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Summary Historical and Pro Forma Consolidated Financial Information
The following table sets forth summary historical and unaudited pro forma consolidated financial information of TH Holdings for the periods and dates indicated. The summary historical balance sheet data as of December 31, 2014 and 2015 and the statement of comprehensive earnings and cash flow data for the years ended December 31, 2013, 2014 and 2015 have been derived from TH Holdings’ audited consolidated financial statements included elsewhere in this offering memorandum. The summary historical balance sheet data as of September 30, 2016 and the statement of comprehensive earnings and cash flow data for the nine months ended September 30, 2015 and September 30, 2016 have been derived from TH Holdings’ unaudited condensed consolidated financial statements included elsewhere in this offering memorandum. The summary historical consolidated balance sheet data as of December 31, 2013 has been derived from TH Holdings’ audited consolidated financial statements not included in this offering memorandum. The summary historical balance sheet data as of September 30, 2015 has been derived from TH Holdings’ unaudited condensed consolidated financial statements not included in this offering memorandum.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for those periods. Results for the nine-month period ended September 30, 2016 are not necessarily indicative of the results that may be expected for the full year. Our audited consolidated financial statements and unaudited historical condensed financial statements included elsewhere in this offering memorandum do not reflect the impact of the Transactions.
The summary unaudited pro forma consolidated balance sheet data as of September 30, 2016 gives effect to the Transactions and the other acquisitions described therein as if they had occurred on September 30, 2016. The summary unaudited pro forma consolidated statement of operations data for the twelve months ended September 30, 2016 has been derived by taking the unaudited pro forma consolidated statement of operations data for the year ended December 31, 2015, adding the unaudited pro forma condensed consolidated statement of operations data for the nine months ended September 30, 2016, and subtracting the unaudited pro forma condensed consolidated statement of operations data for the nine months ended September 30, 2015. See “Unaudited Pro Forma Combined Financial Information.”
The summary unaudited pro forma consolidated financial data for the twelve months ended September 30, 2016 have been included in this offering memorandum in order to provide investors with pro forma information for the latest practicable twelve-month period. The Merger will be accounted for using the acquisition method of accounting. The pro forma adjustments reflect adjustments required under GAAP for business combinations and other adjustments which are based upon, among other things, preliminary estimates of fair market values of assets acquired and liabilities assumed and certain assumptions that we believe are reasonable. Revisions to the preliminary estimates of fair market value may have a significant impact on the pro forma amounts of total assets, total liabilities and equity, depreciation and amortization expense, interest expense and income tax expense. The actual adjustments related to the Transactions will be made as of the closing date of the Merger and the Transactions and may differ from those reflected in the summary unaudited pro forma consolidated financial data presented below. Such differences may be material. The summary unaudited pro forma consolidated financial data are for informational purposes only and do not purport to represent what our results of operations or financial position actually would be if the Merger, the Transactions and the other acquisitions provided for therein had occurred at any date, nor do such data purport to project the results of operations for any future period or as of any future date.
The following historical and unaudited pro forma consolidated financial information is only a summary and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical consolidated financial statements and the notes thereto included elsewhere in this offering memorandum, IPC and its subsidiaries’ historical consolidated financial statements and the notes thereto incorporated by reference herein as well as the information included under the headings “The Transactions,” “Unaudited Pro Forma Combined Financial Information,” “Selected Financial Information.”
1
​
​ ​ ​
Year Ended December 31,
​ ​
Nine Months Ended
September 30,
​ ​
Pro Forma
Twelve
Months
Ended
September 30,
2016
​
(dollars in thousands)
​ ​
2013
​ ​
2014
​ ​
2015
​ ​
2015
​ ​
2016
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
(unaudited)
​ ​
(unaudited)
​
Statement of comprehensive earnings data: ​ ​ ​ ​ ​ ​ ​
Net revenues before provision for uncollectibles
​ ​ ​ $ 4,313,848 ​ ​ ​ ​ $ 4,800,883 ​ ​ ​ ​ $ 5,999,458 ​ ​ ​ ​ $ 4,390,682 ​ ​ ​ ​ $ 5,581,210 ​ ​ ​ ​ $ 7,689,287 ​ ​
Provision for uncollectibles
​ ​ ​ ​ 1,930,253 ​ ​ ​ ​ ​ 1,981,240 ​ ​ ​ ​ ​ 2,402,211 ​ ​ ​ ​ ​ 1,773,062 ​ ​ ​ ​ ​ 2,181,499 ​ ​ ​ ​ ​ 3,003,821 ​ ​
Net revenues
​ ​ ​ ​ 2,383,595 ​ ​ ​ ​ ​ 2,819,643 ​ ​ ​ ​ ​ 3,597,247 ​ ​ ​ ​ ​ 2,617,620 ​ ​ ​ ​ ​ 3,399,711 ​ ​ ​ ​ ​ 4,685,465 ​ ​
Cost of services rendered (exclusive of depreciation and amortization shown separately below)
 ​ ​ ​ ​ ​ ​ ​
Professional service expenses
​ ​ ​ ​ 1,867,817 ​ ​ ​ ​ ​ 2,179,837 ​ ​ ​ ​ ​ 2,836,474 ​ ​ ​ ​ ​ 2,058,876 ​ ​ ​ ​ ​ 2,703,436 ​ ​ ​ ​ ​ 3,704,000 ​ ​
Professional liability costs
​ ​ ​ ​ 74,185 ​ ​ ​ ​ ​ 97,609 ​ ​ ​ ​ ​ 107,505 ​ ​ ​ ​ ​ 81,371 ​ ​ ​ ​ ​ 114,351 ​ ​ ​ ​ ​ 148,034 ​ ​
General and administrative expenses
(includes contingent purchase and other
acquisition compensation expense of
$12,230, $28,669, $23,962, $30,637 and
$17,293 for the nine months ended
September 30, 2015 and 2016 and for the
years ended December 31, 2013, 2014 and
2015, respectively)
​ ​ ​ ​ 228,911 ​ ​ ​ ​ ​ 281,054 ​ ​ ​ ​ ​ 308,193 ​ ​ ​ ​ ​ 219,214 ​ ​ ​ ​ ​ 300,925 ​ ​ ​ ​ ​ 427,865 ​ ​
Other (income) expenses, net
​ ​ ​ ​ (4,536) ​ ​ ​ ​ ​ (4,588) ​ ​ ​ ​ ​ (1,935) ​ ​ ​ ​ ​ (182) ​ ​ ​ ​ ​ (7,947) ​ ​ ​ ​ ​ (9,700) ​ ​
Depreciation
​ ​ ​ ​ 17,070 ​ ​ ​ ​ ​ 20,886 ​ ​ ​ ​ ​ 24,581 ​ ​ ​ ​ ​ 17,423 ​ ​ ​ ​ ​ 25,081 ​ ​ ​ ​ ​ 32,940 ​ ​
Amortization
​ ​ ​ ​ 37,550 ​ ​ ​ ​ ​ 55,647 ​ ​ ​ ​ ​ 83,581 ​ ​ ​ ​ ​ 62,085 ​ ​ ​ ​ ​ 71,425 ​ ​ ​ ​ ​ 93,119 ​ ​
Interest expense, net
​ ​ ​ ​ 14,910 ​ ​ ​ ​ ​ 15,050 ​ ​ ​ ​ ​ 30,986 ​ ​ ​ ​ ​ 14,132 ​ ​ ​ ​ ​ 90,255 ​ ​ ​ ​ ​ 191,677 ​ ​
Loss on refinancing of debt
​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,648 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,069 ​ ​ ​ ​ ​ 1,069 ​ ​
Transaction, integration, and other reorganization costs
​ ​ ​ ​ 3,809 ​ ​ ​ ​ ​ 7,179 ​ ​ ​ ​ ​ 58,301 ​ ​ ​ ​ ​ 7,170 ​ ​ ​ ​ ​ 48,337 ​ ​ ​ ​ ​ 99,468 ​ ​
Earnings before income taxes
​ ​ ​ ​ 143,879 ​ ​ ​ ​ ​ 163,321 ​ ​ ​ ​ ​ 149,561 ​ ​ ​ ​ ​ 157,531 ​ ​ ​ ​ ​ 52,779 ​ ​ ​ ​ ​ (3,005) ​ ​
Provision for income taxes
​ ​ ​ ​ 56,313 ​ ​ ​ ​ ​ 65,232 ​ ​ ​ ​ ​ 66,786 ​ ​ ​ ​ ​ 65,178 ​ ​ ​ ​ ​ 22,579 ​ ​ ​ ​ ​ (3,344) ​ ​
Net earnings
​ ​ ​ ​ 87,566 ​ ​ ​ ​ ​ 98,089 ​ ​ ​ ​ ​ 82,775 ​ ​ ​ ​ ​ 92,353 ​ ​ ​ ​ ​ 30,200 ​ ​ ​ ​ ​ 338 ​ ​
Net earnings (loss) attributable to noncontrolling interest
​ ​ ​ ​ 157 ​ ​ ​ ​ ​ 351 ​ ​ ​ ​ ​ 64 ​ ​ ​ ​ ​ (78) ​ ​ ​ ​ ​ 266 ​ ​ ​ ​ ​ 408 ​ ​
Net earnings attributable to Team Health Holdings, Inc.
​ ​ ​ $ 87,409 ​ ​ ​ ​ $ 97,738 ​ ​ ​ ​ $ 82,711 ​ ​ ​ ​ $ 92,431 ​ ​ ​ ​ $ 29,934 ​ ​ ​ ​ $ (70) ​ ​
​
​ ​ ​
As of December 31,
​ ​
As of
September 30,
​ ​
Pro Forma
as of
September 30,
2016
​
(dollars in thousands)
 ​ ​
2013
​ ​
2014
​ ​
2015
​ ​
2015
​ ​
2016
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
(unaudited)
​ ​
(unaudited)
​
Balance sheet data: ​ ​ ​ ​ ​ ​ ​
Cash and cash equivalents
​ ​ ​ $ 32,331 ​ ​ ​ ​ $ 20,094 ​ ​ ​ ​ $ 28,563 ​ ​ ​ ​ $ 18,194 ​ ​ ​ ​ $ 15,315 ​ ​ ​ ​ $ — ​ ​
Working capital(1)
​ ​ ​ ​ 64,258 ​ ​ ​ ​ ​ (143,054) ​ ​ ​ ​ ​ 169,245 ​ ​ ​ ​ ​ (39,765) ​ ​ ​ ​ ​ (130,623) ​ ​ ​ ​ ​ 302,490 ​ ​
Total assets(2)
​ ​ ​ ​ 1,355,553 ​ ​ ​ ​ ​ 1,967,802 ​ ​ ​ ​ ​ 4,060,842 ​ ​ ​ ​ ​ 2,144,179 ​ ​ ​ ​ ​ 4,470,575 ​ ​ ​ ​ ​ 7,240,783 ​ ​
Total debt(3)
​ ​ ​ ​ 495,706 ​ ​ ​ ​ ​ 798,330 ​ ​ ​ ​ ​ 2,406,263 ​ ​ ​ ​ ​ 755,000 ​ ​ ​ ​ ​ 2,689,105 ​ ​ ​ ​ ​ 3,615,000 ​ ​
Total shareholders’ equity including
noncontrolling interests
​ ​ ​ ​ 268,481 ​ ​ ​ ​ ​ 422,636 ​ ​ ​ ​ ​ 646,688 ​ ​ ​ ​ ​ 569,408 ​ ​ ​ ​ ​ 718,151 ​ ​ ​ ​ ​ 2,622,339 ​ ​
2
​
​ ​ ​
Year Ended December 31,
​ ​
Nine Months Ended
September 30,
​ ​
Twelve
Months
Ended
September 30,
2016
​
(dollars in thousands except ratios and
percentages)
​ ​
2013
​ ​
2014
​ ​
2015
​ ​
2015
​ ​
2016
​
Cash flow data: ​ ​ ​ ​ ​ ​ ​
Net cash provided by operating activities
​ ​ ​ $ 154,409 ​ ​ ​ ​ $ 198,663 ​ ​ ​ ​ $ 145,824 ​ ​ ​ ​ $ 131,943 ​ ​ ​ ​ $ 107,425 ​ ​ ​
Net cash used in investing activities
​ ​ ​ ​ (194,089) ​ ​ ​ ​ ​ (543,017) ​ ​ ​ ​ ​ (1,636,780) ​ ​ ​ ​ ​ (127,381) ​ ​ ​ ​ ​ (401,039) ​ ​ ​
Net cash (used in) provided by financing activities
​ ​ ​ ​ 30,771 ​ ​ ​ ​ ​ 332,117 ​ ​ ​ ​ ​ 1,499,425 ​ ​ ​ ​ ​ (6,462) ​ ​ ​ ​ ​ 280,366 ​ ​ ​
Other financial data and credit statistics: ​ ​ ​ ​ ​ ​ ​
Adjusted EBITDA(4)
​ ​ ​ ​ 251,268 ​ ​ ​ ​ ​ 325,234 ​ ​ ​ ​ ​ 387,539 ​ ​ ​ ​ ​ 289,812 ​ ​ ​ ​ ​ 346,535 ​ ​ ​ ​ $ 444,262 ​ ​
Management Pro Forma Adjusted EBITDA(4)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 527,683 ​ ​
Pro forma interest expense(5)
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 191,677 ​ ​
Pro forma total debt
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,615,000 ​ ​
Ratio of pro forma total debt to Management Pro Forma Adjusted EBITDA
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 6.85x ​ ​
Ratio of pro forma total debt less cash to Management Pro Forma Adjusted
EBITDA 
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 6.85x ​ ​
Maintenance capex(6)
​ ​ ​ ​ 21,378 ​ ​ ​ ​ ​ 24,576 ​ ​ ​ ​ ​ 40,690 ​ ​ ​ ​ ​ 31,123 ​ ​ ​ ​ ​ 22,186 ​ ​ ​ ​ ​ 31,753 ​ ​
Acquisition capex(7)
​ ​ ​ ​ 188,212 ​ ​ ​ ​ ​ 580,758 ​ ​ ​ ​ ​ 1,625,404 ​ ​ ​ ​ ​ 128,557 ​ ​ ​ ​ ​ 419,132 ​ ​ ​ ​ ​ 1,915,979 ​ ​
Ratio of Adjusted EBITDA to pro forma interest expense
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2.75x ​ ​
Adjusted EBITDA less maintenance capex
​ ​ ​ ​ 229,890 ​ ​ ​ ​ ​ 300,658 ​ ​ ​ ​ ​ 346,849 ​ ​ ​ ​ ​ 258,689 ​ ​ ​ ​ ​ 324,349 ​ ​ ​ ​ ​ 412,509 ​ ​
Cash flow conversion(8)
​ ​ ​ ​ 91.5% ​ ​ ​ ​ ​ 92.4% ​ ​ ​ ​ ​ 89.5% ​ ​ ​ ​ ​ 89.3% ​ ​ ​ ​ ​ 93.6% ​ ​ ​ ​ ​ 92.9% ​ ​
​
(1)
Working capital means current assets minus current liabilities.
​
(2)
On an ongoing basis, we evaluate whether facts and circumstances indicate any impairment of the value of our intangible assets. Our most recent evaluation of the indication of an impairment occurred in the fourth quarter of 2016 and indicated a potential impairment related to the value of intangibles from the acquisition of IPC. We are currently in the process of finalizing the assessment of the value of the potential impairment that will be recognized in the financial results for the fourth quarter of 2016. We believe that the final value of the impairment will be significant but will not exceed $1.2 billion.
​
(3)
Includes current portion of long-term debt.
​
(4)
We present Adjusted EBITDA and Management Pro Forma Adjusted EBITDA as supplemental measures of our performance. We present Adjusted EBITDA and Management Pro Forma Adjusted EBITDA because we believe they assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.
​
   
Adjusted EBITDA and Management Pro Forma Adjusted EBITDA are not measurements of financial performance under generally accepted accounting principles. In evaluating our performance as measured by Adjusted EBITDA and Management Pro Forma Adjusted EBITDA, management recognizes and considers the limitations of these measures. Adjusted EBITDA and Management Pro Forma Adjusted EBITDA do not reflect certain cash expenses that we are obligated to make, and although depreciation and amortization are non-cash charges, assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA and Management Pro Forma Adjusted EBITDA do not reflect any cash requirements for such replacements. In addition, other companies in our industry may calculate Adjusted EBITDA and Management Pro Forma Adjusted EBITDA differently than we do or may not calculate them at all, limiting their usefulness as a comparative measure. Because of these limitations, Adjusted EBITDA and Management Pro Forma Adjusted EBITDA should not be considered in isolation or as substitutes for net earnings, operating income, cash flows from operating, investing or financing activities, or any other measure calculated in accordance with generally accepted accounting principles.
​
​
3
​
   
The following unaudited table sets forth a reconciliation of net earnings attributable to TH Holdings to Adjusted EBITDA and Management Pro Forma Adjusted EBITDA:
​
​ ​ ​
Year Ended December 31,
​ ​
Nine Months Ended
September 30,
​ ​
Twelve
Months
Ended
September 30,
2016
​
(dollars in thousands)
​ ​
2013
​ ​
2014
​ ​
2015
​ ​
2015
​ ​
2016
​
Net earnings attributable to Team Health Holdings, Inc.
​ ​ ​ $ 87,409 ​ ​ ​ ​ $ 97,738 ​ ​ ​ ​ $ 82,711 ​ ​ ​ ​ $ 92,431 ​ ​ ​ ​ $ 29,934 ​ ​ ​ ​ $ 20,214 ​ ​
Interest expense, net
​ ​ ​ ​ 14,910 ​ ​ ​ ​ ​ 15,050 ​ ​ ​ ​ ​ 30,986 ​ ​ ​ ​ ​ 14,132 ​ ​ ​ ​ ​ 90,255 ​ ​ ​ ​ ​ 107,109 ​ ​
Provision for income taxes
​ ​ ​ ​ 56,313 ​ ​ ​ ​ ​ 65,232 ​ ​ ​ ​ ​ 66,786 ​ ​ ​ ​ ​ 65,178 ​ ​ ​ ​ ​ 22,579 ​ ​ ​ ​ ​ 24,187 ​ ​
Depreciation
​ ​ ​ ​ 17,070 ​ ​ ​ ​ ​ 20,886 ​ ​ ​ ​ ​ 24,581 ​ ​ ​ ​ ​ 17,423 ​ ​ ​ ​ ​ 25,081 ​ ​ ​ ​ ​ 32,239 ​ ​
Amortization
​ ​ ​ ​ 37,550 ​ ​ ​ ​ ​ 55,647 ​ ​ ​ ​ ​ 83,581 ​ ​ ​ ​ ​ 62,085 ​ ​ ​ ​ ​ 71,425 ​ ​ ​ ​ ​ 92,921 ​ ​
Other (income) expenses, net(a)
​ ​ ​ ​ (4,536) ​ ​ ​ ​ ​ (4,588) ​ ​ ​ ​ ​ (1,935) ​ ​ ​ ​ ​ (182) ​ ​ ​ ​ ​ (7,947) ​ ​ ​ ​ ​ (9,700) ​ ​
Loss on extinguishment and refinancing of debt(b)
​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,648 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,069 ​ ​ ​ ​ ​ 1,069 ​ ​
Contingent purchase and other acquisition compensation expense(c)
​ ​ ​ ​ 23,962 ​ ​ ​ ​ ​ 30,637 ​ ​ ​ ​ ​ 17,293 ​ ​ ​ ​ ​ 12,230 ​ ​ ​ ​ ​ 28,669 ​ ​ ​ ​ ​ 33,732 ​ ​
Transaction, integration and reorganization costs(d)
​ ​ ​ ​ 3,809 ​ ​ ​ ​ ​ 7,179 ​ ​ ​ ​ ​ 58,301 ​ ​ ​ ​ ​ 7,170 ​ ​ ​ ​ ​ 48,337 ​ ​ ​ ​ ​ 99,468 ​ ​
Equity based compensation expense(e)
​ ​ ​ ​ 9,889 ​ ​ ​ ​ ​ 16,152 ​ ​ ​ ​ ​ 17,538 ​ ​ ​ ​ ​ 13,197 ​ ​ ​ ​ ​ 20,531 ​ ​ ​ ​ ​ 24,872 ​ ​
Insurance subsidiaries interest income
​ ​ ​ ​ 1,795 ​ ​ ​ ​ ​ 2,012 ​ ​ ​ ​ ​ 2,108 ​ ​ ​ ​ ​ 1,558 ​ ​ ​ ​ ​ 1,630 ​ ​ ​ ​ ​ 2,180 ​ ​
Severance and other charges
​ ​ ​ ​ 3,097 ​ ​ ​ ​ ​ 8,553 ​ ​ ​ ​ ​ 5,589 ​ ​ ​ ​ ​ 4,590 ​ ​ ​ ​ ​ 688 ​ ​ ​ ​ ​ 1,687 ​ ​
Actuarial adjustment associated with prior periods
​ ​ ​ ​ — ​ ​ ​ ​ ​ 7,088 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Professional liability loss reserve adjustments associated with prior years(f)
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 14,284 ​ ​ ​ ​ ​ 14,284 ​ ​
Adjusted EBITDA
​ ​ ​ $ 251,268 ​ ​ ​ ​ $ 325,234 ​ ​ ​ ​ $ 387,539 ​ ​ ​ ​ $ 289,812 ​ ​ ​ ​ $ 346,535 ​ ​ ​ ​ $ 444,262 ​ ​
Out-of-period revenue adjustments(g) ​ ​ ​ ​ (5,006) ​ ​
Out-of-period adjustment for IPC purchase accounting(h) ​ ​ ​ ​ (3,681) ​ ​
Out-of-period adjustment for workers’ compensation reserve(i) ​ ​ ​ ​ 528 ​ ​
Non-cash joint venture equity income(j) ​ ​ ​ ​ (3,972) ​ ​
Pro forma full-year acquisition adjustments(k) ​ ​ ​ ​ 37,652 ​ ​
IPC synergies(l) ​ ​ ​ ​ 53,861 ​ ​
Start-up losses associated with new customer contracts(m) ​ ​ ​ ​ 4,039 ​ ​
Management Pro Forma Adjusted EBITDA ​ ​ ​ $ 527,683 ​ ​
​
​
(a)
Reflects gain or loss on sale of assets, realized gains on investments, and changes in fair value of investments associated with our non-qualified retirement plan.
​
(b)
For the year ended December 31, 2014, reflects the write-off of deferred financing costs of  $2.7 million from our term loan facility that was refinanced by the Existing Credit Facility as well as certain fees and expenses associated with the amendment and restatement of such credit facility. For the nine months ended September 30, 2016, reflects the write-off of deferred financing costs of  $0.9 million from the Existing Tranche B Term Loan Facility (as defined below) as well as certain fees and expenses associated with the repricing amendment of the Existing Tranche B Term Loan Facility.
​
(c)
Reflects expense recognized for historical and estimated future contingent payments and other compensation expense activity associated with acquisitions.
​
(d)
Reflects expenses associated with accounting, legal, due diligence, other transaction fees related to acquisition activity. For the twelve months ended September 30, 2016, this includes (i) IPC-related transaction expenses of  $14.4 million of accelerated vesting of stock options, $10.3 million of debt issuance costs, $10.1 million of advisory fees, $8.3 million of initial severance costs, $3.8 million of legal costs of IPC Healthcare, Inc. (“IPC”) paid by TH Holdings, $7.4 million of IPC severance costs from the IPC restructuring and $16.8 million of consulting, legal and other costs, and (ii) non-IPC related transaction expenses of  $5.3 million of activist defense advisory fees, $3.0 million of strategic alternatives exploration costs, $6.9 million of severance — reorganization of legacy operations costs, $3.4 million of consulting fees, $8.8 million of executive transition costs and $1.1 million of legacy acquisition transaction costs.
​
(e)
Reflects costs related to options and restricted shares granted under our equity based compensation plan, excluding $3.9 million of equity based compensation expense for the nine months ended September 30, 2016, primarily associated with changes in executive leadership.
​
(f)
Reflects $14.3 million reserved in the first quarter of 2016 to settle two professional liability claims from 2010 and 2012. This is an out-of-period expense.
​
​
4
​
(g)
Reflects adjustment to record income in the periods in which the original episode of care or date of service occurred. This adjustment was driven by higher than expected collections in 2015 compared to estimated revenues and a settlement with a managed care provider that included payments for volumes from prior periods.
​
(h)
Reflects a revaluation adjustment to the IPC balance sheet as part of purchase accounting.
​
(i)
Reflects a recalculation of the workers’ compensation reserves.
​
(j)
Reflects an adjustment to exclude the equity income earned from joint venture investments on the basis that such amounts are non-cash.
​
(k)
Reflects a run-rate adjustment for mergers and acquisitions completed in 2015 and 2016 (as if completed on January 1, 2015).
​
(l)
Reflects approximately $22 million of synergies actioned but not yet realized through September 30, 2016 and approximately $32 million of prospective synergies expected to be realized over 2017 and 2018, in each case with respect to the IPC transaction as summarized below:
​
IPC synergies reconciliation(1)
​ ​ ​ ​ ​ ​ ​ ​ ​
Not Yet Realized
​ ​
Full
Potential
 ​
(dollars in millions)
​ ​
Realized
​ ​
Actioned
​ ​
Prospective
​
Executive team and duplicative public company costs
​ ​ ​ $ 4 ​ ​ ​ ​ $ 2 ​ ​ ​ ​ $ 1 ​ ​ ​ ​ $ 8 ​ ​
Operations / headcount to consolidate markets
​ ​ ​ ​ 8 ​ ​ ​ ​ ​ 7 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 20 ​ ​
Corporate costs including health / dental insurance plans
​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ 7 ​ ​
Revenue cycle / IT: physician training and headcount
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ 2 ​ ​
Cost synergy subtotal EBITDA impact
 ​ ​ ​ $ 16 ​ ​ ​ ​ $ 14 ​ ​ ​ ​ $ 7 ​ ​ ​ ​ $ 38 ​ ​
Managed care pricing: migrating IPC onto Team Health rates / contracts
​ ​ ​ $ 3 ​ ​ ​ ​ $ 6 ​ ​ ​ ​ $ 14 ​ ​ ​ ​ $ 23 ​ ​
Billing: AR intelligence software to improve collections
​ ​ ​ ​ — ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 9 ​ ​ ​ ​ ​ 10 ​ ​
Improved subsidies from hospitals on IPC contracts 
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ 3 ​ ​
Operating synergy subtotal EBITDA impact
​ ​ ​ $ 4 ​ ​ ​ ​ $ 8 ​ ​ ​ ​ $ 25 ​ ​ ​ ​ $ 37 ​ ​
Total potential IPC synergy EBITDA impact
 ​ ​ ​ $ 20 ​ ​ ​ ​ $ 22 ​ ​ ​ ​ $ 32 ​ ​ ​ ​ $ 74 ​ ​
​
​
(1)
For the twelve months ended September 30, 2016.
​
We may not be successful in achieving these synergies within this period, or at all. See “Risk Factors — Risk Factors Related to Our Business — If we are not able to find suitable acquisition candidates or successfully integrate completed acquisitions, including the IPC transaction, into our current operations, we may not be able to profitably operate our consolidated company.”
(m)
Reflects add-back for start-up costs for new ED contracts with an existing customer that incurred premium physician labor costs for the accelerated launch.
​
(5)
Calculated using the estimated interest expense for the first 12 months following the consummation of the Transactions. The interest expense reflects estimated interest rates to be effective upon the closing of the Transactions at an assumed weighted average interest rate of 5.09%. A 0.25% increase in the expected rate of interest of our indebtedness would increase our annual interest expense by approximately $9.0 million.
​
(6)
Maintenance capex consist of purchases of property and equipment; acquisition capex consists of cash paid for acquisitions, net of cash acquired.
​
(7)
Acquisition capex includes contingent purchase expense associated with acquisitions.
​
(8)
Cash flow conversion is defined as the ratio of Adjusted EBITDA less maintenance capex to Adjusted EBITDA.
​
​
5
​
Our business may be adversely affected if the PPACA is repealed in whole or in part or if certain aspects of the PPACA that are beneficial to our business are repealed or changed.
The PPACA remains subject to legislative efforts to repeal or modify the law or delay the implementation of certain aspects of the law. Efforts to date have generally been unsuccessful as a result of the balance of power in Congress and the President’s veto power. However, the recent Presidential and Congressional elections, which resulted in the election of the Republican presidential nominee and Republican majorities in both houses of Congress, may result in additional efforts to repeal or modify the law or to delay the implementation of certain aspects of the PPACA. We estimate that if the PPACA had been repealed in its entirety effective January 1, 2016, our annual pro forma net income before income taxes would have been adversely impacted by $30 million and we would not realize an incremental estimated $30 million in the event of a full expansion of the PPACA; however, because of the many variables and assumptions involved in preparing this estimate, including uncertainty regarding how hospital partners, individuals and employers may respond in the event the PPACA is repealed, the actual impact of any such change may differ materially from our estimate. If the PPACA is repealed or modified, or if implementation of certain aspects of the PPACA are delayed, such repeal, modification or delay may materially adversely impact our business, strategies, prospects, operating results or financial condition. In addition, the potential proposals for the PPACA replacements may have an adverse impact on our business. We are unable to predict the full impact of any repeal, modification or delay in the implementation of the PPACA on us at this time.
6
​​
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The information below set forth the unaudited pro forma combined financial information for Team Health Holdings, Inc. (“Team Health”) and its subsidiaries gives effect to (i) the net proceeds from the notes offered hereby, together with borrowings under our New Senior Secured Credit Facilities and cash equity contributions by certain investment funds affiliated with the sponsors, to pay the cash purchase price for the acquisition of Team Health by the Sponsor, refinance our existing indebtedness, and pay related costs, fees, premiums, and expenses (collectively, the “Transactions”) and (ii) the other acquisitions consumated by us and IPC during the fiscal year ended December 31, 2015, the nine month period ended September 30, 2015, and our acquisition of FEP and Evergreen Emergency Services on October 1, 2016 (collectively, the “Acquisitions”).
With respect to the financing transactions, the unaudited pro forma financial information is based on the assumption that Team Health will incur $2.600 billion of term loans under the New Term Loan Facility, issue $1.015 billion of notes offered hereby, and enter into a $400.0 million New Revolving Credit Facility in connection with the Transactions.
The unaudited pro forma balance sheet as of September 30, 2016 reflects the Transactions as if each occurred on September 30, 2016. The unaudited pro forma statements of operations reflects the Transactions and the Acquisitions as if each occurred on January 1, 2015.
The unaudited pro forma statement of operations for the year ended December 31, 2015 combines the audited consolidated statement of operations of Team Health for the year ended December 31, 2015 and the unaudited consolidated statement of operations for Team Health’s and IPC’s completed 2015 and 2016 acquisitions for the period from January 1, 2015 to the closing of such acquisitions (or, if earlier, December 31, 2015), and applies pro forma adjustments as described herein.
The unaudited pro forma statement of operations for the nine months ended September 30, 2016 combines the unaudited consolidated statement of operations of Team Health for the nine months ended September 30, 2016 and the unaudited consolidated statement of operations for Team Health’s completed 2016 acquisitions for the period from January 1, 2016 to the closing of such acquisitions (or, if earlier, September 30, 2016), and applies pro forma adjustments as described herein.
The unaudited pro forma 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 and the unaudited consolidated statement of operations for Team Health’s completed 2015 and 2016 acquisitions for the period from January 1, 2015 to the closing of such acquisitions (or, if earlier, September 30, 2015), in addition to the unaudited consolidated statement of operations of IPC for the nine months ended September 30, 2015 and IPC’s completed 2015 acquisitions and the unaudited consolidated statement of operations for IPC’s completed 2015 acquisitions for the period from January 1, 2015 to the closing of such acquisitions (or, if earlier, September 30, 2015), and applies pro forma adjustments as described herein.
The unaudited pro forma consolidated statement of operations data for the twelve months ended September 30, 2016 has been derived by taking the unaudited pro forma consolidated statement of operations data for the year ended December 31, 2015, adding the unaudited pro forma condensed consolidated statement of operations data for the nine months ended September 30, 2016, and subtracting the unaudited pro forma condensed consolidated statement of operations data for the nine months ended September 30, 2015.
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 financial information. The pro forma adjustments related to the Transactions and the Acquisitions 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.
7
​
Revisions to the preliminary estimates set forth herein may have a significant impact on the pro forma amounts of total assets, total liabilities and equity, depreciation and amortization expense, interest expense and income tax expense. The actual adjustments will be made as of the closing date of the Merger, the Transactions and certain of the Acquisitions and may differ from those reflected in the summary unaudited pro forma combined financial data presented below. Such differences may be material.
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 financial information reflects the application of pro forma adjustments that are (1) directly attributable to the Transactions and the Acquisitions, (2) factually supportable and (3) expected to have a continuing impact on Team Health’s consolidated financial results. The unaudited pro forma financial information does not reflect any cost savings or synergies or associated costs to achieve such savings or synergies or other restructuring that may result from the Transactions and the Acquisitions.
The unaudited pro forma 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.
8
​
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As of September 30, 2016
(In thousands)
​ ​ ​
Team Health
Historical
 ​ ​
Transaction
Adjustments
 ​ ​
Pro Forma
Combined
 ​
Assets ​ ​ ​ ​ ​ ​ ​ ​ ​
Current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​
Cash and cash equivalents
​ ​ ​ $ 15,315 ​ ​ ​ ​ $ (15,315)(a) ​ ​ ​ ​ $ — ​ ​
Short-term investments
 ​ ​ ​ ​ 1,581 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,581 ​ ​
Accounts receivable, net
​ ​ ​ ​ 821,963 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 821,963 ​ ​
Prepaid expenses and other current assets
​ ​ ​ ​ 65,138 ​ ​ ​ ​ ​ 88,800(a) ​ ​ ​ ​ ​ 149,571 ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (4,367)(b) ​ ​ ​ ​ ​ ​ ​ ​
Receivables under insured programs
 ​ ​ ​ ​ 38,913 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 38,913 ​ ​
Income tax receivable
 ​ ​ ​ ​ 3,287 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,287 ​ ​
Total current assets
​ ​ ​ ​ 946,197 ​ ​ ​ ​ ​ 69,118 ​ ​ ​ ​ ​ 1,015,315 ​ ​
Insurance subsidiaries and other investments
​ ​ ​ ​ 99,939 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 99,939 ​ ​
Receivables under insured programs
​ ​ ​ ​ 102,272 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 102,272 ​ ​
Deferred income taxes
​ ​ ​ ​ 48,625 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 48,625 ​ ​
Property and equipment, net
​ ​ ​ ​ 84,141 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 84,141 ​ ​
Other intangibles, net
​ ​ ​ ​ 320,477 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 320,477 ​ ​
Goodwill
​ ​ ​ ​ 2,485,591 ​ ​ ​ ​ ​ 2,701,090(c) ​ ​ ​ ​ ​ 5,186,681 ​ ​
Other
​ ​ ​ ​ 383,333 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 383,333 ​ ​
Total Assets
 ​ ​ ​ $ 4,470,575 ​ ​ ​ ​ $ 2,770,208 ​ ​ ​ ​ $ 7,240,783 ​ ​
Liabilities and shareholders’ equity ​ ​ ​ ​
Current liabilities: ​ ​ ​ ​
Accounts payable
​ ​ ​ $ 57,060 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 57,060 ​ ​
Accrued compensation and physician payable
​ ​ ​ ​ 323,709 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 323,709 ​ ​
Other accrued liabilities
​ ​ ​ ​ 305,931 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 305,931 ​ ​
Current maturities of long-term debt
​ ​ ​ ​ 390,120 ​ ​ ​ ​ ​ (390,120)(a) ​ ​ ​ ​ ​ 26,125 ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 26,125(b) ​ ​ ​ ​ ​ ​ ​ ​
Total current liabilities
​ ​ ​ ​ 1,076,820 ​ ​ ​ ​ ​ (363,995) ​ ​ ​ ​ ​ 712,825 ​ ​
Long-term debt, less current maturities
​ ​ ​ ​ 2,298,985 ​ ​ ​ ​ ​ (2,298,985)(a) ​ ​ ​ ​ ​ 3,529,000 ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,529,000(b) ​ ​ ​ ​ ​ ​ ​ ​
Other non-current liabilities
​ ​ ​ ​ 376,619 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 376,619 ​ ​
Common stock
​ ​ ​ ​ 743 ​ ​ ​ ​ ​ (743)(c) ​ ​ ​ ​ ​ — ​ ​
Additional paid in capital
​ ​ ​ ​ 876,908 ​ ​ ​ ​ ​ (876,908)(c) ​ ​ ​ ​ ​ — ​ ​
Retained earnings (deficit)
​ ​ ​ ​ (164,039) ​ ​ ​ ​ ​ 164,039(c) ​ ​ ​ ​ ​ (133,200) ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (133,200)(a) ​ ​ ​ ​ ​ ​ ​ ​
Members equity
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,751,000(a) ​ ​ ​ ​ ​ 2,751,000 ​ ​
TeamHealth shareholders’ equity
​ ​ ​ ​ 713,612 ​ ​ ​ ​ ​ 1,904,188 ​ ​ ​ ​ ​ 2,617,800 ​ ​
Noncontrolling interests
​ ​ ​ ​ 4,539 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 4,539 ​ ​
Total equity
​ ​ ​ ​ 718,151 ​ ​ ​ ​ ​ 1,904,188 ​ ​ ​ ​ ​ 2,622,339 ​ ​
Total liabilities and shareholders’ equity
​ ​ ​ $ 4,470,575 ​ ​ ​ ​ $ 2,770,208 ​ ​ ​ ​ $ 7,240,783 ​ ​
​
See accompanying notes to unaudited pro forma financial information.
9
​
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2015
(In thousands, except per share amounts)
​ ​ ​
Team Health
Historical
​ ​
Completed
Team Health
Acquisitions
Pro Forma
Adjustments(d)(f)
 ​ ​
Team Health
Pro Forma
​ ​
Transaction
Adjustments
​ ​
Pro Forma
Combined
​
Net revenue before provision for uncollectibles
 ​ ​ ​ $ 5,999,458 ​ ​ ​ ​ $ 1,638,078 ​ ​ ​ ​ $ 7,637,536 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 7,637,536 ​ ​
Provision for uncollectibles
​ ​ ​ ​ 2,402,211 ​ ​ ​ ​ ​ 655,894 ​ ​ ​ ​ ​ 3,058,105 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,058,105 ​ ​
Net Revenue
 ​ ​ ​ ​ 3,597,247 ​ ​ ​ ​ ​ 982,184 ​ ​ ​ ​ ​ 4,579,431 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 4,579,431 ​ ​
Professional service expense
​ ​ ​ ​ 2,836,474 ​ ​ ​ ​ ​ 719,238 ​ ​ ​ ​ ​ 3,555,712 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,555,712 ​ ​
Professional liability cost
 ​ ​ ​ ​ 107,505 ​ ​ ​ ​ ​ 22,427 ​ ​ ​ ​ ​ 129,932 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 129,932 ​ ​
General and administrative expenses
(including contingent purchase
and other acquisition
compensation expense)
 ​ ​ ​ ​ 308,193 ​ ​ ​ ​ ​ 153,979 ​ ​ ​ ​ ​ 462,172 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 462,172 ​ ​
Other (income) expense, net
 ​ ​ ​ ​ (1,935) ​ ​ ​ ​ ​ (2) ​ ​ ​ ​ ​ (1,937) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,937) ​ ​
Transaction Cost
 ​ ​ ​ ​ 58,301 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 58,301 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 58,301 ​ ​
Depreciation ​ ​ ​ ​ 24,581 ​ ​ ​ ​ ​ 4,232 ​ ​ ​ ​ ​ 28,813 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 28,813 ​ ​
Amortization ​ ​ ​ ​ 83,581 ​ ​ ​ ​ ​ 1,196 ​ ​ ​ ​ ​ 84,777 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 84,777 ​ ​
Interest expense, net
​ ​ ​ ​ 30,986 ​ ​ ​ ​ ​ 1,124 ​ ​ ​ ​ ​ 32,110 ​ ​ ​ ​ ​ (32,110)(b) ​ ​ ​ ​ ​ 191,352 ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 191,352(b) ​ ​ ​ ​ ​ ​ ​ ​
Loss on refinancing of debt
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Earnings before income taxes
​ ​ ​ ​ 149,561 ​ ​ ​ ​ ​ 79,990 ​ ​ ​ ​ ​ 229,551 ​ ​ ​ ​ ​ (159,242) ​ ​ ​ ​ ​ 70,309 ​ ​
Provision for Taxes
 ​ ​ ​ ​ 66,786 ​ ​ ​ ​ ​ 30,720 ​ ​ ​ ​ ​ 97,506 ​ ​ ​ ​ ​ (71,909)(h) ​ ​ ​ ​ ​ 26,397 ​ ​
Net earnings including noncontrolling interests
​ ​ ​ ​ 82,775 ​ ​ ​ ​ ​ 49,270 ​ ​ ​ ​ ​ 132,045 ​ ​ ​ ​ ​ (88,133) ​ ​ ​ ​ ​ 43,912 ​ ​
Less: Net earnings attributable to noncontrolling interests
 ​ ​ ​ ​ 64 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 64 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 64 ​ ​
Net earnings (loss) attributable to TeamHealth
​ ​ ​ $ 82,711 ​ ​ ​ ​ $ 49,270 ​ ​ ​ ​ $ 131,981 ​ ​ ​ ​ $ (88,133) ​ ​ ​ ​ $ 43,848 ​ ​
Weighted average shares outstanding:
 ​ ​ ​ ​ ​ ​
Basic
 ​ ​ ​ ​ 72,086 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 72,086 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 72,086 ​ ​
Diluted
 ​ ​ ​ ​ 73,807 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 73,807 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 73,807 ​ ​
TeamHealth earnings per share as reported:
 ​ ​ ​ ​ ​ ​
Basic
 ​ ​ ​ $ 1.15 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 1.83 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 0.61 ​ ​
Diluted
 ​ ​ ​ $ 1.12 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 1.79 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 0.59 ​ ​
See accompanying notes to unaudited pro forma financial information.
10
​
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2016
(In thousands, except per share amounts)
​ ​ ​
Team Health
Historical
​ ​
Completed
Team Health
Acquisitions
Pro Forma
Adjustments(f)
 ​ ​
Team Health
Pro Forma
​ ​
Transaction
Adjustments
 ​ ​
Pro Forma
Combined
​
Net revenue before provision for uncollectibles
 ​ ​ ​ $ 5,581,210 ​ ​ ​ ​ $ 220,349 ​ ​ ​ ​ $ 5,801,559 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 5,801,559 ​ ​
Provision for uncollectibles
​ ​ ​ ​ 2,181,499 ​ ​ ​ ​ ​ 86,127 ​ ​ ​ ​ ​ 2,267,626 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,267,626 ​ ​
Net Revenue
 ​ ​ ​ ​ 3,399,711 ​ ​ ​ ​ ​ 134,222 ​ ​ ​ ​ ​ 3,533,933 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,533,933 ​ ​
Professional service expense
​ ​ ​ ​ 2,703,436 ​ ​ ​ ​ ​ 97,789 ​ ​ ​ ​ ​ 2,801,225 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,801,225 ​ ​
Professional liability cost
 ​ ​ ​ ​ 114,351 ​ ​ ​ ​ ​ 3,521 ​ ​ ​ ​ ​ 117,872 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 117,872 ​ ​
General and administrative expenses (including contingent purchase and other acquisition compensation expense)
 ​ ​ ​ ​ 300,925 ​ ​ ​ ​ ​ 11,528 ​ ​ ​ ​ ​ 312,453 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 312,453 ​ ​
Other (income) expense, net
 ​ ​ ​ ​ (7,947) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (7,947) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (7,947) ​ ​
Transaction Cost
 ​ ​ ​ ​ 48,337 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 48,337 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 48,337 ​ ​
Depreciation ​ ​ ​ ​ 25,081 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 25,081 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 25,081 ​ ​
Amortization ​ ​ ​ ​ 71,425 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 71,425 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 71,425 ​ ​
Interest expense, net
​ ​ ​ ​ 90,255 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 90,255 ​ ​ ​ ​ ​ (90,255)(b) ​ ​ ​ ​ ​ 143,994 ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 143,994(b) ​ ​ ​ ​ ​ ​ ​ ​
Loss on refinancing of debt
​ ​ ​ ​ 1,069 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,069 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,069 ​ ​
Earnings before income taxes
​ ​ ​ ​ 52,779 ​ ​ ​ ​ ​ 21,385 ​ ​ ​ ​ ​ 74,164 ​ ​ ​ ​ ​ (53,739) ​ ​ ​ ​ ​ 20,425 ​ ​
Provision for Taxes
 ​ ​ ​ ​ 22,579 ​ ​ ​ ​ ​ 8,180 ​ ​ ​ ​ ​ 30,759 ​ ​ ​ ​ ​ (22,990)(h) ​ ​ ​ ​ ​ 7,769 ​ ​
Net earnings including noncontrolling interests
​ ​ ​ ​ 30,200 ​ ​ ​ ​ ​ 13,205 ​ ​ ​ ​ ​ 43,405 ​ ​ ​ ​ ​ (30,749) ​ ​ ​ ​ ​ 12,656 ​ ​
Less: Net earnings attributable to noncontrolling interests
 ​ ​ ​ ​ 266 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 266 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 266 ​ ​
Net earnings attributable to TeamHealth
​ ​ ​ $ 29,934 ​ ​ ​ ​ $ 13,205 ​ ​ ​ ​ $ 43,139 ​ ​ ​ ​ $ (30,749) ​ ​ ​ ​ $ 12,390 ​ ​
Weighted average shares outstanding: ​ ​ ​ ​ ​ ​
Basic
 ​ ​ ​ ​ 73,823 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 73,823 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 73,823 ​ ​
Diluted
 ​ ​ ​ ​ 75,225 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 75,225 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 75,225 ​ ​
TeamHealth earnings per share as reported:
 ​ ​ ​ ​ ​ ​
Basic
 ​ ​ ​ $ 0.41 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 0.58 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 0.17 ​ ​
Diluted
 ​ ​ ​ $ 0.40 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 0.57 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 0.16 ​ ​
See accompanying notes to unaudited pro forma financial information.
11
​
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2015
(In thousands, except per share amounts)
​ ​ ​
Team Health
Historical
​ ​
Completed
Team Health
Acquisitions
Pro Forma
Adjustments(e)(f)
 ​ ​
Team Health
Pro Forma
 ​ ​
IPC
Historical
​ ​
Completed
IPC
Acquisitions
Pro Forma
Adjustments(g)
​ ​
IPC Pro
Forma
 ​ ​
Transaction
Adjustments
 ​ ​
Pro Forma
Combined
​
Net revenue before provision for uncollectibles
 ​ ​ ​ $ 4,390,682 ​ ​ ​ ​ $ 755,678 ​ ​ ​ ​ $ 5,146,360 ​ ​ ​ ​ $ 563,165 ​ ​ ​ ​ $ 40,284 ​ ​ ​ ​ $ 603,449 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 5,749,809 ​ ​
Provision for uncollectibles
​ ​ ​ ​ 1,773,062 ​ ​ ​ ​ ​ 534,312 ​ ​ ​ ​ ​ 2,307,374 ​ ​ ​ ​ ​ 13,581 ​ ​ ​ ​ ​ 955 ​ ​ ​ ​ ​ 14,536 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,321,910 ​ ​
Net Revenue
 ​ ​ ​ ​ 2,617,620 ​ ​ ​ ​ ​ 221,366 ​ ​ ​ ​ ​ 2,838,986 ​ ​ ​ ​ ​ 549,584 ​ ​ ​ ​ ​ 39,329 ​ ​ ​ ​ ​ 588,913 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,427,899 ​ ​
Professional service expense
​ ​ ​ ​ 2,058,876 ​ ​ ​ ​ ​ 168,291 ​ ​ ​ ​ ​ 2,227,167 ​ ​ ​ ​ ​ 396,037 ​ ​ ​ ​ ​ 29,733 ​ ​ ​ ​ ​ 425,770 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,652,937 ​ ​
Professional liability cost
 ​ ​ ​ ​ 81,371 ​ ​ ​ ​ ​ 5,375 ​ ​ ​ ​ ​ 86,746 ​ ​ ​ ​ ​ 12,081 ​ ​ ​ ​ ​ 943 ​ ​ ​ ​ ​ 13,024 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 99,770 ​ ​
General and administrative expenses
(including contingent purchase and other
acquisition compensation expense)
 ​ ​ ​ ​ 219,214 ​ ​ ​ ​ ​ 16,863 ​ ​ ​ ​ ​ 236,077 ​ ​ ​ ​ ​ 105,767 ​ ​ ​ ​ ​ 4,916 ​ ​ ​ ​ ​ 110,683 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 346,760 ​ ​
Other (income) expense, net
 ​ ​ ​ ​ (182) ​ ​ ​ ​ ​ (0) ​ ​ ​ ​ ​ (182) ​ ​ ​ ​ ​ (2) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (2) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (184) ​ ​
Transaction Cost
 ​ ​ ​ ​ 7,170 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 7,170 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 7,170 ​ ​
Depreciation ​ ​ ​ ​ 17,423 ​ ​ ​ ​ ​ 7 ​ ​ ​ ​ ​ 17,430 ​ ​ ​ ​ ​ 3,524 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,524 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 20,954 ​ ​
Amortization ​ ​ ​ ​ 62,085 ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ 62,087 ​ ​ ​ ​ ​ 996 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 996 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 63,083 ​ ​
Interest expense, net
​ ​ ​ ​ 14,132 ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ 14,134 ​ ​ ​ ​ ​ 936 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 936 ​ ​ ​ ​ ​ (15,070)(b) ​ ​ ​ ​ ​ 143,669 ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 143,669(b) ​ ​ ​ ​ ​ ​ ​ ​
Loss on refinancing of debt
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Earnings before income taxes
​ ​ ​ ​ 157,531 ​ ​ ​ ​ ​ 30,826 ​ ​ ​ ​ ​ 188,357 ​ ​ ​ ​ ​ 30,245 ​ ​ ​ ​ ​ 3,737 ​ ​ ​ ​ ​ 33,982 ​ ​ ​ ​ ​ (128,559) ​ ​ ​ ​ ​ 93,739 ​ ​
Provision for Taxes
 ​ ​ ​ ​ 65,178 ​ ​ ​ ​ ​ 12,626 ​ ​ ​ ​ ​ 77,804 ​ ​ ​ ​ ​ 11,493 ​ ​ ​ ​ ​ 1,420 ​ ​ ​ ​ ​ 12,913 ​ ​ ​ ​ ​ (53,208)(h) ​ ​ ​ ​ ​ 37,509 ​ ​
Net earnings including noncontrolling interests
​ ​ ​ ​ 92,353 ​ ​ ​ ​ ​ 18,200 ​ ​ ​ ​ ​ 110,553 ​ ​ ​ ​ ​ 18,752 ​ ​ ​ ​ ​ 2,317 ​ ​ ​ ​ ​ 21,069 ​ ​ ​ ​ ​ (75,392) ​ ​ ​ ​ ​ 56,230 ​ ​
Less: Net earnings attributable to noncontrolling interests
 ​ ​ ​ ​ (78) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (78) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (78) ​ ​
Net earnings attributable to TeamHealth
​ ​ ​ $ 92,431 ​ ​ ​ ​ $ 18,200 ​ ​ ​ ​ $ 110,631 ​ ​ ​ ​ $ 18,752 ​ ​ ​ ​ $ 2,317 ​ ​ ​ ​ $ 21,069 ​ ​ ​ ​ $ (75,392) ​ ​ ​ ​ $ 56,308 ​ ​
Weighted average shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​
Basic
 ​ ​ ​ ​ 71,900 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 71,900 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 71,900 ​ ​
Diluted
 ​ ​ ​ ​ 73,351 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 73,351 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 73,351 ​ ​
TeamHealth earnings per share as reported:
 ​ ​ ​ ​ ​ ​ ​ ​ ​
Basic
 ​ ​ ​ $ 1.29 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 1.54 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 0.78 ​ ​
Diluted
 ​ ​ ​ $ 1.26 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 1.51 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 0.77 ​ ​
See accompanying notes to unaudited pro forma financial information.
12
​
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Twelve Months Ended September 30, 2016
(In thousands, except per share amounts)
​ ​ ​
Team Health
Historical
​ ​
Completed
Team Health
& IPC(i)
Acquisitions
Pro Forma
Adjustments
 ​ ​
TeamHealth
Pro Forma
​ ​
Transaction
Adjustments
​ ​
Pro Forma
Combined
​
Net revenue before provision for uncollectibles
 ​ ​ ​ $ 7,189,986 ​ ​ ​ ​ $ 499,301 ​ ​ ​ ​ $ 7,689,287 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 7,689,287 ​ ​
Provision for uncollectibles
​ ​ ​ ​ 2,810,648 ​ ​ ​ ​ ​ 193,173 ​ ​ ​ ​ ​ 3,003,821 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,003,821 ​ ​
Net Revenue
 ​ ​ ​ ​ 4,379,338 ​ ​ ​ ​ ​ 306,127 ​ ​ ​ ​ ​ 4,685,465 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 4,685,465 ​ ​
Professional service expense
​ ​ ​ ​ 3,481,034 ​ ​ ​ ​ ​ 222,966 ​ ​ ​ ​ ​ 3,704,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,704,000 ​ ​
Professional liability cost
 ​ ​ ​ ​ 140,485 ​ ​ ​ ​ ​ 7,549 ​ ​ ​ ​ ​ 148,034 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 148,034 ​ ​
General and administrative expenses (including contingent purchase and other acquisition compensation expense)
 ​ ​ ​ ​ 389,904 ​ ​ ​ ​ ​ 37,961 ​ ​ ​ ​ ​ 427,865 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 427,865 ​ ​
Other (income) expense, net
 ​ ​ ​ ​ (9,700) ​ ​ ​ ​ ​ (0) ​ ​ ​ ​ ​ (9,700) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (9,700) ​ ​
Transaction Cost
 ​ ​ ​ ​ 99,468 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 99,468 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 99,468 ​ ​
Depreciation ​ ​ ​ ​ 32,239 ​ ​ ​ ​ ​ 701 ​ ​ ​ ​ ​ 32,940 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 32,940 ​ ​
Amortization ​ ​ ​ ​ 92,921 ​ ​ ​ ​ ​ 198 ​ ​ ​ ​ ​ 93,119 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 93,119 ​ ​
Interest expense, net
​ ​ ​ ​ 107,109 ​ ​ ​ ​ ​ 186 ​ ​ ​ ​ ​ 107,295 ​ ​ ​ ​ ​ (107,295) ​ ​ ​ ​ ​ 191,677 ​ ​
​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 191,677 ​ ​ ​ ​ ​ — ​ ​
Loss on refinancing of debt
​ ​ ​ ​ 1,069 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,069 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,069 ​ ​
Earnings before income taxes
​ ​ ​ ​ 44,809 ​ ​ ​ ​ ​ 36,567 ​ ​ ​ ​ ​ 81,376 ​ ​ ​ ​ ​ (84,382) ​ ​ ​ ​ ​ (3,005) ​ ​
Provision for Taxes
 ​ ​ ​ ​ 24,187 ​ ​ ​ ​ ​ 13,361 ​ ​ ​ ​ ​ 37,548 ​ ​ ​ ​ ​ (40,891) ​ ​ ​ ​ ​ (3,334) ​ ​
Net earnings including noncontrolling
interests
​ ​ ​ ​ 20,622 ​ ​ ​ ​ ​ 23,207 ​ ​ ​ ​ ​ 43,829 ​ ​ ​ ​ ​ (43,491) ​ ​ ​ ​ ​ 338 ​ ​
Less: Net earnings attributable to noncontrolling interests
 ​ ​ ​ ​ 408 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 408 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 408 ​ ​
Net earnings attributable to
TeamHealth
​ ​ ​ $ 20,214 ​ ​ ​ ​ $ 23,207 ​ ​ ​ ​ $ 43,421 ​ ​ ​ ​ $ (43,491) ​ ​ ​ ​ $ (70) ​ ​
Weighted average shares outstanding: ​ ​ ​ ​ ​ ​
Basic
 ​ ​ ​ ​ 73,823 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 73,823 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 73,823 ​ ​
Diluted
 ​ ​ ​ ​ 75,225 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 75,225 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 75,225 ​ ​
TeamHealth earnings per share as reported:
 ​ ​ ​ ​ ​ ​
Basic
 ​ ​ ​ $ 0.27 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 0.59 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 0.00 ​ ​
Diluted
 ​ ​ ​ $ 0.27 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 0.58 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 0.00 ​ ​
See accompanying notes to unaudited pro forma financial information.
13
​
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(In thousands, except per share amounts)
(a)
Reflects the incurrence of  $2.600 billion of term loans under the New Term Loan Facility and proceeds from the notes of approximately $1.015 billion to fund the Transactions. A detailed estimate of the sources and uses of cash associated with the Transaction are as follows.
​
​ Sources: ​ ​
​
New $400mm Revolving Credit Facility
​ ​ ​ $ — ​ ​
​
New Term Loan Facility
​ ​ ​ ​ 2,600,000 ​ ​
​
Notes offered hereby
​ ​ ​ ​ 1,015,000 ​ ​
​
Sponsor equity
​ ​ ​ ​ 2,751,000 ​ ​
​
Total Sources
​ ​ ​ $ 6,366,000 ​ ​
​ Uses: ​ ​
​
Equity purchase price
​ ​ ​ $ 3,362,000 ​ ​
​
Refinancing of existing debt
 ​ ​ ​ ​ 2,722,000(i) ​ ​
​
Fees, Costs and Expenses
​ ​ ​ ​ 282,000(ii) ​ ​
​
Total Uses
​ ​ ​ $ 6,366,000 ​ ​
​
​
(i)
Represents the total refinancing of net debt.
​
​
Current long term debt
​ ​ ​ $ 390,120 ​ ​
​
Noncurrent long term debt, net of deferred financing costs
​ ​ ​ ​ 2,298,985 ​ ​
​
Deferred Financing costs
​ ​ ​ ​ 48,335 ​ ​
​
Existing cash
​ ​ ​ ​ (15,315) ​ ​
​
Revolving credit facility increase
​ ​ ​ ​ (125) ​ ​
​
Total refinance
​ ​ ​ ​ 2,722,000 ​ ​
​
(ii)
Represents the estimated financing and other fees, costs and expenses in connection with the Transactions.
​
​
Fees and Expenses
​ ​ ​ $ 282,000 ​ ​
​
Deferred Fees and Expenses
​ ​ ​ ​ 60,000 ​ ​
​
Non-Deferred Fees and Expenses
​ ​ ​ $ 222,000 ​ ​
​
Tax Impact
​ ​ ​ ​ 88,800 ​ ​
​
After-tax Non-Deferred Fees and Expenses
​ ​ ​ $ 133,200 ​ ​
​
(b)
Represents the New Senior Secured Credit Facility and the notes offered hereby and repayment of existing Team Health debt in addition to the elimination of related deferred financing costs.
​
​
New Senior Secured Credit Facility and the notes offered hereby
​ ​ ​ $ 3,615,125(i) ​ ​
​
Estimated total deferred financing costs
​ ​ ​ ​ 60,000 ​ ​
​
Current Portion
​ ​ ​ ​ 26,125 ​ ​
​
Long Term Portion
​ ​ ​ $ 3,529,000 ​ ​
​
Repayment of Team Health debt, net of deferred financing costs
​ ​ ​ ​ (2,689,105) ​ ​
​
Removal of former Team Health revolving credit facility deferred financing balance
​ ​ ​ ​ (4,367) ​ ​
​
Removal of Team Health’s total interest expense for year ended December 31, 2015
​ ​ ​ $ 32,110 ​ ​
​
Removal of Team Health’s total interest expense for nine months ended September 30, 2016
​ ​ ​ $ 90,255 ​ ​
   
14
​
​
Removal of Team Health’s total interest expense for nine months ended September 30, 2015
​ ​ ​ $ 15,070 ​ ​
​
Removal of Team Health’s total interest expense for twelve months ended September 30, 2016
​ ​ ​ $ 107,295 ​ ​
​
Total interest and amortization of deferred financing costs expense for the New Senior Secured Credit Facility and the notes offered hereby for the year ended December 31, 2015
​ ​ ​ $ 191,352 ​ ​
​
Total interest and amortization of deferred financing costs expense for the New Senior Secured Credit Facility and the notes offered hereby for the nine months ended September 30, 2016
​ ​ ​ $ 143,994 ​ ​
​
Total interest and amortization of deferred financing costs expense for the New Senior Secured Credit Facility and the notes offered hereby for the nine months ended September 30, 2015
​ ​ ​ $ 143,669 ​ ​
​
Total interest and amortization of deferred financing costs expense for the New
Senior Secured Credit Facility and the notes offered hereby for the twelve months
ended September 30, 2016
​ ​ ​ $ 191,677 ​ ​
If the weighted average interest rate of 5.09% of the New Senior Secured Credit Facilities and the notes offered hereby 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 Senior Secured Credit Facility and the notes offered hereby for the year ended December 31, 2015
 ​ ​ ​ $ 200,326 ​ ​ ​ ​ $ 182,379 ​ ​
Total interest and amortization of deferred financing costs expense for the New Senior Secured Credit Facility and the notes offered hereby for the nine months ended September 30, 2016
 ​ ​ ​ $ 150,742 ​ ​ ​ ​ $ 137,246 ​ ​
Total interest and amortization of deferred financing costs expense for the New Senior Secured Credit Facility and the notes offered hereby for the nine months ended September 30, 2015
 ​ ​ ​ $ 150,407 ​ ​ ​ ​ $ 136,931 ​ ​
Total interest and amortization of deferred financing costs expense for the New Senior Secured Credit Facility and the notes offered hereby for the twelve months ended September 30, 2016
 ​ ​ ​ $ 200,660 ​ ​ ​ ​ $ 182,694 ​ ​
​
(i)
$125 thousand of this is related to the revolving credit facility increased noted in tickmark (a)
​
(c)
Represents adjustments based on preliminary estimates of fair value and the adjustment to goodwill derived from the difference in the estimated total consideration and the estimated fair value of assets acquired and liabilities. The estimated consideration is based on the cash paid and the assumption of Team Health’s net debt (after adjustment for deferred financing costs, cash, and short term investments). Final consideration will be determined at the closing of the Transactions.
​
​
   
15
​
​
Estimated cash consideration
​ ​ ​ $ 3,362,000 ​ ​
​
Assumption of debt, less deferred financing costs, cash, and short term investments
 ​ ​ ​ ​ 2,720,419 ​ ​
​ ​ ​ ​ ​ $ 6,082,419 ​ ​
​
Accounts receivable
​ ​ ​ ​ 821,963 ​ ​
​
Prepaid expenses and other current assets
​ ​ ​ ​ 65,138(ii) ​ ​
​
Deferred financing costs of Existing Revolving Credit Facility
​ ​ ​ ​ (4,367) ​ ​
​
Receivables under insured programs – current
​ ​ ​ ​ 38,913 ​ ​
​
Income tax receivable
​ ​ ​ ​ 3,287 ​ ​
​
Insurance sub and other investments
​ ​ ​ ​ 99,939 ​ ​
​
Receivables under insured programs – noncurrent
​ ​ ​ ​ 102,272 ​ ​
​
Deferred income taxes – noncurrent
​ ​ ​ ​ 48,625 ​ ​
​
Property and equipment
​ ​ ​ ​ 84,141 ​ ​
​
Intangibles, net
​ ​ ​ ​ 320,477 ​ ​
​
Other assets
​ ​ ​ ​ 383,333 ​ ​
​
Accounts payable – current
​ ​ ​ ​ (57,060) ​ ​
​
Accrued compensation and physician payable – current
​ ​ ​ ​ (323,709) ​ ​
​
Other accrued liabilities – current
​ ​ ​ ​ (305,931) ​ ​
​
Other long term liabilities – noncurrent
​ ​ ​ ​ (376,619) ​ ​
​
Noncontrolling interest
​ ​ ​ ​ (4,539) ​ ​
​
Fair value of assets acquired and liabilities assumed
​ ​ ​ $ 895,738 ​ ​
​
Estimated goodwill
​ ​ ​ ​ 5,186,681 ​ ​
​
Less: historical goodwill
​ ​ ​ ​ 2,485,591 ​ ​
​
Goodwill adjustment
​ ​ ​ $ 2,701,090 ​ ​
​
Common Stock
​ ​ ​ $ 743(i) ​ ​
​
Additional Paid-in-Capital
​ ​ ​ $ 876,908(i) ​ ​
​
Retained Earnings
​ ​ ​ $ (164,039)(i) ​ ​
​
(i)
The common stock, additional paid-in-capital, and retained earnings of Team Health will be adjusted to zero upon the closing of the Transaction.
​
(ii)
No removal of the tax impact of the non-deferred expenses and fees was necessary as the expenses and fees were classified separately in the Uses.
​
(d)
The amounts in this column represent pro forma adjustments for Team Health’s 11 completed acquisitions in 2015 for the period from January 1, 2015 to their closing dates and the pro forma adjustments for IPC’s 20 completed acquisitions in 2015 for the same period. Team Health’s acquisition of IPC was material. All other acquisitions were immaterial.
​
(e)
The amounts in this column represent pro forma adjustments for Team Health’s 11 completed acquisitions in 2015 for the period from January 1, 2015 to their closing dates (or, if earlier, September 30, 2015). This adjustment excludes the IPC transaction. All acquisitions in this column were immaterial.
​
(f)
The amounts in this column represent pro forma adjustments for Team Health’s 11 completed acquisitions in 2016 for the period from January 1, 2016 to their closing dates (or, if earlier, September 30, 2016) or, if included in prior year, for the period from January 1, 2015 to September 30, 2015 or December 31, 2015, as appropriate. All acquisitions in this column were immaterial.
​
(g)
The amounts in this column represent pro forma adjustments for IPC’s 20 completed acquisitions in 2015 for the period from January 1, 2015 to their closing dates (or, if earlier, September 30, 2015). All acquisitions in this column were immaterial.
​
(h)
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.
​
(i)
The amounts in this column represent pro forma adjustments on a last twelve month basis on September 30, 2016 for all acquisitions during that period by Team Health and IPC, including the acquisition of IPC by Team Health.
​
​
   
16
​
NJ USAO Subpoena
The Company received a subpoena from the Eastern District of New Jersey United States Attorney’s Office (“NJ USAO”) on December 12, 2016. The subpoena sought documents related to the Company’s acquisition of emergency department physician practices as well as its nationwide critical care and emergency department coding and billing. The Company is working with the NJ USAO to respond to the document requests. The Company is currently unable to determine the potential impact, if any, that will result from this matter.
   
17