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EX-99.2 - EX-99.2 - PRA Health Sciences, Inc.a17-24668_1ex99d2.htm
EX-99.1 - EX-99.1 - PRA Health Sciences, Inc.a17-24668_1ex99d1.htm
EX-23.1 - EX-23.1 - PRA Health Sciences, Inc.a17-24668_1ex23d1.htm
8-K/A - 8-K/A - PRA Health Sciences, Inc.a17-24668_18ka.htm

Exhibit 99.3

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

The following unaudited pro forma condensed combined financial statements of PRA Health Sciences, Inc. (“PRA” or the “Company”) present the combination of the historical financial information of the Company and Symphony Health Solutions Corporation (“Symphony Health”) adjusted to give effect to the acquisition, as described in “Description of the Acquisition” in the notes to the unaudited pro forma condensed combined financial statements, to be accounted for under the acquisition method of accounting in accordance with Accounting Standards Codification 805, Business Combinations (“ASC 805”).

 

The Unaudited Pro Forma Condensed Combined Balance Sheet is presented as if the acquisition had occurred on June 30, 2017. The Unaudited Pro Forma Condensed Combined Statements of Operations for the six months ended June 30, 2017 and the year ended December 31, 2016 are presented as if the acquisition had occurred on January 1, 2016, the beginning of the earliest period presented. The unaudited pro forma financial information is based on the historical consolidated financial statements of PRA and Symphony Health, and the assumptions and adjustments set forth in the accompanying explanatory notes.

 

These unaudited pro forma combined financial information and the accompanying notes should be read together with (1) the Company’s audited consolidated financial statements and accompanying notes, as of and for the year ended December 31, 2016, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on February 23, 2017, (2) the Company’s unaudited consolidated financial statements and accompanying notes as of and for the six months ended June 30, 2017 and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, which was filed with the SEC on August 8, 2017, (3) Symphony Health’s audited consolidated financial statements for the year ended December 31, 2016, included as exhibit 99.1 to this Form 8-K/A, and (4) Symphony Health’s unaudited consolidated financial statements as of and for the six months ended June 30, 2017, included as exhibit 99.2 to this Form 8-K/A.

 

For purposes of developing the Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2017, the acquired Symphony Health assets, including identifiable intangible assets, and liabilities assumed have been recorded at their estimated fair values with the excess purchase price assigned to goodwill. The estimated fair values assigned in this unaudited pro forma financial information are preliminary and represent PRA’s current best estimate of fair value and are subject to revision. The unaudited pro forma financial information is provided for informational purposes only and is based on available information and assumptions that PRA believes are reasonable. It does not purport to represent what the actual consolidated results of operations or the consolidated financial position of PRA would have been had the acquisition occurred on the dates indicated, nor is it necessarily indicative of future consolidated results of operations or consolidated financial position. The actual financial position and results of operations will differ, perhaps significantly, from the pro forma amounts reflected herein due to a variety of factors, including access to additional information, changes in value not currently identified and changes in operating results following the date of the pro forma financial information.

 

The actual operating results for Symphony Health will be consolidated with the Company’s operating results for all periods subsequent to the acquisition date of September 6, 2017.

 

1



 

Unaudited Pro Forma Condensed Combined Balance Sheet

As of June 30, 2017

(in thousands)

 

 

 

Historical

 

Historical
Symphony

 

Pro Forma

 

 

 

Pro Forma

 

 

 

PRA

 

Health

 

Adjustments

 

Notes

 

Combined Company

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

113,400

 

$

44,242

 

$

(28,814

)

5(a)

 

$

128,828

 

Restricted cash

 

1,578

 

 

 

 

 

1,578

 

Accounts receivable and unbilled services, net

 

607,322

 

45,077

 

 

 

 

652,399

 

Other current assets

 

42,807

 

27,977

 

103

 

5(b)

 

70,887

 

Total current assets

 

765,107

 

117,296

 

(28,711

)

 

 

853,692

 

Fixed assets, net

 

103,322

 

10,895

 

 

 

 

114,217

 

Goodwill

 

1,025,198

 

 

500,253

 

5(c)

 

1,525,451

 

Intangible assets, net

 

480,228

 

 

238,600

 

5(d)

 

718,828

 

Other assets

 

35,802

 

21,659

 

(21,144

)

5(e)(j)

 

36,317

 

Total assets

 

$

2,409,657

 

$

149,850

 

$

688,998

 

 

 

$

3,248,505

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

39,063

 

$

250

 

$

13,500

 

5(f)

 

$

52,813

 

Accounts payable

 

69,899

 

14,626

 

 

 

 

84,525

 

Accrued expenses and other current liabilities

 

168,358

 

27,700

 

90,102

 

5(g)

 

286,160

 

Advanced billings

 

375,866

 

70,961

 

(1,250

)

5(h)

 

445,577

 

Total current liabilities

 

653,186

 

113,537

 

102,352

 

 

 

869,075

 

Long-term debt, net

 

794,401

 

24,116

 

509,712

 

5(f)

 

1,328,229

 

Other long-term liabilities

 

113,887

 

8,575

 

86,172

 

5(i)(j)

 

208,634

 

Total liabilities

 

1,561,474

 

146,228

 

698,236

 

 

 

2,405,938

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

68,586

 

(68,586

)

5(k)

 

 

Common stock

 

626

 

8

 

(8

)

5(k)

 

626

 

Additional paid-in capital

 

886,104

 

41,935

 

(41,935

)

5(k)

 

886,104

 

Accumulated other comprehensive loss

 

(173,062

)

 

 

 

 

(173,062

)

Retained earnings (accumulated deficit)

 

129,025

 

(106,907

)

101,291

 

5(k)

 

123,409

 

Equity attributable to controlling interests stockholders

 

842,693

 

3,622

 

(9,238

)

 

 

837,077

 

Noncontrolling interest

 

5,490

 

 

 

 

 

5,490

 

Total stockholders’ equity

 

848,183

 

3,622

 

(9,238

)

 

 

842,567

 

Total liabilities and stockholders’ equity

 

$

2,409,657

 

$

149,850

 

$

688,998

 

 

 

$

3,248,505

 

 

See accompanying notes to unaudited pro forma condensed combined financial information.

 

2



 

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Six Months Ended June 30, 2017

(in thousands, except per share data)

 

 

 

Historical
PRA

 

Historical
Symphony
Health

 

Pro Forma
Adjustments

 

Notes

 

Pro Forma
Combined
Company

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Service revenue

 

$

885,022

 

$

111,996

 

$

 

 

 

$

997,018

 

Reimbursement revenue

 

136,462

 

 

 

 

 

136,462

 

Total revenue

 

1,021,484

 

111,996

 

 

 

 

1,133,480

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Direct costs

 

588,123

 

79,857

 

 

 

 

667,980

 

Reimbursable out-of-pocket costs

 

136,462

 

 

 

 

 

136,462

 

Selling, general and administrative

 

150,463

 

14,765

 

(1,041

)

5(l)

 

164,187

 

Depreciation and amortization

 

31,293

 

2,095

 

12,443

 

5(d)

 

45,831

 

Loss on disposal of fixed assets, net

 

232

 

 

 

 

 

232

 

Income from operations

 

114,911

 

15,279

 

(11,402

)

 

 

118,788

 

Interest expense, net

 

(19,531

)

(636

)

(8,483

)

5(m)

 

(28,650

)

Foreign currency losses, net

 

(22,210

)

 

 

 

 

(22,210

)

Other expense, net

 

(280

)

 

 

 

 

(280

)

Income before income taxes and equity in income of unconsolidated joint ventures

 

72,890

 

14,643

 

(19,885

)

 

 

67,648

 

Provision for (benefit from) income taxes

 

18,076

 

(21,099

)

(7,855

)

5(n)

 

(10,878

)

Income before equity in income of unconsolidated joint ventures

 

54,814

 

35,742

 

(12,030

)

 

 

78,526

 

Equity in income of unconsolidated joint ventures, net of tax

 

68

 

 

 

 

 

68

 

Net income

 

54,882

 

35,742

 

(12,030

)

 

 

78,594

 

Net income attributable to noncontrolling interest

 

(112

)

 

 

 

 

(112

)

Net income attributable to controlling interest

 

$

54,770

 

$

35,742

 

$

(12,030

)

 

 

$

78,482

 

Net income per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.88

 

 

 

 

 

 

 

$

1.27

 

Diluted

 

$

0.84

 

 

 

 

 

 

 

$

1.20

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

61,908

 

 

 

 

 

 

 

61,908

 

Diluted

 

65,586

 

 

 

 

 

 

 

65,586

 

 

See accompanying notes to unaudited pro forma condensed combined financial information.

 

3



 

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2016

(in thousands, except per share data)

 

 

 

Historical
PRA

 

Historical
Symphony
Health

 

Pro Forma
Adjustments

 

Notes

 

Pro Forma
Combined
Company

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Service revenue

 

$

1,580,023

 

$

200,333

 

$

 

 

 

$

1,780,356

 

Reimbursement revenue

 

231,688

 

 

 

 

 

231,688

 

Total revenue

 

1,811,711

 

200,333

 

 

 

 

2,012,044

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Direct costs

 

1,032,688

 

149,387

 

 

 

 

1,182,075

 

Reimbursable out-of-pocket costs

 

231,688

 

 

 

 

 

231,688

 

Selling, general and administrative

 

269,893

 

30,106

 

 

 

 

299,999

 

Transaction-related costs

 

44,834

 

 

 

 

 

44,834

 

Depreciation and amortization

 

69,506

 

3,034

 

24,887

 

5(d)

 

97,427

 

Loss on disposal of fixed assets, net

 

753

 

 

 

 

 

753

 

Income from operations

 

162,349

 

17,806

 

(24,887

)

 

 

155,268

 

Interest expense, net

 

(54,913

)

(809

)

(17,772

)

5(m)

 

(73,494

)

Loss on extinguishment of debt

 

(38,178

)

 

 

 

 

(38,178

)

Foreign currency gains, net

 

24,029

 

 

 

 

 

24,029

 

Other income, net

 

607

 

 

 

 

 

607

 

Income before income taxes and equity in income of unconsolidated joint ventures

 

93,894

 

16,997

 

(42,659

)

 

 

68,232

 

Provision for (benefit from) income taxes

 

28,494

 

464

 

(16,850

)

5(n)

 

12,108

 

Income before equity in income of unconsolidated joint ventures

 

65,400

 

16,533

 

(25,809

)

 

 

56,124

 

Equity in income of unconsolidated joint ventures, net of tax

 

2,775

 

 

 

 

 

2,775

 

Net income

 

$

68,175

 

$

16,533

 

$

(25,809

)

 

 

$

58,899

 

Net income per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.12

 

 

 

 

 

 

 

$

0.97

 

Diluted

 

$

1.06

 

 

 

 

 

 

 

$

0.91

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

60,759

 

 

 

 

 

 

 

60,759

 

Diluted

 

64,452

 

 

 

 

 

 

 

64,452

 

 

See accompanying notes to unaudited pro forma condensed combined financial information.

 

4



 

Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

1. Description of the Acquisition

 

On September 6, 2017, Pharmaceutical Research Associates, Inc. (“PRA, Inc.”), a Virginia corporation and a wholly-owned subsidiary of PRA Health Sciences, Inc. (“PRA” or the “Company”), completed the previously announced acquisition (the “Acquisition”) of Symphony Health Solutions Corporation (“Symphony Health”), pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of August 3, 2017, by and among PRA, Inc., Symphony Health, Skyhook Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of PRA, Inc. (“Merger Sub”), and STG III, L.P., a Delaware limited partnership, solely in its capacity as the representative (the “Sellers Representative”) of holders of Symphony Health’s capital stock and stock options. Pursuant to the Merger Agreement, Merger Sub merged with and into Symphony Health on September 6, 2017 (the “Merger”), with Symphony Health continuing as the surviving corporation and a wholly-owned subsidiary of PRA, Inc.

 

Pursuant to the Merger Agreement, PRA, Inc. paid approximately $540.8 million in cash for the outstanding equity of Symphony Health, which is subject to customary post-closing adjustments. Under the Merger Agreement, PRA, Inc. may be required to make additional payments in the form of contingent consideration, which is not capped, to the prior equity holders of Symphony Health pursuant to an earnout provision that is based on Symphony Health exceeding financial targets for the twelve month periods ending December 2017 and December 2018.

 

2. Financing Transaction

 

The Company funded the cash consideration for the Merger with proceeds from borrowings under the Joinder (as defined below). PRA, Inc., certain domestic subsidiaries of PRA, Inc., as grantors and guarantors, the lenders party thereto and Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent and collateral agent, entered into the Joinder Agreement (the “Joinder”) on September 6, 2017, which amended the Credit Agreement, dated as of December 6, 2016 (the “Credit Agreement” and, as amended by the Joinder, the “Amended Credit Agreement”), by and among the Company, PRA, Inc., as the borrower, each lender from time to time party thereto and Wells Fargo, as administrative agent, collateral agent, letter of credit issuer and swingline lender. Pursuant to the terms of the Joinder, PRA, Inc. exercised its right under the Credit Agreement to establish an additional tranche of term loans (the “New Term Loan”), pursuant to which, on September 6, 2017, PRA, Inc. borrowed an aggregate principal amount of $550 million to be used to finance the Merger and for general corporate purposes.

 

The New Term Loan matures on December 6, 2021 and bears interest at a rate equal to LIBOR or the adjusted base rate (“ABR”), plus a margin based on the ratio of total indebtedness to EBITDA, ranging from 1.25% to 2.00%, in the case of LIBOR rate loans, and 0.25% to 1.00%, in the case of ABR rate loans. Under the terms of the Joinder, the New Term Loan will amortize in equal quarterly installments of an aggregate annual amount equal to 2.5% of the original principal amount of the New Term Loan, with any remaining balance payable at maturity. Other than with respect to the applicable interest rate and amortization schedule, all terms and conditions applicable to the New Term Loan, including provisions governing mandatory and voluntary prepayments, affirmative and negative covenants and events of default and related penalties, are substantially the same as the terms and conditions contained in the Credit Agreement, as previously disclosed in the Company’s Current Report on Form 8-K filed with the SEC on December 6, 2016.

 

3. Basis of Presentation

 

The accompanying unaudited pro forma condensed combined financial statements give effect to the acquisition of Symphony Health by PRA.  The unaudited pro forma financial information is based on the historical consolidated financial statements of PRA and Symphony Health, and the assumptions and adjustments set forth in

 

5



 

these notes. The unaudited pro forma financial information is provided for informational purposes only and is based on available information and assumptions that the Company believes are reasonable. It does not purport to represent what the actual consolidated results of operations or the consolidated financial position of the Company would have been had the acquisition occurred on the dates indicated, nor is it necessarily indicative of future consolidated results of operations or consolidated financial position. The actual financial position and results of operations will differ, perhaps significantly, from the pro forma amounts reflected herein due to a variety of factors, including access to additional information, changes in value not currently identified and changes in operating results following the date of the pro forma financial information.

 

Pro forma adjustments are included only to the extent they are (i) directly attributable to the acquisition, (ii) factually supportable and (iii) with respect to the statements of operations, expected to have a continuing impact on the combined results. The accompanying unaudited pro forma condensed combined financial information is presented for informational purposes only and is based on available information and assumptions that the Company believes are reasonable.

 

The unaudited pro forma condensed combined financial information does not reflect any cost savings from operating efficiencies or revenue synergies that could result from the acquisition.

 

The acquisition will be accounted for using the acquisition method of accounting. The unaudited pro forma financial information reflects the preliminary assessment of fair values and useful lives assigned to the assets acquired and liabilities assumed. Fair value estimates were determined based on preliminary discussions between the Company and Symphony Health, due diligence efforts and publicly disclosed information for other business combinations in the industry.  The detailed valuation studies necessary to arrive at the required estimates of the fair values for the Symphony Health assets acquired and liabilities assumed have not been completed. Significant assets and liabilities that are subject to preparation of valuation studies to determine appropriate fair value adjustments include fixed assets, identifiable intangible assets, and advanced billings. Changes to the fair values of these assets and liabilities will also result in changes to goodwill and deferred income tax liabilities, which could be material.

 

The Unaudited Pro Forma Condensed Combined Balance Sheet is presented as if the acquisition had occurred on June 30, 2017. The Unaudited Pro Forma Condensed Combined Statements of Operations for the six months ended June 30, 2017 and the year ended December 31, 2016 are presented as if the acquisition had occurred on January 1, 2016, the beginning of the earliest period presented.

 

4. Preliminary Purchase Consideration

 

The fair value of the acquisition consideration, or the purchase price, in the unaudited pro forma financial information as if the acquisition date was June 30, 2017 is estimated to be approximately $650.2 million.  The purchase price includes $541.4 million in cash paid at close and the initial estimate of the earnout liability totaling $108.8 million.

 

The following table presents the preliminary allocation of purchase price to the assets to be acquired and liabilities to be assumed in the merger (in thousands):

 

Cash and cash equivalents

 

$

19,138

 

Accounts receivable and unbilled services, net

 

45,077

 

Other current assets and receivables

 

27,977

 

Fixed assets

 

10,895

 

Identifiable intangibles (discussed further in Note 5(d))

 

238,600

 

Accounts payable, accrued expenses and other liabilities

 

(42,034

)

Advanced billings

 

(69,711

)

Deferred tax liabilities

 

(74,148

)

Other long-term liabilities

 

(5,875

)

Estimated fair value of net assets acquired

 

149,919

 

Purchase price, including contingent consideration

 

650,172

 

Total goodwill

 

$

500,253

 

 

6



 

Upon completion of the fair value assessment following the acquisition, PRA anticipates the finalized fair values of the net assets acquired will differ from the preliminary assessment outlined above. Generally, changes to the initial estimates of the fair value of the assets acquired and liabilities assumed within a one-year measurement period from the acquisition date will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill, which could be material.

 

5. Acquisition-Related Pro Forma Adjustments

 

The unaudited pro forma financial information reflects the following adjustments related to the merger:

 

(a)         Cash and cash equivalents. Adjustment reflects the preliminary net adjustment to cash in connection the Acquisition:

 

(in thousands)

 

 

 

Proceeds from New Term Loan

 

$

 550,000

 

Purchase price

 

(541,388

)

Repayment of Symphony Health’s outstanding debt, including $292 of accrued interest

 

(25,104

)

Debt issuance costs related to New Term Loan

 

(5,511

)

Acquisition-related transaction expenses

 

(6,811

)

Pro forma adjustment

 

$

 (28,814

)

 

(b)         Other current assets.  Adjustment reflects the current portion of prepaid representations and warranties insurance purchased in connection with the Acquisition.

 

(c)          Goodwill. Adjustment to record goodwill resulting from the acquisition of Symphony Health. Goodwill represents the residual of the purchase price over the fair value of the identified assets acquired and liabilities assumed. Goodwill is not amortized but evaluated for impairment annually, or more frequently if events or changes in circumstances indicate an impairment.

 

(d)         Intangible assets. Adjustment reflect the estimated fair values of Symphony Health’s identifiable intangible assets. The primary assets include customer relationships, software, databases, and the Symphony Health trade name.

 

The following tables summarizes information about the other identifiable intangible assets (in thousands, except useful life information):

 

 

 

 

 

Weighted
Average
Useful Life

 

Customer relationships

 

$

161,000

 

12 years

 

Database

 

64,600

 

9 years

 

Software and other intangibles

 

13,000

 

5 years

 

Total fair value of identifiable intangibles

 

$

238,600

 

 

 

 

For the six months ended June 30, 2017, incremental amortization expense on the above intangible assets was $12.4 million. For the year ended December 31, 2016, incremental amortization expense on the above intangible assets was $24.9 million.

 

(e)          Other Assets.  Adjustment reflects the noncurrent portion of prepaid representations and warranties insurance totaling $0.5 million purchased in connection with the Acquisition offset by the reclass of deferred tax assets totaling $21.7 million which were netted against deferred tax liabilities associated with identified intangibles.  See Note 5(j) for further information.

 

7



 

(f)           Long-term debt.  Adjustment reflects a net increase in long-term debt related to financing transaction discussed in Note 2 as follows:

 

(in thousands)

 

Current portion

 

Long-term portion

 

Total

 

New Term Loan

 

$

13,750

 

$

536,250

 

$

550,000

 

New Term Loan debt issuance costs

 

 

(2,422

)

(2,422

)

Less: Repayment of Symphony Health’s debt

 

(250

)

(24,562

)

(24,812

)

Less: Write-off of Symphony Health’s debt issuance costs

 

 

446

 

446

 

Pro forma adjustment

 

$

13,500

 

$

509,712

 

$

523,212

 

 

(g)          Accrued expenses and other current liabilities.  Adjustment reflects the current portion of earnout liability (discussed in Note 4) totaling $90.4 million offset by the write-off of $0.3 million accrued interest associated with Symphony Health’s debt.

 

(h)         Advanced billings.  Adjustment of $1.3 million to reflect the fair value of the assumed performance obligations of Symphony Health using a cost build-up approach.  The revenue associated with this downward adjustment will not be recognized by the combined company post-acquisition.

 

(i)             Other long-term liabilities.  The preliminary pro forma adjustment is calculated as follow:

 

(in thousands)

 

 

 

Adjustment to deferred tax liabilities (discussed further in Note 5(j)

 

$

70,482

 

Long-term portion of earnout liability

 

18,390

 

Long-term portion of deferred revenue fair value adjustment

 

(1,875

)

Write-off of Symphony Health’s deferred rent liability

 

(825

)

Pro forma adjustment

 

$

86,172

 

 

(j)            Deferred taxes.  Adjustment reflects the deferred income tax effects of the preliminary pro forma adjustments made to the pro forma balance sheet, using the U.S statutory tax rate of 35.0% and a blended state tax rate of 4.5% primarily as indicated in the table below:

 

(in thousands)

 

Adjustment to Asset
Acquired (Liability
Assumed)

 

Deferred Tax
Asset

 

Deferred Tax
Liability

 

Estimated fair value adjustment to identifiable intangible assets acquired

 

$

238,600

 

$

 

$

94,247

 

Estimated fair value adjustment to deferred revenue

 

(3,125

)

 

1,234

 

Write-off of Symphony Health’s deferred rent liability

 

(825

)

 

326

 

Reclass of deferred tax asset to reflect net deferred tax liability

 

 

 

(21,659

)

(21,659

)

Adjustments related to purchase price allocation

 

 

 

(21,659

)

74,148

 

Adjustment to retained earnings for transaction costs and the loss on modification of debt

 

(9,282

)

 

(3,666

)

Pro forma adjustment

 

 

 

$

(21,659

)

$

70,482

 

 

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(k)         Stockholders’ equity. Adjustment to eliminate all Symphony Health’s stockholders’ equity, including preferred stock, common stock, additional paid-in capital, and accumulated deficit. Transaction costs and the loss on modification of debt totaling $9.3 million, net of a $3.7 million deferred tax benefit were adjusted to retained earnings.

 

(l)             Acquisition-related costs.  Adjustment to remove $1.0 million of acquisition-related costs that were recorded in the Company’s and Symphony Health’s historical results for the six months ended June 30, 2017.

 

(m)     Interest Expense.  Reflects the adjustment to interest expense associated with the New Term Loan and the payoff of Symphony’s Health’s outstanding indebtedness.  The pro forma adjustment for interest expense for the six months ended June 30, 2017 and the year ended December 31, 2016 is as follows:

 

(in thousands)

 

Year ended
December 31, 2016

 

Six months ended
June 30, 2017

 

New Term Loan

 

$

18,011

 

$

8,834

 

Amortization of deferred financing costs — New Term Loan

 

570

 

285

 

Less: Symphony Health’s historical interest expense

 

(809

)

(636

)

Pro forma adjustment

 

$

17,772

 

$

8,483

 

 

(n)         Provision for (benefit from) income taxes.  Adjustment reflects the income tax effect of the pro forma adjustments made to the pro forma condensed combined statements of operations using the U.S. federal statutory tax rate of 35.0% and a blended state tax rate of 4.5%.

 

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