnel, our business could be adversely affected. Our success substantially depends on the collective performance, contributions and expertise of our senior management team and other keypersonnel including qualified management, professional, scientific and technical operating staff and qualified sales representatives for our contract salesservices. There is significant competition for qualified personnel in the biopharmaceutical services industry, particularly those with higher educationaldegrees, such as a medical degree, a Ph.D or an equivalent degree. The departure of any key executive, the payment of increased compensation to attract andretain qualified personnel, or our inability to continue to identify, attract and retain qualified personnel or replace any departed personnel in a timely fashion,may impact our ability to grow our business and compete effectively in our industry and may negatively affect our ability to meet financial and operationalgoals.Changes in accounting standards may adversely affect our financial statements.From time to time the Financial Accounting Standards Board, or FASB, and SEC issue new or revised guidance that we are required to adopt. It ispossible that future accounting standards may require changes to our current accounting treatment and may require us to make changes to our accountingsystems and processes. These changes could have a material impact on our business, results of operations and financial condition. See Note 2 to our auditedconsolidated financial statements included elsewhere in this Annual Report on Form 10-K for details regarding recently implemented accounting standardsand recently issued accounting pronouncements and the potential impact they may have on the Company. 19Table of ContentsOur effective income tax rate may fluctuate for different reasons, including the recently-enacted U.S. Tax Cuts and Jobs Act, which may adversely affectour operations, earnings and earnings per share. Our effective income tax rate is influenced by our projected profitability in the various taxing jurisdictions in which we operate. The global natureof our business increases our tax risks. In addition, as a result of increased funding needs by governments resulting from fiscal stimulus measures, revenueauthorities in many of the jurisdictions in which we operate are known to have become more active in their tax collection activities. Changes in thedistribution of profits and losses among taxing jurisdictions may have a significant impact on our effective income tax rate, which in turn could have anadverse effect on our net income and earnings per share. The application of tax laws in various taxing jurisdictions, including the United States, is subject tointerpretation, and tax authorities in various jurisdictions may have diverging and sometimes conflicting interpretations of the application of tax laws.Changes in tax laws or tax rulings in the United States or other tax jurisdictions in which we operate, could materially impact our effective 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 in jurisdictions where no income tax benefit canbe recognized;•actual and projected full year pre‑tax income, including differences between actual and anticipated income before taxes in various jurisdictions;•changes in tax laws, or in the interpretation or application of tax laws, in various taxing jurisdictions, including the U.S. Tax Cuts and Jobs Act;•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 we determined that it is more likely thannot that future income tax benefits will not be realized.In addition, our effective income tax rate is influenced by U.S. tax law which has been substantially modified by the U.S. Tax Cuts and Jobs Act. Thefollowing provisions of the U.S. Tax Cuts and Jobs Act could have an adverse effect on our tax rate if it is determined that the provisions are applicable to theCompany:•global intangible low-taxed income; •limitations on the U.S. deductions for net business interest;•base erosion anti-abuse provisions; and•performance-based compensation subject to $1 million limit.These changes may cause fluctuations in our effective income tax rate that could adversely affect our results of operations and cause fluctuations inour earnings and earnings per share. Our business depends on the continued effectiveness and availability of our information systems, including the information systems we use to provide ourservices 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 intend to increase our use ofweb‑enabled and other integrated information systems in delivering our services. We also provide access to similar information systems to certain of ourclients in connection with the services we provide them. As the breadth and complexity of our information systems continue to grow, we will increasingly beexposed to the risks inherent in the development, integration and ongoing operation of evolving information systems, including:•disruption, impairment or failure of data centers, telecommunications facilities or other key infrastructure platforms;•security breaches of, cyberattacks on and other failures or malfunctions in our critical application systems or their associated hardware; and•excessive costs, excessive delays or other deficiencies in systems development and deployment.20Table of ContentsThe materialization of any of these risks may impede the processing of data, the delivery of databases and services, and the day‑to‑day managementof our business and could result in the corruption, loss or unauthorized disclosure of proprietary, confidential or other data. While we have disaster recoveryplans in place, they might not adequately protect us in 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 various computer facilities couldresult 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 atno cost to the client, but at significant cost to us, or result in the termination of a contract or damage to our reputation. Additionally, significant delays insystem enhancements or inadequate 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, the escalation of hostilities and acts of terrorism,particularly involving cities in which we have offices, could adversely affect our business. Although we carry property and business interruption insurance,our coverage might not be adequate to compensate us for all losses that may occur. Unauthorized disclosure of sensitive or confidential data, whether through system failure or employee negligence, fraud or misappropriation, coulddamage our reputation and cause us to lose clients. Similarly, unauthorized access to or through our information systems or those we develop for our clients,whether by our employees or third parties, including a cyber‑attack by computer programmers and hackers who may develop and deploy viruses, worms orother malicious software programs could result in negative publicity, significant remediation costs, legal liability and damage to our reputation and couldhave a material adverse effect on our results of operations. In addition, our liability insurance might not be sufficient in type or amount to adequately coverus against claims related to security breaches, cyber‑attacks and other related breaches. To date, cyber security attacks directed at us have not had a materialimpact on our financial results. Due to the evolving nature 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 our services pose risks to our business. Continued efficient operation of our business requires that we implement standardized global business processes and evolve our informationsystems to enable this implementation. We have continued to undertake significant programs to optimize business processes with respect to our services. Ourinability to effectively manage the implementation and adapt to new processes designed into these new or upgraded systems in a timely and cost‑effectivemanner may result in disruption to our business and negatively affect our operations. We have entered into agreements with certain vendors to provide systems development and integration services that develop or license to us the ITplatform for programs to optimize our business processes. If such vendors fail to perform as required or if there are substantial delays in developing,implementing and updating the IT platform, our client delivery may be impaired, and we may have to make substantial further investments, internally or withthird parties, to achieve our objectives. 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, including obtaining adequate technologyenabled services, creating IT‑enabled services that our clients will find desirable and implementing our business model with respect to these services. Also,increased IT‑related expenditures may negatively impact 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 contingencyplans in place for natural disasters or other catastrophic events, these events, including terrorist attacks, pandemic flu, hurricanes and ice storms, couldnevertheless disrupt our operations or those of our clients, investigators and collaboration partners, which could also affect us. In particular, our headquartersare in Raleigh, North Carolina where hurricanes might occur. Even though we carry business interruption insurance policies and typically have provisions inour contracts that protect us in certain events, we might suffer losses as a result of business interruptions that exceed the coverage available under ourinsurance policies or for which we do not have coverage. Any natural disaster or catastrophic event affecting us or our clients, investigators or collaborationpartners could have a significant negative impact on our operations and financial performance. 21Table of ContentsWe may be adversely affected by client concentration or concentration in therapeutic classes in which we conduct clinical trials. We derive a substantial portion of our revenues from a limited number of large clients. In 2017 and 2016, we derived 42% and 45%, respectively, ofour service revenue from our top five clients. In addition, almost 41% of our backlog, as of December 31, 2017, is concentrated among five clients. If anylarge client decreases or terminates its relationship with us, our business, 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 the areas of oncology and centralnervous system. Conducting multiple clinical trials for different clients in a single therapeutic class involving drugs with the same or similar chemical actionhas in the past, and may in the future, adversely affect our business if some or all of the trials are canceled because of new scientific information or regulatoryjudgments that affect the drugs 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 of operations and financial condition. We have significant operations in non‑U.S. countries that may require complex arrangements to deliver services on global contracts for our clients.Additionally, we have established operations in locations remote from our most developed business centers. As a result, we are subject to heightened risksinherent in conducting business internationally, including the following: •conducting a single trial across multiple countries is complex, and issues in one country, such as a failure to comply with local regulations orrestrictions, may affect the progress of the trial in the other countries, for example, by limiting the amount of data necessary for a trial to proceed,resulting in delays or potential cancellation 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 unfavorable labor regulations or tax policies,which could have an adverse effect on our ability to conduct business in or expatriate 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 be subject to withholding requirements orthe 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 patient informed consent, protection andcompensation in clinical trials, which could delay or inhibit our ability to conduct trials in such jurisdictions or which could materially increasethe risks associated with performing trials in such jurisdictions;•the regulatory or judicial authorities of non‑U.S. countries may not enforce legal rights and recognize business procedures in a manner to whichwe 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 which may conflict with laws in theUnited States;•changes in political and economic conditions may lead to changes in the business environment in which we operate, as well as changes innon‑U.S. currency exchange rates;•clients in non‑U.S. jurisdictions may have longer payment cycles, and it may be more difficult to collect receivables in non‑U.S. jurisdictions; and•natural disasters, pandemics or international conflict, including terrorist acts, could interrupt our services, endanger our personnel or cause projectdelays or loss of trial materials or results.These risks and uncertainties could negatively impact our ability to, among other things, perform large, global projects for our clients. Furthermore,our ability to deal with these issues could be affected by applicable U.S. laws and the need to protect our assets. In addition, we may be more susceptible tothese risks as we enter and continue to target growth in emerging countries and regions, including India, China, Eastern Europe and Latin America, whichmay be subject to a relatively higher risk of political instability, economic volatility, crime, corruption and social and ethnic unrest, all of which areexacerbated in many cases by a lack of an independent and experienced judiciary and uncertainties in how local law is applied and enforced. Thematerialization of any such risks could have an adverse impact on our financial condition and results of operations. 22Table of ContentsDue to the global nature of our business, we may be exposed to liabilities under the Foreign Corrupt Practices Act and various non‑U.S. anti‑corruptionlaws, and any allegation or determination that we violated these laws could have a material adverse effect on our business. We are required to comply with the U.S. Foreign Corrupt Practices Act, or FCPA, and other U.S. and non‑U.S. anti‑corruption laws, which prohibitcompanies 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, the FCPA imposes certain books, records, and accounting control obligations on public companies andother issuers. We operate in parts of the world in which corruption can be common and compliance with anti‑bribery laws may conflict with local customsand practices. Our global operations face the risk of unauthorized payments or offers being made by employees, consultants, sales agents, and other businesspartners outside of our control or without our authorization. It is our policy to implement safeguards to prohibit these practices by our employees andbusiness partners with respect to our operations. However, irrespective of these safeguards, or as a result of monitoring compliance with such safeguards, it ispossible that we or certain other parties may discover or receive information at some point that certain employees, consultants, sales agents, or other businesspartners may have engaged in corrupt conduct for which we might be held responsible. Violations of the FCPA or other non‑U.S. anti‑corruption laws mayresult in restatements of, or irregularities in, our financial statements as well as 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 theU.S. government and/or lose their U.S. export privileges. Changes in anti‑corruption laws or enforcement priorities could also result in increased compliancerequirements and related costs which could adversely affect our business, financial condition and results of operations. In addition, the U.S. or othergovernments may seek to hold us liable for successor liability FCPA violations or violations of other anti‑corruption laws committed by companies in whichwe invest or that we acquired or will acquire. If we are unable to successfully develop and market new services or enter new markets, our growth, results of operations or financial condition could beadversely affected. A key element of our growth strategy is the successful development and marketing of new services and entering new markets that complement orexpand our existing business. As we develop new services or enter new markets, including services targeted at participants in the broader healthcare industry,we may not have or adequately build the competencies necessary to perform such services satisfactorily, may not receive market acceptance for such servicesor may face increased competition. If we are unable to succeed in developing new services, entering new markets or attracting a client base for our newservices or in new markets, we will be unable to implement this element of our growth strategy, and our future business, reputation, results of operations andfinancial condition could be adversely affected. If we fail to perform our services in accordance with contractual requirements, government regulations and ethical considerations, we could be subject tosignificant 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 in bringing new drugs to market.Our services include monitoring clinical trials, laboratory analysis, electronic data capture, patient recruitment, data analytics, technology solutions andother related services. Such services are complex and subject to contractual requirements, government regulations, and ethical considerations. For example,we are subject to regulation by the FDA and comparable non‑U.S. regulatory authorities relating to our activities in conducting pre‑clinical and clinical trials.The clinical trial process must be conducted in accordance with regulations promulgated by the FDA under the Federal Food, Drug and Cosmetic Act, whichrequires the drug to be tested and studied in certain ways. In the United States, before human clinical testing may begin, a manufacturer must file an IND withthe FDA. Further, an IRB for each medical center proposing to participate in the clinical trial must review and approve the protocol for the clinical trial beforethe medical center’s investigators participate. Once initiated, clinical trials must be conducted pursuant to and in accordance with the applicable IND, therequirements of the relevant IRBs, and GCP regulations. Similarly, before clinical trials begin, a drug is tested in pre‑clinical studies that are expected tocomply with Good Laboratory Practice requirements. We are also subject to regulation by the DEA which regulates the distribution, recordkeeping, handling,security, and disposal of controlled substances. If we fail to perform our services in accordance with these requirements, regulatory authorities may takeaction against us. Such actions may include injunctions or failure to grant marketing approval of products, imposition of clinical holds or delays, suspensionor withdrawal of approvals, rejection of data collected in our studies, license revocation, product seizures or recalls, operational restrictions, civil or criminalpenalties or prosecutions, damages or fines. Clients may also bring claims against us for breach of our contractual obligations and patients in the clinicaltrials and patients taking drugs approved 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. 23Table of ContentsSuch consequences could arise if, among other things, the following occur: Improper performance of our services. The performance of clinical development services is complex and time‑consuming. For example, we maymake mistakes in conducting a clinical trial that could negatively impact or obviate the usefulness of the trial or cause the results of the trial to be reportedimproperly. If the trial results are compromised, we could be subject to significant costs or liability, which could have an adverse impact on our ability toperform our services and our reputation would be harmed. As examples:•non‑compliance generally could result in the termination of ongoing clinical trials or the disqualification of data for submission to regulatoryauthorities;•compromise of data from a particular trial, such as failure to verify that adequate informed consent was obtained from patients, could require us torepeat 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 to such risks, improperperformance of our services could have a material adverse effect on our financial condition, damage our reputation and result in the cancellation of currentcontracts by the affected client or other current clients or failure to obtain future 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 or enforcement agencies with respectto regulatory compliance of their clinical trials, programs or the marketing and sale of their drugs. In these situations, we have often provided services to ourclients with respect to the clinical trials, programs or activities being investigated, and we are called upon to respond to requests for information by theauthorities and agencies. There is a risk that either our clients or regulatory authorities could claim that we performed our services improperly or that we areresponsible for clinical trial or program compliance. If our clients or regulatory authorities make such claims against us and prove them, we could be subjectto damages, fines or penalties. In addition, negative publicity regarding regulatory compliance of our clients’ clinical trials, programs or drugs could have anadverse 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 face substantial 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 statehealthcare laws and regulations pertaining to fraud and abuse are and will be applicable to our business. We could be subject to healthcare fraud and abuselaws of both the federal government and the states in which we conduct our business. Because of the breadth of these laws and the narrowness of availablestatutory and regulatory exceptions, it is possible that some of our business activities could be subject to challenge under one or more of such laws. If we orour operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject topenalties, including civil and criminal penalties, damages, fines, imprisonment and the curtailment or restructuring of our operations, any of which couldmaterially adversely affect our ability to operate our business and our financial results. Our services could subject us to potential liability that may adversely affect our results of operations and financial condition. Our business involves the testing of new drugs on patients in clinical trials. Our involvement in the clinical trial and development process creates arisk of liability for personal injury to or death of patients, particularly those with life‑threatening illnesses, resulting from adverse reactions to the drugsadministered during testing or after regulatory approval. For example, we may be sued in the future by individuals alleging personal injury due to theirparticipation in clinical trials and seeking damages from us under a variety of legal theories. If we are required to pay damages or incur defense costs inconnection with any personal injury claim that is outside the scope of indemnification agreements we have with our clients, if any indemnification agreementis not performed in accordance with its terms or if our liability exceeds the amount of any applicable indemnification limits or available insurance coverage,our financial condition, results of operations 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 typically located at hospitals, clinics orother sites and supervise the administration of the investigational drug to patients during the course of a clinical trial. If the investigators commit errors ormake omissions during a clinical trial that result in harm to trial24Table of Contentspatients or after a clinical trial to a patient using the drug after it has received regulatory approval, claims for personal injury or products liability damagesmay result. Additionally, if the investigators engage in fraudulent or negligent behavior, trial data may be compromised, which may require us to repeat theclinical trial or subject us to liability or regulatory action. We do not believe we are legally responsible for the medical care rendered by such third‑partyinvestigators, and we would vigorously defend any claims brought against us. However, it is possible we could be found liable for claims with respect to theactions of third‑party investigators. Some of our services involve direct interaction with clinical trial patients and operation of Phase I and IIa clinical facilities, which could create potentialliability 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 an investigational drug on a limited numberof individuals to evaluate its safety, determine a safe dosage range and identify side effects. Failure to operate such a facility in accordance with applicableregulations could result in disruptions to our operations. Additionally, we face risks associated with adverse events resulting from the administration of suchdrugs and the professional malpractice of medical care providers. We also directly employ nurses and other trained employees who assist in implementing thetesting involved in our clinical trials, such as drawing blood from subjects. Any professional malpractice or negligence by such investigators, nurses or otheremployees could potentially result in liability to us in the event of personal injury to or death of a subject in clinical trials. This liability, particularly if itwere to exceed the limits of any indemnification 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 our ordinary indemnification obligations.The coverage provided by such insurance may not be adequate for all claims we may make or may be contested by our insurance carriers. If our insurance isnot adequate or available to pay liabilities associated with our operations, or if we are unable to purchase adequate insurance at reasonable rates in the future,our profitability may be adversely impacted.We do not currently maintain key person life insurance policies on any of our employees. If any of our key employees were to join a competitor or toform a competing company, some of our clients might choose to use the services of that competitor or new company instead of our own. Furthermore, clientsor other companies seeking to develop in‑house capabilities may hire some of our senior management or key employees. We cannot assure you that a courtwould enforce the non‑competition provisions in our employment agreements. Exchange rate fluctuations may affect our results of operations and financial condition. During 2017, approximately 17% of our service revenue and 39% of our expenses were denominated in currencies other than the U.S. dollar,particularly the Euro and the British Pound. Because a portion of our service revenue and expenses are denominated in currencies other than the U.S. dollarand our financial statements are reported in U.S. dollars, changes in non‑U.S. currency exchange rates could significantly affect our results of operations andfinancial condition. The revenue and expenses of our non‑U.S. operations are generally denominated in local currencies and translated into U.S. dollars for financialreporting purposes. Accordingly, exchange rate fluctuations will affect the translation of non‑U.S. results into U.S. dollars for purposes of reporting ourconsolidated results. We are subject to non‑U.S. currency transaction risk for fluctuations in exchange rates during the period of time between the consummation and cashsettlement of a transaction. We earn revenue from our service contracts over a period of several months and, in some cases, over several years. Accordingly,exchange rate fluctuations during this period may affect our profitability with respect to such contracts. We may limit these risks through exchange rate fluctuation provisions stated in our service contracts, or we may hedge our transaction risk withnon‑U.S. currency exchange contracts or options. We have not, however, hedged any of our non‑U.S. currency transaction risk, and we may experiencefluctuations in financial results from our operations outside the United 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, are subject to rapid technological changes.Our current competitors or other businesses might develop technologies or services that are more25Table of Contentseffective or commercially attractive than, or render obsolete, our current or future technologies and services. If our competitors introduce superiortechnologies or services and if we cannot make enhancements to remain competitive, our competitive position would be harmed. If we are unable to competesuccessfully, we may lose clients or be unable to attract new 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 the degree to which other clients orpotential 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, providers and patients that their drugtherapies are more cost‑effective than competing therapies marketed or being developed by competing firms. In addition to the adverse competitive intereststhat biopharmaceutical companies have with each other, these companies also have adverse interests with respect to drug selection and reimbursement withother participants in the healthcare industry, including payors and providers. Biopharmaceutical companies also compete to be first to the market with newdrug therapies. We regularly provide services to biopharmaceutical companies who compete with each other, and we sometimes provide services to suchclients regarding competing drugs in development. Our existing or future relationships with our biopharmaceutical clients have in the past and may continueto deter other biopharmaceutical clients from using our services or in certain instances has resulted in our clients seeking to place limits on our ability toserve their competitors and other industry participants. In addition, our further expansion into the broader healthcare market may adversely impact ourrelationships with biopharmaceutical clients, and such clients may elect not to use our services, reduce the scope of services that we provide to them or seekto place restrictions on our ability to serve clients in the broader healthcare market with interests that are adverse to theirs. Any loss of clients or reductions inthe level of revenues from a client could have a material adverse effect on our results of operations, business and prospects.If we are unable to manage our joint ventures and identify, acquire and integrate future acquisitions and joint ventures with our existing business, servicesand technologies, our business, results of operations and financial condition could be adversely impacted. We have historically grown our business both organically and through acquisitions, and we anticipate that a portion of our future growth may comefrom acquiring existing businesses, services or technologies and entering into strategic alliances and joint ventures. The success of any acquisition willdepend upon, among other things, our ability to effectively integrate acquired personnel, operations, products and technologies into our business, to obtainregulatory approvals, and to retain 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 acquired such businesses. In addition, anyfuture acquisitions could result in the incurrence of additional debt and related interest expense, contingent liabilities and amortization expenses related tointangible assets, which could have a material adverse effect 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 areadequate and not inadvertently creating competitors. We may be unable to identify suitable acquisition opportunities, properly evaluate the price of suchacquisitions or obtain any necessary financing on commercially acceptable terms. We may also spend time and money investigating and negotiating withpotential acquisition targets and strategic alliance partners but not complete the transaction. Acquisitions involve other risks, including, among others, theassumption of additional liabilities and expenses, difficulties and expenses in connection with integrating the acquired companies and achieving theexpected benefits, issuances of potentially dilutive securities or debt, loss of key employees of the acquired companies, transaction costs, diversion ofmanagement’s attention from other business concerns and, with respect to the acquisition of non‑U.S. companies, the inability to overcome differences innon‑U.S. business practices, language and customs. Our failure to identify potential acquisitions, complete targeted acquisitions and integrate completedacquisitions or identify and manage strategic alliances or joint ventures could have a material adverse effect on our business, financial condition and resultsof operations. We have a significant amount of goodwill and intangible assets on our balance sheet, and our results of operations may be adversely affected if we fail torealize the full value of our goodwill and intangible assets. Our balance sheet reflects goodwill and intangibles assets of $1,512.4 million and $783.8 million, respectively, as of December 31, 2017.Collectively, goodwill and intangibles assets represented 68% of our total assets as of December 31, 2017. In accordance with generally accepted accountingprinciples, or GAAP, goodwill and indefinite-lived intangible assets are not amortized, but are subject to a periodic impairment evaluation. We assess therealizability of our indefinite-lived intangible assets and goodwill annually and conduct an interim evaluation whenever events or changes in circumstances,such as operating losses or a significant decline in earnings associated with the acquired business or asset, indicate that these assets26Table of Contentsmay be impaired. In addition, we review long‑lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount ofthe assets might not be recoverable. If indicators of impairment are present, we evaluate the carrying value in relation to estimates of future undiscounted cashflows. Our ability to realize the value of the goodwill and intangible assets will depend on the future cash flows of the businesses we have acquired, which inturn depend in part on how well we have integrated these businesses into our own business. The carrying amount of the goodwill could be impaired if there isa downturn in our business or our industry or other factors that affect the fair value of our business, in which case a charge to earnings would becomenecessary. If we are not able to realize the value of the goodwill and intangible assets, we may be required to incur material charges relating to the impairmentof those assets. Such impairment charges could materially and adversely affect our operating results and financial condition. See Note 2 to our consolidatedfinancial statements included elsewhere in this Annual Report on Form 10‑K for a further discussion of our goodwill 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 greaterthan 50 percentage point change, by value, in the aggregate stock ownership of certain stockholders over a three‑year period), the corporation’s ability to useits pre‑change net operating loss carryforwards to offset its future taxable income and other pre‑change tax attributes may be limited. We have experienced atleast one ownership change in the past. We may experience additional ownership changes in the future. In addition, future changes in our stock ownership(including future sales by KKR) could result in additional ownership changes. Any such ownership changes could limit our ability to use our net operatingloss carryforwards to offset any future taxable income and other tax attributes. State and non‑U.S. tax laws may also impose limitations on our ability toutilize net operating 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 our growth, we must continue to improveour operating and administrative systems and to attract and retain qualified management, professional, scientific and technical operating personnel. Webelieve that maintaining and enhancing both our systems and personnel at reasonable cost are instrumental to our success. We cannot assure you that we willbe able to enhance our current technology or obtain new technology that will enable our systems to keep pace with developments and the sophisticatedneeds of our clients. The nature and pace of our growth introduces risks associated with quality control and client dissatisfaction due to delays inperformance or other problems. In addition, non‑U.S. operations involve the additional risks of assimilating differences in non‑U.S. business practices, hiringand retaining qualified personnel and overcoming language 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 could adversely impact our financialcondition. We conduct activities that have involved, and may continue to involve, the controlled use of hazardous materials and the creation of hazardoussubstances, including medical waste and other highly regulated substances. Although we believe that our safety procedures for handling the disposal of suchmaterials generally comply with the standards prescribed by non‑U.S., state and federal laws and regulations, our operations nevertheless pose the risk ofaccidental contamination or injury caused by the release of these materials and/or the creation of hazardous substances, including medical waste and otherhighly regulated substances. In the event of such an accident, we could be held liable for damages and cleanup costs which, to the extent not covered byexisting insurance or indemnification, could harm our business. In addition, other adverse effects could result from such liability, including reputationaldamage resulting in the loss of additional business from certain clients. We rely on third parties to provide certain data and other information to us. Our suppliers or providers might increase our cost to obtain, restrict our use ofor refuse to license data, which could lead to our inability to access certain data or provide certain services and, as a result, materially and adversely affectour operating results and financial condition.Our services are derived from, or include, the use of data we collect from third parties. We have several data suppliers that provide us a broad anddiverse scope of information that we collect, use in our business and sell.We generally enter into long-term contractual arrangements with many of our data suppliers. At the time we enter into a new data supply contract orrenew an existing contract, suppliers may increase our cost to obtain and use the data provided by such supplier, increase restrictions on our ability to use orsell such data, or altogether refuse to license the data to us. Also, our data suppliers may fail to meet or adhere to our quality control standards or fail todeliver the data to us. Although no single27Table of Contentssupplier is material to our business, if suppliers that collectively provide a significant amount of the data we receive or use were to increase our costs toobtain or use such data, further restrict our access to or use of such data, fail to meet or adhere to our quality control standards, refuse to provide or fail todeliver data to us, our ability to provide data-dependent services to our clients may be adversely impacted, which could have a material adverse effect on ourbusiness, results of operations, financial condition or cash flow.We rely on third parties for important products and services, services and licenses to certain technology and intellectual property rights and we might notbe able to continue to obtain such products, services and licenses. We depend on certain third parties to provide us with products and services critical to our business. Such services include, among others, suppliers ofdrugs for patients participating in trials, suppliers of kits for use in our laboratories, suppliers of reagents for use in our testing equipment and providers ofmaintenance services for our equipment. The failure of any of these third parties to adequately provide the required products or services, or to do so incompliance with applicable regulatory requirements, could have a material adverse effect on our business.Some of our services rely on intellectual property, technology and other similar property owned and/or controlled by third parties. Our licenses tothis property and technology could terminate or expire and we might not be able to replace these licenses in a timely manner. Also, we might not be able torenew these licenses on similar terms and conditions. Failure to renew these licenses, or renewals of these licenses on less advantageous terms, could have amaterial adverse effect on our business, results of operations, financial condition or cash flow. 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 otherintellectual property. Existing laws of the various countries in which we provide services or solutions offer only limited protection of our intellectualproperty rights, and the protection in some countries may be very limited. We rely upon a combination of trade secrets, confidentiality policies,nondisclosure, invention assignment and other contractual arrangements, and copyright, trademark and trade secret laws, to protect our intellectual propertyrights. These laws are subject to change at any time and certain agreements may not be fully enforceable, which could further restrict our ability to protect ourinnovations. Our intellectual property rights may not prevent competitors from independently developing services similar to or duplicative of ours. Further,the steps we take in this regard might not be adequate to prevent or deter infringement or other misappropriation of our intellectual property by competitors,former employees or other third parties, and we might not be able to detect unauthorized use of, or take appropriate and timely steps to enforce, ourintellectual property rights. Enforcing our rights might also require considerable time, money and oversight, and we may not be successful in enforcing ourrights. Depending on the circumstances, we might need to grant a specific client greater rights in intellectual property developed in connection with acontract than we otherwise generally do. In certain situations, we might forego all rights to the use of intellectual property we create, which would limit ourability to reuse that intellectual property for other clients. Any limitation on our ability to provide a service or solution could cause us to lose revenuegenerating opportunities and 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 any expansion or contraction in thefuture. Rapid expansion or contraction, both of which we have experienced, could strain our operational, human and financial resources and facilities. If wefail to properly manage any changes, our expenses might grow more than revenue and our results of operations and financial condition might be negativelyaffected. 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 these groups, subsidiaries or divisions, itwill 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;28Table of Contents•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 compete successfully, our business will suffer. Weoften compete for business with other biopharmaceutical services companies, universities, niche providers and discovery and development departmentswithin our clients, some of which are large biopharmaceutical services companies in their own right with greater resources than ours. As part of our businessmodel, we have formed preferred vendor relationships. These relationships generally are not contractual and are subject to change at any time. As a result ofthese relationships, we may find reduced access to certain potential clients due to preferred vendor arrangements with other competitors. There are fewbarriers to entry for smaller specialized companies considering entering the industry. Because of their size and focus, these companies might competeeffectively against larger companies like us, which could have a material adverse impact on our business. Additionally, the industry is highly fragmented,with numerous smaller specialized companies and a handful of full‑service companies with global capabilities similar to ours. Increased competition has ledto price and other forms of competition, such as acceptance of less favorable contract terms that could adversely affect our operating results. As a result ofcompetitive pressures, in recent years our industry has experienced consolidation. This trend is likely to produce more competition from the resulting largercompanies for both clients and acquisition candidates. Outsourcing trends in the biopharmaceutical industry and changes in aggregate spending and R&D budgets could adversely affect our operating resultsand growth rate. We provide services to the biopharmaceutical industry and our revenues depend on the outsourcing trends and R&D expenditures in the industry.Economic factors and industry trends that affect biopharmaceutical companies affect our business. Biopharmaceutical companies continue to seek long‑termstrategic collaborations with global CROs with favorable pricing terms. Competition for these collaborations is intense and we may decide to forego anopportunity or we may not be selected, in which case a competitor may enter into the collaboration and our business with the client, if any, may be limited. Inaddition, if the biopharmaceutical industry reduces its outsourcing of clinical trials or such outsourcing fails to grow at projected rates, our operations andfinancial condition could be materially and adversely affected. All of these events could adversely affect our business, results of operations or financialcondition. 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 the outsourcing trends and R&Dexpenditures into fewer companies. Large pharmaceutical companies represent a significant portion of our customer base. The pharmaceutical industry iscurrently undergoing a period of increased merger activity. As a result of this and future consolidations, our client diversity may decrease and our businessmay be adversely affected. In addition, consolidation and other factors in the biopharmaceutical industry, may slow decision making by our clients or resultin the delay or cancellation of clinical trials. 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 are in the process of undertaking,efforts to control growing healthcare costs through legislation, regulation and voluntary agreements with medical care providers and biopharmaceuticalcompanies. We are uncertain as to the effects of these reforms on our business and are unable to predict what legislative proposals, if any, will be adopted inthe future. If regulatory cost containment 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 are adopted, the demand for ourservices could decrease. Government bodies may also adopt healthcare legislation or regulations that are more burdensome than existing regulations. For example, productsafety concerns and recommendations by the Drug Safety Oversight Board could change the regulatory environment for drug products, and new orheightened regulatory requirements may increase our expenses or limit our ability to offer some of our services. Additionally, new or heightened regulatoryrequirements may have a negative impact 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 marketing applications for pharmaceuticalsand biologics, could decrease the business opportunities available to us.29Table of Contents Actions by regulatory authorities or clients to limit the scope of or withdraw an approved drug from the market could result in a loss of revenue. Government regulators have the authority, after approving a drug, to limit its indication for use by requiring additional labeled warnings or towithdraw the drug’s approval for its approved indication based on safety concerns. Similarly, clients may act to voluntarily limit the availability of approveddrugs or withdraw them from the market after we begin our work. If we are providing services to clients for drugs that are limited or withdrawn, we may berequired to narrow the scope of or terminate our services with respect to such drugs, which would prevent us from earning the full amount of service revenueanticipated under the related service contracts. Current and proposed laws and regulations regarding the protection of personal data could result in increased risks of liability or increased cost to us orcould limit our service offerings. The confidentiality, collection, use and disclosure of personal data, including clinical trial patient‑specific information, are subject to governmentalregulation generally in the country in which the personal data was collected or used. For example, U.S. federal regulations under HIPAA generally requireindividuals’ written authorization, in addition to any required informed consent, before protected health information may be used for research and suchregulations specify standards for de‑identifications and for limited data sets. We may also be subject to applicable state privacy and security laws andregulations in states in which we operate. We are both directly and indirectly affected by the privacy provisions surrounding individual authorizationsbecause many investigators with whom we are involved in clinical trials are directly subject to them as a HIPAA “covered entity” and because we obtainidentifiable health information from third parties that are subject to such regulations. Because of recent amendments to the HIPAA data security and privacyrules, there are some instances where we may be a HIPAA “business associate” of a “covered entity,” meaning that we may be directly liable for any breachesin protected health information and other HIPAA violations. These amendments may subject us to HIPAA’s enforcement scheme, which, as amended, canresult 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 identifiable natural person with healthinformation carrying additional obligations, including obtaining the explicit consent from the individual for collection, use or disclosure of the information.In addition, we are subject to laws and regulations with respect to cross‑border transfers of such data out of certain jurisdictions in which we operate,including the EU. If we are unable to transfer data between and among countries and regions in which we operate, it could affect the manner in which weprovide our services or adversely affect our financial results. The United States, the EU and its member states, and other countries where we have operations,continue to issue new privacy and data protection rules and regulations that relate to personal data and health information. Failure to comply with these dataprotection and privacy regulations and rules in various jurisdictions, or to resolve any serious privacy or security complaints, could subject us to regulatorysanctions, criminal prosecution or civil liability. Federal, state and non‑U.S. governments may propose or have adopted additional legislation governing thecollection, possession, use or dissemination of personal data, such as personal health information, and personal financial data as well as security breachnotification rules for loss or theft of such data. Additional legislation or regulation of this type might, among other things, require us to implement newsecurity measures and processes or bring within 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 or duties relating to the use, privacy orsecurity of personal data, we could be subject to civil liability or criminal prosecution, be forced to alter our business practices and suffer reputational harm. The biopharmaceutical industry has a history of patent and other intellectual property litigation, and we might be involved in costly intellectual propertylawsuits. The biopharmaceutical industry has a history of intellectual property litigation, and these lawsuits will likely continue in the future. Accordingly,we may face patent infringement suits by companies that have patents for similar business processes or other suits alleging infringement of their intellectualproperty rights. Legal proceedings relating to intellectual property could be expensive, take significant time and divert management’s attention from otherbusiness concerns, regardless of the outcome of the litigation. If we do not prevail in an infringement lawsuit brought against us, we might have to paysubstantial damages, and we could be required to stop the infringing activity or obtain a license to use technology on unfavorable terms. 30Table of ContentsCircumstances beyond our control could cause the CRO industry to suffer reputational or other harm that could result in an industry‑wide reduction indemand 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. For example, other CROs couldengage 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 materialindustry‑wide reputational harm, one or more CROs could engage in or fail to detect malfeasance, such as inadequately monitoring sites, producinginaccurate databases or analysis, falsifying patient records, and performing incomplete lab work, or take other actions that would reduce the confidence of ourclients in the CRO industry. As a result, the willingness of biopharmaceutical companies to outsource R&D services to CROs could diminish and ourbusiness could thus be harmed materially by events outside our control.Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our debt obligations and may otherwise restrictour activities. As of December 31, 2017, we had total indebtedness of $1,352.4 million, which consisted of: $120.0 million principal amount of variable rateaccounts receivable financing due 2019, $1,140.9 million principal amount of variable rate first lien term loans due 2021, or the 2016 First Lien Term Loan,and $91.5 million in borrowings under our revolving line of credit, or the 2016 Revolver. The 2016 First Lien Term Loan and 2016 Revolver, which wereamended in September 2017 and December 2017, are collectively known as the 2016 Credit Facilities. Specifically, our high level of debt could have important consequences to the holders of our debt, including:•making it more difficult for us to satisfy our obligations with respect to our debt;•limiting our ability to obtain additional financing to fund future working capital, capital expenditures, investments or acquisitions or othergeneral corporate requirements;•requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amountof 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 the 2016 Credit Facilities and accountsreceivable 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 or undertaking such additionalobligations could further exacerbate the risks to our financial condition. Although the credit agreement governing the 2016 Credit Facilities, as amended, contains restrictions on the incurrence of additional indebtedness,these restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could increase.To the extent new debt is added to our current debt levels, the risks to our financial condition would increase. While the credit agreement governing the 2016 Credit Facilities, as amended, also contains restrictions on our ability to make loans andinvestments, these restrictions are subject to a number of qualifications and exceptions, and the investments incurred in compliance with these restrictionscould 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 our indebtedness that could becomedue. The credit agreement governing the 2016 Credit Facilities and the accounts receivable financing agreement, as amended, require us to comply withcertain covenants. In particular, our credit agreement prohibits us from incurring any additional indebtedness, except in specified circumstances, or amendingthe terms of agreements relating to certain existing junior indebtedness, if any, in a manner materially adverse to the lenders under our credit agreementwithout their respective approval. Further, our credit agreement and the accounts receivable financing agreement contain customary covenants, includingcovenants that restrict our ability to acquire and dispose of assets, engage in mergers or reorganizations, pay31Table of Contentsdividends or make investments. A violation of any of these covenants could cause an event of default under our financing agreements.If we default on our financing agreements as a result of our failure to pay principal or interest when due, our material breach of any representation,warranty or covenant, or any other reason, all outstanding amounts could become immediately due and payable. In such case, we may not have sufficientfunds to repay all the outstanding amounts. In addition, or in the alternative, the lenders under our financing agreements could exercise their rights under thesecurity documents entered into in connection with these agreements. If any of the holders of our indebtedness accelerate the repayment of suchindebtedness, there can be no assurance that we will have sufficient assets to repay our indebtedness. If we were unable to repay those amounts, the holders ofour secured indebtedness could proceed against the collateral granted to them to secure that indebtedness. Any acceleration of amounts due or the substantialexercise by the lenders of their rights under the security documents 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 to satisfy our obligations underour 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 and financial, business, regulatory andother 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 covenantsin those facilities. It cannot be assured that our business will generate sufficient cash flow from operations, or that future borrowings will be available to us under our2016 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 or delay capital expenditures, sellassets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meetour scheduled debt service obligations. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financialcondition 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 couldfurther restrict our business operations. In addition, the terms of existing or future debt agreements, may restrict us from adopting some of these alternatives.In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets oroperations to meet our debt service and other obligations. We may not be able to consummate those dispositions for fair market value or at all and anyproceeds that we could 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 all of our debt is variable‑rate debt, fluctuations in interest rates could have a material effect on our business. We currently utilize derivativefinancial instruments such as interest rate swaps to hedge our exposure to interest rate fluctuations, but such instruments may not be effective in reducing ourexposure to interest fluctuations, and we may discontinue utilizing them at any time. As a result, we may incur higher interest costs if interest rates increase.These higher interest costs could have a material adverse impact on our financial condition and the levels of cash we maintain for working capital. KKR continues to have significant influence over us, including control over decisions that require the approval of stockholders, which could limit yourability to influence the outcome of matters submitted to stockholders for a vote. KKR beneficially owned approximately 20.7% of our common stock as of December 31, 2017. Even though KKR does not control a majority of ouroutstanding voting power, it has the ability to exercise significant control over all corporate actions requiring stockholder approval, including:•the election and removal of directors and the size of our board of directors;•any amendment of our certificate of incorporation or bylaws; or•the approval of mergers and other significant corporate transactions, including a sale of substantially all of our assets. 32Table of ContentsProvisions of our corporate governance documents and Delaware law could make any change in our board of directors or in control of our company moredifficult. Our amended and restated certificate of incorporation, our amended and restated bylaws and Delaware law contain provisions, such as provisionsauthorizing, without a vote of stockholders, the issuance of one or more series of preferred stock, that could make it difficult or expensive for a third party topursue a tender offer, change in control or takeover attempt that is opposed by our management and board of directors even if such a transaction would bebeneficial to our stockholders. We also have a staggered board of directors that could make it more difficult for stockholders to change the composition ofour board of directors in any one year. These anti‑takeover provisions could substantially impede the ability of public stockholders to change ourmanagement or board of directors. Our operating results and share price may be volatile, which could cause the fair value of our stockholders’ investments to decline. Securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This marketvolatility, as well as general economic, market or political conditions, could subject the market price of our shares to wide price fluctuations regardless of ouroperating performance. Our operating results and the trading 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 our common stock or the stock of othercompanies 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;•issuance of new or changed securities analysts’ reports or recommendations or termination of coverage of our common stock by securitiesanalysts;•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 price and demand for our shares tofluctuate substantially. While we believe that operating results for any particular quarter are not necessarily a meaningful indication of future results,fluctuations in our quarterly operating results could limit or prevent investors from readily selling their shares and may otherwise negatively affect the marketprice and liquidity of our shares. In addition, 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 lawsuit against us, we could incur substantialcosts defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm ourprofitability and reputation. 33Table of ContentsA significant portion of our total outstanding shares may be sold into the market in the near future. This could cause the market price of our common stockto 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. We have 63,623,950 outstanding sharesof common stock as of December 31, 2017. Certain of our stockholders have demand registration rights and “piggyback” registration rights with respect tofuture registered offerings of our common stock. KKR and other stockholders, who collectively own 20.7% of our common stock, may sell shares of ourcommon 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 price ofour common stock. We also registered all shares of common stock that we may issue under our equity compensation plans and they can be freely sold in thepublic market upon issuance, subject to restrictions on transfer contained in management stockholders agreements entered into between certain recipients ofequity compensation and KKR. As restrictions on transfer end, the market price of our stock could decline if the holders of currently restricted shares sellthem or are perceived by the market as intending to sell them. 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 North America, Europe, Africa, LatinAmerica, Australia and Asia. In 2017, our total rental expense for our facilities and offices was approximately $37.0 million. We do not own any real estate.We believe that our properties, taken as a whole, are in good operating 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 our business. We believe that we haveadequately accrued for these liabilities and that there is no other litigation pending that could materially harm our results of operations and financialcondition. See Note 13 to our consolidated financial statements included elsewhere in this Annual Report on Form 10‑K for a further discussion of our currentlegal proceedings. Item 4. Mine Safety Disclosures Not applicable.34Table of ContentsPART 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 and low sales prices per share of ourcommon stock as reported by the NASDAQ for the periods indicated. High LowFiscal Year 2017 Fourth Quarter$92.00 $75.71Third Quarter$80.99 $73.05Second Quarter$79.98 $61.93First Quarter$66.04 $54.08 High LowFiscal Year 2016 Fourth Quarter$60.96 $50.87Third Quarter$56.77 $39.25Second Quarter$51.35 $39.52First Quarter$47.84 $35.60 Holders of Record On February 16, 2018, we had approximately 132 common stockholders of record. This number does not include beneficial owners for whom sharesare 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 pay any cash dividends on ourcommon stock for the foreseeable future and instead intend to retain earnings, if any, for future operations, expansion and debt repayment. Any decision todeclare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our results ofoperations, 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 the indenture governing our SeniorNotes. See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources—2016Credit Facilities” for restrictions on our ability to pay dividends. Recent Sales of Unregistered Securities There were no unregistered sales of equity securities in 2017 that have not been previously reported. 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 incorporated by reference into any filing ofPRA Health Sciences, Inc. The following graph shows a comparison from November 13, 2014 (the date our common stock commenced trading on the NASDAQ) throughDecember 31, 2017 of the cumulative total return for our common stock, the Nasdaq Composite Index and the Nasdaq Health Care Index. 35Table of ContentsThe graph assumes that $100 was invested at the market close on November 13, 2014 in the common stock of PRA Health Sciences, Inc., the NasdaqComposite Index and the Nasdaq Health Care Index, and assumes reinvestments of dividends, if any. The stock price performance of the following graph isnot necessarily indicative of future stock price performance.Item 6. Selected Financial Data The following tables set forth, for the periods and at the dates indicated, our selected historical consolidated financial data. We have derived theselected consolidated financial data for the years ended December 31, 2015, 2016 and 2017, and as of December 31, 2016 and 2017, from our auditedconsolidated financial statements appearing elsewhere in this Annual Report on Form 10‑K. We have derived the selected consolidated financial data for theperiod from January 1 through September 22, 2013, the period from September 23 through December 31, 2013, the year ended December 31, 2014, and as ofDecember 31, 2013, 2014 and 2015 from our consolidated financial statements not appearing elsewhere in this Annual Report on Form 10‑K. Our historicalresults are not necessarily indicative of the results we may achieve in any future period. The accompanying selected consolidated statements of operations and cash flows data are presented for two periods: Predecessor and Successor,which relate to the period preceding the Company’s acquisition by KKR, or KKR Transaction, and the period succeeding the KKR Transaction, respectively.The Company refers to the operations of PRA Health 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 ofFinancial Condition and Results of Operations” and our consolidated financial statements and the accompanying notes appearing elsewhere in this AnnualReport on Form 10‑K.36Table of Contents Predecessor Successor(in thousands, except per share data)January 1, 2013 -September 22, 2013 September 23, 2013 -December 31, 2013 December 31, 2014 December 31, 2015 December 31, 2016 December 31, 2017Consolidated statement of operations data: Revenue: Service revenue$508,539 $324,362 $1,266,596 $1,375,847 $1,580,023 $1,948,374Reimbursement revenue103,531 54,854 192,990 238,036 231,688 311,015Total revenue612,070 379,216 1,459,586 1,613,883 1,811,711 2,259,389Operating expenses: Direct costs304,102 222,776 859,218 886,528 1,032,688 1,283,868Reimbursable out-of-pocket costs103,531 54,854 192,990 238,036 231,688 311,015Selling, general and administrative142,880 69,730 253,970 246,417 269,893 321,987Transaction-related costs47,486 29,180 — — 44,834 87,709Depreciation and amortization25,144 25,333 96,564 77,952 69,506 78,227Loss on disposal of fixed assets225 — 5 652 753 358(Loss) income from operations(11,298) (22,657) 56,839 164,298 162,349 176,225Interest expense, net(32,719) (23,703) (81,939) (61,747) (54,913) (46,729)Loss on modification or extinguishment of debt(21,678) (7,211) (25,036) — (38,178) (15,023)Foreign currency (losses) gains, net(3,641) (4,117) 10,538 14,048 24,029 (39,622)Other (expense) income, net(530) 1,180 (2,254) (1,434) 607 (304)(Loss) income before income taxes and equity in (losses) income of unconsolidated jointventures(69,866) (56,508) (41,852) 115,165 93,894 74,547(Benefit from) provision for income taxes(22,079) (17,186) (8,154) 30,004 28,494 (12,623)(Loss) income before equity in (losses) income of unconsolidated joint ventures(47,787) (39,322) (33,698) 85,161 65,400 87,170Equity in (losses) income of unconsolidated joint ventures, net of tax(603) (621) (2,044) (3,396) 2,775 123Net (loss) income(48,390) (39,943) (35,742) 81,765 68,175 87,293Net income attributable to noncontrolling interest— — — — — (366)Net (loss) income attributable to PRA Health Sciences, Inc.$(48,390) $(39,943) $(35,742) $81,765 $68,175 $86,927Net (loss) income per share (1): Basic$(1.22) $(1.02) $(0.83) $1.36 $1.12 $1.39Diluted$(1.22) $(1.02) $(0.83) $1.29 $1.06 $1.32Cash dividends declared per common stockholders:$2.83 $— $— $— $— $—Weighted average common shares outstanding: Basic39,643 39,337 42,897 59,965 60,759 62,437Diluted39,643 39,337 42,897 63,207 64,452 65,773Cash flow data: Net cash provided by (used in) operating activities (5)$54,044 $(25,666) $34,034 $152,428 $160,047 $220,408Net cash used in investing activities (5)(54,753) (1,008,419) (11,472) (71,686) (34,614) (687,420)Net cash (used in) provided by financing activities (5)(42,065) 1,115,041 (5,956) (42,444) (101,595) 507,009Other financial data: Backlog (at period end) (2)$— $1,939,666 $2,141,112 $2,440,123 $2,934,823 $3,535,611Net new business (3)462,046 312,298 1,493,652 1,696,635 2,076,484 2,413,730 Successor As of December 31, 2013 As of December 31,2014 As ofDecember 31, 2015 As ofDecember 31, 2016 As of December 31,2017 Consolidated balance sheet data Cash and cash equivalents $72,155 $85,192 $121,065 $144,623 $192,229Accounts receivable and unbilled services, net 294,984 338,781 415,077 439,053 627,003Working capital (11,270) 22,367 43,796 60,538 (94,592)Total assets (4) 2,357,673 2,214,484 2,228,743 2,190,391 3,358,046Total long-term debt, net (4) 1,208,751 924,444 889,514 797,052 1,225,397Total liabilities (4) 1,890,338 1,537,669 1,526,021 1,461,139 2,421,565Total stockholders' equity 467,335 676,815 702,722 729,252 936,481Total liabilities and stockholders' equity (4) 2,357,673 2,214,484 2,228,743 2,190,391 3,358,046 (1)Because of the KKR Transaction, our capital structure for periods before and after the KKR Transaction are not comparable and therefore we are adjusting the number of shares to reflect the stock split only for thesuccessor periods. On September 29, 2014, the Board of Directors of the Company approved, and made legally effective, a 2.34539 to 1 reverse stock split of the Company’s common stock.(2)Our backlog consists of anticipated service revenue for our Clinical Research segment from new business awards that either have not started or are but have not been completed. Backlog varies from period to perioddepending 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 be recognized in the corresponding quarter of the next fiscal year. For the remainder of our business, net newbusiness is the value 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 forcontracts that were modified or canceled during the period. For the fiscal year 2013, net new business excludes the RPS Acquisition. New business awards are for our Clinical Research segment.(4)In 2015 we early adopted ASU No. 2015-03 and ASU No. 2015-15. The balance sheet data for 2014 and 2013 has been 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 for the years ended December 31, 2015 and 2014, and the period from January 1 through September 22,2013, and the period from September 23 through December 31, 2013 has been restated to reflect the adoption of the new standards.37Table of ContentsItem 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 operations together with our “Selected FinancialData” and the consolidated financial statements and the related notes included elsewhere in “Financial Statements and Supplementary Data.” Some of theinformation contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans andstrategy for our business, includes forward‑looking statements that involve risks and uncertainties. You should read the “Risk Factors” section of thisAnnual Report on Form 10‑K for a discussion of important factors that could cause actual results to differ materially from the results described in orimplied by the forward‑looking statements contained in the following discussion and analysis. Overview We are one of the world’s leading global CROs, by revenue, providing outsourced clinical development services to the biotechnology andpharmaceutical industries. We believe we are one of a select group of CROs with the expertise and capability to conduct clinical trials across majortherapeutic areas on a global basis. Our therapeutic expertise includes areas that are among the largest in pharmaceutical development, and we focus inparticular on oncology, central nervous system inflammation, respiratory, cardiometabolic and infectious diseases. We believe that we further differentiateourselves from our competitors through our investments in medical informatics and clinical technologies designed to enhance efficiencies, improve studypredictability and provide better transparency for our clients throughout their clinical development processes. Our Data Solutions segment allows us to betterserve our clients across their entire product lifecycle by (i) improving clinical trial design, recruitment, and execution; (ii) creating real-world data solutionsbased on the use of medicines by actual patients in normal situations; and (iii) increasing the efficiency of healthcare companies' commercial organizationsthrough enhanced analytics and outsourcing services. Contracts define the relationships with our clients and establish the way we earn revenue. Three types of relationships are most common: afixed‑price contract, a time and materials contract and fee‑for‑service arrangements. In cases where the contracts are fixed price, we may bear the cost ofoverruns for the contracted scope, or we may benefit if the costs are lower than we anticipated for the contracted scope. In cases where our contracts arefee‑for‑service, the contracts contain an overall budget for contracted resources. If actual resources used are lower than anticipated, the client generally keepsthe savings and we may be responsible for covering the cost of the unused resource if we are unable to redeploy the resource. For time and material contracts,we bill the client only for the actual hours we spend to complete the contracted scope based upon stated hourly rates by position. The duration of ourcontracts range from a few months to several years. Revenue for services is recognized only after persuasive evidence of an arrangement exists, the sales priceis determinable, services have been rendered, and collectability is reasonably assured. Once these criteria have been met, we recognize revenue for theservices provided on fixed‑fee contracts in our Clinical Research segment based on the proportional performance methodology, which determines theproportion of outputs or performance obligations which have been completed or delivered compared to the total contractual outputs or performanceobligations. To measure performance, we compare the contract costs incurred to estimated total contract costs through completion. As part of the clientproposal and contract negotiation process, we develop a detailed project budget for the direct costs based on the scope of the work, the complexity of thestudy, the geographical location involved and our historical experience. We then establish the individual contract pricing based on our internal pricingguidelines, discount agreements, if any, and negotiations with the client. The estimated total contract costs are reviewed and revised periodically throughoutthe lives of the contracts, with adjustments to revenue resulting from such revisions being recorded on a cumulative basis in the period in which the revisionsare first identified. Our costs consist of expenses 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 direct cost headcount. Other costs weincur are attributable to the expense of operating our business generally, such as leases and maintenance of information technology and equipment. Revenuefrom time and materials contracts is recognized as hours are incurred. Revenues and the related costs of fee‑for‑service contracts are recognized in the periodin which services are performed. We recognize revenue for services provided on fixed-fee contracts in our Data Solutions segment either ratably as earnedover the contract period (for subscription-based services) or upon delivery (for delivery of data solutions or reports). Revenue from time and materialscontracts is recognized as hours are incurred. 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 Historically, we have reported one reportable segment. In conjunction with the acquisition of Symphony Health on September 6, 2017, theCompany expanded its reporting segments. The Company is now managed through two reportable segments, (i) Clinical Research and (ii) Data Solutions.Our chief operating decision maker uses gross profit as the primary measure of each segment's operating results in order to allocate resources and in assessingthe Company's performance. In38Table of Contentsaddition to our GAAP financial measures, we review various financial and operational metrics. For our Clinical Research segment we review new businessawards, cancellations, and backlog.Our gross new business awards for the years ended December 31, 2017, 2016 and 2015 were $2,779.8 million, $2,367.1 million and$1,927.6 million, respectively. New business awards arise when a client selects us to execute its trial and is documented by written or electroniccorrespondence or for our Strategic Solutions offering when the amount of revenue expected to be recognized is measurable. The number of new businessawards can vary significantly from year to year, and awards can have terms ranging from several months to several years. For our Strategic Solutions offering,the value of a new business award is the anticipated service revenue to be recognized in the corresponding quarter of the next fiscal year. For the remainder ofour business, the value of a new award is the anticipated service revenue over the life of the contract, which does not include reimbursement activity orinvestigator fees. In the normal course of business, we experience contract cancellations, which are reflected as cancellations when the client provides us with writtenor electronic correspondence that the work should cease. During the years ended December 31, 2017, 2016 and 2015 we had $366.0 million, $290.6 million,and $231.7 million, respectively, of cancellations for which we received correspondence from the client. The number of cancellations can vary significantlyfrom year to year. The value of the cancellation is the remaining amount of unrecognized service revenue, less the estimated effort to transition the work backto the client. Our backlog consists of anticipated service revenue from new business awards that either have not started or are in process but have not beencompleted. Backlog varies from period to period depending upon new business awards and contract modifications, cancellations, and the amount of servicerevenue recognized under existing contracts. Our backlog at December 31, 2017, 2016 and 2015 was $3.5 billion, $2.9 billion, and $2.4 billion, respectively. Industry Trends ISR estimated in its ISR 2017 Market Report that the size of the worldwide CRO market was approximately $32 billion in 2015 and will grow at a7% CAGR to $44 billion over the next five years. This growth will be driven by an increase in the amount of research and development expenditures andhigher levels of clinical development outsourcing by biopharmaceutical companies. Business Combinations We have completed and will continue to consider strategic business combinations to enhance our capabilities and offerings in certain areas. InSeptember 2017, we acquired Symphony Health, which is expected to enhance our ability to serve customers throughout the clinical research process withtechnologies that provide data and analytics. Additionally, in May 2017, we acquired Parallel 6, Inc., or Parallel 6, which is expected to allow us to offer ourcustomers technologies that provide improved efficiencies by reducing study durations and costs through integrated operational management. These transactions were accounted for as business combinations and the acquired results of operations are included in our consolidated financialinformation since the acquisition date.See Note 4 to our audited consolidated financial statements found elsewhere in this Annual Report on Form 10-K for additional information withrespect to these and other smaller acquisitions. Joint Ventures In June 2017, we closed on a joint venture transaction with Takeda Pharmaceutical Company Ltd., or Takeda, that enables us to provide clinical trialdelivery and pharmacovigilance services as a strategic partner of Takeda Japan. The joint venture was effectuated through the creation of a new legal entity,Takeda PRA Development Center KK, or TDC joint venture. The TDC joint venture is based in Japan and is owned by us (50%) and Takeda (50%).In March 2013, we entered into a joint venture agreement with A2 Healthcare Corporation to form A2PRA Corporation, or A2PRA. The joint ventureprovides research and development outsourcing solutions in Japan to the biopharmaceutical and medical device industries. This joint venture is based inTokyo, Japan and is owned by us (49%) and A2 Healthcare Corporation (51%).See Note 3 and Note 4 to our audited consolidated financial statements found elsewhere in this Annual Report on Form 10-K for additionalinformation with respect to the joint ventures.39Table of Contents 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, time and materials, or fee‑for‑servicearrangements. Revenue for services is recognized only after persuasive evidence of an arrangement exists, the sales price is determinable, services have beenrendered, and collectability is reasonably assured. Once these criteria have been met, we recognize revenue for the services provided on fixed‑fee contracts in the Clinical Research segment based onthe proportional performance methodology, which determines the proportion of outputs or performance obligations which have been completed or deliveredcompared to the total contractual outputs or performance obligations. To measure performance, we compare the contract costs incurred to estimated totalcontract costs through completion. As part of the client proposal and contract negotiation process, we develop a detailed project budget for the direct costsbased on the scope of the work, the complexity of the study, the geographical location involved and our historical experience. We then establish theindividual contract pricing based on our internal pricing guidelines, discount agreements, if any, and negotiations with the client. The estimated totalcontract costs are reviewed and revised periodically throughout the lives of the contracts, with adjustments to revenue resulting from such revisions beingrecorded on a cumulative basis in the period in which the revisions are first identified. The Company recognizes revenue for services provided on fixed-feecontracts in the Data Solutions segment either ratably as earned over the contract period, for subscription-based services, or upon delivery, for one-timedelivery of data solutions or reports. Revenue from time and materials contracts is recognized as hours are incurred. Billable hours typically fluctuate duringthe terms of individual contracts, as services we provide generally increase at the beginning of a study and decrease toward the end of a study. Revenues andthe related costs of fee‑for‑service contracts are recognized in the period in which services are performed. In the Clinical Research segment, 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 client acceptance and payment is deemedreasonably assured. Volume discounts are offered to certain large customers based on annual volume thresholds. We record an estimate of the annual volume rebate as areduction of revenue throughout the period based on the estimated total rebate to be earned for the period. Most of our contracts in the Clinical Research segment 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 to date, the fees, and in some cases, atermination fee or some portion of the fees or profit that we could have earned under the contract if it had not been terminated early. Based on ethical,regulatory, and health considerations, this wind‑down activity may continue for several quarters or years. Therefore, revenue recognized prior to cancellationgenerally does not require a significant adjustment upon cancellation. Increases in the estimated total direct costs to complete a contract without a corresponding proportional increase to the total contract price result in acumulative adjustment to the amount of revenue recognized in the period the change in estimate is determined.Our Data Solutions segment enters into contracts with some of its larger data suppliers that involve non-monetary terms. We will issue purchasecredits to be used toward the data supplier's purchase of the Company's products, services or consulting. In exchange, we receive monetary discounts on thedata received from the data suppliers. The fair value of the revenue earned from the customer purchases is determined based on similar product offerings toother customers. At the end of the contract year, any unused purchase credits will be forfeited or carried over to the next contract year based on the terms ofthe data supplier contract. For the year ended December 31, 2017, we recognized service in kind revenue of $5.8 million from these transactions, which isincluded in service revenue in the accompanying consolidated statements of operations. Clinical Research segment service revenue was $1,857.9 million, $1,580.0 million, and $1,375.8 million for the years ended December 31, 2017,2016 and 2015, respectively. Changes in service revenue from period to period are driven primarily by changes in backlog at the beginning of a period, aswell as new business awards during such period. Additionally, service revenue and billable hours will generally be impacted by the mix of studies that areactive during a period, as different studies have different staffing requirements, as well as the life cycles of projects that are active during a period.40Table of ContentsData Solutions segment service revenue was $90.5 million for the year ended December 31, 2017. Refer to Note 2 - Significant Accounting Policiesof our audited consolidated financial statements for further discussion of our Data Solutions segment's revenue recognition policy. Our service revenues are derived from a wide range of client types. During the year ended December 31, 2017, we derived 53% of our servicerevenue from large pharmaceutical companies, 16% of our service revenue from small‑ to mid‑sized pharmaceutical companies, 16% of our service revenuefrom large biotechnology companies, 14% of our service revenue from all other biotechnology companies and 1% of our service revenue from non-pharmaceutical companies. For the years ended December 31, 2017, 2016, and 2015, our top five clients represented approximately 42%, 45%, and 41%,respectively, of service revenue; this revenue was derived from a combination of fixed‑fee contracts, fee‑for‑service contracts and time and materialscontracts. One client accounted for 10.3% of service revenue during the year ended December 31, 2017. Two of our clients accounted for 11.0% and 10.4% ofservice revenue during the year ended December 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 ended December 31, 2017, 2016 and 2015.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 as reimbursement revenue andreimbursable 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 with independent physician investigators inconnection with clinical trials. We also receive funds from our clients for investigator fees, which are netted against the related costs, since such fees are theobligation 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 bythe client. In addition, we do not pay the independent physician investigator until funds are received from the client. Accordingly, unlike reimbursableout‑of‑pocket costs, we do not recognize these investigator fees in revenue.Reimbursement costs and investigator fees are not included in our backlog because they are pass‑through costs to our clients. We believe that the fluctuations in reimbursement costs and reimbursement revenue from period to period are not meaningful to our underlyingperformance. Costs and Expenses Our costs and expenses are comprised primarily of our direct costs, selling, general and administrative costs, depreciation and amortization andincome taxes. In addition, we incur reimbursable out‑of‑pocket expenses; however, as noted above, our reimbursable out‑of‑pocket expenses are directlyoffset by our reimbursement revenue. Since reimbursement revenue is offset by our out‑of‑pocket reimbursable expenses, we monitor and measure costs as apercentage of service revenue rather than total revenue as we believe this is a more meaningful comparison and better reflects the operations of our business. Direct Costs For our Clinical Research segment, 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 individuals to perform work on ourcontracts. Labor-related charges as a percentage of the Clinical Research segment's total direct costs were 96.4%, 96.6%, and 95.7% for the years endedDecember 31, 2017, 2016 and 2015, respectively. The cost of labor procured through staffing agencies is included in these percentages and represents 5.6%,5.1%, and 4.1% of the Clinical Research segment's total direct costs for the years ended December 31, 2017, 2016 and 2015, respectively. Our remainingdirect costs are items such as travel, meals, postage and freight, patient costs, medical waste and supplies. The total of all these items as a percentage of theClinical Research segment's total direct costs were 3.6%, 3.4%, and 4.3% for the year ended December 31, 2017, 2016 and 2015, respectively.For our Data Solutions segment, direct costs consist primarily of data costs. Data costs as a percentage of the Data Solutions segment's total directcosts were 71.0% for the year ended December 31, 2017. Labor-related charges, such as salaries, benefits and incentive compensation for our employees, were23.0% of the Data Solutions segment's total direct costs41Table of Contentsfor the year ended December 31, 2017. Our remaining direct costs are items such as travel, meals, and supplies and were 6.0% of the Data Solutions segment'stotal direct costs for the year ended December 31, 2017.Historically, direct costs have increased with an increase in service revenues. The future relationship between direct costs and service revenues mayvary from historical relationships. Direct costs as a percentage of service revenues were 65.9%, 65.4%, and 64.4% during the years ended December 31, 2017,2016, and 2015, respectively. Several factors will cause direct costs to decrease as a percentage of service revenues. Deployment of our billable staff in anoptimally efficient manner has the most impact on our ratio of direct cost to service revenue. The most effective deployment of our staff is when they are fullyengaged in billable work and are accomplishing contract related activities at a rate that meets or exceeds budgeted targets. We also seek to optimize ourefficiency by performing work using the employee with the lowest cost. Generally, the following factors may cause direct costs to increase as a percentage ofservice revenues: our staff are not fully deployed, as is the case when there are unforeseen cancellations or delays, or when our staff are accomplishing tasks atlevels of 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 asinformation technology and facilities costs. These expenses also include central overhead costs that are not directly attributable to our operating businessand include certain costs related to insurance, professional fees and property.Transaction‑Related Costs Transaction-related costs consist of expenses incurred with our secondary offerings, transaction-related stock-based compensation awards,revaluations of contingent consideration related to business combinations, the closing of our accounts receivable financing agreement, fees associated withthe Incremental Borrowing (defined below), and our refinancing of the 2013 Credit Facilities (defined below). Loss on Modification or Extinguishment of Debt Loss on modification or extinguishment of debt for the year ended December 31, 2017 was associated with the September 2017 incrementalborrowing under the 2016 Credit Facilities, or the Incremental Borrowing, redemption on our 9.5% senior notes due 2023, or Senior Notes, and the December2017 amendment to the 2016 Credit Facilities, or the 2017 Refinancing. Loss on extinguishment of debt for the year ended December 31, 2016 wasassociated with our cash tender offer on Senior Notes and the refinancing of our variable rate first lien term loan due 2020, or 2013 First Lien Term Loan, andrevolving line of credit, or 2013 Revolver, collectively known as the 2013 Credit Facilities.Depreciation and Amortization Depreciation represents the depreciation charged on our fixed assets. The charge is recorded on a straight‑line method, based on estimated usefullives of three to seven years for computer hardware and software and five to seven years for furniture and equipment. Leasehold improvements are depreciatedover the lesser of the life of the lease term or the useful life of the improvements. Amortization expense consists of amortization recorded onacquisition‑related intangible assets. Customer relationships, backlog, databases and finite‑lived trade names are amortized on an accelerated basis, whichcoincides with the period of economic benefit we expect to receive. All other finite‑lived intangibles are amortized on a straight‑line basis. In accordancewith 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 the geographic distribution of ourpre‑tax earnings among several different taxing jurisdictions. Our effective tax rate can also vary based on changes in the tax rates of the differentjurisdictions. Our effective tax rate is also impacted by tax credits and the establishment or release of deferred tax asset valuation allowances and tax reserves,as well as significant non‑deductible items such as portions of transaction‑related costs. Foreign subsidiaries are taxed separately in their respective jurisdictions. We have foreign net operating loss carryforwards in some jurisdictions.The carryforward periods for these losses vary from five years to an indefinite carryforward period depending on the jurisdiction. Our ability to offset futuretaxable income with the net operating loss carryforwards may be limited in certain instances, including changes in ownership.42Table of Contents Exchange Rate Fluctuations The majority of our foreign operations transact in the Euro, or EUR or British Pound, or GBP. As a result, our revenue and expenses are subject toexchange rate fluctuations with respect to these currencies. We have translated these currencies into U.S. dollars using the following average exchange rates: Year Ended December 31, 2017 2016 2015U.S. Dollars per: Euro1.13 1.11 1.11British Pound1.29 1.35 1.53Results of Operations Consolidated Results of Operations for the Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016 Years Ended December 31,(in thousands)2017 2016Revenue Service revenue$1,948,374 $1,580,023Reimbursement revenue311,015 231,688Total revenue2,259,389 1,811,711Operating expenses Direct costs1,283,868 1,032,688Reimbursable out-of-pocket costs311,015 231,688Selling, general and administrative321,987 269,893Transaction-related costs87,709 44,834Depreciation and amortization78,227 69,506Loss on disposal of fixed assets358 753Income from operations176,225 162,349Interest expense, net(46,729) (54,913)Loss on modification or extinguishment of debt(15,023) (38,178)Foreign currency (losses) gains, net(39,622) 24,029Other (expense) income, net(304) 607Income before income taxes and equity in income of unconsolidated joint ventures74,547 93,894(Benefit from) provision for income taxes(12,623) 28,494Income before equity in income of unconsolidated joint ventures87,170 65,400Equity in income of unconsolidated joint ventures, net of tax123 2,775Net income$87,293 $68,175Net income attributable to noncontrolling interest(366) —Net income attributable to PRA Health Sciences, Inc.$86,927 $68,175 Service revenue increased by $368.4 million, or 23.3%, from $1,580.0 million during the year ended December 31, 2016 to $1,948.4 million duringthe year ended December 31, 2017. Service revenue for the year ended December 31, 2017 benefited from an increase in billable hours and an increase in theeffective rate of the hours billed on our studies, an increase of $90.5 million due to the acquisition of Symphony Health which was completed on September6, 2017, and by a favorable impact of $7.1 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 on our active studies, which wasdriven by the life cycles of projects that were active during the period, the growth in new business awards as a result of higher demand for our services acrossthe industries we serve, and more effective sales efforts and the growth in the overall CRO market. New business awards arise when a client selects us toexecute its trial. The number43Table of Contentsof awards can vary significantly from period to period and our studies have terms ranging from several months to several years. The increase in our effectiverate of the hours billed on our studies is attributable to the contract pricing terms on our current mix of active studies and the mix of clients and the servicesthat we provide to those clients. Direct costs increased by $251.2 million, or 24.3%, from $1,032.7 million during the year ended December 31, 2016 to $1,283.9 million during theyear ended December 31, 2017. Salaries and related benefits in our Clinical Research segment increased $184.3 million as we continue to hire billable staff toensure appropriate staffing levels for our current studies and future growth and an unfavorable impact of $6.4 million from foreign currency exchange ratefluctuations. The addition of our Data Solutions segment resulted in $52.2 million of incremental direct costs during 2017. Direct costs as a percentage ofservice revenue increased from 65.4% during the year ended December 31, 2016 to 65.9% during the year ended December 31, 2017. The increase in directcosts as a percentage of revenue was primarily due to the aforementioned increase in salaries and related benefits.Selling, general and administrative expenses increased by $52.1 million, or 19.3%, from $269.9 million during the year ended December 31, 2016 to$322.0 million during the year ended December 31, 2017. Selling, general and administrative expenses as a percentage of service revenue decreased from17.1% during the year ended December 31, 2016 to 16.5% during the year ended December 31, 2017. The decrease in selling, general and administrativeexpenses as a percentage of service revenue is primarily related to our continued efforts to effectively leverage our selling and administrative functions. During the year ended December 31, 2017, we incurred transaction-related expenses of $87.7 million. These costs consist of $6.4 million of feesincurred in connection with the acquisition of Symphony Health, $5.3 million of stock-based compensation expense related to the release of a portion of thetransfer restrictions on vested options and $1.0 million of third-party costs incurred in connection with our August 2017 secondary offering. The Companyalso recognized changes in the fair value of contingent consideration of $75.0 million related to our recent acquisitions. During the year ended December 31,2016, we incurred transaction-related expenses of $44.8 million. These costs consist of $10.1 million of stock-based compensation expense associated withthe release of the transfer restrictions on a portion of shares issuable upon exercise of vested service-based options in connection with the announcement ofour March, May, and November 2016 secondary offerings. These costs also include $32.0 million of stock-based compensation expense related to the vestingand release of the transfer restrictions of certain performance-based stock options. In addition, we incurred $2.7 million of third-party fees associated with thesecondary offerings and the closing of our accounts receivable financing agreement. Depreciation and amortization expense increased by $8.7 million, or 12.5%, from $69.5 million during the year ended December 31, 2016 to $78.2million during the year ended December 31, 2017. Depreciation and amortization expense as a percentage of service revenue was 4.4% during the year endedDecember 31, 2016 and 4.0% during the year ended December 31, 2017. The decrease in depreciation and amortization expense as a percentage of servicerevenue is primarily due the continued decline in amortization of our acquired intangibles, which are amortized on an accelerated basis. Interest expense, net decreased by $8.2 million from $54.9 million during the year ended December 31, 2016 to $46.7 million during the year endedDecember 31, 2017. The cash tender of our Senior Notes during March 2016 and refinancing of our variable first lien term loans in December 2016contributed to a 1.2% decrease in the weighted average interest rate and resulted in a $12.5 million reduction in interest expense. The $550.0 millionIncremental Borrowing during the year ended December 31, 2017 to fund the Symphony Health acquisition contributed to a $5.9 million increase in interestexpense. Additionally, interest expense decreased by $2.3 million due to lower amortization of debt issuance costs, which was partially offset by an increaseof $0.9 million related to the amortization of our terminated interest rate swaps and interest expense on our current interest rate swap. Loss on modification or extinguishment of debt was $15.0 million during the year ended December 31, 2017 compared to $38.2 million during theyear ended December 31, 2016. The loss on modification or extinguishment of debt during the year ended December 31, 2017 is related to the IncrementalBorrowing, the 2017 Refinancing, and the extinguishment of the Senior Notes. The Incremental Borrowing was to fund the acquisition of Symphony Healthand we recognized $3.1 million in fees in loss on modification of debt. The 2017 Refinancing was to reduce the interest rate margin and amend the paymentschedule on the 2016 First Lien Term Loan as well as increase the 2016 Revolver's borrowing capacity, which resulted in a $0.6 million loss on modificationof debt. The voluntary redemption of the remaining Senior Notes resulted in a $11.3 million loss on extinguishment of debt, which consists of $9.2 millionearly payment premium and $2.1 million write-off of unamortized debt issuance cost. The $38.2 million loss on extinguishment of debt incurred during theyear ended December 31, 2016 was associated with our cash tender offer on our Senior Notes and our refinancing of the 2013 Credit Facilities. The loss of$21.5 million due to our cash tender offer consisted of a $17.4 million early tender premium, a $3.7 million write-off of unamortized debt issuance cost and$0.4 million of fees associated with the transaction. The refinancing of44Table of Contentsour 2013 Credit Facilities resulted in a $16.7 million loss on extinguishment of debt, which consisted of the write-off of $15.8 million write-off ofunamortized debt issuance costs and $0.9 million of fees associated with the transaction. Foreign currency (losses) gains, net changed by $63.7 million from foreign currency gains of $24.0 million during the year ended December 31,2016 to foreign currency losses of $39.6 million during the year ended December 31, 2017. 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 our domestic and internationalsubsidiaries, and gains or losses from foreign currency transactions, such as those resulting from the settlement of third-party accounts receivables andpayables denominated in a currency other than the local currency of the entity making the payment. During the year ended December 31, 2017, foreigncurrency losses were primarily due to the U.S. dollar weakening against the EUR, GBP, Canadian dollar, or CAD, and Russian ruble, or RUB by 13.7%, 9.3%,7.1% and 6.2%, respectively. During the year ended December 31, 2016, the foreign currency gains were primarily a result of the weakening of the GBPagainst the U.S. dollar by 16.7% following the decision by voters in the United Kingdom, to approve a referendum to exit the European Union, commonlyreferred to as Brexit, in June 2016. (Benefit from) provision for income taxes decreased by $41.1 million from a provision of $28.5 million during the year ended December 31, 2016 toa benefit of $12.6 million during the year ended December 31, 2017. Our effective tax benefit rate was 16.9% during the year ended December 31, 2017, andan effective tax rate of 30.3% during the year ended December 31, 2016. The change in the effective tax rate was primarily attributable to (i) the benefitrealized from the tax deduction of stock awards in excess of the amount recognized in the financial statements per guidance under ASU No. 2016-09,"Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting", (ii) the release of the valuationallowance against the federal net deferred tax assets, and (iii) the decrease in the net U.S. deferred tax liabilities due to the Tax Cuts and Jobs Act enactedDecember 22, 2017.Consolidated Results of Operations for the Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015 Years Ended December 31,(in thousands)2016 2015Revenue Service revenue$1,580,023 $1,375,847Reimbursement revenue231,688 238,036Total revenue1,811,711 1,613,883Operating expenses Direct costs1,032,688 886,528Reimbursable out-of-pocket costs231,688 238,036Selling, general and administrative269,893 246,417Transaction-related costs44,834 —Depreciation and amortization69,506 77,952Loss on disposal of fixed assets753 652Income from operations162,349 164,298Interest expense, net(54,913) (61,747)Loss on modification or extinguishment of debt(38,178) —Foreign currency gains, net24,029 14,048Other income (expense), net607 (1,434)Income before income taxes and equity in income (losses) of unconsolidated joint ventures93,894 115,165Provision for income taxes28,494 30,004Income before equity in income (losses) of unconsolidated joint ventures65,400 85,161Equity in income (losses) of unconsolidated joint ventures, net of tax2,775 (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 ended December 31, 2015 to $1,580.0 million duringthe year ended December 31, 2016. Service revenue for the year ended December 31, 2016 benefited from an increase in billable hours and an increase in theeffective rate of the hours billed on our studies, offset by an unfavorable impact of $5.3 million from foreign currency exchange rate fluctuations. The growthin45Table of Contentsservice revenue and the increase in billable hours were due largely to the increase in our backlog as we entered the year, the type of services we are providingon our active studies, which was driven by the life cycles of projects that were active during the period, the growth in new business awards as a result ofhigher demand for our services across the industries we serve, and more effective sales efforts and the growth in the overall CRO market. New business awardsarise when a client selects us to execute 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 the contract pricing terms on our currentmix of active studies and the mix of clients and the services that we provide to those clients. Direct costs increased by $146.2 million, or 16.5%, from $886.5 million during the year ended December 31, 2015 to $1,032.7 million during theyear ended December 31, 2016. The increase in direct costs was primarily due to an increase in labor-related costs of $170.6 million, as we continued to hirebillable staff to support our current projects and as we hired additional staff in anticipation of our growing portfolio of studies, offset by a favorable impact of$21.3 million from foreign currency exchange rate fluctuations. Direct costs as a percentage of service revenue increased from 64.4% during the year endedDecember 31, 2015 to 65.4% during the year ended December 31, 2016. This increase in direct costs as a percentage of service revenue is primarily due to the$8.3 million impact of research and development credits, or R&D Credits, recorded during the year ended December 31, 2015 that related to prior years. TheR&D Credits are the result of a comprehensive analysis we have been performing across the organization to determine whether expenditures incurred qualifyas research and development as defined by the respective jurisdiction. Selling, general and administrative expenses increased by $23.5 million, or 9.5%, from $246.4 million during the year ended December 31, 2015 to$269.9 million during the year ended December 31, 2016. Selling, general and administrative expenses as a percentage of service revenue decreased from17.9% during the year ended December 31, 2015 to 17.1% during the year ended December 31, 2016. This decrease in selling, general and administrativeexpenses as a percentage of service revenue is primarily related to our continued efforts to effectively manage our selling and administrative functions as wecontinue to grow. During the year ended December 31, 2016, we incurred transaction-related expenses of $44.8 million. The costs consist of $10.1 million of stock-based compensation expense associated with the release of the transfer restrictions on a portion of shares issuable upon exercise of vested service-basedoptions 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 expense related to the vesting and release of the transfer restrictions of certain performance-based stock options. In addition, we incurred$2.7 million of third-party fees associated with the secondary offerings and the closing of our accounts receivable financing agreement. Therewere 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 year ended December 31, 2015 to $69.5million during the year ended December 31, 2016. Depreciation and amortization expense as a percentage of service revenue was 5.7% during the year endedDecember 31, 2015 and 4.4% during the year ended December 31, 2016. The decrease in depreciation and amortization expense as a percentage of servicerevenue is primarily 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 endedDecember 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 outstandingdebt 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 lower amortization of debt issuance costs, which was offset by an increase of $4.7 million related to the amortization of our terminatedinterest 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 and there were no losses onmodification of debt during the year ended December 31, 2015. The $38.2 million loss on extinguishment of debt incurred during the year ended December31, 2016 was associated with our cash tender offer on our Senior Notes and our refinancing of the 2013 Credit Facilities. The loss of $21.5 million due to ourcash tender offer consisted of a $17.4 million early tender premium, a $3.7 million write-off of unamortized debt issuance cost and $0.4 million of feesassociated with the transaction. The refinancing of our 2013 Credit Facilities resulted in a $16.7 million loss on extinguishment of debt, which consisted ofthe 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 ended December 31, 2015 to $24.0 million during theyear ended December 31, 2016. The foreign currency gains and losses are due to fluctuations in the46Table of ContentsU.S. dollar, gains or losses that arise in connection with the revaluation of short-term inter-company balances between our domestic and internationalsubsidiaries, and gains or losses from foreign currency transactions, such as those resulting from the settlement of third-party accounts receivables andpayables denominated in a currency other than the local currency of the entity making the payment. During the year ended December 31, 2016, the foreigncurrency gains were primarily a result of the weakening of the British Pound against the U.S. dollar by 16.7% following Brexit. During the year endedDecember 31, 2015, foreign currency gains were primarily due to the devaluation of the Canadian dollar, Euro and British Pound against the U.S. dollar by16.1%, 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, 2015 to $28.5 million during the yearended December 31, 2016. Our effective tax rate was 30.3% and 26.1% during the years ended December 31, 2016 and December 31, 2015, respectively. Thechange in the effective tax rate was primarily attributable to a decrease in global pre-tax income related to an increase in the overall U.S. loss, the impact ofthat loss on the valuation allowance and the increase of foreign earnings that are taxed currently in the U.S.Segment Results of Operations for the Years Ended December 31, 2017, December 31, 2016 and December 31, 2015Clinical Research Years Ended December 31, Change 2017 2016 2015 2017 vs. 2016 2016 vs. 2015(in thousands)Service revenue$1,857,876 $1,580,023 $1,375,847 $277,853 17.6% $204,176 14.8%Gross profit626,186 547,335 489,319 78,851 14.4% 58,016 11.9%Gross profit %33.7% 34.6% 35.6% (0.9)% (1.0)% Year Ended December 31, 2017 Compared to Year Ended December 31, 2016Service revenue increased by $277.9 million, or 17.6%, from $1,580.0 million during the year ended December 31, 2016 to $1,857.9 million duringthe year ended December 31, 2017. Service revenue for the year ended December 31, 2017 benefited from an increase in billable hours and an increase in theeffective rate of hours billed on our studies. The growth in service revenue and the increase in billable hours were due largely to the increase in our backlogas we entered the year, the type of services we are providing on our active studies, which was driven by the life cycles of projects that were active during theperiod, the growth in new business awards as a result of higher demand for our services across the industries we serve, and more effective sales efforts and thegrowth in the overall CRO market. New business awards arise when a client selects us to execute its trial. The number of awards can vary significantly fromperiod to period and our studies have terms ranging from several months to several years. The increase in our effective rate of the hours billed on our studiesis attributable to the contract pricing terms on our current mix of active studies and the mix of clients and the services that we provide to those clients.Gross profit increased by $78.9 million, or 14.4%, from $547.3 million during the year ended December 31, 2016 to $626.2 million during the yearended December 31, 2017 primarily due to an increase in revenue. Gross profit as a percentage of revenue decreased from 34.6% during the year endedDecember 31, 2016 to 33.7% for the same period in 2017. Gross profit as a percentage of revenue decreased primarily due to an increase in labor-related costsof $184.3 million, as we continued to hire billable staff to ensure appropriate staffing levels for our current studies and our future growth.Year Ended December 31, 2016 Compared to Year Ended December 31, 2015Service revenue increased by $204.2 million, or 14.8%, from $1,375.8 million during the year ended December 31, 2015 to $1,580.0 million duringthe year ended December 31, 2016. Service revenue for the year ended December 31, 2016 benefited from an increase in billable hours and an increase in theeffective rate of the hours billed on our studies. The growth in service revenue and the increase in billable hours were due largely to the increase in ourbacklog as we entered the year, the type of services we are providing on our active studies, which was driven by the life cycles of projects that were activeduring the period, the growth in new business awards as a result of higher demand for our services across the industries we serve, and more effective salesefforts and the growth in the overall CRO market. New business awards arise when a client selects us to execute its trial. The number of awards can varysignificantly from period to period and our studies have terms ranging from several months to several years. The increase in our effective rate of the hoursbilled on our studies is47Table of Contentsattributable to the contract pricing terms on our current mix of active studies and the mix of clients and the services that we provide to those clients.Gross profit increased by $58.0 million, or 11.9%, from $489.3 million during the year ended December 31, 2015 to $547.3 million during the yearended December 31, 2016, primarily due to an increase in revenue. Gross profit as a percentage of revenue decreased from 35.6% during the year endedDecember 31, 2015 to 34.6% for the same period in 2016. Gross profit as a percentage of revenue decreased primarily due to the $8.3 million impact of R&DCredits recorded during the year ended December 31, 2015 that related to prior years. The R&D Credits are the result of a comprehensive analysis we havebeen performing across the organization to determine whether expenditures incurred qualify as research and development as defined by the respectivejurisdiction.Data Solutions Years Ended December 31, Change 2017 2016 2015 2017 vs. 2016 2016 vs. 2015(in thousands)Service revenue$90,498 $— $— $90,498 n/a $— n/aGross profit38,320 — — 38,320 n/a — n/aGross profit %42.3% — — n/a n/a Year Ended December 31, 2017 Compared to Year Ended December 31, 2016 and Year Ended December 31, 2015The Company acquired Symphony Health on September 6, 2017, in conjunction with the acquisition the Company expanded its reportingsegments. The Company recognized $90.5 million of revenue and $52.2 million in direct costs during the period between September 6, 2017 and December31, 2017 for our Data Solutions segment. See Note 4 to our consolidated financial statements found elsewhere in this Annual Report on Form 10-K foradditional information about the acquisition.Seasonality Although our business is not generally seasonal, our Clinical Research segment typically experiences a slight decrease in its revenue growth rateduring the fourth quarter due to holiday vacations and a similar decrease in new business awards in the first quarter due to our clients’ budgetary cycles andvacations during the year‑end holiday period. Our Data Solutions segment usually experiences an increase in revenue during the fourth quarter as manypharmaceutical companies use a portion of funds remaining in their annual budgets to purchase its data offerings.Liquidity and Capital Resources We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. Our principal source ofliquidity is operating cash flows. As of December 31, 2017, we had approximately $192.2 million of cash and cash equivalents of which $63.6 million washeld by our foreign subsidiaries. Our expected primary cash needs on both a short and long‑term basis are for capital expenditures, expansion of services,geographic expansion, debt repayments, and other general corporate purposes. We have historically funded our operations and growth, includingacquisitions, with cash flow from operations, borrowings, and issuances of equity securities. We expect to continue expanding our operations throughinternal growth and strategic acquisitions and investments. We expect these activities will be funded from existing cash, cash flow from operations and, ifnecessary or appropriate, borrowings under our existing or future credit facilities. Our sources of liquidity could be affected by our dependence on a smallnumber of industries and clients, compliance with regulations, international risks, and personal injury, environmental or other material litigation claims.48Table of ContentsCash Collections Cash collections from accounts receivable were $2,495.5 million during the year ended December 31, 2017, including $257.1 million of fundsreceived from customers to pay independent physician investigators, or investigators, as compared to $2,074.1 million during the year ended December 31,2016, including $248.2 million of funds received from customers to pay investigators, $1,831.1 million during the year ended December 31, 2015, including$231.4 million of funds received from customers to pay investigators. The increase in cash collections is related to our increase in revenue, driven by anincrease in new business awards and backlog. Discussion of Cash Flows Cash Flow from Operating ActivitiesCash provided by operating activities increased by $60.4 million during the year ended December 31, 2017 as compared to 2016. The increase inoperating cash flow reflects increased cash flows from our operating performance and a slight decrease in cash outflows primarily from working capital. Netincome after non-cash adjustments increased $51.5 million as compared to the prior year and outflows from working capital decreased by $8.9 million. Thedecrease in working capital outflows was primarily driven by positive changes in operating assets and liabilities attributable to the timing and payment ofinvoices offset by an increase in our days sales outstanding during the year ended December 31, 2017.Cash provided by operating activities increased by $7.6 million during the year ended December 31, 2016 as compared to 2015. The increase inoperating cash flow reflects increased cash flows from our operating performance and a reduction in interest payments, which was partially offset by anincrease in cash outflows primarily from working capital. The changes in working capital were driven by a $2.1 million decrease in accounts payable andaccrued expenses during the year ended 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 outflows from our accounts receivable,unbilled services, and advanced billings accounts, driven by a slower rate of increase in our days sales outstanding during the year ended December 31, 2016. Cash Flow from Investing Activities Net cash used in investing activities was $687.4 million during the year ended December 31, 2017, compared to $34.6 million for the same periodof 2016. The net cash outflows from acquisitions increased from $4.3 million during the year ended December 31, 2016 to $625.3 million during the sameperiod in 2017. Additionally, capital expenditures increased by $28.2 million compared to the prior year, which is partially offset by $3.7 million receivedfrom the sale of our ownership stake in the WuXiPRA joint venture during the year ended December 31, 2016. Net cash used in investing activities decreased by $37.1 million during the year ended December 31, 2016 as compared to 2015. The decrease in thecash outflows was primarily due to the $32.9 million payment for the termination of our interest rate swaps during 2015 and a $7.2 million change in cashflows related to our unconsolidated joint ventures. During the year ended December 31, 2015, we made $23.0 million in capital contributions to ourunconsolidated joint ventures and received $19.5 million from the dissolution of our joint venture with KKR, and during the year ended December 31, 2016,we received $3.7 million from the sale of our ownership stake in our WuXiPRA joint venture. Cash Flow from Financing Activities Net cash provided by financing activities during the year ended December 31, 2017 was $507.0 million compared to $101.6 million of net cash usedin financing activities for the same period of 2016. During the year ended December 31, 2017 our long-term debt balance, including borrowing under therevolving line of credit, increased by $516.0 million; these borrowings were used to fund the acquisition of Symphony Health. During the year endedDecember 31, 2016, our total debt decreased by $77.6 million due to voluntary principal payments on our long-term debt. 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 of2015. During the year ended December 31, 2016, we entered into an accounts receivable financing agreement and received proceeds of $120.0 million whichwas used to repay $133.6 million aggregate principal on our Senior Notes, as part of a cash tender offer. In addition, we voluntarily repaid $689.0 million inprincipal balance on the 2013 First Lien Term Loan and received $625.0 million in proceeds from the 2016 First Lien Term Loan. During 2016, we also paid$25.5 million in debt extinguishment and debt issuance costs. For the year ended December 31, 2015, we voluntarily repaid $40.0 million on our 2013 FirstLien Term Loan.49Table of ContentsInflation Our long‑term contracts, those in excess of one year, generally include an inflation or cost of living adjustment for the portion of the services to beperformed beyond one year from the contract date. As a result, we expect that inflation generally will not have a material adverse effect on our operations orfinancial condition. Historically our projection of inflation contained within our contracts has not significantly impacted our operating income. Shouldinflation be in excess of the estimates within our contracts our operating margins would be negatively impacted if we were unable to negotiate contractmodifications with our clients.Indebtedness2016 Credit Facilities The 2016 Credit Facilities provide senior secured financing of up to $1,400.0 million, consisting of: •the 2016 First Lien Term Loan in an aggregate principal amount of up to $1,175.0 million; and •the 2016 Revolver in an aggregate principal amount of up to $225.0 million.The above amounts reflect the $550.0 million Incremental Borrowing associated with the acquisition of Symphony Health and the $100.0 millionnew revolving credit commitment received as part of the 2017 Refinancing. Refer to Note 9 - Revolving credit facilities and long‑term debt for furtherinformation on those transactions. The borrower of the 2016 First Lien Term Loan and the 2016 Revolver is Pharmaceutical Research Associates, Inc., a wholly-owned subsidiary ofPRA Health Sciences, Inc. The 2016 Revolver includes borrowing capacity available for letters of credit up to $25.0 million and for up to $20.0 million ofborrowings 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/or revolving commitments in anaggregate principal amount of up to (a) $275.0 million, plus (b) all voluntary prepayments and corresponding voluntary commitment reductions of the SeniorSecured 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 the incurrence of such amount, we would not exceed a consolidated net first lien secured leverage to consolidated EBITDA ratio of 3.0to 1.0 pro forma for such incremental facilities, minus (d) the sum of (i) the aggregate principal amount of new term loan commitments and new revolvingcredit commitments incurred and (ii) the aggregate principal amount of certain other indebtedness incurred. The lenders under these facilities are not underany obligation to provide any such incremental commitments or loans, and any such addition of or increase in commitments or loans is subject to certaincustomary conditions precedent.Interest Rate and Fees Borrowings under the 2016 First Lien Term Loan and the 2016 Revolver bear interest at a rate equal to, at our option, either (a) London InterbankOffered Rate, or LIBOR, for the relevant interest period, plus an applicable margin; provided that solely with respect to the 2016 First Lien Term Loan LIBORshall be deemed to be no less than 0.00% per annum or (b) an adjusted base rate, or the ABR, plus an applicable margin. The applicable margin on our 2016 First Lien Term Loan is based on our ratio of total debt to EBITDA per the table below:PricingLevel Total indebtednessto EBITDA Ratio Letter ofCreditFees ABR MarginRate Adjusted LIBORMargin Rate CommitmentFeesI > 3.75x 2.00% 1.00% 2.00% 0.40%II < 3.75x but > 3.00x 1.75% 0.75% 1.75% 0.35%III < 3.00x but > 2.25x 1.50% 0.50% 1.50% 0.30%IV < 2.25x but > 1.50x 1.25% 0.25% 1.25% 0.25%V < 1.50x 1.00% 0.00% 1.00% 0.20% 50Table of ContentsIn addition to paying interest on outstanding principal under the 2016 Revolver, the Company is required to pay a commitment fee to the lendersunder the 2016 Revolver in respect of the unutilized commitments thereunder. The commitment fee rate will be based on the ratio of total indebtedness toEBITDA on a given date. We are also required to pay customary letter of credit fees.As of December 31, 2017 and 2016, the weighted average interest rate on the 2016 First Lien Term Loan was 3.45% and 2.70%, respectively. 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 and condemnation events, subject toreinvestment rights and certain other exceptions. The foregoing mandatory prepayments will be applied first to accrued interest and fees and second, to the scheduled installments of principal of the2016 Credit Facilities in direct order of maturity. We may voluntarily repay outstanding loans under the 2016 Credit Facilities at any time without premium or penalty, subject to reimbursements ofthe lenders’ redeployment costs actually incurred in the case of a prepayment of LIBOR borrowings other than on the last day of the relevant interest period. Amortization and Final MaturityThe 2016 First Lien Term Loan, including the Incremental Borrowing and the 2017 Refinancing, is a floating rate term loan with scheduled, fixedquarterly principal payments of $7.2 million to be made quarterly until September 30, 2021, with the remaining $1,033.0 million principal payment due atDecember 6, 2021. The Company has the option of 1, 2, 3 or 6-month borrowing terms under the 2016 Revolver. Principal amounts outstanding under the 2016Revolver are due and payable in full at maturity, on or about December 6, 2021.Guarantee and Security All obligations of the borrower under the 2016 Credit Facilities are unconditionally guaranteed by us and all our material, wholly‑owned U.S.restricted subsidiaries, with customary exceptions including where providing such guarantees is not permitted by law, regulation or contract or would resultin 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 andother 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 capitalstock issued by the borrower and each guarantor and (ii) perfected security interests in substantially all other tangible and intangible assets of the borrowerand 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 certain exceptions, 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; 51Table of Contents•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) certain bankruptcy related events; (vi) impairment of certain security interests in collateral, guaranteesor invalidity or unenforceability of certain 2016 Credit Facilities documents; (vii) monetary judgment defaults; (viii) certain ERISA matters; and (ix) certainchange of control events. The 2016 Credit Facilities requires us to maintain a consolidated total debt to consolidated EBITDA ratio of 4.25 to 1.0 and consolidated EBITDAto fixed charges no less than 3.0 to 1.0 for any four consecutive fiscal quarters for which financial statements have been provided to the administrative agentas required by the Senior Secured Credit Agreement. Following a qualified material acquisition, the 2016 Credit Facilities allows the Company to increase itsConsolidated Total Debt to Consolidated EBITDA Ratio to 5.25 to 1.00; provided that (i) such ratio in respect of each quarter shall be reduced by 0.25 to1.00, (ii) in no event shall such ratio be lower than 4.25 to 1.00 and (iii) such an increase pursuant to this shall be permitted no more than once during anyperiod of 24 consecutive months. The 2016 Credit Facilities also contain certain customary affirmative covenants and events of default, including a change of control.Accounts Receivable Financing Agreement We entered into an accounts receivable financing agreement with PNC Bank, National Association, as administrative agent and lender on March 22,2016.We may borrow up to $140.0 million from PNC, secured by liens on our accounts receivables and other assets. We are liable for customaryrepresentations, warranties, covenants and indemnities. In addition, we have guaranteed the performance of the obligations and will guarantee the obligationsof any additional servicer that may become party to the accounts receivable financing agreement. As of December 31, 2017, the outstanding balance was$120.0 million.The accounts receivable financing agreement terminates on March 22, 2019, unless terminated earlier pursuant to its term. Interest Rate and Fees Loans under the accounts receivable financing agreement will accrue interest at either a reserve-adjusted LIBOR or a base rate, plus 1.60%. As ofDecember 31, 2017 and 2016, the weighted average interest rate on the accounts receivable financing agreement was 2.96% and 2.31%. We may prepayloans upon one business day prior notice and may terminate the accounts receivable financing agreement with 15 days’ prior notice. Covenants and Events of Default The accounts receivable financing agreement contains various customary representations and warranties and covenants, and default provisionswhich provide for the termination and acceleration of the commitments and loans under the accounts receivable financing agreement in circumstancesincluding, but not limited to, failure to make payments when due, breach of representations, warranties or covenants, certain insolvency events or failure tomaintain the security interest in the trade receivables, and defaults under other material indebtedness.52Table of ContentsSenior NotesOn December 29, 2017, the Company redeemed the remaining $91.4 million aggregate principal amount of its Senior Notes. In accordance with theguidance in ASC 470-50, the debt redemption was accounted for as a debt extinguishment. The redemption resulted in a $11.3 million loss onextinguishment of debt, which consists of a $9.2 million early payment premium and $2.1 million write-off of unamortized debt issuance cost which isincluded in loss on modification or extinguishment of debt in the consolidated statement of operations during the year ended December 31, 2017. Contractual Obligations and Commercial Commitments The following table summarizes our future minimum payments for all contractual obligations and commercial commitments for years subsequent tothe year ended December 31, 2017: Payments Due by Period Less than 1year 1 - 3 years 3 - 5 years More than 5years Total (in thousands)Principal payments on long-term debt (1)$120,289 $177,578 $1,054,560 $— $1,352,427Interest payments on long-term debt (1)48,074 91,980 42,118 — 182,172Service purchase commitments (2)80,802 103,761 33,241 95 217,899Operating leases44,071 74,365 57,753 110,394 286,583Less: sublease income(181) (250) (165) — (596)Uncertain income tax positions (3)— — — — —Contingent consideration on acquisition (4)114,692 50,644 — — 165,336Total$407,747 $498,078 $1,187,507 $110,489 $2,203,821(1)Principal payments are based on the terms contained in our credit agreements. Principal payments include payments on 2017 First Lien Term Debt, accounts receivable financing agreement, and borrowings under our2017 Revolver. Interest payments are based on the interest rate in effect on December 31, 2017. (2)Service purchase commitments are defined as agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to bepurchased.(3)As of December 31, 2017, our liability related to uncertain income tax positions was approximately $7.9 million; the entire amount has been excluded from the table as we are unable to predict when these liabilitieswill be paid due to the uncertainties in timing of the settlement of the income tax positions.(4)Represents contingent payments associated with our acquisitions. These amounts are remeasured at fair value every reporting period with the change in fair value recorded in Transaction-related costs (see Note 2 toour consolidated financial statements). The actual amounts ultimately paid out may be different depending on the level of achievement of certain earnings milestones.Off‑Balance Sheet Arrangements We have no off‑balance sheet arrangements. The term “off‑balance sheet arrangement” generally means any transaction, agreement or othercontractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract,derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit,liquidity or market risk support for such assets. Recent Accounting Pronouncements For information on new accounting pronouncements and the impact, if any, on our financial position or results of operations, see Note 2 to ouraudited 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 and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period. Our actual results could differ from those estimates. We believe that the following are some of the more criticaljudgment areas in the application of our accounting policies that affect our financial condition and results of operations. We have discussed the applicationof these critical accounting policies with our board of directors. 53Table of ContentsRevenue Recognition The majority of our service revenue is recorded regionally on a proportional performance basis. Revenue for service is recognized only afterpersuasive evidence of an arrangement exists, the sales price is determinable and collectability is reasonably assured. To measure performance, we comparecontract costs incurred to estimated total contract costs through completion. We believe this is the best indicator of the performance of the contractobligations because the costs relate to the amount of labor hours incurred to perform the service. Direct costs are primarily comprised of labor‑related chargesassociated with the delivery of services. Each month we accumulate costs on each project and compare them to the total current estimated costs to determinethe proportional performance. We then multiply the proportion completed by the contract value to determine the amount of revenue that can be recognized.Each month we review the total current estimated costs on each project to determine if these estimates are still accurate and, if necessary, we adjust the totalestimated 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 are adjusted and refined to reflect anychanges 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 be deemed incorrect due to, among other things, revisions in the scope of work or patient enrollment rate,and a contract modification might be negotiated with the customer to cover additional costs. If not, we bear the risk of costs exceeding our original estimates.Management assumes that actual costs incurred to date under the contract are a valid basis for estimating future costs. Should management’s assumption offuture 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, absentour ability to negotiate a contract modification. We accumulate information on each project to refine our bidding process. Historically, the majority of ourestimates and assumptions have been materially correct, but these estimates might not continue to be accurate in the future. Allowance for Doubtful Accounts Included in “Accounts receivable and unbilled services, net” on our consolidated balance sheets is an allowance for doubtful accounts. Generally,before we do business with a new client, we perform a credit check, as our allowance for doubtful accounts requires that we make an accurate assessment ofour customers’ creditworthiness. Approximately 14% of our client base is small- to mid-sized biotech companies, creating a heightened risk related to thecreditworthiness for a portion of our client base. We manage and assess our exposure to bad debt on each of our contracts. We age our billed accountsreceivable and assess exposure by client type, by aged category, and by specific identification. After all attempts to collect a receivable have failed, thereceivable is written off against the allowance. Historically, we have not had any write‑offs in excess of our allowance. If, at December 31, 2017, our agedaccounts receivable balance greater than 90 days were to increase by 10% (for the U.S. operations), no material adjustments to bad debt expense would berequired. Income Taxes Changes in judgment as to recognition or measurement of tax positions can materially affect the estimate of our effective tax rate and, consequently,our operating results. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustmentsand may not accurately anticipate actual outcomes. We have to use estimates and judgments in calculating certain tax liabilities and determining the recoverability of certain deferred tax assets, whicharise from net operating losses, tax credit carry forwards and temporary differences between the tax and financial statement recognition of revenue andexpense. We are also required to reduce our deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely thannot that some portion or all of the recorded deferred tax assets will not be realized in future periods.On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal RevenueCode. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, thetransition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemedrepatriation of cumulative foreign earnings as of December 31, 2017. The Company has calculated our best estimate of the impact of the Act in our year endincome tax provision in accordance with our understanding of the Act and guidance under SAB 118 available as of the date of this filing and as a result hasrecorded $0.2 million as additional income tax expense in the fourth quarter of 2017, the period in which the legislation was enacted. The provisionalamount related to the remeasurement of certain deferred tax assets, deferred tax liabilities, and U.S. uncertain tax positions, based on the rates at which theyare expected to reverse in the future, was a benefit of $41.7 million. The provisional amount related to the one-time transition tax on the mandatory deemedrepatriation of foreign earnings was $77.6 million based on cumulative foreign earnings of $392.5 million. The Company also recorded a54Table of Contentsprovisional tax benefit of $35.7 million related to the utilization of foreign tax credits against the one-time transition tax. In addition, the Company hasrecorded a valuation allowance against an estimated $12.8 million of excess foreign tax credits related to the transition tax inclusion. The Company iscontinuing to analyze the overall impact of the transition tax inclusion, including its foreign tax credit limitation position and will update the provisionalestimate as it completes its analysis during the measurement period. Due to the complexity of the new law, the Company is still in the process ofinvestigating the related accounting implications. Specifically, for the Global Intangible Low Tax Income (“GILTI”) tax the Company intends to make anaccounting policy decision around whether to account for GILTI as a period cost in the relevant period, or to record deferred taxes related to the basis in theCompany’s foreign subsidiaries once additional guidance is available for assessment.In evaluating our ability to recover our deferred tax assets, in full or in part, we consider all available positive and negative evidence, including ourpast operating results, the existence of cumulative losses in the most recent fiscal years and our forecast of future taxable income on ajurisdiction‑by‑jurisdiction basis. In determining future taxable income, assumptions include the amount of state, federal and international pretax operatingincome, international transfer pricing policies, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies.These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we use tomanage the underlying businesses. Based on our analysis of the above factors, we determined that a valuation allowance of $25.2 million was required as ofDecember 31, 2017 relating to the U.S. foreign tax credit carryforwards, state net operating loss carryforwards, foreign net operating loss carryforwards andstate tax credit carryforwards. Changes in our assumptions 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 complex tax regulations in a multitude ofjurisdictions. We determine our liability for uncertain tax positions globally under the provisions in the FASB's Accounting Standards Codification, or ASC,740, Income Taxes. As of December 31, 2017, we had recorded a liability for uncertain tax positions of $7.9 million. If events occur such that payment ofthese amounts ultimately proves to be unnecessary, the reversal of liabilities would result in tax benefits being recognized in the period when we determinethe liabilities are no longer necessary. If our calculation of liability related to uncertain tax positions proves to be more or less than the ultimate assessment, atax expense or benefit to expense, respectively, would result. The total liability reversal that could affect the tax rate is $0.5 million. Stock‑Based Compensation In accordance with the ASC 718, Stock Compensation, as modified and supplemented, we estimate the value of employee stock options on the dateof grant using either the Black‑Scholes model for all options with a service condition or a lattice model for options with market and performance conditions.The determination of fair value of stock‑based payment awards on the date of grant using an option‑pricing model is affected by the stock price of similarentities as well as assumptions regarding a number of highly complex and subjective variables. These variables include the expected stock price volatilityover the term of the awards, and actual and projected employee stock option exercise behaviors. The Black‑Scholes and lattice models require extensiveactual employee exercise behavior data and the use of a number of complex assumptions including expected volatility, risk‑free interest rate, expecteddividends, and expected life. In developing 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 the volatility of our common share price.We calculate expected volatility based on reported data for selected reasonably similar publicly traded companies for which the historicalinformation is available. For the purpose of identifying peer companies, we consider characteristics such as industry, length of trading history,similar vesting terms and in‑the‑money option status. We plan to continue to use the guideline peer group volatility information until thehistorical volatility of our common shares is relevant to measure expected volatility for future award grants.•The risk‑free interest rate assumption is based upon observed interest rates appropriate for the term of our employee 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 provided by the FASB. For those optionswith a market condition valued under the lattice model, the expected life varies depending on the target stock price that triggers vesting. •We account for forfeitures as they occur. 55Table of ContentsDue to the absence of an active market for our common stock prior to our IPO, the fair value of our common stock on the date of the grant wasdetermined in good faith by our Board of Directors with the assistance of management, based on a number of factors consistent with the methodologiesoutlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued asCompensation. Subsequent to the IPO, the fair value of our common stock is based upon the market price of our common stock on the date of the grant aslisted on the NASDAQ. 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 acquired intangibles. The identificationand valuation of these intangible assets at the time of acquisition require significant management judgment and estimates. We review long‑lived asset groups for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset groupmight not be recoverable. If indicators of impairment are present, we evaluate the carrying value of property and equipment in relation to estimates of futureundiscounted cash flows. As a result of our acquisitions we have recorded goodwill and other identifiable finite and indefinite‑lived acquired intangibles.The identification and valuation of these intangible assets at the time of acquisition require significant management judgment and estimates. In connectionwith acquisitions, valuations were completed and value was assigned to identifiable finite‑lived and indefinite‑lived intangible assets and goodwill, based onthe purchase price of the transactions. We test goodwill for impairment on at least an annual basis by comparing the carrying value to the estimated fair value of our reporting units. OnOctober 1, 2017, we reviewed goodwill for impairment and our analysis indicated that the fair value of goodwill exceeded the carrying value and, therefore,no impairment exists. When evaluating for impairment, we may first perform a qualitative assessment to determine whether it is more likely than not that areporting 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 likely thannot that the fair value of the reporting unit or indefinite-lived intangible asset exceeds its carrying amount, we will calculate the estimated fair value of thereporting unit’s or indefinite-lived intangible asset. Our decision to perform a qualitative impairment assessment for an individual reporting unit in a givenyear 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 estimatedfair value over carrying value at the last quantitative assessment date, the amount of time in between quantitative fair value assessments and the date ofacquisition. During 2017, as part of our annual impairment analysis, we performed the qualitative assessment on each reporting unit comprising of our totalgoodwill balance of $1,512.4 million and for our indefinite-lived trade name intangible asset. If we do not perform a qualitative assessment, goodwill impairment is determined by comparing the fair value of each reporting unit, determinedusing various valuation techniques, with the primary technique being a discounted cash flow analysis, to its carrying value. This process is inherentlysubjective and dependent upon the estimates and assumptions we make. In determining the expected future cash flows of our company, we assume that wewill continue to enter into new contracts, 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, a further significant slowdown inthe worldwide economy or pharmaceutical and biotechnology industry or failure to meet the performance projections included in our forecast. 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 an asset or paid to transfer aliability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.A three‑level hierarchy that prioritizes the inputs used to measure fair value is further described in Note 2 to our audited consolidated financial statementsincluded elsewhere in this Annual Report on Form 10‑K. Fair Value Measurements on a Recurring Basis At December 31, 2017 and 2016, we used Level 3 inputs to measure liabilities totaling $50.6 million and $2.8 million, respectively. The liability atDecember 31, 2017 relates to contingent consideration issued in connection with our acquisition of Symphony Health. The liability at December 31, 2016related to contingent consideration issued in connection with our acquisitions of Value Health Solutions Inc. and Nextrials, Inc. 56Table of ContentsAll derivatives are measured at fair value and recognized as either assets or liabilities on the consolidated balance sheets. The fair value of ourinterest rate swaps, measured using Level 2 inputs, was an asset of $0.4 million and a liability of $0.6 million at December 31, 2017 and 2016, respectively. All investments in marketable securities are measured at fair value using quoted market prices. At December 31, 2017, assets totaling $0.4 millionwere valued using Level 1 inputs. No other liabilities or assets are remeasured at fair value. Dividend History We have not declared or paid dividends during 2017, 2016 and 2015.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 currency exchange rates, interest rates andother relevant market rate or price changes. In the ordinary course of business, we are exposed to various market risks, including changes in foreign currencyexchange rates and interest rates, and we regularly evaluate our exposure to such changes. Our overall risk management strategy seeks to balance themagnitude of the exposure and the cost and availability of appropriate financial instruments. Interest Rate Risk We are subject to market risk associated with changes in interest rates. In September 2015, we entered into an interest rate swap with a notional valueof $250.0 million to hedge our variable rate term debt. This swap will mature in September 2018. At December 31, 2017, we had $1,010.9 millionoutstanding under our 2016 First Lien Term Loan and accounts receivable financing agreement that were not covered by an interest rate swap and thereforesubject to variable interest rates. Each quarter percentage point increase or decrease in the variable rate would result in our interest expense changing byapproximately $2.7 million per year under our unhedged variable rate debt.In January 2018, we entered into two new interest rate swaps in order to minimize interest rate volatility on our debt. For further informationregarding this subsequent event refer to Note 23 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Foreign Exchange Risk Since we operate on a global basis, we are exposed to various foreign currency risks. First, our consolidated financial statements are denominated inU.S. dollars, but a significant portion of our revenue is generated in the local currency of our foreign subsidiaries. Accordingly, changes in exchange ratesbetween the applicable foreign currency and the U.S. dollar will affect the translation of each foreign subsidiary’s financial results into U.S. dollars forpurposes of reporting consolidated financial 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 income (losses) of unconsolidated joint ventures by approximately$17.2 million for the year ended December 31, 2017. The process by which each foreign subsidiary’s financial results are translated into U.S. dollars is asfollows: income statement accounts are translated at average exchange rates for the period; balance sheet asset and liability accounts are translated at end ofperiod exchange rates; and equity accounts are translated at historical exchange rates. Translation of the balance sheet in this manner affects thestockholders’ equity account, referred to as the cumulative translation adjustment account. This account exists only in the foreign subsidiary’s U.S. dollarbalance sheet and is necessary to keep the foreign balance sheet stated in U.S. dollars in balance. Accumulated currency translation adjustments recorded as aseparate component of stockholders’ equity were $(117.2) million and $(201.1) million at December 31, 2017 and 2016, respectively. We do not havesignificant operations in countries 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 to time are denominated incurrencies different than the particular subsidiary’s local currency. These risks are generally applicable only to a portion of the contracts executed by ourforeign subsidiaries providing clinical services. The first risk occurs as revenue recognized for services rendered is denominated in a currency different fromthe currency in which the subsidiary’s expenses are incurred. As a result, the subsidiary’s earnings can be affected by fluctuations in exchange rates.The second risk results from the passage of time between the invoicing of clients under these contracts and the ultimate collection of clientpayments against such invoices. Because the contract is denominated in a currency other than the subsidiary’s local currency, we recognize a receivable atthe time of invoicing for the local currency equivalent of the foreign57Table of Contentscurrency invoice amount. Changes in exchange rates from the time the invoice is prepared until payment from the client is received will result in ourreceiving either more or less in local currency than the local currency equivalent of the invoice amount at the time the invoice was prepared and thereceivable established. This difference is recognized by us as a foreign currency transaction gain or loss, as applicable, and is reported in other expense orincome in our consolidated statements of operations. Historically, fluctuations in exchange rates from those in effect at the time contracts were executed havenot had a material effect on our consolidated financial results.58Table of ContentsItem 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 maintaining adequate internal control over financialreporting. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of our consolidated financial statements for external reporting purposes in accordance with accounting principles generally accepted in theUnited States of America. 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 dispositions of the assets of the Company, (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with accounting principles generally acceptedin the United States of America, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors,and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets thatcould have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements in the consolidated financialstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because ofchanges in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017. In making theseassessments, management used the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in InternalControl — Integrated Framework (2013). Based on management’s assessment and the criteria in the COSO framework, management has concluded that theCompany’s internal control over financial reporting as of December 31, 2017 was effective.Management excluded from its assessment of the Company’s internal control over financial reporting as of December 31, 2017, the internal controlover financial reporting of Symphony Health Solutions Corporation, or Symphony Health, which was acquired on September 6, 2017. This exclusion isconsistent with guidance issued by the SEC that an assessment of a recently acquired business may be omitted from the scope of management's report oninternal control over financial reporting in the year of acquisition. Symphony Health, excluding acquired goodwill and intangible assets, represented 4% ofour consolidated total assets and 5% of our consolidated service revenue as of and for the year ended December 31, 2017. See a discussion of this acquisitionin Note 4, Business Combinations, of the Notes to the Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K. The Company’s independent registered public accounting firm has issued a report on the Company’s internal control over financial reporting. Thisreport appears on page 61 in this Annual Report on Form 10-K. /s/ Colin Shannon /s/ Linda Baddour Colin Shannon Linda BaddourPresident, Chief Executive Officer and Chairman of the Board ofDirectors Executive Vice President and Chief Financial Officer(Principal Executive Officer) (Principal Financial Officer)59Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of PRA Health Sciences, Inc.Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of PRA Health Sciences, Inc. and subsidiaries (the "Company") as of December 31, 2017 and2016, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows, for each of thethree years in the period ended December 31, 2017, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financialstatements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operationsand its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in theUnited States of America.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company'sinternal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued bythe Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2018, expressed an unqualified opinion on theCompany's internal control over financial reporting.Adoption of new Accounting StandardAs discussed in Note 2 to the financial statements, the Company adopted ASU No. 2016-09, “Compensation-Stock Compensation (Topic 718):Improvements to Employee Share-Based Payment Accounting” on January 1, 2017.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Companyin accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing proceduresto assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. We believe that our audits provide a reasonable basis for our opinion./s/ Deloitte & Touche LLPRaleigh, North CarolinaFebruary 22, 2018We have served as the Company's auditor since 2013.60Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of PRA Health Sciences, Inc.Opinion on Internal Control over Financial ReportingWe have audited the internal control over financial reporting of PRA Health Sciences, Inc. and subsidiaries (the “Company”) as of December 31, 2017, basedon criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedfinancial statements as of and for the year ended December 31, 2017, of the Company and our report dated February 22, 2018 expressed an unqualifiedopinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of ASU No. 2016-09, “Compensation-StockCompensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.”As described in “Management’s Report on Internal Control Over Financial Reporting,” management excluded from its assessment the internal control overfinancial reporting at Symphony Health Solutions Corporation, which was acquired on September 6, 2017 and whose financial statements constitute 4% ofconsolidated total assets (excluding acquired goodwill and intangible assets) and 5% of consolidated service revenue as of and for the year ended December31, 2017. Accordingly, our audit did not include the internal control over financial reporting at Symphony Health Solutions Corporation.Basis for OpinionThe Company’s management is responsible 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 Over Financial Reporting.” Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective 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 and evaluating the design and operatingeffectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. Webelieve that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of 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 and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ Deloitte & Touche LLPRaleigh, North CarolinaFebruary 22, 201861Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(in thousands, except share amounts) December 31, 2017 2016ASSETS Current assets: Cash and cash equivalents$192,229 $144,623Restricted cash661 4,715Accounts receivable and unbilled services, net627,003 439,053Prepaid expenses and other current assets55,580 35,367Income taxes receivable1,551 979Total current assets877,024 624,737Fixed assets, net143,070 87,577Goodwill1,512,424 971,980Intangible assets, net783,836 473,976Deferred tax assets8,939 6,568Investment in unconsolidated joint ventures407 284Deferred financing fees1,844 1,762Other assets30,502 23,507Total assets$3,358,046 $2,190,391LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of borrowings under credit facilities$91,500 $—Current portion of long-term debt28,789 31,250Accounts payable64,635 51,335Accrued expenses and other current liabilities303,875 123,589Income taxes payable13,606 25,524Advanced billings469,211 332,501Total current liabilities971,616 564,199Deferred tax liabilities112,181 73,703Long-term debt, net1,225,397 797,052Other long-term liabilities112,371 26,185Total liabilities2,421,565 1,461,139Commitments and contingencies (Note 13) Stockholders' equity: Preferred stock (100,000,000 authorized shares; $0.01 par value) Issued and outstanding -- none— —Common stock (1,000,000,000 authorized shares; $0.01 par value) Issued and outstanding -- 63,623,950 and 61,597,705 at December 31, 2017 and 2016, respectively636 616Additional paid-in capital905,423 879,067Accumulated other comprehensive loss(136,470) (224,686)Retained earnings161,182 74,255Equity attributable to PRA Health Sciences, Inc. stockholders930,771 729,252Noncontrolling interest5,710 —Total stockholders' equity936,481 729,252Total liabilities and stockholders' equity$3,358,046 $2,190,391 The accompanying notes are an integral part of the consolidated financial statements.62Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share amounts) Years Ended December 31, 2017 2016 2015Revenue: Service revenue$1,948,374 $1,580,023 $1,375,847Reimbursement revenue311,015 231,688 238,036Total revenue2,259,389 1,811,711 1,613,883Operating expenses: Direct costs1,283,868 1,032,688 886,528Reimbursable out-of-pocket costs311,015 231,688 238,036Selling, general and administrative321,987 269,893 246,417Transaction-related costs87,709 44,834 —Depreciation and amortization78,227 69,506 77,952Loss on disposal of fixed assets358 753 652Income from operations176,225 162,349 164,298Interest expense, net(46,729) (54,913) (61,747)Loss on modification or extinguishment of debt(15,023) (38,178) —Foreign currency (losses) gains, net(39,622) 24,029 14,048Other (expense) income, net(304) 607 (1,434)Income before income taxes and equity in income (losses) of unconsolidated joint ventures74,547 93,894 115,165(Benefit from) provision for income taxes(12,623) 28,494 30,004Income before equity in income (losses) of unconsolidated joint ventures87,170 65,400 85,161Equity in income (losses) of unconsolidated joint ventures, net of tax123 2,775 (3,396)Net income87,293 68,175 81,765Net income attributable to noncontrolling interest(366) — —Net income attributable to PRA Health Sciences, Inc.$86,927 $68,175 $81,765Net income per share attributable to common stockholders: Basic$1.39 $1.12 $1.36Diluted$1.32 $1.06 $1.29Weighted average common shares outstanding: Basic62,437 60,759 59,965Diluted65,773 64,452 63,207 The accompanying notes are an integral part of the consolidated financial statements.63Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(in thousands) Years Ended December 31, 2017 2016 2015Net income$87,293 $68,175 $81,765Other comprehensive income (loss): Foreign currency translation adjustments83,814 (95,019) (52,433)Unrealized gains (losses) on derivative instruments, net of income taxes of $96, $(622), and $(578)149 (978) (11,273)Reclassification adjustments: Losses on derivatives included in net income, net of income taxes, $2,699, $2,303, and $04,156 3,618 908Comprehensive income (loss)175,412 (24,204) 18,967Comprehensive income attributable to noncontrolling interest(269) — —Comprehensive income (loss) attributable to PRA Health Sciences, Inc.$175,143 $(24,204) $18,967 The accompanying notes are an integral part of the consolidated financial statements.64Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY(in thousands) AccumulatedOtherComprehensive(Loss) Income(Note 16) RetainedEarnings(AccumulatedDeficit) NoncontrollingInterest Common Stock AdditionalPaid-inCapital Shares Amount TotalBalance at December 31, 201459,814 $598 $821,411 $(69,509) $(75,685) $— $676,815Exercise of common stock options257 3 78 — — — 81Issuance of common stock174 1 1,582 — — — 1,583Stock-based compensation— — 5,276 — — — 5,276Net income— — — — 81,765 — 81,765Other comprehensive loss, net of tax— — — (62,798) — — (62,798)Balance at December 31, 201560,245 602 828,347 (132,307) 6,080 — 702,722Exercise of common stock options1,303 13 642 — — — 655Stock-based compensation50 1 49,232 — — — 49,233Income tax benefit from stock-based award activities— — 846 — — — 846Net income— — — — 68,175 — 68,175Other comprehensive loss, net of tax— — — (92,379) — — (92,379)Balance at December 31, 201661,598 616 879,067 (224,686) 74,255 — 729,252Exercise of common stock options1,904 19 8,072 — — — 8,091Issuance of common stock5 — 375 — — — 375Stock-based compensation117 1 17,909 — — — 17,910Non-controlling interest related to Takeda jointventure— — — — — 5,441 5,441Net income— — — — 86,927 366 87,293Other comprehensive income, net of tax— — — 88,216 — (97) 88,119Balance at December 31, 201763,624 $636 $905,423 $(136,470) $161,182 $5,710 $936,481 The accompanying notes are an integral part of the consolidated financial statements.65Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Years Ended December 31, 2017 2016 2015Cash flows from operating activities: Net income$87,293 $68,175 $81,765Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization78,227 69,506 77,952Amortization of debt issuance costs and discount2,108 4,433 5,983Amortization of terminated interest rate swaps6,684 4,961 731Stock-based compensation expense12,616 7,067 5,276Non-cash transaction related stock-based compensation expense5,294 42,166 —Unrealized foreign currency losses (gains)39,700 (24,499) (16,464)Loss on modification or extinguishment of debt15,023 38,178 —Loss on disposal of fixed assets358 753 652Change in acquisition-related contingent consideration74,969 (527) 89Equity in (income) losses of unconsolidated joint ventures(123) (2,775) 3,396Unrealized loss on derivatives171 47 1,787Excess tax benefit from stock-based compensation— (846) —Deferred income taxes(75,915) (10,469) (3,219)Other reconciling items592 (652) 443Changes in operating assets and liabilities, net of acquired assets and assumed liabilities: Accounts receivable and unbilled services(136,330) (31,313) (83,211)Prepaid expenses and other assets1,762 (10,071) (11,675)Accounts payable and other liabilities35,792 (1,474) 36,135Income taxes10,640 7,308 9,958Advanced billings61,547 79 42,830Net cash provided by operating activities220,408 160,047 152,428Cash flows from investing activities: Purchase of fixed assets(61,318) (33,143) (32,814)Proceeds from the sale of fixed assets56 10 44Cash paid for interest on interest rate swap(874) (913) (302)Cash paid to terminate interest rate swaps— — (32,907)Acquisition of Symphony Health Solutions Corporation, net of cash acquired(521,182) — —Payment of Symphony Health Solutions Corporation contingent consideration(67,781) — —Acquisition of Parallel 6, Inc., net of cash acquired(38,859) — —Acquisition of Takeda PRA Development Center KK, net of cash acquired2,680 — —Acquisition of Takeda Pharmaceutical Data Services, Ltd., net of cash acquired(142) — —Acquisition of Nextrials, Inc., net of cash acquired— (4,268) —Acquisition of Value Health Solutions, Inc., net of cash acquired — (543)Payment of ClinStar, LLC working capital settlement— — (1,693)Distributions from unconsolidated joint ventures— 3,700 19,529Contributions to unconsolidated joint ventures— — (23,000)Net cash used in investing activities(687,420) (34,614) (71,686)Cash flows from financing activities: Proceeds from issuance of long-term debt550,000 625,000 —Repayment of long-term debt(125,513) (822,559) (40,000)Proceeds from accounts receivable financing agreement20,000 120,000 —Repayment on accounts receivable financing agreement(20,000) — —Borrowings on line of credit121,500 110,000 90,000Repayments of line of credit(30,000) (110,000) (90,000)Payment of debt prepayment and debt extinguishment costs(9,226) (17,824) —Payment for debt issuance costs(6,588) (7,713) —Payment of common stock issuance costs— — (525)Excess tax benefit from stock-based compensation— 846 —Proceeds from stock option exercises7,236 655 81Payment of acquisition-related contingent consideration(400) — (2,000)Net cash provided by (used in) financing activities507,009 (101,595) (42,444)Effects of foreign exchange changes on cash, cash equivalents, and restricted cash3,555 (625) (3,702)Change in cash, cash equivalents, and restricted cash43,552 23,213 34,596Cash, cash equivalents, and restricted cash, beginning of year149,338 126,125 91,529Cash, cash equivalents, and restricted cash, end of year$192,890 $149,338 $126,125 The accompanying notes are an integral part of the consolidated financial statements.66Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(1) Basis of Presentation Description of Business PRA Health Sciences, Inc. and its subsidiaries (collectively, the Company) is a full‑service global contract research organization providing a broadrange of product development services for pharmaceutical and biotechnology companies around the world. The Company’s integrated services include datamanagement, statistical analysis, clinical trial management, and regulatory and drug development consulting.In September 2017, the Company completed the acquisition of Symphony Health Solutions Corporation, or Symphony Health, to better serveclients across their entire product lifecycle by (i) improving clinical trial design, recruitment, and execution; (ii) creating real-world data solutions based onthe use of medicines by actual patients in normal situations; and (iii) increasing the efficiency of healthcare companies' commercial organizations throughenhanced analytics and outsourcing services. The acquisition of Symphony Health was accounted for as a business combination and the acquired results ofoperations are included in the Company's consolidated financial information since the date of the acquisition. See Note 4 for additional informationregarding the acquisition of Symphony Health. Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the UnitedStates, or GAAP. Secondary Offerings During 2017 and 2016, Kohlberg Kravis Roberts & Co. L.P., or KKR, and certain executive officers of the Company sold a total of 10,000,000 and17,500,000 shares, respectively, of the Company’s common stock as part of secondary offerings. The Company incurred professional fees in connection withthe secondary offerings of $1.0 million and $1.3 million during years ended December 31, 2017 and 2016, respectively. The fees are included in transaction-related costs in the accompanying consolidated statement of operations. As of December 31, 2017, KKR owned 20.7% of the Company’s outstandingcommon stock.(2) Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts and operations of the Company, its subsidiaries and investments inwhich the Company has control. Amounts pertaining to the non-controlling ownership interests held by third parties in the operating results and financialposition of the Company’s majority-owned subsidiaries are reported as non-controlling interests. Intercompany accounts and transactions have beeneliminated in consolidation. Variable Interest Entities Financial Accounting Standards Board’s, or FASB, accounting guidance concerning variable interest entities, or VIE, addresses the consolidation ofbusiness enterprise to which the usual condition of consolidation (ownership of a majority voting interest) does not apply. This guidance focuses oncontrolling financial interests that may be achieved through arrangements that do not involve voting interests. The guidance requires an assessment of whothe primary beneficiary is and whether the primary beneficiary should consolidate the VIE. The primary beneficiary is identified as the variable interestholder that has both the power to direct the activities of the variable interest entity that most significantly impacts the entity’s economic performance and theobligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. Application ofthe VIE consolidation requirements may require the exercise of significant judgment by management.67Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Takeda PRA Development Center KKThe Company entered into a joint venture with Takeda Pharmaceutical Company Ltd. during 2017. For further discussion on the joint venture, referto Note 4, Business Combinations. Accounts Receivable Financing Agreement On March 22, 2016, the Company entered into a three-year accounts receivable financing agreement and related arrangements to securitize certainof its accounts receivable. Under the accounts receivable financing agreement, certain of the Company’s U.S. accounts receivable and unbilled servicesbalances are sold by certain of its consolidated subsidiaries to another of its consolidated subsidiaries, a wholly-owned bankruptcy-remote special purposeentity, or SPE. The SPE in turn may 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 the SPE by holding the residualequity. The Company determined that the SPE is a VIE and it is the primary beneficiary because (i) the Company’s servicing responsibilities for thesecuritized portfolio gives it the power to direct the activities that most significantly impact the performance of the VIE and (ii) its variable interest in the VIEgives it the obligation to absorb losses and the right to receive residual returns that could potentially be significant. As a result, the Company hasconsolidated the VIE within its financial statements. Refer to Note 9, Revolving Credit Facilities and Long-Term Debt, for additional information regarding the accounts receivable financing agreement.Risks and Other Factors The Company’s revenues are dependent on research and development expenditures of the pharmaceutical and biotechnology industries. Anysignificant reduction in research and development expenditures by the pharmaceutical and biotechnology industries could have a material adverse effect onthe Company and its results of operations. Clients of the Company generally may terminate contracts without cause upon 30 to 60 days’ notice. While the Company generally negotiatesdeposit payments and early termination fees up front, such terminations could significantly impact the future level of staff utilization and have a materialadverse effect on the Company and the results of future operations. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period. In particular, the Company’s primary method of revenue recognition requires estimates of costs to be incurred tofulfill existing long-term contract obligations. Actual results could differ from those estimates. Estimates are also used when accounting for certain items suchas allowance for doubtful accounts, depreciation and amortization, asset impairment, certain acquisition-related assets and liabilities including contingentconsideration, income taxes, fair market value determinations, and contingencies. Reportable Segments In conjunction with the acquisition of Symphony Health, the Company expanded its reporting segments. The Company is now managedthrough two reportable segments, Clinical Research and Data Solutions. Clinical Research, which primarily serves biopharmaceutical clients, providesoutsourced clinical research and clinical trial related services. Data Solutions provides data and analytics, technology solutions and real-world insights andservices to companies in the pharmaceutical industry.The Clinical Research segment is solely focused on the execution of clinical trials on a global basis. The Company has considered whether thedelivery of the different types of capabilities in various stages of clinical development constitute separate products or lines of service in accordance withAccounting Standards Codification, or ASC, 280, “Segment Reporting,” or ASC 280, and has concluded that there are substantial similarities and overlaps inthe capabilities delivered at68Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)each stage of clinical development, with the primary differences between the Early Development Services, or EDS, compared to the Product Registration, orPR, and Strategic Solutions, or SS, relating to the points during the life cycle of a clinical trial at which such capabilities are delivered. After review andanalysis of the operating characteristics of each service offering and using the aggregation characteristics under ASC 280, the Company has concluded thatthe services provided are similar across most characteristics. The Company's operations consist of two reportable segments, which represents management's view of the Company's operations based on itsmanagement and internal reporting structure. The Company considered the guidance in ASC 350, “Intangibles—Goodwill and Other,” which notes that areporting unit is an operating segment or one level below an operating segment. PR, EDS, and SS are the business units that are one level below theCompany’s Clinical Research operating segment and the Company determined that they meet the definition of “components,” as discrete financialinformation exists and this information is regularly reviewed by management. The Data Solutions operating segment does not have any material components.Business Combinations Business combinations are accounted for using the acquisition method and, accordingly, the identifiable assets acquired, the liabilities assumed, andany non-controlling interest in the acquiree are recorded at their estimated fair values on the date of the acquisition. Goodwill represents the excess of thepurchase price over the estimated fair value of the net assets 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 liability has been incurred at the date ofthe consolidated financial statements and (2) the amount of the loss can be reasonably estimated. Disclosure in the notes to the consolidated financialstatements is required for loss contingencies that do not meet both these conditions if there is a reasonable possibility that a loss may have been incurred. TheCompany expenses 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 to be cash equivalents. As ofDecember 31, 2017 and 2016, substantially all of the Company’s cash and cash equivalents were held in or invested with large financial institutions. Certainbank deposits may at times be in excess of the Federal Deposit Insurance Corporation insurance limits. Restricted cash The Company receives cash advances from its customers to be used for the payment of investigator costs and other pass-through expenses. The termsof certain customer contracts require that such advances be maintained in separate escrow accounts; these accounts are not commingled with the Company’scash and cash equivalents and are presented separately in the consolidated balance sheets as restricted cash. Additionally, as part of the acquisition of Nextrials, Inc., or Nextrials, the Company was required to transfer $0.5 million to an escrow account heldby a subsidiary. These funds were distributed in 2017. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sumto the total of the same amounts shown in the consolidated statements of cash flows (in thousands): December 31, 2017 2016 2015Cash and cash equivalents$192,229 $144,623 $121,065Restricted cash661 4,715 5,060Total cash, cash equivalents, and restricted cash$192,890 $149,338 $126,12569Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Accounts Receivable and Unbilled Services Accounts receivable represent amounts for which invoices have been sent to clients based upon contract terms. Unbilled services represent amountsearned for services that have been rendered but for which clients have not been billed and include reimbursement revenue. Unbilled services are generallybillable upon submission of appropriate billing information, 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 make required payments. The Companyperforms credit reviews of each customer, monitors collections and payments from customers, and determines the allowance based upon historical experienceand specific customer collection issues. The Company ages billed accounts receivable and assesses exposure by customer type, by aged category, and byspecific identification. After all attempts to collect a receivable have failed, the receivable is written off against the allowance or, to the extent unreserved, tobad debt expense. Advanced Billings Advanced billings represent amounts associated with services, reimbursement revenue and investigator fees that have been received but have not yetbeen earned or paid. Fixed Assets Fixed assets and software purchased or developed for internal use are recorded at cost and are depreciated on a straight-line basis over the followingestimated useful lives: Furniture, fixtures and equipment5-7 yearsComputer hardware and software3-7 yearsLeasehold improvementsLesser 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 guidance in ASC 350‑40, “Internal-Use Software," which require certaindirect costs and interest costs incurred during the application stage of development to be capitalized and amortized over the useful life of the software. Derivative Financial Instruments The Company utilizes interest rate swaps to manage changes in market conditions related to debt obligations. All derivatives are measured at fairvalue and recognized as either assets or liabilities on the consolidated balance sheets. Derivatives that are not determined to be effective hedges are adjustedto fair value with a corresponding effect on earnings. Changes in the fair value of derivatives that are designated and determined to be effective as part of ahedge transaction have no immediate effect on earnings and depending on the type of hedge, are recorded either as part of other comprehensive loss and willbe included in earnings in the period in which earnings are affected by the hedged item, or are included in earnings as an offset to the earnings impact of thehedged item. Any ineffective portion of hedges is reported in earnings as it occurs. Amounts previously recorded in accumulated other comprehensive lossrelated to these interest rate swaps will be reclassified into earnings over the term of the previously hedged borrowing using the swaplet method. TheCompany has elected the accounting policy that cash flows associated with interest rate derivative contracts are classified as cash flows from investingactivities. Contingent ConsiderationThe consideration for the Company’s acquisitions may include potential future earn-out payments that are contingent upon the occurrence ofparticular events. These payments might be based on the achievement of future revenue or earnings milestones. The Company records a contingentconsideration obligation for such contingent payments at fair value on the70Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)acquisition date. The Company estimates the fair value of contingent consideration obligations through valuation models designed to estimate theprobability of such contingent payments based on various assumptions and incorporating estimated success rates. Estimated payments are discounted usingpresent value techniques to arrive at an estimated fair value at the balance sheet date. Changes in the fair value of the contingent consideration obligations,excluding adjustments that qualify as measurement period adjustments, are recognized within the Company’s consolidated statements of operations.Changes in the fair value of the contingent consideration obligations can result from changes to one or multiple inputs, including adjustments to thediscount rates, changes in the amount or probability of achieving certain revenue or earnings targets. These fair value measurements are based on significantinputs not observable in the market. Substantial judgment is employed in determining the appropriateness of these assumptions as of the acquisition date andfor each subsequent period. Accordingly, changes in assumptions or actual results could have a material impact on the amount of contingent considerationexpense the Company records in any given period.During the fourth quarter of 2017, the Company made an accounting policy election to present changes in the fair value of contingent considerationas part of income from operations within transaction-related costs on the consolidated statements of operations. The change in fair value of contingentconsideration for the years ended December 31, 2015 and 2016, totaled $0.1 million and $0.5 million, respectively, and were included in other (expense)income, net on the consolidated statements of operations. Due to the immaterial nature of the prior year balances, they were not reclassified to match thecurrent year presentation.Fair Value MeasurementsThe Company records certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid totransfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at themeasurement date. A three-level fair value hierarchy that prioritizes the inputs used to measure fair value is described below. This hierarchy requires entitiesto maximize the use of observable inputs 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 similar assets and liabilities in active markets;quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroboratedby observable market data.•Level 3—Unobservable inputs that are supported by little or no market activity. This includes certain pricing models, discounted cash flowmethodologies and similar techniques that use significant unobservable inputs. The carrying amount of financial instruments, including cash and cash equivalents, accounts receivable, unbilled services, accounts payable andadvanced 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 on a recurring basis as ofDecember 31, 2017 (in thousands): Level 1 Level 2 Level 3 TotalAssets: Interest rate swap$— $428 $— $428Marketable securities393 — — 393Total$393 $428 $— $821Liabilities: Contingent consideration$— $— $50,644 $50,644Total$— $— $50,644 $50,644 71Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The following table summarizes the fair value of the Company’s financial assets and liabilities that are measured on a recurring basis as ofDecember 31, 2016 (in thousands): Level 1 Level 2 Level 3 TotalLiabilities: Interest rate swap$— $590 $— $590Contingent consideration— — 2,754 2,754Total$— $590 $2,754 $3,344 The Company values contingent consideration using models that include significant unobservable Level 3 inputs, such as projected financialperformance over the earn-out period along with estimates for market volatility and the discount rate applicable to potential cash payments. Interest rateswaps are measured at fair value using a market approach valuation technique. The valuation is based on an estimate of net present value of the expected cashflows using relevant mid-market observable data inputs and based on the assumption of no unusual market conditions or forced liquidation. The following table summarizes the changes in Level 3 financial liabilities measured on a recurring basis (in thousands): Contingent consideration - Accruedexpenses and other current liabilities Contingent consideration - Other long-term liabilitiesBalance at December 31, 2015 $999 $—Initial estimate of Nextrials contingent consideration — 2,282Revaluations included in earnings — (527)Reclassification adjustment 736 (736)Balance at December 31, 2016 1,735 1,019Initial estimate of Symphony Health contingent consideration 90,394 18,390Initial estimate of Parallel 6, Inc. contingent consideration — 8,350Payments on Nextrials contingent consideration (400) —Payments on Symphony Health contingent consideration (67,788) —Measurement period adjustments 24,388 14,279Changes in fair value included in earnings 66,363 8,606Transfer out (114,692) —Balance at December 31, 2017 $— $50,644The $114.7 million transfer out represents the year-end 2017 earn-out payment to the sellers of Symphony Health that was calculated usingobservable inputs at December 31, 2017. The remaining $50.6 million balance at December 31, 2017, which was valued using a Monte Carlo simulation,relates to the 2018 earn-out payment to Symphony Health and is based on its future adjusted earnings before interest, taxes, depreciation and amortization, orAdjusted EBITDA. Key assumptions include (1) a discount rate of 8%, (2) a volatility rate of 32%, and (3) probability adjusted level of Adjusted EBITDA of$56.5 million for the year ended December 31, 2018. Refer to Note 4 for additional discussion of the Symphony Health acquisition. Non-recurring Fair Value Measurements Certain assets and liabilities are carried on the accompanying consolidated balance sheets at cost and are not remeasured to fair value on a recurringbasis. These assets include finite-lived intangible assets which are tested when a triggering event occurs and goodwill and identifiable indefinite-livedintangible assets which are tested for impairment annually on October 1 or when a triggering event occurs. 72Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)As of December 31, 2017, assets carried on the balance sheet and not remeasured to fair value on a recurring basis totaling approximately $2,296.3million were identified as Level 3. These assets are comprised of goodwill of $1,512.4 million and identifiable intangible assets, net of $783.8 million. Refer to Note 9, Revolving Credit Facilities and Long-Term Debt, for additional information regarding the fair value of long-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 in circumstances occur that indicate the carrying value of the asset groupmay not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset group from theexpected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value ofsuch asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. The Company’s primary measure of fair valueis based on discounted cash flows. The measurement of impairment requires the Company to make estimates of these cash flows related to long-lived assets,as well as other fair value determinations. Goodwill and Other Intangibles Goodwill and indefinite-lived intangible assets are tested for impairment annually or more frequently if an event or circumstance indicates that animpairment loss may have been incurred. Separate intangible assets that have finite useful lives are amortized over their estimated useful lives or over theperiod in which economic benefit is received. The Company’s primary finite-lived intangibles are customer relationships, customer backlog, and acquireddatabases, which are amortized on an accelerated basis, 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 basis or whenever it has reason tobelieve goodwill may not be recoverable. The annual impairment test of goodwill is performed during the fourth quarter of each fiscal year. The Companydid not have an impairment for any of the years presented. When evaluating for impairment, the Company may first perform a qualitative assessment to determine whether it is more likely than not that areporting unit or indefinite-lived intangible asset is impaired. If the Company does not perform a qualitative assessment, or if it determines that it is not morelikely than not that the fair value of the reporting unit or indefinite-lived intangible asset exceeds its carrying amount, the Company will calculate theestimated fair value of the reporting unit or indefinite-lived intangible asset. The Company’s decision to perform a qualitative impairment assessment for anindividual 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 theexcess of the reporting unit's estimated fair value over carrying value at the last quantitative assessment date, the amount of time in between quantitative fairvalue assessments and the date of acquisition. During 2017, as part of the Company’s annual impairment analysis, the Company performed the qualitativeassessment for all of its goodwill and indefinite-lived trade name intangible asset balances. If the Company does not perform a qualitative assessment, goodwill impairment is determined by the Company using a two-step process. The firststep of the goodwill impairment test is used to identify potential impairment by comparing the fair value of each reporting unit, determined using variousvaluation techniques, with the primary technique being a discounted cash flow analysis, to its carrying value. If the fair value of a reporting unit exceeds itscarrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amountof a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. Thesecond step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If thecarrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized. Revenue Recognition The Company generally enters into contracts with customers to provide services with payments based on either fixed-fee, time and materials, or fee-for-service arrangements. Revenue for services is recognized only after persuasive evidence of an arrangement exists, the sales price is determinable, serviceshave been rendered, and collectability is reasonably assured.73Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Once these criteria have been met, the Company recognizes revenue for the services provided on fixed-fee contracts in the Clinical Researchsegment based on the proportional performance methodology, which determines the proportion of outputs or performance obligations which have beencompleted or delivered compared to the total contractual outputs or performance obligations. To measure performance, the Company compares the contractcosts incurred to estimated total contract costs through completion. As part of the client proposal and contract negotiation process, the Company develops adetailed project budget for the direct costs based on the scope of the work, the complexity of the study, the geographical location involved and theCompany’s historical experience. The Company then establishes the individual contract pricing based on the Company’s internal pricing guidelines,discount agreements, if any, and negotiations 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 in which the revisions are firstidentified. Contract costs consist primarily of direct labor and other project-related costs. The Company recognizes revenue for services provided on fixed-feecontracts in the Data Solutions segment either ratably as earned over the contract period, for subscription-based services, or upon delivery, for one-timedelivery of data solutions or reports. Revenue from time and materials contracts is recognized as hours are incurred. Revenues and the related costs of fee-for-service contracts are recognized in the period in which services are performed.In the Clinical Research segment, a majority of contracts undergo modifications over the contract period and the Company’s contracts provide forthese modifications. During the modification process, the Company recognizes revenue to the extent it incurs costs, provided client acceptance and paymentis deemed reasonably assured. Volume discounts are offered to certain large customers based on annual volume thresholds. The Company records an estimate of the annual volumerebate as a reduction of revenue throughout the period based on the estimated total rebate to be earned for the period. Most contracts in the Clinical Research segment can be terminated by the client either immediately or after a specified period following notice.These contracts require the client to pay the Company the fees earned through the termination date, the fees and expenses to wind down the study, and, insome cases, a termination fee or some portion of the fees or profit that the Company could have earned under the contract if it had not been terminated early.Therefore, revenue recognized prior to cancellation generally does not require a significant adjustment upon cancellation.The Company's Data Solutions segment enters into contracts with some of its larger data suppliers that involve non-monetary terms. The Companywill issue purchase credits to be used toward the data supplier's purchase of the Company's products, services or consulting. In exchange the Companyreceives monetary discounts on the data received from the data suppliers. The fair value of the revenue earned from the customer purchases is determinedbased on similar product offerings to other customers. At the end of the contract year, any unused purchase credits will be forfeited or carried over to the nextcontract year based on the terms of the data supplier contract. For the year ended December 31, 2017, the Company recognized service in kind revenue of$5.8 million from these transactions, which is included in service revenue in the accompanying consolidated statements of operations. 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 the consolidated statements of operations. As is customary in the industry, the Company routinely enters into separate agreements on behalf of its clients with independent physicianinvestigators in connection with clinical trials. The funds received for investigator fees are netted against the related cost because such fees are the obligationof 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 theevent of default by the client. In addition, the Company does not pay the independent physician investigator until funds are received from the client. Totalpayments to investigators were $250.9 million, $249.6 million, and $208.0 million and for the years ended December 31, 2017, 2016, and 2015, respectively.74Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Concentration of Credit Risk Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, accounts receivable, and unbilledservices. As of December 31, 2017, substantially all of the Company’s cash and cash equivalents were held in or invested with large financial institutions.Accounts receivable include amounts due from pharmaceutical and biotechnology companies. The Company establishes an allowance for potentiallyuncollectible receivables. 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 respective periods was as follows: Years Ended December 31, 2017 2016 2015Customer A10.3% 11.0% —Customer B— 10.4% 10.7%Accounts receivable and unbilled receivables from individual customers that were equal to or greater than 10% of consolidated accounts receivableand unbilled receivables at the respective dates were as follows: December 31, 2017 2016Customer A11.5% 12.0% Foreign Currency The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars at exchange rates in effect 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 aretranslated at average exchange rates prevailing during the period the transactions occurred. Translation gains and losses are included as an adjustment to theaccumulated other comprehensive loss account in stockholders’ equity. Translation gains and losses from foreign currency transactions, such as those resulting from the settlement and revaluation of foreign receivablesand payables, are included in the determination of net income. These amounts are included in foreign currency (losses) gains, net in the consolidatedstatements of operations. In addition, gains or losses related to the Company’s intercompany loans payable and receivable denominated in a foreign currencyother than the subsidiary’s functional currency that are deemed to be of a long-term investment nature are remeasured to cumulative translation and recordedin accumulated other comprehensive loss in the consolidated balance sheets. Income TaxesThe Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities arerecognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets andliabilities and their respective tax bases. Deferred tax assets are recognized for future deductible temporary differences, along with net operating losscarryforwards 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 berecognized under the preceding criteria, a valuation allowance is established to reduce the deferred tax asset to the amount that is more likely than not to berealized. Deferred tax liabilities are recognized for future taxable temporary differences. Deferred tax assets and liabilities are measured using enacted taxrates in effect for the year in which those temporary differences are expected to be recovered or settled. There are inherent uncertainties related to the interpretation of tax regulations in the jurisdictions in which the Company transacts business. Thejudgments and estimates made at a point in time may change based on the outcome of tax audits, as well as changes to, or further interpretations of,regulations. Income tax expense is adjusted in the period in which these events occur, and these adjustments are included in the Company’s consolidatedstatement of operations. If such changes 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 be sustained75Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such aposition are measured based on the largest benefit that has a greater than fifty percent likelihood 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 awards which allow the employee topurchase shares of the Company’s stock at a fixed price. The Company measures compensation cost at the grant date, based on fair value of the award, andrecognizes it as expense over the employees’ requisite service period.The fair value of each option issued during these periods was estimated on the date of grant using the Black-Scholes option pricing model forservice condition awards with the following weighted average assumptions: Years Ended December 31, 2017 2016 2015Risk-free interest rate1.9% 1.5% 1.7%Expected life, in years6.3 6.3 6.3Dividend yieldN/A N/A N/AVolatility29.7% 31.2% 34.4% The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of the grant. The expected life represents the periodof time the grants are expected to be outstanding. The Company uses the historical volatilities of a selected peer group as it does not have sufficient historyto estimate the volatility of its common share price. The Company calculates expected volatility based on reported data for selected reasonably similarpublicly traded companies for which the historical information is available. For the purpose of identifying peer companies, the Company considerscharacteristics 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 value of the Company's commonshares for purposes of determining the exercise price for award grants was determined in good faith by the Company’s Board of Directors, or Board, with theassistance and upon the recommendation of management based on a number of market factors, including: the common shares underlying the award involvedilliquid securities in a private company; results of operations and financial position; and the market performance of publicly traded companies compared tothe Company. The Company accounts for its stock-based compensation for restricted share awards and restricted share units, or collectively, RSAs/RSUs, based onthe closing market price of the Company’s common stock on the trading day immediately prior to the grant date, and recognizes it as expense over theemployees’ requisite service period. Net Income Per Share The calculation of net income per share, or EPS, is based on the weighted average number of common shares or common stock equivalentsoutstanding during the applicable period. The dilutive effect of common stock equivalents is excluded from basic earnings per share and is included in thecalculation of diluted earnings per share, unless the effect of inclusion 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 andamortized to interest expense using the effective interest method, over the respective terms of the related debt. Debt issuance costs relating to the Company’srevolving credit facilities are recorded as an asset; these costs are deferred and amortized to interest expense using the straight-line method. 76Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Compensated Absences The Company accrues for the costs of compensated absences to the extent that the employee’s right to receive payment relates to service alreadyrendered, the obligation vests or accumulates, payment is probable and the amount can be reasonably estimated. The Company’s policies related tocompensated absences vary by jurisdiction and obligations are recorded net of estimated forfeiture due to turnover when reasonably predictable.Operating Leases The Company records rent expense for operating leases, some of which have escalating rent over the term of the lease, on a straight-line basis overthe initial effective lease term. The Company begins depreciation on the date of initial possession, which is generally when the Company enters the spaceand begins to make improvements in preparation for its intended use. Some of the Company’s facility leases provide for concessions by the landlords,including payments for leasehold 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 the difference between rent expense and rentpaid as deferred rent. For tenant allowances for improvements considered to be tenant assets, rent holidays and other lease incentives, the Company records adeferred rent liability at the inception of the lease term and amortizes the deferred rent over the term of the lease as a reduction to rent expense. For tenantallowances considered to be property owner assets, the payment is treated as a reimbursement for the cost of the lessor asset.Transaction-related CostTransaction-related costs consist primarily of: (1) the change in the fair value of acquisition-related contingent consideration; (2) costs incurred inconnection with due diligence performed in connection with acquisitions; (3) costs associated with the accounts receivable financing agreement; and (4)secondary offering costs, which consist of stock-based compensation expense related to the release of the transfer restrictions on vested options and third-party fees incurred in connection with the offerings. Recently Implemented Accounting Standards In March 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or 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 went into effect for public companies for annual periodsbeginning after December 15, 2016. The Company adopted this ASU beginning with the first quarter of 2017. The adoption of this ASU had the followingeffects on the consolidated financial statements: Income taxes - The standard requires excess tax benefits and tax deficiencies to be recorded as income tax benefit or expense in the statement ofoperations. The Company applied the modified retrospective adoption approach beginning in 2017 and recorded a cumulative-effect adjustment to retainedearnings and reduced its deferred tax liabilities by $12.6 million with an offsetting increase to the valuation allowance of $12.6 million. As such, the netimpact to retained earnings was zero. This adjustment relates to tax assets that had previously arisen from tax deductions for equity compensation expensesthat were greater than the compensation recognized for financial reporting. During the year ended December 31, 2017, the Company recorded $33.7 millionin 2017 excess tax benefits associated with equity awards within (benefit from) provision for income taxes on the consolidated statement of operations. Forfeitures – The standard provides an accounting policy election to account for forfeitures as they occur. The Company made this accountingpolicy election and the modified retrospective adoption for this component of the standard did not have a material impact on its financial statements.Statements of Cash Flows - Cash flows related to excess tax benefits are no longer separately classified as a financing activity apart from otherincome tax cash flows. The Company adopted this component of the standard on a prospective basis. Earnings Per Share - The Company uses the treasury stock method to compute diluted earnings per share, unless the effect would be anti-dilutive.Under this method, the Company is no longer required to estimate the tax rate and apply it to the77Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)dilutive share calculation for determining the dilutive earnings per share. The Company adopted this component of the standard on a prospective basis.Recently Issued Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers” (ASC 606). The new revenue standard establishes asingle revenue recognition model for recognizing contracts from customers. Under ASC 606, revenue is recognized when a customer obtains control ofpromised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods orservices. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts withcustomers. The new standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reportingperiod.The standard permits the use of either the retrospective or modified retrospective (cumulative effect) transition method. The Company will adopt thenew standard effective January 1, 2018 using the modified retrospective transition method. Under this approach, the cumulative earnings effect of adoptionof ASC 606 applied to all open contracts will be recorded as an adjustment to opening retained earnings as of January 1, 2018.For the Clinical Research segment, the identification of the number of performance obligations implicit within an arrangement is critical to theapplication of ASC 606. Currently, the Company considers investigator fees and reimbursable out-of-pocket costs distinct from the service portion of thearrangements. Investigator fees have historically been netted against the related costs and out-of-pocket costs are recognized as revenue and expense to theextent incurred. With the adoption of ASC 606, the Company’s long-term arrangements currently accounted for using the proportional performance methodwill be considered a single performance obligation which requires the inclusion of investigator fees and out-of-pocket costs in both the contract revenuevalue and in the cost used to measure performance.Upon adoption of ASC 606, total revenue will be presented as one line item in the consolidated statements of operations. Total revenue will nowinclude service revenue, out-of-pocket costs, and investigator fees that were previously recorded net of the associated cost. As a result of the change inpresentation for investigator fees, total revenue and total costs will materially increase.The inclusion of investigator fees and out-of-pocket costs in the measurement of progress under these contracts as part of one performanceobligation may create a timing difference between amounts the Company is entitled to receive in reimbursement for costs incurred and the amount of revenuerecognized related to such costs on individual projects. This represents a change from current accounting treatment. The magnitude of this timing itemcompared to current accounting is dependent on the relative size and progress of the direct service portion of the arrangement compared to the progress of theinvestigator fees and reimbursable out-of-pocket costs relative to their respective forecasted costs over the life of the project. The Company is finalizing itsassessment of the cumulative impact but anticipates a material deferral of revenue to be recorded as a cumulative adjustment upon adoption.The accounting for contracts within the Data Solutions segment and for short-term contracts within the Clinical Research segment is expected toremain materially consistent with the current accounting treatment. In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which revises the accounting related to lessee accounting. Under the new guidance,lessees will be required to recognize a lease liability and a right-of-use asset for all leases with terms greater than 12 months. Leases will be classified as eitherfinance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The provisions of ASU No. 2016-02 areeffective for fiscal years beginning after December 15, 2018 and should be applied through a modified retrospective transition approach for leases existing at,or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. The Company hasestablished an implementation team to assist with the adoption of the new standard. The evaluation and implementation process is ongoing and is expectedto continue through 2018 as the Company performs an analysis of its lease portfolio to identify potential differences from its current accounting policies, andas it reviews the business processes, systems and controls required to support recognition and disclosure under the new standard. The Company expects torecognize substantially all of its leases on the balance sheet by recording a right-to-use asset and a corresponding lease liability. 78Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations: Clarifying the Definition of a business,” which clarifies that whensubstantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiableassets, it should be treated as an acquisition or disposal of an asset. The amendments to ASU No. 2017-01 are effective for fiscal years beginning afterDecember 15, 2017, with early adoption permitted. The adoption of ASU No. 2017-01 is not expected to have a material impact on the Company'sconsolidated financial statements.In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment,” in order tosimplify the subsequent measurement of goodwill by eliminating the Step 2 goodwill impairment test. Under the amendments in this ASU, an entity shouldperform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity will then recognizean impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however the loss recognized should not exceedthe total amount of goodwill allocated to that reporting unit. The amendments to ASU No. 2017-04 are effective for fiscal years beginning after December 15,2019, with early adoption permitted. The adoption of ASU No. 2017-04 is not expected to have a material impact on the Company's consolidated financialstatements.In May 2017, the FASB issued ASU No. 2017-09, “Compensation-Stock Compensation: Scope of Modification Accounting,” which providesguidance about what changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC Topic718, “Stock Compensation.” The amendments to ASU No. 2017-09 are effective for reporting periods beginning after December 15, 2017, with earlyadoption permitted. The adoption of ASU No. 2017-09 is not expected to have a material impact on the Company's consolidated financial statements.In August 2017, the FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for HedgingActivities," in order to simplify certain aspects of hedge accounting and improve disclosures of hedging arrangements. ASU No. 2017-12 eliminates the needto separately measure and report hedge ineffectiveness and generally requires the entire change in fair value of a hedging instrument to be presented in thesame income statement line as the hedged item. Entities must apply the amendments to cash flow and net investment hedge relationships that exist on thedate of adoption using a modified retrospective approach. The presentation and disclosure requirements must be applied prospectively. The amendments toASU No. 2017-12 are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The adoption of ASU No. 2017-12 is notexpected to have a material impact on the Company's consolidated financial statements.In February 2018, the FASB issued ASU No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification ofCertain Tax Effects from Accumulated Other Comprehensive Income." The amendments in this update allow a reclassification from accumulated othercomprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The amendments in this update also requireentities to disclose their accounting policy for releasing income tax effects from accumulated other comprehensive income. The Amendment to ASU No.2018-02 are effective for the reporting period beginning after December 15, 2018, and interim periods therein. Early adoption is permitted. The Company iscurrently assessing the potential impact of ASU No. 2018-02 on the Company's consolidated financial statements.(3) Joint Ventures The Company entered into a joint venture with Takeda Pharmaceutical Company Ltd. during 2017. For further discussion on the joint venture, referto Note 4, Business Combinations.On May 6, 2016, the Company and WuXi AppTec (Shanghai) Co., Ltd., or WuXi, finalized an agreement to dissolve the WuXiPRA joint venture.Under the agreement, the Company sold its 49% portion of the joint venture located in mainland China for $4.0 million, which subsequently became awholly owned subsidiary of WuXi. The portion of the joint venture located in Hong Kong became a wholly owned subsidiary of the Company and wasacquired 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 the equity in income(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 toWuXiPRA to fund the joint venture’s working capital needs. The Company’s interest in WuXiPRA remained at 49% after the capital contribution. TheCompany recorded reductions to the investment balance of $0.7 million79Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(excluding the gain on the sale) and $2.9 million during the years ended December 31, 2016 and 2015, respectively, for the Company's equity in theventure’s net loss for the period, which is recorded in the equity in income (losses) of unconsolidated joint ventures, net of tax in the consolidated statementof operations. The investment was adjusted for the Company's equity in the venture’s net income (loss), cash contributions, distributions, and otheradjustments required by the equity method of accounting. The Company entered into a joint venture agreement with A2 Healthcare Corporation (formerly part of Asklep, Inc.). The joint venture providesresearch and development outsourcing solutions in Japan to the biopharmaceutical and medical device industries. This joint venture is based in Tokyo,Japan and is owned by the Company (49%) and Asklep (51%). On October 17, 2014, the joint venture changed its name from RPS Asklep, Inc. to A2PRACorporation, or A2PRA. The Company recorded changes to the investment balance totaling $0.1 million, $0.1 million, and $0.0 million during the yearsended December 31, 2017, 2016, and 2015, respectively, for the Company’s equity in the venture’s net income (loss) for the period, which is recorded in theequity in income (losses) of unconsolidated joint venture, net of tax in the Company's consolidated statement of operations. The investment will be adjustedfor the Company’s equity in the venture’s net income (loss), cash contributions, distributions, and other adjustments required by the equity method ofaccounting. The investment in A2PRA totaled $0.4 million and $0.3 million at December 31, 2017 and 2016, respectively. In August 2015, the Company and an affiliate of KKR entered into a joint venture. The joint venture was dissolved in December 2015. The purposeof the joint venture included, among other things, the evaluation of investments or acquisitions to enhance the strategic objectives of the Company. Thejoint venture was jointly owned by the Company (11%) and KKR (89%). The Company contributed $20.0 million to the joint venture in August 2015 andreceived $19.5 million in December 2015 when the joint venture was dissolved. The Company recorded the $0.5 million reduction to the investment balancein equity in income (losses) of unconsolidated joint ventures, net of tax in the consolidated statement of operations. The investment in the joint venture wasadjusted for the Company’s equity in the venture’s net income (loss), cash contributions, distributions, and other adjustments required by the equity methodof accounting. (4) Business Combinations Symphony Health Solutions, Inc.On September 6, 2017, the Company acquired all of the outstanding equity interest of Symphony Health, a provider of data and analytics to helpprofessionals understand the full market lifecycle of products offered for sale by companies in the pharmaceutical industry, for $539.4 million in cash andcontingent consideration, which was not capped, in the form of potential earn-out payments based on a multiple of future earnings for the twelve-monthperiods ending December 2017 and December 2018. With this acquisition, the Company expects to enhance its ability to serve customers throughout theclinical research process with technologies that provide data and analytics.The liability associated with the expected payment of the earn-out was preliminarily valued at $108.8 million at the acquisition date. During thefourth quarter of 2017, the Company recorded a measurement period adjustment to increase the fair value of the contingent consideration at the acquisitiondate to $147.5 million based on the Company's finalized assessment of earnings forecasts as of the acquisition date. This measurement period adjustment wasreflected as a corresponding increase to goodwill as of the acquisition date. The fair value of the contingent consideration was determined by using a MonteCarlo simulation that includes significant unobservable inputs such as a risk-adjusted discount rate and projected future earnings over the earn-out periods.As the fair value was based on significant inputs not observed in the market and thus represented a Level 3 measurement.The Company reassesses the fair value of expected contingent consideration and the corresponding liability each reporting period using a MonteCarlo simulation, which is consistent with the initial measurement of the expected liability. Changes in the fair value of the contingent considerationsubsequent to the acquisition date, excluding adjustments that qualify as measurement period adjustments, are recognized in earnings in the period of suchchange. The Company recorded $85.7 million to transaction-related costs in the consolidated statements of operations during the year ended December 31,2017, associated with changes in the fair value of the earn-out. The Company made a preliminary 2017 earn-out payment, totaling $67.8 million, to theformer owners of Symphony Health during the fourth quarter of 2017. As of December 31, 2017, the earn-out liability totaled $165.3 million; $114.7 millionis included in accrued expenses and other current liabilities and $50.6 million is included in other long-term liabilities in the consolidated balancesheet. During February 2018, the Company made80Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)the year-end 2017 earn-out payment, which totaled $114.7 million. The 2018 earn-out payment, which is based on 2018 earnings and is payable in the firstquarter of 2019, could range from $0 to approximately $110.8 million. The acquisition of Symphony Health was accounted for as a business combination and, accordingly, the assets acquired and the liabilities assumedhave been recorded at their respective fair values as of the acquisition date. In connection with the acquisition, the Company recorded approximately $476.0million of goodwill, which was assigned to the Data Solutions segment and is not deductible for income tax purposes. The goodwill is attributable to theworkforce of the acquired business and expected synergies with the Company’s existing operations. The Company incurred $6.4 million in acquisitionrelated costs that are included in transaction-related costs in the consolidated statements of operations. Due to the timing of the acquisition, the valuation of net assets acquired has not been finalized and is expected to be completed by the end of March2018, and in any case, no later than one year from the acquisition date in accordance with GAAP.The Company’s preliminary estimate of the purchase price allocation is as follows (in thousands): Purchase PriceAllocation Weighted AmortizationPeriodCash and cash equivalents $26,297 Accounts receivable and unbilled services 39,132 Other current assets 23,726 Fixed assets 12,340 Customer relationships 190,100 10 yearsDatabase 137,100 3 yearsTradename 2,000 2 yearsAccounts payable and accrued expenses (42,222) Advanced billings (65,968) Deferred tax liabilities (104,869) Other long-term liabilities (6,740) Estimated fair value of net assets acquired 210,896 Purchase price, including contingent consideration and working capital adjustment 686,877 Total goodwill $475,981 The results of operations for Symphony Health are included in the consolidated financial statements of the Company from the date of acquisition.During this period, Symphony Health's service revenues and net income totaled $90.5 million and $6.3 million, respectively.Since the acquisition date, goodwill decreased by $24.5 million. The change is primarily related to a $90.6 million increase in the allocation of thepurchase price to acquired finite-lived intangible assets, offset by a $38.7 million measurement period adjustment to increase the fair value of the contingentconsideration and a $29.8 million adjustment to the acquired income tax balances.81Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The following unaudited pro-forma information assumes the acquisition of Symphony Health occurred as of the beginning of 2016. This pro-formafinancial information is not necessarily indicative of operating results if the acquisition had been completed at the date indicated, nor is it necessarily anindication of future operating results. December 31,(in thousands, except per share amounts)2017 2016Total revenue$2,408,770 $2,011,544Net income attributable to PRA Health Sciences, Inc.104,700 45,836Net income per share: Basic$1.68 $0.75 Diluted$1.59 $0.71The unaudited pro-forma financial information for the year ended December 31, 2017 includes the following non-recurring adjustments:•a $6.4 million increase to transaction-related costs incurred by the Company during the year ended December 31, 2017 attributable to thetransaction, with a corresponding $2.5 million increase to the benefit from income taxes.•a $3.1 million increase to loss on the modification or extinguishment of long-term debt incurred by the Company during the year ended December31, 2017 attributable to the above transaction, with a corresponding $1.2 million increase to the benefit from income taxes.Takeda TransactionsOn June 1, 2017, the Company acquired all of the outstanding shares of Takeda Pharmaceutical Data Services, Ltd., or TDS, from TakedaPharmaceutical Company Ltd., or Takeda, for $0.7 million in cash. The Company recorded approximately $1.0 million of goodwill, which is assigned to theClinical Research segment and is not deductible for income tax purposes. Pro-forma results of operations and a complete purchase price allocation have notbeen presented because the results of this acquisition did not have a material effect on the Company's consolidated financial statements.On June 1, 2017, the Company and Takeda also closed on a joint venture transaction that enables the Company to provide clinical trial delivery andpharmacovigilance services as a strategic partner of Takeda in Japan. The joint venture transaction was effectuated through the creation of a new legal entity,Takeda PRA Development Center KK, or the TDC joint venture. The Company paid $5.4 million for a 50% equity interest in the TDC joint venture, whichrepresents 50% of the fair value of the net assets and workforce that Takeda contributed to the joint venture. The joint venture provides services includingclinical trial monitoring, project management, regulatory strategy and submissions, data management, biostatistics, drug safety reporting, and medicalmonitoring. The Company is required to buy-out Takeda’s 50% interest in the TDC joint venture in two years. The Company also has an early buy-outoption of Takeda’s 50% interest in December 2018, if both parties agree.The Company determined that the TDC joint venture is a VIE in which the Company is the primary beneficiary. Accordingly, the Companyaccounted for the $5.4 million contribution to the TDC joint venture as a business combination and consolidated the VIE in its financial statements with anoncontrolling interest for the 50% portion owned by Takeda. The assets acquired and the liabilities assumed have been recorded at their respectiveestimated fair values as of June 1, 2017. The Company recorded approximately $2.7 million of goodwill, which is assigned to the Clinical Research segmentand is not deductible for income tax purposes. The goodwill is primarily attributable to the assembled workforce. The Company incurred $0.6 million inacquisition related costs that are included in selling, general and administrative expenses in the consolidated statements of operations.82Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The Company’s fair value of the net assets acquired as part of the TDC joint venture transaction at the closing date of the business combination is asfollows (in thousands): Purchase PriceAllocationCash and cash equivalents $8,120Other current assets 1,671Other non-current assets 799Accounts payable and accrued expenses (2,380)Estimated fair value of net assets acquired 8,210PRA purchase price 5,440Fair value of Takeda's noncontrolling interest 5,440Total goodwill $2,670 The Company has not disclosed post-acquisition or pro-forma revenue and earnings attributable to the TDC joint venture as they did not have amaterial effect on the Company’s consolidated financial statements. Parallel 6, Inc. On May 10, 2017, the Company acquired all of the outstanding equity interest of Parallel 6, Inc., or Parallel 6, a developer of technologies forimproving patient enrollment, engagement, and management of clinical trials, for $39.0 million in cash and contingent consideration in the form of apotential earn-out payment of up to $10.0 million. The earn-out payment is contingent upon the achievement of certain external software sales targets duringthe 18-month period following closing. With this acquisition, the Company expects to enhance its ability to serve customers throughout the clinical researchprocess with technologies that provide improved efficiencies by reducing study durations and costs through integrated operational management.The fair value of the earn-out as of the acquisition date was $8.4 million, which was determined by using a Monte Carlo simulation that includessignificant unobservable inputs such as a risk-adjusted discount rate and projected external software sales of Parallel 6 over the earn-out period. As the fairvalue was based on significant inputs not observed in the market and thus represented a Level 3 measurement. During the fourth quarter of 2017, theCompany determined that the external software sales targets likely would not be met; therefore the Company released the $8.4 million contingentconsideration liability, which is recorded within transaction-related costs in the consolidation statements of operations.The acquisition of Parallel 6 was accounted for as a business combination and, accordingly, the assets acquired and the liabilities assumed havebeen recorded at their respective fair values as of the acquisition date. In connection with the acquisition, the Company recorded approximately $32.5million of goodwill, which was assigned to the Clinical Research segment and is not deductible for income tax purposes. The goodwill is attributable to theworkforce of the acquired business and expected synergies with the Company’s existing information technology operations. The Company incurred $1.3million in acquisition related costs that are included in selling, general and administrative expenses in the consolidated statements of operations. 83Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The Company’s purchase price allocation is as follows (in thousands): Purchase PriceAllocation Weighted AmortizationPeriodCash and cash equivalents $132 Accounts receivable and unbilled services 929 Other current assets 26 Software intangible 15,500 5 yearsOther intangibles 920 5 yearsAccounts payable and accrued expenses (780) Advanced billings (692) Other long-term liabilities (1,148) Estimated fair value of net assets acquired 14,887 Purchase price, including contingent consideration 47,339 Total goodwill $32,452 Since the acquisition date, goodwill decreased by $1.2 million, primarily as a result of adjustments to acquired balances. The Company has notdisclosed post-acquisition or pro-forma revenue and earnings attributable to Parallel 6 as they did not have a material effect on the Company’s consolidatedfinancial statements.Acquisition of Nextrials On March 18, 2016, the Company acquired all of the outstanding shares of Nextrials, Inc., or Nextrials, a developer of web-based software whichintegrates electronic health records with clinical trials, for $4.8 million in cash and contingent consideration in the form of potential earn-out payments of upto $3.0 million. Earn-out payments of $2.0 million and $1.0 million were contingent upon the achievement of project milestones and certain externalsoftware sales targets, respectively, during the 30-month period following closing. The Company recognized a liability of approximately $2.3 million as theestimated acquisition date fair value of the earn-out. The fair value was based on significant inputs not observed in the market and thus represented a Level 3measurement. Changes in the fair value of the earn-out subsequent to the acquisition date were recognized in earnings in the period of the change. TheCompany made a payment of $0.4 million during the year ended December 31, 2017 as a result of the achievements of certain project milestones. During thefourth quarter of 2017, the Company determined that the remaining project milestone and external software sales targets likely would not be met; therefore,the Company released the remaining $1.4 million contingent consideration liability, which is recorded within transaction-related costs in the consolidatedstatements of operations. With this acquisition, the Company expects to enhance its ability to serve customers throughout the clinical research process withtechnologies that include improved 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 and the liabilities assumed have beenrecorded at their respective fair values as of the acquisition date. In connection with the acquisition, the Company recorded approximately $4.3 million ofgoodwill, which is not deductible for income tax purposes. The goodwill is attributable to the workforce of the acquired business and expected synergieswith the Company’s existing information technology operations.84Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The Company’s purchase price allocation is as follows (in thousands): PurchasePriceAllocation WeightedAmortizationPeriodCash and cash equivalents$94 Accounts receivable and unbilled services211 Other current assets96 Property, plant and equipment111 Software intangible5,574 5 yearsAccounts payable and accrued expenses(1,585) Other long-term liabilities(1,663) Estimated fair value of net assets acquired2,838 Purchase price, including contingent consideration7,145 Total goodwill$4,307 Since the acquisition date, goodwill increased by $2.0 million, primarily as a result of adjustments to the acquired income tax balances. Pro formainformation is not provided as the acquisition did not have a material effect on the Company’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 joint venture was dissolved on May 6,2016. The acquisition was accounted for as a business combination and, accordingly, the assets acquired and the liabilities assumed were recorded at theirrespective fair values as of the acquisition date. In connection with the acquisition, the Company recorded approximately $0.6 million of goodwill, which isattributable to the workforce of the acquired business. Pro forma information is not provided as the acquisition did not have a material effect on theCompany’s consolidated results.Acquisition of VHS On June 8, 2015, the Company purchased the assets of Value Health Solutions Inc., or VHS, a software development firm, for $0.5 million in cashand 47,598 unregistered shares of the Company’s common stock with a fair market value of $1.6 million. In June 2017 an additional 4,998 shares of theCompany's common stock with a fair market value of $0.4 million were issued to VHS in accordance with the asset purchase agreement. The asset purchaseagreement also includes contingent consideration in the form of potential earn-out payments of up to $16.0 million. Earn-out payments of $1.0 million and$15.0 million are contingent upon the achievement of project milestones and certain external software sales targets, respectively, during the 48-month periodfollowing closing. The Company recognized a liability of approximately $1.0 million as the estimated acquisition date fair value of the earn-out; this amountis included in the accrued expenses and other current liabilities in the consolidated balance sheet as of December 31, 2016. The fair value of the contingentconsideration was based on significant inputs not observed in the market and thus represented a Level 3 measurement. Changes in the fair value of thecontingent consideration subsequent to the acquisition date were recognized in earnings in the period of the change. During the year ended December 31,2017, the Company released the remaining $1.0 million contingent consideration liability, which is recorded within transaction-related costs in theconsolidation statements of operations as the earn-out targets were not met. 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 study durations and costs throughintegrated operational management. The acquisition of VHS was accounted for as a business combination and, accordingly, the assets acquired and the liabilities assumed have beenrecorded at their respective fair values as of the acquisition date. In connection with the acquisition, the Company recorded approximately $1.0 million ofgoodwill, which is deductible for income tax purposes. The goodwill is attributable to the workforce of the acquired business and expected synergies with theCompany’s existing information technology operations. 85Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The Company’s purchase price allocation is as follows (in thousands): PurchasePriceAllocation WeightedAmortizationPeriodSoftware intangible$2,500 5 yearsProperty, plant and equipment43 Estimated fair value of net assets acquired2,543 Purchase price, including contingent consideration3,499 Total goodwill$956 Pro forma information is not provided as the acquisition did not have a material effect on the Company’s consolidated results. (5) Accounts Receivable and Unbilled Services Accounts receivable and unbilled services include service revenue, reimbursement revenue, and amounts associated with work performed byinvestigators. Accounts receivable and unbilled services were (in thousands): December 31, 2017 2016Accounts receivable$457,676 $284,647Unbilled services170,760 155,609Total accounts receivable and unbilled services628,436 440,256Less allowance for doubtful accounts(1,433) (1,203)Total accounts receivable and unbilled services, net$627,003 $439,053 A rollforward of the allowance for doubtful accounts is as follows (in thousands): Years Ended December 31, 2017 2016 2015Beginning balance$1,203 $2,641 $1,819Charged (credited) to income from operations255 (652) 443Write-offs, recoveries and the effects of foreign currency exchange(25) (786) 379Ending balance$1,433 $1,203 $2,641 (6) Fixed Assets The carrying amount of fixed assets is as follows (in thousands): December 31, 2017 2016Leasehold improvements$49,548 $25,083Computer hardware and software139,861 92,095Furniture and equipment44,325 33,751Total fixed assets233,734 150,929Accumulated depreciation(90,664) (63,352)Total fixed assets, net$143,070 $87,577 All fixed assets are included as collateral for the payment and performance in full of the term loans pledged by the Company and its subsidiaries. 86Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Depreciation expense was $29.0 million, $24.1 million, and $21.2 million for the years ended December 31, 2017, 2016 and 2015, respectively. (7) Goodwill and Intangible Assets Goodwill The changes in the carrying amount of goodwill are as follows (in thousands): Clinical Research Data Solutions ConsolidatedBalance at December 31, 2015$1,014,798 $— $1,014,798Acquisition of Nextrials4,307 — 4,307Acquisition of the WuXiPRA joint venture’s Hong Kong operations570 — 570Currency translation(47,695) — (47,695)Balance at December 31, 2016971,980 — 971,980Acquisition of Symphony Health— 475,981 475,981Acquisition of Parallel 632,452 — 32,452Acquisition of TDC joint venture2,670 — 2,670Acquisition of TDS966 — 966Currency translation28,375 — 28,375Balance at December 31, 2017$1,036,443 $475,981 $1,512,424 There are no accumulated impairment charges as of December 31, 2017 and 2016. Intangible Assets Intangible assets consist of the following (in thousands): December 31, 2017 December 31, 2016 Gross Amount AccumulatedAmortization Net Amount Gross Amount AccumulatedAmortization Net AmountCustomer relationships$565,638 $(72,133) $493,505 $360,328 $(44,886) $315,442Customer backlog123,746 (120,583) 3,163 119,223 (108,847) 10,376Trade names (finite-lived)28,558 (9,265) 19,293 25,740 (6,544) 19,196Patient list and other intangibles44,474 (24,226) 20,248 28,974 (18,442) 10,532Database137,100 (7,544) 129,556 — — —Non-competition agreements2,767 (2,706) 61 2,737 (2,317) 420Total finite-lived intangibleassets902,283 (236,457) 665,826 537,002 (181,036) 355,966 Trade names (indefinite-lived)118,010 — 118,010 118,010 — 118,010Total intangible assets$1,020,293 $(236,457) $783,836 $655,012 $(181,036) $473,976 The Company conducts its annual impairment test of indefinite‑lived intangibles during the fourth quarter of the fiscal year. For the periods endedDecember 31, 2017, 2016 and 2015, the Company concluded that the fair value of indefinite‑lived intangibles exceeded the carrying value and, therefore, noimpairment exists. Amortization expense was $49.2 million, $45.4 million and $56.7 million for the years ended December 31, 2017, 2016 and 2015,respectively. 87Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Estimated amortization expense related to finite‑lived intangible assets for the next five years and thereafter is as follows (in thousands): 2018$71,773201969,130202069,502202164,380202249,9802023 and thereafter341,061Total$665,826 (8) Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following (in thousands): December 31, 2017 2016Compensation, including bonuses, fringe benefits and payroll taxes$125,658 $86,160Acquisition-related contingent considerations114,692 1,735Accrued data costs15,669 —Other44,591 32,078Interest3,265 3,616Total accrued expenses and other current liabilities$303,875 $123,589(9) Revolving Credit Facilities and Long‑Term Debt Long‑term debt consists of the following (in thousands): December 31, 2017 2016Term loans, first lien$1,140,927 $625,000Senior notes— 91,441Accounts receivable financing agreement120,000 120,000Total debt1,260,927 836,441Less current portion of long-term debt(28,789) (31,250)Total long-term debt1,232,138 805,191Less debt issuance costs and discount(6,741) (8,139)Total long-term debt, net$1,225,397 $797,052 Principal payments on long‑term debt are due as follows (in thousands):Current maturities of long-term debt: 2018$28,7892019148,789202028,78920211,054,560Total$1,260,927 88Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)2016 Credit Facilities On December 6, 2016, the Company through its wholly-owned subsidiary, Pharmaceutical Research Associates, Inc., entered into a credit agreementproviding for senior secured credit facilities, or the 2016 Credit Facilities, totaling $750.0 million. The 2016 Credit Facilities were comprised of a $625.0million first lien term loan due 2021, or the 2016 First Lien Term Loan, and a five-year $125.0 million revolving line of credit, or the 2016 Revolver. The proceeds from the 2016 Credit Facilities were used to repay the then outstanding 2013 First Lien Term Loan (defined below). In accordancewith the guidance in ASC 470‑50, “Debt—Modifications and Extinguishments,” the debt repayment was accounted for as a partial debt extinguishment. Therepayment resulted in a $16.7 million loss on extinguishment of debt, consisting of $15.8 million write-off of unamortized debt issuance costs and $0.9million of fees associated with the transaction, which is included in loss on modification or extinguishment of debt in the consolidated statements ofoperations for the year ended December 31, 2016.On September 6, 2017, the Company borrowed $550.0 million, or the Incremental Borrowing, pursuant to an incremental amendment to the creditagreement governing the 2016 Credit Facilities. The incremental borrowing provisions of the credit agreement allow for, among other things, additionalborrowings in the event of a material acquisition by the Company. The proceeds of the Incremental Borrowing were primarily used to fund the acquisition ofSymphony Health. In accordance with the guidance in FASB’s ASC 470-50, the Incremental Borrowing was accounted for as a debt modification. TheIncremental Borrowing resulted in a $3.1 million loss on modification of debt, which consists of fees associated with the transaction for the year endedDecember 31, 2017.On December 28, 2017, the Company amended the credit agreement governing the 2016 Credit Facilities, or the 2017 Refinancing, to refinance the2016 First Lien Term Loan which reduced the interest rate margin and amended the payment schedule applicable to the 2016 First Lien Term Loan. The 2017Refinancing also increased the Company's borrowing capacity under the 2016 Revolver from $125.0 million to $225.0 million and modified the definitionof permitted investments and refreshed the capacity for incremental credit facilities under the Credit Agreement. In accordance with the guidance in ASC470-50, the 2017 Refinancing was accounted for as a debt modification. As a result of the debt modification, the Company recognized a loss of modificationof debt totaling $0.6 million, which was recorded during the year ended December 31, 2017. As collateral for borrowings under the 2016 Credit Facilities, the Company granted a pledge on primarily all of its assets, and the stock ofwholly‑owned U.S. restricted subsidiaries. The Company is also subject to certain financial covenants, which require the Company to maintain certaindebt‑to‑EBITDA and interest expense-to-EBITDA ratios. The 2016 Credit Facilities also contain covenants that, among other things, restrict the Company’sability to create liens, make investments and acquisitions, incur or guarantee additional indebtedness, enter into mergers or consolidations and otherfundamental changes, conduct sales and other dispositions of property or assets, enter into sale-leaseback transactions or hedge agreements, prepaysubordinated debt, pay dividends or make other payments in respect of capital stock, change the line of business, enter into transactions with affiliates, enterinto burdensome agreements with negative pledge clauses, and make subsidiary distributions. After giving effect to the applicable restrictions on thepayment of dividends under the 2016 Credit Facilities, subject to compliance with applicable law, as of December 31, 2017 and December 31, 2016, allamounts in retained earnings were free of restriction and were available for the payment of dividends. The Company does not expect to pay dividends in theforeseeable future. The Company does not expect these covenants to restrict its liquidity, financial condition or access to capital resources in the foreseeablefuture. The 2016 Credit Facilities also contains customary representations, warranties, affirmative covenants, and events of default. 2016 First Lien Term Loan The 2016 First Lien Term Loan, including the Incremental Borrowing and as modified by the 2017 Refinancing, is a floating rate term loan withscheduled, fixed quarterly principal payments of $7.2 million to be made quarterly until September 30, 2021, with the remaining $1,033.0 million principalpayment due at December 6, 2021. The variable interest rate is a rate equal to the London Interbank Offered Rate, or LIBOR, or the adjusted base rate, or ABR, at the election of theCompany, plus a margin based on the ratio of total indebtedness to EBITDA. The margin ranges from 1.00% to 2.00%, in the case of LIBOR loans, and 0.00%to 1.00%, in the case of ABR loans. The Company has the option of 1, 2, 3 or 6 month base interest rates. As of December 31, 2017 and 2016, the weightedaverage interest rate on the first lien term loan was 3.45% and 2.70%, respectively. There are no prepayment penalties.89Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2016 Revolver The Company’s 2016 Revolver, as modified by the 2017 Refinancing, provides for $225.0 million of potential borrowings and expires on December6, 2021. The interest rate on the 2016 Revolver is based on the LIBOR with a 0% LIBOR floor or ABR, at the election of the Company, plus an applicablemargin based on the leverage ratio of the Company. The Company, at its discretion, may elect interest periods of 1, 2, 3 or 6 months. The Company isrequired to pay to the lenders a commitment fee for unused commitments of 0.2% to 0.4% based on the Company’s debt-to-EBITDA ratio. At December 31,2017, the Company had $91.5 million in outstanding borrowings under the 2016 Revolver at a weighted average interest rate of 3.56%; there were nooutstanding borrowings under the 2016 Revolver at December 31, 2016. In the next twelve months, the Company has the ability and intends to repay theoutstanding line of credit obligations; therefore, borrowings under the line of credit have been classified as a current liability. In addition, at December 31,2017 and 2016, the Company had $4.9 million and $7.0 million, respectively, in letters of credit outstanding, which are secured by the 2016 Revolver. 2013 Credit Facilities In September 2013, the Company entered into senior secured credit facilities, or the 2013 Credit Facilities, for an aggregate principal amount of$825.0 million of first lien term loan, or 2013 First Lien Term Loan, and a $125.0 million revolving line of credit, or 2013 Revolver. In September 2013, theCompany also issued $375.0 million in senior notes, or Senior Notes. The proceeds from the 2013 Credit Facilities and the Senior Notes issuances were usedin conjunction with the acquisition by KKR, to fund the acquisition of RPS, repay existing debt, and pay for fees and expenses related to the aforementionedevents. As collateral for borrowings under the 2013 Credit Facilities, the Company granted a pledge on primarily all of its assets, and the stock of designatedsubsidiaries. The Company was subject to certain financial covenants, which required the Company to maintain certain debt‑to‑EBITDA ratios. The 2013Credit Facilities also contained covenants that, among other things, restricted the Company’s ability to incur additional indebtedness, grant liens, makeinvestments, loans, guarantees or advances, 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 leaseback transactions or engage in certaintransactions with affiliates and otherwise restrict certain corporate activities. 2013 First Lien Term Loan The 2013 First Lien Term Loan was a floating rate term loan with scheduled, fixed quarterly principal payments of 0.25% of the original principalbalance through September 2020. The voluntary prepayments made during 2014, using proceeds from the IPO, fully satisfied all required quarterly principalpayments through maturity. The variable interest rate was based on the LIBOR, with a 1.0% LIBOR floor, plus an applicable margin of 3.5%. The applicablemargin was dependent upon the Company’s debt to consolidated EBITDA ratio as defined in the 2013 Credit Facilities. The 2013 Credit Facilities requiredthe Company to prepay outstanding term loans, subject to certain exceptions, with 50% of the Company's annual Excess Cash Flow, which percentage wouldbe reduced to 25% if PRA achieves a debt‑to‑EBITDA ratio of less than or equal to 3.75 to 1.0, but greater than 3.25 to 1.0 on the date of prepayment for themost recent test period and no prepayment would be required if PRA achieves a debt‑to‑EBITDA ratio of less than or equal to 3.25 to 1.0 on the date ofprepayment for the most recent test period, commencing in 2014. The Company had the option of 1, 2, 3 or 6 month base interest rates. There were noprepayment penalties. 2013 Revolver The Company’s 2013 Revolver provided for $125.0 million of potential borrowings and would have expired on September 23, 2018. The interestrate on the 2013 Revolver was based on the LIBOR plus an applicable rate, based on the leverage ratio of the Company. The Company, at its discretion, mayhave chosen interest periods of 1, 2, 3 or 6 months. In addition, the Company was required to pay to the lenders a commitment fee of 0.5% quarterly forunused commitments on the revolver, subject to a step‑down to 0.375% based upon achievement of a certain leverage ratio.90Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Senior Notes In September 2013, the Company issued $375 million of Senior Notes at a rate of 9.50% per year payable on April 1, and October 1 of each year,beginning April 1, 2014. The Senior Notes did not require principal payments and were set to mature on October 1, 2023. The Company could redeem the Senior Notes, in whole or in part, at any time prior to October 1, 2018 subject to a prepayment premium calculatedin accordance with the Senior Notes indenture. From October 1, 2018 through October 1, 2019, the prepayment premium was 4.75% declining ratably to 0%beginning on October 1, 2021. In the event of a change in control, the Company could have been required to offer to repurchase the Senior Notes at a priceequal to the outstanding principal balance and a 1% prepayment premium plus accrued and unpaid interest. The Senior Notes included covenants which place limitations on incurring additional indebtedness, selling certain assets, and making certaindistributions.On March 17, 2016, the Company repurchased $133.6 million aggregate principal amount of its Senior Notes as part of a cash tender offer. Inaccordance with the guidance in ASC 470-50, the debt repurchase was accounted for as a partial debt extinguishment. The repurchase resulted in a $21.5million loss on extinguishment of debt, which consists of a $17.4 million early tender premium, a $3.7 million write-off of unamortized debt issuance costand $0.4 million of fees associated with the transaction which is included in loss on modification or extinguishment of debt in the consolidated statement ofoperations during the year ended December 31, 2016.On December 29, 2017, the Company redeemed the remaining $91.4 million aggregate principal amount of its Senior Notes. In accordance with theguidance in ASC 470-50, the debt redemption was accounted for as a debt extinguishment. The redemption resulted in an $11.3 million loss onextinguishment of debt, which consisted of a $9.2 million early payment premium and $2.1 million write-off of unamortized debt issuance cost which isincluded in loss on modification or extinguishment of debt in the consolidated statement of operations during the year ended December 31, 2017. 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 ofDecember 31, 2017. The initial borrowings in 2016 were used to repay amounts outstanding on the Company’s revolving credit facility that were used tofund the cash tender offer for the Senior Notes. Loans under the accounts receivable financing agreement accrue interest at either a reserve-adjusted LIBOR or a base rate, plus 1.6%. The Companymay prepay loans upon one business day prior notice and may terminate the accounts receivable financing agreement with 15 days’ prior notice. As ofDecember 31, 2017 and 2016, the weighted average interest rate on the accounts receivable financing agreement was 2.96% and 2.31%, respectively. The accounts receivable financing agreement contains various customary representations and warranties and covenants, and default provisionswhich provide for the termination and acceleration of the commitments and loans under the agreement in circumstances including, but not limited to, failureto make payments when due, breach of representations, warranties or covenants, certain insolvency events or failure to maintain the security interest in thetrade receivables, and defaults under other material indebtedness. The accounts receivable financing agreement terminates on March 22, 2019, unless terminated earlier pursuant to its terms. At December 31, 2017,there was $20.0 million of remaining capacity available under the accounts receivable financing agreement. Fair Value of Debt The estimated fair value of the Company’s debt and outstanding borrowings under its revolving credit facilities was $1,352.4 million and $844.2million at December 31, 2017 and 2016, respectively. The fair value of the term loans, borrowings under credit facilities, and accounts receivable financingagreement which totaled $1,352.4 million and $678.7 million at December 31, 2017 and 2016, respectively, was determined based on Level 3 inputs, whichis primarily based on rates at which the debt is traded among financial institutions adjusted for the Company’s credit standing. The fair value of the SeniorNotes91Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)totaled $99.2 million at December 31, 2016, was determined based on Level 2 inputs using the market approach, which is primarily based on rates at whichthe debt is traded among financial institutions. (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. The Company is authorized to issue up toone 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 Directors approved the formation of the 2013Stock Incentive Plan for Key Employees of Pinnacle Holdco Parent, Inc. and its subsidiaries, or the Plan. The Plan allowed for the issuance of stock optionsand other stock-based awards as permitted by applicable laws. The number of shares available for grant under the Plan is 12.5% of the outstanding shares atclosing on a fully diluted basis. The Company rolled over 2,052,909 stock options under the Plan. The fair value of the options that were rolled over equaledthe fair value of the options in the Predecessor Company and, therefore, there was no additional stock-based compensation expense recorded. All stock options granted under the Plan are subject to transfer restrictions of the stock option’s underlying shares once vested and exercised. Thislack of marketability was included as a discount, calculated using the Finnerty Model, when determining the grant date value of these options. Inconjunction with the secondary offerings during 2017 and 2016, the transfer restrictions on a portion of such shares issuable upon exercise of vested optionsgranted under the Plan were released. The release of the transfer restrictions is considered a modification under ASC 718, “Stock Compensation.” As a resultof these modifications, the Company incurred approximately $3.7 million and $10.1 million of incremental compensation expense associated with service-based options during the years ended December 31, 2017 and 2016, respectively, which is included in transaction-related costs in the accompanyingconsolidated statements of operations. On November 23, 2014 and in connection with the Company’s IPO, the Board of Directors approved the formation of the 2014 Omnibus Plan forKey Employees, or the 2014 Omnibus Plan. The 2014 Omnibus Plan allows for the issuance of stock options, stock appreciation rights, restricted shares andrestricted stock units, other stock-based awards, and performance compensation awards as permitted by applicable laws. The number of shares available forgrant under the 2014 Omnibus Plan is 3,200,000. Generally, the Company grants stock options with exercise prices greater than or equal to the fair market value of the Company’s common stock onthe date of grant. The stock option compensation cost calculated under the fair value approach is recognized on a pro-rata basis over the vesting period of thestock options (usually five years under the Plan and four years under the 2014 Omnibus Plan). Most stock option grants are subject to graded vesting asservices are rendered and have a contractual life of ten years. The Board and the Compensation Committee have the discretion to determine different vestingschedules. In December 2013, the Company granted certain employees market-based options under the Plan that vest only upon the achievement of a specifiedinternal rate of return from a liquidity event (“2.0x Options” and “2.5x Options”). At the time of grant, no compensation expense was recorded as the 2.0xOptions and 2.5x Options vest upon a liquidity event, which is not considered probable until the date it occurs. On January 20, 2016, the CompensationCommittee of the Board of Directors adopted a resolution to adjust the vesting criteria for all 2.0x Options granted and still outstanding on such date. Underthe revised vesting criteria, the 2.0x Options vest upon the announcement of a secondary offering. The Company did not record compensation expense on theJanuary 20, 2016 modification date as the Company determined the modification resulted in Type IV Improbable-to-Improbable modification as thesecondary offering was deemed improbable since the event was outside of the Company’s control and could not be considered probable until the date itoccurred. On March 2, 2016, the Company announced a secondary offering of shares by KKR and certain management stockholders, and it became probablethat the 2.0x Options would vest. Due to the modification of the terms of the 2.0x Options, the Company calculated the fair value of these options using theBlack-Scholes option pricing model with the following assumptions: expected life of 2.92 years; risk-free rate of 1.04%; volatility of 45%; dividend yield of0%; 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 the modifications associated with the transfer92Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)restrictions releases noted above, the Company incurred approximately $0.8 million and $25.7 million of incremental compensation expense associated withthe 2.0x Options during the years ended December 31, 2017 and 2016, respectively, which is included in transaction-related costs in the accompanyingconsolidated statements of operations. On November 16, 2016, the 2.5x Options vested upon the achievement of a specified internal rate of return and multiple on invested capital inconnection with the closing of a secondary offering of shares by KKR. In total, 809,755 2.5x Options held by current employees vested. The Companyincurred approximately $0.8 million and $6.4 million of incremental compensation expense associated with the vesting and transfer restriction release of the2.5x Options during the years ended December 31, 2017 and 2016, respectively, which is included in transaction-related costs in the accompanyingconsolidated statements of operations. As of December 31, 2017, there was $59.4 million of unrecognized compensation cost related to unvested stock-based compensation, which isexpected to be recognized over a weighted average period of 2 years. The total fair value of options vested during the years ended December 31, 2017, 2016and 2015 was $5.2 million, $27.3 million and $3.1 million, respectively. Aggregated information regarding the Company’s option plans is summarized below: Options Wtd. AverageExercise Price Wtd. AverageRemainingContractual Life Intrinsic Value(in millions)Outstanding at December 31, 20165,507,347 $15.38 6.7 $218.9Granted1,921,000 75.21 Exercised (1)(2,094,886) 10.19 Expired/forfeited(87,836) 28.47 Outstanding at December 31, 20175,245,625 $39.14 7.6 $272.4Exercisable at December 31, 20172,247,920 $14.12 6.0 $173.0(1) During the year ended December 31, 2017, of the 2,094,886 shares exercised, 190,683 were withheld from the option holders to cover the exercise price of the options being exercised.The weighted average fair value of service-based options granted was $25.24, $15.57 and $10.87 during the years ended December 31, 2017, 2016 and 2015,respectively. Selected information regarding the Company’s stock options as of December 31, 2017 is as follows: Options Outstanding Options ExercisableExercise Price Number ofOptions Wtd AverageRemaining Life(in Years) Wtd. AverageExercise Price Number ofOptions Wtd. AverageRemaining Life(in Years) Wtd. AverageExercise Price$2.94 27,304 5.0 $2.94 27,304 5.0 $2.94$11.73 - 16.42 2,441,121 5.9 $11.89 1,971,291 5.9 $11.82$25.35 - 74.13 1,058,700 8.1 $42.93 249,325 7.4 $33.51$75.01 - 83.37 1,718,500 9.7 $76.08 — — $—The Company recorded a receivable of $2.7 million from the Company's brokerage services provider associated with certain stock option exercises,which was included in the "Prepaid expenses and other current assets" line item on the accompanying consolidated balance sheets as of December 31, 2017.The full amount was received in January 2018. 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 employeesvest 100% on the third anniversary of the date of grant. RSAs/RSUs granted to the Company's non-employee directors vest 50% on the first anniversary of thedate of grant and 50% on the second anniversary of the date of grant. 93Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Activity related to the Company’s RSAs/RSUs in 2017 is as follows: Awards Wtd. AverageGrant-DateFair Value IntrinsicValue(millions)Unvested at December 31, 2016188,590 $32.63 $10.4Granted140,044 64.18 Expired/Forfeited(12,000) 32.81 Vested(7,096) 38.80 Unvested at December 31, 2017309,538 $46.76 $28.2 Stock-based compensation expense related to employee stock options and RSAs/RSUs is summarized below (in thousands): Years Ended December 31, 2017 2016 2015Direct costs$3,552 $1,813 $1,218Selling, general and administrative9,064 5,254 4,058Transaction-related costs5,294 42,166 —Total stock-based compensation expense$17,910 $49,233 $5,276 Employee Stock Purchase Plan In April 2017, the Board of Directors approved the PRA Health Sciences, Inc. 2017 Employee Stock Purchase Plan, or ESPP, which was approved bythe Company’s shareholders on June 1, 2017. The ESPP allows eligible employees to authorize payroll deductions of up to 15% of their base salary or wagesto be applied toward the purchase of shares of the Company’s common stock on the last trading day of the offering period. Participating employees willpurchase shares of the Company's common stock at a discount of up to 15% on the lesser of the closing price of the Company's common stock on theNASDAQ Global Select Market (i) on the first trading day of the offering period or (ii) the last day of any offering period. The aggregate number of shares ofthe Company’s common stock that may be issued under the ESPP may not exceed three million shares and no one employee may purchase any shares underthe ESPP having a collective fair market value greater than $25,000 in any one calendar year. Offering periods under the ESPP will generally be in six monthincrements, commencing on January 1 and July 1 of each calendar year with the compensation committee having the right to establish different offeringperiods. The Company's first offering period will commence on January 1, 2018.(12) Income Taxes The components of income before income taxes and equity in income (losses) of unconsolidated joint ventures are as follows (in thousands): Years Ended December 31, 2017 2016 2015Domestic$(52,083) $(61,226) $(23,400)Foreign126,630 155,120 138,565 $74,547 $93,894 $115,16594Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The components of the (benefit from) provision for income taxes were as follows (in thousands): Years Ended December 31, 2017 2016 2015Current: Federal$30,084 $151 $1,132State2,607 1,842 1,507Foreign30,601 36,970 30,584Total current income tax expense63,292 38,963 33,223Deferred: Federal(70,041) (2,230) (1,349)State(1,203) (451) 1,564Foreign(4,671) (7,788) (3,434)Total deferred income tax benefit(75,915) (10,469) (3,219)Total income tax expense (benefit)$(12,623) $28,494 $30,004 Income taxes computed at the statutory U.S. federal income tax rate of 35.0% are reconciled to the benefit from income taxes as follows: Years Ended December 31, 2017 2016 2015Statutory federal income tax rate35.0 % 35.0 % 35.0 %Federal tax rate change(56.0)% — % — %State income taxes, net of federal benefit(5.5)% 0.3 % 2.0 %Tax on foreign earnings: Foreign rate differential(20.3)% (17.7)% (13.6)%Foreign earnings taxed in the U.S.60.7 % 17.5 % 7.3 %Foreign dividends5.2 % — % — %Non-U.S. research and development credits(3.3)% (3.9)% (4.4)%Stock-based compensation(39.9)% 1.9 % 0.2 %Nondeductible contingent consideration35.4 % — % — %Valuation allowance(28.0)% — % — %Change in liability for uncertain tax positions(3.2)% — % (0.6)%Nondeductible expenses2.2 % 0.1 % 0.3 %Other0.8 % (2.9)% (0.1)%Effective income tax rate(16.9)% 30.3 % 26.1 %95Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Components of the deferred tax assets and liabilities were as follows (in thousands): December 31, 2017 2016Net operating loss carryforwards$48,603 $29,470Accruals and reserves15,943 12,986Equity based compensation7,447 17,392Prepaid expenses and other13,492 25,232Deferred and unbilled revenue24,937 25,718Tax credits15,111 5,295 125,533 116,093Valuation allowance(25,226) (21,689)Total deferred tax assets (net of valuation allowance)100,307 94,404Identified intangibles(190,115) (148,576)Depreciable, amortizable and other property(13,434) (12,963)Deferred tax liabilities(203,549) (161,539)Net deferred tax liability$(103,242) $(67,135)Long-term deferred tax asset$8,939 $6,568Long-term deferred tax liability$(112,181) $(73,703) The Company’s foreign subsidiaries are taxed separately in their respective jurisdictions. As of December 31, 2017, the Company has cumulativeforeign net operating loss carryforwards of approximately $7.4 million. In addition, the Company has federal net operating loss carryforwards ofapproximately $165.6 million and state net operating loss carryforwards of approximately $506.8 million. The carryforward periods for the Company’s net operating losses vary from five years to an indefinite number of years depending on the jurisdiction.The Company’s ability to offset future taxable income with net operating loss carryforwards may be limited in certain instances, including changes inownership. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal RevenueCode. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, thetransition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemedrepatriation of cumulative foreign earnings as of December 31, 2017. The Company has calculated our best estimate of the impact of the Act in our year endincome tax provision in accordance with our understanding of the Act and guidance under SAB 118 available as of the date of this filing and as a result hasrecorded $0.2 million as additional income tax expense in the fourth quarter of 2017, the period in which the legislation was enacted. The provisionalamount related to the remeasurement of certain deferred tax assets, deferred tax liabilities, and U.S. uncertain tax positions, based on the rates at which theyare expected to reverse in the future, was a benefit of $41.7 million. The provisional amount related to the one-time transition tax on the mandatory deemedrepatriation of foreign earnings was $77.6 million based on cumulative foreign earnings of $392.5 million. The Company also recorded a provisional taxbenefit of $35.7 million related to the utilization of foreign tax credits against the one-time transition tax. In addition, the Company has recorded a valuationallowance against an estimated $12.8 million of excess foreign tax credits related to the transition tax inclusion. The Company is continuing to analyze theoverall impact of the transition tax inclusion, including its foreign tax credit limitation position and will update the provisional estimate as it completes itsanalysis during the measurement period. Due to the complexity of the new law, the Company is still in the process of investigating the related accountingimplications. Specifically, for the Global Intangible Low Tax Income (“GILTI”) tax the Company intends to make an accounting policy decision aroundwhether to account for GILTI as a period cost in the relevant period, or to record deferred taxes related to the basis in the Company’s foreign subsidiaries onceadditional guidance is available for assessment.The Company also has federal and state income tax credit carryforwards available to potentially offset future federal and state income tax of $12.8million and $1.9 million, respectively. The federal credits expiring in ten years. The state credits begin expiring in 2022. The Company has provided a fullvaluation allowance against the benefits of these credits. 96Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)In determining the extent to which a valuation allowance for deferred tax assets is required, the Company evaluates all available evidence includingprojections of future taxable income, carry back opportunities, reversal of certain deferred tax liabilities, and other tax‑planning strategies. The valuationallowance at December 31, 2017 relates to the U.S. foreign tax credit carryforwards, certain foreign net operating losses, state net operating losses and statetax credit carryforwards. As of December 31, 2017, the Company has a U.S. net federal deferred tax liability. The Company has concluded that it no longerrequires a valuation allowance that existed at the beginning of the year on its net federal deferred tax assets. As such, the valuation allowance of $21.2million has been released during the year ended December 31, 2017.A reconciliation of the beginning and ending amount of gross unrecognized income tax benefits is presented below (in thousands): Years Ended December 31, 2017 2016 2015Beginning balance$12,432 $11,729 $16,207Additions based on tax positions related to current year1,641 1,196 1,333Additions for income tax positions of prior years400 542 95Impact of changes in exchange rates427 (127) (594)Impact of change in federal tax rate(3,536) — —Settlements with tax authorities(108) (559) —Reductions for income tax positions for prior years(3,174) (349) (4,308)Reductions due to lapse of applicable statute of limitations(171) — (1,004)Ending balance$7,911 $12,432 $11,729 As of December 31, 2017, 2016, and 2015, the total gross unrecognized tax benefits were $7.9 million, $12.4 million, and $11.7 million,respectively. As of December 31, 2017, the total amount of gross unrecognized tax benefits which, if recognized, would impact the Company’s effective taxrate is $7.9 million. The Company anticipates changes in total unrecognized tax benefits due to the expiration of statute of limitations within the next12 months and an income tax audit 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 be recognized as a result is $0.5 million asof the balance sheet date. The Company’s policy for recording interest and penalties associated with uncertain tax positions is to record such items as a component of incometax expense. The Company recorded a decrease of $0.8 million, an increase of $0.1 million, and a decrease of $0.1 million during the years endedDecember 31, 2017, 2016 and 2015, respectively. As of December 31, 2017, the Company has a total of $1.6 million recognized on uncertain tax positions.To the extent interest and penalties are not incurred with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction inincome tax expense. The Company has analyzed filing positions in all of the significant federal, state and foreign jurisdictions where the Company is required to fileincome tax returns. The only periods subject to examination by the major tax jurisdictions where the Company does business are the 2009 through 2016 taxyears. As of December 31, 2017, there are no untaxed undistributed earnings of its foreign subsidiaries. This is due to the U.S. Tax Cuts and Jobs Actenacted December 22, 2017 that requires all untaxed foreign earnings to be currently taxed in the 2017 U.S. federal income tax return. With respect to thepreviously taxed income, as of December 31, 2017, an asset of $1.0 million was recorded for the effect of repatriating a portion of those foreign earnings.Aside from the portion expected to be actually repatriated in future years the Company has not provided for U.S. federal and foreign withholding taxes onthose previously taxed earnings of its foreign subsidiaries. The Company is in the process of evaluating the impact of the new U.S. tax law on its permanentreinvestment assertion. No additional U.S. federal income taxes or foreign withholding taxes have been provided on accumulated earnings of foreignsubsidiaries deemed to have been repatriated as part of the one-time transition tax. The Company's evaluation of the impact of the new U.S. tax law on itspermanent reinvestment assertion is expected to be completed within the one-year measurement period as allowed by SAB 118.97Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)A rollforward of the deferred tax asset valuation allowance accounts is as follows (in thousands): Years Ended December 31, 2017 2016 2015Beginning balance$21,689 $23,205 $16,142Additions - excess benefit offset to NOL change12,623 — —Additions - purchase accounting219 — —Additions - other comprehensive income— — 3,892Additions - charged to expense12,863 3,421 3,770Additions - U.S. federal tax rate change1,330 — —Deductions - charged to expense (including translation adjustments)(23,498) (4,937) (599)Ending balance$25,226 $21,689 $23,205 The valuation allowance at December 31, 2017 is primarily related to U.S. foreign tax credit 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 2036. The Company has sublease agreementsfor certain facilities to reduce rent expense and accommodate expansion needs. The subleases expire at various times through 2022. The Company also leasescertain office equipment under the terms of operating leases expiring at various times through 2023. Rent expense under operating leases, net of sublease rental income, was $37.0 million, $31.9 million and $30.1 million for the years endedDecember 31, 2017, 2016 and 2015, respectively. Future minimum lease commitments on non‑cancelable operating leases are as follows (in thousands): Years Ended December 31,Leases SubleaseRentalIncome Net Total2018$44,071 $(181) $43,890201938,871 (125) 38,746202035,494 (125) 35,369202131,783 (124) 31,659202225,970 (41) 25,9292022 and thereafter110,394 — 110,394Total$286,583 $(596) $285,987 Employment Agreements The Company has entered into employment and non‑compete agreements with certain management employees. In the event of termination ofemployment for certain instances, employees will receive severance payments for base salary and benefits for a specified period (six months for vicepresidents, nine months for senior vice presidents and twelve months for executive vice presidents, the president and chief executive officer). Eachemployment agreement also contains provisions that restrict the employee’s ability to compete directly with the Company for a comparable period afteremployment terminates. In addition, stock option grant agreements for these employees provide the Company with the right to repurchase from theemployee, or the employee with the right to sell to the Company, stock owned by the employee in certain limited instances of termination. 98Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Legal Proceedings The Company is involved in legal proceedings from time to time in the ordinary course of its business, including employment claims and claimsrelated to other business transactions. Although the outcome of such claims is uncertain, management believes that these legal proceedings will not have amaterial adverse effect on the financial condition or results of 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 the export of services provided bythe Company is subject to a local tax on services. The Company has not recorded a liability associated with the claim, which totaled $5.2million at December 31, 2017, given that it is not deemed probable the Company will incur a loss related to this case. However, a deposit totaling $5.2million has been made to the Brazilian court in order to annul the potential tax obligation and to avoid the accrual of additional interest and penalties. Thisbalance is recorded in other assets on the consolidated balance sheets. In June 2015, the Judiciary Court of Justice of the State of Sao Paulo ruled in the favorof the Company, however, the judgment was appealed by the City of Sao Paulo. The Company expects to recover the full amount of the deposit when thecase is settled. In September 2017, a judge from the Superior Court of Justice of Brazil denied relief to the City of Sao Paulo's appeal and upheld the lowercourt's ruling in the favor of the Company for the years 2005 to 2012, and in the period from January to October 2013. The judge from the Superior Court ofJustice of Brazil also ruled that the Company must appeal the lower court's verdict for October 2013 and the subsequent periods as the Judiciary Court ofJustice of the State of Sao Paulo only reviewed the facts that pertained to the period before October 2013. Insurance The Company currently maintains insurance for risks associated with the operation of its business, provision of professional services, and ownershipof property. These policies provide coverage for a variety of potential losses, including, without limitation, loss or damage to property, bodily injury, generalcommercial 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 $0.5 million. Employee Health Insurance The Company is self‑insured for health insurance for employees within the United States. The Company maintains stop‑loss insurance on a “claimsmade” basis for expenses in excess of $0.3 million per member per year. As of December 31, 2017 and 2016, the Company maintained a reserve ofapproximately $5.0 million and $4.1 million, respectively, included in accrued expense and other current liabilities on the consolidated balance sheets, tocover open claims 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, Japan, the Netherlands, NewZealand, the Philippines, South Africa, Spain, Sweden, Thailand, and the United Kingdom. In some cases these plans are required by local laws or regulations. The Company maintains 401(k) plans in the United States, which cover substantially all employees of its U.S. subsidiaries. The Company matchesparticipant's contributions at varying amounts, subject to a maximum contribution of 6% of the participant's compensation. The employer contributions tothe 401(k) plans were approximately $11.9 million, $9.9 million and $6.6 million for the years ended December 31, 2017, 2016 and 2015, respectively.As a result of the Takeda transactions during 2017, the Company maintains defined benefit pension plans sponsored by certain TDC and TDSsubsidiaries in Japan and Germany. The funded status of the defined benefit pension plans, which represents the difference between the projected benefitobligation and the fair value of plan assets, is calculated on a plan-by-plan basis. The funded status of the plan in Japan, which covers approximately 130employees, totaled $0.8 million at December 31, 2017 and was recorded in other assets on the consolidated balance sheets. The unfunded status of the plan inGermany, which covers eight employees, totaled $0.7 million at December 31, 2017 and was recorded in other long-term99Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)liabilities on the consolidated balance sheets. Additional disclosures regarding these defined benefit pension plans have been excluded due to theirimmateriality. The Company did not have defined benefit pension plans prior to 2017.(15) Derivatives The Company is exposed to certain risks relating to its ongoing business operations. The primary risk that the Company seeks to manage by usingderivative instruments is interest rate risk. Accordingly, the Company has instituted interest rate hedging programs that are accounted for in accordance withASC 815, “Derivatives and Hedging.” The interest rate hedging program is a cash flow hedge program designed to minimize interest rate volatility. TheCompany swaps the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount, at specifiedintervals. The Company also employed an interest rate cap that would have compensated the Company if variable interest rates had risen above a pre-determined rate. The Company’s interest rate contracts are designated as hedging instruments. On October 2, 2013, the Company entered into interest rate swap agreements with an aggregate notional principal amount of $620.0 million, or the2013 Swaps. The interest rate swaps were set to begin on September 23, 2015. The interest rate swaps were to be used to hedge the Company’s variable ratedebt. The interest rate swaps had maturity dates ranging from one to five years. During the third quarter of 2015, the Company paid $32.9 million to terminatethe 2013 Swaps. Amounts previously recorded in accumulated other comprehensive loss related to these interest rate swaps, totaling $29.6 million, are beingreclassified into earnings over the term of the previously hedged borrowing using the swaplet method. For the terminated swaps, the Company reclassified$6.3 million, $4.7 million and $0.7 previously recorded in accumulated other comprehensive loss into interest expense during the years ended December 31,2017, 2016 and 2015, respectively. Subsequent to the termination of all existing interest rate swaps, the Company entered into a new interest rate swap agreement with a notionalprincipal amount of $250.0 million and a fixed three month LIBOR of 1.48%, or the 2015 Swap. The interest rate swap began on September 23, 2015 and willmature on September 23, 2018. The interest rate swap is being 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 to modify the fixed rate, repricingdates and embedded floor, or the Modified 2015 Swap. The Company re-designated the Modified 2015 Swap against the refinanced debt under the 2016Credit Facilities. As a result of the re-designation, all amounts previously recorded in accumulated other comprehensive loss related to the 2015 Swap,totaling $0.8 million, were frozen and are being amortized into earnings over the term of the previously hedged borrowing using the swaplet method. TheCompany reclassified $0.4 million previously recorded in accumulated other comprehensive loss into interest expense associated with the 2015 Swap duringthe year ended December 31, 2017. The closing 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 the Company’s derivatives as ofDecember 31, 2017 and 2016 (in thousands): Balance SheetClassification December 31, 2017 December 31, 2016 Notional amount Asset/(Liability) Notional amount Asset/(Liability)Derivatives in an asset position:Other current assets $250,000 $428 $— $— 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 hedging instruments under ASC 815 to otheraccumulated comprehensive loss in the consolidated balance sheets, net of deferred taxes, and will later reclassify into earnings when the hedged item affectsearnings or is no longer expected to occur. Gains and losses from the ineffective portion of any hedge are recognized in earnings immediately. For otherderivative contracts that do not qualify or no longer qualify for hedge accounting, changes in the fair value of the derivatives are recognized in earnings eachperiod. 100Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The table below presents the effect of the Company's derivatives on the consolidated statements of operations and comprehensive (loss) income (inthousands): Years Ended December 31,Derivatives in Cash Flow Hedging Relationships (Interest Rate Contracts)2017 2016 2015Amount of pre-tax gain (loss) recognized in other comprehensive income (loss) on derivatives$245 $(1,600) $(11,851)Amount of loss recognized in other (expense) income, net on derivatives (ineffective portion)— 1 (444)Amount of loss recognized in other (expense) income, net on derivatives (no longer qualify for hedge accounting)— — (1,137)Amount of loss reclassified from accumulated other comprehensive loss into interest expense, net on derivatives(6,855) (5,921) (908) The Company expects that $6.3 million of unrealized losses will be reclassified out of accumulated other comprehensive loss and into interestexpense, net over the next 12 months.In January 2018, the Company entered into two new interest rate derivative agreements. Refer to Note 22 for further details.(16) Accumulated Other Comprehensive (Loss) Income Below is a summary of the components of accumulated other comprehensive (loss) income (in thousands): ForeignCurrencyTranslation DerivativeInstruments TotalBalance at December 31, 2014$(53,639) $(15,870) $(69,509)Other comprehensive loss before reclassifications, net of tax(52,433) (11,273) (63,706)Reclassification adjustments, net of tax— 908 908Balance at December 31, 2015(106,072) (26,235) (132,307)Other comprehensive loss before reclassifications, net of tax(95,019) (978) (95,997)Reclassification adjustments, net of tax— 3,618 3,618Balance at December 31, 2016(201,091) (23,595) (224,686)Other comprehensive income before reclassifications, net of tax83,911 149 84,060Reclassification adjustments, net of tax— 4,156 4,156Balance at December 31, 2017$(117,180) $(19,290) $(136,470) Foreign Currency Translation The change in the foreign currency translation adjustment during the year ended December 31, 2017 was primarily due to the movements in theBritish 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 USDdepreciated by 9.3%, 13.7%, 7.1% and 6.2% versus the GBP, EUR, CAD and RUB respectively, during the year ended December 31, 2017. The movement inthe GBP, EUR, CAD and RUB represented $46.0 million, $31.0 million, $3.5 million and $1.9 million, respectively, of the $83.9 million income recorded toaccumulated other comprehensive loss during the year ended December 31, 2017.The change in the foreign currency translation adjustment during the year ended December 31, 2016 was primarily due to the movements in theGBP, EUR, CAD, and RUB, exchange rates against the USD. The USD strengthened by 16.7% and 3.6% versus the GBP and EUR, respectively, during theyear ended December 31, 2016, and the USD depreciated by 3.1% and 19.5% against the CAD and RUB, respectively, during the same period. The movementin the GBP and EUR represented $90.2 million and $8.4 million, respectively, of the $95.0 million loss recorded to accumulated other comprehensive lossduring the year ended December 31, 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. 101Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The change in the foreign currency translation adjustment during the year ended December 31, 2015 was primarily due to the movements in theGBP, 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. Themovement of the GBP, EUR, and CAD represented $25.8 million, $16.4 million, and $7.1 million, respectively, of the $52.4 million loss recorded toaccumulated other comprehensive loss during the year ended December 31, 2015. Derivative Instruments See Note 15 for further information on changes to accumulated other comprehensive income related to the derivative instruments. (17) Net Income Per Share Basic net income per share is calculated by dividing net income by the weighted average number of common shares outstanding for the applicableperiod. Diluted net income per share is calculated after adjusting the denominator of the basic net income per share calculation for the effect of all potentiallydilutive common shares, which in the Company’s case, includes shares issuable under the stock option and incentive award plan.The following table reconciles the basic to diluted weighted average shares outstanding (in thousands): Years Ended December 31, 2017 2016 2015Basic weighted average common shares outstanding62,437 60,759 59,965Effect of dilutive stock options and RSAs/RSUs3,336 3,693 3,242Diluted weighted average common shares outstanding65,773 64,452 63,207Anti-dilutive shares741 305 115 The anti-dilutive shares disclosed above were calculated using the treasury stock method. The treasury stock method calculates dilution assumingthe exercise of all in-the-money options and vesting of RSAs/RSUs, reduced by the repurchase of shares with the proceeds from the assumed exercises, andunrecognized compensation expense for outstanding awards. (18) Related Party Transactions The Company entered into a joint venture with an affiliate of KKR during 2015. The joint venture was dissolved during the same year. For furtherdiscussion on the related party transaction, refer to Note 3.(19) Supplemental Cash Flow Information The following table presents the Company’s supplemental cash flow information (in thousands): Years Ended December 31, 2017 2016 2015Cash paid during the period for: Income taxes, net of refunds$47,829 $27,644 $17,148Interest48,330 48,156 54,632Non-cash investing and financing activities: Issuance of common stock for the acquisition of Value Health Solutions, Inc.369 — 1,582Accrued fixed assets purchases3,962 2,644 2,733Cashless exercises of stock options13,252 9,456 1,672Additionally, the acquisition date fair value of contingent consideration liabilities recorded during the year ended December 31, 2017 totaled$155.8 million. Refer to Note 2 - Significant Accounting Polices and Note 4 - Business Combinations for further information.102Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(20) Operations by Geographic Area The table below presents certain enterprise‑wide information about the Company’s operations by geographic area for the years ended December 31,2017, 2016 and 2015. The Company attributes revenues to geographical locations based upon where the services are performed. The Company’s operations within each geographical region are further broken down to show each country which accounts for 10% or more of thetotals (in thousands): Years Ended December 31, 2017 2016 2015Service revenue: Americas: United States$1,310,772 $1,063,625 $898,637Other42,227 33,320 32,802Americas1,352,999 1,096,945 931,439Europe, Africa, and Asia-Pacific United Kingdom479,623 394,363 364,476Netherlands79,555 68,118 57,739Other36,197 20,597 22,193Europe, Africa, and Asia-Pacific595,375 483,078 444,408Total service revenue1,948,374 1,580,023 1,375,847Reimbursement revenues311,015 231,688 238,036Total revenue$2,259,389 $1,811,711 $1,613,883 December 31, 2017 2016Long-lived assets: Americas: United States$107,952 $60,462Other1,714 802Americas109,666 61,264Europe, Africa, and Asia-Pacific United Kingdom4,182 3,569Netherlands15,876 13,313Other13,346 9,431Europe, Africa, and Asia-Pacific33,404 26,313Total long-lived assets$143,070 $87,577 (21) SegmentsHistorically, the Company has had one reportable segment. In conjunction with the acquisition of Symphony Health, the Company expanded itsreporting segments. The Company is now managed through two reportable segments, (i) Clinical Research and (ii) Data Solutions. In accordance with theprovisions of ASC 280, "Segment Reporting", the Company's chief operating decision-maker has been identified as the Chief Executive Officer, who reviewsoperating results to make decisions about allocating resources and assessing performance for the entire company.•Clinical Research Segment: The Clinical Research segment, which primarily serves biopharmaceutical clients, provides outsourced clinical researchand clinical trial related services.103Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)•Data Solutions Segment: The Data Solutions segment provides data and analytics, technology solutions and real-world insights and servicesprimarily to the Company’s life science clients.The Company's chief operating decision maker uses gross profit as the primary measure of each segment's operating results in order to allocateresources and in assessing the Company's performance. Reimbursement revenue and reimbursable out-of-pocket costs are not allocated to the Company'ssegments. Asset information by segment is not presented, as this measure is not used by the chief operating decision maker to assess the Company'sperformance. The Company’s reportable segment information is presented below (in thousands): Years Ended December 31, 2017 2016 2015Service revenue: Clinical Research$1,857,876 $1,580,023 $1,375,847Data Solutions90,498 — —Total service revenue1,948,374 1,580,023 1,375,847Direct costs: Clinical Research1,231,690 1,032,688 886,528Data Solutions52,178 — —Total direct costs1,283,868 1,032,688 886,528Gross profit: Clinical Research626,186 547,335 489,319Data Solutions38,320 — —Total gross profit$664,506 $547,335 $489,319Less expenses not allocated to segments: Selling, general and administrative321,987 269,893 246,417Transaction-related costs87,709 44,834 —Depreciation and amortization78,227 69,506 77,952Loss on disposal of fixed assets, net358 753 652Consolidated income from operations176,225 162,349 164,298Interest expense, net(46,729) (54,913) (61,747)Loss on modification or extinguishment of debt(15,023) (38,178) —Foreign currency (losses) gains, net(39,622) 24,029 14,048Other (expense) income, net(304) 607 (1,434)Consolidated income before income taxes and equity in income (losses) ofunconsolidated joint ventures$74,547 $93,894 $115,165104Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(22) Quarterly Financial Data (unaudited) The following table summarizes the Company’s unaudited quarterly results of operations (in thousands, except per share data: 2017 First Quarter Second Quarter Third Quarter Fourth QuarterService revenue$427,080 $457,942 $494,550 $568,802Reimbursement revenue60,680 75,782 87,459 87,094Total revenue487,760 533,724 582,009 655,896Income from operations (1)49,986 64,850 57,776 3,613Provision for (benefit from) income taxes (2)7,883 10,193 (18,241) (12,458)Income (loss) before equity in gains of unconsolidated joint ventures (3)25,182 29,632 48,582 (16,226)Equity in gains of unconsolidated joint ventures42 26 24 31Net income (loss)25,224 29,658 48,606 (16,195)Net (income) loss attributable to non-controlling interests— (112) (401) 147Net income (loss) attributable to PRA Health Sciences, Inc.25,224 29,546 48,205 (16,048)Comprehensive income (loss)42,552 63,892 75,348 (6,380)Comprehensive income (loss) attributable to noncontrolling interest— (50) (373) 154Comprehensive income (loss) attributable to PRA Health Sciences, Inc.$42,552 $63,842 $74,975 $(6,226)Basic earnings (loss) per share (4)$0.41 $0.47 $0.77 $(0.25)Diluted earnings (loss) per share (4)$0.39 $0.45 $0.73 $(0.25) 2016 First Quarter Second Quarter Third Quarter Fourth QuarterService revenue$372,320 $394,249 $399,841 $413,613Reimbursement revenue57,903 61,598 53,414 58,773Total revenue430,223 455,847 453,255 472,386Income from operations (5)18,946 50,348 54,814 38,241(Benefit from) provision for income taxes(5,264) 12,312 10,821 10,625(Losses) income before equity in (losses) gains of unconsolidated jointventures (6)(15,431) 35,423 31,416 13,992Equity in (losses) gains of unconsolidated joint ventures(538) 3,247 33 33Net (loss) income(15,969) 38,670 31,449 14,025Comprehensive (loss) income$(22,251) $567 $21,982 $(24,502)Basic (losses) earnings per share (4)$(0.27) $0.64 $0.52 $0.23Diluted (losses) earnings per share (4)$(0.27) $0.60 $0.49 $0.22(1)During the three months ended December 31, 2017, the Company recorded $75.0 million of transaction-related costs associated with the change in fair value of contingent consideration. During the three months endedSeptember 30, 2017, transaction-related costs consisted of $6.4 million of fees incurred in connection with the acquisition of Symphony Health, $5.3 million of stock-based compensation expense related to the releaseof the transfer restrictions on vested options, and $1.0 million of third-party fees incurred in connection with the August 2017 secondary offering; these amounts were offset by a $1.0 million adjustment to the changein fair value of contingent consideration.As discussed in Note 2 - Significant Accounting Policies, the Company made an accounting policy election to present changes in the fair value of contingent consideration as part of income from operations during thefourth quarter of 2017. As a result, the Company reclassified $0.1 million of costs in both the three months ended March 31, 2017 and June 30, 2017, as well as a $1.0 million benefit during the three month endedSeptember 30, 2017, into income from operations.(2)During the three months ended September 30, 2017 and December 31, 2017, the Company recorded a benefit from income taxes of $18.2 million and $12.5 million, respectively. The benefit was due primarily to (i) thebenefit realized from the tax deduction of stock awards in excess of the amount recognized in the financial statements per guidance under ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718):Improvements to Employee Share-Based Payment Accounting”, (ii) the release of the valuation allowance105Table of ContentsPRA HEALTH SCIENCES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)against the federal net deferred tax assets, and additionally during the three months ended December 31, 2017 (iii) the U.S. federal rate decrease effect on an overall net deferred tax liability due to the recent law changesin the Tax Cuts and Jobs Act.(3)During the three months ended September 30, 2017 and December 31, 2017, the Company recorded a loss on extinguishment of debt of $3.1 million and $11.9 million, respectively. The loss on extinguishment of debtrecorded during the three months ended September 30, 2017 related to the Incremental Borrowings on the Company’s term debt. The loss on extinguishment of debt recorded during the three months ended December 31,2017 related to the refinancing of the Company’s 2016 Credit Facilities and the redemption of the Company's Senior Notes. Refer to Note 9, Current Borrowings and Long-Term Debt, for additional informationregarding the items noted above.(4)The sum of the quarterly per share amounts may not equal per share amounts reported for year‑to‑date periods. This is due to changes in the number of weighted average shares outstanding and the effects of rounding foreach period.(5)Transaction-related costs for the three months ended March 31, 2016, June 30, 2016 and December 31, 2016 were $28.9 million, $2.9 million and $13.0 million, respectively. There were no transaction-related costs forthe three months ended September 30, 2016. Transaction-related costs primarily relate to costs incurred in connection with the March, May and November 2016 secondary offerings and receivables financing agreement.These costs include $42.2 million of non-cash stock-based compensation expense and $2.7 million of third-party fees.(6)During the three months ended March 31, 2016 and December 31, 2016, the Company recorded a loss on extinguishment of debt of $21.5 million and $16.7 million, respectively. The loss on extinguishment of debtrecorded during the three months ended March 31, 2016 related to the cash tender offer on the Company’s Senior Notes. The loss on extinguishment of debt recorded during the three months ended December 31, 2016related to the refinancing of the Company’s 2013 Credit Facilities. Refer to Note 9, Current Borrowings and Long-Term Debt, for additional information regarding the cash tender on the Senior Notes and the 2013 CreditFacilities refinancing.(23) Subsequent EventsOn January 5, 2018, the Company entered into two new interest rate swaps in order to minimize its exposure to variable rate debt and also to replaceinterest rate swaps maturing in September 2018. The first interest rate swap has an aggregate notional amount of $375.0 million, an effective date of January8, 2018, and a maturity date of December 6, 2020. The second interest rate swap has an aggregate notional amount of $250.0 million, an effective date ofSeptember 6, 2018, and a maturity date of September 6, 2020.In February 2018, the Company made an earn-out payment of $114.7 million to the former shareholders of Symphony Health. For further discussionof the earn-out liability, refer to Note 4 - Business Combinations.106Table of ContentsItem 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, 2017, we carried out an evaluation under the supervision and with the participation of our management, including our principalexecutive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Regulations underthe Exchange Act require public companies, including us, to maintain “disclosure controls and procedures,” which are defined in Rule 13a‑15(e) andRule 15d‑15(e) of the Exchange Act to mean a company’s controls and other procedures that provide reasonable assurance that information required to bedisclosed in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in theSEC’s rules and forms and that such information is accumulated and communicated to management, including our principal executive officer and principalfinancial officer, or persons performing 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 error and the circumvention oroverriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance ofachieving their control objectives. Based upon our evaluation, our principal executive officer and principal financial officer concluded that our disclosurecontrols and procedures were effective 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 Annual Report on Form 10-K and isincorporated 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, 2017 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 2018 Annual Meeting of Stockholders for May 31, 2018.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 “2018 Proxy Statement”) to be filed with the SECwithin 120 days of the end of our fiscal year covered by this Annual Report and is incorporated herein by reference. Item 11. Executive Compensation The information required by this item will be included in our 2018 Proxy Statement to be filed with the SEC within 120 days of the end of our fiscalyear 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 2018 Proxy Statement to be filed with the SEC within 120 days of the end of our fiscalyear covered by this Annual Report and is incorporated herein by reference. 107Table of ContentsItem 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item will be included in our 2018 Proxy Statement to be filed with the SEC within 120 days of the end of our fiscalyear 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 2018 Proxy Statement to be filed with the SEC within 120 days of the end of our fiscalyear 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 60Consolidated Balance Sheets 62Consolidated Statements of Operations 63Consolidated Statements of Comprehensive (Loss) Income 64Consolidated Statements of Changes in Stockholders’ Equity 65Consolidated Statements of Cash Flows 66Notes to Consolidated Financial Statements 67(2) Financial Statement Schedules The information required to be submitted in the Financial Statement Schedules for PRA Health Sciences, Inc. and subsidiaries has either been shownin 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 part of this report and are incorporatedherein by reference.Item 16. Form 10-K Summary None.108Table of ContentsEXHIBIT INDEX ExhibitNumber Description of Exhibit3.1 Amended and Restated Certificate of Incorporation of PRA Health Sciences, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’sCurrent 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 the Registrant’s Current Report onForm 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 other parties named thereto(incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8‑K filed on November 18, 2014 (No. 001‑36732))4.2 Sale Participation Agreement of KKR PRA Investors L.P., dated September 23, 2013 (incorporated by reference to Exhibit 4.3 to theRegistrant’s Registration Statement on Form S‑1 (No. 333‑198644))10.1** PRA Health Sciences, Inc. 2017 Employee Stock Purchase Plan (incorporated by reference to Appendix A to the Registrant’s ProxyStatement on Schedule 14A filed on April 21, 2017 (No. 001-36732))10.2** 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8‑K filed onNovember 18, 2014 (No. 001‑36732))10.3** PRA Global Holdings, Inc. 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statementon Form S‑1 (No. 333‑198644))10.4** PRA Holdings, Inc. 2007 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Registration Statement onForm S‑1 (No. 333‑198644))10.5** Form of Stock Option Agreement (incorporated by reference to Exhibit 10.6 to the Registrant’s Registration Statement on Form S‑1(No. 333‑198644))10.6** Form of Rollover Option Agreement (incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S‑1(No. 333‑198644))10.7** Employment Agreement, effective July 1, 2014, between PRA Global Holdings, Inc., PRA International and Colin Shannon (incorporated byreference to Exhibit 10.9 to the Registrant’s Registration Statement on Form S‑1 (No. 333‑198644))10.8** Executive Employment Agreement, effective July 1, 2015, between PRA Health Sciences, Inc. and Linda Baddour (incorporated by referenceto Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 6, 2015 (No. 001‑36732))10.9** Employment and Non‑Competition Agreement, effective as of March 1, 2009, by and between Pharmaceutical Research Associates, Inc. andDavid W. Dockhorn (incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form S‑1 (No. 333‑198644))10.10 Senior Secured Credit Agreement, dated as of September 23, 2013, by and among PRA Holdings, Inc., UBS AG, Stamford Branch, asadministrative agent, and other agents and lenders party thereto (incorporated by reference to Exhibit 10.12 to the Registrant’s RegistrationStatement on Form S‑1 (No. 333‑198644))10.11 Amendment No. 1 to the Senior Secured Credit Agreement, dated as of March 14, 2014, by and among PRA Holdings, Inc., UBS AG,Stamford Branch, as administrative agent, and other agents and lenders party thereto (incorporated by reference to Exhibit 10.13 to theRegistrant’s Registration Statement on Form S‑1 (No. 333‑198644))10.12 Security 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 reference to Exhibit 10.14 to the Registrant’s Registration Statement on Form S‑1(No. 333‑198644))10.13 Guarantee Agreement, dated as of September 23, 2013, by and among PRA Holdings, Inc., UBS AG, Stamford Branch, as administrativeagent, and other agents and lenders party thereto (incorporated by reference to Exhibit 10.15 to the Registrant’s Registration Statement onForm S‑1 (No. 333‑198644))10.14 Indenture, dated as of September 23, 2013, among Pinnacle Merger Sub, Inc., as Issuer, the Guarantors named therein and Wells Fargo Bank,National Association, as Trustee (incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement on Form S‑1(No. 333‑198644))10.15 Registration Rights Agreement among KKR PRA Investors L.P., KKR PRA Investors GP LLC and PRA Health Sciences, Inc. (f/k/a PinnacleHoldco Parent, Inc.) (incorporated by reference to Exhibit 10.17 to the Registrant’s Registration Statement on Form S‑1 (No. 333‑198644))10.16 Monitoring Agreement of PRA Health Sciences, Inc. (f/k/a) Pinnacle Holdco Parent, Inc., dated September 23, 2013 (incorporated byreference to Exhibit 10.18 to the Registrant’s Registration Statement on Form S‑1 (No. 333‑198644))109Table of Contents10.17 Indemnification Agreement among KKR PRA Investors L.P., KKR PRA Investors GP LLC, PRA Health Sciences, Inc. (f/k/a Pinnacle HoldcoParent, Inc.), PRA Holdings, Inc. and Kohlberg Kravis Roberts & Co. L.P. dated September 23, 2013 (incorporated by reference toExhibit 10.19 to the Registrant’s Registration Statement on Form S‑1 (No. 333‑198644))10.18 Stockholders Agreement, dated as of November 18, 2014, among PRA Health Sciences, Inc. and the other parties named thereto(incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8‑K (No. 001‑36732))10.19** Form of Non‑Qualified Stock Option Agreement under the PRA Holdings, Inc. 2007 Equity Incentive Plan (incorporated by reference toExhibit 10.22 to the Registrant’s Registration Statement on Form S‑1 (No. 333‑198644))10.20** Form of Non‑Qualified Stock Option Agreement (Time‑Based Vesting) under the PRA Holdings, Inc. 2007 Equity Incentive Plan(incorporated by reference to Exhibit 10.23 to the Registrant’s Registration Statement on Form S‑1 (No. 333‑198644))10.21** 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 Registration Statement on Form S‑1 (No. 333‑198644))10.22** Form of Option Agreement of PRA International (incorporated by reference to Exhibit 10.25 to the Registrant’s Registration Statement onForm S‑1 (No. 333‑198644))10.23** Amendment to Employment Agreement effective July 1, 2014, dated as of September 22, 2014, between PRA Health Sciences, Inc., PRAInternational, and Colin Shannon (incorporated by reference to Exhibit 10.26 to the Registrant’s Registration Statement on Form S‑1(No. 333‑198644))10.24** Form of Restricted Stock Grant Notice under the PRA Health Sciences, Inc. 2014 Omnibus Incentive Plan (incorporated by reference toExhibit 10.27 to the Registrant’s Registration Statement on Form S‑1 (No. 333‑198644))10.25** Form of Option Grant Notice under the PRA Health Sciences, Inc. 2014 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.1 tothe Registrant's Current Report the Form 8-K filed on September 5, 2017).10.26 Receivables Financing Agreement, dated as of March 22, 2016, by and among PRA Holdings, Inc., PNC Bank, National Association, asadministrative agent, and other agents and lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Reporton Form 8‑K filed on March 25, 2016 (No. 001‑36732))10.27 Purchase and Sale Agreement, dated as of March 22, 2016, by and among PRA Holdings, Inc., PNC Bank, National Association, asadministrative agent, and other agents and lenders party thereto (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Reporton Form 8‑K filed on March 25, 2016 (No. 001‑36732))10.28 Credit Agreement, dated as of December 6, 2016, by and among Pharmaceutical Research Associates, Inc., Wells Fargo Bank, NationalAssociation, as administrative agent, and other agents and lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’sCurrent Report on Form 8‑K filed on December 7, 2016 (No. 001‑36732))10.29 Security Agreement, dated as of December 6, 2016, by and among Pharmaceutical Research Associates, Inc., Wells Fargo Bank, NationalAssociation, as administrative agent, and other agents and lenders party thereto (incorporated by reference to Exhibit 10.2 to the Registrant’sCurrent Report on Form 8‑K filed on December 7, 2016 (No. 001‑36732))10.30 Guarantee Agreement, dated as of December 6, 2016, by and among Pharmaceutical Research Associates, Inc., Wells Fargo Bank, NationalAssociation, as administrative agent, and other agents and lenders party thereto (incorporated by reference to Exhibit 10.3 to the Registrant’sCurrent Report on Form 8‑K filed on December 7, 2016 (No. 001‑36732))10.31 Agreement and Plan of Merger, dated as of August 3, 2017, by and among Pharmaceutical Research Associates, Inc., Symphony HealthSolutions Corporation, Skyhook Merger Sub, Inc., and STG III, L.P. (Incorporated by reference to the Form 8-K filed with the SEC on August7, 2017).10.32 Joinder Agreement, dated as September 6, 2017, by and among of Pharmaceutical Research Associates, Inc., PRA Health Sciences, Inc., eachof the subsidiaries from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent and collateral agent andother agents and lenders party thereto. (Incorporated by reference to the Form 8-K filed with the SEC on September 11, 2017).10.33 Supplement No. 1 to the Guarantee, by and among Symphony Health Solutions Corporation, Source Healthcare Analytics, LLC, and Parallel6, Inc., in favor of Wells Fargo Bank, National Association, as collateral agent. (Incorporated by reference to the Form 8-K filed with the SECon September 11, 2017).10.34 Supplement No. 1 to the Security Agreement, by and among Symphony Health Solutions Corporation, Source Healthcare Analytics, LLC,and Parallel 6, Inc., in favor of Wells Fargo Bank, National Association, as collateral agent. (Incorporated by reference to the Form 8-K filedwith the SEC on September 11, 2017).110Table of Contents10.35 First Amendment and Second Joinder Agreement, dated as of December 28, 2017, by and among Pharmaceutical Research Associates, Inc.(the “Borrower”), PRA Health Sciences, Inc., each of the subsidiaries of the Borrower from time to time party thereto, Wells Fargo Bank,National Association, as administrative agent and collateral agent and other agents and lenders party thereto (Incorporated by reference tothe Form 8-K filed with the SEC on December 29, 2017).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 Exchange Act of 1934, as adoptedpursuant 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 Exchange Act of 1934, as adoptedpursuant to Section 302 of the Sarbanes‑Oxley Act of 200232.1* Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑OxleyAct of 200232.2* Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑OxleyAct of 2002101* The following financial information from PRA Health Sciences, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2017formatted in XBRL: (i) Consolidated Balance Sheets as of December 31, 2017 and December 31, 2016, (ii) Consolidated Statements ofOperations for the years ended December 31, 2017, 2016 and 2015, (iii) Consolidated Statements of Comprehensive Income (Loss) for theyears ended December 31, 2017, 2016 and 2015, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016and 2015, and (v) Notes to Consolidated Financial Statements * Filed herewith. ** This document has been identified as a management contract or compensatory plan or arrangement.SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed onits behalf on February 22, 2018 by the undersigned, thereunto duly authorized. PRA Health Sciences, Inc. By:/s/ Linda Baddour Name:Linda Baddour Title:Executive Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrantand in the capacities indicated on February 22, 2018. 111Table of ContentsSignature Capacity /s/ Colin Shannon Colin Shannon President, Chief Executive Officer and Chairman of the Board of Directors(Principal Executive Officer) /s/ Linda Baddour Linda Baddour Executive Vice President and Chief Financial Officer (Principal Financial andAccounting Officer) /s/ Jeffrey T. Barber Jeffrey T. Barber Director /s/ Max C. Lin Max C. Lin Director /s/ James C. Momtazee James C. Momtazee Director /s/ Ali J. Satvat Ali J. Satvat Director /s/ Matthew P. Young Matthew P. Young Director /s/ Linda S. Grais Linda S. Grais Director /s/ Alexander G. Dickinson DirectorAlexander G. Dickinson 112EXHIBIT 21.1Jurisdiction 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 BelBelarus Pharmaceutical Research Associates CIS, LLC, Minsk Rep OfficeBelgium 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 EOOD - in liquidationCanada 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. u likvidacijiCzech Republic Pharmaceutical Research Associates CZ, s.r.o.Denmark Pharmaceutical Research Associates Denmark ApSEgypt RPS Egypt (Limited Liability Company)Estonia Pharmaceutical Research Associates Baltics OÜEstonia RPS Estonia OÜFinland Pharmaceutical Research Associates Finland OyFrance Pharmaceutical Research Associates SarlFrance ReSearch Pharmaceutical Services France S.A.S.Georgia Pharmaceutical Research Associates Georgia LLCGermany Pharmaceutical Research Associates GmbHGermany RPS Research Italy GmbHGhana Pharm Research Associates (UK) Limited, Ghana BranchGreece Pharmaceutical Research Associates Greece A.E.Guatemala RPS Guatemala, S.A.Hong Kong PRA Health Sciences (Hong Kong) LimitedHong Kong RPS Hong Kong LimitedHungary Pharmaceutical Research Associates, Hungary Research and Development Ltd.Iceland RPS Iceland ehf.India Kinship Technologies Private LimitedJurisdiction of Organization Entity NameIndia 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.Italy Pharmaceutical Research Associates Italy S.r.l.Italy (branch of PRA Germany) Pharmaceutical Research Associates GmbH sede secondariaJapan PRA Health Sciences KKJapan Takeda PRA Development Center KKJapan 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 LimitedNorway RPS Research Norway ASPanama RPS Panama Inc.Peru Pharmaceutical Research Associates Peru Sociedad Anonima Cerrada (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.Puerto Rico Research Pharmaceutical Services Puerto Rico, Inc.Romania Pharmaceutical Research Associates Romania SrlRomania RPS Romania S.R.L.Russia Pharmaceutical Research Associates CIS, LLC, Moscow BranchRussia Pharmaceutical Research Associates CIS, LLC, St. Petersburg BranchRussia ZAO IMP LogisticsRussia LLC RPS ResearchSerbia Pharmaceutical Research Associates doo Belgrade, Dragise Basovana 10/1Serbia Research Pharmaceutical Services d.o.o. Beograd-Stari grad u 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. v likvidáciiJurisdiction of Organization Entity NameSouth Africa PRA Pharmaceutical SA (Proprietary) LimitedSouth Africa RPS Research South Africa (Proprietary) LimitedSouth 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 LimitedUnited Kingdom Pharm Research Associates (UK) LimitedUnited Kingdom Pharm Research Associates Russia LimitedUnited Kingdom Sterling Synergy Systems 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) Parallel 6, Inc.United 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 (Delaware) Source Healthcare Analytics, LLCUnited States (Delaware) Symphony Health Solutions CorporationUnited 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EXHIBIT 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in Registration Statements Nos. 333-200160 and 333-221259 on Form S-8 and No. 333-209883 on Form S-3 ofour reports dated February 22, 2018, relating to the consolidated financial statements of PRA Health Sciences, Inc. and subsidiaries (the “Company”) (whichreport expresses an unqualified opinion and includes an explanatory paragraph relating to the Company’s adoption of ASU No. 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”), and the effectiveness of the Company's internal controlover financial reporting, appearing in this Annual Report on Form 10-K of PRA Health Sciences, Inc. for the year ended December 31, 2017./s/ Deloitte & Touche LLPRaleigh, North CarolinaFebruary 22, 2018Exhibit 31.1CERTIFICATION I, Colin Shannon, certify that:1.I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2017 of PRA Health Sciences, Inc. (the “registrant”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial 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 procedures to 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 withinthose 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 financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date: February 22, 2018 /s/ Colin Shannon Colin Shannon President, Chief Executive Officer andChairman of the Board of Directors(Principal Executive Officer)Exhibit 31.2CERTIFICATION I, Linda Baddour, certify that:1.I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2017 of PRA Health Sciences, Inc. (the “registrant”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial 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 procedures to 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 withinthose 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 financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date: February 22, 2018 /s/ Linda Baddour Linda Baddour Executive Vice President and ChiefFinancial Officer(Principal Financial Officer) EXHIBIT 32.1 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TO SECTION 906OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of PRA Health Sciences, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2017 filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Colin Shannon, President, Chief Executive Officer and Chairman of the Board ofDirectors 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 of 1934; and•The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company forthe periods presented therein. Date: February 22, 2018 By:/s/ Colin Shannon Colin Shannon President, Chief Executive Officer and Chairman of the Board of Directors(Principal Executive Officer) EXHIBIT 32.2 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TO SECTION 906OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of PRA Health Sciences, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2017 filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Linda Baddour, Executive Vice President and Chief Financial Officer of theCompany, 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 of 1934; and•The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company forthe periods presented therein. Date: February 22, 2018 By:/s/ Linda Baddour Linda Baddour Executive Vice President and Chief Financial Officer(Principal Financial Officer) 

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