Note 14 - Condensed Consolidating Financial Information of Guarantor Subsidiaries

9 Months Ended

Sep. 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 September 30, 2012, and for the three and nine months ended September 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. On August 31, 2012, the Company acquired 100% of the outstanding common stock of MedHealth Holdings Pty Limited ("MedHealth"), an Australian entity. In connection with this acquisition, the Company formed a new Delaware holding company, ExamWorks AP, Inc. (“ExamWorks AP”). ExamWorks AP was added to the Indenture as a guarantor of the Senior Unsecured Notes and is a direct subsidiary of the Company.

Condensed Consolidating Statement of Operations for the three months ended September 30, 2011

(In thousands)

	Guarantor Subsidiaries			Non- Guarantor Subsidiaries			ExamWorks Group, Inc. (Parent Corporation)		Consolidated Totals
Revenues	$	78,054		$	31,164		$	—	$	109,218
Costs and expenses:
Costs of revenues		53,781			18,367			—		72,148
Selling, general and administrative expenses		13,441			9,362			—		22,803
Depreciation and amortization		8,848			4,221			—		13,069
Total costs and expenses		76,070			31,950			—		108,020
Income (loss) from operations		1,984			(786	)		—		1,198
Interest and other expenses, net		5,204			83			—		5,287
Loss before income taxes		(3,220	)		(869	)		—		(4,089	)
Benefit for income taxes		(1,316	)		(96	)		—		(1,412	)
Net loss	$	(1,904	)	$	(773	)	$	—	$	(2,677	)
Comprehensive Loss:
Net loss	$	(1,904	)	$	(773	)	$	—	$	(2,677	)
Foreign currency translation adjustments, net of tax		—			(2,627	)		—		(2,627	)
Total comprehensive loss	$	(1,904	)	$	(3,400	)	$	—	$	(5,304	)

Condensed Consolidating Statement of Operations for the nine months ended September 30, 2011

(In thousands)

	Guarantor Subsidiaries			Non- Guarantor  Subsidiaries			ExamWorks  Group, Inc.  (Parent Corporation)		Consolidated Totals
Revenues	$	217,597		$	64,951		$	—	$	282,548
Costs and expenses:
Costs of revenues		147,845			38,380			—		186,225
Selling, general and administrative expenses		40,336			18,449			—		58,785
Depreciation and amortization		24,569			8,584			—		33,153
Total costs and expenses		212,750			65,413			—		278,163
Income (loss) from operations		4,847			(462	)		—		4,385
Interest and other expenses, net		7,738			1,775			—		9,513
Loss before income taxes		(2,891	)		(2,237	)		—		(5,128	)
Benefit for income taxes		(1,408	)		(412	)		—		(1,820	)
Net loss	$	(1,483	)	$	(1,825	)	$	—	$	(3,308	)
Comprehensive Loss:
Net loss	$	(1,483	)	$	(1,825	)	$	—	$	(3,308	)
Foreign currency translation adjustments, net of tax		—			(2,857	)		—		(2,857	)
Total comprehensive loss	$	(1,483	)	$	(4,682	)	$	—	$	(6,165	)

Condensed Consolidating Statement of Operations for the three months ended September 30, 2012

(In thousands)

	Guarantor  Subsidiaries			Non- Guarantor Subsidiaries			ExamWorks  Group, Inc. (Parent Corporation)		Consolidated Totals
Revenues	$	84,785		$	45,300		$	—	$	130,085
Costs and expenses:
Costs of revenues		60,025			26,055			—		86,080
Selling, general and administrative expenses		15,003			13,278			—		28,281
Depreciation and amortization		8,480			5,978			—		14,458
Total costs and expenses		83,508			45,311			—		128,819
Income (loss) from operations		1,277			(11	)		—		1,266
Interest and other expenses, net		5,937			1,609			—		7,546
Loss before income taxes		(4,660	)		(1,620	)		—		(6,280	)
Provision (benefit) for income taxes		(3,692	)		2,038			—		(1,654	)
Net loss	$	(968	)	$	(3,658	)	$	—	$	(4,626	)
Comprehensive Income (Loss):
Net loss	$	(968	)	$	(3,658	)	$	—	$	(4,626	)
Foreign currency translation adjustments, net of tax		(159	)		4,572			—		4,413
Total comprehensive income (loss)	$	(1,127	)	$	914		$	—	$	(213	)

Condensed Consolidating Statement of Operations for the nine months ended September 30, 2012

(In thousands)

	Guarantor Subsidiaries			Non- Guarantor  Subsidiaries			ExamWorks Group, Inc.  (Parent Corporation)		Consolidated Totals
Revenues	$	260,442		$	121,158		$	—	$	381,600
Costs and expenses:
Costs of revenues		182,747			68,729			—		251,476
Selling, general and administrative expenses		47,449			37,193			—		84,642
Depreciation and amortization		25,881			16,364			—		42,245
Total costs and expenses		256,077			122,286			—		378,363
Income (loss) from operations		4,365			(1,128	)		—		3,237
Interest and other expenses, net		16,391			3,902			—		20,293
Loss before income taxes		(12,026	)		(5,030	)		—		(17,056	)
Provision (benefit) for income taxes		(6,938	)		2,138			—		(4,800	)
Net loss	$	(5,088	)	$	(7,168	)	$	—	$	(12,256	)
Comprehensive Loss:
Net loss	$	(5,088	)	$	(7,168	)	$	—	$	(12,256	)
Foreign currency translation adjustments, net of tax		(159	)		5,286			—		5,127
Total comprehensive loss	$	(5,247	)	$	(1,882	)	$	—	$	(7,129	)

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		—		—		10,247			—			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		53,726		10,247			—			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		93,075		265,247			(1,913	)		389,115
Commitments and contingencies
Stockholders’ equity (deficit) (1)		355,403		136,310		(253,789	)		—			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 September 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	$	3,207	$	3,199	$	—		$	—	$	6,406
Accounts receivable, net		45,742		125,355		—			—		171,097
Other receivables		32		30		—			—		62
Prepaid expenses		2,078		2,934		—			—		5,012
Other current assets		13		1,213		—			—		1,226
Total current assets		51,072		132,731		—			—		183,803
Property, equipment and leasehold improvements, net		8,580		1,969		—			—		10,549
Goodwill		242,027		109,999		—			—		352,026
Intangible assets, net		62,494		98,011		—			—		160,505
Deferred tax assets, noncurrent		7,167		4,440		—			—		11,607
Deferred financing costs, net		—		—		10,771			—		10,771
Other assets		493		609		—			—		1,102
Total assets	$	371,833	$	347,759	$	10,771		$	—	$	730,363
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	11,567	$	33,728	$	—		$	—	$	45,295
Accrued expenses		10,414		35,773		—			—		46,187
Accrued interest expense		—		—		5,133			—		5,133
Deferred revenue		166		3,203		—			—		3,369
Current portion of subordinated unsecured notes payable		1,251		—		—			—		1,251
Deferred tax liability		335		23		—			—		358
Current portion of contingent earnout obligation		83		—		—			—		83
Current portion of working capital facilities		—		6,292		—			—		6,292
Other current liabilities		2,498		3,507		—			—		6,005
Total current liabilities		26,314		82,526		5,133			—		113,973
Senior unsecured notes payable		—		—		250,000			—		250,000
Senior secured revolving credit facility and working capital facilities, less current portion		—		28,920		94,905			—		123,825
Long-term subordinated unsecured notes payable, less current portion		528		—		—			—		528
Other long-term liabilities		1,386		424		—			—		1,810
Total liabilities		28,228		111,870		350,038			—		490,136
Commitments and contingencies
Stockholders’ equity (1)		343,605		235,889		(339,267	)		—		240,227
Total liabilities and stockholders' equity	$	371,833	$	347,759	$	10,771		$	—	$	730,363

(1) Includes intercompany investments in subsidiaries.

Condensed Consolidating Statement of Cash Flows for the nine months ended September 30, 2011

(In thousands)

	Guarantor  Subsidiaries			Non-Guarantor Subsidiaries			ExamWorks Group,  Inc. (Parent Corporation)			Consolidated Totals
Net cash provided by (used in) operating activities	$	57,414		$	(30,608	)	$	—		$	26,806
Investing activities:
Cash paid for acquisitions, net		(297,930	)		(2,303	)		—			(300,233	)
Purchases of equipment and leasehold improvements, net		(3,301	)		(820	)		—			(4,121	)
Working capital and other settlements for acquisitions		(168	)		(1,716	)		—			(1,884	)
Net cash used in investing activities		(301,399	)		(4,839	)		—			(306,238	)
Financing activities:
Borrowings under senior secured revolving credit facility		—			—			268,000			268,000
Borrowings under senior unsecured notes payable		—			—			250,000			250,000
Proceeds from the exercise of options and warrants		—			—			2,215			2,215
Excess tax benefit related to share-based compensation		3,112			—			—			3,112
Payment of deferred financing costs		—			—			(9,746	)		(9,746	)
Repayment of subordinated unsecured notes payable		(2,101	)		—			—			(2,101	)
Net borrowings under working capital facilities		—			36,098			—			36,098
Purchases of stock for treasury		—			—			(3,548	)		(3,548	)
Repayment under senior secured revolving credit facility		—			—			(268,000	)		(268,000	)
Intercompany investments and other		238,563			—			(238,921	)		(358	)
Net cash provided by financing activities		239,574			36,098			—			275,672
Exchange rate impact on cash and cash equivalents		—			5			—			5
Net increase (decrease) in cash and cash equivalents		(4,411	)		656			—			(3,755	)
Cash and cash equivalents, beginning of period		31,192			2,432			—			33,624
Cash and cash equivalents, end of period	$	26,781		$	3,088		$	—		$	29,869

Condensed Consolidating Statement of Cash Flows for the nine months ended September 30, 2012

(In thousands)

	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			ExamWorks Group, Inc. (Parent Corporation)			Consolidated  Totals
Net cash provided by operating activities	$	10,938		$	4,149		$	—		$	15,087
Investing activities:
Cash paid for acquisitions, net		(96,942	)		1,141			—			(95,801	)
Purchases of equipment and leasehold improvements, net		(4,379	)		(478	)		—			(4,857	)
Working capital and other settlements for acquisitions		(857	)		1,404			—			547
Net cash provided by (used in) investing activities		(102,178	)		2,067			—			(100,111	)
Financing activities:
Borrowings under senior secured revolving credit facility		—			—			160,640			160,640
Proceeds from the exercise of options and warrants		—			—			1,254			1,254
Purchases of stock for treasury		—			—			(387	)		(387	)
Payment of deferred financing costs		—			—			(1,034	)		(1,034	)
Repayment of subordinated unsecured notes payable		(975	)		—			—			(975	)
Net repayments of working capital facilities		—			(5,517	)		—			(5,517	)
Repayment under senior secured revolving credit facility		—			—			(71,000	)		(71,000	)
Intercompany investments and other		89,378			—			(89,473	)		(95	)
Net cash provided by (used in) financing activities		88,403			(5,517	)		—			82,886
Exchange rate impact on cash and cash equivalents		—			128			—			128
Net increase (decrease) in cash and cash equivalents		(2,837	)		827			—			(2,010	)
Cash and cash equivalents, beginning of period		6,044			2,372			—			8,416
Cash and cash equivalents, end of period	$	3,207		$	3,199		$	—		$	6,406