UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2016

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission file number 000-30318

INVENTIV HEALTH, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

52-2181734

(State or other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

1 VAN DE GRAAFF DRIVE

BURLINGTON, MASSACHUSETTS 01803

(Address of Principal Executive Offices, Including Zip Code)

(800) 416-0555

(Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	o		Accelerated filer	o

Non-accelerated filer	x	(Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Number of shares of the registrant's Common Stock outstanding at May 10, 2016: 1,000

INVENTIV HEALTH, INC.

FORM 10-Q

TABLE OF CONTENTS

		Page

	PART I—FINANCIAL INFORMATION

ITEM 1. Financial Statements (unaudited)		1

	Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015	1

	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2016 and 2015	2

	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2016 and 2015	3

	Condensed Consolidated Statement of Stockholder’s Deficit for the Three Months Ended March 31, 2016	4

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015	5

	Notes to Unaudited Condensed Consolidated Financial Statements	6

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		23

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk		36

ITEM 4. Controls and Procedures		36

	PART II—OTHER INFORMATION

ITEM 1. Legal Proceedings		38

ITEM 1A. Risk Factors		38

ITEM 6. Exhibits		56

SIGNATURES		57

EXHIBIT INDEX		58

PART I. Financial Information

ITEM 1.

Condensed Consolidated Financial Statements (unaudited)

INVENTIV HEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

	March 31,			December 31,
	2016			2015
ASSETS
Current assets:
Cash and cash equivalents	$	77,113		$	121,317
Restricted cash		2,554			1,607
Accounts receivable, net of allowances for doubtful accounts of $5,368 and $5,395 at March 31, 2016 and December 31, 2015, respectively		328,326			359,081
Unbilled services		261,723			207,465
Prepaid expenses and other current assets		45,059			42,930
Income tax receivable		1,022			1,076
Total current assets		715,797			733,476
Property and equipment, net		139,172			142,032
Goodwill		896,765			895,369
Intangible assets, net		325,919			334,646
Non-current deferred tax assets		10,421			10,032
Other assets		39,721			37,134
Total assets	$	2,127,795		$	2,152,689
LIABILITIES AND STOCKHOLDER’S DEFICIT
Current liabilities:
Current portion of capital lease obligations and other financing arrangements	$	25,296		$	23,333
Accrued payroll, accounts payable and accrued expenses		318,948			333,726
Income taxes payable		3,829			5,484
Deferred revenue and client advances		246,621			246,656
Total current liabilities		594,694			609,199
Capital lease obligations, net of current portion		45,525			45,258
Long-term debt, net of current portion		2,117,132			2,101,885
Non-current income tax liability		7,567			5,942
Deferred tax liability		79,106			73,360
Other non-current liabilities		66,750			88,153
Total liabilities		2,910,774			2,923,797
Commitments and contingencies (Note 7)
inVentiv Health, Inc. stockholder’s deficit:
Common stock, $.01 par value, 1,000 shares authorized, issued and outstanding at March 31, 2016 and December 31, 2015, respectively		1			1
Additional paid-in-capital		575,156			573,739
Accumulated deficit		(1,328,213	)		(1,309,136	)
Accumulated other comprehensive loss		(31,921	)		(37,340	)
Total inVentiv Health, Inc. stockholder’s deficit		(784,977	)		(772,736	)
Noncontrolling interest		1,998			1,628
Total stockholder’s deficit		(782,979	)		(771,108	)
Total liabilities and stockholder’s deficit	$	2,127,795		$	2,152,689

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

INVENTIV HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

(unaudited)

	For the Three Months Ended March 31,
	2016			2015
Net revenues	$	541,296		$	450,977
Reimbursed out-of-pocket expenses		90,983			67,323
Total revenues		632,279			518,300
Operating expenses:
Cost of revenues		372,376			300,505
Reimbursable out-of-pocket expenses		90,983			67,323
Selling, general and administrative expenses		123,756			132,914
Total operating expenses		587,115			500,742
Operating income (loss)		45,164			17,558
Gain on extinguishment of debt		221			—
Interest expense		(55,917	)		(56,479	)
Interest income		64			16
Income (loss) before income tax (provision) benefit and income (loss) from equity investments		(10,468	)		(38,905	)
Income tax (provision) benefit		(8,176	)		(4,528	)
Income (loss) before income (loss) from equity investments		(18,644	)		(43,433	)
Income (loss) from equity investments		5			(1,529	)
Net income (loss)		(18,639	)		(44,962	)
Less: Net (income) loss attributable to the noncontrolling interest		(438	)		(123	)
Net income (loss) attributable to inVentiv Health, Inc.	$	(19,077	)	$	(45,085	)

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

INVENTIV HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

	For the Three Months Ended March 31,
	2016			2015
Net Income (loss)	$	(18,639	)	$	(44,962	)
Other comprehensive income (loss):
Foreign currency translation adjustment		5,419			(5,445	)
Total other comprehensive income (loss)		5,419			(5,445	)
Total comprehensive income (loss)		(13,220	)		(50,407	)
Less: Comprehensive (income) loss attributable to the noncontrolling interest		(438	)		(123	)
Comprehensive income (loss) attributable to inVentiv Health, Inc.	$	(13,658	)	$	(50,530	)

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

INVENTIV HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER’S DEFICIT

(in thousands)

(unaudited)

					Additional					Accumulated Other			Non-
			Common Stock		Paid-In		Accumulated			Comprehensive			controlling
	Shares		Stock		Capital		Deficit			Loss			Interest			Total
Balance at December 31, 2015		1	$	1	$	573,739	$	(1,309,136	)	$	(37,340	)	$	1,628		$	(771,108	)
Net loss		—		—		—		(19,077	)		—			438			(18,639	)
Foreign currency translation adjustment		—		—		—		—			5,419			—			5,419
Stock-based compensation expense		—		—		1,417		—			—			—			1,417
Distributions to noncontrolling interest		—		—		—		—			—			(68	)		(68	)
Balance at March 31, 2016		1	$	1	$	575,156	$	(1,328,213	)	$	(31,921	)	$	1,998		$	(782,979	)

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

INVENTIV HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	For the Three Months Ended March 31,
	2016			2015
Cash flows from operating activities:
Net Income (loss)	$	(18,639	)	$	(44,962	)
Adjustments to reconcile net income (loss) to net cash provided by (used) in operating activities:
Depreciation		14,646			11,263
Amortization of intangible assets		9,117			13,740
Amortization of deferred financing costs and original issue discount/premium		4,723			4,751
Payment-in-kind interest		8,025			15,677
(Gain) loss on disposal of assets		447			557
Stock-based compensation expense		1,417			470
Gain on extinguishment of debt		(221	)		—
Deferred taxes		5,736			2,988
Other non-cash adjustments		803			2,509
Changes in assets and liabilities, net
Accounts receivable, net		31,171			(6,235	)
Unbilled services		(53,822	)		(21,522	)
Prepaid expenses and other current assets		(364	)		(2,394	)
Accrued payroll, accounts payable and accrued expenses		(11,910	)		9,329
Income tax receivable and non-current income tax liability		(202	)		1,103
Deferred revenue and client advances		2,355			16,898
Other, net		(2,902	)		(2,021	)
Net cash provided by (used in) operating activities		(9,620	)		2,151
Cash flows from investing activities:
Purchases of property and equipment		(6,170	)		(9,799	)
Proceeds from vehicle sales and rebates on vehicle leases		3,979			3,093
Other, net		(966	)		(238	)
Net cash provided by (used in) investing activities		(3,157	)		(6,944	)
Cash flows from financing activities:
Repayments on capital leases and other financing arrangements		(8,907	)		(8,924	)
Repurchase of Notes		(22,790	)		—
Borrowings under line of credit		—			17,000
Repayment on line of credit		—			(17,000	)
Payment on installment note and contingent consideration related to acquisition		(2,174	)		(1,917	)
Other, net		396			25
Net cash provided by (used in) financing activities		(33,475	)		(10,816	)
Effects of foreign currency exchange rate changes on cash		2,048			(2,797	)
Net increase (decrease) in cash and cash equivalents		(44,204	)		(18,406	)
Cash and cash equivalents, beginning of period		121,317			57,059
Cash and cash equivalents, end of period	$	77,113		$	38,653
Supplemental disclosure of cash flow information:
Cash paid for interest	$	31,281		$	32,888
Cash paid (refund) for income taxes		2,714			526
Supplemental disclosure of non-cash activities:
Vehicles acquired through capital lease agreements		10,667			12,436
Accrued capital expenditures		884			2,487

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

INVENTIV HEALTH, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1.	Organization and Business

inVentiv Health, Inc. (“inVentiv”, or the “Company”) is a leading global provider of outsourced clinical development and commercialization services to biopharmaceutical companies. The Company provides services through two reportable business segments: Clinical and Commercial. The Company provides a full suite of services to enhance its clients’ ability to successfully develop, launch and market their products. The Company offers its solutions on both a standalone and integrated basis. The Company’s services cover the entire biopharmaceutical development and commercialization continuum spanning from first-in-human clinical trials to the ongoing commercialization of mature products.

On August 4, 2010, inVentiv Acquisition, Inc., an indirect, wholly owned subsidiary of inVentiv Group Holdings, Inc. (“Group Holdings” or “Parent”) merged with and into the Company (the “THL Acquisition”). Group Holdings is controlled by affiliates of Thomas H. Lee Partners (“THL”), a global private investment and advisory firm, as well as certain co-investors and certain members of management (together with the private equity funds sponsored by THL, and the co-investors, the “Investors”).

2.	Basis of Presentation

The unaudited condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), and include the accounts of inVentiv Health, Inc. and its wholly owned subsidiaries. In addition, the Company consolidates the accounts of its 60% owned subsidiary and reflects the minority interest as a noncontrolling interest classified in equity. The Company has both equity and cost method investments in securities of certain privately held entities. Investments accounted for under the equity method are recorded at the amount of the Company’s investment and adjusted each period for the Company’s share of the investee’s income or loss. During the quarter ended March 31, 2015, the Company recognized a $1.6 million loss on dissolution of a joint venture accounted for under the equity method, which is included in income (loss) from equity investments in the consolidated statements of operations. Investments accounted for under the cost method are recorded at the historical carrying value. The carrying value of both types of investments is recorded in other assets in the consolidated balance sheets and is immaterial. All intercompany transactions have been eliminated in consolidation.

The condensed consolidated financial statements as of March 31, 2016 and for the three months ended March 31, 2016 and 2015 are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods. They do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the 2015 audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 dated March 18, 2016 on file with the Securities and Exchange Commission (the “SEC”). The results reported in these condensed consolidated financial statements should not necessarily be viewed as indicative of the results that may be expected for the entire year. The balance sheet at December 31, 2015 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.

The unaudited condensed consolidated financial statements of the Company have been prepared in conformity with GAAP, which requires management to make estimates and judgments that affect the reported amount of assets, liabilities, revenue, and expenses and disclosure of contingent assets and liabilities in the accompanying financial statements. The significant estimates made by the Company include the estimated forecast that is used in assessing the realizability of the Company’s deferred tax assets and assessing whether the fair value of intangible assets and goodwill exceed the related carrying value. In addition, the Company also makes significant estimates as it relates to revenue recognition, self-insurance reserves, including reserves for employee medical, automobile insurance and worker’s compensation. In the opinion of management, all adjustments considered necessary for a fair presentation have been reflected in these unaudited condensed consolidated financial statements.

Reclassifications

In the Company’s 2015 financial statements, the Company reclassified certain costs from selling, general and administrative (“SG&A”) expenses to cost of revenues to conform to the presentation adopted for 2015. The revised classification aligns all personnel and related costs associated with service delivery within cost of revenues, along with the associated information technology costs supporting these processes. These changes better harmonize the accounting policies of the group, and are consistent with how management is assessing performance and managing costs. As a result of the revision in the classification of the costs, the previously reported SG&A was reduced by $9.3 million for the three months ended March 31, 2015, and cost of revenues has increased by a corresponding amount. The reclassification had no impact on our consolidated financial position, net operating results included in our statements of operations or cash flows.

3.	Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2016-09 (“ASU 2016-09”), Compensation—Stock Compensation (Topic 718) to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2016-09 on the Company’s consolidated financial position, results of operations and statement of cash flows.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”) to increase transparency and comparability among organizations by requiring the recognition of right-to-use assets and liabilities on the balance sheet and disclosing qualitative and quantitative information about leasing arrangements. ASU 2016-02 will be applied on a modified retrospective basis and to each prior reporting period presented and is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. The adoption of this standard is expected to have a material impact on the Company’s consolidated balance sheets, and its potential impact is currently being evaluated.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which provides guidance for revenue recognition (“ASU 2014-09”). ASU 2014-09 will supersede the revenue recognition requirements in Revenue Recognition (Topic 605), and most industry-specific guidance. In July 2015, the FASB deferred the effective date of the new revenue recognition standard by one year, and it is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted, but no earlier than the original effective date of January 1, 2017. The Company is currently evaluating the impact of adopting ASU 2014-09 on the Company’s consolidated financial position and results of operations.

Goodwill

The following table sets forth the carrying amount of goodwill for each segment as of March 31, 2016 and December 31, 2015 (in thousands):

	Clinical			Commercial		Total
Net goodwill at December 31, 2015	$	382,215		$	513,154	$	895,369
Foreign currency translation		(1	)		1,397		1,396
Net goodwill at March 31, 2016	$	382,214		$	514,551	$	896,765

As of March 31, 2016 and December 31, 2015, the Company had accumulated goodwill impairment losses of $478.3 million.

5.	Intangible Assets

The following table sets forth the carrying amount of the Company’s intangible assets as of March 31, 2016 and December 31, 2015 (in thousands):

	March 31, 2016							December 31, 2015
			Accumulated							Accumulated
	Gross		Amortization			Net		Gross		Amortization			Net
Customer relationships	$	366,169	$	(156,458	)	$	209,711	$	365,777	$	(148,679	)	$	217,098
Technology		27,090		(26,364	)		726		27,003		(26,206	)		797
Tradenames subject to amortization		18,314		(16,787	)		1,527		18,293		(16,657	)		1,636
Backlog		95,029		(90,783	)		4,246		95,014		(89,427	)		5,587
Other		1,020		(615	)		405		1,020		(585	)		435
Total finite-lived intangible assets		507,622		(291,007	)		216,615		507,107		(281,554	)		225,553
Tradenames not subject to amortization		109,304		—			109,304		109,093		—			109,093
Total intangible assets	$	616,926	$	(291,007	)	$	325,919	$	616,200	$	(281,554	)	$	334,646

Debt

The Company’s indebtedness is summarized as follows (in thousands):

	March 31,			December 31,
	2016			2015
Senior Secured Credit Facilities:
Term Loan Facility B3 loans, due 2018	$	129,645		$	129,645
Term Loan Facility B4 loans, due 2018		445,694			445,694
Senior Secured Notes, due 2018		625,000			625,000
ABL Facility		—			—
Junior Lien Secured Notes, due 2018		579,837			569,691
Senior Unsecured Notes, due 2018		376,316			376,316
International Facility		—			—
Capital leases and other financing arrangements		70,821			68,591
Total borrowings		2,227,313			2,214,937
Less: unamortized premium (discount)		(7,993	)		(9,030	)
Less: unamortized deferred financing costs		(31,367	)		(35,431	)
Less: current portion of capital leases and other financing arrangements		(25,296	)		(23,333	)
Total long-term borrowings, net of current portion	$	2,162,657		$	2,147,143

At March 31, 2016, the Company had $575.3 million outstanding under the Senior Secured Credit Facilities, which consisted of $129.6 million under the B3 term loans and $445.7 million under the B4 term loans. The Company had $625.0 million outstanding under the Senior Secured Notes, and there were no outstanding borrowings under the ABL Facility (as defined below). The Company also had $579.8 million outstanding under the Junior Lien Secured Notes (as defined below), and $376.3 million outstanding under the Senior Unsecured Notes. In addition, the Company had capitalized leases and other financing arrangements of $70.8 million outstanding as of March 31, 2016.

On July 1, 2015 one of the Company’s indirect subsidiaries in the United Kingdom, inVentiv Health Clinical UK Ltd., (“inVentiv UK”) as borrower, and one of the Company’s indirect subsidiaries in Switzerland, inVentiv Health Switzerland GmbH, as guarantor, entered into an asset-based lending facility (the “International Facility”) for up to $20.0 million. This facility is available to enhance international cash management. At March 31, 2016, the Company had no outstanding borrowings under the International Facility and would have been able to borrow up to $14.9 million.

On August 15, 2014, the Company consummated an exchange offer (the “Junior Lien Notes Exchange Offer”) with holders of its 10% Senior Unsecured Notes due 2018 in which the Company issued $475.0 million aggregate principal amount of new 10%/12% Junior Lien Secured Notes due 2018 (the “Junior Lien Secured Notes”) in exchange for a like amount of the Company’s 10% Senior Unsecured Notes due 2018. The Junior Lien Secured Notes permit up to six semi-annual interest payments to be settled through the issuance of additional Junior Lien Secured Notes. The interest rate with respect to the Junior Lien Secured Notes is a cash rate of 10% per annum or a payment-in-kind (“PIK”) rate of 12% per annum (“PIK Interest”). The Company paid interest on the Junior Lien Secured Notes for the periods commencing August 15, 2014, February 15, 2015 and August 15, 2015 in PIK Interest and elected to pay interest for the period commencing February 15, 2016 in cash. On January 8, 2016, the Company’s Board of Directors approved the repurchase by the Company of its certain Junior Lien Secured Notes and the subsequent cancellation of such repurchased notes (the “PIK Note Repurchase”). During the three months ended March 31, 2016, the Company repurchased and cancelled an aggregate principal amount of $23.7 million of its Junior Lien Secured Notes, including accrued and unpaid interest, through open market purchases for $23.1 million. As a result of the PIK Note Repurchase, the Company reduced its debt and a pro rata portion of deferred financing costs and debt discount on the transactions and recorded a gain on extinguishment of debt of $0.2 million.

On August 12, 2014, in connection with the Junior Lien Notes Exchange Offer, affiliates of Thomas H. Lee Partners, L.P. and certain co-investors purchased $25.0 million of Junior Lien Secured Notes and $26.3 million of the Company’s 10% Senior Unsecured Notes due 2018 for a total consideration of $50.0 million (the “New Money Investment”). The $26.3 million of 10% Senior Unsecured Notes due 2018 were issued at a 5% discount to par value resulting in a $1.3 million discount that is accreted over the related term using the effective interest method. Additionally, on August 15, 2014 the Company issued an additional $7.0 million of Junior Lien Secured Notes (the “Backstop Consideration”) to a group of holders of the Company’s 10% Senior Unsecured Notes due 2018 as consideration for such holders’ agreement to tender the 10% Senior Unsecured Notes due 2018 held by them into the Junior Lien Notes Exchange Offer.

In connection with the Junior Lien Notes Exchange Offer, the Company’s term loan facility and asset-backed revolving facility were amended on July 28, 2014 (the “Credit Agreement Amendments”) to permit the Junior Lien Notes Exchange Offer, the New Money Investment and the issuance of the Backstop Consideration and to extend the maturities of certain outstanding term loans from 2016 to 2018. The margin on the term loans increased by 0.25% when compared to the interest rates on the prior term loans. There was no net change in the outstanding principal balance of the term loans as a result of the modified terms.

On August 16, 2013, the Company, Citibank, N.A. and certain financial institutions entered into a credit agreement for an asset-based revolving credit facility of up to $150.0 million (the “ABL Facility”), subject to borrowing base availability, which matures on August 16, 2018. Up to $35.0 million of the ABL Facility is available for the issuance of letters of credit.

All obligations under the ABL Facility are secured by the Company’s domestic subsidiaries and secured by a first priority lien on current assets of the Company and its domestic subsidiaries and a second priority lien on all other assets of the Company and its domestic subsidiaries. The available borrowing capacity varies monthly according to the levels of the Company’s eligible accounts receivable and unbilled receivables. As of March 31, 2016, the Company had no outstanding borrowings under the ABL Facility, approximately $18.8 million in letters of credit outstanding against the ABL Facility and would have been able to borrow up to an additional $131.2 million.

Cash Pooling

The Company and certain of its international subsidiaries entered into a notional cash pooling arrangement (“Cash Pool”) to help manage global liquidity requirements. The parties to the arrangement combine their cash balances in pooling accounts with the ability to set-off overdrafts to the bank against positive cash balances. Each subsidiary receives interest on the cash balances or pays interest on amounts owed. At March 31, 2016, the Company’s net cash position in the pool of $34.4 million, defined as the gross cash position in the pool of $113.6 million less borrowings of $79.2 million, is reflected as cash and cash equivalents in the consolidated balance sheet.

Fair Value of Long-Term Debt

The carrying amounts and the estimated fair values of long-term debt as of March 31, 2016 and December 31, 2015 are as follows (in thousands):

	March 31, 2016				December 31, 2015
	Carrying value		Estimated fair value		Carrying value		Estimated fair value
Term Loan Facility	$	568,497	$	573,576	$	567,673	$	570,051
Senior Secured Notes		619,410		643,750		618,616		633,594
Junior Lien Secured Notes		564,027		583,461		551,552		537,646
Senior Unsecured Notes		365,197		372,553		364,043		371,142

The fair value of long-term debt instruments is measured based on market values for debt issues with similar characteristics, such as maturities, credit ratings, collateral and interest rates available on the measurement dates for debt with similar terms (level 2 within the fair value hierarchy). The Company believes the carrying values for capital leases and other financing arrangements approximate their fair values.

7.	Contingencies

On October 31, 2013, Cel-Sci Corporation (Cel-Sci) (“Claimant”) made a demand for arbitration under a Master Services Agreement (the “MSA”), dated as of April 6, 2010 between Claimant and two of the Company’s subsidiaries, inVentiv Health Clinical, LLC (formerly known as PharmaNet, LLC) and PharmaNet GmbH (currently known as inVentiv Health Switzerland GmbH and formerly known as PharmaNet AG) (collectively, “PharmaNet”). Under the MSA and related project agreement, which were terminated by Claimant in April 2013, Claimant engaged PharmaNet in connection with a Phase III Clinical Trial of its investigational drug. The arbitration claim alleges (i) breach of contract, (ii) fraud in the inducement, and (iii) common law fraud on the part of PharmaNet, and seeks damages of at least $50 million. In December 2013, inVentiv Health Clinical, LLC filed a counterclaim against Claimant that alleges breach of contract and seeks at least $2 million in damages. The matter proceeded to the discovery phase. In January 2015, inVentiv Health Clinical, LLC filed additional counterclaims against Claimant that allege (i) breach of contract, (ii) opportunistic breach, restitution and unjust enrichment, and (iii) defamation, and seeks at least $2 million in damages and $20 million in other equitable remedies. A hearing is currently scheduled to begin in September 2016. No assessment can be made at this time as to the likely outcome of this matter. Accordingly, no provision has been recorded as no loss is considered probable.

Other Matters

The Company is subject to lawsuits, investigations and claims arising out of the conduct of its business, including those related to commercial transactions, contracts, government regulation and employment matters. Certain claims, suits and complaints have been filed or are pending against the Company. The Company does not believe that the outcome of any legal proceedings, if decided adversely to its interests, would have a material adverse effect on its business, financial condition or results of operations.

8.	Concentration of Credit Risk

The Company’s receivables are concentrated with major pharmaceutical companies. Credit risk is managed through the continuous monitoring of exposures with the Company’s clients. The Company does not require collateral or other security to support client receivables. For the three months ended March 31, 2016, one client accounted for approximately 12% of the Company’s net revenues. For the three months ended March 31, 2015, no client represented more than 10% of the Company’s net revenues. As of March 31, 2016, one client represented approximately 10% of the accounts receivable balance.

9.	Common Stock and Stock Incentive Plans

On July 2, 2015 the Company’s Board of Directors approved the grant of new option awards to eligible employees in exchange for certain outstanding restricted stock units granted under the Group Holdings’ Equity Incentive Plan, on a one-for-one basis. Thirty-five percent of the options in the new award vest upon the passage of time and completion of a service requirement and sixty-five percent vests based upon achievement of certain specified performance targets and completion of a service requirement. Approximately 148,748 of the outstanding restricted stock units were exchanged in the program. The exchange was treated as a modification of the awards and no incremental stock compensation was recognized as the exchange securities were not considered probable of vesting on the date of the exchange. The Company recognizes the fair value of the new option awards in compensation expense over the service period to the extent that vesting of the awards is considered probable.

On March 25, 2016, the Company granted 106,218 share-based awards. Of these share-based awards, 102,496 represent options that vest thirty-five percent upon the passage of time and completion of a service requirement and sixty-five percent upon achievement of certain specified performance targets and completion of a service requirement. The remaining 3,722 share-based awards are comprised of restricted stock awards that vest if a liquidity event occurs such that the Investors achieve a defined return on their investment and options that vest based on the passage of time. The Company recognizes the fair value of the option awards in compensation expense over the service period to the extent that vesting of the awards is considered probable.

10.	Termination Benefits and Other Cost Reduction Actions

The Company undertook certain actions to continue to integrate its acquisitions and implement cost containment measures in an effort to better align operating costs with market and business conditions. Expenses related to these actions that include real estate consolidations, elimination of redundant functions and employees, are summarized below (in thousands):

	For the Three Months Ended March 31,
	2016		2015
Employee severance and related costs	$	2,745	$	2,579
Facilities-related costs		1,385		176
Total	$	4,130	$	2,755

For the three months ended March 31, 2016 and 2015, restructuring costs of $1.5 million and $1.3 million, respectively, have been included in cost of revenues and $2.6 million and $1.4 million, respectively, have been included in SG&A expenses, respectively. The $4.1 million of costs incurred in the three months ended March 31, 2016 includes $1.2 million of costs related to Clinical and $2.9 million related to Commercial. The $2.8 million of costs incurred in the three months ended March 31, 2015 includes $1.0 million of costs related to Clinical, $1.7 million related to Commercial and $0.1 million related to Corporate.

The following table summarizes the Company’s restructuring reserve as of March 31, 2016 and December 31, 2015 (in thousands):

	Balance at							Balance at
	December 31,							March 31,
	2015		Net Costs		Cash Payments			2016
Employee severance and related costs	$	4,245	$	2,745	$	(3,115	)	$	3,875
Facilities-related costs		3,942		1,385		(1,388	)		3,939
Total	$	8,187	$	4,130	$	(4,503	)	$	7,814

The Company expects that severance payments accrued at March 31, 2016 will be paid within the next twelve months. Certain facility costs will be paid over the remaining lease term of the exited facilities through 2027.

The net costs in the table above exclude non-cash charges of approximately $0.2 million for the three months ended March 31, 2016 related to abandoned assets at certain facilities.

11.	Income Taxes

The Company accounts for income taxes at each interim period using its estimated annual effective tax rate. Discrete items and changes in the estimate of the annual effective tax rate are recorded in the period they occur. The consolidated effective tax rate was approximately (78.1%) and (11.6%) for the three months ended March 31, 2016 and 2015, respectively. The income tax provision for the three months ended March 31, 2016 and 2015 reflects that the Company (i) continued to record a full valuation allowance for its domestic and certain foreign tax jurisdictions, (ii) recorded a tax provision for certain foreign and state jurisdictions that generated earnings, (iii) incurred a deferred tax provision in its domestic jurisdiction arising from taxable temporary differences related to amortization of indefinite-lived intangible assets and goodwill, and (iv) recorded changes in unrecognized tax benefits (including related penalties and interest) as they occur.

The Company provides a valuation allowance to reduce deferred tax assets to their estimated realizable value if, based on the weight of all available evidence, it is not more likely than not that a portion or all of the deferred tax assets will be realized. The Company does not expect to record significant tax benefits on future domestic net operating losses until circumstances justify the recognition of such benefits.

As a result of the domestic valuation allowance, taxable temporary differences from the amortization of goodwill and indefinite-lived intangible assets are expected to result in $8.5 million of income tax expense for 2016, and are reflected in the Company’s estimated domestic annual effective tax rate. Goodwill and indefinite-lived intangible assets are amortized for income tax purposes, but not for financial statement reporting purposes. This difference results in net deferred income tax expense since the taxable temporary difference cannot be scheduled to reverse during the loss carryforward period. The Company will record tax expense related to the amortization of its tax deductible goodwill and indefinite-lived intangible assets during those future periods for which it maintains domestic valuation allowances, or until its estimated unamortized balance of $111.4 million at December 31, 2016 is fully amortized for tax purposes.

12.	Related Parties

Management Arrangements

Upon completion of the THL Acquisition, the Company entered into a management agreement (“THL Management Agreement”) with THL Managers VI, LLC (“THL Managers”), in which THL Managers agreed to provide management services to the Company until the tenth anniversary of the consummation of the THL Acquisition with evergreen one-year extensions thereafter. Pursuant to the THL Management Agreement, THL Managers will receive an aggregate annual management fee in an amount per year equal to the greater of (a) $2.5 million or (b) 1.5% of EBITDA, as defined in the THL Management Agreement. In addition, the Company will reimburse out-of-pocket expenses, including travel related costs, incurred by THL Managers. The Company recognized $0.9 million and $0.7 million in management fees and related costs for the three months ended March 31, 2016 and 2015, respectively.

The management agreement with the THL Managers includes customary exculpation and indemnification provisions in favor of the THL Managers and their affiliates. The THL Managers may terminate their management agreement at any time. The THL Managers’ management agreement will terminate automatically upon an initial public offering or a change of control. Upon termination due to an initial public offering or a change of control, the THL Managers will be entitled to a termination fee based on the net present value of their annual fee due during the remaining period from the date of termination to the then applicable scheduled date of termination of their management agreement.

Upon completion of the THL Acquisition, the Company entered into a management agreement with Liberty Lane IH LLC (“Liberty Lane”), in which Liberty Lane agreed to provide management services to the Company. Mr. Meister, the Company’s former Chief Executive Officer, is affiliated with Liberty Lane. Pursuant to the agreement, Liberty Lane or its affiliates received an aggregate annual management fee in an amount per year equal to $1.0 million. On December 5, 2012, the agreement was amended to lower the per year management fee to $0.8 million beginning January 1, 2013. The agreement was terminated in the second quarter of 2015 with an effective date of September 24, 2014 to reflect Mr. Meister’s resignation as Chief Executive Officer. The Company incurred management fees of $0.2 million for the three months ended March 31, 2015.

On November 12, 2012, the Compensation Committee of Group Holdings granted to Liberty Lane options to purchase shares of Common Stock equal to approximately 1.4% of the fully diluted equity of Group Holdings. The options vest if a liquidity event occurs such that the Investors achieve a certain return on their investment. These awards were cancelled in the second quarter of 2015 to reflect Mr. Meister’s resignation as Chief Executive Officer, and the Company issued 38,054 Multiple of Money (“MoM”) Option Awards to Mr. Meister during 2015.

Commercial Transactions

There were three entities for the three months ended March 31, 2016 and four entities for the three months ended March 31, 2015 in which THL or its affiliates held a 10% or greater interest that provided services exceeding $120,000 in value to the Company. The services included facilities management, audio conferencing and information technology services. The aggregate fees for these services were $0.4 million and $1.6 million for the three months ended March 31, 2016 and 2015, respectively.

One of the Company’s directors, Blane Walter, acquired a 10% or greater interest in and became a director of an entity in 2013 which provided relationship enterprise technology solutions to the Company exceeding $120,000 in value over the previous twelve month period. No services were provided for the three months ended March 31, 2016 and services for fees of $1.8 million were provided for the three months ended March 31, 2015.

Debt Instruments

In 2014, affiliates of Thomas H. Lee Partners, L.P., Liberty Lane and Blane Walter purchased $25.0 million of Junior Lien Secured Notes and $26.3 million of the Company’s 10% Senior Unsecured Notes due 2018 for a total consideration of $50.0 million as described in Note 6.

13.	Fair Value Measurements

The Company’s financial instruments include cash and cash equivalents, accounts receivables, unbilled services, accounts payable, short-term borrowings, capital leases and other financing arrangements as well as deferred revenues and client advances. Due to the short-term nature of such instruments, the Company believes their carrying values approximate fair value. Please refer to Note 6 for discussion of the Company’s debt instruments.

The Company’s contingent consideration obligations are carried at fair value considering the Company’s best estimates as to the probable timing and amount of settlement (level 3 within the fair value hierarchy). As of March 31, 2016, the contingent consideration obligations had an aggregate fair value of $0.4 million, which is included in accrued expenses in the consolidated balance sheets.

The Company’s deferred compensation plan provides eligible management and other highly compensated employees with the opportunity to defer their compensation and to receive the deferred amounts in the future or upon termination of employment with the Company. The Company invests in the underlying mutual fund investments available to plan participants through investments held in a rabbi trust, which generally offset the liability associated with the deferred compensation plan. These securities are classified as trading securities and carried at fair value (level 1 within the fair value hierarchy) of $10.6 million and $10.8 million as of March 31, 2016 and December 31, 2015 and included in other assets in the consolidated balance sheets. Gains and losses are included in SG&A expenses.

14.	Segment Information

The Company provides services through two reportable segments, Clinical and Commercial. Each reportable business segment is comprised of multiple service offerings that, when combined, create a fully integrated biopharmaceutical outsourced services provider. Clinical provides a continuum of services spanning phases I-IV of clinical development. Commercial, provides commercialization, medication adherence and consulting services to biopharmaceutical companies. The Clinical and Commercial segments provide services to the other segments primarily in connection with the delivery of services to the end client. The Company accounts for intersegment sales on prices that management considers to be consistent with market pricing. Total intersegments sales

from Clinical to Commercial was $0.1 million and $0.6 million for the three months ended March 31, 2016 and 2015, respectively. Total intersegment sales from Commercial to Clinical or Corporate and other was $4.4 million and $2.6 million for the three months ended March 31, 2016 and 2015, respectively.

Management measures and evaluates the Company’s operating segments based on segment net revenues and adjusted operating income. The results of these reportable business segments are regularly reviewed by the Company’s chief operating decision maker, the Chief Executive Officer. Certain costs are excluded from segment operating income because management evaluates the operating results of the segments excluding such charges. These items include depreciation and amortization; certain foreign currency impacts; net charges associated with acquisitions; certain legal charges, net of insurance recoveries; certain asset impairment charges; stock-based compensation; as well as corporate and other unallocated expenses. The Corporate and other unallocated expenses primarily consist of expenses for corporate overhead functions such as finance, human resources, information technology, facilities and legal; restructuring and related charges; and certain expenses incurred in connection with the management agreements with affiliates of certain shareholders of the Parent. Although these amounts are excluded from segment operating income, as applicable, they are included in reported consolidated operating loss and in the reconciliations presented below. The Company has not presented segment assets since management does not evaluate the Company’s operating segments using this information.

The Company has an agreement to provide commercialization services to a biopharmaceutical client for launch of certain products in return for a royalty on the client’s net revenues. The results of this arrangement are included in Corporate and other as the contract is managed and evaluated on a corporate level. As these activities were included in the Commercial segment prior to the three months ended September 30, 2015, segment information for the three months ended March 31, 2015 has been restated to include these results in Corporate and other and Commercial recognized intersegment revenues related to performing services under this arrangement.

Selected information for each reportable segment is as follows (in thousands):

	For the Three Months Ended March 31,
	2016			2015
Net Revenues
Clinical	$	254,859		$	219,664
Commercial		290,926			234,546
Intersegment revenues		(4,489	)		(3,233	)
Consolidated net revenues	$	541,296		$	450,977
Adjusted Segment Operating Income (Loss)
Clinical	$	42,736		$	25,649
Commercial		48,920			31,879
Corporate and other		(12,324	)		(8,898	)
Reportable segments adjusted operating income (loss)		79,332			48,630
Depreciation and amortization		(23,763	)		(25,003	)
Stock-based compensation		(1,417	)		(470	)
Other unallocated charges		(8,988	)		(5,599	)
Operating income (loss)		45,164			17,558
Interest income (expense), net		(55,853	)		(56,463	)
Gain on extinguishment of debt		221			—
Income (loss) before income tax (provision) benefit and income (loss) from equity investments	$	(10,468	)	$	(38,905	)

15.	Guarantor Financial Information

Borrowings under each of our Senior Secured Credit Facilities, ABL Facility, Senior Secured Notes, Junior Lien Secured Notes and Senior Unsecured Notes are guaranteed by certain of the Company’s domestic wholly-owned subsidiaries (the “Guarantor Subsidiaries”). The guarantees are full and unconditional and joint and several. The Company’s Senior Secured Credit Facility, ABL Facility, Senior Secured Notes, Junior Lien Secured Notes and Senior Unsecured Notes are not guaranteed by certain of the Company’s subsidiaries, including all of its non-U.S. subsidiaries or non-wholly owned subsidiaries. The following supplemental financial information sets forth, on a condensed consolidating basis, balance sheet information, results of operations, comprehensive loss and cash flow information for inVentiv Health, Inc., the Guarantor Subsidiaries and other subsidiaries (the “Non-Guarantor Subsidiaries”). The supplemental financial information reflects the investments of inVentiv Health, Inc.’s investment in the Guarantor Subsidiaries and Non-Guarantor Subsidiaries using the equity method of accounting.

Subsequent to the issuance of the March 31, 2015 condensed consolidated financial statements, management determined that within the condensed consolidating statement of cash flows, certain intercompany transfers historically presented on a gross basis within operating, investing and financing activities represent centralized treasury activities that are more appropriately presented on a net basis within investing and financing activities between the respective parent, guarantor, and non guarantor entities. The aforementioned items have been corrected in the condensed consolidating statements of cash flows for the three months ended March 31, 2015. The corrections had no impact on the Company’s consolidated financial position, results of operations or cash flows.

15.	Guarantor Financial Information (Continued)

CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION

At March 31, 2016

(in thousands, except share and per share amounts)

	inVentiv			Guarantor		Non-Guarantor
	Health, Inc.			Subsidiaries		Subsidiaries		Eliminations			Total
ASSETS
Current assets:
Cash and cash equivalents	$	27,758			—	$	136,644	$	(87,289	)	$	77,113
Restricted cash		1,716			—		838		—			2,554
Accounts receivable, net of allowances for doubtful accounts		—			266,930		61,396		—			328,326
Unbilled services		—			223,422		38,301		—			261,723
Intercompany receivables		504,621			825,469		84,860		(1,414,950	)		—
Prepaid expenses and other current assets		7,364			19,001		18,694		—			45,059
Income tax receivable		26			—		996		—			1,022
Total current assets		541,485			1,334,822		341,729		(1,502,239	)		715,797
Property and equipment, net		21,369			98,916		18,887		—			139,172
Goodwill		—			855,317		41,448		—			896,765
Intangible assets, net		—			319,311		6,608		—			325,919
Non-current deferred tax assets		—			—		10,421		—			10,421
Other assets		20,331			4,330		15,060		—			39,721
Non-current intercompany receivables		429,168			28,867		—		(458,035	)		—
Investment in consolidated subsidiaries		700,686			107,127		—		(807,813	)		—
Total assets	$	1,713,039		$	2,748,690	$	434,153	$	(2,768,087	)	$	2,127,795
LIABILITIES AND STOCKHOLDER’S (DEFICIT) EQUITY
Current liabilities:
Current portion of capital lease obligations and other financing arrangements	$	1,429		$	23,831	$	79,265	$	(79,229	)	$	25,296
Accrued payroll, accounts payable and accrued expenses		78,168			182,536		66,304		(8,060	)		318,948
Intercompany payables		857,790			537,244		19,916		(1,414,950	)		—
Income taxes payable		—			449		3,380		—			3,829
Deferred revenue and client advances		—			189,789		56,832		—			246,621
Total current liabilities		937,387			933,849		225,697		(1,502,239	)		594,694
Capital lease obligations, net of current portion		—			45,512		13		—			45,525
Long-term debt, net of current portion		1,547,653			569,479		—		—			2,117,132
Non-current income tax liability		—			4,807		2,760		—			7,567
Deferred tax liability		74			77,854		1,178		—			79,106
Other non-current liabilities		12,902			31,599		22,249		—			66,750
Non-current intercompany liabilities		—			429,157		28,878		(458,035	)		—
Total liabilities		2,498,016			2,092,257		280,775		(1,960,274	)		2,910,774
Total inVentiv Health, Inc. stockholder’s deficit		(784,977	)		656,433		151,380		(807,813	)		(784,977	)
Noncontrolling interest		—			—		1,998		—			1,998
Total stockholder’s deficit		(784,977	)		656,433		153,378		(807,813	)		(782,979	)
Total liabilities and stockholder’s deficit	$	1,713,039		$	2,748,690	$	434,153	$	(2,768,087	)	$	2,127,795

15.	Guarantor Financial Information (Continued)

CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION

At December 31, 2015

(in thousands, except share and per share amounts)

	inVentiv			Guarantor		Non-Guarantor
	Health, Inc.			Subsidiaries		Subsidiaries		Eliminations			Total
ASSETS
Current assets:
Cash and cash equivalents	$	55,226			—	$	148,970	$	(82,879	)	$	121,317
Restricted cash		226			—		1,381		—			1,607
Accounts receivable, net of allowances for doubtful accounts		—			292,548		66,533		—			359,081
Unbilled services		—			174,070		33,395		—			207,465
Intercompany receivables		529,457			840,499		18,211		(1,388,167	)		—
Prepaid expenses and other current assets		8,839			11,401		22,690		—			42,930
Income tax receivable		104			—		1,076		(104	)		1,076
Total current assets		593,852			1,318,518		292,256		(1,471,150	)		733,476
Property and equipment, net		23,227			101,507		17,298		—			142,032
Goodwill		—			855,317		40,052		—			895,369
Intangible assets, net		—			328,239		6,407		—			334,646
Non-current deferred tax assets		—			—		10,032		—			10,032
Other assets		19,084			4,491		13,559		—			37,134
Non-current intercompany receivables		416,161			29,235		35,021		(480,417	)		—
Investment in consolidated subsidiaries		676,479			93,191		—		(769,670	)		—
Total assets	$	1,728,803		$	2,730,498	$	414,625	$	(2,721,237	)	$	2,152,689
LIABILITIES AND STOCKHOLDER’S (DEFICIT) EQUITY
Current liabilities:
Current portion of capital lease obligations and other financing arrangements	$	1,936		$	21,324	$	73,355	$	(73,282	)	$	23,333
Accrued payroll, accounts payable and accrued expenses		71,953			200,063		71,307		(9,597	)		333,726
Intercompany payables		820,965			542,500		24,702		(1,388,167	)		—
Income taxes payable		—			165		5,423		(104	)		5,484
Deferred revenue and client advances		—			190,828		55,828		—			246,656
Total current liabilities		894,854			954,880		230,615		(1,471,150	)		609,199
Capital lease obligations, net of current portion		—			45,247		11		—			45,258
Long-term debt, net of current portion		1,533,197			568,688		—		—			2,101,885
Non-current income tax liability		—			4,806		1,136		—			5,942
Deferred tax liability		74			73,047		239		—			73,360
Other non-current liabilities		38,494			30,896		18,763		—			88,153
Non-current intercompany liabilities		34,920			416,260		29,237		(480,417	)		—
Total liabilities		2,501,539			2,093,824		280,001		(1,951,567	)		2,923,797
Total inVentiv Health, Inc. stockholder’s deficit		(772,736	)		636,674		132,996		(769,670	)		(772,736	)
Noncontrolling interest		—			—		1,628		—			1,628
Total stockholder’s deficit		(772,736	)		636,674		134,624		(769,670	)		(771,108	)
Total liabilities and stockholder’s deficit	$	1,728,803		$	2,730,498	$	414,625	$	(2,721,237	)	$	2,152,689

15.	Guarantor Financial Information (Continued)

CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended March 31, 2016

(in thousands)

	inVentiv		Guarantor		Non-Guarantor
	Health, Inc.		Subsidiaries		Subsidiaries		Eliminations			Total
Net revenues	$	—	$	419,336	$	129,933	$	(7,973	)	$	541,296
Reimbursed out-of-pocket expenses		—		83,818		7,214		(49	)		90,983
Total revenues		—		503,154		137,147		(8,022	)		632,279
Operating expenses:
Cost of revenues		—		300,392		79,298		(7,314	)		372,376
Reimbursable out-of-pocket expenses		—		83,818		7,214		(49	)		90,983
Selling, general and administrative expenses		21,129		71,369

INVENTIV HEALTH INC 10-Q