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Business Acquisitions
 12 Months Ended
Dec. 31, 2014
Business Combinations [Abstract]  
Business Acquisitions

6.    Business Acquisitions:

During 2014, the Company completed 13 acquisitions, composed of 11 physician group practices, a complementary revenue cycle management company as well as a consulting services company for total consideration of $488.6 million, consisting of $479.4 million in cash and $9.2 million of contingent consideration.

The Company’s allocation of purchase price is as follows:

 

Current assets

    $ 11.8   

Property and equipment

      3.8   

Goodwill

      389.6   

Other intangible assets

      124.8   

Current liabilities

      (14.4 ) 

Deferred income tax liabilities—long-term

      (26.3 ) 

Other long-term liabilities

      (0.7 ) 
  

 

 

  
   $ 488.6   
  

 

 

  

The physician practice 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 acquisitions of the complementary services businesses establish service offerings that the Company expects will function as support for its own physician practices as well as a revenue generating outsourced services capability.

The contingent consideration of $9.2 million recorded during 2014 is related to agreements to pay additional amounts, based on the achievement of certain performance measures for up to five years ending after the acquisition dates. Potential payments under these provisions are not contingent upon the future employment of the sellers. Approximately $8.5 million of the contingent consideration was recorded as a liability and approximately $0.7 million was recorded as equity, all at acquisition-date fair value. The liability for contingent consideration was recorded using the income approach with assumed discount rates ranging from 2.5% to 5.3% 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 agreements that were recorded with a fair value of $9.2 million is between $0 and $10.3 million. In addition, during 2014, the Company recorded a decrease to its contingent consideration liability of $1.6 million related to the change in fair value of certain contingent consideration agreements for which the performance measures will not be met. This change in fair value was recorded within operating income.

During 2014, the Company paid approximately $15.8 million for contingent consideration related to certain prior-period acquisitions, of which all but the accretion recorded during 2014 was accrued as of December 31, 2013.

Under all contingent consideration provisions, cash payments of up to $37.5 million may be due through 2019, of which $35.3 million is accrued as of December 31, 2014 with the remainder representing accretion that will be recorded through the respective dates of payment.

On June 1, 2014, the Company entered into two joint ventures, one in which it owns a 75% economic interest and one in which it owns a 37.5% economic interest. The financial results of the 75% owned joint venture are fully consolidated into the Company’s operating results and are not material to the Consolidated Financial Statements. In connection with the 37.5% owned joint venture, the Company completed a nonmonetary exchange of certain operations with a fair value of $7.7 million as contribution to the joint venture. The carrying value of the goodwill transferred of $7.2 million and the fixed assets transferred of $0.5 million approximated the fair value of the contribution to this joint venture, and accordingly no gain or loss was recognized on the transaction. The investment in this joint venture is included in other assets, net as presented in the Company’s Consolidated Balance Sheet.

During 2013, the Company completed the acquisition of 11 physician group practices for total consideration of $250.1 million, consisting of $236.7 million in cash and $13.4 million of contingent consideration. In connection with these acquisitions, the Company recorded goodwill of approximately $228.6 million, other intangible assets consisting primarily of physician and hospital agreements of approximately $29.6 million, and other liabilities of approximately $8.1 million.

The results of operations of the practices acquired in 2014 and 2013 have been included in the Company’s Consolidated Financial Statements from the 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 2014 and 2013, including adjustments for pro forma amortization and interest expense, as if the transactions had occurred on January 1, 2013 and January 1, 2012, respectively (in thousands, except per share data):

 

     Years Ended December 31,  
     2014      2013  

Net revenue

    $ 2,590,384       $ 2,494,968   

Net income

      326,216         301,076   

Net income per common share (1):

      

Basic

    $ 3.31       $ 3.04   

Diluted

    $ 3.27       $ 2.98   

Weighted average common shares (1):

      

Basic

      98,588         99,112   

Diluted

      99,887         100,969   

 

(1) The comparison of net income per common share is affected by the changes in the number of weighted average shares outstanding in each period.

 

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 indicated, nor are they indicative of the results of future combined operations.