This website uses cookies to provide you with the best experience. By using this site you agree to our use of cookies. Please read our cookie notice for more information.
iclr-20200930
falseSep 30, 20202020Q3000106095512/31us-gaap:AccountingStandardsUpdate201602Memberus-gaap:AccountingStandardsUpdate201602CumulativeEffectPeriodOfAdoptionMembereighteen months00010609552020-01-012020-09-30iso4217:USD00010609552020-09-3000010609552019-12-31iso4217:EURxbrli:sharesxbrli:shares00010609552020-07-012020-09-3000010609552019-07-012019-09-3000010609552019-01-012019-09-30iso4217:USDxbrli:shares00010609552018-12-3100010609552019-09-300001060955us-gaap:CommonStockMember2019-12-310001060955us-gaap:AdditionalPaidInCapitalMember2019-12-310001060955iclr:OtherUndenominatedCapitalMember2019-12-310001060955us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001060955us-gaap:RetainedEarningsMember2019-12-310001060955iclr:RedeemableNoncontrollingInterestMember2019-12-310001060955us-gaap:RetainedEarningsMember2020-01-012020-09-300001060955iclr:RedeemableNoncontrollingInterestMember2020-01-012020-09-300001060955us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-09-300001060955us-gaap:InterestRateContractMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-09-300001060955us-gaap:InterestRateContractMember2020-01-012020-09-300001060955iclr:CashFlowHedgeMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-09-300001060955iclr:CashFlowHedgeMember2020-01-012020-09-300001060955us-gaap:CommonStockMember2020-01-012020-09-300001060955us-gaap:AdditionalPaidInCapitalMember2020-01-012020-09-300001060955iclr:OtherUndenominatedCapitalMember2020-01-012020-09-300001060955us-gaap:CommonStockMember2020-09-300001060955us-gaap:AdditionalPaidInCapitalMember2020-09-300001060955iclr:OtherUndenominatedCapitalMember2020-09-300001060955us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-300001060955us-gaap:RetainedEarningsMember2020-09-300001060955iclr:RedeemableNoncontrollingInterestMember2020-09-30xbrli:pure0001060955iclr:MeDiNovaResearchMember2020-03-090001060955iclr:MeDiNovaResearchMember2020-07-172020-07-1700010609552019-01-012019-12-310001060955us-gaap:AccountingStandardsUpdate201602Member2019-01-010001060955us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate201602Member2019-12-310001060955iclr:TopClientMember2020-07-012020-09-300001060955iclr:TopClientMember2019-07-012019-09-300001060955iclr:TopClientMember2020-01-012020-09-300001060955iclr:TopClientMember2019-01-012019-09-300001060955iclr:Clients25Member2020-07-012020-09-300001060955iclr:Clients25Member2019-07-012019-09-300001060955iclr:Clients25Member2020-01-012020-09-300001060955iclr:Clients25Member2019-01-012019-09-300001060955iclr:Clients610Member2020-07-012020-09-300001060955iclr:Clients610Member2019-07-012019-09-300001060955iclr:Clients610Member2020-01-012020-09-300001060955iclr:Clients610Member2019-01-012019-09-300001060955iclr:Clients1125Member2020-07-012020-09-300001060955iclr:Clients1125Member2019-07-012019-09-300001060955iclr:Clients1125Member2020-01-012020-09-300001060955iclr:Clients1125Member2019-01-012019-09-300001060955iclr:OtherCustomersMember2020-07-012020-09-300001060955iclr:OtherCustomersMember2019-07-012019-09-300001060955iclr:OtherCustomersMember2020-01-012020-09-300001060955iclr:OtherCustomersMember2019-01-012019-09-3000010609552020-10-012020-09-300001060955iclr:MedpassGroupLimitedMember2020-01-220001060955iclr:MedpassGroupLimitedMemberus-gaap:CustomerRelationshipsMember2020-01-220001060955us-gaap:OrderOrProductionBacklogMembericlr:MedpassGroupLimitedMember2020-01-220001060955iclr:MedpassGroupLimitedMember2020-01-222020-01-220001060955iclr:MedpassGroupLimitedMember2020-09-300001060955iclr:CRNHoldingsLLCSymphonyMember2019-09-240001060955iclr:CRNHoldingsLLCSymphonyMemberus-gaap:CustomerRelationshipsMember2019-09-240001060955iclr:CRNHoldingsLLCSymphonyMemberus-gaap:OrderOrProductionBacklogMember2019-09-240001060955iclr:CRNHoldingsLLCSymphonyMember2019-09-242019-09-240001060955iclr:CRNHoldingsLLCSymphonyMember2020-01-012020-09-300001060955iclr:CRNHoldingsLLCSymphonyMember2020-06-300001060955iclr:MeDiNovaResearchMember2019-05-230001060955iclr:MeDiNovaResearchMemberus-gaap:CustomerRelationshipsMember2019-05-230001060955iclr:MeDiNovaResearchMemberus-gaap:OrderOrProductionBacklogMember2019-05-230001060955iclr:MeDiNovaResearchMemberus-gaap:DatabasesMember2019-05-230001060955iclr:MeDiNovaResearchMember2019-05-232019-05-230001060955iclr:MolecularMDCorpMember2019-01-250001060955iclr:MolecularMDCorpMemberus-gaap:CustomerRelationshipsMember2019-01-250001060955us-gaap:OrderOrProductionBacklogMembericlr:MolecularMDCorpMember2019-01-250001060955iclr:MolecularMDCorpMember2019-01-252019-01-2500010609552020-07-240001060955iclr:ResourceRationalization2020Member2020-01-012020-09-300001060955iclr:WorkforceReductionMembericlr:ResourceRationalization2020Member2020-01-012020-09-300001060955iclr:ResourceRationalization2020Membericlr:OnerousLeaseMember2020-01-012020-09-300001060955iclr:ResourceRationalization2020Memberus-gaap:OtherRestructuringMember2020-01-012020-09-300001060955iclr:ResourceRationalization2020Member2020-07-012020-09-300001060955iclr:ResourceRationalization2020Member2019-07-012019-09-300001060955iclr:ResourceRationalization2020Member2019-01-012019-09-300001060955iclr:WorkforceReductionMembericlr:ResourceRationalization2020Member2020-09-300001060955iclr:ResourceRationalization2020Membericlr:OnerousLeaseMember2020-09-300001060955iclr:ResourceRationalization2020Member2020-09-300001060955iclr:ResourceRationalizations2018Member2018-01-012018-12-310001060955iclr:WorkforceReductionMembericlr:ResourceRationalizations2018Member2018-01-012018-12-310001060955iclr:OnerousLeaseMembericlr:ResourceRationalizations2018Member2018-01-012018-12-310001060955iclr:ResourceRationalizations2018Member2020-01-012020-09-300001060955iclr:WorkforceReductionMembericlr:ResourceRationalizations2018Member2018-12-310001060955iclr:OnerousLeaseMembericlr:ResourceRationalizations2018Member2018-12-310001060955iclr:ResourceRationalizations2018Member2018-12-310001060955iclr:WorkforceReductionMembericlr:ResourceRationalizations2018Member2019-01-012019-12-310001060955iclr:OnerousLeaseMembericlr:ResourceRationalizations2018Member2019-01-012019-12-310001060955iclr:ResourceRationalizations2018Member2019-01-012019-12-310001060955iclr:WorkforceReductionMembericlr:ResourceRationalizations2018Member2019-12-310001060955iclr:OnerousLeaseMembericlr:ResourceRationalizations2018Member2019-12-310001060955iclr:ResourceRationalizations2018Member2019-12-310001060955iclr:WorkforceReductionMembericlr:ResourceRationalizations2018Member2020-01-012020-09-300001060955iclr:OnerousLeaseMembericlr:ResourceRationalizations2018Member2020-01-012020-09-300001060955iclr:WorkforceReductionMembericlr:ResourceRationalizations2018Member2020-09-300001060955iclr:OnerousLeaseMembericlr:ResourceRationalizations2018Member2020-09-300001060955iclr:ResourceRationalizations2018Member2020-09-300001060955us-gaap:OtherCurrentLiabilitiesMember2020-09-300001060955us-gaap:OtherNoncurrentLiabilitiesMember2020-09-300001060955us-gaap:SellingGeneralAndAdministrativeExpensesMember2020-01-012020-09-300001060955us-gaap:SellingGeneralAndAdministrativeExpensesMember2019-01-012019-09-300001060955us-gaap:CostOfSalesMember2020-01-012020-09-300001060955us-gaap:CostOfSalesMember2019-01-012019-09-3000010609552020-04-012020-06-300001060955us-gaap:OtherCurrentLiabilitiesMember2019-09-300001060955iclr:ConsultantsStockPlan2008PlanMember2017-02-130001060955iclr:ConsultantsStockPlan2008PlanMember2017-02-140001060955iclr:EmployeeStockPlanTwentyZeroEightPlanMember2017-02-140001060955iclr:ConsultantsStockPlan2008PlanMember2017-02-142017-02-140001060955iclr:EmployeeStockPlanTwentyZeroEightPlanMember2017-02-142017-02-140001060955iclr:OptionPlans2008Membersrt:MinimumMember2017-02-142017-02-140001060955iclr:EmployeeStockPlanTwentyZeroThreePlanMember2003-01-170001060955iclr:EmployeeStockPlanTwentyZeroThreePlanMember2003-01-172003-01-170001060955us-gaap:EmployeeStockOptionMembericlr:AwardDateAllYearsExcluding2018Member2020-01-012020-09-300001060955us-gaap:EmployeeStockOptionMembericlr:AwardDate2018Membericlr:NonexecutiveDirectorMember2020-01-012020-09-300001060955us-gaap:EmployeeStockOptionMembersrt:MaximumMember2020-09-302020-09-300001060955us-gaap:EmployeeStockOptionMember2019-12-310001060955us-gaap:EmployeeStockOptionMember2019-12-312019-12-310001060955us-gaap:EmployeeStockOptionMember2020-01-012020-09-300001060955us-gaap:EmployeeStockOptionMember2020-09-300001060955us-gaap:EmployeeStockOptionMember2020-09-302020-09-300001060955us-gaap:EmployeeStockOptionMembersrt:MinimumMember2020-09-300001060955us-gaap:EmployeeStockOptionMembersrt:MaximumMember2020-09-300001060955us-gaap:EmployeeStockOptionMember2019-01-012019-09-300001060955us-gaap:EmployeeStockOptionMember2019-09-302019-09-300001060955iclr:RestrictedStockUnitsTwentyThirteenMember2015-05-112015-05-110001060955iclr:RestrictedStockUnitsTwentyThirteenMember2015-05-110001060955iclr:ConsultantsRestrictedStockUnitsTwentyNineteenMember2019-05-160001060955iclr:ConsultantsRestrictedStockUnitsTwentyNineteenMembericlr:NonexecutiveDirectorMember2020-01-012020-09-300001060955iclr:PerformanceShareUnitMember2019-12-310001060955iclr:PerformanceShareUnitMember2019-12-312019-12-310001060955us-gaap:RestrictedStockUnitsRSUMember2019-12-310001060955us-gaap:RestrictedStockUnitsRSUMember2019-12-312019-12-310001060955iclr:PerformanceShareUnitMember2020-01-012020-09-300001060955us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-09-300001060955iclr:PerformanceShareUnitMember2020-09-300001060955iclr:PerformanceShareUnitMember2020-09-302020-09-300001060955us-gaap:RestrictedStockUnitsRSUMember2020-09-300001060955us-gaap:RestrictedStockUnitsRSUMember2020-09-302020-09-300001060955iclr:PerformanceShareUnitMember2019-01-012019-12-310001060955us-gaap:RestrictedStockUnitsRSUMember2019-01-012019-12-310001060955iclr:PerformanceBasedGrantsMembersrt:MaximumMember2020-09-300001060955us-gaap:CostOfSalesMember2020-07-012020-09-300001060955us-gaap:CostOfSalesMember2019-07-012019-09-300001060955us-gaap:SellingGeneralAndAdministrativeExpensesMember2020-07-012020-09-300001060955us-gaap:SellingGeneralAndAdministrativeExpensesMember2019-07-012019-09-3000010609552020-09-302020-09-300001060955iclr:BuybackProgramMembersrt:MaximumMember2020-01-012020-09-300001060955iclr:BuybackProgramMember2019-01-080001060955iclr:BuybackProgramMember2019-01-012019-12-310001060955iclr:BuybackProgramMember2019-12-312019-12-310001060955iclr:BuybackProgramMember2020-01-012020-09-30iclr:segment0001060955country:IE2020-07-012020-09-300001060955country:IE2019-07-012019-09-300001060955country:IE2020-01-012020-09-300001060955country:IE2019-01-012019-09-300001060955iclr:RestOfEuropeMember2020-07-012020-09-300001060955iclr:RestOfEuropeMember2019-07-012019-09-300001060955iclr:RestOfEuropeMember2020-01-012020-09-300001060955iclr:RestOfEuropeMember2019-01-012019-09-300001060955country:US2020-07-012020-09-300001060955country:US2019-07-012019-09-300001060955country:US2020-01-012020-09-300001060955country:US2019-01-012019-09-300001060955iclr:RestOfWorldMember2020-07-012020-09-300001060955iclr:RestOfWorldMember2019-07-012019-09-300001060955iclr:RestOfWorldMember2020-01-012020-09-300001060955iclr:RestOfWorldMember2019-01-012019-09-300001060955country:IE2020-09-300001060955country:IE2019-12-310001060955iclr:RestOfEuropeMember2020-09-300001060955iclr:RestOfEuropeMember2019-12-310001060955country:US2020-09-300001060955country:US2019-12-310001060955iclr:RestOfWorldMember2020-09-300001060955iclr:RestOfWorldMember2019-12-31

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 October, 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 September 30, 2020 we had approximately 15,250 employees, in 94 locations in 40 countries. During the nine months ended September 30, 2020, we derived approximately 34.4%, 55.8% and 9.8% 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

Oncology site network - Oncacare Limited

On July 24, 2020 a subsidiary of the Company, ICON Clinical Research Limited, entered into an agreement to jointly establish a new company, Oncacare Limited ("Oncacare"), with a third party. Oncacare will operate a specialized oncology site network in the US and EMEA regions. The new site network will focus on implementing a range of commercial models with specialist oncology healthcare providers in the US and EMEA, to accelerate the recruitment and retention of patients into oncology trials. The oncology site network will operate as a joint venture between the Company and a third party company which has extensive experience in developing and running a site network.

The Company has invested $4.9 million to obtain a 49% interest in the voting share capital of Oncacare. The Company’s investment in Oncacare is accounted for under the equity method due to the Company's ability to exercise significant influence over Oncacare that is considered to be greater than minor. The Company records its pro rata share of the earnings/losses of this investment in Share of equity method investments in the Condensed Consolidated Statement of Operations. See additional details in note 2 - Significant accounting policies.

The third party has the right to sell the 51% majority voting share capital exclusively to the Company in an eighteen month period, commencing January 1, 2023 and ICON also has the right to acquire the 51% majority voting share capital from August 1, 2025.

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 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.

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.
2


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 nine months ended September 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.

However, ICON has mobilized its vaccine resources to address the COVID-19 global threat, including its ability to conduct home-based trials to minimize infection. In addition, the Company is currently providing clinical monitoring and safety oversight on more than 100 COVID-19 trials for both the private and government sectors.

Revenue for the three months ended September 30, 2020 decreased by $8.7 million, or 1.2%, to $701.7 million, compared to $710.4 million for the three months ended September 30, 2019. Revenue decreased by 1.9% in constant currency and decreased by 3.5% in constant dollar organic terms. The decrease in revenues in the three months ended September 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 experienced 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 costs associated with 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, the terms of which were finalized in July 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 interest rate hedge matured on July 9, 2020 when the interest rates on the issue of new Senior Notes were fixed.
3




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 was 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.
    
4


     ICON plc
CONDENSED CONSOLIDATED BALANCE SHEETS
AS AT SEPTEMBER 30, 2020 AND DECEMBER 31, 2019
(Unaudited)(Audited)
September 30,
2020
December 31, 2019
ASSETS(in thousands)
Current Assets:
Cash and cash equivalents$707,995 $520,309 
Available for sale investments1,729 49,628 
Accounts receivable, net of allowance for credit losses510,636 527,708 
Unbilled revenue440,379 422,769 
Other receivables32,583 39,290 
Prepayments and other current assets42,950 41,517 
Income taxes receivable34,784 23,759 
Total current assets1,771,056 1,624,980 
Other Assets:
Property, plant and equipment, net160,075 165,087 
Goodwill914,413 883,170 
Operating right-of-use assets85,653 104,977 
Other non-current assets17,920 17,439 
Non-current income taxes receivable14,825 17,230 
Non-current deferred tax asset14,181 16,682 
Equity method investments4,817  
Investments in equity-long term12,990 10,053 
Intangible assets69,368 67,894 
Total Assets$3,065,298 $2,907,512 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable$28,702 $24,050 
Unearned revenue450,906 366,988 
Other liabilities402,018 378,543 
Income taxes payable11,506 12,031 
Current bank credit lines and loan facilities349,923 349,640 
Total current liabilities1,243,055 1,131,252 
Other Liabilities:
Non-current operating lease liabilities62,494 76,593 
Non-current other liabilities21,149 17,512 
Non-current government grants812 813 
Non-current income taxes payable13,849 14,301 
Non-current deferred tax liability12,823 9,476 
Commitments and contingencies  
Total Liabilities1,354,182 1,249,947 
Shareholders' Equity:
Ordinary shares, par value 6 euro cents per share; 100,000,000 shares authorized,
52,775,243 shares issued and outstanding at September 30, 2020 and
53,622,206 shares issued and outstanding at December 31, 2019
4,579 4,635 
Additional paid-in capital610,240 577,961 
Other undenominated capital1,134 1,052 
Accumulated other comprehensive income(66,498)(75,819)
Retained earnings1,161,661 1,110,226 
       Total Shareholders' Equity1,711,116 1,618,055 
Redeemable noncontrolling interest 39,510 
Total Shareholders' Equity and Redeemable Noncontrolling Interest1,711,116 1,657,565 
Total Liabilities and Shareholders' Equity and Redeemable Noncontrolling Interest$3,065,298 $2,907,512 

The accompanying notes are an integral part of these condensed consolidated financial statements.
5


ICON plc
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30, 2019
(UNAUDITED)
Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
(in thousands except share and per share data)
Revenue$701,729 $710,441 $2,037,059 $2,080,430 
Costs and expenses: 
Direct costs493,410 499,791 1,444,536 1,465,944 
Selling, general and administrative expense83,117 85,449 253,812 250,564 
Depreciation and amortization16,801 15,157 48,981 45,842 
Restructuring  18,089  
Total costs and expenses593,328 600,397 1,765,418 1,762,350 
Income from operations108,401 110,044 271,641 318,080 
Interest income268 1,852 2,518 5,377 
Interest expense(3,239)(3,393)(9,640)(9,946)
Income before provision for income taxes105,430 108,503 264,519 313,511 
Provision for income taxes(13,706)(13,020)(32,706)(37,516)
Income before share of earnings from equity method investments91,724 95,483 231,813 275,995 
Share of equity method investments(83) (83) 
Net income91,641 95,483 231,730 275,995 
Net income attributable to noncontrolling interest (658)(633)(1,016)
Net income attributable to the Group$91,641 $94,825 $231,097 $274,979 
Net income per Ordinary Share attributable to the Group (note 11): 
Basic$1.74 $1.73 $4.28 $5.08 
Diluted$1.72 $1.72 $4.25 $5.03 
Weighted average number of Ordinary Shares outstanding:  
Basic52,737,299 54,004,963 52,885,252 53,935,939 
Diluted53,194,327 54,550,672 53,283,680 54,386,066 

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

6


ICON plc
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30, 2019 (UNAUDITED)
Nine Months Ended
September 30, 2020September 30, 2019
(in thousands)
Cash flows from operating activities:
Net income $231,730 $275,995 
Adjustments to reconcile net income to net cash provided by operating activities:  
 Loss on disposal of property, plant and equipment123 217 
 Depreciation expense34,553 34,271 
 Impairment of right-of-use assets5,411  
 Reduction in carrying value of operating right-of-use assets21,367 22,867 
 Amortization of intangibles14,428 11,571 
 Amortization of government grants(33)(33)
 Interest on short term investments (823)
 Interest on non-current operating lease liability 1,126 2,020 
 Realized gain on sale of short term investments(232) 
Gain on re-measurement of financial assets(200)(500)
 Loss on settlement of derivative(905) 
 Loss on equity method investments83  
 Stock compensation expense20,157 21,065 
 Amortization of interest rate hedge(725)(692)
 Amortization of financing costs368 393 
 Deferred taxes1,416 3,179 
Changes in assets and liabilities:  
 Decrease in accounts receivable24,623 16,264 
 Increase in unbilled revenue(17,635)(126,375)
 Decrease in other receivables5,373 1,616 
 Increase in prepayments and other current assets(1,620)(5,862)
 Increase in other non-current assets(474)(1,999)
 Increase in unearned revenue82,386 42,119 
 (Decrease)/increase in other current liabilities(21,640)176 
 Decrease in operating lease liabilities(22,797)(25,440)
 Increase in other non-current liabilities887 1,647 
 (Decrease)/increase in income taxes payable(9,428)6,498 
 Increase/(decrease) in accounts payable4,271 (78)
Net cash provided by operating activities372,613 278,096 
Cash flows from investing activities:  
 Purchase of property, plant and equipment(28,026)(31,929)
 Purchase of subsidiary undertakings(47,931)(116,431)
 Purchase of equity method investments(2,450) 
 Cash acquired with subsidiary undertaking10,170 11,700 
 Purchase of available for sale investments  (16,075)
 Sale of available for sale investments47,902 23,814 
 Purchase of investments in equity - long term(2,737)(3,476)
Net cash used in investing activities(23,072)(132,397)
Cash flows from financing activities:  
 Proceeds from exercise of equity compensation12,349 21,054 
 Share issue costs(10)(9)
 Repurchase of ordinary shares(175,000)(141,573)
 Share repurchase costs(140)(103)
Net cash used in financing activities(162,801)(120,631)
Effect of exchange rate movements on cash946 (3,315)
Net increase in cash and cash equivalents187,686 21,753 
Cash and cash equivalents at beginning of period520,309 395,851 
Cash and cash equivalents at end of period$707,995 $417,604 

The accompanying notes are an integral part of these condensed consolidated financial statements.
7


ICON plc
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(UNAUDITED)
 
Group
SharesAmountAdditional
Paid-in
Capital
Other
Undenominated
Capital
Accumulated
Other
Comprehensive
Income
Retained
Earnings
TotalRedeemable Noncontrolling Interest
(dollars in thousands, except share data)
Balance at December 31, 201953,622,206 $4,635 $577,961 $1,052 $(75,819)$1,110,226 $1,618,055 $39,510 
Comprehensive income:
Net income — — — — — 231,097 231,097 633 
Currency translation adjustment
— — — — 12,176 — 12,176 — 
Currency impact of long term funding (net of tax)
— — — — (1,299)— (1,299)— 
Transfer to realized capital gain
— — — — (232)— (232)— 
Amortization of interest rate hedge
— — — — (725)— (725)— 
Loss on interest rate hedge— — — — (905)— (905)
Fair value of cash flow hedge (net of tax)— — — — 306 — 306 — 
Total comprehensive income— — — — 9,321 231,097 240,418 633 
Exercise of share options181,144 12 12,323 — — — 12,335 — 
Issue of restricted share units207,111 14 — — — — 14 — 
Non-cash stock compensation expense— — 19,966 — — — 19,966 — 
Share issuance costs— — (10)— — — (10)— 
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 September 30, 202052,775,243 $4,579 $610,240 $1,134 $(66,498)$1,161,661 $1,711,116 $ 

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

8


ICON plc
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 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 nine months ended September 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

Equity Method Investments

The Company’s investments that are not consolidated are accounted for under the equity method if the Company exercises significant influence that is considered to be greater than minor. These investments are classified as equity method investments on the accompanying Condensed Consolidated Balance Sheet. The Company records its pro rata share of the earnings/losses of these investments in Share of equity method investments in the Condensed Consolidated Statement of Operations. The Company reviews these for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

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 Condensed 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 was 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.
9



    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 Condensed 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 EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
(in thousands)(in thousands)
Top client$87,231 $80,857 $233,930 $270,416 
Clients 2-5182,229 176,598 568,573 512,883 
Clients 6-1089,062 91,134 249,807 247,309 
Clients 11-25118,156 134,111 344,463 399,877 
Other225,051 227,741 640,286 649,945 
Total$701,729 $710,441 $2,037,059 $2,080,430 

10


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

    Accounts receivables and unbilled revenue are as follows:
September 30, 2020December 31, 2019
(in thousands)
Contract assets:
Billed services (accounts receivable)$519,709 $535,088 
Unbilled services (unbilled revenue)440,379 422,769 
Accounts receivable and unbilled revenue960,088 957,857 
Allowance for credit losses(9,073)— 
Allowance for doubtful debts— (7,380)
Accounts receivable and unbilled revenue, net$951,015 $950,477 
    
Unbilled services and unearned revenue or payments on account (contract assets and liabilities) were as follows:
(in thousands, except percentages)September 30, 2020December 31, 2019$ Change% Change
Unbilled services (unbilled revenue)$440,379 $422,769 $17,610 4.2 %
Unearned revenue (payments on account)(450,906)(366,988)(83,918)22.9 %
Net balance$(10,527)$55,781 $(66,308)(118.9)%

    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 Condensed Consolidated Balance Sheet.

    Unbilled services as at September 30, 2020 increased by $17.6 million compared to December 31, 2019. Unearned revenue increased by $83.9 million over the same period resulting in a decrease of $66.3 million in the net balance of unbilled services and unearned revenue or payments on account between December 31, 2019 and September 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 nine months ended September 30, 2020 and September 30, 2019.

    As of September 30, 2020 approximately $6.1 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.

11


5. Goodwill
Nine Months EndedYear Ended
September 30, 2020December 31, 2019
(in thousands)
Opening balance$883,170 $756,260 
Current period acquisitions (Note 6)27,191 126,932 
Prior period acquisitions123  
Foreign exchange movement3,929 (22)
Closing balance$914,413 $883,170 
12


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. The following table summarizes the Company’s fair values of the assets acquired and liabilities assumed:
January 22,
2020
(in thousands)
Cash & cash equivalents$10,170 
Property, plant and equipment45 
Operating right of use assets539 
Goodwill *27,191 
Customer relationships **11,725 
Order backlog **2,883 
Accounts receivable3,033 
Prepayments and other current assets 158 
Accounts payable(368)
Unearned revenue(989)
Other liabilities(2,202)
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 paid564 
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 September 30, 2020, the fair value of this contingent consideration payable to MedPass is $Nil.










13


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. Accounting for the acquisition of Symphony was finalized in the period ended September 30, 2020.

    The acquisition of Symphony 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:
September 24,
2019
(in thousands)
Cash & cash equivalents$3,292 
Property, plant and equipment564 
Operating right of use assets820 
Goodwill *22,865 
Customer relationships **8,159 
Order backlog **2,163 
Accounts receivable4,544 
Unbilled revenue186 
Prepayments and other current assets 181 
Other receivables6 
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 paid341 
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.
** In finalizing the acquisition of Symphony in the twelve month period from acquisition, fair value adjustments were made which resulted in increases in accounts receivable ($0.6 million) and unearned revenue ($1.0 million) and decreases in unbilled revenue ($0.1 million), accounts payable ($0.3 million) and other liabilities ($0.1 million). Customer relationship and order backlog assets were also finalized.
*** The fair value of the contingent consideration was estimated at the date of acquisition. In the three month period ended, 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 selling, general and administrative expense line of the Condensed Consolidated Statement of Operations.
14





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 equipment670 
Operating right of use assets1,558 
Goodwill *81,760 
Customer relationships 3,887 
Order backlog 171 
Patient database 2,542 
Accounts receivable3,488 
Unbilled revenue4,272 
Other receivables819 
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.
**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.




15


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

    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 equipment1,697 
Operating right of use assets2,866 
Goodwill *22,430 
Customer relationships10,708 
Order backlog2,787 
Accounts receivable3,100 
Unbilled revenue2,421 
Other receivables43 
Prepayments and other current assets908 
Deferred tax asset1,568 
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.


7. Equity method investments

The Company has invested $4.9 million to obtain a 49% interest in the voting share capital of Oncacare. The Company’s investment in Oncacare is accounted for under the equity method due to the Company's ability to exercise significant influence over Oncacare that is considered to be greater than minor. The Company records its pro rata share of the earnings/losses of this investment in 'Share of equity method investments' in the Condensed Consolidated Statement of Operations. See additional details in note 2 - Significant accounting policies.

The majority investor has the right to sell the 51% majority voting share capital exclusively to the Company in an eighteen month period, commencing January 1, 2023 and ICON also has the right to acquire the 51% majority voting share capital from August 1, 2025.
16


Ownership PercentageCarrying ValueCarrying Value
At date of investment
September 30, 2020September 30, 2020July 24, 2020
(in thousands)
Oncacare Limited49 %$4,817 $4,900 

The Company has invested $4.9 million in Oncacare, of which, $2.5 million has been paid with the remainder to be paid in the next twelve months.

The Company has recorded a loss of $0.1 million representing its pro rata share of the losses in Oncacare since the date of initial investment.
8. Restructuring

Restructuring charges 

    A restructuring charge of $18.1 million was recognized during the nine months ended September 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 9 - Operating Leases) and provision for other related costs of $1.3 million.

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

Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019

(in thousands)
Restructuring charge
$ $ $18,089 $ 
Total $ $ $18,089  

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

Workforce reductionsOnerous LeaseTotal
(in thousands)
Initial restructuring charge recorded$11,391 $6,698 $18,089 
Utilization(4,278)(642)(4,920)
Foreign exchange movement 123 123 
Provision at September 30, 2020$7,113 $6,179 $13,292 


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 nine months ended September 30, 2020.
17


Workforce reductionsOnerous LeaseTotal
(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)(238)(668)
Provision at September 30, 2020$301 $668 $969 
    
    At September 30, 2020, $10.2 million is included within other liabilities and $4.1 million within non-current other liabilities.
9. Operating leases
    Lease costs recorded under operating leases for the three and nine months ended September 30, 2020 were as follows:

Three Months EndedNine Months Ended
September 30, 2020September 30, 2019