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Business Acquisitions
 6 Months Ended
Jun. 30, 2013
Business Combinations [Abstract]  
Business Acquisitions
5. Business Acquisitions:

During the six months ended June 30, 2013, the Company completed the acquisition of five physician group practices for total consideration of $120.8 million, consisting of $115.7 million in cash, $3.8 million of contingent consideration and $1.3 million in current liabilities. In connection with these acquisitions, the Company recorded goodwill of approximately $108.1 million, other intangible assets consisting primarily of physician and hospital agreements of approximately $19.4 million and other liabilities of $6.7 million. These acquisitions expanded the Company’s national network of physician practices. The Company expects to improve the results of these physician practices through improved managed care contracting, improved collections, identification of growth initiatives, as well as, operating and cost savings based upon the significant infrastructure it has developed.

The contingent consideration of $3.8 million recorded during the six months ended June 30, 2013 is related to an agreement to pay additional cash amounts based on the achievement of certain performance measures for up to three years ending after the acquisition date. The accrued contingent consideration was recorded as a liability at acquisition-date fair value using the income approach with assumed discount rates ranging from 2.5% to 3.0% over the applicable terms and an assumed payment probability of 100% for each of the applicable years. The range of the undiscounted amount the Company could pay under the contingent consideration agreement is between $0 and $4.0 million.

 

During the six months ended June 30, 2013, the Company paid approximately $7.0 million for contingent consideration related to certain prior-period acquisitions, all of which was accrued as of December 31, 2012. In connection with a prior-period acquisition, the Company also recorded other assets of $0.5 million during the six months ended June 30, 2013. The Company expects that $31.8 million of the $107.6 million of goodwill recorded during the six months ended June 30, 2013 will be deductible for tax purposes.

The results of operations of the practices acquired during the six months ended June 30, 2013 and 2012 have been included in the Company’s Condensed Consolidated Financial Statements from their respective dates of acquisition. The following unaudited pro forma information combines the consolidated results of operations of the Company on a GAAP basis and the acquisitions completed during 2013 and 2012, including adjustments for pro forma amortization and interest expense, as if the transactions had occurred on January 1, 2012 and January 1, 2011, respectively (in thousands, except for per share data):

 

     Six Months Ended
June 30,		  
     2013     2012  

Net patient service revenue

    $ 1,065,003      $ 1,043,113   

Net income (1)

    $ 127,820      $ 125,529   

Net income per share (2):

     

Basic

    $ 2.58      $ 2.58   

Diluted

    $ 2.53      $ 2.54   

Weighted average shares (2):

     

Basic

      49,434        48,408   

Diluted

      50,471        49,474   

Effective tax rate (1):

      38.6 %      39.0 % 

 

(1) 

The comparison of net income is affected by the change in the effective tax rate. The effective tax rate was 38.6% for the six months ended June 30, 2013 as compared to 39.0% for the six months ended June 30, 2012.
(2) 

The comparison of net income per share is affected by the changes in the number of weighted average shares outstanding in each period. The basic and diluted weighted average shares outstanding for the six months ended June 30, 2013 were 49.4 million and 50.5 million, respectively, as compared to 48.4 million and 49.5 million, respectively, for the six months ended June 30, 2012.

The pro forma results do not necessarily represent results which would have occurred if the acquisitions had taken place at the beginning of the periods, nor are they indicative of the results of future combined operations.