SEC Filings

10-Q
ENVISION HEALTHCARE CORP filed this Form 10-Q on 11/03/2017
Entire Document
 
Item 1. Financial Statements - (continued)

The following table summarizes the results of discontinued operations for the three and nine months ended September 30, 2017 (in millions):  
 
Three Months Ended September 30, 2017
 
Nine Months Ended September 30, 2017
Net revenues
$
692.2

 
$
1,874.5

Operating expenses:
 
 
 
Salaries and benefits
358.9

 
1,032.8

Supply cost
15.1

 
42.9

Insurance expense
22.0

 
63.0

Other operating expenses
213.6

 
517.1

Transaction and integration costs
11.3

 
17.3

Depreciation and amortization
39.6

 
108.5

Total operating expenses
660.5

 
1,781.6

Equity in earnings of unconsolidated affiliates
0.1

 
0.4

Operating income
31.8

 
93.3

Interest expense, net
22.2

 
67.0

Earnings before income taxes
$
9.6

 
$
26.3


 
 
 
Results of discontinued operations:
 
 
 
Earnings from discontinued operations
$
9.6

 
$
26.3

Income tax expense of discontinued operations
(22.0
)
 
(513.0
)
Net loss from discontinued operations
$
(12.4
)
 
$
(486.7
)

In accordance with ASC 205, “Presentation of Financial Statements”, for purposes of discontinued operations presentation, general corporate expenses are not permitted to be allocated to the operations of a business to be disposed. Accordingly, for the three and nine months ended September 30, 2017 and on a before tax basis, approximately $15.3 million and $44.9 million, respectively, of general corporate expenses, including allocations for corporate salaries and stock-based compensation, general and administrative costs and depreciation, were removed from the medical transportation business and reallocated to the Company's remaining segments. In addition, ASC 205 requires interest associated with debt that is required to be repaid as a result of the disposal transaction to be allocated to discontinued operations. Accordingly, during the three and nine months ended September 30, 2017, the Company allocated $21.8 million and $65.5 million, respectively, in interest expense to the medical transportation business, which is reflected in the loss from discontinued operations. The Company estimated the interest allocation by applying the effective interest rate of the Company's term loan B due 2023 by the estimated proceeds, less taxes and professional fees, from the potential divestiture of the medical transportation business.

For the nine months ended September 30, 2017, the net cash flows provided by operating activities attributable to discontinued operations were $114.0 million and the net cash flows used in investing activities attributable to discontinued operations were $155.3 million, including $78.0 million for acquisitions. As the Medical Transportation business was acquired on December 1, 2016, there were no cash flows attributable to discontinued operations for the nine months ended September 30, 2016.

(6) Fair Value Measurements

The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between market participants to sell the asset or transfer the liability. The inputs used by the Company to measure fair value are classified into the following hierarchy:
 
Level 1: Quoted prices in active markets for identical assets or liabilities.
 
Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with market data at the measurement date.
 
Level 3: Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

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