Note 14 - Condensed Consolidating Financial Information of Guarantor Subsidiaries

6 Months Ended

Jun. 30, 2013

Condensed Consolidating Financial Information Of Guarantor Subsidiaries

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 June 30, 2013, and for the three and six months ended June 30, 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 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 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 Statement of Comprehensive Income (Loss) for the three months ended June 30, 2013

(In thousands)

	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			ExamWorks Group, Inc. (Parent Corporation)		Consolidated Totals
Revenues	$	95,493		$	60,655		$	—	$	156,148
Costs and expenses:
Costs of revenues		67,073			35,045			—		102,118
Selling, general and administrative expenses		17,280			16,796			—		34,076
Depreciation and amortization		8,256			7,566			—		15,822
Total costs and expenses		92,609			59,407			—		152,016
Income from operations		2,884			1,248			—		4,132
Interest and other expenses, net		5,788			1,912			—		7,700
Loss before income taxes		(2,904	)		(664	)		—		(3,568	)
Provision (benefit) for income taxes		(1,820	)		1,035			—		(785	)
Net loss	$	(1,084	)	$	(1,699	)	$	—	$	(2,783	)
Comprehensive Income (Loss):
Net loss	$	(1,084	)	$	(1,699	)	$	—	$	(2,783	)
Foreign currency translation adjustments, net of tax		2,757			(8,488	)		—		(5,731	)
Total comprehensive income (loss)	$	1,673		$	(10,187	)	$	—	$	(8,514	)

Condensed Consolidating Statement of Comprehensive Loss for the six months ended June 30, 2013

(In thousands)

	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			ExamWorks Group, Inc. (Parent Corporation)		Consolidated Totals
Revenues	$	186,671		$	118,180		$	—	$	304,851
Costs and expenses:
Costs of revenues		131,204			68,298			—		199,502
Selling, general and administrative expenses		35,404			31,929			—		67,333
Depreciation and amortization		16,879			15,269			—		32,148
Total costs and expenses		183,487			115,496			—		298,983
Income from operations		3,184			2,684			—		5,868
Interest and other expenses, net		11,347			3,883			—		15,230
Loss before income taxes		(8,163	)		(1,199	)		—		(9,362	)
Provision (benefit) for income taxes		(4,878	)		1,891			—		(2,987	)
Net loss	$	(3,285	)	$	(3,090	)	$	—	$	(6,375	)
Comprehensive Loss:
Net loss	$	(3,285	)	$	(3,090	)	$	—	$	(6,375	)
Foreign currency translation adjustments, net of tax		2,682			(12,664	)		—		(9,982	)
Total comprehensive loss	$	(603	)	$	(15,754	)	$	—	$	(16,357	)

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 June 30, 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	$	1,570	$	7,597	$	—		$	—		$	9,167
Accounts receivable, net		47,574		105,241		—			—			152,815
Prepaid expenses		1,986		3,071		—			—			5,057
Deferred tax assets		22		—		—			(4	)		18
Other current assets		—		1,141		—			—			1,141
Total current assets		51,152		117,050		—			(4	)		168,198
Property, equipment and leasehold improvements, net		7,419		2,646		—			—			10,065
Goodwill		249,006		110,605		—			—			359,611
Intangible assets, net		47,804		68,405		—			—			116,209
Long-term accounts receivable, less current portion		—		32,476		—			—			32,476
Deferred tax assets, noncurrent		15,398		4,833		—			—			20,231
Deferred financing costs, net		—		—		9,175			—			9,175
Other assets		489		1,005		—			—			1,494
Total assets	$	371,268	$	337,020	$	9,175		$	(4	)	$	717,459
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	16,435	$	33,415	$	—		$	—		$	49,850
Accrued expenses		6,161		31,118		—			—			37,279
Accrued interest expense		—		—		10,398			—			10,398
Deferred revenue		102		4,770		—			—			4,872
Current portion of subordinated unsecured notes payable		282		—		—			—			282
Deferred tax liability		—		4		—			(4	)		—
Current portion of contingent earnout obligation		94		—		—			—			94
Other current liabilities		1,584		3,890		—			—			5,474
Total current liabilities		24,658		73,197		10,398			(4	)		108,249
Senior unsecured notes payable		—		—		250,000			—			250,000
Senior secured revolving credit facility and working capital facilities		—		29,261		78,000			—			107,261
Long-term subordinated unsecured notes payable, less current portion		309		—		—			—			309
Other long-term liabilities		1,427		6,009		—			—			7,436
Total liabilities		26,394		108,467		338,398			(4	)		473,255
Commitments and contingencies
Stockholders’ equity (deficit) (1)		344,874		228,553		(329,223	)		—			244,204
Total liabilities and stockholders' equity (deficit)	$	371,268	$	337,020	$	9,175		$	(4	)	$	717,459

(1) Includes intercompany investments in subsidiaries.

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	)
Repayment of subordinated unsecured notes payable		(759	)		—			—			(759	)
Payment of deferred financing costs		—			—			(624	)		(624	)
Net repayments of working capital facilities		—			(4,341	)		—			(4,341	)
Repayments under senior secured revolving credit facility		—			—			(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

Condensed Consolidating Statement of Cash Flows for the six months ended June 30, 2013

(In thousands) 

	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			ExamWorks Group, Inc. (Parent Corporation)			Consolidated Totals
Net cash provided by operating activities	$	8,832		$	8,782		$	—		$	17,614
Investing activities:
Purchases of equipment and leasehold improvements, net		(1,629	)		(1,684	)		—			(3,313	)
Proceeds from foreign currency net investment hedge		3,810			—			—			3,810
Net cash provided by (used in) investing activities		2,181			(1,684	)		—			497
Financing activities:
Borrowings under senior secured revolving credit facility		—			—			77,000			77,000
Proceeds from the exercise of options and warrants		—			—			6,032			6,032
Excess tax benefit related to share-based compensation		—			—			1,752			1,752
Payment of deferred financing costs		—			—			(52	)		(52	)
Net repayments of working capital facilities		—			(3,216	)		—			(3,216	)
Repayment under senior secured revolving credit facility		—			—			(98,300	)		(98,300	)
Intercompany investments and other		(13,568	)		—			13,568			—
Net cash used in financing activities		(13,568	)		(3,216	)		—			(16,784	)
Exchange rate impact on cash and cash equivalents		—			(787	)		—			(787	)
Net increase (decrease) in cash and cash equivalents		(2,555	)		3,095			—			540
Cash and cash equivalents, beginning of period		4,125			4,502			—			8,627
Cash and cash equivalents, end of period	$	1,570		$	7,597		$	—		$	9,167