Note 14 - Condensed Consolidating Financial Information of Guarantor Subsidiaries

6 Months Ended

Jun. 30, 2012

Condensed Consolidating Financial Information Of Guarantor Subsidiaries

(14)         Condensed Consolidating Financial Information of Guarantor Subsidiaries

The Company has outstanding certain indebtedness that is guaranteed by all of its U.S. subsidiaries. However, the indebtedness is not guaranteed by the Company’s foreign subsidiaries. The guarantor subsidiaries are wholly owned and the guarantees are made on a joint and several basis, and are full and unconditional. Separate consolidated financial statements of the guarantor subsidiaries have not been presented because management believes that such information would not be material to investors. However, condensed consolidating financial information as of December 31, 2011 and June 30, 2012, and for the three and six months ended June 30, 2011 and 2012 is presented below. The Company (issuer of the Senior Unsecured Notes) was formed in June 2010 to implement a holding company organizational structure. As a result, all operating activities are conducted through the Company’s wholly-owned subsidiaries.

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) for the Three Months Ended June 30, 2011

(In thousands)

	Guarantor Subsidiaries		Non-Guarantor Subsidiaries			ExamWorks Group, Inc. (Parent Corporation)		Consolidated Totals
Revenues	$	82,685	$	24,057		$	—	$	106,742
Costs and expenses:
Costs of revenues		56,202		14,306			—		70,508
Selling, general and administrative expenses		14,801		6,853			—		21,654
Depreciation and amortization		8,565		2,910			—		11,475
Total costs and expenses		79,568		24,069			—		103,637
Income (loss) from operations		3,117		(12	)		—		3,105
Interest and other expenses, net		2,104		1,110			—		3,214
Income (loss) before income taxes		1,013		(1,122	)		—		(109	)
Provision (benefit) for income taxes		226		(263	)		—		(37	)
Net income (loss)	$	787	$	(859	)	$	—	$	(72	)

Comprehensive Income (Loss):
Net income (loss)	$	787	$	(859	)	$	—	$	(72	)
Foreign currency translation adjustments, net of tax		—		(1,074	)		—		(1,074	)
Total comprehensive income (loss)	$	787	$	(1,933	)	$	—	$	(1,146	)

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) for the Six Months Ended June 30, 2011

(In thousands)

	Guarantor  Subsidiaries			Non-Guarantor Subsidiaries			ExamWorks Group, Inc. (Parent Corporation)		Consolidated Totals
Revenues	$	139,543		$	33,787		$	—	$	173,330
Costs and expenses:
Costs of revenues		94,064			20,013			—		114,077
Selling, general and administrative expenses		26,895			9,087			—		35,982
Depreciation and amortization		15,721			4,363			—		20,084
Total costs and expenses		136,680			33,463			—		170,143
Income from operations		2,863			324			—		3,187
Interest and other expenses, net		2,534			1,692			—		4,226
Income (loss) before income taxes		329			(1,368	)		—		(1,039	)
Benefit for income taxes		(92	)		(316	)		—		(408	)
Net income (loss)	$	421		$	(1,052	)	$	—	$	(631	)

Comprehensive Income (Loss):
Net income (loss)	$	421	$	(1,052	)	$	—	$	(631	)
Foreign currency translation adjustments, net of tax		—		(230	)		—		(230	)
Total comprehensive income (loss)	$	421	$	(1,282	)	$	—	$	(861	)

Condensed Consolidating Statement of Operations and Comprehensive Loss for the Three Months Ended June 30, 2012

(In thousands)

	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			ExamWorks Group, Inc. (Parent Corporation)		Consolidated Totals
Revenues	$	88,462		$	39,315		$	—	$	127,777
Costs and expenses:
Costs of revenues		62,307			21,916			—		84,223
Selling, general and administrative expenses		15,424			12,305			—		27,729
Depreciation and amortization		8,682			5,080			—		13,762
Total costs and expenses		86,413			39,301			—		125,714
Income from operations		2,049			14			—		2,063
Interest and other expenses, net		5,142			1,032			—		6,174
Loss before income taxes		(3,093	)		(1,018	)		—		(4,111	)
Benefit for income taxes		(761	)		(43	)		—		(804	)
Net loss	$	(2,332	)	$	(975	)	$	—	$	(3,307	)

Comprehensive Loss:
Net loss	$	(2,332	)	$	(975	)	$	—	(3,307	)
Foreign currency translation adjustments, net of tax		—			(1,736	)		—	(1,736	)
Total comprehensive loss	$	(2,332	)	$	(2,711	)	$	—	(5,043	)

Condensed Consolidating Statement of Operations and Comprehensive Loss for the Six Months Ended June 30, 2012

(In thousands)

	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			ExamWorks Group, Inc. (Parent Corporation)		Consolidated Totals
Revenues	$	175,657		$	75,858		$	—	$	251,515
Costs and expenses:
Costs of revenues		122,722			42,674			—		165,396
Selling, general and administrative expenses		32,446			23,915			—		56,361
Depreciation and amortization		17,401			10,386			—		27,787
Total costs and expenses		172,569			76,975			—		249,544
Income (loss) from operations		3,088			(1,117	)		—		1,971
Interest and other expenses, net		10,454			2,293			—		12,747
Loss before income taxes		(7,366	)		(3,410	)		—		(10,776	)
Provision (benefit) for income taxes		(3,246	)		100			—		(3,146	)
Net loss	$	(4,120	)	$	(3,510	)	$	—	$	(7,630	)

Comprehensive Loss:
Net loss	$	(4,120	)	$	(3,510	)	$	—	(7,630	)
Foreign currency translation adjustments, net of tax		—			714			—	714
Total comprehensive loss	$	(4,120	)	$	(2,796	)	$	—	(6,916	)

Condensed Consolidating Balance Sheet as of December 31, 2011

(In thousands)

	Guarantor Subsidiaries		Non-Guarantor Subsidiaries		ExamWorks Group, Inc. (Parent Corporation)			Consolidation and Elimination Entries			Consolidated Totals
Assets
Current assets:
Cash and cash equivalents	$	6,044	$	2,372	$	—		$	—		$	8,416
Accounts receivable, net		44,690		99,351		—			—			144,041
Other receivables		26		14		—			—			40
Prepaid expenses		2,694		1,793		—			—			4,487
Deferred tax assets		1,373		267		—			—			1,640
Other current assets		14		1,159		—			—			1,173
Total current assets		54,841		104,956		—			—			159,797
Property, equipment and leasehold improvements, net		7,745		1,173		—			—			8,918
Goodwill		240,252		60,008		—			—			300,260
Intangible assets, net		84,833		61,335		—			—			146,168
Deferred tax assets, noncurrent		—		1,913		—			(1,913	)		—
Deferred financing costs, net		—		—		11,458			—			11,458
Other assets		438		—		—			—			438
Total assets	$	388,109	$	229,385	$	11,458		$	(1,913	)	$	627,039
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	16,728	$	25,914	$	—		$	—		$	42,642
Accrued expenses		4,272		24,138		—			—			28,410
Accrued interest expense		—		3,236		7,011			—			10,247
Deferred revenue		192		1,140		—			—			1,332
Current portion of subordinated unsecured notes payable		1,932		—		—			—			1,932
Current portion of contingent earnout obligation		91		—		—			—			91
Other current liabilities		2,925		2,534		—			—			5,459
Total current liabilities		26,140		56,962		7,011			—			90,113
Senior unsecured notes payable		—		—		250,000			—			250,000
Senior secured revolving credit facility and working capital facilities		—		39,063		5,000			—			44,063
Long-term subordinated unsecured notes payable, less current portion		717		—		—			—			717
Long-term contingent earnout obligation, less current portion		86		—		—			—			86
Deferred tax liability, noncurrent		4,072		—		—			(1,913	)		2,159
Other long-term liabilities		1,691		286		—			—			1,977
Total liabilities		32,706		96,311		262,011			(1,913	)		389,115
Commitments and contingencies
Stockholders’ equity (deficit) (1)		355,403		133,074		(250,553	)		—			237,924
Total liabilities and stockholders' equity (deficit)	$	388,109	$	229,385	$	11,458		$	(1,913	)	$	627,039

(1) Includes intercompany investments in subsidiaries

Condensed Consolidating Balance Sheet as of June 30, 2012

(In thousands)

	Guarantor Subsidiaries		Non-Guarantor Subsidiaries		ExamWorks Group, Inc. (Parent Corporation)			Consolidation and Elimination Entries		Consolidated Totals
Assets
Current assets:
Cash and cash equivalents	$	8,516	$	3,846	$	—		$	—	$	12,362
Accounts receivable, net		45,307		110,621		—			—		155,928
Other receivables		49		37		—			—		86
Prepaid expenses		1,377		2,396		—			—		3,773
Other current assets		13		1,171		—			—		1,184
Total current assets		55,262		118,071		—			—		173,333
Property, equipment and leasehold improvements, net		9,191		1,154		—			—		10,345
Goodwill		242,101		62,514		—			—		304,615
Intangible assets, net		69,751		51,935		—			—		121,686
Deferred tax assets, noncurrent		5,717		3,452		—			—		9,169
Deferred financing costs, net		—		—		11,078			—		11,078
Other assets		459		—		—			—		459
Total assets	$	382,481	$	237,126	$	11,078		$	—	$	630,685
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	13,592	$	27,934	$	—		$	—	$	41,526
Accrued expenses		14,289		30,305		—			—		44,594
Accrued interest expense		—		5,424		4,997			—		10,421
Deferred revenue		176		2,468		—			—		2,644
Current portion of subordinated unsecured notes payable		1,440		—		—			—		1,440
Deferred tax liability		154		316		—			—		470
Current portion of contingent earnout obligation		91		—		—			—		91
Other current liabilities		2,637		2,936		—			—		5,573
Total current liabilities		32,379		69,383		4,997			—		106,759
Senior unsecured notes payable		—		—		250,000			—		250,000
Senior secured revolving credit facility and working capital facilities		—		35,173		—			—		35,173
Long-term subordinated unsecured notes payable, less current portion		520		—		—			—		520
Long-term contingent earnout obligation, less current portion		86		—		—			—		86
Other long-term liabilities		1,461		373		—			—		1,834
Total liabilities		34,446		104,929		254,997			—		394,372
Commitments and contingencies
Stockholders’ equity (deficit) (1)		348,035		132,197		(243,919	)		—		236,313
Total liabilities and stockholders' equity (deficit)	$	382,481	$	237,126	$	11,078		$	—	$	630,685

(1) Includes intercompany investments in subsidiaries.

Condensed Consolidating Statement of Cash Flows for the six months ended June 30, 2011

(In thousands)

	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			ExamWorks Group, Inc. (Parent Corporation)			Consolidated Totals
Net cash provided by (used in) operating activities	$	50,490		$	(34,097	)	$	—		$	16,393
Investing activities:
Cash paid for acquisitions, net		(278,239	)		(2,303	)		—			(280,542	)
Purchases of equipment and leasehold improvements, net		(2,219	)		(415	)		—			(2,634	)
Working capital and other settlements for acquisitions		70			(1,706	)		—			(1,636	)
Net cash used in investing activities		(280,388	)		(4,424	)		—			(284,812	)
Financing activities:
Borrowings under senior secured revolving credit facility		—			—			264,000			264,000
Proceeds from the exercise of options and warrants		—			—			1,313			1,313
Excess tax benefit related to share-based compensation		1,886			—			—			1,886
Payment of deferred financing costs		—			—			(1,838	)		(1,838	)
Repayment of subordinated unsecured notes payable		(1,027	)		—			—			(1,027	)
Net borrowings under working capital facilities		—			37,794			—			37,794
Repayment under senior secured revolving credit facility		—			—			(60,000	)		(60,000	)
Intercompany investments and other		203,200			—			(203,475	)		(275	)
Net cash provided by financing activities		204,059			37,794			—			241,853
Exchange rate impact on cash and cash equivalents		—			148			—			148
Net decrease in cash and cash equivalents		(25,839	)		(579	)		—			(26,418	)
Cash and cash equivalents, beginning of period		31,192			2,432			—			33,624
Cash and cash equivalents, end of period	$	5,353		$	1,853		$	—		$	7,206

Condensed Consolidating Statement of Cash Flows for the six months ended June 30, 2012

(In thousands)

	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			ExamWorks Group, Inc. (Parent Corporation)			Consolidated Totals
Net cash provided by operating activities	$	11,578		$	4,644		$	—		$	16,222
Investing activities:
Purchases of equipment and leasehold improvements, net		(2,671	)		(284	)		—			(2,955	)
Working capital and other settlements for acquisitions		102			1,404			—			1,506
Net cash provided by (used in) investing activities		(2,569	)		1,120			—			(1,449	)
Financing activities:
Borrowings under senior secured revolving credit facility		—			—			11,000			11,000
Proceeds from the exercise of options and warrants		—			—			328			328
Purchases of stock for treasury		—			—			(387	)		(387	)
Payment of deferred financing costs		—			—			(624	)		(624	)
Repayment of subordinated unsecured notes payable		(759	)		—			—			(759	)
Net repayments of working capital facilities		—			(4,341	)		—			(4,341	)
Repayment under credit facilities		—			—			(16,000	)		(16,000	)
Intercompany investments and other		(5,778	)		—			5,683			(95	)
Net cash used in financing activities		(6,537	)		(4,341	)		—			(10,878	)
Exchange rate impact on cash and cash equivalents		—			51			—			51
Net increase in cash and cash equivalents		2,472			1,474			—			3,946
Cash and cash equivalents, beginning of period		6,044			2,372			—			8,416
Cash and cash equivalents, end of period	$	8,516		$	3,846		$	—		$	12,362