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Business Acquisitions
 12 Months Ended
Dec. 31, 2015
Business Combinations [Abstract]  
Business Acquisitions

6.    Business Acquisitions:

During the year ended December 31, 2015, the Company completed 12 acquisitions, of which 10 were physician group practices including seven anesthesiology practices, two neonatology practices and one other pediatric subspecialty practice, and two non-practice acquisitions including a leading radiology physician services and telemedicine company and a complementary third-party receivables company. The acquisition-date fair value of the total consideration for the 12 acquisitions was $853.3 million, inclusive of cash acquired. Approximately $818.3 million was paid in cash, net of $23.0 million in cash acquired, $7.8 million was paid by issuing 114,306 shares of the Company’s common stock, $3.8 million was recorded as a contingent consideration liability and $0.4 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 acquisition of the third-party receivables company was an addition to our existing revenue cycle management company and is expected to further enhance the Company’s services offerings for its hospital and health system partners as an outsourced services capability.

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

 

     Radiology
Acquisition		      Other
Acquisitions		      Total  

Current assets

    $ 51,736       $ 11,445       $ 63,181   

Property and equipment

      11,398         449         11,847   

Other noncurrent assets

      8,237         2,552         10,789   

Goodwill

      313,340         275,984         589,324   

Other intangible assets

      199,960         73,477         273,437   

Current liabilities

      (27,008 )       (1,160 )       (28,168 ) 

Deferred income tax liabilities—long-term

      (15,850 )       (14,356 )       (30,206 ) 

Other long-term liabilities

      (34,275 )       (2,618 )       (36,893 ) 
  

 

 

     

 

 

     

 

 

  
   $ 507,538       $ 345,773       $ 853,311   
  

 

 

     

 

 

     

 

 

  

 

One of the acquisitions completed during the year ended December 31, 2015 remains subject to a working capital adjustment.

The 114,306 shares of the Company’s common stock issued as a component of the purchase consideration for an acquisition completed during the year ended December 31, 2015 had an acquisition-date fair value of $7.8 million. The fair value of such shares was determined using the closing price on the New York Stock Exchange of the Company’s common stock less a discount for lack of marketability, reflecting a three year contractual restriction on disposition or assignment of such common stock.

The contingent consideration of $3.8 million recorded during the year ended December 31, 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 year ended December 31, 2015, the Company recorded a decrease to its contingent consideration liability of $1.0 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.

In addition, during the year ended December 31, 2015, the Company paid $14.3 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 $0.6 million to goodwill composed of a decrease in intangible assets of $5.3 million, an increase of $2.6 million in other current assets, a decrease of $2.6 million in other long-term liabilities and $0.6 million in additional cash consideration related to a working capital true-up adjustment and other measurement period adjustments. These adjustments did not have a material impact on the Company’s Consolidated Financial Statements in any period; therefore, the Company has not retrospectively adjusted such statements.

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.

In June 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, noncurrent, as presented in the Company’s Consolidated Balance Sheets.

 

The results of operations of the practices acquired in 2015 and 2014 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 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):

 

     Years Ended December 31,  
     2015      2014  

Net revenue

    $ 2,946,467       $ 2,945,493   

Net income

      343,575         345,517   

Net income per common share (1):

      

Basic

    $ 3.69       $ 3.50   

Diluted

    $ 3.66       $ 3.46   

Weighted average common shares (1):

      

Basic

      93,077         98,588   

Diluted

      93,960         99,887   

 

(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.