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1(404) 815-2227 reypascual@paulhastings.com | 74133.00053 |
April 24, 2012
VIA EDGAR
U.S. Securities and Exchange Commission
100 F Street N.E.
Washington, D.C. 20549
Attention: Tia L. Jenkins
Re: | ExamWorks Group, Inc. |
Registration Statement on Form S-4 |
Filed April 4, 2012 |
File No.: 333-180549 |
Ladies and Gentlemen;
On behalf of our client, ExamWorks Group, Inc. (“ExamWorks” or the “Company”), we refer you to the registration statement on Form S-4 (File No. 333-180549) filed by ExamWorks with the Securities and Exchange Commission (the “Commission”) on April 4, 2012 (the “Registration Statement”). ExamWorks is filing this letter in response to comments received from the staff of the Commission (the “Staff”) by letter dated April 18, 2012 with respect to the Registration Statement. The Registration Statement incorporates certain of ExamWorks’ public filings by reference, including ExamWorks’ Form 8-K filed on April 4, 2012 (the “8-K”).
The numbering of the paragraphs below corresponds to the numbering in the comment letter, the text of which we have incorporated into this response letter for convenience. These responses are made on behalf of the Company.
Form S-4 filed on April 4, 2012
Incorporation by Reference, page 77
Current Report on Form 8-K filed on April 4, 2012
1. | We note that you combined the financial information of the parent company with its guarantor subsidiaries on the basis that the parent company financial information is not deemed material. The Rule 3-10(f) of Regulation S-X requirement to separately present the parent company financial information partly serves to provide financial information in sufficient detail to allow investors to determine the assets, results of operations and cash flows of each of the consolidating groups. Please revise to separately present the financial information of the parent company apart from the guarantor subsidiaries. |
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U.S. Securities and Exchange Commission
April 24, 2012
Page 2
As discussed with the Staff, the Company plans to amend the 8-K to separately present the parent company financial information. Attached hereto as Exhibit A is the Company’s proposed revised Note 14 to the financial statements contained in the 8-K which implements the separate presentation of the parent company financial information.
2. | It appears you have presented the alternative disclosure allowed by paragraph 1 to Rule 3-10(f) of Regulation S-X for 2009. If so, please confirm and also revise Note 14 to provide all disclosures required by paragraph 1 including the disclosure, if true, that the parent company has no independent assets or operations. |
As discussed with the Staff, the Company (the issuer of the outstanding 9% Senior Unsecured Notes Due 2019) was formed in June 2010 to implement a holding company organizational structure and was therefore not in existence in 2009. Additionally, the Company did not have any foreign subsidiaries until June 2010, when it entered the Canadian market through two acquisitions. As a result, the income statement and cash flows for the year ended December 31, 2009 consisted of only the guarantor subsidiaries and therefore is not presented separately in the 8-K. As discussed with the Staff, the Company plans to amend the 8-K to provide these clarifying details. Attached hereto as Exhibit A is the Company’s proposed revised Note 14 which includes such information.
****************
In preparing our response to the Staff’s comments, the Company acknowledges that:
• | the Company is responsible for the adequacy and accuracy of the disclosure in the filings; | ||
• | the Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking action with respect to the filing; and | ||
• | the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. |
The Company respectfully requests the Staff’s assistance in completing the review of the responses contained in this letter as soon as possible. Please advise us if we can provide any further information or assistance to facilitate your review. Please direct any further comments or questions regarding this response letter to me at 404-815-2227.
Very truly yours,
/s/ Reinaldo Pascual
Reinaldo Pascual
of PAUL HASTINGS LLP
RP:mr
cc: | J. Miguel Fernandez de Castro, ExamWorks Group, Inc. |
Brian McAllister, SEC |
John Archfield, SEC |
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U.S. Securities and Exchange Commission
April 24, 2012
Page 3
Exhibit A
(14) Condensed Consolidating Financial Information of Guarantor Subsidiaries
The Company has outstanding certain indebtedness that is guaranteed by all of its U.S. subsidiaries. However, the indebtedness is not guaranteed by the Company’s foreign subsidiaries. The guarantor subsidiaries are wholly owned and the guarantees are made on a joint and several basis and are full and unconditional. Separate consolidated financial statements of the guarantor subsidiaries have not been presented because management believes that such information would not be material to investors. However, condensed consolidating financial information as of and for the years ended December 31, 2010 and 2011 is presented below. The Company (issuer of the Senior Unsecured Notes) was formed in June 2010 to implement a holding company organizational structure and was therefore not in existence in 2009. As a result, all operating activities are conducted through the Company’s wholly-owned subsidiaries. Additionally, the Company did not have any foreign subsidiaries until June 2010, when it entered the Canadian market through two acquisitions. As a result, the income statement and cash flows for the year ended December 31, 2009 consisted of only the guarantor subsidiaries and therefore is not presented separately below.
Condensed Consolidating Statement of Operations for the year ended December 31, 2011 | ||||||||||||
(In thousands) |
Guarantor Subsidiaries | Non-Guarantor Subsidiaries | ExamWorks Group, Inc. (Parent Corporation) | Consolidated Totals | |||||||||||||
Revenues | $ | 298,056 | $ | 99,804 | $ | — | $ | 397,860 | ||||||||
Costs and expenses: | ||||||||||||||||
Costs of revenues | 203,651 | 58,591 | — | 262,242 | ||||||||||||
Selling, general and administrative expenses | 55,139 | 28,994 | — | 84,133 | ||||||||||||
Depreciation and amortization | 34,081 | 13,358 | — | 47,439 | ||||||||||||
Total costs and expenses | 292,871 | 100,943 | — | 393,814 | ||||||||||||
Income (loss) from operations | 5,185 | (1,139 | ) | — | 4,046 | |||||||||||
Interest and other expenses, net | 14,148 | 2,313 | — | 16,461 | ||||||||||||
Loss before income taxes | (8,963 | ) | (3,452 | ) | — | (12,415 | ) | |||||||||
Provision (benefit) for income taxes | (5,331 | ) | 1,249 | — | (4,082 | ) | ||||||||||
Net loss | $ | (3,632 | ) | $ | (4,701 | ) | $ | — | $ | (8,333 | ) |
Condensed Consolidating Statement of Operations for the year ended December 31, 2010 | ||||||||||||
(In thousands) |
Guarantor Subsidiaries | Non-Guarantor Subsidiaries | ExamWorks Group, Inc. (Parent Corporation) | Consolidated Totals | |||||||||||||
Revenues | $ | 147,917 | $ | 15,594 | $ | — | $ | 163,511 | ||||||||
Costs and expenses: | ||||||||||||||||
Costs of revenues | 94,238 | 9,368 | — | 103,606 | ||||||||||||
Selling, general and administrative expenses | 34,789 | 2,900 | — | 37,689 | ||||||||||||
Depreciation and amortization | 17,044 | 2,461 | — | 19,505 | ||||||||||||
Total costs and expenses | 146,071 | 14,729 | — | 160,800 | ||||||||||||
Income from operations | 1,846 | 865 | — | 2,711 | ||||||||||||
Interest and other expenses, net | 10,034 | 1,199 | — | 11,233 | ||||||||||||
Loss before income taxes | (8,188 | ) | (334 | ) | — | (8,522 | ) | |||||||||
Provision (benefit) for income taxes | (2,538 | ) | 54 | — | (2,484 | ) | ||||||||||
Net loss | $ | (5,650 | ) | $ | (388 | ) | $ | — | $ | (6,038 | ) |
Condensed Consolidating Balance Sheet as of December 31, 2011
(In thousands)
Guarantor Subsidiaries | Non-Guarantor Subsidiaries | ExamWorks Group, Inc. (Parent Corporation) | Consolidation and Elimination Entries | Consolidated Totals | ||||||||||||||||
Assets | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 6,044 | $ | 2,372 | $ | — | $ | — | $ | 8,416 | ||||||||||
Accounts receivable, net | 44,690 | 99,351 | — | — | 144,041 | |||||||||||||||
Other receivables | 26 | 14 | — | — | 40 | |||||||||||||||
Prepaid expenses | 2,694 | 1,793 | — | — | 4,487 | |||||||||||||||
Deferred tax assets | 1,373 | 267 | — | — | 1,640 | |||||||||||||||
Other current assets | 14 | 1,159 | — | — | 1,173 | |||||||||||||||
Total current assets | 54,841 | 104,956 | — | — | 159,797 | |||||||||||||||
Property, equipment and leasehold improvements, net | 7,745 | 1,173 | — | — | 8,918 | |||||||||||||||
Goodwill | 240,252 | 60,008 | — | — | 300,260 | |||||||||||||||
Intangible assets, net | 84,833 | 61,335 | — | — | 146,168 | |||||||||||||||
Deferred tax assets, noncurrent | — | 1,913 | — | (1,913 | ) | — | ||||||||||||||
Deferred financing costs, net | — | — | 11,458 | — | 11,458 | |||||||||||||||
Other assets | 438 | — | — | — | 438 | |||||||||||||||
Total assets | $ | 388,109 | $ | 229,385 | $ | 11,458 | $ | (1,913 | ) | $ | 627,039 | |||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Accounts payable | $ | 16,728 | $ | 25,914 | $ | — | $ | — | $ | 42,642 | ||||||||||
Accrued expenses | 4,272 | 24,138 | — | — | 28,410 | |||||||||||||||
Accrued interest expense | — | 3,236 | 7,011 | — | 10,247 | |||||||||||||||
Deferred revenue | 192 | 1,140 | — | — | 1,332 | |||||||||||||||
Current portion of subordinated unsecured notes payable | 1,932 | — | — | — | 1,932 | |||||||||||||||
Current portion of contingent earnout obligation | 91 | — | — | — | 91 | |||||||||||||||
Other current liabilities | 2,925 | 2,534 | — | — | 5,459 | |||||||||||||||
Total current liabilities | 26,140 | 56,962 | 7,011 | — | 90,113 | |||||||||||||||
Senior unsecured notes payable | — | — | 250,000 | — | 250,000 | |||||||||||||||
Senior revolving credit facility and working capital facilities | — | 39,063 | 5,000 | — | 44,063 | |||||||||||||||
Long-term subordinated unsecured notes payable, less current portion | 717 | — | — | — | 717 | |||||||||||||||
Long-term contingent earnout obligation, less current portion | 86 | — | — | — | 86 | |||||||||||||||
Deferred tax liability, noncurrent | 4,072 | — | — | (1,913 | ) | 2,159 | ||||||||||||||
Other long-term liabilities | 1,691 | 286 | — | — | 1,977 | |||||||||||||||
Total liabilities | 32,706 | 96,311 | 262,011 | (1,913 | ) | 389,115 | ||||||||||||||
Commitments and contingencies | ||||||||||||||||||||
Stockholders’ equity (1) | 355,403 | 133,074 | (250,553 | ) | — | 237,924 | ||||||||||||||
Total liabilities and stockholders' equity | $ | 388,109 | $ | 229,385 | $ | 11,458 | $ | (1,913 | ) | $ | 627,039 |
(1) Includes intercompany investments in subsidiaries. |
Condensed Consolidating Balance Sheet as of December 31, 2010
(In thousands)
Guarantor Subsidiaries | Non-Guarantor Subsidiaries | ExamWorks Group, Inc. (Parent Corporation) | Consolidation and Elimination Entries | Consolidated Totals | ||||||||||||||||
Assets | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 31,192 | $ | 2,432 | $ | — | $ | — | $ | 33,624 | ||||||||||
Accounts receivable, net | 19,271 | 19,367 | — | — | 38,638 | |||||||||||||||
Other receivables | 48 | (15 | ) | — | — | 33 | ||||||||||||||
Prepaid expenses | 1,586 | 589 | — | — | 2,175 | |||||||||||||||
Deferred tax assets | 14 | 54 | — | — | 68 | |||||||||||||||
Other current assets | 42 | — | — | — | 42 | |||||||||||||||
Total current assets | 52,153 | 22,427 | — | — | 74,580 | |||||||||||||||
Property, equipment and leasehold improvements, net | 4,712 | 158 | — | — | 4,870 | |||||||||||||||
Goodwill | 67,676 | 22,906 | — | — | 90,582 | |||||||||||||||
Intangible assets, net | 50,844 | 16,070 | — | — | 66,914 | |||||||||||||||
Deferred tax assets, noncurrent | 5,448 | 2,221 | — | — | 7,669 | |||||||||||||||
Deferred financing costs, net | — | — | 4,176 | — | 4,176 | |||||||||||||||
Other assets | 271 | — | — | — | 271 | |||||||||||||||
Total assets | $ | 181,104 | $ | 63,782 | $ | 4,176 | $ | — | $ | 249,062 | ||||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Accounts payable | $ | 14,376 | $ | 5,623 | $ | — | $ | — | $ | 19,999 | ||||||||||
Accrued expenses | 4,907 | 4,507 | — | — | 9,414 | |||||||||||||||
Accrued interest expense | — | 1,079 | (1,079 | ) | — | — | ||||||||||||||
Deferred revenue | 159 | 113 | — | — | 272 | |||||||||||||||
Current portion of subordinated unsecured notes payable | 2,312 | — | — | — | 2,312 | |||||||||||||||
Current portion of contingent earnout obligation | 2,478 | — | — | — | 2,478 | |||||||||||||||
Other current liabilities | 1,344 | 1,761 | — | — | 3,105 | |||||||||||||||
Total current liabilities | 25,576 | 13,083 | (1,079 | ) | — | 37,580 | ||||||||||||||
Senior revolving credit facility and working capital facilities | — | 4,998 | — | — | 4,998 | |||||||||||||||
Long-term subordinated unsecured notes payable, less current portion | 2,546 | — | — | — | 2,546 | |||||||||||||||
Long-term contingent earnout obligation, less current portion | 2,032 | — | — | — | 2,032 | |||||||||||||||
Other long-term liabilities | 1,666 | — | — | — | 1,666 | |||||||||||||||
Total liabilities | 31,820 | 18,081 | (1,079 | ) | — | 48,822 | ||||||||||||||
Commitments and contingencies | ||||||||||||||||||||
Stockholders’ equity (1) | 149,284 | 45,701 | 5,255 | — | 200,240 | |||||||||||||||
Total liabilities and stockholders' equity | $ | 181,104 | $ | 63,782 | $ | 4,176 | $ | — | $ | 249,062 |
(1) Includes intercompany investments in subsidiaries. |
Condensed Consolidating Statement of Cash Flows for the year ended December 31, 2011 | ||||||||||||
(In thousands) |
Guarantor Subsidiaries | Non-Guarantor Subsidiaries | ExamWorks Group, Inc. (Parent Corporation) | Consolidated Totals | |||||||||||||
Net cash provided by operating activities | $ | 33,994 | $ | 5,549 | $ | — | $ | 39,543 | ||||||||
Investing activities: | ||||||||||||||||
Cash paid for acquisitions, net | (320,496 | ) | (1,752 | ) | — | (322,248 | ) | |||||||||
Purchases of equipment and leasehold improvements, net | (6,048 | ) | (808 | ) | — | (6,856 | ) | |||||||||
Working capital and other settlements for acquisitions | (5,007 | ) | (1,703 | ) | — | (6,710 | ) | |||||||||
Net cash used in investing activities | (331,551 | ) | (4,263 | ) | — | (335,814 | ) | |||||||||
Financing activities: | ||||||||||||||||
Borrowings under credit facilities | — | — | 278,000 | 278,000 | ||||||||||||
Borrowings under senior unsecured notes payable | — | — | 250,000 | 250,000 | ||||||||||||
Net borrowings under working capital facilities | 37,145 | (1,524 | ) | — | 35,621 | |||||||||||
Proceeds from the exercise of options and warrants | — | — | 2,292 | 2,292 | ||||||||||||
Repayment of subordinated unsecured notes payable | (2,421 | ) | — | — | (2,421 | ) | ||||||||||
Purchases of stock for treasury | — | — | (9,421 | ) | (9,421 | ) | ||||||||||
Payment of deferred financing costs | — | — | (9,746 | ) | (9,746 | ) | ||||||||||
Repayment under credit facilities | — | — | (273,000 | ) | (273,000 | ) | ||||||||||
Intercompany investments and other | 237,685 | — | (238,125 | ) | (440 | ) | ||||||||||
Net cash provided by (used in) financing activities | 272,409 | (1,524 | ) | — | 270,885 | |||||||||||
Exchange rate impact on cash and cash equivalents | — | 178 | — | 178 | ||||||||||||
Net decrease in cash and cash equivalents | (25,148 | ) | (60 | ) | — | (25,208 | ) | |||||||||
Cash and cash equivalents, beginning of year | 31,192 | 2,432 | — | 33,624 | ||||||||||||
Cash and cash equivalents, end of year | $ | 6,044 | $ | 2,372 | $ | — | $ | 8,416 |
Condensed Consolidating Statement of Cash Flows for the year ended December 31, 2010 | ||||||||||||
(In thousands) |
Guarantor Subsidiaries | Non-Guarantor Subsidiaries | ExamWorks Group, Inc. (Parent Corporation) | Consolidated Totals | |||||||||||||
Net cash provided by operating activities | $ | 14,565 | $ | 3,738 | $ | — | $ | 18,303 | ||||||||
Investing activities: | ||||||||||||||||
Cash paid for acquisitions, net | (115,331 | ) | 106 | — | (115,225 | ) | ||||||||||
Purchases of equipment and leasehold improvements, net | (1,728 | ) | (2 | ) | — | (1,730 | ) | |||||||||
Working capital and other settlements for acquisitions | 418 | — | — | 418 | ||||||||||||
Net cash provided by (used in) investing activities | (116,641 | ) | 104 | — | (116,537 | ) | ||||||||||
Financing activities: | ||||||||||||||||
Borrowings under credit facilities | — | — | 67,315 | 67,315 | ||||||||||||
Net borrowings (repayments) under working capital facilities | 6,447 | (1,450 | ) | — | 4,997 | |||||||||||
Excess tax benefit related to share-based compensation | — | — | 974 | 974 | ||||||||||||
Proceeds from the exercise of options and warrants | — | — | 703 | 703 | ||||||||||||
Issuance of preferred stock, net | — | — | 32,421 | 32,421 | ||||||||||||
Issuance of common stock, net | — | — | 136,660 | 136,660 | ||||||||||||
Repayments of related party notes | (3,500 | ) | — | — | (3,500 | ) | ||||||||||
Repayment of subordinated unsecured notes payable | (2,167 | ) | — | — | (2,167 | ) | ||||||||||
Purchases of stock for treasury | — | — | — | — | ||||||||||||
Payment of deferred financing costs | — | — | (6,534 | ) | (6,534 | ) | ||||||||||
Repayment under credit facilities | — | — | (100,550 | ) | (100,550 | ) | ||||||||||
Intercompany investments and other | 130,989 | — | (130,989 | ) | — | |||||||||||
Net cash provided by (used in) financing activities | 131,769 | (1,450 | ) | — | 130,319 | |||||||||||
Exchange rate impact on cash and cash equivalents | — | 40 | — | 40 | ||||||||||||
Net increase in cash and cash equivalents | 29,693 | 2,432 | — | 32,125 | ||||||||||||
Cash and cash equivalents, beginning of year | 1,499 | — | — | 1,499 | ||||||||||||
Cash and cash equivalents, end of year | $ | 31,192 | $ | 2,432 | $ | — | $ | 33,624 |