<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-26762
PEDIATRIX MEDICAL GROUP, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0271219
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1455 NORTHPARK DRIVE
FT. LAUDERDALE, FLORIDA 33326
53901-0449
(Address of principal executive offices)
(Zip Code)
(954) 384-0175
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
At August 5, 1996, the Registrant had 14,841,577 shares of $0.01 par value
common stock outstanding.
Page 1 of 17 pages
<PAGE> 2
PEDIATRIX MEDICAL GROUP, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of June 30, 1996 (Unaudited)
and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Income for the Three and Six Months Ended
June 30, 1996 and 1995 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1996 and 1995 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
- ---------------------------
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
- ----------
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PEDIATRIX MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . $10,077 $18,499
Investments in marketable securities . . . . . 7,273 27,718
Accounts receivable, net . . . . . . . . . . . 16,917 12,096
Prepaid expenses . . . . . . . . . . . . . . . 1,489 628
Other current assets . . . . . . . . . . . . . 830 497
Income taxes receivable . . . . . . . . . . . - 330
------- -------
Total current assets . . . . . . . . . . . 36,586 59,768
Property and equipment, net . . . . . . . . . . . . 6,968 4,549
Other assets, net . . . . . . . . . . . . . . . . . 39,407 5,564
------- -------
Total assets . . . . . . . . . . . . . . . $82,961 $69,881
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses . . . . $ 8,810 $ 4,347
Income taxes payable . . . . . . . . . . . . . 196 -
Current portion of note payable . . . . . . . 64 64
Deferred income taxes . . . . . . . . . . . . 4,238 1,909
------- -------
Total current liabilities . . . . . . . . 13,308 6,320
Note payable . . . . . . . . . . . . . . . . . . . 719 751
------- -------
Total liabilities . . . . . . . . . . . . 14,027 7,071
------- -------
Contingencies . . . . . . . . . . . . . . . . . . .
Stockholders' equity:
Preferred Stock . . . . . . . . . . . . . . . -- --
Common stock . . . . . . . . . . . . . . . . . 131 131
Additional paid-in capital . . . . . . . . . . 56,146 55,620
Retained earnings . . . . . . . . . . . . . . 12,692 7,045
Unrealized gain (loss) on investments . . . . (35) 14
------- -------
Total stockholders' equity . . . . . . . . 68,934 62,810
------- -------
Total liabilities and stockholders' equity $82,961 $69,881
======= =======
</TABLE>
The accompanying notes are an integral part of
these financial statements
3
<PAGE> 4
PEDIATRIX MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ------------------------
1996 1995 1996 1995
------- ------- ------- -------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C>
Net patient service revenue . . . . . . . . . . . . . $17,808 $ 9,131 $33,935 $18,017
------- ------- ------- -------
Operating expenses:
Salaries and benefits . . . . . . . . . . . . . . 11,541 6,322 22,337 12,592
Supplies and other operating expenses . . . . . . 1,269 831 2,482 1,438
Depreciation and amortization . . . . . . . . . . 335 66 568 140
------- ------- ------- -------
Total operating expenses . . . . . . . . . . 13,145 7,219 25,387 14,170
------- ------- ------- -------
Income from operations . . . . . . . . . . . 4,663 1,912 8,548 3,847
Investment income . . . . . . . . . . . . . . . . . . 423 147 922 254
Interest expense . . . . . . . . . . . . . . . . . . (27) (31) (62) (59)
------- ------- ------- -------
Income before income taxes . . . . . . . . . 5,059 2,028 9,408 4,042
Income tax provision . . . . . . . . . . . . . . . . 2,024 812 3,761 1,617
------- ------- ------- -------
Net income . . . . . . . . . . . . . . . . $ 3,035 $ 1,216 $ 5,647 $ 2,425
======= ======= ======= =======
Per share data (1995 pro forma):
Net income per common and common equivalent share:
Primary . . . . . . . . . . . . . . . . . . . . $ .22 $ .12 $ .41 $ .24
======= ======= ======= =======
Fully diluted . . . . . . . . . . . . . . . . . $ .22 $ .11 $ .41 $ .21
======= ======= ======= =======
Weighted average shares used in computing net income
per common and common equivalent share:
Primary . . . . . . . . . . . . . . . . . . . . 13,873 7,003 13,785 7,023
======= ======= ======= =======
Fully diluted . . . . . . . . . . . . . . . . . 13,873 11,574 13,799 11,594
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of
these financial statements
4
<PAGE> 5
PEDIATRIX MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
1996 1995
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Cash flows provided (used) by operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,647 $ 2,425
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . 568 140
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . 2,329 32
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . (4,821) 660
Prepaid expenses and other current assets . . . . . . . . . . . . (1,194) (416)
Income taxes receivable/payable . . . . . . . . . . . . . . . . . 950 -
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,766) (1,994)
Accounts payable and accrued expenses . . . . . . . . . . . . . . 2,247 102
-------- -------
Net cash provided by operating activities . . . . . . . . . . . 3,960 949
-------- -------
Cash flows provided (used) by investing activities:
Physician group acquisition payments . . . . . . . . . . . . . . . . . (30,220) -
Purchase of investments . . . . . . . . . . . . . . . . . . . . . . . (6,421) -
Proceeds from sale of investments . . . . . . . . . . . . . . . . . . 26,818 -
Purchase of property and equipment . . . . . . . . . . . . . . . . . . (2,629) (1,115)
-------- -------
Net cash used by investing activities . . . . . . . . . . . . . (12,452) (1,115)
-------- -------
Cash flows provided (used) by financing activities:
Payments on notes payable . . . . . . . . . . . . . . . . . . . . . . (32) (32)
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . 147 -
Payments made to retire common stock . . . . . . . . . . . . . . . . . (45) (132)
-------- -------
Net cash provided (used) by financing activities . . . . . . . . 70 (164)
-------- -------
Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . (8,422) (330)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . 18,499 7,384
-------- -------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . $ 10,077 $ 7,054
======== =======
</TABLE>
The accompanying notes are an integral part of
these financial statements
5
<PAGE> 6
PEDIATRIX MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements
of Pediatrix Medical Group, Inc. (the "Company" or "Pediatrix")
presented herein do not include all disclosures required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, these financial statements include all
adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of interim periods.
The results of operations for the three and six months ended June 30,
1996 are not necessarily indicative of the results of operations to be
expected for the year ended December 31, 1996. The interim condensed
consolidated financial statements should be read in conjunction with
the consolidated financial statements and footnotes thereto included
in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 26, 1996.
2. BUSINESS ACQUISITIONS:
During the first half of 1996 the Company completed acquisitions of
six neonatology and pediatric physician group practices.
- On January 16, 1996, Pediatrix acquired the stock of Neonatal
Specialists, Ltd., an Arizona professional corporation
("NSL"), for an aggregate cash purchase price of $6.0
million.
- On January 29, 1996, Pediatrix acquired certain assets of
Pediatric and Newborn Consultants, P.C., a Colorado
professional corporation ("PNC"), for an aggregate cash
purchase price of $3.6 million.
- On January 29, 1996, Pediatrix completed the acquisition of
the stock of Colorado Neonatal Associates, P.C., a
Colorado professional corporation ("CNA"), for an aggregate
cash purchase price of $1.4 million.
- On May 1, 1996, Pediatrix acquired the stock of Rocky Mountain
Neonatology, P.C., a Colorado professional corporation
("RMN"), for an aggregate cash purchase price of $7.2
million.
- On May 30, 1996, Pediatrix acquired certain assets of West
Texas Neonatal Associates, a Texas general partnership
("WTNA"), for an aggregate cash purchase price of $5.3
million.
- On June 6, 1996, Pediatrix acquired certain assets of Infant
Care Specialists Medical Group, Inc. ("ICS"), for an
aggregate cash purchase price of $6.0 million.
6
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
The prior shareholders of PNC and CNA are also eligible to receive up
to an aggregate of $2 million in April 1997 if certain targets are
achieved at the hospitals served by the Company during the period from
February 1, 1996 to January 31, 1997.
The Company has accounted for the transactions using the purchase
method of accounting and the excess of cost over fair value of net
assets acquired is being amortized on a straight-line basis over 25
years. The results of operations of the acquired companies have been
included in the consolidated financial statements from the dates of
acquisition.
The following unaudited pro forma information combines the
consolidated results of operations of the Company and the acquired
companies as if the acquisitions had occurred on January 1, 1995:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------------
1996 1995
-------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Net patient service revenue . . . . . . $ 41,560 $ 29,729
Net income . . . . . . . . . . . . . . 6,249 2,695
Fully diluted net income per share . . .45 .23
</TABLE>
The pro forma results do not necessarily represent results which would
have occurred if the acquisitions had taken place at the beginning of
the period, nor are they indicative of the results of future combined
operations.
3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Accounts payable . . . . . . . . . . . . . . $2,338 $786
Accrued salaries and bonuses . . . . . . . . 1,547 779
Accrued payroll taxes and benefits . . . . . 690 726
Accrued professional liability coverage . . . 2,006 1,268
Other accrued expenses . . . . . . . . . . . 2,229 788
------ ------
$8,810 $4,347
====== ======
</TABLE>
7
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
4. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE:
As a result of the conversion of preferred stock, which was not
determined to be a common stock equivalent, into common stock in
connection with the initial public offering, the Company has presented
pro forma net income per common and common equivalent share for the
three and six months ended June 30, 1995.
Pro forma net income per common and common equivalent share is
computed based upon the weighted average number of shares of common
stock and common stock equivalents, including the number of shares of
common stock issuable upon conversion of preferred stock, outstanding
during the period. Pursuant to the requirements of the Securities and
Exchange Commission (SEC), common stock issued by the Company during
the 12 months immediately preceding the initial filing of the
registration statement with the SEC, plus common stock equivalents
relating to the grant of common stock options during the same period,
have been included in the calculation of pro forma weighted average
number of common stock and common stock equivalents outstanding for
the three and six months ending June 30, 1995, using the treasury
stock method and the initial public offering price of $20 per share.
Net income per common and common equivalent share on a historical
basis, both primary and fully diluted are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ -----------------------
1996 1995 1996 1995
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Income applicable to common stock:
Net income . . . . . . . . . . . . . . $ 3,035 $ 1,216 $ 5,647 $ 2,425
Less: preferred stock dividends . . . -- (353) -- (706)
------- ------- ------- -------
Income applicable to common stock . . . 3,035 863 5,647 1,719
------- ------- ------- -------
Net income per share:
Primary. . . . . . . . . . . . . . . . $ .22 $ .12 $ .41 $ .24
------- ------- ------- -------
Fully diluted. . . . . . . . . . . . . $ .22 $ .11 $ .41 $ .21
------- ------- ------- -------
Weighted average number of common and
common equivalent shares outstanding:
Primary. . . . . . . . . . . . . . . . 13,873 7,003 13,785 7,023
------- ------- ------- -------
Fully diluted. . . . . . . . . . . . . 13,873 11,574 13,799 11,594
------- ------- ------- -------
</TABLE>
8
<PAGE> 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
Primary income per common and common equivalent share is computed by
dividing net income available to common shareholders by the weighted
average number of common stock and common stock equivalents
outstanding during the period. The voting, redeemable, cumulative,
convertible preferred stock issued in October 1992 and converted into
common stock in September 1995 was determined not to be a common stock
equivalent. In computing primary income per common share for the
three and six months ended June 30, 1995, the preferred stock dividend
reduces net income available to common shareholders. Fully diluted
income per common share is computed by dividing net income by the
weighted average number of common stock and common stock equivalents
outstanding during the period and, for the three and six months ended
June 30, 1995, includes 4,571,063 shares of common stock assumed to be
issued upon the conversion of all shares of the preferred stock.
4. CREDIT FACILITY:
On June 27, 1996, the Company entered into a $30.0 million unsecured
revolving credit facility (the "Credit Facility") with The First
National Bank of Boston ("Bank of Boston") and SunTrust Bank, which
includes a $2.0 million amount reserved to cover deductibles under the
Company's malpractice insurance policies. The Company intends to use
amounts available under the Credit Facility primarily for
acquisitions. The Credit Facility matures on June 30, 1999. At the
Company's option, the Credit Facility bears interest at either LIBOR
plus .875% or the prime rate announced by Bank of Boston. There is no
balance currently outstanding under the Credit Facility.
5. CONTINGENCIES:
During the ordinary course of business, the Company has become a party
to pending and threatened legal actions and proceedings, most of which
involve claims of medical malpractice and are generally covered by
insurance. The Company believes that the outcome of such legal
actions and proceedings will not have a material adverse effect on the
Company's financial condition, results of operations or liquidity.
On May 14, 1996, the Company received the Internal Revenue Service's
("IRS") proposed adjustments to the Company's tax liability in
connection with its examination of the Company's 1992, 1993, and 1994
federal income tax returns. The IRS has challenged certain deductions
that, if disallowed, would result in additional taxes of approximately
$4.5 million, plus interest. The Company and its tax advisors have
prepared and submitted a response to the IRS. The Company and its tax
advisors believe that the tax returns are substantially correct as
filed and intend to vigorously contest the proposed adjustments. The
Company and its tax advisors also believe that the amounts that have
been provided for income taxes are adequate and that the ultimate
resolution of the examination will not result in a material adverse
effect on the Company's consolidated results of operations, financial
position or cash flows.
6. SUBSEQUENT EVENT:
On August 2, 1996, the Company completed a secondary public offering
whereby it issued 1,755,000 shares of common stock resulting in net
cash proceeds to the Company of approximately $59.5 million.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AS COMPARED TO THREE MONTHS ENDED
JUNE 30, 1995
The Company reported net patient service revenue of $17.8 million for
the three months ended June 30, 1996, as compared with $9.1 million for the
same period in 1995, a growth rate of 95.0%. Of this $8.7 million increase,
$8.2 million, or 94.3%, was attributable to new units, including units at which
the Company provides services as a result of acquisitions. Same unit patient
service revenue increased $478,000 or 5.3% for the three months ended June 30,
1996, compared to the same period in 1995. Same units are those units at which
the Company provided services for the entire period for which the percentage is
calculated and the entire prior comparable period. The same unit growth
resulted from volume increases as there were no general price increases during
the periods.
Salaries and benefits increased $5.2 million, or 82.6% to $11.5
million for the three months ended June 30, 1996, as compared with $6.3 million
for the same period in 1995. Of this $5.2 million increase, $4.0 million, or
76.9%, was attributable to hiring new physicians, primarily to support new unit
growth, and the remaining $1.2 million was primarily attributable to increased
support staff and resources added in the areas of nursing, management and
billing and reimbursement. Supplies and other operating expenses increased
$438,000, or 52.7% to $1.3 million for the three months ended June 30, 1996, as
compared with $831,000 for the same period in 1995, primarily as a result of
new units. Depreciation and amortization expense increased by $269,000, or
407.6% to $335,000 for the three months ended June 30, 1996, as compared with
$66,000 for the same period in 1995, primarily as a result of amortization of
goodwill in connection with acquisitions.
Income from operations increased approximately $2.8 million, or
143.9%, to $4.7 million for the three months ended June 30, 1996, as compared
with $1.9 million for the same period in 1995, representing an increase in the
operating margin from 20.9% to 26.2%. The increase in operating margin was
primarily due to increased volume, principally from acquisitions.
The Company earned investment income of approximately $423,000 for the
three months ended June 30, 1996, as compared with $147,000 for the same period
in 1995. The increase in investment income resulted primarily from additional
funds available for investment due to proceeds from the initial public offering
and cash flow from operations.
The effective income tax rate was approximately 40% for both of the
three month periods ended June 30, 1996 and 1995.
Net income increased 149.6% to $3.0 million for the three months ended
June 30, 1996, as compared with $1.2 million for the same period in 1995. Net
income as a percentage of net patient service revenue increased to 17.0% for
the three months ended June 30, 1996, compared to 13.3% for the same period in
1995.
SIX MONTHS ENDED JUNE 30, 1996 AS COMPARED TO SIX MONTHS ENDED JUNE
30, 1995
The Company reported net patient service revenue of $33.9 million for
the six months ended June 30, 1996, as compared with $18.0 million for the same
period in 1995, a growth rate of 88.3%. Of this $15.9 million increase, $14.5
million, or 91.2%, was attributable to new units, including units at which the
Company provides services as a result of acquisitions.
10
<PAGE> 11
Salaries and benefits increased $9.7 million, or 77.4% to $22.3
million for the six months ended June 30, 1996, as compared with $12.6 million
for the same period in 1995. Of this $9.7 million increase, $7.4 million, or
76.3%, was attributable to hiring new physicians, primarily to support new unit
growth, and the remaining $2.3 million was primarily attributable to increased
support staff and resources added in the areas of nursing, management and
billing and reimbursement. Supplies and other operating expenses increased
$1.0 million, or 72.6% to $2.5 million for the six months ended June 30, 1996,
primarily as a result of new units. Depreciation and amortization expense
increased by $428,000 or 305.7% to $568,000 for the six months ended June 30,
1996, as compared with $140,000 for the same period in 1995, primarily as a
result of amortization of goodwill in connection with acquisitions.
Income from operations increased approximately $4.7 million, or 122.2%
to $8.5 million for the six months ended June 30, 1996, as compared with $3.8
million for the same period in 1995, representing an increase in the operating
margin from 21.4% to 25.2%. The increase in operating margin was primarily due
to increased volume, principally from acquisitions.
The Company earned investment income of approximately $922,000 for the
six months ended June 30, 1996, as compared with $254,000 for the same period
in 1995. The increase in investment income resulted primarily from additional
funds available for investment due to proceeds from the initial public offering
and cash flow from operations.
The effective income tax rate was approximately 40% for both of the
six month periods ended June 30, 1996 and 1995.
Net income increased 132.9% to $5.6 million for the six months ended
June 30, 1996, as compared with $2.4 million for the same period in 1995. Net
income as a percentage of net patient service revenue increased to 16.6% for
the six months ended June, 1996, compared to 13.5% for the same period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Prior to its initial public offering (IPO), the Company generated
sufficient cash flow from operations to support its growth strategy, which
primarily consisted of marketing directly to hospital administrators. The
Company significantly increased its acquisition activities commencing with the
fourth quarter of 1995. During the first half of 1996, the Company completed
six acquisitions of neonatology physician group practices, utilizing
approximately $30 million of net proceeds from the IPO. As of June 30, 1996,
the Company had approximately $17 million of cash, cash equivalents and
marketable securities.
As of June 30, 1996, the Company had working capital of approximately
$23.3 million, a decrease of $30.1 million from the working capital of $53.4
million available at December 31, 1995. The decrease is due principally to the
acquisition of six physician group practices as well as additions to property
and equipment and other assets.
On June 27, 1996, the Company entered into a $30.0 million unsecured
revolving credit facility (the "Credit Facility") with The First National Bank
of Boston ("Bank of Boston") and SunTrust Bank, which includes a $2.0 million
amount reserved to cover deductibles under the Company's malpractice insurance
policies. The Company intends to use amounts available under the Credit
Facility primarily for acquisitions. The Credit Facility matures on June 30,
1999. At the Company's option, the Credit Facility bears interest at either
LIBOR plus .875% or the prime rate announced by Bank of Boston. There is no
balance currently outstanding under the Credit Facility.
The Company constructed a new building, which was completed in the
third quarter of 1996 at a total cost of approximately $2.3 million. The
Company funded the construction of the new building with available cash. The
Company has a $783,000 mortgage loan with Bank of Boston which is secured by
11
<PAGE> 12
the corporate headquarters building. The Company has received a $3.0 million
commitment from Bank of Boston for a mortgage loan on the new building and the
corporate headquarters, which will replace the current mortgage loan.
The Company's annual capital expenditures have typically been for
computer hardware and software and for furniture, equipment and improvements at
the corporate headquarters. During the six months ended June 30, 1996, capital
expenditures amounted to approximately $2.6 million, which included $2.3
million related to the new building described above. For the remainder of
1996, the Company anticipates capital expenditures of approximately $1.5
million, including approximately $1.0 million for computer hardware and
software. Capital expenditures during 1997 are not expected to exceed $2.0
million, principally for computer hardware and software.
On August 2, 1996, the Company completed a secondary public offering
whereby it issued 1,755,000 shares of Common Stock resulting in net cash
proceeds to the Company of approximately $59.5 million.
The Company anticipates that funds generated from operations together
with the net proceeds of its secondary offering, cash and marketable securities
on hand and funds available under the Credit Facility, will be sufficient to
meet its working capital requirements and finance any required capital
expenditures and acquisitions for both the short-term and long-term.
12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
During the ordinary course of business, the Company has become a
party to pending and threatened legal actions and proceedings, most of which
involve claims of medical malpractice and are generally covered by insurance.
The Company believes that the outcome of such legal actions and proceedings
will not have a material adverse effect on the Company's financial condition,
results of operations or liquidity.
On May 14, 1996, the Company received the IRS's proposed adjustments
to the Company's tax liability in connection with its examination of the
Company's 1992, 1993 and 1994 federal income tax returns. The IRS has
challenged certain deductions that, if disallowed, would result in additional
taxes of approximately $4.5 million, plus interest. The Company and its tax
advisors have prepared an submitted a response to the IRS. The Company and its
tax advisors believe that the tax returns are substantially correct as filed
and intend to vigorously contest the proposed adjustments. The Company and its
tax advisors also believe that the amounts that have been provided for income
taxes are adequate and that the ultimate resolution of the examination will not
result in a material adverse effect on the Company's consolidated results of
operations, financial position or cash flows.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
(a) The Company's Annual Meeting of Shareholders was held on May
8, 1996.
(b) Not required.
(c) The matters voted on at the Annual Meeting of Shareholders and
the tabulation of votes on such matters are as follows:
1. Election of Directors.
<TABLE>
<CAPTION>
AGAINST OR BROKER
NAME FOR WITHHELD ABSTAINED NON-VOTE
------------------------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C>
Roger J. Medel, M.D. 12,017,187 61,150 0 0
Richard J. Stull, II 12,017,187 61,150 0 0
E. Roe Stamps, IV 12,017,187 61,150 0 0
Bruce R. Evans 12,017,037 61,300 0 0
Frederick V. Miller, M.D. 12,017,187 61,150 0 0
Michael B. Fernandez 12,017,187 61,150 0 0
Albert H. Nahmad 12,017,037 61,300 0 0
</TABLE>
13
<PAGE> 14
2. Proposal to approve the amendment of the Company's
Amended and Restated 1992 Stock Option Plan.
<TABLE>
<CAPTION>
FOR AGAINST OR WITHHELD ABSTAINED BROKER NON-VOTE
---------- ------------------- --------- ---------------
<S> <C> <C> <C>
10,644,319 1,212,858 3,410 217,750
</TABLE>
3. Proposal to approve the adoption of the Company's
1996 Qualified Employee Stock Purchase Plan.
<TABLE>
<CAPTION>
FOR AGAINST OR WITHHELD ABSTAINED BROKER NON-VOTE
---------- ------------------- --------- ---------------
<S> <C> <C> <C>
11,841,378 3,791 3,050 230,118
</TABLE>
4. Proposal to approve the adoption of the Company's
1996 Non-Qualified Employee Stock Purchase Plan.
<TABLE>
<CAPTION>
FOR AGAINST OR WITHHELD ABSTAINED BROKER NON-VOTE
---------- ------------------- --------- ---------------
<S> <C> <C> <C>
11,772,001 71,641 4,577 230,118
</TABLE>
(d) Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
11.1 Statement Re: Computation of Per Share Earnings
27.1 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
During the three months ended June 30, 1996, the Company filed
the following Current Reports on Form 8-K: (i) Form 8-K, dated May 9, 1996,
relating to the acquisition of RMN; (ii) Form 8-K, dated June 12, 1996,
relating to the acquisition of WTNA; and (iii) Form 8-K, dated June 14, 1996,
relating to the acquisition of ICS. The audited financial statements for each
of RMN, WTNA and ICS
14
<PAGE> 15
were included in the Registration Statement on Form S-1, Registration No.
333-07125, filed with the Commission on June 28, 1996.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PEDIATRIX MEDICAL GROUP, INC.
Date: August 13, 1996 By: /s/ Roger J. Medel
---------------------------------------------
Roger J. Medel, President and Chief Executive
Officer (Principal Executive Officer)
Date: August 13, 1996 By: /s/ Lawrence M. Mullen
---------------------------------------------
Lawrence M. Mullen, Chief Financial Officer
(Principal Financial and Accounting Officer)
16
<PAGE> 1
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income applicable to common stock:
Net Income . . . . . . . . . . . . . . $ 3,035,326 $ 1,216,815 $ 5,647,405 $ 2,425,353
Less: preferred stock dividends . . . - (353,176) - (706,354)
----------- ----------- ----------- -----------
Income applicable to common stock . . . . 3,035,326 863,639 5,647,405 1,718,999
=========== =========== =========== ===========
Weighted average number of common and
common equivalent shares
Primary:
Weighted average of common shares
outstanding . . . . . . . . . . . . 13,072,092 6,258,297 13,064,699 6,261,890
Weighted average of dilutive common
stock equivalents . . . . . . . . . 800,903 745,150 720,424 761,157
----------- ----------- ----------- -----------
Weighted average number of common and
common equivalent shares
outstanding for primary earnings
per share . . . . . . . . . . . . . 13,872,995 7,003,447 13,785,123 7,023,047
=========== =========== =========== ===========
Fully diluted:
Weighted average of common shares
outstanding . . . . . . . . . . . . 13,072,092 6,258,297 13,064,699 6,261,890
Weighted average of dilutive common
stock equivalents . . . . . . . . . 800,993 5,316,213 734,801 5,332,220
----------- ----------- ----------- -----------
Weighted average number of common and
common equivalent shares outstanding
for fully diluted earnings per share 13,873,085 11,574,510 13,799,500 11,594,110
=========== =========== =========== ===========
Income per share:
Primary . . . . . . . . . . . . . . . . $ .22 $ .12 $ .41 $ .24
=========== =========== =========== ===========
Fully diluted . . . . . . . . . . . . . $ .22 $ .11 $ .41 $ .21
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996 AND THE
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 10,077
<SECURITIES> 7,273
<RECEIVABLES> 16,917<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 36,586
<PP&E> 6,968<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 82,961
<CURRENT-LIABILITIES> 13,308
<BONDS> 719
0
0
<COMMON> 131
<OTHER-SE> 68,803
<TOTAL-LIABILITY-AND-EQUITY> 82,961
<SALES> 0
<TOTAL-REVENUES> 33,935
<CGS> 0
<TOTAL-COSTS> 25,387
<OTHER-EXPENSES> (922)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62
<INCOME-PRETAX> 9,408
<INCOME-TAX> 3,760
<INCOME-CONTINUING> 5,647
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,647
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
<FN>
<F1>AMOUNTS FOR RECEIVABLES AND PROPERTY PLANT AND EQUIPMENT ARE NET OF ANY
ALLOWANCES AND ACCUMULATED DEPRECIATION.
</FN>
</TABLE>
