TEAM HEALTH HOLDINGS INC. - FORM 8-K - EX-99.4

Attached files

file	filename
8-K - FORM 8-K - TEAM HEALTH HOLDINGS INC.	d82896d8k.htm
EX-4.1 - EX-4.1 - TEAM HEALTH HOLDINGS INC.	d82896dex41.htm
EX-99.1 - EX-99.1 - TEAM HEALTH HOLDINGS INC.	d82896dex991.htm
EX-99.2 - EX-99.2 - TEAM HEALTH HOLDINGS INC.	d82896dex992.htm
EX-23.1 - EX-23.1 - TEAM HEALTH HOLDINGS INC.	d82896dex231.htm
EX-10.1 - EX-10.1 - TEAM HEALTH HOLDINGS INC.	d82896dex101.htm
EX-99.3 - EX-99.3 - TEAM HEALTH HOLDINGS INC.	d82896dex993.htm

Exhibit 99.4

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The tables below set forth the unaudited pro forma combined financial information for Team Health Holdings, Inc. (“Team Health”) giving effect to the net proceeds from our senior notes offering, together with borrowings under our senior secured credit facilities and cash on hand at IPC Healthcare, Inc. (“IPC”), to pay the cash purchase price for the Acquisition of IPC, refinance certain of our indebtedness and indebtedness of IPC, pay-related transaction costs, and finance ongoing working capital and other general corporate purposes (collectively, the “Transactions”) and the other acquisitions described below.

With respect to the financing transactions, the unaudited pro forma combined financial information is based on the assumption that Team Health will incur $1,315.0 million of term loans under the New Tranche B Facility and issue $545.0 million of notes in connection with the Transactions.

The unaudited pro forma combined balance sheet as of September 30, 2015 reflects the Transactions as if each occurred on September 30, 2015. The unaudited pro forma combined statements of operations reflects the Transactions and the other acquisitions described below as if each occurred on January 1, 2014.

The unaudited pro forma combined statement of operations for the year ended December 31, 2014 combines the audited consolidated statement of operations of Team Health for the year ended December 31, 2014, the unaudited consolidated statement of operations for Team Health’s completed 2014 and 2015 (through September 30, 2015) acquisitions for the period from January 1, 2014 to the closing of such acquisitions (or, if earlier, December 31, 2014), the audited consolidated statement of operations of IPC for the year ended December 31, 2014, and the unaudited consolidated statement of operations for IPC’s completed 2014 and 2015 (through September 30, 2015) acquisitions for the period from January 1, 2014 to the closing of such acquisitions (or, if earlier, December 31, 2014) and applies pro forma adjustments as described herein.

The unaudited pro forma combined statement of operations for the nine months ended September 30, 2015 combines the unaudited consolidated statement of operations of Team Health for the nine months ended September 30, 2015, the unaudited consolidated statement of operations for Team Health’s completed 2015 (through September 30, 2015) acquisitions for the period from January 1, 2015 to the closing of such acquisitions, the unaudited consolidated statement of operations of IPC for the nine months ended September 30, 2015, and the unaudited consolidated statement of operations of IPC’s completed 2015 (through September 30, 2015) acquisitions for the period from January 1, 2015 to the closing of such acquisitions and applies pro forma adjustments as described herein.

The unaudited pro forma combined statement of operations for the nine months ended September 30, 2014 combines the unaudited consolidated statement of operations of Team Health for the nine months ended September 30, 2014, the unaudited consolidated statement of operations for Team Health’s completed 2014 and 2015 (through September 30, 2015) acquisitions for the period from January 1, 2014 to the closing of such acquisitions (or, if earlier, September 30, 2014), the unaudited consolidated statement of operations of IPC for the nine months ended September 30, 2014, and the unaudited consolidated statement of operations for IPC’s completed 2014 and 2015 (through September 30, 2015) acquisitions for the period from January 1, 2014 to the closing of such acquisitions (or, if earlier, September 30, 2014) and applies pro forma adjustments as described herein.

The unaudited pro forma combined financial information has been prepared using the acquisition method of accounting for business combinations under GAAP. The adjustments necessary to fairly present the unaudited pro forma combined financial information have been made based on available information and in the opinion of management are reasonable. Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with this unaudited pro forma combined financial information. The pro forma adjustments related to the IPC Acquisition are preliminary and revisions to the fair value of assets acquired and liabilities assumed may have a significant impact on the pro forma adjustments. A final valuation of assets acquired and liabilities assumed has not been completed and the completion of fair value determinations may result in changes in the values assigned to property and equipment and other assets (including intangibles) acquired and liabilities assumed.

The financial information that was utilized in developing the unaudited consolidated statement of operations for Team Health’s and IPC’s completed acquisitions was developed using each acquiree’s most appropriate historical financial information obtained as a part of the due diligence procedures during the acquisition process. All historical financial information was obtained from each acquiree’s internal financial reporting team and not necessarily subject to attestation by an independent auditor.

The unaudited pro forma combined financial information reflects the application of pro forma adjustments that are (1) directly attributable to the Transactions and the other acquisitions described above, (2) factually supportable and (3) expected to have a continuing impact on Team Health’s consolidated financial results. The unaudited pro forma combined financial information does not reflect any cost savings or synergies or associated costs to achieve such savings or synergies, utilization of IPC (or other acquired company) net operating loss carryforwards or other restructuring that may result from the Transactions and other acquisitions.

The unaudited pro forma combined financial information is for illustrative purposes only and does not purport to represent what our financial position or results of operations actually would have been had the events noted above in fact occurred on the assumed dates or to project our financial position or results of operations for any future date or future period.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

As of September 30, 2015

(In thousands)


	Team Health Historical			IPC Historical		IPC Acquisition Adjustments			Financing Adjustments			Pro Forma Combined
ASSETS
Current assets:
Cash and cash equivalents	$	18,194		$	1,975	$	(1,975	)(a)				$	30,093
							11,899	(a)
Accounts receivable, net		577,291			128,923								706,214
Prepaid expenses and other current assets		56,902			12,737		6,000	(a)		(221	)(b)		75,418
Receivables under insured programs		19,514			12,691								32,205

Total current assets		671,901			156,326		15,924			(221	)		843,930
Insurance subsidiaries’ and other investments		97,492			—								97,492
Receivables under insured programs		72,959			23,564								96,523
Deferred income taxes		39,694			—								39,694
Property and equipment, net		74,939			9,608								84,547
Other intangibles, net		326,959			5,145								332,104
Goodwill		800,583			492,407		1,087,892	(c)					2,380,882
Other		59,652			—					35,349	(b)		95,001

	$	2,144,179		$	687,050	$	1,103,816		$	35,128		$	3,970,173

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	48,886		$	16,053							$	64,939
Accrued compensation and physician payable		283,288			37,082								320,370
Other accrued liabilities		127,331			38,910					(76	)(a)		166,165
Income tax payable		20,650			—								20,650
Current maturities of long-term debt		200,000			130,000					(130,000	)(b)		43,150
										(170,000	)(a)
										13,150	(b)
Deferred income taxes		31,511			584								32,095

Total current liabilities		711,666			222,629		—			286,926			647,369
Long-term debt, less current maturities		555,000			—					1,832,199	(b)		2,387,199
Other non-current liabilities		308,105			67,092								375,197
Shareholders’ equity:
Common stock		725			17		(17	)(c)					725
Additional paid-in capital		750,089			192,501		(192,501	)(c)					750,089
Retained Earnings (deficit)		(185,099	)		204,811		(204,811	)(c)					(194,099	)
							(9,000	)(a)

Team Health shareholders’ equity		565,715			397,329		(406,329	)		—			556,715
Noncontrolling interests		3,693			—								3,693

Total shareholders’ equity including noncontrolling interests		569,408			397,329		(406,329	)		—			560,408

	$	2,144,179		$	687,050	$	(406,329	)	$	1,545,273		$	3,970,173

See accompanying notes to unaudited pro forma financial information.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

For the Year Ended December 31, 2014

(In thousands, except share data)


	Team Health Historical			Completed Team Health Acquisitions Pro Forma Adjustments (d)(f)		Team Health Pro Forma			IPC Historical			Completed IPC Acquisitions Pro Forma Adjustments (g)(i)		IPC Pro Forma			IPC Acquisition Adjustments			Financing Adjustments			Pro Forma Combined
Net revenue before provision for uncollectibles	$	4,800,883		$	779,227	$	5,580,110		$	710,836		$	127,168	$	838,004								$	6,418,114
Provision for uncollectibles		1,981,240			321,573		2,302,813			16,851			3,015		19,866									2,322,679

Net revenue		2,819,643			457,654		3,277,297			693,985			124,153		818,138			—			—			4,095,435
Cost of services rendered
Professional service expenses		2,179,837			381,912		2,561,749			490,573			92,842		583,415									3,145,164
Professional liability costs		97,609			10,547		108,156			16,632			2,975		19,607									127,763
General and administrative expenses (includes contingent purchase and other acquisition compensation expense)		281,054			27,462		308,516			116,410			15,519		131,929									440,445
Other (income) expenses, net		(4,588	)		23		(4,565	)		(5	)				(5	)								(4,570	)
Transaction costs		7,179					7,179			—					—			(28	)(l)					7,151
Depreciation		20,886			129		21,015			3,844					3,844									24,859
Amortization		55,647			129		55,776			1,537					1,537									57,313
Interest expense, net		15,050			1,071		16,121			1,328					1,328						(1,328	)(b)		123,629
																					107,508	(b)
Loss on refinancing of debt		3,648					3,648			—					—									3,648

Earnings before income taxes		163,321			36,381		199,702			63,666			12,817		76,483			28			(106,180	)		170,033
Provision for income taxes		65,232			14,516		79,748			24,646			4,960		29,606			11	(k)		(42,426	)(k)		66,939

Net earnings		98,089			21,865		119,954			39,020			7,857		46,877			17			(63,754	)		103,094
Net earnings (loss) attributable to noncontrolling interests		351					351			—					—									351

Net earnings attributable to Team Health Holdings, Inc.	$	97,738		$	21,865	$	119,603		$	39,020		$	7,857	$	46,877		$	17		$	(63,754	)	$	102,743

Net earnings per share of Team Health Holdings, Inc.
Basic	$	1.39				$	1.70																$	1.46
Diluted	$	1.35				$	1.66																$	1.41
Weighted average shares outstanding
Basic		70,400					70,400																	70,400
Diluted		72,164					72,164											474	(j)					72,638

See accompanying notes to unaudited pro forma financial information.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

For the Nine Months Ended September 30, 2015

(In thousands, except share data)


	Team Health Historical			Completed Team Health Acquisitions Pro Forma Adjustments (f)		Team Health Pro Forma			IPC Historical			Completed IPC Acquisitions Pro Forma Adjustments (i)		IPC Pro Forma			IPC Acquisition Adjustments			Financing Adjustments			Pro Forma Combined
Net revenue before provision for uncollectibles	$	4,390,682		$	49,442	$	4,440,124		$	563,165		$	40,284	$	603,449								$	5,043,573
Provision for uncollectibles		1,773,062			19,966		1,793,028			13,581			955		14,536									1,807,564

Net revenue		2,617,620			29,476		2,647,096			549,584			39,329		588,913			—			—			3,236,009
Cost of services rendered
Professional service expenses		2,058,876			25,374		2,084,250			396,037			29,733		425,770									2,510,020
Professional liability costs		81,371			706		82,077			12,081			943		13,024									95,101
General and administrative expenses (includes contingent purchase and other acquisition compensation expense)		219,214			1,076		220,290			105,767			4,916		110,683									330,973
Other (income) expenses, net		(182	)				(182	)		(2	)				(2	)								(184	)
Transaction costs		7,170					7,170								—			(5,265	)(l)					1,905
Depreciation		17,423					17,423			3,524					3,524									20,947
Amortization		62,085					62,085			996					996									63,081
Interest expense, net		14,132					14,132			936					936						(936	)(b)		94,609
							—								—						80,477	(b)

Earnings before income taxes		157,531			2,320		159,851			30,245			3,737		33,982			5,265			(79,541	)		119,557
Provision for income taxes		65,178			961		66,139			11,493			1,420		12,913			2,001	(k)		(39,942	)(k)		48,111

Net earnings		92,353			1,359		93,712			18,752			2,317		21,609			3,264			(46,600	)		71,446
Net earnings (loss) attributable to noncontrolling interests		(78	)				(78	)		—					—									(78	)

Net earnings attributable to Team Health Holdings, Inc.	$	92,431		$	1,359	$	93,790		$	18,752		$	2,317	$	21,609		$	3,264		$	(46,600	)	$	71,524

Net earnings per share of Team Health Holdings, Inc.
Basic	$	1.29				$	1.30																$	0.99
Diluted	$	1.26				$	1.28																$	0.97
Weighted average shares outstanding
Basic		71,900					71,900																	71,900
Diluted		73,351					73,351											556	(j)					73,907

See accompanying notes to unaudited pro forma financial information.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

For the Nine Months Ended September 30, 2014

(In thousands, except share data)


	Team Health Historical			Completed Team Health Acquisitions Pro Forma Adjustments (e)(f)		Team Health Pro Forma			IPC Historical			Completed IPC Acquisitions Pro Forma Adjustments (h)(i)		IPC Pro Forma			IPC Acquisition Adjustments			Financing Adjustments			Pro Forma Combined
Net revenue before provision for uncollectibles	$	3,493,892		$	402,932	$	3,896,824		$	527,951		$	86,411	$	614,362								$	4,511,186
Provision for uncollectibles		1,464,931			168,943		1,633,874			13,200			2,048		15,248									1,649,122

Net revenue		2,028,961			233,989		2,262,950			514,751			84,363		599,114			—			—			2,862,064
Cost of services rendered
Professional service expenses		1,557,696			194,904		1,752,600			363,599			63,276		426,875									2,179,475
Professional liability costs		73,482			5,111		78,593			12,912			2,022		14,934									93,527
General and administrative expenses (includes contingent purchase and other acquisition compensation expense)		195,842			7,164		203,006			85,387			10,545		95,932									298,938
Other (income) expenses, net		(3,457	)		968		(2,489	)		(4	)				(4	)								(2,493	)
Transaction costs		5,734					5,734			—					—			—	(l)					5,734
Depreciation		15,315			129		15,444			2,816					2,816									18,260
Amortization		35,203			129		35,332			1,190					1,190									36,522
Interest expense, net		10,758			1,071		11,829			1,057					1,057						(1,057	)(b)		92,566
							—			—					—						80,737	(b)

Earnings before income taxes		138,388			24,513		162,901			47,794			8,520		56,314			—			(79,680	)		139,535
Provision for income taxes		56,542			10,026		66,568			18,304			3,263		21,567			—	(k)		(32,582	)(k)		55,553

Net earnings		81,846			14,487		96,333			29,490			5,257		34,747			—			(47,098	)		83,982
Net earnings (loss) attributable to noncontrolling interests		212					212			—					—									212

Net earnings attributable to Team Health Holdings, Inc.	$	81,634		$	14,487	$	96,121		$	29,490		$	5,257	$	34,747		$	—		$	(47,098	)	$	83,770

Net earnings per share of Team Health Holdings, Inc.
Basic	$	1.16				$	1.37																$	1.19
Diluted	$	1.13				$	1.34																$	1.16
Weighted average shares outstanding
Basic		70,209					70,209																	70,209
Diluted		71,955					71,955											469	(j)					72,424

See accompanying notes to unaudited pro forma financial information.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

(In thousands)

(a)

Reflects the incurrence of $1,315.0 million of term loans under the New Tranche B Facility and proceeds from the notes of approximately $545.0 million to fund the IPC Acquisition, repay certain amounts of Team Health’s and IPC’s existing debt, and fund debt issuance and other Transaction costs. A detailed estimate of the sources and uses of cash associated with the IPC Acquisition are as follows.


Sources:
IPC cash	$	1,975	(i)
New Tranche B Facility		1,315,000
Notes		545,000

Total Sources	$	1,861,975

Uses:
IPC Acquisition consideration	$	1,485,000
Repay IPC debt and accrued interest		130,076	(ii)
Repay Team Health’s Revolving Credit Facility		170,000
Fees and expenses		65,000	(iii)
Cash to balance sheet		11,899	(i)

Total Uses	$	1,861,975

(i)

Represents net cash impact of the Transactions.

(ii)

Includes $76 of accrued interest.

(iii)

Represents the estimated financing and other fees and expenses in connection with the Transactions.


Fees and expenses	$	65,000
Deferred fees and expenses		50,000

Non-deferred fees and expenses	$	15,000
Tax impact		6,000

After-tax non-deferred fees and expenses	$	9,000

(b)

Represents the New Tranche B Facility and the notes and repayment of existing IPC debt and the elimination of related deferred financing costs.


New Tranche B Facility and the notes	$	1,860,000

Estimated total deferred financing costs for the notes		14,651
Current Portion		13,150

Long Term Portion	$	1,832,199
Estimated total deferred financing costs for New Tranche B Facility	$	35,349
Repayment of IPC debt	$	130,000
Elimination of IPC deferred financing costs	$	221


Removal of IPC’s total interest expense for year ended December 31, 2014	$	1,328
Removal of IPC’s total interest expense for nine months ended September 30, 2015	$	936
Removal of IPC’s total interest expense for nine months ended September 30, 2014	$	1,057
Total interest and amortization of deferred financing costs expense for the New Tranche B Facility and the notes for the year ended December 31, 2014	$	107,508
Total interest and amortization of deferred financing costs expense for the New Tranche B Facility and the notes for the nine months ended September 30, 2015	$	80,477
Total interest and amortization of deferred financing costs expense for the New Tranche B Facility and the notes for the nine months ended September 30, 2014	$	80,737

If the weighted average interest rate of 5.48% of the New Tranche B Facility and the notes changed 0.25%, the total interest and amortization of deferred financing costs expense would be as follows:


		+0.25%		-0.25%

Total interest and amortization of deferred financing costs expense for the New Tranche B Facility and the notes for the year ended December 31, 2014	$	112,098	$	102,918
Total interest and amortization of deferred financing costs expense for the New Tranche B Facility and the notes for the nine months ended September 30, 2015	$	83,909	$	77,045
Total interest and amortization of deferred financing costs expense for the New Tranche B Facility and the notes for the nine months ended September 30, 2014	$	84,185	$	77,289

(c)

Represents adjustments based on preliminary estimates of fair value and the adjustment to goodwill derived from the difference in the estimated total consideration to be transferred by Team Health and the estimated fair value of assets acquired and liabilities assumed by Team Health. The estimated consideration is based on the cash paid by Team Health and the assumption of IPC’s net debt. Final consideration will be determined at the closing of the IPC Acquisition based on the number of shares of IPC common stock and other equity awards outstanding at such time.

The final amounts allocated to assets acquired and liabilities assumed in the IPC Acquisition could differ materially from the preliminary amounts presented herein. A decrease in the fair value of assets acquired or an increase in the fair value of liabilities assumed in the IPC Acquisition from those preliminary valuations presented herein would result in a dollar-for-dollar corresponding increase in the amount of goodwill that will result from the IPC Acquisition.


Estimated cash consideration	$	1,485,000
Assumption of debt, net of cash received		128,025

	$	1,613,025

Accounts receivable		128,923
Prepaid expenses and other current assets		12,516
Receivables under insured programs—current		12,691
Receivables under insured programs—noncurrent		23,564
Property and equipment		9,608
Intangible assets		5,145
Accounts payable—current		(16,053	)
Accrued compensation and physician payable—current		(37,082	)
Other accrued liabilities—current		(38,910	)
Deferred income taxes—current		(584	)
Other long term liabilities—noncurrent		(67,092	)

Fair value of assets acquired and liabilities assumed	$	32,726

Estimated goodwill		1,580,299
Less: historical goodwill	$	492,407

Goodwill adjustment	$	1,087,892

Common Stock	$	17	(i)
Additional Paid-in-Capital	$	192,501	(i)
Retained Earnings	$	204,811	(i)

(i)

The common stock, additional paid-in-capital, and retained earnings of IPC will be adjusted to zero upon the closing of the IPC Acquisition.

(d)

The amounts in this column represent pro forma adjustments for Team Health’s 15 completed acquisitions in 2014 for the period from January 1, 2014 to their closing dates. None of the acquisitions were individually material.

(e)

The amounts in this column represent pro forma adjustments for Team Health’s 11 completed 2014 acquisitions through September 30, 2014 for the period from January 1, 2014 to their closing dates. None of the acquisitions were individually material.

(f)

The amounts in this column represent pro forma adjustments for Team Health’s six completed acquisitions in 2015 through September 30, 2015 for the period from January 1, 2015 to their closing dates or, if included in prior year, for the period from January 1, 2014 to September 30, 2014 or December 31, 2014, as appropriate. None of the acquisitions were individually material.

(g)

The amounts in this column represent pro forma adjustments for IPC’s 22 completed acquisitions in 2014 for the period from January 1, 2014 to their closing dates. None of the acquisitions were individually material.

(h)

The amounts in this column represent pro forma adjustments for IPC’s 15 completed 2014 acquisitions through September 30, 2014 for the period from January 1, 2014 to their closing dates. None of the acquisitions were individually material.

(i)

The amounts in this column represent pro forma adjustments for IPC’s 20 completed acquisitions in 2015 through September 30, 2015 for the period from January 1, 2015 to their closing dates or, if included in prior year, for the period from January 1, 2014 to September 30, 2014 or December 31, 2014, as appropriate. None of the acquisitions were individually material.

(j)

Reflects additional diluted shares added to the weighted average shares outstanding calculation to factor in the effect of IPC’s diluted shares related to outstanding options.

(k)

Reflects adjustments to income taxes to reflect the impact of the above pro forma adjustments applying combined U.S. federal and state statutory tax rates.

(l)

Reflects the removal of IPC’s acquisition-related expenses, related to the IPC Acquisition, included in IPC’s historical statements of operations.

TEAM HEALTH HOLDINGS INC. - FORM 8-K - EX-99.4 - November 23, 2015

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TEAM HEALTH HOLDINGS INC. Reports