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xbrli:shares


FORM 6-K
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 under
the Securities Exchange Act of 1934


For
the month ended April, 2020

ICON plc
(Registrant's name)


333-08704
(Commission file number)


South County Business Park, Leopardstown, Dublin 18, Ireland
(Address of principal executive offices)


Brendan Brennan, CFO
South County Business Park, Leopardstown, Dublin 18, Ireland
Brendan.Brennan@iconplc.com
+353-1-291-2000
(Name, telephone number, email and/or facsimile number and address of Company contact person)



Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
 
Form 20-F___X___
Form 40-F______
 
Indicate by check mark whether the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
 
Yes______
No___X___
 
Indicate by check mark whether the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
 
Yes______
No___X___
 
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule12g3-2(b) under the Securities Exchange Act of 1934.
 
Yes______
No___X___
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82 N/A





ICON plc
Rider A
This report on Form 6-K is hereby incorporated by reference in the registration statement on Form F-3 (Registration No. 333-133371) of ICON plc and in the prospectus contained therein, and this report on Form 6-K shall be deemed a part of such registration statement from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished by ICON plc under the Securities Act of 1933 or the Securities Exchange Act of 1934.


1



GENERAL

As used herein, “ICON”, the “Company” and “we” refer to ICON plc and its consolidated subsidiaries, unless the context requires otherwise.

Business

ICON public limited company (“ICON”) is a clinical research organization (“CRO”), providing outsourced development services on a global basis to the pharmaceutical, biotechnology and medical device industries. We specialize in the strategic development, management and analysis of programs that support all stages of the clinical development process - from compound selection to Phase I-IV clinical studies. Our vision is to be the global CRO partner of choice in drug development by delivering best in class information, solutions and performance in clinical and outcomes research.

We believe that we are one of a select group of CROs with the expertise and capability to conduct clinical trials in most major therapeutic areas on a global basis and have the operational flexibility to provide development services on a stand-alone basis or as part of an integrated “full service” solution. At March 31, 2020 we had approximately 15,100 employees, in 98 locations in 40 countries. During the three months ended March 31, 2020, we derived approximately 31.5%, 58.4% and 10.1% of our revenue in the United States, Europe and Rest of World respectively.

We began operations in 1990 and have expanded our business predominately through organic growth, together with a number of strategic acquisitions to enhance our capabilities and expertise in certain areas of the clinical development process. We are incorporated in Ireland and our principal executive office is located at: South County Business Park, Leopardstown, Dublin 18, Republic of Ireland. The contact telephone number of this office is +353-1-291-2000.

Recent developments

Acquisition

On January 22, 2020 a subsidiary of the Company, ICON Investments Limited acquired 100% of the equity share capital of the MedPass Group ("MedPass"). MedPass is the leading European medical device CRO, regulatory and reimbursement consultancy, that specializes in medical device development and market access. The acquisition of MedPass further enhances ICON’s Medical Device and Diagnostic Research Services, through the addition of new regulatory and clinical capabilities in Europe. The integration of MedPass’s services brings noted expertise in complex class 3 medical devices, interventional cardiology and structural heart devices. The total expected consideration for the acquisition of MedPass is $47.0 million.
 
Redemption of MeDiNova NCI

On March 9, 2020 ICON exercised its option to call the outstanding shares in the noncontrolling interest to take 100% ownership of MeDiNova. Effective from this date, the noncontrolling interest was derecognized and a liability is recognized, representing the assessment of the redemption value of the noncontrolling interest to be settled during the period ended June 30, 2020.

Share repurchase program

On January 8, 2019, the Company commenced a share buyback program of up to 1.0 million ordinary shares which was completed during the year ended December 31, 2019 for total consideration of $141.6 million. On October 22, 2019, the Company commenced a further share buyback program. At December 31, 2019, 35,100 ordinary shares were redeemed for a total consideration of $5.3 million. During the three months ended March 31, 2020, 1,235,218 ordinary shares were redeemed by the Company under this buyback program for a total consideration of $175.0 million.

All ordinary shares that were redeemed under the buyback program were canceled in accordance with the Constitution of the Company and the nominal value of these shares transferred to other undenominated capital as required by Irish Company law.

Assessment of Covid-19 impact on the business

In the period since year-end, as a result of the global spread of COVID-19, the Company has begun to experience a negative impact on our operations. At this point in time, there continues to be significant uncertainty relating to the potential effect of COVID-19 on our business. We have experienced restrictions on our ability to ensure laboratory samples are collected and analyzed on time, our ability to monitor our clinical trials, on the ability of patients or other service providers to travel, and our ability to travel, as a result of the outbreak. The impact has resulted in a requirement to increase investment in impact prevention and increased operating costs.



2



In light of recent developments relating to the COVID-19 global pandemic, the Company is supplementing the risk factors previously disclosed in its Form 20-F filed on February 27, 2020 to include the following risk factor.

COVID-19 has, and may continue to, adversely affected our business performance. The Company has begun to experience a negative impact on our operations as a result of the global spread of COVID-19, including restrictions on our ability to ensure laboratory samples are collected and analyzed on time, our ability to monitor our clinical trials, on the ability of patients or other service providers to travel, and our ability to travel. We have also experienced an increase in operating costs and investments in impact prevention.

The COVID-19 outbreak continues to rapidly evolve. The extent to which the outbreak may impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of COVID-19, the duration of the outbreak, travel restrictions and actions to contain the outbreak or treat its impact, such as social distancing and quarantines or lock-downs, business closures or business disruptions and the effectiveness of actions taken throughout the world to contain and treat the disease.

Our information systems and those of 3rd parties which we utilize may face increased cybersecurity risks due from the COVID-19 pandemic, including from the significant number of employees that are working remotely or otherwise impacted by stay-at-home orders. Additional remote access points provide new potential vulnerabilities to cybercriminals. Employees of ICON & 3rd parties may be more susceptible to social engineering efforts, and to phishing attempts which can disguise malware as a legitimate effort to circulate important information relating to COVID-19. 

Please also refer to the complete Form 20-F filed on February 27, 2020 for additional risks and uncertainties facing the Company that may have adversely affect our business.

New accounting pronouncements

Recently adopted accounting standards

ASU 2016-13 'Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments' (ASC 326) was effective, and adopted by the group, from January 1, 2020. ASC 326 introduces an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The new standard requires loss provisions to reflect an entity’s current estimate of all expected credit losses. The assessment must include consideration of both past events and current conditions. The methodology requires the use of forecast information to provide more timely and accurate credit loss estimates. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with ASC 842 on leases. The Group adopted ASC 326 using the modified retrospective method. Under this transition method, the new standard is applied from January 1, 2020 without restatement of comparative period amounts. There was no impact of adopting ASC 326 on retained earnings at January 1, 2020.

ICON adopted ASU No. 2018-15 'Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40)' (ASU 2018-15) effective from January 1, 2020. ASU 2018-15 provides guidance on when to capitalize implementation costs incurred in hosting arrangements which are accounted for as service contracts. The adoption of ASU 2018-15 did not have an impact on the financial statements.
    

3


     ICON plc
CONDENSED CONSOLIDATED BALANCE SHEETS
AS AT MARCH 31, 2020 AND DECEMBER 31, 2019
 
(Unaudited)
 
(Audited)
 
March 31, 2020

 
December 31, 2019

ASSETS
(in thousands)
Current Assets:

 

Cash and cash equivalents
$
482,372


$
520,309

Available for sale investments
1,727


49,628

Accounts receivable, net of allowance for credit losses
525,642


527,708

Unbilled revenue
446,465


422,769

Other receivables
32,502


39,290

Prepayments and other current assets
41,981


41,517

Income taxes receivable
24,866


23,759

Total current assets
1,555,555


1,624,980

 





Other Assets:





Property, plant and equipment, net
162,840


165,087

Goodwill
893,033


883,170

Operating right-of-use assets
99,251


104,977

Other non-current assets
14,934


17,439

Non-current income taxes receivable
12,090


17,230

Non-current deferred tax asset
14,927


16,682

Investments in equity-long term
10,040


10,053

Intangible assets
78,662


67,894

Total Assets
$
2,841,332


$
2,907,512

LIABILITIES AND SHAREHOLDERS’ EQUITY



Current Liabilities:





Accounts payable
$
23,332


$
24,050

Unearned revenue
386,242


366,988

Other liabilities
435,862


378,543

Income taxes payable
14,059


12,031

Current bank credit lines and loan facilities
349,734


349,640

Total current liabilities
1,209,229


1,131,252

Other Liabilities:
 


 

Non-current operating lease liabilities
74,759


76,593

Non-current other liabilities
16,069


17,512

Non-current government grants
789


813

Non-current income taxes payable
15,275


14,301

Non-current deferred tax liability
11,359


9,476

Commitments and contingencies



Total Liabilities
1,327,480


1,249,947

 





Shareholders' Equity:





Ordinary shares, par value 6 euro cents per share; 100,000,000 shares authorized,





52,508,751 shares issued and outstanding at March 31, 2020 and





53,622,206 shares issued and outstanding at December 31, 2019
4,561


4,635

Additional paid‑in capital
584,852


577,961

Other undenominated capital
1,134


1,052

Accumulated other comprehensive income
(98,955
)

(75,819
)
Retained earnings
1,022,260


1,110,226

       Total Shareholders' Equity
1,513,852


1,618,055

Redeemable noncontrolling interest

 
39,510

Total Shareholders' Equity and Redeemable Noncontrolling Interest
1,513,852

 
1,657,565

Total Liabilities and Shareholders' Equity and Redeemable Noncontrolling Interest
$
2,841,332


$
2,907,512


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

4


ICON plc
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND MARCH 31, 2019
(UNAUDITED)

 
 
Three Months Ended
 
 
March 31, 2020

 
March 31, 2019

 
(in thousands except share and per share data)
 
 
 
 
 
Revenue
 
$
715,102

 
$
674,852

 
 
 
 
 
Costs and expenses:
 
 

 
 
Direct costs
 
505,293

 
475,497

Selling, general and administrative expense
 
87,196

 
81,912

Depreciation and amortization
 
16,322

 
15,497

 
 
 
 
 
Total costs and expenses
 
608,811

 
572,906

 
 
 
 
 
Income from operations
 
106,291

 
101,946

Interest income
 
1,809

 
1,745

Interest expense
 
(3,181
)
 
(3,354
)
 
 
 
 
 
Income before provision for income taxes
 
104,919

 
100,337

Provision for income taxes
 
(12,590
)
 
(12,040
)
 
 
 
 
 
Net income
 
92,329

 
88,297

Net income attributable to noncontrolling interest
 
(633
)
 

Net income attributable to the Group
 
$
91,696


$
88,297

 
 
 
 
 
Net income per Ordinary Share attributable to the Group (note 10):
 
 

 
 
 
 
 
 
 
Basic
 
$
1.63


$
1.64

Diluted
 
$
1.62


$
1.63

 
 
 
 
 
Weighted average number of Ordinary Shares outstanding:
 
 

 
 

 
 
 
 
 
Basic
 
53,348,355

 
53,845,407

 
 
 
 
 
Diluted
 
53,905,022

 
54,142,510


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


5


ICON plc
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND MARCH 31, 2019 (UNAUDITED)

 
Three Months Ended
 
March 31, 2020

 
March 31, 2019

 
(in thousands)
Cash flows from operating activities:
 
 
 
Net income
$
92,329

 
$
88,297

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

 Loss on disposal of property, plant and equipment
37

 

 Depreciation expense
11,413

 
11,582

 Reduction in carrying value of operating right-of-use assets
7,328

 
7,446

 Amortization of intangibles
4,909

 
3,915

 Amortization of government grants
(11
)
 
(11
)
 Interest on short term investments

 
(268
)
 Interest on non-current operating lease liability
493

 
689

 Realized gain on sale of short term investments
(232
)
 

 Loss/(gain) on re-measurement of financial assets
200

 
(500
)
 Stock compensation expense
6,069

 
7,079

 Amortization of interest rate hedge
(241
)
 
(231
)
 Amortization of financing costs
119

 
137

 Deferred taxes
(1,708
)
 
(1,356
)
Changes in assets and liabilities:
 

 
 

 Decrease in accounts receivable
2,869

 
3,545

 Increase in unbilled revenue
(24,038
)
 
(79,478
)
 Decrease in other receivables
5,782

 
398

 Increase in prepayments and other current assets
(956
)
 
(2,187
)
 Decrease/(increase) in other non-current assets
2,466

 
(4,421
)
 Increase in unearned revenue
19,232

 
43,957

 Increase in other current liabilities
19,711

 
16,432

 Decrease in operating lease liabilities
(7,947
)
 
(8,688
)
 Increase/(decrease) in other non-current liabilities
529

 
(13
)
 Increase in income taxes payable
5,304

 
2,907

 (Decrease)/increase in accounts payable
(897
)
 
5,403

Net cash provided by operating activities
142,760

 
94,634

Cash flows from investing activities:
 

 
 

 Purchase of property, plant and equipment
(11,311
)
 
(7,034
)
 Purchase of subsidiary undertakings
(47,333
)
 
(42,349
)
 Cash acquired with subsidiary undertaking
10,170


686

 Purchase of available for sale investments

 
(81
)
 Sale of available for sale investments
47,903

 
239

 Purchase of investments in equity - long term
(187
)
 
(2,019
)
Net cash used in investing activities
(758
)
 
(50,558
)
Cash flows from financing activities:
 

 
 

 Proceeds from exercise of equity compensation
867

 
3,391

 Share issue costs
(3
)
 
(4
)
 Repurchase of ordinary shares
(175,000
)
 
(25,000
)
 Share repurchase costs
(140
)
 
(20
)
Net cash used in financing activities
(174,276
)
 
(21,633
)
Effect of exchange rate movements on cash
(5,663
)
 
(656
)
Net (decrease)/increase in cash and cash equivalents
(37,937
)
 
21,787

Cash and cash equivalents at beginning of period
520,309

 
395,851

Cash and cash equivalents at end of period
$
482,372

 
$
417,638


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

6



ICON plc
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(UNAUDITED)
 
 
 
Group
 
 
Shares

Amount

Additional
Paid-in
Capital

Other
Undenominated
Capital

Accumulated
Other
Comprehensive
Income

Retained
Earnings

Total

Redeemable Noncontrolling Interest

 
(dollars in thousands, except share data)
Balance at December 31, 2019
53,622,206

$
4,635

$
577,961

$
1,052

$
(75,819
)
$
1,110,226

$
1,618,055

$
39,510

 
 
 
 
 
 
 
 
 
Comprehensive income:
 
 
 
 
 
 
 
 
Net income





91,696

91,696

633

Currency translation adjustment




(22,426
)

(22,426
)

Currency impact of long term funding (net of tax)




(591
)

(591
)

Transfer to realized capital gain




(232
)

(232
)

Amortization of interest rate hedge




(241
)

(241
)

Fair value of cash flow hedge (net of tax)




354


354


Total comprehensive income




(23,136
)
91,696

68,560

633

 
 
 
 
 
 
 
 
 
Exercise of share options
31,964

2

859




861


Issue of restricted share units
89,799

6





6


Non-cash stock compensation expense


6,035




6,035


Share issuance costs


(3
)



(3
)

Share repurchase program
(1,235,218
)
(82
)

82


(175,000
)
(175,000
)

Share repurchase costs





(140
)
(140
)

Noncontrolling interest adjustment to redemption amount





(4,522
)
(4,522
)
4,522

Exercise of call option on noncontrolling interest shares







(44,665
)
 
 
 
 
 
 
 
 
 
Balance at March 31, 2020
52,508,751

$
4,561

$
584,852

$
1,134

$
(98,955
)
$
1,022,260

$
1,513,852

$


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


7



ICON plc
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 2020
1. Basis of presentation

These condensed consolidated financial statements which have been prepared in accordance with United States Generally Accepted Accounting Principles (“US GAAP”) have not been audited. The condensed consolidated financial statements reflect all adjustments, which are, in the opinion of management, necessary to present a fair statement of the operating results and financial position for the periods presented. The preparation of the condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures in the condensed consolidated financial statements. Actual results could differ from those estimates.

The condensed consolidated financial statements should be read in conjunction with the accounting policies and notes to the consolidated financial statements included in ICON’s Form 20-F for the year ended December 31, 2019 (see note 2 - Significant accounting policies for impact of adoption of any new accounting standards). Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal period ending December 31, 2020.

2. Significant accounting policies

Redeemable noncontrolling interests and equity

On May 23, 2019, ICON acquired a majority ownership interest in MeDiNova. Included in the purchase agreement are put and call option arrangements with the noncontrolling interest holders that require (put option) or enable (call option) ICON to purchase the remaining minority ownership at a future date. The option is accounted for as temporary equity, which is presented separately as redeemable noncontrolling interest on the Consolidated Balance Sheet. This classification reflects the assessment that the instruments are contingently redeemable in accordance with ASC 480-10-S99 'Distinguishing Liabilities from Equity'.

Redeemable noncontrolling interests are accreted to their redemption value over the period from the date of issuance to the first date on which the option is exercisable. The change in the option's redemption value is recorded against retained earnings. In a computation of earnings per share, the accretion of redeemable noncontrolling interests to their redemption value is a reduction of net income attributable to the Group. Basic and diluted net income per ordinary share attributable to the Group includes the adjustment to reflect the accretion of the noncontrolling interest to its redemption value.

On March 9, 2020 ICON exercised its option to call the outstanding shares in the noncontrolling interest to take 100% ownership of MeDiNova. On exercise of the call option, the noncontrolling interest is extinguished and a liability is recorded for the amount payable to the former noncontrolling interest holders. At March 31, 2020, a liability of $42.6 million has been recorded in relation to the payment due to the former noncontrolling interest holders.

Financial assets - credit losses

On January 1, 2020, the Group adopted ASU 2016-13 'Measurement of Credit Losses on Financial Instruments (ASC 326)', which significantly changes the way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life. The update provides guidance on the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The amendment replaces the current incurred loss impairment approach with a methodology to reflect expected credit losses and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates.

The Group adopted ASC 326 using the modified retrospective method for all in scope financial assets. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The impact of transitioning to the new standard at January 1, 2020 was immaterial and no adjustment was recorded to retained earnings for the cumulative effect of adopting ASC 326.

On transition to ASC 326, the Group has revised the methodology to calculate the allowance for credit losses. The Group's estimate of expected credit losses considers historical credit loss information that is adjusted, where necessary, for current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. The Group's receivables and unbilled services are predominantly due from large and mid-tier pharmaceutical and biotechnology companies that share similar risk characteristics. The Group monitors their portfolio of receivables and unbilled services for any deterioration in current or expected credit quality (for example, expected delinquency level), and adjusts the allowance for credit losses as required.

Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense in the Consolidated Statement of Operations. Losses are charged against the allowance when management believes the uncollectibility of a previously provisioned amount is confirmed.



8



ASC 842 Leases (adopted at January 1, 2019)

The new leasing standard (ASC 842 'Leases') was effective and adopted by ICON from January 1, 2019. ASC 842 'Leases' supersedes the requirements in ASC 840 'Leases' and requires that lessees recognize rights and obligations from virtually all leases (other than leases that meet the definition of a short-term lease) on their balance sheets as right-of-use assets with corresponding lease liabilities. The ASU also provides additional guidance on how to classify leases and how to determine the lease term for accounting purposes.

ICON adopted the new standard under the cumulative effect adjustment approach. Under this transition method, the new standard is applied from January 1, 2019 without restatement of comparative period amounts. Operating lease liabilities and right-of-use assets of $106.5 million were recorded on the Condensed Consolidated Balance Sheet as at January 1, 2019.

There was no impact of adopting ASC 842 on opening retained earnings at January 1, 2019.

3. Revenue

Revenue disaggregated by customer profile is as follows:
 
Three Months Ended
 
March 31, 2020

March 31, 2019

 
(in thousands)
 
 
 
Top client
$
81,267

$
99,994

Clients 2-5
203,741

169,339

Clients 6-10
88,191

89,067

Clients 11-25
124,618

124,826

Other
217,285

191,626

 
 
 
Total
$
715,102

$
674,852


                                                                                                   
4. Accounts receivable, unbilled revenue (contract assets) and unearned revenue or payments on account (contract liabilities)

Accounts receivables and unbilled revenue are as follows:
 
March 31, 2020

 
December 31, 2019

 
(in thousands)
Contract assets:
 
 
 
Billed services (accounts receivable)
$
535,080

 
$
535,088

Unbilled services (unbilled revenue)
446,465

 
422,769

Accounts receivable and unbilled revenue
981,545

 
957,857

Allowance for credit losses
(9,438
)
 

Allowance for doubtful debts

 
(7,380
)
 
 
 
 
Accounts receivable and unbilled revenue, net
$
972,107

 
$
950,477


9




Unbilled services and unearned revenue or payments on account (contract assets and liabilities) were as follows:
(in thousands, except percentages)
March 31, 2020

 
December 31, 2019

 
$ Change
 
% Change
 
 
 
 
 
 
Unbilled services (unbilled revenue)
$
446,465

 
$
422,769

 
$
23,696

 
5.6
%
Unearned revenue (payments on account)
(386,242
)
 
(366,988
)
 
(19,254
)
 
5.2
%
 
 
 
 
 
 
 
 
Net balance
$
60,223

 
$
55,781

 
$
4,442

 
8.0
%


Timing may differ between the satisfaction of performance obligations and the invoicing and collection of amounts related to our contracts with customers. We record assets for amounts related to performance obligations that are satisfied but not yet billed and/or collected. These assets are recorded as unbilled services and therefore contract assets rather than accounts receivables when receipt of the consideration is conditional on something other than the passage of time. Liabilities are recorded for amounts that are collected in advance of the satisfaction of performance obligations or billed in advance of the revenue being earned.

Unbilled services/revenue balances arise where invoicing or billing is based on the timing of agreed milestones related to service contracts for clinical research. Contractual billing arrangements in respect of certain reimbursable expenses (principally investigators) require billing by the investigator to the Company prior to billing by the Company to the customer. As there is no contractual right to set-off between unbilled services (contract assets) and unearned revenue (contract liabilities), each are separately presented gross on the Consolidated Balance Sheet.

Unbilled services as at March 31, 2020 increased by $23.7 million as compared to December 31, 2019. Unearned revenue increased by $19.3 million over the same period resulting in an increase of $4.4 million in the net balance of unbilled services and unearned revenue or payments on account between December 31, 2019 and March 31, 2020. These fluctuations are primarily due to timing of payments and invoicing related to the Group's clinical trial management contracts. Billings and payments are established by contractual provisions including predetermined payment schedules which may or may not correspond to the timing of the transfer of control of the Company's services under the contract. Unbilled services arise from long-term contracts when a cost-based input method of revenue recognition is applied and revenue recognized exceeds the amount billed to the customer.

The credit loss expense and allowance for credit losses recognized on the Group's receivables and unbilled services was de minimis for the three months ended March 31, 2020 and March 31, 2019.

As of March 31, 2020 approximately $5.4 billion of revenue is expected to be recognized in the future in respect of unsatisfied performance obligations. The Company expects to recognize revenue on approximately 43% of the unsatisfied performance obligation over the next 12 months, with the remainder recognized thereafter over the duration of the customer contracts.

5. Goodwill
 
Three Months Ended

 
Year Ended

 
March 31, 2020

 
December 31, 2019

 
(in thousands)
Opening balance
$
883,170

 
$
756,260

Current period acquisitions (Note 6)
25,411

 
126,932

Prior period acquisitions
(70
)
 

Foreign exchange movement
(15,478
)
 
(22
)
 
 
 


Closing balance
$
893,033

 
$
883,170



10



6. Business combinations 

Acquisitions – MedPass Group ("MedPass")

On January 22, 2020 a subsidiary of the Company, ICON Investments Limited acquired 100% of the equity share capital of the MedPass Group. MedPass is the leading European medical device CRO, regulatory and reimbursement consultancy, that specializes in medical device development and market access. The acquisition of MedPass further enhances ICON’s Medical Device and Diagnostic Research Services, through the addition of new regulatory and clinical capabilities in Europe. The integration of MedPass’s services brings noted expertise in complex class 3 medical devices, interventional cardiology and structural heart devices.

The acquisition of Medpass has been accounted for as a business combination in accordance with ASC 805 'Business Combinations'. The Company has made a provisional assessment of the fair value of assets acquired and liabilities assumed as at that date.
 
January 22,

 
2020

 
(in thousands)

Cash & cash equivalents
$
10,170

Property, plant and equipment
45

Operating right of use assets
1,362

Goodwill *
25,411

Intangible asset **
16,570

Accounts receivable
2,825

Prepayments and other current assets
158

Accounts payable
(368
)
Unearned revenue
(206
)
Other liabilities
(2,973
)
Current lease liabilities
(293
)
Non-current lease liabilities
(1,069
)
Non-current deferred tax liability
(4,640
)
 
 
Net assets acquired
$
46,992

 
 
Cash outflows
$
46,992

Contingent consideration ***

 
 
Total consideration
$
46,992

*Goodwill represents the acquisition of an established workforce that specializes in medical device development and market access. None of the goodwill recognized is expected to be deductible for income tax purposes.
**The Company has made an estimate of separate intangible assets acquired, being customer relationships and order book assets. This assessment will be finalized within 12 months of the date of acquisition.
*** The fair value of the contingent consideration was estimated at the date of acquisition. Depending on performance of the company, Medpass could earn up to $6.7 million in contingent consideration. At March 31, 2020, the fair value of this contingent consideration payable to Medpass is $Nil.











11



Acquisitions – CRN Holdings LLC (trading as Symphony Clinical Research ("Symphony"))

On September 24, 2019 a subsidiary of the Company, ICON Clinical Research LLC, acquired a 100% interest in Symphony. Symphony is a leading provider of at-home trial services and site support services. The acquisition of Symphony further enhances our site & patient services offering.

The acquisition of Symphony has been accounted for as a business combination in accordance with ASC 805 'Business Combinations'. The Company has made a provisional assessment of the fair value of assets acquired and liabilities assumed as at that date.

September 24,


2019


(in thousands)

Cash & cash equivalents
$
3,292

Property, plant and equipment
564

Operating right of use assets
820

Goodwill *
22,865

Customer relationships **
8,159

Order backlog **
2,163

Accounts receivable
3,579

Unbilled revenue
186

Prepayments and other current assets
181

Other receivables
6

Accounts payable
(799
)
Unearned revenue
(1,446
)
Other liabilities
(933
)
Current lease liabilities
(289
)
Non-current lease liabilities
(531
)

 

Net assets acquired
$
37,817


 

Cash outflows 
$
34,976

Working capital adjustment paid
341

Contingent consideration payable ***
2,500




Total consideration
$
37,817

*Goodwill represents the acquisition of an established workforce and the capability to provide at-home trial services and site support solutions. The full amount of the goodwill recognized is expected to be deductible for income tax purposes.
**The Company has made an estimate of separate intangible assets acquired, being customer relationships and order book assets. The fair value of Symphony’s intangible assets has been measured provisionally, pending receipt of a final independent valuation. This assessment will be finalized within 12 months of the date of acquisition.
*** The fair value of the contingent consideration was estimated at the date of acquisition. At March 31, 2020 the fair value of this contingent consideration payable to Symphony was $1.0 million. The change in fair value has been recorded in the Condensed Consolidated Statement of Operations.

12



Acquisitions – MeDiNova

On May 23, 2019 a subsidiary of the Company, ICON Clinical Research (U.K.) Limited acquired a majority shareholding in MeDiNova, a site network with research sites in key markets in Europe and Africa. On March 9, 2020 ICON exercised its option to call the outstanding shares in the noncontrolling interest to take 100% ownership of MeDiNova. The acquisition further enhances ICON's patient recruitment capabilities in EMEA and complements ICON's existing site network in the US, PMG Research.

The acquisition of MeDiNova has been accounted for as a business combination in accordance with ASC 805 'Business Combinations'. The Company has made a provisional assessment of the fair value of assets acquired and liabilities assumed as at that date.
 
May 23,

 
2019

 
(in thousands)

Cash & cash equivalents
$
7,719

Property, plant and equipment
670

Operating right of use assets
1,558

Goodwill *
81,567

Customer relationships **
3,887

Order backlog **
171

Patient database **
2,542

Accounts receivable
3,488

Unbilled revenue
4,272

Other receivables
819

Prepayments and other current assets
406

Accounts payable
(5,484
)
Unearned revenue
(5,796
)
Other liabilities
(6,605
)
Current lease liabilities
(430
)
Non-current lease liabilities
(1,128
)
Non-current deferred tax liability
(1,380
)
 
 
Net assets acquired
$
86,276

 
 
Cash outflows 
$
54,123

Working capital adjustment receivable
(439
)
Redeemable noncontrolling interest ***
32,592

 
 
Total consideration
$
86,276

*Goodwill represents the acquisition of an established workforce and access to a broad site network in Europe and Africa. None of the goodwill recognized is expected to be deductible for income tax purposes.
**The Company has made an estimate of separate intangible assets acquired, being customer relationships, order book assets and patient database. This assessment will be finalized within 12 months of the date of acquisition. The fair value of MeDiNova’s intangible assets has been measured provisionally, pending receipt of a final independent valuation.
***The fair value of the redeemable noncontrolling interest on May 23, 2019 was $32.6 million which was estimated by applying an income based approach. The valuation approach used was based on the future earnings of the Company times an appropriate earnings multiple. On March 9, 2020 ICON exercised its option to call the outstanding shares in the noncontrolling interest to take 100% ownership of MeDiNova. Effective from this date, the noncontrolling interest was derecognized and a liability is recognized, representing the assessment of the redemption value of the noncontrolling interest to be settled during the period ended June 30, 2020.

 







13




Acquisitions – MolecularMD Corp ("MMD")

On January 25, 2019 a subsidiary of the Company, ICON Laboratory Services, Inc. acquired 100% of the share capital of MMD. MMD is a molecular diagnostic specialty laboratory that enables the development and commercialization of precision medicines in oncology. The consideration on acquisition was $42.2 million.

The acquisition of MMD has been accounted for as a business combination in accordance with ASC 805 'Business Combinations'. The Company has made an assessment of the fair value of assets acquired and liabilities assumed as at that date. The following table summarizes the Company’s fair values of the assets acquired and liabilities assumed:

January, 25


2019


(in thousands)

Cash & cash equivalent
$
686

Property, plant and equipment
1,697

Operating right of use assets
2,866

Goodwill *
22,430

Customer relationships
10,708

Order backlog
2,787

Accounts receivable
3,100

Unbilled revenue
2,421

Other receivables
43

Prepayments and other current assets
908

Deferred tax asset
1,568

Accounts payable
(1,280
)
Unearned revenue
(540
)
Other liabilities
(1,232
)
Current lease liabilities
(699
)
Non-current lease liabilities
(2,167
)
Non-current other liabilities
(1,123
)
 
 
Net assets acquired
$
42,173


 

Cash outflows 
$
42,349

Working capital adjustment
(176
)
 
 
Total consideration
$
42,173

 
*Goodwill represents the acquisition of an established workforce with experience in molecular diagnostic specialty laboratory services and commercialization of precision medicines in oncology. None of the goodwill recognized is expected to be deductible for income tax purposes.

Accounting for the acquisition of MMD was finalized at December 31, 2019.

7. Restructuring

Restructuring charges 

No restructuring charge was recognized during the three months ended March 31, 2020 (March 31, 2019: $Nil).

Prior Period Restructuring charges 

A restructuring charge of $12.5 million was recognized during the year ended December 31, 2018 under a restructuring plan adopted following a review of operations. The restructuring plan reflected resource rationalization across the business to improve resource utilization, resulting in a charge of $9.7 million and office consolidation resulting in the recognition of an onerous lease obligation of $2.8 million. No additional charge was recorded during the three months ended March 31, 2020.

14



 
Workforce reductions

 
Onerous Lease

 
Total

 
(in thousands)
Initial restructuring charge recorded
$
9,684

 
$
2,806

 
$
12,490

Utilization
(5,399
)
 
(672
)
 
(6,071
)
Provision at December 31, 2018
$
4,285

 
$
2,134

 
$
6,419

Utilization
(3,554
)
 
(1,228
)
 
(4,782
)
Provision at December 31, 2019
$
731

 
$
906

 
$
1,637

Utilization
(430
)
 
(186
)
 
(616
)
Provision at March 31, 2020
$
301

 
$
720

 
$
1,021


    
At March 31, 2020, $0.6 million is included within other liabilities and $0.4 million within non-current other liabilities.

8. Operating leases
Lease costs recorded under operating leases for the three months ended March 31, 2020 were as follows:

 
Three Months Ended
 
March 31, 2020

March 31, 2019

 
(in thousands)
Operating lease costs
8,089

8,655

Income from sub-leases
(268
)
(520
)
Net operating lease costs
$
7,821

$
8,135



Of the total cost of $7.8 million incurred in the three months ended March 31, 2020 (March 31, 2019: $8.1 million), $7.1 million (March 31, 2019: $7.2 million) is recorded within selling, general and administration costs and $0.7 million (March 31, 2019: $0.9 million) is recorded within direct costs.

During the three months ended March 31, 2020 and March 31, 2019, costs incurred by the Group related to variable lease payments was de minimis.

Additional right-of-use assets obtained in exchange for lease obligations during the three months ended March 31, 2020 totaled $4.3 million (March 31, 2019: $13.0 million). The weighted average remaining lease term and weighted-average discount rate at March 31, 2020 were 5.11 years and 2.86%, respectively.

Future minimum lease payments under non-cancelable leases as of March 31, 2020 were as follows:
 
Minimum rental payments

 
(in thousands)

 
March 31, 2020

Due within 1 year
$
27,339

Due between 1 and 5 years
63,599

Thereafter
16,398

Total future minimum lease payments
107,336

Lease imputed interest
(7,726
)
Total
$
99,610



Operating lease liabilities are presented as current and non-current. Operating lease liabilities of $24.8 million have been included in other liabilities as at March 31, 2020 (March 31, 2019: $28.1 million).


15



9. Income taxes
Income taxes recognized during the three months ended March 31, 2020 and March 31, 2019, comprise:

 
Three Months Ended
 
March 31, 2020

 
March 31, 2019

 
(in thousands)
Provision for income taxes
$
12,590

 
$
12,040



As at March 31, 2020 the Company maintains a $21.2 million liability (December 31, 2019: $21.3 million) for unrecognized tax benefit, which is comprised of $20.1 million (December 31, 2019: $20.2 million) related to items generating unrecognized tax benefits and $1.1 million (December 31, 2019: $1.1 million) for interest and related penalties to such items. The Company recognizes interest accrued on unrecognized tax benefits as an additional income tax expense.

The Company has analyzed the filing positions in all of the significant federal, state and foreign jurisdictions where it is required to file income tax returns, as well as open tax years in these jurisdictions. The only periods subject to examination by the major tax jurisdictions where the Company does business are 2015 through 2019 tax years. The Company does not believe that the outcome of any examination will have a material impact on its financial statements.


10. Net income per ordinary share

Basic net income per ordinary share attributable to the Group has been computed by dividing net income available to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted net income per ordinary share is computed by adjusting the weighted average number of ordinary shares outstanding during the period for all potentially dilutive ordinary shares outstanding during the period and adjusting net income for any changes in income or loss that would result from the conversion of such potential ordinary shares.

There is no difference in net income used for basic and diluted net income per ordinary share.

Basic and diluted net income per ordinary share attributable to the Group includes the adjustment to reflect the accretion of the noncontrolling interest in MeDiNova to its redemption value.

The reconciliation of the number of shares used in the computation of basic and diluted net income per ordinary share is as follows:
 
Three Months Ended
 
March 31, 2020

 
March 31, 2019

Weighted average number of ordinary shares outstanding for basic net income per ordinary share
53,348,355

 
53,845,407

Effect of dilutive share options outstanding
556,667

 
297,103

Weighted average number of ordinary shares outstanding for diluted net income per ordinary share
53,905,022

 
54,142,510



16



The reconciliation of net income attributable to the Group and net income attributable to the group (including NCI redemption amount) as used to calculate net income per ordinary share attributable to the Group is as follows:


Three Months Ended

March 31, 2020


March 31, 2019

 
(in thousands)
Net income attributable to the Group
$
91,696


$
88,297

Noncontrolling interest adjustment to redemption amount
(4,522
)
 

Net income attributable to the Group (including NCI redemption adjustment)
$
87,174


$
88,297

 
 
 
 
 
Three Months Ended
 
March 31, 2020

 
March 31, 2019

Net income per Ordinary Share attributable to the Group (including NCI redemption adjustment):





Basic
$
1.63


$
1.64

Diluted
$
1.62


$
1.63




11. Share-based awards

Share Options

On July 21, 2008, the Company adopted the Employee Share Option Plan 2008 (the “2008 Employee Plan”) pursuant to which the Compensation and Organization Committee of the Company’s Board of Directors may grant options to any employee, or any Director holding a salaried office or employment with the Company or a Subsidiary for the purchase of ordinary shares. On the same date, the Company also adopted the Consultants Share Option Plan 2008 (the “2008 Consultants Plan”), pursuant to which the Compensation and Organization Committee of the Company’s Board of Directors may grant options to any consultant, adviser or non-executive Director retained by the Company or any Subsidiary for the purchase of ordinary shares. 

On February 14, 2017, both the 2008 Employee Plan and the 2008 Consultants Plan (together the “2008 Option Plans”) were amended and restated in order to increase the number of options that can be issued under the 2008 Consultants Plan from 0.4 million to 1.0 million and to extend the date for options to be granted under the 2008 Option Plans.

An aggregate of 6.0 million ordinary shares have been reserved under the 2008 Employee Plan, as reduced by any shares issued or to be issued pursuant to options granted under the 2008 Consultants Plan, under which a limit of 1.0 million shares applies.  Further, the maximum number of ordinary shares with respect to which options may be granted under the 2008 Employee Option Plan, during any calendar year to any employee shall be 0.4 million ordinary shares. There is no individual limit under the 2008 Consultants Plan. No options may be granted under the 2008 Option Plans after February 14, 2027. 

Each option granted under the 2008 Option Plans will be an employee stock option, or NSO, as described in Section 422 or 423 of the Internal Revenue Code. Each grant of an option under the 2008 Options Plans will be evidenced by a Stock Option Agreement between the optionee and the Company. The exercise price will be specified in each Stock Option Agreement, however option prices will not be less than 100% of the fair market value of an ordinary share on the date the option is granted. 

On January 17, 2003, the Company adopted the Share Option Plan 2003 (the “2003 Share Option Plan”) pursuant to which the Compensation and Organization Committee of the Board could grant options to officers and other employees of the Company or its subsidiaries for the purchase of ordinary shares. An aggregate of 6.0 million ordinary shares were reserved under the 2003 Share Option Plan; and, in no event could the number of ordinary shares issued pursuant to options awarded under this plan exceed 10% of the outstanding shares, as defined in the 2003 Share Option Plan, at the time of the grant, unless the Board expressly determined otherwise. Further, the maximum number of ordinary shares with respect to which options could be granted under the 2003 Share Option Plan during any calendar year to any employee was 0.4 million ordinary shares. The 2003 Share Option Plan expired on January 17, 2013. No new options may be granted under this plan. 

Share option awards are granted with an exercise price equal to the market price of the Company’s shares at date of grant. Prior to 2018, share options typically vest over a period of five years from date of grant and expire eight years from date of grant. Share options granted to non-executive directors during 2018 vest over 12 months and expire eight years from the date of grant. The maximum contractual term of options outstanding at March 31, 2020 is eight years.

17




The following table summarizes option activity for the three months ended March 31, 2020:
 
Options
Outstanding
Number of Shares 

 
Weighted
Average
Exercise
Price

 
Weighted
Average Grant Date
Fair Value

 
Weighted
Average
Remaining
Contractual
Life
Outstanding at December 31, 2019
656,107

 
$
87.80

 
$
26.60

 
4.76
Granted
100,207

 
$
159.33

 
$
42.11

 
 
Exercised
(31,964
)
 
$
26.95

 
$
10.82

 
 
Canceled/expired
(1,330
)
 
$
22.30

 
$
9.72

 
 
 
 
 
 
 
 
 
 
Outstanding at March 31, 2020
723,020

 
$
100.52

 
$
29.48

 
5.17
 
 
 
 
 
 
 
 
Exercisable at March 31, 2020
365,707

 
$
79.57

 
$
23.91

 
4.06


The Company has outstanding options with fair values ranging from $9.72 to $43.59 per option or a weighted average fair value of $18.95 per option. The Company issues ordinary shares for all options exercised. The total amount of fully vested share options which remained outstanding at March 31, 2020 was 365,707. Fully vested share options at March 31, 2020 have an average remaining contractual term of 4.06 years, an average exercise price of $79.57 and a total intrinsic value of $20.7 million. The total intrinsic value of options exercised during the three months ended March 31, 2020 was $3.5 million (March 31, 2019: $5.4 million).

The following table summarizes the movement in non-vested share options for the three months ended March 31, 2020
 
Options
Outstanding
Number of Shares

 
Weighted Average
Exercise Price

 
Weighted Average
Grant Date Fair Value

Non-vested outstanding at December 31, 2019
358,030

 
$
103.68

 
$
31.28

 


 


 


Granted
100,207

 
$
159.33

 
$
42.11

Vested
(100,924
)
 
$
94.22

 
$
28.20

Forfeited

 
$

 
$

 


 


 


Non-vested outstanding at March 31, 2020
357,313

 
$
121.96

 
$
35.19



Fair value of Stock Options Assumptions

The weighted average fair value of options granted during the three months ended March 31, 2020 and March 31, 2019 was calculated using the Black-Scholes option pricing model. The weighted average grant date fair values and assumptions used were as follows:
 
Three Months Ended
 
March 31, 2020

 
March 31, 2019

Weighted average grant date fair value
$
42.11

 
$
43.59

Assumptions:
 

 
 

Expected volatility
28
%
 
30
%
Dividend yield
%
 
%
Risk-free interest rate
0.78
%
 
2.59
%
Expected life
5 years

 
5 years



Expected volatility is based on the historical volatility of our common stock over a period equal to the expected term of the options; the expected life represents the weighted average period of time that options granted are expected to be outstanding given consideration to vesting schedules and our historical experience of past vesting and termination patterns. The risk-free rate is based on the U.S. government zero-coupon bonds yield curve in effect at time of the grant for periods corresponding with the expected life of the option.

18




Restricted Share Units and Performance Share Units 

On April 23, 2013, the Company adopted the 2013 Employees Restricted Share Unit and Performance Share Unit Plan (the “2013 RSU Plan”) pursuant to which the Compensation and Organization Committee of the Company’s Board of Directors may select any employee, or any Director holding a salaried office or employment with the Company, or a Subsidiary to receive an award under the plan. On May 11, 2015, the 2013 RSU Plan was amended and restated in order to increase the number of shares that can be issued under the RSU Plan by 2.5 million shares. Accordingly, an aggregate of 4.1 million ordinary shares have been reserved for issuance under the 2013 RSU Plan. The shares are awarded at par value and vest over a service period. Awards under the 2013 RSU Plan may be settled in cash or shares at the option of the Company.

On April 30 2019, the Company approved the 2019 Consultants and Directors Restricted Share Unit Plan (the “2019 Consultants RSU Plan”), which was effective as of May 16, 2019, pursuant to which the Compensation and Organization Committee of the Company’s Board of Directors may select any consultant, adviser or non-executive Director retained by the Company, or a Subsidiary to receive an award under the plan. 250,000 ordinary shares have been reserved for issuance under the 2019 Consultants RSU Plan. The awards are at par value and vest over a service period. Awards granted to non-executive directors in May 2019 vest over twelve months.

The Company has awarded RSUs and PSUs to certain key individuals of the Group. The following table summarizes RSU and PSU activity for the three months ended March 31, 2020:
 
 
PSU
Outstanding
Number of
Shares

 
 
PSU
Weighted
Average Grant Date
Fair Value

 
PSU
Weighted
Average
Remaining
Contractual
Life
 
 
RSU
Outstanding
Number of
Shares

 
 
RSU
Weighted
Average Grant Date
Fair Value

 
RSU
Weighted
Average
Remaining
Contractual
Life
Outstanding at December 31, 2019
175,989

 
$
110.79

 
1.04
 
389,900

 
$
119.07

 
1.43
 
 
 
 
 
 
 
 
 
 
 
 
Granted
52,960

 
$
159.33

 
 
 
23,238

 
$
159.33

 
 
Shares vested
(59,192
)
 
$
83.47

 
 
 
(30,607
)
 
$
106.77

 
 
Forfeited
(182
)
 
$
83.47

 
 
 
(4,554
)
 
$
111.07

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at March 31, 2020
169,575

 
$
135.50

 
1.81
 
377,977

 
$
122.64

 
1.33


The fair value of PSUs vested for the three months ended March 31, 2020 totaled $4.9 million (full year 2019: $16.5 million).

The fair value of RSUs vested for the three months ended March 31, 2020 totaled $3.3 million (full year 2019: $8.5 million).

The PSUs vest based on service and specified EPS targets over the periods 2017 – 2019, 2018 – 2020 and 2019 – 2021. Depending on the amount of EPS from 2017 to 2021, up to an additional 78,274 PSUs may also be granted.

Non-cash stock compensation expense

Non-cash stock compensation expense for the three months ended March 31, 2020 and March 31, 2019 has been allocated as follows:
 
Three Months Ended
 
March 31, 2020

 
March 31, 2019

 
(in thousands)
Direct costs
$
1,835

 
$
3,901

Selling, general and administrative
4,234

 
3,178

 
 
 
 
 
$
6,069

 
$
7,079


    
Total non-cash stock compensation expense not yet recognized at March 31, 2020 amounted to $50.7 million. The weighted average period over which this is expected to be recognized is 2.48 years.

19



12. Share capital

The Company can acquire up to 10% of its outstanding ordinary shares (by way of redemption), in accordance with Irish law, the United States securities laws, and the Company’s constitutional documents through open market share acquisitions.

On January 8, 2019, the Company commenced a share buyback program of up to 1.0 million ordinary shares which was completed during the year ended December 31, 2019 for total consideration of $141.6 million. On October 22 2019, the Company commenced a further share buyback program. At December 31, 2019 35,100 ordinary shares were redeemed for a total consideration of $5.3 million.

During the three months ended March 31, 2020 1,235,218 ordinary shares were redeemed by the Company under this buyback program for a total consideration of $175.0 million.

The buyback program gives a broker authority to acquire the Company’s ordinary shares from time to time on the open market in accordance with agreed terms and limitations. All ordinary shares that were redeemed under the buyback program were canceled in accordance with the Constitution of the Company and the nominal value of these shares transferred to an other undenominated capital reserve as required under Irish Company Law.

13. Business segment information

The Company determines and presents operating segments based on the information that is internally provided to the chief operating decision maker, the (‘CODM’) in accordance with ASC 280 'Segment Reporting'. The Company determined that the CODM was comprised of the Chief Executive Officer and the Chief Financial Officer.

The Company determines and presents operating segments based on the information that is provided to the CODM. The Company operates as one single business segment, which is the provision of outsourced development services on a global basis to the pharmaceutical, biotechnology and medical devices industries. There have been no changes to the basis of segmentation or the measurement basis for the segment results in the period.

The Company is a clinical research organization (“CRO”), providing outsourced development services on a global basis to the pharmaceutical, biotechnology and medical device industries. It specializes in the strategic development, management and analysis of programs that support all stages of the clinical development process - from compound selection to Phase I-IV clinical studies. The Company has the expertise and capability to conduct clinical trials in most major therapeutic areas on a global basis and has the operational flexibility to provide development services on a stand-alone basis or as part of an integrated “full service” solution. The Company has expanded predominately through internal growth together with a number of strategic acquisitions to enhance its expertise and capabilities in certain areas of the clinical development process.

The Company is generally awarded projects based upon responses to requests for proposals received from companies in the pharmaceutical, biotechnology and medical device industries or work orders executed under our strategic partnership arrangements. Contracts with customers are generally entered into centrally, in most cases with ICON Clinical Research Limited (“ICON Ireland”), the Company’s principal operating subsidiary in Ireland. Revenues, which consist primarily of fees earned under these contracts, are allocated to individual entities within the Group, based on where the work is performed in accordance with the Company’s global transfer pricing model.

ICON Ireland acts as the group entrepreneur under the Company’s global transfer pricing model given its role in the development and management of the group, its ownership of key intellectual property and customer relationships, its key role in the mitigation of risks faced by the group and its responsibility for maintaining the Company’s global network. ICON Ireland enters into the majority of the Company’s customer contracts.

ICON Ireland remunerates other operating entities in the ICON Group on the basis of a guaranteed cost plus mark-up for the services they perform in each of their local territories. The cost plus mark-up for each ICON entity is established to ensure that each of ICON Ireland and the ICON entities that are involved in the conduct of services for customers, earn an appropriate arms-length return having regard to the assets owned, risks borne, and functions performed by each entity from these intercompany transactions. The cost plus mark up policy is reviewed annually to ensure that it is market appropriate.

The geographic split of revenue disclosed for each region outside Ireland is the cost plus revenue attributable to these entities. The residual revenues of the Group, once each ICON entity has been paid its respective intercompany service fee, generally fall to be retained by ICON Ireland. As such, revenues and income from operations in Ireland are a function of this global transfer pricing model and comprise revenues of the Group after deducting the cost plus revenues attributable to the activities performed outside Ireland.

The Company's areas of operation outside of Ireland include the United States, United Kingdom, Belgium, Bulgaria, France, Germany, Italy, Spain, Poland, Portugal, Czech Republic, Hungary, Israel, Latvia, Romania, Russia, Serbia, Sweden, The Netherlands, Turkey, Ukraine, Canada, Argentina, Brazil, Chile, Colombia, Mexico, Peru, India, China (including Hong Kong), Japan, Singapore, South Korea, The Philippines, Taiwan, Thailand, Australia, New Zealand and South Africa.

20




The geographical distribution of the Company’s segment measures as at March 31, 2020 and December 31, 2019 and for the three months ended March 31, 2020 and March 31, 2019 is as follows:

a) The distribution of revenue by geographical area was as follows:
 
Three Months Ended
 
March 31, 2020

 
March 31, 2019

 
(in thousands)
Ireland *
$
314,972

 
$
298,483

Rest of Europe
102,431

 
90,445

U.S.
225,467

 
218,540

Rest of World
72,232

 
67,384

 
 
 
 
Total
$
715,102

 
$
674,852


* All sales shown for Ireland are export sales.

b) The distribution of income from operations including restructuring by geographical area was as follows:
 
Three Months Ended
 
March 31, 2020

 
March 31, 2019

 
(in thousands)
Ireland
$
73,935

 
$
70,621

Rest of Europe
10,696

 
5,850

U.S.
13,891

 
17,107

Rest of World
7,769

 
8,368

 
 
 
 
Total
$
106,291

 
$
101,946

   

c) The distribution of long-lived assets (including right-of-use assets), net, by geographical area was as follows:

March 31, 2020

 
December 31, 2019


(in thousands)
Ireland
$
107,684

 
$
110,522

Rest of Europe
40,398

 
41,970

U.S.
69,686

 
72,578

Rest of World
44,323

 
44,994

 
 
 
 
Total
$
262,091

 
$
270,064

 
 
 
 

21



d) The distribution of depreciation, amortization and reduction in carrying value of the right-of-use assets by geographical area was as follows:
 
Three Months Ended
 
March 31, 2020

 
March 31, 2019

 
(in thousands)
Ireland
$
8,241

 
$
7,890

Rest of Europe
3,815

 
3,437

U.S.
8,639

 
7,641

Rest of World
2,955

 
3,975

 
 
 
 
Total
$
23,650

 
$