What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-02-16 compared with 2020-02-25 · 114 added, 323 removed, 897 unchanged (33% of the section changed)

13 unchanged sentences

To the shareholders and the Board of Directors of Medpace Holdings, Inc.

and subsidiaries

Opinion on the Financial Statements

4 unchanged sentences

Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for leases as of January 1, 2019, due to the adoption of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 842, Leases, using the comparatives under FASB ASC Topic 840, Leases approach.

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for leases as of January 1, 2019, due to the adoption of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 842, Leases , using the Comparatives Under ASC 840 Option transition approach.

Basis for Opinion

21 unchanged sentences

Our audit procedures related to management’s estimates of costs to complete a contract for the performance obligation used to recognize revenue for certain clinical research contracts included the following, among others:

We tested the effectiveness of controls over revenue recognized throughout the contract term, including management’s controls over estimates of future services to be delivered and costs to be incurred under the contract.

We selected a sample of contracts and performed the following:

15 unchanged sentences

To the shareholders and the Board of Directors of Medpace Holdings, Inc.

and subsidiaries

Opinion on Internal Control over Financial Reporting

29 unchanged sentences

Cash and cash equivalents

Restricted cash

Accounts receivable and unbilled, net (includes $ 2.6 million and $ 1.9 million with related parties at December 31, 2020 and 2019, respectively)

12 unchanged sentences

Total current liabilities

Long-term debt, net, less current portion

Operating lease liabilities

Deemed landlord liability, less current portion

Deferred income tax liability

9 unchanged sentences

35,519,989 and 36,065,278 shares issued and outstanding at December 31, 2020 and 2019, respectively

Treasury stock - 200,000 shares at December 31, 2019 and 2018, respectively

Treasury stock - 185,000 and 200,000 shares at December 31, 2020 and 2019, respectively

Additional paid-in capital

Retained earnings (accumulated deficit)

Retained earnings

Accumulated other comprehensive loss

7 unchanged sentences

Year Ended December 31,

Revenue, net (includes $ 18.9 million and $ 15.1 million with related parties for the years ended December 31, 2019 and 2018)

Service revenue, net (includes $ 11.1 million with related parties for the year ended December 31, 2017)

Reimbursed out-of-pocket revenue (includes $ 1.5 million with related parties for year ended December 31, 2017)

Total revenue

Revenue, net (includes $ 15.9 million, $ 18.9 million and $ 15.1 million with related parties for the years ended December 31, 2020, 2019 and 2018, respectively)

Operating expenses:

6 unchanged sentences

Other expense, net:

Miscellaneous (expense) income, net

Interest expense, net

Total other expense, net

Miscellaneous income (expense), net

Interest income (expense), net

Total other income (expense), net

Income before income taxes

9 unchanged sentences

Year Ended December 31,

Other comprehensive (loss) income

Other comprehensive income (loss)

Foreign currency translation adjustments, net of taxes

6 unchanged sentences

Comprehensive

Income (Loss)

BALANCE — December 31, 2017

4 unchanged sentences

Stock options exercised

Repurchases of common stock

Treasury stock purchases

Tax effect of initial public offering related costs

BALANCE — December 31, 2018

5 unchanged sentences

BALANCE — December 31, 2019

Impact to Retained Earnings from adoption of ASU 2016-02

BALANCE — January 1, 2019

Foreign currency translation

1 unchanged sentence

Stock options exercised

Repurchases of common stock

BALANCE — December 31, 2020

17 unchanged sentences

Accrued expenses

Pre-funded study costs

Advanced billings

4 unchanged sentences

Property and equipment expenditures

Acquisition of intangibles

Net cash used in investing activities

3 unchanged sentences

Payment of debt

Proceeds from revolving loan

Payments on revolving loan

24 unchanged sentences

Share Repurchases

In November 2017, the Board members who are not affiliated with Cinven (the “Disinterested Directors”) approved an agreement to repurchase 2,000,000 shares of the Company’s common stock from Cinven in connection with the Secondary Offering (as described below) for aggregate consideration of approximately $ 60.3 million, representing a purchase price of $ 30.16 per share.

The Company funded the repurchase with approximately $ 60.0 million in borrowings under the Prior Senior Secured Revolving Credit Facility (defined in Note 7 of the Notes to Consolidated Financial Statements) and cash on hand.

In August 2017, the Disinterested Directors of the Company approved a stock repurchase agreement with Medpace Limited Partnership, a Guernsey limited partnership (the “Limited Partnership” acting through its general partner, Medpace GP Limited, a Guernsey company, the “General Partner” and, the Limited Partnership acting through the General Partner, “Cinven”), pursuant to which the Company repurchased 2,000,000 shares of the Company’s common stock from Cinven for aggregate consideration of approximately $ 60.5 million, representing a purchase price of $ 30.27 per share.

The Company funded the repurchase with cash on hand and $ 40.0 million in borrowings under our Prior Senior Secured Revolving Credit Facility.

In April 2017, the Board of the Company authorized a share repurchase program with an authorized repurchase level of $ 50.0 million.

The share repurchase program was cancelled in the fourth quarter of 2017.

Repurchases under the repurchase program took place in the open market or negotiated transactions, at the discretion of the Company’s management.

During the year ended December 31, 2017, the Company repurchased 1,342,786 shares of its outstanding common stock for $ 34.7 million under this share repurchase program.

The Company has elected to constructively retire all repurchased shares with all amounts paid in excess of Common stock par value reflected within Accumulated deficit in the Company’s consolidated balance sheets, except for 200,000 shares, which are reflected within treasury stock in the Company’s consolidated balance sheets.

In the first quarter of 2018, the Board of the Company authorized a share repurchase program with an authorized repurchase level of $ 50.0 million.

There have been no share repurchases under this program.

Secondary Offerings

In the first quarter of 2018, the Board of Directors approved a share repurchase program authorizing up to $ 50.0 million in share repurchases.

In the first quarter of 2020, the Board of Directors approved an increase in the stock repurchase authorization by $ 50.0 million.

In the fourth quarter of 2020, the Board approved the stock repurchase authorization up to $ 150.0 million.

For the year ended December 31, 2020, the Company repurchased 1,183,095 shares for $ 98.3 million.

As of December 31, 2020, we have remaining authorization of $ 102.6 million remaining under the repurchases program.

Repurchases under the share repurchase program are executed in the open market or negotiated transactions under trading plans established pursuant to Rule 10b5-1.

The Company constructively retired the repurchased shares associated with these approved share repurchase programs, with all amounts paid in excess of par value reflected within Retained earnings in the Company’s consolidated balance sheets.

The repurchase program may be suspended or discontinued at any time without notice.

Secondary Offering

During the year ended December 31, 2018, Cinven sold a total of 16,399,997 shares of the Company’s common stock as part of multiple secondary offerings.

3 unchanged sentences

The Company did not sell any shares in or receive any proceeds from the secondary offerings.

During the year ended December 31, 2017, Cinven sold a total of 4,600,000 shares of the Company’s common stock as part of a secondary offering.

The Company incurred professional fees in connection with the secondary offering of $ 0.4 million during year ended December 31, 2017.

The fees are included within operating expenses in the accompanying consolidated statement of operations.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

16 unchanged sentences

Translation adjustments are recorded to Accumulated other comprehensive loss in the consolidated statements of shareholders’ equity and consolidated statements of comprehensive income.

Separately, net realized gains and losses on foreign currency transactions are included in Miscellaneous (expense) income, net, on the consolidated statements of operations.

Foreign currency transactions resulted in a net (loss)/gain of ($ 0.6 ) million, $ 0.4 million, and ($ 1.0 ) million during the years ended December 31, 2019, 2018, and 2017, respectively.

Separately, net realized gains and losses on foreign currency transactions are included in Miscellaneous income (expense), net, on the consolidated statements of operations.

Foreign currency transactions resulted in a net gain/(loss) of $ 0.5 million, ($ 0.6 ) million, and $ 0.4 million during the years ended December 31, 2020, 2019, and 2018, respectively.

Revenue Recognition

10 unchanged sentences

Depending on the timing of when these criteria are met, revenue recognition may vary significantly on a period over period basis.

Accounting for contracts performed over a period of time involves the use of various assumptions to estimate total contract revenue and costs.

The Company estimates expected costs to complete a contract and recognizes contracted revenue over the life of the contract as those costs are incurred.

Accounting for contracts performed over a period of time involves the use of various assumptions to estimate tota l contract revenue and costs.

The Company estimate s expected costs to complete a contract and recognize s contracted revenue over the life of the contract as those costs are incurred.

Cost estimates are based on a detailed project budget and are developed based on many variables, including, but not limited to, the scope of the work, the complexity of the study, the participating geographic locations and the Company’s historical experience.

16 unchanged sentences

Total revenue is presented net of rebates of $ 4.8 million, $ 6.2 million and $ 1.2 million in the consolidated statements of operations during the years ended December 31, 2020, 2019 and 2018, respectively.

The Company occasionally enter s into incentive fee arrangements with customers that provide for additional compensation if certain defined contractual milestones or performance thresholds are met.

The Company occasionally enters into incentive fee arrangements with customers that provide for additional compensation if certain defined contractual milestones or performance thresholds are met.

These additional fees are included in the estimated transaction price when there is a basis to reasonably estimate the amount of the fee and when achievement of the incentive milestone is deemed probable.

These estimates are based on anticipated performance, the Company’s best judg ment at the time or ultimately, upon achievement of the threshold or milestone.

These estimates are based on anticipated performance, the Company’s best judgment at the time or ultimately, upon achievement of the threshold or milestone.

The Company records revenue net of any tax assessments by governmental authorities that are imposed and concurrent with specific revenue generating transactions.

7 unchanged sentences

These relate to certain unitized contracts, and the Company recognizes revenue in the period in which the unit is delivered compared to total contracted units.

On December 31, 2019 and 2018, the Company had approximately $ 1.4 billion and $ 1.1 billion of performance obligations remaining to be performed for active projects.

As of December 31, 2020 and 2019, the Company had approximately $ 1.6 billion and $ 1.4 billion of performance obligations remaining to be performed for active projects.

Concentration of Credit Risk

11 unchanged sentences

Selling, general and administrative includes administrative payroll and related employee benefits, sales and marketing expenses, administrative travel, and other expenses not directly related to service delivery.

Rent, utilities, supplies, and software license expenses are allocated between Total direct costs, and Selling, general and administrative based on

the estimated contribution among service delivery and support function efforts on a percentage basis.

Rent, utilities, supplies, and software license expenses are allocated between Total direct costs, and Selling, general and administrative based on the estimated contribution among service delivery and support function efforts on a percentage basis.

Depreciation and amortization is reported separately in the accompanying consolidated statements of operations.

2 unchanged sentences

Total advertising expenses of $ 0.7 million, $ 0.7 million and $ 0.8 million were incurred during the years ended December 31, 2020, 2019 and 2018, respectively.

Prior to the adoption of Accounting Standard Update No.

2014-09 ‘‘Revenue from Contracts with Customers”, fees paid to investigators and other disbursements in which the Company acts as an agent on behalf of the customer were recorded net in the consolidated statements of operations with no impact on the Company’s revenue or expenses.

Funds received in advance of study expenditures were recorded as Pre-funded study cost liabilities on the consolidated balance sheets.

Any pre-funded amounts remaining at the conclusion of a study were returned to the client.

Pre-funded study cost disbursements of $ 138.7 million were made during the year ended December 31, 2017.

The Company’s consolidated U.S.

federal income tax return is comprised of its U.S.

subsidiaries and one of its foreign branches located in Korea.

All foreign subsidiaries of the Company file tax returns in their local jurisdictions.

The Company’s consolidated US federal income tax return is comprised of its US subsidiaries, one of its foreign branches located in Korea and certain foreign subsidiaries.

The Company provides for income taxes on all transactions that have been recognized in the consolidated financial statements in accordance with accounting guidance governing income tax accounting.

5 unchanged sentences

In estimating future taxable income, the Company has considered both positive and negative evidence, such as historical and forecasted results of operations, and has considered the implementation of prudent and feasible tax planning strategies.

The Company’s current accounting position is that unremitted foreign earnings are indefinitely reinvested.

The Company’s accounting position is that unremitted foreign earnings are indefinitely reinvested.

Therefore, the Company has not recorded deferred foreign withholding taxes on the unremitted foreign earnings.

27 unchanged sentences

Stock-based compensation expense for both the 2016 Plan and 2014 Plan is calculated using the fair value method on the grant date.

The Company expenses stock-based compensation using a graded vesting schedule.

The Company expenses stock-based compensation over the term of the award based on the vesting described in the award agreement.

Stock-based compensation expense is allocated between Total direct costs, and Selling, general and administrative in the consolidated statements of operations based on the underlying classification and scope of work for the employees receiving the Awards.

2 unchanged sentences

The Company’s RSAs are considered participating securities because they are legally issued at the date of grant and holders are entitled to receive non-forfeitable dividends during the vesting term.

The computation of diluted EPS includes additional common shares, such as unvested RSUs and stock options with exercise prices less than the average market price of the Company’s common stock during the period (“in-the-money options”), which would be considered outstanding under the treasury stock method.

The treasury stock method assumes that additional shares would have to be issued in cases where the exercise price of stock options is less than the value of the common stock being acquired because the cash proceeds received from the stock option holder would not be sufficient to acquire that same number of shares.

This assumes that additional shares would have to be issued in cases where the exercise price of stock options is less than the value of the common stock being acquired because the cash proceeds received from the stock option holder would not be sufficient to acquire that same number of shares.

The Company does not compute diluted EPS in cases where the inclusion of such additional shares would be anti-dilutive in effect.

52 unchanged sentences

Variable lease costs are primarily related to adjustments for inflation, common area maintenance and property tax and are recognized within Total direct costs and Selling, general and administrative expenses.

Contracts containing finance leases are recognized initially in the same manner as Operating l ease ROU assets and liabilities;

Contracts containing finance leases are recognized initially in the same manner as Operating lease ROU assets and liabilities;

however, they are recorded on the consolidated balance sheets within Property and equipment, net, Other current liabilities, and Other long-term liabilities.

7 unchanged sentences

Goodwill represents the excess of purchase price over the fair value of net assets acquired in business combinations.

The carrying value of goodwill is reviewed at least annually for impairment, or as indicators of potential impairment are identified, at the reporting unit level.

The reporting units are Phase I-IV clinical research services and Laboratories as of December 31, 2019.

The carrying value of goodwill is reviewed at least annually for impairment, or as indicators of potential impairment

are identified, at the reporting unit level.

The reporting units are Phase I-IV cl inical research services and Laboratories as of December 31, 2020 .

The Company performs its annual impairment tests during the fourth quarter each year, comparing the fair value of each of our reporting units with its carrying amount, inclusive of goodwill.

17 unchanged sentences

Advanced billings represents cash received from customers, or billed amounts per an agreed upon payment schedule, in advance of services being performed or revenue being recognized.

Deemed Landlord Liabilities

Deemed landlord liabilities are recorded at their net present value when the Company enters into qualifying leases and are reduced as the Company makes periodic lease payments on the properties.

Other Current Liabilities and Other Long-Term Liabilities

2 unchanged sentences

Recently Adopted Accounting Standards

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-01, Business Combinations.

The standard changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business.

Under the new guidance, an entity first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets.

If this threshold is met, the set is not a business.

If it’s not met, the entity then evaluates whether the set meets the requirement that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.

ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years.

The Company, as permitted, early adopted ASU 2017-01 using the prospective method in the second quarter of 2017.

In March 2016, the FASB issued ASU No.

2016-09, Compensation - Stock Compensation:

Improvements to Employee Share-Based Payment Accounting .

The new guidance is intended to simplify certain aspects of accounting for share based payments to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows.

The Company elected to adopt this ASU in the first quarter of 2017 as required.

The following summarizes the effects of the adoption on the Company's consolidated financial statements:

Income taxes - Upon adoption of this standard, all excess tax benefits and tax deficiencies (including tax benefits of dividends, if distributed, on share-based payment awards) are recognized as income tax expense or benefit in the statement of operations.

The tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur.

As a result, the Company recognized discrete adjustments to income tax expense for the year ended December 31, 2017 of less than $ 0.1 million related to excess tax benefits.

The Company also recognizes excess tax benefits regardless of whether the benefit reduces taxes payable in the current period.

The Company applied the prospective adoption approach for any unrecognized excess tax benefits beginning in 2017, which did not result in any cumulative-effect adjustment upon adoption.

Prior periods have not been adjusted .

Forfeitures - Prior to adoption, share-based compensation expense was recognized on a straight line basis, net of estimated forfeitures, such that expense was recognized only for share-based awards that were expected to vest.

A forfeiture rate was estimated annually and revised, if necessary, in subsequent periods if actual forfeitures differed from initial estimates.

Upon adoption, the Company no longer applies a forfeiture rate and instead accounts for forfeitures as they occur.

The Company applied the modified retrospective adoption approach beginning in 2017 and booked an immaterial cumulative-effect adjustment to additional paid-in-capital and retained earnings within Shareholders’ Equity.

Prior periods have not been adjusted.

Statements of Cash Flows - The Company historically accounted for excess tax benefits on the consolidated statements of cash flows as a financing activity.

Upon adoption of this standard, excess tax benefits are classified along with other income tax cash flows as an operating activity.

The Company elected to adopt this portion of the standard on a prospective basis beginning in 2017.

Prior periods have not been adjusted.

Earnings Per Share - The Company uses the treasury stock method to compute diluted earnings per share, unless the effect would be anti-dilutive.

Under this method, the Company is no longer required to estimate the tax rate and apply it to the dilutive share calculation for determining the dilutive earnings per share.

The Company utilized the prospective adoption approach and applied this methodology beginning in 2017.

Prior periods have not been adjusted.

Upon adoption, no other aspects of ASU 2016-09 had an effect on the Company's consolidated financial statements or related footnote disclosures.

In May 2014, the FASB issued ASU No.

70 unchanged sentences

ASC 842 allows by policy election, an entity to choose its transition approach.

Entities must adopt ASC 842 on a either a modified retrospective basis to each prior reporting period presented or through an optional alternative method referred to as the “Comparatives Under ASC 840 Approach” which allows entities to apply the new requirements to only those leases that exist as of January 1, 2019.

The Company has elected to adopt ASC 842 utilizing the Comparatives Under ASC 840 Approach.

Entities must adopt ASC 842 on a either a modified retrospective basis to each prior reporting period presented or through an optional alternative method referred to as the “Comparatives Under ASC 840 Option” transition approach which allows entities to apply the new requirements to only those leases that exist as of January 1, 2019.

The Company has elected to adopt ASC 842 utilizing the Comparatives Under ASC 840 Option.

As such, ASC 842 is applied on a prospective basis as of January 1, 2019 and any cumulative catch up adjustment for differences between ASC 842 and ASC 840 were recorded upon adoption.

ASC 842 also allows for the election of certain practical expedients that are meant to ease the burden of transitioning to ASC 842 while still achieving compliance.

ASC 842 also allows for the election of certain practical expedients that are meant to ease the burden of transitioning to ASC 842 whi le still achieving compliance.

The Company elected the “package of three” practical expedient allowing the Company to carry forward decisions made and documented under current U.S.

GAAP, rather than reassessing all of the Company’s contracts to determine whether they are or contain leases and how they would be classified under ASC 842.

GAAP, rather than reassessing all of the Company’s contracts to determine whether they are or contain leases and how they woul d be classified under ASC 842.

The Company has decided not to elect the hindsight practical expedient, which had it been elected, would require the Company to reassess the lease term and assessment of impairment for all of the Company’s leases using the facts and circumstances known up to the adoption date of the standard.

34 unchanged sentences

The Company adopted this standard on a prospective basis in the first quarter of 2019 and it had no impact to the consolidated financial statements.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments” intended to provide financial statement users with more decision-useful information about expected credit losses and other commitments to extend credit held by the reporting entity.

The standard replaces the incurred loss impairment methodology in current GAAP with one that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The update is effective on January 1, 2020, with early adoption permitted.

The Company will adopt this standard in the first quarter of 2020 and expects no material impact to the consolidated financial statements.

The standard replaces the incurred loss impairment methodology with one that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The guidance is effective for fiscal years beginning after December 15, 2019 with early adoption permitted.

The Company adopted this standard in the first quarter of 2020 and it had no material impact to the consolidated financial statements.

CONTRACT ASSETS AND CONTRACT LIABILITIES

10 unchanged sentences

Total accounts receivable and unbilled, net

Unbilled receivables decreased to $ 28.4 million at December 31, 2019 from $ 49.4 million at December 31, 2018.

Contract Liabilities

Advanced billings represents cash received from customers, or billed amounts per an agreed upon payment schedule, in advance of services being performed or revenue being recognized.

During the year ended December 31, 2020, the Company recognized approximately $ 165.6 million of revenue that was included in the Advanced billings balance at the beginning of the year.

Advanced billings consisted of the following (in thousands):

Advanced billings

Advanced billings increased to $ 192.4 million at December 31, 2019, from $ 147.9 million at December 31, 2018.

A rollforward of allowance for doubtful account activity is as follows:

8 unchanged sentences

Computer hardware, software, and phone equipment

Deemed assets from landlord building construction

Construction-in-progress

3 unchanged sentences

Depreciation expense was $ 11.7 million, $ 8.4 million and $ 9.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.

In 2011, Medpace, Inc.

entered into two multi-year lease agreements governing the future occupancy of additional office space in Cincinnati, Ohio.

The Company assumed occupancy of both spaces during 2012 and began making lease payments at that time.

The leases expire in 2027 and the Company has one 10 -year option to extend the term of the leases.

As of December 31, 2018, in accordance with the accounting guidance related to leases under ASC 840, the Company was deemed in substance to be the owner of the properties during the construction phase.

The accounting guidance required that a lessee be considered the owner of a real estate project during the construction period if a related party of the lessee is an owner of the real estate.

Given that a related party of Medpace made an equity investment in the lessor, Medpace was considered the owner of the property for accounting purposes during the buildings’ construction.

Accordingly, the Company reflected the building and related liabilities as Deemed assets from landlord building construction (“Deemed Assets”) and Deemed landlord liabilities, respectively in the consolidated balance sheets.

The Deemed Assets were being fully depreciated, on a straight line basis, over the 15 -year term of the lease.

As of December 31, 2019, in accordance with the accounting guidance related to leases under ASC 842, these leases have been classified as operating leases and the deemed assets have been removed.

See Note 2 in the Notes to Consolidated Financial Statements for a description of the ASC 842 adoption entries.

GOODWILL AND INTANGIBLE ASSETS

7 unchanged sentences

Customer relationships

Developed technologies

Total finite-lived intangible assets

1 unchanged sentence

Customer relationships

Developed technologies

Total accumulated amortization

8 unchanged sentences

Total accrued expenses

Debt consisted of the following at December 31 (in thousands):

Less unamortized discount

Less unamortized term loan debt issuance costs

Long-term debt, net, less current portion

2019 Credit Agreement

On September 30, 2019 (the “Closing Date”), the Company obtained a new unsecured credit facility in an aggregate principal amount up to $ 50.0 million (the “Credit Facility”) through its wholly owned subsidiaries, Medpace, Inc., as borrower (the “Borrower”), and Medpace IntermediateCo, Inc., as guarantor (the “Guarantor”).

On September 30, 2019 (the “Closing Date”), the Company obtained an unsecured credit facility in an aggregate principal amount up to $ 50.0 million (the “Credit Facility”) through its wholly owned subsidiaries, Medpace, Inc., as borrower (the “Borrower”), and Medpace IntermediateCo, Inc., as guarantor (the “Guarantor”).

On the Closing Date, the Borrower and lender entered into a Loan Agreement (the “Loan Agreement”) providing for the Credit Facility, and the Guarantor executed a Guaranty Agreement providing for its guarantee of the payment and performance of the obligations under the Loan Agreement.

1 unchanged sentence

The Loan Agreement also provides that the Credit Facility will expire in 364 days from the Closing Date.

On March 30, 2020, the Company amended the credit facility to extend its expiration date to March 31, 2021 and add provisions for alternative interest rates when certain interbank market offered rates are not available.

The Loan Agreement contains other customary loan terms, representations and warranties, and affirmative and negative covenants, in each case, subject to customary limitations, exceptions and exclusions.

The Loan Agreement contains certain events of default, including, among others, non-payment of principal or interest and breach of the covenants.

As of December 31, 2019, there were no outstanding borrowings under the Credit Facility and $ 0.2 million in letters of credit outstanding related to certain operating lease obligations, which are secured by the Credit Facility.

The Loan Agreement replaced the Company’s senior secured credit agreement dated as of December 8, 2016 (the “Prior Senior Secured Credit Agreement”), which was terminated on September 30, 2019 (the “Termination Date”).

As of September 30, 2019, no amounts were drawn under the Prior Senior Secured Credit Agreement and no fees or penalties were incurred as a result of the termination, other than the payment of accrued commitment fees of $ 0.1 million through the Termination Date.

In addition, on the Termination Date, the Company recorded unamortized loan issuance fees of $ 0.7 million, consisting of $ 0.5 million in Selling, general and administrative and $ 0.2 million of interest expense, during the third quarter of 2019, representing unamortized loan origination fees and loan discounts, respectively, associated with the Prior Senior Secured Credit Agreement.

2016 Credit Agreement

On December 8, 2016, Medpace IntermediateCo, Inc., as borrower, and Medpace Acquisition, Inc., a wholly-owned subsidiary of Medpace Holdings, Inc., as parent guarantor (the “Parent Guarantor”), entered into the Prior Senior Secured Credit Agreement consisting of a $ 165.0 million term loan (the “Prior Senior Secured Term Loan Facility”) issued at 99.7 % and a $ 150.0 million senior secured revolving credit facility (the “Prior Senior Secured Revolving Credit Facility” and, together with the Prior Senior Secured Term Loan Facility, the “Prior Senior Secured Credit Facilities”).

The Prior Senior Secured Term Loan Facility and Prior Senior Secured Revolving Credit Facility were set to expire in December 2021 , but were terminated on September 30, 2019.

The Prior Senior Secured Credit Facilities provided for, at the Company’s option, interest at the Eurocurrency rate or Base rate for the Prior Senior Secured Term Loan Facility and the Prior Senior Secured Revolving Credit Facility borrowings.

The Company, at its discretion, could choose interest periods of one, two, three or six months, which determines the interest rate to be applied.

Interest on Eurocurrency loans was payable at the end of the selected Eurocurrency term and interest on Base rate loans were payable quarterly in conjunction with any required principal payments.

Borrowings under the Prior Senior Secured Credit Facilities bore interest at a rate equal to, at our option, either (i) the adjusted Eurocurrency rate based on LIBOR for U.S.

dollar deposits for loans denominated in dollars, EURIBOR for Euro deposits for loans denominated in Euros and the offer rate for any other currencies for loans denominated in such other currencies for the relevant interest period plus an applicable margin from 1.25 % to 2.25 % based on the total net leverage ratio from less than 1.50 :1.00 to greater than 3.75 :1:00, or (ii) an alternative base rate (determined by reference to the highest of (a) the prime commercial lending rate of the administrative agent, as established from time to time, (b) the Federal Funds Rate plus 0.50 % and (c) the one-month adjusted Eurocurrency rate for loans in U.S.

dollars plus 1.00 %) plus an applicable margin from 0.25 % to 1.25 % based on the total net leverage ratio from less than 1.50 :1.00 to greater than 3.75 :1:00.

The applicable margin as of December 31, 2018 was 1.25 % for eurocurrency loans and 0.25 % for base rate loans.

The Company was able to voluntarily prepay outstanding loans under the Prior Senior Secured Credit Facilities without premium or penalty.

As of December 31, 2018, the interest rate applicable on the term loan was the Eurocurrency interest rate of 3.77 %.

In addition, the Company was required to pay to the lenders a commitment fee on a quarterly basis at an annual rate of 0.375 % of the unused borrowings under the Prior Senior Secured Revolving Credit Facility for the first full fiscal quarter after the closing date, and thereafter 0.50 % if the total net leverage ratio is greater than or equal to 3.00 :1.00, or 0.375 % if the total net leverage ratio is less than 3.00:1.00.

At December 31, 2018 the Company had no outstanding borrowings under the Prior Senior Secured Revolving Credit Facility, resulting in $ 149.8 million in undrawn capacity available under the Prior Senior Secured Revolving Credit Facility.

As of December 31, 2018, the interest rate applicable on the Prior Senior Secured Revolving Credit Facility was the Eurocurrency interest rate of 3.77 %.

In addition, the Company had $ 0.2 million in letters of credit outstanding, which were secured by the Prior Senior Secured Revolving Credit Facility at December 31, 2018.

The original issue discount of $ 0.5 million related to the issuance of the Prior Senior Secured Term Loan Facility was recorded as a reduction of the underlying debt issuances within Long-term debt, net, less current portion and was being amortized over the life of the debt using the effective-interest method.

The unamortized portion of the discount related to the Prior Senior Secured Term Loan Facility was $ 0.3 million as of December 31, 2018.

Per the terms of the Prior Senior Secured Credit Term Loan Facility, principal was scheduled to be paid quarterly on the last business day of March, June, September and December of each year, beginning March 2017.

Origination fees of $ 0.8 million related to the Prior Senior Secured Term Loan Facility were recorded as a reduction of the underlying debt issuances in Long-term debt, net.

These fees were being amortized over the life of the debt using the effective-interest method.

The unamortized portion of the origination fees related to the Prior Senior Secured Term Loan Facility was $ 0.4 million at December 31, 2018.

In the second quarter of 2019, the Company paid off its remaining outstanding obligations against its Prior Senior Secured Term Loan Facility.

Upon satisfaction of the outstanding obligations of the Prior Senior Secured Term Loan Facility, the Company recorded unamortized term loan issuance fees of $ 0.3 million to Selling, general and administrative expenses and the unamortized discount of $ 0.2 million to Interest expense, net.

Origination fees of $ 1.6 million related to the Prior Senior Secured Revolving Credit Facility were originally capitalized as a component of Other assets.

These fees were being amortized over the life of the debt using the effective-interest method.

The unamortized portion of the origination fees related to the Prior Senior Secured Revolving Credit Facility were $ 0.9 million at December 31, 2018.

The Prior Senior Secured Credit Facilities were guaranteed by the Parent Guarantor and its material, direct or indirect wholly owned domestic subsidiaries, with certain exceptions, including where providing such guarantees is not permitted by law, regulation or contract or would result in adverse tax consequences.

The Prior Senior Secured Credit Facilities were subject to customary covenants relating to financial ratios and restrictions on certain types of transactions, including restricting the Company's ability to incur additional indebtedness, acquire and dispose of assets, make investments, pay dividends, or engage in mergers and acquisitions.

The Company was required to maintain a ratio of consolidated funded indebtedness minus unrestricted cash and cash equivalents (in the aggregate not to exceed $ 50 million and to include not more than $ 25 million of foreign unrestricted cash and cash equivalents) to consolidated EBITDA for the most recent four fiscal quarter period not to exceed 4.00 :1.00;

provided that the Company shall be permitted to increase the ratio to 4.50 :1.00 in connection with any permitted acquisition or any other acquisition consented to by the Administrative Agent and the Required Lenders (as defined in the Prior Senior Secured Credit Agreement) with total cash consideration in excess of $ 25 million.

Such increase shall be applicable for the fiscal quarter in which such acquisition is consummated and the three consecutive test periods thereafter.

The Company was also required to maintain a ratio of consolidated EBITDA to consolidated interest expense, in each case for the most recent four fiscal quarter period, of not less than 3.00 :1.00.

The Company was in compliance with all financial covenants as of December 31, 2018.

As of December 31, 2020 and 2019, respectively, there were no outstanding borrowings under the Credit Facility and $ 0.2 million in letters of credit outstanding related to certain operating lease obligations, which are secured by the Credit Facility.

The Company enters into leases for real estate and equipment.

4 unchanged sentences

The components of lease expense were as follows (in thousands):

December 31, 2019

Year Ended December 31,

Operating lease cost

1 unchanged sentence

Supplemental cash flow information related to the leases was as follows (in thousands):

December 31, 2019

Year Ended December 31,

Cash paid for amounts included in the measurement of lease liabilities:

3 unchanged sentences

Supplemental balance sheet information related to the leases was as follows (in thousands):

December 31, 2019

Operating lease right-of-use assets

14 unchanged sentences

imputed interest

As of December 31, 2019, we have several additional leases with contractual obligations, which have not yet commenced, with future payments of $ 133.0 million.

This includes a lease related to a corporate office under construction in Cincinnati, Ohio, which has not yet commenced, with future payments of $ 124.0 million.

This lease will commence in fiscal year 2020 with an initial lease term of 20 years and a renewal option for two 10 -year terms at prevailing market rates.

Comparative period disclosures under ASC 840:

Rental expense under operating leases totaled $ 9.2 million and $ 7.9 million for the years ended December 31, 2018 and 2017, respectively, and is allocated between Total direct costs, and Selling, general and administrative in the consolidated statements of operations.

Future minimum rental payments for lease obligations with initial terms in excess of one year as of December 31, 2018 are as follows (in thousands):

Related Party

Parties Operating

Operating Leases

Total minimum lease payments

Minimum annual payments required in conjunction with the Deemed landlord liabilities as of December 31, 2018 are as follows (in thousands):

Related Party

Minimum Lease

Rental expense under operating leases totaled $ 9.2 million for the year ended December 31, 2018 and is allocated between Total direct costs, and Selling, general and administrative in the consolidated statements of operations.

SHAREHOLDERS’ EQUITY

8 unchanged sentences

Option prices are generally expected to be set at the market price of the Company’s common stock at the date of grant and option terms are not expected to exceed ten years .

The Company granted 816,286 awards to employees under the 2016 Incentive Award Plan during the year ended December 31, 2019, consisting of 10,000 stock option awards and 227,610 restricted stock units (“RSU”) vesting after four years , 5,000 stock option awards vesting after one year , 551,676 fully-vested stock option awards and 22,000 stock option awards with vesting in twelve equal monthly installments beginning on March 31, 2019.

The Company granted 405,237 awards to employees under the 2016 Incentive Award Plan during the year ended December 31, 2020, consisting of 20,724 restricted stock awards (“RSA”) and 177,808 restricted stock units (“RSU”) vesting after four years , 4,800 stock option awards and 2,500 RSU vesting after three years and 199,405 fully-vested stock option awards.

The Company granted an additional 23,148 stock option awards to non-employee directors under the 2016 Incentive Award Plan, during the year ended December 31, 2020.

These awards will vest on the earlier of (a) the day immediately preceding the date of the first annual meeting following the date of grant and (b) the first anniversary of the date of grant, subject to the non-employee director continuing in service through the applicable vesting date.

T he Company granted 850,700 awards to employees under the 2016 Plan during the year ended December 31, 2018, consisting of 550,500 stock option awards and 300,200 restricted stock units (“RSU”), all vesting after four years .

T he Company granted 816,286 awards to employees under the 2016 Incentive Award Plan during the year ended December 31, 2019, consisting of 10,000 stock option awards and 227,610 RSU vesting after four years , 5,000 stock option awards vesting after one year , 551,676 fully-vested stock option awards and 22,000 stock option awards with vesting in twelve equal monthly installments beginning on March 31, 2019.

The Company granted an additional 41,853 stock option awards to non-employee directors under the 2016 Incentive Award Plan, during the year ended December 31, 2019.

The Company granted 968,550 awards to employees under the 2016 Plan during the year ended December 31, 2017, consisting of 797,550 stock option awards, 118,000 restricted stock awards (“RSA”) and 38,000 restricted stock units (“RSU”), all vesting after four years .

The Company granted 15,000 stock option awards, vesting equally on the second, third and fourth anniversary of the grant date over four years .

Additionally, the Company granted 41,346 stock option awards, vesting over one year , to non-employee directors under the 2016 Incentive Award Plan, during the year ended December 31, 2017.

The Company granted 850,700 awards to employees under the 2016 Plan during the year ended December 31, 201 8 , consisting of 550,500 stock option awards and 300,200 RSU , all vesting after four years .

The Company granted an additional 33,801 stock option awards to non-employee directors under the 2016 Incentive Award Plan, during the year ended December 31, 2018.

The 2016 Plan expires in 2026, except for awards then outstanding, and is administered by the Board.

All Awards granted at the IPO or thereafter were or will be issued under the 2016 Plan.

The company satisfies stock option exercises and vested stock awards with newly issued shares.

Shares available for future stock compensation grants totaled 3.2 million and 3.8 million at December 31, 2019 and 2018.

The company satisfies stock option exercises and vested stock awards with treasury shares or newly issued shares.

Shares available for future stock compensation grants under the 2016 Plan totaled 2.9 million and 3.2 million at December 31, 2020 and 2019.

2014 Equity Incentive Plan

8 unchanged sentences

The Tender Offer resulted in the tender and purchase of 229,431 vested options from employee holders of options by MPI.

Under generally accepted accounting guidance governing such transactions, because the Tender offer by an economic interest holder in the Company, this transaction is accounted for as a settlement of vested options and a reissuance of options at fair value as of the transaction date.

Under generally accepted accounting guidance governing such transactions, because the Tender Offer was made by an economic interest holder in the Company, this transaction is accounted for as a settlement of vested options and a reissuance of options at fair value as of the transaction date.

Expense related to the reissuance of options to MPI is included as stock-based compensation expense of $ 5.1 million within Selling, general and administrative expenses during the year ended December 31, 2019.

1 unchanged sentence

Valuation Assumptions

The Company determines the fair value of stock options using the Black-Scholes-Merten option pricing model (the “BSM Model”).

The Company determines the fair value of stock options using the Black-Scholes-Merton option pricing model (the “BSM Model”).

The BSM Model is primarily affected by the fair value of the Company’s common stock (see restricted share valuation discussion below), the expected holding period for the option, expected stock price volatility over the term of the awards, the risk-free interest rate, and expected dividends.

8 unchanged sentences

The Company uses the simplified method, as prescribed by accounting guidance governing such awards, to calculate the expected holding period for options granted to employees as we do not have sufficient historical evidence data to provide a reasonable basis upon which to estimate the expected holding period.

For options valued by the Company for the years ended December 31, 2019, 2018 and 2017, the expected holding period is based on an average between the midpoint of the vesting date and the expiration date of the options.

For options valued by the Company for the years ended December 31, 2020, 2019 and 2018, respectively, the expected holding period is based on an average between the midpoint of the vesting date and the expiration date of the options.

The Company estimates expected volatility primarily by using the historical volatility of a publicly traded peer group that operates in the clinical research and development industry.

3 unchanged sentences

The expected dividend yield is assumed to be zero based on recent and anticipated dividend activity.

Subsequent to the IPO, the fair value of common stock is based upon the market price of the Company’s common stock on the date of grant as listed on the NASDAQ.

Subsequent to the Company’s Initial Public Offering (IPO) in August 2016, the fair value of common stock is based upon the market price of the Company’s common stock on the date of grant as listed on the NASDAQ.

Due to the absence of an active market for the Company’s common stock prior to the IPO, the Company determined the fair value of restricted shares by obtaining an independent valuation of the fair value of the Company’s equity, applying a discount for lack of marketability, and then calculating the implied share price.

65 unchanged sentences

These defined contribution arrangements provide employees with retirement savings and life insurance benefits.

The Company incurred expenses related to these arrangements of $ 1.2 million, $ 1.0 million and $ 0.9 million in the years ended December 31, 2019, 2018 and 2017, respectively, and were allocated between Total direct costs, and Selling, general and administrative in the consolidated statements of operations.

The Company incurred expenses related to these arrangements of $ 1.5 million, $ 1.2 million and $ 1.0 million in the years ended December 31, 2020 , 2019 and 2018 , respectively, and were allocated between Total d irect costs, and Selling, general and administrative in the consolidated statements of operations.

The Company is also required to pay certain minimum statutory post-employment benefits.

The Company recognizes a liability and the associated expense for these benefits when it is probable that employees are entitled to the benefit.

US Tax Reform

The “Tax Cuts and Jobs Act” (TCJA) was enacted on December 22, 2017 and it significantly reforms the Internal Revenue Code of 1986, as amended.

The TCJA, among other things, includes a reduction in the U.S.

federal tax rate from 35 % to 21 %, allows for the expensing of capital expenditures, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, creates new taxes on certain foreign sourced earnings and puts into effect the migration from a “worldwide” system of taxation to a territorial system.

The Company recognized the income tax effects of the “Tax Cuts and Jobs Act” (TCJA) in its audited consolidated financial statements on our 2017 Annual Report on Form 10-K in accordance with Staff Accounting Bulletin No.

118, which provides Securities and Exchange Commission staff guidance for the application of ASC Topic 740, Income Taxes, in the reporting period in which the TCJA was signed into law.

The guidance also provides for a measurement period of up to one year from the enactment date for the Company to complete the accounting for the U.S.

tax law changes.

As such, the Company’s 2017 financial results reflected the provisional estimate of the income tax effects of the TCJA.

The Company completed its analysis of the TCJA in 2018 and adjusted the 2017 provisional estimates to the final amounts.

A summary of the provisional and final amounts is included below:

Transition tax on unrepatriated foreign earnings:

The Company originally estimated a transition tax expense of $ 0.6 million and the final transition tax liability is $ 0.7 million.

The adjustment unfavorably impacted the effective tax rate by approximately 0.1 %.

Reduction of U.S.

Federal Corporate Tax Rate:

The Company originally estimated a provisional tax benefit of $ 3.4 million related to the revaluation of deferred tax assets and liabilities.

The deferred tax assets/liabilities as of December 31, 2017 were adjusted to match the balances per the 2017 U.S.

corporate income tax return.

The revised deferred balance was then adjusted from a 35 % tax rate to a 21 % tax rate.

This resulted in a final tax benefit of approximately $ 3.6 million.

The adjustment favorably impacted the effective tax rate by approximately 0.2 %.

Indefinite reinvestment assertion:

Prior to the passage of the TCJA, the Company asserted that all of the undistributed foreign earnings of its foreign subsidiaries were considered indefinitely reinvested and accordingly, no deferred taxes were provided.

Beginning in 2018, the TCJA provides a 100 % deduction for dividends received from 10 -percent owned foreign corporations by U.S.

corporate shareholders, subject to a one-year holding period.

Although dividend income is now exempt from U.S.

federal tax in the hands of the U.S.

corporate shareholders, companies must still apply the guidance of ASC 740-30-25-18 to account for the tax consequences of outside basis differences and other tax impacts of their investments in non-U.S.

subsidiaries.

The Company has accrued the Transition Tax on the deemed repatriated earnings that were previously indefinitely reinvested.

The Company has not recorded deferred foreign withholding taxes on approximately $ 21.1 million of pre-2018 earnings which are considered permanently reinvested.

Global intangible low taxed income (GILTI):

The TCJA creates a new requirement that certain income (i.e., GILTI) earned by foreign subsidiaries must be included currently in the gross income of the U.S.

The Company has made an accounting policy election to treat GILTI taxes as a current period expense.

The Company files income tax returns for U.S.

34 unchanged sentences

uncertain tax positions

Prior to the passage of the “Tax Cuts and Jobs Act” (TCJA), the Company asserted that all of the undistributed foreign earnings of its foreign subsidiaries were considered indefinitely reinvested and accordingly, no deferred taxes were provided.

Beginning in 2018, the TCJA provides a 100 % deduction for dividends received from 10 -percent owned foreign corporations by U.S.

corporate shareholders, subject to a one-year holding period.

Although dividend income is now exempt from U.S.

federal tax in the hands of the U.S.

subsidiaries.

As of December 31, 2020, the Company’s accounting position is that unremitted foreign earnings are indefinitely reinvested.

Therefore, the Company has not recorded deferred foreign withholding taxes on the unremitted foreign earnings and it is not practicable to determine the amount of the additional taxes that would result if these earnings were repatriated.

The undistributed earnings of foreign subsidiaries was approximately $ 27.8 million.

Components of the Company’s net deferred tax asset (liability) included in the consolidated balance sheets consisted of the following at December 31 (in thousands):

3 unchanged sentences

Foreign operating loss carryforward

state and local tax credits and

state and local tax credits and carryforward

Valuation allowance

5 unchanged sentences

Total deferred tax liabilities

Net deferred tax asset

state and local tax credits noted above will expire in 2024 if not utilized.

Net deferred tax liability

The Company has foreign operating loss carryforwards for which a deferred tax asset of $ 0.3 million has been established.

2 unchanged sentences

Approximately 12 % of the foreign net operating loss carryforwards can be utilized over an indefinite period whereas the remainder will expire at various times from 2023 to 2029 if not utilized.

In May 2017, the Company acquired Nephrogenex which included deferred tax assets of $ 22.2 million, consisting of tax effected net operating losses in the amount of $ 13.5 million, tax effected capitalized research and development expenses of $ 8.5 million and tax effected federal tax credits of $ 0.2 million, and deferred tax liabilities of $ 0.1 million.

In 2018, the Company disposed of approximately $ 7.4 million in deferred tax assets and reduced the deferred credit by approximately $ 6.9 million (net increase in tax expense of approximately $ 0.5 million) as a result of an IRC Section 382 ownership shift that occurred as a result of Cinven’s sales of the Company’s securities.

The ownership shift resulted in a limitation in the ability to utilize the acquired tax attributes and resulted in the described asset write-off and reduction of the deferred credit.

Annual activity related to the Company’s valuation allowance is as follows (in thousands):

4 unchanged sentences

Reductions from utilization, reassessments and

Remeasurement due to effect of tax reform

Ending Balance

21 unchanged sentences

The commitments expire at various times through 2027.

MISCELLANEOUS (EXPENSE) INCOME, NET

Miscellaneous (expense) income, net consisted of the following (in thousands):

MISCELLANEOUS INCOME (EXPENSE), NET

Miscellaneous income (expense), net consisted of the following (in thousands):

Year Ended December 31,

Net (loss) gain on foreign-currency transactions

Other (expense) income

Miscellaneous (expense) income, net

Net gain (loss) on foreign-currency transactions

Other income (expense)

Miscellaneous income (expense), net

RELATED PARTY TRANSACTIONS

1 unchanged sentence

The Company periodically extends short term loans or advances to employees, typically upon commencement of employment.

Total receivables as a result of these employee advances of $ 0.2 million existed at December 31, 2019 and 2018, respectively, and are included in the Prepaid expenses and other current assets and Other assets line items of the consolidated balance sheets, respectively, depending on the contractual repayment date.

Management Fees

In conjunction with the IPO, the Advisory Services Agreement with Cinven Capital Management (V) General Partner Limited (“Cinven”) expired.

Subsequent to the IPO, the Company paid fees for director services provided by Cinven employees that were members of the Company’s Board of Directors and any related committees.

Total receivables as a result of these employee advances of $ 0.2 million existed at December 31, 2020

and 2019 , respectively, and are included in the Prepaid expenses and other current assets and Other assets line items of the consolidated balance sheets, respectively, depending on the contractual repayment date.

Director Fees

The Company paid fees for director services provided by Cinven employees that were members of the Company’s Board of Directors and any related committees.

The director fees were paid directly to Cinven in accordance with the Company’s non-employee director compensation policy.

During the third quarter of 2018, Cinven sold its remaining shares of the Company’s common stock and all three members of the Company’s Board affiliated with Cinven subsequently resigned.

During the years ended December 31, 2018 and 2017, the Company incurred director fees of $ 0.1 million, respectively.

In connection with these fees, Cinven incurred related travel expenses of less than $ 0.1 million and $ 0.1 million, respectively, during the years ended December 31, 2018 and 2017.

During the year ended December 31, 2018, the Company incurred director fees of $ 0.1 million and related travel expenses of less than $ 0.1 million.

Service Agreements

Coherus BioSciences, Inc.

(“Coherus”) and MX II Associates, LLC (“MXII”)

The chief executive officer of the Company was a member of Coherus BioSciences, Inc.’s (“Coherus”) board of directors until his resignation in the first quarter of 2018.

Coherus is no longer considered a related party as of the first quarter of 2018.

During 2011 a related party of the Company in which the Company’s chief executive officer is the managing member, MXII, made an investment in Coherus.

In early 2012 the Company made a $ 2.5 million investment in Coherus.

Concurrent with the initial investment, MXII secured the exclusive rights for Medpace to perform Phase I through Phase III clinical trial work for certain Coherus’ “bio-similar” drug compounds executed through a MSA.

The agreement provides for a minimum fee commitment for clinical trial services and is cancelable without cause by either party upon 30 days prior notice.

During the year ended December 31, 2017, the Company recognized service revenue of $ 8.0 million from Coherus in the Company’s consolidated statements of operations.

In addition, the company recognized Reimbursed out-of-pocket revenue and Reimbursed out-of-pocket expenses with Coherus in the consolidated statements of operations of $ 1.3 million during the year ended December 31, 201 7 .

Xenon Pharmaceuticals, Inc.

Certain executives and employees of the Company, including the chief executive officer, have held equity investments in Xenon, a clinical-stage biopharmaceutical company.

In addition, a Medpace employee was a director of Xenon until May 2015.

During the second quarter of 2017, the chief executive officer sold his entire equity position held in Xenon.

Xenon is no longer considered to be a related party subsequent to this sale.

During July 2015 the Company and Xenon entered into an amended MSA agreement for the Company to provide clinical trial related services.

The Company recognized service revenue from Xenon of $ 0.6 million during the six months ended June 30, 2017 in the Company’s consolidated statements of operations.

In addition, the Company recognized Reimbursed out-of-pocket revenue and Reimbursed out-of-pocket expenses with Xenon in the consolidated statements of operations of $ 0.1 million during the six months ended June 30, 2017.

Cymabay Therapeutics, Inc.

1 unchanged sentence

A Medpace employee was a member Cymabay’s board of directors from the first quarter of 2016 until his resignation in the first quarter of 2020.

The Company and Cymabay entered into a MSA dated October 21, 2016.

The Company and Cymabay entered into a Master Service Agreement (“MSA”) dated October 21, 2016.

Subsequently, the Company and Cymabay have entered into several task orders for the Company to perform clinical trial related services.

The Company recognized total revenue from Cymabay of $ 13.2 million and $ 10.8 million during the years ended December 31, 2019 and 2018 in the Company’s consolidated statements of operations.

The Company recognized service revenue from Cymabay of $ 0.6 million during the year ended December 31, 2017 in the Company’s consolidated statements of operations.

As of December 31, 2019 and 2018, respectively, the Company had Advanced billings from Cymabay of $ 1.6 million and less than $ 0.1 million recorded in the consolidated balance sheets.

In addition, as of December 31, 2019 and 2018, the Company had Accounts receivable and unbilled, net from Cymabay of $ 1.4 million and $ 2.5 million recorded in the consolidated balance sheets, respectively.

The Company recognized total revenue from Cymabay of $ 13.2 million and $ 10.8 million during the years ended December 31, 2019 and 2018, respectively, in the Company’s consolidated statements of operations.

As of December 31, 2019, the Company had Advanced billings from Cymabay of $ 1.6 million recorded in the consolidated balance sheets.

In addition, as of December 31, 2019, the Company had Accounts receivable and unbilled, net from Cymabay of $ 1.4 million recorded in the consolidated balance sheets.

As of the first quarter of 2020, Cymabay is no longer considered a related party.

LIB Therapeutics LLC and subsidiaries (“LIB”)

2 unchanged sentences

Subsequently, the Company and LIB have entered into several task orders for the Company to perform clinical trial related services.

The Company recognized total revenue from LIB of $ 2.0 million and $ 3.7 million during the years ended December 31, 2019 and 2018 in the Company’s consolidated statement of operations.

The Company recognized service revenue from LIB of $ 1.4 million during the year ended December 31, 2017 in the Company’s consolidated statements of operations.

The Company recognized total revenue from LIB of $ 2.6 million, $ 2.0 million and $ 3.7 million during the years ended December 31, 2020, 2019 and 2018 in the Company’s consolidated statement of operations.

As of December 31, 2020 and 2019, the Company had, from LIB, Advanced billings of $ 0.7 million and $ 0.5 million in the consolidated balance sheets, respectively.

In addition, the Company had Accounts receivable and unbilled, net from LIB of $ 0.3 million and $ 1.0 million in the consolidated balance sheets at December 31, 2019 and 2018, respectively.

In addition, the Company had Accounts receivable and unbilled, net from LIB of $ 0.3 million in the consolidated balance sheets at December 31, 2020 and 2019, respectively.

CinRX Pharma and subsidiaries (“CinRx”)

1 unchanged sentence

The Company and CinRx have entered into several task orders for the Company to perform clinical trial related services.

During the years ended December 31, 2019 and 2018, the Company recognized total revenue from CinRx of $ 3.7 million and $ 0.5 million in the Company’s consolidated statements of operations.

During the year ended December 31, 2017, the Company recognized service revenue from CinRx of $ 0.4 million in the Company’s consolidated statements of operations.

During the years ended December 31, 2020, 2019 and 2018, the Company recognized total revenue from CinRx of $ 13.2 million, $ 3.7 million and $ 0.5 million in the Company’s consolidated statements of operations.

As of December 31, 2020 and 2019, the Company had Advanced billings from CinRx of $ 5.8 million and $ 0.9 million in the consolidated balance sheets, respectively.

As of December 31, 2020 and 2019 the Company had Accounts receivable and unbilled, net from CinRx of $ 2.2 million and $ 0.2 million in the consolidated balance sheets.

The Summit, a Dolce Hotel (“The Summit”)

The Summit Hotel (“The Summit”)

The Summit Hotel, located on the Medpace campus, is owned by the chief executive officer, and managed by an unrelated hospitality management entity.

Medpace incurs travel lodging and meeting expenses at The Summit.

During the years ended December 31, 2019 and 2018, Medpace incurred expenses of $ 0.6 million and $ 0.4 million at The Summit.

During the years ended December 31, 2020, 2019 and 2018, Medpace incurred expenses of $ 0.4 million, $ 0.6 million and $ 0.4 million at The Summit.

Medpace Investors, LLC (“MPI”)

4 unchanged sentences

Refer to Note 9 of the Notes to Consolidated Financial Statements for details of the Tender Offer transaction.

Purchase of Real Estate Properties

In December 2016, the Company entered into a purchase agreement for four parcels of real estate property that are closely situated to the Medpace campus in Cincinnati, Ohio, from AT Redevelopment Company, LLC, which is wholly-owned by the Company’s chief executive officer.

The purchase price of the real estate property was $ 0.4 million as determined by an independent third party broker's opinion of value.

The transaction closed on January 11, 2017 .

Leased Real Estate

5 unchanged sentences

Annual base rent for the corporate headquarters allows for adjustments to the rental rate annually for increases in the consumer price index.

U nder ASC 842, operating lease cost recognized for the year ended December 31, 2019 was $ 2.0 million and was allocated between Direct service costs, excluding depreciation and amortization, and Selling, general and administrative in the consolidated statements of operations.

The Operating lease right-of-use assets at December 31, 2019 were $ 5.3 million in the consolidated balance sheets.

O perating lease cost recognized for the years ended December 31, 2020 and 2019 was $ 2.0 million, respectively, and was allocated between Direct service costs, excluding depreciation and amortization, and Selling, general and administrative in the consolidated statements of operations.

The Operating lease right-of-use assets at December 31, 2020 and 2019 were $ 3.5 million and $ 5.3 million in the consolidated balance sheets.

The current and long-term portions of the lease liabilities at December 31, 2020 were $ 1.9 million and $ 1.6 million, respectively, and were recognized in Other current liabilities and Operating lease liabilities in the consolidated balance sheets.

Under ASC 840, lease expense recognized for the years ended December 31, 2018 and 2017 was $ 2.2 million and $ 2.1 million, respectively.

The lease expense was allocated between Direct service costs, excluding depreciation and amortization, and Selling, general and administrative in the consolidated statements of operations.

The current and long-term portions of the lease liabilities at December 31, 2019 were $ 1.8 million and $ 3.5 million, respectively, and were recognized in Other current liabilities and Operating lease liabilities in the consolidated balance sheets.

Under ASC 840, lease expense recognized for the years ended December 31, 2018 was $ 2.2 million and was allocated between Direct service costs, excluding depreciation and amortization, and Selling, general and administrative in the consolidated statements of operations.

In 2018, Medpace, Inc.

entered into a multi-year lease agreement governing future occupancy of additional office space in Cincinnati, Ohio.

entered into a multi-year lease agreement governing future occupancy of additional office space in Cincinnati, Ohio with an entity that is wholly owned by the Company’s chief executive officer and certain members of his immediate family.

The Company began to occupy the premises in the second quarter of fiscal year 2020 .

The lease expires in 2040 and the Company has two 10 -year options to extend the term of the lease.

ASC 842 – Operating Leases

The Company pays rent, taxes, insurance, and maintenance expenses that arise from the use of the property.

Annual base rent for the corporate headquarters allows for adjustments to the rental rate annually for increases in the consumer price index.

The Company has determined that the lease is an operating lease.

Operating lease cost recognized for the year ended December 31, 2020 was $ 3.6 million.

The operating lease cost was allocated between Total direct costs and Selling, general and administrative in the consolidated statements of operations.

The Operating lease right-of-use assets at December 31, 2020 were $ 56.6 million in the consolidated balance sheets.

The current and long-term portions of the lease liabilities at December 31, 2020 were $ 0.7 million and $ 66.8 million, respectively and were recognized in Other current liabilities and Operating lease liabilities in the consolidated balance sheets.

The Company entered into two multi-year lease agreements governing the occupancy of space of two buildings in Cincinnati, Ohio with an entity that is wholly owned by the Company’s chief executive officer and certain members of his immediate family.

2 unchanged sentences

Annual base rent for the corporate headquarters allows for adjustments to the rental rate annually for increases in the consumer price index.

Under ASC 842, the Company has

determined that the leases are operating leases.

Operating lease cost recognized for the year ended December 31, 2019 is $ 3.6 million.

The lease cost was allocated between Total direct costs and Selling, general and administrative in the consolidated statements of operations.

The Operating lease right-of-use assets at December 31, 2019 were $ 21.9 million in the consolidated balance sheets.

The Company has determined that the leases are operating leases.

Operating lease cost recognized for the years ended December 31, 2020 and 2019 was $ 3.6 million, respectively.

The lease cost was allocated between Total direct costs and Selling, general and

administrative in the consolidated statements of operations.

The Operating lease right-of-use assets at December 31, 2020 and 2019 were $ 19.7 million and $ 21.9 million, respectively, in the consolidated balance sheets.

The current and long-term portions of the lease liabilities at December 31, 20 20 were $ 2.4 million and $ 17.2 million, respectively, and were recognized in Other current liabilities and Operating lease liabilities in the consolidated balance sheets.

The current and long-term portions of the lease liabilities at December 31, 2019 were $ 2.3 million and $ 19.7 million, respectively, and were recognized in Other current liabilities and Operating lease liabilities in the consolidated balance sheets.

ASC 840 - Deemed Assets and Deemed Landlord Liabilities

In accordance with the accounting guidance related to leases, the Company was deemed in substance to be the owner of the property during the construction phase and at completion.

Accordingly, the Company reflected the buildings and related liabilities as deemed assets from landlord building construction in Property and equipment, net, Other current liabilities, and Deemed landlord liabilities, respectively, on the consolidated balance sheets.

The deemed assets were being fully depreciated, on a straight line basis, over the 15 -year term of the lease.

Deemed landlord liabilities are recorded at their net present value when the Company enters into qualifying leases and are reduced as the Company makes periodic lease payments on the properties.

Accretion expense was being recorded over the term of the lease as a component of Interest expense, net in the Company’s consolidated statements of operations.

The Company paid $ 3.8 million during the years ended December 31, 2018 and 2017, respectively.

The current and long-term portions of the Deemed landlord liability at December 31, 2018 were $ 2.1 million and $ 24.5 million, respectively.

The Company has recognized $ 14.6 million of deemed assets, net at December 31, 2018, in the consolidated balance sheets.

The Company paid $ 3.8 million during the year ended December 31, 2018 related to leases recognized as deemed assets and deemed landlord liabilities under ASC 840.

Travel Services

5 unchanged sentences

These travel expenses are recorded in Selling, general and administrative in the Company’s consolidated statements of operations.

As of December 31, 2019 and 2018, the Company had Accounts payable due to Aircraft Management Company of less than $ 0.1 million and $ 0.2 million in the consolidated balance sheets, respectively.

CASH FLOW STATEMENT – SUPPLEMENTAL INFORMATION

During the year ended December 31, 2017, the Company engaged in the following significant non-cash investing and financing activities:

Acquired net assets totaling $ 0.7 million consisting of net Deferred tax assets of $ 21.1 million, offset by net Deferred tax liabilities of $ 0.1 million and deferred credits within Other long term liabilities of $ 20.3 million in exchange for Accounts receivable and unbilled, net of $ 0.6 million and Other assets of $ 0.1 million.

ENTITY WIDE DISCLOSURES

15 unchanged sentences

In the current year and for all periods presented, the revenue associated with medical device projects, previously a separate therapeutic area, has been included in the respective therapeutic area that best aligns with the therapeutic focus of the medical device project and represents how management evaluates disaggregated revenue in its internal reporting.

QUARTERLY FINANCIAL DATA (unaudited)

The following table summarizes the Company's unaudited quarterly results of operations (in thousands, except per share data):

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Total direct costs

Income from operations

Net income per share attributable to common shareholders - Basic

Net income per share attributable to common shareholders - Diluted

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Total direct costs

Income from operations

Net income per share attributable to common shareholders - Basic

Net income per share attributable to common shareholders - Diluted

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data