SEC Filing | ICON plc

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iclr-20200630

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 July, 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shall be deemed a part of such registration statement from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished by ICON plc under the Securities Act of 1933 or the Securities Exchange Act of 1934.

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 June 30, 2020 we had approximately 15,150 employees, in 94 locations in 40 countries. During the six months ended June 30, 2020, we derived approximately 31.1%, 58.9% and 10.0% 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 consideration for the acquisition of MedPass is $47.6 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. This liability was settled on July 17, 2020 for $43.9 million.

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 six months ended June 30, 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 experienced a negative impact on its operations. At this point in time, there continues to be significant uncertainty relating to the long-term 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, the ability of patients or other service providers to travel, and our ability to travel, as a result of the outbreak. These factors, amongst others, have resulted in a requirement to increase investment in impact prevention and increased operating costs.

Revenue for the three months ended June 30, 2020 decreased by $74.9 million, or 10.8%, to $620.2 million, compared to $695.1 million for the three months ended June 30, 2019. Revenue decreased by 10.3% in constant currency and decreased by 11.4% in constant dollar organic terms. The decrease in revenues in the three months ended June 30, 2020 is due to the impact the COVID-19 global pandemic has had on operations including; our ability to ensure laboratory samples are collected and analyzed on time, our ability to perform on-site monitoring of clinical trials, the ability of patients or other service providers to travel, and our ability to travel. Certain cost saving measures were introduced in response to COVID-19 including salary reductions. The primary cost saving measure was the application of temporary salary reductions scaled based on seniority of employees.

In light of on-going 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 factors.

COVID-19 has, and may continue to, adversely affect 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, 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 evolve. While our site network and office facilities have begun to re-open on a phased basis, the extent to which the outbreak may continue to 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, additional phases 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 third parties which we utilize may face increased cybersecurity risks due to 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 and third 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 adversely affect our business.

Debt re-financing

On December 15, 2015, ICON Investments Five Unlimited Company issued Senior Notes for aggregate gross proceeds of $350.0 million in a private placement. The Senior Notes will mature on December 15, 2020. This debt will be repaid and new Senior Notes will be drawn in December 2020. In June 2020, the Company entered into an interest rate hedge in respect of the planned refinancing. The interest rate hedge was effective in accordance with Financial Accounting Standards Board (“FASB”) ASC 815 'Derivatives and Hedging'. The fair value of this derivative is recorded within other comprehensive income. The interest rate hedge matured on July 9, 2020 when the interest rates on the issue of new Senior Notes were fixed.

New accounting pronouncements

Recently adopted accounting standards

ASU 2020-04 'Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting' provides optional expedients and exceptions for applying Generally Accepted Accounting Principles ("GAAP") to contracts, hedging relationships, and other transactions affected by the reference rate reform. The amendments apply only to contracts and transactions that reference LIBOR or another reference rate expected to be discontinued as part of the reform. This ASU was issued on March 12, 2020 and applies only to contracts or transactions entered into or evaluated before December 31, 2022. This ASU is effective upon issuance and may be adopted on any date on or after March 12, 2020. The impact of adopting ASU 2020-04 is not expected to be material to the Group.

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.

ICON plc

CONDENSED CONSOLIDATED BALANCE SHEETS

AS AT JUNE 30, 2020 AND DECEMBER 31, 2019


	(Unaudited)		(Audited)
	June 30, 2020		December 31, 2019
ASSETS	(in thousands)
Current Assets:
Cash and cash equivalents	$	592,100	$	520,309
Available for sale investments	1,728		49,628
Accounts receivable, net of allowance for credit losses	473,020		527,708
Unbilled revenue	410,397		422,769
Other receivables	34,456		39,290
Prepayments and other current assets	38,108		41,517
Income taxes receivable	28,589		23,759
Total current assets	1,578,398		1,624,980

Other Assets:
Property, plant and equipment, net	162,552		165,087
Goodwill	901,245		883,170
Operating right-of-use assets	86,267		104,977
Other non-current assets	16,939		17,439
Non-current income taxes receivable	13,451		17,230
Non-current deferred tax asset	15,794		16,682
Investments in equity-long term	11,326		10,053
Intangible assets	72,748		67,894
Total Assets	$	2,858,720	$	2,907,512
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	32,722	$	24,050
Unearned revenue	393,217		366,988
Other liabilities	385,036		378,543
Income taxes payable	9,190		12,031
Current bank credit lines and loan facilities	349,828		349,640
Total current liabilities	1,169,993		1,131,252
Other Liabilities:
Non-current operating lease liabilities	63,974		76,593
Non-current other liabilities	21,662		17,512
Non-current government grants	792		813
Non-current income taxes payable	13,351		14,301
Non-current deferred tax liability	10,465		9,476
Commitments and contingencies	—		—
Total Liabilities	1,280,237		1,249,947

Shareholders' Equity:
Ordinary shares, par value 6 euro cents per share; 100,000,000 shares authorized,
52,629,067 shares issued and outstanding at June 30, 2020 and
53,622,206 shares issued and outstanding at December 31, 2019	4,569		4,635
Additional paid-in capital	592,500		577,961
Other undenominated capital	1,134		1,052
Accumulated other comprehensive income	(89,740)		(75,819)
Retained earnings	1,070,020		1,110,226
Total Shareholders' Equity	1,578,483		1,618,055
Redeemable noncontrolling interest	—		39,510
Total Shareholders' Equity and Redeemable Noncontrolling Interest	1,578,483		1,657,565
Total Liabilities and Shareholders' Equity and Redeemable Noncontrolling Interest	$	2,858,720	$	2,907,512

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

ICON plc

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND JUNE 30, 2019

(UNAUDITED)


		Three Months Ended						Six Months Ended
		June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
	(in thousands except share and per share data)

Revenue		$	620,228	$	695,137	$	1,335,330	$	1,369,989

Costs and expenses:
Direct costs		445,833		490,656		951,126		966,153
Selling, general and administrative expense		83,499		83,203		170,695		165,115
Depreciation and amortization		15,858		15,188		32,180		30,685
Restructuring		18,089		—		18,089		—


Total costs and expenses		563,279		589,047		1,172,090		1,161,953

Income from operations		56,949		106,090		163,240		208,036
Interest income		441		1,780		2,250		3,525
Interest expense		(3,220)		(3,199)		(6,401)		(6,553)

Income before provision for income taxes		54,170		104,671		159,089		205,008
Provision for income taxes		(6,410)		(12,456)		(19,000)		(24,496)

Net income		47,760		92,215		140,089		180,512
Net income attributable to noncontrolling interest		—		(358)		(633)		(358)
Net income attributable to the Group		$	47,760	$	91,857	$	139,456	$	180,154

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

Basic		$	0.91	$	1.70	$	2.55	$	3.34
Diluted		$	0.90	$	1.69	$	2.51	$	3.31






Weighted average number of Ordinary Shares outstanding:

Basic		52,570,104		53,957,446		52,959,229		53,901,427

Diluted		53,028,567		54,449,117		53,691,138		54,355,705

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

ICON plc

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND JUNE 30, 2019 (UNAUDITED)


	Six Months Ended
	June 30, 2020		June 30, 2019
	(in thousands)
Cash flows from operating activities:
Net income	$	140,089	$	180,512
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on disposal of property, plant and equipment	95		29
Depreciation expense	22,643		22,916
Impairment of right-of-use assets	5,411		—
Reduction in carrying value of operating right-of-use assets	14,337		15,046
Amortization of intangibles	9,537		7,769
Amortization of government grants	(22)		(22)
Interest on short term investments	—		(538)
Interest on non-current operating lease liability	1,006		1,506
Realized gain on sale of short term investments	(232)		—
Loss/(gain) on re-measurement of financial assets	—		(500)
Stock compensation expense	13,186		12,834
Amortization of interest rate hedge	(482)		(464)
Amortization of financing costs	258		255
Deferred taxes	(2,613)		2,465
Changes in assets and liabilities:
Decrease/(increase) in accounts receivable	58,170		(9,285)
Decrease/(increase) in unbilled revenue	12,226		(124,158)
Decrease in other receivables	2,689		1,666
Decrease/(increase) in prepayments and other current assets	2,937		(2,946)
Decrease/(increase) in other non-current assets	486		(1,925)
Increase in unearned revenue	25,056		42,263
Decrease in other current liabilities	(33,507)		(10,581)
Decrease in operating lease liabilities	(15,416)		(16,724)
Increase in other non-current liabilities	2,355		147
Decrease in income taxes payable	(5,931)		(3,191)
Increase in accounts payable	8,370		295
Net cash provided by operating activities	260,648		117,369
Cash flows from investing activities:
Purchase of property, plant and equipment	(21,161)		(18,217)
Purchase of subsidiary undertakings	(47,367)		(81,631)
Cash acquired with subsidiary undertaking	10,170		8,405
Purchase of available for sale investments	—		(9,105)
Sale of available for sale investments	47,902		9,061
Purchase of investments in equity - long term	(1,273)		(3,305)
Net cash used in investing activities	(11,729)		(94,792)
Cash flows from financing activities:


Proceeds from exercise of equity compensation	1,461		17,054
Share issue costs	(6)		(6)

Repurchase of ordinary shares	(175,000)		(65,100)
Share repurchase costs	(140)		(52)


Net cash used in financing activities	(173,685)		(48,104)
Effect of exchange rate movements on cash	(3,443)		(116)
Net increase/(decrease) in cash and cash equivalents	71,791		(25,643)
Cash and cash equivalents at beginning of period	520,309		395,851
Cash and cash equivalents at end of period	$	592,100	$	370,208

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

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	—	—		—		—		—		139,456		139,456		633

Currency translation adjustment	—	—		—		—		(11,828)		—		(11,828)		—
Currency impact of long term funding (net of tax)	—	—		—		—		(1,002)		—		(1,002)		—
Transfer to realized capital gain	—	—		—		—		(232)		—		(232)		—
Amortization of interest rate hedge	—	—		—		—		(482)		—		(482)		—
Loss on interest rate hedge	—	—		—		—		(760)		—		(760)
Fair value of cash flow hedge (net of tax)	—	—		—		—		383		—		383		—

Total comprehensive income	—	—		—		—		(13,921)		139,456		125,535		633

Exercise of share options	40,199	3		1,445		—		—		—		1,448		—
Issue of restricted share units	201,880	13		—		—		—		—		13		—
Non-cash stock compensation expense	—	—		13,100		—		—		—		13,100		—
Share issuance costs	—	—		(6)		—		—		—		(6)		—
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 June 30, 2020	52,629,067	$	4,569	$	592,500	$	1,134	$	(89,740)	$	1,070,020	$	1,578,483	$	—

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

ICON plc

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

June 30, 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 six months ended June 30, 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. This liability was settled on July 17, 2020 for $43.9 million.

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.

Leases

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								Six Months Ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
	(in thousands)						(in thousands)

Top client	$	74,932	$	89,565	$	156,199	$	189,559

Clients 2-5	179,018		166,772		381,996		336,285
Clients 6-10	86,449		87,725		160,800		166,499
Clients 11-25	101,417		139,086		231,501		274,748
Other	178,412		211,989		404,834		402,898

Total	$	620,228	$	695,137	$	1,335,330	$	1,369,989

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

Accounts receivables and unbilled revenue are as follows:


	June 30, 2020		December 31, 2019
	(in thousands)
Contract assets:
Billed services (accounts receivable)	$	482,349	$	535,088
Unbilled services (unbilled revenue)	410,397		422,769
Accounts receivable and unbilled revenue	892,746		957,857
Allowance for credit losses	(9,329)		—
Allowance for doubtful debts	—		(7,380)

Accounts receivable and unbilled revenue, net	$	883,417	$	950,477

Unbilled services and unearned revenue or payments on account (contract assets and liabilities) were as follows:


(in thousands, except percentages)	June 30, 2020		December 31, 2019		$ Change		% Change

Unbilled services (unbilled revenue)	$	410,397	$	422,769	$	(12,372)	(2.9)	%
Unearned revenue (payments on account)	(393,217)		(366,988)		(26,229)		7.1	%

Net balance	$	17,180	$	55,781	$	(38,601)	(69.2)	%

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 June 30, 2020 decreased by $12.4 million as compared to December 31, 2019. Unearned revenue increased by $26.2 million over the same period resulting in a decrease of $38.6 million in the net balance of unbilled services and unearned revenue or payments on account between December 31, 2019 and June 30, 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 six months ended June 30, 2020 and June 30, 2019.

As of June 30, 2020 approximately $5.7 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


	Six Months Ended		Year Ended
	June 30, 2020		December 31, 2019
	(in thousands)
Opening balance	$	883,170	$	756,260
Current period acquisitions (Note 6)	27,304		126,932
Prior period acquisitions	123		—
Foreign exchange movement	(9,352)		(22)

Closing balance	$	901,245	$	883,170

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	539
Goodwill *	27,304
Customer relationships **	11,725
Order backlog **	2,883
Accounts receivable	3,033


Prepayments and other current assets	158
Accounts payable	(368)
Unearned revenue	(989)
Other liabilities	(2,315)
Current lease liabilities	(219)
Non-current lease liabilities	(320)
Non-current deferred tax liability	(4,090)

Net assets acquired	$	47,556

Cash outflows	$	46,992
Working capital adjustment payable	564
Contingent consideration ***	—

Total consideration	$	47,556

* 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, the total consideration could increase by a maximum of $6.7 million in contingent consideration. At June 30, 2020, the fair value of this contingent consideration payable to MedPass is $Nil.

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	4,544
Unbilled revenue	186
Prepayments and other current assets	181
Other receivables	6
Accounts payable	(799)
Unearned revenue	(2,411)
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 ***	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 June 30, 2020, the contingent consideration has been settled at fair value in the amount of $0.5 million. The change in fair value has been recorded in the Condensed Consolidated Statement of Operations.

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. Accounting for the acquisition of MeDiNova was finalized in the period ended June 30, 2020.

The acquisition of MeDiNova has been accounted for as a business combination in accordance with ASC 805 'Business Combinations'. The Company 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:


	May 23,
	2019
	(in thousands)
Cash & cash equivalents	$	7,719
Property, plant and equipment	670
Operating right of use assets	1,558
Goodwill *	81,760
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	(6,860)
Current lease liabilities	(430)
Non-current lease liabilities	(1,128)
Non-current deferred tax liability	(1,345)

Net assets acquired	$	86,249

Cash outflows	$	54,123
Working capital adjustment received	(466)
Redeemable noncontrolling interest ***	32,592

Total consideration	$	86,249

*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.

**In finalizing the acquisition of MeDiNova in the twelve month period from acquisition, fair value adjustments were made which resulted in an increase in other liabilities ($1.6 million) and decreases in operating right of use assets ($0.3 million), current lease liabilities ($0.1 million), non-current lease liabilities ($0.3 million) and non-current deferred tax liability ($2.2 million). Customer relationship, order backlog and patient database assets were also finalized.

***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 was recognized, representing the assessment of the redemption value of the noncontrolling interest. This liability was settled on July 17, 2020 for $43.9 million.

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 received	(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

A restructuring charge of $18.1 million was recognized during the three months ended June 30, 2020 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 $11.4 million and office consolidation resulting in a charge for onerous lease obligation of $6.7 million, including the recognition of an impairment of right of use assets of $5.4 million (see note 8 - Operating Leases) and provision for other related costs of $1.3 million.

Details of the restructuring charge recognized in the three and six months ended June, 30, 2020 are as follows:


	Three Months Ended						Six Months Ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
	(in thousands)
Restructuring charge	$	18,089	$	—	$	18,089	$	—

Total	$	18,089	$	—	$	18,089	—

Details of the movement in the restructuring charge recognized in the three and six months ended June, 30, 2020 are as follows:

Workforce reductions

Onerous Lease

Total

(in thousands)

Initial restructuring charge recorded

11,391