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Business Acquisitions
 6 Months Ended
Jun. 30, 2015
Business Combinations [Abstract]  
Business Acquisitions
5. Business Acquisitions:

During the six months ended June 30, 2015, the Company completed the acquisition of seven physician group practices including four anesthesiology practices, two neonatology practices and one other pediatric subspecialty practice. In addition, the Company acquired a leading radiology physician services and telemedicine company for consideration of $508.2 million, inclusive of base consideration of $500.0 million plus approximately $8.2 million in other closing consideration. The total consideration for the eight acquisitions was $596.0 million, inclusive of cash acquired. Approximately $568.9 million was paid in cash, net of $23.0 million in cash acquired, $3.8 million was recorded as a contingent consideration liability and $0.3 million was recorded within other current liabilities.

The physician practice acquisitions expand 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 on the significant infrastructure it has developed. The acquisition of the radiology physician services and telemedicine company provides a platform for growth in the radiology market as well as in the broader telemedicine market, and will further expand the Company’s service offerings to its hospital and health system partners.

The Company’s preliminary allocation of purchase price is as follows (in thousands):

 

     Radiology
Acquisition		      Other
Acquisitions		      Total  

Current assets

    $ 65,238       $ —         $ 65,238   

Property and equipment

      11,398         42         11,440   

Other noncurrent assets

      8,237         —           8,237   

Goodwill

      314,073         69,756         383,829   

Other intangible assets

      199,960         28,033         227,993   

Current liabilities

      (27,558 )       —           (27,558 ) 

Deferred income tax liabilities – long-term

      (28,865 )       (10,078 )       (38,943 ) 

Other long-term liabilities

      (34,275 )       —           (34,275 ) 
  

 

 

     

 

 

     

 

 

  
   $ 508,208       $ 87,753       $ 595,961   
  

 

 

     

 

 

     

 

 

  

Other intangible assets consist primarily of customer relationships, patented technology, physician and hospital agreements and trade names. The Company has recorded provisional estimates for certain intangible assets acquired during the three months ended June 30, 2015, and one of the acquisitions completed during the three months ended June 30, 2015 is subject to a working capital adjustment. The final valuation and working capital adjustment will be completed within the measurement period, and management does not believe the additional adjustments will be material. The Company expects that $10.8 million of the goodwill recorded during the six months ended June 30, 2015 will be deductible for tax purposes.

The contingent consideration of $3.8 million recorded during the six months ended June 30, 2015 is related to an agreement to pay an additional cash amount based on the achievement of certain performance measures for up to two years 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 2.8% to 3.5% 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. In addition, during the three months ended June 30, 2015, the Company recorded a decrease to its contingent consideration liability of $0.8 million related to the change in fair value of a certain contingent consideration agreement for which the performance measures will not be met. This change in fair value was recorded within operating income.

 

In addition, during the six months ended June 30, 2015, the Company paid $5.4 million for contingent consideration related to certain prior-period acquisitions, of which all but the accretion recorded during 2015 was accrued as of December 31, 2014. In connection with prior-period acquisitions, the Company also recorded a net increase of $3.9 million to goodwill composed of a decrease in intangible assets of $5.3 million, a decrease of $2.0 million in other long-term liabilities and $0.6 million in additional cash consideration related to a working capital true-up adjustment. These measurement period adjustments did not have a material impact on the Company’s Condensed Consolidated Financial Statements in any period; therefore, the Company has not retrospectively adjusted such statements.

The results of operations of the practices acquired during the six months ended June 30, 2015 and 2014 have been included in the Company’s Condensed 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 2015 and 2014, including adjustments for pro forma amortization and interest expense, as if the transactions had occurred on January 1, 2014 and January 1, 2013, respectively (in thousands, except per share data):

 

     Six Months Ended
June 30,		  
     2015      2014  

Net revenue

    $ 1,405,488       $ 1,392,726   

Net income

    $ 157,668       $ 158,828   

Net income per common share (1):

      

Basic

    $ 1.69       $ 1.61   

Diluted

    $ 1.67       $ 1.58   

Weighted average common shares (1):

      

Basic

      93,361         98,689   

Diluted

      94,405         100,226   

 

(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.