Note 14 - Condensed Consolidating Financial Information of Guarantor Subsidiaries

3 Months Ended

Mar. 31, 2013

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 100% 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, 2012 and March 31, 2013, and for the three months ended March 31, 2012 and 2013 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 100% 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 Comprehensive Loss for the three months ended March 31, 2012

(In thousands)

	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			ExamWorks Group, Inc. (Parent Corporation)		Consolidated Totals
Revenues	$	87,195		$	36,543		$	—	$	123,738
Costs and expenses:
Costs of revenues		60,415			20,758			—		81,173
Selling, general and administrative expenses		17,022			11,610			—		28,632
Depreciation and amortization		8,719			5,306			—		14,025
Total costs and expenses		86,156			37,674			—		123,830
Income (loss) from operations		1,039			(1,131	)		—		(92	)
Interest and other expenses, net		5,312			1,261			—		6,573
Loss before income taxes		(4,273	)		(2,392	)		—		(6,665	)
Provision (benefit) for income taxes		(2,485	)		143			—		(2,342	)
Net loss	$	(1,788	)	$	(2,535	)	$	—	$	(4,323	)
Comprehensive Loss:
Net loss	$	(1,788	)	$	(2,535	)	$	—	$	(4,323	)
Foreign currency translation adjustments, net of tax		—			2,450			—		2,450
Total comprehensive loss	$	(1,788	)	$	(85	)	$	—	$	(1,873	)

Condensed Consolidating Statement of Comprehensive Loss for the three months ended March 31, 2013

(In thousands)

	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			ExamWorks Group, Inc. (Parent Corporation)		Consolidated Totals
Revenues	$	91,178		$	57,525		$	—	$	148,703
Costs and expenses:
Costs of revenues		64,131			33,253			—		97,384
Selling, general and administrative expenses		18,124			15,133			—		33,257
Depreciation and amortization		8,623			7,703			—		16,326
Total costs and expenses		90,878			56,089			—		146,967
Income from operations		300			1,436			—		1,736
Interest and other expenses, net		5,559			1,971			—		7,530
Loss before income taxes		(5,259	)		(535	)		—		(5,794	)
Provision (benefit) for income taxes		(3,058	)		856			—		(2,202	)
Net loss	$	(2,201	)	$	(1,391	)	$	—	$	(3,592	)
Comprehensive Loss:
Net loss	$	(2,201	)	$	(1,391	)	$	—	$	(3,592	)
Foreign currency translation adjustments, net of tax		(75	)		(4,176	)		—		(4,251	)
Total comprehensive loss	$	(2,276	)	$	(5,567	)	$	—	$	(7,843	)

Condensed Consolidating Balance Sheet as of December 31, 2012

(In thousands)

Assets	Guarantor Subsidiaries		Non-Guarantor Subsidiaries		ExamWorks Group, Inc. (Parent Corporation)			Consolidation and Elimination Entries			Consolidated Totals
Current assets:
Cash and cash equivalents	$	4,125	$	4,502	$	—		$	—		$	8,627
Accounts receivable, net		43,939		100,737		—			—			144,676
Other receivables		17		4		—			—			21
Prepaid expenses		2,723		2,613		—			—			5,336
Deferred tax assets		37		—		—			(21	)		16
Other current assets		—		1,213		—			—			1,213
Total current assets		50,841		109,069		—			(21	)		159,889
Property, equipment and leasehold improvements, net		8,339		1,994		—			—			10,333
Goodwill		258,890		111,253		—			—			370,143
Intangible assets, net		62,420		90,476		—			—			152,896
Long-term accounts receivable, less current portion		—		31,708		—			—			31,708
Deferred tax assets, noncurrent		61		4,112		—			—			4,173
Deferred financing costs, net		—		—		10,258			—			10,258
Other assets		495		606		—			—			1,101
Total assets	$	381,046	$	349,218	$	10,258		$	(21	)	$	740,501
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	14,756	$	32,184	$	—		$	—		$	46,940
Accrued expenses		8,067		27,928		—			—			35,995
Accrued interest expense		—		—		10,918			—			10,918
Deferred revenue		103		3,848		—			—			3,951
Current portion of subordinated unsecured notes payable		275		—		—			—			275
Deferred tax liability		—		21		—			(21	)		—
Current portion of contingent earnout obligation		91		—		—			—			91
Current portion of working capital facilities		—		5,983		—			—			5,983
Other current liabilities		2,226		3,747		—			—			5,973
Total current liabilities		25,518		73,711		10,918			(21	)		110,126
Senior unsecured notes payable		—		—		250,000			—			250,000
Senior secured revolving credit facility and working capital facilities, less current portion		—		28,476		99,926			—			128,402
Long-term subordinated unsecured notes payable, less current portion		300		—		—			—			300
Other long-term liabilities		1,493		6,032		—			—			7,525
Total liabilities		27,311		108,219		360,844			(21	)		496,353
Commitments and contingencies
Stockholders’ equity (deficit) (1)		353,735		240,999		(350,586	)		—			244,148
Total liabilities and stockholders' equity (deficit)	$	381,046	$	349,218	$	10,258		$	(21	)	$	740,501

(1) Includes intercompany investments in subsidiaries.

Condensed Consolidating Balance Sheet as of March 31, 2013

(In thousands)

Assets	Guarantor Subsidiaries		Non-Guarantor Subsidiaries		ExamWorks Group, Inc. (Parent Corporation)			Consolidation and Elimination Entries			Consolidated Totals
Current assets:
Cash and cash equivalents	$	2,208	$	5,501	$	—		$	—		$	7,709
Accounts receivable, net		45,810		101,985		—			—			147,795
Other receivables		—		—		—			—			—
Prepaid expenses		2,516		3,242		—			—			5,758
Deferred tax assets		22		—		—			(4	)		18
Other current assets		—		1,141		—			—			1,141
Total current assets		50,556		111,869		—			(4	)		162,421
Property, equipment and leasehold improvements, net		8,037		2,095		—			—			10,132
Goodwill		248,900		117,958		—			—			366,858
Intangible assets, net		54,987		81,236		—			—			136,223
Long-term accounts receivable, less current portion		—		31,870		—			—			31,870
Deferred tax assets, noncurrent		8,003		4,700		—			—			12,703
Deferred financing costs, net		—		—		9,713			—			9,713
Other assets		492		1,198		—			—			1,690
Total assets	$	370,975	$	350,926	$	9,713		$	(4	)	$	731,610
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	13,584	$	32,618	$	—		$	—		$	46,202
Accrued expenses		7,809		28,861		—			—			36,670
Accrued interest expense		—		—		4,928			—			4,928
Deferred revenue		94		4,280		—			—			4,374
Current portion of subordinated unsecured notes payable		279		—		—			—			279
Deferred tax liability		—		4		—			(4	)		—
Current portion of contingent earnout obligation		92		—		—			—			92
Current portion of working capital facilities		—		6,440		—			—			6,440
Other current liabilities		1,809		3,918		—			—			5,727
Total current liabilities		23,667		76,121		4,928			(4	)		104,712
Senior unsecured notes payable		—		—		250,000			—			250,000
Senior secured revolving credit facility and working capital facilities, less current portion		—		25,192		100,115			—			125,307
Long-term subordinated unsecured notes payable, less current portion		305		—		—			—			305
Other long-term liabilities		1,459		5,883		—			—			7,342
Total liabilities		25,431		107,196		355,043			(4	)		487,666
Commitments and contingencies
Stockholders’ equity (deficit) (1)		345,544		243,730		(345,330	)		—			243,944
Total liabilities and stockholders’ equity (deficit)	$	370,975	$	350,926	$	9,713		$	(4	)	$	731,610

(1) Includes intercompany investments in subsidiaries.

Condensed Consolidating Statement of Cash Flows for the three months ended March 31, 2012

(In thousands)

	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			ExamWorks Group, Inc. (Parent Corporation)			Consolidated Totals
Net cash provided by operating activities	$	1,398		$	3,401		$	—		$	4,799
Investing activities:
Purchases of equipment and leasehold improvements, net		(407	)		(145	)		—			(552	)
Working capital and other settlements for acquisitions		47			861			—			908
Net cash provided by (used in) investing activities		(360	)		716			—			356
Financing activities:
Borrowings under senior secured revolving credit facility		—			—			11,000			11,000
Proceeds from the exercise of options and warrants		—			—			50			50
Purchases of stock for treasury		—			—			(387	)		(387	)
Repayment of subordinated unsecured notes payable		(546	)		—			—			(546	)
Payment of deferred financing costs		—			—			(414	)		(414	)
Net repayments of working capital facilities		—			(3,789	)		—			(3,789	)
Repayment under senior secured revolving credit facility		—			—			(11,000	)		(11,000	)
Intercompany investments and other		(846	)		—			751			(95	)
Net cash used in financing activities		(1,392	)		(3,789	)		—			(5,181	)
Exchange rate impact on cash and cash equivalents		—			76			—			76
Net increase (decrease) in cash and cash equivalents		(354	)		404			—			50
Cash and cash equivalents, beginning of period		6,044			2,372			—			8,416
Cash and cash equivalents, end of period	$	5,690		$	2,776		$	—		$	8,466

Condensed Consolidating Statement of Cash Flows for the three months ended March 31, 2013

(In thousands)

	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			ExamWorks Group, Inc. (Parent Corporation)			Consolidated Totals
Net cash provided by (used in) operating activities	$	(3,794	)	$	2,684		$	—		$	(1,110	)
Investing activities:
Purchases of equipment and leasehold improvements, net		(919	)		(851	)		—			(1,770	)
Net cash used in investing activities		(919	)		(851	)		—			(1,770	)
Financing activities:
Borrowings under senior secured revolving credit facility		—			—			10,000			10,000
Proceeds from the exercise of options and warrants		—			—			2,441			2,441
Excess tax benefit related to share-based compensation		—			—			407			407
Payment of deferred financing costs		—			—			(52	)		(52	)
Net repayments of working capital facilities		—			(800	)		—			(800	)
Repayment under senior secured revolving credit facility		—			—			(10,000	)		(10,000	)
Intercompany investments and other		2,796			—			(2,796	)		—
Net cash provided by (used in) financing activities		2,796			(800	)		—			1,996
Exchange rate impact on cash and cash equivalents		—			(34	)		—			(34	)
Net increase (decrease) in cash and cash equivalents		(1,917	)		999			—			(918	)
Cash and cash equivalents, beginning of period		4,125			4,502			—			8,627
Cash and cash equivalents, end of period	$	2,208		$	5,501		$	—		$	7,709